Supreme Court Decisions

G.R. No. 107566 - BAGUIO MIDLAND COURIER, ET AL. v. THE COURT OF APPEALS, ET AL.

2013-01-15T09:50:16+00:00

G.R. No. 107566 - BAGUIO MIDLAND COURIER, ET AL. v. THE COURT OF APPEALS, ET AL.

SECOND DIVISION

[G.R. NO. 107566 : November 25, 2004]

BAGUIO MIDLAND COURIER, REPRESENTED BY ITS PRESIDENT AND GENERAL MANAGER, OSEO HAMADA AND CECILLE AFABLE, EDITOR-IN-CHIEF, Petitioners, v. THE COURT OF APPEALS (FORMER SP, 6TH DIVISION) AND RAMON LABO, JR., Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari seeking to set aside the Decision¹ of the Court of Appeals, dated 07 January 1992, and the Resolution,² dated 29 September 1992, reversing the decision of the Regional Trial Court (RTC), dated 14 June 1990, which dismissed herein private respondent's claim for damages.

Culled from the records are the following facts:

During the time material to this case, petitioner Oseo C. Hamada (Hamada) was the president and general manager of the Baguio Printing and Publishing Co., Inc., which publishes the Baguio Midland Courier, a weekly newspaper published and circulated in Baguio City and other provinces within the Cordillera region. He was also, at that time, the business manager of said newsweekly. Petitioner Cecille Afable (Afable) was Baguio Midland Courier's editor-in-chief and one of its columnists who ran the column "In and Out of Baguio."

On the other hand, private respondent Ramon L. Labo, Jr., was among the mayoralty candidates in Baguio City for the 18 January 1988 local elections.³ Prior to this, in 1984, private respondent had already embarked on a political career by running for a seat in the former Batasang Pambansa during which time he appointed a certain Benedicto Carantes (Carantes) as his campaign manager. It appears that as part of the campaign propaganda for private respondent in the 1984 local elections, political ads appeared in the various issues of Baguio Midland Courier and campaign paraphernalia were printed by Baguio Printing and Publishing Co., Inc., on his behalf.

Apart from his political endeavors, private respondent was also an active member of the civic group Lions Club having been elected governor of said organization in 1984, 1986, and 1988.

Before the 18 January 1988 local elections, petitioner Afable wrote in her column a series of articles dealing with the candidates for the various elective positions in Baguio City. Quoted hereunder are excerpts from said articles, as well as the respective dates when they were published in the Baguio Midland Courier '

January 3, 1988

. . . Of all the candidates for mayor, Labo has the most imponderables about him, people would ask, "Can he read and write?" Why is he always talking about his Japanese father-in-law? Is he really a Japanese Senator or a barrio kapitan? Is it true that he will send P18 million aid to Baguio? Somebody wanted to put an advertisement of Labo in the Midland Courier but was refused because he has not yet paid his account of the last time he was a candidate for Congress. We will accept all advertisements for him if he pays his old accounts first.⁴

January 10, 1988

I heard that the "Dumpty in the egg" is campaigning for Cortes. Not fair. Some real doctors are also busy campaigning against Labo, because he has not also paid their medical services with them. Since he is donating millions he should settle his small debts like the reportedly insignificant amount of P27,000 only. If he wins several teachers were signifying to resign and leave Baguio forever, and Pangasinan will be the franca-liqua of Baguio.⁵

Claiming that the aforequoted portions of petitioner Afable's column were tainted with malice, private respondent instituted separate criminal and civil actions for libel against herein petitioners. In a resolution, dated 26 December 1988, the Department of Justice dismissed the criminal case due to insufficiency of evidence⁶ while the civil suit was raffled off to RTC, Branch 6, Baguio City.

In the complaint for damages, private respondent alleged that in her 03 January 1988 and 10 January 1988 columns, petitioner Afable made it appear that he (private respondent) could not comply with his financial obligations; that Yuko Narukawa Labo (Narukawa Labo), his co-plaintiff in the case before the trial court, was accused of misrepresenting her social status to the general public thereby subjecting her to public ridicule; that the subject articles were written solely for the purpose of destroying his reputation, integrity, and personality as well as that of Ms. Narukawa Labo; and that said articles were false, untrue, libelous, and published with evil intent. Private respondent and Ms. Narukawa Labo, therefore, prayed for moral damages, exemplary damages, litigation expenses, attorney's fees, and costs of litigation.

Prior to filing their respective answers, petitioners filed separate motions to dismiss⁷ upon the ground that there was failure to comply with Section 6 of Presidential Decree (P.D.) No. 1508,⁸ otherwise known as the Katarungang Pambarangay Law, which required the referral of certain disputes to the barangay conciliation process before they are filed in court. Petitioner Hamada also claimed that the complaint stated no cause of action.

On 05 April 1988, private respondent and Ms. Narukawa Labo filed a motion with leave of court to amend and admit attached amended complaint.⁹ Impleaded in the amended complaint¹⁰ was the Baguio Printing and Publishing Co., Inc., as the publisher of the Baguio Midland Courier.

In its Order, dated 12 April 1988,¹¹ the trial court denied petitioners' motions to dismiss. According to the trial court, as one of the parties to this case was a corporation, P.D. No. 1508 was not applicable as said statute pertained only to actions involving natural persons. In the same order, the trial court granted private respondent and Ms. Narukawa Labo's motion to admit their amended complaint and directed the petitioners to file their answers.

In their answer,¹² petitioners Baguio Midland Courier and Hamada denied that petitioner Afable's 03 and 10 January 1988 articles were libelous. They also claimed that per their company's records, private respondent still owed them a certain sum of money for the political ads and campaign paraphernalia printed by Baguio Printing and Publishing Co., Inc., during private respondent's 1984 campaign, and that the 03 January 1988 column did not accuse Ms. Narukawa Labo of misrepresenting herself before the public. Moreover, they asserted that petitioner Afable's write-ups were fair comments on facts and reports that were of public interest as private respondent was a mayoralty candidate at that time. Finally, petitioners Baguio Midland Courier and Hamada interposed counterclaims for moral damages, exemplary damages, attorney's fees, and costs.

In her answer,¹³ petitioner Afable also denied that the quoted portions of her 03 and 10 January 1988 column were libelous, insisting that they were devoid of malice and "at most contained valid and timely doubts."¹⁴ She also contended that the contents of her column were protected by the constitutional guarantees of freedom of speech and of the press and that the same were privileged as they dealt with a public figure. Petitioner Afable likewise sought counterclaims for moral damages, exemplary damages, and attorney's fees.

During the pre-trial of the case on 31 March 1989, the parties agreed to limit the issues to the following: (1) whether the published items were libelous, false and malicious; (2) whether plaintiffs below were entitled to damages; and (3) whether petitioners (defendants therein) were entitled to damages as claimed in their respective counterclaims.

On 17 July 1989, private respondent's counsel manifested before the trial court that Ms. Narukawa Labo would no longer testify in support of the allegations in the amended complaint as far as they pertain to her.¹⁵ In addition, the 03 January 1988 article was no longer offered in evidence by the private respondent's counsel thus, the trial court interpreted this development to mean that the same ceased to be a part of this suit. The court a quo thereafter proceeded with the trial of the case taking into consideration only the 10 January 1988 column.

In the trial that ensued, private respondent testified that he felt that the phrase "dumpty in the egg" referred to him, interpreting the same to mean someone who is a failure in his business undertakings.¹⁶ Private respondent asserted that such allegation was baseless as he was successful in his various endeavors abroad. With regard to the remainder of the article, private respondent insisted that petitioner Afable made it appear to the public that he owed P27,000 in unpaid medical expenses while in truth, he could not remember having been hospitalized.¹⁷

Subsequently, private respondent presented Dr. Pedro Rovillos, his fellow Lions Club member, who testified that he understood the term "dumpty in the egg" to mean "a zero or a big lie."¹⁸ He further testified that the 10 January 1988 article painted private respondent as a "balasubas"¹⁹ due to the latter's alleged failure to pay his medical expenses.

On the other hand, the petitioners presented Ms. Sylvia Lambino (Lambino), Baguio Printing and Publishing Co., Inc.'s, bookkeeper and accountant, as their first witness. According to Lambino, Baguio Printing and Publishing Co., Inc., sent several statements of accounts and demand letters to private respondent pertaining to his unpaid obligations amounting to P27,415 which he incurred during his campaign for the Batasang Pambansa in 1984.²⁰ She further testified that despite the repeated demands to private respondent, the aforementioned obligations remained unpaid.²¹

Thereafter, petitioner Hamada himself took the witness stand. In his testimony, petitioner Hamada stated that as the president and general manager of the Baguio Printing and Publishing Co., Inc., and as the business manager of the Baguio Midland Courier, he only dealt with the business and advertising aspects of their newspaper business and that the contents of the articles appearing in the pages of the Baguio Midland Courier were overseen by the rest of the staff.²² In addition, petitioner Hamada also corroborated the earlier testimony of Lambino with respect to the outstanding obligations of private respondent.

On 20 December 1989, Carantes took the witness stand for the petitioners. Carantes testified that he was appointed as private respondent's campaign manager when the latter ran for assemblyman in Batasang Pambansa in 1984 and that in his capacity as campaign manager,²³ he hired the services of a certain Noli Balatero to oversee the printing of campaign paraphernalia and publication of political advertisements of private respondent.²⁴ Carantes further testified that the P27,415 indebtedness to Baguio Printing and Publishing Co., Inc., had remained unpaid because the campaign funds private respondent entrusted to him were already fully exhausted. Besides, according to Carantes, the campaign materials printed by the Baguio Printing and Publishing Co., Inc., and political advertisements published in Baguio Midland Courier were no longer covered by the agreement he had with Balatero. However, these materials were printed and published upon the instructions of one Atty. Conrado Bueno who acted as private respondent's "unofficial campaign manager" during the said election. Carantes thus concluded that private respondent was supposed to pay for these campaign materials and advertisements before or after the 1984 election.

For her part, petitioner Afable acknowledged having written the 10 January 1988 article but denied that the same was malicious and intended to destroy private respondent's reputation and integrity; that the phrase "dumpty in the egg" referred to Horato Aquino who was among the candidates for the 1988 local elections in Baguio City; and that the P27,000 pertained to private respondent's unpaid obligation to Baguio Printing and Publishing Co., Inc., the exact amount of which was P27,415.

In its decision, dated 14 June 1990, the trial court dismissed the complaint for lack of merit. According to the trial court, the article in question was privileged and constituted fair comment on matters of public interest as it dealt with the integrity, reputation, and honesty of private respondent who was a candidate for local elective office at that time.

This decision of the trial court was, however, reversed by the appellate court in a decision, dated 07 January 1992, the dispositive portion of which reads:

Construed in the light of the facts and the principles on the matter, and under the plain language of the applicable law, We hold that the evidence was sufficient to prove by preponderance of evidence that the defendants were GUILTY of committing libel on the person of the complainant Ramon Labo, Jr. and should be liable to pay damages. The decision of the trial court is hereby REVERSED and SET ASIDE and the defendants are hereby ordered to pay the plaintiffs as follows:

1) The amount of P200,000.00 as moral damages;

2) The amount of P100,000.00 as exemplary damages;

3) The amount of P50,000.00 for attorney's fees plus costs of litigation.²⁵

In brushing aside the conclusion reached by the trial court, the Court of Appeals noted that private respondent was, at the time the article in question was published, not a public official but a private citizen seeking an elective office and petitioner Afable's article was intended to impeach his honesty, virtue or reputation and to make him appear in the eyes of the public as unfit for public office.

The appellate court also declared that the malicious nature of the article may be deduced from the fact that it was published in the Baguio Midland Courier a few days before the scheduled local elections and from the style and tone of writing employed by petitioner Afable. According to the Court of Appeals, while the entire article was composed of ten paragraphs and referred to several unnamed personalities, it was only in the disputed paragraph where a specific individual was named - herein private respondent. The appellate court therefore concluded that the phrase "dumpty in the egg" could only refer to private respondent and the claimed P27,000 indebtedness is imputable solely to him.

Petitioners thereafter filed their respective motions for reconsideration²⁶ of the aforementioned decision of the Court of Appeals but these were denied through a resolution²⁷ of the appellate court, dated 29 September 1992. Thus, petitioners now come before us raising the following issues:

I

THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT "THERE IS GOOD REASON AND REASONABLE GROUND TO ASSUME THAT THE PUBLICATION OF THE LIBELOUS ARTICLES WAS A MANIFESTATION OF THE SPOUSES' (DEFENDANTS OSEO HAMADA and CECILLE AFABLE) THINKING ON THE MERIT OR DEMERIT OF CANDIDATES FOR BAGUIO CITY MAYOR FOR THE JANUARY 18, 1988 ELECTIONS" SINCE THEY ARE NOT SPOUSES NOR RELATED TO ONE ANOTHER.

II

THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN CONCLUDING THAT PLAINTIFF-APPELLANT RAMON LABO, JR. WAS THE ONE REFERRED TO AS THE "DUMPTY IN THE EGG."

III

THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN CONCLUDING THAT THE PORTION OF THE SUBJECT ARTICLE WHICH STATES THAT "SINCE HE IS DONATING MILLIONS HE SHOULD SETTLE HIS SMALL DEBTS LIKE THE REPORTEDLY INSIGNIFICANT AMOUNT OF P27,000.00" REFERS TO AN INDEBTEDNESS OF LABO TO THE REAL DOCTORS AND NOT TO THE BAGUIO MIDLAND COURIER.

IV

THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THERE WAS MALICE WHEN THE DEFENDANT-APPELL(ANT) CECILLE AFABLE INVITED PUBLIC ATTENTION ON LABO'S PRIVATE LIFE BEING A CANDIDATE FOR THE HIGHEST PUBLIC OFFICE IN THE CITY OF BAGUIO OR THAT THE DEFENDANTS "WERE ACTUALLY NOT MOTIVATED BY GOOD AND JUSTIFIABLE ENDS" IN PUBLISHING SAID ARTICLES ABOUT THE PRIVATE RESPONDENT.

V

THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN REVERSING THE DECISION OF THE TRIAL COURT DISMISSING THE COMPLAINT FOR LACK OF MERIT.²⁸

In a manifestation dated 10 November 1993, we were informed of the death of petitioner Hamada. In our resolution of 08 December 1993, we resolved to substitute the estate of Oseo C. Hamada, for the deceased petitioner Hamada.²⁹

The Court's Ruling

We shall first address the contention of petitioners with regard to alleged errors of facts committed by the Court of Appeals. While we adhere to the principle that findings of fact of the appellate court are binding and conclusive upon us,³⁰ such adherence has not prevented this Court from setting aside the findings of fact of the Court of Appeals when circumstances so warrant. In the recent case of The Insular Life Assurance Company, Ltd. v. Court of Appeals and Sun Brothers & Company,³¹ this Court had the occasion to enumerate the exceptions to the general rule as regards the conclusiveness of the findings of fact of the appellate court, to wit: "(1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of facts are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion."³²

In the case at bar, except for numbers (1), (6), (9), and (10), all of the above exceptions are present.

First. Contrary to the findings of the Court of Appeals that private respondent was the only candidate named in petitioner Afable's column on 10 January 1988, said article actually dealt with the other named candidates for the 1988 local elections in Baguio City and Benguet. A perusal of said article would likewise reveal that it contained not only the opinion of petitioner Afable regarding private respondent but also her take on the other issues involving the other candidates. It would be grave error to impute malice on the subject article based upon a finding that private respondent was unduly singled out by petitioner Afable in her column. In this regard, we dismiss the following conclusion of the appellate court:

. . . Malice may also be inferred from the style and tone of the publication. The entire column on "In and Out of Baguio" on January 10 was composed of ten paragraphs and each paragraph featured or referred to a single person without knowing the person; however, in the second paragraph which mentions the non-payment of P27,000.00, the complainant [private respondent herein] was specifically mentioned in name; hence, no amount of reasoning would erase the fact that the dumpty in the egg was referring to Labo.³³ (Emphasis supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

Second. From the abovequoted portion of the Court of Appeals' ruling, it is daylight clear that the appellate court assumed that since the name of private respondent and the phrase "dumpty in the egg" appeared in the same paragraph, the epithet referred only to the former. We cannot, however, subscribe to such simplistic deduction. A perusal of the paragraph in question easily reveals that the person alluded to by petitioner Afable in her use of "dumpty in the egg" was someone who was campaigning for a certain Atty. Reynaldo Cortes - one of the mayoralty candidates in Baguio City at that time. If, indeed, "dumpty in the egg" referred to private respondent, it follows that he campaigned for his own opponent during the 1988 local elections. Although such gracious attitude on the part of private respondent towards his political opponent would have been commendable, nevertheless, the same is totally contrary to human experience. On this score, we uphold the following argument of petitioners:

Clearly, the private respondent was hallucinating when he claims himself as the person referred to as the "Dumpty in the egg." Otherwise, he would be the one making a mockery out of himself for campaigning against himself and in favor of his political opponent. Had he done that, it is doubtful whether he could have won as City Mayor of Baguio in the 1988 elections, which he actually did.³⁴

Third. In its assailed decision, the Court of Appeals likewise highlighted the fact that petitioners Hamada and Afable were husband and wife and went on to conclude, albeit erroneously, that "(t)here is good reason and reasonable ground to assume that the publication of the libelous article was a manifestation of the spouses' thinking on the merit or demerit of candidates for Baguio City mayor for the 18 January 1988 elections."³⁵ Again, we disagree in this conclusion of the appellate court. The records of this case clearly establish the fact that petitioners Hamada and Afable were siblings and not spouses in that during his testimony on 19 December 1989, petitioner Hamada referred to petitioner Afable as his sister.³⁶ The Court of Appeals' supposition, therefore, that the article subject of this petition reflected the stance of the "husband and wife team" of the petitioners utterly lacks factual support.

Having addressed the factual issues of this case, we shall now proceed to discuss its substantive question of whether the 10 January 1988 article of petitioner Afable was defamatory.

It is a basic precept that in cases involving claims for damages arising out of alleged defamatory articles, it is essential that the alleged victim be identifiable although it is not necessary that he be named.³⁷ It is enough if by intrinsic reference the allusion is apparent or if the publication contains matters of descriptions or reference to facts and circumstances from which others reading the article may know the plaintiff was intended, or if extraneous circumstances point to him such that persons knowing him could and did understand that he was the person referred to.³⁸

In the case of Borjal v. Court of Appeals,³⁹ this Court declared that "[i]t is also not sufficient that the offended party recognized himself as the person attacked or defamed, but it must be shown that at least a third person could identify him as the object of the libelous publication."⁴⁰ Plainly, private respondent has the bounden duty to present before the court evidence that a third person could easily identify him as the person libeled. In this case, private respondent has utterly failed to dispose of this responsibility.

To be sure, private respondent's lone witness, Dr. Rovillos, was able to offer his own understanding of what the phrase "dumpty in the egg" meant.⁴¹ However, during his cross-examination, he failed to sufficiently explain before the court a quo how he arrived at the conclusion that the term referred to private respondent, thus:

Q Now, you said you read this first sentence that says: "I heard that the Dumpty in the egg is campaigning for Cortes." Then you gave us what you thought was the meaning of "Dumpty in the egg." You did not tell us, however, whether you thought that was Ramon Labo or somebody else. Could you tell us, Doctor, when you heard that, you understood that to be Ramon Labo?chanroblesvirtualawlibrary

A That is what I understand.

Q You understood that to be Ramon Labo because a dumpty in the egg means a big zero. Why? You consider Labo a big zero that is why you understood him to be referred to when Cecille C. Afable said "dumpty in the egg?"

A That is what I understand.

Q You also said a "dumpty in the egg" is a big lie. You consider Ramon Labo a big lie that you also thought he was referred to as "dumpty in the egg?"

A No, sir.

Q In fact, Ramon Labo, in your assessment, is the exact opposite of a dumpty [in] the egg?chanroblesvirtualawlibrary

A That I cannot answer.

A So, from your honest perception, some - this this Labo (sic) is a big zero or a big lie that is why you cannot say he is the exact opposite?chanroblesvirtualawlibrary

A Maybe.⁴²

This Court finds Dr. Rovillos's proposition as to what "dumpty in the egg" meant is insufficient to support any finding of liability on the part of the petitioners as he was unable to offer an iota of justification for his conclusion that it pertained to private respondent.

The Court of Appeals also maintained that petitioners could not invoke "public interest" in their defense. It ruled that "[a]n abuse of the freedom of speech and the press should not be tolerated and encouraged if the article published transcends the limit of decent, fair and impartial news reporting and instead becomes a bludgeon or a scalpel to brow beat or slice into shreds a private citizen, of his rights to his good name."⁴³

We do not agree.

Concededly, private respondent was not yet a public official at the time the 10 January 1988 article was published. Nevertheless, this fact does not remove said article from the mantle of protection guaranteed by the freedom of expression provision of the Constitution. Indeed, as early as 1909, in the case of United States v. Sedano,⁴⁴ this Court had recognized the public's right to be informed on the mental, moral, and physical fitness of candidates for public office.

Subsequently, in the leading case of New York Times Co. v. Sullivan,⁴⁵ the US Supreme Court expounded on this principle, viz:

. . . It is of the utmost consequence that the people should discuss the character and qualifications of candidates for their suffrages. The importance to the state and to society of such discussions is so vast, and the advantages derived are so great, that they more than counterbalance the inconvenience of private persons whose conduct may be involved, and occasional injury to the reputations of individuals must yield to the public welfare, although at times such injury may be great. The public benefit from publicity is so great, and the chance of injury to private character so small, that such discussion must be privileged.

. . .

In such a case the occasion gives rise to a privilege, qualified to this extent: any one claiming to be defamed by the communication must show actual malice or go remediless. The privilege extends to a great variety of subjects, and includes matters of public concern, public men, and candidates for office.⁴⁶

Plainly, the rule only applies to fair comment on matters of public interest, fair comment being that which is true, or which if false, expresses the real opinion of the author based upon reasonable degree of care and on reasonable grounds.⁴⁷ The principle, therefore, does not grant an absolute license to authors or writers to destroy the persons of candidates for public office by exposing the latter to public contempt or ridicule by providing the general public with publications tainted with express or actual malice. In the latter case, the remedy of the person allegedly libeled is to show proof that an article was written with the author's knowledge that it was false or with reckless disregard of whether it was false or not. While the law itself creates the presumption that every defamatory imputation is malicious,⁴⁸ nevertheless, the privileged character of a communication destroys said presumption. The burden of proving actual malice shall then rest on the plaintiff, private respondent herein.⁴⁹

In the present case, private respondent was unable to prove that petitioner Afable's column was tainted with actual malice. Verily, the records are replete with evidence that, indeed, private respondent incurred an obligation which had remained unpaid until the time the questioned article was published. While counsel for private respondent persistently harped at the difference between the P27,000 which appeared in petitioner Afable's column and the P27,415 actual indebtedness of private respondent to Baguio Printing and Publishing Co., Inc., the minuscule difference in the amount fails to establish reckless disregard for truth on the part of petitioners. As held by this Court in the Borjal case '

Even assuming that the contents of the articles are false, mere error, inaccuracy or even falsity alone does not prove actual malice. Errors or misstatements are inevitable in any scheme of truly free expression and debate. Consistent with good faith and reasonable care, the press should not be held to account, to a point of suppression, for honest mistakes or imperfections in the choice of language. There must be some room for misstatement of fact as well as for misjudgment. Only by giving them much leeway and tolerance can they courageously and effectively function as critical agencies in our democracy.⁵⁰

Lastly, we hold that petitioner Afable's article constitutes a fair comment on a matter of public interest as it dealt with the character of private respondent who was running for the top elective post in Baguio City at the time. Considering that private respondent assured his would-be constituents that he would be donating millions of his own money, petitioner Afable's column with respect to private respondent's indebtedness provided the public with information as regards his financial status which, in all probability, was still unbeknownst to them at that time. Indeed, the information might have dissuaded some members of the electorate from voting in favor of private respondent but such is the inevitable result of the application of the law. The effect would have been adverse to the private respondent but public interest in this case far outweighs the interest of private respondent.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, dated 07 January 1992, and its Resolution, dated 29 September 1992, denying reconsideration are REVERSED and SET ASIDE, and the trial court's Decision of 14 June 1990 is AFFIRMED. No costs.

SO ORDERED.

Puno, (Acting C.J.), Austria-Martinez, Callejo, Sr., and TINGA, JJ., concur.

Endnotes:

¹ Penned by Associate Justice Jose C. Campos, Jr., with Associate Justices Alicia V. Sempio-Diy and Filemon H. Mendoza, concurring; Rollo, pp. 54-61.

² Rollo, p. 81.

³ Private respondent Ramon L. Labo, Jr., eventually won said election.

⁴ Complaint dated 11 January 1988; Rollo, p. 55.

⁵ Records, p 139.

⁶ Records, pp. 172-176; Exhibit "17" for petitioner Afable.

⁷ Records, pp. 9-12; pp. 14-15.

⁸ Section 6. Conciliation, pre-condition to filing of complaint. - No complaint, petition, action or proceeding involving any matter within the authority of the Lupon as provided in Section 2 hereof shall be filed or instituted in Court or in any other government office for adjudication unless there has been a confrontation of the parties before the Lupon Chairman or Pangkat and no conciliation or settlement had been reached as certified by the Lupon Secretary or the Pangkat Secretary attested by the Lupon or Pangkat Chairman or unless the settlement has been repudiated.

⁹ Records, pp. 29-30.

¹⁰ Records, pp. 31-37.

¹¹ Records, pp. 41-45.

¹² Rollo, pp. 31-35; Annex "B" of the Petition.

¹³ Rollo, pp. 36-41; Annex "C" of the Petition.

¹⁴ Id. at 38.

¹⁵ Rollo, p. 45.

¹⁶ TSN, 18 July 1989, p. 6.

¹⁷ Id. at 10.

¹⁸ TSN, 21 August 1989, p.4.

¹⁹ Ibid.

²⁰ TSN, 10 September 1989, pp. 5-9.

²¹ Id. at 19.

²² TSN, 19 December 1989, p. 4.

²³ TSN, 20 December 1989, p. 15.

²⁴ Id. at 15-16.

²⁵ Rollo, p. 60.

²⁶ Rollo, pp. 62-79; Annexes "G" and "H" of the Petition.

²⁷ Rollo, p. 81.

²⁸ Rollo, pp. 2-3.

²⁹ Rollo, p. 154.

³⁰ Austria v. Court of Appeals, G.R. No. 133323, 09 March 2000, 327 SCRA 668; Ladignon v. Court of Appeals, G.R. No. 122973, 18 July 2000, 336 SCRA 42.

³¹ G.R. No. 126850, 28 April 2004.

³² Id. at 7-8, citations omitted.

³³ Rollo, p. 59.

³⁴ Rollo, p. 143; Memorandum for Petitioners, p. 12.

³⁵ Rollo, p. 59.

³⁶ TSN, 19 December 1989, p. 7.

³⁷ Newsweek, Inc. v. Intermediate Appellate Court, G.R. No. L-63559, 30 May 1986, 142 SCRA 171.

³⁸ Corpus v. Cuaderno, Sr., G.R. No. L-16969, 30 April 1966, 16 SCRA 807.

³⁹ G.R. No. 126466, 14 January 1999, 310 SCRA 1.

⁴⁰ Id. at 18.

⁴¹ According to Dr. Rovillos, the term meant "a zero or a big lie;" TSN, 21 August 1989, p. 4.

⁴² TSN, 21 August 1989, pp. 9-10.

⁴³ Rollo, p. 60.

⁴⁴ 14 Phil. 338 (1909).

⁴⁵ 376 US 254.

⁴⁶ Id. at 281-282, citing Coleman v. MacLennan, 78 Kan. 711, 98 P. 281.

⁴⁷ Supra, note 40 at 341-342.

⁴⁸ Article 354 of the Revised Penal Code provides: "Every defamatory imputation is presumed to be malicious, even if it be true, if no good intention and justifiable motive for making it is shown, except in the following cases:

1. A private communication made by any person to another in the performance of any legal, moral or social duty; and

2. A fair and true report, made in good faith, without any comments or remarks, of any judicial, legislative or other official proceedings which are not of confidential nature, or of any statement, report or speech delivered in said proceedings, or of any other act performed by public officers in the exercise of their functions."

⁴⁹ Supra note 37 at 28.

⁵⁰ Supra note 39 at 30 citing the Concurring Opinion of US Supreme Court Justice Rutledge in Pennekamp v. Florida, 328 US 331, 371-372.

G.R. NOS. 123562-65 - LEONORA A. GESITE, ET AL. v. THE COURT OF APPEALS, ET AL.

2013-01-15T09:50:17+00:00

G.R. NOS. 123562-65 - LEONORA A. GESITE, ET AL. v. THE COURT OF APPEALS, ET AL.

EN BANC

[G.R. NOS. 123562-65 : November 25, 2004]

LEONORA A. GESITE, FE LAMOSTE, ADELAIDA MACALINDOG, and GUIA C. AGATON, Petitioners, v. THE COURT OF APPEALS, THE CIVIL SERVICE COMMISSION, and THE SECRETARY OF THE DEPARTMENT OF EDUCATION, CULTURE AND SPORTS, Respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us is a Petition for Review on Certiorari assailing the Decision¹ of the Court of Appeals dated November 22, 1995 and its Resolution² dated January 22, 1996 in CA-G.R. SP Nos. 37690 and 37705-07 entitled, "Leonora A. Gesite, et al. v. The Civil Service Commission and the Secretary of Education, Culture & Sports."

Petitioners are public school teachers of the E. de los Santos Elementary School in Manila.

Beginning March 1990, simmering unrest struck the ranks of the public school teachers in Metro Manila. They pressed for, among others, the immediate payment of their allowances, 13th month pay for 1989 arising from the implementation of the Salary Standardization Law, the recall of Order No. 39, Series of 1990, issued by the Department of Education, Culture, and Sports (DECS), directing the oversizing of classes and overloading of teachers, and the hiring of 47,000 new teachers. When their demands were not granted, the dissatisfied teachers resolved to take direct mass actions.

On September 17, 1990, a regular school day, about 800 teachers in Metro Manila did not conduct classes. Instead, they assembled in front of the DECS offices to air their grievances. When their representatives conferred with then DECS Secretary Isidro CariÃ±o, he brushed aside their complaints, warning them they would lose their jobs for taking illegal mass actions. He then ordered the teachers to return to work within twenty-four (24) hours, otherwise they will be dismissed from the service. Meantime, he directed the DECS officials to initiate immediate administrative proceedings against those found obstinate.

The action of the DECS Secretary caused more teachers to join the protest action. These included the above-named four petitioners who did not report for work on September 19-21, 1990. Hence, the DECS Secretary filed administrative complaints against them for defying his return-to-work order. They were charged with grave misconduct, gross neglect of duty, gross violation of the Civil Service Law and Regulations, refusal to perform official duty, gross insubordination, conduct prejudicial to the best interest of the service, and absence without official leave.

Despite receipt of notice to file their answer within seventy-two (72) hours but not more than five (5) days, petitioners failed to do so. Consequently, they were deemed to have waived their right to controvert the charges. They were found guilty as charged and ordered dismissed from the service. Subsequently, this penalty was reduced to nine (9) months suspension for petitioners Adelaida Macalindong and Guia Agaton and six (6) months suspension for petitioners Leonora Gesite and Fe Lamoste.

Petitioners interposed an appeal to the Merit System Protection Board, but it was denied for lack of merit.

On appeal to the Civil Service Commission (CSC), the same was also denied. The CSC found that petitioners are liable for "conduct prejudicial to the best interest of the service" on the ground that they "acted without due regard to the adverse consequences of their action which necessarily resulted in the suspension and stoppage of classes, to the prejudice of the pupils/students to whom (they) were responsible." The CSC imposed upon them the penalty of six (6) months suspension without pay. Their respective motions for reconsideration were denied.

Hence, petitioners filed with this Court a special civil action for certiorari , which we referred to the Court of Appeals pursuant to Administrative Circular No. 1-95,³ docketed therein as CA-G.R. SP Nos. 37690 and 37705-07.

On November 23, 1995, the Court of Appeals rendered a joint Decision dismissing the four (4) petitions, thus:

"WHEREFORE, in view of all the foregoing, the present petition for certiorari is DISMISSED for lack of merit; the assailed Resolutions issued by the respondent Civil Service Commission are hereby UPHELD.

SO ORDERED."⁴

Hence, the instant Petition for Review on Certiorari raising the following grounds:

1. THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE CIVIL SERVICE COMMISSION FINDING THEM LIABLE FOR CONDUCT PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE WHEN THEY ONLY EXERCISED THEIR CONSTITUTIONAL RIGHT TO ASSEMBLE PEACEABLY TO AIR THEIR GRIEVANCES; andcralawlibrary

2. THE COURT OF APPEALS ERRED IN DENYING PETITIONERS' PLEA FOR THE PAYMENT OF THEIR BACKWAGES COVERING THE PERIOD WHEN THEY WERE NOT ALLOWED TO TEACH.

In his comment on the petition, the Solicitor General alleged:

1. Petitioners who are all public school teachers form part of the Civil Service, hence their right to peaceful concerted activities, including the right to strike, is not absolute and the exercise thereof is subject to reasonable limitations provided by existing laws; andcralawlibrary

2. The Court of Appeals did not err in affirming the Decision of the Civil Service Commission denying petitioners' prayer for payment of their backwages during the period of their suspension from the service.

The sole controversial issue is whether petitioners, in joining the mass actions taken by the public school teachers, may be held liable for conduct prejudicial to the best interest of the service.

While petitioners admit their participation in the mass actions of the public school teachers in September to mid-October, 1990 which temporarily disrupted classes in Metro Manila, they assert, however, that they were not on strike. Rather, they were merely exercising their Constitutional right to peaceably assemble and petition the government for redress of their grievances.⁵ Thus, they may not be penalized administratively.

The Solicitor General submits that although the Constitution recognizes the rights of government workers to organize, assemble and petition the government for redress of their grievances,⁶ however, the exercise of these rights is not a license for them to engage in strikes, walkouts, and temporary work stoppages.

The question of whether the concerted mass actions launched by the public school teachers, including herein petitioners, in Metro Manila from September to the first half of October 1990 was a strike has long been settled. In Bangalisan v. Court of Appeals,⁷ this Court held:

"The issue of whether or not the mass action launched by the public school teachers during the period from September up to the first half of October, 1990 was a strike has been decided by this Court in a resolution, dated December 18, 1990, in the herein cited case of Manila Public School Teachers Association, et al. v. Laguio, Jr. (G.R. NOS. 95445 & 95590, August 6, 1991, 200 SCRA 323). It was there held 'that from the pleaded and admitted facts, these 'mass actions' were to all intents and purposes a strike; they constituted a concerted and unauthorized stoppage of, or absence from, work which it was the teachers' duty to perform, undertaken for essentially economic reasons.'

It is an undisputed fact that there was a work stoppage and that petitioners' purpose was to realize their demands by withholding their services. The fact that the conventional term 'strike' was not used by the striking employees to describe their common course of action is inconsequential, since the substance of the situation, and not its appearance, will be deemed to be controlling (Board of Education v. New Jersey Education Association (1968) 53 NJ 29, 247 A2d 867)."

Actually, petitioners here were not charged administratively because they engaged in strike. Former DECS Secretary Isidro CariÃ±o filed administrative complaints against them because, as aptly held by the Court of Appeals, they were absent from classes from September 19-21, 1990, in violation of his return-to-work order. Their unauthorized absences disrupted classes and prejudiced the welfare of the school children.

It is relevant to state at this point that the settled rule in this jurisdiction is that employees in the public service may not engage in strikes, mass leaves, walkouts, and other forms of mass action that will lead in the temporary stoppage or disruption of public service.⁸ The right of government employees to organize is limited to the formation of unions or associations only, without including the right to strike.⁹

Here, petitioners, in joining the mass actions, failed to hold classes to the prejudice of their students. While petitioners have the right to assemble peaceably to air their grievances, however, they should have exercised such right in a lawful manner. As this Court held in Jacinto v. Court of Appeals,¹⁰

"Moreover, the petitioners here x x x were not penalized for the exercise of their right to assemble peacefully and to petition the government for a redress of grievances. Rather, the Civil Service Commission found them guilty of conduct prejudicial to the best interest of the service for having absented themselves without proper authority, from their schools during regular school days, in order to participate in the mass protest, their absence ineluctably resulting in the non-holding of classes and in the deprivation of students of education, for which they were responsible. Had petitioners availed themselves of their free time - recess, after classes, weekends or holidays - to dramatize their grievances and to dialogue with the proper authorities within the bounds of law, no one - not the DECS, the CSC or even this Court - could have held them liable for the valid exercise of their constitutionally guaranteed rights. As it was, the temporary stoppage of classes resulting from their activity necessarily disrupted public services, the very evil sought to be forestalled by the prohibition against strikes by government workers. Their act by its nature was enjoined by the Civil Service law, rules and regulations, for which they must, therefore, be made answerable."

We thus find that the Court of Appeals did not err in holding that petitioners engaged in an activity proscribed by the Civil Service Law and Rules. Their absences without authority caused adverse effects upon their students for whose education they are responsible. Clearly, their acts constitute conduct prejudicial to the best interest of the service, an offense punishable under Section 46(27), Chapter 7 (Discipline), Book V of Executive Order No. 292 (Administrative Code of 1987).¹¹

On the issue of their back salaries, we reiterate this Court's ruling in Bangalisan v. Court of Appeals,¹² thus:

"The denial of salary to an employee during the period of his suspension, if he should later be found guilty, is proper because he has given ground for his suspension. x x x

Moreover, the general proposition is that a public official is not entitled to any compensation if he has not rendered any service. As he works, he shall earn. Since petitioners did not work during the period for which they are now claiming salaries, there can be no legal or equitable basis to order the payment of such salaries."

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated November 22, 1995 as well as its Resolution dated January 22, 1996 in CA-G.R. SP Nos. 37690 and 37705-07 are AFFIRMED. Costs against petitioners.

SO ORDERED.

Puno, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Carpio-Morales, Callejo, Sr., Azcuna, TINGA, Chico-Nazario, and Garcia, JJ., concur.
Davide, Jr., C.J., on official leave.
Corona, J., on leave.

Endnotes:

¹ Rollo at 73-38. Per Associate Justice Minerva P, Gonzaga-Reyes (later a member of this Court, now retired) and concurred in by Associate Justices Buenaventura Guererro (retired) and Romeo A. Brawner.

² Rollo at 72.

³ This circular constitutes substantive basis for Rule 43 of the 1997 Rules of Civil Procedure, as amended. Under this Rule, appeals from the judgments of quasi-judicial agencies, including the CSC, should be filed with the Court of Appeals on a Petition for Review .

⁴ Rollo at 84.

⁵ Pursuant to Sec. 4, Art. III of the 1987 Constitution which provides:

"No law shall be passed abridging the freedom of speech, of expression, or of the press, or of the right of the people peaceably to assemble and petition government for redress of grievances."

⁶ Under Sec. 8, Art. III of the same Constitution which states:

"The right of the people, including those employed in the public and private sectors, to form unions, associations, or societies for purposes not contrary to law shall not be abridged."

⁷ 342 Phil 586, 593-594 (1997).

⁸ Social Security System Employees Association (SSEA) v. Court of Appeals, G.R. No. 85279, July 28, 1989, 175 SCRA 686, 696, citing Alliance of Government Workers v. Minister of Labor and Employment, G.R. No. 60403, August 3, 1983, 124 SCRA 1.

⁹ Bangalisan v. Court of Appeals, supra, citing Manila Public School Teachers Association v. Lagiuo, Jr., G.R. NOS. 95445 & 95590, August 6, 1991, 200 SCRA 323; Social Security System Employees Association (SSEA) v. Court of Appeals, supra; and Alliance of Government Workers v. Minister of Labor and Employment, supra.

¹⁰ 346 Phil. 656, 673-674 (1997).

¹¹ The present implementing Rule of this provision is Section 52, Rule IV of the Civil Service Commission Memorandum Circular No. 19, Series of 1999.

¹² Supra, citing Sales v. Mathay, G.R. No. 39557, May 3, 1984, 129 SCRA 180; Reyes v. Hernandez, 71 Phil. 397 (1941).

Gesite v. CA: 123562-65 : November 25, 2004 : J. Sandoval-Gutierrez : En Banc : Decision

2013-01-15T09:50:17+00:00

Gesite v. CA: 123562-65 : November 25, 2004 : J. Sandoval-Gutierrez : En Banc : Decision

EN BANC

[G.R. NOS. 123562-65. November 25, 2004]

LEONORA A. GESITE, FE LAMOSTE, ADELAIDA MACALINDOG, and GUIA C. AGATON, Petitioners, v. THE COURT OF APPEALS, THE CIVIL SERVICE COMMISSION, and THE SECRETARY OF THE DEPARTMENT OF EDUCATION, CULTURE AND SPORTS, Respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us is a Petition for Review on Certiorari assailing the Decision¹ of the Court of Appeals dated November 22, 1995 and its Resolution² dated January 22, 1996 in CA-G.R. SP Nos. 37690 and 37705-07 entitled, Leonora A. Gesite, et al. v. The Civil Service Commission and the Secretary of Education, Culture & Sports.

Petitioners are public school teachers of the E. de los Santos Elementary School in Manila.

Beginning March 1990, simmering unrest struck the ranks of the public school teachers in Metro Manila. They pressed for, among others, the immediate payment of their allowances, 13^th month pay for 1989 arising from the implementation of the Salary Standardization Law, the recall of Order No. 39, Series of 1990, issued by the Department of Education, Culture, and Sports (DECS), directing the oversizing of classes and overloading of teachers, and the hiring of 47,000 new teachers. When their demands were not granted, the dissatisfied teachers resolved to take direct mass actions.

On September 17, 1990, a regular school day, about 800 teachers in Metro Manila did not conduct classes. Instead, they assembled in front of the DECS offices to air their grievances. When their representatives conferred with then DECS Secretary Isidro Cario, he brushed aside their complaints, warning them they would lose their jobs for taking illegal mass actions. He then ordered the teachers to return to work within twenty-four (24) hours, otherwise they will be dismissed from the service. Meantime, he directed the DECS officials to initiate immediate administrative proceedings against those found obstinate.

Petitioners interposed an appeal to the Merit System Protection Board, but it was denied for lack of merit.

On appeal to the Civil Service Commission (CSC), the same was also denied. The CSC found that petitioners are liable for conduct prejudicial to the best interest of the service on the ground that they acted without due regard to the adverse consequences of their action which necessarily resulted in the suspension and stoppage of classes, to the prejudice of the pupils/students to whom (they) were responsible. The CSC imposed upon them the penalty of six (6) months suspension without pay. Their respective motions for reconsideration were denied.

Hence, petitioners filed with this Court a special civil action for certiorari, which we referred to the Court of Appeals pursuant to Administrative Circular No. 1-95,³ docketed therein as CA-G.R. SP Nos. 37690 and 37705-07.

On November 23, 1995, the Court of Appeals rendered a joint Decision dismissing the four (4) petitions, thus:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

WHEREFORE, in view of all the foregoing, the present petition for certiorari is DISMISSED for lack of merit; the assailed Resolutions issued by the respondent Civil Service Commission are hereby UPHELD.

SO ORDERED.⁴ Ï‚rÎ½ll

Hence, the instant Petition for Review on Certiorari raising the following grounds:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

1. THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE CIVIL SERVICE COMMISSION FINDING THEM LIABLE FOR CONDUCT PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE WHEN THEY ONLY EXERCISED THEIR CONSTITUTIONAL RIGHT TO ASSEMBLE PEACEABLY TO AIR THEIR GRIEVANCES; andcralawlibrary

2. THE COURT OF APPEALS ERRED IN DENYING PETITIONERS PLEA FOR THE PAYMENT OF THEIR BACKWAGES COVERING THE PERIOD WHEN THEY WERE NOT ALLOWED TO TEACH.

In his comment on the petition, the Solicitor General alleged:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

2. The Court of Appeals did not err in affirming the Decision of the Civil Service Commission denying petitioners prayer for payment of their backwages during the period of their suspension from the service.

The sole controversial issue is whether Petitioners, in joining the mass actions taken by the public school teachers, may be held liable for conduct prejudicial to the best interest of the service.

The question of whether the concerted mass actions launched by the public school teachers, including herein Petitioners, in Metro Manila from September to the first half of October 1990 was a strike has long been settled. In Bangalisan v. Court of Appeals,⁷ this Court held:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

The issue of whether or not the mass action launched by the public school teachers during the period from September up to the first half of October, 1990 was a strike has been decided by this Court in a resolution, dated December 18, 1990, in the herein cited case of Manila Public School Teachers Association, et al. v. Laguio, Jr. (G.R. NOS. 95445 & 95590, August 6, 1991, 200 SCRA 323). It was there held that from the pleaded and admitted facts, these mass actions were to all intents and purposes a strike; they constituted a concerted and unauthorized stoppage of, or absence from, work which it was the teachers duty to perform, undertaken for essentially economic reasons.

It is an undisputed fact that there was a work stoppage and that petitioners purpose was to realize their demands by withholding their services. The fact that the conventional term strike was not used by the striking employees to describe their common course of action is inconsequential, since the substance of the situation, and not its appearance, will be deemed to be controlling (Board of Education v. New Jersey Education Association (1968) 53 NJ 29, 247 A2d 867).

Actually, petitioners here were not charged administratively because they engaged in strike. Former DECS Secretary Isidro Cario filed administrative complaints against them because, as aptly held by the Court of Appeals, they were absent from classes from September 19-21, 1990, in violation of his return-to-work order. Their unauthorized absences disrupted classes and prejudiced the welfare of the school children.

Here, Petitioners, in joining the mass actions, failed to hold classes to the prejudice of their students. While petitioners have the right to assemble peaceably to air their grievances, however, they should have exercised such right in a lawful manner. As this Court held in Jacinto v. Court of Appeals,¹⁰ Ï‚rÎ½ll

Moreover, the petitioners here x x x were not penalized for the exercise of their right to assemble peacefully and to petition the government for a redress of grievances. Rather, the Civil Service Commission found them guilty of conduct prejudicial to the best interest of the service for having absented themselves without proper authority, from their schools during regular school days, in order to participate in the mass protest, their absence ineluctably resulting in the non-holding of classes and in the deprivation of students of education, for which they were responsible. Had petitioners availed themselves of their free time recess, after classes, weekends or holidays to dramatize their grievances and to dialogue with the proper authorities within the bounds of law, no one not the DECS, the CSC or even this Court could have held them liable for the valid exercise of their constitutionally guaranteed rights. As it was, the temporary stoppage of classes resulting from their activity necessarily disrupted public services, the very evil sought to be forestalled by the prohibition against strikes by government workers. Their act by its nature was enjoined by the Civil Service law, rules and regulations, for which they must, therefore, be made answerable.

On the issue of their back salaries, we reiterate this Courts ruling in Bangalisan v. Court of Appeals,¹² thus:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

The denial of salary to an employee during the period of his suspension, if he should later be found guilty, is proper because he has given ground for his suspension. x x x

Moreover, the general proposition is that a public official is not entitled to any compensation if he has not rendered any service. As he works, he shall earn. Since petitioners did not work during the period for which they are now claiming salaries, there can be no legal or equitable basis to order the payment of such salaries.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated November 22, 1995 as well as its Resolution dated January 22, 1996 in CA-G.R. SP Nos. 37690 and 37705-07 are AFFIRMED. Costs against petitioners.

SO ORDERED.

Puno, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Carpio-Morales, Callejo, Sr., Azcuna, TINGA, Chico-Nazario, and Garcia, JJ., concur.

Davide, Jr., C.J., on official leave.

Corona, J., on leave.

Endnotes:

¹ Rollo at 73-38. Per Associate Justice Minerva P, Gonzaga-Reyes (later a member of this Court, now retired) and concurred in by Associate Justices Buenaventura Guererro (retired) and Romeo A. Brawner.

² Rolloat 72.

³ This circular constitutes substantive basis for Rule 43 of the 1997 Rules of Civil Procedure, as amended. Under this Rule, appeals from the judgments of quasi-judicial agencies, including the CSC, should be filed with the Court of Appeals on a Petition for Review .

⁴ Rollo at 84.

⁵ Pursuant to Sec. 4, Art. III of the 1987 Constitution which provides:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

No law shall be passed abridging the freedom of speech, of expression, or of the press, or of the right of the people peaceably to assemble and petition government for redress of grievances.

⁶ Under Sec. 8, Art. III of the same Constitution which states:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

The right of the people, including those employed in the public and private sectors, to form unions, associations, or societies for purposes not contrary to law shall not be abridged.

⁷ 342 Phil 586, 593-594 (1997).

⁸ Social Security System Employees Association (SSEA) v. Court of Appeals, G.R. No. 85279, July 28, 1989, 175 SCRA 686, 696, citing Alliance of Government Workers v. Minister of Labor and Employment, G.R. No. 60403, August 3, 1983, 124 SCRA 1.

⁹ Bangalisan v. Court of Appeals, supra, citing Manila Public School Teachers Association v. Lagiuo, Jr., G.R. NOS. 95445 & 95590, August 6, 1991, 200 SCRA 323; Social Security System Employees Association (SSEA) v. Court of Appeals, supra; and Alliance of Government Workers v. Minister of Labor and Employment, supra.

¹⁰ 346 Phil. 656, 673-674 (1997).

¹¹ The present implementing Rule of this provision is Section 52, Rule IV of the Civil Service Commission Memorandum Circular No. 19, Series of 1999.

¹² Supra, citing Sales v. Mathay, G.R. No. 39557, May 3, 1984, 129 SCRA 180; Reyes v. Hernandez, 71 Phil. 397 (1941).

G.R. No. 126454 - BIBLE BAPTIST CHURCH, ET AL. v. COURT OF APPEALS, ET AL.

2013-01-15T09:50:18+00:00

G.R. No. 126454 - BIBLE BAPTIST CHURCH, ET AL. v. COURT OF APPEALS, ET AL.

FIRST DIVISION

[G.R. NO. 126454 : November 26, 2004]

BIBLE BAPTIST CHURCH and PASTOR REUBEN BELMONTE, Petitioners, v. COURT OF APPEALS and MR. & MRS. ELMER TITO MEDINA VILLANUEVA, Respondents.

D E C I S I O N

AZCUNA, J.:

This Petition for Review on Certiorari seeks to annul the Decision¹ dated August 7, 1996, of the Court of Appeals in CA-G.R. CV No. 45956, and its Resolution² dated September 12, 1996, denying reconsideration of the decision. In the questioned issuances, the Court of Appeals affirmed the Decision³ dated June 8, 1993, of the Regional Trial Court of Manila, Branch 3, in Civil Case No. 90-55437.

The antecedents are:

On June 7, 1985, the Bible Baptist Church (petitioner Baptist Church) entered into a contract of lease⁴ with Mr. & Mrs. Elmer Tito Medina Villanueva (respondent spouses Villanueva). The latter are the registered owners of a property located at No. 2436 (formerly 2424) Leon Guinto St., Malate, Manila. The pertinent stipulations in the lease contract were:

1. That the LESSOR lets and leases to the LESSEE a store space known as 2424 Leon Guinto Sr. St., Malate, Manila, of which property the LESSOR is the registered owner in accordance with the Land Registration Act.

2. That the lease shall take effect on June 7, 1985 and shall be for the period of Fifteen (15) years.

3. That LESSEE shall pay the LESSOR within five (5) days of each calendar month, beginning Twelve (12) months from the date of this agreement, a monthly rental of Ten Thousand Pesos (P10,000.00) Philippine Currency, plus 10% escalation clause per year starting on June 7, 1988.

4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of Eighty Four Thousand Pesos (P84,000.00) Philippine Currency. Said sum is to be paid directly to the Rural Bank, Valenzuela, Bulacan for the purpose of redemption of said property which is mortgaged by the LESSOR.

5. That the title will remain in the safe keeping of the Bible Baptist Church, Malate, Metro Manila until the expiration of the lease agreement or the leased premises be purchased by the LESSEE, whichever comes first. In the event that the said title will be lost or destroyed while in the possession of the LESSEE, the LESSEE agrees to pay all costs involved for the re-issuance of the title.

6. That the leased premises may be renovated by the LESSEE, to the satisfaction of the LESSEE to be fit and usable as a Church.

7. That the LESSOR will remove all other tenants from the leased premises no later than March 15, 1986. It is further agreed that if those tenants are not vacated by June 1, 1986, the rental will be lowered by the sum of Three Thousand Pesos (P3,000.00) per month until said tenants have left the leased premises.

8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the lease. If the LESSEE decides to purchase the premises the terms will be: A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million), Philippine Currency. B) A down payment agreed upon by both parties. C) The balance of the selling price may be paid at the rate of One Hundred Twenty Thousand Pesos (P120,000.00), Philippine Currency, per year.

x x x.⁵

The foregoing stipulations of the lease contract are the subject of the present controversy.

Although the same lease contract resulted in several cases⁶ filed between the same parties herein, petitioner submits, for this Court's review, only the following errors allegedly committed by the Court of Appeals:

a) Respondent Court of Appeals erred in finding that the option to buy granted the petitioner Baptist Church under its contract of lease with the Villanuevas did not have a consideration and, therefore, did not bind the latter;

b) [R]espondent court again also erred in finding that the option to buy did not have a fixed price agreed upon by the parties for the purchase of the property; andcralawlibrary

c) [F]inally, respondent court erred in not awarding petitioners Baptist Church and its pastor attorney's fees.⁷

In sum, this Court has three issues to resolve: 1) Whether or not the option to buy given to the Baptist Church is founded upon a consideration; 2) Whether or not by the terms of the lease agreement, a price certain for the purchase of the land had been fixed; and 3) Whether or not the Baptist Church is entitled to an award for attorney's fees.

The stipulation in the lease contract which purportedly gives the lessee an option to buy the leased premises at any time within the duration of the lease, is found in paragraph 8 of the lease contract, viz:

8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the lease. If the LESSEE decides to purchase the premises the terms will be: A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million), Philippine Currency. B) A down payment agreed upon by both parties. C) The balance of the selling price may be paid at the rate of One Hundred Twenty Thousand Pesos (P120,000.00), Philippine Currency, per year.

Under Article 1479 of the Civil Code, it is provided:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.

The second paragraph of Article 1479 provides for the definition and consequent rights and obligations under an option contract. For an option contract to be valid and enforceable against the promissor, there must be a separate and distinct consideration that supports it.

In this case, petitioner Baptist Church seeks to buy the leased premises from the spouses Villanueva, under the option given to them. Petitioners claim that the Baptist Church "agreed to advance the large amount needed for the rescue of the property but, in exchange, it asked the Villanuevas to grant it a long term lease and an option to buy the property for P1.8 million."⁸ They argue that the consideration supporting the option was their agreement to pay off the Villanueva's P84,000 loan with the bank, thereby freeing the subject property from the mortgage encumbrance. They state further that the Baptist Church would not have agreed to advance such a large amount as it did to rescue the property from bank foreclosure had it not been given an enforceable option to buy that went with the lease agreement.

In the petition, the Baptist Church states that "[t]rue, the Baptist Church did not pay a separate and specific sum of money to cover the option alone. But the P84,000 it paid the Villanuevas in advance should be deemed consideration for the one contract they entered into - the lease with option to buy."⁹ They rely on the case of Teodoro v. Court of Appeals¹⁰ to support their stand.

This Court finds no merit in these contentions.

First, petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas' property from the mortgage should be deemed the separate consideration to support the contract of option. It must be pointed out that said amount was in fact apportioned into monthly rentals spread over a period of one year, at P7,000 per month. Thus, for the entire period of June 1985 to May 1986, petitioner Baptist Church's monthly rent had already been paid for, such that it only again commenced paying the rentals in June 1986. This is shown by the testimony of petitioner Pastor Belmonte where he states that the P84,000 was advance rental equivalent to monthly rent of P7,000 for one year, such that for the entire year from 1985 to 1986 the Baptist Church did not pay monthly rent.¹¹

This Court agrees with respondents that the amount of P84,000 has been fully exhausted and utilized by their occupation of the premises and there is no separate consideration to speak of which could support the option.¹²

Second, petitioners' reliance on the case of Teodoro v. Court of Appeals¹³ is misplaced. The facts of the Teodoro case reveal that therein respondent Ariola was the registered lessee of a property owned by the Manila Railroad Co. She entered into an agreement whereby she allowed Teodoro to occupy a portion of the rented property and gave Teodoro an option to buy the same, should Manila Railroad Co. decide to sell the property to Ariola. In addition, Teodoro, who was occupying only a portion of the subject rented property, also undertook to pay the Manila Railroad Co., the full amount of the rent supposed to be paid by the registered lessor Ariola. Consequently, unlike this case, Teodoro paid over and above the amount due for her own occupation of a portion of the property. That amount, which should have been paid by Ariola as lessor, and for her own occupation of the property, was deemed by the Court as sufficient consideration for the option to buy which Ariola gave to Teodoro upon Ariola's acquiring the property.

Hence, in Teodoro, this Court was able to find that a separate consideration supported the option contract and thus, its enforcement may be demanded. Petitioners, therefore, cannot rely on Teodoro, for the case even supports the respondents' stand that a consideration that is separate and distinct from the purchase price is required to support an option contract.

Petitioners further insist that a consideration need not be a separate sum of money. They posit that their act of advancing the money to "rescue" the property from mortgage and impending foreclosure, should be enough consideration to support the option.

In Villamor v. Court of Appeals,¹⁴ this Court defined consideration as "the why of the contracts, the essential reason which moves the contracting parties to enter into the contract."¹⁵ This definition illustrates that the consideration contemplated to support an option contract need not be monetary. Actual cash need not be exchanged for the option. However, by the very nature of an option contract, as defined in Article 1479, the same is an onerous contract for which the consideration must be something of value, although its kind may vary.

Specifically, in Villamor v. Court of Appeals,¹⁶ half of a parcel of land was sold to the spouses Villamor for P70 per square meter, an amount much higher than the reasonable prevailing price. Thereafter, a deed of option was executed whereby the sellers undertook to sell the other half to the same spouses. It was stated in the deed that the only reason the spouses bought the first half of the parcel of land at a much higher price, was the undertaking of the sellers to sell the second half of the land, also at the same price. This Court held that the cause or consideration for the option, on the part of the spouses-buyers, was the undertaking of the sellers to sell the other half of the property. On the part of the sellers, the consideration supporting the option was the much higher amount at which the buyers agreed to buy the property. It was explicit from the deed therein that for the parties, this was the consideration for their entering into the contract.

It can be seen that the Court found that the buyer/optionee had parted with something of value, which was the amount he paid over and above the actual prevailing price of the land. Such amount, different from the price of the land subject of the option, was deemed sufficient and distinct consideration supporting the option contract. Moreover, the parties stated the same in their contract.

Villamor is distinct from the present case because, First, this Court cannot find that petitioner Baptist Church parted with anything of value, aside from the amount of P84,000 which was in fact eventually utilized as rental payments. Second, there is no document that contains an agreement between the parties that petitioner Baptist Church's supposed rescue of the mortgaged property was the consideration which the parties contemplated in support of the option clause in the contract. As previously stated, the amount advanced had been fully utilized as rental payments over a period of one year. While the Villanuevas may have them to thank for extending the payment at a time of need, this is not the separate consideration contemplated by law.

Noting that the option clause was part of a lease contract, this Court looked into its previous ruling in the early case of Vda. De Quirino v. Palarca,¹⁷ where the Court did say that "in reciprocal contracts, like the one in question,¹⁸ the obligation or promise of each party is the consideration for that of the other."¹⁹ However, it must be noted that in that case, it was also expressly stated in the deed that should there be failure to exercise the option to buy the property, the optionee undertakes to sell the building and/or improvements he has made on the premises. In addition, the optionee had also been paying an amount of rent that was quite high and in fact turned out to be too burdensome that there was a subsequent agreement to reduce said rentals. The Court found that "the amount of rentals agreed upon x x x - which amount turned out to be so burdensome upon the lessee, that the lessor agreed, five years later, to reduce it - as well as the building and/or improvements contemplated to be constructed and/or introduced by the lessee, were, undoubtedly, part of the consideration for his option to purchase the leased premises."²⁰

Again, this Court notes that the parties therein clearly stipulated in their contract that there was an undertaking on the part of the optionee to sell the improvements made on the property if the option was not exercised. Such is a valuable consideration that could support the option contract. Moreover, there was the excessive rental payments that the optionee paid for five years, which the Court also took into account in deciding that there was a separate consideration supporting the option.

To summarize the rules, an option contract needs to be supported by a separate consideration. The consideration need not be monetary but could consist of other things or undertakings. However, if the consideration is not monetary, these must be things or undertakings of value, in view of the onerous nature of the contract of option. Furthermore, when a consideration for an option contract is not monetary, said consideration must be clearly specified as such in the option contract or clause.

This Court also notes that in the present case both the Regional Trial Court and the Court of Appeals agree that the option was not founded upon a separate and distinct consideration and that, hence, respondents Villanuevas cannot be compelled to sell their property to petitioner Baptist Church.

The Regional Trial Court found that "[a]ll payments made under the contract of lease were for rentals. No money [was] ever exchanged for and in consideration of the option." Hence, the Regional Trial Court found the action of the Baptist Church to be "premature and without basis to compel the defendant to sell the leased premises." The Regional Trial Court consequently ruled:

WHEREFORE, judgment is rendered:

1) Denying plaintiffs' application for writ of injunction;

2) That defendant cannot be compelled to sell to plaintiffs the leased premises in accordance with par. 8 of the contract of lease;

3) Defendant is hereby ordered to reimburse plaintiffs the sum of P15, 919.75 plus 12% interest representing real estate taxes, plaintiffs paid the City Treasurer's Office of Manila;

4) Declaring that plaintiff made a valid and legal consignation to the Court of the initial amount of P18,634.00 for the month of November and December 1990 and every month thereafter.

All other claims of the plaintiffs are hereby dismissed for lack of merit.

No pronouncement as to costs.

SO ORDERED.²¹

On appeal, the Court of Appeals agreed with the Regional Trial Court and found that the option to buy the leased premises was not binding upon the Villanuevas for non-compliance with Article 1479. It found that said option was not supported by a consideration as "no money was ever really exchanged for and in consideration of the option." In addition, the appellate court determined that in the instant case, "the price for the object is not yet certain." Thus, the Court of Appeals affirmed the Regional Trial Court decision and dismissed the appeal for lack of merit.²²

Having found that the option to buy granted to the petitioner Baptist Church was not founded upon a separate consideration, and hence, not enforceable against respondents, this Court finds no need to discuss whether a price certain had been fixed as the purchase price.

Anent the claim for attorney's fees, it is stipulated in paragraph 13 of the lease agreement that in the event of failure of either of the parties to comply with any of the conditions of the agreement, the aggrieved party can collect reasonable attorney's fees.²³

In view of this Court's finding that the option contract is not enforceable for being without consideration, the respondents Villanueva spouses' refusal to comply with it cannot be the basis of a claim for attorney's fees.

Hence, this Court agrees with as the Court of Appeals, which affirmed the findings of the Regional Trial Court, that such claim is to be dismissed for lack of factual and legal basis.

WHEREFORE, the Decision and Resolution of the Court of Appeals subject of the petition are hereby AFFIRMED.

No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Carpio, JJ., concur.

Endnotes:

¹ Rollo, pp. 133-145.

² Id. at 147-148.

³ Id. at 59-64.

⁴ Denominated as a "Lease Agreement;" Records, pp. 9-11.

⁵ Records, pp. 9-10; Emphasis supplied.

⁶ A case for consignation (RTC Manila, Branch 46), a case for ejectment (Civil Case No. 134279-CV, MeTC) and the instant case which originated in the RTC (Civil Case No. 90-55437, RTC Manila, Branch 3).

⁷ Rollo, p. 20.

⁸ Rollo, pp. 9-10.

⁹ Id. at 22.

¹⁰ 155 SCRA 547 (1987).

¹¹ TSN, October 5, 1992, p. 12; TSN, January 26, 1993, p. 6.

¹² Rollo, p. 155.

¹³ Supra, note 10.

¹⁴ 202 SCRA 607 (1991).

¹⁵ Id. at 615.

¹⁶ Ibid.

¹⁷ 29 SCRA 1 (1969).

¹⁸ Also a contract of lease.

¹⁹ Supra, note 17 at 4.

²⁰ Id. at 5.

²¹ Rollo, p. 64; Emphasis ours.

²² Rollo, pp. 143-144.

²³ Records, p. 10.

G.R. No. 126275 - JOHANNE J. PE A, ET AL. v. THE HON. COURT OF APPEALS

2013-01-15T09:50:18+00:00

G.R. No. 126275 - JOHANNE J. PE A, ET AL. v. THE HON. COURT OF APPEALS

SECOND DIVISION

[G.R. NO. 126275 : November 11, 2004]

JOHANNE J. PEÃ‘A & ERLANA G. VDA. DE INOCENCIO, doing business under the name and style of LARGESTONE ENTERPRISES, Petitioners, v. THE HONORABLE COURT OF APPEALS and DURA-TIRE & RUBBER INDUSTRIES, INC., Respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari of the Decision¹ of the Court of Appeals (CA) in CA-G.R. CV No. 42383 affirming the Decision² of the Regional Trial Court (RTC) of Manila, Branch 10, in Civil Case No. 92-61507 and its Resolution dated August 19, 1996 denying the motion for reconsideration of the said decision.

The Antecedents

Respondent Dura-Tire & Rubber Industries, Incorporated (Dura-Tire for brevity) is a corporation engaged in the business of manufacturing and sale of vehicle tires and other rubber products. Among the customers of the respondent were petitioners Johanne J. PeÃ±a and Erlana G. Vda. de Inocencio who, by themselves, were also engaged in the business of buying rubber products from the respondent and of selling the same to their customers under the business name Largestone Enterprises (Largestone). Largestone was also the authorized sales agent of respondent Dura-Tire. The petitioners would purchase rubber products from the respondent on credit for delivery to their customers, after which the petitioners would pay the respondent for the said purchases.

On May 8, 1991, the respondent and petitioner Inocencio entered a surety agreement in which the latter bound and obliged herself, jointly and solidarily, with petitioner PeÃ±a to pay to the respondent, when due, all money indebtedness or obligation of any kind incurred by petitioner PeÃ±a in the past and/or thereafter, arising from or growing out of any sale, whether on credit and/or forwarding on consignment, for sale or return goods and deliveries, as well as customers' accounts guaranteed by petitioner PeÃ±a, and to pay on demand any said indebtedness upon his default.³ Petitioner PeÃ±a signed the agreement as a witness.

As shown by the sales invoices prepared by the respondent, Largestone delivered rubber products to the following business firms during the period of November 17, 1990 to December 10, 1991:

SOLD TO

SALES INVOICE NO.

TERM

DATE

AMOUNT

SALESMAN

Aboitiz Transport System

96864

COD/DMM

November 17, 1990

P92,997.00

R. Lee (Joe PeÃ±a)⁴

Alma Cuilleta c/o Erlana Inocencio

18563

COD/DMM

September 13, 1991

5,614.00

E. Inocencio⁵

Golden Rays Taxi c/o Erlana Inocencio

97871

COD/DMM

August 14, 1991

4,474.15

E.I.⁶

Golden Rays Taxi c/o Erlana Inocencio

17969

COD/DMM

August 17, 1991

29,149.50

E.I.⁷

LT Transport Care Trading

19064

November 4, 1991

24,044.47

LT Transport Care Trading

19077

November 4, 1991

17,521.82

LT Transport Care Trading

19075

November 4, 1991

33,579.06

LT Transport Care Trading

18932

November 4, 1991

29876.80⁸

Inland Trailways c/o Joe PeÃ±a

97487

COD/DMM

May 8, 1991

2,156.00

J.A. Flores ⁹

Ipodca Cooperative

18524

COD/DMM

September 10, 1991

1,527.60

Erlana Inocencio¹⁰

Ipodca Cooperative

18525

COD/PU

September 10, 1991

15,496.80

Erlana Inocencio¹¹

Largestone Enterprises

97847

30D/DMM

August 7, 1991

19,426.23

Joe PeÃ±a¹²

Largestone Enterprises

97890

30D/PU

August 17, 1991

12,591.00

Joe PeÃ±a¹³

Largestone Enterprises

97894

30D/PU

August 19, 1991

3,231.00

Joe PeÃ±a¹⁴

Largestone Enterprises

97921

30D/DMM

August 27, 1991

1,299.51

Joe PeÃ±a¹⁵

Largestone Enterprises

97942

30D/DMM PU

September 4, 1991

9,618.83

Joe PeÃ±a¹⁶

Largestone Enterprises

97967

30D/DMM

September 10, 1991

5,379.05

Joe PeÃ±a¹⁷

Largestone Enterprises

98025

30 Days/DMM

September 25, 1991

6,425.00

Joe PeÃ±a¹⁸

Largestone Enterprises

18414

COD

September 4, 1991

4,546.69

Joe PeÃ±a¹⁹

*Largestone Enterprises

42336

COD/DMM

November 21, 1991

3,400.00

Joe PeÃ±a²⁰

*Largestone Enterprises

42194

December 10, 1991

971.76

Joe PeÃ±a²¹

Pandacan Coop c/o Erlana Inocencio

17942

COD/PU

August 16, 1991

23,174.93

E.I.²²

Pandacan Coop c/o Erlana Inocencio

18305

COD/DMM

August 27, 1991

6,871.40

Erlana I.²³

Pandacan Cooperative

18433

COD/DMM

September 25, 1991

14,824.16

Erlana Inocencio²⁴

Pandacan Coop c/o Erlana Inocencio

18643

COD/DMM

September 18, 1991

1,176.00

E. Inocencio²⁵

Pandacan Cooperative

18786

COD

September 26, 1991

13,567.40

Erlana Inocencio²⁶

Pandacan Cooperative

18789

COD

September 26, 1991

3,230.17

Erlana²⁷

Phil. World Characters & Travel Service Corporation

17089

COD

June 14, 1991

6,400.00

Joe PeÃ±a²⁸

Project 4 Cooperative

17807

COD/DMM

August 7, 1991

3,538.48

E.E. Inocencio²⁹

Project 4 Cooperative

17809

COD/DMM

August 7, 1991

226.16

E. Inocencio³⁰

Project 4 Cooperative

18785

COD

September 26, 1991

2,920.35

Erlana³¹

Tire King Goodyear Servitic

18312

COD/PU

August 28, 1991

5,497.12

Joe PeÃ±a³²

* Delivery Receipt of Massive Sales Inc. c/o Dura-Tire Rubber Industries, Inc.

In partial payment of the said purchases from the respondent, petitioner Inocencio issued the following Philbanking Checks: Check No. 847401 dated November 21, 1991; Check No. 847402 dated December 10,1991; Check No. 847404 dated December 29, 1991; and Check No. 847403 dated January 2, 1992. Petitioner PeÃ±a also drew and issued to the respondent Philippine National Bank Check No. 224391 dated November 25, 1991, in the amounts of P37,456.91, P29,771.10, P19,544.57, P46,431.67, and P14,063.58.³³ However, these checks were returned by the drawee banks for either of the following reasons: "closed account," "payment stopped," or "drawn against insufficient funds." The petitioners, likewise, failed to pay for the balance of their account.

The respondent sent letters on January 22 and 28, 1992 to the petitioners demanding the payment of their account which, according to the respondent, had amounted to P455,742.97, exclusive of interest, as shown in the statement of account appended thereto.³⁴ The petitioners promised to pay their account to the respondent, but reneged thereon.

On June 10, 1992, the respondent filed a Complaint with the RTC of Manila against the petitioners for the collection of their account, plus interests and attorney's fees. The respondent prayed that, after due proceedings, judgment be rendered in its favor and against the petitioners, thus:

Wherefore, Plaintiff prays that after due hearings, judgment be rendered in favor of Plaintiff and against the Defendants, ordering the latter to pay, jointly and severally, the following amounts:

A. P477,212.33 with 14% Int. P.A. from Jan. 20, 1992;

B. P100,000.00 as Attorney's Fee;

C. Cost of suit and other incidental expenses

Such other reliefs and remedies which may be just and equitable under the premises, are likewise prayed for.³⁵

The respondent appended to its complaint the surety agreement executed by it and petitioner Inocencio, the sales invoices issued to Aboitiz Transport, Alma Cuilleta, Golden Rays Taxi, ILT Transport Care Trading, Inland Con Carrier, Inland Trailways, Ipodca Cooperative, Largestone Enterprises, Pandacan Cooperative and Phil. World Charters and Travel Service Corporation, marked as Annexes "B" to "BB" thereof. It also appended to its complaint, as Annex "CC" thereof, the Delivery Receipt to Philtranco and the Sales Invoices to Project 4 Cooperative and Tire King Goodyear Service, as Annexes "DD" to "HH." It further appended to its complaint, as Annexes "II" to "LL" thereof, the five (5) checks drawn and issued by the petitioners in its favor; and, as Annexes "NN" to "OO" thereof, the respondent's letters of demand to the petitioners duly acknowledged by the latter.

In their verified answer to the complaint, the petitioners admitted all the transactions alleged in the complaint in the form of "direct buy" and "commission basis," but denied that the transactions remained wholly or partly unpaid. The petitioners further alleged that:

1. They were not responsible for the collection of the amounts as well as agency covering those transactions covered by Annexes "F," "I,"³⁶ and "HH."³⁷ Petitioner Inocencio admitted the agency only over the transactions covered by Annexes "J,"³⁸ "K,"³⁹ "X,"⁴⁰ "Z,"⁴¹ "AA,"⁴² and "GG,"⁴³ and that, with the assistance of petitioner PeÃ±a, the amounts covered by Annexes "I,"⁴⁴ "J,"⁴⁵ "K,"⁴⁶ "X,"⁴⁷ "Z,"⁴⁸ "AA,"⁴⁹ "DD,"⁵⁰ "GG,"⁵¹ and "HH"⁵² had been collected and paid to the respondent;

2. Petitioner Inocencio admitted the agency and responsibility for the collection of the amounts appearing in Annexes "C" to "E,"⁵³ "V,"⁵⁴ "W,"⁵⁵ "Y,"⁵⁶ "EE,"⁵⁷ and "FF,"⁵⁸ and averred that the amounts covered by Annexes "D,"⁵⁹ "E,"⁶⁰ "V,"⁶¹ "W,"⁶² "Y,"⁶³ "EE,"⁶⁴ and "FF"⁶⁵ had already been collected by her and paid to the respondent;

3. Petitioner PeÃ±a admitted the agency and her responsibility for the collection of the amounts covered by Annexes "B,"⁶⁶ "G,"⁶⁷ "H,"⁶⁸ "BB,"⁶⁹ and "DD,"⁷⁰ and averred that the amount covered by Annex "CC"⁷¹ had been collected by her and paid to the respondent;

4. Petitioner PeÃ±a admitted her purchases of the goods covered by Annexes "L" to "U,"⁷² that the same were still unpaid and expressed her willingness to pay the same to the respondent;

5. The goods covered by Annexes "B,"⁷³ "G,"⁷⁴ and "H"⁷⁵ was of poor quality; consequently, the customers of the petitioners rejected the goods and refused to pay for the same;

6. Petitioner Inocencio admitted that she issued the checks, Annexes "II," "JJ," "KK," and "LL," but averred that she did so only in blank and delivered the same to petitioner PeÃ±a, and only to show the same to the respondent to prove that petitioner Inocencio had a checking account; that without the knowledge and consent of petitioner Inocencio, petitioner PeÃ±a delivered the checks to the respondent in payment of her purchases from the latter; and that petitioner Inocencio did not issue Check No. 224391, Annex "MM."

On August 3, 1992, the trial court issued an Order setting the pre-trial at 8:30 a.m. on September 11, 1992 and requiring the parties to submit their respective pre-trial brief at least three days before the pre-trial date. There is no showing in the records that the petitioners were served with copies of the said order; however, their counsel received a copy of the same on August 14, 1992 and failed to file any pre-trial brief. The respondent filed its pre-trial brief on September 1, 1992. By agreement of the parties, through counsel, pre-trial was reset by the court on October 16, 1992 at 8:30 a.m. Petitioner Inocencio received a copy of the trial court's Order dated September 11, 1992. The parties failed to appear for the pre-trial on October 16, 1992. Consequently, the court dismissed the complaint. The court granted the respondent's motion for reconsideration of the order of dismissal and issued an Order on January 4, 1993 setting the pre-trial at 8:30 a.m. on February 19, 1993. The copies of the order addressed to the petitioners were returned to the court for their failure to claim the same from the post office. As per the notation on the face of the envelope containing the order addressed to the petitioners, the latter had vacated the houses indicated therein.

When the case was called for pre-trial on February 19, 1993, the petitioners and their counsel failed to appear before the court. On motion of the counsel for the respondent, the petitioners were declared as in default for their failure to appear before the court for pre-trial, and for their failure to file their pre-trial brief. The motion of the respondent to adduce its evidence ex parte against the petitioners was granted. The respondent presented Lydia C. Lao whose testimony was completed, and formally offered in evidence as Exhibits "A," "B" to "B-32," "C" to "C-5," "D," and "E" to "E-1," all of which the trial court admitted. The court then issued an order declaring the case submitted for decision. The copy of the said order addressed to the counsel of the petitioners was returned to the court for the reason that the said counsel had apparently transferred his office without notifying the court of his new address. Furthermore, the copy of the order addressed to the petitioners was returned to the court for the reason that the latter had moved to another address.

On April 16, 1993, the trial court rendered a decision in favor of the respondent, the decretal portion of which reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering defendants Johanne J. PeÃ±a and Erlana G. Vda. de Inocencio, doing business under the name and style of Largestone Enterprises, to pay, jointly and severally, plaintiff Dura-Tire and Rubber Industries, Inc. as follows:

a) the sum of P477,212.33 with legal interest per annum from January 28, 1992 until fully paid;

b) the sum of P15,000.00 as and by way of attorney's fees; andcralawlibrary

c) costs of this suit.

SO ORDERED.⁷⁶

The petitioners did not file any motion for reconsideration of the decision, nor a motion for new trial, and appealed the decision instead, contending that:

'THE TRIAL COURT ERRED IN DECLARING THAT FROM THE UNDISPUTED EVIDENCE AT HAND, PLAINTIFF APPEARS TO HAVE INDUBITABLY ESTABLISHED THE ALLEGATION IN THE COMPLAINT, THUS, ENTITLING THE PLAINTIFF TO COLLECT FROM DEFENDANTS, JOINTLY AND SEVERALLY, THE AMOUNT OF P477,212.33.

'THE TRIAL COURT ERRED IN DECLARING THE DEFENDANTS AS IN DEFAULT AND IN ALLOWING PLAINTIFF TO PRESENT EVIDENCE EX PARTE.⁷⁷

On March 19, 1996, the CA promulgated a decision affirming the decision of the RTC. The petitioners filed a motion for reconsideration of the decision, but the CA denied the same.

The Present Petition

The petitioners forthwith filed their Petition for Review on Certiorari , contending as follows:

1. THAT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE LOWER COURT DECLARING DEFENDANT-APPELLANT, ERLANA VDA. DE INOCENCIO, JOINTLY AND SEVERALLY, LIABLE TO DEFENDANT JOHANNED (SIC) PEÃ‘A, REFERRED TO AS "CUSTOMER" IN THE SURETY AGREEMENT, IN VIOLATION OF THE VERY ESSENCE OF A CONTRACT OF GUARANTY UNDER ART. 2058 OF THE NEW CIVIL CODE, AS WELL AS TO OTHER DELIVERIES AS EVIDENCED BY INVOICES (EXHIBITS B, B-1 TO B-32), WHICH WERE NOT PROVEN TO BE DELIVERIES OF WHICH JOHANNE PEÃ‘A HAD INCURRED IN DEBTEDNESS TO PLAINTIFF (SIC).

2. THAT THE HONORABLE COURT HAD ERRED IN DECLARING THAT EVEN IF IT WERE CONCEDED THAT THE DEFENDANTS DID NOT RECEIVED (SIC) THE NOTICE OF PRE-TRIAL CONFERENCE WHICH WAS RETURNED TO THE TRIAL COURT UNCLAIMED, THEIR FAILURE TO FILE A PRE-TRIAL BRIEF AT LEAST THREE DAYS BEFORE THE DATE OF PRE-TRIAL CONFERENCE AS REQUIRED IN CIRCULAR NO. 1-89 OF THE SUPREME COURT (JAN. 19, 1989) IN RELATION TO ADMINISTRATIVE CIRCULAR NO. 3-90 (JAN. 31, 1990) JUSTIFIED THE TRIAL COURT IN DECLARING THEM AS IN DEFAULT.

3. THAT THE COURT OF APPEALS HAD ERRED IN DECLARING THAT FOR FAILURE OF THE DEFENDANTS TO AVAIL THE REMEDY OF NEW TRIAL UNDER SEC. 1(a) OF RULE 37 OR IN THE ALTERNATIVE, A PETITION FOR RELIEF FROM SAID ORDER AND JUDGMENT, IT IS ABSURB (SIC) FOR THE DEFENDANT (SIC) TO QUESTION THE DEFAULT ORDER IN THE PRESENT APPEAL.⁷⁸

The issues for resolution are procedural and substantive. On the procedural issue, the petitioners assert that the trial court erred in declaring them in default for their failure to file their pre-trial brief within three days from their receipt of the Order of the trial court dated August 3, 1992 which set the pre-trial at 8:30 a.m. on September 11, 1992, and for their failure to appear before the court for the pre-trial on February 19, 1993. The petitioners assert that they never received copies of the August 3, 1992 Order of the trial court. They argue that although their counsel received on January 14, 1993 a copy of the trial court's Order dated January 4, 1993 setting the pre-trial on February 19, 1993, they cannot be faulted for their non-appearance for pre-trial on the said date. The petitioners assert that while the face of the envelope addressed to them containing the January 4, 1993 Order of the trial court states that the mail matter was not claimed by them, there is no proof on record that the requisite number of notices of registered matter were sent to and received by them before the same was returned to the court. The petitioners submit that before they could be properly declared as in default for their failure to file their pre-trial brief and for non-appearance during the pre-trial scheduled for February 19, 1993, there must be incontrovertible proof on record that they were notified of the scheduled pre-trial. The petitioners cite the ruling of this court in Vecino v. Court of Appeals.⁷⁹

The respondent, for its part, contends that the petitioners have themselves to blame for their failure to claim their mail matter despite notice thereof to them. The respondent asserts that to substantiate the petitioners' pose would be to allow them to profit from their own negligence and that of their counsel. The petitioners faulted the CA for holding that they had waived their right to assail the trial court's order of default merely because they failed to file a motion for reconsideration of the decision of the trial court or for a new trial.

The Ruling of the Court

We agree with the petitioners that the trial court erred in declaring them as in default for their failure to file a pre-trial brief at least three days before the scheduled pre-trial set on February 19, 1993 and to appear before the trial court on said date and time.

Under Section 1, Rule 20⁸⁰ of the Rules of Court,⁸¹ the parties and their counsel are mandated to appear before the court for pre-trial and if the defendants fail to do so despite due notice and without any justifiable reason therefor, they may be declared as in default, conformably to Section 2, Rule 20 of the said Rules.⁸² The parties are also mandated under Circular No. 1-89 dated January 19, 1989⁸³ to file their respective pre-trial briefs at least three days before the pre-trial conference and if the defendants fail to do so, they may be declared as in default. The parties and their counsel must be served with copies of the order of the court setting the case for pre-trial, either by personal delivery or by mail under Sections 3, 4, and 5, Rule 13⁸⁴ of the Rules of Court, or by substituted service under Section 6, Rule 13⁸⁵ of the Rules of Court.

The rule is that service by registered mail is complete upon actual receipt thereof by the addressee, except when the addressee does not claim his mail within five days from the date of the first notice of the postmaster, in which case, the service shall take effect within the said period. The certification from the postmaster would be the best evidence to prove that the notice had been validly made. However, if there is nothing on record showing how, when, and to whom, the delivery of the registry notices of the registered mail was made, the court should not rely on the notation "return to sender: unclaimed" to support the presumption of constructive service.⁸⁶

As admitted by the petitioners, a copy of the January 4, 1993 Order of the trial court was sent to and received by their counsel on January 14, 1993. A copy of the same order was placed on a sealed brown envelope, addressed to the petitioners. The records also contain a registry notice addressed to the petitioners at "Pandacan, Manila." There is no showing that the notice was sent to or received by the petitioners. In fact, the respondent even failed to submit to the trial court a certificate from the postmaster stating that the clerk of court sent a notice of registered mail to the petitioners' counsel and that the latter received the same. And yet, the trial court declared the petitioners as in default for their counsel's failure to appear for pre-trial and to file their brief three days before February 19, 1993.

We are, thus, convinced that the trial court erred in declaring the petitioners as in default, in allowing the respondent to adduce its evidence ex parte, and in rendering judgment by default against the petitioners.

However, it must be stressed that the petitioners failed to file a motion for new trial under Section 1(a), Rule 37 of the Rules of Court despite receipt of notice of the trial court's decision. The petitioners had the right to appeal the judgment by default on the ground that the said judgment was contrary to law or the evidence. They were, however, proscribed from assailing the trial court's Order dated February 19, 1993 declaring them as in default.

On the substantial as well as the other procedural aspects, petitioner Inocencio avers that the respondent failed to adduce preponderant evidence to prove its claim for the principal amount of P477,212.33. She posits that she is not liable for the checks issued by petitioner PeÃ±a with respect to those purchases made by the latter's customers. She insists that she merely guaranteed the payment of the said purchases, and that the respondent had to first exhaust all the payments to be made by petitioner PeÃ±a before suing her. The petitioners assert that Lydia Lao, the lone witness of the respondent, failed to prove that they were privies to the sales invoices,⁸⁷ or were involved in the transactions covered by the same. They contend that there is no preponderant evidence that the transactions involving the said sales invoices were covered by the surety agreement executed by and between petitioner Inocencio and the respondent.

The burden of proof is on the petitioners to establish their defenses by a preponderance of evidence while the burden of proof is on the respondent, as plaintiff, to prove by a preponderance of evidence the material allegations of its complaint.⁸⁸ If the defendants admit the material allegations of the complaint, the plaintiff is then relieved of its burden.

In this case, the respondent alleged in its complaint that during the period of November 1990 to August 1991, it delivered to the petitioners or to their designated buyers, or upon their orders, credit or on consignment, tires and rubber products evidenced by the sales invoices appended to its complaint,⁸⁹ and that the petitioners still had an outstanding account for products covered by the said sales invoices in the total amount of P329,944.50, inclusive of the total amount of P147,267.83 of the dishonored checks, all of which amounted to P477,212.33. The respondent was, thus, burdened to prove these allegations.

However, petitioner PeÃ±a admitted liability for the products/deliveries to Largestone Enterprises covered by the sales invoices, Annexes "B-10" to "B-19"⁹⁰ in the total amount of P66,789.07, and the sales invoice, Annex "CC" of the complaint,⁹¹ in the amount of P27,235.00. Petitioner Inocencio, likewise, admitted liability for the tires and rubber products covered by the sales invoices, Annexes "I," "J," "K," "W," "X," "Z," "AA," "DD," "GG," "HH," "D," "E," "V," "W," "Y," "EE," and ""FF" in the total amount of P186,706.46. While petitioner Inocencio claimed that the aforesaid amount of P186,706.46 had already been remitted by her to the respondent, there is no record of any receipt which was issued by the respondent to serve as evidence of such payment. Neither did petitioner PeÃ±a adduce any receipt that was issued by the respondent for the amount of P27,235.00. In fine then, petitioner PeÃ±a's total admitted accountability amounted to P94,024.07, while that of petitioner Inocencio amounted to P186,706.46, or the total amount of P280,730.53.

The petitioners claim that they are not liable for the value of the merchandise covered by the other sales invoices on the ground that on the face of the said sales invoices, they had no involvement in the transactions covered by the same. Such contention of the petitioners lacks merit.

Although it appears in the other sales invoices that the petitioners were the salespersons who brokered the sales of the products covered by the said sales invoices to the vendees therein named, the said entries are not conclusive of the extent and the nature of the involvement of the petitioners in the sales of the products under the said sales invoices which are not absolutely binding. They may be explained and put to silence by all the facts and circumstances characterizing the true import of the dealings to which they refer.⁹² The facts contained in the said sales invoices may be contradicted by oral testimony.⁹³ Instead, while petitioner PeÃ±a appears to be the salesperson in the sales invoices in favor of Largestone, she, however, admitted that she was in fact the purchaser of the said products. Moreover, Lao testified that the petitioners purchased the merchandise described in the said sales invoices from the respondent, to be delivered to their respective customers as shown therein, and that the petitioners even promised to pay the same but reneged on their promise, prompting the respondent to send letters of demand to the petitioners. There is no evidence on record to controvert the evidence of the respondent. Furthermore, under the surety contract, petitioner Inocencio bound and obliged herself, jointly and severally, with petitioner PeÃ±a to pay for the merchandise sold and delivered to the customers of the latter or growing out of the said sales or deliveries.⁹⁴ The petitioners even drew and issued checks in partial payment of the said purchases, which checks were, however, dishonored by the drawee banks. The petitioners cannot escape liability for the transactions covered by the sales invoices.

We do not agree with the contention of the respondent that the petitioners drew and issued the checks to it in payment of obligations separate from those covered by the sales invoices appended to its complaint. The respondent failed to adduce any sales invoice issued by it showing sales and deliveries of the products to the petitioners or to their customers for which the latter drew and delivered the checks. We are convinced that the said checks were drawn and issued by the petitioners to the respondent in partial payment of the products covered by the said sales invoices.⁹⁵

In fine, the petitioners are jointly and severally liable to the respondent in the principal amount of P329,944.50.

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 42383, and its Resolution dated August 19, 1996, are hereby AFFIRMED with the modification that the petitioners are ordered to pay, jointly and severally, to the private respondent the principal amount of P329,944.50.

SO ORDERED.

Austria-Martinez, (Acting Chairman), and Chico-Nazario, JJ., concur.
Puno, J., (Chairman), on official leave.
TINGA, J., on leave.

Endnotes:

¹ Penned by Associate Justice Godardo A. Jacinto, with Associate Justices Salome A. Montoya (retired) and Oswaldo D. Agcaoili (retired), concurring.

² Penned by Judge Amor A. Reyes.

³ Exhibit "A."

⁴ Exhibit "B."

⁵ Exhibit "B-1."

⁶ Exhibit "B-2."

⁷ Exhibit "B-3."

⁸ Exhibit "B-4."

⁹ Exhibit "B-7."

¹⁰ Exhibit "B-8."

¹¹ Exhibit "B-9."

¹² Exhibit "B-10."

¹³ Exhibit "B-11."

¹⁴ Exhibit "B-12."

¹⁵ Exhibit "B-13."

¹⁶ Exhibit "B-14."

¹⁷ Exhibit "B-15."

¹⁸ Exhibit "B-16."

¹⁹ Exhibit "B-17."

²⁰ Exhibit "B-18."

²¹ Exhibit "B-19."

²² Exhibit "B-20."

²³ Exhibit "B-21."

²⁴ Exhibit "B-22."

²⁵ Exhibit "B-23."

²⁶ Exhibit "B-24."

²⁷ Exhibit "B-25."

²⁸ Exhibit "B-26."

²⁹ Exhibit "B-29."

³⁰ Exhibit "B-30."

³¹ Exhibit "B-31."

³² Exhibit "B-32."

³³ Records, pp. 4, 41, 42.

³⁴ Exhibits "D" and "E," pp. 43-44.

³⁵ Records, p. 5.

³⁶ Exhibit "B-7."

³⁷ Exhibit "B-32."

³⁸ Exhibit "B-8."

³⁹ Exhibit "B-9."

⁴⁰ Exhibit "B-22."

⁴¹ Exhibit "B-24."

⁴² Exhibit "B-25."

⁴³ Exhibit "B-31."

⁴⁴ Exhibit "B-7."

⁴⁵ Exhibit "B-8."

⁴⁶ Exhibit "B-9."

⁴⁷ Exhibit "B-22."

⁴⁸ Exhibit "B-24."

⁴⁹ Exhibit "B-25."

⁵⁰ Exhibit "B-28."

⁵¹ Exhibit "B-31."

⁵² Exhibit "B-32."

⁵³ Exhibits "B-1" to "B-3."

⁵⁴ Exhibit "B-20."

⁵⁵ Exhibit "B-21."

⁵⁶ Exhibit "B-23."

⁵⁷ Exhibit "B-29."

⁵⁸ Exhibit "B-30."

⁵⁹ Exhibit "B-2."

⁶⁰ Exhibit "B-3."

⁶¹ Exhibit "B-20."

⁶² Exhibit "B-21."

⁶³ Exhibit "B-23."

⁶⁴ Exhibit "B-29."

⁶⁵ Exhibit "B-30."

⁶⁶ Exhibit "B."

⁶⁷ Exhibit "B-5."

⁶⁸ Exhibit "B-6."

⁶⁹ Exhibit "B-26."

⁷⁰ Exhibit "B-28."

⁷¹ Exhibit "B-27."

⁷² Exhibits "B-10" to "B-19."

⁷³ Exhibit "B."

⁷⁴ Exhibit "B-5."

⁷⁵ Exhibit "B-6."

⁷⁶ Records, p. 99.

⁷⁷ CA Rollo, pp. 20-21.

⁷⁸ Rollo, p. 14.

⁷⁹ 76 SCRA 98 (1977).

⁸⁰ SEC. 4. Appearance of parties. - It shall be the duty of the parties and their counsel to appear at the pre-trial. The non-appearance of a party may be excused only if a valid cause is shown therefor or if a representative shall appear in his behalf fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and of documents.

⁸¹ Now Section 4, Rule 18 of the 1997 Rules of Civil Procedure.

⁸² Now Section 5, Rule 18 of the 1997 Rules of Civil Procedure.

⁸³ SEC. 5. Effect of failure to appear. - The failure of the plaintiff to appear when so required pursuant to the next preceding section shall be cause for dismissal of the action. The dismissal shall be with prejudice, unless, otherwise, ordered by the court. A similar failure on the part of the defendant shall be cause to allow the plaintiff to present his evidence ex parte and the court to render judgment on the basis thereof.

⁸⁴ Now Sections 5, 6 and 7, Rule 13 of the 1997 Rules of Civil Procedure.

⁸⁵ Now Section 8, Rule 13 of the 1997 Rules of Civil Procedure.

⁸⁶ Johnson and Johnson (Phils.), Inc. v. Court of Appeals, 201 SCRA 768 (1991).

⁸⁷ Exhibits "B" to "B-32."

⁸⁸ Section 1, Rule 131 of the Revised Rules of Evidence; Section 1, Rule 133, id.

⁸⁹ Exhibits "B," "B-1" to "B-32."

⁹⁰ Exhibits "B-10" to "B-19."

⁹¹ Exhibit "B-27."

⁹² Furst Brothers v. Commercial Bank, 43 S.E. 728 (1903).

⁹³ Flag Fish Company, Inc. v. Main Seafood, Inc., 34 S.E.2d 294 (1945).

⁹⁴ Exhibit "A."

⁹⁵ Exhibits "B" to "B-32."

G.R. No. 127089 - RAFAEL RENDON v. PEOPLE OF THE PHILIPPINES, ET AL.

2013-01-15T09:50:21+00:00

G.R. No. 127089 - RAFAEL RENDON v. PEOPLE OF THE PHILIPPINES, ET AL.

FIRST DIVISION

[G.R. NO. 127089 : November 19, 2004]

RAFAEL RENDON, Petitioner, v. PEOPLE OF THE PHILIPPINES, and INOCENCIA D. MAGRARE, Respondents.

D E C I S I O N

AZCUNA, J.:

Assailed in this Petition for Review is the decision of the Court of Appeals dated October 7, 1996 affirming the conviction of petitioner herein Rafael Rendon for homicide in Criminal Case No. 4181.

Rafael Rendon, petitioner herein, and his wife Teresita, were charged with the crime of murder for the death of Rodolfo Magrare. The complaint, dated November 6, 1989, stated as follows:

That on or about 5:30 o'clock more or less in the afternoon of October 28, 1989, at Brgy. Bia-an, Municipality of Hamtic, Province of Antique, Philippines, and within the preliminary jurisdiction of this Honorable Circuit Trial Court, the above-named accused, conspiring, confederating and mutually helping one another, then and there wil[l]fully, unlawfully, and feloniously with intent to kill and with treachery, [grabbed], [and] grappled with the use of bolo and spear (Bangkaw), stabbed the victim, RODOLFO MAGRARE, and [as] a result thereof, said RODOLFO MAGRARE DIED instantaneously.

Contrary to law.¹

After joint trial, the Regional Trial Court (RTC) of San Jose, Antique, Branch 11, found the spouses Rendon guilty only of homicide:

WHEREFORE in view of all the foregoing premises, accused Rafael Rendon and Teresita Rendon are hereby found guilty beyond reasonable doubt of the crime of homicide for the death of Rodolfo Magrare for which the penalty of reclusion temporal is imposed under Article 249 of the Revised Penal Code. [A]pplying the Indeterminate Sentence Law, and there being one mitigating circumstance of voluntary surrender and no aggravating circumstances to offset the former, accused are hereby sentenced to suffer an indeterminate prison term ranging from six (6) years and one (1) day of pris[i]on mayor, as minimum, to twelve (12) years and one (1) day of reclusion temporal, as maximum, and to indemnify, jointly and severally, the heirs of the deceased in the amount of P50,000.00 for the death of Rodolfo Magrare, and another sum of P15,470.00 spent in relation thereto.²

Rafael and his wife moved for the reconsideration of the above decision and on August 18, 1993, the trial court modified its ruling:

WHEREFORE, in view of all the foregoing premises, judgment is hereby rendered as follows:

Accused Rafael Rendon is hereby found guilty beyond reasonable doubt of the crime of homicide for the death of Rodolfo Magrare for which the penalty of reclusion temporal is imposed under Article 249 of the Revised Penal Code. Applying the Indeterminate Sentence Law, and there being one mitigating circumstance of voluntary surrender and no aggravating circumstances to offset the [same], accused is hereby sentenced to suffer an indeterminate prison term ranging from six (6) years and one (1) day of prision mayor, as minimum, to twelve (12) years and one (1) day of reclusion temporal or maximum, to indemnify the heirs of the deceased in the amount of P50,000.00 for the death of Rodolfo Magrare, and another sum of P15,000.00 spent in relation thereto.

Anent accused Teresita Rendon, the [c]ourt finds her guilty beyond reasonable doubt of the crime of slight physical injuries and hereby sentenced to suffer a definite prison term of ten (10) days.³

From this judgment, Rafael appealed to the Court of Appeals. He was not joined, however, by his wife, Teresita. The Court of Appeals then rendered the questioned decision, the dispositive portion of which reads as follows:

WHEREFORE, we find no reversible error in the appealed Decision, which is hereby AFFIRMED in toto.

SO ORDERED.⁴

The conviction was based on the following facts as found by the Court of Appeals:

x x x The spouses Rodolfo and Inocencia Magrare and the couple Rafael and Teresita Rendon were neighbors in Bia-an, Hamtic, Antique. In the afternoon of October 28, 1989, Rodolfo Magrare and his wife sat on a pile of sand by the roadside in front of their house whiling away their time. By and by, Rafael Rendon with a sheathed bolo hanging by his side went directly to Rodolfo. Suddenly, the bolo was unsheathed and a struggle between the two ensued. The protagonists fell to the ground and rolled over a number of times. Then Rafael and rose left behind a totally wounded Rodolfo. Rodolfo sustained a stab wound at the left side of his neck, incised wound at the buttock and five (5) abrasions in different parts of his body. He died as a result of the wound in his neck. Rafael also suffered a lacerated wound in his left arm and four (4) incised wounds in his hands. He immediately went to the police station and voluntarily surrendered.⁵

In the instant petition, the main issues brought before this Court are:

WHETHER OR NOT THE JUDGMENT IS BASED ON A MIS - APPREHENSION OF FACTS;

WHETHER OR NOT THE FINDINGS OF FACTS ARE CONFLICTING;

WHETHER OR NOT SIMULTANEOUS HEARINGS ARE ALLOWED.⁶

At the outset, this Court notes that the petition is anchored on a plea to review the factual conclusions reached by the trial court. Such a task, however, is foreclosed by the rule that in petitions for certiorari as a mode of appeal, as in the present case, only questions of law distinctly set forth may be raised. These are the questions that do not call for any examination of the probative value of the evidence presented by the parties.⁷

Furthermore, petitioner claims self-defense. He argues that the evidence he presented to prove this claim was not taken into consideration by the trial court and the Court of Appeals. It is the rule that where the accused invokes self-defense, it is incumbent upon him to prove by clear and convincing evidence that he indeed acted in defense of himself. He must rely on the strength of his own evidence and not on the weakness of the prosecution.⁸

To prove self-defense, petitioner brought forward the witness Larry Sarion,⁹ who testified that on the day the incident happened, he was at petitioner's house helping him saw some logs. According to Sarion, they stopped and rested at around 3:30 p.m., and walked to the house of petitioner's father, which was one kilometer away. At around 5:30 p.m., they proceeded back to petitioner's house and as they were walking, the victim Magrare blocked them and asked petitioner, "Why are you smiling?" Petitioner allegedly answered that he was not, but Magrare immediately grabbed petitioner's bolo. The bolo was in a sheath hung at the waist of petitioner. Magrare was not able to completely grab the bolo away from petitioner and the two men struggled for its possession. However, Magrare fell on the ground and was hit on the neck by the bolo. The witness further testified that the two men still continued to struggle for around fifteen minutes. He also saw petitioner's wife helping petitioner strike Magrare.

On the other hand, the prosecution presented two witnesses: (a) Leticia Ferreras,¹⁰ a neighbor of the Magrares, and (b) Inocencia Magrare,¹¹ the widow of the victim. Both witnesses testified that on that fateful day, at around 5:30 p.m., while they were sitting with the victim on a pile of sand in front of the house of the Magrares, petitioner came to them, unsheathed his bolo, and poised himself to attack Magrare. Petitioner, at first, was unable to hit the victim since the latter was able to grab the hand of the former. The two men then struggled for possession of the bolo, but Magrare fell and was hit on the neck by the bolo. Petitioner then called out to his wife for help. His wife came out carrying a spear and started thrusting the spear at the back of Magrare. The victim's wife also testified that petitioner and his wife dragged her husband a few meters away from where the fight began. The two then ran away after they saw that the victim had stopped moving.

This Court agrees with the Solicitor General's observation that there are diametrically opposed versions of how the event happened. When this Court is asked to go over the evidence presented by the parties, and analyze, assess and weigh the same to ascertain if the trial court, affirmed by the appellate court, was correct in according superior credit to this or that piece of evidence and, eventually, to the totality of the evidence of one party or the other, the Court will not do the same.¹² Moreover, the rule is that the conclusions of the lower court on the credibility of witnesses are entitled to great weight and respect. Unless there are substantial facts and circumstances that have been overlooked, which if considered might affect the result of the case, such findings are generally not disturbed on appeal.¹³ In the present case, this Court finds no cogent reason to depart from the findings of the lower court, as affirmed by the Court of Appeals. When the trial court's factual findings have been affirmed by the appellate court, said findings are generally conclusive and binding upon the Court.¹⁴

Petitioner also claims that he was not physically fit enough to dare to attack a bigger and stronger man like the victim, Magrare. He further asserts that, in fact, he walks with a limp, a result of a past leg injury. To prove this, petitioner brought forward Dr. Sme Panes as witness.¹⁵ Dr. Panes testified that he treated petitioner for a leg fracture from January 22, 1988 to February 28, 1988. Upon cross-examination, however, Dr. Panes admitted that such an injury may heal in only thirty days. This Court notes that the attack against Magrare happened on October 28, 1989, more than one year after petitioner allegedly suffered the alleged fracture.

Finally, this Court cannot give credence to the allegation of petitioner that the hearing on July 9, 1990 was held inside the chambers of the presiding judge, and not in open court. An examination of the records does not show that there was anything unusual by the way the trial was being held.¹⁶ Furthermore, the transcripts do not show any objection from petitioner's counsel or any statement made on record that the manner by which the trial was held was highly unusual and directly infringed upon the rights of petitioner as the accused in the case.

WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Carpio, JJ., concur.

Endnotes:

¹ Records, p. 3.

² Rollo, pp. 22-36.

³ Records, pp. 215-218.

⁴ Rollo, p. 21.

⁵ Decision of the Court of Appeals, p. 1; Rollo, p. 17.

⁶ Petition, p. 7; Rollo, p. 9.

⁷ Cormero v. Court of Appeals, 247 SCRA 291 (1995).

⁸ People v. Mercado, 159 SCRA 453 (1988).

⁹ Testimony of Larry Sarion, July 19, 1991.

¹⁰ Testimony of Leticia Ferreras, May 11, 1990.

¹¹ Testimony of Inocencia Magrare, June 14, 1990.

¹² Elayda v. Court of Appeals, 199 SCRA 349 (1991).

¹³ People v. Baluarte, 60 SCRA 356 (1974), Cortez v. Court of Appeals, 163 SCRA 139 (1988), People v. Lapitaje, et al., 397 SCRA 674 (2003).

¹⁴ People v. Castillo, G.R. No. 118912, May 28, 2004.

¹⁵ Testimony of Dr. Sme Panes, August 28, 1998.

¹⁶ Records, pp. 55-56.

G.R. No. 129416 - ZENAIDA B. TIGNO, ET AL. v. SPOUSES ESTAFINO AQUINO, ET AL.

2013-01-15T09:50:21+00:00

G.R. No. 129416 - ZENAIDA B. TIGNO, ET AL. v. SPOUSES ESTAFINO AQUINO, ET AL.

SECOND DIVISION

[G.R. NO. 129416 : November 25, 2004]

ZENAIDA B. TIGNO, IMELDA B. TIGNO and ARMI B. TIGNO, Petitioners, v. SPOUSES ESTAFINO AQUINO and FLORENTINA AQUINO and the HONORABLE COURT OF APPEALS, Respondents.

D E C I S I O N

TINGA, J.:

The controversy in the present petition hinges on the admissibility of a single document, a deed of sale involving interest over real property, notarized by a person of questionable capacity. The assailed ruling of the Court of Appeals, which overturned the findings of fact of the Regional Trial Court, relied primarily on the presumption of regularity attaching to notarized documents with respect to its due execution. We conclude instead that the document has not been duly notarized and accordingly reverse the Court of Appeals.

The facts are as follow:

On 11 January 1980, respondent spouses Estafino and Florentina Aquino (the Aquinos) filed a complaint for enforcement of contract and damages against Isidro Bustria (Bustria).¹ The complaint sought to enforce an alleged sale by Bustria to the Aquinos of a one hundred twenty thousand (120,000) square meter fishpond located in Dasci, Pangasinan. The property was not registered either under the Land Registration Act or under the Spanish Mortgage Law, though registrable under Act No. 3344.² The conveyance was covered by a Deed of Sale dated 2 September 1978.

Eventually, Bustria and the Aquinos entered into a compromise agreement, whereby Bustria agreed to recognize the validity of the sale, and the Aquinos in turn agreed to grant to Bustria the right to repurchase the same property after the lapse of seven (7) years.

Upon submission, the Court of First Instance of Pangasinan, Branch VII, approved and incorporated the compromise agreement in a Decision which it rendered on 7 September 1981.

Bustria died in October of 1986.³ On 1 December 1989, petitioner Zenaida B. Tigno (Tigno), in substitution of her deceased father Isidro Bustria,⁴ attempted to repurchase the property by filing a Motion for Consignation. She deposited the amount of Two Hundred Thirty Thousand Pesos (P200,000.00) with the trial court, now Regional Trial Court (RTC), Branch 55 at Alaminos, Pangasinan. On 18 December 1989, the Aquinos filed an opposition, arguing that the right to repurchase was not yet demandable and that Tigno had failed to make a tender of payment. In an Order dated 10 October 1999, the RTC denied the Motion for Consignation.⁵

In June of 1991, Tigno filed a Motion for a Writ of Execution, which was likewise opposed by the Aquinos, and denied by the RTC. Then, on 6 September 1991, Tigno filed an action for Revival of Judgment,⁶ seeking the revival of the decision in Civil Case No. A-1257, so that it could be executed accordingly.⁷ The Aquinos filed an answer, wherein they alleged that Bustria had sold his right to repurchase the property to them in a deed of sale dated 17 October 1985.⁸

Among the witnesses presented by the Aquinos during trial were Jesus De Francia (De Francia), the instrumental witness to the deed of sale, and former Judge Franklin CariÃ±o (Judge CariÃ±o), who notarized the same. These two witnesses testified as to the occasion of the execution and signing of the deed of sale by Bustria. Thereafter, in their Formal Offer of Documentary Evidence, the Aquinos offered for admission as their Exhibit No. "8," the deed of sale (Deed of Sale)⁹ purportedly executed by Bustria. The admission of the Deed of Sale was objected to by Tigno on the ground that it was a false and fraudulent document which had not been acknowledged by Bustria as his own; and that its existence was suspicious, considering that it had been previously unknown, and not even presented by the Aquinos when they opposed Tigno's previous Motion for Consignation.¹⁰

In an Order dated 6 April 1994, the RTC refused to admit the Deed of Sale in evidence.¹¹ A Motion for Reconsideration praying for the admission of said exhibit was denied in an Order dated 27 April 1994.¹²

Then, on 18 August 1994, a Decision was rendered by the RTC in favor of Tigno. The RTC therein expressed doubts as to the authenticity of the Deed of Sale, characterizing the testimonies of De Francia and CariÃ±o as conflicting.¹³ The RTC likewise observed that nowhere in the alleged deed of sale was there any statement that it was acknowledged by Bustria;¹⁴ that it was suspicious that Bustria was not assisted or represented by his counsel in connection with the preparation and execution of the deed of sale¹⁵ or that Aquino had raised the matter of the deed of sale in his previous Opposition to the Motion for Consignation.¹⁶ The RTC then stressed that the previous Motion for Execution lodged by Tigno had to be denied since more than five (5) years had elapsed from the date the judgment in Civil Case No. A-1257 had become final and executory; but the judgment could be revived by action such as the instant complaint. Accordingly, the RTC ordered the revival of the judgment dated 7 September 1981 in Civil Case No. A-1257.¹⁷

The Aquinos interposed an appeal to the Court of Appeals.¹⁸ In the meantime, the RTC allowed the execution pending appeal of its Decision.¹⁹ On 23 December 1996, the Court of Appeals Tenth Division promulgated a Decision²⁰ reversing and setting aside the RTC Decision. The appellate court ratiocinated that there were no material or substantial inconsistencies between the testimonies of CariÃ±o and De Francia that would taint the document with doubtful authenticity; that the absence of the acknowledgment and substitution instead of a jurat did not render the instrument invalid; and that the non-assistance or representation of Bustria by counsel did not render the document null and ineffective.²¹ It was noted that a notarized document carried in its favor the presumption of regularity with respect to its due execution, and that there must be clear, convincing and more than merely preponderant evidence to contradict the same. Accordingly, the Court of Appeals held that the RTC erred in refusing to admit the Deed of Sale, and that the document extinguished the right of Bustria's heirs to repurchase the property.

After the Court of Appeals denied Tigno's Motion for Reconsideration,²² the present petition was filed before this Court. Tigno imputes grave abuse of discretion and misappreciation of facts to the Court of Appeals when it admitted the Deed of Sale. He also argues that the appellate court should have declared the Deed of Sale as a false, fraudulent and unreliable document not supported by any consideration at all.

The general thrusts of the arguments posed by Tigno are factually based. As such, they could normally lead to the dismissal of this Petition for Review. However, while this Court is not ordinarily a trier of facts,²³ factual review may be warranted in instances when the findings of the trial court and the intermediate appellate court are contrary to each other.²⁴ Moreover, petitioner raises a substantial argument regarding the capacity of the notary public, Judge CariÃ±o, to notarize the document. The Court of Appeals was unfortunately silent on that matter, but this Court will take it up with definitiveness.

The notarial certification of the Deed of Sale reads as follows:

ACKNOWLEDGMENT

REPUBLIC OF THE PHILIPPINES)
PROVINCE OF PANGASINAN ) S.S.
MUNICIPALITY OF ALAMINOS )

SUBSCRIBED AND SWORN TO before me this 17th day of October 1985 at Alaminos, Pangasinan both parties known to me to be the same parties who executed the foregoing instrument.

FRANKLIN CARIÃ‘O
Ex-Officio Notary Public
Judge, M.T.C.
Alaminos, Pangasinan

There are palpable errors in this certification. Most glaringly, the document is certified by way of a jurat instead of an acknowledgment. A jurat is a distinct creature from an acknowledgment. An acknowledgment is the act of one who has executed a deed in going before some competent officer or court and declaring it to be his act or deed; while a jurat is that part of an affidavit where the officer certifies that the same was sworn before him.²⁵ Under Section 127 of the Land Registration Act,²⁶ which has been replicated in Section 112 of Presidential Decree No. 1529,²⁷ the Deed of Sale should have been acknowledged before a notary public.²⁸

But there is an even more substantial defect in the notarization, one which is determinative of this petition. This pertains to the authority of Judge Franklin CariÃ±o to notarize the Deed of Sale.

It is undisputed that Franklin CariÃ±o at the time of the notarization of the Deed of Sale, was a sitting judge of the Metropolitan Trial Court of Alaminos.²⁹ Petitioners point out, citing Tabao v. Asis,³⁰ that municipal judges may not undertake the preparation and acknowledgment of private documents, contracts, and other acts of conveyance which bear no relation to the performance of their functions as judges.³¹ In response, respondents claim that the prohibition imposed on municipal court judges from notarizing documents took effect only in December of 1989, or four years after the Deed of Sale was notarized by CariÃ±o.³²

Respondent's contention is erroneous. Municipal Trial Court (MTC) and Municipal Circuit Trial Court (MCTC) judges are empowered to perform the functions of notaries public ex officio under Section 76 of Republic Act No. 296, as amended (otherwise known as the Judiciary Act of 1948) and Section 242 of the Revised Administrative Code.³³ However, as far back as 1980 in Borre v. Moya,³⁴ the Court explicitly declared that municipal court judges such as CariÃ±o may notarize only documents connected with the exercise of their official duties.³⁵ The Deed of Sale was not connected with any official duties of Judge CariÃ±o, and there was no reason for him to notarize it. Our observations as to the errant judge in Borre are pertinent in this case, considering that Judge CariÃ±o identified himself in the Deed of Sale as "Ex-Officio Notary Public, Judge, MTC:"

[A notary ex officio] should not compete with private law practitioners or regular notaries in transacting legal conveyancing business.

In the instant case, it was not proper that a city judge should notarize documents involving private transactions and sign the document in this wise: "GUMERSINDO ARCILLA, Notary Public Ex-Officio, City Judge" (p. 16, Rollo, Annex D of Complaint). In doing so, he obliterated the distinction between a regular notary and a notary ex officio.³⁶

There are possible grounds for leniency in connection with this matter, as Supreme Court Circular No. I-90 permits notaries public ex officio to perform any act within the competency of a regular notary public provided that certification be made in the notarized documents attesting to the lack of any lawyer or notary public in such municipality or circuit. Indeed, it is only when there are no lawyers or notaries public that the exception applies.³⁷ The facts of this case do not warrant a relaxed attitude towards Judge CariÃ±o's improper notarial activity. There was no such certification in the Deed of Sale. Even if one was produced, we would be hard put to accept the veracity of its contents, considering that Alaminos, Pangasinan, now a city,³⁸ was even then not an isolated backwater town and had its fair share of practicing lawyers.

There may be sufficient ground to call to task Judge CariÃ±o, who ceased being a judge in 1986, for his improper notarial activity. Perhaps though, formal sanction may no longer be appropriate considering Judge CariÃ±o's advanced age, assuming he is still alive.³⁹ However, this Decision should again serve as an affirmation of the rule prohibiting municipal judges from notarizing documents not connected with the exercise of their official duties, subject to the exceptions laid down in Circular No. 1-90.

Most crucially for this case, we should deem the Deed of Sale as not having been notarized at all. The validity of a notarial certification necessarily derives from the authority of the notarial officer. If the notary public does not have the capacity to notarize a document, but does so anyway, then the document should be treated as unnotarized. The rule may strike as rather harsh, and perhaps may prove to be prejudicial to parties in good faith relying on the proferred authority of the notary public or the person pretending to be one. Still, to admit otherwise would render merely officious the elaborate process devised by this Court in order that a lawyer may receive a notarial commission. Without such a rule, the notarization of a document by a duly appointed notary public will have the same legal effect as one accomplished by a non-lawyer engaged in pretense.

The notarization of a document carries considerable legal effect. Notarization of a private document converts such document into a public one, and renders it admissible in court without further proof of its authenticity.⁴⁰ Thus, notarization is not an empty routine; to the contrary, it engages public interest in a substantial degree and the protection of that interest requires preventing those who are not qualified or authorized to act as notaries public from imposing upon the public and the courts and administrative offices generally.⁴¹

On the other hand, what then is the effect on the Deed of Sale if it was not notarized? True enough, from a civil law perspective, the absence of notarization of the Deed of Sale would not necessarily invalidate the transaction evidenced therein. Article 1358 of the Civil Code requires that the form of a contract that transmits or extinguishes real rights over immovable property should be in a public document, yet it is also an accepted rule that the failure to observe the proper form does not render the transaction invalid. Thus, it has been uniformly held that the form required in Article 1358 is not essential to the validity or enforceability of the transaction, but required merely for convenience.⁴² We have even affirmed that a sale of real property though not consigned in a public instrument or formal writing, is nevertheless valid and binding among the parties, for the time-honored rule is that even a verbal contract of sale or real estate produces legal effects between the parties.⁴³

Still, the Court has to reckon with the implications of the lack of valid notarization of the Deed of Sale from the perspective of the law on evidence. After all, the case rests on the admissibility of the Deed of Sale.

Clearly, the presumption of regularity relied upon by the Court of Appeals no longer holds true since the Deed of Sale is not a notarized document. Its proper probative value is governed by the Rules of Court. Section 19, Rule 132 states:

Section 19. Classes of documents. For the purpose of their presentation in evidence, documents are either public or private.

Public documents are:

(a) The written official acts, or records of the official acts of the sovereign authority, official bodies and tribunals, and public officers, whether of the Philippines, or of a foreign country;

(b) Documents acknowledged before a notary public except last wills and testaments; andcralawlibrary

(c) Public records, kept in the Philippines, of private documents required by law to be entered therein.

All other writings are private. (Emphasis supplied.)

The Deed of Sale, invalidly notarized as it was, does not fall under the enumeration of public documents; hence, it must be considered a private document. The nullity of the alleged or attempted notarization performed by Judge CariÃ±o is sufficient to exclude the document in question from the class of public documents. Even assuming that the Deed of Sale was validly notarized, it would still be classified as a private document, since it was not properly acknowledged, but merely subscribed and sworn to by way of jurat.

Being a private document, the Deed of Sale is now subject to the requirement of proof under Section 20, Rule 132, which states:

Section 20. Proof of private document. Before any private document offered as authentic is received in evidence, its due execution and authenticity must be proved either:

(a) By anyone who saw the document executed or written; or

(b) By evidence of the genuineness of the signature or handwriting of the maker.

Any other private document need only be identified as that which is claimed to be.

The Deed of Sale was offered in evidence as authentic by the Aquinos, who likewise insist that its enforceability militates against Tigno's claim. Correspondingly, the burden falls upon the Aquinos to prove its authenticity and due execution. The Court of Appeals clearly erred in not appreciating the Deed of Sale as a private document and in applying the presumption of regularity that attaches only to duly notarized documents, as distinguished from private documents.

Did the RTC err then in refusing to admit the Deed of Sale? We hold that it did not. Section 20, Rule 132 provides ample discretion on the trier of fact before it may choose to receive the private document in evidence. The RTC wisely refused to admit the Deed of Sale, taking great lengths as it did to explain its doubts as to its veracity. The RTC was not convinced of the proffered proof by the Aquinos, and the exercise of its sound discretion as the primary trier of fact warrants due respect.

The most telling observation of the RTC relates to the fact that for the very first time respondents alleged the existence of the Deed of Sale when they filed their answer to petitioner's current action to revive judgment.⁴⁴ Prior to the initiation of the present action, Tigno had tried to operationalize and implement the Compromise Agreement through two judicial means: consignation and execution of judgment. The Aquinos duly opposed these prior attempts of the petitioner to exercise the right to repurchase, but they did not raise then the claim that such right to repurchase was already extinguished by the Deed of Sale. Tigno attempted to exercise the right to repurchase only a few years after the execution of the Deed of Sale to which respondents themselves were signatories. Thus, it is incredulous that the Aquinos did not invoke the Deed of Sale when they opposed in court petitioner's successive attempts at consignation and execution of judgment. The Deed of Sale, if in existence and valid, would have already precluded Tigno's causes of action for either consignation or execution of judgment. The only believable conclusion, as drawn by the RTC, was that the Deed of Sale had yet to be created when petitioner moved in 1990 for consignation and execution of judgment an existential anomaly if we were to agree with the respondents that such document had been signed and notarized back in 1985.

The dubiousness in origin of the Deed of Sale is not alleviated by the other observations of the RTC. It also pointed to certain incredible aspects in the Aquinos' tale of events. It noted that no receipts were ever presented by the respondents to evidence actual payment of consideration by them to Bustria, despite the allegation of the respondents that the amount was covered by seven (7) receipts.⁴⁵ The Aquinos claimed that Bustria kept all the receipts, an assertion which the RTC found as unbelievable, citing ordinary human nature to ask for receipts for significant amounts given and to keep the same.⁴⁶ In itself, the absence of receipts, or any proof of consideration, would not be conclusive since consideration is always presumed. However, given the totality of the circumstances surrounding this case, the absence of such proof further militates against the claims of the Aquinos.

We can appreciate in a similar vein the observation of the Court of Appeals that Bustria did not bother to seek his lawyer's assistance as regards the execution of the Deed of Sale, considering that the subject property had previously been fiercely litigated. Although the Court of Appeals was correct in ruling that the document would not be rendered null or ineffective due to the lack of assistance of counsel, the implausibility of the scenario strikes as odd and therefore reinforces the version found by the RTC as credible.

The Court likewise has its own observations on the record that affirm the doubts raised by the Court of Appeals. Isidro Bustria, who would die in 1986, was already ninety-three (93) years old when he allegedly signed the Deed of Sale in 1985. Still, the Aquinos asserted before the RTC that Bustria traveled unaccompanied from his home in Dasol, Pangasinan, passing through two towns to Alaminos, to execute the Deed of Sale. Without discrediting the accomplishments of nonagenarians capable of great physical feats, it should be acknowledged as a matter of general assumption that persons of Bustria's age are typically sedentary and rarely so foolhardy as to insist on traveling significant distances alone.

Also of note is the fact that there are glaring differences as to the alleged signature of Bustria on the Deed of Sale and as it otherwise appears on the judicial record. Bustria's signature in the 1981 Compromise Agreement is noticeably shaky which is not surprising, considering that it was subscribed when Bustria was eighty-nine (89) years old. However, Bustria's signature on the Deed of Sale, which if genuine was affixed when he was already ninety-three (93) years old, is remarkably steady in its strokes. There are also other evident differences between Bustria's signature on the Deed of Sale and on other documents on the record.

Admittedly, these doubts cast above arise in chief from an appreciation of circumstantial evidence. These have to be weighed against the findings of the Court of Appeals that the fact that Bustria signed the Deed of Sale was established by the respective testimonies of witnesses De Francia and Judge CariÃ±o. In its own appreciation of these testimonies, the RTC alluded to notable inconsistencies in their testimonies. As a final measure of analysis, the Court shall now examine whether the appellate court was in error in reversing the conclusion of the RTC on these testimonies.

The inconsistencies cited by the RTC were that De Francia testified that Judge CariÃ±o himself prepared and typed the Deed of Sale in his office, where the document was signed,⁴⁷ while Judge CariÃ±o testified that he did not type the Deed of Sale since it was already prepared when the parties arrived at his office for the signing.⁴⁸ On this point, the Court of Appeals stated with utter nonchalance that a perusal of the record revealed no material or substantial inconsistencies between the testimonies of Judge CariÃ±o and De Francia.

Strangely, the appellate court made no comment as to the inconsistency pointed out by the RTC as to who prepared the Deed of Sale. If the only point of consideration was the due execution of the Deed of Sale, then the Court of Appeals should have properly come out with its finding. Other variances aside, there are no contradictions in the testimonies of Judge CariÃ±o and De Francia on the question of whether or not Bustria signed the Deed of Sale.

However, as earlier established, the Deed of Sale is a private document. Thus, not only the due execution of the document must be proven but also its authenticity. This factor was not duly considered by the Court of Appeals. The testimonies of Judge CariÃ±o and De Francia now become material not only to establish due execution, but also the authenticity of the Deed of Sale. And on this point, the inconsistencies pointed out by the RTC become crucial.

The matter of authenticity of the Deed of Sale being disputed, the identity of the progenitor of this all-important document is a material evidentiary point. It is disconcerting that the very two witnesses of the respondent offered to prove the Deed of Sale, flatly contradict each other on the basis of their own personal and sensory knowledge. Worse, the purported author of the Deed of Sale disavowed having drafted the document, notwithstanding the contrary testimony grounded on personal knowledge by the documentary witness.

Establishing the identity of the person who wrote the Deed of Sale would not ordinarily be necessary to establish the validity of the transaction it covers. However, since it is the authenticity of the document itself that is disputed, then the opposing testimonies on that point by the material witnesses properly raises questions about the due execution of the document itself. The inconsistencies in the testimonies of Judge CariÃ±o and De Francia are irreconcilable. It is not possible to affirm the testimony of either without denigrating the competence and credibility of the other as a witness. If Judge CariÃ±o was truthful in testifying that he did not write the Deed of Sale, then doubt can be cast as to the reliability of the notarial witness De Francia. It takes a leap of imagination, a high level of gumption, and perverse deliberation for one to erroneously assert, under oath and with particularities, that a person drafted a particular document in his presence.

However, if we were to instead believe De Francia, then the integrity of the notary public, Judge CariÃ±o, would be obviously compromised. Assuming that Judge CariÃ±o had indeed authored the Deed of Sale, it would indeed be odd that he would not remember having written the document himself yet sufficiently recall notarizing the same. If his testimony as to authorship of the document is deemed as dubious, then there is all the reason to make a similar assumption as to his testimony on the notarization of the Deed of Sale.

These inconsistencies are not of consequence because there is need to indubitably establish the author of the Deed of Sale. They are important because they cast doubt on the credibility of those witnesses of the Aquinos, presented as they were to attest to the due execution and authenticity of the Deed of Sale. The Court of Appeals was clearly in error in peremptorily disregarding this observation of the RTC.

As a result, we are less willing than the Court of Appeals to impute conclusive value to the testimonies of de Francia and Judge CariÃ±o. The totality of the picture leads us to agree with the trial court that the Deed of Sale is ineluctably dubious in origin and in execution. The Court deems as correct the refusal of the RTC to admit the Deed of Sale, since its due execution and authenticity have not been proven. The evidence pointing to the non-existence of such a transaction is so clear and convincing that it is sufficient even to rebut the typical presumption of regularity arising from the due execution of notarial documents. However, for the reasons stated earlier, the Deed of Sale is ineluctably an unnotarized document. And the lower court had more than sufficient basis to conclude that it is a spurious document.

Since the validity of the Deed of Sale has been successfully assailed, Tigno's right to repurchase was not extinguished at the time of the filing of the Petition for revival of judgment, as correctly concluded by the RTC. The Court of Appeals being in error when it concluded otherwise, the reinstatement of the RTC Decision is warranted.

WHEREFORE, the Petition is GRANTED. The assailed Decision dated 23 December 1996 and Resolution dated 9 June 1997 of the Court of Appeals in CA-G.R. CV No. 49879 is REVERSED, and the Decision dated 18 August 1994 of the Regional Trial Court of Alaminos, Pangasinan, Branch 55, in Civil Case No. A-1918 is REINSTATED. Costs against respondents.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

Endnotes:

¹ Docketed as Civil Case No. A-1257.

² CA Rollo, p. 31.

³ Rollo, p. 17.

⁴ Petitioner Zenaida B. Tigno herself died on 28 September 1993, and is now substituted in this action by her children Imelda B. Tigno and Armi B. Tigno. Her husband, Camilo D. Tigno, had also died on 21 March 1997. Id. at 8.

⁵ Tigno appealed such denial to the Court of Appeals, but subsequently withdrew her appeal in March of 1991. Id. at 11.

⁶ Docketed as Civil Case No. A-1918.

⁷ Id. at 27.

⁸ Id. at 29.

⁹ Captioned "Sale/Renunciation of Right to Repurchase." Id. at 12.

¹⁰ Id. at 12.

¹¹ Id. at 32. Order penned by Judge V. Bantugan.

¹² Id. at 32-33.

¹³ Id. at 49.

¹⁴ Ibid.

¹⁵ Id. at 49-50.

¹⁶ Id. at 50.

¹⁷ Id. at 53.

¹⁸ Docketed as CA-G.R. CV No. 49879.

¹⁹ Rollo, pp. 12-13.

²⁰ Penned by Justice M. Gonzaga-Reyes, concurred in by Justices R. Mabutas, Jr. and P. AliÃ±o-Hormachuelos.

²¹ Rollo, p. 80.

²² Id. at 91-92.

²³ See e.g., Republic v. Alagad, G.R. No. 66807, 26 January 1989, 169 SCRA 455.

²⁴ See e.g., Lee Eng Hong v. Court of Appeals, 311 Phil. 423 (1995).

²⁵ S. Guevarra, Legal Forms Annotated 40 (8th rev. ed., 1966); citing Bouvier. For an extended disquisition on the differences between a jurat and an acknowledgment, see Gamido v. New Bilibid Prisons (NBP) Officials, 312 Phil. 100, 104.

²⁶ Act No. 496 (1902).

²⁷ "Amending and Codifying the Laws Relative to Registration of Property and for Other Purposes."

²⁸ The provision reads:

Deeds, conveyances, mortgages, leases, releases and discharges affecting lands, whether registered under this act or unregistered shall be sufficient in law when made substantially in accordance with the following forms, and shall be as effective to convey, encumber, lease, release, discharge or bind the lands as though made in accordance with the more prolix forms heretofore in use: Provided, That every such instrument shall be signed by the person or persons executing the same, in the presence of two witnesses, who shall sign the instrument as witnesses to the execution thereof, and shall be acknowledged to be his or their free act and deed by the person or persons executing the same, before the judge of a court of record, or clerk of a court of record, or a notary public, or a justice of the peace, who shall certify to such acknowledgment substantially in the form next hereinafter stated. (Emphasis supplied.)

²⁹ Rollo, p. 17. See also TSN dated 25 May 1993, p. 3.

³⁰ 322 Phil. 630 (1996).

³¹ Rollo, p. 17.

³² Id. at 123.

³³ See Ellert v. Hon. Galapon Jr., 391 Phil. 456 (2000).

³⁴ A.M. No. 1765-CFI, 17 October 1980, 100 SCRA 314.

³⁵ Id. at 321.

³⁶ Id. at 321.

³⁷ Balayon v. Ocampo, A.M. No. MTJ-91-619, 29 January 1993, 218 SCRA 13.

³⁸ Per Republic Act No. 9025 (2001).

³⁹ Hon. CariÃ±o was sixty-six (66) years old when he testified before the RTC on 25 May 1993, thus he would be at least seventy-seven (77) years old as of this writing. See TSN dated 25 May 1993, p. 2.

⁴⁰ Joson v. Baltazar, A.C. No. 575, 14 February 1991, 194 SCRA 114, 119, citing Aspacio v. Inciong, 161 SCRA 181(1988); Bermejo v. Barrios, 31 SCRA 764 (1970). See also BA Finance Corporation v. IAC, G.R. No. 76497, 20 January 1993, 217 SCRA 261, 274; Cabanilla v. Cristal-Tenerio, A.C. No. 6139, 11 November 2003, 415 SCRA 353, 361.

⁴¹ Id.

⁴² See Republic v. Sandiganbayan, G.R. NOS. 108292, 108368, 108548-49, 108550, 10 September 1993, 226 SCRA 314, 322-323, citing 4 Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, 546 Phil. (191). See also Agasen v. Court of Appeals, 382 Phil. 391 (2000), Tapec v. Court of Appeals, G.R. No. 111952, 26 October 1994. "The codal provisions do not require accomplishment of acts or contracts in a public instrument in order to validate the act or contract but only to insure its efficacy so that after the existence of the act or contract has been admitted, the party bound may be compelled to execute the document." Hawaiian Philippine Co. v. Hernaez, 45 Phil. 746 (1924).

⁴³ See Bucton v. Gabar, 154 Phil. 447 (1974); citing Couto v. Cortes, 8 Phil., 459, 460 (1907); Guerrero v. Miguel, 10 Phil., 52, 53 (1908). See also Art. 1405, New Civil Code.

⁴⁴ Rollo, p. 50.

⁴⁵ Id. at 51.

⁴⁶ Ibid.

⁴⁷ Id. at 48-49.

⁴⁸ Id. at 49.

G.R. No. 136438 - TEOFILO C. VILLARICO v. VIVENCIO SARMIENTO, ET AL.

2013-01-15T09:50:22+00:00

G.R. No. 136438 - TEOFILO C. VILLARICO v. VIVENCIO SARMIENTO, ET AL.

THIRD DIVISION

[G.R. NO. 136438 : November 11, 2004]

TEOFILO C. VILLARICO, Petitioner, v. VIVENCIO SARMIENTO, SPOUSES BESSIE SARMIENTO-DEL MUNDO & BETH DEL MUNDO, ANDOK'S LITSON CORPORATION and MARITES' CARINDERIA, Respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us is a Petition for Review on Certiorari of the Decision¹ of the Court of Appeals dated December 7, 1998 in CA-G.R. CV No. 54883, affirming in toto the Decision² of the Regional Trial Court (RTC) of ParaÃ±aque City, Branch 259, dated November 14, 1996, in Civil Case No. 95-044.

The facts of this case, as gleaned from the findings of the Court of Appeals, are:

Teofilo C. Villarico, petitioner, is the owner of a lot in La Huerta, ParaÃ±aque City, Metro Manila with an area of sixty-six (66) square meters and covered by Transfer Certificate of Title (T.C.T.) No. 95453 issued by the Registry of Deeds, same city.

Petitioner's lot is separated from the Ninoy Aquino Avenue (highway) by a strip of land belonging to the government. As this highway was elevated by four (4) meters and therefore higher than the adjoining areas, the Department of Public Works and Highways (DPWH) constructed stairways at several portions of this strip of public land to enable the people to have access to the highway.

Sometime in 1991, Vivencio Sarmiento, his daughter Bessie Sarmiento and her husband Beth Del Mundo, respondents herein, had a building constructed on a portion of said government land. In November that same year, a part thereof was occupied by Andok's Litson Corporation and Marites' Carinderia, also impleaded as respondents.

In 1993, by means of a Deed of Exchange of Real Property, petitioner acquired a 74.30 square meter portion of the same area owned by the government. The property was registered in his name as T.C.T. No. 74430 in the Registry of Deeds of ParaÃ±aque City.

In 1995, petitioner filed with the RTC, Branch 259, ParaÃ±aque City, a complaint for accion publiciana against respondents, docketed as Civil Case No. 95-044. He alleged inter alia that respondents' structures on the government land closed his "right of way" to the Ninoy Aquino Avenue; and encroached on a portion of his lot covered by T.C.T. No. 74430.

Respondents, in their answer, specifically denied petitioner's allegations, claiming that they have been issued licenses and permits by ParaÃ±aque City to construct their buildings on the area; and that petitioner has no right over the subject property as it belongs to the government.

After trial, the RTC rendered its Decision, the dispositive portion of which reads:

"WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring the defendants to have a better right of possession over the subject land except the portion thereof covered by Transfer Certificate of Title No. 74430 of the Register of Deeds of ParaÃ±aque;

2. Ordering the defendants to vacate the portion of the subject premises described in Transfer Certificate of Title No. 74430 and gives its possession to plaintiff; andcralawlibrary

3. Dismissing the claim for damages of the plaintiff against the defendants, and likewise dismissing the claim for attorney's fees of the latter against the former.

Without pronouncement as to costs.

SO ORDERED."³

The trial court found that petitioner has never been in possession of any portion of the public land in question. On the contrary, the defendants are the ones who have been in actual possession of the area. According to the trial court, petitioner was not deprived of his "right of way" as he could use the Kapitan Tinoy Street as passageway to the highway.

On appeal by petitioner, the Court of Appeals issued its Decision affirming the trial court's Decision in toto, thus:

"WHEREFORE, the judgment hereby appealed from is hereby AFFIRMED in toto, with costs against the plaintiff-appellant.

SO ORDERED."⁴

In this petition, petitioner ascribes to the Court of Appeals the following assignments of error:

"I

THE FINDINGS OF FACT OF THE HON. COURT OF APPEALS CONTAINED A CONCLUSION WITHOUT CITATION OF SPECIFIC EVIDENCE ON WHICH THE SAME WAS BASED.

II

THE HON. COURT OF APPEALS ERRED IN CONSIDERING THAT THE ONLY ISSUE IN THIS CASE IS WHETHER OR NOT THE PLAINTIFF-APPELLANT HAS ACQUIRED A RIGHT OF WAY OVER THE LAND OF THE GOVERNMENT WHICH IS BETWEEN HIS PROPERTY AND THE NINOY AQUINO AVENUE.

III

THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT ACCION PUBLICIANA IS NOT THE PROPER REMEDY IN THE CASE AT BAR.

IV

THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT THE EXISTENCE OF THE PLAINTIFF-APPELLANT'S RIGHT OF WAY DOES NOT CARRY POSSESSION OVER THE SAME.

V

THE HON. COURT OF APPEALS ERRED IN NOT RESOLVING THE ISSUE OF WHO HAS THE BETTER RIGHT OF POSSESSION OVER THE SUBJECT LAND BETWEEN THE PLAINTIFF-APPELLANT AND THE DEFENDANT-APPELLEES."⁵

In their comment, respondents maintain that the Court of Appeals did not err in ruling that petitioner's action for accion publiciana is not the proper remedy in asserting his "right of way" on a lot owned by the government.

Here, petitioner claims that respondents, by constructing their buildings on the lot in question, have deprived him of his "right of way" and his right of possession over a considerable portion of the same lot, which portion is covered by his T.C.T. No. 74430 he acquired by means of exchange of real property.

It is not disputed that the lot on which petitioner's alleged "right of way" exists belongs to the state or property of public dominion. Property of public dominion is defined by Article 420 of the Civil Code as follows:

"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 other 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."

Public use is "use that is not confined to privileged individuals, but is open to the indefinite public."⁶ Records show that the lot on which the stairways were built is for the use of the people as passageway to the highway. Consequently, it is a property of public dominion.

Property of public dominion is outside the commerce of man and hence it: (1) cannot be alienated or leased or otherwise be the subject matter of contracts; (2) cannot be acquired by prescription against the State; (3) is not subject to attachment and execution; and (4) cannot be burdened by any voluntary easement.⁷

Considering that the lot on which the stairways were constructed is a property of public dominion, it can not be burdened by a voluntary easement of right of way in favor of herein petitioner. In fact, its use by the public is by mere tolerance of the government through the DPWH. Petitioner cannot appropriate it for himself. Verily, he can not claim any right of possession over it. This is clear from Article 530 of the Civil Code which provides:

"ART. 530. Only things and rights which are susceptible of being appropriated may be the object of possession."

Accordingly, both the trial court and the Court of Appeals erred in ruling that respondents have better right of possession over the subject lot.

However, the trial court and the Court of Appeals found that defendants' buildings were constructed on the portion of the same lot now covered by T.C.T. No. 74430 in petitioner's name. Being its owner, he is entitled to its possession.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated December 7, 1998 in CA-G.R. CV No. 54883 is AFFIRMED with MODIFICATION in the sense that neither petitioner nor respondents have a right of possession over the disputed lot where the stairways were built as it is a property of public dominion. Costs against petitioner.

SO ORDERED.

Panganiban, (Chairman), Carpio Morales and Garcia, JJ., concur.
Corona, J., on leave.

Endnotes:

¹ CA Rollo, pp. 81-85. Penned by Associate Justice Hector L. HofileÃ±a (ret.) and concurred in by Associate Justices Jorge B. Imperial (now deceased) and Omar U. Amin (ret.).

² Id. at 45-50.

³ Id. at 49-50.

⁴ Id. at 84.

⁵ Rollo at 10.

⁶ US v. Tan Piaco, 40 Phil. 853, 856 (1920).

⁷ Tolentino II, Civil Code (1992 ed.), 31-32.

G.R. No. 136477 - M.A. SANTANDER CONSTRUCTION, INC. v. ZENAIDA VILLANUEVA

2013-01-15T09:50:22+00:00

G.R. No. 136477 - M.A. SANTANDER CONSTRUCTION, INC. v. ZENAIDA VILLANUEVA

THIRD DIVISION

[G.R. NO. 136477 : November 10, 2004]

M.A. SANTANDER CONSTRUCTION, INC., Petitioner, v. ZENAIDA VILLANUEVA, Respondent.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Is non-payment of the docket fees and other legal fees a valid ground to dismiss an appeal? This is the only issue in the instant case presented for our resolution.

Challenged in this Petition for Review are the Resolutions¹ of the Court of Appeals dated November 5, 1998 and December 4, 1998 in CA-G.R. CV No. 60439. The Appellate Court dismissed the appeal taken by M.A. Santander Construction, Inc., petitioner, from the adverse Decision of the Regional Trial Court (RTC), Branch 15, San Mateo, Rizal in Civil Case No. 1153-95 for non-payment of docket and other lawful fees.

The instant case stemmed from a complaint for a sum of money filed with the RTC of San Mateo, Rizal on April 11, 1995 by respondent Zenaida Villanueva against petitioner, docketed as Civil Case No. 1153-95. After hearing the case on the merits, the trial court rendered an undated Decision in favor of respondent.

On March 9, 1998, petitioner interposed an appeal to the Court of Appeals.

As earlier mentioned, the Court of Appeals dismissed the appeal for petitioner's failure to pay the required appeal fees.

In its motion for reconsideration, petitioner, through counsel alleged:

"II

With deepest apology to this Honorable Tribunal, herein undersigned counsel admits that he failed to pay the corresponding docket and other fees before the Clerk of Court of the Regional Trial Court of San Mateo, Rizal, for reason that still entertains in his mind the old procedure of waiting from this Honorable COURT for an order/directive to pay the fee before this Honorable COURT OF APPEALS pursuant to the then old standing procedure."²

On November 13, 1998, petitioner paid the required fees.

On December 4, 1998, the Court of Appeals denied petitioner's motion for reconsideration, thus:

"Attached to defendant's Motion for Reconsideration dated November 17, 1998 are xerox copies of OR Nos. 8128693, 3078792, and 7403620, showing its payments of the appellate docket and other lawful fees on November 13, 1998. Obviously, such payments were made only after defendant's receipt of the resolution of November 5, 1998. Not being in accord with Section 4 of Rule 41, which requires payment of the docket and other lawful fees within the period to appeal, the payments made by defendant on November 13, 1998 did not cure the failure to perfect an appeal.

WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.

SO ORDERED."³

Hence, the instant recourse to this Court.

Petitioner contends that an appeal is perfected by the mere filing of a Notice of Appeal. The payment of the docket fee, not being necessary for its perfection, payment should be made only when directed by the court concerned. The Court of Appeals should have liberally interpreted the Rules in keeping with the principle of procedural due process.

Respondent counters that the Court of Appeals did not err when it dismissed petitioner's appeal considering that an appeal fee must be paid within the time for perfecting an appeal.

Petitioner's contention is bereft of merit.

The right to appeal is not a natural right or a part of due process; it is merely a statutory privilege and may be exercised only in the manner and in accordance with the provisions of law.⁴ Thus, one who seeks to avail of the right to appeal must strictly comply with the requirements of the rules,⁵ and failure to do so leads to the loss of the right to appeal.

Rule 41, Section 4 of the 1997 Rules of Civil Procedure, as amended, provides:

"SEC. 4. Appellate court docket and other lawful fees. - Within the period for taking an appeal, the appellant shall pay to the clerk of the court which rendered the judgment or final order appealed from, the full amount of the appellate court docket and other lawful fees. Proof of payment of said fees shall be transmitted to the appellate court together with the original record or the record on appeal.

Failure to pay the appellate court docket and other lawful fees on time is a ground to dismiss the appeal."

The "period for taking an appeal" is fixed by both statute and procedural rules. Batas Pambansa Blg. 129, as amended, provides:

"SEC. 39. Appeals. - The period for appeal from final orders, resolutions, awards, judgments, or decisions of any court in all cases shall be fifteen (15) days counted from the notice of the final order, resolution, award, judgment, or decision appealed from: Provided, however, That in habeas corpus cases, the period for appeal shall be forty-eight (48) hours from the notice of the judgment appealed from. x x x"

Section 3, Rule 41, of the same Rules state:

"SEC. 3. Period of ordinary appeal. - The appeal shall be taken within fifteen (15) days from notice of the judgment or final order appealed from. Where a record of appeal is required, the appellant shall file a notice of appeal and a record on appeal within thirty (30) days from notice of the judgment or final order. x x x"

In the instant case, petitioner received a copy of the Decision of the trial court on March 3, 1998.⁶ Accordingly, it had, pursuant to Section 3, Rule 41, until March 18, 1998 within which to perfect its appeal by filing within that period the Notice of Appeal and paying the appellate docket and other legal fees. While petitioner filed the Notice of Appeal on March 9, 1998, or within the reglementary period, however, it paid the required docket fees only on November 13, 1998, or late by 7 months and 25 days.

The mere filing of the Notice of Appeal is not enough, for it must be accompanied by the payment of the correct appellate docket fees.⁷ Payment in full of docket fees within the prescribed period is mandatory.⁸ It is an essential requirement without which the decision appealed from would become final and executory as if no appeal had been filed. Failure to perfect an appeal within the prescribed period is not a mere technicality but jurisdictional and failure to perfect an appeal renders the judgment final and executory.⁹

In Guevarra v. Court of Appeals,¹⁰ where the docket fees were not paid in full within the prescribed period of fifteen (15) days but were paid forty-one (41) days late due to "inadvertence, oversight, and pressure of work," we held that the Court of Appeals correctly dismissed the appeal. In Lee v. Republic of the Philippines,¹¹ where half of the appellate docket fee was paid within the prescribed period, while the other half was tendered after the period within which payment should have been made, we ruled that no appeal was perfected. Clearly, where the appellate docket fee is not paid in full within the reglementary period, the decision of the trial court becomes final and no longer susceptible to an appeal.¹² For once a decision becomes final, the appellate court is without jurisdiction to entertain the appeal.¹³

We thus hold that the Court of Appeals correctly dismissed petitioner's appeal. Under Section 1, Rule 50, of the 1997 Rules of Civil Procedure, as amended, one of the grounds for dismissal of an appeal is failure of the appellant to pay the docket and other lawful fees.

We note that petitioner's counsel made the following admissions in the petition filed before us:

(1) "[H]e was deceptively misled by the previous practice of waiting for an order from public respondent to pay the appeal docket and related fees in the number of cases that he has brought up."¹⁴

(2) "[C]ounsel for petitioner was guided by the old rule when the notice of appeal was filed on March 9, 1998' "¹⁵

While we appreciate the candor of petitioner's counsel in admitting his mistakes, however, we can not deviate from the Rules. The facts obtaining in this case leave us no option but to deny the petition.

WHEREFORE, the petition is DENIED. The assailed Resolutions of the Court of Appeals dated November 5 and December 4, 1998 in CA-G.R. CV No. 60439 are AFFIRMED. Costs against petitioner.

SO ORDERED.

Panganiban, (Chairman), Carpio-Morales, and Garcia, JJ., concur.
Corona, J., on leave.

Endnotes:

¹ CA Rollo, p. 9. Penned by Associate Justice Artemio G. Tuquero (ret.) and concurred in by Associate Justices Eubolo G. Verzola and Renato C. Dacudao.

² Rollo at 38-39.

³ Id. at 44.

⁴ Tan Tiac Chiong v. Hon. Rodrigo Cosico, 434 Phil. 753, 760 (2002), citing Villanueva v. Court of Appeals, 205 SCRA 537 (1992).

⁵ Neplum, Inc. v. Orbeso, 433 Phil. 844, 867 (2002), citing Pedrosa v. Spouses Hill, 327 Phil. 153 (1996); Del Rosario v. Court of Appeals, G.R. No. 113890, February 22, 1995, 241 SCRA 553.

⁶ Notice of Appeal, Rollo at 35.

⁷ Rodillas v. COMELEC, G.R. No. 119055, July 10, 1995, 245 SCRA 702, 705, citing Galang v. Court of Appeals, 199 SCRA 683 (1991); Guevara v. Court of Appeals, G.R. No. 43714, January 15, 1988, 157 SCRA 32.

⁸ Pedroso v. Spouses Hill, supra at 156.

⁹ Almeda v. Court of Appeals, 354 Phil. 600, 607 (1998), citing Phil. Airlines, Inc. v. NLRC, 263 SCRA 638 (1996).

¹⁰ Supra.

¹¹ G.R. No. 15027, January 31, 1964, 10 SCRA 65, 67, citing Lazaro v. Endencia and Andres, 57 Phil. 552 (1932).

¹² Aramas v. Endona, G.R. No. 32719, October 27, 1982, 117 SCRA 753, 758.

¹³ Garcia v. Echiverri, G.R. No. 44455, October 23, 1984, 132 SCRA 631, 638, citing Santos v. Court of Appeals, 125 SCRA 22 (1983); Acda v. Minister of Labor, 119 SCRA 309 (1982); and Agricultural and Industrial Marketing, Inc. v. Court of Appeals, 118 SCRA 49 (1982).

¹⁴ Petition, Rollo at 13.

¹⁵ Memorandum, id. at 189.

G.R. No. 137862 - ALFREDO ESTRADA, ET AL. v. COURT OF APPEALS, ET AL.

2013-01-15T09:50:23+00:00

G.R. No. 137862 - ALFREDO ESTRADA, ET AL. v. COURT OF APPEALS, ET AL.

SECOND DIVISION

[G.R. NO. 137862 : November 11, 2004]

ALFREDO ESTRADA, RENATO T. CANILANG and MANUEL C. LIM, Petitioners, v. COURT OF APPEALS AND BACNOTAN CEMENT CORPORATION (BCC), Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before this Court is a Petition for Review on Certiorari of the decision¹ of the Court of Appeals in CA-G.R. SP No. 44324, promulgated on April 6, 1998, and the resolution² dated February 24, 1999 denying petitioners' motion for reconsideration.

The facts are as follows:

Alfredo Estrada, Renato T. Canilang and Manuel C. Lim, as concerned citizens and taxpayers, filed on July 31, 1996, before the Regional Trial Court (RTC) of Olongapo City, a complaint for Injunction and Damages with Prayer for Preliminary Injunction and Temporary Restraining Order against Bacnotan Cement Corp. (BCC), Wawandue Fishing Port, Inc. (WFPI), Jeffrey Khong Hun as President of WFPI, Manuel Molina as Mayor of Subic, Zambales, and Ricardo Serrano as Regional Director of the Department of Environment and Natural Resources (DENR).

The complaint alleges that: WFPI and the Municipality of Subic entered into an illegal lease contract, which in turn became the basis of a sub-lease in favor of BCC; the sub-lease between WFPI and BCC is a violation of the first lease because the cement plant, which BCC intended to operate in Wawandue, Subic, Zambales, is not related to the fish port business of WFPI; and BCC's cement plant is a nuisance because it will cause pollution, endanger the health, life and limb of the residents and deprive them of the full use and enjoyment of their properties. The plaintiffs prayed that an order be issued: to restrain and prohibit BCC from opening, commissioning, or otherwise operating its cement plant; and to require the defendants to jointly and solidarily pay the plaintiffs P205,000.00 by way of actual, moral and exemplary damages and attorney's fees.³

Defendants WFPI/Khong Hun and BCC filed separate motions to dismiss, both alleging that the complaint states no cause of action. BCC, in its motion, added that: the plaintiffs failed to exhaust administrative remedies before going to court; that the complaint was premature; and that the RTC has no jurisdiction on the matter. Respondent Serrano of the DENR also filed a motion to dismiss stating that there was no cause of action insofar as he is concerned since there was nothing in the complaint that shows any dereliction of duty on his part.⁴

On December 6, 1996, Judge Eliodoro G. Ubiadas of RTC Olongapo City, Branch 72, issued an order denying respondents' motions to dismiss and granting the prayer for a writ of preliminary injunction.⁵ Pertinent portions of the order read as follows:

The Court notes that the powers vested by law under Executive Order 192, Republic Act 3931 and Presidential Decree 984 are regulatory merely and for the purpose of determining whether pollution exists.

However, under the laws above-mentioned, the powers granted to the DENR thru the Pollution Adjudication Board did not expressly exclude the Courts which under the law are empowered to try both questions of facts and law to determine whether pollution which maybe nuisance per se or by accidents (sic) exist or likely to exist. Under the Constitution, the courts are imbued the inherent power of general jurisdiction to resolve these issues. While it maybe (sic) true that petitioners might have first to seek relief thru the DENR's Pollution Adjudication Board a resort to the remedy provided under the Pollution Adjudication Board is rendered useless and ineffective in the light of the urgency that the said pollution be restrained outright in lieu of the impending risk described in the petition. It will be noted that the DENR did not have the power either in Executive Order 192, Republic Act 3931 and Presidential Decree 984 to issue a writ of injunction. The argument therefore for the exhaustion of administrative remedy and lack of jurisdiction does not warrant the dismissal of this petition against Bacnotan Cement Corporation.⁶

Respondents' motions for reconsideration were likewise denied by the trial court in an order dated May 13, 1997.⁷

Respondent BCC then went to the Court of Appeals on a petition for certiorari and prohibition with preliminary injunction and/or temporary restraining order seeking to reverse and set aside the orders dated December 6, 1996 and May 13, 1997 as well as to lift the writ of preliminary injunction dated December 11, 1996.

On April 6, 1998, the Court of Appeals rendered its decision, granting BCC's petition, thus:

WHEREFORE, in the light of the foregoing disquisitions, the instant petition for certiorari is GRANTED. The assailed Orders dated December 6, 1996 and May 13, 1997 are hereby SET ASIDE. The writ of injunction issued by the public respondent under date of December 11, 1996 is forthwith, LIFTED and the Complaint insofar as petitioner BCC is concerned is ordered forthwith DISMISSED. No costs.

SO ORDERED.⁸

It reasoned that:

FIRSTLY. 'We find that the denial of said Motion to Dismiss by the Court a quo, was a grave abuse of discretion because of the doctrine of Administrative Remedy which requires that where an administrative remedy is provided by statute, relief must be sought administratively first before the Court will take action thereon. As ruled by the Supreme Court in the case of Abe Abe, et al. v. Manta (90 SCRA 524). "When an adequate remedy may be had within the Executive Department of the government but nevertheless a litigant fails or refuses to avail himself of the same, the Judiciary shall decline to interfere. This traditional attitude of the Court is based not only on respect for party litigants but also on respect for a co-equal office in the government. In fine, our Supreme Court has categorically explained in Aquino v. Mariano (129 SCRA 209) that whenever, there is an available Administrative Remedy provided by law, no judicial recourse can be made until such remedy has been availed of and exhausted for three (3) reasons that: (1) Resort to court maybe unnecessary if administrative remedy is available; (2) Administrative Agency may be given a chance to correct itself; and (3) The principle of Amity and Convenience requires that no court can act until administrative processes are completed. Commissioner of Customs v. Navarro (77 SCRA 264).

SECONDLY, it is a well-settled rule that the jurisdiction of the Regional Trial Court is general in character, referring to the existence of nuisance under the provision of Article 694 of the New Civil Code. On the other hand, the Department of Environment and Natural Resources, through the Pollution Adjudication Board (PAB) under R.A. 3931 as amended by P.D. 984, prescribes the Abatement of Pollution. In fine, when it comes to nuisance, the Court has general jurisdiction under the New Civil Code. But when it comes to pollution which is specific, the administrative body like the DENR has jurisdiction. Clearly, nuisance is general or broader in concept while pollution is specific. Following the rule that the specific issue of pollution, which is under the jurisdiction of DENR prevails over the general issue of nuisance which is under the jurisdiction of the RTC (Lagman v. City of Manila, 17 SCRA 579), there is no doubt that the DENR and not the Court should have jurisdiction. Hence, the motion to dismiss filed by petitioner should have been GRANTED by the Court a quo. Since it has no jurisdiction over the subject matter. Its denial by public respondent was therefore a grave abuse of discretion, which is correctible by certiorari .

THIRDLY. We should not lose sight of the fact that the authority to construct in this case is necessarily required prior to the actual construction of petitioner's cement bulk terminal while the permit to operate likewise is required before the petitioner's cement bulk terminal commences its operation. In this case, the petitioner, at the time, had only the authority to construct, pursuant to a valid contract between the WFPI and the petitioner BCC, approved by the Sangguniang Bayan of Subic and Sangguniang Panlalawigan of Zambales and pursuant to the requisite of DENR. Again, it should be remembered that, at the time, petitioner did not yet have the permit to operate (which should properly be made only after a factual determination of the levels of pollution by the DENR). Hence, the injunction issued in this case is premature and should not have been issued at all by public respondent.

FOURTHLY. The effect of the writ of injunction enjoining petitioner from operating the cement bulk terminal (Order of December 6, 1996) and the public respondent's refusal to defer the proceedings below, virtually preempt the DENR from making such determination, nay even the authority to issue the permit to operate is likewise preempted. How can we therefore enjoin operation before the issuance of the permit to operate? It is also a settled rule that the remedy of injunction is not proper where an administrative remedy is available. The permit to operate may not even be issued, at all, by the DENR (Buayan Cattle Co. Inc., v. Quintillan, 128 SCRA 276).

Evidently, the writ of injunction issued in this case, as We view it, is premature. In fact, by issuing the Order of Dec. 6, 1996, the public respondent wrestled the authority from the DENR to determine whether the cement bulk terminal will cause pollution or not, or whether the pollution may only be on acceptable level as to justify the issuance of the permit to operate.

While conceding that prior resort should be made to the DENR, the respondent Judge proceeded to take the contrary stand, following the private respondent's contention that the doctrine of exhaustion of administrative remedies are [sic] inapplicable, since it would cause irreparable injury if private respondents should avail of administrative step before taking Court action.

We do not agree.

The respondents' contention is clearly baseless and highly speculative because how can it possibly produce irreparable injury before the actual operation since petitioner has not yet been issued permit to operate. Besides, We find no evidence shown in the complaint or alleged therein that will support the presence of pollution and which could properly be the subject of injunction.

Finally, it is interesting to note that the complaint filed by the private respondents has no prayer for preliminary injunction (it was not asked, why then should it be given?). Furthermore, the Sublease Agreement having been partly executed, it could no longer be enjoined.

By and large, the lower court's denial of petitioner's motion to dismiss is undoubtedly a grave abuse of discretion amounting to lack of jurisdiction.⁹

The Court of Appeals denied petitioners' motion for reconsideration on February 24, 1999.¹⁰ Hence the present petition alleging that:

. . . THE HONORABLE COURT OF APPEALS HAD CLEARLY DEPARTED FROM THE ESTABLISHED JURISPRUDENCE ENUNCIATED BY THIS HONORABLE COURT WHEN IT RULED THAT THE HEREIN PETITIONERS FAILED TO EXHAUST ADMINISTRATIVE REMEDIES AVAILABLE TO THEM BEFORE THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR) POLLUTION ADJUDICATION BOARD (PAB); and that

THE COURT OF APPEALS ALSO GROSSLY ERRED IN RULING THAT THE REGIONAL TRIAL COURT OF OLONGAPO CITY, BRANCH 72 HAS NO JURISDICTION OVER THE ISSUE OF POLLUTION.¹¹

Petitioners argue that: prior resort to an administrative agency is futile and unnecessary since great and irreparable injury would ensue if the cement repacking plant is allowed to operate in Wawandue, Subic, Zambales; only the court can grant them speedy, effective and immediate relief since the DENR-Pollution Adjudication Board (PAB) has no authority to issue the needed writ of injunction prayed for by petitioners; E.O. No. 192,¹² R.A. No. 3931¹³ or P.D. No. 984¹⁴ does not expressly exclude the power and authority of the RTC to try both questions of fact and of law relative to the determination of the existence of pollution arising from the operation of respondent's cement repacking plant either as a nuisance per se or a nuisance per accidens; and the lower court under the Constitution is imbued with the inherent power and jurisdiction to resolve the issue of pollution.¹⁵

In its Comment, BCC contends that: the instant petition should be dismissed because it is not accompanied by a copy of the petition in CA G.R. SP No. 44324, which violates Rule 45, Sec. 4 of the Rules of Court requiring that the petition be accompanied by relevant pleadings;¹⁶ the Court of Appeals correctly held that the jurisdiction to determine the issue of pollution is lodged primarily with the DENR and not with the RTC; under P.D. No. 984, the task of determining the existence of pollution was bestowed on the National Pollution Control Commission (NPCC), the powers of which were assumed by the DENR under E.O. No. 192; the jurisdiction of the trial courts anent abatement of nuisance in general cannot prevail over the specific, specialized and technical jurisdiction of the DENR-PAB; under the doctrine of exhaustion of administrative remedies, where competence to determine the same issue is placed in the trial court and an administrative body and the issue involves a specialized and technical matter, relief should first be sought before the administrative body prior to instituting suit before the regular courts; the relief sought by the petitioners to prevent the supposedly injurious operation of BCC's cement bulk terminal can be effectively obtained from the DENR, which, under P.D. No. 984, has the authority to grant, modify and revoke permits, and to issue orders for the abatement of pollution and impose mandatory pollution control measures for compliance;¹⁷ since the BCC only has an "authority to construct" and not yet "permit to operate" at the time of the filing of the complaint, the writ of injunction issued by the trial court preempted the DENR from making the determination of whether or not BCC should be allowed to operate; the complaint was properly dismissed since petitioners have no legal capacity to bring a suit for abatement of nuisance; and the right invoked by petitioners is abstract and is not sufficient to confer locus standi.¹⁸

In their Reply, petitioners reiterated their arguments and added that they have fully complied with the requirements of Rule 45.¹⁹

The principal issue that needs to be resolved is whether or not the instant case falls under the exceptional cases where prior resort to administrative agencies need not be made before going to court.

We answer in the negative.

The doctrine of exhaustion of administrative remedies requires that resort be first made with the administrative authorities in the resolution of a controversy falling under their jurisdiction before the same may be elevated to a court of justice for review.²⁰ If a remedy within the administrative machinery is still available, with a procedure pursuant to law for an administrative officer to decide the controversy, a party should first exhaust such remedy before going to court. A premature invocation of a court's intervention renders the complaint without cause of action and dismissible on such ground.²¹

The reason for this is that prior availment of administrative remedy entails lesser expenses and provides for a speedier disposition of controversies. Comity and convenience also impel courts of justice to shy away from a dispute until the system of administrative redress has been completed and complied with.²²

As we explained in Gonzales v. Court of Appeals,²³

The thrust of the rule on exhaustion of administrative remedies is that the courts must allow the administrative agencies to carry out their functions and discharge their responsibilities within the specialized areas of their respective competence. It is presumed that an administrative agency, if afforded an opportunity to pass upon a matter, will decide the same correctly, or correct any previous error committed in its forum. Furthermore, reasons of law, comity and convenience prevent the courts from entertaining cases proper for determination by administrative agencies. Hence, premature resort to the courts necessarily becomes fatal to the cause of action of the petitioner.²⁴

While the doctrine of exhaustion of administrative remedies is flexible and may be disregarded in certain instances, such as:

(1) when there is a violation of due process,

(2) when the issue involved is purely a legal question,

(3) when the administrative action is patently illegal amounting to lack or excess of jurisdiction,

(4) when there is estoppel on the part of the administrative agency concerned,

(5) when there is irreparable injury,

(6) when the respondent is a department secretary whose acts as an alter ego of the President bears [sic] the implied and assumed approval of the latter,

(7) when to require exhaustion of administrative remedies would be unreasonable,

(8) when it would amount to a nullification of a claim,

(9) when the subject matter is a private land in land case proceedings,

(10) when the rule does not provide a plain, speedy and adequate remedy,

(11) when there are circumstances indicating the urgency of judicial intervention,

(12) when no administrative review is provided by law,

(13) where the rule of qualified political agency applies, and

(14) when the issue of non-exhaustion of administrative remedies has been rendered moot.²⁵

we find, however, that the instant case does not fall under any of the recognized exceptional circumstances.

Petitioners claim that their action before the trial court, without going to the DENR first, is justified because they are in danger of suffering grave and irreparable injury from the operation of respondent's cement repacking plant and the DENR does not have the power to grant them the relief they are praying for.

We do not agree.

Republic Act No. 3931, An Act Creating the National Water and Air Pollution Control Commission, was passed on June 18, 1964 to maintain reasonable standards of purity for the waters and air of the country with their utilization for domestic, agricultural, industrial and other legitimate purposes. It created the NPCC which had the power, to issue, renew, or deny permits, for the prevention and abatement of pollution.²⁶

In 1976, Presidential Decree No. 984 was enacted to strengthen the NPCC giving it, among others, the following:

Sec. 6. Powers and Functions - . . .

. . .

(e) Issue orders or decisions to compel compliance with the provisions of this Decree and its implementing rules and regulations only after proper notice and hearing.

(f) Make, alter or modify orders requiring the discontinuance of pollution specifying the conditions and the time within which such discontinuance must be accomplished.

(g) Issue, renew, or deny permits, under such conditions as it may determine to be reasonable, for the prevention and abatement of pollution, for the discharge of sewage, industrial waste, or for the installation or operation of sewage works and industrial disposal system or parts thereof'

(j) serve as arbitrator for the determination of reparations, or restitution of the damages and losses resulting from pollution.

P.D. No. 984 also empowered the commission to issue ex parte orders directing the discontinuance or temporary suspension or cessation of operation of an establishment or person generating sewage or wastes without the necessity of prior public hearing whenever it finds a prima facie evidence that the discharged sewage or wastes are of immediate threat to life, public health, safety or welfare, or to animal or plant life, or exceed the allowable standards set by the commission.²⁷

In 1987, Executive Order No. 192 was passed, reorganizing the DENR. It transferred the power of the NPCC to the Environmental Management Bureau²⁸ and created the PAB, under the Office of the Secretary, which assumed the powers and functions of the NPCC with respect to the adjudication of pollution cases under R.A. No. 3931 and P.D. No. 984.²⁹

In Pollution Adjudication Board v. Court of Appeals,³⁰ we stated that the PAB is the very agency of the government with the task of determining whether the effluents of a particular industrial establishment comply with or violate applicable anti-pollution statutory and regulatory provisions.³¹ We also recognized its power to issue, ex parte, cease and desist orders, thus:

. . . under . . . Section 7(a) of P.D. No. 984, an ex parte cease and desist order may be issued by the (PAB) (a) whenever the wastes discharged by an establishment pose an "immediate threat to life, public health, safety or welfare, or to animal or plant life," or (b) whenever such discharges or wastes exceed "the allowable standards set by the [NPCC]." . . . [I]t is not essential that the Board prove that an "immediate threat to life, public health, safety or welfare, or to animal or plant life" exists before an ex parte cease and desist order may be issued. It is enough if the Board finds that the wastes discharged do exceed "the allowable standards set by the [NPCC]." In respect of discharges of wastes as to which allowable standards have been set by the Commission, the Board may issue an ex parte cease and desist order when there is prima-facie evidence of an establishment exceeding such allowable standards. Where, however, the effluents or discharges have not yet been the subject matter of allowable standards set by the Commission, then the Board may act on an ex parte basis when it finds at least prima facie proof that the wastewater or material involved presents an immediate threat to life, public health, safety or welfare or to animal or plant life. . . .

. . .

Ex parte cease and desist orders are permitted by law and regulations in situations like that here presented precisely because stopping continuous discharge of pollutive and untreated effluents into the rivers and other inland waters of the Philippines cannot be made to wait until protracted litigation over the ultimate correctness or propriety of such orders has run its full course, including multiple and sequential appeals such as those which Solar has taken, which of course may take several years. The relevant pollution control statute and implementing regulations were enacted and promulgated in the exercise of that pervasive, sovereign power to protect the safety, health, and general welfare and comfort of the public, as well as the protection of plant and animal life, commonly designated as the police power. It is a constitutional commonplace that the ordinary requirements of procedural due process yield to the necessities of protecting vital public interests like those here involved, through the exercise of police power. . . .³²

In Laguna Lake Development Authority v. Court of Appeals,³³ we also pronounced that:

The matter of determining whether there is'pollution of the environment that requires control, if not prohibition, of the operation of a business establishment is essentially addressed to the Environmental Management Bureau (EMB) of the DENR which, by virtue of Section 16 of Executive Order No. 192, series of 1987 has assumed the powers and functions of the defunct National Pollution Control Commission created under Republic Act No. 3931. Under said Executive Order, a Pollution Adjudication Board (PAB) under the Office of the DENR Secretary now assumes the powers and functions of the National Pollution Control Commission with respect to adjudication of pollution cases.

As a general rule, the adjudication of pollution cases generally pertains to the Pollution Adjudication Board (PAB), except in cases where the special law provides for another forum.³⁴

Clearly, the claim of petitioners that their immediate recourse to the regular courts is justified because the DENR is powerless to grant them proper relief is without basis.

The Court of Appeals correctly found that the petitioners failed to exhaust administrative remedies before going to court which renders their complaint dismissible on the ground of lack of cause of action.

WHEREFORE, the petition is denied for lack of merit.

SO ORDERED.

Callejo, Sr., and Chico-Nazario, JJ., concur.
Puno, (Chairman), J., on official leave.
TINGA, J., on leave.

Endnotes:

¹ Penned by Associate Justice Jainal Rasul and concurred in by Associate Justices Eugenio Labitoria and Marina Buzon; Rollo, pp. 61-77.

² Rollo, pp. 79-80.

³ Rollo, pp. 29-40.

⁴ Id., Rollo, pp. 63-65.

⁵ Id., pp. 54-57.

⁶ Id., p. 55.

⁷ Id., pp. 58-59.

⁸ Id., pp. 76-77.

⁹ Rollo, pp. 72-76.

¹⁰ Id., p. 80.

¹¹ Id., pp. 20-21.

¹² PROVIDING FOR THE REORGANIZATION OF THE DEPARTMENT OF ENVIRONMENT, ENERGY AND NATURAL RESOURCES, RENAMING IT AS THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, AND FOR OTHER PURPOSES.

¹³ AN ACT CREATING THE NATIONAL WATER AND AIR POLLUTION CONTROL COMMISSION.

¹⁴ PROVIDING FOR THE REVISION OF REPUBLIC ACT NO. 3931, COMMONLY KNOWN AS THE POLLUTION CONTROL LAW, AND FOR OTHER PURPOSES.

¹⁵ Rollo, pp. 24-25.

¹⁶ Id., pp. 97-98.

¹⁷ Rollo, pp. 105-106.

¹⁸ Id., pp. 101-112.

¹⁹ Id., pp. 118-120.

²⁰ Castro v. Gloria, G.R. No. 132174, August 20, 2001, 363 SCRA 417, 422.

²¹ Bangus Fry Fisherfolk v. Lanzanas, G.R. No. 131442, July 10, 2003, 405 SCRA 530.

²² Paat v. Court of Appeals, G.R. No. 111107, January 10, 1997, 266 SCRA 167, 175-176.

²³ G.R. No. 106028, May 9, 2001, 357 SCRA 599.

²⁴ Id., p. 604.

²⁵ Social Security Commission v. Court of Appeals, G.R. 152058, September 27, 2004.

²⁶ Sec. 6(a).

²⁷ Sec. 7(a).

²⁸ Sec. 16.

²⁹ Sec. 19.

³⁰ G.R. No. 93891, March 11, 1991, 195 SCRA 112.

³¹ Id., p. 118.

³² Id., pp. 117-118, 123-124.

³³ G.R. No. 110120, March 16, 1994, 231 SCRA 292.

³⁴ Id., pp. 303-304.

G.R. No. 138085 - AZOLLA FARMS, ET AL. v. COURT OF APPEALS, ET AL.

2013-01-15T09:50:23+00:00

G.R. No. 138085 - AZOLLA FARMS, ET AL. v. COURT OF APPEALS, ET AL.

SECOND DIVISION

[G.R. NO. 138085 : November 11, 2004]

AZOLLA FARMS and FRANCISCO R. YUSECO, Petitioners, v. COURT OF APPEALS and SAVINGS BANK OF MANILA, Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

This is an appeal by certiorari under Rule 45 of the Rules of Court seeking the reversal of the Decision dated February 19, 1999 rendered by the Court of Appeals¹ in CA-G.R. CV No. 53076, which reversed and set aside the decision of the trial court in Civil Case No. 83-20514, and the Resolution dated March 31, 1999, denying petitioners' motion for reconsideration.

Petitioner Francis R. Yuseco, Jr., is the Chairman, President and Chief Operating Officer of petitioner Azolla Farms International Philippines (Azolla Farms), a corporation duly organized under existing laws and engaged in the development, exploitation, production, manufacturing, promotion, marketing, and sale of natural, organic minerals, including its by-products, with the ultimate objective of utilizing said products for the promotion of food production.²

In 1982, Azolla Farms undertook to participate in the National Azolla Production Program wherein it will purchase all the Azolla produced by the Azolla beneficiaries in the amount not exceeding the peso value of all the inputs provided to them. The project also involves the then Ministry of Agriculture, the Kilusang Kabuhayan at Kaunlaran, and the Kiwanis. To finance its participation, petitioners applied for a loan with Credit Manila, Inc., which the latter endorsed to its sister company, respondent Savings Bank of Manila (Savings Bank). The Board of Directors of Azolla Farms, meanwhile, passed a board resolution on August 31, 1982, authorizing Yuseco to borrow from Savings Bank in an amount not exceeding P2,200,000.00.³

The loan having been approved, Yuseco executed a promissory note on September 13, 1982, promising to pay Savings Bank the sum of P1,400,000.00 on or before September 13, 1983.⁴ The net proceeds of P1,225,443.31 was released to FNCB Finance, the mortgagee of a 548 - square meter lot with residential house owned by Yuseco. With the release of the proceeds, FNCB Finance released the mortgage,⁵ and in turn, the property was mortgaged to Savings Bank as collateral for the loan.⁶ Yuseco and Francisco Bargas also executed an assignment of their shares of stock in Azolla Farms as additional security.⁷ Yuseco then executed two other promissory notes on September 27, 1982⁸ and January 4, 1983,⁹ both for the amount of P300,000.00.

However, the Azolla Farms project collapsed. Blaming Savings Bank, petitioners Yuseco and Azolla Farms filed on October 3, 1983 with the Regional Trial Court of Manila (Branch 25), a complaint for damages. In essence, their complaint alleges that Savings Bank unjustifiably refused to promptly release the remaining P300,000.00 which impaired the timetable of the project and inevitably affected the viability of the project resulting in its collapse, and resulted in their failure to pay off the loan. Thus, petitioners pray for P1,000,000.00 as actual damages, among others.¹⁰

Respondent Savings Bank filed its Answer denying the allegations in the complaint. It contends that there was evidence that Yuseco was using the loan proceeds for expenses totally unrelated to the project and they decided to withhold the remaining amount until Yuseco gave the assurance that the diversion of the funds will be stopped. Respondent bank believed that the 90-day interval between the two tranches could not have impaired the operation of the project, and petitioners' subsequent receipt of the proceeds confirmed their agreement to the terms of the loan.

Trial ensued. After respondent, as defendant, rested its case, petitioners filed a Motion to Admit Amended Complaint alleging that the testimony of defense witness Jesus Venturina raised the issue of the invalidity of the promissory notes and the real estate mortgage.¹¹ Petitioners sought the amendment of the complaint to conform to the issues and evidence presented. Their Amended Complaint contains the following amendments:

That defendant bank acts in unilaterally reducing the agreed amount of FOUR MILLION PESOS (P4,000,000.00) to TWO MILLION PESOS (P2,000,000.00) and in unreasonably delay (sic) the release of THREE HUNDRED THOUSAND PESOS (P300,000.00) novated the promissory notes nos. 2491, 2510 and 2669 and also novated the real estate mortgage dated 6 September 1982 executed by plaintiff Francis R. Yuseco, Jr.;¹²

and in their prayer, petitioners seek that the promissory notes and real estate mortgage be declared novated, invalid and unenforceable. Petitioners also amended the actual damages sought, increasing it to P5,000,000.00.¹³

Respondent objected to petitioners' motion,¹⁴ but the trial court nevertheless admitted the Amended Complaint.¹⁵

On June 17, 1994, the trial court rendered its decision annulling the promissory notes and real estate mortgage, and awarding damages to petitioners. The dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered:

DECLARING - -

(a) the promissory notes and real estate mortgage executed by plaintiff Yuseco novated, if not unenforceable; (b) any subsequent foreclosure or sale of the real estate property, without any binding effect;

ORDERING - -

(1) the defendants to return full, uninterrupted and complete possession and ownership of the subject real estate property to plaintiff Francis R. Yuseco, Jr.; (2) the defendant to pay plaintiffs: (a) P1,000,000.00 as actual damages; (b) P200,000.00, as moral damages for the personal sufferings, mental anguish, serious anxiety, social humiliation of plaintiff Yuseco; (c) P50,000.00, as reasonable attorney's fees; and (d) legal interest on the actual damages herein awarded from date of filing the Complaint until fully paid.

The Counterclaim interposed by the defendant in its Answer is hereby dismissed, for lack of merit.

Costs against the defendant.¹⁶

Aggrieved, respondent elevated the case to the Court of Appeals.

Finding merit in respondent's appeal, the Court of Appeals reversed and set aside the trial court's decision per its Decision dated February 19, 1999, the decretal portion of which reads:

WHEREFORE, premises considered, the decision of the trial court in Civil Case No. 83-20514 is hereby REVERSED and SET ASIDE and judgment is hereby entered declaring the promissory notes and real estate mortgage executed in favor of defendant-appellant, as well as the extrajudicial foreclosure and sale of the mortgaged property, as valid and binding. Defendant-appellant is hereby ordered to pay plaintiff Azolla Farms International Philippines, Inc. the amount of fifty thousand pesos (P50,000.00) as nominal damages. No costs.

SO ORDERED.¹⁷

Hence, the herein petition filed before the Court, alleging that:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT REVERSED AND SET ASIDE THE DECISION OF THE COURT A QUO.¹⁸

Two issues are involved in this case: first, whether the trial court erred in admitting petitioners' amended complaint; and second, whether the trial court erred in nullifying the promissory notes, the real estate mortgage, and its extrajudicial foreclosure.

In their motion to amend complaint, petitioners allege that:

2. During the direct examination of defendant bank's witness Jesus Venturina, he testified and identified various documents relating to the invalid and illegal foreclosure on plaintiff Francis R. Yuseco, Jr.'s real property subject of the real estate mortgage dated September 7, 1982 and marked and adopted as Exhibit N for the plaintiffs. Moreover, he testified and identified the promissory notes, marked and adopted as Exhibits L, M and Q for the plaintiffs evidencing the incomplete and invalid consideration of the said mortgage. As a result of the testimony thus given and the documents adduced during said hearing, the issue of the foreclosure on said property has been raised which, therefore, necessitates that the pleadings in this case, the complaint, be amended to conform to the issues raised and the evidence presented;¹⁹

The trial court granted the motion and admitted the Amended Complaint. The Court of Appeals, however, ruled that the trial court should not have admitted the Amended Complaint because it altered petitioners' cause of action. Apparently, the Court of Appeals treated petitioners' amendment of the complaint as one involving amendments after the case is set for hearing under Section 3, Rule 10 of the Rules of Court,²⁰ which is not however applicable to the present case.

The amendment of the complaint was made pursuant to Section 5, Rule 10 of the Rules of Court, governing amendment of pleadings to conform to evidence, to wit:

SEC. 5. Amendment to conform to or authorize presentation of evidence . When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence.

In Mercader v. Development Bank of the Phils. (Cebu Branch),²¹ the Court explained that the foregoing provision envisions two scenarios - - first, when evidence is introduced on an issue not alleged in the pleadings and no objection was interjected and second, when evidence is offered on an issue not alleged in the pleadings but this time an objection was interpolated. In cases where an objection is made, the court may nevertheless admit the evidence where the adverse party fails to satisfy the court that the admission of the evidence would prejudice him in maintaining his defense upon the merits, and the court may grant him a continuance to enable him to meet the new situation created by the evidence.

As can be gleaned from the records, it was petitioners' belief that respondent's evidence justified the amendment of their complaint. The trial court agreed thereto and admitted the amended complaint. On this score, it should be noted that courts are given the discretion to allow amendments of pleadings to conform to the evidence presented during the trial. Thus, in Bank of America, NT and SA v. American Realty Corporation,²² the Court stated:

There have been instances where the Court has held that even without the necessary amendment, the amount proved at the trial may be validly awarded, as in Tuazon v. Bolanos (95 Phil. 106), where we said that if the facts shown entitled plaintiff to relief other than that asked for, no amendment to the complaint was necessary, especially where defendant had himself raised the point on which recovery was based.²³ The appellate court could treat the pleading as amended to conform to the evidence although the pleadings were actually not amended. Amendment is also unnecessary when only clerical error or non substantial matters are involved, as we held in Bank of the Philippine Islands v. Laguna (48 Phil. 5). In Co Tiamco v. Diaz (75 Phil. 672), we stressed that the rule on amendment need not be applied rigidly, particularly where no surprise or prejudice is caused the objecting party. And in the recent case of National Power Corporation v. Court of Appeals (113 SCRA 556), we held that where there is a variance in the defendant's pleadings and the evidence adduced by it at the trial, the Court may treat the pleading as amended to conform with the evidence.²⁴

Verily, the trial court cannot be faulted for admitting the amended complaint as it had the discretion to do so.

However, whether the evidence introduced by respondent, indeed, supported the finding that the promissory notes, the real estate mortgage and the foreclosure sale, are invalid, is a different matter altogether.

As alleged by petitioners, the testimony of respondent's witness, Jesus Venturina, established the novation of the promissory notes and the real estate mortgage, and the illegality of the foreclosure of petitioner Yuseco's property.²⁵ The trial court agreed with petitioners, ruling that there was a novation of the promissory notes and real estate mortgage, which rendered them unforceable, to wit:

The promissory notes and real estate mortgage executed by plaintiff Yuseco appears to have been novated and, therefore, rendered to be unenforceable since there was a change in the parties (from Credit Manila, Inc. to Savings Bank of Manila) and, of course, in the amount of the loan applied for (from P5 Million to P2 Million) which, upon instruction of Mr. de Guzman - - was applied as follows:

It would, therefore, be imporper (sic) to consider and treat the promissory notes and the real estate mortgage as relating to the separate loan of plaintiff Yuseco so made and pursued for the same purpose and nature, all inuring to a specific project - - the Azolla Project!²⁶

The Court of Appeals disagreed with the trial court and held that there was no novation, hence, the promissory notes and the real estate mortgage are valid and binding.

We agree with the appellate court.

Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or, by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor.²⁷ In order for novation to take place, the concurrence of the following requisites is indispensable:²⁸

1. there must be a previous valid obligation,

2. there must be an agreement of the parties concerned to a new contract,

3. there must be the extinguishment of the old contract, and

4. there must be the validity of the new contract.

All these requisites are patently lacking in this case. In the first place, there is no new obligation that supposedly novated the promissory notes or the real estate mortgage, or a pre-existing obligation that was novated by the promissory notes and the real estate mortgage. In fact, there is only one agreement between the parties in this case, i.e., petitioners' P2,000,000.00 loan with respondent, as evidenced by the 3 promissory notes dated September 13 and 27, 1982, and January 4, 1983, and the real estate mortgage. As the Court of Appeals held:

'There was only one single loan agreement in the amount of P2 million between the parties as evidenced by the promissory notes and real estate mortgage - how can it be possibly claimed by plaintiffs that these notes and mortgage were "novated" when no previous notes or mortgage or loan agreement had been executed? What transpired was an application for loan was filed by plaintiffs with Credit Manila in an amount greater than the P2 million eventually granted. This loan application was endorsed to defendant Savings Bank of Manila, processed by the latter and eventually approved by it in the amount of P2 million.

It cannot be said that the loan application of plaintiffs or their initial representations with Credit Manila's Michael de Guzman was already in itself a binding original contract that was later "novated" by defendant. Plaintiff Yuseco being himself a banker, cannot pretend to have been unaware of banking procedures that normally recognize a "loan application" as just that, a mere application. Only upon the bank's approval of the loan application in the amount and under such terms it deems viable and acceptable, that a binding and effective loan agreement comes into existence. Without any such first or original "loan agreement" as approved in the amount and under specified terms by the bank, there can be nothing whatsoever that can be subsequently novated.²⁹

Moreover, records show that petitioners were well aware of the conditions of the loan application. In its August 31, 1982 Board Resolution, the Board of Directors of Azolla Farms authorized Yuseco to "borrow from the SAVINGS BANK OF MANILA, Head Office, sums of money in an amount not exceeding P2,200,000.00."³⁰ The promissory notes signed by Yuseco were respondent Savings Bank's promissory notes, and the real estate mortgage was likewise respondent Savings Bank's standard real estate mortgage form. Obviously, this case is an attempt by petitioners to extricate themselves from their obligations; but they cannot be allowed to have their cake and eat it, too.

WHEREFORE, the petition is DENIED for lack of merit. The Court of Appeals' Decision dated February 19, 1999, together with its Resolution dated March 31, 1999, in CA-G.R. CV No. 53076, is AFFIRMED.

Costs against petitioners.

SO ORDERED.

Callejo, Sr., and Chico-Nazario, JJ., concur.
Puno, J., on official leave.
TINGA, J., on leave.

Endnotes:

¹ Penned by Justice Martin S. Villarama, Jr. with Justices Angelina Sandoval Gutierrez (now a Member of this Court) and Romeo A. Brawner, concurring.

² Records, p. 2.

³ Records, p. 261, Exhibit "K" for petitioners, Exhibit "5" for respondent.

⁴ Id., p. 270, Exhibits "Q" and "11."

⁵ Id., p. 271, Exhibits "R" and "12."

⁶ Id., p. 265, Exhibits "N" and "8."

⁷ Id., p. 28, Annex "B."

⁸ Id., p. 263, Exhibits "L" and "6."

⁹ Id., p. 264, Exhibits "M" and "7."

¹⁰ Id., pp. 2-7.

¹¹ Id., pp. 284-285.

¹² Id., p. 293.

¹³ Id., p. 295.

¹⁴ Id., pp. 298-301.

¹⁵ Id., p. 308.

¹⁶ Id., p. 337.

¹⁷ CA Rollo, p. 160.

¹⁸ Rollo, pp. 12-13.

¹⁹ Records, p. 284.

²⁰ Citing Gulang v. Nadayag, G.R. No. 82630, September 30, 1992, 214 SCRA 355.

²¹ G.R. No. 130699, May 12, 2000, 332 SCRA 82, 97.

²² G.R. No. 133876, December 29, 1999, 321 SCRA 659, 680.

²³ Emphasis ours.

²⁴ Citing Talisay-Silay Milling Co., Inc. v. Asociacion de Agricultures de Talisay-Silay, Inc., G.R. No. 91852, August 15, 1995, 247 SCRA 361.

²⁵ Records, pp. 284 and 293.

²⁶ Id., p. 336.

²⁷ Article 1293, Civil Code; California Bus Lines, Inc. v. State Investment House, Inc., G.R. No. 147950, December 11, 2003, 418 SCRA 297, 308.

²⁸ Garcia v. Llamas, G.R. No. 154127, December 8, 2003, 417 SCRA 292, 301.

²⁹ CA Rollo, pp. 156-157.

³⁰ Records, p. 261; Emphasis ours.

G.R. No. 138090 - ELIZA PABLO y MARTIN, ET AL. v. PEOPLE OF THE PHILIPPINES

2013-01-15T09:50:24+00:00

G.R. No. 138090 - ELIZA PABLO y MARTIN, ET AL. v. PEOPLE OF THE PHILIPPINES

SECOND DIVISION

[G.R. NO. 138090 : November 11, 2004]

ELIZA PABLO y MARTIN, FELOMINA JACOBE y MIRANDA, and VICTORIA ROBERTO y LIMMIPAO, Petitioners, v. PEOPLE OF THE PHILIPPINES, Respondent.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before us for review is the decision¹ of the Court of Appeals promulgated on March 19, 1999, which affirmed in toto the judgment of the Regional Trial Court of Baguio City (Branch 5), convicting petitioners Eliza Pablo and Felomina Jacobe together with accused Victoria Roberto of the crime of Estafa.

Petitioners Eliza and Felomina together with accused Victoria were charged in the Information, to wit:

That on or about the 1st day of February, 1993, in the City of Baguio, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, conspiring, confederating and mutually aiding one another, by means of deceit and misrepresentations, did then and there willfully, unlawfully and feloniously defraud one EVANGELINE BATES y YONGA-AN, in the total amount of P330,000.00, in the following manner, to wit: the said accused induced complainant to deliver to them the amount of P330,000.00 by convincing the complainant that the money will be used to pay the back taxes and defray the expenses for the processing of a land which the accused claimed they are working on to be titled and thereafter subdivide among themselves individually, and the complainant, misled by the representations of the accused delivered to them the amount of P330,000.00, which said accused received and thereafter misappropriated, misapplied and converted the amount to their own personal use and benefit and in spite of demands from them to return the amount upon discovery of the deceit, the accused failed to do so to the damage and prejudice of EVANGELINE BATES y YONGA-AN in the amount of THREE HUNDRED THIRTY THOUSAND (P330,000.00) PESOS, Philippine Currency.

CONTRARY TO LAW.²

Upon arraignment, petitioners Eliza and Felomina together with accused Victoria pleaded not guilty. Trial ensued thereafter. During the presentation of defense evidence, accused Victoria jumped bail.³

The facts of the case as found by the trial court and adopted by the appellate court, are as follows:

The complainant Evangeline Bates gave evidence to the effect that in the last week of January 1993, the three accused approached her. Eliza, her townmate at Tadian, Mt. Province, introduced Victoria and Felomina to her. The three convinced her to contribute P330,000.00 as her share in the payment of the back taxes due on a parcel of land owned by the late Pulmano Molintas and located at Gibraltar Road, Baguio City, and once the title is validated she will be assigned a 2,500-square meter portion of the land. Because Eliza is her townmate and since Victoria assured her that her son is married to a daughter of Pulmano, she agreed.

Thus, starting January 27, 1993, at the Dainty Restaurant on Session Road, Evangeline gave P30,000.00 to Victoria (Exhibit "A"); P100,000.00 on February 1, 1993 (Exhibit "B"); and P202,000.00 on February 9, 1993 (Exhibit "C"). On all these occasions Eliza and Felomina were present and signed as witnesses the receipts issued by Victoria.

Evangeline gave more than P330,000.00, or the total amount of P332,000.00, because the three accused represented to her that they needed expenses in following up the papers of the land. In fact, on January 21, 1993, she gave Eliza another P1,000.00 for the three accused's expenses in going to San Fabian, Pangasinan (Exhibit "E"). On February 6, 1993, she again gave another P9,000.00 to Engr. Orlando Figuerres for survey services and plans (Exhibit "D"). But under date of February 26, 1993, Victoria, with Eliza and Felomina as guarantors and witnesses, acknowledged receipt from Evangeline of the total amount of P337,150.00 only for the payment of back taxes and validation of the title of Pulmano Molintas with the express obligation that should there be a failure to pay the said back taxes and validation of title, the amount shall be returned to Evangeline; otherwise, the title shall be delivered to her (Exhibit "I" or "5").

Subsequently, Evangeline found out that instead of paying for the back taxes and validation of the property, the three accused divided the money among themselves as follows: Victoria - P176,380.00 (Exhibit "H" or "4"); Eliza - P79,380.00 (Exhibit "F" or "2"); and Felomina - P81,380.00 (Exhibit "G" or "3").

Evangeline demanded the return of her money and the three accused executed their respective promissory notes (Id.) to pay the amount each one had misappropriated at the end of June 1993. Up to the present, however, Evangeline has not yet been paid.

The accused Victoria Roberto partially testified on direct examination and then she jumped bail and has not since appeared to continue her testimony and, more importantly, to submit herself to cross-examination. Hence, at the instance of the prosecution, her partial testimony was stricken off the record.

With this development, the other accused, Eliza Pablo and Felomina Jacobe, alleged that it was Victoria who had conceived of the venture regarding the land of the late Pulmano Molintas and she invited them to join her. In turn, it was Eliza who brought Evangeline Bates into the picture.

Eliza claimed that they gave the money that came from Evangeline, together with their own money, to a certain Romeo Alcantara in Manila who is supposedly the engineer of Molintas. However, Eliza did not say how much of her own money did she give to Alcantara. On the other hand, Felomina averred that she agreed to contribute P200,000.00 and already gave Victoria P40,000.00 but the latter issued her no receipt.

In any event, when Evangeline backed out from the deal, all of them - Victoria, Eliza and Felomina - executed their respective promissory notes to return the former's money (Exhibits "2" or "B", "3" or "G" and "4" or "H"). Admittedly, they have not yet paid Evangeline.

The defraudation of Evangeline by the three accused is very evident even from the testimonies given by Eliza and Felomina. They made her believe that they needed her contribution of P330,000.00 to pay the back taxes and validation of a parcel of land belonging to the late Pulmano Molintas, whose daughter is married to a son of Victoria, and, in return, she will be given 2,500-square meter portion of the land; otherwise her money will be given back. However, once she gave her contribution, and more, the accused did not pay any taxes nor undertake any validation work on Pulmano's supposed title. In fact, there is even no title in the name of Pulmano Molintas that could be validated. What the defense presented is a tax declaration (Exhibit "10") in the name of Daisy Pacnos, wife of Molintas, which is not a title, much less capable of validation. Moreover, it is indicated on the tax declaration that the original tax declaration is in the name of a certain Acyay. Accordingly, the declaration in the name of Daisy Pacnos is of doubtful validity.

What the accused did was to divide Evangeline's money among themselves. Their yarn that they gave the money to a certain Romeo Alcantara is an undisguised lie. For they do not even have any receipt to show for it even as the amount runs to hundreds of thousands of pesos.⁴

On the basis thereof, the trial court rendered judgment, the dispositive portion of which reads, as follows:

WHEREFORE, the Court finds and declares the accused ELIZA PABLO y MARTIN, VICTORIA ROBERTO y LIMMIPAO and FELOMINA JACOBE y MIRANDA guilty beyond reasonable doubt of the crime of estafa as charged and hereby sentences EACH of them to suffer an indeterminate penalty of FOUR (4) YEARS and TWO (2) MONTHS of prision correccional, as minimum, to TWENTY (20) YEARS of reclusion temporal, as maximum; to indemnify the offended party, Evangeline Bates, in the following amounts; P79,380.00 to be paid by Eliza Pablo y Martin, P176,380.00 by Victoria Roberto y Limmipao and P81,380.00 by Felomina Jacobe y Miranda, all amounts to bear interest at the legal rate from December 6, 1993, the date of the filing of the Information, until fully paid; and to pay their proportionate share in the costs.

SO ORDERED.⁵

Only petitioners Eliza and Felomina appealed the decision to the Court of Appeals. Accused Victoria was considered to have forfeited her right to appeal as she failed to appear during the promulgation of the judgment of the trial court and she has neither surrendered herself nor has she been arrested.

On appeal, the appellate court rendered herein assailed decision sustaining petitioners' conviction.

Hence, the present Petition for Review on Certiorari under Rule 45 of the Rules of Court on the sole ground:

THE COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONERS REPRESENTATION TO PRIVATE COMPLAINANT ANENT THE PAYMENT OF EACH TAXES AND THE VALIDATION OF TITLE OVER A PARCEL OF LAND BELONGING TO PULMANO MOLINTAS AMOUNTED TO DECEIT AND FALSE REPRESENTATION DESPITE THE KNOWLEDGE OF PRIVATE COMPLAINANT AS TO THE TRUTH OF SAID REPRESENTATION.⁶

Petitioners claim that there is no deceit nor false pretenses in the instant case because the land subject matter of the payment of back taxes and from which a portion of 2,500 square meters would be apportioned to private complainant upon its validation is existing; that their failure to pay the back taxes and secure the validation of the land is not tantamount to deceit or false pretenses; that Evangeline Bates parted with her money not because she was deceived by them, but because she wanted to own a parcel of land at a bargain.

In its Comment, the Office of the Solicitor General (OSG) contends that the claim of appellants that there can be no deceit or false pretenses because of the existence of the land subject matter of payment of back taxes, is misplaced and misleading; that the decisive question is whether or not petitioners had the intention of fulfilling their alleged part of the bargain to private complainant; that petitioners devised the scheme of validating a title supposedly upon payment of its back taxes to extract money from private complainant for their personal needs.

In their Reply, petitioners merely repeated their disquisitions in their petition.

The petition is devoid of merit.

Petitioners were convicted of the crime of Estafa under Article 315 of the Revised Penal Code which provides:

ART. 315. Swindling (estafa). - Any person who shall defraud another by any of the means mentioned hereinbelow. . .

. . .

committed by any of the following means:

1. With unfaithfulness or abuse of confidence, namely:

. . .

(b) By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by the offended in trust or on commission, or for administration, or under any other obligation involving the duty to make delivery of or to return the same, even though such obligation be totally or partially guaranteed by a bond; or by denying having received such money, goods, or other property.

2. By means of the following false pretenses or fraudulent acts executed prior to or simultaneously with the commission of the fraud:

(a) By using fictitious name, or falsely pretending to possess power, influence, qualifications, property, credit, agency, business or imaginary transactions, or by means of other similar deceits.

. . .

The Court of Appeals held:

The evidence is clear that accused-appellants made a false representation to private complainant that the purported transaction is the payment of back taxes and validation of a parcel of land belonging to the late Pulmano Molintas. With this representation, private complainant, was enticed by the trio to part with her money by contributing the amount of P330,000.00 and in return, she will be given a 2,500-square meter lot. Such promises and assurances of herein appellants are evident from the pertinent testimonies of private complainant.

. . .

Receipt of the money by appellants from private complainant was evidenced by Exhibits "A", "B", "C", "E" and "I" (Records, pp. 38-40 and 44). Such receipts were affirmed by all the accused upon their execution of individual promissory notes (Exhibits "F", "G" and "H"; Records, pp. 41-43).

Appellants even misrepresented to private complainant that they already paid the back taxes in Manila.

. . .

Though private complainant knew that the subject land was not titled, appellants made her believe that they can work for the validation of the title of the subject land thereby entitling her to a 2,500-square meter lot.

. . .

Worse, appellants practically admitted having misappropriated the money of private complainant by dividing it among themselves for their personal use. The promissory notes, by its (sic) execution, (Exhibits "F", "G" and "H") are the best evidence that appellants impliedly acknowledged misuse of complainant's money (TSN, April 5, 1994, pp. 13-15).

We find no cogent reason to disregard the above findings of the appellate court. Petitioners' argument that there was no deceit or false pretenses on their part because the land subject matter of the back taxes actually exists, utterly deserves no consideration. As aptly pointed out by the OSG, the same is misplaced and misleading.

Deceit is defined as the false representation of a matter of fact, whether by words or conduct, by false or misleading allegations, or by concealment of that which should have been disclosed which deceives or is intended to deceive another so that he shall act upon it to his legal injury.⁷ False pretense is any deceitful practice or device by which another is led to part with the property in the thing taken.⁸

The deceit or false pretense employed by petitioners is the fact that they assured complainant that the amount of P330,000.00 delivered to them and accused Victoria by Evangeline was to pay the back taxes of a certain parcel of land so that a title may be secured and complainant will be given 2,500 square meters of the subject land.

The failure of petitioners and accused Roberto in not paying the back taxes and in misappropriating the money to their own personal use, constitute the crime of Estafa. Even if the land exists, the crime of Estafa is committed when petitioners and accused Roberto convinced complainant to part with her money on the basis of their assurance that they will pay the back taxes due on the land so as to secure a title over the land and a portion thereof titled in the name of complainant.

WHEREFORE, the petition is DENIED for utter lack of merit. The assailed decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

Callejo, Sr., and Chico-Nazario, JJ., concur.
Puno, J., on official leave.
TINGA, J., on leave.

Endnotes:

¹ Penned by Justice Presbitero J. Velasco, Jr. (now Court Administrator) and concurred in by Justices Consuelo Ynares-Santiago (now Associate Justice of the Supreme Court) and B.A. Adefuin-de la Cruz (now retired).

² Records, p. 201.

³ Order dated July 29, 1004; Records, p. 260.

⁴ Records, pp. 199-200.

⁵ Records, p. 1.

⁶ Rollo, p. 15.

⁷ People v. Menil, Jr., 340 SCRA 125, 142 (2000).

⁸ People v. Avila, 44 Phil 720, 728 (1923).

G.R. No. 138379 - PLACIDO O. URBANES, JR. v. COURT OF APPEALS, ET AL.

2013-01-15T09:50:24+00:00

G.R. No. 138379 - PLACIDO O. URBANES, JR. v. COURT OF APPEALS, ET AL.

SECOND DIVISION

[G.R. NO. 138379 : November 25, 2004]

PLACIDO O. URBANES, JR., operating under the name and style of Catalina Security Agency, Petitioner, v. COURT OF APPEALS and JERRY G. RILLES, Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before this Court is a Petition for Review on Certiorari of the decision¹ of the Court of Appeals dated February 11, 1999, and the resolution² dated April 22, 1999, denying petitioner's motion for reconsideration.

The facts are as follows:

Jerry Rilles started working as a security guard in petitioner's agency on March 29, 1984. On June 24, 1994, the agency's contract with the Social Security System (SSS) in Buendia, Makati, where he was assigned, expired. He then reported to petitioner's office on several occasions for a new assignment, to no avail.

On March 28, 1995, Rilles filed a complaint before the National Labor Relations Commission (NLRC), National Capital Region, Manila, against petitioner and his agency for illegal dismissal, illegal deduction, underpayment of wages, non-payment of premium pay for holiday, rest day, holiday pay, service incentive leave pay, 13th month pay, back wages and attorney's fees.³

In the position paper he submitted to the NLRC dated June 8, 1995, Rilles alleged that: after his assignment with SSS Buendia, he was informed by Mr. Bacal, a former supervisor, that there was a vacant position in the National Home Mortgage Finance Corporation; when he reported on July 26, 1994, as instructed by the personnel department, however, a certain Melody of the department said that there was no post available for him; on October 3, 1994, the agency offered him a post in Bataan which he rejected as he was residing in Manila; on December 15, 1994, he again asked for an assignment but was unsuccessful; on March 27, 1995, a post in Manila was finally offered to him but with the condition that he sign a termination contract first; he refused such offer.⁴

Petitioner and his agency, as respondents a quo, contend that: Rilles was not given the run-around by the agency since there was really a vacant post, as referred to by Mr. Bacal, but such post was filled up on July 6, 1994; on October 3, 1994, he offered Rilles a vacant post in Bataan, where Rilles was assigned in 1984 and where there are stay-in quarters free of charge, but Rilles refused; it is not true that Rilles was offered a post in Manila on March 27, 1995 with the condition that he must sign a termination contract; it is also not true that Rilles reported to the agency on December 15, 1994, because if he did, he would have been given an assignment since there were several vacancies in the Public Estates Authority in Pasay and in the MWSS Caloocan; even now there are several vacancies in Metro Manila where Rilles could be assigned if only he would accept.⁵

On October 31, 1995, Labor Arbiter Jose G. de Vera rendered his decision the dispositive portion of which reads:

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering the respondents to pay the complainant the total sum of P26,076.85, as separation pay and refund of his cash bond, plus ten percent (10%) thereof as attorney's fees.

All other claims of the complainant are hereby dismissed for lack of merit.

SO ORDERED.⁶

He explained that:

This Arbitration Branch is inclined to uphold the complainant in his charge of illegal dismissal. While it is true that complainant was validly relieved from his post at the SSS Makati, it is still the duty of the respondents to provide a reassignment to the complainant considering that his relief from his last post does not constitute a severance of employer-employee relationship. The record shows that when complainant was relieved on June 24, 1994, there were no more assignments given to him, notwithstanding the fact as claimed by the respondents, there were numerous vacant posts available in Metro Manila. If it were true that complainant did not report for reassignment or even refused to accept any assignment, it is still incumbent on the part of the respondents to notify the complainant in writing at his last known address to report for work under pain of disciplinary action. The failure of an employee to report for work or to accept any assignment does not ipso facto result in abandonment for the law particularly Rule XIV, Section 2, Book V of the Omnibus Implementing Rules and Regulations of the Labor Code specifically enjoins the employer to send a written notice to the concerned employee at his last known address. This written notice that respondents could have sent to the complainant should have included a Duty Detail Order if indeed there were vacant posts available for the complainant. There were no such Duty Detail Orders issued by the respondents, or if one is indeed issued, there is no evidence that complainant refused to accept his assignment. Further, if indeed the respondents are really inclined to give any assignment to the complainant, they could have offered one during the initial conferences of the instant case. None of such sort was done by the respondents.

From June 25, 1994 when the complainant was relieved from his last post until the filing of this suit for illegal dismissal on March 28, 1995, or a period of more than six (6) months, there were no assignments given to the complainant. Neither were there notices sent to the complainant requiring him to report for his reassignment. These circumstances clearly indicated constructive illegal dismissal which entitled the complainant to his prayer for separation pay at the rate of one-half month pay for every year of service.

At the prevailing minimum wage rate of P145.00 per day, the complainant's monthly pay rate should be P4,723.37 computed as follows: P145.00 multiplied by 390.9 days divided by 12 months. Thus, at one-half month pay for every year of service, complainant's separation pay amounts to P23,616.85 (P4,723.37 divided by 2 times 10 years).

The complainant's claim of P20.00 per month deduction as bond is duly supported by the payslips he presented in evidence. Accordingly, this must be refunded to him. Thus, from March 29, 1984 up to June 24, 1994, or a total of 123 months, the complainant had accumulated a total deduction of P2,460.00. This claim for refund is not subject to the prescriptive period of three (3) years, since it is the complainant's own money which is involved which was merely deposited with the respondents during the duration of his employment.

Regarding the complainant's claim for underpayment of wages, there were no payslips submitted by him covering the prescriptive period of three (3) years prior to the filing of the complaint. On the other hand, the respondents submitted in evidence payrolls for the period and it appears therein that complainant was duly paid at the rate of P118.00 per day which is in accordance with the prevailing minimum wage rates. Further, the payrolls show that complainant was duly paid of his legal holiday pay and premium pay for his rest days and special holidays. Respondents were also able to show by the payrolls submitted in evidence that complainant was duly paid of his overtime pay, service incentive pay, and 13th month pay during the subject period.⁷

Petitioner appealed and the NLRC on January 28, 1998 affirmed the decision of the Labor Arbiter, to wit:

WHEREFORE, in the light of the foregoing, the appeal is hereby DENIED for lack of merit. The assailed DECISION dated October 31, 1995 is hereby AFFIRMED.

SO ORDERED.⁸

Petitioner's motion for reconsideration likewise failed.⁹

Petitioner then filed a Petition for Certiorari with this Court on June 12, 1998, which was referred, however, to the Court of Appeals on December 9, 1998, following this Court's ruling in St. Martin Funeral Home v. NLRC..¹⁰

On February 11, 1999, the Court of Appeals rendered its decision the fallo of which reads:

WHEREFORE, the petition for certiorari is hereby DENIED for lack of merit. Accordingly, the Resolution of January 28, 1998 is AFFIRMED in toto.¹¹

Hence the present petition where it is claimed that:

PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF OR LACK OF JURISDICTION WHEN IT AFFIRMED THE DECISION OF THE LABOR ARBITER DESPITE THE FACT THAT THE DECISION OF THE LATTER IS CONTRARY TO LAW AND JURISPRUDENCE AND IS NOT SUPPORTED BY THE EVIDENCE ADDUCED.¹²

Petitioner argues that: while the Constitution is committed to the policy of social justice and the protection of the working class, management also has its own rights which are entitled to respect and enforcement in the interest of justice and fair play;¹³ in this case, the last assignment of respondent Rilles at SSS Buendia ended with the expiration of the security service contract with petitioner; respondent was continuously offered an assignment in Bataan, where he was previously assigned, but which respondent refused on the ground that he lives in Manila; respondent was not placed on "stand-by," instead, it was he who did not report regularly to petitioner's headquarters since he did not have the patience, diligence and earnestness in getting an assignment; and the findings and conclusions of the Labor Arbiter that private respondent Rilles was not given any assignment from June 25, 1994, the date of his relief from SSS Buendia, until the filing of this case were merely based on respondent's bare and self-serving allegations in his position paper.¹⁴

In his comment, respondent avers that: the present petition is based on questions of fact and not of law; the factual issues being questioned here were resolved by the Labor Arbiter on the basis of substantial evidence; and the factual findings of the NLRC which coincide with those of the Labor Arbiter should be accorded respect especially since such findings were affirmed in toto by the Court of Appeals when it said that there is substantial evidence on record to support the same.¹⁵

In his reply, petitioner insists that: his petition is based on questions of law and not on fact; if the applicable law and jurisprudence are faithfully applied to the facts in this case, the consequence would be opposed to the findings and conclusions of the Court of Appeals; factual review is also necessary since the factual findings of the Court of Appeals are devoid of support by the evidence on record; respondent was offered an assignment in Bataan on the third month following his relief from SSS Buendia; and since there is no dismissal, constructive or otherwise, no separation pay or back wages are payable.¹⁶

To resolve this case, only one question needs to be answered, i.e., whether or not respondent Rilles was illegally dismissed by petitioner.

We find that he was.

It is axiomatic that the findings of the Labor Arbiter, when affirmed by the NLRC and the Court of Appeals, are binding on this Court unless patently erroneous. This is because it is not the function of this Court to analyze or weigh all over again the evidence already considered in the proceedings below; or reevaluate the credibility of witnesses; or substitute the findings of fact of an administrative tribunal which has expertise in its special field.¹⁷

In this case, we defer to the factual findings of the labor arbiter, who is deemed to have acquired expertise in matters within his jurisdiction¹⁸ specially since his findings were affirmed in toto by the NLRC and the Court of Appeals.

However, certain clarifications need to be made.

The Labor Arbiter in his decision stated that when Rilles was relieved by petitioner's agency on June 24, 1994, there were no more assignments given him.¹⁹ Rilles, in his position paper dated June 8, 1995, meanwhile, admitted that,

On October 3, 1994, respondent (agency) advised (him) to report to Office and he was offered a vacant post in Bataan. However, such offer was rejected by (him) because he was residing in Manila.²⁰ (Emphasis supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

Thus the issue that should have been threshed out below is not just whether or not Rilles was illegally dismissed, but whether or not the assignment offered to him in Bataan was unreasonable and prejudicial to his interest which is tantamount to a constructive dismissal.

As a general rule, the right to transfer or reassign employees is recognized as an employer's right and the prerogative of management.²¹ As the exigency of the business may require, an employer, in the exercise of his prerogative may transfer an employee, provided that said transfer does not result in a demotion in rank or diminution in salary, benefits and other privileges of the employee; or is not unreasonable, inconvenient or prejudicial to the latter; or is not used as a subterfuge by the employer to rid himself of an undesirable worker.²²

As we explained in OSS Security and Allied Services, Inc. v. NLRC,²³

In the employment of personnel, the employer can prescribe the hiring, work assignments, working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of work, subject only to limitations imposed by laws.²⁴ (Emphasis supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

In Philippine Industrial Security Agency Corp. v. Dapiton,²⁵ we also noted that

'transfers can be effected pursuant to a company policy to transfer employees from one place of work to another place of work owned by the employer to prevent connivance among them. Likewise, we have affirmed the right of an employer to transfer an employee to another office in the exercise of what it took to be sound business judgment and in accordance with pre-determined and established office policy and practice. Particularly so when no illicit, improper or underhanded purpose can be ascribed to the employer and the objection to the transfer was grounded solely on the personal inconvenience or hardship that will be caused to the employee by virtue of the transfer. In security services, the transfer connotes a changing of guards or exchange of their posts, or their reassignment to other posts. However, all are considered given their respective posts.²⁶

However, as in all other rights, there are limits. The management prerogative to transfer personnel must be exercised without grave abuse of discretion and putting to mind the basic elements of justice and fair play. There must be no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee.²⁷

As we explained in Globe Telecom, Inc. v. Florendo-Flores,²⁸

In constructive dismissal, the employer has the burden of proving that the transfer and demotion of an employee are for just and valid grounds such as genuine business necessity. The employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee. It must not involve a demotion in rank or a diminution of salary and other benefits. If the employer cannot overcome this burden of proof, the employee's demotion shall be tantamount to unlawful constructive dismissal.²⁹

Thus, it is clear that while petitioner has the prerogative to transfer its guards pursuant to business exigencies, he has the burden, however, to show that the exercise of such prerogative was not done with grave abuse of discretion or contrary to justice and fair play.

This petitioner failed to do. He argues in his present petition that respondent Rilles was continuously offered an assignment in Bataan, and it is only Rilles who refuses, thus there cannot be any constructive dismissal. In the position paper submitted before the NLRC, however, petitioner claimed that there were many posts available in Manila where Rilles could be posted if only Rilles would agree. Thus, instead of adequately showing the necessity of such transfer to Bataan, petitioner cast doubt as to the urgency of such decision. The Labor Arbiter also noted that while petitioner claimed that there are many posts in Manila which it could give to respondent if only respondent would agree, no offer was ever made by petitioner in the conferences conducted before his office. Also, if such offer of an assignment in Manila was actually made, there would have been no need for Rilles to institute the complaint before the NLRC.

While transfer of assignment which may occasion hardship or inconvenience is allowed, this Court however shall not countenance a transfer that is unnecessary, inconvenient and prejudicial to employees.³⁰

Thus, we hold that respondent Rilles was constructively removed and illegally dismissed by petitioner. He is entitled to reinstatement and back wages as a necessary consequence of petitioner's acts.³¹ Back wages are paid as part of the penalty petitioner has to pay for illegally dismissing respondent. It is computed from the time of respondent's dismissal, in this case June 25, 1994, the day after the expiration of his last assignment, up to the time of his reinstatement,³² less whatever amount petitioner may prove that the respondent might have earned in the interim.³³ Petitioner is also liable to refund respondent's cash bond, in the amount of P2,460.00 as found by the Labor Arbiter, and 10% of the total amount to be received by respondent, as attorney's fees, since respondent was compelled to litigate and incur expenses to enforce and protect his rights.³⁴

The Labor Arbiter ordered petitioner to give respondent separation pay. Separation pay, as a rule however, is given whenever reinstatement is no longer feasible due to strained relations.³⁵ Absent any showing that reinstatement is no longer feasible in this case, we hold that respondent should be reinstated instead.

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals is AFFIRMED with the modification that petitioner is ordered to reinstate respondent Jerry Rilles and to pay him back wages from June 25, 1994 up to the date of his reinstatement. This case is remanded to the NLRC for computation of back wages to be paid by petitioner to respondent, in addition to the refund of P2,460.00 as cash bond and ten percent (10%) of the total amount to be received by respondent as attorney's fees.

SO ORDERED.

Puno, (Chairman), Callejo, Sr., TINGA, and Chico-Nazario, JJ., concur.

Endnotes:

¹ Penned by Associate Justice Artemio G. Tuquero and concurred in by Associate Justices Eubulo G. Verzola and Mariano M. Umali, Rollo, pp. 59-62.

² Rollo, p. 65.

³ Id., p. 82.

⁴ Id., p. 85.

⁵ Rollo, pp. 91-96.

⁶ Id., p. 126.

⁷ Rollo, pp. 123-126.

⁸ Id., p. 177.

⁹ Id., p. 196.

¹⁰ G.R. No. 130866, September 16, 1998, 295 SCRA 494; Rollo, p. 61.

¹¹ Id., p. 62.

¹² Id., p. 42.

¹³ Id., p. 44.

¹⁴ Id., pp. 48-51.

¹⁵ Id., pp. 226-226a.

¹⁶ Id., pp. 231-238.

¹⁷ Metro Transit Organization, Inc. v. NLRC, G.R. No. 142133, November 19, 2002, 392 SCRA 229, 239.

¹⁸ Abalos v. Philex Mining Corporaiton, G.R. No. 140374, November 27, 2002, 393 SCRA 134, 142.

¹⁹ Rollo, pp. 123-124.

²⁰ Id., p. 85.

²¹ Abbott Laboratories (Phils.), Inc., v. NLRC, No. L-76959, October 12, 1987, 154 SCRA 713, 717.

²² Sentinel Security Agency, Inc. v. NLRC, G.R. No. 122468, September 3, 1998, 295 SCRA 123, 133.

²³ G.R. No. 112752, February 9, 2000, 325 SCRA 157.

²⁴ Id., p. 164.

²⁵ G.R. No. 127421, December 8, 1999, 320 SCRA 124.

²⁶ Id., pp. 135-136.

²⁷ Yuco Chemical Industries, Inc. v. MOLE, G.R. No. 75656, 185 SCRA 727, 730.

²⁸ G.R. No. 150092, September 27, 2002, 390 SCRA 201.

²⁹ Id., p. 213.

³⁰ Asis v. NLRC, G.R. No. 107378, January 25, 1996, 252 SCRA 379, 384.

³¹ Sentinel Security Agency, Inc. v. NLRC, supra, p. 135.

³² Philippine Industrial Security Agency v. Dapiton, supra, p. 138.

³³ Asis v. NLRC, supra, p. 385.

³⁴ Paguio v. Philippine Long Distance Telephone Co., Inc., G.R. No. 154072, December 3, 2002, 393 SCRA 379, 388.

³⁵ Sentinel Security Agency, Inc. v. NLRC, supra, p. 135.

G.R. No. 138381 - GOVERNMENT SERVICE INSURANCE SYSTEM v. COMMISSION ON AUDIT

2013-01-15T09:50:25+00:00

G.R. No. 138381 - GOVERNMENT SERVICE INSURANCE SYSTEM v. COMMISSION ON AUDIT

EN BANC

[G.R. NO. 138381 : November 10, 2004]

GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, v. COMMISSION ON AUDIT, Respondent.

[G.R. NO. 141625 : November 10, 2004]

GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, v. ALFREDO D. PINEDA, DANIEL GO, FELINO BULANDUS, FELICIMO J. FERRARIS, JR., BEN HUR PORLUCAS, LUIS HIPONIA, MARIA LUISA A. FERNANDEZ, VICTORINA JOVEN, CORAZON S. ALIWANAG, SILVER L. MARTINES, SR., RENATO PEREZ, LOLITA CAYLAN, DOUGLAS VALLEJO and LETICIA ALMAZAN, on their own behalf and on behalf of all GSIS retirees with all of whom they share a common and general interest, Respondents.

R E S O L U T I O N

YNARES-SANTIAGO, J.:

On April 16, 2002, the Court promulgated a decision on these two consolidated cases partially granting the petition in G.R. No. 138381 ("first petition") thereby reversing the Commission on Audit's (COA) disallowance of certain fringe benefits granted to GSIS employees. As a result, the Court ordered the refund of amounts representing fringe benefits corresponding to those allowed in the first petition in favor of the respondents in G.R. No. 141625 ("second petition").

The benefits which the Court ordered to be refunded included increases in longevity pay, children's allowance and management contribution to the Provident Fund as well as premiums for group personal accident insurance. On the other hand, the Court affirmed the COA disallowance of loyalty and service cash award as well as housing allowance in excess of that approved by the COA. Amounts corresponding to these benefits were previously deducted by GSIS from respondents' retirement benefits in view of the COA disallowance in the first petition. COA did not seek reconsideration of the judgment ordering said refund, which thus became final and executory.

On August 7, 2002, the respondents in the second petition, all GSIS retirees, filed a motion for amendatory and clarificatory judgment ("amendatory motion").¹ They averred that we did not categorically resolve the issue raised in the second petition, namely: whether or not the GSIS may lawfully deduct any amount from their retirement benefits in light of Section 39 of Republic Act No. 8291.

According to respondents, said provision of law clearly states that no amount whatsoever could be legally deducted from retirement benefits, even those amounts representing COA disallowances. They posit that we should have ordered refund not only of benefits allowed in the first petition, but all amounts claimed, regardless of whether or not these were allowed by the COA. These include items which were correctly disallowed by the COA in the first petition, as well as disallowed benefits under the second petition. The latter consists of initial payment of productivity bonus, accelerated implementation of the new salary schedule effective August 1, 1995, 1995 mid-year financial assistance and increase in clothing, rice and meal allowances. Respondents further insist that we should have awarded damages in their favor, citing the GSIS' alleged bad faith in making the deductions.

GSIS filed a comment² to respondents' amendatory motion, as directed by the Court in a resolution dated September 3, 2002. GSIS posited that the other benefits not passed upon in the main judgment should be understood by respondents as having been impliedly denied by this Court. It also sought clarification of our decision insofar as it declared that there was no identity of subject matter between the COA proceedings, from which the first petition stemmed, and respondents' claim under the second petition, which emanated from an order of the GSIS Board of Trustees ("Board"). As for the damages claimed by respondents, GSIS insists that it made the deductions in good faith for these were done in accordance with COA directives.

Respondents filed a reply³ to the comment of GSIS on September 9, 2002.

Meanwhile, respondents filed a second motion, this time for leave to file a motion for discretionary and partial execution⁴ ("motion for execution"). They prayed that GSIS be ordered to effect the refund, as finally adjudged in our decision, pending resolution of their amendatory motion as to the other deducted amounts. We granted the motion for execution on September 3, 2002.

Subsequently, on December 26, 2002, counsel for respondents, Atty. Agustin Sundiam, filed a motion for entry and enforcement of attorney's lien⁵ ("motion for charging lien") and a supplement⁶ to this motion on January 10, 2003. He sought entry of a charging lien in the records of this case pursuant to Section 37 of Rule 138. He prayed for an order directing the GSIS to deduct, as his professional fees, 15% from respondents' refund vouchers since the GSIS was already in the process of releasing his clients' checks in compliance with our judgment in the first petition. The payment scheme was allegedly authorized by the Board of Directors of his clients, the GSIS Retirees Association, Inc. (GRIA), through a board resolution⁷ that he has attached to the motion.

Atty. Sundiam's motion for charging lien was opposed by petitioner GSIS on the ground that it was through its efforts, and not Atty. Sundiam's, that the retirees were able to obtain a refund.⁸ Meanwhile, the GRIA confirmed the payment scheme it adopted with Atty. Sundiam and prayed for its approval.⁹

Thereafter, on January 10, 2003, respondents filed another manifestation and motion as well as supplement thereto, claiming that GSIS was deducting new and unspecified sums from the amount it was refunding to respondents. These new deductions purportedly pertain to another set of COA disallowances.¹⁰

On January 21, 2003, respondents again filed a motion¹¹ praying for the inclusion in the refundable amount of dividends on the management contribution to the Provident Fund ("motion for payment of dividends"). Respondents claimed that the contribution, which amounted to Fifty Million Pesos (P50M), was retained by GSIS for more than five years and thus earned a considerable sum of income while under its control. GSIS declared and paid dividends on said contribution to incumbent officials and employees, but refused to extend the same benefits to respondents/retirees.

On March 6, 2003, GSIS filed a joint comment¹² to respondents' two foregoing motions contending that the new deductions are legitimate. The deductions pertain to car loan arrearages, disallowed employees' compensation claims and the like. As for the dividends on the Provident Fund contributions, respondents are not entitled to the same because while the first petition was pending, the contributions were not actually remitted to the fund but were withheld by COA pursuant to its earlier disallowance.

On October 2, 2003, respondents filed another motion¹³ for an order to compel the GSIS to pay dividends on the Provident Fund contributions pending resolution of their other motions. They also sought refund of Permanent Partial Disability (PPD) benefits that GSIS supposedly paid to some of the respondents, but once again arbitrarily deducted from the amount which the Court ordered to be refunded.

In a minute resolution¹⁴ dated November 11, 2003, we denied the last motion for lack of merit. We likewise denied with finality respondents' motion for reconsideration from the denial of said motion.¹⁵

We now resolve the matters raised by the parties.

On the amendatory motion, it must be clarified that the question raised before this Court in the second petition was the issue of the Board's jurisdiction to resolve respondents' claim for refund of amounts representing deductions from their retirement benefits. What was assailed in the second petition was the appellate court's ruling that the Board had jurisdiction over respondents' claim since there was no identity of subject matter between the proceedings then pending before the COA and the petition brought by respondents before the Board. The Court of Appeals did not rule on the main controversy of whether COA disallowances could be deducted from retirement benefits because the Board ordered the dismissal of respondents' claim for alleged lack of jurisdiction, before it could even decide on the principal issue.

Consequently, the only matter that was properly elevated to this Court was the issue of whether or not the Board had jurisdiction over respondents' demands. We did not resolve the issue of whether or not the deductions were valid under Section 39 of RA 8291, for the simple reason that the Board, as well as the appellate court, did not tackle the issue. The doctrine of primary jurisdiction¹⁶ would ordinarily preclude us from resolving the matter, which calls for a ruling to be first made by the Board. It is the latter that is vested by law with exclusive and original jurisdiction to settle any dispute arising under RA 8291, as well as other matters related thereto.¹⁷

However, both the GSIS and respondents have extensively discussed the merits of the case in their respective pleadings and did not confine their arguments to the issue of jurisdiction. Respondents, in fact, submit that we should resolve the main issue on the ground that it is a purely legal question. Respondents further state that a remand of the case to the Board would merely result in unnecessary delay and needless expense for the parties. They thus urge the Court to decide the main question in order to finally put an end to the controversy.

Indeed, the principal issue pending before the Board does not involve any factual question, as it concerns only the correct application of the last paragraph of Section 39, RA 8291. The parties agreed that the lone issue is whether COA disallowances could be legally deducted from retirement benefits on the ground that these were respondents' monetary liabilities to the GSIS under the said provision. There is no dispute that the amounts deducted by GSIS represented COA disallowances. Thus, the only question left for the Board to decide is whether the deductions are allowed under RA 8291.

Under certain exceptional circumstances, we have taken cognizance of questions of law even in the absence of an initial determination by a lower court or administrative body. In China Banking Corporation v. Court of Appeals,¹⁸ the Court held:

At the outset, the Court's attention is drawn to the fact that since the filing of this suit before the trial court, none of the substantial issues have been resolved. To avoid and gloss over the issues raised by the parties, as what the trial court and respondent Court of Appeals did, would unduly prolong this litigation involving a rather simple case of foreclosure of mortgage. Undoubtedly, this will run counter to the avowed purpose of the rules, i.e., to assist the parties in obtaining just, speedy and inexpensive determination of every action or proceeding. The Court, therefore, feels that the central issues of the case, albeit unresolved by the courts below, should now be settled specially as they involved pure questions of law. Furthermore, the pleadings of the respective parties on file have amply ventilated their various positions and arguments on the matter necessitating prompt adjudication.

In Roman Catholic Archbishop of Manila v. Court of Appeals,¹⁹ the Court likewise held that the remand of a case is not necessary where the court is in a position to resolve the dispute based on the records before it. The Court will decide actions on the merits in order to expedite the settlement of a controversy and if the ends of justice would not be subserved by a remand of the case.

Here, the primary issue calls for an application of a specific provision of RA 8291 as well as relevant jurisprudence on the matter. No useful purpose will indeed be served if we remand the matter to the Board, only for its decision to be elevated again to the Court of Appeals and subsequently to this Court. Hence, we deem it sound to rule on the merits of the controversy rather than to remand the case for further proceedings.

The last paragraph of Section 39, RA 8291 specifically provides:

SEC. 39. Exemption from Tax, Legal Process and Lien. -

x x x x x x x x x

The funds and/or the properties referred to herein as well as the benefits, sums or monies corresponding to the benefits under this Act shall be exempt from attachment, garnishment, execution, levy or other processes issued by the courts, quasi-judicial agencies or administrative bodies including Commission on Audit (COA) disallowances and from all financial obligations of the members, including his pecuniary accountability arising from or caused or occasioned by his exercise or performance of his official functions or duties, or incurred relative to or in connection with his position or work except when his monetary liability, contractual or otherwise, is in favor of the GSIS.

It is clear from the above provision that COA disallowances cannot be deducted from benefits under RA 8291, as the same are explicitly made exempt by law from such deductions. Retirement benefits cannot be diminished by COA disallowances in view of the clear mandate of the foregoing provision. It is a basic rule in statutory construction that if a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without interpretation. This is what is known as plain-meaning rule or verba legis.²⁰

Accordingly, the GSIS' interpretation of Section 39 that COA disallowances have become monetary liabilities of respondents to the GSIS and therefore fall under the exception stated in the law is wrong. No interpretation of the said provision is necessary given the clear language of the statute. A meaning that does not appear nor is intended or reflected in the very language of the statute cannot be placed therein by construction.²¹

Moreover, if we are to accept the GSIS' interpretation, then it would be unnecessary to single out COA disallowances as among those from which benefits under RA 8291 are exempt. In such a case, the inclusion of COA disallowances in the enumeration of exemptions would be a mere surplusage since the GSIS could simply consider COA disallowances as monetary liabilities in its favor. Such a construction would empower the GSIS to withdraw, at its option, an exemption expressly granted by law. This could not have been the intention of the statute.

That retirement pay accruing to a public officer may not be withheld and applied to his indebtedness to the government has been settled in several cases. In Cruz v. Tantuico, Jr.,²² the Court, citing Hunt v. Hernandez,²³ explained the reason for such policy thus:

x x x we are of the opinion that the exemption should be liberally construed in favor of the pensioner. Pension in this case is a bounty flowing from the graciousness of the Government intended to reward past services and, at the same time, to provide the pensioner with the means with which to support himself and his family. Unless otherwise clearly provided, the pension should inure wholly to the benefit of the pensioner. It is true that the withholding and application of the amount involved was had under section 624 of the Administrative Code and not by any judicial process, but if the gratuity could not be attached or levied upon execution in view of the prohibition of section 3 of Act No. 4051, the appropriation thereof by administrative action, if allowed, would lead to the same prohibited result and enable the respondents to do indirectly what they can not do directly under section 3 of Act No. 4051. Act No. 4051 is a later statute having been approved on February 21, 1933, whereas the Administrative Code of 1917 which embodies section 624 relied upon by the respondents was approved on March 10 of that year. Considering section 3 of Act No. 4051 as an exception to the general authority granted in section 624 of the Administrative Code, antagonism between the two provisions is avoided. (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

The above ruling was reiterated in Tantuico, Jr. v. Domingo,²⁴ where the Court similarly declared that benefits under retirement laws cannot be withheld regardless of the petitioner's monetary liability to the government.

The policy of exempting retirement benefits from attachment, levy and execution, as well as unwarranted deductions, has been embodied in a long line of retirement statutes. Act No. 4051,²⁵ which provides for the payment of gratuity to officers and employees of the Insular Government upon retirement due to reorganization, expressly provides in its Section 3 that "(t)he gratuity provided for in this Act shall not be attached or levied upon execution."

The law which established the GSIS, Commonwealth Act No. 186 ("CA No. 186"),²⁶ went further by providing as follows:

SEC. 23. Exemptions from legal process and liens. - No policy of life insurance issued under this Act, or the proceeds thereof, except those corresponding to the annual premium thereon in excess of five hundred pesos per annum, when paid to any member thereunder, shall be liable to attachment, garnishment, or other process, or to be seized, taken, appropriated, or applied by any legal or equitable process or operation of law to pay any debt or liability of such member, or his beneficiary, or any other person who may have a right thereunder, either before or after payment; nor shall the proceeds thereof, when not made payable to a named beneficiary, constitute a part of the estate of the member for payment of his debt.

Presidential Decree No. 1146,²⁷ which amended CA No. 186, likewise contained a provision exempting benefits from attachment, garnishment, levy or other processes. However, the exemption was expressly made inapplicable to "obligations of the member to the System, or to the employer, or when the benefits granted are assigned by the member with the authority of the System."²⁸

The latest GSIS enactment, RA 8291,²⁹ provides for a more detailed and wider range of exemptions under Section 39. Aside from exempting benefits from judicial processes, it likewise unconditionally exempts benefits from quasi-judicial and administrative processes, including COA disallowances, as well as all financial obligations of the member. The latter includes any pecuniary accountability of the member which arose out of the exercise or performance of his official functions or duties or incurred relative to his position or work. The only exception to such pecuniary accountability is when the same is in favor of the GSIS.

Thus, "monetary liability in favor of GSIS" refers to indebtedness of the member to the System other than those which fall under the categories of pecuniary accountabilities exempted under the law. Such liability may include unpaid social insurance premiums and balances on loans obtained by the retiree from the System, which do not arise in the performance of his duties and are not incurred relative to his work. The general policy, as reflected in our retirement laws and jurisprudence, is to exempt benefits from all legal processes or liens, but not from outstanding obligations of the member to the System. This is to ensure maintenance of the GSIS' fund reserves in order to guarantee fulfillment of all its obligations under RA 8291.

Notwithstanding the foregoing, however, we find it necessary to nonetheless differentiate between those benefits which were properly disallowed by the COA and those which were not.

Anent the benefits which were improperly disallowed, the same rightfully belong to respondents without qualification. As for benefits which were justifiably disallowed by the COA, the same were erroneously granted to and received by respondents who now have the obligation to return the same to the System.

It cannot be denied that respondents were recipients of benefits that were properly disallowed by the COA. These COA disallowances would otherwise have been deducted from their salaries, were it not for the fact that respondents retired before such deductions could be effected. The GSIS can no longer recover these amounts by any administrative means due to the specific exemption of retirement benefits from COA disallowances. Respondents resultantly retained benefits to which they were not legally entitled which, in turn, gave rise to an obligation on their part to return the amounts under the principle of solutio indebiti.

Under Article 2154 of the Civil Code,³⁰ if something is received and unduly delivered through mistake when there is no right to demand it, the obligation to return the thing arises. Payment by reason of mistake in the construction or application of a doubtful or difficult question of law also comes within the scope of solutio indebiti.³¹

In the instant case, the confusion about the increase and payment of benefits to GSIS employees and executives, as well as its subsequent disallowance by the COA, arose on account of the application of RA 6758 or the Salary Standardization Law and its implementing rules, CCC No. 10. The complexity in the application of these laws is manifested by the several cases that have reached the Court since its passage in 1989.³² The application of RA 6758 was made even more difficult when its implementing rules were nullified for non-publication.³³ Consequently, the delivery of benefits to respondents under an erroneous interpretation of RA 6758 gave rise to an actionable obligation for them to return the same.

While the GSIS cannot directly proceed against respondents' retirement benefits, it can nonetheless seek restoration of the amounts by means of a proper court action for its recovery. Respondents themselves submit that this should be the case,³⁴ although any judgment rendered therein cannot be enforced against retirement benefits due to the exemption provided in Section 39 of RA 8291. However, there is no prohibition against enforcing a final monetary judgment against respondents' other assets and properties. This is only fair and consistent with basic principles of due process.

As such, a proper accounting of the amounts due and refundable is in order. In rendering such accounting, the parties must observe the following guidelines:

(1) All deductions from respondents' retirement benefits should be refunded except those amounts which may properly be defined as "monetary liability to the GSIS";

(2) Any other amount to be deducted from retirement benefits must be agreed upon by and between the parties; andcralawlibrary

(3) Refusal on the part of respondents to return disallowed benefits shall give rise to a right of action in favor of GSIS before the courts of law.

Conformably, any fees due to Atty. Sundiam for his professional services may be charged against respondents' retirement benefits. The arrangement, however, must be covered by a proper agreement between him and his clients under (2) above.

As to whether respondents are entitled to dividends on the provident fund contributions, the same is not within the issues raised before the Court. The second petition refers only to the legality of the deductions made by GSIS from respondents' retirement benefits. There are factual matters that need to be threshed out in determining respondents' right to the payment of dividends, in view of the GSIS' assertion that the management contributions were not actually remitted to the fund. Thus, the payment of dividends should be the subject of a separate claim where the parties can present evidence to prove their respective assertions. The Court is in no position to resolve the matter since the material facts that would prove or disprove the claim are not on record.

In the interest of clarity, we reiterate herein our ruling that there is no identity of subject matter between the COA proceedings, from which the first petition stemmed, and respondents' claim of refund before the Board. While the first petition referred to the propriety of the COA disallowances per se, respondents' claim before the Board pertained to the legality of deducting the COA disallowances from retirement benefits under Section 39 of RA 8291.

Finally, on respondents claim that the GSIS acted in bad faith when it deducted the COA disallowances from their retirement benefits, except for bare allegations, there is no proof or evidence of the alleged bad faith and partiality of the GSIS. Moreover, the latter cannot be faulted for taking measures to ensure recovery of the COA disallowances since respondents have already retired and would be beyond its administrative reach. The GSIS merely acted upon its best judgment and chose to err in the side of prudence rather than suffer the consequence of not being able to account for the COA disallowances. It concededly erred in taking this recourse but it can hardly be accused of malice or bad faith in doing so.

WHEREFORE, in view of the foregoing, the April 16, 2002 Decision in G.R. NOS. 138381 and 141625 is AMENDED. In addition to the refund of amounts corresponding to benefits allowed in G.R. No. 138381, the GSIS is ordered to REFUND all deductions from retirement benefits EXCEPT amounts representing monetary liability of the respondents to the GSIS as well as all other amounts mutually agreed upon by the parties.

SO ORDERED.

Davide, Jr., C.J., Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-Martinez, Carpio-Morales, Azcuna, Chico-Nazario, and Garcia, JJ., concur.
Puno, J. on official leave.
Corona and TINGA, JJ., on leave.
Callejo, Sr., J., no part, Ponente in CA Decision.

Endnotes:

¹ Rollo in G.R. No. 141625, pp. 454-464.

² Id. at 465-473.

³ Id. at 474-489.

⁴ Id. at 449-453.

⁵ Id. at 497-499.

⁶ Id. at 508-510.

⁷ Id. at 500.

⁸ Id. at 512-516.

⁹ Id. at 531-532.

¹⁰ Id. at 503-527.

¹¹ Id. at 518-520.

¹² Id. at 543-551.

¹³ Id. at 562-566.

¹⁴ Id. at 567.

¹⁵ Id. at 573.

¹⁶ Under this doctrine, the court cannot and will not arrogate unto itself the authority to resolve a controversy, the jurisdiction over which is initially lodged with a tribunal possessed of special competence. (Province of Zamboanga del Norte v. Court of Appeals, G.R. No. 109853, 11 October 2000, 342 SCRA 549, 559, citing Paat v. CA, 334 Phil. 146 (1997).

¹⁷ RA 8291, Section 30, which states:

SEC. 30. Settlement of Disputes. - The GSIS shall have original and exclusive jurisdiction to settle any dispute arising under this Act and any other laws administered by the GSIS.

¹⁸ 333 Phil. 158, 165 (1996), citing then Rule 1, Section 2 of the Rules of Court.

¹⁹ G.R. No. 77425, 19 June 1991, 198 SCRA 300, 311.

²⁰ Statutory Construction (2003 Edition) Ruben E. Agpalo, p. 124, citing Bustamante v. NLRC, 332 Phil. 833 (1996).

²¹ Id. at 63.

²² G.R. No. L-49535, 28 October 1988, 166 SCRA 670, 679.

²³ 64 Phil. 753 (1937).

²⁴ G.R. No. 96422, 28 February 1994, 230 SCRA 391.

²⁵ Approved February 21, 1933.

²⁶ Approved November 14, 1936.

²⁷ Approved May 31, 1977.

²⁸ PD No. 1146, Section 33, par. 2.

²⁹ Approved May 30, 1997.

³⁰ Civil Code, Article 2154. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.

³¹ Civil Code, Article 2155. Payment by reason of a mistake in the construction or application of a doubtful or difficult question of law may come within the scope of the preceding article.

³² Among these cases which we cited in our main decision are Philippine Ports Authority v. COA, G.R. No. 100773, 16 October 1992, 214 SCRA 653 and Manila International Airport Authority v. COA, G.R. No. 104217, 5 December 1994, 238 SCRA 714.

³³ De Jesus, et al. v. COA and Jamoralin, G.R. No. 109023, 12 August 1998, 294 SCRA 152.

³⁴ Respondents' comment to the petition in G.R. No. 141625, supra, note 1 at 318.

G.R. No. 138490 - DESIREE L. PAGE-TENORIO v. WILFREDO C. TENORIO, ET AL.

2013-01-15T09:50:25+00:00

G.R. No. 138490 - DESIREE L. PAGE-TENORIO v. WILFREDO C. TENORIO, ET AL.

SECOND DIVISION

[G.R. NO. 138490 : November 24, 2004]

DESIREE L. PAGE-TENORIO, Petitioner, v. WILFREDO C. TENORIO and PRESIDING JUDGE JOSE R. HERNANDEZ OF REGIONAL TRIAL COURT, BRANCH 158, PASIG CITY, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court seeking to nullify and set aside the Order of the Regional Trial Court (RTC), Branch 158, Pasig City, dated 10 March 199[9]¹ denying petitioner's formal offer of exhibits for her failure to furnish copies thereof to the Office of the Solicitor General (OSG) and the City Prosecutor, and the Order² of the RTC dated 13 April 1999 denying petitioner's Motion for Reconsideration.

Stripped of circumlocution, the factual antecedents are -

On 07 August 1998, petitioner Desiree L. Page-Tenorio filed a petition for the declaration of nullity of her marriage to respondent Wilfredo C. Tenorio.³ On 20 August 1998, a copy of the summons, together with the petition and its annexes, was served upon private respondent and was received by him personally. On 02 December 1998, petitioner completed her testimony on direct and cross-examination. On 05 February 1999, Mrs. Regina Togores, Clinical Psychologist of the Judicial and Bar Council, Supreme Court, finished her testimony. On the same day, Julieta C. Tobias, the court-appointed Social Worker, was also presented and she, likewise, concluded her testimony.⁴ On 15 February 1999,⁵ petitioner, through counsel, filed a formal offer of evidence furnishing private respondent with a copy thereof by registered mail. As earlier stated, the trial court, acting on the offer, denied the same on the ground that petitioner failed to furnish copies of said formal offer of evidence to the OSG and the office of the City Prosecutor. Petitioner's motion for reconsideration was further denied in the Order dated 13 April 1999.

Hence, this Petition.

Petitioner assigns a single error⁶ (of the trial court) for our resolution:

THE HONORABLE COURT GRAVELY ABUSED HIS (sic) DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DENYING PETITIONER'S MOTION FOR RECONSIDERATION OF THE ORDER DATED 5 FEBRUARY 1999 GIVEN THE FACT THAT THERE WAS ALREADY SUBSTANTIAL COMPLIANCE WITH THE SAME.

In a resolution of this Court dated 16 June 1999, we resolved, without giving due course to the petition, to require respondents to Comment within ten (10) days from notice.⁷

In its Compliance, the OSG prayed for the dismissal of the petition on the ground that the order was not tainted with grave abuse of discretion and the fact that the petition should have been filed with the Court of Appeals.⁸

Replying⁹ to this Comment, petitioner, through counsel, countered that in her motion for reconsideration dated 18 March 1999 seeking to set aside the Order of the trial court dated 10 March 1999¹⁰ denying her formal offer of evidence, counsel sincerely apologized and attached proof of compliance to the trial court's order and explained that the failure to furnish copies of said formal offer was due to mere oversight brought about by daily court appearances and counsel's treatment for hypertension at that time.

In his Comment,¹¹ private respondent Wilfredo Tenorio manifested that he just wants to be left alone in peace. He has no comment or opposition to the petition and will abide by the decision of this Court.

The petition is not meritorious.

It is noteworthy that on 30 April 1999, the trial court issued an Order¹² dismissing this case on grounds that petitioner's Formal Offer of Exhibits was denied admission and that her other evidence was not preponderant enough to entitle her to a declaration of nullity of marriage under Article 36 of the Family Code.

Petitioner in the main cites that since the OSG and the Public Prosecutor were subsequently furnished copies of her formal offer of evidence, the same constitutes substantial compliance with the 05 February 1999 Order of the trial court. Besides, no damage or prejudice was caused by her belated compliance and, more importantly, technical rules should be relaxed in order to obtain a speedy and efficient administration of justice.

The Order of the trial court dated 05 February 1999 reads:

The testimonies of witnesses Regina Beltran Togores and Julieta Tobias were terminated and as prayed for, counsel for petitioner is given a period of ten (10) days from today within which to file her formal offer of evidence, copy furnished the offices of the Solicitor General and Public Prosecutor, which are given a similar period of time from their receipt of the offer to file their comments/objections, after which, the incident is submitted for resolution.

After the petitioner shall have rested her case, set the initial presentation of oppositor's evidence, if any, on March 16, 1999 at 8:30 o'clock in the morning.¹³

In denying Petitioner's motion for reconsideration, the trial court rationalized:¹⁴

This resolves petitioner's Motion for Reconsideration.

The motion is denied. This Court could not fathom why petitioner failed to furnish the Office of the Solicitor General and the Public Prosecutor's Office of Pasig City a copy of its offer of exhibits. It is not only contained in the Order of February 5, 1999 but very obvious in Article 48 of the Family Code and in the Molina case decided by the Supreme Court.

Consequently, the Order of March 10, 1999¹⁵ stays.

In the earlier case of Vergara, Sr. v. Suelto,¹⁶ this Court made a ruling on the propriety of filing directly to this Court an application for a writ of mandamus or other extraordinary writ against a municipal trial court considering that jurisdiction to issue these writs is also possessed by the Court of Appeals as well as the RTC, thus -

We turn now to the second question posed in the opening paragraph of this opinion, as to the propriety of a direct resort to this Court for the remedy of mandamus or other extraordinary writ against a municipal court, instead of an attempt to initially obtain that relief from the Regional Trial Court of the district or the Court of Appeals, both of which tribunals share this Court's jurisdiction to issue the writ. As a matter of policy such a direct recourse to this Court should not be allowed. The Supreme Court is a court of last resort, and must so remain if it is to satisfactorily perform the functions assigned to it by the fundamental charter and immemorial tradition. It cannot and should not be burdened with the task of dealing with causes in the first instance. Its original jurisdiction to issue the so-called extraordinary writs should be exercised only where absolutely necessary or where serious and important reasons exist therefor. Hence, that jurisdiction should generally be exercised relative to actions or proceedings before the Court of Appeals, or before constitutional or other tribunals, bodies or agencies whose acts for some reason or another, are not controllable by the Court of Appeals. Where the issuance of an extraordinary writ is also within the competence of the Court of Appeals or a Regional Trial Court, it is in either of these courts that the specific action for the writ's procurement must be presented. This is and should continue to be the policy in this regard, a policy that courts and lawyers must strictly observe.

Resolutely, this Court has consistently decreed that a deviation from the strict observance of the principle of judicial hierarchy may be justified only in case of special and important reasons clearly and specifically set forth in the petition. The petitioner, in the instant petition, has not shown to the satisfaction of this Court, by any degree, such special and important reason warranting a disregard of this well-established principle or to rationalize the obvious procedural gaffe committed therein.

At the outset, it is necessary to stress that a direct recourse to this court is highly improper, for it violates the established policy of strict observance of the judicial hierarchy of courts. We need to reiterate, for the guidance of petitioner, that this Court's original jurisdiction to issue a writ of certiorari (as well as prohibition, mandamus, quo warranto, habeas corpus and injunction) is concurrent with the Court of Appeals (CA), as in the present case, and with the RTCs in proper cases within their respective regions. However, this concurrence of jurisdiction does not grant a party seeking any of the extraordinary writs the absolute freedom to file his petition with the court of his choice. This Court is a court of last resort, and must so remain if it is to satisfactorily perform the functions assigned to it by the Constitution and immemorial tradition. The hierarchy of courts determines the appropriate forum for such petitions. Thus, petitions for the issuance of such extraordinary writs against the first level ("inferior") courts should be filed with the RTC, and those against the latter, with the CA. A direct invocation of this Court's original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. This is the established policy. It is a policy that is necessary to prevent inordinate demands upon this Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of its docket.¹⁷ (Emphasis ours)

This same principle was laid down in the case of People v. Cuaresma,¹⁸ where it was held:

. . . A direct invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy that is necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's docket. Indeed, the removal of the restriction on the jurisdiction of the Court of Appeals in this regard, supra - resulting from the deletion of the qualifying phrase, "in aid of its appellate jurisdiction" - was evidently intended precisely to relieve this Court pro tanto of the burden of dealing with applications for the extraordinary writs which, but for the expansion of the appellate court's corresponding jurisdiction, would have had to be filed with it.

The Court feels the need to reaffirm that policy at this time, and to enjoin strict adherence thereto in the light of what it perceives to be a growing tendency on the part of litigants and lawyers to have their applications for the so-called extraordinary writs, and sometime even their appeals, passed upon and adjudicated directly and immediately by the highest tribunal of the land. The proceeding at bar is a case in point. The application for the writ of certiorari sought against a City Court was brought directly to this Court although there is no discernible special and important reason for not presenting it to the Regional Trial Court.

The Court therefore closes this decision with the declaration, for the information and guidance of all concerned, that it will not only continue to enforce the policy, but will require a more strict observance thereof.

This is not to say though that petitioner is left without any remedy under the law as res judicata does not apply in this case considering that a dismissal on the ground of petitioner's failure to furnish copies of her formal offer of evidence to the city prosecutor and the solicitor general does not constitute an adjudication on the merits. The case was dismissed not on the merits, but on a technicality - - the petitioner's failure to comply with an order of the court.¹⁹ It was not an order or judgment determinative of an issue of fact pending before the Court. It was an interlocutory order, because it required the parties to perform certain acts for final adjudication of awards.²⁰ A judgment on the merits is one rendered after a determination of which party is right, as distinguished from a judgment rendered upon some preliminary or formal or merely technical point.²¹ The decision having resolved only an interlocutory matter, res judicata cannot be applied.²²

We find pertinent the ruling of this Court in the case of Macahilig v. Heirs of Grace M. Magalit:²³

A judgment or an order on the merits is one rendered after a determination of which party is upheld, as distinguished from an order rendered upon some preliminary or formal or merely technical point. Dismissal of a case for failure of plaintiff to comply with a "notice of case status" signed by an officer-in-charge does not have the effect of an adjudication on the merits. Strictly speaking, res judicata does not apply to decisions or orders adjudicating interlocutory motions.

Regrettably, while res judicata does not apply, the case cannot be revived because the action is barred by the finality of the order of dismissal rendered by the trial court on 30 April 1999 which the petitioner never questioned. Petitioner may, however, avail herself of the remedy as pronounced in the case of Madarieta v. RTC-Br. 28, Mambajao, Camiguin:²⁴

Upon finality of the order of dismissal, the case could no longer be revived. The trial court has lost authority over the case. Squarely applicable is the decision where this Court emphatically said that after the dismissal has become final through the lapse of the fifteen-day reglementary period, the only way by which the action may be resuscitated or "revived," is by the institution of a subsequent action through the filing of another complaint and the payment of the fees prescribed by law. This is so because upon attainment of finality of a dismissal through the lapse of said reglementary period, the Court losses jurisdiction and control over it and can no longer make any disposition in respect thereof inconsistent with such dismissal.

WHEREFORE, premises considered, the instant Petition for Certiorari is DENIED for lack of merit.

SO ORDERED.

Puno, (Acting C.J.) Austria-Martinez, Callejo, Sr., and TINGA, JJ., concur.

Endnotes:

¹ The Order of Judge Jose Hernandez was erroneously dated as 10 March 1998 instead of 10 March 1999; Rollo, 18.

² Annex A, Rollo, p. 17.

³ Annex E, Rollo, p. 21.

⁴ Annex 1, Rollo, p. 71.

⁵ Annex G, Rollo, pp. 30-33.

⁶ Rollo, p. 8.

⁷ Rollo, p. 58.

⁸ Rollo, pp. 66-69.

⁹ Rollo, pp. 74-79.

¹⁰ See note 1.

¹¹ Rollo, pp. 107-108.

¹² Annex 2, Rollo, p. 72.

¹³ Rollo, p. 71.

¹⁴ Annex A, Rollo, p. 17.

¹⁵ See note 1.

¹⁶ G.R. No. L-74766, 21 December 1987, 156 SCRA 753, 766.

¹⁷ Ouano v. PGTT International Investment Corp., G.R. No. 134230, 17 July 2002, 384 SCRA 589, 592-593; La Bugal-B Laan Tribal Association, Inc. v. Victor O. Ramos, G.R. No. 127882, 27 January 2004.

¹⁸ G.R. No. 67787, 18 April 1989, 172 SCRA 415, 424-425.

¹⁹ Madarieta v. RTC-Br. 28, Mambajao, Camiguin, G.R. No. 126443, 28 February 2000, 326 SCRA 479, 483.

²⁰ Phil. Coal Miner's Union v. Cebu Portland Cement Co., G.R. No. L-19007, 30 April 1964, 119 Phil. 1063, 1069.

²¹ Santos v. IAC, G.R. No. L-66671, 28 October 1986, 145 SCRA 238, 245.

²² Perez v. Court of Appeals, G.R. No. 107737, 01 October 1999, 316 SCRA 43, 47.

²³ G.R. No. 141423, 15 November 2000, 344 SCRA 838, 853.

²⁴ Supra, note 19 at 484.

G.R. No. 139067 - SPS. MA. CARMEN L. JAVELLANA, ET AL. v. HON. PRESIDING JUDGE, REGIONAL TRIAL COURT, BRANCH 30, MANILA, ET AL.

2013-01-15T09:50:27+00:00

G.R. No. 139067 - SPS. MA. CARMEN L. JAVELLANA, ET AL. v. HON. PRESIDING JUDGE, REGIONAL TRIAL COURT, BRANCH 30, MANILA, ET AL.

SECOND DIVISION

[G.R. NO. 139067 : November 23, 2004]

SPS. MA. CARMEN L. JAVELLANA and VICTOR JAVELLANA, Petitioners, v. HON. PRESIDING JUDGE, Regional Trial Court, Branch 30, Manila and BENITO LEGARDA, Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorari filed by petitioners spouses Ma. Carmen and Victor Javellana, assailing the Resolution dated April 30, 1999¹ of the Court of Appeals dismissing their petition for certiorari , docketed as CA-G.R. SP No. 51833, for being filed out of time; and the Resolution dated June 9, 1999² denying petitioners' motion for reconsideration.

The factual background of the case is as follows:

On December 6, 1996, private respondent Benito Legarda filed before the Regional Trial Court of Manila, Branch 30, a complaint for Accion Publiciana and sum of money³ against petitioners, portions of which read:

. . . . .

3. On December 11, 1992, defendants MA. CARMEN L. JAVELLANA and VICTOR C. JAVELLANA entered into a Contract To Sell with plaintiff whereby subject to the terms and conditions therein provided, plaintiff agreed to sell to them its property identified as Lot No. 44, Plan 15 with an area of 139.4 square meters situated in the District of Sampaloc, Manila and covered by Transfer Certificate of Title No. 131305 of the Registry of Deeds of Manila in plaintiff's name for the total sum of P836,400.00 which after a down payment of P83,640.00 the balance of P752,760.00 was to be paid within five (5) years by means of 60 equal monthly installments of P19,943.57 each which included the stipulated interest of 20% per annum. The installments were to be paid every 30th of each month beginning February, 1993.

. . . . .

4. Upon the execution of the Contract To Sell, ANNEX "A", defendants MA. CARMEN L. JAVELLANA and VICTOR C. JAVELLANA were placed in possession of the aforementioned lot.

5. Nevertheless, since February, 1995 defendants spouses have defaulted in the payment of the monthly installments.

6. After the grace period allowed and provided in the Contract To Sell, ANNEX "A", plaintiff exercised its right to cancel the contract by executing a "RESCISSION OF CONTRACT" on October 16, 1996' '. . Formal notice and copy of the "RESCISSION OF THE CONTRACT," Annex "B", have(sic) duly received by defendants.

7. As defendants have made total payments in the sum of P546,453.18 on the "CONTRACT TO SELL", ANNEX "A", up to its rescission on October 16, 1996, ANNEX "B", defendants spouses are entitled to the refund of the cash surrender value equivalent to fifty percent (50%) of the total payments or the sum of P270,726.59 in accordance with the provisions of Section 3(b) of Republic Act No. 6552 (the MACEDA LAW).

8. Plaintiff is ready to pay to defendants spouses the said cash surrender value in the sum of P270,726.59 immediately after the restoration to plaintiff of the possession of Lot No. 44, Plan 15, District of Sampaloc, Manila.

9. Restoration of possession of the lot to plaintiff should be effected not later than thirty (30) days from the date of service upon defendants spouses of the Honorable Court's judgment - - -

A. directing plaintiff to pay defendant spouses the sum of P270,726.59 representing the cash surrender value of the total payments made by them;

b. ordering defendants to vacate forthwith Lot No. 44, Plan 15, District of Sampaloc, Manila and restore possession to plaintiff.⁴

On March 16, 1998, petitioners filed a motion to dismiss⁵ alleging that the trial court has no jurisdiction over the case. Private respondent filed an opposition thereto⁶ and a reply was filed by petitioners.⁷

In an Order dated September 30, 1998,⁸ the trial court denied petitioners' motion to dismiss, a copy of which was received by petitioners on November 3, 1998. Petitioners' motion for reconsideration was likewise denied in an Order dated December 28, 1998,⁹ and received by petitioners on January 18, 1999. Subsequently, petitioners filed their Answer Ad Abundante Cautelam with Compulsory Counterclaim for damages and attorney's fees.¹⁰

Petitioners then filed the subject petition for certiorari under Rule 65¹¹ with the Court of Appeals raising this issue:

WHETHER OR NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT THE REGIONAL TRIAL COURT OF MANILA (BRANCH 30) HAS JURISDICTION OVER THE SUBJECT MATTER OF THE COMPLAINT FILED BY THE PRIVATE RESPONDENT.

On April 30, 1999, the Court of Appeals issued its assailed Resolution dismissing CA-G.R. SP No. 51833 for being filed out of time. Petitioners' motion for reconsideration was denied in a Resolution dated June 9, 1999.

Hence, the present petition which raises the following issues:

I. WHETHER OR NOT THE FAILURE OF THE PETITIONERS TO TIMELY FILE THE PETITION FOR CERTIORARI AMOUNTS TO ESTOPPEL DESPITE THE FACT THAT THE ISSUE TO BE RESOLVED INVOLVES THE JURISDICTION OF THE RESPONDENT COURT.

II. WHETHER OR NOT THE REGIONAL TRIAL COURT OF MANILA (BRANCH 30) HAS JURISDICTION OVER THE SUBJECT MATTER OF THE COMPLAINT FILED BY PRIVATE RESPONDENT.

Petitioners submit that there is a need to reconsider the resolutions of the Court of Appeals since the controversy involves the jurisdiction of the trial court; that rules of procedure should not be applied in a very rigid and technical sense so as not to override substantial justice; that the subject property is a subdivision lot as expressly stipulated in their Contract to Sell; that the dispute between petitioners and respondent involves a subdivision project as defined under Section 2 of P.D. No. 957, hence it is cognizable by the National Housing Authority, now Housing and Land Use Regulatory Board (HLURB),¹² which has exclusive jurisdiction to regulate the real estate trade and business;¹³ that HLURB has jurisdiction even over complaints instituted by developers against subdivision buyers.

In his Comment, private respondent alleges: The title of the case given by petitioners is misleading since it should be Benito Legarda, Inc. and not Benito Legarda; that nowhere in their petition did petitioners challenge the findings of the Court of Appeals that they filed their petition six days late; that they are estopped from questioning the jurisdiction of the trial court since after their motion to dismiss was denied by the trial court, they filed their (1) Answer Ad Abundante Cautelam with Compulsory Counterclaim for damages and attorney's fees; and (2) Pre-trial brief where their counterclaim for damages and attorney's fees were also enumerated; that respondent being the lot owner seeking to enforce the terms and conditions of the Contract To Sell with petitioners is not one of those instances that would fall within the jurisdiction of the HLURB. Petitioners filed their Reply.

We gave due course to the petition and as required, the parties submitted their respective memoranda.

There is no question that at the time petitioners filed CA-G.R. SP No. 51833 on March 19, 1999, the applicable law was Section 4, Rule 65 of the 1997 Rules of Civil Procedure, as amended by the Resolution of July 21, 1998, which provides:

Sec. 4. Where petition filed. - The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution sought to be assailed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, and unless otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by the Court of Appeals.

If the petitioner had filed a motion for new trial or reconsideration in due time after notice of said judgment, order or resolution, the period herein fixed shall be interrupted. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of such denial. No extension of time to file the petition shall be granted except for the most compelling reason and in no case exceeding fifteen (15) days. (Emphasis ours.)

On the basis thereof, the Court of Appeals found the petition belatedly filed, thus:

Applying the aforequoted provision of the rule, since petitioners received a copy of the Order dated September 30, 1998 on NOVEMBER 3, 1998 and they filed a Motion for Reconsideration thereof on NOVEMBER 9, 1998, six (6) days had elapsed; hence petitioners have a remaining period of FIFTY-FOUR (54) DAYS from receipt of the denial of their Motion for Reconsideration within which to file petition for certiorari with this Court.

They received a copy of the Order dated December 28, 1998, denying their Motion for Reconsideration on January 18, 1998; hence, they have until MARCH 13, 1999 within which to file a petition for certiorari . However, the present petition for certiorari was filed only on MARCH 19, 1999, or six (6) days late.¹⁴

However, during the pendency of this case, A.M. No. 00-2-03-SC amended Section 4, Rule 65 which took effect on September 1, 2000, as follows:

Sec. 4. When and where petition filed. - The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the denial of said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless otherwise provided by law or these rules, the petition shall be filed in and cognizable only by the Court of Appeals.

No extension of time to file the petition shall be granted except for compelling reason and in no case exceeding fifteen (15) days. (Emphasis ours.)

We rule that the amendment is deemed applicable to the instant case. As held in San Luis v. CA:¹⁵

Under this amendment, the 60-day period within which to file the petition starts to run from receipt of notice of the denial of the motion for reconsideration, if one is filed. In our decision in Systems Factors Corporation and Modesto Dean v. NLRC, et al. reiterated in Unity Fishing Development Corp. and/or Antonio Dee v. Court of Appeals, et al. the new period was made applicable to pending cases, such as in the case at bar. Settled is the rule that remedial statutes or statutes relating to remedies or modes of procedure, which do not create new rights or take away vested rights but only operate in furtherance of the remedy or confirmation of rights already existing, do not come within the purview of the general rule against the retroactive operation of statutes. Procedural laws are construed to be applicable to actions pending and undetermined at the time of their passage, and are deemed retroactive in that sense and to that extent. As a general rule, the retroactive application of procedural laws cannot be considered violative of any personal rights because no vested right may attach to nor arise therefrom. (Emphasis ours.)

Consequently, counting the 60 days from the time petitioners received the Order of the trial court denying their motion for reconsideration on January 18, 1999, the petition filed with the Court of Appeals on March 19, 1999, was within the reglementary period of filing the same.

Considering the foregoing, the Court of Appeals could take cognizance of the petition for certiorari filed before it. However, instead of remanding the case to it which would unduly prolong the trial of the main case, we shall act on the issue presented, i.e., whether the subject matter of this case falls under the exclusive jurisdiction of the HLURB, which is a question of law.

We rule in the negative.

Under Section 1 of P.D. No. 1344, the National Housing Authority (now HLURB) has exclusive jurisdiction to hear and decide the following, thus:

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; andcralawlibrary

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.

It is a settled rule that jurisdiction over the subject matter is determined by the allegations in the complaint. Jurisdiction is not affected by the pleas or the theories set up by the defendant in an answer or a motion to dismiss. Otherwise, jurisdiction would become dependent almost entirely upon the whims of the defendant.¹⁶ Accordingly, we can resolve the issue presented before us by examining the allegations in the complaint filed by respondent in the trial court, docketed as Civil Case No. 96-81225, for accion publiciana and sum of money.

A reading of the complaint does not show that the subject lot was a subdivision lot which would fall under the jurisdiction of the HLURB. The complaint clearly described the subject lot as Lot No. 44, Plan 15 with an area of 139.4 sq. meters situated in the District of Sampaloc covered by Transfer Certificate of Title No. 131305 of the Registry of Deeds of Manila. We note that such description was used when referring to the subject lot. What appears from the complaint was the fact that the subject lot was sold to petitioners in an ordinary sale of a lot on installment basis; that petitioners allegedly defaulted in the payment of their monthly installments for which reason respondent seeks to recover possession thereof. Thus, the trial court has jurisdiction over the case.

Petitioners' insistence that the subject lot is a subdivision lot, thus cognizable by HLURB is anchored on paragraph 6 of their Contract To Sell which provides:

. . . . .

Notwithstanding the foregoing provisions of the first paragraph of this Sixth Clause no installment payment make (sic) by the SECOND PARTY shall be forfeited in favor of the FIRST PARTY, when the SECOND PARTY, after giving notice to the FIRST PARTY, voluntarily desists from further payment on grounds of lack of development of the FIRST PARTY'S property as a regular subdivision project and within the time limit that had been set for such development, insofar as this requirement may apply to the FIRST PARTY'S property considering that the lots being sold by the FIRST PARTY had been inherited by the FIRST PARTY'S immediate predecessors in interest and constituted scattered fragments of widely separated pre-war subdivisions approved according to the official pre-requisites in force at the time.

We are not convinced.

Both petitioners and respondent failed to attach in their pleadings filed before the trial court, a copy of the Contract To Sell to show the terms and conditions embodied therein. A mere reference to the above-quoted paragraph, standing alone, does not establish that the subject lot is a subdivision lot. What it merely states is that petitioners may invoke the grounds of lack of development of respondent's property as a regular subdivision project and within the time limit set, if such requirements are applicable to the subject lot, for voluntarily desisting from further payments and their installments paid would not be forfeited. There is not even a certainty that those grounds apply to the subject lot. In fact, the use of the phrase "regular subdivision project" does not automatically make the instant case fall under the jurisdiction of the HLURB. In Sps. Kakilala v. Faraon,¹⁷ notwithstanding the allegations of petitioners in their complaint that the subject lot is "a subdivision lot" in a "subdivision project," we held that such allegations were not sufficient to vest the HLURB of jurisdiction over the case, thus:

Jurisdiction is determined by the averments of the complaint and not by the defense contained in the answer. Hence, the jurisdictional issue involved here shall be determined on the basis of the allegations of petitioner's complaint before the HLURB. Petitioners simply alleged therein that the subject lot is "a subdivision lot" in "a subdivision project." Under Section 2(d) and (e) of PD 957, "subdivision project" and "subdivision lot" are defined as follows:

d) Subdivision project - "Subdivision project" shall mean a tract or a parcel of land registered under Act No. 496 which is partitioned primarily for residential purposes into individual lots with or without improvements thereon, and offered to the public for sale, in cash or in installment terms. It shall include all residential, commercial, industrial and recreational areas as well as open spaces and other community and public areas in the project.

e) Subdivision lot. - "Subdivision lot" shall mean any of the lots, whether residential, commercial, industrial, or recreational, in a subdivision project.

There is no allegation in the complaint that the lot purchased by petitioners is part of a tract of land partitioned primarily for residential purposes into individual lots and offered to the public for sale. There is likewise no allegation that the tract of land includes recreational areas and open spaces. Nor does the "Contract to Sell", which forms part of the complaint, describe the subject property as a subdivision lot. What the contract strongly suggests is that the property is simply a lot offered by respondents, as vendors, to the petitioners, as vendees, for sale on installment. As can be clearly gleaned from the same contract, respondents are not acting as subdivision owners, developers, brokers or salesmen, nor are they engaged in the real estate business. What is plain is that the parties are acting only as ordinary sellers and buyers of a specific lot, a portion of a big tract of land co-owned by the heirs of Mariano Faraon. Neither are there undertakings specified in the contract that respondents shall develop the land, like providing for the subdivision concrete roads and sidewalks, street lights, curbs and gutters, underground drainage system, independent water system, landscaping, developed park, and 24-hour security guard service. Even the rights and obligations of the sellers and buyers of a subdivision lot are not provided in the agreement. All these provisions are usually contained in a standard contract involving a sale of a subdivision lot.

WHEREFORE, the Resolutions of the Court of Appeals dated April 30, 1999 and June 9, 1999 in CA - G.R. SP No. 51833 are SET ASIDE. The Orders dated September 30, 1998 of the trial court denying petitioners' motion to dismiss and December 28, 1998 denying their motion for reconsideration are hereby AFFIRMED.

SO ORDERED.

Puno, (Chairman), Callejo, Sr., TINGA, and Chico-Nazario, JJ., concur.

Endnotes:

¹ CA-G.R. SP No. 51833; Penned by Justice Quirino D. Abad Santos, Jr. (now retired), concurred in by Justices Bernardo Ll. Salas (now retired) and Candido V. Rivera (now retired); Rollo, pp. 29-30.

² Rollo, p. 32.

³ Docketed as Civil Case No. 96-81225.

⁴ Rollo, pp. 33-35.

⁵ Id., at pp. 38-41.

⁶ Id., at pp. 43-44.

⁷ Id., at pp. 46-49.

⁸ Id., at p. 50; Per Judge Senecio O. Ortile.

⁹ Id., at pp. 51-54.

¹⁰ Id. at pp. 113-120.

¹¹ 1997 Rules of Civil Procedure.

¹² Per Executive Order No. 90, s. 1986.

¹³ P.D. No. 1344, Empowering the National Housing Authority to issue writ of execution in the enforcement of its decision under Presidential Decree No. 957.

¹⁴ Rollo, p. 30.

¹⁵ 365 SCRA 279, 285 (2001).

¹⁶ Sta. Clara Homeowners' Association v. Gaston, 374 SCRA 396, 409 (2002), citing Commart (Phils.), Inc. v. Securities & Exchange Commission, 198 SCRA 73 (1991).

¹⁷ G.R. No. 143233, October 18, 2004.

G.R. No. 138954 - ASUNCION GALANG ROQUE v. PEOPLE OF THE PHILIPPINES

2013-01-15T09:50:27+00:00

G.R. No. 138954 - ASUNCION GALANG ROQUE v. PEOPLE OF THE PHILIPPINES

FIRST DIVISION

[G.R. NO. 138954 : November 25, 2004]

ASUNCION GALANG ROQUE, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.

D E C I S I O N

AZCUNA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the decision of the Court of Appeals in CA G.R. CR No. 20411, entitled "People of the Philippines v. Asuncion Galang Roque," which affirmed in toto the decision of the Regional Trial Court (RTC) of Guagua, Pampanga, Branch 49, where petitioner was found guilty of the crime of qualified theft.

In an information dated December 3, 1990, the petitioner was charged with qualified theft in the Regional Trial Court of Guagua Pampanga, Branch 49. The Information reads as follows:

That on or about the 16th day of November, 1989, in the municipality of Floridablanca, province of Pampanga, Philippines and within the jurisdiction of his Honorable Court, the above-named accused ASUNCION GALANG ROQUE, being then employed as teller of the Basa Air Base Savings and Loan Association Inc. (BABSLA) with office address at Basa Air Base, Floridablanca, Pampanga, and as such was authorized and reposed with the responsibility to receive and collect capital contributions from its member/contributors of said corporation, and having collected and received in her capacity as teller of the BABSLA the sum of TEN THOUSAND PESOS (P10,000.00), said accused, with intent of gain, with grave abuse of confidence and without the knowledge and consent of said corporation, did then and there willfully, unlawfully and feloniously take, steal and carry away the amount of P10,000.00, Philippine currency, by making it appear that a certain depositor by the name of Antonio Salazar withdrew from his Savings Account No. 1359, when in truth and in fact said Antonio Salazar did not withdr[a]w the said amount of P10,000.00 to the damage and prejudice of BABSLA in the total amount of P10,000.00, Philippine currency.

All contrary to law.¹

The evidence of the prosecution consisted of the testimonies of three witnesses, namely: Antonio Salazar, Rosalina de Lazo and Reynaldo Manlulu and Exhibits A to G with submarkings.

The first prosecution witness, Antonio Salazar (Salazar) is a member/depositor of the Basa Air Base Savings and Loan Association Inc. (BABSLA) as evidenced by his passbook No. 1359. He was made to sign two ledgers when he opened his savings account. On November 16, 1989, Salazar made a deposit of P2,000 at the BABSLA; however, he did not make any withdrawal, nor did he authorize anyone to do the same on that date or on November 17, 1989 or for the whole month of November of that year. Salazar disclosed that around July 1990 he heard that the funds of other depositors were missing inside the BABSLA and were supposedly clandestinely circulating around the base. Prodded by this news, and considering that the balance in his passbook was P46,000, he went to the BABSLA to withdraw P40,000, but was informed that his balance at the BABSLA was insufficient to cover the withdrawal. He was not allowed to withdraw. Rosalina de Lazo, the general manager, informed him that several withdrawals were made on his account amounting to P30,500, as evidenced by three (3) withdrawal slips. Included among these withdrawal slips is one with the amount of P10,000, dated November 16, 1989. Salazar claimed that the signature appearing on said withdrawal slip was not his signature. He does not personally know who made the withdrawal of P10,000. Salazar assumed that the one in control of the funds made the withdrawal.²

The second prosecution witness was the general manager of the BABSLA in the person of Rosalina de Lazo (de Lazo). She has held her position as general manager since 1983. De Lazo averred that the BABSLA had only one teller, and that the petitioner, Asuncion Galang Roque, held that job from 1989 up to the last working day of June 1990. She added that the petitioner had not been absent from work, particularly in 1989. Sometime in July 1990, she met MSgt. Antonio Salazar, who was complaining that the amount of P30,500 was missing from his account. A comparison of the bank's ledger and his passbook manifested that there were three (3) withdrawals appearing on the ledger that do not appear in his passbook, inclusive of the withdrawal made on November 16, 1989. She saw the three (3) withdrawal slips and in the withdrawal slip dated November 16, 1989 the initial after the figure 11-17-89 is the customary initial of the petitioner. She claimed that she was familiar with the customary initial of the petitioner. The withdrawal slip dated November 16, 1989 was made after 3:00 o'clock in the afternoon of the same day but was stamped 11-17-89, as it is bank regulation that all transactions made after 3:00 p.m. will be entered in the book the next day.

De Lazo further testified that at the commencement of the business hour, petitioner gets cash from the treasurer and her beginning cash on November 17, 1989 per Teller's Daily Report was P355,984.53 which she used to serve all kinds of transactions pertaining to withdrawals. The initial over the typewritten name "agroque" is the customary initial of the petitioner, Asuncion Galang Roque. De Lazo claimed to be familiar with it. At the end of the work day petitioner prepared the Abstract of Payment, which is a summary of the withdrawals the teller paid that day as evidenced by several withdrawal slips.

De Lazo testified that before the petitioner went on forced leave petitioner sought her assistance because she feared she would be removed from work. She claimed that petitioner admitted to taking some money from the depositors, including the account of Sgt. Salazar. Unable to help petitioner, she referred her to Col. Dunilayan, the president and chairman of the BABSLA, who told her to return the money immediately. Petitioner told Col. Dunilayan that she would return the money. She failed to do so. During the same meeting, petitioner, in the presence of Col. Dunilayan and de Lazo, prepared a list containing the names of members from whose accounts she took money. Petitioner gave the list to Col. Dunilayan. When petitioner failed to return the money they decided to file a case against her. In the morning of November 17, de Lazo was already aware of the taking of the P10,000 that occurred the day prior. Since she had full trust and confidence in petitioner, and did not fear that this anomaly would persist, she did not ask for the presentation of the passbook so that the corresponding entries could be made in order to avoid a discrepancy between the ledger and the passbook, nor did she send notice to Antonio Salazar. It is the practice of the bank that all withdrawals require the presentation of the passbook. This was the first instance that a transaction was not recorded in the passbook. There are only a few cases wherein she (de Lazo) allows deposits to be made without the presentation of the passbook on the same day. In these instances she just requires the depositor to come some other time for the recording of the transaction in the passbook. As of the date of this testimony, the BABSLA had already paid deposits on accounts from which the petitioner had taken money, including that of Antonio Salazar as indicated in the bank records.³

The third and last prosecution witness is Reynaldo Manlulu, who is both the treasurer and a member of the board of directors of the BABSLA. He testified that petitioner was the teller of the BABSLA in November 1989 and that she reported for work on the 17th of that month. He intimated that on that date petitioner got a beginning cash from him amounting to P355,984.53, including all the the transactions that occurred after 3:00 p.m. of the preceding day. This beginning cash can be seen in the Teller's Daily Report. The signature above the typewritten name "agroque" is petitioner's because she signed it in his presence. Apart from the beginning cash, he also turned over to petitioner the transactions that took place after 3:00 p.m. of the preceding day, particularly the withdrawal slip of MSgt. Salazar. At the end of the business day of November 17, 1989, she prepared an abstract of payment and in this abstract the initial over the typewritten name "agroque" is the initial of the petitioner because she signed it in his presence. Petitioner paid the withdrawal of P16,300 evidenced by the withdrawal slips attached to the abstract of payment. After she prepared the abstract of payment, petitioner turned over to him the cash and all the transactions that were taken after 3:00 p.m. A Cash Count shows the total cash that petitioner turned over to him. The initial over the typewritten name "agroque" is petitioner's because it was signed in his presence.⁴

The evidence for the petitioner consists of the testimony of the petitioner herself and that of Atty. Norbin Dimalanta and Exhibits 1 to 5 with sub-markings.

Petitioner, Asuncion Galang Roque, testified that she was employed as teller at the BABSLA from 1979 until her termination in 1990. In the morning she gets the money from the treasurer and they do a cash count which is reflected in the Teller's Daily Report and at 3:00 p.m. she prepares and submits an abstract of payment. However, before making the abstract, she and the treasurer conduct a cash count and the remaining cash is turned over to the treasurer. As a teller, she received deposits and payments, deposits of checks and payments of loans. She does not discharge any memorandum or withdrawals unless both the manager and the treasurer previously approve it. Depositors cannot withdraw after 3:00 p.m., unless they talk to the manager or treasurer. Withdrawals done after 3:00 p.m. are reflected as transactions of the following day. She insisted that the charge against her of stealing and carrying away P10,000 is false since she did not prepare the withdrawal slip dated November 16, 1989 which involves the account of Antonio Salazar. She also denied forging the signature of Salazar and affixing her initial. Petitioner also disowned the initial in the abstract of payment dated November 17, 1989 and the initials on several withdrawal slips. She claimed to be innocent and contended that Rosalina de Lazo is the one who is guilty because she was only used by the president. The latter is still connected with the BABSLA while the petitioner was terminated in June 1990.

Throughout the eleven years that petitioner worked as a teller at the BABSLA, she had never been absent from work or required by the treasurer to explain any discrepancy or anomaly related to the cash that she handled as a teller. Before her dismissal, petitioner was not suspended by the board of directors of the BABSLA during the investigation of her case. She was put on forced leave which eventually led to her termination. The manager was also supposed to be on forced leave. However, when the manager reported for work and some members protested and filed a petition, the president asked them to retract their statements by means of executing an affidavit of desistance. Even though petitioner received notice regarding the investigation, she did not attend because she knew the personalities of the members of the committee. Only the accused and the complainants whose accounts were withdrawn were investigated. She filed a complaint with the Department of Labor in connection with her dismissal but it was dismissed because she did not pursue it. Apart from the president, there were seven (7) members of the board of directors of the BABSLA in 1990: Col. Dunilayan, Col. Sanchez, MSgt. Romero, Sgt. Manlulu, Sgt. Torato, Mrs. Bagasbas and Capt. Baluyut. Capt. Baluyut was subsequently dimissed as a member of the board of directors.⁵

The second witness for the petitioner was Atty. Norbin Dimalanta. He averred that he only gave advice regarding the legality of the possible dismissal of the petitioner based on the evidence the committee gathered. He was present when the evidence and witnesses were presented. Proper notices were sent to the accused. The chairman of the committee, Leonardo Tolentino, concluded that the initials on the withdrawal slips were similar to the petitioner's initials. He did not suggest the consultation of a handwriting expert on forgery since there were other pieces of evidence showing that the petitioner figured in the anomaly because several witnesses identified the figures appearing in the original copy of the questioned receipt as written by the petitioner. His conclusion that no one else could have done it except for Mrs. Roque was arrived at only after the investigation of the records and documents presented to the committee.⁶

The RTC found the petitioner guilty beyond reasonable doubt of the crime charged, on the following grounds:

After a careful evaluation of the evidence presented by both sides, the Court finds that the prosecution has proved the guilt of the accused beyond reasonable doubt. This finding is supported by the categorical testimony of prosecution witness Reynaldo Manlulu who testified that on November 17, 1989 accused received from him a beginning cash in the amount of P355,984.53 which is shown in a Teller's Daily Report (Exh. D) prepared by the accused and signed by the accused in his presence ( TSN, March 25, 1993, page 3). At the close of business day of November 17, 1989 the accused also prepared an Abstract of Payment (Exh. E) and she signed it in his presence (Id., page 6). Aside from the beginning cash he also turned over to the accused the transactions that took place after 3:00 o'clock of the preceding day particularly the withdrawal slip of M/Sgt. Salazar (Id., page 4) so that it can be entered on the records on that very date as bank regulation requires that transactions occurring after 3:00 o'clock of a particular day are recorded the following day. This explains why although the questionable withdrawal slip was dated November 16, 1989 it was stamped paid on November 17, 1989, for record purposes. Since it was the accused who gave Reynaldo Manlulu the withdrawal slip dated November 16, 1989 the presumption is that, being in possession of said withdrawal slip before its delivery to Reynaldo Manlulu, the accused is the one who prepared the said withdrawal slip. This particular transaction was turned over to him by the accused the previous day (Id., page 5).

The Teller's Daily Report dated November 17, 1989 reflects, among others, a total withdrawal on that date in the amount of P16,300.00. This amount is the totality of withdrawal after adding the seven (7) legitimate withdrawals amounting to P6,300.00 (Exhs. E-2 to E-8) and the questionable withdrawal of P10,000.00 (Exh. C). On the other hand, the Abstract of Payment (Exh. E) reflects, among others, a savings withdrawal of P16,300.00 which tallies with the Teller's Daily Report of that date and with the seven (7) withdrawal slips.

The defense interposed by the accused is one of denial. She claimed that all the initials in the withdrawal slip of P10,000.00 (Exh. C), on the Teller's Daily Report (Exh. D), in the Abstract of Payment (Exh. E) as well as on the list of names of depositors (Exh. G) are not hers, implying, therefore, that these documents were prepared by somebody else. To emphasize that the initials on Exhibits C, D, E, and G are not hers, accused during the hearing on March 18, 1993 wrote six (6) of her initials in a piece of paper (Exh. "1"). However, the Court is not in a position to state whether the initial in Exhibit 1 is the same or different from the initials in Exhibits C, D, E, and G not being an expert along that line. Accused could have very well availed of court processes to request the NBI or PNP Crime Laboratory to determine whether or not the initials in Exhibits C, D, E, and G are hers by comparing the same with similar documents on file with the BABSLA which are abundant as said documents are prepared daily and accused was, prior to her dismissal, the only teller of BABSLA for over a year and has therefore accomplished a lot of these documents. Unfortunately, accused did not make any attempt to do so. At any rate, denial cannot prevail over the affirmative and categorical testimony of Reynaldo Manlulu who stated that accused turned over to him the questionable withdrawal slip on November 16, 1989 and it was in turn returned to the accused by said witness the following day November 17, 1989 in order that said transaction may be reflected on the records on that date. Said witness also positively testified that the accused initialed in his presence the Teller's Daily Report and the Abstract of Payment which said accused prepared on November 17, 1989. Denial is a self-serving negative evidence that cannot be given greater weight than the declaration of credible witnesses who testified on affirmative matters (People v. Carizo, 233 SCRA 687). Like alibi, denial is inherently a weak defense and cannot prevail over the positive and credible testimony of the prosecution witnesses (People v. Macagaleng, 237 SCRA 299).

Accused after denying that the initials over the typewritten name A. G. Roque found in several exhibits introduced by the prosecution are not hers concentrated [on] her defense that Rosalina de Lazo, another prosecution witness, and the General manager of BABSLA was the author of the anomaly being imputed against her because said witness has committed certain anomalous transactions at the BABSLA in the past. Accused, however, never mentioned a word about the testimony of Reynaldo Manlulu which actually proved her undoing. She failed to controvert nor even comment on the damaging testimony of Reynaldo Manlulu that she turned over to him the questionable withdrawal slip and signed and/or placed her initial on the Teller's Daily Report and Abstract of Payment in his presence. Accused did not present any evidence that Reynaldo Manlulu had ulterior motives to testify falsely against her. When there is no evidence indicating that the principal witness for the prosecution was moved by improper motive, the presumption is that he was not so moved, and his testimony is entitled to full faith and credit. (People v. Perciano, 233 SCRA 393). Accused also failed to controvert the testimony of Rosalina de Lazo that accused confessed before Col. Dunilayan, the president of BABSLA that she took money from some depositors which she promised to return and in fact wrote down the names of said depositors before Col. Dunilayan in a piece of paper which she handed to him. This fact and [it being] taken in the light that she failed to appear for investigation after the anomaly was discovered despite due notice, and her lack of interest to pursue a case she filed before the Department of Labor which caused its dismissal, do not speak well of her claim of innocence.

Art. 309, paragraph 2 of the Revised Penal Code provides that the penalty for theft is prision correccional in its medium and maximum periods if the value property stolen is more than P6,000.00 but does not exceed P12,000.00 and since the accused is charged for qualified theft, and the property or money stolen is P10,000.00, under Art. 310 the penalty prescribed for this crime is increased two (2) degrees higher, the basis of which is Art. 309, paragraph 2. Therefore the corresponding penalty is prision mayor maximum to reclusion temporal minimum. However, as the accused is qualified [under] the indeterminate sentence law, the prescribed penalty for her in this case is prision mayor as minimum to reclusion temporal as maximum.

WHEREFORE, judgment is rendered finding the accused guilty beyond reasonable doubt of the crime of qualified theft as charged and she is hereby sentenced to suffer the penalty of 6 years and 1 day of prision mayor as minimum to 12 years, 2 months and 1 day of reclusion temporal as maximum, and to indemnify the offended party Basa Air Base Savings & Loan Association Inc. in the amount of P10,000.00, and to pay the costs.

SO ORDERED.⁷

On appeal, the appellate court found the conviction in accord with law and the evidence and affirmed the decision of the RTC in toto. The Court of Appeals, quoting at length the lower court, reasoned, thus:

The Court fully agrees with the court a quo in finding that appellant's guilt has been proven beyond reasonable doubt. As aptly pointed out by the lower court:

This finding is supported by the categorical testimony of prosecution witness Reynaldo Manlulu who testified that on November 17, 1989 accused received from him a beginning cash in the amount of P355,984.53 which is shown in a Teller's Daily Report (Exh. D) prepared by the accused and signed by the accused in his presence (TSN, March 25, 1993, page 30). At the close of business day of November 17, 1989 the accused also prepared an Abstract of Payment (Exh. E) and signed it in his presence (Id., page 6). Aside from the beginning cash he also turned over to the accused the transaction that took place after 3:00 o'clock of the preceding day particularly the withdrawal slip of M/Sgt. Salazar (Id., page 4) so that it can be entered on the records on that very date as bank regulation required that transaction occurring after 3:00 o'clock of a particular day are recorded the following day. This explains why although the questionable withdrawal slip was dated November 16, 1989 it was stamped paid on November 17, 1989 for record purposes. Since it was the accused who gave Reynaldo Manlulu the withdrawal slip dated November 16, 1989 the presumption is that being in possession of said withdrawal slip before its delivery to Reynaldo Manlulu the accused is the one who prepared the said withdrawal slip. This particular transaction was tuned over to him by the accused the previous day (Id., page 5).

The Teller's Daily Report dated November 17, 1989 reflects among others a total withdrawal on that date in the amount of P16,300.00. This amount is the totality of withdrawal after adding the seven (7) legitimate withdrawals amounting to P6,300.00 (Exhs. E-2 to E-8) and the questionable withdrawal of P10,000.00 (Exh. C). On the other hand the Abstract of Payment (Exh. E) reflects among others a savings withdrawal of P16,300.00 which tallies with the Teller's Daily Report of that date and with the seven (7) withdrawal slips.

Appellant's defense is one of denial. She claims that the initials in the withdrawal slip of P10,000.00 (Exh. C) the Teller's Daily Report (Exh. D) the Abstract of Payment (Exh. E) and list of names of depositors (Exh. G) are not hers thus implying that these documents were prepared by somebody else. To bolster her claim she wrote her initials six (6) times on a piece of paper during the hearing on March 18, 1993 (Exh. 2) probably for comparison purposes. Admittedly there are noticeable differences between her initials in Exhibit 2 and those appearing on Exhibits C to G. This is of course understandable. It was not difficult for appellant to feign her initials in Exhibit 2 in order to mislead the Court.

At any rate no less than Rosalina de Lazo who as general manager of BABSLA is familiar with the initials has positively identified the initials on Exhibits C to G as hers. Likewise, Reynaldo Manlulu categorically stated not only that the questionable withdrawal slip (Exh. C) was turned over to him by appellant on November 16, 1989 and returned to her on November 17, 1989 but also that the Teller's Daily Report (Exh. D) and the Abstract of Payment (Exh. E) were initialed by her in his presence. Needless to say the initials in Exhibits C, D, and E bear such similarities as would lead to the conclusion that they were prepared by one and the same person. Hence, a more worthy and reliable evidence than the mere samples of her initials written during the trial is required to controvert the positive testimonies of Rosalina de Lazo and Reynaldo Manlulu.

No cogent reason has been shown for this court not to give credence to the prosecution witnesses. As aptly observed by the court a quo:

Accused after denying that the initials over the typewritten name A.G. Roque found in several exhibits introduced by the prosecution are not hers concentrated [on] her defense that Rosalina de Lazo another prosecution witness and the General Manager of BABSLA was the author of the anomaly being imputed against her because said witness has committed certain anomalous transactions at the BABSLA in the past. Accused however, never mentioned a word about the testimony of Reynaldo Manlulu which actually proved her undoing. She failed to controvert nor even comment on the damaging testimony of Reynaldo Manlulu that she turned over to him the questionable withdrawal slip and signed and/or placed her initial on the Teller's Daily Report and Abstract of Payment in his presence. Accused did not present any evidence that Reynaldo Manlulu had ulterior motives to testify falsely against her. When there is no evidence indicating that the principal witness for the prosecution was moved by improper motive the presumption is that he was not so moved and his testimony is entitled to full faith and credit. (People v. Perciano 233 SCRA 393). Accused also failed to controvert the testimony of Rosalina de Lazo that the accused confessed before Col. Dunilayan the president of BABSLA that she took money from some depositors which she promised to return and in fact wrote down the names of said depositors before Col. Dunilayan in a piece of paper which she handed to him. This fact and [it being] taken in the light that she failed to appear for investigation after the anomaly was discovered despite due notice, and her lack of interest to pursue a case she filed before the Department of Labor which caused its dismissal, do not speak well of her claim of innocence.

In sum, the Court finds appellant's conviction of the offense charged in accord with law and evidence.⁸

Petitioner now raises the following issues:

I

WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AFFIRMED THE DECISION OF THE LOWER COURT CONVICTING PETITIONER OF THE CRIME OF QUALIFIED THEFT THROUGH FALSIFICATION OF BANK DOCUMENTS?

II

WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AFFIRMED THE DECISION OF THE LOWER COURT CONVICTING PETITIONER OF THE CRIME OF QUALIFIED THEFT BECAUSE OF THE WEAKNESS OF THE DEFENSE OFFERED BY PETITIONER AND NOT ON THE STRENGTH OF THE EVIDENCE OF THE PROSECUTION?

III

WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AFFIRMED THE DECISION OF THE LOWER COURT CONVICTING PETITIONER OF THE CRIME OF QUALIFIED THEFT IN THE ABSENCE OF ANY EVIDENCE WHETHER TESTIMONIAL OR DOCUMENTARY TO THE EFFECT THAT PETITIONER WAS SEEN OR CAUGHT IN THE ACT OF TAKING OR CARRYING AWAY THE SUM OF P10,000.00?

IV

WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AFFIRMED THE DECISION OF THE LOWER COURT CONVICTING PETITIONER OF THE CRIME OF QUALIFIED THEFT WHEN THE AMOUNT OF P10,000.00 WHICH CONSTITUTES THE CORPUS DELICTI OR BODY OF THE CRIME WAS NEVER OFFERED IN EVIDENCE BY THE PROSECUTION?

V

WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AFFIRMED THE DECISION OF THE LOWER COURT CONVICTING PETITIONER OF THE CRIME OF QUALIFIED THEFT WHEN THE PROSECUTION FAILED TO PROVE BEYOND REASONABLE DOUBT THE FACT OF LOSS OF THE AMOUNT OF P10,000.00 IN THE ABSENCE OF ANY AUDIT BY AN INDEPENDENT AUDITOR?⁹

Said issues may be summed up into two:

1. Whether or not qualified theft may be committed when the personal property is in the lawful possession of the accused prior to the commission of the alleged felony?chanroblesvirtualawlibrary

2. Whether or not the elements of qualified theft were proven?

First Issue

Petitioner contends:

Theft as defined in Article 308 of the Revised Penal Code requires physical taking of another's property without violence or intimidation against persons or force upon things.

The crime of theft is akin to the crime of robbery. The only difference is in robbery there is force upon things or violence or intimidation against persons in taking of personal properties. In the crime of theft the taking of the personal property with intent to gain is without violence against or intimidation of persons nor force upon things and the taking shall be without the consent of the owner. In robbery, the taking is against the will of the owner.

Under Article 308 of the Revised Penal Code, the following are the elements of the crime of theft:

1. Intent to gain;

2. Unlawful taking;

3. Personal property belonging to another;

4. Absence of violence or intimidation against persons or force upon things.

The foregoing requirements presume that the personal property is in the possession of another, unlike estafa, [where] the possession of the thing is already in the hands of the offender. In People v. Lacson, 57 Phil. 325, it was held:

"Commentators on the Spanish Penal Code lay great stress on the taking away, that is, getting possession in theft, laying hold of the thing, so that if the thing is not taken away, but received and then appropriated or converted, without consent of the owner, it may be any other crime, that of estafa for instance."

Can a person tasked to receive and collect capital contributions and having collected and received in her capacity as teller as alleged in the information, be guilty of theft? The question should be answered in the negative. xxx¹⁰

Petitioner's argument contradicts jurisprudence. In U.S. v. De Vera,¹¹ the accused, Nieves de Vera, received from Pepe, an Igorot, a bar of gold weighing 559.7 grams for the purpose of having a silversmith examine the same, and bank notes amounting to P200 to have them exchanged for silver coins. Accused appropriated the bar of gold and bank notes. This Court, citing Spanish and U.S. jurisprudence, ruled that the crime committed was theft and not estafa since the delivery of the personal property did not have the effect of transferring the juridical possession, thus such possession remained in the owner; and the act of disposal with gainful intent and lack of owner's consent constituted the crime of theft.

The principle enunciated in U.S. v. De Vera was reiterated in People v. Trinidad,¹² thus:

The defendant received a finger ring from the offended party for the purpose of pledging it as security for a loan of P5 for the benefit of said offended party. Instead of pledging the ring, the defendant immediately carried it to one of her neighbors to whom she sold it for P30 and appropriated the money to her own use.

xxx

The defendant is undoubtedly guilty of having sold the ring without authority and the only question which presents some difficulty is to determine whether the crime committed was theft or whether it should be classified as estafa. The question is discussed at length in the case of United States v. De Vera (43 Phil., 1000) in which the court, citing various authorities, held that "When the delivery of a chattel or cattle has not the effect of transferring the juridical possession thereof, or title thereto, it is presumed that the possession of, and title to, the thing so delivered remains in the owner; and the act of disposing thereof with intent of gain and without the consent of the owner constitutes the crime of theft." This view seems to be supported both by Spanish and American authorities.

xxx

Though the facts in the present case differs somewhat from those in the De Vera case, the underlying principle is the same in both cases: the juridical possession of the thing appropriated did not pass to the perpetrators of the crime, but remained in the owners; they were agents or servants of the owners and not bailees of the property. (See 17 R. C. L., 43, par. 49.) But it has been suggested that one of the essential elements of the crime of theft is that the intent to misappropriate the property taken must exist at the time of the asportation and that while this element clearly existed in the De Vera case, it is not as apparent in the case at bar.

We may agree that in cases such as the present the crime committed should not be regarded as theft unless the circumstances are such that it must be presumed that the intent to convert or misappropriate the property existed at the time it was received by the perpetrator of the crime. But the existence of such intent is, in our opinion, fully as apparent in this case as it was in the De Vera case; the defendant, according to her own statement, offered the ring for sale immediately after its delivery to her, and we are forced to conclude that she did not receive it with honest intentions, but had the disposal of it in mind at the time.

In the case of People v. Locson¹³ which also deals with money of a bank in the possession of its teller, the Court articulated:

Although the question is not specifically raised in the assignments of error, the court has carefully considered the classification of the crime committed by the defendant and found it to be correctly classified by the trial court as qualified theft. The money was in the possession of the defendant as receiving teller of the bank, and the possession of the defendant was the possession of the bank. When the defendant, with a grave abuse of confidence, removed the money and appropriated it to his own use without the consent of the bank, there was the taking or apoderamiento contemplated in the definition of the crime of theft.

In the case of the United States v. De Vera (43 Phil., 1000, 1003), Justice Villamor speaking for the court said:

"The argument advanced in support of the contention of the defense is that the goods misappropriated were not taken by the accused without the consent of the owner who had delivered them to her voluntarily, and this element being lacking, it cannot be the crime of theft.

"It is well to remember the essential elements of the crime of theft, as expounded in the textbooks, which are as follows: First, the taking of personal property; second, that the property belongs to another; third, that the taking away be done with intent of gain; fourth, that the taking away be done without the consent of the owner; and fifth, that the taking away be accomplished without violence or intimidation against persons or force upon things.

"The commentators on the Spanish Penal Code, from which ours was adopted, lay great stress on the first element, which is the taking away, that is, getting possession, laying hold of the thing, so that, as Viada says, if the thing is not taken away, but received and then appropriated or converted without the consent of the owner, it may be any other crime, that of estafa for instance, but in no way that of theft, which consists in the taking away of the thing, that is, in removing it from the place where it is kept by the legal owner, without the latter's consent, that is, without obtaining for the purpose the consent of the legitimate owner."

The doctrine of the case as stated in the syllabus is as follows:

"When the delivery of a chattel or cattle has not the effect of transferring the juridical possession thereof, or title thereto, it is presumed that the possession of, and title to, the thing so delivered remains in the owner; and the act of disposing thereof with intent of gain and without the consent of the owner constitutes the crime of theft."

The Supreme Court of Spain in a decision of June 23, 1886 held that a shepherd, who takes away and converts to his own use several head of the sheep under his care, is guilty of qualified theft. (Viada: Vol. 3, p. 433, 4th ed.)

In the case of People v. Isaac,¹⁴ which involved a temporary driver of a public service vehicle, this Court pronounced:

In the case of U. S. v. De Vera (43 Phil., 1000), this Court said that when the delivery of a chattel has not the effect of transferring the juridical possession thereof, or title thereto, it is presumed that the possession of, and title to, the thing so delivered remains in the owner; and the act of disposing thereof with intent of gain and without the consent of the owner constitutes the crime of theft. This, we think, is actually the case here. For as we see it, appellant had only substituted for the regular driver of a vehicle devoted to the transportation of passengers for a fare or compensation and therefore operated as a public utility; and while his arrangement with the owner was to turn in, not all the fare collected, but only a fixed sum known in the trade as "boundary", still he cannot be legally considered a hirer or lessee, since it is ordained in section 26 of the Rules of Regulations of the Public Service Commission that "no motor vehicle operator shall enter into any kind of contract with any person if by the terms thereof it allows the use and operation of all or any of his equipment under a fixed rental basis." In the eye of the law then, appellant was not a lessee but only an employee or agent of the owner, so that his possession of the vehicle was only an extension of that of the latter. In other words, while he had physical or material possession of the jeepney, the juridical possession thereof remained in the owner. Under those circumstances his disposing of the jeepney with intent of gain and without the consent of its owner makes him guilty of theft.

Quoting from Ruling Case Law, this Court has also said in the same case:

"A felonious taking is necessary in the crime of larceny, and generally speaking, a taking which is done with the consent or acquiescence of the owner of the property is not felonious. But if the owner parts with the possession thereof for a particular purpose, and the person who receives the possession avowedly for that purpose has the fraudulent intention to make use of it as the means of converting it to his own use and does so convert it, this is larceny, for in such case, the fraud supplies the place of the trespass in the taking, or, as otherwise stated, the subsequent felonious conversion of the property by the alleged thief will relate back and make the taking and conversion larceny."

Under this theory, appellant, who, according to his own confession, took the vehicle from its owner already with the intention of appropriating it, should also be deemed guilty of theft. (People v. Trinidad, 50 Phil., 65.)

In the present case, what is involved is the possession of money in the capacity of a bank teller. In People v. Locson,¹⁵ cited above, this Court considered deposits received by a teller in behalf of a bank as being only in the material possession of the teller. This interpretation applies with equal force to money received by a bank teller at the beginning of a business day for the purpose of servicing withdrawals. Such is only material possession. Juridical possession remains with the bank. In line with the reasoning of the Court in the above-cited cases, beginning with People v. De Vera, if the teller appropriates the money for personal gain then the felony committed is theft and not estafa. Further, since the teller occupies a position of confidence, and the bank places money in the teller's possession due to the confidence reposed on the teller, the felony of qualified theft would be committed.

Second Issue

The elements of qualified theft include the elements of theft and any of the circumstances enumerated in Article 310 of the Revised Penal Code¹⁶ (RPC). The elements of theft, which is defined in Artilce 308 of the RPC,¹⁷ are the following:

xxx there are five essential elements which constitute the crime of theft, namely: (1) Taking of personal property; (2) that said property belongs to another; (3) that said taking be done with intent to gain; (4) that, further, it be done without the owner's consent; and (5) finally, that it be accomplished without the use of violence or intimidation against persons, nor of force upon things.¹⁸

The specific qualifying circumstance in Article 310 of the RPC which the information indicated was that the felony was committed with grave abuse of confidence. Hence, to warrant a conviction, the prosecution should have proven the following elements:

1. Taking of personal property.

2. That the said property belongs to another.

3. That the said taking be done with intent to gain.

4. That it be done without the owner's consent.

5. That it be accomplished without the use of violence or intimidation against persons, nor of force upon things.

6. That it be done with grave abuse of confidence.

Regarding the first element, the taking of personal property, the prosecution was not able to present direct evidence that petitioner took the P10,000 on November 16, 1989. The prosecution attempted to prove the taking through circumstantial evidence. One of the pieces of evidence that the prosecution adduced and the trial court and Court of Appeals relied on heavily for the conviction was the withdrawal slip for P10,000, dated November 16, 1989. Antonio Salazar disowned the signature on the withdrawal slip. However, he also indicated that he did not know who made the withdrawal. Rosalina de Lazo testified that the initial on the withdrawal slip, written after the figure 11-17-89, was the customary signature of petitioner. She, however, did not intimate the significance of petitioner's initial on the withdrawal slip. A careful inspection of all the withdrawal slips,¹⁹ including the withdrawal slip stated above, shows that the date and the initial of petitioner were written across the stamped word "paid." This indicates that petitioner's initial was placed in her capacity as a teller which, therefore, only proves that this transaction passed through her hands in such capacity. It does not in any manner show that petitioner prepared the withdrawal slip or that the proceeds of the withdrawal increased her patrimony.

The trial court articulated and the Court of Appeals quoted in toto the following:

Since it was the accused who gave Reynaldo Manlulu the withdrawal slip dated November 16, 1989 the presumption is that, being in possession of said withdrawal slip before its delivery to Reynaldo Manlulu, the accused is the one who prepared the said withdrawal slip. This particular transaction was turned over to him by the accused the previous day²⁰

This presumption is without basis in law. Under the rules of evidence, there is a fixed number of presumptions. These are contained in Sections 2 and 3 of Rule 131, of the Revised Rules of Court. Courts of law should not be too ready to generate other presumptions. After a thorough review of all the presumptions enumerated in Sections 2 and 3 of Rule 131, the presumption that comes closest to the one the RTC and Court of Appeals relied on is paragraph (j), Section 3 of Rule 131, which reads:

That a person found in possession of a thing taken in the doing of a recent wrongful act is the taker and the doer of the whole act; otherwise, that things which a person possesses, or exercises acts of ownership over, are owned by him;

In a long line of cases,²¹ this Court has always applied this presumption to a situation where property has been stolen and the stolen property is found in the possession of the accused. In these cases the possession of the accused gives rise to the presumption that the accused is the taker of the stolen property. In the presumption availed of by the lower courts the property found in the possession of the accused, which is the withdrawal slip, is not stolen property. Furthermore, the presumption the lower court made was not that the petitioner stole anything, but rather that the petitioner was the maker of the withdrawal slip. It is plain that the presumption used by the lower court and the one found in paragraph (j), Section 3 of Rule 131 are different. Consequently, there is no basis for the finding that the withdrawal slip was prepared by the petitioner.

Another piece of evidence offered to prove petitioner's taking is her extrajudicial confession to de Lazo and Col. Dunilayan wherein she allegedly admitted taking money from the accounts of several members of the BABSLA and the list of people from whose accounts she took money, which list petitioner supposedly prepared in the presence of de Lazo and Col. Dunilayan. In the testimony of Rosalina de Lazo, all she mentioned was that petitioner confessed to having taken sums of money from the accounts of several depositors, including the account of Sgt. Salazar. Nowhere in her testimony did she mention that petitioner confessed the exact date on which she took the money, nor the amount she took from the account of Sgt. Salazar. It cannot be deduced from the alleged verbal confession of petitioner that she was confessing a specific taking of P10,000 from the account of Sgt. Salazar on November 16, 1989. She also saw petitioner prepare the list of depositors from whose accounts she had taken some money. Again, a perusal of the handwritten list allegedly prepared by petitioner does not disclose any relation to the specific taking alleged in the information. All that was written on the list, among other names and figures, was the name Salazar, Antonio and the number fifteen (15) to the right of the name. It must be kept in mind that the information was for a theft of P10,000 that occurred on the 16th of November 1989. The list does not mention the date on which the money was taken. Neither does it disclose the precise amount that was taken.

The other pieces of evidence such as the Teller's Daily Report and Abstract of Payment, to which witnesses de Lazo and Salazar both testified as containing the customary initials of petitioner, only corroborate the withdrawal slip. They merely reveal that on the 16th of November 1989, a withdrawal was made on the account of Sgt. Antonio Salazar and that this withdrawal passed through the hands of petitioner in her capacity as a teller of the BABSLA. Again, they prove neither that petitioner prepared the subject withdrawal slip nor that she took the P10,000 on that date.

From the foregoing discussion it is plain that the prosecution failed to prove by direct or sufficient circumstantial evidence that there was a taking of personal property by petitioner.

A discussion of the other elements of qualified theft mentioned above is not necessary. Even if the other elements were satisfactorily proven, the first and most basic element of qualified theft was not established. The prosecution was, therefore, unsuccessful in proving beyond reasonable doubt that the petitioner committed the crime of qualified theft.

WHEREFORE, the petition is GRANTED and the decision and resolution of the Court of Appeals dated December 28, 1998 and May 26, 1999, respectively, are REVERSED and SET ASIDE. Petitioner, Asuncion Galang Roque, is ACQUITTED of the crime of qualified theft charged in the information. No costs.

SO ORDERED.

Quisumbing, (Acting Chairman), Ynares-Santiago, and Carpio, JJ., concur.
Davide, Jr., C.J., (Chairman), on official leave.

Endnotes:

¹ RTC Records, p. 2.

² TSN, May 16, 1991, pp. 3-18.

³ TSN, November 12, 1991, pp. 2-23; December 19, 1991, pp. 1-18.

⁴ TSN, October 22, 1992, pp. 2-9; December 10, 1992, pp. 2-17.

⁵ TSN, March 18, 1993, pp. 3-11; March 25, 1993, pp. 1-13; May 6, 1993, pp. 2-9.

⁶ TSN, June 17, 1993, pp. 3-10.

⁷ CA Rollo, pp. 42-44.

⁸ See CA Decision dated December 28, 1998 and Resolution dated May 26, 1999 denying Motion for Reconsideration, Rollo pp. 28-35, 40.

⁹ Rollo, pp. 16-17.

¹⁰ Rollo, pp. 17-18.

¹¹ 43 Phil. 1000 (1921).

¹² 50 Phil. 65 (1927).

¹³ 57 Phil. 325 (1932).

¹⁴ 96 Phil. 931 (1955).

¹⁵ Supra.

¹⁶ Qualified theft. - The crime of theft shall be punished by the penalties next higher by two degrees than those respectively specified in the next preceding article, if committed by a domestic servant, or with grave abuse of confidence, or if the property stolen is vehicle, mail matter or large cattle or consists of coconuts taken from the premises of a plantation, fish taken from a fishpond or fishery or if property is taken on the occasion of fire, earthquake, typhoon, volcanic eruption, or any other calamity, vehicular accident or civil disturbance.

¹⁷ Who are liable for theft. - Theft is committed by any person who, with intent to gain but without violence against, or intimidation of persons nor force upon things, shall take personal property of another without the latter's consent. xxx

¹⁸ People v. Yusay, 50 Phil. 598 (1927).

¹⁹ Exhibits E-2 to E-8, Exhibits for the Prosecution.

²⁰ CA Rollo, p. 42.

²¹ People v. Geron, 281 SCRA 37 (1997); People v. Zafra, 237 SCRA 664 (1994); People v. Repuela, 183 SCRA 244 (1990); People v. Newman y Beclar, 163 SCRA 496 (1988); People v. Acejo, 97 SCRA 226 (1980); People v. Tanchoco, 76 Phil. 463 (1946); People v. Malasugui, 63 Phil. 221 (1936); U.S. v. Mohamd Ungal, 37 Phil. 835 (1918); U.S. v. Divino, 18 Phil. 425 (1911); U.S. v. Espia, 16 Phil. 506 (1910); U.S. v. Carreon, 12 Phil. 51 (1908); U.S. v. Soriano, 9 Phil. 441 (1907).

G.R. NOS. 139275-76 and 140949 - LIGHT RAIL TRANSIT AUTHORITY v. COURT OF APPEALS, ET AL.

2013-01-15T09:50:29+00:00

G.R. NOS. 139275-76 and 140949 - LIGHT RAIL TRANSIT AUTHORITY v. COURT OF APPEALS, ET AL.

SECOND DIVISION

[G.R. NOS. 139275-76 and 140949 : November 25, 2004]

LIGHT RAIL TRANSIT AUTHORITY, Petitioner, v. COURT OF APPEALS and T.N. LAL & CO., LTD., Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Both filed by petitioner Light Rail Transit Authority (LRTA), G.R. NOS. 139275-76 assail the Decision dated February 26, 1999, rendered by the Court of Appeals (CA) in the consolidated petitions docketed as CA-G.R. SP Nos. 44220 and 44227;¹ G.R. No. 140949, on the other hand, questions the Decision dated November 12, 1999, issued by the CA in CA-G.R. SP No. 52382.² These cases originated from the orders issued by the Regional Trial Court of Pasay City (Branch 111) in Civil Case No. 97-0423.

The antecedent facts of these consolidated petitions were summed up by the CA in CA-G.R. SP Nos. 44220 and 44227, as follows:

On October 1, 1986, T.N. LAL & CO., LTD. (private respondent herein and hereafter to be referred to as LAL for short) donated a stereo system to the LRTA, to provide music for relaxation and amusement in the 18 stations and all the rail vehicles of LRTA along its Line 1. On March 19, 1990, LAL and the LRTA entered into an agreement whereby LAL was authorized to air commercial advertisements through the aforesaid stereo system for a period of five (5) years and three (3) months from March 19, 1990, in consideration of a fee equivalent to thirty percent (30%) of the gross sales of advertisements (less any agency commission) annually, with minimum annual guaranteed fees. Subsequently, the period of the contract was amended to five (5) years from April 1, 1992, or until March 31, 1997.

On March 31, 1997, LAL filed an action for reformation of contract and damages (with application for preliminary mandatory & prohibitory injunction and Temporary Restraining Order) against LRTA with the Regional Trial Court at Pasay City, and the same was docketed as Civil Case No. 97-0423 and raffled to Branch 111, presided over by the respondent judge.

The complaint alleged that vibrations and noises coming from the light rail vehicles caused disruptions in the sound system, resulting in a sharp decline of advertisements aired over the said system. LAL requested for a moratorium of the agreement until the said problem can be solved, but LRTA refused to grant such request. Hence, the complaint prays that the contract be reformed by including therein a provision allowing a moratorium in case of disruption affecting the system attributable to mechanical/technical problems in the LRT line or light rail vehicles, including a pro rata extension of the agreement. The complaint also prays for a temporary restraining order and preliminary injunction ordering the defendant to maintain the status quo and prohibiting it or any of its agents from disrupting, cutting, severing or disconnecting the electric power supplied to the plaintiff's sound system.

Upon receipt of the complaint, the respondent Judge issued a Temporary Restraining Order enjoining the parties to maintain the status quo, and restraining the LRTA from disrupting, cutting, severing or disconnecting the electric power supplied to LAL's sound system installed in all the LRT stations and vehicles. The TRO was to expire on April 20, 1997.

On April 16, 1997, after notice and hearing, the respondent judge issued an Order, the dispositive portion of which is as follows:

WHEREFORE, with all the foregoing considerations, and subject to the condition of plaintiff posting a bond in the amount of Five Hundred Thousand Pesos (P500,000.00), Philippine Currency, conditioned to answer for any damage which the defendant may suffer by reason of the injunction herein granted, let therefore, a Writ of Preliminary Injunction be issued in favor of the plaintiff against the defendant who is enjoined from:

(a) Terminating or declaring as terminated the Agreement dated March 19, 1990 as amended on August 6, 1993 and to observe the status quo before March 31, 1997; and,

(b) As a consequence thereof, to desist from removing, disrupting, interfering, disconnecting or tampering the power supply leading to plaintiff's sound system, in all places, sites and locations within the defendant's area of responsibility for the duration of this proceedings, UNLESS THIS ORDER IS EARLIER RECALLED by this Court.

SO ORDERED. (p. 57, Rollo)

On April 22, 1997, LRTA filed a Manifestation alleging that the failure of LAL to post a bond has rendered the Order dated April 16, 1997 ineffective. On the same day, LRTA unplugged the electrical connection of the sound system.

However, on April 25, 1997, LAL filed an injunction bond in the amount of P500,000.00, and the writ of preliminary injunction was issued by the respondent judge. The same was served on LRTA on the same day.

On April 25, 1997, LAL filed a "Motion to Cite the Defendant in Contempt", alleging that on April 22, 1997, in defiance of the court's Order of March 31, 1997 (sic), the defendant disconnected and cut off the power supply to its sound system thereby disrupting and disturbing the regular programs and advertisements aired therein. The motion was set for hearing on April 29, 1997.

On April 28, 1997, LRTA filed a motion for postponement which was granted and the hearing was reset to May 15, 1997. However, the respondent judge issued an order dated April 29, 1997, the dispositive portion of which is as follows:

WHEREFORE, pending resolution of plaintiff's 'Motion To Cite Defendant In Contempt' which is calendared anew on May 15, 1997 at 8:30 A.M., defendant Light Rail Transit Authority as well as its counsel are hereby ORDERED to comply with the Order of this Court dated April 16, 1997 to cause the complete restoration of the sound system to its original status/condition immediately upon receipt hereof. Let this Order be served for prompt implementation by the Sheriff of this Court who is directed to submit his report/return on the action taken in this regard.

so ordered. (p. 32, Rollo)

On April 30, 1997, the LRTA filed a motion for reconsideration of the said order.

On May 5, 1997, LAL filed another motion to cite Evangeline M. Razon, Geronima P. Anastacio and Atty. Moises S. Tolentino, [Jr.] for civil contempt, for refusing to comply with the order of the court dated April 29, 1997. The motion was requested to be submitted for[to] the court for proper decision "immediately upon receipt hereof".

On May 7, 1997, LRTA filed an opposition to the two motions to cite in contempt.

On May 13, 1997, the respondent judge issued the herein assailed order the dispositive portion of which is as follows:

WHEREFORE, this Court finds the defendants guilty of indirect contempt for defying the Orders of April 16 and 29, 1997 and the Writ of Preliminary Injunction issued in this case. Since the act committed can still be corrected or capable of being undone by the officers of the defendant corporation and/or its agents/operators themselves, let therefore a Warrant of Arrest be issued against the following persons, namely:

1) Evangeline M. Razon, Officer-in-charge, LRTA;

2) Geronima P. Anastacio, Head of LRTA, Legal Department; and,

3) Moises S. Tolentino, [Jr.], General Manager, Metro Transit Organization, Operators of the LRT system.

for their apprehension and incarceration/imprisonment until such time when they have performed or cause to be performed the act complained of in this case, by reconnecting, replugging or reactivating plaintiff's sound system at all LRT facilities and restoring them in the same state and condition as it was on April 16, 1997.

SO ORDERED. (p. 25, Rollo)

Accordingly, warrants of arrest were issued against the persons named in the order. Motions to quash warrants of arrest were filed by LRTA, Evangeline M. Razon, [and] Geronima P. Anastacio. At the same time, the LRTA filed a motion for the respondent judge to inhibit himself from further hearing the case. '³

Atty. Moises S. Tolentino, Jr., General Manager of Metro Transit Organization (operators of the LRT system), then filed a special civil action for certiorari and prohibition (CA-G.R. SP No. 44227) on May 21, 1997, assailing the trial court's order dated May 13, 1997, finding him, Evangeline M. Razon, and Geronima P. Anastacio, guilty of indirect contempt and ordering the issuance of warrants of arrest against them. Atty. Tolentino contended that the trial court issued the orders in disregard of substantive and procedural due process.⁴

Petitioner LRTA, meanwhile, filed a special civil action for certiorari (CA-G.R. SP No. 44220) on May 28, 1997, seeking the annulment of the following orders issued by the trial court: (1) Order dated April 29, 1997, ordering petitioner to comply with the trial court's Order dated April 16, 1997; and (2) Order dated May 13, 1997, denying petitioner's motion for reconsideration and finding Atty. Tolentino, Razon, and Anastacio, guilty of indirect contempt and ordering the issuance of warrants of arrest against them.

CA-G.R. SP Nos. 44220 and 44227 were thereafter consolidated as both involved related issues.⁵

On February 26, 1999, the CA rendered its decision in the above-mentioned cases, the decretal portion of which reads:

WHEREFORE, the petitions filed in these cases are hereby GIVEN DUE COURSE, and judgment is hereby rendered ANNULLING AND SETTING ASIDE the Order dated May 13, 1997 and the warrants of arrest in connection therewith, issued by the respondent judge in Civil Case No. 97-0423.

SO ORDERED.⁶

While the CA annulled the Order dated May 13, 1997 and the warrants of arrest issued by the trial court in Civil Case No. 97-0423, it nevertheless ruled that the writ of preliminary injunction issued by the trial court per Order dated April 16, 1997, as well as the Order dated April 29, 1997, is valid and binding.⁷

Respondent then filed with the trial court a Motion to Enforce the Order dated April 16, 1997. Petitioner, on the other hand, filed a Manifestation asking that the resolution of respondent's motion be suspended on the ground that there appears to be an inconsistency with the body and the dispositive portion of the CA's decision.⁸

Notwithstanding petitioner's manifestation, the trial court issued an order dated April 7, 1999, granting respondent's motion and ordering petitioner to immediately restore the power supply to respondent's sound system within 24 hours.⁹ Petitioner filed a motion for reconsideration but the trial court denied it in another (second) order dated April 7, 1999.

On April 22, 1999, the trial court issued an order amending the second order dated April 7, 1999, to be dated April 20, 1999.¹⁰

Thus, petitioner filed on April 22, 1999, another special civil action for certiorari (CA-G.R. SP No. 52382) with the CA, contesting the trial court's orders dated April 7, 1999 and April 20, 1999 (previously dated April 7, 1999).

Petitioner alleged that the assailed orders were issued with grave abuse of discretion, as these are not in accordance with the CA's decision dated February 26, 1999.¹¹

In the meantime, petitioner, on April 14, 1999, filed in CA-G.R. SP Nos. 44220 and 44227 a Motion for Clarification of Decision,¹² but it was denied by the CA per Resolution dated May 21, 1999.¹³ Petitioner sought reconsideration but it was also denied per Resolution dated July 9, 1999,¹⁴ prompting petitioner to institute on July 29, 1999, a petition for certiorari with this Court, docketed as G.R. NOS. 139275-76.

The CA then promulgated its decision in CA-G.R. SP No. 52382 on November 12, 1999, dismissing the petition and affirming the assailed orders dated April 7, 1999 and April 20, 1999. Petitioner elevated the dismissal to this Court via Petition for Review filed on December 20, 1999, docketed as G.R. No. 140949.

On February 21, 2000, the Court ordered the consolidation of G.R. NOS. 139275-76 and G.R. No. 140949.¹⁵

In G.R. NOS. 139275-76, petitioner raises the following issues:

I

IF THE BODY OF THE DECISION IN THE SAID CONSOLIDATED CASES IS IN CONFLICT WHICH HAS BECOME FINAL CONFLICTS WITH THE DISPOSITIVE PORTION THEREOF, WHICH OF THEM SHALL PREVAIL?

II

CAN THE LIFETIME OF AN EXPIRED CONTRACT BE EXTENDED BY A PRELIMINARY INJUNCTION?¹⁶

In G.R. No. 140949, the following:

1. CAN A BODY OF THE DECISION [WHICH DOES NOT HAVE ANY SUPPORT IN OR CONTRARY TO THE DISPOSITIVE PORTION THEREOF] BE ENFORCED OR EXECUTED?chanroblesvirtualawlibrary

2. WHETHER OR NOT THE ORDER OF THE TRIAL COURT A QUO DATED APRIL 7, 1999 AND THE OTHER ONE ALSO DATED APRIL 7, 1999 [WHICH WAS LATER AMENDED BY THE TRIAL COURT A QUO TO BE DATED APRIL 20, 1999 IN AN ORDER DATED APRIL 22, 1999] ENFORCING THE BODY OF THE DECISION OF THE HONORABLE COURT OF APPEALS DATED FEBRUARY 26, 1999 IN CA-G.R. SP NO. 44220 AND CA-G.R. SP NO. 44227 ARE NULL AND VOID.¹⁷

Petitioner's argument rests mainly on its adamant belief that the discussion of the CA in the body of its Decision dated February 26, 1999, rendered in CA-G.R. SP Nos. 44220 and 44227, is inconsistent with its fallo, which nullified and set aside the trial court's order dated May 13, 1997. According to petitioner, since the May 13, 1997 order is premised on the April 16, 1997 (granting the issuance of the writ of preliminary injunction) and April 29, 1997 (enforcing compliance with the injunctive writ) orders, therefore, these orders are likewise invalid, and respondent cannot seek its enforcement.

The Court, however, has carefully read the assailed decision and cannot find anything inconsistent with the body and fallo. Even a student of law can understand its import. It has been said that, to understand the dispositive portion of a decision, one has only to ascertain the issues of the action.¹⁸

CA-G.R. SP Nos. 44220 and 44227 involved three issues. First is whether or not an injunction order, as embodied in the April 16, 1997 order, is effective prior to the posting of an injunction bond and the issuance of the injunctive writ;¹⁹ second, whether or not the Order of April 29, 1997 is valid and binding;²⁰ and the third is whether or not the petitioners were validly held guilty of contempt of court per Order dated May 13, 1997.²¹

On the first issue, the CA categorically ruled that the April 16, 1997 order is binding even without the filing of the injunction bond.²² On the second issue, the CA likewise ruled that the April 29, 1997 Order is valid and binding.²³ It was on the third issue that the CA found grave abuse of discretion committed by the trial court, and the Order dated May 13, 1997 was consequently rendered null and void. The CA is clear on this score. It held, viz.:

The Motion to Cite Defendant in Contempt, dated April 23, 1997 (Annex "G", Petition, SP No. 44227) does not name them as respondents. It prays only that the defendant (LRTA) "and its officers and employees who are responsible for the act complained of" be held in contempt. It is only in the Motion to Cite Defendants for Civil Contempt Under Rule 71, Section 7 of the Revised Rules of Court dated May 5, 1997 (sic) that Evangeline M. Razon, Geronima P. Atanacio, and Moises S. Tolentino, [Jr.] are mentioned as "responsible on the continuing defiance of the Orders of the Honorable Court." But the said motion was fatally defective in that it did not contain a proper notice of hearing, as required by Sec. 4, Rule 15 of the Revised Rules of Court. It only contains the request to the Branch Clerk of Court that the said motion be submitted to the court "immediately upon receipt hereof."

Worst of all, the respondent judge issued his disputed order ', two (2) days before the date that he himself fixed for the hearing of the motion to cite the defendant in contempt. Clearly, the said persons were denied their day in court.

Moreover, we have reviewed the transcript of the ex parte hearing conducted by the respondent judge on April 29, 1997 (on the motion to cite defendant in contempt dated April 23, 1997), and we find that the evidence presented against the abovenamed persons (who are now facing warrants of arrest) were basically hearsay testimony. - The respondent judge acted with grave abuse of discretion in issuing his disputed order, and its corresponding warrants of arrest, without a hearing, and on the basis of flimsy evidence.²⁴ (Emphasis Ours)

It is plain to see that only the May 13, 1997 order was nullified by the CA. The April 16 and 29, 1997 orders remain valid and binding. Petitioner's argument that these two orders should likewise have been nullified because the May 13, 1997 order is based thereon, is misplaced. The nullity of the May 13, 1997 order was not based on these 2 orders, but on grounds of lack of due process and evidence. These grounds inevitably led to the dispositive portion of the CA's decision. It must be stressed that it is the dispositive part of the judgment that actually settles and declares the rights and obligations of the parties, finally, definitively, and authoritatively, notwithstanding the existence of inconsistent statements in the body that may tend to confuse.²⁵

If there was any error committed by the CA, it was in failing to state in the dispositive portion of the decision that the petition was only partially granted. But this does not affect the decision, as its import can be grasped notwithstanding the lapse. Consequently, the Decision dated February 26, 1999 in CA-G.R. SP Nos. 44220 and 44227 nullifying the Order dated May 13, 1997 is a valid decision.

Nevertheless, the Court agrees with petitioner that the trial court committed grave abuse of discretion in issuing the injunctive writ.

Section 3 of Rule 58 of the Rules of Court provides for the grounds justifying the issuance of a preliminary injunction, to wit:

SEC. 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

The purpose of a preliminary injunction is to prevent threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly studied and adjudicated. To be entitled to an injunctive writ, the petitioner has the burden to establish the following requisites:²⁶

(1) a right in esse or a clear and unmistakable right to be protected;

(2) a violation of that right;

(3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage.

In the present case, respondent's entitlement to the injunctive writ is found on its prima facie legal right to remain in the premises and continue broasting commercial advertisements within the LRT stations. The only way to determine this is to look into the terms of the contract between petitioner and respondent, as it provides for their respective rights and obligations. It is fundamental that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. No amount of extrinsic aids are required and no further extraneous sources are necessary in order to ascertain the parties' intent ²⁷

The "Agreement" contains the following stipulations, inter alia:

Whereas, for purposes of adjusting the five-year period corresponding to the annual minimum guaranteed amount disrupted by the start-up ninety-day period and the six-month moratorium period effective September 1, 1990, to end March 1, 1991, the parties have agreed to formally amend the "Agreement" to reflect the changes thereon;

1. Article I (a) of the "Agreement" is hereby amended to read as follows:

(a.) This Agreement shall be effective for five (5) years to commence on April 1, 1992 until March 31, 1997, unless sooner terminated as provided hereunder."²⁸

The contract explicitly states that it was due to expire on March 31, 1997, the same day respondent filed its action for reformation of contract. When the trial court issued its Order dated April 16, 1997, ordering petitioner to refrain from terminating the contract and to retain respondent's services until further orders from the court, the contract had already expired. Respondent, therefore, has no clear and unmistakable right to be protected by the issuance of the writ. This is but a consequence of their stipulation of a determinate period for its expiration.²⁹ The injunction, in effect, virtually extended the original period agreed upon.

It was the trial court's belief that to allow the contract to expire would render respondent's action for reformation of contract moot and academic.³⁰ Needless to say, a contract can be renewed, revived or extended only by mutual consent of the parties. No court can compel a party to agree to a contract through the instrumentality of a writ of preliminary injunction.³¹ Also, the possibility of irreparable damage without proof of actual existing right is not a ground for an injunction.³²

WHEREFORE, the petitions in G.R. NOS. 139275-76 and 140949, are hereby GRANTED. The Decision dated February 26, 1999, in CA-G.R. SP Nos. 44220 and 44227, and the Decision dated November 12, 1999, in CA-G.R. SP No. 52382, rendered by the Court of Appeals are hereby SET ASIDE. Consequently, the Orders dated April 16 and 29, 1997, issued by the Regional Trial Court of Pasay City (Branch 111) in Civil Case No. 97-0423, and all other orders appurtenant thereto, are NULLIFIED.

The trial court is ORDERED to proceed with Civil Case No. 97-0423 with immediate dispatch.

SO ORDERED.

Puno, (Chairman), Callejo, Sr., TINGA, and Chico-Nazario, JJ., concur.

Endnotes:

¹ Penned by Associate Justice HofileÃ±a, H., (now retired) with Associate Justices Amin, O. (now retired) and Villarama, Jr., M., concurring.

² Penned by Associate Justice Adefuin-dela Cruz, B., (now retired) with Associate Justices Martin, Jr., F. (now retired) and Asuncion, E. J. S., concurring.

³ CA Rollo (SP No. 44227), pp. 168-171.

⁴ CA Rollo (SP No. 44227), p. 9.

⁵ CA Rollo (SP No. 44220), pp. 205-206.

⁶ CA Rollo (SP No. 44227), p. 178.

⁷ Id., pp. 172-174.

⁸ CA Rollo (SP No. 52382), pp. 38-39.

⁹ Id., p. 22.

¹⁰ Id., p. 23.

¹¹ Id., p. 9.

¹² CA Rollo (SP No. 44227), p. 184.

¹³ Id., p. 191.

¹⁴ Id., pp. 220-221.

¹⁵ Rollo (G.R. NOS. 139275-76), p. 45.

¹⁶ Id., p. 17.

¹⁷ Rollo (G.R. No. 140949), p. 21.

¹⁸ Espiritu v. Court of First Instance of Cavite, G.R. No. L-44696, October 18, 1988, 166 SCRA 394, 398 (citing Blas v. Hon. MuÃ±oz-Palma, 4 SCRA 900).

¹⁹ CA Rollo (SP No. 44227), p. 172.

²⁰ Id., p. 173.

²¹ Id., p. 174.

²² Id., p. 173.

²³ Ibid.

²⁴ Id., pp. 177-178.

²⁵ Supra., Espiritu case, at page 399.

²⁶ Tayag v. Lacson, G.R. No. 134971, March 25, 2004.

²⁷ Inter-Asia Services Corp. (International) v. Court of Appeals, G.R. No. 106427, October 21, 1996, 263 SCRA 408, 417.

²⁸ CA Rollo (SP No. 44227), p. 46.

²⁹ Supra., Inter-Asia Services Corp. (International) case, at page 420.

³⁰ CA Rollo (SP No. 44227), p. 56.

³¹ National Food Authority v. Court of Appeals, G.R. NOS. 115121-25, February 9, 1996, 253 SCRA 470, 479.

³² Heirs of Joaquin Asuncion v. Gervacio, Jr., G.R. No. 115741, March 9, 1999, 304 SCRA 322, 329.

LRT v. CA: 139275-76 : November 25, 2004 : J. Austria-Martinez : Second Division : Decision

2013-01-15T09:50:29+00:00

LRT v. CA: 139275-76 : November 25, 2004 : J. Austria-Martinez : Second Division : Decision

SECOND DIVISION

[G.R. NOS. 139275-76 and 140949. November 25, 2004]

LIGHT RAIL TRANSIT AUTHORITY, Petitioner, v. COURT OF APPEALS and T.N. LAL & CO., LTD., Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Both filed by petitioner Light Rail Transit Authority (LRTA), G.R. NOS. 139275-76 assail the Decision dated February 26, 1999, rendered by the Court of Appeals (CA) in the consolidated petitions docketed as CA-G.R. SP Nos. 44220 and 44227;¹ G.R. No. 140949, on the other hand, questions the Decision dated November 12, 1999, issued by the CA in CA-G.R. SP No. 52382.² These cases originated from the orders issued by the Regional Trial Court of Pasay City (Branch 111) in Civil Case No. 97-0423.

The antecedent facts of these consolidated petitions were summed up by the CA in CA-G.R. SP Nos. 44220 and 44227, as follows:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

On October 1, 1986, T.N. LAL & CO., LTD. (private respondent herein and hereafter to be referred to as LAL for short) donated a stereo system to the LRTA, to provide music for relaxation and amusement in the 18 stations and all the rail vehicles of LRTA along its Line 1. On March 19, 1990, LAL and the LRTA entered into an agreement whereby LAL was authorized to air commercial advertisements through the aforesaid stereo system for a period of five (5) years and three (3) months from March 19, 1990, in consideration of a fee equivalent to thirty percent (30%) of the gross sales of advertisements (less any agency commission) annually, with minimum annual guaranteed fees. Subsequently, the period of the contract was amended to five (5) years from April 1, 1992, or until March 31, 1997.

On March 31, 1997, LAL filed an action for reformation of contract and damages (with application for preliminary mandatory & prohibitory injunction and Temporary Restraining Order) against LRTA with the Regional Trial Court at Pasay City, and the same was docketed as Civil Case No. 97-0423 and raffled to Branch 111, presided over by the respondent judge.

The complaint alleged that vibrations and noises coming from the light rail vehicles caused disruptions in the sound system, resulting in a sharp decline of advertisements aired over the said system. LAL requested for a moratorium of the agreement until the said problem can be solved, but LRTA refused to grant such request. Hence, the complaint prays that the contract be reformed by including therein a provision allowing a moratorium in case of disruption affecting the system attributable to mechanical/technical problems in the LRT line or light rail vehicles, including a pro rata extension of the agreement. The complaint also prays for a temporary restraining order and preliminary injunction ordering the defendant to maintain the status quo and prohibiting it or any of its agents from disrupting, cutting, severing or disconnecting the electric power supplied to the plaintiffs sound system.

Upon receipt of the complaint, the respondent Judge issued a Temporary Restraining Order enjoining the parties to maintain the status quo, and restraining the LRTA from disrupting, cutting, severing or disconnecting the electric power supplied to LALs sound system installed in all the LRT stations and vehicles. The TRO was to expire on April 20, 1997.

On April 16, 1997, after notice and hearing, the respondent judge issued an Order, the dispositive portion of which is as follows:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

WHEREFORE, with all the foregoing considerations, and subject to the condition of plaintiff posting a bond in the amount of Five Hundred Thousand Pesos (P500,000.00), Philippine Currency, conditioned to answer for any damage which the defendant may suffer by reason of the injunction herein granted, let therefore, a Writ of Preliminary Injunction be issued in favor of the plaintiff against the defendant who is enjoined from:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

(a) Terminating or declaring as terminated the Agreement dated March 19, 1990 as amended on August 6, 1993 and to observe the status quo before March 31, 1997; and,

(b) As a consequence thereof, to desist from removing, disrupting, interfering, disconnecting or tampering the power supply leading to plaintiffs sound system, in all places, sites and locations within the defendants area of responsibility for the duration of this proceedings, UNLESS THIS ORDER IS EARLIER RECALLED by this Court.

SO ORDERED. (p. 57, Rollo)

On April 25, 1997, LAL filed a Motion to Cite the Defendant in Contempt, alleging that on April 22, 1997, in defiance of the courts Order of March 31, 1997 (sic), the defendant disconnected and cut off the power supply to its sound system thereby disrupting and disturbing the regular programs and advertisements aired therein. The motion was set for hearing on April 29, 1997.

WHEREFORE, pending resolution of plaintiffs Motion To Cite Defendant In Contempt which is calendared anew on May 15, 1997 at 8:30 A.M., defendant Light Rail Transit Authority as well as its counsel are hereby ORDERED to comply with the Order of this Court dated April 16, 1997 to cause the complete restoration of the sound system to its original status/condition immediately upon receipt hereof. Let this Order be served for prompt implementation by the Sheriff of this Court who is directed to submit his report/return on the action taken in this regard.

so ordered. (p. 32, Rollo)

On April 30, 1997, the LRTA filed a motion for reconsideration of the said order.

On May 5, 1997, LAL filed another motion to cite Evangeline M. Razon, Geronima P. Anastacio and Atty. Moises S. Tolentino, [Jr.] for civil contempt, for refusing to comply with the order of the court dated April 29, 1997. The motion was requested to be submitted for[to] the court for proper decision immediately upon receipt hereof.

On May 7, 1997, LRTA filed an opposition to the two motions to cite in contempt.

On May 13, 1997, the respondent judge issued the herein assailed order the dispositive portion of which is as follows:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

WHEREFORE, this Court finds the defendants guilty of indirect contempt for defying the Orders of April 16 and 29, 1997 and the Writ of Preliminary Injunction issued in this case. Since the act committed can still be corrected or capable of being undone by the officers of the defendant corporation and/or its agents/operators themselves, let therefore a Warrant of Arrest be issued against the following persons, namely:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

1) Evangeline M. Razon, Officer-in-charge, LRTA;chanroblesvirtuallawlibrary

2) Geronima P. Anastacio, Head of LRTA, Legal Department; and,

3) Moises S. Tolentino, [Jr.], General Manager, Metro Transit Organization, Operators of the LRT system.

for their apprehension and incarceration/imprisonment until such time when they have performed or cause to be performed the act complained of in this case, by reconnecting, replugging or reactivating plaintiffs sound system at all LRT facilities and restoring them in the same state and condition as it was on April 16, 1997.

SO ORDERED. (p. 25, Rollo)

Accordingly, warrants of arrest were issued against the persons named in the order. Motions to quash warrants of arrest were filed by LRTA, Evangeline M. Razon, [and] Geronima P. Anastacio. At the same time, the LRTA filed a motion for the respondent judge to inhibit himself from further hearing the case. ³ Ï‚rÎ½ll

Atty. Moises S. Tolentino, Jr., General Manager of Metro Transit Organization (operators of the LRT system), then filed a special civil action for certiorari and prohibition (CA-G.R. SP No. 44227) on May 21, 1997, assailing the trial courts order dated May 13, 1997, finding him, Evangeline M. Razon, and Geronima P. Anastacio, guilty of indirect contempt and ordering the issuance of warrants of arrest against them. Atty. Tolentino contended that the trial court issued the orders in disregard of substantive and procedural due process.⁴ Ï‚rÎ½ll

Petitioner LRTA, meanwhile, filed a special civil action for certiorari (CA-G.R. SP No. 44220) on May 28, 1997, seeking the annulment of the following orders issued by the trial court: (1) Order dated April 29, 1997, ordering petitioner to comply with the trial courts Order dated April 16, 1997; and (2) Order dated May 13, 1997, denying petitioners motion for reconsideration and finding Atty. Tolentino, Razon, and Anastacio, guilty of indirect contempt and ordering the issuance of warrants of arrest against them.

CA-G.R. SP Nos. 44220 and 44227 were thereafter consolidated as both involved related issues.⁵ Ï‚rÎ½ll

On February 26, 1999, the CA rendered its decision in the above-mentioned cases, the decretal portion of which reads:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

WHEREFORE, the petitions filed in these cases are hereby GIVEN DUE COURSE, and judgment is hereby rendered ANNULLING AND SETTING ASIDE the Order dated May 13, 1997 and the warrants of arrest in connection therewith, issued by the respondent judge in Civil Case No. 97-0423.

SO ORDERED.⁶ Ï‚rÎ½ll

Respondent then filed with the trial court a Motion to Enforce the Order dated April 16, 1997. Petitioner, on the other hand, filed a Manifestation asking that the resolution of respondents motion be suspended on the ground that there appears to be an inconsistency with the body and the dispositive portion of the CAs decision.⁸ Ï‚rÎ½ll

Notwithstanding petitioners manifestation, the trial court issued an order dated April 7, 1999, granting respondents motion and ordering petitioner to immediately restore the power supply to respondents sound system within 24 hours.⁹ Petitioner filed a motion for reconsideration but the trial court denied it in another (second) order dated April 7, 1999.

On April 22, 1999, the trial court issued an order amending the second order dated April 7, 1999, to be dated April 20, 1999.¹⁰ Ï‚rÎ½ll

Thus, petitioner filed on April 22, 1999, another special civil action for certiorari (CA-G.R. SP No. 52382) with the CA, contesting the trial courts orders dated April 7, 1999 and April 20, 1999 (previously dated April 7, 1999).

Petitioner alleged that the assailed orders were issued with grave abuse of discretion, as these are not in accordance with the CAs decision dated February 26, 1999.¹¹ Ï‚rÎ½ll

In the meantime, Petitioner, on April 14, 1999, filed in CA-G.R. SP Nos. 44220 and 44227 a Motion for Clarification of Decision,¹² but it was denied by the CA per Resolution dated May 21, 1999.¹³ Petitioner sought reconsideration but it was also denied per Resolution dated July 9, 1999,¹⁴ prompting petitioner to institute on July 29, 1999, a Petition for Certiorariwith this Court, docketed as G.R. NOS. 139275-76.

The CA then promulgated its decision in CA-G.R. SP No. 52382 on November 12, 1999, dismissing the petition and affirming the assailed orders dated April 7, 1999 and April 20, 1999. Petitioner elevated the dismissal to this Court via petition for review filed on December 20, 1999, docketed as G.R. No. 140949.

On February 21, 2000, the Court ordered the consolidation of G.R. NOS. 139275-76 and G.R. No. 140949.¹⁵ Ï‚rÎ½ll

In G.R. NOS. 139275-76, petitioner raises the following issues:

IF THE BODY OF THE DECISION IN THE SAID CONSOLIDATED CASES IS IN CONFLICT WHICH HAS BECOME FINAL CONFLICTS WITH THE DISPOSITIVE PORTION THEREOF, WHICH OF THEM SHALL PREVAIL?

CAN THE LIFETIME OF AN EXPIRED CONTRACT BE EXTENDED BY A PRELIMINARY INJUNCTION?¹⁶ Ï‚rÎ½ll

In G.R. No. 140949, the following:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

1. CAN A BODY OF THE DECISION [WHICH DOES NOT HAVE ANY SUPPORT IN OR CONTRARY TO THE DISPOSITIVE PORTION THEREOF] BE ENFORCED OR EXECUTED?chanroblesvirtualawlibrary

2. WHETHER OR NOT THE ORDER OF THE TRIAL COURT A QUO DATED APRIL 7, 1999 AND THE OTHER ONE ALSO DATED APRIL 7, 1999 [WHICH WAS LATER AMENDED BY THE TRIAL COURT A QUO TO BE DATED APRIL 20, 1999 IN AN ORDER DATED APRIL 22, 1999] ENFORCING THE BODY OF THE DECISION OF THE HONORABLE COURT OF APPEALS DATED FEBRUARY 26, 1999 IN CA-G.R. SP NO. 44220 AND CA-G.R. SP NO. 44227 ARE NULL AND VOID.¹⁷ Ï‚rÎ½ll

Petitioners argument rests mainly on its adamant belief that the discussion of the CA in the body of its Decision dated February 26, 1999, rendered in CA-G.R. SP Nos. 44220 and 44227, is inconsistent with its fallo, which nullified and set aside the trial courts order dated May 13, 1997. According to petitioner, since the May 13, 1997 order is premised on the April 16, 1997 (granting the issuance of the writ of preliminary injunction) and April 29, 1997 (enforcing compliance with the injunctive writ) orders, therefore, these orders are likewise invalid, and respondent cannot seek its enforcement.

The Court, however, has carefully read the assailed decision and cannot find anything inconsistent with the body and fallo. Even a student of law can understand its import. It has been said that, to understand the dispositive portion of a decision, one has only to ascertain the issues of the action.¹⁸ Ï‚rÎ½ll

CA-G.R. SP Nos. 44220 and 44227 involved three issues. First is whether or not an injunction order, as embodied in the April 16, 1997 order, is effective prior to the posting of an injunction bond and the issuance of the injunctive writ;¹⁹ second, whether or not the Order of April 29, 1997 is valid and binding;²⁰ and the third is whether or not the petitioners were validly held guilty of contempt of court per Order dated May 13, 1997.²¹ Ï‚rÎ½ll

The Motion to Cite Defendant in Contempt, dated April 23, 1997 (Annex G, Petition, SP No. 44227) does not name them as respondents. It prays only that the defendant (LRTA) and its officers and employees who are responsible for the act complained of be held in contempt. It is only in the Motion to Cite Defendants for Civil Contempt Under Rule 71, Section 7 of the Revised Rules of Court dated May 5, 1997 (sic) that Evangeline M. Razon, Geronima P. Atanacio, and Moises S. Tolentino, [Jr.] are mentioned as responsible on the continuing defiance of the Orders of the Honorable Court. But the said motion was fatally defective in that it did not contain a proper notice of hearing, as required by Sec. 4, Rule 15 of the Revised Rules of Court. It only contains the request to the Branch Clerk of Court that the said motion be submitted to the court immediately upon receipt hereof.

Worst of all, the respondent judge issued his disputed order, two (2) days before the date that he himself fixed for the hearing of the motion to cite the defendant in contempt. Clearly, the said persons were denied their day in court.

Moreover, we have reviewed the transcript of the ex parte hearing conducted by the respondent judge on April 29, 1997 (on the motion to cite defendant in contempt dated April 23, 1997), and we find that the evidence presented against the abovenamed persons (who are now facing warrants of arrest) were basically hearsay testimony. The respondent judge acted with grave abuse of discretion in issuing his disputed order, and its corresponding warrants of arrest, without a hearing, and on the basis of flimsy evidence.²⁴ (Emphasis Ours)

It is plain to see that only the May 13, 1997 order was nullified by the CA. The April 16 and 29, 1997 orders remain valid and binding. Petitioners argument that these two orders should likewise have been nullified because the May 13, 1997 order is based thereon, is misplaced. The nullity of the May 13, 1997 order was not based on these 2 orders, but on grounds of lack of due process and evidence. These grounds inevitably led to the dispositive portion of the CAs decision. It must be stressed that it is the dispositive part of the judgment that actually settles and declares the rights and obligations of the parties, finally, definitively, and authoritatively, notwithstanding the existence of inconsistent statements in the body that may tend to confuse.²⁵ Ï‚rÎ½ll

If there was any error committed by the CA, it was in failing to state in the dispositive portion of the decision that the petition was only partially granted. But this does not affect the decision, as its import can be grasped notwithstanding the lapse. Consequently, the Decision dated February 26, 1999 in CA-G.R. SP Nos. 44220 and 44227 nullifying the Order dated May 13, 1997 is a valid decision.

Nevertheless, the Court agrees with petitioner that the trial court committed grave abuse of discretion in issuing the injunctive writ.

Section 3 of Rule 58 of the Rules of Court provides for the grounds justifying the issuance of a preliminary injunction, to wit:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

SEC. 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

(1) a right in esse or a clear and unmistakable right to be protected;chanroblesvirtuallawlibrary

(2) a violation of that right;chanroblesvirtuallawlibrary

(3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage.

In the present case, respondents entitlement to the injunctive writ is found on its prima facie legal right to remain in the premises and continue broasting commercial advertisements within the LRT stations. The only way to determine this is to look into the terms of the contract between petitioner and respondent, as it provides for their respective rights and obligations. It is fundamental that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. No amount of extrinsic aids are required and no further extraneous sources are necessary in order to ascertain the parties intent ²⁷ Ï‚rÎ½ll

The Agreement contains the following stipulations, inter alia:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

Whereas, for purposes of adjusting the five-year period corresponding to the annual minimum guaranteed amount disrupted by the start-up ninety-day period and the six-month moratorium period effective September 1, 1990, to end March 1, 1991, the parties have agreed to formally amend the Agreement to reflect the changes thereon;chanroblesvirtuallawlibrary

1. Article I (a) of the Agreement is hereby amended to read as follows:Ï‚Î·Î±Ã±rÎ¿blÎµÅ¡ Î½Î¹râ€ Ï…Î±l lÎ±Ï‰ lÎ¹brÎ±rÃ¿

(a.) This Agreement shall be effective for five (5) years to commence on April 1, 1992 until March 31, 1997, unless sooner terminated as provided hereunder.²⁸ Ï‚rÎ½ll

The contract explicitly states that it was due to expire on March 31, 1997, the same day respondent filed its action for reformation of contract. When the trial court issued its Order dated April 16, 1997, ordering petitioner to refrain from terminating the contract and to retain respondents services until further orders from the court, the contract had already expired. Respondent, therefore, has no clear and unmistakable right to be protected by the issuance of the writ. This is but a consequence of their stipulation of a determinate period for its expiration.²⁹ The injunction, in effect, virtually extended the original period agreed upon.

It was the trial courts belief that to allow the contract to expire would render respondents action for reformation of contract moot and academic.³⁰ Needless to say, a contract can be renewed, revived or extended only by mutual consent of the parties. No court can compel a party to agree to a contract through the instrumentality of a writ of preliminary injunction.³¹ Also, the possibility of irreparable damage without proof of actual existing right is not a ground for an injunction.³² Ï‚rÎ½ll

WHEREFORE, the petitions in G.R. NOS. 139275-76 and 140949, are hereby GRANTED. The Decision dated February 26, 1999, in CA-G.R. SP Nos. 44220 and 44227, and the Decision dated November 12, 1999, in CA-G.R. SP No. 52382, rendered by the Court of Appeals are hereby SET ASIDE. Consequently, the Orders dated April 16 and 29, 1997, issued by the Regional Trial Court of Pasay City (Branch 111) in Civil Case No. 97-0423, and all other orders appurtenant thereto, are NULLIFIED.

The trial court is ORDERED to proceed with Civil Case No. 97-0423 with immediate dispatch.

SO ORDERED.

Puno, (Chairman), Callejo, Sr., TINGA, and Chico-Nazario, JJ., concur.

Endnotes:

¹ Penned by Associate Justice Hofilea, H., (now retired) with Associate Justices Amin, O. (now retired) and Villarama, Jr., M., concurring.

² Penned by Associate Justice Adefuin-dela Cruz, B., (now retired) with Associate Justices Martin, Jr., F. (now retired) and Asuncion, E. J. S., concurring.

³ CA Rollo (SP No. 44227), pp. 168-171.

⁴ CA Rollo (SP No. 44227), p. 9.

⁵ CA Rollo (SP No. 44220), pp. 205-206.

⁶ CA Rollo (SP No. 44227), p. 178.

⁷ Id., pp. 172-174.

⁸ CA Rollo (SP No. 52382), pp. 38-39.

⁹ Id., p. 22.

¹⁰ Id., p. 23.

¹¹ Id., p. 9.

¹² CA Rollo (SP No. 44227), p. 184.

¹³ Id., p. 191.

¹⁴ Id., pp. 220-221.

¹⁵ Rollo (G.R. NOS. 139275-76), p. 45.

¹⁶ Id., p. 17.

¹⁷ Rollo (G.R. No. 140949), p. 21.

¹⁸ Espiritu v. Court of First Instance of Cavite, G.R. No. L-44696, October 18, 1988, 166 SCRA 394, 398 (citing Blas v. Hon. Muoz-Palma, 4 SCRA 900).

¹⁹ CA Rollo (SP No. 44227), p. 172.

²⁰ Id., p. 173.

²¹ Id., p. 174.

²² Id., p. 173.

²³ Ibid.

²⁴ Id., pp. 177-178.

²⁵ Supra., Espiritu case, at page 399.

²⁶ Tayag v. Lacson, G.R. No. 134971, March 25, 2004.

²⁷ Inter-Asia Services Corp. (International) v. Court of Appeals, G.R. No. 106427, October 21, 1996, 263 SCRA 408, 417.

²⁸ CA Rollo (SP No. 44227), p. 46.

²⁹ Supra., Inter-Asia Services Corp. (International) case, at page 420.

³⁰ CA Rollo (SP No. 44227), p. 56.

³¹ National Food Authority v. Court of Appeals, G.R. NOS. 115121-25, February 9, 1996, 253 SCRA 470, 479.

³² Heirs of Joaquin Asuncion v. Gervacio, Jr., G.R. No. 115741, March 9, 1999, 304 SCRA 322, 329.

G.R. No. 140228 - FRANCISCO MEDINA, ET AL. v. GREENFIELD DEVELOPMENT CORPORATION

2013-01-15T09:50:29+00:00

G.R. No. 140228 - FRANCISCO MEDINA, ET AL. v. GREENFIELD DEVELOPMENT CORPORATION

SECOND DIVISION

[G.R. NO. 140228 : November 19, 2004]

FRANCISCO MEDINA, MARIA MEDINA, RAYMUNDO MEDINA, ENRIQUE MEDINA, EDGARDO MEDINA, EVELYN MEDINA, ERNIE MEDINA, ELPIDIO MEDINA, EDWIN MEDINA, ELEONOR MEDINA, TEOFILO MEDINA, JR., EUGENE MEDINA, ELVIRA MEDINA, ANATALIO MEDINA, MARIO MEDINA, CORNELIO MEDINA, ERNESTO MEDINA, IGNACIO CONSTANTINO, SANTOS CONSTANTINO, HERMOGENES CONSTANTINO, FLORENCIO CONSTANTINO, VIRGINIA CONSTANTINO, MARCELO GEREMILLO, ROSILA GEREMILLO, ERNESTO GEREMILLO, MERCEDES GEREMILLO, MELENCIO GEREMILLO, BALBINO MEDINA, CRISANTA MEDINA, YOLANDA MEDINA, LYDIA MEDINA, RENATO MEDINA, EUFEMIA MEDINA, VIRGILIO MEDINA, SONIA MEDINA, LUZVIMINDA MEDINA, CRISPIN MEDINA, REMIGIO M. RODOLFO, MILAGROS M. RODOLFO, NIDA M. RODOLFO, BELEN M. RODOLFO, MANUEL M. RODOLFO, ALFREDO M. RODOLFO, SALLY AREVALO, ELMER AREVALO, CELSO AREVALO, JR., VINCENT AREVALO, NENE AREVALO, THE HEIRS OF NAZARIA CRUZ and SANTOS AREVALO, Petitioners, v. GREENFIELD DEVELOPMENT CORPORATION, Respondent.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

The propriety of the writ of preliminary injunction issued by the Regional Trial Court of Muntinlupa City (Branch 276) in Civil Case No. 98-233 is the sole issue in this Petition for Review on Certiorari , assailing the decision of the Court of Appeals nullifying said writ.

Petitioners are the grandchildren of Pedro Medina from two marriages. In his first marriage to Isadora San Jose, Pedro sired three children: Rafael, Rita and Remegia; in his second marriage, this time to Natalia Mullet, Pedro had five: Cornelio, Brigida, Balbino, Crisanta and Rosila. Except for Balbino and Crisanta, all of Pedro's children likewise bore children, the petitioners in this case.¹

On June 5, 1962, Pedro, his brother Alberto Medina and his niece Nazaria Cruz (Alberto's daughter) executed a notarized Contract to Sell in favor of respondent Greenfield Development Corporation over a parcel of land located in Muntinlupa City, then in the Province of Rizal, covered by Transfer Certificate of Title (TCT) No. 100177 (Lot 90-A) and measuring 17,121 square meters.² A notarized Deed of Sale covering said property was subsequently entered into on June 27, 1962, in favor of respondent, and this time signed by Pedro, Cornelio, Brigida, Balbino, Gregoria, Crisanta, Rosila, and Alberto, all surnamed Medina, and Nazaria Cruz, as vendors.³

Thereafter, a notarized Deed of Absolute Sale with Mortgage was executed on September 4, 1964 in favor of respondent over Lot 90-B covered by TCT No. 100178, measuring 16,291 square meters. Signing as vendors were Pedro, Cornelio, Brigida, Balbino, Gregoria, Crisanta, Rosila, and Alberto, all surnamed Medina, and Nazaria Cruz.⁴

By virtue of these sales, respondent was able to register in its name the title to the two parcels of land with TCT No. 100578 covering Lot 90-A and TCT No. 133444 covering Lot 90-B. These properties were consolidated with other lots and were eventually registered on July 19, 1995, in the name of respondent under TCT Nos. 202295, 202296 and 202297.⁵

On November 6, 1998, petitioners instituted Civil Case No. 98-233, an action for annulment of titles and deeds, reconveyance, damages with preliminary injunction and restraining order, against respondent and the Register of Deeds of Makati.⁶ Included in the complaint are the heirs of Nazaria Cruz, as unwilling co-plaintiffs.⁷ Petitioners allege in their complaint that they are co-owners of these two parcels of land. While the titles were registered in the names of Pedro, Alberto, Cornelio, Brigida and Gregoria, all surnamed Medina, they alleged that they were recognized as co-owners thereof. In support of their case, petitioners maintain that the deeds of sale on these properties were simulated and fictitious, and the signatures of the vendors therein were fake. Despite the transfer of the title to respondent's name, they remained in possession thereof and in fact, their caretaker, a certain Santos Arevalo and his family still reside on a portion of the property. On July 13, 1998, petitioners caused an adverse claim to be annotated on the titles. After discovering the annotation, respondent constructed a fence on the property and posted security personnel, barring their ingress and egress. Thus, petitioners sought, among others, the issuance of a temporary restraining order and a writ of preliminary injunction enjoining respondent and its agents and representatives from preventing petitioners to exercise their rights over the properties.⁸

Respondent denied the allegations, stating that petitioners have no valid claim on the properties as it is already titled in its name by virtue of the public documents executed by their predecessors. As counterclaim, respondent alleged that Santos Arevalo is not petitioners' caretaker and it was them who employed him as caretaker.⁹

On January 18, 1999, the trial court issued its resolution granting petitioners' prayer for injunctive relief. The dispositive portion of the resolution reads:

Let therefore an injunction issue, enjoining and directing defendant GREENFIELD DEVELOPMENT CORPORATION, its security guards, agents, representatives, and all those claiming rights under it, from preventing plaintiffs and their caretaker Santos Arevalo, from entering and going out of the subject premises, and from preventing them to exercise their property rights, upon payment of a bond in the amount of P100,000.00.

It is SO ORDERED.¹⁰

Respondent filed a special civil action for certiorari and prohibition with the Court of Appeals, docketed as CA-G.R. SP No. 52015. On July 16, 1999, the Court of Appeals¹¹ rendered its decision nullifying the trial court's resolution, the dispositive portion of which provides:

IN THE (sic) LIGHT OF ALL THE FOREGOING, the petition is hereby GRANTED. The assailed Resolution of the Public Respondent Judge, dated January 18, 1999, in Civil Case No. 98-233 is hereby NULLIFIED.

SO ORDERED.¹²

Petitioners now seek recourse with this Court, alleging the following grounds:

I

THE COURT OF APPEALS ERRED IN RELYING HEAVILY ON THE ANTECEDENT FACTS NARRATED IN THE PETITION OF THE RESPONDENT IN CA-G.R. SP NO. 52015 AND ADOPTED THE SAME AS ITS OWN WITHOUT EVIDENTIARY SUPPORT

II

THE COURT OF APPEALS COMMITTED A GRAVE ERROR IN UPHOLDING THE VALIDITY OF THE DEEDS OF SALE IN FAVOR OF THE RESPONDENT AND IN HOLDING THAT RESPONDENT'S TRANSFER CERTIFICATES OF TITLE ARE VALID DESPITE THE FACT THAT THE SAID ISSUES ARE YET TO BE TRIED

III

THE COURT OF APPEALS ERRED IN PRESUMING THAT NOTARIZED DOCUMENTS ARE VALID AND THAT RESPONDENT'S TORRENS TITLES ARE INDEFEASIBLE ON THE WRONG NOTION THAT THE RESPONDENT WAS PRESUMED INNOCENT PERSON

IV

THE COURT OF APPEALS COMMITTED A MISTAKE IN HOLDING THAT RESPONDENT WAS IN CONSTRUCTIVE POSSESSION OF THE SUBJECT PREMISES NOTWITHSTANDING THAT PETITIONERS ARE IN ACTUAL POSSESSION THEREOF

V

THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONERS' RIGHT TO IMPUGN RESPONDENT'S TITLES HAVE (SIC) PRESCRIBED SINCE AN ACTION OR DEFENSE BASED ON THE INEXISTENCE OF A CONTRACT DOES NOT PRESCRIBE¹³

As stated at the outset, the sole issue in this case is whether or not the trial court erred in granting petitioners' prayer for injunctive relief. This Court's resolution will revolve only on the propriety of the injunction. Any reference to the validity or invalidity of the transfers and the titles is merely preliminary, as the matter should be resolved after trial on the merits.

It was the trial court's opinion that petitioners are entitled to the injunction for the following reasons:

The Court however holds suspect the acquisition by Greenfield Development Corporation of the two parcels. Lot 90-A covered by Transfer Certificate of Title No. 100177, was promised to be sold to defendant under a contract to sell but the other co-owners did not sign this Contract to Sell, who all denied knowledge of the same. No contract of Sale followed this Contract to Sell which cannot be the bases of the issuance of a new title. A Contract to Sell is only a promise to sell, and is not a deed of sale, specially as this Contact to Sell is not signed by all of the registered owners.

This Court cannot also understand how the document, denominated as DEED OF ABSOLUTE SALE WITH MORTGAGE can be the bases (sic) of a new title. The absoluteness of the sale, is contradicted by the mortgage it also provides. There is absoluteness of sale only when the buyer upon execution of the contract, pay (sic) in full the consideration and ownership passes to the Vendee. The registered owners of Lot 90-B covered by Transfer Certificate of Title No. 100178 even deny having executed this document of Deed of Absolute Sale with Mortgage.

Until these matters are threshed out at the trial on the merits, and after this is fully explained and determined, whether the properties were actually sold to Defendant Greenfield Development Corporation, irreparable injury will visit the landowner if the claim of ownership by Greenfield Development Corporation is allowed and not enjoined.¹⁴

The Court of Appeals, however, disagreed with the trial court. It noted that the trial court relied mainly on petitioners' allegations in the complaint, which were not supported by substantial evidence, and ignored the presumption of validity ascribed to the duly notarized deeds of conveyances and the titles issued to respondent. The Court of Appeals also found that respondent is in constructive possession of the properties in dispute considering that it is already the registered owner thereof since 1962. Lastly, the Court of Appeals held that petitioners' right to impugn respondent's title to the property has already prescribed.¹⁵

Section 3, Rule 58 of the Rules of Court provides for the grounds justifying the issuance of a preliminary injunction, to wit:

SEC. 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

The purpose of a preliminary injunction is to prevent threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly studied and adjudicated. Its sole aim is to preserve the status quo until the merits of the case can be heard fully.¹⁶ Thus, to be entitled to an injunctive writ, the petitioner has the burden to establish the following requisites:¹⁷

1) a right in esse or a clear and unmistakable right to be protected;

(2) a violation of that right;

(3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage.

Hence, petitioners' entitlement to the injunctive writ hinges on their prima facie legal right to the properties subject of the present dispute. The Court notes that the present dispute is based solely on the parties' allegations in their respective pleadings and the documents attached thereto. We have on one hand, petitioners' bare assertion or claim that they are co-owners of the properties sold by their predecessors to respondent, and on the other, respondent's claim of ownership supported by deeds of conveyances and torrens titles in their favor. From these alone, it is clear that petitioners failed to discharge the burden of clearly showing a clear and unmistakable right to be protected. Where the complainant's right or title is doubtful or disputed, injunction is not proper. The possibility of irreparable damage without proof of actual existing right is not a ground for an injunction.¹⁸

Petitioners contend that the Court of Appeals should not have relied on respondent's allegations regarding the circumstances surrounding the sales and the transfer of the titles. Petitioners point out that trial on the merits of the case is still ongoing and respondent is yet to adduce evidence in support of its contention. The same, however, applies to petitioners' cause of action. They only have their own allegations and are yet to prove their claim. And as stated earlier, the only bases from which the propriety of the injunction can be determined are their respective pleadings and documents. What tilt the balance in respondent's favor are the notarized documents and the titles to the properties. The well-settled rule is that a document acknowledged before a notary public enjoys the presumption of regularity. It is a prima facie evidence of the facts therein stated. To overcome this presumption, there must be presented evidence that is clear and convincing. Absent such evidence, the presumption must be upheld.¹⁹ In addition, the titles in the name of respondent, having been registered under the Torrens system, are generally a conclusive evidence of the ownership of the land referred to therein,²⁰ and a strong presumption exists that the titles are regularly issued and valid.²¹ Therefore, until and unless petitioners show that the documents are indeed spurious and the titles invalid, then the presumptions must prevail at this juncture.

Petitioners, however, argue that the presumption of validity of the notarized documents and titles cannot be applied in respondent's case as it is not an innocent purchaser.²² According to petitioners, respondent is fully aware that at the time that the Contract to Sell was entered into in 1962, Leon Medina who is a co-owner of the property then covered by TCT No. 21314, was already dead. Suffice it to say that these arguments already involve the merits of the main case pending before the trial court, which should not even be preliminarily dealt with, as it would be premature.

Equally pertinent is the rule that courts should avoid issuing a writ of preliminary injunction, which in effect, would dispose of the main case without trial.²³ The ground relied upon by the trial court in issuing the writ of preliminary injunction in this case is its doubt over the acquisition of the properties by respondent.²⁴ Such basis would be virtually recognizing petitioners' claim that the deeds of conveyances and the titles are a nullity without further proof, to the detriment of the doctrine of presumption of validity in favor of these documents. There would, in effect, be a prejudgment of the main case and a reversal of the rule on the burden of proof since it would assume the proposition which the petitioners are inceptively duty bound to prove.²⁵

Petitioners also claim that they are in actual possession of the property. As alleged in their complaint, they instituted Santos Arevalo, a co-petitioner, as caretaker.²⁶ They also alleged in their petition filed before this Court that Balbino and Yolanda Medina and their respective families are still residing on a portion of the property.²⁷ Respondent belies their claim, declaring that it employed Arevalo as caretaker. Respondent presented a notarized Receipt and Quitclaim dated April 26, 1994, signed by Arevalo, who attested that he was employed by respondent as caretaker and that his stay on the property was a mere privilege granted by respondent.

Possession and ownership are two different legal concepts. Just as possession is not a definite proof of ownership, neither is non-possession inconsistent with ownership. Even assuming that petitioners' allegations are true, it bears no legal consequence in the case at hand because the execution of the deeds of conveyances is already deemed equivalent to delivery of the property to respondent, and prior physical delivery or possession is not legally required.²⁸ Under Article 1498 of the Civil Code, "when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the object of the contract, if from the deed the contrary does not appear or cannot be inferred." Possession is also transferred, along with ownership thereof, to respondent by virtue of the notarized deeds of conveyances.²⁹

In sum, the trial court committed grave abuse of discretion in issuing the writ of preliminary injunction, and the Court of Appeals was correct in nullifying the same.

The Court, however, finds that it was precipitate for the Court of Appeals to rule that petitioners' action is barred by prescription. As previously stressed, the parties are yet to prove their respective allegations and the trial court is yet to receive the evidence. There is nothing on record that can conclusively support the conclusion that the action is barred by prescription. Hence, the Court of Appeals should not have made such ruling.

WHEREFORE, the petition is hereby DENIED for lack of merit. The Decision dated July 16, 1999 rendered by the Court of Appeals in CA-G.R. SP No. 52015 is AFFIRMED, except as to its view on prescription, as discussed in the body of the text.

Let the original records of this case be remanded to the Regional Trial Court of Muntinlupa City (Branch 276) with dispatch for further proceedings.

SO ORDERED.

Puno, (Chairman), Callejo, Sr., TINGA, and Chico-Nazario, JJ., concur.

Endnotes:

¹ Records, pp. 3-4.

² Id., pp. 19-22, Annex "C."

³ Id., pp. 160-165, Annex "I."

⁴ Id., pp. 23-28, Annex "D."

⁵ Id., pp. 29-31, Annexes "E," "F," and "G."

⁶ Id., p. 1.

⁷ Id., p. 2.

⁸ Id., pp. 4-10.

⁹ Id., pp. 132-135.

¹⁰ Id., p. 216.

¹¹ Associate Justice Candido V. Rivera, ponente; Associate Justices Cancio C. Garcia (now a Member of this Court) and Bernardo Ll. Salas, concurring.

¹² CA Rollo, p. 196.

¹³ Rollo, pp. 15-16.

¹⁴ Records, p. 218.

¹⁵ CA Rollo, pp. 189-195.

¹⁶ First Global Realty and Development Corporation v. San Agustin, G.R. No. 144499, February 19, 2002, 377 SCRA 341, 349.

¹⁷ Tayag v. Lacson, G.R. No. 134971, March 25, 2004.

¹⁸ Heirs of Joaquin Asuncion v. Gervacio, Jr., G.R. No. 115741, March 9, 1999, 304 SCRA 322, 329.

¹⁹ Ceballos v. Mercado, G.R. No. 155856, May 28, 2004.

²⁰ Section 49, Act 496; Tichangco v. Enriquez, G.R. No. 150629, June 30, 2004.

²¹ Ching v. Court of Appeals, G.R. No. 59731, January 11, 1990, 181 SCRA 9, 18.

²² Rollo, p. 21.

²³ Searth Commodities Corp. v. Court of Appeals, G.R. No. 64220, March 31, 1992, 207 SCRA 622, 629-630.

²⁴ Records, p. 218.

²⁵ Supra., Note 23. Searth Commodities Corp. case.

²⁶ Records, p. 8.

²⁷ Rollo, p. 11.

²⁸ Sabio v. International Corporate Bank, Inc., G.R. No. 132709, September 4, 2001, 364 SCRA 385, 416.

²⁹ Ibid.

G.R. No. 140931 - RAMON BALITE, ET AL. v. HON. COURT OF APPEALS, ET AL.

2013-01-15T09:50:30+00:00

G.R. No. 140931 - RAMON BALITE, ET AL. v. HON. COURT OF APPEALS, ET AL.

SECOND DIVISION

[G.R. NO. 140931 : November 26, 2004]

RAMON BALITE, JOSE C. LEABRES and FREDERICK M. DE BORJA, Petitioners, v. HON. COURT OF APPEALS (former Special Fourth Division), FELICIDAD SANDOVAL VDA. DE CARLOS and TEOFILO CARLOS II, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari of the November 4, 1999 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 53229, citing petitioner Ramon Balite, the president of the then SIDDCOR Insurance Corporation (SIDDCOR), now the Mega Pacific Insurance Corporation, and its counsel, petitioners Frederick M. de Borja and Jose C. Leabres, in contempt of court for forum shopping and ordering each of them to pay a fine of P1,000.

The Antecedents

On September 1, 1995, Juan De Dios Carlos filed a Complaint in the Regional Trial Court (RTC) of Muntinlupa, Branch 256, against respondent Felicidad Sandoval and her son, respondent Teofilo Carlos II, for declaration of nullity of marriage, status of child, recovery of property, reconveyance, sum of money, and damages, with prayer for the issuance of a writ of preliminary attachment. The case was docketed as Civil Case No. 95-135. On September 7, 1995, the trial court issued an Order granting Carlos's plea for a writ of preliminary attachment upon the posting of a bond in the amount of P20,000,000.¹ The latter filed with the trial court a bond issued by the SIDDCOR, in the amount of P20,000,000 which was approved by the trial court. A writ of preliminary attachment was, thereafter, issued by the trial court on September 15, 1995. Sheriff Antonio D. Blancaflor served a copy of the notice of garnishment to the Philippine National Bank (PNB) covering the deposits of the respondents. The latter filed a motion to discharge the writ of preliminary attachment issued by the court, which motion was denied by the trial court per its Order dated December 4, 1995. By then, the respondents had filed their answer with compulsory counterclaim.

On December 6, 1995, the respondents filed a petition for certiorari with the CA for the nullification of the September 7, 1995 Order and writ of preliminary attachment issued by the court, and the notice of garnishment issued by the sheriff. The case was docketed as CA-G.R. SP No. 39267.

While the petition was pending, the respondents filed a motion for summary judgment. Carlos filed a counter-motion for summary judgment in his favor.

On February 27, 1996, the CA rendered judgment in CA-G.R. SP No. 39267 in favor of the respondents granting their petition and nullifying the assailed order and writ of preliminary attachment issued by the trial court. The appellate court ruled that there was no factual and legal bases for the issuance of the assailed order and writ.

Carlos filed a Petition for Review on Certiorari of the appellate court's decision before the Supreme Court. The case was docketed as G.R. No. 125717.

On April 8, 1996, the trial court rendered a summary judgment in favor of Carlos and against the respondents. The fallo of the decision reads:

WHEREFORE, premises considered, defendants' Motion for Summary Judgment is hereby denied. Plaintiff's Counter-Motion for Summary Judgment is hereby granted and summary judgment is hereby rendered in favor of plaintiff as follows:

1. Declaring the marriage between defendant Felicidad Sandoval and Teofilo Carlos solemnized at Silang, Cavite, on May 14, 1962, evidenced by the Marriage Contract submitted in this case, null and void ab initio for lack of the requisite marriage license;

2. Declaring that the defendant minor, Teofilo S. Carlos II, is not the natural, illegitimate (sic), or legally adopted child of the late Teofilo E. Carlos;

3. Ordering defendant Sandoval to pay and restitute to plaintiff the sum of P18,924,800.00, together with interest thereon at the legal rate from the date of filing of the instant complaint until fully paid;

4. Declaring plaintiff as the sole and exclusive owner of the parcel of land, less the portion adjudicated to the plaintiffs in Civil Case No. 11975, covered by TCT No. 139061 of the Register of Deeds of Makati City, and ordering said Register of Deeds to cancel said title and to issue another title in the sole name of plaintiff herein;

5. Declaring the Contract, Annex K of the Complaint, between plaintiff and defendant Sandoval null and void, and ordering the Register of Deeds of Makati City to cancel TCT No. 139058 in the name of Teofilo Carlos, and to issue another title in the sole name of the plaintiff herein;

6. Declaring the Contract, Annex M of the Complaint, between plaintiff and defendant Sandoval null and void;

7. Ordering the cancellation of TCT No. 210877 in the names of defendant Sandoval and defendant minor Teofilo S. Carlos II and ordering the Register of Deeds of Manila to issue another title in the exclusive name of plaintiff herein;

8. Ordering the cancellation of TCT No. 210878 in the names of defendant Sandoval and defendant minor Teofilo S. Carlos II and ordering the Register of Deeds of Manila to issue another title in the sole name of plaintiff herein.

Let this case be set for hearing for the reception of plaintiff's evidence on his claims for moral damages, exemplary damages, attorney's fees, appearance fees and litigation expenses on June 7, 1996 at 1:30 o'clock (sic) in the afternoon.

SO ORDERED.²

Carlos filed a motion to waive presentation of evidence to prove damages and attorney's fees referred to by the trial court in its summary judgment. On April 26, 1996, the trial court granted the motion. The respondents received on April 19, 1996 a copy of the decision and filed a motion for the reconsideration of the summary judgment on May 23, 1996.

On April 29, 1996, Carlos filed a Motion for Execution pending appeal. On May 21, 1996, the trial court issued an Order granting the motion and ordered the issuance of a writ of execution pending appeal upon the posting of a bond in the amount of P20,000,000.

On June 4, 1996, the respondents filed their Notice of Appeal.

Carlos posted the requisite bond issued by the SIDDCOR in the amount of P20,000,000, which was duly approved by the trial court. The court issued a writ of execution on May 27, 1996. Sheriff Blancaflor served a notice of delivery/payment to the bank managers of the PNB in Muntinlupa City and Malolos, Bulacan.

On June 5, 1996, the PNB filed a Manifestation and Motion to admit its petition for intervention in interpleader with prayer for consignation. The court issued an Order³ denying the motion on June 5, 1996. The dispositive portion of the order reads:

WHEREFORE, the instant PNB's Manifestation and Motion are hereby denied and, unless a Temporary Restraining Order or a Writ of Injunction has been issued by the appellate courts, PNB is hereby directed to comply with the Notice of Delivery/Payment dated May 27, 1996 issued by Sheriff Luis Bucayon II pursuant to the Order dated May 21, 1996 and Writ of Execution dated May 27, 1996 issued by this Court, by delivering the garnished amount to him upon receipt of this Order. Let a copy of this Order be served personally upon PNB by Sheriff Bucayon II. Furnish copy also of this Order upon all parties concerned.

SO ORDERED.⁴

The respondents filed a petition for certiorari with the CA for the nullification of the trial court's May 21, 1996 Order. The case was docketed as CA-G.R. SP No. 40819. On June 6, 1996, the CA issued a Resolution directing the issuance of a status quo order and required Carlos to file his comment on the petition.

On June 13, 1996, Carlos filed a Motion to Dismiss Appeal.⁵ On June 19, 1996, the trial court issued an Order in Civil Case No. 95-135 giving due course to the appeal of the respondents. The appeal was docketed as CA-G.R. SP No. 53229.

On October 21, 1996, this Court dismissed the petition in G.R. No. 125717 and affirmed the assailed decision of the CA in CA-G.R. SP No. 39267. Carlos filed a motion for the reconsideration of the decision, but the Court denied the said motion.

On December 10, 1996, the respondents filed a Motion in CA-G.R. CV No. 53229 for judgment on the attachment bond posted by Carlos. The latter and the SIDDCOR opposed the motion. The CA issued a Resolution dated June 26, 1998 rendering judgment on the attachment bond as prayed for by the respondents. The fallo reads:

WHEREFORE, premises considered, judgment is hereby rendered against the attachment bond, ordering SIDDCOR INSURANCE CORPORATION and plaintiff-appellee to pay defendants-appellants, jointly and severally, the sum of P15,384,509.98, and 12% interest per annum from June 27, 1996 when the unlawful garnishment was effected until fully paid and P1,000,000.00 as attorney's fees with 6% interest thereon from the trial court's decision on April 8, 1996 until fully paid.⁶

On July 27, 1998, SIDDCOR filed a Motion for Reconsideration of the June 26, 1998 Resolution of the CA. On August 7, 1998, the respondents filed in CA-G.R. CV No. 53229 a motion for immediate execution of the June 26, 1998 Resolution, which the appellate court granted over the opposition of Carlos and SIDDCOR per its Resolution dated October 16, 1998. The CA denied the motion for reconsideration of the SIDDCOR and held that its resolution in CA-G.R. SP No. 39267 had already become final and executory. The SIDDCOR, now the Mega Pacific Insurance Corporation (MPIC), filed a motion for reconsideration of its October 16, 1998 Resolution which the appellate court denied on December 22, 1998.

On March 8, 1999, SIDDCOR filed a petition for certiorari with this Court for the nullification of the October 16, 1998 and December 22, 1998 Resolutions of the CA. The case was docketed as G.R. No. 136035. SIDDCOR prayed therein that:

1) The instant Petition for Review be given due course;

2) After due consideration, that the instant Petition for Review be granted, reversing and setting aside the Resolutions of the Honorable Court of Appeals promulgated by the Former Special Fourth Division of the Honorable Court of Appeals dated June 26 and October 16, 1998 in CA-G.R. CV No. 53229 entitled Juan de Dios Carlos v. Felicidad Sandoval Vda. De Carlos, et al. insofar as it renders judgment against the attachment bond issued by herein Petitioner SIDDCOR (now MEGA PACIFIC) INSURANCE CORPORATION and ordering it to pay the amount of P15,384,509.98, and 12% interest per annum from June 27, 1996 when the alleged unlawful garnishment was effected until fully paid and P1,000,000.00 as attorney's fees with 6% interest thereon from the trial court's decision on April 8, 1986 until fully paid.

3) Other reliefs just and equitable under the premises are similarly prayed for.⁷

For their part, the respondents filed a motion, on March 17, 1999, in CA-G.R. CV No. 53229 for the implementation of the appellate court's June 26, 1998 Resolution on the attachment bond. The respondents' motion contained the following prayer:

WHEREFORE, it is most respectfully prayed that the motion for contempt dated October 30, 1998 be considered withdrawn, that the resolution dated October 16, 1998 ordering the lower court to issue the writ of execution be set aside, and directing the Clerk of this Division to issue a writ of execution of the June 26, 1998 resolution above quoted.⁸

On May 5, 1999, the CA issued a Resolution granting the motion of the respondents, thus:

PREMISES CONSIDERED, the motion to implement the June 26, 1998 resolution is hereby GRANTED. The motion for contempt dated October 30, 1998 is considered withdrawn, the resolution dated October 16, 1998 as far as ordering the lower court to issue a writ of execution is set aside, and let a writ of execution be issued on the June 26, 1998 resolution, whose decretal portion reads:

"WHEREFORE, premises considered, judgment is hereby rendered against the attachment bond, ordering SIDDCOR INSURANCE CORPORATION and plaintiff-appellee to pay defendants-appellants, jointly and severally, the sum of P15,384,509.98 and 12% interest per annum from June 27, 1996 when the unlawful garnishment was effected until fully paid and P1,000,000.00 as attorney's fees with 6% interest thereon from the trial court's decision on April 8, 1986 until fully paid."

SO ORDERED.⁹

The CA also resolved to designate Ramon Abalos as Special Sheriff. On May 24, 1999, the respondents filed a motion for the appointment of the City Sheriff of Manila or his deputy to enforce the judgment of the appellate court on the attachment bond. The appellate court granted the motion and issued, on May 26, 1999, an amended writ of execution.

Meantime, on June 9, 1999, the Court issued a Resolution in G.R. No. 136035 granting the plea of the SIDDCOR for the issuance of a temporary restraining order enjoining the CA and the City Sheriff of Manila from enforcing its judgment on the attachment bond; and to comment on the petition. On the same day, the Court issued a temporary restraining order as prayed for by the SIDDCOR.

Nevertheless, on June 11, 1999, the SIDDCOR filed in CA-G.R. CV No. 53229 a motion for reconsideration of the appellate court's Resolution dated May 26, 1999 and the writ of execution and the amended writ of execution issued by it on May 26, 1999. On June 15, 1999, the SIDDCOR also filed a Motion to Recall or Set Aside the notice of garnishment issued by the sheriff based on the amended writ of execution issued by the CA, as well as a motion to quash/recall writ of execution. On June 23, 1999, the CA issued a Resolution enjoining the City Sheriff of Manila from enforcing the writ of execution/garnishment so as not to render the decision of this Court in G.R. No. 136035 moot and academic. The respondents filed a counter-motion for contempt and disciplinary action against the counsel of the SIDDCOR for forum shopping. On July 26, 1999, the CA issued a Resolution denying the motions filed by the SIDDCOR and granting the motion of the respondents. The appellate court ordered the president of the SIDDCOR, petitioner Ramon Balite, and its counsels, petitioners Atty. Frederick de Borja and Atty. Jose Leabres, to show cause why they should not be cited in contempt of court for forum shopping.¹⁰ The CA ruled that the Supreme Court had already acquired jurisdiction over G.R. No. 136035; hence, it no longer had jurisdiction to entertain and resolve the motions of the SIDDCOR for the setting aside of the May 26, 1999 Resolution and writ of execution issued by it. The appellate court held that by filing its motion in CA-G.R. CV No. 53229, the SIDDCOR and its counsel indulged in forum shopping. Thus, the CA set aside its Resolution dated June 23, 1999. The decretal portion of the resolution reads:

WHEREFORE, the motion for reconsideration dated June 11, 1999 and the motion to recall the urgent motion to lift/recall notice of garnishment dated June 15, 1999 of SIDDCOR (now Mega Pacific) Insurance Corp. are hereby DENIED and the counter-motion of defendants-appellants to set aside resolution dated June 23, 1999 is GRANTED and said resolution is hereby SET ASIDE. The President of SIDDCOR (now Mega Pacific) Insurance Corp. and Attys. Frederick M. de Borja and Jose C. Leabres are hereby ordered to show cause why they should not be held in contempt of court and for said attorneys to show cause why no disciplinary action should be taken against them for forum shopping, within ten (10) days from notice.

The reply to garnishment dated May 13, 1999 filed by Banco Filipino and the Manifestation dated May 14, 1999 filed by Prime Bank to the effect that plaintiff-appellee Juan De Dios Carlos has no account with said banks are hereby NOTED.

SO ORDERED.¹¹

Petitioner Balite, the current president of the SIDDCOR (now the MPIC) and Rhodora Morales, its past president, filed a motion for the reconsideration of the July 26, 1999 Resolution of the CA, contending that they filed their urgent motions to lift/recall notice of garnishment issued by the appellate court on June 15, 1999 in order to give the latter a chance to correct itself before pursuing other remedies. They also asserted that their Petition for Review in G.R. No. 136035 involved the summary judgment of the CA on the attachment bond; on the other hand, their two motions sought to prevent the CA from rendering any decision in G.R. No. 136035 moot and academic, since the Court had already assumed jurisdiction over their Petition for Review . They aver that they merely informed the CA that the Court had already issued a temporary restraining order, and merely reacted to the ruling of the appellate court in favor of the respondents. Since they merely wanted to prevent the CA from rendering nugatory any decision of the Supreme Court in G.R. No. 136035 in favor of the SIDDCOR, they should not be cited for contempt. According to the petitioners, it was their duty to protect the rights and interest of the SIDDCOR from the appellate court's usurpation of the Supreme Court's jurisdiction in G.R. No. 136035. The petitioners contended that the appellate court was partial to the counsel of the respondents because it refused to cite him in contempt of court when the said counsel filed a motion for immediate execution of the judgment of the appellate court on the attachment bond despite the pendency of the petition before this Court in G.R. No. 136035.

On November 4, 1999, the appellate court issued a Resolution denying the motion:

'RAMON BALITE, the President of said Corporation and its lawyers, FREDERICK M. DE BORJA and JOSE C. LEABRES, to pay a fine of P1,000.00 each for contempt of court within five (5) days from notice, and to impose upon the same lawyers De Borja and Leabres the penalty of reprimand for forum shopping, on pain of harsher sanction in case of repetition.¹²

The petitioners now come to this Court on a Petition for Review on Certiorari assailing the June 23, 1999 and November 4, 1999 Resolutions of the appellate court, and raised the cogent issue of whether they are guilty of forum shopping and contempt of court for filing their June 11, 1999 motion to recall or set aside writ of execution dated May 26, 1999, and the urgent motion to lift/recall notice of garnishment issued by the City Sheriff of Manila pursuant to the amended writ of execution issued by the appellate court. The petitioners reiterate their arguments in their pleadings in the CA.

In their comment on the petition, respondents Felicidad Carlos and Teofilo Carlos II, the defendants-appellants in CA-G.R. CV No. 53229, contend that the remedy of the petitioners from the writ of execution and amended writ of execution issued by the CA and the notice of garnishment of the sheriff was to secure from the Supreme Court in G.R. No. 136035 a writ of preliminary mandatory injunction, not a motion to lift/recall the said writ and notice of garnishment in the appellate court. They aver that by seeking relief from the CA, the petitioners indulged in forum shopping; hence, they are guilty of contempt of court.

We give due course and grant the petition.

There is forum shopping when a party seeks to obtain remedies in an action in one court, which had already been solicited, and in other courts and other proceedings in other tribunals.¹³ In another case,¹⁴ the Court ruled that forum shopping is the act of one party against another when 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 or more acts or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. A party should not be allowed to present simultaneous remedies in two different forums for it degrades and wreaks havoc to the rule on orderly procedure.¹⁵ A party may avail of the remedies prescribed by the Rules of Court for the myriad reliefs from the court. However, such party is not free to resort to them simultaneously or at his pleasure or caprice. Such party must follow the sequence and hierarchical order in availing such remedies and not resort to shortcuts in procedure or playing fast and loose with the said rules.¹⁶ Forum shopping, an act of malpractice, is considered as trifling with the courts and abusing their processes. It is improper conduct and degrades the administration of justice. If the act of the party or its counsel clearly constitutes willful and deliberate forum shopping, the same shall constitute direct contempt, and a cause for administrative sanctions; as well as a ground for the summary dismissal of the case with prejudice.¹⁷

In this case, the CA issued a resolution in CA-G.R. CV No. 53229 granting the motion of the respondents (the defendants-appellants therein) for a judgment on the attachment bond filed by Carlos and issued by the SIDDCOR in the amount of P20,000,000. The CA, likewise, granted, on October 16, 1998, the motion of the respondents for the execution pending appeal of the said judgment of the CA on the attachment bond on the holding of the CA that its June 26, 1998 Resolution had become final and executory. This impelled the petitioner to seek relief from the Court by filing, on March 4, 1999, a petition for certiorari , docketed as G.R. No. 136035, for the nullification of the June 26, 1998 and October 16, 1998 Resolutions of the CA and for a temporary restraining order and/or a writ of preliminary injunction to enjoin the enforcement of such resolutions pendente lite by the CA and the respondents. Upon the timely filing by the petitioner of its petition and the payment of the requisite docket and other legal fees therefor, the Court acquired jurisdiction over the petition.

Despite the knowledge of the filing of the said petition with this Court, the respondents filed a motion for the immediate implementation of the June 26, 1998 judgment of the CA on the attachment bond on March 17, 1999 which the CA granted on May 5, 1999. The CA issued a writ of execution and an amended writ of execution directing the Sheriff of the City of Manila or his deputy to enforce the writs issued by the CA, and, thus, eschewed the plea of the petitioner for this Court to issue a temporary restraining order or writ of preliminary injunction against the respondents. Even after the Court issued a Resolution in G.R. No. 136035 on June 9, 1999 granting the plea of the petitioner therein for a temporary restraining order and issued the said writ on the said date, the Sheriff issued a notice of garnishment over the funds of the petitioner with the PNB on June 15, 1999.

The petitioner therein had the following remedies: (a) to file a supplemental petition impleading the City Sheriff of Manila as party respondent and assail the amended writ of attachment issued by the CA and the notice of garnishment issued by the Sheriff, and pray for an amended temporary restraining order enjoining the respondents and those acting for and in their behalf from implementing the assailed resolutions of the CA as well as the amended writ of execution and notice of garnishment; or (b) to file a manifestation and omnibus motion in CA-G.R. CV No. 53229 reminding the appellate court that the Court had acquired jurisdiction over its petition in G.R. No. 136035 and had issued a temporary restraining order enjoining the enforcement of the assailed judgment of the CA. The petitioner should have included a prayer therein for the CA to respect and comply with the temporary restraining order of the Court, and to quash/recall the amended writ of execution it issued, as well as the notice of garnishment issued by the Sheriff pursuant to the amended writ of execution. In case the CA denied the said motion, the petitioner could still file the appropriate motion in this Court to cite the CA in contempt. By filing the said motion in the CA, the petitioner therein would thereby be giving the appellate court an opportunity to cleanse itself and to rectify its errors. In fact, SIDDCOR was able to secure a temporary restraining order from the Court in G.R. No. 136035. As this Court ruled in International Container Terminal Services, Inc. v. Court of Appeals:¹⁸

Moreover, "[t]here is forum shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari ) in another." Therefore, a party to a case resorts to forum shopping because "[b]y filing another petition involving the same essential facts and circumstances, xxx, respondents approached two different fora in order to increase their chances of obtaining a favorable decision or action." It cannot be said that private respondent "Manila Pilots" sought to increase its chances of obtaining a favorable decision or action as a result of an adverse opinion in one forum, inasmuch as no unfavorable decision had ever been rendered against private respondent "Manila Pilots" in any of the cases brought before the courts below. On the contrary, private respondent "Manila Pilots" was one of the prevailing parties in Civil Case No. 88-44726 which established with finality its exclusive right together with "United Harbor" to provide pilotage services in the Philippines even prior to the institution of the other actions (G.R. 107720, Civil Case No. 93-66024 and Civil Case No. 93-66143.)¹⁹

Thus, in filing such manifestation and omnibus motion in the CA, SIDDCOR, the petitioner therein, would not have thereby engaged in forum shopping. In this case, SIDDCOR, thru counsel, precisely prayed in its urgent motion to lift/recall notice of garnishment for the CA to rectify its errors in light of the temporary restraining order issued by this Court, as follows:

URGENT MOTION TO LIFT/RECALL

NOTICE OF GARNISHMENT

Surety SIDDCOR (now MEGA PACIFIC) INSURANCE CORPORATION ("Surety" for brevity), thru the undersigned counsel, unto this Honorable Court of Appeals, most respectfully states, that:

1) On 26 May 1999, this Honorable Court issued an amended Writ of Execution commanding the City Sheriff of Manila or his Deputy to enforce the same in accordance with its Resolution dated June 26, 1998 and May 05, 1999;

2) Pursuant thereto, Mr. Mario Villanueva, Sheriff of Manila, issued Notices of Garnishment against the accounts of herein Surety with different banks;

3) On 09 June 1999, the Honorable Supreme Court issued a Resolution granting Surety's prayer for the issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction, in G.R. No. 136035, entitled SIDDCOR (now MEGA PACIFIC) Insurance Corporation v. Felicidad Sandoval Vda. de Carlos, et al., the dispositive portion of which reads:

"Acting on the urgent motion of petitioner for the issuance of a temporary restraining order and/or writ of preliminary injunction, the Court Resolved to: (a) GRANT the same; and (b) ISSUE the TEMPORARY RESTRAINING ORDER prayed for effective as of this date and to continue to be so effective during the entire period that the case is pending or until further orders." (underscoring ours.)

P R A Y E R

ACCORDINGLY, it is most respectfully prayed of this Honorable Court that the Notices of Garnishment issued by the Sheriff of Manila, Mr. Mario Villanueva, against the accounts of herein Surety with different banks, BE LIFTED and/or RECALLED immediately.

Other reliefs just and equitable are similarly prayed for.

RESPECTFULLY SUBMITTED this 15th day of June 1999 at the City of Makati for Manila.²⁰

SIDDCOR, likewise, appended to its motion a copy of a temporary restraining order of the Court and thus prayed that the CA resolve to recall/lift the notice of garnishment, which it alleged was issued by the sheriff in defiance of the temporary restraining order of the Court. However, the CA cited the petitioners herein for contempt of court. What is so nettlesome is that in its June 23, 1999 Resolution, the CA ordered the sheriff to stop the enforcement of the writ of execution and/or garnishment so as not to preempt the action of the Court on the petition in G.R. No. 136035:

Considering the "Motion to Quash/Recall Writ of Execution" filed by SIDDCOR Insurance Corporation (now Mega Pacific Insurance Corporation), defendants-appellants are hereby ordered to file their comment thereto within FIFTEEN (15) DAYS from receipt of notice, after which, the said motion is submitted for resolution with or without said comment.

In the meantime, in order not to pre-empt the action of the Court on the motion and considering further the petition filed by the Surety, Mega Pacific Insurance Corporation, before the Supreme Court and the reliefs prayed for therein, the City Sheriff of Manila or his deputies are hereby directed to temporarily stay the enforcement of the Writ of Execution and/or Garnishment until further order from this Court.²¹

The CA even correctly ruled in its July 26, 1999 Resolution that:

Defendants-appellants also submit that since the Supreme Court has acquired jurisdiction over [the] June 26, 1998 and October 16, 1998 resolutions by virtue of the Petition for Review on Certiorari in G.R. No. 136035 filed by SIDDCOR to set aside said resolutions, this Court has lost jurisdiction over the same; hence, it has no more jurisdiction to entertain the present motion seeking the same objective and issue the resolution dated June 23, 1999.

This is well taken.

"When an appeal is perfected, the action is within the control of the appellate court and the lower court can not undo or modify the proceeding by which such jurisdiction is obtained (Port Banga Lumber Co. v. Export & Import Lumber Co., 28 Phil. 5).

"As soon as the appeal is perfected, the jurisdiction of the appellate court attached, and that of the trial court ceases, as far as the subject matter of the appeal is concerned (4 C.J.S. 1089)" (III Francisco, Revised Rules of Court, Civil Procedure, p. 120).²²

And yet, the CA took cognizance of and granted the March 17, 1999 and May 24, 1999 motions of the respondents for the immediate implementation of its June 26, 1998 Resolution on the attachment bond, and for the appointment of the City Sheriff of Manila to enforce the writ of execution as well as the amended writ of execution issued by it on May 26, 1998, despite the filing by the petitioner of its petition in G.R. No. 136035 and the pendency thereof.

It behooved the CA not to take cognizance of the said motions of the respondents or, at the very least, hold the resolution thereof in abeyance pending the final disposition by this Court of G.R. No. 136035. The CA did not do so. Worse, despite its lack of jurisdiction, the CA granted the said motions of the respondents. And when the petitioners prayed that the CA rectify its error to pay obeisance to the temporary restraining order of this Court in G.R. No. 136035 by recalling/lifting the amended writ of execution and a notice of garnishment as it ought to, the appellate court turned a deaf ear to such plea and even cited the petitioners herein, the president and counsel of the petitioner SIDDCOR, in contempt of court and fined them P1,000 each. By so doing, the CA acted with the gravest abuse of its discretion amounting to lack or excess of jurisdiction. Hence, the Court is constrained to rule that the assailed resolutions issued by the appellate court are null and void.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Resolution of the Court of Appeals dated November 4, 1999 is hereby ANNULLED AND SET ASIDE. No costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga and Chico-Nazario, JJ., concur

Endnotes:

¹ Records, p. 59.

² Id. at 553-555.

³ Id. at 794.

⁴ Id. at 795.

⁵ Id. at 1000-1001.

⁶ Rollo, pp. 17-18.

⁷ Id. at 76-77.

⁸ Id. at 38.

⁹ Id. at 43-44.

¹⁰ Id. at 57-60.

¹¹ Id. at 59-60.

¹² Id. at 34.

¹³ MB Finance Corporation v. Abesamis, 195 SCRA 592 (1991).

¹⁴ Ortigas v. Velasco, 234 SCRA 455 (1997).

¹⁵ First Philippine International Bank v. Court of Appeals, 252 SCRA 259 (1996).

¹⁶ Gatmaytan v. Court of Appeals, 267 SCRA 488 (1997).

¹⁷ Section 5, Rule 7 of the Rules of Court, as amended.

¹⁸ 249 SCRA 389 (1995).

¹⁹ Id. at 395-396.

²⁰ Rollo, pp. 95-96.

²¹ Id. at 55.

²² Id. at 59.

G.R. No. 140973 - JUSTINO LARESMA v. ANTONIO P. ABELLANA

2013-01-15T09:50:30+00:00

G.R. No. 140973 - JUSTINO LARESMA v. ANTONIO P. ABELLANA

SECOND DIVISION

[G.R. NO. 140973 : November 11, 2004]

JUSTINO LARESMA, Petitioner, v. ANTONIO P. ABELLANA, Respondent.

D E C I S I O N

CALLEJO, SR., J.:

On May 24, 1994, respondent Antonio P. Abellana filed a Complaint with the Regional Trial Court (RTC) of Toledo, Cebu, Branch 29, against petitioner Justino Laresma, a farmer, for recovery of possession of Lot 4-E of subdivision plan psd. 271428, a parcel of agricultural land located in Tampa-an, Aloguinsan, Cebu. The lot had an area of 21,223 square meters covered by Transfer Certificate of Title (TCT) No. 47171. He alleged, inter alia, that since 1985, the petitioner had been a lessee of a certain Socorro Chiong, whose agricultural land adjoined his own; and that sometime in 1985, the petitioner, by means of threat, strategy, and stealth, took possession of his property and deprived him of its possession.¹ The respondent prayed that, after due proceedings, judgment be rendered in his favor, ordering the petitioner to vacate the property and pay him actual damages, attorney's fees, and expenses of litigation.² Appended to the complaint was a contract of lease³ executed by the petitioner's wife, Praxedes Seguisabal Laresma, on March 1, 1977, over a parcel of land owned by Socorro Chiong covered by Tax Declaration No. 05561.

To support his complaint, the respondent presented his father, Teotimo Abellana, as witness. Teotimo testified that the petitioner married his maid, Praxedes Seguisabal, after which the couple resided in the property of Socorro Chiong,⁴ which abutted the property of the petitioner and a portion of the property of the Spouses Vicente and Susana Paras. The petitioner thus became a tenant of Socorro Chiong. Teotimo further narrated that sometime in 1989 and 1990, the petitioner transferred his house to the property of his son, the respondent, in the process destroying coconut trees planted on the property to pave the way for the construction of the barangay hall. According to the witness, he reported the incident to the office of the chief of police and the barangay captain. However, the matter was not acted upon.⁵

Teotimo also testified that his son, the respondent, purchased the property from his uncle, Mariano Paras, who, in turn, bought the same from his parents, the Spouses Vicente and Susana Paras.⁶ Based on the said sale, the Register of Deeds issued TCT No. 47171 over the property under the name of the respondent on April 2, 1980.⁷ The respondent had since then declared the property for taxation purposes,⁸ and paid the realty taxes therefor.⁹ Teotimo declared that he requested Geodetic Engineer Lordeck Abella to relocate the property, and the engineer prepared a sketch plan showing that the said lot abutted the property of Socorro Chiong on the northeast and that of Agnes Abellana on the north.¹⁰ He admitted that he and the respondent were informed that the property had been placed under the Operation Land Transfer (OLT), and that they refused to acknowledge the information.¹¹

The respondent's aunt, Socorro Chiong, testified that on October 14, 1972, she and Felicidad Paras Montecillo purchased from her parents, the Spouses Vicente and Susana Paras, a 19-hectare land in Tampa-an, Aloguinsan, Cebu, Lot 4-C of Psd. 271428 Lot 4-E, covered by Tax Declaration No. 009088.¹² Chiong's parents died in 1977. In an Order dated November 8, 1994, the Department of Agrarian Reform (DAR) affirmed the July 11, 1988 Ruling of the DAR Regional Director that the deed of sale over the property executed by her parents in her favor was valid; that the tenants therein, including Justino Laresma and his wife, were bound by the said sale; and that the tenanted portion of the property, including that portion leased to Praxedes Laresma, was outside the scope of the OLT.¹³ She confirmed that the property of the respondent abutted her property on the north.¹⁴

In his answer to the complaint, the petitioner averred that the dispute between him and the respondent was agrarian in nature, within the exclusive jurisdiction of the DAR, involving as it did his right of possession covered by Certificate of Land Transfer (CLT) No. 0-031817 issued to his wife Praxedes. He alleged that the property titled in the name of the respondent consisted of a portion of that property owned by the Spouses Vicente and Susana Paras covered by Original Certificate of Title No. 780 which was placed under OLT under Presidential Decree No. 27. Being a beneficiary of the agrarian reform program of the government, his wife was issued CLT No. 0-031817 on July 13, 1982 over a portion of the property, Lot No. 00013, with an area of 0.1700 hectares. Since then, he and his wife became owners of the property and, as such, were entitled to the possession thereof.

The parties agreed to defer further proceedings for the conduct of an ocular inspection of the property to determine whether Lot No. 00013 covered by CLT No. 0-031817 was, indeed, a part of Lot 4-E covered by TCT No. 47171. On January 13, 1995, the trial court issued an Order allowing the said inspection with Socorro Chiong in attendance.¹⁵ The parties were advised to make a report on the same. The court designated its process server, Felix Navarro, as its representative during the inspection.¹⁶ The Municipal Agrarian Reform Office, for its part, designated Municipal Agrarian Reform Technologist Alberto Epan as its representative.

On February 16, 1995, Epan inspected the property in the presence of the petitioner. The petitioner pointed to Epan eight of the ten OLT muniments. Epan also noticed that there were coconuts scattered on the property, that corn was planted in the plan area, and that the house of the respondent was in the property titled to the petitioner. On February 17, 1995, the parties' respective counsels, including Navarro and Epan, inspected the property. Epan, thereafter, submitted his Report dated February 22, 1995,¹⁷ with a sketch at the dorsal portion showing the respective locations of the property cultivated by the respondent, his house and the OLT muniments.¹⁸ Navarro submitted a separate report on March 7, 1995,¹⁹ where it was indicated that the parties had agreed that the house of the petitioner was located at the respondent's property.

The petitioner denied being the tenant of the respondent. He testified and adduced evidence that he and his wife were married on September 23, 1953,²⁰ and, thereafter, resided in the property of the Spouses Paras²¹ where he was a tenant.²² He delivered one-half of the produce from the land to Susana Paras and kept the rest as his share. Shortly thereafter, the Spouses Paras sold a portion of the property to the respondent. Sometime in 1976 or 1977, the subject property was placed under the OLT.²³ The respondent and Roque Paras protested the inclusion of the property, which was, however, rejected.²⁴ The petitioner also testified that after the death of the Spouses Paras, he gave the share of the produce to the spouses' daughter, Socorro Chiong.²⁵

The petitioner further testified that on July 13, 1982, his wife was issued CLT No. 0-031817 over Lot No. 00013, the property he was cultivating. The lot had an area of 0.1700 hectares and was located at Tampa-an, Aloguinsan, Cebu. Because of lack of funds, his wife was able to make only partial payments of her amortizations for the property to the Land Bank of the Philippines for which she was issued receipts.²⁶ After CLT No. 0-031817 was issued to his wife, he kept all the produce from the land.

The petitioner also presented Felix Navarro and Alberto Epan who affirmed their respective reports on the conduct of the inspection on the property.

On October 30, 1998, the trial court rendered judgment in favor of the respondent and against the petitioner. The fallo of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff as against defendant declaring:

1 - That plaintiff as the lawful owner in fee simple of the entire real property covered by Transfer Certificate of Title No. 47171 [Exhibit "D"]; and, declaring further that plaintiff is entitled to recover possession thereof from defendant;

2 - That the occupation, use, and possession of defendant under the latter's claim as bona fide tenant of plaintiff over the latter's property is null and void ab initio in violation of aforecited provision of the Code of Agrarian Reform, R.A. 3884;

3 - That defendant, his wife, Praxedes Laresma and their children and his agents or representative are hereby ordered to vacate and to surrender the entire possession, use, and occupation of said real property covered by TCT No. 47171 to and in favor of plaintiff;

4 - That defendant is hereby declared liable and ordered to pay plaintiff the sum of P70,000.00 as actual damages, the sum of P10,000.00 as attorney's fees, and P5,000.00 as costs of suit.

SO ORDERED.²⁷

The court ruled that, as evidenced by the contract of lease executed by Praxedes Laresma and Socorro Chiong, the petitioner was the tenant of Chiong and not of the respondent. Thus, the court had jurisdiction over the case. The court rejected the reports of Epan and Navarro, and considered the same as barren of probative weight, considering that the said reports failed to take into account the technical descriptions of Lot 4-C owned by Chiong, Lot 4-E covered by TCT No. 47171, and Lot 00013 covered by CLT No. 0-031817.

Hence, the present Petition for Review on Certiorari under Rule 45 of the Rules of Court.

The petitioner points out that the property subject of the complaint is covered by a CLT issued by the DAR in the name of his wife. The petitioner avers that although the complaint of the respondent appeared to be one for the recovery of possession of the said property (accion publiciana), by claiming that the petitioner was the tenant of Socorro Chiong, the respondent indirectly attacked the said CLT. Hence, the action is within the exclusive jurisdiction of the Department of Agrarian Reform and Adjudication Board (DARAB) under Republic Act No. 6657. The petitioner asserts that, by declaring that the landholding was not legally possessed by him and that he was not a de jure tenant, the trial court thereby declared him as having forfeited his rights under the CLT. He was, thus, prevented from paying his monthly amortizations over the property to the Land Bank of the Philippines as required by law.

The petitioner further asserts that he was the agricultural tenant of the Spouses Paras, the original owners of the property. His right as a farmer subsisted, notwithstanding the transfer of the property of the deceased prior to October 21, 1972, which transfer was registered with the Register of Deeds only on December 21, 1977. He contends that since the landholding was already placed under the scope of OLT, the respondent merely stepped into the shoes of the Spouses Paras. Moreover, having become owners of the property on October 21, 1972, the petitioner and his wife were not obliged to pay damages to the respondent; as such, there was no factual basis for the award of actual damages in the amount of P70,000 in favor of the latter.

In his comment on the petition, the respondent avers that the threshold issue in this case is factual; hence, the remedy of the petitioner was to appeal the decision of the trial court to the Court of Appeals by a writ of error under Rule 41 of the Rules of Court. He contends that he did not, in his complaint, attack the CLT issued to Praxedes Laresma because the property covered by it is a portion of the property of Socorro Chiong, and not that of his property covered by TCT No. 47171. He also posits that the said title is valid and insists that the petitioner had actual knowledge of the sale of the property to him. The petitioner cites the ruling of this Court in Antonio v. Estrella²⁸ to bolster his claim.

As gleaned from the petition, the comment thereon, and the memoranda of the parties, the issues for resolution are the following: (a) whether the action of the respondent in the trial court is in reality an indirect attack on the validity of CLT No. 0-031817 issued to Praxedes Laresma in the guise of an action for recovery of possession (accion publiciana) of the property covered by TCT No. 47171; (b) whether the RTC had jurisdiction over the action of the respondent; and (c) whether the petitioner is liable for damages in favor of the respondent.

On the first two issues, the petitioner avers that he and his wife Praxedes became owners of Lot No. 00013 by virtue of CLT No. 0-031817 which was awarded in the latter's favor. As such, they are entitled to the possession of the lot. The petitioner contends that unless and until CLT No. 0-031817 is nullified in a direct action for the said purpose before the DARAB, they cannot be evicted from the said property. He posits that the action of the respondent against him in the RTC for recovery of possession of real property is, in reality, an indirect attack on the CLT issued to his wife which is proscribed by the ruling of this Court in Miranda v. Court of Appeals.²⁹ He asserts that the decision of the trial court declaring him in illegal possession of the property and not a de jure tenant of the respondent operates as an illegal forfeiture or cancellation of the CLT.

For his part, the respondent asserts that his complaint against the petitioner did not indirectly assail the CLT issued to the latter's wife. He contends that his action was one for the recovery of his possession of a portion of his property Lot 4-E covered by TCT No. 47171, and not that of Lot No. 00013 covered by CLT No. 0-031817 which is a portion of Lot 4-C owned by his aunt Socorro Chiong. He notes that the petitioner himself admits that he has never been his agricultural tenant over his property. Consequently, the respondent concludes, the trial court correctly ruled that the dispute between him and the petitioner is civil in nature and within its exclusive jurisdiction.

We agree with the respondent that the DARAB had no jurisdiction over his action against the petitioner. The bone of contention of the parties and the decisive issue in the trial court was whether or not Lot No. 00013 covered by CLT No. 0-031817 is a portion of Lot 4-E covered by TCT No. 47171 under the name of the respondent. This is the reason why the parties agreed to have Lot No. 00013 resurveyed in relation to Lot 4-C owned by Socorro Chiong and to Lot 4-E titled in the name of the respondent. After a calibration of the evidence on record and the reports of Epan and Navarro, the trial court ruled that Lot No. 00013 formed part of Lot 4-C owned by Socorro Chiong and not of Lot 4-E titled in the name of the respondent:

Plaintiff unabashedly claims that defendant has never been his tenant over the former's property, Lot No. 4-E, but defendant claims otherwise. The evidence of plaintiff tends to establish that defendant is not his or has never been his tenant over his agricultural land, Lot 4-E, but defendant Justino Laresma is rather the tenant of Socorro Chiong over her property, Lot 4-C. In support of this contention that defendant is not plaintiff's own tenant but that of Socorro Chiong, plaintiff offered and adduced the contract of lease duly entered by and between Socorro Chiong and defendant [Exhibit "B"] in 1977 wherein it was clearly stipulated [that] Socorro Chiong as the agricultural lessor leased a portion of her land to defendant, in the latter's capacity as agricultural lessee of Lot 4-C with the obligation to pay Socorro Chiong rentals during the stipulated crop years.

This particular contract of lease [Exhibit "B"] does not show that plaintiff is a privy (sic) to it. It is (sic) goes to show that plaintiff is [not] bound by the terms and conditions thereof.

In the order of DAR under DARRO Adm. Case No. VII-98-88 dated November 8, 1994 [Exhibit "A"] which is actually a decision arising from the tenancy relationship between Socorro Chiong and defendant Justino Laresma, the DAR had expressly ruled that defendant is the tenant of Socorro Chiong of her property but limited to an actual area of 3.7316 hectares and excluding the area of 4.4905 [page 3, Decision] from the scope of the operation of Operation Land Transfer. It was further ruled therein that the landholding of Socorro Chiong was a part of the total landholding owned by her parents, Vicente N. Paras and Susana Paras, both deceased, which was, subsequently, sold by her parents to her as evidenced by a deed of sale dated October 14, 1972 [Exhibit "C"]. This deed of conveyance was affirmed by the DAR as validly executed between Socorro Chiong and defendant Justino Laresma because the latter had actual knowledge and recognition of the said transaction between Socorro and her deceased parents. This actual transfer of ownership of said parcel of land from Socorro Chiong['s] deceased parents to her was evidenced by the execution of the contract of lease between her and defendant on March 10, 1977 (sic) [Exhibit "B"].

But in the said ruling of the DFAR (sic), defendant has been expressly declared by DAR as a bona fide tenant of Socorro Chiong but his farmholding inside her property is limited to an actual area of 3.7316 hectares and excluding the area of 4.4905 [page 3, Decision] from the scope of the operation of Operation Land Transfer.

If defendant were (sic) truly a tenant of plaintiff, he would have also asked plaintiff or his predecessor-in-interest to execute that necessary contract of lease like the instrument, which Socorro Chiong executed in favor of defendant as her tenant. In the absence of said instrument to establish his tenancy over plaintiff's landholding, this Court cannot just presume the existence of an agricultural leasehold relationship between plaintiff and defendant.³⁰

However, this Court cannot accept these ocular reports and the accompanying sketches thereof so as to correctly reflect the identity of defendant's farmholding and to establish its exact location within the land of plaintiff in view of the absence of pertinent technical description of said farmholding in relation to the metes and bounds of plaintiff's land whose technical description is clearly mentioned in plaintiff's Transfer Certificate of Title No. 47171 [Exhibit "D"]. The said technical description of the defendant's farmholding is required to clearly pinpoint its identity with its area and boundaries in relation to the titled property of plaintiff. Without said technical description, it is very difficult to identify defendant's landholdings to be within plaintiff's real property.

In view of the absence of the above-mentioned indispensable requisites or any one of them in order to establish the existence of an agricultural leasehold relationship between plaintiff and defendant, as earlier mentioned, does not make defendant a de jure tenant under the Land Reform Program of the government under existing tenancy laws. [Caballes v. DAR, ibid.].³¹

The petitioner has not assailed the aforequoted findings of the trial court in the petition at bar; hence, he is bound by the said findings.

We agree with the ruling of the RTC that, as gleaned from the material averments of his complaint, the action of the respondent against the petitioner is not an agrarian dispute within the exclusive jurisdiction of the DARAB. The well-entrenched principle is that the jurisdiction of the court over the subject matter of the action is determined by the material allegations of the complaint and the law, irrespective of whether or not the plaintiff is entitled to recover all or some of the claims or reliefs sought therein.³² In Movers-Baseco Integrated Port Services, Inc. v. Cyborg Leasing Corporation,³³ we ruled that the jurisdiction of the court over the nature of the action and the subject matter thereof cannot be made to depend upon the defenses set up in the court or upon a motion to dismiss for, otherwise, the question of jurisdiction would depend almost entirely on the defendant.³⁴ Once jurisdiction is vested, the same is retained up to the end of the litigation. We also held in Arcelona v. Court of Appeals³⁵ that, in American jurisprudence, the nullity of a decision arising from lack of jurisdiction may be determined from the record of the case, not necessarily from the face of the judgment only.

It must be stressed that the regular court does not lose its jurisdiction over an ejectment case by the simple expedient of a party raising as a defense therein the alleged existence of a tenancy relationship between the parties.³⁶ But it is the duty of the court to receive evidence to determine the allegations of tenancy.³⁷ If, after hearing, tenancy had, in fact, been shown to be the real issue, the court should dismiss the case for lack of jurisdiction.³⁸

It is axiomatic that 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.³⁹ Lack of jurisdiction of the court over an action or the subject matter of an action cannot be cured by the silence, acquiescence, or even by express consent of the parties.⁴⁰ If the court has no jurisdiction over the nature of an action, it may dismiss the same ex mero motu or motu proprio. A decision of the court without jurisdiction is null and void; hence, it could never logically become final and executory. Such a judgment may be attacked directly or collaterally.

We agree with the ruling of the trial court that based on the material allegations of the respondent's complaint and even on the admission of the petitioner, the latter had never been an agricultural tenant of the respondent. In fact, the respondent claimed that based on the CLT issued to his wife, they became the owner of the property covered therein. As such, the DARAB had no jurisdiction over the said action. The dispute between the respondent, as plaintiff, and the petitioner, as defendant, in the RTC involving the de jure possession of Lot 4-E covered by TCT No. 47171 is not an agrarian dispute. Decisive of the issue is our ruling in Heirs of the Late Herman Rey Santos v. Court of Appeals:⁴¹

Rule II, Section 1 of the Revised Rules of Procedure of the DARAB, provides:

Section 1. Primary, Original and Appellate Jurisdiction. - The Agrarian Reform Adjudication Board shall have primary jurisdiction, both original and appellate, to determine and adjudicate all agrarian disputes, cases, controversies, and matters or incidents involving the implementation of the Comprehensive Agrarian Reform Program under Republic Act No. 6657, Executive Order Nos. 229, 228, and 129-A, Republic Act No. 3844, as amended, by Republic Act No. 6389, P.D. No. 27, and other agrarian laws and their implementing rules and regulations. (Italics supplied)

"Agrarian dispute" is defined under Section 3(d) of Republic Act No. 6657 (CARP Law), as:

(d) Agrarian Dispute refers to any controversy relating to tenurial arrangements, whether leasehold, stewardship or, otherwise, over lands devoted to agriculture, including disputes concerning farmworkers associations or representation of persons in negotiating, fixing, maintaining, changing or seeking to arrange terms or conditions of such tenurial arrangements.

It includes any controversy relating to compensation of lands acquired under this Act and other terms and conditions of transfer of ownership from landowners to farmworkers, tenants and other agrarian reform beneficiaries, whether the disputants stand in the proximate relation of farm operator and beneficiary, landowner and tenant, or lessor and lessee.

Clearly, no agrarian dispute is involved in this case. In fact, both are contending parties for the ownership of the subject property.

In the case of Morta, Sr. v. Occidental, et al., this Court held:

For DARAB to have jurisdiction over a case, there must exist a tenancy relationship between the parties. In order for a tenancy agreement to take hold over a dispute, it would be essential to establish all its indispensable elements to wit: 1) that the parties are the landowner and the tenant or agricultural lessee; 2) that the subject matter of the relationship is an agricultural land; 3) that there is consent between the parties to the relationship; 4) that the purpose of the relationship is to bring about agricultural production; 5) that there is personal cultivation on the part of the tenant or agricultural lessee; and 6) that the harvest is shared between the landowner and the tenant or agricultural lessee. In Vda. de Tangub v. Court of Appeals (191 SCRA 885), we held that the jurisdiction of the Department of Agrarian Reform is limited to the following: a) adjudication of all matters involving implementation of agrarian reform; b) resolution of agrarian conflicts and land tenure-related problems; and c) approval and disapproval of the conversion, restructuring or readjustment of agricultural lands into residential, commercial, industrial, and other non-agricultural uses.

Petitioners and private respondent have no tenurial, leasehold, or any agrarian relations whatsoever that could have brought this controversy under the ambit of the agrarian reform laws. Consequently, the DARAB has no jurisdiction over the controversy and should not have taken cognizance of private respondent's petition for injunction in the first place.⁴²

However, we find and so hold that the RTC had no jurisdiction over the action of the respondent. In this case, the respondent filed his complaint against the petitioner on May 24, 1994. Hence, the jurisdiction of the regular court over the nature of this action is governed by Republic Act No. 7691, which took effect on April 15, 1994. Section 3 thereof amended Section 33 of Batas Pambansa (B.P.) Blg. 129, and reads:

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil Cases. - Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:

(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any interest therein where the assessed value of the property or interest therein does not exceed Twenty Thousand Pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty Thousand Pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses and costs: Provided, That in cases of land not declared for taxation purposes, the value of such property shall be determined by the assessed value of the adjacent lots.

On the other hand, Section 1 of the Rule amending Section 19 of B.P. Blg. 129 reads:

SEC. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive original jurisdictions:

(2) In all civil actions which involve the title to, or possession of, real property, or any interest therein, where the assessed value of the property involved exceeds Twenty Thousand Pesos (P20,000.00) or for civil actions in Metro Manila, where such value exceeds Fifty Thousand Pesos (P50,000.00) '.

The actions envisaged in the aforequoted provisions are accion publiciana and reinvindicatoria. To determine which court has jurisdiction over the action, the complaint must allege the assessed value of the real property subject of the complaint or the interest thereon. In this case, the complaint of the respondent against the petitioner for recovery of possession of real property (accion publiciana) reads:

3. That plaintiff is the owner and possessor of Lot 4-E covered by TCT No. T-47171 of the Registry of Deeds of the Province of Cebu located at Tampa-an, Aloguinsan, Cebu;

4. That defendant is the tenant of the land of Socorro P. Chiong, which adjoins the parcel of land owned by the plaintiff as shown by a leasehold contract hereto attached as Annex "A" and made an integral part hereof;

5. That sometime in 1985, by means of threats, strategy, and stealth, the herein defendant took possession of the parcel of land owned by herein plaintiff, thus effectively depriving plaintiff of the possession thereof;

6. That the defendants, while illegally occupying the land of herein plaintiff, cut trees, and harvested the fruits of said land causing damages to the plaintiff in the amount of P50,000.00;

7. That despite demand, defendant has refused to vacate said land and return the possession thereof to herein plaintiff, thus compelling the plaintiff to file the present action;

8. In filing the present action, the plaintiff engaged the services of counsel for P10,000.00 and expects to incur expenses of litigation in the amount of P5,000.00.⁴³

The complaint does not contain any allegation of the assessed value of Lot 4-E covered by TCT No. 47171. There is, thus, no showing on the face of the complaint that the RTC had exclusive jurisdiction over the action of the respondent. Moreover, as gleaned from the receipt of realty tax payments issued to the respondent, the assessed value of the property in 1993 was P8,300.00.⁴⁴ Patently then, the Municipal Trial Court of Aloguinsan, Cebu, and not the Regional Trial Court of Toledo City, had exclusive jurisdiction over the action of the respondent.⁴⁵ Hence, all the proceedings in the RTC, including its decision, are null and void.

In light of the foregoing disquisitions of the court, there is no longer a need to still resolve the third issue.

WHEREFORE, the petition is GRANTED. The assailed decision of the Regional Trial Court of Toledo, Cebu City, Branch 29, in Civil Case No. T-466 is NULLIFIED for lack of jurisdiction of the trial court over the action of the respondent against the petitioner. No costs.

SO ORDERED.

Austria-Martinez, and Chico-Nazario, JJ., concur.
Puno, (Chairman), on official leave.
TINGA, J., on leave.

Endnotes:

¹ Records, pp. 1-5.

² Id. at 2-3.

³ Annex "A," Id. at 10.

⁴ TSN, 10 June 1996, p. 13; Id. at 500.

⁵ Id. at 5-6.

⁶ Id. at 11.

⁷ Exhibit "D."

⁸ Exhibits "E" and "F."

⁹ Exhibits "G" to "G-19."

¹⁰ TSN, 10 June 1995, p. 7.

¹¹ Id. at 12.

¹² Exhibit "C."

¹³ Exhibit "A."

¹⁴ TSN, 22 March 1996, p. 6.

¹⁵ Records, p. 130.

¹⁶ Id. at 142.

¹⁷ Exhibit "6."

¹⁸ Exhibit "6-D."

¹⁹ Exhibit "5."

²⁰ Exhibit "7."

²¹ TSN, 15 November 1996, p. 3.

²² Id. at 4.

²³ Exhibits "3" and "4."

²⁴ TSN, 15 November 1996, pp. 10-11.

²⁵ Id. at 22.

²⁶ Exhibits "2" to "2-C."

²⁷ Rollo, pp. 38-39.

²⁸ 156 SCRA 68 (1987).

²⁹ 141 SCRA 302 (1986).

³⁰ Rollo, pp. 36-37.

³¹ Id. at 38.

³² Cruz v. Torres, 316 SCRA 193 (1999).

³³ Boleyley v. Villanueva, 314 SCRA 364 (1999).

³⁴ Ibid.

³⁵ 280 SCRA 20 (1997).

³⁶ Onquit v. Binamira-Parcia, 297 SCRA 354 (1998).

³⁷ Ibid.

³⁸ Isidro v. Court of Appeals, 228 SCRA 503 (1993).

³⁹ Rudolf Lietz Holdings, Inc. v. Register of Deeds of ParaÃ±aque City, 344 SCRA 680 (2000).

⁴⁰ Duero v. Court of Appeals, 373 SCRA 11 (2002).

⁴¹ 327 SCRA 293 (2000).

⁴² Id. at 297-299.

⁴³ Records, pp. 1-2.

⁴⁴ Exhibit "G-16."

⁴⁵ Aliabo v. Carampatan, 354 SCRA 548 (2001); Ouano v. PGTT Int l. Investment Corporation, 384 SCRA 589 (2002).

G.R. No. 141145 - REPUBLIC OF THE PHILIPPINES v. WILSON P. ORFINADA, SR., ET AL.

2013-01-15T09:50:31+00:00

G.R. No. 141145 - REPUBLIC OF THE PHILIPPINES v. WILSON P. ORFINADA, SR., ET AL.

THIRD DIVISION

[G.R. NO. 141145 : November 12, 2004]

REPUBLIC OF THE PHILIPPINES (REPRESENTED BY THE LAND REGISTRATION COMMISSIONER), Petitioner, v. WILSON P. ORFINADA, SR. and LUCRESIA K. ORFINADA, Respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us is the instant Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Joint Decision¹ dated December 13, 1999 rendered by the Court of Appeals in CA-G.R. CV No. 32815, "Republic of the Philippines (represented by the Land Registration Commissioner) v. Wilson P. Orfinada, Sr., Lucresia K. Orfinada and the Register of Deeds of Pasay City," and CA-G.R. CV No. 35230, ISIA v. Enrique Factor and Pilar Development Corporation."

On May 8, 1985, the Republic of the Philippines, petitioner, represented by the Land Registration Commissioner, filed with the Regional Trial Court (RTC), Branch 113, Pasay City, a complaint for annulment of title, docketed as Civil Case No. 2846-P. Impleaded as defendants were spouses Wilson and Lucresia Orfinada, respondents, and the Register of Deeds of Pasay City.

The complaint alleges that Transfer Certificate of Title (T.C.T.) No. 38910-A issued by the Register of Deeds of Pasig, Rizal, now Pasig City, on September 18, 1956, in the names of respondents, is spurious as shown by the following:

1. Respondents obtained T.C.T. No. 38910 by making it appear that it originated from Original Certificate of Title (O.C.T.) No. 383 in the name of Guillermo Cruz. However, O.C.T. No. 383 was actually issued and registered in the name of Paulino Cruz. This O.C.T. was pursuant to Free Patent No. 38910 issued by the Governor General of the Philippine Islands on March 17, 1932 covering a parcel of land described in Plan F-44878 situated in Barrio Sampaloc, Tanay, Rizal, with an area of 22.8387 hectares.

2. On "its face," T.C.T. No. 38910-A in respondents' names was derived from O.C.T. No. 383 registered in the name of Guillermo Cruz. This O.C.T. was based on a Free Patent granted by the President of the Philippines on May 12, 1935. The land covered by this Free Patent is located at Barrio Tanay, Almanza, Las PiÃ±as, Rizal, (now Las PiÃ±as City) consisting of 22.1688 hectares. But this Free Patent was issued by the President of the Philippines on May 12, 1935 under Commonwealth Act (C.A.), No. 141, otherwise known as the Public Land Act. This Act took effect only on November 7, 1936. Hence, no Free Patent could have been issued by the President prior to such date, specifically on May 12, 1935.

In their answer, respondents claimed that they purchased their land from Guillermo Cruz on June 7, 1955. The corresponding Deed of Sale was duly registered in the Registry of Deeds of Pasig, Rizal and annotated at the back of O.C.T. No. 383 in the name of Guillermo Cruz. This O.C.T. was cancelled and in lieu thereof, T.C.T. No. 38910-A was issued in their names.

Contrary to petitioner's allegations, the Free Patent granted by the President of the Philippines in favor of Guillermo Cruz was issued on May 12, 1937, not May 12, 1935. This Free Patent covers a parcel of land described in Plan F-48390 consisting of 21.1688 hectares situated in Barrio Almanza, Las PiÃ±as, Rizal (now Las PiÃ±as City). On the basis of this Free Patent, O.C.T. No. 383 was issued to Guillermo Cruz on August 22, 1937. On the same day, this title was registered in the Registration Book of the Registry of Deeds of Pasig, Rizal, appearing on p. 84, Volume I-A.

Both O.C. T. No. 383 in the name of Guillermo Cruz and its derivative title - T.C.T. No. 38910-A, in the names of respondents, are intact and in the files of the Registry of Deeds of Pasig. Due to the decentralization of this Office, T.C.T. No. 38910-A was one of those transferred to the Registry of Deeds of Pasay City which was given a new number - T.C.T. No. 13674-A, and then to the Registry of Deeds of Las PiÃ±as. Eventually, or on May 19, 1981, they (respondents) sold the land to the Insurance Savings and Investment Agency (ISIA).

Meantime, ISIA, being the new owner of the same parcel of land, filed with the RTC of Makati, Branch 143, a complaint for recovery of the subject property against Enrique Factor and Pilar Development Corporation, docketed as Civil Case No. 2262. In due course, the RTC rendered a Decision dated February 23, 1989 in favor of ISIA, ordering the defendants to vacate the land. The defendants then interposed an appeal to the Court of Appeals, docketed as CA-G.R. CV No. 35230.

Going back to Civil Case No. 2846-P filed by the petitioner against respondents, on January 25, 1991, the RTC of Pasay City, Branch 113, rendered its Decision dismissing the complaint, "there being no competent evidence" to prove the allegations therein. In disposing of the case, the trial court held:

"Deliberating on the evidence as completely and clearly narrated/illustrated above, it is overwhelmingly indisputable and certain that Transfer Certificate of Title No. (38910-A) 13674-A of the Registry of Deeds of Las PiÃ±as (Exh. DD; Exh. 27) in the name of Wilson P. Orfinada, Sr., married to Lucresia K. Orfinada was duly issued on September 18, 1956, the same being a direct transfer from Original Certificate of Title No. 383 (Exh. 65; Exh. K) in the name of Guillermo Cruz, pursuant to a Free Patent issued by the President of the Philippines on May 12, 1937. The aforesaid Transfer Certificate of Title was transferred to the Register of Deeds of Pasay from the Register of Deeds of Pasig, Rizal, then from Pasay City to Las PiÃ±as. (Exh. 27).

"It is no less significant to mention that the defendants were in possession of the property for twenty-nine (29) years already at the time when this complaint for annulment of title was filed on May 8, 1985. The possession can be characterized as continuous, actual, public and adverse possession as established with competent evidence testimonial and documentary. Undeniably, twenty-nine (29) years of possession is more than the requirement for acquiring land under the possessory information (See Republic v. C.A., 161 SCRA 368). The required number of years is only twenty (20) years.

"With precision and clarity, the land in question is registered under the Torrens System. Under this system title of the defendants is made binding against the whole world, including the government, (NGA v. I.A.C., 157 SCRA 380) as soon as the deed of transfer shall have been presented and registered in the office of the Register of Deeds. Importantly, the principle is that it is the act of registration that operates to transfer the title to the land. And to facilitate registration under this system, the government provides to the owner a Torrens Certificate of Title which is submitted for cancellation when the property is transferred to another person who will then be entitled to the issuance of the new Torrens Title.

x x x

"Evidently, the Deed of Absolute Sale (Exh. 2-Orfinada) executed by Guillermo Cruz in favor of Wilson F. Orfinada, was duly registered with the Register of Deeds of Pasig, Rizal, wherein it was annotated at the back of Original Certificate of Title 383 in the name of Guillermo Cruz (Exh. K; Exh. 65), and said OCT was cancelled and in lieu thereof the Pasig Register of Deeds issued Transfer Certificate of Title No. 38910-A in the name of Wilson P. Orfinada on September 18, 1956 (Exh. M).

"Jurisprudentially, the main purpose of the Torrens System is to avoid conflicts of title in and to real estate, and to facilitate transactions relative thereto by giving the public the right to rely upon the fact of a Torrens Certificate of Title and to dispense with the need of inquiring further except when the party concerned has actual knowledge of facts and circumstances that should impel a reasonably cautious man to make such further inquiry (Capitol Subdivision, Inc. v. Province of Negros Occidental, 7 SCRA 60; Pascua v. Copuyoc, 77 SCRA 78).

Clear enough, from the culled evidence the defendants just purchased the property in question when the same was offered to them without inquiring further and firmly relied upon the fact of the Original Certificate of Title in the name of Guillermo Cruz (Exh. K; Exh. 65) and after the perfection of the sale in favor of the defendants that deed of sale was registered with the Registry of Deeds of Pasig, Rizal and the corresponding Transfer Certificate of Title No. 38910-A (Exh. M) was issued in the name of the defendants. Rightfully, they being innocent purchasers in good faith and for value, the posture of these defendants would certainly prevail for it was tersely said by the Honorable Supreme Court in the case of Fule v. Lagare, 7 SCRA 351:

'A purchaser in good faith is one who buys property of another without notice, that some other person has a right to, or interest in such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property.'

"The assertion of plaintiff that the land in question lies in Sampaloc, Tanay, Rizal has not been established with competent evidence. The fact remains that the land lies in Bo. Almanza, Las PiÃ±as and actually in the possession of defendants. The plaintiff was so dependent on the LRA Verification Committee (Exh. A) - giving a conclusion that the title of Wilson P. Orfinada is fake and spurious. To the mind of the Court, said report is tenuous, uncorroborated and unsubstantiated.

"Between the Deed of Absolute Sale (Exh. 2) and the verification report (Exh. A) which the plaintiff was firmly dependent in its cause of action, the former has to be sustained. The reason being that 'a notarial document is evidence of the facts in clear unequivocal manner therein expressed. It has in its favor the presumption of regularity. To contradict all these, there must be evidence that is clear, convincing and more than merely preponderant.' (Ytuirralde v. Aganon, 28 SCRA 407; Cabrera v. Villanueva, 160 SCRA 672; Dy v. Sacay, 165 SCRA 473). And anent the title of the defendants, TCT No. (38910-A) 13674-A, to assert that it is fake and spurious it has to be supported by strong and compelling evidence that it is so. In reliance to the case of Legaspi v. C.A., the Honorable Supreme Court said: 'The evidentiary nature of public document must be sustained in the absence of strong, complete and conclusive proof of its falsity or nullity.'

"Finally, 'the annulment of a registration under the Torrens System should be made with the utmost caution, to maintain the integrity of titles secured thereunder.' (Cabrera v. C.A., 163 SCRA 214)."

Petitioner Republic appealed from the above Decision to the Court of Appeals, docketed as CA-G.R. CV No. 32815.

Later, upon motion of ISIA, the Appellate Court ordered the consolidation of CA-G.R. CV No. 35330 (filed by ISIA) and CA-G.R. CV No. 32815 (filed by petitioner).

On December 13, 1999, the Court of Appeals promulgated the assailed Joint Decision affirming in toto the Decisions of the RTC of Makati, Branch 143 in Civil Case No. 2262 and RTC of Pasay City, Branch 113 in Civil Case No. 2846-P, thus:

"WHEREFORE, PREMISES CONSIDERED,

1) The decision of the Regional Trial Court of Makati, Branch 143, in Civil Case No. 2262 dated February 23, 1989 is hereby AFFIRMED in toto. Costs against appellant.

2) The decision of the Regional Trial Court of Pasay City, Branch 113, in Civil Case No. 2846-P dated January 25, 1991 dismissing plaintiff-appellant's complaint is likewise AFFIRMED in toto. No costs.

SO ORDERED."

Petitioner, in the instant petition, ascribes to the Court of Appeals the following errors:

"1. The Court of Appeals grossly erred and acted under a misapprehension of facts in ruling that the title of the Orfinadas is valid.

2. The Court of Appeals likewise erred when it did not consider that the Torrens System is not a means of acquiring lands but merely a system for registration of title."

In their comment, respondents contend that factual findings of the Court of Appeals are binding on this Court. Considering that the issues raised in the petition are factual, this Court may no longer review the assailed Joint Decision.

Obviously, petitioner here, in its first assigned error, is raising factual issues. Time and again, we had occasion to rule that only questions of law may be raised in a Petition for Review on Certiorari filed with this Court. Moreover, factual findings of the trials courts, when adopted and confirmed by the Court of Appeals, are final and conclusive on this Court,² but there are exceptions.

In Go v. Court of Appeals,³ we held that:

"[I]n Reyes v. Court of Appeals, this Court held that factual findings of the trial court, when adopted and confirmed by the Court of Appeals, are final and conclusive and may not be reviewed on appeal; except: (1) when the inference made is manifestly mistaken, absurd or impossible; (2) when there is a grave abuse of discretion; (3) when the finding is grounded entirely on speculations, surmises or conjectures; (4) when the judgment of the Court of Appeals is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record."

Petitioner, in filing this petition, is invoking one of the exceptions mentioned above, i.e., when the judgment of the Court of Appeals is based on misapprehension of facts. We, therefore, opt to evaluate the evidence of both parties on the basis of the old and cold records before us.

The basic issue for our resolution is whether petitioner has proved by preponderance of evidence that T.C.T. No. 38910-A in the names of respondents is spurious.

"In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. 'Preponderance of evidence' is the weight, credit, and value of the aggregate evidence on either side and is usually considered to be synonymous with the term 'greater weight of the evidence' or 'greater weight of the credible evidence.' Preponderance of evidence is a phrase which, in the last analysis, means probability of the truth. It is evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto. Section 1, Rule 133 of the Revised Rules of Court provides the guidelines in determining preponderance of evidence, thus:

"In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved lies, the court may consider all the facts and circumstances of the case, the witnesses' manner of testifying, their intelligence, their means and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or improbability of their testimony, their interest or want of interest, and also their personal credibility so far as the same legitimately appear upon the trial. The court may also consider the number of witnesses, though the preponderance is not necessarily with the greater number."⁴

Evidence for petitioner shows that on October 21, 1981, the Director of the Bureau of Lands (now Land Management Bureau) wrote the Administrator of the Land Registration Commission (now Land Registration Authority) pointing to the dubiousness of T.C.T. No. 38910-A in the names of respondents. The Land Registration Commission then formed a Committee to conduct an investigation.

Thereafter, the Committee submitted to the Director of Lands its Verification Report and Supplementary Report which disclose the following:

In his letters dated October 9 and November 15, 1981, pursuant to the directive of the Committee, Atty. Ramon Manalastas, then Acting Register of Deeds of Pasig, informed the said Committee that O.C.T. No. 383 in the name of Paulino Cruz "is no longer available." However, his office has in its files a "certified copy" of Free Patent No. 13409 in the name of Paulino Cruz issued by Governor General Theodore Roosevelt on March 17, 1932 covering a parcel of land in Barrio Sampaloc, Tanay, Rizal, with an area of "22 hectares." Pursuant to this Free Patent, O.C.T. No. 383 was issued in the name of Paulino Cruz by the same Registry of Deeds. T.C.T No. 38910 derived therefrom is in the name of Marina Cruz Vda. De San Jose, not in the names of respondents.

On the basis of Atty. Manalatas' letters, the Committee concluded that T.C.T. No. 38910-A could not have been issued in the names of respondents and, therefore, the same is "manufactured and spurious."

The Committee compared the data appearing on Free Patent No. 13409 in the name of Paulino Cruz with those of T.C.T. No. 38910-A in respondents' names (derived from O.C.T. No. 383 in the name of Guillermo Cruz) and found that Free Patent No. 13409 was issued by Governor General Theodore Roosevelt on March 17, 1932. It embraces a parcel of land in Barrio Sampaloc, Tanay, Rizal. Whereas, the Free Patent on the basis of which O.C.T. No. 383 was issued in the name of Guillermo Cruz (from which T.C.T No. 38910-A originated), was granted on May 12, 1935 by the President pursuant to C.A. 141 (Public Land Act), which law was not yet enacted at that time. It took effect only on November 7, 1936.

The Committee Reports further state that, "We therefore presume that the description of the land covered by O.C.T. No. 383 should be the same as what appears on Free Patent No. 13409 in the name of Paulino Cruz."

Petitioner, in contending that T.C.T. No. 38910-A in the names of respondents is a nullity asserts that (a) the latter derived their title fraudulently from O.C.T. No. 383 in the name of Paulino Cruz, based on Free Patent No. 13409; and (b) that O.C.T. No. 383 in the name of their predecessor-in-interest, Guillermo Cruz, is not authentic since the Free Patent on which it was based could not have been issued on May 12, 1935 considering that the governing law, C.A. 141 (Public Land Act), took effect only on November 7, 1936.

Evidence for respondents shows that Atty. Modesto Jimenez, their attorney-in-fact, was able to secure a certified true copy of O.C.T. No. 383 in the name of Guillermo Cruz from the Registry of Deeds of Pasig. He paid the corresponding fee under O.R. No. 9614248.⁵

One time, he went to the same Registry of Deeds to ask for the cancellation of the entry of a mortgage contract an encumbrance appearing at the back page of the original copy of T.C.T. No. 38910-A in the names of respondents. He came to know that the original copy of the title was transferred by the Registry of Deeds of Pasig to the Registry of Deeds of Pasay City. So he proceeded there and upon his request, Atty. Victoriano Torres, the Register of Deeds of Pasay City, had the entry of encumbrance canceled. Atty. Jimenez also learned that the original copy of T.C.T. No. 38910-A was given a new title number by the said Register of Deeds which is T.C.T. No. 13674-A.⁶ Then Atty. Jimenez, being authorized by respondents, had the land re-surveyed and sold the same to the Insurance Savings and Investment Agency (ISIA).

ISIA found that a portion of the area was occupied by Pilar Development and Enrique Factor. This prompted ISIA to file with the RTC of Pasay City a complaint for recovery of property against them. The case was docketed as Civil Case No. 2262. Later, this case was transferred to the RTC, Branch 143 at Makati. During the hearing, Rolando Golla, an employee of the Registry of Deeds of Pasig, testified that in obedience to the order of the trial court, he brought the following:

1) Original copy of O.C.T. No. 383 in the name of Guillermo Cruz; andcralawlibrary

2) Xerox copy of the certified true copy of the same O.C.T.⁷

After considering the evidence presented by both parties, we agree with the Court of Appeals and the trial court that petitioner's complaint must be dismissed for its failure to prove its allegations by preponderance of evidence, specifically that T.C.T. No. 38910-A in the names of respondents is spurious.

I.

Let it be stressed that respondents Wilson and Lucresia Orfinada purchased the property from Guillermo Cruz as early as June 7, 1955, as shown by the Deed of Absolute Sale⁸ duly registered in the Registry of Deeds of Pasig. However, it was only on October 21, 1981, or after 26 years, that the Director of Lands came to realize that respondents' land title, T.C.T. No. 38910-A, now 13674-A, is spurious. What prompted the Director of Lands, after such length of time, to conclude that this title is not genuine? Records are silent on this point.

II

Petitioner maintains that T.C.T. No. 38910-A is spurious just because it was derived from O.C.T. No. 383. Petitioner insists that there is only one O.C.T. No. 383 and it is in the name of Paulino Cruz, not Guillermo Cruz. But Atty. Ramon Manalastas, then Acting Register of Deeds of Pasig, a witness for petitioner, admitted that O.C.T. No. 383 in the name of Paulino Cruz "is no longer available."

Considering that O.C.T. No. 383 in the name of Paulino Cruz no longer exits, petitioner, in maintaining that T.C.T. No. 38910-A originated therefrom, relies on a "certified copy" of Free Patent No. 13409 in the name of Paulino Cruz. According to petitioner, this Free Patent was the basis for the issuance of O.C.T. No. 383 to Paulino Cruz. Such assertion does not persuade us considering that per admission of petitioner itself, O.C.T. No. 383 in the name of Paulino Cruz, is not in the files of the Registry of Deeds of Pasig. Indeed, the Committee Reports state that the investigators merely "presume that the description of the land covered by O.C.T. No. 383 (in the name of Paulino Cruz) should be the same as what appears on Free Patent No. 13409." This means that while Free Patent No. 13409 was granted by the Governor General on March 17, 1932, it does not follow that the corresponding O.C.T. was actually issued to Paulino Cruz and registered in his name.

There being no O.C.T. No. 383 in the name of Paulino Cruz as admitted by petitioner, its allegations that respondents secured their title through fraud and misrepresentation by making it appear that it originated from such O.C.T. No. 383 must fail. Even assuming that O.C.T. No. 383 was issued to Paulino Cruz on the basis of Free Patent No. 13409, still we cannot conclude that respondents committed fraud in obtaining their title. The land covered by Free Patent No. 13409 is in Barrio Sampaloc, Tanay, Rizal, while the property embraced by the Free Patent of Guillermo Cruz is in Barrio Almanza, Las PiÃ±as.

In contending that the respondents' title is void, petitioner also points out that the Free Patent on which it was based is defective. As earlier mentioned, petitioner claims that this Free Patent was issued by the President of the Philippines on May 12, 1935, pursuant to C.A. No. 141 (Public Land Act). But this Act took effect only on November 7, 1936 or prior to May 12, 1935. Hence, no Free Patent could have been issued on that date.

Significantly, respondents presented to the trial court the original copy of T.C.T. No. 38910-A, now in the custody of the Registry of Deeds of Las PiÃ±as. Inscribed on this title is the following:

"It is further certified that said land was originally registered on the 22nd day of August in the year nineteen hundred and thirty-seven, in Registration Book No. l-4, page 84, of the Office of Register of Deeds of Rizal, as Original Certificate of Title No. 383, pursuant to a free patent granted by the President of the Philippines, on the 12th day of May, the year nineteen hundred and thirty seven, under Act No. 141."⁹

From the above statement, it can easily be discerned that it was on May 12, 1937, not in 1935, when the President issued to Guillermo Cruz his Free Patent, pursuant to C.A. 141 (Public Land Act). After three (3) months or on August 22, 1937, the Registry of Deeds of Rizal issued to him O.C.T. No. 383.

There is sufficient evidence to show that this O.C.T. No. 383 in the name of Guillermo Cruz exists. Atty. Jimenez testified that he was able to obtain a certified true copy of the said title from the Registry of Deeds of Pasig. Likewise, Rolando Golla, an employee of the same Registry of Deeds presented to the trial court the original copy of O.C.T. No. 383 in the name of Guillermo Cruz. Petitioner failed to dispute this evidence.

Still, petitioner would not rest in claiming that T.C.T No. 38910-A is a nullity. It invites our attention that T.C.T No. 38910, derived from O.C.T. No. 383 in the name of Paulino Cruz, was issued and registered in the name of one Marina Cruz Vda. de San Jose, not in the names of respondents. Suffice it to state that the land covered by Marina's title is in Barrio San Roque, Tanay, Rizal. Respondents' property is in Barrio Almanza, Las PiÃ±as, Rizal.

Even assuming that there was a defect in O.C.T. No. 383 in the name of Guillermo Cruz, respondents being buyers in good faith have acquired rights over the property. Consequently, we cannot disregard such rights and order the cancellation of the certificate of title. The Court of Appeals held:

"When Wilson Orfinada and Guillermo Cruz entered into a Contract of Deed of Absolute Sale (Folder of Exhibits, p. 85), what was required from Orfinada was merely to look at OCT 383 in the name of Guillermo Cruz. He need not go beyond what he saw on the face of the title. x x x.

x x x

A careful review of the records indicates that the Deed of Absolute Sale (Exh. 2-Orfinada, p. 85) executed by Guillermo Cruz in favor of Wilson P. Orfinada, was duly registered with the Register of Deeds of Pasig, Rizal, wherein it was annotated at the back of Original Certificate of Title No. 383 in the name of Guillermo Cruz (Exh. 65, p. 145) and said OCT was cancelled and in lieu thereof, the Pasig Register of Deeds issued, on September 18, 1956, Transfer Certificate of Title No. 38910-A in the name of Wilson Orfinada.

Consequently, plaintiff-appellant is implying that defendant is not a buyer in good faith. The reliance is misplaced. What is clear from the record is that when Wilson Orfinada purchased the property in question on September 18, 1956 (Exh. M, p. 27), the same was offered to him. He did not inquire further and firmly relied on the face of the original certificate of title in the name of Guillermo Cruz (Exh. 65, p. 145). He had no knowledge whatsoever of any irregularity of the title. As far as Orfinada is concerned, the OCT 383 shown to him was free from any flaw or defect that could give rise to any iota of evidence that it is fake and spurious."

In Legarda v. Court of Appeals,¹⁰ we sustained the buyer's right to rely on the correctness of the certificate of title, thus:

"If a person purchases a piece of land on the assurance that the seller's title thereto is valid, she should not run the risk of being told later that her acquisition was ineffectual after all. If we were to void a sale of property covered by a clean and unencumbered torrens title, public confidence in the Torrens System would be eroded and land transactions would have to be attended by complicated and inconclusive investigations and uncertain proof of ownership. The consequence would be that land conflicts could proliferate and become more abrasive, if not even violent."

Indeed, a Torrens title is generally conclusive evidence of ownership of the land referred to therein, and a strong presumption exists that a Torrens title was regularly issued and valid. A Torrens title is incontrovertible against any informacion possessoria, of other title existing prior to the issuance thereof not annotated on the Torrens title. Moreover, persons dealing with property covered by a Torrens certificate of title are not required to go beyond what appears on its face.¹¹

Similarly, in Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals,¹² we held:

"x x x, the general rule that the direct result of a previous void contract cannot be valid, is inapplicable in this case as it will directly contravene the Torrens system of registration. Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard such rights and order the cancellation of the certificate. The effect of such outright cancellation will be to impair public confidence in the certificate of title. The sanctity of the Torrens system must be preserved; otherwise, everyone dealing with the property registered under the system will have to inquire in every instance as to whether the title had been regularly or irregularly issued, contrary to the evident purpose of the law. Every person dealing with the registered land may safely rely on the correctness of the certificate of title issued therefore and the law will in no way oblige him to go behind the certificate to determine the condition of the property."

On petitioner's second assigned error, suffice it to state that the Court of Appeals did not say that the Torrens System is a means of acquiring lands.

WHEREFORE, the petition is DENIED. The assailed Joint Decision dated December 13, 1999 of the Court of Appeals in CA-G.R. CV No. 32815 is hereby AFFIRMED.

No costs.

SO ORDERED.

Panganiban, (Chairman), Carpio-Morales, and Garcia, JJ., concur.
Corona, J., on leave.

Endnotes:

¹ Penned by Justice Mercedes Gozo-Dadole and concurred in by Justice Eubolo G. Verzola and Justice Artemio G. Tuquero (retired).

² Producer's Bank of the Philippines v. Court of Appeals, G.R. No. 115324, February 19, 2003, 397 SCRA 651.

³ G.R. No. 112550, February 5, 2001, 351 SCRA 145, citing Reyes v. Court of Appeals, 258 SCRA 651 (1996).

⁴ Go v. Court of Appeals, G.R. No. 112550, February 5, 2001, citing Reyes v. Court of Appeals, 258 SCRA 651 (1996).

⁵ Exhibit "12-A," Folder of Exhibits.

⁶ Exhibit "4," Id.; TSN dated August 23, 1990 at 3-4.

⁷ TSN dated September 6, 1990 at 14-22.

⁸ Folder of Exhibits, at 85.

⁹ "Exhibit "DD," Folder of Exhibits at 76.

¹⁰ G.R. No. 94457, October 16, 1997, 280 SCRA 642, 679, citing Tenio-Obsequio v. Court of Appeals, 230 SCRA 550, 557 (1994) and Republic v. Umali, 171 SCRA 647 (1989).

¹¹ Orquiola v. Court of Appeals, G.R. No. 141463, August 6, 2002, 386 SCRA 301, 308.

¹² G.R. No. 120154, June 29, 1998, 291 SCRA 495, 509, citing PeÃ±a, PeÃ±a and PeÃ±a, Registration of Land Titles and Deeds, 1988 Rev. Ed., p. 143, citing Sec. 39, Act 496.

G.R. No. 142441 - PEDRO BONGALON v. COURT OF APPEALS, ET AL.

2013-01-15T09:50:32+00:00

G.R. No. 142441 - PEDRO BONGALON v. COURT OF APPEALS, ET AL.

FIRST DIVISION

[G.R. NO. 142441 : November 10, 2004]

PEDRO BONGALON now substituted by FILIPINA BONGALON, Petitioner, v. COURT OF APPEALS, CECILIO BONGALON and AMPARO BONGALON, Respondents.

D E C I S I O N

CARPIO, J.:

The Case

This is a Petition for Review ¹ of the Decision² dated 27 November 1992 of the Court of Appeals and its Resolution dated 23 February 2000. The 27 November 1992 Decision reversed the Decision³ dated 28 June 1991 of the Regional Trial Court, Branch 17, Tabaco, Albay ("RTC") while the 23 February 2000 Resolution denied the motion for reconsideration.

The Facts

Pedro Bongalon, the late husband of petitioner Filipina Bongalon ("petitioner"), respondents Cecilio Bongalon ("Cecilio") and Amparo Bongalon ("Amparo") and four⁴ others are the children of the late Cirila Bonga ("Cirila") and Bernabe Bongalon ("Bernabe"). Cirila is one of the five children of Rosalia Buenaflor ("Rosalia") and Cornelio Bonga ("Cornelio"). The other children of Rosalia and Cornelio are Trinidad Bonga Bobier ("Trinidad"), Jacoba Bonga Faustino ("Jacoba"), Emilio Bonga ("Emilio") and Benito Bonga ("Benito"). Jacoba had three children, namely, Conchita Faustino Base ("Conchita"), Catalina Faustino Conlo ("Catalina"), and Leonardo Faustino ("Leonardo"). Emilio also had three children, namely, Teodora Bonga Bien ("Teodora"), Francisca Bonga Camba ("Francisca"), and Maxima Bonga Diaz ("Maxima"). It appears that Jacoba and Emilio predeceased their children.⁵

Rosalia was the owner of Lot No. 525-A in A. A. Berces St., Tabaco, Albay measuring 149 square meters and covered by Original Certificate of Title No. RO-17402 (23825) ("OCT No. RO-17402") issued in her name. OCT No. RO-17402 was later cancelled and replaced by Transfer Certificate of Title No. T-67656 ("TCT No. T-67656") also issued in Rosalia's name.⁶ Rosalia died intestate in 1940, survived by her husband and five children.

On 26 July 1943, Trinidad, Conchita, and Teodora executed a Deed of Absolute Sale ("Exhibit 2")⁷ conveying to Cirila "a part of" Lot No. 525-A for P100. On the same day, Cirila, and again Trinidad, Conchita, and Teodora, executed a Deed of Absolute Sale ("Exhibit B")⁸ conveying to Pedro Bongalon "a part of" Lot No. 525-A also for P100. The same notary public notarized both deeds of sale on that same day. On 22 February 1971, Cirila executed another Deed of Absolute Sale ("22 February 1971 Deed of Sale")⁹ conveying Lot No. 525-A to Amparo for P4,500. Amparo subsequently declared Lot No. 525-A in her name for tax purposes and paid the real estate taxes in 1977 and 1978. Even before the execution of the 22 February 1971 Deed of Sale, Amparo and her family were already occupying a 32-square meter portion of Lot No. 525-A where her house stands.¹⁰

Meanwhile, on 30 January 1979, Pedro Bongalon executed an Extrajudicial Settlement of Estate ("Extrajudicial Settlement") declaring that Cirila is the only heir of Rosalia and that he (Pedro Bongalon) is, in turn, the only heir of Cirila. Based on this Extrajudicial Settlement, Pedro Bongalon secured the cancellation of TCT No. T-67656 and obtained Transfer Certificate of Title No. T-67780 ("TCT No. T-67780") issued in his name.

In March 1988, Pedro Bongalon sued respondents in the RTC for "Quieting of Title, Recovery of Portion of Property and Damages." Pedro Bongalon alleged in his complaint that: (1) he is the registered owner of Lot No. 525-A under TCT No. T-67780; (2) respondents occupied Lot No. 525-A through his tolerance; (3) he had several times asked respondents to vacate Lot No. 525-A but they refused to do so; and (4) respondents' occupancy of Lot No. 525-A and their claim of ownership over the property cast a cloud over his title. Pedro Bongalon prayed that the RTC declare his title free of any cloud and order respondents to vacate Lot No. 525-A and pay him damages and litigation expenses.¹¹

In their Answer with Counterclaim, respondents denied Pedro Bongalon's allegations. Respondents claimed that Pedro Bongalon fraudulently obtained TCT No. T-67780 by executing the Extrajudicial Settlement. Amparo claimed that on the contrary, she is the owner of Lot No. 525-A based on the 22 February 1971 Deed of Sale. As counterclaim, respondents sought the nullification of the Extrajudicial Settlement and of TCT No. T-67780. Respondents also prayed for the award of damages and attorney's fees.¹²

During the trial, Pedro Bongalon introduced in evidence other documents to prove his ownership of Lot No. 525-A, such as (1) Exhibit B and (2) Conchita's Affidavit dated 22 May 1978 ("Exhibit C")¹³ confirming the sale under Exhibit B. The RTC admitted these documents in evidence over the objection of respondents.

For their part, respondents also presented in evidence Exhibit 2 to prove that Cirila owned the entire Lot No. 525-A which she later sold to Amparo in the 22 February 1971 Deed of Sale.

Before the RTC could render judgment, Amparo died and her surviving spouse and six children substituted for her.¹⁴

The Trial Court's Ruling

On 28 June 1991, the RTC rendered judgment ("RTC Decision") the dispositive portion of which provides:

WHEREFORE, summing up the evidence, oral and documentary, presented by both parties, Judgment is rendered for the plaintiff and against the defendants.

The Court orders, as it is hereby ordered, that the plaintiff is declared the rightful registered owner of the land consisting of One Hundred Forty Nine (149) square meters, more or less, located at A. A. Berces St., Tabaco, Albay, under Transfer Certificate of Title No. T-67780, in the name of Pedro Bongalon, said title is free from defect, flaw and cloud of doubt, therefore, indefeasible.

The defendants are likewise ordered to vacate and to deliver the portion of the land in question they have occupied to the plaintiff peacefully. And to pay the costs proportionately.¹⁵

The RTC Decision reads:

From the documentary evidence adduced during the hearing by both parties, it appeared that the real property/land in question was formerly and originally owned by Rosalia Buenaflor, covered by Original Certificate of Title No.[RO-17402 (23825)], then to [T -]67656, then to [T-67780], containing an area of One Hundred Forty Nine (149) square meters, more or less, located at then Taylor Street now A. A. Berces Street, Tabaco, Albay. Rosalia Buenaflor married Cornelio Bonga and begot children, namely: Cirila, Trinidad, Jacoba, Emilio and Benito, all surnamed Bonga. Daughter Cirila Bonga got married to Bernabe Bongalon and begot seven (7) children, namely: Pedro, Cecilio, Amparo, Eleuteria and others, all surnamed Bongalon.

On July 26, 1943, two (2) documents were executed over the same parcel of land, this in question (sic).

First document, Exhibit - "2" defendants, Absolute Deed of Sale was executed and signed by vendors Trinidad Bonga, Conchita Faustino, Teodora Bonga, heirs and children of Rosalia Buenaflor Bonga, [conveying] a part of the property in question xxx in favor of vendee Cirila Bonga xxx. Said Absolute Deed of Sale was notarized and acknowledged on July 26, 1943 by a notary public and entered as Doc. No. 2, Page 15, Book No. 1, Series of 1943.

Second document, Exhibit '"B" - plaintiff, Absolute Deed of Sale was executed and signed by vendors Trinidad Bonga, Cirila Bonga, Conchita B. Faustino (sic) and Teodora Bonga, heirs and children of Rosalia Buenaflor Bonga, [conveying] a part of the property in question in favor of vendee Pedro Bongalon (son of Cirila Bonga Bongalon), xxxx Said document was notarized and acknowledged on July 26, 1943 by a Notary Public and entered as Doc. No. 2, Page No. 15, Book No. 1, Series of 1943.

The Exhibit - "2" for the defendants and the Exhibit - "B" for the plaintiff, contained a handwritten insertion, to wit, "a part of" and initialled, which is unclear, found in the first paragraph, later portion. Both documents are (sic) prepared/executed/signed by the same persons/ signatories, acknowledged and notarized by the same Notary Public, Zosimo R. Almonte. Both documents, Absolute Deed of Sale, printed and expressed particular same boundaries and description of the whole area which is One Hundred Forty Nine (149) square meters, more or less, but did not contain expressly the part/portion of said property [sold].

Circumstances surrounding the execution of these two (2) documents is concluded (sic) and construed that Exhibit - "B" for the plaintiff has to be given weight and effect. This, the entire area of 149 square meters, more or less, is the subject of the sale as Cirila Bonga is now one of the four (4) vendors. Each vendor shared or owned at least 37 square meters and 25 centimeters of this land in question, to be candid and clear.

In possession of the Deed of Absolute Sale, vendee Pedro Bongalon applied, processed and managed to have the ownership of said property transferred in his name by submitting an Affidavit of Confirmation, by Conchita F. Base, one of the vendors, dated May 22, 1978 duly subscribed and sworn to by Notary Public Julian C. Cargullo, entered as Doc. No. 92, Page No. 21, Book No. VII, Series of 1978 and an Extrajudicial Settlement of Estate, this is a requirement. Finally, Transfer Certificate of Title No. T-67780 in the name of Pedro Bongalon was issued on [January] 25, 1985. This is an indefeasible title of ownership in favor of the plaintiff.

On February 22, 1971, again Cirila Bonga, vendor again (sic), executed and signed another Deed of Absolute Sale, Exhibit - "1" for the defendants, in favor of Amparo Bongalon Cortezano, vendee, married to Atenogenes A. Cortezano of the same entire parcel of land in question of 149 square meters, more or less, acknowledged and notarized by Notary Public Joel C. Atadero, entered as Doc. No. 1031, Page No. 77, Book No. VII, Series of 1971. By virtue of this instrument, Cortezano, Amparo procured Tax Declaration No. 0020 in her name declaring the entire 149 square meters for taxation purposes for the year 1985 in her name and where a 32 square meters of a house (sic) is constructed thereon.

Exhibit - "1" for the defendants, Deed of Absolute Sale by vendor Cirila Bonga to the latter's daughter vendee Amparo Bonga Cortezano is defective having a flaw or cloud in the rights of an owner. She, Cirila Bonga, is not the only owner of said land. Previously on July 26, 1943 said parcel of land was a subject of Absolute Deed of Sale in favor of Pedro Bongalon, the brother of vendee of Exhibit - "1" Amparo Bongalon Cortezano, by the rightful owners/vendors of the land in question.

Yet it can be argued that the plaintiff's Extrajudicial Settlement of Estate is a defect, a minor one, but what is controlling is Exhibit - "B", Absolute Deed of Sale in his favor dated July 26, 1943, and the Affidavit of Confirmation of Conchita F. Base.

xxxx

Considering the evidence, and with careful perusal of the same adduced by both parties at the hearing, the Court honestly believes, so holds and is of the strong opinion, that the plaintiff's cause of action is sufficiently impressed with merit supporting his claim of possession, as well as ownership of the land.¹⁶

Respondents appealed to the Court of Appeals.

The Court of Appeals' Ruling

In its 27 November 1992 Decision, the Court of Appeals reversed the RTC Decision. The Court of Appeals held:

PREDICATED on the evidence and the law in point, the appeal in this case is sufficiently impressed with merit.

IN THE FIRST PLACE, the basis of the complaint filed by the plaintiff-appellee is that he acquired the property in question by inheritance from his predecessors-in-interest and not by purchase. This fact is shown by the Annotation xxx of the Extrajudicial Settlement of Estate xxx which was the supporting document that authorized the cancellation of TCT No. T-67656 xxx in the name of the original registered owner Rosalia Buenaflor and the issuance of TCT No. T-67780 in favor of and in the name of plaintiff-appellee Pedro Bongalon. In other words, the Extrajudicial Settlement of Estate (which is by inheritance) is the basis of both the complaint and the transfer of the certificate of title from the original owner to the plaintiff-appellee.

SECONDLY, in the trial of the case, what was introduced in evidence were the Deed of Absolute Sale (Exhibit "B") and the Affidavit of Confirmation (Exhibit "C"), though these were never alleged in the complaint. What was alleged in the complaint was the Extrajudicial Settlement of Estate xxx or the mode of inheritance (sic). That is why, the defendants-appellants' counsel vigorously objected of (sic) the admission of Exhibit "B" and Exhibit "C" on the ground that no evidence can be introduced in support of allegation not found in the pleadings xxx. Consequently, the trial court should not have admitted Exhibits "B" and "C" as part of the evidence.

THIRDLY, the only ground upon which plaintiff-appellee can base his stand is the Deed of Absolute Sale (Exh. "B") and the Deed of Confirmation (Exh. "C") after suppressing the presentation and submission of xxx the Extrajudicial Settlement of Estate. Since Exhibit "B" and Exhibit "C" should not have been considered or admitted because the same were not alleged in the complaint xxx, the only remaining issue is TCT No. T-67780.

FOURTHLY, plaintiff-appellee Pedro Bongalon, as already stated, executed the Extrajudicial Settlement of Estate xxx falsely alleging that the original registered owner Rosalia Buenaflor and husband were survived by their only daughter Cirila Bonga Bongalon, mother of the plaintiff-appellee, when in fact Cirila Bonga Bongalon was survived by her seven (7) children namely: Amparo, Cecilio, Eleuterio (sic), Jose, Gloria, Anastacio and Pedro. The first two names are the defendants-appellants and the last one is the plaintiff-appellee. Consequently, the Extrajudicial Settlement of Estate is tainted with fraud, brazen lies and grave misrepresentation which the lower court recognized as a defect, though a minor one, in view of Exhibit "B" and Exhibit "C". It is inevitable that the trial court should have correctly nullified TCT No. T-67780 on the aforecited grounds. For well-settled is the rule that when a party resorts to falsehood to advance his suit, it is presumed that he knows perfectly well that his cause is groundless and this presumption affects the whole mass of evidence presented by such party xxx. crvll

AFTER a careful review of the entire evidence, We perceive no difficulties in sustaining the validity of defendants-appellants' claim or posture.

ACCORDINGLY, in the light of the foregoing disquisitions, the decision of the Court a quo is hereby REVERSED and SET ASIDE and a new one is rendered dismissing the case, with costs against the plaintiff-appellee.¹⁷ (Capitalization and underlining in the original)

Pedro Bongalon sought reconsideration but the Court of Appeals denied his motion in its 23 February 2000 Resolution.¹⁸

Hence, this petition.¹⁹

The Issues

Petitioner raises the following issues for resolution:

I. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE DECISION OF THE TRIAL COURT;

II. WHETHER THE DECISION OF THE COURT OF APPEALS IS IN ACCORD WITH THE FACTS, EVIDENCE AND THE PERTINENT LAWS, PARTICULARLY THE PROVISIONS OF THE CIVIL CODE ON SALE, POSSESSION AND OWNERSHIP.²⁰

In their Comment, Cecilio and the heirs of Amparo reiterate their prayer to nullify TCT No. T - 67780 and the Extrajudicial Settlement.

The Ruling of the Court

The petition is partly meritorious.

On the Admissibility of Exhibits B and C

It was error for the Court of Appeals to rule that the RTC should not have admitted in evidence Exhibits B and C because Pedro Bongalon failed to allege these documents in his complaint. What was at issue before the RTC, as raised in the pleadings filed by the parties, was the ownership of Lot No. 525-A. Pedro Bongalon offered the pieces of evidence in question to support his claim of ownership over Lot No. 525-A. The fact that Pedro Bongalon did not mention Exhibits B and C in his complaint is not a reason to rule them inadmissible. While TCT No. T-67780 was Pedro Bongalon's principal proof of ownership, it did not preclude him from presenting other pieces of evidence to prove his claim. This is especially relevant because of his testimony that he executed the Extrajudicial Settlement only because the Register of Deeds of Albay required it for the issuance of TCT No. T-67780.²¹

The Basis and Extent of Pedro Bongalon's Interest in Lot No. 525-A

There is no dispute that Lot No. 525-A was Rosalia's paraphernal property. Thus, when Rosalia died intestate, she passed on this piece of property to her surviving spouse Cornelio and their five children, namely, Cirila, Trinidad, Jacoba, Emilio, and Benito. These heirs inherited Lot No. 525-A in co-ownership, at 1/6 undivided share each.²² After Cornelio died, his 1/6 undivided share passed to his surviving five children per stirpes, thus increasing their undivided shares to 1/5 each. The 1/5 undivided share of Jacoba, who apparently predeceased her children Conchita, Catalina, and Leonardo, passed to Jacoba's children as co-owners in equal shares. Likewise, the undivided 1/5 share of Emilio, who also apparently predeceased his children Teodora, Francisca, and Maxima, passed to Emilio's children as co-owners in equal shares.

Under Exhibit 2, Trinidad, Teodora, and Conchita sold to Cirila "a part" of Lot No. 525-A on 26 July 1943.²³ Since these co-owners could alienate their undivided shares,²⁴ they sold under Exhibit 2 their undivided shares in Lot No. 525-A to Cirila. Similarly, on the same day, Cirila (and again Trinidad, Teodora, and Conchita), executed Exhibit B conveying to Pedro Bongalon a "part of" Lot No. 525-A. Thus, Cirila sold to Pedro Bongalon her original 1/5 share and the combined undivided shares of Trinidad, Teodora and Conchita she earlier acquired under Exhibit 2.²⁵ The participation of Trinidad, Teodora and Conchita in Exhibit B, while superfluous (as they had earlier sold their undivided shares to Cirila), does not detract from the validity of Exhibit B. In sum, Pedro Bongalon's interest in Lot No. 525-A covers only the undivided shares of Cirila, Trinidad, Teodora, and Conchita.

Thus, contrary to the RTC Decision, Pedro Bongalon did not acquire ownership of the entire Lot No. 525-A under Exhibit B. As the other co-owners, namely, the heirs of Benito Bongalon, and the other children of Jacoba (Catalina and Leonardo) and Emilio (Francisca and Maxima) did not sign either Exhibit B or Exhibit 2, they remained co-owners of Lot No. 525-A. While each co-owner has full ownership of his part and may alienate it, the alienation affects only the portion which pertains to him in the division upon the termination of the co-ownership.²⁶

Neither can petitioner invoke Exhibit C to support her claim that Pedro Bongalon owns the entire Lot No. 525-A. Conchita stated in that document that all the children and descendants of Rosalia (except for Cirila)²⁷ sold their respective undivided shares to Pedro Bongalon under Exhibit B. This statement, however, is obviously false since only Cirila, Trinidad, Teodora and Conchita signed Exhibit B. The other co-owners of Lot No. 525-A who did not affix their signatures in such document did not sell their shares to Pedro Bongalon.

On Whether the 22 February 1971 Deed of Sale Casts a Cloud on Pedro Bongalon's Title

A cloud on title to real property or any interest therein is "any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title."²⁸ The Court finds that the 22 February 1971 Deed of Sale casts a cloud on Pedro Bongalon's interest over Lot No. 525-A. While apparently valid, the 22 February 1971 Deed of Sale is in fact void and prejudicial to the interest of Pedro Bongalon and his heirs. This document purports to show that Amparo was the owner of such property when in fact she was not. This document is void because at the time of its execution, Cirila had no more interest to sell in Lot No. 525-A because she had sold all her interest in that property to Pedro Bongalon in 1943 under Exhibit B. Thus, Cirila's other children, including Amparo and Cecilio, cannot claim any interest over Lot No. 525-A, either by contract, in the case of Amparo, or by hereditary rights, in the case of Cecilio. Amparo's subsequent declaration of Lot No. 525-A under her name for tax purposes (and her payment of the real estate taxes in 1977 and 1978) did not change her status as a stranger to that property. Cecilio and the heirs of Amparo have no right to remain in Lot No. 525-A much less construct improvements on that property.

On the Validity of the Extrajudicial Settlement and of TCT No. T-67780

Respondents squarely raised in the RTC and in the Court of Appeals the issue of the validity of the Extrajudicial Settlement and of TCT No. T-67780. It was thus incumbent upon these courts to resolve this issue. The RTC failed to do so. On the other hand, the Court of Appeals stated in its 27 November 1992 Decision that the Extrajudicial Settlement contained material misrepresentations which nullified TCT No. T-67780. However, the Court of Appeals inexplicably failed to make a ruling on the status of these two documents in the dispositive portion of its ruling. This is error. Having taken cognizance of an action for quieting of title, both courts should have "adjust[ed] all equities of all the parties to the action and determine[d] the status of all controverted claims to or against the property."²⁹

There is no question that Pedro Bongalon falsely stated in the Extrajudicial Settlement that Cirila was the only heir of Rosalia and that he (Pedro Bongalon), in turn, was the sole heir of Cirila. As the Court of Appeals correctly noted, this is not a minor defect but in fact renders the document void. Consequently, TCT No. T-67780, which the Register of Deeds of Albay issued based on the Extrajudicial Settlement, must be cancelled. In Ramirez v. CA,³⁰ also involving a case for quieting of title, this Court annulled several Transfer Certificates of Title on the ground that they were issued based on void documents.

The cancellation of the Extrajudicial Settlement and TCT No. T-67780 does not deprive Pedro Bongalon or his heirs of the right to maintain this action for quieting of title. Under Article 477 of the Civil Code, it is sufficient that the plaintiff has legal or equitable title to or interest in the real property which is the subject matter of the action. Pedro Bongalon's acquisition of the shares of Cirila, Trinidad, Conchita, and Teodora vested him with the necessary legal interest over Lot No. 525-A.

WHEREFORE, we GRANT the petition in part. We SET ASIDE the Decision dated 27 November 1992 and the Resolution dated 23 February 2000 of the Court of Appeals. We enter a new judgment as follows:

(1) The Deed of Sale dated 22 February 1971 and the Deed of Extrajudicial Settlement dated 30 January 1979 are ANNULLED.

(2) Transfer Certificate of Title No. T-67780 is CANCELLED. The Register of Deeds of Albay is ordered to restore Transfer Certificate of Title No. T-67656 in the name of Rosalia Buenaflor, without prejudice to the issuance of another Transfer Certificate of Title in the name of Pedro Bongalon and the other co-owners of Lot No. 525-A, namely, Benito Bongalon, Catalina Faustino Conlo, Leonardo Faustino, Francisca Bonga Camba, and Maxima Bonga Diaz.

(3) Respondent Cecilio Bongalon and the heirs of Amparo Bongalon are ordered to vacate Lot No. 525-A and to remove all the improvements they have constructed on Lot No. 525-A.

SO ORDERED.

Davide, Jr., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.

Endnotes:

¹ Under Rule 45 of the 1997 Rules of Civil Procedure.

² Penned by Associate Justice Jainal D. Rasul with Associate Justices Emeterio C. Cui and Segundino G. Chua concurring.

³ Penned by Judge Milagros JB. Marcaida.

⁴ Eleuteria, Jose, Gloria and Anastacio, all surnamed Bongalon.

⁵ The records do not indicate the names of the spouses of Jacoba and Emilio or whether they predeceased the latter.

⁶ Records, p. 160.

⁷ Ibid., p. 154. Exhibit 2 reads:

KNOW ALL MEN BY THESE PRESENTS:

That we, Trinidad Bonga, of legal age, married to Bernardino Bobier, Conchita Faustino, of legal age, married to Andres Bose, Teodora Bonga, of legal age, married to Eugenio Bien, all filipino citizens and with Residence and Postal Address at the Municipality of Tabaco, Province of Albay, for and in consideration of the sum of One Hundred Pesos (P100.00), Present Currency, to us in hand paid and receipt hereof is hereby acknowledged, by Cerila Bonga (sic), of legal age, married to Bernabe Bongalon, filipina, and with Residence and Postal Address at the Municipality of Tabaco, Province of Albay, with the knowledge and consent of our respective husbands, do hereby SELL, TRANSFER, AND CONVEY; unto the said Cerila Bonga (sic), her heirs and assign, a part of that certain residential lot which we inherited from our deceased mother and grandmother, respectively, and now, belonging to us and in our present possession, more particularly bounded and described as follows:

A parcel of Residential Lot (Lot No. 525, of the Cad. Survey of Tabaco), situated in Taylor Street, Tabaco, Albay, containing an area of one hundred forty-nine (149) square meters, more or less; Bounded on the N. by Taylor Street; on the E. by Cristina Barcebal; on the S. by Felix Berces Jr.; and on the W. by Alfonsa Centura. Covered by Original Certificate of Title No. 23825, issued by the Register of Deeds of the Province of Albay.

That we do hereby covenant and agree with the vendee, Cerila Bonga (sic), that we are lawfully seized in fee of the said premises, that it is free from all liens and encumbrances, that we have the perfect right to convey the same, and that we warrant and forever defend the same unto the said Cerila Bonga (sic), her heirs and assigns, against the lawfull (sic) claims of all persons whomsoever.

In WITNESS WHEREOF, we have hereunto signed this presents, this 26th day of July, 1943, in the Municipality of Tabaco, Province of Albay. (Underscored portion was inserted in writing in the original)

⁸ Ibid., p. 133. Exhibit B (incorrectly marked as "Annex B") reads:

KNOW ALL MEN BY THESE PRESENTS:

That we, Cerila Bonga (sic), of legal age, married to Bernabe B. Bongalon, Trinidad Bonga, of legal age, married to Bernardino Bobier, Conchita Faustino, of legal age, married to Andres Bose (sic), Teodora Bonga, of legal age, married to Eugenio Bien, all filipino citizens and with Residence and Postal Address at the Municipality of Tabaco, Province of Albay, for and in consideration of the sum of One Hundred Pesos (P100.00), Present Currency, to us in hand paid and receipt hereof is hereby acknowledged, by Pedro Bongalon, of legal age, single, son of Cerila Bonga (sic), filipino, and with Residence and Postal Address at the Municipality of Tabaco, Province of Albay, with the knowledge and consent of our respective husbands, do hereby SELL, TRANSFER, AND CONVEY, under the said Pedro Bongalon his heirs and assigns, a part of that certain residential lot which we inherited from our deceased mother and grandmother, respectively, and now, belonging to us and in our present possession, more particularly bounded and described as follows:

A parcel of Residential Lot (Lot No. 525, of the Cad. Survey of Tabaco), situated in Taylor Street, Tabaco, Albay, containing an area of one hundred forty-nine (149) square meters, more or less; Bounded on the N. by Taylor Street; on the E. by Cristina Barcebal; on the S. by Felix Berces Jr., and on the W. by Alfonsa Centura. Covered by Original Certificate of Title No. 23825, issued by the Register of Deeds of the Province of Albay.

That we do hereby covenant and agree with the vendee, Pedro Bongalon, that we are lawfully seized in fee of the said premises, that it is free from all liens and encumbrances, that we have the perfect right to convey the same, and that we warrant and forever defend the same unto the said Pedro Bongalon, his heirs and assigns, against the lawfull claims of all persons whomsoever.

In WITNESSWHEREOF (sic), we have hereunto signed this presents, this 26th day of July, 1943, in the Municipality of Tabaco, Province of Albay. (Underscored portion was inserted in writing in the original)

⁹ Ibid., p. 153. The 22 February 1971 Deed of Sale reads:

KNOW ALL MEN BY THESE PRESENTS:

That I, CIRILA BONGA, of legal age, widow, filipino citizen, and with residence of and with postal address at Legaspi Street, Municipality of Tabaco, Province of Albay, for and in consideration of [the] sum of FOUR THOUSAND AND FIVE HUNDRED PESOS (P4,500.00), in Philippine Currency, paid to me and to my entire satisfaction by AMPARO BONGALON CORTEZANO, of legal age, married to MR. ATENOGENES A. CORTEZANO, filipino citizen, and with residence of and with postal address at the Municipality of Tabaco, Province of Albay, do hereby sell, cede, transfer, convey, and from the date of this instrument, I deliver the property, dominion and material possession unto her, her heirs, executors and assigns, that certain portion of residential land, more particularly bounded and described as follows:

"Part of Original Certificate of Title No. 23825 [a] parcel of residential land (part of Lot No. 525 of the Cadastral Survey of Tabaco), situated at Taylor Street, Tabaco, Albay, containing an area of one hundred and forty-nine (149) square meters, more or less; bounded on the North, by Taylor Street; on the East, by Cristina Barcebal; on the South, by Felix Berces Jr.; and on the West, by Alfonsa Centura. Visible boundaries consists (sic) of cemented posts. Declared under Tax No. __________, and with an ass'd value of P__________ . ["]

of which property, VENDOR is the absolute and exclusive owner, the same being a part of her paraphernal properties, free from all liens and incumbrances, further agreeing to forever defend the same against any and all claims by whomsoever, in favor of VENDEE, her heirs, executors and assigns.

That said property is duly registered under Act 496, as evidenced by the afore-cited Original Certificate of Title. Artilce (sic) 1623 of the New Civil Code of the Philippines, and the provisions of Republic Act No. 3844, known the (sic) Agricultural Land Reform Code, in connection with possible redemptioners thereof, has been complied with.

IN WITNESS WHEREOF, I have hereunto set my hand in the Municipality of Tabaco, Albay, on this 22nd day of February, 1971. (Capitalization and blanks in the original)

¹⁰ Cecilio testified that while he had a house in Lot No. 525-A (where Cirila, Bernabe, and Eleuteria also stayed), he later moved out of it and transferred to Amparo's house after Pedro Bongalon's family moved in his house (TSN, 8 May 1991, pp. 7-10, 17-18).

¹¹ Records, pp. 1-3.

¹² Ibid., pp. 8-10.

¹³ Ibid., p. 134. Exhibit C reads:

KNOW ALL MEN BY THESE PRESENTS:

That I, CONCHITA F. BASE, of legal age, widow and presently a resident and with postal address at Sn (sic) Juan (Patio), Tabaco, Albay, after having been duly sworn to in accordance with law, depose and state:

That I know personally Pedro Bongalon, being the son of my auntie, Cirila Bonga Bongalon (deceased);

That on or about July 26, 1943, due to the death of my grandfather, Cornelio C. Bonga, my mother Jacoba Bonga Faustino (deceased) thru her children, Conchita Faustino Base, Catalina Faustino Conlo, and Leonardo Faustino; Trinidad Bonga Bobier, daughter of the late Cornelio C. Bonga; [illegible] Bonga (deceased) thru his children, Teodora Bonga Bien, Francisca Bonga Camba, and Maxima Bonga Diaz; Benito Bonga (deceased) thru his children Consuelo Bonga Gonzales and Amado Bonga; sold our respective shares in a parcel of residential lot, more particularly bounded and described as follows:

"A parcel of residential lot (lot No. 525, of the Cad. Survey of Tabaco), situated in Taylor Street, Tabaco, Albay, containing an area of one hundred forty-nine (149) square meters, more or less; Bounded on the N. by Taylor Street; on the E. by Cristina Barcebal; on the S. by Felix Barces, Jr. and on the W. by Alfonsa Centura. Covered by Original Certificate of Title No. 23825, issued by the Register of Deeds of the Province of Albay."

to our cousin, Pedro Bonga Bongalon, as evidenced by an Absolute Deed of Sale, executed before Notary Public, Zosimo R. Almonte, as Doc. No. 2, Page No. 15, Book No. 1, Series of 1943;

That said Pedro Bonga Bongalon as vendee has been in continuous possession and without interruption of the lot since the sale by his mother and our aunties;

That as witness vendor to the sale, I hereby execute this instrument of confirmation freely and voluntarily.

IN WITNESS WHEREOF, I have hereunto set my hand this 22[nd] day of May, 1978.

¹⁴ Ibid., p. 81. Because of this substitution, petitioner should have impleaded the heirs of Amparo as co-respondents in this petition in lieu of Amparo.

¹⁵ Ibid., p. 179.

¹⁶ Records, pp. 176-179.

¹⁷ Rollo, pp. 44-45.

¹⁸ Pedro Bongalon died before the filing of this petition and petitioner substituted for him.

¹⁹ Rollo, pp. 10-17.

²⁰ Ibid., p. 13.

²¹ TSN (Pedro Bongalon), 17 September 1990, pp. 19-21.

²² Article 996, Civil Code.

²³ Having acquired their respective shares through inheritance, the undivided shares of Trinidad, Conchita, Teodora and Cirila are paraphernal property (Alvaran v. Marquez, 11 Phil. 263 [1908]) which they can alienate on their own (Article 493, Civil Code).

²⁴ Article 493, Civil Code.

²⁵ While the undivided shares purchased by Cirila under Exhibit 2 presumably form part of her conjugal partnership of gains with Bernabe (having acquired them by onerous title during her marriage), her sale of such shares to Pedro Bongalon in Exhibit B binds the conjugal partnership as Bernabe consented to the sale (Article 172, Civil Code).

²⁶ Article 493, Civil Code. This provision states: "Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership."

²⁷ The name of one of Rosalia's children in Exhibit C is illegible. However, from Exhibit C's enumeration of her children and from the fact that she only had two sons, one of whom (Benito) was named in Exhibit C, it can be inferred that the illegible name refers to Emilio.

²⁸ Article 476, Civil Code.

²⁹ Tolentino, Civil Code of the Philippines, Vol. II, p. 156 (1992 ed.).

³⁰ 356 Phil. 1 (1998).

G.R. No. 142609 - SEASTAR MARINE SERVICES, INC., ET AL. v. LUCIO A. BUL-AN, JR.

2013-01-15T09:50:32+00:00

G.R. No. 142609 - SEASTAR MARINE SERVICES, INC., ET AL. v. LUCIO A. BUL-AN, JR.

SECOND DIVISION

[G.R. NO. 142609 : November 25, 2004]

SEASTAR MARINE SERVICES, INC. AND CICERO L. MALUNDA, Petitioners, v. LUCIO A. BUL-AN, JR., Respondent.

D E C I S I O N

CALLEJO, SR., J.:

This is a Petition for Review under Rule 45 of the Rules of Civil Procedure, as amended, of the Resolution¹ of the Court of Appeals (CA) dated April 29, 1999, dismissing the petition for certiorari filed by petitioner Seastar Marine Services, Inc. (Seastar), as well as the Resolution² dated February 29, 2000, denying the motion for reconsideration thereof.

The Antecedents

Respondent Lucio A. Bul-an, Jr. was hired by petitioner Seastar as an Able Seaman for and in behalf of H.S.S. Holland Ship Service, B.V., on board the M/V Blue Topaz. Under the contract of employment which was approved by the Pre-Employment Services Office of the Philippine Overseas Employment Administration (POEA) on April 26, 1995, the respondent was to receive a monthly salary of US$350.00 for nine (9) months and would be working for 48 hours per week. The said contract was duly signed by the respondent and the President of petitioner Seastar, petitioner Captain Cicero L. Malunda.³

On April 28, 1995, the respondent boarded the M/V Blue Topaz off the coast of Castellon, Spain, with a complement composed mostly of Filipinos.⁴ Shortly thereafter, or on June 16, 1995, Chief Mate Benjamin A. Paruginog mauled the respondent, causing bodily harm and physical injuries to the latter. The respondent immediately reported the incident to Master Captain Stumpe Luitje Jacobus, who assured him that he would settle the matter with Paruginog.

In a Letter⁵ dated June 17, 1995, Captain Jacobus reported to his superiors at the Topaz Seal Shipping Company, Ltd. that the respondent was uncooperative, refused to obey his orders and those of the chief officer, and often pretended to be ill in order to be "free of duty." The Captain expressed his fears of getting into serious trouble in the future with the respondent, and for this reason, wanted to "have this man relieved." A note was inserted below the letter indicating that the respondent had left without permission on "the evening of June 26 at Villanueva, Spain." The letter was countersigned by several crew members, including Paruginog.

Apparently, the respondent had again been maltreated by Paruginog that day. Since the Captain was out on shore, the respondent had decided to immediately leave the boat after the incident. He returned after four (4) days with a priest and Atty. Rafael de Muller Barbat with the intention of taking up the matter with Captain Jacobus. However, the Captain refused to accept his explanation and sided with Paruginog.⁶

In a Letter⁷ dated August 20, 1995 addressed to petitioner Malunda, Paruginog reported the respondent's unusual behavior since boarding the ship, and the circumstances leading to the latter's disembarkation. He denied the respondent's allegations that he (Paruginog) made threats to kill the respondent. Thereafter, Captain Jacobus reiterated his complaints on the respondent's work and uncooperative attitude in another Letter⁸ to his superiors dated August 21, 1995. The Captain explained that he was watching out for the respondent for fear that the latter would force the crew "to do something" so that he (the respondent) could get a free ticket home.

Because of the Captain's refusal to take him back as a member of the complement of the ship, the respondent was forced to seek help from the Philippine Embassy at Barcelona, Spain, and executed an Affidavit⁹ on the matter on June 30, 1995. The respondent was left with no other recourse but to return to the Philippines on July 4, 1995.

Thereafter, the respondent filed a complaint for illegal dismissal with prayer for payment of back wages, as well as actual, moral and exemplary damages against the petitioners. The complaint was docketed as OCW Case No. 00-10-00400-95. The complainant alleged that due to the Captain's refusal to accept him upon his return to the ship, he was forced to return to the Philippines. He immediately reported the matter to the petitioners, but instead of receiving assistance, he was even scolded for returning home. Thus, he sent two letters to the petitioners dated July 12, 1995 and August 2, 1995, demanding the payment of his wages from April 26, 1995 to July 5, 1995. Since his demands were not acted upon, he was constrained to file the case for illegal dismissal.

For its part, petitioner Seastar alleged that the respondent was "psychologically ill" and was dismissed for a justified and lawful cause. It was averred that even only after a few days of boarding the M/V Blue Topaz, the respondent already showed unusual behavior. He not only refused to obey orders from his superior officers; he also refused to work, spending working hours in his cabin, and totally alienated himself from the rest of the complement of the ship, inclusive of its master and officers. Thus:

His actuation or manifestation of himself as the Captain, who is part owner of the vessel, described him, complainant is "just like he lost his common sense."

At the beginning, that is, after about a week on board, he confronted the Master of the vessel and told him "that the vessel was too small for him and too many work." Just the same, he was told by the Master that he "still have to stay your tour." Complainant continuous (sic) to disobey his master and officers and behave indifferently as if he is mentally ill.

On June 26, 1995, while the vessel was anchored at Villanueva, Spain, complainant abandoned ship and was not found until he was reported to the local authorities who located him at Stella Maris Seaman's Club. He claimed that because of fear to be killed or thrown over board by the Chief Officer who is also a Filipino, he abandoned ship and hide (sic) at said Club.

Due to the troubles and problems being encountered by the Master of the vessel and the crew with complainant, he was dismissed and repatriated.¹⁰

On November 19, 1997, the labor arbiter rendered a decision in favor of the respondent. The dispositive portion reads:

IN THE LIGHT OF THE FOREGOING, decision is hereby rendered in favor of the complainant and ordering the respondents to pay complainant:

A. Eighteen Thousand Two Hundred Pesos (P18,200.00) representing unpaid salaries for the first two (2) months of complainant;

b. Forty Thousand Nine Hundred Fifty Pesos (P40,950.00) equivalent to three (3) months salary for the unexpired portion of the employment contract;

c. Ten Thousand Pesos (P10,000.00) as actual damages;

d. Fifty Thousand Pesos (P50,000.00) as moral damages and Thirty Thousand Pesos (P30,000.00) as exemplary damages; andcralawlibrary

e. Ten percent (10%) of all sums owing to complainant as attorney's fees.¹¹

The labor arbiter ruled that the petitioner was dismissed without just cause. According to the labor arbiter, the allegation that the respondent was insane was not proven by the petitioners and, as such, the presumption of sanity in favor of the respondent remained unrebutted. Furthermore, considering that the respondent was not given any notice prior to his dismissal, the petitioners failed to observe the twin requirement of notice and hearing, which constitute the essential elements of due process in cases of employee dismissal. The labor arbiter, likewise, stated that the duration of the respondent's contract with the petitioners was for nine months at $350.00 (approximately P9,100.00). Since the respondent's services were unjustly terminated only after two (2) months of employment, without his wages having been paid, the labor arbiter ruled that the respondent was entitled to "the full reimbursement of the placement fee with interest at twelve percent (12%) per annum, plus salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less," conformably to Section 10, paragraph 6 of Republic Act No. 8042, otherwise known as the Migrant Worker's Act. Citing Reta v. NLRC,¹² the labor arbiter awarded actual damages in favor of the respondent for the petitioners' failure to observe due process. Moral and exemplary damages were also awarded in accordance with the ruling of the Court in Maglutac v. NLRC,¹³ including attorney's fees.

The labor arbiter also held that petitioner Seastar, as the private employment agency, is jointly and solidarily liable with its foreign principal, conformably to the ruling of the Court in Catan v. NLRC.¹⁴

The petitioners assailed the decision of the labor arbiter before the National Labor Relations Commission (NLRC). The appeal was docketed as NLRC NCR CA Case No. 014485-98.

In a Resolution¹⁵ dated September 15, 1998, the NLRC ruled in favor of the respondent and dismissed the appeal for lack of merit, holding that under the facts and circumstances obtaining in the case at bar, the respondent could not be said to have abandoned or resigned from his work. As such, the "inescapable conclusion" was that he was illegally dismissed and entitled to receive the money award given by the labor arbiter. It was further stated that the findings of fact of the labor arbiter are entitled to great respect and are generally binding on the Commission, as long as they are substantially supported by the established facts and evidence on record, as well as the applicable law and jurisprudence, and that in this case, the labor arbiter committed no grave abuse of discretion. As such, the appeal must be dismissed. The dispositive portion of the decision reads:

WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit and the appealed decision, dated 19 November 1997 of Labor Arbiter Ariel Cadiente Santos, is AFFIRMED.

SO ORDERED.¹⁶

The motion for reconsideration of the petitioners was, likewise, denied by the NLRC for lack of merit in a Resolution¹⁷ dated January 12, 1999.

On April 14, 2000, the petitioners filed a Petition for Review on Certiorari under Rule 65 of the Rules of Court, as amended, before the Court of Appeals. However, the petitioners failed to allege the date when they filed their motion for reconsideration of the resolution of the NLRC dismissing their petition. Thus, in a Resolution¹⁸ dated April 29, 1999, the appellate court dismissed the petition on such ground, ruling that it had no other way of determining the timeliness of the filing of the petition, conformably to Sections 3 and 5, Rule 46 of the 1997 Rules of Civil Procedure.

The petitioners then filed a Motion for Reconsideration with Prayer for Leave to Admit Amended Petition on June 2, 1999, which the appellate court, likewise, denied on February 29, 2000.

The petitioners now come to this Court via a Petition for Review , alleging that the appellate court erred as follows:

THE COURT OF APPEALS ERRED IN ISSUING THE FIRST CHALLENGED ORDER DATED 29 APRIL 1999 DISMISSING THE PETITION FOR CERTIORARI FILED BY PETITIONERS IN CA-G.R. SP. NO. 52270 AND IN DENYING PETITIONERS' MOTION FOR RECONSIDERATION WITH PRAYER FOR LEAVE TO ADMIT AMENDED PETITION IN THE SECOND CHALLENGED ORDER DATED 29 FEBRUARY 2000 CONSIDERING THAT:

A. PETITIONERS SUBSTANTIALLY COMPLIED WITH THE REQUIREMENTS OF SECTIONS 3 AND 5, RULE 46 OF THE 1997 RULES OF CIVIL PROCEDURE.

B. IN ANY CASE, THE TIMELINESS OF THE FILING OF THE PETITION FOR CERTIORARI SHOULD BE RECKONED FROM DATE OF PETITIONERS' OFFICIAL RECEIPT OF THE NLRC RESOLUTION DATED 12 JANUARY 1999 ON 28 APRIL 1999.

C. THE COURT OF APPEALS SERIOUSLY ERRED IN NOT REVERSING THE NLRC AND FINDING THAT PRIVATE RESPONDENT WAS DISMISSED FOR JUST AND VALID CAUSE NOTWITHSTANDING THAT:

i) THE PRIVATE RESPONDENT BUL-AN WAS DISMISSED FOR A JUST AND VALID CAUSE AND WITH DUE PROCESS BY PETITIONERS.

ii) THE LABOR ARBITER FAILED TO CONDUCT TRIAL ON THE MERITS ALTHOUGH THE FACTS AND ISSUES INVOLVED WARRANT SUCH TRIAL.

iii) THE PRIVATE RESPONDENT IS NOT ENTITLED TO ANY OF HIS PECUNIARY CLAIMS.

iv) IN ANY CASE, PETITIONER MALUNDA CANNOT BE HELD PERSONALLY AND SOLIDARILY LIABLE WITH PETITIONER CORPORATION SEASTAR.¹⁹

The Present Petition

The petitioners beg the Court's indulgence, and seek the nullification of the resolution of the CA dismissing the petition on purely technical grounds. The petitioners stress that they begged for leave to file an amended petition indicating the date of the filing of their motion for reconsideration. The petitioners allege that they substantially complied with the requirements of Sections 3 and 5, Rule 46 of the 1997 Rules of Civil Procedure, considering that the motion for reconsideration of the NLRC decision was attached to the petition as Annex "B" thereof, where the date of the denial of the said motion for reconsideration was indicated.²⁰ Citing the ruling of the Court in Evangelista v. Mendoza,²¹ the petitioners contend that annexes which are attached to the pleading are to be read and considered as a part thereof, and as such, the petitioners insist that the timeliness of the filing of the petition for certiorari may easily be determined from the petition itself. The petitioners claim that, in any case, the timeliness of the filing of the petition should be reckoned from the date of official receipt of a copy of the resolution of the NLRC denying their motion for reconsideration, or on April 28, 1999.

The petitioners further contend that the respondent was validly dismissed on the ground of willful disobedience of the lawful orders of the representatives of his employers, and gross and habitual neglect of his duties, as provided for under Article 282, paragraphs (a) and (b) of the Labor Code. They assert that adequate and sufficient proof was presented to prove the respondent's gross insubordination and habitual neglect.

The petitioners further allege that the NLRC had acted without or in excess of jurisdiction when it upheld the labor arbiter's ruling. It was incumbent upon the NLRC to remand the case to the labor arbiter, considering that the material and factual issues involving the circumstances of the respondent's separation from employment could only be properly addressed and resolved in such proceedings. Furthermore, considering that the respondent was dismissed for a just and valid cause, the award for unpaid salaries, salaries accruing for the unexpired portion of his contract, actual damages, moral damages and attorney's fees was unjustified. No bad faith could be attributed to the petitioners for the dismissal of the respondent; hence, petitioner Malunda could not be held personally and solidarily liable with petitioner Seastar.

For his part, the respondent claims that the CA did not err in dismissing the petition for having been filed out of time. Furthermore, the appellate court was correct in affirming the decision of the NLRC and in finding that the respondent was illegally dismissed. Considering that the findings of administrative agencies are accorded not only respect but also finality, the appellate court was correct in not disturbing the factual findings of the labor arbiter as affirmed by the NLRC.

The respondent further claims that the issues raised by the petitioners were validly addressed in his (respondent's) pleadings and were sufficiently resolved both by the labor arbiter and the NLRC. Furthermore, Section 4, Rule V of the New Rules of Procedure of the NLRC provides that it is the labor arbiter who is authorized to determine whether or not there is a necessity for conducting formal hearings in cases brought before them for adjudication even after the submission of the parties of their position papers or memoranda. According to the respondent, such determination made by the labor arbiter is entitled to great respect in the absence of arbitrariness, and cites the case of Coca-Cola Salesforce Union v. NLRC.²²

The determinative issue in the case at bar is whether or not the Court of Appeals erred in dismissing the petitioners' petition under Rule 65 of the Rules of Court, as amended, on the ground of the petitioners' failure to indicate the date of receipt of the Resolution of the NLRC denying their motion for reconsideration in the petition before the appellate court.

The Ruling of the Court

The petition has no merit.

It must be stressed that there are three (3) essential dates that must be stated in a petition for certiorari brought under Rule 65, which the Court enumerated and discussed in Santos v. Court of Appeals:²³

'First, the date when notice of the judgment or final order or Resolution was received; second, when a motion for new trial or reconsideration was filed; and third, when notice of the denial thereof was received.'

The requirement of setting forth the three (3) dates in a petition for certiorari under Rule 65 is for the purpose of determining its timeliness. Such a petition is required to be filed not later than sixty (60) days from notice of the judgment, order or Resolution sought to be assailed. Therefore, that the petition for certiorari was filed forty-one (41) days from receipt of the denial of the motion for reconsideration is hardly relevant. The Court of Appeals was not in any position to determine when this period commenced to run and whether the motion for reconsideration itself was filed on time since the material dates were not stated. It should not be assumed that in no event would the motion be filed later than fifteen (15) days. Technical rules of procedure are not designed to frustrate the ends of justice. These are provided to effect the prompt, proper and orderly disposition of cases and thus effectively prevent the clogging of court dockets. Utter disregard of the Rules cannot justly be rationalized by harking on the policy of liberal construction.²⁴

It must be stressed that certiorari , being an extraordinary remedy, the party who seeks to avail of the same must strictly observe the rules laid down by law.²⁵

A careful perusal of the records further shows that in their petition before the Court, the petitioners aver that they received the resolution of the NLRC dated January 12, 1999 denying their motion for reconsideration only on April 28, 1999, "the date the NLRC officially furnished petitioners a copy of said resolution as evidenced by a certified true copy issued by the NLRC."²⁶ However, in their petition before the appellate court, the petitioners made the following admission:

24. To date, undersigned counsel for petitioners have not been furnished a copy of the second questioned Resolution (Annex "B") despite the fact that undersigned counsel had previously entered his appearance for the petitioners as early as 26 March 1998. Accordingly, undersigned counsel had to procure a copy of said Resolution (Annex "B") from the NLRC, on 15 February 1999, the date petitioners, through undersigned counsel, officially received the same. Hence, the instant petition.²⁷

It is settled that a judicial admission is binding on the person who makes it, and absent any showing that it was made through palpable mistake, no amount of rationalization can offset such admission.²⁸ Thus, the Court cannot countenance nor consider the petitioners' claim of actual receipt of the copy of the NLRC resolution on an altogether different date without even an explanation therefor.

The Court notes with approval the following ratiocination of the appellate court when it denied the petitioners' motion for reconsideration:

Movants contend that the timeliness of their petition can be determined from its Annex "B" (which forms part of the petition) stating, among others, that they filed their motion for reconsideration of the NLRC decision on December 10, 1998.

Assuming that movants' contention is in order, still their petition is dismissible as it was filed five days late.

We cannot give credence to movants' claim that they received a copy of the assailed NLRC resolution dated January 12, 1999 only on April 28, 1999 since the instant petition for certiorari was filed earlier or on April 14, 1999. Indeed, here is an absurd situation where the petition assailing the NLRC resolution was filed even before they received a copy thereof.²⁹

Even if the Court were to disregard the merits of the instant case, the petition is still destined to fail.

The petitioners would want this Court to ascertain whether or not the findings of the NLRC, as affirmed by the CA, are substantiated by the evidence on record; hence, requiring a review of factual matters. However, the issues that can be delved into in a Petition for Review under Rule 45 of the Rules of Civil Procedure are limited to questions of law.³⁰ The calibration of the evidence of the parties statutorily belongs to the NLRC. Judicial review of labor cases does not go beyond the evaluation of the sufficiency upon which its labor officials' findings rest.³¹ Furthermore, this Court is not a trier of facts, and this doctrine applies with greater force in labor cases. Factual questions are for labor tribunals to resolve. Indeed, the findings of fact of quasi-judicial bodies, like the NLRC, are accorded with respect, even finality, if supported by substantial evidence.³²

Anent the petitioners' allegation that the NLRC should have remanded the case to the labor arbiter for further proceedings, the following pronouncement of the Court in CaÃ±ete v. National Labor Relations Commission³³ is instructive:

It is clear that the labor arbiter enjoys wide discretion in determining whether there is a need for a formal hearing in a given case'. [H]e or she may use all reasonable means to ascertain the facts of each case without regard to technicalities. The case may be decided on the basis of the pleadings and other documentary evidence presented by the parties. In the absence of any palpable error, arbitrariness or partiality, the method adopted by the labor arbiter to decide a case must be respected by the NLRC.³⁴

Thus, a formal trial-type hearing is not at all times and in all instances essential to due process. It is enough that the parties are given a fair and reasonable opportunity to explain their respective sides of the controversy and to present supporting evidence on which a fair decision can be based.³⁵ In fact, Rule V of the Rules of Procedure of the NLRC, as amended, outlines the procedure to be followed in cases before the labor arbiter, as follows:

Section 3. Submission of Position Papers/Memorandum.'

Should the parties fail to agree upon an amicable settlement, either in whole or in part, during the conferences, the Labor Arbiter shall issue an order stating therein the matters taken up and agreed upon during the conferences and directing the parties to simultaneously file their respective verified position papers.

Those verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that may have been amicably settled, and shall be accompanied by all the supporting documents including the affidavits of their respective witnesses which shall take the place of the latter's direct testimony. The parties shall, thereafter, not be allowed to allege facts, or present evidence to prove facts, not referred to and any cause or causes of action not included in the complaint or position papers, affidavits, and other documents. Unless otherwise requested in writing by both parties, the Labor Arbiter shall direct both parties to submit simultaneously their position papers/memorandum with the supporting documents and affidavits within fifteen (15) calendar days from the date of the last conference, with proof of having furnished each other with copies thereof.

Section 4. Determination of Necessity of Hearing. - Immediately after the submission by the parties of their position papers/memorandum, the Labor Arbiter shall motu proprio determine whether there is a need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevant documentary evidence, if any from any party or witness.

Section 5. Period to Decide Case. - (a) Should the Labor Arbiter find it necessary to conduct a hearing, he shall issue an order to that effect setting the date or dates for the same which shall be determined within ninety (90) days from initial hearing.

He shall render his decision within thirty (30) calendar days, without extension, after the submission of the case by the parties for decision, even in the absence of stenographic notes: Provided, however, that OFW cases shall be decided within ninety (90) calendar days after the filing of the complaint and the acquisition by the labor arbiter of jurisdiction over the parties.

(b) If the Labor Arbiter finds no necessity of further hearing after the parties have submitted their position papers and supporting documents, he shall issue an Order to that effect and shall inform the parties, stating the reasons therefore. In any event, he shall render his decision in the case within the same period provided in paragraph (a) hereof.³⁶

WHEREFORE, the instant petition is DENIED. The assailed Resolutions of the Court of Appeals, dated April 29, 1999 and February 29, 2000, are AFFIRMED. Costs against the petitioners.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, TINGA, and Chico-Nazario, JJ., concur.

Endnotes:

¹ Penned by Associate Justice Angelina Sandoval Gutierrez (now an Associate Justice of the Supreme Court), with Associate Justices Romeo A. Brawner and Martin S. Villarama, Jr., concurring.

² Rollo, pp. 35-37.

³ Id. at 61.

⁴ Id. at 43.

⁵ CA Rollo, p. 29.

⁶ Rollo, p. 66.

⁷ CA Rollo, pp. 31-32.

⁸ Id. at 30.

⁹ Rollo, p. 62.

¹⁰ Respondent's Position Paper, pp. 2-3; CA Rollo, pp. 34-35.

¹¹ Rollo, p. 80.

¹² 232 SCRA 613 (1994).

¹³ 189 SCRA 767 (1990).

¹⁴ 160 SCRA 691 (1988).

¹⁵ Rollo, pp. 102-109.

¹⁶ Id. at 108.

¹⁷ Annex "L," Id. at 110.

¹⁸ Id. at 33.

¹⁹ Id. at 13-14.

²⁰ Id. at 15.

²¹ 1 SCRA 337 (1961).

²² 243 SCRA 680 (1995).

²³ 360 SCRA 521 (2001).

²⁴ Id. at 527-528.

²⁵ University of Immaculate Concepcion, et al. v. Secretary of Labor and Employment, et al., G.R. No. 143557, June 25, 2004.

²⁶ Rollo, p. 17.

²⁷ CA Rollo, p. 7.

²⁸ See Heirs of Miguel Franco v. Court of Appeals, 418 SCRA 60 (2003).

²⁹ Rollo, p. 36.

³⁰ Philippine Telegraph and Telephone Corporation v. Court of Appeals, 412 SCRA 263 (2003).

³¹ CBL Transit, Inc. v. NLRC, et al., G.R. No. 128425, March 11, 2004.

³² Shoppes Manila, Inc. v. NLRC, et al., G.R. No. 147125, January 14, 2004.

³³ 306 SCRA 324 (1999).

³⁴ Id. at 332.

³⁵ Id. at 325-326; Abiera v. NLRC , 215 SCRA 476 (1992); Llora Motors, Inc. v. Drilon, 179 SCRA 175 (1989).

³⁶ The Rules of Procedure of the NLRC, as amended by Resolution No. 3-99, Series of 1999, was further amended by Resolution No. 01-02, Series of 2002, on February 12, 2002. The amendment took effect on March 18, 2002.

G.R. No. 142759 - PHILTREAD TIRE & RUBBER CORPORATION v. ALBERTO VICENTE

2013-01-15T09:50:33+00:00

G.R. No. 142759 - PHILTREAD TIRE & RUBBER CORPORATION v. ALBERTO VICENTE

THIRD DIVISION

[G.R. NO. 142759 : November 10, 2004]

PHILTREAD TIRE & RUBBER CORPORATION, Petitioner, v. ALBERTO VICENTE, Respondent.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

For resolution is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision¹ dated November 25, 1999 and the Resolution² dated March 22, 2000 rendered by the Court of Appeals in CA-G.R. SP No. 52723, entitled "Philtread Tire and Rubber Corporation v. National Labor Relations Commission and Alberto Vicente."

The facts as borne by the records are:

On February 9, 1978, Alberto M. Vicente, respondent, was employed by Philtread Tire and Rubber Corporation, petitioner. At the time of his dismissal from the service, he was a housekeeping coordinator at the General Services Department, receiving a monthly salary of P8,784.00. One of his duties was to recommend to petitioner, for its approval, projects intended for the beautification and maintenance of its premises.

On February 15, 1991, Engr. Ramon Y. Dumo, Administrative Officer and Head of petitioner's Security and Safety Department, received a complaint from Crisente Avis, a sign painter with whom petitioner had a service contract. Avis reported that he was being forced by respondent to overprice by P1,000.00 his service fee of PP3,800.00 and to deliver to him (respondent) the said amount of P1,000.00; and that should Avis fail to do so, he will no longer be awarded future contracts.

Acting thereon, Engr. Dumo conducted an investigation attended by respondent, Avis, and three representatives from the workers' union. Avis declared that sometime in January 1991, petitioner hired him to paint its trash cans, push carts and cigarette waste boxes. They agreed that his services will be paid upon completion of the painting job and submission of the corresponding invoice. However, herein respondent instructed him to prepare an invoice indicating therein that his fee for his painting services is P4,800.00, instead of P3,800.00. Respondent even assured him that the petitioner will approve the invoice.

At this juncture, petitioner assigned respondent to perform janitorial duties, prompting him to request an immediate disposition of his case. But when petitioner directed him to submit his evidence within three (3) days from notice, he failed to comply.

After evaluating the records on hand, petitioner found respondent guilty of extortion, fraud, serious misconduct and willful breach of trust and confidence. Petitioner then sent him a notice terminating his services effective March 3, 1991.

Eventually, respondent filed with the Labor Arbiter a complaint for illegal dismissal and damages against petitioner and Engr. Dumo, docketed as NLRC NCR Case No. 00-03-01376-91.

In due course, the Labor Arbiter rendered a Decision dated December 3, 1992 dismissing respondent's complaint for lack of merit.

Upon appeal, the National Labor Relations Commission (NLRC) promulgated a Decision dated August 29, 1994 reversing the Arbiter's assailed Decision, holding that respondent was illegally dismissed, thus:

"WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE and a new one entered declaring respondent Ramon Y. Dumo and Philtread Tire and Rubber Co. to have illegally dismissed complainant Alberto M. Vicente. Accordingly, respondent is hereby ordered to reinstate complainant to his former or equivalent position without loss of seniority rights and privileges with full backwages from the time of his dismissal up to the time of his reinstatement, whether physical or payroll. Corollary to this, complainant shall be entitled to and be paid for whatever increases and benefits that have accrued to his position reckon from the time of his dismissal.

SO ORDERED."

Petitioner then filed a motion for reconsideration but was denied by the NLRC in a Resolution dated October 11, 1994. Hence, it filed with this Court a petition for certiorari with prayer for the issuance of a temporary restraining order, docketed as G.R. No. 118337.

Pursuant to our ruling in St. Martin's Funeral Home v. NLRC,³ we referred the petition to the Court of Appeals for appropriate action and disposition.

On November 25, 1999, the Appellate Court rendered a Decision affirming the assailed Decision of the NLRC, thus:

"After a review of the records, We find no cogent reason to reverse the respondent Commission.

Private respondent herein was dismissed allegedly for asking, not receiving, the sum of P1,000.00, from Crisente Avis. x x x.

This alleged request is not supported by any documentary evidence. It is strange that no purchase order was presented to show that Crisente Avis was given a contract to paint the trash cans and cigarette butt boxes at the company premises for the contract price of P3,800.00 x x x. In this instance, Mr. Avis did not show any contract to prove that his services were estimated at P3,800.00, as proof that private respondent asked him to overprice it by P1,000.00.

Moreover, it is strange that in reporting the alleged request of private respondent, Mr. Avis complained, not to the personnel department, or to the department in charge of giving out contracts or paying for them, but to the security department. x x x. The only explanation We can find is that the security guards are headed by Mr. Ramon Dumo, who was apparently displeased with private respondent.

x x x

There is also no clear showing that private respondent was in a position to influence company decisions in giving out contracts of services, so that Mr. Avis should be pressured to acceding to his request.

With regard to the report of Avis that private respondent tricked him into going to Cavite to execute an affidavit of retraction, we see no reason why Avis could not have simply refused to sign such affidavit, especially since he was brought before a notary public, a lawyer, whom he could have sought legal assistance.

Finally, private respondent was dismissed for 'willful violation of trust x x x.' However, there is no showing that he occupied a position of trust and confidence. x x x. The position of private respondent as Housekeeping Coordinator at the General Services Department of Philtread can hardly be considered as one of trust and confidence.

WHEREFORE, the petition is hereby DISMISSED for lack of merit.

SO ORDERED."

On December 10, 1999, petitioner filed a motion for reconsideration, but was denied by the Appellate Court in a Resolution dated March 22, 2000.

Hence, this Petition for Review on Certiorari .

Petitioner contends, among others, that the Court of Appeals seriously erred (1) in finding that there is no substantial evidence to support the complaint against petitioner; and (2) in disregarding the testimony of Crisente Avis on the ground that it is an affirmation of his unverified complaint.

The fundamental issue here is whether petitioner was able to prove by substantial evidence that respondent is liable for extortion by forcing Avis to increase his service fee by P1,000.00. The issue raised is factual. It is basic that the findings of fact by the Court of Appeals, when supported by substantial evidence, are conclusive and binding upon the parties and are not reviewable by this Court, unless the case falls under any of the exceptions to the rule, such as when the findings by the Appellate Court are not supported by evidence.⁴ This exception is being relied upon by petitioner.

Here, there is neither direct nor documentary evidence to prove that respondent was involved in extortion. In fact, a careful perusal of the minutes of the investigation reveals that Avis did not categorically state that he was pressured by respondent to overprice his service fee, thus:

"AGENDA: To conduct preliminary investigation regarding the complaint of one CRISENTE AVIS, a painter and a Philtread contractor, alleging that Mr. Alberto Vicente is pressuring him to raise his service fee so that the latter will also gain 'grease money.'

x x x

III. Mr. Avis quoted: 'Talagang sinabi sa akin ni Abet (referring to respondent) na: Cris, gawin mong P4,800 at akin iyong sobra. Mr. Avis also quoted: P3,500 lamang ang gusto ko sana, hindi ko alam kung biro o totoo ang sinabi niya. Mr. Avis averred: Nang mag-follow up ako ngayong umaga, nagtataka si Mr. Sabong kung bakit mataas ang aking singil.

IV. Mr. Vicente quoted as Mr. Avis saying: 'Abet, pwede ba ito, P3,500? Abet answered: Ikaw, mahaba at matagal ang trabaho mo. Cris answered: Abet, lakarin natin ito, ako ang bahala sa iyo.

x x x."⁵

As gleaned from the above minutes, it is not clear that respondent urged or forced Avis to increase his service fee by P1,000.00 and to give the amount to him (respondent). In fact, Avis is not certain whether respondent was really serious when he allegedly told him (Avis) to increase his service fee to P4,800.00. We thus hold that petitioner failed to prove its charge by substantial evidence. Substantial evidence is that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.⁶

The Appellate Court did not err in concluding that there is no valid cause in terminating respondent's employment. The well-established rule is that the findings of fact of the Court of Appeals, particularly where they are in absolute agreement with that of the NLRC, as in this case, are accorded not only great respect but even finality and are deemed binding upon this Court.⁷

Verily, respondent who was illegally dismissed from work is entitled to reinstatement without loss of seniority rights, full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.⁸

However, the circumstances obtaining in this case do not warrant the reinstatement of respondent. Aside from the fact that antagonism caused a severe strain in the parties' employer-employee relationship, petitioner company has "completely ceased its tire manufacturing and marketing operations effective November 11, 1994," as evidenced by its Notice of Indefinite Suspension of Manufacturing Operations dated November 10, 1994⁹ to the Security and Exchange Commission and its Application for Business Retirement dated February 22, 1996¹⁰ filed with the Business Permits & Licensing Office of the City of Muntinlupa. Thus, a more equitable disposition would be an award of separation pay equivalent to at least one month pay, or one month pay for every year of service, whichever is higher, (with a fraction of at least six (6) months being considered as one (1) whole year),¹¹ in addition to his full backwages, allowances and other benefits.¹²

Records show that respondent was employed from February 9, 1978 to March 3, 1991, or for thirteen (13) years, with a monthly salary of P8,784.00. Hence, he is entitled to a separation pay of P114,192.00.

WHEREFORE, the assailed Decision dated November 25, 1999 and the Resolution dated March 22, 2000 of the Court of Appeals in CA-G.R. SP No. 52723 are hereby AFFIRMED with MODIFICATION in the sense that, in lieu of reinstatement, respondent is awarded separation pay equivalent to P114,192.00, plus his full backwages, and other privileges and benefits, or their monetary equivalent, during the period of his dismissal up to his supposed actual reinstatement.

Costs against petitioner.

SO ORDERED.

Panganiban, (Chairman), Carpio-Morales, and Garcia, JJ., concur.
Corona, J., on leave.

Endnotes:

¹ Penned by Justice Hector L. HofileÃ±a (ret.), and concurred in by Justices Omar U. Amin (ret.) and Jose L. Sabio, Jr.

² Annex "B", Petition for Review, Rollo at 39-40.

³ G.R. No. 130866, September 16, 1998, 295 SCRA 494, holding that the appeal from the NLRC should be initially filed with the Court of Appeals, no longer with this Court, pursuant to the doctrine of hierarchy of courts.

⁴ Siasat v. Court of Appeals, G.R. No. 129382, January 23, 2002, 374 SCRA 326, citing Atillo III v. Court of Appeals, 334 Phil. 546 (1997).

⁵ Annex "2" of Position Paper, Records at 36.

⁶ Diamond Motors Corporation v. Court of Appeals, G.R. No. 151981, December 1, 2003, 417 SCRA 46; Anflo Management & Investment Corp. v. Bolanio, G.R. No. 141608, October 4, 2002, 390 SCRA 473; Resngit-Marquez v. Llamas, Jr., Adm. Matter No. RTJ-02-1708, July 23, 2002, 385 SCRA 6; Aklan Electric Cooperative, Inc. v. NLRC, G.R. No. 121439, January 25, 2000, 323 SCRA 258.

⁷ Philippine Journalists, Inc. v. Mosqueda, G.R. No. 141430, May 7, 2004; Allied Banking Corporation v. Court of Appeals, G.R. No. 144412, November 18, 2003, 416 SCRA 65; Hantex Trading Co., Inc. v. Court of Appeals, G.R. No. 148241, September 27, 2002, 390 SCRA 181; Casimiro v. Court of Appeals, G.R. No. 136911, July 3, 2002, 383 SCRA 701; Milestone Realty and Co., Inc. v. Court of Appeals, G.R. No. 135999, April 19, 2002, 381 SCRA 406.

⁸ Pursuant to Article 279, Labor Code, as amended by Section 34, R.A. 6715; Bolinao Security and Investigation Service, Inc. v. Toston, G.R. No. 139135, January 29, 2004 at 11, citing Cebu Marine Beach Resort v. NLRC, G.R. No. 143252, October 20, 2003 and Damasco v. NLRC, 346 SCRA 714 (2000).

⁹ Annex "B" of Reply Memorandum, Rollo at 188.

¹⁰ Annex "D", Ibid. at 191.

¹¹ Bolinao Security and Investigation Service, Inc. v. Toston, ibid., citing Jardine Davies, Inc. v. NLRC, 311 SCRA 289 (1999) and Lopez v. NLRC, 297 SCRA 508 (1998).

¹² Ibid., citing Cebu Marine Beach Resort v. NLRC, id., Samarca v. Arc-Men Industries, Inc., G.R. No. 146118, October 8, 2003 and Philippine Tobacco Flue-Curing and Redrying Corp. v. NLRC, et al., 300 SCRA 37 (1998).

G.R. No. 143214 - PHILIPPINE PORTS AUTHORITY v. CITY OF ILOILO, ET AL.

2013-01-15T09:50:33+00:00

G.R. No. 143214 - PHILIPPINE PORTS AUTHORITY v. CITY OF ILOILO, ET AL.

SECOND DIVISION

[G.R. NO. 143214 : November 11, 2004]

PHILIPPINE PORTS AUTHORITY, Petitioner, v. THE CITY OF ILOILO; ROMEO MANIKAN, in his capacity as Treasurer of Iloilo City; FRANKLIN CORDERO, JR., in his capacity as Assessor of Iloilo City, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

On October 9, 1990, the respondent City of Iloilo sent a "Notice of Sale of Delinquent Real Properties" to petitioner Philippine Ports Authority (PPA) for non-payment of real property taxes covering its facilities and edifices at the Iloilo port for the years 1985-1989, to wit:

Tax Dec. No.

Kind of Property

Assessment

56325

Warehouse

P 81,369.26

61745

Building (Shed)

5,793.22

61747

Residential House

1,754.68

59949

Building

13,959.42

61741

Building

10,294.10

61742

Building

9,998.86

61744

Building

2,821.41¹

The respondent city was the only winning bidder at the public auction conducted by the City Treasurer and the Assessor. Consequently, the said properties were sold to it, and, conformably with Section 76 of Presidential Decree (P.D.) No. 464, a certificate of sale over the properties was executed in its favor.

On November 16, 1990, the City Treasurer sent a "Notice of Right to Redeem" to the petitioner advising it that it had only until October 30, 1991 within which to redeem the properties. The petitioner forthwith filed its complaint against the respondents, the City of Iloilo, its City Treasurer and its Assessor with the Regional Trial Court (RTC) of Iloilo City, Branch 36, for the nullification of the assessment and the sale with a prayer for a temporary restraining order and/or a writ of preliminary injunction. In its complaint, the petitioner alleged, inter alia, that the properties belonged to the Bureau of Customs and/or the national government; hence, the properties were exempt from the payment of realty taxes. To support its argument, the petitioner cited Section 25 of P.D. No. 857, Section 40(a) of P.D. No. 464 and Section 1(e) of Executive Order (E.O.) No. 93 issued on December 17, 1986.

In their answer to the complaint, the respondents alleged that the petitioner's exemption had already been withdrawn under P.D. No. 1931 which took effect on June 11, 1984. Consequently, the sale of the petitioner's properties at public auction was in accord with law.

On October 22, 1992, the trial court rendered judgment in favor of the respondents and ordered the dismissal of the complaint. The decision was elevated to the Court of Appeals via a Petition for Review , which rendered judgment affirming the decision of the RTC on September 15, 1999. In its Decision,² the appellate court ruled that since the petitioner had acquired the properties, it was liable for realty taxes due thereon. The petitioner's motion for reconsideration of the said decision was denied by the appellate court; hence, the instant Petition for Review on Certiorari for the reversal thereof.

The petitioner contends that the subject properties are owned by the Republic of the Philippines. It avers that while under Section 30 of P.D. No. 857, the said properties were transferred to the petitioner, the Republic of the Philippines retained ownership over the same. It claims that while it administers and operates the port of Iloilo, it does so for the benefit of the general public and not for taxable persons. As such, the said properties are exempt from realty taxes under Section 40 of P.D. No. 464. The petitioner further asserts that P.D. No. 1931 and E.O. No. 93 have no application to properties owned by the Republic of the Philippines.

In their comment on the petition, the respondents aver that by virtue of P.D. No. 857 issued on December 23, 1975, the petitioner became the owner of the subject properties. They point out that the petitioner even declared the properties for taxation purposes under its name. The respondents, likewise, posit that the exemption on realty taxes in favor of the petitioner had effectively been withheld under P.D. No. 1931, and that the petitioner cannot invoke P.D. No. 464 because the subject properties are being leased to taxable private persons. The respondents appended to their comment the tax declarations on the properties under the name of the petitioner.

The petition has no merit.

Petitioner PPA Became the Owner Of the Port Facilities
and Appurtenances under P.D. No. 857

When P.D. No. 857 took effect on December 23, 1975, the petitioner became the owner of the facilities and appurtenances, conformably to Sections 30 to 33 thereof, to wit:

SEC. 30. Transfer of Existing and Completed Physical Facilities - In accordance with the transitory provisions of this Decree, there shall be transferred to the Authority all existing and completed public port facilities, quays, wharves, docks, lands, buildings and other property, movable or immovable, belonging to those ports declared as Ports Districts for purposes of this Decree.

SEC. 31. Transfer of Intangible Assets - In accordance with the transitory provisions of this Decree, there shall be transferred to the Authority all intangible assets, powers, rights, foreshore rights, interests and privileges belonging to the Bureau of Customs, and Bureau of Public Works and other agencies relating to port works or port operations, subject to terms to be arranged by and between the Authority and agencies concerned. Any disagreement relating to such transfer shall be elevated to the President for decision.

SEC. 32. Projects in Progress - In accordance with the transitory provisions of this Decree, all ongoing projects relating to the construction of ports and port facilities shall be continued by the agency or agencies involved until completion. After completion, such projects shall be transferred to the Authority in accordance with the agreement among agencies concerned. Any disagreement relating to such transfer shall be elevated to the President for decision.

SEC. 33. Transfer of Liabilities and Debts - Upon the transfer and acceptance by the Authority of the existing physical facilities, intangible assets, and completed projects referred to in the Sections immediately preceding, all debts, liabilities, and obligations of the Bureau of Customs, the Bureau of Public Works, and other government agencies or entities concerned in respect of such physical facilities, intangible assets and completed projects within the Port Districts shall, likewise, be transferred to or deemed incurred by the Authority.

Section 40 of the law further provides that any and all other powers, rights, duties and functions vested in and all properties, authority or instrumentality pertaining to every matter concerning port facilities, ports operations, or port works were transferred to and were vested in the petitioner. These provisions are self-executory, without need of any other formalities or documentations to implement the same.

That the petitioner has not been issued any torrens title over the port and port facilities and appurtenances is of no legal consequence. A torrens title does not, by itself, vest ownership; it is merely an evidence of title over real properties.³ The torrens system does not create or vest title. It has never been recognized as a mode of acquiring ownership over real properties.⁴

That the petitioner became the owner of said facilities and appurtenances is bolstered by the fact that under Article VI, Section 10(b) of P.D. No. 857, the initial paid up capital of the petitioner consists of the following:

(i) The value of assets (including port facilities, quays, wharves, and equipment) and such other properties, movable and immovable as may be contributed by the Government or transferred by the Government or any of its agencies as valued at the date of such contribution or transfer and after deducting or taking into account the loans and other liabilities of the Authority at the time of the takeover of the assets and other properties.

As we held in Mactan Cebu International Airport Authority v. Marcos:⁵

It may be reasonable to assume that the term "lands" refer to "lands" in Cebu City then administered by the Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on for real property taxes. This section involves a "transfer" of the "lands," among other things, to the petitioner and not just the transfer of the beneficial use thereof, with the ownership being retained by the Republic of the Philippines.

This "transfer" is actually an absolute conveyance of the ownership thereof because the petitioner's authorized capital stock consists of, inter alia, "the value of such real estate owned and/or administered by the airports." Hence, the petitioner is now the owner of the land in question and the exception in Section 234(c) of the LGC is inapplicable.⁶

The Petitioner is Liable
For Realty Taxes on its
Facilities and Appurtenances

The petitioner cannot escape liability from the payment of realty taxes by invoking its exemption in Section 40(a) of P.D. No. 464,⁷ which reads:

"SEC. 40. Exemptions from Real Property Tax - The exemption shall be as follows:

a) Real Property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned corporation so exempt by its charter, provided, however, that this exemption shall not apply to real property of the above-named entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person. '

The petitioner cannot, likewise, find solace in Section 25 of P.D. No. 857,⁸ to wit:

SEC. 25. Exemption from Realty Taxes - The Authority shall be exempt from the payment of real property taxes imposed by the Republic of the Philippines, its agencies, instrumentalities or political subdivisions; Provided, That no tax exemptions shall be extended to any subsidiaries of the Authority that may be organized; Provided, finally, That investments in fixed assets shall be deductible for income tax purposes.

First. Section 1, P.D. No. 1931 which took effect on June 11, 1984, effectively withdrew the exemption granted to the petitioner, a government-owned or controlled corporation '

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.

Second. Under the last paragraph of Section 234 of Republic Act No. 7160, otherwise known as the Local Government Code (LGC), the petitioner's exemptions from the real property tax were withdrawn upon the effectivity of the law. Thus:

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 had been granted, for consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;

(d) All real property owned by duly-registered cooperatives as provided for under R.A. No. 6938; andcralawlibrary

(e) Machinery and equipment used for pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.⁹

Patently then, it was the intention of Congress to withdraw the tax exemptions granted to or presently enjoyed by all persons, including government-owned or controlled corporations, upon the effectivity of the LGC as shown by Section 193 thereof:

Section 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. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.

Furthermore, under the repealing clause, Section 534(f) of the LGC, all general and special laws, acts, decrees, or part or parts thereof which are inconsistent with any of the provisions of the law were repealed:

Section 534(f) - Repealing Clause. - All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this code are hereby repealed or modified accordingly.

The clause partakes of the nature of a general repealing clause because it fails to designate the specific act or acts identified by number or title that are submitted to be repealed.¹⁰

Thus, Section 25 of P.D. No. 857 and Section 40 of P.D. No. 464 were repealed by Rep. Act No. 7160. We emphasized the raison d etre for the withdrawal of the exemption in Mactan Cebu International Airport Authority v. Marcos¹¹ as follows:

SEC. 40. Exemptions from Real Property Tax. 'The exemption shall be as follows:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned or controlled corporation so exempt by its charter: Provided, however, That this exemption shall not apply to real property of the above-mentioned entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person.

Note that as reproduced in Section 234(a), the phrase "and any government-owned or controlled corporation so exempt by its charter" was excluded. The justification for this restricted exemption in Section 234(a) seems obvious: to limit further tax exemption privileges, especially in light of the general provision on withdrawal of tax exemption privileges in Section 193 and the special provision on withdrawal of exemption from payment of real property taxes in the last paragraph of Section 234. These policy considerations are consistent with the State policy to ensure autonomy to local governments and the objective of the LGC that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them effective partners in the attainment of national goals. The power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. It may also be relevant to recall that the original reasons for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises, and there was a need for these entities to share in the requirements of development, fiscal or otherwise, by paying the taxes and other charges due from them.¹²

It is wont to state that even under Section 40 of P.D. No. 464, the petitioner is considered a taxable person. The bare fact that the port and its facilities and appurtenances are accessible to the general public does not exempt it from the payment of real property taxes. It must be stressed that the said port facilities and appurtenances are the petitioner's corporate patrimonial properties, not for public use, and that the operation of the port and its facilities and the administration of its buildings are in the nature of ordinary business. The petitioner is clothed, under P.D. No. 857, with corporate status and corporate powers in the furtherance of its proprietary interests:

SEC. 6. Corporate Powers and Duties'

a) The corporate duties of the Authority shall be:

(i) To formulate in coordination with the National Economic and Development Authority a comprehensive and practicable Port Development plan for the State and to program its implementation, renew and update the same annually in coordination with other national agencies.

(ii) To supervise, control, regulate, construct, maintain, operate, and provide such facilities or services as are necessary in the ports vested in, or belonging to the Authority.

(iii) To prescribe rules and regulations, procedures, and guidelines governing the establishment, construction, maintenance, and operation of all other ports, including private ports in the country.

(iv) To license, control, regulate, supervise any construction or structure within any Port District.

(v) To provide services (whether on its own, by contract, or otherwise) within the Port Districts and the approaches thereof, including but not limited to - -

-berthing, towing, mooring, moving, slipping, or docking any vessel;

-loading or discharging any vessel;

-sorting, weighing, measuring, storing, warehousing, or otherwise handling goods.

(vi) To exercise control of or administer any foreshore rights or leases which may be vested in the Authority from time to time.

(vii) To coordinate with the Bureau of Lands or any other government agency or corporation, in the development of any foreshore area.

(viii) To control, regulate, and supervise pilotage and the conduct of pilots in any Port District.

(ix) To provide or assist in the provision of training programs and training facilities for its staff of port operators and users for the efficient discharge of its functions, duties and responsibilities.

(x) To perform such acts or provide such services as may be deemed proper or necessary to carry out and implement the provisions of this Decree.

b) The corporate powers of the Authority shall be as follows:

(i) To succeed in its corporate name.

(ii) To sue and be sued in such corporate name.

(iii) To adopt, alter, and use a corporate seal which shall be judicially noticed.

(iv) To adopt, amend, or repeal its by-laws.

(v) To create or alter its own organization or any Port Management Unit, and staff such an organization or Port Management Unit with appropriate and qualified personnel in accordance with what may be deemed proper or necessary to achieve the objectives of the Authority.

(vi) To make or enter contracts of any kind or nature to enable it to discharge its functions under this Decree.

(vii) To acquire, purchase, own, lease, mortgage, sell, or otherwise dispose of any land, port facility, wharf, quay, or property of any kind, whether movable or immovable.

(viii) To exercise the right of eminent domain, by expropriating the land or areas surrounding the Port of harbor, which in the opinion of the Authority, are vital or necessary for the total development of the Port District.

(ix) To levy dues, rates, or charges for the use of the premises, works, appliances, facilities, or for services provided by or belonging to the Authority, or any other organization concerned with port operations.

(x) To reclaim, excavate, enclose, or raise any part of the lands vested in the Authority.

(xi) To dredge or provide dredging services, within a Port District or elsewhere.

(xii) To acquire any undertaking affording or intending to afford facilities for the loading and discharging or warehousing of goods in the Port Districts.

(xiii) To supply water or bunker for ships.

(xiv) To obtain, insure for or require the insurance of any property, movable or immovable, belonging to the Authority and/or goods in the custody of the Authority.

(xv) To do all such other things and to transact all such business directly or indirectly necessary, incidental or conducive to the attainment of the purposes of the Authority.

(xvi) Generally, to exercise all the powers of a corporation under the Corporation Law insofar as they are not inconsistent with the provisions of this Decree.

The petitioner is even empowered to invest its funds in such government securities approved by the Board of Directors, and derives its income from rates, charges or fees for the use by vessels of the port premises, appliances or equipment.

SEC. 20. Rates and Charges '

a) The Authority may impose, fix, prescribe, increase or decrease such rates, charges or fees for the use of port premises, works, appliances or equipment belonging to the Authority and port facilities provided, and for services rendered by the Authority or by any private organization within a Port District.

Provided, that upon the coming into operation of this Decree, the rates of storage and arrastre charges in all ports of the Philippines shall be those now provided under Parts 4 and 5 of Title VII, Book II of the Tariff and Customs Code until such time when the President of the Philippines upon recommendation of the Board may order that the revised rates, charges or fees are in effect.

b) The Authority shall regulate the rates or charges for port services or port-related services so that taking one year with another, such rates or charges furnish adequate working capital and produce an adequate return on the assets of the Authority. In regulating the rates or charges for individual ports, the Authority shall take into account the development needs of the port's hinterland.

c) All dues, fees, charges and other sums, imposed and collected by the Authority shall accrue to the Authority and shall be disposed of in accordance with the provisions of this Decree.

Clearly then, the petitioner is a profit-earning corporation; hence, its patrimonial properties are subject to tax.¹³

We reject the petitioner's claim that it is exempt from the payment of real property taxes, considering that it does not use the port facilities and buildings. This Court overruled a similar submission as follows:

Under the Real Property Tax Code, real property is classified for assessment purposes on the basis of actual use, which is defined as "the purpose for which the property is principally or predominantly utilized by the person in possession of the property.

Petitioner argues that it merely operates and maintains the LRT system, and that the actual users of the carriageways and terminal stations are the commuting public. It adds that the public-use character of the LRT is not negated by the fact that revenue is obtained from the latter's operations.

We do not agree. Unlike public roads which are open for use by everyone, the LRT is accessible only to those who pay the required fare. It is, thus, apparent that petitioner does not exist solely for public service, and that the LRT carriageways and terminal stations are not exclusively for public use. Although petitioner is a public utility, it is nonetheless profit-earning. It actually uses those carriageways and terminal stations in its public utility business and earns money therefrom.

In any event, there is another legal justification for upholding the assailed CA Decision. Under the Real Property Tax Code, real property "owned by the Republic of the Philippines or any of its political subdivisions and any government-owned or controlled corporation so exempt by its charter, provided, however, that this exemption shall not apply to real property of the abovenamed entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person.¹⁴

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. No costs.

SO ORDERED.

Austria-Martinez, (Acting Chairman), and Chico-Nazario, JJ., concur.
Puno, J., (Chairman), on official leave.
TINGA, J., on leave.

Endnotes:

¹ Rollo, p. 6.

² Penned by Associate Justice Angelina Sandoval-Gutierrez (now an Associate Justice of the Supreme Court), with Associate Justices Romeo A. Brawner and Martin S. Villarama, Jr., concurring.

³ Strait Times, Inc. v. Court of Appeals, 294 SCRA 714 (1998).

⁴ De la Cruz v. Court of Appeals, 286 SCRA 230 (1998).

⁵ 261 SCRA 667 (1996).

⁶ Id. at 691-692.

⁷ P.D. No. 464 took effect on July 1, 1974.

⁸ P.D. No. 857 took effect on December 23, 1975.

⁹ Underscoring supplied.

¹⁰ City Government of San Pablo, Laguna v. Reyes, 305 SCRA 353 (1999).

¹¹ Supra.

¹² Id. at 689-690.

¹³ Light Rail Transit Authority v. Central Board of Assessment Appeals, 342 SCRA 692 (2000).

¹⁴ Id. at 701-702.

G.R. No. 143289 - CRESENCIA L. TAN v. DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH)

2013-01-15T09:50:34+00:00

G.R. No. 143289 - CRESENCIA L. TAN v. DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH)

SECOND DIVISION

[G.R. NO. 143289 : November 11, 2004]

CRESENCIA L. TAN, Petitioner, v. DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), Respondent.

D E C I S I O N

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari of the Decision¹ dated February 29, 2000 of the Court of Appeals (CA) in CA-G.R. SP No. 46752, dismissing the Petition for Review of petitioner Cresencia Tan and affirming the assailed resolution of the Civil Service Commission (CSC) and the resolution denying the motion for reconsideration thereof.

The Antecedents

The petitioner was employed as Accountant I in the Office of the Siquijor Highway Engineering District (SHED). However, she and sixteen (16) others were charged with twenty-two (22) counts of estafa through falsification of public documents before the Sandiganbayan. She was also charged with dishonesty and/or grave misconduct on account of the transactions subject of the criminal charges. In compliance with the Resolution of the Sandiganbayan ordering the suspension of the petitioner and her co-accused, the District Engineer ordered her suspension per his Memorandum dated November 5, 1982. The petitioner filed a motion for reconsideration of the Resolution of the Sandiganbayan.

Earlier, on July 27, 1981, the President of the Philippines had issued Executive Order (E.O.) No. 710, abolishing the Ministry of Public Works and the Ministry of Public Highways and all sections, bureaus, regional offices under its supervision and control and creating the Ministry of Public Works and Highways. Under Section 10 of the said E.O., the Minister of the newly-created ministry, was allowed to appoint qualified personnel to appropriate positions in the new ministry. These included the personnel of the abolished ministry and those not so appointed would be deemed laid off.

A list of prospective appointees for the positions from among those formerly employed in the abolished offices was thereafter prepared. However, the name of the petitioner was not included in the list because of the pending criminal and administrative charges against her. She wrote to the respondent ministry and protested her exclusion from the list, but the Deputy Minister rejected the protest in a Memorandum dated January 5, 1983.

In a Decision dated March 11, 1983, the Minister provisionally dismissed the administrative charges against the petitioner without prejudice to the reopening thereof in the event that she would be reinstated in the government service. On August 4, 1987, the Sandiganbayan issued a Resolution granting the petitioner's motion for reconsideration of its Resolution dated August 31, 1982. As such, the petitioner's suspension was lifted. The petitioner then requested the district engineer to reinstate her to her former position as accountant, but the request was denied. The district engineer reasoned that the position had already been abolished and that Ernesto Calido had been appointed as the accountant in the new ministry's office. The petitioner appealed to the Secretary of Public Works and Highways, but the latter denied the appeal in a Letter dated June 23, 1988. In so ruling, the Secretary relied on Opinion No. 44, series of 1988, of the Secretary of Justice, viz:

That your name was deleted as a contender to the position of accountant of the Office of the District Engineer, Siquijor Engineering District of the merged Ministry of Public Works and Highways on the ground that you were facing administrative and criminal charges finds justifiable and legal basis, especially considering Opinion No. 44, s. 1988, of the Secretary of Justice dated March 11, 1988 wherein it wisely held that:

"It is settled that the abolition of an office effectively terminates the official relation of an officer thereto - reappointment to the new positions created in the then Ministry (now Department) of Public Works and Highways is not a matter of right, but a matter of privilege, to be determined according to the best judgment of the appointing authority or recommending authority. '"²

In the meantime, on May 30, 1989, the Sandiganbayan convicted the petitioner of the crimes charged. She, thereafter, filed a Petition for Review with this Court docketed as G.R. NOS. 88475-96 assailing the decision. On August 5, 1993, the Court rendered judgment reversing the decision of the Sandiganbayan and acquitting the petitioner of the charges.

The petitioner again wrote the now Department of Public Works and Highways (DPWH), the respondent herein, requesting for her reinstatement as Accountant I in the District Engineer's Office of Siquijor, and for the payment of benefits from November 1982 when she was suspended up to the time of her reinstatement. On June 17, 1994, the respondent DPWH wrote the Regional Director and informed the latter that the petitioner could not be reinstated and granted back salaries because she had been laid off; however, she was entitled to all the benefits and gratuities provided under existing laws. The petitioner sought a reconsideration of the said letter, but the same was denied. Nevertheless, the petitioner sought another reconsideration of the said decision, citing Section 27 of Presidential Decree No. 807 and Section 13 of Rep. Act No. 3019. She also emphasized that Ernesto Calido, who was appointed to the position, had resigned effective August 5, 1991.

When her request was denied, the petitioner filed a petition for reinstatement and payment of benefits with the CSC. In Resolution No. 971163, the CSC dismissed the petition, citing Section 10 of E.O. No. 710. The petitioner filed a motion for clarification/reconsideration of the Resolution, which the CSC denied in Resolution No. 974118.

Thereafter, the petitioner filed a Petition for Review with the CA assailing the CSC Resolution. However, the appellate court rendered judgment dismissing the petition for lack of merit. It cited the ruling of this Court that the reorganization order of the President of the Philippines in E.O. No. 710 was made in good faith; having been laid off under the said order, she could no longer be reinstated to her former position.

The Present Petition

In her petition at bar, the petitioner avers that she was illegally dismissed from the government service, in violation of her constitutional right of security of tenure. She contends that she was never notified that her employment was terminated because her position was abolished. She further avers that the power of the Minister to select and appoint personnel from among the employees of the abolished ministries under Section 10 of E.O. No. 710 must be exercised in good faith. She posits that the position of Accountant I, which was filled up by the new Minister by appointing Ernesto Calido, became vacant upon the latter's resignation. There was no valid reason why she should not be appointed to the said position, in view of the letter and spirit of Section 13 of Rep. Act No. 3019 and the rulings of this Court in Pari-an v. Civil Service Commission³ and Sabello v. DECS.⁴ She asserts that she should also be granted back salaries, as in the case of Engineer Norberto Bernad and Engineer Jaime T. Obsequio who, like her, were acquitted and were given back salaries.

The Office of the Solicitor General posits, in its Comment on the Petition, that the CA committed no error in affirming the assailed Resolutions of the CSC.

The Court's Ruling

The petition is denied due course.

In ordering the dismissal of the petitioner, the CA affirmed the rulings of the CSC in its assailed Resolutions Nos. 971163 and 974118, to wit:

After a careful evaluation of the records, We find the appeal without merit.

The position which Tan seeks to be reinstated to in the Ministry of Public Highways has ceased to exist by virtue of Executive Order No. 710 abolishing said office and thereby creating the Ministry (now Department) of Public Works and Highways (MPWH). Tan can no longer claim for reinstatement despite her acquittal by the Supreme Court on the ground that when MPWH was created and she was not reappointed to her original position, she was deemed legally separated from the service. The power of the Minister to appoint personnel is discretionary. Section 10 of Executive Order 710 provides as follows:

"Section 10. x x x. The Minister may appoint qualified personnel of the abolished Ministries to appropriate positions in the new Ministry, and those not so appointed are deemed laid off."

Since Tan was not so appointed in the newly created Ministry, she can no longer claim for reinstatement to her former position.⁵

After a circumspect re-examination of the records at hand, the Commission finds no substantial basis to reconsider its previous resolution dismissing the appeal of Tan.

Although the issue on Tan's non-reinstatement has already been squarely passed upon by the Commission in the herein assailed resolution, it is worthy to restate the well-entrenched rule that the payment of back salary is afforded only to those who have been illegally dismissed and were, thus, ordered reinstated or to those otherwise acquitted of the charges against them (Sabello v. DECS, 180 SCRA 623).

In the instant case, while it is true that Tan was acquitted by [the] Supreme Court from Estafa Through Falsification of Public Documents, her reinstatement to her former position as well as payment of back salary do not automatically attach considering that her separation from the service did not arise from that criminal offense. On the contrary, her separation was due to the abolition of her position by virtue of the reorganization of the MPWH (now DPWH). Since Tan was not reappointed to a position equivalent to her former position, she was deemed separated pursuant to the express provisions of Executive Order No. 710.

Moreover, Tan cannot claim that she was deemed reappointed to her position since she was allowed to exercise her functions even after the reorganization. The fact remains that she was not reappointed to an equivalent position in the reorganized agency.⁶

The appellate court also cited the 1st Indorsement dated June 17, 1994 of Undersecretary Gregorio S. Alvarez, to wit:

The request of Ms. Tan for reinstatement and payment of back salaries has no basis despite her acquittal because during the pendency of the case against her, the Ministry of Public Highways, where she was an employee, and the Ministry of Public Works were abolished by Executive Order #710 and a new Ministry, the Ministry of Public Works and Highways was created.

Sec. 10 of said Executive Order provided that the Minister may appoint qualified personnel of the abolished Ministries to appropriate positions in the new Ministry and those not so appointed are deemed laid - off.

Ms. Tan was not considered for re-appointment to the new Ministry of Public Works and Highways; hence, in accordance with Sec. 10, she was deemed laid off and is no longer an employee of the Department.

Sec. 12 of the same Executive Order provides that "all those who are laid-off under the provisions of this Executive Order shall be entitled to all benefits and gratuities provided for under existing laws."

Considering, therefore, that Ms. Tan was laid-off during the merger of the two Ministries, she is not entitled to reinstatement and payment of back salaries. She is, however, entitled to the payment of her accrued vacation and sick leave credits and other benefits as provided under Sec. 12 of Executive Order #710. She may also retire if she is retireable.⁷

We agree with the CA.

We reject the petitioner's contention that she was illegally dismissed from the government service. The reality is that, she was laid off, following the abolition of the Ministry of Public Works and the Ministry of Public Highways under Section 1 of E.O. No. 710, series of 1982, of the President which reads:

SECTION 1. There is hereby created a Ministry of Public Works and Highways, hereinafter referred to as the Ministry. The existing Ministry of Public Works established pursuant to Executive Order No. 546, as amended, and the existing Ministry of Public Highways established pursuant to Presidential Decree No. 458, as amended, are abolished together with their services, bureaus and similar agencies, regional offices, and all other entities within their supervision and control. Their functions, applicable appropriations, records, equipment, property, and such personnel as may be necessary are hereby transferred to the new Ministry.⁸

To abolish means to do away with, to annul, abrogate or destroy completely. It denotes an intention to do away with the office wholly and permanently.⁹ A valid abolition of offices is neither removal nor separation of the incumbents. No dismissal or separation arises because the position itself ceases to exist.¹⁰

Since the petitioner was not appointed by the Minister to any position in the new Ministry, she was deemed laid off, conformably to Section 10 of E.O. No. 710, viz:

SECTION 10. The Ministry is hereby authorized to issue such orders, rules and regulations as may be necessary to implement the provisions of this Executive Order; provided, that approval of the Ministry of the Budget is obtained relative to the new staffing structure at divisional and lower levels, and the realignment of existing appropriations. The Minister may appoint qualified personnel of the abolished Ministries to appropriate positions in the new Ministry, and those not so appointed are deemed laid off.¹¹

The appointment of qualified personnel of the abolished Ministries to appropriate positions in the new Ministry was addressed to the sound discretion of the new Minister.

In this case, the petitioner failed to show that the Minister acted in bad faith in not appointing her to any position in the Siquijor District Engineering Office under the new Ministry. The records show that the Minister acted on the recommendation of the Evaluation/Selection Committee, composed of all holdover section chiefs and other officials of equivalent or higher rank in the district offices, which was created, conformably with Memorandum Circular No. 6,¹² dated February 2, 1982. The Committee was tasked to submit two separate lists of recommendees for reappointment and those unplaced personnel:

3. Unplaced Personnel

The Evaluation/Selection Committee shall submit together with the list of recommendees for appointment, a separate list of unplaced personnel, using the attached form (Annex "B"), indicating under the "Remarks" column whether they choose to retire, be transferred to another office, or phased out.

4. Time Frame

Activity

Deadline

4.1

Submission of recommendation by District/City Evaluation/Selection Committees to Regional Directors

Feb.15 (1982)

4.2

Submission of recommendations by Regional Directors to the Minister

Feb. 22

4.3

Submission of recommendations by Central Office Evaluation/Selection Committees to Review Boards

Feb. 15¹³

Under Ministry Order No. 38 dated May 24, 1982, the Minister required that:

2. Services of employees who cannot be accommodated due to the abolition of their positions and/or were not selected for appointment per Manning List submitted by their respective Offices, shall be terminated thirty (30) days after the date of approval of the Manning List for the Office concerned.

3. Issuance of Notice of Termination of Employment shall be prepared by the Personnel Division, for signature of the official concerned on the basis of the delineation of functions on the power to appoint subordinate employees as delegated under Ministry Order No. 18 dated 17 February 1982.¹⁴

It must be stressed that the Committee did not recommend the appointment of the petitioner for the reasons set forth in the Deputy Minister's 2nd Indorsement dated January 5, 1983, which was addressed to the Minister:

The number of personnel in the abolished Ministries far exceeded the number of positions authorized for the Ministry of Public Works and Highways. As a consequence, a considerable number of employees, most of them with acceptable performance and with no derogatory records, were phased out of the service due to the abolition of their position in the defunct ministries.

Those retained in the service under the new ministry were selected on the basis of established placement policies and screening criteria. Employees who opted to retire from the service were excluded from the manning lists to minimize placement problems, and those facing administrative/criminal charges at the time of the reorganization were likewise phased out, to select the best suited for the vacancies, and in the exercise of the prerogative of choice vested in the Minister by Executive Order No. 710.

Ms. Cresencia Tan has a pending administrative case for Dishonesty and/or Misconduct. She is also accused before the Sandiganbayan of Estafa thru Falsification of Public Documents, and Violation of Republic Act 3019, for which she had been suspended from Office pendente lite. On this ground, she was excluded from the manning list of the Siquijor Engineering District.¹⁵

In addition, in his Decision dated March 11, 1983, the Minister ruled that the administrative complaint against the petitioner for grave misconduct and/or for dishonesty was dismissed provisionally, without prejudice to its reopening thereof should she reenter the government service in the future. The petitioner did not appeal the decision.

We agree that under Section 13 of Rep. Act No. 3019, if a public officer is acquitted of the charge against her, she is entitled to reinstatement and to the salaries and benefits which she failed to receive during her suspension. However, the petitioner cannot invoke this provision since the dismissal of the administrative proceedings against her was merely provisional, without prejudice to the reopening thereof in case of her reappointment to government service. Furthermore, the law presupposes that at the time of her acquittal, the position occupied by her at the time she was charged would still be extant. As aforestated, the position of the petitioner had been abolished years before her acquittal by the Sandiganbayan; as such, there was no longer an existing position to which she could be reinstated.

On the petitioner's plea for back wages during the time that she was suspended, we find the same barren of factual and legal basis. When she was suspended on November 5, 1982, the President had already issued E.O. No. 710 abolishing the Ministry of Public Works and the Ministry of Public Highways. Besides, under Section 12 thereof, the petitioner is entitled to all the benefits and gratuities provided for under existing laws, and if qualified to return, to all other benefits as are provided for by law. The petitioner's contention, that she should also be granted back salaries in view of a similar grant to Engrs. Norberto Bernad and Jaime T. Obsequio, cannot be given due course absent any documentary evidence to prove her claim.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED DUE COURSE. No costs.

SO ORDERED.

Austria-Martinez, (Acting Chairman), and Chico-Nazario, JJ., concur.
Puno, (Chairman), J., on official leave.
TINGA, J., on leave.

Endnotes:

¹ Penned by Associate Justice Eubulo G. Verzola, with Associate Justices Roberto A. Barrios and Eriberto U. Rosario, Jr. (retired), concurring.

² Records, p. 53.

³ 202 SCRA 772 (1991).

⁴ 180 SCRA 623 (1989).

⁵ Rollo, pp. 129-130.

⁶ Id. at 135.

⁷ Id. at 117-118.

⁸ Underscoring supplied.

⁹ Buklod ng Kawaning EIIB v. Zamora, 360 SCRA 718 (2001).

¹⁰ Dario v. Mison, 176 SCRA 84 (1989).

¹¹ Underscoring supplied.

¹² Id. at 141.

¹³ Id. at 143.

¹⁴ Id. at 144.

¹⁵ Id. at 71.

G.R. No. 144742 - REPUBLIC OF THE PHILIPPINES v. HAMILTON TAN KEH

2013-01-15T09:50:34+00:00

G.R. No. 144742 - REPUBLIC OF THE PHILIPPINES v. HAMILTON TAN KEH

SECOND DIVISION

[G.R. NO. 144742 : November 11, 2004]

REPUBLIC OF THE PHILIPPINES, Petitioner, v. HAMILTON TAN KEH, Respondent.

D E C I S I O N

CALLEJO, SR., J.:

The Republic of the Philippines, represented by the Office of the Solicitor General (OSG), filed the present Petition for Review on Certiorari seeking to reverse and set aside the Decision¹ dated February 11, 2000 of the Court of Appeals in CA-G.R. SP No. 55339 which affirmed the orders promulgated by the Regional Trial Court (RTC) of Caloocan City, Branch 125, granting respondent Hamilton Tan Keh's petition for naturalization and his motion to present evidence of compliance with Republic Act No. 530. Likewise sought to be set aside is the appellate court's Resolution dated August 31, 2000, denying the petitioner's motion for reconsideration.

The case arose from the following undisputed factual antecedents:

On August 10, 1993, respondent Tan Keh filed with the court a quo a petition for naturalization under Commonwealth Act No. 473 (CA 473), otherwise known as the Revised Naturalization Law, as amended. He alleged in his petition that, inter alia, he is a resident of San Jose, Caloocan City and previously resided in Binondo, Manila, Sta. Cruz, Manila and Carmona, Cavite; he was born in the Philippines on May 22, 1959 and is a citizen of China; he is married to Lily Chu Ko, also a Chinese citizen, with whom he has three (3) children, all born in the Philippines; he has continuously resided in the Philippines except for brief visits abroad in connection with his business; he received primary, secondary and tertiary education in Philippine schools and is able to speak and write English and Tagalog; he is employed as company manager of KB Trading and earns therefrom an annual income of P100,000, more or less; he believes in the principles underlying the Philippine Constitution and he has conducted himself in a proper and irreproachable manner; he possesses all the qualifications under Section 2 and none of the disqualifications under Section 4 of CA 473; and he desires to become a citizen of the Republic of the Philippines. The petition was docketed as Naturalization Case No. C-24.

On July 4, 1994, the court a quo issued a Notice of Hearing stating in part:

WHEREFORE, notice is hereby given that said petition will be heard by this court, Regional Trial Court, Branch 125, Caloocan City, located at the 2nd Floor Genato Bldg., 12th Ave., Grace Park, Caloocan City, Metro Manila on April 27, 1995 at 8:30 in the morning.

Let a copy of this notice as well as the petition and its annexes be published, at the expense of the petitioner, in a newspaper of general circulation once a week for three (3) consecutive weeks and in the Official Gazette and to be posted in a public and conspicuous place and in the Office of the Clerk of Court.²

A copy of the said notice, as well as respondent Tan Keh's petition for naturalization, were published in the September 5, 12 and 19, 1994 issues of the Official Gazette. They were, likewise, published in the July 7-13, 1994, July 14-20, 1994 and July 21-27, 1994 issues of the "Newsline."

At the initial hearing on April 27, 1995, the OSG manifested in open court that the notice of hearing and the consequent publication suffered from a fatal defect in that they violated Section 10³ of CA 473. The said provision proscribes the hearing of a petition for naturalization within thirty (30) days preceding any election. The hearing on April 27, 1995 was less than thirty (30) days preceding the May 8, 1995 senatorial, congressional and local elections. Accordingly, on the same day, the court a quo issued an Order canceling the April 27, 1995 hearing and resetting the same to June 9, 1995. However, it no longer ordered the republication of the notice of hearing and the petition.

A Motion to Dismiss respondent Tan Keh's petition for naturalization dated June 16, 1995 was filed by the OSG on the ground that the court a quo did not acquire jurisdiction over the action since the notice of hearing and the consequent publication were fatally defective. The court a quo, however, denied the motion to dismiss, as well as the subsequent motion for reconsideration filed by the OSG.

In the Order dated December 18, 1995, the court a quo granted respondent Tan Keh's petition for naturalization. The dispositive portion thereof stated:

IN VIEW OF ALL THE FOREGOING, the Court believes and so holds that the petitioner has complied with all the requirements to become a Filipino citizen. He has all the qualifications and none of the disqualifications. Upon the expiration of the two-year period provided for by Section 1, Republic Act No. 530, petitioner be allowed (sic) to become a naturalized citizen of the Philippines, after submission of satisfactory proof that he has complied with the other requirements of the aforementioned law.

SO ORDERED.⁴

On February 16, 1996, a few months after his petition for naturalization was granted, respondent Tan Keh filed with the court a quo a Motion for Leave of Court to Travel Abroad. The said motion was granted.

On July 7, 1997, respondent Tan Keh filed a Motion to Defer Oath-taking praying that since he left the country several times, he should be allowed to defer his oath-taking until such time that the two-year probationary period under Section 1 of Rep. Act No. 530 had been completed. The said motion was granted by the court a quo.

On February 22, 1999, respondent Tan Keh filed with the court a quo a Motion to Present Evidence of Compliance with the Requirements of Rep. Act No. 530. The OSG filed an Opposition thereto on the ground that respondent Tan Keh did not comply with the requirements under Section 1 of Rep. Act No. 530, particularly that proscribing an applicant from leaving the country during the two-year probationary period.

In the Order dated May 4, 1999, the court a quo granted respondent Tan Keh's motion to present evidence of compliance with the requirements of Rep. Act No. 530. The OSG sought reconsideration thereof but the court a quo, in the Order dated July 30, 1999, denied the motion.

The OSG then filed with the Court of Appeals a petition for certiorari alleging that the court a quo did not acquire jurisdiction over the action because the notice of hearing and the consequent publication violated Section 10 of CA 473; hence, the same were void and without legal effect. In denying the OSG's motion to dismiss and granting respondent Tan Keh's petition for naturalization, Judge Geronimo Mangay (now retired) allegedly acted with grave abuse of discretion. The OSG likewise imputed grave abuse of discretion on the part of respondent Judge Adoracion G. Angeles (who replaced Judge Mangay) in granting respondent Tan Keh's motion to present evidence of compliance with the requirements of Rep. Act No. 530 despite the fact that, in violation thereof, he left the country within the two-year probationary period.

After the parties had filed their respective pleadings, the appellate court rendered the assailed Decision dated February 11, 2000, dismissing the OSG's petition for certiorari as it ruled that the court a quo committed no grave abuse of discretion in denying the OSG's motion to dismiss and granting respondent Tan Keh's petition for naturalization, as well as in subsequently granting his motion to present evidence of compliance with the requirements of Rep. Act No. 530.

The OSG filed a motion for reconsideration of the assailed decision but the appellate court, in the assailed Resolution dated August 31, 2000, denied the same.

Hence, the recourse to this Court.

In support of its petition, the OSG advances the following arguments:

I

THE COURT OF APPEALS ERRED IN RULING THAT THE TRIAL COURT ACQUIRED JURISDICTION OVER THE CASE DESPITE THE FACT THAT THERE WAS A DEFECTIVE PUBLICATION. THE NOTICE OF HEARING TOOK PLACE WITHIN THE PROHIBITED PERIOD UNDER SECTION 10 OF COMMONWEALTH ACT NO. 473, AS AMENDED, OTHERWISE KNOWN AS THE "REVISED NATURALIZATION LAW." THE TRIAL COURT'S RESETTING OF THE HEARING ON A DATE OTHER THAN THAT STATED IN THE PUBLISHED NOTICE OF HEARING DID NOT CURE THE DEFECT. A VALID AND NOT FATALLY DEFECTIVE PUBLICATION IS A JURISDICTIONAL REQUIREMENT. HENCE, THE TRIAL COURT NEVER ACQUIRED JURISDICTION OVER THE ACTION.

II

THE COURT OF APPEALS ERRED IN RULING THAT SECTION 10 OF COMMONWEALTH ACT NO. 473, AS AMENDED, OTHERWISE KNOWN AS THE REVISED NATURALIZATION LAW, IS NOT A RESTRICTION IN THE PUBLICATION OF THE NOTICE OF HEARING.

III

THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT DID NOT VIOLATE SECTION 1 OR (sic) R.A. NO. 530 EVEN THOUGH HE LEFT THE COUNTRY SEVERAL TIMES DURING THE TWO-YEAR PROBATIONARY PERIOD.

IV

THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT'S TRAVEL ABROAD CAN BE CONSIDERED AS AN EXCEPTION TO SECTION 1 OF R.A. NO 530.⁵

The first two grounds shall be resolved jointly as they are interrelated. Sections 9 and 10 of CA 473 read:

Sec. 9. Notification and appearance. - Immediately upon the filing of a petition, it shall be the duty of the clerk of court to publish the same at the petitioner's expense, once a week for three consecutive weeks, in the Official Gazette, and in one of the newspapers of general circulation in the province where the petitioner resides, and to have copies of said petition and a general notice of the hearing posted in a public and conspicuous place in his office or in the building where said office is located, setting forth in such notice the name, birthplace, and residence of the petitioner, the date and the residence of the petitioner, the date and place of his arrival in the Philippines, the names of the witnesses whom the petitioner proposes to introduce in support of his petition, and the date of the hearing of the petition, which hearing shall not be held until after six months from the date of the last publication of the notice. The clerk shall, as soon as possible, forward copies of the petition, the sentence, the naturalization certificate, and other pertinent data to the Department of the Interior,⁶ the Bureau of Justice,⁷ the Provincial Inspector⁸ of the Philippine Constabulary of the province and the Justice of the Peace⁹ of the municipality wherein the petitioner resides.

Sec. 10. Hearing of the petition. - No petition shall be heard within thirty days preceding any election. The hearing shall be public, and the Solicitor General, either himself or through his delegate or the provincial fiscal concerned, shall appear on behalf of the Commonwealth of the Philippines at all the proceedings and at the hearing. If, after the hearing, the court believes, in view of the evidence taken, that the petitioner has all the qualifications required by, and none of the disqualifications specified in this Act and has complied with all requisites herein established, it shall order the proper naturalization certificate to be issued and the registration of the said naturalization certificate in the proper civil registry as required in Section 10 of Act No. 3753.

It is not disputed that there was publication of the notice of hearing and respondent Tan Keh's petition for naturalization in the Official Gazette and Newsline once a week for three consecutive weeks. The OSG, however, contends that the said publication was defective because the initial hearing on April 27, 1995 took place within the prohibited period under Section 10 of CA 473, i.e., within thirty (30) days preceding the May 8, 1995 elections. The fact that the said hearing was reset to June 9, 1995 did not allegedly cure the defect since the court a quo did not order a republication of the notice of hearing of the latter date.

The OSG maintains that Section 10 of CA 473 also operates as a restriction on the requirement of publication such that the date indicated in the published notice of hearing must not be within thirty (30) days preceding any election. When the hearing was reset to and conducted on June 9, 1995, there was no publication of the notice thereof. Accordingly, the RTC did not allegedly acquire jurisdiction over respondent Tan Keh's petition for naturalization because publication is one of the jurisdictional requirements therefor. Citing jurisprudence, the OSG insists that naturalization laws must be construed strictly and doubts resolved against the applicant.

The Court is not persuaded.

A plain reading of Section 9 of CA 473 shows that for there to be a valid publication, the following requisites must concur: (1) the petition and notice of hearing must be published; (2) the publication must be once a week for three (3) consecutive weeks; and, (3) the publication must be in the Official Gazette and in a newspaper of general circulation in the province where the applicant resides. The said provision also requires that copies of the petition and notice of hearing must be posted in the office of the clerk of court or in the building where the office is located. Further, the petition shall not be heard within six (6) months from the date of last publication of the notice.

Publication is a jurisdictional requirement and non-compliance therewith affects the jurisdiction of the court.¹⁰ The rationale for the publication was enunciated in the early case of Cui v. Republic of the Philippines,¹¹ thus:

The publication required by law in the Official Gazette and in a newspaper of general circulation is a means of screening aliens applying for Filipino citizenship by giving the public a chance to come forward and protest the grant of such citizenship if they possess any information derogatory to the applicant'.¹²

Significantly, the Solicitor General, personally or through his delegate, and the provincial fiscals, are the only officers or persons authorized by law to appear on behalf of the government and oppose an application for naturalization or move for the cancellation of a naturalization certificate already issued.¹³ The government as an agency of the people represents the public, and therefore the Solicitor General who appears on behalf of the government represents the public.¹⁴

On the other hand, Section 10 requires, in part, that "no petition shall be heard within thirty days preceding any election."

The fact that, in this case, the initial hearing was originally set during the prohibited period in Section 10, but well beyond the six (6) months prohibited period in Section 9, did not render the publication of the notice and the petition invalid. Respondent Tan Keh had strictly complied with all the requirements under Section 9. His petition and the notice of hearing were duly published once a week for three consecutive weeks in the Official Gazette during the month of September 1994 and in a newspaper of general circulation in July 1994. Moreover, the original date of hearing, April 27, 1995, was not within six (6) months from the last publication of the notice thereof.

On April 27, 1995, when it was pointed out by the OSG that the said hearing was within the prohibited period in Section 10, the court a quo forthwith cancelled the same and reset it to June 9, 1995. The OSG, as the representative of the Republic, the only other party apart from respondent Tan Keh who possessed an interest in the naturalization proceedings, was fully apprised of the new date of the hearing. There was, thus, no need for the republication of the notice of hearing and the petition for, clearly, the avowed purpose of Section 9 had already been accomplished.

There are two prohibited periods that must be reckoned with under Sections 9 and 10 of CA 473. Section 9 provides that the notice must set forth, inter alia, "the date of the hearing of the petition, which hearing shall not be held within six months from the date of last publication of the notice." Section 10, on the other hand, provides that "no petition shall be heard within thirty days preceding any election." The hearing on June 9, 1995 on respondent Tan Keh's petition was not within any of these two prohibited periods.

The case of Te Tay Seng v. Republic¹⁵ cited by respondent Tan Keh is instructive. In that case, the hearing on the petition for naturalization was set on May 5, 1959. The notice thereof was duly published in the Official Gazette and in a newspaper of general circulation once a week for three (3) consecutive weeks, the last day of publication being October 13, 1958. Thereafter, the applicant moved that the testimony of one of his character witnesses be taken on April 23, 1959 instead of on May 5, 1959, the date set for the hearing of the petition as indicated in the notice. The trial court therein granted the said motion and allowed the taking of the testimony on April 23, 1959. On appeal, among the arguments raised by the Republic was that the trial court did not acquire jurisdiction to take the testimony of the character witness before the publication of the date of hearing in the newspaper and the Official Gazette. The Court ruled against the Republic on this point, holding that "as from October 13, 1958, the last publication of the notice of hearing, to April 23, 1959, the date when the testimony of the character witness Francisco R. Lopez was taken or heard, the six months already had passed, and as it does not appear that an election was to be held within 30 days from April 23, 1959, the testimony of the character witness Francisco R. Lopez taken or heard on April 23, 1959 does not come under the prohibition above quoted."¹⁶

As discussed earlier, all the requisites for a valid publication under Section 9 had been complied with in respect of respondent Tan Keh's petition for naturalization. Further, the hearing thereon on June 9, 1995 was not within any of the prohibited periods under Sections 9 and 10. Contrary to the contention of the OSG, therefore, the court a quo acquired jurisdiction over respondent Tan Keh's petition for naturalization.

Anent the third and fourth arguments proffered by the OSG, which relate to the issue on whether respondent Tan Keh violated Section 1 of Rep. Act No. 530 because he left the country during the two-year period, albeit with leave of the court a quo, the Court believes that it is premature, at this point, to resolve this issue.

Sections 1 and 2 of Rep. Act No. 530 read:

Sec. 1. The provisions of existing laws notwithstanding, no petition for Philippine citizenship shall be heard by the courts until after six months from the publication of the application required by law, nor shall any decision granting the application become executory until after two years from its promulgation and after the court, on proper hearing, with the attendance of the Solicitor General or his representative, is satisfied, and so finds, that during the intervening time the applicant has (1) not left the Philippines, (2) has dedicated himself continuously to a lawful calling or profession, (3) has not been convicted of any offense or violation of Government promulgated rules, (4) or committed any act prejudicial to the interest of the nation or contrary to any Government announced policies.

Sec. 2. After the finding mentioned in section one, the order of the court granting citizenship shall be registered and the oath provided by existing laws shall be taken by the applicant, whereupon, and not before, he will be entitled to the privileges of a Filipino citizen.

The assailed Order dated May 4, 1999 of respondent Judge Angeles merely granted respondent Tan Keh's motion to present evidence of compliance with the requirements of Rep. Act No. 530. It did not, as yet, make any finding with respect to whether respondent Tan Keh had fully complied with the above provision. Neither did it make a categorical ruling that respondent Tan Keh is already entitled to the issuance of a certificate of naturalization and allowed to take his oath as a Filipino citizen. The dispositive portion of the May 4, 1999 Order merely states:

WHEREFORE, premises considered, the instant Motion to Present Evidence of Compliance with the Requirements of RA 530 is hereby GRANTED.

Let the presentation of evidence be held on May 27, 1990 (sic) at 8:30 AM.

SO ORDERED.¹⁷

The said Order is, in fact, in accord with Section 1 of Rep. Act No. 530, which provides that a decision in a naturalization case becomes final only after two years from its promulgation and after another hearing is conducted to determine whether or not there was such compliance. As the Court of Appeals correctly ratiocinated:

At any rate, it would be precipitate for respondent judge to deny private respondent's motion to present evidence to show his compliance with the requirements of R.A. No. 530. If a hearing is held, petitioner would have the opportunity to show the perceived violations by private respondent of the law as to prevent him from embracing Philippine citizenship. In other words, whether or not private respondent has faithfully complied with the legal requirements to warrant his naturalization as a Filipino citizen would be better determined in the course of private respondent's presentation of evidence. At that point, private respondent has the burden of showing compliance.¹⁸

Indeed, the hearing on respondent Tan Keh's motion to present evidence of compliance with the requirements of Rep. Act No. 530 would be the proper venue where the OSG could fully ventilate its perceived violations by respondent Tan Keh of the said law. If the court a quo, after the said hearing and notwithstanding the OSG's opposition, issues to respondent Tan Keh the certificate of naturalization and allows him to take his oath, the OSG, if it is still so minded, may appeal the court a quo's order in accordance with the pertinent provisions of CA 473.¹⁹

In fine, the appellate court committed no reversible error in holding that respondent Judge Angeles did not commit any grave abuse of discretion in granting respondent Tan Keh's motion to present evidence of compliance with the requirements of Rep. Act No. 530.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. No costs.

SO ORDERED.

Austria-Martinez, (Acting Chairman), and Chico-Nazario, JJ., concur.
Puno, (Chairman), J., on official leave.
TINGA, J., on leave.

Endnotes:

¹ Penned by Associate Justice Oswaldo D. Agcaoili, with Associate Justices Corono Ibay-Somera and Renato C. Dacudao, concurring.

² Rollo, p. 61.

³ Infra.

⁴ Rollo, p. 83.

⁵ Rollo, p. 16.

⁶ Now Office of the President.

⁷ Now Office of the Solicitor General.

⁸ Now Provincial Commander.

⁹ Now Regional Trial Court.

¹⁰ Po Yo Bi v. Republic, 205 SCRA 400 (1992).

¹¹ 101 Phil. 649 (1957).

¹² Id. at 653.

¹³ Anti-Chinese League v. Felix, 77 Phil. 1012 (1947).

¹⁴ Ibid.

¹⁵ 7 SCRA 522 (1963).

¹⁶ Id. at 524.

¹⁷ Rollo, p. 93.

¹⁸ Id. at 39-40.

¹⁹ In Tan v. Republic (37 SCRA 353 [1971]) for example, the Court held that "an order granting the petition to take the requisite oath of allegiance of one who had previously obtained a decision favorable to his application, is appealable, and that it is, therefore, improper and illegal to authorize the taking of the said order and before the expiration of the reglementary period to perfect the appeal."

G.R. No. 144880 - PASCUAL AND SANTOS, INC. v. THE MEMBERS OF THE TRAMO WAKAS NEIGHBORHOOD ASSOCIATION, INC., ET AL.

2013-01-15T09:50:35+00:00

G.R. No. 144880 - PASCUAL AND SANTOS, INC. v. THE MEMBERS OF THE TRAMO WAKAS NEIGHBORHOOD ASSOCIATION, INC., ET AL.

THIRD DIVISION

[G.R. NO. 144880 : November 17, 2004]

PASCUAL AND SANTOS, INC., Petitioner, v. THE MEMBERS OF THE TRAMO WAKAS NEIGHBORHOOD ASSOCIATION, INC. represented by DOMINGA MAGNO, Respondents.

D E C I S I O N

CARPIO MORALES, J.:

At bar is a Petition for Review on Certiorari assailing the May 17, 2000 and August 8, 2000 Resolutions¹ of the Court of Appeals (CA) in CA-G.R. No. 57274 which respectively, dismissed the appeal instituted by petitioner Pascual and Santos, Inc. (petitioner) and denied its motion for reconsideration.

The Members of Tramo Wakas Neighborhood Association, represented by Dominga Magno (respondents), lodged before the Presidential Action Center a petition dated January 12, 1994 praying that ownership over three (3) parcels of land situated in Barangay San Dionisio, ParaÃ±aque, Metro Manila, identified as Lot Nos. 4087, 4088 and 5003, Psu-118886, Cad. 229 with an aggregate area of 35,195 square meters be awarded to them. In their petition, respondents alleged that petitioner claims ownership of the subject lots which they have openly, peacefully and continuously occupied since 1957.

The petition was referred to the Land Management Bureau (LMB) where it was docketed as LMB Case No. 2-96, for investigation and hearing.

By Decision² of February 21, 1996, Director Abelardo G. Palad, Jr. of the LMB found for respondents. The dispositive portion of the decision reads, quoted verbatim:

WHEREFORE, it is ordered that the claim of Pascual and Santos, Inc., over Lot 4087, Lot 4088 and Lot 5003, situated at Brgy. San Dionisio, ParaÃ±aque, Metro Manila be, as hereby it is, dismissed. The individual members of TRAMO WAKAS NEIGHBORHOOD ASSOCIATION, now represented by Dominga Magno, if qualified may file appropriate public land applications over the land they actually possessed and occupied. An individual survey shall be conducted on the land at their own expense and after approval of the said survey the same shall be given due course.

SO ORDERED.³

Its Motion for Reconsideration having been denied by Order of June 26, 1996, petitioner lodged an appeal before the Office of the Department of Environment and Natural Resources (DENR) Secretary, docketed as DENR Case No. 7816.

By Decision⁴ of November 25, 1997, then DENR Secretary Victor O. Ramos dismissed the appeal for lack of merit and affirmed in toto the decision of the Director of the LMB. Petitioner's Motion for Reconsideration of the decision having been denied by Order⁵ of May 18, 1998, it filed an appeal before the Office of the President (OP), docketed as O.P. Case No. 98-F-8459, which was likewise dismissed for lack of merit by Decision⁶ of January 20, 2000. The November 25, 1997 DENR decision was affirmed in toto.

Petitioner received a copy of the OP's dismissal of its appeal on February 1, 2000,⁷ following which or on February 16, 2000, it filed a "Petition for Time"⁸ before the CA for an additional period of fifteen days or until March 2, 2000 within which to file its Petition for Review .

By Resolution⁹ of February 21, 2000, the CA granted petitioner's Petition for Time, giving it a non-extendible period of fifteen days from February 16, 2000 or until March 2, 2000 within which to file the petition.

Petitioner subsequently filed its Petition for Review¹⁰ dated March 2, 2000 with the CA, praying that judgment be rendered (1) reversing and setting aside the January 20, 2000 OP Decision and the November 25, 1997 DENR Decision and May 18, 1998 Order, and (2) declaring the subject lots as no longer forming part of the public domain and have been validly acquired by petitioner; or in the alternative, (1) allowing it to present additional evidence in support of its claim to the subject lots, (2) reversing and setting aside the aforementioned Decisions and Order of the OP and the DENR, and (3) declaring the subject lots as no longer forming part of the public domain and have been validly acquired by petitioner.¹¹

By Resolution of May 17, 2000, the CA dismissed the appeal due to infirm Verification and Certification of non-forum shopping and belated filing.

For one, the Verification and Certification of non-forum shopping was signed merely by Estela Lombos and Anita Pascual who allege that they are the duly authorized representatives of petitioner corporation, without showing any proof whatsoever of such authority.

For another, and importantly, the Petition for Review was filed a day after the period petitioner corporation expressly sought. As indicated in its "Petition for Time," petitioner corporation asked for an additional fifteen (15) days, or until March 2, 2000, within which to file its petition, which was granted by the Court per Resolution dated February 21, 2000. However, despite the foregoing, petitioner corporation filed the same only on MARCH 3, 2000 as indicated by the date stamped on the envelope which contains the Petition for Review .¹² (Citations omitted; underscoring supplied)

On June 14, 2000, petitioner filed a Motion for Reconsideration¹³ of the CA May 17, 2000 Resolution, arguing that there was no showing that the persons acting on its behalf were not authorized to do so and that its petition was filed within the additional 15-day period granted by the CA. Attached to the Motion was a Secretary's Certificate¹⁴ dated June 14, 2000 showing that petitioner's Board of Directors approved a Resolution on February 11, 2000 appointing Estela Lombos and Anita Pascual, incumbent directors of the corporation, as its duly authorized representatives who may sign all papers, execute all documents, and do such other acts as may be necessary to prosecute the Petition for Review that it would file with the CA assailing the decision rendered in OP Case No. 98-G-8459.¹⁵

By Resolution of August 23, 2000, the CA denied petitioner's Motion for Reconsideration for lack of merit.

xxx It must be stressed that any person who claims authority to sign, in behalf of another, the Certificate of Non-Forum Shopping, as required by the rules, must show sufficient proof thereof. Bare allegations are not proof, and the representation of one who acts in behalf of another cannot, by itself, serve as proof of his authority to act as agent or of the extent of his authority as agent. Thus, absent such clear proof, the Court cannot accept at face value, such authority to sign in behalf of the corporation.

x x x

Another perusal of the registry return receipts attached to the Petition for Review (Nos. 182, 183 and 184) shows that copies of the Manifestation and Petition for Review were served to private respondent's (sic) counsel, the Office of the President, and the Department of Environment and Natural Resources, on March 2, 2000. However, it does not indicate therein when the Petition for Review was filed with the Court. The registry return receipts (No. 185, 186, 187 and 188) being referred to by petitioner shows (sic) the date March 2, 2000 only on that numbered 188, and does (sic) not show the dates on those numbered 185-187. In fact, said receipts do not even indicate which pertain to the copy filed with the Court.

Moreover, the Court cannot sustain petitioner's supposition that a post office employee might have stamped the wrong date, March 3, 2000, without any proof whatsoever of such error. The date stamped on the envelope which contained the Manifestation and Petition for Review clearly shows that the same was filed on March 3, 2000, and petitioner having failed to rebut the presumption of regularity in the performance of official functions, the same must prevail.¹⁶ (Citations omitted; emphasis in the original; underscoring supplied)

Petitioner thus filed on September 27, 2000 before this Court a "Petition For Time" to file its Petition for Review .

On October 30, 2000, petitioner filed a Petition for Review on Certiorari raising the following issues:

I

WHETHER OR NOT THE PERSONS WHO EXECUTED THE VERIFICATION AND CERTIFICATION OF NON-FORUM SHOPPING ATTACHED TO PSI'S MANIFESTATION/PETITION FOR REVIEW FILED WITH THE COURT OF APPEALS WERE AUTHORIZED TO DO SO.

II

WHETHER OR NOT PSI'S MANIFESTATION/PETITION FOR REVIEW WAS FILED WITHIN THE REGLEMENTARY PERIOD.¹⁷

By Resolution¹⁸ of December 6, 2000, this Court denied the Petition for Review in view of petitioner's failure to submit a valid affidavit of service pursuant to Section 13 of Rule 13 and Sections 3 and 5 of Rule 45 in relation to Section 5 (d) of Rule 56 of the Rules of Court and attach to the petition a duplicate original or certified true copy of the assailed CA resolutions pursuant to Sections 4 (d) and 5 of Rule 45 in relation to Section 5 (d) of Rule 56 of the Rules of Court.

Petitioner filed a Motion for Reconsideration,¹⁹ averring that it had already attached certified true copies of the assailed resolutions of the CA in its "Petition for Time" filed before this Court on September 27, 2000, and while it was the affidavit before the CA which was inadvertently attached to its petition before this Court, the messengerial staff of petitioner's counsel did in fact serve copies of the petition on counsel for respondents, the DENR, the OP and the court a quo as evidenced by registry receipts and return cards²⁰ which it attached to its Motion for Reconsideration.

By Resolution²¹ of March 7, 2001, this Court, finding petitioner's explanation satisfactory, granted the Motion for Reconsideration and reinstated the petition, now the subject of this Decision.

The petition is impressed with merit.

Section 6 (d) of Rule 43 in relation to Section 2 of Rule 42 of the Rules of Court mandates that a Petition for Review shall contain a sworn certification against forum shopping in which the petitioner shall attest that he has not commenced any other action involving the same issues in this Court, the Court of Appeals or different divisions thereof, or any other tribunal or agency; if there is such other action or proceeding, he must state the status of the same; and if he should thereafter learn that a similar action or proceeding has been filed or is pending before this Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency, he undertakes to promptly inform the aforesaid courts and other tribunal or agency thereof within five days therefrom.

For failure to comply with this mandate, Section 7 of Rule 43 provides:

SEC. 7. Effect of failure to comply with requirements. - The failure of the petitioner to comply with any of the foregoing requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof of service of the petition, and the contents of and the documents which should accompany the petition shall be sufficient ground for the dismissal thereof.

The requirement that the petitioner should sign the certificate of non-forum shopping applies even to corporations, considering that the mandatory directives of the Rules of Court make no distinction between natural and juridical persons.²²

In the case at bar, the CA dismissed the petition before it on the ground that Lombos and Pascual, the signatories to the verification and certification on non-forum shopping, failed to show proof that they were authorized by petitioner's board of directors to file such a petition.

Except for the powers which are expressly conferred on it by the Corporation Code and those that are implied by or are incidental to its existence, a corporation has no powers. It exercises its powers through its board of directors and/or its duly authorized officers and agents.²³ Thus, its power to sue and be sued in any court is lodged with the board of directors that exercises its corporate powers.²⁴ Physical acts, like the signing of documents, can be performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific act of the board of directors.²⁵

It is undisputed that when the petition for certiorari was filed with the CA, there was no proof attached thereto that Lombos and Pascual were authorized to sign the verification and non-forum shopping certification. Subsequent to the CA's dismissal of the petition, however, petitioner filed a motion for reconsideration to which it attached a certificate issued by its board secretary stating that on February 11, 2000 or prior to the filing of the petition, Lombos and Pascual had been authorized by petitioner's board of directors to file the petition before the CA.

This Court has ruled that the subsequent submission of proof of authority to act on behalf of a petitioner corporation justifies the relaxation of the Rules for the purpose of allowing its petition to be given due course.²⁶

Thus, in Shipside Incorporated v. Court of Appeals,²⁷ this Court held:

xxx Moreover, in Loyola, Roadway and Uy, the Court excused non-compliance with the requirement as to the certificate of non-forum shopping. With more reason should we allow the instant petition since petitioner herein did submit a certification on non-forum shopping, failing only to show proof that the signatory was authorized to do so. That petitioner subsequently submitted a secretary's certificate attesting that Balbin was authorized to file an action on behalf of petitioner likewise mitigates this oversight.

It must also be kept in mind that while the requirement of the certificate of non-forum shopping is mandatory, nonetheless the requirements must not be interpreted too literally and thus defeat the objective of preventing the undesirable practice of forum shopping.²⁸

As for the timeliness of the filing of its Petition for Review before the CA, petitioner maintains in the affirmative.

Sections 3 and 12 of Rule 13 of the Rules of Court provide:

SEC. 3. Manner of filing. - The filing of pleadings, appearances, motions, notices, orders, judgments and all other papers shall be made by presenting the original copies thereof, plainly indicated as such, personally to the clerk of court or by sending them by registered mail. In the first case, the clerk of court shall endorse on the pleading the date and hour of filing. In the second case, the date of the mailing of motions, pleadings, or any other papers or payments or deposits, as shown by the post office stamp on the envelope or the registry receipt, shall be considered as the date of their filing, payment, or deposit in court. The envelope shall be attached to the record of the case.

SEC. 12. Proof of filing. - The filing of a pleading or paper shall be proved by its existence in the record of the case. If it is not in the record, but is claimed to have been filed personally, the filing shall be proved by the written or stamped acknowledgment of its filing by the clerk of court on a copy of the same; if filed by registered mail, by the registry receipt and by the affidavit of the person who did the mailing, containing a full statement of the date and place of depositing the mail in the post office in a sealed envelope addressed to the court, with postage fully prepaid, and with instructions to the postmaster to return the mail to the sender after ten (10) days if not delivered.

Registry Receipt Nos. 185-188 covering the envelopes bearing the copies of the petition which were sent to the CA indicate that such copies were filed by registered mail at the Domestic Airport Post Office (DAPO) on March 2, 2000.²⁹

The Affidavit of Service³⁰ filed by the person who did the mailing of the petition in behalf of petitioner states that such petition was filed by registered mail by depositing seven copies thereof in four separate sealed envelopes and mailing the same to the Clerk of Court of the CA through the DAPO on March 2, 2000. The affidavit likewise states that on even date, the petition was served on counsel for respondents, the DENR and the OP by depositing copies of the same in sealed envelopes and mailing them to said parties' respective addresses through the DAPO.

And in the Certification³¹ dated October 26, 2000 issued by Postmaster Cesar A. Felicitas of the DAPO, he states that the registered mail matter covered by Registry Receipt Nos. 185-188 addressed to the Clerk of Court of the CA was posted at their office for mailing on March 2, 2000, but that it was "dispatched to the CMEC on March 3, 2000 for proper disposition." This could very well explain why the latter date was stamped on the envelope received by the CA containing the petition.

At all events, strict adherence to rules of procedure must give way to considerations of equity and substantial justice where, as in this case, there is evidence showing that the appeal was filed on time.³²

WHEREFORE, the petition is GRANTED. The Resolutions dated May 17, 2000 and August 23, 2000 of the Court of Appeals are SET ASIDE. The case, CA-G.R. SP No. 57274, is REMANDED to the appellate court which is hereby directed to give due course to the appeal of petitioner.

No costs.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, and Garcia, JJ., concur.
Corona, J., on leave.

Endnotes:

¹ Rollo at 10-20.

² Id. at 277-286.

³ Id. at 286.

⁴ Id. at 209-217.

⁵ Id. at 219-220.

⁶ Id. at 202-207.

⁷ Id. at 65.

⁸ CA Rollo at 1-4.

⁹ Id. at 6.

¹⁰ Id. at 16-131.

¹¹ Id. at 36-37.

¹² Rollo at 14-15.

¹³ Id. at 90-101.

¹⁴ Id. at 98.

¹⁵ Ibid.

¹⁶ Id. at 11-12.

¹⁷ Id. at 29.

¹⁸ Id. at 102-103.

¹⁹ Id. at 105-121.

²⁰ Id. at 120, 139 and 140.

²¹ Id. at 142.

²² Zulueta v. Asia Brewery, 354 SCRA 100, 108 (2001).

²³ National Steel Corporation v. Court of Appeals, 388 SCRA 85, 91-92 (2002) (citation omitted), BA Savings Bank v. Sia, 336 SCRA 484, 488 (2000).

²⁴ Shipside Incorporated v. Court of Appeals, 352 SCRA 334, 345 (2001) (citation omitted).

²⁵ Firme v. Bukal Enterprises and Development Corporation, 414 SCRA 190, 209 (2003) (citation omitted).

²⁶ Novelty Philippines, Inc. v. Court of Appeals, 411 SCRA 211, 219 (2003) (citation omitted), National Steel Corporation v. Court of Appeals, 388 SCRA 85, 92 (2002), BA Savings Bank v. Sia, 336 SCRA 484, 489 (2000).

²⁷ 352 SCRA 334 (2001).

²⁸ Id. at 346-347.

²⁹ Rollo at 87.

³⁰ Id. at 40.

³¹ Id. at 89.

³² South Villa Chinese Restaurant v. NLRC, 250 SCRA 246 (1995).

G.R. No. 144887 - ALFREDO RIGOR v. PEOPLE OF THE PHILIPPINES

2013-01-15T09:50:35+00:00

G.R. No. 144887 - ALFREDO RIGOR v. PEOPLE OF THE PHILIPPINES

FIRST DIVISION

[G.R. NO. 144887 : November 17, 2004]

ALFREDO RIGOR, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.

D E C I S I O N

AZCUNA, J.:

This is a Petition for Review on Certiorari of the decision of the Court of Appeals, in CA-G.R. CR No. 18855, which affirmed the decision of the Regional Trial Court of Pasig, Branch 163, in Criminal Case No. 86025, convicting petitioner Alfredo Rigor of violation of Batas Pambansa Blg. 22 (the Bouncing Checks Law), and imposing upon him the penalty of imprisonment for six (6) months and ordering him to restitute to the Rural Bank of San Juan the sum of P500,000 and to pay the costs.

The Information¹ against petitioner reads:

That on or about the 16th day of November 1989 in the Municipality of San Juan, Metro Manila, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, did then and there willfully, unlawfully and feloniously make or draw and issue to Rural Bank of San Juan, Inc. thru its loan officer Carlos N. Garcia, a postdated check to apply on account or for value the check described below:

Check No.

: 165476

Drawn against

: Associated Bank, Tarlac Branch

In the Amount of

: P500,000.00

Dated

: February 16, 1990

Payable to

: Rural Bank of San Juan

said accused well knowing that at the time of issue on 16 November 1989, he has already insufficient funds or credit with the drawee bank for the payment in full of the face amount of such check and that as of 2 February 1990 his bank accounts were already closed and that check when presented for payment from and after the date thereof, was subsequently dishonored for the reason "Account Closed" and despite receipt of notice of such dishonor, the accused failed to pay said payee the face amount of said check or to make arrangement for full payment thereof during the period of not less than five (5) banking days after receiving notice.

When arraigned, petitioner pleaded not guilty. Thereafter, trial on the merits ensued.

The facts, as narrated by the Court of Appeals, are as follows:

The prosecution evidence was furnished by witnesses Edmarcos Basangan of Rural Bank of San Juan (RBSJ) and Esteban Pasion, employee of the Associated Bank. It was shown that on November 16, 1989, appellant (petitioner herein) applied for a commercial loan from the Rural Bank of San Juan, Inc., at N. Domingo St., San Juan, Metro Manila in the sum of P500,000.00 (Exh. "A"). He signed a promissory note stating that an interest of 24% per annum from its date will be charged on the loan (Exh. "B"). The loan was approved by RBSJ's Bank Manager Melquecedes de Guzman and Controller Agustin Uy. A cashier's check with RBSJ No. 2023424 in the amount of P487,000.00, net proceeds of the loan, was issued to appellant (Exh. "C"). Appellant endorsed, then encashed the check with RBSJ Teller Eleneth Cruz, who stamped thereon the word "paid" (Exh. "C-4"). After appellant received the proceeds, he issued an undated check, Associated Bank Check No. 165476, Tarlac Branch, in the amount of P500,000, payable to RBSJ (Exh. "D").

It was not the bank policy for a borrower to apply for a loan, obtain its approval and its proceeds on the same day. Appellant's case was a special one considering that he is the "kumpare" of the President of RBSJ and he is well-known to all the bank's directors since he, like them, comes from Tarlac.

Appellant failed to pay his loan upon its maturity on December 16, 1989. He personally asked de Guzman for a two-month extension and advised RBSJ to date to February 16, 1990 his Associated Bank check no. 165476. Failing anew to pay, he asked for another two-month extension or up to April 16, 1990. Both requests de Guzman granted. On April 16, 1990, appellant still failed to pay his loan. Basangan and his co-employee, Carlos Garcia, went to Tarlac to collect from appellant the amount of the loan. Appellant's written request for another 30-day extension was denied by de Guzman who instead, sent him a formal demand letter dated April 25, 1990.

On May 25, 1990, Associated Bank check no. 165476 was deposited with PS Bank, San Juan Branch. The check was later returned with the words "closed account" stamped on its face. Associated Bank employee PASION declared that appellant's Current Account No. 1022-001197-9 with Associated Bank had been closed since February 2, 1990. Appellant's balance under the bank's statement of account as of November 16, 1989 was only P859. The most appellant had on his account was P40,000 recorded on November 19, 1989 (Exh. "K").

Basangan and Garcia, in Tarlac, advised appellant of the dishonor of his check. Appellant wrote Atty. Joselito Lim, RBSJ Chairman of the Board, about the loan and arrangements as to the schedule of his payment. His letter was referred to de Guzman, who, in turn, sent to him another demand letter dated September 17, 1990. The letter informed him of the dishonor of his check. De Guzman required him to take the necessary step for the early settlement of his obligation. He still refused to pay.

Appellant denied the charge. He claimed that on November 16, 1989, Agapito Uy and his sister Agnes Angeles proposed to him that he secure a loan from the RBSJ for P500,000. P200,000 of it will be for him and the P300,000 will go to Uy and to his sister to pay unpaid loans of borrowers in their "side banking" activities. For the approval of his loan, Uy told him that appellant can put up his four-door Mercedes Benz as collateral for the P200,000 loan. The P300,000 will have no collateral. Uy also told him the he (Uy) has complete control of the bank and his Mercedes Benz will be enough collateral for the P500,000.

Appellant agreed to the proposal. He signed a blank loan application form and a promissory note plus a chattel mortgage for his Mercedes Benz. Thereafter, he was told to come back in two days. Uy gave him two Premiere Bank checks worth P100,000 each. He gave one check to his brother Efren Rigor and the other to his sister-in-law for encashment in Tarlac. He issued to Uy a personal check for P500,000 undated. This check was deposited in the bank for encashment in the later part of May, 1990 but it bounced. When demand was made for him to pay his loan, he told Uy to get his Mercedes Benz as payment for P200,000 but Uy refused. Uy wanted him to pay the whole amount of P500,000.²

On July 8, 1994, the trial court rendered judgment against petitioner, the dispositive portion of which reads:

WHEREFORE, foregoing premises considered, this Court finds accused Alfredo Rigor guilty beyond reasonable doubt of the crime of Violation of Section 1 of Batas Pambansa Blg. 22 and there being no mitigating or aggravating circumstance on record, imposes upon him the penalty of imprisonment for six (6) months and to restitute to the Rural Bank of San Juan the sum of P500,000.00 and to pay the costs.³

The trial court stated the reasons for petitioner's conviction, thus:

In the case at bar, accused admitted having issued Associated Bank Check No. 165476 in the amount of P500,000.00. the check was undated when issued. Records, however, show that it was issued on 16 November 1989 but as it appear[s] now it is dated 16 February 1990. The probable reason must be because upon the maturity of his loan on 16 December 1989, accused asked for extension of two (2) months to pay the same. And the expiration of that two (2) months period is 16 February 1990. Nevertheless, Exhibit "K" for the prosecution including its submarkings show that the highest outstanding amount in the current account of accused with the Associated Bank, Tarlac Branch for the month of November 1989, the month Rigor issued aforesaid check, is only about P40,000.00. Hence, Rigor has no sufficient deposit in the bank to cover the amount of P500,000.00 when he issued Check No. 165476. Therefore, Rigor knowingly issued the same he having no sufficient funds in or credit with the drawee bank in violation of section 1 of [B.P.] Blg. 22.

The defense of the accused that the amount of loan he secured from the Rural Bank of San Juan is only P200,000.00 is of no moment. The fact is he admitted having issued Associated Bank Check No. 165476 in the amount of P500,000.00 and upon its deposit for encashment, the same was dishonored for reason account closed.⁴

Petitioner appealed his conviction to the Court of Appeals, which affirmed the trial court's decision. The dispositive portion of the appellate court's decision reads:

WHEREFORE, the appealed decision is AFFIRMED with the modification that the reference to lack of mitigating or aggravating circumstances should be deleted and disregarded.⁵

Hence, this Petition for Review on Certiorari .

Petitioner raises the following:

1) Absent the element of knowingly issuing a worthless check entitles the petitioner to acquittal;

2) Without proof that accused actually received a notice of dishonor, a prosecution for violation of the Bouncing Checks Law cannot prosper;

3) The Pasig Court below had no jurisdiction to try and decide the case for violation of Batas Pambansa Bilang 22.⁶

Petitioner contends that he did not violate Batas Pambansa Bilang 22 because he told the officers of the complainant bank from the very beginning that he did not have sufficient funds in the bank; he was merely enticed by Agustin Uy, the bank's managing director and comptroller, to obtain the instant loan where he received only P200,000, while Uy took P300,000; and his check was partly used to collateralize an accommodation in favor of Uy in the amount of P300,000.

The contention is without merit.

Petitioner is charged with violation of Section 1 of Batas Pambansa Bilang 22, thus:

SECTION 1.Checks without sufficient funds. - - Any person who makes or draws and issues any check to apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment, shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two hundred thousand pesos, or both such fine and imprisonment at the discretion of the court.

The elements of the offense are: (1) Making, drawing, and issuance of any check to apply on account or for value; (2) knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit, or dishonor of the check for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.⁷

As found by the Regional Trial Court and the Court of Appeals, all the aforementioned elements are present in this case.

The evidence shows that on November 16, 1989, petitioner applied⁸ for a loan in the amount of P500,000 with the Rural Bank of San Juan and on the same day, he issued an undated Associated Bank Check No. 165476⁹ worth P500,000 payable to Rural Bank of San Juan in connection with the loan, which check was later dated February 16, 1990.¹⁰ The check was thus issued to apply for value.¹¹ This shows the presence of the first element of the offense.

The presence of the second element of the offense is shown by petitioner's admission¹² that he knew of the insufficiency of his funds in the drawee bank when he issued the check and he allegedly did not hide the fact from the officials of the Rural Bank of San Juan.

The Court of Appeals correctly ruled, thus:

x x x

Knowledge involves a state of mind difficult to establish. We hold that appellant's admission of the insufficiency of his fund at the time he issued the check constitutes the very element of "knowledge" contemplated in Sec. 1 of BP 22. The prima facie presumption of knowledge required in Sec. 2, Ibid., does not apply because (a) the check was presented for payment only on May 25, 1990 or beyond the 90-day period, which expired on May 16, 1990, counted from the maturity date of the check on February 16, 1990 and (b) an actually admitted knowledge of a fact needs no presumption.

While it is true that if a check is presented beyond ninety (90) days from its due date, there is no more presumption of knowledge by the drawer that at the time of issue his check has no sufficient funds, the presumption in this case is supplanted by appellant's own admission that he did not hide the fact that he had no sufficient funds for the check. In fact, it appears that when he authorized RBSJ to date his check on February 16, 1990, his current account was already closed two weeks earlier, on February 2, 1990.¹³

Petitioner, however, argues that since the officers of the bank knew that he did not have sufficient funds, he has not violated Batas Pambansa Bilang 22.

Assuming arguendo that the payee had knowledge that he had insufficient funds at the time he issued the check, such knowledge by the payee is immaterial as deceit is not an essential element of the offense under Batas Pambansa Bilang 22.¹⁴ The gravamen of the offense is the issuance of a bad check; hence, malice and intent in the issuance thereof are inconsequential.¹⁵

Moreover, the cited case of Magno v. Court of Appeals,¹⁶ which resulted in the acquittal of the accused therein, is inapplicable to petitioner as the facts of said case are different. In Magno, the bounced checks were issued to cover a warranty deposit in a lease contract, where the lessor-supplier was also the financier of the deposit.¹⁷ It was a modus operandi whereby the supplier of the goods is also able to sell or lease the same goods at the same time privately financing those in desperate need so they may be accommodated.¹⁸ The Court therein held:

To charge the petitioner for the refund of a "warranty deposit" which he did not withdraw as it was not his own account, it having remained with LS Finance, is to even make him pay an unjust "debt," to say the least, since petitioner did not receive the amount in question. All the while, said amount was in the safekeeping of the financing company, which is managed, supervised and operated by the corporation officials and employees of LS Finance. Petitioner did not even know that the checks he issued were turned over by Joey Gomez to Mrs. Teng, whose operation was kept from his knowledge on her instruction. This fact alone evoke suspicion that the transaction is irregular and immoral per se, hence, she specifically requested Gomez not to divulge the source of the "warrant deposit."

It is intriguing to realize that Mrs. Teng did not want the petitioner to know that it was she who "accommodated" petitioner's request for Joey Gomez, to source out the needed funds for the "warranty deposit." Thus it unfolds the kind of transaction that is shrouded with mystery, gimmickry and doubtful legality. It is in simple language, a scheme whereby Mrs. Teng as the supplier of the equipment in the name of her corporation, Mancor, would be able to "sell or lease" its goods as in this case, and at the same time, privately financing those who desperately need petty accommodations as this one. This modus operandi has in so many instances victimized unsuspecting businessmen, who likewise need protection from the law, by availing of the deceptively called "warranty deposit" not realizing that they also fall prey to leasing equipment under the guise of a lease purchase agreement when it is a scheme designed to skim off business clients.¹⁹

This case, however, involves an ordinary loan transaction between petitioner and the Rural Bank of San Juan wherein petitioner issued the check certainly to be applied to the payment of his loan since the check and the loan have the same value of P500,000. Whether petitioner agreed to give a portion of the proceeds of his loan to Agustin Uy, an officer of complainant bank, to finance Uy's and his (petitioner) sister's alleged "side-banking" activity, such agreement is immaterial to petitioner's liability for issuing the dishonored check under Batas Pambansa Bilang 22.

Lozano v. Martinez²⁰ states:

The gravamen of the offense punished by BP 22 is the act of making and issuing a worthless check or a check that is dishonored upon its presentation for payment. It is not the non-payment of an obligation which the law punishes. The law is not intended or designed to coerce a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal sanctions, the making of worthless checks and putting them in circulation. Because of its deleterious effects on the public interest, the practice is proscribed by the law. The law punishes the act not as an offense against property, but an offense against public order.

People v. Nitafan²¹ held that to require that the agreement surrounding the issuance of checks be first looked into and thereafter exempt such issuance from the provisions of Batas Pambansa Bilang 22 on the basis of such agreement or understanding would frustrate the very purpose for which the law was enacted.

Further, the presence of the third element of the offense is shown by the fact that after the check was deposited for encashment, it was dishonored by Associated Bank for reason of "closed account" as evidenced by its Check Return Slip.²² Despite receipt of a notice of dishonor from complainant bank, petitioner failed to pay his obligation.

Petitioner next contends that he did not receive a notice of dishonor, the absence of which precludes criminal prosecution.

The contention is likewise of no merit.

The notice of dishonor of a check may be sent to the drawer or maker by the drawee bank, the holder of the check, or the offended party either by personal delivery or by registered mail.²³ The notice of dishonor to the maker of a check must be in writing.²⁴

In this case, prosecution witness Edmarcos Basangan testified that after petitioner's check was dishonored, he and co-employee Carlos Garcia went to petitioner's residence in Tarlac to inform him about it. Thereafter, petitioner wrote a letter dated June 28, 1990 to Atty. Joselito Lim, RBSJ chairman of the Board of Directors, proposing a manner of paying the loan. The letter was referred to the bank manager who sent petitioner another demand letter²⁵ dated September 17, 1990 through registered mail.²⁶ Said letter informed petitioner of the dishonor of his check for the reason of account closed, and required him to settle his obligation, thus:

x x x

September 17, 1990

Mr. Alfredo Rigor
Victoria, Tarlac

Dear Mr. Rigor,

Please be informed that the check dated February 16, 1990, that you issued purportedly for the payment of your loan, which has already become due and demandable in the sum of PESOS: Five Hundred Thousand Pesos Only (P500,000.00) was dishonored on February 16, 1990 (should be May 25, 1990) for the reason Account Closed (AC).

We trust that you will take the necessary step for the early settlement of your obligation to us.

Very truly yours,

MELQUECEDES DE GUZMAN

The transcript of records²⁷ shows that petitioner admitted knowledge of the dishonor of his check through a demand letter sent to him. Hence, petitioner cannot pretend that he did not receive a notice of dishonor of his check.

Lastly, petitioner contends that the Regional Trial Court of Pasig had no jurisdiction over this case since no proof has been offered that his check was issued, delivered, dishonored or that knowledge of insufficiency of funds occurred in the Municipality of San Juan, Metro Manila.

The contention is untenable.

As regards venue of a criminal action, Section 15, paragraph (a), of Rule 110 of the 2000 Revised Rules of Criminal Procedure, which reflects the old rule,²⁸ provides:

Sec. 15. Place where action is to be instituted.'

(a) Subject to existing laws, the criminal action shall be instituted and tried in the court of the municipality or territory where the offense was committed or where any of its essential ingredients occurred. (Emphasis supplied.)

Violations of Batas Pambansa Bilang 22 are categorized as transitory or continuing crimes.²⁹ In such crimes, some acts material and essential to the crimes and requisite to their consummation occur in one municipality or territory and some in another, in which event, the court of either has jurisdiction to try the cases, it being understood that the first court taking cognizance of the case excludes the other.³⁰ Hence, a person charged with a transitory crime may be validly tried in any municipality or territory where the offense was in part committed.³¹

The evidence clearly shows that the undated check was issued and delivered at the Rural Bank of San Juan, Metro Manila³² on November 16, 1989, and subsequently the check was dated February 16, 1990 thereat. On May 25, 1990, the check was deposited with PS Bank, San Juan Branch, Metro Manila.³³ Thus, the Court of Appeals correctly ruled:

Violations of B.P. 22 are categorized as transitory or continuing crimes. A suit on the check can be filed in any of the places where any of the elements of the offense occurred, that is, where the check is drawn, issued, delivered or dishonored. x x x

The information at bar effectively charges San Juan as the place of drawing and issuing. The jurisdiction of courts in criminal cases is determined by the allegations of the complaint or information. Although, the check was dishonored by the drawee, Associated Bank, in its Tarlac Branch, appellant has drawn, issued and delivered it at RBSJ, San Juan. The place of issue and delivery was San Juan and knowledge, as an essential part of the offense, was also overtly manifested in San Juan. There is no question that crimes committed in November, 1989 in San Juan are triable by the RTC stationed in Pasig. In short both allegation and proof in this case sufficiently vest jurisdiction upon the RTC in Pasig City.³⁴

WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals, in CA-G.R. CR No. 18855, is hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Carpio, JJ., concur.

Endnotes:

¹ Records, p. 3.

² Rollo, pp. 28-32.

³ Supra, note 1, at 186.

⁴ Id. at 185-186.

⁵ Supra, note 2, at 45.

⁶ Id. at 15, 19, 20.

⁷ Vaca v. Court of Appeals, 298 SCRA 656, 661 (1998), citing Navarro v. Court of Appeals, 234 SCRA 639, 643-644 (1994).

⁸ Exh. "A," Records, p. 130.

⁹ Exh. "D," Records, p. 133.

¹⁰ TSN, November 17, 1993, pp. 3-14.

¹¹ See Ngo v. People of the Philippines, G.R. No. 155815, July 14, 2004.

¹² Petition, Rollo, p. 16.

¹³ Supra, note 2, at 35-36.

¹⁴ Cruz v. .Court of Appeals, 233 SCRA 301, 309 (1994).

¹⁵ Ibid.

¹⁶ 210 SCRA 471 (1992).

¹⁷ Ibasco v. Court of Appeals, 261 SCRA 449, 461 (1996).

¹⁸ Ibid.

¹⁹ Supra, note 16, at 477-478.

²⁰ 146 SCRA 323, 338 (1986).

²¹ 215 SCRA 79, 84 (1992).

²² Exh. "G," Records, p. 137.

²³ Sia v. People of the Philippines, G.R. No. 149695, April 28, 2004.

²⁴ Ibid.

²⁵ Exh. "I," Records, p. 139.

²⁶ Exh. "I-2," Records, p. 140.

²⁷ TSN, February 4, 1994, pp. 5-6.

²⁸ The 1985 Rules on Criminal Procedure, Rule 110, Sec. 15. Place where action is to be instituted. '

(a) Subject to existing laws, in all criminal prosecutions the action shall be instituted and tried in the court of the municipality or territory wherein the offense was committed or any one of the essential ingredients thereof took place.

²⁹ Lim v. Court of Appeals, 251 SCRA 408, 416 (1995).

³⁰ Id. at 415-416.

³¹ Id. at 416.

³² TSN, September 15, 1992, pp. 19-21.

³³ TSN, November 10, 1992, p. 8.

³⁴ Supra, note 2, at 41-43.

G.R. No. 145483 - LORENZO SHIPPING CORP. v. BJ MARTHEL INTERNATIONAL, INC.

2013-01-15T09:50:36+00:00

G.R. No. 145483 - LORENZO SHIPPING CORP. v. BJ MARTHEL INTERNATIONAL, INC.

SECOND DIVISION

[G.R. NO. 145483 : November 19, 2004]

LORENZO SHIPPING CORP., Petitioner, v. BJ MARTHEL INTERNATIONAL, INC., Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

This is a Petition for Review seeking to set aside the Decision¹ of the Court of Appeals in CA-G.R. CV No. 54334 and its Resolution denying petitioner's motion for reconsideration.

The factual antecedents of this case are as follows:

Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise shipping. It used to own the cargo vessel M/V Dadiangas Express.

Upon the other hand, respondent BJ Marthel International, Inc. is a business entity engaged in trading, marketing, and selling of various industrial commodities. It is also an importer and distributor of different brands of engines and spare parts.

From 1987 up to the institution of this case, respondent supplied petitioner with spare parts for the latter's marine engines. Sometime in 1989, petitioner asked respondent for a quotation for various machine parts. Acceding to this request, respondent furnished petitioner with a formal quotation,² thus:

May 31, 1989

MINQ-6093
LORENZO SHIPPING LINES
Pier 8, North Harbor
Manila

SUBJECT: PARTS FOR ENGINE MODEL
MITSUBISHI 6UET 52/60

Dear Mr. Go:

We are pleased to submit our offer for your above subject requirements.

Description

Qty.

Unit Price

Total Price

Nozzle Tip

6 pcs.

P 5,520.00

33,120.00

Plunger & Barrel

6 pcs.

27,630.00

165,780.00

Cylinder Head

2 pcs.

1,035,000.00

2,070,000.00

Cylinder Liner

1 set

477,000.00

TOTAL PRICE FOB

MANILA ___________

P2,745,900.00

DELIVERY: Within 2 months after receipt of firm order.

TERMS: 25% upon delivery, balance payable in 5 bi-monthly equal

Installment[s] not to exceed 90 days.

We trust you find our above offer acceptable and look forward to your most valued order.

Very truly yours,

(SGD) HENRY PAJARILLO

Sales Manager

Petitioner thereafter issued to respondent Purchase Order No. 13839,³ dated 02 November 1989, for the procurement of one set of cylinder liner, valued at P477,000, to be used for M/V Dadiangas Express. The purchase order was co-signed by Jose Go, Jr., petitioner's vice-president, and Henry Pajarillo. Quoted hereunder is the pertinent portion of the purchase order:

Name of Description

Qty.

Amount

CYL. LINER M/E

1 SET

P477,000.00

NOTHING FOLLOW

INV. #

TERM OF PAYMENT: 25% DOWN PAYMENT

5 BI-MONTHLY INSTALLMENT[S]

Instead of paying the 25% down payment for the first cylinder liner, petitioner issued in favor of respondent ten postdated checks⁴ to be drawn against the former's account with Allied Banking Corporation. The checks were supposed to represent the full payment of the aforementioned cylinder liner.

Subsequently, petitioner issued Purchase Order No. 14011,⁵ dated 15 January 1990, for yet another unit of cylinder liner. This purchase order stated the term of payment to be "25% upon delivery, balance payable in 5 bi-monthly equal installment[s]."⁶ Like the purchase order of 02 November 1989, the second purchase order did not state the date of the cylinder liner's delivery.

On 26 January 1990, respondent deposited petitioner's check that was postdated 18 January 1990, however, the same was dishonored by the drawee bank due to insufficiency of funds. The remaining nine postdated checks were eventually returned by respondent to petitioner.

The parties presented disparate accounts of what happened to the check which was previously dishonored. Petitioner claimed that it replaced said check with a good one, the proceeds of which were applied to its other obligation to respondent. For its part, respondent insisted that it returned said postdated check to petitioner.

Respondent thereafter placed the order for the two cylinder liners with its principal in Japan, Daiei Sangyo Co. Ltd., by opening a letter of credit on 23 February 1990 under its own name with the First Interstate Bank of Tokyo.

On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in North Harbor, Manila. The sales invoices⁷ evidencing the delivery of the cylinder liners both contain the notation "subject to verification" under which the signature of Eric Go, petitioner's warehouseman, appeared.

Respondent thereafter sent a Statement of Account dated 15 November 1990⁸ to petitioner. While the other items listed in said statement of account were fully paid by petitioner, the two cylinder liners delivered to petitioner on 20 April 1990 remained unsettled. Consequently, Mr. Alejandro Kanaan, Jr., respondent's vice-president, sent a demand letter dated 02 January 1991⁹ to petitioner requiring the latter to pay the value of the cylinder liners subjects of this case. Instead of heeding the demand of respondent for the full payment of the value of the cylinder liners, petitioner sent the former a letter dated 12 March 1991¹⁰ offering to pay only P150,000 for the cylinder liners. In said letter, petitioner claimed that as the cylinder liners were delivered late and due to the scrapping of the M/V Dadiangas Express, it (petitioner) would have to sell the cylinder liners in Singapore and pay the balance from the proceeds of said sale.

Shortly thereafter, another demand letter dated 27 March 1991¹¹ was furnished petitioner by respondent's counsel requiring the former to settle its obligation to respondent together with accrued interest and attorney's fees.

Due to the failure of the parties to settle the matter, respondent filed an action for sum of money and damages before the Regional Trial Court (RTC) of Makati City. In its complaint,¹² respondent (plaintiff below) alleged that despite its repeated oral and written demands, petitioner obstinately refused to settle its obligations. Respondent prayed that petitioner be ordered to pay for the value of the cylinder liners plus accrued interest of P111,300 as of May 1991 and additional interest of 14% per annum to be reckoned from June 1991 until the full payment of the principal; attorney's fees; costs of suits; exemplary damages; actual damages; and compensatory damages.

On 25 July 1991, and prior to the filing of a responsive pleading, respondent filed an amended complaint with preliminary attachment pursuant to Sections 2 and 3, Rule 57 of the then Rules of Court.¹³ Aside from the prayer for the issuance of writ of preliminary attachment, the amendments also pertained to the issuance by petitioner of the postdated checks and the amounts of damages claimed.

In an Order dated 25 July 1991,¹⁴ the court a quo granted respondent's prayer for the issuance of a preliminary attachment. On 09 August 1991, petitioner filed an Urgent Ex-Parte Motion to Discharge Writ of Attachment¹⁵ attaching thereto a counter-bond as required by the Rules of Court. On even date, the trial court issued an Order¹⁶ lifting the levy on petitioner's properties and the garnishment of its bank accounts.

Petitioner afterwards filed its Answer¹⁷ alleging therein that time was of the essence in the delivery of the cylinder liners and that the delivery on 20 April 1990 of said items was late as respondent committed to deliver said items "within two (2) months after receipt of firm order"¹⁸ from petitioner. Petitioner likewise sought counterclaims for moral damages, exemplary damages, attorney's fees plus appearance fees, and expenses of litigation.

Subsequently, respondent filed a Second Amended Complaint with Preliminary Attachment dated 25 October 1991.¹⁹ The amendment introduced dealt solely with the number of postdated checks issued by petitioner as full payment for the first cylinder liner it ordered from respondent. Whereas in the first amended complaint, only nine postdated checks were involved, in its second amended complaint, respondent claimed that petitioner actually issued ten postdated checks. Despite the opposition by petitioner, the trial court admitted respondent's Second Amended Complaint with Preliminary Attachment.²⁰

Prior to the commencement of trial, petitioner filed a Motion (For Leave To Sell Cylinder Liners)²¹ alleging therein that "[w]ith the passage of time and with no definite end in sight to the present litigation, the cylinder liners run the risk of obsolescence and deterioration"²² to the prejudice of the parties to this case. Thus, petitioner prayed that it be allowed to sell the cylinder liners at the best possible price and to place the proceeds of said sale in escrow. This motion, unopposed by respondent, was granted by the trial court through the Order of 17 March 1991.²³

After trial, the court a quo dismissed the action, the decretal portion of the Decision stating:

WHEREFORE, the complaint is hereby dismissed, with costs against the plaintiff, which is ordered to pay P50,000.00 to the defendant as and by way of attorney's fees.²⁴

The trial court held respondent bound to the quotation it submitted to petitioner particularly with respect to the terms of payment and delivery of the cylinder liners. It also declared that respondent had agreed to the cancellation of the contract of sale when it returned the postdated checks issued by petitioner. Respondent's counterclaims for moral, exemplary, and compensatory damages were dismissed for insufficiency of evidence.

Respondent moved for the reconsideration of the trial court's Decision but the motion was denied for lack of merit.²⁵

Aggrieved by the findings of the trial court, respondent filed an appeal with the Court of Appeals²⁶ which reversed and set aside the Decision of the court a quo. The appellate court brushed aside petitioner's claim that time was of the essence in the contract of sale between the parties herein considering the fact that a significant period of time had lapsed between respondent's offer and the issuance by petitioner of its purchase orders. The dispositive portion of the Decision of the appellate court states:

WHEREFORE, the decision of the lower court is REVERSED and SET ASIDE. The appellee is hereby ORDERED to pay the appellant the amount of P954,000.00, and accrued interest computed at 14% per annum reckoned from May, 1991.²⁷

The Court of Appeals also held that respondent could not have incurred delay in the delivery of cylinder liners as no demand, judicial or extrajudicial, was made by respondent upon petitioner in contravention of the express provision of Article 1169 of the Civil Code which provides:

Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

Likewise, the appellate court concluded that there was no evidence of the alleged cancellation of orders by petitioner and that the delivery of the cylinder liners on 20 April 1990 was reasonable under the circumstances.

On 22 May 2000, petitioner filed a motion for reconsideration of the Decision of the Court of Appeals but this was denied through the resolution of 06 October 2000.²⁸ Hence, this Petition for Review which basically raises the issues of whether or not respondent incurred delay in performing its obligation under the contract of sale and whether or not said contract was validly rescinded by petitioner.

That a contract of sale was entered into by the parties is not disputed. Petitioner, however, maintains that its obligation to pay fully the purchase price was extinguished because the adverted contract was validly terminated due to respondent's failure to deliver the cylinder liners within the two-month period stated in the formal quotation dated 31 May 1989.

The threshold question, then, is: Was there late delivery of the subjects of the contract of sale to justify petitioner to disregard the terms of the contract considering that time was of the essence thereof?chanroblesvirtualawlibrary

In determining whether time is of the essence in a contract, the ultimate criterion is the actual or apparent intention of the parties and before time may be so regarded by a court, there must be a sufficient manifestation, either in the contract itself or the surrounding circumstances of that intention.²⁹ Petitioner insists that although its purchase orders did not specify the dates when the cylinder liners were supposed to be delivered, nevertheless, respondent should abide by the term of delivery appearing on the quotation it submitted to petitioner.³⁰ Petitioner theorizes that the quotation embodied the offer from respondent while the purchase order represented its (petitioner's) acceptance of the proposed terms of the contract of sale.³¹ Thus, petitioner is of the view that these two documents "cannot be taken separately as if there were two distinct contracts."³² We do not agree.

It is a cardinal rule in interpretation of contracts that if the terms thereof are clear and leave no doubt as to the intention of the contracting parties, the literal meaning shall control.³³ However, in order to ascertain the intention of the parties, their contemporaneous and subsequent acts should be considered.³⁴ While this Court recognizes the principle that contracts are respected as the law between the contracting parties, this principle is tempered by the rule that the intention of the parties is primordial³⁵ and "once the intention of the parties has been ascertained, that element is deemed as an integral part of the contract as though it has been originally expressed in unequivocal terms."³⁶

In the present case, we cannot subscribe to the position of petitioner that the documents, by themselves, embody the terms of the sale of the cylinder liners. One can easily glean the significant differences in the terms as stated in the formal quotation and Purchase Order No. 13839 with regard to the due date of the down payment for the first cylinder liner and the date of its delivery as well as Purchase Order No. 14011 with respect to the date of delivery of the second cylinder liner. While the quotation provided by respondent evidently stated that the cylinder liners were supposed to be delivered within two months from receipt of the firm order of petitioner and that the 25% down payment was due upon the cylinder liners' delivery, the purchase orders prepared by petitioner clearly omitted these significant items. The petitioner's Purchase Order No. 13839 made no mention at all of the due dates of delivery of the first cylinder liner and of the payment of 25% down payment. Its Purchase Order No. 14011 likewise did not indicate the due date of delivery of the second cylinder liner.

In the case of Bugatti v. Court of Appeals,³⁷ we reiterated the principle that "[a] contract undergoes three distinct stages - preparation or negotiation, its perfection, and finally, its consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. The perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract. The last stage is the consummation of the contract wherein the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof."

In the instant case, the formal quotation provided by respondent represented the negotiation phase of the subject contract of sale between the parties. As of that time, the parties had not yet reached an agreement as regards the terms and conditions of the contract of sale of the cylinder liners. Petitioner could very well have ignored the offer or tendered a counter-offer to respondent while the latter could have, under the pertinent provision of the Civil Code,³⁸ withdrawn or modified the same. The parties were at liberty to discuss the provisions of the contract of sale prior to its perfection. In this connection, we turn to the testimonies of Pajarillo and Kanaan, Jr., that the terms of the offer were, indeed, renegotiated prior to the issuance of Purchase Order No. 13839.

During the hearing of the case on 28 January 1993, Pajarillo testified as follows:

Q: You testified Mr. Witness, that you submitted a quotation with defendant Lorenzo Shipping Corporation dated rather marked as Exhibit A stating the terms of payment and delivery of the cylinder liner, did you not?chanroblesvirtualawlibrary

A: Yes sir.

Q: I am showing to you the quotation which is marked as Exhibit A there appears in the quotation that the delivery of the cylinder liner will be made in two months' time from the time you received the confirmation of the order. Is that correct?chanroblesvirtualawlibrary

A: Yes sir.

Q: Now, after you made the formal quotation which is Exhibit A how long a time did the defendant make a confirmation of the order?chanroblesvirtualawlibrary

A: After six months.

Q: And this is contained in the purchase order given to you by Lorenzo Shipping Corporation?chanroblesvirtualawlibrary

A: Yes sir.

Q: Now, in the purchase order dated November 2, 1989 there appears only the date the terms of payment which you required of them of 25% down payment, now, it is stated in the purchase order the date of delivery, will you explain to the court why the date of delivery of the cylinder liner was not mentioned in the purchase order which is the contract between you and Lorenzo Shipping Corporation?chanroblesvirtualawlibrary

A: When Lorenzo Shipping Corporation inquired from us for that cylinder liner, we have inquired [with] our supplier in Japan to give us the price and delivery of that item. When we received that quotation from our supplier it is stated there that they can deliver within two months but we have to get our confirmed order within June.

Q: But were you able to confirm the order from your Japanese supplier on June of that year?chanroblesvirtualawlibrary

A: No sir.

Q: Why? Will you tell the court why you were not able to confirm your order with your Japanese supplier?chanroblesvirtualawlibrary

A: Because Lorenzo Shipping Corporation did not give us the purchase order for that cylinder liner.

Q: And it was only on November 2, 1989 when they gave you the purchase order?chanroblesvirtualawlibrary

A: Yes sir.

Q: So upon receipt of the purchase order from Lorenzo Shipping Lines in 1989 did you confirm the order with your Japanese supplier after receiving the purchase order dated November 2, 1989?chanroblesvirtualawlibrary

A: Only when Lorenzo Shipping Corporation will give us the down payment of 25%.³⁹

For his part, during the cross-examination conducted by counsel for petitioner, Kanaan, Jr., testified in the following manner:

WITNESS: This term said 25% upon delivery. Subsequently, in the final contract, what was agreed upon by both parties was 25% down payment.

Q: When?chanroblesvirtualawlibrary

A: Upon confirmation of the order.

. . .

Q: And when was the down payment supposed to be paid?chanroblesvirtualawlibrary

A: It was not stated when we were supposed to receive that. Normally, we expect to receive at the earliest possible time. Again, that would depend on the customers. Even after receipt of the purchase order which was what happened here, they re-negotiated the terms and sometimes we do accept that.

Q: Was there a re-negotiation of this term?chanroblesvirtualawlibrary

A: This offer, yes. We offered a final requirement of 25% down payment upon delivery.

Q: What was the re-negotiated term?chanroblesvirtualawlibrary

A: 25% down payment

Q: To be paid when?chanroblesvirtualawlibrary

A: Supposed to be paid upon order.⁴⁰

The above declarations remain unassailed. Other than its bare assertion that the subject contracts of sale did not undergo further renegotiation, petitioner failed to proffer sufficient evidence to refute the above testimonies of Pajarillo and Kanaan, Jr.

Notably, petitioner was the one who caused the preparation of Purchase Orders No. 13839 and No. 14011 yet it utterly failed to adduce any justification as to why said documents contained terms which are at variance with those stated in the quotation provided by respondent. The only plausible reason for such failure on the part of petitioner is that the parties had, in fact, renegotiated the proposed terms of the contract of sale. Moreover, as the obscurity in the terms of the contract between respondent and petitioner was caused by the latter when it omitted the date of delivery of the cylinder liners in the purchase orders and varied the term with respect to the due date of the down payment,⁴¹ said obscurity must be resolved against it.⁴²

Relative to the above discussion, we find the case of Smith, Bell & Co., Ltd. v. Matti,⁴³ instructive. There, we held that '

When the time of delivery is not fixed or is stated in general and indefinite terms, time is not of the essence of the contract. . . .

In such cases, the delivery must be made within a reasonable time.

The law implies, however, that if no time is fixed, delivery shall be made within a reasonable time, in the absence of anything to show that an immediate delivery intended. . . .

We also find significant the fact that while petitioner alleges that the cylinder liners were to be used for dry dock repair and maintenance of its M/V Dadiangas Express between the later part of December 1989 to early January 1990, the record is bereft of any indication that respondent was aware of such fact. The failure of petitioner to notify respondent of said date is fatal to its claim that time was of the essence in the subject contracts of sale.

In addition, we quote, with approval, the keen observation of the Court of Appeals:

. . . It must be noted that in the purchase orders issued by the appellee, dated November 2, 1989 and January 15, 1990, no specific date of delivery was indicated therein. If time was really of the essence as claimed by the appellee, they should have stated the same in the said purchase orders, and not merely relied on the quotation issued by the appellant considering the lapse of time between the quotation issued by the appellant and the purchase orders of the appellee.

In the instant case, the appellee should have provided for an allowance of time and made the purchase order earlier if indeed the said cylinder liner was necessary for the repair of the vessel scheduled on the first week of January, 1990. In fact, the appellee should have cancelled the first purchase order when the cylinder liner was not delivered on the date it now says was necessary. Instead it issued another purchase order for the second set of cylinder liner. This fact negates appellee's claim that time was indeed of the essence in the consummation of the contract of sale between the parties.⁴⁴

Finally, the ten postdated checks issued in November 1989 by petitioner and received by the respondent as full payment of the purchase price of the first cylinder liner supposed to be delivered on 02 January 1990 fail to impress. It is not an indication of failure to honor a commitment on the part of the respondent. The earliest maturity date of the checks was 18 January 1990. As delivery of said checks could produce the effect of payment only when they have been cashed,⁴⁵ respondent's obligation to deliver the first cylinder liner could not have arisen as early as 02 January 1990 as claimed by petitioner since by that time, petitioner had yet to fulfill its undertaking to fully pay for the value of the first cylinder liner. As explained by respondent, it proceeded with the placement of the order for the cylinder liners with its principal in Japan solely on the basis of its previously harmonious business relationship with petitioner.

As an aside, let it be underscored that "[e]ven where time is of the essence, a breach of the contract in that respect by one of the parties may be waived by the other party's subsequently treating the contract as still in force."⁴⁶ Petitioner's receipt of the cylinder liners when they were delivered to its warehouse on 20 April 1990 clearly indicates that it considered the contract of sale to be still subsisting up to that time. Indeed, had the contract of sale been cancelled already as claimed by petitioner, it no longer had any business receiving the cylinder liners even if said receipt was "subject to verification." By accepting the cylinder liners when these were delivered to its warehouse, petitioner indisputably waived the claimed delay in the delivery of said items.

We, therefore, hold that in the subject contracts, time was not of the essence. The delivery of the cylinder liners on 20 April 1990 was made within a reasonable period of time considering that respondent had to place the order for the cylinder liners with its principal in Japan and that the latter was, at that time, beset by heavy volume of work.⁴⁷

There having been no failure on the part of the respondent to perform its obligation, the power to rescind the contract is unavailing to the petitioner. Article 1191 of the New Civil Code runs as follows:

The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The law explicitly gives either party the right to rescind the contract only upon the failure of the other to perform the obligation assumed thereunder.⁴⁸ The right, however, is not an unbridled one. This Court in the case of University of the Philippines v. De los Angeles,⁴⁹ speaking through the eminent civilist Justice J.B.L. Reyes, exhorts:

Of course, it must be understood that the act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court. If the other party denied that rescission is justified, it is free to resort to judicial action in its own behalf, and bring the matter to court. Then, should the court, after due hearing, decide that the resolution of the contract was not warranted, the responsible party will be sentenced to damages; in the contrary case, the resolution will be affirmed, and the consequent indemnity awarded to the party prejudiced. (Emphasis supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

In other words, the party who deems the contract violated may consider it resolved or rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of the suit until the final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages.⁵⁰

Here, there is no showing that petitioner notified respondent of its intention to rescind the contract of sale between them. Quite the contrary, respondent's act of proceeding with the opening of an irrevocable letter of credit on 23 February 1990 belies petitioner's claim that it notified respondent of the cancellation of the contract of sale. Truly, no prudent businessman would pursue such action knowing that the contract of sale, for which the letter of credit was opened, was already rescinded by the other party.

WHEREFORE, premises considered, the instant Petition for Review on Certiorari is DENIED. The Decision of the Court of Appeals, dated 28 April 2000, and its Resolution, dated 06 October 2000, are hereby AFFIRMED. No costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and TINGA, JJ., concur.

Endnotes:

¹ Penned by Associate Justice Eubulo G. Verzola with Associate Justices Roberto A. Barrios and Eriberto U. Rosario, Jr., concurring.

² Exhibit "2" for petitioner; Exhibit "A" for respondent; Records, p. 244.

³ Exhibit "3" for petitioner; Exhibit "B" for respondent; Records, p. 6.

⁴ Exhibits "4-A" to "4-J" for petitioner; Exhibits "E" to "E-9" for respondent; Records, pp. 248-250.

⁵ Exhibit "5" for petitioner; Exhibit "C" for respondent; Records, p. 7.

⁶ Ibid.

⁷ Exhibits "G" and "H" for respondent; Records, pp. 252-253.

⁸ Exhibit "J" for respondent; Records, p. 255.

⁹ Exhibit "K" for respondent; Records, p. 256.

¹⁰ Exhibit "6" for petitioner; Records, p. 269.

¹¹ Exhibit "S" for respondent; Records, p. 263.

¹² Records, pp. 1-5.

¹³ Records, pp. 13-20.

¹⁴ Records, pp. 27-29.

¹⁵ Records, pp. 61-62.

¹⁶ Records, p. 58.

¹⁷ Records, pp. 87-95.

¹⁸ Id.

¹⁹ Records, pp. 115-122.

²⁰ Order dated 09 December 1991; Records, p. 139.

²¹ Dated 20 January 1992; Records, pp. 143-144.

²² Id.

²³ Records, p. 152.

²⁴ Rollo, p. 54.

²⁵ Order dated 04 December 1995; Records, pp. 389-390.

²⁶ Decision dated 28 April 2000, Annex "A" of the Petition; Rollo, pp. 39-46.

²⁷ Id. at 7; Rollo, p. 45.

²⁸ Annex "B" of the Petition; Rollo, pp. 48-49.

²⁹ 17 Am Jur 2d, '333, p.772.

³⁰ Petition, p. 12; Rollo, p. 23.

³¹ Petition, p. 13; Rollo, p. 24.

³² Ibid.

³³ Paramount Surety & Insurance Co., Inc. v. Court of Appeals, G.R. No. 38669, 31 March 1989, 171 SCRA 481.

³⁴ AGRO Conglomerates, Inc. v. Court of Appeals, et al., G.R. No. 117660, 18 December 2000, 348 SCRA 450.

³⁵ Golden Diamond, Inc. v. Court of Appeals, G.R. No. 131436, 31 May 2000, 332 SCRA 605.

³⁶ Carceller v. Court of Appeals and State Investments Houses, Inc., G.R. No. 124791, 10 February 1999, 302 SCRA 718, 725.

³⁷ G.R. No. 138113, 17 October 2000, 343 SCRA 335, 346, citing Ang Yu Asuncion v. CA, G.R. No. 109125, 02 December 1994, 238 SCRA 602.

³⁸ Article 1324 of the Civil Code states: "When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised."

³⁹ TSN, 28 January 1993, pp. 4-8.

⁴⁰ TSN, 01 June 1993, pp. 9-10.

⁴¹ Supra, note 3.

⁴² Ang v. Court of Appeals, G.R. No. 80058, 13 February 1989, 170 SCRA 286.

⁴³ G.R. No. 16570, 09 March 1922, 44 Phil. 874, 881-882.

⁴⁴ Decision dated 28 April 2000, p. 5; Rollo, p. 43.

⁴⁵ Article 1249 of the Civil Code states that "(t)he delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired."

⁴⁶ 17A Am Jur. 2d '624, p. 633.

⁴⁷ TSN, 28 January 1993, p. 18.

⁴⁸ Angeles, et al. v. Calasanz, et al., G.R. No. L-42283, 18 March 1985, 135 SCRA 329.

⁴⁹ G.R. No. L-28602, 29 September 1970, 35 SCRA 102.

⁵⁰ Id. at 107.

G.R. No. 145855 - PEPSI-COLA PRODUCTS PHILIPPINES, INC. v. THE COURT OF APPEALS, ET AL.

2013-01-15T09:50:37+00:00

G.R. No. 145855 - PEPSI-COLA PRODUCTS PHILIPPINES, INC. v. THE COURT OF APPEALS, ET AL.

SECOND DIVISION

[G.R. NO. 145855 : November 24, 2004]

PEPSI-COLA PRODUCTS PHILIPPINES, INC., Petitioner, v. THE COURT OF APPEALS, and PEPSI-COLA PRODUCTS PHILIPPINES, INC. EMPLOYEES & WORKERS UNION (UOEF No. 70) represented by its incumbent president, ISIDRO REALISTA, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari of the Decision¹ of the Court of Appeals (CA) in CA-G.R SP No. 50690, setting aside the decision of the National Labor Relations Commission (NLRC) in NLRC RABX Case No. RO-7-0234-86 and the reinstatement of the decision of the Executive Labor Arbiter in the said case.

The facts, as culled from the records of the case, are as follows:

Pepsi-Cola Products Philippines, Inc. Employees and Workers Union (PCEWU) is a duly - registered labor union of the employees of the Pepsi-Cola Distributors of the Philippines (PCDP).² On July 14, 1986, PCEWU, through its local union president, Arisedes T. Bombeo, filed a Complaint against PCDP with the Regional Arbitration Branch No. X of the Department of Labor and Employment (DOLE), Cagayan de Oro City, for payment of overtime services rendered by fifty-three (53) of its members, who were employed as salesmen, warehousemen, truck helpers, route salesmen, route sales workers, distributors, conductors and forklift operators, on the eight (8) days duly - designated as Muslim holidays for calendar year 1985, in their respective places of assignment, namely: Iligan City, Tubod, Lanao del Norte and Dipolog City.³ The complaint was docketed as NLRC RABX Case No. RO-7-0234-86.

The PCEWU alleged, inter alia, that in previous years, they had been paid overtime pay for services rendered during the eight (8) Muslim holidays in their places of assignment, including Dipolog City. To support its claims, the PCEWU appended to its position paper the following: a photocopy of the applicable provisions of Presidential Decree (P.D.) No. 1083; a certification dated March 26, 1986 from the Regional Autonomous Government of Region 12-A, Marawi City, attesting to the eight (8) Muslim holidays observed in the said region in calendar year 1985; and the individual computation of the overtime claim of each of the workers concerned.⁴

In its position paper, the PCDP maintained that there were only five (5) legal Muslim holidays under the Muslim Code. It asserted that under the law, the cities of Cagayan de Oro and Dipolog were not included in the areas that officially observed the Muslim holidays, and that the said holidays were only applicable to Muslims. It also argued that even assuming that the employees were entitled to such overtime pay, only the rank-and-file employees and not the managerial employees should be given such benefit.

On May 26, 1987, the Executive Labor Arbiter (ELA)⁵ rendered a Decision in favor of PCEWU, ordering PCDP to pay the claims of its workers. The decretal portion of the decision reads:

WHEREFORE, finding merit in complainant's claim, the respondent is hereby ordered to pay the complaining workers their claims for overtime services rendered in calendar year 1985 on duly-designated Muslim holidays corresponding to the following dates: May 20, 1985; June 17, 1985; June 19, 1985; August 26, 1985; September 4, 1985; September 24, 1985; November 25, 1985 and December 19, 1985, for workers involved with places of assignments at Iligan City and Tubod, Lanao del Norte and June 17, 1985; June 19, 1985; August 26, 1985; September 24, 1985 and November 25, 1985, for workers involved in the instant case whose place of assignment is at Dipolog City. Thus:

Ponciano Waslo P 649.20

Valentin EstaÃ±o P 1,003.68

Sergio Estrosas P 711.52

Exequiel CaÃ±eda P 1,091.68

Guindelino Labial P 649.20

Domingo Moreno P 728.56

Eufemio Amora P 1,001.44

Salvador Nisnisan P 1,028.40

Leonides Lesonada P 711.52

Zosimo Clemen P 711.52

David Gotengco P 1,017.52

Toriano Cabelbel P 504.24

Arsenio Calumpang P 711.52

Jose Sales, Jr. P 711.52

Prudencio Labra P 1,584.00

Romulo Dalagan P 498.00

Rodrigo dela Cerna P 498.00

Apolinario Oreniano P 649.20

Pablo Cabanos P 504.24

Felicisimo Dadofalsa P 497.20

Simplecio Torres P 1,071.52

Hadji Nur Usman P 1,065.04

Lumna Salic P 697.20

Cornelio Llanos P 1,078.80

Godofredo Anana P 504.24

Conrado Salon P 504.24

Evaristo Tuante P 1,164.83

Roque Clomas P 711.45

Tomas Fillo P 711.45

Bernaflor Macayan P 1,091.68

Gregorio Moreno P 711.52

Cornelio Iway P 1,091.68

Salvador Anggot P 504.24

Felix Lagat P 711.52

Rogelio Mangubat P 504.24

Avelino Jabonillo P 504.52

Alberto Ordona P 801.28

Dominador Ponce P 1,028.88

Robinson Berhay P 635.95

Juanito Cabale P 405.75

Reynaldo Fulgarinas P 444.70

Emelito Pineda P 435.75

Antonio Andante P 315.15

Dionesio Coyoca P 315.15

Alberto Macapanas P 315.15

Nestor Murro P 315.15

Alfredo Nisnisan P 315.15

Joseph Putian P 315.15

Manuel Quirante P 627.30

Antonio Torres P 315.15

Arturo Pelare P 649.00

Further respondent is hereby ordered to pay Complainant an amount equivalent to ten (10) percent of the aggregate award as attorney's fee.

SO ORDERED.⁶

The ELA ruled that, although P.D. No. 1083 does not specifically mention Dipolog City as one of the places where Muslim holidays are observed, it is nevertheless a part of Zamboanga del Norte and the autonomous region in Mindanao where such Muslim holidays are observed. He also ruled that while there were only five (5) Muslim holidays under P.D. No. 1083, and the Regional Legislative Assembly for Region 12 had passed legislation providing for three (3) more Muslim holidays per the Manifestation of the employees, the latter failed to prove that a similar legislation had been approved by the Regional Legislative Assembly for Region 9. The ELA concluded that those employees assigned in Region 12 were entitled to overtime pay for eight (8) Muslim holidays, but those assigned in Region 9 were not so entitled.

The respondent appealed the decision to the NLRC where it reiterated its contention that, P.D. No. 1083 (Code of Muslim Personal Laws of the Philippines,) enumerates only five (5) legal Muslim holidays. It assailed the finding of the ELA that there were three (3) additional Muslim legal holidays in Region 12 based on the certification made by the Chief of the Administrative Division of the Office of Muslim Affairs, considering that the actual existence of any proclamation issued in relation thereto was not even verified. It argued that only Muslims were covered by the legal Muslim holidays' benefits, and not all persons found in the places enumerated in P.D. No. 1083. The respondent averred that since the employees failed to specify whether they were Muslims or non-Muslims, they were not entitled to the overtime pay awarded by the ELA. It further claimed that Dipolog City is a distinct political subdivision from the province of Zamboanga del Norte, and is not one of those areas enumerated under P.D. No. 1083.⁷

On March 21, 1991, the NLRC rendered judgment⁸ affirming the decision of the ELA with modification:

WHEREFORE, the decision appealed from is Modified consistent with the foregoing resolution. For purposes of recomputing the money claims of complainants, the Labor Arbiter is directed to conduct further proceedings affording both parties reasonable opportunity to be heard. The monetary award, as decreed in the decision of May 31, 1987, is hereby Vacated. No findings as to costs.

SO ORDERED.⁹

The NLRC ruled that, since the respondent had been giving overtime pay during Muslim holidays to its employees, such proclamation had ripened into a company policy; hence, the respondent is estopped from denying the claims for overtime services rendered by its rank-and-file employees during the said Muslim holidays.¹⁰ The NLRC also declared that the other three (3) holidays considered by the ELA, aside from the five (5) Muslim holidays provided under P.D. No. 1083, were not customarily observed by Filipino Muslims. As such, these should not be included in the computation of overtime pay. It also ruled that since the complainants failed to present their daily time records, there can be no basis for the computation and determination for the claims of overtime pay. There was thus a need to present appropriate company records to determine the proper computation of the claims for overtime pay during the post arbitration stage.¹¹

The NLRC also held that the managerial employees were not entitled to receive overtime pay because they were paid on a monthly basis. Furthermore, such overtime pay did not appear to be included in their monthly salaries, and that they were allowed "day-off" privileges or to offset any absences they may have incurred in case they had already exhausted their respective vacation or sick leave credits. The NLRC also declared that the matter of whether the complainants were managerial employees or not should be threshed out during the post arbitration proceedings.¹²

The PCDP filed its motion for partial reconsideration of the NLRC decision. The employees also filed a motion for reconsideration of the decision on April 17, 1991. Pending resolution of the said motions, ownership of various Pepsi-Cola bottling plants was transferred to petitioner Pepsi-Cola Products Philippines, Inc. (PCPPI). The NLRC directed the parties to file their respective pleadings concerning the respondent's existence as a corporate entity. The PCDP alleged that it had ceased to exist as a corporation on July 24, 1989 and that it has winded up its corporate affairs in accordance with law. It also averred that it was now owned by PCPPI.¹³

On February 11, 1992, the NLRC issued a Resolution¹⁴ dismissing the complaint of the PCEWU for the reason that, with the cessation and dissolution of the corporate existence of the PCDP, rendering any judgment against it is incapable of execution and satisfaction:

WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled case on account of a lawful supervening event, that is the dissolution and cessation of the corporate and juridical personality of respondent company thereby rendering any judgment against it incapable of execution and satisfaction. This is without prejudice to the rights of complainants from pursuing their money claims with the proper forum. This order supersedes the previous orders of this Commission in so far as the enforcement of the money claims of complainants are concerned with this labor tribunal. No findings as to costs.

SO ORDERED.¹⁵

The NLRC ruled that it was not competent for it to proceed against the PCDP because it had ceased to exist as a juridical entity. Thus, it no longer resolved the respondent's motion for partial reconsideration, as well as the motion for reconsideration of the employees.

The PCEWU filed a motion for reconsideration of the February 11, 1992 Resolution of the NLRC, but the latter issued a Resolution on June 4, 1992¹⁶ denying the said motion for lack of merit.

The petitioner filed a petition for the nullification of the February 11, 1992 Resolution of the NLRC. In a Resolution dated November 23, 1998, the Court referred the case to the Court of Appeals (CA) for proper disposition.¹⁷ In its petition, the petitioner raised the following issues:

1. WHETHER OR NOT PEPSI-COLA PRODUCTS PHILIPPINES, INC., AS SUCCESSOR-IN-INTEREST OF THE DISSOLVED PEPSI-COLA DISTRIBUTORS OF THE PHILIPPINES, [IS] LIABLE OVER [THE] UNPAID OBLIGATION OF THE DISSOLVED CORPORATION TOWARDS ITS EMPLOYEES;

2. WHETHER OR NOT A DISSOLVED CORPORATION IS EXEMPT FROM THE PAYMENT OF ITS OBLIGATION;

3. WHETHER OR NOT THE NLRC HAS JURISDICTION OVER PEPSI-COLA DISTRIBUTORS OF THE PHILIPPINES.¹⁸

For its part, the respondent averred that notwithstanding the dissolution of the PCDP while the complaint was pending resolution by the NLRC, the latter continued existing as a corporation for a period of three years from the time when it would have been dissolved, conformably to Section 122 of the Corporation Code. It prayed that judgment be rendered in its favor, thus:

WHEREFORE, premises considered, petitioner prays that this Honorable Court issue judgment:

1. Declaring the National Labor Relations Commission to have committed grave abuse of discretion in rendering the assailed resolutions.

2. Reversing the decision of the NLRC in the above-entitled case.

3. Reinstating the decision of the executive labor arbiter on May 4, 1987, ordering respondent to pay the complaining workers their claims for overtime services.

4. Granting petitioner such other reliefs and remedies equitable under the circumstances.¹⁹

In its comment on the petition, the Office of the Solicitor General (OSG) recommended that the petition be granted and that the NLRC be ordered to resolve the motions for reconsideration of the petitioner and respondent therein as follows:

Indeed, respondent NLRC acted without lawful justification when it dismissed the complaint of petitioner union.

PRAYER

WHEREFORE, it is respectfully prayed of this Honorable Court that respondent NLRC's Resolution dated February 11, 1992, dismissing the complaint of petitioner union, and Resolution dated June 4, 1992, denying petitioner union's motion for reconsideration, be annulled and set aside; and that respondent NLRC be ordered to decide on the merits [of] petitioner union's motion for reconsideration of April 17, 1991 only insofar as the actual number of Muslim holidays in 1985 is concerned.

It is further respectfully prayed that, in as much as the instant Comment is adverse to respondent NLRC, the latter be given an opportunity to submit its own Comment, if it so desires.²⁰

The CA found the petition meritorious, and on April 28, 1998, rendered judgment annulling the February 11, 1992 Resolution of the NLRC. It ruled that the NLRC committed grave abuse of its discretion when it dismissed the complaint, citing the ruling of this Court in Pepsi-Cola Bottling Co., et al. v. NLRC.²¹ The CA declared that the PCDP was still in existence when the complaint was filed, and that the supervening dissolution of the corporation did not warrant the dismissal of the complaint against it.²² After all, the appellate court ratiocinated, every corporation is given three (3) years to wind up its affairs. Hence, in case any litigation is filed by or against the corporation within the three (3)-year period which could not be terminated within the expiration of the same, such period must necessarily be prolonged until the final determination of the case, for if the rule were otherwise, corporations in liquidation would lose what should justly belong to them or would be exempt from the payment of just obligations through mere technicality, something that courts should not countenance.²³ However, instead of remanding the case to the NLRC for the resolution of the respondent's motion for partial reconsideration and the petitioner's motion for reconsideration of the decision of the NLRC, the CA set aside the decision of the NLRC and reinstated the decision of the ELA, thus:

WHEREFORE, premises considered, the instant petition is GIVEN DUE COURSE and GRANTED. The questioned resolutions of the NLRC in the above-entitled case are REVERSED and SET ASIDE. The decision of the Executive Labor Arbiter on May 4, 1987, ordering the respondent Pepsi Cola Distributors Philippines and its successor-in-interest Pepsi Cola Products Philippines, Inc., to pay the complaining workers their claims for overtime services, is hereby REINSTATED.²⁴

The petitioner's motion for reconsideration of the CA decision was denied by the appellate court on September 15, 2000.²⁵

Petitioner PCPPI, as the successor-in-interest of PCDP, filed the instant Petition for Review on Certiorari with this Court, assailing the decision and resolution of the CA on the following issues:

I WHETHER OR NOT THE DECISION OF THE COURT OF APPEALS IS NULL AND VOID INSOFAR AS IT REINSTATED THE DECISION OF THE LABOR ARBITER IN FULL WITHOUT EXPRESSING THEREIN THE FACTS AND LAW ON WHICH IT IS BASED.

II. WHETHER OR NOT NON-MUSLIMS LIVING AND WORKING IN PRIVATE COMPANIES LOCATED IN MUSLIM AREAS ARE ENTITLED TO THE MUSLIM HOLIDAY PROVISIONS OF P.D. 1083.

III. WHAT IS THE SPIRIT BEHIND THE DECLARATION AND CELEBRATION OF MUSLIM HOLIDAYS? IS IT TO ENABLE MUSLIMS TO OBSERVE, ENJOY, AND CELEBRATE THEIR RELIGION, OR IS IT TO ALLOW MUSLIM AND NON-MUSLIM ALIKE TO ENJOY ADDITIONAL HOLIDAYS OVER AND ABOVE THE REGULAR AND NATIONWIDE SPECIAL DAYS ALREADY OBSERVED IN THE COUNTRY.

IV. WHETHER OR NOT ALLOWING EVEN NON-MUSLIMS WORKING IN PRIVATE COMPANIES LOCATED IN MUSLIM AREAS, TO BE ENTITLED TO MUSLIM HOLIDAY PAY, IF THEY RENDER WORK DURING MUSLIM HOLIDAYS, WILL PROVE TO BE TOO ONEROUS AND UNFAIR TO THE EMPLOYER IN VIOLATION OF THE LATTER'S RIGHT TO EQUAL PROTECTION OF THE LAW.

V. WHETHER OR NOT THE MUSLIM HOLIDAY PROVISIONS OF P.D. 1083 COVER THE CITY OF DIPOLOG.

VI. WHETHER OR NOT MANAGERIAL EMPLOYEES ARE ENTITLED TO OVERTIME PAY.

VII. WHETHER THERE ARE FIVE (5) OR EIGHT (8) MUSLIM HOLIDAYS TO BE OBSERVED IN THE AREAS AT ISSUE.²⁶

The petitioner avers that the decision of the CA, setting aside the decision of the NLRC and reinstating the decision of the ELA, is null and void because it failed to delve into the factual and legal issues on the merits, such as the number of Muslim legal holidays, and whether non-Muslims, who were assigned in the Muslim areas, were entitled to overtime pay. Despite such failure, it set aside the decision of the NLRC and reinstated that of the ELA. The petitioner avers that this violated Section 14, Article VIII of the Constitution, which reads:

Sec. 14. No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based.

No Petition for Review or motion for reconsideration of a decision of the court shall be refused due course or denied without stating the legal basis therefor.

For its part, the respondent avers that the decision of the CA is in accord with law and the facts. The OSG opted not to file any comment on the petition.

We agree with the ruling of the CA that the NLRC committed a grave abuse of its discretion amounting to lack of jurisdiction in dismissing the case. The NLRC clearly erred in perceiving that, upon the petitioner's acquisition of the PCDP, the latter lost its corporate personality. The appellate court delved into and resolved the issue with sufficient fullness, and supported the same with statutory provisions and applicable case law. Under Section 122 of the Corporation Code, a corporation whose corporate existence is terminated in any manner continues to be a body corporate for three (3) years after its dissolution for purposes of prosecuting and defending suits by and against it and to enable it to settle and close its affairs, culminating in the disposition and distribution of its remaining assets. It may, during the three-year term, appoint a trustee or a receiver who may act beyond that period. The provision which reads in full:

SEC. 122. Corporate Liquidation. - Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established.

At any time during the said three (3) years, the corporation is authorized and empowered to convey all of its properties to trustees for the benefit of stockholders, members, creditors, and other persons in interest. From and after any such conveyance by the corporation of its properties in trust for the benefit of its stockholders, members, creditors and others in interest, all interest which the corporation had in the properties terminates the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest.

Upon the winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member, who is unknown or cannot be found, shall be escheated to the city or municipality where such assets are located.

Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities.

The termination of the life of a corporate entity does not by itself cause the extinction or diminution of the rights and liabilities of such entity.²⁷ If the three-year extended life has expired without a trustee or receiver having been expressly designated by the corporation, within that period, the board of directors (or trustees) itself, may be permitted to so continue as "trustees" by legal implication to complete the corporate liquidation.²⁸

However, we agree with the petitioner's contention that the decision of the CA setting aside the decision of the NLRC and reinstating the decision of the ELA is null and void for lack of jurisdiction.

It bears stressing that the Court of Appeals had no appellate jurisdiction over the issue of whether the decision of the NLRC is correct or not. This is so because the only issue in the CA was whether or not the NLRC committed a grave abuse of its discretion in dismissing the complaint simply and merely because PCDP was acquired by herein petitioner while the complaint of the respondent was pending.

The issue of the correctness of the NLRC decision was not raised in the Court of Appeals by the petitioner therein (now the respondent). And the reason for this is obvious: the petitioner and the respondent therein which are the complainant-appellee and respondent-appellee in the NLRC had filed their respective motions for reconsideration of the decision of the NLRC, and the latter had yet to resolve such motions when it dismissed the case; thus, rendering moot and academic any resolutions on said motions. By dismissing the case, the NLRC thereby set aside, not only the decision of the ELA, but also its own. The only relief the petitioner in the Court of Appeals was entitled to was the nullification of the assailed Resolution of the NLRC and the reinstatement of the case before it. The petitioner was not entitled to a reversal of the decision of the NLRC on the merits of the appeal and the reinstatement of the decision of the ELA appealed from.

In sum, then, the decision of the CA setting aside the decision of the NLRC and reinstating the decision of the ELA is null and void. As we ruled in People v. Court of Appeals:²⁹

'If a court is authorized by statute to entertain jurisdiction in a particular case only, and undertakes to exercise the jurisdiction conferred in a case to which the statute has no application, the judgment rendered is void. The lack of statutory authority to make a particular judgment is akin to lack of subject-matter jurisdiction. In this case, the CA is authorized to entertain and resolve only errors of jurisdiction and not errors of judgment.

A void judgment has no legal and binding effect, force or efficacy for any purpose. In contemplation of law, it is non-existent.'

It behooved the CA, after nullifying the February 11, 1992 Resolution of the NLRC, to order the latter to reinstate the case, inclusive of its decision, and resolve, with reasonable dispatch, the pending motions for reconsideration of the parties. After the NLRC shall have resolved the pending motions, the aggrieved party may then file a petition on certiorari under Rule 65 of the Rules of Court from the decision of the NLRC and its resolution of the said motions.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The assailed Decision of the Court of Appeals, nullifying the February 11, 1992 Decision of the NLRC, is AFFIRMED WITH MODIFICATION. The NLRC is DIRECTED to resolve, with reasonable dispatch, the motions for reconsideration of the parties of its decision. No costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, TINGA, and Chico-Nazario, JJ., concur.

Endnotes:

¹ Penned by Associate Justice Bernardo P. Abesamis (retired), with Associate Justices Martin S. Villarama, Jr. and Elvi John S. Asuncion, concurring.

² See Rollo, p. 25.

³ Ibid.

⁴ Id. at 37.

⁵ Executive Labor Arbiter Zosimo T. Vasallo.

⁶ Rollo, pp. 41-43.

⁷ Id. at 50-51.

⁸ Penned by Presiding Commissioner Musib M. Buat.

⁹ Rollo, p. 58.

¹⁰ Id. at 56.

¹¹ Id. at 57-58.

¹² Id. at 58.

¹³ Id. at 60.

¹⁴ Id. at 60-65.

¹⁵ Id. at 65.

¹⁶ Id. at 66-68.

¹⁷ Id. at 203.

¹⁸ CA Rollo, p. 6.

¹⁹ Id. at 11.

²⁰ Id. at 77-78.

²¹ 210 SCRA 227 (1992).

²² Rollo, pp. 31-32.

²³ Id. at 32.

²⁴ Id. at 33.

²⁵ Id. at 35.

²⁶ Id. at 8-9.

²⁷ See Gonzales v. Sugar Regulatory Administration, 174 SCRA 377 (1989).

²⁸ See Gelano v. Court of Appeals, 103 SCRA 90 (1981).

²⁹ G.R. No. 144332, June 10, 2004.

G.R. No. 146195 - AVELINA ZAMORA, ET AL. v. HEIRS of CARMEN IZQUIERDO, ET AL.

2013-01-15T09:50:38+00:00

G.R. No. 146195 - AVELINA ZAMORA, ET AL. v. HEIRS of CARMEN IZQUIERDO, ET AL.

THIRD DIVISION

[G.R. NO. 146195 : November 18, 2004]

AVELINA ZAMORA, EMERITA ZAMORA-NICOL, SONNY NICOL, TERESA ZAMORA-UMALI, CLARENCE UMALI, ROBERTO ZAMORA, ROLANDO ZAMORA, MARY ANN ZAMORA, MICHELLE ZAMORA and RODRIGO ZAMORA, Petitioners, v. HEIRS of CARMEN IZQUIERDO, represented by their attorney-in-fact, ANITA F. PUNZALAN, Respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us is a Petition for Review on Certiorari ¹ assailing the Decision² of the Court of Appeals dated September 12, 2000 and its Resolution dated December 1, 2000 in CA-G.R. SP No. 54541, entitled "Avelina Zamora, et al., petitioners, v. Heirs of Carmen Izquierdo, represented by the executrix, Anita F. Punzalan, respondents."

The records show that sometime in 1973, Carmen Izquierdo and Pablo Zamora entered into a verbal stipulation whereby the former leased to the latter one of her apartment units located at 117-B General Luna Street, Caloocan City. They agreed on the following: the rental is P3,000.00 per month; the leased premises is only for residence; and only a single family is allowed to occupy it.

After the death of Carmen (lessor) in 1996 her attorney-in-fact, Anita Punzalan, representing the heirs, herein respondents, prepared a new contract of lease wherein the rental was increased from P3,000.00 to P3,600.00 per month.³ However, petitioners refused to sign it.

In January 1997, Pablo (lessee) died. His wife, Avelina Zamora, and their children (two of whom have their own families), herein petitioners, continued to reside in the apartment unit. However, they refused to pay the increased rental and persisted in operating a photocopying business in the same apartment.

Meanwhile, petitioner Avelina Zamora applied with the Metropolitan Waterworks & Sewerage System (MWSS) for a water line installation in the premises. Since a written consent from the owner is required for such installation, she requested respondents' attorney-in-fact to issue it. However, the latter declined because petitioners refused to pay the new rental rate and violated the restrictions on the use of the premises by using a portion thereof for photocopying business and allowing three families to reside therein.

This prompted petitioner Avelina Zamora to file with the Office of the Punong Barangay of Barangay 16, Sona 2, District I, Lungsod ng Caloocan, a complaint against Anita Punzalan (respondents' attorney-in-fact), docketed as "Usaping Bgy. Blg. 1-27-97, Ukol sa: Hindi Pagbibigay ng Pahintulot sa Pagpapakabit ng Tubig."

On August 24, 1997, during the barangay conciliation proceedings, petitioner Avelina Zamora declared that she refused to sign the new lease contract because she is not agreeable with the conditions specified therein.

The following day, Anita Punzalan sent Avelina a letter⁴ informing her that the lease is being terminated and demanding that petitioners vacate the premises within 30 days from notice.

Despite several barangay conciliation sessions, the parties failed to settle their dispute amicably. Hence, the Barangay Chairman issued a Certification to File Action dated September 14, 1997.⁵

Consequently, on October 2, 1997, respondents, represented by Anita Punzalan, filed with the Metropolitan Trial Court (MTC), Branch 49, Caloocan City, a complaint for unlawful detainer and damages against petitioners, docketed as Civil Case No. 23702.⁶ Forthwith, petitioners filed a motion to dismiss⁷ the complaint on the ground that the controversy was not referred to the barangay for conciliation. First, they alleged that the barangay Certification to File Action "is fatally defective" because it pertains to another dispute, i.e., the refusal by respondents' attorney-in-fact to give her written consent to petitioners' request for installation of water facilities in the premises. And, second, when the parties failed to reach an amicable settlement before the Lupong Tagapamayapa, the Punong Barangay (as Lupon Chairman), did not constitute the Pangkat ng Tagapagkasundo before whom mediation or arbitration proceedings should have been conducted, in violation of Section 410(b), Chapter 7 (Katarungang Pambarangay), Title One, Book III of Republic Act No. 7160⁸ (otherwise known as the Local Government Code of 1991), which reads:

"SECTION 410. Procedure for Amicable Settlement.'

(a) x x x

(b) Mediation by lupon chairman - Upon receipt of the complaint, the lupon chairman⁹ shall, within the next working day, summon the respondent(s), with notice to the complainant(s) for them and their witnesses to appear before him for a mediation of their conflicting interests. If he fails in his mediation effort within fifteen (15) days from the first meeting of the parties before him, he shall forthwith set a date for the constitution of the pangkat in accordance with the provisions of this Chapter." (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

Respondents opposed the motion to dismiss,¹⁰ the same being prohibited under Section 19 of the 1991 Revised Rule on Summary Procedure. They prayed that judgment be rendered as may be warranted by the facts alleged in the complaint, pursuant to Section 6¹¹ of the same Rule.

On July 9, 1998, the MTC issued an Order¹² denying petitioners' motion to dismiss and considering the case submitted for decision in view of their failure to file their answer to the complaint.

Petitioners filed a motion for reconsideration,¹³ contending that a motion to dismiss the complaint on the ground of failure to refer the complaint to the Lupon for conciliation is allowed under Section 19 of the 1991 Revised Rule on Summary Procedure, which partly provides:

"SEC. 19. Prohibited pleadings and motions. - The following pleadings, motions, or petitions shall not be allowed in the cases covered by this Rule:

(a) Motion to dismiss the complaint or to quash the complaint or information except on the ground of lack of jurisdiction over the subject matter, or failure to comply with the preceding section [referring to Section 18 on referral of the complaint to the Lupon for conciliation];

x x x."

On August 26, 1998, the MTC rendered a Judgment¹⁴ in favor of respondents and against petitioners, the dispositive portion of which reads:

"WHEREFORE, Judgment is hereby rendered in favor of the plaintiff and against the defendants, ordering defendants and all persons claiming right under them:

1) To vacate the leased premises located at No. 117-B General Luna Street, Caloocan City and to surrender possession thereof to the plaintiff;

2) To pay the amount of three thousand six hundred (P3,600.00) pesos per month starting January, 1997 until the premises being occupied by them is finally vacated and possession thereof is restored to the plaintiff;

3) To pay plaintiff the sum of five thousand (P5,000.00) pesos as and for attorney's fees; andcralawlibrary

4) To pay the costs of this suit.

SO ORDERED."

On appeal, the Regional Trial Court (RTC), Branch 125, Caloocan City, rendered its Decision¹⁵ dated February 15, 1999 affirming the MTC Judgment. Subsequently, it denied petitioners' motion for reconsideration.¹⁶

Petitioners then filed with the Court of Appeals a Petition for Review , docketed as CA-G.R. SP No. 54541. On September 12, 2000, it rendered a Decision¹⁷ affirming the RTC Decision.

Thereafter, petitioners filed a motion for reconsideration but was denied by the Appellate Court in its Resolution dated December 1, 2000.¹⁸

Hence, the instant petition.

The primordial objective of Presidential Decree No. 1508 (the Katarungang Pambarangay Law), now included under R.A. No. 7160 (the Local Government Code of 1991), is to reduce the number of court litigations and prevent the deterioration of the quality of justice which has been brought about by the indiscriminate filing of cases in the courts.¹⁹ To attain this objective, Section 412(a) of R.A. No. 7160 requires the parties to undergo a conciliation process before the Lupon Chairman or the Pangkat as a precondition to filing a complaint in court, thus:

"SECTION 412. Conciliation. - (a) Pre-condition to Filing of Complaint in Court.' No complaint, petition, action, or proceeding involving any matter within the authority of the lupon shall be filed or instituted directly in court or any other government office for adjudication, unless there has been a confrontation between the parties before the lupon chairman or the pangkat, and that no conciliation or settlement has been reached as certified by the lupon or pangkat secretary and attested to by the lupon or pangkat chairman x x x." (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

In the case at bar, the Punong Barangay, as Chairman of the Lupong Tagapamayapa, conducted conciliation proceedings to resolve the dispute between the parties herein. Contrary to petitioners' contention, the complaint does not only allege, as a cause of action, the refusal of respondents' attorney-in-fact to give her consent to the installation of water facilities in the premises, but also petitioners' violation of the terms of the lease, specifically their use of a portion therein for their photocopying business and their failure to pay the increased rental. As correctly found by the RTC:

"The records show that confrontations before the barangay chairman were held on January 26, 1997, February 9, 1997, February 23, 1997, February 28, 1997, July 27, 1997, August 3, 1997, August 10, 1997, August 17, 1997 and August 24, 1997 wherein not only the issue of water installation was discussed but also the terms of the lease and the proposed execution of a written contract relative thereto. It appears, however, that no settlement was reached despite a total of nine meetings at the barangay level.

It is of no moment that the complaint was initially made by defendant-appellant Avelina Zamora because herein plaintiff-appellee was given by the Sangguniang Barangay the authority to bring her grievance to the Court for resolution. While it is true that the Sertifikasyon dated September 14, 1997 is entitled 'Ukol Sa Hindi Pagbibigay Ng Pahintulot Sa Pagpapakabit Ng Tubig', this title must not prevail over the actual issues discussed in the proceedings.

Hence, to require another confrontation at the barangay level as a sine qua non for the filing of the instant case would not serve any useful purpose anymore since no new issues would be raised therein and the parties have proven so many times in the past that they cannot get to settle their differences amicably."²⁰

We cannot sustain petitioners' contention that the Lupon conciliation alone, without the proceeding before the Pangkat ng Tagapagkasundo, contravenes the law on Katarungang Pambarangay. Section 412(a) of R.A. No. 7160, quoted earlier, clearly provides that, as a precondition to filing a complaint in court, the parties shall go through the conciliation process either before the Lupon Chairman (as what happened in the present case), or the Pangkat.

Moreover, in Diu v. Court of Appeals,²¹ we held that "notwithstanding the mandate in Section 410(b) of R.A. No. 7160 that the Barangay Chairman shall constitute a Pangkat if he fails in his mediation efforts," the same "Section 410(b) should be construed together with Section 412(a) of the same law (quoted earlier), as well as the circumstances obtaining in and peculiar to the case." Here, while the Pangkat was not constituted, however, the parties met nine (9) times at the Office of the Barangay Chairman for conciliation wherein not only the issue of water installation was discussed but also petitioners' violation of the lease contract. It is thus manifest that there was substantial compliance with the law which does not require strict adherence thereto.²²

We hold that petitioners' motion to dismiss the complaint for unlawful detainer is proscribed by Section 19(a) of the 1991 Revised Rule on Summary Procedure, quoted earlier. Section 19(a) permits the filing of such pleading only when the ground for dismissal of the complaint is anchored on lack of jurisdiction over the subject matter, or failure by the complainant to refer the subject matter of his/her complaint "to the Lupon for conciliation" prior to its filing with the court. This is clear from the provisions of Section 18 of the same Rule, which reads:

"SEC. 18. Referral to Lupon. - Cases requiring referral to the Lupon for conciliation under the provisions of Presidential Decree No. 1508 where there is no showing of compliance with such requirement, shall be dismissed without prejudice, and may be revived only after such requirement shall have been complied with. This provision shall not apply to criminal cases where the accused was arrested without a warrant." (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

As discussed earlier, the case was referred to the Lupon Chairman for conciliation. Obviously, petitioners' motion to dismiss, even if allowed, is bereft of merit.

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 54541 sustaining the Decision of the RTC which upheld the MTC Judgment is AFFIRMED.

Costs against petitioners.

SO ORDERED.

Panganiban, (Chairman), Carpio-Morales, and Garcia, JJ., concur.
Corona, J., on leave.

Endnotes:

¹ Filed under Rule 45 of the 1997 Rules of Civil Procedure, as amended.

² Penned by Associate Justice Eugenio S. Labitoria and concurred in by Justice Bernardo P. Abesamis and Justice Alicia L. Santos (both retired).

³ Annexes "A" and "C", Petition, Rollo at 38, 53.

⁴ Rollo at 43.

⁵ Id. at 42. The barangay certification was signed by Barangay Secretary Flordeliza Fernandez, Punong Barangay Jose R. Galgana and Lupong Tagapamayapa Efren Simangan.

⁶ Annex "A", Petition, Rollo at 36-41.

⁷ Annex "B", id. at 44-47.

⁸ This law took effect on January 1, 1992. The law on barangay conciliation was originally governed by Presidential Decree No. 1508 (enacted on June 11, 1978) which was repealed by codification in the Local Government Code of 1991.

⁹ Under Section 399 (a) of R.A. 7160, the Punong Barangay is designated as the Lupon Chairman.

¹⁰ Annex "B-1", Petition, Rollo at 48-52.

¹¹ Section 6 of the Revised Rule on Summary Procedure provides:

"SEC. 6. Effect of failure to answer. - Should the defendant fail to answer the complaint within the period above provided [10 days from service of summons], the court, motu proprio, or on motion of the plaintiff, shall render judgment as may be warranted by the facts alleged in the complaint and limited to what is prayed for therein: Provided, however, That the court may in its discretion reduce the amount of damages and attorney's fees claimed for being excessive or otherwise unconscionable. This is without prejudice to the applicability of Section 4, Rule 18 of the Rules of Court, if there are two or more defendants."

¹² Annex "C", Petition, Rollo at 53-54.

¹³ Annex "D", id. at 55-57.

¹⁴ Annex "E", id. at 58-61.

¹⁵ Annex "H", id. at 79-83.

¹⁶ Annex "I", id. at 84.

¹⁷ Annex "J", id. at 85-93.

¹⁸ Annex "L", id. at 98.

¹⁹ Galuba v. Laureta, No. L-71091, January 29, 1988, 157 SCRA 627, 634.

²⁰ RTC Decision, Rollo at 81-82.

²¹ G.R. No. 115213, December 19, 1995, 251 SCRA 472.

²² Id.

G.R. No. 146225 - NASIPIT LUMBER COMPANY, ET AL. v. NATIONAL ORGANIZATION OF WORKINGMEN (NOWM), ET AL.

2013-01-15T09:50:38+00:00

G.R. No. 146225 - NASIPIT LUMBER COMPANY, ET AL. v. NATIONAL ORGANIZATION OF WORKINGMEN (NOWM), ET AL.

SECOND DIVISION

[G.R. NO. 146225 : November 25, 2004]

NASIPIT LUMBER COMPANY and PHILIPPINE WALLBOARD CORPORATION, Petitioners, v. NATIONAL ORGANIZATION OF WORKINGMEN (NOWM) AND ITS 30 MEMBERS, NAMELY: JUANITO LUNETA, MAXIMO SUSE, MARIANO SAJOR, CELSO LADANAN, CATALINO PAYOT, LOPE CABELAN, MANUEL FELIAS, ERNESTO DALAGUAN, ROMEO FLORES, SOPIO AQUILAM, JESUS LEGASPI, RAMONITO ROBLES, JESUS DANOCO, ARESTON LICAYAN, LORETO NAMOCA, ERNESTO GALOPE, SANTIAGO COCAMAS, RAULITO DALAGUAN, ROGELIO FELIAS, LEONILO OLEVER, ALEX CERO, TEODOLFO VILLANUEVA, SOPRONIO RANARION, ANGELO AWA, GERARDO CUHIT, ERNESTO AMORES, ROGELIO PAQUIRA, ALEJANDRO LOQUIAS, ARSENIO AMORA and AGAPITO YBANEZ, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

This is a Petition for Review of the Decision¹ of the Court of Appeals (CA) in CA-G.R. SP No. 50579 affirming, with modification, the Decision² of the National Labor Relations Commission (NLRC), in NLRC Case No. M-003556-97 and the resolution³ of the appellate court denying the petitioners' motion for reconsideration thereof for lack of merit.

The Antecedents

Petitioner Nasipit Lumber Company (Nasipit) and its affiliate, petitioner Philippine Wallboard Corporation (Wallboard), employed, among others, thirty (30) individual workers at the Nasipit Processing Plant. These workers were members of the respondent, the National Organization of Workingmen (NOWM), which belonged to the Western Agusan Workers Union (WAWU-ALU-TUCP) which, in turn, was the certified bargaining unit in the said plant.

Nasipit applied with the National Wage and Productivity Commission (NWPC) for exemption from compliance with Wage Order Nos. RT-01 and RT-01-A. The NWPC rendered judgment on March 8, 1993 denying the application. The corporation challenged the said decision in this Court, and the case was docketed as G.R. No. 113097.

On January 29, 1996, the officers of respondent NOWM, WAWU-ALU-TUCP, representatives of the Department of Labor and Employment (DOLE) and the National Conciliation Mediation Board (NCMB) met and discussed the complaint. The NOWM demanded for the balance of the health bonus of its members for the year 1994, 13th month-pay, and the remaining backlog payables amounting to P1,800.000.00. Although no agreement was arrived at by the conferees, the petitioners granted financial assistance to their rank-and-file employees, security guards and company staff on February 9, 1996.

On February 18, 1996, the General Membership of WAWU-ALU-TUCP, approved and issued Resolution No. 02-96 in which it was stated that except for the rank-and-file workers assigned to the St. Christopher Hospital, the thirty (30) members of respondent NOWM would not report for work effective February 19, 1996. The pertinent portion of the resolution reads:

RESOLVED AS THE GENERAL MEMBERSHIP DO HEREBY RESOLVED that if the Company still fails to pay its long accrued workers' benefits and salaries per CBA and Labor Code particularly the balance of Health Bonus for 1994, the balance of 13th Month Pay for 1995 and the remaining backlog payrolls amounting to P1.8 M which were officially proposed and/or demanded by the union officers of WAWU and TULWU together with ALU representatives in the conference held on January 29, 1996 at Embassy Hotel, Butuan City on or before February 19, 1996, no more rank-and-file workers of the Company will report to work except the rank-and-file workers assigned at St. Christopher Hospital.⁴

The petitioners were informed of the said resolution in a Letter⁵ dated February 19, 1996.

Meanwhile, the Office of the, DOLE, Regional Office No. 13 conducted an inspection of the offices of petitioner Nasipit and found that the corporation committed the following violations of labor standard law, to wit:

a) underpayment of 13th month pay from December for (sic) 1995;

b) non-payment of vacation leave 1995;

c) non-payment of holiday 1995;

d) non-payment of overtime pay;

e) non-payment of benefits under CBA;

f) unpaid wages from December 16-31, 1994 and January-December, 1995.⁶

It appears that a Consolidated Statement of Income and Expenses was filed with the Bureau of Internal Revenue (BIR) on April 15, 1996 showing that petitioner Nasipit had a net loss of P13,489,031.00 in its operations for the year 1994, while its affiliate, petitioner Wallboard had a net loss of P8,754,366.00. It also appears that a Consolidated Statement of Income and Expenses was filed with the BIR on April 15, 1996 showing that for the year ending 1994, Wallboard incurred a net loss of P970,470.00 and for the year ending 1995, it incurred a net loss of P11,236,503.00.

In an Order dated September 4, 1996, the Regional Director directed petitioner Nasipit to pay to its employees P7,629,490.00 as unpaid wages. Petitioner Nasipit filed a motion for reconsideration which was denied. It appealed the Order to the DOLE, which was docketed as ROXIII-CI-002.

On October 24, 1997, the Secretary of Labor and Employment issued an Order⁷ directing the Regional Director to elevate the entire records of the case to the DOLE, Caraga Regional Office, for appropriate proceedings and computation of the total sum rightly due to the workers.

In the meantime, respondents NOWM and its thirty (30) members filed a complaint on November 18, 1996 against the petitioners for illegal cessation of business operations, non-payment of separation pay, underpayment of salary and salary arrears for one (1) year before the Sub-Regional Arbitration Branch of the NLRC. The respondents claimed that the petitioners terminated their employment on the allegation that the latter's operations were suspended effective January 1996. According to the respondents, they should be reinstated to their former positions, conformably to Article 286 of the Labor Code of the Philippines.

Instead of filing their Answer and Position Paper, the petitioners filed a motion to dismiss the complaint on the following grounds:

I. THE ISSUE OF ILLEGAL CESSATION OF OPERATIONS AND SEPARATION PAY IS THE SUBJECT OF ON-GOING EGOTIATIONS BETWEEN NALCO & AFFILIATES MANAGEMENT AND WAWU-ALU-TUCP (LOCAL 381-NMR) WHICH IS THE RECOGNIZED COLLECTIVE BARGAINING AGENT OF ALL COVERED WORKERS/EMPLOYEES WITHIN THE NASIPIT PLANT BARGAINING UNIT.

II. THE ISSUE OF NON-PAYMENT OF SALARY DIFFERENTIALS (P13.00 WAGE INCREASE) IS LIKEWISE BARRED BY A PRIOR PENDING ACTION BETWEEN THE SAME PARTIES FOR THE SAME CAUSE OR ISSUES BEFORE THE HONORABLE SUPREME COURT DOCKETED AS G.R. No. 113097 (Nasipit Lumber Co., Inc., et al., Petitioners, v. National Wages and Productivity Commission [NWPC], et al.).

III. THE ISSUE OF SALARY ARREARAGES IS ALSO BARRED BY A PRIOR ACTION BETWEEN THE SAME PARTIES FOR THE SAME CAUSE NOW PENDING BEFORE THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) DOCKETED AS ROXIII-LSED-0963-CI-001 (In the matter of Complaint Inspection of Nasipit Lumber Co., Inc.).

IV. COMPLAINANT NATIONAL ORGANIZATION OF WORKINGMEN .(NOWM) HAS NO LEGAL PERSONALITY OR CAUSE OF ACTION AGAINST RESPONDENTS NALCO, ET AL., CONSIDERING THAT NALCO & AFFILIATES IS AN ORGANIZED ESTABLISHMENT WITH AN EXISTING CBA . WITH WAWU-ALU.⁸

On July 7, 1997, the labor arbiter dismissed the complaint for lack of merit on his finding that the petitioners had to suspend their operations because of the respondent employees' refusal to report for work:

As borne out by the records, respondents did not cause or initiate the cessation or suspension of respondent NALCO's operations. As aptly pointed out by respondents, NALCO desired to operate, but it cannot do so because on 18 February 1997 (sic), on account of a labor dispute, the general membership of WAWU-ALU-TUCP, the recognized CBA representative, approved Resolution No. 02-96 declaring that effective 19 February 1996, "No more rank-and-file workers of the company will report to work x x x."

The cessation/suspension of NALCO's operations was not management initiated. The deliberate refusal of the workers to work was stage-managed by the union hence Art. 286 of the Labor Code would surely not apply and the complainants are not entitled to separation pay because there was no constructive dismissal. ... In other words, complainants should have filed a case for non-payment of salaries or wages against the herein respondents if this was the case, rather than resort to a concerted action resulting in the stoppage of work/suspension of operations, as in the instant case and later on claim that they were constructively dismissed. They should not blame respondents for the consequential effects of their own acts.⁹

The respondents appealed the decision to the NLRC, which rendered a Decision on March 31, 1998 setting aside the decision of the labor arbiter and awarding separation pay to the thirty members of the respondent union.¹⁰ The NLRC ruled that, contrary to the findings of the labor arbiter, the respondents were dismissed because of their failure to report for work after the petitioners refused to accede to their just demands for monetary benefits. The NLRC also found that the respondents had every reason not to report for work:

Complaining union points out, however, that Resolution No. 02-96 was a mere offshoot of the respondents' refusal to pay the complainant's salaries which at the time the Resolution was passed amounted to about P1.8 Million Pesos. This case originally included as one of the causes of action, the non-payment of salaries to members of the complaining union over a period of one (1) year. This was the principal gripe which brought about the approval of Resolution No. 02-96. Incidentally, this claim was dropped by complainants in this case because it was [the] subject of another case pending before the Department of Labor and Employment under ROXIII-LSED-0963-CI-001.

Now, if the workers had not been paid their salaries for one (1) year, they have a justifiable reason not to continue working and opt to be paid their respective separation pay. An engine cannot run without gas, so to say. Similarly, the workers cannot be forced to work on an empty stomach.

If the Labor Arbiter below only tried to look behind the reason why the union and its members passed Resolution No. 02-96, he could have viewed the case in its proper perspective and ruled differently.¹¹

The petitioners moved for the reconsideration of the decision, but the NLRC denied the same, holding that the separation pay was awarded as a matter of course to the respondents, being the relief necessarily consequential to its finding that the petitioners' cessation of operations was not due to any fault on the part of the respondents. The NLRC emphasized that the award was entirely different in nature from the labor standards case docketed as ROXIII-LSED-0963-CI-001, where the issue involved was non payment of salaries.¹²

On August 26, 1998, the petitioners filed a petition for certiorari with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction with the CA, assailing the decision and resolutions of the NLRC on the following grounds: (a) the NLRC acted without or in excess of jurisdiction in ordering the petitioners to pay the 30 individual respondents separation pay, notwithstanding the position taken by WAWU-ALU-TUCP in its Resolution No. 02-96 not to report for work starting February 19, 1996 unless its members were paid their wages and benefits; and (b) assuming, arguendo, that the 30 individual respondents were entitled to separation pay, the NLRC acted without or in excess of jurisdiction in ordering the payment of separation pay equivalent to one (1) month salary for every year of service.¹³

On August 16, 2000, the CA affirmed the decision of the NLRC, with the modification that the respondents' separation pay was made equivalent to one-half (1/2)-month pay for every year of service, without prejudice to the outcome of G.R. No. 113097 entitled "Nasipit Lumber Co., Inc, et. al. v. National Wages and Productivity Commission (NWPC), et. al."¹⁴ The CA explained as follows:

We are not convinced. It must be borne in mind that the services of the private respondents were terminated in January 1996, a month before the other rank-and-file employees did not report to work. It seems to us that the petitioners made use of this event in order to avoid the fulfillment of their obligation to the private respondents. Moreover, the petitioners' insistence that the cessation of the operation was due to the union holds no water. As correctly observed by the union, such is a mere offshoot of the petitioners' refusal to make good their obligation to the workers concerned.

Furthermore, it is worth noting that after the petitioners' declaration of the temporary suspension of the operations, they gave financial assistance on February 9, 1996 in the following amounts: P300.00 for rank-and-file workers, P400.00 for the security guards, P500.00 for middle managerial employees and P750.00 for the company staff. Such unequal financial assistance added fuel to the already growing ire of the union due to the failure of the petitioners to give what was due them.¹⁵

The CA cited the rulings of this Court in Industrial Timber Corporation v. NLRC,¹⁶ and Sebuguero v. NLRC¹⁷ to support their contentions.

The petitioners filed a motion for reconsideration on September 14, 2000, which was denied by the CA per its Resolution dated November 28, 2000.

Hence, the present Petition for Review .

The petitioners fault the CA for its decision against them, alleging that -

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE INDIVIDUAL RESPONDENTS ARE ENTITLED TO SEPARATION PAY UNDER ARTICLE 283 OF THE LABOR CODE AND THE CASES OF INDUSTRIAL [TIMBER] CORPORATION v. NLRC, 273 SCRA 200 AND SEBUGUERO V. NLRC, 248 SCRA 532.¹⁸

The petitioners aver that they did not terminate the employment of the individual respondents, and that they merely suspended their operations. According to the petitioners, such suspension of operations was based on their Comparative Statement of Income and Expenses for the year endings 1994 and 1995, which showed that they incurred net losses, and that such suspension of operations was sanctioned by Article 286 of the Labor Code.¹⁹ Thus:

It is a fact that in January 1996, petitioners temporarily suspended their operations due to serious business reverses, which business reverses were never questioned by petitioners. In fact, the petitioners' Comparative Statement of Income and Expenses For the Years Ended December 31, 1995 and 1994, hereto attached as Annex "G" (for Nasipit Lumber Company) and ANNEX "H" (for Philippine Wallboard Corporation), show that both petitioners suffered a NET LOSS in 1995 of:

Nasipit Lumber Company - P13,540,816.00

Philippine Wallboard Corporation - P1 1,742,013.00²⁰

Further, the petitioners maintain that their operations did not cease because of the fact that the rank-and-file workers did not report for work; rather it arose from serious business reverses. Likewise, their payments of financial assistance to the employees had no bearing in the present case.²¹

In addition, the petitioners assert that the rulings of this Court in Industrial Timber Corporation v. NLRC²² and Sebuguero v. NLRC²³ have no application because the former does not involve the closure of operations; while the latter case, if upheld, would in effect place premium on the individual respondents' refusal to report to work.²⁴ The petitioners insist that contrary to the ruling of the Court in the Sebuguero case, when the temporary suspension of operations of a company exceeds six (6) months, its employees are entitled to separation pay, thus:

While it may be true that even after six (6) months from January 1996, the individual respondents were without work, it was of their own doing and not that of petitioners. If the individual respondents themselves chose to no longer work pursuant to Resolution No. 02-96, how can their not reporting for work for a period exceeding six (6) months give rise to their being paid separation pay? By awarding them separation pay, the Honorable Court of Appeals placed a premium on the individual respondents' refusal to report for work.

With the foregoing, the petitioners conclude that there is then absolutely no basis in applying the provisions of Article 283 of the Labor Code to justify the payment of separation pay to the individual respondents.²⁵

In their comment on the petition, the respondents aver that the petitioners failed to adduce convincing evidence to justify the suspension of their operations. In fact, the respondents assert, the petitioners even gave financial assistance to the rank-and-file employees, security guards, middle managerial employees and the company staff.

The issues raised by the parties in this case are both factual and legal, to wit: (a) whether the petitioners suspended their operations on account of considerable losses incurred in the years 1994 and 1995; (b) whether the respondents were illegally dismissed by the petitioners; (c) whether the respondents are entitled to separation pay; and (d) if in the affirmative, the amount of entitlement of each individual respondent by way of separation pay and other monetary benefits.

Although only legal issues may be raised in a Petition for Review on Certiorari under Rule 45 of the Rules of Court, the Court is not precluded from delving into and resolving issues of facts, particularly if the findings of the labor arbiter are inconsistent with those of the NLRC and the CA; if the findings of the NLRC and the appellate court are contrary to the evidence and the record; and in order to give substantial justice to the parties. Indeed, Section 6, Rule 45 of the 1997 Rules of Civil Procedure provides:

SEC. 6. Review discretionary. - A review is not a matter of right, but of sound judicial discretion, and will be granted only when there are special and important reasons therefor. The following, while neither controlling nor fully measuring the court's discretion, indicate the character of the reasons which will be considered:

(a) When the court a quo has decided a question of substance, not theretofore determined by the Supreme Court, or has decided it in a way probably not in accord with law or with the applicable decisions of the Supreme Court; or

(b) When the court a quo has so far departed from the accepted and usual course of judicial proceedings, or so far sanctioned such departure by a lower court, as to call for an exercise of the power of supervision.

On the first issue, the petitioners aver that they suspended their operations in January 1996 due to serious business reverses as evidenced by their Statements of Income and Expenses for the years 1994 and 1995. For their part, the respondents aver that the petitioners failed to prove convincingly the factual basis for the suspension of their operations. On the other hand, the labor arbiter ruled that the petitioners' suspension of their operations in February 1996 was not management initiated, but was triggered by the refusal of the respondents to report for work due to the petitioners' failure to give them their wages and other monetary benefits. However, the findings of the labor arbiter were rejected by the NLRC and the CA. The CA ruled on the matter as follows:

We are not convinced. It must be borne in mind that the services of the private respondents were terminated in January 1996, a month before the other rank-and-file employees did not report to work. It seems to us that the petitioners made use of this event in order to avoid the fulfillment of their obligation to the private respondents. Moreover, the petitioners' insistence that the cessation of the operation was due to the union holds no water. As correctly observed by the union, such is a mere offshoot of the petitioners' refusal to make good their obligation to the workers concerned.

Furthermore, it is worth noting that after the petitioners' declaration of the temporary suspension of the operations, they gave financial assistance on February 9, 1996 in the following amounts: P300.00 for rank-and-file workers, P400.00 for the security guards, P500.00 for middle managerial employees and P750.00 for the company staff. Such unequal financial assistance added fuel to the already growing ire of the union due to the failure of the petitioners to give what was due them.²⁶

We find that, based on the records, the petitioners merely downscaled their operations in 1995, and did not suspend the same because of economic difficulties. The respondents continued to work at the Nasipit Processing Plant although each of them received a monthly pay of only P600.00. The petitioners dismissed the respondents when the latter refused to report for work. We agree with the NLRC and the CA that the petitioners' claim of suspending operations in 1994 and 1995 was merely an afterthought to justify their dismissal of the respondents. It must be stressed that the petitioners obstinately refused to heed and agree to the respondents' just demands to pay their monetary benefits and backlog wages amounting to P1,800,000.00, which ultimately led to the latter's dismissal from employment.

We agree with the contention of the petitioners that under Article 286 of the Labor Code, an employer may bona fide suspend the operation of its business for a period of not exceeding six (6) months. In such a case, there is no termination of the employment of the employees, but only a temporary displacement. When the suspension of the business operations exceeds six (6) months, then the employment of the employees would be deemed terminated. On the other hand, if the operation of the business is resumed within six (6) months from the bona fide suspension thereof, it shall be the duty of the employer to reinstate his employees to their former positions without loss of seniority rights, if the latter would indicate their desire to resume work within one (1) month from such resumption of operations, conformably to Article 286 of the Labor Code which reads:

Art. 286. When employment not deemed terminated - The bona fide suspension of the operations of a business or undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a military service or civic duty shall not terminate employment.

In all such cases, the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later than one (1) month from the resumption of operations of his employer or from his relief from the military or civic duty.

Closure or suspension of operations for economic reasons is, therefore, recognized as a valid exercise of management prerogative. The determination to cease or suspend operations is a prerogative of management, which the State does not usually interfere with as no business or undertaking is required to continue operating at a loss simply because it has to maintain its workers in employment. Such an act would be tantamount to a taking of property without due process of law.²⁷

However, the burden of proving, with sufficient and convincing evidence, that such closure or suspension is bona fide falls upon the employer.²⁸ As we ruled in Somerville Stainless Steel Corporation v. NLRC:²⁹

Considering the severe consequences occasioned by retrenchment on the livelihood of the employee(s) to be dismissed, and the avowed policy of the State - under Sec. 3, Art. XIII of the Constitution, and Art. 3 of the Labor Code - to afford fall protection to labor and to assure the employee's right to enjoy security of tenure, the Court reiterates that "not every loss incurred or expected to be incurred by a company will justify retrenchment. The losses must be substantial and the retrenchment must be reasonably necessary to avert such losses. Settled is the rule that the employer bears the burden of proving this allegation of the existence or imminence of substantial losses, which by its nature is an affirmative defense. It is the duty of the employer to prove with clear and satisfactory evidence that legitimate business reasons exist to justify retrenchment. Failure to do so "inevitably results in a finding that the dismissal is unjustified." And the determination of whether an employer has sufficiently and successfully discharged this burden of proof "is essentially a question of fact for the Labor Arbiter and the NLRC to determine."

Otherwise, such ground for termination would be susceptible to abuse by scheming employers who might be merely feigning business losses or reverses in their business ventures to ease out employees.³⁰

In the present case, the petitioners failed to prove with convincing evidence a bona fide suspension of their operations in 1994, 1995 and even in January 1996 due to acute economic losses in their operations.

First. The only evidence adduced by the petitioners that they sustained huge losses in their operations for 1994 and 1995 were the xerox copies of unsigned and unverified Comparative Statements of Income and Expenses for the Years Ended December 31, 1994 and 1995 filed with the BIR only on April 15, 1996. The petitioners failed to submit any other documents to support the said Comparative Statements. Thus, such statements are barren of probative weight.

Second. Despite their alleged huge losses in 1994 and 1995, the petitioners continued employing the respondents, although each of them received a monthly salary of only P600.00.

Third. The petitioners' claim that they were ready to resume operations in January 1996 were it not for the respondent union's issuance of Resolution No. 02-96 belies their contention that they sustained huge losses in their operations in 1994 and 1995. There is no evidence on record that the petitioners ever gave notice to their employees of the suspension of their operations, and, thereafter, that they were ready to resume such operation in January 1996.

Fourth. The CA declared that the petitioners even gave the following benefits to their employees on February 9, 1996; financial assistance of P300.00 for the rank-and-file employees; P400.00 for the security guards; P500.00 for middle managerial employees; and P750.00 for the company staff. The petitioners admitted these findings of the appellate court.

We note that the award of separation pay by the CA to the respondents was without prejudice to the ruling of this Court in Nasipit Lumber Company, et al. v. National Wages and Productivity Commission, et al..³¹ However, this Court, as early as April 27, 1998, had already promulgated its decision dismissing the petition in the said case.³² The decision of the CA has to be modified.

IN LIGHT OF THE FOREGOING, the petition is DENIED for lack of merit. The decision of the Court of Appeals is AFFIRMED with MODIFICATION. The petitioners are DIRECTED to pay, jointly and severally, each of the individual private respondents separation pay equivalent to one-half (1/2) month pay for every year of service. No costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, TINGA, and Chico-Nazario, JJ., concur.

Endnotes:

¹ Penned by Associate Justice Delilah Vidallon-Magtolis, with Associate Justices Eloy R. Bello, Jr. (retired) and Elvi John S. Asuncion, concurring.

² RAB-10-11-00322-96 for "illegal cessation of business operations, non-payment of separation pay, underpayment of salary, salary differentials, salary arrears."

³ Rollo, p. 23.

⁴ CA Rollo, p. 26.

⁵ Id. at 25.

⁶ Id. at 34.

⁷ Id. at 36.

⁸ Id. at 29.

⁹ Rollo, pp. 30-31.

¹⁰ CA Rollo, Annex "F."

¹¹ Id. at 34-35.

¹² Rollo, p. 36.

¹³ CA Rollo, p. 9

¹⁴ Rollo,p.22.

¹⁵ Id. at 20.

¹⁶ 243 SCRA 200 (1995).

¹⁷ 248 SCRA 532 (1995).

¹⁸ Id. at 6.

¹⁹ Rollo, p. 9

²⁰ Id. at 7.

²¹ Id.

²² Supra.

²³ Supra.

²⁴ Id. at 10.

²⁵ id.

²⁶ Rollo, p. 20.

²⁷ Industrial Timber Corporation v. NLRC (5th Division), 273 SCRA 200 (1997).

²⁸ ibid.

²⁹ 287 SCRA 420 (1998).

³⁰ J.A.T. General Services, et al. v. NLRC, G.R. No. 148340, January 26, 2004.

³¹ 289 SCRA 667 (1998).

³² Ibid.

G.R. No. 146703 - SUNRISE MANNING AGENCY, INC. v. NATIONAL LABOR RELATIONS COMMISSION, ET AL.

2013-01-15T09:50:40+00:00

G.R. No. 146703 - SUNRISE MANNING AGENCY, INC. v. NATIONAL LABOR RELATIONS COMMISSION, ET AL.

THIRD DIVISION

[G.R. NO. 146703 : November 18, 2004]

SUNRISE MANNING AGENCY, INC., Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION and RUEL ZARASPE, Respondents.

D E C I S I O N

CARPIO MORALES, J.:

From the Court of Appeals Decision of August 4, 2000 and Resolution of January 11, 2001 denying petitioner's Motion for Reconsideration thereof, the present Petition for Review on Certiorari was lodged.

Private respondent Ruel Zaraspe was hired as Chief Cook of petitioner's vessel M.V. "Nikolaos" commencing on December 18, 1995.

On June 22, 1996, private respondent's services were terminated.

By petitioner's claim, private respondent had, from the start of his employment, showed signs of deviant behavior. Mentioned by petitioner as undesirable acts of private respondent involving "insubordination, inefficiency and neglect of duty," and theft, are as follows:

. . . his abrasive character was the subject of conversation as he would figure in near violent confrontations with his fellow workers; that in January 1996, Chief Mate Berdanilo caught him lying in bed in his cabin at lunch time and told him to get up and make himself busy; that in the presence of twenty (20) other seamen, complainant told to mind his own business and locked himself in his cabin; that when the Chief Mate was informed of the incident, Master Captain Dimos told the Chief Mate to give complainant time to adjust to his work environment; that complainant was caught several times drinking beer even in the presence of the officers; that even his work attitude deteriorated; that in February 1996, Chief Engineer Simiriotis caught him roaming around the vessel and chatting when he was supposed to be cooking for the crew; that when the Chief Engineer came closer to ask him if food was ready, complainant smelled of liquor; that instead of answering, complainant threw a roll of toilet paper at the Chief Engineer's face; that it was learned that complainant had just spent hours in the comfort room vomiting because of heavy drinking; that when the Captain talked to complainant about his work attitude, he retorted that he was the victim of all the incidents and it was the others who should be reprimanded; that complainant left the vessel several times without permission in violation of a strictly enforced rule; that when the Master of the vessel asked complainant why there was no bread for breakfast, complainant retorted that he should look in the refrigerator as he did not feel like cooking; that complainant was warned by the Master that anymore insubordination will be dealt with severity; that for several weeks, packs of cigarettes were reported missing and complainant who does the inventory of ship supplies reported that the crew were consuming the missing cigarettes by exceeding their consumption list; that during one inspection, the missing cigarettes were found in complainant's cabinet; that when asked on the spot, complainant merely replied that it was a ploy by someone to discredit him but he would not specify; that the Master started an investigation and it was gathered that complainant was responsible for the pilferage; that the captain told complainant that he did not merely violate the rules but committed a crime and was terminated; that complainant was terminated for cause for violation of company rules and regulations, willful disobedience and insubordination and willful breach of trust; that he was accorded due process of law; and that he is not entitled to the unexpired portion of his contract and his other money claims.¹

Petitioner claims that while it was initially lenient toward private respondent, he subsequently committed intolerable offenses, the last of which was theft, thus compelling the captain of the vessel to terminate his services on June 22, 1996.

Aggrieved by his dismissal, private respondent filed an illegal dismissal case with the National Labor Relations Commission (NLRC). The case was assigned to Labor Arbiter Edgardo M. Madriaga who, by decision of June 4, 1998, found the dismissal legal and accordingly dismissed the complaint.

On appeal by private respondent, the NLRC, by Resolution of December 18, 1998, reversed the Labor Arbiter's decision. Petitioner filed a Motion for Reconsideration which only raised the procedural issue of private respondent's failure to serve it a copy of his memorandum of appeal. This motion was denied by Resolution of June 22, 1999.

Petitioner thereupon filed on August 17, 1999 a petition for certiorari with the Court of Appeals seeking to vacate the above-mentioned resolutions of the NLRC. By Decision of August 4, 2000, the Court of Appeals affirmed the resolutions of the NLRC.

On the procedural issue, the appellate court held that private respondent's failure to furnish petitioner a copy of his memorandum of appeal was not a jurisdictional defect that would bar the appeal as to render the Labor Arbiter's decision final and executory. On the merits, the same court held that petitioner failed to satisfy the burden of proving that private respondent was terminated for a valid cause and in accordance with due process:

As already pointed out by the NLRC, petitioner failed to present sufficient evidence to prove that private respondent committed the imputed acts. Neither an affidavit nor any piece of company record was submitted before the NLRC.

Verily, when there is no showing of a clear, valid, and legal cause for the termination of employment, the law considers the matter as a case of illegal dismissal and the burden is on the employer to prove that the termination was for valid and authorized cause. (Valiant Machinery and Metal Corp. v. National Labor Relations Commission, 252 SCRA 369 [1996])

x x x

To be validly effected, the dismissal must observe the twin requirements of due process - notice and hearing. The employer has the burden of proving that the former has been served with two notices: (1) one to apprise him of the particular acts or omissions for which his dismissal is sought and (2) the other to inform him of his employer's decision to dismiss him. x x x In the case before us, the record is bereft of any showing that formal notice of the charge was given to private respondent prior to his dismissal.²

Petitioner's Motion for Reconsideration of the appellate court's decision was denied by Resolution of January 11, 2001, hence, the present petition.

In seeking the reversal of the challenged Decision and Resolution of the Court of Appeals, petitioner argues that the NLRC resolutions are null and void, (1) the Labor Arbiter's decision having become final and executory because the reglementary period was not stopped by private respondent's appeal owing to his failure to serve a copy of his memorandum of appeal upon petitioner, and (2) they having been rendered in violation of petitioner's right to due process as it was not given the opportunity to refute private respondent's allegations in his memorandum of appeal.

Public and private respondents do not deny that petitioner was not served a copy of private respondent's memorandum of appeal. What is disputed is the legal consequence thereof.

In support of its position that by private respondent's failure to serve a copy of his memorandum upon petitioner, the running of the reglementary period to appeal was not tolled, petitioner cites Section 3(a), Rule VI of the NLRC Rules of Procedure, viz:

Requisites for Perfection of Appeal. - (a) The appeal shall be filed within the reglementary period as provided in Section 1 of this Rule; shall be under oath with proof of payment of the required appeal fee and the posting of a cash or surety bond as provided in Section 5 of this Rule; shall be accompanied by a memorandum of appeal xxx and proof of service on the party of such appeal.

A mere notice of appeal without complying with the other requisites aforestated shall not stop the running of the period of perfecting an appeal. (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

Petitioner's position does not lie. It has long been settled that mere failure to serve a copy of a memorandum of appeal upon the opposing party does not bar the NLRC from entertaining an appeal. In Pagdonsalan v. NLRC,³ this Court held:

The first issue raised herein is not of first impression. In J.D. Magpayo Customs Brokerage v. NLRC (118 SCRA 646), this Court ruled that the appellant's failure to furnish copy of his memorandum appeal to respondent is not a jurisdictional defect, and does not justify dismissal of the appeal. Thus,

The failure to give a copy of the appeal to the adverse party was a mere formal lapse, an excusable neglect. Time and again We have acted on petitions to review decisions of the Court of Appeals even in the absence of proof of service of a copy thereof to the Court of Appeals as required by Section 1 of Rule 45, Rules of Court. We act on the petitions and simply require the petitioners to comply with the rule.

Jurisprudential support is not absent to sustain Our action. In Estrada v. National Labor Relations Commission, G.R. 57735, March 19, 1982, 112 SCRA 688, this Court set aside the order of the NLRC which dismissed an appeal on the sole ground that the appellant had not furnished the appellee a memorandum of appeal contrary to the requirements of Article 223 of the New Labor Code and Section 9, Rule XIII of its Implementing Rules and Regulations.

The same rule was reiterated in Carnation Phil. Employees Labor Union-FFW v. NLRC (G.R. No. 64397, promulgated October 11, 1983). (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

As for petitioner's claim that the NLRC resolutions are void for having been rendered in violation of its right to due process, petitioner cites the case of Philippine National Construction Corporation v. NLRC⁴ wherein this Court held:

x x x It appears that petitioner was not a participant in the appeal interposed by private respondents. Apparently, such non-participation was never petitioner's choice as the record is bereft of any indication that petitioner was ever informed or notified of private respondents' appeal. There is no proof that petitioner was furnished a copy of private respondents' Memorandum of Appeal, nor was it required to comment thereon. No reference is made whatsoever in the NLRC Decision to any argument, position or comment raised by petitioner in response to the appeal. That petitioner was denied due process is well-substantiated." (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

This case is not analogous to the one at bar, however. For even if petitioner was not furnished a copy of private respondent's memorandum of appeal, it eventually became a participant in the proceedings on appeal when it filed a motion for reconsideration of the NLRC Decision, unlike the petitioner in Philippine National Construction.

More in point is the case of Estrada v. NLRC⁵ (cited in Pagdonsalan) where the respondent-employer, who was likewise not furnished a copy of the memorandum of appeal, filed a motion for reconsideration of the NLRC resolution. In ruling out denial of due process, this Court held:

x x x

Neither can private respondent validly complain that it has been denied its right to due process by having been allegedly deprived of the opportunity to answer petitioner's appeal on account of the latter's failure to furnish the former with a copy of his memorandum of appeal. Since the entire record of the case on appeal is open for review by the NLRC, the absence of an answer or opposition to the appeal would not really have a significant bearing on the adjudication of the case, as would otherwise perhaps constitute a denial of private respondent's right to due process. Besides, private respondent had already the opportunity to answer petitioner's appeal when he filed a motion for reconsideration of the earlier decision of the NLRC. Significantly, however, said respondent never touched on the merits of the case in his aforementioned motion for reconsideration. Instead, it relied solely on technicality to oppose petitioner's appeal which thereby reasonably creates the impression that its case is weak as in fact it is. (Emphasis and underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

Considering that the entire record of a case on appeal is open for review by the NLRC, and that herein petitioner was afforded a fair opportunity to be heard when it filed a motion for reconsideration after receiving a copy of the first NLRC resolution, it cannot validly claim that it was deprived of due process. Petitioner's assertion that its motion solely questioned private respondent's failure to serve a copy of his memorandum⁶ only strengthens the pararellism between the present case and Estrada and further undermines its position. In limiting its motion for reconsideration to procedural issues, petitioner effectively waived its opportunity to be heard on the merits of the case. It was thus not deprived of its right to due process which this Court in Paat v. Court of Appeals⁷ discoursed on as follows:

x x x Due process does not necessarily mean or require a hearing, but simply an opportunity or right to be heard. One may be heard, not solely by verbal presentation but also, and perhaps many times more creditably and practicable than oral argument, through pleadings. In administrative proceedings moreover, technical rules of procedure and evidence are not strictly applied; administrative process cannot be fully equated with due process in its strict judicial sense. Indeed, deprivation of due process cannot be successfully invoked where a party was given the chance to be heard on his motion for reconsideration, as in the instant case, when private respondents were undisputedly given the opportunity to present their side when they filed a letter of reconsideration dated June 28, 1989 which was, however, denied in an order of July 12, 1989 of Executive Director Baggayan. In Navarro III v. Damasco, we ruled that:

The essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek a reconsideration of the action or ruling complained of. A formal or trial type hearing is not at all times and in all instances essential. The requirements are satisfied when the parties are afforded fair and reasonable opportunity to explain their side of the controversy at hand. What is frowned upon is the absolute lack of notice or hearing. (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

WHEREFORE, the petition is DENIED.

Costs against petitioner.

SO ORDERED.

Panganiban, (Chairman), and Garcia, JJ., concur.
Sandoval-Gutierrez, J., no part. Chair of the CA Div. which rendered the assailed Decision.
Corona, J., on leave.

Endnotes:

¹ Rollo at 37-39.

² Id. at 42-43.

³ 127 SCRA 463 (1984).

⁴ 292 SCRA 266 (1998).

⁵ 112 SCRA 688 (1982).

⁶ Rollo at 190.

⁷ 266 SCRA 167 (1997).

G.R. No. 146717 - TRANSFIELD PHILIPPINES, INC. v. LUZON HYDRO CORPORATION, ET AL.

2013-01-15T09:50:40+00:00

G.R. No. 146717 - TRANSFIELD PHILIPPINES, INC. v. LUZON HYDRO CORPORATION, ET AL.

SECOND DIVISION

[G.R. NO. 146717 : November 22, 2004]

TRANSFIELD PHILIPPINES, INC., Petitioner, v. LUZON HYDRO CORPORATION, AUSTRALIA and NEW ZEALAND BANKING GROUP LIMITED and SECURITY BANK CORPORATION, Respondents.

D E C I S I O N

TINGA, J.:

Subject of this case is the letter of credit which has evolved as the ubiquitous and most important device in international trade. A creation of commerce and businessmen, the letter of credit is also unique in the number of parties involved and its supranational character.

Petitioner has appealed from the Decision¹ of the Court of Appeals in CA-G.R. SP No. 61901 entitled "Transfield Philippines, Inc. v. Hon. Oscar Pimentel, et al.," promulgated on 31 January 2001.²

On 26 March 1997, petitioner and respondent Luzon Hydro Corporation (hereinafter, LHC) entered into a Turnkey Contract³ whereby petitioner, as Turnkey Contractor, undertook to construct, on a turnkey basis, a seventy (70)-Megawatt hydro-electric power station at the Bakun River in the provinces of Benguet and Ilocos Sur (hereinafter, the Project). Petitioner was given the sole responsibility for the design, construction, commissioning, testing and completion of the Project.⁴

The Turnkey Contract provides that: (1) the target completion date of the Project shall be on 1 June 2000, or such later date as may be agreed upon between petitioner and respondent LHC or otherwise determined in accordance with the Turnkey Contract; and (2) petitioner is entitled to claim extensions of time (EOT) for reasons enumerated in the Turnkey Contract, among which are variations, force majeure, and delays caused by LHC itself.⁵ Further, in case of dispute, the parties are bound to settle their differences through mediation, conciliation and such other means enumerated under Clause 20.3 of the Turnkey Contract.⁶

To secure performance of petitioner's obligation on or before the target completion date, or such time for completion as may be determined by the parties' agreement, petitioner opened in favor of LHC two (2) standby letters of credit both dated 20 March 2000 (hereinafter referred to as "the Securities"), to wit: Standby Letter of Credit No. E001126/8400 with the local branch of respondent Australia and New Zealand Banking Group Limited (ANZ Bank)⁷ and Standby Letter of Credit No. IBDIDSB-00/4 with respondent Security Bank Corporation (SBC)⁸ each in the amount of US$8,988,907.00.⁹

In the course of the construction of the project, petitioner sought various EOT to complete the Project. The extensions were requested allegedly due to several factors which prevented the completion of the Project on target date, such as force majeure occasioned by typhoon Zeb, barricades and demonstrations. LHC denied the requests, however. This gave rise to a series of legal actions between the parties which culminated in the instant petition.

The first of the actions was a Request for Arbitration which LHC filed before the Construction Industry Arbitration Commission (CIAC) on 1 June 1999.¹⁰ This was followed by another Request for Arbitration, this time filed by petitioner before the International Chamber of Commerce (ICC)¹¹ on 3 November 2000. In both arbitration proceedings, the common issues presented were: [1) whether typhoon Zeb and any of its associated events constituted force majeure to justify the extension of time sought by petitioner; and [2) whether LHC had the right to terminate the Turnkey Contract for failure of petitioner to complete the Project on target date.

Meanwhile, foreseeing that LHC would call on the Securities pursuant to the pertinent provisions of the Turnkey Contract,¹² petitioner in two separate letters¹³ both dated 10 August 2000 advised respondent banks of the arbitration proceedings already pending before the CIAC and ICC in connection with its alleged default in the performance of its obligations. Asserting that LHC had no right to call on the Securities until the resolution of disputes before the arbitral tribunals, petitioner warned respondent banks that any transfer, release, or disposition of the Securities in favor of LHC or any person claiming under LHC would constrain it to hold respondent banks liable for liquidated damages.

As petitioner had anticipated, on 27 June 2000, LHC sent notice to petitioner that pursuant to Clause 8.2¹⁴ of the Turnkey Contract, it failed to comply with its obligation to complete the Project. Despite the letters of petitioner, however, both banks informed petitioner that they would pay on the Securities if and when LHC calls on them.¹⁵

LHC asserted that additional extension of time would not be warranted; accordingly it declared petitioner in default/delay in the performance of its obligations under the Turnkey Contract and demanded from petitioner the payment of US$75,000.00 for each day of delay beginning 28 June 2000 until actual completion of the Project pursuant to Clause 8.7.1 of the Turnkey Contract. At the same time, LHC served notice that it would call on the securities for the payment of liquidated damages for the delay.¹⁶

On 5 November 2000, petitioner as plaintiff filed a Complaint for Injunction, with prayer for temporary restraining order and writ of preliminary injunction, against herein respondents as defendants before the Regional Trial Court (RTC) of Makati.¹⁷ Petitioner sought to restrain respondent LHC from calling on the Securities and respondent banks from transferring, paying on, or in any manner disposing of the Securities or any renewals or substitutes thereof. The RTC issued a seventy-two (72)-hour temporary restraining order on the same day. The case was docketed as Civil Case No. 00-1312 and raffled to Branch 148 of the RTC of Makati.

After appropriate proceedings, the trial court issued an Order on 9 November 2000, extending the temporary restraining order for a period of seventeen (17) days or until 26 November 2000.¹⁸

The RTC, in its Order¹⁹ dated 24 November 2000, denied petitioner's application for a writ of preliminary injunction. It ruled that petitioner had no legal right and suffered no irreparable injury to justify the issuance of the writ. Employing the principle of "independent contract" in letters of credit, the trial court ruled that LHC should be allowed to draw on the Securities for liquidated damages. It debunked petitioner's contention that the principle of "independent contract" could be invoked only by respondent banks since according to it respondent LHC is the ultimate beneficiary of the Securities. The trial court further ruled that the banks were mere custodians of the funds and as such they were obligated to transfer the same to the beneficiary for as long as the latter could submit the required certification of its claims.

Dissatisfied with the trial court's denial of its application for a writ of preliminary injunction, petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65, with prayer for the issuance of a temporary restraining order and writ of preliminary injunction.²⁰ Petitioner submitted to the appellate court that LHC's call on the Securities was premature considering that the issue of its default had not yet been resolved with finality by the CIAC and/or the ICC. It asserted that until the fact of delay could be established, LHC had no right to draw on the Securities for liquidated damages.

Refuting petitioner's contentions, LHC claimed that petitioner had no right to restrain its call on and use of the Securities as payment for liquidated damages. It averred that the Securities are independent of the main contract between them as shown on the face of the two Standby Letters of Credit which both provide that the banks have no responsibility to investigate the authenticity or accuracy of the certificates or the declarant's capacity or entitlement to so certify.

In its Resolution dated 28 November 2000, the Court of Appeals issued a temporary restraining order, enjoining LHC from calling on the Securities or any renewals or substitutes thereof and ordering respondent banks to cease and desist from transferring, paying or in any manner disposing of the Securities.

However, the appellate court failed to act on the application for preliminary injunction until the temporary restraining order expired on 27 January 2001. Immediately thereafter, representatives of LHC trooped to ANZ Bank and withdrew the total amount of US$4,950,000.00, thereby reducing the balance in ANZ Bank to US$1,852,814.00.

On 2 February 2001, the appellate court dismissed the petition for certiorari . The appellate court expressed conformity with the trial court's decision that LHC could call on the Securities pursuant to the first principle in credit law that the credit itself is independent of the underlying transaction and that as long as the beneficiary complied with the credit, it was of no moment that he had not complied with the underlying contract. Further, the appellate court held that even assuming that the trial court's denial of petitioner's application for a writ of preliminary injunction was erroneous, it constituted only an error of judgment which is not correctible by certiorari , unlike error of jurisdiction.

Undaunted, petitioner filed the instant Petition for Review raising the following issues for resolution:

WHETHER THE "INDEPENDENCE PRINCIPLE" ON LETTERS OF CREDIT MAY BE INVOKED BY A BENEFICIARY THEREOF WHERE THE BENEFICIARY'S CALL THEREON IS WRONGFUL OR FRAUDULENT.

WHETHER LHC HAS THE RIGHT TO CALL AND DRAW ON THE SECURITIES BEFORE THE RESOLUTION OF PETITIONER'S AND LHC'S DISPUTES BY THE APPROPRIATE TRIBUNAL.

WHETHER ANZ BANK AND SECURITY BANK ARE JUSTIFIED IN RELEASING THE AMOUNTS DUE UNDER THE SECURITIES DESPITE BEING NOTIFIED THAT LHC'S CALL THEREON IS WRONGFUL.

WHETHER OR NOT PETITIONER WILL SUFFER GRAVE AND IRREPARABLE DAMAGE IN THE EVENT THAT:

A. LHC IS ALLOWED TO CALL AND DRAW ON, AND ANZ BANK AND SECURITY BANK ARE ALLOWED TO RELEASE, THE REMAINING BALANCE OF THE SECURITIES PRIOR TO THE RESOLUTION OF THE DISPUTES BETWEEN PETITIONER AND LHC.

B. LHC DOES NOT RETURN THE AMOUNTS IT HAD WRONGFULLY DRAWN FROM THE SECURITIES.²¹

Petitioner contends that the courts below improperly relied on the "independence principle" on letters of credit when this case falls squarely within the "fraud exception rule." Respondent LHC deliberately misrepresented the supposed existence of delay despite its knowledge that the issue was still pending arbitration, petitioner continues.

Petitioner asserts that LHC should be ordered to return the proceeds of the Securities pursuant to the principle against unjust enrichment and that, under the premises, injunction was the appropriate remedy obtainable from the competent local courts.

On 25 August 2003, petitioner filed a Supplement to the Petition²² and Supplemental Memorandum,²³ alleging that in the course of the proceedings in the ICC Arbitration, a number of documentary and testimonial evidence came out through the use of different modes of discovery available in the ICC Arbitration. It contends that after the filing of the petition facts and admissions were discovered which demonstrate that LHC knowingly misrepresented that petitioner had incurred delays' notwithstanding its knowledge and admission that delays were excused under the Turnkey Contract to be able to draw against the Securities. Reiterating that fraud constitutes an exception to the independence principle, petitioner urges that this warrants a ruling from this Court that the call on the Securities was wrongful, as well as contrary to law and basic principles of equity. It avers that it would suffer grave irreparable damage if LHC would be allowed to use the proceeds of the Securities and not ordered to return the amounts it had wrongfully drawn thereon.

In its Manifestation dated 8 September 2003,²⁴ LHC contends that the supplemental pleadings filed by petitioner present erroneous and misleading information which would change petitioner's theory on appeal.

In yet another Manifestation dated 12 April 2004,²⁵ petitioner alleges that on 18 February 2004, the ICC handed down its Third Partial Award, declaring that LHC wrongfully drew upon the Securities and that petitioner was entitled to the return of the sums wrongfully taken by LHC for liquidated damages.

LHC filed a Counter-Manifestation dated 29 June 2004,²⁶ stating that petitioner's Manifestation dated 12 April 2004 enlarges the scope of its Petition for Review of the 31 January 2001 Decision of the Court of Appeals. LHC notes that the Petition for Review essentially dealt only with the issue of whether injunction could issue to restrain the beneficiary of an irrevocable letter of credit from drawing thereon. It adds that petitioner has filed two other proceedings, to wit: (1) ICC Case No. 11264/TE/MW, entitled "Transfield Philippines Inc. v. Luzon Hydro Corporation," in which the parties made claims and counterclaims arising from petitioner's performance/misperformance of its obligations as contractor for LHC; and (2) Civil Case No. 04-332, entitled "Transfield Philippines, Inc. v. Luzon Hydro Corporation" before Branch 56 of the RTC of Makati, which is an action to enforce and obtain execution of the ICC's partial award mentioned in petitioner's Manifestation of 12 April 2004.

In its Comment to petitioner's Motion for Leave to File Addendum to Petitioner's Memorandum, LHC stresses that the question of whether the funds it drew on the subject letters of credit should be returned is outside the issue in this appeal. At any rate, LHC adds that the action to enforce the ICC's partial award is now fully within the Makati RTC's jurisdiction in Civil Case No. 04-332. LHC asserts that petitioner is engaged in forum-shopping by keeping this appeal and at the same time seeking the suit for enforcement of the arbitral award before the Makati court.

Respondent SBC in its Memorandum, dated 10 March 2003²⁷ contends that the Court of Appeals correctly dismissed the petition for certiorari . Invoking the independence principle, SBC argues that it was under no obligation to look into the validity or accuracy of the certification submitted by respondent LHC or into the latter's capacity or entitlement to so certify. It adds that the act sought to be enjoined by petitioner was already fait accompli and the present petition would no longer serve any remedial purpose.

In a similar fashion, respondent ANZ Bank in its Memorandum dated 13 March 2003²⁸ posits that its actions could not be regarded as unjustified in view of the prevailing independence principle under which it had no obligation to ascertain the truth of LHC's allegations that petitioner defaulted in its obligations. Moreover, it points out that since the Standby Letter of Credit No. E001126/8400 had been fully drawn, petitioner's prayer for preliminary injunction had been rendered moot and academic.

At the core of the present controversy is the applicability of the "independence principle" and "fraud exception rule" in letters of credit. Thus, a discussion of the nature and use of letters of credit, also referred to simply as "credits," would provide a better perspective of the case.

The letter of credit evolved as a mercantile specialty, and the only way to understand all its facets is to recognize that it is an entity unto itself. The relationship between the beneficiary and the issuer of a letter of credit is not strictly contractual, because both privity and a meeting of the minds are lacking, yet strict compliance with its terms is an enforceable right. Nor is it a third-party beneficiary contract, because the issuer must honor drafts drawn against a letter regardless of problems subsequently arising in the underlying contract. Since the bank's customer cannot draw on the letter, it does not function as an assignment by the customer to the beneficiary. Nor, if properly used, is it a contract of suretyship or guarantee, because it entails a primary liability following a default. Finally, it is not in itself a negotiable instrument, because it is not payable to order or bearer and is generally conditional, yet the draft presented under it is often negotiable.²⁹

In commercial transactions, a letter of credit is a financial device developed by merchants as a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying.³⁰ The use of credits in commercial transactions serves to reduce the risk of nonpayment of the purchase price under the contract for the sale of goods. However, credits are also used in non-sale settings where they serve to reduce the risk of nonperformance. Generally, credits in the non-sale settings have come to be known as standby credits.³¹

There are three significant differences between commercial and standby credits. First, commercial credits involve the payment of money under a contract of sale. Such credits become payable upon the presentation by the seller-beneficiary of documents that show he has taken affirmative steps to comply with the sales agreement. In the standby type, the credit is payable upon certification of a party's nonperformance of the agreement. The documents that accompany the beneficiary's draft tend to show that the applicant has not performed. The beneficiary of a commercial credit must demonstrate by documents that he has performed his contract. The beneficiary of the standby credit must certify that his obligor has not performed the contract.³²

By definition, a letter of credit is a written instrument whereby the writer requests or authorizes the addressee to pay money or deliver goods to a third person and assumes responsibility for payment of debt therefor to the addressee.³³ A letter of credit, however, changes its nature as different transactions occur and if carried through to completion ends up as a binding contract between the issuing and honoring banks without any regard or relation to the underlying contract or disputes between the parties thereto.³⁴

Since letters of credit have gained general acceptability in international trade transactions, the ICC has published from time to time updates on the Uniform Customs and Practice (UCP) for Documentary Credits to standardize practices in the letter of credit area. The vast majority of letters of credit incorporate the UCP.³⁵ First published in 1933, the UCP for Documentary Credits has undergone several revisions, the latest of which was in 1993.³⁶

In Bank of the Philippine Islands v. De Reny Fabric Industries, Inc.,³⁷ this Court ruled that the observance of the UCP is justified by Article 2 of the Code of Commerce which provides that in the absence of any particular provision in the Code of Commerce, commercial transactions shall be governed by usages and customs generally observed. More recently, in Bank of America, NT & SA v. Court of Appeals,³⁸ this Court ruled that there being no specific provisions which govern the legal complexities arising from transactions involving letters of credit, not only between or among banks themselves but also between banks and the seller or the buyer, as the case may be, the applicability of the UCP is undeniable.

Article 3 of the UCP provides that credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s), even if any reference whatsoever to such contract(s) is included in the credit. Consequently, the undertaking of a bank to pay, accept and pay draft(s) or negotiate and/or fulfill any other obligation under the credit is not subject to claims or defenses by the applicant resulting from his relationships with the issuing bank or the beneficiary. A beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the applicant and the issuing bank.

Thus, the engagement of the issuing bank is to pay the seller or beneficiary of the credit once the draft and the required documents are presented to it. The so-called "independence principle" assures the seller or the beneficiary of prompt payment independent of any breach of the main contract and precludes the issuing bank from determining whether the main contract is actually accomplished or not. Under this principle, banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the general and/or particular conditions stipulated in the documents or superimposed thereon, nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any documents, or for the good faith or acts and/or omissions, solvency, performance or standing of the consignor, the carriers, or the insurers of the goods, or any other person whomsoever.³⁹

The independent nature of the letter of credit may be: (a) independence in toto where the credit is independent from the justification aspect and is a separate obligation from the underlying agreement like for instance a typical standby; or (b) independence may be only as to the justification aspect like in a commercial letter of credit or repayment standby, which is identical with the same obligations under the underlying agreement. In both cases the payment may be enjoined if in the light of the purpose of the credit the payment of the credit would constitute fraudulent abuse of the credit.⁴⁰

Can the beneficiary invoke the independence principle?chanroblesvirtualawlibrary

Petitioner insists that the independence principle does not apply to the instant case and assuming it is so, it is a defense available only to respondent banks. LHC, on the other hand, contends that it would be contrary to common sense to deny the benefit of an independent contract to the very party for whom the benefit is intended. As beneficiary of the letter of credit, LHC asserts it is entitled to invoke the principle.

As discussed above, in a letter of credit transaction, such as in this case, where the credit is stipulated as irrevocable, there is a definite undertaking by the issuing bank to pay the beneficiary provided that the stipulated documents are presented and the conditions of the credit are complied with.⁴¹ Precisely, the independence principle liberates the issuing bank from the duty of ascertaining compliance by the parties in the main contract. As the principle's nomenclature clearly suggests, the obligation under the letter of credit is independent of the related and originating contract. In brief, the letter of credit is separate and distinct from the underlying transaction.

Given the nature of letters of credit, petitioner's argument that it is only the issuing bank that may invoke the independence principle on letters of credit does not impress this Court. To say that the independence principle may only be invoked by the issuing banks would render nugatory the purpose for which the letters of credit are used in commercial transactions. As it is, the independence doctrine works to the benefit of both the issuing bank and the beneficiary.

Letters of credit are employed by the parties desiring to enter into commercial transactions, not for the benefit of the issuing bank but mainly for the benefit of the parties to the original transactions. With the letter of credit from the issuing bank, the party who applied for and obtained it may confidently present the letter of credit to the beneficiary as a security to convince the beneficiary to enter into the business transaction. On the other hand, the other party to the business transaction, i.e., the beneficiary of the letter of credit, can be rest assured of being empowered to call on the letter of credit as a security in case the commercial transaction does not push through, or the applicant fails to perform his part of the transaction. It is for this reason that the party who is entitled to the proceeds of the letter of credit is appropriately called "beneficiary."

Petitioner's argument that any dispute must first be resolved by the parties, whether through negotiations or arbitration, before the beneficiary is entitled to call on the letter of credit in essence would convert the letter of credit into a mere guarantee. Jurisprudence has laid down a clear distinction between a letter of credit and a guarantee in that the settlement of a dispute between the parties is not a pre-requisite for the release of funds under a letter of credit. In other words, the argument is incompatible with the very nature of the letter of credit. If a letter of credit is drawable only after settlement of the dispute on the contract entered into by the applicant and the beneficiary, there would be no practical and beneficial use for letters of credit in commercial transactions.

Professor John F. Dolan, the noted authority on letters of credit, sheds more light on the issue:

The standby credit is an attractive commercial device for many of the same reasons that commercial credits are attractive. Essentially, these credits are inexpensive and efficient. Often they replace surety contracts, which tend to generate higher costs than credits do and are usually triggered by a factual determination rather than by the examination of documents.

Because parties and courts should not confuse the different functions of the surety contract on the one hand and the standby credit on the other, the distinction between surety contracts and credits merits some reflection. The two commercial devices share a common purpose. Both ensure against the obligor's nonperformance. They function, however, in distinctly different ways.

Traditionally, upon the obligor's default, the surety undertakes to complete the obligor's performance, usually by hiring someone to complete that performance. Surety contracts, then, often involve costs of determining whether the obligor defaulted (a matter over which the surety and the beneficiary often litigate) plus the cost of performance. The benefit of the surety contract to the beneficiary is obvious. He knows that the surety, often an insurance company, is a strong financial institution that will perform if the obligor does not. The beneficiary also should understand that such performance must await the sometimes lengthy and costly determination that the obligor has defaulted. In addition, the surety's performance takes time.

The standby credit has different expectations. He reasonably expects that he will receive cash in the event of nonperformance, that he will receive it promptly, and that he will receive it before any litigation with the obligor (the applicant) over the nature of the applicant's performance takes place. The standby credit has this opposite effect of the surety contract: it reverses the financial burden of parties during litigation.

In the surety contract setting, there is no duty to indemnify the beneficiary until the beneficiary establishes the fact of the obligor's performance. The beneficiary may have to establish that fact in litigation. During the litigation, the surety holds the money and the beneficiary bears most of the cost of delay in performance.

In the standby credit case, however, the beneficiary avoids that litigation burden and receives his money promptly upon presentation of the required documents. It may be that the applicant has, in fact, performed and that the beneficiary's presentation of those documents is not rightful. In that case, the applicant may sue the beneficiary in tort, in contract, or in breach of warranty; but, during the litigation to determine whether the applicant has in fact breached the obligation to perform, the beneficiary, not the applicant, holds the money. Parties that use a standby credit and courts construing such a credit should understand this allocation of burdens. There is a tendency in some quarters to overlook this distinction between surety contracts and standby credits and to reallocate burdens by permitting the obligor or the issuer to litigate the performance question before payment to the beneficiary.⁴²

While it is the bank which is bound to honor the credit, it is the beneficiary who has the right to ask the bank to honor the credit by allowing him to draw thereon. The situation itself emasculates petitioner's posture that LHC cannot invoke the independence principle and highlights its puerility, more so in this case where the banks concerned were impleaded as parties by petitioner itself.

Respondent banks had squarely raised the independence principle to justify their releases of the amounts due under the Securities. Owing to the nature and purpose of the standby letters of credit, this Court rules that the respondent banks were left with little or no alternative but to honor the credit and both of them in fact submitted that it was "ministerial" for them to honor the call for payment.⁴³

Furthermore, LHC has a right rooted in the Contract to call on the Securities. The relevant provisions of the Contract read, thus:

4.2.1. In order to secure the performance of its obligations under this Contract, the Contractor at its cost shall on the Commencement Date provide security to the Employer in the form of two irrevocable and confirmed standby letters of credit (the "Securities"), each in the amount of US$8,988,907, issued and confirmed by banks or financial institutions acceptable to the Employer. Each of the Securities must be in form and substance acceptable to the Employer and may be provided on an annually renewable basis.⁴⁴

8.7.1 If the Contractor fails to comply with Clause 8.2, the Contractor shall pay to the Employer by way of liquidated damages ("Liquidated Damages for Delay") the amount of US$75,000 for each and every day or part of a day that shall elapse between the Target Completion Date and the Completion Date, provided that Liquidated Damages for Delay payable by the Contractor shall in the aggregate not exceed 20% of the Contract Price. The Contractor shall pay Liquidated Damages for Delay for each day of the delay on the following day without need of demand from the Employer.

8.7.2 The Employer may, without prejudice to any other method of recovery, deduct the amount of such damages from any monies due, or to become due to the Contractor and/or by drawing on the Security."⁴⁵

A contract once perfected, binds the parties not only to the fulfillment of what has been expressly stipulated but also to all the consequences which according to their nature, may be in keeping with good faith, usage, and law.⁴⁶ A careful perusal of the Turnkey Contract reveals the intention of the parties to make the Securities answerable for the liquidated damages occasioned by any delay on the part of petitioner. The call upon the Securities, while not an exclusive remedy on the part of LHC, is certainly an alternative recourse available to it upon the happening of the contingency for which the Securities have been proffered. Thus, even without the use of the "independence principle," the Turnkey Contract itself bestows upon LHC the right to call on the Securities in the event of default.

Next, petitioner invokes the "fraud exception" principle. It avers that LHC's call on the Securities is wrongful because it fraudulently misrepresented to ANZ Bank and SBC that there is already a breach in the Turnkey Contract knowing fully well that this is yet to be determined by the arbitral tribunals. It asserts that the "fraud exception" exists when the beneficiary, for the purpose of drawing on the credit, fraudulently presents to the confirming bank, documents that contain, expressly or by implication, material representations of fact that to his knowledge are untrue. In such a situation, petitioner insists, injunction is recognized as a remedy available to it.

Citing Dolan's treatise on letters of credit, petitioner argues that the independence principle is not without limits and it is important to fashion those limits in light of the principle's purpose, which is to serve the commercial function of the credit. If it does not serve those functions, application of the principle is not warranted, and the commonlaw principles of contract should apply.

It is worthy of note that the propriety of LHC's call on the Securities is largely intertwined with the fact of default which is the self-same issue pending resolution before the arbitral tribunals. To be able to declare the call on the Securities wrongful or fraudulent, it is imperative to resolve, among others, whether petitioner was in fact guilty of delay in the performance of its obligation. Unfortunately for petitioner, this Court is not called upon to rule upon the issue of default'such issue having been submitted by the parties to the jurisdiction of the arbitral tribunals pursuant to the terms embodied in their agreement.⁴⁷

Would injunction then be the proper remedy to restrain the alleged wrongful draws on the Securities?chanroblesvirtualawlibrary

Most writers agree that fraud is an exception to the independence principle. Professor Dolan opines that the untruthfulness of a certificate accompanying a demand for payment under a standby credit may qualify as fraud sufficient to support an injunction against payment.⁴⁸ The remedy for fraudulent abuse is an injunction. However, injunction should not be granted unless: (a) there is clear proof of fraud; (b) the fraud constitutes fraudulent abuse of the independent purpose of the letter of credit and not only fraud under the main agreement; and (c) irreparable injury might follow if injunction is not granted or the recovery of damages would be seriously damaged.⁴⁹

In its complaint for injunction before the trial court, petitioner alleged that it is entitled to a total extension of two hundred fifty-three (253) days which would move the target completion date. It argued that if its claims for extension would be found meritorious by the ICC, then LHC would not be entitled to any liquidated damages.⁵⁰

Generally, injunction is a preservative remedy for the protection of one's substantive right or interest; it is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. The issuance of the writ of preliminary injunction as an ancillary or preventive remedy to secure the rights of a party in a pending case is entirely within the discretion of the court taking cognizance of the case, the only limitation being that this discretion should be exercised based upon the grounds and in the manner provided by law.⁵¹

Before a writ of preliminary injunction may be issued, there must be a clear showing by the complaint that there exists a right to be protected and that the acts against which the writ is to be directed are violative of the said right.⁵² It must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious damage.⁵³ Moreover, an injunctive remedy may only be resorted to when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation.⁵⁴

In the instant case, petitioner failed to show that it has a clear and unmistakable right to restrain LHC's call on the Securities which would justify the issuance of preliminary injunction. By petitioner's own admission, the right of LHC to call on the Securities was contractually rooted and subject to the express stipulations in the Turnkey Contract.⁵⁵ Indeed, the Turnkey Contract is plain and unequivocal in that it conferred upon LHC the right to draw upon the Securities in case of default, as provided in Clause 4.2.5, in relation to Clause 8.7.2, thus:

4.2.5 The Employer shall give the Contractor seven days' notice of calling upon any of the Securities, stating the nature of the default for which the claim on any of the Securities is to be made, provided that no notice will be required if the Employer calls upon any of the Securities for the payment of Liquidated Damages for Delay or for failure by the Contractor to renew or extend the Securities within 14 days of their expiration in accordance with Clause 4.2.2.⁵⁶

8.7.2 The Employer may, without prejudice to any other method of recovery, deduct the amount of such damages from any monies due, or to become due, to the Contractor and/or by drawing on the Security.⁵⁷

The pendency of the arbitration proceedings would not per se make LHC's draws on the Securities wrongful or fraudulent for there was nothing in the Contract which would indicate that the parties intended that all disputes regarding delay should first be settled through arbitration before LHC would be allowed to call upon the Securities. It is therefore premature and absurd to conclude that the draws on the Securities were outright fraudulent given the fact that the ICC and CIAC have not ruled with finality on the existence of default.

Nowhere in its complaint before the trial court or in its pleadings filed before the appellate court, did petitioner invoke the fraud exception rule as a ground to justify the issuance of an injunction.⁵⁸ What petitioner did assert before the courts below was the fact that LHC's draws on the Securities would be premature and without basis in view of the pending disputes between them. Petitioner should not be allowed in this instance to bring into play the fraud exception rule to sustain its claim for the issuance of an injunctive relief. Matters, theories or arguments not brought out in the proceedings below will ordinarily not be considered by a reviewing court as they cannot be raised for the first time on appeal.⁵⁹ The lower courts could thus not be faulted for not applying the fraud exception rule not only because the existence of fraud was fundamentally interwoven with the issue of default still pending before the arbitral tribunals, but more so, because petitioner never raised it as an issue in its pleadings filed in the courts below. At any rate, petitioner utterly failed to show that it had a clear and unmistakable right to prevent LHC's call upon the Securities.

Of course, prudence should have impelled LHC to await resolution of the pending issues before the arbitral tribunals prior to taking action to enforce the Securities. But, as earlier stated, the Turnkey Contract did not require LHC to do so and, therefore, it was merely enforcing its rights in accordance with the tenor thereof. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.⁶⁰ More importantly, pursuant to the principle of autonomy of contracts embodied in Article 1306 of the Civil Code,⁶¹ petitioner could have incorporated in its Contract with LHC, a proviso that only the final determination by the arbitral tribunals that default had occurred would justify the enforcement of the Securities. However, the fact is petitioner did not do so; hence, it would have to live with its inaction.

With respect to the issue of whether the respondent banks were justified in releasing the amounts due under the Securities, this Court reiterates that pursuant to the independence principle the banks were under no obligation to determine the veracity of LHC's certification that default has occurred. Neither were they bound by petitioner's declaration that LHC's call thereon was wrongful. To repeat, respondent banks' undertaking was simply to pay once the required documents are presented by the beneficiary.

At any rate, should petitioner finally prove in the pending arbitration proceedings that LHC's draws upon the Securities were wrongful due to the non-existence of the fact of default, its right to seek indemnification for damages it suffered would not normally be foreclosed pursuant to general principles of law.

Moreover, in a Manifestation,⁶² dated 30 March 2001, LHC informed this Court that the subject letters of credit had been fully drawn. This fact alone would have been sufficient reason to dismiss the instant petition.

Settled is the rule that injunction would not lie where the acts sought to be enjoined have already become fait accompli or an accomplished or consummated act.⁶³ In Ticzon v. Video Post Manila, Inc.⁶⁴ this Court ruled that where the period within which the former employees were prohibited from engaging in or working for an enterprise that competed with their former employer the very purpose of the preliminary injunction 'has expired, any declaration upholding the propriety of the writ would be entirely useless as there would be no actual case or controversy between the parties insofar as the preliminary injunction is concerned.

In the instant case, the consummation of the act sought to be restrained had rendered the instant petition moot for any declaration by this Court as to propriety or impropriety of the non-issuance of injunctive relief could have no practical effect on the existing controversy.⁶⁵ The other issues raised by petitioner particularly with respect to its right to recover the amounts wrongfully drawn on the Securities, according to it, could properly be threshed out in a separate proceeding.

One final point. LHC has charged petitioner of forum-shopping. It raised the charge on two occasions. First, in its Counter-Manifestation dated 29 June 2004⁶⁶ LHC alleges that petitioner presented before this Court the same claim for money which it has filed in two other proceedings, to wit: ICC Case No. 11264/TE/MW and Civil Case No. 04-332 before the RTC of Makati. LHC argues that petitioner's acts constitutes forum-shopping which should be punished by the dismissal of the claim in both forums. Second, in its Comment to Petitioner's Motion for Leave to File Addendum to Petitioner's Memorandum dated 8 October 2004, LHC alleges that by maintaining the present appeal and at the same time pursuing Civil Case No. 04-332 wherein petitioner pressed for judgment on the issue of whether the funds LHC drew on the Securities should be returned petitioner resorted to forum-shopping. In both instances, however, petitioner has apparently opted not to respond to the charge.

Forum-shopping is a very serious charge. It exists when a party repetitively avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending in, or already resolved adversely, by some other court.⁶⁷ It may also consist in 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 special civil action of certiorari , or the institution of two 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 other party.⁶⁸ To determine whether a party violated the rule against forum-shopping, the test applied is whether the elements of litis pendentia are present or whether a final judgment in one case will amount to res judicata in another.⁶⁹ Forum-shopping constitutes improper conduct and may be punished with summary dismissal of the multiple petitions and direct contempt of court.⁷⁰

Considering the seriousness of the charge of forum-shopping and the severity of the sanctions for its violation, the Court will refrain from making any definitive ruling on this issue until after petitioner has been given ample opportunity to respond to the charge.

WHEREFORE, the instant petition is DENIED, with costs against petitioner.

Petitioner is hereby required to answer the charge of forum-shopping within fifteen (15) days from notice.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

Endnotes:

¹ Penned by Justice Candido V. Rivera, concurred in by Justices Conchita Carpio-Morales and Rebecca de Guia-Salvador.

² Rollo, pp. 52-61.

³ Id. at 62-252.

⁴ Id. at 75-76.

⁵ Clause 1.1, Volume II of the Turnkey Contract, Rollo, p. 81.

⁶ 20.3 Dispute Resolution.

If at anytime any dispute or difference shall arise between the Employer and the Contractor in connection with or arising out of this Contract or the carrying out of the Works, the parties together shall in good faith exert all efforts to resolve such dispute or difference by whatever means they deem appropriate, including conciliation, mediation and seeking the assistance of technical, accounting or other experts. At the request of any party, the chief executives of the Employer and the Contractor shall meet in a good-faith effort to reach an amicable settlement of the dispute or difference. Any dispute or difference that the parties are unable to resolve within a reasonable time may, at the option of either party, be referred to arbitration in accordance with Clause 20.4. (Id. at 179)

⁷ Annex "C," Rollo, pp. 254-256.

⁸ Annex "D," Id. at 257-259.

⁹ Clause 4.2.1, Volume II of the Turnkey Contract, Id. at 94.

¹⁰ Id. at 261-265.

¹¹ Id. at 359-382.

¹² Turnkey Contract, Clause 4.2.5, Rollo, p. 94, in relation to Clause 8.7.1., Rollo, p. 132.

¹³ Annex "H," Rollo, pp. 287-289; Annex "H-1," Rollo, pp. 320-322.

¹⁴ Clause 8.2. Time for Completion.

The Contractor shall complete all the Works, including the Tests on Completion, in accordance with the Program on or before the Target Completion Date. (Rollo, p. 125)

¹⁵ Vol. 1, Rollo, pp. 355-357.

¹⁶ 8.7.1. If the Contractor fails to comply with Clause 8.2, the Contractor shall pay to the Employer by way of liquidated damages ("Liquidated Damages for Delay") the amount of US$75,000 for each and every day or part of a day that shall elapse between the Target Completion Date and the Completion Date, provided that Liquidated Damages for Delay payable by the Contractor shall in the aggregate not exceed 20% of the Contract Price. The Contractor shall pay Liquidated Damages for Delay for each day of the delay on the following day without need of demand from the Employer.

¹⁷ Annex "L," Rollo, pp. 383-402.

¹⁸ Annex "N," Id. at 406-409.

¹⁹ Annex "O," Id. at 412-423.

²⁰ Docketed as CA-G.R. SP No. 61901.

²¹ Rollo, pp. 25-26.

²² Vol. II; Id. at 2-78.

²³ Id. at 79-92.

²⁴ Id. at 95-98

²⁵ Id. at 109-113.

²⁶ Id. at 666-671.

²⁷ Id. at 598-607.

²⁸ Id. at 619-630.

²⁹ Joseph, Letters of Credit: The Developing Concepts and Financing Functions, 94 Banking Law Journal 850-851 [1977] cited in M. Kurkela, Letters of Credit under International Trade Law, 321 (1985).

³⁰ Bank of America v. Court of Appeals, G.R. No. 105395, 10 December 1993, 228 SCRA 357 citing William S. Shaterian, Export-Import Banking: The Instruments and Operations Utilized by American Exporters and Importers and Their Banks in Financing Foreign Trade, 284-374 (1947).

³¹ E&H Partners v. Broadway Nat'l Bank, 39 F. Supp. 2d 275, (United States Circuit Court, S.D. New York) No. 96 Civ. 7098 (RLC), 19 October 1998 <http://www.westlaw.com>.

³² J. Dolan, The Law of Letters of Credit, Revised Ed. (2000).

³³ 24 A Words and Phrases 590, Permanent Edition.

³⁴ Ibid.

³⁵ Jackson & Davey, International Economic Relations, 53 (2nd ed.).

³⁶ ICC Publication No. 500.

³⁷ 146 Phil. 269 (1970).

³⁸ G.R. No. 105395, 10 December 1993, 228 SCRA 357.

³⁹ Article 15, UCP.

⁴⁰ Kurkela, Letters of Credit Under International Trade Law, 286-287 (1985).

⁴¹ Art. 10, UCP.

⁴² Supra note 32 at 1-27.

⁴³ Rollo, pp. 604 and 624.

⁴⁴ Underscoring supplied; Id. at 94.

⁴⁵ Underscoring supplied; Id. at 132.

⁴⁶ Art. 1315, Civil Code.

⁴⁷ Clause 20.4.1, Turnkey Contract, Rollo, p. 179.

⁴⁸ Supra note 32 at 2-63.

⁴⁹ M. Kurkela, Letters of Credit Under International Trade Law, 309 (1985).

⁵⁰ Rollo, p. 391.

⁵¹ Batangas Laguna Tayabas Bus Company, Inc. v. Bitanga, 415 Phil. 43.

⁵² Shin v. Court of Appeals, G.R. No. 113627, 6 February 2001, 351 SCRA 257.

⁵³ Zabat v. Court of Appeals, G.R. No. 122089, 23 August 2000, 338 SCRA 551; Philippine Economic Zone Authority v. Vianzon, G.R. No. 131020, 20 July 2000, 336 SCRA 309; Valencia v. Court of Appeals, G.R. No. 119118, 19 February 2001, 352 SCRA 72; Crystal v. Cebu International School, G.R. No. 135433, 4 April 2001, 356 SCRA 296; Ong Ching Kian Chuan v. Court of Appeals, 415 Phil. 365 (2001).

⁵⁴ Philippine National Bank v. Ritratto Group, Inc., 414 Phil. 494 (2001).

⁵⁵ Rollo, p. 31.

⁵⁶ Underscoring supplied; Id. at 94-95.

⁵⁷ Id. at 132.

⁵⁸ Vide Annex "L," Rollo. pp. 392-399; Petition for Certiorari, CA Rollo, pp. 7-43.

⁵⁹ Salafranca v. Philamlife Village Homeowners Association, Inc., 360 Phil. 652; Ruby Industrial Corporation v. Court of Appeals, 348 Phil. 480; Victorias Milling Co., Inc. v. Court of Appeals, 389 Phil. 184.

⁶⁰ Article 1159, Civil Code.

⁶¹ Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.

⁶² Rollo, p. 493.

⁶³ Aznar Brothers Realty Company v. Court of Appeals, G.R. No. 128102, 7 March 2000, 327 SCRA 359; Soriano v. Court of Appeals, 416 Phil. 226 (2001); Rodil Enterprises v. Court of Appeals, G.R. No. G.R. No. 129609, 29 November 2001, 371 SCRA 79; Unionbank of the Philippines v. Court of Appeals, 370 Phil. 837 (1999).

⁶⁴ 389 Phil. 20 (2000).

⁶⁵ Black's Law Dictionary, p. 1008, citing Leonhart v. McCormick, D.C. Pa., 395 F. Supp. 1073.

⁶⁶ Vol. II, Rollo, pp. 666-669.

⁶⁷ Tantoy, Sr. v. Court of Appeals, G.R. No. 141427, April 20, 2001, 357 SCRA 329.

⁶⁸ Bangko Silangan Development Bank v. Court of Appeals, 412 Phil. 755 (2001).

⁶⁹ Tirona v. Alejo, G.R. No. 129313, October 10, 2001, 367 SCRA 17; Manalo v. Court of Appeals, G.R. No. 141297, October 8, 2001, 366 SCRA 752.

⁷⁰ Tantoy, Sr. v. Court of Appeals, supra note 67.; Caviles v. Seventeenth Division, Court of Appeals, G.R. No. 126857, September 18, 2002, 389 SCRA 306.

G.R. No. 147937 - THE PHILIPPINE AMERICAN LIFE & GENERAL INSURANCE COMPANY v. HON. AUGUSTO V. BREVA, ET AL.

2013-01-15T09:50:41+00:00

G.R. No. 147937 - THE PHILIPPINE AMERICAN LIFE & GENERAL INSURANCE COMPANY v. HON. AUGUSTO V. BREVA, ET AL.

SECOND DIVISION

[G.R. NO. 147937 : November 11, 2004]

THE PHILIPPINE AMERICAN LIFE & GENERAL INSURANCE COMPANY, Petitioner, v. HON. AUGUSTO V. BREVA, in his capacity as Presiding Judge, Regional Trial Court, Davao City, Branch 10, and MILAGROS P. MORALES, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a Petition for Review of the Decision¹ of the Court of Appeals (CA), dated October 24, 2000, dismissing the special civil action for certiorari and prohibition filed by the petitioner, The Philippine American Life & General Insurance Company, and the Resolution dated April 25, 2001, denying the petitioner's motion for reconsideration.

The petitioner is a domestic corporation duly organized under Philippine laws with principal address at the Philamlife Building, United Nations Avenue, Ermita, Manila, and with a regional office in Davao City.

The Antecedents

On September 22, 1999, respondent Milagros P. Morales filed a Complaint² for damages and reimbursement of insurance premiums against the petitioner with the Regional Trial Court (RTC) of Davao City, Branch 10, docketed as Civil Case No. 27554-99. The complaint specifically stated that the petitioner could be served with summons and other court processes through its Manager at its branch office located at Rizal St., Davao City.

Thereafter, Summons³ dated September 29, 1999, together with the complaint, was served upon the petitioner's Davao regional office, and was received by its Insurance Service Officer, Ruthie Babael, on November 19, 1999.⁴

On December 8, 1999, the petitioner filed a Motion to Dismiss⁵ the complaint on the ground of lack of jurisdiction over its person due to improper service of summons. It contended that summons was improperly served upon its employee in its regional office at Davao City, and that the said employee was not among those named in Section 11,⁶ Rule 14 of the 1997 Rules of Civil Procedure upon whom service of summons may be properly made.

On December 9, 1999, the respondent filed an Amended Complaint,⁷ alleging that summons and other court processes could also be served at its principal office at the Philamlife Building, U.N. Avenue, Ermita, Manila, through the president or any of its officers authorized to receive summons.

On December 10, 1999, the RTC issued an Order⁸ denying the petitioner's motion to dismiss and directing the issuance of an alias summons to be served at its main office in Manila.⁹

The RTC held that the improper service of summons on the petitioner is not a ground for dismissal of the complaint considering that the case was still in its initial stage. It ruled that the remedy was to issue an alias summons to be served at the principal office of the petitioner. It also held that the jurisprudence cited by the petitioner was inapplicable, as it involved a case already decided by a court which did not have jurisdiction over the defendant therein due to improper service of summons.

On January 12, 2000, the petitioner filed a Motion for Reconsideration¹⁰ of the said order. In the meantime, on December 14, 1999, the petitioner received an Alias Summons¹¹ together with a copy of the amended complaint.

On January 14, 2000, the RTC issued an Order¹² denying the petitioner's motion for reconsideration and supplemental oral motion to strike out the amended complaint. The RTC reiterated that it would be improper to dismiss the case at its early stage because the remedy would be to issue an alias summons. Anent the motion to strike out the amended complaint, the RTC held that the complaint may be amended without leave of court considering that the respondent had not yet filed an answer thereto.

On March 2, 2000, the petitioner filed with the CA a special action for certiorari and prohibition under Rule 65, with application for a writ of preliminary injunction and/or temporary restraining order, assailing the Orders dated December 10, 1999 and January 14, 2000.

On October 24, 2000, the CA dismissed the petition and affirmed the assailed orders of the RTC. The CA held that the service of the alias summons on the amended complaint upon the authorized officers of the petitioner at its principal office in Manila vested the RTC with jurisdiction over its person. The CA, likewise, denied the petitioner's motion for reconsideration of the said decision on April 25, 2001.

Hence, this Petition for Review .

The petitioner avers that the trial court committed grave abuse of discretion when it denied the motion to dismiss on the ground of lack of jurisdiction over its person because the service of the summons at its regional office through an insurance service officer was improper. Sec. 11, Rule 14 of the 1997 Revised Rules of Civil Procedure is strict as to the persons upon whom valid service of summons on a corporation can be made. The petitioner argues that where summons is improperly served, it becomes ministerial upon the trial court, on motion of the defendant, to dismiss the complaint pursuant to Sec. 1(a),¹³ Rule 16 of the 1997 Revised Rules of Civil Procedure.

The petitioner further avers that the trial court did not acquire jurisdiction over it upon the service of alias summons on the amended complaint because such alias summons was improperly issued. Sec. 5,¹⁴ Rule 14 of the 1997 Revised Rules of Civil Procedure explicitly provides that the previous summons must have been lost or unserved to warrant the issuance of alias summons. The petitioner opines that the issuance of an alias summons presupposes the existence of a previous valid summons which, however, has not been served or has been lost. It maintains that considering that there are specific circumstances that need to exist to warrant its issuance, the alias summons cannot be treated as a matter of nomenclature.¹⁵

The respondent, for her part, avers that the receipt of the amended complaint together with the alias summons by the petitioner cured the defects in the first service of summons. She argues that any procedural defect on the service of alias summons is not sufficient to warrant the dismissal of the case.¹⁶

The Court's Ruling

The core issues in this case are (1) whether the trial court committed grave abuse of discretion in denying the motion to dismiss on the ground of lack of jurisdiction over the person of the petitioner due to improper service of summons, and (2) whether the trial court acquired jurisdiction over the person of the petitioner as the defendant therein.

The petition is without merit.

The trial court did not commit grave abuse of discretion when it denied the motion to dismiss filed by the petitioner due to lack of jurisdiction over its person. In denying the motion to dismiss, the CA correctly relied on the ruling in Lingner & Fisher GMBH v. Intermediate Appellate Court,¹⁷ thus:

A case should not be dismissed simply because an original summons was wrongfully served. It should be difficult to conceive, for example, that when a defendant personally appears before a Court complaining that he had not been validly summoned, that the case filed against him should be dismissed. An alias summons can be actually served on said defendant.¹⁸

In the recent case of Teh v. Court of Appeals,¹⁹ the petitioner therein also filed a motion to dismiss before filing his answer as defendant in the trial court on the ground of failure to serve the summons on him. In that case, the Court agreed with the appellate court's ruling that there was no abuse of discretion on the part of the trial court when the latter denied the petitioner's motion to dismiss the complaint and ordered the issuance of an alias summons.²⁰

We note, however, that in this case, the complaint was amended after the petitioner filed the motion to dismiss. The trial court even acknowledged this when it rendered its order denying the motion to dismiss and ordered the issuance of an alias summons. The Rules on Civil Procedure provide that the amended complaint supersedes the complaint that it amends.²¹ Contrary to the petitioner's claim, the summons issued on the amended complaint does not become invalid. In fact, summons on the original complaint which has already been served continues to have its legal effect. Thus, where the defendant has already been served summons on the original complaint, the amended complaint may be served upon him without need of another summons. Conversely, when no summons has yet been validly served on the defendant, new summons for the amended complaint must be served on him.²²

In the instant case, since at the time the complaint was amended no summons had been properly served on the petitioner and it had not yet appeared in court, new summons should have been issued on the amended complaint.²³ Hence, the CA was correct when it held that, technically, the trial court should have ordered the issuance of an original summons, not an alias summons.²⁴ After all, an alias summons is merely a continuation of the original summons. In this case, however, there was no sense in issuing an alias summons on the original complaint since the complaint had already been amended. The trial court should have instead issued a new summons on the amended complaint.

Nonetheless, the CA deemed it necessary to treat the alias summons as a matter of nomenclature, considering that the rationale behind the service of summons - to make certain that the corporation would promptly and properly receive notice of the filing of an action against it - has been served in this case. The CA held that it would be a great injustice to the respondent if the complaint would be dismissed just because what was issued and served was an alias summons; that she would be made to file a new complaint and thus, incur further monetary burden.²⁵

We agree with the CA. It is not pertinent whether the summons is designated as an "original" or an "alias" summons as long as it has adequately served its purpose. What is essential is that the summons complies with the requirements under the Rules of Court and it has been duly served on the defendant together with the prevailing complaint. In this case, the alias summons satisfies the requirements under the Rules, both as to its content and the manner of service. It contains all the information required under the rules, and it was served on the persons authorized to receive the summons on behalf of the petitioner at its principal office in Manila. Moreover, the second summons was technically not an alias summons but more of a new summons on the amended complaint. It was not a continuation of the first summons considering that it particularly referred to the amended complaint and not to the original complaint.

WHEREFORE, the petition is DENIED for lack of merit. The October 24, 2000 Decision and the April 25, 2001 Resolution of the Court of Appeals are hereby AFFIRMED.

SO ORDERED.

Austria-Martinez, (Acting Chairman), and Chico-Nazario, JJ., concur.
Puno, (Chairman), J., on official leave.
TINGA, J., on leave.

Endnotes:

¹ Penned by Associate Justice Bienvenido L. Reyes, with Associate Justices Ramon A. Barcelona and Rodrigo V. Cosico, concurring.

² Rollo, p. 32.

³ Id. at 31.

⁴ CA Rollo, p. 5.

⁵ Rollo, p. 41.

⁶ Sec. 11. Service upon domestic private juridical entity. - When the defendant is a corporation, partnership or association organized under the laws of the Philippines with a juridical personality, service may be made on the president, a managing partner, general manager, corporate secretary, treasurer, or in-house counsel.

⁷ Rollo, p. 53.

⁸ Id. at 46.

⁹ Id.

¹⁰ Id. at 47.

¹¹ Id. at 52.

¹² Id. at 61.

¹³ Section 1. Grounds. - Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:

(a) That the court has no jurisdiction over the person of the defending party;

¹⁴ Section 5. Issuance of alias summons. - If a summons is returned without being served on any or all of the defendants, the server shall also serve a copy of the return on the plaintiff's counsel, stating the reasons for the failure of service, within five (5) days therefrom. In such a case, or if the summons has been lost, the clerk, on demand of the plaintiff, may issue an alias summons.

¹⁵ Rollo, p. 211.

¹⁶ Id. at 219.

¹⁷ 125 SCRA 522 (1983), cited in Far Corporation v. Francisco, 146 SCRA 197 (1986).

¹⁸ Id. at 527; also cited in Far Corporation v. Francisco, supra.

¹⁹ 401 SCRA 576 (2003)

²⁰ Id. at 581.

²¹ Sec. 8, Rule 10, 1997 Revised Rules of Civil Procedure.

²² Vlason Enterprises Corporation v. Court of Appeals, 310 SCRA 26 (1999).

²³ Id. at 58.

²⁴ Rollo, p. 24.

²⁵ Id. at 25.

G.R. No. 147227 - MARIA REMEDIOS ARGANA, ET AL. v. REPUBLIC OF THE PHILIPPINES

2013-01-15T09:50:41+00:00

G.R. No. 147227 - MARIA REMEDIOS ARGANA, ET AL. v. REPUBLIC OF THE PHILIPPINES

SECOND DIVISION

[G.R. NO. 147227 : November 19, 2004]

MARIA REMEDIOS ARGANA, DONATA ALMENDRALA VDA. DE ARGANA, LUIS ARGANA, JR., PEREGRINO ARGANA, ESTATE OF GELACIO ARGANA, EUFROCINIO NOFUENTE, AMPARO ARGANA NOFUENTE, JUANITO ROGELIO, MILAGROS ARGANA ROGELIO, MARIA FELICIDAD ARGANA, MARIA DOROTEA ARGANA, REFEDOR SOUTH GOLD PROPERTY MANAGEMENT & DEVELOPMENT CORPORATION, Petitioners, v. REPUBLIC OF THE PHILIPPINES, Respondent.

D E C I S I O N

TINGA, J.:

Before the Court is a Petition for Certiorari assailing the Resolution dated April 11, 2000 and the Order dated February 22, 2001 of the Sandiganbayan, Third Division, in Civil Case No. 0026.¹

On July 29, 1987, respondent Republic of the Philippines filed with the Sandiganbayan a Petition for Forfeiture of alleged ill-gotten assets and properties of the late Maximino A. Argana, who served as Mayor of the Municipality of Muntinlupa² from 1964 to 1967 and from 1972 until his death in 1985.

On October 28, 1998, the Sandiganbayan remanded the case to the Presidential Commission on Good Government (PCGG) for the conduct of an inquiry. In 1990, the case was reactivated in the Sandiganbayan. Petitioners Maria Remedios Argana, Donata Almendrala Vda. De Argana, Luis Argana, Jr., Peregrino Argana, Estate of Gelacio Argana, Eufrocinio Nofuente, Amparo Argana Nofuente, Juanito Rogelio, Milagros Argana Rogelio, Maria Felicidad Argana, Maria Dorotea Argana, and Refedor South Gold Property Management & Development Corporation filed a series of motions, including a Motion to Dismiss on the ground of the lack of authority of the PCGG to institute the case on behalf of respondent. This issue eventually reached this Court and was decided in favor of respondent on September 29, 1994.³

Petitioners, in their Answer, denied that the properties sought to be forfeited by respondent were unlawfully acquired by the deceased Mayor and/or by petitioners. Still, to avoid a protracted litigation, petitioners exerted efforts to settle the case amicably with respondent through the PCGG.

After a series of motions were again filed by petitioners, the Sandiganbayan finally set the case for pre-trial on November 26, 1997, but the pre-trial was reset several times in view of the manifestation of the parties that they were in the process of negotiating a compromise.

On August 7, 1997, petitioners' offer of compromise was accepted by the PCGG in its Resolution No. 97-180-A.⁴

Thereafter, the PCGG conducted an evaluation of the properties offered for settlement by petitioners. In a Memorandum dated August 18, 1997, Mauro J. Estrada, Director of the PCGG Research and Development Program, recommended the inclusion of another tract of land⁵ belonging to petitioners among the properties which would be subject of the compromise.

On September 18, 1997, respondent, represented by PCGG Commissioners Reynaldo S. Guiao and Herminio A. Mendoza entered into a Compromise Agreement with petitioners, represented by petitioner Maria Felicidad Argana. Petitioners conveyed, ceded and released in favor of respondent a total of 361.9203 hectares of agricultural land in Pangil and Famy, Laguna, or 75.12% of the properties subject of litigation, in consideration of the dismissal or withdrawal of all pending civil, criminal and administrative cases filed, litigated or investigated by respondent against them. The remainder was distributed as follows:

To be retained by the late Mayor Argana's heirs

9.88%

47.78787 hectares

Owned by the Mayor's Brothers and Sisters

5.53%

26.6318 hectares

Foreclosed by Los BaÃ±os Rural Bank

1.24%

5.9856 hectares

Owned by Other Persons

8.23%

39.64865 hectares

24.88%

120.05392 hectares⁶

In a letter dated October 7, 1997,⁷ the PCGG informed the Office of the Solicitor General (OSG) of the signing of the Compromise Agreement and requested the OSG to file the appropriate motion for approval thereof with the Sandiganbayan.

Subsequently, the OSG requested for clarification from the PCGG if the compromise agreement included all the sequestered assets of petitioners subject of litigation. In response to the request, PCGG informed the OSG in a letter dated February 4, 1998⁸ that the properties mentioned in the Compromise Agreement comprise all the sequestered assets subject of litigation, and reiterated that it entered into a compromise agreement with petitioners because it believed that the evidence might not be sufficient to warrant continuing the prosecution of Civil Case No. 0026 and that it is to the best interest of the government to accept the offer of petitioners.⁹

On May 27, 1998, then President of the Republic of the Philippines Fidel V. Ramos approved the Compromise Agreement between petitioners and respondent.¹⁰

On June 4, 1998,¹¹ the OSG filed with the Sandiganbayan a Motion to Approve Compromise Agreement. Petitioners expressed their conformity to the motion on June 15, 1998.

After conducting hearings on the motion, the Sandiganbayan promulgated its Decision on July 31, 1998 approving the Compromise Agreement and rendering judgment in accordance with the terms thereof.¹²

However, on October 5, 1998, respondent, through the OSG and the PCGG, filed with the Sandiganbayan a Motion to Rescind Compromise Agreement and to Set Aside Judgment by Compromise (Motion to Rescind). Respondent prayed for the rescission of the Compromise Agreement or reformation thereof after a renegotiation with petitioners. Respondent contended that the partition of the properties in the Compromise Agreement was grossly disadvantageous to the government and that there was fraud and insidious misrepresentation by petitioners in the distribution and partition of properties, to the damage and prejudice of the government. According to respondent, there was fraud and insidious misrepresentation because petitioners proposed to divide the properties'with 75% accruing to the government and the remaining 25% going to petitioners and their other creditors'based on the total land area of the properties instead of on their value. As a result, the government obtained only Three Million Six Hundred Twenty Thousand Pesos (P3,620,000.00) worth of land, while petitioners received almost Four Billion Pesos (P4,000,000,000.00) worth.

Petitioners filed an Answer to the Motion to Rescind and contended that the July 31, 1998 Decision of the Sandiganbayan could no longer be annulled because it had already become final and executory; that respondent's counsel had no authority to file the motion; and that the motion was defective because it did not include a Certification against Forum-Shopping. They also argued that there was no agreement to divide the properties by a 75% to 25% ratio in favor of the government. What they proposed to cede to the government by way of compromise were their properties in Pangil covered by Transfer Certificate of Title (TCT) Nos. T-4044 and T-4009 and those in Famy, Laguna covered by TCT Nos. T-3813 to T-3817 and T-4104, 4106 and 4108, not a specific percentage of the properties subject of litigation.¹³

In its Resolution dated September 22, 1999, the Sandiganbayan treated the Motion to Rescind as a petition for relief from judgment under Rule 38 of the 1997 Rules on Civil Procedure and set the motion for hearing.

On April 11, 2000, the Sandiganbayan issued a Resolution granting respondent's motion to rescind and setting aside the Decision dated July 31, 1998. The Sandiganbayan held that the Motion to Rescind was filed on time on October 5, 1998, the working day immediately following October 4, 1998, which was a Sunday and the 60th day after respondent received the July 31, 1998 Decision on August 5, 1998. It also ruled that the presumption that the OSG had authority to file the Motion to Rescind was not overcome by petitioners. Under Republic Act No. 1379,¹⁴ the filing and prosecution of cases for forfeiture of unlawfully acquired property is a function of the OSG. Petitioners failed to show proof that pleadings or motions filed by lawyers of the government or the PCGG must first be approved by the PCGG En Banc and by the President of the Republic. The Sandiganbayan likewise held that respondent was not required to file a certification against forum-shopping because the motion to rescind was not an initiatory pleading.¹⁵

With respect to the issue of fraud, it held that there was extrinsic fraud in the execution of the Compromise Agreement. The Sandiganbayan stated:

'The values were deliberately omitted to make it appear that the Compromise Agreement adheres to the 75%-25% ratio broadly adopted by the PCGG in compromising cases of ill-gotten wealth. It was this 75%-25% mode of compromise, with the greater share of 75% going to the government that misled the Court to believe, as We did believe, that the Compromise Agreement was fair, reasonable and advantageous to the Government'.

'What was projected to be a 75%-25% ratio was in reality a 00.15%-99.85% ratio, with 99.85% going to the Arganas. This is unconscionable and immoral. And since it results in a transaction grossly disadvantageous and immoral to the government, it is against the law as being violative of Section 3(g) of Republic Act 3019.

In the instant case, fraud of an extrinsic character exists because the representatives of plaintiff Republic in the PCGG connived with defendants in hiding the assessed or market values of the properties involved, so as to make it appear that the Compromise Agreement adhered to the 75%-25% ratio adopted by the PCGG in entering into compromise of cases involving the recovery of ill-gotten wealth. Through their infidelity, those in the PCGG who handled or were closely involved with the case during the last days of the previous administration fraudulently gave the Compromise Agreement a semblance of fairness and official acceptability. They sold plaintiff Republic down the river by entering into an agreement grossly disadvantageous to the government. For while plaintiff Republic got 00.15% (00.15074) of the estimated value of all the properties involved in this case, defendants almost ran away with 99.85% (99.84526) of their value. This is patently unfair. It is no compromise but a virtual sell-out. It could not have been pulled off without the connivance or collusion of those responsible for the case in the PCGG. Instead of protecting the interest of the government, they connived at its defeat almost.¹⁶

Petitioners filed a Motion for Reconsideration dated May 9, 2000 and a Supplement to said motion dated May 30, 2000. Petitioners also filed an Urgent Motion for Voluntary Inhibition dated May 18, 2000 praying that the members of the Third Division of the Sandiganbayan voluntarily inhibit themselves from hearing and resolving the petitioners' pending motions.

On February 22, 2001, the Sandiganbayan issued two Orders, one denying petitioners' motion for reconsideration,¹⁷ and the other, denying the motion for voluntary inhibition.¹⁸

Hence, petitioners filed the present petition on April 27, 2001.

Respondent filed its Comment on October 22, 2001.

On November 12, 2001, the Court issued a Resolution giving due course to the petition and requiring the parties to submit their respective memoranda.¹⁹

Respondent filed its Memorandum on January 29, 2002. Petitioners filed theirs on February 26, 2002. In their respective memoranda, the parties reiterated the arguments in their earlier pleadings.

Specifically, petitioners raise the following arguments:

(A) The Sandiganbayan (Third Division) denied Petitioners their right to substantive and procedural due process when it refused to voluntarily inhibit itself from further hearing the instant case.

(B) The PCGG lawyers had no authority to ask for the rescission of the subject Compromise Agreement without the consent of the PCGG En Banc and the President of the Republic of the Philippines.

(C) The Motion to Rescind, which was treated by the Sandiganbayan (Third Division) as a Petition for Relief under Rule 38 of the Rules of Court, is fatally defective because'

1. It was not filed by a party to the case, i.e., it was filed by counsel without the client's authority.

2. It was filed out of time.

3. It was filed sans any supporting Affidavit of Merit.

4. It lacked the required Certification on Non-Forum Shopping.

(D) There is no factual or legal basis for the finding of fraud by the Sandiganbayan (Third Division).

(E) Upon approval of the Compromise Agreement, the Sandiganbayan (Third Division) lost jurisdiction over the case, including the authority to rescind said Compromise Agreement and to set aside the judgment based thereon.

(F) The Sandiganbayan (Third Division) lacked authority to alter a contract by construction or to make a new contract for the parties.

(G) Since the Compromise Agreement had already been implemented, rescission cannot be availed of.²⁰

Petitioners contend that the members of the Third Division of the Sandiganbayan should have inhibited themselves from resolving petitioners' motion for reconsideration because from the tenor of the April 11, 2000 Order of the court granting respondent's motion to rescind, it was evident that the Sandiganbayan had already prejudged the properties subject of litigation as having been unlawfully acquired.²¹

Petitioners likewise assert that the property value of a property offered for the amicable settlement of a case is not always material in determining the validity of a compromise agreement. They point out that what impelled the PCGG to enter into a compromise agreement with them was PCGG's perception that its evidence against petitioners was weak and might not be sufficient to justify maintaining the case against them.²²

In addition, petitioners insist that the Motion to Rescind which was treated by the Sandiganbayan as a petition for relief from judgment under Rule 38 is fatally defective for (i) lack of authority of respondent's lawyers to file the same; (ii) having been filed out of time; (iii) non-submission of an Affidavit of Merit; and (iv) non-submission of a Certification against Forum-Shopping.²³

It is argued by petitioners that the Sandiganbayan should have denied respondent's Motion to Rescind outright for having been filed without authority from the PCGG En Banc and the President of the Republic, both of whom earlier approved and authorized the execution of the Compromise Agreement. According to petitioners, after final judgment has been rendered in a case, an attorney has no implied authority from his client to seek material or substantial alterations or modifications in such judgment.²⁴

Petitioners claim that the Motion to Rescind was filed only on October 5, 1998, or beyond sixty (60) days from the time the Sandiganbayan promulgated its July 31, 1998 Decision approving the Compromise Agreement.²⁵ In support of their petition, petitioners cite Section 3 of Rule 38 which requires that the petition for relief be filed within sixty (60) days after the party seeking the relief learns of the judgment or final order to be set aside, and not more than six (6) months after such judgment or final order was entered. They also invoke the case of Samonte v. Samonte²⁶ where the Court held that a judgment upon compromise is deemed to have come to the knowledge of the parties on the very day it is entered.²⁷

It is further argued by petitioners that the Sandiganbayan's finding that the settlement between petitioners and respondent was attended by fraud has no factual or legal basis. Petitioners point out that the property values cited by respondent in its Motion to Rescind were based solely on the estimates of the PCGG lawyers and no evidence of the valuation of the properties were presented before the Sandiganbayan to establish fraud. They also contend that the Sandiganbayan had no legal basis for taking judicial notice of the fact that agricultural land in rural areas such as Famy and Pangil, Laguna is much cheaper and is usually sold by the hectare, while land in Metro Manila and in nearby municipalities such as Muntinlupa is more valuable and sold per square meter. Petitioners insist that knowledge of the valuation of property is not a condition sine qua non for the validity of a compromise agreement.²⁸

Petitioners also assert that the Sandiganbayan did not have jurisdiction to annul the Compromise Agreement because its July 31, 1998 Decision had already become final and executory. Moreover, as a contract validly entered into by the parties, the Compromise Agreement had binding effect and authority on the parties thereto even if it were not judicially approved.²⁹

Petitioners likewise contend that the Sandiganbayan cannot alter the Compromise Agreement which is a valid and binding contract between themselves and respondent and impose the additional requirement that "the moneys, properties or assets involved in the compromise must be fully disclosed and described not only as to the number or area (in case of real properties) but also as to their exact location, classification, appraised and fair market value, liens and encumbrances, whether titled or not, etc., so as to leave no room for doubt that all the parties, the Court and the public know exactly what each party is giving or taking away, and under what specific terms and conditions."³⁰ According to them, the imposition of this requirement would be beyond the scope of the Sandiganbayan's authority.³¹

Lastly, petitioners argue that the Compromise Agreement can no longer be rescinded because it had already been implemented. In support of this argument, petitioners claim that on September 22, 1997, or four days after the signing of the agreement, they delivered to the PCGG the original TCTs of the properties ceded to respondent under the agreement.³²

Respondent, through the OSG, contends that the Sandiganbayan's April 11, 2000 Resolution which granted the motion to rescind the Compromise Agreement and set aside its July 31, 1998 Decision cannot be the proper subject of a Petition for Certiorari. According to respondent, petitioners were not without any other remedy from the adverse ruling of the Sandiganbayan, and they should have gone to trial and reiterated their special defenses.³³

Respondent also maintains that the Sandiganbayan did not err in denying petitioners' motion for voluntary inhibition of its members because petitioners' allegations of partiality and bias were not supported by clear and convincing evidence.³⁴

It is also argued by respondent that there is no rule or law requiring that pleadings or motions filed by lawyers of the government or the PCGG must first be approved by the PCGG En Banc and by the President of the Republic.³⁵

Anent the alleged procedural infirmities in the filing of the Motion to Rescind, respondent asserts that it complied with the reglementary period for the filing of a petition for relief from judgment under Rule 38 and that it is not an initiatory pleading which is required to be accompanied by a Certification against Forum-Shopping.³⁶

Respondent disagrees with the contention of petitioners that the Sandiganbayan already lost jurisdiction over the case when it rendered its Decision on the Compromise Agreement on July 31, 1998 considering that the decision is immediately executory since there is no appeal from such judgment. According to respondent, the Rules of Court does recognize the jurisdiction of the court which rendered a decision over a petition for relief from the same decision, and does not distinguish whether the judgment is based on the evidence presented or on a compromise agreement. Moreover, as an exception to the general rule that the court which rendered judgment on the compromise cannot modify such compromise, the court may order modifications thereon when the parties consent to such modification or when there is a hearing to determine the presence or absence of vitiated consent.³⁷

Respondent adds that the Sandiganbayan did not make a new contract for the parties but simply declared their Compromise Agreement null and void with the net effect of continuing the case from where it left off.³⁸

Respondent insists that a compromise agreement which is unconscionable, shocking to the mind and contrary to law and public policy, such as that entered into by it with petitioners, is null and void. A void compromise agreement vests no rights and creates no obligations. Considering that the compromise agreement sought to be declared void in this case is one which is prejudicial to the government, it is the Court's duty to strike it down as null and void.³⁹

It is argued by respondent that while it did not present additional evidence after it filed the Motion to Rescind, it submitted the motion on the basis of all the verified pleadings and papers on record. Respondent likewise claims that the Sandiganbayan did not err in taking judicial notice of the fact that agricultural lands in the provinces, such as the lands titled in petitioners' names in Famy and Pangil, Laguna, are much cheaper than lands in urban areas such as those in Muntinlupa City. Respondent insists that such fact is a matter of public knowledge and may be taken judicial notice of under Section 1, Rule 129 of the Revised Rules of Court.⁴⁰

Respondent also points out that petitioners expressly admitted in their Answer to the Motion to Rescind that the value of the properties which they ceded to respondent under the Compromise Agreement is less than the value of the properties retained by them.⁴¹

Respondent claims that there was fraud of an extrinsic character because its representatives in the PCGG connived with petitioners in concealing the assessed or market values of the properties subject of the Compromise Agreement to make it appear that the latter adhered to the 75%-25% ratio adopted by the PCGG in entering into compromise of cases involving the recovery of ill-gotten wealth. It is pointed out by respondent that the OSG was in fact initially reluctant to file the motion for approval of the compromise agreement with the Sandiganbayan because the Compromise Agreement only mentioned the areas of the properties but conspicuously failed to mention the property values thereof. Respondent explained:

On October 7, 1997, the PCGG forwarded to the OSG a copy of the Compromise Agreement between the Republic and the Arganas in SB Civil Case No. 0026, with a request that the OSG file a motion with the Sandiganbayan for the approval of the said Compromise Agreement. On November 7, 1997, in reply to the letter of PCGG, the OSG with then Solicitor General Silvestre H. Bello III as signatory, wrote the PCGG requesting it to submit to the OSG clarification on the provision in the compromise agreement that the properties mentioned therein comprise all the sequestered assets subject of the litigation considering that in the petition filed by the Republic, it is alleged that the late mayor Argana acquired no less than 251 OCTs/TCTs in Muntinlupa and the neighboring towns plus some other ill-gotten properties. The OSG likewise opined that the Compromise Agreement must first be submitted to the President for his approval before submitting it to the Sandiganbayan.

On February 10, 1998, the OSG received a reply from the PCGG, through Commissioner Herminio Mendoza, reiterating that the PCGG has decided to enter into the compromise agreement because it believes that the evidence may not be sufficient to warrant continuing prosecution of Civil Case No. 0026 against the Arganas.

With respect to OSG's request for clarification, the PCGG furnished the OSG a copy of the report conducted by the PCGG Research and Development Department whereby it is stated that there are 324 OCTs/TCTs evaluated representing real properties of the late Mayor Argana with a total land area of 481.77422 hectares out of which the Republic will get 361.9203 hectares or 75.12% of the total land area under the Compromise Agreement. No mention, however, was made as to the value of the properties to be ceded to the Republic and the properties to be retained by the Arganas.

On March 2, 1998, the OSG, through then Solicitor General Romeo C. dela Cruz, again wrote the PCGG reiterating its previous position that before submitting the compromise agreement to the Sandiganbayan for approval, it must first be submitted to the President of the Philippines for his approval as required in par. 6 of the Compromise Agreement. The OSG also reiterated its request for clarification regarding the properties covered by the compromise agreement as the Report submitted to it made mention of 361.9203 hectares or 75.12% out of the total land area of 481.71422 hectares to be ceded to the Republic, and 24.88% to be retained by the Arganas, no mention whatsoever was made of the kind of land, location and value of the respective areas.

On June 2, 1998, the OSG received a letter dated May 29,1998 from then Commissioner Herminio A. Mendoza forwarding it copy of the approval by then President Fidel Ramos of the Compromise Agreement. With respect to its query, it was stated therein that the PCGG is unable to determine the value of the land to be ceded to the Republic and those to be retained by the Arganas because of the big number of the parcels of the land located mainly in Muntinlupa, Metro Manila and Laguna and/or the lack of available records showing their respective values for tax purposes. The PCGG reiterated their request that the OSG file with the Sandiganbayan in SB Civil Case No. 0026 a motion for the approval of the compromise agreement.

Obviously, through such a scheme, those in the PCGG then who handled or were involved with the case fraudulently gave the Compromise Agreement a semblance of fairness and official acceptability, but in truth, it was grossly disadvantageous to the government. The motion to approve compromise agreement was filed by the OSG out of courtesy as the PCGG was able to get the approval of then Pres. Fidel V. Ramos but not because it (OSG) totally approved the same after an independent evaluation of the report.⁴² (Emphasis in the original.)

Finally, respondent argues that the Compromise Agreement had not yet been implemented. Although petitioners delivered the TCTs covering the lots ceded to respondent under the terms of the compromise on September 22, 1997, such delivery could not have the effect of implementation of the Compromise Agreement because the contract was submitted to the Sandiganbayan for approval only on June 15, 1998. The Compromise Agreement expressly required that in order for it to be effective, it must be approved by the President of the Republic and of the Sandiganbayan.⁴³

The issues for the Court's resolution are as follows:

1) Whether a petition for certiorari is the proper remedy;

2) Whether the OSG and the PCGG lawyers have authority to file the Motion to Rescind on behalf of respondent;

3) Whether the Motion to Rescind, which was treated by the Sandiganbayan as a petition for relief, complied with the requirements of Rule 38 of the 1997 Rules of Civil Procedure;

4) Whether the Sandiganbayan acted with grave abuse of discretion in granting the Motion to Rescind and in setting aside its Decision dated July 31, 1998; andcralawlibrary

5) Whether the members of the Sandiganbayan's Third Division should have inhibited themselves from resolving petitioners' Motion for Reconsideration.

The Court shall first tackle the first, second, third and fifth issues since these involve procedural matters.

The Court does not agree with respondent's contention that a petition for certiorari is not the proper remedy to assail the February 22, 2001 Order of the Sandiganbayan which affirmed its earlier directive to set the case against petitioners for pre-trial following the annulment of its judgment by compromise agreement. A special civil action for certiorari may be instituted when any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law.⁴⁴ The Court has previously held that an order setting the case for further proceedings, issued after the original judgment rendered pursuant to a compromise agreement is set aside, is an interlocutory order and is therefore not appealable.⁴⁵ Since no appeal is available against such an order, the proper remedy to assail it is a special civil action for certiorari . The remedy taken by petitioners is therefore proper.

Petitioners' contention that the Motion to Rescind filed by the lawyers of the PCGG and of the OSG should have been treated by the Sandiganbayan as a mere scrap of paper because the motion was filed without the authority of the PCGG En Banc and of the President of the Republic has no legal basis. There is no requirement under the law that pleadings and motions filed by lawyers of the government or the PCGG must first be approved by the PCGG En Banc and by the President of the Philippines. More importantly, R.A. No. 1379 expressly authorizes the OSG to prosecute cases of forfeiture of property unlawfully acquired by any public officer or employee.⁴⁶ It must be remembered that it was the OSG which filed Civil Case No. 0026 for the forfeiture of petitioners' allegedly ill-gotten wealth, and that the Compromise Agreement between petitioners and respondent was an amicable settlement of that case. By filing an action for rescission of the Compromise Agreement based on extrinsic fraud, the OSG was merely performing its legal duty to recover the wealth purportedly amassed unlawfully by the late Mayor Argana during his terms as Mayor of Muntinlupa. The Motion to Rescind was filed precisely because the PCGG, as respondent's authorized representative in the compromise, discovered that the execution of the Compromise Agreement was attended by fraud and sought the help of the OSG which in turn is the duly authorized government agency to represent respondent in forfeiture cases under R.A. No. 1379. Hence, the Sandiganbayan correctly upheld the authority of the OSG, assisted by the PCGG, in filing the Motion to Rescind.

The Court also finds that there was no grave abuse of discretion on the part of the Sandiganbayan in granting the Motion to Rescind, which it treated as a petition for relief from judgment under Rule 38 of the 1997 Rules on Civil Procedure. Section 3 thereof prescribes the periods within which the petition for relief must be filed:

Time for filing petition; contents and verification.' A petition provided for in either of the preceding sections of this Rule must be verified, filed within sixty (60) days after the petitioner learns of the judgment, final order or other proceeding to be set aside, and not more than six (6) months after such judgment or final order was entered, or such proceeding was taken, and must be accompanied with affidavits showing the fraud, accident, mistake or excusable negligence relied upon, and the facts constituting the petitioner's good and substantial cause of action or defense, as the case may be.

The Court has previously held that as applied to a judgment based on compromise, both the sixty (60)-day and six (6)-month reglementary periods within which to file a petition for relief should be reckoned from the date when the decision approving the compromise agreement was rendered because such judgment is considered immediately executory and entered on the date that it was approved by the court.⁴⁷

Applying the foregoing rule to the present case, the sixty (60)-day period should be counted from July 31, 1998, the date of the Sandiganbayan Decision granting the Motion to Approve Compromise Agreement. The sixtieth day from July 31, 1998 is September 29, 1998. The Motion to Rescind was filed by the OSG only on October 5, 1998, clearly several days after the sixtieth day from the rendition of the July 31, 1998 Decision.

This notwithstanding, the Court finds that no grave abuse can be ascribed to the Sandiganbayan in admitting the Motion to Rescind as a petition for relief was timely filed.

Although as a general rule, the party filing a petition for relief must strictly comply with the sixty (60)-day and six (6)-month reglementary periods under Section 3, Rule 38,⁴⁸ it is not without exceptions. The Court relaxed the rule in several cases⁴⁹ and held that the filing of a petition for relief beyond the sixty 60-day period is not fatal so long as it is filed within the six (6)-month period from entry of judgment.⁵⁰

The Court notes that the filing of the Motion to Rescind on October 5, 1998 was indeed seven days beyond the sixty 60-day period but still well within the six (6)-month period from entry of judgment. Moreover, the case involves an alleged fraud committed against the Republic, and thus justifies the liberal interpretation of procedural laws by the Sandiganbayan.

Petitioners' claim that respondent failed to attach an affidavit of merit to its Motion to Rescind is belied by the record of the case. Petitioners in fact attached, as Annex "N" of their Petition for Certiorari, a copy of the respondent's Motion to Rescind. The Affidavit of Merit signed by Dennis M. Taningco, the counsel of the PCGG in Civil Case No. 0026, was attached to the Motion to Rescind. In any case, the Court in Mago v. Court of Appeals⁵¹ held that the absence of an affidavit of merit does not always result in the denial of the petition for relief, so long as the facts required to be set out in the affidavit appear in the verified petition. The oath which forms part of the petition elevates it to the same category as an affidavit.⁵²

Neither was it necessary for respondent to attach a Certification against Forum-Shopping to the Motion to Rescind. As correctly held by the Sandiganbayan, the Motion to Rescind, which in effect was a petition for relief, is not an initiatory pleading which requires the inclusion of a Certification against Forum-Shopping. Section 2, Rule 38 requires that a petition for relief must be filed with the court which rendered the judgment or order sought to be set aside, and in the same case wherein the judgment or order was rendered. If the court finds that the allegations in the petition for relief are true, it shall set aside the judgment and try the principal case upon the merits as if a timely motion for new trial had been granted.⁵³ Clearly, then, a petition for relief is not an initiatory pleading in a new case which would require the filing by the petitioner therein of a Certification of Non - Forum Shopping.

The Court also finds no abuse of discretion by the Sandiganbayan in denying petitioners' Urgent Motion for Voluntary Inhibition. As explained in Gutang v. Court of Appeals,⁵⁴ the import of the rule on voluntary inhibition is that the decision of a judge on whether or not to inhibit is left to his or her sound discretion and conscience, based on his or her rational and logical assessment of the case where the motion for inhibition is filed. It implies that in addition to pecuniary interest, relationship, or previous participation in the matter under litigation which are grounds for mandatory inhibition under the first paragraph of Section 1, Rule 137 of the Revised Rules of Court there might be other causes that could diminish the objectivity of the judge, thus warranting his or her inhibition. Petitioners' claim of bias and partiality on the part of the Sandiganbayan justices who issued the April 11, 2000 Resolution, evaluated in light of the resolution itself, is evidently more imagined than real. To say, as is petitioners' wont, that a judge who throws out a party's motion in the language employed by the Sandiganbayan in the questioned Resolution is necessarily prejudiced, is to be indiscriminate and precipitate.

Petitioners' assertion that the April 11, 2000 Resolution was harshly worded and evinced prejudgment of the case in respondent's favor is easily disproved by a reading of the Resolution in its entirety. As will be discussed hereafter, the Sandiganbayan's pronouncement that the Compromise Agreement was grossly disadvantageous and prejudicial to the government is supported by the facts on record. In charging the Sandiganbayan with forejudgment when it said that "all it takes to prove the case is evidence that the properties are manifestly out of proportion to the late Mayor Maximino A. Argana's salary and to his other lawful income and other legitimately acquired income,"⁵⁵ petitioners have taken the statement out of context. The Sandiganbayan made the statement in relation to its bewilderment as to why the PCGG expressed difficulty in prosecuting the case against the late Mayor Argana in spite of the presumption regarding unexplained wealth in Section 8 of R.A. No. 3019 (the Anti-Graft and Corrupt Practices Act). The Sandiganbayan therefore had legal and factual grounds to deny petitioners' motion for inhibition.

Anent the propriety of the Sandiganbayan's nullification of the Compromise Agreement on the ground of extrinsic fraud, the Court holds that no error nor grave abuse of discretion can be ascribed to the Sandiganbayan for ruling that the execution of the Compromise Agreement was tainted with fraud on the part of petitioners and in connivance with some PCGG officials. A circumspect review of the record of the case reveals that fraud, indeed, was perpetuated upon respondent in the execution of the Compromise Agreement, the assessed or market values of the properties offered for settlement having been concealed from the reviewing authorities such as the PCGG En Banc and even the President of the Republic. The discussion of the Sandiganbayan on the nature and extent of the fraud perpetuated upon respondent in the execution of the Compromise Agreement is clear and convincing:

Noticeable from the documents submitted to the court after the decision approving the Compromise Agreement was promulgated is the fact that only the percentage of sharing based on area was mentioned and brought to the attention of the PCGG en banc and the Solicitor General. The value of the properties was never, and not even once, mentioned. Thus, in the Memorandum of Director Mauro J. Estrada of the PCGG Research and Development Department to the PCGG Chairman, dated August 18, 1997, the following exposition appears:

"12. On July 10, 1996, the Arganas submitted a proposal for Compromise Agreement (copy attached, per Annex "J") that would cede by donation about 231 hectares of agricultural lands to the government, Xerox copies of nine (9) TCTs attached therewith, enumerated as follows:

"TCT No.

Area in Square Meters

Location

T-3813

47,908

Famy, Laguna

T-8314

47,461

-do -

T-8315

30,000

-do -

T-8316

40,000

-do -

T-8317

30,000

-do -

T-4104

20,000

-do -

T-4106

38,550

-do -

T-4108

31,618

-do -

T-4044

1,137,361
883,355

San Isidro & Banilan,
Pangil, Laguna

2,306,253 Sq. Meters
230,6253 Hectares

"Another big tract of land located at Matikiw, Pangil, Laguna, consisting of 131,2950 hectares covered by TCT No. T-4009, per Annex "K" may be considered for inclusion in the proposed compromise settlement. The reason for this is that this land is being eyed by the DAR for distribution under the CARP. As a whole, the government may be able to acquire about 361.9203 hectares of land equivalent to 75.12% of the 481.7742 hectares of land of sequestered real estate property belonging to the Arganas and other owners.

"However, of the 481.7742 hectares covered by a sequestration order, the late Mayor Argana owns about 409.50817 hectares and possibly the heirs are willing to cede 361.9203 hectares which is equivalent to 88.38%, retaining 47.5887 hectares or 11.62% of what they owned.

"E. EVALUATION

"1) As presented in Annex "L", page 13, the total area of real estate property sequestered aggregated to 481.7742 hectares accounted as follows:

Total Area Sequestered

100.00%

481.77422

Accounted as Follows:

a) owned by Mayor Maximino Argana

75.12%

409.50817 has.

b) Owned by his Brothers & Sisters

9.88%

26.6318 has.

c) Foreclosed by Los BaÃ±os Rural Bank

1.24%

5.9856 has.

d) Owned by Other Persons

8.23%

39.64865 has.

TOTAL

100.00%

481.77422 has.

"2) Out of the total area of 481.77422 hectares covered by a sequestration order, about 409.50817 hectares are owned by the late Mayor Argana. The other lots are owned by his brothers and sisters (26.6318 hectares), foreclosed by Los BaÃ±os Rural Bank (5.9856 hectares), and registered and/or acquired by other persons (39.64865 hectares). In the event that the other big area consisting of 131.2950 hectares of land is included in the compromise settlement in favor of the government, a total of 361-50817 (sic) hectares of land would comprise about 88.38 % of the 409.50817 hectares registered in the name of the late Mayor Argana.

3) However, as a whole the 361.9203 hectares to be ceded to the government is equivalent to 75.12% of the 481.77422 hectares sequestered by PCGG as presented above. Since the late mayor owns 409.50817 hectares to the government, the percentage share of the government would be 88.38 % and the remaining 11.62 % may be retained by the heirs of the late Mayor Argana, equivalent to 47.58787 hectares.

"F. SUMMARY

"The family of the late Mayor Maximino A. Argana offered to cede to the government a total of 230.62553 hectares of land covered by nine (9) TCTs. Another property, however, consisting of 131.2950 hectares may be considered for inclusion which would increase to 361.9203 hectares of land that may be ceded to the government.

"In the event that the 361.9203 hectares are finally considered and acceptable by both parties, the PCGG and the Arganas, the 481.77422 hectares of sequestered property would be accounted as follows:

Total Area Sequestered

100.00%

481.77422 has.

Accounted as follows:

a) To be ceded the Government

75.12%

361.9203 has.

b) To be retained by the late Mayor Argana's Heirs

9.88%

47.78787 has.

c) Owned by his Brothers & Sisters

5.53%

26.6318 has.

d) Foreclosed by Los BaÃ±os Rural Bank

1.24%

5.9856 has.

e) Owned by Other Persons

8.23%

39.64865 has.

Total

100.00%

481.77422 has.

"However, since the late Mayor Argana owns 409.50817 hectares sequestered and may possibly cede 361.9203 hectares, the percentage share of the government would be 88.38% of the 409.50817 hectares actually registered in his name and his children.

"G. RECOMMENDATION

"The PCGG wanted to recover as much as it could and as fast as possible, while the Arganas wanted to buy peace without admitting guilt. In order to avoid further lengthy litigation and to put an end to an almost ten-year unresolved sequestration issue, and to expedite recovery so that the remaining assets may be used to contribute to the national recovery, the 230.6253 hectares of land covered by nine (9) TCTs (Nos. T-3813, T-3814, T-3815, T-3816, T-3817, T-4104, T-4106, T-4108 and T-4044) offered by the Arganas be favorably considered, on condition that another real estate property covered by TCT No. T-4009, located at Matikiw, Pangil, Laguna, consisting of 131.2950 hectares, be included and to be ceded to the government. All other lots sequestered should be freed from the sequestration order.

"As a whole, the government stands to acquire about 361.9203 hectares out of the 409.50817 hectares registered in the name of Sps. Maximino A. Argana, REFEDOR, and their children, equivalent to 88.38%. The remaining 11.62% or 47.58787 hectares will be retained by the latter.

"For the consideration of the Commission.

Signed

MAURO J. ESTRADA"
(Record, v. 6, pp. 776-78)
(Underlining supplied)

. . . .

The value of the properties must have been raised or even discussed during the several years that the properties were held under sequestration. Yet, not even the PCGG bothered to produce any tax declaration, assessment or appraisal to show the assessed or fair market value of the properties. . . . .

Again in another Memorandum of Director Mauro J. Estrada to PCGG Counsel Edgardo L. Kilayko, dated February 2, 1988, the properties were listed according to the name of the owner, certificate of title, area in square meters, location and percentages in relation to the whole. Obvious from the listing is the absence of a column to indicate the value of the properties or their classification. . . .

The percentage based solely on area, was clearly emphasized, as shown by the following portions of said Memorandum:

"Out of the 409.50817 hectares registered in the name of Spouses Maximo A. Argana and Donata A. Argana as presented above, 361.9203 hectares covering eleven (11) TCTs are to be ceded to the government under the compromise agreement signed by Argana and the Commission in the latter part of 1997. The 361.9203 hectares to be ceded to the government is equivalent to 75.12 % of the total area of 481.77422 hectares, as presented below: x x x" (Record, v. 6, p. 1739) (underlining supplied)

"As a whole, there are 324 TCTs/OCTs covering a total area of 481.77422 hectares, out of which the heirs of the late Mayor agreed to cede 361.9203 hectares equivalent to 75.12 % of the total area. Sometime. In August 1997, the Commission agreed to accept the offer by concluding a compromise agreement with the heirs of the late Mayor." (Record, v. 6, p. 1739) (underlining supplied)

. . . .

. . . The values were deliberately omitted to make it appear that the Compromise Agreement adheres to the 75%-25% ratio broadly adopted by the PCGG in compromising cases of ill-gotten wealth. It was this 75%-25% mode of compromise, with the greater share of 75% going to the government that misled the Court to believe, as We did believe, that the Compromise Agreement was fair, reasonable and advantageous to the Government. . . .

. . . What was projected to be a 75%-25% ratio was in reality a 00.15%-99.85% ratio, with 99.85% going to the Arganas. This is unconscionable and immoral. And since it results in a transaction grossly disadvantageous and immoral to the government, it is against the law as being violative of Section 3(g) of Republic Act 3019.

. . .

In the instant case, fraud of an extrinsic character exists because the representatives of plaintiff Republic in the PCGG connived with defendants in hiding the assessed or market values of the properties involved, so as to make it appear that the Compromise Agreement adhered to the 75%-25% ratio adopted by the PCGG in entering into compromise of cases involving the recovery of ill-gotten wealth. Through their infidelity, those in the PCGG who handled or were closely involved with the case during the last days of the previous administration fraudulently gave the Compromise Agreement a semblance of fairness and official acceptability. They sold plaintiff Republic down the river by entering into an agreement grossly disadvantageous to the government. For while plaintiff Republic got 00.15% (00.15074) of the estimated value of all the properties involved in this case, defendants almost ran away with 99.85% (99.84526) of their value. This is patently unfair. It is no compromise but a virtual sell-out. It could not have been pulled off without the connivance or collusion of those responsible for the case in the PCGG. Instead of protecting the interest of the government, they connived at its defeat almost.⁵⁶ (Emphasis in the original.)

It is evident from the foregoing that the ruling of the Sandiganbayan is grounded on facts and on the law. The Court sees no reason to depart from the conclusions drawn by the Sandiganbayan on the basis of its findings, especially considering that the three justices comprising the Sandiganbayan's Third Division conducted a thorough examination of the documents submitted by the parties to this case, heard the testimonies of the parties' witnesses and observed their deportment during the hearing on the Motion to Rescind.

Moreover, it is an established rule that the State cannot be estopped by the mistakes of its agents.⁵⁷ Respondent cannot be bound by a manifestly unjust compromise agreement reviewed on its behalf and entered into by its representatives from the PCGG who apparently were not looking after respondent's best interests.

WHEREFORE, the petition is DISMISSED for lack of merit. The Resolution dated April 11, 2000 of the Sandiganbayan granting the Motion to Rescind Compromise Agreement and to Set Aside Judgment by Compromise and setting the case for pre-trial, as well as the Order dated February 22, 2001 denying petitioners' motion for reconsideration, are hereby AFFIRMED.

Costs against petitioners.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

Endnotes:

¹ Republic of the Philippines v. Maria Remedios Argana, As Administratrix of the Intestate Estate of the Deceased Maximino A. Argana and in her own behalf, Donata Almendrala Vda. De Argana, Luis Argana, Jr., Peregrino Argana, Estate Of Gelacio Argana, Eufrocinio Nofuente, Amparo Argana Nofuente, Juanito Rogelio, Milagros Argana Rogelio, Maria Felicidad Argana, Maria Dorotea Argana, Refedor South Gold Property Management & Development Corporation.

² Now Muntinlupa City.

³ See Republic of the Philippines v. Sandiganbayan, G.R. No. 115906, September 29, 1994, 237 SCRA 242. The Court held therein that the PCGG has the power to conduct preliminary investigation of cases for forfeiture of allegedly ill-gotten wealth although not committed by the respondent or defendant in close association with former President Ferdinand E. Marcos.

⁴ The Resolution was approved by the PCGG En Banc, i.e., Chairman Magtanggol C. Gunigundo, Commissioners Reynaldo S. Guiao, Hermilo R. Rosal, Juliet C. Bertuben and Herminio A. Mendoza. It states:

WHEREAS, the Argana family had on various occasions offered to enter into a compromise settlement agreement with the Government thru the Presidential Commission on Good Government (PCGG);

WHEREAS, the Commission has examined the manner of acquisition of the Argana properties, and relieves that it is for the best interest of the Government and the Filipino people to accept said offer and since the evidence may not sufficiently warrant continuing the maintenance of the case;

WHEREAS, both parties believe that a compromise settlement is to their mutual benefit and best interest;

NOW, THEREFORE, be it resolved as it is hereby RESOLVED, that the offer of compromise settlement agreement by the Arganas is hereby approved. PROVIDED, FURTHER, that the compromise settlement agreement shall be approved by the President of the Republic of the Philippines and the Sandiganbayan. Commissioners REYNALDO S. GUIAO and HERMINIO A. MENDOZA are hereby authorized to sign the Compromise Agreement for and in behalf of the Commission (Rollo, p. 65).

⁵ The tract of land referred to is a 131.2950-hectare property located at Matikiw, Pangil, Laguna, covered by TCT No. T-4009.

⁶ See April 11, 2001 Resolution of the Sandiganbayan in Civil Case No. 0026; Rollo, p. 174.

⁷ Id. at 76.

⁸ The letter was sent by PCGG Commissioner Mendoza to Acting Solicitor General Romeo C. Dela Cruz; Id. at 80.

⁹ Id. at 80.

¹⁰ Id. at 81.

¹¹ Id. at 82.

¹² Id. at 85-92.

¹³ Answer; Id. at 112.

¹⁴ An Act Declaring Forfeiture in Favor of the State Any Property Found to Have Been Unlawfully Acquired by Any Public Officer or Employee and Providing for the Proceedings Therefor; June 18, 1995.

¹⁵ Rollo, pp. 165-171.

¹⁶ April 11, 2000 Resolution; Id. at 176-180.

¹⁷ Id. at 63-64.

¹⁸ Id. at 62.

¹⁹ Id. at 268-269.

²⁰ Memorandum for Petitioners, Id. at 332.

²¹ Id. at 333-337.

²² Id. at 335.

²³ Id. at 342-349.

²⁴ Id. at 337-341.

²⁵ Id. at 343-346.

²⁶ No. L-40683, June 27, 1975, 64 SCRA 524.

²⁷ Rollo, pp. 343-345.

²⁸ Id. at 350-352.

²⁹ Id. at 358-360.

³⁰ Resolution dated April 11, 2000; Id. at 180-181.

³¹ Id. at 362-364.

³² Id. at 364-365.

³³ Memorandum for Respondent; Id. at 286.

³⁴ Id. at 287-291.

³⁵ Id. at 291-294.

³⁶ Id. at 295-298.

³⁷ Id. at 306-308.

³⁸ Id. at 308.

³⁹ Id. at 298, 309-310.

⁴⁰ Id. at 300-301.

⁴¹ Id. at 302.

⁴² Id. at 258-262.

⁴³ Id. at 308-309.

⁴⁴ Section 1, Rule 65, 1997 Rules on Civil Procedure.

⁴⁵ Arrieta v. Malayan Sawmill Company, 133 Phil. 481 (1968).

⁴⁶ See Sections 2 and 9, R.A. No. 1379.

⁴⁷ Manipor v. Ricafort, G.R. No. 150159, July 25, 2003, 407 SCRA 298; and Bodiogan v. Hon. Ceniza, et al., 102 Phil. 750 (1957).

⁴⁸ Gold Line Transit, Inc. v. Ramos, 415 Phil. 492 (2001).

⁴⁹ See Mago v. Court of Appeals, 363 Phil. 225 (1999); Balite v. Cabangon, 126 Phil. 450 (1967); People's Homesite & Housing Corp. (PHHC) v. Tiongco, et al., 120 Phil. 994 (1964). See also Prudential Bank v. Macadaeg, 105 Phil. 791 (1959).

⁵⁰ In Mago (supra note 49), the petition for relief was filed nine (9) days from the lapse of the sixty (60)-day period. In PHHC (supra note 49), although the petition for relief was also filed beyond the sixty (60)-day period, the Court directed the trial court to admit the motion in view of the "fishy and suspicious" conduct of defendants' counsel which resulted in depriving them of their day in court.

⁵¹ Supra note 49.

⁵² Id., citing Fabar v. Rodelas, No. L-46394, October 26, 1977, 79 SCRA 638, and Consul v. Consul, No, L. 22713, July 26, 1966, 79 SCRA 667.

⁵³ Braca v. Tan, 84 Phil. 582 (1949).

⁵⁴ 354 Phil. 77 (1998).

⁵⁵ Rollo, p. 178.

⁵⁶ Id. at 172-180.

⁵⁷ Republic v. Imperial, 362 Phil. 466 (1999); Concurring Opinion of J. Puno in Republic v. Court of Appeals, 359 Phil. 530 (1998); Lim v. Pacquing, 310 Phil. 722 (1995); GSIS v. Court of Appeals, G.R. No. 103590, January 29, 1993, 218 SCRA 233; Republic v. Intermediate Appellate Court, G.R. No. 69138, May 19, 1992, 209 SCRA 90; Republic v. Court of Appeals, No. L-56077, February 28, 1985, 135 SCRA 156. See also Republic v. Sandiganbayan, G.R. NOS. 108292, 108363, 108548-49 and 108550, September 10, 1993, 226 SCRA 314.

G.R. No. 148189 - EMERITO REMULLA v. JOSELITO DP. MANLONGAT

2013-01-15T09:50:43+00:00

G.R. No. 148189 - EMERITO REMULLA v. JOSELITO DP. MANLONGAT

THIRD DIVISION

[G.R. NO. 148189 : November 11, 2004]

EMERITO REMULLA, Petitioner, v. JOSELITO DP. MANLONGAT, Respondent.

D E C I S I O N

PANGANIBAN, J.:

Rules on the perfection of appeals, particularly on the period for filing notices of appeal, must occasionally yield to the loftier ends of substantial justice and equity. In this case, the one-day delay in the filing of the Notice of Appeal was due to the senseless foot-dragging of the public prosecutor. The State must not be prejudiced or estopped by the negligence of its agents.

The Case

Before us is a Petition for Review¹ under Rule 45 of the Rules of Court, assailing the November 24, 1999 Decision² and the May 9, 2001 Resolution³ of the Court of Appeals (CA) in CA-GR SP No. 47632. The CA disposed as follows:

"WHEREFORE, premises considered, the instant petition is hereby GRANTED. The Order dated January 8, 1998 is hereby ordered set aside. Accordingly, respondent Judge is hereby directed to give due course to the notice of appeal filed by the prosecution on December 19, 1996."⁴

The challenged Resolution, on the other hand, denied petitioner's Motion for Reconsideration "for the reasons that (a) [respondent] was not served a copy of said Motion; [and] (b) the page/pages subsequent to page 4 of the 'Amended Complaint' appended to said Motion was/were not appended thereto."

The Facts

The CA narrated the antecedents as follows:

"[Respondent] Joselito Manlongat filed a complaint before the Office of the City Prosecutor of Makati for (1) frustrated murder against Christian Torres; (2) Ramoncito Cabreira filed a complaint against Torres for physical injuries [sic];⁵ and (3) 'other light threats' against [petitioner Remulla, which] was later on withdrawn. Instead, a complaint for grave coercion was filed against [petitioner Remulla] by David Paras, Jeffrey Quizon and Carlos Packing, docketed as I.S. No. 94-570. x x x A separate complaint was [also] filed by [respondent] for frustrated murder against x x x Remulla as co-principal of Torres, [which complaint was] docketed as I.S. No. 94-571.

"After the preliminary investigation, Prosecutor Jaime Adoc found probable cause for frustrated murder against Torres. However, the charges for physical injuries against Torres and the charges of frustrated murder and grave coercion against x x x Remulla were dismissed. [Respondent] filed a [motion for partial] reconsideration of Prosecutor Adoc's resolution insofar as it dismissed the complaint for frustrated murder and grave coercion against x x x Remulla. The motion was however denied. [Respondent] filed a Petition for Review before the Department of Justice. Meantime, the City Prosecutor filed an information for frustrated murder against Torres (Criminal Case No. 94-4264), [which case was] raffled to Branch 57, Regional Trial Court of Makati City. Torres was arraigned and trial commenced.

"On October 4, 1995, then Secretary of Justice, Teofisto Guingona, Jr. modified Prosecutor Adoc's resolution and instead directed to cause the indictment of x x x Remulla as co-principal of Torres in the frustrated murder case. [Petitioner] Remulla moved to reconsider the Justice Secretary's resolution but it was denied on January 31, 1996. In consideration of the resolution of the Justice Secretary, Prosecutor Renato C. Francisco filed a motion to amend the information in Criminal Case No. 94-4264 to include x x x Remulla as Torres' co-accused. The trial court however denied the motion to amend in its Order dated March 11, 1996. The prosecution moved to reconsider [the] order of denial but it was likewise denied on June 10, 1996.

"On August 2, 1996, the City Prosecutor's Office of Makati filed a separate information for frustrated murder against x x x Remulla (Criminal Case No. 96-1386), which was raffled to Branch 132 of the Regional Trial Court of Makati City presided by Judge Herminio Benito. Three (3) days thereafter, or on August 5, 1996, x x x Remulla filed a Motion to Hold Issuance of Warrant of Arrest and to Dismiss/Quash [the] Information.

"On August 19, 1996, Judge Herminio Benito ordered x x x the transfer of Criminal Case No. 96-1386 to Branch 57 for consolidation with Criminal Case No. 94-4264. Accordingly, x x x Remulla re-filed his motion to Hold Issuance of Warrant of Arrest and to Dismiss/Quash [the] Information before Branch 57, to which the prosecution filed its [J]oint [O]pposition.

"On November 28, 1996, Judge Francisco X. Velez of Branch 57 ordered the dismissal of the Information against x x x Remulla on the ground of forum-shopping. The City Prosecutor's Office of Makati received [a] copy of the order of dismissal on December 3, 1996, while [the] private prosecutors received their copy on December 5, 1996.

"On December 19, 1996, Prosecutor Andres N. Marcos filed a Notice of Appeal, impugning the aforesaid order of dismissal. On the same day, Judge Nemesio Felix, acting judge of Branch 57, in place of Judge Velez who retired, resolved to deny the Notice of Appeal on the ground that it was filed out of time. Both public and private prosecutors filed a motion to reconsider the December 19, 1996 order. x x x [Petitioner] filed his Opposition thereto.

"On April 23, 1997, acting on [respondent's] motion for reconsideration, respondent judge, who had taken over as presiding judge of Branch 57, resolved in the interest of substantial justice, [to] set aside the December 19, 1996 order of Judge Felix and accordingly directed the entire records of the case to be elevated to [the Court of Appeals]. x x x Remulla moved for reconsideration of this order. [Respondent] opposed the motion.

"On January 8, 1998, the x x x assailed order was issued by the [trial court] judge, reversing his prior order dated April 23, 1997 and accordingly denied prosecution's notice of appeal."⁶

Ruling of the Court of Appeals

The appellate court ruled that the 15-day reglementary period to file a Notice of Appeal should be reckoned from December 3, 1995, the date the public prosecutor received a copy of the November 28, 1996 Order of dismissal, not on December 5, 1996, when the private prosecutor received his own copy. Accordingly, by December 19, 1996, the period to file the Notice of Appeal had lapsed.

Nonetheless, the appellate court held that the public prosecutor's failure to file the Notice of Appeal on time was excusable. In their desire to have their appeal taken, respondent and his private counsel consulted the Office of the Solicitor General (OSG) over the apprehensions of the public prosecutor about bringing the appeal by himself. The CA added that their efforts to conform to the rule that the prosecution of criminal cases was under the direction and control of the public prosecutor should not operate to penalize private complainant.

The CA further said it was aware of the general rule that an appeal was a mere statutory privilege that could be availed of only in the manner prescribed by law. Nonetheless, the appellate court held that the rigid application of the rule could be relaxed in the interest of substantial justice.

Hence, this Petition.⁷

Issues

In his Memorandum, petitioner raises the following issues:

"I.

Whether or not the Honorable Court of Appeals gravely erred in ordering the lower court to give due course to the prosecution's Notice of Appeal.

"II.

Whether or not the Honorable Court of Appeals seriously erred in holding that the prosecution's failure to file the Notice of Appeal on time was excusable.

"III.

Whether or not the Honorable Court of Appeals gravely erred in denying petitioner's Motion for Reconsideration of its assailed Decision on the grounds that petitioner failed to furnish the respondent with a copy of the petitioner's motion for reconsideration and for failure to attach page 4 of the Amended Complaint."⁸

These issues boil down to two: whether the CA (1) correctly gave due course to respondent's appeal and (2) erred in denying petitioner's Motion for Reconsideration.

The Court's Ruling

The Petition has no merit.

First Issue:
Due Course to Notice of Appeal

Petitioner bemoans the alleged inconsistency and flip-flop of the CA. While it admitted that respondent had filed his Notice of Appeal beyond the reglementary period, it nevertheless gave due course to the appeal. Petitioner argues that no exceptional instances merited the relaxation of the rules.

On the other hand, the CA contends that the rule governing the perfection of appeals ought not to be applied very strictly when a technical and rigid enforcement would defeat the ends of substantial justice. It adds that the belated filing of a Notice of Appeal was justified and excusable.

Generally, the right to appeal is not constitutional, natural or inherent;⁹ it is a mere statutory privilege to be exercised only in accordance with the provisions of the law.¹⁰ It has thus been held that the failure to perfect an appeal in the manner and within the period allowed by law¹¹ renders the questioned decision final and executory and precludes the appellate court from acquiring jurisdiction to review it.¹²

However, these rules are not iron-clad. This Court is not impervious to instances when rules of procedure must yield to the loftier demands of substantial justice and equity.¹³ Procedural rules are mere tools designed to facilitate the attainment of justice; their application must be liberalized to promote public interest.¹⁴

In a number of cases, the Supreme Court has in fact relaxed the period for perfecting an appeal, especially on grounds of substantial justice,¹⁵ or when there are other special and meritorious circumstances and issues.¹⁶ Verily, this Court has the power to relax or suspend the rules or to exempt a case from their rigid operation when warranted by compelling reasons and the requirements of justice.¹⁷

In the present case, the late filing - - by only one day - - of the prosecution's Notice of Appeal was excusable, considering respondent's diligent efforts. The CA aptly observed:

"Nonetheless, it is our view that the failure to file the [N]otice of [A]ppeal on time, considering the attendant circumstances in this case, is excusable. It does not warrant the denial of the [N]otice of [A]ppeal. In his reply to the opposition to the [M]otion for [R]econsideration of the [O]rder denying the [N]otice of [A]ppeal, reiterated in his present petition, petitioner spelled out in detail the diligence he had exerted for the timely filing of the necessary [N]otice of [A]ppeal by the public prosecutor. His asseverations, which were never disputed by the [petitioner, were as] follows:

'4. Five (5) days after the private prosecutor received [a copy of the Decision] on December 5, 1996, they sought audience with the public prosecutor to inquire if a Notice of Appeal was already filed. The public prosecutor expressed reluctance to file the Notice of Appeal until he has acquainted himself with the records of the case. Moreover, he directed the private prosecutor to refer the matter to the Office of the Solicitor General for proper disposition, it being his considered opinion that it is the OSG which represents 'the people' on appeal.

'5. The private prosecutor did so, as directed by the public prosecutor. Thus, on December 12, 1996, or seven (7) days from the time the private prosecutors received a copy of the assailed Order, a letter endorsing the case for appeal was filed with the OSG.

x x x x x x x x x

'6. From the time said letter-endorsement was submitted, private prosecutors have made repeated follow-ups with the OSG regarding its disposition on the matter. Subsequently, the OSG notified the private prosecutors that it has referred the matter back to the City Prosecutor of Makati x x x, [saying] that the latter still has the requisite personality to file a [Notice of Appeal].'

"It is quite evident that [respondent] fervently intended to appeal the [O]rder of [D]ismissal of the new Information against [petitioner]. His effort to conform to the rule that prosecution of criminal cases rests on the discretion and control of the public prosecutor (Section 5, Rule 110 of the Revised Rules of Civil Procedure) should not thereafter operate to penalize him."¹⁸

More important, we cannot countenance any deprivation of the People of the Philippines of their day in court as a result of the public prosecutor's utterly unreasonable foot-dragging in filing the Notice of Appeal.

In pushing for the strict application of the rules, petitioner cites cases¹⁹ that do not apply to the present controversy. Those cases have been decided on the merits; hence, for the stability of judicial processes, the importance of letting the judgments attain finality must invariably be stressed.

Such a situation does not obtain here. To recall, the criminal case against petitioner had been nipped in the bud before it could even be prosecuted. Thus, to disallow the appeal on purely technical grounds would leave the prosecution with no recourse. It would be deprived of its day in court. Recall, too, that the persistence of respondent has given the Department of Justice the opportunity to find prima facie merit in the former's Complaint.

Time and time again, this Court has stressed that the ends of justice would be served better when cases are determined, not on mere technicality or some procedural nicety, but on the merits - - after all the parties are given full opportunity to ventilate their causes and defenses.²⁰ Lest it be forgotten, dismissal of appeals purely on technical grounds is frowned upon. The rules of procedure ought not to be applied in a very rigid, technical sense, for they have been adopted to help secure - - not override - - substantial justice.²¹ For this reason, courts must proceed with caution so as not to deprive a party of statutory appeal; rather, they must ensure that all litigants are granted the amplest opportunity for the proper and just ventilation of their causes, free from the constraint of technicalities.²²

Second Issue:
Denial of Motion for Reconsideration

Petitioner charges the CA with misapprehension of the facts when it denied his Motion for Reconsideration. He alleges that the grounds it relied upon were not germane to the instant case. First, he says that copies of his Motion for Reconsideration were furnished the private prosecutor and the Office of the Solicitor General, which represents the government in appeals involving criminal cases. Second, there was no attachment to the Motion and no "Amended Complaint" or "Amended Information" submitted to the trial court. What were actually filed with the lower court, he says, were a Motion to Admit Amended Information and an Amended Information, each consisting of one page.

This Court has closely examined the Motion for Reconsideration²³ of the assailed Decision and the questioned Resolution.²⁴ Clearly erroneous was the second ground invoked by the CA: "the page/pages subsequent to page 4 of the "Amended Complaint" appended to the said motion was/were not appended thereto." Nowhere in the 11-page Motion for Reconsideration is there any reference, much less any appended, "Amended Complaint." In fact, the only Annex was a "3-page letter"²⁵ "endorsing the case for appeal."

Thus, it is appropriate to remind the CA to be more careful in its language. A court must strive to ascertain the facts of each case before rendering judgments or orders, lest it open itself to charges of "gross recklessness or omission tantamount to grave abuse of discretion,"²⁶ as in the present case.

Be that as it may, petitioner's Motion for Reconsideration obviously lacked merit, because it merely rehashed grounds that had already been passed upon in the assailed Decision. Hence, the Motion should indeed be denied.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

SO ORDERED.

Sandoval-Gutierrez, Carpio Morales, and Garcia, JJ., concur.
Corona, J., on leave.

Endnotes:

¹ Rollo, pp. 15-46.

² Id., pp. 47-55. Fourth Division. Penned by Justice Mariano M. Umali, with the concurrence of Justices Quirino D. Abad Santos Jr. (Division chairman) and Romeo J. Callejo Sr. (now a member of this Court).

³ Rollo, p. 57.

⁴ CA Decision, p. 9; rollo, p. 55.

⁵ Actually, only the Complaints for (1) and (3) were filed by Respondent Manlongat. It was Ramoncito Cabreira who filed the second Complaint.

⁶ CA Decision, pp. 2-4; rollo, pp. 48-50. Citations omitted.

⁷ The Petition was deemed submitted for decision on August 16, 2004, upon the Court's receipt of the Manifestation signed by respondent himself, indicating that he was no longer interested in pursuing the case, whose disposition he was leaving to the sound discretion of the Court; and that for this reason, he had not filed his Memorandum as directed by the Court in a Resolution dated July 5, 2004. The Office of the Solicitor General filed on July 4, 2003, its Memorandum signed by Assistant Solicitors General Carlos N. Ortega and Nestor J. Ballacillo and Associate Solicitor Maricar S. A. Prudon-Sison. Petitioner's Memorandum, signed by Atty. Isidoro F. Molina, was received by the Court on November 25, 2003.

⁸ Petitioner's Memorandum, p. 4; rollo, p. 621. Original in upper case.

⁹ Yao v. CA, 344 SCRA 202, 214, October 24, 2000; Republic v. CA, 372 Phil. 259, 265, August 31, 1999; Lacson v. The Executive Secretary, 361 Phil. 251, 276, January 20, 1999.

¹⁰ Producers Bank of the Philippines v. CA, 430 Phil. 812, 828, April 17, 2002; Republic v. CA, 379 Phil. 92, 98, January 18, 2000; Cabellan v. CA, 363 Phil 460, 467, March 3, 1999; Spouses Ortiz v. CA, 360 Phil. 95, 100-101, December 4, 1998.

¹¹ Cuevas v. Bais Steel Corporation, 391 SCRA 192, 202, October 17, 2002; Nueva Ecija I Electric Cooperative, Inc. v. NLRC, 380 Phil. 44, 54, January 24, 2000; APEX Mining, Inc. v. CA, 377 Phil. 482, 493, November 29, 1999.

¹² Yao v. CA, supra; Dayrit v. Philippine Bank of Communications, 386 SCRA 117, 125, August 1, 2002; EGV Realty Development Corporation v. CA, 369 Phil. 911, 923, July 20, 1999.

¹³ Nueva Ecija I Electric Cooperative, Inc. v. NLRC, supra.

¹⁴ Paras v. Baldado, 354 SCRA 141, 146, March 8, 2001.

¹⁵ Yutingco v. CA, 435 Phil. 83, 91, August 1, 2002; Tan Tiac Chiong v. Cosico, 434 Phil. 753, 760, July 31, 2002; Olacao v. NLRC, 177 SCRA 38, 49, August 29, 1989.

¹⁶ Equitable PCI Bank v. Ku, 355 SCRA 309, 316, March 26, 2001; De Guzman v. Sandiganbayan, 326 Phil. 182, 188-189, April 11, 1996; Orata v. Intermediate Appellate Court, 185 SCRA 148, 152, May 8, 1990; Olacao v. NLRC, supra; Republic v. CA, 83 SCRA 453, 475-476, May 31, 1978.

¹⁷ Republic v. Imperial Jr., 362 Phil. 466, 477, February 11, 1999.

¹⁸ CA Decision, pp. 6-7; rollo, pp. 52-53.

¹⁹ Republic v. CA, 379 Phil. 92, January 18, 2000; Batara v. CA, 360 Phil. 425, December 16, 1998; Spouses Ortiz v. CA, supra; Ortega v. CA, 359 Phil. 126, November 16, 1998; Trans International v. CA, 358 Phil. 369, October 12, 1998; Tan v. CA, 356 Phil. 1058, September 22, 1998; Almeda v. CA, 354 Phil. 600, July 16, 1998; Ditching v. CA, 331 Phil. 665, October 18, 1996; Garbo v. CA, 327 Phil. 780, July 5, 1996; Pedrosa v. Spouses Hill, 327 Phil. 153, June 14, 1996; Azores v. Securities & Exchange Commission, 322 Phil. 425, January 25, 1996; Bank of America, NT & SA v. Gerochi Jr., 230 SCRA 9, February 10, 1994; Velasco v. Ortiz, 184 SCRA 303, April 16, 1990; Edra v. CA, 179 SCRA 344, November 13, 1989; Limpot v. CA, 170 SCRA 367, February 20, 1989; Municipality of Obando, Bulacan v. IAC, 154 SCRA 363, September 29, 1987.

²⁰ Paras v. Baldado, supra.

²¹ Jaro v. CA, 427 Phil. 532, 548, February 19, 2002.

²² Salazar v. CA, 426 Phil. 864, 876, February 6, 2002.

²³ Rollo, pp. 305-315.

²⁴ Dated May 9, 2001; rollo, p. 57.

²⁵ Denominated as Annex "U," p. 3 of Motion for Reconsideration; rollo, p. 307.

²⁶ Petitioner's Memorandum, p. 18; rollo, p. 635.

G.R. No. 148199 - HENRY JAMES PIKE v. NATIONAL POWER CORPORATION

2013-01-15T09:50:43+00:00

G.R. No. 148199 - HENRY JAMES PIKE v. NATIONAL POWER CORPORATION

SECOND DIVISION

[G.R. NO. 148199 : November 24, 2004]

HENRY JAMES PIKE, Petitioner, v. NATIONAL POWER CORPORATION, Respondent.

D E C I S I O N

CALLEJO, SR., J.:

Challenged in this case is the Decision¹ of the Court of Appeals (CA) in National Power Corporation v. Henry James Pike, Aurelia Gapit and Crisanto Navarette, CA-G.R. CV No. 56686, which set aside and reversed the judgment of the Regional Trial Court (RTC) of Calamba, Laguna, Branch 35, in Civil Case No. 2245-95-C in the form of an Order.²

The Antecedents

The National Power Corporation (NPC) is a government-owned and controlled corporation created and existing by virtue of Republic Act No. 6395, as amended, for the purpose of undertaking the development of hydraulic power, the production of power from any source, particularly by constructing, operating and maintaining power plants, auxiliary plants, dams, reservoirs, pipes, mains, transmission lines, power stations and other works, and to develop hydraulic power from any river, creek, lake, spring and waterfalls in the Philippines.

On November 17, 1995, NPC filed a Complaint for the expropriation of a portion of Lot No. 4553, Cad. 397, Bay Cadastre, with an area of 14,212 square meters, located at Barangay Bitin, Bay, Laguna, for the construction and maintenance of its Modular Plant D Project. Impleaded as defendants were petitioner Henry James Pike, Crisanto Navarette and Aurelia Gapit, who were alleged to be the owners/claimants of the property. In his omnibus answer to the complaint, the petitioner claimed ownership of the entire property. He alleged that his property, covered by Tax Declaration No. 02-003-0454, originally consisted of 45,492 square meters and that a portion with an area of 22,703 square meters had been expropriated by the respondent, leaving a residue of 19,571 square meters. He prayed that, after due proceedings, judgment be rendered in his favor, thus:

WHEREFORE, premises considered, defendant PIKE, in particular, and unto this Honorable Court, most respectfully prays that judgment be rendered in favor of herein defendant PIKE and ordering plaintiff:

1. To pay defendant PIKE the fair and prevailing value of the taken land, covering an area of 14,212 square meters, with legal interest thereon, computed from the date of its actual taking without authority of law and consent;

2. On Affirmative Defenses; and, On Prayer For Summary And/Or Judgment On The Pleadings:

To require hearing thereon, with notice to plaintiff, and, thereafter, to render summary judgment and/or judgment on the pleading in favor of defendant Pike, in particular;

3. To pay defendant PIKE the amount of P800,000.00 in terms of actual, consequential, moral, exemplary, corrective and exemplary damages;

4. To pay defendant PIKE another amount of P150,000.00 by way of attorney's fees;

5. To pay defendant PIKE the other amount of P25,000.00 as additional expenses of litigations.

That defendant PIKE further prays for such other relief and remedies that the Honorable Court may deem it just, proper and equitable under the premises.³

The parties submitted a Joint Memorandum⁴ to the court on January 11, 1996 in which they prayed that partial judgment be rendered over a portion of the property with an area of 9,058 square meters, including the improvements thereon, at the price of P147.75 per square meter, to be paid by the respondent to the petitioner as owner thereof. On motion of the petitioner, the court issued an Order on January 12, 1996, directing the respondent to pay to the petitioner the amount of P1,338,319.50 for the portion of the property covering an area of 9,058 square meters, and a separate payment for the improvements thereon.⁵ Thus, only a portion of the property with an area of 5,159 square meters was to be litigated on by the parties.

The petitioner, thereafter, filed an Omnibus Motion for Leave and to Admit his Amended Answer Impleading Cross-Claims, where he claimed ownership of the remaining 5,159-square meter portion of the property. The petitioner prayed that, after due proceedings, judgment be rendered, thus:

WHEREFORE, premises considered, defendant PIKE, in particular, and unto this Honorable Court, most respectfully prays that judgment be rendered in favor of herein defendant PIKE and ordering plaintiff:

1. To pay defendant PIKE the fair and prevailing value of the taken land, covering an area of 14,212 square meters, with legal interest thereon, computed from the date of its actual taking without authority of law and consent;

2. On Affirmative Defenses; and, On Prayer For Summary And/Or Judgment On The Pleadings:

To require hearing thereon, with notice to plaintiff, and, thereafter, to render summary judgment and/or judgment on the pleading in favor of defendant Pike, in particular;

3. On Cross-Claims: To direct plaintiff, herein plaintiff National Power Corporation, to pay and compensate, in terms of just compensation, herein defendant Henry James Pike, in particular, to the exclusion of co-defendants Crisanto Navarette and Aurelia Gapit;

4. To pay defendant PIKE the amount of P800,000.00 in terms of actual, consequential, moral, exemplary, corrective and nominal damages;

5. To pay defendant PIKE another amount of P25,000.00, as additional expenses of litigations.

That defendant PIKE further prays for such other relief and remedies that the Honorable Court may deem it just, proper and equitable under the premises.⁶

Nevertheless, the petitioner filed, on February 12, 1996, an Omnibus Motion for Leave to File and Admit Third-Party Complaint against the respondent and Crisanto Navarette and Aurelia Gapit, appending thereto his third-party complaint. On February 14, 1996, the trial court issued an Order admitting the petitioner's amended answer; however, his motion for leave to file and admit third-party complaint was denied. Despite the service of the amended answer of the petitioner on Navarette and Gapit, the latter failed to file their answers on his cross-claims. On motion of the petitioner, the trial court issued an Order⁷ on March 8, 1996, declaring Navarette and Gapit in default on the petitioner's cross-claims, and set the reception of evidence, ex parte, thereon at 8:30 a.m. of March 15, 1996.

On June 25, 1996, Navarette and Gapit, through their attorney-in-fact Engr. Rodel Formeloza, filed a verified motion to lift the March 8, 1996 Order of the trial court and filed their answer with counterclaims and cross-claims. They alleged therein that the petitioner was an American citizen, disqualified to own real property, and that, having been in actual, adverse and continuous possession of property with an area of 6,500 square meters for more than thirty (30) years, they had acquired the same by virtue of acquisitive prescription and were the owners thereof. Navarette and Gapit, likewise, alleged that:

13. Defendant Pike's act of claiming a land that is not his and, worse, if he accepted the payment for the same knowing fully well that the same does not belong nor that he is not qualified to own such lands, is plain and simple fraud;

14. If defendant Pike received anything from the NPC that should not pertain to him but to herein defendants, the same must be returned to herein defendants;

15. Because of his wrongful claim that a portion of defendants' land belongs to him, herein defendants suffered actual, moral, exemplary and litigation damages (sic), to wit:

A. Actual damages for the hiring of a geodetic surveyor to prove the extent of their land ownership; the going to and from the Bureau of Lands to have the same approved, coordination with the NPC, prior to this suit, to clarify and prove their ownership thereof;

b. Moral damages for the pain and the worry, the social humiliation sleepless nights and besmirched reputation caused by his wrongfully claiming the lands belonging to the herein defendants;

c. Exemplary damages for claiming a land that is not his and asking the NPC to pay him for lands that he knows he does not own nor be unable to own;

d. The cost of hiring the herein counsel for an agreed sum of Fifty Thousand Pesos (P50,000) and the costs of suit such as xeroxing, mailing, printing in the computer and others, in the amount of P50,000 for the duration of this suit;

e. Others.⁸

The petitioner opposed the motion, contending that he was a natural-born Filipino; and that he owned the property to the exclusion of Navarette and Gapit. On August 21, 1996, the trial court granted the motion of Navarette and Gapit and set aside its March 8, 1996 Order declaring them in default on the petitioner's cross-claims, and admitted the said answer of the said defendants.⁹ On September 18, 1996, the trial court issued an Order¹⁰ terminating the pre-trial.

In an Order dated February 24, 1997, the trial court rendered judgment in favor of the petitioner as follows:

WHEREFORE, premises considered, this Court resolves to give judicious weight on the rightful ownership of defendant Henry James Pike, in particular, over the remaining portion of land with an area of 5,159 square meters; and, accordingly, plaintiff National Power Corporation is hereby directed to pay defendant Pike, to the exclusion of defendants Crisanto Navarette and Aurelia Gapit, the computed amount of P762,242.25 for the area of 5,159 square meters at P147.75 per square meter.

In the meantime, all counterclaims and cross-claims lodged by [the] respective parties in this case, including all pleadings of the same imports, are hereby dismissed without pronouncement as to costs.

SO ORDERED.¹¹

Believing that the February 24, 1997 judgment of the RTC had become final and executory, the respondent paid the amount to the petitioner.

Gapit and Navarette appealed the order to the CA which rendered judgment in their favor on April 30, 2001, reversing and setting aside the February 24, 1997 Order of the RTC, and ordered the remand of the records to the RTC for further proceedings.

The petitioner now comes to the court via a Petition for Review on Certiorari against the respondent, alleging that the CA erred as follows: (a) in assuming appellate jurisdiction over the appeal and in reversing the decision of the RTC which had become final and executory; (b) in holding that the respondents were deprived of their day in court; and (c) in not dismissing the appeal before it on the ground of forum shopping.¹²

In its comment on the petition, the respondent avers that '

[THE] PETITIONER HAS FAILED TO IMPLEAD AS RESPONDENTS THE PROPER PARTIES; OTHERWISE STATED, AURELIA GUPIT (SIC) AND CRISANTO NAVARETTE, NOT NPC, SHOULD HAVE BEEN IMPLEADED AS RESPONDENTS IN THE INSTANT PETITION.¹³

The respondent further claims that the petitioner has no cause of action against it, considering that it had already paid the petitioner the total amount of P2,100,561.75 for the entire property sought to be expropriated, including that portion claimed by Gapit and Navarette, the defendants-appellants in the CA:

In passing, it is worthy to note for purposes of record that the original appeal (CA-G.R. CV No. 56686), wherein the decision rendered by the Honorable Court of Appeals on April 30, 2001, last; and, on account of said decision the present appeal has been lodged with the Honorable Supreme [Court], was then elevated to the Honorable Appellate Court, in Manila, by way of [an] appeal, without the knowledge or acquiescence of herein appellant Pike. In effect, the partial judgment (Annex "O," supra) rendered under Civil Case No. 2245-95-C (petition) (RTC-Br. 35, Calamba) as well as the subsequent Court order, dated February 24, 1997, (Annex "M," supra) were both stamped with finality and, thus, put to end appellant Pike's claims for just compensation on his expropriated land had been paid in the total amount of TWO MILLION ONE HUNDRED THOUSAND FIVE HUNDRED SIXTY ONE & 75/100 (P2,100,561.75), as its full compensation that ultimately terminated the original expropriation proceeding in so as herein appellant Pike and the appellee Napocor were concern (sic).

Thus, as between appellee Napocor and appellant Pike, there is no cogent reason and legal basis for the latter (Pike) to cross-examine the witnesses of appellee (Napocor), nor to adduce evidence on his part.¹⁴

In his reply, the petitioner asserts that there is no longer a need to still implead Navarette and Gapit as parties, as they had already been given their day in court in the trial and appellate courts.

The Ruling of the Court

The issue before the Court is whether or not the respondent is the proper party-in-interest as party-respondent.

We agree with the respondent that the proper parties as respondents in the present petition are Gapit and Navarette, who were the defendants-appellants in the CA.

First. Section 4, Rule 45 of the 1997 Rules of Civil Procedure provides that:

Sec. 4. Contents of petition. - The petition shall be filed in eighteen (18) copies, with the original copy intended for the court being indicated as such by the petitioner; and shall (a) state the full name of the appealing party as the petitioner and the adverse party as respondent, without impleading the lower courts or judges thereof either as petitioners or respondents; (b) indicate the material dates showing when notice of the judgment or final order or resolution subject thereof was received, when a motion for new trial or reconsideration, if any, was filed and when notice of the denial thereof was received; (c) set forth concisely a statement of the matters involved, and the reasons or arguments relied on for the allowance of the petition; (d) be accompanied by a clearly legible duplicate original, or a certified true copy of the judgment or final order or resolution certified by the clerk of court of the court a quo and the requisite number of plain copies thereof, and such material portions of the record as would support the petition; and (e) contain a sworn certification against forum shopping as provided in the last paragraph of Section 2, Rule 42.¹⁵

The adverse parties in the Rule refer to the parties in whose favor the appellate court rendered its decision adverse to the petitioner, as appellee. Under the decision of the CA, the aggrieved parties are the petitioner and the respondent NPC; on the other hand, Gapit and Navarette, the winning parties in the CA, are the adverse parties in this case.

Second. Gapit and Navarette are parties-in-interest under Section 2, Rule 3 of the 1997 Rules of Civil Procedure, which reads:

Sec. 2. Parties-in-interest. - A real party-in-interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless, otherwise, authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party-in-interest.

They are, in fact, indispensable parties under Section 7, Rule 3 of the said Rules:

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

Unless Gapit and Navarette are joined as parties-respondents, any judgment of the Court in this case shall not be binding on them. All subsequent actuations of the Court shall then be rendered null and void for want of authority to act, not only as to the absent parties but also as to those present.¹⁶ The Court cannot thus proceed without their presence.

Clearly, the respondent is not the proper party as respondent before this Court because it was the plaintiff-appellee in the CA; as such, it has the option to assail the decision of the CA or to simply abide by it. The respondent opted not to challenge the decision of the CA. Besides, the respondent had already paid to the petitioner the price of the property, including that claimed by Gapit and Navarette, as fixed by the trial court in its February 24, 1997 Decision.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, TINGA, and Chico-Nazario, JJ., concur.

Endnotes:

¹ Penned by Associate Justice Ruben T. Reyes, with Associate Justices Eriberto U. Rosario, Jr. (retired) and Juan Q. Enriquez, Jr., concurring.

² Penned by Judge Romeo C. De Leon.

³ Records, pp. 32-33.

⁴ Id. at 70-71.

⁵ Id. at 73.

⁶ Id. at 87-88.

⁷ Id. at 112.

⁸ Id. at 181-182.

⁹ Id. at 231.

¹⁰ Id. at 240.

¹¹ Id. at 318.

¹² Rollo, p. 40.

¹³ Id. at 161.

¹⁴ Id. at 163-164.

¹⁵ Underscoring supplied.

¹⁶ Lim Tan Hu v. Ranolete, 66 SCRA 425 (1975).

G.R. No. 148223 - FERNANDO GABATIN, ET AL. v. LAND BANK OF THE PHILIPPINES

2013-01-15T09:50:44+00:00

G.R. No. 148223 - FERNANDO GABATIN, ET AL. v. LAND BANK OF THE PHILIPPINES

SECOND DIVISION

[G.R. NO. 148223 : November 25, 2004]

FERNANDO GABATIN, JOSE GABATIN AND ALBERTO GABATIN, Petitioners, v. LAND BANK OF THE PHILIPPINES, Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

Before us is a petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the Decision and Resolution dated 15 September 2000 and 03 May 2001, respectively, of the Court of Appeals in CA-G.R. CV No. 61240, entitled, "Fernando Gabatin, Alberto Gabatin and Jose Gabatin, petitioners-appellees v. Department of Agrarian Reform, respondent." The Decision set aside the order of the Special Agrarian Court (SAC) dated 04 May 1998, and the Resolution denied petitioners' motion for reconsideration.

Petitioners Fernando, Alberto, and Jose, all surnamed Gabatin, were registered owners of three parcels of rice land situated in Sariaya, Quezon, under separate certificates of title, namely: Transfer Certificate of Title (TCT) No. T-107863 (0.3965 hectare),¹ TCT No. T-107864 (1.4272 hectares)² and TCT No. T-107865 (1.4330 hectares).³ In 1989, the properties, pursuant to the Land Reform Program of the Government as defined under Presidential Decree (P.D.) No. 27⁴ and Executive Order (E.O.) No. 228,⁵ were placed by the Department of Agrarian Reform (DAR) under its Operation Land Transfer (OLT). The properties were distributed to deserving farmer beneficiaries through the issuance of emancipation patents.⁶

The formula prescribed under P.D. No. 27 and E.O. No. 228⁷ for computing the Land Value (LV) of rice lands is 2.5 x Average Gross Production (AGP) x Government Support Price (GSP). Otherwise stated, the formula is as follows:

LV = 2.5 x AGP x GSP

The AGP for the lots covered under TCTs No. T-107863 and No. T-107864 was at 94.64 cavans per hectare while that of TCT No. T-107865 was at 118.47.⁸ The DAR and respondent Land Bank of the Philippines (Land Bank), fixed the GSP at P35 which was the price of each cavan of palay in 1972, when the lots were deemed taken for distribution. Hence, respondent's valuation of the properties:

Acquired Property

Area in hectares

Land Value

TCT No. T-107864

1.4272

P 11,818.47

TCT No. T-107865

1.4330

14,854.66

TCT No. T-107863

.3965

3,283.41⁹

TOTAL

P 29,956.54

Petitioners rejected the valuation.

On 16 April 1996, petitioners filed a case for the determination of just compensation of their lands with the Regional Trial Court (RTC) of Lucena City, naming the DAR and Land Bank as respondents.¹⁰ The case was docketed as Civil Case No. 96-57 and raffled to Branch 56, the designated Special Agrarian Court (SAC). Petitioners prayed that the just compensation be fixed in accordance with the formula in P.D. No. 27, with 6% compounded annual interest to be paid based on the price of palay at the time of payment and not at the time of taking. The SAC, in its order,¹¹ fixed the GSP of palay at the current price of P400 as basis for the computation of the payment, and not the GSP at the time of taking, thus:

TCT T-107863

P 37,524.76

TCT T-107864

P 135,070.20

TCT T-107865

P 169,767.50

TOTAL

P 342,362.46¹²

Respondent Land Bank filed a motion for reconsideration¹³ dated 04 June 1998 which was denied by the trial court in its Order¹⁴ dated 23 July 1998. Of the two respondents in the trial court, only Land Bank appealed to the Court of Appeals under Rule 41 of the Rules of Court.¹⁵

On 10 July 2000, petitioners filed a motion to remand the records to the SAC and to dismiss the appeal on the grounds that the decision of the SAC became final and executory, and that the appeal raised issues involving purely questions of law. They maintained that the appeal of respondent, not being an indispensable party, did not stop the running of the period to appeal, thereby making the decision final. They also claimed that the appeal should be dismissed because the proper venue is the Supreme Court via a Petition for Review under Rule 45, and not the Court of Appeals.¹⁶

On 15 September 2000, the Court of Appeals rendered a decision denying the motion to dismiss and reversing the decision of the SAC. It ruled it has jurisdiction over the appeal reasoning that its jurisdiction over appeals from RTCs cannot simply be disregarded on the submission that the issues presented before it are purely legal in nature. As to the personality of Land Bank to file the said appeal, the Court of Appeals made a finding that respondent was a necessary party; hence, it had a personality to appeal the SAC decision. It also fixed the GSP at the time of taking of the land in 1972, instead of the GSP at the time of payment. Thus:

Based on the foregoing, the appropriate land valuation formula for the appellees' property should be two and a half (2' ) multiplied by the average gross production multiplied by the price of palay (P35.00), (P.D. No. 27). In addition, the said amount shall accumulate compounded interest at 6% per annum, pursuant to A.O. No. 13, (1994) (supra) computed from the time of taking, i.e., when P.D. No. 27 came into effect in October, 1972, until the full amount is paid.

. . .

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The appealed order of the Regional Trial Court below is hereby REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered fixing the just compensation due to the petitioners-appellees based on the price of palay per cavan at the time the subject properties were taken, under the formula abovementioned, with interest at 6% per annum, compounded annually, starting October, 1972 until the full amount is paid.¹⁷

The petitioners' motion for reconsideration was likewise denied.¹⁸

Hence, this Petition for Review . The following issues were raised:

FIRST: Is the special mode of appeal by Petition for Review from a decision of the Special Agrarian Court (SAC) pursuant to Section 60 of R.A. 6657 still effective as the only mode of appeal from decisions of the SAC?chanroblesvirtualawlibrary

SECOND: May the Court of Appeals give due course to the appeal filed by a necessary party without being joined by the indispensable party which did not appeal the decision?chanroblesvirtualawlibrary

THIRD: Whether just compensation in kind (palay) at the time of the taking of the properties shall be appraised at the price of the commodity at the time of the taking or at the time it was ordered paid by the SAC?

FIRST ISSUE

In the case of Land Bank v. De Leon¹⁹ (hereinafter referred to as Decision), we made the definitive pronouncement that a Petition for Review under Rule 42, and not an ordinary appeal under Rule 41, is the appropriate mode of appeal on the decisions of the RTCs acting as SACs. In the said case, Land Bank filed a motion for reconsideration. In a resolution²⁰ dated 20 March 2003 (hereinafter referred to as Resolution), we resolved the Motion for Reconsideration in this wise:

WHEREFORE, the motion for reconsideration dated October 16, 2002 and the supplement to the motion for reconsideration dated November 11, 2002 are PARTIALLY GRANTED. While we clarify that the Decision of this Court dated September 10, 2002 stands, our ruling therein that a Petition for Review is the correct mode of appeal from decisions of Special Agrarian Courts shall apply only to cases appealed after the finality of this Resolution.²¹ (Emphasis supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

Herein petitioners assailed the Resolution. It is the remonstration of the petitioners that since the notice of appeal filed by respondent under Rule 41 was incorrect, the same did not stop the running of the reglementary period to file a Petition for Review under Rule 42. The decision, therefore, of the SAC became final and executory and, consequently, respondent had completely lost the remedy of appeal. In effect, petitioners contended that the Resolution, when it prescribed for the prospective application of the Decision, took away their vested rights to immediate payment of just compensation and created a second right to appeal in favor of the respondent.

On the other hand, respondent asseverates that since its appeal of the decision of the SAC, via notice of appeal under Rule 41, was perfected prior to the promulgation of the Resolution, the same cannot be dismissed outright since the Resolution applies prospectively.²²

We do not agree with the petitioners.

It bears noting that the Decision, which prescribed for Rule 42 as the correct mode of appeal from the decisions of the SAC, was promulgated by this Court only on 10 September 2002, while the Resolution of the motion for reconsideration of the said case giving it a prospective application was promulgated on 20 March 2003. Respondent appealed to the Court of Appeals on 31 July 1998 via ordinary appeal under Rule 41 of the Rules of Court. Though appeal under said rule is not the proper mode of appeal, said erroneous course of action cannot be blamed on respondent. It was of the belief that such recourse was the appropriate manner to question the decisions of the SAC. In Land Bank v. De Leon,²³ we held:

On account of the absence of jurisprudence interpreting Sections 60 and 61 of RA 6657 regarding the proper way to appeal decisions of Special Agrarian Courts as well as the conflicting decisions of the Court of Appeals thereon, LBP cannot be blamed for availing of the wrong mode. Based on its own interpretation and reliance on the Buenaventura ruling, LBP acted on the mistaken belief that an ordinary appeal is the appropriate manner to question decisions of Special Agrarian Courts.

Thus, while the rule is that the appropriate mode of appeal from the decisions of the SAC is through Petition for Review under Rule 42, the same rule is inapplicable in the instant case. The Resolution categorically stated that said ruling shall apply only to those cases appealed after 20 March 2003.²⁴

It is beyond cavil, therefore, that since this Court had already ruled on the prospective application of the Land Bank v. De Leon decision, said issue must be laid to rest and must no longer be disturbed in this decision. Stare decisis et non quieta movere.²⁵ Stand by the decisions and disturb not what is settled. It is a very desirable and necessary judicial practice that when a court has laid down a principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it to all future cases where the facts are substantially the same, absent any countervailing considerations.²⁶ An in-depth study of the case at bar clearly shows that it does not fall under the exception of the stare decisis rule.

SECOND ISSUE

Petitioners find fault in the decision of the Court of Appeals which ruled that Land Bank has the right to appeal on the ground that it is a necessary party. It is argued that DAR, being the only agency authorized by law to represent the Republic of the Philippines in the acquisition of private agricultural lands for agrarian reform, as stated under Section 51(1) of Republic Act No. 3844 and amended by Rep. Act No. 6389, is an indispensable party in expropriation proceedings. Petitioners allege that Land Bank is only a necessary party, thus, the Court of Appeals should have dismissed the appeal pursuant to MWSS v. Court of Appeals²⁷ which states that "when indispensable parties are not before the courts, the action should be dismissed." Hence, petitioners concluded that the Court of Appeals acted without jurisdiction when it gave due course and decided the appeal filed by Land Bank, a necessary party, without being joined by the DAR, the indispensable party.

Respondent answered that it can file an appeal independently of the DAR in land valuation or in just compensation cases arising from the agrarian reform program. In support of its argument, respondent avers that it is an agency created primarily to provide financial support in all phases of agrarian reform pursuant to Section 74 of Rep. Act No. 3844 and Section 64 of Rep. Act No. 6657. It is also vested with the primary responsibility and authority in the valuation and compensation of covered landholdings to carry out the full implementation of the Agrarian Reform Program.²⁸ It may agree with the DAR and the landowner as to the amount of just compensation to be paid to the latter and may also disagree with them and bring the matter to court for judicial determination.²⁹

Respondent cited jurisprudence pronouncing that it is not just a "mere rubber stamp" but a "necessary cog"³⁰ in agrarian reform as it does not just exercise a ministerial function but has an "independent discretionary role"³¹ in the valuation process of the land covered by land reform. Respondent further stressed that this Court, in the Decision, has recognized its right to appeal from an adverse decision in a just compensation case.

We agree with the respondent.

The Rules of Court provides that parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants.³² In BPI v. Court of Appeals,³³ this Court explained:

. . . An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had. The party's interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties' that his legal presence as a party to the proceeding is an absolute necessity. In his absence there cannot be a resolution of the dispute of the parties before the court which is effective, complete, or equitable.

Conversely, a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not necessarily be prejudiced by a judgment which does complete justice to the parties in court. He is not indispensable if his presence would merely permit complete relief between him and those already parties to the action or will simply avoid multiple litigation.

Without the presence of indispensable parties to a suit or proceeding, judgment of a court cannot attain real finality. (emphasis supplied)

It must be observed that once an expropriation proceeding for the acquisition of private agricultural lands is commenced by the DAR, the indispensable role of Land Bank begins.

Even in the preliminary stage of the valuation and the determination of just compensation, the respondent's task is inseparably interwoven with that of the DAR, thus:

. . . under the law, the Land Bank of the Philippines is charged with the initial responsibility of determining the value of lands placed under agrarian reform and compensation to be paid for their taking (Section 1, E.O. 405). Through the notice sent to the landowner pursuant to '16(a) of R.A. No. 6657, the DAR makes an offer. In case the landowner rejects the offer, a summary administrative proceeding is held and afterward, the provincial (PARAD), the regional (RARAD) or the central (DARAB) adjudicator as the case maybe, depending on the value of the land, fixes the price to be paid for the land. If the landowner does not agree to the price fixed, he may bring the matter to the RTC acting as Special Agrarian Court.³⁴

E.O. No. 405 provides that the DAR is required to make use of the determination of the land valuation and compensation by the Land Bank as the latter is primarily responsible for the determination of the land valuation and compensation for all private lands under Rep. Act No. 6657.³⁵

In Sharp International Marketing v. Court of Appeals,³⁶ this Court even went on to say that without the Land Bank, there would be no amount to be established by the government for the payment of just compensation, thus:

As may be gleaned very clearly from EO 229, the LBP is an essential part of the government sector with regard to the payment of compensation to the landowner. It is, after all, the instrumentality that is charged with the disbursement of public funds for purposes of agrarian reform. It is therefore part, an indispensable cog, in the governmental machinery that fixes and determines the amount compensable to the landowner. Were LBP to be excluded from that intricate, if not sensitive, function of establishing the compensable amount, there would be no amount "to be established by the government" as required in Section 6 of EO 229. (emphasis supplied)

More telling is the fact that Land Bank can disagree with the decision of the DAR in the determination of just compensation, and bring the matter to the RTC designated as a SAC for final determination of just compensation.³⁷

The foregoing clearly shows that there would never be a judicial determination of just compensation absent respondent Land Bank's participation. Logically, it follows that respondent is an indispensable party in an action for the determination of just compensation in cases arising from agrarian reform program.

Assuming arguendo that respondent is not an indispensable party but only a necessary party as is being imposed upon us by the petitioners, we find the argument of the petitioners that only indispensable parties can appeal to be incorrect.

There is nothing in the Rules of Court that prohibits a party in an action before the lower court to make an appeal merely on the ground that he is not an indispensable party. The Rules of Court does not distinguish whether the appellant is an indispensable party or not. To avail of the remedy, the only requirement is that the person appealing must have a present interest in the subject matter of the litigation and must be aggrieved or prejudiced by the judgment.³⁸ A party, in turn, is deemed aggrieved or prejudiced when his interest, recognized by law in the subject matter of the lawsuit, is injuriously affected by the judgment, order or decree.³⁹ The fact that a person is made a party to a case before the lower court, and eventually be made liable if the judgment be against him, necessarily entitles him to exercise his right to appeal. To prohibit such party to appeal is nothing less than an outright violation of the rules on fair play.

THIRD ISSUE

To determine the land value under P.D. No. 27 and E.O. No. 228, the following formula is used:

LV (land value) = 2.5 x AGP x GSP

Petitioners argue that the GSP be fixed at the time of payment by SAC which was then at P400. In support thereof, they cited the case of Land Bank v. Court of Appeals,⁴⁰ wherein Land Bank was ordered to pay the land value based on the GSP at the time the Provincial Agrarian Reform Adjudicator's (PARAD) decision was rendered, and not at the time of the taking of the property. Petitioners also made reference to Article 1958 of the Civil Code which provides for the appraisal of an interest payable in kind at the current price of the product at the time and place of payment.⁴¹

Respondent counters that in keeping with settled jurisprudence, the determination of compensation for lands covered by P.D. No. 27 is reckoned from the time of the taking of the same.⁴² Under E.O. No. 228, 21 October 1972 was the time of taking for this was when the landowner was effectively deprived of possession and dominion over his landholding.⁴³

In the case at bar, parties are in harmony as to the AGP of the lots under consideration. The AGP for the lots covered under TCTs No. T-107863 and No. T-107864 was at 94.64 cavans per hectare, and that for the lot under TCT No. T-107865 was at 118.47.⁴⁴

The pith of the controversy is the determination of the GSP for one cavan of palay. Should the same be based on the price at the time of taking or at the time of payment as ordered by the SAC?chanroblesvirtualawlibrary

We must stress, at the outset, that the taking of private lands under the agrarian reform program partakes of the nature of an expropriation proceeding.⁴⁵ In a number of cases, we have stated that in computing the just compensation for expropriation proceedings, it is the value of the land at the time of the taking, not at the time of the rendition of judgment, which should be taken into consideration.⁴⁶ This being so, then in determining the value of the land for the payment of just compensation, the time of taking should be the basis. In the instant case, since the dispute over the valuation of the land depends on the rate of the GSP used in the equation, it necessarily follows that the GSP should be pegged at the time of the taking of the properties.

In the instant case, the said taking of the properties was deemed effected on 21 October 1972, when the petitioners were deprived of ownership over their lands in favor of qualified beneficiaries, pursuant to E.O. No. 228⁴⁷ and by virtue of P.D. No. 27.⁴⁸ The GSP for one cavan of palay at that time was at P35.⁴⁹ Prescinding from the foregoing discussion, the GSP should be fixed at said rate, which was the GSP at the time of the taking of the subject properties.

Petitioners are not rendered disadvantaged by the computation inasmuch as they are entitled to receive the increment of six percent (6%) yearly interest compounded annually pursuant to DAR Administrative Order No. 13, Series of 1994.⁵⁰ As amply explained by this Court:⁵¹

The purpose of AO No. 13 is to compensate the landowners for unearned interests. Had they been paid in 1972 when the GSP for rice and corn was valued at P35.00 and P31.00, respectively, and such amounts were deposited in a bank, they would have earned a compounded interest of 6% per annum. Thus, if the PARAD used the 1972 GSP, then the product of (2.5 x AGP x P35.00 or P31.00) could be multiplied by (1.06) to determine the value of the land plus the additional 6% compounded interest it would have earned from 1972.

Petitioners' reliance on Land Bank v. Court of Appeals⁵² where we ordered Land Bank to pay the just compensation based on the GSP at the time the PARAD rendered the decision, and not at the time of the taking, is not well taken. In that case, PARAD, in its decision, used the GSP at the time of payment in determining the land value. When the decision became final and executory, Land Bank, however, refused to pay the landowner arguing that the PARAD's valuation was null and void for want of jurisdiction. We ruled therein that the PARAD has the authority to determine the initial valuation of lands involving agrarian reform. Thus, the decision of the PARAD was binding on Land Bank. Land Bank was estopped from questioning the land valuation made by PARAD because it participated in the valuation proceedings and did not appeal the said decision. Hence, Land Bank was compelled to pay the land value based on the GSP at the time of payment.

The factual milieu of the case relied upon by petitioners is different from the case at bar. In the case on hand, respondent insisted from the very start that the land valuation be based on the GSP at the time of the taking - - 1972. It stood firm on that ground. When SAC ordered Land Bank to pay petitioners the land value based on the GSP at the time of payment, respondent vehemently disagreed and questioned the valuation before the Court of Appeals.

WHEREFORE, we DENY the instant petition. The Decision of the Court of Appeals dated 15 September 2000 and its Resolution dated 03 May 2001 in CA-G.R. CV No. 61240 are hereby AFFIRMED. No costs.

SO ORDERED.

Puno, (Acting C.J.) Austria-Martinez, Callejo, Sr., and TINGA, JJ., concur.

Endnotes:

¹ Located in Brgy. Antipolo, Sariaya, Quezon.

² Located in Brgy. Antipolo, Sariaya, Quezon.

³ Located in Brgy. Talaan-Pantok, Sariaya, Quezon.

⁴ Decreeing the Emancipation of Tenants from the Bondage of the Soil, Transferring to Them the Ownership of the Land They Till and Providing the Instruments and Mechanism therefor [issued 21 October 1972].

⁵ Declaring Full Land Ownership to Qualified Farmer Beneficiaries Covered by Presidential Decree No. 27: Determining the Value of Remaining Unvalued Rice and Corn Lands Subject to P.D. No. 27; and Providing for the Manner of Payment by the Farmer Beneficiary and Mode of Compensation to the Landowner [issued 17 July 1987].

⁶ Rollo, p. 53.

⁷ Under Section 2, E.O. No. 228, the value of rice and corn lands is determined as follows:

Sec. 2. Henceforth, the valuation of rice and corn lands covered by P.D. No. 27 shall be based on the average gross production determined by the Barangay Committee on Land Production in accordance with Department Memorandum Circular No. 26, series of 1973, and related issuances and regulations of the Department of Agrarian Reform. The average gross production per hectare shall be multiplied by two and a half (2.5), the product of which shall be multiplied by Thirty-Five Pesos (P35), the government support price for one cavan of 50 kilos of palay on October 21, 1972, or Thirty-One Pesos (P31), the government support price for one cavan of 50 kilos of corn on October 21, 1972, and the amount arrived at shall be the value of the rice and corn land, as the case may be, for the purpose of determining its cost to the farmer and compensation to the landowner.

⁸ RTC Records, p. 281.

⁹ Records, p. 262. The valuation of the Land Bank for this property came later on 17 September 1997.

¹⁰ Records, pp. 1-2.

¹¹ RTC Records, p. 324.

¹² Rollo, p. 10.

¹³ RTC Records, pp. 293-300.

¹⁴ RTC Records, p. 324.

¹⁵ CA Records, pp. 10-11.

¹⁶ CA Records, pp. 291-297.

¹⁷ Rollo, pp. 33-34.

¹⁸ Rollo, pp. 46-47.

¹⁹ G.R. No. 143275, 10 September 2002, 388 SCRA 537.

²⁰ Land Bank v. De Leon, G.R. No. 143275, 20 March 2003, 399 SCRA 376.

²¹ Id. at 385.

²² Rollo, p. 114.

²³ Supra note 20 at 382-383.

²⁴ Id.

²⁵ Pinlac v. Court of Appeals, G.R. No. 91486, 10 September 2003, 410 SCRA 419; Tala Realty Services, Corp. v. Banco Filipino Savings and Mortgage Bank, G.R. No. 137980, 20 June 2000, 334 SCRA 114; Acosta, et al. v. Court of Appeals, et al., G.R. No. 132088, 28 June 2000, 334 SCRA 486.

²⁶ Villena, et al. v. Chavez, G.R. No. 148126, 10 November 2003, 415 SCRA 33.

²⁷ G.R. NOS. 126000 and 128520, 07 October 1998, 297 SCRA 287, 309.

²⁸ Section 15, E.O. No. 228.

²⁹ Sections 16 and 18 of Rep. Act No. 6657.

³⁰ Sharp International Marketing v. Court of Appeals, G.R. No. 93661, 04 September 1991, 201 SCRA 299.

³¹ Land Bank v. Court of Appeals, G.R. No. 128557, 29 December 1999, 321 SCRA 629.

³² Section 7 of Rule 3 of the Rules of Court.

³³ G.R. No. 146923, 30 April 2003, 402 SCRA 449, 455, citing BA Finance Corporation v. CA, G.R. No. 102998, 05 July 1996, 258 SCRA 102.

³⁴ Land Bank v. Spouses Banal, G.R. No. 143276, 20 July 2004; Land Bank v. Wycoco, G.R. NOS. 140160 and 146733, 13 January 2004; Republic v. Court of Appeals, G.R. No. 122256, 30 October 1996, 263 SCRA 758, 764.

³⁵ E.O. No. 405, Section 1.

³⁶ Supra note 30; Land Bank v. Court of Appeals, supra note 31.

³⁷ Land Bank v. Spouses Banal, supra note 34.

³⁸ III Vicente J. Francisco, The Revised Rules of Court in the Philippines, p. 69, East Publishing, Manila (1968).

³⁹ Ibid.

⁴⁰ Supra note 31.

⁴¹ Article 1958 of the Civil Code provides: In the determination of interest, if it is payable in kind, its value shall be appraised at the current price of the products or goods at the time and place of payment.

⁴² National Power Corporation v. Gutierrez, G.R. No. 60077, 18 January 1991, 193 SCRA 1; Association of Small Landowners in the Phils., Inc. v. Secretary of Agrarian Reform, G.R. NOS. 78742, 79310, 79744 and 79777, 14 July 1989, 175 SCRA 343; Export Processing Zone Authority v. Dulay, G.R. No. L-59603, 29 April 1987, 149 SCRA 305; Commissioner of Public Highways v. Burgos, G.R. No. L-36706, 31 March 1980, 96 SCRA 831; Republic v. Vda. De Castellvi, G.R. No. L-20620, 15 August 1974, 58 SCRA 336; Republic v. Deleste, 99 Phil. 1035 (1956).

⁴³ Locsin v. Valenzuela, G.R. NOS. 51333 and 52289, 19 February 1991, 194 SCRA 194.

⁴⁴ RTC Records, p. 84.

⁴⁵ Land Bank of the Philippines v. Court of Appeals, G.R. NOS. 118712 and 118745, 05 July 1996, 258 SCRA 404; Association of Small Landowners in the Phils., Inc. v. Secretary of Agrarian Reform, supra note 42.

⁴⁶ Republic of the Philippines v. Ker and Company Limited, G.R. No. 136171, 02 July 2002, 383 SCRA 584; Association of Small Landowners in the Phils., Inc. v. Secretary of Agrarian Reform, supra note 42.

⁴⁷ Operation Land Transfer.

⁴⁸ E.O. No. 228, Section 1 provides: All qualified farmer beneficiaries are now deemed full owners as of October 21, 1972 of the land they acquired by virtue of Presidential Decree No. 27.

⁴⁹ Ibid., Section 2.

⁵⁰ Land Bank v. Court of Appeals, supra note 31 at 646.

⁵¹ Ibid.

⁵² Supra note 31.

G.R. No. 148256 - ADELINO FELIX v. NATIONAL LABOR RELATIONS COMMISSION, ET AL.

2013-01-15T09:50:44+00:00

G.R. No. 148256 - ADELINO FELIX v. NATIONAL LABOR RELATIONS COMMISSION, ET AL.

THIRD DIVISION

[G.R. NO. 148256 : November 17, 2004]

ADELINO FELIX, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION (NLRC) 3RD DIVISION and REPUBLIC ASAHI GLASS CORPORATION, Respondents.

D E C I S I O N

CARPIO MORALES, J.:

From the Court of Appeals Decision¹ of May 21, 2001 affirming that of the National Labor Relations Commission which dismissed petitioner Adelino Felix's complaint for illegal dismissal against Republic Asahi Glass Corporation (the company), petitioner comes to this Court on a Petition for Review on Certiorari .

Petitioner was hired by the company on October 1, 1980 as a Cadet Engineer. In 1983 he became a supervisor, a position he held until January 1992.² In January 1992, he was designated as Marketing Officer II, a position at the company's Fabricated Glass Division Marketing (FGD Marketing).³

FGD Marketing promotes market expansion, solicits purchase orders, monitors inventory and update of records, finds sources of automotive laminated glass products, regularly visits customers' warehouse and production line, receives customers' complaints, and initiates the return of vacated wooden crates in customers' warehouses.⁴ It likewise coordinates with other departments of the company including the Production Planning Control Department for the scheduling of tempered glass production, the Logistics Department for delivery requirements and schedule, and the Credit and Collection Department for establishment of credit lines and terms for new customers.⁵

Sometime in 1992, petitioner was offered a chance to train and qualify for the position of Assistant Manager but as he was content with his position as Marketing Officer II, he declined and waived the opportunity to the one who was next-in-line.⁶

As Marketing Officer II of the FGD Marketing, the bulk of petitioner's functions related to sales, which required him to perform his duties away from the principal place of business of the company.⁷ He handled the accounts of Philippine Automotive Manufacturing Corporation (PAMCOR), Universal Motors Corporation (UMC), Honda Cars Philippines, Inc., and Francisco Motors Corporation (FMC) and reported directly to the Manager of FGD Marketing, Ms. Marilyn Encinares.⁸

By petitioner's claim, sometime in July 1994, he was asked by certain officers of the company, particularly Ms. Encinares and Mr. Roberto G. Agustin, Assistant Vice President, Manpower Technical Services, to resign and accept a separation package, failing which he would be terminated for loss of confidence.⁹

Petitioner, however, refused to resign and accept separation benefits, drawing the officers of the company to, by his claim, start harassing him.¹⁰ Thus, he was not given work¹¹ and another employee, Mr. Elmer Tacata, was assigned to take over his post and function.¹² And one morning, he found on his desk a newspaper clipping of a job opening for a "Tempering Glass Supervisor" in the Middle East.¹³

Unable to withstand the manner by which he was being treated by the company, he, through his lawyer, warned it by letter of August 16, 1994 about the illegality of its actions. The letter reads:

Gentlemen:

I am writing in behalf of my client, MR. ADELINO L. FELIX, your Marketing Officer, Fabricated Glass Division.

It appears that you have been unlawfully compelling him to voluntarily resign with a separation package otherwise you will terminate him due to alleged loss of trust and confidence.

I have also been informed that no formal charges have been officially furnished him which constitute[s] your alleged grounds for termination. My client is also being subjected to undue mental torture because you deliberately refuse to assign any tasks to him these past few weeks despite his being always present at work.

I need not tell you that what you have been doing to my client is illegal and malicious. You are hereby put on notice that unless the necessary rectifications are made to the wrong done to my client, we shall file the necessary legal action/s against you for the redress of his grievances, impleading in the intended case/s your responsible officers.¹⁴

Upon receipt of petitioner's letter also on August 16, 1994, the company transferred him from his position as Marketing Officer II of the FGD Marketing to Supervisor IV of the Technical Services Division (TSD).¹⁵ And replying to petitioner's letter, the company emphasized that given the series of irresponsible and inefficient acts he had committed which justified the initiation of an administrative proceeding against him,¹⁶ it instead offered him a separation package upon his resignation in order to give him an opportunity to opt for a graceful exit¹⁷ . The company went on to declare that it had finally decided to initiate disciplinary action against him in view of, in the main, his irresponsibility in sending the August 16, 1994 letter which pre-empted management prerogatives.¹⁸

Thus the company, by letter of September 27, 1994, directed petitioner to explain in writing within 48 hours from receipt thereof why his services should not be terminated for loss of trust and confidence, viz:

Dear Mr. Felix:

At the outset, you are reminded that you held a position of trust and confidence as a Marketing Officer of the Fabricated Glass Division.

On various dates and occasions, you breached the trust reposed in you by the Management in that you committed, among other(s), the following:

1. Absence Without Leave (AWOL) for six (6) working days from May 29 to June 5, 1992.

2. Lingering unnecessarily or killing time at the place of customers. Worse, engaging employees and officers of [the] customers in argument[s] and quarrel[s] to the extent that you were interfering in their functions and antagonizing them.

3. Going to or visiting UMC (Mandaluyong) only when called upon to do so.

4. Always not attending the regular morning meetings at FGD Production Office.

The over-all assessment of customers you have dealt with is that you are an irresponsible and ineffective representative of the Company. As a customary management functions (sic), and considering that you are an officer, your case has been discussed, and necessarily your transfer or even your voluntary resignation and other probabilities were mentioned unofficially and informally. In other words, by your own acts, you constrained Management to evaluate you at this stage.

Management then expected you to act as an officer. Instead you wrote that letter dated 12 August 1994 and followed by the letter of your lawyer dated 16 August 1994. These letters are both premature and designed to pre-empt Management prerogative. This merely confirms your irresponsibility. Your action is unworthy of being a trusted officer of the company.

Management has come to the conclusion that you can no longer be vested with functions that are central to the effective operations of the Company. In short, it has lost its confidence in you.

You are hereby directed to explain in writing within 48 hours from receipt hereof why your services should not be terminated for loss of trust and confidence and therefore, for cause. You may engage the advice of your counsel, if you desire, in preparing your explanation. Your failure to submit your explanation in writing within the period required shall be construed as a waiver on your part and the Management will proceed to act accordingly.¹⁹ (Underscoring and emphasis supplied)

By letter of September 28, 1994, petitioner denied the charges against him. He explained that his absence for 6 days from May 29 to June 5, 1992 was occasioned by some problems at home which he had to personally attend to, information for which absence he relayed to his office; and that upon reporting for work, he submitted a written explanation to Ms. Encinares who accepted it as shown by her signature on his admission slip.²⁰

On the charge that he was "lingering unnecessarily or killing time at the place of customers," he, denying the same, proffered that he valued his work and would not do anything to jeopardize his employment in the company which had given him a good source of income for the past 14 years.²¹

Likewise denying the charge that he visited the UMC plant only when called upon to do so, petitioner proffered that he made it a point to regularly visit the plant, and when technical problems arose, he attended to them immediately.²²

On the charge that he had not attended the daily 3 minutes meeting²³ at the FGD Production Office, petitioner, denying the same, explained that the Warehouse and Production Department preferred to talk to only one person and if there were matters or concerns that needed to be addressed by the FGD Marketing, he coursed them through Engr. Raymond Santayana who was chosen to act as the representative during those meetings.²⁴

Petitioner attributed the company's harassment against him to his being a member of the supervisory union then being formed.²⁵

The company subsequently terminated petitioner's services for loss of trust and confidence by letter of September 30, 1994 reading:

Dear Mr. Felix:

We received on 29 September your letter explanation dated 28 September 1994.

A perusal of your letter-explanation shows that you have not actually clarified much less satisfied management why it should not lose its trust and confidence reposed in you as an officer of the company. You did not even respond to the finding of Management that you were "irresponsible and ineffective representative of the Company" which is disappointing to say the least.

It is amusing but also disappointing that you, like an ordinary rank and filer (sic), is now trying to hide under the skirt of "unionism" to cover your shortcomings. We are not aware of the formation of any such supervisory union. The stand of the Company in unionism is clear. Unionism has nothing to do with your case and you know that.

We regret to advise you therefore that the Company is terminating your services for loss of trust and confidence and therefore for cause effective upon receipt hereof. You are further directed to turn over all papers, documents and other property of the Company to your department head.

For your compliance.²⁶ (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

Petitioner thus lodged on October 10, 1994 a complaint for illegal dismissal.²⁷

Petitioner claims that he was terminated because of his active participation in the formation of a supervisory union, and that the so-called "due process" afforded to him was a sham because the company had decided to terminate his employment before his receipt of the September 27, 1994 show-cause letter.²⁸ To support his claim, petitioner referred to a circular dated August 15, 1994 sent by the company to its clients, informing them that petitioner had been relieved of his position as Marketing Officer II effective August 1, 1994.²⁹

On the other hand, the company denied that it harassed petitioner and that he was dismissed for his union activities,³⁰ it maintaining that aside from the 4 grounds it stated in its September 27, 1994 show-cause letter to him, he had incurred frequent absences as early as in 1991 which were not due to emergency reasons but to his personal endeavors such as attending to his duties as barangay kagawad, or to his "palayan" or piggery or "palaisdaan."³¹ Additionally, it complained that petitioner did not utilize company time effectively as he would go home directly after making calls on customers even if there remained 3 or 4 hours of company time.³²

To substantiate its claim that petitioner was dismissed for cause, the company submitted the following documentary evidence.

1. A letter sent to petitioner by M.S. Encinares dated June 16, 1992 regarding the six (6) days vacation leave from May 29 to June 5, 1992.³³

2. A memorandum dated March 11, 1994 prepared by M.S. Encinares regarding petitioner's absence in the daily three (3) minute meeting of the Marketing Associates and Staff with the Production Group.³⁴

3. A report dated August 18, 1994 submitted by M.S. Encinares on a meeting held by Francisco Motors Corp. (FMC) with its suppliers including Republic Glass Asahi Company, citing the report³⁵ of Elmer Tacata, the company's representative to the meeting, that FMC complained of delayed deliveries and irregular visits of the company representative.³⁶

4. A report dated September 19, 1994 prepared by N.B. Galpa on his trip to Nissan Motors, FMC, Universal Motors, PAMCOR and Honda Cars Philippines about some of its products being rejected and returned due to scratches, distortion, "chipping and no-hole," mispacking and handling procedure.³⁷

5. Affidavit of M.S. Encinares dated November 15, 1995 on petitioner's work ethics and behavior.³⁸

Relying on the documentary evidence submitted by the company, the Labor Arbiter, by Decision of October 16, 1996, dismissed petitioner's complaint in this wise:

In the present case, sufficient factual basis has been established to justify the dismissal of complainant on the ground of loss of trust and confidence, Complainant's six-day absence without official leave had been properly documented by the Company in a letter dated 16 June 1992 (Annex "B", Respondent's Position Paper). Complainant's negative attitude towards the daily 3-minute meetings among the FGD Staff was likewise documented in a memorandum dated 11 March 1994 prepared by M.S. Encinares (Annex "C", Position Paper). His inefficiency and lack of sense of responsibility in relation to customer service have likewise been documented in several inter-office reports on problems and complaints from accounts handled by complainant. In a report dated 18 August 1994 submitted by M.S. Encinares regarding the account of Francisco Motors Corporation ("FMC") which was the responsibility of complainant, FMC's complaints about delayed deliveries and irregular visits of RAGC representative were put on record (Annex "B" Reply Position Paper). The aforementioned report dated 18 August 1994 is based on the minutes of a meeting of suppliers which includes the Company, held on 17 August 1994 called by FMC to discuss said problems of delayed deliveries and irregular visits (Annex "C", Reply Position Paper). As to the other accounts handled by complainant, complaints on these accounts, regarding rejected glasses and returns due to scratches, distortion, chipping and no-hole, mispacking and handling procedure, were documented in a report dated 19 September 1994 prepared by N.B. Galpa (Annex "D", Reply Position Paper). The said reports were further substantiated by Marilyn S. Encinares, Manager, Fabricated Glass Division-Marketing in her affidavit executed on 15 November 1995.³⁹ (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

On appeal, the National Labor Relations Commission (NLRC), quoting extensively from the Decision of the Labor Arbiter, dismissed petitioner's complaint for lack of merit by Decision⁴⁰ of March 20, 1998. Petitioner moved for reconsideration of the decision, but it was denied in a resolution⁴¹ of May 7, 1998.

Undaunted, petitioner filed a petition for certiorari with this Court which referred it to the Court of Appeals in accordance with St. Martin Funeral Homes v. NLRC⁴²

By Decision of May 21, 2001, the Court of Appeals upheld the dismissal of petitioner's complaint, it holding that petitioner performed the function of a salesman and in the position he was holding, loss of trust and confidence is a valid cause for dismissal.

Hence, the present petition.

The issue boils down to whether the company's loss of trust and confidence in petitioner is founded on facts established by substantial and competent evidence.⁴³

The petition is impressed with merit.

Undoubtedly, the rule is that high respect is accorded to the findings of fact of quasi-judicial agencies, more so in the case at bar where both the Labor Arbiter and the NLRC share the same findings. The rule is not, however, without exceptions one of which is when the findings of fact of the labor officials on which the conclusion was based are not supported by substantial evidence.⁴⁴ The same holds true when it is perceived that far too much is concluded, inferred or deduced from bare facts adduced in evidence.⁴⁵

It is noted that petitioner's appeal to the NLRC raised serious errors in the findings of fact of the Labor Arbiter. The NLRC failed, however, to address them, it rendering an 8-page decision 7 pages of which quoted in full the decision of the Labor Arbiter.

Unlike in other cases where the complainant has the burden of proof to discharge its allegations, the burden of establishing facts as bases for an employer's loss of confidence in an employee - facts which reasonably generate belief by the employer that the employee was connected with some misconduct and the nature of his participation therein is such as to render him unworthy of trust and confidence demanded of his position - is on the employer.⁴⁶ Should the employer fail in discharging this onus, the dismissal of the employee cannot be sustained. This is consonant with the constitutional guarantee of security of tenure, as implemented in what is now Sec. 279 of the Labor Code, as amended.⁴⁷

The employer's evidence, although not required to be of such degree as that required in criminal cases, i.e., proof beyond reasonable doubt, must be substantial - it must clearly and convincingly establish the facts upon which loss of confidence in the employee may be made to rest.⁴⁸

In the case at bar, the company failed to discharge this burden.

The company complained of petitioner having incurred 6 days of absence without leave from May 29 to June 5, 1992. This complaint had earlier been the subject of a letter⁴⁹ addressed to petitioner dated June 16, 1992 wherein Ms. Encinares advised him that communicating through the telephone of a leave of absence is inappropriate. While petitioner's written explanation for his absence discloses a conflict of interest between his employment with the company and his operation of his rice plantation, he therein made a commitment to improve his over-all performance and reporting habits, drawing the company to conditionally approve his 6 days leave and charge the same to his vacation leave.⁵⁰

The records do not disclose that petitioner incurred any further absences without leave. More importantly, except for that incident in 1992, the company failed to show that there were instances during the 14 years that petitioner had been employed that he incurred absences without leave.

The propriety of petitioner's 6 days of absence having priorly been threshed out by the parties, the company may no longer ask petitioner to, more than two years later by letter of September 27, 1994, re-explain his absence and use the same to justify his dismissal.

As for the charge that petitioner had not been attending the daily 3 minutes meeting of the FGD Marketing, the inter-office correspondence dated March 11, 1994 shows that "the deliberate failure of [petitioner] in attending the meeting could be attributed to that argument between [him and] AAN (A.A. Naval) . . . that occurred last January 28, 1994 over the present system of PAMCOR in handling local development of glass components."⁵¹ It bears noting, however, that the company took no action on the matter, nor warned petitioner that his attendance in the meetings was mandatory. It was several months later or on September 27, 1994 when the company first called his attention to it and used it as a basis for dismissing him. It is thus deemed to have overlooked his absence in the daily meetings.

A company is expected to call the attention of an employee to any undesirable act or omission within a reasonable time. In the case at bar, the failure of the company to timely take any disciplinary action against petitioner undermines its claim that petitioner's continued absence in the meetings rendered him unfit for continued employment with it.

That the company hastily dismissed petitioner is clearly apparent. As petitioner argued, he was not given adequate time to prepare for his defense, but was peremptorily dismissed, even without any formal investigation or hearing.⁵²

It is settled that where the employee denies the charges against him, a hearing is necessary to thresh out any doubt. The failure of the company to give petitioner, who denied the charges against him, the benefit of a hearing and an investigation before his termination constitutes an infringement of his constitutional right to due process. So Roche (Philippines) v. National Labor Relations Commission⁵³ instructs:

In denying that they have deprived the right of Villareal to due process, the petitioners pointed out that he was informed of the charges against him and he was given the opportunity to explain his side. Citing Associated Citizen's Bank v. Ople [103 SCRA 130 (1981)], the petitioners attempted to substantiate their argument by mentioning that this Court had previously done away with the holding of a hearing in order to comply with the constitutional requirement of due process.

However, the circumstances obtaining in the above-cited case bears no resemblance to the case at bar. The former contemplates a situation where the employee admits his guilt and all his admissions are corroborated by documentary evidence. Such is not the case in the present controversy where Villareal never admitted the commission of the offense he was being charged of. The records do not indubitably show that Villareal was actually in Cebu City on that day. A hearing was, therefore, necessary to thresh out all doubts as to the conflicting allegations of De la Cruz and Villareal. The failure of petitioner to give private respondent the benefit of a hearing and an investigation before his termination constitutes an infringement of his constitutional right to due process of law [BLTB Bus Co. v. Court of Appeals, 71 SCRA 470 (1976); see also Batas Pambansa Blg. 130].⁵⁴ (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

As for the other two charges - that petitioner as a field officer unnecessarily lingered or killed time at the place of clients and engaged them in arguments and quarrels, and that he visited UMC (Mandaluyong) only when called upon to do so - the company failed to substantiate the same.

Except for the mere allegation of petitioner's manager⁵⁵ that its clients have been complaining of petitioner's work attitude and performance, there is no concrete evidence to show the same.

The inter-office memoranda relied upon by the Labor Arbiter were accomplished only after petitioner's counsel sent the August 16, 1994 cautioning the company that petitioner could not be legally compelled to voluntarily resign and accept a separation package.

It bears emphasis that the matter of determining whether the cause for dismissing an employee is justified on the ground of loss of confidence cannot be left entirely to the employer. Impartial tribunals do not rely only on the statement made by the employer that there is "loss of confidence" unless duly proved or sufficiently substantiated.⁵⁶

The report⁵⁷ of Ms. Encinares dated August 18, 1994, citing a report⁵⁸ of Elmer Tacata, that FMC had been complaining about lack of visiting company representative and delayed deliveries for the month of August cannot be attributed to petitioner.

As explained by petitioner, during the later part of July 1994, right after he refused to resign, he was not given work. He could not thus transact business with clients since another employee, Tacata, was assigned to take over his post and function.⁵⁹ In his report, Tacata stated that "FMC noted that some suppliers fail to obtain their Delivery Authorization causing delays in their deliveries."⁶⁰ He hastened to add, however, that the suppliers who attended the FMC meeting included other companies like Transworld Rubber and UE Automotive Manufacturing.⁶¹

Tacata's statement that "Arnel Deunida [Supply Superintendent of FMC] requested that our customer service and QA Staffs resume their regular visits to FMC to inspect and evaluate glass rejects"⁶² in fact gives credence to the allegation of petitioner that he regularly visited his client and it was only in late July 1994 that he could no longer do so, Tacata having taken over his position.

Instead of exercising prudence in examining the evidence, the Labor Arbiter hastily attributed fault to petitioner, viz:

xxx As to the other accounts handled by complainant, complaints on these accounts, regarding rejected glasses and returns due to scratches, distortion, chipping and no-hole, mispacking and handling procedure, were documented in a report dated 19 September 1994 prepared by N.B. Galpa (Annex "D" Reply Position Paper).⁶³

Nowhere, however, in the report⁶⁴ submitted by N.B. Galpa on his trip to the companies whose accounts were formerly handled by petitioner (Nissan Motors, FMC, Universal Motors, PAMCOR and Honda Cars) is it shown that petitioner was directly responsible for the rejected or rejected other glasses and items. The report shows that the alleged defects in the returned items, like those returned to PAMCOR, consisted of scratches - 12 pcs., distortion - 2, chipping - 1, and no hole - 1; for Honda Cars, deep scratch (WS) - 1 pc., no bolt (SR3 FD) - 1 pc., broken (SR4 FD) - 1pc.⁶⁵ These defects are not, however, uncommon in a business dealing in glasses.

To attribute these product returns to petitioner and conclude that he is inefficient and irresponsible is unfounded. For as of September 19, 1994, when N.B. Galpa submitted his report, petitioner had long been divested of responsibility over these accounts. In any event, even if the returned items were part of those previously delivered during the period when petitioner was still handling those accounts, the complaints pertain to the quality of the goods delivered or defects caused by mishandling. These complaints should then have been properly directed to the Production Planning and Control Department or the Logistics Department which were tasked to manage product quality and delivery. As admitted by the company, petitioner's function at the FGD Marketing was confined to sales.

That the N.B. Galpa report⁶⁶ which was accomplished a month after petitioner was officially transferred from the FGD Marketing to the Technical Services Division, still contained a complaint by FMC that the company "has not been in constant contact with FMC, and in fact [was] ignoring [its] request to settle the issue about F-1300 RQ (deep double curve, but within Specs). . ."⁶⁷ indicates that it was directed against the company. Such notwithstanding, the Labor Arbiter regarded all the complaints contained in the report as proof of petitioner's inefficiency and irresponsibility.

Absent any standard of performance upon which petitioner was rated on the job, loss of confidence has no basis.

Ms. Encinares' accusatory affidavits and inter-office memoranda are then not only self-serving but baseless. Accusation cannot take the place of proof.⁶⁸

At all events, even if all the allegations-charges set forth in the September 27, 1994 letter of the company to petitioner are true, they are not of such nature which merit the penalty of dismissal, given petitioner's service for 14 years. Dismissal is unduly harsh and grossly disproportionate to the charges. This rule on proportionality - that the penalty imposed should be commensurate to the gravity of his offense - has been observed in a number of cases.⁶⁹

In labor-management relations, there can be no higher penalty than dismissal from employment. Dismissal severs employment ties and could well be the economic death sentence of an employee. Dismissal prejudices the socio-economic well being of the employee's family and threatens the industrial peace. Due to its far reaching implications, our Labor Code decrees that an employee cannot be dismissed, except for the most serious causes. The overly concern of our laws for the welfare of employees is in accord with the social justice philosophy of our Constitution.⁷⁰ (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

While Article 282 of the Labor Code provides that an employer may terminate an employee based on fraud or willful breach of the trust reposed in him by his employer or duly authorized representative, loss of trust and confidence as a just cause for dismissal was never intended to provide employers with a carte blanche for terminating employees. Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given imprimatur by this Court, could readily reduce to barren the constitutional guarantee of security of tenure.⁷¹ As explained in Dela Cruz v. NLRC:⁷²

It is of course settled that an employee may terminate the services of an employee due to loss of trust and confidence. However, the loss must be based not on ordinary breach by the latter of the trust reposed in him by the former, but, in the language of Article 28[2]c of the Labor Code, on willful breach. A breach is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. Elsewhere stated, it must rest on substantial grounds and not on the employer's arbitrariness, whims, caprice or suspicion; otherwise, the employee would eternally remain at the mercy of the employer. It should be genuine and not simulated; nor should it appear as a mere afterthought to justify earlier action taken in bad faith or a subterfuge for causes which are improper, illegal of unjustified. It has never been intended to afford an occasion for abuse because of its subjective nature. There must therefore be an actual breach of duty committed by the employee which must be established by substantial evidence.⁷³ (Citations omitted; Emphasis and underscoring supplied)

There being no basis in law or in fact justifying petitioner's dismissal on the basis of loss of trust and confidence, his dismissal was illegal.

WHEREFORE, the petition is GRANTED. The challenged decision of the appellate court is hereby SET ASIDE and a new one entered:

(1) DECLARING illegal and void petitioner's dismissal from the service of the company, and

(2) ORDERING the company to pay petitioner full back wages from the time he was dismissed from the service until the finality of this decision; and separation pay, equivalent to one month salary for every year of service, computed from the time petitioner was first employed and until the finality of this decision, reinstatement being no longer possible due to strained relations of the parties.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, and Garcia, JJ., concur
Corona, J., on leave

Endnotes:

¹ Rollo at 63-69.

² Id. at 18.

³ Id. at 95.

⁴ Id. at 135-136.

⁵ Id. at 135-136.

⁶ Id. at 179.

⁷ Id. at 131.

⁸ Id. at 18-19.

⁹ Id. at 6.

¹⁰ Ibid.

¹¹ Id. at 71.

¹² Id. at 13.

¹³ Id. at 20.

¹⁴ Id. at 71.

¹⁵ Id. at 72.

¹⁶ Id. at 98.

¹⁷ Id. at 99.

¹⁸ Id. at 99.

¹⁹ Id. at 73-74.

²⁰ Id. at 75.

²¹ Ibid.

²² Id. at 75.

²³ Id. at 139.

²⁴ Id. at 76.

²⁵ Id. at 76.

²⁶ Id. at 77.

²⁷ Id. at 215.

²⁸ Id. at 21.

²⁹ Ibid.

³⁰ Id. at 24.

³¹ Id. at 22.

³² Id. at 125.

³³ Id. at 137-138.

³⁴ Id. at 139.

³⁵ Id. at 152-154.

³⁶ Id. at 151.

³⁷ Id. at 155-158.

³⁸ Id. at 165-170.

³⁹ Id. at 26-27.

⁴⁰ Id. at 38-46.

⁴¹ CA Rollo at 42.

⁴² 295 SCRA 494 (1998).

⁴³ Rollo at 11.

⁴⁴ Austria v. National Labor Relations Commission, 310 SCRA 293, 300 (1999).

⁴⁵ Marcelo v. National Labor Relations Commission, 240 SCRA 782, 785 (1995).

⁴⁶ Pilipinas Bank v. National Labor Relations Commission, 215 SCRA 750, 756 (1992).

⁴⁷ Quezon Electric Cooperative v. National Labor Relations Commission, 172 SCRA 88, 97 (1989).

⁴⁸ Pilipinas Bank v. National Labor Relations Commission, supra at 757.

⁴⁹ Rollo at 137-138.

⁵⁰ Id. at 137-138.

⁵¹ Id. at 181.

⁵² Id. at 238.

⁵³ 178 SCRA 386 (1989).

⁵⁴ Roche (Philippines) v. National Labor Relations Commission, 178 SCRA 386, 393-394 (1989).

⁵⁵ Rollo at 84-89.

⁵⁶ Dosch v. National Labor Relations Commission, 123 SCRA 296, 317 (1983), citing De Leon v. National Labor Relations Commission, 100 SCRA 691, 700 (1980).

⁵⁷ Rollo at 151.

⁵⁸ Id. at 152-154.

⁵⁹ Id. at 13.

⁶⁰ Id. at 152.

⁶¹ Ibid.

⁶² Id. at 153.

⁶³ Id. at 26-27.

⁶⁴ Id. at 155-158.

⁶⁵ Id. at 157-158.

⁶⁶ Id. at 155-158.

⁶⁷ Id. at 155.

⁶⁸ Austria v. National Labor Relations Commission, 310 SCRA 293, 303 (1999).

⁶⁹ Dela Cruz v. National Labor Relations Commission, 268 SCRA 458, 471 (1997); Associated Labor Unions-TUCP v. NLRC, 302 SCRA 708, 715-716 (1999); Gelmart Industries Phils., Inc. v. NLRC, 176 SCRA 295, 303 (1989); Bustillos v., Inciong, 120 SCRA 262, 267 (1983); Marcelo v. National Labor Relations Commission, 240 SCRA 782, 785 (1995).

⁷⁰ Cebu Filveneer Corp. v. NLRC (Fourth Division), 286 SCRA 556, 562-563 (1998).

⁷¹ Mabeza v. National Labor Relations Commission, 271 SCRA 670, 682 (1997).

⁷² 268 SCRA 458 (1997)

⁷³ Dela Cruz v. National Labor Relations Commission, supra at 470.

G.R. No. 148287 - PET PLANS, INC., ET AL. v. COURT OF APPEALS

2013-01-15T09:50:45+00:00

G.R. No. 148287 - PET PLANS, INC., ET AL. v. COURT OF APPEALS

SECOND DIVISION

[G.R. NO. 148287 : November 23, 2004]

PET PLANS, INC. and ADRIAN V. OCAMPO, Petitioners, v. COURT OF APPEALS, Respondent.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the nullification of the resolutions of the Court of Appeals dated February 28, 2001¹ and May 22, 2001,² which dismissed CA-G.R. SP. No. 62410, a special civil action for certiorari brought to it by petitioners, and denied petitioners' motion for reconsideration, respectively.

The factual and procedural antecedents are as follows:

Petitioner PET PLANS, Incorporated (PET PLANS for brevity) is a company engaged in the business of selling educational, pension and memorial plans while co-petitioner Adrian V. Ocampo (Ocampo for brevity) is its President.

On January 16, 1995, petitioner PET PLANS employed Jaime M. Abad (Abad for brevity) as its Sales Operations Manager/District Manager, assigning him to its branch office in Aparri, Cagayan. In a letter dated June 10, 1999, petitioners informed Abad that, effective June 16, 1999, he is being reassigned as a Trust Manager, a position which is next lower in rank than the one he was then occupying. The reasons for his demotion are his failure to comply with the sales quota for the years 1998 and 1999, to recruit manpower and to develop his agency. On August 31, 1999, Abad filed a complaint with the National Labor Relations Commission (NLRC), Regional Arbitration Branch No. 02, Tuguegarao, Cagayan for illegal dismissal/demotion, damages, non-payment of basic wages, 13th month pay and other monetary incentives against PET PLANS and Ocampo.³

On December 28, 1999, Executive Labor Arbiter Ricardo N. Olairez rendered a decision, the dispositive portion of which reads:

WHEREFORE, with all the foregoing considerations, judgment is hereby rendered declaring complainant illegally dismissed and ordering respondents jointly and severally to reinstate him to his former position without loss of seniority rights with full backwages and other benefits computed at P26,533.00 basic pay including 13th month pay and allowances from June 16 to December 31, 1999, and P144, 910.35 unpaid basic wages including 13th month pay for 1996 to 1998 plus ten percent attorney's fees. The reinstatement aspect is immediately executory even pending appeal. In case reinstatement is no longer feasible complainant shall be paid separation pay of one month compensation pay including allowances for every year of service. All other claims are hereby dismissed.

SO ORDERED.

Petitioners appealed the decision to the NLRC. On July 25, 2000, the NLRC promulgated its decision with the following dispositive portion:

WHEREFORE, the decision appealed from is hereby MODIFIED to the extent that the award of backwages amounting to P26,533.00 is hereby SET ASIDE. In all other aspects, the said decision is hereby AFFIRMED.

SO ORDERED.

Petitioners filed a motion for reconsideration but the same was denied.

Aggrieved by the NLRC decision, herein petitioners, on January 24, 2001, filed a special civil action for certiorari with the Court of Appeals.

On February 28, 2001, the Court of Appeals issued a Resolution, to wit:

The Court resolves to DISMISS the petition for defective or insufficient certification against forum-shopping in that it is not signed by the principal party or by petitioner himself as referred to by Section 5, Rule 7 of the 1997 Rules of Civil Procedure but was signed by a certain Rolando Espino without any certification or attachment that he was indeed authorized to sign for and in behalf of the petitioner corporation and to bind the same.

SO ORDERED.

Petitioners filed a motion for reconsideration but the same was denied in a Resolution issued by the Court of Appeals on May 22, 2001.

Hence, the present petition. Petitioners claim that:

The Honorable Court of Appeals has decided questions of substance in a way not in accord with law or with applicable decisions of this Honorable Supreme Court;

The Honorable Court of Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it dismissed the petition docketed as CA G.R. SP NO. 62410 on the ground of defective or insufficient certification against forum shopping, contending that it was not signed by the principal party or by petitioner himself as referred to by Section 5, Rule 7 of the 1997 Rules of Civil Procedure;

The Honorable Court of Appeals gravely erred or acted with grave abuse of discretion when it did not consider as substantial compliance with Section 5, Rule 7 of the 1997 Rules of Civil Procedure, paragraph 1 of the questioned certification which categorically stated that Rolando Espino is the duly authorized representative of the petitioners, which allegation was made under oath;

The Honorable Court of Appeals gravely erred or acted with grave abuse of discretion when it ignored the Secretary's Certificate and President's Certification submitted by petitioners, attesting to the fact that Rolando Espino, being the first vice-president for legal affairs and corporate secretary is authorized to represent PET PLANS INC. in all cases whether filed by or against the company.⁴

Before going into the main issue of the case, we deem it proper to pass upon the correctness of the mode of review availed of by petitioners in filing the present petition.

Petitioners brought the present case to this Court through a Petition for Review on Certiorari under Rule 45 of the Rules of Court. The present petition seeks to set aside the Resolutions of the Court of Appeals which outrightly dismissed the special civil action for certiorari . No issue as to the merits of the case was presented in the present petition. The only issue raised before us is the propriety of the dismissal by the Court of Appeals of the petition for certiorari filed before it, - that is, whether or not the Court of Appeals gravely abused its discretion in dismissing the said petition. In fact, the petition filed before us merely seeks to have the case remanded to the Court of Appeals for adjudication on the merits of the petition. Understandably, there is nothing to appeal under Rule 45⁵ from the questioned resolutions of the Court of Appeals as there was no judgment on the merits of the issues raised before it. Thus, the instant petition should be considered as a special civil action for certiorari under Rule 65 of the Rules of Court.

We now come to the main issue in the present case.

Whether the Court of Appeals acted with grave abuse of discretion when it dismissed petitioners' special civil action for certiorari (CA-G.R. SP No. 62410) on the ground that petitioners failed to comply with the provisions of the Rules of Court on verification and certificate of non-forum shopping?chanroblesvirtualawlibrary

The applicable provision is Section 1, Rule 65 of the Rules of Court, to wit:

Section 1. Petition for certiorari . - When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the third paragraph of section 3, Rule 46.

Pertinent portions of Section 3, Rule 46 provides:

Section 3. Contents and filing of petition; effect of non-compliance with requirements. - . . .

The petitioner shall also submit together with the petition a sworn certification that he has not theretofore commenced any other action involving the same issues in the Supreme Court, the Court of Appeals or different divisions thereof, or any other tribunal or agency; if there is such other action or proceeding, he must state the status of the same; and if he should thereafter learn that a similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency, he undertakes to promptly inform the aforesaid courts and other tribunal or agency thereof within five (5) days therefrom.

. . .

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition.

In CA-G.R. SP No. 62410, a certain Rolando M. Espino signed the Verification and Certification attached to the petition for certiorari , as the duly authorized representative of petitioners. However, no proof was presented to show that Espino is indeed the authorized representative of petitioners. As a consequence, CA-G.R. SP No. 62410 was dismissed by the Court of Appeals.

Subsequent to such dismissal, however, petitioners filed a motion for reconsideration attaching thereto a certificate issued by Espino, who is also the corporate secretary of PET PLANS, indicating that on December 2, 2000, the Board of Directors of petitioner corporation issued a resolution authorizing him to represent the corporation in all cases filed by or against it, "giving him full authority to enter into an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and of documents, as well as to sign, execute and deliver all pleadings, agreements, papers and documents and do all those necessary to carry into effect the herein resolution."⁶ The Secretary's Certificate was accompanied by a certification issued by herein petitioner Ocampo, the President/CEO of petitioner corporation, attesting to the fact that Espino is indeed the Corporate Secretary of petitioner corporation, and that he is authorized to represent petitioner corporation in all cases filed by or against it, which includes the authority to sign, execute and deliver all pleadings, agreements, papers and documents.⁷

We have ruled time and again that litigants should have the amplest opportunity for a proper and just disposition of their cause - free, as much as possible, from the constraints of procedural technicalities.⁸ The policy of our judicial system is to encourage full adjudication of the merits of an appeal; and this Court, in the exercise of its equity jurisdiction, may reverse the dismissal of appeals that are grounded on non-compliance with procedural or formal requirements.⁹ On the other hand, equally settled is the rule that save for the most persuasive of reasons, strict compliance with procedural rules is enjoined to facilitate the orderly administration of justice.¹⁰ The liberality in the application of rules of procedure may not be invoked if it will result in the wanton disregard of the rules or cause needless delay in the administration of justice.¹¹ Indeed, it cannot be gainsaid that obedience to the requirements of procedural rule is needed if we are to expect fair results therefrom.¹²

In the present case, a reading of the subject resolution issued by the Board of Directors of PET PLANS, shows that it authorizes Espino to represent only PET PLANS, not its co-petitioner, Ocampo. Nothing in the records at hand indicates that Espino is clothed with special authority to represent Ocampo. Hence, Espino does not represent Ocampo, in the filing of CA-G.R. SP No. 62410. As such, Ocampo, being a petitioner in his own right, should have also signed the verification and certificate of non-forum shopping attached to the petition of CA-G.R. SP No. 62410. Ordinarily, Ocampo should have been considered a nominal party as he was merely impleaded by complainant in his capacity as the president of PET PLANS and no specific claim or charge against him, in his personal capacity, was alleged in the complaint filed with the NLRC, Regional Arbitration Branch. However, considering that the Labor Arbiter's decision made him jointly and solidarily liable with PET PLANS, he has become a real party-in-interest whose stake, subsequent to the Labor Arbiter's decision, have become distinct from those of petitioner corporation. As such, it becomes inevitable for him to sign the verification and certificate of non-forum shopping.

Section 3, Rule 46 of the Rules of Court requires that the petitioner shall sign the certificate of non-forum shopping. In the case of corporations, the physical act of signing may be performed in behalf of the corporate entity by specifically authorized individuals for the simple reason that corporations, as artificial persons, cannot do the task themselves.¹³ However, in the case of natural persons, the Rule requires the parties themselves to sign the certificate of non-forum shopping.¹⁴ The reason for such a requirement is that the petitioner himself, or in case of a corporation, its duly authorized representative, knows better than anyone else whether a separate case has been filed or pending which involves substantially the same issues.¹⁵

In the present case, it cannot be said with certainty that Espino knows beyond doubt that Ocampo has not filed before any court or tribunal a separate case related to the present petition and the petition in CA-G.R. SP No. 62410. In Loquias v. Office of the Ombudsman,¹⁶ we held that failure of one of the petitioners to sign the verification and certificate against forum shopping constitutes a defect in the petition, which is a ground for dismissing the same. While we have held in rulings subsequent to Loquias that this rule may be relaxed, petitioners must comply with two conditions: first, petitioners must show justifiable cause for their failure to personally sign the certification and; second, they must also be able to prove that the outright dismissal of the petition would seriously impair the orderly administration of justice.¹⁷ In the present case, we find that petitioners failed to prove the presence of these conditions. The dismissal by the Court of Appeals of CA-G.R. SP No. 62410 should have put petitioners on guard as to the basic procedural requirements in filing the petition. Notwithstanding such dismissal and their subsequent filing of a motion for reconsideration, petitioners still failed to substantially comply with the requirements of the Rules by the failure of Ocampo to sign the certificate of non-forum shopping. In the present petition filed before us, PET PLANS once again failed to submit proof that it has authorized Espino to file the present petition or to sign the verification and certificate against forum shopping attached thereto. Likewise, petitioner Ocampo again failed to sign the certificate of non-forum shopping. We cannot allow a party to gain an advantage from its flagrant disregard of the Rules.¹⁸ We find this fatal to petitioners' cause.

Thus, we find that the Court of Appeals did not gravely abuse its discretion in rendering the assailed Resolutions in CA-G.R. SP No. 62410.

WHEREFORE, the instant petition is DISMISSED.

Costs against petitioners.

SO ORDERED.

Puno, (Chairman), Callejo, Sr., TINGA, and Chico-Nazario, JJ., concur.

Endnotes:

¹ Penned by Justice Andres B. Reyes, Jr. and concurred in by Justices Bennie A. Adefuin-Dela Cruz and Rebecca de Guia-Salvador.

² Ibid.

³ Docketed as NLRC RAB II Case No. 09-0089-99.

⁴ Rollo, pp. 17-18.

⁵ Rules of Court.

⁶ CA Rollo, p. 99.

⁷ Id., p. 100.

⁸ Novelty Philippines, Inc. v. Court of Appeals, 411 SCRA 211, 220 (2003).

⁹ Ibid.

¹⁰ El Reyno Homes, Inc. v. Ong, 397 SCRA 563, 570 (2003).

¹¹ Ibid.

¹² Mariveles Shipyard Corp. v. Court of Appeals, 415 SCRA 573, 584 (2003).

¹³ Ibid.

¹⁴ Ibid.

¹⁵ Ibid.

¹⁶ 338 SCRA 62, 68 (2000).

¹⁷ Spouses Ortiz v. Court of Appeals, 299 SCRA 708, 712 (1998); Docena v. Lapesura, 355 SCRA 658, 667 (2001); Torres v. Specialized Packaging Development Corporation, G.R. No. 149634, July 6, 2004.

¹⁸ Philippine Banking Corporation v. Court of Appeals, G.R. No. 127469, January 15, 2004.

G.R. No. 148318 - NATIONAL POWER CORPORATION v. HON. ROSE MARIE ALONZO-LEGASTO, ET AL.

2013-01-15T09:50:46+00:00

G.R. No. 148318 - NATIONAL POWER CORPORATION v. HON. ROSE MARIE ALONZO-LEGASTO, ET AL.

SECOND DIVISION

[G.R. NO. 148318 : November 22, 2004]

NATIONAL POWER CORPORATION, Petitioner, v. HON. ROSE MARIE ALONZO-LEGASTO, as Presiding Judge, RTC of Quezon City, Branch 99, JOSE MARTINEZ, Deputy Sheriff, RTC of Quezon City, CARMELO V. SISON, Chairman, Arbitration Board, and FIRST UNITED CONSTRUCTORS CORPORATION, Respondents.

D E C I S I O N

TINGA, J.:

National Power Corporation (NPC) filed the instant Petition for Review¹ dated July 19, 2001, assailing the Decision² of the Court of Appeals dated May 28, 2001 which affirmed with modification the Order³ and Writ of Execution⁴ respectively dated May 22, 2000 and June 9, 2000 issued by the Regional Trial Court. In its assailed Decision, the appellate court declared respondent First United Constructors Corporation (FUCC) entitled to just compensation for blasting works it undertook in relation to a contract for the construction of power facilities it entered into with petitioner. The Court of Appeals, however, deleted the award for attorney's fees having found no basis therefor.

The facts culled from the Decision of the Court of Appeals are undisputed:

On April 14, 1992, NPC and FUCC entered into a contract for the construction of power facilities (civil works) - Schedule 1 - 1x20 MW Bacon-Manito II Modular Geothermal Power Plant (Cawayan area) and Schedule 1A - 1x20 MW Bacon-Manito II Modular Geothermal Power Plant (Botong area) in Bacon, Sorsogon (BACMAN II). The total contract price for the two schedules is P108,493,966.30, broken down as follows:

SCHEDULE

1 - Cawayan area

P 52,081,421.00

1A - Botong area

P 56,412,545.30

P 108,493,966.30

Appended with the Contract is the contract price schedule which was submitted by the respondent FUCC during the bidding. The price for grading excavation was P76.00 per cubic meter.

Construction activities commenced in August 1992. In the latter part of September 1992 and after excavating 5.0 meters above the plant elevation, FUCC requested NPC that it be allowed to blast to the design grade of 495 meters above sea level as its dozers and rippers could no longer excavate. It further requested that it be paid P1,346.00 per cubic meter similar to the rate of NPC's project in Palinpinon.

While blasting commenced on October 6, 1992, NPC and FUCC were discussing the propriety of an extra work order and if such is in order, at what price should FUCC be paid.

Sometime in March 1993, NPC Vice President for Engineering Construction, Hector Campos, created a task force to review FUCC's blasting works. The technical task force recommended that FUCC be paid P458.07 per cubic meter as such being the price agreed upon by FUCC.

The matter was further referred to the Department of Public [W]orks and Highways (DPWH), which in a letter dated May 19, 1993, recommended the price range of P500.00 to P600.00 per cubic meter as reasonable. It further opined that the price of P983.75 per cubic meter proposed by Lauro R. Umali, Project Manager of BACMAN II was high. A copy of the DPWH letter is attached as Annex "C", FUCC's Exhibit EEE-Arbitration.

In a letter dated June 28, 1993, FUCC formally informed NPC that it is accepting the proposed price of P458.07 per cubic meter. A copy of the said letter is attached as Annex "D", FUCC's Exhibit L Arbitration.

In the meantime, by March 1993, the works in Botong area were in considerable delay. By May 1993, civil works in Botong were kept at a minimum until on November 1, 1993, the entire operation in the area completely ceased and FUCC abandoned the project.

Several written and verbal warnings were given by NPC to FUCC. On March 14, 1994, NPC's Board of Directors passed Resolution No. 94-63 approving the recommendation of President Francisco L. Viray to take over the contract. President Viray's recommendation to take over the project was compelled by the need to stave-off huge pecuniary and non-monetary losses, namely:

(a) Generation loss estimated to be at P26,546,400/month;

(b) Payment of steam penalties to PNOC-EDC the amount estimated to be at P10,206,048.00/month;

(c) Payment of liquidated damages due to the standby of electromechanical contractor;

(d) Loss of guaranteed protection (warranties) of all delivered plant equipment and accessories as Mitsubishi Corporation, electromechanical contractor, will not be liable after six months of delivery.

To prevent NPC from taking over the project, on March 28, 1994, FUCC filed an action for Specific Performance and Damages with Preliminary Injunction and Temporary Restraining Order before Branch 99, Regional Trial Court, Quezon City.

Under paragraph 19 of its Complaint, FUCC admitted that it agreed to pay the price of P458.07 per cubic meter.

On April 5, 1994, Judge de Guzman issued a temporary restraining order and on April 21, 1994, the trial court resolved to grant the application for issuance of a writ of preliminary injunction.

On July 7, 1994, NPC filed a Petition for Certiorari with Prayer for Temporary Restraining Order and Preliminary Injunction before the First Division of the Court of Appeals asserting that no injunction may issue against any government projects pursuant to Presidential Decree 1818.

On July 8, 1994, the Court of Appeals through then Associate Justice Bernardo Pardo issued a temporary restraining order and on October 20, 1994, the said court rendered a Decision granting NPC's Petition for Certiorari and setting aside the lower court's Order dated April 21, 1994 and the Writ of Preliminary Injunction dated May 5, 1994.

However, notwithstanding the dissolution by the Court of Appeals of the said injunction, on July 15, 1995, FUCC filed a Complaint before the Office of the Ombudsman against several NPC employees for alleged violation of Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act. Together with the complaint was an Urgent Ex-Parte Motion for the issuance of a cease and [d]esist [o]rder to restrain NPC and other NPC officials involved in the BACMAN II project from canceling and/or from taking over FUCC's contract for civil works of said project.

Then on November 16, 1994, FUCC filed before the Supreme Court a Petition for Review assailing the Decision of the Court of [A]ppeals dated October 20, 1994. In its Comment, NPC raised the issue that FUCC resorted to forum shopping as it applied for a cease and desist order before the National Ombudsman despite the dissolution of the injunction by the Court of Appeals.

Pending the petition filed by FUCC before the Supreme Court, on April 20, 1995 the NPC and FUCC entered into a Compromise Agreement.

Under the Compromise Agreement, the parties agreed on the following:

1. Defendant shall process and pay the undisputed unpaid billings of Plaintiff in connection with the entire project fifteen (15) days after a reconciliation of accounts by both Plaintiff and Defendant or thirty (30) days from the date of approval of this Compromise Agreement by the Court whichever comes first. Both parties agree to submit and include those accounts which could not be reconciled among the issues to be arbitrated as hereunder provided;

2. Plaintiff accepts and acknowledges that Defendant shall have the right to proceed with the works by re-bidding or negotiating the project immediately upon the signing of herein Compromise Agreement;

3. This Compromise Agreement shall serve as the Supplemental Agreement for payment of plaintiff's blasting works at the Botong site;

4. Upon approval of this Compromise Agreement by the Court or Plaintiff's receipt of payment of this undisputed unpaid billings from Defendant whichever comes first, the parties shall immediately file a Joint Manifestation and Motion for the withdrawal of the following Plaintiff's petition from the Supreme Court, Plaintiff's Complaint from the National Ombudsman, the Complaint and Amended Complaint from the RTC, Br. 99 of Quezon City;

5. Upon final resolution of the Arbitration, as hereunder prescribed, the parties shall immediately execute the proper documents mutually terminating Plaintiff's contract for the civil works of the BACMAN II Project (Contract No. Sp90DLM-918 (I & A);

6. Such mutual termination of Plaintiff's contract shall have the following effects and/or consequences: (a) the construction works of Plaintiff at the Kawayan and Bolong sites, at its present stage of completion, shall be accepted and/or deemed to have been accepted by defendant; (b) Plaintiff shall have no more obligation to Defendant in respect of the BACMAN II Project except as provided in clause (e) below; (c) Defendant shall release all retention moneys of plaintiff within a maximum period of thirty (30) days from the date of final Resolution of the Arbitration; (d) no retention money shall thenceforth be withheld by Defendant in its payment to Plaintiff under this Compromise Agreement, and (e) Plaintiff shall put up a one-year guaranty bond for its completed civil works at the Kawayan site, retroactive to the date of actual use of the plant by defendant;

7. Plaintiff's blasting works claims and other unresolved claims, as well as the claims of damages of both parties shall be settled through a two stage process to wit:

STAGE 1

7.1 Plaintiff and Defendant shall execute and sign this Compromise Agreement which they will submit for approval by this Court. Under this Compromise Agreement both parties agree that:

xxx xxx

STAGE 2

7.1 The parties shall submit for arbitration to settle: (a) the price of blasting, (b) both parties' claims for damages, delays, interests, and (c) all other unresolved claims of both parties, including the exact volume of blasted rocks;

7.2 The arbitration shall be through a three-member commission to be appointed by the Honorable Court. Each party shall nominate one member. The Chairman of the Arbitration Board shall be [a] person mutually acceptable to both parties, preferably from the academe;

7.3 The parties shall likewise agree upon the terms under which the arbitrable issues shall be referred to the Arbitration Board. The terms of reference shall form part of the Compromise Agreement and shall be submitted by the parties to the Honorable Court within a period of seven (7) days from the signing of the Compromise Agreement;

7.4 The Arbitration Board shall have a non-extendible period of three (3) months within which to complete the arbitration process and submit its Decision to the Honorable Court;

7.5 The parties agree that the Decision of the Arbitration Board shall be final and executory;

7.6 By virtue of this Compromise Agreement, except as herein provided, the parties shall mutually waive, forgo and dismiss all of their other claims and/or counterclaim in this case. Plaintiff and defendant warrant that after approval by the Court of this Compromise Agreement neither party shall file Criminal or Administrative cases or suits against each other or its Board or member of its officials on grounds arising from the case.

The Compromise Agreement was subsequently approved by the Court on May 24, 1995.

The case was subsequently referred by the parties to the arbitration board pursuant to their Compromise Agreement. On December 9, 1999 the Arbitration Board rendered its ruling the dispositive portion of which states:

WHEREFORE, claimant is hereby declared entitled to an award of P118,681,328.28 as just compensation for blasting works, plus ten percent (10%) thereof for attorney's fees and expenses of litigation.

Considering that payment in the total amount of P36,550,000.00 had previously been made, respondent is hereby ordered to pay claimant the remaining sum of P82,131,328.28 for attorney's fees and expenses of litigation.

Pursuant to the Compromise Agreement approved by this Honorable Court, the parties have agreed that the decision of the Arbitration Board shall be final and executory.

SO ORDERED.

On December 10, 1999 plaintiff FUCC filed a Motion for Execution while defendant NPC filed a Motion to Vacate Award by the Arbitration Board on December 20, 1999.

On May 22, 2000 Presiding Judge Rose Marie Alonzo Legasto issued an order the dispositive portion of which states:

"WHEREFORE, the Arbitration Award issued by the Arbitration Board is hereby APPROVED and the Motion for Execution filed by plaintiff hereby GRANTED. The Motion to Vacate Award filed by defendant is hereby DENIED for lack of merit.

Accordingly, let a writ of execution be issued to enforce the Arbitration Award.

SO ORDERED."⁵ (Bracketed words supplied)

NPC went to the Court of Appeals on the lone issue of whether respondent judge acted with grave abuse of discretion in issuing the Order dated May 22, 2000 and directing the issuance of a Writ of Execution.

In its assailed Decision, the appellate court declared that the court a quo did not commit grave abuse of discretion considering that the Arbitration Board acted pursuant to its powers under the Compromise Agreement and that its award has factual and legal bases.

The Court of Appeals gave primacy to the court-approved Compromise Agreement entered into by the parties and concluded that they intended the decision of the arbitration panel to be final and executory. Said the court:

For one, what the price agreed to be submitted for arbitration are pure issues of fact (i.e., the price of blasting; both parties' claims for damages, delay, interests and all other unresolved claims of both parties, including the exact volume of blasted rocks). Also, the manner by which the Arbitration Board was formed and the terms under which the arbitrable issues were referred to said Board are specified in the agreement. Clearly, the parties had left to the Arbitration Board the final adjudication of their remaining claims and waived their right to question said Decision of the Board. Hence, they agreed in clear and unequivocal terms in the Compromise Agreement that said Decision would be immediately final and executory. Plaintiff relied upon this stipulation in complying with its various obligations under the agreement. To allow defendant to now go back on its word and start questioning the Decision would be grossly unfair considering that the latter was also a party to the Compromise Agreement entered into part of which dealt with the creation of the Arbitration Board.⁶

The appellate court likewise held that petitioner failed to present evidence to prove its claim of bias and partiality on the part of the Chairman of the Arbitration Board, Mr. Carmelo V. Sison (Mr. Sison).

Further, the Court of Appeals found that blasting is not part of the unit price for grading and structural excavation provided for in the contract for the BACMAN II Project, and that there was no perfected contract between the parties for an extra work order for blasting. Nonetheless, since FUCC relied on the representation of petitioner's officials that the extra work order would be submitted to its Board of Directors for approval and that the blasting works would be paid, the Court of Appeals ruled that FUCC is entitled to just compensation on grounds of equity and promissory estoppel.

Anent the issue of just compensation, the appellate court took into account the estimate prepared by a certain Mr. Lauro R. Umali (Mr. Umali), Project Manager of the BACMAN II Project, which itemized the various costs involved in blasting works and came up with P1,310.82 per cubic meter, consisting of the direct cost for drilling, blasting excavation, stockpiling and hauling, and a 30% mark up for overhead, contractor's tax and contingencies. This estimate was later changed to P983.75 per cubic meter to which FUCC agreed. The Court of Appeals, however, held that just compensation should cover only the direct costs plus 10% for overhead expenses. Thus, it declared that the amount of P763.00⁷ per cubic meter is sufficient. Since the total volume of blasted rocks as computed by Dr. Benjamin Buensuceso, Jr.⁸ of the U.P. College of Engineering is 97,032.16 cubic meters, FUCC is entitled to the amount of P74,035,503.50 as just compensation.

Although the Court of Appeals adjudged FUCC entitled to interest,⁹ the dispositive portion of the assailed Decision¹⁰ did not provide for the payment of interest. Moreover, the award of attorney's fees was deleted as there was no legal and factual ground for its imposition.

Petitioner, represented by the Office of the Solicitor General in the instant Petition, rehashes its submissions before the Court of Appeals. It claims that the appellate court failed to pass upon the following issues:

1. The Chairman of the Arbitration Board showed extreme bias in prejudging the case.

2. The Chairman of the Arbitration Board greatly exceeded his powers when he mediated for settlement in the court of arbitration proceedings.

3. The Chairman of the Arbitration Board committed serious irregularity in hastily convening the Board in two days, which thereafter released its report.

4. The Arbitration Board Committed manifest injustice prejudicial to petitioner based on the following:

A. It rendered an award based on equity despite the mandatory provision of the law.

b. The Board's decision to justify that equity applies herein despite the fact that FUCC never submitted its own actual costs for blasting and PHESCO, INC., the succeeding contractor, did not employ blasting but used ordinary excavation method at P75.59 per cubic meter which is approximately the same unit price of plaintiff (FUCC).

c. It gravely erred when the Board claimed that an award of just compensation must be given to respondent FUCC for what it has actually spent and yet instead of using as basis P458.07 which is the price agreed upon by FUCC, it chose an estimate made by an NPC employee.

d. It gravely erred when it relied heavily on the purported letter of NPC Project Manager Lauro R. Umali, when the same has not been identified nor were the handwritten entries in Annex ii established to be made by him.

5. The Arbitration Board gravely erred in computing interest at 12% and from the time of plaintiff's extrajudicial claim despite the fact that herein case is an action for specific performance and not for payment of loan or forbearance of money, and despite the fact that it has resolved that there was no perfected contract and there was no bad faith on the part of defendant.

6. On June 25, 2000, NPC discovered the Sub-Contract Agreement of FUCC with a unit price of only P430/per cubic meter.¹¹ [Emphasis in the original]

Specifically, petitioner asserts that Mr. Sison exhibited bias and prejudgment when he exhorted it to pay FUCC for the blasting works after concluding that the latter was allowed to blast. Moreover, Mr. Sison allegedly attempted to mediate the conflict between the parties in violation of Section 20,¹² paragraph 2 of Republic Act No. 876 (R.A. 876) otherwise known as the Arbitration Law. Petitioner also questions the abrupt manner by which the decision of the Arbitration Board was released.

Petitioner avers that FUCC's claim for blasting works was not approved by authorized officials in accordance with Presidential Decree No. 1594 (P.D. 1594) and its implementing rules which specifically require the approval of the extra work by authorized officials before an extra work order may be issued in favor of the contractor. Thus, it should not be held liable for the claim. If at all, only the erring officials should be held liable. Further, FUCC did not present evidence to prove the actual expenses it incurred for the blasting works. What the Arbitration Board relied upon was the memorandum of Mr. Umali which was neither identified or authenticated during the arbitration proceedings nor marked as evidence for FUCC. Moreover, the figures indicated in Mr. Umali's memorandum were allegedly mere estimates and were recommendatory at most.

Petitioner likewise claims that its succeeding contractor, Phesco, Inc. (Phesco), was able to excavate the same rock formation without blasting.

Finally, it asserts that the award of P763.00 per cubic meter has no factual and legal basis as the sub-contract between FUCC and its blasting sub-contractor, Dynamic Blasting Specialists of the Philippines (Dynamic), was only P430.00 per cubic meter.

In its Comment¹³ dated October 15, 2001, FUCC points out that petitioner's arguments are exactly the same as the ones it raised before the Arbitration Board, the trial court and the Court of Appeals. Moreover, in the Compromise Agreement between the parties, petitioner committed to abide by the decision of the Arbitration Board. It should not now be allowed to question the decision.

FUCC likewise notes that Atty. Jose G. Samonte (Atty. Samonte), one of the members of the Arbitration Board, was nominated by petitioner itself. If there was any irregularity in its proceedings such as the bias and prejudgment petitioner imputes upon Mr. Sison, Atty. Samonte would have complained. As it is, Atty. Samonte concurred in the decision of the Arbitration Board and dissented only as to the award of attorney's fees.

As regards the issue of interest, FUCC claims that the case involves forbearance of money and not a claim for damages for breach of an obligation in which case interest on the amount of damages awarded may be imposed at the rate of six percent (6%) per annum.

Finally, FUCC asserts that its sub-contract agreement with Dynamic is not newly-discovered evidence. Petitioner's lawyers allegedly had a copy of the sub-contract in their possession. In any event, the unit price of P430.00 per cubic meter appearing in the sub-contract represents only a fraction of the costs incurred by FUCC for the blasting works.

Petitioner filed a Reply¹⁴ dated March 18, 2002 reiterating its earlier submissions.

The parties in the present case mutually agreed to submit to arbitration the settlement of the price of blasting, the parties' claims for damages, delay and interests and all other unresolved claims including the exact volume of blasted rocks.¹⁵ They further mutually agreed that the decision of the Arbitration Board shall be final and immediately executory.¹⁶

A stipulation submitting an ongoing dispute to arbitration is valid. As a rule, the arbitrator's award cannot be set aside for mere errors of judgment either as to the law or as to the facts. Courts are generally without power to amend or overrule merely because of disagreement with matters of law or facts determined by the arbitrators. They will not review the findings of law and fact contained in an award, and will not undertake to substitute their judgment for that of the arbitrators. A contrary rule would make an arbitration award the commencement, not the end, of litigation. Errors of law and fact, or an erroneous decision on matters submitted to the judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial review of an arbitration award is, thus, more limited than judicial review of a trial.¹⁷

However, an arbitration award is not absolute and without exceptions. Where the conditions described in Articles 2038, 2039 and 2040 of the Civil Code¹⁸ applicable to both compromises and arbitrations are obtaining, the arbitrators' award may be annulled or rescinded.¹⁹ Additionally, judicial review of an arbitration award is warranted when the complaining party has presented proof of the existence of any of the grounds for vacating, modifying or correcting an award outlined under Sections 24 and 25 of R.A. 876, viz:

Section 24. Grounds for vacating an award. - In any of the following cases, the court must make an order vacating the award upon the petition of any party to the controversy when such party proves affirmatively that in the arbitration proceedings:

(a) The award was procured by corruption, fraud, or other undue means; or

(b) That there was evident partiality or corruption in the arbitrators or any of them; or

(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or more of the arbitrators was disqualified to act as such under section nine hereof, and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced; or

(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them was not made.

When an award is vacated, the court, in its discretion, may direct a new hearing either before the same arbitrators or before a new arbitrator or arbitrators to be chosen in the manner provided in the submission or contract for the selection of the original arbitrator or arbitrators, and any provision limiting the time in which the arbitrators may make a decision shall be deemed applicable to the new arbitration to commence from the date of the court's order.

Where the court vacates an award, costs not exceeding fifty pesos and disbursements may be awarded to the prevailing party and the payment thereof may be enforced in like manner as the payment of costs upon the motion in an action.

Section 25. Grounds for modifying or correcting an award. - In any one of the following cases, the court must make an order modifying or correcting the award, upon the application of any party to the controversy which was arbitrated:

(a) Where there was an evident miscalculation of figures, or an evident mistake in the description of any person, thing or property referred to in the award; or

(b) Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the decision upon the matter submitted; or

(c) Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it had been a commissioner's report, the defect could have been amended or disregarded by the court.

The order may modify and correct the award so as to effect the intent thereof and promote justice between the parties.

In this case, petitioner does not specify which of the foregoing grounds it relies upon for judicial review. Petitioner avers that "if and when the factual circumstances referred to in the provisions aforementioned are present, judicial review of the award is warranted."²⁰ From its presentation of issues, however, it appears that the alleged evident partiality of Mr. Sison is singled out as a ground to vacate the board's decision.

We note, however, that the Court of Appeals found that petitioner did not present any proof to back up its claim of evident partiality on the part of Mr. Sison. Its averments to the effect that Mr. Sison was biased and had prejudged the case do not suffice to establish evident partiality. Neither does the fact that a party was disadvantaged by the decision of the arbitration committee prove evident partiality.²¹

According to the appellate court, "[p]etitioner was never deprived of the right to present evidence nor was there any showing that the Board showed signs of any bias in favor of FUCC. As correctly found by the trial court, this Court cannot find its way to support petitioner's contention that there was evident partiality in the assailed Award of the Arbitrator in favor of the respondent because the conclusion of the Board, which the Court found to be well-founded, is fully supported by substantial evidence."²²

There is no reason to depart from this conclusion.

However, we take exception to the arbitrators' determination that based on promissory estoppel per se or alone, FUCC is entitled to just compensation for blasting works for the reasons discussed hereunder.

Section 9 of P.D. No. 1594, entitled Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts, provides:

SECTION 9. Change Order and Extra Work Order. A change order or extra work order may be issued only for works necessary for the completion of the project and, therefore, shall be within the general scope of the contract as bid[ded] and awarded. All change orders and extra work orders shall be subject to the approval of the Minister of Public Works, Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be.

The pertinent portions of the Implementing Rules and Regulations of P.D. 1594 provide:

CI - Contract Implementation:

These Provisions Refer to Activities During Project Construction, i.e., After Contract Award Until Completion, Except as May Otherwise be Specifically Referred to Provisions Under Section II. IB - Instructions to Bidders.

CI 1 - Variation Orders - Change Order/Extra Work Order/Supplemental Agreement

4. An Extra Work Order may be issued by the implementing official to cover the introduction of new work items after the same has been found to strictly comply with Section CI-1-1 and approved by the appropriate official if the amount of the Extra Work Order is within the limits of the former's authority to approve original contracts and under the following conditions:

A. Where there are additional works needed and necessary for the completion, improvement or protection of the project which were not included as items of work in the original contract.

b. Where there are subsurface or latent physical conditions at the site differing materially from those indicated in the contract.

c. Where there are duly unknown physical conditions at the site of an unusual nature differing materially from those ordinarily encountered and generally recognized as inherent in the work or character provided for in the contract.

d. Where there are duly approved construction drawings or any instruction issued by the implementing office/agency during the term of contract which involve extra cost.

6. A separate Supplemental Agreement may be entered into for all Change Orders and Extra Work Orders if the aggregate amount exceeds 25% of the escalated original contract price. All change orders/extra work orders beyond 100% of the escalated original contract cost shall be subject to public bidding except where the works involved are inseparable from the original scope of the project in which case negotiation with the incumbent contractor may be allowed, subject to approval by the appropriate authorities.

7. Any Variation Order (Change Order, Extra Work Order or Supplemental Agreement) shall be subject to the escalation formula used to adjust the original contract price less the cost of mobilization. In claiming for any Variation Order, the contractor shall, within seven (7) calendar days after such work has been commenced or after the circumstances leading to such condition(s) leading to the extra cost, and within 28 calendar days deliver a written communication giving full and detailed particulars of any extra cost in order that it may be investigated at that time. Failure to provide either of such notices in the time stipulated shall constitute a waiver by the contractor for any claim. The preparation and submission of Change Orders, Extra Work Orders or Supplemental Agreements are as follows:

A. If the Project Engineer believes that a Change Order, Extra Work Order or Supplemental Agreement should be issued, he shall prepare the proposed Order or Supplemental Agreement accompanied with the notices submitted by the contractor, the plans therefore, his computations as to the quantities of the additional works involved per item indicating the specific stations where such works are needed, the date of his inspections and investigations thereon, and the log book thereof, and a detailed estimate of the unit cost of such items of work, together with his justifications for the need of such Change Order, Extra Work Order or Supplemental Agreement, and shall submit the same to the Regional Director of office/agency/corporation concerned.

b. The Regional Director concerned, upon receipt of the proposed Change Order, Extra Work Order or Supplemental Agreement shall immediately instruct the technical staff of the Region to conduct an on-the-spot investigation to verify the need for the work to be prosecuted. A report of such verification shall be submitted directly to the Regional Director concerned.

c. The Regional Director concerned after being satisfied that such Change Order, Extra Work Order or Supplemental Agreement is justified and necessary, shall review the estimated quantities and prices and forward the proposal with the supporting documentation to the head of office/agency/corporation for consideration.

d. If, after review of the plans, quantities and estimated unit cost of the items of work involved, the proper office/agency/corporation committee empowered to review and evaluate Change Orders, Extra Work Orders or Supplemental Agreements recommends approval thereof, the head of office/agency/corporation, believing the Change Order, Extra Work Order or Supplemental Agreement to be in order, shall approve the same. The limits of approving authority for any individual, and the aggregate of, Change Orders, Extra Work Orders or Supplemental Agreements for any project of the head of office/agency/corporation shall not be greater than those granted for an original project.

CI 3 - Conditions under which Contractor is to Start Work under Variation Orders and Receive Payments

1. Under no circumstances shall a contractor proceed to commence work under any Change Order, Extra Work Order or Supplemental Agreement unless it has been approved by the Secretary or his duly authorized representative. Exceptions to the preceding rule are the following:

A. The Regional Director, or its equivalent position in agencies/offices/corporations without plantilla position for the same, may, subject to the availability of funds, authorize the immediate start of work under any Change or Extra Work Order under any or all of the following conditions:

(1) In the event of an emergency where the prosecution of the work is urgent to avoid detriment to public service, or damage to life and/or property; and/or

(2) When time is of the essence; provided, however, that such approval is valid on work done up to the point where the cumulative increase in value of work on the project which has not yet been duly fully approved does not exceed five percent (5%) of the adjusted original contract price, or P500,000 whichever is less; provided, further, that immediately after the start of work, the corresponding Change/Extra Work Order shall be prepared and submitted for approval in accordance with the above rules herein set. Payments for works satisfactorily accomplished on any Change/Extra Work Order may be made only after approval of the same by the Secretary or his duly authorized representative.

b. For a Change/Extra Work Order involving a cumulative amount exceeding five percent (5%) of the original contract price or original adjusted contract price no work thereon may be commenced unless said Change/Extra Work Order has been approved by the Secretary or his duly authorized representative. [Emphasis supplied]

It is petitioner's submission, and FUCC does not deny, that the claim for payment of blasting works in Botong alone was approximately P170,000,000.00, a figure which far exceeds the original contract price of P80,000,000.00 for two (2) project sites. Under the foregoing implementing rules, for an extra work order which exceeds 5% of the original contract price, no blasting work may be commenced without the approval of the Secretary or his duly authorized representative. Moreover, the procedure for the preparation and approval of the extra work order outlined under Contract Implementation (CI) 1(7) above should have been complied with. Accordingly, petitioner's officials should not have authorized the commencement of blasting works nor should FUCC have proceeded with the same.

The following events, culled from the decision of the Arbitration Board and the assailed Decision, are made the bases for the finding of promissory estoppel on the part of petitioner:

1. After claimant [respondent herein] encountered what it claimed to be massive hard rock formation (Testimony of witness Dumaliang, TSN, 28 October 1996, pp. 41-42; Testimony of witness Lataquin, 28 November 1996, pp. 2-3; 20-23; Exh. "JJJ" and sub-markings) and informed respondent [petitioner herein] about it, respondent's own geologists went to the Botong site to investigate and confirmed the rock formation and recommended blasting (Cf. Memorandum of Mr. Petronilo E. Pana, Acting Manager of the Geoscience Services Department and the report of the geologists who conducted the site investigation; Exhs. "F" and "F-1").

2. Claimant asked for clearance to blast the rock formation to the design grade (Letter dated 28 September 1992; Exh. "UU"). The engineers of respondent at the project site advised claimant to proceed with its suggested method of extraction (Order/Instruction given by Mr. Reuel R. Declaro and Mr. Francis A. Paderna dated 29 September 1992; Exh. "C").

3. Claimant requested that the intended blasting works be confirmed as extra work order by responsible officials of respondent directly involved in the BACMAN II Project (i.e., then BACMAN II Project Manager, Mr. Lauro R. Umali and Mr. Angelito G. Senga, Section Chief, Civil Engineering Design of respondent's Design Department which bidded the project). These officials issued verbal instructions to the effect: (a) that claimant could blast the rock formation down to the design grade of 495 masl; (b) that said blasting works would be an extra work order; and (c) that claimant would be paid for said blasting works using the price per cubic meter for similar blasting works at Palinpinon, or at P1,346.00 per cubic meter.

4. Claimant sent two (2) confirmatory letters to respondent, both addressed to its President, one dated 30 September 1992, and sent through Mr. Angelito Senga, Chief Civil Design - Thermal, the other dated 02 October 1992, and sent through Mr. Lauro R. Umali, Project Manager BacMan II (Exhs. "D" and "E"; Testimony of witness Dumaliang, TSN, 28 October 1996, pp. 43-49). The identical letters read:

We wish to confirm your instruction for us to proceed with the blasting of the Botong Plant site to the design grade pending issuance of the relevant variation order. This is to avoid delay in the implementation of this critical project due to the urgent need to blast rocks on the plant site.

We are confirming further your statement that the said blasting works is an extra work order and that we will be paid using the price established in your Palinpinon contract with Phesco.

Thank you for your timely action and we look forward to the immediate issuance of the extra work order.

We are now mobilizing equipment and manpower for the said work and hope to start blasting next week.

5. Respondent received the letters but did not reply thereto nor countermand the earlier instructions given to claimant to proceed with the blasting works. The due execution and authenticity of these letters (Exhs. "D-1" and "E-1") and the fact of receipt (Exhs. "D-2" and "E-2") were duly proved by claimant (Testimony of witness Dumaliang, TSN, 28 October 1996, 43-49).

6. In mid-October 1992, three (3) Vice-Presidents of respondent visited the project site and were informed of claimant's blasting activities. While respondent claims that one of the Vice-Presidents, Mr. Rodrigo Falcon, raised objections to claimant's blasting works as an extra work order, they instructed claimant to speed up the works because of the power crisis then hounding the country. Stipulation no. 24 of the Joint Stipulation of Facts of the parties which reads: "24. In mid-October 1992, three (3) Vice-Presidents of respondent, namely: Mr. Hector N. Campos, Sr., of Engineering Construction, Mr. C.A. Pastoral of Engineering Design, and Mr. Rodrigo P. Falcon, visited the project site and were likewise apprised of claimant's blasting activities. They never complained about the blasting works, much less ordered its cessation. In fact, no official of respondent ever ordered that the blasting works be stopped."

7. After visiting Botong, Mr. Hector N. Campos, Sr., then Vice President of Engineering Construction, instructed Mr. Fernando A. Magallanes then Manager of the Luzon Engineering Projects Department, to evaluate claimant's blasting works and to submit his recommendations on the proper price therefor. In a memorandum dated 17 November 1992 (Exh. "G" and sub-markings), Mr. Magallanes confirmed that claimant's blasting works was an extra work order and recommended that it be paid at the price for similar blasting works at Palinpinon, or at P1,346.00 per cubic meter. Mr. Campos concurred with the findings and recommendations of Mr. Magallanes and instructed Mr. Lauro R. Umali, then Project Manager of BacMan II, to implement the same as shown by his instructions scribbled on the memorandum.

8. Mr. Umali and the project team prepared proposed Extra Work Order No. 2 - Blasting (Exh. "DDD" - Memorandum of Mr. Umali to Mr. Campos dated 20 January 1993 forwarding proposed Extra Work Order No. 2), recommending a price of P983.75 per cubic meter for claimant's blasting works. Claimant agreed to this price (Testimony of witness Dumaliang, 7 November 1996, p. 48).

9. On 19 February 1993, claimant brought the matter of its unpaid blasting works to the attention of the then NPC Chairman [also Secretary of the Department of Energy then] Delfin L. Lazaro during a meeting with the multi-sectoral task force monitoring the implementation of power plant projects, who asked then NPC President Pablo B. Malixi what he was doing about the problem. President Malixi thereafter convened respondent's vice-presidents and ordered them to quickly document the variation order and pay claimant. The vice-president, and specifically Mr. Campos, pledged that the variation order for claimant's blasting works would be submitted for the approval of the NPC Board during the first week of March 1993. Claimant thereafter sent respondent a letter dated 22 February 1993 (Ex. "K") to confirm this pledge (Testimony of witness Dumaliang, 7 November 1996, pp. 28-30).

10. Mr. Campos created a task force (i.e., the Technical Task Force on the Study and Review of Extra Work Order No. 2; Exh. "FFF") to review claimant's blasting works. After several meetings with the task force, claimant agreed to the lower price of P458.07 per cubic meter, in exchange for quick payment (Testimony of witness Dumaliang, 7 November 1996, p. 30).

11. However, no variation order was issued and no payment came, although it appears from two (2) radiograms sent by Mr. Campos to Mr. Paderna at the project site that the variation order was being processed and that payment to claimant was forthcoming (Exhs. "AAA" and "BBB").

12. Respondent asked the Department of Public Works and Highways (DPWH) about the standard prices for blasting in the projects of the DPWH. The DPWH officially replied to respondent's query in a letter dated 19 May 1993 but the task force still failed to seek Board approval for claimant's variation order. The task force eventually recommended that the issue of grading excavation and structural excavation and the unit prices therefor be brought into voluntary arbitration (Testimony of witness Dumaliang, 7 November 1996, pp. 30-57).

13. Claimant thereafter saw Mr. Francisco L. Viray, the new NPC President, who proposed that claimant accept the price of P458.07 per cubic meter for its blasting works with the balance of its claim to be the subject of arbitration. Claimant accepted the offer and sent the letter dated 28 September 1993 (Exh. "O") to formalize said acceptance. However, no variation order was issued and the promised payment never came. (Testimony of witness Dumaliang, 7 November 1996, p. 58).

14. After some time, claimant met Mr. Viray on 19 October 1993 at the project site, and with some NPC officers in attendance, particularly Mr. Gilberto A. Pastoral, Vice-President for Engineering Design, who was instructed by Mr. Viray to prepare the necessary memorandum (i.e., that claimant would be paid P458.07 per cubic meter with the balance of its claim to be the subject of arbitration) for the approval of the NPC Board. Claimant formalized what transpired during this meeting in its letter to Mr. Pastoral dated 22 October 1993 (Exhibit "R"). But no action was taken by Mr. Pastoral and no variation order was issued by respondent (Testimony of witness Dumaliang, 7 November 1996, pp. 57-58).²³ [Emphasis supplied and bracketed words]

Promissory estoppel "may arise from the making of a promise, even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice."²⁴ Promissory estoppel presupposes the existence of a promise on the part of one against whom estoppel is claimed. The promise must be plain and unambiguous and sufficiently specific so that the court can understand the obligation assumed and enforce the promise according to its terms.²⁵

In the present case, the foregoing events clearly evince that the promise that the blasting works would be paid was predicated on the approval of the extra work order by petitioner's Board. Even FUCC acknowledged that the blasting works should be an extra work order and requested that the extra work order be confirmed as such and approved by the appropriate officials. Notably, even as the extra work order allegedly promised to it was not yet forthcoming, FUCC commenced blasting.

The alleged promise to pay was therefore conditional and up to this point, promissory estoppel cannot be established as the basis of petitioner's liability especially in light of P.D. 1594 and its implementing rules of which both parties are presumed to have knowledge. In Mendoza v. Court of Appeals, supra, we ruled that "[a] cause of action for promissory estoppel does not lie where an alleged oral promise was conditional, so that reliance upon it was not reasonable. It does not operate to create liability where it does not otherwise exist."

Petitioner's argument that it is not bound by the acts of its officials who acted beyond the scope of their authority in allowing the blasting works is correct. Petitioner is a government agency with a juridical personality separate and distinct from the government. It is not a mere agency of the government but a corporate entity performing proprietary functions. It has its own assets and liabilities and exercises corporate powers, including the power to enter into all contracts, through its Board of Directors.

In this case, petitioner's officials exceeded the scope of their authority when they authorized FUCC to commence blasting works without an extra work order properly approved in accordance with P.D. 1594. Their acts cannot bind petitioner unless it has ratified such acts or is estopped from disclaiming them.²⁶

However, the Compromise Agreement entered into by the parties, petitioner being represented by its President, Mr. Guido Alfredo A. Delgado, acting pursuant to its Board Resolution No. 95-54 dated April 3, 1995, is a confirmatory act signifying petitioner's ratification of all the prior acts of its officers. Significantly, the parties agreed that "[t]his Compromise Agreement shall serve as the Supplemental Agreement for the payment of plaintiff's blasting works at the Botong site"²⁷ in accordance with CI 1(6) afore-quoted. In other words, it is primarily by the force of this Compromise Agreement that the Court is constrained to declare FUCC entitled to payment for the blasting works it undertook.

Moreover, since the blasting works were already rendered by FUCC and accepted by petitioner and in the absence of proof that the blasting was done gratuitously, it is but equitable that petitioner should make compensation therefor, pursuant to the principle that no one should be permitted to enrich himself at the expense of another.²⁸

This brings us to the issue of just compensation.

The parties proposed in the terms of reference jointly submitted to the Arbitration Board that should FUCC be adjudged entitled to just compensation for its blasting works, the price therefor should be determined based on the payment for blasting works in similar projects of FUCC and the amount it paid to its blasting subcontractor.²⁹ They agreed further that "the price of the blasting at the Botong site . . . shall range from Defendant's position of P76.00 per cubic meter as per contract to a maximum of P1,144.00"³⁰

Petitioner contends that the Arbitration Board, trial court and the appellate court unduly relied on the memorandum of Mr. Umali which was allegedly not marked as an exhibit. We note, however, that this memorandum actually forms part of the record of the case as Exhibit "DDD."³¹ Moreover, both the Arbitration Board and the Court of Appeals found that Mr. Umali's proposal is the best evidence on record as it is supported by detailed cost estimates that will serve as basis to determine just compensation.

While the Arbitration Board found that FUCC did not present evidence showing the amount it paid to its blasting sub-contractor, it did present testimony to the effect that it incurred other costs and expenses on top of the actual blasting cost. Hence, the amount of P430.00 per cubic meter indicated in FUCC's Contract of Agreement with Dynamic is not controlling.

Moreover, FUCC presented evidence showing that in two (2) other projects where blasting works were undertaken, petitioner paid the contractors P1,346 per cubic meter for blasting and disposal of solid rocks in the Palinpinon project and P1,144.51 per cubic meter for rock excavation in the Hermosa Balintawak project. Besides, while petitioner claims that in a contract with Wilper Construction for the construction of the Tayabas sub-station, the price agreed for blasting was only P96.13, petitioner itself did not present evidence in support of this claim.³²

Parenthetically, the point raised by petitioner that its subsequent contractor, Phesco, did not undertake blasting works in excavating the same rock formation is extraneous and irrelevant. The fact is that petitioner allowed FUCC to blast and undertook to pay for the blasting works.

At this point, we hearken to the rule that the findings of the Arbitration Board, affirmed by the trial court and the Court of Appeals and supported as they are by substantial evidence, should be accorded not only respect but finality.³³ Accordingly, the amount of P763.00 per cubic meter fixed by the Arbitration Board and affirmed by the appellate court as just compensation should stand.

As regards the issue of interest, while the appellate court declared in the body of its Decision "that interest which would represent the cost of the money spent be imposed on the money actually spent by claimant for the blasting works,"³⁴ there is no pronouncement as to the payment of interest in the dispositive portion of the Decision even as it specifically deleted the award of attorney's fees.

Despite its knowledge of the appellate court's omission, FUCC did not file a motion for reconsideration or appeal from its Decision. In failing to do so, FUCC allowed the Decision to become final as to it.

In Edwards v. Arce,³⁵ we ruled that in a case decided by a court, the true judgment of legal effect is that entered by the clerk of said court pursuant to the dispositive part of its decision. The only portion of the decision that may be the subject of execution is that which is ordained or decreed in the dispositive portion. Whatever may be found in the body of the decision can only be considered as part of the reasons or conclusions of the court and serve only as guides to determine the ratio decidendi.³⁶

Even so, the Court allows a judgment which had become final and executory to be clarified when there is an ambiguity caused by an omission or mistake in the dispositive portion of the decision.³⁷ In Reinsurance Company of the Orient, Inc. v. Court of Appeals,³⁸ we held:

In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court, the Court applying the above doctrine said:

"xxx We clarify, in other words, what we did affirm. What is involved here is not what is ordinarily regarded as a clerical error in the dispositive part of the decision of the Court of First Instance, which type of error is perhaps best typified by an error in arithmetical computation. At the same time, what is involved here is not a correction of an erroneous judgment or dispositive portion of a judgment. What we believe is involved here is in the nature of an inadvertent omission on the part of the Court of First Instance (which should have been noticed by private respondent's counsel who had prepared the complaint), of what might be described as a logical follow-through of something set forth both in the body of the decision and in the dispositive portion thereof: the inevitable follow-through, or translation into, operational or behavioral terms, of the annulment of the Deed of Sale with Assumption of Mortgage, from which petitioners' title or claim of title embodied in TCT 133153 flows." (Italics supplied)³⁹

In this case, the omission of the award of interest was obviously inadvertent. Correction is therefore in order. However, we do not agree with the Arbitration Board that the interest should be computed at 12%. Since the case does not involve a loan or forbearance of money, goods or credit and court judgments thereon, the interest due shall be computed at 6% per annum computed from the time the claim was made in 1992 as determined by the Arbitration Board and in accordance with Articles 2209 and 1169 of the Civil Code. The actual base for the computation of legal interest shall be on the amount finally adjudged.⁴⁰ Further, when the judgment awarding a sum of money becomes final and executory, the rate of legal interest shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.⁴¹

WHEREFORE, the petition is GRANTED in part. The appealed decision is MODIFIED in that the amount of P74,035,503.50 shall earn legal interest of six percent (6%) from 1992. A twelve percent (12%) interest, in lieu of six percent (6%), shall be imposed on such amount upon finality of this decision until the payment thereof.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

Endnotes:

¹ Rollo, pp. 9-56.

² Id. at 58-87; Penned by Associate Justice Eugenio S. Labitoria and concurred in by Associate Justices Eloy R. Bello, Jr. and Perlita J. Tria-Tirona.

³ Id. at 88-92.

⁴ Id. at 93.

⁵ Id. at 59-67.

⁶ Id. at 71-72.

⁷ Representing direct costs of P693.65 and 10% mark up for overhead of P69.36.

⁸ The technical consultant engaged by both parties to compute the volume of blasted rocks.

⁹ Rollo, p. 83.

¹⁰ Id. at 86-87. The dispositive portion reads:

"WHEREFORE, the petition is hereby DENIED for lack of merit. The order dated May 22, 2000 and Writ of Execution dated June 9, 2000 of Regional Trial Court-National Capital Judicial Region, Branch 99, Quezon City are hereby AFFIRMED with the modification that private respondent is entitled to P74,035,503.50 (i.e. 97,032.16 cubic meters P763.00 per cubit meter) as per computation of Dr. Benjamin Buensuceso, [Jr.] (technical person engaged by both parties for said computation) and the award of attorney's fee is deleted.

SO ORDERED."

¹¹ Supra note 1 at 33-35.

¹² Sec. 20. - Form of contents of award.

'''

In the event that the parties to an arbitration have, during the course of such arbitration, settled their dispute, they may request of the arbitrators that such settlement be embodied in an award which shall be signed by the arbitrators. No arbitrator shall act as a mediator in any proceeding in which he is acting as arbitrator; and all negotiation towards settlement of the dispute must take place without the presence of the arbitrators.

¹³ Supra note 1 at 249-272.

¹⁴ Id. at 310-320.

¹⁵ Id. at 19; par. 7.1 of the Compromise Agreement; also at Rollo, p. 112.

¹⁶ Id. at 20; par. 7.5 of the Compromise Agreement; also at Rollo, p. 112.

¹⁷ Asset Privatization Trust v. Court of Appeals, 360 Phil. 768 (1998), citations omitted.

¹⁸ Art. 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of documents is subject to the provisions of Article 1330 of this Code.

However, one of the parties cannot set up a mistake of fact as against the other if the latter, by virtue of the compromise, has withdrawn from a litigation already commenced.

Art. 2039. When the parties compromise generally on all differences which they might have with each other, the discovery of documents referring to one or more but not to all of the questions settled shall not itself be a cause for annulment or rescission of the compromise, unless said documents have been concealed by one of the parties.

But the compromise may be annulled or rescinded if it refers only to one thing to which one of the parties has no right, as shown by the newly-discovered documents.

Art. 2040. If after a litigation has been decided by a final judgment, a compromise should be agreed upon, either or both parties being unaware of the existence of the final judgment, the compromise may be rescinded.

Ignorance of a judgment which may be revoked or set aside is not a valid ground for attacking a compromise.

¹⁹ Chung Fu Industries (Phils.), Inc. v. Court of Appeals, G.R. No. 96283, February 25, 1992, 206 SCRA 545 (1992).

²⁰ Supra note 1 at 33.

²¹ Adamson v. Court of Appeals, G.R. No. 106879, May 27, 1994, 232 SCRA 602.

²² Supra note 1 at 74.

²³ Id. at 144-148, Arbitration Award; see also Rollo, pp. 79-81, Decision of the Court of Appeals.

²⁴ Mendoza v. Court of Appeals, 412 Phil. 14 (2001), citing Ramos v. Central Bank, 41 SCRA 565 (1971).

²⁵ Ibid.

²⁶ San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals, 357 Phil. 631 (1998).

²⁷ Supra, note 1 at 107; par. 3, Compromise Agreement.

²⁸ Dominguez v. Court of Appeals, No. L-52715, February 28, 1985, 135 SCRA 98.

²⁹ Supra, note 1 at 22.

³⁰ Id. at 109; par.7.1, Compromise Agreement.

³¹ Id. at 150.

³² Id. at 149.

³³ National Steel Corporation v. Regional Trial Court of Lanao del Norte, Br. 2, Iligan City, 364 Phil. 240 (1999), citing Chung Fu Industries v. Court of Appeals, 206 SCRA 545, International Container Terminal Services v. National Labor Relations Commission, 256 SCRA 124 and Ang Tibay v. CIR, 69 Phil. 635.

³⁴ Supra, note 1 at 83.

³⁵ 98 Phil. 688 (1956).

³⁶ Ibid. citations omitted.

³⁷ Filipino Legion Corporation v. Court of Appeals, 155 Phil. 616 (1974).

³⁸ G.R. No. 61250, June 3, 1991, 198 SCRA 19.

³⁹ Id. at 29 citing Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court, 152 SCRA 309 (1987).

⁴⁰ Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78; Pilipinas Bank v. Court of Appeals, G.R. No. 97873, August 12, 1993, 225 SCRA 268.

⁴¹ Ibid.

G.R. No. 148333 - VIRGILIO SANTIAGO v. BERGENSEN D.Y. PHILIPPINES, ET AL.

2013-01-15T09:50:47+00:00

G.R. No. 148333 - VIRGILIO SANTIAGO v. BERGENSEN D.Y. PHILIPPINES, ET AL.

THIRD DIVISION

[G.R. NO. 148333 : November 17, 2004]

VIRGILIO SANTIAGO, Petitioner, v. BERGENSEN D.Y. PHILIPPINES and NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION), Respondents.

D E C I S I O N

CARPIO MORALES, J.:

Petitioner Virgilio Santos' petition for Certiorari before the Court of Appeals having been dismissed by Resolution¹ of October 15, 1999 on the ground that it was filed out of time, and his Motion for Reconsideration having been denied by Resolution² of May 18, 2001, he lodged the Petition for Review on Certiorari at bar.

Petitioner filed a complaint for illegal dismissal, non-payment of wages, overtime pay, vacation pay, moral and exemplary damages and attorney's fees against Bergensen D.Y. Philippines (respondent) before the Labor Arbiter.

The Labor Arbiter dismissed the complaint for lack of merit.

On appeal, the National Labor Relations Commission (NLRC), by Resolution³ of November 16, 1998, affirmed the finding that petitioner was not illegally dismissed. It, however, required respondent to pay petitioner the sum of Ten (10) Thousand Pesos (P10,000.00) for failure to afford petitioner due process.

Petitioner received a copy of the NLRC Resolution on December 18, 1998.⁴ On December 28, 1998, he filed a motion for reconsideration which the NLRC denied with finality by Resolution⁵ of August 5, 1999. On August 18, 1999,⁶ "he was informed by another law firm" of the denial of the Motion for Reconsideration.

On October 11, 1999, he filed before the appellate court a petition for Certiorari, docketed as CA-G.R. SP No. 55295, which was, as earlier adverted to, dismissed by Resolution⁷ of October 15, 1999 for having been filed four (4) days late.

Petitioner through counsel alleged that he received copy of the resolution dated November 16, 1998 of the National Labor Relations Commission (NLRC) on December 18, 1998, denying his appeal. Ten days (10) days later, or on December 28, 1998, he filed his motion for reconsideration. On August 18, 1999, he actually received copy of the NLRC's resolution denying his aforesaid motion for reconsideration (although admittedly said resolution was received by another law firm earlier on August 16, 1999). The present petition for certiorari was filed on December 11, 1999.

There are fifty-four (54) days from August 18, 1999 to October 11, 1999. However, the ten (10) day period from receipt of the assailed resolution on December 18, 1998 to the filing of his motion for reconsideration on December 28, 1998 must be included in determining the 60-day reglementary period (Section 4, Rule 65 of the 1997 Rules of Civil Procedure as amended by Resolution of the Supreme Court En Banc dated July 21, 1998 in Bar Matter No. 803 which took effect on September 1, 1998). The last day of the reglementary period for filing the petition for certiorari was on October 7, 1999. Hence, the present petition for certiorari was filed four (4) days late.⁸ (Emphasis and underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

Petitioner's Motion for Reconsideration which was filed on November 17, 1999 was denied by Resolution⁹ of May 18, 2001, hence, the petition at bar.

Before this Court, petitioner invokes the retroactive application of A.M. No. 00-2-03-SC, which took effect on September 1, 2000, amending Section 4, Rule 65 of the 1997 Rules of Civil Procedure, contending that rules of procedure should be liberally construed in order to promote its objectives of securing a just, speedy and inexpensive disposition of every action and proceeding.¹⁰

Under A.M. No. 00-2-03-SC, in case a motion for reconsideration of the judgment, order or resolution sought to be assailed has been filed, the 60-day period to file a petition for certiorari shall be counted from notice of the denial of such motion. Thus Section 4, Rule 65, as amended by A.M. No. 00-2-03-SC, provides:

SEC. 4. When and where petition filed. - The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the denial of said motion. (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

This Court finds for petitioner.

When petitioner filed his petition for Certiorari before the appellate court on October 15, 1999, the prevailing rule was Section 4, Rule 65 (as amended by the Supreme Court En Banc Resolution in Bar Matter No. 83 dated July 21, 1998) which provided:

SEC. 4. Where petition filed. - The petition may be filed not later than sixty (60) days from notice of the judgment, order or resolution sought to be assailed xxx. crvll

If the petitioner had filed a motion for new trial or reconsideration in due time after notice of said judgment, order or resolution, the period herein fixed shall be interrupted. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of such denial. No extension of time to file the petition shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days.

The appellate court thus correctly dismissed his petition.

When petitioner filed his Motion for Reconsideration on November 17, 1999, the same above-quoted rule was still prevailing. When the appellate court resolved said motion, however, or on May 18, 2001, Section 4, Rule 65 had already been amended by A.M. No. 00-2-03-SC.

A.M. No. 00-2-03-SC, which is a rule of procedure, may be retroactively applied to actions pending and undetermined at the time of their passage¹¹ and will not violate any right of a person who may feel that he is adversely affected, inasmuch as there is no vested rights in rules of procedure.¹²

Remedial statues or statutes relating to remedies or modes of procedure, which do not create new or take away vested rights, but only operate in furtherance of the remedy or confirmation of rights already existing, do not come within the legal conception of a retroactive law, or the general rule against retroactive operation of statutes. Statutes regulating the procedures of the courts will be construed as applicable to actions pending and undetermined at the time of their passage. Procedural laws are retroactive in that sense and to that extent.¹³ (Citations omitted) chanroblesvirtuallawlibrary

The record shows that petitioner received the NLRC Resolution denying his Motion for Reconsideration on August 18, 1999. Under A.M. No. 00-2-03-SC, he had 60 days or until October 17, 1999 to file a petition for certiorari before the appellate court. He filed one on October 11, 1999, well within the reglementary period.

WHEREFORE the petition is hereby GRANTED. The assailed Court of Appeals Resolutions of October 15, 1999 and May 18, 2001 are hereby SET ASIDE and the case is REMANDED to said court for appropriate action.

No costs.

Panganiban, (Chairman), Sandoval-Gutierrez, and Garcia, JJ., concur.
Corona, J., on leave.

Endnotes:

¹ Rollo at 20-21.

² Id. at 17-18.

³ CA Rollo at 20-27.

⁴ Rollo at 5.

⁵ CA Rollo at 28-30.

⁶ Rollo at 5.

⁷ Id. at 20-21.

⁸ Ibid.

⁹ Rollo at 17-18.

¹⁰ Id. at 3.

¹¹ Republic v. Court of Appeals, 399 SCRA 277 (2003); Universal Robina Corporation v. Court of Appeals, 373 SCRA 311 (2002); Pfizer, Inc. v. Galan, 358 SCRA 240 (2001); Unity Fishing Development v. Court of Appeals, 351 SCRA 140 (2001); Systems Factors Corporation v. National Labor Relations Commission, 346 SCRA 149 (2000); Narzoles v. National Labor Relations Commission, 341 SCRA 533 (2000).

¹² Republic v. Court of Appeals, supra at 284.

¹³ Systems Factors Corporation v. National Labor Relations Commission, 346 SCRA 149, 152 (2000).

G.R. No. 148541 - DEVELOPMENT BANK OF THE PHILIPPINES v. BONITA O. PEREZ, ET AL.

2013-01-15T09:50:47+00:00

G.R. No. 148541 - DEVELOPMENT BANK OF THE PHILIPPINES v. BONITA O. PEREZ, ET AL.

SECOND DIVISION

[G.R. NO. 148541 : November 11, 2004]

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, v. BONITA O. PEREZ and ALFREDO PEREZ, respondents.

D E C I S I O N

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari seeking to reverse and set aside the Decision¹ of the Court of Appeals (CA) dated February 28, 2001, and to reinstate the Decision of the Regional Trial Court (RTC), Makati City, Branch 145, in Civil Case No. 12057, as modified by trial court's Order dated June 11, 1993.

The Antecedents

On April 28, 1978, petitioner Development Bank of the Philippines (DBP) sent a letter to respondent Bonita Perez, informing the latter of the approval of an industrial loan amounting to P214,000.00 for the acquisition of machinery and equipment and for working capital, and an additional industrial loan amounting to P21,000.00 to cover unforeseen price escalation.²

On May 18, 1978, the respondents were made to sign four promissory notes covering the total amount of the loan, P235,000.00. Three promissory notes for P24,000.00, P48,000.00, and P142,000.00, respectively, were executed, totaling P214,000.00. These promissory notes were all due on August 31, 1988.³ A fourth promissory note due on September 19, 1988 was, likewise, executed to cover the additional loan of P21,000.00.⁴ The promissory notes were to be paid in equal quarterly amortizations and were secured by a mortgage contract covering real and personal properties.⁵

On September 6, 1978, the petitioner sent a letter⁶ to the respondents informing them of the terms for the payment of the P214,000.00 industrial loan. On November 8, 1978, the petitioner sent another letter⁷ to the respondents informing them about the terms and conditions of their additional P21,000.00 industrial loan.

Due to the respondents' failure to comply with their amortization payments, the petitioner decided to foreclose the mortgages that secured the obligation. However, in a Letter⁸ dated October 7, 1981, Mrs. Perez requested for a restructuring of their account due to difficulties they were encountering in collecting receivables.

On April 1, 1982, the petitioner informed the respondents that it had approved the restructuring of their accounts.⁹ The loan was restructured, and on May 6, 1982, the respondents signed another promissory note in the amount of P231,000.00 at eighteen percent (18%) interest per annum, payable quarterly at P12,553.27, over a period of ten years. The promissory note stated in part:

PROMISSORY NOTE

P231,000.00 Makati, Metro Manila, May 6, 1982

On or before May 7, 1992, for value received, I/we, jointly and severally, promise to pay the DEVELOPMENT BANK OF THE PHILIPPINES, or order at its office at Makati, Metro Manila, Philippines, the sum of TWO HUNDRED THIRTY-ONE THOUSAND PESOS (P231,000.00), Philippine Currency, with interest at the rate of EIGHTEEN per centum (18%) per annum. Before the date of maturity, we hereby bind ourselves to make partial payments, the first payment to be made on August 7, 1982 and the subsequent payments on the 7th day of every three (3) months thereafter, and each of all such payments shall be TWELVE THOUSAND FIVE HUNDRED FIFTY-THREE and 27/100 PESOS (P12,553.27) which shall cover amortizations on the principal and interest at the above-mentioned rate.

This loan shall be subject to penalty charges and additional interest as follows:

On loan with amortizations or portions thereof in arrears irrespective of age.

Additional interest at the basic loan interest rate per annum computed on total amortizations past due irrespective of age.

P L U S

Penalty charge of 8% per annum computed on total amortizations in arrears irrespective of age.

The DBP further reserves the right to increase, with notice to the mortgagor, the rate of interest on the loan as well as all other fees and charges on loans and advances pursuant to such policy as it may adopt from time to time during the period of the loan; Provided that the rate of interest on the loan shall be reduced in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board; Provided, further, that the adjustment in the rate of interest shall take effect on or after the effectivity of the increase or decrease in the maximum rate of interest.

In case of non-payment of the amount of this note or any portion of it on demand, when due, or any other amount or amounts due on account of this note, the entire obligation shall become due and demandable, and if, for the enforcement of the payment thereof, the DEVELOPMENT BANK OF THE PHILIPPINES, is constrained to entrust the case to its attorneys, I/we, jointly and severally, bind myself/ourselves to pay for attorney's fees, as provided for in the mortgage contract, in addition to the legal fees and other incidental expenses. In the event of foreclosure of the mortgage securing this note, I/we further bind myself/ourselves, jointly and severally, to pay the deficiency, if any.

SIGNED IN THE PRESENCE OF:

illegible SGD. SGD.

illegible BONITA ANG ORDIALES ALFREDO PEREZ

(Bonita O. Perez)

This Promissory Note supersedes the Promissory Note dated May 18, 1978 and stands secured by a mortgage contract executed by the above parties on the same date, subject to the following terms and conditions.¹⁰

As stated in the promissory note, the first amortization was due on August 7, 1982, and the succeeding amortizations, every quarter thereafter. However, the respondents made their first payment amounting to P15,000.00¹¹ only on April 20, 1983 or after the lapse of three quarters.¹² Their second payment, which should have been paid on November 7, 1982, was made on December 2, 1983 and only in the amount of P5,000.00. The third payment was then made at the time when the ninth quarterly amortization should have been paid. After this, the respondents completely stopped paying.¹³ The total payments they made after the restructure of the loan amounted to P35,000.00 only.¹⁴

This failure to meet the quarterly amortization of the loan prompted the petitioner to institute foreclosure proceedings on the mortgages. The sale of the properties covered by the mortgage contract was scheduled on October 30, 1985.¹⁵

On October 24, 1985, the respondents filed a Complaint¹⁶ for the nullification of the new promissory note with damages and preliminary prohibitory injunction. The complaint alleged that the petitioner restructured the respondents' obligation in bad faith by requiring them to sign another promissory note for P231,000.00 without considering the total payments made on the loan amounting to P224,383.43. The respondents claimed that the petitioner failed to explain to them how it had arrived at the amount of the restructured loan. The respondents also alleged that the petitioner failed to furnish them with a disclosure statement as required by Rep. Act No. 3765, also known as the Truth in Lending Act, prior to the consummation of the transaction. They averred that the interest imposed on the said transaction was usurious. They, likewise, alleged that the new promissory note constituted a novation of the previous obligations.

In its answer, the petitioner denied the allegations and averred that the claim for violation of the disclosure requirement under Rep. Act No. 3765 was not within the jurisdiction of the RTC and was barred by prescription. By way of compulsory counterclaim, the petitioner prayed that the respondents be ordered to pay their obligation, plus exemplary damages and costs.¹⁷ During trial, the petitioner presented a Statement of Account dated September 14, 1990, showing that the total amount of the obligation as of September 15, 1990 was P1,384,465.71.¹⁸

On October 25, 1985, the trial court ordered the petitioner to desist from holding the public auction of the respondents' properties. The trial court issued an Order on April 25, 1986 to maintain the status quo.

In its Decision dated May 10, 1993, the court a quo upheld the validity of the new promissory note and ordered the respondents to pay their obligation. The dispositive portion reads:

WHEREFORE, judgment is rendered dismissing the complaint for failure of plaintiffs to prove their causes of action by clear preponderance of evidence, with costs against them.

The order issued on April 25, 1986, ordering the defendant Bank to maintain the status quo and suspending the auction sale, is hereby set aside.

Defendant Bank's counterclaim is hereby granted, and plaintiffs are hereby ordered to pay the former the sum of One Million Three Hundred Eighty-four Thousand Four Hundred Sixty-five Pesos and Seventy-one Centavos (P1,384,465.71), representing the latter's obligation as of September 15, 1990, with interest thereon at the legal rate of twelve (12%) percent per annum pursuant to Sec. 2 of CB Circular No. 905; (Sagrador v. Valderrama, supra), from September 15, 1990 up to full payment of said sum. The other counterclaim for exemplary damages is hereby dismissed.

SO ORDERED.¹⁹

Upon the petitioner's motion for reconsideration, the trial court issued an order²⁰ amending the dispositive portion of its decision by changing the rate of interest to eighteen percent (18%) per annum.

Dissatisfied, the respondents appealed to the CA. On February 28, 2001, the CA rendered a decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the Decision dated May 10, 1993, docketed as Civil Case No. 12057 by the Regional Trial Court of Makati, Branch 145, is hereby MODIFIED in the sense that the amount of P1,384,465.71 as of September 1990 is SET ASIDE and the formula mandated by Central Bank Circular No. 158 should be applied by the trial court in computing the total obligation and liability of appellants. All the other parts of the assailed decision are AFFIRMED in toto.

SO ORDERED.²¹

The CA found that the respondents did not voluntarily sign the restructured promissory note as they were only forced to sign it for fear of having their mortgaged property foreclosed by the bank. It ruled that the restructured promissory note which was prepared by the petitioner alone was a contract of adhesion which violates the rule on mutuality of contracts.

Nonetheless, the CA held that the trial court should have used the formula prescribed by paragraph 3,²² Sec. 2(i), Central Bank (CB) Circular No. 158, Rules and Regulations Implementing Rep. Act No. 3765, in computing the total obligation of the respondents considering that Sec. 3(a) thereof provides that it applies to any loans, mortgages, deeds of trust, advances and discounts.²³ The CA also held that since the loan is secured by a mortgage contract, the eighteen percent (18%) interest rate was excessive and usurious under CB Circular No. 817. According to the appellate court, CB Circular No. 905, series of 1982, simply suspended the effectivity of the Usury Law; it did not authorize either party to unilaterally raise the interest without the other party's consent.²⁴ Finally, the CA concluded that there was neither basis nor explanation as to how the measly amount of P214,000.00 in 1972, restructured to P231,000.00 in 1982, ballooned to P1,384,465.71 as of September 15, 1990.²⁵

Both parties moved to reconsider the said decision. The CA denied the said motions in a Resolution dated May 31, 2001.

The Present Petition

The petitioner raises the following grounds in the instant petition:

1. Whether or not the Honorable Court of Appeals had decided this instant case in a way not in accord with the spirit and intent of Republic Act No. 3765, otherwise known as the Truth in Lending Act, when it declared that "the trial court should have applied the formula provided by Central Bank Circular No. 158, series of 1963, as provided above to arrive at the total obligations of appellants less the amounts paid by appellants as evidenced by the vouchers and receipts attached to the records;"

2. Whether or not the conclusion of the Honorable Court of Appeals stating that the private respondents did not voluntarily sign the restructured promissory note is entirely grounded on speculations and/or surmises or conjectures;

3. Whether or not the Honorable Court of Appeals failed to notice certain relevant facts which if it had been considered would change its finding that the restructured promissory note was prepared by the appellee Bank alone;

4. Whether or not the Honorable Court of Appeals failed to notice certain relevant facts which if it had been considered would change its finding that the amount of P1,384,465.71 as of September 15, 1990 has neither basis at all nor any explanation how this amount came to existence;

5. Whether or not the conclusion of the Honorable Court of Appeals stating that petitioner DBP failed to follow Central Bank Circular No. 158 is grounded entirely on speculation and surmises or conjecture. And whether or not this finding is contradicted by another finding of the same court; andcralawlibrary

6. Whether or not this Honorable Court of Appeals committed grave abuse of discretion when it ruled that pursuant to Central Bank Circular No. 817 the 18% interest per annum agreed upon by the parties in the restructured promissory note is usurious, and that the same should be reduced to 12% being the legal rate of interest.²⁶

In a nutshell, the issues in this case are as follows: (1) whether the new promissory note is voidable for not having been voluntarily signed by the respondents and for being a contract of adhesion; (2) whether the interest rate agreed upon by the parties in the new promissory note is usurious; (3) whether Central Bank Circular No. 158 should be applied in computing the total obligations of the respondents; and (4) the amount of the total obligation of the respondents.

The petition is partly meritorious.

Anent the first issue, the petitioner points out that the respondents admitted to having signed the new promissory note. It avers that there was no evidence on record showing that the signing of the new promissory note was attended by mistake, violence, intimidation, undue influence, or fraud. The petitioner posits that the respondents' claim of having been forced to sign the restructured note for fear of having their mortgaged property foreclosed cannot serve as legal basis to conclude that the respondents did not voluntarily sign the new promissory note.²⁷ The petitioner maintains that a perusal of the evidence would reveal that the new promissory note was the result of the mutual agreement of the parties and, as such, is not a contract of adhesion.²⁸

On the other hand, the respondents argue that this is a question of fact which is not subject to review by this Court. According to the respondents, the fact that the restructured loan proved disadvantageous to them belies the petitioner's claim that they voluntarily signed the new promissory note.

We agree with the petitioner.

In Petitions for Review on Certiorari as a mode of appeal under Rule 45 of the Rules of Court, the petitioner can raise only questions of law - the Supreme Court is not the proper venue to consider a factual issue as it is not a trier of facts.²⁹ A departure from the general rule may be warranted where the findings of fact of the Court of Appeals are contrary to the findings and conclusions of the trial court, or when the same is unsupported by the evidence on record.³⁰

In the instant case, there was no evidence showing that the respondents signed the new promissory note through mistake, violence, intimidation, undue influence, or fraud. The respondents merely alleged that they were forced to restructure their loan for fear of having their mortgaged properties foreclosed. However, it is axiomatic that this would not amount to vitiated consent. The last paragraph of Article 1335 of the New Civil Code specifically states that a threat to enforce one's claim through competent authority, if the claim is just or legal, does not vitiate consent. Foreclosure of mortgaged properties in case of default in payment of a debtor is a legal remedy afforded by law to a creditor. Hence, a threat to foreclose the mortgage would not, per se, vitiate consent.

The CA noted that the petitioner prepared the new promissory note on its own and that the only participation of the respondents was to sign the same. The CA concluded, therefore, that the new promissory note was a contract of adhesion.

A contract of adhesion is so-called because its terms are prepared by only one party while the other party merely affixes his signature signifying his adhesion thereto.³¹ While we accede to the appellate court's conclusion that the new promissory note was in the nature of a contract of adhesion, we cannot fathom how this can further the respondents' case. In discussing the consequences of a contract of adhesion, we held in Rizal Commercial Banking Corporation v. Court of Appeals:³²

It bears stressing that a contract of adhesion is just as binding as ordinary contracts. It is true that we have, on occasion, struck down such contracts as void when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. Nevertheless, contracts of adhesion are not invalid per se; they are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.³³

On the second issue, the CA held that under CB Circular No. 817, if the loan is secured by a registered real estate, the interest of eighteen percent (18%) is usurious. The petitioner, however, argues that usury has become legally inexistent with the promulgation of CB Circular No. 905.³⁴ It contends that the interest rate should be eighteen percent (18%), the interest rate they agreed upon.³⁵ For their part, the respondents argue that the Central Bank engaged in self-legislation in enacting CB Circular No. 905.

We agree with the ruling of the CA. It is elementary that the laws in force at the time the contract was made generally govern the effectivity of its provision.³⁶ We note that the new promissory note was executed on May 6, 1982, prior to the effectivity of CB Circular No. 905 on January 1, 1983. At that time, The Usury Law, Act No. 2655, as amended by Presidential Decree No. 116, was still in force and effect.

Under the Usury Law, no person shall receive a rate of interest, including commissions, premiums, fines and penalties, higher than twelve percent (12%) per annum or the maximum rate prescribed by the Monetary Board for a loan secured by a mortgage upon real estate the title to which is duly registered.³⁷

In this case, by specific provision in the new promissory note, the restructured loan continued to be secured by the same mortgage contract executed on May 18, 1978 which covered real and personal properties of the respondents. We, therefore, find the eighteen percent (18%) interest rate plus the additional interest and penalty charges of eighteen percent (18%) and eight percent (8%), respectively, to be highly usurious.

In usurious loans, the entire obligation does not become void because of an agreement for usurious interest; the unpaid principal debt still stands and remains valid, but the stipulation as to the usurious interest is void. Consequently, the debt is to be considered without stipulation as to the interest.³⁸ In the absence of an express stipulation as to the rate of interest, the legal rate at twelve percent (12%) per annum shall be imposed.³⁹

Neither is the contention of the respondents that the Central Bank engaged in self-legislation correct. As we held in First Metro Investment Corporation v. Este Del Sol Mountain Reserve, Inc.: ⁴⁰

'Central Bank Circular No. 905 did not repeal nor in any way amend the Usury Law but simply suspended the latter's effectivity. The illegality of usury is wholly the creature of legislation. A Central Bank Circular cannot repeal a law. Only a law can repeal another law. Thus, retroactive application of a Central Bank Circular cannot, and should not, be presumed.⁴¹

On the third issue, the petitioner argues that CB Circular No. 158 does not prescribe a formula in computing a debtor's monetary obligation, but merely provides for the formula in computing the simple annual rate. It contends that the amount of the debtor's obligation must be computed in accordance with the interest rate, charges, and manner of computation agreed upon by the parties.⁴²

We agree. The total obligation of the respondents must be computed according to the terms and conditions agreed upon. The formula provided under paragraph 3, Sec. 2(i), CB Circular No. 158 cannot be used in computing the total obligation of the respondents because it merely applies to the computation of the simple annual rate. Simple annual rate is the uniform percentage which represents the ratio, on an annual basis, between the finance charges and the amount to be financed.⁴³ It is one of the items required to be disclosed under the Truth in Lending Act pursuant to the State's policy to protect its citizens from lack of awareness of the true cost of credit.⁴⁴

Finally, we find that the records are insufficient to enable us to determine the total amount of the respondents' obligation. It is not even clear how much the respondents have already paid on the restructured loans and when such payments were made. The receipts presented in evidence by the respondents only showed that they paid P15,000.00 on April 20, 1983 and P5,000.00 on December 2, 1983.⁴⁵ On the other hand, Mr. Roberto Balarao, who is assigned to the Traffic and Processing Department of the petitioner, testified that a third payment was made, but failed to state the amount.⁴⁶ Another witness, Carmen Chamen, an account officer of the petitioner, testified that after the restructuring of the account, the total payment made was P35,000.00.⁴⁷

Moreover, considering our previous conclusion that the interest rates prescribed under the new promissory note are usurious, the statement of account presented by the petitioner is no longer pertinent. It must be stressed that such statement of account was arrived at based on the usurious interest rates. Hence, the total amount of the obligation must necessarily be recomputed.

IN LIGHT OF ALL THE FOREGOING, the assailed Decision dated February 28, 2001 of the Court of Appeals and Order dated June 11, 1993 of the Regional Trial Court, Makati City, Branch 145, are AFFIRMED WITH MODIFICATION. The case is hereby REMANDED to the trial court for determination of the total amount of the respondents' obligation according to the reduced interest rate of twelve percent (12%) per annum.

SO ORDERED.

Austria-Martinez and Chico-Nazario, JJ., concur
Puno, J., on official leave
Tinga,J., on leave

Endnotes:

¹ Penned by Associate Justice Mercedes Gozo-Dadole, with Associate Justices Fermin A. Martin, Jr. and Portia AliÃ±o-Hormachuelos, concurring.

² Records, pp. 369-370.

³ Rollo, pp. 78-80.

⁴ Records, p. 368.

⁵ Id. at 250.

⁶ Id. at 375-376.

⁷ Id. at 377-378.

⁸ Id. at 390.

⁹ Id. at 384.

¹⁰ Id. at 254.

¹¹ Id. at 268.

¹² Id. at 708-709.

¹³ Id. at 435.

¹⁴ Id. at 714.

¹⁵ Id. at 244-245.

¹⁶ Rollo, pp. 68-77.

¹⁷ Id. at 95.

¹⁸ Records, p. 395.

¹⁹ Rollo, pp. 104-105.

²⁰ Id. at 106.

²¹ Id. at 130.

²² Paragraph 3, Sec. 2(i), CB Circular No. 158-63 provides:

In the case of the normal installment type of credit of at least one year in duration, where installment payments of equal amount are made in regular time periods spaced not more than one year apart, the simple annual rate (R), in percent, is computed by the following method:

R = 2x (finance charge) x (12) x 100%

(amount to be financed) (total number of payments plus one)

²³ Rollo, p. 124.

²⁴ Id. at 128.

²⁵ Id. at 127.

²⁶ Id. at 46-47.

²⁷ Memorandum for the Petitioner, pp. 17-18.

²⁸ Id. at 22.

²⁹ Montecillo v. Reynes, 385 SCRA 244 (2002).

³⁰ Changco v. Court of Appeals, 379 SCRA 590 (2002).

³¹ ErmitaÃ±o v. Court of Appeals, 306 SCRA 218 (1999).

³² 305 SCRA 449 (1999).

³³ Id. at 454.

³⁴ Rollo, p. 140.

³⁵ Id. at 141-142.

³⁶ Puerto v. Court of Appeals, 383 SCRA 185 (2002).

³⁷ Sec. 2, Act No. 2655, as amended by P.D. No. 116.

³⁸ First Metro Investment Corporation v. Este Del Sol Mountain Reserve, Inc., 369 SCRA 99 (2001).

³⁹ CB Circular No. 416 dated July 29, 1974, raised the legal interest to 12% per annum.

⁴⁰ Supra, note 37.

⁴¹ Id. at 111.

⁴² Rollo, p. 48.

⁴³ Sec. 2(i), CB Circular No. 158-63.

⁴⁴ Sec. 2, Rep. Act No. 3765.

⁴⁵ Records, p. 268.

⁴⁶ Id. at 435.

⁴⁷ Id. at 714.

G.R. No. 148562 - TAGBILARAN INTEGRATED SETTLERS ASSOCIATION, ET AL. v. HONORABLE COURT OF APPEALS, ET AL.

2013-01-15T09:50:48+00:00

G.R. No. 148562 - TAGBILARAN INTEGRATED SETTLERS ASSOCIATION, ET AL. v. HONORABLE COURT OF APPEALS, ET AL.

THIRD DIVISION

[G.R. NO. 148562 : November 25, 2004]

TAGBILARAN INTEGRATED SETTLERS ASSOCIATION [TISA] INCORPORATED THRU ITS SECRETARY-TREASURER REPRESENTATIVE SIXTO MUMAR, SR. AS WELL AS ITS OTHER OFFICERS AND MEMBERS, NAMELY: AURELIO CIRUNAY, CIPRIANO GAMIL, ROBERTO MEDINA, BASILISA PUMARES, MARIETA LUMAYNO, CRISOSA A. TAPAY, JULIETA DURAN, RAMON RAMOS, JR., DELIO ERANA, EMETERIA ALE, PANFILO LAWAY, CRISPIN PENASO, HADJE MALIK, ALANGADI SULTAN, BERNARDA GULLEBAN, MANUEL CHATTO, KABSARAN MAMACAL, PEDRO ESTOQUE, and EULALIO SARAMOSING, Petitioners, v. HONORABLE COURT OF APPEALS, TAGBILARAN WOMAN'S CLUB REPRESENTED BY ITS PRESIDENT and LAMBERT'S REPRESENTED BY ITS MANAGER, CRISPIN PENASO, SPS. ALEX and ARLENE SANTOS, NECITA BOLATETE, CAROL CURIBA, MAMARI BUSAR, ANTONIO BULASA, SUSAN PANTOJA, LEONORA ESTALLO, DANIEL OMICTIN, BOBBY BANDIANON and CARMEN CRISTALES, Respondents.

D E C I S I O N

CARPIO MORALES, J.:

On Petition for Review on Certiorari is the appellate court's Decision¹ of February 28, 2001 affirming that of Branch 2 of the Regional Trial Court of Tagbilaran City, Bohol.²

Petitioner Tagbilaran Integrated Settlers Association (TISA), is an organization founded in 1991 by individuals who have residential and business establishments in a commercial lot located at Torralba and Parras Streets in Tagbilaran City. The lot, which has an area of 2,726 square meters, is covered by TCT No. (142) 21047 in the name of respondent Tagbilaran Women's Club (TWC).

In 1986-1987, the TWC entered into separate written lease contracts for a period of one year with individual petitioners herein, Aurelio Cirunay, Roberto Medina, Basilisa Pumares, Marietta Lumayno, Ramon Ramos Jr., Delio Erana, Elemeterio Ale, Alangadi Sultan, Manuel Chatto, and Cipriano Gamil.³

Pertinent provisions of each contract of lease included the following: (1) stall space rented shall be exclusively used for business; (2) converting the space into dwelling is strictly prohibited; (3) no subleasing is allowed without the knowledge and consent of TWC; (4) all ordinances as to sanitary and building permits shall be complied with; (5) rentals shall be paid monthly; (6) the period of lease is for one year only; and (7) any violation of the lease contract automatically rescinds the contract of lease.⁴

The other petitioners, namely Crisosa Tapay, Julieta Duran, Panfilo Laway, Crispin Penaso, Hadje Malik, Bernardo Gulleban, Kabsaran Mamacal, Pedro Estoque and Eulalio Saramosing are sublessees of stalls in the lot.⁵

In a letter to petitioners dated January 6, 1990, TWC demanded that they vacate the rented premises on the following grounds: expiration of lease contracts, non-payment of rentals, and violations of the conditions of lease including noncompliance with sanitary and building ordinances.⁶ Another letter of demand, dated July 16, 1990, was sent to petitioners who refused to vacate the premises, however.

On February 25, 1993, TWC entered into a lease contract on the lot with one Lambert Lim who at once paid a total of P240,000.00 representing payment of rentals for the first twelve (12) months.⁷ Petitioners nevertheless refused to vacate the lot, they contending that the contract of lease between TWC and Lambert Lim is null and void because TWC impliedly extended to them new contracts of lease when it continued collecting monthly rentals from them.

Petitioners soon filed on March 31, 1993 a petition against TWC and Lim for prohibition, annulment of contract of lease, and damages with prayer for the issuance of a writ of preliminary prohibitory injunction before the RTC of Tagbilaran City, Bohol.⁸

In the meantime, petitioners consigned the monthly rentals before Branch 2 of the RTC (the trial court).⁹

By decision¹⁰ of January 24, 1997, the trial court dismissed petitioners' petition, disposing as follows:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered in favor of the defendants and against the plaintiffs and third-party defendants:

1. Ordering the dismissal of plaintiff's complaint/petition;

2. Declaring the lease contract between the First Defendant TWC and Second defendant Lambert Lim to be valid and binding;

3. Ordering the plaintiffs, the third-party defendant and the herein occupants acting for and in behalf of the plaintiffs and third-party defendants to vacate the premises of the defendant TWC's lot under TCT No. (142) 21047, within three (3) months from the finality of the Decision;

4. Declaring the rental deposits consigned by plaintiffs with the Clerk of Court in the total sum of P176,585.00, as payment for all rentals and damages owing to the defendants, by reason of the filing of the suit, in the equitable and proportionate amount of P56,585.00 to the First Defendant TWC, and P140,000 to Second Defendant Lambert Lim; andcralawlibrary

5. To pay the costs.¹¹ (Underscoring supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

Petitioners appealed the trial court's decision before the Court of Appeals which, by decision¹² of February 28, 2001, affirmed that of the trial court.

Petitioner's motion for reconsideration of the appellate court's decision having been denied by Resolution¹³ of June 11, 2001, they lodged the present petition which raises the same issues raised before the trial court and the appellate court, to wit: (1) granting that the contracts of lease between TWC and petitioners have expired, whether implied new lease contracts existed which justify petitioners' continued occupation of the lot; (2) whether TWC violated its obligation under Article 1654 (c) of the Civil Code when it entered into a lease contract with Lim on February 25, 1993; and (3) whether the provisions of Presidential Decree No. 1517, Presidential Decree No. 20, Proclamation No. 1893, and Presidential Decree No. 1517 apply to the case at bar.¹⁴

The petition fails.

The lease contracts executed by TWC and petitioners in 1986/1987 were for a period of one year. Following Article 1669¹⁵ of the Civil Code, the lease contracts having been executed for a determinate time, they ceased on the day fixed, that is, a year after their execution without need of further demand.

While no subsequent lease contracts extending the duration of the original lease were forged, it appears that TWC allowed petitioners to continue occupying the lot as in fact it continued to demand, collect and accept monthly rentals.¹⁶ An implied new lease (tacita reconduccion) was thus created pursuant to Article 1670 of the New Civil Code which provides:

If at the end of the contract the lessee should continue enjoying the thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is understood that there is an implied new lease, not for the period of the original contract, but for the time established in Articles 1682 and 1687. The other terms of the original contract shall be revived.

Since the period for the tacita reconduccion was not fixed and the rentals were paid on a monthly basis, the contract was from month-to-month.¹⁷

A month-to-month lease under Article 1687¹⁸ is a lease with a definite period, hence, it is terminable at the end of each month upon demand to vacate by the lessor.¹⁹

When notice to vacate dated January 6, 1990 was sent by TWC to petitioners, followed by another dated July 16, 1990, the tacita reconduccion was aborted. For a notice to vacate constitutes an express act on the part of the lessor that it no longer consents to the continued occupation by the lessees of its property.

The notice required [under Article 1670] is the one given after the expiration of the lease period for the purpose of aborting an implied renewal of the lease.²⁰ (Emphasis supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

As thus correctly found by the Court of Appeals,

[t]he implied lease of appellants expired upon demand made by the appellee TWC on January 1990. From then on appellee TWC had the right to terminate the lease at the end of the term of the impliedly renewed contracts whose expiration dates w[ere] at the end of the month of January 1990. Although appellants continued to pay rent[al]s after said date, it is clear that they no longer have the right to continue in the possession of the subject lot because their continued stay therein was without the consent of appellee TWC.²¹

Contrary to petitioners' contention, the subsequent acceptance by the lessor of rental payments does not, absent any circumstance that may dictate a contrary conclusion, legitimize the unlawful character of their possession.²²

As for petitioners' contention that TWC violated Article 1654 (c) of the Civil Code when it entered into a lease contract with Lim on February 25, 1993 without their previous consent, the same does not lie. For after TWC notified petitioners, by letter of January 6, 1990, to vacate the occupied premises, the implied new lease had been aborted and they, therefore, had no right to continue occupying the lot. Their continued occupation of the premises had thus become unlawful.

While TWC as a lessor is obliged to, under Article 1654 of the Civil Code, maintain the lessee in the peaceful and adequate enjoyment of the lease, the obligation persist only for the duration of the contract.²³

As to whether petitioners are covered by P.D. No. 1517, Proclamation No. 1893, RA 7279 and Presidential Decree No. 20, this Court holds in the negative.

Under P.D. 1517, only legitimate tenants who have resided on the land for ten years or more who have built their homes on the land and residents who have legally occupied the lands by contract, continuously for the last ten years, are given the right of first refusal to purchase the land within a reasonable time.²⁴ In the case at bar, petitioners entered into one year lease contracts with TWC for commercial use only and conversion of the rented premises to dwelling was strictly prohibited. On that score alone, petitioners' case does not fall under P.D. No. 1517.

At all events, P.D. No. 1517 is indisputably applicable only in specific areas declared to be located within the so-called urban zones.²⁵ As found by the trial court, petitioners failed to show that there was a proclamation issued by the President declaring the lot to be within the urban land reform zone, a condition sine qua non under Section 4²⁶ of P.D. 1517.²⁷

As for Proclamation No. 1893,²⁸ the same covers only the Metropolitan Manila Area.

With respect to Section 28 of R.A. 7279, it covers only lands in urban areas, including existing areas for priority development, zonal improvement sites, slum improvement, resettlement sites, and other areas that may be identified by the local government units as suitable for socialized housing.²⁹ Petitioners have not shown, nay alleged, however, that the lot falls within the coverage of said law.

Finally, with respect to Presidential Decree No. 20,³⁰ the same seeks to regulate rentals of properties used for housing purposes and not for commercial use, hence, its inapplication to petitioners' case.

Finally, with respect to the disposition of the amount consigned in court by petitioners, there being no factual basis to conclusively determine whether a portion thereof represents rentals accruing before the execution on February 25, 1993 of the lease contract between Lim and TWC and whether said lease contract remains unabrogated, the matter of determining who between TWC and Lim has the right to the consigned amount and the accrued rentals rests with the trial court.

WHEREFORE, the challenged decision of the appellate court which affirmed that of the trial court is hereby AFFIRMED with MODIFICATION in that petitioners and any occupants of the lot acting for and in their behalf are ordered to PAY any unpaid and accrued monthly rentals plus legal interest until the leased premises have been surrendered to the TWC and/or Lambert Lim.

Let the records of the case be remanded to the court of origin, Branch 2 of the Regional Trial Court of Tagbilaran City, which is directed to determine who between respondents herein has a right to the consigned amount in the sum of P176,585.00 and to any accrued and unpaid rentals to due petitioners.

Costs against petitioners.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, and Garcia, JJ., concur.
Corona, J., on leave.

Endnotes:

¹ Rollo at 27-36.

² Id. at 20-26.

³ Id. at 22.

⁴ CA Rollo at 65-66.

⁵ Rollo at 23.

⁶ Id. at 23-24.

⁷ Id. at 71.

⁸ Id. at 4.

⁹ Id. at 31.

¹⁰ Id. at 20-26.

¹¹ Id. at 26.

¹² Id. at 27-36.

¹³ Id. at 43-44.

¹⁴ Id. at 7-9.

¹⁵ Art. 1669. If the lease was made for a determinate time. It ceases upon the day fixed, without the need of a demand.

¹⁶ Rollo at 8.

¹⁷ Paterno v. Court of Appeals, 272 SCRA 770, 778 (1997).

¹⁸ Civil Code, Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; and from day to day, if the rent is to be paid daily. However, even though a monthly rent is paid, and no period for the lease has been set, the courts may fix a longer term for the lease after the lessee has occupied the premises for over one year. If the rent is weekly, the courts may likewise determine a longer period after the lessee has been in possession for over six months. In case of daily rent, the courts may also fix a longer period after the lessee has stayed in the place for over one month.

¹⁹ Chua v. Court of Appeals, 242 SCRA 744, 751 (1995).

²⁰ Ibid.

²¹ Rollo at 33.

²² LL and Company Development and Agro-Industrial Corporation v. Huang Chao-Chun, 378 SCRA 612, 627 (2002).

²³ Civil Code, Article 1654. The lessor is obliged:

xxx

(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract.

²⁴ P.D. 1517, Section 6. Land Tenancy in Urban Land Reform Areas. - Within the Urban Zones legitimate tenants who have resided on the land for ten years or more who have built their homes on the land and residents who have legally occupied the lands by contract, continuously for the last ten years shall not be dispossessed of the land and shall be allowed the right of first refusal to purchase the same within a reasonable time and at reasonable prices, under terms and conditions to be determines by the Urban Zone Expropriation and Land Management Committee created by Section 8 of this Decree.

²⁵ Delos Santos v. Court of Appeals, 368 SCRA 226, 229 (2001).

²⁶ P.D. 1517, Section 4. Proclamation of Urban Land Redorm Zones. - The President shall proclaim specific parcels of urban and urbanizable lands as Urban Land Reform Zones, otherwise known as Urban Zones for purposes of this Decree xxx. crvll

²⁷ Rollo at 25.

²⁸ Proclamation No. 1893, Declaring the Entire Metropolitan Manila Area as an Urban Land Reform Zone (September 11, 1979).

²⁹ Banson v. Court of Appeals, 246 SCRA 42, 46 (1995).

³⁰ Presidential Decree No. 20, Amending Certain Provisions of Republic Act No. 6359, entitled "An Act to Regulate Rentals for the Years of Dwelling Units or of Land on which Another's Dwelling is Located and Penalizing Violations thereof, and for Other Purposes."

G.R. No. 148739 - FAR CORPORATION v. RENATO MAGDALUYO, ET AL.

2013-01-15T09:50:48+00:00

G.R. No. 148739 - FAR CORPORATION v. RENATO MAGDALUYO, ET AL.

SECOND DIVISION

[G.R. NO. 148739 : November 19, 2004]

FAR CORPORATION, Petitioner, v. RENATO MAGDALUYO, ANTONIO VALDEZ, and ROLANDO CHUA, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

In an appeal from a Decision or final order of the Regional Trial Court to the Court of Appeals, will the payment of the appellate docket fees made one hundred and thirty-two (132) days after the lapse of the reglementary period to take an appeal, justify its dismissal?chanroblesvirtualawlibrary

This is the question to be resolved in this case.

The relevant and undisputed facts are as follows:

On 25 November 1997, a complaint¹ was filed by respondents herein against petitioner Far Corporation, Rosa O. Caram, and Fermin Manuel Caram III for Specific Performance with Prayer for a Writ of Preliminary Injunction and Damages, with the Regional Trial Court (RTC), Branch 137, Makati City, docketed as Civil Case No. 97-2745. A Decision² was rendered by the said court on 21 December 1998, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered, ordering defendant FAR Corporation to pay plaintiffs RENATO T. MAGDALUYO, ANTONIO L. VALDEZ and ROLANDO E. CHUA, Seven Hundred Fifty Thousand (P750,000.00) Pesos as broker's commission with legal interest at the rate of six (6%) [percent] per annum from 2 May 1990 until fully paid; however said commissions, inclusive of interest, should be divided equally in four parts, and - given to each plaintiff, and - to defendant Fermin Manuel Caram III; attorney's fees equivalent to twenty percent of the amounts due; and costs of the suit.

The complaint, insofar as defendants Rosa O. Caram and Fermin Manuel Caram III (sic), is dismissed for lack of sufficient evidence.

The Decision of the trial court was received by petitioner on 18 February 1999.³

Not fully satisfied with the trial court's Decision, petitioner filed a Motion for Reconsideration⁴ on 02 March 1999, to which respondents filed a Comment⁵ dated 18 March 1999.

In an Order⁶ dated 02 February 2000, the trial court denied the Motion for Reconsideration for lack of merit. This Order was received by petitioner on 17 February 2000.⁷

On 21 February 2000, petitioner filed a Notice of Appeal⁸ with the trial court. An Order⁹ was issued by the trial court judge on 28 March 2000, directing the Branch Clerk of Court to transmit immediately the entire records of the case, with the transcript of stenographic notes, to the Court of Appeals. The same were transmitted to the Court of Appeals on 22 June 2000.¹⁰

On 18 July 2000, petitioner filed with the Court of Appeals an Ex-Parte Manifestation and Submission dated 17 July 2000.¹¹ In said pleading, petitioner manifested that it has paid the required appeal docket fees with the trial court, whose Decision and order were being appealed, and prayed that the receipts for payment be included as part of the records of the case. Attached therewith were the originals of the Clerk of Court, RTC-Makati Official Receipts, with numbers 12856671 (for P300) and 12857288 (for P200),¹² both dated 13 July 2000.

On 28 July 2000, respondents filed a Comment with Motion to Dismiss before the Court of Appeals.¹³ Respondents moved for the dismissal of the appeal on the ground that petitioner failed to pay the docket fees within the period for taking an appeal.

On 31 August 2000, the Court of Appeals issued a Resolution,¹⁴ quoted as follows:

From the records it appear(s) that appellant filed his notice of appeal on February 21, 2000. Yet based on the "Ex-Parte Manifestation and Submission" filed by counsel for defendant-appellant it appears that the appeal docket fees were paid only on July 13, 2000, obviously way beyond the period for perfecting an appeal. In view thereof, the present appeal is DISMISSED for non-payment of docket fees within the period for perfecting an appeal.

The said Resolution was received by petitioner on 18 September 2000,¹⁵ and on 21 September 2000, it filed a Motion for Reconsideration.¹⁶ On 21 November 2000, respondents filed a Comment on the Motion For Reconsideration,¹⁷ to which petitioner filed a Motion to Strike Comment¹⁸ dated 27 December 2000. The Court of Appeals, in another Resolution¹⁹ promulgated on 27 June 2001, dismissed the Motion for Reconsideration for lack of merit. The same is quoted hereunder:

After a reading of the Motion for Reconsideration filed by defendant-appellant Far Corporation, we find no reason to disturb our previous ruling dismissing the appeal for non-payment of docket fee within the period of perfecting an appeal.

The contention of defendant appellant that under Sec. 1(c), Rule 50, the ground to dismiss an appeal is failure to pay the docket fee but not failure to pay the docket fee on time, is untenable. On this respect, it is worth stressing that based on the records, it took defendant-appellant almost five (5) months before paying the required docket fee. Such unreasonable delay would be tantamount to failure to pay the docket fee which is a ground for dismissal of an appeal pursuant to Sec. 1(c) of the Rules of Court.

WHEREFORE, the Motion for Reconsideration is hereby denied for lack of merit.

Hence, this petition.

Petitioner assigned the following errors:

1. That the Court of Appeals committed serious and reversible error of law when it peremptorily and precipitously dismissed its formative appeal, and refused to reconsider said dismissal, based on the procedural technicality of late payment of appeal docket fees, rather than on the substantial merits of the case, thereby unduly depriving it of its right to appeal; andcralawlibrary

2. That by its unjustifiable actions which constitute unwarranted deviation from, and disregard of, the prevailing doctrines laid down by this Court, the Court of Appeals unjustly denied due process to petitioner, who by paying the appeal docket fees at its own initiative showed complete good faith and willingness to comply with the Rules.²⁰

In support of the assignment of errors, petitioner submits the arguments that the nonpayment on time of the appeal docket fees is a non-fatal lapse, or a non-jurisdictional defect which the Court of Appeals should have overlooked in order to attain substantial justice.²¹ This argument, according to petitioner, was based on our rulings in the earlier cases of Rosario Yambao v. Court of Appeals,²² Ayala Land, Inc. v. Sps. Morris and Socorro Carpo,²³ and Santos v. Court of Appeals.²⁴ Further, petitioner argues that the Court of Appeals hastily and wrongly dismissed its appeal considering that there was good faith and willingness on its part to comply with the Rules by voluntarily paying the docket fees.²⁵

The petition is devoid of merit.

The reliance of petitioner in the three aforementioned cases is misplaced.

In Yambao v. Court of Appeals,²⁶ the failure of the petitioners to pay the correct amount of docket fees was due to the erroneous assessment by the Clerk of Court of the Regional Trial Court, Valenzuela City (the assessment was short by P20), as evidenced by the 10 December 1999 Certification issued by the Office of the Clerk of Court. The fault was not upon the petitioners themselves, but upon a civil servant. In this case, we even reiterated the ruling that the payment of docket fees within the prescribed period is mandatory for the perfection of an appeal.

In the case of Ayala Land, Inc. v. Sps. Morris and Socorro Carpo,²⁷ the appellant was likewise unable to pay the correct amount of docket fees due to an error of an officer of the Court in computing the correct amount (the assessment was short by P5). Therefore, there was no fault on its part.

The case of Santos v. Court of Appeals,²⁸ wherein we laid down the rule that the payment of the appeal fee is not a prerequisite for the perfection of an appeal, is not totally applicable in the case at bar. The Santos case was decided at a time when the 1997 Rules on Civil Procedure was not yet in effect. It was also a case involving an appeal, not from the RTC to the Court of Appeals, but from the Municipal Trial Court to the RTC. The applicable rules at that time were the Interim Rules and Guidelines relative to the implementation of the Judiciary Reorganization Act of 1981²⁹ which did not provide that the payment of the appeal fee is a prerequisite for the perfection of an appeal,³⁰ and Section 8, Rule 141 of the Revised Rules of Court which imposes an appeal fee in cases of appeal from the municipal trial courts and specifies the person/s to whom the appeal fee shall be paid, without specifying when said payment shall be made.³¹

The rules with respect to the payment of the appellate docket fees have substantially changed with the advent of the 1997 Rules on Civil Procedure.

Rule 41, Section 4, of the 1997 Rules on Civil Procedure provides:

SEC. 4. Appellate court docket and other lawful fees. - Within the period for taking an appeal, the appellant shall pay to the clerk of the court which rendered the judgment or final order appealed from, the full amount of the appellate court docket and other lawful fees. Proof of payment of said fees shall be transmitted to the appellate court together with the original record or the record on appeal. (Emphasis supplied)Ï‚rÎ±lÎ±Ï‰lÎ¹brÎ±rÃ¿

The aforecited rule is not merely directory, as the payment of the docket and other legal fees within the prescribed period is both mandatory and jurisdictional.³² It bears stressing that an appeal is not a right, but a mere statutory privilege.³³

An ordinary appeal from a Decision or final order of the RTC to the Court of Appeals must be made within fifteen (15) days from notice.³⁴ And within this period, the full amount of the appellate court docket and other lawful fees must be paid to the clerk of the court which rendered the judgment or final order appealed from.

The requirement of paying the full amount of the appellate docket fees within the prescribed period is not a mere technicality of law or procedure.³⁵

Time and again, this Court has consistently held that the "payment of docket fees within the prescribed period is mandatory for the perfection of an appeal. Without such payment, the appeal is not perfected. The appellate court does not acquire jurisdiction over the subject matter of the action and the Decision sought to be appealed from becomes final and executory."³⁶

The nonpayment of the docket and other lawful fees within the reglementary period as provided under Section 4 of Rule 41³⁷ is a ground for the dismissal of an appeal, as provided for under Section 1(c) Rule 50,³⁸ to wit:

SECTION 1. Grounds for dismissal of appeal. - An appeal may be dismissed by the Court of Appeals, on its own motion or on that of the appellee, on the following grounds:

. . .

c. Failure of the appellant to pay the docket and other lawful fees as provided in Section 4 of Rule 41; . . . .

Rules of Procedure must be faithfully followed. But the rules may be relaxed, for persuasive and weighty reasons, to relieve a litigant of an injustice commensurate with his failure to comply with the prescribed procedure.³⁹ In the case of La Salette College v. Victor Pilotin,⁴⁰ we held:

Notwithstanding the mandatory nature of the requirement of payment of appellate docket fees, we also recognize that its strict application is qualified by the following: first, failure to pay those fees within the reglementary period allows only discretionary, not automatic, dismissal; second, such power should be used by the court in conjunction with its exercise of sound discretion in accordance with the tenets of justice and fair play, as well as with a great deal of circumspection in consideration of all attendant circumstances.

In petitioner's Memorandum,⁴¹ our ruling in the case of Mactan Cebu International Airport Authority (MCIAA) v. Mangubat,⁴² where we held that "[l]ate payment of docket fees may be admitted when the party showed willingness to abide by the Rules by immediately paying the required fees,"⁴³ was cited. This doctrine cannot be applied in the case at bar because, in the MCIAA case, the Solicitor General, as counsel for the petitioner, paid the appellate docket fees six (6) days after the timely filing of the notice of appeal. In the instant case, the payment of the appellate docket fees was made 132 days after the lapse of the reglementary period to take an appeal. It is also worthy to note that when the Solicitor General filed the notice of appeal, the 1997 Rules had been in effect only for fourteen (14) days, and that is why we ruled that "the omission of the Solicitor General to pay docket fees together with the filing of the notice of appeal fourteen (14) days after the effectivity of the new rules may be excused."⁴⁴

The payment of the full amount of the docket fee is an indispensable step for the perfection of an appeal.⁴⁵ In both original and appellate cases, the court acquires jurisdiction over the case only upon the payment of the prescribed docket fees.⁴⁶ Inasmuch as the payment of the appellate docket fees in this case was made 132 days after the expiration of the period for the perfection of an appeal, the Court of Appeals did not acquire jurisdiction over the case, except to order its dismissal. Thus, the Decision rendered by the RTC, Branch 137, Makati City, in Civil Case No. 97-2745, dated 21 December 1998, became final and executory by operation of law.

The term "substantial justice" is not a magic wand that will automatically compel this Court to suspend procedural rules. "Procedural rules are not to be belittled or dismissed simply because their non-observance may have resulted in prejudice to a party's substantive rights. Like all rules, they are required to be followed except only for the most persuasive of reasons when they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed."⁴⁷

Considering the circumstances present here, we are not exactly convinced that a relaxation of the Rules is in order. Petitioner miserably failed to provide this Court with persuasive and weighty reasons that would allow us to exercise our discretion on whether or not to adhere to the strict requirement of the law. Thus, as propitiously pointed out by respondents, we must yield to the time-honored principle "Justice is for all. Litigants to an action have equal footing in a court of law. Rules are laid down for the benefit of all and should not be made dependent upon a suitor's sweet time and own bidding."⁴⁸

WHEREFORE, in view of all the foregoing, the petition is hereby DISMISSED. The assailed Resolutions of the Court of Appeals are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and TINGA, JJ., concur.

Endnotes:

¹ Rollo, p. 22.

² Penned by Judge Santiago Javier Ranada, Rollo, pp. 99-103.

³ Rollo, p. 123.

⁴ Rollo, pp. 104-116.

⁵ Rollo, pp. 117-119.

⁶ Rollo, pp. 120-121.

⁷ Petition for Certiorari, p. 2; Rollo, p. 10.

⁸ Rollo, p. 123.

⁹ Rollo, p. 122.

¹⁰ Records, p. 3.

¹¹ Records, pp. 11-13.

¹² Records, p. 13.

¹³ Records, pp. 23-24.

¹⁴ Records, p. 26; Thirteenth Division, penned by Associate Justice Eloy R. Bello, Jr., with Associate Justices Delilah Vidallon-Magtolis and Eliezer R. De Los Santos, concurring.

¹⁵ Rollo, p. 130.

¹⁶ Rollo, pp. 130-133.

¹⁷ Records, pp. 32-33.

¹⁸ Records, pp. 34-36.

¹⁹ Records, p. 38; Former Thirteenth Division.

²⁰ Rollo, p. 11.

²¹ Rollo, p. 12.

²² G.R. No. 140894, 27 November 2000, 346 SCRA 141.

²³ G.R. No. 140162, 22 November 2000, 345 SCRA 579.

²⁴ G.R. No. 114726, 14 February 1996, 253 SCRA 632.

²⁵ Rollo, p. 13.

²⁶ Supra.

²⁷ Supra.

²⁸ Supra.

²⁹ B.P. Blg. 129.

³⁰ Resolution of the Court En Banc dated 11 January 1983, E. Appellate Procedure, par. 20.

³¹ Resolution of the Court En Banc dated 04 September 1990, effective 02 November 1990.

³² Lazaro v. Court of Appeals, G.R. No. 137761, 06 April 2000, 330 SCRA 208.

³³ Badillo v. Tayag , G.R. No. 143976 and No. 145846, 03 April 2003, 400 SCRA 494.

³⁴ Rule 41, Section 3, 1997 Rules on Civil Procedure.

³⁵ Manalili v. De Leon, G.R. No. 140858, 27 November 2001, 370 SCRA 625.

³⁶ Navarro v. Metropolitan Bank and Trust Co., G.R. No. 138031, 27 May 2004, citing Alfonso v. Andres, G.R. No. 139611, 04 October 2002, 390 SCRA 465.

³⁷ 1997 Rules on Civil Procedure.

³⁸ Ibid.

³⁹ Navarro v. Metropolitan Bank and Trust Co., supra.

⁴⁰ G.R. No. 149227, 11 December 2003, 418 SCRA 381, 387.

⁴¹ Rollo, pp. 131-139.

⁴² G.R. No. 136121, 16 August 1999, 312 SCRA 463.

⁴³ Ibid., at 467 (Emphasis ours).

⁴⁴ Ibid.

⁴⁵ Rodillas v. COMELEC, G.R. No. 119055, 10 July 1995, 245 SCRA 702, citing Dorego v. Perez, G.R. No. L-24922, 02 January 1968, 22 SCRA 8, and Bello v. Fernando, G.R. No. L-16970, 30 January 1962, 4 SCRA 135.

⁴⁶ Ibid., citing Acda v. Minister of Labor, G.R. No. L-51607, 15 December 1982, 119 SCRA 306.

⁴⁷ Lazaro v. Court of Appeals, supra, citing Galang v. CA, G.R. No. 76221, 29 July 1991, 199 SCRA 683; Pedrosa v. Hill, G.R. No. 120804, 14 June 1996, 257 SCRA 373; Ditching v. CA, G.R. No. 109834, 18 October 1996, 263 SCRA 343; Ginete, et al. v. CA, G.R. No. 127596, 24 September 1998, 296 SCRA 38.

⁴⁸ Rollo, p. 146.

G.R. No. 149734 - DR. DANIEL VAZQUEZ, ET AL. v. AYALA CORPORATION

2013-01-15T09:50:49+00:00

G.R. No. 149734 - DR. DANIEL VAZQUEZ, ET AL. v. AYALA CORPORATION

SECOND DIVISION

[G.R. NO. 149734 : November 19, 2004]

DR. DANIEL VAZQUEZ and MA. LUIZA M. VAZQUEZ, Petitioners, v. AYALA CORPORATION, Respondent.

D E C I S I O N

TINGA, J.:

The rise in value of four lots in one of the country's prime residential developments, Ayala Alabang Village in Muntinlupa City, over a period of six (6) years only, represents big money. The huge price difference lies at the heart of the present controversy. Petitioners insist that the lots should be sold to them at 1984 prices while respondent maintains that the prevailing market price in 1990 should be the selling price.

Dr. Daniel Vazquez and Ma. Luisa Vazquez¹ filed this Petition for Review on Certiorari² dated October 11, 2001 assailing the Decision³ of the Court of Appeals dated September 6, 2001 which reversed the Decision⁴ of the Regional Trial Court (RTC) and dismissed their complaint for specific performance and damages against Ayala Corporation.

Despite their disparate rulings, the RTC and the appellate court agree on the following antecedents:⁵

On April 23, 1981, spouses Daniel Vasquez and Ma. Luisa M. Vasquez (hereafter, Vasquez spouses) entered into a Memorandum of Agreement (MOA) with Ayala Corporation (hereafter, AYALA) with AYALA buying from the Vazquez spouses, all of the latter's shares of stock in Conduit Development, Inc. (hereafter, Conduit). The main asset of Conduit was a 49.9 hectare property in Ayala Alabang, Muntinlupa, which was then being developed by Conduit under a development plan where the land was divided into Villages 1, 2 and 3 of the "Don Vicente Village." The development was then being undertaken for Conduit by G.P. Construction and Development Corp. (hereafter, GP Construction).

Under the MOA, Ayala was to develop the entire property, less what was defined as the "Retained Area" consisting of 18,736 square meters. This "Retained Area" was to be retained by the Vazquez spouses. The area to be developed by Ayala was called the "Remaining Area". In this "Remaining Area" were 4 lots adjacent to the "Retained Area" and Ayala agreed to offer these lots for sale to the Vazquez spouses at the prevailing price at the time of purchase. The relevant provisions of the MOA on this point are:

"5.7. The BUYER hereby commits that it will develop the 'Remaining Property' into a first class residential subdivision of the same class as its New Alabang Subdivision, and that it intends to complete the first phase under its amended development plan within three (3) years from the date of this Agreement. x x x"

5.15. The BUYER agrees to give the SELLERS a first option to purchase four developed lots next to the "Retained Area" at the prevailing market price at the time of the purchase."

The parties are agreed that the development plan referred to in paragraph 5.7 is not Conduit's development plan, but Ayala's amended development plan which was still to be formulated as of the time of the MOA. While in the Conduit plan, the 4 lots to be offered for sale to the Vasquez Spouses were in the first phase thereof or Village 1, in the Ayala plan which was formulated a year later, it was in the third phase, or Phase II-c.

Under the MOA, the Vasquez spouses made several express warranties, as follows:

"3.1. The SELLERS shall deliver to the BUYER:

xxx

3.1.2. The true and complete list, certified by the Secretary and Treasurer of the Company showing:

xxx

D. A list of all persons and/or entities with whom the Company has pending contracts, if any.

xxx

3.1.5. Audited financial statements of the Company as at Closing date.

4. Conditions Precedent

All obligations of the BUYER under this Agreement are subject to fulfillment prior to or at the Closing, of the following conditions:

4.1. The representations and warranties by the SELLERS contained in this Agreement shall be true and correct at the time of Closing as though such representations and warranties were made at such time; and

xxx

6. Representation and Warranties by the SELLERS

The SELLERS jointly and severally represent and warrant to the BUYER that at the time of the execution of this Agreement and at the Closing:

xxx

6.2.3. There are no actions, suits or proceedings pending, or to the knowledge of the SELLERS, threatened against or affecting the SELLERS with respect to the Shares or the Property; andcralawlibrary

7. Additional Warranties by the SELLERS

7.1. With respect to the Audited Financial Statements required to be submitted at Closing in accordance with Par. 3.1.5 above, the SELLER jointly and severally warrant to the BUYER that:

7.1.1 The said Audited Financial Statements shall show that on the day of Closing, the Company shall own the "Remaining Property", free from all liens and encumbrances and that the Company shall have no obligation to any party except for billings payable to GP Construction & Development Corporation and advances made by Daniel Vazquez for which BUYER shall be responsible in accordance with Par. 2 of this Agreement.

7.1.2 Except to the extent reflected or reserved in the Audited Financial Statements of the Company as of Closing, and those disclosed to BUYER, the Company as of the date thereof, has no liabilities of any nature whether accrued, absolute, contingent or otherwise, including, without limitation, tax liabilities due or to become due and whether incurred in respect of or measured in respect of the Company's income prior to Closing or arising out of transactions or state of facts existing prior thereto.

7.2 SELLERS do not know or have no reasonable ground to know of any basis for any assertion against the Company as at closing or any liability of any nature and in any amount not fully reflected or reserved against such Audited Financial Statements referred to above, and those disclosed to BUYER.

x x x

7.6.3 Except as otherwise disclosed to the BUYER in writing on or before the Closing, the Company is not engaged in or a party to, or to the best of the knowledge of the SELLERS, threatened with, any legal action or other proceedings before any court or administrative body, nor do the SELLERS know or have reasonable grounds to know of any basis for any such action or proceeding or of any governmental investigation relative to the Company.

7.6.4 To the knowledge of the SELLERS, no default or breach exists in the due performance and observance by the Company of any term, covenant or condition of any instrument or agreement to which the company is a party or by which it is bound, and no condition exists which, with notice or lapse of time or both, will constitute such default or breach."

After the execution of the MOA, Ayala caused the suspension of work on Village 1 of the Don Vicente Project. Ayala then received a letter from one Maximo Del Rosario of Lancer General Builder Corporation informing Ayala that he was claiming the amount of P1,509,558.80 as the subcontractor of G.P. Construction...

G.P. Construction not being able to reach an amicable settlement with Lancer, on March 22, 1982, Lancer sued G.P. Construction, Conduit and Ayala in the then Court of First Instance of Manila in Civil Case No. 82-8598. G.P. Construction in turn filed a cross-claim against Ayala. G.P. Construction and Lancer both tried to enjoin Ayala from undertaking the development of the property. The suit was terminated only on February 19, 1987, when it was dismissed with prejudice after Ayala paid both Lancer and GP Construction the total of P4,686,113.39.

Taking the position that Ayala was obligated to sell the 4 lots adjacent to the "Retained Area" within 3 years from the date of the MOA, the Vasquez spouses sent several "reminder" letters of the approaching so-called deadline. However, no demand after April 23, 1984, was ever made by the Vasquez spouses for Ayala to sell the 4 lots. On the contrary, one of the letters signed by their authorized agent, Engr. Eduardo Turla, categorically stated that they expected "development of Phase 1 to be completed by February 19, 1990, three years from the settlement of the legal problems with the previous contractor."

By early 1990 Ayala finished the development of the vicinity of the 4 lots to be offered for sale. The four lots were then offered to be sold to the Vasquez spouses at the prevailing price in 1990. This was rejected by the Vasquez spouses who wanted to pay at 1984 prices, thereby leading to the suit below.

After trial, the court a quo rendered its decision, the dispositive portion of which states:

"THEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant, ordering defendant to sell to plaintiffs the relevant lots described in the Complaint in the Ayala Alabang Village at the price of P460.00 per square meter amounting to P1,349,540.00; ordering defendant to reimburse to plaintiffs attorney's fees in the sum of P200,000.00 and to pay the cost of the suit."

In its decision, the court a quo concluded that the Vasquez spouses were not obligated to disclose the potential claims of GP Construction, Lancer and Del Rosario; Ayala's accountants should have opened the records of Conduit to find out all claims; the warranty against suit is with respect to "the shares of the Property" and the Lancer suit does not affect the shares of stock sold to Ayala; Ayala was obligated to develop within 3 years; to say that Ayala was under no obligation to follow a time frame was to put the Vasquezes at Ayala's mercy; Ayala did not develop because of a slump in the real estate market; the MOA was drafted and prepared by the AYALA who should suffer its ambiguities; the option to purchase the 4 lots is valid because it was supported by consideration as the option is incorporated in the MOA where the parties had prestations to each other. [Emphasis supplied]

Ayala Corporation filed an appeal, alleging that the trial court erred in holding that petitioners did not breach their warranties under the MOA⁶ dated April 23, 1981; that it was obliged to develop the land where the four (4) lots subject of the option to purchase are located within three (3) years from the date of the MOA; that it was in delay; and that the option to purchase was valid because it was incorporated in the MOA and the consideration therefor was the commitment by Ayala Corporation to petitioners embodied in the MOA.

As previously mentioned, the Court of Appeals reversed the RTC Decision. According to the appellate court, Ayala Corporation was never informed beforehand of the existence of the Lancer claim. In fact, Ayala Corporation got a copy of the Lancer subcontract only on May 29, 1981 from G.P. Construction's lawyers. The Court of Appeals thus held that petitioners violated their warranties under the MOA when they failed to disclose Lancer's claims. Hence, even conceding that Ayala Corporation was obliged to develop and sell the four (4) lots in question within three (3) years from the date of the MOA, the obligation was suspended during the pendency of the case filed by Lancer.

Interpreting the MOA's paragraph 5.7 above-quoted, the appellate court held that Ayala Corporation committed to develop the first phase of its own amended development plan and not Conduit's development plan. Nowhere does the MOA provide that Ayala Corporation shall follow Conduit's development plan nor is Ayala Corporation prohibited from changing the sequence of the phases of the property it will develop.

Anent the question of delay, the Court of Appeals ruled that there was no delay as petitioners never made a demand for Ayala Corporation to sell the subject lots to them. According to the appellate court, what petitioners sent were mere reminder letters the last of which was dated prior to April 23, 1984 when the obligation was not yet demandable. At any rate, the Court of Appeals found that petitioners in fact waived the three (3)-year period when they sent a letter through their agent, Engr. Eduardo Turla, stating that they "expect that the development of Phase I will be completed by 19 February 1990, three years from the settlement of the legal problems with the previous contractor."⁷

The appellate court likewise ruled that paragraph 5.15 above-quoted is not an option contract but a right of first refusal there being no separate consideration therefor. Since petitioners refused Ayala Corporation's offer to sell the subject lots at the reduced 1990 price of P5,000.00 per square meter, they have effectively waived their right to buy the same.

In the instant Petition, petitioners allege that the appellate court erred in ruling that they violated their warranties under the MOA; that Ayala Corporation was not obliged to develop the "Remaining Property" within three (3) years from the execution of the MOA; that Ayala was not in delay; and that paragraph 5.15 of the MOA is a mere right of first refusal. Additionally, petitioners insist that the Court should review the factual findings of the Court of Appeals as they are in conflict with those of the trial court.

Ayala Corporation filed a Comment on the Petition⁸ dated March 26, 2002, contending that the petition raises questions of fact and seeks a review of evidence which is within the domain of the Court of Appeals. Ayala Corporation maintains that the subcontract between GP Construction, with whom Conduit contracted for the development of the property under a Construction Contract dated October 10, 1980, and Lancer was not disclosed by petitioners during the negotiations. Neither was the liability for Lancer's claim included in the Audited Financial Statements submitted by petitioners after the signing of the MOA. These justify the conclusion that petitioners breached their warranties under the afore-quoted paragraphs of the MOA. Since the Lancer suit ended only in February 1989, the three (3)-year period within which Ayala Corporation committed to develop the property should only be counted thence. Thus, when it offered the subject lots to petitioners in 1990, Ayala Corporation was not yet in delay.

In response to petitioners' contention that there was no action or proceeding against them at the time of the execution of the MOA on April 23, 1981, Ayala Corporation avers that the facts and circumstances which gave rise to the Lancer claim were already extant then. Petitioners warranted that their representations under the MOA shall be true and correct at the time of "Closing" which shall take place within four (4) weeks from the signing of the MOA.⁹ Since the MOA was signed on April 23, 1981, "Closing" was approximately the third week of May 1981. Hence, Lancer's claims, articulated in a letter which Ayala Corporation received on May 4, 1981, are among the liabilities warranted against under paragraph 7.1.2 of the MOA.

Moreover, Ayala Corporation asserts that the warranties under the MOA are not just against suits but against all kinds of liabilities not reflected in the Audited Financial Statements. It cannot be faulted for relying on the express warranty that except for billings payable to GP Construction and advances made by petitioner Daniel Vazquez in the amount of P38,766.04, Conduit has no other liabilities. Hence, petitioners cannot claim that Ayala Corporation should have examined and investigated the Audited Financial Statements of Conduit and should now assume all its obligations and liabilities including the Lancer suit and the cross-claim of GP Construction.

Furthermore, Ayala Corporation did not make a commitment to complete the development of the first phase of the property within three (3) years from the execution of the MOA. The provision refers to a mere declaration of intent to develop the first phase of its (Ayala Corporation's) own development plan and not Conduit's. True to its intention, Ayala Corporation did complete the development of the first phase (Phase II-A) of its amended development plan within three (3) years from the execution of the MOA. However, it is not obliged to develop the third phase (Phase II-C) where the subject lots are located within the same time frame because there is no contractual stipulation in the MOA therefor. It is free to decide on its own the period for the development of Phase II-C. If petitioners wanted to impose the same three (3)-year timetable upon the third phase of the amended development plan, they should have filed a suit to fix the time table in accordance with Article 1197¹⁰ of the Civil Code. Having failed to do so, Ayala Corporation cannot be declared to have been in delay.

Ayala Corporation further contends that no demand was made on it for the performance of its alleged obligation. The letter dated October 4, 1983 sent when petitioners were already aware of the Lancer suit did not demand the delivery of the subject lots by April 23, 1984. Instead, it requested Ayala Corporation to keep petitioners posted on the status of the case. Likewise, the letter dated March 4, 1984 was merely an inquiry as to the date when the development of Phase 1 will be completed. More importantly, their letter dated June 27, 1988 through Engr. Eduardo Turla expressed petitioners' expectation that Phase 1 will be completed by February 19, 1990.

Lastly, Ayala Corporation maintains that paragraph 5.15 of the MOA is a right of first refusal and not an option contract.

Petitioners filed their Reply¹¹ dated August 15, 2002 reiterating the arguments in their Petition and contending further that they did not violate their warranties under the MOA because the case was filed by Lancer only on April 1, 1982, eleven (11) months and eight (8) days after the signing of the MOA on April 23, 1981. Ayala Corporation admitted that it received Lancer's claim before the "Closing" date. It therefore had all the time to rescind the MOA. Not having done so, it can be concluded that Ayala Corporation itself did not consider the matter a violation of petitioners' warranty.

Moreover, petitioners submitted the Audited Financial Statements of Conduit and allowed an acquisition audit to be conducted by Ayala Corporation. Thus, the latter bought Conduit with "open eyes."

Petitioners also maintain that they had no knowledge of the impending case against Conduit at the time of the execution of the MOA. Further, the MOA makes Ayala Corporation liable for the payment of all billings of GP Construction. Since Lancer's claim was actually a claim against GP Construction being its sub-contractor, it is Ayala Corporation and not petitioners which is liable.

Likewise, petitioners aver that although Ayala Corporation may change the sequence of its development plan, it is obliged under the MOA to develop the entire area where the subject lots are located in three (3) years.

They also assert that demand was made on Ayala Corporation to comply with their obligation under the MOA. Apart from their reminder letters dated January 24, February 18 and March 5, 1984, they also sent a letter dated March 4, 1984 which they claim is a categorical demand for Ayala Corporation to comply with the provisions of the MOA.

The parties were required to submit their respective memoranda in the Resolution¹² dated November 18, 2002. In compliance with this directive, petitioners submitted their Memorandum¹³ dated February 14, 2003 on even date, while Ayala Corporation filed its Memorandum¹⁴ dated February 14, 2003 on February 17, 2003.

We shall first dispose of the procedural question raised by the instant petition.

It is well-settled that the jurisdiction of this Court in cases brought to it from the Court of Appeals by way of Petition for Review under Rule 45 is limited to reviewing or revising errors of law imputed to it, its findings of fact being conclusive on this Court as a matter of general principle. However, since in the instant case there is a conflict between the factual findings of the trial court and the appellate court, particularly as regards the issues of breach of warranty, obligation to develop and incurrence of delay, we have to consider the evidence on record and resolve such factual issues as an exception to the general rule.¹⁵ In any event, the submitted issue relating to the categorization of the right to purchase granted to petitioners under the MOA is legal in character.

The next issue that presents itself is whether petitioners breached their warranties under the MOA when they failed to disclose the Lancer claim. The trial court declared they did not; the appellate court found otherwise.

Ayala Corporation summarizes the clauses of the MOA which petitioners allegedly breached when they failed to disclose the Lancer claim:

a) Clause 7.1.1. - that Conduit shall not be obligated to anyone except to GP Construction for P38,766.04, and for advances made by Daniel Vazquez;

b) Clause 7.1.2. - that except as reflected in the audited financial statements Conduit had no other liabilities whether accrued, absolute, contingent or otherwise;

c) Clause 7.2. - that there is no basis for any assertion against Conduit of any liability of any value not reflected or reserved in the financial statements, and those disclosed to Ayala;

d) Clause 7.6.3. - that Conduit is not threatened with any legal action or other proceedings; andcralawlibrary

e) Clause 7.6.4. - that Conduit had not breached any term, condition, or covenant of any instrument or agreement to which it is a party or by which it is bound.¹⁶

The Court is convinced that petitioners did not violate the foregoing warranties.

The exchanges of communication between the parties indicate that petitioners substantially apprised Ayala Corporation of the Lancer claim or the possibility thereof during the period of negotiations for the sale of Conduit.

In a letter¹⁷ dated March 5, 1984, petitioner Daniel Vazquez reminded Ayala Corporation's Mr. Adolfo Duarte (Mr. Duarte) that prior to the completion of the sale of Conduit, Ayala Corporation asked for and was given information that GP Construction sub-contracted, presumably to Lancer, a greater percentage of the project than it was allowed. Petitioners gave this information to Ayala Corporation because the latter intimated a desire to "break the contract of Conduit with GP." Ayala Corporation did not deny this. In fact, Mr. Duarte's letter¹⁸ dated March 6, 1984 indicates that Ayala Corporation had knowledge of the Lancer subcontract prior to its acquisition of Conduit. Ayala Corporation even admitted that it "tried to explore legal basis to discontinue the contract of Conduit with GP" but found this "not feasible when information surfaced about the tacit consent of Conduit to the sub-contracts of GP with Lancer."

At the latest, Ayala Corporation came to know of the Lancer claim before the date of Closing of the MOA. Lancer's letter¹⁹ dated April 30, 1981 informing Ayala Corporation of its unsettled claim with GP Construction was received by Ayala Corporation on May 4, 1981, well before the "Closing"²⁰ which occurred four (4) weeks after the date of signing of the MOA on April 23, 1981, or on May 23, 1981.

The full text of the pertinent clauses of the MOA quoted hereunder likewise indicate that certain matters pertaining to the liabilities of Conduit were disclosed by petitioners to Ayala Corporation although the specifics thereof were no longer included in the MOA:

7.1.1 The said Audited Financial Statements shall show that on the day of Closing, the Company shall own the "Remaining Property", free from all liens and encumbrances and that the Company shall have no obligation to any party except for billings payable to GP Construction & Development Corporation and advances made by Daniel Vazquez for which BUYER shall be responsible in accordance with Paragraph 2 of this Agreement.

7.1.2 Except to the extent reflected or reserved in the Audited Financial Statements of the Company as of Closing, and those disclosed to BUYER, the Company as of the date hereof, has no liabilities of any nature whether accrued, absolute, contingent or otherwise, including, without limitation, tax liabilities due or to become due and whether incurred in respect of or measured in respect of the Company's income prior to Closing or arising out of transactions or state of facts existing prior thereto.

7.2 SELLERS do not know or have no reasonable ground to know of any basis for any assertion against the Company as at Closing of any liability of any nature and in any amount not fully reflected or reserved against such Audited Financial Statements referred to above, and those disclosed to BUYER.

x x x

7.6.3 Except as otherwise disclosed to the BUYER in writing on or before the Closing, the Company is not engaged in or a party to, or to the best of the knowledge of the SELLERS, threatened with, any legal action or other proceedings before any court or administrative body, nor do the SELLERS know or have reasonable grounds to know of any basis for any such action or proceeding or of any governmental investigation relative to the Company.

7.6.4 To the knowledge of the SELLERS, no default or breach exists in the due performance and observance by the Company of any term, covenant or condition of any instrument or agreement to which the Company is a party or by which it is bound, and no condition exists which, with notice or lapse of time or both, will constitute such default or breach."²¹ [Emphasis supplied]

Hence, petitioners' warranty that Conduit is not engaged in, a party to, or threatened with any legal action or proceeding is qualified by Ayala Corporation's actual knowledge of the Lancer claim which was disclosed to Ayala Corporation before the "Closing."

At any rate, Ayala Corporation bound itself to pay all billings payable to GP Construction and the advances made by petitioner Daniel Vazquez. Specifically, under paragraph 2 of the MOA referred to in paragraph 7.1.1, Ayala Corporation undertook responsibility "for the payment of all billings of the contractor GP Construction & Development Corporation after the first billing and any payments made by the company and/or SELLERS shall be reimbursed by BUYER on closing which advances to date is P1,159,012.87."²²

The billings knowingly assumed by Ayala Corporation necessarily include the Lancer claim for which GP Construction is liable. Proof of this is Ayala Corporation's letter²³ to GP Construction dated before "Closing" on May 4, 1981, informing the latter of Ayala Corporation's receipt of the Lancer claim embodied in the letter dated April 30, 1981, acknowledging that it is taking over the contractual responsibilities of Conduit, and requesting copies of all sub-contracts affecting the Conduit property. The pertinent excerpts of the letter read:

In this connection, we wish to inform you that this morning we received a letter from Mr. Maximo D. Del Rosario, President of Lancer General Builders Corporation apprising us of the existence of subcontracts that they have with your corporation. They have also furnished us with a copy of their letter to you dated 30 April 1981.

Since we are taking over the contractual responsibilities of Conduit Development, Inc., we believe that it is necessary, at this point in time, that you furnish us with copies of all your subcontracts affecting the property of Conduit, not only with Lancer General Builders Corporation, but all subcontracts with other parties as well'²⁴

Quite tellingly, Ayala Corporation even attached to its Pre-Trial Brief²⁵ dated July 9, 1992 a copy of the letter²⁶ dated May 28, 1981 of GP Construction's counsel addressed to Conduit furnishing the latter with copies of all sub-contract agreements entered into by GP Construction. Since it was addressed to Conduit, it can be presumed that it was the latter which gave Ayala Corporation a copy of the letter thereby disclosing to the latter the existence of the Lancer sub-contract.

The ineluctable conclusion is that petitioners did not violate their warranties under the MOA. The Lancer sub-contract and claim were substantially disclosed to Ayala Corporation before the "Closing" date of the MOA. Ayala Corporation cannot disavow knowledge of the claim.

Moreover, while in its correspondence with petitioners, Ayala Corporation did mention the filing of the Lancer suit as an obstacle to its development of the property, it never actually brought up nor sought redress for petitioners' alleged breach of warranty for failure to disclose the Lancer claim until it filed its Answer²⁷ dated February 17, 1992.

We now come to the correct interpretation of paragraph 5.7 of the MOA. Does this paragraph express a commitment or a mere intent on the part of Ayala Corporation to develop the property within three (3) years from date thereof? Paragraph 5.7 provides:

5.7. The BUYER hereby commits that it will develop the 'Remaining Property' into a first class residential subdivision of the same class as its New Alabang Subdivision, and that it intends to complete the first phase under its amended development plan within three (3) years from the date of this Agreement'.²⁸

Notably, while the first phrase of the paragraph uses the word "commits" in reference to the development of the "Remaining Property" into a first class residential subdivision, the second phrase uses the word "intends" in relation to the development of the first phase of the property within three (3) years from the date of the MOA. The variance in wording is significant. While "commit"²⁹ connotes a pledge to do something, "intend"³⁰ merely signifies a design or proposition.

Atty. Leopoldo Francisco, former Vice President of Ayala Corporation's legal division who assisted in drafting the MOA, testified:

COURT

You only ask what do you mean by that intent. Just answer on that point.

ATTY. BLANCO

Don't talk about standard.

WITNESS

A Well, the word intent here, your Honor, was used to emphasize the tentative character of the period of development because it will be noted that the sentence refers to and I quote "to complete the first phase under its amended development plan within three (3) years from the date of this agreement, at the time of the execution of this agreement, your Honor." That amended development plan was not yet in existence because the buyer had manifested to the seller that the buyer could amend the subdivision plan originally belonging to the seller to conform with its own standard of development and second, your Honor, (interrupted)³¹

It is thus unmistakable that this paragraph merely expresses an intention on Ayala Corporation's part to complete the first phase under its amended development plan within three (3) years from the execution of the MOA. Indeed, this paragraph is so plainly worded that to misunderstand its import is deplorable.

More focal to the resolution of the instant case is paragraph 5.7's clear reference to the first phase of Ayala Corporation's amended development plan as the subject of the three (3)-year intended timeframe for development. Even petitioner Daniel Vazquez admitted on cross-examination that the paragraph refers not to Conduit's but to Ayala Corporation's development plan which was yet to be formulated when the MOA was executed:

Q: Now, turning to Section 5.7 of this Memorandum of Agreement, it is stated as follows: "The Buyer hereby commits that to develop the remaining property into a first class residential subdivision of the same class as New Alabang Subdivision, and that they intend to complete the first phase under its amended development plan within three years from the date of this agreement."

Now, my question to you, Dr. Vasquez is that there is no dispute that the amended development plan here is the amended development plan of Ayala?

A: Yes, sir.

Q: In other words, it is not Exhibit "D-5" which is the original plan of Conduit?chanroblesvirtualawlibrary

A: No, it is not.

Q: This Exhibit "D-5" was the plan that was being followed by GP Construction in 1981?chanroblesvirtualawlibrary

A: Yes, sir.

Q: And point of fact during your direct examination as of the date of the agreement, this amended development plan was still to be formulated by Ayala?chanroblesvirtualawlibrary

A: Yes, sir.³²

As correctly held by the appellate court, this admission is crucial because while the subject lots to be sold to petitioners were in the first phase of the Conduit development plan, they were in the third or last phase of the Ayala Corporation development plan. Hence, even assuming that paragraph 5.7 expresses a commitment on the part of Ayala Corporation to develop the first phase of its amended development plan within three (3) years from the execution of the MOA, there was no parallel commitment made as to the timeframe for the development of the third phase where the subject lots are located.

Lest it be forgotten, the point of this petition is the alleged failure of Ayala Corporation to offer the subject lots for sale to petitioners within three (3) years from the execution of the MOA. It is not that Ayala Corporation committed or intended to develop the first phase of its amended development plan within three (3) years. Whether it did or did not is actually beside the point since the subject lots are not located in the first phase anyway.

We now come to the issue of default or delay in the fulfillment of the obligation.

Article 1169 of the Civil Code provides:

Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declares; or

(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins.

In order that the debtor may be in default it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially.³³

Under Article 1193 of the Civil Code, obligations for whose fulfillment a day certain has been fixed shall be demandable only when that day comes. However, no such day certain was fixed in the MOA. Petitioners, therefore, cannot demand performance after the three (3) year period fixed by the MOA for the development of the first phase of the property since this is not the same period contemplated for the development of the subject lots. Since the MOA does not specify a period for the development of the subject lots, petitioners should have petitioned the court to fix the period in accordance with Article 1197³⁴ of the Civil Code. As no such action was filed by petitioners, their complaint for specific performance was premature, the obligation not being demandable at that point. Accordingly, Ayala Corporation cannot likewise be said to have delayed performance of the obligation.

Even assuming that the MOA imposes an obligation on Ayala Corporation to develop the subject lots within three (3) years from date thereof, Ayala Corporation could still not be held to have been in delay since no demand was made by petitioners for the performance of its obligation.

As found by the appellate court, petitioners' letters which dealt with the three (3)-year timetable were all dated prior to April 23, 1984, the date when the period was supposed to expire. In other words, the letters were sent before the obligation could become legally demandable. Moreover, the letters were mere reminders and not categorical demands to perform. More importantly, petitioners waived the three (3)-year period as evidenced by their agent, Engr. Eduardo Turla's letter to the effect that petitioners agreed that the three (3)-year period should be counted from the termination of the case filed by Lancer. The letter reads in part:

I. Completion of Phase I

As per the memorandum of Agreement also dated April 23, 1981, it was undertaken by your goodselves to complete the development of Phase I within three (3) years. Dr. & Mrs. Vazquez were made to understand that you were unable to accomplish this because of legal problems with the previous contractor. These legal problems were resolved as of February 19, 1987, and Dr. & Mrs. Vazquez therefore expect that the development of Phase I will be completed by February 19, 1990, three years from the settlement of the legal problems with the previous contractor. The reason for this is, as you know, that security-wise, Dr. & Mrs. Vazquez have been advised not to construct their residence till the surrounding area (which is Phase I) is developed and occupied. They have been anxious to build their residence for quite some time now, and would like to receive assurance from your goodselves regarding this, in compliance with the agreement.

II. Option on the adjoining lots

We have already written your goodselves regarding the intention of Dr. & Mrs. Vazquez to exercise their option to purchase the two lots on each side (a total of 4 lots) adjacent to their "Retained Area". They are concerned that although over a year has elapsed since the settlement of the legal problems, you have not presented them with the size, configuration, etc. of these lots. They would appreciate being provided with these at your earliest convenience.³⁵

Manifestly, this letter expresses not only petitioners' acknowledgement that the delay in the development of Phase I was due to the legal problems with GP Construction, but also their acquiescence to the completion of the development of Phase I at the much later date of February 19, 1990. More importantly, by no stretch of semantic interpretation can it be construed as a categorical demand on Ayala Corporation to offer the subject lots for sale to petitioners as the letter merely articulates petitioners' desire to exercise their option to purchase the subject lots and concern over the fact that they have not been provided with the specifications of these lots.

The letters of petitioners' children, Juan Miguel and Victoria Vazquez, dated January 23, 1984³⁶ and February 18, 1984³⁷ can also not be considered categorical demands on Ayala Corporation to develop the first phase of the property within the three (3)-year period much less to offer the subject lots for sale to petitioners. The letter dated January 23, 1984 reads in part:

You will understand our interest in the completion of the roads to our property, since we cannot develop it till you have constructed the same. Allow us to remind you of our Memorandum of Agreement, as per which you committed to develop the roads to our property "as per the original plans of the company", and that

1. The back portion should have been developed before the front portion - which has not been the case.

2. The whole project - front and back portions be completed by 1984.³⁸

The letter dated February 18, 1984 is similarly worded. It states:

In this regard, we would like to remind you of Articles 5.7 and 5.9 of our Memorandum of Agreement which states respectively:'³⁹

Even petitioner Daniel Vazquez' letter⁴⁰ dated March 5, 1984 does not make out a categorical demand for Ayala Corporation to offer the subject lots for sale on or before April 23, 1984. The letter reads in part:

'and that we expect from your goodselves compliance with our Memorandum of Agreement, and a definite date as to when the road to our property and the development of Phase I will be completed.⁴¹

At best, petitioners' letters can only be construed as mere reminders which cannot be considered demands for performance because it must appear that the tolerance or benevolence of the creditor must have ended.⁴²

The petition finally asks us to determine whether paragraph 5.15 of the MOA can properly be construed as an option contract or a right of first refusal. Paragraph 5.15 states:

5.15 The BUYER agrees to give the SELLERS first option to purchase four developed lots next to the "Retained Area" at the prevailing market price at the time of the purchase.⁴³

The Court has clearly distinguished between an option contract and a right of first refusal. An option is a preparatory contract in which one party grants to another, for a fixed period and at a determined price, the privilege to buy or sell, or to decide whether or not to enter into a principal contract. It binds the party who has given the option not to enter into the principal contract with any other person during the period designated, and within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration.⁴⁴

In a right of first refusal, on the other hand, while the object might be made determinate, the exercise of the right would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that are yet to be firmed up.⁴⁵

Applied to the instant case, paragraph 5.15 is obviously a mere right of first refusal and not an option contract. Although the paragraph has a definite object, i.e., the sale of subject lots, the period within which they will be offered for sale to petitioners and, necessarily, the price for which the subject lots will be sold are not specified. The phrase "at the prevailing market price at the time of the purchase" connotes that there is no definite period within which Ayala Corporation is bound to reserve the subject lots for petitioners to exercise their privilege to purchase. Neither is there a fixed or determinable price at which the subject lots will be offered for sale. The price is considered certain if it may be determined with reference to another thing certain or if the determination thereof is left to the judgment of a specified person or persons.⁴⁶

Further, paragraph 5.15 was inserted into the MOA to give petitioners the first crack to buy the subject lots at the price which Ayala Corporation would be willing to accept when it offers the subject lots for sale. It is not supported by an independent consideration. As such it is not governed by Articles 1324 and 1479 of the Civil Code, viz:

Art. 1324. When the offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised.

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.

Consequently, the "offer" may be withdrawn anytime by communicating the withdrawal to the other party.⁴⁷

In this case, Ayala Corporation offered the subject lots for sale to petitioners at the price of P6,500.00/square meter, the prevailing market price for the property when the offer was made on June 18, 1990.⁴⁸ Insisting on paying for the lots at the prevailing market price in 1984 of P460.00/square meter, petitioners rejected the offer. Ayala Corporation reduced the price to P5,000.00/square meter but again, petitioners rejected the offer and instead made a counter-offer in the amount of P2,000.00/square meter.⁴⁹ Ayala Corporation rejected petitioners' counter-offer. With this rejection, petitioners lost their right to purchase the subject lots.

It cannot, therefore, be said that Ayala Corporation breached petitioners' right of first refusal and should be compelled by an action for specific performance to sell the subject lots to petitioners at the prevailing market price in 1984.

WHEREFORE, the instant petition is DENIED. No pronouncement as to costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

Endnotes:

¹ Alternatively spelled Vasquez.

² Rollo, pp. 10-187 with Annexes.

³ Id. at 193-210; Penned by Associate Justice Perlita J. Tria-Tirona and concurred in by Associate Justices Eugenio S. Labitoria and Eloy R. Bello, Jr.

⁴ Id. at 74-79; Dated September 11, 1995.

⁵ Id. at 193-198; Culled from the Decision of the Court of Appeals.

⁶ Id. at 50-62.

⁷ Id. at 206.

⁸ Id. at 240-289.

⁹ Id. at 53.

¹⁰ Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof.

The courts shall also fix the duration of the period when it depends upon the will of the debtor.

In every case, the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by them.

¹¹ Supra, note 2 at 300-323.

¹² Id. at 324-325.

¹³ Id. at 331-369.

¹⁴ Id. at 370-433.

¹⁵ Rosario v. Court of Appeals, 369 Phil. 729 (1999), citations omitted.

¹⁶ Supra, note 2 at 401-402.

¹⁷ RTC Records, pp. 60-61.

¹⁸ Id. at 90-91

¹⁹ Id. at 77.

²⁰ Supra note 2 at 53.

²¹ Id. at 58-60.

²² Id. at 52-53. The full text of paragraph 2 reads:

2. Purchase Price and Mode of Payment

The Purchase Price shall be FIFTY-SIX MILLION SIX HUNDRED TWENTY THREE THOUSAND THREE HUNDRED THIRTY EIGHT PESOS AND EIGHTY CENTAVOS (P56,623,338.80) and shall be paid at the Closing by the BUYER by means of a manager's check(s) payable to Ma. Luisa M. Vazquez in her own behalf and as representative of the other SELLERS, less the earnest money of EIGHT MILLION PESOS (P8,000,000.00) herein paid as mentioned below; provided, however, that on or before the Closing, SELLERS shall deliver to the BUYER duly executed letters of instruction from the other SELLERS specifically authorizing Ma. Luisa M. Vazquez to receive on their own behalf their respective payments by means of a manager's check for the entire Purchase Price stated in this Paragraph payable to SELLERS. In addition to the foregoing, BUYER shall be responsible for the payment of all billings of the contractor GP Construction & Development Corporation after the first billing and any payments made by the company and/or SELLERS shall be reimbursed by BUYER on closing which advances to date is P1,159,012.87.

Earnest money in the sum of EIGHT MILLION PESOS (P8,000,000.00), Philippine Currency, shall be paid upon signing of this document.

²³ Supra, note 17 at 78.

²⁴ Ibid.

²⁵ Supra, note 17 at 69-76.

²⁶ Id. at 81-82.

²⁷ Id. at 32-38.

²⁸ Supra, note 2 at 55.

²⁹ Black's Law Dictionary, Sixth Edition, p. 273.

³⁰ Id. at 809.

³¹ TSN, November 18, 1993, pp. 35-36.

³² TSN, August 3, 1993, pp. 17-19.

³³ 4 A. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, 102 (1991).

³⁴ Supra note 10.

³⁵ Supra, note 17 at 651.

³⁶ Id. at 151.

³⁷ Id. at 154.

³⁸ Supra, note 36.

³⁹ Supra, note 37.

⁴⁰ Supra, note 17 at 157-158.

⁴¹ Id. at 158.

⁴² A. Tolentino, op. cit. supra, note 33 citing 2 Castan 528 and 3 Valverde 104.

⁴³ Supra, note 2 at 57.

⁴⁴ Litonjua v. L&R Corporation, 385 Phil. 538 (2000); Carceller v. Court of Appeals, 362 Phil. 332 (1999); Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., 332 Phil. 525 (1996).

⁴⁵ Ang Yu Asuncion v. Court of Appeals, G.R. No. 109125, December 2, 1994, 238 SCRA 602.

⁴⁶ Art. 1469, Civil Code.

⁴⁷ A. Tolentino, op. cit. supra, note 33 at 465.

⁴⁸ Supra, note 2 at 63.

⁴⁹ Id. at 209-210.

The testimony of petitioner Daniel Vazquez on direct examination reads:

Q Mr. Witness, at the last hearing which was interrupted by the brown-out, we were on Exhibit "L", which I am handing to you, upon receipt of Exhibit "L" which is the June 18, 1990 letter of Ayala to you, what did you do, if any?chanroblesvirtualawlibrary

A We contacted Ayala to tell them we wanted to exercise our option and that we were not agreeable with the price they are mentioning here, sir.

Q Did you offer any price?chanroblesvirtualawlibrary

A Yes, sir, we offered them a price.

Q According to the complaint, the price in April 1984 could have been only P460.00 pesos per square meter. Where did you get that price?chanroblesvirtualawlibrary

A One of our secretaries, Mr. Eusebio, I believe, contacted the Ayala Corporation and that was the price the Ayala Corporation was selling it at that time, sir.

Q Did the Ayala Corporation reduce this price for purposes of arriving in an agreeable or acceptable offer?chanroblesvirtualawlibrary

A Yes, sir, we did.

Q How much did the Ayala Corporation dropped to?chanroblesvirtualawlibrary

A Ayala dropped, if I remember right, to I think P4,000.00 pesos, sir.

Q And how about you?chanroblesvirtualawlibrary

A We increased our price to P2,000.00 pesos based on the selling price of Ayala at that time converted to dollars and reconverted to pesos at this later dates of 1991. (TSN dated April 20, 1993, pp. 3-5).

SOLD TO	SALES INVOICE NO.	TERM	DATE	AMOUNT	SALESMAN
Aboitiz Transport System	96864	COD/DMM	November 17, 1990	P92,997.00	R. Lee (Joe PeÃ±a)⁴
Alma Cuilleta c/o Erlana Inocencio	18563	COD/DMM	September 13, 1991	5,614.00	E. Inocencio⁵
Golden Rays Taxi c/o Erlana Inocencio	97871	COD/DMM	August 14, 1991	4,474.15	E.I.⁶
Golden Rays Taxi c/o Erlana Inocencio	17969	COD/DMM	August 17, 1991	29,149.50	E.I.⁷
LT Transport Care Trading	19064		November 4, 1991	24,044.47
LT Transport Care Trading	19077		November 4, 1991	17,521.82
LT Transport Care Trading	19075		November 4, 1991	33,579.06
LT Transport Care Trading	18932		November 4, 1991	29876.80⁸
Inland Trailways c/o Joe PeÃ±a	97487	COD/DMM	May 8, 1991	2,156.00	J.A. Flores ⁹
Ipodca Cooperative	18524	COD/DMM	September 10, 1991	1,527.60	Erlana Inocencio¹⁰
Ipodca Cooperative	18525	COD/PU	September 10, 1991	15,496.80	Erlana Inocencio¹¹
Largestone Enterprises	97847	30D/DMM	August 7, 1991	19,426.23	Joe PeÃ±a¹²
Largestone Enterprises	97890	30D/PU	August 17, 1991	12,591.00	Joe PeÃ±a¹³
Largestone Enterprises	97894	30D/PU	August 19, 1991	3,231.00	Joe PeÃ±a¹⁴
Largestone Enterprises	97921	30D/DMM	August 27, 1991	1,299.51	Joe PeÃ±a¹⁵
Largestone Enterprises	97942	30D/DMM PU	September 4, 1991	9,618.83	Joe PeÃ±a¹⁶
Largestone Enterprises	97967	30D/DMM	September 10, 1991	5,379.05	Joe PeÃ±a¹⁷
Largestone Enterprises	98025	30 Days/DMM	September 25, 1991	6,425.00	Joe PeÃ±a¹⁸
Largestone Enterprises	18414	COD	September 4, 1991	4,546.69	Joe PeÃ±a¹⁹
*Largestone Enterprises	42336	COD/DMM	November 21, 1991	3,400.00	Joe PeÃ±a²⁰
*Largestone Enterprises	42194		December 10, 1991	971.76	Joe PeÃ±a²¹
Pandacan Coop c/o Erlana Inocencio	17942	COD/PU	August 16, 1991	23,174.93	E.I.²²
Pandacan Coop c/o Erlana Inocencio	18305	COD/DMM	August 27, 1991	6,871.40	Erlana I.²³
Pandacan Cooperative	18433	COD/DMM	September 25, 1991	14,824.16	Erlana Inocencio²⁴
Pandacan Coop c/o Erlana Inocencio	18643	COD/DMM	September 18, 1991	1,176.00	E. Inocencio²⁵
Pandacan Cooperative	18786	COD	September 26, 1991	13,567.40	Erlana Inocencio²⁶
Pandacan Cooperative	18789	COD	September 26, 1991	3,230.17	Erlana²⁷
Phil. World Characters & Travel Service Corporation	17089	COD	June 14, 1991	6,400.00	Joe PeÃ±a²⁸
Project 4 Cooperative	17807	COD/DMM	August 7, 1991	3,538.48	E.E. Inocencio²⁹
Project 4 Cooperative	17809	COD/DMM	August 7, 1991	226.16	E. Inocencio³⁰
Project 4 Cooperative	18785	COD	September 26, 1991	2,920.35	Erlana³¹
Tire King Goodyear Servitic	18312	COD/PU	August 28, 1991	5,497.12	Joe PeÃ±a³²

Tax Dec. No.	Kind of Property	Assessment
56325	Warehouse	P 81,369.26
61745	Building (Shed)	5,793.22
61747	Residential House	1,754.68
59949	Building	13,959.42
61741	Building	10,294.10
61742	Building	9,998.86
61744	Building	2,821.41¹

	Activity	Deadline
4.1	Submission of recommendation by District/City Evaluation/Selection Committees to Regional Directors	Feb.15 (1982)
4.2	Submission of recommendations by Regional Directors to the Minister	Feb. 22
4.3	Submission of recommendations by Central Office Evaluation/Selection Committees to Review Boards	Feb. 15¹³

Check No.	: 165476
Drawn against	: Associated Bank, Tarlac Branch
In the Amount of	: P500,000.00
Dated	: February 16, 1990
Payable to	: Rural Bank of San Juan

Description	Qty.	Unit Price	Total Price
Nozzle Tip	6 pcs.	P 5,520.00	33,120.00
Plunger & Barrel	6 pcs.	27,630.00	165,780.00
Cylinder Head	2 pcs.	1,035,000.00	2,070,000.00
Cylinder Liner	1 set		477,000.00
	TOTAL PRICE FOB MANILA ___________		P2,745,900.00

Name of Description	Qty.	Amount
CYL. LINER M/E	1 SET	P477,000.00
NOTHING FOLLOW
INV. #
TERM OF PAYMENT: 25% DOWN PAYMENT
5 BI-MONTHLY INSTALLMENT[S]

To be retained by the late Mayor Argana's heirs	9.88%	47.78787 hectares
Owned by the Mayor's Brothers and Sisters	5.53%	26.6318 hectares
Foreclosed by Los BaÃ±os Rural Bank	1.24%	5.9856 hectares
Owned by Other Persons	8.23%	39.64865 hectares
	24.88%	120.05392 hectares⁶

"TCT No.	Area in Square Meters	Location
T-3813	47,908	Famy, Laguna
T-8314	47,461	-do -
T-8315	30,000	-do -
T-8316	40,000	-do -
T-8317	30,000	-do -
T-4104	20,000	-do -
T-4106	38,550	-do -
T-4108	31,618	-do -
T-4044	1,137,361 883,355	San Isidro & Banilan, Pangil, Laguna
	2,306,253 Sq. Meters 230,6253 Hectares

Total Area Sequestered	100.00%	481.77422
Accounted as Follows:
a) owned by Mayor Maximino Argana	75.12%	409.50817 has.
b) Owned by his Brothers & Sisters	9.88%	26.6318 has.
c) Foreclosed by Los BaÃ±os Rural Bank	1.24%	5.9856 has.
d) Owned by Other Persons	8.23%	39.64865 has.
TOTAL	100.00%	481.77422 has.

Acquired Property	Area in hectares	Land Value
TCT No. T-107864	1.4272	P 11,818.47
TCT No. T-107865	1.4330	14,854.66
TCT No. T-107863	.3965	3,283.41⁹
TOTAL		P 29,956.54

TCT T-107863	P 37,524.76
TCT T-107864	P 135,070.20
TCT T-107865	P 169,767.50
TOTAL	P 342,362.46¹²

SCHEDULE
1 - Cawayan area	P 52,081,421.00
1A - Botong area	P 56,412,545.30
	P 108,493,966.30