G.R. No.

L-33022 April 22, 1975

CENTRAL BANK OF THE PHILIPPINES, petitioner,

vs.
COURT OF APPEALS and ABLAZA CONSTRUCTION & FINANCE CORPORATION, respondents.

F.E. Evangelista for petitioner.

Cruz, Villarin & Laureta for private respondent.

BARREDO, J.: +.wph! 1

Petition of the Central Bank of the Philippines for review of the decision of the Court of Appeals in CA-G.R.
No. 43638-R affirming the judgment of the Court of First Instance of Rizal in Civil Case No. Q-10919
sentenced petitioner to pay respondent Ablaza Construction and Finance Corporation damages for breach
contract in that after having formally and officially awarded, pursuant to the results of the usual bidding to
Ablaza in December 1965 the "contract" for the construction of its San Fernando, La Union branch building
and allowed said contractor to commence the work up to about May, 1966, albeit without any written formal
contract having been executed, the Bank failed and refused to proceed with the project, unless the plans
were revised and a lower price were agreed to by Ablaza, the Bank claiming that its action was pursuant to
the policy of fiscal restraint announced by the then new President of the Philippines on December 30, 1965
and the Memorandum Circular No. 1 dated December 31, 1965 of the same President.

The factual background of this case is related in the following portions of the decision of the trial court, which
the Court of Appeals affirmed without modification: t.hqw

Sometime in 1965, defendant Central Bank of the Philippines issued Invitations to Bid and
Instructions to Bidders for the purpose of receiving sealed proposals for the general
construction of its various proposed regional offices, including the Central Bank regional
office building in San Fernando, La Union.

In response to the aforesaid Invitations to Bid, the plaintiff Ablaza Construction and Finance
Corporation, which was one of the qualified bidders, submitted a bid proposal for the general
construction of defendant's proposed regional office building in San Fernando, La Union at
the public bidding held on November 3, 1965. The said proposal was, as required by the
defendant accompanied by a cash bidder's bond in the sum of P275,000.00.

On December 7, 1965, the Monetary Board of the defendant Central Bank of the Philippines,
after evaluating all the bid proposals submitted during the above-mentioned bidding,
unanimously voted and approved the award to the plaintiff of the contract for the general
construction of defendant's proposed regional office building in San Fernando, La Union, for
the sum of P3,749,000.00 under plaintiff's Proposal Item No. 2.

Pursuant thereto, on December 10, 1965, Mr. Rizalino L. Mendoza, Assistant to the
Governor and concurrently the Chairman of the Management Building Committee of the
defendant Central Bank of the Philippines, set a telegram to the plaintiff, informing the latter
that the contract for the general construction of defendant's proposed regional office building
in San Fernando, La Union, had been awarded to the plaintiff. The said telegram was
followed by a formal letter, also dated December 10, 1965, duly signed by said Mr. Rizalino
L. Mendoza, confirming the approval of the award of the above-stated contract under
plaintiff's Proposal Item No. 2 in the amount of P3,749,000.00.

Upon receipt of the aforementioned letter, plaintiff immediately accepted the said award by
means of a letter dated December 15, 1965, whereby plaintiff also requested permission for
its workmen to enter the site of the project, build a temporary shelter and enclosure, and do
some clearing job thereat. Accordingly, said permission was granted by the defendant as
embodied in its letter dated January 4, 1966, addressed to the plaintiff..

Within five (5) days from receipt by the plaintiff of the said notice of award, and several times
thereafter Mr. Nicomedes C. Ablaza, an officer of the plaintiff corporation, went personally to
see Mr. Rizalino L. Mendoza at the latter's Central Bank office to follow up the signing of the
corresponding contract. A performance bond in the total amount of P962,250.00
(P275,000.00 of which was in cash and P687,250.00 in the form of a surety bond) was
subsequently posted by the plaintiff in compliance with the above-stated Instructions to
Bidders, which bond was duly accepted by the defendant.
 Pursuant to the permission granted by the defendant, as aforesaid, plaintiff commenced
actual construction work on the project about the middle of January, 1966. On February 8,
1966, by means of a formal letter, defendant requested the plaintiff to submit a schedule of
deliveries of materials which, according to plaintiff's accepted proposal, shall be furnished by
the defendant. In compliance therewith, on February 16, 1966, plaintiff submitted to the
defendant the schedule of deliveries requested for.

During the period when the actual construction work on the project was in progress, Mr.
Nicomedes G. Ablaza had several meetings with Mr. Rizalino L. Mendoza at the latter's
office in the Central Bank. During those meetings, they discussed the progress of the
construction work being then undertaken by the plaintiff of the projects of the defendant in
San Fernando, La Union, including the progress of the excavation work.

Sometime during the early part of March, 1966, Mr. Rizalino L. Mendoza was at the
construction site of the said project. While he was there, he admitted having seen pile of soil
in the premises. At that time, the excavation work being undertaken by the plaintiff was about
20% complete. On March 22, 1966, defendant again wrote the plaintiff, requesting the latter
to submit the name of its representative authorized to sign the building contract with the
defendant. In compliance with the said request, plaintiff submitted to the defendant the name
of its duly authorized representative by means of a letter dated March 24, 1966.

A meeting called by the defendant was held at the conference room of the Central Bank on
May 20, 1966. At the said meeting, the defendant, thru Finance Secretary Eduardo
Romualdez, announced, among other things, the reduction of the appropriations for the
construction of the defendant's various proposed regional offices, including that of the
proposed San Fernando, La Union regional office building, the construction of which had
already been started by the plaintiff. He also stated that the Central Bank Associated
Architects would be asked to prepare new plans and designs based on such reduced
appropriations. The defendant, during that same meeting, also advised the plaintiff, thru
Messrs. Nicomedes G. Ablaza and Alfredo G. Ablaza (who represented the plaintiff
corporation at the said meeting), to stop its construction work on the Central Bank Regional
office building in San Fernando, La Union. This was immediately complied with by the
plaintiff, although its various construction equipment remained in the jobsite. The defendant
likewise presented certain offer and proposals to the plaintiff, among which were: (a) the
immediate return of plaintiff's cash bidder's bond of P275,000.00; (b) the payment of interest
on said bidder's bond at 12% per annum; (c) the reimbursement to the plaintiff of the value of
all the work accomplished at the site; (d) the entering into a negotiated contract with the
plaintiff on the basis of the reduced appropriation for the project in question; and (e) the
reimbursement of the premium on plaintiff's performance bond. Not one of these offers and
proposals of the defendant, however, was accepted by the plaintiff during that meeting of
May 20, 1966.

On June 3, 1966, plaintiff, thru counsel, wrote the defendant, demanding for the formal
execution of the corresponding contract, without prejudice to its claim for damages. The
defendant, thru its Deputy Governor, Mr. Amado R. Brinas, on June 15, 1966, replied to the
said letter of the plaintiff, whereby the defendant claimed that an agreement was reached
between the plaintiff and the defendant during the meeting held on May 20, 1966. On the
following day, however, in its letter dated June 16, 1966, the plaintiff, thru counsel,
vehemently denied that said parties concluded any agreement during the meeting in
question.

On July 5, 1966, defendant again offered to return plaintiff's cash bidder's bond in the
amount of P275,000.00. The plaintiff, thru counsel, on July 6, 1966, agreed to accept the
return of the said cash bond, without prejudice, however, to its claims as contained in its
letters to the defendant dated June 3, June 10, and June 16, 1966, and with further
reservation regarding payment of the corresponding interest thereon. On July 7, 1966, the
said sum of P275,000.00 was returned by the defendant to the plaintiff.

On January 30, 1967, in accordance with the letter of the plaintiff, thru counsel, dated
January 26, 1967, the construction equipment of the plaintiff were pulled out from the
construction site, for which the plaintiff incurred hauling expenses.

The negotiations of the parties for the settlement of plaintiff's claims out of court proved to be
futile; hence, the present action was instituted by plaintiff against the defendant." (Pp. 249-
256, Rec. on Appeal).

It may be added that the Instructions to Bidders on the basis of which the bid and award in question were
submitted and made contained, among others, the following provisions: t.hqw
 IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and
no other act of the Owner shall constitute the acceptance of the Proposal. The acceptance of
a Proposal shall bind the successful bidder to execute the Contract and to be responsible for
liquidated damages as herein provided. The rights and obligations provided for in the
Contract shall become effective and binding upon the parties only with its formal execution.

xxx xxx xxx

IB 114.1 The bidder whose proposal is accepted will be required to appear at the Office of
the Owner in person, or, if a firm or corporation, a duly authorized representative shall so
appear, and to execute that contract within five (5) days after notice that the contract has
been awarded to him. Failure or neglect to do so shall constitute a breach of agreement
effected by the acceptance of the Proposal.

xxx xxx xxx

IB 118.1 The Contractor shall commence the work within ten (10) calendar days from the
date he receives a copy of the fully executed Contract, and he shall complete the work within
the time specified." (Pp. 18-19 & 58-59, Petitioner-Appellant's Brief.)

In the light of these facts, petitioner has made the following assignment of errors: t.hqw

I. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS A PERFECTED

CONTRACT BETWEEN PETITIONER CENTRAL BANK OF THE PHILIPPINES AND
RESPONDENT ABLAZA CONSTRUCTION & FINANCE CORPORATION FOR THE
GENERAL CONSTRUCTION WORK OF PETITIONER'S REGIONAL OFFICE BUILDING
AT SAN FERNANDO, LA UNION.

II. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS

COMMITTED A BREACH OF CONTRACT.

III. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD GIVEN ITS
APPROVAL TO THE WORK DONE BY RESPONDENT ABLAZA CONSTRUCTION &
FINANCE CORPORATION.

IV. THE COURT OF APPEALS ERRED IN HOLDING THAT THE AWARD OF ACTUAL
AND COMPENSATORY DAMAGES, ATTORNEY'S FEES AND RETAINING FEE IS FAIR
AND REASONABLE, AND IN HOLDING THAT PETITIONER IS LIABLE FOR COSTS." (Pp.
A & B, Petitioner-Appellant's Brief.)

Under the first assigned error, petitioner denotes the major part of its effort to the discussion of its
proposition that there could be no perfected contract in this case, (contrary to the conclusion of the courts
below) because there is no showing of compliance, and in fact, there has been no compliance with the
requirement that there must be a certification of the availability of funds by the Auditor General pursuant to
Section 607 of the Revised Administrative Code which provides thus: t.hqw

Section 607. Certificate showing appropriation to meet contract. Except in the case of a
contract for personal service or for supplies to be carried in stock, no contract involving an
expenditure by the National Government of three thousand pesos or more shall be entered
into or authorized until the Auditor General shall have certified to the officer entering into
such obligation that funds have been duly appropriated for such purpose and that the
amount necessary to cover the proposed contract is available for expenditure on account
thereof. When application is made to the Auditor General for the certificate herein required, a
copy of the proposed contract or agreement shall be submitted to him accompanied by a
statement in writing from the officer making the application showing all obligations not yet
presented for audit which have been incurred against the appropriation to which the contract
in question would be chargeable; and such certificate, when signed by the Auditor, shall be
attached to and become a part of the proposed contract, and the sum so certified shall not
thereafter be available for expenditure for any other purposes until the Government is
discharged from the contract in question.

Except in the case of a contract for supplies to be carried in stock, no contract involving the
expenditure by any province, municipality, chartered city, or municipal district of two
thousand pesos or more shall be entered into or authorized until the treasurer of the political
division concerned shall have certified to the officer entering into such contract that funds
have been duly appropriated for such purpose and that the amount necessary to cover the
proposed contract is available for expenditure on account thereof. Such certificate, when
signed by the said treasurer, shall be attached to and become part of the proposed contract
 and the sum so certified shall not thereafter be available for expenditure for any other
purpose until the contract in question is lawfully abrogated or discharged.

For the purpose of making the certificate hereinabove required ninety per centum of the
estimated revenues and receipts which should accrue during the current fiscal year but
which are yet uncollected, shall be deemed to be in the treasury of the particular branch of
the Government against which the obligation in question would create a charge." (Pp. 23-25,
Petitioner-Appellant's Brief.)

It is contended that in view of such omission and considering the provisions of Section 608 of the same code
to the effect that "a purported contract entered into contrary to the requirements of the next preceding
section hereof shall be wholly void", "no contract between the petitioner and respondent Ablaza Construction
and Finance Corporation for the general construction of the proposed regional office building of the Central
Bank in San Fernando, La Union, was ever perfected because only the first stage, that is the award of the
contract to the lowest responsible bidder, respondent Ablaza Construction and Finance Corporation, was
completed." (p. 29, Petitioner-Appellant's Brief.) And in support of this pose, petitioner relies heavily on Tan
C. Tee & Co. vs. Wright thus: t.hqw

The aforesaid requirements of the Revised Administrative Code for the perfection of
government contracts have been upheld by this Honorable Court in the case of Tan C. Tee
Co. vs. Wright, 53 Phil. 172, in which case it was held that the award of the contract to the
lowest bidder does not amount to entering into the contract because of the requirement of
Section 607 of the Revised Administrative Code that a copy of the proposed contract shall be
submitted to the Auditor General together with a request for the availability of funds to cover
the proposed contract. Thus, this Honorable Court held: t.hqw

'To award the contract to the lowest responsible bidder is not the equivalent
of entering into the contract. Section 607 of the Administrative Code requires
that a copy of the proposed contract shall be submitted along with the
request for the certificate of availability of funds, but there could be no
proposed contract to be submitted until after the award was made.'

And to guide government authorities in the letting of government contracts, this Honorable
Court, in said case of Tan C. Tee vs. Wright, supra, laid down the procedure which should be
followed, as follows: t.hqw

`PROCEDURE WHICH SHOULD BE FOLLOWED IN THE LETTING OF

CONTRACTS FOR INSULAR WORKS. The procedure which should be
followed in the letting of contracts for Insular works is the following: First,
there is an award of the contract by the Director of Public Works to the lowest
responsible bidder. Second, there is a certificate of availability of funds to be
obtained from the Insular Auditor, and in some cases from the Insular
Treasurer, to cover the proposed contract. And third, there is a contract to be
executed on behalf of the Government by the Director of Public Works with
the approval of the department head.'" (Pp. 27-28, Petitioner-Appellant's
Brief.)

The contention is without merit. To start with, the record reveals that it is more of an afterthought.
Respondent never raised this question whether in its pleadings or at the hearings in the trial court. We have
also read its brief in the appellate court and no mention is made therein of this point. Not even in its
memorandum submitted to that court in lieu of oral argument is there any discussion thereof, even as it
appears that emphasis was given therein to various portions of the Revised Manual of Instructions to
Treasurers regarding the perfection and constitution of public contracts. In fact, reference was made therein
to Administrative Order No. 290 of the President of the Philippines, dated February 5, 1959, requiring "all
contracts of whatever nature involving P10,000 or more to be entered into by all bureaus and offices, ...
including the ... Central Bank ... shall be submitted to the Auditor General for examination and review before
the same are perfected and/or consummated, etc.", without mentioning, however, that said administrative
order was no longer in force, the same having been revoked on January 17, 1964 by President Macapagal
under Administrative Order No. 81, s. 1964.

Hence, if only for the reason that it is a familiar rule in procedure that defenses not pleaded in the answer
may not be raised for the first time on appeal, petitioner's position cannot be sustained. Indeed, in the Court
of Appeals, petitioner could only bring up such questions as are related to the issues made by the parties in
their pleadings, particularly where factual matters may be involved, because to permit a party to change his
theory on appeal "would be unfair to the adverse party." (II, Moran, Rules of Court, p. 505, 1970 ed.)
Furthermore, under Section 7 of Rule 51, the appellate court cannot consider any error of the lower court
"unless stated in the assignment of errors and properly argued in the brief."

Even prescinding from this consideration of belatedness, however, it is Our considered view that contracts
entered into by petitioner Central Bank are not within the contemplation of Sections 607 and 608 cited by it.
Immediately to be noted, Section 607 specifically refers to "expenditure(s) of the National Government" and
that the term "National Government" may not be deemed to include the Central Bank. Under the
Administrative Code itself, the term "National Government" refers only to the central government, consisting
of the legislative, executive and judicial departments of the government, as distinguished from local
governments and other governmental entities and is not synonymous, therefore, with the terms "The
Government of the Republic of the Philippines" or "Philippine Government", which are the expressions broad
enough to include not only the central government but also the provincial and municipal governments,
chartered cities and other government-controlled corporations or agencies, like the Central Bank. (I, Martin,
Administrative Code, p. 15.)

To be sure the Central Bank is a government instrumentality. But it was created as an autonomous body
corporate to be governed by the provisions of its charter, Republic Act 265, "to administer the monetary and
banking system of the Republic." (Sec. 1) As such, it is authorized "to adopt, alter and use a corporate seal
which shall be judicially noticed; to make contracts; to lease or own real and personal property, and to sell or
otherwise dispose of the same; to sue and be sued; and otherwise to do and perform any and all things that
may be necessary or proper to carry out the purposes of this Act. The Central Bank may acquire and hold
such assets and incur such liabilities as result directly from operations authorized by the provisions of this
Act, or as are essential to the proper conduct of such operations." (Sec. 4) It has capital of its own and
operates under a budget prepared by its own Monetary Board and otherwise appropriates money for its
operations and other expenditures independently of the national budget. It does not depend on the National
Government for the financing of its operations; it is the National Government that occasionally resorts to it
for needed budgetary accommodations. Under Section 14 of the Bank's charter, the Monetary Board may
authorize such expenditures by the Central Bank as are in the interest of the effective administration and
operation of the Bank." Its prerogative to incur such liabilities and expenditures is not subject to any
prerequisite found in any statute or regulation not expressly applicable to it. Relevantly to the issues in this
case, it is not subject, like the Social Security Commission, to Section 1901 and related provisions of the
Revised Administrative Code which require national government constructions to be done by or under the
supervision of the Bureau of Public Works. (Op. of the Sec. of Justice No. 92, Series of 1960) For these
reasons, the provisions of the Revised Administrative Code invoked by the Bank do not apply to it. To Our
knowledge, in no other instance has the Bank ever considered itself subject thereto.

In Zobel vs. City of Manila, 47 Phil. 169, this Court adopted a restrictive construction of Section 607 of the
Administrative Code thus:

The second question to be considered has reference to the applicability of section 607 of the Administrative
Code to contracts made by the City of Manila. In the second paragraph of said section it is declared that no
contract involving the expenditure by any province, municipality, township, or settlement of two thousand
pesos or more shall be entered into or authorized until the treasurer of the political division concerned shall
have certified to the officer entering into such contract that funds have been duly appropriated for such
purpose and that the amount necessary to cover the proposed contract is available for expenditure on
account thereof. It is admitted that no such certificate was made by the treasurer of Manila at the time the
contract now in question was made. We are of the opinion that the provision cited has no application to
contracts of a chartered city, such as the City of Manila. Upon examining said provision (sec. 607) it will be
found that the term chartered city, or other similar expression, such as would include the City of Manila, is
not used; and it is quite manifest from the careful use of terms in said section that chartered cities were
intended to be excluded. In this connection the definitions of "province," "municipality," and "chartered city,"
given in section 2 of the Administrative Code are instructive. The circumstance that for certain purposes the
City of Manila has the status both of a province and a municipality (as is true in the distribution of revenue) is
not inconsistent with this conclusion." 1

We perceive no valid reason why the Court should not follow the same view now in respect to the first
paragraph of the section by confirming its application only to the offices comprised within the term National
Government as above defined, particularly insofar as government-owned or created corporations or entities
having powers to make expenditures and to incur liabilities by virtue of their own corporate authority
independently of the national or local legislative bodies, as in the case of the petitioner herein, are
concerned. Whenever necessary, the Monetary Board, like any other corporate board, makes all required
appropriations directly from the funds of the Bank and does not need any official statement of availability
from its treasurer or auditor and without submitting any papers to, much less securing the approval of the
Auditor General or any outside authority before doing so. Indeed, this is readily to be inferred from the repeal
already mentioned earlier of Administrative Order No. 290, s. 1959, which petitioner tried to invoke,
overlooking perhaps such repeal. In other words, by that repeal, the requirement that the Central Bank
should submit to the Auditor General for examination and review before contracts involving P10,000 or more
to be entered into by it "before the same are perfected and/or consummated" had already been eliminated at
the time the transaction herein involved took place. Consequently, the point of invalidity pressed, belatedly
at that, by petitioner has no leg to stand on.

The other main contention of petitioner is that the purported or alleged contract being relied upon by
respondent never reached the stage of perfection which would make it binding upon the parties and entitle
either of them to sue for specific performance in case of breach thereof. In this connection, since the
transaction herein involved arose from the award of a construction contract 2 by a government corporation and
the attempt on its part to discontinue with the construction several months after such award had been accepted by
the contractor and after the latter had already commenced the work without any objection on the part of the
corporation, so much so that entry into the site for the purpose was upon express permission from it, but before
any written contract has been executed, it is preferable that certain pertinent points be clarified for the proper
resolution of the issue between the parties here and the general guidance of all who might be similarly situated.

Petitioner buttresses its position in regard to this issue on the provisions earlier quoted in this opinion of the
Instruction to Bidders:t.hqw

IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and
no other act of the Owner shall constitute the acceptance of the Proposal. The acceptance of
a Proposal shall bind the successful bidder to execute the Contract and to be responsible for
liquidated damages as herein provided. The rights and obligations provided for in the
Contract shall become effective and binding upon the parties only with its formal execution.

xxx xxx xxx

IB 118.1 The Contractor shall commence the work within ten (10) calendar days from the
date he receives a copy of the fully executed Contract, and he shall complete the work within
the time specified." (Pp. 18-19, Petitioner-Appellant's Brief.)

Petitioner insists that under these provisions, the rights and obligations of the Bank and Ablaza could
become effective and binding only upon the execution of the formal contract, and since admittedly no formal
contract has yet been signed by the parties herein, there is yet no perfected contract to speak of and
respondent has, therefore, no cause of action against the Bank. And in refutation of respondent's argument
that it had already started the work with some clearing job and foundation excavations, which has never
been stopped by petitioner who had previously given express permission to respondent to enter the jobsite,
build a temporary shelter and enclosures thereon, petitioner counters that under the above instructions,
respondent is supposed to commence the work "within ten (10) calendar days from the date he receives a
copy of the fully executed Contract," and for said respondent to have started actual construction work before
any contract has been signed was unauthorized and was consequently undertaken at his own risk, all the
above circumstances indicative of estoppel notwithstanding.

We are not persuaded that petitioner's posture conforms with law and equity. According to Paragraph IB
114.1 of the Instructions to Bidders, Ablaza was "required to appear in the office of the Owner (the Bank) in
person, or, if a firm or corporation, a duly authorized representative (thereof), and to execute the contract
within five (5) days after notice that the contract has been awarded to him. Failure or neglect to do so shall
constitute a breach of agreement effected by the acceptance of the Proposal." There can be no other
meaning of this provision than that the Bank's acceptance of the bid of respondent Ablaza effected an
actionable agreement between them. We cannot read it in the unilateral sense suggested by petitioner that it
bound only the contractor, without any corresponding responsibility or obligation at all on the part of the
Bank. An agreement presupposes a meeting of minds and when that point is reached in the negotiations
between two parties intending to enter into a contract, the purported contract is deemed perfected and none
of them may thereafter disengage himself therefrom without being liable to the other in an action for specific
performance.

The rather ambiguous terms of Paragraph IB 113.4 of the Instructions to Bidders relied upon by petitioner
have to be reconciled with the other paragraphs thereof to avoid lack of mutuality in the relation between the
parties. This invoked paragraph stipulates that "the acceptance of (respondent's) Proposal shall bind said
respondent to execute the Contract and to be responsible for liquidated damages as herein provided." And
yet, even if the contractor is ready and willing to execute the formal contract within the five (5) day period
given to him, petitioner now claims that under the invoked provision, it could refuse to execute such contract
and still be absolutely free from any liability to the contractor who, in the meantime, has to make necessary
arrangements and incur expenditures in order to be able to commence work "within ten (10) days from the
date he receives a copy of the fully executed Contract," or be responsible for damages for delay. The
unfairness of such a view is too evident to be justified by the invocation of the principle that every party to a
contract who is sui juris and who has entered into it voluntarily and with full knowledge of its unfavorable
provisions may not subsequently complain about them when they are being enforced, if only because there
are other portions of the Instruction to Bidders which indicate the contrary. Certainly, We cannot sanction
that in the absence of unavoidable just reasons, the Bank could simply refuse to execute the contract and
thereby avoid it entirely. Even a government owned corporation may not under the guise of protecting the
public interest unceremoniously disregard contractual commitments to the prejudice of the other party.
Otherwise, the door would be wide open to abuses and anomalies more detrimental to public interest. If
there could be instances wherein a government corporation may justifiably withdraw from a commitment as
a consequence of more paramount considerations, the case at bar is not, for the reasons already given, one
of them.

As We see it then, contrary to the contention of the Bank, the provision it is citing may not be considered as
determinative of the perfection of the contract here in question. Said provision only means that as regards
the violation of any particular term or condition to be contained in the formal contract, the corresponding
action therefor cannot arise until after the writing has been fully executed. Thus, after the Proposal of
respondent was accepted by the Bank thru its telegram and letter both dated December 10, 1965 and
respondent in turn accepted the award by its letter of December 15, 1965, both parties became bound to
proceed with the subsequent steps needed to formalize and consummate their agreement. Failure on the
part of either of them to do so, entities the other to compensation for the resulting damages. To such effect
was the ruling of this Court in Valencia vs. RFC 103 Phil. 444. We held therein that the award of a contract
to a bidder constitutes an acceptance of said bidder's proposal and that "the effect of said acceptance was
to perfect a contract, upon notice of the award to (the bidder)". (at p. 450) We further held therein that the
bidder's "failure to (sign the corresponding contract) do not relieve him of the obligation arising from the
unqualified acceptance of his offer. Much less did it affect the existence of a contract between him and
respondent". (at p. 452)

It is neither just nor equitable that Valencia should be construed to have sanctioned a one-sided view of the
perfection of contracts in the sense that the acceptance of a bid by a duly authorized official of a
government-owned corporation, financially and otherwise autonomous both from the National Government
and the Bureau of Public Works, insofar as its construction contracts are concerned, binds only the bidder
and not the corporation until the formal execution of the corresponding written contract.

Such unfairness and inequity would even be more evident in the case at bar, if We were to uphold
petitioner's pose. Pertinently to the point under consideration, the trial court found as follows:

To determine the amount of damages recoverable from the defendant, plaintiff's claim for actual damages in
the sum of P298,433.35, as hereinabove stated, and the recommendation of Messrs. Ambrosio R. Flores
and Ricardo Y. Mayuga, as contained in their separate reports (Exhs. "13" and "15"), in the amounts of
P154,075.00 and P147,500.00, respectively, should be taken into account.

There is evidence on record showing that plaintiff incurred the sum of P48,770.30 for the preparation of the
jobsite, construction of bodegas, fences field offices, working sheds, and workmen's quarters; that the value
of the excavation work accomplished by the plaintiff at the site was P113,800.00; that the rental of the
various construction equipment of the plaintiff from the stoppage of work until the removal thereof from the
jobsite would amount to P78,540.00 (Exhs. "K" - "K-l"); that the interest on the cash bond of P275,000.00
from November 3, 1965 to July 7, 1966 at 12% per annum would be P22,000.00; that for removing said
construction equipment from the jobsite to Manila, plaintiff paid a hauling fee of P700.00 (Exhs. "L" - "L-1" );
that for the performance bond that the plaintiff posted as required under its contract with the defendant, the
former was obliged to pay a premium of P2,216.55; and that the plaintiff was likewise made to incur the sum
of P32,406.50, representing the 3% contractor's tax (Exhs. "AA" - "A-l"). The itemized list of all these
expenditures, totalling P298,433.35 is attached to the records of this case (Annex "B", Complaint) and forms
part of the evidence of the plaintiff. Mr. Nicomedes G. Ablaza, the witness for the plaintiff, properly identified
said document and affirmed the contents thereof when he testified during the hearing. The same witness
likewise explained in detail the various figures contained therein, and identified the corresponding supporting
papers.

It is noteworthy, in this connection, that there is nothing in the records that would show that the defendant
assailed the accuracy and/or reasonableness of the figures presented by the plaintiff; neither does it appear
that the defendant offered any evidence to refute said figures.

While it is claimed by the defendant that the plaintiff incurred a total expense of only P154,075.00 according
to the report of Mr. Ambrosio R. Flores, or P147,500.00, according to the report of Mr. Ricardo Y. Mayuga,
the Court finds said estimates to be inaccurate. To cite only an instance, in estimating, the value of the
excavation work, the defendant merely measured the depth, length and width of the excavated, area which
was submerged in water, without ascertaining the volume of rock and the volume of earth actually excavated
as was done by the plaintiff who prepared a detailed plan showing the profile of the excavation work
performed in the site (Exh. "B"). Likewise, the unit measure adopted by the defendant was in cubic meter
while it should be in cubic yard. Also the unit price used by the defendant was only P8.75 for rock excavation
while it should be P10.00 per cubic yard; and only P4.95 for earth excavation while it should be P5.50 per
cubic yard as clearly indicated in plaintiff's proposal (Annex "A", Complaint; same as Annex "1", Answer).
The Court, therefore, can not give credence to defendant's, aforementioned estimates in view of their
evident inaccuracies.

The Court finds from the evidence adduced that Plaintiff claim for actual damages in the sum of
P298,433.35 is meritorious.

The Bulk of plaintiffs claims consists of expected profit which it failed to realize due to the breach of the
contract in question by the defendant. As previously stated, the plaintiff seeks to recover the amount of
P814,190.00 by way of unrealized expected profit. This figure represents 18% of P4,523,275.00 which is the
estimated direct cost of the subject project.

As it has been established by the evidence that the defendant in fact was guilty of breach of contract and,
therefore, liable for damages (Art. 1170, New Civil Code), the Court finds that the plaintiff is entitled to
recover from the defendant unrealized expected profit as part of the actual or compensatory damages.
Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the
profits which the obligee failed to obtain (Art. 2200, New Civil Code).

Where a party is guilty of breach of contract, the other party is entitled to recover the profit which the latter
would have been able to make had the contract been performed (Paz P. Arrieta, et al., plaintiffs-appellees,
vs. National Rice Corporation defendant-appellant, G.R. No. L-15645, promulgated on January 31, 1964;
Vivencio Cerrano, plaintiff-appellee, vs. Tan Chuco, defendant-appellant, 38 Phil. 392).

Regarding the expected profit, a number of questions will have to be answered: Is the 18% unrealized
expected profit being claimed by the plaintiff reasonable? Would the plaintiff be entitled to the whole amount
of said expected profit although there was only partial performance of the contract? Would the 18%
expected profit be based on the estimated direct cost of the subject in the amount of P4,523,275.00, or on
plaintiff's bid proposal of P3,749,000.00?

On the question of reasonableness of the 18% expected profit, the Court noted that according to defendant's
own expert witness, Mr. Ambrosio R. Flores, 25% contractor's profit for a project similar in magnitude as the
one involved in the present case would be ample and reasonable. Plaintiff's witness, Mr. Nicomedes G.
Ablaza, an experienced civil engineer who has been actively engaged in the construction business, testified
that 15% to 20% contractor's profit would be in accordance with the standard engineering practice.
Considering the type of the project involved in this case, he stated, the contractor's profit was placed at 18%.
Taking into consideration the fact that this percentage of profit is even lower than what defendant's witness
considered to be ample and reasonable, the Court believes that the reasonable percentage should be 18%
inasmuch as the actual work was not done completely and the plaintiff has not invested the whole amount of
money called for by the project." (Pp. 263-268, Record on Appeal.)

These findings have not been shown to Us to be erroneous. And additional and clarificatory details, which
We find to be adequately supported by the record, are stated in Respondents' brief thus: t.hqw

23. In a letter dated January 4, 1966, petitioner Central Bank, through the same Mr.
Mendoza, to this request of respondent Ablaza. (Annex "D-1" to the Partial Stipulation of
Facts, R.A., p. 146).

24. Acting upon this written permission, respondent Ablaza immediately brought its men and
equipment from Manila to the construction site in San Fernando, La Union, and promptly
commenced construction work thereat. This work, consisted of the setting up of an enclosure
around the site, the building of temporary shelter for its workmen, and the making of the
necessary excavation works. (Commissioner's Report, R.A., p. 181).

25. Following the commencement of such construction work, petitioner Central Bank,
through a letter dated February 8, 1966, formally requested respondent Ablaza to submit to
petitioner the following:t.hqw

(a) A schedule of deliveries of material which, under the terms of respondent

Ablaza's approved proposal, were to be furnished by petitioner.

(b) A time-table for the accomplishment of the construction work.

In short, as early as February 8, 1966, or more than three months prior to

petitioner's repudiation of the contract in question the latter (petitioner)
already took the above positive steps it compliance with its own obligations
under the contract.

26. Acting upon petitioner's above letter of February 8, 1966, on February 16, 1966,
respondent Ablaza submitted the schedule of deliveries requested by petitioner.
(Commissioner's Report, R.A., p. 182; Decision id., 252; also Exhs. "D" to "D-7", inclusive.)

27. During the period of actual construction, respondent Ablaza, on several occasions,
actually discussed the progress of the work with Mr. Mendoza. In addition, in March 1966,
the latter (Mr. Mendoza) personally visited the construction site. There he saw the work
which respondent had by that time already accomplished which consisted of the completion
of approximately 20% of the necessary excavation works. (Commissioner's Report, R.A., p.
182; Decision, id., p. 252).

28. Following Mr. Mendoza's visit at the construction site, or more specifically on March 22,
1966, the latter (Mendoza) wrote to respondent Ablaza, instructing the latter to formally
designate the person to represent the corporation at the signing of the formal construction
contract. (Exh. "H"; also t.s.n., pp. 119-121, December 18, 1967).
29. By a letter dated March 24, 1966, respondent Ablaza promptly complied with the above
request. (Exh. "I"; also t.s.n., pp 121-123, December 18, 1967).

30. Subsequently, respondent Ablaza posted the required performance guaranty bond in the
total amount of P962,250.00, consisting of (a) a cash bond in the amount of P275,000.00,
and (b) a surety bond, PSIC Bond No. B-252-ML, dated May 19, 1966, in the amount of
P687,250.00. In this connection, it is important to note that the specific purpose of this bond
was to guarantee "the faithful Performance of the Contract" by respondent Ablaza. (Partial
Stipulation of Facts, par. 6, R.A., p. 141).This performance guaranty bond was duly accepted
by petitioner.(Id.)

31. However, on May 20, 1966, petitioner Central Bank called for a meeting with
representatives of respondent Ablaza and another contractor. This meeting was held at the
Conference Room of the Central Bank Building. At this meeting, then Finance Secretary
Eduardo Romualdez, who acted as the representative of petitioner, announced that the
Monetary Board had decided to reduce the appropriations for the various proposed Central
Bank regional office buildings, including the one for San Fernando, La Union.

32. In view of this decision, Secretary Romualdez informed respondent Ablaza that new
plans and designs for the proposed regional office building in San Fernando would have to
be drawn up to take account of the reduction in appropriation. Secretary Romualdez then
advised respondent to suspendwork at the construction site in San Fernando in the
meanwhile. (Decision, R.A., pp. 253-254).

33. After making the above announcements, Secretary Romualdez proposed that all existing
contracts previously entered into between petitioner Central Bank and the several winning
contractors (among them being respondent Ablaza) be considered set aside.

34. Obviously to induce acceptance of the above proposal, Secretary Romualdez offered the
following concessions to respondent Ablaza: t.hqw

(a) That its cash bond in the amount of P275,000.00 be released

immediately, and that interest be paid thereon at the rate of 12% per annum.

(b) That respondent Ablaza be reimbursed for expenses incurred for the
premiums on the performance bond which it posted, and which petitioner had
already accepted. (Decision, R.A., pp. 253-254).

35. In addition, Secretary Romualdez also proposed the conclusion of a new contract with
respondent Ablaza for the construction of a more modest regional office building at San
Fernando, La Union, on anegotiated basis. However, the sincerity and feasibility of this
proposal was rendered dubious by a caveat attached to it, as follows: t.hqw

'4. Where auditing regulations would permit, the Central Bank would enter
into a negotiated contract with the said corporation (Ablaza) for the
construction work on the building on the basis of the revised estimates.'
(Annex "8" to Answer, R.A., p. 95).

36. The revised cost fixed for this proposed alternative regional office building was fixed at a
maximum of P3,000,000.00 (compared to P3,749,000.00 under the contract originally
awarded to respondent). (Annex "6-A" to Answer, R.A., p. 87).

37. Needless perhaps to state, respondent Ablaza rejected the above proposals (pars. 34
and 35, supra.), and on June 3, 1966, through counsel, wrote to petitioner demanding the
formal execution of the contract previously awarded to it, or in the alternative, to pay "all
damages and expenses suffered by (it) in the total amount of P1,181,950.00 ... "(Annex "7"
to Answer, R.A., pp. 89-91; Decision, id., p. 254).

38. In a letter dated June 15, 1966, petitioner Central Bank, through Deputy Governor
Amado R. Brinas, replied to respondent Ablaza's demand denying any liability on the basis
of the following claim:t.hqw

`(That, allegedly) in line with the agreement ... reached between the Central
Bank and Ablaza Construction and Finance Corporation at a meeting held ...
on May 20, 1966,' "whatever agreements might have been previously agreed
upon between (petitioner and respondent) would be considered set aside."
(Decision, R.A., p. 255; Annex "8" to Answer, id., pp. 93-96.)
 39. The above claim was, however, promptly and peremptorily denied by respondent Ablaza,
through counsel, in a letter dated June 16, 1966. (Partial Stipulation of Facts, par. 9, R.A., p.
142, also Annex "G" thereof; Commissioner's Report, R.A., p. 185; Decision, id., p. 255.)"
(Appellee's Brief, pars. 23 to 39, pp. 14-19.)

None of these facts is seriously or in any event sufficiently denied in petitioner's reply brief.

Considering all these facts, it is quite obvious that the Bank's insistence now regarding the need for the
execution of the formal contract comes a little too late to be believable. Even assuming arguendo that the
Revised Manual of Instructions to Treasurers were applicable to the Central Bank, which is doubtful,
considering that under the provisions of its charter already referred to earlier, disbursements and
expenditures of the Bank are supposed to be governed by rules and regulations promulgated by the
Monetary Board, in this particular case, the attitude and actuations then of the Bank in relation to the work
being done by Ablaza prior to May 20, 1966 clearly indicate that both parties assumed that the actual
execution of the written contract is a mere formality which could not materially affect their respective
contractual rights and obligations. In legal effect, therefore, the Bank must be considered as having waived
such requirement.

To be more concrete, from December 15, 1965, when Ablaza accepted the award of the contract in
question, both parties were supposed to have seen to it that the formal contract were duly signed. Under the
Instructions to Bidders, Ablaza was under obligation to sign the same within five (5) days from notice of the
award, and so, he called on the Bank at various times for that purpose. The Bank never indicated until May,
1966 that it would not comply. On the contrary, on February 8, 1966, Ablaza was requested to submit a
"schedule of deliveries of materials" which under the terms of the bid were to be furnished by the Bank. On
March 22, 1966, Ablaza received a letter from the Bank inquiring as to who would be Ablaza's representative
to sign the formal contract. In the meanwhile, no less than Mr. Rizalino Mendoza, the Chairman of the
Management Building Committee of the Central Bank who had been signing for the Bank all the
communications regarding the project at issue, had visited the construction site in March, 1966, just before
he wrote the request abovementioned of the 22nd of that month for the nomination of the representative to
sign the formal contract, and actually saw the progress of the work and that it was being continued, but he
never protested or had it stopped. All these despite the fact that the Memorandum Circular being invoked by
the Bank was issued way back on December 31, 1965 yet. And when finally on May 20, 1966 the Bank met
with the representatives of Ablaza regarding the idea of changing the plans to more economical ones, there
was no mention of the non-execution of the contract as entitling the Bank to back out of it unconditionally.
Rather, the talk, according to the findings of the lower courts, was about the possibility of setting aside
whatever agreement there was already. Under these circumstances, it appears that respondent has been
made to believe up to the time the Bank decided definitely not to honor any agreement at all that its
execution was not indispensable to a contract to be considered as already operating and respondent could
therefore proceed with the work, while the contract could be formalized later.

Petitioner contends next that its withdrawal from the contract is justified by the policy of economic restraint
ordained by Memorandum Circular No. 1. We do not see it that way. Inasmuch as the contract here in
question was perfected before the issuance of said Memorandum Circular, it is elementary that the same
may not be enforced in such a manner as to result in the impairment of the obligations of the contract, for
that is not constitutionally permissible. Not even by means of a statute, which is much more weighty than a
mere declaration of policy, may the government issue any regulation relieving itself or any person from the
binding effects of a contract. (Section 1 (10), Article III, Philippine Constitution of 1953 and Section 11,
Article IV, 1973 Constitution of the Philippines.) Specially in the case of the Central Bank, perhaps, it might
not have been really imperative that it should have revised its plans, considering that it has its own
resources independent of those of the national government and that the funds of the Central Bank are
derived from its own operations, not from taxes. In any event, if the memorandum circular had to be
implemented, the corresponding action in that direction should have been taken without loss of time and
before the contract in question had taken deeper roots. It is thus clear that in unjustifiably failing to honor its
contract with respondent, petitioner has to suffer the consequences of its action.

The last issue submitted for Our resolution refers to the amount of damages awarded to Ablaza by the trial
court and found by the Court of Appeals to be "fair and reasonable." Again, after a review of the record, We
do not find sufficient ground to disturb the appealed judgment even in this respect, except as to attorney's
fees.

There are three principal items of damages awarded by the courts below, namely: (1) compensation for
actual work done in the amount of P298,433.35, (2) unrealized profits equivalent to 18% of the contract price
of P3,749,000 or P674,820.00 and (3) 15% of the total recovery as attorney's fees in addition to the P5,000
already paid as retaining fee. All of these items were the subject of evidence presented by the parties.
According to the Court of Appeals: t.hqw

As regard the accuracy and reasonableness of the award for damages, both actual and
compensatory, it is to be noted that the trial court subjected the Commissioner's report and
the evidence adduced therein to a careful scrutiny. Thus, when the appellant called the trial
court's attention to the fact that the P814,190.00 unrealized expected profit being claimed by
 appellee represented 18% of P4,523,275.00 which was the estimated cost of the project,
while the contract awarded to appellee was only in the amount of P3,749,000.00 as per its
bid proposal, the Court made the necessary modification. It is further to be noted that the
amount of 18% of the estimated cost considered in the said award is much less than that
given by appellant's own expert witness, Ambrosio R. Flores. He testified that 25% as
contractor's profit "would be fair, ample and reasonable." (T.s.n, p. 557, Batalla.)" (p. 17 A,
Appellant's brief.)

Basically, these are factual conclusions which We are not generally at liberty to disregard. And We have not
been shown that they are devoid of reasonable basis.

There can be no dispute as to the legal obligation of petitioner to pay respondent the actual expenses it has
incurred in performing its part of the contract.

Upon the other hand, the legal question of whether or not the Bank is liable for unrealized profits presents no
difficulty. In Arrieta vs. Naric G.R. No. L-15645, Jan. 31, 1964, 10 SCRA 79, this Court sustained as a matter
of law the award of damages n the amount of U.S. $286,000, payable in Philippine Currency, measured in
the rate of exchange prevailing at the time the obligation was incurred (August, 1952), comprising of
unrealized profits of the plaintiff, Mrs. Paz Arrieta, in a case where a government-owned corporation, the
Naric failed to proceed with the purchase of imported rice after having accepted and approved the bid of
Arrieta and after she had already closed her contract with her foreign sellers.

Actually, the law on the matter is unequivocally expressed in Articles 2200 and 2201 of the Civil Code
thus:t.hqw

ART. 2200. Identification for damages shall comprehend not only the value of the loss
suffered, but also that of the profits, which the obligee failed to obtain..

ART. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in
good faith is liable shall be those that are the natural and probable consequences of the
breach of the obligation, and which the parties have forseen or could have reasonably
foreseen at the time the obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to the non- performance of the obligation.

Construing these provisions, the following is what this Court held in Cerrano vs. Tan Chuco, 38 Phil. 392: t.hqw

.... Article 1106 (now 2200) of the Civil Code establishes the rule that prospective profits may
be recovered as damages, while article 1107 (now 2201) of the same Code provides that the
damages recoverable for the breach of obligations not originating in fraud (dolo) are those
which were or might have been foreseen at the time the contract was entered into. Applying
these principles to the facts in this case, we think that it is unquestionable that defendant
must be deemed to have foreseen at the time he made the contract that in the event of his
failure to perform it, the plaintiff would be damaged by the loss of the profit he might
reasonably have expected to derive from its use.

When the existence of a loss is established, absolute certainty as to its amount is not
required. The benefit to be derived from a contract which one of the parties has absolutely
failed to perform is of necessity to some extent, a matter of speculation, but the injured party
is not to be denied all remedy for that reason alone. He must produce the best evidence of
which his case is susceptible and if that evidence warrants the inference that he has been
damaged by the loss of profits which he might with reasonable certainty have anticipated but
for the defendant's wrongful act, he is entitled to recover. As stated in Sedgwick on Damages
(Ninth Ed., par. 177):

The general rule is, then, that a plaintiff may recover compensation for any gain which he
can make it appear with reasonable certainty the defendant's wrongful act prevented him
from acquiring, ...'. (See also Algarra vs. Sandejas, 27 Phil. Rep., 284, 289; Hicks vs. Manila
Hotel Co., 28 Phil. Rep., 325.) (At pp. 398-399.)

Later, in General Enterprises, Inc. vs. Lianga Bay Logging Co. Inc., 11 SCRA 733, Article 2200 of the Civil
Code was again applied as follows: t.hqw

Regarding the actual damages awarded to appellee, appellant contends that they are
unwarranted inasmuch as appellee has failed to adduce any evidence to substantiate them
even assuming arguendo that appellant has failed to supply the additional monthly 2,000,000
board feet for the remainder of the period agreed upon in the contract Exhibit A. Appellant
maintains that for appellee to be entitled to demand payment of sales that were not effected
 it should have proved (1) that there are actual sales made of appellee's logs which were not
fulfilled, (2) that it had obtained the best price for such sales, (3) that there are buyers ready
to buy at such price stating the volume they are ready to buy, and (4) appellee could not
cover the sales from the logs of other suppliers. Since these facts were not proven,
appellee's right to unearned commissions must fail.

This argument must be overruled in the light of the law and evidence on the matter. Under
Article 2200 of the Civil Code, indemnification for damages comprehends not only the value
of the loss suffered but also that of the profits which the creditor fails to obtain. In other
words, lucrum cessans is also a basis for indemnification. The question then that arises is:
Has appellee failed to make profits because of appellant's breach of contract, and in the
affirmative, is there here basis for determining with reasonable certainty such unearned
profits?

Appellant's memorandum (p. 9) shows that appellee has sold to Korea under the contract in
question the following board feet of logs, Breareton Scale: t.hqw

Months Board Feet

From June to August 1959 3,007,435

September, 1959 none
October, 1959 2,299,805
November, 1959 801,021
December, 1959 1,297,510

Total 7,405,861

The above figures tally with those of Exhibit N. In its brief (p. 141) appellant claims that in
less than six months' time appellee received by way of commission the amount of
P117,859.54, while in its memorandum, appellant makes the following statement:

`11. The invoice F.O.B. price of the sale through plaintiff General is P767,798.82 but the
agreed F.O.B. price was P799,319.00, the commission at 13% (F.O.B.) is P117,859.54. But,
as there were always two prices Invoice F.O.B price and F.O.B. price as per contract,
because of the sales difference amounting to P31,920.18, and the same was deducted from
the commission, actually paid to plaintiff General is only P79,580.82.' " It appears, therefore,
that during the period of June to December, 1959, in spite of the short delivery incurred by
appellant, appellee had been earning its commission whenever logs were delivered to it. But
from January, 1960, appellee had ceased to earn any commission because appellant failed
to deliver any log in violation of their agreement. Had appellant continued to deliver the logs
as it was bound to pursuant to the agreement it is reasonable to expect that it would have
continued earning its commission in much the same manner as it used to in connection with
the previous shipments of logs, which clearly indicates that it failed to earn the commissions
it should earn during this period of time. And this commission is not difficult to estimate.
Thus, during the seventeen remaining months of the contract, at the rate of at least
2,000,000 board feet, appellant should have delivered thirty-four million board feet. If we take
the number of board feet delivered during the months prior to the interruption, namely,
7,405,861 board feet, and the commission received by appellee thereon, which amounts to
P79,580.82, we would have that appellee received a commission of P.0107456 per board
feet. Multiplying 34 million board feet by P.0107456, the product is P365,350.40, which
represents the lucrum cessans that should accrue to appellee. The award therefore, made
by the court a quo of the amount of P400,000.00 as compensatory damages is not
speculative, but based on reasonable estimate.

In the light of these considerations, We cannot say that the Court of Appeals erred in making the
aforementioned award of damages for unrealized profits to respondent Ablaza.

With respect to the award for attorney's fees, We believe that in line with the amount fixed in Lianga, supra.,
an award of ten per centum (10%) of the amount of the total recovery should be enough.

PREMISES CONSIDERED, the decision of the Court of Appeals in this case is affirmed, with the
modification that the award for attorney's fees made therein is hereby reduced to ten per centum (10%) of
the total recovery of respondent Ablaza.

Costs against petitioner.

EN BANC
[G.R. No. L-9657. November 29, 1956.]
LEOPOLDO T. BACANI and MATEO A. MATOTO, Plaintiffs-Appellees, vs. NATIONAL COCONUT CORPORATION,
ET AL., Defendants, NATIONAL COCONUT CORPORATION and BOARD OF LIQUIDATORS, Defendants-
Appellants.

DECISION
BAUTISTA ANGELO, J.:
Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First Instance of Manila. During
the pendency of Civil Case No. 2293 of said court, entitled Francisco Sycip vs. National Coconut Corporation,
Assistant Corporate Counsel Federico Alikpala, counsel forDefendant, requested said stenographers for copies of
the transcript of the stenographic notes taken by them during the hearing. Plaintiffs complied with the request
by delivering to Counsel Alikpala the needed transcript containing 714 pages and thereafter submitted to him
their bills for the payment of their fees. The National Coconut Corporation paid the amount of P564 to Leopoldo
T. Bacani and P150 to Mateo A. Matoto for said transcript at the rate of P1 per page.
Upon inspecting the books of this corporation, the Auditor General disallowed the payment of these fees and
sought the recovery of the amounts paid. On January 19, 1953, the Auditor General required the Plaintiffs to
reimburse said amounts on the strength of a circular of the Department of Justice wherein the opinion was
expressed that the National Coconut Corporation, being a government entity, was exempt from the payment of
the fees in question. On February 6, 1954, the Auditor General issued an order directing the Cashier of the
Department of Justice to deduct from the salary of Leopoldo T. Bacani the amount of P25 every payday and
from the salary of Mateo A. Matoto the amount of P10 every payday beginning March 30, 1954. To prevent
deduction of these fees from their salaries and secure a judicial ruling that the National Coconut Corporation is
not a government entity within the purview of section 16, Rule 130 of the Rules of Court, this action was
instituted in the Court of First Instance of Manila.
Defendants set up as a defense that the National Coconut Corporation is a government entity within the purview
of section 2 of the Revised Administrative Code of 1917 and, hence, it is exempt from paying the stenographers
fees under Rule 130 of the Rules of Court. After trial, the court found for the Plaintiffs declaring (1)
that Defendant National Coconut Corporation is not a government entity within the purview of section 16, Rule
130 of the Rules of Court; (2) that the payments already made by said Defendant to Plaintiffs herein and
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received by the latter from the former in the total amount of P714, for copies of the stenographic transcripts in
question, are valid, just and legal; and (3) that Plaintiffs are under no obligation whatsoever to make a refund
chan roblesvirtualawlibrary

of these payments already received by them. This is an appeal from said decision.
Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is exempt from paying the
legal fees provided for therein, and among these fees are those which stenographers may charge for the
transcript of notes taken by them that may be requested by any interested person (section 8). The fees in
question are for the transcript of notes taken during the hearing of a case in which the National Coconut
Corporation is interested, and the transcript was requested by its assistant corporate counsel for the use of said
corporation.
On the other hand, section 2 of the Revised Administrative Code defines the scope of the term Government of
the Republic of the Philippines as follows: chanroblesvirtuallawlibrary

The Government of the Philippine Islands is a term which refers to the corporate governmental entity through
which the functions of government are exercised throughout the Philippine Islands, including, save as the
contrary appears from the context, the various arms through which political authority is made effective in said
Islands, whether pertaining to the central Government or to the provincial or municipal branches or other form
of local government.
The question now to be determined is whether the National Coconut Corporation may be considered as
included in the term Government of the Republic of the Philippines for the purposes of the exemption of the
legal fees provided for in Rule 130 of the Rules of Court.
As may be noted, the term Government of the Republic of the Philippines refers to a government entity
through which the functions of government are exercised, including the various arms through which political
authority is made effective in the Philippines, whether pertaining to the central government or to the provincial
or municipal branches or other form of local government. This requires a little digression on the nature and
functions of our government as instituted in our Constitution.
To begin with, we state that the term Government may be defined as that institution or aggregate of
institutions by which an independent society makes and carries out those rules of action which are necessary to
enable men to live in a social state, or which are imposed upon the people forming that society by those who
possess the power or authority of prescribing them (U.S. vs. Dorr, 2 Phil., 332). This institution, when referring
to the national government, has reference to what our Constitution has established composed of three great
departments, the legislative, executive, and the judicial, through which the powers and functions of government
are exercised. These functions are twofold: constitute and ministrant. The former are those which constitute
chanroblesvirtuallawlibrary

the very bonds of society and are compulsory in nature; the latter are those that are undertaken only by way chan roblesvirtualawlibrary

of advancing the general interests of society, and are merely optional. President Wilson enumerates the
constituent functions as follows: chanroble svirtuallawlibrary

(1) The keeping of order and providing for the protection of persons and property from violence and robbery.
(2) The fixing of the legal relations between man and wife and between parents and children.
(3) The regulation of the holding, transmission, and interchange of property, and the determination of its
liabilities for debt or for crime.
(4) The determination of contract rights between individuals.
(5) The definition and punishment of crime.
(6) The administration of justice in civil cases.
(7) The determination of the political duties, privileges, and relations of citizens.
(8) Dealings of the state with foreign powers: the preservation of the state from external danger or chanroblesvirtuallawlibrary

encroachment and the advancement of its international interests. (Malcolm, The Government of the Philippine
Islands, p. 19.)
The most important of the ministrant functions are: public works, public education, public charity, health and chanroblesvirtuallawlibrary

safety regulations, and regulations of trade and industry. The principles deter mining whether or not a
government shall exercise certain of these optional functions are: (1) that a government should do for the chanroblesvirtuallawlibrary

public welfare those things which private capital would not naturally undertake and (2) that a government
should do these things which by its very nature it is better equipped to administer for the public welfare than is
any private individual or group of individuals. (Malcolm, The Government of the Philippine Islands, pp. 19-20.)
From the above we may infer that, strictly speaking, there are functions which our government is required to
exercise to promote its objectives as expressed in our Constitution and which are exercised by it as an attribute
of sovereignty, and those which it may exercise to promote merely the welfare, progress and prosperity of the
people. To this latter class belongs the organization of those corporations owned or controlled by the
government to promote certain aspects of the economic life of our people such as the National Coconut
Corporation. These are what we call government-owned or controlled corporations which may take on the form
of a private enterprise or one organized with powers and formal characteristics of a private corporations under
the Corporation Law.
The question that now arises is: Does the fact that these corporation perform certain functions of government
chanroblesvirtuallawlibrary

make them a part of the Government of the Philippines?

The answer is simple: they do not acquire that status for the simple reason that they do not come under the
chanroble svirtuallawlibrary

classification of municipal or public corporation. Take for instance the National Coconut Corporation. While it
was organized with the purpose of adjusting the coconut industry to a position independent of trade
preferences in the United States and of providing Facilities for the better curing of copra products and the
proper utilization of coconut by-products, a function which our government has chosen to exercise to promote
the coconut industry, however, it was given a corporate power separate and distinct from our government, for it
was made subject to the provisions of our Corporation Law in so far as its corporate existence and the powers
that it may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in the
same manner as any other private corporations, and in this sense it is an entity different from our government.
As this Court has aptly said, The mere fact that the Government happens to be a majority stockholder does not
make it a public corporation (National Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-587). By
becoming a stockholder in the National Coal Company, the Government divested itself of its sovereign character
so far as respects the transactions of the corporation . Unlike the Government, the corporation may be sued cralaw

without its consent, and is subject to taxation. Yet the National Coal Company remains an agency or
instrumentality of government. (Government of the Philippine Islands vs. Springer, 50 Phil., 288.)
To recapitulate, we may mention that the term Government of the Republic of the Philippines used in section
2 of the Revised Administrative Code refers only to that government entity through which the functions of the
government are exercised as an attribute of sovereignty, and in this are included those arms through which
political authority is made effective whether they be provincial, municipal or other form of local government.
These are what we call municipal corporations. They do not include government entities which are given a
corporate personality separate and distinct from the government and which are governed by the Corporation
Law. Their powers, duties and liabilities have to be determined in the light of that law and of their corporate
charters. They do not therefore come within the exemption clause prescribed in section 16, Rule 130 of our
Rules of Court.
Public corporations are those formed or organized for the government of a portion of the State. (Section 3,
Republic Act No. 1459, Corporation Law).
The generally accepted definition of a municipal corporation would only include organized cities and towns,
and like organizations, with political and legislative powers for the local, civil government and police regulations
of the inhabitants of the particular district included in the boundaries of the corporation. Heller vs. Stremmel,
52 Mo. 309, 312.
In its more general sense the phrase municipal corporation may include both towns and counties, and other
public corporations created by government for political purposes. In its more common and limited signification,
it embraces only incorporated villages, towns and cities. Dunn vs. Court of County Revenues, 85 Ala. 144, 146, 4
So. 661. (McQuillin, Municipal Corporations, 2nd ed., Vol. 1, p. 385.)
We may, therefore, define a municipal corporation in its historical and strict sense to be the incorporation, by
the authority of the government, of the inhabitants of a particular place or district, and authorizing them in their
corporate capacity to exercise subordinate specified powers of legislation and regulation with respect to their
local and internal concerns. This power of local government is the distinctive purpose and the distinguishing
feature of a municipal corporation proper. (Dillon, Municipal Corporations, 5th ed., Vol. I, p. 59.)
It is true that under section 8, Rule 130, stenographers may only charge as fees P0.30 for each page of transcript
of not less than 200 words before the appeal is taken and P0.15 for each page after the filing of the appeal, but
in this case the National Coconut Corporation has agreed and in fact has paid P1.00 per page for the services
rendered by the Plaintiffs and has not raised any objection to the amount paid until its propriety was disputed
by the Auditor General. The payment of the fees in question became therefore contractual and as such is valid
even if it goes beyond the limit prescribed in section 8, Rule 130 of the Rules of Court.
As regards the question of procedure raised by Appellants, suffice it to say that the same is insubstantial,
considering that this case refers not to a money claim disapproved by the Auditor General but to an action of
prohibition the purpose of which is to restrain the officials concerned from deducting from Plaintiffs salaries the
amount paid to them as stenographers fees. This case does not come under section 1, Rule 45 of the Rules of
Court relative to appeals from a decision of the Auditor General.
Wherefore, the decision appealed from is affirmed, without pronouncement as to costs.

G.R. No. 155650 July 20, 2006

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,

vs.
COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF PARAAQUE, SANGGUNIANG
PANGLUNGSOD NG PARAAQUE, CITY ASSESSOR OF PARAAQUE, and CITY TREASURER OF
PARAAQUE, respondents.

DECISION

CARPIO, J.:

The Antecedents

Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport
(NAIA) Complex in Paraaque City under Executive Order No. 903, otherwise known as the Revised
Charter of the Manila International Airport Authority ("MIAA Charter"). Executive Order No. 903 was issued
on 21 July 1983 by then President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 9091 and

TAX
TAXABLE YEAR TAX DUE PENALTY TOTAL
DECLARATION
E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49
E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00
E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00
E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24
E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99
E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00
E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00
*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00
*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00
GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42

2982 amended the MIAA Charter.

As operator of the international airport, MIAA administers the land, improvements and equipment within the
NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,3 including the
runways and buildings ("Airport Lands and Buildings") then under the Bureau of Air Transportation.4 The
MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through
sale or any other mode unless specifically approved by the President of the Philippines.5

On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The
OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate tax granted
to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Paraaque to
pay the real estate tax imposed by the City. MIAA then paid some of the real estate tax already due.

On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Paraaque
for the taxable years 1992 to 2001. MIAA's real estate tax delinquency is broken down as follows:

1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75

#9476101 for P28,676,480.00

#9476103 for P49,115.006

On 17 July 2001, the City of Paraaque, through its City Treasurer, issued notices of levy and warrants of
levy on the Airport Lands and Buildings. The Mayor of the City of Paraaque threatened to sell at public
auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA thus
sought a clarification of OGCC Opinion No. 061.

On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC
pointed out that Section 206 of the Local Government Code requires persons exempt from real estate tax to
show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof that MIAA is
exempt from real estate tax.

On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction,
with prayer for preliminary injunction or temporary restraining order. The petition sought to restrain the City
of Paraaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport
Lands and Buildings. The petition was docketed as CA-G.R. SP No. 66878.

On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day
reglementary period. The Court of Appeals also denied on 27 September 2002 MIAA's motion for
reconsideration and supplemental motion for reconsideration. Hence, MIAA filed on 5 December 2002 the
present petition for review.7

Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the Barangay Halls of
Barangays Vitalez, Sto. Nio, and Tambo, Paraaque City; in the public market of Barangay La Huerta; and
in the main lobby of the Paraaque City Hall. The City of Paraaque published the notices in the 3 and 10
January 2003 issues of the Philippine Daily Inquirer, a newspaper of general circulation in the Philippines.
The notices announced the public auction sale of the Airport Lands and Buildings to the highest bidder on 7
February 2003, 10:00 a.m., at the Legislative Session Hall Building of Paraaque City.

A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an
Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion
sought to restrain respondents the City of Paraaque, City Mayor of Paraaque, Sangguniang
Panglungsod ng Paraaque, City Treasurer of Paraaque, and the City Assessor of Paraaque
("respondents") from auctioning the Airport Lands and Buildings.

On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court
ordered respondents to cease and desist from selling at public auction the Airport Lands and Buildings.
Respondents received the TRO on the same day that the Court issued it. However, respondents received
the TRO only at 1:25 p.m. or three hours after the conclusion of the public auction.

On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.

On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued
during the hearing, MIAA, respondent City of Paraaque, and the Solicitor General subsequently submitted
their respective Memoranda.

MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of
MIAA. However, MIAA points out that it cannot claim ownership over these properties since the real owner
of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to
devote the Airport Lands and Buildings for the benefit of the general public. Since the Airport Lands and
Buildings are devoted to public use and public service, the ownership of these properties remains with the
State. The Airport Lands and Buildings are thus inalienable and are not subject to real estate tax by local
governments.

MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the payment of
real estate tax. MIAA insists that it is also exempt from real estate tax under Section 234 of the Local
Government Code because the Airport Lands and Buildings are owned by the Republic. To justify the
exemption, MIAA invokes the principle that the government cannot tax itself. MIAA points out that the reason
for tax exemption of public property is that its taxation would not inure to any public advantage, since in such
a case the tax debtor is also the tax creditor.

Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax
exemption privileges of "government-owned and-controlled corporations" upon the effectivity of the
Local Government Code. Respondents also argue that a basic rule of statutory construction is that the
express mention of one person, thing, or act excludes all others. An international airport is not among the
exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA
cannot claim that the Airport Lands and Buildings are exempt from real estate tax.

Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8 where we held
that the Local Government Code has withdrawn the exemption from real estate tax granted to international
airports. Respondents further argue that since MIAA has already paid some of the real estate tax
assessments, it is now estopped from claiming that the Airport Lands and Buildings are exempt from real
estate tax.

The Issue

This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are exempt from
real estate tax under existing laws. If so exempt, then the real estate tax assessments issued by the City of
Paraaque, and all proceedings taken pursuant to such assessments, are void. In such event, the other
issues raised in this petition become moot.

The Court's Ruling

We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local
governments.

First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National
Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the
Republic of the Philippines and thus exempt from real estate tax.

1. MIAA is Not a Government-Owned or Controlled Corporation

Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real
estate tax. Respondents claim that the deletion of the phrase "any government-owned or controlled so
exempt by its charter" in Section 234(e) of the Local Government Code withdrew the real estate tax
exemption of government-owned or controlled corporations. The deleted phrase appeared in Section 40(a)
of the 1974 Real Property Tax Code enumerating the entities exempt from real estate tax.

There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax.
However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory
Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as
follows:

SEC. 2. General Terms Defined. x x x x

(13) Government-owned or controlled corporation refers to any agency organized as a stock or

non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through its instrumentalities either
wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one
(51) percent of its capital stock: x x x. (Emphasis supplied)

A government-owned or controlled corporation must be "organized as a stock or non-stock corporation."

MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it
has no capital stock divided into shares. MIAA has no stockholders or voting shares. Section 10 of the
MIAA Charter9 provides:

SECTION 10. Capital. The capital of the Authority to be contributed by the National Government
shall be increased from Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion
(P10,000,000,000.00) Pesos to consist of:
 (a) The value of fixed assets including airport facilities, runways and equipment and such other
properties, movable and immovable[,] which may be contributed by the National Government or
transferred by it from any of its agencies, the valuation of which shall be determined jointly with the
Department of Budget and Management and the Commission on Audit on the date of such
contribution or transfer after making due allowances for depreciation and other deductions taking
into account the loans and other liabilities of the Authority at the time of the takeover of the assets
and other properties;

(b) That the amount of P605 million as of December 31, 1986 representing about seventy percentum
(70%) of the unremitted share of the National Government from 1983 to 1986 to be remitted to the
National Treasury as provided for in Section 11 of E. O. No. 903 as amended, shall be converted
into the equity of the National Government in the Authority. Thereafter, the Government contribution
to the capital of the Authority shall be provided in the General Appropriations Act.

Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.

Section 3 of the Corporation Code10 defines a stock corporation as one whose "capital stock is divided
into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA
has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence,
MIAA is not a stock corporation.

MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code
defines a non-stock corporation as "one where no part of its income is distributable as dividends to its
members, trustees or officers." A non-stock corporation must have members. Even if we assume that the
Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation.
Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA
Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury.11 This
prevents MIAA from qualifying as a non-stock corporation.

Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable,
religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or
similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these
purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or
controlled corporation. What then is the legal status of MIAA within the National Government?

MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental
functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with
corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a
government "instrumentality" as follows:

SEC. 2. General Terms Defined. x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if
not all corporate powers, administering special funds, and enjoying operational autonomy, usually
through a charter. x x x (Emphasis supplied)

When the law vests in a government instrumentality corporate powers, the instrumentality does not become
a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it
remains a government instrumentality exercising not only governmental but also corporate powers. Thus,
MIAA exercises the governmental powers of eminent domain,12 police authority13 and the levying of fees and
charges.14 At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law,
insofar as these powers are not inconsistent with the provisions of this Executive Order."15

Likewise, when the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery although not integrated with the
department framework. The MIAA Charter expressly states that transforming MIAA into a "separate and
autonomous body"16 will make its operation more "financially viable."17

Many government instrumentalities are vested with corporate powers but they do not become stock or non-
stock corporations, which is a necessary condition before an agency or instrumentality is deemed a
government-owned or controlled corporation. Examples are the Mactan International Airport Authority, the
Philippine Ports Authority, the University of the Philippines and Bangko Sentral ng Pilipinas. All these
government instrumentalities exercise corporate powers but they are not organized as stock or non-stock
corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code. These
government instrumentalities are sometimes loosely called government corporate entities. However, they
are not government-owned or controlled corporations in the strict sense as understood under the
Administrative Code, which is the governing law defining the legal relationship and status of government
entities.

A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which
states:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:

xxxx

(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalitiesand local government units.(Emphasis and underscoring supplied)

Section 133(o) recognizes the basic principle that local governments cannot tax the national government,
which historically merely delegated to local governments the power to tax. While the 1987 Constitution now
includes taxation as one of the powers of local governments, local governments may only exercise such
power "subject to such guidelines and limitations as the Congress may provide."18

When local governments invoke the power to tax on national government instrumentalities, such power is
construed strictly against local governments. The rule is that a tax is never presumed and there must be
clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is
resolved against taxation. This rule applies with greater force when local governments seek to tax national
government instrumentalities.

Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption.
However, when Congress grants an exemption to a national government instrumentality from local taxation,
such exemption is construed liberally in favor of the national government instrumentality. As this Court
declared in Maceda v. Macaraig, Jr.:

The reason for the rule does not apply in the case of exemptions running to the benefit of the
government itself or its agencies. In such case the practical effect of an exemption is merely to
reduce the amount of money that has to be handled by government in the course of its operations.
For these reasons, provisions granting exemptions to government agencies may be construed
liberally, in favor of non tax-liability of such agencies.19

There is, moreover, no point in national and local governments taxing each other, unless a sound and
compelling policy requires such transfer of public funds from one government pocket to another.

There is also no reason for local governments to tax national government instrumentalities for rendering
essential public services to inhabitants of local governments. The only exception is when the legislature
clearly intended to tax government instrumentalities for the delivery of essential public services for
sound and compelling policy considerations. There must be express language in the law empowering
local governments to tax national government instrumentalities. Any doubt whether such power exists is
resolved against local governments.

Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code,
local governments cannot tax national government instrumentalities. As this Court held in Basco v.
Philippine Amusements and Gaming Corporation:

The states have no power by taxation or otherwise, to retard, impede, burden or in any
manner control the operation of constitutional laws enacted by Congress to carry into
execution the powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat
316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over local governments.

"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of
power on the part of the States to touch, in that way (taxation) at least, the instrumentalities
of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or
political subdivision can regulate a federal instrumentality in such a way as to prevent it from
consummating its federal responsibilities, or even to seriously burden it in the
accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis
supplied)

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local
authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool
for regulation" (U.S. v. Sanchez, 340 US 42).
 The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v.
Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which
has the inherent power to wield it. 20

2. Airport Lands and Buildings of MIAA are Owned by the Republic

a. Airport Lands and Buildings are of Public Dominion

The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the
State or the Republic of the Philippines. The Civil Code provides:

ARTICLE 419. Property is either of public dominion or of private ownership.

ARTICLE 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth. (Emphasis supplied)

ARTICLE 421. All other property of the State, which is not of the character stated in the preceding
article, is patrimonial property.

ARTICLE 422. Property of public dominion, when no longer intended for public use or for public
service, shall form part of the patrimonial property of the State.

No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like "roads,
canals, rivers, torrents, ports and bridges constructed by the State," are owned by the State. The term
"ports" includes seaports and airports. The MIAA Airport Lands and Buildings constitute a "port"
constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are
properties of public dominion and thus owned by the State or the Republic of the Philippines.

The Airport Lands and Buildings are devoted to public use because they are used by the public for
international and domestic travel and transportation. The fact that the MIAA collects terminal fees and
other charges from the public does not remove the character of the Airport Lands and Buildings as
properties for public use. The operation by the government of a tollway does not change the character of the
road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly
through the taxes they pay the government, or only those among the public who actually use the road
through the toll fees they pay upon using the road. The tollway system is even a more efficient and equitable
manner of taxing the public for the maintenance of public roads.

The charging of fees to the public does not determine the character of the property whether it is of public
dominion or not. Article 420 of the Civil Code defines property of public dominion as one "intended for public
use." Even if the government collects toll fees, the road is still "intended for public use" if anyone can use the
road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on
the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road
do not affect the public character of the road.

The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines,
constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not
change the character of MIAA as an airport for public use. Such fees are often termed user's tax. This
means taxing those among the public who actually use a public facility instead of taxing all the public
including those who never use the particular public facility. A user's tax is more equitable a principle of
taxation mandated in the 1987 Constitution.21

The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for
both international and domestic air traffic,"22 are properties of public dominion because they are intended for
public use.As properties of public dominion, they indisputably belong to the State or the Republic of
the Philippines.

b. Airport Lands and Buildings are Outside the Commerce of Man

The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public
dominion. As properties of public dominion, the Airport Lands and Buildings are outside the
commerce of man. The Court has ruled repeatedly that properties of public dominion are outside the
commerce of man. As early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that
properties devoted to public use are outside the commerce of man, thus:
 According to article 344 of the Civil Code: "Property for public use in provinces and in towns
comprises the provincial and town roads, the squares, streets, fountains, and public waters, the
promenades, and public works of general service supported by said towns or provinces."

The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not
in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit
of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for
private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing
a contract over a thing of which it could not dispose, nor is it empowered so to do.

The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man
may be the object of a contract, and plazas and streets are outside of this commerce, as was
decided by the supreme court of Spain in its decision of February 12, 1895, which says: "Communal
things that cannot be sold because they are by their very nature outside of commerce are
those for public use, such as the plazas, streets, common lands, rivers, fountains, etc."
(Emphasis supplied) 23

Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside
the commerce of man:

xxx Town plazas are properties of public dominion, to be devoted to public use and to be made
available to the public in general. They are outside the commerce of man and cannot be disposed
of or even leased by the municipality to private parties. While in case of war or during an emergency,
town plazas may be occupied temporarily by private individuals, as was done and as was tolerated
by the Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or
use must also cease, and the town officials should see to it that the town plazas should ever be kept
open to the public and free from encumbrances or illegal private constructions.24 (Emphasis
supplied)

The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be
the subject of an auction sale.25

Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition
through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public
dominion is void for being contrary to public policy. Essential public services will stop if properties of public
dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of
Paraaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-
payment of real estate tax.

Before MIAA can encumber26 the Airport Lands and Buildings, the President must first withdraw from
public usethe Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth
Act No. 141, which "remains to this day the existing general law governing the classification and disposition
of lands of the public domain other than timber and mineral lands,"27 provide:

SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the
President may designate by proclamation any tract or tracts of land of the public domain as
reservations for the use of the Republic of the Philippines or of any of its branches, or of the
inhabitants thereof, in accordance with regulations prescribed for this purposes, or for quasi-public
uses or purposes when the public interest requires it, including reservations for highways, rights of
way for railroads, hydraulic power sites, irrigation systems, communal pastures or lequas
communales, public parks, public quarries, public fishponds, working men's village and other
improvements for the public benefit.

SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three
shall benon-alienable and shall not be subject to occupation, entry, sale, lease, or other
disposition until again declared alienable under the provisions of this Act or by proclamation
of the President. (Emphasis and underscoring supplied)

Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public
use, these properties remain properties of public dominion and are inalienable. Since the Airport Lands and
Buildings are inalienable in their present status as properties of public dominion, they are not subject to levy
on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use,
their ownership remains with the State or the Republic of the Philippines.

The authority of the President to reserve lands of the public domain for public use, and to withdraw such
public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which
states:
 SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government. (1) The
President shall have the power to reserve for settlement or public use, and for specific public
purposes, any of the lands of the public domain, the use of which is not otherwise directed
by law. The reserved land shall thereafter remain subject to the specific public purpose
indicated until otherwise provided by law or proclamation;

x x x x. (Emphasis supplied)

There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or
presidential proclamation from public use, they are properties of public dominion, owned by the Republic
and outside the commerce of man.

c. MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter
12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties
owned by the Republic, thus:

SEC. 48. Official Authorized to Convey Real Property. Whenever real property of the Government
is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by the
President, unless the authority therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of any
political subdivision or of any corporate agency or instrumentality, by the executive head of the
agency or instrumentality. (Emphasis supplied)

In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its
executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the
Republic can sign such deed of conveyance.28

d. Transfer to MIAA was Meant to Implement a Reorganization

The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the
Bureau of Air Transportation of the Department of Transportation and Communications. The MIAA Charter
provides:

SECTION 3. Creation of the Manila International Airport Authority. x x x x

The land where the Airport is presently located as well as the surrounding land area of
approximately six hundred hectares, are hereby transferred, conveyed and assigned to the
ownership and administration of the Authority, subject to existing rights, if any. The Bureau of
Lands and other appropriate government agencies shall undertake an actual survey of the area
transferred within one year from the promulgation of this Executive Order and the corresponding title
to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale
or through any other mode unless specifically approved by the President of the Philippines.
(Emphasis supplied)

SECTION 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport
facilities, runways, lands, buildings and other property, movable or immovable, belonging to the
Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air
Transportation relating to airport works or air operations, including all equipment which are
necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority.
(Emphasis supplied)

SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air
Transportation and Transitory Provisions. The Manila International Airport including the Manila
Domestic Airport as a division under the Bureau of Air Transportation is hereby abolished.

x x x x.

The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash,
promissory notes or even stock since MIAA is not a stock corporation.

The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and
Buildings to MIAA, thus:
 WHEREAS, the Manila International Airport as the principal airport of the Philippines for both
international and domestic air traffic, is required to provide standards of airport accommodation and
service comparable with the best airports in the world;

WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded
to meet the current and future air traffic and other demands of aviation in Metro Manila;

WHEREAS, a management and organization study has indicated that the objectives of providing
high standards of accommodation and service within the context of a financially viable
operation, will best be achieved by a separate and autonomous body; and

WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the
President of the Philippines is given continuing authority to reorganize the National Government,
which authority includes the creation of new entities, agencies and instrumentalities of the
Government[.] (Emphasis supplied)

The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not
meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely
to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body.
The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by
the Republic. No party claims any ownership rights over MIAA's assets adverse to the Republic.

The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through
sale or through any other mode unless specifically approved by the President of the Philippines."
This only means that the Republic retained the beneficial ownership of the Airport Lands and Buildings
because under Article 428 of the Civil Code, only the "owner has the right to x x x dispose of a thing." Since
MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport Lands and
Buildings.

At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without
the Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only
one who can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the
Airport Lands and Buildings belong to the Republic.

e. Real Property Owned by the Republic is Not Taxable

Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by
the Republic of the Philippines." Section 234(a) provides:

SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of
the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person;

x x x. (Emphasis supplied)

This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local
governments from imposing "[t]axes, fees or charges of any kind on the National Government, its agencies
and instrumentalitiesx x x." The real properties owned by the Republic are titled either in the name of the
Republic itself or in the name of agencies or instrumentalities of the National Government. The
Administrative Code allows real property owned by the Republic to be titled in the name of agencies or
instrumentalities of the national government. Such real properties remain owned by the Republic and
continue to be exempt from real estate tax.

The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national
government. This happens when title of the real property is transferred to an agency or instrumentality even
as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the
tax exemption. Section 234(a) of the Local Government Code states that real property owned by the
Republic loses its tax exemption only if the "beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person." MIAA, as a government instrumentality, is not a taxable person under
Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to
MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties
subject to real estate tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt
from real estate tax. For example, the land area occupied by hangars that MIAA leases to private
corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land
area for a consideration to ataxable person and therefore such land area is subject to real estate tax.
In Lung Center of the Philippines v. Quezon City, the Court ruled:

Accordingly, we hold that the portions of the land leased to private entities as well as those parts of
the hospital leased to private individuals are not exempt from such taxes. On the other hand, the
portions of the land occupied by the hospital and portions of the hospital used for its patients,
whether paying or non-paying, are exempt from real property taxes.29

3. Refutation of Arguments of Minority

The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local
Government Code of 1991 withdrew the tax exemption of "all persons, whether natural or juridical" upon
the effectivity of the Code. Section 193 provides:

SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions are hereby withdrawn upon effectivity of this Code. (Emphasis supplied)

The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local
Government Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real
estate tax. Thus, the minority declares:

It is evident from the quoted provisions of the Local Government Code that the withdrawn
exemptions from realty tax cover not just GOCCs, but all persons. To repeat, the provisions lay
down the explicit proposition that the withdrawal of realty tax exemption applies to all persons. The
reference to or the inclusion of GOCCs is only clarificatory or illustrative of the explicit provision.

The term "All persons" encompasses the two classes of persons recognized under our laws,
natural and juridical persons. Obviously, MIAA is not a natural person. Thus, the
determinative test is not just whether MIAA is a GOCC, but whether MIAA is a juridical person
at all. (Emphasis and underscoring in the original)

The minority posits that the "determinative test" whether MIAA is exempt from local taxation is its status
whether MIAA is a juridical person or not. The minority also insists that "Sections 193 and 234 may be
examined in isolation from Section 133(o) to ascertain MIAA's claim of exemption."

The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly
withdrew the tax exemption of all juridical persons "[u]nless otherwise provided in this Code." Now,
Section 133(o) of the Local Government Code expressly provides otherwise, specifically prohibiting local
governments from imposing any kind of tax on national government instrumentalities. Section 133(o) states:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:

xxxx

(o) Taxes, fees or charges of any kinds on the National Government, its agencies and
instrumentalities, and local government units. (Emphasis and underscoring supplied)

By express mandate of the Local Government Code, local governments cannot impose any kind of tax on
national government instrumentalities like the MIAA. Local governments are devoid of power to tax the
national government, its agencies and instrumentalities. The taxing powers of local governments do not
extend to the national government, its agencies and instrumentalities, "[u]nless otherwise provided in this
Code" as stated in the saving clause of Section 133. The saving clause refers to Section 234(a) on the
exception to the exemption from real estate tax of real property owned by the Republic.

The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are subject
to tax by local governments. The minority insists that the juridical persons exempt from local taxation are
limited to the three classes of entities specifically enumerated as exempt in Section 193. Thus, the minority
states:

x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly
registered under Republic Act No. 6938; and (c) non-stock and non-profit hospitals and educational
institutions. It would be belaboring the obvious why the MIAA does not fall within any of the exempt
entities under Section 193. (Emphasis supplied)
The minority's theory directly contradicts and completely negates Section 133(o) of the Local Government
Code. This theory will result in gross absurdities. It will make the national government, which itself is a
juridical person, subject to tax by local governments since the national government is not included in the
enumeration of exempt entities in Section 193. Under this theory, local governments can impose any kind of
local tax, and not only real estate tax, on the national government.

Under the minority's theory, many national government instrumentalities with juridical personalities will also
be subject to any kind of local tax, and not only real estate tax. Some of the national government
instrumentalities vested by law with juridical personalities are: Bangko Sentral ng Pilipinas,30 Philippine Rice
Research Institute,31Laguna Lake

Development Authority,32 Fisheries Development Authority,33 Bases Conversion Development

Authority,34Philippine Ports Authority,35 Cagayan de Oro Port Authority,36 San Fernando Port
Authority,37 Cebu Port Authority,38 and Philippine National Railways.39

The minority's theory violates Section 133(o) of the Local Government Code which expressly prohibits local
governments from imposing any kind of tax on national government instrumentalities. Section 133(o) does
not distinguish between national government instrumentalities with or without juridical personalities. Where
the law does not distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national
government instrumentalities, with or without juridical personalities. The determinative test whether MIAA is
exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national government
instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision
of law prohibiting local governments from imposing any kind of tax on the national government, its agencies
and instrumentalities.

Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise provided in this
Code." This means that unless the Local Government Code grants an express authorization, local
governments have no power to tax the national government, its agencies and instrumentalities. Clearly, the
rule is local governments have no power to tax the national government, its agencies and instrumentalities.
As an exception to this rule, local governments may tax the national government, its agencies and
instrumentalities only if the Local Government Code expressly so provides.

The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code,
which makes the national government subject to real estate tax when it gives the beneficial use of its real
properties to a taxable entity. Section 234(a) of the Local Government Code provides:

SEC. 234. Exemptions from Real Property Tax The following are exempted from payment of the
real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person.

x x x. (Emphasis supplied)

Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to
this exemption is when the government gives the beneficial use of the real property to a taxable entity.

The exception to the exemption in Section 234(a) is the only instance when the national government, its
agencies and instrumentalities are subject to any kind of tax by local governments. The exception to the
exemption applies only to real estate tax and not to any other tax. The justification for the exception to the
exemption is that the real property, although owned by the Republic, is not devoted to public use or public
service but devoted to the private gain of a taxable person.

The minority also argues that since Section 133 precedes Section 193 and 234 of the Local Government
Code, the later provisions prevail over Section 133. Thus, the minority asserts:

x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted
rule of construction, in case of conflict the subsequent provisions should prevail. Therefore, MIAA, as
a juridical person, is subject to real property taxes, the general exemptions attaching to
instrumentalities under Section 133(o) of the Local Government Code being qualified by Sections
193 and 234 of the same law. (Emphasis supplied)

The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and
Sections 193 and 234 on the other. No one has urged that there is such a conflict, much less has any one
presenteda persuasive argument that there is such a conflict. The minority's assumption of an irreconcilable
conflict in the statutory provisions is an egregious error for two reasons.
First, there is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits
its subordination to other provisions of the Code when Section 193 states "[u]nless otherwise provided in this
Code." By its own words, Section 193 admits the superiority of other provisions of the Local Government
Code that limit the exercise of the taxing power in Section 193. When a provision of law grants a power but
withholds such power on certain matters, there is no conflict between the grant of power and the withholding
of power. The grantee of the power simply cannot exercise the power on matters withheld from its power.

Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local Government Units."
Section 133 limits the grant to local governments of the power to tax, and not merely the exercise of a
delegated power to tax. Section 133 states that the taxing powers of local governments "shall not extend to
the levy" of any kind of tax on the national government, its agencies and instrumentalities. There is no
clearer limitation on the taxing power than this.

Since Section 133 prescribes the "common limitations" on the taxing powers of local governments, Section
133 logically prevails over Section 193 which grants local governments such taxing powers. By their very
meaning and purpose, the "common limitations" on the taxing power prevail over the grant or exercise of the
taxing power. If the taxing power of local governments in Section 193 prevails over the limitations on such
taxing power in Section 133, then local governments can impose any kind of tax on the national government,
its agencies and instrumentalities a gross absurdity.

Local governments have no power to tax the national government, its agencies and instrumentalities, except
as otherwise provided in the Local Government Code pursuant to the saving clause in Section 133 stating
"[u]nless otherwise provided in this Code." This exception which is an exception to the exemption of the
Republic from real estate tax imposed by local governments refers to Section 234(a) of the Code. The
exception to the exemption in Section 234(a) subjects real property owned by the Republic, whether titled in
the name of the national government, its agencies or instrumentalities, to real estate tax if the beneficial use
of such property is given to a taxable entity.

The minority also claims that the definition in the Administrative Code of the phrase "government-owned or
controlled corporation" is not controlling. The minority points out that Section 2 of the Introductory Provisions
of the Administrative Code admits that its definitions are not controlling when it provides:

SEC. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole,
or a particular statute, shall require a different meaning:

xxxx

The minority then concludes that reliance on the Administrative Code definition is "flawed."

The minority's argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a
statute may require a different meaning than that defined in the Administrative Code. However, this does not
automatically mean that the definition in the Administrative Code does not apply to the Local Government
Code. Section 2 of the Administrative Code clearly states that "unless the specific words x x x of a particular
statute shall require a different meaning," the definition in Section 2 of the Administrative Code shall apply.
Thus, unless there is specific language in the Local Government Code defining the phrase "government-
owned or controlled corporation" differently from the definition in the Administrative Code, the definition in
the Administrative Code prevails.

The minority does not point to any provision in the Local Government Code defining the phrase
"government-owned or controlled corporation" differently from the definition in the Administrative Code.
Indeed, there is none. The Local Government Code is silent on the definition of the phrase "government-
owned or controlled corporation." The Administrative Code, however, expressly defines the phrase
"government-owned or controlled corporation." The inescapable conclusion is that the Administrative Code
definition of the phrase "government-owned or controlled corporation" applies to the Local Government
Code.

The third whereas clause of the Administrative Code states that the Code "incorporates in a unified
document the major structural, functional and procedural principles and rules of governance." Thus, the
Administrative Code is the governing law defining the status and relationship of government departments,
bureaus, offices, agencies and instrumentalities. Unless a statute expressly provides for a different status
and relationship for a specific government unit or entity, the provisions of the Administrative Code prevail.

The minority also contends that the phrase "government-owned or controlled corporation" should apply only
to corporations organized under the Corporation Code, the general incorporation law, and not to
corporations created by special charters. The minority sees no reason why government corporations with
special charters should have a capital stock. Thus, the minority declares:

I submit that the definition of "government-owned or controlled corporations" under the

Administrative Code refer to those corporations owned by the government or its instrumentalities
 which are created not by legislative enactment, but formed and organized under the Corporation
Code through registration with the Securities and Exchange Commission. In short, these are GOCCs
without original charters.

xxxx

It might as well be worth pointing out that there is no point in requiring a capital structure for GOCCs
whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not
empowered to declare dividends or alienate their capital shares.

The contention of the minority is seriously flawed. It is not in accord with the Constitution and existing
legislations. It will also result in gross absurdities.

First, the Administrative Code definition of the phrase "government-owned or controlled corporation" does
not distinguish between one incorporated under the Corporation Code or under a special charter. Where the
law does not distinguish, courts should not distinguish.

Second, Congress has created through special charters several government-owned corporations organized
as stock corporations. Prime examples are the Land Bank of the Philippines and the Development Bank of
the Philippines. The special charter40 of the Land Bank of the Philippines provides:

SECTION 81. Capital. The authorized capital stock of the Bank shall be nine billion pesos, divided
into seven hundred and eighty million common shares with a par value of ten pesos each, which
shall be fully subscribed by the Government, and one hundred and twenty million preferred shares
with a par value of ten pesos each, which shall be issued in accordance with the provisions of
Sections seventy-seven and eighty-three of this Code. (Emphasis supplied)

Likewise, the special charter41 of the Development Bank of the Philippines provides:

SECTION 7. Authorized Capital Stock Par value. The capital stock of the Bank shall be Five
Billion Pesos to be divided into Fifty Million common shares with par value of P100 per share. These
shares are available for subscription by the National Government. Upon the effectivity of this
Charter, the National Government shall subscribe to Twenty-Five Million common shares of stock
worth Two Billion Five Hundred Million which shall be deemed paid for by the Government with the
net asset values of the Bank remaining after the transfer of assets and liabilities as provided in
Section 30 hereof. (Emphasis supplied)

Other government-owned corporations organized as stock corporations under their special charters are the
Philippine Crop Insurance Corporation,42 Philippine International Trading Corporation,43 and the Philippine
National Bank44 before it was reorganized as a stock corporation under the Corporation Code. All these
government-owned corporations organized under special charters as stock corporations are subject to real
estate tax on real properties owned by them. To rule that they are not government-owned or controlled
corporations because they are not registered with the Securities and Exchange Commission would remove
them from the reach of Section 234 of the Local Government Code, thus exempting them from real estate
tax.

Third, the government-owned or controlled corporations created through special charters are those that
meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the
government-owned or controlled corporation must be established for the common good. The second
condition is that the government-owned or controlled corporation must meet the test of economic viability.
Section 16, Article XII of the 1987 Constitution provides:

SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of
economic viability. (Emphasis and underscoring supplied)

The Constitution expressly authorizes the legislature to create "government-owned or controlled

corporations" through special charters only if these entities are required to meet the twin conditions of
common good and economic viability. In other words, Congress has no power to create government-owned
or controlled corporations with special charters unless they are made to comply with the two conditions of
common good and economic viability. The test of economic viability applies only to government-owned or
controlled corporations that perform economic or commercial activities and need to compete in the market
place. Being essentially economic vehicles of the State for the common good meaning for economic
development purposes these government-owned or controlled corporations with special charters are
usually organized as stock corporations just like ordinary private corporations.

In contrast, government instrumentalities vested with corporate powers and performing governmental or
public functions need not meet the test of economic viability. These instrumentalities perform essential
public services for the common good, services that every modern State must provide its citizens. These
instrumentalities need not be economically viable since the government may even subsidize their entire
operations. These instrumentalities are not the "government-owned or controlled corporations" referred to in
Section 16, Article XII of the 1987 Constitution.

Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities
vested with corporate powers but performing essential governmental or public functions. Congress has
plenary authority to create government instrumentalities vested with corporate powers provided these
instrumentalities perform essential government functions or public services. However, when the legislature
creates through special charters corporations that perform economic or commercial activities, such entities
known as "government-owned or controlled corporations" must meet the test of economic viability
because they compete in the market place.

This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and
similar government-owned or controlled corporations, which derive their income to meet operating expenses
solely from commercial transactions in competition with the private sector. The intent of the Constitution is to
prevent the creation of government-owned or controlled corporations that cannot survive on their own in the
market place and thus merely drain the public coffers.

Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional
Commission the purpose of this test, as follows:

MR. OPLE: Madam President, the reason for this concern is really that when the government
creates a corporation, there is a sense in which this corporation becomes exempt from the test of
economic performance. We know what happened in the past. If a government corporation loses,
then it makes its claim upon the taxpayers' money through new equity infusions from the government
and what is always invoked is the common good. That is the reason why this year, out of a budget of
P115 billion for the entire government, about P28 billion of this will go into equity infusions to support
a few government financial institutions. And this is all taxpayers' money which could have been
relocated to agrarian reform, to social services like health and education, to augment the salaries of
grossly underpaid public employees. And yet this is all going down the drain.

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good,"
this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the
responsibility of meeting the market test so that they become viable. And so, Madam President, I
reiterate, for the committee's consideration and I am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC
TEST," together with the common good.45

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The
1987 Constitution of the Republic of the Philippines: A Commentary:

The second sentence was added by the 1986 Constitutional Commission. The significant addition,
however, is the phrase "in the interest of the common good and subject to the test of economic
viability." The addition includes the ideas that they must show capacity to function efficiently in
business and that they should not go into activities which the private sector can do better. Moreover,
economic viability is more than financial viability but also includes capability to make profit and
generate benefits not quantifiable in financial terms.46(Emphasis supplied)

Clearly, the test of economic viability does not apply to government entities vested with corporate powers
and performing essential public services. The State is obligated to render essential public services
regardless of the economic viability of providing such service. The non-economic viability of rendering such
essential public service does not excuse the State from withholding such essential services from the public.

However, government-owned or controlled corporations with special charters, organized essentially for
economic or commercial objectives, must meet the test of economic viability. These are the government-
owned or controlled corporations that are usually organized under their special charters as stock
corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines. These are
the government-owned or controlled corporations, along with government-owned or controlled corporations
organized under the Corporation Code, that fall under the definition of "government-owned or controlled
corporations" in Section 2(10) of the Administrative Code.

The MIAA need not meet the test of economic viability because the legislature did not create MIAA to
compete in the market place. MIAA does not compete in the market place because there is no competing
international airport operated by the private sector. MIAA performs an essential public service as the primary
domestic and international airport of the Philippines. The operation of an international airport requires the
presence of personnel from the following government agencies:
 1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers,
screening out those without visas or travel documents, or those with hold departure orders;

2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations;

3. The quarantine office of the Department of Health, to enforce health measures against the spread
of infectious diseases into the country;

4. The Department of Agriculture, to enforce measures against the spread of plant and animal
diseases into the country;

5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists
and the escape of criminals, as well as to secure the airport premises from terrorist attack or seizure;

6. The Air Traffic Office of the Department of Transportation and Communications, to authorize
aircraft to enter or leave Philippine airspace, as well as to land on, or take off from, the airport; and

7. The MIAA, to provide the proper premises such as runway and buildings for the government
personnel, passengers, and airlines, and to manage the airport operations.

All these agencies of government perform government functions essential to the operation of an
international airport.

MIAA performs an essential public service that every modern State must provide its citizens. MIAA derives
its revenues principally from the mandatory fees and charges MIAA imposes on passengers and airlines.
The terminal fees that MIAA charges every passenger are regulatory or administrative fees47 and not income
from commercial transactions.

MIAA falls under the definition of a government instrumentality under Section 2(10) of the Introductory
Provisions of the Administrative Code, which provides:

SEC. 2. General Terms Defined. x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not
all corporate powers, administering special funds, and enjoying operational autonomy, usually
through a charter. x x x (Emphasis supplied)

The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-owned or
controlled corporation. Without a change in its capital structure, MIAA remains a government instrumentality
under Section 2(10) of the Introductory Provisions of the Administrative Code. More importantly, as long as
MIAA renders essential public services, it need not comply with the test of economic viability. Thus, MIAA is
outside the scope of the phrase "government-owned or controlled corporations" under Section 16, Article XII
of the 1987 Constitution.

The minority belittles the use in the Local Government Code of the phrase "government-owned or controlled
corporation" as merely "clarificatory or illustrative." This is fatal. The 1987 Constitution prescribes explicit
conditions for the creation of "government-owned or controlled corporations." The Administrative Code
defines what constitutes a "government-owned or controlled corporation." To belittle this phrase as
"clarificatory or illustrative" is grave error.

To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the
Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock
corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of
the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a
government instrumentality vested with corporate powers and performing essential public services pursuant
to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality,
MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government
Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a
taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real
property owned by the Republic is given to a taxable entity.

Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties
of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the
Civil Code provides:

Art. 420. The following things are property of public dominion:

 (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth. (Emphasis supplied)

The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and
Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether
intended for public use or public service, the Airport Lands and Buildings are properties of public dominion.
As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus
exempt from real estate tax under Section 234(a) of the Local Government Code.

4. Conclusion

Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the
legal relation and status of government units, agencies and offices within the entire government machinery,
MIAA is a government instrumentality and not a government-owned or controlled corporation. Under Section
133(o) of the Local Government Code, MIAA as a government instrumentality is not a taxable person
because it is not subject to "[t]axes, fees or charges of any kind" by local governments. The only exception is
when MIAA leases its real property to a "taxable person" as provided in Section 234(a) of the Local
Government Code, in which case the specific real property leased becomes subject to real estate tax. Thus,
only portions of the Airport Lands and Buildings leased to taxable persons like private parties are subject to
real estate tax by the City of Paraaque.

Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use,
are properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420
specifically mentions "ports x x x constructed by the State," which includes public airports and seaports, as
properties of public dominion and owned by the Republic. As properties of public dominion owned by the
Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real
estate tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that
properties of public dominion are not subject to execution or foreclosure sale.

WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of
5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and
Buildings of the Manila International Airport Authority EXEMPT from the real estate tax imposed by the City
of Paraaque. We declare VOID all the real estate tax assessments, including the final notices of real estate
tax delinquencies, issued by the City of Paraaque on the Airport Lands and Buildings of the Manila
International Airport Authority, except for the portions that the Manila International Airport Authority has
leased to private parties. We also declare VOID the assailed auction sale, and all its effects, of the Airport
Lands and Buildings of the Manila International Airport Authority.

No costs.

SO ORDERED.

G.R. No. 88291 June 8, 1993

ERNESTO M. MACEDA, petitioner,

vs.
HON. CATALINO MACARAIG, JR., in his capacity as Executive Secretary, Office of the President,
HON. VICENTE JAYME, ETC., ET AL., respondents.

Angara, Abello, Concepcion & Cruz for respondent Pilipinas Shell Petroleum Corporation.

Siguion Reyna, Montecillo & Ongsiako for Caltex.

NOCON, J.:

Just like lightning which does strike the same place twice in some instances, this matter of indirect tax
exemption of the private respondent National Power Corporation (NPC) is brought to this Court a second
time. Unfazed by the Decision We promulgated on May 31, 1991 1 petitioner Ernesto Maceda asks this Court
to reconsider said Decision. Lest We be criticized for denying due process to the petitioner. We have decided to
take a second look at the issues. In the process, a hearing was held on July 9, 1992 where all parties presented
their respective arguments. Etched in this Court's mind are the paradoxical claims by both petitioner and private
respondents that their respective positions are for the benefit of the Filipino people.

I
A Chronological review of the relevant NPC laws, specially with respect to its tax exemption provisions, at
the risk of being repetitious is, therefore, in order.

On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a
public corporation, mainly to develop hydraulic power from all water sources in the Philippines. 2 The sum of
P250,000.00 was appropriated out of the funds in the Philippine Treasury for the purpose of organizing the NPC
and conducting its preliminary work. 3 The main source of funds for the NPC was the flotation of bonds in the
capital markets 4 and these bonds

. . . issued under the authority of this Act shall be exempt from the payment of all taxes by
the Commonwealth of the Philippines, or by any authority, branch, division or political
subdivision thereof and subject to the provisions of the Act of Congress, approved March 24,
1934, otherwise known as the Tydings McDuffle Law, which facts shall be stated upon the
face of said bonds. . . . . 5

On June 24, 1938, C.A. No. 344 was enacted increasing to P550,000.00 the funds needed for the initial
operations of the NPC and reiterating the provision of the flotation of bonds as soon as the first construction
of any hydraulic power project was to be decided by the NPC Board. 6 The provision on tax exemption in
relation to the issuance of the NPC bonds was neither amended nor deleted.

On September 30, 1939, C.A. No. 495 was enacted removing the provision on the payment of the bond's
principal and interest in "gold coins" but adding that payment could be made in United States dollars. 7 The
provision on tax exemption in relation to the issuance of the NPC bonds was neither amended nor deleted.

On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to
guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans. 8 He
was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and
Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives 9 and for the
reconstruction and development of the economy of the country.10 It was expressly stated that:

Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges,
contributions and restrictions of the Republic of the Philippines, its provinces, cities and
municipalities. 11

On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other
types of indebtedness, aside from indebtedness incurred by flotation of bonds. 12 As to the pertinent tax
exemption provision, the law stated as follows:

To facilitate payment of its indebtedness, the National Power Corporation shall be exempt
from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the
Philippines, its provinces, cities and municipalities. 13

On July 10, 1952, R.A. No. 813 was enacted amending R.A. No. 357 in that, aside from the IBRD, the
President of the Philippines was authorized to negotiate, contract and guarantee loans with the Export-
Import Bank of of Washigton, D.C., U.S.A., or any other international financial institution. 14 The tax provision
for repayment of these loans, as stated in R.A. No. 357, was not amended.

On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax exemption for real estate
taxes. As enacted, the law states as follows:

To facilitate payment of its indebtedness, the National Power Corporation shall be exempt
from all taxes, except real property tax, and from all duties, fees, imposts, charges, and
restrictions of the Republic of the Philippines, its provinces, cities, and municipalities. 15

On September 8, 1955, R.A. No. 1397 was enacted directing that the NPC projects to be funded by the
increased indebtedness 16 should bear the National Economic Council's stamp of approval. The tax exemption
provision related to the payment of this total indebtedness was not amended nor deleted.

On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was
authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357. 17 The tax
provision related to the repayment of these loans was not amended nor deleted.

On June 13, 1958, R.A. No. 2058 was enacting fixing the corporate life of NPC to December 31, 2000. 18 All
19
laws or provisions of laws and executive orders contrary to said R.A. No. 2058 were expressly repealed.

On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock
corporation with an authorized capital stock of P100,000,000.00 divided into 1,000.000 shares having a par
value of P100.00 each, with said capital stock wholly subscribed to by the Government. 20 No tax exemption
was incorporated in said Act.
On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to
P250,000,000.00 with the increase to be wholly subscribed by the Government. 21 No tax provision was
incorporated in said Act.

On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to
P300,000,000.00, the increase to be wholly subscribed by the Government. No tax provision was
incorporated in said Act. 22

On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as
amended. Declared as primary objectives of the nation were:

Declaration of Policy. Congress hereby declares that (1) the comprehensive development,
utilization and conservation of Philippine water resources for all beneficial uses, including
power generation, and (2) the total electrification of the Philippines through the development
of power from all sources to meet the needs of industrial development and dispersal and the
needs of rural electrification are primary objectives of the nation which shall be pursued
coordinately and supported by all instrumentalities and agencies of the government,
including the financial institutions. 23

Section 4 of C.A. No. 120, was renumbered as Section 8, and divided into sections 8 (a) (Authority to incur
Domestic Indebtedness) and Section 8 (b) (Authority to Incur Foreign Loans).

As to the issuance of bonds by the NPC, Paragraph No. 3 of Section 8(a), states as follows:

The bonds issued under the authority of this subsection shall be exempt from the payment of
all taxes by the Republic of the Philippines, or by any authority, branch, division or political
subdivision thereof which facts shall be stated upon the face of said bonds. . . . 24

As to the foreign loans the NPC was authorized to contract, Paragraph No. 5, Section 8(b), states as follows:

The loans, credits and indebtedness contracted under this subsection and the payment of
the principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials and supplies by the Corporation, paid from the proceeds of any loan,
credit or indebtedeness incurred under this Act, shall also be exempt from all taxes, fees,
imposts, other charges and restrictions, including import restrictions, by the Republic of the
Philippines, or any of its agencies and political subdivisions. 25

A new section was added to the charter, now known as Section 13, R.A. No. 6395, which declares the non-
profit character and tax exemptions of NPC as follows:

The Corporation shall be non-profit and shall devote all its returns from its capital investment,
as well as excess revenues from its operation, for expansion. To enable the Corporation to
pay its indebtedness and obligations and in furtherance and effective implementation of the
policy enunciated in Section one of this Act, the Corporation is hereby declared exempt:

(a) From the payment of all taxes, duties, fees, imposts, charges costs and service fees in
any court or administrative proceedings in which it may be a party, restrictions and duties to
the Republic of the Philippines, its provinces, cities, and municipalities and other government
agencies and instrumentalities;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the National
Government, its provinces, cities, municipalities and other government agencies and
instrumentalities;

(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees
on import of foreign goods required for its operations and projects; and

(d) From all taxes, duties, fees, imposts and all other charges its provinces, cities,
municipalities and other government agencies and instrumentalities, on all petroleum
products used by the Corporation in the generation, transmission, utilization, and sale of
electric power. 26

On November 7, 1972, Presidential Decree No. 40 was issued declaring that the electrification of
the entire country was one of the primary concerns of the country. And in connection with this, it
was specifically stated that:

The setting up of transmission line grids and the construction of associated generation
facilities in Luzon, Mindanao and major islands of the country, including the Visayas, shall be
 the responsibility of the National Power Corporation (NPC) as the authorized implementing
agency of the State. 27

xxx xxx xxx

It is the ultimate objective of the State for the NPC to own and operate as a single integrated
system all generating facilities supplying electric power to the entire area embraced by any
grid set up by the NPC.28

On January 22, 1974, P.D. No. 380 was issued giving extra powers to the NPC to enable it to fulfill its role
under aforesaid P.D. No. 40. Its authorized capital stock was raised to P2,000,000,000.00, 29 its total
30
domestic indebtedness was pegged at a maximum of P3,000,000,000.00 at any one time, and the NPC was
authorized to borrow a total of US$1,000,000,000.00 31 in foreign loans.

The relevant tax exemption provision for these foreign loans states as follows:

The loans, credits and indebtedness contracted under this subsection and the payment of
the principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials, supplies and services, by the Corporation, paid from the proceeds of
any loan, credit or indebtedness incurred under this Act, shall also be exempt from all direct
and indirect taxes, fees, imposts, other charges and restrictions, including import restrictions
previously and presently imposed, and to be imposed by the Republic of the Philippines, or
any of its agencies and political subdivisions. 32(Emphasis supplied)

Section 13(a) and 13(d) of R.A. No 6395 were amended to read as follows:

(a) From the payment of all taxes, duties, fees, imposts, charges and restrictions to the
Republic of the Philippines, its provinces, cities, municipalities and other government
agencies and instrumentalities including the taxes, duties, fees, imposts and other charges
provided for under the Tariff and Customs Code of the Philippines, Republic Act Numbered
Nineteen Hundred Thirty-Seven, as amended, and as further amended by Presidential
Decree No. 34 dated October 27, 1972, and Presidential Decree No. 69, dated November
24, 1972, and costs and service fees in any court or administrative proceedings in which it
may be a party;

xxx xxx xxx

(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or
indirectly by the Republic of the Philippines, its provinces, cities, municipalities and other
government agencies and instrumentalities, on all petroleum products used by the
Corporation in the generation, transmission, utilization and sale of electric
power. 33 (Emphasis supplied)

On February 26, 1970, P.D. No. 395 was issued removing certain restrictions in the NPC's sale of electricity
to its different customers. 34 No tax exemption provision was amended, deleted or added.

On July 31, 1975, P.D. No. 758 was issued directing that P200,000,000.00 would be appropriated annually
to cover the unpaid subscription of the Government in the NPC authorized capital stock, which amount
would be taken from taxes accruing to the General Funds of the Government, proceeds from loans,
issuance of bonds, treasury bills or notes to be issued by the Secretary of Finance for this particular
purpose. 35

On May 27, 1976 P.D. No. 938 was issued

(I)n view of the accelerated expansion programs for generation and transmission facilities
which includes nuclear power generation, the present capitalization of National Power
Corporation (NPC) and the ceilings for domestic and foreign borrowings are deemed
insufficient; 36

xxx xxx xxx

(I)n the application of the tax exemption provisions of the Revised Charter, the non-profit
character of NPC has not been fully utilized because of restrictive interpretation of the taxing
agencies of the government on said provisions; 37

xxx xxx xxx

(I)n order to effect the accelerated expansion program and attain the declared objective of
total electrification of the country, further amendments of certain sections of Republic Act No.
 6395, as amended by Presidential Decrees Nos. 380, 395 and 758, have become
imperative; 38

Thus NPC's capital stock was raised to P8,000,000,000.00, 39 the total domestic indebtedness ceiling was
increased to P12,000,000,000.00, 40 the total foreign loan ceiling was raised to US$4,000,000,000.00 41 and
Section 13 of R.A. No. 6395, was amended to read as follows:

The Corporation shall be non-profit and shall devote all its returns from its capital investment
as well as excess revenues from its operation, for expansion. To enable the Corporation to
pay to its indebtedness and obligations and in furtherance and effective implementation of
the policy enunciated in Section one of this Act, the Corporation, including its subsidiaries, is
hereby declared exempt from the payment of all forms of taxes, duties, fees, imposts as well
as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any
court or administrative proceedings. 42

II

On the other hand, the pertinent tax laws involved in this controversy are P.D. Nos. 882, 1177, 1931 and
Executive Order No. 93 (S'86).

On January 30, 1976, P.D. No. 882 was issued withdrawing the tax exemption of NPC with regard to imports
as follows:

WHEREAS, importations by certain government agencies, including government-owned or

controlled corporation, are exempt from the payment of customs duties and compensating
tax; and

WHEREAS, in order to reduce foreign exchange spending and to protect domestic

industries, it is necessary to restrict and regulate such tax-free importations.

NOW THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of

the powers vested in me by the Constitution, and do hereby decree and order the following:

Sec. 1. All importations of any government agency, including government-owned or

controlled corporations which are exempt from the payment of customs duties and internal
revenue taxes, shall be subject to the prior approval of an Inter-Agency Committee which
shall insure compliance with the following conditions:

(a) That no such article of local manufacture are available in sufficient quantity and
comparable quality at reasonable prices;

(b) That the articles to be imported are directly and actually needed and will be used
exclusively by the grantee of the exemption for its operations and projects or in the conduct
of its functions; and

(c) The shipping documents covering the importation are in the name of the grantee to whom
the goods shall be delivered directly by customs authorities.

xxx xxx xxx

Sec. 3. The Committee shall have the power to regulate and control the tax-free importation
of government agencies in accordance with the conditions set forth in Section 1 hereof and
the regulations to be promulgated to implement the provisions of this Decree. Provided,
however, That any government agency or government-owned or controlled corporation, or
any local manufacturer or business firm adversely affected by any decision or ruling of the
Inter-Agency Committee may file an appeal with the Office of the President within ten days
from the date of notice thereof. . . . .

xxx xxx xxx

Sec. 6. . . . . Section 13 of Republic Act No. 6395; . . .. and all similar provisions of all general
and special laws and decrees are hereby amended accordingly.

xxx xxx xxx

On July 30, 1977, P.D. 1177 was issued as it was

 . . . declared the policy of the State to formulate and implement a National Budget that is an
instrument of national development, reflective of national objectives, strategies and plans.
The budget shall be supportive of and consistent with the socio-economic development plan
and shall be oriented towards the achievement of explicit objectives and expected results, to
ensure that funds are utilized and operations are conducted effectively, economically and
efficiently. The national budget shall be formulated within a context of a regionalized
government structure and of the totality of revenues and other receipts, expenditures and
borrowings of all levels of government-owned or controlled corporations. The budget shall
likewise be prepared within the context of the national long-term plan and of a long-term
budget program. 43

In line with such policy, the law decreed that

All units of government, including government-owned or controlled corporations, shall pay income taxes,
customs duties and other taxes and fees are imposed under revenues laws: provided, that organizations
otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the General
Fund in the exact amount of taxes/duties due: provided, further, that a procedure shall be established by the
Secretary of Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be
considered as both revenue and expenditure of the General Fund. 44

The law also declared that

[A]ll laws, decrees, executive orders, rules and regulations or parts thereof which are
inconsistent with the provisions of the Decree are hereby repealed and/or modified
accordingly. 45

On July 11, 1984, most likely due to the economic morass the Government found itself in after the Aquino
assassination, P.D. No. 1931 was issued to reiterate that:

WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant of tax
privileges to any government-owned or controlled corporation and all other units of
government; 46

and since there was a

. . . need for government-owned or controlled corporations and all other units of government
enjoying tax privileges to share in the requirements of development, fiscal or otherwise, by
paying the duties, taxes and other charges due from them. 47

it was decreed that:

Sec. 1. The provisions of special on general law to the contrary notwithstanding, all
exemptions from the payment of duties, taxes, fees, imposts and other charges heretofore
granted in favor of government-owned or controlled corporations including their subsidiaries,
are hereby withdrawn.

Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the
recommendation of the Fiscal Incentives Review Board created under Presidential Decree
No. 776, is hereby empowered to restore, partially or totally, the exemptions withdrawn by
Section 1 above, any applicable tax and duty, taking into account, among others, any or all of
the following:

1) The effect on the relative price levels;

2) The relative contribution of the corporation to the revenue generation effort;

3) The nature of the activity in which the corporation is engaged in; or

4) In general the greater national interest to be served.

xxx xxx xxx

Sec. 5. The provisions of Presidential Decree No. 1177 as well as all other laws, decrees,
executive orders, administrative orders, rules, regulations or parts thereof which are
inconsistent with this Decree are hereby repealed, amended or modified accordingly.

On December 17, 1986, E.O. No. 93 (S'86) was issued with a view to correct presidential restoration or
grant of tax exemption to other government and private entities without benefit of review by the Fiscal
Incentives Review Board, to wit:
 WHEREAS, Presidential Decree Nos. 1931 and 1955 issued on June 11, 1984 and October
14, 1984, respectively, withdrew the tax and duty exemption privileges, including the
preferential tax treatment, of government and private entities with certain exceptions, in order
that the requirements of national economic development, in terms of fiscals and other
resources, may be met more adequately;

xxx xxx xxx

WHEREAS, in addition to those tax and duty exemption privileges were restored by the
Fiscal Incentives Review Board (FIRB), a number of affected entities, government and
private, had their tax and duty exemption privileges restored or granted by Presidential action
without benefit or review by the Fiscal Incentives Review Board (FIRB);

xxx xxx xxx

Since it was decided that:

[A]ssistance to government and private entities may be better provided where necessary by
explicit subsidy and budgetary support rather than tax and duty exemption privileges if only
to improve the fiscal monitoring aspects of government operations.

It was thus ordered that:

Sec. 1. The Provisions of any general or special law to the contrary notwithstanding, all tax
and duty incentives granted to government and private entities are hereby withdrawn,
except:

a) those covered by the non-impairment clause of the Constitution;

b) those conferred by effective internation agreement to which the Government of the Republic of the
Philippines is a signatory;

c) those enjoyed by enterprises registered with:

(i) the Board of Investment pursuant to Presidential Decree No. 1789, as amended;

(ii) the Export Processing Zone Authority, pursuant to Presidential Decree No. 66 as
amended;

(iii) the Philippine Veterans Investment Development Corporation Industrial Authority

pursuant to Presidential Decree No. 538, was amended.

d) those enjoyed by the copper mining industry pursuant to the provisions of Letter of Instructions No. 1416;

e) those conferred under the four basic codes namely:

(i) the Tariff and Customs Code, as amended;

(ii) the National Internal Revenue Code, as amended;

(iii) the Local Tax Code, as amended;

(iv) the Real Property Tax Code, as amended;

f) those approved by the President upon the recommendation of the Fiscal Incentives
Review Board.

Sec. 2. The Fiscal Incentives Review Board created under Presidential Decree No. 776, as
amended, is hereby authorized to:

a) restore tax and/or duty exemptions withdrawn hereunder in whole or in part;

b) revise the scope and coverage of tax and/or duty exemption that may be restored;

c) impose conditions for the restoration of tax and/or duty exemption;

d) prescribe the date of period of effectivity of the restoration of tax and/or duty exemption;

e) formulate and submit to the President for approval, a complete system for the grant of subsidies to
deserving beneficiaries, in lieu of or in combination with the restoration of tax and duty exemptions or
 preferential treatment in taxation, indicating the source of funding therefor, eligible beneficiaries and the
terms and conditions for the grant thereof taking into consideration the international commitment of the
Philippines and the necessary precautions such that the grant of subsidies does not become the basis for
countervailing action.

Sec. 3. In the discharge of its authority hereunder, the Fiscal Incentives Review Board shall
take into account any or all of the following considerations:

a) the effect on relative price levels;

b) relative contribution of the beneficiary to the revenue generation effort;

c) nature of the activity the beneficiary is engaged; and

d) in general, the greater national interest to be served.

xxx xxx xxx

Sec. 5. All laws, orders, issuances, rules and regulations or parts thereof inconsistent with
this Executive Order are hereby repealed or modified accordingly.

E.O. No. 93 (S'86) was decreed to be effective 48 upon the promulgation of the rules and regulations, to be
issued by the Ministry of Finance. 49 Said rules and regulations were promulgated and published in the Official
Gazette
on February 23, 1987. These became effective on the 15th day after promulgation 50 in the Official
Gasetter, 51 which 15th day was March 10, 1987.

III

Now to some definitions. We refer to the very simplistic approach that all would-be lawyers, learn in their
TAXATION I course, which fro convenient reference, is as follows:

Classifications or kinds of Taxes:

According to Persons who pay or who bear the burden:

a. Direct Tax the where the person supposed to pay the tax really pays it. WITHOUT transferring the
burden to someone else.

Examples: Individual income tax, corporate income tax, transfer taxes (estate tax, donor's tax), residence
tax, immigration tax

b. Indirect Tax that where the tax is imposed upon goods BEFORE reaching the consumer who ultimately
pays for it, not as a tax, but as a part of the purchase price.

Examples: the internal revenue indirect taxes (specific tax, percentage taxes, (VAT) and the tariff and
customs indirect taxes (import duties, special import tax and other dues) 52

IV

To simply matter, the issues raised by petitioner in his motion for reconsideration can be reduced to the
following:

(1) What kind of tax exemption privileges did NPC have?

(2) For what periods in time were these privileges being enjoyed?

(3) If there are taxes to be paid, who shall pay for these taxes?

Petitioner contends that P.D. No. 938 repealed the indirect tax exemption of NPC as the phrase "all forms of
taxes etc.," in its section 10, amending Section 13, R.A. No. 6395, as amended by P.D. No. 380, does not
expressly include "indirect taxes."

His point is not well-taken.

A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was
to be completely tax exempt from all forms of taxes direct and indirect.
NPC's tax exemptions at first applied to the bonds it was authorized to float to finance its operations upon its
creation by virtue of C.A. No. 120.

When the NPC was authorized to contract with the IBRD for foreign financing, any loans obtained were to be
completely tax exempt.

After the NPC was authorized to borrow from other sources of funds aside issuance of bonds it was
again specifically exempted from all types of taxes "to facilitate payment of its indebtedness." Even when the
ceilings for domestic and foreign borrowings were periodically increased, the tax exemption privileges of the
NPC were maintained.

NPC's tax exemption from real estate taxes was, however, specifically withdrawn by Rep. Act No. 987, as
above stated. The exemption was, however, restored by R.A. No. 6395.

Section 13, R.A. No. 6395, was very comprehensive in its enumeration of the tax exemptions allowed NPC.
Its section 13(d) is the starting point of this bone of contention among the parties. For easy reference, it is
reproduced as follows:

[T]he Corporation is hereby declared exempt:

xxx xxx xxx

(d) From all taxes, duties, fees, imposts and all other charges imposed by the Republic of the
Philippines, its provinces, cities, municipalities and other government agencies and
instrumentalities, on all petroleum products used by the Corporation in the generation,
transmission, utilization, and sale of electric power.

P.D. No. 380 added phrase "directly or indirectly" to said Section 13(d), which now reads as follows:

xxx xxx xxx

(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or
indirectly by the Republic of the Philippines, its provinces, cities, municipalities and other
government agencies and instrumentalities, on all petroleum products used by the
Corporation in the generation, transmission, utilization and sale of electric power. (Emphasis
supplied)

Then came P.D. No. 938 which amended Sec. 13(a), (b), (c) and (d) into one very simple paragraph as
follows:

The Corporation shall be non-profit and shall devote all its returns from its capital investment
as well as excess revenues from its operation, for expansion. To enable the Corporation to
pay its indebtedness and obligations and in furtherance and effective implementation of the
policy enunciated in Section one of this Act, the Corporation, including its subsidiaries, is
hereby declared exempt from the payment ofALL FORMS OF taxes, duties, fees, imposts as
well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any
court or administrative proceedings. (Emphasis supplied)

Petitioner reminds Us that:

[I]t must be borne in mind that Presidential Decree Nos. 380

and 938 were issued by one man, acting as such the Executive and Legislative. 53

xxx xxx xxx

[S]ince both presidential decrees were made by the same person, it would have been very
easy for him to retain the same or similar language used in P.D. No. 380 P.D. No. 938 if his
intention were to preserve the indirect tax exemption of NPC. 54

Actually, P.D. No. 938 attests to the ingenuousness of then President Marcos no matter what his fault were.
It should be noted that section 13, R.A. No. 6395, provided for tax exemptions for the following items:

13(a) : court or administrative proceedings;

13(b) : income, franchise, realty taxes;

13(c) : import of foreign goods required for its operations and projects;
 13(d) : petroleum products used in generation of electric power.

P.D. No. 938 lumped up 13(b), 13(c), and 13(d) into the phrase "ALL FORMS OF TAXES, ETC.,", included
13(a) under the "as well as" clause and added PNOC subsidiaries as qualified for tax exemptions.

This is the only conclusion one can arrive at if he has read all the NPC laws in the order of enactment or
issuance as narrated above in part I hereof. President Marcos must have considered all the NPC statutes
from C.A. No. 120 up to its latest amendments, P.D. No. 380, P.D. No. 395 and P.D. No. 759, AND came
up 55 with a very simple Section 13, R.A. No. 6395, as amended by P.D. No. 938.

One common theme in all these laws is that the NPC must be enable to pay its indebtedness 56 which, as of
P.D. No. 938, was P12 Billion in total domestic indebtedness, at any one time, and U$4 Billion in total foreign
loans at any one time. The NPC must be and has to be exempt from all forms of taxes if this goal is to be
achieved.

By virtue of P.D. No. 938 NPC's capital stock was raised to P8 Billion. It must be remembered that to pay the
government share in its capital stock P.D. No. 758 was issued mandating that P200 Million would be
appropriated annually to cover the said unpaid subscription of the Government in NPC's authorized capital
stock. And significantly one of the sources of this annual appropriation of P200 million is TAX MONEY
accruing to the General Fund of the Government. It does not stand to reason then that former President
Marcos would order P200 Million to be taken partially or totally from tax money to be used to pay the
Government subscription in the NPC, on one hand, and then order the NPC to pay all its indirect taxes, on
the other.

The above conclusion that then President Marcos lumped up Sections 13 (b), 13 (c) and (d) into the phrase
"All FORMS OF" is supported by the fact that he did not do the same for the tax exemption provision for the
foreign loans to be incurred.

The tax exemption on foreign loans found in Section 8(b), R.A. No. 6395, reads as follows:

The loans, credits and indebtedness contracted under this subsection and the payment of
the principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials and supplies by the Corporation, paid from the proceeds of any loan,
credit or indebtedness incurred under this Act, shall also be exempt from all taxes, fees,
imposts, other charges and restrictions, including import restrictions, by the Republic of the
Philippines, or any of its agencies and political subdivisions. 57

The same was amended by P.D. No. 380 as follows:

The loans, credits and indebtedness contracted this subsection and the payment of the
principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials, supplies and services, by the Corporation, paid from the proceeds of
any loan, credit or indebtedness incurred under this Act, shall also be exempt from all direct
and indirect taxes, fees, imposts, other charges and restrictions, including import
restrictions previously and presently imposed, and to be imposed by the Republic of the
Philippines, or any of its agencies and political subdivisions. 58(Emphasis supplied)

P.D. No. 938 did not amend the same 59 and so the tax exemption provision in Section 8 (b), R.A. No. 6395, as
amended by P.D. No. 380, still stands. Since the subject matter of this particular Section 8 (b) had to do only with
loans and machinery imported, paid for from the proceeds of these foreign loans, THERE WAS NO OTHER
SUBJECT MATTER TO LUMP IT UP WITH, and so, the tax exemption stood as is with the express mention of
"direct
and indirect" tax exemptions. And this "direct and indirect" tax exemption privilege extended to "taxes, fees,
imposts, other charges . . . to be imposed" in the future surely, an indication that the lawmakers wanted the
NPC to be exempt from ALL FORMS of taxes direct and indirect.

It is crystal clear, therefore, that NPC had been granted tax exemption privileges for both direct and indirect
taxes under P.D. No. 938.

VI

Five (5) years on into the now discredited New Society, the Government decided to rationalize government
receipts and expenditures by formulating and implementing a National Budget. 60 The NPC, being a
government owned and controlled corporation had to be shed off its tax exemption status privileges under P.D.
No. 1177. It was, however, allowed to ask for a subsidy from the General Fund in the exact amount of
taxes/duties due.

Actually, much earlier, P.D. No. 882 had already repealed NPC's tax-free importation privileges. It allowed,
however, NPC to appeal said repeal with the Office of the President and to avail of tax-free importation
privileges under its Section 1, subject to the prior approval of an Inter-Agency Committed created by virtue
of said P.D. No. 882. It is presumed that the NPC, being the special creation of the State, was allowed to
continue its tax-free importations.

This Court notes that petitioner brought to the attention of this Court, the matter of the abolition of NPC's tax
exemption privileges by P.D. No. 1177 61 only in his Common Reply/Comment to private Respondents'
"Opposition" and "Comment" to Motion for Reconsideration, four (4) months AFTER the motion for
Reconsideration had been filed. During oral arguments heard on July 9, 1992, he proceeded to discuss this tax
exemption withdrawal as explained by then Secretary of Justice Vicente Abad Santos in opinion No. 133 (S
'77). 62 A careful perusal of petitioner's senate Blue Ribbon Committee Report No. 474, the basis of the petition at
bar, fails to yield any mention of said P.D. No. 1177's effect on NPC's tax exemption privileges. 63 Applying by
analogy Pulido vs. Pablo, 64 the court declares that the matter of P.D. No. 1177 abolishing NPC's tax exemption
privileges was not seasonably invoked 65 by the petitioner.

Be that as it may, the Court still has to discuss the effect of P.D. No. 1177 on the NPC tax exemption
privileges as this statute has been reiterated twice in P.D. No. 1931. The express repeal of tax privileges of
any government-owned or controlled corporation (GOCC). NPC included, was reiterated in the fourth
whereas clause of P.D. No. 1931's preamble. The subsidy provided for in Section 23, P.D. No. 1177, being
inconsistent with Section 2, P.D. No. 1931, was deemed repealed as the Fiscal Incentives Revenue Board
was tasked with recommending the partial or total restoration of tax exemptions withdrawn by Section 1,
P.D. No. 1931.

The records before Us do not indicate whether or not NPC asked for the subsidy contemplated in Section
23, P.D. No. 1177. Considering, however, that under Section 16 of P.D. No. 1177, NPC had to submit to the
Office of the President its request for the P200 million mandated by P.D. No. 758 to be appropriated
annually by the Government to cover its unpaid subscription to the NPC authorized capital stock and that
under Section 22, of the same P.D. No. NPC had to likewise submit to the Office of the President its internal
operating budget for review due to capital inputs of the government (P.D. No. 758) and to the national
government's guarantee of the domestic and foreign indebtedness of the NPC, it is clear that NPC was
covered by P.D. No. 1177.

There is reason to believe that NPC availed of subsidy granted to exempt GOCC's that suddenly found
themselves having to pay taxes. It will be noted that Section 23, P.D. No. 1177, mandated that the Secretary
of Finance and the Commissioner of the Budget had to establish the necessary procedure to accomplish the
tax payment/tax subsidy scheme of the Government. In effect, NPC, did not put any cash to pay any tax as it
got from the General Fund the amounts necessary to pay different revenue collectors for the taxes it had to
pay.

In his memorandum filed July 16, 1992, petitioner submits:

[T]hat with the enactment of P.D. No. 1177 on July 30, 1977, the NPC lost all its duty and tax
exemptions, whether direct or indirect. And so there was nothing to be withdrawn or to be
restored under P.D. No. 1931, issued on June 11, 1984. This is evident from sections 1 and
2 of said P.D. No. 1931, which reads:

"Section 1. The provisions of special or general law to the contrary

notwithstanding, all exemptions from the payment of duties, taxes, fees,
imports and other charges heretofore granted in favor of government-owned
or controlled corporations including their subsidiaries are hereby withdrawn."

Sec. 2. The President of the Philippines and/or the Minister of Finance, upon
the recommendation of the Fiscal Incentives Review Board created under
P.D. No. 776, is hereby empowered to restore partially or totally, the
exemptions withdrawn by section 1 above. . . .

Hence, P.D. No. 1931 did not have any effect or did it change NPC's status. Since it had
already lost all its tax exemptions privilege with the issuance of P.D. No. 1177 seven (7)
years earlier or on July 30, 1977, there were no tax exemptions to be withdrawn by section 1
which could later be restored by the Minister of Finance upon the recommendation of the
FIRB under Section 2 of P.D. No. 1931. Consequently, FIRB resolutions No. 10-85, and 1-
86, were all illegally and validly issued since FIRB acted beyond their statutory authority by
creating and not merely restoring the tax exempt status of NPC. The same is true for FIRB
Res. No. 17-87 which restored NPC's tax exemption under E.O. No. 93 which likewise
abolished all duties and tax exemptions but allowed the President upon recommendation of
the FIRB to restore those abolished.

The Court disagrees.

Applying by analogy the weight of authority that:

 When a revised and consolidated act re-enacts in the same or substantially the same terms
the provisions of the act or acts so revised and consolidated, the revision and consolidation
shall be taken to be a continuation of the former act or acts, although the former act or acts
may be expressly repealed by the revised and consolidated act; and all rights
and liabilities under the former act or acts are preserved and may be enforced. 66

the Court rules that when P.D. No. 1931 basically reenacted in its Section 1 the first half of Section 23, P.D.
No. 1177, on withdrawal of tax exemption privileges of all GOCC's said Section 1, P.D. No. 1931 was
deemed to be a continuation of the first half of Section 23, P.D. No. 1177, although the second half of
Section 23, P.D. No. 177, on the subsidy scheme for former tax exempt GOCCs had been expressly
repealed by Section 2 with its institution of the FIRB recommendation of partial/total restoration of tax
exemption privileges.

The NPC tax privileges withdrawn by Section 1. P.D. No. 1931, were, therefore, the same NPC tax
exemption privileges withdrawn by Section 23, P.D. No. 1177. NPC could no longer obtain a subsidy for the
taxes it had to pay. It could, however, under P.D. No. 1931, ask for a total restoration of its tax exemption
privileges, which, it did, and the same were granted under FIRB Resolutions Nos. 10-85 67 and 1-86 68 as
approved by the Minister of Finance.

Consequently, contrary to petitioner's submission, FIRB Resolutions Nos. 10-85 and 1-86 were both legally
and validly issued by the FIRB pursuant to P.D. No. 1931. FIRB did not created NPC's tax exemption status
but merely restored it. 69

Some quarters have expressed the view that P.D. No. 1931 was illegally issued under the now rather
infamous Amendment No. 6 70 as there was no showing that President Marcos' encroachment on legislative
prerogatives was justified under the then prevailing condition that he could legislate "only if the Batasang
Pambansa 'failed or was unable to act inadequately on any matter that in his judgment required immediate action'
to meet the 'exigency'. 71

Actually under said Amendment No. 6, then President Marcos could issue decrees not only when the Interim
Batasang Pambansa failed or was unable to act adequately on any matter for any reason that in his
(Marcos') judgment required immediate action, but also when there existed a grave emergency or a threat or
thereof. It must be remembered that said Presidential Decree was issued only around nine (9) months after
the Philippines unilaterally declared a moratorium on its foreign debt payments 72 as a result of the economic
crisis triggered by loss of confidence in the government brought about by the Aquino assassination. The
Philippines was then trying to reschedule its debt payments. 73 One of the big borrowers was the NPC 74 which had
a US$ 2.1 billion white elephant of a Bataan Nuclear Power Plant on its back. 75 From all indications, it must have
been this grave emergency of a debt rescheduling which compelled Marcos to issue P.D. No. 1931, under his
Amendment 6 power. 76

The rule, therefore, that under the 1973 Constitution "no law granting a tax exemption shall be passed
without the concurrence of a majority of all the members of the Batasang Pambansa" 77 does not apply as
said P.D. No. 1931 was not passed by the Interim Batasang Pambansa but by then President Marcos under His
Amendment No. 6 power.

P.D. No. 1931 was, therefore, validly issued by then President Marcos under his Amendment No. 6
authority.

Under E.O No. 93 (S'86) NPC's tax exemption privileges were again clipped by, this time, President Aquino.
Its section 2 allowed the NPC to apply for the restoration of its tax exemption privileges. The same was
granted under FIRB Resolution No. 17-87 78 dated June 24, 1987 which restored NPC's tax exemption
privileges effective, starting March 10, 1987, the date of effectivity of E.O. No. 93 (S'86).

FIRB Resolution No. 17-87 was approved by the President on October 5, 1987. 79 There is no indication,
however, from the records of the case whether or not similar approvals were given by then President Marcos for
FIRB Resolutions Nos. 10-85 and 1- 86. This has led some quarters to believe that a "travesty of justice" might
have occurred when the Minister of Finance approved his own recommendation as Chairman of the Fiscal
Incentives Review Board as what happened inZambales Chromate vs. Court of Appeals 80 when the Secretary of
Agriculture and Natural Resources approved a decision earlier rendered by him when he was the Director of
Mines, 81 and in Anzaldo vs. Clave 82 where Presidential Executive Assistant Clave affirmed, on appeal to
Malacaang, his own decision as Chairman of the Civil Service Commission. 83

Upon deeper analysis, the question arises as to whether one can talk about "due process" being violated
when FIRB Resolutions Nos. 10-85 and 1-86 were approved by the Minister of Finance when the same were
recommended by him in his capacity as Chairman of the Fiscal Incentives Review Board. 84

In Zambales Chromite and Anzaldo, two (2) different parties were involved: mining groups and scientist-
doctors, respectively. Thus, there was a need for procedural due process to be followed.
In the case of the tax exemption restoration of NPC, there is no other comparable entity not even a single
public or private corporation whose rights would be violated if NPC's tax exemption privileges were to be
restored. While there might have been a MERALCO before Martial Law, it is of public knowledge that the
MERALCO generating plants were sold to the NPC in line with the State policy that NPC was to be the State
implementing arm for the electrification of the entire country. Besides, MERALCO was limited to Manila and
its environs. And as of 1984, there was no more MERALCO as a producer of electricity which could
have objected to the restoration of NPC's tax exemption privileges.

It should be noted that NPC was not asking to be granted tax exemption privileges for the first time. It was
just asking that its tax exemption privileges be restored. It is for these reasons that, at least in NPC's case,
the recommendation and approval of NPC's tax exemption privileges under FIRB Resolution Nos. 10-85 and
1-86, done by the same person acting in his dual capacities as Chairman of the Fiscal Incentives Review
Board and Minister of Finance, respectively, do not violate procedural due process.

While as above-mentioned, FIRB Resolution No. 17-87 was approved by President Aquino on October 5,
1987, the view has been expressed that President Aquino, at least with regard to E.O. 93 (S'86), had no
authority to sub-delegate to the FIRB, which was allegedly not a delegate of the legislature, the power
delegated to her thereunder.

A misconception must be cleared up.

When E.O No. 93 (S'86) was issued, President Aquino was exercising both Executive and Legislative
powers. Thus, there was no power delegated to her, rather it was she who was delegating her power. She
delegated it to the FIRB, which, for purposes of E.O No. 93 (S'86), is a delegate of the legislature. Clearly,
she was not sub-delegating her power.

And E.O. No. 93 (S'86), as a delegating law, was complete in itself it set forth the policy to be carried
out 85 and it fixed the standard to which the delegate had to conform in the performance of his functions, 86 both
qualities having been enunciated by this Court in Pelaez vs. Auditor General. 87

Thus, after all has been said, it is clear that the NPC had its tax exemption privileges restored from June 11,
1984 up to the present.

VII

The next question that projects itself is who pays the tax?

The answer to the question could be gleamed from the manner by which the Commissaries of the Armed
Forces of the Philippines sell their goods.

By virtue of P.D. No. 83, 88 veterans, members of the Armed of the Philippines, and their defendants but
groceries and other goods free of all taxes and duties if bought from any AFP Commissaries.

In practice, the AFP Commissary suppliers probably treat the unchargeable specific, ad valorem and other
taxes on the goods earmarked for AFP Commissaries as an added cost of operation and distribute it over
the total units of goods sold as it would any other cost. Thus, even the ordinary supermarket buyer probably
pays for the specific, ad valorem and other taxes which theses suppliers do not charge the AFP
Commissaries. 89

IN MUCH THE SAME MANNER, it is clear that private respondents-oil companies have to absorb the taxes
they add to the bunker fuel oil they sell to NPC.

It should be stated at this juncture that, as early as May 14, 1954, the Secretary of Justice renders an
opinion, 90wherein he stated and We quote:

xxx xxx xxx

Republic Act No. 358 exempts the National Power Corporation from "all taxes, duties, fees,
imposts, charges, and restrictions of the Republic of the Philippines and its provinces, cities,
and municipalities." This exemption is broad enough to include all taxes, whether direct or
indirect, which the National Power Corporation may be required to pay, such as the specific
tax on petroleum products. That it is indirect or is of no amount [should be of no moment], for
it is the corporation that ultimately pays it. The view which refuses to accord the exemption
because the tax is first paid by the seller disregards realities and gives more importance to
form than to substance. Equity and law always exalt substance over from.

xxx xxx xxx

 Tax exemptions are undoubtedly to be construed strictly but not so grudgingly as knowledge
that many impositions taxpayers have to pay are in the nature of indirect taxes. To limit the
exemption granted the National Power Corporation to direct taxes notwithstanding the
general and broad language of the statue will be to thwrat the legislative intention in giving
exemption from all forms of taxes and impositions without distinguishing between those that
are direct and those that are not. (Emphasis supplied)

In view of all the foregoing, the Court rules and declares that the oil companies which supply bunker fuel oil
to NPC have to pay the taxes imposed upon said bunker fuel oil sold to NPC. By the very nature of indirect
taxation, the economic burden of such taxation is expected to be passed on through the channels of
commerce to the user or consumer of the goods sold. Because, however, the NPC has been exempted from
both direct and indirect taxation, the NPC must beheld exempted from absorbing the economic burden of
indirect taxation. This means, on the one hand, that the oil companies which wish to sell to NPC absorb all
or part of the economic burden of the taxes previously paid to BIR, which could they shift to NPC if NPC did
not enjoy exemption from indirect taxes. This means also, on the other hand, that the NPC may refuse to
pay the part of the "normal" purchase price of bunker fuel oil which represents all or part of the taxes
previously paid by the oil companies to BIR. If NPC nonetheless purchases such oil from the oil companies
because to do so may be more convenient and ultimately less costly for NPC than NPC itself importing
and hauling and storing the oil from overseas NPC is entitled to be reimbursed by the BIR for that part of
the buying price of NPC which verifiably represents the tax already paid by the oil company-vendor to the
BIR.

It should be noted at this point in time that the whole issue of who WILL pay these indirect taxes HAS BEEN
RENDERED moot and academic by E.O. No. 195 issued on June 16, 1987 by virtue of which the ad
valorem tax rate on bunker fuel oil was reduced to ZERO (0%) PER CENTUM. Said E.O. no. 195 reads as
follows:

EXECUTIVE ORDER NO. 195

AMENDING PARAGRAPH (b) OF SECTION 128 OF THE NATIONAL INTERNAL

REVENUE CODE, AS AMENDED BY REVISING THE EXCISE TAX RATES OF CERTAIN
PETROLEUM PRODUCTS.

xxx xxx xxx

Sec. 1. Paragraph (b) of Section 128 of the National Internal Revenue Code, as amended, is
hereby amended to read as follows:

Par. (b) For products subject to ad valorem tax only:

PRODUCT AD VALOREM TAX RATE

1. . . .

2. . . .

3. . . .

4. Fuel oil, commercially known as bunker oil and on similar fuel oils having more or less the
same generating power 0%

xxx xxx xxx

Sec. 3. This Executive Order shall take effect immediately.

Done in the city of Manila, this 17th day of June, in the year of Our Lord, nineteen hundred
and eighty-seven. (Emphasis supplied)

The oil companies can now deliver bunker fuel oil to NPC without having to worry about who is going to bear
the economic burden of the ad valorem taxes. What this Court will now dispose of are petitioner's complaints
that some indirect tax money has been illegally refunded by the Bureau of Internal Revenue to the NPC and
that more claims for refunds by the NPC are being processed for payment by the BIR.

A case in point is the Tax Credit Memo issued by the Bureau of Internal Revenue in favor of the NPC last
July 7, 1986 for P58.020.110.79 which were for "erroneously paid specific and ad valorem taxes during the
period from October 31, 1984 to April 27, 1985. 91 Petitioner asks Us to declare this Tax Credit Memo illegal as
the PNC did not have indirect tax exemptions with the enactment of P.D. No. 938. As We have already ruled
otherwise, the only questions left are whether NPC Is entitled to a tax refund for the tax component of the price of
the bunker fuel oil purchased from Caltex (Phils.) Inc. and whether the Bureau of Internal Revenue properly
refunded the amount to NPC.

After P.D. No. 1931 was issued on June 11, 1984 withdrawing the
tax exemptions of all GOCCs NPC included, it was only on May 8, 1985 when the BIR issues its letter
authority to the NPC authorizing it to withdraw tax-free bunker fuel oil from the oil companies pursuant to
FIRB Resolution No. 10-85. 92 Since the tax exemption restoration was retroactive to June 11, 1984 there was a
need. therefore, to recover said amount as Caltex (PhiIs.) Inc. had already paid the BIR the specific and ad
valorem taxes on the bunker oil it sold NPC during the period above indicated and had billed NPC
correspondingly. 93 It should be noted that the NPC, in its letter-claim dated September 11, 1985 to the
Commissioner of the Bureau of Internal Revenue DID NOT CATEGORICALLY AND UNEQUIVOCALLY STATE
that itself paid the P58.020,110.79 as part of the bunker fuel oil price it purchased from Caltex (Phils) Inc. 94

The law governing recovery of erroneously or illegally, collected taxes is section 230 of the National Internal
Revenue Code of 1977, as amended which reads as follows:

Sec. 230. Recover of tax erroneously or illegally collected. No suit or proceeding shall be
maintained in any court for the recovery of any national internal revenue tax hereafter
alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed
to have been collected without authority, or of any sum alleged to have been excessive or in
any Manner wrongfully collected. until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such tax,
penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be begun after the expiration of two years from
the date of payment of the tax or penalty regardless of any supervening cause that may arise
after payment; Provided, however, That the Commissioner may, even without a written claim
therefor, refund or credit any tax, where on the face of the return upon which payment was
made, such payment appears clearly, to have been erroneously paid.

xxx xxx xxx

Inasmuch as NPC filled its claim for P58.020,110.79 on September 11, 1985, 95 the Commissioner correctly
issued the Tax Credit Memo in view of NPC's indirect tax exemption.

Petitioner, however, asks Us to restrain the Commissioner from acting favorably on NPC's claim for
P410.580,000.00 which represents specific and ad valorem taxes paid by the oil companies to the BIR from
June 11, 1984 to the early part of 1986. 96

A careful examination of petitioner's pleadings and annexes attached thereto does not reveal when the
alleged claim for a P410,580,000.00 tax refund was filed. It is only stated In paragraph No. 2 of the Deed of
Assignment 97executed by and between NPC and Caltex (Phils.) Inc., as follows:

That the ASSIGNOR(NPC) has a pending tax credit claim with the Bureau of Internal
Revenue amounting to P442,887,716.16. P58.020,110.79 of which is due to Assignor's oil
purchases from the Assignee (Caltex [Phils.] Inc.)

Actually, as the Court sees it, this is a clear case of a "Mexican standoff." We cannot restrain the BIR from
refunding said amount because of Our ruling that NPC has both direct and indirect tax exemption privileges.
Neither can We order the BIR to refund said amount to NPC as there is no pending petition for review
on certiorari of a suit for its collection before Us. At any rate, at this point in time, NPC can no longer file any
suit to collect said amount EVEN IF lt has previously filed a claim with the BIR because it is time-barred
under Section 230 of the National Internal Revenue Code of 1977. as amended, which states:

In any case, no such suit or proceeding shall be begun after the expiration of two years from
the date of payment of the tax or penalty REGARDLESS of any supervening cause that may
arise after payment. . . . (Emphasis supplied)

The date of the Deed of Assignment is June 6. 1986. Even if We were to assume that payment by NPC for
the amount of P410,580,000.00 had been made on said date. it is clear that more than two (2) years had
already elapsed from said date. At the same time, We should note that there is no legal obstacle to the BIR
granting, even without a suit by NPC, the tax credit or refund claimed by NPC, assuming that NPC's claim
had been made seasonably, and assuming the amounts covered had actually been paid previously by the
oil companies to the BIR.

WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of petitioner is hereby DENIED
for lack of merit and the decision of this Court promulgated on May 31, 1991 is hereby AFFIRMED.

SO ORDERED.
G.R. No. 102976 October 25, 1995

IRON AND STEEL AUTHORITY, petitioner,

vs.
THE COURT OF APPEALS and MARIA CRISTINA FERTILIZER CORPORATION, respondents.

FELICIANO, J.:

Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 dated 9 August
1973 in order, generally, to develop and promote the iron and steel industry in the Philippines. The
objectives of the ISA are spelled out in the following terms:

Sec. 2. Objectives The Authority shall have the following objectives:

(a) to strengthen the iron and steel industry of the Philippines and to expand the domestic
and export markets for the products of the industry;

(b) to promote the consolidation, integration and rationalization of the industry in order to
increase industry capability and viability to service the domestic market and to compete in
international markets;

(c) to rationalize the marketing and distribution of steel products in order to achieve a
balance between demand and supply of iron and steel products for the country and to ensure
that industry prices and profits are at levels that provide a fair balance between the interests
of investors, consumers suppliers, and the public at large;

(d) to promote full utilization of the existing capacity of the industry, to discourage investment
in excess capacity, and in coordination, with appropriate government agencies to encourage
capital investment in priority areas of the industry;

(e) to assist the industry in securing adequate and low-cost supplies of raw materials and to
reduce the excessive dependence of the country on imports of iron and steel.

The list of powers and functions of the ISA included the following:

Sec. 4. Powers and Functions. The authority shall have the following powers and
functions:

xxx xxx xxx

(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent
resale and/or lease to the companies involved if it is shown that such use of the State's
power is necessary to implement the construction of capacity which is needed for the
attainment of the objectives of the Authority;

xxx xxx xxx

(Emphasis supplied)

P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August 1973. 1 When
ISA's original term expired on 10 October 1978, its term was extended for another ten (10) years by Executive
Order No. 555 dated 31 August 1979.

The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National Development
Corporation which is itself an entity wholly owned by the National Government, embarked on an expansion
program embracing, among other things, the construction of an integrated steel mill in Iligan City. The
construction of such a steel mill was considered a priority and major industrial project of the Government.
Pursuant to the expansion program of the NSC, Proclamation No. 2239 was issued by the President of the
Philippines on 16 November 1982 withdrawing from sale or settlement a large tract of public land (totalling
about 30.25 hectares in area) located in Iligan City, and reserving that land for the use and immediate
occupancy of NSC.

Since certain portions of the public land subject matter Proclamation No. 2239 were occupied by a non-
operational chemical fertilizer plant and related facilities owned by private respondent Maria Cristina
Fertilizer Corporation ("MCFC"), Letter of Instruction (LOI), No. 1277, also dated 16 November 1982, was
issued directing the NSC to "negotiate with the owners of MCFC, for and on behalf of the Government, for
the compensation of MCFC's present occupancy rights on the subject land." LOI No. 1277 also directed that
should NSC and private respondent MCFC fail to reach an agreement within a period of sixty (60) days from
the date of LOI No. 1277, petitioner ISA was to exercise its power of eminent domain under P.D. No. 272
and to initiate expropriation proceedings in respect of occupancy rights of private respondent MCFC relating
to the subject public land as well as the plant itself and related facilities and to cede the same to the NSC. 2

Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August 1983,
petitioner ISA commenced eminent domain proceedings against private respondent MCFC in the Regional
Trial Court, Branch 1, of Iligan City, praying that it (ISA) be places in possession of the property involved
upon depositing in court the amount of P1,760,789.69 representing ten percent (10%) of the declared
market values of that property. The Philippine National Bank, as mortgagee of the plant facilities and
improvements involved in the expropriation proceedings, was also impleaded as party-defendant.

On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA in turn placed
NSC in possession and control of the land occupied by MCFC's fertilizer plant installation.

The case proceeded to trial. While the trial was ongoing, however, the statutory existence of petitioner ISA
expired on 11 August 1988. MCFC then filed a motion to dismiss, contending that no valid judgment could
be rendered against ISA which had ceased to be a juridical person. Petitioner ISA filed its opposition to this
motion.

In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did dismiss the
case. The dismissal was anchored on the provision of the Rules of Court stating that "only natural or juridical
persons or entities authorized by law may be parties in a civil case." 3 The trial court also referred to non-
compliance by petitioner ISA with the requirements of Section 16, Rule 3 of the Rules of Court. 4

Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the expiration of
its term, its juridical existence continued until the winding up of its affairs could be completed. In the
alternative, petitioner ISA urged that the Republic of the Philippines, being the real party-in-interest, should
be allowed to be substituted for petitioner ISA. In this connection, ISA referred to a letter from the Office of
the President dated 28 September 1988 which especially directed the Solicitor General to continue the
expropriation case.

The trial court denied the motion for reconsideration, stating, among other things that:

The property to be expropriated is not for public use or benefit [__] but for the use and
benefit [__] of NSC, a government controlled private corporation engaged in private business
and for profit, specially now that the government, according to newspaper reports, is offering
for sale to the public its [shares of stock] in the National Steel Corporation in line with the
pronounced policy of the present administration to disengage the government from its private
business ventures. 5 (Brackets supplied)

Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court of Appeals
affirmed the order of dismissal of the trial court. The Court of Appeals held that petitioner ISA, "a government
regulatory agency exercising sovereign functions," did not have the same rights as an ordinary corporation
and that the ISA, unlike corporations organized under the Corporation Code, was not entitled to a period for
winding up its affairs after expiration of its legally mandated term, with the result that upon expiration of its
term on 11 August 1987, ISA was "abolished and [had] no more legal authority to perform governmental
functions." The Court of Appeals went on to say that the action for expropriation could not prosper because
the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become
ineffective as a result of the delegate's dissolution, and could not be continued in the name of Republic of
the Philippines, represented by the Solicitor General:

It is our considered opinion that under the law, the complaint cannot prosper, and therefore,
has to be dismissed without prejudice to the refiling of a new complaint for expropriation if
the Congress sees it fit." (Emphases supplied)

At the same time, however, the Court of Appeals held that it was premature for the trial court to have
ruled that the expropriation suit was not for a public purpose, considering that the parties had not yet
rested their respective cases.

In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted the action for
expropriation in its capacity as agent of the Republic of the Philippines, the Republic, as principal of ISA, is
entitled to be substituted and to be made a party-plaintiff after the agent ISA's term had expired.

Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a law further
extending the term of ISA after 11 August 1988 evinced a "clear legislative intent to terminate the juridical
existence of ISA," and that the authorization issued by the Office of the President to the Solicitor General for
continued prosecution of the expropriation suit could not prevail over such negative intent. It is also
contended that the exercise of the eminent domain by ISA or the Republic is improper, since that power
would be exercised "not on behalf of the National Government but for the benefit of NSC."

The principal issue which we must address in this case is whether or not the Republic of the Philippines is
entitled to be substituted for ISA in view of the expiration of ISA's term. As will be made clear below, this is
really the only issue which we must resolve at this time.

Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action:

Sec. 1. Who May Be Parties. Only natural or juridical persons or entities authorized by law
may be parties in a civil action.

Under the above quoted provision, it will be seen that those who can be parties to a civil action may
be broadly categorized into two (2) groups:

(a) those who are recognized as persons under the law whether natural, i.e., biological
persons, on the one hand, or juridical person such as corporations, on the other hand; and

(b) entities authorized by law to institute actions.

Examination of the statute which created petitioner ISA shows that ISA falls under category (b) above. P.D.
No. 272, as already noted, contains express authorization to ISA to commence expropriation proceedings
like those here involved:

Sec. 4. Powers and Functions. The Authority shall have the following powers and
functions:

xxx xxx xxx

(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent
resale and/or lease to the companies involved if it is shown that such use of the State's
power is necessary to implement the construction of capacity which is needed for the
attainment of the objectives of the Authority;

xxx xxx xxx

(Emphasis supplied)

It should also be noted that the enabling statute of ISA expressly authorized it to enter into certain
kinds of contracts "for and in behalf of the Government" in the following terms:

xxx xxx xxx

(i) to negotiate, and when necessary, to enter into contracts for and in behalf of the
government, for the bulk purchase of materials, supplies or services for any sectors in the
industry, and to maintain inventories of such materials in order to insure a continuous and
adequate supply thereof and thereby reduce operating costs of such sector;

xxx xxx xxx

(Emphasis supplied)

Clearly, ISA was vested with some of the powers or attributes normally associated with juridical personality.
There is, however, no provision in P.D. No. 272 recognizing ISA as possessing general or comprehensive
juridical personality separate and distinct from that of the Government. The ISA in fact appears to the Court
to be a non-incorporated agency or instrumentality of the Republic of the Philippines, or more precisely of
the Government of the Republic of the Philippines. It is common knowledge that other agencies or
instrumentalities of the Government of the Republic are cast in corporate form, that is to say,
are incorporated agencies or instrumentalities, sometimes with and at other times without capital stock, and
accordingly vested with a juridical personality distinct from the personality of the Republic. Among such
incorporated agencies or instrumentalities are: National Power Corporation; 6 Philippine Ports
Authority; 7 National Housing Authority; 8 Philippine National Oil Company; 9 Philippine National Railways; 10 Public
Estates Authority; 11 Philippine Virginia Tobacco Administration, 12 and so forth. It is worth noting that the term
"Authority" has been used to designate both incorporated and non-incorporated agencies or instrumentalities of
the Government.

We consider that the ISA is properly regarded as an agent or delegate of the Republic of the Philippines.
The Republic itself is a body corporate and juridical person vested with the full panoply of powers and
attributes which are compendiously described as "legal personality." The relevant definitions are found in the
Administrative Code of 1987:

Sec. 2. General Terms Defined. Unless the specific words of the text, or the context as a
whole, or a particular statute, require a different meaning:

(1) Government of the Republic of the Philippines refers to the corporate governmental
entity through which the functions of government are exercised throughout the Philippines,
including, save as the contrary appears from the context, the various arms through which
political authority is made effective in the Philippines, whether pertaining to the autonomous
regions, the provincial, city, municipal or barangay subdivisions or other forms of local
government.

xxx xxx xxx

(4) Agency of the Government refers to any of the various units of the Government, including
a department, bureau, office, instrumentality, or government-owned or controlled corporation,
or a local government or a distinct unit therein.

xxx xxx xxx

(10) Instrumentality refers to any agency of the National Government, not integrated within
the department framework, vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter. This term includes regulatory agencies, chartered
institutions and government-owned or controlled corporations.

xxx xxx xxx

(Emphases supplied)

When the statutory term of a non-incorporated agency expires, the powers, duties and functions as well as
the assets and liabilities of that agency revert back to, and are re-assumed by, the Republic of the
Philippines, in the absence of special provisions of law specifying some other disposition thereof such as,
e.g., devolution or transmission of such powers, duties, functions, etc. to some other identified successor
agency or instrumentality of the Republic of the Philippines. When the expiring agency is
an incorporated one, the consequences of such expiry must be looked for, in the first instance, in the charter
of that agency and, by way of supplementation, in the provisions of the Corporation Code. Since, in the
instant case, ISA is a non-incorporated agency or instrumentality of the Republic, its powers, duties,
functions, assets and liabilities are properly regarded as folded back into the Government of the Republic of
the Philippines and hence assumed once again by the Republic, no special statutory provision having been
shown to have mandated succession thereto by some other entity or agency of the Republic.

The procedural implications of the relationship between an agent or delegate of the Republic of the
Philippines and the Republic itself are, at least in part, spelled out in the Rules of Court. The general rule is,
of course, that an action must be prosecuted and defended in the name of the real party in interest. (Rule 3,
Section 2) Petitioner ISA was, at the commencement of the expropriation proceedings, a real party in
interest, having been explicitly authorized by its enabling statute to institute expropriation proceedings. The
Rules of Court at the same time expressly recognize the role of representative parties:

Sec. 3. Representative Parties. A trustee of an expressed trust, a guardian, an executor

or administrator, or a party authorized by statute may sue or be sued without joining the party
for whose benefit the action is presented or defended; but the court may, at any stage of the
proceedings, order such beneficiary to be made a party. . . . . (Emphasis supplied)

In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or delegate or
representative of the Republic of the Philippines pursuant to its authority under P.D. No. 272. The present
expropriation suit was brought on behalf of and for the benefit of the Republic as the principal of ISA.
Paragraph 7 of the complaint stated:

7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for the
construction and installation of iron and steel manufacturing facilities that are indispensable
to the integration of the iron and steel making industry which is vital to the promotion of
public interest and welfare. (Emphasis supplied)

The principal or the real party in interest is thus the Republic of the Philippines and not the National
Steel Corporation, even though the latter may be an ultimate user of the properties involved should
the condemnation suit be eventually successful.
From the foregoing premises, it follows that the Republic of the Philippines is entitled to be substituted in the
expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term of ISA having expired. Put a little
differently, the expiration of ISA's statutory term did not by itself require or justify the dismissal of the eminent
domain proceedings.

It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration of ISA's
statutory term, was not a ground for dismissal of such proceedings since a party may be dropped or added
by order of the court, on motion of any party or on the court's own initiative at any stage of the action and on
such terms as are just.13 In the instant case, the Republic has precisely moved to take over the proceedings as
party-plaintiff.

In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, 14 the Court recognized that the
Republic may initiate or participate in actions involving its agents. There the Republic of the Philippines was held
to be a proper party to sue for recovery of possession of property although the "real" or registered owner of the
property was the Philippine Ports Authority, a government agency vested with a separate juridical personality. The
Court said:

It can be said that in suing for the recovery of the rentals, the Republic of the Philippines
acted as principal of the Philippine Ports Authority, directly exercising the commission it had
earlier conferred on the latter as its agent. . . . 15 (Emphasis supplied)

In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again
another proceeding, as the trial court and Court of Appeals had required, was to generate
unwarranted delay and create needless repetition of proceedings:

More importantly, as we see it, dismissing the complaint on the ground that the Republic of
the Philippines is not the proper party would result in needless delay in the settlement of this
matter and also in derogation of the policy against multiplicity of suits. Such a decision would
require the Philippine Ports Authority to refile the very same complaint already proved by the
Republic of the Philippines and bring back as it were to square one. 16 (Emphasis supplied)

As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the Philippines
for the ISA upon the ground that the action for expropriation could not prosper because the basis for the
proceedings, the ISA's exercise of its delegated authority to expropriate, had become legally ineffective by
reason of the expiration of the statutory term of the agent or delegated i.e., ISA. Since, as we have held
above, the powers and functions of ISA have reverted to the Republic of the Philippines upon the
termination of the statutory term of ISA, the question should be addressed whether fresh legislative authority
is necessary before the Republic of the Philippines may continue the expropriation proceedings initiated by
its own delegate or agent.

While the power of eminent domain is, in principle, vested primarily in the legislative department of the
government, we believe and so hold that no new legislative act is necessary should the Republic decide,
upon being substituted for ISA, in fact to continue to prosecute the expropriation proceedings. For the
legislative authority, a long time ago, enacted a continuing or standing delegation of authority to the
President of the Philippines to exercise, or cause the exercise of, the power of eminent domain on behalf of
the Government of the Republic of the Philippines. The 1917 Revised Administrative Code, which was in
effect at the time of the commencement of the present expropriation proceedings before the Iligan Regional
Trial Court, provided that:

Sec. 64. Particular powers and duties of the President of the Philippines. In addition to his
general supervisory authority, the President of the Philippines shall have such other specific
powers and duties as are expressly conferred or imposed on him by law, and also, in
particular, the powers and duties set forth in this Chapter.

Among such special powers and duties shall be:

xxx xxx xxx

(h) To determine when it is necessary or advantageous to exercise the right of eminent

domain in behalf of the Government of the Philippines; and to direct the Secretary of Justice,
where such act is deemed advisable, to cause the condemnation proceedings to be begun in
the court having proper jurisdiction. (Emphasis supplied)

The Revised Administrative Code of 1987 currently in force has substantially reproduced the
foregoing provision in the following terms:

Sec. 12. Power of eminent domain. The President shall determine when it is necessary or
advantageous to exercise the power of eminent domain in behalf of the National
 Government, anddirect the Solicitor General, whenever he deems the action advisable, to
institute expopriation proceedings in the proper court. (Emphasis supplied)

In the present case, the President, exercising the power duly delegated under both the 1917 and
1987 Revised Administrative Codes in effect made a determination that it was necessary and
advantageous to exercise the power of eminent domain in behalf of the Government of the Republic
and accordingly directed the Solicitor General to proceed with the suit. 17

It is argued by private respondent MCFC that, because Congress after becoming once more the depository
of primary legislative power, had not enacted a statute extending the term of ISA, such non-enactment must
be deemed a manifestation of a legislative design to discontinue or abort the present expropriation suit. We
find this argument much too speculative; it rests too much upon simple silence on the part of Congress and
casually disregards the existence of Section 12 of the 1987 Administrative Code already quoted above.

Other contentions are made by private respondent MCFC, such as, that the constitutional requirement of
"public use" or "public purpose" is not present in the instant case, and that the indispensable element of just
compensation is also absent. We agree with the Court of Appeals in this connection that these contentions,
which were adopted and set out by the Regional Trial Court in its order of dismissal, are premature and are
appropriately addressed in the proceedings before the trial court. Those proceedings have yet to produce a
decision on the merits, since trial was still on going at the time the Regional Trial Court precipitously
dismissed the expropriation proceedings. Moreover, as a pragmatic matter, the Republic is, by such
substitution as party-plaintiff, accorded an opportunity to determine whether or not, or to what extent, the
proceedings should be continued in view of all the subsequent developments in the iron and steel sector of
the country including, though not limited to, the partial privatization of the NSC.

WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to the extent
that it affirmed the trial court's order dismissing the expropriation proceedings, is hereby REVERSED and
SET ASIDE and the case is REMANDED to the court a quo which shall allow the substitution of the Republic
of the Philippines for petitioner Iron and Steel Authority and for further proceedings consistent with this
Decision. No pronouncement as to costs.

SO ORDERED.

G.R. Nos. 95122-23 May 31, 1991

BOARD OF COMMISSIONERS, petitioners,

vs.
HON. JOSELITO DELA ROSA, Presiding Judge, RTC Manila, Branch 29, WILLIAM T.
GATCHALIAN,respondents.

BOARD OF COMMISSIONERS, petitioners,

vs.
HON. TERESITA DIZON CAPULONG, Presiding Judge, RTC Branch 172, Valenzuela, Metro Manila,
DEE HUA T. GATCHALIAN, SHERWING T. GATCHALIAN, KENNETH T. GATCHALIAN, REXLON T.
GATCHALIAN, and WESLIE T. GATCHALIAN, respondents.

G.R. Nos. 95612-13 May 31, 1991

WILLIAM T. GATCHALIAN, petitioner,

vs.
BOARD OF COMMISSIONERS (COMMISSION ON IMMIGRATION AND DEPORTATION), et
al., respondents.

The Solicitor General for petitioners.

edesma, Saludo & Associates for respondent William Gatchalian.
Cervo and Tanay Law Office for respondent T.D. Capulong, D.H.T. Gatchalian, et al.

BIDIN, J.:

This is a petition for certiorari and prohibition filed by the Solicitor General seeking 1) to set aside the
Resolution/Temporary Restraining Order dated September 7, 1990, issued by respondent Judge de la Rosa
in Civil Case No. 90-54214 which denied petitioners' motion to dismiss and restrained petitioners from
commencing or continuing with any of the proceedings which would lead to the deportation of respondent
William Gatchalian, docketed as D.C. No. 90-523, as well as the Order of respondent Judge Capulong dated
September 6, 1990 in Civil Case No. 3431-V-90 which likewise enjoined petitioners from proceeding with the
deportation charges against respondent Gatchalian, and 2) to prohibit respondent judges from further acting
in the aforesaid civil cases.
On October 23, 1990, respondent Gatchalian filed his Comment with Counter-Petition, docketed as G.R.
Nos. 96512-13, alleging lack of jurisdiction on the part of respondent Board of Commissioners, et al., over
his person with prayer that he be declared a Filipino citizen, or in the alternative, to remand the case to the
trial court for further proceedings.

On December 13, 1990, petitioners filed their comment to respondent Gatchalian's counter-petition. The
Court considers the comment filed by respondent Gatchalian as answer to the petition and petitioners'
comment as answer to the counter-petition and gives due course to the petitions.

There is no dispute as to the following facts:

On July 12, 1960, Santiago Gatchalian, grandfather of William Gatchalian, was recognized by the Bureau of
Immigration as a native born Filipino citizen following the citizenship of his natural mother, Marciana
Gatchalian (Annex "1", counter-petition). Before the Citizenship Evaluation Board, Santiago Gatchalian
testified that he has five (5) children with his wife Chu Gim Tee, namely: Jose Gatchalian, Gloria Gatchalian,
Francisco Gatchalian, Elena Gatchalian and Benjamin Gatchalian (Annex "2", counter-petition).

On June 27, 1961, William Gatchalian, then a twelve-year old minor, arrived in Manila from Hongkong
together with Gloria, Francisco, and Johnson, all surnamed Gatchalian. They had with them Certificates of
Registration and Identity issued by the Philippine Consulate in Hongkong based on a cablegram bearing the
signature of the then Secretary of Foreign Affairs, Felixberto Serrano, and sought admission as Filipino
citizens. Gloria and Francisco are the daughter and son, respectively, of Santiago Gatchalian; while William
and Johnson are the sons of Francisco.

After investigation, the Board of Special Inquiry No. 1 rendered a decision dated July 6, 1961, admitting
William Gatchalian and his companions as Filipino citizens (Annex "C", petition). As a consequence thereof,
William Gatchalian was issued Identification Certificate No. 16135 by the immigration authorities on August
16, 1961 (Annex "D", petition).

On January 24, 1962, the then Secretary of Justice issued Memorandum No. 9 setting aside all decisions
purporting to have been rendered by the Board of Commissioners on appeal or on review motu proprio of
decisions of the Board of Special Inquiry. The same memorandum directed the Board of Commissioners to
review all cases where entry was allowed on the ground that the entrant was a Philippine citizen. Among
those cases was that of William and others.

On July 6, 1962, the new Board of Commissioners, after a review motu proprio of the proceedings had in the
Board of Special Inquiry, reversed the decision of the latter and ordered the exclusion of, among others,
respondent Gatchalian (Annex "E", petition). A warrant of exclusion also dated July 6, 1962 was issued
alleging that "the decision of the Board of Commissioners dated July 6, 1962 . . . has now become final and
executory (Annex "F", petition).

The actual date of rendition of said decision by the Board of Commissioners (whether on July 6, 1962 or July
20, 1962) became the subject of controversy in the 1967 case of Arocha vs. Vivo (21 SCRA 532) wherein
this Court sustained the validity of the decision of the new Board of Commissioners having been
promulgated on July 6, 1962, or within the reglementary period for review.

Sometime in 1973, respondent Gatchalian, as well as the others covered by the July 6, 1962 warrant of
exclusion, filed a motion for re-hearing with the Board of Special Inquiry where the deportion case against
them was assigned.

On March 14, 1973, the Board of Special Inquiry recommended to the then Acting Commissioner Victor
Nituda the reversal of the July 6, 1962 decision of the then Board of Commissioners and the recall of the
warrants of arrest issued therein (Annex "5", counter-petition).

On March 15, 1973, Acting Commissioner Nituda issued an order reaffirming the July 6, 1961 decision of the
Board of Special Inquiry thereby admitting respondent Gatchalian as a Filipino citizen and recalled the
warrant of arrest issued against him (Annex "6", counter-petition).

On June 7, 1990, the acting director of the National Bureau of Investigation wrote the Secretary of Justice
recommending that respondent Gatchalian along with the other applicants covered by the warrant of
exclusion dated July 6, 1962 be charged with violation of Sec. 37 (a), pars. 1 and 2, in relation to Secs. 45
(c), and (d) and (e) of Commonwealth Act No. 613, as amended, also known as the Immigration Act of 1940
(Annex "G", petition).

On August 1, 1990, the Secretary of Justice indorsed the recommendation of the NBI to the Commissioner
of Immigration for investigation and immediate action (Annex "20", counter-petition).

On August 15, 1990, petitioner Commissioner Domingo of the Commission of Immigration and
Deportation * issued a mission order commanding the arrest of respondent William Gatchalian (Annex "18",
counter-petition). The latter appeared before Commissioner Domingo on August 20, 1990 and was released
on the same day upon posting P200,000.00 cash bond.

On August 29, 1990, William Gatchalian filed a petition for certiorari and prohibition with injunction before the
Regional Trial Court of Manila, Br. 29, presided by respondent Judge dela Rosa, docketed as Civil Case No.
90-54214.

On September 4, 1990, petitioners filed a motion to dismiss Civil Case No. 90-54214 alleging that
respondent judge has no jurisdiction over the Board of Commissioners and/or the Board of Special Inquiry.
Nonetheless, respondent judge dela Rosa issued the assailed order dated September 7, 1990, denying the
motion to dismiss.

Meanwhile, on September 6, 1990, respondent Gatchalian's wife and minor children filed before the
Regional Trial Court of Valenzuela, Metro Manila, Br. 172, presided by respondent judge Capulong Civil
Case No. 3431-V-90 for injunction with writ of preliminary injunction. The complaint alleged, among others,
that petitioners acted without or in excess of jurisdiction in the institution of deportation proceedings against
William. On the same day, respondent Capulong issued the questioned temporary restraining order
restraining petitioners from continuing with the deportation proceedings against William Gatchalian.

The petition is anchored on the following propositions: 1) respondent judges have no jurisdiction over
petitioners (Board of Commissioners, et al.,) and the subject matter of the case, appellate jurisdiction being
vested by BP 129 with the Court of Appeals; 2) assuming respondent judges have jurisdiction, they acted
with grave abuse of discretion in preempting petitioners in the exercise of the authority and jurisdiction to
hear and determine the deportation case against respondent Gatchalian, and in the process determine also
his citizenship; 3) respondent judge dela Rosa gravely abused his discretion in ruling that the issues raised
in the deportation proceedings are beyond the competence and jurisdiction of petitioners, thereby
disregarding the cases of Arocha vs. Vivo and Vivo vs. Arca (supra), which put finality to the July 6, 1962
decision of the Board of Commissioners that respondent Gatchalian is a Chinese citizen; and 4) respondent
judge Capulong should have dismissed Civil Case No. 3431-V-90 for forum-shopping.

In his counter-petition, William Gatchalian alleges among others that: 1) assuming that the evidence on
record is not sufficient to declare him a Filipino citizen, petitioners have no jurisdiction to proceed with the
deportation case until the courts shall have finally resolved the question of his citizenship; 2) petitioners can
no longer judiciously and fairly resolve the question of respondent's citizenship in the deportation case
because of their bias, pre-judgment and prejudice against him; and 3) the ground for which he is sought to
be deported has already prescribed.

For purposes of uniformity, the parties herein will be referred to in the order the petitions were filed.

Petitioners argue that under Sec. 9 (3) of BP 129, it is the Court of Appeals which has exclusive appellate
jurisdiction over all final judgments or orders of quasi-judicial agencies, boards or commissions, such as the
Board of Commissioners and the Board of Special Inquiry.

Respondent, on the other hand, contends that petitioners are not quasi-judicial agencies and are not in
equal rank with Regional Trial Courts.

Under Sec. 21 (1) of Batas Pambansa Blg. 129, the Regional Trial Courts have concurrent jurisdiction with
this Court and the Court of Appeals to issue "writs of certiorari, prohibition, mandamus, quo warranto,
habeas corpusand injunction which may be enforced in any part of their respective regions, . . ." Thus, the
RTCs are vested with the power to determine whether or not there has been a grave abuse of discretion on
the part of any branch or instrumentality of the government.

It is true that under Sec. 9 (3) of Batas Pambansa Blg. 129, the Court of Appeals is vested with

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, order, or awards
of Regional Trial Courts and quasi-judicial agencies, instrumentalities, board or commission, except
those falling within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the provisions of this Act, and of sub-paragraph (1) of the third paragraph of and sub-
paragraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

It does not provide, however, that said exclusive appellate jurisdiction of the Court of Appeals extends
to all quasi-judicial agencies. The quasi-judicial bodies whose decisions are exclusively appealable to the
Court of Appeals are those which under the law, Republic Act No. 5434, or their enabling acts, are
specifically appealable to the Court of Appeals (Presidential Anti-Dollar Salting Task Force vs. Court of
Appeals, 171 SCRA 348 [1989]; Lupangco vs. Court of Appeals, 160 SCRA 848 [1988]). Thus, under
Republic Act No. 5434, it is specifically provided that the decisions of the Land Registration Commission
(LRC), the Social Security Commission (SSC), Civil Aeronautics Board (CAB), the Patent Office and the
Agricultural Invention Board are appealable to the Court of Appeals.
In the Presidential Anti-Dollar Salting Task Force (supra), this Court clarified the matter when We ruled:

Under our Resolution dated January 11, 1983:

. . . The appeals to the Intermediate Appellate Court (now Court of Appeals) from quasi-
judicial bodies shall continue to be governed by the provisions of Republic Act No. 5434
insofar as the same is not inconsistent with the provisions of B.P. Blg. 129.

The pertinent provisions of Republic Act No. 5434 are as follows:

Sec. 1. Appeals from specified agencies. Any provision of existing law or Rules of Court to
the contrary notwithstanding, parties aggrieved by a final ruling, award, order, or decision, or
judgment of the Court of Agrarian Relations; the Secretary of Labor under Section 7 of
Republic Act Numbered Six hundred and two, also known as the "Minimum Wage Law"; the
Department of Labor under Section 23 of Republic Act Numbered Eight hundred seventy-
five, also known as the "Industrial Peace Act"; the Land Registration Commission; the Social
Security Commission; the Civil Aeronautics Board; the Patent Office and the Agricultural
Inventions Board, may appeal therefrom to the Court of Appeals, within the period and in the
manner herein provided, whether the appeal involves questions of fact, mixed questions of
fact and law, or questions of law, or all three kinds of questions. From final judgments or
decisions of the Court of Appeals, the aggrieved party may appeal by certiorari to the
Supreme Court as provided under Rule 45 of the Rules of Court.

Because of subsequent amendments, including the abolition of various special courts, jurisdiction
over quasi-judicial bodies has to be, consequently, determined by the corresponding amendatory
statutes. Under the Labor Code, decisions and awards of the National Labor Relations Commission
are final and executory, but, nevertheless, reviewable by this Court through a petition
for certiorari and not by way of appeal.

Under the Property Registration Decree, decision of the Commission of Land Registration, en
consulta, are appealable to the Court of Appeals.

The decisions of the Securities and Exchange Commission are likewise appealable to the Appellate
Court, and so are decisions of the Social Security Commission.

As a rule, where legislation provides for an appeal from decisions of certain administrative bodies to
the Court of Appeals, it means that such bodies are co-equal with the Regional Trial Courts, in terms
of rank and stature, and logically, beyond the control of the latter. (Emphasis supplied)

There are quasi-judicial agencies, as the National Labor Relations Commissions, whose decisions are
directly appealable to this Court. It is only when a specific law, as Republic Act No. 5434, provides appeal
from certain bodies or commissions to the Court of Appeals as the Land Registration Commission (LRC),
Securities and Exchange Commission (SEC) and others, that the said commissions or boards may be
considered co-equal with the RTCs in terms of rank, stature and are logically beyond the control of the latter.

However, the Bureau of Immigration (or CID) is not among those quasi-judicial agencies specified by law
whose decisions, orders, and resolutions are directly appealable to the Court of Appeals. In fact, its
decisions are subject to judicial review in accordance with Sec. 25, Chapter 4, Book VII of the 1987
Administrative Code, which provides as follows:

Sec. 25. Judicial Review.(1) Agency decisions shall be subject to judicial review in accordance
with this chapter and applicable laws.

xxx xxx xxx

(6) The review proceeding shall be filed in the court specified in the statute or, in the absence
thereof, in any court of competent jurisdiction in accordance with the provisions on venue of the
Rules of Court.

Said provision of the Administrative Code, which is subsequent to B.P. Blg. 129 and which thus modifies the
latter, provides that the decision of an agency like the Bureau of Immigration should be subject to review by
the court specified by the statute or in the absence thereof, it is subject to review by any court of competent
jurisdiction in accordance with the provisions on venue of the Rules of Court.

B.P. Blg. 129 did not intend to raise all quasi-judicial bodies to the same level or rank of the RTC except
those specifically provided for under the law as aforestated. As the Bureau of Immigration is not of equal
rank as the RTC, its decisions may be appealable to, and may be reviewed through a special civil action
for certiorari by, the RTC (Sec. 21, (1) BP 129).
True, it is beyond cavil that the Bureau of Immigration has the exclusive authority and jurisdiction to try and
hear cases against an alleged alien, and in the process, determine also their citizenship (Lao Gi vs. Court of
Appeals, 180 SCRA 756 [1989]). And a mere claim of citizenship cannot operate to divest the Board of
Commissioners of its jurisdiction in deportation proceedings (Miranda vs. Deportation Board, 94 Phil. 531
[1954]).

However, the rule enunciated in the above-cases admits of an exception, at least insofar as deportation
proceedings are concerned. Thus, what if the claim to citizenship of the alleged deportee is satisfactory?
Should the deportation proceedings be allowed to continue or should the question of citizenship be
ventilated in a judicial proceeding? InChua Hiong vs. Deportation Board (96 Phil. 665 [1955]), this Court
answered the question in the affirmative, and We quote:

When the evidence submitted by a respondent is conclusive of his citizenship, the right to immediate
review should also be recognized and the courts should promptly enjoin the deportation
proceedings. A citizen is entitled to live in peace, without molestation from any official or authority,
and if he is disturbed by a deportation proceeding, he has the unquestionable right to resort to the
courts for his protection, either by a writ of habeas corpus or of prohibition, on the legal ground that
the Board lacks jurisdiction. If he is a citizen and evidence thereof is satisfactory, there is no sense
nor justice in allowing the deportation proceedings to continue, granting him the remedy only after
the Board has finished its investigation of his undesirability.

. . . And if the right (to peace) is precious and valuable at all, it must also be protected on time, to
prevent undue harassment at the hands of ill-meaning or misinformed administrative officials. Of
what use is this much boasted right to peace and liberty if it can be availed of only after the
Deportation Board has unjustly trampled upon it, besmirching the citizen's name before the bar of
public opinion? (Emphasis supplied)

The doctrine of primary jurisdiction of petitioners Board of Commissioners over deportation proceedings is,
therefore, not without exception (Calacday vs. Vivo, 33 SCRA 413 [1970]; Vivo vs. Montesa, 24 SCRA 155
[1967]). Judicial intervention, however, should be granted only in cases where the "claim of citizenship is so
substantial that there are reasonable grounds to believe that the claim is correct. In other words, the remedy
should be allowed only on sound discretion of a competent court in a proper proceeding (Chua Hiong vs.
Deportation Board, supra; Co. vs. Deportation Board, 78 SCRA 107 [1977]). It appearing from the records
that respondent's claim of citizenship is substantial, as We shall show later, judicial intervention should be
allowed.

In the case at bar, the competent court which could properly take cognizance of the proceedings instituted
by respondent Gatchalian would nonetheless be the Regional Trial Court and not the Court of Appeals in
view of Sec. 21 (1), BP 129, which confers upon the former jurisdiction over actions for prohibition
concurrently with the Court of Appeals and the Supreme Court and in line with the pronouncements of this
Court in Chua Hiong and Co cases.

Ordinarily, the case would then be remanded to the Regional Trial Court. But not in the case at
bar. Considering the voluminous pleadings submitted by the parties and the evidence presented, We deem
1w phi 1

it proper to decide the controversy right at this instance. And this course of action is not without precedent
for "it is a cherished rule of procedure for this Court to always strive to settle the entire controversy in a
single proceeding leaving no root or branch to bear the seeds of future litigation. No useful purpose will be
served if this case is remanded to the trial court only to have its decision raised again to the Court of
Appeals and from there to this Court" (Marquez vs. Marquez, 73 Phil. 74; Keramic Industries, Inc. vs.
Guerrero, 61 SCRA 265 [1974]) Alger Electric, Inc. vs. Court of Appeals (135 SCRA 37 [1985]), citing Gayos
vs. Gayos (67 SCRA 146 [1975]).

In Lianga Bay Logging Co., Inc. vs. Court of Appeals (157 SCRA 357 [1988]), We also stated:

Remand of the case to the lower court for further reception of evidence is not necessary where the
court is in a position to resolve the dispute based on the records before it. On many occasions, the
Court, in the public interest and the expeditious administration of justice, has resolved actions on the
merits instead of remanding them to the trial court for further proceedings, such as where the ends
of justice would not be subserved by the remand of the case or when public interest demands an
early disposition of the case or where the trial court had already received all the evidence of the
parties (Quisumbing vs. CA, 112 SCRA 703; Francisco, et al., vs. The City of Davao, et al., supra;
Republic vs. Security Credit & Acceptance Corp., et al., 19 SCRA 58; Samal vs. CA, supra; Republic
vs. Central Surety & Insurance Co., 25 SCRA 641).

Likewise in Tejones vs. Gironella (159 SCRA 100 [1988]), We said:

Sound practice seeks to accommodate the theory which avoids waste of time, effort and expense,
both to the parties and the government, not to speak of delay in the disposal of the case
(cf. Fernandez vs. Garcia, 92 Phil. 592, 297). A marked characterstic of our judicial set-up is that
 where the dictates of justice so demand . . . the Supreme Court should act, and act with finality (Li
Siu Liat vs. Republic, 21 SCRA 1039, 1046, citingSamal vs. CA, 99 Phil. 230 and US vs. Gimenez,
34 Phil. 74.) (Beautifont, Inc. vs. Court of appeals, et al., Jan. 29, 1988; See also Labo vs.
Commission on Elections, 176 SCRA 1 [1989]).

Respondent Gatchalian has adduced evidence not only before the Regional Trial Court but also before Us in
the form of public documents attached to his pleadings. On the other hand, Special Prosecutor Renato
Mabolo in his Manifestation (dated September 6, 1990; Rollo, p. 298, counter-petition) before the Bureau of
Immigration already stated that there is no longer a need to adduce evidence in support of the deportation
charges against respondent. In addition, petitioners invoke that this Court's decision in Arocha vs.
Vivo and Vivo vs. Arca (supra), has already settled respondent's alienage. Hence, the need for a judicial
determination of respondent's citizenship specially so where the latter is not seeking admission, but is
already in the Philippines (for the past thirty [30] years) and is being expelled (Chua Hiong vs. Deportation
Board, supra).

According to petitioners, respondent's alienage has been conclusively settled by this Court in
the Arocha and Vivocases, We disagree. It must be noted that in said cases, the sole issue resolved therein
was the actual date of rendition of the July 6, 1962 decision of the then board of Commissioners, i.e.,
whether the decision was rendered on July 6, 1962 or on July 20, 1962 it appearing that the figure (date)
"20" was erased and over it was superimposed the figure "6" thereby making the decision fall within the one-
year reglementary period from July 6, 1961 within which the decision may be reviewed. This Court did not
squarely pass upon any question of citizenship, much less that of respondent's who was not a party in the
aforesaid cases. The said cases originated from a petition for a writ of habeas corpus filed on July 21, 1965
by Macario Arocha in behalf of Pedro Gatchalian. Well settled is the rule that a person not party to a case
cannot be bound by a decision rendered therein.

Neither can it be argued that the Board of Commissioners' decision (dated July 6, 1962) finding respondent's
claim to Philippine citizenship not satisfactorily proved, constitute res judicata. For one thing, said decision
did not make any categorical statement that respondent Gatchalian is a Chinese. Secondly, the doctrine
of res judicata does not apply to questions of citizenship (Labo vs. Commission on Elections
(supra); citing Soria vs. Commissioner of Immigration, 37 SCRA 213; Lee vs. Commissioner of Immigration,
42 SCRA 561 [1971]; Sia Reyes vs. Deportation Board, 122 SCRA 478 [1983]).

In Moy Ya Lim vs. Commissioner of Immigration (41 SCRA 292 [1971]) and in Lee vs. Commissioner of
Immigration (supra), this Court declared that:

(e)verytime the citizenship of a person is material or indispensable in a judicial or administrative

case, whatever the corresponding court or administrative authority decides therein as to such
citizenship is generally not considered as res adjudicata, hence it has to be threshed out again and
again as the occasion may demand.

An exception to the above rule was laid by this Court in Burca vs. Republic (51 SCRA 248 [1973]), viz:

We declare it to be a sound rule that where the citizenship of a party in a case is definitely resolved
by a court or by an administrative agency, as a material issue in the controversy, after a full-blown
hearing with the active participation of the Solicitor General or his authorized representative, and this
finding or the citizenship of the party is affirmed by this Court, the decision on the matter shall
constitute conclusive proof of such party's citizenship in any other case or proceeding. But it is made
clear that in no instance will a decision on the question of citizenship in such cases be considered
conclusive or binding in any other case or proceeding, unless obtained in accordance with the
procedure herein stated.

Thus, in order that the doctrine of res judicata may be applied in cases of citizenship, the following must be
present: 1) a person's citizenship must be raised as a material issue in a controversy where said person is a
party; 2) the Solicitor General or his authorized representative took active part in the resolution thereof, and
3) the finding or citizenship is affirmed by this Court.

Gauged by the foregoing, We find the pre-conditions set forth in Burca inexistent in
the Arocha and Vivo cases relied upon by petitioners. Indeed, respondent William Gatchalian was not even
a party in said cases.

Coming now to the contention of petitioners that the arrest of respondent follows as a matter of
consequence based on the warrant of exclusion issued on July 6, 1962, coupled with
the Arocha and Vivo cases (Rollo, pp. 33), the Court finds the same devoid of merit.

Sec. 37 (a) of Commonwealth Act No. 613, as amended, otherwise known as the Immigration Act of 1940,
reads:
 Sec. 37. (a) The following aliens shall be arrested upon the warrant of the Commissioner of
Immigration or of any other officer designated by him for the purpose and deported upon the warrant
of the Commissioner of Immigration after a determination by the Board of Commissioner of the
existence of the ground for deportation as charged against the alien. (Emphasis supplied)

From a perusal of the above provision, it is clear that in matters of implementing the Immigration Act insofar
as deportation of aliens are concerned, the Commissioner of Immigration may issue warrants of arrest only
after a determination by the Board of Commissioners of the existence of the ground for deportation as
charged against the alien. In other words, a warrant of arrest issued by the Commissioner of Immigration, to
be valid, must be for the sole purpose of executing a final order of deportation. A warrant of arrest issued by
the Commissioner of Immigration for purposes of investigation only, as in the case at bar, is null and void for
being unconstitutional (Ang Ngo Chiong vs. Galang, 67 SCRA 338 [1975] citing Po Siok Pin vs. Vivo, 62
SCRA 363 [1975]; Vivo vs. Montesa, 24 SCRA 155; Morano vs. Vivo, 20 SCRA 562; Qua Chee Gan vs.
Deportation Board, 9 SCRA 27 [1963]; Ng Hua To vs. Galang, 10 SCRA 411; see also Santos vs.
Commissioner of Immigration, 74 SCRA 96 [1976]).

As We held in Qua Chee Gan vs. Deportation Board (supra), "(t)he constitution does not distinguish
warrants between a criminal case and administrative proceedings. And if one suspected of having
committed a crime is entitled to a determination of the probable cause against him, by a judge, why should
one suspected of a violation of an administrative nature deserve less guarantee?" It is not indispensable that
the alleged alien be arrested for purposes of investigation. If the purpose of the issuance of the warrant of
arrest is to determine the existence of probable cause, surely, it cannot pass the test of constitutionality for
only judges can issue the same (Sec. 2, Art. III, Constitution).

A reading of the mission order/warrant of arrest (dated August 15, 1990; Rollo, p. 183, counter-petition)
issued by the Commissioner of Immigration, clearly indicates that the same was issued only for purposes of
investigation of the suspects, William Gatchalian included. Paragraphs 1 and 3 of the mission order directs
the Intelligence Agents/Officers to:

xxx xxx xxx

1. Make a warrantless arrest under the Rules of Criminal Procedure, Rule 113, Sec. 5, for violation
of the Immigration Act, Sec. 37, para. a; Secs. 45 and 46 Administrative Code;

xxx xxx xxx

3. Deliver the suspect to the Intelligence Division and immediately conduct custodial interrogation,
after warning the suspect that he has a right to remain silent and a right to counsel; . . .

Hence, petitioners' argument that the arrest of respondent was based, ostensibly, on the July 6, 1962
warrant of exclusion has obviously no leg to stand on. The mission order/warrant of arrest made no mention
that the same was issued pursuant to a final order of deportation or warrant of exclusion.

But there is one more thing that militates against petitioners' cause. As records indicate, which petitioners
conveniently omitted to state either in their petition or comment to the counter-petition of respondent,
respondent Gatchalian, along with others previously covered by the 1962 warrant of exclusion, filed a motion
for re-hearing before the Board of Special Inquiry (BSI) sometime in 1973.

On March 14, 1973, the Board of Special Inquiry, after giving due course to the motion for re-hearing,
submitted a memorandum to the then Acting Commissioner Victor Nituda (Annex "5", counter-petition)
recommending 1 the reconsideration of the July 6, 1962 decision of the then Board of Commissioners which
reversed the July 6, 1961 decision of the then Board of Special Inquiry No. 1 and 2 the lifting of the warrants
of arrest issued against applicants. The memorandum inferred that the "very basis of the Board of
Commissioners in reversing the decision of the Board of Special Inquiry was due to a forged cablegram by
the then Secretary of Foreign Affairs, . . ., which was dispatched to the Philippine Consulate in Hong Kong
authorizing the registration of applicants as P.I. citizens." The Board of Special Inquiry concluded that "(i)f at
all, the cablegram only led to the issuance of their Certificate(s) of Identity which took the place of a passport
for their authorized travel to the Philippines. It being so, even if the applicants could have entered illegally,
the mere fact that they are citizens of the Philippines entitles them to remain in the country."

On March 15, 1973, then Acting Commissioner Nituda issued an Order (Annex "6", counter-petition) which
affirmed the Board of Special Inquiry No. 1 decision dated July 6, 1961 admitting respondent Gatchalian and
others as Filipino citizens; recalled the July 6, 1962 warrant of arrest and revalidated their Identification
Certificates.

The above order admitting respondent as a Filipino citizen is the last official act of the government on the
basis of which respondent William Gatchalian continually exercised the rights of a Filipino citizen to the
present. Consequently, the presumption of citizenship lies in favor of respondent William Gatchalian.
There should be no question that Santiago Gatchalian, grandfather of William Gatchalian, is a Filipino
citizen. As a matter of fact, in the very order of the BOC of July 6, 1962, which reversed the July 6, 1961 BSI
order, it is an accepted fact that Santiago Gatchalian is a Filipino. The opening paragraph of said order
states:

The claim to Filipino citizenship of abovenamed applicants is based on the citizenship of one
Santiago Gatchalian whose Philippine citizenship was recognized by the Bureau of Immigration in an
Order dated July 12, 1960. (Annex "37", Comment with Counter-Petition).

Nonetheless, in said order it was found that the applicants therein have not satisfactorily proven that they
are the children and/or grandchildren of Santiago Gatchalian. The status of Santiago Gatchalian as a Filipino
was reiterated in Arocha and Arca (supra) where advertence is made to the "applicants being the
descendants of one Santiago Gatchalian, a Filipino." (at p. 539).

In the sworn statement of Santiago Gatchalian before the Philippine Consul in Hongkong in 1961 (Annex "1"
to the Comment of petitioners to Counter-Petition), he reiterated his status as a Philippine citizen being the
illegitimate child of Pablo Pacheco and Marciana Gatchalian, the latter being a Filipino; that he was born in
Manila on July 25, 1905; and that he was issued Philippine Passport No. 28160 (PA-No. A91196) on
November 18, 1960 by the Department of Foreign Affairs in Manila. In his affidavit of January 23, 1961
(Annex "5", counter-petition), Santiago reiterated his claim of Philippine citizenship as a consequence of his
petition for cancellation of his alien registry which was granted on February 18, 1960 in C.E.B. No. 3660-L;
and that on July 20, 1960, he was recognized by the Bureau of Immigration as a Filipino and was issued
Certificate No. 1-2123.

The dissenting opinions of my esteemed brethrens, Messrs. Justices F.P. Feliciano and H.G. Davide, Jr.,
proposing to re-open the question of citizenship of Santiago Gatchalian at this stage of the case, where it is
not even put in issue, is quite much to late. As stated above, the records of the Bureau of Immigration show
that as of July 20, 1960, Santiago Gatchalian had been declared to be a Filipino citizen. It is a final decision
that forecloses a re-opening of the same 30 years later. Petitioners do not even question Santiago
Gatchalian's Philippine citizenship. It is the citizenship of respondent William Gatchalian that is in issue and
addressed for determination of the Court in this case.

Furthermore, petitioners' position is not enhanced by the fact that respondent's arrest came twenty-eight
(28) years after the alleged cause of deportation arose. Section 37 (b) of the Immigration Act states that
deportation "shall not be effected . . . unless the arrest in the deportation proceedings is made within five (5)
years after the cause of deportation arises." In Lam Shee vs. Bengzon (93 Phil. 1065 [1953]), We laid down
the consequences of such inaction, thus:

There is however an important circumstance which places this case beyond the reach of the
resultant consequence of the fraudulent act committed by the mother of the minor when she
admitted that she gained entrance into the Philippines by making use of the name of a Chinese
resident merchant other than that of her lawful husband, and that is, that the mother can no longer
be the subject of deportation proceedings for the simple reason that more than 5 years had elapsed
from the date of her admission. Note that the above irregularity was divulged by the mother herself,
who in a gesture of sincerity, made an spontaneous admission before the immigration officials in the
investigation conducted in connection with the landing of the minor on September 24, 1947, and not
through any effort on the part of the immigration authorities. And considering this frank admission,
plus the fact that the mother was found to be married to another Chinese resident merchant, now
deceased, who owned a restaurant in the Philippines valued at P15,000 and which gives a net profit
of P500 a month, the immigration officials then must have considered the irregularity not serious
enough when, inspire of that finding, they decided to land said minor "as a properly documented
preference quota immigrant" (Exhibit D). We cannot therefore but wonder why two years later the
immigration officials would reverse their attitude and would take steps to institute deportation
proceedings against the minor.

Under the circumstances obtaining in this case, we believe that much as the attitude of the mother
would be condemned for having made use of an improper means to gain entrance into the
Philippines and acquire permanent residence there, it is now too late, not to say unchristian, to
deport the minor after having allowed the mother to remain even illegally to the extent of validating
her residence by inaction, thus allowing the period of prescription to set in and to elapse in her favor.
To permit his deportation at this late hour would be to condemn him to live separately from his
mother through no fault of his thereby leaving him to a life of insecurity resulting from lack of support
and protection of his family. This inaction or oversight on the part of immigration officials has created
an anomalous situation which, for reasons of equity, should be resolved in favor of the minor herein
involved. (Emphasis supplied)

In the case at bar, petitioners' alleged cause of action and deportation against herein respondent arose in
1962. However, the warrant of arrest of respondent was issued by Commissioner Domingo only on August
15, 1990 28 long years after. It is clear that petitioners' cause of action has already prescribed and by
their inaction could not now be validly enforced by petitioners against respondent William Gatchalian.
Furthermore, the warrant of exclusion dated July 6, 1962 was already recalled and the Identification
certificate of respondent, among others, was revalidated on March 15, 1973 by the then Acting
Commissioner Nituda.

It is also proposed in the dissenting opinions of Messrs. Justices Feliciano and Davide, Jr., that the BOC
decision dated July 6, 1962 and the warrant of exclusion which was found to be valid in Arocha should be
applicable to respondent William Gatchalian even if the latter was not a party to said case. They also opined
that under Sec. 37 (b) of the Immigration Act, the five (5) years limitation is applicable only where the
deportation is sought to be effected under clauses of Sec. 37 (b) other than clauses 2, 7, 8, 11 and 12 and
that no period of limitation is applicable in deportations under clauses 2, 7, 8, 11 and 12.

The Court disagrees. Under Sec. 39 of the Immigration Act, it is reiterated that such deportation proceedings
should be instituted within five (5) years. Section 45 of the same Act provides penal sanctions for violations
of the offenses therein enumerated with a fine of "not more than P1,000.00 and imprisonment for not more
than two (2) years and deportation if he is an alien." Thus:

Penal Provisions

Sec. 45. Any individual who

(a) When applying for an immigration document personates another individual, or falsely appears in
the name of deceased individual, or evades the immigration laws by appearing under an assumed
name; fictitious name; or

(b) Issues or otherwise disposes of an immigration document, to any person not authorized by law to
receive such document; or

(c) Obtains, accepts or uses any immigration document, knowing it to be false; or

(d) Being an alien, enters the Philippines without inspection and admission by the immigration
officials, or obtains entry into the Philippines by wilful, false, or misleading representation or wilful
concealment of a material fact; or

(e) Being an alien shall for any fraudulent purpose represent himself to be a Philippine citizen in
order to evade any requirement of the immigration laws; or

(f) In any immigration matter shall knowingly make under oath any false statement or
representations; or

(g) Being an alien, shall depart from the Philippines without first securing an immigration clearance
certificates required by section twenty-two of this Act; or

(h) Attempts or conspires with another to commit any of the foregoing acts, shall be guilty of an
offense, and upon conviction thereof, shall be fined not more than one thousand pesos, and
imprisoned for not more than two years, and deported if he is an alien. (Emphasis supplied)

Such offenses punishable by correctional penalty prescribe in 10 years (Art. 90, Revised Penal Code);
correctional penalties also prescribe in 10 years (Art. 92, Revised Penal Code).

It must be noted, however, that under Sec. 1, Act No. 3326 [1926], as amended, (Prescription for Violations
Penalized by Special Acts and Municipal Ordinances) "violations penalized by special acts shall, unless
otherwise provided in such acts, prescribe in accordance with the following rules: . . .c) after eight years for
those punished by imprisonment for two years or more, but less than six years; . . ."

Consequently, no prosecution and consequent deportation for violation of the offenses enumerated in the
Immigration Act can be initiated beyond the eight-year prescriptive period, the Immigration Act being a
special legislation.

The Court, therefore, holds that the period of effecting deportation of an alien after entry or a warrant of
exclusion based on a final order of the BSI or BOC are not imprescriptible. The law itself provides for a
period of prescription. Prescription of the crime is forfeiture or loss of the rights of the State to prosecute the
offender after the lapse of a certain time, while prescription of the penalty is the loss or forfeiture by the
government of the right to execute the final sentence after the lapse of a certain time (Padilla, Criminal Law,
Vol. 1, 1974, at p. 855).

"Although a deportation proceeding does not partake of the nature of a criminal action, however, considering
that it is a harsh and extraordinary administrative proceeding affecting the freedom and liberty of a person,
the constitutional right of such person to due process should not be denied. Thus, the provisions of the
Rules of Court of the Philippines particularly on criminal procedure are applicable to deportation
proceedings." (Lao Gi vs. Court of Appeals, supra). Under Sec. 6, Rule 39 of the Rules of Court, a final
judgment may not be executed after the lapse of five (5) years from the date of its entry or from the date it
becomes final and executory. Thereafter, it may be enforced only by a separate action subject to the statute
of limitations. Under Art. 1144 (3) of the Civil Code, an action based on judgment must be brought within 10
years from the time the right of action accrues.

In relation to Sec. 37 (b) of the Immigration Act, the rule, therefore, is:

1. Deportation or exclusion proceedings should be initiated within five (5) years after the cause of
deportation or exclusion arises when effected under any other clauses other than clauses 2, 7, 8, 11 and 12
and of paragraph (a) of Sec. 37 of the Immigration Act; and

2. When deportation or exclusion is effected under clauses 2, 7, 8, 11 and 12 of paragraph (a) of Sec. 37,
the prescriptive period of the deportation or exclusion proceedings is eight (8) years.

In the case at bar, it took petitioners 28 years since the BOC decision was rendered on July 6, 1962 before
they commenced deportation or exclusion proceedings against respondent William Gatchalian in 1990.
Undoubtedly, petitioners' cause of action has already prescribed. Neither may an action to revive and/or
enforce the decision dated July 6, 1962 be instituted after ten (10) years (Art. 1144 [3], Civil Code).

Since his admission as a Filipino citizen in 1961, respondent William Gatchalian has continuously resided in
the Philippines. He married Ting Dee Hua on July 1, 1973 (Annex "8", counter-petition) with whom he has
four (4) minor children. The marriage contract shows that said respondent is a Filipino (Annex "8"). He holds
passports and earlier passports as a Filipino (Annexes "9", "10" & "11", counter-petition). He is a registered
voter of Valenzuela, Metro Manila where he has long resided and exercised his right of suffrage (Annex 12,
counter-petition). He engaged in business in the Philippines since 1973 and is the director/officer of the
International Polymer Corp. and Ropeman International Corp. as a Filipino (Annexes, "13" & "14", counter-
petition). He is a taxpayer. Respondent claims that the companies he runs and in which he has a controlling
investment provides livelihood to 4,000 employees and approximately 25,000 dependents. He continuously
enjoyed the status of Filipino citizenship and discharged his responsibility as such until petitioners initiated
the deportation proceedings against him.

"The power to deport an alien is an act of the State. It is an act by or under the authority of the sovereign
power. It is a police measure against undesirable aliens whose presence in the country is found to be
injurious to the public good and domestic tranquility of the people" (Lao Gi vs. Court of Appeals, supra). How
could one who has helped the economy of the country by providing employment to some 4,000 people be
considered undesirable and be summarily deported when the government, in its concerted drive to attract
foreign investors, grants Special Resident Visa to any alien who invest at least US$50,000.00 in the
country? Even assuming arguendo that respondent is an alien, his deportation under the circumstances is
unjust and unfair, if not downright illegal. The action taken by petitioners in the case at bar is diametrically
opposed to settled government policy.

Petitioners, on the other hand, claim that respondent is an alien. In support of their position, petitioners point
out that Santiago Gatchalian's marriage with Chu Gim Tee in China as well as the marriage of Francisco
(father of William) Gatchalian to Ong Chiu Kiok, likewise in China, were not supported by any evidence other
than their own self-serving testimony nor was there any showing what the laws of China were. It is the
postulate advanced by petitioners that for the said marriages to be valid in this country, it should have been
shown that they were valid by the laws of China wherein the same were contracted. There being none,
petitioners conclude that the aforesaid marriages cannot be considered valid. Hence, Santiago's children,
including Francisco, followed the citizenship of their mother, having been born outside of a valid marriage.
Similarly, the validity of the Francisco's marriage not having been demonstrated, William and Johnson
followed the citizenship of their mother, a Chinese national.

After a careful consideration of petitioner's argument, We find that it cannot be sustained.

In Miciano vs. Brimo (50 Phil. 867 [1924]; Lim and Lim vs. Collector of Customs, 36 Phil. 472; Yam Ka Lim
vs. Collector of Customs, 30 Phil. 46 [1915]), this Court held that in the absence of evidence to the contrary,
foreign laws on a particular subject are presumed to be the same as those of the Philippines. In the case at
bar, there being no proof of Chinese law relating to marriage, there arises the presumption that it is the
same as that of Philippine law.

The lack of proof of Chinese law on the matter cannot be blamed on Santiago Gatchalian much more on
respondent William Gatchalian who was then a twelve-year old minor. The fact is, as records indicate,
Santiago was not pressed by the Citizenship Investigation Board to prove the laws of China relating to
marriage, having been content with the testimony of Santiago that the Marriage Certificate was lost or
destroyed during the Japanese occupation of China. Neither was Francisco Gatchalian's testimony
subjected to the same scrutiny by the Board of Special Inquiry. Nevertheless, the testimonies of Santiago
Gatchalian and Francisco Gatchalian before the Philippine consular and immigration authorities regarding
their marriages, birth and relationship to each other are not self-serving but are admissible in evidence as
statements or declarations regarding family reputation or tradition in matters of pedigree (Sec. 34, Rule 130).
Furtheremore, this salutary rule of evidence finds support in substantive law. Thus, Art. 267 of the Civil Code
provides:

Art. 267. In the absence of a record of birth, authentic document, final judgment or possession of
status, legitimate filiation may be proved by any other means allowed by the Rules of Court and
special laws. (See also Art. 172 of the Family Code)

Consequently, the testimonies/affidavits of Santiago Gatchalian and Francisco Gatchalian aforementioned

are not self-serving but are competent proof of filiation (Art. 172 [2], Family Code).

Philippine law, following the lex loci celebrationis, adheres to the rule that a marriage formally valid where
celebrated is valid everywhere. Referring to marriages contracted abroad, Art. 71 of the Civil Code (now Art.
26 of the Family Code) provides that "(a)ll marriages performed outside of the Philippines in accordance with
the laws in force in the country where they were performed, and valid there as such, shall also be valid in
this country . . ." And any doubt as to the validity of the matrimonial unity and the extent as to how far the
validity of such marriage may be extended to the consequences of the coverture is answered by Art. 220 of
the Civil Code in this manner: "In case of doubt, all presumptions favor the solidarity of the family.
Thus, every intendment of law or facts leans toward the validity of marriage, the indissolubility of the
marriage bonds, the legitimacy of children, the community of property during marriage, the authority of
parents over their children, and the validity of defense for any member of the family in case of unlawful
aggression." (Emphasis supplied). Bearing in mind the "processual presumption" enunciated inMiciano and
other cases, he who asserts that the marriage is not valid under our law bears the burden of proof to present
the foreign law.

Having declared the assailed marriages as valid, respondent William Gatchalian follows the citizenship of his
father Francisco, a Filipino, as a legitimate child of the latter. Francisco, in turn is likewise a Filipino being
the legitimate child of Santiago Gatchalian who (the latter) is admittedly a Filipino citizen whose Philippine
citizenship was recognized by the Bureau of Immigration in an order dated July 12, 1960.

Finally, respondent William Gatchalian belongs to the class of Filipino citizens contemplated under Sec. 1,
Article IV of the Constitution, which provides:

Sec. 1. The following are citizens of the Philippines:

(1) Those who are citizens of the Philippines at the time of the adoption of this Constitution. . . .

This forecloses any further question about the Philippine citizenship of respondent William Gatchalian.

The Court is not unaware of Woong Woo Yiu vs. Vivo (13 SCRA 552 [1965]) relied upon by petitioners. The
ruling arrived thereat, however, cannot apply in the case at bar for the simple reason that the parties therein
testified to have been married in China by a village leader, which undoubtedly is not among those authorized
to solemnize marriage as provided in Art. 56 of the Civil Code (now Art. 7, Family Code).

Premises considered, the Court deems it unnecessary to resolve the other issues raised by the parties.

WHEREFORE, G.R. Nos. 95122-23 is DISMISSED for lack of merit; G.R. Nos. 95612-13 is hereby
GRANTED and respondent William Gatchalian is declared a Filipino citizen. Petitioners are hereby
permanently enjoined from continuing with the deportation proceedings docketed as DC No. 90-523 for lack
of jurisdiction over respondent Gatchalian, he being a Filipino citizen; Civil Cases No. 90-54214 and 3431-V-
90 pending before respondent judges are likewise DISMISSED. Without pronouncement as to costs.

G.R. No. 79886 November 22, 1989

QUALITRANS LIMOUSINE SERVICE, INC., petitioner,

vs.
ROYAL CLASS LIMOUSINE SERVICE, LAND TRANSPORTATION COMMISSION, COURT OF
APPEALS,respondents.

G.R. No. 79887 November 22, 1989

QUALITRANS LIMOUSINE SERVICE, INC.,

vs.
ROYAL CLASS LIMOUSINE SERVICE, JUDGE PERPETUA COLOMA, and COURT OF
APPEALS,respondents.
SARMIENTO, J.:

These two petitions, in the nature of appeals by certiorari, from a joint judgment of the Court of Appeals,
were brought by Qualitrans Limousine Service, Inc., grantee of a certificate of public convenience issued by
the defunct Board of Transportation to operate a "garage (tourist) air-conditioned service" 1 in Manila to any
point in the island of Luzon. By our Resolution of September 7, 1988, we consolidated the twin cases. We also
gave due course thereto.

The facts, never disputed, are stated in the decision of the Court of Appeals. We quote:

xxx xxx xxx

On June 22, 1982, the then Board of Transportation, now the Land Transportation
Commission, rendered a Decision granting petitioner a certificate of public convenience to
operate a garage (tourist) air-conditioned service within the City of Manila and from said
place to any point in Luzon, and vice-versa (Annex A, CA-G.R. SP No. 10049).

On June 25, 1982, said Decision was amended by converting petitioner's certificate of public
convenience for garage service into one for limousine tourist service for the transportation of
all outgoing passengers of the Manila International Airport (Annex B, CA-G.R. SP No.
10049).

On October 14, 1985, a Deed of Absolute Sale (Annex I of both Records) was executed by
private respondent with Transcare, Inc., a duly licensed limousine service operator and
likewise, a holder of a certificate of public convenience (Annex 2 of both Records). By virtue
of said sale, the franchise granted to Transcare, Inc. for the use of 40 units of tourist cars
was sold to private respondent.

On December 27, 1985, upon application filed for the approval of aforementioned sale, an
Order was issued by the Land Transportation Commission granting a provisional permit in
favor of private respondent (Annexes C and 3, CA-G.R. SP No. 10049); Annexes B and 3
CA-G.R. No. 10370-SP). The prefatory portion thereof states:

The application filed in this case is for the approval of sale made by
TRANSCARE, INC., in favor of ROYAL CLASS LIMOUSINE SERVICE of the
Certificate of Public Convenience issued in Case Nos. 81-4405 and 82-415
authorizing the operation of a TOURIST CAR (AIR-CONDITIONED)
SERVICE within the New Manila International Airport and from said place to
any point in the Island of Luzon accessible to motor vehicle traffic and vice-
versa, involving the right to operate forty (40) units authorized therein. ...
(Emphasis supplied).

On June 17, 1986, petitioner filed a motion for reconsideration before the Land
Transportation Commission to correct the route specified in the prefatory portion of its
December 27, 1986 Order (Annex 4 of both Records). Petitioner argues that the application
filed by private respondent was for the route from the "New Manila International Airport to
hotels and from said hotels to any point in Luzon accessible to vehicular traffic and vice-
versa", and not from the "New Manila International Airport ... to any point in the Island of
Luzon ... " (ibidem). Petitioner claims that respondent has been soliciting passengers from
the New Manila International Airport to transport them to any point in Luzon to the prejudice
of petitioner's business.

On September 1, 1986, petitioner filed Civil Case No. 4275-P before the Pasay City Regional
Trial Court for damages with prayer for issuance of a writ of mandatory injunction against
private respondent (Annex D, CA-G.R. SP No. 10049: Annex 5, CA-G.R. SP No. 10370).

On same date, Hon. Fermin A. Martin. Jr., Vice-Executive Judge of the Pasay City Regional
Trial Court, issued a Restraining Order directing private respondent to desist from ferrying
passengers from the New Manila International Airport to their residences (Annex E, CA-G.R.
SP No. 10049; Annex 6, CA-G.R. SP No. 10370). The petition for preliminary injunction was
set for hearing on September 5, 1986.

On September 3, 1986, private respondent, defendant in Civil Case No. 4275, filed an
Urgent Motion to Dissolve/Lift Restraining Order issued by Hon. Fermin A. Martin, Jr. (Annex
F, CA-G.R. SP No. 10049). Thereafter, same respondent filed an Opposition to petitioner's
application for a writ of preliminary mandatory injunction (Annex G, CA-G.R. SP No. 10049).
 In the hearing of September 5, 1986, respondent Hon. Perpetua D. Coloma, in whose
Branch the civil case was raffled, gave petitioner up to September 8, 1986 within which to file
an opposition, if any, to respondent urgent motion.

On September 8, 1986, petitioner filed the required opposition (Annex 1, CA-G.R. SP No.
10049). On that same date, respondent Judge ruled on said urgent motion and petitioner's
earlier prayer for the issuance of a preliminary mandatory injunction. Pertinent portions of
respondent Judge's Order read as follows:

After a careful examination of the arguments of both parties to support their

respective claims, this Court believes that the defendant's contention finds
justification under the doctrine of exhaustion of Administrative remedies.

xxx xxx xxx

Further, this Court doesn't have jurisdiction over this case under Sec. 19 BP
Blg. 129.

RTC shall have Exclusive jurisdiction. SEC. 19, BP Blg. 129.

6. In all cases not within the exclusive jurisdiction of a any

Court, Tribunal, person or body exercising judicial or quasi-
judicial functions.

IN VIEW OF ALL THE FOREGOING, this Court is constrained to Lift as it

does lift the Restraining Order dated September 1, 1986 and hereby denies
the Issuance of Preliminary Mandatory. (Sic) (Annex H, CA-G.R. SP No.
10049; Annex 8, CA-G.R. SP No. 10370).

On September 16, 1986, petitioner filed a Motion for Reconsideration (Annex J, CA-G.R. SP
No. 10049) which was denied by respondent Court on September 19, 1986.

In the meantime, private respondent filed in respondent Commission a Petition for

Declaratory Relief (sic) requestioning the latter to declare the extent of its rights under its
provisional authority (Annex C, CA-G.R. SP No. 10370).

On September 17, 1986, petitioner was able to secure from respondent Commission an
Order directing private respondent "to immediately cease and desist from operating its units
from the New Manila International Airport to any point in Luzon" (Annexes D and 9, CA-G.R.
SP No. 10370). Two days later, however, this Order was lifted by respondent Commission
upon motion of private respondent (Annex 5, CA-G.R. SP No. 10049; Annexes 10 and 11,
CA-G.R. SP No. 10370).

On September 23, 1986, petitioner filed before this Court CA-G.R. SP No. 10049 praying,
among others, that a Restraining Order issue to prevent implementation of the September 8,
and 19, 1986 Orders of respondent Court and to direct said Court to grant the injunction
prayed for therein.

On October 1, 1986, petitioner filed its Opposition to private respondent's Petition for
Declaratory Relief pending before respondent Commission (Annex F, CA-G.R. SP No.
10370).

On October 9, 1986, respondent Commission acted on private respondent's Petition for

Declaratory Relief ruling that the provisional authority granted to private respondent was "to
transport passengers from the New Manila International Airport and from said place to any
point in the Island of Luzon ...." (Annex G, CA-G.R. SP No. 10370).

On October 15, 1986, petitioner filed a motion for respondent Commission to reconsider its
Order of October 9, 1986 (Annex H, CA-G.R. SP No. 10370). This was denied by said
Commission in its Order dated October 17, 1986 (Annex I, CA-G.R. SP No. 10370). 2

xxx xxx xxx

The Court of Appeals dismissed both of Qualitrans' petitions and directed it to respect the issuance of a
certificate of public convenience (CPC) in favor of Royal Class Limousine Service. The petitioner now holds
the Appellate Court to be in error, in these respects:

I
THE COURT OF APPEALS ERRED IN RULING THAT THE LAND TRASPORTATION COMMISSION HAD
JURISDICTION OVER PETITIONS FOR DECLARATORY RELIEF,

II

THE COURT OF APPEALS ERRED IN RULING THAT THE PETITION FOR DECLARATORY RELIEF OF
PRIVATE RESPONDENT WAS PROPER.

III

THE COURT OF APPEALS ERRED IN NOT RULING THAT THE DECISIONS OF THE LAND
TRANSPORTATION COMMISSION IN CASES NOS. 81-4405 AND 82-416 ARE VOID FOR BEING
CONTRARY TO MINISTRY ORDER NO. 81-054.

IV

THE COURT OF APPEALS ERRED IN NOT RULING THAT THE LAND TRANSPORTATION
COMMISSION DENIED PETITIONER DUE PROCESS OF LAW, BECAUSE IT ADVANCED THE TIME OF
THE HEARING WITHOUT NOTICE TO PETITIONER.

THE COURT OF APPEALS ERRED IN RULING THAT THE ORDERS OF OCTOBER 9 AND 17, 1986 OF
THE LAND TRANSPORTATION COMMISSION WAS SUPPORTED BY THE EVIDENCE, WHEN NONE
WAS EVER ADDUCED.

VI

THE COURT OF APPEALS ERRED IN NOT RULING THAT PRIVATE RESPONDENT IS NOT
AUTHORIZED TO TRANSPORT PASSENGERS DIRECTLY FROM THE MANILA INTERNATIONAL
AIRPORT TO DESTINATIONS OTHER THAN HOTELS. 3

Anent the said Appellate Court's affirmance of the Regional Trial Court's Order 4 dismissing Qualitrans'
complaint for injunction and damages, Qualitrans assigns the following errors:

THE REGIONAL TRIAL COURT HAS JURISDICTION OVER CIVIL CASE NO. 4275-P.

II

THE DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES IS NOT APPLICABLE TO THIS

CASE.

III

PETITIONER IS ENTITLED TO THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION. 5

We sustain the Court of Appeals in both cases.

I (G.R. No 79886)

1. As to claims that the Land Transportation Commission can not entertain suits for
declaratory relief, there is merit in the ruling under question to the effect that the
Commission, under its enabling law, Executive Order No. 1011, has ample powers to modify
certificates of public convenience, including the grant of latitudinarian franchises in favor of
public utilities. We quote:

... The (Land Transportation) Commission shall have, among others, the following powers
and functions:

(a) Quasi-judicial powers and functions which require notice and hearing

xxx xxx xxx

(2) To issue, amend, revise, suspend or cancel Certificates of Public

Convenience or permits authorizing the operation of public land
 transportation services provided by motorized vehicles, and to prescribe the
appropriate terms and conditions therefor; 6

xxx xxx xxx

Royal Class' application is, quintessentially, a petition for an expanded route, over which the Board
exercises jurisdiction under its charter. If it seemed like an "action for declaratory relief", it is only a
coincidence, for the nature of an action is to be determined by what the petition alleges and not by the
appellation the parties have attached to their pleadings. 7 Whether it is a petition for declaratory relief or for
revision or grant or cancellation of an existing CPC, the authority of the Commission to act is justified, so long as it
has been properly invoked.

The fact that Qualitrans had, meanwhile, commenced suit in the Regional Trial Court (RTC) does not oust
the Commission of its jurisdiction. The Commission had a primacy of authority to take cognizance of Royal
Class 'inquiry. It is to be noted, indeed, that the very trial court, by its order of September 8, 1986, 8 denied
the issuance of preliminary injunctive relief sought by Qualitrans, in deference, precisely, to the Board's primal
and preferential jurisdiction.

2. Of course, the Commission's action must have been preceded by due notice and
hearing, 9and precisely, it is Qualitrans' complaint that it had been deprived of due process for
failure of the transportation body to give it notice and hearing (in particular, of Royal Class' motion
to lift cease and desist order). The records show, however, that the decision of the Board is
founded on substantial evidence. 10 Moreover, in administrative cases, notice" is not
indispensable, but the deprivation of opportunity to be heard. That is not the case here. The
reality is that on October 1, 1986, Qualitrans opposed Royal Class' application for "declaratory
relief." 11 It can not therefore be heard to say that the Commission had acted without giving the
petitioner an avenue to air its side of the story.

3. Anent charges that the Commission issued the questioned certificate of public
convenience without evidence, suffice it to say that:

xxx xxx xxx

. . .the courts cannot or will not determine a controversy involving a question which is within
the jurisdiction of an administrative tribunal prior to the decision of that question by the
administrative tribunal, where the question demands the exercise of sound administrative
discretion requiring the special knowledge, experience, and services of the administrative
tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is
essential to comply with the purposes of the regulatory statute administered." Recently, this
Court speaking thru Mr. Chief Justice Claudio Teehankee said:

In this era of clogged court dockets, the need for specialized administrative boards or
commissions with the special knowledge, experience and capability to hear and determine
promptly disputes on technical matters or essentially factual matters, subject to judicial
review in case of grave abuse of discretion, has become well nigh indispensable. 12

The records also reveal that there were sound reasons for the lifting of the Commission's cease and desist
order, to wit:

xxx xxx xxx

1. Complaint's (sic) Motion for Reconsideration of the order dated December

27, 1985, in Case No. 85-9619 filed on June 17, 1986, has not yet been
resolved by this Commission;

2. Respondent's Petition for Declaratory Relief filed on September 15, 1986,

is still pending resolution by this Commission;

3. Considerable losses and irreparable injury will be sustained by

respondent, not to mention the loss of income of its drivers/employees whose
only source of livelihood is dependent on the present and continuous
operation of respondent; and

4. Above all, public interest and convenience will suffer and be prejudiced if
respondent is restrained from ferrying passengers from the New MIA directly
to their respective residences;

5. Likewise, a restraining order should be granted only where there is a clear

showing that there is indeed a flagrant violation on (sic) the property right of
 another. Absence of which or in case of ambiguity, a restraining order is
unavailing. And in the present case there is really that ambiguity attendant to
the issues involved, which this Commission shall have to resolve on the
merits so as not to prejudice either party. 13

3. As to charges that the certificate of public convenience of the private respondent had
allowed it to transport clients from the Ninoy Aquino International Airport only to hotels but
not to any other destination, the Court is agreed that the controlling jurisprudence is Carmelo
and Oriol v. Monserrat, 14 in which we held:

xxx xxx xxx

Everything else being equal, the real, primary question involved is whether it is better and
more convenient for the travelling public in the City of Manila to have two taxicab companies
in operation than it is to have one, and whether in truth and in fact the granting of another
similar license to the petitioners would operate as a real injury to Monserrat. He is the first in
the field and so long as he maintains good and efficient service and meets the demand of the
public, it is fair to assume that he will hold his present customers and would have nothing to
fear from the granting of a license to the petitioners, and if for any reason he does not give
the required kind of service or satisfy the needs of the public, then he would have no right to
complain.

xxx xxx xxx

That is to say, taxies are not operated on any schedule or over any certain route or between
certain points or in any direction, and that the certificate granted to Monserrat is in the nature
of a blanket franchise to operate a taxicab service over any and all of the streets and alleys
of the city, in any direction, from any place, and at any time, subject to the call and wish of
the customer only both as to time, place, and route of travel. That is to say, it is in the sole
discretion of the person desiring to travel whether he shall call a taxi or an auto garage car,
and as to when he shall call it, and where he shall go, and in the operation of an autobus
line, the operator must maintain a fixed schedule over a specified route between certain
points, and must make his trips with or without passengers. 15

The abovestated doctrine applies with equal force to the case under consideration. For
although Monserratinvolved a fleet of taxicabs, the taxicab business is no different, fundamentally, from a
limousine service because both have very broad destinations.

That Royal Class had, itself, admitted that its franchise covered the NAIA-hotel route alone, does not
weaken the Commission's ruling. The yardstick, so Monserrat tells us, is that:

xxx xxx xxx

In the granting or refusal of a certificate of public convenience, all things considered, the
question is what is for the best interests of the public. 16

Like Monserrat, the Court finds it "hard to conceive how it would be for the best interests of the public" 17, to
have one line only, "and how the public would be injured by the granting of the certificate in question, for it must
be conceded that two companies in the field would stimulate the business..." 18

It is simply bellyaching to say that Royal Class had transcended the bounds of the certificate of public
convenience granted to it. What Qualitrans is plainly carping about is the threat the Royal Class' certificate of
public convenience poses on its foothold in the "limo" service business. This is monopolism, plainly and
simply, and we can not tolerate it. The constitutional mandate is for "a more equitable distribution of
opportunities, income, and wealth" 19 and for the State to regulate or prohibit monopolies." 20

As we have held furthermore, a provisional authority is given on showing of public need. 21 Thus, it may be
issued ex-parte.

II (G.R. No. 79887)

1. For the same reasons, the above appeal must also fail. The Regional Trial Court (RTC)
had acted correctly in dismissing Qualitrans' damage suit.

Ramos v. Court of First Instance of Tayabas, 22 in which we sustained the jurisdiction of the CFI (now, RTC) at
the expense of Public Service Commission (now, the Land Transportation Commission), has no application. In
that case, the aggrieved party had denounced his adversary's action before the PSC. The latter, however, had
failed to act. We stamped our imprimatur on the CFI's jurisdiction because of temporal constraints. ("Damages
pile up day by day as infringement continues. The Public Service Commission has been afforded an opportunity
to give relief and has not done so." 23

In addition, there is a need to square the functioning of administrative bodies vis-a-vis contemporary
realities. As we have observed, the increasing pattern of law and legal development has been to entrust
"special cases" to "special bodies" rather than the courts. As we have also held, the shift of emphasis is
attributed to the need to slacken the encumbered dockets of the judiciary and so also, to leave "special
cases" to specialists and persons trained therefor.

There is no merit in the claims that Royal Class has been guilty of unfair competition. For starters, its CPC
has been duly issued. It (CPC) can not therefore be said to have been acquired through duress or deceit to
warrant such a charge.

2. Failure to exhaust administrative remedies is arrayed against Qualitrans. Hence, it can not
validly revoke our ruling in Arrow Transportation Corp. v. Board of Transportation. 24 That
case was impelled by urgent need, which the courts could address more swiftly. It is not the case
here. Not much is at stake in the "limo" business. We hold that the Commission should have
better been left alone to discharge its duty without court interference.

3. We are not impressed that Qualitrans has successfully shown that it is entitled to the
injunctive writ. Its appeal to "ruinous competition" 25 is not well-taken. Under the Constitution,
the national economy stands for, "competi[tion] in both domestic and foreign
markets." 26 Obviously, not every kind of competition is "ruinous competition". All things
considered and all things equal, competition is a healthy thing. Besides, there is no showing that
Qualitrans stood to lose its capital investment with the approval of Royal Class' franchise. 27 Our
considered opinion is that Qualitrans should improve its services as a counter-balance to Royal
Class' own toehold in the market. And let that be its challenge.

WHEREFORE, the petitions are DENIED. The decision appealed from is AFFIRMED in toto. No costs.

SO ORDERED.

A.M. No. RTJ-06-2017 June 19, 2008

LT. GEN. ALFONSO P. DAGUDAG (Ret.), complainant,

vs.
JUDGE MAXIMO G.W. PADERANGA, Regional Trial Court, Branch 38, Cagayan de Oro City, respondent.

DECISION

PER CURIAM, J.:

This is a complaint for gross ignorance of the law and conduct unbecoming a judge filed by retired Lt. Gen.
Alfonso P. Dagudag (Gen. Dagudag), Head of Task Force Sagip Kalikasan, against Judge Maximo G. W.
Paderanga (Judge Paderanga), Presiding Judge of the Regional Trial Court, Branch 38, Cagayan de Oro
City.

On or about 30 January 2005, the Region VII Philippine National Police Regional Maritime Group
(PNPRMG) received information that MV General Ricarte of NMC Container Lines, Inc. was shipping
container vans containing illegal forest products from Cagayan de Oro to Cebu. The shipments were falsely
declared as cassava meal and corn grains to avoid inspection by the Department of Environment and
Natural Resources (DENR).1

On 30 and 31 January 2005, a team composed of representatives from the PNPRMG, DENR, and the
Philippine Coast Guard inspected the container vans at a port in Mandaue City, Cebu. The team discovered
the undocumented forest products and the names of the shippers and consignees:

Container Van No. Shipper Consignee

NCLU 2000492-22GI Polaris Chua Polaris Chua
IEAU 2521845-2210 Polaris Chua Polaris Chua
NOLU 2000682-22GI Rowena Balangot Rowena Balangot
INBU 3125757-BB2210 Rowena Balangot Rowena Balangot
NCLU 20001591-22GI Jovan Gomez Jovan Gomez
GSTU 339074-US2210 Jovan Gomez Jovan Gomez
CRXU 2167567 Raffy Enriquez Raffy Enriquez
NCLU 2001570-22GI Raffy Enriquez Raffy Enriquez
The crew of MV General Ricarte failed to produce the certificate of origin forms and other pertinent transport
documents covering the forest products, as required by DENR Administrative Order No. 07-94. Gen.
Dagudag alleged that, since nobody claimed the forest products within a reasonable period of time, the
DENR considered them as abandoned and, on 31 January 2005, the Provincial Environment and Natural
Resources Office (PENRO) Officer-in-Charge (OIC), Richard N. Abella, issued a seizure receipt to NMC
Container Lines, Inc.2

On 1 February 2005, Community Environment and Natural Resources Office (CENRO) OIC Loreto A. Rivac
(Rivac) sent a notice to NMC Container Lines, Inc. asking for explanation why the government should not
confiscate the forest products.3 In an affidavit4 dated 9 February 2005, NMC Container Lines, Inc.s Branch
Manager Alex Conrad M. Seno stated that he did not see any reason why the government should not
confiscate the forest products and that NMC Container Lines, Inc. had no knowledge of the actual content of
the container vans.

On 2, 9, and 15 February 2005, DENR Forest Protection Officer Lucio S. Canete, Jr. posted notices on the
CENRO and PENRO bulletin boards and at the NMC Container Lines, Inc. building informing the unknown
owner about the administrative adjudication scheduled on 18 February 2005 at the Cebu City CENRO.
Nobody appeared during the adjudication.5 In a resolution6 dated 10 March 2005, Rivac, acting as
adjudication officer, recommended to DENR Regional Executive Director Clarence L. Baguilat that the forest
products be confiscated in favor of the government.

In a complaint7 dated 16 March 2005 and filed before Judge Paderanga, a certain Roger C. Edma (Edma)
prayed that a writ of replevin be issued ordering the defendants DENR, CENRO, Gen. Dagudag, and others
to deliver the forest products to him and that judgment be rendered ordering the defendants to pay him
moral damages, attorneys fees, and litigation expenses. On 29 March 2005, Judge Paderanga issued a writ
of replevin8 ordering Sheriff Reynaldo L. Salceda to take possession of the forest products.

In a motion to quash the writ of replevin,9 the defendants DENR, CENRO, and Gen. Dagudag prayed that
the writ of replevin be set aside: (1) Edmas bond was insufficient; (2) the forest products were falsely
declared as cassava meal and corn grains; (3) Edma was not a party-in-interest; (4) the forest products were
not covered by any legal document; (5) nobody claimed the forest products within a reasonable period of
time; (6) the forest products were already considered abandoned; (7) the forest products were lawfully
seized under the Revised Forestry Code of the Philippines; (8) replevin was not proper; (9) courts could not
take cognizance of cases pending before the DENR; (10) Edma failed to exhaust administrative remedies;
and (11) the DENR was the agency responsible for the enforcement of forestry laws. In a motion to
dismiss ad cautelam10 dated 12 April 2005, the defendants prayed that the complaint for replevin and
damages be dismissed: (1) the real defendant is the Republic of the Philippines; (2) Edma failed to exhaust
administrative remedies; (3) the State cannot be sued without its consent; and (4) Edma failed to allege that
he is the owner or is entitled to the possession of the forest products.

In an order11 dated 14 April 2005, Judge Paderanga denied the motion to quash the writ of replevin for lack
of merit.

Gen. Dagudag filed with the Office of the Court Administrator (OCA) an affidavit-complaint12 dated 8 July
2005 charging Judge Paderanga with gross ignorance of the law and conduct unbecoming a judge. Gen.
Dagudag stated that:

During the x x x hearing, [Judge Paderanga] showed manifest partiality in favor of x x x Edma.
DENRs counsel was lambasted, cajoled and intimidated by [Judge Paderanga] using words such as
"SHUT UP" and "THATS BALONEY."

xxxx

Edma in the replevin case cannot seek to recover the wood shipment from the DENR since he had
not sought administrative remedies available to him. The prudent thing for [Judge Paderanga] to
have done was to dismiss the replevin suit outright.

xxxx

[Judge Paderangas] act[s] of taking cognizance of the x x x replevin suit, issuing the writ of replevin
and the subsequent denial of the motion to quash clearly demonstrates [sic] ignorance of the law.

In its 1st Indorsement13 dated 1 August 2005, the OCA directed Judge Paderanga to comment on the
affidavit-complaint. In his comment14 dated 6 September 2005, Judge Paderanga stated that he exercised
judicial discretion in issuing the writ of replevin and that he could not delve into the issues raised by Gen.
Dagudag because they were related to a case pending before him.

In its Report15 dated 10 July 2006, the OCA found that Judge Paderanga (1) violated the doctrine of
exhaustion of administrative remedies; (2) violated the doctrine of primary jurisdiction; and (3) used
inappropriate language in court. The OCA recommended that the case be re-docketed as a regular
administrative matter; that Judge Paderanga be held liable for gross ignorance of the law and for violation of
Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary;16 and that he be
fined P30,000.

In its Resolution17 dated 16 August 2006, the Court re-docketed the case as a regular administrative matter
and required the parties to manifest whether they were willing to submit the case for decision based on the
pleadings already filed. Judge Paderanga manifested his willingness to submit the case for decision based
on the pleadings already filed.18 Since Gen. Dagudag did not file any manifestation, the Court considered
him to have waived his compliance with the 16 August 2006 Resolution.19

The Court finds Judge Paderanga liable for gross ignorance of the law and for conduct unbecoming a judge.

The DENR is the agency responsible for the enforcement of forestry laws. Section 4 of Executive Order No.
192 states that the DENR shall be the primary agency responsible for the conservation, management,
development, and proper use of the countrys natural resources.

Section 68 of Presidential Decree No. 705, as amended by Executive Order No. 277, states that possessing
forest products without the required legal documents is punishable. Section 68-A states that the DENR
Secretary or his duly authorized representatives may order the confiscation of any forest product illegally
cut, gathered, removed, possessed, or abandoned.

In the instant case, the forest products were possessed by NMC Container Lines, Inc. without the required
legal documents and were abandoned by the unknown owner. Consequently, the DENR seized the forest
products.

Judge Paderanga should have dismissed the replevin suit outright for three reasons. First, under the
doctrine of exhaustion of administrative remedies, courts cannot take cognizance of cases pending before
administrative agencies. In Factoran, Jr. v. Court of Appeals,20 the Court held that:

The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of law,
comity and convenience, should not entertain suits unless the available administrative
remedies have first been resorted to and the proper authorities have been given an
appropriate opportunity to act and correct their alleged errors, if any, committed in the
administrative forum. (Emphasis ours)

In Dy v. Court of Appeals,21 the Court held that a party must exhaust all administrative remedies before he
can resort to the courts. In Paat v. Court of Appeals,22 the Court held that:

This Court in a long line of cases has consistently held that before a party is allowed to seek the
intervention of the court, it is a pre-condition that he should have availed of all the means of
administrative processes afforded him. Hence, if a remedy within the administrative
machinery can still be resorted to by giving the administrative officer concerned every opportunity
to decide on a matter that comes within his jurisdiction then such remedy should be exhausted
first before courts judicial power can be sought. The premature invocation of courts
intervention is fatal to ones cause of action. Accordingly, absent any finding of waiver or
estoppel the case is susceptible of dismissal for lack of cause of action. (Emphasis ours)

In the instant case, Edma did not resort to, or avail of, any administrative remedy. He went straight to court
and filed a complaint for replevin and damages. Section 8 of Presidential Decree No. 705, as amended,
states that (1) all actions and decisions of the Bureau of Forest Development Director are subject to review
by the DENR Secretary; (2) the decisions of the DENR Secretary are appealable to the President; and (3)
courts cannot review the decisions of the DENR Secretary except through a special civil action
for certiorari or prohibition. In Dy,23 the Court held that all actions seeking to recover forest products in the
custody of the DENR shall be directed to that agency not the courts. In Paat,24 the Court held that:

Dismissal of the replevin suit for lack of cause of action in view of the private respondents
failure to exhaust administrative remedies should have been the proper course of action by
the lower court instead of assuming jurisdiction over the case and consequently issuing the
writ [of replevin].Exhaustion of the remedies in the administrative forum, being a condition
precedent prior to ones recourse to the courts and more importantly, being an element of private
respondents right of action, is too significant to be waylaid by the lower court.

xxxx

Moreover, the suit for replevin is never intended as a procedural tool to question the orders of
confiscation and forfeiture issued by the DENR in pursuance to the authority given under P.D.
705, as amended. Section 8 of the said law is explicit that actions taken by the
 Director of the Bureau of Forest Development concerning the enforcement of the provisions of
the said law are subject to review by the Secretary of DENR and that courts may not review
the decisions of the Secretary except through a special civil action for certiorari or
prohibition. (Emphasis ours)

Second, under the doctrine of primary jurisdiction, courts cannot take cognizance of cases pending before
administrative agencies of special competence. The DENR is the agency responsible for the enforcement of
forestry laws. The complaint for replevin itself stated that members of DENRs Task Force Sagip
Kalikasan took over the forest products and brought them to the DENR Community Environment and Natural
Resources Office. This should have alerted Judge Paderanga that the DENR had custody of the forest
products, that administrative proceedings may have been commenced, and that the replevin suit had to be
dismissed outright. In Tabao v. Judge Lilagan25 a case with a similar set of facts as the instant case the
Court held that:

The complaint for replevin itself states that the shipment x x x [was] seized by the NBI for verification
of supporting documents. It also states that the NBI turned over the seized items to the DENR "for
official disposition and appropriate action." x x x To our mind, these allegations [should] have
been sufficient to alert respondent judge that the DENR has custody of the seized items and
that administrative proceedings may have already been commenced concerning the
shipment. Under the doctrine of primary jurisdiction, courts cannot take cognizance of cases
pending before administrative agencies of special competence. x x x The prudent thing for
respondent judge to have done was to dismiss the replevin suit outright. (Emphasis ours)

In Paat,26 the Court held that:

[T]he enforcement of forestry laws, rules and regulations and the protection, development and
management of forest lands fall within the primary and special responsibilities of the Department of
Environment and

Natural Resources. By the very nature of its function, the DENR should be given a free hand
unperturbed by judicial intrusion to determine a controversy which is well within its
jurisdiction. The assumption by the trial court, therefore, of the replevin suit filed by private
respondents constitutes an unjustified encroachment into the domain of the administrative
agencys prerogative. The doctrine of primary jurisdiction does not warrant a court to
arrogate unto itself the authority to resolve a controversy the jurisdiction over which is
initially lodged with an administrative body of special competence. (Emphasis ours)

Third, the forest products are already in custodia legis and thus cannot be the subject of replevin. There was
a violation of the Revised Forestry Code and the DENR seized the forest products in accordance with law.
In Calub v. Court of Appeals,27 the Court held that properties lawfully seized by the DENR cannot be the
subject of replevin:

Since there was a violation of the Revised Forestry Code and the seizure was in accordance
with law, in our view the [properties seized] were validly deemed in custodia legis.
[They] could not be subject to an action for replevin. For it is property lawfully taken by virtue of
legal process and considered in the custody of the law, and not otherwise. (Emphasis ours)

Judge Paderangas acts of taking cognizance of the replevin suit and of issuing the writ of replevin constitute
gross ignorance of the law. In Tabao,28 the Court held that:

Under the doctrine of primary jurisdiction, courts cannot take cognizance of cases pending before
administrative of special competence. x x x [T]he plaintiff in the replevin suit who [sought] to
recover the shipment from the DENR had not exhausted the administrative remedies
available to him. The prudent thing for respondent judge to have done was to dismiss the
replevin suit outright.

Under Section 78-A of the Revised Forestry Code, the DENR secretary or his authorized
representatives may order the confiscation of forest products illegally cut, gathered, removed, or
possessed or abandoned.

xxxx

Respondent judges act of taking cognizance of the x x x replevin suit clearly demonstrates
ignorance of the law. x x x [J]udges are expected to keep abreast of all laws and prevailing
jurisprudence. Judges are duty bound to have more than just a cursory acquaintance with laws and
jurisprudence. Failure to follow basic legal commands constitutes gross ignorance of the law
from which no one may be excused, not even a judge. (Emphasis ours)
Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary states that competence is a
prerequisite to the due performance of judicial office. Section 3 of Canon 6 states that judges shall take
reasonable steps to maintain and enhance their knowledge necessary for the proper performance of judicial
duties. Judges should keep themselves abreast with legal developments and show acquaintance with
laws.29

The rule that courts cannot prematurely take cognizance of cases pending before administrative agencies is
basic. There was no reason for Judge Paderanga to make an exception to this rule. The forest products
were in the custody of the DENR and Edma had not availed of any administrative remedy. Judge Paderanga
should have dismissed the replevin suit outright. In Espaol v. Toledo-Mupas,30 the Court held that:

Being among the judicial front-liners who have direct contact with the litigants, a wanton display of
utter lack of familiarity with the rules by the judge inevitably erodes the confidence of the public in the
competence of our courts to render justice. It subjects the judiciary to embarrassment. Worse, it
could raise the specter of corruption.

When the gross inefficiency springs from a failure to consider so basic and elemental a rule, a law,
or a principle in the discharge of his or her duties, a judge is either too incompetent and undeserving
of the exalted position and title he or she holds, or the oversight or omission was deliberately done in
bad faith and in grave abuse of judicial authority.

The OCA found Judge Paderanga liable for using inappropriate language in court: "We x x x find
respondents intemperate use of "Shut up!" and "Baloney!" well nigh inappropriate in court proceedings. The
utterances are uncalled for."31

Indeed, the 14 and 22 April 2005 transcripts of stenographic notes show that Judge Paderanga was
impatient, discourteous, and undignified in court:

Atty. Luego: Your Honor, we want to have this motion because that is...
Judge Paderanga: I am asking you why did you not make any rejoinder[?]
xxxx
Atty. Luego: I apologize, Your Honor. We are ready to...
Judge Paderanga: Ready to what? Proceed.
Atty. Luego: Yes, Your Honor. We filed this motion to quash replevin, Your Honor, on the grounds,
first and foremost, it is our contention, Your Honor, with all due respect of [sic] this Honorable Court,
that the writ of replevin dated March 29, 2005 was improper, Your Honor, for the reasons that the
lumber, subject matter of this case, were apprehended in accordance with...
Judge Paderanga: Where is your proof that it was apprehended? Where is your proof? Is that
apprehension proven by a seizure receipt? Where is your seizure receipt?
Atty. Luego: Under the rules...
Judge Paderanga: Where is your seizure receipt? You read your rules. What does [sic] the rules
say? Where in your rules does it say that it does not need any seizure receipt? You look at your
rules. You point out the rules. You take out your rules and then you point out. Do you have the
rules?
xxxx
Atty. Luego: Your Honor, there was no seizure receipt, but during the apprehension, Your Honor,
there was no claimant.
Judge Paderanga: Answer me. Is there a seizure receipt?
Atty. Luego: But during the apprehension, Your Honor, no owner has [sic] appeared.
xxxx
Atty. Luego: According to [the] rules, Your Honor, if there is no...
Judge Paderanga: Whom are you seizing it from? To [sic] whom are you taking it from?
Atty. Luego: From the shipping company, Your Honor.
xxxx
Atty. Luego: Your Honor please, the shipping company denied the ownership of that lumber.
xxxx
Atty. Luego: But the shipping company, Your Honor,...
Judge Paderanga: Shut up. Thats baloney. You are seizing it from nobody. Then how can you
seize it from the shipping company. Are you not? You are a lawyer. Who is in possession of the
property? The shipping company. Why did you not issue [a] seizure receipt to the shipping
company?
Atty. Luego: But the... May I continue, Your Honor?
xxxx
Judge Paderanga: Stop talking about the shipping company. Still you did not issue a seizure receipt
here. Well, Im telling you you should have issued [a] seizure receipt to the shipping company.
xxxx
Judge Paderanga: You are a lawyer. You should know how to write pleadings. You write the
pleadings the way it should be, not the way you think it should be.
Atty. Luego: Im sorry, Your Honor.
 Judge Paderanga: You are an officer of the court. You should be careful with your language. You
say that I am wrong. Its you who are [sic] wrong because you do not read the law.
xxxx
Judge Paderanga: Then you read the law. How dare you say that the Court is wrong.
xxxx
Judge Paderanga: Are you not representing [the DENR]?
Atty. Luego: Yes, in this case, Your Honor.
Judge Paderanga: Then you are representing them. They are your clients. What kind of a lawyer
are you?32
xxxx
Atty. Tiamson: Specifically it was stated in the [Factoran] versus Court of Appeals [case] that the
Court should not interfere, Your Honor.
Judge Paderanga: No.
xxxx
Judge Paderanga: The problem with you people is you do not use your heads.
Atty. Tiamson: We use our heads, your Honor.
xxxx
Atty. Tiamson: Your Honor, we would like to put on record that we use our heads, your
Honor.33 (Emphasis ours)

Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary states that judges shall
be patient, dignified, and courteous in relation to lawyers. Rule 3.04, Canon 3 of the Code of Judicial
Conduct states that judges should be patient and courteous to lawyers, especially the inexperienced. They
should avoid the attitude that the litigants are made for the courts, instead of the courts for the litigants.

Judicial decorum requires judges to be temperate in their language at all times. They must refrain from
inflammatory, excessively rhetoric, or vile language.34 They should (1) be dignified in demeanor and refined
in speech; (2) exhibit that temperament of utmost sobriety and self-restraint; and (3) be considerate,
courteous, and civil to all persons who come to their court.35 In Juan de la Cruz v. Carretas,36 the Court held
that:

A judge who is inconsiderate, discourteous or uncivil to lawyers x x x who appear in his sala commits
an impropriety and fails in his duty to reaffirm the peoples faith in the judiciary. He also violates
Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary.

xxxx

It is reprehensible for a judge to humiliate a lawyer x x x. The act betrays lack of patience, prudence
and restraint. Thus, a judge must at all times be temperate in his language. He must choose his
words x x x with utmost care and sufficient control. The wise and just man is esteemed for his
discernment. Pleasing speech increases his persuasiveness.

Equanimity and judiciousness should be the constant marks of a dispenser of justice. A judge should
always keep his passion guarded. He can never allow it to run loose and overcome his reason. He
descends to the level of a sharp-tongued, ill-mannered petty tyrant when he utters harsh words x x x.
As a result, he degrades the judicial office and erodes public confidence in the judiciary.

Judge Paderangas refusal to consider the motion to quash the writ of replevin, repeated interruption of the
lawyers, and utterance of "shut up," "thats baloney," "how dare you say that the court is wrong," "what kind
of a lawyer are you?," and "the problem with you people is you do not use your heads" are undignified and
very unbecoming a judge. In Office of the Court Administrator v. Paderanga,37 the Court already
reprimanded Judge Paderanga for repeatedly saying "shut up," being arrogant, and declaring that he had
"absolute power" in court. He has not changed.

Section 8, Rule 140 of the Rules of Court classifies gross ignorance of the law as a serious offense. It is
punishable by (1) dismissal from the service, forfeiture of benefits, and disqualification from reinstatement to
any public office; (2) suspension from office without salary and other benefits for more than three months but
not exceeding six months; or (3) a fine of more than P20,000 but not exceeding P40,000.38 Section 10 of
Rule 140 classifies conduct unbecoming a judge as a light offense. It is punishable by (1) a fine of not less
than P1,000 but not exceedingP10,000; (2) censure; (3) reprimand; or (4) admonition with warning.39

The Court notes that this is Judge Paderangas third offense. In Office of the Court Administrator v.
Paderanga,40the Court held him liable for grave abuse of authority and simple misconduct for
unceremoniously citing a lawyer in contempt while declaring himself as having "absolute power" and for
repeatedly telling a lawyer to "shut up." InBeltran, Jr. v. Paderanga,41 the Court held him liable for undue
delay in rendering an order for the delay of nine months in resolving an amended formal offer of exhibits. In
both cases, the Court sternly warned Judge Paderanga that the commission of another offense shall be
dealt with more severely. The instant case and the two cases decided against him demonstrate Judge
Paderangas arrogance, incorrigibility, and unfitness to become a judge.
Judge Paderanga has two other administrative cases pending against him one42 for gross ignorance of
the law, knowingly rendering an unjust judgment, and grave abuse of authority, and the other43 for gross
misconduct, grave abuse of authority, and gross ignorance of the law.

The Court will not hesitate to impose the ultimate penalty on those who have fallen short of their
accountabilities. It will not tolerate any conduct that violates the norms of public accountability and
diminishes the faith of the people in the judicial system.44

WHEREFORE, the Court finds Judge Maximo G.W. Paderanga, Regional Trial Court, Branch 38, Cagayan
de Oro City, GUILTY of GROSS IGNORANCE OF THE LAW and UNBECOMING CONDUCT. Accordingly,
the CourtDISMISSES him from the service, with forfeiture of all retirement benefits, except accrued leave
credits, and with prejudice to reinstatement or appointment to any public office, including government-owned
or controlled corporations.

G.R. No. 167569 September 4, 2009

CARLOS T. GO, SR., Petitioner,
vs.
LUIS T. RAMOS, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 167570
JIMMY T. GO, Petitioner,
vs.
LUIS T. RAMOS, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 171946
HON. ALIPIO F. FERNANDEZ, JR., in his capacity as the Commissioner of the BUREAU OF
IMMIGRATION; ATTY. FAISAL HUSSIN and ANSARI M. MACAAYAN, in their capacity as Intelligence
Officers of the BUREAU OF IMMIGRATION, Petitioners,
vs.
JIMMY T. GO a.k.a. JAIME T. GAISANO, Respondent.

DECISION

QUISUMBING, J.:

Before us are three petitions. G.R. Nos. 167569 and 167570 are petitions for review on certiorari to set aside
the October 25, 2004 Decision1 and February 16, 2005 Resolution2 of the Court of Appeals in CA-G.R. SP
No. 85143 that affirmed the Decision3 dated January 6, 2004 and Order4 dated May 3, 2004 of the Regional
Trial Court (RTC) of Pasig City, Branch 167 in SCA No. 2218 upholding the preparation and filing of
deportation charges against Jimmy T. Go, the corresponding Charge Sheet5 dated July 3, 2001, and the
deportation proceedings thereunder conducted.

On the other hand, G.R. No. 171946, also a petition for review on certiorari, seeks to set aside the
December 8, 2005 Decision6 and March 13, 2006 Resolution7 of the appellate court in CA-G.R. SP No.
88277.

Considering that the three cases arose from the same factual milieu, the Court resolved to consolidate G.R.
Nos. 167570 and 167569 with G.R. No. 171946 per Resolution8 dated February 26, 2007.

These petitions stemmed from the complaint-affidavit9 for deportation initiated by Luis T. Ramos before the
Bureau of Immigration and Deportation (now Bureau of Immigration) against Jimmy T. Go alleging that the
latter is an illegal and undesirable alien. Luis alleged that while Jimmy represents himself as a Filipino
citizen, Jimmys personal circumstances and other records indicate that he is not so. To prove his
contention, Luis presented the birth certificate of Jimmy, issued by the Office of the Civil Registrar of Iloilo
City, which indicated Jimmys citizenship as "FChinese." Luis argued that although it appears from Jimmys
birth certificate that his parents, Carlos and Rosario Tan, are Filipinos, the document seems to be tampered,
because only the citizenship of Carlos appears to be handwritten while all the other entries were typewritten.
He also averred that in September 1989 or thereabout, Jimmy, through stealth, machination and scheming
managed to cover up his true citizenship, and with the use of falsified documents and untruthful
declarations, was able to procure a Philippine passport from the Department of Foreign Affairs.

Jimmy refuted the allegations in his counter-affidavit,10 averring that the complaint for deportation initiated by
Luis was merely a harassment case designed to oust him of his rightful share in their business dealings.
Jimmy maintained that there is no truth to the allegation that he is an alien, and insisted that he is a natural-
born Filipino. Jimmy alleged that his father Carlos, who was the son of a Chinese father and Filipina mother,
elected Philippine citizenship in accordance with Article IV, Section 1, paragraph 411 of the 1935 Constitution
and Commonwealth Act No. 62512 (Com. Act No. 625), as evidenced by his having taken the Oath of
Allegiance on July 11, 1950 and having executed an Affidavit of Election of Philippine citizenship on July 12,
1950. Although the said oath and affidavit were registered only on September 11, 1956, the reason behind
such late registration was sufficiently explained in an affidavit. Jimmy added that he had even voted in the
1952 and 1955 elections.13 He denied that his father arrived in the Philippines as an undocumented alien,
alleging that his father has no record of arrival in this country as alleged in the complaint-affidavit precisely
because his father was born and raised in the Philippines, and in fact, speaks fluent Ilonggo and Tagalog.14

With regard to the erroneous entry in his birth certificate that he is "FChinese," he maintained that such was
not of his own doing, but may be attributed to the employees of the Local Civil Registrars Office who might
have relied on his Chinese-sounding surname when making the said entry. He asserted that the said office
has control over his birth certificate; thus, if his fathers citizenship appears to be handwritten, it may have
been changed when the employees of that office realized that his father has already taken his oath as a
Filipino.15 As regards the entry in his siblings certificates of birth, particularly Juliet Go and Carlos Go, Jr.,
that their father is Chinese, Jimmy averred that the entry was erroneous because it was made without prior
consultation with his father.16

In a Resolution17 dated February 14, 2001, Associate Commissioner Linda L. Malenab-Hornilla dismissed
the complaint for deportation against Jimmy. Associate Commissioner Hornilla affirmed the findings of the
National Bureau of Investigation tasked to investigate the case that Jimmys father elected Filipino
citizenship in accordance with the provisions of the 1935 Philippine Constitution. By operation of law,
therefore, the citizenship of Carlos was transmitted to Jimmy, making him a Filipino as well.

On March 8, 2001,18 the Board of Commissioners (Board) reversed said dismissal, holding that Carlos
election of Philippine citizenship was made out of time. Finding Jimmys claim to Philippine citizenship in
serious doubt by reason of his fathers questionable election thereof, the Board directed the preparation and
filing of the appropriate deportation charges against Jimmy.

On July 3, 2001, the corresponding Charge Sheet was filed against Jimmy, charging him of violating Section
37(a)(9)19 in relation to Section 45(c)20 of Com. Act No. 613, otherwise known as The Philippine Immigration
Act of 1940,21 as amended, committed as follows:

xxxx

1. That Respondent was born on October 25, 1952 in Iloilo City, as evidenced by a copy of his birth
certificate wherein his citizenship was recorded as "Chinese";

2. That Respondent through some stealth machinations was able to subsequently cover up his true
and actual citizenship as Chinese and illegally acquired a Philippine Passport under the name
JAIME T. GAISANO, with the use of falsified documents and untruthful declarations, in violation of
the above-cited provisions of the Immigration Act[;]

3. That [R]espondent being an alien, has formally and officially represent[ed] and introduce[d]
himself as a citizen of the Philippines, for fraudulent purposes and in order to evade any
requirements of the immigration laws, also in violation of said law.

CONTRARY TO LAW.22

On November 9, 2001, Carlos and Jimmy filed a petition for certiorari and prohibition23 with application for
injunctive reliefs before the RTC of Pasig City, Branch 167, docketed as SCA No. 2218, seeking to annul
and set aside the March 8, 2001 Resolution of the Board of Commissioners, the Charge Sheet, and the
proceedings had therein. In essence, they challenged the jurisdiction of the Board to continue with the
deportation proceedings.

In the interim, the Board issued a Decision24 dated April 17, 2002, in BSI-D.C. No. ADD-01-117, ordering the
apprehension and deportation of Jimmy. The dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing, the Board of Commissioners hereby Orders the apprehension of
respondent JIMMY T. GO @ JAIME T. GAISANO and that he be then deported to CHINA of which he is a
citizen, without prejudice, however, to the continuation of any and all criminal and other proceedings that are
pending in court or before the prosecution arm of the Philippine Government, if any. And that upon
expulsion, he is thereby ordered barred from entry into the Philippines.

SO ORDERED.25

In view of the said Decision, Carlos and Jimmy filed on June 13, 2002 a supplemental petition for certiorari
and prohibition26 before the trial court and reiterated their application for injunctive reliefs. The trial court
issued a writ of preliminary prohibitory injunction pending litigation on the main issue, enjoining the Bureau
from enforcing the April 17, 2002 Decision.27 Later, however, the trial court dissolved the writ in a
Decision28 dated January 6, 2004 as a consequence of the dismissal of the petition.

Carlos and Jimmy moved for reconsideration. But their motion was likewise denied.29
Following the dismissal of the petition in SCA No. 2218, the Board issued a warrant of deportation 30 which
led to the apprehension of Jimmy. Jimmy commenced a petition for habeas corpus, but the same was
eventually dismissed by reason of his provisional release on bail.31

Carlos and Jimmy then questioned the Decision in SCA No. 2218 as well as the Resolution denying their
motion for reconsideration by way of a petition for certiorari before the Court of Appeals, docketed as CA-
G.R. SP No. 85143. They imputed grave abuse of discretion by the trial court for passing upon their
citizenship, claiming that what they asked for in their petition was merely the nullification of the March 8,
2001 Resolution and the charge sheet.

The appellate tribunal dismissed the petition.32 It did not find merit in their argument that the issue of
citizenship should proceed only before the proper court in an independent action, and that neither the
Bureau nor the Board has jurisdiction over individuals who were born in the Philippines and have exercised
the rights of Filipino citizens. The appellate tribunal also rejected their claim that they enjoy the presumption
of being Filipino citizens.

The Court of Appeals held that the Board has the exclusive authority and jurisdiction to try and hear cases
against an alleged alien, and in the process, determine their citizenship.

The appellate court agreed with the trial court that the principle of jus soli was never extended to the
Philippines; hence, could not be made a ground to ones claim of Philippine citizenship. Like the trial court,
the appellate tribunal found that Carlos failed to elect Philippine citizenship within the reasonable period of
three years upon reaching the age of majority. Furthermore, it held that the belated submission to the local
civil registry of the affidavit of election and oath of allegiance in September 1956 was defective because the
affidavit of election was executed after the oath of allegiance, and the delay of several years before their
filing with the proper office was not satisfactorily explained.

The course of action taken by the trial court was also approved by the appellate tribunal. The Court of
Appeals stated that the trial court necessarily had to rule on the substantial and legal bases warranting the
deportation proceeding in order to determine whether the Board acted without or in excess of jurisdiction, or
with grave abuse of discretion. Moreover, the appellate court found that due process was properly observed
in the proceedings before the Board, contrary to the claim of Jimmy.

Unfazed with the said ruling, they moved for reconsideration. Their motion having been denied,33 Carlos and
Jimmy each filed a petition for review on certiorari before this Court, respectively docketed as G.R. Nos.
167569 and 167570.

Meanwhile, in view of the dismissal of CA-G.R. SP. No. 85143, Bureau of Immigration Commissioner Alipio
F. Fernandez, Jr. issued Warrant of Deportation No. AFF-04-00334 dated November 16, 2004 to carry out
the April 17, 2002 Decision in BSI-D.C. No. ADD-01-117. This resulted in the apprehension and detention of
Jimmy at the Bureau of Immigration Bicutan Detention Center, pending his deportation to China.35

On account of his detention, Jimmy once again filed a petition for habeas corpus36 before the RTC of Pasig
City, Branch 167, docketed as SP. Proc. No. 11507 assailing his apprehension and detention despite the
pendency of his appeal and his release on recognizance.

In an Order37 dated December 6, 2004, the trial court dismissed the said petition ruling that the remedy of
habeas corpus cannot be availed of to obtain an order of release once a deportation order has already been
issued by the Bureau. Jimmy moved for reconsideration of the Order, but this was also denied by the trial
court in an Order38dated December 28, 2004.

Jimmy assailed the Orders of the trial court in a petition for certiorari and prohibition before the appellate
court, docketed as CA-G.R. No. 88277. The Court of Appeals granted the petition and enjoined the
deportation of Jimmy until the issue of his citizenship is settled with finality by the court. The Court of
Appeals held as follows:

xxxx

the issuance of a warrant to arrest and deport the petitioner without any proof whatsoever of his violation
of the bail conditions [that he was previously granted] is arbitrary, inequitable and unjust, for the policies
governing the grant of his bail should likewise apply in the cancellation of the said bail. Although a
deportation proceeding does not partake of the nature of a criminal action, yet considering that it is such a
harsh and extraordinary administrative proceeding affecting the freedom and liberty of a person who all his
life has always lived in the Philippines, where he has established his family and business interests, one who
appears to be not completely devoid of any claim to Filipino citizenship, being the son of a Filipina, whose
father is alleged to also have elected to be a Filipino, the constitutional right of such person to due process
cannot be peremptorily dismissed or ignored altogether, and indeed should not be denied. If it later turns out
that the petitioner is a Filipino after all, then the overly eager Immigration authorities would have expelled
and relegated to statelessness one who might in fact be a Filipino by blood.
xxxx

WHEREFORE, in view of the foregoing, the petition with reference to the Warrant of Deportation issued by
the BID is hereby GRANTED. The Bureau of Immigration and Deportation, through Commissioner Alipio F.
Fernandez, Jr., Atty. Faizal Hussin and Ansari Maca Ayan, and any of their deputized agents, are
ENJOINED from deporting petitioner Jimmy T. Go, a.k.a. Jaime T. Gaisano, until the issue of petitioners
citizenship is finally settled by the courts of justice.

SO ORDERED.39

Their motion for reconsideration40 having been denied on March 13, 2006, Hon. Alipio Fernandez, in his
capacity as the Commissioner of the Bureau of Immigration, and Atty. Faisal Hussin and Ansari M.
Macaayan, in their capacity as Intelligence Officers of the Bureau of Immigration, are before this Court as
petitioners in G.R. No. 171946.

The parties have raised the following grounds for their respective petitions:

G.R. No. 167569

I.

THE PROCEEDINGS HAD BEFORE THE BUREAU OF IMMIGRATION AND DEPORTATION (B.I.D.) ARE
NULL AND VOID FOR ITS FAILURE TO IMPLEAD AN INDISPENSABLE PARTY IN THE PERSON OF
PETITIONER CARLOS GO, SR.

II.

GIVEN THE SUBSTANTIAL EVIDENCE TO PROVE HEREIN PETITIONER CARLOS GO SR.S

FILIPINO CITIZENSHIP, A FULL BLOWN TRIAL UNDER THE MORE RIGID RULES OF EVIDENCE
PRESCRIBED IN COURT PROCEEDINGS SHOULD HAVE BEEN CONDUCTED TO DETERMINE HIS
FILIPINO CITIZENSHIP AND NOT THROUGH MERE "SUMMARY PROCEEDINGS" SUCH AS THE ONE
HAD BEFORE THE B.I.D. AS WELL AS IN THE COURT A QUO.

III.

A FILIPINO CITIZEN IS NOT REQUIRED TO ELECT PHILIPPINE CITIZENSHIP.

IV.

ASSUMING CARLOS GO, SR. STILL NEEDS TO ELECT PHILIPPINE CITIZENSHIP, HE HAD COMPLIED
WITH ALL THE REQUIREMENTS OF COM. ACT NO. 625.

V.

PETITIONER CARLOS GO, SR. ENJOYS THE "PRESUMPTION OF CITIZENSHIP."

VI.

RESPONDENTS "CAUSE OF ACTION" HAD LONG PRESCRIBED.41

G.R. No. 167570

I.

THE PROCEEDINGS HAD BEFORE THE BUREAU OF IMMIGRATION AND DEPORTATION (B.I.D.) ARE
NULL AND VOID FOR ITS FAILURE TO IMPLEAD AN INDISPENSABLE PARTY IN THE PERSON OF
PETITIONERS FATHER, CARLOS GO, SR.

II.

THE DEPORTATION PROCEEDINGS BEFORE THE B.I.D. ARE NULL AND VOID FOR ITS FAILURE TO
OBSERVE DUE PROCESS.

III.

THE B.I.D.S CAUSE OF ACTION AGAINST HEREIN PETITIONER JIMMY T. GO HAD ALREADY
PRESCRIBED.
 IV.

GIVEN THE SUBSTANTIAL EVIDENCE TO PROVE HEREIN PETITIONERS FILIPINO CITIZENSHIP,

A FULL BLOWN TRIAL UNDER THE MORE RIGID RULES OF EVIDENCE PRESCRIBED IN COURT
PROCEEDINGS SHOULD HAVE BEEN CONDUCTED TO DETERMINE HIS FILIPINO CITIZENSHIP AND
NOT THROUGH MERE "SUMMARY PROCEEDINGS" SUCH AS THE ONE HAD BEFORE THE B.I.D.42

G.R. No. 171946

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW IN ENJOINING RESPONDENTS

DEPORTATION.43

Succinctly stated, the issues for our resolution are: (a) whether the cause of action of the Bureau against
Carlos and Jimmy had prescribed; (b) whether the deportation proceedings are null and void for failure to
implead Carlos as an indispensable party therein; (c) whether the evidence adduced by Carlos and Jimmy to
prove their claim to Philippine citizenship is substantial and sufficient to oust the Board of its jurisdiction from
continuing with the deportation proceedings in order to give way to a formal judicial action to pass upon the
issue of alienage; (d) whether due process was properly observed in the proceedings before the Board; and
(e) whether the petition for habeas corpus should be dismissed.

The arguments raised by Carlos and Jimmy in their respective petitions are merely a rehash of the
arguments they adduced before the appellate tribunal and the trial court. Once again, they raised the same
argument of prescription. As to Carlos, it is his position that being recognized by the government to have
acquired Philippine citizenship, evidenced by the Certificate of Election issued to him on September 11,
1956, his citizenship could no longer be questioned at this late date. As for Jimmy, he contends that the
Boards cause of action to deport him has prescribed for the simple reason that his arrest was not made
within five (5) years from the time the cause of action arose, which according to him commenced in 1989
when he was alleged to have illegally acquired a Philippine passport.

In any event, they argue that the deportation proceeding should be nullified altogether for failure to implead
Carlos as an indispensable party therein. Jimmy posits that the deportation case against him was made to
depend upon the citizenship of his father, Carlos, in that the Board found justification to order his deportation
by declaring that his father is a Chinese citizen even though the latter was never made a party in the
deportation proceedings. They argue that the Board could not simply strip Carlos of his citizenship just so
they could question the citizenship of Jimmy. To do so without affording Carlos the opportunity to adduce
evidence to prove his claim to Philippine citizenship would be the height of injustice. For failing to accord him
the requisite due process, the whole proceeding should perforce be stuck down.

While they concede that the Board has jurisdiction to hear cases against an alleged alien, they insist that
judicial intervention may be resorted to when the claim to citizenship is so substantial that there are
reasonable grounds to believe that the claim is correct, like in this case. Their claim to Philippine citizenship,
they said, is clearly shown by the fact that they were born, had been raised and had lived in this country all
their lives; they speak fluent Tagalog and Ilonggo; they engage in businesses reserved solely for Filipinos;
they exercise their right to suffrage; they enjoy the rights and privileges accorded only to citizens; and they
have no record of any Alien Certificate of Registration. More importantly, they contend that they were validly
issued Philippine passports. They further posit that the judicial intervention required is not merely a judicial
review of the proceedings below, but a full-blown, adversarial, trial-type proceedings where the rules of
evidence are strictly observed.

Considering that his citizenship affects that of his son, Carlos opted to present controverting arguments to
sustain his claim to Philippine citizenship, notwithstanding the fact that according to him, he was never
impleaded in the deportation proceedings.

Carlos takes exception to the ruling of the appellate court that the doctrine of jus soli failed to accord him
Philippine citizenship for the reason that the same was never extended to the Philippines. He insists that if
his Philippine citizenship is not recognized by said doctrine, it is nonetheless recognized by the laws
enforced prior to the 1935 Constitution, particularly the Philippine Bill of 190244 and the Philippine Autonomy
Act of August 29, 1916 (Jones Law of 1916).45

According to Carlos, the Philippine Bill of 1902 and the Jones Law of 1916 deemed all inhabitants of the
Philippine Islands as well as their children born after the passage of said laws to be citizens of the
Philippines. Because his father, Go Yin An, was a resident of the Philippines at the time of the passage of
the Jones Law of 1916, he (Carlos) undoubtedly acquired his fathers citizenship. Article IV, first paragraph,
of the 1935 Constitution therefore applies to him. Said constitutional provision reads:

ARTICLE IV. Citizenship

SECTION 1. The following are citizens of the Philippines:

(1) Those who are citizens of the Philippine Islands at the time of the adoption of this Constitution.

xxxx

Even assuming that his father remained as a Chinese, Carlos also claims that he followed the citizenship of
his Filipina mother, being an illegitimate son, and that he even validly elected Philippine citizenship when he
complied with all the requirements of Com. Act No. 625. He submits that what is being disputed is not
whether he complied with Com. Act No. 625, but rather, the timeliness of his compliance. He stresses that
the 3-year compliance period following the interpretation given by Cuenco v. Secretary of Justice46 to Article
IV, Section 1(4) of the 1935 Constitution and Com. Act No. 625 when election must be made, is not an
inflexible rule. He reasoned that the same decision held that such period may be extended under certain
circumstances, as when the person concerned has always considered himself a Filipino, like in his case.47

We deny the appeal of Carlos and Jimmy for lack of merit.

Carlos and Jimmys claim that the cause of action of the Bureau has prescribed is untenable. Cases
involving issues on citizenship are sui generis. Once the citizenship of an individual is put into question, it
necessarily has to be threshed out and decided upon. In the case of Frivaldo v. Commission on
Elections,48 we said that decisions declaring the acquisition or denial of citizenship cannot govern a persons
future status with finality. This is because a person may subsequently reacquire, or for that matter, lose his
citizenship under any of the modes recognized by law for the purpose.49 Indeed, if the issue of ones
citizenship, after it has been passed upon by the courts, leaves it still open to future adjudication, then there
is more reason why the government should not be precluded from questioning ones claim to Philippine
citizenship, especially so when the same has never been threshed out by any tribunal.

Jimmys invocation of prescription also does not persuade us. Section 37 (b) of Com. Act No. 613 states:

Section 37.

xxxx

(b) Deportation may be effected under clauses 2, 7, 8, 11 and 12 of this section at any time after entry, but
shall not be effected under any other clause unless the arrest in the deportation proceedings is made within
five years after the cause of deportation arises.

xxxx

As shown in the Charge Sheet, Jimmy was charged for violation of Section 37(a)(9),50 in relation to Section
45(e)51of Com. Act No. 613. From the foregoing provision, his deportation may be effected only if his arrest
is made within 5 years from the time the cause for deportation arose. The court a quo is correct when it ruled
that the 5-year period should be counted only from July 18, 2000, the time when Luis filed his complaint for
deportation. It is the legal possibility of bringing the action which determines the starting point for the
computation of the period of prescription.52 Additionally, Section 2 of Act No. 3326,53 as amended, entitled
"An Act to Establish Periods of Prescription for Violations Penalized by Special Acts and Municipal
Ordinances and to Provide When Prescription Shall Begin to Run," provides:

Sec. 2. Prescription shall begin to run from the day of the commission of the violation of the law, and if the
same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its
investigation and punishment.

xxxx

The counting could not logically start in 1989 when his passport was issued because the government was
unaware that he was not a Filipino citizen. Had the government been aware at such time that he was not a
Filipino citizen or there were certain anomalies attending his application for such passport, it would have
denied his application.

As to the issue of whether Carlos is an indispensable party, we reiterate that an indispensable party is a
party in interest without whom no final determination can be had of an action, and who shall be joined either
as plaintiff or defendant.54 To be indispensable, a person must first be a real party in interest, that is, one
who stands to be benefited or injured by the judgment of the suit, or the party entitled to the avails of the
suit.55 Carlos clearly is not an indispensable party as he does not stand to be benefited or injured by the
judgment of the suit. What is sought is the deportation of Jimmy on the ground that he is an alien. Hence,
the principal issue that will be decided on is the propriety of his deportation. To recall, Jimmy claims that he
is a Filipino under Section 1(3),56 Article IV of the 1935 Constitution because Carlos, his father, is allegedly a
citizen.57 Since his citizenship hinges on that of his fathers, it becomes necessary to pass upon the
citizenship of the latter. However, whatever will be the findings as to Carlos citizenship will in no way
prejudice him.
Citizenship proceedings, as aforestated, are a class of its own, in that, unlike other cases, res judicata does
not obtain as a matter of course. In a long line of decisions, this Court said that every time the citizenship of
a person is material or indispensable in a judicial or administrative case, whatever the corresponding court
or administrative authority decides therein as to such citizenship is generally not considered as res judicata;
hence, it has to be threshed out again and again as the occasion may demand.58 Res judicata may be
applied in cases of citizenship only if the following concur:

1. a persons citizenship must be raised as a material issue in a controversy where said person is a
party;

2. the Solicitor General or his authorized representative took active part in the resolution thereof; and

3. the finding or citizenship is affirmed by this Court.59

In the event that the citizenship of Carlos will be questioned, or his deportation sought, the same has to be
ascertained once again as the decision which will be rendered hereinafter shall have no preclusive effect
upon his citizenship. As neither injury nor benefit will redound upon Carlos, he cannot be said to be an
indispensable party in this case.

There can be no question that the Board has the authority to hear and determine the deportation case
against a deportee and in the process determine also the question of citizenship raised by him.60 However,
this Court, following American jurisprudence, laid down the exception to the primary jurisdiction enjoyed by
the deportation board in the case of Chua Hiong v. Deportation Board61 wherein we stressed that judicial
determination is permitted in cases when the courts themselves believe that there is substantial evidence
supporting the claim of citizenship, so substantial that there are reasonable grounds for the belief that the
claim is correct.62 Moreover, when the evidence submitted by a deportee is conclusive of his citizenship, the
right to immediate review should also be recognized and the courts shall promptly enjoin the deportation
proceedings.63

While we are mindful that resort to the courts may be had, the same should be allowed only in the sound
discretion of a competent court in proper proceedings.64 After all, the Boards jurisdiction is not divested by
the mere claim of citizenship.65 Moreover, a deportee who claims to be a citizen and not therefore subject to
deportation has the right to have his citizenship reviewed by the courts, after the deportation
proceedings.66 The decision of the Board on the question is, of course, not final but subject to review by the
courts.671avvphi 1

After a careful evaluation of the evidence, the appellate court was not convinced that the same was
sufficient to oust the Board of its jurisdiction to continue with the deportation proceedings considering that
what were presented particularly the birth certificates of Jimmy, as well as those of his siblings, Juliet Go
and Carlos Go, Jr. indicate that they are Chinese citizens. Furthermore, like the Board, it found the election
of Carlos of Philippine citizenship, which was offered as additional proof of his claim, irregular as it was not
made on time.

We find no cogent reason to overturn the above findings of the appellate tribunal. The question of whether
substantial evidence had been presented to allow immediate recourse to the regular courts is a question of
fact which is beyond this Courts power of review for it is not a trier of facts.68 None of the exceptions69 in
which this Court may resolve factual issues has been shown to exist in this case. Even if we evaluate their
arguments and the evidence they presented once again, the same conclusion will still be reached.

One of the arguments raised to sustain Carlos claim to Philippine citizenship is the doctrine of jus soli, or the
doctrine or principle of citizenship by place of birth. To recall, both the trial court and the Court of Appeals
ruled that the doctrine of jus soli was never extended to the Philippines. We agree. The doctrine of jus soli
was for a time the prevailing rule in the acquisition of ones citizenship.70 However, the Supreme Court
abandoned the principle of jus soli in the case of Tan Chong v. Secretary of Labor.71 Since then, said
doctrine only benefited those who were individually declared to be citizens of the Philippines by a final court
decision on the mistaken application of jus soli.72

Neither will the Philippine Bill of 190273 nor the Jones Law of 191674 make Carlos a citizen of the Philippines.
His bare claim that his father, Go Yin An, was a resident of the Philippines at the time of the passage of the
said laws, without any supporting evidence whatsoever will not suffice.

It is a settled rule that only legitimate children follow the citizenship of the father and that illegitimate children
are under the parental authority of the mother and follow her nationality.75 Moreover, we have also ruled that
an illegitimate child of a Filipina need not perform any act to confer upon him all the rights and privileges
attached to citizens of the Philippines; he automatically becomes a citizen himself.76 However, it is our
considered view that absent any evidence proving that Carlos is indeed an illegitimate son of a Filipina, the
aforestated established rule could not be applied to him.
As to the question of whether the election of Philippine citizenship conferred on Carlos Filipino citizenship,
we find that the appellate court correctly found that it did not.

Com. Act No. 625 which was enacted pursuant to Section 1(4), Article IV of the 1935 Constitution,
prescribes the procedure that should be followed in order to make a valid election of Philippine citizenship.
Under Section 1 thereof, legitimate children born of Filipino mothers may elect Philippine citizenship by
expressing such intention "in a statement to be signed and sworn to by the party concerned before any
officer authorized to administer oaths, and shall be filed with the nearest civil registry. The said party shall
accompany the aforesaid statement with the oath of allegiance to the Constitution and the Government of
the Philippines."77

However, the 1935 Constitution and Com. Act No. 625 did not prescribe a time period within which the
election of Philippine citizenship should be made. The 1935 Charter only provides that the election should
be made "upon reaching the age of majority." The age of majority then commenced upon reaching 21 years.
In the opinions of the then Secretary of Justice on cases involving the validity of election of Philippine
citizenship, this dilemma was resolved by basing the time period on the decisions of this Court prior to the
effectivity of the 1935 Constitution. In these decisions, the proper period for electing Philippine citizenship
was, in turn, based on the pronouncements of the Department of State of the United States Government to
the effect that the election should be made within a "reasonable time" after attaining the age of majority. The
phrase "reasonable time" has been interpreted to mean that the election should be made within three (3)
years from reaching the age of majority.78

It is true that we said that the 3-year period for electing Philippine citizenship may be extended as when the
person has always regarded himself as a Filipino. Be that as it may, it is our considered view that not a
single circumstance was sufficiently shown meriting the extension of the 3-year period. The fact that Carlos
exercised his right of suffrage in 1952 and 1955 does not demonstrate such belief, considering that the acts
were done after he elected Philippine citizenship. On the other hand, the mere fact that he was able to vote
does not validate his irregular election of Philippine citizenship. At most, his registration as a voter indicates
his desire to exercise a right appertaining exclusively to Filipino citizens but does not alter his real
citizenship, which, in this jurisdiction, is determined by blood (jus sanguinis). The exercise of the rights and
privileges granted only to Filipinos is not conclusive proof of citizenship, because a person may
misrepresent himself to be a Filipino and thus enjoy the rights and privileges of citizens of this country.79

It is incumbent upon one who claims Philippine citizenship to prove to the satisfaction of the court that he is
really a Filipino. No presumption can be indulged in favor of the claimant of Philippine citizenship, and any
doubt regarding citizenship must be resolved in favor of the state.80

As Carlos and Jimmy neither showed conclusive proof of their citizenship nor presented substantial proof of
the same, we have no choice but to sustain the Boards jurisdiction over the deportation proceedings. This is
not to say that we are ruling that they are not Filipinos, for that is not what we are called upon to do. This
Court necessarily has to pass upon the issue of citizenship only to determine whether the proceedings may
be enjoined in order to give way to a judicial determination of the same. And we are of the opinion that said
proceedings should not be enjoined.

In our considered view, the allegation of Jimmy that due process was not observed in the deportation
proceedings must likewise fail.

Deportation proceedings are administrative in character, summary in nature, and need not be conducted
strictly in accordance with the rules of ordinary court proceedings.81 The essence of due process is simply an
opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain ones side or
an opportunity to seek reconsideration of the action or ruling complained of.82 As long as the parties are
given the opportunity to be heard before judgment is rendered, the demands of due process are sufficiently
met.83 Although Jimmy was not furnished with a copy of the subject Resolution and Charge Sheet as alleged
by him, the trial court found that he was given ample opportunity to explain his side and present
controverting evidence, thus:

x x x It must be stressed that after receiving the Order dated September 11, 2001 signed by BSI Chief
Ronaldo P. Ledesma on October 4, 2001, petitioner Jimmy T. Go admitted that when his representative
went to the B.I.D. to inquire about the said Order, the latter chanced upon the Resolution dated February 14,
2001 and March 8, 2001 as well as the Charge Sheet dated July 3, 2001. Hence on October 5, 2001, he
filed a "Motion for Extension of Time to File Memorandum" and as such, was allowed by Ronaldo P.
Ledesma an extension of ten (10) days to submit his required memorandum. x x x84

This circumstance satisfies the demands of administrative due process.

As regards the petition in G.R. No. 171946, petitioners contend that the appellate tribunal erred in enjoining
Jimmys deportation.85
Petitioners question the remedy availed of by Jimmy. They argue that the existence of the remedy of an
ordinary appeal proscribes the filing of the petition for certiorari as was done in this case. They point out that
the appeal period in habeas corpus cases is only 48 hours, compared to a special civil action under Rule 65
of the Rules of Court which is 60 days. This clearly shows that an ordinary appeal is the more plain, speedy
and adequate remedy; hence, it must be the one availed of.86 Since the decision of the trial court was not
properly appealed, the same may be said to have attained finality, and may no longer be disturbed.87

They maintain that the dismissal of the petition for habeas corpus by the trial court was proper. A petition for
habeas corpus has for its purpose only the determination of whether or not there is a lawful ground for
Jimmys apprehension and continued detention. They urge that the decision of the Board dated April 17,
2002 that ordered Jimmys deportation has already attained finality by reason of the belated appeal taken by
Jimmy from the said decision on April 2, 2004 before the Office of the President, or after almost two years
from the time the decision was rendered. Said decision of the Board, they insist, is the lawful ground that
sanctions Jimmys apprehension and detention.88

Petitioners in G.R. No. 171946 also argue that Jimmy cannot rely on the bail on recognizance he was
previously granted to question his subsequent apprehension and detention. Under the Philippine
Immigration Act of 1940, the power to grant bail can only be exercised while the alien is still under
investigation, and not when the order of deportation had already been issued by the Board.89 Hence, the bail
granted was irregular as it has no legal basis. Furthermore, they said the petition for habeas corpus
necessarily has to be dismissed because the same is no longer proper once the applicant thereof has been
charged before the Board, which is the case with Jimmy.90Nonetheless, they claim that the habeas corpus
case is rendered moot and academic as Jimmy is no longer being detained.91

On the other hand, Jimmy counters that the instant petition for certiorari and prohibition is the most
appropriate, speedy and adequate remedy in spite of the availability of ordinary appeal considering that what
is involved in this case is his cherished liberty. Grave abuse of discretion on the part of the petitioners in
ordering his arrest and detention, he argues, all the more justifies the avails of the extraordinary
writ.92 Contrary to the petitioners stand, Jimmy argues that the April 17, 2002 Decision of the Board has not
attained finality owing to the availability of various remedies, one of which is an appeal, and in fact is actually
void because it was rendered without due process.93 He also insists that the bail issued to him is valid and
effective until the final determination of his citizenship before the proper courts.94 Moreover, he maintains
that the petition for habeas corpus was proper since its object is to inquire into the legality of ones detention,
and if found illegal, to order the release of the detainee.95As in his petition in G.R. No. 167570, Jimmy also
contends that the proceedings before the Board is void for failure to implead therein his father, and that he
should have been given a full blown trial before a regular court where he can prove his citizenship.96

Considering the arguments and contentions of the parties, we find the petition in G.R. No. 171946
meritorious.a1f

We have held in a litany of cases that the extraordinary remedies of certiorari, prohibition and mandamus
are available only when there is no appeal or any plain, speedy and adequate remedy in the ordinary course
of law. The writ of certiorari does not lie where an appeal may be taken or where another adequate remedy
is available for the correction of the error.97

The petitioners correctly argue that appeal should have been the remedy availed of as it is more plain,
speedy and adequate. The 48-hour appeal period demonstrates the adequacy of such remedy in that no
unnecessary time will be wasted before the decision will be re-evaluated.

A petition for the issuance of a writ of habeas corpus is a special proceeding governed by Rule 102 of the
Revised Rules of Court. The objective of the writ is to determine whether the confinement or detention is
valid or lawful. If it is, the writ cannot be issued. What is to be inquired into is the legality of a persons
detention as of, at the earliest, the filing of the application for the writ of habeas corpus, for even if the
detention is at its inception illegal, it may, by reason of some supervening events, such as the instances
mentioned in Section 498 of Rule 102, be no longer illegal at the time of the filing of the application.99

Once a person detained is duly charged in court, he may no longer question his detention through a petition
for issuance of a writ of habeas corpus. His remedy would be to quash the information and/or the warrant of
arrest duly issued. The writ of habeas corpus should not be allowed after the party sought to be released
had been charged before any court. The term "court" in this context includes quasi-judicial bodies of
governmental agencies authorized to order the persons confinement, like the Deportation Board of the
Bureau of Immigration.100 Likewise, the cancellation of his bail cannot be assailed via a petition for habeas
corpus. When an alien is detained by the Bureau of Immigration for deportation pursuant to an order of
deportation by the Deportation Board, the Regional Trial Courts have no power to release such alien on bail
even in habeas corpus proceedings because there is no law authorizing it.101

Given that Jimmy has been duly charged before the Board, and in fact ordered arrested pending his
deportation, coupled by this Courts pronouncement that the Board was not ousted of its jurisdiction to
continue with the deportation proceedings, the petition for habeas corpus is rendered moot and academic.
This being so, we find it unnecessary to touch on the other arguments advanced by respondents regarding
the same subject.

WHEREFORE, the petitions in G.R. Nos. 167569 and 167570 are DENIED. The Decision dated October 25,
2004 and Resolution dated February 16, 2005 of the Court of Appeals in CA-G.R. SP No. 85143 are
AFFIRMED. The petition in G.R. No. 171946 is hereby GRANTED. The Decision dated December 8, 2005
and Resolution dated March 13, 2006 of the Court of Appeals in CA-G.R. SP No. 88277 are REVERSED
and SET ASIDE. The December 6, 2004 and December 28, 2004 Orders of the Regional Trial Court of
Pasig City, Branch 167 are hereby REINSTATED.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 156287 February 16, 2010

FELICITAS M. MACHADO and MARCELINO P. MACHADO, Petitioners,

vs.
RICARDO L. GATDULA, COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS, and IRINEO S.
PAZ, Sheriff IV, Office of the Provincial Sheriff, San Pedro, Laguna, Respondents.

DECISION

BRION, J.:

Before this Court is the Petition for Review on Certiorari1 filed by petitioners Felicitas M. Machado and
Marcelino P. Machado (the Machados), assailing the decision2 of the Court of Appeals (CA) dated January
31, 2002 and the resolution3 dated December 5, 2002 in CA-G.R. SP No. 65871. The CA decision dismissed
the Machados petition for certiorari and their motion for reconsideration, and upheld the jurisdiction of the
Commission on Settlement of Land Problems (COSLAP) to render judgment over a private land and to issue
the corresponding writs of execution and demolition.

THE FACTUAL ANTECEDENTS

The dispute involves two adjoining parcels of land located in Barangay San Vicente, San Pedro, Laguna,
one belonging to the Machados, and the other belonging to respondent Ricardo L. Gatdula (Gatdula).

On February 2, 1999, Gatdula wrote a letter4 to the COSLAP requesting assistance because the Machados
allegedly blocked the right of way to his private property by constructing a two-door apartment on their
property.

Acting on Gatdulas letter, the COSLAP conducted a mediation conference on February 25, 1999; the
parties then agreed to have a verification survey conducted on their properties and to share the attendant
expenses. Thereafter, the COSLAP issued an Order dated March 16, 1999 directing the Chief of the Survey
Division of the Community Environment and Natural Resources Office Department of Environment and
Natural Resources (CENRO-DENR), to conduct a verification survey on May 9, 1999. The order likewise
stated that in the event that no surveyor is available, the parties may use the services of a private surveyor,
whom the CENRO-DENR Survey Division would deputize.

As scheduled, a private surveyor, Junior Geodetic Engineer Abet F. Arellano (Engr. Arellano), conducted a
verification survey of the properties in the presence of both parties. Engr. Arellano submitted a report to the
COSLAP finding that the structure built by the Machados encroached upon an alley found within the Gatdula
property. Engr. Arellanos findings corroborated the separate report of Engineer Noel V. Soqueco of the
CENRO, Los Baos, Laguna that had also been submitted to the COSLAP.

The Machados contested these reports in their position paper dated August 26, 1999. They alleged that
Gatdula had no right of action since they did not violate Gatdulas rights.5 They further assailed the
jurisdiction of the COSLAP, stating that the proper forum for the present case was the Regional Trial Court
of San Pedro, Laguna.

The COSLAP Ruling

On October 25, 1999, the COSLAP issued a resolution6 (October 25, 1999 COSLAP Resolution) directing
the Machados to reopen the right of way in favor of Gatdula. In so ruling, the COSLAP relied on the
verification survey made by Engr. Arellano, which established that the Machados had encroached on the
existing alley in Gatdulas property.
The COSLAP declared the Machados estopped from questioning its jurisdiction to decide the case, since
they actively participated in the mediation conferences and the verification surveys without raising any
jurisdictional objection. It ruled that its jurisdiction does not depend on the convenience of the Machados.

The Machados filed a motion for reconsideration which the COSLAP denied in a resolution dated January
24, 2000.

On February 18, 2000, the Machados filed a notice of appeal7 with the Office of the President (OP).

While this appeal was pending, the COSLAP, upon Gatdulas motion, issued a writ of execution8 enforcing
the terms of the October 25, 1999 COSLAP Resolution. The Machados opposed the writ by filing a motion to
quash on March 30, 2001.9 They argued that the October 25, 1999 COSLAP Resolution was not yet ripe for
execution in view of the pending appeal before the OP.

Since the Machados persistently refused to reopen the right of way they closed, the provincial sheriff
recommended to COSLAP the issuance of a writ of demolition. The COSLAP issued the writ of
demolition10 on July 12, 2001.

The CA Ruling

On July 31, 2001, the Machados went to the CA for relief through a Petition for Certiorari and
Prohibition,11 claiming that the COSLAP issued the writs of execution and demolition with grave abuse of
discretion.

The CA found the Machados claim unfounded and, accordingly, dismissed their petition in its decision of
January 31, 2002.12 It declared that the COSLAP correctly issued the assailed writs because the October 25,
1999 COSLAP Resolution had already become final and executory for failure of the Machados to avail of the
proper remedy against the COSLAP orders and resolutions. Under Section 3 (2)13 of Executive Order No.
561 (EO 561), the resolutions, orders, and decisions of the COSLAP become final and executory 30 days
after promulgation, and are appealable by certiorari only to the Supreme Court. In Sy v. Commission on the
Settlement of Land Problems,14 it was held that under the doctrine of judicial hierarchy, the orders,
resolutions and decisions of the COSLAP, as a quasi-judicial agency, are directly appealable to the CA
under Rule 43 of the 1997 Rules of Civil Procedure, and not to the Supreme Court. Thus, the CA ruled that
the Machados appeal to the OP was not the proper remedy and did not suspend the running of the period
for finality of the October 25, 1999 COSLAP Resolution.

On the issue of jurisdiction, the CA found that the COSLAP was created to provide a more effective
mechanism for the expeditious settlement of land problems, in general; the present case, therefore, falls
within its jurisdiction.15Moreover, the Machados active participation in the mediation conference and their
consent to bring about the verification survey bound them to the COSLAPs decisions, orders and
resolutions.

From this CA decision, the Machados filed a motion for reconsideration,16 which the CA subsequently denied
in its Resolution of December 5, 2002.17

The Machados thus filed the present Rule 45 petition with this Court, raising two vital issues:

1. Whether the COSLAP has jurisdiction over Gatdulas complaint for right of way against the
Machados; and

2. Whether the COSLAP can validly issue the writs of execution and demolition against the
Machados.

THE COURTS RULING

We find the petition meritorious.

The COSLAP does not have jurisdiction over the present case

In resolving the issue of whether the COSLAP has jurisdiction over the present case, a review of the history
of the COSLAP and an account of the laws creating the COSLAP and its predecessor, the Presidential
Action Committee on Land Problems (PACLAP), is in order.

The COSLAPs forerunner, the PACLAP, was created on July 31, 1970 pursuant to Executive Order No.
251. As originally conceived, the committee was tasked to expedite and coordinate the investigation and
resolution of land disputes, streamline and shorten administrative procedures, adopt bold and decisive
measures to solve land problems, and/or recommend other solutions.
On March 19, 1971, Executive Order No. 305 was issued reconstituting the PACLAP. The committee was
given exclusive jurisdiction over all cases involving public lands and other lands of the public domain,18 and
was likewise vested with adjudicatory powers phrased in broad terms:

1. To investigate, coordinate, and resolve expeditiously land disputes, streamline administrative

proceedings, and, in general, to adopt bold and decisive measures to solve problems involving public lands
and lands of the public domain.19 [emphasis supplied]

Thereafter, Presidential Decree No. 832 (PD 832)20 was issued on November 27, 1975 reorganizing the
PACLAP and enlarging its functions and duties. The decree also granted PACLAP quasi-judicial functions.
Section 2 of PD 832 states:

Section 2. Functions and duties of the PACLAP. The PACLAP shall have the following functions and
duties:

1. Direct and coordinate the activities, particularly the investigation work, of the various
government agencies and agencies involved in land problems or disputes, and streamline
administrative procedures to relieve small settlers and landholders and members of cultural
minorities of the expense and time-consuming delay attendant to the solution of such
problems or disputes;

2. Refer for immediate action any land problem or dispute brought to the attention of the
PACLAP, to any member agency having jurisdiction thereof: Provided, That when the
Executive Committee decides to act on a case, its resolution, order or decision thereon shall
have the force and effect of a regular administrative resolution, order or decision, and shall
be binding upon the parties therein involved and upon the member agency having jurisdiction
thereof;

xxxx

4. Evolve and implement a system of procedure for the speedy investigation and resolution
of land disputes or problems at provincial level, if possible. [emphasis supplied]

The PACLAP was abolished by EO 561 effective on September 21, 1979, and was replaced by the
COSLAP. Unlike the former laws, EO 561 specifically enumerated 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.

The Commission shall promulgate such rules and procedures as will ensure expeditious resolution and
action on the above cases. The resolution, order or decision of the Commission on any of the foregoing
cases shall have the force and effect of a regular administrative resolution, order or decision and shall be
binding upon the parties therein and upon the agency having jurisdiction over the same. Said resolution,
order or decision shall become final and executory within thirty (30) days from its promulgation and shall be
appealable by certiorari only to the Supreme Court. [emphasis supplied]

Under these terms, the COSLAP has two different rules in acting on a land dispute or problem lodged before
it, e.g., COSLAP can assume jurisdiction only if the matter is one of those enumerated in paragraph 2(a) to
(e) of the law. Otherwise, it should refer the case to the agency having appropriate jurisdiction for settlement
or resolution.21 In resolving whether to assume jurisdiction over a case or to refer it to the particular agency
concerned, the COSLAP considers: (a) the nature or classification of the land involved; (b) the parties to the
case; (c) the nature of the questions raised; and (d) the need for immediate and urgent action thereon to
prevent injury to persons and damage or destruction to property. The terms of the law clearly do not vest on
the COSLAP the general power to assume jurisdiction over any land dispute or problem.22 Thus, under EO
561, the instances when the COSLAP may resolve land disputes are limited only to those involving public
lands or those covered by a specific license from the government, such as pasture lease agreements, timber
concessions, or reservation grants.23

Undisputably, the properties involved in the present dispute are private lands owned by private parties, none
of whom is a squatter, a patent lease agreement holder, a government reservation grantee, a public land
claimant or a member of any cultural minority.24

Moreover, the dispute between the parties can hardly be classified as critical or explosive in nature that
would generate social tension or unrest, or a critical situation that would require immediate and urgent
action. The issues raised in the present case primarily involve the application of the Civil Code provisions on
Property and the Easement of Right of Way. As held in Longino v. General,25 "disputes requiring no special
skill or technical expertise of an administrative body that could be resolved by applying pertinent provisions
of the Civil Code are within the exclusive jurisdiction of the regular courts."

The Machados cannot invoke Section 3, paragraph 2(e) of EO 561, which provides that the COSLAP may
assume jurisdiction over complaints involving "other similar land problems of grave urgency," to justify the
COSLAPs intervention in this case. The statutory construction principle of ejusdem generic prescribes that
where general words follow an enumeration of persons or things, by words of a particular and specific
meaning, such general words are not to be construed in their widest extent but are to be held as applying
only to persons or things of the same kind as those specifically mentioned.26 A dispute between two parties
concerning the right of way over private lands cannot be characterized as similar to those enumerated under
Section 3, paragraph 2(a) to (d) of EO 561. 1avvphi1

In Davao New Town Development Corporation v. Commission on the Settlement of Land Problems27
where we ruled that the COSLAP does not have blanket authority to assume every matter referred to it we
made it clear that its jurisdiction is confined only to disputes over lands in which the government has a
proprietary or regulatory interest.

The CA apparently misread and misapplied the Courts ruling in Baaga v. Court of Appeals.28 Baaga
involved two contending parties who filed free patent applications for a parcel of public land with the Bureau
of Lands. Because of the Bureau of Lands failure to act within a reasonable time on the applications and to
conduct an investigation, the COSLAP decided to assume jurisdiction over the case. Since the dispute
involved a public land on a free patent issue, the COSLAP undeniably had jurisdiction over the Baaga
case.

Jurisdiction is conferred by law and a judgment issued by a quasi-judicial body without jurisdiction is
void

By reason of the Machados active participation in the mediation conferences and the COSLAP verification
surveys, the CA declared the Machados estopped from questioning the bodys jurisdiction and bound by its
decisions, orders and resolutions. We disagree with this ruling.

Jurisdiction over a subject matter is conferred by law and not by the parties action or conduct.29 Estoppel
generally does not confer jurisdiction over a cause of action to a tribunal where none, by law, exists. In
Lozon v. NLRC,30 we declared that:

Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it appears that the
court has no jurisdiction over the subject matter, the action shall be dismissed. This defense may be
interposed at any time, during appeal or even after final judgment. Such is understandable, as this kind of
jurisdiction is conferred by law and not within the courts, let alone the parties, to themselves determine or
conveniently set aside. In People v. Casiano, this Court, on the issue of estoppel, held:

The operation of the principle of estoppel on the question of jurisdiction seemingly depends upon whether
the lower court actually had jurisdiction or not. If it had no jurisdiction, but the case was tried and decided
upon the theory that it had jurisdiction, the parties are not barred, on appeal, from assailing such jurisdiction,
for the same must exist as a matter of law, and may not be conferred by consent of the parties or by
estoppel However if the lower court had jurisdiction, and the case was heard and decided upon a given
theory, such, for instance, as that the court had no jurisdiction, the party who induced it to adopt such theory
will not be permitted, on appeal, to assume an inconsistent position that the lower court had jurisdiction.
Here, the principle of estoppel applies. The rule that jurisdiction in conferred by law, and does not depend
upon the will of the parties, has no bearing thereon. [emphasis supplied]
In this case, the COSLAP did not have jurisdiction over the subject matter of the complaint filed by Gatdula,
yet it proceeded to assume jurisdiction over the case and even issued writs of execution and demolition
against the Machados. The lack of jurisdiction cannot be cured by the parties participation in the
proceedings before the COSLAP.31 Under the circumstances, the Machados can rightfully question its
jurisdiction at anytime, even during appeal or after final judgment. A judgment issued by a quasi-judicial
body without jurisdiction is void.32 It cannot be the source of any right or create any obligation. All acts
pursuant to it and all claims emanating from it have no legal effect. The void judgment can never become
final and any writ of execution based on it is likewise void.33

WHEREFORE, premises considered, we GRANT the petition for review on certiorari. The assailed Court of
Appeals decision dated January 31, 2002 and resolution dated December 5, 2002 in CA-G.R. SP No. 65871
are REVERSED and SET ASIDE. The Decision of the Commission on the Settlement of Land Problems
dated October 25, 1999 in COSLAP Case No. 99-59, as well as the writ of execution dated March 21, 2001
and the writ of demolition dated July 12, 2001, are declared NULL and VOID for having been issued without
jurisdiction.

SO ORDERED.

G.R. No. 165569 July 29, 2010

UNIVERSITY OF SANTO TOMAS, GLENDA A. VARGAS, MA. SOCORRO S. GUANHING, in their

capacities as Dean and Assistant Dean, respectively, of the College of Nursing of the University of
Santo Tomas, and RODOLFO N. CLAVIO, in his capacity as Registrar of the University of Santo
Tomas, Petitioners,
vs.
DANES B. SANCHEZ, Respondent.

DECISION

DEL CASTILLO, J.:

Where a valid cause of action exists, parties may not simply bypass litigation by the simple expediency of a
Motion to Dismiss. Instead of abbreviating the proceedings, it has had the opposite effect: unnecessary
litigation for almost seven years. Here, in particular, where any resolution of the case will depend on the
appreciation of evidence, a full-blown trial is necessary to unearth all relevant facts and circumstances.

This petition for review on certiorari assails the Decision1 dated July 20, 2004 of the Court of Appeals (CA) in
CA-G.R. SP No. 79404 which affirmed the denial of petitioners motion to dismiss and directed the Regional
Trial Court (RTC) of Dinalupihan, Bataan, Branch 5, to proceed with trial. Also assailed is the
Resolution2 dated September 22, 2004 denying the motion for reconsideration.

Factual Antecedents

This case began with a Complaint3 for Damages filed by respondent Danes B. Sanchez (respondent)
against the University of Santo Tomas (UST) and its Board of Directors, the Dean and the Assistant Dean of
the UST College of Nursing, and the University Registrar for their alleged unjustified refusal to release the
respondents Transcript of Records (ToR). The case was raffled to Branch 5 of the RTC of Dinalupihan,
Bataan, and docketed as Civil Case No. DH-788-02.

In his Complaint, respondent alleged that he graduated from UST on April 2, 2002 with a Bachelors Degree
of Science in Nursing. He was included in the list of candidates for graduation and attended graduation
ceremonies. On April 18, 2002, respondent sought to secure a copy of his ToR with the UST Registrars
Office, paid the required fees, but was only given a Certificate of Graduation by the Registrar. Despite
repeated attempts by the respondent to secure a copy of his ToR, and submission of his class cards as
proof of his enrolment, UST refused to release his records, making it impossible for him to take the nursing
board examinations, and depriving him of the opportunity to make a living. The respondent prayed that the
RTC order UST to release his ToR and hold UST liable for actual, moral, and exemplary damages,
attorneys fees, and the costs of suit.

Instead of filing an Answer, petitioners filed a Motion to Dismiss4 where they claimed that they refused to
release respondents ToR because he was not a registered student, since he had not been enrolled in the
university for the last three semesters. They claimed that the respondents graduation, attendance in
classes, and taking/passing of examinations were immaterial because he ceased to be a student when he
failed to enroll during the second semester of school year 2000-2001. They also sought the dismissal of the
case on the ground that the complaint failed to state a cause of action, as paragraph 10 of the complaint
admitted that:

10. On several occasions, [respondent] went to see the [petitioners] to get his ToR, but all of these were
futile for he was not even entertained at the Office of the Dean. Worst, he was treated like a criminal forcing
him to admit the fact that he did not enroll for the last three (3) semesters of his schooling. [Petitioner] Dean
tried to persuade the [respondent] to give the original copies of the Class Cards which he has in his
possession. These are the only [bits of] evidence on hand to prove that he was in fact officially enrolled.
[Respondent] did not give the said class cards and instead gave photo copies to the [Petitioner] Dean. The
Office of the Dean of Nursing of [petitioner] UST became very strict in receiving documents from the
[respondent]. [They have] to be scrutinized first before the same are received. Receiving, as [respondent]
believes, is merely a ministerial function [of] the [petitioners] and the documents presented for receiving
need not be scrutinized especially so when x x x they are not illegal. Copies of the class cards are hereto
attached as "F" hereof.5

After the parties filed their responsive pleadings,6 petitioners filed a Supplement to their Motion to
Dismiss,7 alleging that respondent sought administrative recourse before the Commission on Higher
Education (CHED) through a letter-complaint dated January 21, 2003. Thus, petitioners claimed that the
CHED had primary jurisdiction to resolve matters pertaining to school controversies, and the filing of the
instant case was premature.

Ruling of the Regional Trial Court

After another exchange of pleadings,8 the RTC issued an Order9 dated April 1, 2003 denying the Motion to
Dismiss on the ground that the issues involved required an examination of the evidence, which should be
threshed out during trial. Petitioners Motion for Reconsideration10 was denied in an Order11 dated August 1,
2003, so petitioners sought recourse before the CA.

Ruling of the Court of Appeals

The CA affirmed the denial of petitioners Motion to Dismiss, and directed the RTC to proceed with trial.

Issues

Petitioners seek recourse before us raising the following issues:

1) The CHED exercises quasi-judicial power over controversies involving school matters and has
primary jurisdiction over respondents demand for the release of his ToR. Thus, respondent failed to
exhaust administrative remedies;

2) Since respondent sought recourse with both the CHED and the RTC, respondent violated the rule
against forum-shopping; and

3) The Complaint failed to state a cause of action, since respondent admitted that he was not
enrolled in UST in the last three semesters prior to graduation.

Our Ruling

The petition is denied for lack of merit.

The doctrine of exhaustion of administrative remedies does not apply in this case.

The doctrine of exhaustion of administrative remedies requires that where a

remedy before an administrative agency is provided, the administrative agency concerned must be given the
opportunity to decide a matter within its jurisdiction before an action is brought before the courts.12 Failure to
exhaust administrative remedies is a ground for dismissal of the action.13

In this case, the doctrine does not apply because petitioners failed to demonstrate that recourse to the
CHED is mandatory or even possible in an action such as that brought by the respondent, which is
essentially one for mandamus and damages. The doctrine of exhaustion of administrative remedies admits
of numerous exceptions,14one of which is where the issues are purely legal and well within the jurisdiction of
the trial court, as in the present case.15 Petitioners liability if any for damages will have to be decided by
the courts, since any judgment inevitably calls for the application and the interpretation of the Civil
Code.16 As such, exhaustion of administrative remedies may be dispensed with. As we held in Regino v.
Pangasinan Colleges of Science and Technology:17

x x x exhaustion of administrative remedies is applicable when there is competence on the part of the
administrative body to act upon the matter complained of. Administrative agencies are not courts; x x x
neither [are they] part of the judicial system, [or] deemed judicial tribunals. Specifically, the CHED does not
have the power to award damages. Hence, petitioner could not have commenced her case before the
Commission. (Emphasis ours)
In addition, the rule on primary jurisdiction applies only where the administrative agency exercises quasi-
judicial or adjudicatory functions.18 Thus, an essential requisite for this doctrine to apply is the actual
existence of quasi-judicial power.19 However, petitioners have not shown that the CHED possesses any such
power to "investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw
conclusions."20 Indeed, Section 8 of Republic Act No. 772221 otherwise known as the Higher Education Act
of 1994, certainly does not contain any express grant to the CHED of judicial or quasi-judicial power.

Petitioners also claim that even without any express grant of quasi-judicial power by the legislature, the
CHED is authorized to adjudicate the case filed by respondent on the strength of the following provisions of
the Manual of Regulations of Private Schools:22

(1) Section 33, which authorizes the CHED to cancel or revoke the graduation of any student whose records
are found to be fraudulent:

Section 33. Authority to Graduate Without Department Approval. One of the benefits which may be made
available for accredited schools of the appropriate level is the authority to graduate students from accredited
courses or programs of study without prior approval of the Department, the conditions of which are as
follows:

a) The school head must furnish the Regional Office of the region where the school is situated a
copy of its certificate of accreditation.

b) Within two weeks after the graduation exercise, the school shall submit to the Regional Office
concerned an alphabetical list of graduates by course, accompanied by a certification under oath
signed by the school registrar certifying that the students listed (1) have complied with all the
requirements of the Department, (2) were conferred their respective certificates or degrees on a
specific date, (3) have complete scholastic records on file in the school, and (4) have their Form 137
for high school and Form IX for college, as the case may be, in the custody of the school. This list
shall be sufficient basis for issuing special orders, if still necessary.

The school will be held fully liable for the veracity of the records without prejudice to any legal action,
including revocation of government recognition, as may be called for under the circumstances.

The Department reserves the right to cancel or revoke the graduation of any student whose records are
found to be fraudulent.

(2) Section 72, which permits the school to withhold students credentials under certain specified
circumstances, and authorizes the CHED to

issue a students credentials in case these are unlawfully withheld by the school:

Section 72. Withholding of Credentials. The release of the transfer credentials of any pupil or student may
be withheld for reasons of suspension, expulsion, or non-payment of financial obligations or property
responsibility of the pupil or student to the school. The credentials shall be released as soon as his
obligation shall have been settled or the penalty of suspension or expulsion lifted.

However, if, after due inquiry, a school is found to have unjustifiably refused to issue transfer credentials or
student records, the Department may issue the same without prejudice to the imposition of appropriate
administrative sanctions against the school concerned.

The most cursory perusal of these provisions shows that they are inapplicable. Section 33 concerns the
conditions and authority of accredited schools to authorize the graduation of students without the prior
authority of the CHED. Corollarily, the CHED may cancel or revoke the graduation if it is found to be
fraudulent. We are not aware that the CHED has taken any action to revoke the respondents graduation,
though it is free to do so.

As regards Section 72, it refers to a schools right to withhold the release of credentials due to "suspension,
expulsion, or non-payment of financial obligations or property responsibility." None of these circumstances is
present, and there has been no intimation that respondents ToR has been withheld on any of these
grounds.

In any event, even if we were to assume that these provisions were applicable, the CHED remains without
authority to adjudicate an action for damages.

Respondent is not guilty of forum shopping

Forum shopping exists when, as a result of an adverse opinion in one

forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another, or when he institutes
two or more actions or proceedings grounded on the same cause, on the gamble that one or the other court
would make a favorable disposition.23 Here, there can be no forum shopping precisely because the CHED is
without quasi-judicial power, and cannot make any disposition of the case whether favorable or otherwise.
As we held in Cabarrus, Jr. v. Bernas:24

The courts, tribunal and agencies referred to under Circular No. 28-91, revised Circular No. 28-91 and
Administrative Circular No. 04-94 are those vested with judicial powers or quasi-judicial powers and those
who not only hear and determine controversies between adverse parties, but to make binding orders or
judgments. As succinctly put by R.A. 157, the NBI is not performing judicial or quasi-judicial functions. The
NBI cannot therefore be among those forums contemplated by the Circular that can entertain an action or
proceeding, or even grant any relief, declaratory or otherwise.

The Complaint states a cause of action

Under Rule 16, Section 1(g) of the Rules of Court, a motion to dismiss may be made on the ground that the
pleading asserting the claim states no cause of action.25 To clarify the essential test required to sustain
dismissal on this ground, we have explained that "[t]he test of the sufficiency of the facts found in a petition,
to constitute a cause of action, is whether admitting the facts alleged, the court could render a valid
judgment upon the same in accordance with the prayer of the petition."26 Stated otherwise, a complaint is
said to assert a sufficient cause of action if, admitting what appears solely on its face to be correct, the
plaintiff would be entitled to the relief prayed for.27

The Complaint makes the following essential allegations: that petitioners unjustifiably refused to release
respondents ToR despite his having obtained a degree from UST; that petitioners claim that respondent
was not officially enrolled is untrue; that as a result of petitioners unlawful actions, respondent has not been
able to take the nursing board exams since 2002; that petitioners actions violated Articles 19-21 of the Civil
Code; and that petitioners should be ordered to release respondents ToR and held liable for P400,000.00
as moral damages,P50,000.00 as exemplary damages, P50,000.00 as attorneys fees and costs of suit,
and P15,000.00 as actual damages. Clearly, assuming that the facts alleged in the Complaint are true, the
RTC would be able to render a valid judgment in accordance with the prayer in the Complaint.

Petitioners argue that paragraph 10 of the Complaint contains an admission that respondent was not
officially enrolled at UST. Said paragraph reads:

10. On several occasions, [respondent] went to see the [petitioners] to get his ToR, but all of these were
futile for he was not even entertained at the Office of the Dean. Worst, he was treated like a criminal forcing
him to admit the fact that he did not enroll for the last three (3) semesters of his schooling. [Petitioner] Dean
tried to persuade the [respondent] to give the original copies of the Class Cards which he has in his
possession. These are the only [bits of] evidence on hand to prove that he was in fact officially enrolled.
[Respondent] did not give the said class cards and instead gave photo copies to the [Petitioner] Dean. The
Office of the Dean of Nursing of [petitioner] UST became very strict in receiving documents from the
[respondent]. [They have] to be scrutinized first before the same are received. Receiving, as [respondent]
believes, is merely a ministerial function [of] the [petitioners] and the documents presented for receiving
need not be scrutinized especially so when x x x they are not illegal. Copies of the class cards are hereto
attached as "F" hereof.28

This statement certainly does not support petitioners claim that respondent admitted that he was not
enrolled. On the contrary, any allegation concerning the use of force or intimidation by petitioners, if
1avv phi1

substantiated, can only serve to strengthen respondents complaint for damages.

We fully agree with the RTCs finding that a resolution of the case requires the presentation of evidence
during trial. Based on the parties allegations, the issues in this case are far from settled. Was respondent
enrolled or not? Was his degree obtained fraudulently? If so, why was he permitted by the petitioners to
graduate? Was there fault or negligence on the part of any of the parties? Clearly, these are factual matters
which can be best ventilated in a full-blown proceeding before the trial court.

WHEREFORE, the petition is DENIED. The Decision dated July 20, 2004 and the Resolution dated
September 22, 2004 of the Court of Appeals in CA-G.R. SP No. 79404 are AFFIRMED. The Regional Trial
Court of Dinalupihan, Bataan, Branch 5, is DIRECTED to continue the proceedings in Civil Case No. DH-
788-02 with all deliberate speed.

Costs against petitioners.

SO ORDERED.

G.R. No. 80916 November 9, 1990

C.T. TORRES ENTERPRISES, INC., petitioner,
vs.
HON. ROMEO J. HIBIONADA, EFREN DIONGON, and PLEASANTVILLE DEVELOPMENT
CORPORATION,respondents.

Federico T. Tabino Jr. for petitioner.

Depasucat, Depasucat & Su Law Offices for Efren Diongon.

CRUZ, J.:

The same issue of jurisdiction that was raised in Solid Homes v. Payawal 1 is raised in the case at bar. The
same ruling laid down in that earlier case must be applied in the present controversy.

The petitioner as agent of private respondent Pleasantville Development Corporation sold a subdivision lot
on installment to private respondent Efren Diongon. The installment payments having been completed,
Diongon demanded the delivery of the certificate of title to the subject land. When neither the petitioner nor
Pleasantville complied, he filed a complaint against them for specific performance and damages in the
Regional Trial Court of Negros Occidental. This was docketed as Civil Case No. 3514. The two defendants
each filed an answer with cross-claim and counterclaim. The plaintiff filed a reply and answered the
counterclaims. Pre-trial was scheduled and heard and trial briefs were submitted by Pleasantville and
Diongon. The case was set for initial hearing. It was then that C.T. Torres Enterprises filed a motion to
dismiss for lack of jurisdiction, contending that the competent body to hear and decide the case was the
Housing and Land Use Regulatory Board. The motion was heard and Diongon later filed an opposition. On
September 17, 1987, the trial court 2 denied the motion to dismiss in an order reading as follows:

Before this Court for resolution is the Motion to Dismiss filed by defendant C.T. Torres
Enterprises, Inc. alleging among other things, that this Court has no jurisdiction over the
subject matter considering that the present action falls within the jurisdiction of the Housing
and Land Use Regulatory Board by virtue of Executive Order No. 90 dated December 17,
1986.

Plaintiff filed an opposition to the said motion to dismiss traversing the allegations therein
stated. A perusal of both pleadings and the complaint filed by plaintiff, the issue to be
determined are basically governed by the provisions of the New Civil Code, particularly on
contracts. The complaint is one for specific performance with damages which is a justiciable
issue under the Civil Code and jurisdiction to hear the said issue is conferred on the regular
Courts pursuant to Batas Pambansa Blg. 129.

It is, therefore, the finding of this Court that jurisdiction as conferred by law is vested in the
regular courts and not in the Housing and Land Use Regulatory Board. The Motion to
Dismiss is, therefore, DENIED for lack of merit.

SO ORDERED.

The petitioner is now before this Court on certiorari to question this order.

In holding that the complaint for specific performance with damages was justiciable under the Civil Code and
so came under the jurisdiction of the regular courts under B.P. 129, the trial court failed to consider the
express provisions of P.D. No. 1344 and related decrees. It also erred in supposing that only the regular
courts can interpret and apply the provisions of the Civil Code, to the exclusion of the quasi-judicial bodies.

P.D. No. 957, promulgated July 12, 1976 and otherwise known as "The Subdivision and Condominium
Buyers' Protective Decree," provides that the National Housing Authority shall have exclusive authority to
regulate the real estate trade and business.

The scope of the regulatory authority lodged in the National Housing Authority is indicated in the second and
third paragraphs of the preamble, thus:

WHEREAS, the numerous reports reveal that many real estate subdivision owners,
developers, operators, and/or sellers have reneged on their representations and obligations
to provide and maintain properly subdivision roads, drainage, sewerage, water systems,
lighting systems and other similar basic requirements, thus endangering the health and
safety of home and lot buyers;

WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent
manipulations perpetrated by unscrupulous subdivision and condominium sellers and
 operators, such as failure to deliver titles to the buyers or titles free from hens and
encumbrances, and to pay real estate taxes and fraudulent sales of the same subdivision
lots to different innocent purchasers for value. (Emphasis supplied)

P.D. No. 1344, which was promulgated April 2, 1978, and empowered the National Housing Authority to
issue writs of execution in the enforcement of its decisions under P.D. No. 957, specified the quasi-judicial
jurisdiction of the agency as follows:

SECTION 1. In the exercise of its functions to regulate the real estate trade and business
and in addition to its powers provided for in Presidential Decree No. 957, the National
Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following
nature:

A. Unsound real estate business practices;

B. Claims involving refund and any other claims filed by subdivision lot or condominium unit
buyer against the project owner developer, dealer, broker or salesman; and

C. Cases involving specific performance of contractual and statutory obligations filed by

buyers of subdivision lots or condominium units against the owner, developer, dealer, broker
or salesman. (Emphasis supplied)

Under E.O. No. 648 dated February 7, 1981, the regulatory functions conferred on the National Housing
Authority under P.D. Nos. 957,1344 and other related laws were transferred to the Human Settlements
Regulatory Commission, which was renamed Housing and Land Use Regulatory Board by E.O. No. 90
dated December 17, 1986.

It is clear from Section 1(c) of the above quoted PD No. 1344 that the complaint for specific performance
with damages filed by Diongon with the Regional Trial Court of Negros Occidental comes under the
jurisdiction of the Housing and Land Use Regulatory Board. Diongon is a buyer of a subdivision lot seeking
specific performance of the seller's obligation to deliver to him the corresponding certificate of title.

The argument that only courts of justice can adjudicate claims resoluble under the provisions of the Civil
Code is out of step with the fast-changing times. There are hundreds of administrative bodies now
performing this function by virtue of a valid authorization from the legislature. This quasi-judicial function, as
it is called, is exercised by them as an incident of the principal power entrusted to them of regulating certain
activities falling under their particular expertise.

In the Solid Homes case, for example, the Court affirmed the competence of the Housing and Land Use
Regulatory Board to award damages although this is an essentially judicial power exercisable ordinarily only
by the courts of justice. This departure from the traditional allocation of governmental powers is justified by
expediency, or the need of the government to respond swiftly and competently to the pressing problems of
the modem world.

Thus we have held:

It is by now commonplace learning that many administrative agencies exercise and perform
adjudicatory powers and functions, though to a limited extent only. Limited delegation of
judicial or quasi-judicial authority to administrative agencies (e.g. the Securities and
Exchange Commission and the National Labor Relations Commission) is well recognized in
our jurisdiction, basically because the need for special competence and experience has been
recognized as essential in the resolution of questions of complex or specialized character
and because of a companion recognition that the dockets of our regular courts have
remained crowded and clogged. 3

xxx xxx xxx

As a result of the growing complexity of the modern society, it has become necessary to
create more and more administrative bodies to help in the regulation of its ramified activities.
Specialized in the particular fields assigned to them, they can deal with the problems thereof
with more expertise and dispatch than can be expected from the legislature or the courts of
justice. This is the reason for the increasing vesture of quasi-legislative and quasi-judicial
powers in what is now not unquestionably called the fourth department of the government. 4

xxx xxx xxx

There is no question that a statute may vest exclusive original jurisdiction in an

administrative agency over certain disputes and controversies falling within the agency's
special expertise. The very definition of an administrative agency includes its being vested
 with quasi-judicial powers. The ever increasing variety of powers and functions given to
administrative agencies recognizes the need for the active intervention of administrative
agencies in matters calling for technical knowledge and speed in countless controversies
which cannot possibly be handled by regular courts. 5

The argument of the private respondents that the petition is premature because no motion for
reconsideration of the questioned order of trial court had been filed stresses the rule but disregards the
exception. It is settled that the motion for reconsideration may be dispensed with if the issue raised is a
question of law, 6 as in the case at bar. The issue pleaded here is lack of jurisdiction. It could therefore be raised
directly and immediately with this Court without the necessity of an antecedent motion for reconsideration.

We hold, in sum, that the complaint for specific performance and damages was improperly filed with the
respondent court, jurisdiction over the case being exclusively vested in the Housing and Land Use
Regulatory Board. We also hold that the order denying the motion to dismiss was subject to immediate
challenge before this Court as the filing (and denial) of a motion for reconsideration was not an
indispensable requirement.

WHEREFORE, the petition is GRANTED. The questioned Order of September 17, 1987, is SET ASIDE and
Civil Case No. 3514 in the Regional Trial Court of Negros Occidental is hereby DISMISSED, without
prejudice to the filing of the proper complaint with the Housing and Land Use Regulatory Board if so desired.
No costs.

SO ORDERED.

[G.R. No. 139360. September 23, 2003]

HLC CONSTRUCTION AND DEVELOPMENT CORPORATION AND HENRY

LOPEZ CHUA, petitioners, vs. EMILY HOMES SUBDIVISION
HOMEOWNERS ASSOCIATION (EHSHA), respondents.

DECISION
CORONA, J.:

Assailed in the instant petition for certiorari under Rule 65 of the Rules of Court[1]

is the March 15, 1999 order of the Regional Trial Court of Davao del Sur, Branch
[2]

19, denying the motion to dismiss of petitioners HLC Construction and Development
Corporation and Henry Lopez Chua, on the ground of lack of jurisdiction and a
defective certification against non-forum shopping.
Respondents Emily Homes Subdivision Homeowners Association (EHSHA) and
the 150 individual members thereof filed on October 21, 1998 a civil action for
breach of contract, damages and attorneys fees with the Regional Trial Court of
Davao del Sur, Branch 19, against petitioners, the developers of low-cost housing
units like Emily Homes Subdivision. Respondents alleged that petitioners used
substandard materials in the construction of their houses, like coco lumber and
termite-infested door jambs. Petitioners furthermore allegedly did not adhere to the
house plan specifications because the ceiling lines were sagging and there were
deviations from the plumb line of the mullions, door jams (sic) and concrete
columns. Respondents asked petitioners to repair their defective housing units but
[3]

petitioners failed to do so. Respondents had to repair their defective housing units
using their own funds. Hence, they prayed for actual and moral damages arising
from petitioners breach of the contract plus exemplary damages and attorneys fees.
On December 11, 1998, petitioners filed a motion to dismiss the complaint,
claiming that it was the Housing and Land Use Regulatory Board (HLURB) and not
the trial court which had jurisdiction over the case. They also cited the defective
certification on non-forum shopping which was signed only by the president of
EHSHA and not by all its members; such defect allegedly warranted the dismissal of
the complaint. The trial court denied petitioners motion to dismiss on the ground that
the case fell within its jurisdiction, not with the HLURB, and that respondents
certificate of non-forum shopping substantially complied with Rule 7, Section 5 of
the 1997 Rules of Civil Procedure. It also denied petitioners motion for
reconsideration.
Aggrieved, petitioners filed the instant petition for certiorari, alleging that the trial
court committed grave abuse of discretion amounting to lack or in excess of
jurisdiction in holding (1) that the case between petitioners and respondents fell
within the jurisdiction of the civil courts and (2) that respondents had substantially
complied with the rules on forum shopping despite the fact that only one of the 150
respondents had signed the certificate therefor.
Petitioners are correct that the case between them and respondents fell within
the jurisdiction of the HLURB, not the trial court. However, we cannot sustain
petitioners contention that respondents certificate of non-forum shopping was
defective, thus allegedly warranting the outright dismissal thereof by the trial court.
The general rule is that the certificate of non-forum shopping must be signed by
all the plaintiffs in a case and the signature of only one of them is
insufficient. However, the Court has also stressed that the rules on forum shopping
[4]

were designed to promote and facilitate the orderly administration of justice and thus
should not be interpreted with such absolute literalness as to subvert its own
ultimate and legitimate objective. The strict compliance with the provisions
[5]

regarding the certificate of non-forum shopping merely underscores its mandatory

nature in that the certification cannot be altogether dispensed with or its
requirements completely disregarded. It does not thereby prohibit substantial
compliance with its provisions under justifiable circumstances. [6]

Thus in the recent case of Cavile, et al. vs. Heirs of Clarita Cavile, et al., we [7]

ruled:

[T]he execution by Thomas George Cavile, Sr., in behalf of all the other petitioners of the
certificate of non-forum shopping constitute substantial compliance with the Rules. All the
petitioners, being relatives and co-owners of the properties in dispute, share a common
interest thereon. They also share a common defense in the complaint for partition filed by
respondents. Thus, when they filed the instant petition, they filed it as a collective, raising
only one argument to defend their rights over the properties in question. There is sufficient
basis, therefore, for Thomas George Cavile, Sr. to speak for and in behalf of his co-
petitioners that they have not filed any action or claim involving the same issues in another
court or tribunal, nor is there other pending action or claim in another court or tribunal
involving the same issues. Moreover, it has been held that the merits of the substantive
aspects of the case may be deemed as special circumstances for the Court to take cognizance
of a petition for review although the certification against forum shopping was executed and
signed by only one of the petitioners.

The above ruling is squarely applicable to the present case. Respondents (who
were plaintiffs in the trial court) filed the complaint against petitioners as a group,
represented by their homeowners association president who was likewise one of the
plaintiffs, Mr. Samaon M. Buat. Respondents raised one cause of action which was
the breach of contractual obligations and payment of damages. They shared a
common interest in the subject matter of the case, being the aggrieved residents of
the poorly constructed and developed Emily Homes Subdivision. Due to the
collective nature of the case, there was no doubt that Mr. Samaon M. Buat could
validly sign the certificate of non-forum shopping in behalf of all his co-plaintiffs. In
cases therefore where it is highly impractical to require all the plaintiffs to sign the
certificate of non-forum shopping, it is sufficient, in order not to defeat the ends of
justice, for one of plaintiffs, acting as representative, to sign the certificate provided
that, as in Cavile et al., the plaintiffs share a common interest in the subject matter
of the case or filed the case as a collective, raising only one common cause of
action or defense.
In any case, even if it was correct for the trial court to rule that respondents had
substantially complied with the rules on forum shopping and thus, their complaint
before it should not be dismissed, we find that the trial court should have
nonetheless dismissed the complaint for a more important reason it had no
jurisdiction over it. It is the HLURB, not the trial court, which had jurisdiction over
respondents complaint. The HLURB is the government agency empowered to
[8]

regulate the real estate trade and business, having exclusive jurisdiction to hear and
decide cases involving:
(a) unsound real estate business practices;
(b) claims involving refunds and any other claims filed by subdivision lot or
condominium unit buyers against the project owner, developer, dealer, broker or
salesman;
(c) and cases involving specific performance of contractual and statutory obligations
filed by buyers of subdivision lots or condominium units against the owner,
developer, dealer, broker or salesman.[9]
In this case, respondents complaint was for the reimbursement of expenses
incurred in repairing their defective housing units constructed by petitioners.Clearly,
the HLURB had jurisdiction to hear it. In the case of Arranza vs. B.F Homes,
Inc., this Court ruled that:
[10]

xxx the HLURB has jurisdiction over complaints arising from contracts between the
subdivision developer and the lot buyer or those aimed at compelling the subdivision
developer to comply with its contractual and statutory obligations to make the subdivision a
better place to live in.
[11]

The fact that the subject matter of the complaint involved defective housing units
did not remove the complaint from the HLURBs jurisdiction. The delivery of
habitable houses was petitioners responsibility under their contract with
respondents. The trial court should have granted the motion to dismiss filed by
petitioners so that the issues therein could be expeditiously heard and resolved by
the HLURB.
WHEREFORE, the petition is hereby GRANTED. The March 15, 1999 order of
the Regional Trial Court of Davao del Sur, Branch 19, denying the petitioners motion
to dismiss, is ANNULLED and Civil Case No. 3731 before it (trial court) is hereby
DISMISSED for lack of jurisdiction. This is without prejudice to the re-filing of the
respondents complaint in the HLURB.
SO ORDERED.

G.R. No. 156164 September 4, 2009

SPS. LEONARDO AND MILAGROS CHUA, Petitioners,

vs.
HON. JACINTO G. ANG, DENNIS R. PASTRANA, IN THEIR CAPACITIES AS CITY AND ASSISTANT
PROSECUTOR OF PASIG, RESPECTIVELY, FERDINAND T. SANTOS, ROBERT JOHN L.
SOBREPEA, NOEL M. CARIO, ROBERTO S. ROCO, ALICE ODCHIQUE-BONDOC,* ROMULO T.
SANTOS AND ENRIQUE A. SOBREPEA, JR., Respondents.

DECISION

BRION, J.:
Before us is the petition for certiorari1] filed by the spouses Leonardo and Milagros Chua (petitioners) to
assail the Resolution dated November 4, 2002 of the City Prosecutor of Pasig in I.S. No. PSG 02-02-09150.
The City Prosecutors Resolution dismissed the complaint filed by the petitioners against Ferdinand T.
Santos, Robert John L. Sobrepea, Noel M. Cario, Roberto S. Roco, Alice Odchique-Bondoc, Romulo T.
Santos and Enrique A. Sobrepea, Jr. (private respondents) for violation of Presidential Decree (P.D.) No.
957, otherwise known as "The Subdivision and Condominium Buyers Protective Decree."

FACTUAL BACKGROUND

The antecedent facts, drawn from the records, are briefly summarized below.

On February 11, 1999, the petitioners (as buyers) and Fil-Estate Properties, Inc. (FEPI, as developers)
executed a Contract To Sell2 a condominium unit. Despite the lapse of three (3) years, FEPI failed to
construct and deliver the contracted condominium unit to the petitioners.

As a result, the petitioners filed on September 3, 2002 a Complaint-Affidavit3 before the Office of the City
Prosecutor of Pasig City accusing the private respondents, as officers and directors of FEPI, of violating
P.D. No. 957, specifically its Sections 17 and 20, in relation with Section 39.4 These provisions state:

Sec. 17. Registration. - All contracts to sell, deeds of sale and other similar instruments relative to the sale or
conveyance of the subdivision lots and condominium units, whether or not the purchase price is paid in full,
shall be registered by the seller in the Office of the Register of Deeds of the province or city where the
property is situated.

xxx

Sec. 20. Time of Completion. - Every owner or developer shall construct and provide the facilities,
improvements, infrastructures and other forms of development, including water supply and lighting facilities,
which are offered and indicated in the approved subdivision or condominium plans, brochures, prospectus,
printed matters, letters or in any form of advertisement, within one year from the date of the issuance of the
license for the subdivision or condominium project or such other period of time as may be fixed by the
Authority.

xxx

Sec. 39. Penalties. - Any person who shall violate any of the provisions of this Decree and/or any rule or
regulation that may be issued pursuant to this Decree shall, upon conviction, be punished by a fine of not
more than twenty thousand (P20,000.00) pesos and/or imprisonment of not more than ten years: Provided,
That in the case of corporations, partnership, cooperatives, or associations, the President, Manager or
Administrator or the person who has charge of the administration of the business shall be criminally
responsible for any violation of this Decree and/or the rules and regulations promulgated pursuant thereto.
[Emphasis supplied]

The petitioners alleged that the private respondents did not construct and failed to deliver the contracted
condominium unit to them and did not register the Contract to Sell with the Register of Deeds.

Of the seven (7) private respondents, only private respondent Alice Odchique-Bondoc filed a Counter-
Affidavit.5 She countered that the City Prosecutor has no jurisdiction over the case since it falls under the
exclusive jurisdiction of the Housing and Land Use Regulatory Board (HLURB).

On November 4, 2002, Assistant City Prosecutor Dennis R. Pastrana and Pasig City Prosecutor Jacinto G.
Ang (public respondents), respectively issued and approved the Resolution6 dismissing the complaint for
being premature. The Resolution held that it is the HLURB that has exclusive jurisdiction over cases
involving real estate business and practices.

THE PETITION and THE PARTIES POSITIONS

On December 12, 2002, the petitioners filed the present petition7 anchored on the following ground:

PUBLIC RESPONDENTS COMMITTED MANIFEST ERROR AND GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION, WHEN IT DISMISSED PETITIONER'S
COMPLAINANT (sic) ON THE GROUND THAT THE HLURB, NOT THEIR OFFICE HAS JURISDICTION
TO CONDUCT PRELIMINARY INVESTIGATION AND FILE THE CORRESPONDING INFORMATION IN
COURT FOR CRIMINAL VIOLATIONS OF P.D. No. 957.8

The petitioners argue that jurisdiction to entertain criminal complaints is lodged with the city prosecutor and
that the jurisdiction of the HLURB under P.D. No. 957 is limited to the enforcement of contractual rights, not
the investigation of criminal complaints.
In their Comment,9 the private respondents submit that the petition should be dismissed outright because
the petitioners failed to avail of other remedies provided by law, such as (a) the filing of a motion for
reconsideration with the City Prosecutor of Pasig City, (b) the filing of a petition for review with the Secretary
of the Department of Justice (DOJ), (c) the filing of a motion for reconsideration of any judgment rendered by
the DOJ, or (d) the filing of an appeal or a petition for certiorari with the Court of Appeals (CA); that even
if certiorari is a proper remedy, the petition was filed in violation of the hierarchy of courts; and that even on
the merits, the petition must fail since the public respondents correctly dismissed the complaint as a
reasonable interpretation of P.D. No. 957 which requires a prior determination by the HLURB that a
corporation violated P.D. No. 957 before criminal charges may be filed against its corporate officers.

In their Reply, the petitioners reiterate that the public respondents abdicated their authority to conduct a
preliminary investigation and to indict the private respondents for criminal violations of P.D. No. 957 when
they dismissed the criminal complaint for being premature.10

OUR RULING

We find the petition meritorious.

At the outset, we note that the petitioners indeed filed the present petition for certiorari without prior recourse
to other available remedies provided by law and the observance of the judicial hierarchy of courts.
Nonetheless, the rules on prior recourse to these available remedies are not without exceptions, nor is the
observance of the judicial hierarchy of courts an inflexible rule; the peculiarity, uniqueness and unusual
character of the factual and circumstantial settings of a case may allow the flexible application of these
established legal principles to achieve fair and speedy dispensation of justice.

A prior motion for reconsideration is unnecessary: (a) where the order is a patent nullity, as where the court
a quo has no jurisdiction; (b) where the questions raised in the certiorari proceedings have been duly raised
and passed upon by the lower court, or are the same as those raised and passed upon in the lower court;
(c) where there is an urgent necessity for the resolution of the question and any further delay would
prejudice the interests of the Government or of the petitioner; (d) where, under the circumstances, a motion
for reconsideration would be useless; (e) where petitioner was deprived of due process and there is an
extreme urgency for relief; (f) where, in a criminal case, relief from an order of arrest is urgent and the grant
of such relief by the trial court is improbable; (g) where the proceedings in the lower court are a nullity for
lack of due process; (h) where the proceedings were ex parte or in which the petitioner had no opportunity to
object; or (i) where the issue raised is one purely of law or where public interest is involved.11

On the other hand, prior exhaustion of administrative remedies may be dispensed with and judicial action
may be validly resorted to immediately: (a) when there is a violation of due process; (b) when the issue
involved is purely a legal question; (c) when the administrative action is patently illegal amounting to lack or
excess of jurisdiction; (d) when there is estoppel on the part of the administrative agency concerned; (e)
when there is irreparable injury; (f) when the respondent is a department secretary whose acts as an alter
ego of the President bear the implied and assumed approval of the latter; (g) when to require exhaustion of
administrative remedies would be unreasonable; (h) when it would amount to a nullification of a claim; (i)
when the subject matter is a private land in land case proceedings; (j) when the rule does not provide a
plain, speedy and adequate remedy; or (k) when there are circumstances indicating the urgency of judicial
intervention.12

On the non-observance of the principle of hierarchy of courts, it must be remembered that this rule generally
applies to cases involving conflicting factual allegations. Cases which depend on disputed facts for decision
cannot be brought immediately before us as we are not triers of facts.13 A strict application of this rule may
be excused when the reason behind the rule is not present in a case, as in the present case, where the
issues are not factual but purely legal. In these types of questions, this Court has the ultimate say so that we
merely abbreviate the review process if we, because of the unique circumstances of a case, choose to hear
and decide the legal issues outright.14

In the present petition for certiorari, we find that there are four (4) compelling reasons to allow the petitioners'
invocation of our jurisdiction in the first instance, even without prior recourse to a motion for reconsideration
or to the exhaustion of administrative remedies, and even in disregard of the principle of hierarchy of courts.

First, the petitioners raise a pure question of law involving jurisdiction over criminal complaints for violation of
P.D. No. 957. A question of law exists when the doubt or controversy concerns the correct application of law
or jurisprudence to a certain set of facts; or when the issue does not call for an examination of the probative
value of the evidence presented, the truth or falsehood of facts being admitted.15 As noted earlier, this Court
is the undisputed final arbiter of all questions of law.

Second, the present case requires prompt action because public interest and welfare are involved in
subdivision and condominium development, as the terms of P.D. Nos. 957 and 1344 expressly
reflect.16 Questions of conflicting processes, essentially based on jurisdiction, will consistently recur as
peoples need for housing (and hence, subdivisions and condominiums) escalate. Shelter is a basic human
need whose fulfillment cannot afford any kind of delay.17

Third, considering that this case has been pending for nearly seven (7) years (since the filing of the
Complaint-Affidavit on September 3, 2002) to the prejudice not only of the parties involved, but also of the
subdivision and condominium regulatory system and its need for the prompt determination of controversies,
the interests of justice now demand the direct resolution of the jurisdictional issue this proceeding poses. As
mentioned, at stake in this case is shelter a basic human need and to remand the case to the DOJ for a
determination of the merits of the parties jurisdictional tug-of-war would not serve any purpose other than to
further delay its resolution.18 Thus, the practicality of the situation and the need for the speedy administration
of justice justify a departure from the strict application of procedural rules. Besides, the issue before us
presents no special difficulty, and we feel it should be decided now, without going through the procedural
formalities that shall anyway end up with this Court.

Fourth, the petition is meritorious. The public respondents committed grave abuse of discretion in dismissing
the criminal complaints for violation of P.D. No. 957 on the ground that jurisdiction lies with the HLURB.

Generally, the extent to which an administrative agency may exercise its powers depends largely, if not
wholly, on the provisions of the statute creating and defining the terms of the agencys mandate. P.D. No.
1344 clarifies and spells out the quasi-judicial dimensions of the grant of jurisdiction to the HLURB in the
following specific terms:19

SEC. 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its
powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive
jurisdiction to hear and decide cases of the following nature:

A. Unsound real estate business practices;

B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer
against the project owner, developer, dealer, broker or salesman; and

C. Cases involving specific performance of contractual and statutory obligations filed by buyers of
subdivision lots or condominium units against the owner, developer, dealer, broker or salesman.

The extent of its quasi-judicial authority, on the other hand, is defined by the terms of P.D. No. 957 whose
Section 3 provides:

x x x National Housing Authority [now HLURB]. - The National Housing Authority shall have exclusive
jurisdiction to regulate the real estate trade and business in accordance with the provisions of this Decree.

The provisions of P.D No. 957 were intended to encompass all questions regarding subdivisions and
condominiums. The intention was to provide for an appropriate government agency, the HLURB, to which all
parties buyers and sellers of subdivision and condominium units - may seek remedial recourse. The law
recognized, too, that subdivision and condominium development involves public interest and welfare and
should be brought to a body, like the HLURB, that has technical expertise.20 In the exercise of its powers, the
HLURB, on the other hand, is empowered to interpret and apply contracts, and determine the rights of
private parties under these contracts. This ancillary power, generally judicial, is now no longer with the
regular courts to the extent that the pertinent HLURB laws provide.21

Viewed from this perspective, the HLURBs jurisdiction over contractual rights and obligations of parties
under subdivision and condominium contracts comes out very clearly. But hand in hand with this definition
and grant of authority is the provision on criminal penalties for violations of the Decree, provided under the
Decrees Section 39, heretofore quoted. Significantly, nothing in P.D. No. 957 vests the HLURB with
jurisdiction to impose the Section 39 criminal penalties. What the Decree provides is the authority of the
HLURB to impose administrative fines under Section 38, as implemented by the Rules Implementing the
Subdivision and Condominium Buyers Protective Decree. This Section of the Decree provides:

Sec. 38. Administrative Fines. The Authority may prescribe and impose fines not exceeding ten thousand
pesos for violations of the provisions of this Decree or of any rule or regulation thereunder. Fines shall be
payable to the Authority and enforceable through writs of execution in accordance with the provisions of the
Rules of Court.1avv phi 1

The Implementing Rules, for their part, clarify that "The implementation and payment of administrative fines
shall not preclude criminal prosecution of the offender under Section 39 of the Decree." Thus, the
implementing rules themselves expressly acknowledge that two separate remedies with differing
consequences may be sought under the Decree, specifically, the administrative remedy and criminal
prosecution.
Unless the contrary appears under other provisions of law (and in this case no such provision applies), the
determination of the criminal liability lies within the realm of criminal procedure as embodied in the Rules of
Court. Section 2, Rule 112 of these Rules provide that the prerogative to determine the existence or non-
existence of probable cause lies with the persons duly authorized by law; as provided in this Rule, they are
(a) Provincial or City Prosecutors and their assistants; (b) Judges of the Municipal Trial Courts and Municipal
Circuit Trial Courts; (c) National and Regional State Prosecutors; and (d) other officers as may be authorized
by law.

In the present case, the petitioners have expressly chosen to pursue the criminal prosecution as their
remedy but the prosecutor dismissed their complaint. The prosecutors dismissal for prematurity was
apparently on the view that an administrative finding of violation must first be obtained before recourse can
be made to criminal prosecution. This view is not without its model in other laws; one such law is in the
prosecution of unfair labor practice under the Labor Code where no criminal prosecution for unfair labor
practice can be instituted without a final judgment in a previous administrative proceeding.22 The need for a
final administrative determination in unfair labor practice cases, however, is a matter expressly required by
law. Where the law is silent on this matter, as in this case, the fundamental principle that administrative
cases are independent from criminal actions23 fully applies, subject only to the rules on forum shopping
under Section 5, Rule 7 of the Rules of Court.24 In the present case, forum shopping is not even a matter for
consideration since the petitioners have chosen to pursue only one remedy criminal prosecution. Thus, we
see no bar to their immediate recourse to criminal prosecution by filing the appropriate complaint before the
prosecutors office.

In light of these legal realities, we hold that the public respondent prosecutors should have made a
determination of probable cause in the complaint before them, instead of simply dismissing it for prematurity.
Their failure to do so and the dismissal they ordered effectively constituted an evasion of a positive duty and
a virtual refusal to perform a duty enjoined by law; they acted on the case in a manner outside the
contemplation of law. This is grave abuse of discretion amounting to a lack of or in excess of jurisdiction
warranting a reversal of the assailed resolution.25 In the concrete context of this case, the public prosecutors
effectively shied away from their duty to prosecute, a criminal violation of P.D. No. 957 as mandated by
Section 5, Rule 110 of the Rules of Court and Republic Act No. 5180,26 as amended,27 otherwise known as
the Law on Uniform Procedure of Preliminary Investigation.

As a final word, we stress that the immediate recourse to this Court that this Decision allows should not
serve as a precedent in other cases where the prosecutor dismisses a criminal complaint, whether under
P.D. No. 957 or any other law. Recourse to (a) the filing a motion for reconsideration with the City or
Provincial Prosecutor, (b) the filing a petition for review with the Secretary of the DOJ, (c) the filing a motion
for reconsideration of any judgment rendered by the DOJ, and (d) intermediate recourse to the CA, are
remedies that the dictates of orderly procedure and the hierarchy of authorities cannot dispense with. Only
the extremely peculiar circumstances of the present case compelled us to rule as we did; thus our ruling in
this regard is a rare one that should be considered pro hac vice.

WHEREFORE, we hereby GRANT the petition and accordingly REVERSE and SET ASIDE the Resolution
dated November 4, 2002 of the City Prosecutor of Pasig in I.S. No. PSG 02-02-09150. The complaint is
hereby ordered returned to the Office of the City Prosecutor of Pasig City for the determination of probable
cause and the filing of the necessary information, if warranted. No costs.

SO ORDERED.

G.R. No. 128354 April 26, 2005

HOME BANKERS SAVINGS & TRUST CO., Petitioner,

vs.
THE HONORABLE COURT OF APPEALS, PABLO N. AREVALO, FRANCISCO A. UY, SPOUSES
LEANDRO A. SORIANO, JR. and LILIAN SORIANO, ALFREDO LIM and FELISA CHI LIM/ALFREDO
LIM, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul the
Decision1 of the Court of Appeals (CA) dated November 28, 1996 in CA-G.R. SP No. 40892 and its
Resolution dated February 19, 1997 denying petitioners motion for reconsideration.

Each of private respondents entered into separate contracts to sell with TransAmerican Sales and
Exposition (TransAmerican) through the latters Owner/General Manager, Engr. Jesus Garcia, involving
certain portions of land covered by Transfer Certificate of Title (TCT) No. 19155, located at No. 45 Gen. Lim
Street, Heroes Hill, Quezon City, together with one unit three-storey townhouse to be built on each portion,
as follows:
 Respondent Pablo N. Arevalo purchased the portion of land denominated as Unit No. 52 for the
amount ofP750,000.00 on August 21, 1988 and had already fully paid the purchase price on
September 3, 1988;

Respondent Alfredo Lim purchased the portion of land denominated as Unit No. 13 for the amount
ofP800,000.00 on December 22, 1988 and fully paid the same upon execution of the agreement on
the same day;

Respondent Francisco A. Uy purchased the portion of land denominated as Unit No. 64 on October
29, 1988 in the amount of P800,000.00 payable in installments and had allegedly made a total
payment ofP581,507.41. He ordered to stop the payment of all [postdated] checks from September
1990 to November 1995 on the ground of non-completion of his unit and had later learned of the
foreclosure of the property;

Respondent spouses Leandro A. Soriano, Jr. and Lilian Soriano purchased the portion of land
denominated as Unit No. 35 on February 15, 1990 in the amount of P1,600,000.00 and had allegedly
made a payment ofP669,960.00. They had stopped paying because of non-completion of the
project and had later learned of the foreclosure of the property;

Respondents Alfredo Lim and Santos Lim purchased the portion of land denominated as Unit No.
76 forP700,000.00 on October 1988 and had been fully paid as of March 18, 1989; Santos Lim
subsequently sold and assigned his share of the property to private respondent Felisa Chi Lim on
May 12, 1989.

It is stipulated in their respective contracts that their individual townhouses will be fully completed and
constructed as per plans and specifications and the respective titles thereto shall be delivered and
transferred to private respondents free from all liens and encumbrances upon their full payment of the
purchase price. However, despite repeated demands, Garcia/TransAmerican failed to comply with their
undertakings.

On May 30, 1989, Engr. Garcia and his wife Lorelie Garcia obtained from petitioner Home Bankers Savings
and Trust Company (formerly Home Savings Bank and Trust Company) a loan in the amount
of P4,000,000.00 and without the prior approval of the Housing and Land Use Regulatory Board (HLURB),
the spouses mortgaged7 eight lots covered by TCT Nos. 3349 to 3356 as collateral. Petitioner registered its
mortgage on these titles without any other encumbrance or lien annotated therein. The proceeds of the loan
were intended for the development of the lots into an eight-unit townhouse project. However, five out of
these eight titles turned out to be private respondents townhouses subject of the contracts to sell with
Garcia/TransAmerican.

When the loan became due, Garcia failed to pay his obligation to petitioner. Consequently, petitioner
instituted an extrajudicial foreclosure8 on the subject lots and being the highest bidder in the public auction, a
certificate of sale9in its favor was issued by the sheriff on February 26, 1990. Subsequently, the sheriffs
certificate of sale was registered and annotated on the titles of the subject lots in the Register of Deeds of
Quezon City.

On November 8, 1990, private respondents filed a complaint with the Office of Appeals, Adjudication and
Legal Affairs (OAALA), HLURB, against Garcia/TransAmerican as seller/developer of the property and
petitioner, as indispensable party, for non-delivery of titles and non-completion of the subdivision
project.10 They prayed for the completion of the units, annulment of the mortgage in favor of petitioner,
release of the mortgage on the lots with fully paid owners and delivery of their titles, and for petitioner to
compute individual loan values of amortizing respondents and to accept payments from them and damages.

Petitioner filed its Answer contending that private respondents have no cause of action against it; that at the
time of the loan application and execution of the promissory note and real estate mortgage by Garcia, there
were no known individual buyers of the subject land nor annotation of any contracts, liens or encumbrances
of third persons on the titles of the subject lots; that the loan was granted and released without notifying
HLURB as it was not necessary.

Private respondents filed their Reply and a motion for the judgment on the pleadings. Petitioner did not file a
rejoinder. Private respondents filed a manifestation reiterating for a judgment on their pleadings and asked
that the reliefs prayed for be rendered as far as petitioner was concerned. Upon motion of private
respondents, the case against Garcia/TransAmerican was archived for failure to serve summons on him/it
despite efforts to locate his whereabouts or its office. The case was then considered submitted for decision.

On August 16, 1991, OAALA rendered its Decision,11 the dispositive portion of which reads:

WHEREFORE, Judgment is hereby rendered as follows:

 1. Declaring the mortgage executed by and between respondents Engr. Jesus
Garcia/TransAmerican Sales and Exposition and Home Bankers Savings and Trust Company
(formerly Home Savings Bank and Trust Company) to be unenforceable as against all the
complainants;

2. Ordering the Register of Deeds of Quezon City to cancel the annotations of the mortgage
indebtedness between respondents Engr. Jesus Garcia and Home Bankers Savings and Trust
Company (formerly Home Savings Bank and Trust Company);

3. Ordering, likewise the Register of Deeds of Quezon City to cancel the annotation of the
Certificate of Sale in favor of the respondent Home Bankers Savings and Trust Company on the
following Transfer Certificates of Title to wit:

1) TCT No. 3350

2) TCT No. 3351

3) TCT No. 3352

4) TCT No. 3354

5) TCT No. 3356

4. Ordering respondent Home Bankers Savings and Trust Company (formerly Home Savings Bank
and Trust Company) to:

4.1. AS TO THE FIRST CAUSE OF ACTION

Deliver to Complainant Pablo N. Arevalo TCT No. 3352 free from all liens and
encumbrances.

4.2. AS TO THE SECOND CAUSE OF ACTION

Deliver to Complainant Alfredo Lim TCT No. 3356 free from all liens and encumbrances.

4.3. AS TO THE THIRD CAUSE OF ACTION

To compute and/or determine the loan value of complainant Francisco A. Uy who was not
able to complete or make full payment and to accept payment and/or receive amortization
from said complainant Francisco A. Uy and upon full payment to deliver TCT No. 3351 free
from all liens and encumbrances.

4.4. AS TO THE FOURTH CAUSE OF ACTION

To compute and/or determine the loan value of Complainant Spouses Leandro A. Soriano,
Jr. and Lilian Soriano who were not able to complete or make full payment and to accept
and/or receive amortization from said Complainants Soriano and upon full payment to deliver
TCT No. 3354 free from all liens and encumbrances.

4.5. AS TO THE FIFTH CAUSE OF ACTION

Deliver to complainant Alfredo Lim and Felisa Chi Lim TCT No. 3350 free from all liens and
encumbrances.

without prejudice to its right to require respondent Engr. Jesus Garcia/TransAmerican to constitute
new collaterals in lieu of the said titles sufficient in value to cover the mortgage obligation.12

Petitioner filed an appeal with the Board of Commissioners of the HLURB which dismissed the same in a
decision dated June 15, 1992.13 Petitioner then elevated the case to the Office of the President which
rendered a decision dated June 30, 199514 dismissing the appeal and affirming the June 15, 1992 decision
of the HLURB. Petitioners motion for reconsideration was also denied in a Resolution dated May 7, 1996.15

Petitioner filed a petition for review with the CA which, in the herein assailed decision dated November 28,
1996, denied the petition and affirmed the decision of the Office of the President. The CA applied the case
of Union Bank of the Philippines vs. HLURB, et al.,16 where it was held that the act of a subdivision
developer of mortgaging the subdivision without the knowledge and consent of a unit buyer and without the
approval of the National Housing Authority (NHA, now HLURB) is violative of Section 18 of P.D. No. 957
thus, falling under the exclusive jurisdiction of HLURB.
The CA upheld the findings of the OAALA, HLURB that private respondents had already entered into
separate contracts to sell with TransAmerican as early as 1988 while it was only in 1989 that spouses
Garcia applied for a loan with petitioner and executed a mortgage contract over the subject lots; that the
proceeds of the loan were purposely intended for the development of a property which was the same
property subject of the contracts to sell; that despite the contracts to sell, Garcia/TransAmerican did not
apprise petitioner of the existence of these contracts nor did petitioner exhaust any effort to inquire into their
existence since petitioner merely relied on the purported clean reconstituted titles in the name of Garcia; that
the mortgage of the subject lots without the consent of the buyers and the authorization of the HLURB is a
clear violation of P.D. No. 957; that the mortgage contract is void and unenforceable against private
respondents.

Petitioners motion for reconsideration was denied by the CA in its Resolution dated February 19, 1997.17

Petitioner is now before us raising the following grounds in support of its petition:

A. THE OFFICE OF THE PRESIDENT ERRED IN RULING THAT THE HLURB HAS
JURISDICTION TO NULLIFY OR DECLARE UNENFORCEABLE THE REAL ESTATE MORTGAGE
VALIDLY CONSTITUTED BY THE OWNER.

B. ASSUMING ARGUENDO THAT THE HLURB HAS JURISDICTION, RESPONDENT COURT

MANIFESTLY ERRED IN FINDING THE REAL ESTATE MORTGAGE IN FAVOR OF HOME AS
INVALID AND UNENFORCEABLE AGAINST RESPONDENTS.

C. IN THE EVENT THAT THE DECISION OF THE RESPONDENT COURT FINDING THE REAL
ESTATE MORTGAGE IN FAVOR OF HOME AS INVALID AND UNENFORCEABLE AGAINST
RESPONDENTS IS UPHELD, THE UNREGISTERED CONTRACTS TO SELL IN FAVOR OF
RESPONDENTS SHOULD ALSO BE HELD VALID ONLY AS TO THE PARTIES THERETO BUT
UNENFORCEABLE AGAINST PETITIONER.

Private respondents filed their Comment and petitioner filed its Reply thereto.

In a Resolution dated February 23, 2004, we gave due course to the petition and required the parties to
submit their respective memoranda which they complied with.

The petition is devoid of merit.

Notably, the issues raised are mere rehash of the issues already passed upon by the HLURB, the Office of
the President and the CA which we uphold as we find no reversible errors committed.

Petitioner claims that HLURB has no power to declare the mortgage contract over real property executed
between a real estate developer and petitioner, a banking institution, void or unenforceable, as it is properly
within the jurisdiction of the Regional Trial Court. Petitioner asserts that being a mortgagee of the subject
lots and a purchaser in good faith, it is not a project owner, developer, or dealer contemplated under P.D.
No. 1344, the law which expanded the jurisdiction of the NHA; and that since there is no seller-buyer
relationship existing between it and private respondents, HLURB has no jurisdiction to rule on the validity of
the mortgage and to annul foreclosure proceedings.

The argument is untenable.

The CA did not err in affirming the decision of the Office of the President that HLURB has jurisdiction to
declare invalid the mortgage contract executed between Garcia/TransAmerican and petitioner over the
subject lots insofar as private respondents are concerned. It correctly relied on Union Bank of the
Philippines vs. HLURB, et al.18where we squarely ruled on the question of HLURBs jurisdiction to hear and
decide a condominium buyers complaint for: (a) annulment of a real estate mortgage constituted by the
project owner without the consent of the buyer and without the prior written approval of the NHA; (b)
annulment of the foreclosure sale; and (c) annulment of the condominium certificate of title that was issued
to the highest bidder at the foreclosure sale, thus:

. . . The issue in HLURB Case No. REM-062689-4077 is the validity of the real estate mortgage of
Davids condominium unit that FRDC executed in favor of the Union Bank and Far East Bank without
prior approval of the National Housing Authority and the legality of the title which the mortgage
banks acquired as highest bidder therefore in the extrajudicial foreclosure sale. The applicable
provisions of P.D. No. 957, otherwise known as "The Subdivision and Condominium Buyers
Protective Decree" are quoted hereunder as follows:

Sec. 3. NATIONAL HOUSING AUTHORITY. The National Housing Authority shall have
exclusive jurisdiction to regulate the real estate trade and business in accordance with the
provisions of this Decree.
 Section 18. Mortgages No mortgage on any unit or lot shall be made by the owner or developer
without prior written approval of the authority. Such approval shall not be granted unless it is shown
that the proceeds of the mortgage loan shall be used for the development of the condominium or
subdivision project and effective measures have been provided to ensure such utilization. The loan
value of each lot or unit covered by the mortgage shall be determined and the buyer thereof if any
shall be notified before the release of the loan. The buyer may, at his option, pay his installment for
the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage
indebtedness secured by the particular lot or unit being paid for, with a view to enabling said buyer to
obtain title over the lot or unit promptly after full payment thereof.

P.D. No. 1344 of April 2, 1978 expanded the jurisdiction of the National Housing Authority to include the
following:

Sec. 1. In the exercise of its function to regulate the real estate trade and business and in addition
to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have
exclusive jurisdiction to hear and decide cases of the following nature:

A. Unsound real estate business practices;

B. Claims involving refund and any other claims filed by subdivision lot or condominium
unit buyer against the project owner, developer, dealer, broker or salesman; and

C. Cases involving specific performance of contractual and statutory obligations filed by

buyers of subdivision lot or condominium unit against the owner, developer, broker or
salesman.

On February 7, 1981, Executive Order No. 648 transferred the regulatory and quasi-judicial functions of the
NHA to the Human Settlements Regulatory Commission.

Sec. 8. TRANSFER OF FUNCTIONS. The regulatory functions of the National Housing Authority
pursuant to Presidential Decree Nos. 957, 1216, 1344 and other related laws are hereby transferred
to the Commission, together with such applicable personnel, appropriation, records, equipment and
property necessary for the enforcement and implementation of such functions. Among these
regulatory functions are:

1. Regulation of the real estate trade and business:

...

7. Approval of mortgage on any subdivision lot or condominium unit made by the

owner or developer;

...

11. Hear and decide cases on unsound real estate business practices; claims
involving refund filed against project owners, developers, dealers, brokers, or
salesmen; and cases of specific performance.

Executive Order No. 90 dated December 17, 1986 changed the name of the Human Settlements
Regulatory Commission to Housing and Land Use Regulatory Board (HLURB).

Clearly, FRDCs act of mortgaging the condominium project to Bancom and FEBTC, without the
knowledge and consent of David as buyer of a unit therein, and without the approval of the NHA
(now HLURB) as required by P.D. No. 957, was not only an unsound real estate business practice
but also highly prejudicial to the buyer. David, who has a cause of action for annulment of the
mortgage, the mortgage foreclosure sale, and the condominium certificate of title that was issued to
the UBP and FEBTC as the highest bidders at the sale. The case falls within the exclusive
jurisdiction of the NHA (now HLURB) as provided in P.D. No. 957 of 1976 and P.D. No. 1344 of
1978.

...

We hold that the jurisdiction of the HLURB to regulate the real estate trade is broad enough to
include jurisdiction over complaints for specific performance of the sale, or annulment of the
mortgage, of a condominium unit, with damages.19

Petitioner avers that the Union Bank ruling is not applicable in its case, since it had no knowledge of any
buyer of the subject lots at the time the mortgage was constituted; that there was no construction in the
subject lots at the time petitioner accepted the same as collateral; that the title to the subject property was
still in the process of being reconstituted and the loan was in fact meant for the development of the subject
lots into an eight-unit townhouse project.

We are not persuaded.

Contrary to petitioners claim that there were no buyers of the subject lots at the time of the constitution of
the mortgage, records show that private respondents Arevalo, Uy, Alfredo Lim and Santos Lim had entered
into contracts to sell with Garcia/TransAmerican as early as 1988 for their respective lots. In fact, they,
except for Uy, had already fully paid their townhouse units in 1988 without the certificates of title being
delivered to them. Garcia mortgaged the subject lots without their knowledge and consent.

While private respondents spouses Soriano bought the subject lots after the constitution of the mortgage in
favor of petitioner, the subject lots are, as early as 1988, subdivision lots which as defined under Section
2(e) of P.D. No. 957 to mean any of the lots, whether residential, commercial, industrial, or recreational in a
subdivision project20 are entitled to the protection of P.D. No. 957.

Under Section 18 of P.D. No. 957, it is provided that no mortgage on any unit or lot shall be made by the
owner or developer without prior written approval of the authority. Such approval shall not be granted unless
it is shown that the proceeds of the mortgage loan shall be used for the development of the condominium or
subdivision project and effective measures have been provided to ensure such utilization. As in the Union
Bank, the mortgage was constituted on the subject lots in favor of petitioner without the prior written
approval from the HLURB, thus HLURB has jurisdiction to rule on the validity of the mortgage.

Notwithstanding that petitioner became the owner of the subject lots by being the highest bidder in the
extrajudicial foreclosure sale, it must be remembered that it was first a mortgagee of the same. Since the lot
was mortgaged in violation of Section 18 of P.D. No. 957, HLURB has jurisdiction to declare the mortgage
void insofar as private respondents are concerned and to annul the foreclosure sale. In Far East Bank and
Trust Co. vs. Marquez,21 we held that Section 18 of P.D. No. 957 is a prohibitory law, and acts committed
contrary to it are void. We said:

In determining whether a law is mandatory, it is necessary to ascertain the legislative intent, as

stated by Sen. Arturo M. Tolentino, an authority on civil law:

There is no well-defined rule by which a mandatory or prohibitory law may, in all

circumstances, be distinguished from one which is directory, suppletory, or permissive. In
the determination of this question, the prime object is to ascertain the legislative
intention. Generally speaking, those provisions which are mere matter of form, or which are
not material, do not affect any substantial right, and do not relate to the essence of the thing
to be done, so that compliance is a matter of convenience rather than substance, are
considered to be directory. On the other hand, statutory provisions which relate to matters of
substance, affect substantial rights and are the very essence of the thing required to be
done, are regarded as mandatory.

In Philippine National Bank vs. Office of the President, we had occasion to mull over the intent of
P.D. No. 957 thus:

. . . [T]he unmistakable intent of the law [is] to protect innocent lot buyers from scheming
subdivision developers. As between these small lot buyers and the gigantic financial
institutions which the developers deal with, it is obvious that the law as an instrument of
social justice must favor the weak. Indeed, the petitioner Bank had at its disposal vast
resources with which it could adequately protect its loan activities, and therefore is presumed
to have conducted the usual "due diligence" checking and ascertaining (whether thru ocular
inspection or other modes of investigation) the actual status, condition, utilization and
occupancy of the property offered as collateral, . . . On the other hand, private respondents
obviously were powerless to discover attempt of the land developer to hypothecate the
property being sold to them. It was precisely in order to deal with this kind of situation that
P.D. No. 957 was enacted, its very essence and intendment being to provide a protective
mantle over helpless citizens who may fall prey to the razzmatazz of what P.D. No. 957
termed "unscrupulous subdivision and condominium sellers."

Concededly, P.D. No. 957 aims to protect innocent lot buyers. Section 18 of the decree
directly addresses the problem of fraud committed against buyers when the lot they have
contracted to purchase, and which they have religiously paid for, is mortgaged without their
knowledge. The avowed purpose of P.D. No. 957 compels the reading of Section 18 as
prohibitory acts committed contrary to it are void. Such construal ensures the attainment of
the purpose of the law: to protect lot buyers, so that they do not end up still homeless despite
having fully paid for their home lots with their hard-earned cash.22
Since the mortgage is void, HLURBs orders of the cancellation of the sheriffs certificate of sale, release of
the mortgaged lots and delivery of the corresponding titles to respondents who had fully paid the purchase
price of the units are but the necessary consequences of the invalidity of the mortgage for the protection of
private respondents.

Anent the second issue, petitioner contends that since the titles on their face were free from any claims,
liens and encumbrances at the time of the mortgage, it is not obliged under the law to go beyond the
certificates of title registered under the Torrens system and had every reason to rely on the correctness and
validity of those titles.

We are not convinced.

While the cases23 cited by petitioner held that the mortgagee is not under obligation to look beyond the
certificate of title when on its face, it was free from lien or encumbrances, the mortgagees therein were
considered in good faith as they were totally innocent and free from negligence or wrongdoing in the
transaction. In this case, petitioner knew that the loan it was extending to Garcia/TransAmerican was for the
purpose of the development of the eight-unit townhouses. Petitioners insistence that prior to the approval of
the loan, it undertook a thorough check on the property and found the titles free from liens and
encumbrances would not suffice. It was incumbent upon petitioner to inquire into the status of the lots which
includes verification on whether Garcia had secured the authority from the HLURB to mortgage the subject
lots. Petitioner failed to do so. We likewise find petitioner negligent in failing to even ascertain from Garcia if
there are buyers of the lots who turned out to be private respondents. Petitioners want of knowledge due to
its negligence takes the place of registration, thus it is presumed to know the rights of respondents over the
lot. The conversion of the status of petitioner from mortgagee to buyer-owner will not lessen the importance
of such knowledge.24 Neither will the conversion set aside the consequence of its negligence as a
mortgagee.25

Judicial notice can be taken of the uniform practice of banks to investigate, examine and assess the real
estate offered as security for the application of a loan. We cannot overemphasize the fact that the Bank
cannot barefacedly argue that simply because the title or titles offered as security were clean of any
encumbrances or lien, that it was thereby relieved of taking any other step to verify the over-reaching
implications should the subdivision be auctioned on foreclosure.26 We find apropos to cite our ruling in Far
East Bank and Trust Co. vs. Marquez, thus:27

Petitioner argues that it is an innocent mortgagee whose lien must be respected and protected,
since the title offered as security was clean of any encumbrances or lien. We do not agree.

. . . As a general rule, where there is nothing on the certificate of title to indicate any cloud or vice in
the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore
further than what the Torrens Title upon its face indicates in quest for any hidden defect or inchoate
right that may subsequently defeat his right thereto. This rule, however, admits of an exception as
where the purchaser or mortgagee has knowledge of a defect or lack of title in the vendor, or that he
was aware of sufficient facts to induce a reasonably prudent man to inquire into the status of the
property in litigation.

Petitioner bank should have considered that it was dealing with a [townhouse] project that was
already in progress. A reasonable person should have been aware that, to finance the project,
sources of funds could have been used other than the loan, which was intended to serve the
purpose only partially. Hence, there was need to verify whether any part of the property was already
the subject of any other contract involving buyers or potential buyers. In granting the loan, petitioner
bank should not have been content merely with a clean title, considering the presence of
circumstances indicating the need for a thorough investigation of the existence of buyers like
respondent. Having been wanting in care and prudence, the latter cannot be deemed to be an
innocent mortgagee.

Petitioner cannot claim to be a mortgagee in good faith. Indeed it was negligent, as found by the
Office of the President and by the CA. Petitioner should not have relied only on the representation
of the mortgagor that the latter had secured all requisite permits and licenses from the government
agencies concerned. The former should have required the submission of certified true copies of
those documents and verified their authenticity through its own independent effort.

Having been negligent in finding out what respondents rights were over the lot, petitioner must be
deemed to possess constructive knowledge of those rights.

As to the third issue, petitioner contends that private respondents were negligent in failing to register their
contracts to sell in accordance with Section 17 of P.D. No. 957; that private respondents unregistered
contracts to sell are binding only on them and Garcia/TransAmerican but not on petitioner which had no
actual or constructive notice of the sale at the time the mortgage was constituted.
We disagree.

Section 17 of P.D. No. 95728 provides that the seller shall register the contracts to sell with the Register of
Deeds of Quezon City. Thus, it is Garcias responsibility as seller to register the contracts and petitioner
should not blame private respondents for not doing so. As we have said earlier, considering petitioners
negligence in ascertaining the existence or absence of authority from HLURB for Garcia/TransAmerican to
mortgage the subject lots, petitioner cannot claim to be an innocent purchaser for value and in good
faith. Petitioner is bound by private respondents contracts to sell executed with Garcia/TransAmerican.

The last paragraph of Section 18 of P.D. No. 957 provides that respondents who have not yet paid in full
have the option to pay their installment for the lot directly to the mortgagee (petitioner) who is required to
apply such payments to the corresponding mortgage indebtedness secured by the particular lot or unit being
paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment
thereof. Thus, petitioner is obliged to accept the payment of remaining unpaid amortizations, without
prejudice to petitioner banks seeking relief against the subdivision developer.29

Notably, although no issue was taken on the fact that the case against Garcia/TransAmerican, the
developer/seller and mortgagor of the subject lots, was archived for failure to serve summons on him/it as
his whereabouts or the office could not be located, it must be stated that Garcia/TransAmerican is not an
indispensable party since a final determination on the validity of the mortgage over the subject lots can be
rendered against petitioner. Thus, the absence of Garcia/TransAmerican did not hamper the OAALA from
resolving the dispute between private respondents and petitioner.

In China Bank vs. Oliver,30 we held that the mortgagor, who allegedly misrepresented herself to be
Mercedes M. Oliver, the registered owner of TCT No. S-50195, is not an indispensable party in a case filed
by a person claiming to be the true registered owner, for annulment of mortgage and cancellation of title
against the mortgagee, China Bank. We found therein that even without the mortgagor, the true Mercedes
Oliver can prove in her complaint that she is the real person referred in the title and she is not the same
person using the name who entered into a deed of mortgage with the mortgagee, China Bank.

In the present case, private respondents, in their complaint, alleged that the mortgage was constituted
without the prior written approval of the HLURB which is in violation of Section 18 of P.D. No.
957. Petitioners admission that it granted and released the loan without notifying the HLURB because of its
belief that it was not necessary to do so, is fatal to petitioners defense. As a consequence thereof, the
mortgage constituted in favor of petitioner can be declared invalid as against private respondents even
without the presence of Garcia/TransAmerican. It is worthy to mention that the assailed decision was
rendered merely against petitioner and had not made any pronouncement as to Garcia/TransAmericans
liability to private respondents for the non-completion of the projects; or to herein petitioner, as mortgagee.

The present case merely involves the liability of petitioner bank to private respondents as buyers of the lots
and townhouse units.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

G.R. No. 180394 September 29, 2008

MARJORIE B. CADIMAS, by her Attorney-In-Fact, VENANCIO Z. ROSALES,

vs.
MARITES CARRION and GEMMA HUGO, Respondents.

DECISION

TINGA, J.:

This is a petition for review on certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure, assailing
the Decision2 and Resolution3 of the Court of Appeals in CA-G.R. SP No. 98572. The appellate court
set aside two orders4 of the Regional Trial Court (RTC), Branch 85, Quezon City issued in Civil Case
No. Q-04-53581 on the ground that the trial court had no jurisdiction over the case.

The instant petition stemmed from the complaint5 for accion reivindicatoria and damages filed by
petitioner Marjorie B. Cadimas, through her attorney-in-fact, Venancio Z. Rosales, against respondents
Marites Carrion and Gemma Hugo. The complaint was docketed as Civil Case No. Q-04-53581 and
raffled to Branch 85 of the RTC of Quezon City.

In the complaint, petitioner averred that she and respondent Carrion were parties to a Contract To Sell
dated 4 August 2003, wherein petitioner sold to respondent Carrion a town house located at Lot 4-F-1-
12 No. 23 Aster Street, West Fairview Park Subdivision, Quezon City for the sum ofP330,000.00 to be
paid in installments. According to petitioner, Carrion had violated paragraph 8 of said contract when she
transferred ownership of the property to respondent Hugo under the guise of a special power of
attorney, which authorized the latter to manage and administer the property for and in behalf of
respondent Carrion. Allegedly, petitioner asked respondent Carrion in writing to explain the alleged
violation but the latter ignored petitioners letter, prompting petitioner to demand in writing that Carrion
and Hugo vacate the property and to cancel the contract.6

On 28 October 2004, petitioner filed a Motion To Declare Defendant Marites Carrion In Default,7alleging
that despite the service of summons and a copy of the complaint, respondent Carrion failed to file a
responsive pleading within the reglementary period.

Respondent Hugo filed a Motion To Dismiss8 on her behalf and on behalf of respondent Carrion on 18
November 2004, citing the grounds of lack of jurisdiction to hear the case on the part of the RTC and
estoppel and/or laches on the part of petitioner. Respondent Hugo argued that the Housing and Land
Use Regulatory Board (HLURB) has jurisdiction over the complaint because ultimately, the sole issue
to be resolved was whether petitioner, as the owner and developer of the subdivision on which the
subject property stood, was guilty of committing unsound real estate business practices.

In the same motion, respondent Hugo averred that the RTC had not acquired jurisdiction over the
person of respondent Carrion for not complying with Section 16, Rule 14 of the Rules of Court on the
proper service of summons on a non-resident defendant. However, attached to the motion was a
special power of attorney, whereby respondent Carrion had authorized respondent Hugo, among
others, to manage and administer the subject property and to prosecute and defend all suits to protect
her rights and interest in said property.9

After petitioner filed a comment on the motion to dismiss, the RTC issued an Omnibus Order10 on 21
March 2005, which denied the motion to dismiss. The RTC held that the courts jurisdiction is not
determined by the defenses set up in the answer or the motion to dismiss.

In the same omnibus order, the RTC ruled that summons was served properly, thus, the court had
acquired jurisdiction over respondent Carrion. The RTC noted that respondent Hugos failure to
disclose at the outset that she was equipped with a special power of attorney was an act constitutive of
misleading the court. Thus, the RTC declared respondent Carrion in default, directed petitioner to
present evidence ex-parte against respondent Carrion, and respondent Hugo to file an answer.

On 18 April 2005, respondent Hugo filed an answer on her behalf and as the attorney-in-fact of
respondent Carrion.11 The answer pleaded a compulsory counterclaim for damages. The following day,
petitioner presented evidence ex-parte against respondent Carrion. Thus, on 22 April 2005, respondent
Hugo sought a reconsideration of the omnibus order, praying for the dismissal of the complaint, the
cancellation of the presentation of evidence ex-parte, the lifting of the order of default against
respondent Carrion and the issuance of an order directing the extraterritorial service of summons on
respondent Carrion.12

On 17 January 2007, the RTC issued an order, upholding its jurisdiction over petitioners complaint.
Citing the interest of substantial justice, the RTC lifted the order of default against respondent Carrion
and set the pre-trial conference of the case.13

However, respondents elevated the matter to the Court of Appeals via a special civil action for
certiorari, praying that the Omnibus Order dated 21 March 2005 and Order dated 17 January 2007
issued by Judge Teodoro T. Riel be reversed and set aside and that the complaint in Civil Case No. Q-
04-53581 be dismissed for lack of jurisdiction.

On 27 September 2007, the Court of Appeals rendered the assailed Decision granting respondents
petition for certiorari. The appellate court set aside the assailed orders of the RTC and ordered the
dismissal of petitioners complaint for lack of jurisdiction. In its Resolution dated 9 November 2007, the
Court of Appeals denied petitioners motion for reconsideration.

Hence, the instant petition, raising the following arguments: (1) based on the allegations in the
complaint, the RTC has jurisdiction over Civil Case No. Q-04-53581; (2) in any case, respondents have
expressly submitted to or recognized the jurisdiction of the RTC by filing an answer with counterclaim;
and (3) respondents erroneously availed of a Rule 65 petition instead of filing a timely appeal from the
order denying their motion to dismiss.14

Essentially, petitioner argues that based on the allegations in the complaint and the reliefs sought, the
RTC has jurisdiction over the matter. In any case, the compulsory counterclaim pleaded in the answer
of respondents was an express recognition on their part of the jurisdiction of the RTC over the
complaint for accion reivindicatoria, petitioner adds.

The petition is meritorious.

The nature of an action and the jurisdiction of a tribunal are determined by the material allegations of
the complaint and the law at the time the action was commenced. Jurisdiction of the tribunal over the
subject matter or nature of an action is conferred only by law and not by the consent or waiver upon a
court which, otherwise, would have no jurisdiction over the subject matter or nature of an action.15

An examination of Section 1 of Presidential Decree (P.D.) No. 1344,16 which enumerates the regulatory
functions of the HLURB,17

readily shows that its quasi-judicial function is limited to hearing only the following specific cases:

SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in
addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall
have exclusive jurisdiction to hear and decide cases of the following nature:

A. Unsound real estate business practices;

B. Claims involving refund and any other claims filed by subdivision lot or condominium unit
buyer against the project owner, developer, dealer, broker, or salesman; and

C. Cases involving specific performance of contractual and statutory obligations filed by buyers
of subdivision lot or condominium unit against the owner, developer, dealer or salesman.

The aforequoted provision must be read in the light of the statutes preamble or the introductory or
preparatory clause that explains the reasons for its enactment or the contextual basis for its
interpretation. The scope of the regulatory authority thus lodged in the National Housing Authority
(NHA) [now HLURB] is indicated in the second and third preambular paragraphs of the statute which
provide:

"WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators,
and/or sellers have reneged on their representations and obligations to provide and maintain properly
subdivision roads, drainage, sewerage, water systems, lighting systems and other similar basic
requirements, thus endangering the health and safety of home and lot buyers;

WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations
perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to
deliver titles to the buyers or titles free from liens and encumbrances, and to pay real estate taxes, and
fraudulent sales of the same subdivision lots to different innocent purchasers for value ."18

The boom in the real estate business all over the country resulted in more litigation between subdivision
owners/developers and lot buyers with the issue of the jurisdiction of the NHA or the HLURB over such
controversies as against that of regular courts. In the cases that reached this Court, the ruling has
consistently been that the NHA or the HLURB has jurisdiction over complaints arising from contracts
between the subdivision developer and the lot buyer or those aimed at compelling the subdivision
developer to comply with its contractual and statutory obligations to make the subdivision a better place
to live in.19

We agree with the ruling of the RTC that it has jurisdiction over the case based on the allegations of the
complaint. Nothing in the complaint or in the contract to sell suggests that petitioner is the proper party
to invoke the jurisdiction of the HLURB. There is nothing in the allegations in the complaint or in the
terms and conditions of the contract to sell that would suggest that the nature of the controversy calls
for the application of either P.D. No. 957 or P.D. No. 1344 insofar as the extent of the powers and
duties of the HLURB is concerned.

Note particularly paragraphs (b) and (c) of Sec. 1, P.D. No. 1344 as worded, where the HLURBs
jurisdiction concerns cases commenced by subdivision lot or condominium unit buyers. As to paragraph
(a), concerning "unsound real estate practices," the logical complainants would be the buyers and
customers against the sellers (subdivision owners and developers or condominium builders and
realtors), and not vice versa.20

The complaint does not allege that petitioner is a subdivision lot buyer. The contract to sell does not
contain clauses which would indicate that petitioner has obligations in the capacity of a subdivision lot
developer, owner or broker or salesman or a person engaged in real estate business. From the face of
the complaint and the contract to sell, petitioner is an ordinary seller of an interest in the subject
property who is seeking redress for the alleged violation of the terms of the contract to sell. Petitioners
complaint alleged that a contract to sell over a townhouse was entered into by and between petitioner
and respondent Carrion and that the latter breached the contract when Carrion transferred the same to
respondent Hugo without petitioners consent.21 Thus, petitioner sought

the cancellation of the contract and the recovery of possession and ownership of the town house.
Clearly, the complaint is well within the jurisdiction of the RTC.

In Javellana v. Hon. Presiding Judge, RTC, Branch 30, Manila,22 the Court affirmed the jurisdiction of
the RTC over the complaint for accion publiciana and sum of money on the ground that the complaint
did not allege that the subject lot was part of a subdivision project but that the sale was an ordinary sale
on an installment basis. Even the mere assertion that the defendant is a subdivision developer or that
the subject lot is a subdivision lot does not automatically vest jurisdiction on the HLURB. On its face,
the complaint must sufficiently describe the lot as a subdivision lot and sold by the defendant in his
capacity as a subdivision developer to fall within the purview of P.D. No. 957 and P.D. No. 1344 and
thus within the exclusive jurisdiction of the HLURB.23

In their comment, respondents cite Antipolo Realty Corp. v. National Housing Authority,24 to bolster the
argument that the HLURB has jurisdiction over controversies involving the determination of the rights of
the parties under a contract to sell a subdivision lot. Antipolo Realty is not squarely applicable to the
instant controversy. The issue in said case called for the determination of whether the developer
complied with its obligations to complete certain specified improvements in the subdivision within the
specified period of time, a case that clearly falls under Section 1, paragraph (c) of P.D. No. 1344.

In the instances where the jurisdiction of the HLURB was upheld, the allegations in the complaint
clearly showed that the case involved the determination of the rights and obligations of the parties in a
sale of real estate under P.D. No. 957,25 or the complaint for specific performance sought to compel the
subdivision developer to comply with its undertaking under the contract to sell,26 or the claim by the
subdivision developer would have been properly pleaded as a counterclaim in the HLURB case filed by
the buyer against the developer to avoid splitting causes of action.27

The statement in Suntay v. Gocolay28 to the effect that P.D. No. 957 encompasses all questions
regarding subdivisions and condominiums, which was cited by the Court of Appeals in the assailed
decision, is a mere obiter dictum. As a matter of fact, the Court in Suntay nullified the orders issued by
the HLURB over the action for the annulment of an auction sale, cancellation of notice of levy and
damages on the ground of lack of jurisdiction. P.D. No. 957 and P.D. No. 1344 were not the applicable
laws because the action was brought against a condominium buyer and not against the developer,
seller, or broker contemplated under P.D. No. 1344. The action likewise involved the determination of
ownership over the disputed condominium unit, which by its nature does not fall under the classes of
disputes cognizable by the HLURB under Section 1 of P.D. No. 1344.

The Court of Appeals held that the provision in the contract to sell mandating membership of the buyer
of the housing unit in a housing corporation was a strong indication that the property purchased by
respondent Carrion from petitioner was part of a tract of land subdivided primarily for residential
purposes. Thus, the appellate court concluded that the HLURB has jurisdiction over the controversy
because the property subject thereof was part of a subdivision project.

Not every controversy involving a subdivision or condominium unit falls under the competence of the
HLURB29 in the same way that the mere allegation of relationship between the parties, i.e., that of being
subdivision owner/developer and subdivision lot buyer, does not automatically vest jurisdiction in the
HLURB. For an action to fall within the exclusive jurisdiction of the HLURB, the decisive element is the
nature of the action as enumerated in Section 1 of P.D. No. 1344.30 Notably, inSpouses Dela Cruz v.
Court of Appeals,31 the Court upheld the jurisdiction of the RTC over the complaint for cancellation of
the contract to sell of a subdivision house and lot because the case did not fall under any of the cases
mentioned in Section 1, P.D. No. 1344. In interpreting said provision, the Court explained, thus:

On this matter, we have consistently held that the concerned administrative agency, the National
Housing Authority (NHA) before and now the HLURB, has jurisdiction over complaints aimed at
compelling the subdivision developer to comply with its contractual and statutory obligations.

For their part, respondents claim that the resolution of the case ultimately calls for the interpretation of
the contract to sell and the determination of whether petitioner is guilty of committing unsound real
estate business practices, thus, the proper forum to hear and decide the matter is the HLURB. The
argument does not impress.
It is an elementary rule of procedural law that jurisdiction of the court over the subject matter is
determined by the allegations of the complaint irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted therein. As a necessary consequence, the jurisdiction
of the court cannot be made to depend upon the defenses set up in the answer or upon the motion to
dismiss, for otherwise, the question of jurisdiction would almost entirely depend upon the defendant.
What determines the jurisdiction of the court is the nature of the action pleaded as appearing from the
allegations in the complaint. The averments in the complaint and the character of the relief sought are
the matters to be consulted.32 Thus, the allegations in respondents motion to dismiss on the unsound
real estate business practices allegedly committed by petitioner, even if proved to be true, cannot serve
to oust the RTC of its jurisdiction over actions for breach of contract and damages which has been
conferred to it by law.

WHEREFORE, the instant petition for review on certiorari is GRANTED and the Decision dated 27
September 2007 and Resolution dated 9 November 2007 of the Court of Appeals in CA-G.R. SP No.
98572 are REVERSED and SET ASIDE. The orders dated 21 March 2005 and 17 January 2007 of the
Regional Trial Court, Branch 85, Quezon City in Civil Case No. Q-04-53581 are REINSTATED. The
Regional Trial Court is ORDERED to resume the proceedings in and decide Civil Case No. Q-04-53581
with deliberate speed. Costs against respondents.

SO ORDERED.

G.R. No. 131683 June 19, 2000

JESUS LIM ARRANZA; LORENZO CINCO; QUINTIN TAN; JOSE ESCOBAR; ELBERT FRIEND;
CLASSIC HOMES VILLAGE ASSOCIATION, INC.; BF NORTHWEST HOMEOWNERS' ASSOCIATION,
INC.; and UNITED BF HOMEOWNERS' ASSOCIATIONS, INC., petitioners,
vs.
B.F. HOMES, INC. AND THE HONORABLE COURT OF APPEALS, respondent.

DAVIDE, JR., C.J.:

For resolution in this petition is the issue of whether it is the Securities and Exchange Commission (SEC) or
the Housing and Land Use Regulatory Board (HLURB) that has jurisdiction over a complaint filed by
subdivision homeowners against a subdivision developer that is under receivership for specific performance
regarding basic homeowners' needs such as water, security and open spaces.

Respondent BF Homes, Inc. (BFHI), is a domestic corporation engaged in developing subdivisions and
selling residential lots. One of the subdivisions that respondent developed was the BF Homes Paraaque
Subdivision, which now sprawls across not only a portion of the City of Paraaque but also those of the
adjoining cities of Las Pias and Muntinlupa.

When the Central Bank ordered the closure of Banco Filipino, which had substantial investments in
respondent BFHI, respondent filed with the SEC a petition for rehabilitation and a declaration that it was in a
state of suspension of payments. On 18 March 1985, the SEC placed respondent under a management
committee. Upon that committee's dissolution on 2 February 1988, the SEC appointed Atty. Florencio B.
Orendain as a Receiver, and approved a Revised Rehabilitation Plan.

As a Receiver, Orendain instituted a central security system and unified the sixty-five homeowners'
associations into an umbrella homeowners' association called United BF Homeowners' Associations, Inc.
(UBFHAI), which was thereafter incorporated with the Home Insurance and Guaranty Corporation (HIGC).1

In 1989, respondent, through Orendain, turned over to UBFHAI control and administration of security in the
subdivision, the Clubhouse and the open spaces along Concha Cruz Drive. Through the Philippine
Waterworks and Construction Corporation (PWCC), respondent's managing company for waterworks in the
various BF Homes subdivisions, respondent entered into an agreement with UBFHAI for the annual
collection of community assessment fund and for the purchase of eight new pumps to replace the over-
capacitated pumps in the old wells.

On 7 November 1994, Orendain was relieved by the SEC of his duties as a Receiver, and a new Board of
Receivers consisting of eleven members of respondent's Board of Directors was appointed for the
implementation of Phases II and III of respondent's rehabilitation.2 The new Board, through its Chairman,
Albert C. Aguirre, revoked the authority given by Orendain to use the open spaces at Concha Cruz Drive
and to collect community assessment funds; deferred the purchase of new pumps; recognized BF
Paraaque Homeowners' Association, Inc., (BFPHAI) as the representative of all homeowners in the
subdivision; took over the management of the Clubhouse; and deployed its own security guards in the
subdivision.
Consequently, on 5 July 1995, herein petitioners filed with the HLURB a class suit "for and in behalf of the
more than 7,000 homeowners in the subdivision" against respondent BFHI, BF Citiland Corporation, PWCC
and A.C. Aguirre Management Corporation "to enforce the rights of purchasers of lots" in BF Homes
Paraaque3. They alleged that:

1. The forty (40) wells, mostly located at different elevations in Phases 3 and 4 of the subdivision
and with only twenty-seven (27) productive, are the sources of the inter-connected water system in
the 765-hectare subdivision;

2. There is only one drainage and sewer system;

3. There is one network of roads;

4. There are eight (8) entry and exit points to the subdivision and from three (3) municipalities (now
cities), a situation obtaining in this subdivision only and nowhere else;

5. There was no security force for the entire subdivision until 1988;

6. There are not enough open spaces in the subdivision in relation to the total land area developed;
and whatever open spaces are available have been left unkempt, undeveloped and neglected;

7. There are no zoning guidelines which resulted in unregulated constructions of structures and the
proliferation of business establishments in residential areas; and

8. The BFPHAI became "moribund" sometime in 1980 on account of its failure to cope with the
delivery of basic services except for garbage collection.

Petitioners raised "issues" on the following basic needs of the homeowners: rights-of-way; water; open
spaces; road and perimeter wall repairs; security; and the interlocking corporations that allegedly made it
convenient for respondent "to compartmentalize its obligations as general developer, even if all of these are
hooked into the water, roads, drainage and sewer systems of the subdivision."4 Thus, petitioner prayed that:

A. A cease-and-desist order from selling any of the properties within the subdivision be issued
against respondent BFHI, BF Citi, ACAMC, and/or any and all corporations acting as
surrogates/alter-egos, sister companies of BFHI and/or its stockholders until the warranties, facilities
and infrastructures shall have been complied with or put up (and) the advances of UBFHAI
reimbursed, otherwise, to cease and desist from rescinding valid agreements or contracts for the
benefit of complainants, or committing acts diminishing, duliting or otherwise depriving complainants
of their rights under the law as homeowners;

B. After proper proceedings the bond or deposit put up by respondent BF Homes, Inc. be forfeited in
favor of petitioners;

C. Respondent BFHI be ordered to immediately turnover the roads, open spaces, and other facilities
built or put up for the benefit of lot buyers/homeowners in the subdivision to complainant UBFHAI as
representative of all homeowners in BF Homes Paraaque, free from all liens, encumbrances, and
taxes in arrears;

D. If the open spaces in the subdivision are not sufficient as required by law, to impose said
penalties/sanctions against BFHI or the persons responsible therefor;

E. Order the reimbursement of advances made by UBFHAI;

F. Turn over all amounts which may have been collected from users' fees of the stop of open space
at Concha Cruz Drive;

G. Order PWCC to effect and restore 24-hour water supply to all residents by adding new wells
replacing over-capacitated pumps and otherwise improving water distribution facilities;

H. Order PWCC to continue collecting the Community Development Fund and remit all amounts
collected to UBFHAI;

I. Order BFHI to immediately withdraw the guards at the clubhouse and the 8 entry and exit points to
the subdivision, this being an act of usurpation and blatant display of brute force;

J. The appropriate penalties/sanctions be imposed against BF Citi, ACAMC or any other interlocking
corporation of BFHI or any of its principal stockholders in respect of the
 diminution/encroaching/violation on the rights of the residents of the subdivision to enjoy/avail of the
facilities/services due them; and

K. Respondents be made to pay attorney's fees and the costs of this suit.5

In its answer, respondent claimed that (a) it had complied with its contractual obligations relative to the
subdivision's development; (b) respondent could not be compelled to abide by agreements resulting from
Orendain's ultra viresacts; and (c) petitioners were precluded from instituting the instant action on account of
Section 6(c) of P.D. No. 902-A providing for the suspension of all actions for claims against a corporation
under receivership. Respondent interposed counterclaims and grayed for the dismissal of the complaint.6

Petitioners thereafter filed an urgent motion for a cease-and-desist/status quo order. Acting on this motion,
HLURB Arbiter Charito M. Bunagan issued a 20-day temporary restraining order to avoid rendering nugatory
and ineffectual any judgment that could be issued in the case;7 and subsequently, an Order granting
petitioners' prayer for preliminary injunction was issued

enjoining and restraining respondent BF Homes, Incorporated, its agents and all persons acting for
and in its behalf from taking over/administering the Concha Garden Row, from issuing stickers to
residents and non-residents alike for free or with fees, from preventing necessary improvements and
repairs of infrastructures within the authority and administration of complainant UBFHAI, and from
directly and indirectly taking over security in the eight (8) exit points of the subdivision or in any
manner interfering with the processing and vehicle control in subject gates and otherwise to remove
its guards from the gates upon posting of a bond of One Hundred Thousand Pesos (P100,000.00)
which bond shall answer for whatever damages respondents may sustain by reason of the issuance
of the writ of preliminary injunction if it turns out that complainant is not entitled thereto.8

Respondent thus filed with the Court of Appeals a petition for certiorari and prohibition docketed as CA-G.R.
SP No. 39685. It contended in the main that the HLURB acted "completely without jurisdiction" in issuing the
Order granting the writ of preliminary injunction considering that inasmuch as respondent is under
receivership, the "subject matter of the case is one exclusively within the jurisdiction of the SEC."9

On 28 November 1997, the Court of Appeals rendered a decision 10 annulling and setting aside the writ of
preliminary injunction issued by the HLURB. It ruled that private respondents' action may properly be
regarded as a "claim" within the contemplation of PD No. 902-A which should be placed on equal footing
with those of petitioners' other creditor or creditors and which should be filed with the Committee of
Receivers. In any event, pursuant to Section 6(c) of P.D. No. 902-A and SEC's Order of 18 March 1985,
petitioners' action against respondent, which is under receivership, should be suspended.

Hence, petitioners filed the instant petition for review on certiorari. On 26 January 1998, the Court issued a
temporary restraining order (TRO) enjoining respondent, its officers, representatives and persons acting
upon its orders from

(a) taking over/administering the Concha Garden Row; (b) issuing stickers to residents and non-
residents alike for free or with fees; (c) preventing necessary improvements and repairs of
infrastructures within the authority and administration of complainant United BF Homeowners'
Association, Inc. (UBFHAI); (d) directly and indirectly taking over security in the eight (8) exit points
of all of BF Homes Paraaque Subdivision or in any manner interfering with the processing and
vehicle control in the subject gates; and (e) otherwise to remove its guards from the gates. . . . . 11

Respondent's motion to lift the TRO was denied.

At the hearing on 1 July 1998, the primary issue in this case was defined as "which body has jurisdiction
over petitioners' claims, the Housing and Land Use Regulatory Board (HLURB) or the Securities and
Exchange Commission (SEC)?" The collateral issue to be addressed is "assuming that the HLURB has
jurisdiction, may the proceedings therein be suspended pending the outcome of the receivership before the
SEC?"

For their part, petitioners argue that the complaint referring to rights of way, water, open spaces, road and
perimeter wall repairs, security and respondent's interlocking corporations that facilitated circumvention of its
obligation involves unsound real estate practices. The action is for specific performance of a real estate
developers' obligations under P.D. No. 957, and the relief sought is revocation of the subdivision project's
registration certificate and license to sell. These issues are within the jurisdiction of the HLURB. Even if
respondent is under receivership, its obligations as a real estate developer under P.D. No. 957 are not
suspended. Section 6(c) of P.D. No. 902-A, as amended by P.D. No. 957, on "suspension of all actions for
claims against corporations" refers solely to monetary claims which are but incidental to petitioner's
complaints against BFHI, and if filed elsewhere than the HLURB, it would result to splitting causes of action.
Once determined in the HLURB, however, the monetary awards should be submitted to the SEC as
established claims. Lastly, the acts enjoined by the HLURB are not related to the disposition of BFHI's
assets as a corporation undergoing its final phase of rehabilitation.
On the other hand, respondent asserts that the SEC, not the HLURB, has jurisdiction over petitioners'
complaint based on the contracts entered into by the former receiver. The SEC, being the appointing
authority, should be the one to take cognizance of controversies arising from the performance of the
receiver's duties. Since respondent's properties are under the SEC's custodia legis, they are exempt from
any court process.

Jurisdiction is the authority to hear and determine a cause the right to act in a case. 12 It is conferred by
law and not by mere administrative policy of any court or tribunal. 1 It is determined by the averments of the
complaint and not by the defense contained in the answer. 14 Hence, the jurisdictional issue involved here
shall be determined upon an examination of the applicable laws and the allegations of petitioners' complaint
before the HLURB.

Presidential Decree No. 957 (The Subdivision and Condominium Buyers' Protective Decree) was issued on
12 July 1976 in answer to the popular call for correction of pernicious practices of subdivision owners and/or
developers that adversely affected the interests of subdivision lot buyers. Thus, one of the "whereas
clauses" of P.D. No. 957 states:

WHEREAS, numerous reports reveal that many real estate subdivision owners, developers,
operators, and/or sellers have reneged on their representations and obligations to provide and
maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other
similar basic requirements, thus endangering the health and safety of home and lot buyers. . . .

Sec. 3 of P.D. No. 957 empowered the National Housing Authority (NHA) with the "exclusive jurisdiction to
regulate the real estate trade and business." On 2 April 1978, P.D. No. 1344 was issued to expand the
jurisdiction of the NHA to include the following:

Sec. 1. In the exercise of its functions to regulate the real estate trade and business and in addition
to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have
exclusive jurisdiction to hear and decide cases of the following nature:

A. Unsound real estate business practices;

B. Claims involving refund and any other claims filed by subdivision lot or condominium unit
buyer against the project owner, developer, dealer, broker or salesman; and

C. Cases involving specific performance of contractual and statutory obligations filed by

buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or
salesman. (Emphasis supplied.)

Thereafter, the regulatory and quasi-judicial functions of the NHA were transferred to the Human
Settlements Regulatory Commission (HSRC) by virtue of Executive Order No. 648 dated 7 February 1981.
Section 8 thereof specifies the functions of the NHA that were transferred to the HSRC including the
authority to hear and decide "cases on unsound real estate business practices; claims involving refund filed
against project owners, developers, dealers, brokers or salesmen and cases of specific performance."
Executive Order No. 90 dated 17 December 1986 renamed the HSRC as the Housing and Land Use
Regulatory Board (HLURB). 15

The boom in the real estate business all over the country resulted in more litigation between subdivision
owners/developers and lot buyers with the issue of the jurisdiction of the NHA or the HLURB over such
controversies as against that of regular courts. In the cases 16 that reached this Court, the ruling has
consistently been that the NHA or the HLURB has jurisdiction over complaints arising from contracts
between the subdivision developer and the lot buyer or those aimed at compelling the subdivision developer
to comply with its contractual and statutory obligations to make the subdivision a better place to live in.

Notably, in Antipolo Realty Corporation v. National Housing Authority, 17 one of the issues raised by the
homeowners was the failure of Antipolo Realty to develop the subdivision in accordance with its
undertakings under the contract to sell. Such undertakings include providing the subdivision with concrete
curbs and gutters, underground drainage system, asphalt paved roads, independent water system, electrical
installation with concrete posts, landscaping and concrete sidewalks, developed park or amphitheater and
24-hour security guard service. The Court held that the complaint filed by the homeowners was within the
jurisdiction of the NHA.1avvphi1

Similarly, in Alcasid v. Court of Appeals, 18 the Court ruled that the HLURB, not the RTC, has jurisdiction
over the complaint of lot buyers for specific performance of alleged contractual and statutory obligations of
the defendants, to wit, the execution of contracts of sale in favor of the plaintiffs and the introduction in the
disputed property of the necessary facilities such as asphalting and street lights.
In the case at bar, petitioners' complaint is for specific performance to enforce their rights as purchasers of
subdivision lots as regards rights of way, water, open spaces, road and perimeter wall repairs, and security.
Indisputably then, the HLURB has jurisdiction over the complaint.

The fact that respondent is under receivership does not divest the HLURB of that jurisdiction. A receiver is a
1aw phil

person appointed by the court, or in this instance, by a quasi-judicial administrative agency, in behalf of all
the parties for the purpose of preserving and conserving the property and preventing its possible destruction
or dissipation, if it were left in the possession of any of the parties. 19 It is the duty of the receiver to
administer the assets of the receivership estate; and in the management and disposition of the property
committed to his possession, he acts in a fiduciary capacity and with impartiality towards all interested
persons. 20 The appointment of a receiver does not dissolve a corporation, nor does it interfere with the
exercise of its corporate rights. 21 In this case where there appears to be no restraints imposed upon
respondent as it undergoes rehabilitation receivership, 22 respondent continues to exist as a corporation and
hence, continues or should continue to perform its contractual and statutory responsibilities to petitioners as
homeowners.

Receivership is aimed at the preservation of, and at making more secure, existing rights; it cannot be used
as an instrument for the destruction of those rights. 2

No violation of the SEC order suspending payments to creditors would result as far as petitioners' complaint
before the HLURB is concerned. To reiterate, what petitioners seek to enforce are respondent's obligations
as a subdivision developer. Such claims are basically not pecuniary in nature although it could incidentally
involve monetary considerations. All that petitioners' claims entail is the exercise of proper subdivision
management on the part of the SEC-appointed Board of Receivers towards the end that homeowners shall
enjoy the ideal community living that respondent portrayed they would have when they bought real estate
from it.

Neither may petitioners be considered as having "claims" against respondent within the context of the
followingproviso of Section 6 (c) of P.D. No. 902-A, as amended by P.D. Nos. 1653, 1758 and 1799, to
warrant suspension of the HLURB proceedings:

[U]pon appointment of a management committee, rehabilitation receiver, board or body, pursuant to

this Decree, all actions for claims against corporations, partnerships or associations under
management or receivership pending before any court, tribunal, board or body shall be suspended
accordingly. (Emphasis supplied.)

In Finasia Investments and Finance Corporation v. Court of Appeals, 24 this Court defined and explained the
term "claim" in Section 6 (c) of P.D. No. 902-A, as amended, as follows:

We agree with the public respondent that the word "claim" as used in Sec. 6 (c) of P.D. 902-A, as
amended, refers to debts or demands of a pecuniary nature. It means "the assertion of a right to
have money paid. It is used in special proceedings like those before administrative court, on
insolvency." (Emphasis supplied.)

Hence, in Finansia Investments, the Court held that a civil case to nullify a special power of attorney
because the principal's signature was forged should not be suspended upon the appointment of a receiver
of the mortgagee to whom a person mortgaged the property owned by such principal. The Court ruled that
the cause of action in that civil case "does not consist of demand for payment of debt or enforcement of
pecuniary liability." It added:

It has nothing to do with the purpose of Section 6 (c) of P.D. 902-A, as amended, which is to prevent
a creditor from obtaining an advantage or preference over another with respect to action against
corporation, partnership, association under management or receivership and to protect and preserve
the rights of party litigants as well as the interest of the investing public or creditors. Moreover, a final
verdict on the question of whether the special power of attorney in question is a forgery or not will
not amount to any preference or advantage to Castro who was not shown to be a creditor of
FINASIA. 25

In this case, under the complaint for specific performance before the HLURB, petitioners do not aim to
enforce a pecuniary demand. Their claim for reimbursement should be viewed in the light of respondent's
alleged failure to observe its statutory and contractual obligations to provide petitioners a "decent human
settlement" and "ample opportunities for improving their quality of life." 26 The HLURB, not the SEC, is
equipped with the expertise to deal with that matter.

On the other hand, the jurisdiction of the SEC is defined by P.D. No. 902-A, as amended, as follows:

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with it as
 expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to
hear and decide cases involving:

a) Devices or schemes employed by or any act of the board of directors, business

associates, its officers or partners, amounting to fraud and misrepresentation which may be
detrimental to the interest of the public and/or of the stockholders, partners, members of
associations or organizations registered with the Commission;

b) Controversies arising out of intra-corporate or partnership relations, between and among

stockholders, members of associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members, or associates,
respectively; and between such corporation, partnership or association and the State insofar
as it concerns their individual franchise or right to exist as such entity; [and]

c) Controversies in the election or appointments of directors, trustees, officers, or managers

of such corporation, partnerships or associations.

For the SEC to acquire jurisdiction over any controversy under these provisions, two elements must be
considered: (1) the status or relationship of the parties; and (2) the nature of the question that is the subject
of their controversy.27 The first element requires that the controversy must arise "out of intra-corporate or
partnership relations between and among stockholders, members or associates; between any or all of them
and the corporation, partnership or association of which they are stockholders, members or associates,
respectively; and between such corporation, partnership or association and the State in so far as it concerns
their individual franchises." 28 Petitioners are not stockholders, members or associates of respondent. They
are lot buyers and now homeowners in the subdivision developed by the respondent.

The second element requires that the dispute among the parties be intrinsically connected with the
regulation or the internal affairs of the corporation, partnership or association. 29 The controversy in this case
is remotely related to the "regulation" of respondent corporation or to respondent's "internal affairs."

It should be stressed that the main concern in this case is the is the issue of jurisdiction over petitioners'
complaint against respondent for specific performance. P.D. No. 902-A, as amended, defines the jurisdiction
of the SEC; while P.D. No. 957, as amended, delineates that of the HLURB. These two quasi-
judicial agencies exercise functions that are distinct from each other. The SEC has authority over the
operation of all kinds of corporations, partnerships or associations with the end in view of protecting the
interests of the investing public and creditors. On the other hand, the HLURB has jurisdiction over matters
relating to observance of laws governing corporations engaged in the specific business of development of
subdivisions and condominiums. The HLURB and the SEC being bestowed with distinct powers and
functions, the exercise of those functions by one shall not abate the performance by the other of its own
functions. As respondent puts it, "there is no contradiction between P.D. No. 902-A and P.D. No. 957." 30

What complicated the jurisdictional issue in this case is the fact that petitioners are primarily praying for the
retention of respondent's obligations under the Memorandum of Agreement that Receiver Orendain had
entered into with them but which the present Board of Receivers had revoked.

In Figueroa v. SEC, 31 this Court has declared that the power to overrule or revoke the previous acts of the
management or Board of Directors of the entity under receivership is within a receiver's authority, as
provided for by Section 6 (d) (2) of P.D. No. 902-A. Indeed, when the acts of a previous receiver or
management committee prove disadvantageous or inimical to the rehabilitation of a distressed corporation,
the succeeding receiver or management committee may abrogate or cast aside such acts. However, that
prerogative is not absolute. It should be exercised upon due consideration of all pertinent and relevant laws
when public interest and welfare are involved. The business of developing subdivisions and corporations
being imbued with public interest and welfare, any question arising from the exercise of that prerogative
should be brought to the proper agency that has technical know-how on the matter.

P.D. No. 957 was promulgated to encompass all questions regarding subdivisions and condominiums. It is
aimed at providing for an appropriate government agency, the HLURB, to which all parties aggrieved in the
implementation of its provisions and the enforcement of contractual rights with respect to said category of
real estate may take recourse. Nonetheless, the powers of the HLURB may not in any way be deemed as in
derogation of the SEC's authority. P.D. Nos. 902-A and 957, as far as both are concerned with corporations,
are laws in pari materia. P.D. No. 902-A relates to all corporations, while P.D. No. 957 pertains to
corporations engaged in the particular business of developing subdivisions and condominiums. Although the
provisions of these decrees on the issue of jurisdiction appear to collide when a corporation engaged in
developing subdivisions and condominiums is under receivership, the same decrees should be construed as
far as reasonably possible to be in harmony with each other to attain the purpose of an expressed national
policy. 32

Hence, the HLURB should take jurisdiction over petitioners' complaint because it pertains to matters within
the HLURB's competence and expertise. The HLURB should view the issue of whether the Board of
Receivers correctly revoked the agreements entered into between the previous receiver and the petitioners
from the perspective of the homeowners' interests, which P.D. No. 957 aims to protect. Whatever monetary
awards the HLURB may impose upon respondent are incidental matters that should be addressed to the
sound discretion of the Board of Receivers charged with maintaining the viability of respondent as a
corporation. Any controversy that may arise in that regard should then be addressed to the SEC.

It is worth noting that the parties agreed at the 1 July 1998 hearing that should the HLURB establish and
grant petitioners' claims, the same should be referred to the SEC. Thus, the proceedings at the HLURB
should not be suspended notwithstanding that respondent is still under receivership. The TRO that this
Court has issued should accordingly continue until such time as the HLURB shall have resolved the
controversy. The present members of the Board of Receivers should be reminded of their duties and
responsibilities as an impartial Board that should serve the interests of both the homeowners and
respondent's creditors. Their interests, financial or otherwise, as members of respondent's Board of
Directors should be circumscribed by judicious and unbiased performance of their duties and responsibilities
as members of the Board of Receivers. Otherwise, respondent's full rehabilitation may face a bleak future.
Both parties should never give full rein to acts that could prove detrimental to the interests of the
homeowners and eventually jeopardize respondent's rehabilitation.

WHEREFORE, the questioned Decision of the Court of Appeals is hereby REVERSED and SET ASIDE.
This case is REMANDED to the Housing and Land Use Regulatory Board for continuation of proceedings
with dispatch as the Securities and Exchange Commission proceeds with the rehabilitation of respondent BF
Homes, Inc., through the Board of Receivers. Thereafter, any and all monetary claims duly established
before the HLURB shall be referred to the Board of Receivers for proper disposition and thereafter, to the
SEC, if necessary. No costs.

SO ORDERED.

G.R. No. 125447 August 14, 1998

MARINA PROPERTIES CORPORATION, petitioner,

vs.
COURT OF APPEALS and H.L. CARLOS CONSTRUCTION, INC., respondents.

G.R. No. 125475 August 14, 1998

H.L. CARLOS CONSTRUCTION, INC., petitioner,

vs.
COURT OF APPEALS and MARINA PROPERTIES CORPORATION, respondents.

DAVIDE, JR., J.:

We resolve here two (2) separate appeals from the decision 1 of the Court of Appeals of 27 June 1996 in CA-G.R.
SP No. 37927, which affirmed with modification the 15 March 1995 Order 2 of the Office of the President in O.P.
Case No. 5462 which, in turn, affirmed in toto the 14 June 1993 decisions 3 of the Housing and Land Use
Regulatory Board (HLURB) in the case filed by H.L. Carlos Construction, Inc. (hereafter H.L. CARLOS) against
MARINA Properties Corporation (hereafter MARINA) for Specific Performance with Damages and docketed as
REM-A-1179. 4

The factual antecedents, as summarized by the Court of Appeals, are as follows:

Petitioner Marina Properties Corporation (MARINA for short) is a domestic corporation

engaged in the business of real estate development. Among its projects is a condominium
complex project, known as the "MARINA BAYHOMES CONDOMINIUM PROJECT"
consisting of 10 building clusters with 31 housing units to be built on a parcel of land at
Asiaworld City, Coastal Road in Paraaque, Metro Manila. The area is covered by T.C.T. No.
(121211) 42201 of the Registry of Deeds of the same municipality.

The construction of the project commenced sometime in 1988, with respondent H.L. Carlos
Construction, Inc. (H.L. CARLOS for brevity) as the principal contractor, particularly of Phase
III.

As an incentive to complete the construction of Phase III, MARINA allowed H.L. CARLOS to
purchase a condominium unit therein known as Unit B-121. Thus, on October 9, 1988, the
parties entered into a Contract to Purchase and to Sell covering Unit B-121 for
P3,614,000.00. H.L. CARLOS paid P1,034,200.00 as downpayment, P50,000.00 as cash
deposit and P67,024.22 equivalent to 13 monthly amortizations.
After paying P1,810,330.70, which was more than half of the contract price, H.L. CARLOS
demanded for the delivery of the unit, but MARINA refused. This prompted H.L. CARLOS to
file with the Regional Trial Court of Makati, Branch 61 a complaint for damages against
MARINA, docketed as Civil Case No. 89-5870.

Meanwhile, on April 20, 1990, MARINA wrote H.L. CARLOS that it was exercising its option
under their Contract to Purchase and to Sell to take over the completion of the project due to
its (H.L. CARLOS') abandonment of the construction of the Phase III project.

In a letter dated March 15, 1991, H.L. CARLOS inquired from MARINA about the "turn-over
status" of the condominium unit. MARINA replied that it was cancelling the Contract to
Purchase and Sell due to H.L. CARLOS' abandonment of the construction of the Phase III
Project and its filing of baseless and harassment suits against MARINA and its officers.

Forthwith, H.L. CARLOS filed the instant complaint for specific performance with damages
against MARINA with the Housing and Land Use Regulatory Board (HLURB), alleging
among others, that it has substantially complied with the terms and conditions of the Contract
to Purchase and Sell, having paid more than 50% of the contract price of the condominium
unit; and that MARINA's act of cancelling the contract was done with malice and bad faith.
H.L. CARLOS prays that MARINA be ordered to deliver to it the subject unit, accept the
monthly amortizations on the remaining balance, execute the final deed of sale and deliver
the title of the unit upon full payment of the contract price. Also, H.L. CARLOS prays for the
award of actual and exemplary damages as well as attorney's fees.

In its answer, MARINA claimed that its cancellation of the Contract to Purchase and Sell is
justified since H.L. CARLOS has failed to pay its monthly installment since October 1989 or
for a period of almost two (2) years; that H.L. CARLOS abandoned its work on the project as
of December 1989; and that the instant case should have been suspended in view of the
pendency of Civil Case No. 89-5870 for damages in the Makati RTC involving the same
issues.

On February 21, 1992, the HLURB, through Atty. Abraham N. Vermudez, Arbiter, rendered a
decision; the dispositive portion of which reads:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered

declaring the cancellation of the subject Contract to Sell as null and void and
ordering respondent Marina Properties Corporation as follows:

1. To turn over the subject condominium unit to herein

complainant, accept monthly amortization[s] on the remaining
balance and to execute the final deed of sale and deliver
title/ownership of the subject property to the complainant
upon full payment of the contract price.

2. To pay complainant actual damages of P30,000.00 per

month commencing from March 1990 until the delivery of the
subject property and the amount of P50,000.00 as exemplary
damages.

3. To pay complainant the amount of P50,000.00 as and by

way of attorney's fees.

4. To pay to this Board the amount of P5,000.00 as [an]

administrative fine.

IT IS SO ORDERED.

In ruling for H.L. CARLOS, the HLURB Arbiter held:

xxx xxx xxx

Respondent's position that the case is a complex one is more imaginary than
real. Clearly, the cancellation of the subject "Contract to Purchase and to
Sell" was in violation of Republic Act No. 6552, otherwise known as the
"Realty Installment Buyers Protection Act," which prescribes the procedure
for cancellation of installment contracts for the purchase of subdivision lots
and/or condominium units.
 In the case at bar, the complainant had already paid P1,810,330.70 or more
than 50% of the contract price of P3,614,000.00 and more than the total of
two years (24 months) installments computed at the monthly installment of
P67,024.22, inclusive of the downpayment, which is more than 24
installments. Under RA. 6552, notarial cancellation of the installment contract
becomes effective only upon payment of the cash surrender value to the
purchaser, which however respondent did not do.

Respondent's cancellation of the subject contract was clearly illegal, void and
cannot be sanctioned.

Neither can this Office find merit in respondent's contention that this case
should be suspended because of the pending civil case between the parties,
said pending case, Civil Case No. 89-5870 in the Regional Trial Court,
Branch 61, Makati, Metro Manila, was filed by the same complainant herein
against the same respondent for collection of unpaid billings in the amount of
about P10,000,000.00.

On the other hand, this Office finds that respondent's act in cancelling the
subject installment sales contract without following the provisions of R.A.
6552 is an unsound real estate business practice for which respondent is
fined the sum of P5,000.00.

As to damages and attorney's fees claimed by complainant and borne out by

the records, this Office finds that respondent should be held liable for
unearned rental income of P30,000.00 per month, commencing from March
1990 when the condominium unit should have been delivered until actual
delivery thereof, and attorney's fees of P50,000.00, both amounts to be
deducted from the unpaid balance due on the subject condominium unit.

Likewise, for its wanton breach of the subject contract, respondent is ordered
to pay exemplary damages in the amount of P50,000.00 as an example for
the public good, deductible from the balance due on the subject
condominium unit.

xxx xxx xxx

Whereupon, MARINA interposed an appeal to the Board of Commissioners of HLURB (First

Division) which affirmed the assailed decision.

On further appeal to the Office of the President, the decision of the Board of Commissioners
(First Division) was affirmed.

MARINA filed a motion for reconsideration but was denied. 5

MARINA filed a petition for review with the Court of Appeals ascribing the following errors to the Office of the
President:

(1) In sustaining the award of actual damages for unrealized profits in favor of
private respondent H.L. CARLOS which were unliquidated, speculative and
patently unreasonable;

(2) In declaring the motion for reconsideration filed by MARINA "pro-

forma" and depriving it of the right of appeal; and

(3) In not dismissing the case on the grounds of litis pendentia, forum-
shopping and splitting a single cause of action. 6

The Court of Appeals sustained MARINA as regards the award of actual damages, finding that no evidence was
presented to prove the P30,000.00 award as monthly rental for the condominium unit. However, as to the
pronouncement of the Office of the President that MARINA's motion for reconsideration was merely pro-forma,
the Court of Appeals noted that MARINA did not raise any new issue in its motion for reconsideration. In the same
vein, respondent court ruled that MARINA was not deprived of its right to appeal.

The Court of Appeals likewise brushed aside MARINA's assertion that the complaint should have been
dismissed on the ground of litis pendentia thus:

The requisites of lis pendens as a ground for dismissal of a complaint are: (1) identity of
parties or at least such representing the same interest in both actions; (2) identity of rights
 asserted as prayed for, the reliefs being founded on the same facts; and (3) identity in both
cases is such that the judgment that may be rendered in the pending case, regardless of
which party is successful, would amount to res judicata to the other case.

There is no dispute that the case at bench and Civil Case No. 89-5870 for damages at the
Makati RTC involves the same parties although in the civil case, the officers of MARINA
have been impleaded as co-defendants. While the first requisite obtains in this case, the last
two are conspicuously absent.

It will be observed that the two cases involve distinct and separate causes of action or rights
asserted. Civil Case No. 89-5870 is for the collection of sums of money corresponding to
unpaid billings and labor costs incurred by H.L. CARLOS in the construction of the project
under the Construction Contractagreed upon by the parties. Upon the other hand, the case
at bench is for specific performance (delivery of the condominium unit) and damages arising
from the unilateral cancellation of the Contract to Purchase and to Sell by MARINA.

Moreover, the reliefs sought are also different. In the civil case, H.L. CARLOS prays for the
award of P7,065,885.03 representing unpaid labor costs, change orders and price
escalations including the sum of P2,000,000.00 as additional compensatory damages. In the
instant case, H.L. CARLOS seeks not only the awa[r]d of actual and exemplary damages but
also the delivery of the condominium unit upon MARINA's acceptance of the monthly
amortization on the remaining balance, the execution of a final deed of sale and the delivery
of the title to the said private respondent.

MARINA's claim that the present complaint should be dismissed on the ground of splitting a
cause of action, deserves scant consideration. The two complaints did not arise from a single
cause of action but from two separate causes of action. It bears emphasis that H.L.
CARLOS' cause of action in the civil case stemmed from the breach by MARINA of its
contractual obligation under the Construction Contract, while in the case at bench, H.L.
CARLOS' cause of action is premised on the unilateral cancellation of the Contract to
Purchase and Sell by MARINA. 7

Accordingly, the Court of Appeals affirmed the Order of the Office of the President but deleted the award of actual
damages. As such, the parties sought redress from this Court by way of separate petitions.

In G.R. No. 125447, MARINA asserts that the Court of Appeals erred: (1) in finding that petitioner should
turn over the subject condominium unit to H.L. CARLOS and accept monthly amortizations on the remaining
balance; and (2) in not ordering the dismissal of the case on the grounds of litis pendentia, forum-shopping
and splitting of a single cause of action.

On the other hand, in G.R. No. 125475, H.L. CARLOS contends that the Court of Appeals gravely erred in:
(1) finding that the award of actual damages equivalent to P30,000.00 in unearned monthly rentals was not
sustained by evidence; (2) in not declaring that the petition for review was filed out of time and fatally
defective for lack of verification and certification by MARINA Properties, and in not declaring the decision of
the Office of the President final and executory; and (3) in not dismissing MARINA's appeal as without merit.

MARINA's motion to consolidate both cases was granted in a resolution dated 27 January 1997. 8

We first address the lone procedural issue of the timeliness of the petition for review filed by MARINA with the
Court of Appeals and the supposed lack of verification and certification.

We find without merit the allegation that MARINA's petition for review before the Court of Appeals was filed
out of time as MARINA's motion for reconsideration (of the order of the Office of the President) was found to
be pro formaand, therefore, did not stop the running of its period to appeal.

MARINA filed its Motion for Reconsideration 9 on the last day of its period to appeal, specifically, on 3 May
1995. However, the motion was found by the Office of the President to be pro forma as "the issues of litis
pendentia, forum-shopping and splitting of a cause of action as well as the issue of unliquidated, speculative and
unreasonable damages raised therein were basically the same issues raised and discussed extensively in the
Appeal Memorandum and which were already weighed, discussed and considered by this Office in its Order
dated March 15, 1995." 10 As a consequence, the Office of the President declared its decision final and executory.

Under our rules of procedure, a party adversely affected by a decision of a trial court may move for
reconsideration thereof on the following grounds: (a) the damages awarded are excessive; (b) the evidence
is insufficient to justify the decision; or (c) the decision is contrary to law. 11 A motion for reconsideration
interrupts the running of the period to appeal, unless the motion is pro forma, 12 This is now expressly set forth in
the last paragraph of Section 2, Rule 37, 1997 Rules of Civil Procedure.

A motion for reconsideration based on the foregoing grounds is deemed pro forma if the same does not
specify the findings or conclusions in the judgment which are not supported by the evidence or contrary to
law, making express reference to the pertinent evidence or legal provisions. 13 It is settled that although a
motion for reconsideration may merely reiterate issues already passed upon by the court, that by itself does not
make it pro forma and is immaterial because what is essential is compliance with the requisites of the
Rules. 14 Thus, in Guerra Enterprises, Co. Inc. v. CFI of Lanao del Sur, 15 we ruled:

Among the ends to which a motion for reconsideration is addressed, one is precisely to
convince the court that its ruling is erroneous and improper, contrary to the law or the
evidence; and in doing so, the movant has to dwell of necessity upon the issues passed
upon by the court. If a motion for reconsideration may not discuss these issues, the
consequence would be that after a decision is rendered, the losing party would be confined
to filing only motions for reopening and new trial. We find in the Rules of Court no warrant for
ruling to that effect, a ruling that would, in effect eliminate subsection (c) of Section 1 of Rule
37.

On this note, it has also been fittingly observed that:

Where the circumstances of a case do not show an intent on the part of the pleader to
merely delay the proceedings, and his motion reveals a bona fide effort to present additional
matters or to reiterate his arguments in a different light, the courts should be slow to declare
the same outright as pro forma. The doctrine relating to pro forma motions has a direct
bearing upon the movant's valuable right to appeal. It would be in the interest of justice to
accord the appellate court the opportunity to review the decision of the trial court on the
merits than to abort the appeal by declaring the motion pro forma, such that the period to
appeal was not interrupted and had consequently lapsed. 16

We are thus unable to hold that MARINA's motion for reconsideration was merely pro forma. Our review of the
records reveals that said motion adequately pointed out the conclusions MARINA regarded as erroneous and
contrary to law, and even referred to findings not supported by evidence as well as jurisprudence to sustain
MARINA's claims. As to the justification proffered by the Office of the President that it had already passed upon
the issues raised by MARINA in its motion, plainly, the authorities cited above readily refute such a position.

It may be pointed out that under Supreme Court Circular No. 1-91 dated 27 February 1991 and Revised
Administrative Circular No. 1-95 dated 16 May 1995, which took effect on 1 June 1995, an aggrieved party is
allowed one motion for reconsideration of the assailed decision or final order before he may file a petition for
review with the Court of Appeals. All told, MARINA's motion for reconsideration was but proper under the
adjective rules extant in this jurisdiction.

The charge of a lack of verification or certification in MARINA's petition before the Court of Appeals is
baseless. Even the most cursory of reviews will disclose that such may be found on pages 30 and 31 of the
Petition. 17

We agree with the conclusion of the Court of Appeals that the award of P30,000.00 as actual damages for
unearned monthly rental income starting from March 1990 until the delivery of the property to H.L. CARLOS was
arbitrary. Article 2199 of the Civil Code provides that one is entitled to adequate compensation only for such
pecuniary loss suffered by him as is duly proved. 18 Actual damages, to be recoverable, must not only be capable
of proof, but must actually be proved with a reasonable degree of certainty. 19 Courts cannot simply rely on
speculation, conjecture or guesswork in determining the fact and amount of damages. 20 As the Court of Appeals
correctly found here that no proof was submitted by H.L. CARLOS to substantiate the recovery of actual damages
in the form of monthly rentals, the deletion of such award was but appropriate.

The issue of forum shopping raised by MARINA deserves scant consideration. H.L. CARLOS was not guilty
of forum shopping when it sued MARINA before the HLURB to enforce their Contract To Purchase and To
Sell. Forum shopping is the act of a party against whom an adverse judgment has been rendered in one
forum, of seeking another (and possibly favorable) opinion in another forum other than by appeal or the
special civil action of certiorari, or the institution of two (2) or more actions or proceedings grounded on the
same cause on the supposition that one or the other court might look with favor upon the party. 21 Contrary to
MARINA's assertion, H.L. CARLOS' complaint was hardly a duplication of Civil Case No. 89-5870 which was filed
to collect the sum of money corresponding to unpaid billings from their Construction Contract. The cause of action
in the civil case was, therefore, totally distinct from the cause of action in the complaint before the HLURB. For
this reason, neither could there have been splitting of a cause of action.

Anent the absence of litis pendentia, the Court of Appeals' meticulous analysis of this issue leaves no room
for improvement and we adopt it as our own.

We likewise uphold the finding that MARINA's cancellation of the Contract To Buy and To Sell was clearly
illegal. Prior to MARINA's unilateral act of rescission, H.L. CARLOS had already paid P1,810,330.70, or
more than 50% of the contract price of P3,614,000.00. Moreover, the sum H.L. CARLOS had disbursed
amounted to more than the total of 24 installments, i.e., two years' worth of installments computed at a
monthly installment rate of P67,024.22, inclusive of the downpayment.
As to the governing law, Section 24 of P.D. 957 22 provides:

Sec. 24 Failure to pay installments. The rights of the buyer in the event of his failure to
pay the installments due for reasons other than failure of the owner or developer to develop
the project shall be governed by Republic Act. No. 6552.

Then among the requirements of R.A. No. 6552, 23 in order to effect the cancellation of a contract, a
notarial cancellation must first be had. 24 Therefore, absent this, MARINA's cancellation of its contract with
H.L. CARLOS was void.

In conclusion, cases involving specific performance of contractual and statutory obligations, filed by buyers
of subdivision lots or condominium units against the owner, developer, dealer, broker or salesman fall under
the jurisdiction of the HLURB. 25 It is incumbent upon said administrative agency, in the exercise of its powers
and functions, to interpret and apply contracts, determine the rights of the parties under these contracts, and
award damages whenever appropriate. 26

WHEREFORE, the petitions in these consolidated cases, G.R. No. 125447 and G.R. No. 125475 are DENIED
and the assailed decision of respondent Court of Appeals of 27 June 1996 is hereby AFFIRMED.

Costs against petitioner in each case.

SO ORDERED.