Heirs Of Ramon B. Gayares, et. al. Vs.

Pacific
Asia Overseas Shipping Corporation, And
Kuwa; G.R. No. 178477; 16 July 2012
DECISION
DEL CASTILLO, J.:
Heavy workload, standing alone, is not considered a compelling reason to justify a request for extension of time to file
a petition for certiorari under Rule 65 of the Rules of Court.

Assailed in this Petition for Review on Certiorari [1] is the March 13, 2007 Resolution[2] of the Court of Appeals (CA) in
CA-G.R. SP No. 98133 which denied petitioners’ Motion for Extension of Time. Also assailed is the June 1, 2007
Resolution[3] denying petitioners’ motion for reconsideration for lack of merit.

Factual Antecedents

In February 1998, Ramon B. Gayares (Gayares) was hired by Pacific Asia Overseas Shipping Corporation on behalf
of its principal, Kuwait Oil Tanker Co., S.A.K., as an Able Seaman aboard its vessel M/T A1 Awdah. The contract was
for a period of nine months with a monthly salary of US$ 499.00.[4] Prior to his embarkation on March 12,
1998,[5] Gayares underwent medical examination and was found “fit to work” by the examining physician. [6] However,
on April 22, 1998, he was repatriated to the Philippines for medical reasons.[7]

On December 18, 1998, Gayares filed a complaint for disability/medical benefits, illness allowance, damages and
attorney’s fees against herein respondents.

Ruling of the Labor Arbiter

On February 24, 2000, the Labor Arbiter rendered a Decision8 ordering respondents to pay Gayares disability
benefits, sickness allowance, and attorney’s fees. According to the Labor Arbiter, Gayares’ disability of
“blephasrospasm with oramandibular dystonia” was contracted during his employment [9] and not preexisting as
contended by the respondents considering that he was diagnosed “fit to work” by the company-physician.[10]

Aggrieved, respondents filed an appeal with the National Labor Relations Commission (NLRC). [11]

On June 12, 2004, or during the pendency of the appeal, Gayares died[12] and was substituted by his heirs, herein
petitioners.

Ruling of the National Labor Relations Commission

On February 10, 2006, the NLRC rendered its Decision[13] deleting the award of disability benefits but affirming the
award of sickness allowance and 10% thereof as attorney’s fees.[14] The NLRC held that Gayares is not entitled to
disability benefits because he miserably failed to show that: “(a) the cause of his illness was reasonably connected
with his work; or (b) the sickness for which he claimed disability benefit is an accepted occupational disease; or (c)
his working conditions increased the risk of contracting the disease.” [15] The NLRC also opined that Gayares could not
have contracted the illness during the term of his employment contract, it having manifested a mere 22 days after
embarkation and considering that the said disease is hereditary. [16]Neither was there any proof that Gayares’
employment contributed or even aggravated his illness. [17]
On the other hand, the NLRC opined that Gayares is entitled to receive sickness allowance benefits. The NLRC
noted that the company-designated physician failed to assess his degree of disability after his repatriation or to
declare him fit to work after subjecting him to medical examinations.[18]Besides, sickness allowance benefit is separate
and distinct from disability benefit and is not dependent on whether it is work-connected or not.

Petitioners’ motion for reconsideration was denied in a Resolution [19] dated November 30, 2006.

Petitioners received on January 3, 2007[20] a copy of the November 30, 2006 NLRC Resolution denying their motion
for reconsideration. However, instead of filing a Petition for Certiorari, petitioners opted to file a Motion for Extension
of Time[21] which was received by the CA on March 5, 2007.[22]

Ruling of the Court of Appeals

On March 13, 2007, the CA issued a Resolution[23] which denied petitioners’ Motion for Extension of Time and
dismissed the case. According to the CA, requests for extension of time under Section 4, Rule 65 of the Rules of
Court may only be allowed for “compelling reason.”[24] The CA observed that mere pressure and volume of work
cannot be considered “compelling reason” to justify a request for extension. Consequently, when petitioners filed their
Petition for Certiorari, the CA merely noted the same in the Resolution [25]dated March 27, 2007.

Petitioners moved for reconsideration.[26] Finding no justifiable ground to warrant the reversal of its earlier ruling, the
CA denied the motion for lack of merit in a Resolution27 dated June 1, 2007.

Hence, this petition.

Issues

In their Petition for Review on Certiorari,[28] petitioners submitted the sole issue of whether:
THE COURT OF APPEALS GRAVELY ERRED IN DENYING PETITIONERS’ MOTION FOR EXTENSION OF TIME TO
FILE PETITION FOR CERTIORARI DATED MARCH 5, 2007 NOTWITHSTANDING THAT THERE ARE COMPELLING
REASONS STATED IN THE SAID MOTION IN ACCORDANCE WITH SECTION 4, RULE 65 OF THE RULES OF
COURT, AS AMENDED.[29]

In their Memorandum,[30] however, petitioners presented the following issues of whether:

1. THE COURT OF APPEALS GRAVELY ERRED IN DENYING PETITIONERS’ MOTION FOR EXTENSION
OF TIME TO FILE PETITION FOR CERTIORARI DATED MARCH 5, 2007 NOTWITHSTANDING THAT
THERE ARE COMPELLING REASONS STATED IN THE SAID MOTION IN ACCORDANCE WITH
SECTION 4, RULE 65 OF THE RULES OF COURT, AS AMENDED.

2.

3. THE APPEAL OF PETITIONER IS CLEARLY MERITORIOUS [IN] THAT TECHNICALITIES, IF ANY,

SHALL GIVE WAY TO SUBSTANTIAL JUSTICE.[31]

Petitioners’ Arguments

Petitioners argue that the CA gravely erred in denying their motion for extension of time and, consequently, in
dismissing outright their petition for certiorari for having been filed late. They insist that their counsel’s heavy workload
is compelling reason to grant their request for additional time to file their petition. [32] They also claim that since this is a
labor case,[33] the worker’s welfare should be given preference in “carrying out and interpreting the Labor Code’s
provisions and its implementing regulations.”[34]
Notably, petitioners absolutely failed to discuss in their petition the substantial merits of their case. It is only in their
Memorandum that petitioners assert that their appeal is meritorious. They allege that Gayares’ illness was acquired
during his employment and aggravated by the nature of his work. [35]

Respondents’ Arguments

Respondents, on the other hand, maintain that petitioners have no inherent right to expect that their motion for
additional time will be granted as the same rests on the discretion of the court. Respondents also stress that no
compelling reason was presented by petitioners as basis for such request. Respondents maintain that Gayares is not
entitled to disability benefits as he was repatriated just 22 days into his contract and his illness was neither acquired
during the period of his employment with respondents nor aggravated by his work.

Our Ruling

The petition lacks merit.

The general rule is to file the petition for certiorari
within the 60-day reglementary period. A 15-day
extension is the exception to the rule and the
request may only be granted for
compelling reason.

Section 4,[36] Rule 65 of the Rules of Court provides:

Section 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.

xxxx

No extension of time to file the petition shall be granted except for compelling reason and in no case exceeding fifteen (15) days.

It is thus explicit from the foregoing that as a general rule, the petition shall be filed within the 60-day reglementary
period. As an exception, an extension of time may be granted but only for a compelling reason and only for 15 days.
More important, the discretion to grant or deny said request lies solely in the court.

Hence, the party requesting such extension must not expect that his request will be granted as he has no inherent
right to the same.

Petitioners did not cite any compelling reason

to justify their request for extension.

In the instant case, petitioners sought a 15-day extension from the CA since they failed to file their petition within the
60-day reglementary period. In their Motion for Extension of Time,[37] they averred thus:

xxxx

4. Petitioners intend to elevate the matter to this Honorable Court through a Petition for Certiorari under Rule 65 of the 1997
Rules of Civil Procedure, thus they have until today, March 5, 2007 within which to file a Petition for Certiorari with this
Honorable Court.
5. However, due to heavy pressure of work on the part of the undersigned counsel, consisting in the preparation of various
pleadings, briefs and memoranda in other equally important cases, aggravated by almost daily court appearances and the fact that
he is one of the counsels in the case entitled “People of the Philippines vs. Jose Antonio Leviste”, docketed as Crim. Case No.
07-179, pending before the Regional Trial Court of Makati City, Branch 150, wherein he has to prepare various urgent pleadings,
he would need an additional period of fifteen (15) days from today, March 5, 2007 or until March 20, 2007 within which to file
the said petition with this Honorable Court.[38]

In short, petitioners cite “heavy pressure of work” as the sole reason for their failure to file their petition on time.
Unfortunately for them, the CA found the same “not a compelling reason” and thus pronounced in its assailed March
13, 2007 Resolution39 thus:

Considering that the 15-day extension allowable under Section 4 of the Rule 65 of the 1997 Revised Rules of Civil Procedure is
strictly conditioned on “compelling reason” advance[d] by the movant and mere pressure and volume of work has already been
held by the Supreme Court as not a compelling reason to justify an extension, the petitioners’ Motion for Extension of Time
dated March 5, 2007 is hereby DENIED.

Accordingly, this case is ordered OUTRIGHTLY DISMISISED for failure to file the petition for certiorari within the 60-day
reglementary period which expired on March 3, 2007.

SO ORDERED.

We agree with the CA.

It is settled jurisprudence that heavy pressure of work is not considered compelling reason to justify a request for an
extension of time to file a petition for certiorari. “Heavy workload is relative and often self-serving. Standing alone, it is
not a sufficient reason to deviate from the 60-day rule.”[40] In Yutingco v. Court of Appeals,[41] therein petitioners’
counsel cited heavy workload in seeking the court’s leniency. However, the same was rebuffed by the Court
ratiocinating that such “circumstance alone does not provide the court sufficient reason to merit allowance of an
extension of the 60-day period to file the petition for certiorari. Heavy workload x x x ought to be coupled with more
compelling reasons such as illness of counsel or other emergencies that could be substantiated by affidavits of
merit.”[42]

In the instant case, petitioners’ counsel merely referred to “heavy pressure of work”, nothing more, in asking for
additional time. Incidentally, he also mentioned that he is one of the counsels of the accused in People v. Jose
Antonio Leviste then pending before the Makati Regional Trial Court. However, we note that he is merely “one of the
counsels” in the said criminal case. As such, any task must have been distributed among the counsels. Besides,
counsel should bear in mind that in accepting new cases, he should not deprive his “older” cases of the same
competence and efficiency he devotes on these new cases, or cause prejudice to them in one way or another.
In Miwa v. Atty. Medina,[43] we had occasion to “remind lawyers to handle only as many cases as they can efficiently
handle. For it is not enough that a practitioner is qualified to handle a legal matter, he is also required to prepare
adequately and give the appropriate attention to his legal work.” [44] “[M]embers of the bar must take utmost care of the
cases they handle for they owe fidelity to the cause of their clients.” [45] Petitioners must also do well to remember that
“motions for extension are not granted as a matter of right but in the sound discretion of the court, and lawyers should
never presume that their motions for extension or postponement will be granted or that they will be granted for the
length of time they pray for.”[46]

Petitioners belatedly raised the issue on

the substantial merits of their case.

It is worthy of note that in their Petition for Review on Certiorari filed before this Court, the only issue raised by the
petitioners was the alleged error of the CA in denying their motion for extension of time. They focused and limited
their discussion on the fact that their counsel’s heavy workload should have compelled the CA to be lenient towards
their cause. Thus, when respondents were required by this Court to file their comment, they aptly observed that “[t]he
sole issue raised by the petitioners in their present petition concerns the denial by the Honorable Court of Appeals of
their Motion for Extension of Time to file their Petition for Certiorari x x x.”[47] As a necessary consequence,
respondents likewise limited their discussion on debunking the claim of petitioners that ‘heavy workload’ constitutes
compelling reason to grant a request for extension.

We likewise reviewed petitioners’ Reply[48] and we note that the discussion therein referred only to the denial of the
motion for extension. No discussion whatsoever was made as regards the substantial merits of the case. In fact, as
we have mentioned before, it was only in petitioners’ Memorandum where they raised for the first time the issue that
their appeal is meritorious.

This is not only unfair to the respondents who were deprived of the opportunity to propound their arguments on the
issue. It is likewise not allowed by the rules. In the June 23, 2008 Resolution, [49] the Court reminded the parties that
“[n]o new issues may be raised by a party in the memorandum.”[50] The rationale for this was explained by the Court
in Heirs of Cesar Marasigan v. Marasigan,[51] thus:

This Court significantly notes that the first three issues, alleging lack of jurisdiction and cause of action, are raised by petitioners
for the first time in their Memorandum. No amount of interpretation or argumentation can place them within the scope of the
assignment of errors they raised in their Petition.

The parties were duly informed by the Court in its Resolution dated September 17, 2003 that no new issues may be raised by a
party in his/its Memorandum and the issues raised in his/its pleadings but not included in the Memorandum shall be deemed
waived or abandoned. The raising of additional issues in a memorandum before the Supreme Court is irregular, because said
memorandum is supposed to be in support merely of the position taken by the party concerned in his petition, and the raising of
new issues amounts to the filing of a petition beyond the reglementary period. The purpose of this rule is to provide all parties to
a case a fair opportunity to be heard. No new points of law, theories, issues or arguments may be raised by a party in the
Memorandum for the reason that to permit these would be offensive to the basic rules of fair play, justice and due process.

Petitioners failed to heed the Court’s prohibition on the raising of new issues in the Memorandum. [52]

Based on the foregoing, we find no necessity to discuss the second issue which was raised by the petitioners for the
first time only in their Memorandum.

WHEREFORE, based on the foregoing, the Petition for Review on Certiorari is DENIED. The Resolution of the Court
of Appeals in CA-G.R. SP No. 98133 March 13, 2007 denying petitioners’ Motion for Extension of Time and the
Resolution dated June 1, 2007 denying reconsideration thereof are AFFIRMED.

SO ORDERED.

Bersamin, (Acting Chairperson), Abad, Villarama, Jr. and Perlas-Bernabe, JJ., concur.
HEIRS OF JOSE MARCIAL K. OCHOA
NAMELY vs. G & S TRANSPORT
CORPORATION; G.R. NOS. 170071 AND
170125; 16 JULY 2012
RESOLUTION
DEL CASTILLO, J.:
Before us is the Motion for Reconsideration[1] of our March 9, 2011 Decision
filed by G & S Transport Corporation (G & S).

Brief Background

On March 9, 2011, we rendered a Decision[2] in the consolidated petitions of G

& S[3] and of the heirs.[4] These petitions stemmed from a Complaint[5] for
Damages filed by the heirs against G & S with the Regional Trial Court (RTC),
Pasig City, Branch 164 on account of Jose Marcial’s death while onboard a
taxicab owned and operated by G & S.

The RTC adjudged G & S guilty of breach of contract of carriage and ordered
it to pay the heirs the following amounts:

1. P50,000 as civil indemnity;

2. P6,537,244.96 for loss of earning capacity of the deceased;

3. P100,000.00 for attorney’s fees; and,

4. costs of litigation.[6]

Acting upon the heirs’ Partial Motion for Reconsideration,[7] the RTC also
ordered G & S to pay the heirs the following:

1. P300,000.00 as moral damages;

2. P50,000.00 as exemplary damages.[8]

On appeal, the Court of Appeals (CA) affirmed the RTC Decision but with the
modifications that the awards for loss of income in the amount of
P6,537,244.96 be deleted and that moral damages be reduced to
P200,000.00.[9] The deletion was ordered on the ground that the income
certificate issued by Jose Marcial’s employer, the United States Agency for
International Development (USAID), is self-serving, unreliable and biased, and
that the same was not supported by competent evidence such as income tax
returns or receipts. With respect to moral damages, the CA found the same
excessive and disproportionate to the award of P50,000.00 exemplary
damages. Thus, the same was reduced to P200,000.00.[10]

The parties’ respective appeals[11] from the CA Decision became the subject of
this Court’s March 9, 2011 Decision which denied G & S’s petition and partly
granted that of the heirs. The Court affirmed the assailed CA Decision with the
modifications that G & S is ordered to pay the heirs P6,611,634.59 for loss of
earning capacity of the deceased, as well as moral damages in the reduced
amount of P100,000.00. The dispositive portion of our March 9, 2011
Decision, reads:

WHEREFORE, the petition for review on certiorari in G.R. No. 170071

is PARTLY GRANTED while the petition in G.R. No. 170125 is DENIED. The
assailed Decision and Resolution dated June 29, 2005 and October 12, 2005 of the
Court of Appeals in CA-G.R. CV No. 75602 are AFFIRMED with the
MODIFICATIONS that G & S is ordered to pay the heirs of Jose Marcial K. Ochoa
the sum of P6,611,634.59 for loss of earning capacity of the deceased and
P100,000.00 as moral damages.

SO ORDERED.[12]

G & S’s Motion for Reconsideration

G & S filed a Motion for Reconsideration[13] arguing that the USAID

Certification used as basis in computing the award for loss of income is
inadmissible in evidence because it was not properly authenticated and
identified in court by the signatory thereof; that it exercised the diligence of a
good father of a family in the selection and supervision of its employees and,
hence, was able to overcome the presumption of fault imputed to it; and, that
while settled is the rule that this Court is not a trier of facts, G & S can seek a
review of facts even if it did not particularly state under which exception to
such rule its case falls.
The heirs’ Comment to the Motion for Reconsideration

In their Comment,[14] the heirs point out that G & S’s arguments have already
been squarely passed upon by this Court and by the lower courts. Moreover,
these arguments involve questions of fact which cannot be reviewed in a
petition for review on certiorari. As to the USAID Certification, the heirs aver
that the same was properly admitted in evidence. This is because Jose
Marcial’s widow, witness Ruby Bueno Ochoa, was able to competently testify
as to the authenticity and due execution of the said Certification since the
signatory thereof, Jonas Cruz (Cruz), personally issued and handed the same
to her. In addition, the accuracy of the contents of the Certification was never
questioned by G & S as, in fact, it did not present evidence to dispute its
contents.

The Court’s Ruling

The Motion for Reconsideration is denied.

The requirement of authentication of

documentary evidence applies only to a
private document.

It is true that before a private document offered as authentic be received in

evidence, its due execution and authenticity must first be proved.[15] However,
it must be remembered that this requirement of authentication only pertains to
private documents and “does not apply to public documents, these being
admissible without further proof of their due execution or genuineness. Two
reasons may be advanced in support of this rule, namely: said documents
have been executed in the proper registry and are presumed to be valid and
genuine until the contrary is shown by clear and convincing proof; and,
second, because public documents are authenticated by the official signature
and seals which they bear and of which seals, courts may take judicial
notice.”[16]Hence, in a case, the Court held that in the presentation of public
documents as evidence, due execution and authenticity thereof are already
presumed.[17]

The subject USAID Certification is a

public document, hence, does not require
authentication.
It therefore becomes necessary to first ascertain whether the subject USAID
Certification is a private or public document before this Court can rule upon
the correctness of its admission and consequent use as basis for the award of
loss of income in these cases.

Sec. 19, Rule 132 of the Rules of Court classifies documents as either public
or private, viz:

Sec. 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;
and

(c) Public records, kept in the Philippines, of private documents required by law to be
entered therein. All other writings are private. (Emphasis supplied.)

Paragraph (a) of the above-quoted provision classifies 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, as public documents. As mentioned in our March 9, 2011 Decision,
USAID is the principal United States agency that extends assistance to
countries recovering from disaster, trying to escape poverty, and engaging in
democratic reforms and that it is an independent federal government agency
that receives over-all foreign policy guidance from the Secretary of State of
the United States.[18] A further research on said agency shows that it was
created through Executive Order 10973[19] by President John F. Kennedy on
November 3, 1961 pursuant to the Foreign Assistance Act of 1961.[20] It is
headed by an Administrator and Deputy Administrator, both appointed by the
President of the Unites States and confirmed by its Senate.[21] From these,
there can be no doubt that the USAID is an official government agency of a
foreign country, the United States. Hence, Cruz, as USAID’s Chief of the
Human Resources Division in the Philippines, is actually a public officer.
Apparently, Cruz’s issuance of the subject USAID Certification was made in
the performance of his official functions, he having charge of all employee files
and information as such officer. In view of these, it is clear that the USAID
Certification is a public document pursuant to paragraph (a), Sec. 19, Rule
132 of the Rules of Court. Hence, and consistent with our above discussion,
the authenticity and due execution of said Certification are already presumed.
Moreover, as a public document issued in the performance of a duty by a
public officer, the subject USAID Certification is prima facie evidence of the
facts stated therein.[22] And, there being no clear and sufficient evidence
presented by G & S to overcome these presumptions, the RTC is correct
when it admitted in evidence the said document. The USAID Certification
could very well be used as basis for the award for loss of income to the heirs.

G & S failed to overcome the presumption

that “the common carrier is at fault or is negligent
when a passenger dies or is injured.” [23]

G & S insists that it exercised the required diligence of a good father of a

family when it hired and continued to employ Bibiano Padilla, Jr. (the driver of
the ill-fated Avis taxicab). It claims that it was able to prove this through the
documentary exhibits it submitted before the trial court and that the same are
sufficient to relieve it from liability to the heirs.

The reasons advanced by G & S in support of this argument are mere rehash
if not a repetition of those raised in its petition which have already been
considered and passed upon in our March 9, 2011 Decision and, hence, do
not require reconsideration. The conclusion therefore that G & S failed to
overcome the presumption that the common carrier is at fault or is negligent
when a passenger dies or is injured stands.

There is no compelling reason to reexamine

the factual findings of the lower courts.

G & S questions the portion of our March 9, 2011 Decision which reads:

In this case, the said three issues boil down to the determination of the following
questions: What is the proximate cause of the death of Jose Marcial? Is the testimony
of prosecution witness Clave credible? Did G & S exercise the diligence of a good
father of a family in the selection and supervision of its employees? Suffice it to say
that these are all questions of fact which require this Court to inquire into the
probative value of the evidence presented before the trial court. As we have
consistently held, “[t]his Court is not a trier of facts. It is not a function of this court to
analyze or weigh evidence. When we give due course to such situations, it is solely by
way of exception. Such exceptions apply only in the presence of extremely
meritorious cases.” Here, we note that although G & S enumerated in its
Consolidated Memorandum the exceptions to the rule that a petition for review on
certiorari should only raise questions of law, it nevertheless did not point out under
what exception its case falls. And, upon review of the records of the case, we are
convinced that it does not fall under any. Hence, we cannot proceed to resolve said
issues and disturb the findings and conclusions of the CA with respect thereto. x x
x[24] (Emphasis supplied.)

G & S avers that its failure to indicate the specific ground/exception for this
Court to review the facts of the case should not be taken against it. It
contends that even if it failed to specify which of the exceptions is applicable
here, the Court should have nonetheless determined the existence of any of
the said exceptions on its own.

This matter has been properly addressed in our March 9, 2011 Decision.
While we indeed mentioned that G & S failed to indicate under which of the
exceptions its case falls, the line following that portion states that “And, upon
review of the records of the case, we are convinced that it does not fall under
any.” It is plain from this statement that although G & S failed to specify the
reason why we should resolve factual questions in these cases, we
nevertheless have carefully studied the records to ascertain whether there
exists sufficient justification for us to re-examine the factual findings of the
lower courts. And convinced that there is none, we adhered to the settled
principle that a review of the factual findings of the lower courts is outside the
province of a Petition for Review on Certiorari.

The award of attorney’s fees and cost

of litigation should be deleted.

While we are constrained to deny the present Motion Reconsideration for the
reasons above-stated, we cannot, however, end without discussing the
awards of attorney’s fees and costs of litigation.

In Mercury Drug Corporation v. Baking.[25] the Court held viz:

On the matter of attorney’s fees and expenses of litigation, it is settled that the reasons
or grounds for the award thereof must be set forth in the decision of the court. Since
the trial court’s decision did not give the basis of the award, the same must be
deleted. In Vibram Manufacturing Corporation v. Manila Electric Company, we
held:

Likewise, the award for attorney’s fees and litigation expenses should be deleted.
Well-enshrined is that ‘an award for attorney’s fees must be stated in the text of the
court’s decision and not in the dispositive portion only’ (Consolidated Bank and Trust
Corporation (Solidbank) v. Court of Appeals, 246 SCRA 193 [1995]) and Keng Hua
Paper Products, Inc. v. Court of Appeals, 286 SCRA 257 [1998]). This is also true
with the litigation expenses where the body of the decision discusses nothing for its
basis.

The Text of the court a quo’s Decision is bereft of any factual or legal
justification for the awards of attorney’s fees and costs of litigation. It merely
declared the grant of said awards to the heirs in the dispositive portion of its
decision. Hence, the same should be deleted.

WHEREFORE, the awards of attorney’s fees and costs of litigation

are DELETED. G & S’s Motion for Reconsideration
is DENIED with FINALITY.

SO ORDERED.

Velasco, Jr., (Chairperson), Abad*, Villarma, Jr.**, and Perez, JJ., concur.
FLORDELIZA MARIA REYES RAYEL vs.
PHILIPPINE LUEN THAI HOLDINGS, ET.
AL.; G. R. No. 174893 AND G. R. NO. 174893;
11 JULY 2012
DECISION
DEL CASTILLO, J.:

The law is fair and just to both labor and management. Thus, while the
Constitution accords an employee security or tenure, it abhors oppression to
an employer who cannot be compelled to retain an employee whose
continued employment would he patently inimical to its interest.

This Petition for Review on Certiorari[1] assails the July 18, 2006 Decision[2] or
the Court of Appeals (CA) in CA-G.R. SP No. 86937, which (1) reversed the
National Labor Relations Commission (NL RC) March 23, 2004
Resolution[3]and in effect, its July 21, 2004[4] Resolution as well, (2) declared
petitioner Flordeliza Maria Reyes-Rayel’s (petitioner) dismissal from
employment valid, and (3) ordered respondents Philippine Luen Thai
Holdings, Corp. (PLTHC)/L&T International Group Phils., Inc. (L&T)
(respondents) to pay petitioner an amount equivalent to three months salary
pursuant to the termination provision of the employment contract.

Factual Antecedents

In February 2000, PLTHC hired petitioner as Corporate Human Resources

(CHR) Director for Manufacturing for its subsidiary/affiliate company, L&T. In
the employment contract,[5] petitioner was tasked to perform functions in
relation to administration, recruitment, benefits, audit/compliance, policy
development/ structure, project plan, and such other works as may be
assigned by her immediate superior, Frank Sauceda (Sauceda), PLTHC’s
Corporate Director for Human Resources.

On September 6, 2001, petitioner received a Prerequisite Notice[6] from

Sauceda and the Corporate Legal Counsel of PLTHC, Ma. Lorelie T. Edles
(Edles), which reads:
This has reference to your failure to perform in accordance with management
directives in various instances, which collectively have resulted in loss of confidence
in your capability to promote the interests of the Company.

The most deleterious to the Company has been your pronouncements against the
Human Resource Information System (HRIS) or HR2 Program, a corporate initiative
that is at the core and is crucial to the enhancement of personnel management for the
global operations of the Company. On numerous occasions, in the presence of
colleagues and subordinates, you made statements that serve to undermine the
Company’s efforts at pursuing the HR2 Program. You ought to have realized that
when leveled by an officer of your rank, no less than a Director of the Corporate
Human Resources Division, such remarks are highly inflammatory and their negative
impact is magnified.

Just as flagrant is your inability to incite collaboration and harmony within the
Corporate Human Resources Division. Instead, colleagues and subordinates complain
of your negative attitude towards the Company, its officers and people. You have
established notoriety for your temper and have alienated most members of your
division. You ought to have realized that when exhibited by an officer of your rank,
no less than a Director of the Corporate Human Resources Division, poor
interpersonal skills and the lack of moral suasion are extremely damaging.

The foregoing have, in fact, manifested in your own unsatisfactory performance

rating, and in the departure of promising employees who could not work with you.

In view of the above, we afford you the opportunity to submit your written reply to
this memorandum within forty-eight (48) hours from its receipt. Failure to so submit
shall be construed as waiver of your right to be heard. Consequently, the Company
shall immediately decide on this matter.

x x x x[7]

In petitioner’s written response[8] dated September 10, 2001, she explained

that her alleged failure to perform management directives could be attributed
to the lack of effective communication with her superiors due to malfunctioning
email system. This caused her to miss certain directives coming from her
superiors and likewise, for her superiors to overlook the reports she was
submitting. She denied uttering negative comments about the HR2 Program
and instead claimed to have intimated her support for it. She further denied
causing disharmony in her division. Petitioner emphasized that in June 2001,
she received a relatively good rating of 80.2% in her overall performance
appraisal[9] which meant that she displayed dependable work level
performance as well as good corporate relationship with her superiors and
subordinates.

In a Termination Notice[10] dated September 12, 2001, respondents, through

Sauceda and Edles, dismissed petitioner from the service for loss of
confidence on her ability to promote the interests of the company. This led
petitioner to file a Complaint[11] for illegal dismissal, payment of separation pay,
13th month pay, moral and exemplary damages, attorney’s fees, and other
unpaid company benefits against respondents and its officers, namely,
Sauceda, Edles and Willie Tan (Tan), the Executive Vice-President of PLTHC.

Proceedings before the Labor Arbiter

In her Position Paper,[12] petitioner argued that her dismissal was without valid
or just cause and was effected without due process. According to her, the
causes for her dismissal as stated in the Prerequisite Notice and Notice of
Termination are not proper grounds for termination under the Labor Code and
the same do not even pertain to any willful violation of the company’s code of
discipline or any other company policy. Even the alleged loss of confidence
was not supported by any evidence of wrongdoing on her part. She likewise
claimed that due process was not observed since she was not afforded a
hearing, investigation and right to appeal as per company procedure for
disciplining employees. Furthermore, respondents were guilty of violating the
termination provision under the employment contract which stipulated that
employment after probationary period shall be terminated by giving the
employee a three-month notice in writing or by paying three months salary in
lieu of notice. Petitioner also accused respondents of having acted in bad faith
by subjecting her to public humiliation and embarrassment when she was
ordered to immediately turn over the company car, vacate her office and
remove all her belongings on the same day she received the termination
notice, in full view of all the other employees.

Respondents, on the other hand, claimed that they have a wide discretion in
dismissing petitioner as she was occupying a managerial position. They
claimed in their Position Paper[13] that petitioner’s inefficiency and lackadaisical
attitude in performing her work were just and valid grounds for termination. In
the same token, her gross and habitual neglect of duties were enough bases
for respondents to lose all their confidence in petitioner’s ability to perform her
job satisfactorily. Also, petitioner was accorded due process as she was
furnished with two notices – the first requiring her to explain why she should
not be terminated, and the second apprising her of the management’s
decision to terminate her from employment.

Further in their Reply[14] to petitioner’s position paper, respondents enumerated

the various instances which manifested petitioner’s poor work attitude and
dismal performance, to wit: 1) her failure to perform in accordance with
management directives such as when she unreasonably delayed the hiring of
a Human Rights and Compliance Manager; failed to establish communication
with superiors and co-workers; failed to regularly update Sauceda of the
progress of her work; requested for reimbursement of unauthorized
expenditures; and, gave orders contrary to policy on the computation of legal
and holiday pay; 2) her negative pronouncements against the company’s
program in the presence of colleagues and subordinates; 3) her inability to
incite collaboration and harmony within her department; 4) her negative
attitude towards the company, its officers and employees; and 5) her low
performance appraisal rating which is unacceptable for a top level personnel
like herself. Exchange of emails, affidavits and other documents were
presented to provide proof of incidents which gave rise to these allegations.
Respondents also asserted that the procedure laid down in the company’s
code of discipline, which provided for the mandatory requirements of notice,
hearing/investigation and right to appeal, only applies to rank and file,
supervisory, junior managerial and department managerial employees and not
to petitioner, a CHR Director, who plays a key role in these termination
proceedings. Further, the three-month notice for termination, as written in the
employment contract, is only necessary when there is no just cause for the
employee’s dismissal and, therefore, not applicable to petitioner. Respondents
then disputed petitioner’s money claims and also sought the dropping of
Sauceda, Edles and Tan from the complaint for not being real parties in
interest.

In her rejoinder,[15] petitioner stood firm on her conviction that she was
dismissed without valid cause by presenting documentary evidence of her
good performance. Further, she insisted that she was dismissed for reasons
different from those mentioned in the Prerequisite Notice and Notice of
Termination, both of which did not state gross and habitual neglect of duties
as a ground. She also construed respondents’ act of offering her a settlement
or compensation right after her termination as their acknowledgement of the
illegal act they committed against her. Moreover, petitioner argued that the
company policies on procedural due process apply to all its employees,
whether rank and file or managerial.
In a Decision[16] dated October 21, 2002, the Labor Arbiter declared petitioner
to have been illegally dismissed. It was held that petitioner cannot be charged
with undermining the HR2 Program of the company since evidence was
presented to show that she was already divested of duties relative to this
program. Also, respondents’ accusation that petitioner caused disharmony
among colleagues and subordinates has no merit as there was ample proof
that petitioner was in constant communication with her co-workers through
official channels and email. Further, the Labor Arbiter theorized that
petitioner’s performance rating demonstrated a passing or satisfactory grade
and therefore could not be a sufficient and legitimate basis to terminate her for
loss of trust and confidence. Moreover, petitioner cannot be dismissed based
merely on these vague offenses but only for specific offenses which, under
the company’s code of conduct, merit the penalty of outright dismissal. The
dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring that

complainant was illegally dismissed by respondent corporation, and the latter is
hereby directed to reinstate complainant to her former position and pay her full
backwages and benefits computed below, as follows:

A. Backwages September 12, 2001 to October 21, 2002

1. Salaries and Wages

P80,000 x 13.30 months = P1,064,000.00

2. 13th month pay

P1,064,000.00 / 12 = 88,666.67
3. VL P80,000 / 26 x 10 days = 34,102.56
P1,186,769.23

B. Attorney’s Fees (10%) 118,676.92

P1,305,446.15

SO ORDERED.[17]

Proceedings before the National Labor Relations Commission

Respondents appealed to the NLRC.[18] For her part, petitioner filed before the
Labor Arbiter a Motion for Recomputation[19] of the awards. This motion was,
however, denied in an Order[20] dated March 17, 2003 on the ground that
petitioner could challenge any disposition made only by way of an appeal
within the reglementary period and not through a motion.

In a Decision[21] dated August 20, 2003, the NLRC found merit in respondents’
appeal. To the NLRC, respondents have sufficiently established the validity of
petitioner’s dismissal on the ground of loss of trust and confidence through the
various emails, affidavits and other documents attached to the records.
Specifically, respondents have proven that petitioner failed to recruit a Human
Rights and Compliance Manager, ignored company policies, failed to
effectively communicate with her superiors and subordinates, and displayed
ineptitude in her work as a director and in her relationship with her co-workers.
These showed that there exist enough bases for respondents to lose the trust
they had reposed on petitioner, who, as a managerial employee, was
expected to possess exemplary work attitude. The NLRC, however, noted that
the employment contract specifically provided for payment of three months
salary in lieu of the stipulated three-month notice in case of termination, thus:

IN LIGHT OF THE FOREGOING PREMISES, the decision appealed from is hereby

MODIFIED, to declare the dismissal of complainant legal but to order respondent[s]
to pay complainant the sum of P240,000.00 representing three months salary as
expressed in complainant’s contract of employment. All other claims are DISMISSED
for lack of merit.

SO ORDERED.[22]

Petitioner filed a Motion for Reconsideration[23] which was granted by the

NLRC. In a Resolution[24] dated March 23, 2004, the NLRC concluded that
petitioner was not afforded due process as she was not given the opportunity
to refute the charges against her through an investigation and an appeal at
the company level. Thus, respondents failed to establish the truthfulness of
the allegations against her as to support the validity of the dismissal. The
NLRC also agreed with petitioner’s claim that she was subjected to humiliation
on the day of her termination. Consequently, the NLRC declared petitioner’s
dismissal as illegal and thus reinstated the Labor Arbiter’s Decision with
modification that respondents be ordered to pay petitioner separation pay in
lieu of reinstatement due to the strained relation between the parties.

In a Resolution[25] dated July 21, 2004, the NLRC resolved to dismiss

respondents’ motion for reconsideration.
 Proceedings before the Court of Appeals

Respondents thus filed with the CA a Petition for Certiorari with Urgent Motion
for Issuance of Temporary Restraining Order (TRO) or Writ of Preliminary
Injunction.[26] Petitioner then filed her Comment[27] thereto. Subsequently, the
CA denied respondents’ prayer for TRO in a Resolution[28]dated February 15,
2005.

On July 18, 2006, the CA rendered a Decision[29] finding merit in the petition.
The CA found sufficient evidence to support the dismissal of petitioner on the
ground of loss of trust and confidence. It regarded petitioner’s 80.2%
performance rating as below par and hence, declared that she cannot merely
rely on the same in holding on to her position as CHR Director, a highly
sensitive and demanding post. Also, despite the opportunity to improve,
petitioner continued to display poor work attitude, dismal performance and
rancorous and abusive behavior towards co-workers as gleaned from the
various emails and affidavits of her superiors and other employees. These
circumstances, taken together, constitute sufficient cause for respondents to
lose confidence in petitioner’s ability to continue in her job and to promote the
interest of the company.

Moreover, the CA did not subscribe to petitioner’s allegation that she was
denied due process. On the contrary, said court found that she was
adequately notified of the charges against her through the show cause notice
which clearly stated the instances that served as sufficient bases for the loss
of trust and confidence, to wit: her failure to perform in accordance with
management directives and her actions of undermining company goals and
causing disharmony among her co-workers. After finding her written response
to be unsatisfactory, petitioner was likewise properly notified of the company’s
decision to terminate her services. Clearly, respondents observed the
requirements of procedural due process. Nevertheless, respondents, in
effecting the dismissal, should have paid petitioner her salary for three months
as provided for in the employment contract. For its failure to do so, the CA
ordered respondents to pay petitioner three months salary in accordance with
their contractual undertaking. The dispositive portion of the CA Decision
states:

WHEREFORE, the Resolution of the National Labor Relations Commission dated

March 23, 2004 is REVERSED. [Respondents] are hereby ordered to pay [petitioner]
the amount corresponding to three [months] salary pursuant to the termination
provision of the employment contract.
SO ORDERED.[30]

Petitioner’s Motion for Reconsideration[31] was denied in the CA

Resolution[32]dated October 4, 2006.

Issues

Hence, the present petition raising the following issues:

I. WHETHER X X X THE COURT OF APPEALS COMMITTED AN ERROR
WHEN IT REVERSED THE DECISION OF THE NLRC
ON CERTIORARIDESPITE THE FACT THAT THE NLRC DID NOT COMMIT
GRAVE ABUSE OF DISCRETION WHEN IT AFFIRMED THE FACTUAL
FINDINGS OF THE LABOR ARBITER . THAT PETITIONER WAS ILLEGALLY
DISMISSED FROM HER EMPLOYMENT BY RESPONDENTS.

II. WHETHER X X X THE ALLEGED VALID OR JUST CAUSE FOR

TERMINATION OF PETITIONER FROM HER EMPLOYMENT WAS PROVEN
AND ESTABLISHED BY SUBSTANTIAL EVIDENCE ON RECORD.

III. WHETHER X X X RESPONDENTS DEPRIVED PETITIONER OF HER

RIGHT TO DUE PROCESS WHEN RESPONDENTS DISMISSED PETITIONER
WITHOUT CONDUCTING ANY INVESTIGATION TO DETERMINE THE
VERACITY AND TRUTHFULNESS OF THE ALLEGATIONS AGAINST
PETITIONER IN VIOLATION OF RESPONDENTS’ OWN COMPANY
POLICIES.[33]

Petitioner posits that there is no substantial evidence to establish valid

grounds for her dismissal since various emails from her superiors illustrating
her accomplishments and commendations, as well as her “good” overall
performance rating negate loss of trust and confidence. She also insists that
she was not afforded due process at the company level. She claims that she
was not properly informed of the offenses charged against her due to the
vagueness of the terms written in the termination notices and that no
investigation and hearing was conducted as required by company policy.

Our Ruling

The petition is devoid of merit. The Court finds no cogent reason to

depart from the ruling of the CA that petitioner was validly dismissed.
There exists a valid ground for petitioner’s
termination from employment.

Jurisprudence provides that an employer has a distinct prerogative and wider

latitude of discretion in dismissing a managerial personnel who performs
functions which by their nature require the employer’s full trust and
confidence.[34] As distinguished from a rank and file personnel, mere existence
of a basis for believing that a managerial employee has breached the trust of
the employer justifies dismissal.[35] “[L]oss of confidence as a ground for
dismissal does not require proof beyond reasonable doubt as the law requires
only that there be at least some basis to justify it.”[36]

Petitioner, in the present case, was L&T’s CHR Director for Manufacturing. As
such, she was directly responsible for managing her own departmental staff. It
is therefore without question that the CHR Director for Manufacturing is a
managerial position saddled with great responsibility. Because of this,
petitioner must enjoy the full trust and confidence of her superiors. Not only
that, she ought to know that she is “bound by more exacting work ethics” [37]and
should live up to this high standard of responsibility. However, petitioner
delivered dismal performance and displayed poor work attitude which
constitute sufficient reasons for an employer to terminate an employee on the
ground of loss of trust and confidence. Respondents also impute upon
petitioner gross negligence and incompetence which are likewise justifiable
grounds for dismissal.[38] The burden of proving that the termination was for a
valid cause lies on the employer.[39] Here, respondents were able to overcome
this burden as the evidence presented clearly support the validity of
petitioner’s dismissal.

First, records show that petitioner indeed unreasonably failed to effectively

communicate with her immediate superior. There was an apparent neglect in
her obligation to maintain constant communication with Sauceda in order to
ensure that her work is up to par. This is evident from the various
emails[40]showing that she failed to update Sauceda on the progress of her
important assignments on several occasions. While petitioner explained in her
written reply to the Prerequisite Notice that such failure to communicate was
due to the company’s computer system breakdown, respondents however
were able to negate this as they have shown that the computer virus which
affected the company’s system only damaged some email addresses of
certain employees which did not include that of Sauceda’s. On the other hand,
petitioner failed to present any concrete proof that the said computer virus
also damaged Sauceda’s email account as to effectively disrupt their regular
communication. Moreover, we agree with respondents’ stance that petitioner
could still reach Sauceda through other means of communication and should
not completely rely on the web.

Second, the affidavits of petitioner’s co-workers revealed her negative attitude

and unprofessional behavior towards them and the company. In her
affidavit,[41] Agnes Suzette Pasustento, L&T’s Manager for the Corporate
Communications Department, attested to petitioner’s “badmouthing” of
Sauceda in one of their meetings abroad and of discussing with her about
filing a labor case against the company. Also, in the affidavits of Rizza S.
Esplana[42](Sauceda’s Executive Assistant), Cynthia Yñiguez[43] (Corporate
Human Resources Manager of an affiliate of L&T), and Ana Wilma
Arreza[44] (Human Resources and Administration Division Manager of an
affiliate of L&T), they narrated several instances which demonstrated
petitioner’s notoriously bad temper. They all described her to have an
“irrational” behavior and “superior and condescending” attitude in the
workplace. Unfortunately for petitioner, these sworn statements which notably
remain uncontroverted and unrefuted, militate against her innocence and
strengthen the adverse averments against her.[45] It is well to state that as a
CHR Director tasked to efficiently manage the company’s human resource
team and practically being considered the “face” of the Human Resource,
petitioner should exhibit utmost concern for her employer’s interest. She
should likewise establish not only credibility but also respect from co-workers
which can only be attained if she demonstrates maturity and professionalism
in the discharge of her duties. She is also expected to act as a role model who
displays uprightness both in her own behavior and in her dealings with others.

The third and most important is petitioner’s display of inefficiency and

ineptitude in her job as a CHR Director. In the affidavit[46] of Ornida B. Calma,
Chief Accountant of L&T’s affiliate company, petitioner, on two occasions,
gave wrong information regarding issues on leave and holiday pay which
generated confusion among employees in the computation of salaries and
wages. Due to the nature of her functions, petitioner is expected to have
strong working knowledge of labor laws and regulations to help shed light on
issues and questions regarding the same instead of complicating them.
Petitioner obviously failed in this respect. No wonder she received a less than
par performance in her performance evaluation conducted in June 2001,
contrary to her assertion that an 80.2% rating illustrates good and dependable
work performance. As can be gleaned in the performance appraisal form,
petitioner received deficient marks and low ratings on areas of problem
solving and decision making, interpersonal relationships, planning and
organization, project management and integrity notwithstanding an overall
passing grade. As aptly remarked by the CA, these low marks revealed the
“degree of [petitioner’s] work handicap” and should have served as a notice
for her to improve on her job. However, she appeared complacent and
remained lax in her duties and this naturally resulted to respondents’ loss of
confidence in her managerial abilities.

Taking all these circumstances collectively, the Court is convinced that

respondents have sufficient and valid reasons in terminating the services of
petitioner as her continued employment would be patently inimical to
respondents’ interest. An employer “has the right to regulate, according to its
discretion and best judgment, all aspects of employment, including work
assignment, working methods, processes to be followed, working regulations,
transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers.”[47] “[S]o long as they are exercised in good
faith for the advancement of the employer’s interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or
under valid agreements,”[48] the exercise of this management prerogative must
be upheld.

Anent petitioner’s imputation of bad faith upon respondents, the same

deserves no credence. That she was publicly embarrassed when she was
coerced by Sauceda and Edles to vacate her office, return the company car
and take all her personal belongings on the day she was dismissed, are all
mere allegations not substantiated by proof. And since it is hornbook rule that
he who alleges must prove, we could not therefore conclude that her
termination was tainted with any malice or bad faith without any sufficient
basis to substantiate this bare allegation. Moreover, we are more inclined to
believe that respondents’ offer of settlement immediately after petitioner’s
termination was more of a generous offer of financial assistance rather than
an indication of ill-motive on respondents’ part.

Petitioner was accorded due process.

Petitioner insists that she was not properly apprised of the specific grounds for
her termination as to give her a reasonable opportunity to explain. This is
because the Prerequisite Notice and Notice of Termination did not mention
any valid or authorized cause for dismissal but rather merely contained
general allegations and vague terms.
We have examined the Prerequisite Notice and contrary to petitioner’s
assertion, find the same to be free from any ambiguity. The said notice
properly advised petitioner to explain through a written response her failure to
perform in accordance with management directives, which deficiency resulted
in the company’s loss of confidence in her capability to promote its interest. As
correctly explained by the CA, the notice cited specific incidents from various
instances which showed petitioner’s “repeated failure to comply with work
directives, her inclination to make negative remarks about company goals and
her difficult personality,” that have collectively contributed to the company’s
loss of trust and confidence in her. Indeed, these specified acts, in addition to
her low performance rating, demonstrated petitioner’s neglect of duty and
incompetence which support the termination for loss of trust and confidence.

Neither can there be any denial of due process due to the absence of a
hearing or investigation at the company level. It has been held in a plethora of
cases that due process requirement is met when there is simply an
opportunity to be heard and to explain one’s side even if no hearing is
conducted.[49] In the case of Perez v. Philippine Telegraph and Telephone
Company,[50] this Court pronounced that an employee may be afforded ample
opportunity to be heard by means of any method, verbal or written, whether in
a hearing, conference or some other fair, just and reasonable way, in that:

xxxx

After receiving the first notice apprising him of the charges against him, the employee
may submit a written explanation (which may be in the form of a letter, memorandum,
affidavit or position paper) and offer evidence in support thereof, like relevant
company records (such as his 201 file and daily time records) and the sworn
statements of his witnesses. For this purpose, he may prepare his explanation
personally or with the assistance of a representative or counsel. He may also ask the
employer to provide him copy of records material to his defense. His written
explanation may also include a request that a formal hearing or conference be held. In
such a case, the conduct of a formal hearing or conference becomes mandatory, just as
it is where there exist substantial evidentiary disputes or where company rules or
practice requires an actual hearing as part of employment pretermination procedure.
To this extent, we refine the decisions we have rendered so far on this point of law.

xxxx
In sum, the following are the guiding principles in connection with the hearing
requirement in dismissal cases:

(a) ‘ample opportunity to be heard’ means any meaningful opportunity (verbal or

written) given to the employee to answer the charges against him and submit evidence
in support of his defense, whether in a hearing, conference or some other fair, just and
reasonable way.

(b) a formal hearing or conference becomes mandatory only when requested by the
employee in writing or substantial evidentiary disputes exist or a company rule or
practice requires it, or when similar circumstances justify it.

(c) the ‘ample opportunity to be heard’ standard in the Labor Code prevails over the
‘hearing or conference’ requirement in the implementing rules and regulations. [51]

In this case, petitioner’s written response to the Prerequisite Notice provided

her with an avenue to explain and defend her side and thus served the
purpose of due process. That there was no hearing, investigation or right to
appeal, which petitioner opined to be a violation of company policies, is of no
moment since the records is bereft of any showing that there is an existing
company policy that requires these procedures with respect to the termination
of a CHR Director like petitioner or that company practice calls for the same.
There was also no request for formal hearing on the part of petitioner.

As she was served with a notice apprising her of the charges against her, and
also a subsequent notice informing her of the management’s decision to
terminate her services alter respondents found her written response to the first
notice unsatisfactory, petitioner was clearly afforded her right to due process.

WHEREFORE, the petition is DENIED. The assailed Decision dated July 1

2006 of the Court of Appeals in CA-G.R. SP No. 86937 is AFFIRMED.

SO ORDERED.

Leonardo-De Castro* (Acting Chairperson), Brion,** Villarama, Jr., and Perlas-

Bernabe, JJ., concur.
JUDGE PELAGIA DALMACIO- JOAQUIN
vs. NICOMEDES DELA CRUZ; A.M. No. P-
06-2241 (Formerly OCA IPI No. 06-2422-P)
A.M. No. P-06-2241 (Formerly OCA IPI No.
06-2422-P); 10 JULY 2012
DECISION
DEL CASTILLO, J.:
This is an administrative complaint filed by Judge Pelagia Dalmacio-Joaquin
(Judge Dalmacio-Joaquin) against Process Server Nicomedes Dela Cruz
(Dela Cruz), both of the Municipal Trial Court in Cities, City of San Jose Del
Monte, Bulacan, for Conduct Unbecoming of Court Personnel and Dishonesty.

Factual Antecedents

In her Complaint[1] dated March 29, 2006, Judge Dalmacio-Joaquin alleged

that Dela Cruz submitted belated and false returns of service of notice. In
particular, she claimed that Dela Cruz received the Order dated November 25,
2005 relative to Criminal Case No. 5744-96 on December 9, 2005 but served
the same to the parties only on March 23, 2006. She also alleged that Dela
Cruz submitted false returns relative to Criminal Case Nos. 04-0488 and 04-
0489, No. 04-0483 and No. 05-0213. According to Judge Dalmacio-Joaquin,
Dela Cruz stated in his return of service in Criminal Case Nos. 04-0488 and
04-0489 that the accused therein was no longer residing at her given
address. However, during pre-trial, this was denied by the accused herself
who declared in open court that she has not transferred residence. Anent
Criminal Case No. 04-0483, Dela Cruz likewise indicated in his return of
service that therein accused is no longer residing at his given address and
that the houses thereat have already been demolished. However, during the
scheduled pre-trial, the complainant manifested that the accused who is her
neighbor still resides at his given address and that his house is still standing
thereon. Finally, as regards Criminal Case No. 05-0213, two of the accused
therein manifested during their scheduled arraignment that they are still
residing at their given address contrary to the report of Dela Cruz. Hence, the
trial court motu propiolifted their warrants of arrest.
Judge Dalmacio-Joaquin also alleged that notwithstanding receipt of three
Orders dated March 10, 2006 relative to Criminal Case Nos. 04-0488 and 04-
0489, No. 04-0483 and No. 05-0213, directing him to explain why no
administrative action should be taken against him for submitting false returns,
Dela Cruz still failed to submit any explanation or compliance thereon.
According to Judge Dalmacio-Joaquin, the aforesaid acts of Dela Cruz were
unbecoming, undesirable, dishonest and even more reprehensible,
undermined the integrity of the court processes and tarnished the
trustworthiness of the court employees and of the judiciary.

In his Comment[2] filed on May 30, 2006, Dela Cruz denied the allegation that
he deliberately delayed the service of the November 25, 2005 Order relative
to Criminal Case No. 5744-96. He claimed that the same was served to the
parties concerned three days before the scheduled hearing. Anent the returns
relative to Criminal Case Nos. 04-0488 and 04-0489, No. 04-0483 and No. 05-
0213, Dela Cruz vehemently denied submitting false returns. He averred that
as regards Criminal Case Nos. 04-0488 and 04-0489, he served the
subpoena to Randy R. Masa, a purok leader in the area who told him that
accused Cecilia Pareño was no longer residing at said address and has in fact
transferred to another barangay. As regards Criminal Case No. 04-0483,
Dela Cruz claimed that he personally went to the given address of the therein
accused and was told by a certain Hilda Malabao that there were no longer
residents thereat as the houses have already been demolished. As regards
Criminal Case No. 05-0213, Dela Cruz narrated that the accused were not at
their given address when he attempted to serve the court process. He
averred that it was not his intention to submit incorrect or misleading returns.
He also claimed that Judge Dalmacio-Joaquin only wanted to harass him as
this is not the first administrative complaint she filed against him.

In view of the factual issues presented, we resolved to refer the matter to the
Executive Judge of the Regional Trial Court, Malolos, Bulacan for
investigation, report and recommendation.[3]

Report of the Investigating Judge

On April 23, 2009, Executive Judge Herminia V. Pasamba (Investigating

Judge) submitted her Report.[4] The Investigating Judge found that service of
the November 25, 2005 Order in Criminal Case No. 5744-96 was delayed for
at least three months. As regards the returns relative to Criminal Case Nos.
04-0488 and 04-0489, No. 04-0483 and No. 05-0213, the Investigating Judge
noted that although the same contained false entries, the same, however,
were not deliberately or intentionally done as Dela Cruz merely relied on his
sources. As regards the show cause order issued by Judge Dalmacio-
Joaquin, the Investigating Judge noted that Dela Cruz did not file any
explanation relative to said returns as directed. For reference, the Report of
the Investigating Judge contained the following findings:

The submitted returns on the three (3) orders all dated March 10, 2005 run counter
[to] the explanations given during the respective dates of hearing by the private
complainant/accused/defense counsel in the said cases. Respondent, on being
confronted, with the false returns offered as explanation his overwhelming job as the
only process server in the Municipal Trial Court in Cities of San Jose del Monte City
servicing fifty-nine (59) barangays and even produced his still unserved processes of
about ninety-eight (98) orders as of the date of his examination. As regards the
November 25, 2005 order in Criminal Case No. 5744-96, it was confirmed that the
same was received on December 9, 2005 but served only some three months later, at
least three (3) days before the scheduled hearing. No compliance however was filed
on the orders issued by the complainant Hon. Judge to the show cause [relative to] the
false returns.[5]

For the above infractions, the Investigating Judge recommended that Dela
Cruz be suspended from employment for a period of one year.[6]

In a Resolution[7] dated November 16, 2009, we referred the Report of the

Investigating Judge to the Office of the Court Administrator (OCA) for
evaluation, report and recommendation.

Report of the Office of the Court Administrator

In its Report,[8] the OCA agreed with the Investigating Judge that Dela Cruz
indeed submitted false returns which amounts to dishonesty, a grave offense
punishable with the extreme penalty of dismissal from service with forfeiture of
retirement benefits, except accrued leave credits, and with prejudice to re-
employment in any branch or instrumentality of the government. Considering
however that on June 10, 2008, Dela Cruz had already resigned from the
service “which the Court accepted without prejudice to the continuation of his
administrative cases,”[9] the OCA recommended that Dela Cruz’s benefits,
except accrued leave credits, be forfeited, with prejudice to re-employment in
any government instrumentality.

Our Ruling
As regards the November 25, 2005 Order in Criminal Case No. 5744-
96, it is undisputed that it was belatedly served by Dela Cruz only on
March 23, 2006, or three months and 14 days after he received the
same on December 9, 2005. However, Dela Cruz maintains that he
was not remiss in his tasks despite such delay considering his heavy
workload and the fact that the parties received copies of the Order
three days before the scheduled hearing.
“The duty of a process server is vital to the administration of justice. A
process server’s primary duty is to serve court notices which precisely
requires utmost care on his part by ensuring that all notices assigned to him
are duly served on the parties.”[10] “Unjustified delay in performing this task
constitutes neglect of duty and warrants the imposition of administrative
sanctions.”[11]

Dela Cruz adverted to “heavy workload” as the cause of the delay in the
service of the Order. During the hearing before the Investigating Judge, he
contended that he has “too many subpoenas and processes”[12] to serve. He
also alleged that he is the only Process Server assigned in the sala of Judge
Dalmacio-Joaquin[13] and that he is serving 59 barangays of San Jose Del
Monte City.[14]

We find such an excuse unsatisfactory. “All employees in the judiciary should

be examples of responsibility, competence and efficiency.”[15] As Process
Server, Dela Cruz ought to be aware of the importance to serve the court
processes with dispatch. “It is through the process server that defendants
learn of the action brought against them by the complainant. More important,
it is also through the service of summons by the process server that the trial
court acquires jurisdiction over the defendant. It is therefore important that
summonses, other writs and court processes be served expeditiously.” [16]
Besides, “heavy workload x x x is not an adequate excuse to be remiss in the
diligent performance of one’s public duties as a public servant. Otherwise,
every government employee charged with negligence and dereliction of duty
will always use this as a convenient excuse to escape punishment to the great
prejudice of public service.”[17] In this instance, we find Dela Cruz guilty of
simple neglect of duty for the delay in the service of the subject Order.

As regards the returns filed relative to Criminal Case Nos. 04-0488 and 04-
0489, No. 04-0483 and No. 05-0213, we agree with both the Investigating
Judge and the OCA that the same contained erroneous entries. In Criminal
Case Nos. 04-0488 and 04-0489, Dela Cruz stated in his return that the
accused was no longer residing at her stated address. However, this was
denied by the accused herself who appeared in court during trial and declared
that she has not transferred residence. In Criminal Case No. 04-0483, Dela
Cruz likewise stated in his return that the accused could no longer be found at
his given address and that his house was already demolished. During the
pre-trial, however, the complainant appeared and manifested that accused is
his neighbor; that he has not transferred residence; and that his house is still
standing on the subject property. In Criminal Case No. 05-0213, two of the
accused therein belied Dela Cruz’s claim that they were no longer residing at
their given address.

However, we do not agree with the OCA that the above infractions amount to
dishonesty. “This Court has defined dishonesty as the ‘disposition to lie,
cheat, deceive, or defraud; untrustworthiness; lack of integrity; lack of
honesty, probity or integrity in principle; lack of fairness and
straightforwardness; disposition to defraud, deceive or betray.’”[18]
“[D]ishonesty x x x is not simply bad judgment or negligence. Dishonesty is a
question of intention. In ascertaining the intention of a person accused of
dishonesty, consideration must be taken not only of the facts and
circumstances which gave rise to the act committed by the respondent, but
also of his state of mind at the time the offense was committed, the time he
might have had at his disposal for the purpose of meditating on the
consequences of his act, and the degree of reasoning he could have had at
that moment.”[19]

We agree with the observation of the Investigating Judge that Dela Cruz did
not deliberately or intentionally make such erroneous entries. As Dela Cruz
explained, he merely relied on the persons whom he interviewed when he
went to the given addresses. We are inclined to give credence to said
explanation considering that no ill-motive, malice or corruption was imputed
upon Dela Cruz. It was never alleged, much less established, that Dela Cruz
was impelled by some evil design or corrupt motives to commit said errors or
to favor any party or litigant. Hence, we find him guilty only of negligence in
the the performance of his tasks, and not of dishonesty. Much as we
empathize with Dela Cruz considering his heavy workload, the same however
is an unacceptable excuse[20] for him not to exercise prudence and care in
verifying the information relayed to him.

Finally, anent the failure of Dela Cruz to submit his explanation pursuant to
the show cause orders of Judge Dalmacio-Joaquin, we find the same
understandable under the circumstances. The records show that Dela Cruz
received the show cause orders on March 22, 2006.[21] In Criminal Case Nos.
04-0488 and 04-0489, he was given three days from receipt, or until March
25, 2006 within which to submit his explanation. In Criminal Case No. 04-
0483 and Criminal Case No. 05-0213, he was given five days from receipt, or
until March 27, 2006 within which to submit his compliance. In the interim,
Dela Cruz received from this Court a copy of the Resolution in A.M. OCA IPI
No. 05-2299 admonishing him for failing to attach copies of the return of
service to the records of the case. Notwithstanding the foregoing, Judge
Dalmacio-Joaquin did not afford him much leeway as the former immediately
filed before this Court on March 29, 2006 the instant complaint. Thus, we can
only surmise that Dela Cruz’s failure to submit his explanation was not
intentional or willful but that he was merely overtaken by the turn of the
events.

Notably, this is not the first time that Dela Cruz has been administratively
charged. In A.M. OCA IPI No. 05-2299-P, per Resolution[22] dated February
20, 2006, the Court admonished and warned Dela Cruz it appearing that “he
committed occasional errors and failed to attach copies of the return of service
to the records of the cases.” Note, however, that admonition and warning are
not considered as penalties.[23] On the other hand, in A.M. No. P-07-2321, the
Court found him guilty of insubordination because he walked out during a
meeting with his chief of office and co-employees and ignored his superior’s
directive to return so they could finish their discussion.[24] In addition, he was
found guilty of misconduct for verbally abusing his co-employees and
reporting for work drunk.[25] For said infractions, he was meted the penalty of
suspension of one year without pay, with stern warning that a repetition of
similar or analogous infractions shall be dealt with more severely. However,
during the pendency of this case, Dela Cruz resigned from service.

In sum, we find Dela Cruz guilty not of dishonesty but only of simple neglect of
duty which is defined as “the failure of an employee to give proper attention to
a required task or to discharge a duty due to carelessness or indifference.” [26]
Considering his 24 years of service in the judiciary and his health
condition,[27]as well as the fact that no prejudice was caused to the party-
litigants in the above-mentioned cases as they were all able to attend the
scheduled hearings, we deem it proper to impose upon Dela Cruz the penalty
of suspension of three months.[28] However, in view of Dela Cruz’s resignation
on June 10, 2008, forfeiture of his salaries for three months should instead be
imposed in lieu of suspension, to be deducted from whatever benefits he may
be entitled to under existing laws.
WHEREFORE, premises considered, NICOMEDES DELA CRUZ, former
Process Server, Municipal Trial Court in Cities, San Jose del Monte, Bulacan,
is hereby found GUILTY of Simple Neglect of Duty. His salaries for three
months are ordered FORFEITED to be deducted from whatever benefits he
may be entitled to under existing laws.

SO ORDERED.

Carpio, Velasco, Jr., Leonardo-De Castro, Brion, Peralta, Villarama, Jr.,

Perez, Mendoza, Sereno, Reyes, and Perlas-Bernabe, JJ., concur.
Bersamin, and Abad, JJ., on official leave.
EMILIA LIM vs. MINDANAO WINES &
LIQUOR GALLERIA; G.R. NO. 175851; 04
JULY 2012
DECISION
DEL CASTILLO, J.:
Acquittal from a crime does not necessarily mean absolution from civil liability.

Despite her acquittal from the charges of violation of Batas Pambansa Bilang
22 (BP 22) or the Bouncing Checks Law, the lower courts still found petitioner
Emilia Lim (Emilia) civilly liable and ordered her to pay the value of the
bounced checks, a ruling which was upheld by the Court of Appeals (CA) in its
June 30, 2006 Decision[1] and November 9, 2006 Resolution[2] in CA-G.R.
SP No. 64897.

In this Petition for Review on Certiorari, Emilia prays for the reversal and
setting aside of the said rulings of the CA. She contends that since her
acquittal was based on insuffiency of evidence, it should then follow that the
civil aspect of the criminal cases filed against her be likewise dismissed.
Hence, there is no basis for her adjudged civil liability.

Factual Antecedents

Sales Invoice No. 1711[3] dated November 24, 1995, as well as Statement of
Accounts No. 076[4] indicate that respondent Mindanao Wines and Liquor
Galleria (Mindanao Wines) delivered several cases of liquors to H & E
Commercial owned by Emilia, for which the latter issued four Philippine
National Bank (PNB) postdated checks worth P25,000.00 each. When two of
these checks, particularly PNB Check Nos. 951453[5] and 951454[6] dated
October 10, 1996 and October 20, 1996, respectively, bounced for the
reasons ‘ACCOUNT CLOSED’ and ‘DRAWN AGAINST INSUFFICIENT
FUNDS’, Mindanao Wines, thru its proprietress Evelyn Valdevieso, demanded
from H & E Commercial the payment of their value through two separate
letters both dated November 18, 1996.[7] When the demands went unheeded,
Mindanao Wines filed before Branch 2 of the Municipal Trial Court in Cities
(MTCC) of Davao City Criminal Case Nos. 68,309-B-98 and 68,310-B-98
against Emilia for violations of BP 22.[8]
During trial, the prosecution presented its sole witness, Nieves Veloso

(Nieves), accountant and officer-in-charge of Mindanao Wines. She testified

that Emilia has been a customer of Mindanao Wines who purchased from it
assorted liquors. In fact, Sales Invoice No. 1711 covered the orders made by
Emilia from Mindanao Wines and these orders were delivered by the latter’s
salesman Marcelino Bersaluna[9] (Marcelino) to H & E Commercial in San
Francisco, Agusan del Sur. For the same, Marcelino received the four PNB
checks and accordingly endorsed them to Mindanao Wines. Out of these four
PNB checks, two were already paid, i.e., one was collected while the other
redeemed in court.[10]

With regard to the bounced PNB Check Nos. 951453 and 951454, Nieves
claimed that upon her instructions Marcelino went to H & E Commercial more
than 10 times to collect their value. But since his efforts were in vain, two
demand letters were thus sent to Emilia which were duly received by her as
the same were ‘signed by the recipient of the letters’.[11]

On cross, Nieves admitted that she neither saw Emilia issue the checks nor
accompanied Marcelino in delivering the orders to H & E Commercial or in
collecting the unpaid checks.[12] Asked about the corresponding sales order
covering Sales Invoice No. 1711, she acknowledged that the sales order was
unsigned and explained that sales orders of customers are handled by the
Credit and Collection Department of Mindanao Wines.[13]

After the prosecution rested its case, Emilia filed a Demurrer to Evidence[14]
claiming insufficiency of evidence. She asserted that not one of the elements
of BP 22 was proven because the witness merely relied upon the reports of
the salesman; that the purchases covered by Sales Invoice No. 1711 were
unauthorized because the corresponding job order was unsigned; and that it
was never established that the bank dishonored the checks or that she was
even sent a notice of dishonor.

Ruling of the Municipal Trial Court in Cities

In its December 10, 1999 Order,[15] the MTCC granted the Demurrer to
Evidence. It ruled that while Emilia did issue the checks for value, the
prosecution nevertheless miserably failed to prove one essential element that
consummates the crime of BP 22, i.e., the fact of dishonor of the two subject
checks. It noted that other than the checks, no bank representative testified
about presentment and dishonor. Hence, the MTCC acquitted Emilia of the
criminal charges. However, the MTCC still found her civilly liable because
when she redeemed one of the checks during the pendency of the criminal
cases, the MTCC considered the same as an acknowledgement on her part of
her obligation with Mindanao Wines. Pertinent portions of the MTCC Order
read:

The elements of B.P. Blg. 22 must concur before one can be convicted of this
offense. Since one element is wanting, it is believed that the guilt of the
accused has not been established beyond reasonable doubt. The Court,
however, opines that the accused is civilly liable. There is evidence on record
that an account was contracted. She should, therefore, pay.

WHEREFORE, the demurrer to evidence is granted and these cases are

ordered DISMISSED.

Accused, however, is adjudged to pay complainant the total amounts of the 2

checks which is P50,000.00, with interest at the rate of 12% per annum to be
computed from the date of notice which is November 18, 1996 until the
amount is paid in full; to reimburse complainant of the expenses incurred in
filing these cases in the amount of P1,245.00, and to pay attorney’s fees of
P10,000.00.

SO ORDERED.[16]

Ruling of the Regional Trial Court

Dissatisfied that her acquittal did not carry with it her exoneration from civil
liability, Emilia appealed to the Regional Trial Court (RTC) of Davao City,
Branch 13. Emilia contended that since the MTCC dismissed the criminal
cases ‘on the ground of insufficient evidence,’ the civil aspect of the criminal
cases should likewise be automatically dismissed. She argued that the court
may only award damages for the civil aspect of BP 22 if the criminal cases
have been dismissed on ‘reasonable doubt’ upon proof of preponderance of
evidence.

The RTC was not persuaded by Emilia’s contentions. The RTC clarified that
the MTCC dismissed the criminal cases based on ‘reasonable doubt’ and not
on ‘insufficiency of evidence.’ And while the prosecution failed to prove
criminal liability beyond reasonable doubt, Emilia’s indebtedness was
nonetheless proven by preponderance of evidence, the quantum of evidence
required to prove the same. Thus, the RTC declared in its January 5, 2001
Order[17] that:

The prosecution however had established that the accused had issued the
checks subject of these cases. The accused had impliedly admitted that she
was the maker of the checks subject of [these] case[s] when she redeemed a
third check from the complainant. In fact, the accused had never categorically
denied having issued the checks subject of these cases. When the accused
filed the Demurrer to Evidence, she had hypothetically admitted the evidence
presented by the prosecution to be true, and this includes the allegation of the
prosecution that the accused issued the checks subject of these cases for
value.[18]

Thus, it dismissed the appeal, viz:

WHEREFORE, in view of the foregoing, the appeal of the accused in these

cases is hereby DISMISSED, and the decision appealed from is hereby
AFFIRMED IN TOTO.

SO ORDERED.[19]

Ruling of the Court of Appeals

Undeterred, Emilia filed before the CA a Petition for Review[20] still insisting
that the MTCC’s dismissal was based on ‘insufficiency of evidence’ and that
same pertains to both the criminal and civil aspects of BP 22. She reiterated
that there was no basis for the civil award made by the MTCC since the
prosecution failed to show evidence of her civil liability and that a court can
only award civil liability in cases of acquittals based on reasonable doubt and
not on insufficiency of evidence.

In its June 30, 2006 Decision, the CA emphasized that even if acquitted, an
accused may still be held civilly liable if a) the acquittal was based on
reasonable doubt or b) the court declared that the liability of the accused is
only civil. Just like the RTC, the CA ruled that the dismissal of the criminal
cases against Emilia was expressly based on reasonable doubt, hence, she is
not free from civil liability because the same is not automatically extinguished
by acquittal based on said ground. The CA further declared that even granting
that her acquittal was for ‘insufficiency of evidence,’ the same is still akin to a
dismissal based on reasonable doubt.

Respecting the factual conclusions of the lower courts anent Emilia’s civil
liability, the CA noted that Emilia had never denied issuing the subject checks
for value which, in themselves constituted evidence of indebtedness.
Moreover, she failed to refute the prosecution’s evidence when she filed a
Demurrer to Evidence. The CA therefore affirmed the assailed Order of the
RTC except that it deleted the award of attorney’s fees, thus:

WHEREFORE, premises considered, the assailed Order of the Regional Trial

Court (RTC), Br. 13, Davao City, affirming in toto the Order of the Municipal
Trial Court in Cities (MTCC), Br. 2, Davao City as to the civil liability of Emilia
Lim, is hereby AFFIRMED with the sole modification that the award of
attorney’s fees in favor of the Respondent is DELETED.

SO ORDERED. [21]

On Motion for Reconsideration,[22] Emilia asserted that by granting her

Demurrer to Evidence based on insufficiency of evidence, the MTCC
acknowledged that there is absolutely no case against her. She alleged that
the ‘preponderance of evidence’ required in determining civil liability does not
apply to her as she never presented any evidence at all, implying that in such
a determination, both parties should have presented their respective evidence
for the purpose of ascertaining as to which of the evidence presented is
superior.

The CA, however, rejected the motion in its Resolution[23] dated November 9,
2006. It held that ‘insufficiency’ does not mean the ‘total absence of evidence,’
but that ‘evidence is lacking of what is necessary or required to make out her
case.’ The CA explained that the MTCC acquitted Emilia because the
quantum of evidence required for a finding of guilt beyond reasonable doubt
was insufficient to convict her of BP 22. However, the extinction of the civil
aspect does not necessarily follow such acquittal. The CA also disregarded
Emilia’s argument that a ‘preponderance of evidence’ should be a comparison
of evidence of the opposing parties as such interpretation would lead to
absurdity because by simply refusing to present evidence, a defendant can
then be easily absolved from a civil suit.
Hence, this petition raising the following assignment of errors:

1) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT

HOLDING THAT THE AWARD OF CIVIL LIABILITY IN FAVOR OF THE
RESPONDENT AND AGAINST THE PETITIONER IS A NULLITY FOR LACK
OF DUE PROCESS, APART FROM THE FACT THAT THE COMPLAINANT
IS NOT A JURIDICAL PERSON OR IS NOT THE REAL PARTY IN
INTEREST.

2) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT

HOLDING THAT BECAUSE THE GROUND FOR THE DISMISSAL WAS
FOR “INSUFFICIENCY OF EVIDENCE” AND NOT ON “REASONABLE
DOUBT,” THE DISMISSAL OF THE CRIMINAL CASES CARRIES WITH IT
THE DISMISSAL OF THE CIVIL CASES DEEMED INSTITUTED THEREIN.

3) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ITS

APPLICATION OF THE CONCEPT OF “PREPONDERANCE OF
EVIDENCE.”

4) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT

HOLDING THAT THERE IS NO PIECE OF “ADMISSIBLE EVIDENCE”
PRESENTED THAT MAY BE TAKEN INTO ACCOUNT TO PROVE CIVIL
LIABILITY.[24]

In sum, the core issue in this petition is whether the dismissal of Emilia’s BP
22 cases likewise includes the dismissal of their civil aspect.

Our Ruling

The petition lacks merit.

Emilia’s allegations that she was denied due process and that Mindanao
Wines is not the real party in interest do not merit our attention as these were
never raised for resolution before the courts below.

Emilia claims that she was deprived of due process when the courts below
declared her civilly liable. In support of this, she cites Salazar v. People[25]
wherein it was held that a court cannot rule upon the civil aspect of the case
should it grant a demurrer to evidence with leave of court since the accused is
entitled to adduce controverting evidence on the civil liability. Emilia likewise
contends that Mindanao Wines is not a juridical person, it being a single
proprietorship only and thus, not the real party in interest in this case.

We note, however, that Emilia had never invoked before the courts below the
ruling in Salazar. Neither did she specify in her pleadings filed therein whether
her demurrer was filed with or without leave of court. It is only now that Emilia
is claiming that the same was filed with leave of court in an apparent attempt
to conform the facts of this case with that in Salazar. The same goes true with
regard to the questioned locus standi of Mindanao Wines. Emilia likewise did
not raise in her pleadings filed with the RTC or the CA that the civil aspect is
dismissible for lack of cause of action because Mindanao Wines is not a
juridical person and thus not a real party in interest. In fact, the courts below
all along considered Mindanao Wines as the plaintiff and the trial proceeded
as such.

Obviously, these new issues are mere afterthoughts. They were raised only
for the first time in this petition for review on certiorari. Never were they
presented before the RTC and the CA for resolution. To allow Emilia to wage
a legal blitzkrieg and blindside Mindanao Wines is a violation of the latter’s
due process rights:

It is well-settled that no question will be entertained on appeal unless it has

been raised in the proceedings below. Points of law, theories, issues and
arguments not brought to the attention of the lower court, administrative
agency or quasi-judicial body, need not be considered by a reviewing court,
as they cannot be raised for the first time at that late stage. Basic
considerations of fairness and due process impel this rule. Any issue raised
for the first time on appeal is barred by estoppel.[26]

For this reason, the said issues do not merit the Court’s consideration.

Notwithstanding her acquittal, Emilia is civilly liable.

“The extinction of the penal action does not carry with it the extinction of the
civil liability where x x x the acquittal is based on reasonable doubt as only
preponderance of evidence is required”[27] in civil cases. On this basis, Emilia
insists that the MTCC dismissed the BP 22 cases against her not on the
ground of reasonable doubt but on insufficiency of evidence. Hence, the civil
liability should likewise be extinguished. Emilia’s Demurrer to Evidence,
however, betrays this claim. Asserting insufficiency of evidence as a ground
for granting said demurrer, Emilia herself argued therein that the prosecution
has not proven [her] guilt beyond reasonable doubt.[28] And in consonance
with such assertion, the MTCC in its judgment expressly stated that her guilt
was indeed not established beyond reasonable doubt, hence the acquittal.[29]

In any case, even if the Court treats the subject dismissal as one based on
insufficiency of evidence as Emilia wants to put it, the same is still tantamount
to a dismissal based on reasonable doubt. As may be recalled, the MTCC
dismissed the criminal cases because one essential element of BP 22 was
missing, i.e., the fact of the bank’s dishonor. The evidence was insufficient to
prove said element of the crime as no proof of dishonor of the checks was
presented by the prosecution. This, however, only means that the trial court
cannot convict Emilia of the crime since the prosecution failed to prove her
guilt beyond reasonable doubt, the quantum of evidence required in criminal
cases. Conversely, the lack of such proof of dishonor does not mean that
Emilia has no existing debt with Mindanao Wines, a civil aspect which is
proven by another quantum of evidence, a mere preponderance of evidence.

Emilia also avers that a court’s determination of preponderance of evidence

necessarily entails the presentation of evidence of both parties. She thus
believes that she should have been first required to present evidence to
dispute her civil liability before the lower courts could determine
preponderance of evidence.

We disagree.

“Preponderance of evidence is [defined as] 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’. It is evidence which is more convincing to the court
as worthy of belief than that which is offered in opposition thereto.”[30]
Contrary to Emilia’s interpretation, a determination of this quantum of
evidence does not need the presentation of evidence by both parties. As
correctly reasoned out by the CA, Emilia’s interpretation is absurd as this will
only encourage defendants to waive their presentation of evidence in order for
them to be absolved from civil liability for lack of preponderance of evidence.
Besides, Emilia should note that even when a respondent does not present
evidence, a complainant in a civil case is nevertheless burdened to
substantiate his or her claims by preponderance of evidence before a court
may rule on the reliefs prayed for by the latter. Settled is the principle that
“parties must rely on the strength of their own evidence, not upon the
weakness of the defense offered by their opponent.”[31]

Lastly, we see no reason to disturb the ruling of the CA anent Emilia’s civil
liability. As may be recalled, the CA affirmed the lower courts’ factual findings
on the matter. Factual findings of the trial court, when affirmed by the CA, will
not be disturbed.[32] Also, “[i]t is a settled rule that in a petition for review on
certiorari under Rule 45 of the Rules of [Court], only questions of law may be
raised by the parties and passed upon by this Court.”[33] Moreover, “it is well
to remember that a check may be evidence of indebtedness. A check, the
entries of which are in writing, could prove a loan transaction.”[34] While
Emilia is acquitted of violations of BP 22, she should nevertheless pay the
debt she owes.

WHEREFORE, the petition for review on certiorari is DENIED. The challenged

June 30, 2006 Decision and November 9, 2006 Resolution of the Court of
Appeals in CA-G.R. SP No. 64897 are hereby AFFIRMED in toto.

SO ORDERED.
LAND BANK OF THE PHILIPPINES,
PETITIONER, VS. HEIRS OF MAXIMO
PUYAT AND GLORIA PUYAT,
REPRESENTED BY ATTORNEY-IN-FACT
MARISSA PUYAT, RESPONDENTS.
DECISION
DEL CASTILLO, J.:
In agrarian reform cases, when the acquisition process under Presidential
Decree (PD) No. 27 remains incomplete upon the effectivity of Republic Act
(RA) No. 6657, the process should be completed under the new law.[1]

Before the Court is a Petition for Review[2] assailing the June 28, 2006
Decision[3] of the Court of Appeals (CA) in CA-G.R. SP No. 86582. The
dispositive portion of the assailed Decision reads:

WHEREFORE, the decision dated May 11, 2004 as amended by the order
dated September 3, 2004 is AFFIRMED subject to the modification that the
reckoning of the 6% interest per annum shall be from March 21, 1990.

Costs of suit shall be paid by the petitioner.

SO ORDERED.[4]

Factual Antecedents

Gloria and Maximo Puyat,[5] both deceased, are the registered owners of a
parcel of riceland consisting of 46.8731 hectares located in Barangay Bakod
Bayan, Cabanatuan City, Province of Nueva Ecija (subject property).
Respondents are the heirs of Gloria and Maximo Puyat, and the pro-indiviso
co-owners of the subject property.

The records do not disclose when the Department of Agrarian Reform (DAR)
placed 44.3090 hectares of Puyats’ land under Operation Land Transfer
pursuant to PD 27. It is, however, clear that the DAR issued several
emancipation patents in favor of various farmer-beneficiaries in December
1989.[6] All of the said patents were annotated on Puyats’ Transfer Certificate
of Title (TCT) No. 1773 on March 20, 1990, and thereby caused the
concomitant partial cancellation of Puyats’ title.

The Puyats did not receive any compensation for the cancellation of their title
over the awarded portions of the subject property.

It was only on September 18, 1992 (more than two years after the DAR
awarded the property to farmer-beneficiaries) that the Land Bank of the
Philippines (Land Bank) received DAR’s instruction to pay just compensation
to the Puyats.[7] Accordingly, Land Bank made its initial valuation of
P2,012.50 per hectare or a total of P92,752.10. Deducting the farmers’ lease
rentals amounting to P5,241.20, the Land Bank recommended the payment to
the landowners of the net value of P87,510.90.[8] Respondents received Land
Bank’s initial valuation together with the Notice of Acquisition and Valuation
Form, and rejected the valuation for being “ridiculously low.”

The heirs of Puyat filed a complaint for determination and payment of just
compensation[9] with the Regional Trial Court (RTC) of Cabanatuan City,
Nueva Ecija on November 24, 1998. The complaint, docketed as Agr. Case
No. 124-AF, was raffled to Branch 23 of the said court.

Respondents presented the supervising agriculturalist from the City Agro-

Industrial Office, who testified that the average palay production for Barangay
Bakod Bayan ranges from 70 to 80 cavans per hectare.[10] Another officer
from the same office testified that the average annual palay production is
around 65 cavans per hectare.[11] The zoning officer of the City Planning and
Development Office testified that the subject property is located in the agro-
industrial district, which is near the central business district of Cabanatuan
City.[12] The zonal value determined by the Bureau of Internal Revenue (BIR)
for this area is P10.00 per square meter.[13] Respondents prayed that their
468,731 square meter-property be valued at P100,000.00 per hectare.[14]

The Land Bank and the DAR answered that the valuation was made in strict
compliance with the formula provided for lands acquired under PD 27 and
Executive Order (EO) No. 228. DAR presented a memorandum dated
1976,[15] which shows that the average gross production for three years prior
to 1976 was 23 cavans[16] per hectare only. It maintained that the valuation of
respondents’ property should be made using the prevailing rates on October
21, 1972, or the date when PD 27 took effect. Land Bank, on the other hand,
presented its Claims Processing Form,[17] which showed that it set the
valuation at P2,012.50. per hectare.[18]

Ruling of the Regional Trial Court

The trial court first determined what law should be applied in determining the
just compensation due to respondents. According to the trial court, while the
property was appropriated pursuant to PD 27, its valuation should be made in
accordance with Section 17 of RA 6657.

The trial court found that respondents’ property could yield an average of 65
cavans per hectare, per harvest season. It could be planted with rice and
corn. It is located in an agro-industrial area, accessible by concrete roads, and
properly serviced by telecommunication and other utilities. The BIR pegged
the zonal value for this area at P10 per square meter, or P100,000.00 per
hectare.

Taking the above factors in consideration, the court declared that the
reasonable compensation for respondents’ property should be P100,000.00
per hectare.

Since the government took the respondents’ property on March 20, 1990 (the
date when the emancipation patents were annotated on respondents’ TCT
No. 1773) without giving the respondents just compensation for such taking,
there was delay in payment which justifies the imposition of legal interest.
Thus, the trial court ordered the DAR, through the Land Bank, to pay 6% legal
interest per annum from the date of taking until the amount is fully paid.

The trial court disposed of the case thus:

WHEREFORE, all premises considered, judgment is hereby rendered

ordering defendant Department of Agrarian Reform through the defendant
Land Bank of the Philippines to pay plaintiffs Gloria Puyat and all the Heirs of
Maximo Puyat, thru their Attorney-in-Fact Marissa Puyat the total amount of
Four Million Six Hundred Eighty Seven Thousand Three Hundred Ten
(P4,687,310.00) Philippine Currency, representing the just compensation of
the property with a total area of 46.8731 hectares, situated in Barangay Bakod
Bayan, Cabanatuan City, Nueva Ecija, covered by T.C.T No. 1773 with 6%
legal interest per annum from date of taking (which the Court determines to be
in 1990) until fully paid.
SO ORDERED.[19]

Upon Land Bank’s motion, the trial court modified its decision by reducing the
compensable area to the actual area acquired by the DAR. The court
explained:

Considering that only 44.3090 hectares [were] distributed to farmer-

beneficiaries this should only be the area to be compensated at the rate of
P100,000.00 per hectare for a total amount of Four Million Four Hundred
Thirty Thousand Nine Hundred (P4,430,900.00) Pesos.[20]

xxxx

Wherefore, the Motion for Reconsideration is partially Granted.

The Decision dated May 11, 2004 is hereby amended and defendant
Department of Agrarian Reform through the Land Bank of the Philippines [is]
hereby directed to pay plaintiffs Gloria Puyat and the Heirs of Maximo Puyat,
thru their Attorney-in-Fact Marissa Puyat, the amount of Four Million Four
Hundred Thirty Thousand Nine Hundred (P4,430,900.00) Pesos representing
the just compensation of the covered 44.3090 hectares of their property
(covered by TCT No. 1773) situated at Barangay Bakod Bayan, Cabanatuan
City, which [were] actually distributed to farmer-beneficiaries with 6% legal
interest per annum from the date of taking (in 1990) until fully paid.

SO ORDERED.[21]

Land Bank appealed the modified decision to the CA. It raised two main
issues. First, it argued that the trial court erred in computing the just
compensation using the factors provided in Section 17 of RA 6657. Since
respondents’ land was acquired in accordance with PD 27, its valuation
should likewise be limited to the formula mandated under PD 27 and EO 228.
Second, if the court followed the formula provided for lands acquired under
PD 27 and EO 228, a 6% yearly compounded interest is already provided
therein, hence the additional 6% legal interest imposed by the trial court would
be redundant. The prayer reads:

WHEREFORE, premises considered, it is respectfully prayed of this

Honorable Court that after due consideration, a DECISION be rendered
ANNULLING AND SETTING ASIDE the Decision dated 11 May 2004 x x x
and the Order dated 03 September 2004 x x x for being CONTRARY TO P.D.
NO. 27 AND E.O. NO. 228, and RELEVANT/MATERIAL EVIDENCE
PRESENTED, and TO ISSUE another Decision UPHOLDING the LAND
VALUATION based on the foregoing laws and evidence amounting to
EIGHTY NINE THOUSAND ONE HUNDRED SEVENTY ONE PESOS &
86/100 (PHP 89,171.86) as the just compensation for the subject landholding.

x x x x[22]

Ruling of the Court of Appeals

The appellate court noted that the question presented is what law should be
used in the determination of just compensation of lands acquired pursuant to
PD 27.[23] Corollarily, once a court determines which law governs just
compensation, can its decision be limited to the formula provided in the
administrative orders of the DAR?

The CA held that the determination of just compensation is a judicial function,

which cannot be unduly restricted by requiring the courts to strictly adhere to
formulae appearing in legislative or executive acts. Being a judicial function,
courts can choose to rely on the factors enumerated in Section 17 of RA
6657, even if these factors do not appear in PD 27 or EO 228. Such reliance
cannot be assailed as irregular or illegal considering that the courts would still
rely on reasonable factors for ascertaining just compensation.[24]

The CA also explained that the imposition of legal interest on the just
compensation is not an error. The legal interest was properly imposed
considering that the Puyats were deprived of their property since March 20,
1990 without receiving just compensation therefor. However, in order to be
precise, the CA modified the RTC Decision by imposing the legal interest not
from “1990”, but from March 20, 1990, which is the date when the
emancipation patents were inscribed on TCT No. 1773.

Land Bank moved for a reconsideration[25] of the adverse decision, which

motion was denied by the appellate court in its October 16, 2006
Resolution.[26]

Issues
1. Can lands acquired pursuant to PD 27 be valued using the factors
appearing in Section 17 of RA 6657?

2. Is it proper to impose the 6% legal interest per annum on the unpaid just
compensation?

3. Should the case be remanded to the trial court for the recomputation of just
compensation using Section 17 of RA 6657, as amended by RA 9700?

Land Bank argues that the just compensation must be valued at the time of
taking of the property. Since respondents’ lands were acquired pursuant to PD
27, it is deemed taken under the law operative since October 21, 1972 (the
effectivity date of PD 27). Thus, Land Bank posits that the CA erred in
computing the just compensation based on Section 17 of RA 6657, a law that
came into effect after the time of taking.

Further, according to Land Bank, if PD 27 and EO 228 are to be applied, the

interest rate is already provided for under DAR AO No. 13, series of 1994, as
amended by DAR AO No. 2, series of 2004. Thus, the 6% interest on the just
compensation imposed by the trial and appellate courts is erroneous for being
a double interest and should be deleted.

Our Ruling

Which law determines the just compensation for lands acquired under
Presidential Decree No. 27?

The Court has already resolved the first question posed by Land Bank in
several decisions.[27] It has been held that, when the government takes
property pursuant to PD 27, but does not pay the landowner his just
compensation until after RA 6657 has taken effect in 1988, it becomes more
equitable to determine the just compensation using RA 6657. Land Bank of
the Philippines v. Natividad[28] explained it thus:

Land Bank’s contention that the property was acquired for purposes of
agrarian reform on October 21, 1972, the time of the effectivity of PD 27, ergo
just compensation should be based on the value of the property as of that
time and not at the time of possession in 1993, is likewise erroneous. In Office
of the President, Malacañang, Manila v. Court of Appeals, we ruled that the
seizure of the landholding did not take place on the date of effectivity of PD 27
but would take effect [upon] payment of just compensation.

Under the factual circumstances of this case, the agrarian reform process is
still incomplete as the just compensation to be paid private respondents has
yet to be settled. Considering the passage of Republic Act No. 6657 (RA
6657) before the completion of this process, the just compensation should be
determined and the process concluded under the said law. Indeed, RA 6657
is the applicable law, with PD 27 and EO 228 having only suppletory effect,
conformably with our ruling in Paris v. Alfeche.

xxxx

It would certainly be inequitable to determine just compensation based on the

guideline provided by PD 27 and EO 228 considering the DAR’s failure to
determine just compensation for a considerable length of time. That just
compensation should be determined in accordance with RA 6657, and not PD
27 or EO 228, is especially imperative considering that just compensation
should be the full and fair equivalent of the property taken from its owner by
the expropriator, the equivalent being real, substantial, full and ample.[29]

In the case at bar, respondents’ title to the property was cancelled and
awarded to farmer-beneficiaries on March 20, 1990. In 1992, Land Bank
approved the initial valuation for the just compensation that will be given to
respondents. Both the taking of respondents’ property and the valuation
occurred during the effectivity of RA 6657. When the acquisition process
under PD 27 remains incomplete and is overtaken by RA 6657, the process
should be completed under RA 6657, with PD 27 and EO 228 having
suppletory effect only.[30] This means that PD 27 applies only insofar as there
are gaps in RA 6657; where RA 6657 is sufficient, PD 27 is superseded.
Among the matters where RA 6657 is sufficient is the determination of just
compensation. In Section 17 thereof, the legislature has provided for the
factors that are determinative of just compensation. Petitioner cannot insist on
applying PD 27 which would render Section 17 of RA 6657 inutile.

Interest rate awarded for the delay

The trial and appellate courts imposed an interest of 6% per annum on the
just compensation to be given to the respondents based on the finding that
Land Bank was guilty of delay.

Land Bank maintains that the formula contained in DAR AO No. 13, series of
1994, already provides for 6% compounded interest. Thus, the additional
imposition of 6% interest by the trial and appellate courts is unwarranted.[31]

There is a fallacy in Land Bank’s position. The 6% interest rate imposed by

the trial and appellate courts would be a double imposition of interest had the
courts below also applied DAR AO No. 13, series of 1994. But the fact
remains that the courts below did not apply DAR AO No. 13. In fact, that is
precisely the reason why Land Bank appealed the trial court’s decision to the
CA, and the latter’s decision to this Court. Therefore, Land Bank is cognizant
that the lower courts’ imposition of the 6% interest cannot constitute a double
imposition of a legal interest.

The Court is not unaware that current jurisprudence sets the interest rate for
delay in payments in agrarian cases at 12% per annum.[32] In the case at bar,
however, the respondents did not contest the interest awarded by the lower
courts and instead asked for the affirmance in toto of the appellate court’s
decision.[33] In keeping with the demands of due process, therefore, the
Court deems it fit not to disturb the interest rate imposed by the courts below.

No need to remand

After the parties filed their respective memorandum in 2007 and submitted the
case for resolution,[34] Congress passed a new agrarian reform law, RA
9700, which further amended RA 6657, as amended. RA 9700, entitled An Act
Strengthening the Comprehensive Agrarian Reform Program (CARP),
Extending the Acquisition and Distribution of all Agricultural Lands, Instituting
Necessary Reforms, Amending for the Purpose Certain Provisions of Republic
Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law
of 1988, as amended, and Appropriating Funds Therefor, took effect on July
1, 2009.[35] It provides in Section 5 thereof that all valuations that are “subject
to challenge by the landowners” shall be “completed and finally resolved
pursuant to Section 17 of Republic Act No. 6657, as amended.” Section 5 of
RA 9700 is reproduced below:

SECTION 5. Section 7 of Republic Act No. 6657, as amended, is hereby

further amended to read as follows:
SEC. 7. Priorities. – The DAR, in coordination with the Presidential Agrarian
Reform Council (PARC) shall plan and program the final acquisition and
distribution of all remaining unacquired and undistributed agricultural lands
from the effectivity of this Act until June 30, 2014. Lands shall be acquired and
distributed as follows:

Phase One: During the five (5)-year extension period hereafter all remaining
lands above fifty (50) hectares shall be covered for purposes of agrarian
reform upon the effectivity of this Act. xxx rice and corn lands under
Presidential Decree No. 27; xxx: Provided, furthermore, That all previously
acquired lands wherein valuation is subject to challenge by landowners shall
be completed and finally resolved pursuant to Section 17 of Republic Act No.
6657, as amended; x x x[36]

Relatedly, RA 9700 amended Section 17 of RA 6657 by adding factors for the

determination of just compensation, i.e., the value of standing crop and
seventy percent (70%) of the zonal valuation of the BIR, translated into a
basic formula by the DAR. The amended provision reads as follows:

SECTION 7. Section 17 of Republic Act No. 6657, as amended, is hereby

further amended to read as follows:

SEC. 17. Determination of Just Compensation. – In determining just

compensation, the cost of acquisition of the land, the value of the standing
crop, the current value of like properties, its nature, actual use and income,
the sworn valuation by the owner, the tax declarations, the assessment made
by government assessors, and seventy percent (70%) of the zonal valuation
of the Bureau of Internal Revenue (BIR), translated into a basic formula by the
DAR shall be considered, subject to the final decision of the proper court. The
social and economic benefits contributed by the farmers and the farmworkers
and by the Government to the property as well as the nonpayment of taxes or
loans secured from any government financing institution on the said land shall
be considered as additional factors to determine its valuation.[37]

Thus, in a Manifestation and Motion dated January 21, 2010,[38] Land Bank
submits that RA 9700 has rendered its Petition moot and that the case should
now be remanded to the trial courts so that the valuation for respondents’
property may be made in accordance with Section 17 of RA 6657, as
amended by RA 9700.
Respondents opposed. They maintained that there is no more need to
remand the case to the trial court because their property has already been
valued using Section 17 of RA 6657, as amended.[39]

There is no merit in Land Bank’s motion to remand the case. RA 9700 took
effect at a time when this case was already submitted for resolution. All the
issues had been joined and the parties had argued exhaustively on their
various contentions. The issue regarding the applicability of RA 9700 to the
instant case was not among those discussed in the parties’ memoranda. For
us to rule that RA 9700 decrees a remand of the case would be abhorrent to
the rules of fair play.

Moreover, Land Bank’s position — that RA 9700 decrees a wholesale remand

of all cases involving the determination of just compensation so that they may
all be resolved using Section 17 of RA 6657, as amended by RA 9700, no
matter in what stage of proceedings they are found — is a contentious issue
that should be ventilated in a proper case. It appears that the DAR itself, in
implementing RA 9700, does not share Land Bank’s position that all pending
valuations shall be processed in accordance with Section 17 of RA 6657, as
amended by RA 9700. Administrative Order No. 02, series of 2009 (DAR AO
No. 02-09), which is the Implementing Rules of RA 9700 and which DAR
formulated pursuant to Section 31[40] of RA 9700, provides:

VI. Transitory Provision

xxxx

[W]ith respect to land valuation, all Claim Folders received by LBP prior to
July 1, 2009 shall be valued in accordance with Section 17 of R.A. No. 6657
prior to its amendment by R.A. No. 9700.

The Implementing Rules of RA 9700 thus authorize the valuation of lands in

accordance with the old Section 17 of RA 6657, as amended (prior to further
amendment by RA 9700), so long as the claim folders for such lands have
been received by Land Bank prior to its amendment by RA 9700 in 2009. In
the instant case, Land Bank received the claim folder for the respondents’
property in 1992,[41] which was long before the effectivity of RA 9700 in 2009.
Following DAR’s own understanding of RA 9700, it appears that there is no
reason to remand the case since the valuation can be determined in
accordance with the old Section 17 of RA 6657, as amended (prior to further
amendment by RA 9700).

Further, DAR AO No. 02-09 makes clear distinctions with respect to the laws
that should govern the valuation of lands, to wit:

IV. Statement of Policies

xxxx

D. Land Valuation and Landowner Compensation

1. The compensation for lands covered under RA 9700 shall be:

a) the amount determined in accordance with the criteria provided for in

Section 7 of the said law and existing guidelines on land valuation; x x x

2. All previously acquired lands wherein valuation is subject to challenge by

landowners shall be completed and finally resolved pursuant to Section 17 of
R.A. No. 6657, as amended.

In like manner, claims over tenanted rice and corn lands under P.D. No. 27
and Executive Order (E.O.) No. 228 whether submitted or not to the Land
Bank of the Philippines (LBP) and not yet approved for payment shall be
valued under R.A. No. 6657, as amended.

Landholdings covered by P.D. No. 27 and falling under Phase I of R.A. No.
9700 shall be valued under R.A. No. 9700.

The above shows DAR’s opinion that valuations shall be made either under
RA 9700 or under “Section 17 of R.A. No. 6657, as amended.” It appears that
lands yet to be acquired and distributed by the DAR when RA 9700 took effect
shall be valued using RA 9700, while lands already acquired but unpaid when
RA 9700 took effect shall be valued using “Section 17 of R.A. No. 6657, as
amended” (i.e., as amended by earlier amendatory laws, prior to further
amendment by RA 9700). The administrative order, therefore, negates Land
Bank’s contention that all pending valuations should make use of Section 17
of RA 6657, as amended by RA 9700. Land Bank’s contention must await
resolution in a proper case where the issue is timely raised and properly
argued by the parties. The instant case is not the suitable venue.
Lastly, in arriving at the valuations for respondents’ property, the Court also
considers that the courts below had already followed Section 17 of RA 6657,
as amended. That RA 9700 added two new factors to the said provision, is not
sufficient ground for remanding the case under the factual milieu of this case.
To remand the case now for another valuation, so that the two new factors
may also be considered, appears impractical and inequitable. The
respondents have been deprived of their property for 22 years. It is time that
they receive what has long been due them.

No wanton disregard of the factors provided under Republic Act No. 6657

Land Bank maintains that, assuming arguendo that RA 6657 is the applicable
law, the trial and appellate courts wantonly disregarded the basic valuation
formula in DAR AO No. 5, series of 1998, which implements Section 17 of RA
6657. It insists that courts are not at liberty to dispense of these formulations
at will. Land Bank thus asks that the case be remanded to the trial court for a
proper determination of the just compensation in accordance with DAR AO
No. 5, series of 1998.

We disagree. The trial and appellate courts arrived at the just compensation
with due consideration for the factors provided in Section 17 of RA 6657 (prior
to its amendment by RA 9700). They took into account the nature of the
property, its actual use or the crops planted thereon, the volume of its
produce, and its value according to government assessors. As the CA
correctly held, the determination of just compensation is a judicial function;
hence, courts cannot be unduly restricted in their determination thereof. To do
so would deprive the courts of their judicial prerogatives and reduce them to
the bureaucratic function of inputting data and arriving at the valuation. While
the courts should be mindful of the different formulae created by the DAR in
arriving at just compensation, they are not strictly bound to adhere thereto if
the situations before them do not warrant it.[42] Apo Fruits Corporation v.
Court of Appeals[43] thoroughly discusses this issue, to wit:

x x x [T]he basic formula and its alternatives – administratively determined (as

it is not found in Republic Act No. 6657, but merely set forth in DAR AO No. 5,
Series of 1998) – although referred to and even applied by the courts in
certain instances, does not and cannot strictly bind the courts. To insist that
the formula must be applied with utmost rigidity whereby the valuation is
drawn following a strict mathematical computation goes beyond the intent and
spirit of the law. The suggested interpretation is strained and would render the
law inutile. Statutory construction should not kill but give life to the law. As we
have established in earlier jurisprudence, the valuation of property in eminent
domain is essentially a judicial function which is vested in the regional trial
court acting as a SAC, and not in administrative agencies. The SAC,
therefore, must still be able to reasonably exercise its judicial discretion in the
evaluation of the factors for just compensation, which cannot be arbitrarily
restricted by a formula dictated by the DAR, an administrative agency. Surely,
DAR AO No. 5 did not intend to straightjacket the hands of the court in the
computation of the land valuation. While it provides a formula, it could not
have been its intention to shackle the courts into applying the formula in every
instance. The court shall apply the formula after an evaluation of the three
factors, or it may proceed to make its own computation based on the
extended list in Section 17 of Republic Act No. 6657, which includes other
factors[.] x x x[44]

As a final note, it has not escaped the Court’s notice that the DAR and the
Land Bank appear nonchalant in depriving landowners of their properties.
They seem to ignore the requirements of law such as notice, valuation, and
deposit of initial valuation before taking these properties, and yet they ask for
a strict compliance with the law when it comes to compensating the
landowners. This inequitable situation appears in innumerable cases and this
Court feels duty-bound to remind the DAR and the Land Bank to give as much
regard for the law when taking property as they do when they are ordered to
pay for them. The rights of landowners cannot be lightly set aside and
disregarded for the attainment of the lofty ideals of agrarian reform.

WHEREFORE, premises considered, the Petition is DENIED for lack of merit.

The assailed June 28, 2006 Decision of the Court of Appeals in CA-G.R. SP
No. 86582 is AFFIRMED.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:
 PRESBITERO J. VELASCO, JR. *
Associate Justice
TERESITA J. LEONARDO-DE CASTRO **
Associate Justice
Acting Chairperson
ARTURO D. BRION ***
Associate Justice
ESTELA M. PERLAS-BERNABE ****
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice
Acting Chairperson

CERTIFICATION

I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 173520 January 30, 2013

NATIONAL POWER CORPORATION, Petitioner,

vs.
SPOUSES RODOLFO ZABALA and LILIA BAYLON, Respondents.

DECISION

DEL CASTILLO, J.:

Legislative enactments, as well as executive issuances, fixing or providing fix the

method of computing just compensation are tantamount to impermissible
encroachment on judicial prerogatives.1 Thus they are not binding on courts and,
at best, are treated as mere guidelines in ascertaining the amount of just
compensation.2

This Petition for Review on Certiorari3 assails the July 10, 2006 Decision4 of the
Court of Appeals (CA) in CA-G.R. CV No. 85396 which affirmed the June 28,
2004 Partial Decision5 of the Regional Trial Court (RTC), Branch 2, Balanga City
in an eminent domain case,6 ordering petitioner National Power Corporation (
Napocor) to pay respondents spouses Rodolfo Zabala and Lilia Baylon (spouses
Zabala) just compensation ofP-150.00 per square meter for the 6,820-square
meter portion of the spouses' property which was traversed by transmission lines
of Napocor under its 230 KV Limay-Hermosa Permanent Transmission Lines
Project.

Factual Antecedents

The facts of this case as found by the CA and adopted by Napocor are as
follows:

On October 27, 1994, plaintiff-appellant National Power Corporation ("Napocor" x

x x) filed a complaint for Eminent Domain against defendants-appellees Sps. R.
Zabala & L. Baylon, Tomas Aguirre, Generosa de Leon and Leonor Calub
("Spouses Zabala", "Aguirre" "de Leon", and "Calub," respectively x x x) before
the Regional Trial Court, Balanga City, Bataan alleging that: defendants-
appellees Spouses Zabala and Baylon, Aguirre, de Leon, and Calub own parcels
of land located in Balanga City, Bataan; it urgently needed an easement of right
of way over the affected areas for its 230 KV Limay-Hermosa Transmission
Line[s]; the said parcels of land have neither been applied nor expropriated for
any public use, and were selected in a manner compatible with the greatest
public good and the least private injury; it repeatedly negotiated with the
defendants-appellees for the acquisition of right of way easement over the said
parcels of land but failed to reach an agreement with the latter; it has the right to
take or enter upon the possession of the subject properties pursuant to
Presidential Decree No. 42, which repealed Section 2, Rule 67 of the Rules of
Court upon the filing of the expropriation complaint before the proper court or at
anytime thereafter, after due notice to defendants-appellees, and upon deposit
with the Philippine National Bank of the amount equal to the assessed value of
the subject properties for taxation purposes which is to be held by said bank
subject to the orders and final disposition of the court; and it is willing to deposit
the provisional value representing the said assessed value of the affected
portions of the subject property x x x. It prayed for the issuance of a writ of
possession authorizing it to enter and take possession of the subject property, to
demolish all the improvements x x x thereon, and to commence with the
construction of the transmission lines project on the subject properties, and to
appoint not more than three (3) commissioners to ascertain and report the just
compensation for the said easement of right of way.

xxxx

On January 11, 1995, defendant-appellee Spouses Zabala moved to dismiss the

complaint averring that: the Balanga City proper is already crowded and x x x
needs additional space to meet the housing requirements of the growing
population; the only direction the city proper could expand is the side where their
subject property is located; they incurred a considerable expense in the
preparatory development of the subject property into a subdivision to serve the
interest and well being of the growing population of Balanga; the said growing
need for housing and said preparatory development would necessarily increase
the value of the said property; the just compensation would be higher if the
proposed transmission lins of plaintiff-appellant Napocor is installed or made to
pass or traverse through their property rather than through the parcels of land
farther from the existing city proper and away from their property which was
tapped to meet the expansion requirements of the Balanga City proper; the
transfer of the proposed transmission lines from their property to a farther
location is more economical and less expensive to plaintiff-appellant Napocor
and it would better serve the interest of the people of Balanga because said
location is less developed, not needed for the expansion requirements of
Balanga City proper, the lots that would be traversed command a lower price and
less compensation would be paid by plaintiff-appellant Napocor; the traversing of
the transmission lines through their property would impact negatively on the
housing expansion in Balanga, the high tension wires would endanger the life
and limb of the inhabitants within the area, and decrease the value of their
subject property; the complaint does not show that the installation of the
proposed transmission wires on their property is the most direct, practical and
least burdensome means to achieve public good; the assessed value of
₱1,636.89 stated in Tax Declaration No. 1646 is insufficient because it has been
revised and cancelled by Tax Declaration No. 11052 which shows a higher
assessment value for the said property; and plaintiff-appellant Napocor did not
exert earnest efforts toward the direct purchase of the needed portion of their
property before filing a complaint before the lower court.

On March 4, 1996 and March 7, 1996 plaintiff-appellant Napocor and

defendants-appellees Spouses Zabala filed their respective Pre-Trial Briefs.

On December 4, 1997, the Commissioners submitted their

Report/Recommendation fixing the just compensation for the use of defendants-
appellees Spouses Zabala’s property as easement of right of way at ₱150.00 per
square meter without considering the consequential damages.

Plaintiff-appellant Napocor prayed in its Comment to the commissioners’ report,

that the report be recommitted to the commissioners for the modification of the
report and the substantiation of the same with reliable and competent
documentary evidence based on the value of the property at the time of its
taking. On their part, defendants-appellees Spouses Zabala prayed, in the
Comments, for the fixing of the just compensation at ₱250.00 per square meter.

On February 25, 1998, the lower court recommitted the report to the
Commissioners for further report on the points raised by the parties.

On August 20, 2003, the Commissioners submitted their Final Report fixing the
just compensation at ₱500.00 per square meter.7

Since the Commissioners had already submitted their Final Report8 on the
valuation of the subject property, spouses Zabala moved for the resolution of the
case insofar as their property was concerned. Thus, on June 28, 2004, the RTC
rendered its Partial Decision,9 ruling that Napocor has the lawful authority to take
for public purpose and upon payment of just compensation a portion of spouses
Zabala’s property. The RTC likewise ruled that since the spouses Zabala were
deprived of the beneficial use of their property, they are entitled to the actual or
basic value of their property. Thus, it fixed the just compensation at ₱150.00 per
square meter. The dispositive portion of the RTC’s Partial Decision reads:
WHEREFORE, premises considered, the Court having determined that Napocor
has a lawful right to take the subject properties in the exercise of the power of
eminent domain upon payment of just compensation, the petition is hereby
granted.

Accordingly, Napocor is hereby ordered to pay defendant Spouses Rodolfo

Zabala and Lilia Baylon the amount of Php 150.00 per square meter for the 6,820
square meters taken from the latter’s property, as the just compensation fixed
and recommended by the commissioners determined as of the date of the taking
of the property.

As regards x x x the properties of the other defendants, the determination of x x x

just compensation is hereby held in abeyance until the submission of the
commissioners’ report.

SO ORDERED.10

Napocor appealed to the CA. It argued that the Commissioners’ reports upon
which the RTC based the just compensation are not supported by documentary
evidence. Necessarily, therefore, the just compensation pegged by the RTC at
₱150.00 per square meter also lacked basis. Napocor likewise imputed error on
the part of the RTC in not applying Section 3A of Republic Act (RA) No.
639511 which limits its liability to easement fee of not more than 10% of the
market value of the property traversed by its transmission lines.

On July 10, 2006, the CA rendered the assailed Decision affirming the RTC’s
Partial Decision.

Issue

Hence, this Petition anchored on the ground that:

THE COURT OF APPEALS ERRED IN AFFIRMING THE PARTIAL DECISION

DATED JUNE 28, 2004 AND THE ORDER DATED FEBRUARY 7, 2005 OF THE
TRIAL COURT FIXING THE AMOUNT OF ₱150.00 PER SQUARE METER AS
THE FAIR MARKET VALUE OF THE SUBJECT PROPERTY SINCE THE SAME
IS NOT SUPPORTED BY DOCUMENTARY EVIDENCE.12

Napocor contends that under Section 3A of RA No. 6395, it is not required to pay
the full market value of the property when the principal purpose for which it is
actually devoted will not be impaired by its transmission lines. It is enough for
Napocor to pay easement fee which, under the aforementioned law, should not
exceed 10% of the market value of the affected property. Napocor argues that
when it installed its transmission lines, the property of spouses Zabala was
classified as riceland and was in fact devoted to the cultivation of palay. Its
transmission lines will not, therefore, affect the primary purpose for which the
subject land is devoted as the same only pass through it. The towers to which
such lines are connected are not even built on the property of spouses Zabala,
who will remain the owner of and continue to enjoy their property. Hence, the
RTC and the CA, according to Napocor, both erred in not applying Section 3A of
RA No. 6395.

Napocor further argues that even assuming that spouses Zabala are entitled to
the full market value of their property, the award of ₱150.00 per square meter as
just compensation lacks basis because the recommendation of the
Commissioners is not supported by documentary evidence.

Our Ruling

The petition is partially meritorious.

Section 3A of RA No. 6395 cannot

restrict the constitutional power of the

courts to determine just compensation.

In insisting that the just compensation cannot exceed 10% of the market value of
the affected property, Napocor relies heavily on Section 3A of RA No. 6395, the
pertinent portions of which read:

Sec. 3A. In acquiring private property or private property rights through

expropriation proceedings where the land or portion thereof will be traversed by
the transmission lines, only a right-of-way easement thereon shall be acquired
when the principal purpose for which such land is actually devoted will not be
impaired, and where the land itself or portion thereof will be needed for the
projects or works, such land or portion thereof as necessary shall be acquired.

In determining the just compensation of the property or property sought to be

acquired through expropriation proceedings, the same shall:

(a) With respect to the acquired land or portion thereof, not to exceed the
market value declared by the owner or administrator or anyone having
legal interest in the property, or such market value as determined by the
assessor, whichever is lower.
 (b) With respect to the acquired right-of-way easement over the land or
portion thereof, not to exceed ten percent (10%) of the market value
declared by the owner or administrator or anyone having legal interest in
the property, or such market value as determined by the assessor
whichever is lower.

xxxx

Just compensation has been defined as "the full and fair equivalent of the
property taken from its owner by the expropriator. The measure is not the taker's
gain, but the owner’s loss. The word ‘just’ is used to qualify the meaning of the
word ‘compensation’ and to convey thereby the idea that the amount to be
tendered for the property to be taken shall be real, substantial, full and
ample."13 The payment of just compensation for private property taken for public
use is guaranteed no less by our Constitution and is included in the Bill of
Rights.14 As such, no legislative enactments or executive issuances can prevent
the courts from determining whether the right of the property owners to just
compensation has been violated. It is a judicial function that cannot "be usurped
by any other branch or official of the government."15 Thus, we have consistently
ruled that statutes and executive issuances fixing or providing for the method of
computing just compensation are not binding on courts and, at best, are treated
as mere guidelines in ascertaining the amount thereof.16 In National Power
Corporation v. Bagui,17 where the same petitioner also invoked the provisions of
Section 3A of RA No. 6395, we held that:

Moreover, Section 3A-(b) of R.A. No. 6395, as amended, is not binding on the
Court. It has been repeatedly emphasized that the determination of just
compensation in eminent domain cases is a judicial function and that any
valuation for just compensation laid down in the statutes may serve only as a
guiding principle or one of the factors in determining just compensation but it may
not substitute the court’s own judgment as to what amount should be awarded
and how to arrive at such amount.18

This ruling was reiterated in Republic v. Lubinao,19 National Power Corporation v.

Tuazon20 and National Power Corporation v. Saludares21 and continues to be the
controlling doctrine. Notably, in all these cases, Napocor likewise argued that it is
liable to pay the property owners for the easement of right-of-way only and not
the full market value of the land traversed by its transmission lines. But we
uniformly held in those cases that since the high-tension electric current passing
through the transmission lines will perpetually deprive the property owners of the
normal use of their land, it is only just and proper to require Napocor to
recompense them for the full market value of their property.
The just compensation of ₱150.00 per
square meter as fixed by the RTC is not
supported by evidence.

It has likewise been our consistent ruling that just compensation cannot be
arrived at arbitrarily. Several factors must be considered, such as, but not limited
to, acquisition cost, current market value of like properties, tax value of the
condemned property, its size, shape, and location. But before these factors can
be considered and given weight, the same must be supported by documentary
evidence.

In the case before us, it appears that the Commissioners’ November 28, 1997
Report/Recommendation22 is not supported by any documentary evidence. There
is nothing therein which would show that before arriving at the recommended just
compensation of ₱150.00, the Commissioners considered documents relevant
and pertinent thereto. Their Report/Recommendation simply states that on
November 17, 1997, the Commissioners conducted an ocular inspection; that
they interviewed persons in the locality; that the adjacent properties have market
value of ₱150.00 per square meter; and, that the property of Nobel Philippine
which is farther from the Roman Expressway is being sold for ₱200.00 per
square meter. No documentary evidence whatsoever was presented to support
their report that indeed the market value of the adjacent properties are ₱150.00
and that of Nobel Philippine is ₱200.00.

Napocor objected to the Report/Recommendation of the Commissioners and

pointed out that the same is not supported by documentary evidence.23 spouses
Zabala likewise commented thereon and argued that their property should be
valued at ₱250.00 per square meter.24 Accordingly, the RTC recommitted the
Report/Recommendation to the Commissioners for further evaluation of the
points raised by the parties.25

In April 1998, the Commissioners submitted a Supplemental Report.26 Then on

August 20, 2003, the Commissioners submitted their Final
Report27 recommending a compensation of ₱500.00 per square meter. But like
their earlier reports, the Commissioners’ Final Report lacks documentary support.
It reads:

1. Further ocular inspection was conducted on the property under

consideration of the Honorable Court.

2. To date the land is properly secured, contained and fenced with

concrete hollow blocks.
 3. The property is not tenanted and the area covered and affected by the
transmission lines has not been tilled and planted x x x.

4. Upon inquiry from the landowners, the Sps. Rodolfo and Lilia Zabala,
they intimated that they are proposing to develop the property into a
subdivision, as they already fenced and contained the area.

5. At present, another property which is very far from the Roman

Expressway was subdivided, known as the St. Elizabeth Country Homes.
Lots are being sold there at ₱1,700.00 per square meter.

6. The property of the Sps. Zabala is only some meters away from the
Roman Expressway compared to the St. Elizabeth Country Homes which
is very far from the highway.

7. Moreover, the other subdivisions, Maria Lourdes and Vicarville which

are within the vicinity sell their lots now ranging from ₱1,800.00 per square
meter to ₱2,500.00.

8. As already stated, the property of the Sps. Zabala is within the built-up
area classified as residential, commercial and industrial.

9. In its earlier reports in 1998, the commission recommended a just

compensation of ₱150.00 per square meter.

10. But considering the considerable lapse of time and increase in the
valuation of the properties within the area, the commissioners are impelled
to increase the recommended valuation to ₱500.00 per square meter.

WHEREFORE, it is recommended to the Honorable Court that the owners of the

property affected and traversed by the transmission lines of the NPC be
compensated at ₱500.00 per square meter.28

In Republic v. Santos,29 we ruled that a commissioners’ land valuation which is

not based on any documentary evidence is manifestly hearsay and should be
disregarded by the court, viz:

The statement in the 1970 report of the commissioners that according to the
owners of adjoining lots the prices per square meter ranged from ₱150 to ₱200
and that subdivision lots in the vicinity were being sold at ₱85 to ₱120 a square
meter was not based on any documentary evidence. It is manifestly hearsay.
Moreover, those prices refer to 1970 or more than a year after the expropriation
was effected.30
The same ruling was arrived at in National Power Corporation v. Diato-
Bernal,31 where we overturned the ruling of the trial court and the CA adopting
the findings of the commissioners sans supporting documentary evidence
therefor. Thus:

It is evident that the above conclusions are highly speculative and devoid of any
actual and reliable basis. First, the market values of the subject property’s
neighboring lots were mere estimates and unsupported by any corroborative
documents, such as sworn declarations of realtors in the area concerned, tax
declarations or zonal valuation from the Bureau of Internal Revenue for the
contiguous residential dwellings and commercial establishments. The report also
failed to elaborate on how and by how much the community centers and
convenience facilities enhanced the value of respondent’s property. Finally, the
market sales data and price listings alluded to in the report were not even
appended thereto.32

Under Section 8,33 Rule 67 of the Rules of Court, the trial court may accept or
reject, whether in whole or in part, the commissioners’ report which is merely
advisory and recommendatory in character. It may also recommit the report or
set aside the same and appoint new commissioners. In the case before us,
however, in spite of the insufficient and flawed reports of the Commissioners and
Napocor’s objections thereto, the RTC eventually adopted the same. It shrugged
off Napocor’s protestations and limited itself to the reports submitted by the
Commissioners. It neither considered nor required the submission of additional
evidence to support the recommended ₱150.00 per square meter just
compensation. Ergo, insofar as just compensation is concerned, we cannot
sustain the RTC’s Partial Decision for want of documentary support. 1âw phi 1

Lastly, it should be borne in mind that just compensation should be computed

based on the fair value of the subject property at the time of its taking or the filing
of the complaint, whichever came first.34 Since in this case the filing of the
eminent domain case came ahead of the taking, just compensation should be
based on the fair market value of spouses Zabala’s property at the time of the
filing of Napocor’s Complaint on October 27, 1994 or thereabouts.

WHEREFORE, the instant Petition is PARTIALLY GRANTED. This case is

REMANDED to the Regional Trial Court, Branch 2, Balanga City for the proper
determination of just compensation.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 181218 January 28, 2013

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF

PUBLIC WORKS AND HIGHWAYS,Petitioner,
vs.
HEIRS OF SPOUSES PEDRO BAUTISTA and VALENTINA
MALABANAN, Respondents.

DECISION

DEL CASTILLO, J.:

Time and again it has been said that the market value of a piece of property is
the price that may be agreed upon by parties willing but not compelled to enter
into a sale. As expected, a seller in dire need of funds will accept less, and a
buyer desperate to acquire naturally agrees to pay more, than what the property
is truly worth.

This Petition for Review on Certiorari1 assails the October 31, 2007 Decision2 of
the Court of Appeals (CA) in CA-G.R. CV No. 85751 as well as its January 11,
2008 Resolution3 denying petitioner's motion for reconsideration.

Factual Antecedents

Pedro Bautista and Valentina Malabanan (spouses Bautista) are the registered
owners of a 1,893-square meter parcel of land (the lot) located in Barangay
Bulacnin North, Lipa City and covered by Transfer Certificate of Title No.
41750.4 Respondents are their children.

Sometime in 2000, herein petitioner Republic of the Philippines, through the

Department of Public Works and Highways (DPWH), acquired by negotiated sale
a 36-square meter portion of the lot for ₱46,800.00 or at ₱1,300.00 per square
meter for use in the STAR (Southern Tagalog Arterial Road) Tollway project. The
sale was annotated on the title on June 1, 2000.5

Later on, petitioner offered to purchase an additional 1,155 square meters of the
lot at ₱100.00 per square meter, but the spouses Bautista refused to sell. The
portion sought to be purchased was to be used for the Balete-Lipa City
Interchange Ramp B, which would serve as a motorist’s entry/exit to/from Lipa
City.

On July 7, 2004, the petitioner filed a Complaint6 with the Regional Trial Court of
Lipa City for the expropriation of the said 1,155-square meter portion (the subject
portion). The case was docketed as Civil Case No. 2004-0408 and raffled to
Branch 12. In its Amended Complaint,7 petitioner alleged that the zonal valuation
of the lot at the time of the filing of the Complaint as determined by the Bureau of
Internal Revenue (BIR) is ₱100.00 per square meter,8which is thus the fair value
of the property for purposes of expropriation.

During the expropriation proceedings, the spouses Bautista passed away, and
were accordingly substituted by the respondents.

In their Answer,9 respondents claimed that the valuation of ₱100.00 per square
meter based on the BIR zonal valuation is not fair considering that the petitioner
in the past bought a portion of the same property at ₱1,300.00 per square
meter.10 They added that the current fair market value of the lot should be
pegged at more than ₱3,000.00 per square meter.11

In a September 27, 2004 Order,12 the trial court authorized petitioner to enter and
take possession of the subject portion after depositing the amount of
₱115,500.00 with the Land Bank of the Philippines.13

In an Order of Expropriation14 dated January 5, 2005, the trial court condemned

the subject portion for expropriation and constituted a panel of commissioners,
consisting of the Lipa City Assessor and the Registrar of Deeds of Lipa City,15 for
the purpose of ascertaining just compensation that should be paid to
respondents. On petitioner’s Opposition,16 however, the trial court appointed a
third commissioner in the person of Nimfa Martinez-Mecate (Mecate), who is the
DPWH special agent for Road Right-of-Way for Region IV-A17

After hearing, the Lipa City Assessor and the Registrar of Deeds submitted to the
court their Joint Commissioners’ Report18 dated May 3, 2005. In a nutshell, the
report states that:

1. The fair market value of the whole lot (the 1,893-square meter lot) is
₱189,630.00 for the land, or ₱100.17 per square meter; ₱144,000.00 for
the residential portion; and ₱19,200.00 for the improvements;19

2. On the northwest portion of the lot are clusters of residential buildings of

medium/high construction. On the southeastern portion are clusters of
 residential buildings of medium construction and two large-scale poultry
and breeding farms;20

3. The Lipa City Hall is within a 4.5-kilometer radius;21

4. Within a radius of six kilometers of the lot are first and second class
subdivisions which sell at ₱3,000.00 to ₱3,200.00 per square meter.22

5. Within three kilometers is the New Era University;23

6. Within 3.5 kilometers is the Fiesta World Mall;24

7. Within five kilometers is the Mount Malarayat Golf and Country Club, a
world-class golf course and residential estate where the price per square
meter ranges from ₱4,000.00 to ₱6,500.00;25

8. On October 6, 1999,26 petitioner acquired by sale a 36-square meter

portion of the lot for ₱46,800.00 or at ₱1,300.00 per square meter;27

9. The petitioner made several other purchases of land within the vicinity,
ranging from ₱500.00 up to ₱3,000.00 per square meter, from 1997 up to
2003.28 The average price of all these purchases within the vicinity
amounts to ₱1,960.00 per square meter;29

10. The peso-dollar exchange rate in 1997 was ₱26.00 to $1.00, while the
current (2005) rate is at ₱54.00 to $1.00. This demonstrates that the peso
has lost value, and the price per square meter of the subject portion should
be correspondingly increased;30 and

11. Just compensation for the subject portion should be based on the
market value of the property, which is "that sum of money which a person
desirous but not compelled to buy, and an owner willing but not compelled
to sell, would agree on as a price to be given and received therefor,"31 and
not limited to the assessed value of the property or the schedule of market
values determined by the provincial or city appraisal committee.32

The Lipa City Assessor and the Registrar of Deeds thus concluded in their Joint
Commissioners’ Report that just compensation for the subject portion should be
within the range of ₱1,960.00 and ₱2,500.00 per square meter.33 To this,
respondents filed their Comment34 dated June 23, 2005 accepting such valuation
as fair and reasonable.

On the other hand, Mecate’s Commissioner’s Report35 dated April 25, 2005 which
was submitted to the trial court is summarized, thus:
 1. The factors considered in arriving at the fair market value of the subject
portion are the cost of acquisition; current value of like properties; its actual
or potential uses; and its size, shape, location and its tax declaration;36

2. It is the time of taking that is the determining factor in fixing the just
compensation. If the property expropriated is agricultural, the adaptability
thereof for conversion in the future into a residential site does not affect its
nature when plaintiff assumed possession thereof, although it is a
circumstance that should be considered in determining its value at that
time, an agricultural land;37

3. The classification of respondents’ property as reflected in the tax

declaration is only ₱360.00 per square meter for 400 square meters of
residential land, ₱150.00 per square meter for commercial land, and
₱136.99 per square meter for 1,343 square meters of orchard land;38

4. Based on the 1998 Appraisal Committee Report of the Lipa City

Appraisal Committee, the amount fixed for agricultural land along the road
is only ₱500.00 per square meter, and ₱1,300.00 per square meter for
residential land;39

5. The February 20, 2003 Certification of the BIR Assistant Revenue

Officer indicates that the zonal valuation for agricultural land within the
vicinity of the subject portion is only ₱100.00 per square meter and
₱485.00 per square meter for residential land therein; and40

6. The highest and most profitable use of the property is for commercial
and light industrial use. The consequential benefits for the remaining
portion of the properties outweigh the consequential damages. The
construction of the exit ramp going to and from Lipa City gives great value
to the remaining portion of respondents’ property, which in effect increases
its value tenfold.41

Mecate thus recommended that the reasonable value for agricultural, orchard,
and sugar land is ₱400.00 per square meter, and ₱600.00 per square meter for
residential and commercial land.42

Ruling of the Regional Trial Court

On August 18, 2005, the trial court rendered its Decision,43 fixing just
compensation for the subject portion, including all its improvements, at ₱1,960.00
per square meter, thus:
WHEREFORE, the just compensation for the 1,155 square meters parcel of land
expropriated by the plaintiff as site of the right of way connection with the
construction of the Balete-Lipa City Interchange Ramp B, Lipa City, is fixed at
₱1,960.00 per square meter, including all the improvements thereon, or a total of
₱2,263,800.

The Republic of the Philippines, represented by the Secretary, Department of

Public Works and Highways, is ordered to pay to the defendants, the
aforementioned amount of ₱2,263,800, with interest at the legal rate, from the
time it took possession of the condemned property, until fully paid.

If the defendants or any of them refuse or fail to receive said payment, the same
shall be made to the Clerk of Court, RTC, Lipa City, who shall receive such
payment and be responsible on his bond therefor.

Upon finality of this decision, the Branch Clerk of Court of this Court is directed to
immediately issue a certified true copy of the same for recording in the Office of
the Register of Deeds of Lipa City. With costs against the plaintiff.

IT IS SO ORDERED.44

The trial court validated the public purpose for which expropriation of the subject
portion was necessary. As for the issue of just compensation, the trial court
adopted the May 3, 2005 Joint Commissioners’ Report of the Lipa City Assessor
and the Registrar of Deeds, finding the recommended valuation of ₱1,960.00 per
square meter as reasonable, fair, and realistic.

Petitioner interposed an appeal with the CA.

Ruling of the Court of Appeals

Docketed as CA-G.R. CV No. 85751, the appeal questioned the trial court’s
₱1,960.00 valuation, claiming that in arriving at such amount, the trial court
disregarded other documentary evidence such as the assessed value, tax
declaration, the BIR zonal valuation, and the appraisal report of the Lipa City
Assessor.

The CA sustained the trial court’s reliance on the Lipa City Assessor and the
Registrar of Deeds’s May 3, 2005 Joint Commissioners’ Report, finding that the
same took into consideration the fair market value of the subject portion, the
condition of the surroundings, the improvements introduced, the character of the
property, and the value of adjacent and nearby properties as shown by the deeds
of sale covering the same. The CA also noted that in 2000, petitioner bought a
36-square meter portion of respondents’ property at ₱1,300.00 per square meter,
which means that as of 2000, respondents’ property already had a market value
of ₱1,300.00 per square meter.

The CA added that with the passage of time and construction of the STAR
tollway beside respondents’ property, the value thereof has appreciated. These
factors and circumstances were not taken into consideration in Mecate’s April 25,
2005 report.

The CA further held that the May 3, 2005 Joint Commissioners’ Report is the
majority decision of the constituted board of commissioners. Such being the
case, the trial court may not be faulted for relying thereon. In the absence of
abuse on the part of the commissioners or the trial court, their determination
regarding just compensation must be sustained.

The CA thus affirmed the trial court’s Decision, with the modification that the
amount deposited by petitioner shall be deducted from the adjudged just
compensation of ₱2,263,800.00, thus:

WHEREFORE, the appealed Decision dated August 18, 2005 is affirmed, subject
to the modification that the preliminary deposit of ₱115,000.00 with Land Bank of
the Philippines shall be deducted from the total amount of just compensation of
₱2,263,800.00.

SO ORDERED.45

Unable to obtain a reconsideration of the appellate court’s Decision, petitioners

filed the present Petition.

Issues

Petitioner assigns the following issues for resolution:

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE

TRIAL COURT’S DECISION FIXING THE JUST COMPENSATION AT
₱1,960.00 PER SQUARE METER DESPITE ITS FAILURE TO
CONSIDER ALL FACTORS IN ARRIVING AT SAID AMOUNT OF JUST
COMPENSATION PRESCRIBED UNDER THE APPLICABLE LAWS.

II
 THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
TRIAL COURT’S ERRONEOUS RELIANCE ON THE JOINT
COMMISSIONERS’ REPORT RECOMMENDING THE AMOUNT OF
₱1,960.00 PER SQUARE METER, AN AMOUNT WHICH IS EXCESSIVE,
HIGHLY SPECULATIVE, UNSUBSTANTIATED AND CONTRARY TO
THE RULES AND APPLICABLE JURISPRUDENCE FOR DETERMINING
JUST COMPENSATION.46

Petitioner’s Arguments

Petitioner argues that the CA’s reliance on the Joint Commissioners’ Report is
erroneous because the said report failed to consider all factors prescribed by law
specifically Republic Act (RA) No. 897447 in determining just compensation.
Petitioner asserts that under RA 8974, there are standards for the assessment of
the value of the expropriated land which the trial court and the commissioners
concerned failed to consider, thus:

Section 5. Standards for the Assessment of the Value of the Land Subject of
Expropriation Proceedings or Negotiated Sale. - In order to facilitate the
determination of just compensation, the court may consider, among other well-
established factors, the following relevant standards:

(a) The classification and use for which the property is suited;

(b) The developmental costs for improving the land;

(c) The value declared by the owners;

(d) The current selling price of similar lands in the vicinity;

(e) The reasonable disturbance compensation for the removal and/or

demolition of certain improvement on the land and for the value of
improvements thereon;

(f) The size, shape or location, tax declaration and zonal valuation of the
land;

(g) The price of the land as manifested in the ocular findings, oral as well
as documentary evidence presented; and

(h) Such facts and events as to enable the affected property owners to
have sufficient funds to acquire similarly-situated lands of approximate
areas as those required from them by the government, and thereby
rehabilitate themselves as early as possible.
Petitioner adds that under Section 648 of Rule 67 of the Rules of Court,
commissioners in an expropriation case should assess the consequential
damages to the property not taken and deduct from such consequential damages
the consequential benefits to be derived by the owner from the public use or
purpose of the property taken, the operation of its franchise by the corporation or
the carrying on of the business of the corporation or person taking the property;
but in no case shall the consequential benefits assessed exceed the
consequential damages assessed, or the owner be deprived of the actual value
of his property so taken.

Petitioner also argues that it is erroneous for the CA to affirm the trial court’s
Decision, which disregarded absolutely Mecate’s April 25, 2005 Commissioner’s
Report, which properly took into consideration the BIR zonal valuation, the
assessed value, tax declarations covering the property, and the character of the
subject portion sought to be expropriated. It adds that the trial court’s valuation is
grossly excessive, considering that the subject portion is merely agricultural land.

Petitioner thus prays that the CA Decision be reversed and set aside, and that
the Court render judgment modifying the trial court’s Decision, thus reducing the
amount of just compensation for the subject portion from ₱1,960.00 per square
meter to between ₱400.00 and ₱600.00 per square meter.

Respondents’ Arguments

Respondents insist in their Comment49 that the trial court’s judgment, as affirmed
by the CA, is supported by evidence, in accord with existing jurisprudence, and,
echoing the trial court, reasonable, fair, and realistic. On the other hand,
Mecate’s Commissioner’s Report fails to take into consideration the previous
acquisition by the petitioner of a portion of their property at ₱1,300.00 per square
meter in 2000; the fair market value of the property; and decisions of the Court
which emphasize that in the determination of just compensation, it is not only the
value appearing on the tax declarations and BIR zonal valuations that are
considered, but also the nature, character and condition of the land, as well as its
surroundings, improvements and capabilities.

Respondents conclude that the adjudged just compensation in the amount of

₱1,960.00 per square meter for the subject portion is not excessive.

Our Ruling

The Petition must be denied.

This Court is not a trier of facts. Questions of fact may not be raised in a petition
brought under Rule 45, as such petition may only raise questions of law.

This rule applies in expropriation cases.50 Moreover, factual findings of the trial
court, when affirmed by the CA, are generally binding on this Court. An
evaluation of the case and the issues presented leads the Court to the
conclusion that it is unnecessary to deviate from the findings of fact of the trial
and appellate courts.

Under Section 851 of Rule 67 of the Rules of Court, the trial court sitting as an
expropriation court may, after hearing, accept the commissioners’ report and
render judgment in accordance therewith. This is what the trial court did in this
case. The CA affirmed the trial court’s pronouncement in toto. Given these facts,
the trial court and the CA’s identical findings of fact concerning the issue of just
compensation should be accorded the greatest respect, and are binding on the
Court absent proof that they committed error in establishing the facts and in
drawing conclusions from them. There being no showing that the trial court and
the CA committed any error, we thus accord due respect to their findings.

The only legal question raised by the petitioner relates to the commissioners’ and
the trial court’s alleged failure to take into consideration, in arriving at the amount
of just compensation, Section 5 of RA 8974 enumerating the standards for
assessing the value of expropriated land taken for national government
infrastructure projects. What escapes petitioner, however, is that the courts are
not bound to consider these standards; the exact wording of the said provision is
that "in order to facilitate the determination of just compensation, the courts may
consider" them. The use of the word "may" in the provision is construed as
permissive and operating to confer discretion.52 In the absence of a finding of
abuse, the exercise of such discretion may not be interfered with. For this case,
the Court finds no such abuse of discretion.

Besides, a cursory review of the May 3, 2005 Joint Commissioners’ Report leads
one to the conclusion, without need of further elaboration, that the
commissioners and the trial court did not ignore absolutely the standards
enumerated in Section 5. Quite the contrary, they took into consideration several
of these standards in arriving at the amount of just compensation, specifically:

(a) The classification and use for which the property is suited;

(b) The current selling price of similar lands in the vicinity;

(c) The size, shape or location, and tax declaration of the land; and
 (d) The price of the land as manifested in the ocular findings, oral as well
as documentary evidence presented.

In fact, the May 3, 2005 Joint Commissioners’ Report took into consideration four
out of the eight standards enumerated in Section 5. This can hardly be termed a
total disregard of Section 5.

On the other hand, Mecate’s April 25, 2005 Commissioner’s Report evidently
failed to consider factors other than the value of the subject portion as reflected
in the tax declarations, the BIR zonal valuation, and its classification as an
agricultural land. Although Mecate professes to base her Report on the fair
market value of the property, current values of like properties, the property’s
actual or potential uses, and location, still in reality these factors were not taken
into account in arriving at the conclusions contained in her Report. To make
matters worse, Mecate based her Report on the 1998 Appraisal Committee
Report of the Lipa City Appraisal Committee, which is clearly obsolete and does
not reflect 2004 property values. The Complaint for expropriation was filed in
2004; thus, just compensation should be based on 2004 valuations. "Where the
institution of the action precedes entry into the property, the just compensation is
to be ascertained as of the time of the filing of the complaint." 53

It is quite evident that petitioner is a desperate buyer of the subject portion. It

1âwphi1

needs the property for the Balete-Lipa City Interchange Ramp B, and no property
other than the subject portion could answer this need. Having purchased a
portion of respondents’ property in 2000 at ₱1,300.00 per square meter – by
negotiated sale at that – there appears to be no reason why it should not be
made to pay just compensation at a premium four years later. It is evidently
unfair and absurd that, after negotiating a sale at a higher price of ₱1,300.00,
petitioner should later insist on a lower ₱600.00, ₱400.00, or even ₱100.00
valuation for the same land four years after such negotiated sale. It should be
bound by the higher ₱1,300.00 valuation, at the very least. Given the increase in
population and rate of growth and progress in the country, it is highly unlikely if
not impossible that property values would take a downward trend. This applies to
Lipa City

especially; the Joint Commissioners' Report indicates how the city has rapidly
progressed through the years -- where once there was grass, concrete structures
now stand.

Moreover, of note are petitioner's several purchases of land within the vicinity,
ranging from ₱500.00 up to ₱3,000.00 per square meter, from 1997 up to 2003.
The average price of all these purchases within the vicinity amounts to P 1
,960.00 per square meter. Although it may be said that from the facts this amount
is low, the respondents have nonetheless given their assent to this valuation in
their June 23, 2005 Comment54 as well as in their July 25, 2008 Comment55 filed
before this Court. Thus, as to them, the market value of the subject portion is
₱1,960.00 per square meter. As for the petitioner- a desperate buyer of the
subject portion which is absolutely necessary to link the existing highway to the
city- this is what it should be made to pay for the subject portion. It must be
remembered that "the market value of the property is the price that may be
agreed upon by parties willing but not compelled to enter into a sale. Not unlikely,
a buyer desperate to acquire it would agree to pay more, and a seller in urgent
need of funds would agree to accept less, than what it is actually worth."56

WHEREFORE, the Petition is DENIED. The assailed October 31, 2007 Decision
and January 11, 2008 Resolution of the Court of Appeals in CA-G.R. CV No.
85751 are AFFIRMED.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION MARTIN S. VILLARAMA, JR.*

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 189355 January 23, 2013

PEOPLE OF THE PHILIPPINES, Plaintiff/Appellee,

vs.
ROLANDO CABUNGAN, Accused/Appellant.

DECISION

DEL CASTILLO, J.:

In a prosecution for the crime of rape, the culpability of the offender often hinges
on the story of the offended party. Thus, courts usually rely on her credibility or
the lack of it as against the bare denials of the accused.

This is an appeal interposed by Rolando Cabungan (appellant) from the July 9,

2009 Decision1 of the Court of Appeals (CA) in CA-G.R. CR-H.C. No. 03142
which affirmed with modification the November 7, 2007 Decision2of the Regional
Trial Court (RTC), Branch 54, Alaminos City, Pangasinan, finding him guilty
beyond reasonable doubt of the crime of rape.

Factual Antecedents

On April 14, 2003,3 appellant was charged with the crime of rape in Criminal
Case No. 4398-A before the RTC of Alaminos City, Pangasinan. On a plea of not
guilty,4 he was tried upon an Information which alleges:

That sometime in November, 2002 in Siapar, Anda, Pangasinan, Philippines and

within the jurisdiction of this Honorable Court, the above-named accused by
means of force, threats and intimidation, did then and there willfully, unlawfully
and feloniously have carnal knowledge of his step-daughter (daughter of his wife
or common-law wife), "AAA",5 a fifteen (15) yr. old minor, in their own house to
her damage and prejudice.

Contrary to Articles 266-A and 266-B of the Revised Penal Code.6

The circumstances surrounding the charge are as follows:

Appellant is the uncle of "AAA," he being the husband of the sister of "AAA’s"
mother. He lived in the house of "AAA" because he was supposed to take care of
her and her brother while their mother was working abroad. Sometime in
November, 2002, at about 10:00 o’clock in the evening, and while "AAA" was
alone in her room, appellant suddenly came in. He sat beside "AAA" and then
removed her shorts and panty. Appellant also took off his sando and shorts,
mounted "AAA" and inserted his penis into her vagina while she was lying down.
"AAA" tried to push him but to no avail as he was stronger than her. She then felt
something come out from appellant, who thereupon stood up and threatened to
kill her if she would report the incident to anyone.

From "AAA’s" recount, appellant started abusing her when she was still in Grade
IV but could no longer remember the number of times he ravished her. She did
not tell anybody about her misfortune except her friend "BBB" as she was afraid
of appellant’s threats. It was "BBB" who informed "AAA’s" mother of the incident.

When Dra. Ma. Teresa G. Sanchez (Dra. Sanchez) of the Western Pangasinan
District Hospital examined "AAA" on February 17, 2003, she discovered old
hymenal lacerations at four o’clock and nine o’clock positions. The vagina of
"AAA", according to her, could admit two fingers with ease and this could have
been caused by penetration of an erect penis. She did not, however, find any
physical injury on "AAA’s" body. These findings and conclusion were contained in
a written certification marked in evidence as Exhibit "A"7 which Dra. Sanchez
identified in court.

Appellant, on the other hand, denied raping "AAA". He claimed that "AAA" lived
in his house since her birth until she was in Grade IV when "AAA’s" mother had
their own house constructed. Since then, "AAA" lived in their new house together
with her brother and appellant’s daughter and appellant would just occasionally
visit and sleep in the said house. Appellant figured that he was charged with rape
because of his advice that "AAA" should leave her boarding house since her
mother does not want her to be mingling with male boardmates.

Ruling of the Regional Trial Court

After trial, the RTC found "AAA’s" narration of her ordeal at the hands of
appellant positive and categorical and, hence, accorded it full faith and credence.
Thus, by its Decision8 dated November 7, 2007, the RTC declared appellant
guilty beyond reasonable doubt of rape and sentenced him to suffer the penalty
of reclusion perpetua.

The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing premises, the court finds the accused
guilty beyond reasonable doubt of the crime of rape and he is hereby sentenced
to suffer the penalty of RECLUSION PERPETUA.

The accused is further ordered to pay the offended party the sum of SEVENTY
FIVE THOUSAND (Php75,000.00) as civil indemnity.

The Provincial Jailer is ordered to transfer the living body of the accused to the
National Penitentiary at Muntinlupa City upon receipt of this Decision.

Finally, the period of preventive imprisonment of the accused in the Provincial

Jail, Lingayen, Pangasinan shall be credited for purposes of the service of his
sentence.

SO ORDERED.9

Ruling of the Court of Appeals

Appellant sought reversal of his conviction before the CA. However, the CA, in its
Decision10 dated July 9, 2009, affirmed with modifications the RTC Decision in
that the amount of civil indemnity was reduced and appellant was ordered to
further pay "AAA" moral damages, viz:

WHEREFORE, in the light of the foregoing, the instant appeal is DENIED. The
decision appealed from is AFFIRMED with the modifications that the award for
civil indemnity is reduced to P50,000.00 and an additional award of P50,000.00
for moral damages is hereby ordered.

IT IS SO ORDERED.11

Still undeterred, appellant is now before this Court arguing that the lower courts
erred in finding him guilty beyond reasonable doubt for the crime of rape.

Our Ruling

The present appeal is utterly devoid of merit.

Appellant tries to undermine the credibility of "AAA" as a rape victim. He

contends that the belated filing of the Complaint, "AAA’s" act of still returning to
their house even after she was allegedly raped therein by the appellant, her
failure to shout and offer resistance during the rape, and the several material
inconsistencies between her affidavit and her open court testimony, tainted her
credibility.
The Court disagrees. Indeed, there was no prompt revelation of what befell
"AAA." But this is not enough reason to discredit her. A delay in reporting a rape
case for two months or longer, as in this case, cannot be taken against the rape
victim. "Long silence and delay in reporting the crime of rape have not always
been construed as indications of a false accusation."12 "A rape charge becomes
doubtful only when the delay or inaction in revealing its commission is
unreasonable and unexplained."13 In People v. Domingo,14 we held that "it is not
uncommon that a rape victim conceal for some time the assault against her
person on account of fear of the threats posed by her assailant."15This is exactly
the situation in this case. "AAA’s" delay in filing the Complaint is not without a
valid reason. She was cowed by appellant’s threats which hindered her from
immediately reporting her painful ordeal to the authorities.

Appellant next contends that "AAA’s" act of still coming back to their house
where the incident allegedly occurred is contrary to human behavior. If it is true
that she was raped there, she would have avoided going home to their house
and would have instead stayed in some other place like her boarding house or
the residence of her brother. Normal behavior, he avers, dictates that "AAA"
would refrain from returning to the place of the incident.

Such contention fails to persuade. The fact that "AAA" was acting in a manner
outside the normal behavior will not result in appellant’s exoneration. Moreover, it
bears stressing that not all victims can be expected to act conformably with the
usual expectation of everyone or in the manner suggested by the accused.
Besides, it has been established that the place of the incident is "AAA’s" own
house where she has the right to stay and go home to after staying in a boarding
house during the weekdays. She also has no other place to go home to since the
place of her brother in Solano, Nueva Vizcaya is too far away. Thus, "AAA’s"
actuations can hardly be considered contrary to normal human conduct.

Neither does "AAA’s" alleged failure to shout and offer resistance during the
incident deserve credence. Contrary to appellant’s assertion, the records show
that "AAA" tried to resist his advances but was not successful because he is
bigger and stronger than her. In any event, the law does not impose upon a rape
victim the burden of proving resistance especially when, as in this case,
intimidation is exercised upon the victim who submitted herself to the advances
of her assailant because of fear for her life.

Anent the inconsistencies between "AAA’s" affidavit and her testimony in open
court as pointed out by the appellant, the Court finds that the same are not
material and refer only to minor details. The alleged contradictions as to whether
appellant is her uncle or step-father and whether it was she or her friend who
revealed her ordeal to her mother are inconsequential matters that will not affect
the determination of whether appellant is innocent of the crime charged or not. In
People v. Tolentino,16 we ruled that inconsistencies which are trivial and
insignificant "do not warrant rejection of the entire testimony nor the reversal of
the judgment. Accuracy in account has never been used as a standard against
which the credibility of witnesses are tested since it is undeniable that human
memory is fickle and prone to the stresses of emotions x x x."

Moreover, appellant’s assertion that "AAA" had male companions in her boarding
house and that anyone of them could have indulged in sexual intercourse with
her is purely speculative and has no factual basis. "A rape victim’s testimony as
to who abused her is credible where she has absolutely no motive to incriminate
and testify against the accused."17 Verily, it is unlikely and unnatural for a victim
and her relatives to point to someone else as the author of the crime other than
the real culprit.18

Finally, appellant attacks the credibility of Dra. Sanchez. He claims that the said
doctor’s conclusion that "AAA" could have been raped is merely based on the
narration made to her by "AAA." He also gives emphasis on the doctor’s
admission that the insertion of two fingers with ease into "AAA’s" vagina is
possible even in the absence of prior sexual intercourse. Moreover, appellant
stresses that the likelihood that an erect penis could have caused the lacerations
found in "AAA’s" vagina is just a mere possibility.

The Court, however, is not convinced. The doctor’s finding that "AAA" was a
victim of rape cannot be regarded as hearsay considering that it was not based
solely on "AAA’s" story but anchored mostly on the former’s own examination of
the latter.19 Regarding the possibility of inserting two fingers with ease even in the
absence of prior sexual intercourse, suffice it to state that "the condition of the
woman’s hymen x x x is not conclusive on the question of whether rape has or
has not been committed as the mere introduction of the male organ into the labia
majora of the pudendum is sufficient to consummate rape."20 In any event, this
Court has already ruled that a medical examination of the victim as well as the
medical certificate are merely corroborative in character and are not
indispensable for conviction in rape cases. What is important is that the
testimony of the private complainant about the incident is clear, unequivocal and
credible, and this we find to be the case here. "Further, well-settled is the rule
that prior sexual intercourse which could have resulted in hymenal laceration is
not necessary in rape cases for virginity is not an element of rape."21 Neither can
the absence of bodily injury negate the commission of rape.

In the light of the positive identification by "AAA" whose narration of the incident
was found credible by the RTC and the CA, appellant’s proffered defense of
denial fails. "Like the defense of alibi, a denial crumbles in the light of positive
declarations."22 Moreover, it is a fundamental rule that findings of the trial courts
which are factual in nature and which involve credibility are accorded respect
when no glaring errors, gross misapprehension of facts or speculative, arbitrary
and unsupported conclusions can be gathered therefrom. "The rule finds an even
more stringent application where said findings are sustained by the CA,"23 as in
this case.

All told, the CA correctly affirmed the RTC’s conviction of appellant for the rape of
"AAA."

The Penalty

The crime committed in this case is simple rape only in view of the failure of the
prosecution to prove with clarity the special qualifying circumstance of
relationship. While the information alleges that "AAA" is the step-daughter of the
appellant, there is nothing on record to support the same. The stepfather-
stepdaughter relationship as a qualifying circumstance presupposes that the
victim’s mother and the accused are married to each other which, however, is not
obtaining in this case. Hence, the CA’s affirmance of the penalty of reclusion
perpetua as imposed upon appellant by the RTC is proper.

The Civil Indemnity

We agree with the CA in reducing the civil indemnity awarded by the trial court
from P75,000.00 to P50,000.00 in view of the finding that appellant is guilty only
of simple rape. Also, we respect the award of moral damages made by the CA in
the amount of P50,000.00. "Moral damages in rape cases should be awarded
without need of showing that the victim suffered trauma or mental, physical, and
psychological sufferings constituting the basis thereof."24

We note that both the trial court and the CA failed to award exemplary
damages. In People v. Tejero,25 we held that "when either one of the qualifying
1âw phi 1

circumstances of relationship or minority (for qualified rape under Article 266-B of

the Revised Penal Code) is omitted or lacking, that which is pleaded in the
Information and proved by the evidence may be considered as an aggravating
circumstance. As such, AAA’s minority may be considered as an aggravating
circumstance. When a crime is committed with an aggravating circumstance
either as qualifying or generic, an award of exemplary damages is justified under

Article 2230 of the New Civil Code." Thus, conformably with the above ruling, we
hold that "AAA" is entitled to an award of exemplary damages in the amount of
P30,000.00.
In addition, pursuant to prevailing jurisprudence, "interest at the rate of 6% per
annum shall be imposed on all damages awarded from the date of the finality of
this judgment until fully paid."26

WHEREFORE, the appeal is. DISMISSED. The assailed Decision of the Court of
Appeals dated July 9 .. 2009 in CA-G.R. CR-H.C. No. 03142 is AFFIRMED with
MODIFICATIONS that "AAA" is further awarded the amount of P30,000.00 as
exemplary damages and interest at the rate of 6% per annum is imposed on all
damages awarded from the date of finality of this judgment until1iilly paid.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

JOSE PORTUGAL PEREZ ESTELA M. PERLAS-BERNABE

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN*

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No.173425 January 22, 2013

FORT BONIFACIO DEVELOPMENT CORPORATION, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE and REVENUE DISTRICT
OFFICER, REVENUE DISTRICT NO. 44, T AGUIG and PATEROS, BUREAU
OF INTERNAL REVENUE, Respondents.

RESOLUTION

DEL CASTILLO, J.:

This resolves respondents' Motion for Reconsideration.1 Respondents raise the

following arguments: "1) Prior payment of tax is inherent in the nature and
payment of the 8% transitional input tax;2 2) Revenue Regulations No. 7-95
providing for 8% transitional input tax based on the value of the improvements on
the real properties is a valid legislative rule;3 3) For failure to clearly prove its
entitlement to the transitional input tax credit, petitioner's claim for tax refund
must fail in light of the basic doctrine that tax refund partakes of the nature of a
tax exemption which should be construed strictissimi juris against the taxpayer."4

We deny with finality the Motion for Reconsideration filed by respondents; the
basic issues presented have already been passed upon and no substantial
argument has been adduced to warrant the reconsideration sought.

In his Dissent, Justice Carpio cites four grounds as follows: "first, petitioner is not
entitled to any refund of input [Value-added tax] VAT, since the sale by the
national government of the Global City land to petitioner was not subject to any
input VAT; second, the Tax Code does not allow any cash refund of input VAT,
only a tax credit; third, even for zero-rated or effectively zero-rated VAT-
registered taxpayers, the Tax Code does not allow any cash refund or credit of
transitional input tax; and fourth, the cash refund, not being supported by any
prior actual tax payment, is unconstitutional since public funds will be used to pay
for the refund which is for the exclusive benefit of petitioner, a private entity."5
At the outset, it must be pointed out that all these arguments have already been
extensively discussed and argued, not only during the deliberations but likewise
in the exchange of comments/opinions.

Nevertheless, we will discuss them again for emphasis. First argument:

"Petitioner is not entitled to any refund of input VAT since the sale by the national
government of the Global City land to petitioner was not subject to any input
VAT."6

Otherwise stated, it is argued that prior payment of taxes is a prerequisite before

a taxpayer could avail of the transitional input tax credit.

This argument has long been settled. To reiterate, prior payment of taxes is not
necessary before a taxpayer could avail of the 8% transitional input tax credit.
This position is solidly supported by law and jurisprudence, viz:

First. Section 105 of the old National Internal Revenue Code (NIRC)
clearly provides that for a taxpayer to avail of the 8% transitional input tax
credit, all that is required from the taxpayer is to file a beginning inventory
with the Bureau of Internal Revenue (BIR). It was never mentioned in
Section 105 that prior payment of taxes is a requirement. For clarity and
reference, Section 105 is reproduced below:

SEC. 105. Transitional input tax credits. – A person who becomes

liable to value-added tax or any person who elects to be a VAT-
registered person shall, subject to the filing of an inventory as
prescribed by regulations, be allowed input tax on his beginning
inventory of goods, materials and supplies equivalent to 8% of the
value of such inventory or the actual value-added tax paid onsuch
goods, materials and supplies, whichever is higher, which shall be
creditable against the output tax. (Emphasis supplied.)

Second. Since the law (Section 105 of the NIRC) does not provide for prior
payment of taxes, to require it now would be tantamount to judicial
legislation which, to state the obvious, is not allowed.

Third. A transitional input tax credit is not a tax refund per se but a tax
credit. Logically, prior payment of taxes is not required before a taxpayer
could avail of transitional input tax credit. As we have declared in our
September 4, 2012 Decision,7 "tax credit is not synonymous to tax refund.
Tax refund is defined as the money that a taxpayer overpaid and is thus
returned by the taxing authority. Tax credit, on the other hand, is an
amount subtracted directly from one’s total tax liability. It is any amount
 given to a taxpayer as a subsidy, a refund, or an incentive to encourage
investment."8

Fourth. The issue of whether prior payment of taxes is necessary to avail

of transitional input tax credit is no longer novel. It has long been settled by
jurisprudence. In fact, in the earlier case of Fort Bonifacio Development
Corporation v. Commissioner of Internal Revenue,9 this Court had already
ruled that—

x x x. If the intent of the law were to limit the input tax to cases where
actual VAT was paid, it could have simply said that the tax base shall be
the actual value-added tax paid. Instead, the law as framed contemplates
a situation where a transitional input tax credit is claimed even if there was
no actual payment of VAT in the underlying transaction. In such cases, the
tax base used shall be the value of the beginning inventory of goods,
materials and supplies.10

Fifth. Moreover, in Commissioner of Internal Revenue v. Central Luzon

Drug Corp.,11 this Court had already declared that prior payment of taxes is
not required in order to avail of a tax credit.12 Pertinent portions of the
Decision read:

While a tax liability is essential to the availment or use of any tax credit, prior tax
payments are not. On the contrary, for the existence or grant solely of such
credit, neither a tax liability nor a prior tax payment is needed. The Tax Code is in
fact replete with provisions granting or allowing tax credits, even though no taxes
have been previously paid.

For example, in computing the estate tax due, Section 86(E) allows a tax
credit‒subject to certain limitations‒for estate taxes paid to a foreign country.
Also found in Section 101(C) is a similar provision for donor’s taxes‒again when
paid to a foreign country–in computing for the donor’s tax due. The tax credits in
both instances allude to the prior payment of taxes, even if not made to our
government.

Under Section 110, a VAT (Value-Added Tax)-registered person engaging in

transactions–whether or not subject to the VAT–is also allowed a tax credit that
includes a ratable portion of any input tax not directly attributable to either
activity. This input tax may either be the VAT on the purchase or importation of
goods or services that is merely due from–not necessarily paid by–such VAT-
registered person in the course of trade or business; or the transitional input tax
determined in accordance with Section 111(A). The latter type may in fact be an
amount equivalent to only eight percent of the value of a VAT-registered person’s
beginning inventory of goods, materials and supplies, when such amount‒as
computed‒is higher than the actual VAT paid on the said items. Clearly from this
provision, the tax credit refers to an input tax that is either due only or given a
value by mere comparison with the VAT actually paid–then later prorated. No tax
is actually paid prior to the availment of such credit.

In Section 111(B), a one and a half percent input tax credit that is merely
presumptive is allowed. For the purchase of primary agricultural products used
as inputs–either in the processing of sardines, mackerel and milk, or in the
manufacture of refined sugar and cooking oil–and for the contract price of public
works contracts entered into with the government, again, no prior tax payments
are needed for the use of the tax credit.

More important, a VAT-registered person whose sales are zero-rated or

effectively zero-rated may, under Section 112(A), apply for the issuance of a tax
credit certificate for the amount of creditable input taxes merely due–again not
necessarily paid to–the government and attributable to such sales, to the extent
that the input taxes have not been applied against output taxes. Where a
taxpayer is engaged in zero-rated or effectively zero-rated sales and also in
taxable or exempt sales, the amount of creditable input taxes due that are not
directly and entirely attributable to any one of these transactions shall be
proportionately allocated on the basis of the volume of sales. Indeed, in availing
of such tax credit for VAT purposes, this provision–as well as the one earlier
mentioned–shows that the prior payment of taxes is not a requisite.

It may be argued that Section 28(B)(5)(b) of the Tax Code is another illustration
of a tax credit allowed, even though no prior tax payments are not required.
Specifically, in this provision, the imposition of a final withholding tax rate on cash
and/or property dividends received by a nonresident foreign corporation from a
domestic corporation is subjected to the condition that a foreign tax credit will be
given by the domiciliary country in an amount equivalent to taxes that are merely
deemed paid. Although true, this provision actually refers to the tax credit as a
condition only for the imposition of a lower tax rate, not as a deduction from the
corresponding tax liability. Besides, it is not our government but the domiciliary
country that credits against the income tax payable to the latter by the foreign
corporation, the tax to be foregone or spared.

In contrast, Section 34(C)(3), in relation to Section 34(C)(7)(b), categorically

allows as credits, against the income tax imposable under Title II, the amount of
income taxes merely incurred–not necessarily paid–by a domestic corporation
during a taxable year in any foreign country. Moreover, Section 34(C)(5) provides
that for such taxes incurred but not paid, a tax credit may be allowed, subject to
the condition precedent that the taxpayer shall simply give a bond with sureties
satisfactory to and approved by petitioner, in such sum as may be required; and
further conditioned upon payment by the taxpayer of any tax found due, upon
petitioner’s redetermination of it.

In addition to the above-cited provisions in the Tax Code, there are also tax
treaties and special laws that grant or allow tax credits, even though no prior tax
payments have been made.

Under the treaties in which the tax credit method is used as a relief to avoid
double taxation, income that is taxed in the state of source is also taxable in the
state of residence, but the tax paid in the former is merely allowed as a credit
against the tax levied in the latter. Apparently, payment is made to the state of
source, not the state of residence. No tax, therefore, has been previously paid to
the latter.

Under special laws that particularly affect businesses, there can also be tax
credit incentives. To illustrate, the incentives provided for in Article 48 of
Presidential Decree No. (PD) 1789, as amended by Batas Pambansa Blg. (BP)
391, include tax credits equivalent to either five percent of the net value earned,
or five or ten percent of the net local content of export. In order to avail of such
credits under the said law and still achieve its objectives, no prior tax payments
are necessary.

From all the foregoing instances, it is evident that prior tax payments are not
indispensable to the availment of a tax credit. Thus, the CA correctly held that the
availment under RA 7432 did not require prior tax payments by private
establishments concerned. However, we do not agree with its finding that the
carry-over of tax credits under the said special law to succeeding taxable
periods, and even their application against internal revenue taxes, did not
necessitate the existence of a tax liability.

The examples above show that a tax liability is certainly important in the
availment or use, not the existence or grant, of a tax credit. Regarding this
matter, a private establishment reporting a net loss in its financial statements is
no different from another that presents a net income. Both are entitled to the tax
credit provided for under RA 7432, since the law itself accords that unconditional
benefit. However, for the losing establishment to immediately apply such credit,
where no tax is due, will be an improvident usance.13

Second and third arguments: "The Tax Code does not allow any cash refund of
input VAT, only a tax credit;" and "even for zero-rated or effectively zero-rated
VAT-registered taxpayers, the Tax Code does not allow any cash refund or credit
of transitional input tax."14
Citing Sections 110 and 112 of the Tax Code, it is argued that the Tax Code
does not allow a cash refund, only a tax credit.

This is inaccurate.

First. Section 112 of the Tax Code speaks of zero-rated or effectively zero-rated
sales. Notably, the transaction involved in this case is not zero-rated or
effectively zero-rated sales.

Second. A careful reading of Section 112 of the Tax Code would show that it
allows either a cash refund or a tax credit for input VAT on zero-rated or
effectively zero-rated sales. For reference, Section 112 is herein quoted, viz:

Sec. 112. Refunds or Tax Credits of Input Tax. –

(A) Zero-rated or Effectively Zero-rated Sales. – Any VAT-registered person,

whose sales are zero-rated or effectively zero-rated may, within two (2) years
after the close of the taxable quarter when the sales were made, apply for the
issuance of a tax credit certificate or refund of creditable input tax due or paid
attributable to such sales, except transitional input tax, to the extent that such
input tax has not been applied against output tax: x x x. (Emphasis supplied.)

Third. Contrary to the Dissent, Section 112 of the Tax Code does not prohibit
cash refund or tax credit of transitional input tax in the case of zero-rated or
effectively zero-rated VAT registered taxpayers, who do not have any output
VAT. The phrase "except transitional input tax" in Section 112 of the Tax Code
was inserted to distinguish creditable input tax from transitional input tax credit.
Transitional input tax credits are input taxes on a taxpayer’s beginning inventory
of goods, materials, and supplies equivalent to 8% (then 2%) or the actual VAT
paid on such goods, materials and supplies, whichever is higher. It may only be
availed of once by first-time VAT taxpayers. Creditable input taxes, on the other
hand, are input taxes of VAT taxpayers in the course of their trade or business,
which should be applied within two years after the close of the taxable quarter
when the sales were made.

Fourth. As regards Section 110, while the law only provides for a tax credit, a
taxpayer who erroneously or excessively pays his output tax is still entitled to
recover the payments he made either as a tax credit or a tax refund. In this case,
since petitioner still has available transitional input tax credit, it filed a claim for
refund to recover the output VAT it erroneously or excessively paid for the 1st
quarter of 1997. Thus, there is no reason for denying its claim for tax
refund/credit.
Fifth. Significantly, the dispositive portion of our September 4, 2012
Decision15 directed the respondent Commissioner of Internal Revenue (CIR) to
either refund the amount paid as output VAT for the 1st quarter of 1997 or to
issue a tax credit certificate. We did not outrightly direct the cash refund of the
amount claimed, thus:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated

July 7, 2006 of the Court of Appeals in CA-G.R. SP No. 61436 is REVERSED
and SET ASIDE. Respondent Commissioner of Internal Revenue is ordered to
refund to petitioner Fort Bonifacio Development Corporation the amount of
₱359,652,009.47 paid as output VAT for the first quarter of 1997 in light of the
transitional input tax credit available to petitioner for the said quarter, or in the
alternative, to issue a tax credit certificate corresponding to such amount.

SO ORDERED.16

Sixth. Notably, in the earlier case of Fort Bonifacio, we likewise directed the
respondent to either refund or issue a tax credit certificate. It bears emphasis that
this Decision already became final and executory and entry of judgment was
made in due course. The dispositive portion of our Decision in said case reads:

WHEREFORE, the petitions are GRANTED. The assailed decisions of the Court
of Tax Appeals and the Court of Appeals are REVERSED and SET ASIDE.
Respondents are hereby (1) restrained from collecting from petitioner the amount
of ₱28,413,783.00 representing the transitional input tax credit due it for the
fourth quarter of 1996; and (2) directed to refund to petitioner the amount of
₱347,741,695.74 paid as output VAT for the third quarter of 1997 in light of the
persisting transitional input tax credit available to petitioner for the said quarter,
or to issue a tax credit corresponding to such amount. No pronouncement as to
costs.17

Clearly, the CIR has the option to return the amount claimed either in the form of
tax credit or refund.

Fourth argument. "The cash refund, not being supported by any prior actual tax
payment, is unconstitutional since public funds will be used to pay for the refund
which is for the exclusive benefit of petitioner, a private entity."18

Otherwise stated, it is argued that the refund or issuance of tax credit certificate
violates the mandate in Section 4(2) of the Government Auditing Code of the
Philippines that "Government funds or property shall be spent or used solely for
public purposes." Again, this is inaccurate. On the contrary, the grant of a refund
or issuance of tax credit certificate in this case would not contravene the above
provision. The refund or tax credit would not be unconstitutional because it is
precisely pursuant to Section 105 of the old NIRC which allows refund/tax credit.

Final Note

As earlier mentioned, the issues in this case are not novel. These same issues
had been squarely ruled upon by this Court in the earlier Fort Bonifacio case.
This earlier Fort Bonifacio case already attained finality and entry of judgment
was already made in due course. To reverse our Decision in this case would
logically affect our Decision in the earlier Fort Bonifacio case. Once again, this
Court will become an easy target for charges of "flip-flopping."

ACCORDINGLY, the Motion for Reconsideration is DENIED with FINALITY, the

basic issues presented having been passed upon and no substantial argument
having been adduced to warrant the reconsideration sought. No further pleadings
or motions shall be entertained in this case. Let entry of final judgment be made
in due course.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE (On official Leave)

CASTRO ARTURO D. BRION*
Associate Justice Associate Justice

DIOSDADO M. PERALTA LUCAS P. BERSAMIN

Associate Justice Associate Justice

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

 Associate Justice Associate Justice

BIENVENIDO L. REYES ESTELA M. PERLAS-BERNABE

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIll of the Constitution, it is hereby certified that
the conclusions in the above Resolution had been reached in consultation before
the case was assigned to the writer of the opinion of the Court.

MARIA LOURDES P. A. SERENO

Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 184698 January 21, 2013

SPOUSES ALBERTO AND SUSAN CASTRO, Petitioners,

vs.
AMPARO PALENZUELA, for herself and as authorized representative of
VIRGINIA ABELLO, GERARDO ANTONIO ABELLO, ALBERTO DEL
ROSARIO, INGEBORG REGINA DEL ROSARIO, HANS DEL ROSARIO,
MARGARET DEL ROSARIO ISLETA, ENRIQUE ALENZUELA and CARLOS
MIGUEL PALENZUELA,Respondents.

DECISION

DEL CASTILLO, J.:

A demand letter presented in evidence by a lessee to prove a lesser liability for

unpaid rentals than that awarded by the trial court constitutes an admission of
liability to the extent of such lesser amount.

This Petition for Review on Certiorari1 assails the January 29, 2008 Decision2 of
the Court of Appeals (CA) which dismissed the appeal in CA-G.R. CV No. 86925,
and its September 15, 2008 Resolution3 denying petitioners' Motion for
Reconsideration.

Factual Antecedents

Respondents Amparo Palenzuela, Virginia Abello, Gerardo Antonio Abello,

Alberto Del Rosario, Ingeborg Regina Del Rosario, Hans Del Rosario, Margaret
Del Rosario Isleta, Enrique Palenzuela and Carlos Miguel Palenzuela own
several fishponds in Bulacan, Bulacan totaling 72 hectares.4 In March 1994,
respondents, through their duly appointed attorney-in-fact and co-respondent
Amparo Palenzuela, leased out these fishponds to petitioners, spouses Alberto
and Susan Castro. The lease was to be for five years, or from March 1, 1994 up
to June 30, 1999.5The Contract of Lease6 of the parties provided for the following
salient provisions:
 1. For the entire duration of the lease, the Castro spouses shall pay a total
consideration of ₱14,126,600.00,7via postdated checks8 and according to
the following schedule:

a. Upon signing of the lease agreement, petitioners shall pay

₱842,300.00 for the lease period March 1, 1994 to June 30, 1994;9

b. On or before June 1, 1994, petitioners shall pay ₱2,520,000.00 for

the one-year lease period July 1, 1994 to June 30, 1995;10

c. On or before June 1, 1995, petitioners shall pay ₱2,520,000.00 for

the one-year lease period July 1, 1995 to June 30, 1996;11

d. On or before June 1, 1996, petitioners shall pay ₱2,520,000.00 for

the one-year lease period July 1, 1996 to June 30, 1997;12

e. On or before June 1, 1997, petitioners shall pay ₱2,796,000.00 for

the one-year lease period July 1, 1997 to June 30, 1998;13 and

f. On or before June 1, 1998, petitioners shall pay ₱2,928,300.00 for

the one-year lease period July 1, 1998 to June 30, 1999.14

2. Petitioners committed to pay respondents the amount of ₱500,000.00 in

five yearly installments from June 1, 1994. The amount represents arrears
of the previous lessee, which petitioners agreed to assume;15

3. Petitioners shall exercise extraordinary care and diligence in the

maintenance of the leased premises, with the obligation to maintain in
good order, repair and condition, among others, two warehouses found
thereon;16

4. Necessary repairs,17 licenses, permits, and other fees18 necessary and

incidental to the operation of the fishpond shall be for petitioners’ account;

5. Petitioners shall not sublease the premises to third parties;19 and,

6. Should respondents be constrained to file suit against petitioners on

account of the lease, the latter agrees to pay liquidated damages in the
amount of ₱1,000,000.00, 25% as attorney’s fees, and costs of the suit.20

The lease expired on June 30, 1999, but petitioners did not vacate and continued
to occupy and operate the fishponds until August 11, 1999, or an additional 41
days beyond the contract expiration date.
Previously, or on July 22, 1999, respondents sent a letter21 to petitioners
declaring the latter as trespassers and demanding the settlement of the latter’s
outstanding obligations, including rent for petitioners’ continued stay within the
premises, in the amount of ₱378,451.00, broken down as follows:

Unpaid balance as of May 31, 1999 for ₱111,082.0

the fifth year of the lease 0
Accrued interest from May 31, 1999 to
July 31, 1999 at 16% 23,344.00
Trespassing fee for the whole month of
July 1999 244,025.00 22

Total owed to the Lessors ₱378,451.00

Petitioners are in actual receipt of this letter.23

On June 8, 2000,24 respondents instituted Civil Case No. Q-00-41011 for

collection of a sum of money with damages in the Regional Trial Court (RTC) of
Quezon City, Branch 215, claiming that petitioners committed violations of their
lease agreement – non-payment of rents as stipulated, subletting the fishponds,
failure to maintain the warehouses, and refusal to vacate the premises on
expiration of the lease – which caused respondents to incur actual and liquidated
damages and other expenses in the respective amounts of ₱570,101.0025 for
unpaid rent, ₱275,430.0026 for unpaid additional rent for petitioners’ one-month
extended stay beyond the contract date, and ₱2,000,000.0027 for expenses
incurred in restoring and repairing their damaged warehouses. In addition,
respondents prayed to be awarded moral and exemplary damages, attorney’s
fees, and costs of litigation.28

For failure to file their Answer, petitioners were declared in default,29 and on
August 16, 2000, during the presentation of evidence for the plaintiffs,
respondent Amparo Palenzuela testified, detailing petitioners’ several violations
of the lease contract; petitioners’ failure to maintain the warehouses in good
condition; their unauthorized subleasing of the premises to one Cynthia Reyes;
their failure to pay the license fees, permits and other fees; their extended stay
for 41 days, or until August 11, 1999 despite expiration of the lease on June 30,
1999; and petitioners’ unpaid rents in the aggregate amount of ₱863,796.00,
interest included.30

During said proceedings, respondents presented in evidence a statement of

account31 detailing petitioners’ outstanding obligations as of July 31, 1999.
In a subsequent Order,32 the trial court, on petitioners’ motion, lifted its previous
Order of default, and the latter were given the opportunity to cross-examine
respondents’ witnesses which they failed to do. Moreover, they also failed to
attend subsequent scheduled hearings. The trial court thus declared the
forfeiture, on waiver, of petitioners’ rights to cross-examine and present their
evidence, and considered the case submitted for decision based solely on
respondents’ evidence.33 However, on petitioners’ motion,34 the trial court again
reconsidered, and scheduled the presentation of their evidence on October 5,
2001.35

However, petitioners moved to reset the October 5, 2001 hearing.36 After several
postponements, the trial was reset to April 11, 2002.37 On said date, the testimony
of the first witness for the defense, petitioner Alberto Castro, was taken and
completed. Cross-examination was scheduled on May 30, 2002,38 but was
rescheduled to be taken on August 21, 2002.39

On August 21, 2002, petitioners once more failed to appear; the trial court, in an
Order40 of even date, decreed that petitioner Alberto Castro’s testimony be
stricken off the record and declared the case submitted for decision. Petitioners
moved for reconsideration;41 respondents opposed,42 noting that for more than two
years and in spite of several opportunities afforded them, petitioners have been
unable to participate in the proceedings and present their evidence. The trial
court did not reconsider.43

Petitioners took issue in the CA via Petition for Certiorari,44 but the appellate
court, in a February 18, 2004 Decision,45 sustained the trial court and declared
that no grave abuse of discretion was committed when it ordered the striking out
of petitioner Alberto Castro’s testimony and the termination of trial.

Petitioners next filed a Motion to Inhibit46 claiming that they could not obtain
justice and a fair trial from the presiding judge. In her April 21, 2003
Order,47 Judge Ma. Luisa Quijano-Padilla voluntarily inhibited herself from trying
the case. She stressed, however, that she was doing so only in order that the
probity and objectivity of the court could be maintained, but not because
petitioners’ grounds for seeking inhibition are meritorious.

The case was then re-raffled to Branch 85 of the Quezon City RTC, which
required the parties to submit memoranda.48 While respondents submitted theirs,
petitioners did not.

Ruling of the Regional Trial Court

On January 31, 2005, the trial court issued its Decision,49 decreeing as follows:
WHEREFORE, judgment is hereby rendered ordering the defendants, jointly and
severally, to pay plaintiffs the following:

1. Eight Hundred Sixty-three Thousand Seven Hundred Ninety Six Pesos

(₱863,796.00), by way of actual or compensatory damages;

2. Fifty Thousand Pesos (₱50,000.00), by way of moral damages;

3. Fifty Thousand Pesos (₱50,000.00), by way of exemplary damages;

4. The amount equivalent to twenty-five (25%) percent of the total amount

recoverable herein by plaintiffs, by way of attorney’s fees; and

5. Costs of suit.

SO ORDERED.50

The trial court held that petitioners violated the terms of the lease:51 petitioners
failed to pay rent on time,52 the warehouses were shown to be in damaged
condition,53 and they overstayed beyond the contract period.54 However,
respondents failed to prove the actual amount of their pecuniary losses in regard
to the damaged warehouses, which entitles them merely to nominal
damages.55 As to moral damages, the trial court held that because petitioners
acted in gross and wanton disregard of their contractual obligations, respondents
are entitled to such damages, as well as attorneys fees as stipulated at 25% of
the total amount recoverable.56

With respect to petitioners, the trial court said that although they claim to have
paid all their obligations in full, no evidence to such effect has been
presented,57 for the precise reason that they failed to participate in the
proceedings on their own account.

Both parties moved for reconsideration. Respondents prayed that petitioners be

made additionally liable for liquidated damages and ₱2,000,000.00 as
compensation for the restoration of the damaged warehouses.58

Petitioners, in their Verified Motion for Reconsideration,59 argued that the

evidence is not sufficient to warrant a finding of liability on their part, and the
award is excessive. They claimed that they should not be made to pay additional
rent for their unauthorized stay beyond the lease expiration date, or from July 1
to August 11, 1999, because the lease agreement did not provide for such.
Likewise, they claimed that, as represented by respondents themselves in their
July 22, 1999 demand letter,60 which they annexed to their Verified Motion for
Reconsideration and was presented to the court for the first time, petitioners’
outstanding obligation, including back rentals, interest, and the supposed one-
month additional rent, was pegged at a mere ₱378,451.00; thus, the judgment
award of ₱863,796.00 is excessive and illegal. Petitioners added that there is no
factual basis for the award of moral and exemplary damages. Thus, they prayed
that the Decision be reconsidered and that the Complaint be dismissed.

In a January 30, 2006 Omnibus Order,61 the trial court declined to reconsider.
Only petitioners went up to the CA on appeal.

Ruling of the Court of Appeals

In the CA, petitioners maintained that the Decision is erroneous and the awards
excessive, echoing their previous argument below that the lease agreement did
not authorize respondents to charge additional rents for their extended stay and
interest on delayed rental payments. They added that respondents are not
entitled to moral and exemplary damages and attorney’s fees. Finally, they
bemoaned the trial court’s act of resolving their Verified Motion for
Reconsideration of the Decision without conducting oral arguments.

The CA, however, was unconvinced. It held that the preponderance of

evidence,62 which remained uncontroverted by petitioners, points to the fact that
petitioners indeed failed to pay rent in full, considering that their postdated
checks bounced upon presentment,63 and their unauthorized extended stay from
July 1 until August 11, 1999.64 It added that petitioners were undeniably guilty of
violating several provisions of the lease agreement, as it has also been shown
that they failed to pay rent on time and illegally subleased the property to one
Cynthia Reyes, who even made direct payments of rentals to respondents on
several occasions.65

On petitioners’ argument that respondents are not entitled to additional rent for
petitioners’ extended stay beyond the lease expiration date, the CA held that the
respondents are in fact authorized to collect whatever damages they may have
incurred by reason of the lease,66 citing Section 16 of the lease agreement which
provides as follows:

SECTION 16. TERMINATION OR CANCELLATION OF THE LEASE. Any delay

in or violation, failure or refusal of the LESSEE to perform and comply with any of
the obligations stipulated hereunder shall automatically give an absolute right to
the LESSORS to cancel, terminate or otherwise rescind this Contract of Lease. x
x x.

xxxx
The above provisions shall, however, be without prejudice to any right of claim by
the LESSORS against the LESSEE for whatever damages which may be
incurred or assessed under this Contract of Lease.67 (Emphasis supplied)

The CA found no error in the award of moral and exemplary damages, noting
that petitioners’ violations of the lease agreement compelled respondents to
litigate and endure unreasonable delays, sleepless nights, mental anguish, and
serious anxiety.68 As for attorney’s fees, the CA sustained the trial court’s award
of 25%, saying that such stipulation may be justified under Article 2208 of the
Civil Code.69 Since respondents were compelled to incur expenses to protect their
interests as a result of petitioners’ acts and omissions, they should be allowed to
collect the stipulated attorney’s fees.70

Finally, the CA held that the matter of conducting further oral arguments on a
party’s Motion for Reconsideration rests upon the sound discretion of the court.
Because petitioners’ Verified Motion for Reconsideration is a mere reiteration of
their defenses which they raised all throughout the proceedings below,
conducting a hearing on the motion would have been a mere superfluity.71

The CA thus dismissed the petitioners’ appeal and sustained in toto the January
31, 2005 decision of the trial court.72 Their Motion for Reconsideration73 was
denied as well, through the questioned September 15, 2008 Resolution.74

Issues

The instant Petition thus raises the following issues:

THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT

CALLING THE TRIAL COURT TO TASK FOR REFUSING TO RECEIVE
EVIDENCE IN SUPPORT OF THE VERIFIED MOTION FOR
RECONSIDERATION OF PETITIONERS ON THE GROUND THAT THE
AWARD OF DAMAGES IS EXCESSIVE.

THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT

DISCERNING THE INTERNAL FACTUAL INCONSISTENCIES OF THE
FINDINGS OF THE TRIAL COURT AS WELL AS THE LACK OF LEGAL
BASIS THEREOF, VIS-À-VIS THE CLAIM OF UNPAID RENT AND
INTEREST, IN CLEAR DISREGARD OF THE PRONOUNCEMENTS OF
THIS HONORABLE COURT IN MARTIN V. COURT OF APPEALS.
 C

THERE IS SIMILARLY NO BASIS FOR THE AWARD OF MORAL AND

EXEMPLARY DAMAGES, AND THE HONORABLE COURT OF APPEALS
WAS IN GRIEVOUS ERROR IN SUSTAINING THE TRIAL COURT IN
CLEAR DISREGARD OF THIS HONORABLE COURT’S
PRONOUNCEMENTS IN ABS-CBN BROADCASTING CORPORATION V.
COURT OF APPEALS.75

Petitioners’ Arguments

Petitioners pray for the setting aside of the questioned Decision and Resolution
of the CA, as well as the dismissal of respondents’ Complaint, claiming that they
have in fact settled all their obligations to respondents.

Petitioners first claim that they should have been given the opportunity to present
evidence during proceedings covering their Verified Motion for Reconsideration
of the trial court’s Decision, invoking Section 1, Rule 37 of the Rules of
Court76 which allows them to question the trial court’s Decision on the ground that
the damages awarded are excessive or that the evidence is insufficient to justify
the Decision.77

Petitioners direct the Court’s attention to respondents’ July 22, 1999 demand
letter78 indicating that their outstanding obligation was only ₱378,451.00, which
thus renders excessive the award of ₱863,796.00.

Petitioners next insist that the lease agreement did not authorize respondents to
charge additional rents for their July 1 to August 11, 1999 extended stay,79 which
thus renders without legal or factual basis and excessive the award of
₱863,796.00.80 If at all, the basis for computation thereof should be the
immediately preceding monthly rental of ₱244,025.00.81 Nor is the imposition of
interest allowed under the agreement. Petitioners concede that in the absence of
stipulation as to interest, respondents are entitled only to 6% annual interest as
indemnity for damages,82 pursuant to Article 2209 of the Civil Code.83

On the issue of petitioners’ contract violations, it is claimed that petitioners are

not guilty of subleasing the property to one Cynthia Reyes (Reyes). They argue
that although Reyes paid a portion of the rentals, this may not be taken as
sufficient proof of the existence of a sublease agreement between them; and
even assuming that a sublease agreement indeed existed between them, such
arrangement was condoned by respondents when they accepted payments of
rents made directly to them by Reyes.84
Regarding damages and attorney’s fees, petitioners maintain that there could not
have been delay in the payment of rentals as to warrant the award of moral
damages, since they have paid the rents in full; their supposed liability was only
for the additional rent incurred for their extended stay. Petitioners proceed to
argue that if only respondents had exercised their option – allowed under the
lease agreement – to forcibly evict petitioners from the premises, then they would
not have incurred the damages they claim to be entitled to. As for the award of
exemplary damages and attorney’s fees, petitioners find no factual and legal
bases for the grant thereof. Since they did not act with malice or bad faith in all
matters relative to the lease, respondents should not be entitled thereto.85

Respondents’ Arguments

In their Comment,86 respondents insist that petitioners committed several

violations of the lease agreement,87specifically: for their failure to pay the rents on
time,88 for subleasing the property to Reyes,89 for neglecting to maintain the
warehouses which resulted in their damaged condition after the lease,90 for
refusing to vacate the premises upon the expiration of the lease,91 and for their
neglect and refusal to pay the required fishpond license and permit fees imposed
by the municipality of Bulacan.92 Respondents add that for these violations, they
incurred actual damages and suffered moral damages, which further entitles
them to exemplary damages and attorney’s fees as stipulated in the lease
agreement.93

Respondents insist that far from being excessive, the trial court’s award is
instead insufficient, considering the damages suffered as a result of the
petitioners’ neglect to maintain the premises, specifically the warehouses, as
agreed.

Respondents maintain that in the event of expiration of the lease period and the
lessee maintains himself within the premises, the law authorizes the collection of
rentals on a month-to-month or year-to-year basis,94 citing Articles 1670 and 1687
of the Civil Code.95 Thus, even if the lease agreement with petitioners failed to
provide for a stipulation covering lease extension, the obligation to pay rent is not
extinguished by the expiration of the lease on June 30, 1999.96

Respondents further claim that interest should be paid at 12% per annum, and
not merely 6%, on the outstanding obligation.97

Our Ruling
While this Court is not a trier of facts, it appears that both the trial court and the
CA have misappreciated the facts and the evidence; rectification is thus in order,
if justice is to be properly served.

But first, on the procedural issue raised, the Court cannot subscribe to
petitioners’ argument that they had a right to a hearing on their motion for
reconsideration. The trial court may not be faulted for denying what it could have
perceived was another of petitioners’ delaying tactics, given how they acted
throughout the proceedings. It may have been a baffling situation for the trial
court to find itself suddenly confronted with petitioners’ zeal in presenting their
case, at such a late stage, when they have repeatedly waived such right during
the trial of the case. Indeed, it possessed sufficient discretion to grant or deny the
hearing sought for their motion for reconsideration; under the circumstances, the
Court finds that such discretion was exercised soundly. Besides, as will be seen,
the evidence is ample and clear enough to warrant judgment outside of a
hearing.

Both courts erred in finding that there are outstanding rents owing to the
respondents in the amount of ₱863,796.00. Attention must be called to
respondents’ July 22, 1999 demand letter.98 The letter, which appears to have
been handwritten and signed by Amparo Palenzuela herself, makes a demand
upon petitioners to pay the total amount of ₱378,451.00 which respondents claim
constitutes what is owing to them as of July 31, 1999 by way of unpaid rentals
(₱111,082.00); additional rent for the whole duration of petitioners’ stay on the
premises beyond the contract date, or for the whole of July 1999 (₱244,025.00);
and interest from May 31, 1999 up to July 31, 1999 (₱23,344.00). This letter
belies the claim that petitioners owed respondents a greater amount by way of
unpaid rents. Even though it is not newly-discovered evidence, it is material;
indeed, petitioners could not have presented it during trial because they were
declared in default.

Of this amount – ₱378,451.00 – petitioners admit to paying nothing. Thus, for

petitioners, this is their admitted liability.

The Court notes further that respondents do not even dispute petitioners’
argument that the amount of ₱863,796.00 actually represented rentals being
claimed for their one-month extended stay on the premises, which to them is
excessive. This argument of the petitioners finds support in the direct testimony
of respondents’ witness, Amparo Palenzuela, thus –

Q x x x Madam Witness, you mentioned x x x that the defendants have

outstanding obligation to you. Can you tell the Court how much is the outstanding
obligation to you of the defendants with respect to their occupation of your
fishponds?

A Up to July 31, 2000,99 Mr. Castro’s obligation is ₱863,796.00.

Q Can you briefly explain to the Court how you came about this figure?

A Actually this is what he owes for back lease that he has not paid including
interest. This one is supposedly for overstaying of one month. We did not charge
him 41 days, we are only charging him one month and that is the total.100

Q With respect to this ₱863,796.00 this is the total as of July?

A July 31.

Q 2000?101

A That’s right.

Q And this pertains to unpaid rent and interest thereof?

A That’s right.

Q The stipulated interest thereof?

A That’s right.

Q And with respect to damages which you expect to incur is not yet included in
this?

A Yes.

Q And the unpaid municipal fees are also not included in this?

A Not included but they have been paid.102 (Emphasis supplied)

Indeed, respondents do not deny that this amount of ₱863,796.00 is what they
are actually charging petitioners for one month’s extended use of their fishponds.
If this is so, then it is truly excessive, considering that for the immediately
preceding month – the whole of June 1999 – it costs only ₱244,025.00103 for the
petitioners to rent the same property. The trial court may have been impelled to
accept respondents’ own computation104 of what they believed was due from
petitioners on account of the fact that at that time, petitioners were declared in
default and could not cross-examine the respondents’ witness. But the fact
remains that the July 22, 1999 demand letter105clearly sets forth in detail what
appears to be the true, accurate and reasonable amount of petitioners’
outstanding obligation. If this document were a forgery, respondents would have
vehemently objected to its presentation at the very first opportunity.

Yet they did not. Such document could thus be considered and given weight.
"[T]he omission x x x ‘to rebut that which would have naturally invited an
immediate, pervasive and stiff opposition x x x create[s] an adverse inference
that either the controverting [evidence] x x x presented x x x will only prejudice its
case, or that the uncontroverted evidence indeed speaks of the truth’."106

As for petitioners’ submission that respondents were not authorized to charge

additional rent for their extended stay, this issue should be deemed settled by
their very reliance on the July 22, 1999 demand letter,107 where a charge for
additional rent for their extended stay in the amount of ₱244,025.00 is included.
By adopting the letter as their own evidence in seeking a reduction in the award
of unpaid rent, petitioners are considered to have admitted liability for additional
rent as stated therein, in the amount of ₱244,025.00. Petitioners may not
simultaneously accept and reject the demand letter; this would go against the
rules of fair play. Besides, respondents are correct in saying that when the lease
expired on June 30, 1999 and petitioners continued enjoying the premises
without objection from the respondents, an implied new lease was created
pursuant to Article 1670 of the Civil Code, which placed upon petitioners the
obligation to pay additional rent.

On the matter of interest, the proper rate is not 6% as petitioners argue, but 12%
per annum, collected from the time of extrajudicial demand on July 22, 1999.
Back rentals in this case are equivalent to a loan or forbearance of money.108

On the issue of moral and exemplary damages, the Court finds no reason to
disturb the trial and appellate courts’ award in this regard. Petitioners have not
been exactly above-board in dealing with respondents. They have been found
guilty of several violations of the agreement, and not just one. They incurred
delay in their payments, and their check payments bounced, for one; for another,
they subleased the premises to Reyes, in blatant disregard of the express
prohibition in the lease agreement; thirdly, they refused to honor their obligation,
as stipulated under the lease agreement, to pay the fishpond license and other
permit fees and; finally, they refused to vacate the premises after the expiration
of the lease.1âwphi1

Even though respondents received payments directly from the sublessee Reyes,
this could not erase the fact that petitioners are guilty of subleasing the fishponds
to her. Respondents may have been compelled to accept payment from Reyes
only because petitioners have been remiss in honoring their obligation to pay
rent.

Bad faith "means breach of a known duty through some motive or interest or ill
will."109 By refusing to honor their solemn obligations under the lease, and instead
unduly profiting from these violations, petitioners are guilty of bad faith. Moral
damages may be awarded when the breach of contract is attended with bad
faith.110 "Exemplary damages may [also] be awarded when a wrongful act is
accompanied by bad faith or when the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner x x x. [And] since the award of
exemplary damages is proper in this case, attomey's fees and costs of the suit
may also be recovered,111 as stipulated in the lease agreement.

WHEREFORE, premises considered, the Petition is DENIED. The January 29,

2008 Decision of the Court of Appeals in CA-G.R. CV No. 86925 which affirmed
in toto the January 31, 2005 Decision of the Regional Trial Court of Quezon City,
Branch 85 in Civil Case No. Q-00-41011 is AFFIRMED with the MODIFICATION
that the actual and compensatory damages are reduced to ₱3 78,451.00, the
same to earn legal interest at the rate of twelve percent (12%) per annum from
July 22, 1999 until fully paid.

SO ORDERED.

MARIANO C. DEL CASTILLO

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 179628 January 16, 2013

THE MANILA INSURANCE COMPANY, INC., Petitioner,

vs.
SPOUSES ROBERTO and AIDA AMURAO, Respondents.

DECISION

DEL CASTILLO, J.:

The jurisdiction of the Construction Industry Arbitration Commission (CIAC) is

conferred by law. Section 41 of Executive Order (E.O.) No. I 008, otherwise
known as the Construction Industry Arbitration Law, "is broad enough to cover
any dispute arising from, or connected with construction contracts, whether these
involve mere contractual money claims or execution of the works."2

This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails
the Decision4 dated June 7, 2007 and the Resolution5 dated September 7, 2007
of the Court of Appeals (CA) in CA-G.R. SP No. 96815.

Factual Antecedents

On March 7, 2000, respondent-spouses Roberto and Aida Amurao entered into a

Construction Contract Agreement (CCA)6 with Aegean Construction and
Development Corporation (Aegean) for the construction of a six-storey
commercial building in Tomas Morato corner E. Rodriguez Avenue, Quezon
City.7 To guarantee its full and faithful compliance with the terms and conditions
of the CCA, Aegean posted performance bonds secured by petitioner The Manila
Insurance Company, Inc.8 (petitioner) and Intra Strata Assurance Corporation
(Intra Strata).9

On November 15, 2001, due to the failure of Aegean to complete the project,
respondent spouses filed with the Regional Trial Court (RTC) of Quezon City,
Branch 217, a Complaint,10 docketed as Civil Case No. Q-01-45573, against
petitioner and Intra Strata to collect on the performance bonds they issued in the
amounts of ₱2,760,000.00 and ₱4,440,000.00, respectively.11
Intra Strata, for its part, filed an Answer12 and later, a Motion to Admit Third Party
Complaint,13 with attached Third Party Complaint14 against Aegean, Ronald D.
Nicdao, and Arnel A. Mariano.

Petitioner, on the other hand, filed a Motion to Dismiss15 on the grounds that the
Complaint states no cause of action16 and that the filing of the Complaint is
premature due to the failure of respondent-spouses to implead the principal
contractor, Aegean.17 The RTC, however, denied the motion in an Order18 dated
May 8, 2002. Thus, petitioner filed an Answer with Counterclaim and Cross-
claim,19 followed by a Third Party Complaint20 against Aegean and spouses
Ronald and Susana Nicdao.

During the pre-trial, petitioner and Intra Strata discovered that the CCA entered
into by respondent-spouses and Aegean contained an arbitration clause.21

Hence, they filed separate Motions to Dismiss22 on the grounds of lack of cause
of action and lack of jurisdiction.

Ruling of the Regional Trial Court

On May 5, 2006, the RTC denied both motions.23 Petitioner and Intra Strata
separately moved for reconsideration but their motions were denied by the RTC
in its subsequent Order24 dated September 11, 2006.

Aggrieved, petitioner elevated the case to the CA by way of special civil action for
certiorari.25

Ruling of the Court of Appeals

On June 7, 2007, the CA rendered a Decision26 dismissing the petition. The CA

ruled that the presence of an arbitration clause in the CCA does not merit a
dismissal of the case because under the CCA, it is only when there are
differences in the interpretation of Article I of the construction agreement that the
parties can resort to arbitration.27 The CA also found no grave abuse of discretion
on the part of the RTC when it disregarded the fact that the CCA was not yet
signed at the time petitioner issued the performance bond on February 29,
2000.28 The CA explained that the performance bond was intended to be
coterminous with the construction of the building.29 It pointed out that "if the
delivery of the original contract is contemporaneous with the delivery of the
surety’s obligation, each contract becomes completed at the same time, and the
consideration which supports the principal contract likewise supports the
subsidiary one."30 The CA likewise said that, although the contract of surety is
only an accessory to the principal contract, the surety’s liability is direct, primary
and absolute.31 Thus:

WHEREFORE, we resolve to DISMISS the petition as we find that no grave

abuse of discretion attended the issuance of the order of the public respondent
denying the petitioner’s motion to dismiss.

IT IS SO ORDERED.32

Petitioner moved for reconsideration but the CA denied the same in a

Resolution33 dated September 7, 2007.

Issues

Hence, this petition raising the following issues:

A.

THE HONORABLE CA ERRED WHEN IT HELD THAT IT IS ONLY WHEN

THERE ARE DIFFERENCES IN THE INTERPRETATION OF ARTICLE I OF
THE CONSTRUCTION AGREEMENT THAT THE PARTIES MAY RESORT TO
ARBITRATION BY THE CIAC.

B.

THE HONORABLE CA ERRED IN TREATING PETITIONER AS A SOLIDARY

DEBTOR INSTEAD OF A SOLIDARY GUARANTOR.

C.

THE HONORABLE [CA] OVERLOOKED AND FAILED TO CONSIDER THE

FACT THAT THERE WAS NO ACTUAL AND EXISTING CONSTRUCTION
AGREEMENT AT THE TIME THE MANILA INSURANCE BOND NO. G (13)
2082 WAS ISSUED ON FEBRUARY 29, 2000.34

Petitioner’s Arguments

Petitioner contends that the CA erred in ruling that the parties may resort to
arbitration only when there is difference in the interpretation of the contract
documents stated in Article I of the CCA.35 Petitioner insists that under Section 4
of E.O. No. 1008, it is the CIAC that has original and exclusive jurisdiction over
construction disputes, such as the instant case.36
Petitioner likewise imputes error on the part of the CA in treating petitioner as a
solidary debtor instead of a solidary guarantor.37 Petitioner argues that while a
surety is bound solidarily with the obligor, this does not make the surety a
solidary co-debtor.38 A surety or guarantor is liable only if the debtor is himself
liable.39 In this case, since respondent-spouses and Aegean agreed to submit
any dispute for arbitration before the CIAC, it is imperative that the dispute
between respondent-spouses and Aegean must first be referred to arbitration in
order to establish the liability of Aegean.40 In other words, unless the liability of
Aegean is determined, the filing of the instant case is premature.41

Finally, petitioner puts in issue the fact that the performance bond was issued
prior to the execution of the CCA.42Petitioner claims that since there was no
existing contract at the time the performance bond was executed, respondent-
spouses have no cause of action against petitioner.43 Thus, the complaint should
be dismissed.44

Respondent spouses’ Arguments

Respondent-spouses, on the other hand, maintain that the CIAC has no

jurisdiction over the case because there is no ambiguity in the provisions of the
CCA.45 Besides, petitioner is not a party to the CCA.46 Hence, it cannot invoke
Article XVII of the CCA, which provides for arbitration
proceedings.47 Respondent-spouses also insist that petitioner as a surety is
directly and equally bound with the principal.48 The fact that the performance
bond was issued prior to the execution of the CCA also does not affect the
latter’s validity because the performance bond is coterminous with the
construction of the building.49

Our Ruling

The petition has merit.

Nature of the liability of the surety

A contract of suretyship is defined as "an agreement whereby a party, called the

surety, guarantees the performance by another party, called the principal or
obligor, of an obligation or undertaking in favor of a third party, called the obligee.
It includes official recognizances, stipulations, bonds or undertakings issued by
any company by virtue of and under the provisions of Act No. 536, as amended
by Act No. 2206."50 We have consistently held that a surety’s liability is joint and
several, limited to the amount of the bond, and determined strictly by the terms of
contract of suretyship in relation to the principal contract between the obligor and
the obligee.51 It bears stressing, however, that although the contract of suretyship
is secondary to the principal contract, the surety’s liability to the obligee is
nevertheless direct, primary, and absolute.52

In this case, respondent-spouses (obligee) filed with the RTC a Complaint

against petitioner (surety) to collect on the performance bond it issued. Petitioner,
however, seeks the dismissal of the Complaint on the grounds of lack of cause of
action and lack of jurisdiction.

The respondent-spouses have cause of action against the petitioner; the

performance bond is coterminous with the CCA

Petitioner claims that respondent-spouses have no cause of action against it

because at the time it issued the performance bond, the CCA was not yet signed
by respondent-spouses and Aegean.

We do not agree.

A careful reading of the Performance Bond reveals that the "bond is coterminous
with the final acceptance of the project."53 Thus, the fact that it was issued prior to
the execution of the CCA does not affect its validity or effectivity.

But while there is a cause of action against petitioner, the complaint must still be
dismissed for lack of jurisdiction.

The CIAC has jurisdiction over the case

Section 4 of E.O. No. 1008 provides that:

SEC. 4. Jurisdiction. – The CIAC shall have original and exclusive jurisdiction
over disputes arising from, or connected with, contracts entered into by parties
involved in construction in the Philippines, whether the dispute arises before or
after the completion of the contract, or after the abandonment or breach thereof.
These disputes may involve government or private contracts. For the Board to
acquire jurisdiction, the parties to a dispute must agree to submit the same to
voluntary arbitration.

The jurisdiction of the CIAC may include but is not limited to violation of
specifications for materials and workmanship, violation of the terms of
agreement, interpretation and/or application of contractual time and delays,
maintenance and defects, payment, default of employer or contractor, and
changes in contract cost.
Excluded from the coverage of the law are disputes arising from employer-
employee relationships which shall continue to be covered by the Labor Code of
the Philippines.

Based on the foregoing, in order for the CIAC to acquire jurisdiction two
requisites must concur: "first, the dispute must be somehow connected to a
construction contract; and second, the parties must have agreed to submit the
dispute to arbitration proceedings."54

In this case, both requisites are present.

The parties agreed to submit to arbitration proceedings "any dispute arising in the
course of the execution and performance of the CCA by reason of difference in
interpretation of the Contract Documents x x x which the parties are unable to
resolve amicably between themselves."55 Article XVII of the CCA reads:

ARTICLE XVII – ARBITRATION

17.1 Any dispute arising in the course of the execution and performance of this
Agreement by reason of difference in interpretation of the Contract Documents
set forth in Article I which the OWNER and the CONTRACTOR are unable to
resolve amicably between themselves shall be submitted by either party to a
board of arbitrators composed of Three (3) members chosen as follows: One (1)
member shall be chosen by the CONTRACTOR AND One (1) member shall be
chosen by the OWNER. The said Two (2) members, in turn, shall select a third
member acceptable to both of them. The decision of the Board of Arbitrators
shall be rendered within Ten (10) days from the first meeting of the board, which
decision when reached through the affirmative vote of at least Two (2) members
of the board shall be final and binding upon the OWNER and CONTRACTOR. 1âwphi1

17.2 Matters not otherwise provided for in this Contract or by Special Agreement
of the parties shall be governed by the provisions of the Arbitration Law,
Executive Order No. 1008.56

In William Golangco Construction Corporation v. Ray Burton Development

Corporation,57 we declared that monetary claims under a construction contract
are disputes arising from "differences in interpretation of the contract" because
"the matter of ascertaining the duties and obligations of the parties under their
contract all involve interpretation of the provisions of the contract."58 Following our
reasoning in that case, we find that the issue of whether respondent-spouses are
entitled to collect on the performance bond issued by petitioner is a "dispute
arising in the course of the execution and performance of the CCA by reason of
difference in the interpretation of the contract documents."
The fact that petitioner is not a party to the CCA cannot remove the dispute from
the jurisdiction of the CIAC because the issue of whether respondent-spouses
are entitled to collect on the performance bond, as we have said, is a dispute
arising from or connected to the CCA.

In fact, in Prudential Guarantee and Assurance, Inc. v. Anscor Land, Inc.,59 we

rejected the argument that the jurisdiction of CIAC is limited to the construction
industry, and thus, cannot extend to surety contracts. In that case, we declared
that "although not the construction contract itself, the performance bond is
deemed as an associate of the main construction contract that it cannot be
separated or severed from its principal. The Performance Bond is significantly
and substantially connected to the construction contract that there can be no
doubt it is the CIAC, under Section 4 of E.O. No. 1008, which has jurisdiction
over any dispute arising from or connected with it."60

In view of the foregoing, we agree with the petitioner that juriisdiction over the
instant case lies with the CIAC, and not with the RTC. Thus, the Complaint filed
by respondent-spouses with the RTC must be dismissed.

WHEREFORE, the petition is hereby GRANTED. The Decision dated June 7,

2007 and the Resolution dated September 7, 2007 of the Court of Appeals in CA-
G.R. SP No. 96815 are hereby ANNULLED and SET ASIDE. The Presiding
Judge of the Regional Trial Court of Quezon City, Branch 217 1s DIRECTED to
dismiss Civil Case No. Q-01-45573 for lack of jurisdiction.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

TERESITA J. LEONARDO-DE
JOSE PORTUGAL PEREZ
CASTRO*
Associate Justice
Associate Justice

MARVIC MARIO VICTOR F. LEONEN**

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 180463 January 16, 2013

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
AFP RETIREMENT AND SEPARATION BENEFITS SYSTEM,* Respondent,
HEIRS OF CABALO KUSOP and ATTY. NILO J. FLAVIANO, Respondents-
Intervenors.

DECISION

DEL CASTILLO, J.:

The processes of the State should not be trifled with. The failure of a party to
avail of the proper remedy to acquire or perfect one's title to land cannot justify a
resort to other remedies which are otherwise improper and do not provide for the
full oppot1unity to prove his title, but instead require him to concede it before
availment.

Certificates of title issued covering inalienable and non-disposable public land,

even in the hands of an alleged innocent purchaser for value, should be
cancelled.

Before us is a Petition for Review on Certiorari1 questioning the October 26, 2007
Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 75170, which reversed
the November 5, 2001 Decision3 of the Regional Trial Court (RTC), Branch 23 of
General Santos City in Civil Case No. 6419.

Factual Antecedents

Lots X, Y-1 and Y-2 – lands of the public domain consisting of 52,678 square
meters located in Barrio Dadiangas, General Santos Municipality (now General
Santos City) – were reserved for recreation and health purposes by virtue of
Proclamation No. 1684 (Proc. 168), which was issued in 1963. In 1983,
Proclamation No. 22735 (Proc. 2273) was issued amending Proc. 168, and
removing and segregating Lots Y-1 and Y-2 from the reservation and declaring
them open for disposition to qualified applicants. As a result, only Lot X – which
consists of 15,020 square meters – remained part of the reservation now known
as Magsaysay Park.

The record discloses that respondents-intervenors waged a campaign – through

petitions and pleas made to the President – to have Lots Y-1 and Y-2 taken out
of the reservation for the reason that through their predecessor Cabalo Kusop
(Kusop), they have acquired vested private rights over these lots. This campaign
resulted in Proc. 2273, which re-classified and returned Lots Y-1 and Y-2 to their
original alienable and disposable state.

In 1997, respondents-intervenors filed applications6 for the issuance of individual

miscellaneous sales patents over the whole of Lot X with the Department of
Environment and Natural Resources (DENR) regional office in General Santos
City, which approved them. Consequently, 16 original certificates of title7 (OCTs)
covering Lot X were issued in the names of respondents-intervenors and several
others. In September 1997, these 16 titles were simultaneously conveyed8 to
herein respondent AFP-Retirement and Separation Benefits System (AFP-
RSBS), resulting in the issuance of 16 new titles (the AFP-RSBS titles) –
Transfer Certificates of Title (TCT) No. T-81051 through T-81062, T-81146-T-
81147, and T-81150-T-81151.9

On September 11, 1998, herein petitioner Republic of the Philippines instituted

Civil Case No. 6419, which is a Complaint10 for reversion, cancellation and
annulment of the AFP-RSBS titles, on the thesis that they were issued over a
public park which is classified as inalienable and non-disposable public land.

Respondents-intervenors intervened11 in Civil Case No. 6419, and, together with

the defendant AFP-RSBS, argued that their predecessor-in-interest Kusop had
acquired vested interests over Lot X even before Proc. 168 was issued, having
occupied the same for more than 30 years. They claimed that these vested
rights, taken together with the favorable recommendations and actions of the
DENR and other government agencies to the effect that Lot X was alienable and
disposable land of the public domain, as well as the subsequent issuance of
sales patents and OCTs in their names, cannot be defeated by Proc. 168. They
added that under Proc. 168, private rights are precisely recognized, as shown by
the preliminary paragraph thereof which states:

Upon the recommendation of the Secretary of Agriculture and Natural Resources

and pursuant to the authority vested in me by law, I, Diosdado Macapagal,
President x x x, do hereby withdraw from sale or settlement and reserve for
recreational and health resort site purposes, under the administration of the
municipality of General Santos, subject to private rights, if any there be x x
x12 (Emphasis supplied.)
Ruling of the Regional Trial Court

On November 5, 2001, the trial court rendered judgment nullifying the AFP-RSBS
titles and ordering the return of Lot X to the Republic, with the corresponding
issuance of new titles in its name. The trial court ruled that the respondents-
intervenors – having benefited by the grant, through Proc. 2273, of Lots Y-1 and
Y-2 to them – can no longer claim Lot X, which has been specifically declared as
a park reservation under Proc. 168 and further segregated under Proc. 2273. In
other words, their private rights, which were guaranteed under Proc. 168, have
already been recognized and respected through the subsequently issued Proc.
2273; as a consequence, the succeeding sales patents and OCTs in the names
of the respondents-intervenors should be declared null and void not only for
being in violation of law, but also because respondents-intervenors did not
deserve to acquire more land.

Ruling of the Court of Appeals

The CA reduced the issues for resolution to just two: 1) whether the respondents-
intervenors acquired vested rights over Lot X, and 2) whether AFP-RSBS is a
buyer in good faith.13 It went on to declare that Lot X was alienable and
disposable land, and that respondents-intervenors’ predecessor-in-interest
acquired title by prescription, on the basis of the documentary evidence
presented:

1. Report to the President of the Republic dated August 2, 1982 by the

Board of Liquidators, recommending the amendment of Proc. 168 to
recognize and respect the rights of respondents-intervenors’
predecessors-in-interest, who have been in possession of portions of the
reservation since time immemorial;14

2. Report of District Land Officer Buenaventura Gonzales of the Bureau of

Lands, dated May 26, 1975, likewise stating that respondents-intervenors’
predecessors-in-interest have been in possession of portions of the
reservation since time immemorial, and that for this reason, Proc. 168 was
never in force and effect;15

3. Report of Deputy Public Land Inspector Jose Balanza of the Bureau of

Lands, dated May 6, 1976, finding that the property covered by Proc. 168
is private property and within an area declared as alienable and disposable
under Project No. 47 per L.C. Map No. 700 established by the then Bureau
of Forestry;16
 4. Tax Declaration No. 716 in the name of Cabalo Kusop and its
subsequent revisions;17

5. Certifications issued by the (then) municipal treasurer of General Santos

and official receipts showing payment of taxes from 1945-1972;18

6. Sworn declaration of ownership submitted to the Philippine

Constabulary;19

7. 1975 letter of then General Santos Mayor acknowledging that Kusop

was in possession of Lot X even before the war; and20

8. Statements and testimonies of several witnesses.21

The CA added that as a consequence of their predecessor’s possession of Lot X

since time immemorial, respondents-intervenors have acquired title without need
of judicial or other action, and the property ceased to be public land and thus
became private property.22 It stressed that while "government has the right to
classify portions of public land, the primary right of a private individual who
possessed and cultivated the land in good faith much prior to such classification
must be recognized and should not be prejudiced by after-events which could not
have been anticipated."23

The CA went on to justify that the reason why Proc. 2273 did not take Lot X out
of the public domain is not because the Executive wanted it to remain a
recreational park reserve – but because the respondents-intervenors were in the
process of donating said Lot X to General Santos City, and the President
deemed it unnecessary to still place it within the coverage of Proc. 2273.

The CA further ruled that the miscellaneous sales patents issued in the names of
the respondents-intervenors affirm their claim of ownership over Lot X, while the
OCTs subsequently issued in their names rendered their claim indefeasible.

Finally, the appellate court declared that since respondents-intervenors’ titles to

Lot X were duly obtained, the sale and transfer thereof to respondent AFP-RSBS
should be accorded the same treatment as a sale or transfer made to a
purchaser in good faith. Besides, it having been shown that the petitioner is not
entitled to Lot X since it already belonged to the respondents-intervenors,
petitioner had no right to raise the issue of AFP-RSBS’ good or bad faith.

Thus, petitioner’s Complaint for reversion was dismissed.

Issues
The petition now enumerates the following issues for resolution:

BY APPLYING FOR MISCELLANEOUS SALES PATENT, THE HEIRS

HAVE ADMITTED THAT LOT X IS PUBLIC LAND. THE EVIDENCE THEY
SUBMITTED TO ESTABLISH THEIR ALLEGED PRIVATE OWNERSHIP
IS THEREFORE UNAVAILING.

II

THE ALLEGED "VESTED RIGHTS" OF THE HEIRS OVER LOT X

CANNOT PREVAIL AGAINST GOVERNMENT OWNERSHIP OF PUBLIC
LAND UNDER THE REGALIAN DOCTRINE.

III

THERE IS NO BASIS TO CONCLUDE THAT PROCLAMATION 2273

RECOGNIZED THE OWNERSHIP OF LOT X BY THE HEIRS. NEITHER
IS THERE BASIS TO CLAIM THAT THE HEIRS RETAINED OWNERSHIP
OF LOT X DUE TO THE FAILURE OF THE CITY OF GENERAL SANTOS
TO ACCEPT THE DONATION OF LOT X.

IV

AFP-RSBS IS NOT A BUYER IN GOOD FAITH.24

Petitioner’s Arguments

Apart from echoing the pronouncements of the trial court, the Republic, in its
Petition and Consolidated Reply,25submits that respondents-intervenors’
applications for miscellaneous sales patents constitute acknowledgment of the
fact that Lot X was public land, and not private property acquired by prescription.

Petitioner argues further that with the express recognition that Lot X is public
land, it became incumbent upon respondents-intervenors – granting that they are
entitled to the issuance of miscellaneous sales patents – to prove that Lot X is
alienable and disposable land pursuant to Commonwealth Act No. 14126 (CA
141); and that in this regard respondents-intervenors failed. They offered proof,
in the form of reports and recommendations made by the Bureau of Lands and
the Board of Liquidators, among others, which were insufficient to establish that
Lot X was alienable and disposable land of the public domain. Besides, under the
law governing miscellaneous sales patents, Republic Act No. 73027 (RA 730), it is
specifically required that the property covered by the application should be one
that is not being used for a public purpose. Yet the fact remains that Lot X is
being utilized as a public recreational park. This being the case, Lot X should not
have qualified for distribution allowable under RA 730.

Petitioner next insists that if indeed respondents-intervenors have become the

owners of Lot X by acquisitive prescription, they should have long availed of the
proper remedy or remedies to perfect their title through an action for confirmation
of imperfect title or original registration. Yet they did not; instead, they resorted to
an application for issuance of miscellaneous sales patents. By so doing,
respondents-intervenors conceded that they had not acquired title to Lot X.

Petitioner next advances the view that respondents-intervenors’ vested rights

cannot prevail as against the State’s right to Lot X under the Regalian doctrine.
Petitioner argues that the presumption still weighs heavily in favor of state
ownership of all lands not otherwise declared private and that since Lot X was
not declared open for disposition as were Lots Y-1 and Y-2 by and under Proc.
2273, it should properly retain its character as an inalienable public recreational
park.

Finally, petitioner submits that the good or bad faith of AFP-RSBS is irrelevant
because any title issued on inalienable public land is void even in the hands of an
innocent purchaser for value.28

Respondents’ Arguments

AFP-RSBS and the respondents-intervenors collectively argue that the grounds

relied upon by the Republic in the petition involve questions of fact, which the
Court may not pass upon. They add that since private rights are explicitly
recognized under Proc. 168, the respondents-intervenors’ predecessor’s prior
possession since time immemorial over Lot X should thus be respected and
should bestow title upon respondents-intervenors.

They argue that if respondents-intervenors chose the wrong remedy in their

attempt to perfect their title over Lot X, this was an innocent mistake that in no
way divests such title, which was already perfected and acquired by virtue of
their predecessor’s open, continuous and uninterrupted possession of Lot X.

Finally, they argue that the reports and recommendations of the Bureau of Lands
and the Board of Liquidators constitute findings of facts of administrative
agencies which thus bind the Court. They add that the presumption arising from
the Regalian doctrine may be overcome by proof to the contrary, and that it has
in fact been overcome by the evidence presented before the trial court.
Our Ruling

The Court grants the Petition.

From the wording of Proc. 168, the land it comprises is subject to sale or
settlement, and thus alienable and disposable – Upon the recommendation of the
Secretary of Agriculture and Natural

Resources and pursuant to the authority vested in me by law, I, Diosdado

Macapagal, President x x x, do hereby withdraw from sale or settlement and
reserve for recreational and health resort site purposes, under the administration
of the municipality of General Santos, subject to private rights, if any there be x x
x29 (Emphasis and underscoring supplied.)

However, this alienable and disposable character of the land covered by the
proclamation was subsequently withdrawn, and the land was re-classified by
then President Macapagal to pave the way for the establishment of a park
reservation, subject only to previously acquired private rights. Respondents-
intervenors then lobbied for the exclusion of certain portions of the reservation
which they claimed to be theirs, allegedly acquired by their predecessor Kusop
through prescription. They were successful, for in 1983, then President Marcos
issued Proc. 2273, which excluded and segregated Lots Y-1 and Y-2 from the
coverage of Proc. 168. In addition, Proc. 2273 declared Lots Y-1 and Y-2 open
for distribution to qualified beneficiaries – which included the herein respondents-
intervenors. However, Lot X was retained as part of the reservation.

Respondents-intervenors did not question Proc. 2273, precisely because they

were the beneficiaries thereof; nor did they object to the retention of Lot X as part
of the park reserve. Instead, in 1997, they applied for, and were granted, sales
patents over Lot X.

Evidently, the sales patents over Lot X are null and void, for at the time the sales
patents were applied for and granted, the land had lost its alienable and
disposable character. It was set aside and was being utilized for a public
purpose, that is, as a recreational park. Under Section 83 of CA 141, "the
President may designate by proclamation any tract or tracts of land of the public
domain as reservations for the use of the Commonwealth of the Philippines or of
any of its branches, or of the inhabitants thereof, in accordance with regulations
prescribed for this purpose, or for quasi-public uses or purposes, when the public
interest requires it, including reservations for highways, rights of way for
railroads, hydraulic power sites, irrigation systems, communal pastures or leguas
comunales, public parks, public quarries, public fishponds, workingmen's village
and other improvements for the public benefit." And under the present
Constitution, national parks are declared part of the public domain, and shall be
conserved and may not be increased nor diminished, except by law.30

The 1935 Constitution classified lands of the public domain into agricultural,
forest or timber. Meanwhile, the 1973 Constitution provided the following
divisions: agricultural, industrial or commercial, residential, resettlement, mineral,
timber or forest and grazing lands, and such other classes as may be provided
by law, giving the government great leeway for classification. Then the 1987
Constitution reverted to the 1935 Constitution classification with one addition:
national parks. Of these, only agricultural lands may be alienated. x x
x31 (Emphasis supplied.)

Respondents-intervenors no longer had any right to Lot X – not by acquisitive

prescription, and certainly not by sales patent. In fact, their act of applying for the
issuance of miscellaneous sales patents operates as an express
acknowledgment that the State, and not respondents-intervenors, is the owner of
Lot X. It is erroneous to suppose that respondents-intervenors possessed title to

Lot X when they applied for miscellaneous sales patents, for the premise of such
grant or privilege is precisely that the State is the owner of the land, and that the
applicant acknowledges this and surrenders to State ownership. The
government, as the agent of the State, is possessed of the plenary power as the
persona in law to determine who shall be the favored recipients of public lands,
as well as under what terms they may be granted such privilege, not excluding
the placing of obstacles in the way of their exercise of what otherwise would be
ordinary acts of ownership.32

Respondents-intervenors’ actions betray their claim of ownership to Lot X. When

Proc. 168 was issued, they did not institute action to question its validity, using as
cause of action their claimed ownership and title over the land. The same is true
when Proc. 2273 came out. They did not file suit to invalidate it because it
contravenes their claimed ownership over Lot X. They simply sat and waited for
the good graces of the government to fall on their laps. They simply waited for
the

State to declare them beneficiaries of the land. And when the President failed to
include Lot X in Proc. 2273 and declare it open for disposition to them as
beneficiaries, they filed their applications for issuance of miscellaneous sales
patents over said lot. All these actions are anathema to a claim of ownership, and
instead indicate a willingness to abide by the actions of the State, a show of
respect for its dominion over the land.
Under the law, respondents-intervenors are charged with knowledge of the law;
they cannot feign ignorance. In fact, they could not claim to be unaware of Proc.
168, for precisely they hid under its protective mantle to seek the invalidation of a
donation claimed to have been made by them to one Jose Tayoto. Thus, in
Tayoto v. Heirs of Kusop,33 an alleged donee (Tayoto) of property located within
Lots X, Y-1, and Y-2 filed a case for quieting of title against the donors – herein
respondents-intervenors – to protect the property which they allegedly donated to
him, which was then in danger of being lost for the reason that respondents-
intervenors supposedly reneged on the donation. Respondents-intervenors filed
an urgent motion to dismiss the Complaint claiming, among others, the "invalidity
of the donation as the subject thereof had not yet been

excluded from the Magsaysay Park."34 In disposing of the case, the Court made
the following pronouncement:

Be that as it may, the donation is void. There are three essential elements of
donations: [1] the reduction of the patrimony of the donor, [2] the increase in the
patrimony of the donee, and [3] the intent to do an act of liberality (animus
donandi). Granting that there is an animus donandi, we find that the alleged
donation lacks the first two elements which presuppose the donor's ownership
rights over the subject of the donation which he transmits to the donee thereby
enlarging the donee's estate. This is in consonance with the rule that a donor
cannot lawfully convey what is not his property. In other words, a donation of a
parcel of land the dominical rights of which do not belong to the donor at the time
of the donation, is void. This holds true even if the subject of the donation is not
the land itself but the possessory and proprietary rights over said land.

In this case, although they allegedly declared Magsaysay Park as their own for
taxation purposes, the heirs of Cabalo Kusop did not have any transmissible
proprietary rights over the donated property at the time of the donation. In fact,
with respect to Lot Y-2, they still had to file a free patents application to obtain an
original certificate of title thereon. This is because Proclamation No. 2273
declaring as ‘open to disposition under the provisions of the Public Land Act’
some portions of the Magsaysay Park, is not an operative law which
automatically vests rights of ownership on the heirs of Cabalo Kusop over their
claimed parcels of land.

The import of said quoted proviso in a presidential proclamation is discussed in

the aforecited Republic v. Court of Appeals case which dealt with the validity of a
donation by a sales awardee of a parcel of land which was later reserved by
presidential proclamation for medical center site purposes. We held therein that
where the land is withdrawn from the public domain and declared as disposable
by the Director of Lands under the Public Land Act, the Sales Award covering the
same confers on a sales awardee only a possessory and not proprietary right
over the land applied, for. The disposition of the land by the Director is merely
provisional as the applicant still has to comply with the requirements of the law
before any patent is issued. It is only after the compliance with such
requirements that the patent is issued and the land applied for considered
‘permanently disposed of by the Government.’

The interpretation of said proviso should even be more stringent in this case
considering that with respect to Lot Y-1, the heirs of Cabalo Kusop do not appear
to have taken even the initial steps mandated by the Public Land Act for
claimants of the land excluded from the public domain. The alleged donation was
therefore no more than an exercise in futility.35 (Emphasis and underscoring
supplied.)

For obvious reasons, respondents-intervenors should have, as early as 1990

when the above Decision was promulgated, taken exception to its
pronouncements if they rightfully believed that the property covered by Proc. 168
(which included Lot X) rightfully belonged to them. Yet they did not. Instead, after
seven long years or in 1997, they filed their applications for the issuance of
miscellaneous sales patents over Lot X. This act of filing applications for the
issuance of miscellaneous sales patents in their name, taken in conjunction with
all the other attendant circumstances, constitutes an express acknowledgment
that the land does not belong to them, but to the State.

Neither may respondents-intervenors claim innocent mistake for all their

missteps in claiming the subject property as their own. The mistakes are simply
too numerous, and respondents-intervenors’ inaction since 1963 is too glaring.
To repeat, their actions are anathema to a claim of ownership. While it is true that
possession since time immemorial could result in the acquisition of title without
need of judicial or other action, respondents-intervenors’ actions and conduct, as
shown above, not only negate the application of such principle, but in fact point to
the opposite.

The principle of estoppel "bars [one] from denying the truth of a fact which has, in
the contemplation of law, become settled by the acts and proceedings of judicial
or legislative officers or by the act of the party himself, either by conventional
writing or by representations, express or implied or in pais."36

Besides, respondents-intervenors should not be allowed to trifle with the

processes of the State. They cannot resort to other remedies which are improper
1âwphi1

and do not provide for the opportunity to prove their title, but instead require them
to concede it before availment.
Contrary to the CA’s pronouncements, proof or evidence of possession since
time immemorial becomes irrelevant and cannot support a claim of ownership or
application for a patent, not only because respondents-intervenors have
conceded ownership to the State, but also on account of the fact that Lot X has
been withdrawn from being alienable and disposable public land, and is now
classified and being used as a national park. It has ceased to be alienable, and
no proof by the respondents-intervenors will operate to bolster their claim; Lot X
will never be awarded to them or to anybody so long as it is being used as a
public park or reserve.

The CA justifies that Proc. 2273 was issued on the assumption that respondents-
intervenors were about to donate Lot X to the city (General Santos City); thus,
the President has seen fit not to include it in the proclamation. This is specious. If
the President indeed knew of the intended donation, then it was all the more
necessary for him to have included Lot X in Proc. 2273 and withdrawn it from the
coverage of Magsaysay Park; or else the donation to the city would be null and
void, for want of right to donate. Yet he did not. Lot X was retained as part of the
park reserve precisely because the respondents-intervenors had no vested right
to it. And, far from confirming ownership over Lot X, the Republic is correct in the
opinion that the miscellaneous sales patents amount to an acknowledgment that
respondents-intervenors’ rights are inferior, and cannot defeat ownership over
Lot X by the State.

Given the above pronouncements, the CA’s ruling on other matters, as well as
the respondents’ arguments on specific points, become irrelevant and
inapplicable, if not necessarily invalidated.

Finally, as regards AFP-RSBS’ rights, the Court sustains the petitioner’s view
that "any title issued covering non-disposable lots even in the hands of an
alleged innocent purchaser for value shall be cancelled."37 We deem this case
worthy of such principle. Besides, we cannot ignore the basic principle that a
spring cannot rise higher than its source; as successor-in-interest, AFP-RSBS
cannot acquire a better title than its predecessor, the herein respondents-
intervenors.38 Having acquired no title to the property in question, there is no
other recourse but for AFP-RSBS to surrender to the rightful ownership of the
State.

WHEREFORE, premises considered, the Petition is GRANTED. The October 26,

2007 Decision of the Court of Appeals in CA-G.R. CV No. 75170 is ANNULLED
and SET ASIDE. The November 5, 2001 Decision of the Regional Trial Court,
Branch 23 of General Santos City in Civil Case No. 6419 is REINSTATED.
The Register of Deeds of General Santos City is ordered to CANCEL Transfer
Certificates of Title Nos. T-81051, T-81052, T-81053, T-81054, T-81055, T-
81056, T-81057, T-81058, T-81059, T-81060, T-81061, T-81062, T-81146, T-
81147, T-81150, and T-81151, and ISSUE in lieu thereof, new titles in the name
of the Republic of the Philippines.

No costs.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

JOSE PORTUGAL PEREZ ESTELA M. PERLAS-BERNABE

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN*

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 178611 January 14, 2013

ESTRELLA ADUAN ORPIANO, Petitioner,

vs.
SPOUSES ANTONIO C. TOMAS and MYRNA U. TOMAS, Respondents.

DECISION

DEL CASTILLO, J.:

Considerations of expediency cannot justify a resort to procedural shortcuts. The

end does not justify the means; a meritorious case cannot overshadow the
condition that the means employed to pursue it must be in keeping with the
Rules.

Assailed in this Petition for Review on Certiorari1 are the May 7, 2007
Decision2 of the Court of Appeals (CA) which dismissed the petition in CA-G.R.
SP No. 97341, and its June 28, 2007 Resolution3 denying petitioner's motion for
reconsideration.

Factual Antecedents

Petitioner Estrella Aduan Orpiano (Estrella) is the widow of Alejandro Orpiano

(Alejandro). Part of their conjugal estate is an 809.5-square meter lot in Quezon
City covered by Transfer Certificate of Title (TCT) No. RT-23468 (the lot).

In 1979, a Decision was rendered by the defunct Juvenile and Domestic

Relations Court (JDRC) of Quezon City declaring Estrella an absent/absentee
spouse and granting Alejandro the authority to sell the lot. The JDRC Decision
was annotated on the back of TCT No. RT-23468.

On March 19, 1996, Alejandro sold the lot on installment basis to respondent
spouses Antonio and Myrna Tomas (the Tomas spouses) for ₱12,170,283.00.
That very same day, a new title – TCT No. N-152326 – was issued in the name
of the Tomas spouses despite the fact that the purchase price has not been paid
in full, the spouses having been given until December of that same year to
complete their payment.
On October 28, 1996, Alejandro filed Civil Case No. Q-96-29261 (the collection
case) in the Regional Trial Court (RTC) of Quezon City, Branch 226 (the
collection court), seeking collection of the balance of the price in the amount of
₱4,314,100.00 supposedly left unpaid by the Tomas spouses, with damages.[4]

During the pendency of the collection case, Alejandro passed away. His heirs,
Estrella included, were substituted in his stead in the collection case. Estrella
moved to amend the Complaint to one for rescission/annulment of sale and
cancellation of title, but the court denied her motion. She next moved to be
dropped as party plaintiff but was again rebuffed.

On June 11, 2005, Estrella filed Civil Case No. Q-05-56216 (the annulment case)
for annulment of the March 1996 sale and cancellation of TCT No. N-152326,
with damages, against the Tomas spouses and the Register of Deeds of Quezon
City which was impleaded as a nominal party.5 The case was raffled to Branch 97
of the Quezon City RTC (the annulment court). In her Complaint, Estrella claimed
that the 1979 declaration of her absence and accompanying authority to sell the
lot were obtained by Alejandro through misrepresentation, fraud and deceit,
adding that the May 1979 JDRC Decision was not published as required by law
and by the domestic relations court. Thus, the declaration of absence and
Alejandro’s authority to sell the lot are null and void. Correspondingly, the
ensuing sale to the Tomas spouses should be voided, and TCT No. N-152326
cancelled.

In their Answer to the annulment Complaint, the Tomas spouses prayed for the
dismissal thereof on the ground of forum shopping, arguing that the filing of the
annulment case was prompted by the denial of Estrella’s motion initiated in the
collection case to amend the Complaint to one for annulment of sale. The
annulment case is Estrella’s attempt at securing a remedy which she could not
obtain in the collection case. The Tomas spouses added that the dismissal of the
annulment case would preclude the possibility that the two courts might render
conflicting decisions.

After pre-trial in the annulment case, the court proceeded to tackle the issue of
forum shopping. The parties submitted their respective memoranda touching on
the sole issue of whether Estrella is guilty of forum shopping.

Ruling of the Regional Trial Court

On September 25, 2006, the trial court issued an Order6 dismissing the
annulment case. It sustained the view taken by the Tomas spouses that Estrella
filed the annulment case only because the collection court denied her motion to
amend the case to one for annulment of the sale, and thus the annulment case
was Estrella’s attempt at obtaining a remedy which she could not secure in the
collection case. It added that because the two cases involve the same subject
matter, issues, and parties, there indeed is a possibility that conflicting decisions
could be rendered by it and the collection court, the possibility made even greater
because the two cases involve antithetical remedies.

Estrella moved for reconsideration but the court was unmoved.

Ruling of the Court of Appeals

On December 27, 2006, Estrella filed with the CA a Petition for

Certiorari7 questioning the September 25, 2006 Order of the annulment court.
The appellate court, however, could not be persuaded. Finding no grave abuse
of discretion in the annulment court's dismissal of the annulment case, the CA
found that Estrella was indeed guilty of forum shopping in filing the annulment
suit while the collection case was pending. Applying the test articulated in a
multitude of decided cases – that where a final judgment in one case will amount
to res judicata in another – it follows that there is forum shopping. The CA held
that a final judgment in the collection case ordering the Tomas spouses to pay
the supposed balance of the price will necessarily result in a finding that the sale
between Alejandro and the Tomas spouses is a valid sale. This then would
prevent a declaration of nullity of the sale in the annulment case.

Accordingly, the CA dismissed Estrella’s Petition for Certiorari. Her Motion for
Reconsideration was likewise denied, hence the present Petition.

Issue

The sole issue to be resolved in this case is whether there is indeed forum
shopping.

Petitioner’s Arguments

Estrella argues that it was Alejandro and not she who initiated the collection
case, and that she, their two children, and Alejandro’s four illegitimate children
were merely substituted in the case as his heirs by operation of law; thus, she
should not be bound by the collection case. She claims that in the first place, she
was not privy to Alejandro’s sale of the lot to the Tomas spouses. Having been
unwillingly substituted in the collection case, she forthwith moved to amend the
Complaint in order to include, as one of the remedies sought therein, annulment
of the sale insofar as her conjugal share in the lot is concerned. But the court
denied her motion. Next, she moved to be dropped or stricken out as plaintiff to
the collection case, but again, the trial court rebuffed her.
Estrella maintains that on account of these repeated denials, she was left with no
other alternative but to institute the annulment case. She claims that since the
collection case does not further her interest — which is to seek annulment of the
sale and recover her conjugal share — and the collection court would not grant
her motions to amend and to be dropped or stricken out as party plaintiff therein,
she thus has a right to maintain a suit to have the sale annulled. It is therefore
erroneous for the CA to state that she initiated the annulment suit only for the
purpose of obtaining a favorable ruling in said court, which she could not achieve
in the collection court.

She further adds that there is obviously no identity of parties, cause of action, or
reliefs prayed for between the collection and annulment cases; the two involve
absolutely opposite reliefs. She stresses the fact that she is seeking annulment
of the sale with respect only to her conjugal share, and not those of her co-heirs.

Respondents’ Arguments

The Tomas spouses, apart from echoing the trial court and the CA, emphasize
that the rule prohibiting forum shopping precisely seeks to avoid the situation
where the two courts – the collection court and the annulment court – might
render two separate and contradictory decisions. If the annulment case is
allowed to proceed, then it could result in a judgment declaring the sale null and
void, just as a decision in the collection case could be issued ordering them to
pay the balance of the price, which is tantamount to a declaration that the sale is
valid.

They add that Estrella could no longer question the 1979 JDRC Decision, having
failed to challenge the same immediately upon obtaining notice thereof; she did
not even bother to have her declaration of absence lifted. They claim that after
the lapse of 26 years, prescription has finally set in. They likewise argue that if
both cases are allowed to remain pending, a ridiculous situation could arise
where, after having paid the balance as ordered by the collection court, they
could lose not only the lot but also their payments in case a decision in the
annulment court is rendered nullifying and canceling the sale and ordering the
return of the lot to Alejandro’s heirs, Estrella included.

Our Ruling

The petition must be denied.

"Forum shopping is defined as an act of a party, against whom an adverse

judgment or order has been rendered in one forum, of seeking and possibly
getting a favorable opinion in another forum, other than by appeal or special civil
action for certiorari. It may also be the institution of two or more actions or
proceedings grounded on the same cause on the supposition that one or the
other court would make a favorable disposition. x x x It is expressly prohibited x x
x because it trifles with and abuses court processes, degrades the administration
of justice, and congests court dockets. A willful and deliberate violation of the rule
against forum shopping is a ground for summary dismissal of the case, and may
also constitute direct contempt."8

Although the Court believes that Estrella was not prompted by a desire to trifle
with judicial processes, and was acting in good faith in initiating the annulment
case, still the said case should be dismissed because it produces the same effect
which the rule on forum shopping was fashioned to preclude. If the collection
case is not dismissed and it, together with the annulment case, proceeds to
finality, not only do we have a possibility of conflicting decisions being rendered;
an unfair situation, as envisioned by the Tomas spouses, might arise where after
having paid the balance of the price as ordered by the collection court, the
cancellation of the TCT and return of the property could be decreed by the
annulment court. Besides, allowing the two cases to remain pending makes
litigation simply a game of chance where parties may hedge their position by
betting on both sides of the case, or by filing several cases involving the same
issue, subject matter, and parties, in the hope of securing victory in at least one
of them. But, as is already well known, the "trek to justice is not a game of
chance or skill but rather a quest for truth x x x."9

Moreover, allowing Estrella to proceed with the annulment case while the
collection case is still pending is like saying that she may accept the deed of sale
and question it at the same time. For this is the necessary import of the two
pending cases: joining as plaintiff in the collection case implies approval of the
deed, while suing to declare it null and void in the annulment court entails a
denunciation thereof. This may not be done. "A person cannot accept and reject
the same instrument"10 at the same time. It must be remembered that "the
absence of the consent of one (spouse to a sale) renders the entire sale null and
void, including the portion of the conjugal property pertaining to the spouse who
contracted the sale."11

The Court realizes the quandary that Estrella — motivated by the solitary desire
to protect her conjugal share in the lot from what she believes was Alejandro’s
undue interference in disposing the same without her knowledge and consent —
finds herself in. While raring to file the annulment case, she has to first cause the
dismissal of the collection case because she was by necessity substituted therein
by virtue of her being Alejandro’s heir; but the collection court nonetheless
blocked all her attempts toward such end. The collection court failed to
comprehend her predicament, her need to be dropped as party to the collection
case in order to pursue the annulment of the sale.

As plaintiff in the collection case, Estrella – though merely succeeding to

Alejandro’s rights – was an indispensable party, or one without whom no final
determination can be had in the collection case.12 Strictly, she may not be
dropped from the case. However, because of her dual identity, first as heir and
second as owner of her conjugal share, she has been placed in the unique
position where she has to succeed to her husband’s rights, even as she must
protect her separate conjugal share from Alejandro’s perceived undue
disposition. She may not seek to amend the cause of action in the collection case
to one for annulment of sale, because this adversely affects the interests of her
co-heirs, which is precisely to obtain payment of the supposed balance of the
sale price.

Nor may Estrella simultaneously maintain the two actions in both capacities, as
heir in the collection case and as separate owner of her conjugal share in the
annulment case. This may not be done, because, as was earlier on declared, this
amounts to simultaneously accepting and rejecting the same deed of sale. Nor is
it possible to prosecute the annulment case simultaneously with the collection
case, on the premise that what is merely being annulled is the sale by Alejandro
of Estrella’s conjugal share. To repeat, the absence of the consent of one spouse
to a sale renders the entire sale null and void, including the portion of the
conjugal property pertaining to the spouse who contracted the sale.

Undoubtedly, Estrella had the right to maintain the annulment case as a measure
of protecting her conjugal share. There thus exists a just cause for her to be
dropped as party plaintiff in the collection case so that she may institute and
maintain the annulment case without violating the rule against forum shopping.
Unless this is done, she stands to lose her share in the conjugal property. But the
issue of whether the sale should be annulled is a different matter altogether. 1âwphi1

Under the Rules, parties may be dropped or added by order of the court on
motion of any party or on its own initiative at any stage of the action and on such
terms as are just.13 Indeed, it would have been just for the collection court to have
allowed Estrella to prosecute her annulment case by dropping her as a party
plaintiff in the collection case, not only so that she could protect her conjugal
share, but also to prevent the interests of her co-plaintiffs from being adversely
affected by her conflicting actions in the same case. By seeking to be dropped
from the collection case, Estrella was foregoing collection of her share in the
amount that may be due and owing from the sale. It does not imply a waiver in
any manner that affects the rights of the other heirs.
While Estrella correctly made use of the remedies available to her – amending
the Complaint and filing a motion to drop her as a party – she committed a
mistake in proceeding to file the annulment case directly after these remedies
were denied her by the collection court without first questioning or addressing the
propriety of these denials. While she may have been frustrated by the collection
court’s repeated rejection of her motions and its apparent inability to appreciate
her plight, her proper recourse nevertheless should have been to file a petition
for certiorari or otherwise question the trial court’s denial of her motion to be
dropped as plaintiff, citing just reasons which call for a ruling to the contrary.
Issues arising from joinder or misjoinder of parties are the proper subject of
certiorari.14

In fine, we reiterate that considerations of expediency cannot justify a resort to

procedural shortcuts. The end does not justify the means; a meritorious case
cannot overshadow the condition that the means employed to pursue it must be
in keeping with the Rules.

WHEREFORE, premises considered, the Petition is DENIED for lack of merit.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 170770 January 9, 2013

VITALIANO N. AGUIRRES II and FIDEL N. AGUIRRE, Petitioners,

vs.
FQB+7, INC., NATHANIEL D. BOCOBO, PRISCILA BOCOBO and ANTONIO
DE VILLA, Respondents.

DECISION

DEL CASTILLO, J.:

Pursuant to Section 145 of the Corporation Code, an existing intra-corporate

dispute, which does not constitute a continuation of corporate business, is not
affected by the subsequent dissolution of the corporation.

Before the Court is a Petition for Review on Certiorari of the June 29, 2005
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 87293, which nullified
the trial court’s writ of preliminary injunction and dismissed petitioner Vitaliano N.
Aguirre’s (Vitaliano) Complaint before the Regional Trial Court (RTC) for lack of
jurisdiction. The dispositive portion of the assailed Decision reads:

WHEREFORE, the assailed October 15, 2004 Order, as well as the October 27,
2004 Writ of Preliminary Injunction, are SET ASIDE. With FQB+7, Inc.’s
dissolution on September 29, 2003 and Case No. 04111077’s ceasing to become
an intra-corporate dispute said case is hereby ordered DISMISSED for want of
jurisdiction.

SO ORDERED.2

Likewise assailed in this Petition is the appellate court’s December 16, 2005
Resolution,3 which denied a reconsideration of the assailed Decision.

Factual Antecedents

On October 5, 2004, Vitaliano filed, in his individual capacity and on behalf of

FQB+7, Inc. (FQB+7), a Complaint4for intra-corporate dispute, injunction,
inspection of corporate books and records, and damages, against respondents
Nathaniel D. Bocobo (Nathaniel), Priscila D. Bocobo (Priscila), and Antonio De
Villa (Antonio). The Complaint alleged that FQB+7 was established in 1985 with
the following directors and subscribers, as reflected in its Articles of
Incorporation:

Directors Subscribers
1. Francisco Q. Bocobo 1. Francisco Q. Bocobo
2. Fidel N. Aguirre 2. Fidel N. Aguirre
3. Alfredo Torres 3. Alfredo Torres
4. Victoriano Santos 4. Victoriano Santos
5. Victorino Santos5 5. Victorino Santos
6. Vitaliano N. Aguirre II
7. Alberto Galang
8. Rolando B. Bechayda6

To Vitaliano’s knowledge, except for the death of Francisco Q. Bocobo and

Alfredo Torres, there has been no other change in the above listings.

The Complaint further alleged that, sometime in April 2004, Vitaliano discovered
a General Information Sheet (GIS) of FQB+7, dated September 6, 2002, in the
Securities and Exchange Commission (SEC) records. This GIS was filed by
Francisco Q. Bocobo’s heirs, Nathaniel and Priscila, as FQB+7’s president and
secretary/treasurer, respectively. It also stated FQB+7’s directors and
subscribers, as follows:

Directors Subscribers
1. Nathaniel D. Bocobo 1. Nathaniel D. Bocobo
2. Priscila D. Bocobo 2. Priscila D. Bocobo
3. Fidel N. Aguirre 3. Fidel N. Aguirre
4. Victoriano Santos 4. Victorino7 Santos
5. Victorino Santos 5. Victorino Santos
6. Consolacion Santos8 6. Consolacion Santos9
Further, the GIS reported that FQB+7’s stockholders held their annual meeting
on September 3, 2002.10

The substantive changes found in the GIS, respecting the composition of

directors and subscribers of FQB+7, prompted Vitaliano to write to the "real"
Board of Directors (the directors reflected in the Articles of Incorporation),
represented by Fidel N. Aguirre (Fidel). In this letter11 dated April 29, 2004,
Vitaliano questioned the validity and truthfulness of the alleged stockholders
meeting held on September 3, 2002. He asked the "real" Board to rectify what he
perceived as erroneous entries in the GIS, and to allow him to inspect the
corporate books and records. The "real" Board allegedly ignored Vitaliano’s
request.

On September 27, 2004, Nathaniel, in the exercise of his power as FQB+7’s

president, appointed Antonio as the corporation’s attorney-in-fact, with power of
administration over the corporation’s farm in Quezon Province.12Pursuant thereto,
Antonio attempted to take over the farm, but was allegedly prevented by Fidel
and his men.13

Characterizing Nathaniel’s, Priscila’s, and Antonio’s continuous representation of

the corporation as a usurpation of the management powers and prerogatives of
the "real" Board of Directors, the Complaint asked for an injunction against them
and for the nullification of all their previous actions as purported directors,
including the GIS they had filed with the SEC. The Complaint also sought
damages for the plaintiffs and a declaration of Vitaliano’s right to inspect the
corporate records.

The case, docketed as SEC Case No. 04-111077, was assigned to Branch 24 of
the RTC of Manila (Manila RTC), which was a designated special commercial
court, pursuant to A.M. No. 03-03-03-SC.14

The respondents failed, despite notice, to attend the hearing on Vitaliano’s

application for preliminary injunction.15Thus, in an Order16 dated October 15,
2004, the trial court granted the application based only on Vitaliano’s testimonial
and documentary evidence, consisting of the corporation’s articles of
incorporation, by-laws, the GIS, demand letter on the "real" Board of Directors,
and police blotter of the incident between Fidel’s and Antonio’s groups. On
October 27, 2004, the trial court issued the writ of preliminary injunction17 after
Vitaliano filed an injunction bond.

The respondents filed a motion for an extension of 10 days to file the "pleadings
warranted in response to the complaint," which they received on October 6,
2004.18 The trial court denied this motion for being a prohibited pleading under
Section 8, Rule 1 of the Interim Rules of Procedure Governing Intra-corporate
Controversies under Republic Act (R.A.) No. 8799.19

The respondents filed a Petition for Certiorari and Prohibition,20 docketed as CA-
G.R. SP No. 87293, before the CA. They later amended their Petition by
impleading Fidel, who allegedly shares Vitaliano’s interest in keeping them out of
the corporation, as a private respondent therein.21

The respondents sought, in their certiorari petition, the annulment of all the
proceedings and issuances in SEC Case No. 04-11107722 on the ground that
Branch 24 of the Manila RTC has no jurisdiction over the subject matter, which
they defined as being an agrarian dispute.23 They theorized that Vitaliano’s real
goal in filing the Complaint was to maintain custody of the corporate farm in
Quezon Province. Since this land is agricultural in nature, they claimed that
jurisdiction belongs to the Department of Agrarian Reform (DAR), not to the
Manila RTC.24 They also raised the grounds of improper venue (alleging that the
real corporate address is different from that stated in the Articles of
Incorporation)25 and forum-shopping26 (there being a pending case between the
parties before the DAR regarding the inclusion of the corporate property in the
agrarian reform program).27 Respondents also raised their defenses to Vitaliano’s
suit, particularly the alleged disloyalty and fraud committed by the "real" Board of
Directors,28 and respondents’ "preferential right to possess the corporate
property" as the heirs of the majority stockholder Francisco Q. Bocobo.29

The respondents further informed the CA that the SEC had already revoked
FQB+7’s Certificate of Registration on September 29, 2003 for its failure to
comply with the SEC reportorial requirements.30 The CA determined that the
corporation’s dissolution was a conclusive fact after petitioners Vitaliano and
Fidel failed to dispute this factual assertion.31

Ruling of the Court of Appeals

The CA determined that the issues of the case are the following: (1) whether the
trial court’s issuance of the writ of preliminary injunction, in its October 15, 2004
Order, was attended by grave abuse of discretion amounting to lack of
jurisdiction; and (2) whether the corporation’s dissolution affected the trial court’s
jurisdiction to hear the intra corporate dispute in SEC Case No. 04-111077.32

On the first issue, the CA determined that the trial court committed a grave abuse
of discretion when it issued the writ of preliminary injunction to remove the
respondents from their positions in the Board of Directors based only on
Vitaliano’s self-serving and empty assertions. Such assertions cannot outweigh
the entries in the GIS, which are documented facts on record, which state that
respondents are stockholders and were duly elected corporate directors and
officers of FQB+7, Inc. The CA held that Vitaliano only proved a future right in
case he wins the suit. Since an injunction is not a remedy to protect future,
contingent or abstract rights, then Vitaliano is not entitled to a writ.33

Further, the CA disapproved the discrepancy between the trial court’s October
15, 2004 Order, which granted the application for preliminary injunction, and its
writ dated October 27, 2004. The Order enjoined all the respondents "from
entering, occupying, or taking over possession of the farm owned by Atty.
Vitaliano Aguirre II," while the writ states that the subject farm is "owned by
plaintiff corporation located in Mulanay, Quezon Province." The CA held that this
discrepancy imbued the October 15, 2004 Order with jurisdictional infirmity.34

On the second issue, the CA postulated that Section 122 of the Corporation
Code allows a dissolved corporation to continue as a body corporate for the
limited purpose of liquidating the corporate assets and distributing them to its
creditors, stockholders, and others in interest. It does not allow the dissolved
corporation to continue its business. That being the state of the law, the CA
determined that Vitaliano’s Complaint, being geared towards the continuation of
FQB+7, Inc.’s business, should be dismissed because the corporation has lost its
juridical personality.35Moreover, the CA held that the trial court does not have
jurisdiction to entertain an intra-corporate dispute when the corporation is already
dissolved.36

After dismissing the Complaint, the CA reminded the parties that they should
proceed with the liquidation of the dissolved corporation based on the existing
GIS, thus:

With SEC’s revocation of its certificate of registration on September 29, 2004

[sic], FQB+7, Inc. will be obligated to wind up its affairs. The Corporation will
have to be liquidated within the 3-year period mandated by Sec. 122 of the
Corporation Code.

Regardless of the method it will opt to liquidate itself, the Corporation will have to
reckon with the members of the board as duly listed in the General Information
Sheet last filed with SEC. Necessarily, and as admitted in the complaint below,
the following as listed in the Corporation’s General Information Sheet dated
September 6, 2002, will have to continue acting as Members of the Board of
FQB+7, Inc. viz:

x x x x37
Herein petitioners filed a Motion for Reconsideration.38 They argued that the CA
erred in ruling that the October 15, 2004 Order was inconsistent with the writ.
They explained that pages 2 and 3 of the said Order were interchanged in the
CA’s records, which then misled the CA to its erroneous conclusion. They also
posited that the original sentence in the correct Order reads: "All defendants are
further enjoined from entering, occupying or taking over possession of the farm
owned by plaintiff corporation located in Mulanay, Quezon." This sentence is in
accord with what is ordered in the writ, hence the CA erred in nullifying the Order.

On the second issue, herein petitioners maintained that the CA erred in

characterizing the reliefs they sought as a continuance of the dissolved
corporation’s business, which is prohibited under Section 122 of the Corporation
Code. Instead, they argued, the relief they seek is only to determine the real
Board of Directors that can represent the dissolved corporation.

The CA denied the Motion for Reconsideration in its December 16, 2005
Resolution.39 It determined that the crucial issue is the trial court’s jurisdiction
over an intra-corporate dispute involving a dissolved corporation.40 Based on the
prayers in the Complaint, petitioners seek a determination of the real Board that
can take over the management of the corporation’s farm, not to sit as a
liquidation Board. Thus, contrary to petitioners’ claims, their Complaint is not
geared towards liquidation but a continuance of the corporation’s business.

Issues

1. Whether the CA erred in annulling the October 15, 2004 Order based on
interchanged pages.

2. Whether the Complaint seeks to continue the dissolved corporation’s

business.

3. Whether the RTC has jurisdiction over an intra-corporate dispute

involving a dissolved corporation.

Our Ruling

The Petition is partly meritorious.

On the nullification of the Order of preliminary injunction.

Petitioners reiterate their argument that the CA was misled by the interchanged
pages in the October 15, 2004 Order. They posit that had the CA read the Order
in its correct sequence, it would not have nullified the Order on the ground that it
was issued with grave abuse of discretion amounting to lack of jurisdiction.41

Petitioners’ argument fails to impress. The CA did not nullify the October 15,
2004 Order merely because of the interchanged pages. Instead, the CA
determined that the applicant, Vitaliano, was not able to show that he had an
actual and existing right that had to be protected by a preliminary injunction. The
most that Vitaliano was able to prove was a future right based on his victory in
the suit. Contrasting this future right of Vitaliano with respondents’ existing right
under the GIS, the CA determined that the trial court should not have disturbed
the status quo. The CA’s discussion regarding the interchanged pages was made
only in addition to its above ratiocination. Thus, whether the pages were
interchanged or not will not affect the CA’s main finding that the trial court issued
the Order despite the absence of a clear and existing right in favor of the
applicant, which is tantamount to grave abuse of discretion. We cannot disturb
the CA’s finding on this score without any showing by petitioners of strong basis
to warrant the reversal.

Is the Complaint a continuation of

business?

Section 122 of the Corporation Code prohibits a dissolved corporation from

continuing its business, but allows it to continue with a limited personality in order
to settle and close its affairs, including its complete liquidation, thus:

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.

xxxx

Upon learning of the corporation’s dissolution by revocation of its corporate

franchise, the CA held that the intra-corporate Complaint, which aims to continue
the corporation’s business, must now be dismissed under Section 122.

Petitioners concede that a dissolved corporation can no longer continue its

business. They argue, however, that Section 122 allows a dissolved corporation
to wind up its affairs within 3 years from its dissolution. Petitioners then maintain
that the Complaint, which seeks only a declaration that respondents are
strangers to the corporation and have no right to sit in the board or act as officers
thereof, and a return of Vitaliano’s stockholdings, intends only to resolve
remaining corporate issues. The resolution of these issues is allegedly part of
corporate winding up.

Does the Complaint seek a continuation of business or is it a settlement of

corporate affairs? The answer lies in the prayers of the Complaint, which state:

PRAYER

WHEREFORE, it is most respectfully prayed of this Honorable Court that

judgment be rendered in favor of the plaintiffs and against the defendants, in the
following wise:

I. ON THE PRAYER OF TRO/STATUS QUO ORDER AND WRIT OF

PRELIMINARY INJUNCTION:

1. Forthwith and pending the resolution of plaintiffs’ prayer for

issuance of writ of preliminary injunction, in order to maintain the
status quo, a status quo order or temporary restraining order (TRO)
be issued enjoining the defendants, their officers, employees, and
agents from exercising the powers and authority as members of the
Board of Directors of plaintiff FQB as well as officers thereof and
from misrepresenting and conducting themselves as such, and
enjoining defendant Antonio de Villa from taking over the farm of the
plaintiff FQB and from exercising any power and authority by reason
of his appointment emanating from his co-defendant Bocobos.

2. After due notice and hearing and during the pendency of this
action, to issue writ of preliminary injunction prohibiting the
defendants from committing the acts complained of herein, more
particularly those enumerated in the immediately preceeding
paragraph, and making the injunction permanent after trial on the
merits.

II. ON THE MERITS

After trial, judgment be rendered in favor of the plaintiffs and against the
defendants, as follows:
 1. Declaring defendant Bocobos as without any power and authority
to represent or conduct themselves as members of the Board of
Directors of plaintiff FQB, or as officers thereof.

2. Declaring that Vitaliano N. Aguirre II is a stockholder of plaintiff

FQB owning fifty (50) shares of stock thereof.

3. Allowing Vitaliano N. Aguirre II to inspect books and records of the

company.

4. Annulling the GIS, Annex "C" of the Complaint as fraudulent and

illegally executed and filed.

5. Ordering the defendants to pay jointly and solidarily the sum of at

least ₱200,000.00 as moral damages; at least ₱100,000.00 as
exemplary damages; and at least ₱100,000.00 as and for attorney’s
fees and other litigation expenses.

Plaintiffs further pray for costs and such other relief just and equitable under the
premises.42

The Court fails to find in the prayers above any intention to continue the
corporate business of FQB+7. The Complaint does not seek to enter into
contracts, issue new stocks, acquire properties, execute business transactions,
etc. Its aim is not to continue the corporate business, but to determine and
vindicate an alleged stockholder’s right to the return of his stockholdings and to
participate in the election of directors, and a corporation’s right to remove
usurpers and strangers from its affairs. The Court fails to see how the resolution
of these issues can be said to continue the business of FQB+7.

Neither are these issues mooted by the dissolution of the corporation. A

corporation’s board of directors is not rendered functus officio by its dissolution.
Since Section 122 allows a corporation to continue its existence for a limited
purpose, necessarily there must be a board that will continue acting for and on
behalf of the dissolved corporation for that purpose. In fact, Section 122
authorizes the dissolved corporation’s board of directors to conduct its liquidation
within three years from its dissolution. Jurisprudence has even recognized the
board’s authority to act as trustee for persons in interest beyond the said three-
year period.43 Thus, the determination of which group is the bona fide or rightful
board of the dissolved corporation will still provide practical relief to the parties
involved.
The same is true with regard to Vitaliano’s shareholdings in the dissolved
corporation. A party’s stockholdings in a corporation, whether existing or
dissolved, is a property right44 which he may vindicate against another party who
has deprived him thereof. The corporation’s dissolution does not extinguish such
property right. Section 145 of the Corporation Code ensures the protection of this
right, thus:

Sec. 145. Amendment or repeal. – No right or remedy in favor of or against any

corporation, its stockholders, members, directors, trustees, or officers, nor any
liability incurred by any such corporation, stockholders, members, directors,
trustees, or officers, shall be removed or impaired either by the subsequent
dissolution of said corporation or by any subsequent amendment or repeal of this
Code or of any part thereof. (Emphases supplied.)

On the dismissal of the Complaint for

lack of jurisdiction.

The CA held that the trial court does not have jurisdiction over an intra-corporate
dispute involving a dissolved corporation. It further held that due to the
corporation’s dissolution, the qualifications of the respondents can no longer be
questioned and that the dissolved corporation must now commence liquidation
proceedings with the respondents as its directors and officers.

The CA’s ruling is founded on the assumptions that intra-corporate controversies

continue only in existing corporations; that when the corporation is dissolved,
these controversies cease to be intra-corporate and need no longer be resolved;
and that the status quo in the corporation at the time of its dissolution must be
maintained. The Court finds no basis for the said assumptions.

Intra-corporate disputes remain even

when the corporation is dissolved.

Jurisdiction over the subject matter is conferred by law. R.A. No.

879945 conferred jurisdiction over intra-corporate controversies on courts of
general jurisdiction or RTCs,46 to be designated by the Supreme Court. Thus, as
long as the nature of the controversy is intra-corporate, the designated RTCs
have the authority to exercise jurisdiction over such cases.

So what are intra-corporate controversies? R.A. No. 8799 refers to Section 5 of

Presidential Decree (P.D.) No. 902-A (or The SEC Reorganization Act) for a
description of such controversies:
 a) Devices or schemes employed by or any acts, of the board of directors,
business associates, its officers or partners, amounting to fraud and
misrepresentation which may be detrimental to the interest of the public
and/or of the stockholder, partners, members of associations or
organizations registered with the Commission;

b) Controversies arising out of intra-corporate or partnership relations,

between and among stockholders, members, or associates; between any
or all of them and the corporation, partnership or association of which they
are stockholders, members or associates, respectively; and between such
corporation, partnership or association and the state insofar as it concerns
their individual franchise or right to exist as such entity;

c) Controversies in the election or appointments of directors, trustees,

officers or managers of such corporations, partnerships or associations.

The Court reproduced the above jurisdiction in Rule 1 of the Interim Rules of
Procedure Governing Intra-corporate Controversies under R.A. No. 8799:

SECTION 1. (a) Cases Covered – These Rules shall govern the procedure to be
observed in civil cases involving the following:

(1) Devices or schemes employed by, or any act of, the board of
directors, business associates, officers or partners, amounting to
fraud or misrepresentation which may be detrimental to the interest
of the public and/or of the stockholders, partners, or members of any
corporation, partnership, or association;

(2) Controversies arising out of intra-corporate, partnership, or

association relations, between and among stockholders, members,
or associates; and between, any or all of them and the corporation,
partnership, or association of which they are stockholders, members,
or associates, respectively;

(3) Controversies in the election or appointment of directors,

trustees, officers, or managers of corporations, partnerships, or
associations;

(4) Derivative suits; and

(5) Inspection of corporate books.

Meanwhile, jurisprudence has elaborated on the above definitions by providing
tests in determining whether a controversy is intra-corporate. Reyes v. Regional
Trial Court of Makati, Br. 14247 contains a comprehensive discussion of these two
tests, thus:

A review of relevant jurisprudence shows a development in the Court's approach

in classifying what constitutes an intra-corporate controversy. Initially, the main
consideration in determining whether a dispute constitutes an intra-corporate
controversy was limited to a consideration of the intra-corporate relationship
existing between or among the parties. The types of relationships embraced
under Section 5(b) x x x were as follows:

a) between the corporation, partnership, or association and the public;

b) between the corporation, partnership, or association and its

stockholders, partners, members, or officers;

c) between the corporation, partnership, or association and the State as far

as its franchise, permit or license to operate is concerned; and

d) among the stockholders, partners or associates themselves. xxx

The existence of any of the above intra-corporate relations was sufficient to

confer jurisdiction to the SEC now the RTC, regardless of the subject matter of
the dispute. This came to be known as the relationship test.

However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain
Reserve, Inc., the Court introduced the nature of the controversy test. We
declared in this case that it is not the mere existence of an intra-corporate
relationship that gives rise to an intra-corporate controversy; to rely on the
relationship test alone will divest the regular courts of their jurisdiction for the sole
reason that the dispute involves a corporation, its directors, officers, or
stockholders. We saw that there is no legal sense in disregarding or minimizing
the value of the nature of the transactions which gives rise to the dispute.

Under the nature of the controversy test, the incidents of that relationship must
also be considered for the purpose of ascertaining whether the controversy itself
is intra-corporate. The controversy must not only be rooted in the existence of an
intra-corporate relationship, but must as well pertain to the enforcement of the
parties' correlative rights and obligations under the Corporation Code and the
internal and intra-corporate regulatory rules of the corporation. If the relationship
and its incidents are merely incidental to the controversy or if there will still be
conflict even if the relationship does not exist, then no intra-corporate controversy
exists.

The Court then combined the two tests and declared that jurisdiction should be
determined by considering not only the status or relationship of the parties, but
also the nature of the question under controversy. This two-tier test was adopted
in the recent case of Speed Distribution, Inc. v. Court of Appeals:

'To determine whether a case involves an intra-corporate controversy, and is to

be heard and decided by the branches of the RTC specifically designated by the
Court to try and decide such cases, two elements must concur: (a) the status or
relationship of the parties, and [b] the nature of the question that is the subject of
their controversy.1âw phi 1

The first element requires that the controversy must arise out of intra-corporate
or partnership relations between any or all of the parties and the corporation,
partnership, or association of which they are stockholders, members or
associates, between any or all of them and the corporation, partnership or
association of which they are stockholders, members or associates, respectively;
and between such corporation, partnership, or association and the State insofar
as it concerns the individual franchises. The second element requires that the
dispute among the parties be intrinsically connected with the regulation of the
corporation. If the nature of the controversy involves matters that are purely civil
in character, necessarily, the case does not involve an intra-corporate
controversy.' (Citations and some emphases omitted; emphases supplied.)

Thus, to be considered as an intra-corporate dispute, the case: (a) must arise out
of intra-corporate or partnership relations, and (b) the nature of the question
subject of the controversy must be such that it is intrinsically connected with the
regulation of the corporation or the enforcement of the parties’ rights and
obligations under the Corporation Code and the internal regulatory rules of the
corporation. So long as these two criteria are satisfied, the dispute is intra-
corporate and the RTC, acting as a special commercial court, has jurisdiction
over it.

Examining the case before us in relation to these two criteria, the Court finds and
so holds that the case is essentially an intra-corporate dispute. It obviously arose
from the intra-corporate relations between the parties, and the questions involved
pertain to their rights and obligations under the Corporation Code and matters
relating to the regulation of the corporation. We further hold that the nature of the
case as an intra-corporate dispute was not affected by the subsequent
dissolution of the corporation.
It bears reiterating that Section 145 of the Corporation Code protects, among
others, the rights and remedies of corporate actors against other corporate
actors. The statutory provision assures an aggrieved party that the corporation’s
dissolution will not impair, much less remove, his/her rights or remedies against
the corporation, its stockholders, directors or officers. It also states that corporate
dissolution will not extinguish any liability already incurred by the corporation, its
stockholders, directors, or officers. In short, Section 145 preserves a corporate
actor’s cause of action and remedy against another corporate actor. In so doing,
Section 145 also preserves the nature of the controversy between the parties as
an intra-corporate dispute.

The dissolution of the corporation simply prohibits it from continuing its business.
However, despite such dissolution, the parties involved in the litigation are still
corporate actors. The dissolution does not automatically convert the parties into
total strangers or change their intra-corporate relationships. Neither does it
change or terminate existing causes of action, which arose because of the
corporate ties between the parties. Thus, a cause of action involving an intra-
corporate controversy remains and must be filed as an intra-corporate dispute
despite the subsequent dissolution of the corporation.

WHEREFORE, premises considered, the Petition for Review on Certiorari is

PARTIALLY GRANTED. The assailed June 29, 2005 Decision of the Court of
Appeals in CA-G.R. SP No. 87293, as well as its December 16, 2005 Resolution,
are ANNULLED with respect to their dismissal of SEC Case No. 04-111077 on
the ground of lack of jurisdiction. The said case is ordered REINSTATED before
Branch 24 of the Regional Trial Court of Manila. The rest of the assailed
issuances are AFFIRMED.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 180919 January 9, 2013

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
MELBA L. ESPIRITU, PRIMITIVA M. SERASPE, SIMPRESUETA M.
SERASPE, a.k.a. "Aileen," Accused.
SIMPRESUETA M. SERASPE, a.k.a. "Aileen," Accused-Appellant.

DECISION

DEL CASTILLO, J.:

Appellant Simpresueta M. Seraspe (appellant) assails the July 25, 2007

Decision1 of the Court of Appeals (CA) in CA-G.R. CR-H.C. No. 02045 which
affirmed her conviction for illegal sale of dangerous drugs by the Regional Trial
Court (RTC) of Las Piñas City, Branch 275 in Criminal Case No. 99-1127.2

Factual Antecedents

Appellant, together with her mother, Primitiva M. Seraspe (Seraspe), and Melba
L. Espiritu (Espiritu) were charged with violation of Section 15, Article II of
Republic Act (R.A.) No. 6425 (The Dangerous Drugs Act of 1972), as amended,
in an Amended Information,3 the accusatory portion of which reads as follows:

That on or about June 1, 1999 in Las Piñas City and within the jurisdiction of this
Honorable Court, the above-named accused, conspiring, conniving,
confederating, and helping one another, did, then and there willfully, unlawfully,
feloniously and knowingly sell, dispense, transport, deal in, administer, deliver,
negotiate and distribute 983.5 grams of methamphetamine hydrochloride
(shabu), a regulated drug, to Ms. Criselda Manila, who acted as poseur buyer,
said accused, selling, dispensing, transporting, administering and distributing the
aforementioned regulated drug without any license, permit or authority from the
government to do so, in consideration of an amount of money which accused
demanded and received from the poseur buyer.

CONTRARY TO LAW.4
The three entered separate pleas of "not guilty" to the crime charged during their
arraignment on December 1, 1999.5 Thereafter, trial ensued.

Version of the Prosecution

The key witnesses presented by the prosecution were Police Chief Inspector
Ricardo Dandan (P/Chief Insp. Dandan), a member of the now defunct
Presidential Anti-Organized Crime Task Force (PAOCTF), and Criselda Manila,
a.k.a., Carla (Carla), liaison officer of PAOCTF. From their testimonies, 6 the
following facts emerge:

On May 15, 1999, P/Chief Insp. Dandan received a telephone call from a
confidential informant who told him about the drug trafficking activities of Espiritu
in Cainta and in the Cities of Las Piñas, Muntinlupa, Taguig and Parañaque. He
immediately reported this information to Senior Police Superintendent Cesar
Mancao, who, in turn, instructed him to create a police team to conduct an
operation relative thereto. P/Chief Insp. Dandan thus formed Team Golf
composed of SPO4 Bahadi (also referred to as SPO4 Bajade), SPO4
Tuanggang, SPO2 Roberto O. Agbalog, PO3 Osmundo B. Cariño (PO3 Cariño),
SPO1 Leopoldo Platilla, SPO2 Laroga (also referred to as SPO2 Laruga), PO3
Olaya and Carla. Carla was to act as the poseur-buyer and PO3 Cariño as her
husband.

On the same day, Team Golf proceeded to SM Southmall in Las Piñas City and
met the confidential informant. Thereafter Carla, PO3 Cariño and the civilian
informant headed to Espiritu’s house and presented themselves to Espiritu. After
the introductions, negotiation for the sale of shabu followed. Carla ordered two
kilos of shabu for a discounted price of ₱750,000.00. Espiritu, in turn, took
Carla’s cellphone number and promised to call once the shabu becomes
available.

On May 27, 1999, Espiritu called Carla and asked the latter to wait. She again
called two days later and arranged for a meeting at noon of the next day in SM
Bacoor. Hence, on May 30, 1999, Carla proceeded to the agreed place while
Espiritu arrived thereat together with appellant. Espiritu directed appellant to give
a sample of the shabu to Carla inside the rest room so the latter could examine it.
Appellant obliged. After they parted ways, Carla gave the sample to P/Chief Insp.
Dandan, who readily knew that the same was shabu because of his familiarity
with the drug.

At around 7:00 p.m. of the same day, Espiritu again called Carla and told her that
she already has two kilos of shabu but would deliver only one kilo. She would
deliver the rest after receipt of the payment for the first. The two then agreed to
meet in the food court of RFC Manuela (RFC Food Court), Las Piñas City for the
delivery of the drugs.

Upon learning this, P/Chief Insp. Dandan immediately gathered the buy-bust
team, gave them instructions and prepared four marked 500 peso bills and
boodle money. The team then repaired to the meeting place on June 1, 1999. At
about 3:00 p.m., Carla and PO3 Cariño occupied one of the tables in the RFC
Food Court while the rest of the team positioned themselves nearby. Espiritu and
appellant arrived at around 5:00 p.m. After ascertaining from Carla if she brought
the money, Espiritu ordered appellant to get the shabu. Appellant left and
returned 30 minutes later with her mother, Seraspe, who was then carrying a
bag. Appellant took the said bag and handed it to Espiritu, who, together with
Carla, proceeded to the restroom to examine the contents thereof. When Carla
emerged from the restroom, she made the pre-arranged signal by scratching her
head. Whereupon, the buy-bust team arrested Espiritu, Seraspe and appellant.
The marked money was recovered from Espiritu while the plastic bag containing
the substance subject of the buy-bust operation was marked by PO3 Cariño with
the Visayan word "tigulang." Upon laboratory examination, the seized specimen
weighing 983.5 grams was found positive for methamphetamine hydrochloride or
shabu.7

Version of the Defense

Espiritu, Seraspe and appellant claimed that they were merely induced by the
PAOCTF operatives to sell the dangerous drug. Their testimonies8 revealed the
following circumstances:

Espiritu first met Carla when the latter went to her house together with the civilian
informant in the second week of April 1999. Carla wanted to talk to Espiritu’s
husband, who is a lawyer and a casino financier, in the hope of getting his help in
purchasing shabu from his Chinese clients. When Espiritu told Carla that her
husband does not want to get involved in that kind of business, Carla instead
sought her help. Carla promised to pay ₱750,00.00 for a kilo of shabu. Fearing
that her husband would get mad about it, Espiritu declined the offer.

After a couple of days, Carla returned to Espiritu’s house, this time with PO3
Cariño whom she introduced as her husband. Again, they sought her assistance
in purchasing shabu and showed her an attaché case containing ₱1.5 million.
Espiritu again declined. But as Carla and PO3 Cariño returned four more times
with the same request and showing her the money each time, Espiritu finally told
them that she would see what she can do. At that time, she was in need of
money for the tuition fees of her grandchildren and the medicines of her son.
Espiritu thus introduced Carla and PO3 Cariño to appellant, an employee of her
husband in the casino.

Appellant claimed that during her first meeting with Carla and PO3 Cariño, the
two asked her to help them look for shabu and showed her money in an attaché
case. She initially refused but changed her mind when the couple kept on
returning to her place to convince her. Thinking that she would be able to pay her
debts and provide for the needs of her children with the money being offered by
Carla and PO3 Cariño, she acceded and told them that she would try to look for
shabu.

On May 30, 1999, appellant and Espiritu went to the house of a certain Aida Go
(Aida) to get the shabu. Appellant then kept the shabu in her house as instructed
by Espiritu. On June 1, 1999, she and Espiritu went to RFC Food Court to meet
with Carla and PO3 Cariño. Appellant handed the shabu to Espiritu, who entered
the restroom with Carla. However, when they came out, they were already
surrounded by policemen and were arrested.

Seraspe, for her part, claimed that she had no knowledge of the transaction as
she just accompanied her daughter, appellant, to the RFC Food Court.

Ruling of the Regional Trial Court

In its Decision9 of July 29, 2002, the trial court found that all the accused
conspired to deliver and sell shabu10 And contrary to accused’s claim that they
were merely instigated by the authorities to commit the crime charged, it found
that their arrest was the result of a valid entrapment operation.11 It thus disposed:

WHEREFORE, judgment is hereby rendered finding accused MELBA L.

ESPIRITU, PRIMITIVA M. SERASPE and SIMPRESUETA M. SERASPE guilty
beyond reasonable doubt and sentenced to suffer each the penalty of Reclusion
Perpetua and pay a fine of ₱500,000.00 and costs.

SO ORDERED.12

Espiritu, Seraspe and appellant filed a Notice of Appeal,13 which was given due
course by the trial court in an Order dated August 5, 2002.14 Pursuant thereto, the
records of the case were elevated to this Court.

However, on October 15, 2004, Espiritu filed a Manifestation with Motion to

Withdraw Appeal15 because she intends to apply for executive clemency in view
of her old age and illness. The Court granted the motion in a Resolution16dated
December 1, 2004 and the case was declared closed and terminated with
respect to her. An Entry of Judgment17 relative thereto was accordingly issued
and entered in the Book of Entries of Judgment.

In the Court’s Resolution18 dated November 9, 2005, the case was transferred to
the CA for appropriate action and disposition in view of the ruling in People v.
Mateo19 allowing an intermediate review by the said court of cases where the
penalty imposed is death, life imprisonment or reclusion perpetua, as in this
case.

Subsequently, Seraspe likewise filed a Manifestation with Motion to Withdraw

Appeal20 since she also intends to apply for executive clemency in view of her old
age. The CA granted the same in a Resolution21 dated August 7, 2006 and the
case was likewise declared closed and terminated insofar as she was concerned.
A Partial Entry of Judgment22 was likewise issued and entered in the Book of
Entries of Judgment on even date.

Thus, appellant was the only one left pursuing the appeal.

Ruling of the Court of Appeals

In a Decision23 dated July 25, 2007, the CA upheld the RTC’s finding of a valid
entrapment24 and accorded respect and finality upon the trial court’s assessment
of the credibility of witnesses.25 The dispositive portion of its Decision reads:

WHEREFORE, the Decision appealed from is AFFIRMED.

SO ORDERED.26

Hence, this appeal.

Assignment of Errors

The errors raised in the Accused-Appellant’s Brief27 and Supplemental Brief28 are
as follows:

THE TRIAL COURT ERRED IN CONVICTING THE ACCUSED-APPELLANT OF

VIOLATION OF SECTION 15, ARTICLE II, IN RELATION TO SECTION 21,
ARTICLE IV, AS AMENDED BY R.A. 7659, WHEN THE LATTER’S GUILT WAS
NOT PROVEN BEYOND REASONABLE DOUBT.29

THE COURT OF APPEALS GRAVELY ERRED IN CONVICTING THE

ACCUSED-APPELLANT DESPITE THE LAME EVIDENCE OF THE
PROSECUTION TO WARRANT A FINDING OF CONSPIRACY BEYOND
REASONABLE DOUBT.30
Our Ruling

The petition has no merit.

The two essential elements of the crime

of illegal sale of dangerous drugs were

duly established by the prosecution;

appellant conspired with her co-accused

in the commission of the crime charged.

Appellant faults the trial court in convicting her of the crime of illegal sale of
dangerous drugs.

In the prosecution of illegal sale of dangerous drugs, the two essential elements
are: "(1) the identity of the buyer and the seller, the object, and the consideration;
and (2) the delivery of the thing sold and the payment therefor."31Hence,
evidence that establishes both elements by the required quantum of proof, i.e.,
guilt beyond reasonable doubt,32 must be presented. Here, the said elements
were duly proved by the prosecution. Carla and P/Chief Insp. Dandan positively
identified appellant and her co-accused as the sellers of the contraband who sold
the same in exchange for the marked money. The item was seized, marked and
upon examination was identified as shabu, a dangerous drug. The same was
subsequently presented in evidence. Moreover, Carla provided a detailed
testimony as to the delivery and sale of shabu, viz:

Q What time did you reach the area?

A About 3:00 in the afternoon.

Q After reaching the area at Manuela Food Court, what happened next?

A And then the group positioned themselves inside the Food Court.

Q How about x x x you and Cariño?

A And we positioned ourselves at the next table.

Q What happened after you positioned yourselves at the table?

A And then Melba Espiritu and Aileen Seraspe arrived at around 5:00 in the
afternoon.

Q And what happened after Melba Espiritu and Aileen Seraspe arrived?

A She asked me if I have already the money.

Q What was your answer if any?

A I answered yes.

Q What happened next after you answered yes that you have money?

A And she asked Aileen Seraspe to go out.

Q For what reason?

A To get the shabu.

Q So what happened after Melba Espiritu directed Aileen to go out and get the
shabu?

A When Aileen returned she was with her mother Primitiva Seraspe.

Q And what happened after Aileen came back together with her mother Primitiva
Seraspe?

A And Primitiva Seraspe is carrying a gray envelope clutch bag which looks like
an envelope.

Q And what happened after Aileen came back together with Primitiva Seraspe
who was then carrying a gray clutch type bag?

A And then she left her mother in one of the tables and she took a gray bag and
opened it and took another plastic pink bag containing shabu and gave it to
Melba.

Q So what happened after Aileen Seraspe took off the pink bag inside the gray
bag and hand[ed] it over to Melba Espiritu?

A And then I was invited by Melba Espiritu to the comfort room.

Q What happened after she [went with you inside] the comfort room?
A She showed me that sir and asked me to look at it.

Q She showed you what?

A Shabu sir.

Q What happened next?

A After looking inside the plastic bag containing shabu, I gave her the money.

Q And how did you [give] her the money?

A After I gave her the money, I went out of the C.R.

Q What happened to the shabu?

A It is still in my possession sir.

Q And what happened after you went out of the CR carrying the shabu?

A After getting out of the CR I made a signal.

Q And what was the signal?

A I scratched my hair using my right hand.

Q At this juncture Your Honor witness is demonstrating by scratching her hair.

What happened next after you scratched your hair?

A And they arrested Melba carrying the money.33

The Court has no reason to doubt the above testimony of Carla. Aside from the
fundamental rule that findings of the trial court regarding the credibility of
prosecution witnesses are accorded respect considering that it is the trial court
that had the opportunity to observe their conduct and demeanor,34 the Court
notes that appellant herself corroborated the prosecution’s account of the crime,
viz.:

Q How many kilos did you sell to the buyer, if you sold anything?

A We first brought one (1) kilo.

Q When you say "we", you are referring to you and to Melba Espiritu, is that
correct?
A Yes, Sir.

xxxx

Q And what happened while at RFC?

A While we were in RFC, I handed the shabu to Melba Espiritu and then they
entered the CR and when they went out of the CR there were already many
policemen.35

Moreover, appellant questions the lower courts’ finding of conspiracy between

her and her co-accused. She claims that she merely accompanied Espiritu in
going to the RFC Food Court and had nothing to do with the transaction. As a
matter of fact, the shabu was not even found in or recovered from her
possession. It just so happened that she was in the area during the delivery of
the drugs.

The Court is not persuaded.

There is conspiracy if two or more persons agree to commit a felony and decide
to commit it.36 "Conspiracy must be proven on the same quantum of evidence as
the felony subject of the agreement of the parties. Conspiracy may be proved by
direct or circumstantial evidence consisting of acts, words, or conduct of the
alleged conspirators before, during and after the commission of the felony to
achieve a common design or purpose."37

The existence of conspiracy in this case was clearly established not only by the
prosecution’s evidence but also by appellant’s very own testimony, viz:

Q So, it was your own decision to go with Melba Espiritu to get that shabu from
Aida Go?

A Yes, sir.

Q And in going there, your intention was to earn money?

A Yes, sir.

Q And who entered into this transaction of getting shabu from Aida Go, was it
you or Melba Espiritu?

A The two (2) of them. They were the ones who made the deal.
Q And what was your participation while Melba Espiritu and Aida Go were
transacting about that shabu?

A My only participation would only be to carry that shabu from where we will get it
up to the buyer.

Q And did you pay any amount of money to Aida Go in order to get that two (2)
kilos of shabu?

A No, sir. It was given to us on a consignment basis.

Q And do you know the meaning of "consignment basis"?

A It will be paid after the deal.

Q And you mentioned that your participation would be to bring that shabu from
where?

A Get it from Baclaran then go to RFC.

FISCAL VILLANUEVA:

Q Where in Baclaran?

A I don’t know the exact address but I can go there. I mean, I will be able to go
there. It is near 7-Eleven.

Q Along Roxas Boulevard or Quirino Avenue?

A You can pass through Quirino Avenue and Baclaran.

Q And when did you get that shabu in Baclaran?

A I think it was at the end of May. End of May.

Q And from whom did you get the shabu in Baclaran?

A From the house of Aida Go.

Q And who handed the shabu to you?

A It was not handed to me only. They only instructed me to carry it. It was placed
in a bag.
Q So, how were you able to know that that box contains that shabu if nobody
handed it to you?

A Because I know that we will be getting shabu. So, when Melba Espiritu told me
to carry it, that box, I was thinking that it was already the shabu.

Q So, Melba Espiritu was with you when you went to Baclaran when you picked
up that shabu?

A Yes, sir.

Q So, the two of you were together in picking [up] that shabu?

A Yes, sir.

Q When was that?

A May 30.

Q And what happened after you [picked up] that shabu in Baclaran together with
Melba Espiritu?

A She instructed me to keep first the shabu in my house.

Q So, it was Melba Espiritu who was dealing … who was telling you what to do?

A Yes, sir.

Q So, what happened after you kept that shabu in your house?

A I don’t know what happened because it was Melba and the PAOCTFwho were
the ones dealing.

Q So, you voluntarily and knowingly carried that shabu for Melba Espiritu?

A Yes. sir.38

"An accepted badge of conspiracy is when the accused by their acts aimed at the
same object, one performing one part and another performing another so as to
complete it with a view to the attainment of the same object, and their acts
though apparently independent were in fact concerted and cooperative,
indicating closeness of personal association, concerted action and concurrence
of sentiments."39 As can be gleaned from appellant’s above-quoted testimony as
well as from the testimony of Carla as to what transpired during the actual buy-
bust operation,appellant acted in common concert with her co-accused in the
illegal sale of shabu. She cannot therefore isolate her act of merely
accompanying Espiritu to the RFC Food Court or carrying the shabu since in
conspiracy the act of one is the act of all.40 "To be a conspirator, one need not
participate in every detail of the execution; he need not even take part in every
act or need not even know the exact part to be performed by the others in the
execution of the conspiracy."41

Appellant’s defense of instigation is unworthy of belief.

Appellant raises the defense of instigation to gain her acquittal. She argues that
the government, through the PAOCTF operatives, induced her to commit the
offense when they repeatedly approached and asked her to sell them shabu.

The Court is unswayed.

"Instigation means luring the accused into a crime that he, otherwise, had no
intention to commit, in order to prosecute him."42 It differs from entrapment which
is the employment of ways and means in order to trap or capture a criminal.43 In
instigation, the criminal intent to commit an offense originates from the inducer
and not from the accused who had no intention to commit and would not have
committed it were it not for the prodding of the inducer.44 In entrapment, the
criminal intent or design originates from the accused and the law enforcers
merely facilitate the apprehension of the criminal by using ruses and
schemes.45 Instigation results in the acquittal of the accused, while entrapment
may lead to prosecution and conviction.46

Here, the evidence clearly established that the police operatives employed
entrapment, not instigation, to capture appellant and her cohorts in the act of
selling shabu. It must be recalled that it was only upon receipt of a report of the
drug trafficking activities of Espiritu from the confidential informant that a buy-
bust team was formed and negotiations for the sale of shabu were made. Also,
appellant testified that she agreed to the transaction of her own free will when
she saw the same as an opportunity to earn money. Notably too, appellant was
able to quickly produce a sample. This confirms that she had a ready supply of
the illegal drugs. Clearly, she was never forced, coerced or induced through
incessant entreaties to source the prohibited drug for Carla and PO3 Cariño and
this she even categorically admitted during her testimony.47

Moreover, a police officer’s act of soliciting drugs from appellant during the buy-
bust operation, or what is known as the "decoy solicitation," is not prohibited by
law and does not invalidate the buy-bust operation.48 In People v. Legaspi,49 this
Court pronounced that in a prosecution for sale of illicit drugs, any of the
following will not exculpate the accused: "(1) that facilities for the commission of
the crime were intentionally placed in his way; or (2) that the criminal act was
done at the solicitation of the decoy or poseur-buyer seeking to expose his
criminal act; or (3) that the police authorities feigning complicity in the act were
present and apparently assisted in its commission."50Hence, even assuming that
the PAOCTF operatives repeatedly asked her to sell them shabu, appellant’s
defense of instigation will not prosper. This is "especially true in that class of
cases where the offense is the kind that is habitually committed, and the
solicitation merely furnished evidence of a course of conduct. Mere deception by
the police officer will not shield the perpetrator, if the offense was committed by
him free from the influence or instigation of the police officer."51

All told, we find no reason to disturb the findings of the trial court as affirmed by
the appellate court, and thus sustain the conviction of appellant for illegal sale of
dangerous drugs.

The Penalty

Under Section 15, Article III, in relation to Section 20, Article IV, of the Dangerous
Drugs Act of 1972, as amended by R.A. No. 7659, the unauthorized sale of 200
grams or more of shabu or methamphetamine hydrochloride is punishable by
reclusion perpetua to death and a fine ranging from five hundred thousand pesos
to ten million pesos.52

The total weight of the shabu confiscated in this case is 983.5 grams. Hence, the
1âw phi 1

proper penalty should be reclusion perpetua to death. But since the penalty of
reclusion perpetua to death consists of two indivisible penalties, appellant was
correctly meted the lesser penalty of reclusion perpetua, conformably with Article
63(2) of the Revised Penal Code which provides that when there are no
mitigating or aggravating circumstances in the commission of the deed, the
lesser penalty shall be applied. Considering the quantity of shabu sold, we
likewise find reasonable the fine of ₱500,000.00 imposed by the trial court.53

WHEREFORE, the assailed Decision dated July 25, 2007 of the Court of
Appeals in CA-G.R. CR-H.C. No. 02045 is AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 173559 January 7, 2013

LETICIA DIONA, represented by her Attorney-in-Fact, MARCELINA

DIONA, Petitioner,
vs.
ROMEO A. BALANGUE, SONNY A. BALANGUE, REYNALDO A.
BALANGUE, and ESTEBAN A. BALANGUE, JR., Respondents.

DECISION

DEL CASTILLO, J.:

The great of a relief neither sought by the party in whose favor it was given not
supported by the evidence presented violates the opposing party’s right to due
process and may be declared void ab initio in a proper proceeding.

This Petition for Review on Certiorari1 assails the November 24, 2005
Resolution2 of the Court of Appeals (CA) issued in G.R. SP No. 85541 which
granted the Petition for Annulment of Judgment3 filed by the respondents seeking
to nullify that portion of the October 17, 2000 Decision4 of the Regional Trial
Court (RTC), Branch 75, Valenzuela City awarding petitioner 5% monthly interest
rate for the principal amount of the loan respondent obtained from her.

This Petition likewise assails the CA’s June 26, 2006 Resolution5 denying
petitioner’s Motion for Reconsideration.

Factual Antecedents

The facts of this case are simple and undisputed.

On March 2, 1991, respondents obtained a loan of ₱45,000.00 from petitioner

payable in six months and secured by a Real Estate Mortgage6 over their 202-
square meter property located in Marulas, Valenzuela and covered by Transfer
Certificate of Title (TCT) No. V-12296.7 When the debt became due, respondents
failed to pay notwithstanding demand. Thus, on September 17, 1999, petitioner
filed with the RTC a Complaint8 praying that respondents be ordered:
 (a) To pay petitioner the principal obligation of ₱45,000.00, with interest
thereon at the rate of 12% per annum, from 02 March 1991 until the full
obligation is paid.

(b) To pay petitioner actual damages as may be proven during the trial but
shall in no case be less than ₱10,000.00; ₱25,000.00 by way of attorney’s
fee, plus ₱2,000.00 per hearing as appearance fee.

(c) To issue a decree of foreclosure for the sale at public auction of the
aforementioned parcel of land, and for the disposition of the proceeds
thereof in accordance with law, upon failure of the respondents to fully pay
petitioner within the period set by law the sums set forth in this complaint.

(d) Costs of this suit.

Other reliefs and remedies just and equitable under the premises are likewise
prayed for.9 (Emphasis supplied)

Respondents were served with summons thru respondent Sonny A. Balangue

(Sonny). On October 15, 1999, with the assistance of Atty. Arthur C. Coroza
(Atty. Coroza) of the Public Attorney’s Office, they filed a Motion to Extend Period
to Answer. Despite the requested extension, however, respondents failed to file
any responsive pleadings. Thus, upon motion of the petitioner, the RTC declared
them in default and allowed petitioner to present her evidence ex parte.10

Ruling of the RTC sought to be annulled.

In a Decision11 dated October 17, 2000, the RTC granted petitioner’s Complaint.
The dispositive portion of said Decision reads:

WHEREFORE, judgment is hereby rendered in favor of the petitioner, ordering

the respondents to pay the petitioner as follows:

a) the sum of FORTY FIVE THOUSAND (₱45,000.00) PESOS,

representing the unpaid principal loan obligation plus interest at 5% per
month [sic] reckoned from March 2, 1991, until the same is fully paid;

b) ₱20,000.00 as attorney’s fees plus cost of suit;

c) in the event the [respondents] fail to satisfy the aforesaid obligation, an

order of foreclosure shall be issued accordingly for the sale at public
auction of the subject property covered by Transfer Certificate of Title No.
V-12296 and the improvements thereon for the satisfaction of the
petitioner’s claim.
SO ORDERED.12 (Emphasis supplied)

Subsequently, petitioner filed a Motion for Execution,13 alleging that respondents

did not interpose a timely appeal despite receipt by their former counsel of the
RTC’s Decision on November 13, 2000. Before it could be resolved, however,
respondents filed a Motion to Set Aside Judgment14 dated January 26, 2001,
claiming that not all of them were duly served with summons. According to the
other respondents, they had no knowledge of the case because their co-
respondent Sonny did not inform them about it. They prayed that the RTC’s
October 17, 2000 Decision be set aside and a new trial be conducted.

But on March 16, 2001, the RTC ordered15 the issuance of a Writ of Execution to
implement its October 17, 2000 Decision. However, since the writ could not be
satisfied, petitioner moved for the public auction of the mortgaged
property,16 which the RTC granted.17 In an auction sale conducted on November
7, 2001, petitioner was the only bidder in the amount of ₱420,000.00. Thus, a
Certificate of Sale18 was issued in her favor and accordingly annotated at the
back of TCT No. V-12296.

Respondents then filed a Motion to Correct/Amend Judgment and To Set Aside

Execution Sale19 dated December 17, 2001, claiming that the parties did not
agree in writing on any rate of interest and that petitioner merely sought for a
12% per annum interest in her Complaint. Surprisingly, the RTC awarded 5%
monthly interest (or 60% per annum) from March 2, 1991 until full payment.
Resultantly, their indebtedness inclusive of the exorbitant interest from March 2,
1991 to May 22, 2001 ballooned from ₱124,400.00 to ₱652,000.00.

In an Order20 dated May 7, 2002, the RTC granted respondents’ motion and
accordingly modified the interest rate awarded from 5% monthly to 12% per
annum. Then on August 2, 2002, respondents filed a Motion for Leave To
Deposit/Consign Judgment Obligation21 in the total amount of ₱126,650.00.22

Displeased with the RTC’s May 7, 2002 Order, petitioner elevated the matter to
the CA via a Petition for Certiorari23under Rule 65 of the Rules of Court. On
August 5, 2003, the CA rendered a Decision24 declaring that the RTC exceeded
its jurisdiction in awarding the 5% monthly interest but at the same time
pronouncing that the RTC gravely abused its discretion in subsequently reducing
the rate of interest to 12% per annum. In so ruling, the CA ratiocinated:

Indeed, We are convinced that the Trial Court exceeded its jurisdiction when it
granted 5% monthly interest instead of the 12% per annum prayed for in the
complaint. However, the proper remedy is not to amend the judgment but to
declare that portion as a nullity. Void judgment for want of jurisdiction is no
judgment at all. It cannot be the source of any right nor the creator of any
obligation (Leonor vs. CA, 256 SCRA 69). No legal rights can emanate from a
resolution that is null and void (Fortich vs. Corona, 312 SCRA 751).

From the foregoing, the remedy of the respondents is to have the Court declare
the portion of the judgment providing for a higher interest than that prayed for as
null and void for want of or in excess of jurisdiction. A void judgment never
acquire[s] finality and any action to declare its nullity does not prescribe (Heirs of
Mayor Nemencio Galvez vs. CA, 255 SCRA 672).

WHEREFORE, foregoing premises considered, the Petition having merit, is

hereby GIVEN DUE COURSE. Resultantly, the challenged May 7, 2002 and
September 5, 2000 orders of Public Respondent Court are hereby ANNULLED
and SET ASIDE for having been issued with grave abuse of discretion amounting
to lack or in excess of jurisdiction. No costs.

SO ORDERED.25 (Emphases in the original; italics supplied.)

Proceedings before the Court of Appeals

Taking their cue from the Decision of the CA in the special civil action for
certiorari, respondents filed with the same court a Petition for Annulment of
Judgment and Execution Sale with Damages.26 They contended that the portion
of the RTC Decision granting petitioner 5% monthly interest rate is in gross
violation of Section 3(d) of Rule 9 of the Rules of Court and of their right to due
process. According to respondents, the loan did not carry any interest as it was
the verbal agreement of the parties that in lieu thereof petitioner’s family can
continue occupying respondents’ residential building located in Marulas,
Valenzuela for free until said loan is fully paid.

Ruling of the Court of Appeals

Initially, the CA denied due course to the Petition.27 Upon respondents’ motion,
however, it reinstated and granted the Petition. In setting aside portions of the
RTC’s October 17, 2000 Decision, the CA ruled that aside from being
unconscionably excessive, the monthly interest rate of 5% was not agreed upon
by the parties and that petitioner’s Complaint clearly sought only the legal rate of
12% per annum. Following the mandate of Section 3(d) of Rule 9 of the Rules of
Court, the CA concluded that the awarded rate of interest is void for being in
excess of the relief sought in the Complaint. It ruled thus:
WHEREFORE, respondents’ motion for reconsideration is GRANTED and our
resolution dated October 13, 2004 is, accordingly, REVERSED and SET ASIDE.
In lieu thereof, another is entered ordering the ANNULMENT OF:

(a) public respondent’s impugned October 17, 2000 judgment, insofar as it

awarded 5% monthly interest in favor of petitioner; and

(b) all proceedings relative to the sale at public auction of the property
titled in respondents’ names under Transfer Certificate of Title No. V-
12296 of the Valenzuela registry.

The judgment debt adjudicated in public respondent’s impugned October 17,

2000 judgment is, likewise, ordered RECOMPUTED at the rate of 12% per
annum from March 2, 1991. No costs.

SO ORDERED.28 (Emphases in the original.)

Petitioner sought reconsideration, which was denied by the CA in its June 26,
2006 Resolution.29

Issues

Hence, this Petition anchored on the following grounds:

I. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND

SERIOUS ERROR OF LAW WHEN IT GRANTED RESPONDENTS’
PETITION FOR ANNULMENT OF JUDGMENT AS A SUBSTITUTE OR
ALTERNATIVE REMEDY OF A LOST APPEAL.

II. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND

SERIOUS ERROR AND MISAPPREHENSION OF LAW AND THE FACTS
WHEN IT GRANTED RESPONDENTS’ PETITION FOR ANNULMENT OF
JUDGMENT OF THE DECISION OF THE REGIONAL TRIAL COURT OF
VALENZUELA, BRANCH 75 DATED OCTOBER 17, 2000 IN CIVIL CASE
NO. 241-V-99, DESPITE THE FACT THAT SAID DECISION HAS
BECOME FINAL AND ALREADY EXECUTED CONTRARY TO THE
DOCTRINE OF IMMUTABILITY OF JUDGMENT.30

Petitioner’s Arguments

Petitioner claims that the CA erred in partially annulling the RTC’s October 17,
2000 Decision. She contends that a Petition for Annulment of Judgment may be
availed of only when the ordinary remedies of new trial, appeal, petition for relief
or other appropriate remedies are no longer available through no fault of the
claimant. In the present case, however, respondents had all the opportunity to
question the October 17, 2000 Decision of the RTC, but because of their own
inaction or negligence they failed to avail of the remedies sanctioned by the
rules. Instead, they contented themselves with the filing of a Motion to Set Aside
Judgment and then a Motion to Correct/Amend Judgment and to Set Aside
Execution Sale.

Petitioner likewise argues that for a Rule 47 petition to prosper, the same must
either be based on extrinsic fraud or lack of jurisdiction. However, the allegations
in respondents’ Rule 47 petition do not constitute extrinsic fraud because they
simply pass the blame to the negligence of their former counsel. In addition, it is
too late for respondents to pass the buck to their erstwhile counsel considering
that when they filed their Motion to Correct/Amend Judgment and To Set Aside
Execution Sale they were already assisted by their new lawyer, Atty. Reynaldo A.
Ruiz, who did not also avail of the remedies of new trial, appeal, etc. As to the
ground of lack of jurisdiction, petitioner posits that there is no reason to doubt
that the RTC had jurisdiction over the subject matter of the case and over the
persons of the respondents.

While conceding that the RTC patently made a mistake in awarding 5% monthly
interest, petitioner nonetheless invokes the doctrine of immutability of final
judgment and contends that the RTC Decision can no longer be corrected or
modified since it had long become final and executory. She likewise points out
that respondents received a copy of said Decision on November 13, 2000 but did
nothing to correct the same. They did not even question the award of 5% monthly
interest when they filed their Motion to Set Aside Judgment which they anchored
on the sole ground of the RTC’s lack of jurisdiction over the persons of some of
the respondents.

Respondents’ Arguments

Respondents do not contest the existence of their obligation and the principal
amount thereof. They only seek quittance from the 5% monthly interest or 60%
per annum imposed by the RTC. Respondents contend that Section (3)d of Rule
9 of the Rules of Court is clear that when the defendant is declared in default, the
court cannot grant a relief more than what is being prayed for in the Complaint. A
judgment which transgresses said rule, according to the respondents, is void for
having been issued without jurisdiction and for being violative of due process of
law.

Respondents maintain that it was through no fault of their own, but through the
gross negligence of their former counsel, Atty. Coroza, that the remedies of new
trial, appeal or petition for relief from judgment were lost. They allege that after
filing a Motion to Extend Period to Answer, Atty. Coroza did not file any pleading
resulting to their being declared in default. While the said lawyer filed on their
behalf a Motion to Set Aside Judgment dated January 26, 2001, he however took
no steps to appeal from the Decision of the RTC, thereby allowing said judgment
to lapse into finality. Citing Legarda v. Court of Appeals,31 respondents aver that
clients are not always bound by the actions of their counsel, as in the present
case where the clients are to lose their property due to the gross negligence of
their counsel.

With regard to petitioner’s invocation of immutability of judgment, respondents

argue that said doctrine applies only to valid and not to void judgments.

Our Ruling

The petition must fail.

We agree with respondents that the award of 5% monthly interest violated their
right to due process and, hence, the same may be set aside in a Petition for
Annulment of Judgment filed under Rule 47 of the Rules of Court.

Annulment of judgment under Rule 47; an exception to the final judgment rule;
grounds therefor.

A Petition for Annulment of Judgment under Rule 47 of the Rules of Court is a

remedy granted only under exceptional circumstances where a party, without
fault on his part, has failed to avail of the ordinary remedies of new trial, appeal,
petition for relief or other appropriate remedies. Said rule explicitly provides that it
is not available as a substitute for a remedy which was lost due to the party’s
own neglect in promptly availing of the same. "The underlying reason is traceable
to the notion that annulling final judgments goes against the grain of finality of
judgment. Litigation must end and terminate sometime and somewhere, and it is
essential to an effective administration of justice that once a judgment has
become final, the issue or cause involved therein should be laid to rest."32

While under Section 2, Rule 4733 of the Rules of Court a Petition for Annulment of
Judgment may be based only on the grounds of extrinsic fraud and lack of
jurisdiction, jurisprudence recognizes lack of due process as additional ground to
annul a judgment.34 In Arcelona v. Court of Appeals,35 this Court declared that a
final and executory judgment may still be set aside if, upon mere inspection
thereof, its patent nullity can be shown for having been issued without jurisdiction
or for lack of due process of law.
Grant of 5% monthly interest is way beyond the 12% per annum interest sought
in the Complaint and smacks of violation of due process.

It is settled that courts cannot grant a relief not prayed for in the pleadings or in
excess of what is being sought by the party. They cannot also grant a relief
without first ascertaining the evidence presented in support thereof. Due process
considerations require that judgments must conform to and be supported by the
pleadings and evidence presented in court. In Development Bank of the
Philippines v. Teston,36 this Court expounded that:

Due process considerations justify this requirement. It is improper to enter an

order which exceeds the scope of relief sought by the pleadings, absent notice
which affords the opposing party an opportunity to be heard with respect to the
proposed relief. The fundamental purpose of the requirement that allegations of a
complaint must provide the measure of recovery is to prevent surprise to the
defendant.

Notably, the Rules is even more strict in safeguarding the right to due process of
a defendant who was declared in default than of a defendant who participated in
trial. For instance, amendment to conform to the evidence presented during trial
is allowed the parties under the Rules.37 But the same is not feasible when the
defendant is declared in default because Section 3(d), Rule 9 of the Rules of
Court comes into play and limits the relief that may be granted by the courts to
what has been prayed for in the Complaint. It provides:

(d) Extent of relief to be awarded. – A judgment rendered against a party in

default shall not exceed the amount or be different in kind from that prayed for
nor award unliquidated damages.

The raison d’être in limiting the extent of relief that may be granted is that it
cannot be presumed that the defendant would not file an Answer and allow
himself to be declared in default had he known that the plaintiff will be accorded a
relief greater than or different in kind from that sought in the Complaint.38 No
doubt, the reason behind Section 3(d), Rule 9 of the Rules of Court is to
safeguard defendant’s right to due process against unforeseen and arbitrarily
issued judgment. This, to the mind of this Court, is akin to the very essence of
due process. It embodies "the sporting idea of fair play"39 and forbids the grant of
relief on matters where the defendant was not given the opportunity to be heard
thereon.

In the case at bench, the award of 5% monthly interest rate is not supported both
by the allegations in the pleadings and the evidence on record. The Real Estate
Mortgage40 executed by the parties does not include any provision on interest.
When petitioner filed her Complaint before the RTC, she alleged that
respondents borrowed from her "the sum of FORTY-FIVE THOUSAND PESOS
(₱45,000.00), with interest thereon at the rate of 12% per annum"41 and sought
payment thereof. She did not allege or pray for the disputed 5% monthly interest.
Neither did she present evidence nor testified thereon. Clearly, the RTC’s award
of 5% monthly interest or 60% per annum lacks basis and disregards due
process. It violated the due process requirement because respondents were not
informed of the possibility that the RTC may award 5% monthly interest. They
were deprived of reasonable opportunity to refute and present controverting
evidence as they were made to believe that the complainant petitioner was
seeking for what she merely stated in her Complaint.

Neither can the grant of the 5% monthly interest be considered subsumed by

petitioner’s general prayer for "other reliefs and remedies just and equitable
under the premises x x x."42 To repeat, the court’s grant of relief is limited only to
what has been prayed for in the Complaint or related thereto, supported by
evidence, and covered by the party’s cause of action.43 Besides, even assuming
that the awarded 5% monthly or 60% per annum interest was properly alleged
and proven during trial, the same remains unconscionably excessive and ought
to be equitably reduced in accordance with applicable jurisprudence. In Bulos, Jr.
v. Yasuma,44 this Court held:

In the case of Ruiz v. Court of Appeals, citing the cases of Medel v. Court of
Appeals, Garcia v. Court of Appeals, Spouses Bautista v. Pilar Development
Corporation and the recent case of Spouses Solangon v. Salazar, this Court
considered the 3% interest per month or 36% interest per annum as excessive
and unconscionable. Thereby, the Court, in the said case, equitably reduced the
rate of interest to 1% interest per month or 12% interest per annum. (Citations
omitted)

It is understandable for the respondents not to contest the default order for, as
alleged in their Comment, "it is not their intention to impugn or run away from
their just and valid obligation."45 Nonetheless, their waiver to present evidence
should never be construed as waiver to contest patently erroneous award which
already transgresses their right to due process, as well as applicable
jurisprudence.

Respondents’ former counsel was grossly negligent in handling the case of his
clients; respondents did not lose ordinary remedies of new trial, petition for relief,
etc. through their own fault.

Ordinarily, the mistake, negligence or lack of competence of counsel binds the

client. This is based on the rule that any act performed by a counsel within the
1âw phi1
scope of his general or implied authority is regarded as an act of his client. A
recognized exception to the rule is when the lawyers were grossly negligent in
their duty to maintain their client’s cause and such amounted to a deprivation of
their client’s property without due process of law.46 In which case, the courts must
step in and accord relief to a client who suffered thereby.47

The manifest indifference of respondents’ former counsel in handling the cause

of his client was already present even from the beginning. It should be recalled
that after filing in behalf of his clients a Motion to Extend Period to Answer, said
counsel allowed the requested extension to pass without filing an Answer, which
resulted to respondents being declared in default. His negligence was
aggravated by the fact that he did not question the awarded 5% monthly interest
despite receipt of the RTC Decision on November 13, 2000.48 A simple reading of
the dispositive portion of the RTC Decision readily reveals that it awarded
exorbitant and unconscionable rate of interest. Its difference from what is being
prayed for by the petitioner in her Complaint is so blatant and very patent. It also
defies elementary jurisprudence on legal rate of interests. Had the counsel
carefully read the judgment it would have caught his attention and compelled him
to take the necessary steps to protect the interest of his client. But he did not.
Instead, he filed in behalf of his clients a Motion to Set Aside Judgment49 dated
January 26, 2001 based on the sole ground of lack of jurisdiction, oblivious to the
fact that the erroneous award of 5% monthly interest would result to his clients’
deprivation of property without due process of law. Worse, he even allowed the
RTC Decision to become final by not perfecting an appeal. Neither did he file a
petition for relief therefrom. It was only a year later that the patently erroneous
award of 5% monthly interest was brought to the attention of the RTC when
respondents, thru their new counsel, filed a Motion to Correct/Amend Judgment
and To Set Aside Execution Sale. Even the RTC candidly admitted that it "made
a glaring mistake in directing the defendants to pay interest on the principal loan
at 5% per month which is very different from what was prayed for by the
plaintiff."50

"A lawyer owes entire devotion to the interest of his client, warmth and zeal in the
maintenance and defense of his rights and the exertion of his utmost learning
and ability, to the end that nothing can be taken or withheld from his client except
in accordance with the law."51 Judging from how respondents’ former counsel
handled the cause of his clients, there is no doubt that he was grossly negligent
in protecting their rights, to the extent that they were deprived of their property
without due process of law.

In fine, respondents did not lose the remedies of new trial, appeal, petition for
relief and other remedies through their own fault. It can only be attributed to the
gross negligence of their erstwhile counsel which prevented them from pursuing
such remedies. We cannot also blame respondents for relying too much on their
former counsel. Clients have reasonable expectations that their lawyer would
amply protect their interest during the trial of the case.52 Here,

"respondents are plain and ordinary people x x x who are totally ignorant of the
intricacies and technicalities of law and legal procedures. Being so, they
completely relied upon and trusted their former counsel to appropriately act as
their interest may lawfully warrant and require."53

As a final word, it is worth noting that respondents’ principal obligation was only
₱45,000.00. Due to their former counsel’s gross negligence in handling their
cause, coupled with the RTC’s erroneous, baseless, and illegal award of 5%
monthly interest, they now stand to lose their property and still owe petitioner a
large amount of money. As aptly observed by the CA:

x x x If the impugned judgment is not, therefore, rightfully nullified, petitioners will

not only end up losing their property but will additionally owe private respondent
the sum of ₱232,000.00 plus the legal interest said balance had, in the
meantime, earned. As a court of justice and equity, we cannot, in good
conscience, allow this unconscionable situation to prevail.54

Indeed, this Court is appalled by petitioner’s invocation of the doctrine of

immutability of judgment. Petitioner does not contest as she even admits that the
RTC made a glaring mistake in awarding 5% monthly interest.55 Amazingly, she
wants to benefit from such erroneous award. This Court cannot allow this
injustice to happen.

WHEREFORE, the instant Petition is hereby DENIED and the assailed

November 24, 2005 and June 26, 2006 Resolution of the Court of Appeals in CA-
G.R. SP No. 85541 are AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 172590 January 7, 2013

MARY LOUISE R. ANDERSON, Petitioner,

vs.
ENRIQUE HO, Respondent.

DECISION

DEL CASTILLO, J.:

As her petition for review was dismissed by the Court of Appeals (CA) on a
technical ground, petitioner now invokes the liberal application of the rules of
procedure.

Assailed in this Petition for Review on Certiorari1 is the July 14, 2005
Resolution2 of the CA in CA-G.R. SP No. 89793 which dismissed the petition for
review of petitioner Mary Louise R. Anderson (Anderson) because the
certification against forum shopping attached thereto was signed by counsel on
her behalf without the proper authority. Likewise assailed is the CA’s May 4,
2006 Resolution3 denying the motion for reconsideration thereof.

Factual Antecedents

On June 5, 2003, Anderson filed a Complaint4 for Ejectment against respondent

Enrique Ho (Ho) before the Metropolitan Trial Court (MeTC) of Quezon City.5 She
alleged that through her mere tolerance, Ho is in possession of her parcel of land
at Roosevelt Avenue, Quezon City covered by Transfer Certificate of Title No. N-
1933686(Roosevelt property). As she was already in need of the said property,
Anderson served upon Ho a Demand Letter to Vacate but despite receipt thereof,
Ho refused. Because of this, Anderson prayed that the MeTC order Ho to vacate
the Roosevelt property and pay her damages and attorney’s fees.

In his Answer with Compulsory Counterclaim,7 Ho denied that his occupation of

the Roosevelt property is through Anderson’s mere tolerance. He claimed that
since Anderson is an American citizen, he managed her affairs in the Philippines
and administered her properties in Quezon City and Cebu. When Anderson
sought his assistance in ejecting her relatives from the Roosevelt property and in
demolishing the St. Anthony de Padua Church built thereon, Ho (1) secured the
services of a lawyer to file an ejectment case against the occupants of the
property; (2) dutifully appeared in court on Anderson’s behalf who was then in the
United States of America (U.S.A.); and (3) was able to secure a judgment from
the court in favor of Anderson. For all these, Anderson did not pay Ho a single
centavo and instead executed a written document dated January 14, 19998 which
states that as partial payment for Ho’s services, Anderson is authorizing him "to
make use of the Roosevelt property as his residence free of charge provided he
vacates [it] if there is a buyer for the lot" and "that the balance of Ho’s
compensation shall consist of 10% of the proceeds of the sale of any or all of her
properties located in Roosevelt Avenue, M.H. del Pilar Street and Ana Maria
Street, all in Quezon City; Cebu City; and Cebu province". In view of this, Ho
averred that he possesses the property not through mere tolerance but as part of
his compensation for services rendered to Anderson. Hence, he is entitled to the
continued possession thereof until such time that the property is sold and he is
paid the 10% of the proceeds of its sale.

Ruling of the Metropolitan Trial Court

On June 25, 2004, the MeTC rendered a Decision9 dismissing the case for lack
of cause of action. It gave much weight to the written document executed by
Anderson wherein she gave her consent for Ho to occupy the Roosevelt property
provided that the latter shall vacate the same if there is already a buyer for the
lot. There being no allegation that the said property already has a buyer, she
could not eject Ho therefrom.

Ruling of the Regional Trial Court

On appeal, the Regional Trial Court (RTC) in its Decision10 of January 21, 2005
ruled as follows:

The evidence of the parties thus stands upon an equipoise. With the
equiponderance of evidence, the Court is inclined to consider the dismissal of the
complaint as without prejudice depending on the outcome of the determination in
the proper forum whether or not the written document dated January 14, 1999 x x
x was falsified.

WHEREFORE, the Court modifies the Decision dated June 25, 2004 of the
Metropolitan Trial Court of Quezon City in Civil Case No. 30840 by dismissing
the complaint without prejudice.

SO ORDERED.11
Anderson moved for reconsideration,12 but the same was denied by the RTC in
an Order13 dated April 1, 2005, a copy of which was received by her counsel on
May 5, 2005.14

Ruling of the Court of Appeals

Intending to file with the CA a Petition for Review under Rule 42 of the Rules of
Court, Anderson’s counsel, Atty. Rommel V. Oliva (Atty. Oliva), filed a Motion for
Extension of Time of 15 days from May 20, 2005 or until June 4, 2005 within
which to file a petition15 allegedly due to the revisions required in the initial draft
and on account of heavy pressure of work. This was granted by the CA in a
Minute Resolution16 dated May 31, 2005. Subsequently, said counsel sought
another extension of 15 days or until June 19, 2005,17 this time claiming that the
petition had already been finalized and sent to Anderson in Hawaii, U.S.A. for her
to read as well as sign the certification and verification portion thereof. However,
as of the last day of the extended period on June 4, 2005, the petition has not yet
been sent back, hence, the additional extension being sought. In the interest of
justice, the CA once again granted the said motion for extension.18 On June 20,
2005,19 Atty. Oliva was finally able to file the Petition for Review20 but the
certification against forum shopping attached thereto was signed by him on
Anderson’s behalf without any accompanying authority to do so. Hence, the CA
issued a Resolution21 on July 14, 2005, viz:

The Court resolves to DISMISS herein Petition for Review as the certification
against forum shopping was executed not by the petitioner herself but by her
counsel without attaching therewith any special authority to sign on her behalf.

SO ORDERED.22

Anderson filed a Motion for Reconsideration.23 During its pendency, she also filed
a Manifestation24 to which was attached an Affidavit25 and a Special Power of
Attorney (SPA)26 authorizing her counsel to cause the preparation and filing of
the Petition for Review and to sign and execute the verification and certification
against forum shopping on her behalf. She explained in the Affidavit that at the
time the petition was filed, her health condition hindered her from going to the
proper authority to execute the necessary SPA so she just verbally instructed her
lawyer to draft the petition and cause the filing of the same. Nevertheless, upon
learning of the dismissal of her case, she returned to the Philippines even against
her doctor’s advice and executed an SPA in favor of her counsel. She thus
prayed that the subsequently submitted documents be considered in resolving
her pending Motion for Reconsideration.
The CA, however, remained unswayed and denied the Motion for
Reconsideration in a Resolution27 dated May 4, 2006.

Hence, this Petition for Review on Certiorari.

The Parties’ Arguments

Anderson prays for the relaxation of the rules on certification against forum
shopping and cites a number of jurisprudence wherein the Court considered the
subsequent submission or correction of a certificate of non-forum shopping as
substantial compliance. One in particular is Donato v. Court of Appeals28 which
she claims to be on all fours with the present case. Moreover, Anderson stresses
that the merits of the case should at all times prevail over the rigid application of
technical rules. She then proceeds to discuss her arguments relating to the
substantial merits of her petition.

On the other hand, Ho points out that despite the extensions granted by the CA
within which to file the Petition for Review, Anderson still failed to sign the
certification against forum shopping. This, he avers, demonstrates Anderson’s
brazen disregard of technical rules. Anent the argument of substantial
compliance, Ho cites Mendigorin v. Cabantog29 where the Court reiterated its
earlier pronouncement that substantial compliance will not suffice in a matter
involving strict observance of the rule regarding a certificate of non-forum
shopping.30 At any rate, Ho insists that Anderson has no sufficient cause of action
for ejectment and damages against him.

Our Ruling

The petition has no merit.

No justifiable reason exists in this case

as to relax the rule on certification

against forum shopping.

The need to abide by the Rules of Court and the procedural requirements it
imposes has been constantly underscored by this Court. One of these procedural
requirements is the certificate of non-forum shopping which, time and again, has
been declared as basic, necessary and mandatory for procedural orderliness.31

In Vda. De Formoso v. Philippine National Bank,32 the Court reiterated the

guidelines respecting non-compliance with or submission of a defective
certificate of non-forum shopping, the relevant portions of which are as follows:
4) As to certification against forum shopping, non-compliance therewith or a
defect therein, x x x, is generally not curable by its subsequent submission or
correction thereof, unless there is a need to relax the Rule on the ground of
‘substantial compliance’ or presence of ‘special circumstances or compelling
reasons’.

xxxx

6) Finally, the certification against forum shopping must be executed by the

party-pleader, not by his counsel. If, however, for reasonable or justifiable
reasons, the party-pleader is unable to sign, he must execute a Special Power of
Attorney designating his counsel of record to sign on his behalf.33 (Emphasis
supplied)

The requirement that it is the petitioner, not her counsel, who should sign the
certificate of non-forum shopping is due to the fact that a "certification is a
peculiar personal representation on the part of the principal party, an assurance
given to the court or other tribunal that there are no other pending cases
involving basically the same parties, issues and causes of action."34 "Obviously, it
is the petitioner, and not always the counsel whose professional services have
been retained for a particular case, who is in the best position to know whether
sheactually filed or caused the filing of a petition in that case."35 Per the above
guidelines, however, if a petitioner is unable to sign a certification for reasonable
or justifiable reasons, she must execute an SPA designating her counsel of
record to sign on her behalf. "A certification which had been signed by counsel
without the proper authorization is defective and constitutes a valid cause for the
dismissal of the petition."36

In this light, the Court finds that the CA correctly dismissed Anderson’s Petition
for Review on the ground that the certificate of non-forum shopping attached
thereto was signed by Atty. Oliva on her behalf sans any authority to do so. While
the Court notes that Anderson tried to correct this error by later submitting an
SPA and by explaining her failure to execute one prior to the filing of the petition,
this does not automatically denote substantial compliance. It must be
remembered that a defective certification is generally not curable by its
subsequent correction. And while it is true that in some cases the Court
considered such a belated submission as substantial compliance, it "did so only
on sufficient and justifiable grounds that compelled a liberal approach while
avoiding the effective negation of the intent of the rule on non-forum shopping."37

Unlike in Donato38 and the other cases cited by Anderson, no sufficient and
justifiable grounds exist in this case as to relax the rules on certification against
forum shopping.
In Donato, the CA dismissed therein petitioner’s Petition for Review on the
ground, among others, that the certification against forum shopping was signed
by his counsel. In filing a motion for reconsideration, petitioner submitted a
certification duly signed by himself. However, the CA ruled that his subsequent
compliance did not cure the defect of the instant petition and denied his Motion
for Reconsideration. When the case reached this Court, it was held, viz:

The petition for review filed before the CA contains a certification against forum
shopping but said certification was signed by petitioner’s counsel. In submitting
the certification of non-forum shopping duly signed by himself in his motion for
reconsideration, petitioner has aptly drawn the Court’s attention to the physical
impossibility of filing the petition for review within the 15-day reglementary period
to appeal considering that he is a resident of 1125 South Jefferson Street,
Roanoke, Virginia, U.S.A. where he needs to personally accomplish and sign the
verification.

We fully agree with petitioner that it was physically impossible for the petition to
have been prepared and sent to the petitioner in the United States, for him to
travel from Virginia, U.S.A. to the nearest Philippine Consulate in Washington,
D.C., U.S.A. in order to sign the certification before the Philippine Consul, and for
him to send back the petition to the Philippines within the 15-day reglementary
period. Thus, we find that petitioner has adequately explained his failure to
personally sign the certification which justifies relaxation of the rule.

We have stressed that the rules on forum shopping, which were precisely
designed to promote and facilitate the orderly administration of justice, should not
be interpreted with such absolute literalness as to subvert its own ultimate and
legitimate objective which is simply to prohibit and penalize the evils of forum-
shopping. The subsequent filing of the certification duly signed by the petitioner
himself should thus be deemed substantial compliance, pro hac vice.39

While at first blush Donato appears to be similar with the case at bench, a deeper
and meticulous comparison of the two cases reveals essential differences. In
Donato, the Court held that it was impossible for the petition to have been
prepared and sent to the therein petitioner in the USA; for him to travel from
Virginia to the nearest Philippine Consulate in Washington D.C.; and for the
petition to be sent back to the Philippines within the 15-day reglementary period.
The same could not, however, be said in this case. It must be remembered that
on top of the 15-day reglementary period to file the petition, Atty. Oliva sought
and was granted a total extension of 30 days to file the same. Hence, Anderson
had a total of 45 days to comply with the requirements of a Petition for Review as
against the 15 days afforded to the petitioner in Donato. To this Court, the said
period is more than enough time for Anderson to execute an SPA before the
nearest Philippine Consulate, which again unlike in Donato, was located in the
same state where Anderson was (Hawaii), and thereafter to send it to the
Philippines. Anent her allegation that her health condition at that time hindered
her from going to the proper authorities to execute an SPA, the same deserves
scant consideration as no medical certificate was submitted to support this.
"Indeed, the age-old but familiar rule is that he who alleges must prove his
allegations."40

Moreover, simultaneous with the filing of a Motion for Reconsideration, the

proper certificate of non-forum shopping was submitted by the petitioner in
Donato. Notably in this case, the SPA was submitted two months after the filing
of Anderson’s Motion for Reconsideration. It took that long because instead of
executing an SPA before the proper authorities in Hawaii and sending the same
to the Philippines, Anderson still waited until she came back to the country and
only then did she execute one. It thus puzzles the Court why Anderson opted not
to immediately submit the SPA despite her awareness that the same should have
been submitted simultaneously with the Petition for Review. Hence, it cannot
help but conclude that the delay in the submission of the SPA is nothing but a
product of Anderson’s sheer laxity and indifference in complying with the rules. It
is well to stress that "rules are laid down for the benefit of all and should not be
made dependent upon a suitor’s sweet time and own bidding."41 They should be
faithfully complied with42 and may not simply be ignored to suit the convenience
of a party.43 Although they are liberally construed in some situations, there must,
however, be a showing of justifiable reasons and at least a reasonable attempt at
compliance therewith,44 which unfortunately are not obtaining in this case.

In view of the foregoing, this Court affirms the CA’s dismissal of Anderson’s
Petition for Review.1âwphi1

As a final note, the Court reiterates that:

x x x procedural rules are designed to facilitate the adjudication of cases. Courts

and litigants alike are enjoined to abide strictly by the rules. While in certain
instances, we allow a relaxation in the application of the rules, we never intend to
forge a weapon for erring litigants to violate the rules with impunity. The liberal
interpretation and application of rules apply only in proper cases of demonstrable
merit and under justifiable causes and circumstances. While it is true that
litigation is not a game of technicalities, it is equally true that every case must be
prosecuted in accordance with the prescribed procedure to ensure an orderly
and speedy administration of justice. Party litigants and their counsels are well
advised to abide by rather than flaunt, procedural rules for these rules illumine
the path of the law and rationalize the pursuit of justice.45
WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed
Resolution dated July 14, 2005 and May 4, 2006 of the Court of Appeals in CA-
G.R. SP No. 89793 are AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SPECIAL FIRST DIVISION

G.R. No. 177751 January 7, 2013

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
FLORENCIO AGACER,* EDDIE AGACER, ELYNOR AGACER, FRANKLIN
AGACER and ERIC*** AGACER,Accused-Appellants.

RESOLUTION

DEL CASTILLO, J.:

For resolution is appellants' Motion for Reconsideration1 of our December 14,

2011 Decision2 affirming their conviction for the murder of Cesario Agacer, the
dispositive portion of which reads as follows:

WHEREFORE, the Court AFFIRMS the November 17, 2006 Decision of the
Court of Appeals in CA-G.R. CR-H.C. No. 01543 which affirmed the August 7,
2001 Decision of the Regional Trial Court, Branch 8, Aparri, Cagayan, finding
appellants Florencio, Franklin, Elynor, Eddie and Eric, all surnamed Agacer.
guilty beyond reasonable doubt of the crime of murder, with the following
modifications:

(1) actual damages is DELETED;

(2) the appellants are ORDERED to pay the heirs of Cesario Agacer
₱25,000.0 as temperate damages; and

(3) the appellants are ORDERED to pay the heirs of Cesario Agacer h
interest at the legal rate of six percent (6%) per annum on all the amounts
of damages awarded, commencing from the date of finality of this Decision
until fully paid.

Costs against appellants.

SO ORDERED.3

Appellants assert that their mere presence at the scene of the crime is not
evidence of conspiracy;4 that there was no treachery since a heated argument
preceded the killing of the victim;5 and that even assuming that their guilt was
duly established, the privileged mitigating circumstance of minority should have
been appreciated in favor of appellant Franklin Agacer (Franklin) who was only
16 years and 106 days old at the time of the incident, having been born on
December 21, 1981.6

In our February 13, 2012 Resolution,7 we required the Office of the Solicitor
General (OSG) to comment on the Motion for Reconsideration particularly on the
issue of Franklin’s minority.

Meanwhile, in a letter8 dated June 8, 2012, the Officer-in-Charge of the New

Bilibid Prison, informed us that appellant Florencio Agacer (Florencio) died on
February 17, 2007, as evidenced by the attached Certificate of Death indicating
cardio pulmonary arrest secondary to status asthmaticus as the cause of death.9

The OSG, in its Comment,10 asserts that there exists no cogent reason to disturb
our findings and conclusions as to the guilt of the appellants since the facts and
evidence clearly established conspiracy and treachery. However, it did not
oppose and even agreed with appellants’ argument that minority should have
been appreciated as a privileged mitigating circumstance in favor of Franklin, the
same being duly supported by a copy of Franklin’s Certificate of Live Birth
secured from the National Statistics Office (NSO) Document Management
Division.11

Issues

Hence, the following issues for our resolution:

1. Was the evidence sufficient to establish the existence of conspiracy and

treachery in the commission of the crime charged?

2. Should the mitigating circumstance of minority be appreciated in favor of

appellant Franklin?

3. Does the death of appellant Florencio extinguish his criminal and civil
liabilities?

Our Ruling

There is partial merit in appellants’ Motion for Reconsideration.

Reiterated Arguments in a Motion for Reconsideration Do Not Need a New

Judicial Determination.
Appellants’ contention that the prosecution’s evidence is insufficient to prove
conspiracy and treachery is a mere rehash of their argument set forth in their
brief, "which we already considered, weighed and resolved before we rendered
the Decision sought to be reconsidered."12 It is not a new issue that needs further
judicial determination.13There is therefore no necessity to discuss and rule again
on this ground since "this would be a useless formality of ritual invariably
involving merely a reiteration of the reasons already set forth in the judgment or
final order for rejecting the arguments advanced by the movant."14

As a Minor, Franklin is Entitled to the Privileged Mitigating Circumstance of

Minority.

Nevertheless, we agree with appellants that Franklin is entitled to the privileged

mitigating circumstance of minority. Franklin’s Certificate of Live Birth shows that
he was born on December 20, 1981, hence, was merely 16 years old at the time
of the commission of the crime on April 2, 1998. He is therefore entitled to the
privileged mitigating circumstance of minority embodied in Article 68(2) of the
Revised Penal Code. It provides that when the offender is a minor over 15 and
under 18 years, the penalty next lower than that prescribed by law shall be
imposed on the accused but always in the proper period. The rationale of the law
in extending such leniency and compassion is that because of his age, the
accused is presumed to have acted with less discernment.15 This is regardless of
the fact that his minority was not proved during the trial and that his birth
certificate was belatedly presented for our consideration, since to rule
accordingly will not adversely affect the rights of the state, the victim and his
heirs.

Penalty to be Imposed Upon Franklin.

Pursuant to the above discussion, the penalty imposed upon Franklin must be
accordingly modified. The penalty for murder is reclusion perpetua to death. A
degree lower is reclusion temporal.16 There being no aggravating and ordinary
mitigating circumstance, the penalty to be imposed on Franklin should be
reclusion temporal in its medium period, as maximum, which ranges from
fourteen (14) years, eight (8) months and one (1) day to seventeen (17) years
and four (4) months.17 Applying the Indeterminate Sentence Law, the penalty
next lower in degree is prision mayor, the medium period of which ranges from
eight (8) years and one (1) day to ten (10) years. Due to the seriousness of the
crime and the manner it was committed, the penalty must be imposed at its most
severe range.

The Death of Florencio Prior to Our Final Judgment Extinguishes His Criminal
Liability and Civil Liability Ex Delicto.
On the effect of the death of appellant Florencio on his criminal liability, Article
89(1) of the Revised Penal Code provides that:

Art. 89. How criminal liability is totally extinguished. – Criminal liability is totally
extinguished.

1. By the death of the convict, as to the personal penalties; and as to pecuniary

penalties, liability therefor is extinguished only when the death of the offender
occurs before final judgment;

xxxx

It is also settled that "upon the death of the accused pending appeal of his
conviction, the criminal action is extinguished inasmuch as there is no longer a
defendant to stand as the accused; the civil action instituted therein for recovery
of civil liability ex delicto is ipso facto extinguished, grounded as it is on the
criminal."18

While Florencio died way back on February 7, 2007, the said information was not
timely relayed to the Court, such that we were unaware of the same when we
rendered our December 14, 2011 Decision. It was only later that we were
informed of Florencio’s death through the June 8, 2012 letter of the Officer-in-
Charge of the New Bilibid Prison. Due to this development, it therefore becomes
necessary for us to declare Florencio 's criminal liability as well as his civil liability
ex delicto to have been extinguished by his death prior to final judgment. The
judgment or conviction is thus set aside insofar as Florencio is concerned.

WHEREFORE, appellants' Motion for Reconsideration is PARTIALLY

GRANTED. Our Decision dated December 14, 2011 is MODIFIED as follows: (a)
1âw phi 1

appellant Franklin Agacer is sentenced to suffer the penalty often (10) years of
prision mayor in its medium period, as minimum, to seventeen (17) years and
four ( 4) months of reclusion temporal in its medium period, as maximum, and (b)
the criminal liability and civil liability ex delicto of appellant Florencio Agacer are
declared EXTINGUISHED by his death prior to final judgment. The judgment or
conviction against him is therefore SET ASIDE.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 175492 February 27, 2013

CARLOS L. OCTAVIO, Petitioner,

vs.
PIDLIPPINE LONG DISTANCE TELEPHONE COMPANY, Respondent.

DECISION

DEL CASTILLO, J.:

Every Collective Bargaining Agreement (CBA) shall provide a grievance

machinery to which all disputes arising from its implementation or interpretation
will be subjected to compulsory negotiations. This essential feature of a CBA
provides the parties with a simple, inexpensive and expedient system of finding
reasonable and acceptable solutions to disputes and helps in the attainment of a
sound and stable industrial peace.

Before us is a Petition for Review on Certiorari1 assailing the August 31, 2006
Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 93578, which
dismissed petitioner Carlos L. Octavio's (Octavio) Petition for Certiorari3assailing
the September 30, 2005 Resolution4 of the National Labor Relations Commission
(NLRC). Said NLRC Resolution affirmed the August 30, 2004 Decision5 of the
Labor Arbiter which dismissed Octavio's Complaint for payment of salary
increases against respondent Philippine Long Distance Company (PLDT).
Likewise assailed in this Petition is the November 15, 2006 Resolution6 which
denied Octavio’s Motion for Reconsideration.7

Factual Antecedents

On May 28, 1999, PLDT and Gabay ng Unyon sa Telekominaksyon ng mga

Superbisor (GUTS) entered into a CBA covering the period January 1, 1999 to
December 31, 2001 (CBA of 1999-2001). Article VI, Section I thereof provides:

Section 1. The COMPANY agrees to grant the following across-theboard salary

increase during the three years covered by this Agreement to all employees
covered by the bargaining unit as of the given dates:

Effective January 1, 1999 – 10% of basic wage or ₱2,000.00 whichever is higher;

Effective January 1, 2000 – 11% of basic wage or ₱2,250.00 whichever is higher;

Effective January 1, 2001 – 12% of basic wage or ₱2,500.00 whichever is

higher.8

On October 1, 2000, PLDT hired Octavio as Sales System Analyst I on a

probationary status. He became a member of GUTS. When Octavio was
regularized on January 1, 2001, he was receiving a monthly basic salary of
₱10,000.00. On February 1, 2002, he was promoted to the position of Sales
System Analyst 2 and his salary was increased to ₱13,730.00.

On May 31, 2002, PLDT and GUTS entered into another CBA covering the
period January 1, 2002 to December 31, 2004 (CBA of 2002-2004) which
provided for the following salary increases: 8% of basic wage or ₱2,000.00
whichever is higher for the first year (2002); 10% of basic wage or ₱2,700.00
whichever is higher for the second year (2003); and, 10% of basic wage or
₱2,400.00 whichever is higher for the third year (2004).9

Claiming that he was not given the salary increases of ₱2,500.00 effective
January 1, 2001 and ₱2,000.00 effective January 1, 2002, Octavio wrote the
President of GUTS, Adolfo Fajardo (Fajardo).10 Acting thereon and on similar
grievances from other GUTS members, Fajardo wrote the PLDT Human
Resource Head to inform management of the GUTS members’ claim for
entitlement to the across-the-board salary increases.11

Accordingly, the Grievance Committee convened on October 7, 2002 consisting

of representatives from PLDT and GUTS. The Grievance Committee, however,
failed to reach an agreement. In effect, it denied Octavio’s demand for salary
increases. The Resolution (Committee Resolution), reads as follows:

October 7, 2002

UNION ISSUE :

1. Mr. Carlos L. Octavio, Sales System Analyst I, CCIM-Database,

was promoted to S2 from S1 last February 01, 2002. He claimed that
the whole ₱2,000 (1st yr. GUTS-CBA increase) was not given to
him.

2. He was hired as a probationary employee on October 01, 2000

and was regularized on January 01, 2001. He claimed that
Management failed to grant him the GUTS-CBA increase last
January 2001.
 MANAGEMENT POSITION :

Issue # 1:

A) Promotional Policy: adjustment of basic monthly salary to the

minimum salary of the new position.

B) Mr. Octavio’s salary at the time of his promotion and before the
conclusion of the GUTS CBA was ₱10,000.00.

C) Upon the effectivity of his promotion on February 1, 2002, his

basic monthly salary was adjusted to ₱13,730.00, the minimum
salary of the new position.

D) In June 2002, the GUTS-CBA was concluded and Mr. Octavio’s

basic salary was recomputed to include the ₱2,000.00 1st year
increase retroactive January 2002. The resulting basic salary was
₱12,000.00.

E) Applying the above-mentioned policy, Mr. Octavio’s basic salary

was adjusted to the minimum salary of the new position, which is
₱13,730.00.

Issue # 2:

All regularized supervisory employees as of January 1 are not entitled to the

GUTS CBA increase. However, as agreed with GUTS in the grievance case of
18 personnel of International & Luzon Core Network Management Center,
probationary employees who were hired outside of PLDT and regularized as
supervisors/management personnel on January 1, 2002 shall be entitled to
GUTS CBA. This decision shall be applied prospectively and all previous similar
cases are not covered.

RESOLUTION :

After protracted deliberation of these issues, the committee failed to reach an

agreement. Hence, Management position deemed adopted.

MANAGEMENT UNION

_______(signed)_______ _______(signed)_______
WILFREDO A. GUADIA ADOLFO L.FAJARDO
 _______(signed)_______ _______(signed)_______
ROSALINDA S. RUIZ CONFESOR A. ESPIRITU

_______(signed)_______ _______(signed)_______
ALEJANDRO C. FABIAN CHARLITO A. AREVALO12

Aggrieved, Octavio filed before the Arbitration Branch of the NLRC a Complaint
for payment of said salary increases.

Ruling of the Labor Arbiter

Octavio claimed entitlement to salary increases per the CBAs of 1999-2001 and
2002-2004. He insisted that when he was regularized as a supervisory employee
on January 1, 2001, he became entitled to receive the across-the-board increase
of ₱2,500.00 as provided for under the CBA of 1999-2001 which took effect on
January 1, 1999. Then pursuant to the CBA of 2002-2004, he should have
received an additional increase of ₱2,000.00 apart from the merit increase of
₱3,730.00 which was given him due to his promotion on February 1, 2002.
However, PLDT unilaterally decided to deem as included in the said ₱3,730.00
the ₱2,000.00 across-the-board increase for 2002 as stipulated in the CBA of
2002-2004. This, according to Octavio, amounts to diminution of benefits.
Moreover, Octavio averred that the CBA cannot be the subject of further
negotiation as it has the force of law between the parties. Finally, Octavio
claimed that PLDT committed an act of unfair labor practice because, while it
granted the claim for salary increase of 18 supervisory employees who were
regularized on January 1, 2002 and onwards, it discriminated against him by
refusing to grant him the same salary increase. He thus prayed for an additional
award of damages and attorney’s fees.

PLDT countered that the issues advanced by Octavio had already been resolved
by the Union-Management Grievance Committee when it denied his claims
through the Committee Resolution. Moreover, the grant of across-the board
salary increase for those who were regularized starting January 1, 2002 and the
exclusion thereto of those who were regularized on January 1, 2001, do not
constitute an act of unfair labor practice as would result in any discrimination or
encourage or discourage membership in a labor organization. In fact, when the
Union-Management Grievance Committee came up with the Committee
Resolution, they considered the same as the most practicable and reasonable
solution for both management and union. At any rate, the said Committee
Resolution had already become final and conclusive between the parties for
failure of Octavio to elevate the same to the proper forum. In addition, PLDT
claimed that the NLRC has no jurisdiction to hear and decide Octavio’s claims.
In a Decision dated August 30, 2004, the Labor Arbiter dismissed the Complaint
of Octavio and upheld the Committee Resolution.

Ruling of the National Labor Relations Commission

Upon Octavio’s appeal, the NLRC, in its September 30, 2005 Resolution,
affirmed the Labor Arbiter’s Decision. It upheld the Labor Arbiter’s finding that
Octavio’s salary had already been adjusted in accordance with the provisions of
the CBA. The NLRC further ruled that it has no jurisdiction to decide the issues
presented by Octavio, as the same involved the interpretation and
implementation of the CBA. According to it, Octavio should have brought his
claim before the proper body as provided in the 2002-2004 CBA’s provision on
grievance machinery and procedure.

Octavio’s Motion for Reconsideration was likewise dismissed by the NLRC in its
November 21, 2005 Resolution.13

Ruling of the Court of Appeals

Octavio thus filed a Petition for Certiorari14 which the CA found to be without
merit. In its August 31, 2006 Decision,15 the CA declared the Committee
Resolution to be binding on Octavio, he being a member of GUTS, and because
he failed to question its validity and enforceability.

In his Motion for Reconsideration,16 Octavio disclaimed his alleged failure to

question the Committee Resolution by emphasizing that he filed a Complaint
before the NLRC against PLDT. However, the CA denied Octavio’s Motion for
Reconsideration in its November 15, 2006 Resolution.17

Issues

Hence, Octavio filed this Petition raising the following issues for our
consideration:

a. Whether x x x the employer and bargaining representative may amend

the provisions of the collective bargaining agreement without the consent
and approval of the employees;

b. If so, whether the said agreement is binding [on] the employees;

c. Whether x x x merit increases may be awarded simultaneously with

increases given in the Collective Bargaining Agreement;
 d. Whether x x x damages may be awarded to the employee for violation
by the employer of its commitment under its existing collective bargaining
agreement.18

Octavio submits that the CA erred in upholding the Committee Resolution which
denied his claim for salary increases but granted the same request of 18 other
similarly situated employees. He likewise asserts that both PLDT and GUTS had
the duty to strictly implement the CBA salary increases; hence, the Committee
Resolution, which effectively resulted in the modification of the CBAs’ provision
on salary increases, is void.

Octavio also insists that PLDT is bound to grant him the salary increase of
₱2,000.00 for the year 2002 on top of the merit increase given to him by reason
of his promotion. It is his stance that merit increases are distinct and separate
from across-the-board salary increases provided for under the CBA.

Our Ruling

The Petition has no merit.

Under Article 26019 of the Labor Code, grievances arising from the interpretation
or implementation of the parties’ CBA should be resolved in accordance with the
grievance procedure embodied therein. It also provides that all unsettled
grievances shall be automatically referred for voluntary arbitration as prescribed
in the CBA.

In its Memorandum,20 PLDT set forth the grievance machinery and procedure
provided under Article X of the CBA of 2002-2004, viz:

Section 1. GRIEVANCE MACHINERY - there shall be a Union-Management

Grievance Committee composed of three (3) Union representatives designated
by the UNION Board of Directors and three (3) Management representatives
designated by the company President. The committee shall act upon any
grievance properly processed in accordance with the prescribed procedure. The
Union representatives to the Committee shall not lose pay for attending meetings
where Management representatives are in attendance.

Section 2. GRIEVANCE PROCEDURE - The parties agree that all disputes

between labor and management may be settled through friendly negotiations;
that the parties have the same interest in the continuity of work until all points in
dispute shall have been discussed and settled; that an open conflict in any form
involves losses to the parties; and that therefore, every effort shall be exerted to
avoid such an open conflict. In furtherance of these principles, the parties agree
to observe the following grievance procedures.

Step 1. Any employee (or group of employees) who believes that he has a
justifiable grievance shall present the matter initially to his division head, or if the
division is involved in the grievance, to the company official next higher to the
division head (the local manager in the provincial exchanges) not later that fifteen
(15) days after the occurrence of the incident giving rise to the grievance. The
initial presentation shall be made to the division head either by the aggrieved
party himself or by the Union Steward or by any Executive Officer of the Union
who is not a member of the grievance panel. The initial presentation may be
1âwphi1

made orally or in writing.

Step 2. Any party who is not satisfied with the resolution of the grievance at Step
1 may appeal in writing to the Union-Management Grievance Committee within
seven (7) days from the date of receipt of the department head’s decision.

Step 3. If the grievance is not settled either because of deadlock or the

failure of the committee to decide the matter, the grievance shall be
transferred to a Board of Arbitrators for the final decision. The Board shall
be composed of three (3) arbitrators, one to be nominated by the Union, another
to be nominated by the Management, and the third to be selected by the
management and union nominees. The decision of the board shall be final and
binding both the company and the Union in accordance with law. Expenses of
arbitration shall be divided equally between the Company and the
Union.21 (Emphasis supplied)

Indisputably, the present controversy involves the determination of an

employee’s salary increases as provided in the CBAs. When Octavio’s claim for
salary increases was referred to the Union-Management Grievance Committee,
the clear intention of the parties was to resolve their differences on the proper
interpretation and implementation of the pertinent provisions of the CBAs. And in
accordance with the procedure prescribed therein, the said committee made up
of representatives of both the union and the management convened.
Unfortunately, it failed to reach an agreement. Octavio’s recourse pursuant to the
CBA was to elevate his grievance to the Board of Arbitrators for final decision.
Instead, nine months later, Octavio filed a Complaint before the NLRC.

It is settled that "when parties have validly agreed on a procedure for resolving
grievances and to submit a dispute to voluntary arbitration then that procedure
should be strictly observed."22 Moreover, we have held time and again that
"before a party is allowed to seek the intervention of the court, it is a precondition
that he should have availed of all the means of administrative processes afforded
him. Hence, if a remedy within the administrative machinery can still be resorted
to by giving the administrative officer concerned every opportunity to decide on a
matter that comes within his jurisdiction, then such remedy should be exhausted
first before the court’s judicial power can be sought. The premature invocation of
the court’s judicial intervention is fatal to one’s cause of action."23 "The underlying
principle of the rule on exhaustion of administrative remedies rests on the
presumption that when the administrative body, or grievance machinery, is
afforded a chance to pass upon the matter, it will decide the same correctly."24

By failing to question the Committee Resolution through the proper procedure

prescribed in the CBA, that is, by raising the same before a Board of Arbitrators,
Octavio is deemed to have waived his right to question the same. Clearly, he
departed from the grievance procedure mandated in the CBA and denied the
Board of Arbitrators the opportunity to pass upon a matter over which it has
jurisdiction. Hence, and as correctly held by the CA, Octavio’s failure to assail the
validity and enforceability of the Committee Resolution makes the same binding
upon him. On this score alone, Octavio’s recourse to the labor tribunals below, as
well as to the CA, and, finally, to this Court, must therefore fail.

At any rate, Octavio cannot claim that the Committee Resolution is not valid,
binding and conclusive as to him for being a modification of the CBA in violation
of Article 25325 of the Labor Code. It bears to stress that the said resolution is a
product of the grievance procedure outlined in the CBA itself. It was arrived at
after the management and the union through their respective representatives
conducted negotiations in accordance with the CBA. On the other hand, Octavio
never assailed the competence of the grievance committee to take cognizance of
his case. Neither did he question the authority or credibility of the union
representatives; hence, the latter are deemed to have properly bargained on his
behalf since "unions are the agent of its members for the purpose of securing just
and fair wages and good working conditions."26 In fine, it cannot be gainsaid that
the Committee Resolution is a modification of the CBA. Rather, it only provides
for the proper implementation of the CBA provision respecting salary increases.

Finally, Octavio’s argument that the denial of his claim for salary increases
constitutes a violation of Article 10027 of the Labor Code is devoid of merit. Even
assuming that there has been a diminution of benefits on his part, Article 100
does not prohibit a union from offering and agreeing to reduce wages and
benefits of the employees as the right to free collective bargaining includes the
right to suspend it.28 PLDT averred that one of the reasons why Octavio’s salary
was recomputed as to include in his salary of ₱13,730.00 the ₱2,000.00 increase
for 2002 is to avoid salary distortion. At this point, it is well to emphasize that
bargaining should not be equated to an "adversarial litigation where rights and
obligations are delineated and remedies applied."29 Instead, it covers a process
of finding a reasonable and acceptable solution to stabilize labor-management
relations to promote stable industrial peace.30Clearly, the Committee Resolution
was arrived at after considering the intention of both PLDT and GUTS to foster
industrial peace.

All told, we find no error on the part of the Labor Arbiter, the NLRC and the CA in
unanimously upholding the validity and enforceability of the Grievance
Committee Resolution dated October 7, 2002.

WHEREFORE, the petition is DENIED. The August 31, 2006 Decision and
November 15, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 93578
are AFFIRMED.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 178347 February 25, 2013

SALVA CION VILLANUEVA, TEOFILO TREDEZ, DONALD BUNDAC, DANNY

CABIGUEN, GREGORIO DELGADO, and BILLY BUNGAR, Petitioners,
vs.
PALAWAN COUNCIL FOR SUSTAINABLE DEVELOPMENT, represented by
Executive Director ROMEO DORADO, and PATRICIA LOUISE MINING AND
DEVELOPMENT CORPORATION, represented by Engineer FERNANDO
ESGUERRA, Respondents.

DECISION

DEL CASTILLO, J.:

"The writ of certiorari is an extraordinary remedy that the Court issues

only under closely defined grounds and procedures that litigants and their
lawyers must scrupulously observe.1

This is a Petition for Review2 on Certiorari of the May 7, 2007 Order3 of the
Regional Trial Court (RTC) of Palawan and Puerto Princesa City, Branch 47,
which dismissed petitioners’ Petition for Certiorari and Mandamus4 on the ground
of lack of jurisdiction. The fallo of the assailed Order reads:

WHEREFORE, premises considered, finding merit in the motion to dismiss, the

same is hereby granted. Hence, this case is hereby ordered DISMISSED on the
ground of lack of jurisdiction, which dismissal is without prejudice.

SO ORDERED.5

Background

On June 19, 1992, Republic Act (RA) No. 7611 or the "Strategic Environment
Plan (SEP) for Palawan Act" was signed into law. It called for the establishment
of the Environmentally Critical Areas Network (ECAN), which is a "graded system
of protection and development control over the whole of Palawan."6 The ECAN
will categorize the terrestrial areas, coastal areas, and tribal lands in Palawan
according to the degree of human disruption that these areas can tolerate. Core
zones (consisting of all types of natural forest, mountain peaks, and habitats of
endangered and rare species) are to be strictly protected and maintained free of
human disruption,7 controlled use areas allow controlled logging and
mining,8 while multiple use areas are open for development.9 The law vested the
task of creating and implementing the ECAN on the Palawan Council for
Sustainable Development (PCSD).10

Pursuant to its rule-making authority under RA 7611,11 the PCSD promulgated

the SEP Clearance Guidelines,12which require all proposed undertakings in the
Palawan province to have an SEP Clearance from PCSD before application for
permits, licenses, patents, grants, or concessions with the relevant government
agencies. Generally, the PCSD issues the clearance if the ECAN allows the type
of proposed activity in the proposed site; it denies the clearance if the ECAN
prohibits the type of proposed activity in the proposed site.

Factual Antecedents

The controversy in the instant case arose when PCSD issued an SEP Clearance
to Patricia Louise Mining and Development Corporation (PLMDC) for its
proposed small-scale nickel mining project to be conducted in a controlled use
area in Barangay Calategas in the Municipality of Narra, Province of Palawan.

The petitioners, who are farmers and residents of Barangay Calategas, sought
the recall of the said clearance in their letter13 to PCSD Chairman, Abraham
Kahlil Mitra. The PCSD, through its Executive Director, Romeo B. Dorado,
denied their request for lack of basis.14

On August 7, 2006, petitioners filed a Petition for Certiorari and

Mandamus15 against PCSD and PLMDC with the RTC of Palawan and Puerto
Princesa City. They prayed for the nullification of the said SEP Clearance for
violating various provisions of RA 761116 and PCSD Resolution No. 05-
250.17 They alleged that these provisions prohibit small-scale nickel mining for
profit in the proposed site,18 which, they maintain, is not even a controlled use
zone, but actually a core zone.19

PLMDC20 and PCSD sought the dismissal of the Petition on various grounds,
including the impropriety of the remedy of certiorari. PCSD argued that it did not
perform a quasi-judicial function.21

The trial court denied the said motions in its Order22 dated September 20, 2006. It
ruled, among others, that certiorari is proper to assail PCSD’s action. PCSD
Administrative Order (AO) No. 6 series of 2000 or the Guidelines in the
Implementation of SEP Clearance System states that the PCSD must conduct a
public hearing, and study the supporting documents for sufficiency and accuracy,
before it decides whether to issue the clearance to the project proponent. The
trial court concluded that this procedure is an exercise of a quasi-judicial power.

The trial court denied23 reconsideration of the above Order.

PLMDC and PCSD again filed Motions to Dismiss but this time on the ground of
lack of jurisdiction. They argued that, under Section 4 of Rule 65 of the Rules of
Court, only the Court of Appeals [CA] can take cognizance of a Petition
for Certiorari and Mandamus filed against a quasi-judicial body.24

The trial court agreed and issued the assailed Order.25

Petitioners appealed directly to this Court.

In their respective memoranda, all the parties submitted that PCSD is exercising
quasi-judicial functions.26 They only diverge on the issue of which court – the CA
or the RTC – has the jurisdiction to review the actions of this quasi-judicial body.

Petitioners argue that the RTC has certiorari jurisdiction over PCSD because the
latter is a quasi-judicial body functioning only within the RTC’s territorial
jurisdiction.27 Moreover, the RTC is the proper court following the principle of
judicial hierarchy.28

On the other hand, respondents argue that, under Section 4 of Rule 65, only the
CA can take cognizance of certiorari petitions against quasi-judicial bodies.29

Our Ruling

The following requisites must concur for a Petition for Certiorari to prosper,
namely:

"(a) The writ is directed against a tribunal, board, or officer exercising

judicial or quasi-judicial functions;

(b) Such tribunal, board, or officer has acted without or in excess of

jurisdiction, or with grave abuse of discretion amounting to lack or excess
of jurisdiction; and

(c) There is no appeal or any plain, speedy, and adequate remedy in the
ordinary course of law."30

In the case at bar, the parties submit that the public respondent PCSD is
exercising a quasi-judicial function in its issuance of the SEP clearance based on
the procedure it follows under its own AO 6 or Guidelines in the Implementation
of SEP Clearance System.31 This procedure includes reviewing the sufficiency
and accuracy of the documents submitted by the project proponent and
conducting public hearings or consultations with the affected community.

The Court disagrees with the parties’ reasoning and holds that PCSD did not
perform a quasi-judicial function that is reviewable by petition for certiorari.

There must be an enabling statute or legislative act conferring quasi-judicial

power upon the administrative body.32RA 7611, which created the PCSD, does
not confer quasi-judicial powers on the said body:

SEC. 19. Powers and Functions. – In order to successfully implement the

provisions of this Act, the Council is hereby vested with the following powers and
functions:

(1) Formulate plans and policies as may be necessary to carry out the
provisions of this Act.

(2) Coordinate with the local governments to ensure that the latter’s plans,
programs and projects are aligned with the plans, programs and policies of
the SEP.

(3) Call on any department, bureau, office, agency or instrumentality of the

Government, and on private entities and organizations for cooperation and
assistance in the performance of its functions.

(4) Arrange, negotiate for, accept donations, grants, gifts, loans, and other
fundings from domestic and foreign sources to carry out the activities and
purposes of the SEP.

(5) Recommend to the Congress of the Philippines such matters that may
require legislation in support of the objectives of the SEP.

(6) Delegate any or all of its powers and functions to its support staff, as
hereinafter provided, except those which by provisions of law cannot be
delegated;

(7) Establish policies and guidelines for employment on the basis of merit,
technical competence and moral character and prescribe a compensation
and staffing pattern;
 (8) Adopt, amend and rescind such rules and regulations and impose
penalties therefor for the effective implementation of the SEP and the other
provisions of this Act.

(9) Enforce the provisions of this Act and other existing laws, rules and
regulations similar to or complementary with this Act;

(10) Perform related functions which shall promote the development,

conservation, management, protection, and utilization of the natural
resources of Palawan; and

(11) Perform such other powers and functions as may be necessary in

carrying out its functions, powers, and the provisions of this Act.

Save possibly for the power to impose penalties33 under Section 19(8) (which is
not involved in PCSD’s issuance of an SEP Clearance), the rest of the conferred
powers, and the powers necessarily implied from them, do not include
adjudication or a quasi-judicial function.

Instead of reviewing the powers granted by law to PCSD, the trial court found the
following procedure outlined in PCSD’s AO 6, as supposedly descriptive of an
adjudicatory process:

1. The project proponent submits a brief description of the processes it

seeks to undertake and the location and description of the proposed
project site.34

2. The PCSD staff reviews the sufficiency and accuracy of these

documents, and conducts a field validation.35

3. The PCSD staff may conduct public consultations or public hearings to

determine the acceptability of the project in the community.36

4. The evaluation of the project shall be based on the ECAN Zoning of

Palawan, ecological sustainability, social acceptability, and economic
viability of the project.37

5. The staff makes an evaluation report, stating therein his recommended

action, for the consideration of the PCSD.38

6. The PCSD may issue or deny the SEP clearance.39

 7. In case of approval, the SEP clearance, together with the evaluation
reports, shall be transmitted to the DENR as bases for the latter’s
subsequent processing of the required permits.40

8. In case of denial, the project proponent may seek reconsideration.

PCSD’s action on the reconsideration is considered final and executory.41

9. The DENR will undertake an independent evaluation of the project and

shall not in any way be prejudiced by the PCSD’s actions.42

The Court disagrees.

First, PCSD AO 6, cited by the trial court and the parties, cannot confer a quasi-
judicial power on PCSD that its enabling statute clearly withheld. An agency’s
power to formulate rules for the proper discharge of its functions is always
circumscribed by the enabling statute.43 Otherwise, any agency conferred with
rule-making power, may circumvent legislative intent by creating new powers for
itself through an administrative order.

More importantly, the procedure outlined in PCSD AO 6 does not involve

adjudication. A government agency performs adjudicatory functions when it
renders decisions or awards that determine the rights of adversarial parties,
which decisions or awards have the same effect as a judgment of the
court.44 These decisions are binding, such that when they attain finality, they
have the effect of res judicata that even the courts of justice have to respect.45 As
we have held in one case,46 "judicial or quasi-judicial function involves the
determination of what the law is, and what the legal rights of the contending
parties are, with respect to the matter in controversy and, on the basis thereof
and the facts obtaining, the adjudication of their respective rights. In other words,
the tribunal, board or officer exercising judicial or quasi-judicial function must be
clothed with power and authority to pass judgment or render a decision on the
controversy construing and applying the laws to that end."

In issuing an SEP Clearance, the PCSD does not decide the rights and
obligations of adverse parties with finality. The SEP Clearance is not even a
license or permit. All it does is to allow the project proponent to proceed with its
application for permits, licenses, patents, grants, or concessions with the relevant
government agencies. The SEP Clearance allows the project proponent to prove
the viability of their project, their capacity to prevent environmental damage, and
other legal requirements, to the other concerned government agencies.47 The
SEP Clearance in favor of PLMDC does not declare that the project proponent
has an enforceable mining right within the Municipality of Narra; neither does it
adjudicate that the concerned citizens of the said municipality have an obligation
to respect PLMDC’s right to mining. In fact, as seen in Section 5 of AO 6, the
PCSD bases its actions, not on the legal rights and obligations of the parties
(which is necessary in adjudication), but on policy considerations, such as social
acceptability, ecological sustainability, and economic viability of the project.

Further, PCSD’s receipt of documents and ascertainment of their sufficiency and

accuracy are not indicative of a judicial function. It is, at most, an investigatory
function to determine the truth behind the claims of the project proponent. This
Court has held that the power to investigate is not the same as adjudication,48 so
long as there is no final determination of the parties’ respective rights and
obligations.

Lastly, the fact that the PCSD conducts public consultations or hearings does not
mean that it is performing quasi-judicial functions. AO 6 defines public
hearing/public consultation simply as an "activity undertaken by PCSD to gather
facts and thresh out all issues, concerns and apprehensions and at the same
time provide the project proponent with the opportunity to present the project to
the affected community."49 Its purpose is not to adjudicate the rights of
contending parties but only to "ascertain the acceptability of the project in the
community and to ensure that the interests of all stakeholders are
considered,"50 pursuant to RA 7611’s policy of "encouraging the involvement of
all sectors of society and maximizing people participation x x x in natural
resource management, conservation and protection."51 On the other hand, the
purpose of hearings in judicial bodies is to ascertain the truth of the parties’
claims through an adversarial process. Clearly, the purpose of PCSD’s public
consultations is not for adversaries to pit their claims against each other. Since
the PCSD’s actions cannot be considered quasi-judicial, the same cannot be
reviewed via a special civil action for certiorari. Where an administrative body or
officer does not exercise judicial or quasi-judicial power, certiorari does not lie.52

A review of the Petition for Certiorari reveals another flaw. The alleged grounds
1âw phi 1

for the nullity of the SEP Clearance are its violations of certain provisions of RA
7611 and PCSD Resolution No. 05-250. Clearly, an ordinary action for the
nullification of the SEP Clearance is a plain, speedy, and adequate remedy
available to the petitioners, which precludes resort to a special civil action.53 This
ordinary action will allow the parties to litigate factual issues, such as petitioners’
contention that PLMDC’s proposed mining site is in a core zone, it being in a
natural forest and a critical watershed, contrary to PCSD’s claim that it is in a
controlled use zone. Certiorari would not have provided the petitioners with such
an opportunity because it is limited to questions of jurisdiction and does not
resolve factual matters.54 Certiorari does not involve a full-blown trial but is
generally restricted to the filing of pleadings (petition, comment, reply, and
memoranda), unless the court opts to hear the case.55 Since an ordinary action is
available and in fact appears to be more appropriate, petitioners were wrong to
resort to the extraordinary remedy of certiorari.

The same fate befalls the Petition for Mandamus. Petitioners prayed that the
PCSD be compelled to comply with the provisions ofRA 7611. Clearly, the
success of the Petition for Mandamus depends on a prior finding that the PCSD
violated RA 7611 in issuing the SEP Clearance. There can be no such finding
with the dismissal of the Petition for Certiorari.

Given the foregoing, it is no longer necessary to resolve the jurisdictional issue

presented by the parties.

WHEREFORE, premises considered, the assailed May 7, 2007 Order of Branch

47 of the Regional Trial Court of Palawan and Puerto Princesa City dismissing
the Petition for Certiorari and Mandamus, docketed as Civil Case No. 4218,
is AFFIRMED but for being an IMPROPER REMEDY.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 179965 February 20, 2013

NICOLAS P. DIEGO, Petitioner,

vs.
RODOLFO P. DIEGO and EDUARDO P. DIEGO, Respondents.

DECISION

DEL CASTILLO, J.:

It is settled jurisprudence, to the point of being elementary, that an agreement

which stipulates that the seller shall execute a deed of sale only upon or after tl1ll
payment of the purchase price is a contract to sell, not a contract of sale.
In Reyes v. Tuparan, 1 this Court declared in categorical terms that "[w]here the
vendor promises to execute a deed of absolute sale upon the completion
by the vendee of the payment of the price, the contract is only a contract to
sell. The aforecited stipulation shows that the vendors reserved title to the
subject property until full payment of the purchase price."

In this case, it is not disputed as in tact both parties agreed that the deed of sale
shall only be executed upon payment of the remaining balance of the purchase
price. Thus, pursuant to the above stated jurisprudence, we similarly declare that
the transaction entered into by the parties is a contract to sell.

Before us is a Petition for Review on Certiorari2 questioning the June 29, 2007
Decision3 and the October 3, 2007 Resolution4 of the Court of Appeals (CA) in
CA-G.R. CV No. 86512, which affirmed the April 19, 2005 Decision5 of the
Regional Trial Court (RTC), Branch 40, of Dagupan City in Civil Case No. 99-
02971-D.

Factual Antecedents

In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo,

respondent herein, entered into an oral contract to sell covering Nicolas’s share,
fixed at ₱500,000.00, as co-owner of the family’s Diego Building situated in
Dagupan City. Rodolfo made a downpayment of ₱250,000.00. It was agreed that
the deed of sale shall be executed upon payment of the remaining balance of
₱250,000.00. However, Rodolfo failed to pay the remaining balance.

Meanwhile, the building was leased out to third parties, but Nicolas’s share in the
rents were not remitted to him by herein respondent Eduardo, another brother of
Nicolas and designated administrator of the Diego Building. Instead, Eduardo
gave Nicolas’s monthly share in the rents to Rodolfo. Despite demands and
protestations by Nicolas, Rodolfo and Eduardo failed to render an accounting
and remit his share in the rents and fruits of the building, and Eduardo continued
to hand them over to Rodolfo.

Thus, on May 17, 1999, Nicolas filed a Complaint6 against Rodolfo and Eduardo
before the RTC of Dagupan City and docketed as Civil Case No. 99-02971-D.
Nicolas prayed that Eduardo be ordered to render an accounting of all the
transactions over the Diego Building; that Eduardo and Rodolfo be ordered to
deliver to Nicolas his share in the rents; and that Eduardo and Rodolfo be held
solidarily liable for attorney’s fees and litigation expenses.

Rodolfo and Eduardo filed their Answer with Counterclaim7 for damages and
attorney’s fees. They argued that Nicolas had no more claim in the rents in the
Diego Building since he had already sold his share to Rodolfo. Rodolfo admitted
having remitted only ₱250,000.00 to Nicolas. He asserted that he would pay the
balance of the purchase price to Nicolas only after the latter shall have executed
a deed of absolute sale.

Ruling of the Regional Trial Court

After trial on the merits, or on April 19, 2005, the trial court rendered its
Decision8 dismissing Civil Case No. 99-02971-D for lack of merit and ordering
Nicolas to execute a deed of absolute sale in favor of Rodolfo upon payment by
the latter of the ₱250,000.00 balance of the agreed purchase price. It made the
following interesting pronouncement:

It is undisputed that plaintiff (Nicolas) is one of the co-owners of the Diego

Building, x x x. As a co-owner, he is entitled to [his] share in the rentals of the
said building. However, plaintiff [had] already sold his share to defendant Rodolfo
Diego in the amount of ₱500,000.00 and in fact, [had] already received a partial
payment in the purchase price in the amount of ₱250,000.00. Defendant
Eduardo Diego testified that as per agreement, verbal, of the plaintiff and
defendant Rodolfo Diego, the remaining balance of ₱250,000.00 will be paid
upon the execution of the Deed of Absolute Sale. It was in the year 1997
when plaintiff was being required by defendant Eduardo Diego to sign the Deed
of Absolute Sale. Clearly, defendant Rodolfo Diego was not yet in default as the
plaintiff claims which cause [sic] him to refuse to sign [sic] document. The
contract of sale was already perfected as early as the year 1993 when plaintiff
received the partial payment, hence, he cannot unilaterally revoke or rescind the
same. From then on, plaintiff has, therefore, ceased to be a co-owner of the
building and is no longer entitled to the fruits of the Diego Building.

Equity and fairness dictate that defendant [sic] has to execute the necessary
document regarding the sale of his share to defendant Rodolfo Diego.
Correspondingly, defendant Rodolfo Diego has to perform his obligation as per
their verbal agreement by paying the remaining balance of ₱250,000.00.9

To summarize, the trial court ruled that as early as 1993, Nicolas was no longer
entitled to the fruits of his aliquot share in the Diego Building because he had
"ceased to be a co-owner" thereof. The trial court held that when Nicolas
received the ₱250,000.00 downpayment, a "contract of sale" was perfected.
Consequently, Nicolas is obligated to convey such share to Rodolfo, without right
of rescission. Finally, the trial court held that the ₱250,000.00 balance from
Rodolfo will only be due and demandable when Nicolas executes an absolute
deed of sale.

Ruling of the Court of Appeals

Nicolas appealed to the CA which sustained the trial court’s Decision in toto. The
CA held that since there was a perfected contract of sale between Nicolas and
Rodolfo, the latter may compel the former to execute the proper sale document.
Besides, Nicolas’s insistence that he has since rescinded their agreement in
1997 proved the existence of a perfected sale. It added that Nicolas could not
validly rescind the contract because: "1) Rodolfo ha[d] already made a partial
payment; 2) Nicolas ha[d] already partially performed his part regarding the
contract; and 3) Rodolfo opposes the rescission."10

The CA then proceeded to rule that since no period was stipulated within which
Rodolfo shall deliver the balance of the purchase price, it was incumbent upon
Nicolas to have filed a civil case to fix the same. But because he failed to do so,
Rodolfo cannot be considered to be in delay or default.

Finally, the CA made another interesting pronouncement, that by virtue of the

agreement Nicolas entered into with Rodolfo, he had already transferred his
ownership over the subject property and as a consequence, Rodolfo is legally
entitled to collect the fruits thereof in the form of rentals. Nicolas’ remaining right
is to demand payment of the balance of the purchase price, provided that he first
executes a deed of absolute sale in favor of Rodolfo.
Nicolas moved for reconsideration but the same was denied by the CA in its
Resolution dated October 3, 2007.

Hence, this Petition.

Issues

The Petition raises the following errors that must be rectified:

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT

THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN PETITIONER
NICOLAS DIEGO AND RESPONDENT RODOLFO DIEGO OVER NICOLAS’S
SHARE OF THE BUILDING BECAUSE THE SUSPENSIVE CONDITION HAS
NOT YET BEEN FULFILLED.

II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE

CONTRACT OF SALE BETWEEN PETITIONER AND RESPONDENT
RODOLFO DIEGO REMAINS LEGALLY BINDING AND IS NOT RESCINDED
GIVING MISPLACED RELIANCE ON PETITIONER NICOLAS’ STATEMENT
THAT THE SALE HAS NOT YET BEEN REVOKED.

III

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT

PETITIONER NICOLAS DIEGO ACTED LEGALLY AND CORRECTLY WHEN
HE UNILATERALLY RESCINDED AND REVOKED HIS AGREEMENT OF SALE
WITH RESPONDENT RODOLFO DIEGO CONSIDERING RODOLFO’S
MATERIAL, SUBSTANTIAL BREACH OF THE CONTRACT.

IV

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT

PETITIONER HAS NO MORE RIGHTS OVER HIS SHARE IN THE BUILDING,
DESPITE THE FACT THAT THERE WAS AS YET NO PERFECTED
CONTRACT OF SALE BETWEEN PETITIONER NICOLAS DIEGO AND
RODOLFO DIEGO AND THERE WAS YET NO TRANSFER OF OWNERSHIP
OF PETITIONER’S SHARE TO RODOLFO DUE TO THE NON-FULFILLMENT
BY RODOLFO OF THE SUSPENSIVE CONDITION UNDER THE CONTRACT.

V
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT
RESPONDENT RODOLFO HAS UNJUSTLY ENRICHED HIMSELF AT THE
EXPENSE OF PETITIONER BECAUSE DESPITE NOT HAVING PAID THE
BALANCE OF THE PURCHASE PRICE OF THE SALE, THAT RODOLFO HAS
NOT YET ACQUIRED OWNERSHIP OVER THE SHARE OF PETITIONER
NICOLAS, HE HAS ALREADY BEEN APPROPRIATING FOR HIMSELF AND
FOR HIS PERSONAL BENEFIT THE SHARE OF THE INCOME OF THE
BUILDING AND THE PORTION OF THE BUILDING ITSELF WHICH WAS DUE
TO AND OWNED BY PETITIONER NICOLAS.

VI

THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING

ACTUAL DAMAGES, ATTORNEY’S FEES AND LITIGATION EXPENSES TO
THE PETITIONER DESPITE THE FACT THAT PETITIONER’S RIGHTS HAD
BEEN WANTONLY VIOLATED BY THE RESPONDENTS.11

Petitioner’s Arguments

In his Petition, the Supplement12 thereon, and Reply,13 Nicolas argues that,
contrary to what the CA found, there was no perfected contract of sale even
though Rodolfo had partially paid the price; that in the absence of the third
element in a sale contract – the price – there could be no perfected sale; that
failing to pay the required price in full, Nicolas had the right to rescind the
agreement as an unpaid seller.

Nicolas likewise takes exception to the CA finding that Rodolfo was not in default
or delay in the payment of the agreed balance for his (Nicolas’s) failure to file a
case to fix the period within which payment of the balance should be made. He
believes that Rodolfo’s failure to pay within a reasonable time was a substantial
and material breach of the agreement which gave him the right to unilaterally and
extrajudicially rescind the agreement and be discharged of his obligations as
seller; and that his repeated written demands upon Rodolfo to pay the balance
granted him such rights.

Nicolas further claims that based on his agreement with Rodolfo, there was to be
no transfer of title over his share in the building until Rodolfo has effected full
payment of the purchase price, thus, giving no right to the latter to collect his
share in the rentals.

Finally, Nicolas bewails the CA’s failure to award damages, attorney’s fees and
litigation expenses for what he believes is a case of unjust enrichment at his
expense.
 Respondents’ Arguments

Apart from echoing the RTC and CA pronouncements, respondents accuse the
petitioner of "cheating" them, claiming that after the latter received the
₱250,000.00 downpayment, he "vanished like thin air and hibernated in the USA,
he being an American citizen,"14 only to come back claiming that the said amount
was a mere loan.

They add that the Petition is a mere rehash and reiteration of the petitioner’s
arguments below, which are deemed to have been sufficiently passed upon and
debunked by the appellate court.

Our Ruling

The Court finds merit in the Petition.

The contract entered into by Nicolas and Rodolfo was a contract to sell.

a) The stipulation to execute a deed of sale upon full payment of the

purchase price is a unique and distinguishing characteristic of a contract
to sell. It also shows that the vendor reserved title to the property until full
payment.

There is no dispute that in 1993, Rodolfo agreed to buy Nicolas’s share in the
Diego Building for the price of ₱500,000.00. There is also no dispute that of the
total purchase price, Rodolfo paid, and Nicolas received, ₱250,000.00.
Significantly, it is also not disputed that the parties agreed that the remaining
amount of ₱250,000.00 would be paid after Nicolas shall have executed a deed
of sale.

This stipulation, i.e., to execute a deed of absolute sale upon full payment of the
purchase price, is a unique and distinguishing characteristic of a contract to
sell. In Reyes v. Tuparan,15 this Court ruled that a stipulation in the
contract, "[w]here the vendor promises to execute a deed of absolute sale
upon the completion by the vendee of the payment of the price," indicates
that the parties entered into a contract to sell. According to this Court, this
particular provision is tantamount to a reservation of ownership on the part of the
vendor. Explicitly stated, the Court ruled that the agreement to execute a deed of
sale upon full payment of the purchase price "shows that the vendors reserved
title to the subject property until full payment of the purchase price."16

In Tan v. Benolirao,17 this Court, speaking through Justice Brion, ruled that the
parties entered into a contract to sell as revealed by the following stipulation:
d) That in case, BUYER has complied with the terms and conditions of this
contract, then the SELLERS shall execute and deliver to the BUYER the
appropriate Deed of Absolute Sale;18

The Court further held that "[j]urisprudence has established that where the
seller promises to execute a deed of absolute sale upon the completion by
the buyer of the payment of the price, the contract is only a contract to
sell."19

b) The acknowledgement receipt signed by Nicolas as well as the

contemporaneous acts of the parties show that they agreed on a contract
to sell, not of sale. The absence of a formal deed of conveyance is
indicative of a contract to sell.

In San Lorenzo Development Corporation v. Court of Appeals,20 the facts show

that spouses Miguel and Pacita Lu (Lu) sold a certain parcel of land to Pablo
Babasanta (Pablo). After several payments, Pablo wrote Lu demanding "the
execution of a final deed of sale in his favor so that he could effect full payment
of the purchase price."21 To prove his allegation that there was a perfected
contract of sale between him and Lu, Pablo presented a receipt signed by Lu
acknowledging receipt of ₱50,000.00 as partial payment.22

However, when the case reached this Court, it was ruled that the transaction
entered into by Pablo and Lu was only a contract to sell, not a contract of sale.
The Court held thus:

The receipt signed by Pacita Lu merely states that she accepted the sum of fifty
thousand pesos (₱50,000.00) from Babasanta as partial payment of 3.6 hectares
of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that the
seller reserves the ownership of the property until full payment of the price which
is a distinguishing feature of a contract to sell, the subsequent acts of the parties
convince us that the Spouses Lu never intended to transfer ownership to
Babasanta except upon full payment of the purchase price.

Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that
despite his repeated requests for the execution of the final deed of sale in his
favor so that he could effect full payment of the price, Pacita Lu allegedly refused
to do so. In effect, Babasanta himself recognized that ownership of the
property would not be transferred to him until such time as he shall have
effected full payment of the price. Moreover, had the sellers intended to
transfer title, they could have easily executed the document of sale in its
required form simultaneously with their acceptance of the partial payment,
but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally
be considered as a perfected contract to sell.23

In the instant case, records show that Nicolas signed a mere

receipt24 acknowledging partial payment of ₱250,000.00 from Rodolfo. It states:

July 8, 1993

Received the amount of [₱250,000.00] for 1 share of Diego Building as partial

payment for Nicolas Diego.

(signed)
Nicolas Diego25

As we ruled in San Lorenzo Development Corporation v. Court of Appeals,26 the

parties could have executed a document of sale upon receipt of the partial
payment but they did not. This is thus an indication that Nicolas did not intend to
immediately transfer title over his share but only upon full payment of the
purchase price. Having thus reserved title over the property, the contract entered
into by Nicolas is a contract to sell. In addition, Eduardo admitted that he and
Rodolfo repeatedly asked Nicolas to sign the deed of sale27 but the latter refused
because he was not yet paid the full amount. As we have ruled in San Lorenzo
Development Corporation v. Court of Appeals,28the fact that Eduardo and
Rodolfo asked Nicolas to execute a deed of sale is a clear recognition on their
part that the ownership over the property still remains with Nicolas. In fine, the
totality of the parties’ acts convinces us that Nicolas never intended to transfer
the ownership over his share in the Diego Building until the full payment of the
purchase price. Without doubt, the transaction agreed upon by the parties was a
contract to sell, not of sale.

In Chua v. Court of Appeals,29 the parties reached an impasse when the seller
wanted to be first paid the consideration before a new transfer certificate of title
(TCT) is issued in the name of the buyer. Contrarily, the buyer wanted to secure
a new TCT in his name before paying the full amount. Their agreement was
embodied in a receipt containing the following terms: "(1) the balance of
₱10,215,000.00 is payable on or before 15 July 1989; (2) the capital gains tax is
for the account of x x x; and (3) if [the buyer] fails to pay the balance x x x the
[seller] has the right to forfeit the earnest money x x x."30 The case eventually
reached this Court. In resolving the impasse, the Court, speaking
through Justice Carpio, held that "[a] perusal of the Receipt shows that the true
agreement between the parties was a contract to sell."31 The Court noted that
"the agreement x x x was embodied in a receipt rather than in a deed of sale,
ownership not having passed between them."32 The Court thus concluded
that "[t]he absence of a formal deed of conveyance is a strong indication
that the parties did not intend immediate transfer of ownership, but only a
transfer after full payment of the purchase price."33 Thus, the "true agreement
between the parties was a contract to sell."34

In the instant case, the parties were similarly embroiled in an impasse. The
parties’ agreement was likewise embodied only in a receipt. Also, Nicolas did not
want to sign the deed of sale unless he is fully paid. On the other hand, Rodolfo
did not want to pay unless a deed of sale is duly executed in his favor. We thus
say, pursuant to our ruling in Chua v. Court of Appeals35 that the agreement
between Nicolas and Rodolfo is a contract to sell.

This Court cannot subscribe to the appellate court’s view that Nicolas
should first execute a deed of absolute sale in favor of Rodolfo, before the latter
can be compelled to pay the balance of the price. This is patently ridiculous, and
goes against every rule in the book. This pronouncement virtually places the
prospective seller in a contract to sell at the mercy of the prospective buyer, and
sustaining this point of view would place all contracts to sell in jeopardy of being
rendered ineffective by the act of the prospective buyers, who naturally would
demand that the deeds of absolute sale be first executed before they pay the
balance of the price. Surely, no prospective seller would accommodate.

In fine, "the need to execute a deed of absolute sale upon completion of

payment of the price generally indicates that it is a contract to sell, as it
implies the reservation of title in the vendor until the vendee has completed
the payment of the price."36 In addition, "[a] stipulation reserving ownership in
the vendor until full payment of the price is x x x typical in a contract to
sell."37 Thus, contrary to the pronouncements of the trial and appellate courts, the
parties to this case only entered into a contract to sell; as such title cannot legally
pass to Rodolfo until he makes full payment of the agreed purchase price.

c) Nicolas did not surrender or deliver title or possession to Rodolfo.

Moreover, there could not even be a surrender or delivery of title or possession

to the prospective buyer Rodolfo. This was made clear by the nature of the
agreement, by Nicolas’s repeated demands for the return of all rents unlawfully
and unjustly remitted to Rodolfo by Eduardo, and by Rodolfo and Eduardo’s
repeated demands for Nicolas to execute a deed of sale which, as we said
before, is a recognition on their part that ownership over the subject property still
remains with Nicolas.

Significantly, when Eduardo testified, he claimed to be knowledgeable about the

terms and conditions of the transaction between Nicolas and Rodolfo. However,
aside from stating that out of the total consideration of ₱500,000.00, the amount
of ₱250,000.00 had already been paid while the remaining ₱250,000.00 would
be paid after the execution of the Deed of Sale, he never testified that there was
a stipulation as regards delivery of title or possession.38

It is also quite understandable why Nicolas belatedly demanded the payment of

the rentals. Records show that the structural integrity of the Diego Building was
severely compromised when an earthquake struck Dagupan City in 1990.39 In
order to rehabilitate the building, the co-owners obtained a loan from a
bank.40 Starting May 1994, the property was leased to third parties and the
rentals received were used to pay off the loan.41 It was only in 1996, or after
payment of the loan that the co-owners started receiving their share in the
rentals.42 During this time, Nicolas was in the USA but immediately upon his
return, he demanded for the payment of his share in the rentals which Eduardo
remitted to Rodolfo. Failing which, he filed the instant Complaint. To us, this
bolsters our findings that Nicolas did not intend to immediately transfer title over
the property.

It must be stressed that it is anathema in a contract to sell that the prospective

seller should deliver title to the property to the prospective buyer pending the
latter’s payment of the price in full. It certainly is absurd to assume that in the
absence of stipulation, a buyer under a contract to sell is granted ownership of
the property even when he has not paid the seller in full. If this were the case,
then prospective sellers in a contract to sell would in all likelihood not be paid the
balance of the price.

This ponente has had occasion to rule that "[a] contract to sell is one where the
prospective seller reserves the transfer of title to the prospective buyer until the
happening of an event, such as full payment of the purchase price. What the
seller obliges himself to do is to sell the subject property only when the entire
amount of the purchase price has already been delivered to him. ‘In other words,
the full payment of the purchase price partakes of a suspensive condition, the
nonfulfillment of which prevents the obligation to sell from arising and thus,
ownership is retained by the prospective seller without further remedies by the
prospective buyer.’ It does not, by itself, transfer ownership to the buyer."43

The contract to sell is terminated or cancelled.

Having established that the transaction was a contract to sell, what happens now
to the parties’ agreement?

The remedy of rescission is not available in contracts to sell.44 As explained

in Spouses Santos v. Court of Appeals:45
In view of our finding in the present case that the agreement between the parties
is a contract to sell, it follows that the appellate court erred when it decreed that a
judicial rescission of said agreement was necessary. This is because there was
no rescission to speak of in the first place. As we earlier pointed out, in a contract
to sell, title remains with the vendor and does not pass on to the vendee until the
purchase price is paid in full. Thus, in a contract to sell, the payment of the
purchase price is a positive suspensive condition. Failure to pay the price agreed
upon is not a mere breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an obligatory force. This is
entirely different from the situation in a contract of sale, where non-payment of
the price is a negative resolutory condition. The effects in law are not identical. In
a contract of sale, the vendor has lost ownership of the thing sold and cannot
recover it, unless the contract of sale is rescinded and set aside. In a contract to
sell, however, the vendor remains the owner for as long as the vendee has not
complied fully with the condition of paying the purchase price. If the vendor
should eject the vendee for failure to meet the condition precedent, he
is enforcing the contract and not rescinding it. When the petitioners in the instant
case repossessed the disputed house and lot for failure of private respondents to
pay the purchase price in full, they were merely enforcing the contract and not
rescinding it. As petitioners correctly point out, the Court of Appeals erred when it
ruled that petitioners should have judicially rescinded the contract pursuant to
Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of
the purchase price as a resolutory condition. It does not apply to a contract to
sell. As to Article 1191, it is subordinated to the provisions of Article 1592 when
applied to sales of immovable property. Neither provision is applicable in the
present case.46

Similarly, we held in Chua v. Court of Appeals47 that "Article 1592 of the Civil
Code permits the buyer to pay, even after the expiration of the period, as long as
no demand for rescission of the contract has been made upon him either
judicially or by notarial act. However, Article 1592 does not apply to a contract to
sell where the seller reserves the ownership until full payment of the price,"48 as
in this case.
1âw phi1

Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay
the purchase price, the contract to sell was deemed terminated or cancelled.49 As
we have held in Chua v. Court of Appeals,50 "[s]ince the agreement x x x is a
mere contract to sell, the full payment of the purchase price partakes of a
suspensive condition. The non-fulfillment of the condition prevents the
obligation to sell from arising and ownership is retained by the seller
without further remedies by the buyer." Similarly, we held in Reyes v.
Tuparan51 that "petitioner’s obligation to sell the subject properties becomes
demandable only upon the happening of the positive suspensive condition, which
is the respondent’s full payment of the purchase price. Without respondent’s
full payment, there can be no breach of contract to speak of because
petitioner has no obligation yet to turn over the title. Respondent’s failure to
pay in full the purchase price in full is not the breach of contract contemplated
under Article 1191 of the New Civil Code but rather just an event that prevents
the petitioner from being bound to convey title to respondent." Otherwise stated,
Rodolfo has no right to compel Nicolas to transfer ownership to him because he
failed to pay in full the purchase price. Correlatively, Nicolas has no obligation to
transfer his ownership over his share in the Diego Building to Rodolfo.52

Thus, it was erroneous for the CA to rule that Nicolas should have filed a case to
fix the period for Rodolfo’s payment of the balance of the purchase price. It was
not Nicolas’s obligation to compel Rodolfo to pay the balance; it was Rodolfo’s
duty to remit it.

It would appear that after Nicolas refused to sign the deed as there was yet no
full payment, Rodolfo and Eduardo hired the services of the Daroya Accounting
Office "for the purpose of estimating the amount to which [Nicolas] still owes
[Rodolfo] as a consequence of the unconsummated verbal agreement regarding
the former’s share in the co-ownership of [Diego Building] in favor of the
latter."53 According to the accountant’s report, after Nicolas revoked his
agreement with Rodolfo due to non-payment, the downpayment of ₱250,000.00
was considered a loan of Nicolas from Rodolfo.54 The accountant opined that the
₱250,000.00 should earn interest at 18%.55 Nicolas however objected as regards
the imposition of interest as it was not previously agreed upon. Notably, the
contents of the accountant’s report were not disputed or rebutted by the
respondents. In fact, it was stated therein that "[a]ll the bases and assumptions
made particularly in the fixing of the applicable rate of interest have been
discussed with [Eduardo]."56

We find it irrelevant and immaterial that Nicolas described the termination or

cancellation of his agreement with Rodolfo as one of rescission. Being a layman,
he is understandably not adept in legal terms and their implications. Besides, this
Court should not be held captive or bound by the conclusion reached by the
parties. The proper characterization of an action should be based on what the
law says it to be, not by what a party believed it to be. "A contract is what the law
defines it to be x x x and not what the contracting parties call it."57

On the other hand, the respondents’ additional submission – that Nicolas

cheated them by "vanishing and hibernating" in the USA after receiving Rodolfo’s
₱250,000.00 downpayment, only to come back later and claim that the amount
he received was a mere loan – cannot be believed. How the respondents could
have been cheated or disadvantaged by Nicolas’s leaving is beyond
comprehension. If there was anybody who benefited from Nicolas’s perceived
"hibernation", it was the respondents, for they certainly had free rein over
Nicolas’s interest in the Diego Building. Rodolfo put off payment of the balance of
the price, yet, with the aid of Eduardo, collected and appropriated for himself the
rents which belonged to Nicolas.

Eduardo is solidarily liable with Rodolfo as regards the share of Nicolas in

the rents.

For his complicity, bad faith and abuse of authority as the Diego Building
administrator, Eduardo must be held solidarily liable with Rodolfo for all that
Nicolas should be entitled to from 1993 up to the present, or in respect of actual
damages suffered in relation to his interest in the Diego Building. Eduardo was
the primary cause of Nicolas’s loss, being directly responsible for making and
causing the wrongful payments to Rodolfo, who received them under obligation
to return them to Nicolas, the true recipient. As such, Eduardo should be
1âwphi 1

principally responsible to Nicolas as well. Suffice it to state that every person

must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith; and every
person who, contrary to law, wilfully or negligently causes damage to another,
shall indemnify the latter for the same.58

Attorney’s fees and other costs.

"Although attorney’s fees are not allowed in the absence of stipulation, the court
can award the same when the defendant’s act or omission has compelled the
plaintiff to incur expenses to protect his interest or where the defendant acted in
gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just
and demandable claim."59 In the instant case, it is beyond cavil that petitioner was
constrained to file the instant case to protect his interest because of respondents’
unreasonable and unjustified refusal to render an accounting and to remit to the
petitioner his rightful share in rents and fruits in the Diego Building. Thus, we
deem it proper to award to petitioner attorney’s fees in the amount of
₱50,000.00,60 as well as litigation expenses in the amount of ₱20,000.00 and the
sum of ₱1,000.00 for each court appearance by his lawyer or lawyers, as prayed
for.

WHEREFORE, premises considered, the Petition is GRANTED. The June 29,

2007 Decision and October 3, 2007 Resolution of the Court of Appeals in CA-
G.R. CV No. 86512, and the April 19, 2005 Decision of the Dagupan City
Regional Trial Court, Branch 40 in Civil Case No. 99-02971-D, are
hereby ANNULLED and SET ASIDE.
The Court further decrees the following:

1. The oral contract to sell between petitioner Nicolas P. Diego and

respondent Rodolfo P. Diego is DECLARED terminated/cancelled;

2. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to

surrender possession and control, as the case may be, of Nicolas P.
Diego’s share in the Diego Building. Respondents are further commanded
to return or surrender to the petitioner the documents of title, receipts,
papers, contracts, and all other documents in any form or manner
pertaining to the latter’s share in the building, which are deemed to be in
their unauthorized and illegal possession;

3. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to

immediately render an accounting of all the transactions, from the period
beginning 1993 up to the present, pertaining to Nicolas P. Diego’s share in
the Diego Building, and thereafter commanded to jointly and severally
remit to the petitioner all rents, monies, payments and benefits of whatever
kind or nature pertaining thereto, which are hereby deemed received by
them during the said period, and made to them or are due, demandable
and forthcoming during the said period and from the date of this Decision,
with legal interest from the filing of the Complaint;

4. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED,

immediately and without further delay upon receipt of this Decision, to
solidarily pay the petitioner attorney’s fees in the amount of ₱50,000.00;
litigation expenses in the amount of ₱20,000.00 and the sum of ₱1,000.00
per counsel for each court appearance by his lawyer or lawyers;

5. The payment of ₱250,000.00 made by respondent Rodolfo P. Diego,

with legal interest from the filing of the Complaint, shall be APPLIED, by
way of compensation, to his liabilities to the petitioner and to answer for all
damages and other awards and interests which are owing to the latter
under this Decision; and

6. Respondents’ counterclaim is DISMISSED.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 182358 February 20, 2013

DEPARTMENT OF HEALTH, THE SECRETARY OF HEALTH, and MA.

MARGARITA M. GALON, Petitioners,
vs.
PHIL PHARMA WEALTH, INC., Respondent.

DECISION

DEL CASTILLO, J.:

The state may not be sued without its consent. Likewise, public officials may not
be sued for acts done in the perfom1ance of their official functions or within the
scope of their authority.

This Petition for Review on Certiorari1 assails the October 25, 2007 Decision2 of
the Court of Appeals (CA) in CA-G.R. CV No. 85670, and its March 31, 2008
Reso1ution3 denying petitioners' Motion for Reconsideration.4

Factual Antecedents

On December 22, 1998, Administrative Order (AO) No. 27 series of 19985 was
issued by then Department of Health (DOH) Secretary Alfredo G. Romualdez
(Romualdez). AO 27 set the guidelines and procedure for accreditation of
government suppliers of pharmaceutical products for sale or distribution to the
public, such accreditation to be valid for three years but subject to annual review.

On January 25, 2000, Secretary Romualdez issued AO 10 series of 20006 which

amended AO 27. Under Section VII7 of AO 10, the accreditation period for
government suppliers of pharmaceutical products was reduced to two years.
Moreover, such accreditation may be recalled, suspended or revoked after due
deliberation and proper notice by the DOH Accreditation Committee, through its
Chairman.

Section VII of AO 10 was later amended by AO 66 series of 2000,8 which

provided that the two-year accreditation period may be recalled, suspended or
revoked only after due deliberation, hearing and notice by the DOH Accreditation
Committee, through its Chairman.
On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided
for a list and category of sanctions to be imposed on accredited government
suppliers of pharmaceutical products in case of adverse findings regarding their
products (e.g. substandard, fake, or misbranded) or violations committed by them
during their accreditation.

In line with Memorandum No. 171-C, the DOH, through former Undersecretary
Ma. Margarita M. Galon (Galon), issued Memorandum No. 209 series of
2000,10 inviting representatives of 24 accredited drug companies, including herein
respondent Phil Pharmawealth, Inc. (PPI) to a meeting on October 27, 2000.
During the meeting, Undersecretary Galon handed them copies of a document
entitled "Report on Violative Products"11 issued by the Bureau of Food and
Drugs12 (BFAD), which detailed violations or adverse findings relative to these
accredited drug companies’ products. Specifically, the BFAD found that PPI’s
products which were being sold to the public were unfit for human consumption.

During the October 27, 2000 meeting, the 24 drug companies were directed to
submit within 10 days, or until November 6, 2000, their respective explanations
on the adverse findings covering their respective products contained in the
Report on Violative Products.

Instead of submitting its written explanation within the 10-day period as required,
PPI belatedly sent a letter13 dated November 13, 2000 addressed to
Undersecretary Galon, informing her that PPI has referred the Report on
Violative Products to its lawyers with instructions to prepare the corresponding
reply. However, PPI did not indicate when its reply would be submitted; nor did it
seek an extension of the 10-day period, which had previously expired on
November 6, 2000, much less offer any explanation for its failure to timely submit
its reply. PPI’s November 13, 2000 letter states:

Madam,

This refers to your directive on 27 October 2000, on the occasion of the meeting
with selected accredited suppliers, during which you made known to the
attendees of your requirement for them to submit their individual comments on
the Report on Violative Products (the "Report") compiled by your office and
disseminated on that date.

In this connection, we inform you that we have already instructed our lawyers to
prepare on our behalf the appropriate reply to the Report furnished to us. Our
lawyers in time shall revert to you and furnish you the said reply.

Please be guided accordingly.

Very truly yours,

(signed)
ATTY. ALAN A.B. ALAMBRA

Vice-President for Legal and Administrative Affairs14

In a letter-reply15 dated November 23, 2000 Undersecretary Galon found

"untenable" PPI’s November 13, 2000 letter and therein informed PPI that,
effective immediately, its accreditation has been suspended for two years
pursuant to AO 10 and Memorandum No. 171-C.

In another December 14, 2000 letter16 addressed to Undersecretary Galon, PPI

through counsel questioned the suspension of its accreditation, saying that the
same was made pursuant to Section VII of AO 10 which it claimed was patently
illegal and null and void because it arrogated unto the DOH Accreditation
Committee powers and functions which were granted to the BFAD under
Republic Act (RA) No. 372017 and Executive Order (EO) No. 175.18 PPI added
that its accreditation was suspended without the benefit of notice and hearing, in
violation of its right to substantive and administrative due process. It thus
demanded that the DOH desist from implementing the suspension of its
accreditation, under pain of legal redress.

On December 28, 2000, PPI filed before the Regional Trial Court of Pasig City a
Complaint19 seeking to declare null and void certain DOH administrative
issuances, with prayer for damages and injunction against the DOH, former
Secretary Romualdez and DOH Undersecretary Galon. Docketed as Civil Case
No. 68200, the case was raffled to Branch 160. On February 8, 2002, PPI filed
an Amended and Supplemental Complaint,20 this time impleading DOH Secretary
Manuel Dayrit (Dayrit). PPI claimed that AO 10, Memorandum No. 171-C,
Undersecretary Galon’s suspension order contained in her November 23, 2000
letter, and AO 14 series of 200121 are null and void for being in contravention of
Section 26(d) of RA 3720 as amended by EO 175, which states as follows:

SEC. 26. x x x

(d) When it appears to the Director [of the BFAD] that the report of the Bureau
that any article of food or any drug, device, or cosmetic secured pursuant to
Section twenty-eight of this Act is adulterated, misbranded, or not registered, he
shall cause notice thereof to be given to the person or persons concerned and
such person or persons shall be given an opportunity to be heard before the
Bureau and to submit evidence impeaching the correctness of the finding or
charge in question.
For what it claims was an undue suspension of its accreditation, PPI prayed that
AO 10, Memorandum No. 171-C, Undersecretary Galon’s suspension order
contained in her November 23, 2000 letter, and AO 14 be declared null and void,
and that it be awarded moral damages of ₱5 million, exemplary damages of ₱1
million, attorney’s fees of ₱1 million, and costs of suit. PPI likewise prayed for the
issuance of temporary and permanent injunctive relief.

In their Amended Answer,22 the DOH, former Secretary Romualdez, then

Secretary Dayrit, and Undersecretary Galon sought the dismissal of the
Complaint, stressing that PPI’s accreditation was suspended because most of
the drugs it was importing and distributing/selling to the public were found by the
BFAD to be substandard for human consumption. They added that the DOH is
primarily responsible for the formulation, planning, implementation, and
coordination of policies and programs in the field of health; it is vested with the
comprehensive power to make essential health services and goods available to
the people, including accreditation of drug suppliers and regulation of importation
and distribution of basic medicines for the public.

Petitioners added that, contrary to PPI’s claim, it was given the opportunity to
present its side within the 10-day period or until November 6, 2000, but it failed to
submit the required comment/reply. Instead, it belatedly submitted a November
13, 2000 letter which did not even constitute a reply, as it merely informed
petitioners that the matter had been referred by PPI to its lawyer. Petitioners
argued that due process was afforded PPI, but because it did not timely avail of
the opportunity to explain its side, the DOH had to act immediately – by
suspending PPI’s accreditation – to stop the distribution and sale of substandard
drug products which posed a serious health risk to the public. By exercising
DOH’s mandate to promote health, it cannot be said that petitioners committed
grave abuse of discretion.

In a January 8, 2001 Order,23 the trial court partially granted PPI’s prayer for a
temporary restraining order, but only covering PPI’s products which were not
included in the list of violative products or drugs as found by the BFAD.

In a Manifestation and Motion24 dated July 8, 2003, petitioners moved for the
dismissal of Civil Case No. 68200, claiming that the case was one against the
State; that the Complaint was improperly verified; and lack of authority of the
corporate officer to commence the suit, as the requisite resolution of PPI’s board
of directors granting to the commencing officer – PPI’s Vice President for Legal
and Administrative Affairs, Alan Alambra, – the authority to file Civil Case No.
68200 was lacking. To this, PPI filed its Comment/Opposition.25

Ruling of the Regional Trial Court

In a June 14, 2004 Order,26 the trial court dismissed Civil Case No. 68200,
declaring the case to be one instituted against the State, in which case the
principle of state immunity from suit is applicable.

PPI moved for reconsideration,27 but the trial court remained steadfast.28

PPI appealed to the CA.

Ruling of the Court of Appeals

Docketed as CA-G.R. CV No. 85670, PPI’s appeal centered on the issue of

whether it was proper for the trial court to dismiss Civil Case No. 68200.

The CA, in the herein assailed Decision,29 reversed the trial court ruling and
ordered the remand of the case for the conduct of further proceedings. The CA
concluded that it was premature for the trial court to have dismissed the
Complaint. Examining the Complaint, the CA found that a cause of action was
sufficiently alleged – that due to defendants’ (petitioners’) acts which were
beyond the scope of their authority, PPI’s accreditation as a government supplier
of pharmaceutical products was suspended without the required notice and
hearing as required by Section 26(d) of RA 3720 as amended by EO 175.
Moreover, the CA held that by filing a motion to dismiss, petitioners were deemed
to have hypothetically admitted the allegations in the Complaint – which state
that petitioners were being sued in their individual and personal capacities – thus
negating their claim that Civil Case No. 68200 is an unauthorized suit against the
State.

The CA further held that instead of dismissing the case, the trial court should
have deferred the hearing and resolution of the motion to dismiss and proceeded
to trial. It added that it was apparent from the Complaint that petitioners were
being sued in their private and personal capacities for acts done beyond the
scope of their official functions. Thus, the issue of whether the suit is against the
State could best be threshed out during trial on the merits, rather than in
proceedings covering a motion to dismiss.

The dispositive portion of the CA Decision reads:

WHEREFORE, the appeal is hereby GRANTED. The Order dated June 14, 2004
of the Regional Trial Court of Pasig City, Branch 160, is
hereby REVERSED and SET-ASIDE. ACCORDINGLY, this case is REMANDED
to the trial court for further proceedings.

SO ORDERED.30
Petitioners sought, but failed, to obtain a reconsideration of the Decision. Hence,
they filed the present Petition.

Issue

Petitioners now raise the following lone issue for the Court’s resolution:

Should Civil Case No. 68200 be dismissed for being a suit against the State?31

Petitioners’ Arguments

Petitioners submit that because PPI’s Complaint prays for the award of damages
against the DOH, Civil Case No. 68200 should be considered a suit against the
State, for it would require the appropriation of the needed amount to satisfy PPI’s
claim, should it win the case. Since the State did not give its consent to be sued,
Civil Case No. 68200 must be dismissed. They add that in issuing and
implementing the questioned issuances, individual petitioners acted officially and
within their authority, for which reason they should not be held to account
individually.

Respondent’s Arguments

Apart from echoing the pronouncement of the CA, respondent insists that Civil
Case No. 68200 is a suit against the petitioners in their personal capacity for acts
committed outside the scope of their authority.

Our Ruling

The Petition is granted.

The doctrine of non-suability.

The discussion of this Court in Department of Agriculture v. National Labor

Relations Commission32 on the doctrine of non-suability is enlightening.

The basic postulate enshrined in the constitution that ‘(t)he State may not be
sued without its consent,’ reflects nothing less than a recognition of the sovereign
character of the State and an express affirmation of the unwritten rule effectively
insulating it from the jurisdiction of courts. It is based on the very essence of
sovereignty. x x x [A] sovereign is exempt from suit, not because of any formal
conception or obsolete theory, but on the logical and practical ground that there
can be no legal right as against the authority that makes the law on which the
right depends. True, the doctrine, not too infrequently, is derisively called ‘the
royal prerogative of dishonesty’ because it grants the state the prerogative to
defeat any legitimate claim against it by simply invoking its nonsuability. We have
had occasion to explain in its defense, however, that a continued adherence to
the doctrine of non-suability cannot be deplored, for the loss of governmental
efficiency and the obstacle to the performance of its multifarious functions would
be far greater in severity than the inconvenience that may be caused private
parties, if such fundamental principle is to be abandoned and the availability of
judicial remedy is not to be accordingly restricted.

The rule, in any case, is not really absolute for it does not say that the state may
not be sued under any circumstance. On the contrary, as correctly phrased, the
doctrine only conveys, ‘the state may not be sued without its consent;’ its clear
import then is that the State may at times be sued. The State’s consent may be
given either expressly or impliedly. Express consent may be made through a
general law or a special law. x x x Implied consent, on the other hand, is
conceded when the State itself commences litigation, thus opening itself to a
counterclaim or when it enters into a contract. In this situation, the government is
deemed to have descended to the level of the other contracting party and to have
divested itself of its sovereign immunity. This rule, x x x is not, however, without
qualification. Not all contracts entered into by the government operate as a
waiver of its non-suability; distinction must still be made between one which is
executed in the exercise of its sovereign function and another which is done in its
proprietary capacity.33

As a general rule, a state may not be sued. However, if it consents, either

expressly or impliedly, then it may be the subject of a suit.34 There is express
consent when a law, either special or general, so provides. On the other hand,
there is implied consent when the state "enters into a contract or it itself
commences litigation."35 However, it must be clarified that when a state enters
into a contract, it does not automatically mean that it has waived its non-
suability. 36 The State "will be deemed to have impliedly waived its non-suability
[only] if it has entered into a contract in its proprietary or private capacity.
[However,] when the contract involves its sovereign or governmental capacity[,] x
x x no such waiver may be implied."37 "Statutory provisions waiving [s]tate
immunity are construed in strictissimi juris. For, waiver of immunity is in
derogation of sovereignty."38

The DOH can validly invoke state immunity.

a) DOH is an unincorporated agency which performs sovereign or

governmental functions.

In this case, the DOH, being an "unincorporated agency of the government"39 can
validly invoke the defense of immunity from suit because it has not consented,
either expressly or impliedly, to be sued. Significantly, the DOH is an
unincorporated agency which performs functions of governmental character.

The ruling in Air Transportation Office v. Ramos40 is relevant, viz:

An unincorporated government agency without any separate juridical personality

of its own enjoys immunity from suit because it is invested with an inherent power
of sovereignty. Accordingly, a claim for damages against the agency cannot
prosper; otherwise, the doctrine of sovereign immunity is violated. However, the
need to distinguish between an unincorporated government agency performing
governmental function and one performing proprietary functions has arisen. The
immunity has been upheld in favor of the former because its function is
governmental or incidental to such function; it has not been upheld in favor of the
latter whose function was not in pursuit of a necessary function of government
but was essentially a business.41

b) The Complaint seeks to hold the DOH solidarily and jointly liable with the
other defendants for damages which constitutes a charge or financial
liability against the state.

Moreover, it is settled that if a Complaint seeks to "impose a charge or financial

liability against the state,"42 the defense of non-suability may be properly invoked.
In this case, PPI specifically prayed, in its Complaint and Amended and
Supplemental Complaint, for the DOH, together with Secretaries Romualdez and
Dayrit as well as Undersecretary Galon, to be held jointly and severally liable for
moral damages, exemplary damages, attorney’s fees and costs of
suit.43 Undoubtedly, in the event that PPI succeeds in its suit, the government or
the state through the DOH would become vulnerable to an imposition or financial
charge in the form of damages. This would require an appropriation from the
national treasury which is precisely the situation which the doctrine of state
immunity aims to protect the state from.

The mantle of non-suability extends to complaints filed against public

officials for acts done in the performance of their official functions.

As regards the other petitioners, to wit, Secretaries Romualdez and Dayrit, and
Undersecretary Galon, it must be stressed that the doctrine of state immunity
extends its protective mantle also to complaints filed against state officials for
acts done in the discharge and performance of their duties.44 "The suability of a
government official depends on whether the official concerned was acting within
his official or jurisdictional capacity, and whether the acts done in the
performance of official functions will result in a charge or financial liability against
the government."45 Otherwise stated, "public officials can be held personally
accountable for acts claimed to have been performed in connection with official
duties where they have acted ultra vires or where there is showing of bad
faith."46 Moreover, "[t]he rule is that if the judgment against such officials will
require the state itself to perform an affirmative act to satisfy the same, such as
the appropriation of the amount needed to pay the damages awarded against
them, the suit must be regarded as against the state x x x. In such a situation, the
state may move to dismiss the [C]omplaint on the ground that it has been filed
without its consent." 47

It is beyond doubt that the acts imputed against Secretaries Romualdez and
Dayrit, as well as Undersecretary Galon, were done while in the performance and
discharge of their official functions or in their official capacities, and not in their
personal or individual capacities. Secretaries Romualdez and Dayrit were being
charged with the issuance of the assailed orders. On the other hand,
Undersecretary Galon was being charged with implementing the assailed
issuances. By no stretch of imagination could the same be categorized as ultra
vires simply because the said acts are well within the scope of their authority.
Section 4 of RA 3720 specifically provides that the BFAD is an office under the
Office of the Health Secretary. Also, the Health Secretary is authorized to issue
rules and regulations as may be necessary to effectively enforce the provisions
of RA 3720.48 As regards Undersecretary Galon, she is authorized by law to
supervise the offices under the DOH’s authority,49 such as the BFAD. Moreover,
there was also no showing of bad faith on their part. The assailed issuances
were not directed only against PPI. The suspension of PPI’s accreditation only
came about after it failed to submit its comment as directed by Undersecretary
Galon. It is also beyond dispute that if found wanting, a financial charge will be
imposed upon them which will require an appropriation from the state of the
needed amount. Thus, based on the foregoing considerations, the Complaint
against them should likewise be dismissed for being a suit against the state
which absolutely did not give its consent to be sued. Based on the foregoing
considerations, and regardless of the merits of PPI’s case, this case deserves a
dismissal. Evidently, the very foundation of Civil Case No. 68200 has crumbled at
this initial juncture.

PPI was not denied due process.

However, we cannot end without a discussion of PPI’s contention that it was

denied due process when its accreditation was suspended "without due notice
and hearing." It is undisputed that during the October 27, 2000 meeting,
Undersecretary Galon directed representatives of pharmaceutical companies,
PPI included, to submit their comment and/or reactions to the Report on Violative
Products furnished them within a period of 10 days. PPI, instead of submitting its
comment or explanation, wrote a letter addressed to Undersecretary Galon
informing her that the matter had already been referred to its lawyer for the
drafting of an appropriate reply. Aside from the fact that the said letter was
belatedly submitted, it also failed to specifically mention when such reply would
be forthcoming. Finding the foregoing explanation to be unmeritorious,
Undersecretary Galon ordered the suspension of PPI’s accreditation for two
years. Clearly these facts show that PPI was not denied due process. It was
given the opportunity to explain its side. Prior to the suspension of its
accreditation, PPI had the chance to rebut, explain, or comment on the findings
contained in the Report on Violative Products that several of PPI’s products are
not fit for human consumption. However, PPI squandered its opportunity to
explain. Instead of complying with the directive of the DOH Undersecretary within
the time allotted, it instead haughtily informed Undersecretary Galon that the
matter had been referred to its lawyers. Worse, it impliedly told Undersecretary
Galon to just wait until its lawyers shall have prepared the appropriate reply. PPI
however failed to mention when it will submit its "appropriate reply" or how long
Undersecretary Galon should wait. In the meantime, PPI’s drugs which are
included in the Report on Violative Products are out and being sold in the market.
Based on the foregoing, we find PPI’s contention of denial of due process totally
unfair and absolutely lacking in basis. At this juncture, it would be trite to mention
that "[t]he essence of due process in administrative proceedings is the
opportunity to explain one’s side or seek a reconsideration of the action or ruling
complained of. As long as the parties are given the opportunity to be heard
before judgment is rendered, the demands of due process are sufficiently met.
What is offensive to due process is the denial of the opportunity to be heard. The
Court has repeatedly stressed that parties who chose not to avail themselves of
the opportunity to answer charges against them cannot complain of a denial of
due process."50

Incidentally, we find it inieresting that in the earlier case of Department q( Health

v. Phil Pharmawealth, Inc. 51respondent filed a Complaint against DOH anchored
on the same issuances which it assails in the present case. In the earlier case
of Department of Health v. Phil Pharmawealth, Jnc., 52 PPI submitted to the DOH
a request for the inclusion of its products in the list of accredited drugs as
required by AO 27 series of 1998 which was later amended by AO 10 series of
2000. In the instant case, however, PPI interestingly claims that these issuances
are null and void.

WHEREFORE, premises considered, the Petition is GRANTED. Civil Case No.

68200 is ordered DISMISSED.

SO ORDERED.
G.R. No. 178125 March 18, 2013
THE ORCHARD GOLF AND COUNTRY CLUB, Petitioner,
vs.
AMELIA R. FRANCISCO, Respondent.

G.R. No. 180636 March 13, 2013

LORENZO T. TANGGA-AN,* Petitioner,
vs.
PIDLIPPINE TRANSMARINE CARRIERS, INC.,
UNIVERSE TANKSHIP DELAWARE LLC, and CARLOS
C. SALINAS, Respondents.

G.R. No. 179611 March 12, 2013

EFREN S. ALMUETE, Petitioner,
vs.
PEOPLE OF THE PHILIPPINES, Respondent.

A.C. No. 9259 March 13, 2013

JASPER JUNNO F. RODICA, Complainant,
vs.
ATTY. MANUEL "LOLONG" M. LAZARO, ATTY. EDWIN
M. ESPEJO, ATTY. ABEL M. ALMARIO, ATTY.
MICHELLE B. LAZARO, ATTY. JOSEPH C. TAN, and
JOHN DOES, Respondents.
G.R. No. 173622 March 11, 2013
ROBERN DEVELOPMENT CORPORATION and
RODOLFO M. BERNARDO, JR., Petitioners,
vs.
PEOPLE'S LANDLESS ASSOCIATION represented by
FLORIDA RAMOS and NARDO LABORA, Respondent.
G.R. No.188841 March 6, 2013
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,
vs.
JAIME FERNANDEZ y HERTEZ a.k.a.
"DEBON", Accused-Appellant.
G.R. No. 180843 April 17, 2013
APOLONIO GARCIA, in substitution of his deceased
mother, Modesta Garcia, and CRISTINA
SALAMAT,Petitioners,
vs.
DOMINGA ROBLES VDA. DE CAPARAS, Respondent.
G.R. No. 171298 April 15, 2013
SPOUSES OSCAR and THELMA
CACAYORIN, Petitioners,
vs.
ARMED FORCES AND POLICE MUTUAL BENEFIT
ASSOCIATION, INC., Respondent.
G.R. No. 178952 April 10, 2013
HEIRS OF LAZARO GALLARDO, namely:
PROSPERIDAD PANLAQUI-GALLARDO, MARIA
CARMEN P. GALLARDO-NUNAG, MARIO LAZARO P.
GALLARDO, JOY CATALINA P. GALLARDO, PINKY
PERPETUA P. GALLARDO and LAZARO P. GALLARDO,
JR., Petitioners,
vs.
PORFERIO SOLIMAN, VIVIAN VALETE, and ANTONIO
SOLIMAN, Respondents.*
G.R. No. 181182 April 10, 2013
BOARDWALK BUSINESS VENTURES, INC., Petitioner,
vs.
ELVIRA A. VILLAREAL (deceased) substituted by
Reynaldo P. Villareal, Jr.-spouse, Shekinah Marie
Villareal-Azugue-daughter, Reynaldo A. Villareal ill-son,
Shahani A. Villareal-daughter, and Billy Ray A. Villareal-
son,Respondents.
G.R. No.176289 April 8, 2013
MOLDEX REALTY, INC., Petitioner,
vs.
FLORA A. SABERON, Respondent.
G.R. No. 178758 April 3, 2013
MARCELINO and VITALIANA DALANGIN, Petitioners,
vs.
CLEMENTE PEREZ, CECILIA GONZALES, SPOUSES
JOSE BASIT and FELICIDAD PEREZ, SPOUSES
MELECIO MANALO and LETICIA DE GUZMAN, AND
THE PROVINCIAL SHERIFF OF
BATANGAS,Respondents.
G.R. No. 179041 April 1, 2013
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,
vs.
ARNEL NOCUM,* REY JOHNNY RAMOS, CARLOS JUN
POSADAS, PANDAO POLING PANGANDAG (all at
large), Accused,
REYNALDO MALLARI, Accused-Appellant.