Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 125078

May 30, 2011

BERNABE L. NAVIDA, JOSE P. ABANGAN, JR., CEFERINO P. ABARQUEZ, ORLANDITO A. ABISON, FELIPE
ADAYA, ALBERTO R. AFRICA, BENJAMIN M. ALBAO, FELIPE ALCANTARA, NUMERIANO S. ALCARIA,
FERNANDO C. ALEJADO, LEOPOLDO N. ALFONSO, FLORO I. ALMODIEL, ANTONIO B. ALVARADO, ELEANOR
AMOLATA, RODOLFO P. ANCORDA, TRIFINO F. ANDRADA, BERT B. ANOCHE, RAMON E. ANTECRISTO, ISAGANI
D. ANTINO, DOMINGO ANTOPINA, MANSUETO M. APARICIO, HERMINIGILDO AQUINO, MARCELO S. AQUINO,
JR., FELIPE P. ARANIA, ULYSES M. ARAS, ARSENIO ARCE, RUPERTO G. ARINZOL, MIGUEL G. ARINZOL,
EDGARADO P. ARONG, RODRIGO D.R. ASTRALABIO, RONNIE BACAYO, SOFRONIO BALINGIT, NELSON M.
BALLENA, EMNIANO BALMONTE, MAXIMO M. BANGI, SALVADOR M. BANGI, HERMOGENES T. BARBECHO,
ARSENIO B. BARBERO, DIOSDADO BARREDO, VIRGILIO BASAS, ALEJANDRO G. BATULAN, DOMINGO A.
BAUTISTA, VICTOR BAYANI, BENIGNO BESARES, RUFINO BETITO, GERARDO A. BONIAO, CARLO B.
BUBUNGAN, FERNANDO B. BUENAVISTA, ALEJANDRINO H. BUENO, TOMAS P. BUENO, LEONARDO M.
BURDEOS, VICENTE P. BURGOS, MARCELINO J. CABALUNA, DIOSDADO CABILING, EMETRIO C. CACHUELA,
BRAULIO B. CADIVIDA, JR., SAMSON C. CAEL, DANIEL B. CAJURAO, REY A. CALISO, NORBERTO F.
CALUMPAG, CELESTINO CALUMPAG, LORETO CAMACHO, VICTORIANO CANETE, DOMINADOR P. CANTILLO,
FRUCTUSO P. CARBAJOSA, VICTORINO S. CARLOS, VICTOR CARLOS, GEORGE M. CASSION, JAIME S.
CASTAARES, FLAVIANO C. CASTAARES, ELPIDIO CATUBAY, NATHANIEL B. CAUSANG, BEOFIL B. CAUSING,
ADRIANO R. CEJAS, CIRILO G. CERERA, SR., CRISTITUTO M. CEREZO, DANTE V. CONCHA, ALBERT
CORNELIO, CESAR CORTES, NOEL Y. CORTEZ, SERNUE CREDO, CORNELIO A. CRESENCIO, ALEX CRUZ,
ROGER CRUZ, RANSAM CRUZ, CANUTO M. DADULA, ROMEO L. DALDE, ZACARIAS DAMBAAN, ELISEO
DAPROZA, VIRGILIO P. DAWAL, TESIFREDO I. DE TOMAS, GAMALLER P. DEANG, CARMELINO P. DEANG,
DIOSDADO P. DEANG, DOMINGO A. DEANG, FELIPE R. DEANG, JR., JULIETO S. DELA CRUZ, ELIEZER R. DELA
TORRE, JEFFREY R. DELA TORRE, RAUL DEMONTEVERDE, FELIPE P. DENOLAN, RUBENCIO P. DENOY,
RODRIGO M. DERMIL, ROLANDO B. DIAZ, LORENZO DIEGO, JOVENCIO DIEGO, SATURNINO DIEGO, GREGORIO
DIONG, AMADO R. DIZON, FE DIZON, VIRGILO M. DOMANTAY, LEO S. DONATO, DOMINADOR L. DOSADO,
NESTOR DUMALAG, FREDDIE DURAN, SR., MARIO C. ECHIVERE, AQUILLO M. EMBRADORA, MIGUEL EMNACE,
RIO T. EMPAS, EFRAIM ENGLIS, ANICETO ENOPIA, DIOCENE ENTECOSA, RUBENTITO D. ENTECOSA, AVELINO
C. ENTERO, FORTUNATA ENTRADA, ROGELIO P. EROY, RODOLFO M. ESCAMILLA, SERGIO C. ESCANTILLA,
LAZARO A. ESPAOLA, EULOGIO M. ETURMA, PRIMO P. FERNANDEZ, EDILBERTO D. FERNANDO, GREGORIO
S. FERNANDO, VICENTE P. FERRER, MARCELO T. FLOR, ANTONIO M. FLORES, REDENTOR T. FLOREZA,
NORBERTO J. FUENTES, RICARDO C. GABUTAN, PEDRO D.V. GALEOS, ARNULFO F. GALEOS, EDGARDO V.
GARCESA, BERNARDO P. GENTOBA, EDUARDO P. GENTOBA, VICTORIO B. GIDO, ROLANDO V. GIMENA,
EARLWIN L. GINGOYO, ERNESTO GOLEZ, JUANITO G. GONZAGA, ONOFRE GONZALES, AMADO J. GUMERE,
LEONARDO M. GUSTO, ALEJANDRO G. HALILI, NOEL H. HERCEDA, EMILIO V. HERMONDO, CLAUDIO
HIPOLITO, TORIBIO S ILLUSORIO, TEODURO G. IMPANG, JR., GIL A. JALBUNA, HERMIE L. JALICO, ARMANDO
B. JAMERLAN, NARCISO JAPAY, LIBURO C. JAVINAS, ALEJANDO S. JIMENEZ, FEDERICO T. JUCAR,
NAPOLEON T. JUMALON, OSCAR JUNSAY, ANASTACIO D. LABANA, CARLOS C. LABAY, AVELINO L.
LAFORTEZA, LOE LAGUMBAY, NORBETO D. LAMPERNIS, ROLANDO J. LAS PEAS, ISMAEL LASDOCE,
RENOLO L. LEBRILLA, CAMILO G. LEDRES, ANASTACIO LLANOS, ARMANDO A. LLIDO, CARLITO LOPEZ,
ARISTON LOS BAEZ, CONCISO L. LOVITOS, ARQUILLANO M. LOZADA, RODOLFO C. LUMAKIN, PRIMITIVO
LUNTAO, JR., EMILIO S. MABASA, JR., JUANITO A. MACALISANG, TEOTIMO L. MADULIN, JOSEPH D.
MAGALLON, PEDRO P. MAGLASANG, MARIO G. MALAGAMBA, JAIME B. MAMARADLO, PANFILO A. MANADA,
SR., RICARDO S. MANDANI, CONCHITA MANDANI, ALBERTO T. MANGGA, ALEJANDRO A. MANSANES, RUFINO
T. MANSANES, EUTIQUIO P. MANSANES, ALCIO P. MARATAS, AGAPITO D. MARQUEZ, RICARDO R. MASIGLAT,
DENDERIA MATABANG, ARNELO N. MATILLANO, HERNANI C. MEJORADA, ROSITA MENDOZA, GREGORIO R.
MESA, RENATO N. MILLADO, ANTONIO L. MOCORRO, ALBERTO M. MOLINA, JR., DOMINGO P. MONDIA,
JUANITO P. MONDIA, RICARDO MONTAO, RAUL T. MONTEJO, ROGELIO MUNAR, RODOLFO E. MUEZ,
CRESENCIO NARCISO, PANFILO C. NARCISO, BRICS P. NECOR, MOISES P. NICOLAS, NEMESIO G. NICOLAS,
ALFREDO NOFIEL, FELIX T. NOVENA, MARCELO P. OBTIAL, SR., TEODORO B. OCRETO, BIBIANO C. ODI,
ALFREDO M. OPERIO, TEOTISTO B. OPON, IZRO M. ORACION, ALAN E. ORANAS, ELPEDIO T. OSIAS, ERNESTO
M. PABIONA, NARCISO J. PADILLA, NELSON G. PADIOS, SR., FRNACISCO G. PAGUNTALAN, RENE B.
PALENCIA, MICHAEL P. PALOMAR, VIRGILIO E. PANILAGAO, NOLITO C. PANULIN, ROMEO PARAGUAS,
NESTOR B. PASTERA, VICENTE Q. PEDAZO, EDGAR M. PEARANDA, ILUMINIDO B. PERACULLO, ANTONIO C.
PEREZ, DOMINGO PEREZ, OSCAR C. PLEOS, ANTONIETO POLANCOS, SERAFIN G. PRIETO, ZENAIDA
PROVIDO, FERNANDO Y. PROVIDO, ERNESTO QUERO, ELEAZAR QUIJARDO, WILLIAM U. QUINTOY, LAURO
QUISTADIO, ROGELIO RABADON, MARCELINO M. RELIZAN, RAUL A. REYES, OCTAVIO F. REYES, EDDIE M.
RINCOR, EMMANUEL RIVAS, RODULFO RIVAS, BIENVENIDO C. ROMANCA, JACINTO ROMOC, ROMEO S.
ROMUALDO, ALBERTO ROSARIO, ROMEO L. SABIDO, SIMON SAGNIP, TIMOTEO SALIG, ROMAN G.
SALIGONAN, VICTORINO SALOMON, GENEROSO J. SALONGKONG, RODOLFO E. SALVANI, JIMMY A. SAMELIN,
EDUARDO A. SAMELIN, ANDRES A. SAMELIN, GEORGE SAMELIN, ROMEO A. SARAOSOS, RUDIGELIO S.
SARMIENTO, CIRILO SAYAANG, JARLO SAYSON, LEONCIO SERDONCILLO, RODOLFO C. SERRANO, NESTOR
G. SEVILLA, SIMEON F. SIMBA, CATALINO S. SIMTIM, SERAFIN T. SINSUANGCO, EDUARDO A. SOLA,
VICTORINO M. SOLOMON, JAIME B. SUFICIENCIA, LYNDON SUMAJIT, ALFREDO P. SUMAJIT, ALFREDO L.
SUMAJIT, PEDRO A. SUMARAGO, ERNESTO SUMILE, NESTOR S. SUMOG-OY, MANUEL T. SUPAS, WILFREDO A.
TABAQUE, CONSTANCIO L. TACULAD, EUFROCINO A. TAGOTO, JR., SERAPIO TAHITIT, PANTALEON T.
TAMASE, ERNESTO TARRE, MAGNO E. TATOY, AVELINO TAYAPAD, SAMUEL S. TERRADO, APOLINARIO B.

TICO, ORLANDO TINACO, ALBERT G. TINAY, ANTONIO TOLEDO, ANTONIO M. TORREGOSA, ISABELO TORRES,
JIMMY C. TORRIBIO, EDUARDO Y. TUCLAOD, JACINTO UDAL, RICARDO M. URBANO, ERNESTO G. VAFLOR,
FILOMENO E. VALENZUELA, SALORIANO VELASCO, RODOLFO VIDAL, WALTER VILLAFAE, DANTE VILLALVA,
PERIGRINO P. VILLARAN, JESUS L. VILLARBA, ELEAZAR D. VILLARBA, JENNY T. VILLAVA, HENRY C.
VILLEGAS, DELFIN C. WALOG, RODOLFO YAMBAO, EDGAR A. YARE, MANSUETO M. YBERA, EDUARDO G.
YUMANG, HENRY R. YUNGOT, ROMEO P. YUSON, ARSENIA ZABALA, FELIX N. ZABALA and GRACIANO
ZAMORA, Petitioners,
vs.
HON. TEODORO A. DIZON, JR., Presiding Judge, Regional Trial Court, Branch 37, General Santos City, SHELL
OIL CO., DOW CHEMICAL CO., OCCIDENTAL CHEMICAL CORP., STANDARD FRUIT CO., STANDARD FRUIT &
STEAMSHIP CO., DOLE FOOD CO., INC., DOLE FRESH FRUIT CO., DEL MONTE FRESH PRODUCE N.A., DEL
MONTE TROPICAL FRUIT CO., CHIQUITA BRANDS INTERNATIONAL, INC. and CHIQUITA BRANDS,
INC., Respondents.
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G.R. No. 125598
THE DOW CHEMICAL COMPANY and OCCIDENTAL CHEMICAL CORPORATION, Petitioners,
vs.
BERNABE L. NAVIDA, JOSE P. ABANGAN, JR., CEFERINO P. ABARQUEZ, ORLANDITO A. ABISON, FELIPE
ADAYA, ALBERTO R. AFRICA, BENJAMIN M. ALBAO, FELIPE ALCANTARA, NUMERIANO S. ALCARIA,
FERNANDO C. ALEJADO, LEOPOLDO N. ALFONSO, FLORO I. ALMODIEL, ANTONIO B. ALVARADO, ELEANOR
AMOLATA, RODOLFO P. ANCORDA, TRIFINO F. ANDRADA, BERT B. ANOCHE, RAMON E. ANTECRISTO, ISAGANI
D. ANTINO, DOMINGO ANTOPINA, MANSUETO M. APARICIO, HERMINIGILDO AQUINO, MARCELO S. AQUINO,
JR., FELIPE P. ARANIA, ULYSES M. ARAS, ARSENIO ARCE, RUPERTO G. ARINZOL, MIGUEL G. ARINZOL,
EDGARADO P. ARONG, RODRIGO D.R. ASTRALABIO, RONNIE BACAYO, SOFRONIO BALINGIT, NELSON M.
BALLENA, EMNIANO BALMONTE, MAXIMO M. BANGI, SALVADOR M. BANGI, HERMOGENES T. BARBECHO,
ARSENIO B. BARBERO, DIOSDADO BARREDO, VIRGILIO BASAS, ALEJANDRO G. BATULAN, DOMINGO A.
BAUTISTA, VICTOR BAYANI, BENIGNO BESARES, RUFINO BETITO, GERARDO A. BONIAO, CARLO B.
BUBUNGAN, FERNANDO B. BUENAVISTA, ALEJANDRINO H. BUENO, TOMAS P. BUENO, LEONARDO M.
BURDEOS, VICENTE P. BURGOS, MARCELINO J. CABALUNA, DIOSDADO CABILING, EMETRIO C. CACHUELA,
BRAULIO B. CADIVIDA, JR., SAMSON C. CAEL, DANIEL B. CAJURAO, REY A. CALISO, NORBERTO F.
CALUMPAG, CELESTINO CALUMPAG, LORETO CAMACHO, VICTORIANO CANETE, DOMINADOR P. CANTILLO,
FRUCTUSO P. CARBAJOSA, VICTORINO S. CARLOS, VICTOR CARLOS, GEORGE M. CASSION, JAIME S.
CASTAARES, FLAVIANO C. CASTAARES, ELPIDIO CATUBAY, NATHANIEL B. CAUSANG, BEOFIL B. CAUSING,
ADRIANO R. CEJAS, CIRILO G. CERERA, SR., CRISTITUTO M. CEREZO, DANTE V. CONCHA, ALBERT
CORNELIO, CESAR CORTES, NOEL Y. CORTEZ, SERNUE CREDO, CORNELIO A. CRESENCIO, ALEX CRUZ,
ROGER CRUZ, RANSAM CRUZ, CANUTO M. DADULA, ROMEO L. DALDE, ZACARIAS DAMBAAN, ELISEO
DAPROZA, VIRGILIO P. DAWAL, TESIFREDO I. DE TOMAS, GAMALLER P. DEANG, CARMELINO P. DEANG,
DIOSDADO P. DEANG, DOMINGO A. DEANG, FELIPE R. DEANG, JR., JULIETO S. DELA CRUZ, ELIEZER R. DELA
TORRE, JEFFREY R. DELA TORRE, RAUL DEMONTEVERDE, FELIPE P. DENOLAN, RUBENCIO P. DENOY,
RODRIGO M. DERMIL, ROLANDO B. DIAZ, LORENZO DIEGO, JOVENCIO DIEGO, SATURNINO DIEGO, GREGORIO
DIONG, AMADO R. DIZON, FE DIZON, VIRGILO M. DOMANTAY, LEO S. DONATO, DOMINADOR L. DOSADO,
NESTOR DUMALAG, FREDDIE DURAN, SR., MARIO C. ECHIVERE, AQUILLO M. EMBRADORA, MIGUEL EMNACE,
RIO T. EMPAS, EFRAIM ENGLIS, ANICETO ENOPIA, DIOCENE ENTECOSA, RUBENTITO D. ENTECOSA, AVELINO
C. ENTERO, FORTUNATA ENTRADA, ROGELIO P. EROY, RODOLFO M. ESCAMILLA, SERGIO C. ESCANTILLA,
LAZARO A. ESPAOLA, EULOGIO M. ETURMA, PRIMO P. FERNANDEZ, EDILBERTO D. FERNANDO, GREGORIO
S. FERNANDO, VICENTE P. FERRER, MARCELO T. FLOR, ANTONIO M. FLORES, REDENTOR T. FLOREZA,
NORBERTO J. FUENTES, RICARDO C. GABUTAN, PEDRO D.V. GALEOS, ARNULFO F. GALEOS, EDGARDO V.
GARCESA, BERNARDO P. GENTOBA, EDUARDO P. GENTOBA, VICTORIO B. GIDO, ROLANDO V. GIMENA,
EARLWIN L. GINGOYO, ERNESTO GOLEZ, JUANITO G. GONZAGA, ONOFRE GONZALES, AMADO J. GUMERE,
LEONARDO M. GUSTO, ALEJANDRO G. HALILI, NOEL H. HERCEDA, EMILIO V. HERMONDO, CLAUDIO
HIPOLITO, TORIBIO S ILLUSORIO, TEODURO G. IMPANG, JR., GIL A. JALBUNA, HERMIE L. JALICO, ARMANDO
B. JAMERLAN, NARCISO JAPAY, LIBURO C. JAVINAS, ALEJANDO S. JIMENEZ, FEDERICO T. JUCAR,
NAPOLEON T. JUMALON, OSCAR JUNSAY, ANASTACIO D. LABANA, CARLOS C. LABAY, AVELINO L.
LAFORTEZA, LOE LAGUMBAY, NORBETO D. LAMPERNIS, ROLANDO J. LAS PEAS, ISMAEL LASDOCE,
RENOLO L. LEBRILLA, CAMILO G. LEDRES, ANASTACIO LLANOS, ARMANDO A. LLIDO, CARLITO LOPEZ,
ARISTON LOS BAEZ, CONCISO L. LOVITOS, ARQUILLANO M. LOZADA, RODOLFO C. LUMAKIN, PRIMITIVO
LUNTAO, JR., EMILIO S. MABASA, JR., JUANITO A. MACALISANG, TEOTIMO L. MADULIN, JOSEPH D.
MAGALLON, PEDRO P. MAGLASANG, MARIO G. MALAGAMBA, JAIME B. MAMARADLO, PANFILO A. MANADA,
SR., RICARDO S. MANDANI, CONCHITA MANDANI, ALBERTO T. MANGGA, ALEJANDRO A. MANSANES, RUFINO
T. MANSANES, EUTIQUIO P. MANSANES, ALCIO P. MARATAS, AGAPITO D. MARQUEZ, RICARDO R. MASIGLAT,
DENDERIA MATABANG, ARNELO N. MATILLANO, HERNANI C. MEJORADA, ROSITA MENDOZA, GREGORIO R.
MESA, RENATO N. MILLADO, ANTONIO L. MOCORRO, ALBERTO M. MOLINA, JR., DOMINGO P. MONDIA,
JUANITO P. MONDIA, RICARDO MONTAO, RAUL T. MONTEJO, ROGELIO MUNAR, RODOLFO E. MUEZ,
CRESENCIO NARCISO, PANFILO C. NARCISO, BRICS P. NECOR, MOISES P. NICOLAS, NEMESIO G. NICOLAS,
ALFREDO NOFIEL, FELIX T. NOVENA, MARCELO P. OBTIAL, SR., TEODORO B. OCRETO, BIBIANO C. ODI,
ALFREDO M. OPERIO, TEOTISTO B. OPON, IZRO M. ORACION, ALAN E. ORANAS, ELPEDIO T. OSIAS, ERNESTO
M. PABIONA, NARCISO J. PADILLA, NELSON G. PADIOS, SR., FRANCISCO G. PAGUNTALAN, RENE B.
PALENCIA, MICHAEL P. PALOMAR, VIRGILIO E. PANILAGAO, NOLITO C. PANULIN, ROMEO PARAGUAS,
NESTOR B. PASTERA, VICENTE Q. PEDAZO, EDGAR M. PEARANDA, ILUMINIDO B. PERACULLO, ANTONIO C.
PEREZ, DOMINGO PEREZ, OSCAR C. PLEOS, ANTONIETO POLANCOS, SERAFIN G. PRIETO, ZENAIDA
PROVIDO, FERNANDO Y. PROVIDO, ERNESTO QUERO, ELEAZAR QUIJARDO, WILLIAM U. QUINTOY, LAURO

QUISTADIO, ROGELIO RABADON, MARCELINO M. RELIZAN, RAUL A. REYES, OCTAVIO F. REYES, EDDIE M.
RINCOR, EMMANUEL RIVAS, RODULFO RIVAS, BIENVENIDO C. ROMANCA, JACINTO ROMOC, ROMEO S.
ROMUALDO, ALBERTO ROSARIO, ROMEO L. SABIDO, SIMON SAGNIP, TIMOTEO SALIG, ROMAN B.
SALIGONAN, VICTORINO SALOMON, GENEROSO M. SALONGKONG, RODOLFO E. SALVANI, JIMMY A.
SAMELIN, EDUARDO A. SAMELIN, ANDRES A. SAMELIN, GEORGE SAMELIN, ROMEO A. SARAOSOS,
RUDIGELIO S. SARMIENTO, CIRILO SAYAANG, JARLO SAYSON, LEONCIO SERDONCILLO, RODOLFO C.
SERRANO, NESTOR G. SEVILLA, SIMEON F. SIMBA, CATALINO S. SIMTIM, SERAFIN T. SINSUANGCO, EDUARDO
A. SOLA, VICTORINO M. SOLOMON, JAIME B. SUFICIENCIA, LYNDON SUMAJIT, ALFREDO P. SUMAJIT,
ALFREDO L. SUMAJIT, PEDRO A. SUMARAGO, ERNESTO SUMILE, NESTOR S. SUMOG-OY, MANUEL T. SUPAS,
WILFREDO A. TABAQUE, CONSTANCIO L. TACULAD, EUFROCINO A. TAGOTO, JR., SERAPIO TAHITIT,
PANTALEON T. TAMASE, ERNESTO TARRE, MAGNO E. TATOY, AVELINO TAYAPAD, SAMUEL S. TERRADO,
APOLINARIO B. TICO, ORLANDO TINACO, ALBERT G. TINAY, ANTONIO TOLEDO, ANTONIO M. TORREGOSA,
ISABELO TORRES, JIMMY C. TORRIBIO, EDUARDO Y. TUCLAOD, JACINTO UDAL, RICARDO M. URBANO,
ERNESTO G. VAFLOR, FILOMENO E. VALENZUELA, SALORIANO VELASCO, RODOLFO VIDAL, WALTER
VILLAFAE, DANTE VILLALVA, PERIGRINO P. VILLARAN, JESUS L. VILLARBA, ELEAZAR D. VILLARBA, JENNY
T. VILLAVA, HENRY C. VILLEGAS, DELFIN C. WALOG, RODOLFO YAMBAO, EDGAR A. YARE, MANSUETO M.
YBERA, EDUARDO G. YUMANG, HENRY R. YUNGOT, ROMEO P. YUSON, ARSENIA ZABALA, FELIX N. ZABALA,
and GRACIANO ZAMORA, Respondents.
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G.R. No. 126654
CORNELIO ABELLA, JR., IRENEO AGABATU, PRUDENCIO ALDEPOLIA, ARTEMIO ALEMAN, FIDEL ALLERA,
DOMINGO ALONZO, CORNELIO AMORA, FELIPE G. AMORA, LEOPOLDO AMORADO, MARCELINO ANDIMAT,
JORGE ANDOY, MARGARITO R. ANGELIA, GREGOTIO APRIANO, ALFREDO A. ARARAO, BONIFACIO L.
ARTIGAS, JERSON ASUAL, SERAFIN AZUCENA, FELIX M. BADOY, JULIAN J. BAHALLA, REYNALDO BAHAYA,
ANTONIO L. BALDAGO, CESAR N. BALTAZAR, DOMINADO A. BARING, ANTIPAS A. BATINGAL, MARCIANO
NATINGAL, MARINO BIBANCO, LEANDRO BILIRAN, MARGARITO BLANCO, CATALINO BONGO, MELCHOR
BRIGOLE, ELISEO BRINA, ROBERTO BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO, CELSO M. BUSIA,
RPDITO CABAGTE, RICARADO C. CABALLES, CARLITO A. CAINDOC, CANDIDO CALO, JR., PEDRITO CAMPAS,
FERNANDO R. CAPAROSO, DANILO CARILLO, BONIFACIO M. CATCHA, FRANKLIN CLARAS, JOSE F.
COLLAMAT, BERNARDO M. COMPENDIO, CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR.,
RICADO C. DEIPARIME, GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A. DIAZ, QUINTINO
DISIPULO, JR., CESAR G. DONAYRE, JOSE DULABAY, JAIRO DUQUIZA, ANTONIO ENGBINO, ALFREDO
ESPINOSA, ALONZO FAILOG, JAIME FEROLINO, RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A.
GEROLAGA, RODULFO G. GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO,
HECTOR GUMBAN, CAMILO HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS, ALFREDO INTOD, OLEGARIO
IYUMA, DOMINGO B. JAGMOC, JR., EDUARDO JARGUE, ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO
A. LADURA, CONSTANCIO M. LAGURA, FRANCISCO LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO
LAURDEN, VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO LAYAO, NEMENCIO C.
LINAO, PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE, RAMON MAGDOSA, NILO MAGLINTE, MARINO G.
MALINAO, CARLITO MANACAP, AURELIO A. MARO, CRISOSTOMO R. MIJARES, CESAR MONAPCO, SILVANO
MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO H. NALAS, EMELIANO C.
NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY,
DOROTEO S. OMBRETE, TEOFILIO OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA,
ALFREDO P. PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG, RESURRECCION
PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO, ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO
QUIZON, DIONISIO RAMOS, MAMERTO RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO
RETANAL, CARLITO ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO
SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD, ROMEO TAYCO, RENATO
TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E. TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA,
HERMONEGES TIRADOR, JOSELITO TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA,
VICENTE VILLA, ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M. VILLEGAS, Petitioners,
vs.
THE HON. ROMEO D. MARASIGAN, Presiding Judge of Regional Trial Court, Branch 16, Davao City, SHELL OIL
CO., DOW CHEMICAL CO., OCCIDENTAL CHEMICAL CORP., STANDARD FRUIT CO., STANDARD FRUIT &
STEAMSHIP CO., DOLE FOOD CO., INC., DOLE FRESH FRUIT CO., DEL MONTE FRESH PRODUCE N.A., DEL
MONTE TROPICAL FRUIT CO., CHIQUITA BRANDS INTERNATIONAL, INC. and CHIQUITA BRANDS,
INC., Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 127856
DEL MONTE FRESH PRODUCE N.A. and DEL MONTE TROPICAL FRUIT CO., Petitioners,
vs.
THE REGIONAL TRIAL COURT OF DAVAO CITY, BRANCHES 16 AND 13, CORNELIO ABELLA, JR., IRENEO
AGABATU, PRUDENCIO ALDEPOLIA, ARTEMIO ALEMAN, FIDEL ALLERA, DOMINGO ALONZO, CORNELIO
AMORA, FELIPE G. AMORA, LEOPOLDO AMORADO, MARCELINO ANDIMAT, JORGE ANDOY, MARGARITO R.
ANGELIA, GREGOTIO APRIANO, ALFREDO A. ARARAO, BONIFACIO L. ARTIGAS, JERSON ASUAL, SERAFIN
AZUCENA, FELIX M. BADOY, JULIAN J. BAHALLA, REYNALDO BAHAYA, ANTONIO L. BALDAGO, CESAR N.
BALTAZAR, DOMINADO A. BARING, ANTIPAS A. BATINGAL, MARCIANO NATINGAL, MARINO BIBANCO,

LEANDRO BILIRAN, MARGARITO BLANCO, CATALINO BONGO, MELCHOR BRIGOLE, ELISEO BRINA, ROBERTO
BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO, CELSO M. BUSIA, RPDITO CABAGTE, RICARADO C.
CABALLES, CARLITO A. CAINDOC, CANDIDO CALO, JR., PEDRITO CAMPAS, FERNANDO R. CAPAROSO,
DANILO CARILLO, BONIFACIO M. CATCHA, FRANKLIN CLARAS, JOSE F. COLLAMAT, BERNARDO M.
COMPENDIO, CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR., RICADO C. DEIPARIME,
GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A. DIAZ, QUINTINO DISIPULO, JR., CESAR G.
DONAYRE, JOSE DULABAY, JAIRO DUQUIZA, ANTONIO ENGBINO, ALFREDO ESPINOSA, ALONZO FAILOG,
JAIME FEROLINO, RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A. GEROLAGA, RODULFO G.
GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO, HECTOR GUMBAN, CAMILO
HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS, ALFREDO INTOD, OLEGARIO IYUMA, DOMINGO B.
JAGMOC, JR., EDUARDO JARGUE, ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO A. LADURA,
CONSTANCIO M. LAGURA, FRANCISCO LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO LAURDEN,
VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO LAYAO, NEMENCIO C. LINAO,
PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE, RAMON MAGDOSA, NILO MAGLINTE, MARINO G.
MALINAO, CARLITO MANACAP, AURELIO A. MARO, CRISOSTOMO R. MIJARES, CESAR MONAPCO, SILVANO
MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO H. NALAS, EMELIANO C.
NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY,
DOROTEO S. OMBRETE, TEOFILIO OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA,
ALFREDO P. PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG, RESURRECCION
PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO, ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO
QUIZON, DIONISIO RAMOS, MAMERTO RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO
RETANAL, CARLITO ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO
SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD, ROMEO TAYCO, RENATO
TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E. TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA,
HERMONEGES TIRADOR, JOSELITO TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA,
VICENTE VILLA, ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M. VILLEGAS, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 128398
CHIQUITA BRANDS, INC., and CHIQUITA BRANDS INTERNATIONAL, INC., Petitioners,
vs.
HON. ANITA ALFELOR-ALAGABAN, in her capacity as Presiding Judge of the Regional Trial Court, Davao City,
Branch 13, CORNELIO ABELLA, JR., IRENEO AGABATU, PRUDENCIO ALDEPOLIA, ARTEMIO ALEMAN, FIDEL
ALLERA, DOMINGO ALONZO, CORNELIO AMORA, FELIPE G. AMORA, LEOPOLDO AMORADO, MARCELINO
ANDIMAT, JORGE ANDOY, MARGARITO R. ANGELIA, GREGOTIO APRIANO, ALFREDO A. ARARAO, BONIFACIO
L. ARTIGAS, JERSON ASUAL, SERAFIN AZUCENA, FELIX M. BADOY, JULIAN J. BAHALLA, REYNALDO BAHAYA,
ANTONIO L. BALDAGO, CESAR N. BALTAZAR, DOMINADO A. BARING, ANTIPAS A. BATINGAL, MARCIANO
NATINGAL, MARINO BIBANCO, LEANDRO BILIRAN, MARGARITO BLANCO, CATALINO BONGO, MELCHOR
BRIGOLE, ELISEO BRINA, ROBERTO BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO, CELSO M. BUSIA,
RPDITO CABAGTE, RICARADO C. CABALLES, CARLITO A. CAINDOC, CANDIDO CALO, JR., PEDRITO CAMPAS,
FERNANDO R. CAPAROSO, DANILO CARILLO, BONIFACIO M. CATCHA, FRANKLIN CLARAS, JOSE F.
COLLAMAT, BERNARDO M. COMPENDIO, CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR.,
RICADO C. DEIPARIME, GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A. DIAZ, QUINTINO
DISIPULO, JR., CESAR G. DONAYRE, JOSE DULABAY, JAIRO DUQUIZA, ANTONIO ENGBINO, ALFREDO
ESPINOSA, ALONZO FAILOG, JAIME FEROLINO, RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A.
GEROLAGA, RODULFO G. GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO,
HECTOR GUMBAN, CAMILO HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS, ALFREDO INTOD, OLEGARIO
IYUMA, DOMINGO B. JAGMOC, JR., EDUARDO JARGUE, ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO
A. LADURA, CONSTANCIO M. LAGURA, FRANCISCO LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO
LAURDEN, VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO LAYAO, NEMENCIO C.
LINAO, PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE, RAMON MAGDOSA, NILO MAGLINTE, MARINO G.
MALINAO, CARLITO MANACAP, AURELIO A. MARO, CRISOSTOMO R. MIJARES, CESAR MONAPCO, SILVANO
MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO H. NALAS, EMELIANO C.
NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY,
DOROTEO S. OMBRETE, TEOFILIO OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA,
ALFREDO P. PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG, RESURRECCION
PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO, ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO
QUIZON, DIONISIO RAMOS, MAMERTO RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO
RETANAL, CARLITO ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO
SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD, ROMEO TAYCO, RENATO
TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E. TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA,
HERMONEGES TIRADOR, JOSELITO TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA,
VICENTE VILLA, ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M. VILLEGAS, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court, which arose out
of two civil cases that were filed in different courts but whose factual background and issues are closely intertwined.

The petitions in G.R. Nos. 1250781 and 1255982 both assail the Order3 dated May 20, 1996 of the Regional Trial Court
(RTC) of General Santos City, Branch 37, in Civil Case No. 5617. The said Order decreed the dismissal of the case in
view of the perceived lack of jurisdiction of the RTC over the subject matter of the complaint. The petition in G.R. No.
125598 also challenges the Orders dated June 4, 1996 4 and July 9, 1996,5 which held that the RTC of General Santos
City no longer had jurisdiction to proceed with Civil Case No. 5617.
On the other hand, the petitions in G.R. Nos. 126654, 6 127856,7 and 1283988 seek the reversal of the Order9dated
October 1, 1996 of the RTC of Davao City, Branch 16, in Civil Case No. 24,251-96, which also dismissed the case on the
ground of lack of jurisdiction.
G.R. Nos. 125078, 125598, 126654, 127856, and 128398 were consolidated in the Resolutions dated February 10,
1997,10 April 28, 199711 and March 10, 1999.12
The factual antecedents of the petitions are as follows:
Proceedings before the Texas Courts
Beginning 1993, a number of personal injury suits were filed in different Texas state courts by citizens of twelve foreign
countries, including the Philippines. The thousands of plaintiffs sought damages for injuries they allegedly sustained from
their exposure to dibromochloropropane (DBCP), a chemical used to kill nematodes (worms), while working on farms in
23 foreign countries. The cases were eventually transferred to, and consolidated in, the Federal District Court for the
Southern District of Texas, Houston Division. The cases therein that involved plaintiffs from the Philippines were "Jorge
Colindres Carcamo, et al. v. Shell Oil Co., et al.," which was docketed as Civil Action No. H-94-1359, and "Juan Ramon
Valdez, et al. v. Shell Oil Co., et al.," which was docketed as Civil Action No. H-95-1356. The defendants in the
consolidated cases prayed for the dismissal of all the actions under the doctrine of forum non conveniens.
In a Memorandum and Order dated July 11, 1995, the Federal District Court conditionally granted the defendants motion
to dismiss. Pertinently, the court ordered that:
Delgado, Jorge Carcamo, Valdez and Isae Carcamo will be dismissed 90 days after the entry of this Memorandum and
Order provided that defendants and third- and fourth-party defendants have:
(1) participated in expedited discovery in the United States xxx;
(2) either waived or accepted service of process and waived any other jurisdictional defense within 40 days after
the entry of this Memorandum and Order in any action commenced by a plaintiff in these actions in his home
country or the country in which his injury occurred. Any plaintiff desiring to bring such an action will do so within 30
days after the entry of this Memorandum and Order;
(3) waived within 40 days after the entry of this Memorandum and Order any limitations-based defense that has
matured since the commencement of these actions in the courts of Texas;
(4) stipulated within 40 days after the entry of this Memorandum and Order that any discovery conducted during
the pendency of these actions may be used in any foreign proceeding to the same extent as if it had been
conducted in proceedings initiated there; and
(5) submitted within 40 days after the entry of this Memorandum and Order an agreement binding them to satisfy
any final judgment rendered in favor of plaintiffs by a foreign court.
xxxx
Notwithstanding the dismissals that may result from this Memorandum and Order, in the event that the highest court of
any foreign country finally affirms the dismissal for lack of jurisdiction of an action commenced by a plaintiff in these
actions in his home country or the country in which he was injured, that plaintiff may return to this court and, upon proper
motion, the court will resume jurisdiction over the action as if the case had never been dismissed for [forum non
conveniens].13
Civil Case No. 5617 before the RTC of General Santos City and G.R. Nos. 125078 and 125598
In accordance with the above Memorandum and Order, a total of 336 plaintiffs from General Santos City (the petitioners in
G.R. No. 125078, hereinafter referred to as NAVIDA, et al.) filed a Joint Complaint 14 in the RTC of General Santos City on
August 10, 1995. The case was docketed as Civil Case No. 5617. Named as defendants therein were: Shell Oil Co.
(SHELL); Dow Chemical Co. (DOW); Occidental Chemical Corp. (OCCIDENTAL); Dole Food Co., Inc., Dole Fresh Fruit
Co., Standard Fruit Co., Standard Fruit and Steamship Co. (hereinafter collectively referred to as DOLE); Chiquita Brands,
Inc. and Chiquita Brands International, Inc. (CHIQUITA); Del Monte Fresh Produce N.A. and Del Monte Tropical Fruit Co.
(hereinafter collectively referred to as DEL MONTE); Dead Sea Bromine Co., Ltd.; Ameribrom, Inc.; Bromine Compounds,
Ltd.; and Amvac Chemical Corp. (The aforementioned defendants are hereinafter collectively referred to as defendant
companies.)
Navida, et al., prayed for the payment of damages in view of the illnesses and injuries to the reproductive systems which
they allegedly suffered because of their exposure to DBCP. They claimed, among others, that they were exposed to this

chemical during the early 1970s up to the early 1980s when they used the same in the banana plantations where they
worked at; and/or when they resided within the agricultural area where such chemical was used. Navida, et al., claimed
that their illnesses and injuries were due to the fault or negligence of each of the defendant companies in that they
produced, sold and/or otherwise put into the stream of commerce DBCP-containing products. According to NAVIDA, et al.,
they were allowed to be exposed to the said products, which the defendant companies knew, or ought to have known,
were highly injurious to the formers health and well-being.
Instead of answering the complaint, most of the defendant companies respectively filed their Motions for Bill of
Particulars.15 During the pendency of the motions, on March 13, 1996, NAVIDA, et al., filed an Amended Joint
Complaint,16 excluding Dead Sea Bromine Co., Ltd., Ameribrom, Inc., Bromine Compounds, Ltd. and Amvac Chemical
Corp. as party defendants.
Again, the remaining defendant companies filed their various Motions for Bill of Particulars. 17 On May 15, 1996, DOW filed
an Answer with Counterclaim.18
On May 20, 1996, without resolving the motions filed by the parties, the RTC of General Santos City issued an Order
dismissing the complaint. First, the trial court determined that it did not have jurisdiction to hear the case, to wit:
THE COMPLAINT FOR DAMAGES FILED WITH THE REGIONAL TRIAL COURT SHOULD BE DISMISSED FOR LACK
OF JURISDICTION
xxxx
The substance of the cause of action as stated in the complaint against the defendant foreign companies cites activity on
their part which took place abroad and had occurred outside and beyond the territorial domain of the Philippines. These
acts of defendants cited in the complaint included the manufacture of pesticides, their packaging in containers, their
distribution through sale or other disposition, resulting in their becoming part of the stream of commerce.
Accordingly, the subject matter stated in the complaint and which is uniquely particular to the present case, consisted of
activity or course of conduct engaged in by foreign defendants outside Philippine territory, hence, outside and beyond the
jurisdiction of Philippine Courts, including the present Regional Trial Court. 19
Second, the RTC of General Santos City declared that the tort alleged by Navida, et al., in their complaint is a tort
category that is not recognized in Philippine laws. Said the trial court:
THE TORT ASSERTED IN THE PRESENT COMPLAINT AGAINST DEFENDANT FOREIGN COMPANIES IS NOT
WITHIN THE SUBJECT MATTER JURISDICTION OF THE REGIONAL TRIAL COURT, BECAUSE IT IS NOT A TORT
CATEGORY WITHIN THE PURVIEW OF THE PHILIPPINE LAW
The specific tort asserted against defendant foreign companies in the present complaint is product liability tort. When the
averments in the present complaint are examined in terms of the particular categories of tort recognized in the Philippine
Civil Code, it becomes stark clear that such averments describe and identify the category of specific tort known as product
liability tort. This is necessarily so, because it is the productmanufactured by defendant foreign companies, which is
asserted to be the proximate cause of the damages sustained by the plaintiff workers, and the liability of the defendant
foreign companies, is premised on being themanufacturer of the pesticides.
It is clear, therefore, that the Regional Trial Court has jurisdiction over the present case, if and only if the Civil Code of the
Philippines, or a suppletory special law prescribes a product liability tort, inclusive of and comprehending the specific tort
described in the complaint of the plaintiff workers. 20
Third, the RTC of General Santos City adjudged that Navida, et al., were coerced into submitting their case to the
Philippine courts, viz:
FILING OF CASES IN THE PHILIPPINES - COERCED AND ANOMALOUS
The Court views that the plaintiffs did not freely choose to file the instant action, but rather were coerced to do so, merely
to comply with the U.S. District Courts Order dated July 11, 1995, and in order to keep open to the plaintiffs the
opportunity to return to the U.S. District Court.21
Fourth, the trial court ascribed little significance to the voluntary appearance of the defendant companies therein, thus:
THE DEFENDANTS SUBMISSION TO JURISDICTION IS CONDITIONAL AS IT IS ILLUSORY
Defendants have appointed their agents authorized to accept service of summons/processes in the Philippines pursuant
to the agreement in the U.S. court that defendants will voluntarily submit to the jurisdiction of this court. While it is true that
this court acquires jurisdiction over persons of the defendants through their voluntary appearance, it appears that such
voluntary appearance of the defendants in this case is conditional. Thus in the "Defendants Amended Agreement
Regarding Conditions of Dismissal for Forum Non Conveniens" (Annex to the Complaint) filed with the U.S. District Court,
defendants declared that "(t)he authority of each designated representative to accept service of process will become
effective upon final dismissal of these actions by the Court". The decision of the U.S. District Court dismissing the case is
not yet final and executory since both the plaintiffs and defendants appealed therefrom (par. 3(h), 3(i), Amended

Complaint). Consequently, since the authority of the agent of the defendants in the Philippines is conditioned on the final
adjudication of the case pending with the U.S. courts, the acquisition of jurisdiction by this court over the persons of the
defendants is also conditional. x x x.
The appointment of agents by the defendants, being subject to a suspensive condition, thus produces no legal effect and
is ineffective at the moment.22
Fifth, the RTC of General Santos City ruled that the act of NAVIDA, et al., of filing the case in the Philippine courts violated
the rules on forum shopping and litis pendencia. The trial court expounded:
THE JURISDICTION FROWNS UPON AND PROHIBITS FORUM SHOPPING
This court frowns upon the fact that the parties herein are both vigorously pursuing their appeal of the decision of the U.S.
District court dismissing the case filed thereat. To allow the parties to litigate in this court when they are actively pursuing
the same cases in another forum, violates the rule on forum shopping so abhorred in this jurisdiction. x x x.
xxxx
THE FILING OF THE CASE IN U.S. DIVESTED THIS COURT OF ITS OWN JURISDICTION
Moreover, the filing of the case in the U.S. courts divested this court of its own jurisdiction. This court takes note that the
U.S. District Court did not decline jurisdiction over the cause of action. The case was dismissed on the ground of forum
non conveniens, which is really a matter of venue. By taking cognizance of the case, the U.S. District Court has, in
essence, concurrent jurisdiction with this court over the subject matter of this case. It is settled that initial acquisition of
jurisdiction divests another of its own jurisdiction. x x x.
xxxx
THIS CASE IS BARRED BY THE RULE OF "LITIS PENDENCIA"
Furthermore, the case filed in the U.S. court involves the same parties, same rights and interests, as in this case. There
exists litis pendencia since there are two cases involving the same parties and interests. The court would like to
emphasize that in accordance with the rule on litis pendencia x x x; the subsequent case must be dismissed. Applying the
foregoing [precept] to the case-at-bar, this court concludes that since the case between the parties in the U.S. is still
pending, then this case is barred by the rule on "litis pendencia." 23
In fine, the trial court held that:
It behooves this Court, then to dismiss this case. For to continue with these proceedings, would be violative of the
constitutional provision on the Bill of Rights guaranteeing speedy disposition of cases (Ref. Sec. 16, Article III,
Constitution). The court has no other choice. To insist on further proceedings with this case, as it is now presented, might
accord this court a charming appearance. But the same insistence would actually thwart the very ends of justice which it
seeks to achieve.
This evaluation and action is made not on account of but rather with due consideration to the fact that the dismissal of this
case does not necessarily deprive the parties especially the plaintiffs of their possible remedies. The court is cognizant
that the Federal Court may resume proceedings of that earlier case between the herein parties involving the same acts or
omissions as in this case.
WHEREFORE, in view of the foregoing considerations, this case is now considered DISMISSED. 24
On June 4, 1996, the RTC of General Santos City likewise issued an Order,25 dismissing DOWs Answer with
Counterclaim.
CHIQUITA, DEL MONTE and SHELL each filed a motion for reconsideration 26 of the RTC Order dated May 20, 1996,
while DOW filed a motion for reconsideration27 of the RTC Order dated June 4, 1996. Subsequently, DOW and
OCCIDENTAL also filed a Joint Motion for Reconsideration 28 of the RTC Order dated May 20, 1996.
In an Order29 dated July 9, 1996, the RTC of General Santos City declared that it had already lost its jurisdiction over the
case as it took into consideration the Manifestation of the counsel of NAVIDA, et al., which stated that the latter had
already filed a petition for review on certiorari before this Court.
CHIQUITA and SHELL filed their motions for reconsideration30 of the above order.
On July 11, 1996, NAVIDA, et al., filed a Petition for Review on Certiorari in order to assail the RTC Order dated May 20,
1996, which was docketed as G.R. No. 125078.
The RTC of General Santos City then issued an Order 31 dated August 14, 1996, which merely noted the incidents still
pending in Civil Case No. 5617 and reiterated that it no longer had any jurisdiction over the case.

On August 30, 1996, DOW and OCCIDENTAL filed their Petition for Review on Certiorari, 32 challenging the orders of the
RTC of General Santos City dated May 20, 1996, June 4, 1996 and July 9, 1996. Their petition was docketed as G.R. No.
125598.
In their petition, DOW and OCCIDENTAL aver that the RTC of General Santos City erred in ruling that it has no jurisdiction
over the subject matter of the case as well as the persons of the defendant companies.
In a Resolution33 dated October 7, 1996, this Court resolved to consolidate G.R. No. 125598 with G.R. No. 125078.
CHIQUITA filed a Petition for Review on Certiorari,34 which sought the reversal of the RTC Orders dated May 20, 1996,
July 9, 1996 and August 14, 1996. The petition was docketed as G.R. No. 126018. In a Resolution 35 dated November 13,
1996, the Court dismissed the aforesaid petition for failure of CHIQUITA to show that the RTC committed grave abuse of
discretion. CHIQUITA filed a Motion for Reconsideration,36 but the same was denied through a Resolution37 dated January
27, 1997.
Civil Case No. 24,251-96 before the RTC of Davao City and G.R. Nos. 126654, 127856, and 128398
Another joint complaint for damages against SHELL, DOW, OCCIDENTAL, DOLE, DEL MONTE, and CHIQUITA was filed
before Branch 16 of the RTC of Davao City by 155 plaintiffs from Davao City. This case was docketed as Civil Case No.
24,251-96. These plaintiffs (the petitioners in G.R. No. 126654, hereinafter referred to as ABELLA, et al.) amended their
Joint-Complaint on May 21, 1996.38
Similar to the complaint of NAVIDA, et al., ABELLA, et al., alleged that, as workers in the banana plantation and/or as
residents near the said plantation, they were made to use and/or were exposed to nematocides, which contained the
chemical DBCP. According to ABELLA, et al., such exposure resulted in "serious and permanent injuries to their health,
including, but not limited to, sterility and severe injuries to their reproductive capacities." 39ABELLA, et al., claimed that the
defendant companies manufactured, produced, sold, distributed, used, and/or made available in commerce, DBCP
without warning the users of its hazardous effects on health, and without providing instructions on its proper use and
application, which the defendant companies knew or ought to have known, had they exercised ordinary care and
prudence.
Except for DOW, the other defendant companies filed their respective motions for bill of particulars to which ABELLA, et
al., filed their opposition. DOW and DEL MONTE filed their respective Answers dated May 17, 1996 and June 24, 1996.
The RTC of Davao City, however, junked Civil Case No. 24,251-96 in its Order dated October 1, 1996, which, in its
entirety, reads:
Upon a thorough review of the Complaint and Amended Complaint For: Damages filed by the plaintiffs against the
defendants Shell Oil Company, DOW Chemicals Company, Occidental Chemical Corporation, Standard Fruit Company,
Standard Fruit and Steamship, DOLE Food Company, DOLE Fresh Fruit Company, Chiquita Brands, Inc., Chiquita Brands
International, Del Monte Fresh Produce, N.A. and Del Monte Tropical Fruits Co., all foreign corporations with Philippine
Representatives, the Court, as correctly pointed out by one of the defendants, is convinced that plaintiffs "would have this
Honorable Court dismiss the case to pave the way for their getting an affirmance by the Supreme Court" (#10 of
Defendants Del Monte Fresh Produce, N.A. and Del Monte Tropical Fruit Co., Reply to Opposition dated July 22, 1996).
Consider these:
1) In the original Joint Complaint, plaintiffs state that: defendants have no properties in the Philippines; they have no
agents as well (par. 18); plaintiffs are suing the defendants for tortuous acts committed by these foreign corporations on
their respective countries, as plaintiffs, after having elected to sue in the place of defendants residence, are now
compelled by a decision of a Texas District Court to file cases under torts in this jurisdiction forcauses of actions which
occurred abroad (par. 19); a petition was filed by same plaintiffs against same defendants in the Courts of Texas, USA,
plaintiffs seeking for payment of damages based on negligence, strict liability, conspiracy and international tort theories
(par. 27); upon defendants Motion to Dismiss on Forum non [conveniens], said petition was provisionally dismissed on
condition that these cases be filed in the Philippines or before 11 August 1995 (Philippine date; Should the Philippine
Courts refuse or deny jurisdiction, the U. S. Courts will reassume jurisdiction.)
11. In the Amended Joint Complaint, plaintiffs aver that: on 11 July 1995, the Federal District Court issued a Memorandum
and Order conditionally dismissing several of the consolidated actions including those filed by the Filipino complainants.
One of the conditions imposed was for the plaintiffs to file actions in their home countries or the countries in which they
were injured x x x. Notwithstanding, the Memorandum and [O]rder further provided that should the highest court of any
foreign country affirm the dismissal for lack of jurisdictions over these actions filed by the plaintiffs in their home countries
[or] the countries where they were injured, the said plaintiffs may return to that court and, upon proper motion, the Court
will resume jurisdiction as if the case had never been dismissed for forum non conveniens.
The Court however is constrained to dismiss the case at bar not solely on the basis of the above but because it shares the
opinion of legal experts given in the interview made by the Inquirer in its Special report "Pesticide Cause Mass Sterility," to
wit:
1. Former Justice Secretary Demetrio Demetria in a May 1995 opinion said: The Philippines should be an
inconvenient forum to file this kind of damage suit against foreign companies since the causes of action alleged in
the petition do not exist under Philippine laws. There has been no decided case in Philippine Jurisprudence

awarding to those adversely affected by DBCP. This means there is no available evidence which will prove and
disprove the relation between sterility and DBCP.
2. Retired Supreme Court Justice Abraham Sarmiento opined that while a class suit is allowed in the Philippines
the device has been employed strictly. Mass sterility will not qualify as a class suit injury within the contemplation
of Philippine statute.
3. Retired High Court Justice Rodolfo Nocom stated that there is simply an absence of doctrine here that permits
these causes to be heard. No product liability ever filed or tried here.
Case ordered dismissed.40
Docketed as G.R. No. 126654, the petition for review, filed on November 12, 1996 by ABELLA, et al., assails before this
Court the above-quoted order of the RTC of Davao City.
ABELLA, et al., claim that the RTC of Davao City erred in dismissing Civil Case No. 24,251-96 on the ground of lack of
jurisdiction.
According to ABELLA, et al., the RTC of Davao City has jurisdiction over the subject matter of the case since Articles 2176
and 2187 of the Civil Code are broad enough to cover the acts complained of and to support their claims for damages.
ABELLA, et al., further aver that the dismissal of the case, based on the opinions of legal luminaries reported in a
newspaper, by the RTC of Davao City is bereft of basis. According to them, their cause of action is based on quasi-delict
under Article 2176 of the Civil Code. They also maintain that the absence of jurisprudence regarding the award of
damages in favor of those adversely affected by the DBCP does not preclude them from presenting evidence to prove
their allegations that their exposure to DBCP caused their sterility and/or infertility.
SHELL, DOW, and CHIQUITA each filed their respective motions for reconsideration of the Order dated October 1, 1996
of the RTC of Davao City. DEL MONTE also filed its motion for reconsideration, which contained an additional motion for
the inhibition of the presiding judge.
The presiding judge of Branch 16 then issued an Order41 dated December 2, 1996, voluntarily inhibiting himself from trying
the case. Thus, the case was re-raffled to Branch 13 of the RTC of Davao City.
In an Order42 dated December 16, 1996, the RTC of Davao City affirmed the Order dated October 1, 1996, and denied the
respective motions for reconsideration filed by defendant companies.
Thereafter, CHIQUITA filed a Petition for Review dated March 5, 1997, questioning the Orders dated October 1, 1996 and
December 16, 1996 of the RTC of Davao City. This case was docketed as G.R. No. 128398.
In its petition, CHIQUITA argues that the RTC of Davao City erred in dismissing the case motu proprio as it acquired
jurisdiction over the subject matter of the case as well as over the persons of the defendant companies which voluntarily
appeared before it. CHIQUITA also claims that the RTC of Davao City cannot dismiss the case simply on the basis of
opinions of alleged legal experts appearing in a newspaper article.
Initially, this Court in its Resolution43 dated July 28, 1997, dismissed the petition filed by CHIQUITA for submitting a
defective certificate against forum shopping. CHIQUITA, however, filed a motion for reconsideration, which was granted by
this Court in the Resolution44 dated October 8, 1997.
On March 7, 1997, DEL MONTE also filed its petition for review on certiorari before this Court assailing the abovementioned orders of the RTC of Davao City. Its petition was docketed as G.R. No. 127856.
DEL MONTE claims that the RTC of Davao City has jurisdiction over Civil Case No. 24,251-96, as defined under the law
and that the said court already obtained jurisdiction over its person by its voluntary appearance and the filing of a motion
for bill of particulars and, later, an answer to the complaint. According to DEL MONTE, the RTC of Davao City, therefore,
acted beyond its authority when it dismissed the case motu proprio or without any motion to dismiss from any of the
parties to the case.
In the Resolutions dated February 10, 1997, April 28, 1997, and March 10, 1999, this Court consolidated G.R. Nos.
125078, 125598, 126654, 127856, and 128398.
The Consolidated Motion to Drop DOW, OCCIDENTAL, and SHELL as Party-Respondents filed by NAVIDA, et al. and
ABELLA, et al.
On September 26, 1997, NAVIDA, et al., and ABELLA, et al., filed before this Court a Consolidated Motion (to Drop PartyRespondents).45 The plaintiff claimants alleged that they had amicably settled their cases with DOW, OCCIDENTAL, and
SHELL sometime in July 1997. This settlement agreement was evidenced by facsimiles of the "Compromise Settlement,
Indemnity, and Hold Harmless Agreement," which were attached to the said motion. Pursuant to said agreement, the
plaintiff claimants sought to withdraw their petitions as against DOW, OCCIDENTAL, and SHELL.

DOLE, DEL MONTE and CHIQUITA, however, opposed the motion, as well as the settlement entered into between the
plaintiff claimants and DOW, OCCIDENTAL, and SHELL.
The Memoranda of the Parties
Considering the allegations, issues, and arguments adduced by the parties, this Court, in a Resolution dated June 22,
1998,46 required all the parties to submit their respective memoranda.
CHIQUITA filed its Memorandum on August 28, 1998;47 SHELL asked to be excused from the filing of a memorandum
alleging that it had already executed a compromise agreement with the plaintiff claimants. 48 DOLE filed its Memorandum
on October 12, 199849 while DEL MONTE filed on October 13, 1998.50 NAVIDA, et al., and ABELLA, et al., filed their
Consolidated Memorandum on February 3, 1999;51 and DOW and OCCIDENTAL jointly filed a Memorandum on
December 23, 1999.52
The Motion to Withdraw Petition for Review in G.R. No. 125598
On July 13, 2004, DOW and OCCIDENTAL filed a Motion to Withdraw Petition for Review in G.R. No.
125598, 53explaining that the said petition "is already moot and academic and no longer presents a justiciable controversy"
since they have already entered into an amicable settlement with NAVIDA, et al. DOW and OCCIDENTAL added that they
have fully complied with their obligations set forth in the 1997 Compromise Agreements.
DOLE filed its Manifestation dated September 6, 2004, 54 interposing no objection to the withdrawal of the petition, and
further stating that they maintain their position that DOW and OCCIDENTAL, as well as other settling defendant
companies, should be retained as defendants for purposes of prosecuting the cross-claims of DOLE, in the event that the
complaint below is reinstated.
NAVIDA, et al., also filed their Comment dated September 14, 2004, 55 stating that they agree with the view of DOW and
OCCIDENTAL that the petition in G.R. No. 125598 has become moot and academic because Civil Case No. 5617 had
already been amicably settled by the parties in 1997.
On September 27, 2004, DEL MONTE filed its Comment on Motion to Withdraw Petition for Review Filed by Petitioners in
G.R. No. 125598,56 stating that it has no objections to the withdrawal of the petition filed by DOW and OCCIDENTAL in
G.R. No. 125598.
In a Resolution57 dated October 11, 2004, this Court granted, among others, the motion to withdraw petition for review filed
by DOW and OCCIDENTAL.
THE ISSUES
In their Consolidated Memorandum, NAVIDA, et al., and ABELLA, et al., presented the following issues for our
consideration:
IN REFUTATION
I. THE COURT DISMISSED THE CASE DUE TO LACK OF JURISDICTION.
a) The court did not simply dismiss the case because it was filed in bad faith with petitioners intending to
have the same dismissed and returned to the Texas court.
b) The court dismissed the case because it was convinced that it did not have jurisdiction.
IN SUPPORT OF THE PETITION
II. THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT MATTER OF THE CASE.
a. The acts complained of occurred within Philippine territory.
b. Art. 2176 of the Civil Code of the Philippines is broad enough to cover the acts complained of.
c. Assumption of jurisdiction by the U.S. District Court over petitioner[s] claims did not divest Philippine
[c]ourts of jurisdiction over the same.
d. The Compromise Agreement and the subsequent Consolidated Motion to Drop Party Respondents
Dow, Occidental and Shell does not unjustifiably prejudice remaining respondents Dole, Del Monte and
Chiquita.58
DISCUSSION
On the issue of jurisdiction

Essentially, the crux of the controversy in the petitions at bar is whether the RTC of General Santos City and the RTC of
Davao City erred in dismissing Civil Case Nos. 5617 and 24,251-96, respectively, for lack of jurisdiction.
Remarkably, none of the parties to this case claims that the courts a quo are bereft of jurisdiction to determine and resolve
the above-stated cases. All parties contend that the RTC of General Santos City and the RTC of Davao City have
jurisdiction over the action for damages, specifically for approximately P2.7 million for each of the plaintiff claimants.
NAVIDA, et al., and ABELLA, et al., argue that the allegedly tortious acts and/or omissions of defendant companies
occurred within Philippine territory. Specifically, the use of and exposure to DBCP that was manufactured, distributed or
otherwise put into the stream of commerce by defendant companies happened in the Philippines. Said fact allegedly
constitutes reasonable basis for our courts to assume jurisdiction over the case. Furthermore, NAVIDA, et al., and
ABELLA, et al., assert that the provisions of Chapter 2 of the Preliminary Title of the Civil Code, as well as Article 2176
thereof, are broad enough to cover their claim for damages. Thus, NAVIDA, et al., and ABELLA, et al., pray that the
respective rulings of the RTC of General Santos City and the RTC of Davao City in Civil Case Nos. 5617 and 24,251-96
be reversed and that the said cases be remanded to the courts a quo for further proceedings.
DOLE similarly maintains that the acts attributed to defendant companies constitute a quasi-delict, which falls under
Article 2176 of the Civil Code. In addition, DOLE states that if there were no actionable wrongs committed under
Philippine law, the courts a quo should have dismissed the civil cases on the ground that the Amended Joint-Complaints
of NAVIDA, et al., and ABELLA, et al., stated no cause of action against the defendant companies. DOLE also argues that
if indeed there is no positive law defining the alleged acts of defendant companies as actionable wrong, Article 9 of the
Civil Code dictates that a judge may not refuse to render a decision on the ground of insufficiency of the law. The court
may still resolve the case, applying the customs of the place and, in the absence thereof, the general principles of law.
DOLE posits that the Philippines is the situs of the tortious acts allegedly committed by defendant companies as NAVIDA,
et al., and ABELLA, et al., point to their alleged exposure to DBCP which occurred in the Philippines, as the cause of the
sterility and other reproductive system problems that they allegedly suffered. Finally, DOLE adds that the RTC of Davao
City gravely erred in relying upon newspaper reports in dismissing Civil Case No. 24,251-96 given that newspaper articles
are hearsay and without any evidentiary value. Likewise, the alleged legal opinions cited in the newspaper reports were
taken judicial notice of, without any notice to the parties. DOLE, however, opines that the dismissal of Civil Case Nos.
5617 and 24,251-96 was proper, given that plaintiff claimants merely prosecuted the cases with the sole intent of securing
a dismissal of the actions for the purpose of convincing the U.S. Federal District Court to re-assume jurisdiction over the
cases.
In a similar vein, CHIQUITA argues that the courts a quo had jurisdiction over the subject matter of the cases filed before
them. The Amended Joint-Complaints sought approximately P2.7 million in damages for each plaintiff claimant, which
amount falls within the jurisdiction of the RTC. CHIQUITA avers that the pertinent matter is the place of the alleged
exposure to DBCP, not the place of manufacture, packaging, distribution, sale, etc., of the said chemical. This is in
consonance with the lex loci delicti commisi theory in determining the situs of a tort, which states that the law of the place
where the alleged wrong was committed will govern the action. CHIQUITA and the other defendant companies also
submitted themselves to the jurisdiction of the RTC by making voluntary appearances and seeking for affirmative reliefs
during the course of the proceedings. None of the defendant companies ever objected to the exercise of jurisdiction by the
courts a quo over their persons. CHIQUITA, thus, prays for the remand of Civil Case Nos. 5617 and 24,251-96 to the RTC
of General Santos City and the RTC of Davao City, respectively.
The RTC of General Santos City and the RTC of Davao City have jurisdiction over Civil Case Nos. 5617 and 24,251-96,
respectively
The rule is settled that jurisdiction over the subject matter of a case is conferred by law and is determined by the
allegations in the complaint and the character of the relief sought, irrespective of whether the plaintiffs are entitled to all or
some of the claims asserted therein.59 Once vested by law, on a particular court or body, the jurisdiction over the subject
matter or nature of the action cannot be dislodged by anybody other than by the legislature through the enactment of a
law.
At the time of the filing of the complaints, the jurisdiction of the RTC in civil cases under Batas Pambansa Blg. 129, as
amended by Republic Act No. 7691, was:
SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction:
xxxx
(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorneys fees, litigation
expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or,
in such other cases in Metro Manila, where the demand, exclusive of the abovementioned items exceeds Two hundred
thousand pesos (P200,000.00).60
Corollary thereto, Supreme Court Administrative Circular No. 09-94, states:
2. The exclusion of the term "damages of whatever kind" in determining the jurisdictional amount under Section 19 (8) and
Section 33 (1) of B.P. Blg. 129, as amended by R.A. No. 7691, applies to cases where the damages are merely incidental
to or a consequence of the main cause of action. However, in cases where the claim for damages is the main cause of
action, or one of the causes of action, the amount of such claim shall be considered in determining the jurisdiction of the
court.

Here, NAVIDA, et al., and ABELLA, et al., sought in their similarly-worded Amended Joint-Complaints filed before the
courts a quo, the following prayer:
PRAYER
WHEREFORE, premises considered, it is most respectfully prayed that after hearing, judgment be rendered in favor of the
plaintiffs ordering the defendants:
a) TO PAY EACH PLAINTIFF moral damages in the amount of One Million Five Hundred Thousand Pesos
(P1,500,00.00);
b) TO PAY EACH PLAINTIFF nominal damages in the amount of Four Hundred Thousand Pesos (P400,000.00)
each;
c) TO PAY EACH PLAINTIFF exemplary damages in the amount of Six Hundred Thousand Pesos (P600,000.00);
d) TO PAY EACH PLAINTIFF attorneys fees of Two Hundred Thousand Pesos (P200,000.00); and
e) TO PAY THE COSTS of the suit.61
From the foregoing, it is clear that the claim for damages is the main cause of action and that the total amount sought in
the complaints is approximately P2.7 million for each of the plaintiff claimants. The RTCs unmistakably have jurisdiction
over the cases filed in General Santos City and Davao City, as both claims by NAVIDA, et al., and ABELLA, et al., fall
within the purview of the definition of the jurisdiction of the RTC under Batas Pambansa Blg. 129.
Moreover, the allegations in both Amended Joint-Complaints narrate that:
THE CAUSES OF ACTION
4. The Defendants manufactured, sold, distributed, used, AND/OR MADE AVAILABLE IN COMMERCE nematocides
containing the chemical dibromochloropropane, commonly known as DBCP. THE CHEMICAL WAS USED AGAINST the
parasite known as the nematode, which plagued banana plantations, INCLUDING THOSE in the Philippines. AS IT
TURNED OUT, DBCP not only destroyed nematodes. IT ALSO CAUSED ILL-EFFECTS ON THE HEALTH OF PERSONS
EXPOSED TO IT AFFECTING the human reproductive system as well.
5. The plaintiffs were exposed to DBCP in the 1970s up to the early 1980s WHILE (a) they used this product in the
banana plantations WHERE they were employed, and/or (b) they resided within the agricultural area WHERE IT WAS
USED. As a result of such exposure, the plaintiffs suffered serious and permanent injuries TO THEIR HEALTH, including,
but not limited to, STERILITY and severe injuries to their reproductive capacities.
6. THE DEFENDANTS WERE AT FAULT OR WERE NEGLIGENT IN THAT THEY MANUFACTURED, produced, sold,
and/or USED DBCP and/or otherwise, PUT THE SAME into the stream of commerce, WITHOUT INFORMING THE
USERS OF ITS HAZARDOUS EFFECTS ON HEALTH AND/OR WITHOUT INSTRUCTIONS ON ITS PROPER USE AND
APPLICATION. THEY allowed Plaintiffs to be exposed to, DBCP-containing materials which THEY knew, or in the
exercise of ordinary care and prudence ought to have known, were highly harmful and injurious to the Plaintiffs health and
well-being.
7. The Defendants WHO MANUFACTURED, PRODUCED, SOLD, DISTRIBUTED, MADE AVAILABLE OR PUT DBCP
INTO THE STREAM OF COMMERCE were negligent OR AT FAULT in that they, AMONG OTHERS:
a. Failed to adequately warn Plaintiffs of the dangerous characteristics of DBCP, or to cause their
subsidiaries or affiliates to so warn plaintiffs;
b. Failed to provide plaintiffs with information as to what should be reasonably safe and sufficient clothing
and proper protective equipment and appliances, if any, to protect plaintiffs from the harmful effects of
exposure to DBCP, or to cause their subsidiaries or affiliates to do so;
c. Failed to place adequate warnings, in a language understandable to the worker, on containers of
DBCP-containing materials to warn of the dangers to health of coming into contact with DBCP, or to
cause their subsidiaries or affiliates to do so;
d. Failed to take reasonable precaution or to exercise reasonable care to publish, adopt and enforce a
safety plan and a safe method of handling and applying DBCP, or to cause their subsidiaries or affiliates
to do so;
e. Failed to test DBCP prior to releasing these products for sale, or to cause their subsidiaries or affiliates
to do so; and
f. Failed to reveal the results of tests conducted on DBCP to each plaintiff, governmental agencies and
the public, or to cause their subsidiaries or affiliate to do so.

8. The illnesses and injuries of each plaintiff are also due to the FAULT or negligence of defendants Standard Fruit
Company, Dole Fresh Fruit Company, Dole Food Company, Inc., Chiquita Brands, Inc. and Chiquita Brands International,
Inc. in that they failed to exercise reasonable care to prevent each plaintiffs harmful exposure to DBCP-containing
products which defendants knew or should have known were hazardous to each plaintiff in that they, AMONG OTHERS:
a. Failed to adequately supervise and instruct Plaintiffs in the safe and proper application of DBCPcontaining products;
b. Failed to implement proper methods and techniques of application of said products, or to cause such to
be implemented;
c. Failed to warn Plaintiffs of the hazards of exposure to said products or to cause them to be so warned;
d. Failed to test said products for adverse health effects, or to cause said products to be tested;
e. Concealed from Plaintiffs information concerning the observed effects of said products on Plaintiffs;
f. Failed to monitor the health of plaintiffs exposed to said products;
g. Failed to place adequate labels on containers of said products to warn them of the damages of said
products; and
h. Failed to use substitute nematocides for said products or to cause such substitutes to [be]
used.62 (Emphasis supplied and words in brackets ours.)
Quite evidently, the allegations in the Amended Joint-Complaints of NAVIDA, et al., and ABELLA, et al., attribute to
defendant companies certain acts and/or omissions which led to their exposure to nematocides containing the chemical
DBCP. According to NAVIDA, et al., and ABELLA, et al., such exposure to the said chemical caused ill effects, injuries and
illnesses, specifically to their reproductive system.
Thus, these allegations in the complaints constitute the cause of action of plaintiff claimants a quasi-delict, which under
the Civil Code is defined as an act, or omission which causes damage to another, there being fault or negligence. To be
precise, Article 2176 of the Civil Code provides:
Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
As specifically enumerated in the amended complaints, NAVIDA, et al., and ABELLA, et al., point to the acts and/or
omissions of the defendant companies in manufacturing, producing, selling, using, and/or otherwise putting into the
stream of commerce, nematocides which contain DBCP, "without informing the users of its hazardous effects on health
and/or without instructions on its proper use and application." 63
Verily, in Citibank, N.A. v. Court of Appeals,64 this Court has always reminded that jurisdiction of the court over the subject
matter of the action is determined by the allegations of the complaint, irrespective of whether or not the plaintiffs are
entitled to recover upon all or some of the claims asserted therein. The jurisdiction of the court cannot be made to depend
upon the defenses set up in the answer or upon the motion to dismiss, for otherwise, the question of jurisdiction would
almost entirely depend upon the defendants. What determines the jurisdiction of the court is the nature of the action
pleaded as appearing from the allegations in the complaint. The averments therein and the character of the relief sought
are the ones to be consulted.
Clearly then, the acts and/or omissions attributed to the defendant companies constitute a quasi-delict which is the basis
for the claim for damages filed by NAVIDA, et al., and ABELLA, et al., with individual claims of approximately P2.7 million
for each plaintiff claimant, which obviously falls within the purview of the civil action jurisdiction of the RTCs.
Moreover, the injuries and illnesses, which NAVIDA, et al., and ABELLA, et al., allegedly suffered resulted from their
exposure to DBCP while they were employed in the banana plantations located in the Philippines or while they were
residing within the agricultural areas also located in the Philippines. The factual allegations in the Amended JointComplaints all point to their cause of action, which undeniably occurred in the Philippines. The RTC of General Santos
City and the RTC of Davao City obviously have reasonable basis to assume jurisdiction over the cases.
It is, therefore, error on the part of the courts a quo when they dismissed the cases on the ground of lack of jurisdiction on
the mistaken assumption that the cause of action narrated by NAVIDA, et al., and ABELLA, et al., took place abroad and
had occurred outside and beyond the territorial boundaries of the Philippines, i.e., "the manufacture of the pesticides, their
packaging in containers, their distribution through sale or other disposition, resulting in their becoming part of the stream
of commerce,"65 and, hence, outside the jurisdiction of the RTCs.
Certainly, the cases below are not criminal cases where territoriality, or the situs of the act complained of, would be
determinative of jurisdiction and venue for trial of cases. In personal civil actions, such as claims for payment of damages,
the Rules of Court allow the action to be commenced and tried in the appropriate court, where any of the plaintiffs or
defendants resides, or in the case of a non-resident defendant, where he may be found, at the election of the plaintiff. 66

In a very real sense, most of the evidence required to prove the claims of NAVIDA, et al., and ABELLA, et al., are
available only in the Philippines. First, plaintiff claimants are all residents of the Philippines, either in General Santos City
or in Davao City. Second, the specific areas where they were allegedly exposed to the chemical DBCP are within the
territorial jurisdiction of the courts a quo wherein NAVIDA, et al., and ABELLA, et al., initially filed their claims for damages.
Third, the testimonial and documentary evidence from important witnesses, such as doctors, co-workers, family members
and other members of the community, would be easier to gather in the Philippines. Considering the great number of
plaintiff claimants involved in this case, it is not far-fetched to assume that voluminous records are involved in the
presentation of evidence to support the claim of plaintiff claimants. Thus, these additional factors, coupled with the fact
that the alleged cause of action of NAVIDA, et al., and ABELLA, et al., against the defendant companies for damages
occurred in the Philippines, demonstrate that, apart from the RTC of General Santos City and the RTC of Davao City
having jurisdiction over the subject matter in the instant civil cases, they are, indeed, the convenient fora for trying these
cases.67
The RTC of General Santos City and the RTC of Davao City validly acquired jurisdiction over the persons of all the
defendant companies
It is well to stress again that none of the parties claims that the courts a quo lack jurisdiction over the cases filed before
them. All parties are one in asserting that the RTC of General Santos City and the RTC of Davao City have validly
acquired jurisdiction over the persons of the defendant companies in the action below. All parties voluntarily,
unconditionally and knowingly appeared and submitted themselves to the jurisdiction of the courts a quo.
Rule 14, Section 20 of the 1997 Rules of Civil Procedure provides that "[t]he defendants voluntary appearance in the
action shall be equivalent to service of summons." In this connection, all the defendant companies designated and
authorized representatives to receive summons and to represent them in the proceedings before the courts a quo. All the
defendant companies submitted themselves to the jurisdiction of the courts a quo by making several voluntary
appearances, by praying for various affirmative reliefs, and by actively participating during the course of the proceedings
below.
In line herewith, this Court, in Meat Packing Corporation of the Philippines v. Sandiganbayan, 68 held that jurisdiction over
the person of the defendant in civil cases is acquired either by his voluntary appearance in court and his submission to its
authority or by service of summons. Furthermore, the active participation of a party in the proceedings is tantamount to an
invocation of the courts jurisdiction and a willingness to abide by the resolution of the case, and will bar said party from
later on impugning the court or bodys jurisdiction.69
Thus, the RTC of General Santos City and the RTC of Davao City have validly acquired jurisdiction over the persons of
the defendant companies, as well as over the subject matter of the instant case. What is more, this jurisdiction, which has
been acquired and has been vested on the courts a quo, continues until the termination of the proceedings.
It may also be pertinently stressed that "jurisdiction" is different from the "exercise of jurisdiction." Jurisdiction refers to the
authority to decide a case, not the orders or the decision rendered therein. Accordingly, where a court has jurisdiction over
the persons of the defendants and the subject matter, as in the case of the courts a quo, the decision on all questions
arising therefrom is but an exercise of such jurisdiction. Any error that the court may commit in the exercise of its
jurisdiction is merely an error of judgment, which does not affect its authority to decide the case, much less divest the
court of the jurisdiction over the case.70
Plaintiffs purported bad faith in filing the subject civil cases in Philippine courts
Anent the insinuation by DOLE that the plaintiff claimants filed their cases in bad faith merely to procure a dismissal of the
same and to allow them to return to the forum of their choice, this Court finds such argument much too speculative to
deserve any merit.
It must be remembered that this Court does not rule on allegations that are unsupported by evidence on record. This
Court does not rule on allegations which are manifestly conjectural, as these may not exist at all. This Court deals with
facts, not fancies; on realities, not appearances. When this Court acts on appearances instead of realities, justice and law
will be short-lived.71 This is especially true with respect to allegations of bad faith, in line with the basic rule that good faith
is always presumed and bad faith must be proved. 72
In sum, considering the fact that the RTC of General Santos City and the RTC of Davao City have jurisdiction over the
subject matter of the amended complaints filed by NAVIDA, et al., and ABELLA, et al., and that the courts a quo have also
acquired jurisdiction over the persons of all the defendant companies, it therefore, behooves this Court to order the
remand of Civil Case Nos. 5617 and 24,251-96 to the RTC of General Santos City and the RTC of Davao City,
respectively.
On the issue of the dropping of DOW, OCCIDENTAL and SHELL as respondents in view of their amicable settlement with
NAVIDA, et al., and ABELLA, et al.
NAVIDA, et al., and ABELLA, et al., are further praying that DOW, OCCIDENTAL and SHELL be dropped as respondents
in G.R. Nos. 125078 and 126654, as well as in Civil Case Nos. 5617 and 24,251-96. The non-settling defendants
allegedly manifested that they intended to file their cross-claims against their co-defendants who entered into compromise
agreements. NAVIDA, et al., and ABELLA, et al., argue that the non-settling defendants did not aver any cross-claim in
their answers to the complaint and that they subsequently sought to amend their answers to plead their cross-claims only

after the settlement between the plaintiff claimants and DOW, OCCIDENTAL, and SHELL were executed. NAVIDA, et al.,
and ABELLA, et al., therefore, assert that the cross-claims are already barred.
In their Memoranda, CHIQUITA and DOLE are opposing the above motion of NAVIDA, et al., and ABELLA, et al., since
the latters Amended Complaints cited several instances of tortious conduct that were allegedly committed jointly and
severally by the defendant companies. This solidary obligation on the part of all the defendants allegedly gives any codefendant the statutory right to proceed against the other co-defendants for the payment of their respective shares.
Should the subject motion of NAVIDA, et al., and ABELLA, et al., be granted, and the Court subsequently orders the
remand of the action to the trial court for continuance, CHIQUITA and DOLE would allegedly be deprived of their right to
prosecute their cross-claims against their other co-defendants. Moreover, a third party complaint or a separate trial,
according to CHIQUITA, would only unduly delay and complicate the proceedings. CHIQUITA and DOLE similarly insist
that the motion of NAVIDA, et al., and ABELLA, et al., to drop DOW, SHELL and OCCIDENTAL as respondents in G.R.
Nos. 125078 and 126654, as well as in Civil Case Nos. 5617 and 24,251-96, be denied.
Incidentally, on April 2, 2007, after the parties have submitted their respective memoranda, DEL MONTE filed a
Manifestation and Motion73 before the Court, stating that similar settlement agreements were allegedly executed by the
plaintiff claimants with DEL MONTE and CHIQUITA sometime in 1999. Purportedly included in the agreements were Civil
Case Nos. 5617 and 24,251-96. Attached to the said manifestation were copies of the Compromise Settlement, Indemnity,
and Hold Harmless Agreement between DEL MONTE and the settling plaintiffs, as well as the Release in Full executed by
the latter.74 DEL MONTE specified therein that there were "only four (4) plaintiffs in Civil Case No. 5617 who are claiming
against the Del Monte parties"75 and that the latter have executed amicable settlements which completely satisfied any
claims against DEL MONTE. In accordance with the alleged compromise agreements with the four plaintiffs in Civil Case
No. 5617, DEL MONTE sought the dismissal of the Amended Joint-Complaint in the said civil case. Furthermore, in view
of the above settlement agreements with ABELLA, et al., in Civil Case No. 24,251-96, DEL MONTE stated that it no longer
wished to pursue its petition in G.R. No. 127856 and accordingly prayed that it be allowed to withdraw the same.
Having adjudged that Civil Case Nos. 5617 and 24,251-96 should be remanded to the RTC of General Santos City and
the RTC of Davao City, respectively, the Court deems that the Consolidated Motions (to Drop Party-Respondents) filed by
NAVIDA, et al., and ABELLA, et al., should likewise be referred to the said trial courts for appropriate disposition.
Under Article 2028 of the Civil Code, "[a] compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced." Like any other contract, an extrajudicial
compromise agreement is not excepted from rules and principles of a contract. It is a consensual contract, perfected by
mere consent, the latter being manifested by the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract.76 Judicial approval is not required for its perfection.77 A compromise has upon the
parties the effect and authority of res judicata78 and this holds true even if the agreement has not been judicially
approved.79 In addition, as a binding contract, a compromise agreement determines the rights and obligations of only the
parties to it.80
In light of the foregoing legal precepts, the RTC of General Santos City and the RTC of Davao City should first receive in
evidence and examine all of the alleged compromise settlements involved in the cases at bar to determine the propriety of
dropping any party as a defendant therefrom.
The Court notes that the Consolidated Motions (to Drop Party-Respondents) that was filed by NAVIDA, et al., and
ABELLA, et al., only pertained to DOW, OCCIDENTAL and SHELL in view of the latter companies alleged compromise
agreements with the plaintiff claimants. However, in subsequent developments, DEL MONTE and CHIQUITA supposedly
reached their own amicable settlements with the plaintiff claimants, but DEL MONTE qualified that it entered into a
settlement agreement with only four of the plaintiff claimants in Civil Case No. 5617. These four plaintiff claimants were
allegedly the only ones who were asserting claims against DEL MONTE. However, the said allegation of DEL MONTE
was simply stipulated in their Compromise Settlement, Indemnity, and Hold Harmless Agreement and its truth could not be
verified with certainty based on the records elevated to this Court. Significantly, the 336 plaintiff claimants in Civil Case
No. 5617 jointly filed a complaint without individually specifying their claims against DEL MONTE or any of the other
defendant companies. Furthermore, not one plaintiff claimant filed a motion for the removal of either DEL MONTE or
CHIQUITA as defendants in Civil Case Nos. 5617 and 24,251-96.
There is, thus, a primary need to establish who the specific parties to the alleged compromise agreements are, as well as
their corresponding rights and obligations therein. For this purpose, the courts a quo may require the presentation of
additional evidence from the parties. Thereafter, on the basis of the records of the cases at bar and the additional
evidence submitted by the parties, if any, the trial courts can then determine who among the defendants may be dropped
from the said cases.
It is true that, under Article 2194 of the Civil Code, the responsibility of two or more persons who are liable for the same
quasi-delict is solidary. A solidary obligation is one in which each of the debtors is liable for the entire obligation, and each
of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. 81
In solidary obligations, the paying debtors right of reimbursement is provided for under Article 1217 of the Civil Code, to
wit:
Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer
to pay, the creditor may choose which offer to accept.

He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for
the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be
demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the
obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each.1avvphil
The above right of reimbursement of a paying debtor, and the corresponding liability of the co-debtors to reimburse, will
only arise, however, if a solidary debtor who is made to answer for an obligation actually delivers payment to the creditor.
As succinctly held in Lapanday Agricultural Development Corporation v. Court of Appeals, 82 "[p]ayment, which means not
only the delivery of money but also the performance, in any other manner, of the obligation, is the operative fact which will
entitle either of the solidary debtors to seek reimbursement for the share which corresponds to each of the [other]
debtors."83
In the cases at bar, there is no right of reimbursement to speak of as yet. A trial on the merits must necessarily be
conducted first in order to establish whether or not defendant companies are liable for the claims for damages filed by the
plaintiff claimants, which would necessarily give rise to an obligation to pay on the part of the defendants.
At the point in time where the proceedings below were prematurely halted, no cross-claims have been interposed by any
defendant against another defendant. If and when such a cross-claim is made by a non-settling defendant against a
settling defendant, it is within the discretion of the trial court to determine the propriety of allowing such a cross-claim and
if the settling defendant must remain a party to the case purely in relation to the cross claim.
In Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals, 84 the Court had the occasion to
state that "where there are, along with the parties to the compromise, other persons involved in the litigation who have not
taken part in concluding the compromise agreement but are adversely affected or feel prejudiced thereby, should not be
precluded from invoking in the same proceedings an adequate relief therefor." 85
Relevantly, in Philippine International Surety Co., Inc. v. Gonzales, 86 the Court upheld the ruling of the trial court that, in a
joint and solidary obligation, the paying debtor may file a third-party complaint and/or a cross-claim to enforce his right to
seek contribution from his co-debtors.
Hence, the right of the remaining defendant(s) to seek reimbursement in the above situation, if proper, is not affected by
the compromise agreements allegedly entered into by NAVIDA, et al., and ABELLA, et al., with some of the defendant
companies.
WHEREFORE, the Court hereby GRANTS the petitions for review on certiorari in G.R. Nos. 125078, 126654, and
128398. We REVERSE and SET ASIDE the Order dated May 20, 1996 of the Regional Trial Court of General Santos City,
Branch 37, in Civil Case No. 5617, and the Order dated October 1, 1996 of the Regional Trial Court of Davao City, Branch
16, and its subsequent Order dated December 16, 1996 denying reconsideration in Civil Case No. 24,251-96, and
REMAND the records of this case to the respective Regional Trial Courts of origin for further and appropriate proceedings
in line with the ruling herein that said courts have jurisdiction over the subject matter of the amended complaints in Civil
Case Nos. 5617 and 24,251-96.
The Court likewise GRANTS the motion filed by Del Monte to withdraw its petition in G.R. No. 127856. In view of the
previous grant of the motion to withdraw the petition in G.R. No. 125598, both G.R. Nos. 127856 and 125598 are
considered CLOSED AND TERMINATED.
No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

Supreme Court

Manila
SECOND DIVISION
CELIA S. VDA. DE HERRERA,Petitioner,

- versus -

G.R. No. 170251

Present:
CARPIO, J., Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.
Promulgated:
June 1, 2011

EMELITA BERNARDO, EVELYN BERNARDO as

Guardian of Erlyn, Crislyn and Crisanto Bernardo,*
Respondents.
x--------------------------------------------------x
DECISION

PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the Decision [1] and
Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 73674.
The antecedents are as follows:
Respondents heirs of Crisanto S. Bernardo, represented by Emelita Bernardo, filed a complaint before the Commission on the
Settlement of Land Problems (COSLAP) against Alfredo Herrera (Alfredo) for interference, disturbance, unlawful claim, harassment
and trespassing over a portion of a parcel of land situated at Barangay Dalig, Cardona, Rizal, with an area of 7,993 square meters. The
complaint was docketed as COSLAP Case No. 99-221.
Respondents claimed that said parcel of land was originally owned by their predecessor-in-interest, Crisanto Bernardo, and was later
on acquired by Crisanto S. Bernardo. The parcel of land was later on covered by Tax Declaration No. CD-006-0828 under the name of
the respondents.
Petitioner, on the other hand, alleged that the portion of the subject property consisting of about 700 square meters was bought by
Diosdado Herrera, Alfredo's father, from a certain Domingo Villaran. Upon the death of Diosdado Herrera, Alfredo inherited the 700square-meter lot.
The COSLAP, in a Resolution[3] dated December 6, 1999, ruled that respondents have a rightful claim over the subject
property. Consequently, a motion for reconsideration and/or reopening of the proceedings was filed by Alfredo. The COSLAP, in an
Order[4] dated August 21, 2002, denied the motion and reiterated its Order dated December 6, 1999. Aggrieved, petitioner Celia S.
Vda. de Herrera, as the surviving spouse of Alfredo, filed a petition for certiorari with the CA.[5] The CA, Twelfth Division, in its
Decision dated April 28, 2005, dismissed the petition and affirmed the resolution of the COSLAP. The CA ruled that the COSLAP has
exclusive jurisdiction over the present case and, even assuming that the COSLAP has no jurisdiction over the land dispute of the
parties herein, petitioner is already estopped from raising the issue of jurisdiction because Alfredo failed to raise the issue of lack of
jurisdiction before the COSLAP and he actively participated in the proceedings before the said body. Petitioner filed a motion for
reconsideration, which was denied by the CA in a Resolution dated October 17, 2005.
Hence, petitioner elevated the case to this Court via Petition for Review on Certiorari under Rule 45 of the Rules of Court, with the
following issues:
I

WHETHER OR NOT COSLAP HAD JURISDICTION TO DECIDE THE QUESTION OF

OWNERSHIP.
II
WHETHER OR NOT THE ISSUANCE OF A TORRENS TITLE IN THE NAME OF THE
PETITIONER'S HUSBAND IN 2002 RENDERED THE INSTANT CONTROVERSY ON THE ISSUE
OF OWNERSHIP OVER THE SUBJECT PROPERTY MOOT AND ACADEMIC.[6]

Petitioner averred that the COSLAP has no adjudicatory powers to settle and decide the question of ownership over the subject land.
Further, the present case cannot be classified as explosive in nature as the parties never resorted to violence in resolving the
controversy. Petitioner submits that it is the Regional Trial Court which has jurisdiction over controversies relative to ownership of the
subject property.
Respondents, on the other hand, alleged that the COSLAP has jurisdiction over the present case. Further, respondents argued that
petitioner is estopped from questioning the jurisdiction of the COSLAP by reason of laches due to Alfredo's active participation in the
actual proceedings before the COSLAP. Respondents said that Alfredo's filing of the Motion for Reconsideration and/or Reopening of
the proceedings before the COSLAP is indicative of his conformity with the questioned resolution of the COSLAP.
The main issue for our resolution is whether the COSLAP has jurisdiction to decide the question of ownership between the parties.
The petition is meritorious.
The COSLAP was created by virtue of Executive Order (E.O.) No. 561, issued on September 21, 1979 by then President Ferdinand E.
Marcos. It is an administrative body established as a means of providing a mechanism for the expeditious settlement of land problems
among small settlers, landowners and members of the cultural minorities to avoid social unrest.
Section 3 of E.O. No. 561 specifically enumerates the instances when the COSLAP can exercise its adjudicatory functions:
Section 3. Powers and Functions. - The Commission shall have the following powers and functions:
xxxx
2. Refer and follow up for immediate action by the agency having appropriate jurisdiction
any land problem or dispute referred to the Commission: Provided, That the Commission may, in
the following cases, assume jurisdiction and resolve land problems or disputes which are critical
and explosive in nature considering, for instance, the large number of the parties involved, the
presence or emergence of social tension or unrest, or other similar critical situations requiring
immediate action:
(a) Between occupants/squatters and pasture lease agreement holders or timber
concessionaires;
(b) Between occupants/squatters and government reservation grantees;
(c) Between occupants/squatters and public land claimants or applicants;
(d) Petitions for classification, release and/or subdivision of lands of the public
domain; and
(e) Other similar land problems of grave urgency and magnitude.[7]
Administrative agencies, like the COSLAP, are tribunals of limited jurisdiction that can only wield powers which are specifically
granted to it by its enabling statute. [8] Under Section 3 of E.O. No. 561, the COSLAP has two options in acting on a land dispute or
problem lodged before it, to wit: (a) refer the matter to the agency having appropriate jurisdiction for settlement/resolution; or (b)
assume jurisdiction if the matter is one of those enumerated in paragraph 2 (a) to (e) of the law, if such case is critical and explosive in
nature, taking into account the large number of parties involved, the presence or emergence of social unrest, or other similar critical
situations requiring immediate action. In resolving whether to assume jurisdiction over a case or to refer the same to the particular
agency concerned, the COSLAP has to consider the nature or classification of the land involved, the parties to the case, the nature of
the questions raised, and the need for immediate and urgent action thereon to prevent injuries to persons and damage or destruction to
property. The law does not vest jurisdiction on the COSLAP over any land dispute or problem.[9]
In the instant case, the COSLAP has no jurisdiction over the subject matter of respondents' complaint. The present case does not fall
under any of the cases enumerated under Section 3, paragraph 2 (a) to (e) of E.O. No. 561. The dispute between the parties is not

critical and explosive in nature, nor does it involve a large number of parties, nor is there a presence or emergence of social tension or
unrest. It can also hardly be characterized as involving a critical situation that requires immediate action.
It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government agency, over the nature and subject
matter of a petition or complaint is determined by the material allegations therein and the character of the relief prayed for,
irrespective of whether the petitioner or complainant is entitled to any or all such reliefs. [10]
Respondents' cause of action before the COSLAP pertains to their claim of ownership over the subject property, which is an action
involving title to or possession of real property, or any interest therein, [11] the jurisdiction of which is vested with the Regional Trial
Courts or the Municipal Trial Courts depending on the assessed value of the subject property.[12]
The case of Banaga v. Commission on the Settlement of Land Problems, [13] applied by the CA and invoked by the respondents, is
inapplicable to the present case. Banagainvolved parties with conflicting free patent applications over a parcel of public land and
pending with the Bureau of Lands. Because of the Bureau of Land's inaction within a considerable period of time on the claims and
protests of the parties and to conduct an investigation, the COSLAP assumed jurisdiction and resolved the conflicting claims of the
parties. The Court held that since the dispute involved a parcel of public land on a free patent issue, the COSLAP had jurisdiction over
that case. In the present case, there is no showing that the parties have conflicting free patent applications over the subject parcel of
land that would justify the exercise of the COSLAP's jurisdiction.
Since the COSLAP has no jurisdiction over the action, all the proceedings therein, including the decision rendered, are null and void.
[14]

A judgment issued by a quasi-judicial body without jurisdiction is void. It cannot be the source of any right or create any

obligation.[15] All acts performed pursuant to it and all claims emanating from it have no legal effect. [16] Having no legal effect, the
situation is the same as it would be as if there was no judgment at all. It leaves the parties in the position they were before the
proceedings.[17]
Respondents allegation that petitioner is estopped from questioning the jurisdiction of the COSLAP by reason of laches does not hold
water. Petitioner is not estopped from raising the jurisdictional issue, because it may be raised at any stage of the proceedings, even on
appeal, and is not lost by waiver or by estoppel. [18] The fact that a person attempts to invoke unauthorized jurisdiction of a court does
not estop him from thereafter challenging its jurisdiction over the subject matter, since such jurisdiction must arise by law and not by
mere consent of the parties.[19]
In Regalado v. Go,[20] the Court held that laches should be clearly present for the Sibonghanoy[21] doctrine to apply, thus:
Laches is defined as the "failure or neglect for an unreasonable and unexplained length of time, to do that
which, by exercising due diligence, could or should have been done earlier, it is negligence or omission to assert a
right within a reasonable length of time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it.
The ruling in People v. Regalario that was based on the landmark doctrine enunciated in Tijam v.
Sibonghanoy on the matter of jurisdiction by estoppel is the exception rather than the rule. Estoppel by laches may
be invoked to bar the issue of lack of jurisdiction only in cases in which the factual milieu is analogous to that in the
cited case. In such controversies, laches should have been clearly present; that is, lack of jurisdiction must have been
raised so belatedly as to warrant the presumption that the party entitled to assert it had abandoned or declined to
assert it.
In Sibonghanoy, the defense of lack of jurisdiction was raised for the first time in a motion to dismiss filed
by the Surety almost 15 years after the questioned ruling had been rendered. At several stages of the proceedings, in
the court a quo as well as in the Court of Appeals, the Surety invoked the jurisdiction of the said courts to obtain
affirmative relief and submitted its case for final adjudication on the merits. It was only when the adverse decision
was rendered by the Court of Appeals that it finally woke up to raise the question of jurisdiction. [22]
The factual settings attendant in Sibonghanoy are not present in the case at bar that would justify the application of estoppel by laches
against the petitioner. Here, petitioner assailed the jurisdiction of the COSLAP when she appealed the case to the CA and at that time,
no considerable period had yet elapsed for laches to attach. Therefore, petitioner is not estopped from assailing the jurisdiction of the
COSLAP. Additionally, no laches will even attach because the judgment is null and void for want of jurisdiction. [23]

Anent the issuance of OCT No. M-10991 in favor of petitioners husband Alfredo Herrerra in 2002, respondents alleged that there
was fraud, misrepresentation and bad faith in the issuance thereof. Thus, respondents are now questioning the legality of OCT No. M10991, an issue which this Court cannot pass upon in this present petition. It is a rule that the validity of a Torrens title cannot be
assailed collaterally.[24] Section 48 of Presidential Decree No. 1529 provides that:
Certificate not Subject to Collateral Attack. A certificate of title shall not be subject to collateral attack. It cannot
be altered, modified, or canceled, except in a direct proceeding in accordance with law.

The issue of the validity of the Title was brought only during the proceedings before this Court as said title was issued in the name of
petitioner's husband only during the pendency of the appeal before the CA. The issue on the validity of title, i.e., whether or not it was
fraudulently issued, can only be raised in an action expressly instituted for that purpose [25] and the present appeal before us, is simply
not the direct proceeding contemplated by law.
WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals, dated April 28, 2005 and
October 17, 2005, respectively, in CA-G.R. SP No. 73674 are REVERSED and SET ASIDE. The Decision and Order of the
Commission on the Settlement of Land Problems, dated December 6, 1999 and August 21, 2002, respectively, in COSLAP Case No.
99-221, are declared NULL and VOID for having been issued without jurisdiction.
SO ORDERED.

SPECIAL FIRST DIVISION

[G.R. No. 192649 : June 22, 2011]
HOME GUARANTY CORPORATION, PETITIONER, VS. R-II BUILDERS INC. AND NATIONAL

HOUSING AUTHORITY, RESPONDENTS.

RESOLUTION
PEREZ, J.:
Before the Court are: (a) the Entry of Appearance filed by Atty. Lope E. Feble of the Toquero Exconde
Manalang Feble Law Offices as collaborating counsel for respondent R-II Builders, Inc. (R-II Builders), with
prayer to be furnished all pleadings, notices and other court processes at its given address; and (b) the
motion filed by R-II Builders, seeking the reconsideration of Court's decision dated 9 March 2011 on the
following grounds: [1]
I
THE HONORABLE COURT ERRED IN RULING THAT RTC MANILA, BRANCH 22, HAD NO
JURISDICTION OVER THE PRESENT CASE SINCE RTC-MANILA, BRANCH 24, TO WHICH THE
INSTANT CASE WAS INITIALLY RAFFLED HAD NO AUTHORITY TO HEAR THE CASE BEING A
SPECIAL COMMERCIAL COURT.
II.
THE HONORABLE COURT ERRED IN RULING THAT THE CORRECT DOCKET FEES WERE NOT PAID.
In urging the reversal of the Court's decision, R-II Builders argues that it filed its complaint with the Manila
RTC which is undoubtedly vested with jurisdiction over actions where the subject matter is incapable of
pecuniary estimation; that through no fault of its own, said complaint was raffled to Branch 24, the
designated Special Commercial Court (SCC) tasked to hear intra-corporate controversies; that despite the
determination subsequently made by Branch 24 of the Manila RTC that the case did not involve an intracorporate dispute, the Manila RTC did not lose jurisdiction over the same and its Executive Judge correctly
directed its re-raffling to Branch 22 of the same Court; that the re-raffle and/or amendment of pleadings
do not affect a court's jurisdiction which, once acquired, continues until the case is finally terminated; that
since its original Complaint, Amended and Supplemental Complaint and Second Amended Complaint all
primarily sought the nullification of the Deed of Assignment and Conveyance (DAC) transferring the Asset
Pool in favor of petitioner Home Guaranty Corporation (HGC), the subject matter of the case is clearly one
which is incapable of pecuniary estimation; and, that the court erred in holding that the case was a real
action and that it evaded the payment of the correct docket fees computed on the basis of the assessed
value of the realties in the Asset Pool.
R-II Builders' motion is bereft of merit.
The record shows that, with the raffle of R-II Builders' complaint before Branch 24 of the Manila RTC and
said court's grant of the application for temporary restraining order incorporated therein, HGC sought a
preliminary hearing of its affirmative defenses which included, among other grounds, lack of jurisdiction
and improper venue. It appears that, at said preliminary hearing, it was established that R-II Builders'
complaint did not involve an intra-corporate dispute and that, even if it is, venue was improperly laid since
none of the parties maintained its principal office in Manila. While it is true, therefore, that R-II Builders
had no hand in the raffling of the case, it cannot be gainsaid that Branch 24 of the RTC Manila had no
jurisdiction over the case. Rather than ordering the dismissal of the complaint, however, said court issued
the 2 January 2008 order erroneously ordering the re-raffle of the case. In Atwel v. Concepcion
Progressive Association, Inc. [2] and Reyes v. Hon. Regional Trial Court of Makati, Branch 142 [3] which
involved SCCs trying and/or deciding cases which were found to be civil in nature, this Court significantly
ordered the dismissal of the complaint for lack of jurisdiction instead of simply directing the re-raffle of the
case to another branch.
Even then, the question of the Manila RTC's jurisdiction over the case is tied up with R-II Builder's
payment of the correct docket fees which should be paid in full upon the filing of the pleading or other
application which initiates an action or proceeding. [4] While it is, consequently, true that jurisdiction, once
acquired, cannot be easily ousted, [5] it is equally settled that a court acquires jurisdiction over a case only
upon the payment of the prescribed filing and docket fees. [6] Already implicit from the filing of the
complaint in the City of Manila where the realties comprising the Asset Pool are located, the fact that the
case is a real action is evident from the allegations of R-II Builders' original Complaint, Amended and
Supplemental Complaint and Second Amended Complaint which not only sought the nullification of the
DAC in favor of HGC but, more importantly, prayed for the transfer of possession of and/or control of the
properties in the Asset Pool. Its current protestations to the contrary notwithstanding, no less than R-II
Builders - in its opposition to HGC's motion to dismiss - admitted that the case is a real action as it affects
title to or possession of real property or an interest therein. [7] Having only paid docket fees corresponding
to an action where the subject matter is incapable of pecuniary estimation, R-II Builders cannot
expediently claim that jurisdiction over the case had already attached.
In De Leon v. Court of Appeals, [8] this Court had, of course, ruled that a case for rescission or annulment
of contract is not susceptible of pecuniary estimation although it may eventually result in the recovery of

real property. Taking into consideration the allegations and the nature of the relief sought in the complaint
in the subsequent case of Serrano v. Delica, [9] however, this Court determined the existence of a real
action and ordered the payment of the appropriate docket fees for a complaint for cancellation of sale
which prayed for both permanent and preliminary injunction aimed at the restoration of possession of the
land in litigation is a real action. In discounting the apparent conflict in said rulings, the Court went on to
rule as follows in Ruby Shelter Builders and Realty Development Corporation v. Hon. Pablo C,
Formaran, [10] to wit:
The Court x x x does not perceive a contradiction between Serrano and the Spouses De Leon. The Court
calls attention to the following statement in Spouses De Leon: "A review of the jurisprudence of this Court
indicates that in determining whether an action is one the subject matter of which is not capable of
pecuniary estimation, this Court has adopted the criterion of first ascertaining the nature of the principal
action or remedy sought." Necessarily, the determination must be done on a case-to-case basis,
depending on the facts and circumstances of each. What petitioner conveniently ignores is that in Spouses
De Leon, the action therein that private respondents instituted before the RTC was "solely for annulment
or rescission" of the contract of sale over a real property. There appeared to be no transfer of title or
possession to the adverse party x x x. (Underscoring Supplied)
Having consistently sought the transfer of possession and control of the properties comprising the Asset
Pool over and above the nullification of the Deed of Conveyance in favor of HGC, it follows R-II Builders
should have paid the correct and appropriate docket fees, computed according to the assessed value
thereof. This much was directed in the 19 May 2008 Order issued by Branch 22 of the Manila RTC which
determined that the case is a real action and admitted the Amended and Supplemental Complaint R-II
Builders subsequently filed in the case. [11] In obvious evasion of said directive to pay the correct docket
fees, however, R-II Builders withdrew its Amended and Supplemental Complaint and, in lieu thereof, filed
its Second Amended Complaint which, while deleting its causes of action for accounting and conveyance of
title to and/or possession of the entire Asset Pool, nevertheless prayed for its appointment as Receiver of
the properties comprising the same. In the landmark case of Manchester Development Corporation v.
Court of Appeals, [12] this Court ruled that jurisdiction over any case is acquired only upon the payment of
the prescribed docket fee which is both mandatory and jurisdictional. Although it is true that
the Manchester Ruledoes not apply despite insufficient filing fees when there is no intent to defraud the
government, [13]R-II Builders' evident bad faith should clearly foreclose the relaxation of said rule.
In addition to the jurisdictional and pragmatic aspects underlying the payment of the correct docket fees
which have already been discussed in the decision sought to be reconsidered, it finally bears emphasizing
that the Asset Pool is comprised of government properties utilized by HGC as part of its sinking fund, in
pursuit of its mandate as statutory guarantor of government housing programs. With the adverse
consequences that could result from the transfer of possession and control of the Asset Pool, it is
imperative that R-II Builders should be made to pay the docket and filing fees corresponding to the
assessed value of the properties comprising the same.
WHEREFORE, the Court resolves to:
(a) NOTE the Entry of Appearance of Atty. Lope E. Feble of Tuquero Exconde Manalang Feble Law Offices
as collaborating counsel for respondent R-II Builders, Inc.; and DENY counsel's prayer to be furnished
with all pleadings notices and other court processes at Unit 2704-A, West Tower, Philippine Stock Exchange
Centre, Exchange Road, Ortigas Center Pasig, since only the lead counsel is entitled to service of court
processes;
(b) DENY with FINALITY R-II Builders, Inc.'s Motion for Reconsideration of the Decision dated 9 March
2011 for lack of merit, the basic issues having been already passed upon and there being no substantial
argument to warrant a modification of the same. No further pleadings or motions shall be entertained
herein.
Let an Entry of Judgment in this case be made in due course.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION
CEFERINA DE UNGRIA [DECEASED],
substituted by her HEIRS, represented by
LOLITA UNGRIA SAN JUAN-JAVIER, and
RHODORA R. PELOMIDA as their Attorney-infact,
Petitioner,
- versus -

G.R. No. 165777

Present:
CARPIO,* J.,
VELASCO, JR., J., Chairperson,
PERALTA,
ABAD, and
MENDOZA, JJ.

THE HONORABLE COURT OF APPEALS,

THE HONORABLE REGIONAL TRIAL
COURT OF GENERAL SANTOS CITY,
BRANCH 35, ROSARIO DIDELES VDA. DE
CASTOR, NEPTHALIE CASTOR ITUCAS,
FEROLYN CASTOR FACURIB, RACHEL DE Promulgated:
CASTOR, LEA CASTOR DOLLOLOSA, and July 25, 2011
ROSALIE CASTOR BENEDICTO,
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
PERALTA, J.:

Assailed in this petition for review on certiorari are the Decision[1] dated May 26, 2004 and the Resolution [2] dated September 17,
2004 of the Court of Appeals (CA) in CA-G.R. SP No. 60764.
On August 26, 1999, respondents Rosario Dideles Vda. de Castor (Rosario), Nepthalie Castor Itucas, Ferolyn Castor Facurib
(Ferolyn), Rachel De Castor, Lea Castor Dollolosa and Rosalie Castor Benedicto, filed with the Regional Trial Court (RTC) of
General Santos City a Complaint[3] for ownership, possession and damages, and alternative causes of action either to declare two
documents as patent nullities, and/or for recovery of Rosario's conjugal share with damages or redemption of the subject land against
petitioner Ceferina de Ungria, defendants Avelino Gumban, Dolores Cagaitan, Zacasio Poutan, PO1 Jonas Montales, Ignacio Olarte
and alias Dory. Respondent Rosario is the surviving wife of the late Fernando Castor, while the rest of the respondents are their
legitimate children. The documents they sought to annul are (1) the Deed of Transfer of Rights and Interest including Improvements
thereon dated October 3, 1960 allegedly executed by Fernando in favor of Eugenio de Ungria, petitioner's father; and (2) the Affidavit
of Relinquishment dated November 23, 1960 executed by Eugenio in favor of petitioner.
Petitioner Ceferina filed a Motion to Dismiss[4] (Ex-Abundante Ad Cautelam) on the following grounds: (1) the claim or demand has
been extinguished by virtue of the valid sale of Lot No. 1615 to Eugenio; (2) the action is barred by extraordinary acquisitive
prescription; (3) the action is barred by laches; and (4) plaintiff failed to state a cause of action, or filed the case prematurely for failure
to resort to prior barangay conciliation proceedings.
Petitioner also filed an Addendum to the Motion to Dismiss [5] raising the following additional grounds: (1) plaintiffs have no legal
capacity to sue; and (2) the court has no jurisdiction over the case for failure of plaintiffs to pay the filing fee in full. Respondents filed
their Opposition thereto.
On November 19, 1999, the RTC issued an Order[6] denying the motion to dismiss, to wit:
After the motion to dismiss and its addendum have been received, it is now ripe for resolution. One of the grounds
alleged in the complaint is for the recovery of conjugal share on Lot No. 1615, of Pls-209 D with damages.
It is alleged that the late Fernando Castor and Rosario Dideles Vda. de Castor were married on September 15, 1952,
and the application to the land was dated January 17, 1952 and the patent was issued by the President on November
19, 1954.
The said land was sold to the defendant on October 3, 1960 (Annex C) and an Affidavit of Relinquishment dated
November 23, 1960 which was made a part thereof as Annex D. Considering the marriage of September 15, 1992,
the said land became conjugal as of the date of the marriage and, therefore, thereof belongs to the wife, Rosario
Dideles Vda. de Castor.
Thus, considering the above, the motion to dismiss is DENIED.[7]
Petitioner Ceferina filed a Motion for Reconsideration,[8] which the RTC denied in an Order[9] dated February 4, 2000.

Petitioner filed an Omnibus Motion[10] asking the RTC to resolve the issues of (1) whether or not the complaint should be dismissed or
expunged from the records pursuant to Supreme Court (SC) Circular No. 7; (2) reconsidering the findings contained in the Order
dated February 4, 2000; and (3) holding in abeyance the submission of the answer to the complaint.
Pending resolution of the motion, respondents filed a Motion to Allow[11] them to continue prosecuting this case as indigent litigants.
On March 8, 2000, the RTC resolved the Omnibus Motion in an Order[12] that read in this wise:
On the omnibus motion regarding filing fees, the plaintiffs asserted in its motion that they are charging defendant
actual and compensatory damages such as are proved during the hearing of this case. So also are attorneys fees and
moral damages, all to be proved during the hearing of this case.
Since there was no hearing yet, they are not in a possession (sic) to determine how much is to be charged.
At any rate, if after hearing the Clerk of Court determine that the filing fees is still insufficient, considering the total
amount of the claim, the Clerk of Court should determine and, thereafter, if any amount is found due, he must
require the private respondent to pay the same x x x.
As to the second issue, the same has already been decided in its order dated February 4, 2000.
WHEREFORE, premises considered, the omnibus motion is DENIED.
The defendant shall file their answer within fifteen (15) days from receipt of this order.[13]

From this Order, petitioner filed a motion for reconsideration and clarification on whether plaintiffs should be allowed to
continue prosecuting the case as indigent litigants.
On March 30, 2000, the RTC issued a Clarificatory Order[14] reading as follows:
As has been said, the plaintiff asserted in its motion that they are charging defendants actual and compensatory
damages as has been proved during the hearing of this case. So also are attorney's fees and moral damages all to be
proved during the hearing of this case.
Since there was no hearing yet, they are not in a possession (sic) to determine how much is to be charged.
At any rate, after hearing, the Clerk of Court determines that the filing fee is still insufficient, the same shall be
considered as lien on the judgment that may be entered.
As to the motion seeking from the Honorable Court allowance to allow plaintiff to continue prosecuting this case as
indigent litigants, suffice it to say that the same is already provided for in this order.
WHEREFORE, the defendants shall file their answer within fifteen (15) days from receipt of this Order.[15]

In an Order dated May 31, 2000, the RTC again denied petitioner's motion for reconsideration.
Petitioner filed with the CA a petition for certiorari and prohibition with prayer for the issuance of a temporary restraining order
and/or writ of preliminary injunction. Petitioner sought the nullification of the Order dated November 19, 1999 and the subsequent
orders issued by the RTC thereto for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction.
Respondents filed their Comment thereto.
In a Decision dated May 26, 2004, the CA dismissed the petition. The CA found that SC Circular No. 7 would not apply where the
amount of damages or value of the property was immaterial; that the Circular could be applied only in cases where the amount
claimed or the value of the personal property was determinative of the court's jurisdiction citing the case of Tacay v. RTC of Tagum,
Davao del Norte.[16] The CA found that respondents had paid the corresponding docket fees upon the filing of the complaint, thus, the
RTC had acquired jurisdiction over the case despite the failure to state the amount of damages claimed in the body of the complaint or
in the prayer thereof. The CA found that the RTC did not commit grave abuse of discretion amounting to lack of jurisdiction when it
denied petitioner's motion to dismiss. It noted that the RTC's Clarificatory Order dated March 30, 2000, which stated that if after
hearing the Clerk of Court determines that the filing fee is still insufficient, the same shall be considered as lien on the judgment that
may be entered was in accordance with the rule laid down in Sun Insurance Office, Ltd. v. Asuncion.[17] The CA proceeded to state that
a judicious examination of the complaint pointed to a determination of the respective rights and interests of the parties over the
property based on the issues presented therein which could only be determined in a full-blown trial on the merits of the case.

Petitioner filed a Motion for Reconsideration, which the CA denied in a Resolution dated September 17, 2004. The CA ruled, among
others, that the defenses of acquisitive prescription and laches were likewise unavailing. It found that the subject property is covered
by a Torrens title (OCT No. V-19556); thus, it is axiomatic that adverse, notorious and continuous possession under a claim of
ownership for the period fixed by law is ineffective against a Torrens title; that unless there are intervening rights of third persons
which may be affected or prejudiced by a decision directing the return of the lot to petitioner, the equitable defense of laches will not
apply as against the registered owner.
Hence, this petition for review on certiorari where petitioner raises the following assignment of errors:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT TRIAL COURT COMMITTED
GRAVE ABUSE OF DISCRETION IN DENYING PETITIONER'S MOTION TO DISMISS DESPITE
RESPONDENTS' NON-PAYMENT OF THE CORRECT DOCKET FEES.
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE ACTION OF PRIVATE RESPONDENTS IS
BARRED BY LACHES AND EXTRAORDINARY ACQUISITIVE PRESCRIPTION. [18]

We find the petition without merit.

Preliminarily, although not raised as an issue in this petition, we find it necessary to discuss the issue of jurisdiction over the subject
matter of this case. Respondents' complaint was filed in 1999, at the time Batas Pambansa Blg. (BP) 129, the Judiciary
Reorganization Act of 1980, was already amended by Republic Act (RA) No. 7691, An Act Expanding the Jurisdiction of the
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts, amending for the purpose BP Blg. 129.
[19]

Section 1 of RA 7691, amending BP Blg. 129, provides that the RTC shall exercise exclusive original jurisdiction on the following

actions:
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization Act of 1980,"
is hereby amended to read as follows:
Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;
(2) In all civil actions which involve the title to, or possession of, real property, or any
interest therein, where the assessed value of the property involved exceeds Twenty Thousand
Pesos (P20,000.00) or for civil actions in Metro Manila, where such value exceeds Fifty Thousand
Pesos (P50,000.00), except actions for forcible entry into and unlawful detainer of lands or
buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts; x x x

Section 3 of RA No. 7691 expanded the exclusive original jurisdiction of the first level courts, thus:
Section 3. Section 33 of the same law (BP Blg. 129) is hereby amended to read as follows:
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts in Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit
Trial Courts shall exercise:
xxxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, or
possession of, real property, or any interest therein where the assessed value of
the property or interest therein does not exceed Twenty Thousand Pesos
(P20,000.00) or, in civil actions in Metro Manila, where such assessed value
does not exceed Fifty Thousand Pesos (P50,000.00) exclusive of interest,
damages of whatever kind, attorney's fees, litigation expenses and
costs: Provided, That in cases of land not declared for taxation purposes, the
value of such property shall be determined by the assessed value of the adjacent
lots.

Respondents filed their Complaint with the RTC; hence, we would first determine whether the RTC has jurisdiction over the subject
matter of this case based on the above-quoted provisions.
The Complaint filed by respondents in the RTC was for ownership, possession and damages, and alternative causes of action either to
declare two documents as patent nullities and/or for recovery of conjugal share on the subject land with damages or redemption of the
subject land. In their Complaint, respondents claimed that Rosario and Fernando are the registered owners of the subject land with an
assessed value of P12,780.00; that the couple left the cultivation and enjoyment of the usufruct of the subject land to Fernando's
mother and her second family to augment their means of livelihood; that respondent Rosario and Fernando thought that when the
latter's mother died in 1980, the subject land was in the enjoyment of the second family of his mother, but later learned that the subject
land was leased by petitioner Ceferina; that sometime in August 1999, respondents learned of the existence of the Deed of Transfer of
Rights and Interest including Improvements thereon dated October 3, 1960, where Fernando had allegedly transferred his rights and
interests on the subject land in favor of Eugenio, petitioner Ceferina's father, as well as an Affidavit of Relinquishment dated
November 23, 1960 executed by Eugenio in favor of petitioner Ceferina; that Fernando's signature in the Deed of Transfer was not his
but a forgery; and the Affidavit of Relinquishment was also void as it was a direct result of a simulated Deed of Transfer.
Respondents prayed that they be declared as absolute and lawful owners of the subject land and to order petitioner and the
other defendants to vacate the premises and restore respondents to its possession and enjoyment therefore. On their second cause of
action, they prayed that the Deed of Transfer of Rights and Interest Including Improvements Thereon be declared as a forgery, purely
simulated and without any consideration; hence, inexistent, void ab initio and/or a patent nullity, as well as the Affidavitof
Relinquishment which was the direct result of the Deed of Transfer. Respondents also prayed in the alternative that if the Deed be
finally upheld as valid, to order petitioner to reconvey to respondent Rosario the undivided one-half portion of the subject land as
conjugal owner thereof and to account and reimburse her of its usufruct; and/or to allow them to redeem the subject land.
It would appear that the first cause of action involves the issue of recovery of possession and interest of the parties over the
subject land which is a real action. Respondents alleged that the assessed value of the subject land was P12,780.00 based on Tax
Declaration No. 15272. Thus, since it is a real action with an assessed value of less than P20,000.00, the case would fall under the
jurisdiction of the MTC as provided under the above-quoted Section 33 (3) of BP 129, as amended.
Notably, however, respondents in the same Complaint filed alternative causes of action assailing the validity of the Deed of
Transfer of Rights and Interest executed by Fernando in favor of petitioner's father. Respondents also sought for the reconveyance to
respondent Rosario of the undivided one-half portion of the subject land as conjugal owner thereof in case the Deed of Transfer of
Rights and Interest will be upheld as valid; and/or for redemption of the subject land. Clearly, this is a case of joinder of causes of
action which comprehends more than the issue of possession of, or any interest in the real property under contention, but includes an
action to annul contracts and reconveyance which are incapable of pecuniary estimation and, thus, properly within the jurisdiction of
the RTC.[20]
In Singson v. Isabela Sawmill,[21] we held that:
In determining whether an action is one the subject matter of which is not capable of pecuniary estimation
this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is
primarily for the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether
jurisdiction is in the municipal courts or in the courts of first instance would depend on the amount of the claim.
However, where the basic issue is something other than the right to recover a sum of money, where the money claim
is purely incidental to, or a consequence of, the principal relief sought, this Court has considered such actions as
cases where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by
courts of first instance (now Regional Trial Courts).[22]

Thus, respondents correctly filed their Complaint with the RTC.

It is a settled rule in this jurisdiction that when an action is filed in court, the complaint must be accompanied by the payment
of the requisite docket and filing fees. [23] It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment
of the prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. [24]

Section 7(b)(1) of Rule 141 of the Rules of Court provides:

SEC. 7. Clerks of Regional Trial Courts. - (a) For filing an action or a permissive counter-claim or money
claim against an estate not based on judgment, or for filing with leave of court a third-party, fourth-party, etc.
complaint, or a complaint-in-intervention, and for all clerical services in the same, if the total-sum claimed,
exclusive of interest, or the stated value of the property in litigation, is:
xxxx
(b) For filing:
1. Actions where the value of the subject matter
cannot be estimated ........ P400.00
2. x x x
In a real action, the assessed value of the property, or if there is none, the estimated value thereof
shall be alleged by the claimant and shall be the basis in computing the fees.[25]

Since we find that the case involved the annulment of contract which is not susceptible of pecuniary estimation, thus, falling
within the jurisdiction of the RTC, the docket fees should not be based on the assessed value of the subject land as claimed by
petitioner in their memorandum, but should be based on Section 7(b)(1) of Rule 141. A perusal of the entries in the Legal Fees Form
attached to the records would reflect that the amount of P400.00 was paid to the Clerk of Court, together with the other fees, as
assessed by the Clerk of Court. Thus, upon respondents' proof of payment of the assessed fees, the RTC has properly acquired
jurisdiction over the complaint. Jurisdiction once acquired is never lost, it continues until the case is terminated.

[26]

Notably, petitioners claim that the RTC did not acquire jurisdiction in this case is premised on her contention that respondents violated
SC Circular No. 7 issued on March 24, 1998 requiring that all complaints must specify the amount of damages sought not only in the
body of the pleadings but also in the prayer to be accepted and admitted for filing. Petitioner argues that respondents alleged in
paragraph 13 of their Complaint that:
(T)he reasonable rental for the use of the [subject] land is P2,000.00 per hectare, every crop time, once every four
months, or P6,000.00 a year per hectare; that defendants in proportion and length of time of their respective
occupancy is and/or are jointly and severally liable to plaintiffs of the produce thereby in the following
proportions, viz: (a) for defendant Ceferina de Ungria for a period of time claimed by her as such; (b) for defendants
Dolores Cagautan, a certain alias Dory, and PO1 Jonas Montales, of an undetermined area, the latter having entered
the areasometime in 1998 and defendant alias Dory, only just few months ago; that defendant Ignacio Olarte and
Zacasio Puutan of occupying about one-half hectare each.[27]

and in their prayer asked:

x x x Ordering the defendants, jointly and severally, in proportion to the length and area of their respective
occupancy, to pay reasonable rentals to the plaintiffs in the proportion and amount assessed in paragraph 13 of the
First Cause of Action.
xxxx
(a) Ordering the defendants, jointly and severally, to pay plaintiffs actual and compensatory damages such as are
proved during the hearing of this case;
(b) Ordering the defendants, jointly and severally, to pay plaintiffs attorneys' fees and moral damages, all to be
proved during the hearing of this case.[28]

Thus, the RTC should have dismissed the case, since respondents did not specify the amount of damages in their prayer.
We are not persuaded.
SC Circular No. 7 was brought about by our ruling in Manchester Development Corporation v. Court of Appeals,[29] where we held
that a pleading which does not specify in the prayer the amount of damages being asked for shall not be accepted or admitted, or shall
otherwise be expunged from the record; and that the Court acquires jurisdiction over any case only upon the payment of the prescribed
docket fee.

However, in Sun Insurance Office, Ltd. v. Asuncion,[30] we laid down the following guidelines in the payment of docket fees, to wit:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the
prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where
the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment
of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall
not be considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment
of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and
payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or
if specified the same has been left for determination by the court, the additional filing fee therefor shall constitute a
lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly-authorized deputy to enforce said
lien and assess and collect the additional fee.

Subsequently, in Heirs of Bertuldo Hinog v. Melicor,[31] we said:

Furthermore, the fact that private respondents prayed for payment of damages "in amounts justified by the evidence"
does not call for the dismissal of the complaint for violation of SC Circular No. 7, dated March 24, 1988 which
required that all complaints must specify the amount of damages sought not only in the body of the pleadings but
also in the prayer in order to be accepted and admitted for filing. Sun Insurance effectively modified SC Circular No.
7 by providing that filing fees for damages and awards that cannot be estimated constitute liens on the awards finally
granted by the trial court.
x x x judgment awards which were left for determination by the court or as may be proven during trial would still be
subject to additional filing fees which shall constitute a lien on the judgment. It would then be the responsibility of
the Clerk of Court of the trial court or his duly-authorized deputy to enforce said lien and assess and collect the
additional fees.[32]

A reading of the allegations in the complaint would show that the amount of the rental due can only be determined after a final
judgment, since there is a need to show supporting evidence when the petitioner and the other defendants started to possess the subject
land. Thus, we find no reversible error committed by the CA when it ruled that there was no grave abuse of discretion committed by
the RTC in issuing its Order dated March 30, 2000, where the RTC stated that since there was no hearing yet, respondents are not in a
position to determine how much is to be charged and that after hearing, the Clerk of Court determines that the filing fee is still
insufficient, the same shall be considered as lien on the judgment that may be entered.
Petitioner claims that the action is barred by extraordinary acquisitive prescription and laches. Petitioner contends that she took
possession of the land in the concept of an owner, open, exclusive, notorious and continuous since 1952 through her predecessor-ininterest, Eugenio, and by herself up to the present; that the late Fernando and private respondents had never taken possession of the
land at any single moment; and that, granting without admitting that the transfer of rights between Fernando and Eugenio was null and
void for any reason whatsoever, petitioner's possession of the land had already ripened into ownership after the lapse of 30 years from
August 1952 by virtue of the extraordinary acquisitive prescription.
We are not persuaded.
It is a well-entrenched rule in this jurisdiction that no title to registered land in derogation of the rights of the registered owner shall be
acquired by prescription or adverse possession. [33] Prescription is unavailing not only against the registered owner but also against his
hereditary successors.[34] In this case, the parcel of land subject of this case isa titled property, i.e., titled in the name of the late
Fernando Castor, married to Rosario Dideles.
Petitioner claims that respondent had impliedly admitted the fact of sale by Fernando to Eugenio in August 1952, but only according
to respondents, the sale was null and void because it violated the provisions of the Public Land Act. Petitioner argues that the
application of Fernando, dated January 17, 1952, was not the homestead application referred to in Sections 118 and 124 of the Public
Land Act; and that Fernando's application was only as settler, or for the allocation of the subject land to him vice the original settler
Cadiente.
Such argument does not persuade.

The trial in this case has not yet started as in fact no answer has yet been filed. We find that these issues are factual which must be
resolved at the trial of this case on the merits wherein both parties will be given ample opportunity to prove their respective claims and
defenses.
Anent petitioner's defense of laches, the same is evidentiary in nature and cannot be established by mere allegations in the pleadings.
Without solid evidentiary basis, laches cannot be a valid ground to dismiss respondents' complaint. [35] Notably, the allegations of
respondents in their petition filed before the RTC which alleged among others:
7. That sometime between the years 1965 to 1970, defendant Ceferina de Ungria, accompanied by Miss Angela
Jagna-an, appeared in the residence of plaintiff Rosario Dideles Vda. de Castor in Bo.1, Banga, South Cotabato, and
requested her to sign a folded document with her name only appearing thereon, telling her that it has something to do
with the land above-described, of which she refused telling her that she better return it to the person who requested
her to do so (referring to her mother-in-law), more so that her husband was out at that time;
8. That when the matter was brought home to Fernando Castor, the latter just commented that [his] mother desires
the land above-described to be sold to defendant Ceferina de Ungria which however he was opposed to do so even
as they occasionally come into heated arguments everytime this insistence on the same subject propped up;
9. That even after the death of the mother of the late Fernando Castor in Bo. Bula, City of General Santos, sometime
in 1980, the latter and his surviving wife thought all the while that the land above-described was in the enjoyment of
his late mother's family with his 2 nd husband; that it was only after sometime when plaintiff Rosario Dideles Vda. de
Castor heard that the land above-described had even been leased by defendant Ceferina de Ungria with the Stanfilco
and Checkered farm;
10. That sometime in 1997, defendant Ceferina de Ungria sent overtures to plaintiffs through Ester Orejana, who is
the half sister-in-law of plaintiff Rosario Dideles Vda. de Castor that she desires to settle with them relating to the
land above-described; that the overtures developed into defendant Ceferina de Ungria meeting for the
purpose plaintiff Ferolyn Castor Facurib where the negotiation continued with Lolita Javier as attorney-in-fact after
defendant Ceferina de Ungria left to reside in Manila and which resulted later to the attorney-in-fact offering the
plaintiffsP100,000.00 to quitclaim on their rights over the said land, which offer, however, was refused by plaintiffs
as so [insignificant] as compared to the actual value of the same land; that in that negotiation, defendant Ceferina de
Ungria was challenged to show any pertinent document to support her claim on the land in question and where she
meekly answered by saying at the time that she does not have any of such document;

x x x x[36]

would not conclusively establish laches. Thus, it is necessary for petitioners to proceed to trial and present controverting evidence to
prove the elements of laches.
WHEREFORE, the petition for review is DENIED.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION
ATIKO TRANS, INC. and

G.R. No. 167545

CHENG LIE NAVIGATION

CO., LTD.,

Present:
Petitioners,
CORONA, C.J., Chairperson,
LEONARDO-DE CASTRO,
- versus -

BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

PRUDENTIAL GUARANTEE
AND ASSURANCE, INC.,

Promulgated:

Respondent.

August 17, 2011

x----------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
Where service of summons upon the defendant principal is coursed thru its co-defendant agent, and the latter happens to be a domestic corporation, the
rules on service of summons upon a domestic private juridical entity [1] must be strictly complied with. Otherwise, the court cannot be said to have
acquired jurisdiction over the person of both defendants. And insofar as the principal is concerned, such jurisdictional flaw cannot be cured by the agents
subsequent voluntary appearance.
This Petition for Review on Certiorari assails the December 10, 2004 Decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 82547 which
affirmed the April 8, 2003 Decision[3] of the Regional Trial Court (RTC), Branch 150, Makati City. Said Decision of the RTC affirmed the August 6,
2002 Decision[4] of the Metropolitan Trial Court (MeTC), Branch 63, Makati City, which disposed as follows:
WHEREFORE, judgment is rendered declaring defendants Cheng Lie Navigation Co., Ltd. and Atiko Trans, Inc. solidarily liable to
pay plaintiff Prudential Guarantee & Assurance, Inc. the following amounts:
1.

P205,220.97 as actual damages with interest of 1% per month from 14 December 1999 until full payment;

2.

P10,000.00 as Attorneys fees; and

3.

Costs of suit.

SO ORDERED.[5]

Likewise assailed is the CAs Resolution[6] dated March 16, 2005 which denied the Motion for Reconsideration of the said December 10, 2004 Decision.
Factual Antecedents
On December 11, 1998, 40 coils of electrolytic tinplates were loaded on board M/S Katjana in Kaohsiung, Taiwan for shipment to Manila. The
shipment was covered by Bill of Lading No. KNMNI-15126[7] issued by petitioner Cheng Lie Navigation Co., Ltd. (Cheng Lie) with Oriental Tin Can
& Metal Sheet Manufacturing Co., Inc. (Oriental) as the notify party. The cargoes were insured against all risks per Marine Insurance Policy No. 20RN18749/99 issued by respondent Prudential Guarantee and Assurance, Inc. (Prudential).
On December 14, 1998, M/S Katjana arrived in the port of Manila. Upon discharge of the cargoes, it was found that one of the tinplates was
damaged, crumpled and dented on the edges.The sea van in which it was kept during the voyage was also damaged, presumably while still on board the
vessel and during the course of the voyage.
Oriental then filed its claim against the policy. Satisfied that Orientals claim was compensable, Prudential paid Oriental P205,220.97
representing the amount of losses it suffered due to the damaged cargo.

Proceedings before the Metropolitan Trial Court

On December 14, 1999, Prudential filed with the MeTC of Makati City a Complaint [8] for sum of money against Cheng Lie and Atiko Trans,
Inc. (Atiko). In addition to the above undisputed facts, Prudential alleged that:
1.
Plaintiff (Prudential) is a domestic insurance corporation duly organized and existing under the laws of
the Philippines with office address at Coyiuto House, 119 Carlos Palanca[,] Jr. St., LegaspiVillage, Makati City;
2.
Defendant Cheng Lie Navigation Co. Ltd., is [a] foreign shipping company doing business in the Philippines
[thru] its duly authorized shipagent defendant Atiko Trans Inc. which is a domestic corporation duly established and created under
the laws of the Philippines with office address at 7th Floor, Victoria Bldg., United Nation[s] Ave., Ermita, Manila, where both
defendants may be served with summons and other court processes;
3.
At all times material to the cause of action of this complaint, plaintiff was and still is engaged in, among others,
marine insurance business; Whereas Defendant Cheng Lie Navigation Co. Ltd. was and still is engaged in, among others, shipping,
transportation and freight/cargo forwarding business, and as such, owned, operated and/or chartered the ocean going vessel M/S
Katjana as common carrier to and from any Philippine [port] in international trade [thru] its duly authorized shipagent defendant
Atiko Trans Inc. (Both defendants are hereinafter referred to as the CARRIER);
xxxx
9. Plaintiff, as cargo-insurer and upon finding that the consignees insurance claim was in order and compensable, paid the
latters claim in the amount of P205,220.97 under and by virtue of the aforesaid insurance policy, thereby subrogating herein plaintiff
to all the rights and causes of action appertaining to the consignee against the defendants;[9]
On March 20, 2000, Prudential filed a Motion to Declare Defendant in Default,[10] alleging among others that on March 1, 2000 a copy of the
summons was served upon petitioners thru cashier Cristina Figueroa and that despite receipt thereof petitioners failed to file any responsive
pleading. Acting on the motion, the MeTC issued an Order [11] declaring Cheng Lie and Atiko in default and allowing Prudential to present its
evidence ex-parte.
On August 6, 2002, the MeTC rendered its judgment by default. Atiko then filed a Notice of Appeal[12] dated November 4, 2002.
Proceedings before the Regional Trial Court and the Court of Appeals
In its Memorandum of Appeal,[13] Atiko argued that Prudential failed to prove the material allegations of the complaint. Atiko asserted that
Prudential failed to prove by preponderance of evidence that it is a domestic corporation with legal personality to file an action; that Cheng Lie is a private
foreign juridical entity operating its shipping business in the Philippines thru Atiko as its shipagent; that Cheng Lie is a common carrier, which owns and
operates M/S Katjana; that Prudential was subrogated to the rights of Oriental; and, that Atiko can be held solidarily liable with Cheng Lie.
Although assisted by the same counsel, Cheng Lie filed its own Memorandum of Appeal [14] maintaining that the MeTC never acquired
jurisdiction over its person.
On April 8, 2003, the RTC rendered its Decision dismissing the appeal and affirming the Decision of the MeTC. Atiko and Cheng Lie
challenged the RTC Decision before the CA via a Petition for Review[15] under Rule 42 of the Rules of Court but the appellate court affirmed the RTCs
Decision.
Hence, this petition.
Issues
In their Memorandum,[16] petitioners raised the following issues:
1.

WHETHER X X X THE DECISION OF MAKATI [MeTC] WHICH WAS AFFIRMED BY MAKATI RTC AND
THE COURT OF APPEALS IS NULL AND VOID FOR FAILURE TO ACQUIRE JURISDICTION OVER THE
PERSONS OF THE PETITIONERS-DEFENDANTS CONSIDERING THAT THE SUMMONS WERE NOT
PROPERLY SERVED ON THEM AS REQUIRED BY RULE 14 OF THE RULES OF COURT.

2.

WHETHER X X X THE RESPONDENT-PLAINTIFF IS REQUIRED TO PROVE THE MATERIAL

ALLEGATIONS IN THE COMPLAINT EVEN IN DEFAULT JUDGMENT OR WHETHER OR NOT IN DEFAULT

JUDGMENT, ALL ALLEGATIONS IN THE COMPLAINT ARE DEEMED CONTROVERTED, HENCE, MUST BE
PROVED BY COMPETENT EVIDENCE.
2.1. WHETHER X X X RESPONDENT-PLAINTIFF IS OBLIGED TO PROVE ITS LEGAL PERSONALITY TO
SUE EVEN IN DEFAULT JUDGMENT.
2.2. WHETHER X X X RESPONDENT-PLAINTIFF IS OBLIGED TO PROVE THAT PETITIONERDEFENDANT ATIKO IS THE SHIPAGENT OF PETITIONER-DEFENDANT CHENG LIE EVEN IN
DEFAULT JUDGMENT.
2.3. WHETHER X X X THE TESTIMONIES OF THE WITNESSES AND THE DOCUMENTARY EXHIBITS
CAN BE CONSIDERED FOR PURPOSES OTHER THAN THE PURPOSE FOR WHICH THEY WERE
OFFERED.
2.4. WHETHER X X X A MOTION TO DECLARE DEFENDANT IN DEFAULT ADDRESSED AND SENT TO
ONLY ONE OF THE DEFENDANTS WOULD BIND THE OTHER DEFENDANT TO WHOM THE
MOTION WAS NOT ADDRESSED AND NOT SENT.[17]

Our Ruling
The petition is partly meritorious. We shall first tackle the factual matters involved in this case, then proceed with the jurisdictional issues
raised.
Petitioners raised factual matters which are not the proper subject of this appeal.

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

Petitioners also argue that the MeTC did not acquire jurisdiction over the person of Atiko as the summons was received by its cashier, Cristina
Figueroa. They maintain that under Section 11, Rule 14 of the Rules of Court, when the defendant is a domestic corporation like Atiko, summons may
be served only upon its president, general manager, corporate secretary, treasurer or in-house counsel.
We are not persuaded. True, when the defendant is a domestic corporation, service of summons may be made only upon the persons
enumerated in Section 11, Rule 14 of the Rules of Court. [20] However, jurisdiction over the person of the defendant can be acquired not only by proper
service of summons but also by defendants voluntary appearance without expressly objecting to the courts jurisdiction, as embodied in Section 20, Rule
14 of the Rules of Court, viz:

SEC. 20. Voluntary appearance. The defendants voluntary appearance in the action shall be equivalent to service of
summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant
shall not be deemed a voluntary appearance.

In the case at bench, when Atiko filed its Notice of Appeal,[21] Memorandum of Appeal,[22] Motion for Reconsideration[23] of the April 8, 2003
Decision of the RTC, and Petition for Review,[24] it never questioned the jurisdiction of the MeTC over its person. The filing of these pleadings seeking
affirmative relief amounted to voluntary appearance and, hence, rendered the alleged lack of jurisdiction moot. In Palma v. Galvez,[25] this Court
reiterated the oft-repeated rule that the filing of motions seeking affirmative relief, such as, to admit answer, for additional time to file answer, for
reconsideration of a default judgment, and to lift order of default with motion for reconsideration, are considered voluntary submission to the jurisdiction
of the court.
Moreover, petitioners contention is a mere afterthought. It was only in their Memorandum[26] filed with this Court where they claimed, for the
first time, that Atiko was not properly served with summons. In La Naval Drug Corporation v. Court of Appeals,[27] it was held that the issue of
jurisdiction over the person of the defendant must be seasonably raised. Failing to do so, a party who invoked the jurisdiction of a court to secure an
affirmative relief cannot be allowed to disavow such jurisdiction after unsuccessfully trying to obtain such relief.[28]
It may not be amiss to state too that in our February 13, 2006 Resolution,[29] we reminded the parties that they are not allowed to interject new
issues in their memorandum.
MeTC did not acquire jurisdiction over the person of Cheng Lie.

Petitioners likewise challenge the validity of the service of summons upon Cheng Lie, thru Atiko. They claim that when the defendant is a
foreign private juridical entity which has transacted business in the Philippines, service of summons may be made, among others, upon its resident
agent. In this case, however, there is no proof that Atiko is the local agent of Cheng Lie.
On this score, we find for the petitioners. Before it was amended by A.M. No. 11-3-6-SC,[30] Section 12 of Rule 14 of the Rules of Court reads:
SEC. 12. Service upon foreign private juridical entity. When the defendant is a foreign private juridical entity which has
transacted business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose,
or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the
Philippines.

Elucidating on the above provision of the Rules of Court, this Court declared in Pioneer International, Ltd. v. Guadiz, Jr.[31] that when the
defendant is a foreign juridical entity, service of summons may be made upon:
1.

Its resident agent designated in accordance with law for that purpose;

2.

The government official designated by law to receive summons if the corporation does not have a resident agent; or,

3.

Any of the corporations officers or agents within the Philippines.

In the case at bench, no summons was served upon Cheng Lie in any manner prescribed above. It should be recalled that Atiko was not
properly served with summons as the person who received it on behalf of Atiko, cashier Cristina Figueroa, is not one of the corporate officers enumerated
in Section 11 of Rule 14 of the Rules of Court. The MeTC acquired jurisdiction over the person of Atiko not thru valid service of summons but by the
latters voluntary appearance. Thus, there being no proper service of summons upon Atiko to speak of, it follows that the MeTC never acquired
jurisdiction over the person of Cheng Lie. To rule otherwise would create an absurd situation where service of summons is valid upon the purported
principal but not on the latters co-defendant cum putative agent despite the fact that service was coursed thru said agent. Indeed, in order for the court to
acquire jurisdiction over the person of a defendant foreign private juridical entity under Section 12, Rule 14 of the Rules of Court, there must be prior
valid service of summons upon the agent of such defendant.
Also, the records of this case is bereft of any showing that cashier Cristina Figueroa is a government official designated by law to receive
summons on behalf of Cheng Lie or that she is an officer or agent of Cheng Lie within the Philippines. Hence, her receipt of summons bears no
significance insofar as Cheng Lie is concerned. At this point, we emphasize that the requirements of the rule on summons must be strictly followed,
[32]

lest we ride roughshod on defendants right to due process.[33]

With regard to Cheng Lies filing of numerous pleadings, the same cannot be considered as voluntary appearance. Unlike Atiko, Cheng Lie
never sought affirmative relief other than the dismissal of the complaint on the ground of lack of jurisdiction over its person. From the very beginning, it
has consistently questioned the validity of the service of summons and the jurisdiction of the MeTC over its person.
It does not escape our attention though that Cheng Lies pleadings do not indicate that the same were filed by way of special appearance. But
these, to our mind, are mere inaccuracies in the title of the pleadings. What is important are the allegations contained therein which consistently resisted
the jurisdiction of the trial court. Thus, Cheng Lie cannot be considered to have submitted itself to the jurisdiction of the courts.[34]
In fine, since the MeTC never acquired jurisdiction over the person of Cheng Lie, its decision insofar as Cheng Lie is concerned is void.[35]
Cheng Lie was improperly declared in default.

Applying the above disquisition, the MeTC likewise erred in declaring Cheng Lie in default. Settled is the rule that a defendant cannot be
declared in default unless such declaration is preceded by a valid service of summons.[36]
WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed December 10, 2004 Decision of the Court of Appeals in
CA-G.R. SP No. 82547 is AFFIRMED with the MODIFICATION that the judgment insofar as Cheng Lie Navigation Co., Ltd. is concerned is
declared VOID for failure to acquire jurisdiction over its person as there was improper service of summons.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

SPOUSES
GARCIA,

BENJAMIN

and

NORMA

Petitioner,

G.R. No. 169157

Present:

VELASCO, JR., J., Chairperson,

PERALTA,
- versus -

ABAD,
PEREZ,* and
MENDOZA, JJ.

ESTER
GARCIA,
AMADO
GARCIA,
ADELA GARCIA, ROSA GARCIA and
DAVID GARCIA,
Respondents.

Promulgated:

November 14, 2011

x ----------------------------------------------------------------------------------------x
DECISION

PERALTA, J.:

For review is the Court of Appeals (CA) Decision [1] dated May 12, 2005 and Resolution [2] dated
August 3, 2005 in CA-G.R. SP No. 41556. The assailed decision dismissed the Amended Petition
for Certiorari with Preliminary Injunction and/or Temporary Restraining Order (TRO) [3] filed by petitioners,
Spouses Benjamin and Norma Garcia, questioning the Regional Trial Court (RTC) [4] Orders[5] dated April 24,
1996[6] and July 9, 1996[7] denying their Urgent Motion to Quash Order of Execution [8] and Motion for
Reconsideration,[9] respectively, in Civil Case No. Q-36147; while the assailed resolution denied petitioners
motion for reconsideration.

The facts of the case follow:

Emilio Garcia (Emilio) and Eleuteria Pineda Garcia (Eleuteria) had nine (9) children, namely: Jerameal, Jose,
Rita Garcia-Shipley (Rita), respondents Ester, Amado, Adela, Rosa, David and petitioner Benjamin, all
surnamed Garcia. Eleuteria died in 1927. Emilio, thereafter, married Monica Cruz (Monica), with whom he
had eight (8) children, namely: Irma, Imelda, Rogelio, Emilio, Maurita, Felixberto, Violeta and Rosalinda. [10]

On October 26, 1962, Emilio died intestate, survived by his wife Monica Cruz and his children of the first
and second marriage. He left, among others, a 1,564-square-meter (sq m) lot (hereafter referred to as
subject property) located in San Francisco Del Monte, Quezon City covered by Transfer Certificate of Title
(TCT) No. 18550 registered in the name of Emilio married to Eleuteria. [11]

On June 28, 1965, Emilios children of the first marriage executed a General Power of Attorney (GPA) in
favor of Rita. On July 29, 1971, Benjamin and Rita executed a Deed of Extrajudicial Settlement of Estate,
declaring themselves as the sole and only heirs of Emilio and Eleuteria, and adjudicating unto themselves
the subject property, 1,000 sq m of which to Rita and the remaining 564 sq m to Benjamin. [12] Pursuant to
said Deed, TCT No. 18550 was cancelled and TCT No. 170385 was issued in the name of Rita and
Benjamin. The latter title was further cancelled and two (2) new TCTs were issued, namely, TCT No. 171639
in the name of Benjamin corresponding to his share of the subject property and TCT No. 171640 in the
name of Rita for her share.[13]

On July 25, 1973, Emilios daughters (Irma and Imelda) of his second marriage filed a complaint against Rita
and Benjamin for the annulment of title, docketed as Civil Case No. Q-17933. In addition to the annulment
and cancellation of the TCT, Irma and Imelda prayed that the property covered thereby be partitioned in
accordance with the law on intestate succession. [14] The parties, thereafter, entered into a Compromise
Agreement[15] which was approved by the court on August 29, 1974. [16] The subject property was supposed
to be partitioned among the siblings of the first and second marriage. Pursuant to the said agreement as
approved by the court, the children of the first marriage were supposed to receive a total area of 1,091.90
sq m, while the children of the second marriage, including the surviving spouse Monica, were supposed to
receive a total area of 472.10 sq m.[17] It was further agreed upon by the parties that the shares of Monica
and her children were to be taken from Ritas 1,000-sq-m portion of the subject property. [18]

However, instead of executing the judgment based on the compromise agreement, Rita divided her 1,000sq-m property 555 sq m for herself and 445 sq m for Monica and her children. Consequently, TCT No.
171640 was cancelled and TCT No. 207117 was issued to Monica and her children, while TCT No. 207116
to Rita.[19]
On April 17, 1975, a permanent service road was constructed on Ritas property. Consequently, a
Deed of Exchange was executed between Rita on the one hand, and Monica and her children, on the other.
This resulted in the issuance of TCT No. 207210 for 445 sq m in the name of Rita and TCT No. 207211 for
555 sq m to Monica and her children. [20] On August 22, 1979, Rita sold her property covered by TCT No.
207210 to petitioner Norma Dimalanta Garcia (Norma) resulting in the registration and issuance of TCT No.
278765 in the name of Norma married to Benjamin.[21]

Respondents Ester, Adela, Amado, Rosa and David filed a complaint for reconveyance, which was
later amended[22] on October 26, 1982, of the parcel of land originally covered by TCT No. 18550, against
Rita, Benjamin, and Monica and her children. The case was docketed as Civil Case No. Q-36147. They
alleged that Benjamin and Rita were able to adjudicate between themselves the subject property by
claiming to be the only heirs of Emilio, when in fact they were not. They, thus, demanded for their shares

in the subject property since, as children of the first marriage (which includes Benjamin and Rita), they are
entitled to a total area of 1,091 sq m, pursuant to the August 28, 1974 Compromise Agreement.

On March 15, 1989, the RTC rendered a Decision [23] in favor of respondents, the dispositive portion
of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiff[s] and against the defendants as follows:

1.

Defendants are ordered to convey to plaintiffs the portions

corresponding to their shares in the property in question based upon the
Compromise Agreement dated August 28, 1974, computed in accordance
with the law on intestate succession; and

2.

Defendants are ordered to pay attorney[s] fees amounting to P5,000.00.

Costs against the defendants.

SO ORDERED.[24]

The court noted that Benjamin and Ritas basis in adjudicating between themselves the subject
property was the GPA allegedly executed by respondents in favor of Rita. However, the court held that the
law requires a special power of attorney, not a GPA, in repudiating an inheritance. It follows that the deed
of extrajudicial settlement executed by Benjamin and Rita is defective for having knowingly and willingly
excluded compulsory heirs. The partition earlier made by Benjamin and Rita, and later by Monica and her
children based on the compromise agreement, is incomplete. Consequently, there is a need to complete
the distribution to the omitted heirs.[25]

On appeal, except for the deletion of the award of attorneys fees, the CA affirmed [26] the RTC
decision. When elevated before the Court, we denied the petition and, consequently, affirmed the CA
decision. The decision attained finality. [27] The corresponding Writ of Execution[28] was issued thereafter.

Meanwhile on August 30, 1993, Norma filed a Petition for Quieting of Title [29] against Amado with the
RTC. The case was docketed as Civil Case No. Q-93-17396. Norma alleged that she is the owner of a
portion of the property being claimed by Amado and his siblings in a reconveyance case in which she was
not made a party. She added that she bought the property from Rita. [30] The case, however, was dismissed
on motion of Amado on the ground of res judicata considering that the title to the property claimed by
Norma emanated from TCT No. 18550 which was already declared to have been fraudulently partitioned by
Rita and Benjamin.[31]

On motion of respondents, an Alias Writ of Execution [32] in the reconveyance case was issued, the
pertinent portion of which reads:

NOW THEREFORE, the defendants are hereby ordered to convey to plaintiffs the
portions corresponding their shares in the property in question based upon the Compromise
Agreement dated August 28, 1974, computed in accordance with the law on intestate
succession and to show proof of compliance with this writ within sixty (60) days from
receipt. Likewise, the Branch Deputy Sheriff, Mr. Cesar M. Torio, is ordered to return this writ
into [this] court within sixty (60) days from date with your proceedings endorsed thereon. [33]

Petitioners, however, opposed the writ on the ground that the compromise agreement referred to in
the decision did not cover their properties.[34] In an Urgent Motion to Quash Order of Execution,
[35]

petitioners insisted that in including the properties of Benjamin and Norma in the order of execution, the

judge amended the judgment sought to be executed. [36] They likewise pointed out that Norma was never
impleaded in the reconveyance case.

In an Order[37] dated April 24, 1996, the RTC denied the motion to quash. The RTC explained that the
issue of Normas non-inclusion in the reconveyance case had been finally settled when her case had been
dismissed for quieting of title precisely because of the reconveyance case that had become final and
executory. Petitioners motion for reconsideration[38] was likewise denied in an Order[39] dated July 9, 1996.

In a special civil action for certiorari, the CA found no grave abuse of discretion on the part of the
RTC in issuing the above orders. The CA pointed out that the assailed order of execution did not amend the
March 15, 1989 decision sought to be executed. [40] It explained that the order of execution merely clarified
the dispositive portion of the decision with reference to the other portions thereof. [41] It found that the
parcels of land in the name of petitioners form part of the decision as they originated from the mother title
TCT No. 18550 against which the execution may be had in favor of respondents. [42] As to the non-inclusion
of Norma as indispensable party in the reconveyance case, the appellate court applied the rule on estoppel
by laches, considering that Norma was very much aware of the existence of the litigations involving the
subject property.[43] Finally, on petitioners claim of the indefeasibility of the Torrens title, the CA stressed
that mere issuance of the certificate of title does not foreclose the possibility that the property may be
under co-ownership with persons not named in the title.[44]

Aggrieved, petitioners filed this petition assailing in general the denial of their urgent motion to
quash writ of execution.

The petition is without merit.

The existence of the courts decision in Civil Case No. Q-36147 for reconveyance and the August 28, 1974
Compromise Agreement, is undisputed. In said decision, the court ordered Benjamin, Rita, Monica and her
children, to convey to respondents the portions corresponding to their shares in the subject property based

on the compromise agreement. In the compromise agreement, the subject property was divided as follows:
1,091 sq m as the total shares of the children of the first marriage and 472 sq m for Monica and her
children. Pursuant to the final and executory decision above, the RTC issued a Writ of Execution and
eventually the assailed Alias Writ of Execution.

Petitioners, however, opposed the implementation of the writ of execution on two grounds: (1) the
compromise agreement did not include the portion of the subject property in the name of Benjamin, thus,
should not be considered part of the property ordered by the court to be reconveyed to respondents; and
(2) the writ of execution could not cover the portion of the subject property in the name of Norma, since
she was not impleaded in the reconveyance case, and as such, is not bound by the decision sought to be
executed.

We do not agree with petitioners.

To determine the propriety of petitioners claims, it is necessary to look into the terms of the compromise
agreement and the conclusions of the court in the decision sought to be executed.

First, the compromise agreement. It must be recalled that the compromise agreement came about
because of the case for annulment of title instituted by Monica and her children against Benjamin and Rita.
At the time of the institution of the annulment case, the subject property had been divided between
Benjamin and Rita, wherein they were issued their respective titles, TCT No. 171639 in the name of
Benjamin covering 564 sq m and TCT No. 171640 in the name of Rita covering 1,000 sq m. The parties
later entered into a compromise agreement recognizing the rights of Monica and her children to the
subject property as heirs of Emilio being the surviving wife and children of the second marriage. To
facilitate the delivery of their[45] shares, it was stated in the compromise agreement that their shares shall
be taken from Ritas portion covered by TCT No. 171640.

Respondents were not parties to the annulment case or to the compromise agreement but their
rights to the subject property as heirs of Emilio were recognized. Of the 1,564 sq m property, 1,091 sq m
was agreed upon as the total shares of the children of the first marriage which include Rita, Benjamin and
respondents, and 472 sq m for Monica and her children. From Ritas 1,000 sq m share, 472 [46] sq m was
supposed to be given to Monica and her children. After deducting said area, 528 sq m remained for the
children of the first marriage who are entitled to 1,091 sq m. Although it was not specifically stated in the
compromise agreement, obviously, the shares of the children of the first marriage should be taken from
the remaining 528 sq m of Rita and the 564 sq m of Benjamin. Benjamins claim that the portion of the
property registered in his name is not covered by the compromise agreement, certainly, has no leg to
stand on.
Second, the decision in the reconveyance case sought to be executed. The action for reconveyance
was instituted by the other heirs of Emilio who were not parties to the annulment case nor to the
compromise agreement. They based their claim on their entitlement to 1,091 sq m as children of the first
marriage. Although several cancellations of titles had already taken place, it is clear from the decision

sought to be executed that the subject property was that originally covered by TCT No. 18550. Considering
that Benjamins title which is TCT No. 171639 was derived from TCT No. 18550, the same was definitely
included.

Moreover, in deciding the reconveyance case in favor of respondents, the court took into
consideration how TCT No. 18550, covering the subject property, was cancelled and how TCT Nos. 171639
and 171640, in the names of Benjamin and Rita, came about. The court applied the laws on intestate
succession and implied trust before it finally concluded that respondents were excluded from the partition
and are thus entitled to their shares. Undoubtedly, these rules apply not only to Rita but also to Benjamin.
If we were to sustain Benjamins claim that the portion of the property registered in his name is excluded,
the shares of the omitted heirs will not be completed.

Neither can we sustain petitioners contention that the writ of execution cannot include the portion
of the subject property registered in the name of Norma as she was never a party to the reconveyance
case.

As clearly stated above, several cancellations of titles had taken place since the death of Emilio
until the present case was instituted, which we now reiterate for a proper perspective. The subject
property was originally covered by TCT No. 18550 in the name of Emilio, married to Eleuteria. By virtue of
the extrajudicial settlement of estate executed by Rita and Benjamin, a new title was issued in their
names, TCT No. 170385. Two new titles were later issued, TCT No. 171639 in the name of Benjamin and
TCT No. 171640 in the name of Rita. Pursuant to the compromise agreement entered into with their
brothers and sisters of the second marriage, TCT No. 171640 was cancelled and new ones were issued, TCT
No. 207117 in the name of Monica and her children and TCT No. 207116 in the name of Rita. A Deed of
Exchange was, thereafter, executed resulting in the cancellation of the latter titles and new ones were
issued, TCT No. 207211 in the name of Monica and her children and TCT No. 207210 in the name of Rita.
Eventually, Rita decided to sell the portion of the property registered in her name to Norma resulting in the
cancellation of her title and the issuance of the new title in the name of Norma, TCT No. 278765. In sum, at
the time of the issuance of the questioned writ of execution, the subject property was covered by TCT No.
171639 covering 564 sq m in the name of Benjamin; TCT No. 207211 covering 555 sq m in the name of
Monica and her children; and TCT No. 278765 covering 445 sq m in the name of Norma, the wife of
Benjamin.

Respondents instituted the action for reconveyance involving the subject property originally
covered by TCT No. 18550. At that time, Norma had been the registered owner of a portion of the subject
property. As such, she was an indispensable party as her title to the property was affected. The Court had
thoroughly discussed in a number of cases the nature and definition of an indispensable party, to wit:

x x x [I]ndispensable parties [are] parties-in-interests without whom there can be no final

determination of an action. As such, they must be joined either as plaintiffs or as
defendants. The general rule with reference to the making of parties in a civil action
requires, of course, the joinder of all necessary parties where possible, and the joinder of all
indispensable parties under any and all conditions, their presence being a sine qua non for
the exercise of judicial power. x x x[47]

An indispensable party is a party who has such an interest in the controversy or

subject matter that a final adjudication cannot be made, in his absence, without injuring or
affecting that interest, a party who has not only an interest in the subject matter of the
controversy, but also has an interest of such nature that a final decree cannot be made
without affecting his interest or leaving the controversy in such a condition that its final
determination may be wholly inconsistent with equity and good conscience. It has also
been considered that an indispensable party is a person in whose absence there cannot be
a determination between the parties already before the court which is effective, complete,
or equitable. Further, an indispensable party is one who must be included in an action
before it may properly go forward.[48]

Thus, a person who was not impleaded in the complaint cannot be bound by the decision rendered
therein, for no man shall be affected by a proceeding in which he is a stranger. [49] Otherwise stated, things
done between strangers ought not to injure those who are not parties to them. [50]

In this case, however, as aptly held by the RTC and CA, Norma is estopped from invoking the rule on
indispensable party. Estoppel by laches or stale demands ordains that the failure or neglect, for an
unreasonable and unexplained length of time, to do that which by exercising due diligence could or should
have been done earlier, or the negligence or omission to assert a right within a reasonable time, warrants
a presumption that the party entitled to assert it either has abandoned it or declined to assert it. [51] There
is no absolute rule as to what constitutes laches; it is addressed to the sound discretion of the court. Being
an equitable doctrine, its application is controlled by equitable considerations. [52]

The CA has thoroughly explained the circumstances showing Normas knowledge of the existence of
the pending litigation involving the subject property which includes the portion registered in her name. We
quote with approval the exhaustive observations and explanations of the CA in this wise:

[Records show] that petitioner Norma D. Garcia had knowledge of the existence of
Civil Case No. Q-36147 [for reconveyance] as well as the subject thereof. The Amended
Complaint dated 26 October 1982 specifically mentioned petitioner Benjamin Garcia as
being married to herein petitioner Norma Dimalanta Garcia. It even alleged in paragraph 14
thereof that the property covered by TCT No. 207210 in the name of Rita Garcia-Shipley was
transferred to petitioner Norma Dimalanta Garcia by virtue of a Deed of Sale dated 22
August 1979 executed between petitioner Norma Garcia and Rita Garcia-Shipley and
resulted to the registration and issuance of TCT No. 278765, now TCT No. 66234, in the
name of Norma Garcia married to Benjamin Garcia. Likewise, in paragraph 15 of the said
Amended Complaint, private respondents alleged that demands were made on Rita GarciaShipley, Benjamin Garcia and Norma D. Garcia for the conveyance to them (plaintiffs) of
their legitimate shares.

Further, the private respondents alleged in their Comment dated 10 January 1997,
that petitioner Norma D. Garcia was very much aware of the existence of Civil Case No. Q36147 as the same involves the estate of her deceased parent-in-law Emilio Garcia from
which her property covered by TCT No. 66234 came from; that she knew very well that her
property is involved in the litigation yet she did not take steps to have the same excluded
therefrom, and that she even participated actively during the trial of the case and testified
to support the theory put up by the defendants. Petitioner Norma Garcias filing of the
Petition for Quieting of Title with [the] RTC of Quezon City docketed as Q-93-17396 raffled to

Branch 103 (Judge Jaime N. Salazar, Jr.) supports private respondentsassertion of petitioner
Norma Garcias knowledge of the existence and subject matter of the reconveyance case
(Civil Case No. Q-36147) as she categorically stated in paragraph 6 of said Petition that said
case for reconveyance of property apparently includes the property registered in her
name. x x x

xxxx

We, therefore, find that petitioner Norma Garcia is estopped by laches from invoking
the rule on indispensable parties. Taking into consideration the established circumstances
surrounding the transfer in her name of the parcel of land covered by TCT No. 66234
(278765), her non-joinder as an indispensable party is a mere technicality that cannot
prevail over considerations of substantial justice. x x x[53]

Indeed, evidence clearly shows that Norma had knowledge of the existence and the pendency of the
reconveyance case filed by respondents against her husband Benjamin, Rita, and Monica and her children.
She is now estopped from claiming that the RTC had not acquired jurisdiction over her and thus not bound
by the decision sought to be executed. [54] The RTC, therefore, did not abuse its discretion in denying
petitioners urgent motion to quash the writ of execution.

WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals
Decision dated May 12, 2005 and Resolution dated August 3, 2005 in CA-G.R. SP No. 41556,
are AFFIRMED.

SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION
FEDMAN DEVELOPMENT
CORPORATION,
Petitioner,

- versus -

G.R. No. 165025

Present:
CORONA, C.J., Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.
Promulgated:

FEDERICO AGCAOILI,

August 31, 2011

Respondent.
x-----------------------------------------------------------------------------------------x
DECISION
BERSAMIN, J.:

The non-payment of the prescribed filing fees at the time of the filing of the complaint or other initiatory pleading fails to
vest jurisdiction over the case in the trial court. Yet, where the plaintiff has paid the amount of filing fees assessed by the clerk of
court, and the amount paid turns out to be deficient, the trial court still acquires jurisdiction over the case, subject to the payment by
the plaintiff of the deficiency assessment.
Fedman Development Corporation (FDC) appeals the decision promulgated on August 20, 2004, [1] whereby the Court of
Appeals (CA) affirmed the judgment rendered on August 28, 1998 by the Regional Trial Court (RTC), Branch 150, Makati City, in
favor of the respondent.[2]
Antecedents
FDC was the owner and developer of a condominium project known as Fedman Suites Building (FSB) located on Salcedo
Street, Legazpi Village, Makati City. On June 18, 1975, Interchem Laboratories Incorporated (Interchem) purchased FSBs Unit 411
under a contract to sell. On March 31, 1977, FDC executed a Master Deed with Declaration of Restrictions,[3] and formed the Fedman
Suite Condominium Corporation (FSCC) to manage FSB and hold title over its common areas. [4]
On October 10, 1980, Interchem, with FDCs consent, transferred all its rights in Unit 411 to respondent Federico Agcaoili
(Agcaoili), a practicing attorney who was then also a member of the Provincial Board of Quezon Province. [5] As consideration for the
transfer, Agcaoili agreed: (a) to pay Interchem 150,000.00 upon signing of the deed of transfer; (b) to update the account by paying
to FDC the amount of 15,473.17 through a 90 day-postdated check; and (c) to deliver to FDC the balance of 137,286.83 in 135
equal monthly installments of 1,857.24 effective October 1980, inclusive of 12% interest per annum on the diminishing balance. The
obligations Agcaoili assumed totaled302,760.00.[6]
In December 1983, the centralized air-conditioning unit of FSBs fourth floor broke down. [7] On January 3, 1984, Agcaoili,
being thereby adversely affected, wrote to Eduardo X. Genato (Genato), vice-president and board member of FSCC, demanding the
repair of the air-conditioning unit.[8] Not getting any immediate response, Agcaoili sent follow-up letters to FSCC reiterating the
demand, but the letters went unheeded. He then informed FDC and FSCC that he was suspending the payment of his condominium
dues and monthly amortizations.[9]
On August 30, 1984, FDC cancelled the contract to sell involving Unit 411 and cut off the electric supply to the unit. Agcaoili
was thus prompted to sue FDC and FSCC in the RTC, Makati City, Branch 144 for injunction and damages. [10] The parties later
executed a compromise agreement that the RTC approved through its decision of August 26, 1985. As stipulated in the compromise
agreement, Agcaoili paid FDC the sum of 39,002.04 as amortizations for the period from November 1983 to July 1985; and also paid
FSCC an amount of 17,858.37 for accrued condominium dues, realty taxes, electric bills, and surcharges as of March 1985. As a
result, FDC reinstated the contract to sell and allowed Agcaoili to temporarily install two window-type air-conditioners in Unit 411. [11]
On April 22, 1986, FDC again disconnected the electric supply of Unit 411.[12] Agcaoili thus moved for the execution of the
RTC decision dated August 26, 1985.[13] On July 17, 1986, the RTC issued an order temporarily allowing Agcaoili to obtain his electric
supply from the other units in the fourth floor of FSB until the main meter was restored.[14]
On March 6, 1987, Agcaoili lodged a complaint for damages against FDC and FSCC in the RTC, which was raffled to
Branch 150 in Makati City. He alleged that the disconnection of the electric supply of Unit 411 on April 22, 1986 had unjustly
deprived him of the use and enjoyment of the unit; that the disconnection had seriously affected his law practice and had caused him
sufferings, inconvenience and embarrassment; that FDC and FSCC violated the compromise agreement; that he was entitled to actual
damages amounting to 21,626.60, as well as to moral and exemplary damages, and attorneys fees as might be proven during the trial;

that the payment of interest sought by FDC and FSCC under the contract to sell was illegal; and that FDC and FSCC were one and the
same corporation. He also prayed that FDC and FSCC be directed to return the excessive amounts collected for real estate taxes. [15]
In its answer, FDC contended that it had a personality separate from that of FSCC; that it had no obligation or liability in
favor of Agcaoili; that FSCC, being the manager of FSB and the title-holder over its common areas, was in charge of maintaining all
central and appurtenant equipment and installations for utility services (like air-conditioning unit, elevator, light and others); that
Agcaoili failed to comply with the terms of the contract to sell; that despite demands, Agcaoili did not pay the amortizations due from
November 1983 to March 1985 and the surcharges, the total amount of which was 376,539.09; that due to the non-payment, FDC
cancelled the contract to sell and forfeited the amount of 219,063.97 paid by Agcaoili, applying the amount to the payment of
liquidated damages, agents commission, and interest; that it demanded that Agcaoili vacate Unit 411, but its demand was not heeded;
that Agcaoili did not pay his monthly amortizations of 1,883.84 from October 1985 to May 1986, resulting in FSCC being unable to
pay the electric bills on time to the Manila Electric Company resulting in the disconnection of the electric supply of FSB; that it
allowed Agcaoili to obtain electric supply from other units because Agcaoili promised to settle his accounts but he reneged on his
promise; that Agcaoilis total obligation was 55,106.40; that Agcaoilis complaint for damages was baseless and was intended to cover
up his delinquencies; that the interest increase from 12% to 24% per annum was authorized under the contract to sell in view of the
adverse economic conditions then prevailing in the country; and that the complaint for damages was barred by the principle of res
judicata because the issues raised therein were covered by the RTC decision dated August 26, 1985.
As compulsory counterclaim, FDC prayed for an award of moral and exemplary damages each amounting to 1,000,000.00,
attorneys fees amounting to 100,000.00 and costs of suit.[16]
On its part, FSCC filed an answer, admitting that the electric supply of Unit 411 was disconnected for the second time on
April 22, 1986, but averring that the disconnection was justified because of Agcaoilis failure to pay the monthly amortizations and
condominium dues despite repeated demands. It averred that it did not repair the air-conditioning unit because of dwindling
collections caused by the failure of some unit holders to pay their obligations on time; that the unit holders were notified of the
electricity disconnection; and that the electric supply of Unit 411 could not be restored until Agcaoili paid his condominium dues
totaling 14,701.16 as of April 1987. [17]
By way of counterclaim, FSCC sought moral damages and attorneys fees of 100,000.00 and 50,000.00, respectively, and
cost of suit.[18]
On August 28, 1998, the RTC rendered judgment in favor of Agcaoili, holding that his complaint for damages was not barred
by res judicata; that he was justified in suspending the payment of his monthly amortizations; that FDCs cancellation of the contract to
sell was improper; that FDC and FSCC had no separate personalities; and that Agcaoili was entitled to damages. The RTC disposed
thuswise:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and as against both defendants,
declaring the increased rates sought by defendants to be illegal, and ordering defendant FDC/FSCC to reinstate the
contract to sell, as well as to provide/restore the air-conditioning services/electric supply to plaintiffs unit. Both
defendants are likewise ordered to pay plaintiff:
a. The amount of 21,626.60 as actual damages;
b.

500,000.00 as moral damages;

c. 50,000.00 as exemplary damages; and

d.

50,000.00 as and for attorneys fees.

and to return to plaintiff the excess amount collected from him for real estate taxes.
SO ORDERED.[19]

FDC appealed, but the CA affirmed the RTC.[20] Hence, FDC comes to us on further appeal.[21]
Issues

FDC claims that there was a failure to pay the correct amount of docket fee herein because the complaint did not specify the
amounts of moral damages, exemplary damages, and attorneys fees; that the payment of the prescribed docket fee by Agcaoili was
necessary for the RTC to acquire jurisdiction over the case; and that, consequently, the RTC did not acquire jurisdiction over this case.
FDC also claims that the proceedings in the RTC were void because the jurisdiction over the subject matter of the action
pertained to the Housing and Land Use Regulatory Board (HLURB); and that both the RTC and the CA erred in ruling: ( a) that
Agcaoili had the right to suspend payment of his monthly amortizations; (b) that FDC had no right to cancel the contract to sell; and
(c) that FDC and FSCC were one and same corporation, and as such were solidarily liable to Agcaoili for damages. [22]
Ruling
The petition has no merit.
I
The filing of the complaint or other initiatory pleading and the payment of the prescribed docket fee are the acts that vest a
trial court with jurisdiction over the claim. [23] In an action where the reliefs sought are purely for sums of money and damages, the
docket fees are assessed on the basis of the aggregate amount being claimed. [24] Ideally, therefore, the complaint or similar pleading
must specify the sums of money to be recovered and the damages being sought in order that the clerk of court may be put in a position
to compute the correct amount of docket fees.
If the amount of docket fees paid is insufficient in relation to the amounts being sought, the clerk of court or his duly
authorized deputy has the responsibility of making a deficiency assessment, and the plaintiff will be required to pay the deficiency.
[25]

The non-specification of the amounts of damages does not immediately divest the trial court of its jurisdiction over the case,

provided there is no bad faith or intent to defraud the Government on the part of the plaintiff. [26]
The prevailing rule is that if the correct amount of docket fees are not paid at the time of filing, the trial court still acquires
jurisdiction upon full payment of the fees within a reasonable time as the court may grant, barring prescription.[27] The prescriptive
period that bars the payment of the docket fees refers to the period in which a specific action must be filed, so that in every case the
docket fees must be paid before the lapse of the prescriptive period, as provided in the applicable laws, particularly Chapter 3, Title V,
Book III, of the Civil Code, the principal law on prescription of actions.[28]
In Rivera v. Del Rosario,[29] the Court, resolving the issue of the failure to pay the correct amount of docket fees due to the
inadequate assessment by the clerk of court,ruled that jurisdiction over the complaint was still validly acquired upon the full payment
of the docket fees assessed by the Clerk of Court. Relying on Sun Insurance Office, Ltd., (SIOL) v. Asuncion,[30] the Court opined that
the filing of the complaint or appropriate initiatory pleading and the payment of the prescribed docket fees vested a trial court with
jurisdiction over the claim, and although the docket fees paid were insufficient in relation to the amount of the claim, the clerk of court
or his duly authorized deputy retained the responsibility of making a deficiency assessment, and the party filing the action could be
required to pay the deficiency, without jurisdiction being automatically lost.
Even where the clerk of court fails to make a deficiency assessment, and the deficiency is not paid as a result, the trial court
nonetheless continues to have jurisdiction over the complaint, unless the party liable is guilty of a fraud in that regard, considering that
the deficiency will be collected as a fee in lien within the contemplation of Section 2, [31]Rule 141 (as revised by A.M. No. 00-2-01SC).[32] The reason is that to penalize the party for the omission of the clerk of court is not fair if the party has acted in good faith.
Herein, the docket fees paid by Agcaoili were insufficient considering that the complaint did not specify the amounts of
moral damages, exemplary damages and attorneys fees. Nonetheless, it is not disputed that Agcaoili paid the assessed docket fees.
Such payment negated bad faith or intent to defraud the Government.[33] Nonetheless, Agcaoili must remit any docket fee deficiency to
the RTCs clerk of court.
II

FDC is now barred from asserting that the HLURB, not the RTC, had jurisdiction over the case. As already stated, Agcaoili
filed a complaint against FDC in the RTC on February 28, 1985 after FDC disconnected the electric supply of Unit 411. Agcaoili and
FDC executed a compromise agreement on August 16, 1985. The RTC approved the compromise agreement through its decision of
August 26, 1985. In all that time, FDC never challenged the RTCs jurisdiction nor invoked the HLURBs authority. On the contrary,
FDC apparently recognized the RTCs jurisdiction by its voluntary submission of the compromise agreement to the RTC for approval.
Also, FDC did not assert the HLURBs jurisdiction in its answer to Agcaoilis second complaint (filed on March 6, 1987). Instead, it
even averred in that answer that the decision of August 26, 1985 approving the compromise agreement already barred Agcaoili from
filing the second complaint under the doctrine of res judicata. FDC also thereby sought affirmative relief from the RTC through its
counterclaim.
FDC invoked HLURBs authority only on September 10, 1990, [34] or more than five years from the time the prior case was
commenced on February 28, 1985, and after the RTC granted Agcaoilis motion to enjoin FDC from cancelling the contract to sell. [35]
The principle of estoppel, which is based on equity and public policy, [36] dictates that FDCs active participation in both RTC
proceedings and its seeking therein affirmative reliefs now precluded it from denying the RTCs jurisdiction. Its acknowledgment of
the RTCs jurisdiction and its subsequent denial of such jurisdiction only after an unfavorable judgment were inappropriate and
intolerable. The Court abhors the practice of any litigant of submitting a case for decision in the trial court, and then accepting the
judgment only if favorable, but attacking the judgment for lack of jurisdiction if it is not. [37]
III
In upholding Agcaoilis right to suspend the payment of his monthly amortizations due to the increased interest rates imposed
by FDC, and because he found FDCs cancellation of the contract to sell as improper, the CA found and ruled as follows:
It is the contention of the appellee that he has the right to suspend payments since the increase in interest rate
imposed by defendant-appellant FDC is not valid and therefore cannot be given legal effect. Although Section II,
paragraph d of the Contract to Sell entered into by the parties states that, should there be an increase in bank interest
rate for loans and/or other financial accommodations, the rate of interest provided for in this contract shall be
automatically amended to equal the said increased bank interest rate, the date of said amendment to coincide with
the date of said increase in interest rate, the said increase still needs to [be] accompanied by valid proofs and not one
of the parties must unilaterally alter what was originally agreed upon. However, FDC failed to substantiate the
alleged increase with sufficient proof, thus we quote with approval the findings of the lower court, to wit:
In the instant case, defendant FDC failed to show by evidence that it incurred loans and /or other
financial accommodations to pay interest for its loans in developing the property. Thus, the increased
interest rates said defendant is imposing on plaintiff is not justified, and to allow the same is tantamount
to unilaterally altering the terms of the contract which the law proscribes. Article 1308 of the Civil Code
provides:
Art. 1308 The contract must bind both contracting parties; its validity or compliance cannot
be left to the will of one of them.
For this reason, the court sees no valid reason for defendant FDC to cancel the contract to sell on
ground of default or non-payment of monthly amortizations. (RTC rollo, pp. 79-80)
It was also grave error on the part of the FDC to cancel the contract to sell for non-payment of the monthly
amortizations without taking into consideration Republic Act 6552, otherwise known as the Maceda Law. The policy
of law, as embodied in its title, is to provide protection to buyers of real estate on installment payments. As clearly
specified in Section 3, the declared public policy espoused by Republic Act No. 6552 is to protect buyers of real
estate on installment payments against onerous and oppressive conditions. Thus, in order for FDC to have validly
cancelled the existing contract to sell, it must have first complied with Section 3 (b) of RA 6552. FDC should have
refund the appellee the cash surrender value of the payments on the property equivalent to fifty percent of the total
payments made. At this point, we, find no error on the part of the lower court when it ruled that:
There is nothing in the record to show that the aforementioned requisites for a valid cancellation of a
contract where complied with by defendant FDC. Hence, the contract to sell which defendant FDC
cancelled as per its letter dated August 17, 1987 remains valid and subsisting. Defendant FDC cannot by
its own forfeit the payments already made by the plaintiff which as of the same date amounts
to 263,637.73.(RTC rollo, p. 81)[38]

We sustain the aforequoted findings and ruling of the CA, which were supported by the records and relevant laws, and were
consistent with the findings and ruling of the RTC. Factual findings and rulings of the CA are binding and conclusive upon this Court
if they are supported by the records and coincided with those made by the trial court.[39]
FDCs claim that it was distinct in personality from FSCC is unworthy of consideration due to its being a question of fact that
cannot be reviewed under Rule 45.[40]
Among the obligations of FDC and FSCC to the unit owners or purchasers of FSBs units was the duty to provide a
centralized air-conditioning unit, lighting, electricity, and water; and to maintain adequate fire exit, elevators, and cleanliness in each
floor of the common areas of FSB.[41] But FDC and FSCC failed to repair the centralized air-conditioning unit of the fourth floor of
FSB despite repeated demands from Agcaoili.[42] To alleviate the physical discomfort and adverse effects on his work as a practicing
attorney brought about by the breakdown of the air-conditioning unit, he installed two window-type air-conditioners at his own
expense.[43] Also, FDC and FSCC failed to provide water supply to the comfort room and to clean the corridors. [44] The fire exit and
elevator were also defective.[45] These defects, among other circumstances, rightly compelled Agcaoili to suspend the payment of his
monthly amortizations and condominium dues. Instead of addressing his valid complaints, FDC disconnected the electric supply of his
Unit 411 and unilaterally increased the interest rate without justification. [46]
Clearly, FDC was liable for damages. Article 1171 of the Civil Code provides that those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof are liable for damages.
WHEREFORE, we DENY the petition for review; AFFIRM the decision of the Court of Appeals; and DIRECT the Clerk
of Court of the Regional Trial Court, Makati City, Branch 150, or his duly authorized deputy to assess and collect the additional
docket fees from the respondent as fees in lien in accordance with Section 2, Rule 141 of theRules of Court.
SO ORDERED.

SECOND DIVISION
JESSE U. LUCAS,
Petitioner,

G.R. No. 190710

Present:

CARPIO, J.,
- versus -

Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

JESUS S. LUCAS,

Promulgated:

Respondent.
June 6, 2011

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

DECISION

NACHURA, J.:

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

The antecedents of the case are, as follows:

On July 26, 2007, petitioner, Jesse U. Lucas, filed a Petition to Establish Illegitimate Filiation (with Motion for
the

Submission

of

Parties

to

DNA

Testing) [2] before

the

Regional

Trial

Court

(RTC),

Branch

72, Valenzuela City. Petitioner narrated that, sometime in 1967, his mother, Elsie Uy (Elsie), migrated
to Manila from Davao and stayed with a certain Ate Belen (Belen) who worked in a prominent nightspot
in Manila. Elsie would oftentimes accompany Belen to work. On one occasion, Elsie got acquainted with
respondent, Jesus S. Lucas, at Belens workplace, and an intimate relationship developed between the two.
Elsie eventually got pregnant and, on March 11, 1969, she gave birth to petitioner, Jesse U. Lucas. The
name of petitioners father was not stated in petitioners certificate of live birth. However, Elsie later on told
petitioner that his father is respondent. On August 1, 1969, petitioner was baptized at San Isidro
Parish, Taft Avenue, Pasay City. Respondent allegedly extended financial support to Elsie and petitioner for
a period of about two years. When the relationship of Elsie and respondent ended, Elsie refused to accept
respondents offer of support and decided to raise petitioner on her own. While petitioner was growing up,
Elsie made several attempts to introduce petitioner to respondent, but all attempts were in vain.

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

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

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

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

After learning of the September 3, 2007 Order, respondent filed a motion for reconsideration. [5] Respondent
averred that the petition was not in due form and substance because petitioner could not have personally
known the matters that were alleged therein. He argued that DNA testing cannot be had on the basis of a
mere allegation pointing to respondent as petitioners father. Moreover, jurisprudence is still unsettled on
the acceptability of DNA evidence.
On July 30, 2008, the RTC, acting on respondents motion for reconsideration, issued an Order [6] dismissing
the case. The court remarked that, based on the case of Herrera v. Alba,[7] there are four significant
procedural aspects of a traditional paternity action which the parties have to face: a prima facie case,
affirmative defenses, presumption of legitimacy, and physical resemblance between the putative father
and the child. The court opined that petitioner must first establish these four procedural aspects before he
can present evidence of paternity and filiation, which may include incriminating acts or scientific evidence
like blood group test and DNA test results. The court observed that the petition did not show that these
procedural aspects were present. Petitioner failed to establish a prima facie case considering that (a) his
mother did not personally declare that she had sexual relations with respondent, and petitioners statement
as to what his mother told him about his father was clearly hearsay; (b) the certificate of live birth was not
signed by respondent; and (c) although petitioner used the surname of respondent, there was no
allegation that he was treated as the child of respondent by the latter or his family. The court opined that,
having failed to establish a prima facie case, respondent had no obligation to present any affirmative
defenses. The dispositive portion of the said Order therefore reads:
WHEREFORE, for failure of the petitioner to establish compliance with the four
procedural aspects of a traditional paternity action in his petition, his motion for the
submission of parties to DNA testing to establish paternity and filiation is
hereby DENIED. This case is DISMISSED without prejudice.
SO ORDERED.[8]

Petitioner seasonably filed a motion for reconsideration to the Order dated July 30, 2008, which the RTC
resolved in his favor. Thus, on October 20, 2008, it issued the Order [9]setting aside the courts previous
order, thus:
WHEREFORE, in view of the foregoing, the Order dated July 30, 2008 is hereby
reconsidered and set aside.

Let the Petition (with Motion for the Submission of Parties to DNA Testing) be set for
hearing on January 22, 2009 at 8:30 in the morning.

xxxx

SO ORDERED.[10]

This time, the RTC held that the ruling on the grounds relied upon by petitioner for filing the petition is
premature considering that a full-blown trial has not yet taken place. The court stressed that the petition
was sufficient in form and substance. It was verified, it included a certification against forum shopping, and
it contained a plain, concise, and direct statement of the ultimate facts on which petitioner relies on for his
claim, in accordance with Section 1, Rule 8 of the Rules of Court. The court remarked that the allegation

that the statements in the petition were not of petitioners personal knowledge is a matter of evidence. The
court also dismissed respondents arguments that there is no basis for the taking of DNA test, and that
jurisprudence is still unsettled on the acceptability of DNA evidence. It noted that the new Rule on DNA
Evidence[11] allows the conduct of DNA testing, whether at the courts instance or upon application of any
person who has legal interest in the matter in litigation.

Respondent filed a Motion for Reconsideration of Order dated October 20, 2008 and for Dismissal of
Petition,[12] reiterating that (a) the petition was not in due form and substance as no defendant was named
in the title, and all the basic allegations were hearsay; and (b) there was no prima facie case, which made
the petition susceptible to dismissal.

The RTC denied the motion in the Order dated January 19, 2009, and rescheduled the hearing. [13]

Aggrieved, respondent filed a petition for certiorari with the CA, questioning the Orders dated
October 20, 2008 and January 19, 2009.

On September 25, 2009, the CA decided the petition for certiorari in favor of respondent, thus:

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

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

The CA remarked that petitioner filed the petition to establish illegitimate filiation, specifically
seeking a DNA testing order to abbreviate the proceedings. It noted that petitioner failed to show that the
four significant procedural aspects of a traditional paternity action had been met. The CA further held that
a DNA testing should not be allowed when the petitioner has failed to establish a prima facie case, thus:

While the tenor [of Section 4, Rule on DNA Evidence] appears to be absolute, the rule could not
really have been intended to trample on the substantive rights of the parties. It could have not
meant to be an instrument to promote disorder, harassment, or extortion. It could have not been
intended to legalize unwarranted expedition to fish for evidence. Such will be the situation in this
particular case if a court may at any time order the taking of a DNA test. If the DNA test in

compulsory recognition cases is immediately available to the petitioner/complainant without

requiring first the presentation of corroborative proof, then a dire and absurd rule would result.
Such will encourage and promote harassment and extortion.

xxxx

At the risk of being repetitious, the Court would like to stress that it sees the danger of allowing an
absolute DNA testing to a compulsory recognition test even if the plaintiff/petitioner failed to
establish prima facie proof. x x x If at anytime, motu proprio and without pre-conditions, the court
can indeed order the taking of DNA test in compulsory recognition cases, then the prominent and
well-to-do members of our society will be easy prey for opportunists and extortionists. For no cause
at all, or even for [sic] casual sexual indiscretions in their younger years could be used as a means
to harass them. Unscrupulous women, unsure of the paternity of their children may just be taking
the chances-just in case-by pointing to a sexual partner in a long past one-time encounter. Indeed
an absolute and unconditional taking of DNA test for compulsory recognition case opens wide the
opportunities for extortionist to prey on victims who have no stomach for scandal. [15]

Petitioner moved for reconsideration. On December 17, 2009, the CA denied the motion for lack of
merit.

[16]

In this petition for review on certiorari, petitioner raises the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT RESOLVED THE ISSUE OF LACK
OF JURISDICTION OVER THE PERSON OF HEREIN RESPONDENT ALBEIT THE SAME WAS
NEVER RAISED IN THE PETITION FOR CERTIORARI.

I.A
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT RULED THAT
JURISDICTION WAS NOT ACQUIRED OVER THE PERSON OF THE RESPONDENT.

I.B
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT FAILED TO
REALIZE THAT THE RESPONDENT HAD ALREADY SUBMITTED VOLUNTARILY TO
THE JURISDICTION OF THE COURT A QUO.

I.C
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT ESSENTIALLY
RULED THAT THE TITLE OF A PLEADING, RATHER THAN ITS BODY, IS
CONTROLLING.

II.
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT ORDERED THE DISMISSAL OF
THE PETITION BY REASON OF THE MOTION (FILED BY THE PETITIONER BEFORE THE COURT A
QUO) FOR THE CONDUCT OF DNA TESTING.

II.A

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT ESSENTIALLY

RULED THAT DNA TESTING CAN ONLY BE ORDERED AFTER THE PETITIONER
ESTABLISHES PRIMA FACIE PROOF OF FILIATION.

III.
WHETHER OR NOT THE COURT OF APPEALS ERRED WITH ITS MISPLACED RELIANCE ON THE
CASE OF HERRERA VS. ALBA,

ESPECIALLY AS REGARDS THE FOUR SIGNIFICANT PROCEDURAL ASPECTS OF A TRADITIONAL

PATERNITY ACTION.[17]

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

Petitioner argues that the case was adversarial in nature. Although the caption of the petition does not
state respondents name, the body of the petition clearly indicates his name and his known address. He
maintains that the body of the petition is controlling and not the caption.

Finally, petitioner asserts that the motion for DNA testing should not be a reason for the dismissal of the
petition since it is not a legal ground for the dismissal of cases. If the CA entertained any doubt as to the
propriety of DNA testing, it should have simply denied the motion. [18] Petitioner points out that Section 4 of
the Rule on DNA Evidence does not require that there must be a prior proof of filiation before DNA testing
can be ordered. He adds that the CA erroneously relied on the four significant procedural aspects of a
paternity case, as enunciated in Herrera v. Alba.[19] Petitioner avers that these procedural aspects are not
applicable at this point of the proceedings because they are matters of evidence that should be taken up
during the trial.[20]

In his Comment, respondent supports the CAs ruling on most issues raised in the petition for certiorari and
merely reiterates his previous arguments. However, on the issue of lack of jurisdiction, respondent
counters that, contrary to petitioners assertion, he raised the issue before the CA in relation to his claim
that the petition was not in due form and substance. Respondent denies that he waived his right to the
service of summons. He insists that the alleged waiver and voluntary appearance was conditional upon a
finding by the court that summons is indeed required. He avers that the assertion of affirmative defenses,
aside from lack of jurisdiction over the person of the defendant, cannot be considered as waiver of the
defense of lack of jurisdiction over such person.

The petition is meritorious.

Primarily, we emphasize that the assailed Orders of the trial court were orders denying respondents
motion to dismiss the petition for illegitimate filiation. An order denying a motion to dismiss is an
interlocutory order which neither terminates nor finally disposes of a case, as it leaves something to be
done by the court before the case is finally decided on the merits. As such, the general rule is that the
denial of a motion to dismiss cannot be questioned in a special civil action for certiorari, which is a remedy
designed to correct errors of jurisdiction and not errors of judgment. Neither can a denial of a motion to
dismiss be the subject of an appeal unless and until a final judgment or order is rendered. In a number of
cases, the court has granted the extraordinary remedy of certiorari on the denial of the motion to dismiss
but only when it has been tainted with grave abuse of discretion amounting to lack or excess of
jurisdiction.[21] In the present case, we discern no grave abuse of discretion on the part of the trial court in
denying the motion to dismiss.

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

We need not belabor the issues on whether lack of jurisdiction was raised before the CA, whether
the court acquired jurisdiction over the person of respondent, or whether respondent waived his right to
the service of summons. We find that the primordial issue here is actually whether it was necessary, in the
first place, to serve summons on respondent for the court to acquire jurisdiction over the case. In other
words, was the service of summons jurisdictional? The answer to this question depends on the nature of
petitioners action, that is, whether it is an action in personam, in rem, or quasi in rem.

An action in personam is lodged against a person based on personal liability; an action in rem is
directed against the thing itself instead of the person; while an action quasi in rem names a person as
defendant, but its object is to subject that person's interest in a property to a corresponding lien or
obligation. A petition directed against the "thing" itself or the res, which concerns the status of a person,
like a petition for adoption, annulment of marriage, or correction of entries in the birth certificate, is an
action in rem.[22]

In an action in personam, jurisdiction over the person of the defendant is necessary for the court to
validly try and decide the case. In a proceeding in rem or quasi in rem, jurisdiction over the person of the
defendant is not a prerequisite to confer jurisdiction on the court, provided that the latter has jurisdiction
over the res. Jurisdiction over the resis acquired either (a) by the seizure of the property under legal
process, whereby it is brought into actual custody of the law, or (b) as a result of the institution of legal
proceedings, in which the power of the court is recognized and made effective. [23]

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

If at all, service of summons or notice is made to the defendant, it is not for the purpose of vesting
the court with jurisdiction, but merely for satisfying the due process requirements. [25] This is but proper in
order to afford the person concerned the opportunity to protect his interest if he so chooses. [26] Hence,
failure to serve summons will not deprive the court of its jurisdiction to try and decide the case. In such a
case, the lack of summons may be excused where it is determined that the adverse party had, in fact, the
opportunity to file his opposition, as in this case. We find that the due process requirement with respect to
respondent has been satisfied, considering that he has participated in the proceedings in this case and he
has the opportunity to file his opposition to the petition to establish filiation.

To address respondents contention that the petition should have been adversarial in form, we
further hold that the herein petition to establish filiation was sufficient in form. It was indeed adversarial in
nature despite its caption which lacked the name of a defendant, the failure to implead respondent as
defendant, and the non-service of summons upon respondent. A proceeding is adversarial where the party
seeking relief has given legal warning to the other party and afforded the latter an opportunity to contest
it.[27] In this petitionclassified as an action in remthe notice requirement for an adversarial proceeding was
likewise satisfied by the publication of the petition and the giving of notice to the Solicitor General, as
directed by the trial court.

The petition to establish filiation is sufficient in substance. It satisfies Section 1, Rule 8 of the Rules
of Court, which requires the complaint to contain a plain, concise, and direct statement of the ultimate
facts upon which the plaintiff bases his claim. A fact is essential if it cannot be stricken out without leaving
the statement of the cause of action inadequate. [28] A complaint states a cause of action when it contains
the following elements: (1) the legal right of plaintiff, (2) the correlative obligation of the defendant, and
(3) the act or omission of the defendant in violation of said legal right. [29]

The petition sufficiently states the ultimate facts relied upon by petitioner to establish his filiation to
respondent. Respondent, however, contends that the allegations in the petition were hearsay as they were
not of petitioners personal knowledge. Such matter is clearly a matter of evidence that cannot be
determined at this point but only during the trial when petitioner presents his evidence.

In a motion to dismiss a complaint based on lack of cause of action, the question submitted to the court for
determination is the sufficiency of the allegations made in the complaint to constitute a cause of action
and not whether those allegations of fact are true, for said motion must hypothetically admit the truth of
the

facts

alleged

in

the

complaint. [30]

The inquiry is confined to the four corners of the complaint, and no other. [31] The test of the sufficiency of
the facts alleged in the complaint is whether or not, admitting the facts alleged, the court could render a
valid judgment upon the same in accordance with the prayer of the complaint. [32]

If the allegations of the complaint are sufficient in form and substance but their veracity and correctness
are assailed, it is incumbent upon the court to deny the motion to dismissand require the defendant to
answer and go to trial to prove his defense.
ascertained at the trial of the case on the merits.

The veracity of the assertions of the parties can be

[33]

The statement in Herrera v. Alba[34] that there are four significant procedural aspects in a traditional
paternity case which parties have to face has been widely misunderstood and misapplied in this case. A
party is confronted by these so-called procedural aspects during trial, when the parties have presented
their respective evidence. They are matters of evidence that cannot be determined at this initial stage of
the proceedings, when only the petition to establish filiation has been filed. The CAs observation that
petitioner failed to establish a prima facie casethe first procedural aspect in a paternity caseis therefore
misplaced. A prima facie case is built by a partys evidence and not by mere allegations in the initiatory
pleading.

Clearly then, it was also not the opportune time to discuss the lack of a prima facie case vis--vis the
motion for DNA testing since no evidence has, as yet, been presented by petitioner. More essentially, it is
premature to discuss whether, under the circumstances, a DNA testing order is warranted considering that
no such order has yet been issued by the trial court. In fact, the latter has just set the said case for
hearing.

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

The Rule on DNA Evidence was enacted to guide the Bench and the Bar for the introduction and use
of DNA evidence in the judicial system. It provides the prescribed parameters on the requisite elements for

reliability and validity (i.e., the proper procedures, protocols, necessary laboratory reports, etc.), the
possible sources of error, the available objections to the admission of DNA test results as evidence as well
as the probative value of DNA evidence. It seeks to ensure that the evidence gathered, using various
methods of DNA analysis, is utilized effectively and properly, [and] shall not be misused and/or abused
and, more importantly, shall continue to ensure that DNA analysis serves justice and protects, rather than
prejudice the public.[35]

Not surprisingly, Section 4 of the Rule on DNA Evidence merely provides for conditions that are
aimed to safeguard the accuracy and integrity of the DNA testing. Section 4 states:

SEC. 4. Application for DNA Testing Order. The appropriate court may, at any time,
either motu proprio or on application of any person who has a legal interest in the matter in
litigation, order a DNA testing. Such order shall issue after due hearing and notice to the
parties upon a showing of the following:
(a) A biological sample exists that is relevant to the case;
(b) The biological sample: (i) was not previously subjected to the type of DNA testing
now requested; or (ii) was previously subjected to DNA testing, but the results
may require confirmation for good reasons;
(c) The DNA testing uses a scientifically valid technique;
(d) The DNA testing has the scientific potential to produce new information that is
relevant to the proper resolution of the case; and
(e) The existence of other factors, if any, which the court may consider as potentially
affecting the accuracy or integrity of the DNA testing.
This Rule shall not preclude a DNA testing, without need of a prior court order, at the
behest of any party, including law enforcement agencies, before a suit or proceeding is
commenced.

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

In some states, to warrant the issuance of the DNA testing order, there must be a show cause
hearing wherein the applicant must first present sufficient evidence to establish a prima facie case or a
reasonable possibility of paternity or good cause for the holding of the test. [36] In these states, a court
order for blood testing is considered a search, which, under their Constitutions (as in ours), must be
preceded by a finding of probable cause in order to be valid. Hence, the requirement of a prima facie case,
or reasonable possibility, was imposed in civil actions as a counterpart of a finding of probable cause. The
Supreme Court of Louisiana eloquently explained

Although a paternity action is civil, not criminal, the constitutional prohibition against
unreasonable searches and seizures is still applicable, and a proper showing of sufficient
justification under the particular factual circumstances of the case must be made before a
court may order a compulsory blood test. Courts in various jurisdictions have differed

regarding the kind of procedures which are required, but those jurisdictions have almost
universally found that a preliminary showing must be made before a court can
constitutionally order compulsory blood testing in paternity cases. We agree, and find that,
as a preliminary matter, before the court may issue an order for compulsory blood testing,
the moving party must show that there is a reasonable possibility of paternity. As explained
hereafter, in cases in which paternity is contested and a party to the action refuses to
voluntarily undergo a blood test, a show cause hearing must be held in which the court can
determine whether there is sufficient evidence to establish a prima facie case which
warrants issuance of a court order for blood testing.[37]

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

Notwithstanding these, it should be stressed that the issuance of a DNA testing order remains
discretionary upon the court. The court may, for example, consider whether there is absolute necessity for
the DNA testing. If there is already preponderance of evidence to establish paternity and the DNA test
result would only be corroborative, the court may, in its discretion, disallow a DNA testing.

WHEREFORE, premises considered, the petition is GRANTED. The Court of Appeals Decision dated
September 25, 2009 and Resolution dated December 17, 2009 areREVERSED and SET ASIDE. The Orders
dated

October

20,

2008

and

the Regional Trial Court of Valenzuela City are AFFIRMED.

SO ORDERED.

January

19,

2009

of

SECOND DIVISION
[G.R. No. 173085 : January 19, 2011]
PHILIPPINE VETERANS BANK, Petitioner, v. BASES CONVERSION DEVELOPMENT AUTHORITY,
LAND BANK OF THE PHILIPPINES, ARMANDO SIMBILLO, CHRISTIAN MARCELO, ROLANDO
DAVID, RICARDO BUCUD, PABLO SANTOS, AGRIFINA ENRIQUEZ, CONRADO ESPELETA,
CATGERUBE CASTRO, CARLITO MERCADO AND ALFREDO SUAREZ, Respondents.
DECISION

ABAD, J.:

This case is about the authority of the court in an expropriation case to adjudicate questions of ownership
of the subject properties where such questions involve the determination of the validity of the issuance to
the defendants of Certificates of Land Ownership Awards (CLOAs) and Emancipation Patents (EPs),
questions that fall within the jurisdiction of the Department of Agrarian Reform Adjudication Board
(DARAB).chanrobles|lawlibrary
The Facts and the Case
In late 2003 respondent Bases Conversion Development Authority (BCDA), a government corporation,
filed several expropriation actions before the various branches of the Regional Trial Court (RTC) of Angeles
City, for acquisition of lands needed for the construction of the Subic-Clark-Tarlac Expressway Project. Ten
of these cases were raffled to Branch 58 of the court[1] and it is these that are the concern of the present
petition.chanrobles|lawlibrary
The defendants in Branch 58 cases were respondents Armando Simbillo, Christian Marcelo, Rolando David,
Ricardo Bucud, Pablo Santos, Agrifina Enriquez, Conrado Espeleta, Catgerube Castro, Carlito Mercado, and
Alfredo Suarez. They were the registered owners of the expropriated lands that they acquired as
beneficiaries of the comprehensive agrarian reform program. Another defendant was Land Bank of the
Philippines, the mortgagee of the lands by virtue of the loans it extended for their acquisition. The lands
in these cases were located in Porac and Floridablanca, Pampanga.chanrobles|lawlibrary
On learning of the expropriation cases before Branch 58, petitioner Philippine Veterans Bank (PVB) filed
motions to intervene in all the cases with attached complaints-in-intervention, a remedy that it adopted in
similar cases with the other branches. PVB alleged that the covered properties actually belonged to
Belmonte Agro-Industrial Development Corp. which mortgaged the lands to PVB in 1976. PVB had since
foreclosed on the mortgages and bought the same at public auction in 1982. Unfortunately, the bank had
been unable to consolidate ownership in its name.chanrobles|lawlibrary
But, in its order of August 18, 2004,[2] Branch 58 denied PVB's motion for intervention on the ground that
the intervention amounts to a third-party complaint that is not allowed in expropriation cases and that the
intervention would delay the proceedings in the cases before it. Besides, said Branch 58, PVB had a
pending action for annulment of the titles issued to the individual defendants and this was pending before
Branch 62 of the court.chanrobles|lawlibrary
PVB filed its motion for reconsideration but Branch 58 denied the same, prompting the bank to file a
petition for certiorari with the Court of Appeals (CA).[3] On January 26, 2006 the CA rendered a decision,
dismissing the petition for lack of merit.[4] It also denied in a resolution dated June 2, 2006[5] PVB's
motion for reconsideration.chanrobles|lawlibrary
Meanwhile, on April 3, 2006 Branch 58 issued separate decisions in all 10 cases before it, granting the
expropriation of the subject properties. The court noted the uncertainty as to the ownership of such
properties but took no action to grant BCDA's prayer in its complaint that it determine the question of
ownership of the same pursuant to Section 9, Rule 67 of the Revised Rules of Civil Procedure.[6]
The Issue Presented
The issue presented in this case is whether or not the CA erred in holding that PVB was not entitled to
intervene in the expropriation cases before Branch 58 of the Angeles City RTC.chanrobles|lawlibrary
The Court's Ruling
PVB maintains that in deciding the case, the RTC and the CA ignored Section 9, Rule 67 of the 1997 Rules
of Civil Procedure, which authorizes the court adjudicating the expropriation case to hear and decide

conflicting claims regarding the ownership of the properties involved while the compensation for the
expropriated property is in the meantime deposited with the court. Section 9 provides:chanrobles|
virtuallawlibrary
Sec. 9. Uncertain ownership; conflicting claims. - If the ownership of the property taken is
uncertain, or there are conflicting claims to any part thereof, the court may order any sum or
sums awarded as compensation for the propertyto be paid to the court for the benefit of the
person adjudged in the same proceeding to be entitled thereto. But the judgment shall require
the payment of the sum or sums awarded to either the defendant or the court before the
plaintiff can enter upon the property, or retain it for the public use or purpose if entry has
already been made.
PVB's point regarding the authority of the court in expropriation cases to hear and adjudicate conflicting
claims over the ownership of the lands involved in such cases is valid. But such rule obviously cannot
apply to PVB for the following reasons:chanrobles|virtuallawlibrary
1. At the time PVB tried to intervene in the expropriation cases, its conflict with the farmer beneficiaries
who held CLOAs, EPs, or TCTs emanating from such titles were already pending before Angeles City RTC
Branch 62, a co-equal branch of the same court. Branch 58 had no authority to pre-empt Branch 62 of its
power to hear and adjudicate claims that were already pending before it.chanrobles|lawlibrary
2. Of course, subsequently, after the CA dismissed PVB's petition on January 26, 2006, the latter filed a
motion for reconsideration, pointing out that it had in the meantime already withdrawn the actions it filed
with Branch 62 after learning from the decision of the Supreme Court in Department of Agrarian Reform v.
Cuenca,[7] that jurisdiction over cases involving the annulment of CLOAs and EPs were vested by Republic
Act 6657 in the DARAB.[8]
PVB now points out that, since there was no longer any impediment in RTC Branch 58 taking cognizance of
its motion for intervention and adjudicating the parties' conflicting claims over the expropriated properties,
the CA was in error in not reconsidering its decision.chanrobles|lawlibrary
But PVB's withdrawal of its actions from Branch 62 cannot give Branch 58 comfort. As PVB itself insists,
jurisdiction over the annulment of the individual defendants' CLOAs and EPs (which titles if annulled would
leave PVB's titles to the lands unchallenged) lies with the DARAB. Branch 58 would still have no power to
adjudicate the issues of ownership presented by the PVB's intervention.chanrobles|lawlibrary
Actually, PVB's remedy was to secure an order from Branch 58 to have the proceeds of the expropriation
deposited with that branch in the meantime, pending adjudication of the issues of ownership of the
expropriated lands by the DARAB. Section 9 above empowers the court to order payment to itself of the
proceeds of the expropriation whenever questions of ownership are yet to be settled. There is no reason
why this rule should not be applied even where the settlement of such questions is to be made by another
tribunal.chanrobles|lawlibrary
WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of Appeals dated
January 26, 2006 and its resolution dated June 2, 2006 in CA-G.R. SP 88144.chanrobles|lawlibrary
SO ORDERED.

EN BANC

WILSON P. GAMBOA,

G.R. No. 176579

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

CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
SERENO, JJ.

PABLITO V. SANIDAD and

Promulgated:

ARNO V. SANIDAD,
Petitioners-in-Intervention.

June 28, 2011

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

DECISION

CARPIO, J.:

The Case

This is an original petition for prohibition, injunction, declaratory relief and declaration of nullity of the sale of shares of stock of
Philippine Telecommunications Investment Corporation (PTIC) by the government of the Republic of the Philippines to Metro Pacific
Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company Limited (First Pacific).

The Antecedents

The facts, according to petitioner Wilson P. Gamboa, a stockholder of Philippine Long Distance Telephone Company (PLDT), are as
follows:1

On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which granted PLDT a franchise and the right to engage in
telecommunications business. In 1969, General Telephone and Electronics Corporation (GTE), an American company and a major
PLDT stockholder, sold 26 percent of the outstanding common shares of PLDT to PTIC. In 1977, Prime Holdings, Inc. (PHI) was
incorporated by several persons, including Roland Gapud and Jose Campos, Jr. Subsequently, PHI became the owner of 111,415
shares of stock of PTIC by virtue of three Deeds of Assignment executed by PTIC stockholders Ramon Cojuangco and
Luis Tirso Rivilla. In 1986, the 111,415 shares of stock of PTIC held by PHI were sequestered by the Presidential Commission on
Good Government (PCGG). The 111,415 PTIC shares, which represent about 46.125 percent of the outstanding capital stock of PTIC,
were later declared by this Court to be owned by the Republic of the Philippines.2

In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm, acquired the remaining 54 percent of the outstanding
capital stock of PTIC. On 20 November 2006, the Inter-Agency Privatization Council (IPC) of the Philippine Government announced
that it would sell the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, through a public bidding to be
conducted on 4 December 2006. Subsequently, the public bidding was reset to 8 December 2006, and only two bidders, Parallax
Venture Fund XXVII (Parallax) and Pan-Asia Presidio Capital, submitted their bids. Parallax won with a bid of P25.6 billion or
US$510 million.

Thereafter, First Pacific announced that it would exercise its right of first refusal as a PTIC stockholder and buy the 111,415 PTIC
shares by matching the bid price of Parallax. However, First Pacific failed to do so by the 1 February 2007 deadline set by IPC and
instead, yielded its right to PTIC itself which was then given by IPC until 2 March 2007 to buy the PTIC shares. On 14 February 2007,
First Pacific, through its subsidiary, MPAH, entered into a Conditional Sale and Purchase Agreement of the 111,415 PTIC shares, or
46.125 percent of the outstanding capital stock of PTIC, with the Philippine Government for the price of P25,217,556,000 or
US$510,580,189. The sale was completed on 28 February 2007.

Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of 46.125 percent of PTIC shares is actually an indirect
sale of 12 million shares or about 6.3 percent of the outstanding common shares of PLDT. With the sale, First Pacifics common
shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby increasing the common shareholdings of foreigners
in PLDT to about 81.47 percent. This violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign
ownership of the capital of a public utility to not more than 40 percent.3

On the other hand, public respondents Finance Secretary Margarito B. Teves, Undersecretary John P. Sevilla, and PCGG
Commissioner Ricardo Abcede allege the following relevant facts:

On 9 November 1967, PTIC was incorporated and had since engaged in the business of investment holdings. PTIC held 26,034,263
PLDT common shares, or 13.847 percent of the total PLDT outstanding common shares. PHI, on the other hand, was incorporated in
1977, and became the owner of 111,415 PTIC shares or 46.125 percent of the outstanding capital stock of PTIC by virtue of three
Deeds of Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 PTIC shares held by PHI were
sequestered by the PCGG, and subsequently declared by this Court as part of the ill-gotten wealth of former President Ferdinand
Marcos. The sequestered PTIC shares were reconveyed to the Republic of the Philippines in accordance with this Courts
decision4 which became final and executory on 8 August 2006.
The Philippine Government decided to sell the 111,415 PTIC shares, which represent 6.4 percent of the outstanding common shares of
stock of PLDT, and designated the Inter-Agency Privatization Council (IPC), composed of the Department of Finance and the PCGG,
as the disposing entity. An invitation to bid was published in seven different newspapers from 13 to 24 November 2006. On 20
November 2006, a pre-bid conference was held, and the original deadline for bidding scheduled on 4 December 2006 was reset to 8
December 2006. The extension was published in nine different newspapers.

During the 8 December 2006 bidding, Parallax Capital Management LP emerged as the highest bidder with a bid of P25,217,556,000.
The government notified First Pacific, the majority owner of PTIC shares, of the bidding results and gave First Pacific until 1
February 2007 to exercise its right of first refusal in accordance with PTICs Articles of Incorporation. First Pacific announced its
intention to match Parallaxs bid.

On 31 January 2007, the House of Representatives (HR) Committee on Good Government conducted a public hearing on the
particulars of the then impending sale of the 111,415 PTIC shares. Respondents Teves and Sevilla were among those who attended the
public hearing. The HR Committee Report No. 2270 concluded that: (a) the auction of the governments 111,415 PTIC shares bore due
diligence, transparency and conformity with existing legal procedures; and (b) First Pacifics intended acquisition of the
governments 111,415 PTIC shares resulting in First Pacifics 100% ownership of PTIC will not violate the 40 percent
constitutional limit on foreign ownership of a public utility since PTIC holds only 13.847 percent of the total outstanding
common shares of PLDT.5 On 28 February 2007, First Pacific completed the acquisition of the 111,415 shares of stock of PTIC.

Respondent Manuel V. Pangilinan admits the following facts: (a) the IPC conducted a public bidding for the sale of 111,415 PTIC
shares or 46 percent of the outstanding capital stock of PTIC (the remaining 54 percent of PTIC shares was already owned by First
Pacific and its affiliates); (b) Parallax offered the highest bid amounting to P25,217,556,000; (c) pursuant to the right of first refusal in
favor of PTIC and its shareholders granted in PTICs Articles of Incorporation, MPAH, a First Pacific affiliate, exercised its right of
first refusal by matching the highest bid offered for PTIC shares on 13 February 2007; and (d) on 28 February 2007, the sale was
consummated when MPAH paid IPC P25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares.
Respondent Pangilinan denies the other allegations of facts of petitioner.

On 28 February 2007, petitioner filed the instant petition for prohibition, injunction, declaratory relief, and declaration of nullity of
sale of the 111,415 PTIC shares. Petitioner claims, among others, that the sale of the 111,415 PTIC shares would result in an increase
in First Pacifics common shareholdings in PLDT from 30.7 percent to 37 percent, and this, combined with Japanese
NTT DoCoMos common shareholdings in PLDT, would result to a total foreign common shareholdings in PLDT of 51.56 percent
which is over the 40 percent constitutional limit.6 Petitioner asserts:

If and when the sale is completed, First Pacifics equity in PLDT will go up from 30.7 percent to 37.0 percent of its common
or voting- stockholdings, x x x. Hence, the consummation of the sale will put the two largest foreign investors in PLDT First
Pacific and Japans NTT DoCoMo, which is the worlds largest wireless telecommunications firm, owning 51.56 percent of
PLDT common equity. xx x With the completion of the sale, data culled from the official website of the New York Stock
Exchange (www.nyse.com) showed that those foreign entities, which own at least five percent of common equity, will
collectively own 81.47 percent of PLDTs common equity. x x x
x x x as the annual disclosure reports, also referred to as Form 20-K reports x x x which PLDT submitted to
the New York Stock Exchange for the period 2003-2005, revealed that First Pacific and several other
foreign entities breached the constitutional limit of 40 percent ownership as early as 2003. x x x7

Petitioner raises the following issues: (1) whether the consummation of the then impending sale of 111,415 PTIC shares to First
Pacific violates the constitutional limit on foreign ownership of a public utility; (2) whether public respondents committed grave abuse
of discretion in allowing the sale of the 111,415 PTIC shares to First Pacific; and (3) whether the sale of common shares to foreigners
in excess of 40 percent of the entire subscribed common capital stock violates the constitutional limit on foreign ownership of a public
utility.8

On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a Motion for Leave to Intervene and Admit Attached Petition-inIntervention. In the Resolution of 28 August 2007, the Court granted the motion and noted the Petition-in-Intervention.

Petitioners-in-intervention join petitioner Wilson Gamboa x x x in seeking, among others, to enjoin and/or nullify the sale by
respondents of the 111,415 PTIC shares to First Pacific or assignee. Petitioners-in-intervention claim that, as PLDT subscribers, they
have a stake in the outcome of the controversy x x x where the Philippine Government is completing the sale of government owned
assets in [PLDT], unquestionably a public utility, in violation of the nationality restrictions of the Philippine Constitution.

The Issue

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

The Ruling of the Court

The petition is partly meritorious.

Petition for declaratory relief treated as petition for mandamus

At the outset, petitioner is faced with a procedural barrier. Among the remedies petitioner seeks, only the petition for prohibition is
within the original jurisdiction of this court, which however is not exclusive but is concurrent with the Regional Trial Court and the
Court of Appeals. The actions for declaratory relief,10 injunction, and annulment of sale are not embraced within the original
jurisdiction of the Supreme Court. On this ground alone, the petition could have been dismissed outright.

While direct resort to this Court may be justified in a petition for prohibition, 11 the Court shall nevertheless refrain from discussing the
grounds in support of the petition for prohibition since on 28 February 2007, the questioned sale was consummated when MPAH paid
IPC P25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares.

However, since the threshold and purely legal issue on the definition of the term capital in Section 11, Article XII of the Constitution
has far-reaching implications to the nationaleconomy, the Court treats the petition for declaratory relief as one for mandamus.12

In Salvacion v. Central Bank of the Philippines,13 the Court treated the petition for declaratory relief as one for mandamus considering
the grave injustice that would result in the interpretation of a banking law. In that case, which involved the crime of rape committed by
a foreign tourist against a Filipino minor and the execution of the final judgment in the civil case for damages on the tourists dollar
deposit with a local bank, the Court declared Section 113 of Central Bank Circular No. 960, exempting foreign currency deposits from
attachment, garnishment or any other order or process of any court, inapplicable due to the peculiar circumstances of the case. The
Court held that injustice would result especially to a citizen aggrieved by a foreign guest like accused x x x that would negate Article
10 of the Civil Code which provides that in case of doubt in the interpretation or application of laws, it is presumed that the
lawmaking body intended right and justice to prevail. The Court therefore required respondents Central Bank of the Philippines, the
local bank, and the accused to comply with the writ of execution issued in the civil case for damages and to release the dollar deposit
of the accused to satisfy the judgment.

In Alliance of Government Workers v. Minister of Labor,14 the Court similarly brushed aside the procedural infirmity of the petition for
declaratory relief and treated the same as one for mandamus. In Alliance, the issue was whether the government unlawfully excluded
petitioners, who were government employees, from the enjoyment of rights to which they were entitled under the law. Specifically, the
question was: Are the branches, agencies, subdivisions, and instrumentalities of the Government, including government owned or
controlled corporations included among the four employers under Presidential Decree No. 851 which are required to pay their
employees x x x a thirteenth (13th) month pay x x x ? The Constitutional principle involved therein affected all government
employees, clearly justifying a relaxation of the technical rules of procedure, and certainly requiring the interpretation of the assailed
presidential decree.

In short, it is well-settled that this Court may treat a petition for declaratory relief as one for mandamus if the issue involved has farreaching implications. As this Court held inSalvacion:

The Court has no original and exclusive jurisdiction over a petition for declaratory relief. However, exceptions to this rule
have been recognized. Thus, where the petition has far-reaching implications and raises questions that should be
resolved, it may be treated as one for mandamus.15 (Emphasis supplied)

In the present case, petitioner seeks primarily the interpretation of the term capital in Section 11, Article XII of the Constitution. He
prays that this Court declare that the term capital refers to common shares only, and that such shares constitute the sole basis in
determining foreign equity in a public utility. Petitioner further asks this Court to declare any ruling inconsistent with such
interpretation unconstitutional.

The interpretation of the term capital in Section 11, Article XII of the Constitution has far-reaching implications to the national
economy. In fact, a resolution of this issue will determine whether Filipinos are masters, or second class citizens, in their own country.
What is at stake here is whether Filipinos or foreigners will have effective control of the national economy. Indeed, if ever there is a
legal issue that has far-reaching implications to the entire nation, and to future generations of Filipinos, it is the threshhold legal issue
presented in this case.

The Court first encountered the issue on the definition of the term capital in Section 11, Article XII of the Constitution in the case
of Fernandez v. Cojuangco, docketed as G.R. No. 157360.16 That case involved the same public utility (PLDT) and substantially the
same private respondents. Despite the importance and novelty of the constitutional issue raised therein and despite the fact that the
petition involved a purely legal question, the Court declined to resolve the case on the merits, and instead denied the same for
disregarding the hierarchy of courts.17 There, petitioner Fernandez assailed on a pure question of law the Regional Trial Courts
Decision of 21 February 2003 via a petition for review under Rule 45. The Courts Resolution, denying the petition, became final on 21
December 2004.
The instant petition therefore presents the Court with another opportunity to finally settle this purely legal issue which is of
transcendental importance to the national economy and a fundamental requirement to a faithful adherence to our Constitution. The
Court must forthwith seize such opportunity, not only for the benefit of the litigants, but more significantly for the benefit of the entire
Filipino people, to ensure, in the words of the Constitution, a self-reliant and independent national economy effectively controlled by
Filipinos.18 Besides, in the light of vague and confusing positions taken by government agencies on this purely legal issue, present and
future foreign investors in this country deserve, as a matter of basic fairness, a categorical ruling from this Court on the extent of their
participation in the capital of public utilities and other nationalized businesses.

Despite its far-reaching implications to the national economy, this purely legal issue has remained unresolved for over 75 years since
the 1935 Constitution. There is no reason for this Court to evade this ever recurring fundamental issue and delay again defining the
term capital, which appears not only in Section 11, Article XII of the Constitution, but also in Section 2, Article XII on co-production
and joint venture agreements for the development of our natural resources, 19 in Section 7, Article XII on ownership of private
lands,20 in Section 10, Article XII on the reservation of certain investments to Filipino citizens, 21 in Section 4(2), Article XIV on the
ownership of educational institutions,22 and in Section 11(2), Article XVI on the ownership of advertising companies. 23

Petitioner has locus standi

There is no dispute that petitioner is a stockholder of PLDT. As such, he has the right to question the subject sale, which he claims to
violate the nationality requirement prescribed in Section 11, Article XII of the Constitution. If the sale indeed violates the Constitution,
then there is a possibility that PLDTs franchise could be revoked, a dire consequence directly affecting petitioners interest as a
stockholder.

More importantly, there is no question that the instant petition raises matters of transcendental importance to the public. The
fundamental and threshold legal issue in this case, involving the national economy and the economic welfare of the Filipino people,
far outweighs any perceived impediment in the legal personality of the petitioner to bring this action.

In Chavez v. PCGG,24 the Court upheld the right of a citizen to bring a suit on matters of transcendental importance to the public, thus:

In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the
enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner
is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest in the
result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a

right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and
enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners legal standing,
the Court declared that the right they sought to be enforced is a public right recognized by no less than the fundamental law of the
land.
Legaspi v. Civil Service Commission, while reiterating Taada, further declared that when a mandamus proceeding involves the
assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and,
therefore, part of the general public which possesses the right.
Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract
for the development, management and operation of the Manila International Container Terminal, public interest [was] definitely
involved considering the important role [of the subject contract] . . . in the economic development of the country and the
magnitude of the financial consideration involved. We concluded that, as a consequence, the disclosure provision in the
Constitution would constitute sufficient authority for upholding the petitioners standing. (Emphasis supplied)

Clearly, since the instant petition, brought by a citizen, involves matters of transcendental public importance, the petitioner has the
requisite locus standi.

Definition of the Term Capital in

Section 11, Article XII of the 1987 Constitution

Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution mandates the Filipinization of public utilities, to
wit:

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or associations organized under the laws of the
Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or
authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be
granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the
common good so requires. The State shall encourage equity participation in public utilities by the general public. The
participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate
share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the
Philippines. (Emphasis supplied)

The above provision substantially reiterates Section 5, Article XIV of the 1973 Constitution, thus:

Section 5. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or associations organized under the laws of the
Philippines at least sixty per centum of the capital of which is owned by such citizens, nor shall such franchise,
certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise
or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the National
Assembly when the public interest so requires. The State shall encourage equity participation in public utilities by the general
public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their
proportionate share in the capital thereof. (Emphasis supplied)

The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV of the 1935 Constitution, viz:

Section 8. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or other entities organized under the laws of the
Philippines sixty per centum of the capital of which is owned by citizens of the Philippines, nor shall such franchise,
certificate, or authorization be exclusive in character or for a longer period than fifty years. No franchise or right shall be
granted to any individual, firm, or corporation, except under the condition that it shall be subject to amendment, alteration, or
repeal by the Congress when the public interest so requires. (Emphasis supplied)

Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional Commission, reminds us that the Filipinization provision
in the 1987 Constitution is one of the products of the spirit of nationalism which gripped the 1935 Constitutional Convention. 25 The
1987 Constitution provides for the Filipinization of public utilities by requiring that any form of authorization for the operation of
public utilities should be granted only to citizens of the Philippines or to corporations or associations organized under the laws of the
Philippines at least sixty per centum of whose capital is owned by such citizens. The provision is [an express] recognition of the
sensitive and vital position of public utilities both in the national economy and for national security.26 The evident purpose of the
citizenship requirement is to prevent aliens from assuming control of public utilities, which may be inimical to the national
interest.27 This specific provision explicitly reserves to Filipino citizens control of public utilities, pursuant to an overriding economic
goal of the 1987 Constitution: to conserve and develop our patrimony28 and ensure a self-reliant and independent national
economy effectively controlled by Filipinos.29

Any citizen or juridical entity desiring to operate a public utility must therefore meet the minimum nationality requirement prescribed
in Section 11, Article XII of the Constitution. Hence, for a corporation to be granted authority to operate a public utility, at least 60
percent of its capital must be owned by Filipino citizens.

The crux of the controversy is the definition of the term capital. Does the term capital in Section 11, Article XII of the Constitution
refer to common shares or to the total outstanding capital stock (combined total of common and non-voting preferred shares)?

Petitioner submits that the 40 percent foreign equity limitation in domestic public utilities refers only to common shares because such
shares are entitled to vote and it is through voting that control over a corporation is exercised. Petitioner posits that the term capital in
Section 11, Article XII of the Constitution refers to the ownership of common capital stock subscribed and outstanding, which class of
shares alone, under the corporate set-up of PLDT, can vote and elect members of the board of directors. It is undisputed that PLDTs
non-voting preferred shares are held mostly by Filipino citizens. 30 This arose from Presidential Decree No. 217,31 issued on 16 June
1973 by then President Ferdinand Marcos, requiring every applicant of a PLDT telephone line to subscribe to non-voting preferred
shares to pay for the investment cost of installing the telephone line. 32

Petitioners-in-intervention basically reiterate petitioners arguments and adopt petitioners definition of the term capital. 33 Petitioners-inintervention allege that the approximate foreign ownership of common capital stock of PLDT x x x already amounts to at least 63.54%
of the total outstanding common stock, which means that foreigners exercise significant control over PLDT, patently violating the 40
percent foreign equity limitation in public utilities prescribed by the Constitution.

Respondents, on the other hand, do not offer any definition of the term capital in Section 11, Article XII of the Constitution. More
importantly, private respondents Nazareno andPangilinan of PLDT do not dispute that more than 40 percent of the common shares of
PLDT are held by foreigners.

In particular, respondent Nazarenos Memorandum, consisting of 73 pages, harps mainly on the procedural infirmities of the petition
and the supposed violation of the due process rights of the affected foreign common shareholders. Respondent Nazareno does not
deny petitioners allegation of foreigners dominating the common shareholdings of PLDT. Nazarenostressed mainly that the
petition seeks to divest foreign common shareholders purportedly exceeding 40% of the total common shareholdings in PLDT
of their ownership over their shares. Thus, the foreign natural and juridical PLDT shareholders must be impleaded in this suit so that
they can be heard.34 Essentially, Nazareno invokes denial of due process on behalf of the foreign common shareholders.

While Nazareno does not introduce any definition of the term capital, he states that among the factual assertions that need to be
established to counter petitioners allegations is the uniform interpretation by government agencies (such as the SEC),
institutions and corporations (such as the Philippine National Oil Company-Energy Development Corporation or PNOCEDC) of including both preferred shares and common shares in controlling interest in view of testing compliance with the 40%
constitutional limitation on foreign ownership in public utilities.35

Similarly, respondent Manuel V. Pangilinan does not define the term capital in Section 11, Article XII of the Constitution. Neither does
he refute petitioners claim of foreigners holding more than 40 percent of PLDTs common shares. Instead,
respondent Pangilinan focuses on the procedural flaws of the petition and the alleged violation of the due process rights of foreigners.
Respondent Pangilinan emphasizes in his Memorandum (1) the absence of this Courts jurisdiction over the petition; (2) petitioners
lack of standing; (3) mootness of the petition; (4) non-availability of declaratory relief; and (5) the denial of due process rights.
Moreover, respondent Pangilinan alleges that the issue should be whether owners of shares in PLDT as well as owners of shares in
companies holding shares in PLDT may be required to relinquish their shares in PLDT and in those companies without any law
requiring them to surrender their shares and also without notice and trial.

Respondent Pangilinan further asserts that Section 11, [Article XII of the Constitution] imposes no nationality requirement on the
shareholders of the utility company as a condition for keeping their shares in the utility company. According to him, Section 11
does not authorize taking one persons property (the shareholders stock in the utility company) on the basis of another partys alleged
failure to satisfy a requirement that is a condition only for that other partys retention of another piece of property (the utility company
being at least 60% Filipino-owned to keep its franchise).36

The OSG, representing public respondents Secretary Margarito Teves, Undersecretary John P. Sevilla, Commissioner Ricardo Abcede,
and Chairman Fe Barin, is likewise silent on the definition of the term capital. In its Memorandum 37 dated 24 September 2007, the
OSG also limits its discussion on the supposed procedural defects of the petition, i.e. lack of standing, lack of jurisdiction, noninclusion of interested parties, and lack of basis for injunction. The OSG does not present any definition or interpretation of the term
capital in Section 11, Article XII of the Constitution. The OSG contends that the petition actually partakes of a collateral attack on
PLDTs franchise as a public utility, which in effect requires a full-blown trial where all the parties in interest are given their day in
court.38

Respondent Francisco Ed Lim, impleaded as President and Chief Executive Officer of the Philippine Stock Exchange (PSE), does not
also define the term capital and seeks the dismissal of the petition on the following grounds: (1) failure to state a cause of action
against Lim; (2) the PSE allegedly implemented its rules and required all listed companies, including PLDT, to make proper and
timely disclosures; and (3) the reliefs prayed for in the petition would adversely impact the stock market.

In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez who claimed to be a stockholder of record of PLDT, contended
that the term capital in the 1987 Constitution refers to shares entitled to vote or the common shares. Fernandez explained thus:

The forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of
shares of stock entitled to vote, i.e., common shares, considering that it is through voting that control is being exercised. x x x

Obviously, the intent of the framers of the Constitution in imposing limitations and restrictions on fully nationalized and
partially nationalized activities is for Filipino nationals to be always in control of the corporation undertaking said activities.
Otherwise, if the Trial Courts ruling upholding respondents arguments were to be given credence, it would be possible for the
ownership structure of a public utility corporation to be divided into one percent (1%) common stocks and ninety-nine
percent (99%) preferred stocks. Following the Trial Courts ruling adopting respondents arguments, the common shares can be
owned entirely by foreigners thus creating an absurd situation wherein foreigners, who are supposed to be minority
shareholders, control the public utility corporation.

xxxx

Thus, the 40% foreign ownership limitation should be interpreted to apply to both the beneficial ownership and the
controlling interest.

xxxx

Clearly, therefore, the forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to
ownership of shares of stock entitled to vote, i.e., common shares. Furthermore, ownership of record of shares will not suffice
but it must be shown that the legal and beneficial ownership rests in the hands of Filipino citizens. Consequently, in the case
of petitioner PLDT, since it is already admitted that the voting interests of foreigners which would gain entry to petitioner
PLDT by the acquisition of SMART shares through the Questioned Transactions is equivalent to 82.99%, and the nominee
arrangements between the foreign principals and the Filipino owners is likewise admitted, there is, therefore, a violation of
Section 11, Article XII of the Constitution.
Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited by the Trial Court to support the proposition
that the meaning of the word capital as used in Section 11, Article XII of the Constitution allegedly refers to the sum total of
the shares subscribed and paid-in by the shareholder and it allegedly is immaterial how the stock is classified, whether as
common or preferred, cannot stand in the face of a clear legislative policy as stated in the FIA which took effect in 1991 or
way after said opinions were rendered, and as clarified by the above-quoted Amendments. In this regard, suffice it to state
that as between the law and an opinion rendered by an administrative agency, the law indubitably prevails. Moreover, said
Opinions are merely advisory and cannot prevail over the clear intent of the framers of the Constitution.

In the same vein, the SECs construction of Section 11, Article XII of the Constitution is at best merely advisory for it is the
courts that finally determine what a law means.39

On the other hand, respondents therein, Antonio O. Cojuangco, Manuel V. Pangilinan, Carlos A. Arellano, Helen Y.
Dee, Magdangal B. Elma, Mariles Cacho-Romulo, Fr. BienvenidoF. Nebres, Ray C. Espinosa, Napoleon L. Nazareno, Albert F. Del
Rosario, and Orlando B. Vea, argued that the term capital in Section 11, Article XII of the Constitution includes preferred shares since
the Constitution does not distinguish among classes of stock, thus:

16. The Constitution applies its foreign ownership limitation on the corporations capital, without distinction as to classes of
shares. x x x

In this connection, the Corporation Code which was already in force at the time the present (1987) Constitution was drafted
defined outstanding capital stock as follows:

Section 137. Outstanding capital stock defined. The term outstanding capital stock, as used in this Code, means the total
shares of stock issued under binding subscription agreements to subscribers or stockholders, whether or not fully or partially
paid, except treasury shares.

Section 137 of the Corporation Code also does not distinguish between common and preferred shares, nor exclude either
class of shares, in determining the outstanding capital stock (the capital) of a corporation. Consequently, petitioners
suggestion to reckon PLDTs foreign equity only on the basis of PLDTs outstanding common shares is without legal basis.
The language of the Constitution should be understood in the sense it has in common use.
xxxx

17. But even assuming that resort to the proceedings of the Constitutional Commission is necessary, there is nothing in the
Record of the Constitutional Commission (Vol. III) which petitioner misleadingly cited in the Petition x x x which supports
petitioners view that only common shares should form the basis for computing a public utilitys foreign equity.
xxxx

18. In addition, the SEC the government agency primarily responsible for implementing the Corporation Code, and which also
has the responsibility of ensuring compliance with the Constitutions foreign equity restrictions as regards nationalized
activities x x x has categorically ruled that both common and preferred shares are properly considered in determining
outstanding capital stock and the nationality composition thereof.40

We agree with petitioner and petitioners-in-intervention. The term capital in Section 11, Article XII of the Constitution refers only to
shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares, 41 and not to the total
outstanding capital stock comprising both common and non-voting preferred shares.
The Corporation Code of the Philippines42 classifies shares as common or preferred, thus:

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

Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in
all respects to every other share.
Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such
shares shall nevertheless be entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another corporation or other corporations;
7. Investment of corporate funds in another corporation or business in accordance with this Code; and
8. Dissolution of the corporation.
Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as
provided in this Code shall be deemed to refer only to stocks with voting rights.

Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the corporation. 43 This is
exercised through his vote in the election of directors because it is the board of directors that controls or manages the corporation. 44 In
the absence of provisions in the articles of incorporation denying voting rights to preferred shares, preferred shares have the same
voting rights as common shares. However, preferred shareholders are often excluded from any control, that is, deprived of the right to
vote in the election of directors and on other matters, on the theory that the preferred shareholders are merely investors in the
corporation for income in the same manner as bondholders.45 In fact, under the Corporation Code only preferred or redeemable shares
can be deprived of the right to vote.46 Common shares cannot be deprived of the right to vote in any corporate meeting, and any
provision in the articles of incorporation restricting the right of common shareholders to vote is invalid. 47

Considering that common shares have voting rights which translate to control, as opposed to preferred shares which usually have no
voting rights, the term capital in Section 11, Article XII of the Constitution refers only to common shares. However, if the preferred
shares also have the right to vote in the election of directors, then the term capital shall include such preferred shares because the right
to participate in the control or management of the corporation is exercised through the right to vote in the election of directors. In
short, the term capital in Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the election of
directors.

This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of Filipino citizens the control
and management of public utilities. As revealed in the deliberations of the Constitutional Commission, capital refers to the voting
stock or controlling interest of a corporation, to wit:

MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60-40 in
Section 3, 60-40 in Section 9 and 2/3-1/3 in Section 15.

MR. VILLEGAS. That is right.

MR. NOLLEDO. In teaching law, we are always faced with this question: Where do we base the equity requirement, is it on
the authorized capital stock, on the subscribed capital stock, or on the paid-up capital stock of a corporation? Will the
Committee please enlighten me on this?

MR. VILLEGAS. We have just had a long discussion with the members of the team from the UP Law Center who provided
us a draft. The phrase that is contained here which we adopted from the UP draft is 60 percent of voting stock.

MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital
stock shall be entitled to vote.

MR. VILLEGAS. That is right.

MR. NOLLEDO. Thank you.

With respect to an investment by one corporation in another corporation, say, a corporation with 60-40 percent equity invests
in another corporation which is permitted by the Corporation Code, does the Committee adopt the grandfather rule?

MR. VILLEGAS. Yes, that is the understanding of the Committee.

MR. NOLLEDO. Therefore, we need additional Filipino capital?

MR. VILLEGAS. Yes.48

xxxx
MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.

MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase voting stock or controlling interest.

MR. AZCUNA. Hence, without the Davide amendment, the committee report would read: corporations or associations at
least sixty percent of whose CAPITAL is owned by such citizens.

MR. VILLEGAS. Yes.

MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be owned by citizens.

MR. VILLEGAS. That is right.

MR. AZCUNA. But the control can be with the foreigners even if they are the minority. Let us say 40 percent of the
capital is owned by them, but it is the voting capital, whereas, the Filipinos own the nonvoting shares. So we can have
a situation where the corporation is controlled by foreigners despite being the minority because they have the voting
capital. That is the anomaly that would result here.

MR. BENGZON. No, the reason we eliminated the word stock as stated in the 1973 and 1935 Constitutions is that
according to Commissioner Rodrigo, there are associations that do not have stocks. That is why we say CAPITAL.

MR. AZCUNA. We should not eliminate the phrase controlling interest.

MR. BENGZON. In the case of stock corporations, it is assumed.49 (Emphasis supplied)

Thus, 60 percent of the capital assumes, or should result in, controlling interest in the corporation. Reinforcing this interpretation of
the term capital, as referring to controlling interest or shares entitled to vote, is the definition of a Philippine national in the Foreign
Investments Act of 1991,50 to wit:

SEC. 3. Definitions. - As used in this Act:

a. The term Philippine national shall mean a citizen of the Philippines; or a domestic partnership or association wholly
owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty
percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or
a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one
hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of
funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least
sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its
non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty
percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by
citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both
corporations must be citizens of the Philippines, in order that the corporation, shall be considered a Philippine national.
(Emphasis supplied)

In explaining the definition of a Philippine national, the Implementing Rules and Regulations of the Foreign Investments Act of 1991
provide:

b. Philippine national shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the
citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent
[60%] of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee
of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least
sixty percent [60%] of the fund will accrue to the benefit of the Philippine nationals; Provided,that where a corporation its
non-Filipino stockholders own stocks in a Securities and Exchange Commission [SEC] registered enterprise, at least sixty
percent [60%] of the capital stock outstanding and entitled to vote of both corporations must be owned and held by citizens of
the Philippines and at least sixty percent [60%] of the members of the Board of Directors of each of both corporation must be

citizens of the Philippines, in order that the corporation shall be considered a Philippine national. The control test shall be
applied for this purpose.

Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding
capital stock whether fully paid or not, but only such stocks which are generally entitled to vote are considered.

For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to
meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is
essential. Thus, stocks, the voting rights of which have been assigned or transferred to aliens cannot be considered
held by Philippine citizens or Philippine nationals.

Individuals or juridical entities not meeting the aforementioned qualifications are considered as non-Philippine
nationals. (Emphasis supplied)

Mere legal title is insufficient to meet the 60 percent Filipino-owned capital required in the Constitution. Full beneficial ownership of
60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is required. The legal and beneficial
ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipino nationals in accordance with the
constitutional mandate. Otherwise, the corporation is considered as non-Philippine national[s].

Under Section 10, Article XII of the Constitution, Congress may reserve to citizens of the Philippines or to corporations or
associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress
may prescribe, certain areas of investments. Thus, in numerous laws Congress has reserved certain areas of investments to Filipino
citizens or to corporations at least sixty percent of the capital of which is owned by Filipino citizens. Some of these laws are: (1)
Regulation of Award of Government Contracts or R.A. No. 5183; (2) Philippine Inventors Incentives Act or R.A. No. 3850; (3)
Magna Carta for Micro, Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping Development Act or R.A.
No. 7471; (5) Domestic Shipping Development Act of 2004 or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A.
No. 10055; and (7) Ship Mortgage Decree or P.D. No. 1521. Hence, the term capital in Section 11, Article XII of the Constitution is
also used in the same context in numerous lawsreserving certain areas of investments to Filipino citizens.

To construe broadly the term capital as the total outstanding capital stock, including both common and non-voting preferred shares,
grossly contravenes the intent and letter of the Constitution that the State shall develop a self-reliant and independent national
economy effectively controlled by Filipinos. A broad definition unjustifiably disregards who owns the all-important voting stock,
which necessarily equates to control of the public utility.

We shall illustrate the glaring anomaly in giving a broad definition to the term capital. Let us assume that a corporation has 100
common shares owned by foreigners and 1,000,000 non-voting preferred shares owned by Filipinos, with both classes of share having
a par value of one peso (P1.00) per share. Under the broad definition of the term capital, such corporation would be considered
compliant with the 40 percent constitutional limit on foreign equity of public utilities since the overwhelming majority, or more than
99.999 percent, of the total outstanding capital stock is Filipino owned. This is obviously absurd.

In the example given, only the foreigners holding the common shares have voting rights in the election of directors, even if they hold
only 100 shares. The foreigners, with a minuscule equity of less than 0.001 percent, exercise control over the public utility. On the
other hand, the Filipinos, holding more than 99.999 percent of the equity, cannot vote in the election of directors and hence, have no
control over the public utility. This starkly circumvents the intent of the framers of the Constitution, as well as the clear language of
the Constitution, to place the control of public utilities in the hands of Filipinos. It also renders illusory the State policy of an
independent national economy effectively controlled by Filipinos.

The example given is not theoretical but can be found in the real world, and in fact exists in the present case.

Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of directors. PLDTs Articles of Incorporation
expressly state that the holders of Serial Preferred Stock shall not be entitled to vote at any meeting of the stockholders for the
election of directors or for any other purpose or otherwise participate in any action taken by the corporation or its stockholders, or
to receive notice of any meeting of stockholders.51

On the other hand, holders of common shares are granted the exclusive right to vote in the election of directors. PLDTs Articles of
Incorporation52 state that each holder of Common Capital Stock shall have one vote in respect of each share of such stock held by him
on all matters voted upon by the stockholders, and the holders of Common Capital Stock shall have the exclusive right to vote for
the election of directors and for all other purposes.53

In short, only holders of common shares can vote in the election of directors, meaning only common shareholders exercise control
over PLDT. Conversely, holders of preferred shares, who have no voting rights in the election of directors, do not have any control
over PLDT. In fact, under PLDTs Articles of Incorporation, holders of common shares have voting rights for all purposes, while
holders of preferred shares have no voting right for any purpose whatsoever.

It must be stressed, and respondents do not dispute, that foreigners hold a majority of the common shares of PLDT. In fact, based on
PLDTs 2010 General Information Sheet (GIS),54which is a document required to be submitted annually to the Securities and Exchange
Commission,55 foreigners hold 120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common shares.56 In
other words, foreigners hold 64.27% of the total number of PLDTs common shares, while Filipinos hold only 35.73%. Since holding a
majority of the common shares equates to control, it is clear that foreigners exercise control over PLDT. Such amount of control
unmistakably exceeds the allowable 40 percent limit on foreign ownership of public utilities expressly mandated in Section 11, Article
XII of the Constitution.

Moreover, the Dividend Declarations of PLDT for 2009,57 as submitted to the SEC, shows that per share the SIP58 preferred shares
earn a pittance in dividends compared to the common shares. PLDT declared dividends for the common shares at P70.00 per share,
while the declared dividends for the preferred shares amounted to a measly P1.00 per share.59 So the preferred shares not only cannot
vote in the election of directors, they also have very little and obviously negligible dividend earning capacity compared to common
shares.

As shown in PLDTs 2010 GIS,60 as submitted to the SEC, the par value of PLDT common shares is P5.00 per share, whereas the par
value of preferred shares is P10.00 per share. In other words, preferred shares have twice the par value of common shares but cannot
elect directors and have only 1/70 of the dividends of common shares. Moreover, 99.44% of the preferred shares are owned by
Filipinos while foreigners own only a minuscule 0.56% of the preferred shares.61 Worse, preferred shares constitute 77.85% of the
authorized capital stock of PLDT while common shares constitute only 22.15%. 62 This undeniably shows that beneficial interest in
PLDT is not with the non-voting preferred shares but with the common shares, blatantly violating the constitutional requirement of 60
percent Filipino control and Filipino beneficial ownership in a public utility.

The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipinos in accordance with
the constitutional mandate. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the
voting rights, is constitutionally required for the States grant of authority to operate a public utility. The undisputed fact that the PLDT
preferred shares, 99.44% owned by Filipinos, are non-voting and earn only 1/70 of the dividends that PLDT common shares earn,
grossly violates the constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership of a public utility.
In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60 percent of the dividends, of PLDT. This
directly contravenes the express command in Section 11, Article XII of the Constitution that [n]o franchise, certificate, or any other
form of authorization for the operation of a public utility shall be granted except to x x xcorporations x x x organized under the laws of
the Philippines, at least sixty per centum of whose capital is owned by such citizens x x x.

To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises the sole right to vote in the
election of directors, and thus exercise control over PLDT; (2) Filipinos own only 35.73% of PLDTs common shares, constituting a
minority of the voting stock, and thus do not exercise control over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no
voting rights; (4) preferred shares earn only 1/70 of the dividends that common shares earn;63 (5) preferred shares have twice the par
value of common shares; and (6) preferred shares constitute 77.85% of the authorized capital stock of PLDT and common shares only
22.15%. This kind of ownership and control of a public utility is a mockery of the Constitution.

Incidentally, the fact that PLDT common shares with a par value of P5.00 have a current stock market value of P2,328.00 per
share,64 while PLDT preferred shares with a par value ofP10.00 per share have a current stock market value ranging from only P10.92
to P11.06 per share,65 is a glaring confirmation by the market that control and beneficial ownership of PLDT rest with the common
shares, not with the preferred shares.

Indisputably, construing the term capital in Section 11, Article XII of the Constitution to include both voting and non-voting shares
will result in the abject surrender of our telecommunications industry to foreigners, amounting to a clear abdication of the States
constitutional duty to limit control of public utilities to Filipino citizens. Such an interpretation certainly runs counter to the
constitutional provision reserving certain areas of investment to Filipino citizens, such as the exploitation of natural resources as well
as the ownership of land, educational institutions and advertising businesses. The Court should never open to foreign control what the
Constitution has expressly reserved to Filipinos for that would be a betrayal of the Constitution and of the national interest. The Court
must perform its solemn duty to defend and uphold the intent and letter of the Constitution to ensure, in the words of the Constitution,
a self-reliant and independent national economy effectively controlled by Filipinos.

Section 11, Article XII of the Constitution, like other provisions of the Constitution expressly reserving to Filipinos specific areas of
investment, such as the development of natural resources and ownership of land, educational institutions and advertising business,
is self-executing. There is no need for legislation to implement these self-executing provisions of the Constitution. The rationale why
these constitutional provisions are self-executing was explained in Manila Prince Hotel v. GSIS,66 thus:
x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the
presumption now is that all provisions of the constitution are self-executing. If the constitutional provisions are treated as
requiring legislation instead of self-executing, the legislature would have the power to ignore and practically nullify the
mandate of the fundamental law. This can be cataclysmic. That is why the prevailing view is, as it has always been, that

. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. . . . Unless the
contrary is clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary rule
would give the legislature discretion to determine when, or whether, they shall be effective. These provisions would be
subordinated to the will of the lawmaking body, which could make them entirely meaningless by simply refusing to pass the
needed implementing statute. (Emphasis supplied)

In Manila Prince Hotel, even the Dissenting Opinion of then Associate Justice Reynato S. Puno, later Chief Justice, agreed that
constitutional provisions are presumed to be self-executing. Justice Puno stated:

Courts as a rule consider the provisions of the Constitution as self-executing, rather than as requiring future legislation for
their enforcement. The reason is not difficult to discern. For if they are not treated as self-executing, the mandate of the
fundamental law ratified by the sovereign people can be easily ignored and nullified by Congress. Suffused with
wisdom of the ages is the unyielding rule that legislative actions may give breath to constitutional rights but
congressional inaction should not suffocate them.

Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests, searches and seizures, the rights of a
person under custodial investigation, the rights of an accused, and the privilege against self-incrimination. It is recognized
that legislation is unnecessary to enable courts to effectuate constitutional provisions guaranteeing the fundamental rights of
life, liberty and the protection of property. The same treatment is accorded to constitutional provisions forbidding the taking
or damaging of property for public use without just compensation. (Emphasis supplied)

Thus, in numerous cases,67 this Court, even in the absence of implementing legislation, applied directly the provisions of the 1935,
1973 and 1987 Constitutions limiting land ownership to Filipinos. In Soriano v. Ong Hoo,68 this Court ruled:

x x x As the Constitution is silent as to the effects or consequences of a sale by a citizen of his land to an alien, and as both
the citizen and the alien have violated the law, none of them should have a recourse against the other, and it should only be
the State that should be allowed to intervene and determine what is to be done with the property subject of the violation. We
have said that what the State should do or could do in such matters is a matter of public policy, entirely beyond the scope of
judicial authority. (Dinglasan, et al. vs. Lee Bun Ting, et al., 6 G. R. No. L-5996, June 27, 1956.)While the legislature has
not definitely decided what policy should be followed in cases of violations against the constitutional prohibition,
courts of justice cannot go beyond by declaring the disposition to be null and void as violative of the Constitution.
x x x (Emphasis supplied)

To treat Section 11, Article XII of the Constitution as not self-executing would mean that since the 1935 Constitution, or over the last
75 years, not one of the constitutional provisions expressly reserving specific areas of investments to corporations, at least 60 percent
of the capital of which is owned by Filipinos, was enforceable. In short, the framers of the 1935, 1973 and 1987 Constitutions
miserably failed to effectively reserve to Filipinos specific areas of investment, like the operation by corporations of public utilities,
the exploitation by corporations of mineral resources, the ownership by corporations of real estate, and the ownership of educational
institutions. All the legislatures that convened since 1935 also miserably failed to enact legislations to implement these vital
constitutional provisions that determine who will effectively control the national economy, Filipinos or foreigners. This Court cannot
allow such an absurd interpretation of the Constitution.

This Court has held that the SEC has both regulatory and adjudicative functions.69 Under its regulatory functions, the SEC can be
compelled by mandamus to perform its statutory duty when it unlawfully neglects to perform the same. Under its adjudicative or
quasi-judicial functions, the SEC can be also be compelled by mandamus to hear and decide a possible violation of any law it
administers or enforces when it is mandated by law to investigate such violation.

Under Section 17(4)70 of the Corporation Code, the SEC has the regulatory function to reject or disapprove the Articles of
Incorporation of any corporation where the required percentage of ownership of the capital stock to be owned by citizens of the
Philippines has not been complied with as required by existing laws or the Constitution. Thus, the SEC is the government agency
tasked with the statutory duty to enforce the nationality requirement prescribed in Section 11, Article XII of the Constitution on the
ownership of public utilities. This Court, in a petition for declaratory relief that is treated as a petition for mandamus as in the present
case, can direct the SEC to perform its statutory duty under the law, a duty that the SEC has apparently unlawfully neglected to
do based on the 2010 GIS that respondent PLDT submitted to the SEC.
Under Section 5(m) of the Securities Regulation Code,71 the SEC is vested with the power and function to suspend or revoke, after
proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of
the grounds provided by law. The SEC is mandated under Section 5(d) of the same Code with the power and function to investigate
x x x the activities of persons to ensure compliance with the laws and regulations that SEC administers or enforces. The GIS that all
corporations are required to submit to SEC annually should put the SEC on guard against violations of the nationality requirement
prescribed in the Constitution and existing laws. This Court can compel the SEC, in a petition for declaratory relief that is treated as a
petition for mandamus as in the present case, to hear and decide a possible violation of Section 11, Article XII of the Constitution in
view of the ownership structure of PLDTs voting shares, as admitted by respondents and as stated in PLDTs 2010 GIS that PLDT
submitted to SEC.

WHEREFORE, we PARTLY GRANT the petition and rule that the term capital in Section 11, Article XII of the 1987 Constitution
refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares, and not
to the total outstanding capital stock (common and non-voting preferred shares). Respondent Chairperson of the Securities and
Exchange Commission is DIRECTED to apply this definition of the term capital in determining the extent of allowable foreign
ownership in respondent Philippine Long Distance Telephone Company, and if there is a violation of Section 11, Article XII of the
Constitution, to impose the appropriate sanctions under the law.

SO ORDERED.

SECOND DIVISION

ORLANDO A. RAYOS, G.R. No. 196063

FE A. RAYOS-DELA PAZ,
represented by Present:
DR. ANTONIO A. RAYOS, and
ENGR. MANUEL A. RAYOS, CARPIO, J., Chairperson,
Petitioners, BRION,
PEREZ,
SERENO, and
- versus - REYES, JJ.
THE CITY OF MANILA, Promulgated:
Respondent. December 14, 2011
x-----------------------------------------------------------------------------------------x

R ES OLUTION

CARPIO, J.:

The Case

This petition, captioned as a petition for review on certiorari and declaratory relief,1 assails the Order of 6 January 20112 of the
Regional Trial Court of Manila, Branch 49, denying reconsideration of the trial courts Order of 11 March 2010 3 which denied the
motion to dismiss filed by petitioners Orlando A. Rayos, Fe A. Rayos Dela Paz, and Engr. Manuel A. Rayos.4

The Facts

The present case originated from a complaint for eminent domain filed by respondent City of Manila against Remedios V.
De Caronongan, Patria R. Serrano, Laureano M. Reyes, Paz B. Sison, Teofila B. Sison, Leticia R. Ventanilla, Rosalinda
R. Barrozo (defendants), docketed as Civil Case No. 03108154.

In its Complaint,5 the City of Manila alleged that it passed Ordinance No. 7949 authorizing the City Mayor to acquire by
expropriation, negotiation or by any other legal means the parcel of land co-owned by defendants, which is covered by TCT No.
227512 and with an area of 1,182.20 square meters. The City of Manila offered to purchase the property atP1,000.00 per square meter.

In their Answer,6 defendants conveyed their willingness to sell the property to the City of Manila, but at the price of P50,000.00 per
square meter which they claimed was the fair market value of the land at the time.

In the course of the proceedings, Laureano, one of the defendants, died on 1 December 2003 and was substituted by his son petitioner
Manuel A. Rayos. Meanwhile, petitioner OrlandoA. Rayos intervened while petitioner Fe A. Rayos Dela Paz was added as a
defendant.

On 7 December 2009, petitioners Orlando A. Rayos, Fe A. Rayos Dela Paz, and Engr. Manuel A. Rayos filed a Motion to Dismiss on
the grounds that (1) Ordinance No. 7949 is unconstitutional and (2) the cases of Lagcao v. Labra7 and Jesus Is Lord Christian School
Foundation, Inc. v. Municipality (now City) of Pasig, Metro Manila8 apply squarely to the present case.

On 11 March 2010, the trial court denied the motion to dismiss. The trial court ruled that the motion to dismiss did not show any
compelling reason to convince the court that the doctrine of stare decisis applies. Petitioners failed to demonstrate how or why the
facts in this case are similar with the cited cases in order that the issue in this case be resolved in the same manner. The trial court
disposed of the motion to dismiss in this wise:

In view of the foregoing, and after intense evaluation of the records on hand, the Motion to Dismiss cannot be granted.

In order to prevent further delay to the prejudice of all the proper parties in this case, continue with the trial for the
determination of just compensation on July 7, 2010 at one oclock in the afternoon.

SO ORDERED.9

On 6 January 2011, the trial court denied the motion for reconsideration.

Petitioners filed with this Court the present petition reiterating the arguments in their motion to dismiss, namely, (1) Ordinance No.
7949 is unconstitutional, and (2) the cases of Lacgaov. Labra10 and Jesus Is Lord Christian School Foundation, Inc. v. Municipality
(now City) of Pasig, Metro Manila11 apply squarely to this case.

The Ruling of the Court

We deny the petition.

An order denying a motion to dismiss is interlocutory and not appealable.12 An order denying a motion to dismiss does not finally
dispose of the case, and in effect, allows the case to proceed until the final adjudication thereof by the court. As such, it is merely
interlocutory in nature and thus, not appealable.13 Section 1(c), Rule 41 of the Rules of Court provides:

SECTION 1. Subject of appeal. - An appeal may be taken from a judgment or final order that completely disposes of the case, or of a
particular matter therein when declared by these Rules to be appealable.
No appeal may be taken from:

xxx
(c) An interlocutory order;
xxx
In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate special civil
action under Rule 65.

Clearly, no appeal, under Rule 45 of the Rules of Court, may be taken from an interlocutory order. In case of denial of an interlocutory
order, the immediate remedy available to the aggrieved party is to file a special civil action for certiorari under Rule 65 of the Rules of
Court.

In this case, since the trial courts order denying the motion to dismiss is not appealable, petitioners should have filed a petition for
certiorari under Rule 65 to assail such order, and not a petition for review on certiorari under Rule 45 of the Rules of Court. For being
a wrong remedy, the present petition deserves outright dismissal.

Even if the Court treats the present petition as a petition for certiorari under Rule 65, which is the proper remedy to challenge the order
denying the motion to dismiss, the same must be dismissed for violation of the principle of hierarchy of courts. This well-settled
principle dictates that petitioners should file the petition for certiorari with the Court of Appeals, and not directly with this Court.

Indeed, this Court, the Court of Appeals and the Regional Trial Courts exercise concurrent jurisdiction to issue writs of certiorari,
prohibition, mandamus, quo warranto, habeas corpusand injunction.14 However, such concurrence in jurisdiction does not give
petitioners unbridled freedom of choice of court forum.15 In Heirs of Bertuldo Hinog v. Melicor,16 citingPeople v. Cuaresma,17 the
Court held:

This Courts original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this Court with Regional Trial Courts
and with the Court of Appeals. This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the
writs an absolute, unrestrained freedom of choice of the court to which application therefor will be directed.There is after all a
hierarchy of courts. That hierarchy is determinative of the venue of appeals, and also serves as a general determinant of the
appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that
petitions for the issuance of extraordinary writs against first level (inferior) courts should be filed with the Regional Trial Court, and
those against the latter, with the Court of Appeals. A direct invocation of the Supreme Courts original jurisdiction to issue these
writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the
petition. This is [an] established policy. It is a policy necessary to prevent inordinate demands upon the Courts time and attention
which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Courts docket.
(Emphasis supplied.)

In short, to warrant a direct recourse to this Court, petitioners must show exceptional and compelling reasons therefor, clearly and
specifically set out in the petition. This petitionersfailed to do.

Petitioners merely rehashed the arguments in their motion to dismiss, which consist mainly of unsubstantiated allegations. Petitioners
invoke the cases of Lagcao v. Labra18 and Jesus Is Lord Christian School Foundation, Inc. v. Municipality (now City) of Pasig, Metro
Manila19 in challenging the constitutionality of Ordinance No. 7949 without, however, showing clearly the applicability and similarity
of those cases to the present controversy. Neither did petitioners explain why Ordinance No. 7949 is repugnant to the Constitution.
Nor did petitioners specifically and sufficiently set forth any extraordinary and important reason to justify direct recourse to this
Court.20

Likewise, assuming the present petition is one for declaratory relief, 21 as can be gleaned from the caption of the petition, this Court has
only appellate, not original, jurisdiction over such a petition. While this Court may treat a petition for declaratory relief as one for
prohibition22 or mandamus, over which this Court exercises original jurisdiction,23 it must be stressed that this special treatment is
undertaken only in cases with far reaching implications and transcendental issues that need to be resolved. 24

In the present case, there is absolutely nothing which shows that it has far-reaching implications and involves transcendental questions
deserving of this Courts treatment of the petition as one for prohibition or mandamus.

WHEREFORE, we DENY the petition.

SO ORDERED.

SECOND DIVISION

SERGIO I. CARBONILLA, G.R. No. 193247

EMILIO Y. LEGASPI IV, and

ADONAIS Y. REJUSO,
Petitioners,
- versus BOARD OF AIRLINES
REPRESENTATIVES
(MEMBER AIRLINES:
ASIANA AIRLINES, CATHAY
PACIFIC AIRWAYS, CHINA
AIRLINES, CEBU PACIFIC
AIRLINES, CHINA
SOUTHERN AIRLINES,
CONTINENTAL MICRONESIA
AIRLINES, EMIRATES,
ETIHAD AIRWAYS, EVA AIR
AIRWAYS, FEDERAL
EXPRESS CORPORATION,
GULF AIR, JAPAN AIRLINES,
AIR FRANCE-KLM ROYAL
DUTCH AIRLINES, KOREAN
AIR, KUWAIT AIRWAYS
CORPORATION, LUFTHANSA
GERMAN AIRLINES,
MALAYSIA AIRLINES,
NORTHWEST AIRLINES,
PHILIPPINE AIRLINES, INC.,
QANTAS AIRWAYS, LTD.,
QATAR AIRLINES, ROYAL
BRUNEI AIRLINES,
SINGAPORE AIRLINES,
SWISS INTERNATIONAL
AIRLINES, LTD., SAUDI
ARABIAN AIRLINES, and
THAI INTERNATIONAL
AIRWAYS),

Respondents.
x--------------------------------------x
OFFICE OF THE PRESIDENT, G.R. No. 194276
represented by HON. PAQUITO
N. OCHOA,* in his capacity as
EXECUTIVE SECRETARY, Present:
DEPARTMENT OF FINANCE,
represented by HON. CESAR V. CARPIO, J., Chairperson,
PURISIMA** in his capacity as BRION,
SECRETARY OF FINANCE, DEL CASTILLO,***
and THE BUREAU OF CUSTOMS, PEREZ, and
represented by HON. ANGELITO SERENO, JJ.
A. ALVAREZ**** in his capacity as
COMMISSIONER OF CUSTOMS,
Petitioners,
- versus BOARD OF AIRLINES
REPRESENTATIVES
(MEMBER AIRLINES:
ASIANA AIRLINES, CATHAY
PACIFIC AIRWAYS, CHINA
AIRLINES, CEBU PACIFIC
AIRLINES, CHINA
SOUTHERN AIRLINES,
CONTINENTAL MICRONESIA
AIRLINES, EMIRATES,
ETIHAD AIRWAYS, EVA AIR
AIRWAYS, FEDERAL
EXPRESS CORPORATION,
GULF AIR, JAPAN AIRLINES,
AIR FRANCE-KLM ROYAL
DUTCH AIRLINES, KOREAN
AIR, KUWAIT AIRWAYS
CORPORATION, LUFTHANSA

GERMAN AIRLINES,
MALAYSIA AIRLINES,
NORTHWEST AIRLINES,
PHILIPPINE AIRLINES, INC.,
QANTAS AIRWAYS, LTD.,
QATAR AIRLINES, ROYAL
BRUNEI AIRLINES,
SINGAPORE AIRLINES,
SWISS INTERNATIONAL
AIRLINES, LTD., SAUDI
ARABIAN AIRLINES, and
THAI INTERNATIONAL Promulgated:
AIRWAYS),
Respondents. September 14, 2011
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

CARPIO, J.:

The Cases

Before the Court are two petitions for review1 assailing the Decision2 promulgated on 9 July 2009 by the Court of Appeals in CA-G.R.
SP No. 103250.

In G.R. No. 193247, petitioners Sergio I. Carbonilla, Emilio Y. Legaspi IV, and Adonais Y. Rejuso (Carbonilla, et al.) assail the
Resolution3 promulgated on 5 August 2010 by the Court of Appeals in CA-G.R. SP No. 103250.

In G.R. No. 194276, petitioners Office of the President, represented by Paquito N. Ochoa in his capacity as Executive Secretary,
Department of Finance, represented by Cesar V.Purisima in his capacity as Secretary of Finance, and the Bureau of Customs (BOC),
represented by Angelito A. Alvarez in his capacity as Commissioner of Customs (Office of the President, et al.), assail the
Resolution4 promulgated on 26 October 2010 by the Court of Appeals in CA-G.R. SP No. 103250.

The Antecedent Facts

The facts, as gathered from the assailed Decision of the Court of Appeals, are as follows:

The Bureau of Customs5 issued Customs Administrative Order No. 1-2005 (CAO 1-2005) amending CAO 7-92.6 The Department of
Finance7 approved CAO 1-2005 on 9 February 2006. CAO 7-92 and CAO 1-2005 were promulgated pursuant to Section 35068 in
relation to Section 6089 of the Tariff and Customs Code of the Philippines (TCCP).

Petitioners Office of the President, et al. alleged that prior to the amendment of CAO 7-92, the BOC created on 23 April 2002 a
committee to review the overtime pay of Customs personnel in Ninoy Aquino International Airport (NAIA) and to propose its
adjustment from the exchange rate of P25 to US$1 to the then exchange rate of P55 to US$1. The Office of the President, et al. alleged
that for a period of more than two years from the creation of the committee, several meetings were conducted with the agencies
concerned, including respondent Board of Airlines Representatives (BAR), to discuss the proposed rate adjustment that would be
embodied in an Amendatory Customs Administrative Order.
On the other hand, BAR alleged that it learned of the proposed increase in the overtime rates only sometime in 2004 and only through
unofficial reports.

On 23 August 2004, BAR wrote a letter addressed to Edgardo L. De Leon, Chief, Bonded Warehouse Division, BOC-NAIA,
informing the latter of its objection to the proposed increase in the overtime rates. BAR further requested for a meeting to discuss the
matter.

BAR wrote the Secretary of Finance on 31 January 2005 and 21 February 2005 reiterating its concerns against the issuance of CAO 12005. In a letter dated 3 March 2005, the Acting District Collector of BOC informed BAR that the Secretary of Finance already
approved CAO 1-2005 on 9 February 2005. As such, the increase in the overtime rates became effective on 16 March 2005. BAR still
requested for an audience with the Secretary of Finance which was granted on 12 October 2005.

The BOC then sent a letter to BARs member airlines demanding payment of overtime services to BOC personnel in compliance with
CAO 1-2005. The BARs member airlines refused and manifested their intention to file a petition with the Commissioner of Customs
and/or the Secretary of Finance to suspend the implementation of CAO 1-2005.

In a letter dated 31 August 2006,10 Undersecretary Gaudencio A. Mendoza, Jr. (Usec. Mendoza), Legal and Revenue Operations
Group, Department of Finance informed BAR, through its Chairman Felix J. Cruz (Cruz), that they find no valid ground to disturb the
validity of CAO 1-2005, much less to suspend its implementation or effectivity and that its implementation effective 16 March 2005 is
legally proper.

In separate letters both dated 4 December 2006,11 Cruz requested the Office of the President and the Office of the Executive Secretary
to review the decision of Usec. Mendoza. Cruz manifested the objection of the International Airlines operating in the Philippines to
CAO 1-2005. On 13 December 2006, Deputy Executive Secretary Manuel B. Gaite (Deputy Exec.Sec. Gaite) issued an
Order12 requiring BAR to pay its appeal fee and submit an appeal memorandum within 15 days from notice. BAR paid the appeal fee
and submitted its appeal memorandum on 19 January 2007.

The Decision of the Office of the President

In a Decision13 dated 12 March 2007, the Office of the President denied the appeal of BAR and affirmed the Decision of the
Department of Finance.

The Office of the President ruled that the BOC was merely exercising its rule-making or quasi-legislative power when it issued CAO
1-2005. The Office of the President ruled that since CAO 1-2005 was issued in the exercise of BOCs rule-making or quasi-legislative
power, its validity and constitutionality may only be assailed through a direct action before the regular courts. The Office of the
President further ruled that, assuming that BARs recourse before the Office of the President was proper and in order, the appeal was
filed out of time because BAR received the letter-decision of the Secretary of Finance on 4 September 2006 but it filed its appeal only
on 4 December 2006, beyond the 30-day period provided under Administrative Order No. 18 dated 12 February 1987.

The Office of the President also ruled that the grounds raised by BAR, namely, (1) the failure to comply with the publication
requirement; (2) that the foreign exchange cannot be a basis for rate increase; and (3) that increase in rate was ill-timed, were already
deliberated during the meetings held between the BOC and the stakeholders and were also considered by the Secretary of Finance.
The Office of the President further adopted the position of the BOC that several public hearings and consultations were conducted by
the BOC-NAIA Collection District, which were in substantial compliance with Section 9, Chapter I, Book VII of the Administrative
Code of 1987. BAR did not oppose the exchange rate used in CAO 7-92 which was the exchange rate at that time and thus, the BOCNAIA Collection District found it strange that BAR was questioning the fixing of the adjusted pay rates which were lower than the
rate provided under Section 3506 of the TCCP. The Office of the President ruled that there is a legal presumption that the rates fixed
by an administrative agency are reasonable, and that the fixing of the rates by the Government, through its authorized agents, involved
the exercise of reasonable discretion.

BAR filed a motion for reconsideration. In its Resolution14 dated 14 March 2008, the Office of the President denied BARs motion for
reconsideration.

BAR filed a petition for review under Rule 45 before the Court of Appeals.

Petitioners Carbonilla, et al. filed an Omnibus Motion to Intervene before the Court of Appeals on the ground that as customs
personnel, they would be directly affected by the outcome of the case. Petitioners Carbonilla, et al. also adopted the Comment filed by
the Office of the Solicitor General (OSG).
The Decision of the Court of Appeals

In its 26 February 2009 Resolution,15 the Court of Appeals denied the motion for intervention filed by Carbonilla, et al. The Court of
Appeals ruled that the petition before it involved the resolution of whether the decision of the Office of the President was correctly
rendered. The Court of Appeals held that the intervenors case was for collection of their unpaid overtime services and their interests
could not be protected or addressed in the resolution of the case. The Court of Appeals ruled that Carbonilla, et al. should pursue their
case in a separate proceeding against the proper respondents.

Carbonilla, et al. filed a motion for reconsideration of the 26 February 2009 resolution.

Without resolving Carbonilla, et al.s motion for reconsideration, the Court of Appeals promulgated the assailed 9 July 2009 Decision
which set aside the 12 March 2007 Decision and 14 March 2008 Resolution of the Office of the President and declared Section 3506
of the TCCP, CAO 7-92 and CAO 1-2005 unenforceable against BAR.

Ruling that it could take cognizance of BARs appeal, the Court of Appeals held that BAR could not be faulted for not filing a case
before the Court of Tax Appeals (CTA) because the Office of the President admitted that it preempted any action before the CTA.
Deputy Exec. Sec. Gaite treated the letters of BAR as an appeal and required it to pay appeal fee and to submit an appeal
memorandum. The Court of Appeals further ruled that what the Office of the President treated as a decision of the Department of
Finance was merely an advisory letter dated 31 August 2006 and to treat it as a decision from which an appeal could be taken and then
rule that it was not perfected on time would deprive BAR of its right to due process.

The Court of Appeals further ruled that it has the power to resolve the constitutional issue raised against CAO 7-92 and CAO 1-2005.
The Court of Appeals ruled that Section 8, ArticleIX(B) of the Constitution prohibits an appointive public officer or employee from
receiving additional, double or indirect compensation, unless specifically authorized by law. The Court of Appeals ruled that Section
3506 of the TCCP only authorized payment of additional compensation for overtime work, and thus, the payment of traveling and
meal allowances under CAO 7-92 and CAO 1-2005 are unconstitutional and could not be enforced against BAR members.

The Court of Appeals ruled that Section 3506 of the TCCP failed the completeness and sufficient standard tests to the extent that it
attempted to cover BAR members through CAO 7-92 and CAO 1-2005. The Court of Appeals ruled that the phrase other persons
served did not provide for descriptive terms and conditions that might be completely understood by the BOC. The Court of Appeals

ruled that devoid of common distinguishable characteristic, aircraft owners and operators should not have been lumped together with
importers and shippers. The Court of Appeals also ruled that Section 3506 of the TCCP failed the sufficient standard test because it
does not contain adequate guidelines or limitations needed to map out the boundaries of the delegates authority.

The dispositive portion of the Court of Appeals Decision reads:

WHEREFORE, the petition is GRANTED. Declaring Section 3506 of the TCCP as well as CAO 7-92 and CAO 1-2005 to be
unenforceable as against the petitioners, the appealed Decision dated March 12, 2007 and Resolution dated March 14, 2008
are hereby SET ASIDE.

SO ORDERED.16

Petitioners Carbonilla, et al. filed their motion for reconsideration of the 9 July 2009 Decision. In its 5 August 2010 Resolution, the
Court of Appeals, among others, denied Carbonilla, et al.s motion for reconsideration.

Carbonilla, et al. came to this Court via a petition for review, docketed as G.R. No. 193247, on the following grounds:

I.

II.

The Honorable Court of Appeals seriously erred in law in ruling that the Court of Tax Appeals did not have jurisdiction
on the subject controversy.
The Honorable Court of Appeals seriously erred in law in ruling that Section 3506 of the TCCP failed the completeness
and sufficient standard tests.

III.

The Honorable Court of Appeals seriously erred in law in ruling that CAO 7-92 as amended by CAO 1-2005 as well as
Section 3506 of the TCCP are not enforceable against BARs members.

IV.

The Honorable Court of Appeals seriously erred in law in not ruling that estoppel and/or laches should have prevented the
BAR from questioning CAO 1-2005.

V.

The Honorable Court of Appeals seriously erred in law in issuing the decision dated July 9, 2009 in denying petitioners
intervention and motion for reconsideration dated August 3, 2009.17

The Office of the President, et al. also filed a motion for reconsideration dated 28 July 2009 assailing the 9 July 2009 Decision of the
Court of Appeals.

Meanwhile, in a Resolution promulgated on 12 May 2010,18 the Court of Appeals directed BAR to continue complying with the 12
March 2007 Decision of the Office of the President. The Court of Appeals ruled that BAR unlawfully withheld the rightful overtime
payment of BOC employees when it stopped paying its obligations under CAO 7-92, as amended by CAO 1-2005, since the Court of
Appeals 9 July 2009 Decision had not attained finality pending the resolution of the motion for reconsideration filed by the Office of
the President, et al. BAR filed a motion for reconsideration dated 26 May 2010 for the reversal of the 12 May 2010 Resolution of the
Court of Appeals.

In a Resolution promulgated on 26 October 2010, the Court of Appeals granted BARs 26 May 2010 motion for reconsideration and
denied the 28 July 2009 motion for reconsideration of the Office of the President, et al.

The Office of the President, et al. filed a petition for review before this Court, docketed as G.R. No. 194276, raising the following
grounds:

I.

The Court of Appeals erred in giving due course to respondents BAR and its member airlines petition for review because
it had no jurisdiction over the issues raised therein by respondents, to wit:

1.

CAO No. 1-2005 is invalid as the increased overtime pay rates and meal and transportation allowances
fixed therein are unreasonable and confiscatory; and

2.

The act of the Bureau of Customs charging and/or collecting from BARs member airlines the cost of the
overtime pay and meal and transportation allowances of Bureau of Customs (BOC) personnel in connection
with the discharge of their government duties, functions and responsibilities is legally impermissible and,
therefore, invalid.

These issues involve the validity and collection of money charges authorized by the Customs Law and thus the Court of Tax
Appeals (CTA) has exclusive jurisdiction thereof.
I.

Granting arguendo that the Court of Appeals has jurisdiction over the said issues raised by the BAR and its member
airlines, the Court of Appeals should have dismissed their petition for review filed under Rule 45 of the Rules of Court on the
following grounds:

1.

A petition for review under Ruled 43 of the Rules of Court cannot be filed to question the quasi-legislative or rule-making
power of the Commissioner of Customs;

2.

BARs appeal to the Office of the President questioning the 31 August 2006 Decision of the Department of Finance (DOF),
finding that CAO No. 1-2005 is valid, was filed out of time;

3.

Some of respondents BAR member airlines country managers who executed the verification and certification of non-forum
shopping of their petition for review did not have the necessary authorization of the said member airlines for them to execute
the same; and

4.

Administrative procedural due process was observed in the promulgation by the Commissioner of Customs of the
questioned CAO No. 1-2005.

II.

Respondents BAR and its member airlines are guilty of laches and estoppel and thus are effectively barred from
questioning the authority of the Commissioner of Customs to promulgate pursuant to Section 608 in relation to Section 3506
of the Tariff and Customs Code (TCCP), as amended, not only CAO No. 1-2005, but also CAO No. 7-92.

III.

The Court of Appeals erred in going beyond the issues raised by respondents BAR and its member airlines not only in the
pleadings filed by them in the proceedings below but also in their petition for review.

IV.

Section 3506 of the TCCP, CAO No. 1-2005 and CAO No. 7-92 are valid. Said law and its implementing regulations neither
constitute undue delegation of legislative power nor authorize overpayment of BOC personnel. 19

The Issues

For resolution in these cases are the following issues:

1.

Whether the Court of Appeals committed a reversible error in denying the intervention of Carbonilla, et
al.;

2.

Whether the Court of Appeals has jurisdiction over BARs petition;

3.

Whether BARs appeal before the Office of the President was filed on time;

4.

Whether the officers of some of BARs member airlines who executed the verification and certification of
non-forum shopping have the necessary authorization to execute them;

5.
6.

Whether BAR was guilty of laches and/or estoppel; and

Whether the Court of Appeals committed a reversible error in declaring Section 3506 of the TCCP, CAO
7-92, and CAO 1-2005 unenforceable against BAR.

The Ruling of this Court

The petition in G.R. No. 193247 has no merit while the petition in G.R. No. 194276 is meritorious.

Intervention in G.R. No. 193247

On the matter of the intervention of Carbonilla, et al., Section 1, Rule 19 of the 1997 Rules of Civil Procedure provides:

Section 1. Who may intervene. - A person who has a legal interest in the matter in litigation, or in the success of either of the
parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of
property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action.
The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the
original parties, and whether or not the intervenors rights may be fully protected in a separate proceeding.

Intervention is not a matter of right but it may be permitted by the courts when the applicant shows facts which satisfy the
requirements authorizing intervention.20 In G.R. No. 193247, the Court of Appeals denied Carbonilla, et al.s motion for intervention in
its 26 February 2009 Resolution on the ground that the case was for collection of unpaid overtime services and thus should be pursued
in a separate proceeding against the proper respondents. A reading of the Carbonilla, et al.s Omnibus Motion21 supports the ground
invoked by the Court of Appeals in denying the motion. The Omnibus Motion states:

3.

The said movants-intervenors all held offices or were stationed at the Ninoy Aquino International Airport
[NAIA] and who have all been rendering overtime services thereat for so many years.

4.

Movant-Intervenor Carbonilla has retired from government service last September 2007 without his being
paid the additional rates set by CAO No. 1-2005 which became effective on March 16, 2007.
The effectivity and implementation of the said CAO No. 1-2005 is the main issue in this case.

5.

Thus, it is noteworthy to mention that all the movants-intervenors all rendered overtime services since
March 16, 2005 or for all the time material to the issue in this case.

6.

Movants-Intervenors urgently need their respective [differential]/back payments representing overtime

services rendered from 16 March 2005 to the present pursuant to the implementation of CAO No. 1-2005.

7.

Said differential/back payments pursuant to CAO No. 1-2005 would be of great help to the movantsintervenors considering that as of 24 January 2008, herein movants-intervenors were stripped of their
respective overtime duties by the District Collector of Customs at NAIA for reasons only known to the
latter.

8.

The full implementation of CAO No. 1-2005 would not only benefit the cause and financial needs of
herein movants-intervenors but also that of the other 900 or so employees of the Bureau of Customs-NAIA
who are rendering overtime services thereat up to the present.22

Clearly, Carbonilla, et al. were really after the payment of their differential or back payments for services rendered. Hence, the Court
of Appeals correctly denied the motion for intervention.

It should be stressed that the allowance or disallowance of a motion for intervention is addressed to the sound discretion of the
courts.23 The permissive tenor of the Rules of Court shows the intention to give the courts the full measure of discretion in allowing or
disallowing the intervention.24 Once the courts have exercised this discretion, it could not be reviewed by certiorari or controlled by
mandamus unless it could be shown that the discretion was exercised in an arbitrary or capricious manner.25 Carbonilla, et al. failed to
show that the Court of Appeals rendered its resolution in an arbitrary or capricious manner.

In addition, Carbonilla, et al. admitted in their petition that their motion for reconsideration of the 26 February 2009 Resolution of the
Court of Appeals had been denied in open court during the oral arguments held by the Court of Appeals on 16 December
2009.26 Carbonilla, et al. did not act on the denial of this motion but only pursued their motion for reconsideration of the 9 July 2009
Decision of the Court of Appeals. Hence, the denial of Carbonilla, et al.s motion for intervention had already attained finality.

Having ruled against the right of Carbonilla, et al. to intervene, we see no reason to rule on the other issues they raise unless raised in
G.R. No. 194276.

We now discuss the issues raised in G.R. No. 194276.

Jurisdiction of the Court of Appeals

The Office of the President, et al. argue that the Court of Appeals should have denied BARs petition because it had no jurisdiction
over the issues raised, involving the validity and collection of money charges authorized by Customs Law, which are under the
jurisdiction of the CTA.

We do not agree.

The jurisdiction of the Court of Appeals over BARs petition stems from Section 1 in relation to Section 3, Rule 43 of the 1997 Rules
of Civil Procedure which states that appeals from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial
agency in the exercise of its quasi judicial functions[,] which includes the Office of the President, may be taken to the Court of
Appeals. BARs petition for review to the Court of Appeals from the 12 March 2007 Decision and 14 March 2008 Resolution of the
Office of the President falls within the jurisdiction of the Court of Appeals.

As noted by the Court of Appeals, the Office of the President took cognizance of Cruzs letter dated 4 December 2006 requesting for a
review of the 31 August 2006 letter of Usec. Mendoza. Deputy Exec. Sec. Gaite required BAR to pay the appeal fee and submit its
appeal memorandum. Thereafter, the Office of the President issued its 12 March 2007 Decision affirming the decision of the
Department of Finance and then denied BARs motion for reconsideration in its 14 March 2008 Resolution. BARs only recourse is to
file a petition for review before the Court of Appeals under Rule 43 of the 1997 Rules on Civil Procedure. The exercise by the Court
of Appeals of its appellate jurisdiction over the decision of the Office of the President is entirely distinct from the issue of whether
BAR committed a procedural error in elevating the case before the Office of the President instead of filing its appeal before the CTA.

Timeliness of the Appeal before the Office of the President

The Court of Appeals ruled that the question of whether BARs appeal before the Office of the President was filed on time was
rendered academic when BAR paid the appeal fee and submitted its appeal memorandum on time. The Court of Appeals held that
Deputy Exec. Sec. Gaite could not validly require BAR to perfect its appeal in his 13 December 2006 Order and then rule, after its
perfection, that the appeal was not filed on time. The Court of Appeals ruled that the 13 December 2006 Order of Deputy Exec.
Sec. Gaite stopped BAR from pursuing any recourse with the CTA. The Court of Appeals further ruled that the Office of the President
did not explain how the 31 August 2006 letter of Usec. Mendoza became a decision of the Secretary of Finance when it was only an
advisory letter.

We do not agree with the Court of Appeals.

The Office of the President is not precluded from issuing the assailed decision in the same way that this Court is not proscribed from
accepting a petition before it, requiring the payment of docket fees, directing the respondent to comment on the petition, and after
studying the case, from ruling that the petition was filed out of time or that it lacks merit.

However, Cruzs 4 December 2006 letters to then President Gloria Macapagal Arroyo and then Exec. Sec. Eduardo Ermita are not in
the nature of an appeal provided for under Administrative Order No. 18, series of 1987 (AO 18).27 Section 1 of AO 18 provides that an
appeal to the Office of the President shall be taken within 30 days from receipt by the aggrieved party of the decision, resolution or
order complained of or appealed from. Section 2 of AO 18 cites caption, docket number of the case as presented in the office of origin,
and addresses of the parties. Section 3 mentions pauper litigants. In sum, the appeal provided under AO 18 refers to adversarial cases.
It does not refer to a review of administrative rules and regulations, as what BAR asked the Office of the President to do in this case.
BAR, in writing the Office of the President, was exhausting its administrative remedies. BAR could still go to the regular courts after
the Office of the President acted on its request for a review of Usec. Mendozas 31 August 2006 letter. The decision of the Office of the
President did not foreclose BARs remedy to bring the matter to the regular courts.
BAR is assailing the issuance and implementation of CAO 1-2005. CAO 1-2005 is an amendment to CAO 7-92. CAO 7-92 was
issued [b]y authority of Section 608, in relation to Section 3506, of the Tariff and Customs Code of the Philippines x x x. On this
score, we do not agree with the Office of the President that BAR, instead of filing an appeal before its office, should have filed an
appeal before the CTA in accordance with Section 7 of Republic Act No. 928228 (RA 9282) which reads:

Section 7. Jurisdiction. - The CTA shall exercise:

(a) Exclusive appellate jurisdiction, to review by appeal, as herein provided:

xxxx

4. Decisions of the Commissioner of Customs in vases involving liability for customs duties, fees and other money charges,
seizure, detention or release of property affected, fines forfeitures or other penalties in relation thereto, or other matters
arising under the Customs Law or other laws administered by the Bureau of Customs.

Under Section 11 of RA 9282, an appeal to the CTA should be taken within 30 days from receipt of the assailed decision or ruling.
However, Section 2313, Book II of Republic Act No. 1937 (RA 1937)29 provides:

Section 2313. Review of Commissioner. - The person aggrieved by the decision or action of the Collector in any matter
presented upon protest or by his action in any case of seizure may, within fifteen (15) days after notification on writing by the
Collector of his action or decision, file a written notice to the Collector with a copy furnished to the Commissioner of his
intention to appeal the action or decision of the Collector to the Commissioner. Thereupon the Collector shall forthwith
transmit all the records of the proceedings to the Commissioner, who shall approve, modify or reverse the action or decision
of the Collector and take such steps and make such orders as may be necessary to give effect to his decision.
Provided, That when an appeal is filed beyond the period herein prescribed, the same shall be deemed dismissed.

If in any seizure proceedings, the Collector renders a decision adverse to the Government, such decision shall automatically
be reviewed by the Commissioner and the records of the case shall be elevated within five (5) days from the promulgation of
the decision of the Collector. The Commissioner shall render a decision on the automatic appeal within thirty (30) days from
receipts of the records of the case. If the Collectors decision is reversed by the Commissioner, the decision of the
Commissioner shall be final and executory. However, if the Collectors decision is affirmed, or if within thirty (30) days from

receipt of the record of the case by the Commissioner no decision is rendered of the decision involves imported articles
whose published value is five million pesos (P5,000,000) or more, such decision shall be deemed automatically appealed to
the Secretary of Finance and the records of the proceedings shall be elevated within five (5) days from the promulgation of
the decision of the Commissioner or of the Collector under appeal, as the case may be. Provided, further, That if the decision
of the Commissioner or of the Collector under appeal, as the case may be, is affirmed by the Secretary of Finance, or if
within thirty (30) days from receipt of the records of the proceedings by the Secretary of Finance, no decision is rendered, the
decision of the Secretary of Finance, or of the Commissioner, or of the Collector under appeal, as the case may be, shall
become final and executory.

xxxx

Section 2402 of RA 1937 further provides:

Section 2402. Review by Court of Appeals. - The party aggrieved by a ruling of the Commissioner in any matter brought
before him upon protest or by his action or ruling in any case of seizure may appeal to the Court of Tax Appeals, in the
manner and within the period prescribed by law and regulations.

Clearly, what is appealable to the CTA are cases involving protest or seizure, which is not the subject of BARs appeal in these cases.
BARs actions, including seeking an audience with the Secretary of Finance, 30 as well as writing to the Executive Secretary and the
Office of the President, are part of the administrative process to question the validity of the issuance of an administrative regulation,
that is, of CAO 1-2005, entitled Amendments to Customs Administrative Order No. 7-92 (Rules and Regulations Governing the
Overtime Pay and Other Compensations Related Thereto Due to Customs Personnel at the NAIA).

CAO 1-2005 was issued pursuant to Section 608 of the TCCP which provides:

Section 608. Commissioner to Make Rules and Regulations. - The Commissioner shall, subject to the approval of the
Secretary of Finance, promulgate all rules and regulations necessary to enforce the provisions of this Code. x x x

The jurisdiction over the validity and constitutionality of rules and regulations issued by the Commissioner under Section 608 of the
TCCP lies before the regular courts. It is not within the jurisdiction of the Office of the President or the CTA. Hence, the Office of the
President erred in holding that BARs appeal was filed late because BAR can still raise the issue before the regular courts.
Verification and Certification
of Non-Forum Shopping

The Office of the President, et al. allege that the Court of Appeals should have dismissed the petition because of BARs failure to
comply fully with the requirements of verification and certification of non-forum shopping.

We agree with the Court of Appeals in its liberal interpretation of the Rules. Verification of a pleading is a formal, not jurisdictional,
requirement.31 The requirement is simply a condition affecting the form of the pleading and non-compliance with the requirement does
not render the pleading fatally defective.32

As regards the certification of non-forum shopping, this Court may relax the rigid application of the rules to afford the parties the
opportunity to fully ventilate their cases on the merits.33 This is in line with the principle that cases should be decided only after giving
all parties the chance to argue their causes and defenses.34 Technicality and procedural imperfections should not serve as basis of
decisions and should not be used to defeat the substantive rights of the other party.35

Estoppel and Laches

The Office of the President, et al. allege that BAR is guilty of estoppel and laches because it did not question CAO 7-92 which had
been in effect since 1992. The Office of the President, et al. argue that a direct attack of CAO 1-2005 is a collateral attack of CAO 792 since CAO 7-92 is the main administrative regulation enacted to implement Section 3506 of the TCCP.

The argument has no merit.

BAR is not questioning the validity of CAO 7-92 or Section 3506 of the TCCP. BAR is questioning the validity of CAO 1-2005 on the
following grounds: (1) that it was approved in violation of BARs right to due process because its approval did not comply with the
required publication notice under Section 9(2), Chapter I, Book VII, of the Administrative Code of the Philippines; (2) that CAO 12005 inappropriately based its justification on the declining value of the Philippine peso versus the U.S. dollar when services of the
BOC are rendered without spending any foreign currency; and (3) that the increase in BOC rates aggravates the already high operating
cost paid by the airlines which are still reeling from the impact of consecutive negative events such as SARS, Iraqi war, avian flu and
the unprecedented increase in fuel prices. BARs objection to CAO 1-2005 could not be considered a direct attack on CAO 7-92
because BAR was merely objecting to the amendments to CAO 7-92. BAR did not question the validity of CAO 7-92 itself. Even
during the pendency of these cases before the Court of Appeals, BAR members continued to pay the rates prescribed under CAO 792. It was only upon the promulgation of the Court of Appeals Decision declaring CAO 7-92 and CAO 1-2005 unconstitutional that
BAR recommended to its members to stop paying the charges imposed by the BOC.

Hence, BAR is not estopped from questioning CAO 1-2005 on the ground alone that it did not question the validity of CAO 7-92.

Constitutionality of CAO 7-92, CAO 1-2005

and Section 3506 of the TCCP

The Office of the President, et al. allege that the Court of Appeals acted beyond its jurisdiction when it passed upon the validity of
CAO 7-92 and Section 3506 of the TCCP.

We do not agree with the Office of the President, et al.

Section 8, Rule 51 of the 1997 Rules of Civil Procedure also states:

Section 8. Questions that may be decided. - No error which does not affect the jurisdiction over the subject matter or the
validity of the judgment appealed from or the proceedings therein, will be considered unless stated in the assignment of
errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass
upon plain errors and clerical errors.

The Court of Appeals deemed it necessary to rule on the issue for the proper determination of these cases. The Court has ruled that the
Court of Appeals is imbued with sufficient authority and discretion to review matters, not otherwise assigned as errors on appeal, if it
finds that their consideration is necessary in arriving at a complete and just resolution of the case or to serve the interests of justice or
to avoid dispensing piecemeal justice.36 Further, while it is true that the issue of constitutionality must be raised at the first opportunity,
this Court, in the exercise of sound discretion, can take cognizance of the constitutional issues raised by the parties in accordance with
Section 5(2)(a), Article VII of the 1987 Constitution.37

The Court has further ruled:

When an administrative regulation is attacked for being unconstitutional or invalid, a party may raise its unconstitutionality
or invalidity on every occasion that the regulation is being enforced. For the Court to exercise its power of judicial review, the
party assailing the regulation must show that the question of constitutionality has been raised at the earliest opportunity. This
requisite should not be taken to mean that the question of constitutionality must be raised immediately after the execution of
the state action complained of. That the question of constitutionality has not been raised before is not a valid reason for
refusing to allow it to be raised later. A contrary rule would mean that a law, otherwise unconstitutional, would lapse into
constitutionality by the mere failure of the proper party to promptly file a case to challenge the same. 38

Section 3506 of the TCCP provides:

Section 3506. Assignment of Customs Employees to Overtime Work. - Customs employees may be assigned by a Collector to
do overtime work at rates fixed by the Commissioner of Customs when the service rendered is to be paid by the importers,
shippers or other persons served. The rates to be fixed shall not be less than that prescribed by law to be paid to employees of
private enterprise.

We do not agree with the Court of Appeals in excluding airline companies, aircraft owners, and operators from the coverage of Section
3506 of the TCCP. The term other persons served refers to all other persons served by the BOC employees. Airline companies, aircraft
owners, and operators are among other persons served by the BOC employees. As pointed out by the OSG, the processing of
embarking and disembarking from aircrafts of passengers, as well as their baggages and cargoes, forms part of the BOC functions.
BOC employees who serve beyond the regular office hours are entitled to overtime pay for the services they render.

The Court of Appeals ruled that, applying the principle of ejusdem generis, airline companies, aircraft owners, and operators are not in
the same category as importers and shippers because an importer brings goods to the country from a foreign country and pays custom
duties while a shipper is one who ships goods to another; one who engages the services of a carrier of goods; one who tenders goods
to a carrier for transportation. However, airline passengers pass through the BOC to declare whether they are bringing goods that need
to be taxed. The passengers cannot leave the airport of entry without going through the BOC. Clearly, airline companies, aircraft
owners, and operators are among the persons served by the BOC under Section 3506 of the TCCP.

The overtime pay of BOC employees may be paid by any of the following: (1) all the taxpayers in the country; (2) the airline
passengers; and (3) the airline companies which are expected to pass on the overtime pay to passengers. If the overtime pay is taken
from all taxpayers, even those who do not travel abroad will shoulder the payment of the overtime pay. If the overtime pay is taken
directly from the passengers or from the airline companies, only those who benefit from the overtime services will pay for the services
rendered. Here, Congress deemed it proper that the payment of overtime services shall be shouldered by the other persons served by
the BOC, that is, the airline companies. This is a policy decision on the part of Congress that is within its discretion to determine. Such
determination by Congress is not subject to judicial review.

We do not agree with the Court of Appeals that Section 3506 of the TCCP failed the completeness and sufficient standard tests. Under
the first test, the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the
delegate, the only thing he will have to do is to enforce it.39 The second test requires adequate guidelines or limitations in the law to
determine the boundaries of the delegates authority and prevent the delegation from running riot.40 Contrary to the ruling of the Court
of Appeals, Section 3506 of the TCCP complied with these requirements. The law is complete in itself that it leaves nothing more for
the BOC to do: it gives authority to the Collector to assign customs employees to do overtime work; the Commissioner of Customs
fixes the rates; and it provides that the payments shall be made by the importers, shippers or other persons served. Section 3506 also
fixed the standard to be followed by the Commissioner of Customs when it provides that the rates shall not be less than that prescribed
by law to be paid to employees of private enterprise.

Contrary to the ruling of the Court of Appeals, BOC employees rendering overtime services are not receiving double compensation for
the overtime pay, travel and meal allowances provided for under CAO 7-92 and CAO 1-2005. Section 3506 provides that the rates
shall not be less than that prescribed by law to be paid to employees of private enterprise. The overtime pay, travel and meal
allowances are payment for additional work rendered after regular office hours and do not constitute double compensation prohibited
under Section 8, Article IX(B) of the 1987 Constitution41 as they are in fact authorized by law or Section 3506 of the TCCP.

BAR raises the alleged failure of BOC to publish the required notice of public hearing and to conduct public hearings to give all
parties the opportunity to be heard prior to the issuance of CAO 1-2005 as required under Section 9(2), Chapter I, Book VII of the
Administrative Code of the Philippines. Section 9(2) provides:

Sec. 9. Public Participation. - (1) If not otherwise required by law, an agency shall, as far as practicable, publish or circulate
notices of proposed rules and afford interested parties the opportunity to submit their views prior to the adoption of any rule.

(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been published in a
newspaper of general circulation at least two (2) weeks before the first hearing thereon.

(3) In cases of opposition, the rules on contested cases shall be observed.

BARs argument has no merit.

The BOC created a committee to re-evaluate the proposed increase in the rate of overtime pay and for two years, several meetings
were conducted with the agencies concerned to discuss the proposal. BAR and the Airline Operators Council participated in these
meetings and discussions. Hence, BAR cannot claim that it was denied due process in the imposition of the increase of the overtime
rate. CAO 1-2005 was published in the Manila Standard, a newspaper of general circulation in the Philippines on 18 February
200542 and while it was supposed to take effect on 5 March 2005, or 15 days after its publication, the BOC-NAIA still deferred BARs
compliance until 16 March 2005.
WHEREFORE, we DENY the petition in G.R. No. 193247. We GRANT the petition in G.R. No. 194276 and SET ASIDE the 9
July 2009 Decision and 26 October 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 103250. Petitioner Bureau of
Customs is DIRECTED to implement CAO 1-2005 immediately.
SO ORDERED.

SECOND DIVISION

MANILA INTERNATIONAL AIRPORT

AUTHORITY,
Petitioner,

G.R. No. 185535

Present:
CARPIO, J., Chairperson,
NACHURA,

- versus -

REYNALDO (REYMUNDO[1]) AVILA,

CALIXTO AGUIRRE, and SPS.
ROLANDO and ANGELITA QUILANG,
Respondents.

PERALTA,
ABAD, and
MENDOZA, JJ.

Promulgated:
January 31, 2011

X ---------------------------------------------------------------------------------------X
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 filed by the Manila International Airport Authority (MIAA) seeking to
reverse and set aside the June 16, 2008 Decision [2] of the Court of Appeals (CA) in CA-G.R. SP No. 97536 which annulled the August
7, 2006[3] and the November 13, 2006 [4] Resolutions of the Regional Trial Court of Pasay City, Branch 117 (RTC), in Civil Case No.
05-0399-CFM.
From the records, it appears that in June 1968, the late Tereso Tarrosa (Tarrosa) leased a 4,618 square meter parcel of land
located along the MIAA Road in Pasay City from its owner, MIAA. Before the expiration of the lease sometime in 1993, Tarrosa filed
a case against MIAA to allow him to exercise his pre-emptive right to renew the lease contract. Finding that Tarrosa violated certain
provisions of its contract with MIAA, the trial court dismissed the case. Tarrosa appealed before the CA but to no avail. When Tarrosa
passed away, he was substituted by his estate represented by his heirs attorney-in-fact, Annie Balilo (Balilo). On June 9, 1998, the CA
decision became final and executory.[5]
Thereafter, MIAA sent letters of demand to the heirs asking them to vacate the subject land. Unheeded, MIAA instituted an
ejectment suit against the Estate of Tarrosa(Estate) before the Metropolitan Trial Court of Pasay City, Branch 47 (MeTC), docketed
as Civil Case No. 64-04-CFM. On February 18, 2005, the MeTC rendered its decision [6]ordering the Estate and all persons claiming
rights under it to vacate the premises, peacefully return possession thereof to MIAA and pay rentals, attorneys fees and costs of suit.
The Estate, through Balilo, appealed the case to the RTC, where it was docketed as Civil Case No. 05-0399-CFM. In its July
22, 2005 Decision,[7] the RTC gave due course to the appeal and affirmed the MeTC decision in toto.
The Estate then filed a motion for reconsideration while MIAA sought the correction of a clerical error in the MeTC decision
as well as the issuance of a writ of execution.On September 20, 2005, the RTC issued an omnibus order [8] denying the Estates motion
for reconsideration, granting MIAAs motion to correct a clerical error and granting the motion for the issuance of a writ of execution.
On the strength of the writ of execution issued by the RTC, a notice to vacate was served on the occupants of the subject
premises. The RTC Sheriff partially succeeded in evicting the Estate, Balilo and some other occupants. Still, others remained in the
premises.[9]
Among the remaining occupants were respondents Calixto E. Aguirre (Aguirre), Reymundo Avila (Avila), and spouses
Rolando and Angelita Quilang (Quilangs), who filed separate special appearances with motions to quash the writ of execution. [10] In
essence, all of them interposed that they were not covered by the writ of execution because they did not derive their rights from the
Estate since they entered the subject premises only after the expiration of the lease contract between MIAA and Tarrosa. They further
stated that the subject premises had already been set aside as a government housing project by virtue of Presidential Proclamation No.
595 (Proclamation No. 595).[11]
On May 5, 2006, the RTC granted the motion to quash filed by the remaining occupants, including Avila and the Quilangs.

On August 4, 2006, the RTC denied the motion to quash filed by Aguirre. In its August 4, 2006 Resolution,[12] the RTC stated:
It is important to emphasize at this juncture that during the ocular inspection conducted by this
court (Thru Presiding Judge, Henrick F. Gingoyon), records reveal that the area occupied by Mr. Calixto
Aguirre, as he claimed, is more or less 1,000 square meters. Thus, citing the provision of the law
pertaining to qualified occupants or beneficiaries who can avail of the privilege, the area alone possessed
by Mr. Calixto Aguirre will not qualify as beneficiary under Republic Act 7279. Moreover, the result of the
ocular inspection revealed that the area is used by Mr. Calixto Aguirre as business establishment and in
fact some of them were even subject for lease.
Therefore, from the very nature of the utilization of the property the same is beyond doubt not
covered and the same is contrary to the letter and spirit of the aforementioned Presidential Proclamation
No. 595.
WHEREFORE, premises considered, the instant Motion to Quash Writ of Execution and Set
Aside Judgment filed by Mr. Calixto Aguirre is hereby DENIED for lack of merit.
SO ORDERED. (underscoring supplied)[13]
On August 7, 2006, a similar finding was made with regard to Avila and the Quilangs when the RTC resolved MIAAs motion
for reconsideration. In its August 7, 2006 Resolution, the RTC likewise wrote:
Unfortunately, however, the result of the ocular inspection revealed that some of the 28
Oppositors, namely: Mr. REYMUNDO AVILA; SPS. ROLANDO QUILANG AND ANGELITA QUILANG;
ROMEO CAGAS; JEANETTE LOPEZ, are using the property subject to this case not as family dwelling
but rather utilized as business establishments.Thus, the said occupancy is not covered under Republic Act
7279 in order to be considered qualified beneficiaries. Relatedly, therefore that the Writ of Execution
cannot be implemented against the afore-named persons on the ground that they are qualified
beneficiaries under Presidential Proclamation No. 595 in relation to the provision of Republic Act 7279 is
unwarranted under the circumstances.
It is important to emphasize at this juncture that during the ocular inspection conducted by this
court (Thru Presiding Judge, Henrick F. Gingoyon), records reveal that the area occupied by Mr.
REYNALDO (REYMUNDO) AVILA, is occupying more or less 500 square meters and the same is actually
use[d] as an apartment for lease/ rent; Sps. ROLANDO AND ANGELITA QUILANG; is occupying the
premises by virtue of the rights vested by their father, Calixto Aguirre, and also utilizing the property for
rent; ROMEO CAGAS AND JEANNETE LOPEZ are tenants of Calixto Aguirre.
Thus, citing the provision of the law pertaining to qualified occupants or beneficiaries who can
avail of the privilege, the area alone possessed by Mr. Reynaldo (Reymundo) Avila; Sps. Rolando and
Angelita Quilang will not qualify as beneficiaries under Republic Act 7279. Moreover, the area as shown in
the result of the ocular inspection is used by them as business establishment and in fact some of them
were even subject for lease.
Therefore, from the very nature of the utilization of the property the same is beyond doubt not
covered and the same is contrary to the letter and spirit of the aforementioned Presidential Proclamation
No. 595 in relation to Republic Act 7279.
WHEREFORE, premises considered, the Order dated May 5, 2006 is hereby MODIFIED in so far
as Oppositors REYNALDO (REYMUNDO) AVILA; Sps. ROLANDO QUILANG and ANGELITA
QUILANG; ROMEO CAGAS AND JEANETTE LOPEZ are concerned. Let the corresponding Writ of
Execution against the afore-mentioned persons be issued.
SO ORDERED. (underscoring supplied)[14]
The above findings were reiterated in the assailed RTCs Joint Resolution dated November 13, 2006 which denied the
separate motions for reconsideration of the respondents.
On account of this, Aguirre, Avila and the Quilangs went to the CA on certiorari questioning the propriety of the RTCs
disposition, more particularly, its finding that they were not qualified beneficiaries under Proclamation No. 595.
On June 16, 2008, the CA rendered the subject decision annulling the RTC resolutions dated August 7, 2006 and November
13, 2006. According to the CA, there was a grave abuse of discretion on the part of the RTC in ruling that respondents could not
invoke Proclamation No. 595 because the mandate to determine the same rested with the National Housing Authority (NHA). Thus:
X x x. As provided in said Proclamation No. 595, the National Housing Authority (NHA), under
the supervision of the Housing and Urban Development Coordinating Council (HUDCC) and in

coordination with the MIAA, shall be the agency primarily responsible for the administration and
disposition of the lots subject thereof in favor of the bona fide occupants therein, pursuant to the
provisions of Sections 8, 9 and 12 of Republic Act 7279 and other pertinent laws. [15]
In a related case, MIAA also went to the CA on certiorari questioning the RTCs grant of another motion to quash its writ of
execution filed by other remaining occupants.Said occupants are not parties in this case. The case was docketed as CA-G.R. SP No.
96477.[16] In said case, taking note that the occupants themselves admitted that they had entered the subject premises without the
permission of either the MIAA or the Estate, the CA ruled that the said occupants were mere trespassers or squatters who had no right
to possess the same. Accordingly, the writ of execution issued in the ejectment case could be enforced against them even though they
were not named parties in the ejectment suit. Some of the occupants/aggrieved parties therein, namely, Alejandro Aguirre (son of
Calixto Aguirre) and Norberto Aguirre (brother of Calixto Aguirre), came to this Court via a petition for review but it was summarily
denied for having been filed out of time and for their failure to show any reversible error on the part of the CA. The denial became
final and executory on July 23, 2009.[17]
Going back to the June 16, 2008 CA Decision, MIAA comes now to this Court questioning its annulment of the RTC
resolutions by raising the following:
ISSUES:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT PUBLIC
RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
IN EXCESS OF JURISDICTION WHEN HE ARROGATED UPON HIMSELF THE DETERMINATION
THAT PRIVATE RESPONDENTS ARE NOT QUALIFIED BENEFICIARIES UNDER PROCLAMATION
NO. 595
WHETHER OR NOT A NAKED CLAIM OF POTENTIAL QUALIFIED BENEFICIARIES OF A
SOCIALIZED HOUSING PROGRAM PREVAIL OVER THE RIGHTS OF THE PERSON WITH PRIOR
PHYSICAL POSSESSION AND A BETTER RIGHT OVER THE DISPUTED REAL PROPERTY[18]
The Court finds the petition meritorious.
As mentioned earlier, the controversy stemmed from an ejectment suit filed by MIAA against the Estate represented by Balilo
wherein the MeTC ordered the eviction of the Estate, Balilo and all those claiming rights under them.
The MeTC decision was affirmed by the RTC. Eventually, the Estate, Balilo and some occupants were evicted.
[19]

Respondents Aguirre, Avila and the Quilangs, together with some other remaining occupants, filed their separate special

appearances and sought to quash the RTCs writ of execution. They claimed that they did not derive their right to occupy the premises
from the Estate or from Balilo but rather from Proclamation No. 595 as they were potential beneficiaries of the same. In its opposition,
the MIAA submitted documents prepared and signed by Balilo showing that the respondents were tenants of Tarrosa or Balilo. [20] The
RTC, through its then Presiding Judge, the late Henrick F. Gingoyon (Judge Gingoyon), conducted an ocular inspection on the
premises. Judge Jesus B. Mupas, who took over from Judge Gingoyon, reproduced the findings of the latter in his August 4, 2006
Resolution.[21]
The same finding was reached with respect to Avila and the Quilangs in the August 7, 2006 Resolution of the RTC [22] and
reiterated in its Joint Resolution dated November 13, 2006 which dismissed the separate motions for reconsideration of the
respondents.
Going over the RTCs findings and disposition, the Court is of the considered view that it acted well within its jurisdiction. It
is settled in ejectment suits that a defendants claim of ownership over a disputed property will not divest the first level courts of their
summary jurisdiction. Thus, even if the pleadings raise the issue of ownership, the court may still pass on the same although only for
the purpose of determining the question of possession. Any adjudication with regard to the issue of ownership is only provisional and
will not bar another action between the same parties which may involve the title to the land. This doctrine is but a necessary

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

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

ASIATRUST DEVELOPMENT BANK,

G.R. No. 179558

Petitioner,

Present:
- versus CARPIO, J.,
Chairperson,
NACHURA,
PERALTA,
FIRST AIKKA DEVELOPMENT, INC. and UNIVAC
DEVELOPMENT, INC.,
Respondents.

ABAD, and
MENDOZA, JJ.
Promulgated:

June 11, 2011

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

DECISION

NACHURA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of Appeals
(CA) Decision[1] dated June 28, 2007 and Resolution[2] dated August 29, 2007 in CA-G.R. SP No. 97408.

The Facts

Respondents First Aikka Development, Inc. (FADI) and Univac Development, Inc. (UDI) are domestic
corporations engaged in the construction and/or development of roads, bridges, infrastructure projects,
subdivisions, housing, land, memorial parks, and other industrial and commercial projects for the
government or any private entity or individual.[3]

In the course of their business, FADI and UDI availed of separate loan accommodations or credit lines with
petitioner Asiatrust Development Bank.[4] The aggregate amount of the loan obtained by respondents
was P114,000,000.00. Respondents religiously and faithfully complied with their loan obligations, but
during the Asian Financial Crisis, which directly and adversely affected mainly the construction and real
estate industry, respondents could not pay their obligations in cash. [5] This prompted respondents to
negotiate with petitioner for different modes of payment that the former might avail of. Petitioner thus
agreed that respondents assign the receivables of their various contracts to sell involving the lots in the
residential subdivision projects they were developing, instead of paying in cash. [6]

Notwithstanding the above agreement, petitioner insisted on collecting the loan per the loan documents.
Petitioner

claimed

that

respondents

were

already

in

default

and

demanded

the

payment

of P145,830,220.95. Respondents denied that they were in default because of the assignment of their
receivables to petitioner. Respondents contested petitioners claim and demanded for an accounting to
determine the correct and true amount of their obligations. [7]

On May 10, 2006, respondents filed a consolidated Petition for Corporate Rehabilitation with Prayer
for Suspension of Payments [8] with the Regional Trial Court (RTC) of Baguio City, Branch 59. The case was
docketed as Civil Case No. 6267-R. Respondents alleged that they were unable to pay their loan based on
the claim of petitioner. Though they have sufficient assets to pay their loan, respondents averred that they
were not liquid. They also stated that they were threatened by petitioner with various cases aimed at
disrupting the operations of respondents which might eventually lead to the cessation of their business.
[9]

Respondents prayed that an order be issued staying the enforcement of any and all claims of their

creditors, investors, and suppliers, whether for money or otherwise, against petitioner, their guarantors,
and sureties.[10] By way of rehabilitation, respondents also sought the determination of the true and correct
amount of their loan obligation with petitioner.[11]

On May 16, 2006, the RTC issued an Order,[12] the pertinent portions of which read:

After an examination of the contents of the petition setting forth with sufficient particularity
and material facts pursuant to Section 2 of Rule 4 of the Interim Rules of Procedures (sic) of
Corporate Rehabilitation and the supporting documents attached thereto and finding the
same to be sufficient in form and substance, the Court hereby:

1.
ORDERS STAYING enforcement of all claims whether for money or
otherwise and whether such enforcement is by court action or otherwise, against the
debtors (herein petitioners)[, their] guarantors and [sureties] not solidarily liable with the
debtors. In particular[,] ASIATRUST BANK BE STAYED from proceeding with the foreclosure
and auction sale of the mortgaged properties;

2. APPOINTS PATRICK V. CAOILE as interim rehabilitation receiver with a bond of two million
(P2,000,000.00) pesos;

xxxx

7. FIXES the initial hearing on the petition on June 29, 2006 at 11:00 oclock (sic) in the
morning.[13]

On June 2, 2006, Robert Cuchado, an officer of petitioner, went to Baguio City to secure a copy of the
petition for rehabilitation but failed to do so because, at that time, the personnel of the rehabilitation court
were attending the Judicial Service Training. Petitioner then tried to secure a copy of the petition through
the sheriff of the RTC of La Trinidad, Benguet. The rehabilitation court, however, required petitioner to file a
motion to that effect, together with a written document authorizing the sheriff to secure a copy thereof. On
June 9, 2006, the rehabilitation court issued an Order granting the motion filed by petitioner and gave it a
certified true copy of the petition.[14]

On the day of the initial hearing, petitioner, through its counsel Atty. Mario C. Lorenzo (Atty. Lorenzo), went
to court with a Motion for Leave of Court to Admit Opposition to Rehabilitation Petition [15] with the attached
Opposition to Petition for Rehabilitation. [16] In an Order[17] dated July 17, 2006, the RTC denied the motion
and explained:

Under par. 9 of the Stay Order[,] all creditors, etc., were given ten (10) days before the initial
hearing to file their comment or opposition to the petition and putting them on notice that
failure to do so will bar them from participating in the proceedings.

It is only on June 29, 2006, the date of the initial hearing that Asiatrust filed its Motion with
Leave to Admit Opposition. The motion partakes of the nature of a motion for extension of
time to file pleading which is a prohibited pleading under Rule 3(e) of the Interim Rules of
Procedure on Corporate Rehabilitation.[18]
On July 31, 2006, when the case was called for hearing, Enrico J. Ong (Ong) appeared as representative of
petitioner because the latters counsel could not go to court due to the cancellation of his flight as a result
of bad weather. The rehabilitation court recognized the appearance of Ong only to inform the court that
the counsel for petitioner could not attend the hearing. There being no other oppositors or creditors in
court despite due notices, the rehabilitation court terminated the initial hearing and directed the
rehabilitation receiver to evaluate respondents rehabilitation plan and then report the results thereof to the
court.[19]

On October 13, 2006, the rehabilitation receiver called for a conference and presented the draft of the
rehabilitation report to petitioner, represented by Atty. Lorenzo and Ong, and to respondents. Petitioner
filed a manifestation and motion in court calling its attention to the alleged refusal of the receiver to hear
its side. Petitioner thus asked for judicial assistance to enable it to actively participate in the rehabilitation
proceedings and protect its interest. The receiver finalized and later on filed his evaluation report in court.
He recommended the approval of the rehabilitation plan. [20]

On December 5, 2006, the RTC issued an Order,[21] the pertinent portions of which read:

On the same ground under Rule 3 of the Interim Rules, the Motion of Oppositor
Asiatrust to participate in the Rehabilitation Proceedings is DENIED. This pleading partakes
of a [P]etition for Relief which is also a prohibited pleading under par. d of Rule 3 of the same
rule. Moreover, the motion has also the purpose to reconsider the courts ruling in denying
the admission of their opposition to the [P]etition for Rehabilitation.

It must be stressed that under par. 9 of the Stay Order, All creditors, etc., were given ten
(10) days before the initial hearing to file their comment or opposition to the petition
and putting them on notice that failure to do so will bar them from participating in
the proceedings.

As to the Rehabilitation Report and the Integrated Revised Rehabilitation Plan and Schedule
of the petitioners, the court, after a careful and thorough examination and review of the
report, it is its considered judgment that the rehabilitation of the debtor is feasible and
hereby APPROVES the Rehabilitation Report and the REVISED REHABILITATION PLAN.

xxxx

WHEREFORE, premises all duly considered, the Motion of Asiatrust to participate in

the Rehabilitation Proceedings is hereby DENIED, the Rehabilitation Report and the
Integrated Revised Rehabilitation Plan of Receiver Patrick Caoile is APPROVED and the Notice
of the Appearance of the Cabato Law Office as collaborating counsel for Oppositor Asiatrust
is NOTED.

The court appointed Receiver shall submit his report every three (3) months and a
yearly report on the status of the progress of the rehabilitation and the implementation and
monitoring of the same.

SO ORDERED.[22]

Aggrieved, petitioner elevated the case to the CA via a Petition for Review [23] under Rule 43 of the Rules of
Court.

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

The Issues

Undaunted, petitioner comes before this Court, raising the following errors:

A.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF

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

B.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF

LAW WHEN IT AFFIRMED THE APPROVAL OF THE REHABILITATION PLAN DESPITE THE
REHABILITATION COURTS FAILURE TO CONDUCT A CLARIFICATORY HEARING TO RESOLVE
THE UNSETTLED ISSUE ON THE AMOUNT OF INDEBTEDNESS OF PRIVATE RESPONDENTS AND
THE REHABILITATION RECEIVERS FAILURE TO MAKE A CREDIBLE AND INDEPENDENT
INVESTIGATION ON THE AMOUNT OF INDEBTEDNESS OF RESPONDENT CORPORATIONS,
THEREBY DEVIATING FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL
PROCEEDINGS.C.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF

LAW WHEN IT INEXPLICABLY AFFIRMED THE REHABILITATION COURTS APPROVAL OF THE
CONSOLIDATED PETITION FOR REHABILITATION, DESPITE THE SUBSTANTIAL EVIDENCE
SHOWING THAT THE PETITION WAS FILED IN THE WRONG VENUE INSOFAR AS RESPONDENT
UNIVAC DEVELOPMENT IS CONCERNED AND WAS FATALLY DEFECTIVE ON ITS FACE.

D.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF

LAW WHEN IT REFUSED TO RULE ON THE SUBSTANTIAL AND FORMAL DEFECTS OF THE
REHABILITATION PLAN ON THE PRETEXT THAT THE REHABILITATION COURTS APPROVAL OF
THE RESPONDENTS REHABILITATION IS BINDING ON IT, DESPITE THE ABSENCE OF
SUBSTANTIAL EVIDENCE THAT WOULD SUPPORT THE DECISION OF THE REHABILITATION
COURT.

E.

WHETHER OR NOT THE HONORABLE COURTS EXERCISE OF ITS DISCRETIONARY REVIEW

POWERS IS WARRANTED UNDER THE CIRCUMSTANCES.[25]

Petitioners Arguments

Petitioner avers that it was denied due process when the rehabilitation court refused to admit its
opposition to the petition for rehabilitation and to comment on the rehabilitation plan. [26] It explains that
the late submission of the opposition was brought about by the baseless and unfounded requirements
imposed by the court.[27] Considering that there are valid and substantial grounds for the dismissal of the
petition for rehabilitation, petitioner insists that its comment and opposition should have been admitted by
the rehabilitation court. Petitioner points out that while the court denied its motion for leave to admit its
opposition, it (the court) allowed the Securities and Exchange Commission to submit its comment long
after the prescribed period.[28]

Petitioner adds that the rehabilitation courts unwarranted refusal to recognize the appearance of its
duly authorized representative constitutes a denial of its right to due process. [29] Petitioner also insists that
mere delay in the submission of the comment on the petition for rehabilitation does not warrant the denial
of petitioners right to participate in the rehabilitation proceedings. It likewise assails the rehabilitation
courts jurisdiction over UDI, whose principal place of business is in Pasig City, which is beyond the

jurisdiction of the RTC of Baguio City. It, thus, challenges the consolidated petition for rehabilitation.
[30]

Moreover, petitioner avers that respondents failed to show that they had adequate capital to sustain

their operations during the interim period of corporate rehabilitation. [31] Lastly, petitioner denies that it is
estopped from assailing the rehabilitation plan as it already received payment from respondents based on
the rehabilitation plan. It clarifies that it accepted the check payments subject to the outcome of this case.
[32]

Respondents Arguments

Respondents, on the other hand, aver that the petition is legally infirm as there are no special important
reasons for the Court to exercise its sound judicial discretion to review the assailed CA Decision. [33] They
also argue that petitioners failure to participate in the rehabilitation proceedings could be attributed to its
counsels own slackness and disregard for the rules. [34] On the issue of the rehabilitation courts jurisdiction,
respondents counter that petitioner could no longer assail it as petitioner actively participated and
continues to participate in the rehabilitation proceedings, including the receipt of payments in accordance
with the approved rehabilitation plan. [35] They explain that in the Orders dated May 16, 2006, the
rehabilitation court held that the petition is sufficient in form and substance; July 17, 2006, the
rehabilitation court denied petitioners motion for leave to admit its comment on the petition for
rehabilitation; and July 31, 2006, the court declared that there is merit in the petition which was given due
course. Petitioners failure to assail the above orders rendered them final and immutable. Respondents thus
opine that petitioner could no longer assail them in this petition for review. [36]

Respondents likewise insist that petitioner could no longer participate in the rehabilitation
proceedings because of its failure to file its comment on the petition. In other words, respondents said, the
filing of the comment on the petition is a condition precedent to the filing of the comment on the
rehabilitation plan.[37] On the amount of the loan obligation, respondents claim that there was a valid basis
and there was a determination of the true and correct amount thereof. [38]
The Courts Ruling

Though the rehabilitation proceedings had gone as far as the approval and the subsequent implementation
of the rehabilitation plan, we must confront the issue of the rehabilitation courts jurisdiction to hear and
decide the case insofar as respondent UDI is concerned. A perusal of petitioners pleadings clearly shows
that it had repeatedly raised the jurisdictional question. The courts below, however, ignored this issue as
they did not recognize petitioners right to participate in the rehabilitation proceedings.

While it is true that petitioner had been asking the rehabilitation and appellate courts that it be allowed to
participate, contrary to respondents contention, the same did not amount to estoppel that would bar it
from questioning the rehabilitation courts jurisdiction. It is well-settled that the courts jurisdiction may be
assailed at any stage of the proceedings, even for the first time on appeal. The reason is that jurisdiction is
conferred by law, and lack of it affects the very authority of the court to take cognizance of and to render
judgment on the action.[39] In its Opposition to the petition for rehabilitation, petitioner already questioned

the courts jurisdiction over UDI. On appeal to the CA, it again raised the same issue, but it failed to obtain
a favorable decision. We cannot, therefore, say that petitioner slept on its rights. It is not estopped from
raising the jurisdictional issue even at this stage. In any event, even if petitioner had not raised the issue
of jurisdiction, the reviewing court would still not be precluded from ruling on the matter of jurisdiction.

Neither can estoppel be imputed to petitioner for its receipt of payments made by respondents in
accordance with the rehabilitation plan. It has been established that in its letters to respondents, petitioner
explained that it received payments subject to the results of its appeal. Besides, it is a basic rule that
estoppel does not confer jurisdiction on a tribunal that has none over the cause of action or subject matter
of the case.[40]

Records show that the Petition for Corporate Rehabilitation with Prayer for Suspension of Payments [41] was
filed by two corporations, namely, FADI and UDI. Respondent FADI is a real estate corporation duly
organized and existing under and by virtue of Philippine laws, with principal place of business
in Baguio City.[42] Respondent UDI, on the other hand, is a real estate corporation with principal place of
business in Pasig City.[43] Respondents explain in their petition that they filed the consolidated petition
because they availed of separate but intertwined loan obligations or credit lines, and that they have
interlocking directors, owners, and officers. As such, a full and complete settlement of the loan obligations
will involve the two corporations and, consequently, the rehabilitation of one will entail the rehabilitation of
the other.[44]

We find that the consolidation of the petitions involving these two separate entities is not proper.

Although FADI and UDI have interlocking directors, owners, and officers and intertwined loans, the two
corporations are separate, each with a personality distinct from the other. To be sure, in determining the
feasibility of rehabilitation, the court evaluates the assets and liabilities of each of these corporations
separately and not jointly with other corporations.

Moreover, Section 2, Rule 3 of the Rules, the rule applicable at the time of the filing of the petition,
provides:

Sec. 2. Venue. Petitions for rehabilitation pursuant to these Rules shall be filed in the
Regional Trial Court having jurisdiction over the territory where the debtors principal office is
located.

Considering that UDIs principal office is located in Pasig City, the petition should have been filed with the
RTC in Pasig City and not in Baguio City. The latter court cannot, therefore, take cognizance of the
rehabilitation petition insofar as UDI is concerned for lack of jurisdiction.

This error, however, will not result in the dismissal of the entire petition since the RTC of Baguio City had
jurisdiction over the petition of FADI in accordance with the above-quoted provision of the Rules.
On the issue of whether the rehabilitation court, as affirmed by the CA, correctly denied petitioners
prayer

to

participate

in

the

rehabilitation

proceedings

because

of

the

belated

filing

of

its

Comment/Opposition to respondents petition for rehabilitation, we answer in the negative.

The Court promulgated the Rules in order to provide a remedy for summary and non-adversarial
rehabilitation proceedings of distressed but viable corporations. [45] These Rules are to be construed liberally
to obtain for the parties a just, expeditious, and inexpensive disposition of the case. [46] To be sure, strict
compliance with the rules of procedure is essential to the administration of justice. Nonetheless, technical
rules of procedure are mere tools designed to facilitate the attainment of justice. Their strict and rigid
application should be relaxed when they hinder rather than promote substantial justice. [47] Otherwise
stated, strict application of technical rules of procedure should be shunned when they hinder rather than
promote substantial justice.[48]

In this case, instead of filing its opposition to the petition for rehabilitation at least ten days before the date
of the initial hearing as required by the Rules, petitioner filed a Motion for Leave of Court to Admit
Opposition to Rehabilitation Petition[49] with the attached Opposition to Petition for Rehabilitation [50] on the
date of the initial hearing. Because the pleading was not filed on time, the RTC denied the motion. While
the court has the discretion whether or not to admit the opposition belatedly filed by petitioner, it is our
considered opinion that the RTC gravely abused its discretion when it refused to grant the motion, even as
the factual circumstances of the case require that the Rules be liberally construed in the interest of justice.

Admittedly, petitioner is respondents major creditor. The parties even explained that the new payment
scheme adopted in the approved rehabilitation plan maintained the same scheme as that stipulated in the
contracts between respondents and their creditors except that of petitioner. In other words, respondents
could pay the other creditors in the same manner as that stipulated in their contracts but could not abide
by the terms of their contracts with petitioner.

Moreover, petitioner and respondents differ in their assessment and computation of the latters
obligations to the former. Petitioner claims that respondents owe itP145,830,220.95, while the latter only
admit a total obligation of P24,202,015. This disparity in the parties claims makes it more important for the
rehabilitation court to have given petitioner the opportunity to be heard. Besides, in their petition before
the RTC, respondents sought the determination of the true and correct amount of their loan with petitioner.
[51]

We consider this as a compelling reason for the liberal interpretation of the Rules, and the rehabilitation

court should have admitted petitioners comment on the petition for rehabilitation and allowed petitioner to
participate in the proceedings.
Time and again, we have held that cases should, as much as possible, be resolved on the merits, not on
mere technicalities. In cases where we dispense with the technicalities, we do not mean to undermine the
force and effectivity of the periods set by law. In those rare cases where we did not stringently apply the
procedural rules, there always existed a clear need to prevent the commission of a grave injustice, as in
the present case.[52] Our judicial system and the courts have always tried to maintain a healthy balance

between the strict enforcement of procedural laws and the guarantee that every litigant be given the full
opportunity for the just and proper disposition of his cause.[53]

Corporate rehabilitation connotes the restoration of the debtor to a position of successful operation and
solvency, if it is shown that its continued operation is economically feasible and its creditors can recover by
way of the present value of payments projected in the rehabilitation plan, more if the corporation
continues as a going concern than if it is immediately liquidated. [54]

Rehabilitation proceedings in our jurisdiction have equitable and rehabilitative purposes. On the one hand,
they attempt to provide for the efficient and equitable distribution of an insolvent debtors remaining assets
to its creditors; and on the other, to provide debtors with a fresh start by relieving them of the weight of
their outstanding debts and permitting them to reorganize their affairs. [55] The purpose of rehabilitation
proceedings is to enable the company to gain a new Lease on life and thereby allow creditors to be paid
their claims from its earnings.[56]

The determination of the true and correct amount due petitioner is important in assessing whether FADI
may be successfully rehabilitated. It is thus necessary that petitioner be given the opportunity to be heard
by the rehabilitation court. The court should admit petitioners comment on or opposition to FADIs petition
for rehabilitation and allow petitioner to participate in the rehabilitation proceedings to determine if indeed
FADI could maintain its corporate existence. A remand of the case to the rehabilitation court is, therefore,
imperative. To be sure, the successful rehabilitation of a distressed corporation will benefit its debtors,
creditors, employees, and the economy in general.[57]

As much as we would like to honor the rehabilitation plan approved by the rehabilitation court,
particularly because it has already been partially implemented, we cannot sustain the decision of the
court, as affirmed by the CA, if we are to ensure that rehabilitation is indeed feasible. It is especially
important in this case to hear petitioner, as the major creditor of the distressed corporation, since it is a
banking institution.

Banks are entities engaged in the lending of funds obtained through deposits from the public. They
borrow the publics excess money and lend out the same. Banks, therefore, redistribute wealth in the
economy by channeling idle savings to profitable investments. [58] Banks operate (and earn income) by
extending credit facilities financed primarily by deposits from the public. They plough back the bulk of said
deposits into the economy in the form of loans. Since banks deal with the publics money, their viability
depends largely on their ability to return those deposits on demand. For this reason, banking is undeniably
imbued with public interest. Consequently, much importance is given to sound lending practices and good
corporate governance.[59]
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals
Decision dated June 28, 2007 and Resolution dated August 29, 2007 in CA-G.R. SP No. 97408 are SET
ASIDE. Consequently, the Order of the RTC dated July 17, 2006 and those issued subsequent thereto are
hereby NULLIFIED.

We REMAND the records of the case pertaining to the petition for rehabilitation of First Aikka
Development, Inc. to the Regional Trial Court of Baguio City, Branch 59, for further proceedings. The court
is ORDERED to admit petitioner Asiatrust Development Banks Comment/Opposition to the petition for
rehabilitation and to allow petitioner to participate in said proceedings.

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

SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

ENRIQUE U. BETOY,
Petitioner,

- versus -

THE BOARD OF DIRECTORS, NATIONAL

EN BANC
G.R. Nos. 156556-57
Present:
CORONA, C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.
Promulgated:
October 4, 2011

POWER CORPORATION,
Respondent.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
PERALTA, J.:
Before this Court is a special civil action for certiorari[1] and supplemental petition for mandamus,[2] specifically assailing National
Power Board Resolutions No. 2002-124 and No. 2002-125, as well as Sections 11, 34, 38, 48, 52 and 63 of Republic Act (R.A.) No.
9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA). Also assailed is Rule 33 of the Implementing
Rules and Regulations (IRR) of the EPIRA.
The facts of the case are as follows:
On June 8, 2001, the EPIRA was enacted by Congress with the goal of restructuring the electric power industry and privatization of
the assets of the National Power Corporation (NPC).
Pursuant to Section 48[3] of the EPIRA, a new National Power Board of Directors (NPB) was created. On February 27, 2002, pursuant
to Section 77[4] of the EPIRA, the Secretary of the Department of Energy promulgated the IRR.
On the other hand, Section 63 of the EPIRA provides for separation benefits to officials and employees who would be affected by the
restructuring of the electric power industry and the privatization of the assets of the NPC, to wit:
Section 63. Separation Benefits of Officials and Employees of Affected Agencies. - National Government
employees displaced or separated from the service as a result of the restructuring of the electricity
industry and privatization of NPC assets pursuant to this Act, shall be entitled to either a separation pay
and other benefits in accordance with existing laws, rules or regulations or be entitled to avail of the
privileges provided under a separation plan which shall be one and one-half month salary for every year of
service in the government: Provided, however, That those who avail of such privileges shall start their
government service anew if absorbed by any government-owned successor company. In no case shall there be
any diminution of benefits under the separation plan until the full implementation of the restructuring and
privatization.
Displaced or separated personnel as a result of the privatization, if qualified, shall be given preference in the
hiring of the manpower requirements of the privatized companies. x x x[5]

Rule 33[6] of the IRR provided for the coverage and the guidelines for
the separation benefits to be given to the employees affected.
On November 18, 2002, pursuant to Section 63 of the EPIRA and Rule 33 of the IRR, the NPB passed NPB Resolution No. 2002124[7] which, among others, resolved that all NPC personnel shall be legally terminated on January 31, 2003 and shall be entitled to
separation benefits. On the same day, the NPB passed NPB Resolution No. 2002-125 [8]which created a transition team to manage and
implement the separation program.
As a result of the foregoing NPB Resolutions, petitioner Enrique U. Betoy, together with thousands of his co-employees from the NPC
were terminated.
Hence, herein petition for certiorari with petitioner praying for the grant of the following reliefs from this Court, to wit:
1. Declaring National Power Board Resolution Nos. 2002-124 and 2002-125 and its Annex B Null and
Void, the fact [that] it was done with extraordinary haste and in secrecy without the able participation of the Napocor
Employees Consolidated Union (NECU) to represent all career civil service employees on issues affecting their
rights to due process, equity, security of tenure, social benefits accrued to them, and as well as the disclosure of
public transaction provisions of the 1987 Constitution because during its proceeding the National Power Board had
acted with grave abuse of discretion and disregarding constitutional and statutory injunctions on removal of public
servants and non-diminution of social benefits accrued to separated employees, thus, amounting to excess of
jurisdiction;

2. Striking down Section 11, Section 48 and Section 52 of RA 9136 (EPIRA) for being violative of Section
13, Article VII of the 1987 Constitution and, therefore, unconstitutional;
3. Striking Section 34 of RA 9136 (EPIRA) for being exorbitant display of State Power and was not
premised on the welfare of the FILIPINO PEOPLE or principle of salus populi est suprema lex;
4. Striking down Section 38 for RA 9136 (EPIRA) for being a prelude to Charter Change without a valid
referendum for ratification of the entire voter citizens of the Philippine Republic;
5. Striking down all other provisions of RA 9136 (EPIRA) found repugnant to the 1987 Constitution;
6. Striking down all provisions of the Implementing Rules and Regulations (IRR) of the EPIRA found repugnant to
the 1987 Constitution;
7. Striking down Section 63 of RA 9136 (EPIRA) for classifying such provisions in the same vein with
Proclamation No. 50 used against MWSS employees and its failure to classify which condition comes first whether
the restructuring effecting total reorganization of the electric power industry making NPC financially viable or the
privatization of NPC assets where manpower reduction or sweeping/lay-off or termination of career civil service
employees follows the disposal of NPC assets. This is a clear case of violation of the EQUAL PROTECTION
CLAUSE, therefore, unconstitutional;
8. Striking down Rule 33 of the Implementing Rules [and] Regulations (IRR) for disregarding the constitutional and
statutory injunction on arbitrary removal of career civil service employees; and
9. For such other reliefs deemed equitable with justice and fairness to more than EIGHT THOUSAND (8,000)
EMPLOYEES of the National Power Corporation (NPC) whose fate lies in the sound disposition of the Honorable
Supreme Court.[9]

In addition, petitioner also filed a supplemental petition for mandamus praying for his reinstatement.
The petition is without merit.
Before anything else, this Court shall first tackle whether it was proper for petitioner to directly question the constitutionality of the
EPIRA before this Court.
Section 5(1) and (2), Article VIII of the 1987 Constitution provides that:
SECTION 5. The Supreme Court shall have the following powers:
1. Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and
over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.
2. Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the rules of court may
provide, final judgments and orders of lower courts in:
(a)
All cases in which the constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or
regulation is in question.[10]

Based on the foregoing, this Court's jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, and habeas corpus,
while concurrent with that of the Regional Trial Courts and the Court of Appeals, does not give litigants unrestrained freedom of
choice of forum from which to seek such relief. [11] The determination of whether the assailed law and its implementing rules and
regulations contravene the Constitution is within the jurisdiction of regular courts. The Constitution vests the power of judicial review
or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or
regulation in the courts, including the Regional Trial Courts.[12]

It has long been established that this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the
appropriate courts, or where exceptional and compelling circumstances justify availment of a remedy within and call for the exercise
of our primary jurisdiction.[13] Thus, herein petition should already be dismissed at the outset; however, since similar petitions have
already been resolved by this Court tackling the validity of NPB Resolutions No. 2002-124 and No. 2002-125, as well as the
constitutionality of certain provisions of the EPIRA, this Court shall disregard the procedural defect.

Validity of NPB Resolutions No. 2002-124 and No. 2002-125

The main issue raised by petitioner deals with the validity of NPB Resolutions No. 2002-124 and No. 2002-125.

In NPC Drivers and Mechanics Association (NPC DAMA) v. National Power Corporation (NPC),[14] this Court had already ruled that
NPB Resolutions No. 2002-124 and No. 2002-125 are void and of no legal effect.
NPC Drivers involved a special civil action for Injunction seeking to enjoin the implementation of the same assailed NPB
Resolutions. Petitioners therein put in issue the fact that the NPB Resolutions were not concluded by a duly constituted Board of
Directors since no quorum in accordance with Section 48 of the EPIRA existed. In addition, petitioners therein argued that the assailed
NPB Resolutions cannot be given legal effect as it failed to comply with Section 47 of the EPIRA which required the endorsement of
the Joint Congressional Power Commission and the President of the Philippines. Ruling in favor of petitioners therein, this Court ruled
that NPB Resolutions No. 2002-124 and No. 2002-125 are void and of no legal effect for failure to comply with Section 48 of the
EPIRA, to wit:
We agree with petitioners. In enumerating under Section 48 those who shall compose the National Power Board of
Directors, the legislature has vested upon these persons the power to exercise their judgment and discretion in
running the affairs of the NPC. Discretion may be defined as the act or the liberty to decide according to the
principles of justice and ones ideas of what is right and proper under the circumstances, without willfulness or favor.
Discretion, when applied to public functionaries, means a power or right conferred upon them by law of acting
officially in certain circumstances, according to the dictates of their own judgment and conscience, uncontrolled by
the judgment or conscience of others. It is to be presumed that in naming the respective department heads as
members of the board of directors, the legislature chose these secretaries of the various executive departments on the
basis of their personal qualifications and acumen which made them eligible to occupy their present positions as
department heads. Thus, the department secretaries cannot delegate their duties as members of the NPB, much less
their power to vote and approve board resolutions, because it is their personal judgment that must be exercised in the
fulfilment of such responsibility.
xxxx
In the case at bar, it is not difficult to comprehend that in approving NPB Resolutions No. 2002-124 and No. 2002125, it is the representatives of the secretaries of the different executive departments and not the secretaries
themselves who exercised judgment in passing the assailed Resolution, as shown by the fact that it is the signatures
of the respective representatives that are affixed to the questioned Resolutions. This, to our mind, violates the duty
imposed upon the specifically enumerated department heads to employ their own sound discretion in exercising the
corporate powers of the NPC. Evidently, the votes cast by these mere representatives in favor of the adoption of the
said Resolutions must not be considered in determining whether or not the necessary number of votes was garnered
in order that the assailed Resolutions may be validly enacted. Hence, there being only three valid votes cast out of
the nine board members, namely those of DOE Secretary Vincent S. Perez, Jr.; Department of Budget and
Management Secretary Emilia T. Boncodin; and NPC OIC-President Rolando S. Quilala, NPB Resolutions No.
2002-124 and No. 2002-125 are void and are of no legal effect.[15]

However, a supervening event occurred in NPC Drivers when it was brought to this Court's attention that NPB Resolution No. 200755 was promulgated on September 14, 2007confirming and adopting the principles and guidelines enunciated in NPB Resolutions No.
2002-124 and No. 2002-125.
On December 2, 2009, this Court promulgated a Resolution [16] clarifying the amount due the individual employees of NPC in view of
NPB Resolution No. 2007-55. In said Resolution, this Court clarified the exact date of the legal termination of each class of NPC
employees, thus:
From all these, it is clear that our ruling, pursuant to NPB Resolution No. 2002-124, covers all employees of the
NPC and not only the 16 employees as contended by the NPC. However, as regards their right to reinstatement, or
separation pay in lieu of reinstatement, pursuant to a validly approved Separation Program, plus backwages, wage
adjustments, and other benefits, the same shall be computed from the date of legal termination as stated in NPC
Circular No. 2003-09, to wit:
a) The legal termination of key officials, i.e., the Corporate Secretary, Vice-Presidents and Senior VicePresidents who were appointed under NP Board Resolution No. 2003-12, shall be at the close of office hours
of January 31, 2003.
b) The legal termination of personnel who availed of the early leavers' scheme shall be on the last day of
service in NPC but not beyond January 15, 2003.
c) The legal termination of personnel who were no longer employed in NPC after June 26, 2001 shall be the date
of actual separation in NPC.
d) For all other NPC personnel, their legal termination shall be at the close of office hours/shift schedule
of February 28, 2003.[17]

As to the validity of NPB Resolution No. 2007-55, this Court ruled that the same will have a prospective effect, to wit:
What then is the effect of the approval of NPB Resolution No. 2007-55 on 14 September 2007? The approval of
NPB Resolution No. 2007-55, supposedly by a majority of the National Power Board as designated by law, that
adopted, confirmed and approved the contents of NPB Resolutions No. 2002-124 and No. 2002-125 will have
a prospective effect, not a retroactive effect. The approval of NPB Resolution No. 2007-55 cannot ratify and
validate NPB Resolutions No. 2002-124 and No. 2002-125 as to make the termination of the services of all NPC
personnel/employees on 31 January 2003 valid, because said resolutions were void.
The approval of NPB Resolution No. 2007-55 on 14 September 2007 means that the services of all NPC
employees have been legally terminated on this date. All separation pay and other benefits to be received by said
employees will be deemed cut on this date. The computation thereof shall, therefore, be from the date of their illegal
termination pursuant to NPB Resolutions No. 2002-124 and No. 2002-125 as clarified by NPB Resolution No. 200311 and NPC Resolution No. 2003-09 up to 14 September 2007. Although the validity of NPB Resolution No. 200755 has not yet been passed upon by the Court, same has to be given effect because NPB Resolution No. 2007-55
enjoys the presumption of regularity of official acts. The presumption of regularity of official acts may be rebutted
by affirmative evidence of irregularity or failure to perform a duty. Thus, until and unless there is clear and
convincing evidence that rebuts this presumption, we have no option but to rule that said resolution is valid
and effective as of 14 September 2007.[18]

Based on the foregoing, this Court concluded that the computation of the amounts due the employees who were terminated and/or
separated as a result of, or pursuant to, the nullified NPB Board Resolutions No. 2002-124 and No. 2002-125 shall be from their date
of illegal termination up to September 14, 2007 when NPB Resolution No. 2007-55 was issued.
Thus, the resolution of the validity of NPB Board Resolutions No. 2002-124 and No. 2002-125 is, therefore, moot and academic in
view of the Court's pronouncements in NPC Drivers.
Anent the question of the constitutionality of Section 63 of RA 9136, as well as Rule 33 of the IRR, this Court finds that the same is
without merit.
A reorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or
redundancy of functions.[19] It could result in the loss of ones position through removal or abolition of an office. However, for a
reorganization for the purpose of economy or to make the bureaucracy more efficient to be valid, it must pass the test of good faith;
otherwise, it is void ab initio.[20]
It is undisputed that NPC was in financial distress and the solution found by Congress was to pursue a policy towards its privatization.
The privatization of NPC necessarily demanded the restructuring of its operations. To carry out the purpose, there was a need to
terminate employees and re-hire some depending on the manpower requirements of the privatized companies. The privatization and
restructuring of the NPC was, therefore, done in good faith as its primary purpose was for economy and to make the bureaucracy more
efficient.
In Freedom from Debt Coalition v. Energy Regulatory Commission, [21] this Court discussed why there was a need for a shift towards
the privatization and restructuring of the electric power industry, to wit:
One of the landmark pieces of legislation enacted by Congress in recent years is the EPIRA. It established a new
policy, legal structure and regulatory framework for the electric power industry.
The new thrust is to tap private capital for the expansion and improvement of the industry as the large government
debt and the highly capital-intensive character of the industry itself have long been acknowledged as the critical
constraints to the program. To attract private investment, largely foreign, the jaded structure of the industry had to be
addressed. While the generation and transmission sectors were centralized and monopolistic, the distribution side
was fragmented with over 130 utilities, mostly small and uneconomic. The pervasive flaws have caused a low
utilization of existing generation capacity; extremely high and uncompetitive power rates; poor quality of service to
consumers; dismal to forgettable performance of the government power sector; high system losses; and an inability
to develop a clear strategy for overcoming these shortcomings.
Thus, the EPIRA provides a framework for the restructuring of the industry, including the privatization of the assets
of the National Power Corporation (NPC), the transition to a competitive structure, and the delineation of the roles

of various government agencies and the private entities. The law ordains the division of the industry into four (4)
distinct sectors, namely: generation, transmission, distribution and supply. Corollarily, the NPC generating plants
have to be privatized and its transmission business spun off and privatized thereafter.[22]
Petitioner argues that bad faith is clearly manifested as the reorganization has an eye to replace current favorite less competent
appointees. In addition, petitioner contends that qualifications and behavioral aspect were being set aside. [23]
Section 2 of R.A. No. 6656[24] cites certain circumstances showing bad faith in the removal of employees as a result of any
reorganization, thus:
Sec. 2. No officer or employee in the career service shall be removed except for a valid cause and after due
notice and hearing. A valid cause for removal exist when, pursuant to a bona fide reorganization, a position has been
abolished or rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet the
exigencies of the service, or other lawful causes allowed by the Civil Service Law. The existence of any or some of
the following circumstances may be considered as evidence of bad faith in the removals made as a result of the
reorganization, giving rise to a claim for reinstatement or reappointment by an aggrieved party:
a) Where there is a significant increase in the number of positions in the new staffing pattern of the
department or agency concerned;
b) Where an office is abolished and another performing substantially the same functions is created;
c) Where incumbents are replaced by those less qualified in terms of status of appointment, performance
and merit;
d) Where there is a reclassification of offices in the department or agency concerned and the reclassified
offices perform substantially the same functions as the original offices; and
e) Where the removal violates the order of separation provided in Section 3 hereof.

The Solicitor General, however, argues that petitioner has not shown any circumstance to prove that the restructuring of NPC was
done in bad faith. We agree.
Petitioner's allegation that the reorganization was merely undertaken to accommodate new appointees is at most speculative and bereft
of any evidence on record. It is settled that bad faith must be duly proved and not merely presumed. It must be proved by clear and
convincing evidence,[25] which is absent in the case at bar.
In addition, petitioner has no legal or vested right to be reinstated as Section 63 of the EPIRA as well as Section 5, Rule 33 of the IRR
clearly state that the displaced or separated personnel as a result of the privatization, if qualified, shall be given preference in the hiring
of the manpower requirements of the privatized companies. Clearly, the law only speaks of preference and by no stretch of the
imagination can the same amount to a legal right to the position. Undoubtedly, not all the terminated employees will be re-hired by the
selection committee as the manpower requirement of the privatized companies will be different. As correctly observed by the Solicitor
General, the selection of employees for purposes of re-hiring them necessarily entails the exercise of discretion or judgment. [26] Such
being the case, petitioner, cannot, by way of mandamus, compel the selection committee to include him in the re-hired employees,
more so, since there is no evidence showing that said committee acted with grave abuse of discretion or that the re-hired employees
were merely accommodated and not qualified.
Validity of Sections 11, 48, and 52 of RA 9136
Petitioner argues that Sections 11,[27] 48,[28] and 52[29] of the EPIRA are unconstitutional for violating Section 13, Article VII of the
1987 Constitution.
Section 13, Article VII of the 1987 Constitution provides:
Sec. 13. The President, Vice-President, the Members of the Cabinet, and their deputies or assistants shall not, unless
otherwise provided in this Constitution, hold any other office or employment during their tenure. They shall not,
during said tenure, directly or indirectly practice any other profession, participate in any business, or be financially
interested in any contract with, or in any franchise, or special privilege granted by the Government or any
subdivision, agency, or instrumentality thereof, including government-owned or controlled corporations or their
subsidiaries. They shall strictly avoid conflict of interest in the conduct of their office.
x x x x.[30]

In Civil Liberties Union v. Executive Secretary,[31] this Court explained that the prohibition contained in Section 13, Article VII of the
1987 Constitution does not apply to posts occupied by the Executive officials specified therein without additional compensation in
an ex-officio capacity as provided by law and as required by the primary function of said official's office, to wit:
The prohibition against holding dual or multiple offices or employment under Section 13, Article VII of the
Constitution must not, however, be construed as applying to posts occupied by the Executive officials specified
therein without additional compensation in an ex-officio capacity as provided by law and as required by the primary
functions of said officials' office. The reason is that these posts do not comprise "any other office" within the
contemplation of the constitutional prohibition but are properly an imposition of additional duties and functions on
said officials.To characterize these posts otherwise would lead to absurd consequences, among which are: The
President of the Philippines cannot chair the National Security Council reorganized under Executive Order No. 115
(December 24, 1986). Neither can the Vice-President, the Executive Secretary, and the Secretaries of National
Defence, Justice, Labor and Employment and Local Government sit in this Council, which would then have no
reason to exist for lack of a chairperson and members. The respective undersecretaries and assistant secretaries,
would also be prohibited.
xxxx
The term "primary" used to describe "functions" refers to the order of importance and thus means chief or principal
function. The term is not restricted to the singular but may refer to the plural. The additional duties must not only be
closely related to, but must be required by the official's primary functions. Examples of designations to positions by
virtue of one's primary functions are the Secretaries of Finance and Budget, sitting as members of the Monetary
Board, and the Secretary of Transportation and Communications, acting as Chairman of the Maritime Industry
Authority and the Civil Aeronautics Board.[32]
The designation of the members of the Cabinet to form the NPB does not violate the prohibition contained in our Constitution as the
privatization and restructuring of the electric power industry involves the close coordination and policy determination of various
government agencies. Section 2 of the EPIRA clearly shows that the policy toward privatization would involve financial, budgetary
and environmental concerns as well as coordination with local government units, to wit:
SECTION 2. Declaration of Policy. It is hereby declared the policy of the State:
(a) To ensure and accelerate the total electrification of the country;
(b) To ensure the quality, reliability, security and affordability of the supply of electric power;
(c) To ensure transparent and reasonable prices of electricity in a regime of free and fair
competition and full public accountability to achieve greater operational and economic efficiency
and enhance the competitiveness of Philippine products in the global market;
(d) To enhance the inflow of private capital and broaden the ownership base of the power
generation, transmission and distribution sectors;
(e) To ensure fair and non-discriminatory treatment of public and private sector entities
in the process of restructuring the electric power industry;
(f) To protect the public interest as it is affected by the rates and services of electric utilities and
other providers of electric power;
(g) To assure socially and environmentally compatible energy sources and infrastructure;
(h) To promote the utilization of indigenous and new and renewable energy resources in power
generation in order to reduce dependence on imported energy;
(i) To provide for an orderly and transparent privatization of the assets and liabilities of the
National Power Corporation (NPC);
(j) To establish a strong and purely independent regulatory body and system to ensure consumer
protection and enhance the competitive operation of the electricity market; and
(k) To encourage the efficient use of energy and other modalities of demand side management.
As can be gleaned from the foregoing enumeration, the restructuring of the electric power industry inherently involves the
participation of various government agencies. In Civil Liberties, this Court explained that mandating additional duties and functions to
Cabinet members which are not inconsistent with those already prescribed by their offices or appointments by virtue of their special
knowledge, expertise and skill in their respective executive offices, is a practice long-recognized in many jurisdictions. It is a practice
justified by the demands of efficiency, policy direction, continuity and coordination among the different offices in the Executive
Branch in the discharge of its multifarious tasks of executing and implementing laws affecting national interest and general welfare
and delivering basic services to the people.[33]
The production and supply of energy is undoubtedly one of national interest and is a basic commodity expected by the people. This
Court, therefore, finds the designation of the respective members of the Cabinet, as ex-officio members of the NPB, valid.
This Court is not unmindful, however, that Section 48 of the EPIRA is not categorical in proclaiming that the concerned Cabinet
secretaries compose the NPB Board only in anex-officio capacity. It is only in Section 52 creating the Power Sector Assets and

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

The foregoing discussion, notwithstanding, the concerned officials should not receive any additional compensation pursuant to their
designation as ruled in Civil Liberties, thus:
The ex-officio position being actually and in legal contemplation part of the principal office, it follows that the official
concerned has no right to receive additional compensation for his services in the said position. The reason is that these
services are already paid for and covered by the compensation attached to his principal office. It should be obvious
that if, say, the Secretary of Finance attends a meeting of the Monetary Board as an ex-officio member thereof, he is
actually and in legal contemplation performing the primary function of his principal office in defining policy in
monetary and banking matters, which come under the jurisdiction of his department. For such attendance, therefore,
he is not entitled to collect any extra compensation, whether it be in the form of a per diem or an honorarium or an
allowance, or some other such euphemism. By whatever name it is designated, such additional compensation is
prohibited by the Constitution.
In relation thereto, Section 14 of the EPIRA provides:
SEC. 14. Board Per Diems and Allowances. The members of the Board shall receive per diem for each regular or
special meeting of the board actually attended by them and, upon approval of the Secretary of the Department of
Finance, such other allowances as the Board may prescribe.

Section 14 relates to Section 11 which sets the composition of the TRANSCO Board naming the Secretary of the Department of
Finance as the ex officio Chairman of the Board. The other members of the TRANSCO Board include the Secretary of the Department
of Energy and the Secretary of the Department of Environment and Natural Resources.However, considering the constitutional
prohibition, it is clear that such emoluments or additional compensation to be received by the members of the NPB do not apply and
should not be received by those covered by the constitutional prohibition, i.e., the Cabinet secretaries. It is to be noted that three of the
members of the NPB are to be appointed by the President, who would be representing the interests of those in Luzon, Visayas,
and Mindanao, who may be entitled to such honorarium or allowance if they do not fall within the constitutional prohibition.
Hence, the said cabinet officials cannot receive any form of additional compensation by way of per diems and allowances. Moreover,
any amount received by them in their capacity as members of the Board of Directors should be reimbursed to the government, since
they are prohibited from collecting additional compensation by the Constitution.
These interpretations are consistent with the fundamental rule of statutory construction that a statute is to be read in a manner that
would breathe life into it, rather than defeat it, [36] and is supported by the criteria in cases of this nature that all reasonable doubts
should be resolved in favor of the constitutionality of a statute.[37]
Constitutionality of Section 34[38] of the EPIRA
The Constitutionality of Section 34 of the EPIRA has already been passed upon by this Court in Gerochi v. Department of Energy,
[39]

to wit:
Finally, every law has in its favor the presumption of constitutionality, and to justify its nullification, there must be a
clear and unequivocal breach of the Constitution and not one that is doubtful, speculative, or argumentative.
Indubitably, petitioners failed to overcome this presumption in favor of the EPIRA. We find no clear violation of the
Constitution which would warrant a pronouncement that Sec. 34 of the EPIRA and Rule 18 of its IRR are
unconstitutional and void.[40]

In Gerochi, this Court ruled that the Universal Charge is not a tax but an exaction in the exercise of the State's police power. The
Universal Charge is imposed to ensure the viability of the country's electric power industry.
Petitioner argues that the imposition of a universal charge to address the stranded debts and contract made by the government through
the NCC-IPP contracts or Power Utility-IPP contracts or simply the bilateral agreements or contracts is an added burden to the
electricity-consuming public on their monthly power bills. It would mean that the electricity-consuming public will suffer in carrying
this burden for the errors committed by those in power who runs the affairs of the State. This is an exorbitant display of State Power at
the expense of its people.[41]
It is basic that the determination of whether or not a tax is excessive oppressive or confiscatory is an issue which essentially involves a
question of fact and, thus, this Court is precluded from reviewing the same.

Validity of Section 38[42] of the EPIRA

Petitioner argues that the abolishment of the ERB and its replacement of a very powerful quasi-judicial body named the Energy
Regulatory Commission (ERC), pursuant to Section 38 up to Section 43 of the EPIRA or RA 9136, which is tasked to dictate the dayto-day affairs of the entire electric power industry, seems a prelude to Charter Change. Petitioner submits that under the 1987
Constitution, there are only three constitutionally-recognized Commissions, they are: the Civil Service Commission (CSC), the
Commission on Audit (COA) and the Commission on Elections (COMELEC).[43]

Petitioners argument that the creation of the ERC seems to be a prelude to charter change is flimsy and finds no support in law. This
Court cannot subscribe to petitioners thesis that in order for the newly-enacted RA 9136 or EPIRA to become a valid law, we should
have to call first a referendum to amend or totally change the People's Charter.[44]
In any case, the constitutionality of the abolition of the ERB and the creation of the ERC has already been settled in Kapisanan ng
mga Kawani ng Energy Regulatory Board v. Commissioner Fe Barin,[45] to wit:
All laws enjoy the presumption of constitutionality. To justify the nullification of a law, there must be a clear and
unequivocal breach of the Constitution. KERB failed to show any breach of the Constitution.
A public office is created by the Constitution or by law or by an officer or tribunal to which the power to create the
office has been delegated by the legislature. The power to create an office carries with it the power to abolish.
President Corazon C. Aquino, then exercising her legislative powers, created the ERB by issuing Executive Order
No. 172 on 8 May 1987.
The question of whether a law abolishes an office is a question of legislative intent. There should not be any
controversy if there is an explicit declaration of abolition in the law itself. Section 38 of RA 9136 explicitly
abolished the ERB. x x x[46]
Moreover, in Kapisanan, this Court ruled that because of the expansion of the ERC's functions and concerns, there was a
valid abolition of the ERB.[47]
Validity of Section 63[48]
Contrary to petitioner's argument, Section 63 of the EPIRA and Section 33 of the IRR of the EPIRA did not impair the vested rights of
NPC personnel to claim benefits under existing laws. Neither does the EPIRA cut short the years of service of the employees
concerned. If an employee availed of the separation pay and other benefits in accordance with existing laws or the superior separation
pay under the NPC restructuring plan, it is but logical that those who availed of such privilege will start their government service anew
if they will later be employed by any government-owned successor company or government instrumentality.
It is to be noted that this Court ruled in the case of Herrera v. National Power Corporation,[49] that Section 63 of the EPIRA
precluded the receipt by the terminated employee of both separation and retirement benefits under the Government Service Insurance
System (GSIS) organic law, or Commonwealth Act (C.A.) No. 186.[50]
However, it must be clarified that this Courts pronouncements in
Herrera that separated and retired employees of the NPC are not entitled to receive retirement benefits under C.A. No. 186, referred
only to the gratuity benefits granted by R.A. No. 1616, [51] which was to be paid by NPC as the last employer. It did not proscribe the
payment of retirement benefits to qualified retirees under R.A. No. 660, [52] Presidential Decree (P.D.) No. 1146,[53] R.A. No. 8291,
[54]

and other GSIS and social security laws.

The factual and procedural antecedents of Herrera reveal that it arose from a case between NPC and several of its separated

employees who were asking additional benefits from NPC under R.A. No. 1616 after receiving from the former separation benefits
under Section 63 of R.A. No. 9136.
Unable to resolve the issue with its former employees amicably, NPC filed a petition for declaratory relief, docketed as Civil
Case SCA No. Q-03-50681,[55] before the Regional Trial Court of Quezon City, raising the issue of whether or not the employees of
NPC are entitled to receive retirement benefits under R.A. No. 1616 over and above the separation benefits granted by R.A. No. 9136.
[56]

Under R.A. No. 1616, a gratuity benefit is given to qualified retiring members of the GSIS, which is payable by the last
employer. In addition to said gratuity benefits, the qualified employee shall also be entitled to a refund of retirement premiums paid,
consisting of personal contributions of the employee plus interest, and government share without interest, payable by the GSIS. It
effectively amended Section 12 (c) of C.A. No. 186, as follows:
(c) Retirement is likewise allowed to any official or employee, appointive or elective, regardless of age and
employment status, who has rendered a total of at least twenty years of service, the last three years of which are

continuous. The benefit shall, in addition to the return of his personal contributions with interest compounded
monthly and the payment of the corresponding employer's premiums described in subsection (a) of Section five
hereof, without interest, be only a gratuity equivalent to one month's salary for every year of the first twenty
years of service, plus one and one-half months salary for every year of service over twenty but below thirty
years and two months salary for every year of service over thirty years in case of employees based on the
highest rate received and in case of elected officials on the rates of pay as provided by law. This gratuity is
payable on the rates of pay as provided by law.This gratuity is payable by the employer or officer concerned
which is hereby authorized to provide the necessary appropriation or pay the same from any unexpended
items of appropriations or savings in its appropriations. Officials and employees retired under this Act shall be
entitled to the commutation of the unused vacation and sick leave, based on the highest rate received, which they
may have to their credit at the time of retirement. x x x[57] (Emphasis supplied.)

After trial, the RTC rendered a Decision ruling against the NPC employees, the decretal portion of which reads:
WHEREFORE, premises considered, Republic Act No. 9136 DID NOT SPECIFICALLY AUTHORIZE
the National Power Corporation to grant retirement benefits under Republic Act No. 1616 in addition to separation
pay under Republic Act No. 9136.
SO ORDERED.[58]

Petitioners therein then sought recourse directly to this Court on a pure question of law. In the preparatory statement of the
Petition for Review on Certiorari,[59] it is apparent that the case was limited only to the interpretation of Section 63 of R.A. No. 9136,
in relation to R.A. No. 1616, on the matter of retirement benefits, to wit:
This is a case of first impression limited to the interpretation of Section 63, R.A. 9136 (EPIRA), granting separation
pay to terminated NAPOCOR employees, in relation to R.A. 1616, on the matter of retirement benefits. Respondents
NAPOCOR and DEPARTMENT OF BUDGET AND MANAGEMENT erroneously contend that the entitlement to
the separation pay under R.A. 9136 forfeits the retirement benefit under R.A. 1616. Petitioners most respectfully
submit that since R.A. 9136 and R.A. 1616 are not inconsistent with each other and they have distinct noble
purposes, entitlement to separation pay will not disqualify the separated employee who is qualified to retire from
receiving retirement benefits allowed under another law. x x x[60]

However, in the Decision dated December 18, 2009, it was held that petitioners therein were not only entitled to receive
retirement benefits under R.A. No. 1616 but also were not entitled to receive retirement benefits under Commonwealth Act No. 186,
as amended, which, in effect, might lead to the conclusion that the declaration encompassed all other benefits granted by C.A. No. 186
to its qualified members.
In relation to R.A. No. 1616, Herrera should have affected only the payment of gratuity benefits by NPC, being the last
employer, to its separated employees. It was even categorically stated that petitioners therein were entitled to a refund of their
contributions to the retirement fund, and the monetary value of any accumulated vacation and sick leaves, [61] which is clearly
congruous to the mandate of R.A. No. 1616. The matter of availment of retirement benefits of qualified employees under any other
law to be paid by the GSIS should not and was not covered by the decision. In the first place, it was never an issue.
In the case of Santos v. Servier Philippines, Inc.,[62] citing Aquino v. National Labor Relations Commission,[63] We declared
that the receipt of retirement benefits does not bar the retiree from receiving separation pay. Separation pay is a statutory right
designed to provide the employee with the wherewithal during the period that he/she is looking for another employment. On the other
hand, retirement benefits are intended to help the employee enjoy the remaining years of his life, lessening the burden of worrying
about his financial support, and are a form of reward for his loyalty and service to the employer. A separation pay is given during
ones employable years, while retirement benefits are given during ones unemployable years. Hence, they are not mutually exclusive.
[64]

Even in the deliberations of Congress during the passage of R.A. No. 9136, it was manifest that it was not the intention of the
law to infringe upon the vested rights of NPC personnel to claim benefits under existing laws. To assure the worried and uneasy NPC
employees, Congress guaranteed their entitlement to a separation pay to tide them over in the meantime. [65] More importantly, to

further allay the fears of the NPC employees, especially those who were nearing retirement age, Congress repeatedly assured them in
several public and congressional hearings that on top of their separation benefits, they would still receive their retirement benefits, as
long as they would qualify and meet the requirements for its entitlement.
The transcripts of the Public Consultative Meeting on the Power Bill held on February 16, 2001, disclose the following:
xxxx
THE CHAIRMAN (SEN. J. OSMENA). Well, the other labor representation here is Mr. Anguluan.
MR. ANGULUAN: Yes, Your Honor.
THE CHAIRMAN (SEN. J. OSMENA). Okay. Will you present your paper?
MR. ANGULUAN: We have prepared a paper which we have sent to the honorable members of the Bicam. x x x.
THE CHAIRMAN (SEN. J. OSMENA). I dont think anyone is going to deprive you of your rights under the
law. You will enjoy all your rights. You will receive retirement benefits, separation pay, and all of the
rights that are provided to you by law. What we have objected to in the Senate is retirement benefits higher than
what everybody else gets, like 150 percent or subject to the approval of the board which means sky is the limit. So,
we have objected to that. But what you are entitled to under the law, you will get under the law and nobody will
deprive you of that.[66]
A year later, on February 12, 2002, the Joint Congressional Power Commission was held. The transcripts of the hearing bare
the following:
xxxx
THE CHAIRMAN (REP. BADELLES). They will still be subject to the same conditions. Meaning, NPC has the
discretion whether to reabsorb or hire back those that avail of the separation benefits.
SEN. OSMENA (J). No. But they are not being - - the plants are not being sold, so they are but what we are giving
them is a special concession of retiring early.
No, okay. You consider . . .
THE CHAIRMAN (REP. BADELLES). We are not speaking of retirement here, we are speaking of
their separation benefits . . .
SEN. OSMENA (J). Okay, separation benefits.
THE CHAIRMAN (REP. BADELLES). Precisely, if they are considered terminated.
SEN. OSMENA (J). All right. Separation . . .
THE CHAIRMAN (REP. BADELLES). A retirement plan is a different program than separation.
SEN. OSMENA (J). Separation benefits, okay.
THE CHAIRMAN (REP. BADELLES). All right.[67]

Thus, it is clear that a separation pay at the time of the reorganization of the NPC and retirement benefits at the appropriate
future time are two separate and distinct entitlements. Stated otherwise, a retirement plan is a different program from a separation
package.
There is a whale of a difference between R.A. No. 1616 and C.A. No. 186, together with its amendatory laws. They have
different legal bases, different sources of fundsand different intents.
In R.A. No. 1616, which is the subject issue in Herrera, the retirees are entitled to gratuity benefits to be paid by the last
employer and refund of premiums to be paid by the GSIS. On the other hand, retirement benefits under C.A. No. 186, as amended by
R.A. No. 8291, are to be paid by the GSIS. Stated otherwise, under R.A. No. 1616, what would be paid by the last employer, NPC,
would be gratuity benefits, and GSIS would merely refund the retirement premiums consisting of personal contributions of the

employee plus interest, and the employers share without interest. Under C.A. No. 186, as amended, it is the GSIS who would pay the
qualified employees their retirement benefits.
Indeed, with several amendments to C.A. No. 186,[68] the Court finds it necessary to clarify Herrera and categorically declare
that it affected only those seeking benefitsunder R.A. No. 1616.[69] It could not have meant to affect those employees who retired, and
who will retire, under the different amendatory laws of C.A. No. 186 like R.A. No. 660,[70] P.D. No. 1146[71] and R.A. No. 8291.[72]
At any rate, entitlement of qualified employees to receive separation pay and retirement benefits is not proscribed by the
1987 Constitution. Section 8 of Article IX (B) of the 1987 Constitution reads:
SEC. 8. No elective or appointive public officer or employee shall receive additional, double or indirect
compensation, unless specifically authorized by law, nor accept without the consent of the Congress, any present,
emolument, office, or title of any kind from any foreign government.
Pensions or gratuities shall not be considered as additional, double, or indirect compensation.[73]

Moreover, retirement benefits under C.A. No. 186 are not even considered as compensation. Section 2 (e) of C.A. No. 186
categorically states that
Benefits granted by this Act by virtue of such life or retirement insurance shall not be considered as compensation
or emolument.[74]
Under the GSIS law, the retired employees earned their vested right under their contract of insurance after they religiously
paid premiums to GSIS. Under the contract, GSIS is bound to pay the retirement benefits as it received the premiums from the
employees and NPC.
In Marasigan v. Cruz,[75] this Court ratiocinated that:
A retirement law such as C.A. 186 and amendatory laws is in the nature of a contract between the
government and its employees. When an employee joins the government service, he has a right to expect that after
rendering the required length of service and fulfilled the conditions stated in the laws on retirement, he would be
able to enjoy the benefits provided in said laws. He regularly pays the dues prescribed therefore. It would be cruel
to deny him the benefits he had been expecting at the end of his service by imposing conditions for his
retirement, which are not found in the law. It is believed to be a legal duty as well as a moral obligation on the
part of the government to honor its commitments to its employees when as in this case, they have met all the
conditions prescribed by law and are therefore entitled to receive their retirement benefits.[76]

Thus, where the employee retires and meets the eligibility requirements, he acquires a vested right to benefits that is protected
by the due process clause. Retirees enjoy a protected property interest whenever they acquire a right to immediate payment under preexisting law. Thus, a pensioner acquires a vested right to benefits that have become due as provided under the terms of the public
employees pension statute. No law can deprive such person of his pension rights without due process of law, that is, without notice
and opportunity to be heard. [77] Verily, when an employee has complied with the statutory requirements to be entitled to receive his
retirement benefits, his right to retire and receive what is due him by virtue thereof becomes vested and may not thereafter be revoked
or impaired.
Moreover, Section 63 of the EPIRA law, if misinterpreted as proscribing payment of retirement benefits under the GSIS law,
would be unconstitutional as it would be violative of Section 10, Article III of the 1987 Constitution [78] or the provision on nonimpairment of contracts.
In view of the fact that separation pay and retirement benefits are different entitlements, as they have different legal bases,
different sources of funds, and different intents, the exclusiveness of benefits rule provided under R.A. No. 8291 is not
applicable. Section 55 of R.A. No. 8291 states: Whenever other laws provide similar benefits for the same contingencies covered by
this Act, the member who qualifies to the benefits shall have the option to choose which benefits will be paid to him.

Accordingly, the Court declares that separated, displaced, retiring, and retired employees of NPC are legally entitled to the
retirement benefits pursuant to the intent of Congress and as guaranteed by the GSIS laws. Thus, the Court reiterates:
1] that the dispositive portion in Herrera holding that separated and retired employees are not entitled to receive retirement
benefits under Commonwealth Act No. 186, referred only to the gratuity benefits under R.A. No. 1616, which was to be paid by NPC,
being the last employer;
2] that it did not proscribe the payment of the retirement benefits to qualified retirees under R.A. No. 660, P.D. No. 1146,
R.A. No. 8291, and other GSIS and social security laws; and
3] that separated, rehired, retiring, and retired employees should receive, and continue to receive, the retirement benefits to
which they are legally entitled.
Petition for Mandamus
As for petitioner's prayer that he be reinstated, suffice it to state that the issue has been rendered moot by the Decision and Resolutions
of this Court in the case of NPC Drivers and Mechanics Association (NPC DAMA) v. National Power Corporation (NPC) [79] and by
the above disquisitions.
In Conclusion
While we commend petitioner's attempt to argue against the privatization of the NPC, it is not the proper subject of herein petition.
Petitioner belabored on alleging facts to prove his point which, however, go into policy decisions which this Court must not delve into
less we violate separation of powers. The wisdom of the privatization of the NPC cannot be looked into by this Court as it would
certainly violate this guarded principle. The wisdom and propriety of legislation is not for this Court to pass upon. [80] Every law has in
its favor the presumption of constitutionality, and to justify its nullification, there must be a clear and unequivocal breach of the
Constitution, and not one that is doubtful, speculative or argumentative.[81]

As in National Power Corporation Employees Consolidated Union (NECU) v. National Power Corporation (NPC),[82] this
Court held:
Whether the States policy of privatizing the electric power industry is wise, just, or expedient is not for this Court to
decide. The formulation of State policy is a legislative concern. Hence, the primary judge of the necessity, adequacy,
wisdom, reasonableness and expediency of any law is primarily the function of the legislature. [83]

WHEREFORE, premises considered and subject to the above disquisitions, the Petition for Certiorari and the Supplemental Petition
for Mandamus are DISMISSED for lack of merit.

SO ORDERED.