G.R. No. 176694 July 18, 2014 latter’s television broadcast signals in full, without alteration or deletion.

This is known as the "must-carry-rule."10

GMA NETWORK, INC., Petitioner,
vs. With the denial of its motion for reconsideration,11 the petitioner went to
CENTRAL CATV, INC., Respondent. the CA, alleging that the NTC committed grave procedural and
substantive errors in dismissing the complaint.
DECISION
THE CA RULING
BRION, J.:
The CA upheld the NTC ruling. The NTC did not err in considering the
respondent’s pieces of evidence thatwere attached to its demurrer to
We resolve the challenge, under the standards of a Rule 45 petition for
evidence since administrative agencies are not bound by the technical
review, to the decision1 dated November 14, 2006 and the
rules of procedure.12
resolution2 dated February 15, 2007 of the Court of Appeals (CA) in
CA-G.R. SP No. 93439 affirming the order3 dated December 10, 2004
of the National Telecommunications Commission (NTC)4 that Due to the failure of EO No. 205 to define what constitutes
dismissed the complaint of petitioner GMA Network, Inc. based on the "infringement," EO No. 436 merely filled-in the details without
motion to dismiss by way of demurrer to evidence of respondent expanding, modifying and/or repealing EO No. 205.13 The NTC was
Central CATV, Inc. also correct in modifying or amending the must-carryrule under MC 4-
08-88 as the NTC merely implemented the directive of EO No. 436.14
THE FACTUAL ANTECEDENTS
Hence, this present petition for review on certiorari.
Sometime in February 2000, the petitioner, together with the
Kapisanan ng mga Brodkaster ng Pilipinas, Audiovisual THE PARTIES’ ARGUMENTS
Communicators, Incorporated, Filipinas Broadcasting Network and
Rajah Broadcasting Network, Inc. (complainants), filed with the NTC a
On the procedural issues, the petitioner argues that the NTC erred in:
complaint against the respondent to stop it from soliciting and showing
(i) granting the demurrer to evidence based only on the insufficiency of
advertisements in its cable television (CATV)system, pursuant to
the complaint and not on the insufficiency of evidence; and (ii)
Section 2 of Executive Order (EO) No. 205.5 Under this provision, a
considering the evidence of the respondent in its demurrer to evidence
grantee’s authority to operate a CATV system shall not infringe on the
on top of the petitioner’s evidence.15
television and broadcast markets. The petitioner alleged that the
phrase "television and broadcast markets" includes the commercial or
advertising market. On the substantive issue,the petitioner alleges that the NTC gravely
erred in failing to differentiate between EO No. 205, which is a law, and
EO No. 436 which is merely an executive issuance. An executive
In its answer, the respondent admitted the airing of commercial
issuance cannot make a qualification on the clearprohibition in the law,
advertisement on its CATV network but alleged that Section 3 of EO
EO No. 205.16 In allowing infringement under certain conditions, EO
No. 436, which was issued by former President Fidel V. Ramos on
No. 436 overturned EO No. 205 which prohibits, without qualification,
September 9, 1997, expressly allowed CATVproviders to carry
the infringement on the markets of free TV networks, such as the
advertisements and other similar paid segments provided there is
petitioner. In doing so, the Executive arrogated upon itself the power of
consent from their program providers.6
subordinate legislation that Congress has explicitly reserved to the
NTC.17
After the petitioner presented and offered its evidence, the respondent
filed a motion to dismiss by demurrer toevidence claiming that the
Too, in granting the demurrer toevidence, the NTC effectively revised
evidence presented by the complainants failed toshow how the
EO No. 205, contrary to the basic rule that in the exercise of
respondent’s acts of soliciting and/or showing advertisements infringed
quasilegislative power, the delegate cannot supplant and modify its
upon the television and broadcast market.7
enabling statute.18

THE NTC RULING

On the other hand, the respondent agrees with the CA that the NTC
properly considered the certifications attached to the respondent’s
The NTC granted the respondent’s demurrer to evidence and demurrer to evidence19 since the petitioner had the chance to peruse
dismissed the complaint. It ruled that since EO No. 205 does not define these certifications in the course of the presentation of its evidence.
"infringement," EO No. 436 merely clarified or filled-in the details of the
term to mean that the CATV operatorsmay show advertisements,
EO No. 205 does not expressly prohibit CATV operators from soliciting
provided that they secure the consent of their program providers. In the
and showing advertisements. The non-infringement limitation under
present case, the documents attached to the respondent’s demurrer to
Section 2 thereof, although couched in general terms, should not be
evidence showed that its program providers have given such consent.
interpreted in such a way as to deprive CATV operatorsof legitimate
Although the respondent did not formally offer these documents as
business opportunities.20 Also, EO No. 436, being an executive
evidence, the NTC could still consider them since they formed part of
issuance and a valid administrative legislation, has the force and effect
the records and the NTC is not bound by the strict application of
of a law and cannot be subject to collateral attack.21
technical rules.8

The NTC added that since the insertion of advertisements under EO
No. 436 would result in the alteration ordeletion of the broadcast
signals of the consenting television broadcast station, its ruling
necessarily results in the amendment of these provisions.The second
paragraph9 of Section 3 of EO No. 436 is deemed to amend the
previous provisional authority issued to the respondent, as well as
Sections 6.2.1 and 6.4 of the NTC’s Memorandum Circular (MC) 4-08-
88. Sections 6.2.1 and 6.4 require the CATV operators within the
Grade A or B contours of a television broadcast station to carry the
THE ISSUES
1) Whether the CA erred in affirming the order of the NTC
which granted the respondent’s motion to dismiss by
demurrer to evidence.
2) Whether the respondent is prohibited from showing
advertisements under Section 2 of EO No. 205, in relation
toparagraph 2, Section 3 of EO No. 436.
1
 THE COURT’S RULING Despite the petitioner’s objections,26 the NTC disregarded the rule on
demurrer by allowing the submission of the respondent’s evidence
while depriving the petitioner of the opportunity to question, examine or
We deny the petition for lack of merit.
refute the submitted documents.27

Procedural Issues
That the petitioner had the chance to peruse these documents is of no
moment. In a demurrer to evidence, the respondent’s evidence should
The remedy of a demurrer to evidence is applicable in the proceedings not have been considered in the first place.As the NTC optedto
before the NTC, pursuant to Section 1, Rule 9, Part 9 of its Rules of consider the respondent’s evidence, it should not have resolved the
Practice and Procedure which provides for the suppletory application of case through the remedy of demurrer but instead allowed the
the Rules of Court. respondent to formally present its evidence where the petitioner could
properly raise its objections. Clearly, there was a violation of the
petitioner’s due process right.
Rule 3322 of the Rules of Court provides for the rule on demurrer to
evidence:
Substantive Issues
Section 1. Demurrer to evidence. — After the plaintiff has completed
the presentation of his evidence, the defendant may move for dismissal The primary issue in the present case is whether the respondent, as a
on the ground that upon the facts and the law the plaintiff has shown CATV operator, could show commercial advertisements in its CATV
no right to relief. If his motion is denied he shall have the right to networks. The petitioner anchors its claim on Section 228 of EO No.
present evidence. If the motion is granted but on appeal the order of 205 while the respondent supports its defense from paragraph 2,
dismissal is reversed he shall be deemed to have waivedthe right to Section 329 of EO No. 436. The Court finds, however, that both the
present evidence. NTC and the CA failed to correctly appreciate EO No. 205 and EO No.
436 in resolving the present case.
In other words, the issue to be resolved in a motion to dismiss based
on a demurrer to evidence is whether the plaintiff is entitled to the relief 1. EO No. 205 is a law while EONo. 436 is an executive issuance
prayed for based on the facts and the law.23 In Casent Realty
Development Corp. v. Philbanking Corp.,24 the Court explained that
For one, we agree with the petitioner that the NTC and the CA
these facts and law do not include the defendant’s evidence:
proceeded from the wrong premise that both EO No. 205 and EO No.
436 are statutes. This is a critical point to consider since the NTC and
What should be resolved in a motion to dismiss based on a demurrer the CA rulings on the merits would have no leg to stand on had they
to evidence is whether the plaintiff is entitled to the relief based on the properly appreciated the nature of these two executive issuances.
facts and the law. The evidence contemplated by the rule on demurrer
is that which pertains to the merits of the case, excluding technical
EO No. 205 was issued by President Corazon Aquino on June 30,
aspects such as capacity to sue. However, the plaintiff’s evidence
1987. Under Section 6, Article 18 ofthe 1987 Constitution, the
should not be the only basis in resolving a demurrer to evidence. The
incumbent President shall continue to exerciselegislative powers until
"facts" referred toin Section 8 should include all the means sanctioned
the first Congress is convened. The Congress was convened only on
by the Rules of Court in ascertaining matters in judicial proceedings.
July 27, 1987.30 Therefore, at the time of the issuance of EO No. 205,
These include judicial admissions, mattersof judicial notice, stipulations
President Aquino was still exercising legislative powers. In fact, the
made during the pre-trial and trial, admissions, and presumptions, the
intent to regard EO No. 205 as a law is clear under Section 7 thereof
only exclusion being the defendant’s evidence.
which provides for the repeal or modification of all inconsistent
laws,orders, issuances and rules and regulations, or parts thereof.
In granting the demurrer to evidence in the present case, the NTC
considered both the insufficiency of the allegations in the complaint
EO No. 436, on the other hand, is an executive order which was issued
and the insufficiency of the complainants’ evidence in light of its
by President Ramos in the exercise purely of his executive power. In
interpretation of the provisions of EO No. 205 and EO No. 436. The
short, it is not a law.
NTC ruled that the complainants, including the petitioner, failed to
proveby substantial evidence that the respondent aired the subject
advertisements without the consent of its program providers, The NTC and the CA, however, failed to consider the distinction
asrequired under EO No. 436. The NTC, therefore, has issued the between the two executive orders. In considering EO No. 436 as a law,
assailed order upon a consideration of the applicable laws and the the NTC and the CA hastily concluded thatit has validly qualified
evidence of the petitioner. On this score, the grant of the demurrer Section 2 of EO No. 205 and has amended the provisionsof MC 4-08-
suffers no infirmity. 88. Following this wrong premise, the NTC and the CA ruled that the
respondent has a right to show advertisements under Section 3 of EO
No. 436.
However, the NTC further extended itsconsideration of the issue to the
respondent’s pieces of evidence thatwere attached to its demurrer to
evidence. On this score,we agree with the petitioner that the NTC The incorrect interpretation by the NTC and the CA led to the
erred. erroneous resolution of the petitioner’s complaint and appeal. While the
respondent indeed has the right to solicit and show advertisements, as
will be discussed below, the NTC and the CA incorrectly interpreted
Rule 33 of the Rules of Court, as explained in our ruling in Casent,
and appreciated the relevant provisions of the law and rules. We seek
proscribes the court or the tribunal from considering the defendant’s
to correct this error in the present case by ruling that MC 4-08-88 alone
evidence in the resolution of a motion to dismiss based on a demurrer
sufficiently resolves the issue on whether the respondent could show
to evidence.
advertisements in its CATV networks. In other words, EONo. 436 is not
material in resolving the substantive issue before us.
While an administrative agency is not strictly bound by technical rules
of procedure in the conduct of its administrative proceedings, the
2. The CATV operators are not prohibited from showing
relaxation of the rules should not result in violating fundamental
advertisements under EO No. 205 and its implementing rules and
evidentiary rules, including due process.25 In the present case, the
regulations, MC 4-08-88
NTC proceeded against the very nature of the remedy of demurrer to
evidence when it considered the respondent’s evidence, specifically
the certifications attached to the respondent’s demurrer to evidence.

2
Section 631 of EO No. 205 expressly and unequivocally vests with the
NTC the delegated legislative authority to issue its implementing rules
and regulations.32
Following this authority, the NTC has issued the implementing rules
and regulations of EO No. 205 through MC 4-08-88. Its whereas clause
provides that it was issued pursuant to Act No. 384633 and EO No. 205
which granted the NTC the authority to set down rules and regulations
on CATV systems.
MC 4-08-88 has sufficiently filled-inthe details of Section 2 of EO No.
205, specifically the contentious provisothat "the authority to operate
[CATV] shall not infringe on the television and broadcast markets."
First,Section 6.1 of MC 04-08-88 clarifies what the phrase "television
and broadcast markets" covers, when it identified the major television
markets as follows:
SECTION 6 CARRIAGE OF TELEVISION
BROADCAST SIGNALS
6.1 Major Television Markets
For purposes of the cable television rules, the following is a
list of the major television markets:
a. Naga
b. Legaspi
c. Metro Manila
d. Metro Cebu
e. Bacolod
f. Iloilo
g. Davao
h. Cagayan de Oro
i. Zamboanga34
It is clear from this provision that the phrase "television
market" connotes "audience" or "viewers" in geographic
areas and not the commercial or advertising marketas what
the petitioner claims. Second, the kind of infringement
prohibited by Section 2 of EO No. 205 was particularly
clarified under Sections 6.2, 6.2.1, 6.4(a)(1) and 6.4(b) of MC
04-08-88, which embody the "must-carry rule." This rule
mandates that the local TV broadcast signals of an
authorized TV broadcast station, such as the petitioner,
should be carried in fullby the CATV operator, without
alteration or deletion. These sections provide as follows:
6.2 Mandatory Coverage
6.2.1 A cable TV system operating in a community which is
within the Grade A or Grade B contours of an authorized TV
broadcast station or stations mustcarry the TV signals of
these stations.
6.4 Manner of Carriage
a. Where a television broadcast signal is required to be
carried by a community unit, pursuant tothe rules in this sub-
part:
1. The signal shall be carried without material degradation in
quality(within the limitations imposed by the technical state of
the art), and where applicable, in accordance with the
technical standards[.]
xxxx
b. Where a television broadcast signal is carried by a
community unit, pursuant to the rules in the CATV standards
the program broadcast shall be carried in full, without
deletion or alternation of anyexcept as required by this part.35
An understanding of the "must-carryrule" would show how it carries out
the directive of Section 2 of EONo. 205 that the CATV operation must
not infringe upon the broadcast television markets, specifically the
audience market. In ABS-CBN Broadcasting Corporation v. Philippine
Multi-Media System, Inc.,36 the Court clarified the "must-carry rule" and
its interplay in the free-signal TV, such as the petitioner, and the CATV
operators, such as the respondent, and to quote:
Anyone in the country who owns a television set and antenna can
receive ABS-CBN’s signals for free. Other broadcasting organizations
with free-to-air signals such as GMA-7, RPN-9, ABC-5, and IBC-13 can
likewise be accessed for free. No payment is required to view the said
channels because these broadcasting networks do not generate
revenue from subscription from their viewers but from airtime revenue
from contracts with commercial advertisers and producers, as well as
from direct sales.
In contrast, cable and DTH television earn revenues from viewer
subscription.In the case of PMSI, it offers its customers premium paid
channels from content providers like Star Movies, Star World, Jack TV,
and AXN, among others, thus allowing its customers to go beyond the
limits of "Free TV and Cable TV." It does not advertise itself as a local
channel carrier because these local channels can be viewed with or
without DTH television.
Relevantly, PMSI’s carriage of Channels 2 and 23 is material in arriving
at the ratings and audience share of ABS-CBN and its programs.
These ratings help commercial advertisers and producers decide
whether to buy airtime from the network. Thus, the must-carry rule is
actually advantageous to the broadcasting networks because it
provides them with increased viewership which attracts commercial
advertisers and producers.
On the other hand, the carriage of free-to-air signals imposes a burden
to cable and DTH television providerssuch as PMSI. PMSI uses none
of ABS-CBN’s resourcesor equipment and carries the signals and
shoulders the costs without any recourse of charging. Moreover, such
carriage of signals takes up channel space which can otherwise be
utilized for other premium paid channels.
Contrary to the petitioner’s claim,EO No. 205 was not issued solely for
the benefit of the free-signal TV networks. In fact, it was issued to end
the monopoly of Sining Makulay, Inc. which was granted by then
President Ferdinand Marcos an exclusive franchise, through
Presidential Decree (PD) No. 1512, to operate CATV system anywhere
within the Philippines.37 EO No. 205 encouraged the growth of CATV
operation when it expressly repealed PD No. 151238 thus encouraging
competition in the CATV industry. As stated in the whereas clause of
EO No. 205, the primary purpose of the law in regulating the CATV
operations was for the protection of the public and the promotion of the
general welfare.
MC 4-08-88 mirrored the legislative intent of EO No. 205 and
acknowledged the importance of the CATV operations in the promotion
3
of the general welfare. The circular provides in its whereas clause that
the CATV has the ability to offer additional programming and to carry
much improved broadcast signals in the remote areas, thereby
enriching the lives of the rest of the population through the
dissemination of social, economic and educational information,and
cultural programs.

Unavoidably, however, the improved broadcast signals that CATV

offers may infringe or encroach upon the audience or viewer market of
the free-signal TV. This is so because the latter’s signal may not reach
the remote areas or reach them with poorsignal quality. To foreclose
this possibility and protect the free-TV market (audience market), the
must-carry rule was adopted to level the playing field. With the must-
carry rule in place, the CATV networks are required to carry and show
in fullthe freelocal TV’s programs, including advertisements, without
alteration or deletion. This, in turn, benefits the public who would have
a wide-range of choices of programs or broadcast to watch. This also
benefits the free-TV signal as their broadcasts are carried under the
CATV’s much-improved broadcast signals thus expanding their
viewer’s share.

In view of the discussion above, the Court finds that the quoted
sections of MC 4-08-88, i.e., 6.2, 6.2.1, 6.4(a)(1) and 6.4(b) which
embody the "must-carry rule," are the governing rules in the present
case. These provisions sufficiently and fairly implement the intent of
Section 2 of EO No. 205 to protect the broadcast television market vis-
à-visthe CATV system. For emphasis, under these rules, the phrase
"television and broadcast markets" means viewers oraudience market
and not commercial advertisement market as claimed bythe petitioner.
Therefore, the respondent’s act of showing advertisements does not
constitute an infringement of the "television and broadcast markets"
under Section 2 of EO No. 205.

The implementing rules and regulations embodied in this circular,

whose validity is undisputed by the parties, "partake of the nature of a
statute and are just as binding as if they have been written in the
statute itself. As such, they have the force and effect of law and enjoy
the presumption of constitutionality and legality until they are set aside
with finality in an appropriate case by a competent court."39

The Court further finds that the NTC also erred in ruling that EO No.
436 has deemed to amend Sections 6.2.1 and 6.4 of MC4-08-88. In
arriving at this ruling, the NTC proceeded from the wrong interpretation
of EO No. 436 as a law, resulting in the consequenterroneous
conclusion that EO No. 436 could amend MC 4-08-88. The Court
cannot uphold these patently incorrect findings of the NTC even though
it is a specialized implementing agency.

Since the right of the respondent to show advertisements is clearly

supported by EO No. 205 and MC 4-08-88, the Court finds no
necessity to pass upon the issue on the validity of EO No. 436,
specifically Section 3 thereof.

WHEREFORE, we DENY the petition and, accordingly, AFFIRM the

decision and resolution of the Court of Appeals dated November 14,
2006 and February 15, 2007, respectively. Costs against petitioner
GMA Network, Inc.

SO ORDERED.

4
G.R. NO. 207970
its complaint for sum of money in the RTC,12averring as follows:
FERNANDO MEDICAL ENTERPRISES, INC., Petitioner,
vs.
WESLEYAN UNIVERSITY PHILIPPINES, INC., Respondent.
DECISION
BERSAMIN, J.:
The trial court may render a judgment on the pleadings upon motion of
the claiming party when the defending party's answer fails to tender an
issue, or otherwise admits the material allegations of the adverse
party's pleading. For that purpose, only the pleadings of the parties in
the action are considered. It is error for the trial court to deny the
motion for judgment on the pleadings because the defending party's
pleading in another case supposedly tendered an issue of fact.
The Case
The petitioner appeals the decision promulgated on July 2,
2013,1 whereby the Court of Appeals (CA) affirmed the order issued on
November 23, 2011 by the Regional Trial Court (RTC), Branch 1, in
Manila, denying its motion for judgment on the pleadings in Civil Case
No. 09-122116 entitled Fernando Medical Enterprises, Inc. v.
Wesleyan University-Philippines.2
Antecedents
From January 9, 2006 until February 2, 2007, the petitioner, a domestic
corporation dealing with medical equipment and supplies, delivered to
and installed medical equipment and supplies at the respondent’s
hospital under the following contracts:
a. Memorandum of Agreement dated January 9, 2006 for the
supply of medical equipment in the total amount of
P18,625,000.00;3
b. Deed of Undertaking dated July 5, 2006 for the installation
of medical gas pipeline system valued at P8,500,000.00;4
c. Deed of Undertaking dated July 27, 2006 for the supply of
one unit of Diamond Select Slice CT and one unit of
Diamond Select CV-P costing P65,000,000.00;5 and
d. Deed of Undertaking dated February 2, 2007 for the
supply of furnishings and equipment worth P32,926,650.00.6
According to the petitioner, the respondent paid only P67,357,683.23
of its total obligation of P123,901,650.00, leaving unpaid the sum of
P54,654,195.54.7 However, on February 11, 2009, the petitioner and
the respondent, respectively represented by Rafael P. Fernando and
Guillermo T. Maglaya, Sr., entered into an agreement,8 whereby the
former agreed to reduce its claim to only P50,400,000.00, and allowed
the latter to pay the adjusted obligation on installment basis within 36
months.9
In the letter dated May 27, 2009,10 the respondent notified the
petitioner that its new administration had reviewed their contracts and
had found the contracts defective and rescissible due to economic
prejudice or lesion; and that it was consequently declining to recognize
the February 11, 2009 agreement because of the lack of approval by
its Board of Trustees and for having been signed by Maglaya whose
term of office had expired.
On June 24, 2009, the petitioner sent a demand letter to the
respondent.11
Due to the respondent’s failure to pay as demanded, the petitioner filed
xxxx
2. On January 9, 2006, plaintiff supplied defendant with
hospital medical equipment for an in consideration of
P18,625,000.00 payable in the following manner: (2.1) For
nos. 1 to 9 of items to be sourced from Fernando Medical
Equipment, Inc. (FMEI) – 30% down payment of
P17,475,000 or P5,242,500 with the balance of P12,232,500
or 70% payable in 24 equal monthly instalments of
P509,687.50 and (2.2.) cash transaction amounting to
P1,150,000.00 (2.3) or an initial cash payment of
P6,392,500.00 with the remaining balance payable in 24
equal monthly installments every 20th day of each month
until paid, as stated in the Memorandum of Agreement, copy
of which is hereto attached as Annex "A";
3. On July 5, 2006, plaintiff installed defendants medical gas
pipeline system in the latter’s hospital building complex for
and in consideration of P8,500,000.00 payable upon
installation thereof under a Deed of Undertaking, copy of
which is hereto attached as Annex "B";
4. On July 27, 2006, plaintiff supplied defendant one (1) unit
Diamond Select Slice CT and one (1) unit Diamond Select
CV-9 for and in consideration of P65,000,000.00 thirty
percent (30%) of which shall be paid as down payment and
the balance in 30 equal monthly instalments as provided in
that Deed of Undertaking, copy of which is hereto attached
as Annex "C";
5. On February 2, 2007, plaintiff supplied defendants hospital
furnishings and equipment for an in consideration of
P32,926,650.00 twenty percent (20%) of which was to be
paid as downpayment and the balance in 30 months under a
Deed of Undertaking, copy of which is hereto attached
as Annex "D";
6. Defendant’s total obligation to plaintiff was
P123,901,650.00 as of February 15, 2009, but defendant
was able to pay plaintiff the sum of P67,357,683.23 thus
leaving a balance P54,654,195.54 which has become
overdue and demandable;
7. On February 11, 2009, plaintiff agreed to reduce its claim
to only P50,400,000.00 and extended its payment for 36
months provided defendants shall pay the same within 36
months and to issue 36 postdated checks therefor in the
amount of P1,400,000.00 each to which defendant agreed
under an Agreement, copy of which is hereto attached
as Annex "E";
8. Accordingly, defendant issued in favor of plaintiff 36
postdated checks each in the [a]mount of P1,400,000.00 but
after four (4) of the said checks in the sum of P5,600,000.00
were honored defendant stopped their payment thus making
the entire obligation of defendant due and demandable
under the February 11, 2009 agreement;
9. In a letter dated May 27, 2009, defendant claimed that all
of the first four (4) agreements may be rescissible and one of
them is unenforceable while the Agreement dated February
11, 2009 was without the requisite board approval as it was
signed by an agent whose term of office already expired,
copy of which letter is hereto attached as Annex "F";
10. Consequently, plaintiff told defendant that if it does not
want to honor the February 11, 2009 contract then plaintiff
5
 will insists [sic] on its original claim which is P54,654,195.54
and made a demand for the payment thereof within 10 days
from receipt of its letter copy of which is hereto attached
as Annex "G";
11. Defendant received the aforesaid letter on July 6, 2009
but to date it has not paid plaintiff any amount, either in the
first four contracts nor in the February 11, 2009 agreement,
hence, the latter was constrained to institute the instant suit
and thus incurred attorney’s fee equivalent to 10% of the
overdue account but only after endeavouring to resolve the
dispute amicable and in a spirit of friendship[;]
12. Under the February 11, 2009 agreement the parties
agreed to bring all actions or proceedings thereunder or
characterized therewith in the City of Manila to the exclusion
of other courts and for defendant to pay plaintiff 3% per
months of delay without need of demand;13
xxxx
The respondent moved to dismiss the complaint upon the following
grounds,14 namely: (a) lack of jurisdiction over the person of the
defendant; (b) improper venue; (c) litis pendentia; and (d) forum
shopping. In support of the ground of litis pendentia, it stated that it had
earlier filed a complaint for the rescission of the four contracts and of
the February 11, 2009 agreement in the RTC in Cabanatuan City; and
that the resolution of that case would be determinative of the
petitioner’s action for collection.15
After the RTC denied the motion to dismiss on July 19, 2009,16 the
respondent filed its answer (ad cautelam),17averring thusly:
xxxx
2. The allegations in Paragraphs Nos. 2, 3, 4, and 5 of the
complaint are ADMITTED subject to the special and
affirmative defenses hereafter pleaded;
3. The allegations in Paragraphs Nos. 6, 7 and 8 of the
complaint are DENIED for lack of knowledge or information
sufficient to form a belief as to the truth or falsity thereof,
inasmuch as the alleged transactions were undertaken
during the term of office of the past officers of defendant
Wesleyan University-Philippines. At any rate, these
allegations are subject to the special and affirmative
defenses hereafter pleaded;
4. The allegations in Paragraphs Nos. 9 and 10 of the
complaint are ADMITTED subject to the special and
affirmative defenses hereafter pleaded;
5. The allegations in Paragraphs Nos. 11 and 12 of the
complaint are DENIED for being conclusions of law.18
xxxx
The petitioner filed its reply to the answer.19
On September 28, 2011, the petitioner filed its Motion for Judgment
Based on the Pleadings,20 stating that the respondent had admitted the
material allegations of its complaint and thus did not tender any issue
as to such allegations.
The respondent opposed the Motion for Judgment Based on the
Pleadings, arguing that it had specifically denied the material
allegations in the complaint, particularly paragraphs 6, 7, 8, 11 and
12.21
On November 23, 2011, the RTC issued the order denying the Motion
for Judgment Based on the Pleadings of the petitioner, to wit:
At the hearing of the "Motion for Judgment Based on the Pleadings"
filed by the plaintiff thru counsel, Atty. Jose Mañacop on September
28, 2011, the court issued an Order dated October 27, 2011 which
read in part as follows:
xxxx
Considering that the allegations stated on the Motion for Judgment
Based on the Pleadings, are evidentiary in nature, the Court, instead of
acting on the same, hereby sets this case for pre-trial, considering that
with the Answer and the Reply, issues have been joined.
xxxx
In view therefore of the Order of the Court dated October 27, 2011, let
the Motion for Judgment Based on the Pleadings be hereby ordered
DENIED on reasons as abovestated and hereto reiterated.
xxxx
SO ORDERED.22
The petitioner moved for reconsideration,23 but its motion was denied
on December 29, 2011.24
The petitioner assailed the denial in the CA on certiorari.25
Judgment of the CA
On July 2, 2013, the CA promulgated its decision. Although observing
that the respondent had admitted the contracts as well as the February
11, 2009 agreement, viz.:
It must be remembered that Private Respondent admitted the
existence of the subject contracts, including Petitioner’s fulfilment of its
obligations under the same, but subjected the said admission to the
"special and affirmative defenses" earlier raised in its Motion to
Dismiss.
xxxx
Obviously, Private Respondent’s special and affirmative defenses are
not of such character as to avoid Petitioner’s claim. The same special
and affirmative defenses have been passed upon by the RTC in its
Order dated July 19, 2010 when it denied Private Respondent’s Motion
to Dismiss. As correctly found by the RTC, Private Respondent’s
special and affirmative defences of lack of jurisdiction over its person,
improper venue, litis pendentia and wilful and deliberate forum
shopping are not meritorious and cannot operate to dismiss Petitioner’s
Complaint. Hence, when Private Respondent subjected its admission
to the said defenses, it is as though it raised no defense at all.
Not even is Private Respondent’s contention that the rescission case
must take precedence over Petitioner’s Complaint for Sum of Money
tenable.1avvphi1 To begin with, Private Respondent had not yet
proven that the subject contracts are rescissible. And even if the
subject contracts are indeed rescissible, it is well-settled that
rescissible contracts are valid contracts until they are rescinded. Since
the subject contracts have not yet been rescinded, they are deemed
valid contracts which may be enforced in legal contemplation.
6
In effect, Private Respondent admitted that it entered into the subject
contracts and that Petitioner had performed its obligations under the
same.
As regards Private Respondent’s denial by disavowal of knowledge of
the Agreement dated February 11, 2009, We agree with Petitioner that
such denial was made in bad faith because such allegations are plainly
and necessarily within its knowledge.
In its letter dated May 27, 2009, Private Respondent made reference to
the Agreement dated February 11, 2009, viz.:
"The Agreement dated 11 February 2009, in particular, was entered
into by an Agent of the University without the requisite authority from
the Board of Trustees, and executed when said agent’s term of office
had already expired. Consequently, such contract is, being an
unenforceable contract."
Also, Private Respondent averred in page 5 of its Complaint for
Rescission, which it attached to its Motion to Dismiss, that:
"13. On 6 February 2009, when the terms of office of plaintiff’s Board of
Trustess chaired by Dominador Cabasal, as well as of Atty. Guillermo
C. Maglaya as President, had already expired, thereby rendering them
on a hold-over capacity, the said Board once again authorized Atty.
Maglaya to enter into another contract with defendant FMEI, whereby
the plaintiff was obligated to pay and deliver to defendant FMEI the
amount of Fifty Million Four Hundred Thousand Pesos
(Php50,400,000.00) in thirty five (35) monthly instalments of One
Million Four Hundred Thousand Pesos (Php1,400,000.00),
representing the balance of the payment for the medical equipment
supplied under the afore-cited rescissible contracts. This side
agreement, executed five (5) days later, or on 11 February 2009, and
denominated as "AGREEMENT", had no object as a contract, but was
entered into solely for the purpose of getting the plaintiff locked-in to
the payment of the balance price under the rescissible contracts; x x x"
From the above averments, Private Respondent cannot deny
knowledge of the Agreement dated February 11, 2009. In one case, it
was held that when a respondent makes a "specific denial" of a
material allegation of the petition without setting forth the substance of
the matters relied upon to support its general denial, when such
matters where plainly within its knowledge and the defendant could not
logically pretend ignorance as to the same, said defendant fails to
properly tender an issue.26
the CA ruled that a judgment on the pleadings would be improper
because the outstanding balance due to the petitioner remained to be
an issue in the face of the allegations of the respondent in its complaint
for rescission in the RTC in Cabanatuan City, to wit:
However, Private Respondent’s disavowal of knowledge of its
outstanding balance is well-taken. Paragraph 6 of Petitioner’s
Complaint states that Private Respondent was able to pay only the
amount of P67,357,683.23. Taken together with paragraph 8, which
states that Private Respondent was only able to make good four (4)
check payments worth P1,400,000.00 or a total of P5,600,000.00,
Private Respondent’s total payments would be, in Petitioner’s
view, P72,957,683.23. However, in its Complaint for Rescission,
attached to its Motion to Dismiss Petitioner’s Complaint for Sum of
Money, Private Respondent alleged that:
"16. To date, plaintiff had already paid defendant the amount of
Seventy Eight Million Four Hundred One Thousand Six Hundred Fifty
Pesos (P78,401,650.00)"
It is apparent that Private Respondent’s computation and Petitioner’s
computation of the total payments made by Private Respondent are
different. Thus, Private Respondent tendered an issue as to the
amount of the balance due to Petitioner under the subject contracts.27
Hence, this appeal.
Issue
The petitioner posits that the CA erred in going outside of the
respondent’s answer by relying on the allegations contained in the
latter’s complaint for rescission; and insists that the CA should have
confined itself to the respondent’s answer in the action in order to
resolve the petitioner’s motion for judgment based on the
pleadings.1âwphi1
In contrast, the respondent contends that it had specifically denied the
material allegations of the petitioner’s complaint, including the amount
claimed; and that the CA only affirmed the previous ruling of the RTC
that the pleadings submitted by the parties tendered an issue as to the
balance owing to the petitioner.
Did the CA commit reversible error in affirming the RTC’s denial of the
petitioner’s motion for judgment on the pleadings?
Ruling of the Court
The appeal is meritorious.
The rule on judgment based on the pleadings is Section 1, Rule 34 of
the Rules of Court, which provides thus:
Section 1. Judgment on the pleadings. – Where an answer fails to
tender an issue, or otherwise admits the material allegations of the
adverse party’s pleading, the court may, on motion of that party, direct
judgment on such pleading. x x x
The essential query in resolving a motion for judgment on the
pleadings is whether or not there are issues of fact generated by the
pleadings.28 Whether issues of fact exist in a case or not depends on
how the defending party’s answer has dealt with the ultimate facts
alleged in the complaint. The defending party’s answer either admits or
denies the allegations of ultimate facts in the complaint or other
initiatory pleading. The allegations of ultimate facts the answer admit,
being undisputed, will not require evidence to establish the truth of
such facts, but the allegations of ultimate facts the answer properly
denies, being disputed, will require evidence.
The answer admits the material allegations of ultimate facts of the
adverse party’s pleadings not only when it expressly confesses the
truth of such allegations but also when it omits to deal with them at
all.29 The controversion of the ultimate facts must only be by specific
denial. Section 10, Rule 8 of the Rules of Court recognizes only three
modes by which the denial in the answer raises an issue of fact. The
first is by the defending party specifying each material allegation of fact
the truth of which he does not admit and, whenever practicable, setting
forth the substance of the matters upon which he relies to support his
denial. The second applies to the defending party who desires to deny
only a part of an averment, and the denial is done by the defending
party specifying so much of the material allegation of ultimate facts as
is true and material and denying only the remainder. The third is done
by the defending party who is without knowledge or information
sufficient to form a belief as to the truth of a material averment made in
the complaint by stating so in the answer. Any material averment in the
complaint not so specifically denied are deemed admitted except an
averment of the amount of unliquidated damages.30
In the case of a written instrument or document upon which an action
or defense is based, which is also known as the actionable document,
the pleader of such document is required either to set forth the
substance of such instrument or document in the pleading, and to
attach the original or a copy thereof to the pleading as an exhibit, which
shall then be deemed to be a part of the pleading, or to set forth a copy
in the pleading.31 The adverse party is deemed to admit the
7
genuineness and due execution of the actionable document unless he
specifically denies them under oath, and sets forth what he claims to
be the facts, but the requirement of an oath does not apply when the
adverse party does not appear to be a party to the instrument or when
compliance with an order for an inspection of the original instrument is
refused.32
That the respondent qualified its admissions and denials by subjecting
them to its special and affirmative defenses of lack of jurisdiction over
its person, improper venue, litis pendentia and forum shopping was of
no consequence because the affirmative defenses, by their nature,
involved matters extrinsic to the merits of the petitioner’s claim, and
thus did not negate the material averments of the complaint.

In Civil Case No. 09-122116, the respondent expressly
admitted paragraphs no. 2, 3, 4, 5, 9 and 10 of the complaint. The
admission related to the petitioner’s allegations on: (a) the four
transactions for the delivery and installation of various hospital
equipment; (b) the total liability of the respondent; (c) the payments
made by the respondents; (d) the balance still due to the petitioner;
and (e) the execution of the February 11, 2009 agreement. The
admission of the various agreements, especially the February 11, 2009
agreement, significantly admitted the petitioner’s complaint. To recall,
the petitioner’s cause of action was based on the February 11, 2009
agreement, which was the actionable document in the case. The
complaint properly alleged the substance of the February 11, 2009
agreement, and contained a copy thereof as an annex. Upon the
express admission of the genuineness and due execution of the
February 11, 2009 agreement, judgment on the pleadings became
proper.33 As held in Santos v. Alcazar:34
Lastly, we should emphasize that in order to resolve the
petitioner’s Motion for Judgment Based on the Pleadings, the trial court
could rely only on the answer of the respondent filed in Civil Case No.
09-122116. Under Section 1, Rule 34 of the Rules of Court, the answer
was the sole basis for ascertaining whether the complaint’s material
allegations were admitted or properly denied. As such, the
respondent’s averment of payment of the total of P78,401,650.00 to
the petitioner made in its complaint for rescission had no relevance to
the resolution of the Motion for Judgment Based on the Pleadings. The
CA thus wrongly held that a factual issue on the total liability of the
respondent remained to be settled through trial on the merits. It should
have openly wondered why the respondent's answer in Civil Case No.
09-122116 did not allege the supposed payment of the
P78,401,650.00, if the payment was true, if only to buttress the specific
denial of its alleged liability. The omission exposed the respondent's
denial of liability as insincere.

There is no need for proof of execution and authenticity with respect to WHEREFORE, the Court REVERSES and SETS ASIDE the decision
documents the genuineness and due execution of which are admitted promulgated on July 2, 2013; DIRECTS the Regional Trial Court,
by the adverse party. With the consequent admission engendered by Branch 1, in Manila to resume its proceedings in Civil Case No. 09-
petitioners’ failure to properly deny the Acknowledgment in their 122116 entitled Fernando Medical Enterprises, Inc. v. Wesleyan
Answer, coupled with its proper authentication, identification and offer University-Philippines, and to forthwith act on and grant the Motion for
by the respondent, not to mention petitioners’ admissions in Judgment Based on the Pleadings by rendering the proper judgment
paragraphs 4 to 6 of their Answer that they are indeed indebted to on the pleadings; and ORDERS the respondent to pay the costs of
respondent, the Court believes that judgment may be had solely on the suit.
document, and there is no need to present receipts and other
documents to prove the claimed indebtedness. The Acknowledgment,
SO ORDERED.
just as an ordinary acknowledgment receipt, is valid and binding
between the parties who executed it, as a document evidencing the
loan agreement they had entered into. The absence of rebutting
evidence occasioned by petitioners’ waiver of their right to present
evidence renders the Acknowledgment as the best evidence of the
transactions between the parties and the consequential indebtedness
incurred. Indeed, the effect of the admission is such that a prima
facie case is made for the plaintiff which dispenses with the necessity
of evidence on his part and entitled him to a judgment on the pleadings
unless a special defense of new matter, such as payment, is
interposed by the defendant.35 (citations omitted)

The respondent denied paragraphs no. 6, 7 and 8 of the complaint "for

lack of knowledge or information sufficient to form a belief as to the
truth or falsity thereof, inasmuch as the alleged transactions were
undertaken during the term of office of the past officers of defendant
Wesleyan University-Philippines." Was the manner of denial effective
as a specific denial?

We answer the query in the negative. Paragraph no. 6 alleged that the
respondent’s total obligation as of February 15, 2009 was
P123,901,650.00, but its balance thereafter became only
P54,654,195.54 because it had since then paid P67,357,683.23 to the
petitioner. Paragraph no. 7 stated that the petitioner had agreed with
the respondent on February 11, 2009 to reduce the balance to only
P50,400,000.00, which the respondent would pay in 36 months
through 36 postdated checks of P1,400,000.00 each, which the
respondent then issued for the purpose. Paragraph no. 8 averred that
after four of the checks totalling P5,600,000.00 were paid the
respondent stopped payment of the rest, rendering the entire obligation
due and demandable pursuant to the February 11, 2009 agreement.
Considering that paragraphs no. 6, 7 and 8 of the complaint averred
matters that the respondent ought to know or could have easily known,
the answer did not specifically deny such material averments. It is
settled that denials based on lack of knowledge or information of
matters clearly known to the pleader, or ought to be known to it, or
could have easily been known by it are insufficient, and constitute
ineffective36 or sham denials.37

8
 [ G.R. No. 202989, March 25, 2015 ]
COMGLASCO CORPORATION/AGUILA GLASS, PETITIONER, VS.
SANTOS CAR CHECK CENTER CORPORATION, RESPONDENT.
DECISION
REYES, J.:
On August 16, 2000, respondent Santos Car Check Center Corporation
(Santos), owner of a showroom located at 75 Delgado Street, in Iloilo
City, leased out the said space to petitioner Comglasco Corporation
(Comglasco), an entity engaged in the sale, replacement and repair of
automobile windshields, for a period of five years at a monthly rental of
P60,000.00 for the first year, P66,000.00 on the second year, and
P72,600.00 on the third through fifth years.[1]
On October 4, 2001, Comglasco advised Santos through a letter[2] that
it was pre-terminating their lease contract effective December 1,
2001. Santos refused to accede to the pre-termination, reminding
Comglasco that their contract was for five years. On January 15, 2002,
Comglasco vacated the leased premises and stopped paying any further
rentals. Santos sent several demand letters, which Comglasco
completely ignored. On September 15, 2003, Santos sent its final
demand letter,[3] which Comglasco again ignored. On October 20,
2003, Santos filed suit for breach of contract.[4]
Summons and a copy of the complaint, along with the annexes, were
served on Comglasco on January 21, 2004, but it moved to dismiss the
complaint for improper service. The Regional Trial Court (RTC) of
Iloilo City, Branch 37, dismissed the motion and ordered the summons
served anew. On June 28, 2004, Comglasco filed its Answer.[5] Santos
moved for a judgment on the pleadings, which the RTC granted. On
August 18, 2004, the trial court rendered its judgment,[6] the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of [Santos] and
against [Comglasco]:
1. Ordering [Comglasco] to faithfully comply with [its] obligation under
the Contract of Lease and pay its unpaid rentals starting January 16,
2002 to August 15, 2003 in the total amount of Php1,333,200.00, plus
12% interest per annum until fully paid;
2. To pay [Santos]:
a) Php200,000.00 as attorney's fees;
b) [Php]50,000.00 as litigation expenses;
c) [Php]400,000.00 as exemplary damages.
3. Costs of the suit.
SO ORDERED.[7]
On February 14, 2005, Santos moved for execution pending
Comglasco's appeal, which the trial court granted on May 12, 2005. In
its appeal, Comglasco interposed the following issues for resolution:
1. Whether or not judgment on the pleadings was properly
invoked by the trial court as basis for rendering its decision;
2. Whether or not material issues were raised in [Comglasco's]
Answer;
3. Whether or not damages may be granted by the trial court
without proof and legal basis.[8]
In its Decision[9] dated August 10, 2011, the Court of Appeals (CA)
affirmed the judgment of the RTC but reduced the award of attorney's
fees to P100,000.00 and deleted the award of litigation expenses and
exemplary damages.
Petition for Review to the Supreme Court
In this petition, Comglasco raises the following issues:
1. Whether or not judgment on the pleadings was properly
invoked by the trial court as basis for rendering its decision?
2. Whether or not material issues were raised in [Comglasco's]
answer?
3. Whether or not summary judgment or judgment on the
pleadings is the proper remedy for [Santos] under the
circumstances of the present case?
4. Whether or not the amount deposited for advance rental and
deposit should be credited to [Comglasco's] account?
5. Whether or not attorney's fees may be granted by the trial
court without proof and legal basis?[10]
Paragraph 15 of the parties' lease contract[11] permits pre-termination
with cause in the first three years and without cause after the third
year. Citing business reverses which it ascribed to the 1997 Asian
financial crisis, Comglasco insists that under Article 1267 of the Civil
Code it is exempted from its obligation under the contract, because its
business setback is the "cause" contemplated in their lease which
authorized it to pre-terminate the same. Article 1267 provides:
Art. 1267. When the service has become so difficult as to be manifestly
beyond the contemplation of the parties, the obligor may also be
released therefrom, in whole or in part.
Comglasco argues that it cannot be said to have admitted in its Answer
the material allegations of the complaint precisely because it invoked
therein a valid cause for its decision to pre-terminate the lease before
the lapse of three years; that therefore, in view of its pleaded "cause"
for reneging on its rentals (the 1997 Asian financial crisis), the RTC
should have ordered the reception of evidence for this purpose, after
which a summary judgment would then have been proper, not a
judgment on the pleadings. After all, Santos has claimed in its Motion
for Summary Judgment that Comglasco's cited "cause" for pre-
termination was fictitious or a sham, whereas in truth the prevailing
business climate which ensued after the 1997 currency crisis resulted in
great difficulty on its part to comply with the terms of the lease "as to
be manifestly beyond the contemplation of the parties"; thus,
Comglasco should be deemed released from the lease.
Next, Comglasco insists that its advance rentals and deposit totaling
P309,000.00 should be deducted from any sum awarded to Santos
while it also insists that there is no factual and legal basis for the award
of damages.
Ruling of the Court
The petition is denied.
The first three issues being related will be discussed together.
Comglasco maintains that the RTC was wrong to rule that its answer to
Santos' complaint tendered no issue, or admitted the material
allegations therein; that the court should have heard it out on the
reason it invoked to justify its action to pre-terminate the parties' lease;
that therefore a summary judgment would have been the proper
recourse, after a hearing.
In Philippine National Construction Corporation v. CA[12] (PNCC),
which also involves the termination of a lease of property by the lessee
"due to financial, as well as technical, difficulties,"[13] the Court ruled:
9
The obligation to pay rentals or deliver the thing in a contract of lease
falls within the prestation "to give"; hence, it is not covered within the
scope of Article 1266. At any rate, the unforeseen event and causes
mentioned by petitioner are not the legal or physical impossibilities
contemplated in said article. Besides, petitioner failed to state
specifically the circumstances brought about by "the abrupt change in
the political climate in the country" except the alleged prevailing
uncertainties in government policies on infrastructure projects.
The principle of rebus sic stantibus neither fits in with the facts of the
case. Under this theory, the parties stipulate in the light of certain
prevailing conditions, and once these conditions cease to exist, the
contract also ceases to exist. This theory is said to be the basis of
Article 1267 of the Civil Code, which provides:
Art. 1267. When the service has become so difficult as to be manifestly
beyond the contemplation of the parties, the obligor may also be
released therefrom, in whole or in part.
This article, which enunciates the doctrine of unforeseen events, is not,
however, an absolute application of the principle of rebus sic stantibus,
which would endanger the security of contractual relations. The
parties to the contract must be presumed to have assumed the risks of
unfavorable developments. It is therefore only in absolutely
exceptional changes of circumstances that equity demands assistance
for the debtor.
In this case, petitioner wants this Court to believe that the abrupt
change in the political climate of the country after the EDSA Revolution
and its poor financial condition "rendered the performance of the lease
contract impractical and inimical to the corporate survival of the
petitioner."
This Court cannot subscribe to this argument. As pointed out by
private respondents:
xxxx
Anent petitioner's alleged poor financial condition, the same will
neither release petitioner from the binding effect of the contract of
lease. As held in Central Bank v. Court of Appeals, cited by private
respondents, mere pecuniary inability to fulfill an engagement does not
discharge a contractual obligation, nor does it constitute a defense to
an action for specific performance.[14]
Relying on Article 1267 of the Civil Code to justify its decision to
pre-terminate its lease with Santos, Comglasco invokes the 1997 Asian
currency crisis as causing it much difficulty in meeting its
obligations. But in PNCC,[15] the Court held that the payment of lease
rentals does not involve a prestation "to do" envisaged in Articles 1266
and 1267 which has been
rendered legally or physically impossible without the fault of the
obligor-lessor. Article 1267 speaks of a prestation involving service
which has been rendered so difficult by unforeseen subsequent events
as to be manifestly beyond the contemplation of the parties. To be
sure, the Asian currency crisis befell the region from July 1997 and for
sometime thereafter, but Comglasco cannot be permitted to blame its
difficulties on the said regional economic phenomenon because it
entered into the subject lease only on August 16, 2000, more than three
years after it began, and by then Comglasco had known what business
risks it assumed when it opened a new shop in Iloilo City.
This situation is no different from the Court's finding in PNCC wherein
PNCC cited the assassination of Senator Benigno Aquino Jr. (Senator
Aquino) on August 21, 1983 and the ensuing national political and
economic crises as putting it in such a difficult business climate that it
should be deemed released from its lease contract. The Court held that
the political upheavals, turmoils, almost daily mass demonstrations,
unprecedented inflation, and peace and order deterioration which
followed Senator Aquino's death were a matter of judicial notice, yet
despite this business climate, PNCC knowingly entered into a lease
with therein respondents on November 18, 1985, doing so with open
eyes of the deteriorating conditions of the country. The Court rules
now, as in PNCC, that there are no "absolutely exceptional changes of
circumstances that equity demands assistance for the debtor."[16]
As found by the CA, Comglasco's Answer admitted the material
allegations in the complaint, to wit: a) that Santos holds absolute title
to a showroom space; b) that Comglasco leased the said showroom
from Santos; c) that after a little over a year, Comglasco pre-terminated
the lease; d) that, disregarding Santos' rejection of the pre-termination
of their lease, Comglasco vacated the leased premises on January 15,
2002; e) that Comglasco never denied the existence and validity of the
parties' lease contract. Specifically, the CA noted that Paragraph 2 of
the Answer admitted the allegations in Paragraphs 2, 3 and 4 of the
complaint that the lease was for five years, starting on August 16, 2000
and to expire on August 15, 2005, at a monthly rental of P60,000.00
on the first year, P66,000.00 on the second year, and P72,600.00 on
the third up to the fifth year.
The RTC acted correctly in resorting to Section 1 of Rule 34, on
Judgment on the Pleadings, to cut short a needless trial. This Court
agrees with the CA that Comglasco cannot cite Article 1267 of the Civil
Code, and that it must be deemed to have admitted the material
allegations in the complaint. Section 1, Rule 34 reads:
Sec. 1. Judgment on the pleadings. - Where an answer fails to tender
an issue, or otherwise admits the material allegations of the adverse
party's pleading, the court may, on motion of that party, direct
judgment on such pleading. However, in actions for declaration of
nullity or annulment of marriage or for legal separation, the material
facts alleged in the complaint shall always be proved.
A judgment on the pleadings is a judgment on the facts as
pleaded,[17] and is based exclusively upon the allegations appearing in
the pleadings of the parties and the accompanying annexes.[18] It is
settled that the trial court has the discretion to grant a motion for
judgment on the pleadings filed by a party if there is no controverted
matter in the case after the answer is filed.[19] A genuine issue of fact is
that which requires the presentation of evidence, as distinguished from
a sham, fictitious, contrived or false issue.[20] Come to think of it, under
Rule 35, on Summary Judgments, Comglasco had recourse to move for
summary judgment, wherein it could have adduced supporting
evidence to justify its action on the parties' lease, but it did not do
so. Section 2 of Rule 35 provides:
Sec. 2. Summary judgment for defending party. - A party against
whom a claim, counterclaim, or cross-claim is asserted or a declaratory
relief is sought may, at any time, move with supporting affidavits,
depositions or admissions for a summary judgment in his favor as to all
or any part thereof.
Concerning, now, whether Comglasco's alleged rental deposit and
advance rentals of P309,000.00 should be credited to Comglasco's
account, let it suffice to state that it never raised this matter in its
answer to the complaint, nor in its appeal to the CA. Certainly, it
cannot do so now.
Finally, as to whether attorney's fees may be recovered by Santos,
Article 2208(2) of the Civil Code justifies the award thereof, in the
absence of stipulation, where the defendant's act or omission has
compelled the plaintiff to incur expenses to protect his interest. The
pre-termination of the lease by Comglasco was not due to any fault of
Santos, and Comglasco completely ignored all four demands of Santos
to pay the rentals due from January 16, 2002 to August 15, 2003,
thereby compelling Santos to sue to obtain relief. It is true that the
policy of the Court is that no premium should be placed on the right to
litigate,[21] but it is also true that attorney's fees are in the nature of
actual damages, the reason being that litigation costs money.[22] But
the Court agrees with the CA that the lesser amount of P100,000.00 it
awarded to Santos instead of P200,000.00 adjudged by the RTC, is
more reasonable.
WHEREFORE, premises considered, the petition is DENIED for
lack of merit.
SO ORDERED.
10
G.R. No. 178899 November 15, 2010
PHILIPPINE BUSINESS BANK, Petitioner,
vs.
FELIPE CHUA, Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 filed by Philippine
Business Bank (PBB) challenging the decision of the Court of Appeals
(CA) in CA-G.R. SP No. 94883 dated February 8, 2007,2 insofar as it
overturned the Regional Trial Court’s (RTC’s) order dated December
16, 2005 declaring the finality of its Partial Summary Judgment and
granting the issuance of a writ of execution against respondent Felipe
Chua (respondent Chua). PBB also seeks to overturn the resolution of
the CA dated July 18, 2007, which denied its motion for
reconsideration.
FACTUAL ANTECEDENTS
From the records, the following facts are not in dispute.
On March 22, 2002, Tomas Tan (Tan), a stockholder and
director/Treasurer of CST Enterprises, Inc. (CST), filed a derivative suit
for the Declaration of Unenforceability of Promissory Notes and
Mortgage, Nullity of Secretary’s Certificate, Injunction, Damages with
Prayer for the Issuance of Temporary Restraining Order/Writ of
Preliminary Injunction against PBB, Francis Lee, Alfredo Yao, Rodulfo
Besinga, Stephen Taala, Rose Robles, Henry Ramos, Yu Heng,
Mabuhay Sugar Central, Inc., Nancy Chan, Henry Chan, John Dennis
Chua, Jaime Soriano, Voltaire Uychutin, Peter Salud, Edgar Lo,
respondent Felipe Chua, and John Does before the Makati City
Regional Trial Court.3
In Tan’s amended complaint dated January 9, 2003, he alleged that
sometime in February 2001, before he went abroad for medical
treatment, he turned over to respondent Chua, a director and the
President of CST, the original copies of Transfer Certificate of Title
Nos. 124275 and 157581, titles to lands owned by, and registered in
the name of, CST. In January 2002, the respondent informed him that
CST’s properties had been fraudulently used as collateral for loans
allegedly taken out in CST’s name, but without proper authority from
CST stockholders and/or the Board of Directors. 4
From his investigation, Tan discovered that a certain Atty. Jaime
Soriano had issued a Secretary’s certificate, which stated that John
Dennis Chua was authorized during a duly constituted CST board
meeting to open a bank account and obtain credit facilities under the
name of CST with PBB. This Secretary’s Certificate also authorized
John Dennis Chua to use CST’s properties as security for these
loans.5 Using this Secretary’s Certificate, John Dennis Chua took out
loans with PBB in the total amount of Ninety-One Million One Hundred
Thousand Pesos (₱91,100,000.00),6 and used CST properties as
collateral.7 Respondent Chua signed as co-maker with John Dennis
Chua, who signed both as the representative of CST, as well as in his
personal capacity, on six promissory notes to PBB to evidence parts of
this loan.8
When PBB threatened to foreclose the mortgage on these properties
after CST defaulted,9 Tan filed the present complaint, essentially
arguing that the loans/promissory notes and mortgage made out in
CST’s name are unenforceable against it, since they were entered into
by persons who were unauthorized to bind the company.10
In its Amended Answer,11 PBB claimed that the loans to CST, as well
as the corresponding mortgage over CST properties, were all valid and
binding since the loan applications and documents accomplished by
John Dennis Chua were supported by the duly accomplished
secretary’s certificate, which authorized him to obtain credit facilities in
behalf of CST. In addition, the original copies of the titles to the
properties were offered to PBB as collaterals.
PBB’s Amended Answer also included a cross-claim against
respondent Chua, demanding payment of the promissory notes he
signed as co-maker with John Dennis Chua.12
In respondent Chua’s Answer to the Cross-Claim of PBB,13 he claimed
that he never applied for a loan with the PBB. He further denied
authorizing John Dennis Chua to apply for any loans in CST’s name, or
to use CST properties as security for any loans.14 Nevertheless, he
admitted that he signed, as co-maker, six promissory notes covering
the loans obtained by John Dennis Chua with PBB. According to
respondent Chua, he executed these promissory notes after the loans
had already been consummated, "in a sincere effort to persuade John
Dennis Chua to pay off the unauthorized loan and retrieve from cross-
claimant PBB the CST titles."15
PBB subsequently filed a Motion for Partial Summary Judgment based
on Section 1, Rule 35 of the 1997 Rules of Civil Procedure (Rules),
claiming that since respondent Chua already admitted the execution of
the promissory notes in favor of PBB amounting to Seventy Five Million
Pesos (₱75,000,000.00),16 insofar as its cross-claim against him was
concerned, there was no genuine issue on any material fact on the
issue of his liability to PBB. PBB argued that although respondent
Chua claimed that he signed the promissory notes merely to persuade
John Dennis Chua to pay off his loan to PBB, he was still liable as an
accommodation party under Section 29 of the Negotiable Instruments
Law.17
THE RTC’S PARTIAL SUMMARY JUDGMENT
Acting on PBB’s motion, the RTC issued a partial summary judgment
on PBB’s cross-claim on July 27, 2005, finding respondent Chua liable
as a signatory to the promissory notes amounting to Seventy-Five
Million Pesos (₱75,000,000.00). The RTC reasoned that by signing as
a co-maker, he obligated himself to pay the amount indicated in the
promissory notes, even if he received no consideration in return. Thus,
the RTC ordered him to pay PBB the amount of ₱75,000,000.00, plus
interests and costs.18
In its order dated December 16, 2005, the RTC resolved respondent
Chua’s Notice of Appeal, as well as PBB’s Motion to Disallow Appeal
and to Issue Execution. Citing Section 1, Rule 41 of the Rules, the
RTC ruled that respondent Chua could not file a notice of appeal.
Instead, he should have filed a special civil action for certiorariunder
Rule 65 of the Rules. However, since the period for filing
a certiorari petition had already lapsed without respondent filing any
petition, the partial summary judgment had become final and
executory. Thus, it ordered the issuance of a writ of execution for the
satisfaction of the partial summary judgment in favor of PBB.19
On December 21, 2005, the RTC issued an order appointing Renato
Flora as the special sheriff to implement the writ of execution. In line
with this order, Renato Flora, on December 23, 2005, issued a Notice
of Levy and Sale on Execution of Personal Properties, addressed to
respondent Chua. He proceeded with the execution sale, and on
December 28, 2005, he issued a certificate of sale over respondent
Chua’s 900 shares of stock in CST in favor of PBB. He also posted a
notice of sheriff’s sale on January 10, 2006 over respondent Chua’s
five parcels of land located in Las Pinas, Pasay City, and Muntinlupa.20
THE COURT OF APPEALS DECISION
Respondent Chua filed a petition for certiorari and mandamus with the
CA to challenge: (a) the December 16, 2005 order, granting PBB’s
motion to disallow his appeal; (b) the December 21, 2005 order,
granting PBB’s motion to appoint Renato Flora as special sheriff to
11
implement the writ of execution; and (c) the February 16, 2006 order
denying his motion for reconsideration and to suspend execution. In
essence, respondent Chua alleged that the RTC acted with grave
abuse of discretion in disallowing his appeal of the partial summary
judgment, and in issuing a writ of execution. Significantly, respondent
Chua did not question the propriety of the partial summary judgment.
On February 8, 2007, the CA issued the assailed decision, partly
affirming the RTC order dated December 16, 2005 on the matter of the
disallowance of respondent Chua’s appeal. The CA held that
respondent Chua could not appeal the partial summary judgment while
the main case remained pending, in keeping with Section 1(g), Rule 41
of the Rules.
However, the CA held that the RTC committed grave abuse of
discretion when it issued the writ of execution against respondent
Chua. As found by the CA, the RTC grievously erred when it held that
the partial judgment had become final and executory when respondent
Chua failed to avail of the proper remedy of certiorari within the 60 day
reglementary period under Rule 65. Since a partial summary judgment
does not finally dispose of the action, it is merely an interlocutory, not a
final, order. Thus, it could not attain finality.
The CA further noted that certiorari is an independent action and not
part of the appeal proceedings, and failure to file a certiorari petition
would not result in the finality of the judgment or final order. The RTC,
thus, committed grave abuse of discretion amounting to lack of
jurisdiction when it granted the issuance of a writ of execution, and the
corresponding writ of execution issued by the court a quo, as well as
the subsequent implementing proceedings, were void.
THE PETITION
PBB submits two issues for our resolution:
I.
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED AN ERROR IN APPLYING
JURISPRUDENCE NOT ON ALL FOURS [WITH] THE
FACTUAL BACKDROP OF THE CASE.
II.
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED AN ERROR IN RECALLING AND
SETTING ASIDE THE WRIT OF EXECUTION AND ALL
THE PROCEEDINGS TAKEN FOR ITS IMPLEMENTATION
ON THE WRONG NOTION THAT THE PARTIAL
SUMMARY JUDGMENT HAS NOT BECOME FINAL AND
EXECUTORY.
THE RULING
We DENY the petition for being unmeritorious.
Nature of Partial Summary Judgment
PBB’s motion for partial summary judgment against respondent Chua
was based on Section 1, Rule 35 of the Rules, which provides:
Section 1. Summary Judgment for claimant. - A party seeking to
recover upon a claim, counterclaim, or cross-claim or to obtain a
declaratory relief may, at any time after the pleading in answer thereto
has been served, move with supporting affidavits, depositions or
admissions for a summary judgment in his favor upon all or any part
thereof.
A summary judgment, or accelerated judgment, is a procedural
technique to promptly dispose of cases where the facts appear
undisputed and certain from the pleadings, depositions, admissions
and affidavits on record, or for weeding out sham claims or defenses at
an early stage of the litigation to avoid the expense and loss of time
involved in a trial.21 When the pleadings on file show that there are no
genuine issues of fact to be tried, the Rules allow a party to obtain
immediate relief by way of summary judgment, that is, when the facts
are not in dispute, the court is allowed to decide the case summarily by
applying the law to the material facts.22
The rendition by the court of a summary judgment does not always
result in the full adjudication of all the issues raised in a case. For
these instances, Section 4, Rule 35 of the Rules provides:
Section 4. Case not fully adjudicated on motion. – If on motion under
this Rule, judgment is not rendered upon the whole case or for all the
reliefs sought and a trial is necessary, the court at the hearing of the
motion, by examining the pleadings and the evidence before it and by
interrogating counsel shall ascertain what material facts exist without
substantial controversy and what are actually and in good faith
controverted. It shall thereupon make an order specifying the facts that
appear without substantial controversy, including the extent to which
the amount of damages or other relief is not in controversy, and
directing such further proceedings in the action as are just. The facts
so specified shall be deemed established, and the trial shall be
conducted on the controverted facts accordingly.
This is what is referred to as a partial summary judgment. A careful
reading of this section reveals that a partial summary judgment was
never intended to be considered a "final judgment," as it does not "[put]
an end to an action at law by declaring that the plaintiff either has or
has not entitled himself to recover the remedy he sues for."23 The
Rules provide for a partial summary judgment as a means to simplify
the trial process by allowing the court to focus the trial only on the
assailed facts, considering as established those facts which are not in
dispute.
After this sifting process, the court is instructed to issue an order, the
partial summary judgment, which specifies the disputed facts that have
to be settled in the course of trial. In this way, the partial summary
judgment is more akin to a record of pre-trial,24 an interlocutory order,
rather than a final judgment.
The differences between a "final judgment" and an "interlocutory order"
are well-established. We said in Denso (Phils.) Inc. v. Intermediate
Appellate Court25 that:
[A] final judgment or order is one that finally disposes of a case, leaving
nothing more to be done by the Court in respect thereto, e.g., an
adjudication on the merits which, on the basis of the evidence
presented at the trial, declares categorically what the rights and
obligations of the parties are and which party is in the right; or a
judgment or order that dismisses an action on the ground, for instance,
of res judicata or prescription. Once rendered, the task of the Court is
ended, as far as deciding the controversy or determining the rights and
liabilities of the litigants is concerned. Nothing more remains to be
done by the Court except to await the parties' next move . . . and
ultimately, of course, to cause the execution of the judgment once it
becomes "final" or, to use the established and more distinctive term,
"final and executory."
xxxx
Conversely, an order that does not finally dispose of the case, and
does not end the Court's task of adjudicating the parties' contentions
and determining their rights and liabilities as regards each other, but
obviously indicates that other things remain to be done by the Court, is
"interlocutory", e.g., an order denying a motion to dismiss under Rule
16 of the Rules x x x Unlike a 'final judgment or order, which is
appealable, as above pointed out, an 'interlocutory order may not be
12
questioned on appeal except only as part of an appeal that may
eventually be taken from the final judgment rendered in the case. 26
Bearing in mind these differences, there can be no doubt that the
partial summary judgment envisioned by the Rules is an interlocutory
order that was never meant to be treated separately from the main
case. As we explained in Guevarra v. Court of Appeals:27
It will be noted that the judgment in question is a "partial summary
judgment." It was rendered only with respect to the private
respondents’ first and second causes of action alleged in their
complaint. It was not intended to cover the other prayers in the said
complaint, nor the supplementary counterclaim filed by the petitioners
against the private respondents, nor the third-party complaint filed by
the petitioners against the Security Bank and Trust Company. A partial
summary judgment "is not a final or appealable judgment." (Moran,
Vol. 2, 1970 Edition, p. 189, citing several cases.) "It is merely a pre-
trial adjudication that said issues in the case shall be deemed
established for the trial of the case." (Francisco, Rules of Court, Vol. II,
p. 429.)
xxxx
The partial summary judgment rendered by the trial court being merely
interlocutory and not ‘a final judgment’, it is puerile to discuss whether
the same became final and executory due to the alleged failure to
appeal said judgment within the supposed period of appeal. What the
rules contemplate is that the appeal from the partial summary judgment
shall be taken together with the judgment that may be rendered in the
entire case after a trial is conducted on the material facts on which a
substantial controversy exists. This is on the assumption that the
partial summary judgment was validly rendered, which, as shown
above, is not true in the case at bar.28
We reiterated this ruling in the cases of Province of Pangasinan v.
Court of Appeals29 and Government Service Insurance System v.
Philippine Village Hotel, Inc.30
Applicability of Guevarra
PBB asserts that our pronouncement in the cases of Guevarra,
Province of Pangasinan, and Government Service Insurance System
cannot be applied to the present case because these cases involve
factual circumstances that are completely different from the facts
before us. While the partial summary judgments in the cited cases
decided only some of the causes of action presented, leaving other
issues unresolved, PBB insists that as far as its cross-claim against
respondent Chua is concerned, the court a quo’s partial summary
judgment is a full and complete adjudication because the award is for
the whole claim.31 According to PBB, whatever the court decides as
regards the main case, this will not affect the liability of respondent
Chua as a solidary debtor in the promissory notes, since the creditor
can proceed against any of the solidary debtors. In other words, no
substantial controversy exists between PBB and respondent Chua, and
there is nothing more to be done on this particular issue.
We do not agree with PBB’s submission.
In the Guevarra case, the Court held that the summary judgment
rendered by the lower court was in truth a partial summary judgment
because it failed to resolve the other causes of action in the complaint,
as well as the counterclaim and the third party complaint raised by the
defendants.
Contrary to PBB’s assertions, the same could be said for the case
presently before us. The partial summary judgment in question
resolved only the cross-claim made by PBB against its co-defendant,
respondent Chua, based on the latter’s admission that he signed
promissory notes as a co-maker in favor of PBB. This is obvious from
the dispositive portion of the partial summary judgment, quoted below
for convenient reference:
WHEREFORE, a partial summary judgment is hereby rendered on the
cross-claim of cross-defendant Philippine Business Bank against
cross-defendant Felipe Chua, ordering the latter to pay the former as
follows:
1. The amount of Ten Million (₱10,000,000.00) Pesos,
representing the value of the Promissory Note dated April
17, 2001, plus interest thereof at the rate of 16% from April
12, 2002, until fully paid;
2. The amount of Twelve Million (₱12,000,000.00) Pesos,
representing the value of the Promissory Note dated April 5,
2001, plus interest thereon at the rate of 17% from April 1,
2002, until fully paid;
3. The amount of Twenty Three Million (₱23,000,000.00)
Pesos, representing the value of the Promissory Note dated
April 25, 2001, plus interest thereon at the rate of 16% from
April 19, 2002, until fully paid;
4. The amount of Eight Million (₱8,000,000.00) Pesos,
representing the value of the Promissory Note dated June
20, 2001, plus interest thereon at the rate of 17% from June
20, 2001, until fully paid;
5. The amount of Seven Million (₱7,000,000.00) Pesos,
representing the value of the Promissory Note dated June
22, 2001, plus interest thereon at the rate of 17% from June
17, 2002, until fully paid;
6. The amount of Fifteen Million (₱15,000,000.00) Pesos,
representing the value of the Promissory Note dated June
28, 2001, plus interest thereon at the rate of 17% from June
24, 2002, until fully paid;
7. Plus cost of suit.
SO ORDERED. 32
Clearly, this partial summary judgment did not dispose of the case as
the main issues raised in plaintiff Tomas Tan’s complaint, i.e., the
validity of the secretary’s certificate which authorized John Dennis
Chua to take out loans, and execute promissory notes and mortgages
for and on behalf of CST, as well as the validity of the resultant
promissory notes and mortgage executed for and on behalf of CST,
remained unresolved.
Chua shares common interest with co-defendant- debtors
Still, PBB insists that the partial summary judgment is a final judgment
as regards PBB’s cross-claim against respondent Chua since
respondent Chua’s liability will not be affected by the resolution of the
issues of the main case.
On its face, the promissory notes were executed by John Dennis Chua
in two capacities – as the alleged representative of CST, and in his
personal capacity. Thus, while there can be no question as to
respondent Chua’s liability to PBB (since he already admitted to
executing these promissory notes as a co-maker), still, the court a
quo’s findings on: (a) whether John Dennis Chua was properly
authorized to sign these promissory notes on behalf of CST, and (b)
whether John Dennis Chua actually signed these promissory notes in
his personal capacity, would certainly have the effect of determining
whether respondent Chua has the right to go after CST and/or John
Dennis Chua for reimbursement on any payment he makes on these
13
promissory notes, pursuant to Article 1217 of the Civil Code, which
states:
Article 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.
In other words, PBB has a common cause of action against respondent
Chua with his alleged co-debtors, John Dennis Chua and CST, it would
simply not be proper to treat respondent Chua separately from his co-
debtors.
Moreover, we cannot turn a blind eye to the clear intention of the trial
court in rendering a partial summary judgment. Had the trial court truly
intended to treat PBB’s cross-claim against respondent Chua
separately, it could easily have ordered a separate trial via Section 2,
Rule 31 of the Rules, which states:
Section 2. Separate trials. – The court, in furtherance of convenience
or to avoid prejudice, may order a separate trial of any claim, cross-
claim, counterclaim, or third-party complaint, or of any separate issue
or of any number of claims, cross-claims, counterclaims, third-party
complaints or issues.
That the trial court did not do so belies PBB’s contention.
It has also not escaped our attention that PBB, in its Motion to Disallow
Appeal and to Issue Execution Against Cross-Defendant Felipe
Chua,33 already admitted that the partial summary judgment is not a
judgment or final order that completely disposes of the case. In its own
words:
xxxx
3. However, the remedy availed of by [respondent Chua] is
patently erroneous because under Rule 41 Section 1 of the
Rules of Court, an appeal may be taken only from a
judgment or final order that completely disposes the case;
4. The judgment rendered by [the RTC] dated July 27, 2005
is only a partial summary judgment against [respondent
Chua], on the crossclaim of cross-claimant Philippine
Business Bank. The main case which involves the claim of
plaintiffs against the principal defendants is still pending and
has not yet been adjudged by [the RTC].34
Thus, PBB cannot now be allowed to deny the interlocutory nature of
the partial summary judgment.
Certiorari not the proper remedy
PBB also maintains that the partial summary judgment attained finality
when respondent Chua failed to file a certiorari petition, citing the last
paragraph of Section 1, Rule 41 of the Rules as basis. We quote:
Section 1. Subject of appeal. – An appeal maybe 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:
xxxx
(g) A judgment or final order for or against one or more of several
parties or in separate claims, counterclaims, cross-claims and third
party complaints, while the main case is pending, unless the court
allows an appeal therefrom;
xxxx
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.
Contrary to PBB’s contention, however, certiorari was not the proper
recourse for respondent Chua. The propriety of the summary judgment
may be corrected only on appeal or other direct review, not a petition
for certiorari,35 since it imputes error on the lower court’s judgment. It is
well-settled that certiorari is not available to correct errors of procedure
or mistakes in the judge’s findings and conclusions of law and
fact.36 As we explained in Apostol v. Court of Appeals:37
As a legal recourse, the special civil action of certiorari is a limited form
of review. The jurisdiction of this Court is narrow in scope; it is
restricted to resolving errors of jurisdiction, not errors of judgment.
Indeed, as long as the courts below act within their jurisdiction, alleged
errors committed in the exercise of their discretion will amount to mere
errors of judgment correctable by an appeal or a petition for review.38
In light of these findings, we affirm the CA’s ruling that the partial
summary judgment is an interlocutory order which could not become a
final and executory judgment, notwithstanding respondent Chua’s
failure to file a certiorari petition to challenge the judgment.
Accordingly, the RTC grievously erred when it issued the writ of
execution against respondent Chua.
In view of this conclusion, we find it unnecessary to resolve the issue
raised by respondent Chua on the validity of the RTC’s appointment of
a special sheriff for the implementation of the execution writ.
Propriety of Summary Judgment Reserved for Appeal
As a final point, we note that respondent Chua has raised with this
Court the issue of the propriety of the partial summary judgment issued
by the RTC. Notably, respondent Chua never raised this issue in his
petition for certiorari before the CA. It is well settled that no question
will be entertained on appeal unless it has been raised in the
proceedings below.39 Basic considerations of due process impel the
adoption of this rule.40
Furthermore, this issue would be better resolved in the proper appeal,
to be taken by the parties once the court a quo has completely
resolved all the issues involved in the present case in a final
judgment.1avvphi1 If we were to resolve this issue now, we would be
preempting the CA, which has primary jurisdiction over this issue.
Lastly, taking jurisdiction over this issue now would only result in
multiple appeals from a single case which concerns the same, or
integrated, causes of action. As we said in Santos v. People:41
Another recognized reason of the law in permitting appeal only from a
final order or judgment, and not from an interlocutory or incidental one,
is to avoid multiplicity of appeals in a single action, which must
necessarily suspend the hearing and decision on the merits of the case
14
during the pendency of the appeal. If such appeal were allowed, the
trial on the merits of the case would necessarily be delayed for a
considerable length of time, and compel the adverse party to incur
unnecessary expenses, for one of the parties may interpose as many
appeals as incidental questions may be raised by him, and
interlocutory orders rendered or issued by the lower court.

WHEREFORE, premises considered, we DENY the petition for lack of

merit and AFFIRM the Decision of the Court of Appeals in CA-G.R. SP
No. 94883 dated February 8, 2007, as well as its Resolution dated July
18, 2007. Costs against the petitioner, Philippine Business Bank.

SO ORDERED.

15
 G.R. No. 212493, June 01, 2016
GABRIEL YAP, SR. DULY REPRESENTED BY GILBERT
YAP AND ALSO IN HIS PERSONAL CAPACITY, GABRIEL
YAP, JR., AND HYMAN YAP, Petitioners, v. LETECIA SIAO,
LYNEL SIAO, JANELYN SIAO, ELEANOR FAYE SIAO,
SHELETT SIAO AND HONEYLET SIAO, Respondents.
G.R. No. 212504
CEBU SOUTH MEMORIAL GARDEN,
INC., Petitioner, v. LETECIA SIAO, LYNEL SIAO, JANELYN
SIAO, ELEANOR FAYE SIAO, SHELETT SIAO AND
HONEYLET SIAO, Respondents.
DECISION
PEREZ, J.:
Before this court are two consolidated cases involving two petitions for
Review on Certiorari. These petitions assail the Decision[1] dated 9
October 2013 and Resolution[2] dated 26 March 2014 of the Court of
Appeals in CA-G.R. CV No. 02037.
Petitioners in G.R. No. 212493 are deceased Gabriel Yap, Sr.,
represented by his son and the President of Cebu South Memorial
Garden, Inc., Gilbert Yap; Gabriel Yap, Jr., in his capacity as Treasurer;
and Hyman Yap, as one of the directors, while petitioner in G.R. No.
212504 is Cebu South Memorial Garden, Inc. Respondents in both
cases are Letecia Siao and her children, Lynel, Janelyn, Eleonor,
Shellett and Honeylet.
These consolidated cases arose from a Complaint for Specific
Performance filed by petitioners Cebu South Memorial Gardens, Inc.
and Gabriel Yap, Sr., both represented by Gilbert Yap against
respondents Honeylet Siao and Letecia Siao on 27 April 1999. Gilbert
Yap, in his own behalf, Gabriel Yap, Jr. and Hyman Yap joined the
plaintiffs in their Supplemental Complaint. In their Second Amended
Complaint, the petitioners alleged that Gabriel Yap, Sr. and Letecia
Siao entered into a Certificate of Agreement where the parties agreed
on the following terms:
1. To convert the parcels of land covered by TCT Nos. 66716,
66714 and 66713, registered in the names of Spouses Sergio
and Letecia Siao, into memorial lots;
2. To organize themselves into a corporation;
3. To transfer ownership of the parcels of land to Gabriel Yap
who will transfer ownership thereof to the corporation;
4. To give advance payment to Letecia Siao in the amount of
P100,000.00 per month until Letecia Siao is financially
stable to support herself and her family.[3]
As a backgrounder, respondent Letecia Siao's husband Sergio Siao was
indebted to petitioner Gabriel Yap, Sr. Petitioners claim that the titles
to the subject parcels of land were in the possession of Gabriel Yap, Sr.
as collateral for the loan. In consideration of condoning the loan,
Gabriel Yap, Sr. returned the titles to Letecia Siao on the condition that
the parcels of land covered by the titles would be developed into
memorial lots.[4]
Petitioners claimed that respondents refused to transfer the ownership
of the three parcels of land to Cebu South Memorial Garden, Inc.,
causing them to be exposed to numerous lawsuits from the buyers of
the burial plots.
Respondents argued that Letecia Siao was coerced to sign the
Certificate of Agreement, rendering it null and void.
A panel of commissioners was appointment to determine the financial
standing of petitioner corporation and the actual money received by
Letecia Siao.
On 31 January 2000 and during the pendency of the case before the
commissioners, respondents filed a Motion for Payment of Monthly
Support[5] for Leticia Siao's family and herself. Respondents relied on
the agreement made by the parties during the preliminary conference
to abide by the terms of the Certificate of Agreement. In a
Resolution[6] dated 5 April 2000, the RTC granted the motion for
monthly support and ordered Gabriel Yap, Sr. to pay immediately
Letecia Siao the amount of P1,300,000.00. Resultantly, petitioners
filed a Motion for Summary Judgment[7] on 24 May 2002 alleging that
respondents had abandoned their defense of the nullity of the
Certificate of Agreement when they agreed to implement its provisions.
Petitioners submitted that the trial court may render a summary
judgment or judgment on the pleadings based on the admitted facts.
On 1 August 2002, Judge Generosa G. Labra of Branch 23 of the
Regional Trial Court (RTC) of Cebu City issued an Order denying the
motion and holding that there were no existing admissions or admitted
facts by respondents to be considered. Petitioners filed a Motion for
Reconsideration but it was denied on 11 September 2002. Petitioners
elevated the matter to the Court of Appeals.
On 10 October 2003, the Court of Appeals in CA-G.R. SP No.
73850,[8] through Associate Justice Eugenio S. Labitoria, reversed the
trial court's decision and ordered its judge to render summary
judgment in favor of petitioners. The appellate court ruled that by
claiming benefits arising from the Certificate of Agreement,
respondents had invoked the validity and effectiveness of the
Agreement.
Respondents sought for reconsideration but it was denied by the
appellate court. Respondents did not file an appeal before the Supreme
Court within the reglementary period. Thus, the Decision became final
and executory on 7 June 2004 and the same had been recorded in the
Book of Entries of Judgment.[9]
In compliance with the Order that had become final, on 7 February
2006, RTC Branch 13 of Cebu City Judge Meinrado P. Paredes
rendered a Summary Judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered directing defendants to
transfer to the plaintiff-movant the three (3) parcels of land covered by
TCT Nos. 66714, 66713 and 66716 after this judgment shall have
become final and executory.
Should defendants fail to do so, the Branch Clerk of Court is directed to
prepare a deed of conveyance or transfer of the said titles to the
plaintiff CSMG, Inc. at the expense of defendants.[10]
The motion for reconsideration filed by respondents was denied. Once
again, respondents filed an appeal under Rule 41 of the Rules of Court
seeking to reverse and set aside the Summary Judgment rendered by
the RTC.
On 9 October 2013, the Court of Appeals set aside the Summary
Judgment on a technicality. The appellate court found that the
certification against forum-shopping appended to the complaint is
defective because there was no board resolution and special power of
attorney vesting upon Gilbert Yap the authority to sign the certification
on behalf of petitioner corporation and individual petitioners. The
appellate court added that the procedural defects affected the
jurisdiction of the court in that the court never acquired jurisdiction
over the case because the complaints are considered not filed and are
ineffectual. Petitioners filed their separate motions for reconsideration
but they were denied by the appellate court.
The following errors are grounds for the allowance of these petitions:
16
 1. The Honorable Court of Appeals made an error in applying
the law when the same resolved to reverse the decision the
[c]ourt a quo on the ground that even if Gilbert Yap is the
president of petitioner corporation the same had no
authority to institute the complaint unless he can produce a
board resolution showing his authority.
2. The Honorable Court of Appeals also erred when it
entertained the issue on lack of Certificate of Non-forum
shopping when the raising of said grounds is already barred
by the Rules on Pleading and Omnibus Motion Rule.[11]
3. The Court of Appeals gravely erred and acted contrary to law
in reversing the summary judgment and dismissing the
complaints filed by petitioner on ground that the RTC Cebu
had no jurisdiction over the complaint and plaintiff because
the verification and certification of non-forum shopping
signed by the president of the corporation was not
accompanied by a board resolution considering that:
Gilbert Yap, as President of petitioner, can sign the verification and
certification even without a board resolution. Hence, his
3.1
verification and certification is valid. Consequently, the complaint
and second amended complaint are likewise valid.
The Court of Appeals gravely erred and acted contrary to law in
ruling that the subsequent submission of petitioner's board
3.2
resolution cannot be deemed as substantial compliance to the rule
on verification and certificate of non-forum shopping.
The execution of a verification and certification of non-forum
[shopping] is a formal, not a [jurisdictional] issue. It may be waived
3.3 if not raised on time. In the instant case, respondents waived the
alleged [defect] when they failed to raise it in a motion to dismiss or
answer.
The assailed decision resolved an issue beyond its jurisdiction.
3.4
Thus, it is void under the principle of coram non judice.
The validity of the complaints have been settled with finality. In its shopping even without a board resolution, to wit:
decision dated 10 October 2013, the Court of Appeals thru the
another division (nineteenth division) directed RTC Cebu to render x x x x
summary judgment there being no genuine issues to be tried. The
3.5
Court of Appeals (Fifth Division) in the present case violated the
doctrine of immutability of judgment when it dismissed the
complaints, thereby effectively directing the trial court not to
render any summary judgment.
4. The Court of Appeals gravely erred in reversing the summary
judgment despite the fact the same is consistent with the
Certificate of Agreement.[12]
Petitioner Yaps, in G.R. No. 212493 maintain that the signature of the
President of the corporation is sufficient to vest authority on him to
represent the corporation sans a board resolution. Petitioners stress
that the Special Power of Attorney categorically granted Gilbert Yap the
full authority to appear and represent Gabriel Yap, Sr. With respect to
the failure of Gabriel Yap, Jr. and Hyman Yap to sign the certificate of
non-forum shopping, petitioners assert that while the two men share a
common interest with petitioner corporation and Gabriel Yap, Sr.,
these are not indispensable parties, thus their signatures are not
necessary. Petitioners also submit that the issue of a defective
certification of non-forum shopping was belatedly raised, thus should
not have been considered.[13]
Petitioner in G.R. No. 212504 adds that the appellate court should have
considered the subsequent submission of the board resolution as
substantial compliance with the Rules. Petitioner also argues that the
appellate court violated the doctrine of immutability of judgment when
it dismissed the complaints thereby effectively directing the trial court
not to render any summary judgment.[14]
Respondents filed one Comment on both petitions. They argue that
petitioners, except for Gabriel Yap, Sr. are not parties to the Certificate
of Agreement, thus the petitions should be dismissed because as
against them no rights were violated. Respondents insist that the
Certificate of Agreement is void because it involved unliquidated
community properties. Respondents further claim that petitioners,
other than Cebu South Memorial Garden, did not appeal the Summary
Judgment before the Court of Appeals, hence, they are all bound by the
denial of their Motion for Summary Judgment by the RTC. With
respect to the alleged defect in the Certification of Non-forum
shopping, respondents echoed the ruling of the Court of Appeals.[15]
We will first discuss the procedural aspect of this case where the Court
of Appeals wholly based its decision. The appellate court ruled that the
certification against forum-shopping is defective because it was signed
by Gilbert Yap without a valid board resolution. In the leading case
of Cagayan Valley Drug Corporation v. Commission on Internal
Revenue,[16] the Court, in summarizing numerous jurisprudence,
rendered a definitive rule that the following officials or employees of
the company can sign the verification and certification without need of
a board resolution: (1) the Chairperson of the Board of Directors, (2)
the President of a corporation, (3) the General Manager or Acting
General Manager, (4) Personnel Officer, and (5) an Employment
Specialist in a labor case. The rationale behind the rule is that these
officers are "in a position to verify the truthfulness and correctness of
the allegations in the petition."[17]
In Cebu Metro Pharmacy, Inc v. Euro-Med Laboratories, Pharmacy,
Inc.,[18] the President and Manager of Cebu Metro was held by the
Court as having the authority to sign the verification and certification
of non-forum shopping even without the submission of a written
authority from the board. The Court went on to say:
As the corporation's President and Manager, she is in a position to
verify the truthfulness and correctness of the allegations in the petition.
In addition, such an act is presumed to be included in the scope of her
authority to act within the domain of the general objectives of the
corporation's business and her usual duties in the absence of any
contrary provision in the corporation's charter or by-laws.[19]
Cebu Metro also cited cases wherein the Court allowed officers of a
corporation to sign the verification and certification of non-forum
In Ateneo de Naga University v. Manalo, we held that the lone
signature of the University President was sufficient to fulfill the
verification requirement, because such officer had sufficient knowledge
to swear to the truth of the allegations in the petition.
In People's Aircargo and Warehousing Co., Inc. v. CA, we held that in
the absence of a charter or by-law provision to the contrary, the
president of a corporation is presumed to have the authority to act
within the domain of the general objectives of its business and within
the scope of his or her usual duties. Moreover, even if a certain contract
or undertaking is outside the usual powers of the president, the
corporation's ratilication of the contract or undertaking and the
acceptance of benefits therefrom make the corporate president's
actions binding on the corporation.[20]
Bolstering our conclusion that the certification of non-forum shopping
is valid is the subsequent appending of the board resolution to
petitioners' motion for reconsideration. The Board Resolution reads:
BOARD RESOLUTION NO. 01
Series of 2013
WHEREAS, the corporation is presently facing a Civil Case entitled
Cebu South Memorial Garden, Inc. versus Letecia Siao, Lynel Siao,
Janelyn Siao, Eleanor Faye Siao, Shelett Siao and Honeylet Siao, and
docketed as Civil Case No. CEB-23707 before the Regional Trial Court
of Ccbu City, Branch 13, and is mostly like to [raise] to the Court of
Appeals and the Supreme Court by our corporation or by the opposing
party depending on the outcome of the said case.
WHEREAS, the corporation needs to appoint its authorized
representative who will be vested with the authority to sign the
Verification and Certificate of Forum Shopping for any and all
pleadings to be filed before the Court of Appeals and the Supreme
Court as the need of the case requires.
17

WHEREAS, the corporation also needs to ratify the action taken by the
president of the corporation in the person of Gilbert Yap who signed
the Verification and the Certificate of Non-Forum Shopping in the
Complaint filed by this corporation before the Regional Trial Court of
Cebu City last April 27, 1999 and docketed as [Civil Case No. CEB-
23707].
WHEREFORE, it is hereby resolved that:
1. The action of the president Gilbert Yap in signing the Verification
and Certificate of Non-forum Shopping in [Civil Case No. CEB-23707]
filed before the Regional Trial Court of Cebu City on April 27, 1999 is
hereby ratified/affirmed by this Board with all legal effects and
consequences.
2. The corporate president Gilbert Yap is given full authority to sign
the Verification and Certificate on Non-forum Shopping for all
pleadings to be filed with the Court of Appeals and after with the
Supreme Court of the Philippines.[21]
The Board of Directors of Cebu South Memorial Garden, through a
Board Resolution, not only authorized the President of the corporation
to sign the Certificate of Forum-Shopping but it ratified the action
taken by Gilbert Yap in signing the forum-shopping certificate.
In Swedish Match Philippines, Inc. v. The Treasurer of the City of
Manila,[22] we held that the belated submission of a Secretary's
certification constitutes substantial compliance with the rules, thus:
Clearly, this is not an ordinary case of belated submission of proof of
authority from the board of directors. Petitioner-corporation ratified
the authority of Ms. Beleno to represent it in the Petition filed before
the RTC, particularly in Civil Case No. 03-108163, and consequently to
sign the verification and certification of non-forum shopping on behalf
of the corporation. This fact confirms and affirms her authority and
gives this Court all the more reason to uphold that authority.[23]
In Cosco Philippine Shipping, Inc. v. Kemper Insurance,[24] we cited
instances wherein the lack of authority of the person making the
certification of non-forum shopping was remedied through subsequent
compliance by the parties therein:
In China Banking Corporation v. Mondragon International
Philippines, Inc., the CA dismissed the petition filed by China Bank,
since the latter failed to show that its bank manager who signed the
certification against non-forum shopping was authorized to do so. We
reversed the CA and said that the case be decided on the merits despite
the failure to attach the required proof of authority, since the board
resolution which was subsequently attached recognized the pre-
existing status of the bank manager as an authorized signatory.
In Abaya Investments Corporation v. Merit Philippines, where the
complaint before the Metropolitan Trial Court of Manila was instituted
by petitioner's Chairman and President, Ofelia Abaya, who signed the
verification and certification against non-forum shopping without
proof of authority to sign for the corporation, we also relaxed the rule.
We did so taking into consideration the merits of the case and to avoid
a re-litigation of the issues and further delay the administration of
justice, since the case had already been decided by the lower courts on
the merits. Moreover, Abaya's authority to sign the certification was
ratified by the Board.[25]
In Lim v. Court of Appeals, Mindanao Station[26] it was ruled that the
Assistant Vice-President for BPI Northern Mindanao, who was then the
highest official representing the bank in the Northern Mindanao area,
is in a position to verify the truthfulness and correctness of the
allegations in the subject complaint, signifying his authority in filing
the complaint and to sign the verification and certification against
forum shopping.
In Fuji Television Network v. Espiritu,[27]
we highlighted two rules
relative to certification against forum-shopping:
xxxx
4) As to certification against forum shopping, non-compliance
therewith or a defect therein, unlike in verification, is generally not
curable by its subsequent submission or correction thereof, unless
there is a need to relax the Rule on the ground of "substantial
compliance" or presence of "special circumstances or compelling
reasons."
5) The certification against forum shopping must be signed by all the
plaintiffs or petitioners in a case; otherwise, those who did not sign will
be dropped as parties to the case. Under reasonable or justifiable
circumstances, however, as when all the plaintiffs or petitioners share a
common interest and invoke a common cause of action or defense, the
signature of only one of them in the certification against forum
shopping substantially complies with the Rule.
xxxx
Clearly, a defect in the certification is allowed on the ground of
substantial compliance as in this case.
Applying the above-mentioned rule, the signatures of petitioners
Gabriel Yap, Jr. and Hyman Yap are not indispensable for the validity
of the certification. These petitioners indeed share a common cause of
action with Gilbert Yap in that they are impleaded as officers and
directors of Cebu South Memorial Garden, the very same corporation
represented by Gilbert Yap.
At any rate, any objection as to compliance with the requirement of
verification in the complaint should have been raised in the
proceedings below, and not in the appellate court for the first time.[28]
In Young v. John Keng Seng,[29] it was also held that the question of
forum shopping cannot be raised in the Court of Appeals and in the
Supreme Court, since such an issue must be raised at the earliest
opportunity in a motion to dismiss or a similar pleading.
The Court of Appeals relied on procedural rules rather than on the
merits of the case. On this score, we can remand the case to the Court
of Appeals for an opportunity to rule on the substance of the case. The
Court, in the public interest and expeditious administration of justice,
has resolved action on the merits, instead of remanding them for
further proceedings, as where the ends of justice would not be sub-
served by the remand of the case or where the trial court had already
received all the evidence of the parties. Briefly stated, a remand of the
instant case to the Court of Appeals would serve no purpose save to
further delay its disposition contrary to the spirit of fair play.[30]
Considering that this case has dragged on for 15 years with no concrete
solution in sight, we shall proceed to discuss the merits.
We reiterate the ruling penned by Justice Labitoria of the Court of
Appeals in CA-G.R. SP No. 73850[31] directing the trial court to render a
summary judgment. The issues and arguments posed by respondents
have already been passed upon and resolved by the Court of Appeals.
By appealing the summary judgment, respondents are in effect asking
the Court of Appeals to revisit the same issues. We cannot allow this
under the principle of the "law of the case."
The "law of the case" doctrine applies in a situation where an appellate
court has made a ruling on a question on appeal and thereafter
remands the case to the lower court to effect the ruling; the question
settled by the appellate court becomes the law of the case at the lower
court and in any subsequent appeal. It means that whatever is
irrevocably established as the controlling legal rule or decision between
the same parties in the same case continues to be the law of the case,
whether correct on general principles or not, so long as the facts on
which the legal rule or decision was predicated continue to be the facts
of the case before the court.[32]
The rationale behind this rule is to enable an appellate court to perform
its duties satisfactorily and efficiently, which would be impossible if a
question, once considered and decided by it, were to be litigated anew
in the same case upon any and every subsequent appeal. Without it,
there would be endless litigation. Litigants would be free to speculate
on changes in the personnel of a court, or on the chance of having
propositions rewritten once gravely ruled on solemn argument and
18
handed down as the law of a given case.[33]
In the Labitoria decision, the Court of Appeals directed the trial court
to render a summary judgment on the ground that there was no longer
any legal controversy regarding the Certificate of Agreement when
respondents relied on the same agreement to ask for support. This
ruling became the law of the case between the parties which cannot be
disturbed. Respondents cannot raise this same issue in another
petition.
WHEREFORE, the petition is GRANTED. The Court of Appeals'
Decision dated 9 October 2013 and Resolution dated 26 March 2014 in
CA-G.R. CV No. 02037 are REVERSED and SET ASIDE. The
Summary Judgment in Civil Case No. CEB-23707 rendered by the
Regional Trial Court, Branch 13, Cebu City is AFFIRMED.
SO ORDERED.

In any case, we affirm the summary judgment rendered by the trial

court, as directed by the Court of Appeals. A summary judgment is
permitted only if there is no genuine issue as to any material fact and a
moving party is entitled to a judgment as a matter of law. A summary
judgment is proper if, while the pleadings on their face appear to raise
issues, the affidavits, depositions, and admissions presented by the
moving party show that such issues are not genuine.[34]

A "genuine issue" is an issue of fact which requires the presentation of

evidence as distinguished from a sham, fictitious, contrived or false
claim. When the facts as pleaded appear uncontested or undisputed,
then there is no real or genuine issue or question as to the facts, and
summary judgment is called for. The party who moves for summary
judgment has the burden of demonstrating clearly the absence of any
genuine issue of fact, or that the issue posed in the complaint is
patently unsubstantial so as not to constitute a genuine issue for trial.
Trial courts have limited authority to render summary judgments and
may do so only when there is clearly no genuine issue as to any
material fact. When the facts as pleaded by the parties are disputed or
contested, proceedings for summary judgment cannot take the place of
trial.[35]

Petitioners' complaint seeks for specific performance from

respondents, i.e. to transfer ownership of the subject properties to
petitioner corporation based on the Certificate of Agreement. As their
defense, respondents challenge the validity of the Agreement. However,
respondents filed a motion for support relying on the same Agreement
that they are impugning. In view of this admission, respondents are
effectively banking on the validity of the Agreement. Thus, there are no
more issues that need to be threshed out. As aptly explained by the
appellate court:

Clearly, there is no longer any legal controversy in this case which

would justify trial. By claiming benefits arising from the Certificate of
Agreement, private respondents had invoked the validity and
effectiveness of the Certificate of Agreement which according to them is
the law between the parties.

After invoking the validity and effectiveness of the Certificate of

Agreement, private respondents cannot now be heard claiming that
they could not be required to perform their obligations under the
Certificate of Agreement because the said contract is void or that
because private respondent Leticia Siao had no authority to bind the
other private respondents.

The application of the principle of estoppel is proper and timely in

heading off private respondents efforts at renouncing their previous
acts to the prejudice of petitioner. The principle of equity and natural
justice, as expressly adopted in Article 1431 of the Civil Code, and
pronounced as one of the CONCLUSIVE presumption under rule 131,
Section 3 (a) of the Rules of Court, as follows: "Whenever a party has,
by his own declaration, act or omission, intentionally and deliberately
led another to believe a particular thing to be true, and to act upon such
a belief, he cannot, in any litigation arising out of such declaration, act
or omission, be permitted to falsify it."

Private respondents, having performed affirmative acts upon which the

petitioner and public respondent based their subsequent actions,
cannot thereafter refute their acts or renege on the effects of the same,
to the prejudice of the latter. To allow private respondents to do so
would be tantamount to conferring upon them the liberty to limit their
liability at their whims and caprices, which is against the very
principles of equity and natural justice.[36] (Emphasis Supplied)

Considering the foregoing, we grant the petition.

19
 G.R. No. 201017, December 05, 2016
MAJESTIC PLUS HOLDING INTERNATIONAL,
INC., Petitioner, v. BULLION INVESTMENT AND
DEVELOPMENT CORPORATION, Respondent.
G.R. No. 215289, December 5, 2016
MAJESTIC PLUS HOLDING INTERNATIONAL,
INC., Petitioner, v. BULLION INVESTMENT AND
DEVELOPMENT CORPORATION, GENESSON U.
TECSON, ROLAND M. LAUTCHANG, WILSON
CHUNBON CHENG KOA, LUIS K. LOKIN, JR.,
JEFFERSON U. TECSON AND ROSALINE C. CHING,
PERALTA J.:*
Before the Court are two (2) consolidated petitions for review
on certiorari under Rule 45 of the Rules of Court.
In G.R. No. 201017, petitioner Majestic Plus Holdings International,
Inc. (Majestic) seeks to nullify the Decision[1] dated November 2, 2011
and the Resolution[2] dated March 14, 2012, respectively, of the Court
of Appeals (CA) in CA-G.R. SP No. 121072.
In G.R. No. 215289, Majestic prays for the reversal and setting aside of
the Decision[3] dated October 23, 2013 and the Resolution[4]dated
November 4, 2014, respectively, of the CA in CA-G.R. CV No. 97537.
The factual and procedural antecedents follow.
In a Resolution passed on August 14, 2001, the City Council of Manila
authorized its Mayor to enter into a contract with any reputable
corporation for the long term lease and development of a 4,808.40-
square-meter non-income generating property of the City located
within the vicinity of Felipe II, Reina Regente and General La Chambre
Streets in Binondo, Manila. Pursuant to such authority, the Office of
the City Mayor issued an Invitation to Pre-qualify and Bid for the said
development project. Subsequently, herein respondent company,
Bullion Investment and Development Corporation (Bullion)
participated and won in the bidding.
2.1. MAJESTIC and BULLION agree that the present
shareholdings and assets of BULLION shall be valued at
ONE HUNDRED TWENTY MILLION PESOS
(Php120,000,000.00).
2.2. It is expressly agreed that the 80% equity interest to be
acquired by MAJESTIC shall correspond to NINETY-SIX
MILLION PESOS (PhP96,000,000.00), payable
by MAJESTIC under the following Terms of Payment
provided in the succeeding section.
2.3 MAJESTIC agrees to infuse additional capital to cover
the expenditure for the completion of the construction of the
MALL.
3. TERMS OF PAYMENT
The 80% equity interest, corresponding to NINETY-SIX
MILLION PESOS (Php96,000,000.00), shall be payable
by MAJESTIC to the existing stockholders of BULLION as
follows:
3.1 Upon execution of this MOA, MAJESTIC shall pay
THIRTY-FIVE MILLION PESOS (Php35,000,000.00).
3.2 The balance of SIXTY-ONE MILLION PESOS(Php61
,000,000.00) shall be payable as follows:
3.2.1. TEN MILLION PESOS (Php10,000,000.00) within 75
days from the execution of this MOA;
3.2.2. SIX MILLION PESOS (Php6,000,000.00) payable 30
days thereafter;
3.2.3. SIX MILLION PESOS (Php6,000,000.00) payable 30
days after 3.2.2;
3.2.4. SIX MILLION PESOS (Php6,000,000.00) payable 30
days after 3.2.3;
3.2.5. SIX MILLION PESOS (Php6,000,000.00) payable 30
days after 3.2.4;
3.2.6. ELEVEN MILLION PESOS (Php11,000,000.00)
payable 30 days after
3.2.7. EIGHT MILLION PESOS (Php8,000,000.00) payable
30 days after 3.2.6;
3.2.8. EIGHT MILLION PESOS (Php8,000,000.00) payable
within two (2) years from the execution of this MOA.

Thus, on June 30, 2003, the City of Manila, through then City Mayor
Joselito Atienza, and Bullion, represented by its President Roland
Lautachang, entered into a Contract[5] for the lease of the said property
for a period of twenty-five (25) years. Under the Contract, Bullion, as
lessee, agreed to construct two 4-storey buildings, one of which shall be
used as an extension office of the Manila City Hall for its institutional
services, while the other shall be used for commercial purposes.
4.
Bullion then commenced construction and was able to finish and turn
over the City Hall extension building to the Manila City Government.
However, Bullion was unable to finish the construction of the
commercial building. Bullion then sought the help of and was able to
convince petitioner corporation, Majestic Plus Holding International,
Incorporation (Majestic), to invest in Bullion's business venture,
particularly the completion of the construction of its commercial
building which was intended to be used as a mall (Meisic Mall).
On September 7, 2004, Bullion, represented by its President, entered
into a Memorandum of Agreement[6] (MOA) with Majestic, which was
represented by one Dionisio N. Yao. Pertinent portions of the MOA
read, thus:
1. SUBJECT MATTER
MAJESTIC agrees to acquire 80% equity interest
in BULLION, subject to the following terms and conditions,
and the completion of the construction of the subject MALL
by both parties.
2. CONSIDERATION
3.3 The above payments shall all be covered by post-dated
checks to be issued by MAJESTIC in favor
of BULLION and/or Bingson U. Tecson, duly-authorized
representative of existing stockholders.
TRANSFER OF SHARES
4.1. The shares representing the 30% equity
of BULLION shall be ceded and transferred to MAJESTIC
only upon full payment of the amount of THIRTY-FIVE
MILLION PESOS (Php35,000,000.00), pursuant to Sec. 3.1.
4.2. Additional shares representing the 10% equity
of BULLION shall be assigned and transferred
to MAJESTIC upon payment of the additional amount of
TEN MILLION PESOS (Php10,000,000.00) based on Sec.
3.2.1
4.3. Upon payment of the additional amount of TWENTY-
FOUR MILLION PESOS (Php24,000,000.00) based on
Secs. 3.2.2, 3.2.3, 3.2.4 and 3.2.5, additional shareholdings
representing 20% equity of BULLION shall be assigned and
transferred to MAJESTIC.
4.4. The parties undertake to execute the necessary
documents for the transfer of additional shares
corresponding to another 20% upon receipt of the full
payment of the EIGHTY-EIGHT MILLION PESOS
(Php88,000,000.00).
4.5. BULLION shall provide and/or
furnish MAJESTIC copies of all corporate records, such as
but not limited to [the] Article of Incorporation, By-laws,
Financial Statements, General Information Sheets, Board
20
 Resolutions, etc.
5. CAPITAL INFUSION
5.1. The MAJESTIC shall infuse additional capital to cover
the construction cost for the full completion of the MALL.
The additional funding for the construction cost and
completion of the MALL shall be converted to increased
equity for MAJESTIC.
5.2. BULLION and MAJESTIC agree to amend the
Authorized Capital Stock of BULLION from the existing
THIRTY MILLION PESOS (Php30,000,000.00) to at least
TWO HUNDRED MILLION PESOS (Php200,000,000.00)
to ref1ect the actual capital investments of the parties and for
the construction and completion of the MALL.
5.3. In the event of any capital call and infusion,
existing BULLION stockholders shall have the option to
maintain their 20% percent equity. In case any stockholder
waives his option to subscribe to any additional capital call
or infusion, the other stockholders shall be given the option
to subscribe to the remaining unpaid subscription rights
offering.
6. ACCELERATION CLAUSE
6.1. MAJESTIC shall have the option to accelerate the
Terms of Payment under Sec. 3 in order to expedite the
implementation of Sec. 4.
6.2. In the event that MAJESTIC fails to pay, despite
written demands, at least two (2) installment dues within the
period provided in this MOA, the full balance of the amount
unpaid shall become immediately due and demandable.
7. DEFAULT
7.1. Should MAJESTIC default in the payment of at least
two (2) installment dues under this contract, BULLION, at
its sole option may elect to rescind the contract in which
event only half of the total amount paid by MAJESTIC shall
be refunded to it without need of demand. MAJESTIC shall
be considered in default upon its failure to pay the full
amount of the outstanding obligation within fifteen (15) days
from written demand of BULLION.
7.2 In the event BULLION elects to rescind the contract
under this provision, it shall serve a written notice of the
rescission to MAJESTIC.
7.3. In the event BULLION fails to comply with any of its
undertaking under this contract, a written demand shall
likewise be made giving it 15 days to comply. Upon failure to
do so, MAJESTIC shall serve a written notice of rescission
to BULLION. All sums paid by MAJESTIC shall be
refunded to it after written demand.
7.4. In the event that any of the parties should be compelled
to seek judicial relief against any of the parties, the aggrieved
parties shall pay an amount equivalent to 10% of the total
amount claimed as attorney's fees, plus cost of litigation and
other expenses.
8. MANAGEMENT Upon payment of Php35,000,000.00 by
MAJESTIC, a joint management committee shall be created
and convened by the Board of Directors that will oversee the
construction and operation of the MALL for a period of six
(6) months.
x x x[7]
Following the execution of the MOA, Majestic issued five (5) checks, on
various dates, for an aggregate amount of Fifty-Seven Million Pesos
(P57,000,000.00) in favor of Bullion, as partial payment of the 80%
equity interest in the latter. Bullion acknowledged such payment.
However, it alleged that an additional four (4) checks, representing a
total amount of P31,000,000.00, which were subsequently issued by
Majestic were dishonored because of "Stop Payment" orders.[8] As a
result, Bullion sent letters to Majestic demanding payment in full of the
latter's outstanding obligations, otherwise the former would be
constrained to rescind the MOA.[9] For Majestic's failure to heed
Bullion's demands, the latter sent another letter to the former, dated
June 24, 2005, informing it that Bullion had elected to rescind the
MOA.[10]
Meanwhile, Majestic took over the supervision and eventually finished
the construction of the Meisic Mall, except with respect to some minor
installations. Based on the Summary of Payments,[11] attached to its
complaint, Majestic claims that, aside from the P57,000,000.00 it had
earlier paid to Bullion, it also incurred expenses for the purpose of
sustaining the construction of Meisic Mall and the acquisition of
various equipment for use inside the mall in the sum of One Hundred
Thirty-Four Million Five Hundred Twenty-Two Thousand Eight
Hundred Three Pesos and TwentyTwo Centavos
(P134,522,803.22).[12] Thus, the aggregate amount alleged to have been
invested by Majestic is P191,522,803.22.
With the completion of major construction works and the installation
of the aforementioned equipment, the Meisic Mall became operational
as early as May 2005. Majestic conducted business therein by renting
out the mall's leasable spaces to stallholders and by employing
personnel for the security, maintenance and upkeep of the mall's
premises.[13]
However, in the morning of June 25, 2005, respondent, aided by
several police personnel and security guards, entered the premises and
took physical possession and control of Meisic Mall.
This prompted Majestic to file a Complaint[14] for Specific Performance,
Injunction and Damages with a Prayer for Temporary Restraining
Order and/or Writ of Preliminary Injunction against Bullion, together
with several other persons. Majestic alleged that it has become a
majority shareholder of Bullion by reason of its P191,522,803.22
investment, which comprises 95.76% of the agreed P200,000,000.00
authorized capital stock of Bullion. Majestic also claims that the subject
MOA remains valid and binding and that Bullion failed to comply with
its undertakings thereunder.
In its Answer,[15] Bullion denied the material allegations of Majestic's
complaint alleging the defense that it was the latter which, in fact,
violated the provisions of the MOA causing Bullion to rescind the said
agreement.
Initially, the instant case was treated as an intra-corporate dispute and
raffled to Branch 24 of the Regional Trial Court (RTC) of Manila, a
commercial court, wherein several Orders were issued against Bullion,
and eventually, a Decision[16] dated October 12, 2005 was rendered in
favor of Majestic. Bullion assailed the RTC Orders via a special civil
action for certiorari filed with the CA, docketed as CA-G.R. SP No.
91886, while respondent's stockholders filed an appeal of the RTC
Decision, docketed as CA-G.R. CV No. 86167. These two (2) actions
were subsequently consolidated by the CA and in its
Decision,[17] promulgated on February 19, 2008, via a special division of
five, unanimously set aside the Decision of the commercial court and
remanded the case to Branch 24, RTC of Manila to be tried as an
ordinary specific performance case. However, on Majestic's motion, the
presiding judge of Branch 24 subsequently inhibited himself from the
case[18] prompting the executive judge to assign the same to Branch 46,
RTC of Manila which is also a commercial court.[19] The parties did not
question the jurisdiction of Branch 46.
In the ensuing proceedings before Branch 46, the parties jointly moved
that the case be submitted for summary judgment, to which the RTC
acceded.[20]
On July 28, 2011, Branch 46, RTC of Manila rendered a Decision[21] in
favor of petitioner, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff Majestic Plus Holding International, Inc. and
against the herein defendants, ordering the latter to:
1. Strictly comply and implement in full the terms and
conditions of the Memorandum of Agreement, more
particularly the acquisition of 80% shareholdings of
21
 defendant Bullion by plaintiff Majestic;
2. Issue the shares of stock of defendant Bullion in favor of
plaintiff Majestic corresponding to 40% which has long been
paid by plaintiff Majestic and record the same in its Stock
and Transfer Book;
3. Maintain/restore plaintiff Majestic in the physical possession
and control of the entire Meisic Mall premises;
4. Transfer the remaining shares of stock in the name of
plaintiff Majestic up to the extent of 80% shareholdings upon
payment of the balance of P39,000,000.00 and to record the
same in the Stock and Transfer Book;
5. Furnish/provide plaintiff Majestic within reasonable time all
of defendant Bullion's corporate records;
6. Immediately cause the amendment of the authorized capital
stock of defendant Bullion from P30,000,000.00 to
P200,000,000.00 and reflect the increased equity of
plaintiff Majestic brought about by the expenses it incurred
to complete the Meisic Mall; and
7. Pay the cost of this suit.
The counterclaims of the herein defendants are dismissed for lack of
merit.
SO ORDERED.[22]
Bullion and its directors appealed the above RTC Decision with the
CA.[23]
On August 22, 2011, Majestic filed a Motion for Execution Pending
Appeal[24] which was granted by the RTC by virtue of a Special
Order[25] and two other related orders,[26] all dated September 1, 2011.
Consequently, a Writ of Execution Pending Appeal[27] on even date was
issued. Per Sheriff’s Return dated September 2, 2011, the Writ was
served on Bullion and was thereby immediately implemented.[28] In
accordance with the Writ, the Sheriff was able to completely and
successfully remove the physical possession and control of Meisic Mall
from Bullion and deliver the same to Majestic.[29]
In view thereof, Bullion filed a Petition for Certiorari[30] before the CA
seeking the nullification of the: (1) Special Order granting the Motion
for Execution Pending Appeal; (2) Order granting police assistance to
the implementing Sheriff; (3) Order granting the appointment of a
Special Sheriff; and (4) Writ of Execution Pending Appeal. Bullion also
prayed for the issuance of a Temporary Restraining Order and
Mandatory Injunction.
In its Decision[31] dated November 2, 2011, the CA granted the aforesaid
Petition and annulled and set aside the Special Order and the two (2)
other assailed Orders, all dated September 1, 2011, the dispositive
portion of which states:
WHEREFORE, premises considered, the instant Petition is
hereby GRANTED. The assailed Special Order and the two (2) other
Orders, all dated 02 September 2011 rendered by the public respondent
judge are ANNULLED and SET ASIDE. Any and all acts committed
in pursuance of the said Orders are necessarily NULLIFIED.
Accordingly, let a writ of final prohibitory and mandatory injunction
issue, as follows:
1. The public and private respondents, together with all persons
acting for and in their behalf are ENJOINED from
proceeding with the implementation of the public
respondent's Decision dated 28 July 2011 in Civil Case No.
05-113352 entitled, "Majestic Plus Holding International,
Inc. vs. Bullion Investment and Development Corporation,
Genesson U. Tecson, Roland M. Lautchang, Wilson Chun
Bon Cheng Koa, Luis K. Lokin, Jr., Jefferson U. Tecson and
Rosalie C. Ching," as well as the writ of execution pending
appeal dated 01 September 2011 ; and
2. The public and private respondents, and all persons acting
for and in their behalf, are ORDERED to RESTORE the
possession and control of the Meisic Mall to petitioner in the
same situation and condition immediately before the
Decision dated 28 July 2011 in Civil Case No. 05-113352
aforecited.
SO ORDERED.[32]
The CA basically ruled that the RTC committed grave abuse of
discretion in granting Majestic's motion for execution pending appeal
since the "good reasons" required by Rule 39 of the Rules of Court are
found to be absent in the instant case.
On November 14, 2011, Majestic filed a Motion for Reconsideration
with the CA, which was denied in its Resolution[33] dated March 14,
2012. Thus, the filing of the present petition by Majestic, docketed as
G.R. No. 201017, raising the following grounds:
A.
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED
WHEN IT RULED THAT THE REQUISITE FILING OF A MOTION
FOR RECONSIDERATION WOULD ONLY DELAY THE URGENT
NECESSITY TO RESOLVE THE TEMPORARY RESTRAINING
ORDER AS CONTAINED IN THE PETITION ITSELF.
B.
THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT ACCEPTED A HIGHLY DEFECTIVE
VERIFICATION AND CERTIFICATION AS WELL AS SECRETARY'S
CERTIFICATE SUBMITTED BY BULLION.
C.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS
ERROR IN DISREGARDING THE UNDISPUTED FACT THAT
BULLION'S PETITION FOR CERTIORARI PRESENTS
ISSUES/MATTERS THAT ARE PROPER AND ALSO THE SUBJECT
OF THE APPEAL INTERPOSED BY BULLION.
D.
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED
WHEN IT STRUCK DOWN THE "GOOD REASONS" AS FOUND BY
THE TRIAL COURT.
E.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN
ORDERING THE RESTORATION OF THE POSSESSION AND
CONTROL OF THE MEISIC MALL TO BULLION.[34]
During the pendency of G.R. No. 201017, the CA promulgated its
Decision[35] on Bullion's appeal of the July 28, 2011 Decision of the
RTC. The CA essentially ruled that since there are genuine issues of fact
in the present case which require the presentation of evidence, the RTC
should have proceeded to conduct a full-blown trial and should have
refrained from issuing a summary judgment. Hence, the assailed CA
Decision disposed as follows:
WHEREFORE, the appealed July 28, 2011 Decision of the Regional
Trial Court of Manila, Branch 46, National Capital Judicial Region is
hereby REVERSED AND SET ASIDE.
Accordingly, the portion of the Decision directing defendant-appellant
Bullion Investment and Development Corporation to maintain/restore
plaintiff Majestic in the physical possession and control of the entire
Meisic Mall premises is declared to be of no force and effect. The right
of defendant-appellant Bullion Investment and Development
Corporation to physically possess, manage and control the Meisic Mall,
now known as 11/88 Mall, is recognized. As to the other aspects of the
case, let this case be REMANDED to the RTC of Manila, to be re-
raff1ed to a regular court and not to a special commercial court, for
22
further proceedings and proper disposition, according to regular
procedure.
SO ORDERED.[36]
Aggrieved by the CA Decision, Majestic comes to this Court via the
instant petition, docketed as G.R. No. 215289, on the following
grounds:
I. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN
REVERSING THE DECISION OF THE REGIONAL TRIAL COURT
BRANCH 46 OF MANILA.
II. THE REGIONAL TRIAL COURT BRANCH 46 OF MANILA HAS
JURISDICTION OVER THE CASE.
III. THE REGIONAL TRIAL COURT BRANCH 46 OF MANILA DID
NOT EXCEED JURISDICTION.
IV. THE REGIONAL TRIAL COURT BRANCH 46 OF MANILA DID
NOT ERR IN GRANTING MAJESTIC CLAIMS AND DISMISSING
DEFENDANTS-APPELLANTS' COUNTER-CLAIM.
V. THE HONORABLE COURT OF APPEALS ERRED WHEN IT
DENIED MAJESTIC'S MOTION FOR RECONSIDERATION.[37]
In a Resolution[38] dated January 28, 2015, this Court resolved to
consolidate G.R. No. 201017 and 215289.
The petitions lack merit.
At the outset, it behooves this Court to determine the issue of whether
or not the RTC, Branch 46 of Manila has jurisdiction over the subject
matter of the instant case. In its Comment in G.R. No. 215289, Bullion
contends that neither Branch 24 nor Branch 46 of the RTC of Manila
has jurisdiction over the suit for specific performance filed by Majestic.
Bullion argues that having been designated as special commercial
courts, the jurisdiction of Branches 24 and 46 is limited to trying and
deciding special commercial cases only. On the other hand, Majestic
counters that the designation of RTCs as special commercial courts has
not, in any way, limited their jurisdiction to hear and decide cases of all
nature, whether civil, criminal or special proceedings.
As a basic premise, the Court reiterates the principle that a court's
acquisition of jurisdiction over a particular case's subject matter is
different from incidents pertaining to the exercise of its
jurisdiction.[39] Jurisdiction over the subject matter of a case is
conferred by law, whereas a court's exercise of jurisdiction, unless
provided by the law itself, is governed by the Rules of Court or by the
orders issued from time to time by the Supreme Court.[40] The matter of
whether the RTC resolves an issue in the exercise of its general
jurisdiction or of its limited jurisdiction as a special court is only a
matter of procedure and has nothing to do with the question of
jurisdiction.[41]
Moreover, it should be noted that Special Commercial Courts (SCCs)
are still considered courts of general jurisdiction.[42] Section 5.2[43]of
R.A. No. 8799, otherwise known as The Securities Regulation Code,
directs merely the Supreme Court's designation of RTC branches that
shall exercise jurisdiction over intra-corporate disputes. The
assignment of intra-corporate disputes to SCCs is only for the purpose
of streamlining the workload of the RTCs so that certain branches
thereof like the SCCs can focus only on a particular subject
matter.[44]Nothing in the language of the law suggests the diminution of
jurisdiction of those RTCs to be designated as SCCs.[45] The RTC
exercising jurisdiction over an intra-corporate dispute can be likened to
an RTC exercising its probate jurisdiction or sitting as a special
agrarian court. The designation of the SCCs as such has not in any way
limited their jurisdiction to hear and decide cases of all nature, whether
civil, criminal or special proceedings.[46]
Stated differently, in the ruling case of Gonzales, et al. v. GJH Land.
Inc., et al.,[47] this Court held that:
x x x the fact that a particular branch x x x has been designated as a
Special Commercial Court does not shed the RTC's general jurisdiction
over ordinary civil cases under the imprimatur of statutory law, i.e.,
Batas Pambansa Bilang (BP) 129. To restate, the designation of Special
Commercial Courts was merely intended as a procedural tool to
expedite the resolution of commercial cases in line with the
court's exercise of jurisdiction. This designation was not made by
statute but only by an internal Supreme Court rule under its authority
to promulgate rules governing matters of procedure and its
constitutional mandate to supervise the administration of all courts
and the personnel thereof. Certainly, an internal rule promulgated by
the Court cannot go beyond the commanding statute. But as a more
fundamental reason, the designation of Special Commercial Courts is,
to stress, merely an incident related to the court's exercise of
jurisdiction, which, as first discussed, is distinct from the concept of
jurisdiction over the subject matter. The RTC's general jurisdiction
over ordinary civil cases is therefore not abdicated by an internal rule
streamlining court procedure.[48]
Hence, based on the foregoing, it is clear that Branch 46, RTC of
Manila, despite being designated as an SCC, has jurisdiction to hear
and decide Majestic's suit for specific performance.
Having disposed of the question of jurisdiction, the Court will now
proceed to delve into the merits of the present petitions.
There are two basic issues posed in these two petitions. First is the
correctness of the July 28, 2011 Decision of the RTC via summary
judgment. Second is the propriety of ordering the execution of such
Decision pending appeal. In turn, the Court notes that both these
issues hinge on the preliminary determination of whether or not the
RTC was correct in considering the case appropriate for summary
judgment. The Court will, thus, follow the course taken by the CA and
proceed to determine first if it was proper for the RTC to render its
assailed summary judgment.
Summary judgment is a procedural device resorted to in order to avoid
long drawn out litigations and useless delays.[49] Relief by summary
judgment is intended to expedite or promptly dispose of cases where
the facts appear undisputed and certain from the pleadings,
depositions, admissions and affidavits.[50] Summary judgments are
proper when, upon motion of the plaintiff or the defendant, the court
finds that the answer filed by the defendant does not tender a genuine
issue as to any material fact and that one party is entitled to a judgment
as a matter of law.[51] But if there be a doubt as to such facts and
there be an issue or issues of fact joined by the parties,
neither one of them can pray for a summary
judgment.[52] Where the facts pleaded by the parties are
disputed or contested, proceedings for a summary judgment
cannot take the place of a trial.[53]
In Calubaquib, et al. v. Republic of the Philippines,[54] this Court had
the occasion to discuss the nature of a summary judgment and to
reiterate the conditions that should be met before it can be resorted to,
to wit:
xxxx
An examination of the Rules will readily show that a summary
judgment is by no means a hasty one. It assumes a scrutiny of facts in a
summary hearing after the filing of a motion for summary judgment by
one party supported by affidavits, depositions, admissions, or other
documents, with notice upon the adverse party who may file an
opposition to the motion supported also by affidavits, depositions, or
other documents x x x. In spite of its expediting character, relief
by summary judgment can only be allowed after compliance
with the minimum requirement of vigilance by the court in a
summary hearing considering that this remedy is in
derogation of a party's right to a plenary trial of his case. At
any rate, a party who moves for summary judgment has the burden of
demonstrating clearly the absence of any genuine issue of fact, or that
the issue posed in the complaint is so patently unsubstantial as not to
constitute a genuine issue for trial, and any doubt as to the existence of
such an issue is resolved against the movant.
As mentioned above, a summary judgment is permitted only if there is
no genuine issue as to any material fact and the moving party is
entitled to a judgment as a matter of law. The test of the propriety of
rendering summary judgments is the existence of a genuine issue of
fact, as distinguished from a sham, fictitious, contrived or false claim. A
factual issue raised by a party is considered as sham when by its nature
23
it is evident that it cannot be proven or it is such that the party
tendering the same has neither any sincere intention nor adequate
evidence to prove it. This usually happens in denials made by
defendants merely for the sake of having an issue and thereby gaining
delay, taking advantage of the fact that their answers are not under
oath anyway.
In determining the genuineness of the issues, and hence the
propriety of rendering a summary judgment, the court is
obliged to carefully study and appraise, not the tenor or
contents of the pleadings, but the facts alleged under oath by
the parties and/or their witnesses in the affidavits that they
submitted with the motion and the corresponding
opposition. Thus, it is held that, even if the pleadings on their face
appear to raise issues, a summary judgment is proper so long as "the
affidavits, depositions, and admissions presented by the moving party
show that such issues are not genuine."
The filing of a motion and the conduct of a hearing on the
motion are, therefore, important because these enable the
court to determine if the parties' pleadings, affidavits and
exhibits in support of, or against, the motion are sufficient to
overcome the opposing papers and adequately justify the
finding that, as a matter of law, the claim is clearly
meritorious or there is no defense to the action. The non-
observance of the procedural requirements of filing a motion
and conducting a hearing on the said motion warrants the
setting aside of the summary judgment.[55]
In the present case, it is true that both parties moved for the rendition
of a summary judgment.[56] However, it is apparent that the RTC did
not comply with the procedural guidelines when it ordered that the
case be submitted for summary judgment without first conducting a
hearing to determine if there are indeed no genuine issues of fact that
would necessitate trial. The trial court merely required the parties to
submit their respective memoranda, together with their affidavits and
exhibits and, although the parties presented opposing claims, the RTC
hastily rendered a summary judgment. Thus, the trial court erred in
cursorily issuing the said judgment.
Undoubtedly, the case at bar may not, even by the most liberal or
strained interpretation, be considered as one not involving genuine
issues of fact which necessitates presentation of evidence to determine
which of the two conflicting assertions is correct. A careful examination
of the pleadings will show that Majestic's causes of action in its
Complaint are anchored on Bullion's supposed violations of the
provision of the subject MOA. On the other hand, Majestic's allegations
are controverted by Bullion who, in a like manner, asserts that by
virtue of Majestic's failure to comply with the provisions of the said
MOA, it decided to rescind the same. These diametrically opposed and
conflicting claims present a factual dispute which can be resolved and
settled only by means of evidence presented during trial. The
documents and memorandum submitted by the parties all the more
show that the facts pleaded are disputed or contested. It is true that the
main document from which the parties base their claims and defenses
is the same MOA and that the issue submitted for resolution before the
RTC is which of the parties complied with or violated the provisions of
the said MOA. However, arising from this main issue are conflicting
allegations coming from both parties. In turn, these allegations tender
genuine issues of fact necessitating the presentation of evidence, thus,
precluding the rendition of a summary judgment. Certainly, the issue
as to who violated the subject MOA, thus, raised by the parties and
formulated by the RTC in its Amended Pre-Trial Order, as well as the
particular matters as to whether or not the said MOA has been validly
rescinded and whether or not Majestic has, in fact, incurred
P134,522,803.22 in completing the construction of and in maintaining
the operation of the Meisic Mall, are issues which may not be
categorized as frivolous and sham so as to dispense with the
presentation of evidence in a formal trial.
As to the issue of rescission of the subject MOA, Bullion contends that
it rescinded the MOA because Majestic failed to pay several
installments of its obligations which are due thereunder, which failure
gives Bullion the right to rescind the same. On the other hand, Majestic
opposes the rescission insisting that the MOA remains valid and
binding for Bullion's failure to comply with the conditions of a valid
rescission as set under the MOA. Majestic likewise argues that it was, in
fact, Bullion which violated the provisions of the MOA. It is a settled
rule that extrajudicial rescission has a legal effect where the other party
does not oppose it.[57] Where it is objected to, a judicial determination
of the issue is still necessary.[58] Thus, considering Majestic's strong
opposition to Bullion's rescission of the MOA, and since both parties
allege that the other had violated the MOA, the Court agrees with the
CA that the issue of rescission necessitates judicial intervention which
entails examination by the trial court of evidence presented by the
parties in a full-blown trial.
Also, the Court finds no error in the ruling of the CA that the aggregate
sum of P134,522,803.22 alleged by Majestic as expenses it incurred in
completing the construction of the Meisic Mall, as well as in the
acquisition of equipment and facilities used therein, is yet to be
substantiated by competent proof. The only evidence presented by
Majestic to support its claims is an Affidavit[59] executed by the Finance
Comptroller of its allied corporation, accompanied by a summary of
Payments Made to Meisic Mall.[60] Majestic has yet to present receipts
or other competent documentary evidence to prove the said payments.
Moreover, these claims were specifically denied by Bullion in its
Answer to the Complaint. In view of such denial, Majestic's claims are,
thus, subject to confirmation and validation by proof during trial
proper.
Morever, in a Special Division composed of five (5) Justices, the CA in
its February 19, 2008 Decision, which remanded the case to the RTC to
be tried as an ordinary specific performance case, held that Majestic's
Complaint raises many factual issues which, while refuted by Bullion's
Answer, would still have to be disproved by evidence in further
proceedings.[61] Also, in its presently assailed Decision dated November
2, 2011, another Division of the CA, which annulled the RTC Order
granting Majestic's motion for execution pending appeal, expressed
misgivings with respect to the trial court's disposition of the case by
ratiocinating in this wise:
What is more, the Court is mystified [perplexed?] on how the public
respondent judge came to rule as to the actions sought to be
implemented or enforced in the assailed Orders. Of course, the Court is
aware that the entry of private respondents shareholdings in the stock
and transfer books, the amendment of value of its investments and the
award of physical possession of the Meisic Mall, are all contained in the
dispositive portion of the lower court's Decision. However, it appears in
the very same Decision that the proceedings before the public
respondent are summary in nature and that the sole issue which the
parties agreed upon is who between these parties violated the
Memorandum of Agreement. Nothing more, nothing less.[62]
Furthermore, a perusal of the records of the case would show that
Majestic itself is not totally convinced that the case is, indeed, ripe for
summary judgment. In its Motion for Reconsideration of the May 13,
2010 Order of the RTC of Manila, which initially dismissed its
Complaint on the ground of lack of cause of action, Majestic argued for
the need of a full-blown trial to thresh out the parties' conflicting
claims, to wit:
xxxx
As regard[s] defendant Bullion's alleged non commission of any act or
omission in violation of [Majestic's] rights and the failure of the latter
to comply with its obligations, these are in no doubt, evidentiary
matters which have yet to be established in a full blown trial. As the
records would show, the case has not even reached the pre-trial hearing
and therefore, it becomes too premature for the Honorable Court to
make a definite ruling on the alleged lack of cause of action.
Indeed, unless the parties have presented their respective evidence in
chief, any findings on the alleged lack of cause of action will be highly
premature and speculative at best.[63]
In granting Majestic's Motion for Reconsideration, the RTC agreed
with Majestic's above-quoted argument and ruled, thus:
xxxx
A perusal of the complaint hypothetically admitting all the facts and
allegations in the subject complaint [shows that] there [are] sufficient
24
factual averments where this Court can render valid judgments.
Essentially, these causes of action raise many factual issues traversing
on the Memorandum of Agreement and the obligation of the
defendant[s] to the plaintiff which indeed have to be disproved by the
defendants in a full blown trial as this was refuted in the Answer. Even
the comment in the motion for reconsideration establishing the
circumstances involving the rescission of the Memorandum of
Agreement are clear factual matters which should be proved and
threshed out in a full blown trial.[64]

On the basis of the foregoing, it is clear that the RTC erred in rendering
its assailed summary judgment. Thus, the CA did not commit error in
setting aside the said summary judgment.

In view of this Court's affirmance of the CA ruling which reversed and

set aside the July 28, 2011 Decision of the RTC, there is no longer any
RTC judgment that may be executed. Hence, the issue as to whether or
not there are "good reasons" to execute the assailed Decision of the
RTC has become moot and academic. This is in accordance with our
ruling in Osmeña III v. Social Security System of the
Philippines,[65] where we defined a moot and academic case or issue as
follows:

A case or issue is considered moot and academic when it ceases to

present a justiciable controversy by virtue of supervening events, so
that an adjudication of the case or a declaration on the issue would be
of no practical value or use. In such instance, there is no actual
substantial relief which a petitioner would be entitled to, and which
would be negated by the dismissal of the petition. Courts generally
decline jurisdiction over such case or dismiss it on the ground of
mootness - save when, among others, a compelling constitutional issue
raised requires the formulation of controlling principles to guide the
bench, the bar and the public; or when the case is capable of repetition
yet evading judicial review.[66]

Consequently, this Court no longer finds any need to discuss and

resolve the other issues raised in G.R. No. 201017.

As to who between the parties has the right of possession, control and
operation of the Meisic Mall, suffice it to say that the Court agrees with
the disquisition of the CA in its October 23, 2013 Decision in CA-GR.
CV No. 97537, which sustains the restoration of possession and control
of the Meisic Mall in favor of Bullion, to wit:

Basic is the rule in corporation law that the business and affairs of a
corporation [are] handled by a Board of Directors and not the
controlling stockholder. All corporate powers are exercised, all
business conducted and all properties controlled by the Board of
Directors. Hence, [even granting that] Majestic has become the
controlling stockholder of the Bullion x x x by itself alone, it cannot
have the physical possession and operate the business of the Meisic
Mall.[67]

Finally, the Court agrees with the ruling of the CA which ordered the
remand of the case to the RTC of Manila to be re-raffled to a non-
commercial court for further proceedings and proper disposition.

WHEREFORE, the instant petitions are DENIED. The November 2,

2011 Decision and March 14, 2012 Resolution of the Court of Appeals
in CA-G.R. SP No. 121072 are AFFIRMED. The October 23, 2013
Decision and November 4, 2014 Resolution of the Court of Appeals in
CA-GR. CV No. 97537 are, likewise, AFFIRMED. The Executive Judge
of the Regional Trial Court of Manila is hereby ORDERED to
PROMPTLY RE-RAFFLE the case among the non-commercial
courts with a directive that the same be resolved with deliberate
dispatch.

SO ORDERED.

25
G.R. No. L-17619 October 31, 1962
FRANCISCA GATCHALIAN, plaintiff-appellee,
vs.
GORGONIO PAVILIN, JOSE DE VERA, EUGENIO DE VERA, JOSE
ORTIZ, ALFONSO ORTIZ, and CONRADO CABUYADO, defendants-
appellants.
Francisco C. Dalupan for plaintiff-appellee.
Fiesta and Cerezo for defendants-appellants.
REYES, J.B.L., J.:
Appeal on points of law from a summary judgment rendered on 15
December 1959 by the Court of First Instance of Isabela, Branch II
(Judge Pedro C. Quinto, presiding), in its Case No. 385, declaring
plaintiff-appellee Francisca Gatchalian owner of the disputed property
and ordering defendants-appellants to vacate the same; as well as
from the supplementary decision of 23 August 1960 awarding
damages against the defendants and in favor of plaintiff.
In substance, the complaint, which was filed on 9 August 1958, alleged
that plaintiff-appellee Gatchalian is the owner of a tract of land
consisting of three lots with a total area of about 143 hectares as
evidenced by one Original Certificate of Title No. P-31 (Sales Patent
No. V-33) of the Register of Deeds of the Province of Isabela; that Lot
No. 2 thereof consists of about 88 hectares, portions of which were "by
means of force, strategy, and/or stealth, unlawfully entered" by herein
defendants-appellants during the planting season of 1953, "ejecting the
plaintiff and/or her representative or representatives, thereby illegally
depriving said plaintiff of the possession of said portions" which have
an aggregate area of 36 hectares; and that the extent or area in Lot
No. 2 respectively entered by the defendants are, more or less, as
follows:
Gorgonio Pavilin 3 hectares
Jose de Vera and Eugenio de Vera 12 "
Jose Ortiz 8"
Alfonso Ortiz 8"
Conrado Cabuyado 5"
TOTAL 36 hectares;
and prayed for recovery and damages.
In their joint answer, appellants not only denied the material facts and
allegations of the complaint also made "Affirmative and Alternative
Defenses" with "Counterclaim", with special emphasis on the fact that
said Certificate of Title No. P-31 is null and void ab initio, the same
being a forest land at the time it was all bought in 1947 by plaintiff-
appellee. Furthermore, appellants claim in their answer that "the
alleged landholding and title of the plaintiff could not have covered
defendants landholding" (paragraph 2, Affirmative and alternative
Defenses); that their predecessors-in-interest, in good faith, took
possession, made clearings, cultivations and improvements thereon for
several years long before 1953, openly, continuously, exclusively,
publicly and peacefully, on concept of owners thereof, with intention of
acquiring later on their respective land titles over the same from the
Bureau of Lands, in the manner provided by law, as soon as it is
released by the Bureau of Forestry. In attempting to perfect their claim
over their landholding appellants claim in their answer and submitted
affidavit that they had filed and paid for their homestead applications,
entered and numbered as H.A. Nos. V-68296; V-68301; V-68382; and
V-68298 (Exhibits 3 and 4, pp. 57-58 and 63-65, Record on Appeal),
after the said land was actually released by the Bureau of Forestry to
the Bureau of Lands on 17 May 1954, several years before plaintiff's
patent was issued by that Bureau.
Upon motion of the plaintiff, and overruling the objections of the
defendants, the court below declared that there was no genuine issue
of fact in so far as the title to property was concerned, and granted
summary judgment in her favor, ordering defendants to vacate the
land. In a supplementary decision, plaintiff was awarded damage to be
paid by defendants.
Their motions for reconsideration having been rejected, defendants
appealed to this Court.
The theory of plaintiff-appellee, accepted by the Court a quo, is that the
defendants-appellants' pleadings raised no genuine issue of fact. We
find this contention unwarranted.
Our examination of the pleadings and affidavits submitted for the
defendants reveals that while inartistically drawn, they interpose two
main defenses: (1) that their landholdings lay outside the title of the
plaintiff; and (2) that if her title did cover their landholdings, the title was
acquired illegally, because at the time the plaintiff's sales patent was
issued, the land covered was still part of a forest reserve. While such
defenses are to a certain extent incompatible inter se, it can not be
said that they raise no genuine issue of fact. It must be remembered
that section 9 of Rule 15 specifically authorizes the pleading of
alternative or hypothetical defenses, and the decisions of this Court
hold that such defenses may be inconsistent with each other provided
each is consistent in itself. (Castle Bros. vs. Go Juno, 7 Phil. 144; Heirs
of Marquez vs. Valencia, 52 O.G. 6176; I Moran, Comments on the
Rules of Court, 1957 Ed., pp. 234-235.)
In view of the circumstances, the following notes that former Chief
Justice Moran (cf. cit.) has made on the rendition of summary
judgments under the Federal Rules are opposite and fully applicable to
the case now before us:
A summary judgment should not be granted unless the facts
are clear and undisputed, and if there is a controversy upon
any question of fact, there should be a trial of the action
upon its merits (Kissick Construction Co. vs. First National
Bank of Wahoo, Nebraska, 6 Fed. Rules Service, 56c. 41,
Dec. 3, 1940). (Moran's Comments on the Rules of Court,
Vol. I, p. 600, 2nd Ed.)
Authority of court to enter summary judgment. — Rule 56 (in
this jurisdiction Rule 36, sec. 3) does not vest in the court
jurisdiction summarily to try the issues on depositions and
affidavits, but gives the court limited authority to enter
summary judgment only if it clearly appears that there is no
genuine issue of material fact. Upon a motion for summary
Judgment the Court's sole function is to determine whether
there is an issue of fact to be tried, and all doubts as to the
existence of an issue of fact must be resolved against the
moving party. On a motion for summary judgment the court
is not authorized to decide an issue of fact, but is to
determine whether pleadings and record before the court
create an issue of fact be tried. In other words, the rule (Rule
36, see. 3) does invest the court with jurisdiction summarily
to try the actual issues on affidavits, but authorizes summary
judgement only if it clearly appears that there is no genuine
issue as to any material fact. (Moran, supra, p. 603)
Movant has burden of showing absence of genuine issue. —
A party who moves for summary judgment has the burden of
demonstrating clearly the absence of any genuine issue of
fact, and any doubt as to the existence of such an issue is
resolved against the movant. The courts are quite critical of
papers presented by the moving party, but not of the
opposing papers. Thus, in ruling on a motion for summary
judgement the court should take that view of the evidence
26
 most favor to the party against whom it is directed, giving
that party the benefit of all favorable inferences. That one
may surmise from plaintiff's showing that defendant is
unlikely to prevail upon a trial is not a sufficient basis to
assume that defendant's allegations are sham, frivolous or
unsubstantial. If defense relied upon by the defendant is
legally sufficient does not appear "patently sham" the motion
for summary judgement should be denied. (Moran, supra,
pp. 601-602)

The conflicting claims of the parties plainly require exact delimitation of

the areas covered by the title of plaintiff and those occupied by the
defendants in order to find out if they overlap. To do so, a trial is
indispensable.

As to the alleged lack of personality of defendants-appellants to assail

appellee's land grant and certificate title for the reason that said
appellants are mere prospective homestead applicants, it is sufficient
to remark by reason of their prior occupancy and cultivation, these
parties have already acquired possessory rights that they may
vindicate and defend against intruders without better title. And if it be
true that the Bureau of Lands had no jurisdiction to issue a patent in
favor of appellee Francisca Gatchalian because the land involved was
still alienable forest land when granted, then it may be plausible
contended that her patent title would be ab initio void subject to attack
at any time by any party adversely affected (Civil Code, Arts. 1409,
1421; Vano vs. Insular Gov't., 41 Phil. 161; Adorable vs. Dir. of
Forestry, L-13663, 25 March 1960). Be that as it may, the questions of
law should be resolved after, and not before, the questions of fact are
properly litigated, since the facts proved may well affect the legal
provisions applicable.

WHEREFORE, we find that the court a quo erred in rendering the

summary judgment complained of; hence, its decisions in its Civil Case
No. 385 (II Branch), dated 15 December 1959 and 23 August 1960, are
annulled and set aside. The records are ordered remanded to the court
below for trial on the merits in conformity with the Rules and
established practice, and for a new judgment as the facts, law, and
justice may warrant. Costs against appellee Francisca Gatchalian.

27
G.R. No. 212623
ENRIQUE G. DE LEON, Petitioners,
vs.
PEOPLE OF THE PHILIPPINES and SPO3 PEDRITO L.
LEONARDO, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set
aside the November 14, 2013 Decision1 and the May 20, 2014
Resolution2 of the Court of Appeals (CA) in CA-G.R. CR No. 35390,
which affirmed the September 28, 2012 Decision3 of the Regional Trial
Court, Branch 27, Manila (RTC), sustaining the conviction of accused
Enrique De Leon (De Leon) for Grave Oral Defamation by the
Metropolitan Trial Court, Branch 6, Manila (MeTC).
Records show that De Leon was charged with Grave Oral Defamation
in the Information filed before the MeTC, docketed as Criminal Case
No. 453376-CR, the accusatory portion of which reads:
That, on or about April 17, 2006, in the City of Manila, Philippines, the
said accused, with the deliberate intent to besmirch the honor and
reputation of one SPO3 PEDRITO L. LEONARDO, did and there
wilfully, unlawfully, feloniously publicly proffer against the latter
slanderous words and expressions such as "WALANGHIYA KANG
MANGONGOTONG NA PULIS KA, ANG YABANG YABANG MO
NOON. PATAY KA SA AKIN MAMAYA [,]" and other words and
expressions of similar import, thereby bringing the said SPO3
PEDRITO L. LEONARDO into public contempt, discredit and ridicule.
Contrary to law.4
Upon arraignment, De Leon entered a plea of not guilty. Pursuant to
the Supreme Court Circular No. 20-2002, De Leon and private
respondent SPO3 Pedrito Leonardo (SPO3 Leonardo) appeared
before the Philippine Mediation Center to settle the civil aspect of the
case. The conciliation meeting, however, bogged down. Hence, the
proceedings before the lower court continued. During the pre-trial, the
parties pre-marked their respective exhibits and moved for the trial to
commence.
Version of the Prosecution
The prosecution presented three witnesses, namely: private
respondent SPO3 Leonardo, Carlito Principe (Principe) and Jennifer
Malupeng (Malupeng). Their combined testimonies narrated that De
Leon and his son, John Christopher De Leon (John), filed a complaint
for Grave Misconduct against SPO3 Leonardo before the People’s Law
Enforcement Board (PLEB), docketed as Administrative Case Nos. 06-
02-060 (291) II and 06-02-061 (292) II.
The first hearing was scheduled on April 17, 2006 at the PLEB office
on the 5th Floor of the Manila City Hall; At around 1:30 o’clock in the
afternoon, while waiting outside the PLEB office on the 5th floor of the
Manila City Hall, SPO3 Leonardo noticed De Leon and several of his
companions approaching. Before entering the PLEB office, De Leon
uttered these words to SPO3 Leonardo, "Walanghiya kang
mangongotong na pulis ka, ang yabang yabang mo noon. Patay ka sa
akin ngayon."
The words uttered by De Leon caused SPO3 Leonardo
embarrassment because there were several persons present at the
PLEB premises. He could have arrested De Leon but he did not want
to make a scene. Afterwards, De Leon’s wife, Concepcion, emerged
from the said office and apologized to Leonardo for her husband’s
actuations. SPO3 Leonardo calmly proceeded to the Special
Operations Group of the Philippine National Police (PNP) located at
the Manila City Hall to have the incident entered in its blotter. On the
same day, SPO3 Leonardo filed his complaint at the Office of the City
Prosecutor (OCP) together with Principe.5
Version of the Defense
The defense presented Fernando Manalo (Manalo), Ruperto
Molera (Molera), Concepcion De Leon (Concepcion) and the accused
himself as witnesses.
From their testimonies, the defense claimed that there was a prior
incident that took place on the morning of February 27, 2006 when De
Leon, with his son John, while having breakfast with their fellow
joggers at the Philippine National Railroad-Tutuban Station, were
approached by SPO3 Leonardo who arrived on his scooter. With his
gun drawn, SPO3 Leonardo walked fast towards the group and at a
distance of two meters, more or less, he said, "Putang ina mo, tapos ka
na Ricky Boy, referring to De Leon." He pressed the trigger but the gun
did not fire, when he was to strike again, De Leon was able to escape
with the help of John.6
Consequently, De Leon and John filed an administrative complaint for
grave misconduct against SPO3 Leonardo before the PLEB and the
first hearing was set on April 17, 2006. In his Sinumpaang Salaysay sa
Paghahabla filed before the PLEB, De Leon narrated that he and
SPO3 Leonardo were former jogging buddies and that the latter
wanted to borrow money from the former in the amount of
P150,000.00, but he declined. SPO3 Leonardo became upset with him,
culminating in the gun-pointing incident.7
On April 17, 2006, at around 1:30 o’clock in the afternoon, De Leon, in
the company of his wife Concepcion, Manalo, Molera, and several
others went to the PLEB office to attend the hearing. When De Leon
and his companions arrived at the PLEB, they saw SPO3 Leonardo
seated on the bench alone; that they were about to pass when SPO3
Leonardo stood up, badmouthed and threatened De Leon by uttering
the words, "Putang-ina mong mayabang ka, pag di mo inurong
demanda mo sa akin, papatayin kita."
Moments later, they caused the incident to be entered in the police
blotter. From there, they returned to the PLEB office where they were
advised to file charges against SPO3 Leonardo in Camp Crame.
Malupeng and Principe were not seen at the PLEB office premises.
Molera even tried to pacify SPO3 Leonardo by saying, "Itok (referring
to SPO3 Leonardo), ano ka ba naman andito na tayo sa husgado,
ayaw mo pang tigilan ang kamumura kay Ricky, referring to De Leon."
De Leon did not do anything, he simply entered the PLEB office and
sat down there because he got nervous. He also denied apologizing to
SPO3 Leonardo.
Also on April 17, 2006, De Leon utilized the police blotter to file a case
against SPO3 Leonardo in Camp Crame. He filed the said case only
after he received the subpoena from the OCP for the case filed against
him by SPO3 Leonardo. Although he was with his lawyer when he
went to Camp Crame, the latter did not advise him to file a complaint in
the OCP right away. According to De Leon, he also saw SPO3
Leonardo deposit his service firearm while at the PLEB office.8
The Ruling of the MeTC
In its Decision,9 dated April 15, 2011, the MeTC found De Leon guilty
beyond reasonable doubt of Grave Oral Defamation. The trial court
considered SPO3 Leonardo’s police blotter as prima facie evidence of
the facts contained therein. His actuations on the day of the incident
were spontaneous. As borne by the records, he immediately reported
the incident and filed his complaint on that very same day. Considering
the animosity between him and De Leon, it was contrary to human
experience to expect the him to arrest the latter right there and then
when his motives would necessarily be met with doubt later on. Neither
28
was there any ill-motive on the part of witness Principe whose
testimony was given great probative consequence.10 The MeTC found
De Leon’s defense as only an afterthought and self-serving as he
merely filed the counter-charges against Leonardo after he had
received the subpoena from the OCP. The dispositive portion of the
MeTC decision reads:
WHEREFORE, with the foregoing, the Court finds the accused Enrique
De Leon y Garcia GUILTY beyond reasonable doubt of the crime
charged and is hereby SENTENCED to suffer the indeterminate
penalty of 4 months and 1 day of arresto mayor, as minimum penalty,
to 1 year, 1 month and 11 days of prision correccional in its minimum
period, as maximum penalty.
On the civil aspect ex delicto, the accused is ORDERED to pay the
private complainant P10,000 as moral damages.
SO ORDERED.11
The verdict being unacceptable to him, De Leon filed his Notice of
Appeal,12 dated April 18, 2011.
On May 4, 2011, the RTC issued the Order13 directing De Leon to file
his appeal memorandum. De Leon, however, failed to comply. For his
failure to file the same, the RTC issued another Order, 14 dated
December 28, 2011, dismissing his appeal. De Leon then filed a
motion for reconsideration15 on January 30, 2012, which was granted
by the RTC in its Order,16 dated May 22, 2012.
On June 15, 2012, De Leon filed his appeal memorandum 17 and
argued, among others, that the MeTC decision lacked the necessary
constitutional and procedural requirements of a valid decision.
The Ruling of the RTC
On September 28, 2012, the RTC rendered its decision affirming
in toto the ruling of the MeTC. It opined that where the issue was the
extent of credence properly given to the declarations made by
witnesses, the findings of the trial court were accorded great weight
and respect. In appreciating the evidence of the prosecution, the RTC
observed that the MeTC properly discussed in seriatim how it arrived at
De Leon’s conviction. Thus, contrary to his contentions, the findings of
the MeTC were clearly elucidated.18
On October 30, 2012, De Leon filed his motion for
reconsideration,19 but it was denied by the RTC in its November 27,
2012 Order.
Aggrieved, De Leon filed a petition for review under Rule 42 before the
CA.
The Ruling of the CA
The CA affirmed the RTC decision with modification as to the imposed
penalty. The CA stated that the issue of credibility was already raised
with the RTC and was resolved against De Leon. The CA found that he
had not shown any sufficient reason to justify a departure from the
factual findings of the MeTC, which were affirmed by the RTC.20
According to the CA, to call SPO3 Leonardo a "walanghiya,"
"mayabang" and "mangongotong" in public unquestionably constituted
grave oral defamation. These words seriously attacked SPO3
Leonardo’s character. The term "mangongotong" actually imputed a
crime that was dishonorable to him as a police authority. There having
been no provocation on the part of SPO3 Leonardo and that the
utterances complained of were not made in the heat of unrestrained
anger or obfuscation, the RTC did not err in upholding the judgment
against De Leon for the crime of grave oral defamation.21 The decretal
portion of the CA decision reads:
WHEREFORE, the petition for review is DENIED. The assailed
decision of the RTC is AFFIRMED except that the minimum sentence
of imprisonment is modified to the extent that the penalty to be served
shall be: four (4) months as minimum [minus the one (1) day] to a
maximum of one (1) year, one (1) month and eleven (11) days, (as
imposed by the trial court).
IT IS SO ORDERED.22
De Leon moved for partial reconsideration of the CA decision but to no
avail.
Hence, this petition, where De Leon raises matters in question that can
be summarized as follows:
ISSUES
I. WHETHER THE DECISION OF THE MeTC FAILED TO INCLUDE
THE FACTS AND THE LAW UPON WHICH THE DECISION WAS
BASED
II. WHETHER DE LEON’S GUILT HAS BEEN PROVEN BEYOND
REASONABLE DOUBT.
In his Petition for Review,23 De Leon again argues that the MeTC
decision suffers from constitutional infirmity. The lower court should
have decided the case on the basis of the testimonies of the witnesses
for the defense. Also, the conviction was based simply on De Leon’s
conduct during trial and not on the merits of the case.24
In its Comment,25 the Office of the Solicitor General (OSG) countered
that the testimonies of SPO3 Leonardo and Principe were credible and
competent. Further, in the absence of clear and convincing extrinsic
evidence to prove the charge of bias and partiality on the part of MeTC
Judge Teresa Soriaso (Judge Soriaso), the presumption of regularity in
the performance of the judge’s function will stand.26
In his Reply,27 however, De Leon insisted that the prosecution failed to
prove his guilt beyond reasonable doubt. The intent on his part to
diminish the esteem, goodwill or confidence of SPO3 Leonardo or to
excite adverse, derogatory or unpleasant feelings or opinion of others
against him was lacking as his testimony was made in good faith,
without malice. He also reiterated his stand that there was no finding of
clear and distinct facts and law to serve as a basis for its conclusion of
convicting him for the crime charged and that the MeTC decision was
not based on the merits, rather on the personal sentiments harbored by
Judge Soriaso against him.28
The Court’s Ruling
The MeTC Decision clearly stated the facts and the law on which it was
based
Under Section 14, Article VIII of the Constitution, no decision shall be
rendered by any court without expressing therein clearly and distinctly
the facts and the law on which it is based. Section 1 of Rule 36 of the
Rules of Court provides that a judgment or final order determining the
merits of the case shall be in writing personally and directly prepared
by the judge, stating clearly and distinctly the facts and the law on
which it is based, signed by him and filed with the clerk of the court.
Faithful adherence to the requirements of Section 14, Article VIII of the
Constitution is indisputably a paramount component of due process
and fair play. A decision that does not clearly and distinctly state the
facts and the law on which it is based leaves the parties in the dark as
29
to how it was reached and is precisely prejudicial to the losing party,
who is unable to pinpoint the possible errors of the court for review by
a higher tribunal. More than that, the requirement is an assurance to
the parties that, in arriving at a judgment, the judge did so through the
processes of legal reasoning. It is, thus, a safeguard against the
impetuosity of the judge, preventing him from deciding ipse dixit.29
The standard "expected of the judiciary" is that the decision rendered
makes clear why either party prevailed under the applicable law to the
facts as established.1âwphi1 Nor is there any rigid formula as to the
language to be employed to satisfy the requirement of clarity and
distinctness. The discretion of the particular judge in this respect, while
not unlimited, is necessarily broad. There is no sacramental form of
words which he must use upon pain of being considered as having
failed to abide by what the Constitution directs.30
It is understandable that courts, with heavy dockets and time
constraints, often find themselves with little to spare in the preparation
of decisions to the extent most desirable. Judges might learn to
synthesize and to simplify their pronouncements. Nevertheless,
concisely written such as they may be, decisions must still distinctly
and clearly express, at least in minimum essence, its factual and legal
bases.31
In this case, there was no breach of the constitutional mandate that
decisions must express clearly and distinctly the facts and the law on
which they are based. The CA correctly stated that the MeTC clearly
emphasized in its decision, the factual findings, as well as the
credibility and the probative weight of the evidence for the defense vis-
à-vis the evidence of the prosecution. The MeTC presented both the
version of the prosecution and that of the defense. De Leon was not
left in the dark. He was fully aware of the alleged errors of the MeTC.
The RTC, as an appellate court, found no reason to reverse the
decision of the MeTC.|
Likewise, when it comes to credibility of witnesses, this Court accords
the highest respect, even finality, to the evaluation by the lower court of
the testimonies of the witnesses presented before it. 32
Although De Leon claims that the testimony of Principe is incredible,
the MeTC, the RTC and the CA perceived it otherwise. First, there was
no ill motive on the part of Principe for him to weave a tale of lies
against De Leon. Second, Judge Soriaso was able to observe
Principe’s demeanor during trial. He was observed to be candid and
composed and his conduct on the witness stand did not mirror that of
an insincere or false witness.
No bias and partiality on the part of Judge Soriaso
Unless there is concrete proof that a judge has a personal interest in
the proceedings and that his bias stems from an extra-judicial source,
this Court shall always presume that a magistrate shall decide on the
merits of a case with an unclouded vision of its facts.33 Bias and
prejudice cannot be presumed, in light especially of a judge's sacred
obligation under his oath of office to administer justice with impartiality.
There should be clear and convincing evidence to prove the charge;
mere suspicion of partiality is not enough.34
De Leon posits that Judge Soriaso harbored ill feelings towards him
which eventually resulted in his conviction. No evidence, however, was
ever adduced to justify such allegation.1awp++i1 Thus, such argument
must also fail.
The crime committed is only Slight Oral Defamation
Oral Defamation or Slander is libel committed by oral (spoken) means,
instead of in writing. It is defined as "the speaking of base and
defamatory words which tend to prejudice another in his reputation,
office, trade, business or means of livelihood."35 The elements of oral
defamation are: (1) there must be an imputation of a crime, or of a vice
or defect, real or imaginary, or any act, omission, status or
circumstances; (2) made orally; (3) publicly; (4) and maliciously; (5)
directed to a natural or juridical person, or one who is dead; (6) which
tends to cause dishonour, discredit or contempt of the person
defamed. Oral defamation may either be simple or grave. It becomes
grave when it is of a serious and insulting nature.
An allegation is considered defamatory if it ascribes to a person the
commission of a crime, the possession of a vice or defect, real or
imaginary or any act, omission, condition, status or circumstance which
tends to dishonor or discredit or put him in contempt or which tends to
blacken the memory of one who is dead. To determine whether a
statement is defamatory, the words used in the statement must be
construed in their entirety and should be taken in their plain, natural
and ordinary meaning as they would naturally be understood by
persons reading them, unless it appears that they were used and
understood in another sense.36|It must be stressed that words which
are merely insulting are not actionable as libel or slander per se, and
mere words of general abuse however opprobrious, ill-natured, or
vexatious, whether written or spoken, do not constitute a basis for an
action for defamation in the absence of an allegation for special
damages. The fact that the language is offensive to the plaintiff does
not make it actionable by itself.37
In this case, the Court agrees that the words uttered by De Leon were
defamatory in nature. It is, however, of the view that the same only
constituted simple oral defamation.
Whether the offense committed is serious or slight oral defamation,
depends not only upon the sense and grammatical meaning of the
utterances but also upon the special circumstances of the case, like
the social standing or the advanced age of the offended party.38 "The
gravity depends upon: (1) the expressions used; (2) the personal
relations of the accused and the offended party; and (3) the special
circumstances of the case, the antecedents or relationship between the
offended party and the offender, which may tend to prove the intention
of the offender at the time. In particular, it is a rule that uttering
defamatory words in the heat of anger, with some provocation on the
part of the offended party constitutes only a light felony."39
There are cases where the Court considered the circumstances of the
concerned parties and held that the defamation was grave serious in
nature.
In U.S. v. Tolosa,40 where a woman of violent temper hurled offensive
and scurrilous epithets including words imputing unchastity against a
respectable married lady and tending to injure the character of her
young daughters, the Court ruled that the crime committed was grave
slander. In Balite v. People,41 the accused was found guilty of grave
oral defamation as the scurrilous words he imputed to the offended
party constituted the crime of estafa.
In some cases, the Court has declared that the defamatory utterances
were not grave on the basis of the peculiar situations obtaining.
In the case of People v. Arcand,42 a priest called the offended party a
gangster in the middle of the sermon. The Court affirmed the conviction
of the accused for slight slander as there was no imputation of a crime,
a vice or immorality. In Pader v. People,43 the Court ruled that the
crime committed was only slight oral defamation as it considered the
expression, "putang ina mo," as expression to convey anger or
displeasure. Such utterance was found not seriously insulting
considering that he was drunk when he uttered those words and his
anger was instigated by what the private complainant did when the
former’s father died. Also in Jamilano v. Court of Appeals,44where
calling someone "yabang" (boastful or arrogant) was found not
defamatory, the complainant’s subsequent recourse to the law on oral
defamation was not sustained by the Court.
30
Considering the factual backdrop of this case, the Court is convinced
that the crime committed by De Leon was only slight oral defamation
for the following reasons:
First, as to the relationship of the parties, they were obviously
acquainted with each other as they were former jogging buddies. Prior
to the purported gun-pointing incident, there was no reason for De
Leon to harbor ill feelings towards SPO3 Leonardo.
Second, as to the timing of the utterance, this was made during the first
hearing on the administrative case, shortly after the alleged gun-
pointing incident. The gap between the gun-pointing incident and the
first hearing was relatively short, a span of time within which the
wounded feelings could not have been healed. The utterance made by
De Leon was but a mere product of emotional outburst, kept inside his
system and unleashed during their encounter.
Third, such words taken as a whole were not uttered with evident intent
to strike deep into the character of SPO3 Leonardo as the animosity
between the parties should have been considered. It was because of
the purported gun-pointing incident that De Leon hurled those words.
There was no intention to ridicule or humiliate SPO3 Leonardo
because De Leon’s utterance could simply be construed as his
expression of dismay towards his actions as his friend and member of
the community.
The defamatory remarks were not in connection with the public officer’s
duty
Finally, the Court finds that even though SPO3 Leonardo was a police
officer by profession, his complaint against De Leon for oral defamation
must still prosper. It has been held that a public officer should not be
too onion-skinned and should be tolerant of criticism. The doctrine,
nevertheless, would only apply if the defamatory statement was uttered
in connection with the public officer’s duty. The following cases are
illustrative:
45
In the case of Evangelista v. Sepulveda, petitioner lawyer made the
following statements in his appeal brief:
always looked upon to set the example how public officials should
correctly conduct themselves even in the face of extreme provocation.
In both cases, the criticisms directed towards the public officer were
made in connection with the dissatisfaction of the performance of their
respective duties. Here, however, the malicious imputations were
directed towards the public officer with respect to their past strained
personal relationship. To note, De Leon’s displeasure towards SPO3
Leonardo could be traced to a gun-pointing incident where the latter
was angered when the former failed to grant him a private loan
transaction in the amount of Pl50,000.00.
One of man's most prized possessions is his integrity. There lies a thin
line between criticism and outright defamation. When one makes
commentaries about the other's performance of official duties, the
criticism is considered constructive, then aimed for the betterment of
his or her service to the public. It is thus, a continuing duty on the part
of the public officer to make room for improvement on the basis of this
constructive criticism in as much as it is imperative on the part of the
general public to make the necessary commentaries should they see
any lapses on the part of the public officer. In this case, however, the
criticism was more destructive than constructive and, worse, it was
directed towards the personal relations of the parties.
To reiterate, their altercation and De Leon's subsequent defamation
were not in connection with SPO3 Leonardo's public duties. Taking into
account the circumstances of the incident, calling
him "walanghiya" and "mangongotong na pulis" was evidently geared
towards his reputation as a private individual of the community. Thus,
the defamation committed by De Leon, while only slight in character,
must not go unpunished.
Accordingly, De Leon should be meted out only the penalty of arresto
mayor or a fine not exceeding P200.00 pesos, for committing slight oral
defamation as prescribed under Article 358 of the Revised Penal Code.
WHEREFORE, the petition is PARTIALLY GRANTED. The April 15,
2011 Decision of the Metropolitan Trial Court, Branch 6, Manila, is
hereby MODIFIED to read as follows:

WHEREFORE, finding Enrique De Leon guilty beyond reasonable

THIS BLUNDER of the TRIAL COURT, AT ONCE SHOCKING AND
doubt of the crime of Slight Oral Defamation, the Court hereby
UNPARDONABLE, BETRAYS BOTTOMLESS IGNORANCE OF
sentences him to pay a fine of P200.00, with subsidiary imprisonment
LEGAL FUNDAMENTALS AND IS A BLACK REFLECTION ON THE
in case of insolvency, and to pay the costs.
COMPETENCE OF ITS INCUMBENT. IT COULD BE A GROUND
FOR PROSECUTION AND ADMINISTRATIVE ACTION.
On the civil aspect ex delicto, the accused is ordered to pay the private
complainant P5,000.00 as moral damages.
This shocking, colossal blunder deserves condemnation no end and
cries for immediate relief in order to avoid repetitions of miscarriages of
justice. SO ORDERED.

Appalled by the contents of the brief, the trial court judge charged the
petitioner for indirect contempt. In absolving the latter, this Court
recognized that lawyers sometimes get carried away and forget
themselves especially if they act as their own counsel. Hence, if the
judge had felt insulted, he should have sought redress by other means
as it was not seemly for him to be a judge of his own cause.

In Yabut v. Ombudsman,46 petitioner vice mayor was directing traffic as

he was concurrently the commander of the Traffic Management
Division at that time. On board his vehicle was private respondent
Doran, who was impatient about the traffic. Angry words turned into an
exchange of punches and Doran stuck a dirty finger at petitioner.
Charged with an administrative case before the Office of the
Ombudsman, petitioner vice mayor was suspended. The attendant
circumstances served no excuse for the mauling incidents that
followed. Though the acts of Doran were no less than "an act of spite,
degradation and mockery," it did not justify an equally abhorrent
reaction from petitioner. This Court wrote that public officers, especially
those who were elected, should not be too onion-skinned as they are

31
G.R. No. 173326 December 15, 2010
SOUTH COTABATO COMMUNICATIONS CORPORATION and
GAUVAIN J. BENZONAN, Petitioners,
vs.
HON. PATRICIA A. STO. TOMAS, SECRETARY OF LABOR AND
EMPLOYMENT, ROLANDO FABRIGAR, MERLYN VELARDE,
VINCE LAMBOC, FELIPE GALINDO, LEONARDO MIGUEL, JULIUS
RUBIN, EDEL RODEROS, MERLYN COLIAO and EDGAR
JOPSON, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This a petition for review on certiorari under Rule 45 of the Rules of
Court with application for temporary restraining order and/or writ of
preliminary injunction seeking to set aside the Resolution1 dated July
20, 2005 as well as its related Resolution2 dated May 22, 2006 of the
Court of Appeals in CA-G.R. SP No. 00179-MIN. In essence, the same
petition likewise seeks to set aside the Order3 dated November 8, 2004
and the Order4 dated February 24, 2005 of public respondent
Secretary Patricia A. Sto. Tomas of the Department of Labor and
Employment (DOLE) as well as the Order5 dated May 20, 2004 of the
Regional Director, DOLE Regional XII Office.
The facts of this case, as culled from the Order dated November 8,
2004 of DOLE Secretary Sto. Tomas, are as follows:
On the basis of a complaint, an inspection was conducted at the
premises of appellant DXCP Radio Station on January 13, 2004, where
the following violations of labor standards laws were noted:
1. Underpayment of minimum wage;
2. Underpayment of 13th month pay;
3. Non-payment of five (5) days service incentive leave pay;
4. Non-remittance of SSS premiums;
5. Non-payment of rest day premium pay of some employee;
6. Non-payment of holiday premium pay; and
7. Some employees are paid on commission basis aside
from their allowances.
A copy of the Notice of Inspection Results was explained to and
received by Tony Ladorna for appellants. Later on, or on January 16,
200[4], another copy of the Notice of Inspection Results was received
by Felipe S. Galindo, Technical Supervisor of appellant DXCP. The
Notice of Inspection Results required the appellants to effect restitution
and/or correction of the above violations within five (5) calendar days
from receipt of the Notice. Likewise, appellants were informed that any
questions on the findings should be submitted within five (5) working
days from receipts of the Notice.
A summary investigation was scheduled on March 3, 2004, where only
appellees appeared, while appellants failed to appear despite due
notice. Another hearing was held on April 1, 2004, where appellees
appeared, while a certain Nona Gido appeared in behalf of Atty.
Thomas Jacobo. Ms. Gido sought to re-schedule the hearing, which
the hearing officer denied.
On May 20, 2004, the Regional Director issued the assailed Order,
directing appellants to pay appellees the aggregate amount of Seven
Hundred Fifty Nine Thousand Seven Hundred Fifty Two Pesos
(Php759,752.00).6
The dispositive portion of the Order dated May 20, 2004 of the
Regional Director of the DOLE Region XII Office reads as follows:
WHEREFORE, premises considered, respondent DXCP Radio Station
and/or Engr. Gauvain Benzonan, President, is hereby ordered to pay
the seven (7) affected workers of their Salary Differential,
Underpayment of 13th Month Pay, Five (5) days Service Incentive
Leave Pay, Rest Day Premium Pay and Holiday Premium Pay in the
total amount of SEVEN HUNDRED FIFTY-NINE THOUSAND SEVEN
HUNDRED FIFTY-TWO PESOS (₱759,752.00), Philippine Currency
as indicated in the Annex "A" hereof and to submit proof of compliance
to the Department of Labor and Employment, Regional Office No. XII,
Cotabato City within ten (10) calendar days from receipt of this Order. 7
Petitioners appealed their case to then DOLE Secretary Sto. Tomas.
However, this appeal was dismissed in an Order dated November 8,
2004 wherein the Secretary ruled that, contrary to their claim,
petitioners were not denied due process as they were given
reasonable opportunity to present evidence in support of their defense
in the administrative proceeding before the Regional Director of DOLE
Region XII Office. The dispositive portion of the said Order follows:
WHEREFORE, premises considered, the appeal by DXCP Radio
Station and Engr. Gauvain Benzonan is hereby DISMISSED for lack of
merit. The Order dated May 24, 2004 of the Regional Director,
directing appellants to pay the nine (9) appellees the aggregate
amount of Seven Hundred Fifty-Nine Thousand Seven Hundred Fifty-
Two Pesos (Php759,752.00), representing their claims for wage
differentials, 13th month pay differentials, service incentive leave pay,
holiday premium and rest day premium, is AFFIRMED.8
Undeterred, petitioners filed a Motion for Reconsideration with the
DOLE Secretary but this was denied in an Order dated February 24,
2005, the dispositive portion of which states:
WHEREFORE, premises considered, the Motion for Reconsideration
filed by DXCP Radio Station and Engr. Gauvain Benzonan, is hereby
DENIED for lack of merit. Our Order dated November 8, 2004,
affirming the Order dated May 20, 2004 of the OIC-Director, Regional
Office No. 12, directing appellants to pay Rolando Fabrigar and eight
(8) others, the aggregate amount of Seven Hundred Fifty-Nine
Thousand Seven Hundred Fifty-Two Pesos (Php759,752.00),
representing their claims for wage and 13th month pay differentials,
service incentive leave pay, holiday pay and rest day premium, is
AFFIRMED.9
In light of this setback, petitioners elevated their case to the Court of
Appeals but their petition was dismissed in the assailed Court of
Appeals Resolution dated July 20, 2005 because of several procedural
infirmities that were explicitly cited in the same, to wit:
1. The petition was not properly verified and the Certification of Non-
Forum Shopping was not executed by the plaintiff or principal party in
violation of Sections 4 and 5 of Rule 7 of the 1997 Rules of Civil
Procedure, as the affiant therein was not duly authorized to represent
the corporation. Such procedural lapse renders the entire pleading of
no legal effect and is dismissible. Sections 4 and 5 of Rule 7 of the
1997 Rules of Civil Procedure provide:
SEC. 4. Verification. – Except when otherwise specifically required by
law or rule, pleadings need not be under oath, verified or accompanied
by affidavit.
32
A pleading is verified by an affidavit that the affiant has read the
pleadings and that the allegations therein are true and correct of his
personal knowledge or based on authentic records.
A pleading required to be verified which contains a verification based
on "information and belief" or upon "knowledge, information and belief"
or lacks a proper verification, shall be treated as an unsigned pleading.
x x x.
SEC. 5. Certification against forum shopping. – The plaintiff or principal
party shall certify under oath in the complaint or other initiatory
pleading asserting a claim for relief, or in a sworn certification annexed
thereto and simultaneously filed therewith:
xxxx
Failure to comply with the foregoing requirements shall not be curable
by mere amendment of the complaint or other initiatory pleading but
shall be cause for the dismissal of the case without prejudice, unless
otherwise provided, upon motion and after hearing. The submission of
a false certification or non-compliance with any of the undertakings
therein shall constitute indirect contempt of court, without prejudice to
the corresponding administrative and criminal actions. If the acts of the
party or his counsel clearly constitute willful and deliberate forum
shopping, the same shall be ground for summary dismissal with
prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions. x x x.
2. Annexes A, B, C, E and its attachments and F are not certified true
copies contrary to Section 1, Rule 65 of the 1997 Rules of Civil
Procedure which provides:
SECTION 1. Petition for Certiorari. – x x x
xxxx
The petition shall be accompanied by a certified true copy of the
judgment, order or resolution subject thereof, copies of all pleadings
and documents relevant and pertinent thereto, and a sworn certification
of non-forum shopping as provided in the third paragraph of section 3,
Rule 46. x x x.
3. Petitioner’s counsel failed to indicate the date of issue of his IBP
Official Receipt. As provided for under Bar Matter 287 dated
September 26, 2000:
"All pleadings, motions and papers filed in court whether personally or
by mail shall bear counsel’s current IBP official receipt number and
date of issue otherwise, such pleadings, motions and paper may not be
acted upon by the court, without prejudice to whatever disciplinary
action the court may take against the erring counsel who shall likewise
be required to comply with the such (sic) requirement within five (5)
days from notice. Failure to comply with such requirement shall be
ground for further disciplinary sanction and for contempt of court." x x
x.10
Petitioners then filed a Motion for Reconsideration and the Court of
Appeals ruled in its assailed Resolution dated May 22, 2006 that
petitioners’ subsequent submission made them substantially comply
with the second and third procedural errors that were mentioned in the
Court of Appeals Resolution dated July 20, 2005. However, the Court
of Appeals also ruled that, with regard to the first procedural error,
petitioners’ justification does not deserve merit reasoning that "[w]hile it
may be true that there are two (2) petitioners and that petitioner
Gauvain Benzonan signed the verification and the certificate of non-
forum shopping of the petition, the records show that petitioner
Gauvain Benzonan did not initiate the petition in his own capacity to
protect his personal interest in the case but was, in fact, only acting for
and in the corporation’s behalf as its president."11 Thus, the Court of
Appeals noted that "[h]aving acted in the corporation’s behalf,
petitioner Benzonan should have been clothed with the corporation’s
board resolution authorizing him to institute the petition."12
The Court of Appeals likewise ruled that petitioners’ attachment of a
"Secretary’s Certificate" to their Motion for Reconsideration
(purportedly to remedy the first procedural mistake in their petition
for certiorari under Rule 65) was insufficient since their submission
merely authorized petitioner Benzonan "to represent the corporation
and cause the preparation and filing of a Motion for Reconsideration
before the Court of Appeals."13
Consequently, petitioners filed the instant petition wherein they raised
the following issues:
a. Whether the Court of Appeals committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it dismissed the
Petition for Certiorari and denied the Motion for Reconsideration on its
finding that the petition was not properly verified and the certification of
non-forum shopping was not executed by the principal party allegedly
in violation of Sections 4 and 5, Rule 7 of the 1997 Rules of Civil
Procedure?
b. Whether petitioners were denied due process of law in the
proceedings before the Regional Director and the Office of the
Secretary, both of the Department of Labor and Employment?
c. Whether there was sufficient basis in the Order issued by the
Regional Director, DOLE, Regional Office No. XII, dated May 20,
2004?14
Anent the first procedural issue, the Court had summarized the
jurisprudential principles on the matter in Cagayan Valley Drug
Corporation v. Commissioner of Internal Revenue.15 In said case, we
held that a President of a corporation, among other enumerated
corporate officers and employees, can sign the verification and
certification against of non-forum shopping in behalf of the said
corporation without the benefit of a board resolution. We quote the
pertinent portion of the decision here:
It must be borne in mind that Sec. 23, in relation to Sec. 25 of the
Corporation Code, clearly enunciates that all corporate powers are
exercised, all business conducted, and all properties controlled by the
board of directors. A corporation has a separate and distinct
personality from its directors and officers and can only exercise its
corporate powers through the board of directors. Thus, it is clear that
an individual corporate officer cannot solely exercise any corporate
power pertaining to the corporation without authority from the board of
directors. This has been our constant holding in cases instituted by a
corporation.
In a slew of cases, however, we have recognized the authority of some
corporate officers to sign the verification and certification against forum
shopping. In Mactan-Cebu International Airport Authority v. CA, we
recognized the authority of a general manager or acting general
manager to sign the verification and certificate against forum shopping;
in Pfizer v. Galan, we upheld the validity of a verification signed by an
"employment specialist" who had not even presented any proof of her
authority to represent the company; in Novelty Philippines, Inc. v. CA,
we ruled that a personnel officer who signed the petition but did not
attach the authority from the company is authorized to sign the
verification and non-forum shopping certificate; and in Lepanto
Consolidated Mining Company v. WMC Resources International Pty.
Ltd. (Lepanto), we ruled that the Chairperson of the Board and
President of the Company can sign the verification and certificate
against non-forum shopping even without the submission of the
board’s authorization.
In sum, we have held that the following officials or employees of the
company can sign the verification and certification without need of a
33
board resolution: (1) the Chairperson of the Board of Directors, (2) the SO ORDERED.
President of a corporation, (3) the General Manager or Acting General
Manager, (4) Personnel Officer, and (5) an Employment Specialist in a
labor case.

While the above cases do not provide a complete listing of authorized

signatories to the verification and certification required by the rules, the
determination of the sufficiency of the authority was done on a case to
case basis. The rationale applied in the foregoing cases is to justify the
authority of corporate officers or representatives of the corporation to
sign the verification or certificate against forum shopping, being "in a
position to verify the truthfulness and correctness of the allegations in
the petition."16 (Emphases supplied.)lawp++il

It must be stressed, however, that the Cagayan ruling qualified that the
better procedure is still to append a board resolution to the complaint
or petition to obviate questions regarding the authority of the signatory
of the verification and certification.17

Nonetheless, under the circumstances of this case, it bears reiterating

that the requirement of the certification of non-forum shopping is rooted
in the principle that a party-litigant shall not be allowed to pursue
simultaneous remedies in different fora, as this practice is detrimental
to an orderly judicial procedure. However, the Court has relaxed, under
justifiable circumstances, the rule requiring the submission of such
certification considering that, although it is obligatory, it is not
jurisdictional. Not being jurisdictional, it can be relaxed under the rule
of substantial compliance.18

In the case at bar, the Court holds that there has been substantial
compliance with Sections 4 and 5, Rule 7 of the 1997 Revised Rules
on Civil Procedure on the petitioners’ part in consonance with our
ruling in the Lepanto Consolidated Mining Company v. WMC
Resources International PTY LTD.19 that we laid down in 2003 with the
rationale that the President of petitioner-corporation is in a position to
verify the truthfulness and correctness of the allegations in the petition.
Petitioner Benzonan clearly satisfies the aforementioned jurisprudential
requirement because he is the President of petitioner South Cotabato
Communications Corporation. Moreover, he is also named as co-
respondent of petitioner-corporation in the labor case which is the
subject matter of the special civil action for certiorari filed in the Court
of Appeals.

Clearly, it was error on the part of the Court of Appeals to dismiss

petitioners’ special civil action for certiorari despite substantial
compliance with the rules on procedure. For unduly upholding
technicalities at the expense of a just resolution of the case, normal
procedure dictates that the Court of Appeals should be tasked with
properly disposing the petition, a second time around, on the merits.

The Court is mindful of previous rulings which instructs us that when

there is enough basis on which a proper evaluation of the merits can
be made, we may dispense with the time-consuming procedure in
order to prevent further delays in the disposition of the
case.20 However, based on the nature of the two remaining issues
propounded before the Court which involve factual issues and given
the inadequacy of the records, pleadings, and other evidence available
before us to properly resolve those questions, we are constrained to
refrain from passing upon them.

After all, the Court has stressed that its jurisdiction in a petition for
review on certiorari under Rule 45 of the Rules of Court is limited to
reviewing only errors of law, not of fact, unless the findings of fact
complained of are devoid of support by the evidence on record, or the
assailed judgment is based on the misapprehension of facts.21

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed

Resolutions of the Court of Appeals are REVERSED and SET ASIDE.
The case is REMANDED to the Court of Appeals for proper disposition
of CA-G.R. SP No. 00179-MIN.

34
 G.R. No. 215072, September 07, 2016
PHILIPPINE NATIONAL BANK, Petitioner, v. HEIRS OF
THE LATE IRENEO AND CARIDAD ENTAPA, NAMELY:
ROSARIO ENTAPA-ORPEZA, JULIANNE E.
HAMM,1 CERINA G. ENTAPA, WINSTON G. ENTAPA
(DECEASED) REPRESENTED BY HIS SPOUSE, NINFA
LAMISTOZA-ENTAPA, FRANKLIN G. ENTAPA, MARINA E.
SCHACHT, AND ELVIRA G. ENTAPA, Respondents.
DECISION
LEONEN, J.:
The Constitution requires that a court must state the factual
and legal grounds on which its decisions are based. Any
decision that fails to adhere to this mandate is void.
The Philippine National Bank, through a Petition for Review on
Certiorari,2 assails the Decision3 dated June 4, 2013 and
Resolution4 dated October 2, 2014 of the Court of Appeals,
which nullified the Decision5 of Branch 54 of the Regional Trial
Court of Bacolod City. The Court of Appeals nullified the
Regional Trial Court Decision for failing to state the facts and
law on which it was based.6chanrobleslaw
On December 5, 1973, Caridad Entapa (Entapa) and her
children, Julianna E. Hamm and Winston Entapa, executed a
Special Power of Attorney authorizing Joseph Gonzaga
(Gonzaga) to enter into legal transactions on their
behalf.7chanrobleslaw
Entapa owned Lot No. 2665 with an area of 16.067 hectares
and covered by Original Certificate of Title No. P-6497.8 On
January 3, 1974,9 Gonzaga executed a real estate mortgage
over Lot No. 2665 in favor of the Philippine National Bank to
guarantee his loan of P30,600.00.10chanrobleslaw
Gonzaga failed to pay the loan.11 The property was foreclosed
and was sold at a public auction. The Philippine National Bank
emerged as the winning bidder.12 A Certificate of Sale was
issued in the bank's favor on December 29,
1983.13chanrobleslaw
Entapa's other heirs had no knowledge of Gonzaga's Special
Power of Attorney. They learned of the foreclosure sale only
after the public auction.14chanrobleslaw
Rosario Entapa Orpeza (Orpeza), representing Entapa's other
heirs, went to the Philippine National Bank at Lacson Street,
Bacolod City to ask about the repurchase of the
property.15 Despite knowledge that the property had already
been foreclosed, she wrote a letter dated March 15, 1995 to
Raul Topacio, Assistant Vice President and Branch Manager,
requesting a restructuring and recomputation of Gonzaga's
loan in accordance with the guidelines of Republic Act No.
7202.16chanrobleslaw
On May 2, 1996, the Philippine National Bank informed
Orpeza that its Branch Credit Committee approved her
request and stated the terms and conditions of the Thirteen-
Year Plan of Payment.17 Two (2) of the seven (7) conditions
were to deposit 20% of the total recomputed amount and to
pay the arrears of the realty taxes on the
property.18chanrobleslaw
In compliance, Orpeza sent a bank transfer of 9,797 German
Deutschmark equivalent to P178,336.19, 20% of the
recomputed amount.19 She also paid the realty taxes on the
property.20chanrobleslaw
Orpeza alleged that after she deposited the amount, she
discovered that five (5) families were already residing and
planting crops on Lot No. 2665, by virtue of Certificates of
Land Ownership (CLOA) issued by the Department of Agrarian
Reform.21 She went to the Philippine National Bank to ask for
an explanation and to request the bank to file a case to annul
the CLOAs.22 The bank did not offer an explanation but only
issued a certification declaring that according to their records,
there had been no transfer of Lot No. 2665 to the Department
of Agrarian Reform.23chanrobleslaw
Orpeza went to the Department of Agrarian Reform, where
she was able to secure copies of the Deed of Sale, Deed of
Transfer, and Voluntary Offer of Sale of Lot No. 2665 by the
Philippine National Bank to the Department of Agrarian
Reform.24 Moreover, she was informed by Assistant Regional
Director Homer Tobias that Lot No. 2665 was already covered
by the Comprehensive Agrarian Reform Program, and CLOAs
had been issued according to the law.25cralawred He also
explained that the lot was voluntarily offered for
Comprehensive Agrarian Reform Program coverage by
Philippine National Bank on September 30,
1989.26chanrobleslaw
As a result, Orpeza demanded the return of the downpayment
she made with the Philippine National Bank and asked for the
annulment of the CLOAs.27 "[The Philippine National Bank] did
not take any action."28 As the bank still refused to refund the
amount despite demand, Orpeza and her siblings instituted a
complaint for collection of sum of money against the
Philippine National Bank on October 5, 1998.29chanrobleslaw
In its defense, the Philippine National Bank insisted that
before it approved Orpeza's request for restructuring and
recomputation, it verified that Lot No. 2665 was not included
in the transfer of properties to the Department of Agrarian
Reform.30 It also alleged that when Lot No. 2665 was offered
to the Department of Agrarian Reform on September 30,
1989, it had no knowledge nor information as to the status of
its application as it had not received any payment from the
Land Bank of the Philippines.31chanrobleslaw
The Philippine National Bank alleged that while there was a
Voluntary Offer to Sell Lot No. 2665, it did not acquire a
record of the Voluntary Offer to Sell until 1998 and only came
to know of the existence of the CLOAs when Orpeza informed
its officers.32chanrobleslaw
On April 31, 2006, the Regional Trial Court of Bacolod City
ordered the Philippine National Bank to return the initial
downpayment of P178,336.10, realty taxes of P56,421.30,
exemplary damages at P50,000.00, moral damages at
P50,000.00, and attorney's fees of 15% of the amount due,
with legal interest.33chanrobleslaw
The Regional Trial Court Decision
reads:ChanRoblesVirtualawlibrary
This is a case for collection of sum of money with claims for
damages, instituted by the heirs of Ireneo and Caridad
Entapa, namely: Rosario Entapa-Oropeza [sic], Julianna E.
Warn, Cerina G. Entapa, Winston G. Entapa represented . . .
by his Spouse Ninfa Lamistoza-Entapa, Franklin G. Entapa,
Marina E. Schacht and Elvira Entapa.
Ireneo Entapa, deceased, died on December 7, 1967 in the
city of Bago, survived by his widow, Caridad Entapa and
legitimate children herein before named. Ireneo Entapa was
35
the registered owner of two parcels of lands located in
Barangay Ilijan, City of Bago, denominated as Lot No. 2664
covered by TCT No. T- and Lot No. 2666 covered by TCT No.
T-[sic]. The wife and widow, Caridad Entapa, now deceased
was also a registered owner of Lot No. 2665, covered by TCT
OCT No. R-6497.
When Ireneo Entapa died, the lands devolved upon his heirs,
the surviving wife, Caridad Entapa, and their children.
During the lifetime of the wife, Caridad Entapa, together with
the children: namely, Juliana E. Ham and Winston Entapa as
heirs-owners of the aforementioned lots, executed a Special
Power of Attorney in favor of Joseph Gonzaga, to mortgage
the lot to banking institutions.
Joseph Gonzaga mortgaged the properties to the Philippine
National Bank-Bacolod Branch.
The other children except the two who signed the Special
Power of Attorney were working abroad and they were
unaware of the execution of the Special Power of Attorney in
favor of Joseph Gonzaga.
The loan was not paid by Joseph Gonzaga and the Philippine
National Bank sold the lands in a public auction. The bid was
awarded to the mortgagee-bank, the Philippine National Bank.
A certificate of Sale issued to the Philippine National Bank
marked in evidence as Exhibit [sic].
When the children heirs learned of the foreclosure of the
properties while they were abroad, the heirs headed by
Rosario Entapa Orpeza, made representation with the
Philippine National Bank to purchase back the properties via
restructuring of the loan under Republic Act No. 7202
otherwise known as the Sugar Restitution Law.
Pursuant to the Sugar Restitution Law, the Philippine National
Bank through its Vice President[,] Mr. Topaciof,] accepted in
principle the restructuring of the loan and for the heirs to
purchase back the properties with 20% percent [sic] down
payment of the recomputed value which amounted to Php
178,336.50. In addition, the heirs were also required to
update the realty taxes of the lots. The heirs obliged by
paying the realty taxes. The heirs through Rosario Entapa
Orpeza paid the required deposit of Php 178,336.50. It was
paid in German Currency converted to Philippine peso
prevailing at the time. The heirs were happy that they could
get back their ancestral lots where they grew up.
Rosario Entapa Orpeza who spearheaded the repurchase of
the properties was based in the United States of America
working as an accountant. She stayed in the country
abandoning meanwhile her work in the USA just to
consummate the repurchase of the properties and she lost
income while staying in the Philippines.
When Rosario Entapa Orpeza had paid for the realty taxes
and the 20% downpayment for the repurchase, she wanted to
visit the lands located on the mountainside in Upper Maao,
Bago City. She discovered that the properties are occupied by
several families who are CARP beneficiaries and are holding
CLOA[s] issued by the Department of Agrarian Reform.
She confronted the PNB official, Mr. Raul Topacio on the
alleged CARP coverage of the lots but she was reassured that
the PNB shall take care of it.
It was sometime on March 15, 1995 when Rosario Entapa
Orpeza formally applied for restructuring under the Sugar
Restitution Law. On May 22, 1995, the Assistant Vice
President Raul G. Topacio informed Rosario Entapa Orpeza of
the total obligations which required twenty (20%) percent
down payment and the account shall be payable in[ ] 13
years.
The restructuring of the loan was officially approved by the
Branch Committee on April 16, 1996.
Before approving the restructuring of the Entapa loan, the
PNB verified if the properties have been turned over to the
Department of Agrarian Reform as required by[ ] law on
acquired agricultural assets of the bank. There was a list of
properties transferred to the DAR (Exhibit 7) and the
properties of Caridad Entapa were not in the list indicating
that the subject properties have not been transferred for
CARP coverage. The owner's duplicate of the title is still with
the PNB.
Rosario Entapa Orpeza signed "ACCEPTANCE" in the May
1996 letter of the PNB on the terms of restructuring of the
loan.
When the alleged CARP coverage was verified with the
Department of Agrarian Reform, documents cropped up
indicating that the lot was sold by the PNB to the Department
of Agrarian Reform way back on September 30, 1989. The
DAR sent a notice of Land Valuation (Exhibit 0) dated March
6, 1992. The Department of Agrarian Reform processed the
awards of the land and CLOA[s] were issued and given to the
beneficiaries.
From the evidence adduced, it appears that the Philippine
National Bank was not meticulous in allowing the Entapa Heirs
to avail of the Sugar Restitution Law to repurchase their
property. The PNB agreed to grant the restitution because
from the record they looked into, the Entapa property was not
among those transferred to the Department of Agrarian
Reform, actually the property had been offered to the DAR
under the Voluntary Offer to Sell (VOS), and the valuation
[had] been determined and communicated to the Philippine
National Bank as shown by subsequent check of record.
The Certificate of Land Ownership Award (CLOA) have [sic]
been issued and distributed to the awardees; thus, it became
legally impossible to go on with the repurchase of the
property by the Entapa Heirs under the Sugar Restitution Law
or plain repurchase of the property.
With the situation that the Entapa Heirs could no longer work
and hope to reacquire their property, the plaintiffs-heirs
formally demanded for the return of the 20% initial deposit
paid to the PNB and also the real property taxes paid when
the property had already been divided and awarded to the
beneficiaries covered by CLOA[s].
The Philippine National Bank did not return the amount paid
by the Entapa Heirs which led to the filing of the instant case.
Likewise, the Entapa Heirs suffered for the vain hope that
they could get back the properties with so much attachment
or sentimental value.
The repurchase had not materialized; thus, the demand to
return the amounts paid.
In a nutshell, the Entapa Heirs, who were working abroad in
the United States and Germany, came to know that the lot of
the mother had been foreclosed and the redemption period
had lapsed. The heirs wanted to recover the property and one
option was to repurchase the property under the Sugar
Restitution Law. The heirs were allowed in principle to
repurchase the property under the Restitution Law. The
36
Philippine National Bank was under the impression that the
subject property still belonged to the PNB because the
owner's duplicate of the title was still on file and a check on
the list of properties transferred to the Department of
Agrarian Reform, the Entapa property was not among them —
the acquired agricultural lands shall be turned over to the
DAR for purposes of the Land Reform program. The Philippine
National Bank formally communicated to the Entapa Heirs of
the approval of the repurchase and the valuation wherein the
former owners were required initially the 20% of the valuation
and the Entapa heirs did pay. The heirs were likewise required
to update the real property taxes which they complied.
When the Entapa heirs came to know that the subject lot had
been earlier offered to the Department of Agrarian Reform
under the Voluntary Offer to Sell (VOS) scheme of the CARP,
they were aghast and their hope to be able to get back the
property came to naught. The PNB tried to reassure the heirs
that the Certificate of Title is still in the name of the PNB and
it would push through the repurchase under the Sugar
Restitution Law.
With the granting of the CLOA[s] to the beneficiaries who had
been in actual occupation and cultivation, there was no more
possibility for the heirs to get back the land.
The Entapa heirs demanded for the return of the money they
had paid for the value of the land and the real property taxes
they paid, for they could not repurchase the land. The PNB
refused to timely return the amounts paid by the heirs which
finally led to the instant suit. Rosario Entapa Orpeza had to
delay her return to her work to the United States of America
in order to consummate the repurchase and getting back of
the property. In the USA, she had a work which earned
regularly for her in dollars. Rosario claims moral and actual
damages for the failure to get back the property which has
sentimental value to the children.
With the repurchase not carried, there is the duty to return
the amounts paid by the Entapa heirs.
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendant:
1. The defendant is ordered to return to the
plaintiff the following amounts:
a. Php 178,336.10 - representing
initial downpayment for the
repurchase of the lot plus legal
interests until paid;
b. Php 56,421.30 representing realty
taxes paid on the lot plus legal
interests until paid;
c. Php 50,000.00 as exemplary
damages;
d. Php 50,000.00 as moral damages;
and cralawlawlibrary
e. Attorney's fees of 15% of the
amount due; and cralawlawlibrary
f. To pay the costs of suit.
SO ORDERED.34chanroblesvirtuallawlibrary
The Philippine National Bank appealed to the Court of Appeals
and argued that (1) the trial court's Decision violated the
Constitution and the Rules of Civil Procedure when it failed to
state the facts and law on which its ruling was based, and (2)
the trial court erred in ordering it to return the
payments.35chanrobleslaw
On June 4, 2013, the Court of Appeals nullified the Regional
Trial Court Decision and remanded the case to it for the
rendition of judgment under the Constitution and Rules of
Court.36chanrobleslaw
The Court of Appeals found that after a careful reading of the
trial court's Decision, the Decision did not contain analysis of
the evidence of the parties or reference to any legal basis to
reach its conclusions, contrary to the requirements of Article
VIII, Section 1437 of the Constitution and Rule 36, Section
138 of the Rules of Court.39chanrobleslaw
However, the Court of Appeals also pointed out that the
Philippine National Bank could not raise new arguments on
appeal as its argument that it was entitled to apply Orpeza's
downpayment to Gonzaga's outstanding loan constituted a
change of theory, which should be disallowed on appeal.40 The
dispositive portion of the Court of Appeals Decision
reads:ChanRoblesVirtualawlibrary
WHEREFORE, in view of all the foregoing, the appeal
is GRANTED. The assailed 31 August 2006 Decision of the
Regional Trial Court Branch 54 of Bacolod City in Civil Case
No. 98-10510 is NULLIFIED as it does not conform with
Section 14 Article VII [sic] of the 1987 Constitution and
Section 1 Rule 36 of the Rules of Court.
The records of the case are hereby remanded to the said
Regional Trial Court for the rendition of judgment in
accordance with the mandate of the Constitution and the
Rules of Court, with dispatch.
SO ORDERED.41 (Emphasis in the original)
The Philippine National Bank moved for reconsideration, but
the Motion was denied in the Resolution dated October 2,
2014.42chanrobleslaw
Aggrieved, petitioner Philippine National Bank filed before this
Court a Petition for Review on Certiorari arguing that the
Court of Appeals erred in rendering judgment on the merits
despite nullifying the Regional Trial Court Decision and
remanding the case.43 It also argues that the Court of Appeals
should not have held them liable to pay respondents Heirs of
Ireneo and Caridad Entapa:ChanRoblesVirtualawlibrary
II. The Court of Appeals seriously erred when it held
petitioner PNB liable to return the amount of Phpl78,336.10
representing initial downpayment of respondents plus legal
interest effective 14 October 1998 until paid.
III. The Court of Appeals seriously erred when it held
petitioner PNB liable to return the amount of Php56,421.30
representing the realty taxes paid by respondents plus legal
interest until paid.
....
IV. The Court of Appeals seriously erred when it held the
Bank liable to pay moral damages, exemplary damages,
attorney's fees and cost of suit to
respondents.44chanroblesvirtuallawlibrary
In their Comment,45 respondents argue that the Court of
Appeals did not make any adjudication on the merits of the
case since the dispositive portion of the Decision did not
actually state that petitioner was liable to respondents for the
37
stated amounts.46 Respondents further assert that the Court
of Appeals discussed the other issues because petitioner
raised these issues before the Court of Appeals, and if
petitioner did not want the Court of Appeals to discuss these
issues, then it should not have raised them.47 Respondents
argue that even assuming that there was an adjudication on
the merits, the Court of Appeals would not have erred in
finding petitioner liable since its bad faith was clear from the
facts and the evidence.48chanrobleslaw
The issues before this Court are:
chanRoblesvirtualLawlibraryFirst, whether the Court of
Appeals erred in nullifying the Regional Trial Court Decision;
and cralawlawlibrary
Second, whether the Court of Appeals adjudicated on the
merits of the case despite ordering its remand to the trial
court.
The Petition is denied.
A court must state the factual and legal basis for its decisions;
otherwise, its decisions are void.
Article VIII, Section 14 of the Constitution provides:
chanRoblesvirtualLawlibrary
ARTICLE VIII
Judicial Department
....
SECTION 14. No decision shall be rendered by any court
without expressing therein clearly and distinctly the facts and
the law on which it is based.
No petition for review or motion for reconsideration of a
decision of the court shall be refused due course or denied
without stating the legal basis therefor.
Rule 36, Section 1 of the Rules of Court
provides:ChanRoblesVirtualawlibrary
RULE 36
Judgments, Final Orders and Entry Thereof
SECTION 1. Rendition of judgments and final orders. — A
judgment or final order determining the merits of the case
shall be in writing personally and directly prepared by the
judge, stating clearly and distinctly the facts and the law on
which it is based, signed by him, and filed with the clerk of
the court.
The Court of Appeals, in nullifying the Decision of the trial
court, stated that it "contained no reference to any legal basis
in reaching its conclusions"49 nor did it "cite any legal
authority or principle to support its conclusion that [the] bank
is liable."50 The Court of Appeals found that the "trial court
merely narrated the factual circumstances of the case and
directly declared the liability of the [bank] to pay
[respondents] the amount she paid as downpayment for the
re-purchase of the subject land."51chanrobleslaw
The Regional Trial Court Decision52 dated August 31, 2006 is
four (4) pages long. Its first three (3) pages state the facts of
the case. The fourth page states:ChanRoblesVirtualawlibrary
The Entapa heirs demanded for the return of the money they
had paid for the value of the land and the real property taxes
they paid, for they could not repurchase the land. The PNB
refused to timely return the amounts paid by the heirs which
finally led to the instant suit. Rosario Entapa Orpeza had to
delay her return to her work to the United States of America
in order to consummate the repurchase and getting back of
the property. In the USA, she had a work which earned
regularly for her in dollars. Rosario claims moral and actual
damages for the failure to get back the property which has
sentimental value to the children.
With the repurchase not carried, there is the duty to return
the amounts paid by the Entapa heirs.
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendant:
1. The defendant is ordered to return to the
plaintiff the following amounts:
a. Php 178,336.10 — representing
initial downpayment for the
repurchase of the lot plus legal
interests until paid;
b. Php 56,421.30 representing realty
taxes paid on the lot plus legal
interests until paid;
c. Php 50,000.00 as exemplary
damages;
d. Php 50,000.00 as moral damages;
and cralawlawlibrary
e. Attorney's fees of 15% of the
amount due; and cralawlawlibrary
f. To pay the costs of suit.
SO ORDERED.53chanroblesvirtuallawlibrary
The trial court failed to cite any legal basis for declaration of
petitioner's liability. The Decision merely contained a
recitation of facts and a dispositive portion. Yao v. Court of
Appeals54 nullified a similar decision for failure of the court to
state the legal basis for its ruling:ChanRoblesVirtualawlibrary
Faithful adherence to the requirements of Section 14, Article
VIII of the Constitution is indisputably a paramount
component of due process and fair play. It is likewise
demanded by the due process clause of the Constitution. The
parties to a litigation should be informed of how it was
decided, with an explanation of the factual and legal reasons
that led to the conclusions of the court. The court cannot
simply say that judgment is rendered in favor of X and
against Y and just leave it at that without any justification
whatsoever for its action. The losing party is entitled to know
why he lost, so he may appeal to the higher court, if
permitted, should he believe that the decision should be
reversed. A decision that does not clearly and distinctly state
the facts and the law on which it is based leaves the parties in
the dark as to how it was reached and is precisely prejudicial
to the losing party, who is unable to pinpoint the possible
errors of the court for review by a higher tribunal. More than
that, the requirement is an assurance to the parties that, in
reaching judgment, the judge did so through the processes of
legal reasoning. It is, thus, a safeguard against the
impetuosity of the judge, preventing him from deciding ipse
dixit. Vouchsafed neither. the sword nor the purse by the
Constitution but nonetheless vested with the sovereign
prerogative of passing judgment on the life, liberty or
property of his fellowmen, the judge must ultimately depend
on the power of reason for sustained public confidence in the
justness of his decision.
Thus the Court has struck down as void, decisions of lower
38
courts and even of the Court of Appeals whose careless should not ordinarily be regarded as such."60chanrobleslaw
disregard of the constitutional behest exposed their
sometimes cavalier attitude not only to their magisterial It was not necessary for the Court of Appeals to discuss the
responsibilities but likewise to their avowed fealty to the other issues that petitioner raised in order to determine that
Constitution.55 (Emphasis supplied, citations omitted) the case must be remanded to the trial court. In any case,
petitioner is not precluded from presenting the same
In Yao, the assailed decision was nullified and the records of
arguments before the trial court.
the case were remanded to the trial court. The Court of
Appeals in this case did the same.
We take this opportunity to remind judges and justices of
their solemn duty to uphold and defend the Constitution and
The constitutional requirement that the basis of the decision
the principles it embodies. This duty is so basic that it appears
of our courts should be clearly articulated and made legible to
in the Oath of Office of every public officer and
the parties does not merely assure fairness . . . . It is likewise
employee61 and is stated only in the third whereas clause of
crucial to assure the public that the judiciary arrives at its
the New Code of Judicial Conduct.62 When the law is basic and
conclusions on the basis of reasonable inference from credible
the rules are elementary, the duty of a judge is simply to
and admissible evidence and the text of law and our
apply it.63 Failure to do so constitutes gross ignorance of the
jurisprudence. Decisions of all courts should not be based on
law.64 It entails additional expenses on the part of the party-
any other considerations. Not only will fully coherent and
litigants and creates an undeserved public impression of the
cogent reasons have greater chances to convince the litigants
lack of competence of the entire judiciary.
of their chances on appeal; they also make appeals possible.
After all, appellate courts cannot be assumed to have so
WHEREFORE, the Petition is DENIED. The Decision dated
much omniscience that they can read what the trial judge has
June 4, 2013 and the Resolution dated October 2, 2014 of the
not written.
Court of Appeals in CA-G.R. CV No. 01895 are AFFIRMED.
Petitioner likewise argues that the Court of Appeals should not
A copy of this Decision shall be served on the Office of the
have ruled that it was liable to respondents.
Court Administrator, who is DIRECTED to initiate proceedings
against Presiding Judge Demosthenes L. Magallanes of Branch
This is erroneous.
54 of the Regional Trial Court of Bacolod City for gross
ignorance of the law and any other violation of our Rules.
Nothing in the Court of Appeals Decision ordered petitioner to
return to respondents their downpayment and pay: them
SO ORDERED.chanRoblesvirtualLawlibrary
damages. Petitioner brought the appeal before the Court of
Appeals, arguing, among others, that it should not have been
held liable since it already applied Orpeza's downpayment to
Gonzaga's outstanding loan.56 The Court of Appeals, in
addressing petitioner's arguments, explained that it could not
rule on these arguments since it was brought for the first time
on appeal:ChanRoblesVirtualawlibrary
While it is true that [petitioner] has the right to recover the
deficiency of Gonzaga's loan obligation under the well-
entrenched rule that a creditor is not precluded from
recovering any unpaid balance on the principal obligation if
the extrajudicial foreclosure sale of the property subject of
the real estate mortgage results in a deficiency, still, such
defenses could not be countenanced because it was belatedly
raised only on appeal, not during the trial before the court a
quo.

Added to that, [petitioner] did not present any proof to

substantiate its allegations. Their factual allegations clearly
required the presentation of additional evidence in order to
properly address the issues raised in the new theory. This,
[petitioner] failed to do. Hence, this Court cannot give due
course to the new issues raised in the appeal for lack of
evidence. Justice and fair play dictate that [petitioner's]
change of theory of their case on appeal be
disallowed.57 (Emphasis supplied)
Strangely, petitioner now comes before this Court and argues
that the Court of Appeals should not have adjudicated on the
arguments that it had raised before it.

Even if the Court of Appeals had adjudicated upon the merits

of the case, any discussion would have been considered obiter
dictum since the entire case was remanded to the trial court.

Obiter dictum is "an opinion expressed by a court upon some

question of law which is not necessary to the decision of the
case before it."58 It is a "a remark made, or opinion expressed
. . . upon a point not necessarily involved in the determination
of the cause, or introduced by way of illustration, or analogy
or argument."59 It "lacks the force of an adjudication and
39
G.R. Nos. 177857-58 January 24, 2012
court insofar as these issuances are adverse to their interests:
PHILIPPINE COCONUT, PRODUCERS FEDERATION, INC.
(COCOFED), MANUEL V. DEL ROSARIO, DOMINGO P. ESPINA,
SALVADOR P. BALLARES, JOSELITO A. MORALEDA, PAZ M.
YASON, VICENTE A. CADIZ, CESARIA DE LUNA TITULAR, and
RAYMUNDO C. DE VILLA, Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent,
WIGBERTO E. TAÑADA, OSCAR F. SANTOS, SURIGAO DEL SUR
FEDERATION OF AGRICULTURAL COOPERATIVES (SUFAC) and
MORO FARMERS ASSOCIATION OF ZAMBOANGA DEL SUR
(MOFAZS), represented by ROMEO C. ROYANDOYAN, Intervenors.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 178193
reversal of the following judgments and resolutions of the anti-graft
1) Partial Summary Judgment6 dated July 11, 2003, as
reiterated in a resolution7 of December 28, 2004, denying
COCOFED’s motion for reconsideration, and the May 11,
2007 resolution denying COCOFED’s motion to set case for
trial and declaring the partial summary judgment final and
appealable,8 all issued in Civil Case No. 0033-A; and
2) Partial Summary Judgment9 dated May 7, 2004, as also
reiterated in a resolution10 of December 28, 2004, and
the May 11, 2007 resolution11 issued in Civil Case No. 0033-
F. The December 28, 2004 resolution denied COCOFED’s
Class Action Omnibus Motion therein praying to dismiss CC
Case No. 0033-F on jurisdictional ground and alternatively,
reconsideration and to set case for trial. The May 11, 2007
resolution declared the judgment final and appealable.

DANILO S. URSUA, Petitioner,

For convenience, the partial summary judgment (PSJ) rendered on
vs.
July 11, 2003 in CC No. 0033-A shall hereinafter be referred to
REPUBLIC OF THE PHILIPPINES, Respondent,
as PSJ-A, and that issued on May 7, 2004 in CC 0033-F, as PSJ-F.
PSJ-A and PSJ-F basically granted the Republic’s separate motions
DECISION for summary judgment.

VELASCO, JR., J.: On June 5, 2007, the court a quo issued a Resolution in CC No. 0033-
A, which modified PSJ-A by ruling that no further trial is needed on the
issue of ownership of the subject properties. Likewise, on May 11,
The Case 2007, the said court issued a Resolution in CC No. 0033-F amending
PSJ-F in like manner.
Cast against a similar backdrop, these consolidated petitions for review
under Rule 45 of the Rules of Court assail and seek to annul certain On the other hand, petitioner Ursua, in G.R. No. 178193, limits his
issuances of the Sandiganbayan in its Civil Case No. 0033-A entitled, petition for review on PSJ-A to the extent that it negates his claims
"Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et
over shares of stock in UCPB.
al., Defendants, COCOFED, et al., BALLARES, et al., Class Action
Movants," and Civil Case No. 0033-F entitled, "Republic of the
Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et al., Defendants." Tañada, et al. have intervened12 in G.R. Nos. 177857-58 in support of
Civil Case (CC) Nos. 0033-A and 0033-F are the results of the splitting the government’s case.
into eight (8) amended complaints of CC No. 0033 entitled, "Republic
of the Philippines v. Eduardo Cojuangco, Jr., et al.," a suit for recovery
Another petition was filed and docketed as G.R. No. 180705. It
of ill-gotten wealth commenced by the Presidential Commission on
involves questions relating to Eduardo M. Cojuangco, Jr.’s (Cojuangco,
Good Government (PCGG), for the Republic of the Philippines
Jr.’s) ownership of the UCPB shares, which he allegedly received as
(Republic), against Ferdinand E. Marcos and several individuals,
option shares, and which is one of the issues raised in PSJ-A.13 G.R.
among them, Ma. Clara Lobregat (Lobregat) and petitioner Danilo S.
No. 180705 was consolidated with G.R. Nos. 177857-58 and 178193.
Ursua (Ursua). Lobregat and Ursua occupied, at one time or another,
On September 28, 2011, respondent Republic filed a Motion to
directorial or top management positions in either the Philippine
Resolve G.R. Nos. 177857-58 and 178193.14 On January 17, 2012, the
Coconut Producers Federation, Inc. (COCOFED) or the Philippine
Court issued a Resolution deconsolidating G.R. Nos. 177857-58 and
Coconut Authority (PCA), or both.1 Each of the eight (8) subdivided
178193 from G.R. No. 180705. This Decision is therefore separate and
complaints correspondingly impleaded as defendants only the alleged
distinct from the decision to be rendered in G.R. No. 180705.
participants in the transaction/s subject of the suit, or who are averred
as owner/s of the assets involved.
The Facts
The original complaint, CC No. 0033, as later amended to make the
allegations more specific, is described in Republic v. The relevant facts, as culled from the records and as gathered from
Sandiganbayan2 (one of several ill-gotten suits of the same title Decisions of the Court in a batch of coco levy and illegal wealth cases,
disposed of by the Court) as revolving around the provisional take over are:
by the PCGG of COCOFED, Cocomark, and Coconut Investment
Company and their assets and the sequestration of shares of stock in
In 1971, Republic Act No. (R.A.) 6260 was enacted creating the
United Coconut Planters Bank (UCPB) allegedly owned by, among
Coconut Investment Company (CIC) to administer the Coconut
others, over a million coconut farmers, and the six (6) Coconut Industry
Investment Fund (CIF), which, under Section 815 thereof, was to be
Investment Fund (CIIF) corporations,3 referred to in some pleadings as
sourced from a PhP 0.55 levy on the sale of every 100 kg. of copra. Of
CIIF oil mills and the fourteen (14) CIIF holding companies4(hereafter
the PhP 0.55 levy of which the copra seller was, or ought to be, issued
collectively called "CIIF companies"), so-called for having been either
COCOFUND receipts, PhP 0.02 was placed at the disposition of
organized, acquired and/or funded as UCPB subsidiaries with the use
COCOFED, the national association of coconut producers declared by
of the CIIF levy. The basic complaint also contained allegations about
the Philippine Coconut Administration (PHILCOA, now PCA16 ) as
the alleged misuse of the coconut levy funds to buy out the majority of
having the largest membership.17
the outstanding shares of stock of San Miguel Corporation (SMC).

The declaration of martial law in September 1972 saw the issuance of

More particularly, in G.R. Nos. 177857-58, class action petitioners
several presidential decrees ("P.Ds.") purportedly designed to improve
COCOFED and a group of purported coconut farmers and COCOFED
the coconut industry through the collection and use of the coconut levy
members (hereinafter "COCOFED et al." collectively)5 seek the
fund. While coming generally from impositions on the first sale of

40
copra, the coconut levy fund came under various names, the different
establishing laws and the stated ostensible purpose for the exaction
explaining the differing denominations. Charged with the duty of
collecting and administering the Fund was PCA.18 Like COCOFED with
which it had a legal linkage,19 the PCA, by statutory provisions
scattered in different coco levy decrees, had its share of the coco
levy.20
The following were some of the issuances on the coco levy, its
collection and utilization, how the proceeds of the levy will be managed
and by whom, and the purpose it was supposed to serve:
1. P.D. No. 276 established the Coconut Consumers
Stabilization Fund (CCSF) and declared the proceeds of the
CCSF levy as trust fund,21 to be utilized to subsidize the sale
of coconut-based products, thus stabilizing the price of
edible oil.22
2. P.D. No. 582 created the Coconut Industry Development
Fund (CIDF) to finance the operation of a hybrid coconut
seed farm.
3. Then came P.D. No. 755 providing under its Section 1 the
following:
It is hereby declared that the policy of the State is
to provide readily available credit facilities to the
coconut farmers at a preferential rates; that this
policy can be expeditiously and efficiently realized
by the implementation of the "Agreement for the
Acquisition of a Commercial Bank for the benefit of
Coconut Farmers" executed by the [PCA]…; and
that the [PCA] is hereby authorized to distribute,
for free, the shares of stock of the bank it acquired
to the coconut farmers….
Towards achieving the policy thus declared, P.D.
No. 755, under its Section 2, authorized PCA to
utilize the CCSF and the CIDF collections to
acquire a commercial bank and deposit the CCSF
levy collections in said bank, interest free, the
deposit withdrawable only when the bank has
attained a certain level of sufficiency in its equity
capital. The same section also decreed that all
levies PCA is authorized to collect shall not be
considered as special and/or fiduciary funds or
form part of the general funds of the government
within the contemplation of P.D. No. 711.23
4. P.D. No. 961 codified the various laws relating to the
development of coconut/palm oil industries.
5. The relevant provisions of P.D. No. 961, as later amended
by P.D. No. 1468 (Revised Coconut Industry Code), read:
ARTICLE III
Levies
Section 1. Coconut Consumers Stabilization Fund Levy. — The [PCA]
is hereby empowered to impose and collect … the Coconut
Consumers Stabilization Fund Levy ….
….
Section 5. Exemption. — The [CCSF] and the [CIDF] as well as all
disbursements as herein authorized, shall not be construed …
as special and/or fiduciary funds, or as part of the general funds of
the national government within the contemplation of PD 711; … the
intention being that said Fund and the disbursements thereof as
herein authorized for the benefit of the coconut farmers shall
be owned by them in their private capacities: …. (Emphasis
supplied.)
6. Letter of Instructions No. (LOI) 926, Series of 1979, made reference
to the creation, out of other coco levy funds, of the Coconut Industry
Investment Fund (CIIF) in P.D. No. 1468 and entrusted a portion of the
CIIF levy to UCPB for investment, on behalf of coconut farmers, in oil
mills and other private corporations, with the following equity ownership
structure:24
Section 2. Organization of the Cooperative Endeavor. – The [UCPB], in
its capacity as the investment arm of the coconut farmers thru the
[CIIF] … is hereby directed to invest, on behalf of the coconut farmers,
such portion of the CIIF … in private corporations … under the
following guidelines:
a) The coconut farmers shall own or control at least … (50%) of the
outstanding voting capital stock of the private corporation [acquired]
thru the CIIF and/or corporation owned or controlled by the farmers
thru the CIIF …. (Words in bracket added.)
Through the years, a part of the coconut levy funds went directly or
indirectly to various projects and/or was converted into different assets
or investments.25 Of particular relevance to this case was their use to
acquire the First United Bank (FUB), later renamed UCPB, and the
acquisition by UCPB, through the CIIF companies, of a large block of
SMC shares. 26
Apropos the intended acquisition of a commercial bank for the purpose
stated earlier, it would appear that FUB was the bank of choice which
the Pedro Cojuangco group (collectively, "Pedro Cojuangco") had
control of. The plan, then, was for PCA to buy all of Pedro Cojuangco’s
shares in FUB. However, as later events unfolded, a simple direct sale
from the seller (Pedro) to PCA did not ensue as it was made to appear
that Cojuangco, Jr. had the exclusive option to acquire the former’s
FUB controlling interests. Emerging from this elaborate, circuitous
arrangement were two deeds; the first, simply denominated
as Agreement,27 dated May 1975,28 entered into by and between
Cojuangco, Jr., for and in his behalf and in behalf of "certain other
buyers," and Pedro Cojuangco, purportedly accorded Cojuangco, Jr.
the option to buy 72.2% of FUB’s outstanding capital stock, or 137,866
shares (the "option shares," for brevity), at PhP 200 per share.
The second but related contract, dated May 25, 1975, was
denominated as Agreement for the Acquisition of a Commercial Bank
for the Benefit of the Coconut Farmers of the Philippines.29 It had
PCA,30 for itself and for the benefit of the coconut farmers, purchase
from Cojuangco, Jr. the shares of stock subject of the First Agreement
for PhP 200 per share. As additional consideration for PCA’s buy-out of
what Cojuangco, Jr. would later claim to be his exclusive and personal
option,31 it was stipulated that, from PCA, Cojuangco, Jr. shall receive
equity in FUB amounting to 10%, or 7.22%, of the 72.2%, or fully paid
shares.
Apart from the aforementioned 72.2%, PCA purchased from other FUB
shareholders 6,534 shares.
While the 64.98% portion of the option shares (72.2% – 7.22% =
64.98%) ostensibly pertained to the farmers, the corresponding stock
certificates supposedly representing the farmers’ equity were in the
name of and delivered to PCA.32 There were, however, shares forming
part of the aforesaid 64.98% portion, which ended up in the hands of
non-farmers.33 The remaining 27.8% of the FUB capital stock were not
covered by any of the agreements.
Under paragraph 8 of the second agreement, PCA agreed to
expeditiously distribute the FUB shares purchased to such "coconut
farmers holding registered COCOFUND receipts" on equitable basis.
41
As found by the Sandiganbayan, the PCA appropriated, out of its own motion, sending the Republic to come to this Court on
fund, an amount for the purchase of the said 72.2% equity, albeit it certiorari, docketed as G.R. Nos. 147062-64, to annul said
would later reimburse itself from the coconut levy fund. 34 order; and

As of June 30, 1975, the list of FUB stockholders shows PCA with 5. By Decision of December 14, 2001, in G.R. Nos. 147062-
129,955 shares.35 64 (Republic v. COCOFED), 40 the Court declared the coco
levy funds as prima facie public funds. And purchased as the
sequestered UCPB shares were by such funds, beneficial
Shortly after the execution of the PCA – Cojuangco, Jr. Agreement,
ownership thereon and the corollary voting rights prima
President Marcos issued, on July 29, 1975, P.D. No. 755 directing, as
facie pertain, according to the Court, to the government.
earlier narrated, PCA to use the CCSF and CIDF to acquire a
commercial bank to provide coco farmers with "readily available credit
facilities at preferential rate," and PCA "to distribute, for free," the bank The instant proceedings revolve around CC 0033-A (Re: Anomalous
shares to coconut farmers. Purchase and Use of [FUB] now [UCPB])41 and CC 0033-F (Re:
Acquisition of San Miguel Corporation Shares of Stock), the first case
pivoting mainly on the series of transactions culminating in the alleged
Then came the 1986 EDSA event. One of the priorities of then
anomalous purchase of 72.2% of FUB’s outstanding capital stock and
President Corazon C. Aquino’s revolutionary government was the
the transfer by PCA of a portion thereof to private individuals.
recovery of ill-gotten wealth reportedly amassed by the Marcos family
COCOFED, et al. and Ballares, et al. participated in CC No. 0033-A as
and close relatives, their nominees and associates. Apropos thereto,
class action movants.
she issued Executive Order Nos. (E.Os.) 1, 2 and 14, as amended by
E.O. 14-A, all Series of 1986. E.O. 1 created the PCGG and provided it
with the tools and processes it may avail of in the recovery Petitioners COCOFED et al.42 and Ursua43 narrate in their petitions how
efforts;36 E.O. No. 2 asserted that the ill-gotten assets and properties the farmers’ UCPB shares in question ended up in the possession of
come in the form of shares of stocks, etc.; while E.O. No. 14 conferred those as hereunder indicated:
on the Sandiganbayan exclusive and original jurisdiction over ill-gotten
wealth cases, with the proviso that "technical rules of procedure and
1) The farmers’ UCPB shares were originally registered in
evidence shall not be applied strictly" to the civil cases filed under the
the name of PCA for the eventual free distribution thereof to
E.O. Pursuant to these issuances, the PCGG issued numerous orders
and registration in the individual names of the coconut
of sequestration, among which were those handed out, as earlier
farmers in accordance with PD 755 and the IRR that PCA
mentioned, against shares of stock in UCPB purportedly owned by or
shall issue;
registered in the names of (a) more than a million coconut farmers and
(b) the CIIF companies, including the SMC shares held by the CIIF
companies. On July 31, 1987, the PCGG instituted before the 2) Pursuant to the stock distribution procedures set out in
Sandiganbayan a recovery suit docketed thereat as CC No. 0033. PCA Administrative Order No. 1, s. of 1975, (PCA AO
1),44 farmers who had paid to the CIF under RA 6260 and
registered their COCOFUND (CIF) receipts with PCA were
After the filing and subsequent amendments of the complaint in CC
given their corresponding UCPB stock certificates. As of
0033, Lobregat, COCOFED et al., and Ballares et al., purportedly
June 1976, the cut-off date for the extended registration, only
representing over a million coconut farmers, sought and were allowed
16 million worth of COCOFUND receipts were registered,
to intervene.37 Meanwhile, the following incidents/events transpired:
leaving over 50 million shares undistributed;

1. On the postulate, inter alia, that its coco-farmer members

3) PCA would later pass Res. 074-78, s. of 1978, to allocate
own at least 51% of the outstanding capital stock of UCPB,
the 50 million undistributed shares to (a) farmers who were
the CIIF companies, etc., COCOFED et al., on November
already recipients thereof and (b) qualified farmers to be
29, 1989, filed Class Action Omnibus Motion praying for the
identified by COCOFED after a national census.
lifting of the orders of sequestration referred to above and for
a chance to present evidence to prove the coconut farmers’
ownership of the UCPB and CIIF shares. The plea to present 4) As of May 1981, some 15.6 million shares were still held
evidence was denied; by and registered in the name of COCOFED "in behalf of
coconut farmers" for distribution immediately after the
completion of the national census, to all those determined by
2. Later, the Republic moved for and secured approval of a
the PCA to be bonafide coconut farmers, but who have not
motion for separate trial which paved the way for the
received the bank shares;45 and
subdivision of the causes of action in CC 0033, each
detailing how the assets subject thereof were acquired and
the key roles the principal played; 5) Prior to June 1986, a large number of coconut farmers
opted to sell all/part of their UCPB shares below their par
value. This prompted the UCPB Board to authorize the CIIF
3. Civil Case 0033, pursuant to an order of the
companies to buy these shares. Some 40.34 million
Sandiganbayan would be subdivided into eight complaints,
common voting shares of UCPB ended up with these
docketed as CC 0033-A to CC 0033-H.38
CIIF companies albeit initially registered in the name of
UCPB.
Lobregat, Ballares et al., COCOFED, et al., on the
strength of their authority to intervene in CC 0033,
On the other hand, the subject of CC 0033-F are two (2) blocks of SMC
continued to participate in CC 0033-A where one
shares of stock, the first referring to shares purchased through and
of the issues raised was the misuse of the
registered in the name of the CIIF holding companies. The purported
names/identities of the over a million coconut
ownership of the second block of SMC shares is for the nonce
farmers;39
irrelevant to the disposition of this case. During the time material, the
CIIF block of SMC shares represented 27% of the outstanding capital
4. On February 23, 2001, Lobregat, COCOFED, Ballares et stock of SMC.
al., filed a Class Action Omnibus Motion to enjoin the PCGG
from voting the sequestered UCPB shares and the SMC
Civil Case No. 0033-A
shares registered in the names of the CIIF companies. The
Sandiganbayan, by Order of February 28, 2001, granted the

42
After the pre-trial, but before the Republic, as plaintiff a quo, could
present, as it committed to, a list of UCPB stockholders as of February
25, 1986,46 among other evidence, COCOFED, et al., on the premise
that the sequestered farmers’ UCPB shares are not unlawfully acquired
assets, filed in April 2001 their Class Action Motion for a Separate
Summary Judgment. In it, they prayed for a judgment dismissing the
complaint in CC 0033-A, for the reason that the over than a million
unimpleaded coconut farmers own the UCPB shares. In March 2002,
they filed Class Action Motion for Partial Separate Trial on the issue of
whether said UCPB shares have legitimately become the private
property of the million coconut farmers.
Correlatively, the Republic, on the strength of the December 14, 2001
ruling in Republic v. COCOFED47 and on the argument, among others,
that the claim of COCOFED and Ballares et al. over the subject UCPB
shares is based solely on the supposed COCOFUND receipts issued
for payment of the R.A. 6260 CIF levy, filed a Motion for Partial
Summary Judgment [RE: COCOFED, et al. and Ballares, et al.] dated
April 22, 2002, praying that a summary judgment be rendered
declaring:
a. That Section 2 of [PD] 755, Section 5, Article III of P.D.
961 and Section 5, Article III of P.D. No. 1468 are
unconstitutional;
b. That … (CIF) payments under … (R.A.) No. 6260 are not
valid and legal bases for ownership claims over UCPB
shares; and
c. That COCOFED, et al., and Ballares, et al. have not
legally and validly obtained title over the subject UCPB
shares.
After an exchange of pleadings, the Republic filed its sur-rejoinder
praying that it be conclusively held to be the true and absolute owner of
the coconut levy funds and the UCPB shares acquired therefrom.48
A joint hearing on the separate motions for summary judgment to
determine what material facts exist with or without controversy
followed.49 By Order50 of March 11, 2003, the Sandiganbayan detailed,
based on this Court’s ruling in related cases, the parties’
manifestations made in open court and the pleadings and evidence on
record, the facts it found to be without substantial controversy, together
with the admissions and/or extent of the admission made by the parties
respecting relevant facts, as follows:
As culled from the exhaustive discussions and manifestations of the
parties in open court of their respective pleadings and evidence on
record, the facts which exist without any substantial controversy are set
forth hereunder, together with the admissions and/or the extent or
scope of the admissions made by the parties relating to the relevant
facts:
1. The late President Ferdinand E. Marcos was President …
for two terms . . . and, during the second term, … declared
Martial Law through Proclamation No. 1081 dated
September 21, 1972.
2. On January 17, 1973, [he] issued Proclamation No. 1102
announcing the ratification of the 1973 Constitution.
3. From January 17, 1973 to April 7, 1981, [he] . . .exercised
the powers and prerogative of President under the 1935
Constitution and the powers and prerogative of President . . .
the 1973 Constitution.
[He] …promulgated various [P.D.s], among which
were P.D. No. 232, P.D. No. 276, P.D. No. 414,
P.D. No. 755, P.D. No. 961 and P.D. No. 1468.
4. On April 17, 1981, amendments to the 1973 Constitution
were effected and, on June 30, 1981, [he], after being
elected President, "reassumed the title and exercised the
powers of the President until 25 February 1986."
5. Defendants Maria Clara Lobregat and Jose R. Eleazar, Jr.
were [PCA] Directors … during the period 1970 to 1986….
6. Plaintiff admits the existence of the following agreements
which are attached as Annexes "A" and "B" to the Opposition
dated October 10, 2002 of defendant Eduardo M.
Cojuangco, Jr. to the above-cited Motion for Partial
Summary Judgment:
a) "Agreement made and entered into this ______
day of May, 1975 at Makati, Rizal, Philippines, by
and between:
PEDRO COJUANGCO, Filipino, x x x, for and in
his own behalf and in behalf of certain other
stockholders of First United Bank listed in Annex
"A" attached hereto (hereinafter collectively called
the SELLERS);
– and –
EDUARDO COJUANGCO, JR., Filipino, x x x,
represented in this act by his duly authorized
attorney-in-fact, EDGARDO J. ANGARA, for and
in his own behalf and in behalf of certain other
buyers, (hereinafter collectively called the
BUYERS)";
WITNESSETH: That
WHEREAS, the SELLERS own of record and
beneficially a total of 137,866 shares of stock, with
a par value of P100.00 each, of the common stock
of the First United Bank (the "Bank"), a
commercial banking corporation existing under the
laws of the Philippines;
WHEREAS, the BUYERS desire to purchase, and
the SELLERS are willing to sell, the
aforementioned shares of stock totaling 137,866
shares (hereinafter called the "Contract Shares")
owned by the SELLERS due to their special
relationship to EDUARDO COJUANGCO, JR.;
NOW, THEREFORE, for and in consideration of
the premises and the mutual covenants herein
contained, the parties agree as follows:
1. Sale and Purchase of Contract
Shares
Subject to the terms and conditions of
this Agreement, the SELLERS hereby
sell, assign, transfer and convey unto
the BUYERS, and the BUYERS hereby
purchase and acquire, the Contract
Shares free and clear of all liens and
encumbrances thereon.
2. Contract Price
The purchase price per share of the
Contract Shares payable by the
43
BUYERS is P200.00 or an aggregate
price of P27,573,200.00 (the "Contract
Price").
3. Delivery of, and payment for, stock
certificates
Upon the execution of this Agreement,
(i) the SELLERS shall deliver to the
BUYERS the stock certificates
representing the Contract Shares, free
and clear of all liens, encumbrances,
obligations, liabilities and other burdens
in favor of the Bank or third parties, duly
endorsed in blank or with stock powers
sufficient to transfer the shares to
bearer; and (ii) BUYERS shall deliver to
the SELLERS P27,511,295.50
representing the Contract Price less the
amount of stock transfer taxes payable
by the SELLERS, which the BUYERS
undertake to remit to the appropriate
authorities. (Emphasis added.)
4. Representation and Warranties of
Sellers
The SELLERS respectively and
independently of each other represent
and warrant that:
(a) The SELLERS are the
lawful owners of, with good
marketable title to, the
Contract Shares and that (i)
the certificates to be delivered
pursuant thereto have been
validly issued and are fully
paid and no-assessable; (ii)
the Contract Shares are free
and clear of all liens,
encumbrances, obligations,
liabilities and other burdens in
favor of the Bank or third
parties…
This representation shall
survive the execution and
delivery of this Agreement and
the consummation or transfer
hereby contemplated.
(b) The execution, delivery
and performance of this
Agreement by the SELLERS
does not conflict with or
constitute any breach of any
provision in any agreement to
which they are a party or by
which they may be bound.
(c) They have complied with
the condition set forth in
Article X of the Amended
Articles of Incorporation of the
Bank.
5. Representation of BUYERS ….
6. Implementation
The parties hereto hereby agree to
execute or cause to be executed such
documents and instruments as may be
required in order to carry out the intent
and purpose of this Agreement.
7. Notices ….
IN WITNESS WHEREOF, the parties hereto have
hereunto set their hands at the place and on the
date first above written.
EDUARDO COJUANGCO,
PEDRO COJUANGCO
JR.
(on his own behalf and in
(on his own behalf and in
behalf of the other Sellers
behalf
listed in Annex "A" hereof)
of the other Buyers)
(SELLERS)
(BUYERS)
By:
EDGARDO J. ANGARA
Attorney-in-Fact
xxx xxx xxx
b) "Agreement for the Acquisition of a Commercial Bank for the Benefit
of the Coconut Farmers of the Philippines, made and entered into this
25th day of May 1975 at Makati, Rizal, Philippines, by and between:
EDUARDO M. COJUANGCO, JR., x x x, hereinafter referred to as the
SELLER;
– and –
PHILIPPINE COCONUT AUTHORITY, a public corporation created by
Presidential Decree No. 232, as amended, for itself and for the benefit
of the coconut farmers of the Philippines, (hereinafter called the
BUYER)"
WITNESSETH: That
WHEREAS, on May 17, 1975, the Philippine Coconut Producers
Federation ("PCPF"), through its Board of Directors, expressed the
desire of the coconut farmers to own a commercial bank which will be
an effective instrument to solve the perennial credit problems and, for
that purpose, passed a resolution requesting the PCA to negotiate with
the SELLER for the transfer to the coconut farmers of the SELLER’s
option to buy the First United Bank (the "Bank") under such terms and
conditions as BUYER may deem to be in the best interest of the
coconut farmers and instructed Mrs. Maria Clara Lobregat to convey
such request to the BUYER;
WHEREAS, the PCPF further instructed Mrs. Maria Clara Lobregat to
make representations with the BUYER to utilize its funds to finance the
purchase of the Bank;
WHEREAS, the SELLER has the exclusive and personal option to buy
144,400 shares (the "Option Shares") of the Bank, constituting 72.2%
of the present outstanding shares of stock of the Bank, at the price of
P200.00 per share, which option only the SELLER can validly exercise;
WHEREAS, in response to the representations made by the coconut
farmers, the BUYER has requested the SELLER to exercise his
personal option for the benefit of the coconut farmers;
44
WHEREAS, the SELLER is willing to transfer the Option Shares to the entitled to such salaries and
BUYER at a price equal to his option price of P200 per share; emoluments as the Board of Directors
may determine;
WHEREAS, recognizing that ownership by the coconut farmers of a
commercial bank is a permanent solution to their perennial credit (c) The SELLER shall recruit and
problems, that it will accelerate the growth and development of the develop a professional management
coconut industry and that the policy of the state which the BUYER is team to manage and operate the Bank
required to implement is to achieve vertical integration thereof so that under the control and supervision of the
coconut farmers will become participants in, and beneficiaries of, the Board of Directors of the Bank;
request of PCPF that it acquire a commercial bank to be owned by the
coconut farmers and, appropriated, for that purpose, the sum of P150
(d) The BUYER undertakes to cause
Million to enable the farmers to buy the Bank and capitalize the Bank to
three (3) persons designated by the
such an extension as to be in a position to adopt a credit policy for the
SELLER to be elected to the Board of
coconut farmers at preferential rates;
Directors of the Bank;

WHEREAS, x x x the BUYER is willing to subscribe to additional

(e) The SELLER shall receive no
shares ("Subscribed Shares") and place the Bank in a more favorable
compensation for managing the Bank,
financial position to extend loans and credit facilities to coconut farmers
other than such salaries or emoluments
at preferential rates;
to which he may be entitled by virtue of
the discharge of his function and duties
NOW, THEREFORE, for and in consideration of the foregoing as President, provided … and
premises and the other terms and conditions hereinafter contained, the
parties hereby declare and affirm that their principal contractual intent
(f) The management contract may be
is (1) to ensure that the coconut farmers own at least 60% of the
assigned to a management company
outstanding capital stock of the Bank; and (2) that the SELLER shall
owned and controlled by the SELLER.
receive compensation for exercising his personal and exclusive option
to acquire the Option Shares, for transferring such shares to the
coconut farmers at the option price of P200 per share, and for 4. As compensation for exercising his personal
performing the management services required of him hereunder. and exclusive option to acquire the Option Shares
and for transferring such shares to the coconut
farmers, as well as for performing the
1. To ensure that the transfer to the coconut
management services required of him, SELLER
farmers of the Option Shares is effected with the
shall receive equity in the Bank amounting, in the
least possible delay and to provide for the faithful
aggregate, to 95,304 fully paid shares in
performance of the obligations of the parties
accordance with the procedure set forth in
hereunder, the parties hereby appoint the
paragraph 6 below;
Philippine National Bank as their escrow agent
(the "Escrow Agent").
5. In order to comply with the Central Bank
program for increased capitalization of banks and
Upon execution of this Agreement, the BUYER
to ensure that the Bank will be in a more favorable
shall deposit with the Escrow Agent such amount
financial position to attain its objective to extend to
as may be necessary to implement the terms of
the coconut farmers loans and credit facilities, the
this Agreement….
BUYER undertakes to subscribe to shares with an
aggregate par value of P80,864,000 (the
2. As promptly as practicable after execution of "Subscribed Shares"). The obligation of the
this Agreement, the SELLER shall exercise his BUYER with respect to the Subscribed Shares
option to acquire the Option Share and SELLER shall be as follows:
shall immediately thereafter deliver and turn over
to the Escrow Agent such stock certificates as are
(a) The BUYER undertakes to
herein provided to be received from the existing
subscribe, for the benefit of the coconut
stockholders of the Bank by virtue of the exercise
farmers, to shares with an aggregate par
on the aforementioned option….
value of P15,884,000 from the present
authorized but unissued shares of the
3. To ensure the stability of the Bank and Bank; and
continuity of management and credit policies to be
adopted for the benefit of the coconut farmers, the
(b) The BUYER undertakes to
parties undertake to cause the stockholders and
subscribe, for the benefit of the coconut
the Board of Directors of the Bank to authorize and
farmers, to shares with an aggregate par
approve a management contract between the
value of P64,980,000 from the increased
Bank and the SELLER under the following terms:
capital stock of the Bank, which
subscriptions shall be deemed made
(a) The management contract shall be upon the approval by the stockholders of
for a period of five (5) years, renewable the increase of the authorized capital
for another five (5) years by mutual stock of the Bank from P50 Million to
agreement of the SELLER and the P140 Million.
Bank;
The parties undertake to declare stock
(b) The SELLER shall be elected dividends of P8 Million out of the present
President and shall hold office at the authorized but unissued capital stock of
pleasure of the Board of Directors. While P30 Million.
serving in such capacity, he shall be

45
6. To carry into effect the agreement of the parties
that the SELLER shall receive as his
compensation 95,304 shares:
(a) ….
(b) With respect to the Subscribed
Shares, the BUYER undertakes, in order
to prevent the dilution of SELLER’s
equity position, that it shall cede over to
the SELLER 64,980 fully-paid shares
out of the Subscribed Shares. Such
undertaking shall be complied with in the
following manner: ….
7. The parties further undertake that the Board of
Directors and management of the Bank shall
establish and implement a loan policy for the Bank
of making available for loans at preferential rates
of interest to the coconut farmers ….
8. The BUYER shall expeditiously distribute from
time to time the shares of the Bank, that shall be
held by it for the benefit of the coconut farmers of
the Philippines under the provisions of this
Agreement, to such, coconut farmers holding
registered COCOFUND receipts on such equitable
basis as may be determine by the BUYER in its
sound discretion.
9. ….
10. To ensure that not only existing but future
coconut farmers shall be participants in and
beneficiaries of the credit policies, and shall be
entitled to the benefit of loans and credit facilities
to be extended by the Bank to coconut farmers at
preferential rates, the shares held by the coconut
farmers shall not be entitled to pre-emptive rights
with respect to the unissued portion of the
authorized capital stock or any increase thereof.
11. After the parties shall have acquired two-thirds
(2/3) of the outstanding shares of the Bank, the
parties shall call a special stockholders’ meeting of
the Bank:
(a) To classify the present authorized
capital stock of P50,000,000 divided into
500,000 shares, with a par value of
P100.00 per share into: 361,000 Class A
shares, with an aggregate par value of
P36,100,000 and 139,000 Class B
shares, with an aggregate par value of
P13,900,000. All of the Option Shares
constituting 72.2% of the outstanding
shares, shall be classified as Class A
shares and the balance of the
outstanding shares, constituting 27.8%
of the outstanding shares, as Class B
shares;
(b) To amend the articles of
incorporation of the Bank to effect the
following changes:
(i) change of corporate name
to First United Coconut Bank;
(ii) replace the present
provision restricting the
transferability of the shares
with a limitation on ownership
by any individual or entity to
not more than 10% of the
outstanding shares of the
Bank;
(iii) provide that the holders of
Class A shares shall not be
entitled to pre-emptive rights
with respect to the unissued
portion of the authorized
capital stock or any increase
thereof; and
(iv) provide that the holders of
Class B shares shall be
absolutely entitled to pre-
emptive rights, with respect to
the unissued portion of Class
B shares comprising part of
the authorized capital stock or
any increase thereof, to
subscribe to Class B shares in
proportion t the subscriptions
of Class A shares, and to pay
for their subscriptions to Class
B shares within a period of
five (5) years from the call of
the Board of Directors.
(c) To increase the authorized capital
stock of the Bank from P50 Million to
P140 Million….;
(d) To declare a stock dividend of P8
Million payable to the SELLER, the
BUYER and other stockholders of the
Bank out of the present authorized but
unissued capital stock of P30 Million;
(e) To amend the by-laws of the Bank
accordingly; and
(f) To authorize and approve the
management contract provided in
paragraph 2 above.
The parties agree that they shall vote
their shares and take all the necessary
corporate action in order to carry into
effect the foregoing provisions of this
paragraph 11 ….
12. It is the contemplation of the parties that the
Bank shall achieve a financial and equity position
to be able to lend to the coconut farmers at
preferential rates.
In order to achieve such objective, the parties shall
cause the Bank to adopt a policy of reinvestment,
by way of stock dividends, of such percentage of
the profits of the Bank as may be necessary.
13. The parties agree to execute or cause to be
executed such documents and instruments as may
be required in order to carry out the intent and
purpose of this Agreement.
46
IN WITNESS WHEREOF, … "There were shares forming part of the aforementioned 64.98% which
were later sold or transferred to non-coconut farmers.
PHILIPPINE COCONUT AUTHORITY
(BUYER) 14. Under the May 27, 1975 Agreement, defendant Cojuangco’s equity
in the FUB (now UCPB) was ten percent (10%) of the shares of stock
acquired by the PCA for the benefit of the coconut farmers.
By:

15. That the fully paid 95.304 shares of the FUB, later the UCPB,
EDUARDO COJUANGCO, JR. MARIA CLARA L. LOBREGAT
acquired by defendant … Cojuangco, Jr. pursuant to the May 25, 1975
(SELLER)
Agreement were paid for by the PCA in accordance with the terms and
conditions provided in the said Agreement.
xxx xxx xxx
16. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et
7. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the affidavits of the coconut farmers (specifically, Exhibit
al. admit that the … (PCA) was the "other buyers" represented by …. "1-Farmer" to "70-Farmer") uniformly state that:
Cojuangco, Jr. in the May 1975 Agreement entered into between
Pedro Cojuangco (on his own behalf and in behalf of other sellers
a. they are coconut farmers who sold coconut
listed in Annex "A" of the agreement) and … Cojuangco, Jr. (on his
products;
own behalf and in behalf of the other buyers). Defendant Cojuangco
insists he was the "only buyer" under the aforesaid Agreement.
b. in the sale thereof, they received COCOFUND
receipts pursuant to R.A. No. 6260;
8. …..

c. they registered the said COCOFUND receipts;

9. Defendants Lobregat, et al., and COCOFED, et al., and Ballares, et
and
al. admit that in addition to the 137,866 FUB shares of Pedro
Cojuangco, et al. covered by the Agreement, other FUB stockholders
sold their shares to PCA such that the total number of FUB shares d. by virtue thereof, and under R.A. No. 6260, P.D.
purchased by PCA … increased from 137,866 shares to 144,400 Nos. 755, 961 and 1468, they are allegedly
shares, the OPTION SHARES referred to in the Agreement of May 25, entitled to the subject UCPB shares.
1975. Defendant Cojuangco did not make said admission as to the
said 6,534 shares in excess of the 137,866 shares covered by the
but subject to the following qualifications:
Agreement with Pedro Cojuangco.

a. there were other coconut farmers who received

10. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et
UCPB shares although they did not present said
al. admit that the Agreement, described in Section 1 of Presidential
COCOFUND receipt because the PCA distributed
Decree (P.D.) No. 755 dated July 29, 1975 as the "Agreement for the
the unclaimed UCPB shares not only to those who
Acquisition of a Commercial Bank for the Benefit of Coconut Farmers"
already received their UCPB shares in exchange
executed by the Philippine Coconut Authority" and incorporated in
for their COCOFUND receipts but also to the
Section 1 of P.D. No. 755 by reference, refers to the "AGREEMENT
coconut farmers determined by a national census
FOR THE ACQUISITION OF A COMMERCIAL BANK FOR THE
conducted pursuant to PCA administrative
BENEFIT OF THE COCONUT FARMERS OF THE PHILIPPINES"
issuances;
dated May 25, 1975 between defendant Eduardo M. Cojuangco, Jr.
and the [PCA] (Annex "B" for defendant Cojuangco’s OPPOSITION TO
PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT [RE: b. [t]here were other affidavits executed by
EDUARDO M. COJUANGCO, JR.] dated September 18, 2002). Lobregat, Eleazar, Ballares and Aldeguer relative
to the said distribution of the unclaimed UCPB
shares; and
Plaintiff refused to make the same admission.

c. the coconut farmers claim the UCPB shares by

11. … the Court takes judicial notice that P.D. No. 755 was published
virtue of their compliance not only with the laws
[in] … volume 71 of the Official Gazette but the text of the agreement
mentioned in item (d) above but also with the
… was not so published with P.D. No. 755.
relevant issuances of the PCA such as, PCA
Administrative Order No. 1, dated August 20, 1975
12. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et (Exh. "298-Farmer"); PCA Resolution No. 033-78
al. admit that the PCA used public funds, … in the total amount of dated February 16, 1978….
P150 million, to purchase the FUB shares amounting to 72.2% of the
authorized capital stock of the FUB, although the PCA was later
The plaintiff did not make any admission as to the foregoing
reimbursed from the coconut levy funds and that the PCA subscription
qualifications.
in the increased capitalization of the FUB, which was later renamed the
… (UCPB), came from the said coconut levy funds….
17. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et
al. claim that the UCPB shares in question have legitimately become
13. Pursuant to the May 25, 1975 Agreement, out of the 72.2% shares
the private properties of the 1,405,366 coconut farmers solely on the
of the authorized and the increased capital stock of the FUB (later
basis of their having acquired said shares in compliance with R.A. No.
UCPB), entirely paid for by PCA, 64.98% of the shares were placed in
6260, P.D. Nos. 755, 961 and 1468 and the administrative issuances
the name of the "PCA for the benefit of the coconut farmers" and
of the PCA cited above.
7,22% were given to defendant Cojuangco. The remaining 27.8%
shares of stock in the FUB which later became the UCPB were not
covered by the two (2) agreements referred to in item no. 6, par. (a) 18. …..
and (b) above.

47
On July 11, 2003, the Sandiganbayan issued the assailed PSJ-A 4. The so-called "Farmers’ UCPB shares" covered
finding for the Republic, the judgment accentuated by (a) the by 64.98% of the UCPB shares of stock, which
observation that COCOFED has all along manifested as representing formed part of the 72.2% of the shares of stock of
over a million coconut farmers and (b) a declaration on the issue of the former FUB and now of the UCPB, the entire
ownership of UCPB shares and the unconstitutionality of certain consideration of which was charged by PCA to the
provisions of P.D. No. 755 and its implementing regulations. On the CCSF, are hereby declared conclusively owned
matter of ownership in particular, the anti-graft court declared that the by, the Plaintiff Republic of the Philippines.
64.98% sequestered "Farmers’ UCPB shares," plus other shares paid
by PCA are "conclusively" owned by the Republic. In its pertinent
C. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT
parts, PSJ-A, resolving the separate motions for summary judgment in
(RE: EDUARDO M. COJUANGCO, JR.) dated September
seriatim with separate dispositive portions for each, reads:
18, 2002 filed by Plaintiff.

WHEREFORE, in view of the foregoing, we rule as follows:

1. Sec. 1 of P.D. No. 755 did not validate the
Agreement between PCA and defendant Eduardo
xxx xxx xxx M. Cojuangco, Jr. dated May 25, 1975 nor did it
give the Agreement the binding force of a law
because of the non-publication of the said
A. Re: CLASS ACTION MOTION FOR A SEPARATE
Agreement.
SUMMARY JUDGMENT dated April 11, 2001 filed by
Defendant Maria Clara L. Lobregat, COCOFED, et al., and
Ballares, et al. 2. Regarding the questioned transfer of the shares
of stock of FUB (later UCPB) by PCA to defendant
Cojuangco or the so-called "Cojuangco UCPB
The Class Action Motion for Separate Summary Judgment
shares" which cost the PCA more than Ten Million
dated April 11, 2001 filed by defendant Maria Clara L.
Pesos in CCSF in 1975, we declare, that the
Lobregat, COCOFED, et al. and Ballares, et al., is hereby
transfer of the following FUB/UCPB shares to
DENIED for lack of merit.
defendant Eduardo M. Cojuangco, Jr. was not
supported by valuable consideration, and therefore
B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT null and void:
(RE: COCOFED, ET AL. AND BALLARES, ET AL.) dated
April 22, 2002 filed by Plaintiff.
a. The 14,400 shares from the "Option
Shares";
1. a. Section 1 of P.D. No. 755, taken in relation to
Section 2 of the same P.D., is unconstitutional: (i)
b. Additional Bank Shares Subscribed
for having allowed the use of the CCSF to benefit
and Paid by PCA, consisting of:
directly private interest by the outright and
unconditional grant of absolute ownership of the
FUB/UCPB shares paid for by PCA entirely with 1. Fifteen Thousand Eight
the CCSF to the undefined "coconut farmers", Hundred Eighty-Four (15,884)
which negated or circumvented the national policy shares out of the authorized
or public purpose declared by P.D. No. 755 to but unissued shares of the
accelerate the growth and development of the bank, subscribed and paid by
coconut industry and achieve its vertical PCA;
integration; and (ii) for having unduly delegated
legislative power to the PCA.
2. Sixty Four Thousand Nine
Hundred Eighty (64,980)
b. The implementing regulations issued shares of the increased
by PCA, namely, Administrative Order capital stock subscribed and
No. 1, Series of 1975 and Resolution paid by PCA; and
No. 074-78 are likewise invalid for their
failure to see to it that the distribution of
3. Stock dividends declared
shares serve exclusively or at least
pursuant to paragraph 5 and
primarily or directly the aforementioned
paragraph 11 (iv) (d) of the
public purpose or national policy
Agreement.
declared by P.D. No. 755.

3. The above-mentioned shares of stock of the

2. Section 2 of P.D. No. 755 which mandated that
FUB/UCPB transferred to defendant Cojuangco
the coconut levy funds shall not be considered
are hereby declared conclusively owned by the
special and/or fiduciary funds nor part of the
Republic of the Philippines.
general funds of the national government and
similar provisions of Sec. 5, Art. III, P.D. No. 961
and Sec. 5, Art. III, P.D. No. 1468 contravene the 4. The UCPB shares of stock of the alleged fronts,
provisions of the Constitution, particularly, Art. IX nominees and dummies of defendant Eduardo M.
(D), Sec. 2; and Article VI, Sec. 29 (3). Cojuangco, Jr. which form part of the 72.2%
shares of the FUB/UCPB paid for by the PCA with
public funds later charged to the coconut levy
3. Lobregat, COCOFED, et al. and Ballares, et al.
funds, particularly the CCSF, belong to the plaintiff
have not legally and validly obtained title of
Republic of the Philippines as their true and
ownership over the subject UCPB shares by virtue
beneficial owner.
of P.D. No. 755, the Agreement dated May 25,
1975 between the PCA and defendant Cojuangco,
and PCA implementing rules, namely, Adm. Order Let trial of this Civil Case proceed with respect to the issues
No. 1, s. 1975 and Resolution No. 074-78. which have not been disposed of in this Partial Summary

48
 Judgment. For this purpose, the plaintiff’s Motion Ad
Cautelam to Present Additional Evidence dated March 28,
2001 is hereby GRANTED.
From PSJ-A, Lobregat moved for reconsideration which
COCOFED, et al. and Ballares, et al. adopted. All these
motions were denied in the extended assailed Resolution51 of
December 28, 2004.
Civil Case No. 0033-F
Here, the Republic, after filing its pre-trial brief, interposed a Motion for
Judgment on the Pleadings and/or for [PSJ] (Re: Defendants CIIF
Companies, 14 Holding Companies and COCOFED, et al.) praying
that, in light of the parties’ submissions and the supervening ruling
in Republic v. COCOFED52 which left certain facts beyond question, a
judgment issue:
1) Declaring Section 5 of Article III of P.D. No. 961 (Coconut
Industry Code) and Section 5 of Article III of P.D. No. 1468
(Revised Coconut Industry Code) to be unconstitutional;
2) Declaring that CIF payments under RA No. 6260 are not
valid and legal bases for ownership claims over the CIIF
companies and, ultimately, the CIIF block of SMC shares;
and
3) Ordering the reconveyance of the CIIF companies, the 14
holding companies, and the 27% CIIF block of San Miguel
Corporation shares of stocks in favor of the government and
declaring the ownership thereof to belong to the government
in trust for all the coconut farmers.
At this juncture, it may be stated that, vis-à-vis CC 0033-F, Gabay
Foundation, Inc. sought but was denied leave to intervene. But
petitioners COCOFED, et al. moved and were allowed to intervene53 on
the basis of their claim that COCOFED members beneficially own the
block of SMC shares held by the CIIF companies, at least 51% of
whose capitol stock such members own. The claim, as the OSG
explained, arose from the interplay of the following: (a) COCOFED et
al.’s alleged majority ownership of the CIIF companies under Sections
954 and 1055 of P.D. No. 1468, and (b) their alleged entitlement to
shares in the CIIF companies by virtue of their supposed registration of
COCOFUND receipts allegedly issued to COCOFED members upon
payment of the R.A. 6260 CIF levy.56
Just as in CC No. 0033-A, the Sandiganbayan also conducted a
hearing in CC No. 0033-F to determine facts that appeared without
substantial controversy as culled from the records and, by Order57 of
February 23, 2004, outlined those facts.
On May 7, 2004, the Sandiganbayan, in light of its ruling in CC No.
0033-A and disposing of the issue on ownership of the CIIF oil and
holding companies and their entire block of subject SMC shares,
issued the assailed PSJ-F also finding for the Republic, the fallo of
which pertinently reading:
WHEREFORE, in view of the foregoing, we hold that:
The Motion for Partial Summary Judgment (Re: Defendants CIIF
Companies, 14 Holding Companies and Cocofed et al.) filed by Plaintiff
is hereby GRANTED. ACCORDINGLY, THE CIIF COMPANIES,
namely:
1. Southern Luzon Coconut Oil Mills (SOLCOM);
2. Cagayan de Oro Oil Co., Inc. (CAGOIL);
3. Iligan Coconut Industries, Inc. (ILICOCO);
4. San Pablo Manufacturing Corp. (SPMC);
5. Granexport Manufacturing Corp. (GRANEX); and
6. Legaspi Oil Co., Inc. (LEGOIL),
AS WELL AS THE 14 HOLDING COMPANIES, NAMELY:
1. Soriano Shares, Inc.;
2. ACS Investors, Inc.;
3. Roxas Shares, Inc.;
4. Arc Investors, Inc.;
5. Toda Holdings, Inc.;
6. AP Holdings, Inc.;
7. Fernandez Holdings, Inc.;
8. SMC Officers Corps, Inc.;
9. Te Deum Resources, Inc.;
10. Anglo Ventures, Inc.;
11. Randy Allied Ventures, Inc.;
12. Rock Steel Resources, Inc.;
13. Valhalla Properties Ltd., Inc.; and
14. First Meridian Development, Inc.
AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION
(SMC) SHARES OF STOCK TOTALLING 33,133,266 SHARES AS OF
1983 … ARE DECLARED OWNED BY THE GOVERNMENT IN
TRUST FOR ALL THE COCONUT FARMERS GOVERNMENT AND
ORDERDED RECONVEYED TO THE GOVERNMENT.58 (Emphasis
and capitalization in the original; underscoring added.)
Let the trial of this Civil Case proceed with respect to the issues which
have not been disposed of in this Partial Summary Judgment, including
the determination of whether the CIIF Block of SMC Shares adjudged
to be owned by the Government represents 27% of the issued and
outstanding capital stock of SMC according to plaintiff or to 31.3% of
said capital stock according to COCOFED, et al and Ballares, et al.
SO ORDERED.
Expressly covered by the declaration and the reconveyance directive
are "all dividends declared, paid and issued thereon as well as any
increments thereto arising from, but not limited to, exercise of pre-
emptive rights."
On May 26, 2004, COCOFED et al., filed an omnibus motion (to
dismiss for lack of subject matter jurisdiction or alternatively for
reconsideration and to set case for trial), but this motion was denied
per the Sandiganbayan’s Resolution59 of December 28, 2004.
49
On May 11, 2007, in CC 0033-A, the Sandiganbayan issued a
Resolution60 denying Lobregat’s and COCOFED’s separate motions to
set the case for trial/hearing, noting that there is no longer any point in
proceeding to trial when the issue of their claim of ownership of the
sequestered UCPB shares and related sub-issues have already been
resolved in PSJ-A.
For ease of reference, PSJ-A and PSJ-F each originally decreed trial
or further hearing on issues yet to be disposed of. However, the
Resolution61 issued on June 5, 2007 in CC 0033-A and the
Resolution62 of May 11, 2007 rendered in CC 0033-F effectively
modified the underlying partial summary judgments by deleting that
portions on the necessity of further trial on the issue of ownership of (1)
the sequestered UCPB shares, (2) the CIIF block of SMC shares and
(3) the CIIF companies. As the anti-graft court stressed in both
resolutions, the said issue of ownership has been finally resolved in the
corresponding PSJs.63
Hence, the instant petitions.
The Issues
COCOFED et al., in G.R. Nos. 177857-58, impute reversible error on
the Sandiganbayan for (a) assuming jurisdiction over CC Nos. 0033-A
and 0033-F despite the Republic’s failure to establish below the
jurisdictional facts, i.e., that the sequestered assets sought to be
recovered are ill-gotten in the context of E.O. Nos. 1, 2, 14 and 14-A;
(b) declaring certain provisions of coco levy issuances unconstitutional;
and (c) denying the petitioners’ plea to prove that the sequestered
assets belong to coconut farmers. Specifically, petitioners aver:
I. The Sandiganbayan gravely erred … when it refused to acknowledge
that it did not have subject matter jurisdiction over the ill-gotten wealth
cases because the respondent Republic failed to prove, and did not
even attempt to prove, the jurisdictional fact that the sequestered
assets constitute ill-gotten wealth of former President Marcos and
Cojuangco. Being without subject matter jurisdiction over the ill-gotten
wealth cases, a defect previously pointed out and repeatedly assailed
by COCOFED, et al., the assailed PSJs and the assailed Resolutions
are all null and void.
A. Insofar as the ill-gotten wealth cases are
concerned, the Sandiganbayan’s subject matter
jurisdiction is limited to the recovery of "ill-gotten
wealth" as defined in Eos 1, 2, 14 and 14-A.
Consistent with that jurisdiction, the subdivided
complaints in the ill-gotten wealth cases expressly
alleged that the sequestered assets constitutes "ill-
gotten wealth" of former President Marcos and
Cojuangco, having been filed pursuant to, and in
connection with, Eos 1, 2, 14 and 14-A, the
Sandiganbayan gravely erred, if not exceeded its
jurisdiction, when it refused to require the
respondent Republic to prove the aforesaid
jurisdictional fact.
B. …. Having no evidence on record to prove the
said jurisdictional fact, the Sandiganbayan gravely
erred, if not grossly exceeded its statutory
jurisdiction, when it rendered the assailed PSJs
instead of dismissing the ill-gotten wealth cases….
C. Under Section 1 of Rule 9 of the Rules of Court,
lack of jurisdiction over the subject matter may be
raised at any stage of the proceedings…. In any
event, in pursuing its intervention in the ill-gotten
wealth cases, COCOFED, et al precisely
questioned the Sandiganbayan’s subject matter
jurisdiction, asserted that the jurisdictional fact
does not exist, moved to dismiss the ill-gotten
wealth cases and even prayed that the writs of
sequestration over the sequestered assets be
lifted. In concluding that those actions constitute
an "invocation" of its jurisdiction, the
Sandiganbayan clearly acted whimsically,
capriciously and in grave abuse of its discretion.
II. Through the assailed PSJs and the assailed Resolutions, the
Sandiganbayan declared certain provisions of the coconut levy laws as
well as certain administrative issuances of the PCA as unconstitutional.
In doing so, the Sandiganbayan erroneously employed, if not grossly
abused, its power of judicial review….
A. … the Sandiganbayan gravely erred, if not
brazenly exceeded its statutory jurisdiction and
abused the judicial powers, when it concluded that
the public purpose of certain coconut levy laws
was not evident, when it thereupon formulated its
own public policies and purposes for the coconut
levy laws and at the same time disregarded the
national policies specifically prescribed therein.
B. In ruling that "it is not clear or evident how the
means employed by the [coconut levy] laws" would
"serve the avowed purpose of the law" or "can
serve a public purpose", the Sandiganbayan
erroneously examined, determined and evaluated
the wisdom of such laws, a constitutional power
within the exclusive province of the legislative
department.
C. The Sandiganbayan gravely erred in declaring
Section 1 of PD 755, PCA [AO] 1 and PCA
Resolution No. 074-78 constitutionally infirm by
reason of alleged but unproven and
unsubstantiated flaws in their implementation.
D. The Sandiganbayan gravely erred in concluding
that Section 1 of PD 755 constitutes an undue
delegation of legislative power insofar as it
authorizes the PCA to promulgate rules and
regulations governing the distribution of the UCPB
shares to the coconut farmers. Rather, taken in
their proper context, Section 1 of PD 755 was
complete in itself, [and] prescribed sufficient
standards that circumscribed the discretion of the
PCA….
More importantly, this Honorable Court has, on three (3) separate
occasions, rejected respondent Republic’s motion to declare the
coconut levy laws unconstitutional. The Sandiganbayan gravely erred,
if not acted in excess of its jurisdiction, when it ignored the settled
doctrines of law of the case and/or stare decisis and granted
respondent Republic’s fourth attempt to declare the coconut levy laws
unconstitutional, despite fact that such declaration of unconstitutionality
was not necessary to resolve the ultimate issue of ownership involved
in the ill-gotten wealth cases.
III. In rendering the assailed PSJs and thereafter refusing to proceed to
trial on the merits, on the mere say-so of the respondent Republic, the
Sandiganbayan committed gross and irreversible error, gravely abused
its judicial discretion and flagrantly exceeded its jurisdiction as it
effectively sanctioned the taking of COCOFED, et al.’s property by the
respondent Republic without due process of law and through
retroactive application of the declaration of unconstitutionality of the
coconut levy laws, an act that is not only illegal and violative of the
settled Operative Fact Doctrine but, more importantly, inequitable to
the coconut farmers whose only possible mistake, offense or
misfortune was to follow the law.
A. ….
50
 1. In the course of the almost twenty
(20) years that the ill-gotten wealth
cases were pending, COCOFED, et al.
repeatedly asked to be allowed to
present evidence to prove that the true,
actual and beneficial owners of the
sequestered assets are the coconut
farmers and not Cojuangco, an alleged
"crony" of former President Marcos. The
Sandiganbayan grievously erred and
clearly abused its judicial discretion
when it repeatedly and continuously
denied COCOFED, et al. the opportunity
to present their evidence to disprove the
baseless allegations of the Ill-Gotten
Wealth Cases that the sequestered
assets constitute ill-gotten wealth of
Cojuangco and of former President
Marcos, an error that undeniably and
illegally deprived COCOFED, et al of
their constitutional right to be heard.
2. The Sandiganbayan erroneously
concluded that the Assailed PSJs and
Assailed Resolutions settled the ultimate
issue of ownership of the Sequestered
Assets and, more importantly, resolved
all factual and legal issues involved in
the ill-gotten wealth cases. Rather, as
there are triable issues still to be
resolved, it was incumbent upon the
Sandiganbayan to receive evidence
thereon and conduct trial on the merits.
3. Having expressly ordered the parties
to proceed to trial and thereafter
decreeing that trial is unnecessary as
the Assailed PSJs were "final" and
"appealable" judgments, the
Sandiganbayan acted whimsically,
capriciously and contrary to the Rules of
Court, treated the parties in the ill-gotten
wealth cases unfairly, disobeyed the
dictate of this Honorable Court and,
worse, violated COCOFED, et al’s right
to due process and equal protection of
the laws.
B. The Sandiganbayan gravely erred if not grossly
abused its discretion when it repeatedly
disregarded, and outrightly refused to recognize,
the operative facts that existed as well as the
rights that vested from the time the coconut levy
laws were enacted until their declaration of
unconstitutionality in the assailed PSJs. As a
result, the assailed PSJs constitute a proscribed
retroactive application of the declaration of
unconstitutionality, a taking of private property,
and an impairment of vested rights of ownership,
all without due process of law.64 Otherwise stated,
the assailed PSJs and the assailed Resolutions
effectively penalized the coconut farmers whose
only possible mistake, offense or misfortune was
to follow the laws that were then legal, valid and
constitutional.
IV. The voluminous records of these ill-gotten wealth cases readily
reveal the various dilatory tactics respondent Republic resorted to….
As a result, despite the lapse of almost twenty (20) years of litigation,
the respondent Republic has not been required to, and has not even
attempted to prove, the bases of its perjurious claim that the
sequestered assets constitute ill-gotten wealth of former President
Marcos and his crony, Cojuangco. In tolerating respondent Republic’s
antics for almost twenty (20) years…, the Sandiganbayan so glaringly
departed from procedure and thereby flagrantly violated COCOFED, et
al.’s right to speedy trial.
In G.R. No. 178193, petitioner Ursua virtually imputes to the
Sandiganbayan the same errors attributed to it by petitioners in G.R.
Nos. 177857-58.65 He replicates as follows:
I
The Sandiganbayan decided in a manner not in accord with the Rules
of Court and settled jurisprudence in rendering the questioned PSJ as
final and appealable thereafter taking the sequestered assets from
their owners or record without presentation of any evidence, thus, the
questioned PSJ and the questioned Resolutions are all null and void.
A. The Sandiganbayan’s jurisdiction insofar as the ill-gotten
wealth cases are concerned, is limited to the recovery of "ill-
gotten wealth" as defined in Executive Orders No. 1, 2, 14
and 14-A.
B. The Sandiganbayan should have decided to dismiss the
case or continue to receive evidence instead of ruling
against the constitutionality of some coconut levy laws and
PCA issuances because it could decide on other grounds
available to it.
II
The Sandiganbayan gravely erred when it declared PD. 755, Section 1
and 2, Section 5, Article 1 of PD 961, and Section 5 of Art. III of PD
1468 as well as administrative issuances of the PCA as
unconstitutional in effect, it abused it power of judicial review….
A. The Sandiganbayan gravely erred in concluding that the
purpose of PD 755 Section 1 and 2, Section 5, Article 1 of
PD 961, and Section 5 of Art. III of PD 1468 is not evident. It
then proceeded to formulated its own purpose thereby
intruding into the wisdom of the legislature in enacting [t]he
law.
B. The Sandiganbayan gravely erred in declaring Section 1
of PD 755, PCA [AO] No. 1 and PCA Resolution No. 074-78
unconstitutional due to alleged flaws in their implementation.
C. The Sandiganbayan gravely erred in concluding that
Section 1 of PD No. 755 constitutes an undue delegation of
legislative power insofar as it authorizes the PCA to
promulgate rules and regulations governing the distribution
of the UCPB shares to the coconut farmers. Section 1 of PD
755 was complete in itself, prescribed sufficient standards
that circumscribed the discretion of the PCA and merely
authorized the PCA to fill matters of detail an execution
through promulgated rules and regulations.
III
The coconut levy laws, insofar as they allowed the PCA to promulgate
rules and regulations governing the distribution of the UCPB to the
coconut farmers, do not constitute an undue delegation of legislative
power as they were complete in themselves and prescribed sufficient
standards that circumscribed the discretion of the PCA.
IV
Assuming ex-gratia argumenti that the coconut levy laws are
unconstitutional, still, the owners thereof cannot be deprived of their
51
property without due process of law considering that they have in good
faith acquired vested rights over the sequestered assets.
In sum, the instant petitions seek to question the decisions of the
Sandiganbayan in both CC Nos. 0033-A and 0033-F, along with the
preliminary issues of objection. We shall address at the outset, (1) the
common preliminary questions, including jurisdictional issue, followed
by (2) the common primary contentious issues (i.e. constitutional
questions), and (3) the issues particular to each case.
The Court’s Ruling
I
The Sandiganbayan has jurisdiction over the subject
matter ofthe subdivided amended complaints.
The primary issue, as petitioners COCOFED, et al. and Ursua put
forward, boils down to the Sandiganbayan’s alleged lack of jurisdiction
over the subject matter of the amended complaints. Petitioners
maintain that the jurisdictional facts necessary to acquire jurisdiction
over the subject matter in CC No. 0033-A have yet to be established.
In fine, the Republic, so petitioners claim, has failed to prove the ill-
gotten nature of the sequestered coconut farmers’ UCPB shares.
Accordingly, the controversy is removed from the subject matter
jurisdiction of the Sandiganbayan and necessarily any decision
rendered on the merits, such as PSJ-A and PSJ-F, is void.
To petitioners, it behooves the Republic to prove the jurisdictional facts
warranting the Sandiganbayan’s continued exercise of jurisdiction over
ill-gotten wealth cases. Citing Manila Electric Company [Meralco] v.
Ortañez,66petitioners argue that the jurisdiction of an adjudicatory
tribunal exercising limited jurisdiction, like the Sandiganbayan,
"depends upon the facts of the case as proved at the trial and not
merely upon the allegation in the complaint."67 Cited too is PCGG v.
Nepumuceno,68 where the Court held:
The determinations made by the PCGG at the time of issuing
sequestration … orders cannot be considered as final determinations;
that the properties or entities sequestered or taken-over in fact
constitute "ill-gotten wealth" according to [E.O.] No. 1 is a question
which can be finally determined only by a court – the Sandiganbayan.
The PCGG has the burden of proving before the Sandiganbayan that
the assets it has sequestered or business entity it has provisionally
taken-over constitutes "ill-gotten wealth" within the meaning of [E.O.]
No. 1 and Article No. XVIII (26) of the 1987 Constitution.
Petitioners’ above posture is without merit.
Justice Florenz D. Regalado explicates subject matter jurisdiction:
16. Basic … is the doctrine that the jurisdiction of a court over the
subject-matter of an action is conferred only by the Constitution or the
law and that the Rules of Court yield to substantive law, in this case,
the Judiciary Act and B.P. Blg. 129, both as amended, and of which
jurisdiction is only a part. Jurisdiction … cannot be acquired through, or
waived, enlarged or diminished by, any act or omission of the parties;
neither can it be conferred by the acquiescence of the court….
Jurisdiction must exist as a matter of law…. Consequently, questions
of jurisdiction may be raised for the first time on appeal even if such
issue was not raised in the lower court….
17. Nevertheless, in some case, the principle of estoppel by laches has
been availed … to bar attacks on jurisdiction….69
It is, therefore, clear that jurisdiction over the subject matter is
conferred by law. In turn, the question on whether a given suit comes
within the pale of a statutory conferment is determined by the
allegations in the complaint, regardless of whether or not the plaintiff
will be entitled at the end to recover upon all or some of the claims
asserted therein.70 We said as much in Magay v. Estiandan:71
[J]urisdiction over the subject matter is determined by the allegations of
the complaint, irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted therein-a matter that
can be resolved only after and as a result of the trial. Nor may the
jurisdiction of the court be made to depend upon the defenses set up in
the answer or upon the motion to dismiss, for, were we to be governed
by such rule, the question of jurisdiction could depend almost entirely
upon the defendant.
Of the same tenor was what the Court wrote in Allied Domecq
Philippines, Inc. v. Villon:72
Jurisdiction over the subject matter is the power to hear and determine
the general class to which the proceedings in question belong.
Jurisdiction over the subject matter is conferred by law and not by the
consent or acquiescence of any or all of the parties or by erroneous
belief of the court that it exists. Basic is the rule that jurisdiction over
the subject matter is determined by the cause or causes of action as
alleged in the complaint.
The material averments in subdivided CC No. 0033-A and CC No.
0033-F included the following:
12. Defendant Eduardo Cojuangco, Jr served as a public officer during
the Marcos administration….
13. Defendant Eduardo Cojuangco, Jr., taking advantage of his
association, influence and connection, acting in unlawful concert with
the [Marcoses] and the individual defendants, embarked upon devices,
schemes and stratagems, including the use of defendant corporations
as fronts, to unjustly enrich themselves as the expense of the Plaintiff
and the Filipino people, such as when he –
a) manipulated, beginning the year 1975 with the active
collaboration of Defendants …, Marai Clara Lobregat, Danilo
Ursua [etc.], the purchase by the … (PCA) of 72.2% of the
outstanding capital stock of the … (FUB) which was
subsequently converted into a universal bank named …
(UCPB) through the use of … (CCSF) … in a manner
contrary to law and to the specific purposes for which said
coconut levy funds were imposed and collected under P.D.
276 and under anomalous and sinister designs and
circumstances, to wit:
(i) Defendant Eduardo Cojuangco, Jr. coveted the
coconut levy funds as a cheap, lucrative and risk-
free source of funds with which to exercise his
private option to buy the controlling interest in
FUB….
(ii) to legitimize a posteriori his highly anomalous
and irregular use and diversion of government
funds to advance his own private and commercial
interests … Defendant Eduardo Cojuangco, Jr.
caused the issuance … of PD 755 (a) declaring
that the coconut levy funds shall not be considered
special and fiduciary and trust funds …
conveniently repealing for that purpose a series of
previous decrees … establishing the character of
the coconut levy funds as special, fiduciary, trust
and governments; (b) confirming the agreement
between …Cojuangco and PCA on the purchase
of FUB by incorporating by reference said private
commercial agreement in PD 755;
(iii) ….
52
 (iv) To perpetuate his opportunity … to build his
economic empire, … Cojuangco caused the
issuance of an unconstitutional decree (PD 1468)
requiring the deposit of all coconut levy funds with
UCPB interest free to the prejudice of the
government and finally
(v) Having fully established himself as the
undisputed "coconut king" with unlimited powers to
deal with the coconut levy funds, the stage was
now set for Defendant Eduardo Cojuangco, Jr. to
launch his predatory forays into almost all aspects
of Philippine activity namely …. oil mills.
(vi) In gross violation of their fiduciary positions
and in contravention of the goal to create a bank
for coconut farmers of the country, the capital
stock of UCPB as of February 25, 1986 was
actually held by the defendants, their lawyers,
factotum and business associates, thereby finally
gaining control of the UCPB by misusing the
names and identities of the so-called "more than
one million coconut farmers."
(b) created and/or funded with the use of coconut levy funds
various corporations, such as … (COCOFED) … with the
active collaboration and participation of Defendants Juan
Ponce Enrile, Maria Clara Lobregat … most of whom
comprised the interlocking officers and directors of said
companies; dissipated, misused and/or misappropriated a
substantial part of said coco levy funds … FINALLY GAIN
OWNERSHIP AND CONTROL OF THE UNITED COCONUT
PLANTERS BANK BY MISUSING THE NAMES AND/OR
IDENTIFIES OF THE SO-CALLLED "MORE THAN ONE
MILLION COCONUT FARNMERS;
(c) misappropriated, misused and dissipated P840 million of
the … (CIDF) levy funds deposited with the National
Development Corporation (NIDC) as administrator –trustee
of said funds and later with UCPB, of which Defendant
Eduardo Cojuangco, Jr. was the Chief Executive Officer….
(d) established and caused to be funded with coconut levy
fundfs, with the active collaboration of Defendants Ferdinand
E. Marcos through the issuance of LOI 926 and of [other]
defendants … the United Coconut Oil Mills, Inc., a
corporation controlled by Defendant Eduardo Cojuangco, Jr.
and bought sixteen (16) certain competing oil mills at
exorbitant prices … then mothballed them….
xxx xxx xxx
(i) misused coconut levy funds to buy majority of the
outstanding shares of stock of San Miguel Corporation….
xxx xxx xxx
14. Defendants Eduardo Cojuangco, Jr. … of the Angara Concepcion
Cruz Regala and Abello law offices (ACCRA) plotted, devised,
schemed, conspired and confederated with each other in setting up,
through the use of the coconut levy funds the financial and corporate
structures that led to the establishment of UCPB UNICOM [etc.] and
more than twenty other coconut levy funded corporations including the
acquisition of [SMC] shares and its institutionalization through
presidential directives of the coconut monopoly….
xxx xxx xxx
16. The acts of Defendants, singly or collectively, and /or in unlawful
concert with one another, constitute gross abuse of official position and
authority, flagrant breach of public trust and fiduciary obligations,
brazen abuse of right and power, unjust enrichment, violation of the
Constitution and laws … to the grave and irreparable damage of the
Plaintiff and the Filipino people.
CC No. 0033-F
12. Defendant Eduardo Cojuangco, Jr., served as a public officer
during the Marcos administration….
13. Having fully established himself as the undisputed "coconut king"
with unlimited powers to deal with the coconut levy funds, the stage
was now set for … Cojuangco, Jr. to launch his predatory forays into
almost all aspects of Philippine economic activity namely … oil mills ….
14. Defendant Eduardo Cojuangco, Jr., taking undue advantage of his
association, influence, and connection, acting in unlawful concert with
Defendants Ferdinand E. Marcos and Imelda R. Marcos, and the
individual defendants, embarked upon devices, schemes and
stratagems, including the use of defendant corporations as fronts, to
unjustly enrich themselves at the expense of Plaintiff and the Filipino
people….
(a) Having control over the coconut levy, Defendant Eduardo
M. Cojuangco invested the funds in diverse activities, such
as the various businesses SMC was engaged in….;
xxx xxx xxx
(c) Later that year [1983], Cojuangco also acquired the
Soriano stocks through a series of complicated and secret
agreements, a key feature of which was a "voting trust
agreement" that stipulated that Andres, Jr. or his heir would
proxy over the vote of the shares owned by Soriano and
Cojuangco….
xxx xxx xxx
(g) All together, Cojuangco purchased 33 million shares of
the SMC through the … 14 holding companies
xxx xxx xxx
3.1. The same fourteen companies were in turn owned by
the … six (6) so-called CIIF Companies….
(h) Defendant Corporations are but "shell" corporations
owned by interlocking shareholders who have previously
admitted that they are just "nominee stockholders" who do
not have any proprietary interest over the shares in their
names…. [L]awyers of the Angara Abello Concepcion
Regala & Cruz (ACCRA) Law offices, the previous counsel
who incorporated said corporations, prove that they were
merely nominee stockholders thereof.
(l) These companies, which ACCRA Law Offices organized
for Defendant Cojuangco to be able to control more than
60% of SMC shares, were funded by institutions which
depended upon the coconut levy such as the UCPB,
UNICOM, … (COCOLIFE), among others. Cojuangco and
his ACCRA lawyers used the funds from 6 large coconut oil
mills and 10 copra trading companies to borrow money from
the UCPB and purchase these holding companies and the
SMC stocks. Cojuangco used $ 150 million from the coconut
levy, broken down as follows:
53
 Amount Source Purpose
(in million)
$ 22.26 Oil Mills equity in holding
Companies
$ 65.6 Oil Mills loan to holding
Companies
$ 61.2 UCPB loan to holding
Companies [164]
The entire amount, therefore, came from the coconut levy,
some passing through the Unicom Oil mills, others directly
from the UCPB.
(m) With his entry into the said Company, it began to get
favors from the Marcos government, significantly the
lowering of the excise taxes … on beer, one of the main
products of SMC.
15. Defendants … plotted, devised, schemed, conspired and
confederated with each other in setting up, through the use of coconut
levy funds, the financial and corporate framework and structures that
led to the establishment of UCPB, [etc.], and more than twenty other
coconut levy-funded corporations, including the acquisition of [SMC]
shares and its institutionalization through presidential directives of the
coconut monopoly….
16. The acts of Defendants, singly or collectively, and/or in unlawful
concert with one another, constitute gross abuse of official position and
authority, flagrant breach of public trust and fiduciary obligations,
brazen abuse of right and power, unjust enrichment, violation of the
constitution and laws of the Republic of the Philippines, to the grave
and irreparable damage of Plaintiff and the Filipino people.73
Judging from the allegations of the defendants’ illegal acts thereat
made, it is fairly obvious that both CC Nos. 0033-A and CC 0033-F
partake, in the context of EO Nos. 1, 2 and 14, series of 1986, the
nature of ill-gotten wealth suits. Both deal with the recovery of
sequestered shares, property or business enterprises claimed, as
alleged in the corresponding basic complaints, to be ill-gotten assets of
President Marcos, his cronies and nominees and acquired by taking
undue advantage of relationships or influence and/or through or as a
result of improper use, conversion or diversion of government funds or
property. Recovery of these assets––determined as shall hereinafter
be discussed as prima facie ill-gotten––falls within the unquestionable
jurisdiction of the Sandiganbayan.74
P.D. No. 1606, as amended by R.A. 7975 and E.O. No. 14, Series of
1986, vests the Sandiganbayan with, among others, original jurisdiction
over civil and criminal cases instituted pursuant to and in connection
with E.O. Nos. 1, 2, 14 and 14-A. Correlatively, the PCGG Rules and
Regulations defines the term "Ill-Gotten Wealth" as "any asset,
property, business enterprise or material possession of persons within
the purview of [E.O.] Nos. 1 and 2, acquired by them directly, or
indirectly thru dummies, nominees, agents, subordinates and/or
business associates by any of the following means or similar
schemes":
(1) Through misappropriation, conversion, misuse or
malversation of public funds or raids on the public treasury;
(2) ….;
(3) By the illegal or fraudulent conveyance or disposition of
assets belonging to the government or any of its
subdivisions, agencies or instrumentalities or government-
owned or controlled corporations;
(4) By obtaining, receiving or accepting directly or indirectly
any shares of stock, equity or any other form of interest or
participation in any business enterprise or undertaking;
(5) Through the establishment of agricultural, industrial or
commercial monopolies or other combination and/or by the
issuance, promulgation and/or implementation of decrees
and orders intended to benefit particular persons or special
interests; and
(6) By taking undue advantage of official position, authority,
relationship or influence for personal gain or
benefit.75 (Emphasis supplied)
Section 2(a) of E.O. No. 1 charged the PCGG with the task of assisting
the President in "[T]he recovery of all ill-gotten wealth accumulated by
former … [President] Marcos, his immediate family, relatives,
subordinates and close associates … including the takeover or
sequestration of all business enterprises and entities owned or
controlled by them, during his administration, directly or
through nominees, by taking undue advantage of their public office
and/or using their powers, authority, influence, connections or
relationship." Complementing the aforesaid Section 2(a) is Section 1 of
E.O. No. 2 decreeing the freezing of all assets "in which the [Marcoses]
their close relatives, subordinates, business associates, dummies,
agents or nominees have any interest or participation."
The Republic’s averments in the amended complaints, particularly
those detailing the alleged wrongful acts of the defendants, sufficiently
reveal that the subject matter thereof comprises the recovery by the
Government of ill-gotten wealth acquired by then President Marcos, his
cronies or their associates and dummies through the unlawful,
improper utilization or diversion of coconut levy funds aided by P.D.
No. 755 and other sister decrees. President Marcos himself issued
these decrees in a brazen bid to legalize what amounts to private
taking of the said public funds.
Petitioners COCOFED et al. and Ursua, however, would insist that the
Republic has failed to prove the jurisdiction facts: that the sequestered
assets indeed constitute ill-gotten wealth as averred in the amended
subdivided complaints.
This contention is incorrect.
There was no actual need for Republic, as plaintiff a quo, to adduce
evidence to show that the Sandiganbayan has jurisdiction over the
subject matter of the complaints as it leaned on the averments in the
initiatory pleadings to make visible the jurisdiction of the
Sandiganbayan over the ill-gotten wealth complaints. As previously
discussed, a perusal of the allegations easily reveals the sufficiency of
the statement of matters disclosing the claim of the government
against the coco levy funds and the assets acquired directly or
indirectly through said funds as ill-gotten wealth. Moreover, the Court
finds no rule that directs the plaintiff to first prove the subject matter
jurisdiction of the court before which the complaint is filed. Rather, such
burden falls on the shoulders of defendant in the hearing of a motion to
dismiss anchored on said ground or a preliminary hearing thereon
when such ground is alleged in the answer.
COCOFED et al. and Ursua’s reliance on Manila Electric Company
[Meralco] v. Ortanez76 is misplaced, there being a total factual
dissimilarity between that and the case at bar. Meralco involved a labor
dispute before the Court of Industrial Relations (CIR) requiring the
54
interpretation of a collective bargaining agreement to determine which
between a regular court and CIR has jurisdiction. There, it was held
that in case of doubt, the case may not be dismissed for failure to state
a cause of action as jurisdiction of CIR is not merely based on the
allegations of the complaint but must be proved during the trial of the
case. The factual milieu of Meralco shows that the said procedural
holding is peculiar to the CIR. Thus, it is not and could not be a
precedent to the cases at bar.
Even PCGG v. Nepomuceno77 is not on all fours with the cases at
bench, the issue therein being whether the regional trial court has
jurisdiction over the PCGG and sequestered properties, vis-à-vis the
present cases, which involve an issue concerning the Sandiganbayan’s
jurisdiction. Like in Meralco, the holding in Nepomuceno is not
determinative of the outcome of the cases at bar.
While the 1964 Meralco and the Nepomuceno cases are inapplicable,
the Court’s ruling in Tijam v. Sibonhonoy78 is the leading case on
estoppel relating to jurisdiction. In Tijam, the Court expressed
displeasure on "the undesirable practice of a party submitting his case
for decision and then accepting judgment, only if favorable, and then
attacking it for lack of jurisdiction, when adverse."
Considering the antecedents of CC Nos. 0033-A and 0033-F,
COCOFED, Lobregat, Ballares, et al. and Ursua are already precluded
from assailing the jurisdiction of the Sandiganbayan. Remember that
the COCOFED and the Lobregat group were not originally impleaded
as defendants in CC No. 0033. They later asked and were allowed by
the Sandiganbayan to intervene. If they really believe then that the
Sandiganbayan is without jurisdiction over the subject matter of the
complaint in question, then why intervene in the first place? They could
have sat idly by and let the proceedings continue and would not have
been affected by the outcome of the case as they can challenge the
jurisdiction of the Sandiganbayan when the time for implementation of
the flawed decision comes. More importantly, the decision in the case
will have no effect on them since they were not impleaded as
indispensable parties. After all, the joinder of all indispensable parties
to a suit is not only mandatory, but jurisdictional as well.79 By their
intervention, which the Sandiganbayan allowed per its resolution dated
September 30, 1991, COCOFED and Ursua have clearly manifested
their desire to submit to the jurisdiction of the Sandiganbayan and seek
relief from said court. Thereafter, they filed numerous pleadings in the
subdivided complaints seeking relief and actively participated in
numerous proceedings. Among the pleadings thus filed are the
Oppositions to the Motion for Intervention interposed by the
Pambansang Koalisyon ng mga Samahang Magsasaka at
Manggagawa sa Niyogan and Gabay ng Mundo sa Kaunlaran
Foundation, Inc., a Class Action Omnibus Motion to enjoin the PCGG
from voting the SMC shares dated February 23, 2001 (granted by
Sandiganbayan) and the Class Action Motion for a Separate Summary
Judgment dated April 11, 2001. By these acts, COCOFED et al. are
now legally estopped from asserting the Sandiganbayn’s want of
jurisdiction, if that be the case, over the subject matter of the complaint
as they have voluntarily yielded to the jurisdiction of the
Sandiganbayan. Estoppel has now barred the challenge on
Sandiganbayan’s jurisdiction.
The ensuing excerpts from Macahilig v. Heirs of Magalit80 are
instructive:
We cannot allow her to attack its jurisdiction simply because it
rendered a Decision prejudicial to her position. Participation in all
stages of a case before a trial court effectively estops a party from
challenging its jurisdiction. One cannot belatedly reject or repudiate its
decision after voluntarily submitting to its jurisdiction, just to secure
affirmative relief against one’s opponent or after failing to obtain such
relief. If, by deed or conduct, a party has induced another to act in a
particular manner, estoppel effectively bars the former from adopting
an inconsistent position, attitude or course of conduct that thereby
causes loss or injury to the latter.
Lest it be overlooked, this Court has already decided that the
sequestered shares are prima facie ill-gotten wealth rendering the
issue of the validity of their sequestration and of the jurisdiction of the
Sandiganbayan over the case beyond doubt. In the case of COCOFED
v. PCGG,81 We stated that:
It is of course not for this Court to pass upon the factual issues thus
raised. That function pertains to the Sandiganbayan in the first
instance. For purposes of this proceeding, all that the Court needs to
determine is whether or not there is prima facie justification for the
sequestration ordered by the PCGG. The Court is satisfied that there
is. The cited incidents, given the public character of the coconut levy
funds, place petitioners COCOFED and its leaders and officials, at
least prima facie, squarely within the purview of Executive Orders Nos.
1, 2 and 14, as construed and applied in BASECO, to wit:
"1. that ill-gotten properties (were) amassed by the leaders and
supporters of the previous regime;
"a. more particularly, that ‘(i)ll-gotten wealth was accumulated by …
Marcos, his immediate family, relatives, subordinates and close
associates, …. (and) business enterprises and entities (came to be)
owned or controlled by them, during … (the Marcos) administration,
directly or through nominees, by taking undue advantage of their public
office and using their powers, authority, influence, connections or
relationships’;
"b. otherwise stated, that ‘there are assets and properties purportedly
pertaining to [the Marcoses], their close relatives, subordinates,
business associates, dummies, agents or nominees which had been or
were acquired by them directly or indirectly, through or as a result of
the improper or illegal use of funds or properties owned by the
Government …or any of its branches, instrumentalities, enterprises,
banks or financial institutions, or by taking undue advantage of their
office, authority, influence, connections or relationship, resulting in their
unjust enrichment ….;
xxx xxx xxx
2. The petitioners’ claim that the assets acquired with the coconut levy
funds are privately owned by the coconut farmers is founded on certain
provisions of law, to wit [Sec. 7, RA 6260 and Sec. 5, Art. III, PD
1468]… (Words in bracket added; italics in the original).
In their attempt to dismiss the amended complaints in question,
petitioners asseverate that (1) the coconut farmers cannot be
considered as "subordinates, close and/or business associates,
dummies, agents and nominees" of Cojuangco, Jr. or the Marcoses,
and (2) the sequestered shares were not illegally acquired nor acquired
"through or as result of improper or illegal use or conversion of funds
belonging to the Government." While not saying so explicitly,
petitioners are doubtless conveying the idea that wealth, however
acquired, would not be considered "ill-gotten" in the context of EO 1, 2
and 14, s. of 1986, absent proof that the recipient or end possessor
thereof is outside the Marcos’ circle of friends, associates, cronies or
nominees.
We are not convinced.
As may be noted, E.O. 1 and 2 advert to President Marcos, or his
associates’ nominees. In its most common signification, the term
"nominee" refers to one who is designated to act for another usually in
a limited way; 82 a person in whose name a stock or bond certificate is
registered but who is not the actual owner thereof is considered a
nominee."83 Corpus Juris Secundum describes a nominee as one:
… designated to act for another as his representative in a rather limited
sense. It has no connotation, however, other than that of acting for
another, in representation of another or as the grantee of another. In its
commonly accepted meaning the term connoted the delegation of
55
authority to the nominee in a representative or nominal capacity only,
and does not connote the transfer or assignment to the nominee of any
property in, or ownership of, the rights of the person nominating him.84
So, the next question that comes to the fore is: would the term
"nominee" include the more than one million coconut farmers alleged
to be the recipients of the UCPB shares?
Guided by the foregoing definitions, the query must be answered in the
affirmative if only to give life to those executive issuances aimed at
ensuring the recovery of ill-gotten wealth. It is basic, almost
elementary, that:
Laws must receive a sensible interpretation to promote the ends for
which they are enacted. They should be so given reasonable and
practical construction as will give life to them, if it can be done without
doing violence to reason. Conversely, a law should not be so
construed as to allow the doing of an act which is prohibited by law, not
so interpreted as to afford an opportunity to defeat compliance with its
terms, create an inconsistency, or contravene the plain words of the
law. Interpretatio fienda est ut res magis valeat quam pereat or that
interpretation as will give the thing efficacy is to be adopted. 85
E.O. 1, 2, 14 and 14-A, it bears to stress, were issued precisely to
effect the recovery of ill-gotten assets amassed by the Marcoses, their
associates, subordinates and cronies, or through their nominees. Be
that as it may, it stands to reason that persons listed as associated with
the Marcoses86 refer to those in possession of such ill-gotten wealth but
holding the same in behalf of the actual, albeit undisclosed owner, to
prevent discovery and consequently recovery. Certainly, it is well-nigh
inconceivable that ill-gotten assets would be distributed to and left in
the hands of individuals or entities with obvious traceable connections
to Mr. Marcos and his cronies. The Court can take, as it has in fact
taken, judicial notice of schemes and machinations that have been put
in place to keep ill-gotten assets under wraps. These would include the
setting up of layers after layers of shell or dummy, but controlled,
corporations87 or manipulated instruments calculated to confuse if not
altogether mislead would-be investigators from recovering wealth
deceitfully amassed at the expense of the people or simply the fruits
thereof. Transferring the illegal assets to third parties not readily
perceived as Marcos cronies would be another. So it was that in PCGG
v. Pena, the Court, describing the rule of Marcos as a "well entrenched
plundering regime of twenty years," noted the magnitude of the past
regime’s organized pillage and the ingenuity of the plunderers and
pillagers with the assistance of experts and the best legal minds in the
market.88
Hence, to give full effect to E.O. 1, 2 and 14, s. of 1986, the term
"nominee," as used in the above issuances, must be taken to mean to
include any person or group of persons, natural or juridical, in whose
name government funds or assets were transferred to by Pres.
Marcos, his cronies or his associates. To this characterization must
include what the Sandiganbayan considered the "unidentified" coconut
farmers, more than a million of faceless and nameless coconut
farmers, the alleged beneficiaries of the distributed UCPB shares, who,
under the terms of Sec. 10 of PCA A.O. No. 1, s. of 1975, were
required, upon the delivery of their respective stock certificates, to
execute an irrevocable proxy in favor of the Bank’s manager. There is
thus ample truth to the observations - "[That] the PCA provided this
condition only indicates that the PCA had no intention to constitute the
coconut farmer UCPB stockholder as a bona fide stockholder;" that the
1.5 million registered farmer-stockholders were "mere nominal
stockholders."89
From the foregoing, the challenge on the Sandiganbayan’s subject
matter jurisdiction at bar must fail.
II
Petitioners COCOFED et al. were not
deprived of their right to be heard.
As a procedural issue, COCOFED, et al. and Ursua next contend that
in the course of almost 20 years that the cases have been with the
anti-graft court, they have repeatedly sought leave to adduce evidence
(prior to respondent’s complete presentation of evidence) to prove the
coco farmers’ actual and beneficial ownership of the sequestered
shares. The Sandiganbayan, however, had repeatedly and
continuously disallowed such requests, thus depriving them of their
constitutional right to be heard.
This contention is untenable, their demand to adduce evidence being
disallowable on the ground of prematurity.
The records reveal that the Republic, after adducing its evidence in CC
No. 0033-A, subsequently filed a Motion Ad Cautelam for Leave to
Present Additional Evidence dated March 28, 2001. This motion
remained unresolved at the time the Republic interposed its Motion for
Partial Summary Judgment. The Sandiganbayan granted the later
motion and accordingly rendered the Partial Summary Judgment,
effectively preempting the presentation of evidence by the defendants
in said case (herein petitioners COCOFED and Ursua).
Section 5, Rule 30 the Rules of Court clearly sets out the order of
presenting evidence:
SEC. 5. Order of trial.—Subject to the provisions of section 2 of Rule
31, and unless the court for special reasons otherwise directs, the trial
shall be limited to the issues stated in the pre-trial order and shall
proceed as follows:
(a) The plaintiff shall adduce evidence in support of his
complaint;
(b) The defendant shall then adduce evidence in support of
his defense, counterclaim, cross-claim and third-party
complaint;
xxx xxx xxx
(g) Upon admission of the evidence, the case shall be
deemed submitted for decision, unless the court directs the
parties to argue or to submit their respective memoranda or
any further pleadings.
If several defendants or third-party defendants, and so forth. having
separate defenses appear by different counsel, the court shall
determine the relative order of presentation of their evidence.
(Emphasis supplied.)
Evidently, for the orderly administration of justice, the plaintiff shall first
adduce evidence in support of his complaint and after the formal offer
of evidence and the ruling thereon, then comes the turn of defendant
under Section 3 (b) to adduce evidence in support of his defense,
counterclaim, cross-claim and third party complaint, if any. Deviation
from such order of trial is purely discretionary upon the trial court, in
this case, the Sandiganbayan, which cannot be questioned by the
parties unless the vitiating element of grave abuse of discretion
supervenes. Thus, the right of COCOFED to present evidence on the
main case had not yet ripened. And the rendition of the partial
summary judgments overtook their right to present evidence on their
defenses.
It cannot be stressed enough that the Republic as well as herein
petitioners were well within their rights to move, as they in fact
separately did, for a partial summary judgment. Summary judgment
may be allowed where, save for the amount of damages, there is, as
shown by affidavits and like evidentiary documents, no genuine issue
as to any material fact and the moving party is entitled to a judgment
as a matter of law. A "genuine issue", as distinguished from one that is
fictitious, contrived and set up in bad faith, means an issue of fact that
56
calls for the presentation of evidence.90 Summary or accelerated
judgment, therefore, is a procedural technique aimed at weeding out
sham claims or defenses at an early stage of the litigation. 91 Sections
1, 2 and 4 of Rule 35 of the Rules of Court on Summary Judgment,
respectively provide:
SECTION 1. Summary judgment for claimant.—A party seeking to
recover upon a claim, counterclaim, or cross-claim … may, at any time
after the pleading in answer thereto has been served, move with
supporting affidavits, depositions or admissions for a summary
judgment in his favor upon all or any part thereof.
SEC. 2. Summary judgment for defending party.—A party against
whom a claim, counterclaim or cross-claim is asserted … is sought
may, at any time, move with supporting affidavits, depositions or
admissions for a summary judgment in his favor as to all or any part
thereof.
SEC. 4. Case not fully adjudicated on motion.—If on motion under this
Rule, judgment is not rendered upon the whole case or for all the
reliefs sought and a trial is necessary, the court at the hearing of the
motion, by examining the pleadings and the evidence before it and by
interrogating counsel shall ascertain what material facts exist without
substantial controversy and what are actually and in good faith
controverted. It shall thereupon make an order specifying the facts that
appear without substantial controversy, including the extent to which
the amount of damages or other relief is not in controversy, and
directing such further proceedings in the action as are just. The facts
so specified shall be deemed established, and the trial shall be
conducted on the controverted facts accordingly.
Clearly, petitioner COCOFED’s right to be heard had not been violated
by the mere issuance of PSJ-A and PSJ-F before they can adduce
their evidence.
As it were, petitioners COCOFED et al. were able to present
documentary evidence in conjunction with its "Class Action Omnibus
Motion" dated February 23, 2001 where they appended around four
hundred (400) documents including affidavits of alleged farmers. These
petitioners manifested that said documents comprise their evidence to
prove the farmers’ ownership of the UCPB shares, which were
distributed in accordance with valid and existing laws. 92
Lastly, COCOFED et al. even filed their own Motion for Separate
Summary Judgment, an event reflective of their admission that there
are no more factual issues left to be determined at the level of the
Sandiganbayan. This act of filing a motion for summary judgment is a
judicial admission against COCOFED under Section 26, Rule 130
which declares that the "act, declaration or omission of a party as to a
relevant fact may be given in evidence against him."
Viewed in this light, the Court has to reject petitioners’ self-serving
allegations about being deprived the right to adduce evidence.
III
The right to speedy trial was not violated.
This brings to the fore the alleged violation of petitioners’ right to a
speedy trial and speedy disposition of the case. In support of their
contention, petitioners cite Licaros v. Sandiganbayan,93 where the
Court dismissed the case pending before the Sandiganbayan for
violation of the accused’s right to a speedy trial.
It must be clarified right off that the right to a speedy disposition of case
and the accused’s right to a speedy trial are distinct, albeit kindred,
guarantees, the most obvious difference being that a speedy
disposition of cases, as provided in Article III, Section 16 of the
Constitution, obtains regardless of the nature of the case:
Section 16. All persons shall have the right to a speedy disposition of
their cases before all judicial, quasi-judicial, or administrative bodies.
In fine, the right to a speedy trial is available only to an accused and is
a peculiarly criminal law concept, while the broader right to a speedy
disposition of cases may be tapped in any proceedings conducted by
state agencies. Thus, in Licaros the Court dismissed the criminal case
against the accused due to the palpable transgression of his right to a
speedy trial.
In the instant case, the appropriate right involved is the right to a
speedy disposition of cases, the recovery of ill-gotten wealth being a
civil suit.
Nonetheless, the Court has had the occasion to dismiss several cases
owing to the infringement of a party’s right to a speedy disposition of
cases.94 Dismissal of the case for violation of this right is the general
rule. Bernat v. The Honorable Sandiganbayan (5th
Division)95 expounds on the extent of the right to a speedy disposition
of cases as follows:
Section 16 of Article III of the Constitution guarantees the right of all
persons to a "speedy disposition of their cases." Nevertheless, this
right is deemed violated only when the proceedings are attended by
vexatious, capricious and oppressive delays. Moreover, the
determination of whether the delays are of said nature is relative and
cannot be based on a mere mathematical reckoning of time. Particular
regard must be taken of the facts and circumstances peculiar to each
case. As a guideline, the Court in Dela Peña v. Sandiganbayan
mentioned certain factors that should be considered and balanced,
namely: 1) length of delay; 2) reasons for the delay; 3) assertion or
failure to assert such right by the accused; and 4) prejudice caused by
the delay.
xxx xxx xxx
While this Court recognizes the right to speedy disposition quite
distinctly from the right to a speedy trial, and although this Court has
always zealously espoused protection from oppressive and vexatious
delays not attributable to the party involved, at the same time, we hold
that a party’s individual rights should not work against and preclude the
people’s equally important right to public justice. In the instant case,
three people died as a result of the crash of the airplane that the
accused was flying. It appears to us that the delay in the disposition of
the case prejudiced not just the accused but the people as well. Since
the accused has completely failed to assert his right seasonably and
inasmuch as the respondent judge was not in a position to dispose of
the case on the merits… we hold it proper and equitable to give the
parties fair opportunity to obtain … substantial justice in the premises.
The more recent case of Tello v. People96 laid stress to the restrictive
dimension to the right to speedy disposition of cases, i.e., it is lost
unless seasonably invoked:
In Bernat …, the Court denied petitioner’s claim of denial of his right to
a speedy disposition of cases considering that [he] … chose to remain
silent for eight years before complaining of the delay in the disposition
of his case. The Court ruled that petitioner failed to seasonably assert
his right and he merely sat and waited from the time his case was
submitted for resolution. In this case, petitioner similarly failed to assert
his right to a speedy disposition of his case…. He only invoked his right
to a speedy disposition of cases after [his conviction]…. Petitioner’s
silence may be considered as a waiver of his right.
An examination of the petitioners’ arguments and the cited indicia of
delay would reveal the absence of any allegation that petitioners
moved before the Sandiganbayan for the dismissal of the case on
account of vexatious, capricious and oppressive delays that attended
the proceedings. Following Tello, petitioners are deemed to have
waived their right to a speedy disposition of the case. Moreover,
57
delays, if any, prejudiced the Republic as well. What is more, the
alleged breach of the right in question was not raised below. As a
matter of settled jurisprudence, but subject to equally settled exception,
an issue not raised before the trial court cannot be raised for the first
time on appeal.97 The sporting idea forbidding one from pulling
surprises underpins this rule. For these reasons, the instant case
cannot be dismissed for the alleged violation of petitioners’ right to a
speedy disposition of the case.
IV
Sections 1 and 2 of P.D. No. 755, Article III, Section 5 of P.D. No. 961
and Article III, Section 5 of P.D. No. 1468, are unconstitutional.
The Court may pass upon the constitutionality of P.D. Nos. 755, 961
and 1468.
Petitioners COCOFED et al. and Ursua uniformly scored the
Sandiganbayan for abusing its power of judicial review and wrongly
encroaching into the exclusive domain of Congress when it declared
certain provisions of the coconut levy laws and PCA administrative
issuances as unconstitutional.
We are not persuaded.
It is basic that courts will not delve into matters of constitutionality
unless unavoidable, when the question of constitutionality is the very lis
mota of the case, meaning, that the case cannot be legally resolved
unless the constitutional issue raised is determined. This rule finds
anchorage on the presumptive constitutionality of every enactment.
Withal, to justify the nullification of a statute, there must be a clear and
unequivocal breach of the Constitution. A doubtful or speculative
infringement would simply not suffice.98
Just as basic is the precept that lower courts are not precluded from
resolving, whenever warranted, constitutional questions, subject only to
review by this Court.
To Us, the present controversy cannot be peremptorily resolved
without going into the constitutionality of P.D. Nos. 755, 961 and 1468
in particular. For petitioners COCOFED et al. and Ballares et al.
predicate their claim over the sequestered shares and necessarily their
cause on laws and martial law issuances assailed by the Republic on
constitutional grounds. Indeed, as aptly observed by the Solicitor
General, this case is for the recovery of shares grounded on the
invalidity of certain enactments, which in turn is rooted in the shares
being public in character, purchased as they were by funds raised by
the taxing and/or a mix of taxing and police powers of the state. 99 As
may be recalled, P.D. No. 755, under the policy-declaring provision,
authorized the distribution of UCPB shares of stock free to coconut
farmers. On the other hand, Section 2 of P.D. No. 755, hereunder
quoted below, effectively authorized the PCA to utilize portions of the
CCSF to pay the financial commitment of the farmers to acquire UCPB
and to deposit portions of the CCSF levies with UCPB interest free.
And as there also provided, the CCSF, CIDF and like levies that PCA
is authorized to collect shall be considered as non-special or fiduciary
funds to be transferred to the general fund of the Government,
meaning they shall be deemed private funds.
Section 2 of P.D. No. 755 reads:
Section 2. Financial Assistance. — To enable the coconut farmers to
comply with their contractual obligations under the aforesaid
Agreement, the [PCA] is hereby directed to draw and utilize the
collections under the [CCSF] authorized to be levied by [PD] No. 232,
as amended, to pay for the financial commitments of the coconut
farmers under the said agreement and, except for [PCA’s] budgetary
requirements …, all collections under the [CCSF] Levy and (50%) of
the collections under the [CIDF] shall be deposited, interest free, with
the said bank of the coconut farmers and such deposits shall not be
withdrawn until the … the bank has sufficient equity capital …; and
since the operations, and activities of the [PCA] are all in accord with
the present social economic plans and programs of the Government,
all collections and levies which the [PCA] is authorized to levy and
collect such as but not limited to the [CCS Levy] and the [CIDF] …
shall not be considered or construed, under any law or regulation,
special and/or fiduciary funds and do not form part of the general funds
of the national government within the contemplation of [P.D.] No. 711.
(Emphasis supplied)
A similar provision can also be found in Article III, Section 5 of P.D. No.
961 and Article III, Section 5 of P.D. No. 1468, which We shall later
discuss in turn:
P.D. No. 961
Section 5. Exemptions. The Coconut Consumers Stabilization Fund
and the Coconut Industry Development Fund as well as all
disbursements of said funds for the benefit of the coconut farmers as
herein authorized shall not be construed or interpreted, under any law
or regulation, as special and/or fiduciary funds, or as part of the
general funds of the national government within the contemplation of
P.D. No. 711; nor as a subsidy, donation, levy, government funded
investment, or government share within the contemplation of P.D. 898,
the intention being that said Fund and the disbursements thereof as
herein authorized for the benefit of the coconut farmers shall be owned
by them in their own private capacities.100 (Emphasis Ours)
P.D. No. 1468
Section 5. Exemptions. The [CCSF] and the [CIDF] as well as all
disbursement as herein authorized, shall not be construed or
interpreted, under nay law or regulation, as special and/or fiduciary
funds, or as part of the general funds of the national government within
the contemplation of PD 711; nor as subsidy, donation, levy
government funded investment, or government share within the
contemplation of PD 898, the intention being that said Fund and the
disbursements thereof as herein authorized for the benefit of the
coconut farmers shall be owned by them in their private
capacities….101 (Emphasis Ours.)
In other words, the relevant provisions of P.D. Nos. 755, as well as
those of P.D. Nos. 961 and 1468, could have been the only plausible
means by which close to a purported million and a half coconut farmers
could have acquired the said shares of stock. It has, therefore, become
necessary to determine the validity of the authorizing law, which made
the stock transfer and acquisitions possible.
To reiterate, it is of crucial importance to determine the validity of P.D.
Nos. 755, 961 and 1468 in light of the constitutional proscription
against the use of special funds save for the purpose it was
established. Otherwise, petitioners’ claim of legitimate private
ownership over UCPB shares and indirectly over SMC shares held by
UCPB’s subsidiaries will have no leg to stand on, P.D. No. 755 being
the only law authorizing the distribution of the SMC and UCPB shares
of stock to coconut farmers, and with the aforementioned provisions
actually stating and holding that the coco levy fund shall not be
considered as a special – not even general – fund, but shall be owned
by the farmers in their private capacities.102
The Sandiganbayan’s ensuing ratiocination on the need to pass upon
constitutional issues the Republic raised below commends itself for
concurrence:
This Court is convinced of the imperative need to pass upon the issues
of constitutionality raised by Plaintiff. The issue of constitutionality of
the provisions of P.D. No. 755 and the laws related thereto goes to the
very core of Plaintiff’s causes of action and defenses thereto. It will
serve the best interest of justice to define this early the legal framework
within which this case shall be heard and tried, taking into account the
58
admission of the parties and the established facts, particularly those
relating to the main substance of the defense of Lobregat, COCOFED,
et al. and Ballares, et al., which is anchored on the laws being assailed
by Plaintiff on constitutional grounds.
xxx xxx xxx
The Court is also mindful that lower courts are admonished to observe
a becoming modesty in examining constitutional questions, but that
they are nonetheless not prevented from resolving the same whenever
warranted, subject only to review by the highest tribunal (Ynot v.
Intermediate Appellate Court).
xxx xxx xxx
It is true that, as a general rule, the question of constitutionality must
be raised at the earliest opportunity. The Honorable Supreme Court …
has clearly stated that the general rule admits of exceptions, thus:
xxx xxx xxx
‘For courts will pass upon a constitutional question only when
presented before it in bona fide cases for determination, and the fact
that the question has not been raised before is not a valid reason for
refusing to allow it to be raised later…. It has been held that the
determination of a constitutional question is necessary whenever it is
essential to the decision of the case … as where the right of a party is
founded solely on a statute, the validity of which is attacked.’
In the case now before us, the allegations of the Subdivided Complaint
are consistent with those in the subject Motion, and they sufficiently
raise the issue of constitutionality of the provisions of laws in question.
The Third Amended Complaint (Subdivided) states:
‘(ii) to legitimize a posteriori his highly anomalous and irregular use and
diversion of government funds to advance his own private and
commercial interests, … Cojuangco, Jr. caused the issuance … of PD
755 (a) declaring that the coconut levy funds shall not be considered
special and fiduciary and trusts funds and do not form part of the
general funds of the National Government, conveniently repealing for
that purpose a series of coconut levy funds as special, fiduciary, trust
and government funds….
xxx xxx xxx
‘(iv) To perpetuate his opportunity to deal with and make use the
coconut levy funds to build his economic empire, Cojuangco, Jr.
caused the issuance by Defendant Ferdinand E. Marcos of an
unconstitutional decree (PD 1468) requiring the deposit of all coconut
levy funds with UCPB, interest free, to the prejudice of the
government.’
The above-quoted allegations in the Third Amended Complaint
(Subdivided) already question the "legitimacy" of the exercise by
former President Marcos of his legislative authority when he issued
P.D. Nos. 755 and 1468. The provision of Sec. 5, Art. III of P.D. 961 is
substantially similar to the provisions of the aforesaid two [PDs]. P.D.
No. 755 allegedly legitimized the "highly anomalous and irregular use
and diversion of government funds to advance his [defendant
Cojuangco’s] own private and commercial interest." The issuance of
the said [PD] which has the force and effect of a law can only be
assailed on constitutional grounds. The merits of the grounds adverted
to in the allegations of the Third Amended Complaint (Subdivided) can
only be resolved by this Court by testing the questioned [PDs], which
are considered part of the laws of the land….
As early as June 20, 1989, this Court in its Resolution expressed this
Court’s understanding of the import of the allegations of the complaint,
as follows:
"It is likewise alleged in the Complaint that in order to legitimize the
diversion of funds, defendant Ferdinand E. Marcos issued the
Presidential Decrees referred to by the movants. This is then the core
of Plaintiff’s complaint: that, insofar as the coconut levy is concerned,
these decrees had been enacted as tools for the acquisition of ill-
gotten wealth for specific favored individuals.
"Even if Plaintiff may not have said so effectively, the complaint in fact
disputes the legitimacy, and, if one pleases, the constitutionality of
such enactments….
"The issue is validly raised on the face of the complaint and defendants
must respond to it."
Since … the question of constitutionality … may be raised even on
appeal if the determination of such a question is essential to the
decision of the case, we find more reason to resolve this constitutional
question at this stage of the proceedings, where the defense is
grounded solely on the very laws the constitutionality of which are
being questioned and where the evidence of the defendants would
seek mainly to prove their faithful and good faith compliance with the
said laws and their implementing rules and regulations.103 (Emphasis
added.)
The Court’s rulings in COCOFED v. PCGG and Republic v.
Sandiganbayan, as law of the case, are speciously invoked.
To thwart the ruling on the constitutionality of P.D. Nos. 755, 961 and
1468, petitioners would sneak in the argument that the Court has, in
three separate instances, upheld the validity, and thumbed down the
Republic’s challenge to the constitutionality, of said laws imposing the
different coconut levies and prescribing the uses of the fund collected.
The separate actions of the Court, petitioners add, would conclude the
Sandiganbayan on the issue of constitutionality of said issuances,
following the law-of-the-case principle. Petitioners allege:
Otherwise stated, the decision of this Honorable Court in the
COCOFED Case overruling the strict public fund theory espoused by
the Respondent Republic, upholding the propriety of the laws imposing
the collections of the different Coconut Levies and expressly allowing
COCOFED, et al., to prove that the Sequestered Assets have
legitimately become their private properties had become final and
immutable.104
Petitioners are mistaken.
Yu v. Yu,105 as effectively reiterated in Vios v. Pantangco,106 defines
and explains the ramifications of the law of the case principle as
follows:
Law of the case has been defined as the opinion delivered on a former
appeal. It is a term applied to an established rule that when an
appellate court passes on a question and remands the case to the
lower court for further proceedings, the question there settled becomes
the law of the case upon subsequent appeal. It means that whatever is
once irrevocably established as the controlling legal rule or decision
between the same parties in the same case continues to be the law of
the case, … so long as the facts on which such decision was
predicated continue to be the facts of the case before the court.
Otherwise put, the principle means that questions of law that have
been previously raised and disposed of in the proceedings shall be
controlling in succeeding instances where the same legal question is
raised, provided that the facts on which the legal issue was predicated
continue to be the facts of the case before the court. Guided by this
definition, the law of the case principle cannot provide petitioners any
comfort. We shall explain why.
59
In the first instance, petitioners cite COCOFED v. PCGG. 107 There,
respondent PCGG questioned the validity of the coconut levy laws
based on the limits of the state’s taxing and police power, as may be
deduced from the ensuing observations of the Court:
…. Indeed, the Solicitor General suggests quite strongly that the laws
operating or purporting to convert the coconut levy funds into private
funds, are a transgression of the basic limitations for the licit exercise
of the state's taxing and police powers, and that certain provisions of
said laws are merely clever stratagems to keep away government audit
in order to facilitate misappropriation of the funds in question.
The utilization and proper management of the coconut levy funds, [to
acquire shares of stocks for coconut farmers and workers] raised as
they were by the State’s police and taxing power are certainly the
concern of the Government…. The coconut levy funds are clearly
affected with public interest. Until it is demonstrated satisfactorily that
they have legitimately become private funds, they must prima facie be
accounted subject to measures prescribed in EO Nos. 1, 2, and 14 to
prevent their concealment, dissipation, etc….108 [Words in bracket
added.]
The issue, therefore, in COCOFED v. PCGG turns on the legality of the
transfer of the shares of stock bought with the coconut levy funds to
coconut farmers. This must be distinguished with the issues in the
instant case of whether P.D. No. 755 violated Section 29, paragraph 3
of Article VI of the 1987 Constitution as well as to whether P.D. No.
755 constitutes undue delegation of legislative power. Clearly, the
issues in both sets of cases are so different as to preclude the
application of the law of the case rule.
The second and third instances that petitioners draw attention to refer
to the rulings in Republic v. Sandiganbayan, where the Court by
Resolution of December 13, 1994, as reiterated in another resolution
dated March 26, 1996, resolved to deny the separate motions of the
Republic to resolve legal questions on the character of the coconut
levy funds, more particularly to declare as unconstitutional (a) coconut
levies collected pursuant to various issuances as public funds and (b)
Article III, Section 5 of P.D. No. 1468.
Prescinding from the foregoing considerations, petitioners would state:
"Having filed at least three (3) motions … seeking, among others, to
declare certain provisions of the Coconut Levy Laws unconstitutional
and having been rebuffed all three times by this Court," the Republic -
and necessarily Sandiganbayan – "should have followed as [they were]
legally bound by this … Court’s prior determination" on that above
issue of constitutionality under the doctrine of Law of the Case.
Petitioners are wrong. The Court merely declined to pass upon the
constitutionality of the coconut levy laws or some of their provisions. It
did not declare that the UCPB shares acquired with the use of coconut
levy funds have legitimately become private.
The coconut levy funds are in the nature of taxes and can only be used
for public purpose. Consequently, they cannot be used to purchase
shares of stocks to be given for free to private individuals.
Indeed, We have hitherto discussed, the coconut levy was imposed in
the exercise of the State’s inherent power of taxation. As We wrote in
Republic v. COCOFED:109
Indeed, coconut levy funds partake of the nature of taxes, which, in
general, are enforced proportional contributions from persons and
properties, exacted by the State by virtue of its sovereignty for the
support of government and for all public needs.
Based on its definition, a tax has three elements, namely: a) it is an
enforced proportional contribution from persons and properties; b) it is
imposed by the State by virtue of its sovereignty; and c) it is levied for
the support of the government. The coconut levy funds fall squarely
into these elements for the following reasons:
(a) They were generated by virtue of statutory enactments imposed on
the coconut farmers requiring the payment of prescribed amounts.
Thus, PD No. 276, which created the Coconut Consumer[s]
Stabilization Fund (CCSF), mandated the following:
"a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or its
equivalent in other coconut products, shall be imposed on every first
sale, in accordance with the mechanics established under RA 6260,
effective at the start of business hours on August 10, 1973.
"The proceeds from the levy shall be deposited with the Philippine
National Bank or any other government bank to the account of the
Coconut Consumers Stabilization Fund, as a separate trust fund which
shall not form part of the general fund of the government."
The coco levies were further clarified in amendatory laws, specifically
PD No. 961 and PD No. 1468 – in this wise:
"The Authority (PCA) is hereby empowered to impose and collect a
levy, to be known as the Coconut Consumers Stabilization Fund Levy,
on every one hundred kilos of copra resecada, or its equivalent …
delivered to, and/or purchased by, copra exporters, oil millers,
desiccators and other end-users of copra or its equivalent in other
coconut products. The levy shall be paid by such copra exporters, oil
millers, desiccators and other end-users of copra or its equivalent in
other coconut products under such rules and regulations as the
Authority may prescribe. Until otherwise prescribed by the Authority,
the current levy being collected shall be continued."
Like other tax measures, they were not voluntary payments or
donations by the people. They were enforced contributions exacted on
pain of penal sanctions, as provided under PD No. 276:
"3. Any person or firm who violates any provision of this Decree or the
rules and regulations promulgated thereunder, shall, in addition to
penalties already prescribed under existing administrative and special
law, pay a fine of not less than P2,500 or more than P10,000, or suffer
cancellation of licenses to operate, or both, at the discretion of the
Court."
Such penalties were later amended thus: ….
(b) The coconut levies were imposed pursuant to the laws enacted by
the proper legislative authorities of the State. Indeed, the CCSF was
collected under PD No. 276…."
(c) They were clearly imposed for a public purpose. There is absolutely
no question that they were collected to advance the government’s
avowed policy of protecting the coconut industry. This Court takes
judicial notice of the fact that the coconut industry is one of the great
economic pillars of our nation, and coconuts and their byproducts
occupy a leading position among the country’s export products….
Taxation is done not merely to raise revenues to support the
government, but also to provide means for the rehabilitation and the
stabilization of a threatened industry, which is so affected with public
interest as to be within the police power of the State….
Even if the money is allocated for a special purpose and raised by
special means, it is still public in character…. In Cocofed v. PCGG, the
Court observed that certain agencies or enterprises "were organized
and financed with revenues derived from coconut levies imposed under
a succession of law of the late dictatorship … with deposed Ferdinand
Marcos and his cronies as the suspected authors and chief
beneficiaries of the resulting coconut industry monopoly." The Court
continued: "…. It cannot be denied that the coconut industry is one of
60
the major industries supporting the national economy. It is, therefore,
the State’s concern to make it a strong and secure source not only of
the livelihood of a significant segment of the population, but also of
export earnings the sustained growth of which is one of the imperatives
of economic stability.110 (Emphasis Ours)
We have ruled time and again that taxes are imposed only for a public
purpose.111 "They cannot be used for purely private purposes or for the
exclusive benefit of private persons."112 When a law imposes taxes or
levies from the public, with the intent to give undue benefit or
advantage to private persons, or the promotion of private enterprises,
that law cannot be said to satisfy the requirement of public
purpose.113 In Gaston v. Republic Planters Bank, the petitioning sugar
producers, sugarcane planters and millers sought the distribution of the
shares of stock of the Republic Planters Bank, alleging that they are
the true beneficial owners thereof.114 In that case, the investment, i.e.,
the purchase of the said bank, was funded by the deduction of PhP
1.00 per picul from the sugar proceeds of the sugar producers
pursuant to P.D. No. 388.115 In ruling against the petitioners, the Court
held that to rule in their favor would contravene the general principle
that revenues received from the imposition of taxes or levies "cannot
be used for purely private purposes or for the exclusive benefit of
private persons."116 The Court amply reasoned that the Stabilization
Fund must "be utilized for the benefit of the entire sugar industry, and
all its components, stabilization of the domestic market including
foreign market, the industry being of vital importance to the country’s
economy and to national interest."117
Similarly in this case, the coconut levy funds were sourced from forced
exactions decreed under P.D. Nos. 232, 276 and 582, among
others,118 with the end-goal of developing the entire coconut
industry.119 Clearly, to hold therefore, even by law, that the revenues
received from the imposition of the coconut levies be used purely for
private purposes to be owned by private individuals in their private
capacity and for their benefit, would contravene the rationale behind
the imposition of taxes or levies.
Needless to stress, courts do not, as they cannot, allow by judicial fiat
the conversion of special funds into a private fund for the benefit of
private individuals. In the same vein, We cannot subscribe to the idea
of what appears to be an indirect – if not exactly direct – conversion of
special funds into private funds, i.e., by using special funds to purchase
shares of stocks, which in turn would be distributed for free to private
individuals. Even if these private individuals belong to, or are a part of
the coconut industry, the free distribution of shares of stocks
purchased with special public funds to them, nevertheless cannot be
justified. The ratio in Gaston,120 as expressed below, applies mutatis
mutandis to this case:
The stabilization fees in question are levied by the State … for a
special purpose – that of "financing the growth and development of the
sugar industry and all its components, stabilization of the domestic
market including the foreign market." The fact that the State has taken
possession of moneys pursuant to law is sufficient to constitute them
as state funds even though they are held for a special purpose….
That the fees were collected from sugar producers,[etc.], and that the
funds were channeled to the purchase of shares of stock in respondent
Bank do not convert the funds into a trust fund for their benefit nor
make them the beneficial owners of the shares so purchased. It is but
rational that the fees be collected from them since it is also they who
are benefited from the expenditure of the funds derived from
it. ….121 (Emphasis Ours.)
In this case, the coconut levy funds were being exacted from copra
exporters, oil millers, desiccators and other end-users of copra or its
equivalent in other coconut products.122 Likewise so, the funds here
were channeled to the purchase of the shares of stock in UCPB.
Drawing a clear parallelism between Gaston and this case, the fact that
the coconut levy funds were collected from the persons or entities in
the coconut industry, among others, does not and cannot entitle them
to be beneficial owners of the subject funds – or more bluntly, owners
thereof in their private capacity. Parenthetically, the said private
individuals cannot own the UCPB shares of stocks so purchased using
the said special funds of the government.123
Coconut levy funds are special public funds of the government.
Plainly enough, the coconut levy funds are public funds. We have ruled
in Republic v. COCOFED that the coconut levy funds are not only
affected with public interest; they are prima facie public funds.124 In fact,
this pronouncement that the levies are government funds was admitted
and recognized by respondents, COCOFED, et al., in G.R. No.
147062-64.125 And more importantly, in the same decision, We clearly
explained exactly what kind of government fund the coconut levies are.
We were categorical in saying that coconut levies are treated as
special funds by the very laws which created them:
Finally and tellingly, the very laws governing the coconut levies
recognize their public character. Thus, the third Whereas clause of PD
No. 276 treats them as special funds for a specific public purpose.
Furthermore, PD No. 711 transferred to the general funds of the State
all existing special and fiduciary funds including the CCSF. On the
other hand, PD No. 1234 specifically declared the CCSF as a special
fund for a special purpose, which should be treated as a special
account in the National Treasury.126 (Emphasis Ours.)
If only to stress the point, P.D. No. 1234 expressly stated that coconut
levies are special funds to be remitted to the Treasury in the General
Fund of the State, but treated as Special Accounts:
Section 1. All income and collections for Special or Fiduciary Funds
authorized by law shall be remitted to the Treasury and treated as
Special Accounts in the General Fund, including the following:
(a) [PCA] Development Fund, including all income derived therefrom
under Sections 13 and 14 of [RA] No. 1145; Coconut Investments
Fund under Section 8 of [RA] No. 6260, including earnings, profits,
proceeds and interests derived therefrom; Coconut Consumers
Stabilization Funds under Section 3-A of PD No. 232, as inserted by
Section 3 of P.D. No. 232, as inserted by Section 2 of P.D. No. 583;
and all other fees accruing to the [PCA] under the provisions of Section
19 of [RA] No. 1365, in accordance with Section 2 of P.D. No. 755 and
all other income accruing to the [PCA] under existing
laws.127 (Emphasis Ours)
Moreover, the Court, in Gaston, stated the observation that the
character of a stabilization fund as a special fund "is emphasized by
the fact that the funds are deposited in the Philippine National Bank
[PNB] and not in the Philippine Treasury, moneys from which may be
paid out only in pursuance of an appropriation made by
law."128 Similarly in this case, Sec.1 (a) of P.D. No. 276 states that the
proceeds from the coconut levy shall be deposited with the PNB, then
a government bank, or any other government bank under the account
of the CCSF, as a separate trust fund, which shall not form part of the
government’s general fund.129 And even assuming arguendo that the
coconut levy funds were transferred to the general fund pursuant to
P.D. No. 1234, it was with the specific directive that the same be
treated as special accounts in the general fund.130
The coconut levy funds can only be used for the special purpose and
the balance thereof should revert back to the general fund.
Consequently, their subsequent reclassification as a private fund to be
owned by private individuals in their private capacities under P.D. Nos.
755, 961 and 1468 are unconstitutional.
To recapitulate, Article VI, Section 29 (3) of the 1987 Constitution,
restating a general principle on taxation, enjoins the disbursement of a
special fund in accordance with the special purpose for which it was
collected, the balance, if there be any, after the purpose has been
fulfilled or is no longer forthcoming, to be transferred to the general
funds of the government, thus:
61
Section 29(3)….
(3) All money collected on any tax levied for a special purpose shall be
treated as a special fund and paid out for such purpose only. If the
purpose for which a special fund was created has been fulfilled or
abandoned, the balance, if any, shall be transferred to the general
funds of the Government. (Emphasis Ours)
Correlatively, Section 2 of P.D. No. 755 clearly states that:
Section 2. Financial Assistance. To enable the coconut farmers to
comply with their contractual obligations under the aforesaid
Agreement, the [PCA] is hereby directed to draw and utilize the
collections under the Coconut Consumers Stabilization Fund [CCSF]
authorized to be levied by [P.D.] 232, as amended, to pay for the
financial commitments of the coconut farmers under the said
agreement…. and the Coconut Industry Development Fund as
prescribed by Presidential Decree No. 582 shall not be considered or
construed, under any law or regulation, special and/or fiduciary funds
and do not form part of the general funds of the national government
within the contemplation of Presidential Decree No. 711. (Emphasis
Ours)
Likewise, as discussed supra, Article III, Section 5 of both P.D. Nos.
961 and 1468 provides that the CCSF shall not be construed by any
law as a special and/or trust fund, the stated intention being that actual
ownership of the said fund shall pertain to coconut farmers in their
private capacities.131 Thus, in order to determine whether the relevant
provisions of P.D. Nos. 755, 961 and 1468 complied with Article VI,
Section 29 (3) of the 1987 Constitution, a look at the public policy or
the purpose for which the CCSF levy was imposed is necessary.
The CCSF was established by virtue of P.D. No. 276 wherein it is
stated that:
WHEREAS, an escalating crisis brought about by an abnormal
situation in the world market for fats and oils has resulted in supply and
price dislocations in the domestic market for coconut-based goods, and
has created hardships for consumers thereof;
WHEREAS, the representatives of the coconut industry … have
proposed the implementation of an industry-financed stabilization
scheme which will permit socialized pricing of coconut-based
commodities;
WHEREAS, it is the policy of the State to promote the welfare and
economic well-being of the consuming public;
….
1. In addition to its powers granted under [P.D.] No. 232, the [PCA] is
hereby authorized to formulate and immediately implement a
stabilization scheme for coconut-based consumer goods, along the
following general guidelines:
(a) ….The proceeds of the levy shall be deposited with the Philippine
National Bank or any other government bank to the account of the
CCSF as a separate trust fund….
(b) The Fund shall be utilized to subsidize the sale of coconut-based
products at prices set by the Price Control Council….:
….
As couched, P.D. No. 276 created and exacted the CCSF "to advance
the government’s avowed policy of protecting the coconut
industry."132 Evidently, the CCSF was originally set up as a special fund
to support consumer purchases of coconut products. To put it a bit
differently, the protection of the entire coconut industry, and even more
importantly, for the consuming public provides the rationale for the
creation of the coconut levy fund. There can be no quibbling then that
the foregoing provisions of P.D. No. 276 intended the fund created and
set up therein not especially for the coconut farmers but for the entire
coconut industry, albeit the improvement of the industry would
doubtless redound to the benefit of the farmers. Upon the foregoing
perspective, the following provisions of P.D. Nos. 755, 961 and 1468
insofar as they declared, as the case may be, that: "[the coconut levy]
fund and the disbursements thereof [shall be] authorized for the benefit
of the coconut farmers and shall be owned by them in their private
capacities;"133 or the coconut levy fund shall not be construed by any
law to be a special and/or fiduciary fund, and do not therefore form part
of the general fund of the national government later on;134 or the UCPB
shares acquired using the coconut levy fund shall be distributed to the
coconut farmers for free,135 violated the special public purpose for
which the CCSF was established.
In sum, not only were the challenged presidential issuances
unconstitutional for decreeing the distribution of the shares of stock for
free to the coconut farmers and, therefore, negating the public purpose
declared by P.D. No. 276, i.e., to stabilize the price of edible oil136 and
to protect the coconut industry.137 They likewise reclassified, nay
treated, the coconut levy fund as private fund to be disbursed and/or
invested for the benefit of private individuals in their private capacities,
contrary to the original purpose for which the fund was created. To
compound the situation, the offending provisions effectively removed
the coconut levy fund away from the cavil of public funds which
normally can be paid out only pursuant to an appropriation made by
law.138 The conversion of public funds into private assets was illegally
allowed, in fact mandated, by these provisions. Clearly therefore, the
pertinent provisions of P.D. Nos. 755, 961 and 1468 are
unconstitutional for violating Article VI, Section 29 (3) of the
Constitution. In this context, the distribution by PCA of the UCPB
shares purchased by means of the coconut levy fund – a special fund
of the government – to the coconut farmers, is therefore void.
We quote with approval the Sandiganbayan’s reasons for declaring the
provisions of P.D. Nos. 755, 961 and 1468 as unconstitutional:
It is now settled, in view of the ruling in Republic v. COCOFED, et al.,
supra, that "Coconut levy funds are raised with the use of the police
and taxing powers of the State;" that "they are levies imposed by the
State for the benefit of the coconut industry and its farmers" and that
"they were clearly imposed for a public purpose." This public purpose
is explained in the said case, as follows:
…. c) They were clearly imposed for a public purpose. There is
absolutely no question that they were colleted to advance the
government’s avowed policy of protecting the coconut industry….
"Taxation is done not merely to raise revenues to support the
government, but also to provide means for the rehabilitation and the
stabilization of a threatened industry, which is so affected with public
interest as to be within the police power of the State, as held in Caltex
Philippines v. COA and Osmeña v. Orbos.
xxx xxx xxx
The avowed public purpose for the disbursement of the CCSF is
contained in the perambulatory clauses and Section 1 of P.D. No. 755.
The imperativeness of enunciating the public purpose of the
expenditure of funds raised through taxation is underscored in the case
of Pascual v. The Secretary of Public Works and Communications, et
al, supra, which held:
"As regards the legal feasibility of appropriating public funds for a
private purpose the principle according to Ruling Case Law, is this:
62
‘It is a general rule that the legislature is without power to appropriate
public revenue for anything but a public purpose … it is the essential
character of the direct object of the expenditure which must determine
its validity as justifying a tax, and not the magnitude of the interests to
be affected nor the degree to which the general advantage of the
community, and thus the public welfare may be ultimately benefited by
their promotion. Incidental advantage to the public or to the state,
which results from the promotion of private interests and the prosperity
of private enterprises or business, does not justify their aid by the use
of public money.’ 25 R.L.C. pp. 398-400)
"The rule is set forth in Corpus Juris Secundum in the following
language:
xxx xxx xxx
‘The test of the constitutionality of a statute requiring the use of public
funds is whether the statute is designed to promote the public interests,
as opposed to the furtherance of the advantage of individuals, although
each advantage to individuals might incidentally serve the public….’
(81 C.J.S. p. 1147)
"Needless to say, this Court is fully in accord with the foregoing
views…. Besides, reflecting as they do, the established jurisprudence
in the United States, after whose constitutional system ours has been
patterned, said views and jurisprudence are, likewise, part and parcel
of our own constitutional law."
The gift of funds raised by the exercise of the taxing powers of the
State which were converted into shares of stock in a private
corporation, slated for free distribution to the coconut farmers, can only
be accorded constitutional sanction if it will directly serve the public
purpose declared by law….139
Section 1 of P.D. No. 755, as well as PCA Administrative Order No. 1,
Series of 1975 (PCA AO 1), and Resolution No. 074-75, are invalid
delegations of legislative power.
Petitioners argue that the anti-graft court erred in declaring Section 1 of
PD 755, PCA Administrative Order No. 1 and PCA Resolution No. 074-
78 constitutionally infirm by reason of alleged but unproven and
unsubstantiated flaws in their implementation. Additionally, they explain
that said court erred in concluding that Section 1 of PD No. 755
constitutes an undue delegation of legislative power insofar as it
authorizes the PCA to promulgate rules and regulations governing the
distribution of the UCPB shares to the farmers.
These propositions are meritless.
The assailed PSJ-A noted the operational distribution nightmare faced
by PCA and the mode of distribution of UCPB shares set in motion by
that agency left much room for diversion. Wrote the Sandiganbayan:
The actual distribution of the bank shares was admittedly an enormous
operational problem which resulted in the failure of the intended
beneficiaries to receive their shares of stocks in the bank, as shown by
the rules and regulations, issued by the PCA, without adequate
guidelines being provided to it by P.D. No. 755. PCA Administrative
Order No. 1, Series of 1975 (August 20, 1975), "Rules and Regulations
Governing the Distribution of Shares of Stock of the Bank Authorized to
be Acquired Pursuant to PCA Board Resolution No. 246-75", quoted
hereunder discloses how the undistributed shares of stocks due to
anonymous coconut farmers or payors of the coconut levy fees were
authorized to be distributed to existing shareholders of the Bank:
"Section 9. Fractional and Undistributed Shares – Fractional shares
and shares which remain undistributed … shall be distributed to all the
coconut farmers who have qualified and received equity in the Bank
and shall be apportioned among them, as far as practicable, in
proportion to their equity in relation to the number of undistributed
equity and such further rules and regulations as may hereafter be
promulgated.’
The foregoing PCA issuance was further amended by Resolution No.
074-78, still citing the same problem of distribution of the bank
shares….:
xxx xxx xxx
Thus, when 51,200,806 shares in the bank remained undistributed, the
PCA deemed it proper to give a "bonanza" to coconut farmers who
already got their bank shares, by giving them an additional share for
each share owned by them and by converting their fractional shares
into full shares. The rest of the shares were then transferred to a
private organization, the COCOFED, for distribution to those
determined to be "bona fide coconut farmers" who had "not received
shares of stock of the Bank." ….
The PCA thus assumed, due to lack of adequate guidelines set by P.D.
No. 755, that it had complete authority to define who are the coconut
farmers and to decide as to who among the coconut farmers shall be
given the gift of bank shares; how many shares shall be given to them,
and what basis it shall use to determine the amount of shares to be
distributed for free to the coconut farmers. In other words, P.D. No. 755
fails the completeness test which renders it constitutionally infirm.
Regarding the second requisite of standard, it is settled that legislative
standard need not be expressed….
We observed, however, that the PCA [AO] No. 1, Series of 1975 and
PCA Rules and Regulations 074-78, did not take into consideration the
accomplishment of the public purpose or the national standard/policy of
P.D. No. 755 which is directly to accelerate the development and
growth of the coconut industry and as a consequence thereof, to make
the coconut farmers "participants in and beneficiaries" of such growth
and development. The said PCA issuances did nothing more than
provide guidelines as to whom the UCPB shares were to be distributed
and how many bank shares shall be allotted to the beneficiaries. There
was no mention of how the distributed shares shall be used to achieve
exclusively or at least directly or primarily the aim or public purpose
enunciated by P.D. No. 755. The numerical or quantitative distribution
of shares contemplated by the PCA regulations which is a condition for
the validly of said administrative issuances. There was a reversal of
priorities. The narrow private interests prevailed over the laudable
objectives of the law…. However, under the May 25, 1975 agreement
implemented by the PCA issuances, the PCA acquired only 64.98% of
the shares of the bank and even the shares covering the said 64.98%
were later on transferred to non-coconut farmers."
The distribution for free of the shares of stock of the CIIF Companies is
tainted with the above-mentioned constitutional infirmities of the PCA
administrative issuances. In view of the foregoing, we cannot consider
the provision of P.D. No. 961 and P.D. No. 1468 and the implementing
regulations issued by the PCA as valid legal basis to hold that assets
acquired with public funds have legitimately become private
properties." 140 (Emphasis added.)
P.D. No. 755 involves an invalid delegation of legislative power, a
concept discussed in Soriano v. Laguardia,141citing the following
excerpts from Edu v. Ericta:
It is a fundamental … that Congress may not delegate its legislative
power…. What cannot be delegated is the authority … to make laws
and to alter and repeal them; the test is the completeness of the statute
in all its term and provisions when it leaves the hands of the legislature.
To determine whether or not there is an undue delegation of legislative
power, the inquiry must be directed to the scope and definiteness of
the measure enacted. The legislature does not abdicate its functions
63
when it describes what job must be done, who is to do it, and what is
the scope of his authority….
To avoid the taint of unlawful delegation, there must be a standard,
which implies at the very least that the legislature itself determines
matters of principle and lays down fundamental policy. Otherwise, the
charge of complete abdication may be hard to repel. A standard thus
defines legislative policy, marks its limits, maps out its boundaries and
specifies the public agency to apply it. It indicates the circumstances
under which the legislative command is to be effected. It is the criterion
by which legislative purpose may be carried out. Thereafter, the
executive or administrative office designated may in pursuance of the
above guidelines promulgate supplemental rules and
regulations.142 (Emphasis supplied)
Jurisprudence is consistent as regards the two tests, which must be
complied with to determine the existence of a valid delegation of
legislative power. In Abakada Guro Party List, et al. v. Purisima,143 We
reiterated the discussion, to wit:
Two tests determine the validity of delegation of legislative power: (1)
the completeness test and (2) the sufficient standard test. A law is
complete when it sets forth therein the policy to be executed, carried
out or implemented by the delegate. It lays down a sufficient standard
when it provides adequate guidelines or limitations in the law to map
out the boundaries of the delegate’s authority and prevent the
delegation from running riot. To be sufficient, the standard must specify
the limits of the delegate’s authority, announce the legislative policy
and identify the conditions under which it is to be implemented.
In the instant case, the requisite standards or criteria are absent in P.D.
No. 755. As may be noted, the decree authorizes the PCA to distribute
to coconut farmers, for free, the shares of stocks of UCPB and to pay
from the CCSF levy the financial commitments of the coconut farmers
under the Agreement for the acquisition of such bank. Yet, the decree
does not even state who are to be considered as coconut farmers.
Would, say, one who plants a single coconut tree be already
considered a coconut farmer and, therefore, entitled to own UCPB
shares? If so, how many shares shall be given to him? The definition of
a coconut farmer and the basis as to the number of shares a farmer is
entitled to receive for free are important variables to be determined by
law and cannot be left to the discretion of the implementing agency.
Moreover, P.D. No. 755 did not identify or delineate any clear condition
as to how the disposition of the UCPB shares or their conversion into
private ownership will redound to the advancement of the national
policy declared under it. To recall, P.D. No. 755 seeks to "accelerate
the growth and development of the coconut industry and achieve a
vertical integration thereof so that coconut farmers will become
participants in, and beneficiaries of, such growth and
development."144 The Sandiganbayan is correct in its observation and
ruling that the said law gratuitously gave away public funds to private
individuals, and converted them exclusively into private property
without any restriction as to its use that would reflect the avowed
national policy or public purpose. Conversely, the private individuals to
whom the UCPB shares were transferred are free to dispose of them
by sale or any other mode from the moment of their acquisition. In fact
and true enough, the Sandiganbayan categorically stated in its Order
dated March 11, 2003,145 that out of the 72.2% shares and increased
capital stock of the FUB (later UCPB) allegedly covered by the May 25,
1975 Agreement,146 entirely paid for by PCA, 7.22% were given to
Cojuangco and the remaining 64.98%, which were originally held by
PCA for the benefit of the coconut farmers, were later sold or
transferred to non-coconut farmers.147 Even the proposed rewording of
the factual allegations of Lobregat, COCOFED, et al. and Ballares, et
al., reveals that indeed, P.D. No. 755 did not provide for any guideline,
standard, condition or restriction by which the said shares shall be
distributed to the coconut farmers that would ensure that the same will
be undertaken to accelerate the growth and development of the
coconut industry pursuant to its national policy. The proposed
rewording of admissions reads:
There were shares forming part of the aforementioned 64.98% which
were, after their distribution, for free, to the coconut farmers as
required by P.D. No. 755, sold or transferred respectively by individual
coconut farmers who were then the registered stockholders of those
UCPB shares to non-coconut farmers.148
Clearly, P.D. No. 755, insofar as it grants PCA a veritable carte
blanche to distribute to coconut farmers UCPB shares at the level it
may determine, as well as the full disposition of such shares to private
individuals in their private capacity without any conditions or
restrictions that would advance the law’s national policy or public
purpose, present a case of undue delegation of legislative power. As
such, there is even no need to discuss the validity of the administrative
orders and resolutions of PCA implementing P.D. No. 755. Water
cannot rise higher than its source.
Even so, PCA AO 1 and PCA Resolution No. 078-74, are in
themselves, infirm under the undue delegation of legislative powers.
Particularly, Section 9 of PCA AO I provides:
SECTION 9. Fractional and Undistributed Shares – Fractional shares
and shares which remain undistributed as a consequence of the failure
of the coconut farmers to register their COCOFUND receipts or the
destruction of the COCOFUND receipts or the registration of
COCOFUND receipts in the name of an unqualified individual, after the
final distribution is made on the basis of the consolidated IBM
registration Report as of March 31, 1976 shall be distributed to all the
coconut farmers who have qualified and received equity in the Bank
and shall be appointed among them, as far as practicable, in proportion
to their equity in relation to the number of undistributed equity and such
further rules and regulations as may hereafter be promulgated.
The foregoing provision directs and authorizes the distribution of
fractional and undistributed shares as a consequence of the failure of
the coconut farmers with Coco Fund receipts to register them, even
without a clear mandate or instruction on the same in any pertinent
existing law. PCA Resolution No. 078-74 had a similar provision, albeit
providing more detailed information. The said Resolution identified
51,200,806 shares of the bank that remained undistributed and PCA
devised its own rules as to how these undistributed and fractional
shares shall be disposed of, notwithstanding the dearth as to the
standards or parameters in the laws which it sought to implement.
Eventually, what happened was that, as correctly pointed out by the
Sandiganbayan, the PCA gave a "bonanza" to supposed coconut
farmers who already got their bank shares, by giving them extra shares
according to the rules established – on its own – by the PCA under
PCA AO 1 and Resolution No. 078-74. Because of the lack of
adequate guidelines under P.D. No. 755 as to how the shares were
supposed to be distributed to the coconut farmers, the PCA thus
assumed that it could decide for itself how these shares will be
distributed. This obviously paved the way to playing favorites, if not
allowing outright shenanigans. In this regard, this poser raised in the
Court’s February 16, 1993 Resolution in G.R. No. 96073 is as relevant
then as it is now: "How is it that shares of stocks in such entities which
was organized and financed by revenues derived from coconut levy
funds which were imbued with public interest ended up in private
hands who are not farmers or beneficiaries; and whether or not the
holders of said stock, who in one way or another had had some part in
the collection, administration, disbursement or other disposition of the
coconut levy funds were qualified to acquire stock in the corporations
formed and operated from these funds." 149
Likewise, the said PCA issuances did not take note of the national
policy or public purpose for which the coconut levy funds were imposed
under P.D. No. 755, i.e. the acceleration of the growth and
development of the entire coconut industry, and the achievement of a
vertical integration thereof that could make the coconut farmers
participants in, and beneficiaries of, such growth and
development.150 Instead, the PCA prioritized the coconut farmers
themselves by fully disposing of the bank shares, totally disregarding
64
the national policy for which the funds were created. This is clearly an
undue delegation of legislative powers.
With this pronouncement, there is hardly any need to establish that the
sequestered assets are ill-gotten wealth. The documentary evidence,
the P.D.s and Agreements, prove that the transfer of the shares to the
more than one million of supposed coconut farmers was tainted with
illegality.
Article III, Section 5 of P.D. No. 961 and Article III, Section 5 of P.D.
No. 1468 violate Article IX (D) (2) of the 1987 Constitution.
Article III, Section 5 of P.D. No. 961 explicitly takes away the coconut
levy funds from the coffer of the public funds, or, to be precise,
privatized revenues derived from the coco levy. Particularly, the
aforesaid Section 5 provides:
Section 5. Exemptions. The Coconut Consumers Stabilization Fund
and the Coconut Industry Development fund as well as all
disbursements of said funds for the benefit of the coconut farmers as
herein authorized shall not be construed or interpreted, under any law
or regulation, as special and/or fiduciary funds, or as part of the
general funds of the national government within the contemplation of
P.D. No. 711; nor as a subsidy, donation, levy, government funded
investment, or government share within the contemplation of P.D. 898
the intention being that said Fund and the disbursements thereof as
herein authorized for the benefit of the coconut farmers shall be owned
in their own private capacity.151 (Emphasis Ours)
The same provision is carried over in Article III, Section 5 of P.D. No.
1468, the Revised Coconut Industry Code:
These identical provisions of P.D. Nos. 961 and 1468 likewise violate
Article IX (D), Section 2(1) of the Constitution, defining the powers and
functions of the Commission on Audit ("COA") as a constitutional
commission:
Sec. 2. (1) The Commission on Audit shall have the power, authority,
and duty to examine, audit, and settle all accounts pertaining to the
revenue and receipts of, and expenditures or uses of funds and
property, owned or held in trust by, or pertaining to, the Government, or
any of its subdivisions, agencies, or instrumentalities, including
government-owned and controlled corporations with original charters,
and on a post-audit basis: (a) constitutional bodies, commissions and
offices that have been granted fiscal autonomy under this Constitution;
(b) autonomous state colleges and universities; (c) other government-
owned or controlled corporations and their subsidiaries;. 152(Emphasis
Ours)
A similar provision was likewise previously found in Article XII (D),
Section 2 (1) of the 1973 Constitution, thus:
Section 2. The Commission on Audit shall have the following powers
and functions:
(1) Examine, audit, and settle, in accordance with law and regulations,
all accounts pertaining to the revenues and receipts of, and
expenditures or uses of funds and property, owned or held in trust by,
or pertaining to, the Government, or any of its subdivisions, agencies,
or instrumentalities, including government-owned and controlled
corporations; keep the general accounts of the government and, for
such period as may be provided by law, preserve the vouchers
pertaining thereto; and promulgate accounting and auditing rules and
regulations including those for the prevention of irregular, unnecessary,
excessive, or extravagant expenditures or use of funds and
property.153 (Emphasis Ours)
The Constitution, by express provision, vests the COA with the
responsibility for State audit.154 As an independent supreme State
auditor, its audit jurisdiction cannot be undermined by any law. Indeed,
under Article IX (D), Section 3 of the 1987 Constitution, "[n]o law shall
be passed exempting any entity of the Government or its subsidiary in
any guise whatever, or any investment of public funds, from the
jurisdiction of the Commission on Audit."155 Following the mandate of
the COA and the parameters set forth by the foregoing provisions, it is
clear that it has jurisdiction over the coconut levy funds, being special
public funds. Conversely, the COA has the power, authority and duty to
examine, audit and settle all accounts pertaining to the coconut levy
funds and, consequently, to the UCPB shares purchased using the
said funds. However, declaring the said funds as partaking the nature
of private funds, ergo subject to private appropriation, removes them
from the coffer of the public funds of the government, and
consequently renders them impervious to the COA audit jurisdiction.
Clearly, the pertinent provisions of P.D. Nos. 961 and 1468 divest the
COA of its constitutionally-mandated function and undermine its
constitutional independence.
The assailed purchase of UCPB shares of stocks using the coconut
levy funds presents a classic example of an investment of public funds.
The conversion of these special public funds into private funds by
allowing private individuals to own them in their private capacities is
something else. It effectively deprives the COA of its constitutionally-
invested power to audit and settle such accounts. The conversion of
the said shares purchased using special public funds into pure and
exclusive private ownership has taken, or will completely take away the
said funds from the boundaries with which the COA has jurisdiction.
Obviously, the COA is without audit jurisdiction over the receipt or
disbursement of private property. Accordingly, Article III, Section 5 of
both P.D. Nos. 961 and 1468 must be struck down for being
unconstitutional, be they assayed against Section 2(1), Article XII (D)
of the 1973 Constitution or its counterpart provision in the 1987
Constitution.
The Court, however, takes note of the dispositive portion of PSJ-A,
which states that:156
xxx xxx xxx
2. Section 2 of P.D. No. 755 which mandated that the coconut levy
funds shall not be considered special and/or fiduciary funds nor part of
the general funds of the national government and similar provisions of
Sec. 3, Art. III, P.D. 961 and Sec. 5, Art. III, P.D. 1468 contravene the
provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and
Article VI, Sec. 29 (3). (Emphasis Ours)
xxx xxx xxx
However, a careful reading of the discussion in PSJ-A reveals that it is
Section 5 of Article III of P.D. No. 961 and not Section 3 of said decree,
which is at issue, and which was therefore held to be contrary to the
Constitution. The dispositive portion of the said PSJ should therefore
be corrected to reflect the proper provision that was declared as
unconstitutional, which is Section 5 of Article III of P.D. No. 961 and not
Section 3 thereof.
V
The CIIF Companies and the CIIF Block
of SMC shares are public funds/assets
From the foregoing discussions, it is fairly established that the coconut
levy funds are special public funds. Consequently, any property
purchased by means of the coconut levy funds should likewise be
treated as public funds or public property, subject to burdens and
restrictions attached by law to such property.
65
In this case, the 6 CIIF Oil Mills were acquired by the UCPB using
coconut levy funds.157 On the other hand, the 14 CIIF holding
companies are wholly owned subsidiaries of the CIIF Oil
Mills.158 Conversely, these companies were acquired using or whose
capitalization comes from the coconut levy funds. However, as in the
case of UCPB, UCPB itself distributed a part of its investments in the
CIIF oil mills to coconut farmers, and retained a part thereof as
administrator.159 The portion distributed to the supposed coconut
farmers followed the procedure outlined in PCA Resolution No. 033-
78.160 And as the administrator of the CIIF holding companies, the
UCPB authorized the acquisition of the SMC shares. 161 In fact, these
companies were formed or organized solely for the purpose of holding
the SMC shares.162 As found by the Sandiganbayan, the 14 CIIF
holding companies used borrowed funds from the UCPB to acquire the
SMC shares in the aggregate amount of P1.656 Billion.163
Since the CIIF companies and the CIIF block of SMC shares were
acquired using coconut levy funds – funds, which have been
established to be public in character – it goes without saying that these
acquired corporations and assets ought to be regarded and treated as
government assets. Being government properties, they are accordingly
owned by the Government, for the coconut industry pursuant to
currently existing laws.164
It may be conceded hypothetically, as COCOFED et al. urge, that the
14 CIIF holding companies acquired the SMC shares in question using
advances from the CIIF companies and from UCPB loans. But there
can be no gainsaying that the same advances and UCPB loans are
public in character, constituting as they do assets of the 14 holding
companies, which in turn are wholly-owned subsidiaries of the 6 CIIF
Oil Mills. And these oil mills were organized, capitalized and/or
financed using coconut levy funds. In net effect, the CIIF block of SMC
shares are simply the fruits of the coconut levy funds acquired at the
expense of the coconut industry. In Republic v. COCOFED, 165 the en
banc Court, speaking through Justice (later Chief Justice) Artemio
Panganiban, stated: "Because the subject UCPB shares were acquired
with government funds, the government becomes their prima facie
beneficial and true owner." By parity of reasoning, the adverted block
of SMC shares, acquired as they were with government funds, belong
to the government as, at the very least, their beneficial and true owner.
We thus affirm the decision of the Sandiganbayan on this point. But as
We have earlier discussed, reiterating our holding in Republic v.
COCOFED, the State’s avowed policy or purpose in creating the
coconut levy fund is for the development of the entire coconut industry,
which is one of the major industries that promotes sustained economic
stability, and not merely the livelihood of a significant segment of the
population.166 Accordingly, We sustain the ruling of the Sandiganbayan
in CC No. 0033-F that the CIIF companies and the CIIF block of SMC
shares are public funds necessary owned by the Government. We,
however, modify the same in the following wise: These shares shall
belong to the Government, which shall be used only for the benefit of
the coconut farmers and for the development of the coconut industry.
Sandiganbayan did not err in ruling that
PCA (AO) No. 1, Series of 1975 and
PCA rules and regulations 074-78 did
not comply with the national standard
or policy of P.D. No. 755.
According to the petitioners, the Sandiganbayan has identified the
national policy sought to be enhanced by and expressed under Section
1 in relation to Section 2 of P.D. No. 755. Yet, so petitioners argue, that
court, with grave abuse of discretion, disregarded such policy and
thereafter, ruled that Section 1 in relation to Section 2 of P.D. No. 755
is unconstitutional as the decree failed to promote the purpose for
which it was enacted in the first place.
We are not persuaded. The relevant assailed portion of PSJ-A states:
We observe, however, that the PCA [AO] No. 1, Series of 1975 and
PCA Rules and Regulations 074-78, did not take into consideration the
accomplishment of the public purpose or the national standard/policy of
P.D. No. 755 which is directly to accelerate the development and
growth of the coconut industry and as a consequence thereof, to make
the coconut farmers "participants in and beneficiaries" of such growth
and development.…
It is a basic legal precept that courts do not look into the wisdom of the
laws passed. The principle of separation of powers demands this
hands-off attitude from the judiciary. Saguiguit v. People167 teaches
why:
… [W]hat the petitioner asks is for the Court to delve into the policy
behind or wisdom of a statute, … which, under the doctrine of
separation of powers, it cannot do,…. Even with the best of motives,
the Court can only interpret and apply the law and cannot, despite
doubts about its wisdom, amend or repeal it. Courts of justice have no
right to encroach on the prerogatives of lawmakers, as long as it has
not been shown that they have acted with grave abuse of discretion.
And while the judiciary may interpret laws and evaluate them for
constitutional soundness and to strike them down if they are proven to
be infirm, this solemn power and duty do not include the discretion to
correct by reading into the law what is not written therein.
We reproduce the policy-declaring provision of P.D. No. 755, thus:
Section 1. Declaration of National Policy. — It is hereby declared that
the policy of the State is to provide readily available credit facilities to
the coconut farmers at preferential rates; that this policy can be …
efficiently realized by the implementation of the "Agreement for the
Acquisition of a Commercial Bank for the benefit of the Coconut
Farmers" executed by the [PCA], the terms of which "Agreement" are
hereby incorporated by reference; and that the [PCA] is hereby
authorized to distribute, for free, the shares of stock of the bank it
acquired to the coconut farmers under such rules and regulations it
may promulgate.
P.D. No. 755 having stated in no uncertain terms that the national
policy of providing cheap credit facilities to coconut farmers shall be
achieved with the acquisition of a commercial bank, the Court is
without discretion to rule on the wisdom of such an undertaking. It is
abundantly clear, however, that the Sandiganbayan did not look into
the policy behind, or the wisdom of, P.D. No. 755. In context, it did no
more than to inquire whether the purpose defined in P.D. No. 755 and
for which the coco levy fund was established would be carried out,
obviously having in mind the (a) dictum that the power to tax should
only be exercised for a public purpose and (b) command of Section 29,
paragraph 3 of Article VI of the 1987 Constitution that:
(3) All money collected on any tax levied for a special purpose shall be
treated as a special fund and paid out for such purpose only. If the
purpose for which a special fund was created has been fulfilled or
abandoned, the balance, if any, shall be transferred to the general
funds of the Government. (Emphasis supplied)
For the above reason, the above-assailed action of the Sandiganbayan
was well within the scope of its sound discretion and mandate.
Moreover, petitioners impute on the anti-graft court the commission of
grave abuse of discretion for going into the validity of and in declaring
the coco levy laws as unconstitutional, when there were still factual
issues to be resolved in a full blown trial as directed by this Court. 168
66
Petitioners COCOFED and the farmer representatives miss the point.
They acknowledged that their alleged ownership of the sequestered
shares in UCPB and SMC is predicated on the coco levy decrees.
Thus, the legality and propriety of their ownership of these valuable
assets are directly related to and must be assayed against the
constitutionality of those presidential decrees. This is a primordial
issue, which must be determined to address the validity of the rest of
petitioners’ claims of ownership. Verily, the Sandiganbayan did not
commit grave abuse of discretion, a phrase which, in the abstract,
denotes the idea of capricious or whimsical exercise of judgment or the
exercise of power in an arbitrary or despotic manner by reason of
passion or personal hostility as to be equivalent to having acted without
jurisdiction.169
The Operative Fact Doctrine does not apply
Petitioners assert that the Sandiganbayan’s refusal to recognize the
vested rights purportedly created under the coconut levy laws
constitutes taking of private property without due process of law. They
reason out that to accord retroactive application to a declaration of
unconstitutionality would be unfair inasmuch as such approach would
penalize the farmers who merely obeyed then valid laws.
This contention is specious.
In Yap v. Thenamaris Ship’s Management,170 the Operative Fact
Doctrine was discussed in that:
As a general rule, an unconstitutional act is not a law; it confers no
rights; it imposes no duties; it affords no protection; it creates no office;
it is inoperative as if it has not been passed at all. The general rule is
supported by Article 7 of the Civil Code, which provides:
Art. 7. Laws are repealed only by subsequent ones, and their violation
or non-observance shall not be excused by disuse or custom or
practice to the contrary.
The doctrine of operative fact serves as an exception to the
aforementioned general rule. In Planters Products, Inc. v. Fertiphil
Corporation, we held:
The doctrine of operative fact, as an exception to the general rule, only
applies as a matter of equity and fair play. It nullifies the effects of an
unconstitutional law by recognizing that the existence of a statute prior
to a determination of unconstitutionality is an operative fact and may
have consequences which cannot always be ignored. The past cannot
always be erased by a new judicial declaration.
The doctrine is applicable when a declaration of unconstitutionality will
impose an undue burden on those who have relied on the invalid law.
Thus, it was applied to a criminal case when a declaration of
unconstitutionality would put the accused in double jeopardy or would
put in limbo the acts done by a municipality in reliance upon a law
creating it.171
In that case, this Court further held that the Operative Fact Doctrine will
not be applied as an exception when to rule otherwise would
be iniquitous and would send a wrong signal that an act may be
justified when based on an unconstitutional provision of law. 172
The Court had the following disquisition on the concept of the
Operative Fact Doctrine in the case of Chavez v. National Housing
Authority:173
The "operative fact" doctrine is embodied in De Agbayani v. Court of
Appeals, wherein it is stated that a legislative or executive act, prior to
its being declared as unconstitutional by the courts, is valid and must
be complied with, thus:
As the new Civil Code puts it: "When the courts declare a law to be
inconsistent with the Constitution, the former shall be void and the
latter shall govern. Administrative or executive acts, orders and
regulations shall be valid only when they are not contrary to the laws of
the Constitution." It is understandable why it should be so, the
Constitution being supreme and paramount. Any legislative or
executive act contrary to its terms cannot survive.
Such a view has support in logic and possesses the merit of simplicity.
It may not however be sufficiently realistic. It does not admit of doubt
that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with.
This is so as until after the judiciary, in an appropriate case, declares
its invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be
more fitting than that in a subsequent litigation regard be had to what
has been done while such legislative or executive act was in operation
and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be
reckoned with. This is merely to reflect awareness that precisely
because the judiciary is the governmental organ which has the final
say on whether or not a legislative or executive measure is valid, a
period of time may have elapsed before it can exercise the power of
judicial review that may lead to a declaration of nullity. It would be to
deprive the law of its quality of fairness and justice then, if there be no
recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual
existence of a statute, prior to such a determination [of
unconstitutionality], is an operative fact and may have consequences
which cannot justly be ignored. The past cannot always be erased by a
new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, with respect to
particular relations, individual and corporate, and particular conduct,
private and official." This language has been quoted with approval in a
resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc.
v. Flores. An even more recent instance is the opinion of Justice
Zaldivar speaking for the Court in Fernandez v. Cuerva and Co.
(Emphasis supplied.)
The principle was further explicated in the case of Rieta v. People of
the Philippines, thus:
In similar situations in the past this Court had taken the pragmatic and
realistic course set forth in Chicot County Drainage District vs. Baxter
Bank to wit:
The courts below have proceeded on the theory that the Act of
Congress, having been found to be unconstitutional, was not a law;
that it was inoperative, conferring no rights and imposing no duties,
and hence affording no basis for the challenged decree…. It is quite
clear, however, that such broad statements as to the effect of a
determination of unconstitutionality must be taken with qualifications.
The actual existence of a statute, prior to [the determination of its
invalidity], is an operative fact and may have consequences which
cannot justly be ignored. The past cannot always be erased by a new
judicial declaration. The effect of the subsequent ruling as to invalidity
may have to be considered in various aspects –with respect to
particular conduct, private and official. Questions of rights claimed to
have become vested, of status, of prior determinations deemed to have
finality and acted upon accordingly, of public policy in the light of the
nature both of the statute and of its previous application, demand
examination. These questions are among the most difficult of those
which have engaged the attention of courts, state and federal, and it is
manifest from numerous decisions that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified.
Moreover, the Court ruled in Chavez that:
Furthermore, when petitioner filed the instant case against respondents
on August 5, 2004, the JVAs were already terminated by virtue of the
67
MOA between the NHA and RBI. The respondents had no reason to
think that their agreements were unconstitutional or even questionable,
as in fact, the concurrent acts of the executive department lent validity
to the implementation of the Project. The SMDRP agreements have
produced vested rights in favor of the slum dwellers, the buyers of
reclaimed land who were issued titles over said land, and the agencies
and investors who made investments in the project or who bought
SMPPCs. These properties and rights cannot be disturbed or
questioned after the passage of around ten (10) years from the start of
the SMDRP implementation. Evidently, the "operative fact" principle
has set in. The titles to the lands in the hands of the buyers can no
longer be invalidated.174
In the case at bar, the Court rules that the dictates of justice, fairness
and equity do not support the claim of the alleged farmer-owners that
their ownership of the UCPB shares should be respected. Our reasons:
1. Said farmers or alleged claimants do not have any legal right to own
the UCPB shares distributed to them. It was not successfully refuted
that said claimants were issued receipts under R.A. 6260 for the
payment of the levy that went into the Coconut Investment Fund (CIF)
upon which shares in the "Coconut Investment Company" will be
issued. The Court upholds the finding of the Sandiganbayan that said
investment company is a different corporate entity from the United
Coconut Planters Bank. This was in fact admitted by petitioners during
the April 17, 2001 oral arguments in G.R. Nos. 147062-64.175
The payments under R.A. 6260 cannot be equated with the payments
under P.D. No. 276, the first having been made as contributions to the
Coconut Investment Fund while the payments under P.D. No. 276
constituted the Coconut Consumers Stabilization Fund ("CCSF"). R.A.
6260 reads:
Section 2. Declaration of Policy. It is hereby declared to be the national
policy to accelerate the development of the coconut industry through
the provision of adequate medium and long-term financing for capital
investment in the industry, by instituting a Coconut Investment fund
capitalized and administered by coconut farmers through a Coconut
Investment Company.176
P.D. No. 276 provides:
1. In addition to its powers granted under Presidential Decree No. 232,
the Philippine Coconut Authority is hereby authorized to formulate and
immediately implement a stabilization scheme for coconut-based
consumer goods, along the following general guidelines:
(a) ….
The proceeds from the levy shall be deposited with the Philippine
National Bank or any other government bank to the account of the
Coconut Consumers Stabilization Fund, as a separate trust fund which
shall not form part of the general fund of the government.
(b) The Fund shall be utilized to subsidize the sale of coconut-based
products at prices set by the Price Control Council, under rules and
regulations to be promulgated by the Philippine Consumers
Stabilization Committee….177
The PCA, via Resolution No. 045-75 dated May 21, 1975, clarified the
distinction between the CIF levy payments under R.A. 6260 and the
CCSF levy paid pursuant to P.D. 276, thusly:
It must be remembered that the receipts issued under R.A. No. 6260
were to be registered in exchange for shares of stock in the Coconut
Investment Company (CIC), which obviously is a different corporate
entity from UCPB. This fact was admitted by petitioners during the April
17, 2001 oral arguments in G.R. Nos. 147062-64.
In fact, while the CIF levy payments claimed to have been paid by
petitioners were meant for the CIC, the distribution of UCPB stock
certificates to the coconut farmers, if at all, were meant for the payors
of the CCSF in proportion to the coconut farmer’s CCSF contributions
pursuant to PCA Resolution No. 045-75 dated May 21, 1975:
RESOLVED, FURTHER, That the amount of ONE HUNDRED FIFTY
MILLION (P150,000,000.00) PESOS be appropriated and set aside
from available funds of the PCA to be utilized in payment for the shares
of stock of such existing commercial bank and that the Treasurer be
instructed to disburse the said amount accordingly.
xxx xxx xxx
RESOLVED, FINALLY, That … be directed to organize a team which
shall prepare a list of coconut farmers who have paid the levy and
contributed to the [CCSF] and to prepare a stock distribution plan to
the end that the aforesaid coconut farmers shall receive certificates of
stock of such commercial bank in proportion to their contributions to
the Fund.
Unfortunately, the said resolution was never complied with in the
distribution of the so-called "farmers" UCPB shares.
The payments therefore under R.A. 6260 are not the same as those
under P.D. No. 276. The amounts of CIF contributions under R.A. 6260
which were collected starting 1971 are undeniably different from the
CCSF levy under P.D. No. 276, which were collected starting 1973.
The two (2) groups of claimants differ not only in identity but also in the
levy paid, the amount of produce and the time the government started
the collection.
Thus, petitioners and the alleged farmers claiming them pursuant to
R.A. 6260 do not have any legal basis to own the UCPB shares
distributed to them, assuming for a moment the legal feasibility of
transferring these shares paid from the R.A. 6260 levy to private
individuals.
2. To grant all the UCPB shares to petitioners and its alleged members
would be iniquitous and prejudicial to the remaining 4.6 million farmers
who have not received any UCPB shares when in fact they also made
payments to either the CIF or the CCSF but did not receive any receipt
or who was not able to register their receipts or misplaced them.
Section 1 of P.D. No. 755 which was declared unconstitutional cannot
be considered to be the legal basis for the transfer of the supposed
private ownership of the UCPB shares to petitioners who allegedly paid
the same under R.A. 6260. The Solicitor General is correct in
concluding that such unauthorized grant to petitioners constitutes
illegal deprivation of property without due process of law. Due process
of law would mean that the distribution of the UCPB shares should be
made only to farmers who have paid the contribution to the CCSF
pursuant to P.D. No. 276, and not to those who paid pursuant to R.A.
6260. What would have been the appropriate distribution scheme was
violated by Section 1 of P.D. No. 755 when it required that the UCPB
shares should be distributed to coconut farmers without distinction – in
fact, giving the PCA limitless power and free hand, to determine who
these farmers are, or would be.
We cannot sanction the award of the UCPB shares to petitioners who
appear to represent only 1.4 million members without any legal basis to
the extreme prejudice of the other 4.6 million coconut farmers
(Executive Order No. 747 fixed the number of coconut farmers at 6
million in 1981). Indeed, petitioners constitute only a small percentage
of the coconut farmers in the Philippines. Thus, the Sandiganbayan
correctly declared that the UCPB shares are government assets in
trust for the coconut farmers, which would be more beneficial to all the
coconut farmers instead of a very few dubious claimants;
68
3. The Sandiganbayan made the finding that due to enormous
operational problems and administrative complications, the intended
beneficiaries of the UCPB shares were not able to receive the shares
due to them. To reiterate what the anti-graft court said:
The actual distribution of the bank shares was admittedly an enormous
operational problem which resulted in the failure of the intended
beneficiaries to receive their shares of stocks in the bank, as shown by
the rules and regulations, issued by the PCA, without adequate
guidelines being provided to it by P.D. No. 755. PCA Administrative
Order No. 1, Series of 1975 (August 20, 1975), "Rules and Regulations
Governing the Distribution of Shares of Stock of the Bank Authorized to
be Acquired Pursuant to PCA Board Resolution No. 246-75", quoted
hereunder discloses how the undistributed shares of stocks due to
anonymous coconut farmers or payors of the coconut levy fees were
authorized to be distributed to existing shareholders of the Bank:
"Section 9. Fractional and Undistributed Shares – Fractional shares
and shares which remain undistributed as a consequence of the failure
of the coconut farmers to register their COCOFUND receipts or the
destruction of the COCOFUND receipts or the registration of the
COCOFUND receipts in the name of an unqualified individual, after the
final distribution is made on the basis of the consolidated IBM
registration Report as of March 31, 1976 shall be distributed to all the
coconut farmers who have qualified and received equity in the Bank
and shall be apportioned among them, as far as practicable, in
proportion to their equity in relation to the number of undistributed
equity and such further rules and regulations as may hereafter be
promulgated.’
The foregoing PCA issuance was further amended by Resolution No.
074-78, still citing the same problem of distribution of the bank shares.
This latter Resolution is quoted as follows:
RESOLUTION NO. 074-78
AMENDMENT OF ADMINISTRATIVE ORDER
NO. 1, SERIES OF 1975, GOVERNING THE
DISTRIBUTION OF SHARES
WHEREAS, pursuant to PCA Board Resolution No. 246-75, the total
par value of the shares of stock of the Bank purchased by the PCA for
the benefit of the coconut farmers is P85,773,600.00 with a par value
of P1.00 per share or equivalent to 85,773.600 shares;
WHEREAS, out of the 85,773,600 shares, a total of 34,572,794 shares
have already been distributed in accordance with Administrative Order
No. 1, Series of 1975, to wit:
First Distribution - 12,573,059
Second Distribution - 10,841,409
Third Distribution - 11,158,326
34,572,794
"WHEREAS, there is, therefore, a total of 51,200,806 shares still
available for distribution among the coconut farmers;
WHEREAS, it was determined by the PCA Board, in consonance with
the policy of the state on the integration of the coconut industry, that
the Bank shares must be widely distributed as possible among the
coconut farmers, for which purpose a national census of coconut
farmers was made through the Philippine Coconut Producers
Federation (COCOFED);
WHEREAS, to implement such determination of the PCA Board, there
is a need to accordingly amend Administrative Order No. 1, Series of
1975;
NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY
RESOLVED, that the remaining 51,200,806 shares of stock of the
Bank authorized to be acquired pursuant to the PCA Board Resolution
No. 246-75 dated July 25, 1975 be distributed as follows:
(1) All the coconut farmers who have received their shares in the equity
of the Bank on the basis of Section 8 of Administrative Order No. 1,
Series of 1975, shall receive additional share for each share presently
owned by them;
(2) Fractional shares shall be completed into full shares, and such full
shares shall be distributed among the coconut farmers who qualified
for the corresponding fractional shares;
(3) The balance of the shares, after deducting those to be distributed in
accordance with (1) and (2) above, shall be transferred to COCOFED
for distribution, immediately after completion of the national census of
coconut farmers prescribed under Resolution No. 033-78 of the PCA
Board, to all those who are determined by the PCA Board to be bona
fide coconut farmers and have not received shares of stock of the
Bank. The shares shall be equally determined among them on the
basis of per capita.
RESOLVED, FURTHER, That the rules and regulations under
Administrative Order No. 1, Series of 1975, which are inconsistent with
this Administrative Order be, as they are hereby, repealed and/or
amended accordingly."
Thus, when 51,200,806 shares in the bank remained undistributed, the
PCA deemed it proper to give a "bonanza" to coconut farmers who
already got their bank shares, by giving them an additional share for
each share owned by them and by converting their fractional shares
into full shares. The rest of the shares were then transferred to a
private organization, the COCOFED, for distribution to those
determined to be "bona fide coconut farmers" who had "not received
shares of stock of the Bank." The distribution to the latter was made on
the basis of "per capita", meaning without regard to the COCOFUND
receipts. The PCA considered itself free to disregard the said receipts
in the distribution of the shares although they were considered by the
May 25, 1975 Agreement between the PCA and defendant Cojuangco
(par. [8] of said Agreement) and by Sections 1, 3, 4, 6 and 9, PCA
Administrative Order No. 1, Series of 1975 as the basis for the
distribution of shares.
The PCA thus assumed, due to lack of adequate guidelines set by P.D.
No. 755, that it had complete authority to define who are the coconut
farmers and to decide as to who among the coconut farmers shall be
given the gift of bank shares; how many shares shall be given to them,
and what basis it shall use to determine the amount of shares to be
distributed for free to the coconut farmers. In other words, P.D. No. 755
fails the completeness test which renders it constitutionally infirm.
Due to numerous flaws in the distribution of the UCPB shares by PCA,
it would be best for the interest of all coconut farmers to revert the
ownership of the UCBP shares to the government for the entire
coconut industry, which includes the farmers;
4. The Court also takes judicial cognizance of the fact that a number, if
not all, of the coconut farmers who sold copra did not get the receipts
for the payment of the coconut levy for the reason that the copra they
produced were bought by traders or middlemen who in turn sold the
same to the coconut mills. The reality on the ground is that it was these
traders who got the receipts and the corresponding UCPB shares. In
69
addition, some uninformed coconut farmers who actually got the
COCOFUND receipts, not appreciating the importance and value of
said receipts, have already sold said receipts to non-coconut farmers,
thereby depriving them of the benefits under the coconut levy laws.
Ergo, the coconut farmers are the ones who will not be benefited by
the distribution of the UCPB shares contrary to the policy behind the
coconut levy laws. The nullification of the distribution of the UCPB
shares and their transfer to the government for the coconut industry
will, therefore, ensure that the benefits to be deprived from the UCPB
shares will actually accrue to the intended beneficiaries – the genuine
coconut farmers.
From the foregoing, it is highly inappropriate to apply the operative fact
doctrine to the UCPB shares. Public funds, which were supposedly
given utmost safeguard, were haphazardly distributed to private
individuals based on statutory provisions that are found to be
constitutionally infirm on not only one but on a variety of grounds.
Worse still, the recipients of the UCPB shares may not actually be the
intended beneficiaries of said benefit. Clearly, applying the Operative
Fact Doctrine would not only be iniquitous but would also serve
injustice to the Government, to the coconut industry, and to the people,
who, whether willingly or unwillingly, contributed to the public funds,
and therefore expect that their Government would take utmost care of
them and that they would be used no less, than for public purpose.
We clarify that PSJ-A is subject of another petition for review
interposed by Eduardo Cojuangco, Jr., in G.R. No. 180705 entitled,
Eduardo M. Cojuangco, Jr. v. Republic of the Philippines, which shall
be decided separately by this Court. Said petition should accordingly
not be affected by this Decision save for determinatively legal issues
directly addressed herein.
WHEREFORE, the petitions in G.R. Nos. 177857-58 and 178793 are
hereby DENIED. The Partial Summary Judgment dated July 11, 2003
in Civil Case No. 0033-A as reiterated with modification in Resolution
dated June 5, 2007, as well as the Partial Summary Judgment dated
May 7, 2004 in Civil Case No. 0033-F, which was effectively amended
in Resolution dated May 11, 2007, are AFFIRMED with modification,
only with respect to those issues subject of the petitions in G.R. Nos.
177857-58 and 178193. However, the issues raised in G.R. No.
180705 in relation to Partial Summary Judgment dated July 11, 2003
and Resolution dated June 5, 2007 in Civil Case No. 0033-A, shall be
decided by this Court in a separate decision.
The Partial Summary Judgment in Civil Case No. 0033-A dated July
11, 2003, is hereby MODIFIED, and shall read as follows:
WHEREFORE, in view of the foregoing, We rule as follows:
SUMMARY OF THE COURT’S RULING.
A. Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY
JUDGMENT dated April 11, 2001 filed by Defendant Maria Clara L.
Lobregat, COCOFED, et al., and Ballares, et al.
The Class Action Motion for Separate Summary Judgment dated April
11, 2001 filed by defendant Maria Clara L. Lobregat, COCOFED, et al.
and Ballares, et al., is hereby DENIED for lack of merit.
B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE:
COCOFED, ET AL. AND BALLARES, ET AL.) dated April 22, 2002
filed by Plaintiff.
1. a. The portion of Section 1 of P.D. No. 755, which reads:
…and that the Philippine Coconut Authority is hereby authorized to
distribute, for free, the shares of stock of the bank it acquired to the
coconut farmers under such rules and regulations it may promulgate.
taken in relation to Section 2 of the same P.D., is unconstitutional: (i)
for having allowed the use of the CCSF to benefit directly private
interest by the outright and unconditional grant of absolute ownership
of the FUB/UCPB shares paid for by PCA entirely with the CCSF to the
undefined "coconut farmers", which negated or circumvented the
national policy or public purpose declared by P.D. No. 755 to
accelerate the growth and development of the coconut industry and
achieve its vertical integration; and (ii) for having unduly delegated
legislative power to the PCA.
b. The implementing regulations issued by PCA, namely,
Administrative Order No. 1, Series of 1975 and Resolution No. 074-78
are likewise invalid for their failure to see to it that the distribution of
shares serve exclusively or at least primarily or directly the
aforementioned public purpose or national policy declared by P.D. No.
755.
2. Section 2 of P.D. No. 755 which mandated that the coconut levy
funds shall not be considered special and/or fiduciary funds nor part of
the general funds of the national government and similar provisions of
Sec. 5, Art. III, P.D. No. 961 and Sec. 5, Art. III, P.D. No. 1468
contravene the provisions of the Constitution, particularly, Art. IX (D),
Sec. 2; and Article VI, Sec. 29 (3).
3. Lobregat, COCOFED, et al. and Ballares, et al. have not legally and
validly obtained title of ownership over the subject UCPB shares by
virtue of P.D. No. 755, the Agreement dated May 25, 1975 between the
PCA and defendant Cojuangco, and PCA implementing rules, namely,
Adm. Order No. 1, s. 1975 and Resolution No. 074-78.
4. The so-called "Farmers’ UCPB shares" covered by 64.98% of the
UCPB shares of stock, which formed part of the 72.2% of the shares of
stock of the former FUB and now of the UCPB, the entire consideration
of which was charged by PCA to the CCSF, are hereby declared
conclusively owned by, the Plaintiff Republic of the Philippines.
xxx xxx xxx
So ordered.
The Partial Summary Judgment in Civil Case No. 0033-F dated May 7,
2004, is hereby MODIFIED, and shall read as follows:
WHEREFORE, the Motion for Execution of Partial summary judgment
(re: CIIF Block of Smc Shares of Stock) dated August 8, 2005 of the
plaintiff is hereby denied for lack of merit. However, this Court orders
the severance of this particular claim of Plaintiff. The Partial Summary
Judgment dated May 7, 2004 is now considered a separate final and
appealable judgment with respect to the said CIIF Block of SMC
shares of stock.1avvphi1
The Partial Summary Judgment rendered on May 7, 2004 is modified
by deleting the last paragraph of the dispositive portion, which will now
read, as follows:
Wherefore, in view of the foregoing, we hold that:
The Motion for Partial Summary Judgment (Re: Defendants CIIF
Companies, 14 Holding Companies and Cocofed, et al) filed by Plaintiff
is hereby GRANTED. Accordingly, the CIIF Companies, namely:
1. Southern Luzon Coconut Oil Mills (SOLCOM);
2. Cagayan de Oro Oil Co., Inc. (CAGOIL);
3. Iligan Coconut Industries, Inc. (ILICOCO);
70
 4. San Pablo Manufacturing Corp. (SPMC);

5. Granexport Manufacturing Corp. (GRANEX); and

6. Legaspi Oil Co., Inc. (LEGOIL),

As well as the 14 Holding Companies, namely:

1. Soriano Shares, Inc.;

2. ACS Investors, Inc.;

3. Roxas Shares, Inc.;

4. Arc Investors; Inc.;

5. Toda Holdings, Inc.;

6. AP Holdings, Inc.;

7. Fernandez Holdings, Inc.;

8. SMC Officers Corps, Inc.;

9. Te Deum Resources, Inc.;

10. Anglo Ventures, Inc.;

11. Randy Allied Ventures, Inc.;

12. Rock Steel Resources, Inc.;

13. Valhalla Properties Ltd., Inc.; and

14. First Meridian Development, Inc.

AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION (SMC)

SHARES OF STOCK TOTALING 33,133,266 SHARES AS OF 1983
TOGETHER WITH ALL DIVIDENDS DECLARED, PAID AND ISSUED
THEREON AS WELL AS ANY INCREMENTS THERETO ARISING
FROM, BUT NOT LIMITED TO, EXERCISE OF PRE-EMPTIVE
RIGHTS ARE DECLARED OWNED BY THE GOVERNMENT TO BE
USED ONLY FOR THE BENEFIT OF ALL COCONUT FARMERS
AND FOR THE DEVELOPMENT OF THE COCONUT INDUSTRY,
AND ORDERED RECONVEYED TO THE GOVERNMENT.

The Court affirms the Resolutions issued by the Sandiganbayan on

June 5, 2007 in civil case no. 0033-A and ON May 11, 2007 in civil
case No. 0033-F, that there is no more necessity of further trial with
respect to the issue of ownership of (1) the sequestered UCPB shares,
(2) the CIIF block of SMC shares, and (3) the CIIF companies. as they
have finally been ADJUDICATED in the AFOREMENTIONED
PARTIAL SUMMARY JUDGMENTS DATED jULY 11, 2003 AND mAY
7, 2004.

SO ORDERED.

71
 G.R. No. 203075, March 16, 2016
MILAGROS DIAZ, EDUARDO Q. CATACUTAN, DANTE Q.
CATACUTAN, REPRESENTED BY THEIR COMMON
ATTORNEY-IN-FACT, FERNANDO Q.
CATACUTAN, Petitioners, v. SPOUSES GAUDENCIO
PUNZALAN AND TERESITA PUNZALAN, Respondents.
DECISION
PERALTA, J.:
For the Court's Resolution is a Petition for Review under Rule
45 of the Rules of Court which petitioners Milagros Diaz,
Eduardo Q. Catacutan, Dante Q. Catacutan, et al. filed,
assailing the Decision1 of the Court of Appeals (CA), dated
February 17, 2012, and its Resolution2 dated July 25, 2012 in
CA-G.R. SP No. 112959. The CA reversed the Decision3 of the
Regional Trial Court (RTC) of San Fernando, Pampanga,
Branch 43, in Civil Case No. 13692, which affirmed the June
22, 2009 Municipal Circuit Trial Court (MCTC) Decision.4
The factual and procedural antecedents are as follows:
Petitioners alleged that their mother, Rufina Vda. de
Catacutan, who died on November 17, 2005, had acquired a
parcel of land in Mapanique, Candaba, Pampanga, consisting
of 3,272 square meters, covered by Transfer Certificate of
Title No. 3169. They contend that respondents spouses
Gaudencio and Teresita Punzalan (Spouses Punzalan)
constructed their house on a portion of said lot without their
consent and knowledge. But petitioners allowed them to stay,
thinking that they would vacate once their need for the
property arises. However, when they made a demand, the
Spouses Punzalan refused to vacate. Thus; on April 9, 2008,
petitioners wrote the spouses a formal demand letter to
vacate. Still, they refused to leave the property.
On August 22, 2008, petitioners filed a Complaint for unlawful
detainer with the MCTC of Sta. Ana-Candaba, Pampanga. The
MCTC then rendered a Decision on June 22, 2009, with .the
following dispositive portion:
chanRoblesvirtualLawlibrary
IN VIEW OF ALL THE FOREGOING CONSIDERATIONS,
judgment is hereby rendered in favor of the plaintiffs and
against the defendants ordering the latter, their privies and all
persons claiming rights, interests or possession over lot No. 8
of the subdivision plan PSD-020070 (OLT), being a portion of
PSU-103330 situated in the Barrio (Mapanique) Barangca,
Municipality of Candaba, Pampanga, covered by Transfer
Certificate of Title No. 3169 of the Registry of Deeds of
Pampanga in the name of Rufina Vda. de Catacutan, to vacate
and surrender its peaceful possession to the plaintiffs; to pay
Php1,000.00 per month from April 09, 2008, the date of
Demand to Vacate, until defendants finally vacate the
premises; to pay Php20,000.00 by way of attorney's fees to
the plaintiffs and to pay the costs of suit in the amount of
Php2,735.00 duly covered by Official Receipts.
SO ORDERED.5ChanRoblesVirtualawlibrary
The Spouses Punzalan, thus, brought the case before the San
Fernando RTC, which ruled, on November 25, 2009, in this
wise:
chanRoblesvirtualLawlibrary
WHEREFORE, finding no reversible error in the assailed
Decision, the court hereby AFFIRMS it in toto.
Costs against the defendants-appellants.
Furnish all concerned parties with copies of this Decision.
SO ORDERED.6ChanRoblesVirtualawlibrary
Aggrieved, the Spouses Punzalan elevated the case to the CA.
On February 17, 2012, the CA reversed the RTC, thus:
chanRoblesvirtualLawlibrary
WHEREFORE, in the light of the foregoing, the instant
petition is GRANTED. The assailed decision of the Regional
Trial Court of San Fernando City, Pampanga, Branch 43
is REVERSED and SET ASIDE. The complaint in Civil Case
No. 08-0407 of the Municipal Circuit Trial Court of Sta. Ana-
Candaba, Pampanga is DISMISSED for lack of jurisdiction.
SO ORDERED.7ChanRoblesVirtualawlibrary
Hence, petitioners filed a Motion for Reconsideration, but the
same was denied. Thus, the present petition.
Petitioners insist that their complaint states a cause of action
for unlawful detainer and thus, the MCTC duly acquired
jurisdiction.
The petition lacks merit.
Well settled is the rule that jurisdiction of the court in
ejectment cases is determined by the allegations of the
complaint and the character of the relief sought.8 The
complaint should embody such statement of facts as to bring
the party clearly within the class of cases under Section 1,
Rule 70 of the 1997 Rules of Civil Procedure, as amended.
Said provision states:
chanRoblesvirtualLawlibrary
SECTION 1. Who may institute proceedings, and when. -
Subject to the provisions of the next succeeding section, a
person deprived of the possession of any land or building by
force, intimidation, threat, strategy, or stealth, or a lessor,
vendor, vendee, or other person against whom the possession
of any land or building is unlawfully withheld after the
expiration or termination of the right to hold possession, by
virtue of any contract, express or implied, or the legal
representatives or assigns of any such lessor, vendor,
vendee, or other person, may, at any time within one (1) year
after such unlawful deprivation or withholding of possession,
bring an action in the proper Municipal Trial Court against the
person or persons unlawfully withholding or depriving of
possession, or any person or persons claiming under them,
for the restitution of such possession, together with damages
and costs.
Under the aforequoted rule, there are two (2) entirely distinct
and different causes of action, to wit: (1) a case for forcible
entry, which is an action to recover possession of a property
from the defendant whose occupation thereof is illegal from
the beginning as he acquired possession by fierce,
intimidation, threat, strategy or stealth; and (2) a case
for unlawful detainer, which is an action for recovery of
possession from the defendant whose possession of the
property was lawful at the inception by virtue of a contract
with the plaintiff, be it express or implied, but subsequently
became illegal when he continued his possession despite the
termination of his right or authority.9
Here, petitioners claim that their cause of action is one for
unlawful detainer and not for forcible entry. The Court
disagrees.
A complaint sufficiently alleges a cause of action for unlawful
detainer if it recites the following: (1) the defendant's initial
possession of the property was lawful, either by contract with
72
or by tolerance of the plaintiff; (2) eventually, such
possession became illegal upon the plaintiffs notice to the
defendant of the termination of the latter's right of
possession; (3) thereafter, the defendant remained in
possession and deprived the plaintiff of the enjoyment of the
property; and (4) the plaintiff instituted the complaint for
ejectment within one (1) year from the last demand to vacate
the property.10
On the other hand, in an action for forcible entry, the
following requisites are essential for the MTC to acquire
jurisdiction over the case.: (1) the plaintiff must allege prior
physical possession of the property; (2) the plaintiff was
deprived of possession by force, intimidation, threat, strategy
or stealth; and (3) the action must be filed within one (1)
year from the date of actual entry on the land, except that
when the entry is through stealth, the one (1)-year period is
counted from the time the plaintiff-owner or legal possessor
learned of the deprivation of the physical possession of the
property. It is not necessary, however, for the complaint to
expressly use the exact language of the law. For as long as it
is shown that^the dispossession took place under said
conditions, it is considered as sufficient compliance with the
requirements.11
Contrary to petitioners' contention that none of the means to
effectuate forcible entry was alleged in the complaint, the
Court finds that the allegations actually make up a case of
forcible entry. They claimed in thiir Complaint12 that the
Spouses Punzalan constructed their dwelling house on a
portion of petitioners' lot, without the latter's prior consent
and knowledge. This clearly falls under stealth, which is
defined as any secret, sly or clandestine act to avoid
discovery and to gain entrance into, or to remain within
residence of another without permission.13 Here, the evidence
clearly reveal that the spouses' possession was illegal at the
inception and not merely tolerated, considering that they
started to occupy the subject lot and thereafter built a house
on the same without the permission and consent of
petitioners. The spouses' entry into the land was, therefore,
effected clandestinely, without the knowledge of the owners.
Consequently, it is categorized as possession by stealth which
is forcible entry.14
The CA correctly held that the allegations of the complaint
failed to state the essential elements of an action for unlawful
detainer. The allegation that the Spouses Punzalan entered
the subject property and constructed their house on a portion
of the same without petitioners' knowledge and consent is
more consistent with an action for forcible entry, which should
have been filed within a year from the discovery of said illegal
entry.15 Instead, petitioners allowed them to stay, thinking
that they would simply accede if asked to vacate the
premises. Certainly, petitioners' kind tolerance came, not
from the inception, as required to constitute unlawful
detainer, but only upon learning of the unlawful entry.
In the similar case of Zacarias v. Anacay,16 the petitioner
argued that unlawful detainer was the proper remedy,
considering that she merely tolerated respondents' stay in the
premises after demand to vacate was made upon them. They
had, in fact, entered into an agreement and she was only
forced to take legal action when respondents reneged on their
promise to vacate the property after the lapse of the period
agreed upon. The Court held that the MCTC clearly had no
jurisdiction over the case as the complaint did not satisfy the
jurisdictional requirement of a valid cause for unlawful
detainer. As in said case, the complaint in the case at bar
likewise failed to allege a cause of action for unlawful detainer
as it did not describe possession by the Spouses Punzalan
being initially legal or tolerated by petitioners and which
merely became illegal upon the latter's termination of such
lawful possession. The fact that petitioners actually tolerated
the spouses' continued occupation after discovery of their
entry into the subject premises will not and cannot
automatically create an action for unlawful detainer. Such
possession could not have possibly been legal from the start
as it was without their knowledge or consent, much less
based on any contract, express or implied. What is decisive is
the nature of the defendant's entry into or initial possession of
the property. It must be stressed that the defendant's
possession in unlawful detainer is originally legal but simply
became illegal due to the expiration or termination of the
right to possess. The plaintiffs supposed acts of tolerance
must have been present right from the start of the
possession. Otherwise, if the possession was already unlawful
at the outset, it would constitute an action for forcible entry,
and the filing of one for unlawful detainer would be an
improper remedy. To hold otherwise would espouse a
dangerous doctrine, and for two reasons: (1) forcible entry
into the land is an open challenge to the right of the
possessor. Violation of that right authorizes a speedy redress
in the inferior court provided for in the rules. But if one (1)
year from the entry is allowed to lapse before a suit is filed,
then the remedy ceases to be speedy, and the possessor is
deemed to have waived his right to seek relief in the inferior
court; and (2) if a forcible entry action in the inferior court is
allowed after the lapse of a number of years, then the result
may well be that no action of forcible entry can actually
prescribe. No matter how long such defendant has already,
been in physical possession, the plaintiff will merely have to
make a demand, file a case upon a plea of tolerance - to
prevent prescription from setting in - and summarily throw
him out of the land. Such a conclusion is unreasonable.
Especially if we bear in mind the postulates that proceedings
of forcible entry and unlawful detainer are summary in
nature, and that the one (1)-year time-bar to initiate a suit is
but in pursuance of the summary nature of the action.17 Since
the prescriptive period for filing an action for forcible entry
had lapsed, petitioner could not convert her action into one
for unlawful detainer, reckoning the one (1)-year period to file
her action from the time of the demand to vacate.18
Verily, to vest the court jurisdiction to effect the ejectment of
an occupant, it is necessary that the complaint should
embody such a statement of facts as brings the party clearly
within the class of cases for which the statutes provide a
remedy, as these proceedings are summary in nature. The
complaint must show enough on its face to give the court
jurisdiction without having to resort to parol testimony.19
In the instant case, the allegations in the complaint do not
contain any averment of fact that would substantiate
petitioners' claim that they permitted or tolerated the
occupation of the property by the Spouses Punzalan right
from the start. This failure of petitioners to allege the key
jurisdictional facts constitutive of unlawful detainer is fatal.
Since the complaint did not satisfy the jurisdictional
requirement of a valid cause for unlawful detainer, the MCTC
corollarily failed to acquire jurisdiction over the case.20
Indeed, a void judgment for lack of jurisdiction is no
judgment at all. It cannot be the source of any right neither
can it be the creator of any obligation. All acts performed
pursuant to it and all claims emanating from it have no legal
effect. The same can never become final and any writ of
execution based on it will be void.21
Petitioners may be the lawful possessors of the subject
property, but they unfortunately availed of the wrong remedy
to recover possession. Nevertheless, they may still opt to file
an accion publiciana or accion reivindicatoria with the proper
73
RTC.22

WHEREFORE, IN VIEW OF THE FOREGOING, the petition

is DENIED. The Decision of the Court of Appeals, dated
February 17, 2012, and its Resolution dated July 25, 2012 in
CA-G.R. SP No. 112959, are hereby AFFIRMED.

SO ORDERED.cralawlawlibrary

74
 [ G.R. No. 174838, June 01, 2016 ]
STRONGHOLD INSURANCE CO., INC., PETITIONER, VS. PAMANA
ISLAND RESORT HOTEL AND MARINA CLUB, INC., RESPONDENT.
RESOLUTION
REYES, J.:
This resolves the Petition for Review[1] filed by Stronghold Insurance
Company, Inc. (Stronghold) assailing the Decision[2] dated July 20,
2006 and Resolution[3] dated September 26, 2006 of the Court of
Appeals (CA) in CA-G.R. SP No. 94313.
The Antecedents
The case stems from an action for sum of money filed by Pamana
Island Resort Hotel and Marina Club, Inc. (Pamana) and Flowtech
Construction Corporation (Flowtech) against Stronghold on the basis
of a Contractor's All Risk Bond of P9,047,960.14 obtained by Flowtech
in relation to the construction of Pamana's project in Pamana Island,
Subic Bay. On January 27, 1992, a fire in the project burned down
cottages being built by Flowtech, resulting in losses to Pamana.[4]
In a Decision[5] dated October 14, 1999, the Regional Trial Court (RTC)
of Makati City, Branch 135 declared Stronghold liable for the claim.
Besides the award of insurance proceeds, exemplary damages and
attorney's fees, the trial court ordered the payment of interest at double
the applicable rate, following Section 243 of the Insurance Code which
Stronghold was declared to have violated, and reads:
Sec. 243. The amount of any loss or damage for which an insurer may
be liable, under any policy other than life insurance policy, shall be
paid within thirty days after proof of loss is received by the insurer and
ascertainment of the loss or damage is made either by agreement
between the insured and the insurer or by arbitration; but if such
ascertainment is not had or made within sixty days after such receipt
by the insurer of the proof of loss, then the loss or damage shall be paid
within ninety days after such receipt. Refusal or failure to pay the loss
or damage within the time prescribed herein will entitle the assured to
collect interest on the proceeds of the policy for the duration of the
delay at the rate of twice the ceiling prescribed by the Monetary Board,
unless such failure or refusal to pay is based on the ground that the
claim is fraudulent.
The decretal portion of the RTC judgment reads:
WHEREFORE], premises considered, judgment is hereby rendered
ordering [STRONGHOLD] to pay [FLOWTECH] and [PAMANA]:
1. The proceeds of the insurance in the sum of Four Million
Seven Hundred Twenty-Eight Thousand Two Hundred
Ninety-Seven and 82/100 Pesos [P4,728,297.82] with double
the rate of interest thereon from the date of demand until
fully paid;
2. P500,000[.00] as exemplary damages; and
3. P100,000[.00] as attorney's fees.
SO ORDERED.[6]
Stronghold's appeal seeking the reversal of the RTC judgment was
denied by the CA and thereafter, by the SC. On March 4, 2005,
Flowtech filed with the RTC a motion for execution, which was
granted[7] on May 10, 2005. A Writ of Execution[8] was issued on May
12, 2005.[9]
Thereafter, Stronghold filed an Urgent Motion to Suspend Execution
and to Rationalize Enforcement of the Decision,[10] dated August 16,
2005, contending that the interest penalty being demanded from it
through the Sheriff was unconscionable and iniquitous. The motion
was opposed by Pamana, which contended that the RTC decision had
become final and thus, could no longer be amended, altered and
modified. Furthermore, the double interest rate being imposed upon
the award was argued to be supported by Section 243 of the Insurance
Code.
Ruling of the RTC
On November 22, 2005, the RTC rendered its Order[11] granting
Stronghold's motion. Interest was substantially reduced following the
court's pronouncement that its computation should be reckoned from
the date of promulgation of judgment until its finality and not from the
date of demand until full payment as enunciated in the Decision dated
October 14, 1999. The trial court reasoned:
Engr. Edgardo C. Camering, President of [Flowtech], computed the
amount of judgment, as follows:
Principal award — P 4,728,297.82
Interest — P 7,528,774.05
Exemplary Damages — P 500,000.00
Attorney's Fee — P 100,000.00
Interest — P 419,976.00
Execution Fees,
Transportation fees, and P 65,500.00
Miscellaneous fees —
total amount — P13,342,547.87
The claim of [Flowtech] of interest in the amount of P419,976.00
appears to be without basis. This amount of interest must refer to the
award of exemplary damages and attorney's fees. These awards do not
earn interest. The Decision did not state that exemplary damages in the
amount of P500,000.00 and attorney's fees in the amount of
P100,000.00 are to earn interest until fully paid.
xxxx
The claim of (Pamana and Flowtech] for the interest of the
principal amount in the sum of P7,528,774.05, docs not
appear to be accurate. The principal amount of
P4,728,297.82 demanded x x x was ascertained only after the
trial of the case on its merits. The obligation of [Stronghold]
is not a loan or [forbearance] of money. The interest on the
obligation shall begin to run from the time the claim is made
judicially and cxtrajudicially when the demand was
established with certainty. But when such certainty cannot be
so reasonably established at the time of the demand, the
interest shall begin only from the date of judgment of the
court. x x x:
xxxx
The Decision was promulgated on October 14, 1999. The interest on
the principal amount should be reckoned from this date up
to x x x December 15, 2004, when the judgment became final
and executory. The period covers five [5] years and two [2] months
and one [1] day. The total interest at 12% per annum is computed
as follows:
x x x x The amounts to be executed are as follows:
Principal award - P4,728,297.82
Interest- 2,933,120.64
Exemplary Damages - 500,000.00
Attorney's Fees - 100,000.00
Total- P8,261,418.46
75
WHEREFORE, premises considered, the Branch Sheriff is hereby
directed to execute the total amount of P8,261,418.46. The previous
Order of this Court suspending the implementation of the writ of
execution is hereby lifted.
SO ORDERED.[12] (Emphasis ours)
Execution fees and related expenses being claimed were disallowed for
lack of basis. After its motion to reconsider was denied on February 22,
2006, Pamana appealed to the CA.[13]
Ruling of the CA
Applicable Rate of Interest
A disagreement, however, concerns the question of whether an interest
rate of 6% or 12% per annum should apply in the computation, as this
subject was not specifically defined in the RTC judgment in the main
case. The RTC, in the Order dated November 22, 2005, pegged the
interest rate at 6% per annum by explaining that Stronghold's
obligation did not equate to a loan or forbearance of money. On the
other hand, the CA explained that the double rate should be based on
12% per annum, as the Insurance Code pertained to a rate "twice the
ceiling prescribed by the Monetary Board"[21] and thus could only refer
to the rate applicable to obligations constituting a loan or forbearance
of money.[22]

On July 20, 2006, the CA rendered its Decision[14] granting Pamana's
petition, explaining that the RTC Decision dated October 14, 1999 had
become final and executory, and thus immutable and unalterable. The
CA decision's dispositive portion reads:
WHEREFORE, premises considered, the present petition is hereby
GIVEN DUE COURSE and the writ prayed for accordingly GRAN TED.
The assailed Orders dated November 22, 2005 and February 22, 2006
of the respondent Judge in Civil Case No. 94-385 are hereby
ANNULLED and SET ASIDE.
No pronouncement as to costs.
SO ORDERED.[15]
Dissatisfied, Stronghold appealed to this Court.
Ruling of the Court
Immutability of Final Judgments
The Court denies the petition. As correctly pointed out by the CA, the
RTC's order to implement carried substantial changes in a judgment
that had become final and executory. These variations pertained to
"(1) the date from which the double rate of interest on the principal
amount of the claim, shall be computed; (2) up to when such interest
shall run; and (3) the applicable rate of interest."[16] Instead of "double
the rate of interest [on the proceeds of insurance] from the date of
demand until fully paid,"[17] the RTC's computation for purposes of
execution was limited to an interest rate of 6% per annum, resulting in
a double rate of only 12% per annum, to be reckoned from the date of
the trial court's judgment until it became final and executory.
The Court agrees with the CA that given the provisions of the Insurance
Code, which is a special law, the applicable rate of interest shall be that
imposed in a loan or forbearance of money as imposed by the Bangko
Sentral ng Pilipinas (BSP), even irrespective of the nature of
Stronghold's liability. In the past years, this rate was at 12% per
annum. However, in light of Circular No. 799 issued by the BSP on
June 21, 2013 decreasing interest on loans or forbearance of money,
the CA's declared rate of 12% per annum shall be reduced to 6% per
annum from the time of the circular's effectivity on July 1, 2013. The
Court explained in Nacar v. Gallery Frames[23] that the new rate
imposed under the circular could only be applied prospectively, and
not retroactively.[24]
Issue of Estoppel
As regards the issue of estoppel raised by Stronghold in view of
Pamanas's receipt of checks issued by the former pursuant to the RTC's
order to implement, the Court rejects the argument in view of a failure
to sufficiently establish that Pamana accepted the sums in full
satisfaction of their claims.
WHEREFORE, the petition is DENIED. The Decision dated July 20,
2006 and Resolution dated September 26, 2006 of the Court of
Appeals in CA-G.R. SP No. 94313 are AFFIRMED with
MODIFICATION in that beginning July 1, 2013, the applicable
interest shall be computed pursuant to Section 243 of the Insurance
Code at double the rate of six percent (6%) per annum.
SO ORDERED.

Clearly, the RTC's issuances contravened a settled principle affecting

execution of judgments. Time and again, courts have emphasized that a
writ of execution must conform substantially to every essential
particular of the judgment promulgated. An execution that is not in
harmony with the judgment is bereft of validity. This applies because
"once a judgment becomes final and executory, all that remains is the
execution of the decision which is a matter of right. The prevailing
party is entitled to a writ of execution, the issuance of which is the trial
court's ministerial duty."[18]

While exceptions to the rule on immutability of final judgments are

applied in some cases, these are limited to the following instances: (1)
the correction of clerical errors; (2) the so-called nunc pro tunc entries
which cause no prejudice to any party; and (3) void judgments.[19]None
of these exceptions attend Stronghold's case.

Although some arguments advanced by Stronghold appeal to the

substantive issues or merits of the RTC's main judgment that favored
Pamana, such matters have long been settled via the RTC decision that
had become final and executory. Anent the computation of interest on
Stronghold's liability, it was explained that the notice of loss was
promptly served upon Stronghold, but it took more than a year to reject
the claim in violation of Section 243 of the Insurance Code.[20] Thus,
double the applicable rate of interest on the principal award should be
imposed.

76
 G.R. No. 205061, June 08, 2016
EMERTIA G. MALIXI, Petitioner, v. MEXICALI
PHILIPPINES AND/OR FRANCESCA
MABANTA, Respondents.
DECISION
DEL CASTILLO, J.:
Before us is a Petition for Review on Certiorari1 seeking to set
aside the August 29, 2012 Decision2 of the Court of Appeals
(CA) in CA-G.R. SP No. 115413, which dismissed the Petition
for Certiorari filed therewith and affirmed the May 28, 2010
Resolution3 of the National Labor Relations Commission
(NLRC) reinstating respondents Mexicali Philippines (Mexicali)
and Francesca Mabanta's appeal, partly granting it and
ordering petitioner Emerita G. Malixi's (petitioner)
reinstatement but without the payment of backwages.
Likewise assailed is the December 14, 2012 Resolution4 of the
CA denying petitioner's Motion for Reconsideration.5
Antecedent Facts
This case arose from an Amended Complaint6 for illegal
dismissal and nonpayment of service charges, moral and
exemplary damages and attorney's fees filed by petitioner
against respondents Mexicali and its General Manager,
Francesca Mabanta, on February 4, 2009 before the Labor
Arbiter, docketed as NLRC NCR Case No. 12-17618-08.
Petitioner alleged that on August 12, 2008, she was hired by
respondents as a team leader assigned at the delivery
service, receiving a daily wage of Three Hundred Eighty Two
Pesos (P382.00) sans employment contract and identification
card (ID). In October 2008, Mexicali's training officer, Jay
Teves (Teves), informed her of the management's intention to
transfer and appoint her as store manager at a newly opened
branch in Alabang Town Center, which is a joint venture
between Mexicali and Calexico Food Corporation (Calexico),
due to her satisfactory performance. She was apprised that
her monthly salary as the new store manager would be
Fifteen Thousand Pesos (P15,000,00) with service charge,
free meal and side tip. She then subsequently submitted a
resignation letter7 dated October 15, 2008, as advised by
Teves. On October 17, 2008, she started working as the store
manager of Mexicali in Alabang Town Center although, again,
no employment contract and ID were issued to her. However,
in December 2008, she was compelled by Teves to sign an
end-of-contract letter by reason of a criminal complaint for
sexual harassment she filed on December 3, 2008 against
Mexicali's operations manager, John Pontero (Pontero), for
the sexual advances made against her during Pontero's visits
at Alabang branch.8 When she refused to sign the end-of-
contract letter, Mexicali's administrative officer, Ding Luna
(Luna), on December 15, 2008, personally went to the branch
and caused the signing of the same. Upon her vehement
refusal to sign, she was informed by Luna that it was her last
day of work.
Respondents, however, denied responsibility over petitioner's
alleged dismissal. They averred that petitioner has resigned
from Mexicali in October 2008 and hence, was no longer
Mexicali's employee at the time of her dismissal but rather an
employee of Calexico, a franchisee of Mexicali located in
Alabang Town Center which is a separate and distinct
corporation.
In her reply, petitioner admitted having resigned from
Mexicali but averred that her resignation was a condition for
her promotion as store manager at Mexicali's Alabang Town
Center branch. She asserted that despite her resignation, she
remained to be an employee of Mexicali because Mexicali was
the one who engaged her, dismissed her and controlled the
performance of her work as store manager in the newly
opened branch.
Proceedings before the Labor Arbiter
In a Decision9 dated August 27, 2009, the Labor Arbiter
declared petitioner to have been illegally dismissed by
respondents. By piercing the veil of corporate fiction, the
Labor Arbiter ruled that Mexicali and Calexico are one and the
same with interlocking board of directors. The Labor Arbiter
sustained petitioner's claim that she is an employee of
Mexicali as she was hired at Calexico by Mexicali's corporate
officers and also dismissed by them and hence, held Mexicali
responsible for petitioner's dismissal. The Labor Arbiter then
observed that petitioner was only forced to resign as a
condition for her promotion, thus, cannot be utilized by
Mexicali as a valid defense. As the severance from
employment was attended by fraud, petitioner was awarded
moral and exemplary damages. The dispositive portion of the
Decision reads:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, respondents are hereby
declared guilty of illegal dismissal and ORDERED to reinstate
complainant to her former position even pending appeal. All
the respondents are hereby jointly and severally ordered to
pay complainant the following:
1. Full backwages from date of dismissal to
date of actual reinstatement which to date
amounts to P139,013.94.
2. Moral damages in the sum of P100,000.00.
3. Exemplary damages in the sum of
P50,000.00.
SO ORDERED.10ChanRoblesVirtualawlibrary
Proceedings before the National Labor Relations
Commission
On October 26, 2009, respondents filed an Appeal
Memorandum with Prayer for Injunction11 with the NLRC,
averring that the Labor Arbiter erred in: (1) holding them
liable for the acts of Calexico, which is a separate entity
created with a different purpose, principal office,
directors/incorporators, properties, management and business
plans from Mexicali as evidenced by their respective Articles
of Incorporation and By-Laws;12 (2) ruling that petitioner's
resignation was not voluntary; and, (3) ruling that there is an
employer-employee relationship between petitioner and
Mexicali on the basis of petitioner's mere allegation that she
was hired and dismissed by Mexicali's officers.
In a Resolution13 dated November 25, 2009, the NLRC
dismissed the appeal for having been filed beyond the 10-day
reglementary period to appeal. The NLRC rioted that the
Appeal Memorandum was filed only on October 26, 2009
despite respondents' receipt of the Labor Arbiter's Decision on
October 13, 2009 (as stated in the Appeal Memorandum).
Respondents filed a Motion for Reconsideration and Motion for
Issuance of TRO/Injunction14 explaining that the Appeal
77
Memorandum filed by them contained a typographical error as
to the date of actual receipt of the Labor Arbiter's Decision;
that while a copy of the said decision was received by them
on October 13, 2009, the same was only received by their
counsel of record on October 15, 200915 which is the
reckoning date of the 10-day reglementary period within
which to appeal.
In a Resolution16 dated May 28, 2010, the NLRC granted
respondents' motion and reinstated the appeal. The NLRC
ruled that pursuant to its Rules of Procedure, the date to
reckon the 10-day reglementary period should be the date
when the counsel actually received the copy of the Labor
Arbiter's Decision and that respondents' appeal was filed on
time.
The NLRC likewise ruled on the merits of the appeal. It partly
granted it by sustaining respondents' contention that Mexicali
and Calexico are separate and distinct entities, Calexico being
the true employer of petitioner at the time of her dismissal.
Contrary to the findings of the Labor Arbiter, petitioner
voluntarily resigned from Mexicali to transfer to Calexico in
consideration of a higher pay and upon doing so severed her
employment ties with Mexicali. The NLRC, nevertheless,
ordered Mexicali, being the employer of Teves and Luna who
caused petitioner's termination from her employment with
Calexico, to reinstate petitioner to her job at Calexico but
without paying her any backwages. The dispositive portion of
the NLRC Resolution reads:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, this Commission GRANTS
the Motion, for Reconsideration of its 25 November 2009
Resolution which dismissed the appeal for having been filed
out of time.
This Commission also PARTLY GRANTS the appeal of
respondents-appellants and the Decision of the Labor Arbiter
dated 27 August 2009 is MODIFIED ordering Mexicali Food
Corporation to cause the reinstatement of complainant-
appellee to his former position as store manager at its
franchisee Calexico Food Corporation within ten (10) days
from receipt of this Resolution without backwages.
SO ORDERED. ChanRoblesVirtualawlibrary
17
Proceedings before the Court of Appeals
Petitioner sought recourse with the CA via Petition
for Certiorari.18 It was petitioner's contention that the NLRC
erred in reinstating respondents' appeal despite being filed
beyond the reglementary period; in resolving the issue of
dismissal considering that only the timeliness of the appeal
was the sole issue raised in respondents' motion for
reconsideration; and in holding that she was not illegally
dismissed but voluntarily resigned from Mexicali.
In a Decision19 dated August 29, 2012, the CA dismissed the
Petition for Certiorari and affirmed the May 28, 2010
Resolution of the NLRC. The CA ruled that the NLRC correctly
reinstated respondents' appeal and properly resolved the
issues raised therein to conform with the well-settled principle
of expeditious administration of justice. The CA also agreed
with the NLRC that there was no illegal dismissal since
petitioner voluntarily tendered her resignation to assume a
position in Calexico.
Petitioner moved for reconsideration which was denied by the
CA in its Resolution20 of December 14, 2012.
Hence, this Petition.
Issues
I
WHETHER THE COURT OF APPEALS ERRED IN SUSTAINING
THE NATIONAL LABOR RELATIONS COMMISSION'S DECISION
REINSTATING THE RESPONDENTS' APPEAL DESPITE BEING
FILED OUT OF TIME.
II
WHETHER THE COURT OF APPEALS ERRED IN SUSTAINING
THE NATIONAL LABOR RELATIONS COMMISSION'S
RESOLUTION (TO THE RESPONDENTS' MOTION FOR
RECONSIDERATION) PARTLY GRANTING THE RESPONDENTS'
APPEAL (REGARDING THE ISSUE OF ILLEGAL DISMISSAL)
DESPITE BEING A NON-ISSUE IN THEIR MOTION FOR
RECONSIDERATION.
III
WHETHER THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN HOLDING THAT THERE WAS NO
ILLEGAL DISMISSAL.
IV
WHETHER THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN HOLDING THAT THE PETITIONER
RESIGNED FROM HER EMPLOYMENT WITH THE
RESPONDENTS.
V
WHETHER THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN FAILING TO RULE ON THE ISSUE OF
WHETHER OR NOT THE PETITIONER IS ENTITLED TO THE
AWARD OF MORAL AND EXEMPLARY DAMAGES RENDERED BY
THE LABOR ARBITER, DESPITE BEING RAISED IN THE
PETITIONER'S PETITION FOR
CERTIORARI.21ChanRoblesVirtualawlibrary
Petitioner maintains that the CA gravely erred in affirming the
NLRC's reinstatement of respondents' appeal despite being
filed out of time and the NLRC's ruling that there was no
illegal dismissal, arguing that it is a non-issue in respondents'
motion for reconsideration and there was absence of any valid
cause for terminating her employment with Mexicali.
Our Ruling
The Petition has no merit.
The appeal before the NLRC was filed on time.
Section 6, Rule III of the 2005 Revised Rules of Procedure of
the NLRC (2005 NLRC Rules) expressly mandates that "(f)or
purposes of appeal, the period shall be counted from receipt
of such decisions, resolutions, or orders by the counsel or
representative of record." This procedure is in line with the
established rule that if a party has appeared by counsel,
service upon him shall be made upon his counsel.22 "The
purpose of the rule is to maintain a uniform procedure
calculated to place in competent hands the prosecution of a
party's case."23 Thus, Section 9, Rule III of the NLRC Rules
provides that "(a)ttorneys and other representatives of
parties shall have authority to bind their clients in all matters
of procedure x x x."
Accordingly, the 10-day period for filing an appeal with the
NLRC should be counted from the receipt by respondents'
78
counsel of a copy of the Labor Arbiter's Decision on October
15, 2009. Petitioner's contention that the reckoning period
should be the date respondents actually received the Decision
on October 13, 2009 is bereft of any legal basis. As
mentioned, when a party to a suit appears by counsel, service
of every judgment and all orders of the court must be sent to
the counsel. Notice to counsel is an effective notice to the
client, while notice to the client and not his counsel is not
notice in law.24Therefore, receipt of notice by the counsel of
record is the reckoning point of the reglementary
period.25From the receipt of the Labor Arbiter's Decision by
respondent's counsel on October 15, 2009, the 10thday falls
on October 25, 2009 which is a Sunday, hence, Monday,
October 26, 2009, is the last day to file the appeal.
Consequently, respondents' appeal was timely filed.
The NLRC has authority to resolve the appeal on its merits
despite being a non-issue in respondents' motion for
reconsideration.
Petitioner still argues that the NLRC gravely abused its
discretion in ruling on the merits of the case despite being a
non-issue in the motion for reconsideration, She contends
that in resolving the issue of the legality or illegality of her
dismissal, which was not raised in respondents' motion for
reconsideration, the NLRC deprived her of the opportunity to
properly refute or oppose respondents' evidence thereby
violating her right to due process.
The contention is untenable. The essence of procedural due
process is that a party to a case must be given sufficient
opportunity to be heard and to present evidence.26 Indeed,
petitioner had this opportunity to present her own case and
submit evidence to support her allegations. She has
submitted her position paper with supporting documents as
well as reply to respondents' position paper to refute
respondents' evidence before the Labor Arbiter.
On the basis of these documents submitted by the parties,
the NLRC then resolved the merits of respondents' appeal.
The Court finds that the NLRC has authority to rely on the
available evidence obtaining in the records. Article 221 of the
Labor Code allows the NLRC to decide the case on the basis of
the position papers and other documents submitted by the
parties without resorting to the technical rules of evidence
observed in the regular courts of justice.27 After all, the NLRC
is not bound by the technical niceties of law and procedure
and the rules obtaining in the courts of law.28 In any event,
the NLRC is mandated to use every and all reasonable means
to ascertain the facts in each case speedily and objectively,
without regard to technicalities of law or procedure, all in the
interest of due process.29
Petitioner voluntarily resigned from Mexicali. No employer-
employee relationship between petitioner and Mexicali at the
time of alleged dismissal.
Ruling on the substantive matters, the Court finds that there
exists no employer-employee relationship between petitioner
and respondents as to hold the latter liable for illegal
dismissal.
The CA, affirming the NLRC, found that petitioner voluntarily
resigned from Mexicali. Petitioner, however, claims that she
was induced into resigning considering the higher position and
attractive salary package; moreover, she avers that her
resignation cannot effectively sever her employment ties with
Mexicali.
We disagree. "Resignation is the voluntary act of an employee
who is in a situation where one believes that personal reasons
cannot be sacrificed in favor of the exigency of the service,
and one has no other choice but to dissociate oneself from
employment. It is a formal pronouncement or relinquishment
of an office, with the intention of relinquishing the office
accompanied by the act of relinquishment. As the intent to
relinquish must concur with the overt act of relinquishment,
the acts of the employee before and after the alleged
resignation must be considered in determining whether he or
she, in fact, intended to sever his or her
employment."30 Here, petitioner tendered her resignation
letter preparatory to her transfer to Calexico for a higher
position and pay. In the said letter, she expressed her
gratitude and appreciation for the two months of her
employment with Mexicali and intimated that she regrets
having to leave the company. Clearly, expressions of
gratitude and appreciation as well as manifestation of regret
in leaving the company negates the notion that she was
forced and coerced to resign. In the same vein, an
inducement for a higher position and salary cannot defeat the
voluntariness of her actions. It should be emphasized that
petitioner had an option to decline the offer for her transfer,
however, she opted to resign on account of a promotion and
increased pay. "In termination cases, the employee is not
afforded any option; the employee is dismissed and his only
recourse is to institute a complaint for illegal dismissal against
his employer x x x."31 Clearly, this does not hold true for
petitioner in the instant case. Further, as aptly observed by
the CA, petitioner is a managerial employee, who, by her
educational background could not have been coerced, forced
or induced into resigning from her work.
Upon petitioner's resignation, petitioner ceased to be an
employee of Mexicali and chose to be employed at Calexico.
Petitioner, however, claims that Mexicali and Calexico are one
and the same and that Mexicali was still her employer upon
her transfer to Calexico since she was hired and dismissed by
Mexicali's officers and that Mexicali exercised the power of
control over her work performance.
We rule otherwise. The Labor Arbiter's finding that the two
corporations are one and the same with interlocking board of
directors has no factual basis. It is basic that "a corporation is
an artificial being invested with a personality separate and
distinct from those of the stockholders and from other
corporations to which it may be connected or related."32 Clear
and convincing evidence is needed to warrant the application
of the doctrine of piercing the veil of corporate fiction,33 In our
view, the Labor Arbiter failed to provide a clear justification
for the application of the doctrine. The Articles of
Incorporation and By-Laws of both corporations show that
they have distinct business locations and distinct business
purposes. It can also be gleaned therein that they have a
different set of incorporators or directors since only two out of
the five directors of Mexicali are also directors of Calexico. At
any rate, the Court has ruled that the existence of
interlocking directors, corporate officers and shareholders is
not enough justification to disregard the separate corporate
personalities.34 To pierce the veil of corporate fiction, there
should be clear and convincing proof that fraud, illegality or
inequity has been committed against third persons.35 For
while respondents' act of not issuing employment contract
and ID may be an indication of the proof required, however,
this, by itself, is not sufficient evidence to pierce the
corporate veil between Mexicali and Calexico.
More importantly, there was no existing employer-employee
relationship between petitioner and Mexicali. To prove
petitioner's claim of an employer-employee relationship, the
following should be established by competent evidence: "(1)
the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the
79
power of control over the employee's conduct."36 "Although no
particular form of evidence is required to prove the existence
of the relationship, and any competent and relevant evidence
to prove the relationship may be admitted, a finding mat the
relationship exists must nonetheless rest on substantial
evidence, which is that amount of relevant evidence that a
reasonable mind might accept as adequate to justify a
conclusion."37 We find that petitioner failed to establish her
claim based on the aforementioned criteria. As to petitioner's
allegation that it was Teves who selected and hired her as
store manager of Calexico and likewise, together with Luna,
initiated her dismissal, suffice it to state that bare allegations,
unsubstantiated by evidence, are not equivalent to
proof.38Nevertheless, Teves merely informed petitioner of the
management's intention to transfer her and thereafter
advised her to execute a resignation letter, to which she
complied. Nowhere was there any allegation or proof that
Teves was the one who directly hired her as store manager of
Calexico. Also, Teves and Luna merely initiated petitioner's
dismissal. The end-of-contract purportedly signed by Luna to
effectuate her termination was not presented. Again, mere
allegation is not synonymous with proof No substantial
evidence was adduced to show that respondents had the
power to wield petitioner's termination from employment.
Anent the element of control, petitioner failed to cite a single
instance to prove that she was subject to the control of
respondents insofar as the manner in which she should
perform her work as store manager. The bare assertion that
she was required to work from Friday through Wednesday is
not enough indication that the performance of her job was
subject to the control of respondents. On the other hand, the
payslips39 presented by petitioner reveal that she received her
salary from Calexico and no longer from Mexicali starting the
month of October 2008.

This Court is, therefore, convinced that petitioner is no longer

an employee of respondents considering her resignation. In
the absence of an employer-employee relationship between
petitioner and respondents, petitioner cannot successfully
claim that she was dismissed, much more illegally dismissed,
by the latter. The dismissal of petitioner's complaint against
respondents is, therefore, proper.

In the Resolution dated May 28, 2010, however, the NLRC

ordered respondents to reinstate petitioner as store manager
at Calexico but without the payment of backwages,
ratiocinating that Mexicali's officers (Teves and Luna) wrongly
arrogated upon themselves the power to dismiss petitioner.
We view that the NLRC erred in this respect. It is to be noted
that Calexico is not a party to this case."It is well-settled that
no man shall be affected by any proceeding to which he is a
stranger, and strangers to a case are not bound by a
judgment rendered by the court."40 "Due process requires
that a court decision can only bind a party to the litigation
and not against one who did not have his day in court."41 An
adjudication in favour of or against Calexico, a stranger to
this case, is hence void.chanrobleslaw

WHEREFORE, the Petition is DENIED. The August 29, 2012

Decision and December 14, 2012 Resolution of the Court of
Appeals in CA-G.R. SP No. 115413 affirming the May 28,
2010 Resolution of the National Labor Relations Commission
are AFFIRMED with MODIFICATION that the order for
respondent Mexicali Food Corporation to cause the
reinstatement of petitioner Emerita G. Malixi to her former
position as store manager at Calexico Food Corporation
without backwages is DELETED. The Complaint against
respondents Mexicali Philippines and/or Francesca Mabanta
is DISMISSED.

SO ORDERED.
80
G.R. No. 163175 June 27, 2008
CITY OF MAKATI, JEJOMAR BINAY and ERNESTO S.
MERCADO, petitioners,
vs.
MUNICIPALITY (NOW CITY) OF TAGUIG, METROPOLITAN
MANILA, THE EXECUTIVE SECRETARY, BASES CONVERSION
AND DEVELOPMENT AUTHORITY, FORT BONIFACIO
DEVELOPMENT CORPORATION, REGISTER OF DEEDS VICENTE
A. GARCIA and THE LAND MANAGEMENT BUREAU
DIRECTOR,respondents.
DECISION
QUISUMBING, J.:
This is a petition for review on certiorari of the Decision1 dated June 6,
2003 and Resolution2 dated March 26, 2004 of the Court of Appeals in
CA-G.R. SP No. 54692 affirming the September 25, 1998 Order3 of the
Regional Trial Court (RTC) of Makati, Branch 141, dismissing
petitioners’ petition for prohibition with a prayer for temporary
restraining order and/or preliminary injunction.
The facts are as follows:
On March 13, 1992, then President Corazon C. Aquino approved
Republic Act No. 72274 creating the Bases Conversion and
Development Authority (BCDA). Section 4 (a) of Rep. Act No. 7227
provides that one of the purposes of the BCDA is "to own, hold and/or
administer the military reservations of John Hay Air Station, Wallace
Air Station, O’Donnell Transmitter Station, San Miguel Naval
Communications Station, Mt. Sta. Rita Station (Hermosa, Bataan) and
those portions of Metro Manila military camps which may be
transferred to it by the President."
On December 8, 1992, pursuant to Section 4 (a) of Rep. Act No. 7227,
then President Fidel V. Ramos issued Executive Order No. 405 placing
under the administration of the BCDA portions of Fort Bonifacio which
are identified and described in Plans Swo-00-0012656 and Swo-00-
001266.7 Per Plans Swo-00-001265 and Swo-00-001266, said portions
of Fort Bonifacio are located in the Municipality of Taguig, Metro
Manila.
On November 22, 1993, the Municipality of Taguig (Taguig) filed in the
RTC of Pasig City, Branch 153, an action for judicial confirmation of its
territory and boundary limits against the Municipality (now City) of
Makati (Makati), Teofisto P. Guingona in his capacity as Executive
Secretary, Angel Alcala in his capacity as Secretary of the Department
of Environment and Natural Resources, and Abelardo Palad, Jr. in his
capacity as Director of the Land Management Bureau. The complaint
was docketed as Civil Case No. 63896.8
In its complaint, Taguig prayed for the declaration of the
unconstitutionality and nullity of Presidential Proclamations Nos. 2475
and 518,9 which transferred to the City of Makati certain parts of Fort
Bonifacio that were allegedly within the boundary of the Municipality of
Taguig, despite the absence of authority on the part of the President
and without the benefit of a plebiscite as required by applicable
provisions of the Constitution. Taguig likewise sought a temporary
restraining order and writ of preliminary injunction to restrain Secretary
Alcala and Director Palad, Jr. from disposing of the lots covered by
Proclamation No. 518, and to restrain the Municipality (now City) of
Makati from exercising jurisdiction over, making improvements on, or
otherwise treating as part of its territory: (1) the area of 74 hectares
that was uninhabited or otherwise consisted of farmlands or wide open
spaces before the issuance of Proclamation No. 2475 in 1986; and, (2)
the remaining portion of Parcel 4, Psu-2031, and a part of Parcel 3,
Psu-2031 which together constitute the "Inner Fort" or military camp
proper of Fort Bonifacio. The Municipality of Taguig also prayed that
after due hearing, the injunction be made final and permanent and that
judgment be rendered confirming the Fort Bonifacio military
reservation, which consists of Parcels 3 and 4, Psu-2031, to be part of
the Municipality of Taguig.10
On January 20, 1995, then President Ramos issued Special Patent No.
359511 conveying to the BCDA "the tracts of land of the public domain
situated in Barangay Fort Bonifacio, Municipality of Taguig, Metro
Manila, identified and more particularly described as Lot Nos. 1 to 4
and 6, Swo-00-001265, containing an area of 877,318 square meters,
and Lot Nos. 1 to 23 and 25, Swo-00-001266, containing an area of
2,344,300 square meters."
On February 7, 1995, then President Ramos issued Special Patent No.
359612 canceling Special Patent No. 3595 and granting to the Fort
Bonifacio Development Corporation (FBDC) "the tracts of land of the
public domain situated in Barangay Fort Bonifacio, Municipality of
Taguig, Metro Manila, identified and more particularly described as Lot
Nos. 1, 2 and 6, Swo-00-001265, containing an area of 673,979 square
meters, and Lot Nos. 17, 21, 22 and 23, Swo-00-001266, containing an
area of 1,497,837 square meters."
On February 10, 1995, Original Certificate of Title (OCT) No. SP-001
covering the tracts of land mentioned in Special Patent No. 3596 was
issued to FBDC.13
On April 18, 1996, the City of Makati, together with its mayor, vice
mayor, members of its city council, the congressional representative for
the first district of Makati, the Barangay Captains of Barangays Post
Proper Northside and Post Proper Southside and a concerned citizen,
filed a petition for prohibition and mandamus (with prayer for temporary
restraining order and/or preliminary injunction) against the respondents
herein before the RTC of Makati, Branch 141. The case was docketed
as Civil Case No. 96-554.14
In its complaint, the City of Makati, et al. prayed that a temporary
restraining order be issued directing the Municipality of Taguig to
cease and desist from requiring and accepting payment of real estate
taxes and other taxes or fees on lands located in Fort Bonifacio or
Barangays Post Proper Northside and Post Proper Southside; from
requiring business permits and licenses; and from imposing on,
collecting and accepting permit/license fees from the residents of said
Barangays or Fort Bonifacio. The City of Makati, et al. likewise prayed
that the BCDA and FBDC be directed to cease and desist from paying
to the Municipality of Taguig realty taxes and other municipal taxes and
permit/license fees in connection with or for the tracts of land granted
to them or either of them under Special Patent No. 3596 dated
February 7, 1995, and respondent Register of Deeds to cease and
desist from further acting on OCT No. SP-001.
On May 23, 1996, the Municipality of Taguig moved to dismiss Civil
Case No. 96-554 on the grounds that the RTC-Makati has no
jurisdiction over the nature of the action; there is another action
pending between the same parties for the same cause; the petition
violates the rule on forum shopping, the petition states no cause of
action; and the venue is improperly laid.15
FBDC also filed a motion to dismiss on May 24, 1996, citing as bases
thereof that petitioners have no cause of action against FBDC; the
RTC has no jurisdiction over the petition; the petition is not the
appropriate remedy for the annulment of Special Patent No. 3596 and
Original Certificate of Title No. SP-001; there is another action pending
between the same parties for the same cause; and the petition
constitutes a violation of Administrative Circular No. 04-94 of the
Supreme Court.16 BCDA likewise filed a motion to dismiss on the
grounds that the petition does not state a cause of action against it,
and that BCDA was improperly impleaded as respondent in the case.17
On September 25, 1998, the RTC of Makati City, Branch 141, issued
an Order dismissing Civil Case No. 96-554. The RTC-Makati held:
81
 xxxx
After a careful evaluation and study of the arguments
adduced by both parties, this Court finds and so holds that
this case must be dismissed on at least two grounds,
namely: litis penden[t]ia and violation of the anti[-]forum
shopping circular.
Undisputedly, Civil Case No. 63896 earlier filed with and still
pending before the Pasig RTC involved the tracts of land
covered by Special Patent No. 3596 and O.C.T. No. SP-001.
In said case, respondent Taguig sought to recover them or
that the same be declared within its territorial jurisdiction. ...
xxxx
All the foregoing requisites of litis penden[t]ia are herein
obtaining. While it may [be] true that of 20 petitioners in this
case only the City of Makati is a party to Civil Case No.
63896, the 19 others represent the same interest as
petitioner City of Makati over the disputed tracts of land. The
fact that the position of the parties was [reversed], the
plaintiff in the first case being the defendants in the second
case and vice versa does not negate identity of parties for
the purpose of litis penden[t]ia. In both cases[,] the factual
issue is the location of the subject tracts of land, and the
resolution of the first case, that is, the Pasig case, would
constitute resjudicata to the instant case.
xxxx
It being that litis penden[t]ia is herein obtaining, petitioners
have violated Administrative Circular No. 09-94 of the
Supreme Court, prohibiting forum shopping. ...
The Court finds no merit in the other grounds interposed by
the movants. There is no need to discuss them in view of the
foregoing ruling.
WHEREFORE, let this [case] be dismissed without
pronouncement as to costs.
SO ORDERED.18
On June 6, 2003, the Court of Appeals affirmed the RTC-Makati ruling.
The Court of Appeals held:
The requisites of litis pendentia having concurred,
petitioners-appellants clearly violated the rule on forum-
shopping when they filed Civil Case No. 96-554. The
established rule is that forum-shopping exists where the
elements of litis pendentia are present.
With this finding and conclusion, We see no necessity to
dwell on the other issues raised in this appeal. It suffices to
recapitulate that the Makati Regional Trial Court was right in
dismissing the duplicitous suit lodged before it due
to litis pendentia and forum-shopping.
WHEREFORE, the appealed Order is hereby AFFIRMED.
SO ORDERED.19
Hence, this petition.
Petitioners raise the following issues:
I.
WHETHER OR NOT PETITIONERS VIOLATED THE
RULES ON FORUM SHOPPING[;]
II.
WHETHER OR NOT THERE
IS LITIS PENDENTIA BETWEEN THE MAKATI CITY RTC
PETITION AND THE TAGUIG CITY RTC CASE[;]
III.
THE COURT OF APPEALS COMMITTED GRAVE ERROR
IN DECIDING THE APPEAL A QUO ONLY ON THE
ISSUES OF LITIS PENDENTIA AND FORUM
SHOPPING[.]20
Simply put, in this petition the issues are: (1) Is litis pendentia present?
and (2) Did petitioners violate the rules on forum shopping?
Petitioners, in their Memorandum,21 argue that they did not violate the
rules on forum shopping since there is no identity of parties, no identity
of rights or causes of action asserted, and no identity of reliefs sought
between those in Civil Case No. 96-554 and Civil Case No. 63896.
They argue that Civil Case No. 96-554 is a petition for prohibition and
mandamus with prayer for a temporary restraining order raising the
issue of whether or not then President Ramos committed grave abuse
of discretion in issuing Special Patent No. 3596; and whether or not
OCT No. SP-001 in favor of BCDA is null and void, whereas Civil Case
No. 63896 is a complaint filed by the Municipality of Taguig for judicial
confirmation of its boundaries. Petitioners argue that if the validity of
Special Patent No. 3596 and OCT No. SP-001 is not addressed, a
situation may arise wherein the boundaries of the Municipality of
Taguig as determined by the RTC-Pasig City case will clash with
Special Patent No. 3596 and OCT No. SP-001 declaring certain areas
of Fort Bonifacio to be within the Municipality of Taguig. Petitioners
argue that Civil Case No. 63896 and Civil Case No. 96-554 do not
seek the same relief, such that a judgment in one will
constitute res judicata in the other and vice versa. Since there can be
no forum shopping in this case, petitioners argue that the requirements
of litis pendentia are not met.
On the other hand, respondent Municipality of Taguig, in its
Memorandum,22 maintain that the Court of Appeals did not err in
dismissing the appeal of petitioners on the grounds
of litis pendentia and forum shopping. The FBDC, in its
Memorandum,23 reiterate that the Makati case was properly dismissed
on the ground of litis pendentia, that it was filed in violation of the rule
against forum shopping, and that the dismissal of the Makati case
insofar as it concerns FBDC should be upheld on the ground of lack of
cause of action. As to petitioners’ argument that former President
Ramos gravely abused his discretion in issuing Special Patent No.
3596, this issue was properly ignored by the Court of Appeals because
said matters were not taken up below and therefore cannot be raised
for the first time on appeal.
As to the first issue, litis pendentia is a Latin term which literally means
"a pending suit." It is variously referred to in some decisions as lis
pendens and auter action pendant. While it is normally connected with
the control which the court has over a property involved in a suit during
the continuance proceedings, it is interposed more as a ground for the
dismissal of a civil action pending in court.24
Litis pendentia as a ground for the dismissal of a civil action refers to
that situation wherein another action is pending between the same
parties for the same cause of action, such that the second action
becomes unnecessary and vexatious. For litis pendentia to be invoked,
the concurrence of the following requisites is necessary:
82
(a) identity of parties or at least such as represent the same interest in
both actions;

(b) identity of rights asserted and reliefs prayed for, the reliefs being
founded on the same facts; and

(c) the identity in the two cases should be such that the judgment that
may be rendered in one would, regardless of which party is successful,
amount to res judicata in the other.25

In this case, the first requisite, identity of parties or at least such as

represent the same interest in both actions, is present. The Court of
Appeals correctly ruled that the fact that there is no absolute identity of
parties in both cases will not preclude the application of the rule
of litis pendentia, since only substantial and not absolute identity of
parties is required for litis pendentia to lie. Except for Antonio
Sinchioco, who joined the action as citizen and taxpayer, the other
petitioners in Civil Case No. 96-554 have a community of interest with
the City of Makati.

The second requisite, identity of rights asserted and reliefs prayed for,
the reliefs being founded on the same facts, is also present.

A review of the records would show that the reliefs sought by both
parties are actually the same. Although petitioners insist that what they
seek is a nullification of Special Patent Nos. 3595 and 3596 and that
the issue boils down to whether or not then President Ramos
committed grave abuse of discretion in issuing Special Patent Nos.
3595 and 3596, what petitioners wish to nullify is not Special Patent
Nos. 3595 and 3596, but the wordings therein that the property is
located in the Municipality of Taguig. To do so would entail going into
the issue of boundaries of Makati and Taguig, which is the issue in
Civil Case No. 63896.

Likewise present is the third requisite that the identity of the two cases
should be such that the judgment that may be rendered in one would,
regardless of which party is successful, amount to res judicata in the
other.

WHEREFORE, the petition is DENIED for lack of merit. The Decision

and Resolution dated June 6, 2003 and March 26, 2004, respectively,
of the Court of Appeals in CA-G.R. SP No. 54692 are AFFIRMED. No
pronouncement as to costs.

SO ORDERED.

83
 G.R. No. 208410, October 19, 2016
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. MARY
JOY CILOT Y MARIANO AND ORLANDO BRIGOLE Y
APON, Accused-Appellants.
DECISION
PEREZ, J.:
For review is the Decision1 dated 26 September 2012 of the
Court of Appeals in CA-G.R. CR-HC No. 04249 affirming the
judgment of conviction of appellants Mary Joy Cilot y Mariano
(Mary Joy) and Orlando Brigole y Apon (Orlando) by the
Regional Trial Court (RTC) of Pasig City, Branch 69 for the
special complex crime of kidnapping with rape.
Appellants were charged under four separate Informations
which read:
chanRoblesvirtualLawlibrary
Criminal Case No. 134484-H
That on or about the 8th day of January 2007, in the City of
[PPP], Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, in conspiracy with one
another, with the use of a gun, a deadly weapon and with
lewd design, by means of force, threat and intimidation,
Orlando Brigole, did, then and there wilfully, unlawfully and
feloniously have sexual intercourse with one
[AAAJ,2 seventeen years old (17), a minor, against her with
and without her consent.3chanrobleslaw
Criminal Case No. 134485-H
That on or about the 8th day of January 2007, in the City of
[PPP], Philippines, and within the jurisdiction of this Honorable
Court, the above named accused, in conspiracy with one
another, with the use of a gun, a deadly weapon and with
lewd design, by means of force, threat and intimidation, May
Joy M. Cilot, did, then and there wilfully, unlawfully and
feloniously insert her finger into the genital or [vagina] of one
[AAAJ, seventeen years old (17), a minor, against her will and
without her consent.4chanrobleslaw
Criminal Case No. 134486-H
That on or about the 28th day of December 2006, in the City
of (PPP), Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, in conspiracy
with one another, being then a private individual and without
authority of law or justifiable reason, did, then and there
wilfully, unlawfully and feloniously kidnap one [AAA],
seventeen years old (17), a minor, attended by the qualifying
circumstance of extorting ransom from BBB, minor, against
their will and prejudice.5chanrobleslaw
Criminal Case No. 134487-H
That on or about the 9th day of January, 2007, in the City of
[PPP], Philippines, and within the jurisdiction of this Honorable
Court, the above named accused, did, then and there wilfully,
unlawfully and feloniously have in his possession, direct
custody and control one (1) grenade ("Granada") which is an
explosive, without first securing the necessary license or
permit from the proper authorities.6
The facts are as follows:
chanRoblesvirtualLawlibraryAAA, then seventeen (17) years
old, was employed as a sales lady at a drug store in PPP City.
She first met Mary Joy when the latter went to the drug store
on 7 December 2006 and introduced herself as a relative of
AAA. Mary Joy promised AAA an overseas work for a fee.
Thus, AAA gave Mary Joy a total of P1,500.00. On 28
December 2006 at around 6:00a.m., AAA went for a jog.
When she passed by the house of Mary Joy, the latter
suddenly grabbed her and forced her to enter the house.
Thereat, Mary Joy took AAA's cellular phone and sent a
message to AAA's female employer that she left the store
because the former's husband had been abusing her. Mary
Joy threatened AAA with a gun and a grenade if AAA would
try to escape. AAA was detained from 26 December 2006
until 9 January 2007. On 8 January 2007 at around 11:00
p.m., AAA was awakened by Mary Joy's live-in partner,
Orlando. Orlando kicked AAA and dragged her into the bed
that he and Mary Joy shared. Orlando forced AAA to lie down.
Mary Joy held AAA's breast, removed her bra, and inserted
her finger into AAA's vagina. Thereafter, Orlando inserted his
penis twice into AAA's vagina. AAA was crying and at the
same time trying to resist the couple's advances but to no
avail on the following day, Mary Joy brought AAA to a mall in
Bicutan to meet with AAA's relatives regarding AAA's alleged
debt to Mary Joy. When they were met by AAA's aunt, uncle
and sister, they took AAA from Mary Joy and brought her to a
police station to report the incident. Appellants were arrested
at their house.7chanrobleslaw
CCC, AAA's sister, testified that while AAA was missing, Mary
Joy was collecting payments from her for AAA's alleged debt.
It was Mary Joy who informed CCC that she could meet her
sister at a mall in Bicutan.8chanrobleslaw
AAA was subjected to a medical examination. According to
Medico Legal Report No. R07-0079 dated 15 January 2007,
AAA was found to have suffered a deep healed laceration at 4
and 9 o'clock positions and shallow healed laceration at 7
o'clock position in her hymen; and one (1) contusion on the
proximal 3rd of her right thigh, measuring 2x1 cm., 11 cm. to
its midlines.9chanrobleslaw
For the part of the defense, Mary Joy testified that Orlando is
her live-in partner. She first met AAA when she went to the
drug store to buy a pregnancy test kit. They eventually
became friends and AAA even confided to Mary Joy that she
was being molested by her male employer. On 29 December
2006, AAA went to Mary Joy's house and stayed there until 9
January 2007. On 3 January 2007, Mary Joy scolded AAA for
coming home drunk. On 9 January 2007, Mary Joy sent AAA
off to her aunt. At around 3:00 p.m., several policemen went
to her house to conduct a search. The policemen took several
of their things and placed them under arrest. Mary Joy denied
that she and Orlando sexually abused AAA.10chanrobleslaw
Orlando related that he was informed by Mary Joy that AAA
will be coming to their house because she was abused by her
male employer. He advised AAA to report the incident to the
police but the latter refused to do so. He recalled telling Mary
Joy about AAA's coming home drunk. He denied raping AAA
and claimed that he even treated her like a sister. He
surmised that AAA filed charges against them in retaliation for
scolding her.11chanrobleslaw
On 3 September 2009, the trial court rendered a Decision
finding appellant guilty of the crime charged, thus:
chanRoblesvirtualLawlibrary
84
WHEREFORE, finding accused Mary Joy Cilot and Orlando
Brigole guilty beyond reasonable doubt in Criminal Case No.
134486-H for a special complex crime of Kidnapping with
Rape under Art. 267 of the Revised Penal Code, as amended
by RA No. 7659, this Court hereby sentences each accused to
suffer the penalty of Reclusion Perpetua without eligibility of
parole; and to pay in solidum AAA the amount of Php
100,000.00 for moral damages; Php 100,000.00 for civil
indemnity and Php 50,000.00 for exemplary damages.
In Criminal Cases Nos. 134484-H and 134485-H, accused
Brigole and Cilot are Acquitted while in Criminal Case No.
134487, accused Brigole is also Acquitted.12
3. Criminal Case No. 134486-H for kidnapping against
appellants; and cralawlawlibrary
4. Criminal Case No. 134487-H for illegal possession of
an explosive against Orlando.
Based on the evidence adduced during trial, appellants were
indeed guilty of kidnapping and rape.
The evidence of the prosecution, particularly the testimony of
AAA and the medical report overwhelmingly establish
appellants' guilt beyond reasonable doubt.

In convicting appellants for the crime of kidnapping with rape,
the trial court relied heavily on the testimony of AAA who was
considered by the court as having testified candidly and
truthfully that she was kidnapped and raped by
appellants. The trial court also found that it was not
sufficiently established that the purpose of kidnapping is to
extort ransom from AAA or her relatives.
AAA clearly pointed to appellants as the perpetrators, who
conspired to commit the crime of kidnapping, to wit:
chanRoblesvirtualLawlibrary
Q: Now do you remember where were you on
December 28, 2006 at around 6:30 in the morning?

Strangely, despite a finding of rape, the trial court acquitted A: I was in front of the house where I was staying
appellants in Criminal Case Nos. 134484-H and 134485-H. because I will go on jogging, Sir.

On 26 September 2012,13 the Court of Appeals affirmed Q: Where is your 'tinutuluyan' located?
appellants' conviction for the special complex crime of
kidnapping with rape. A: Upper Bicutan, Taguig City, sir.
In a Resolution14 dated 23 September 2013, the Court
xx
required the parties to simultaneously file their respective
xx
supplemental briefs. Both parties however manifested that
they are adopting their briefs filed before the Court of
Appeals.15chanrobleslaw Q: While you were having an exercise at that particular
time do you remember any unusual incident that
In their Brief,16 appellants argue that AAA's testimony cannot happened?
support a judgment of conviction. First, appellants point out
that while AAA testified that she was sexually abused on 8 A: WhilI was jogging, I passed by their house then she
January 2007, the medical examination conducted two (2) grabbed me.
days later revealed that AAA had healed lacerations which
indicate that the incident would have occurred four (4) to ten Q: Where is their house located?
(10) days prior to the examination. Second, appellants
asserted that it is unbelievable for both appellants to conspire A: Also at Upper Bicutan, sir.
in sexually abusing AAA due to alleged illegal drug use which
was not proven during the trial. Third, appellants stressed xx
that Mary Joy was four (4) months pregnant at that time of xx
the incident, hence, incapable of dragging AAA all by herself
considering her physical condition. Fourth, appellants find it
Q: Now whom are you referring to when you said she
strange for AAA's sister to report her disappearance only on 2
grabbed you?
January 2007. In sum, appellants fault the trial court for
misapprehending and misinterpreting the facts and
circumstances of the case thus warranting their acquittal. A: Ate joy, sir.

The issue for resolution is whether appellants have been Q: How did she grab you?
proven guilty beyond reasonable doubt of the special complex
crime of kidnapping with rape. A: She forced me to go inside her house.

At the outset, we note that there are errors pertaining not Q: Who were with you during that time?
only to the fallo of the trial court's decision but on the
designation of the offense committed well. A: None, sir.

There are a total of four (4) Informations filed against Q: What happened next when she grabbed you and
appellants: forced you inside her house?
chanRoblesvirtualLawlibrary
A: She forced me to go inside her house then she
locked the door.
1. Criminal Case No. 134484-H for rape against Orland;
'Inagaw po niya sa akin ang cellphone ko, tapos
2. Criminal Case No. 134485-H for rape' through sexual pinagtetext po niya ang amo ko na kaya daw po ako
assault against Mary Joy;
85
 by simulating public authority; or (c) any serious physical
umalis dun kasi binaboy daw po ako ng amo kong
injuries are inflicted upon the person kidnapped or detained
lalaki tapos ginamit po niya pangalan ko."
or threats to kill him are made; or (d) the person kidnapped
or detained is a minor, female, or a public
Q: Now after she locked the door what happened next officer.18chanrobleslaw
if any.
The crime of kidnapping was proven by the prosecution.
A: Then she showed me a gun and a grenade and Appellants are private individuals. The primary element of the
threatened me not to try to go outside or try to crime of kidnapping is the actual confinement or restraint of
escape because they will shoot me, sir. the victim, or the deprivation of his liberty. It is not necessary
for the victim to be locked up or placed in an enclosure; it is
Q: 'Nila' you are referring to they, who is the sufficient for him to be detained or deprived of his liberty in
companion of Mary Joy Cilot? any manner. AAA was forcibly taken and detained at the
house of appellants where she was deprived of her liberty for
A: Kuya Lando, Sir. 12 days or from 28 December 2006 until 9 January 2007. AAA
was consistently threatened by the couple. Whenever the
Q: Are you referring to Orlando Brigole y Apor, one of couple would leave the house, they would padlock the door to
the accused in this case. prevent AAA from escaping. AAA is a female and was a minor
at the time that she was kidnapped.
A: Yes, sir.
The crime of rape was established through AAA's further
narration, thus:
Q: Now how long have you been in the house of Mary
Joy and Orlando? chanRoblesvirtualLawlibrary

A: More or less two (2) weeks, sir. xxxx Q: Now, on January 8, 2007 at around eleven o'clock in
the evening, do you remember where were you on
ATTY. LACANILAO that particular date and time?

Q: What is the house made of? A: I was sleeping in my 'higaan' sir.

A: Concrete, it looks like an apartment, ma'am. Q: Where is that 'higaan' located?

Q: Was there a time when you were left alone by the A: In their house, sir.
accused during the day?
Q: You are referring to the house of Mary Joy and
A: The girl sometimes leave[s] in the morning or in the Orlando?
afternoon but they padlock the house, ma'am.
A: Yes sir.
COURT (TO THE WITNESS)- Did you attempt to
leave the place? Q: What were you doing at that particular time?

WITNESS - I did not because they were always A: 'Natutulog po ako tapos tinadyakan po akong bigla ni
threatening me with the gun, Your Honor. Kuya Lando tapes hinila po at dinala niya ako sa
higaan nila' sir.
xx
xx Q: Who, pulled you?

Q: Have you attempted to ask for help when you were A: Kuya Lando, sir.
left alone?
Q: Now what happen(ed) when you were brought to
A: No ma'am because I was afraid and even if I shot, it their room?
cannot be heard outside. They were always pointing
the gun at me. A: They forced me to lie down. They (sic) Ate Joy held
my breast and removed my bra.
Q: When you have (sic) the opportunity to go to the CR
alone, why did you not shout? Q: What else happened?

A: Kuya Lando was threatening me and he was always A: Pagkatapos po noon, si Kuya Lando naman po, tapos
pointing the gun at me, ma'am. 17 piningger pa po ako ni Ate Joy.

Q: What do you mean by 'piningger'?

The elements of kidnapping under Article 267 of the Revised
Penal Code are: (1) the offender is a private individual; (2) he A: Ate Joy inserted her finger inside my private part,
kidnaps or detains another or in any other manner deprives sir.
the latter of his liberty; (3) the act of detention or kidnapping
must be illegal; and (4) in the commission of the offense, any Q: What do you mean by 'piningger"'
of the following circumstances is present: (a) the kidnapping
or detention lasts for more than 3 days; or (b) it is committed
86
 A: 'Pinasok po niya ang finger niya sa ari ko.'
Instead of convicting appellants of the separate offenses of
kidnapping and rape as charged in three separate
Q: Who? Informations, the trial court found appellants guilty of the
special complex crime of kidnapping with rape. The trial court
A: Ate Joy. clearly relied on the last paragraph of Article 267 of the
Revised Penal Code, as amended, which provides that if the
Q: Now aside from that what happened next if any? victim is killed or dies as a consequence of the detention, or is
raped or subjected to torture or dehumanizing acts, the
A: 'Pagkatapos po nun pinasok naman po ni Kuya Lando maximum penalty shall be imposed. This provision gives rise
iyung ari niya sa ari ko, two (2) times po' sir. to a special complex crime, where the law provides a single
penalty for two or more component offenses.22chanrobleslaw
Q: What was your reaction when Orlando inserted his
penis to your private part? The trial court would have been correct had the there been an
Information specifically filed for the crime of kidnapping with
rape.
A: Hindi po niya naano gaano kasi tinutulak-tulak ko po
sila habang umiiyak po ako kasi pinipilit po nila, kasi
Section 6, Rule 110 of the Revised Rules on Criminal
pinapakitaan po nila ako ng baril pag hindi daw po
Procedure provides that a complaint or information is
ako pumayag, sir.
sufficient if it states the name of the accused; the designation
of the offense given by the statute; the acts or omissions
Q: What was Mary Joy doing when Orlando inserted his complained of as constituting the offense; the name of the
pivate organ to your private part? offended party; the approximate date of the commission of
the offense; and the place where the offense was committed.
A: She was just watching us, sir. 19

Basic is the rule that every element constituting the offense

must be· alleged in the information. The rationale of this rule
The crime of rape was also established through the testimony
has been explained in the case of Andaya v. People,23 to wit:
of AAA that first, Mary Joy committed an act of sexual assault
by inserting her finger into AAA's vagina followed by Orlando
chanRoblesvirtualLawlibrary
who had carnal knowledge of AAA by inserting his penis into
xxx. The main purpose of requiring the various elements of a
AAA's vagina. Orlando succeeded in having carnal knowledge
crime to be set out in the information is to enable the accused
of AAA through the use of threat and intimidation.
to suitably prepare his defense because he is presumed to
have no independent knowledge of the facts that constitute
Appellants question the findings of the medico-legal as
the offense. The allegations of facts constituting the offense
inconsistent with the claim that AAA was raped just three
charged are substantial matters and an accused's right to
days before she underwent a physical examination. We agree
question his conviction based on facts not alleged in the
with the Court of Appeals that healed lacerations do not
information cannot be waived. No matter how conclusive and
negate rape, thus:
convincing the evidence of guilt may be, an accused cannot
be convicted of any offense unless it is charged in the
chanRoblesvirtualLawlibrary
information on which he is tried or is necessarily included
The absence of fresh lacerations in AAA's hymen does not
therein. To convict him of a ground not alleged while he is
negate sexual intercourse and does not prove that she was
concentrating his defense against the ground alleged would
not raped. A freshly broken hymen is not an essential element
plainly be unfair and underhanded. The rule is that a variance
of rape. Healed lacerations do not negate rape. In fact,
between the allegation in the information and proof adduced
rupture of the hymen is not essential. In rape, complete or
during trial shall be fatal to the criminal case if it is material
full penetration of the complainant's private part is not
and prejudicial to the accused so much so that it affects his
necessary. Neither is the rupture of the hymen
substantial rights.24 (Citations omitted)
essential. What is fundamental is that the entrance, or at
least the introduction of the male organ into the labia of the
pudendum, is proved, as in the case at bar. Verily, the mere We stressed in the case of Dela Chica v.
introduction of the male organ into the labia majora at the Sandiganbayan25cralawred that the test in determining
victim's genitalia, and not the full penetration of the whether the information validly charges an offense is whether
complainant's private part, consummates the crime. Hence, the material facts alleged in the complaint or information will
the "touching" or "entry" of the penis into the labia majora or establish the essential elements of the offense charged as
the labia minora of the pudendum of the victim's genitalia defined in the law. In this examination, matters aliunde are
constitutes consummated rape. In other words, the successful not considered. The law essentially requires this to enable the
penetration by the rapist of the female's genital organ is not accused suitably to prepare his defense, as he is presumed to
indispensable. Penile invasion necessarily entails contact with have no independent knowledge of the facts that constitute
the labia and even the briefest of contacts without laceration the offense.
of the hymen is deemed to be
rape.20chanroblesvirtuallawlibrary More pertinently, in charging the commission of a complex
offense, the information must allege each element of the
component offenses with the same precision that would be
With respect to the perceived incredulities in the statement of
necessary if they were made the subject of a separate
AAA, we defer to the finding of the trial court which upheld
prosecution.26chanrobleslaw
AAA's version as believable. It is well-settled that where the
issue is one of credibility of witnesses, and in this case their
Criminal Case No. 134484-H charged Orlando only with rape.
testimonies as well, the findings of the trial court are not to
Criminal Case No. 134485-H charged Mary Joy with rape
be disturbed unless the consideration of certain facts of
through sexual assault, while Criminal Case No. 134486-H
substance and value, which have been plainly overlooked,
accused appellants of kidnapping. An information charging a
might affect the result of the case.21chanrobleslaw
87
special complex crime of kidnapping with rape, as in this
case, should include that which alleges the commission of
kidnapping qualified by extortion of ransom and that which
alleges rape on the same occasion. Considering that the
existing Informations do not contain the essential and
material ingredients for the commission of kidnapping with
rape, appellants cannot be convicted for that special complex
crime. Appellants can only be convicted of the separate
offenses of kidnapping and rape, both of which were duly
proven.
proceedings a nullity, will not defeat a plea of autrefois
acquit.32 Said error unfortunately downgrades the crime to
kidnapping and completely takes rape out of the picture albeit
proven during trial.
The prescribed penalty for kidnapping under Article 267 of the
Revised Penal Code, as amended, is reclusion perpetua to
death. Absent any mitigating or aggravating circumstances
which attended the commission of the crime, we impose the
penalty of reclusion perpetua.

Confident that the information in Criminal Case No. 134486-H
covered the crime of kidnapping with rape, the trial court
acquitted appellants in three other Informations.
It was clearly stated in the body of the trial court's decision
that the prosecution had proven beyond reasonable doubt
that respondents raped AAA, thus:
chanRoblesvirtualLawlibrary
During the period AAA was deprived of her liberty, it was
proved that [Orlando] and [Mary Joy] had a concerted action
in furtherance of the crime of rape.
A modification on the award of damages is in order. In line
with recent jurisprudence,33 we decrease the award in civil
indemnity and moral damages to P75,000.00 each and we
increase the exemplary damages to P75,000.00.
WHEREFORE, the 26 September 2012 Decision of the Court
of Appeals in CA-G.R. CR-HC No. 04249 finding appellants
Mary Joy Cilot y Mariano and Orlando Brigole y Apon guilty of
the complex crime of kidnapping with rape is REVERSED and
SET ASIDE. Appellants are instead found guilty of
kidnapping. We sentence them to suffer the penalty
of reclusion perpetua and to pay AAA the following amounts:

xxxx
1. P75,000.00 as civil indemnity;
2. P75,000.00 as moral damages; and
That AAA lodged a heinous crime against [Orlando] and [Mary
3. P75,000.00 as exemplary exemplary damages.
Joy] because the latter reprimanded her for coming home late
and drunk is simply incredible. Their denial is a negative
defense and crumbles in the light of the positive assertion of All damages awarded shall earn interest at the rate of six
AAA who testified in a candid and truthful manner. Further, percent (6%) per annum from the date of finality of this
the victim's account of molestation is corroborated by the Decision until fully paid.
medical findings of the medico-legal officer.27
SO ORDERED.chanRoblesvirtualLawlibrary
However, we defer to the general rule that where there is a
conflict between the fallo, or the dispositive part, and the
body of the decision or order, the fallo prevails on the theory
that the fallo is the final order and becomes the subject of
execution, while the body of the decision merely contains the
reasons or conclusions of the court ordering nothing.28 We
are aware of an exception to the aforestated rule, i.e., where
one can clearly and unquestionably conclude from the body of
the decision that there was a mistake in the dispositive
portion, the body of the decision will prevail.29chanrobleslaw

The mistake contemplated .tn the exception refers to a

clerical error. In Spouses Rebuldea v. Intermediate Appellate
Court,30 the Court held that the trial court did not gravely
abuse its discretion when it corrected the dispositive portion
of its decision to make it conform to the body of the decision,
and to rectify the clerical errors which interchanged the
mortgagors and the mortgagee. In People v. Lacbayan,31 the
mistake in the dispositive portion of the decision pertains to
the omission of actual damages and a wrong amount attached
to moral damages when it was clear from the body of the
decision that the trial court did in fact award the heirs of the
victim P30,069.00 as actual damages and P100,000.00 as
moral damages.

The mistake committed by the trial court is far from being

clerical or inadvertent. It acquitted appellants based on its
flawed reliance to an information which it thought was
sufficient to charge and convict appellants of the crime of
kidnapping with rape. The judgment of acquittal in favor of an
accused necessarily ends the case in which he is prosecuted
and the same cannot be appealed nor reopened because of
the doctrine that nobody may be put twice in jeopardy for the
same offense. Appellants have been erroneously but formally
acquitted by the trial court. That judgment of acquittal is a
final verdict. Errors or irregularities, which do not render the

88
 G.R. No. 206690, July 11, 2016
BARRIO FIESTA RESTAURANT, LIBERTY ILAGAN,
SUNSHINE ONGPAUCO-IKEDA AND MARICO
CRISTOBAL, Petitioners, v. HELEN C.
BERONIA, Respondent.
BRION, J.:
In this petition for review on certiorari,[1] we resolve the challenge to
the June 21, 2012 decision[2] and the April 5, 2013 resolution[3]of
the Court of Appeals (CA) in CA-G.R. SP No. 119458.
The CA reversed and set aside the December 7, 2010 decision[4] of the
National Labor Relations Commission (NLRC) and reinstated the May
31, 2010 ruling[5] of the labor arbiter (LA) declaring respondent Helen
C. Beronia (Beronia) illegally dismissed.
The Antecedents
On August 17, 2009, Beronia filed a complaint[6] for illegal dismissal,
praying for backwages, damages, and attorney's fees against Barrio
Fiesta Restaurant (Barrio Fiesta), its owner Liberty Ilagan (Ilagan),
General Manager Sunshine Ongpauco-Ikeda (Ikeda), and Personnel
Officer Marico Cristobal (Cristobal) (collectively referred to
as petitioners).
Beronia claimed that on February 12, 1988, the spouses Rodolfo
Ongpauco and Liberty Ilagan[7] hired her as receptionist[8] at one of
their restaurants, the Mikimito. In 1989, they made her a cashier and
assigned her at the Bakahan at Manukan restaurants; in 1990, they
also assigned her at two branches of the Barrio Fiesta. She worked in
these four restaurants until 1999 when she went on absence without
leave to take care of her sick daughter.
Beronia added that after seven months, she was called back to work
and was again assigned at the Barrio Fiesta. On September 5, 2008,
Irene Molina (Molina), the cashier assigned to the shift preceding
Beronia's, failed to enter in the cash register (Omron machine) a sales
transaction worth P582.00. When Beronia began her shift (night shift),
she failed to see Molina's handwritten note and her previous
unrecorded sales transaction resulting in an excess of P582.00 in the
cash register as compared to the amount recorded in the cash book.
Beronia argued that, in the following month, she used the P582.00
"overage" to offset the "shortages" she incurred on three separate
instances when she could not find the corresponding receipts and
vouchers despite diligent search. She believed in good faith that
"offsetting" was authorized as it was the "usual practice among the
cashiers, as sanctioned by the secretaries authorized to check the
cashiers' cash book regularly x x x."[9]
She explained that this practice is based on the fact that, unlike in fast,
food chains and department stores where money moves only in one
direction (i.e., coming only from customer payments), the money
handled by Barrio Fiesta cashiers also includes money used by the
restaurant for its regular business expenses.[10]
On October 5, 2008, Ilagan's secretary, Nora Olarte (Olarte), reported
the offsetting to Cristobal. Cristobal subsequently directed Beronia to
submit a written explanation on the incident within 24
hours.[11] Beronia submitted her explanation, written on a half sheet of
pad paper dated October 10, 2008, admitting that she had applied the
overage to her shortages.[12]
Cristobal then gave her a termination of employment
memorandum[13] dated October 17, 2008, which she refused to accept
because it was not signed by Ikeda. She received the signed termination
notice three weeks later; she stopped reporting for work starting
November 15, 2008.
On February 3, 2009, Ilagan asked her to report back to work. She
accepted the request as she was in dire need of money to support her
daughter. She signed a contract to work as waitress[14] from February 4
to July 30, 2009 during which she was made to train new cashiers. On
July 30, 2009, she was completely discharged.
The petitioners, through Atty. Richard Neil S. Chua (Chua) of Ligon
Solis Mejia Florendo (Ligon, et al.) law firm, denied the claimed
liability. They confirmed Beronia's employment as cashier at Barrio
Fiesta, noting that for a while, her performance was satisfactory. In
2007, however, her work ethic changed; she was often late for work
until she was suspended for seven days due to her repeated
tardiness.[15] They added that Beronia was also suspended for two days
for berating co-employees who confronted her for pocketing tips
without giving them their share.[16]
The worst among Beronia's transgressions, the petitioners pointed out,
involved acts that resulted in the loss of their trust and confidence in
her.
The first of these acts occurred on October 2, 2006, when Barrio
Fiesta's accounting department discovered that Beronia withheld/took
cash ("cash out") from the sales of the restaurant and released the
amount to one Maribeth "Letlet" Echaluche without authority from the
management.[17] They maintained that the act constituted qualified
theft but they nonetheless gave Beronia a chance and allowed her to
continue her employment.
Beronia committed another act of qualified theft - the offsetting
incident - which Beronia had in fact admitted.[18] The management
discovered this act when Olarte reported on September 5, 2008 that
Beronia applied (offset) the P594.00 (which she claimed was only
P582.00 overage in the sale transactions of the cashier previous to her
shift) to the shortages in her (Beronia's) transactions during the night
shift.[19] The petitioners maintained that "offsetting" is a prohibited act
as it is an implied admission of taking the cash surplus for one day and
applying it to cash shortages for the previous days. They stressed that
the cash involved was restaurant property, not the cashier's.
On November 17, 2008, Beronia reported for work for the last time; at
the close of business hours, the management dismissed Beronia for just
cause.[20] She left the work premises peacefully.
After three months (or sometime in February 2009), Beronia
approached Ilagan and begged that she be given any job at Barrio
Fiesta. For humanitarian considerations, they granted Beronia's
request, but told her that "due to her prior acts of theft, she would not
be allowed to handle cash."[21] They advised her to apply for
employment, which she did,[22] and Barrio Fiesta employed her as
acting supervisor on a contractual basis for the period February 4,
2009 to July 30, 2009.[23]
Before the end of July 2009, the petitioners notified Beronia of the
expiration of her contract on July 30, 2009.[24] She left the work
premises peacefully on July 30, 2009, only to return sometime in
August asking that she be hired again. They decided, however, not to
employ her anymore. Beronia then filed the complaint for illegal
dismissal, which they believed she did to spite them for the termination
of her employment in November 2008.
In the decision[25] dated May 31, 2010, the LA declared that Beronia
had been illegally dismissed, and ordered the petitioners to pay
Beronia separation pay in lieu of reinstatement and backwages from
the date of dismissal up to the signing of the decision.
The LA ruled that the dismissal penalty the petitioners imposed on
Beronia was grossly disproportionate to the wrong she had committed
as the petitioners failed to prove that Beronia was motivated by bad
faith. The P582.00 shortage was a negligible amount, thus, her alleged
violation of the unwritten policy on "offsetting of shortages" could be
considered to have been done in good faith.
The LA added that Beronia deserves compassion given her more or less
twenty-year service in the company as well as the fact that the "off-
setting" incident was her first offense-
Finally, the LA ruled, the petitioners' subsequent act of rehiring and
assigning Beronia to a higher position - as Acting Supervisor to train
89
incoming cashiers - belie their charge of serious misconduct and breach
of trust and confidence.
The NLRC decision
On petitioners' appeal,[26] the NLRC reversed the LA's ruling in its
December 7, 2010 decision.[27]
The NLRC pointed out that Beronia was hired as cashier of Barrio
Fiesta restaurant - a position of utmost trust and confidence. Prior to
the offsetting incident, she had already been warned for releasing cash
to a person without prior authority from the management. While she
claimed that offsetting short amounts was a practice among cashiers
with the implicit authorization of the secretaries, she failed to show
that she sought the authorization of the secretary on duty before
undertaking the offsetting. In fact, the secretary was the one who
brought to Cristobal's attention her unauthorized offsetting.
Thus, the NLRC concluded that the wrong Beronia committed
rendered her unworthy of the utmost trust and confidence reposed on
her by the petitioners justifying her dismissal from the service. That the
amount involved was "only" P594.00 did not mean that Beronia did
not breach the petitioners' trust and confidence.
Beronia sought reconsideration[28] of the NLRC's December 7, 2010
decision. On January 13, 2011, the petitioners filed their opposition
to Beronia's motion for reconsideration;[29] the opposition was
personally signed and filed by Ilagan and Ikeda.
The NLRC subsequently denied Beronia's motion for reconsideration
on February 24, 2010.[30] prompting the latter to seek recourse before
the CA via a petition for certiorari.[31]
The Proceedings before the CA
On August 1, 2011, the CA issued a resolution[32] directing the
petitioners to file their comment.
On September 16, 2011, the CA issued another resolution[33] stating,
among others, that "no manifestation and comment has been filed by
the [petitioners]."
In a resolution[34] dated March 2, 2012, the CA gave the petitioners a
last opportunity to file their comment to Beronia's petition within ten
days from notice.
Subsequently, in its June 8, 2012 resolution,[35] the CA submitted the
case for decision sans the petitioners' comment.
In the June 21, 2012 decision,[36] the CA reinstated the LA's May 31,
2010 decision, declaring that Beronia had been dismissed without just
cause and without the observance of due process.
The CA ruled that the petitioners' basis for dismissing Beronia was
unclear as they failed to show or prove that the company prohibited the
act of offsetting. The CA also pointed out that while the petitioners
submitted a copy of a memorandum dated June 22, 2004, requiring all
cashiers to explain in writing their shortages or overages, the
memorandum was submitted for the first time - together with their
opposition to Beronia's motion for reconsideration - and was neither an
original nor a certified copy.
The CA agreed that the value of the amount involved was immaterial,
but pointed out that the petitioners nonetheless failed to show that
Beronia's breach of confidence was willful.
The CA added that the petitioners in fact also failed to prove the theft
Beronia allegedly committed when she released, without prior consent
and authority of the management, amounts of money to a certain
Marileth Echaluche. The violation report shows that they simply
warned Beronia for her failure to report the release of cash and not for
committing theft. Thus, absent proof of bad faith and ill motive in this
release of money, the loss of trust and confidence simply has no basis.
Finally, the CA noted that the petitioners' subsequent rehiring of
Beronia as acting supervisor negates the charge of loss of trust and
confidence, An employer would not likely require a previously
dismissed employee charged with theft to train its incoming cashiers.
On November 29, 2012, the petitioners, through Real Bartolo &
Real law offices, filed with the CA an Entry of Appearance with
Manifestation and Motion for Reconsideration.[37]
In its April 5, 2013 resolution,[38] the CA, among others: (1) merely
noted the petitioners' manifestation and motion for time within which
to comply, pointing out that it has already received the postal registry
return receipt for the petitioners' counsel on record - Ligon, et al. -
showing that the petitioners' counsel has received a copy of the CA's
June 21, 2012 decision on June 29, 2012; (2) noted the petitioners'
termination of their counsel of record's services on February 19, 2013;
and (3) denied the petitioners' motion for reconsideration for being
138 days late.
The records show that the petitioners, through their counsel of
record, Ligon et al., received copies of the CA's August 1, 2011;
September 16, 2011; March 2, 2012; and June 8, 2012 resolutions and
of the June 21, 2012 decision.
The Petition
The petitioners seek the reversal of the CA rulings, arguing that the CA
reversibly erred in declaring that: (1) their motion for reconsideration
was filed out of time; (2) Beronia was illegally dismissed; and (3) she
was denied due process.[39]
On the first assignment of error, the petitioners ask for a liberal
application of the procedural rules, reasoning that they believed all the
while that they were being represented by their former counsel, Ligon,
et al., through Atty. Chua. Atty. Chua, however, alleged that he had
ceased to be their lawyer since 2010 when his services "were
disengaged" by mutual agreement with the petitioners[40] after the
appeal to the NLRC was filed. The petitioners argue that the procedural
lapse before the CA was clearly due to a miscommunication with the
law firm for which they should not be made to suffer, in the interest of
substantial justice.
On the illegal dismissal issue, the petitioners insist that Beronia was
dismissed for just cause. They argue that Beronia committed acts
resulting in a breach of their trust that, together with her previous
infractions, justify the termination of her employment.
They reiterate in this regard that the most serious of Beronia's
infractions refers to the offsetting of shortages in her sales transactions
with the overage in sales handled by another cashier. Beronia admitted
the offsetting, stating in her explanation "yong over ko ay inoffset ko
sa short ko."[41] They stress that she was aware that the management
never consented to the offsetting as there is an existing policy on the
matter.[42] Thus, they contend that her admission serves as substantial
evidence of fraud and serious misconduct resulting in their loss of trust
and confidence in her as a cashier of the restaurant.
They add that, being equally protected under the law, they have the
prerogative to discipline the employees and to impose appropriate
penalties on erring workers pursuant to company rules and
regulations. They likewise have the prerogative to hire dismissed
employees out of compassion for a specific period; as they did in
Beronia's case when they hired her for the fixed period of February 4,
2009 to July 30, 2009.
On the due process issue, the petitioners argue that the essence of due
process is simply an opportunity to be heard or to explain one's side as
applied in administrative proceedings. In the present case, they point
out that Barrio Fiesta served the first notice (October 9, 2008
memorandum) on Beronia informing her of the charges against her
and asking her for a written explanation within 24 hours.
Initially, Beronia offered a verbal explanation on the offsetting
incident, but when told that it should be in writing, she wrote down her
explanation on a half sheet of pad paper stating that she had applied
90
the overage to her shortages.[43] They thus submit that they duly
accorded Beronia the required due process.
The Case for Beronia
Beronia prays that the petition "be denied for utter lack of
merit."[44] She asserts that the CA committed no error in denying the
petitioners' motion for reconsideration for late filing, a procedural
lapse admitted by the petitioners themselves, although they put the
blame on their former counsel - Ligon, et al. - for not informing them
of its receipt of the June 21, 2012 decision of the CA.
She argues that the petitioners' alleged miscommunication with their
former counsel should not be made an excuse for their failure to file
their motion for reconsideration with the CA on time. The documents
the petitioners had in fact presented show that they and not their
former counsel have been negligent in handling their case.
Since the petitioners filed their motion for reconsideration only on
November 29, 2012, or 138 days after the lapse of the reglementary
period, the June 21, 2012 decision of the CA had already become final
and executory.
On the main issue, Beronia argues that the CA correctly ruled that she
was illegally dismissed as the act of offsetting does not amount to fraud
or willful breach that would justify termination of employment for loss
of trust and confidence. She insists that the petitioners failed to present
evidence to show that she willfully and deliberately misrepresented
Barrio Fiesta's sales record; on the contrary, she sufficiently explained
that it was Molina who failed to enter the sales transaction in question.
She adds that her subsequent rehiring by the petitioners negated loss of
trust as a basis for her dismissal.
Beronia bewails the petitioners' reliance on her alleged past infractions
as additional ground for her dismissal, contending that there is likewise
no evidence that she committed these infractions. In any case, she
argues that the alleged tip-pocketing, berating of co-employees, and
failing to release cash to a co-employee were offenses which had
already been meted their corresponding penalties; they also have no
relation to the offense of "offsetting" for which she was charged in the
October 9, 2008 show-cause memorandum[45] and for which she was
eventually dismissed.
Finally, Beronia assails the petitioners' failure to afford her due process
in her petition for dismissal. She argues that she was not given
adequate opportunity to prepare for her defense as she was given only
24 hours to submit her explanation and was not sufficiently informed
of the specific facts upon which the charge was based. Although a
formal hearing is not required, she adds, the employee should
nevertheless be given ample time to be heard, which was absent in her
case, and the defect was not cured with the third notice (dated October
17, 2008) laying down additional charges for her dismissal.
The Issue
The core issues for the Court's resolution are: (1) whether the CA
reversibly erred in denying the petitioners' motion for reconsideration
for belated filing; and (2) whether the CA erred in reinstating the labor
arbiter's ruling finding Beronia dismissed without just cause and
without due process.
The Court's Ruling
We resolve to DENY the petition.
The CA did not err in denying the petitioners' motion for
reconsideration for belated filing.
A. The petitioners' motion for reconsideration was filed well
beyond the fifteen-day reglementary period.
There is no question that the petitioners filed their motion for
reconsideration of the CA's June 21, 2012 decision 138 days beyond the
fifteen-day reglementary period for filing the motion. The petitioners,
through their former counsel, received the copy of this CA decision on
June 29, 2012, and had only until July 14, 2012 (or until July 16, 2012
since July 14, 2012 was a Saturday) to file their motion for
reconsideration. They filed this motion, through a new counsel, only on
November 29, 2012.
Under Section 1, Rule 52 of the Rules of Court, a motion for
reconsideration of a judgment or final resolution should be filed within
fifteen (15) days from notice. If no appeal or motion for reconsideration
is filed within this period, the judgment or final resolution shall
forthwith be entered by the clerk in the book of entries of judgment as
provided under Section 10 of Rule 51.[46]
The fifteen-day reglementary period for filing a motion for
reconsideration is non-extendible.
In Ponciano Jr. v. Laguna Lake Development Authority, et al.,[47] the
Court refused to admit a motion for reconsideration filed only one day
late, pointing out that the Court has, in the past, similarly refused to
admit belatedly filed motions for reconsideration.
Without a motion for reconsideration of the CA's June 21, 2012
decision duly filed on time, the petitioners lost their right to assail the
CA decision before this Court. "For purposes of determining its
timeliness, a motion for reconsideration may properly be treated as an
appeal. As a step to allow an inferior court to correct itself before
review by a higher court, a motion for reconsideration must necessarily
be filed within the period to appeal. When filed beyond such period, the
motion for reconsideration ipso facto forecloses the right to appeal."[48]
In other words, the petitioners' failure to timely file the motion for
reconsideration foreclosed any right which they may have had under
the rules not only to seek reconsideration of the CA's June 21, 2012
decision; more importantly, the failure foreclosed their right to assail
the CA decision before this Court.
B. The supposed negligence of the petitioners' former
counsel was the result of their actions and Inactions, hence,
is binding on the petitioners.
The petitioners claim that their former counsel - Ligon, et al. through
Atty. Chua - did not inform them of the CA's August 1, 2011; September
16, 2011; March 2, 2012; and June 8, 2012 resolutions, and of the June
21, 2012 decision, this omission "effectively depriv[ing] [them] of
procedural and substantive due process of law."[49] They argue that
their procedural lapse before the CA was clearly due to a
miscommunication with their former law firm and that the CA should
not have denied their motion for reconsideration in the interest of
substantial justice.
We do not see any merit in this argument.
We are not unaware that in certain cases, this Court allowed the liberal
application of procedural rules. We stress, however, that these cases
are the exceptions and were sufficiently justified by attendant
meritorious and exceptional circumstances.
A motion for reconsideration on the ground of excusable negligence is
addressed to the sound discretion of the court which cannot be granted
except upon a clear showing of justifiable circumstances negating the
effects of any negligence that might have been present.
We emphasize and reiterate that rules of procedure must be faithfully
complied with and cannot be based solely on the claim of substantial
merit. Rules prescribing the time to do specific acts or to undertake
certain proceedings are considered absolutely indispensable to prevent
needless delays and to the orderly and prompt discharge of judicial
business. By their very nature, these rules are mandatory.[50]
In the present case, the only permissible consideration we can take is to
determine whether circumstances exist to excuse the petitioners' delay
in the filing of their motion for reconsideration. If there are none, as
indeed we find because the petitioners utterly failed to show us one,
then the delay is fatal.
91
We note that on January 13, 2011, the petitioners filed
an Opposition,[51] dated January 5, 2011, to the motion filed by
Beronia seeking reconsideration of the NLRC's December 7, 2010
decision.
Significantly, this January 5, 2011 opposition was signed personally by
petitioners Ilagan and Ikeda, on behalf of themselves and of petitioner
Barrio Fiesta, instead of by Atty. Chua for Ligon, et al. as the
petitioners' counsel.
As a rule, when a party to a proceeding is represented by counsel, it is
the counsel who signs any pleading filed in the course of the
proceeding. The party represented does not have to sign the pleadings,
save only in the specific instances required by the rules; they appear
before the court and participate in the proceedings only when
specifically required by the court or tribunal.
In the petitioners' case, they were themselves aware that Beronia
sought reconsideration of the NLRC decision as they had, in fact,
personally opposed this motion instead of through their counsel on
record, Ligon, et al. Had they still been represented by their counsel,
through Atty. Chua as they claim, the latter would have signed and filed
the opposition in their behalf.
Viewed in this light, the petitioners must have known that Ligon, et
al. no longer represented them in this case; this was true even at the
NLRC level and before the case reached the CA.
This conclusion becomes unavoidable when we consider the February
25, 2013 letter of Atty. Chua replying to Ilagan's February 13, 2013
letter[52] purportedly terminating the services of Ligon, et al. in the
case.
In the February 25, 2013 letter, Atty. Chua categorically pointed out
that he had not been the petitioners' counsel since 2010 due to their
mutual agreement. To quote this letter:
"February 25, 2013
xxxx
Dear Mrs. Liberty D. Ilagan,
I received your letter that you are terminating my services effectively
immediately.
However, this is no longer possible since I have not been your
counsel since 2010 due to our mutual agreement to
disengage all professional relationships after the appeal to
the NLRC was made in relation to your case.
You will recall, hopefully, that you even asked me for copies of a
notice to withdraw as your legal counsel to make way for
your new lawyer, which I readily provided you through your
assistant Ms. Gerly who was then working in your Barrio Fiesta, Makati
Branch. You and Gerly were specifically instructed to sign the
Conforme and file the same [with] the NLRC simultaneously with the
new counsel you alleged to have engaged already by that time.
I also gave Ms. Gerly all of the folders and documents relevant to this
case,
As to whether or not you actually submitted my Notice to Withdraw as
Counsel to the said quasi-judicial body (NLRC) is already unknown to
me, but the same was your responsibility to do since it was upon your
adamant request.
xxxx
I hope this clarifies the situation, and I wish you all the best.
Very truly yours,
RICHARD NEIL S. CHUA" [emphases and underscorings supplied]
Considered together, the January 5, 2011 opposition and the February
25, 2013 letter of Atty. Chua more than sufficiently show that there
could not have been any miscommunication between the petitioners
and their former counsel that could have reasonably prevented the
petitioners from immediately acting on Beronia's certiorari petition
before the CA. Their failure to act on Beronia's certiorari petition,
therefore, was due solely to their own fault or negligence, not to their
former counsel's as they claim.
C. The CA decision became final and executory which the CA
and even this Court could no longer review.
As the petitioners failed to timely seek reconsideration or appeal within
the fifteen-day reglementary period, the CA's June 21, 2012 decision
automatically became final and executory after the lapse of this fifteen-
day period.
"It is well-settled that judgments or orders become final and executory
by operation of law and not by judicial declaration. The finality of a
judgment becomes a fact upon the lapse of the reglementary period of
appeal if no appeal is perfected or [no] motion for reconsideration or
new trial is filed."[53] "The court need not even pronounce the finality of
the order as the same becomes final by operation of law. In fact, it
could not even validly entertain a motion for reconsideration after the
lapse of the period for taking an appeal x x x The subsequent filing
of a motion for reconsideration cannot disturb the finality of
the judgment or order."[54]
Once a decision becomes final and executory, it is "immutable and
unalterable, and can no longer be modified in any respect, even if the
modification is meant to correct what is perceived to be an erroneous
conclusion of fact or law, and regardless of whether the modification
is attempted to be made by the court rendering it or by the highest
court of the land."[55]
The CA in this case lost jurisdiction when the petitioners failed to file
the motion for reconsideration within the fifteen-day reglementary
period. The petitioners' subsequent filing of the motion for
reconsideration 138 days after the deadline did not and could no longer
disturb the finality of the June 21, 2012 decision nor restore
jurisdiction which had already been lost.[56]
Accordingly, the CA did not err in refusing to admit and act on the
petitioners' motion for reconsideration. At the time the petitioners filed
their motion for reconsideration, the decision subject of this motion
had already become final.
Consequently, we can no longer review nor modify in any way the CA's
June 21, 2012 decision. With this conclusion, we see no reason for us to
resolve the petitioners' other issues.
WHEREFORE, we hereby DENY the petition as the decision dated
June 21, 2012 and the resolution dated April 5, 2013 of the Court of
Appeals in CA-G.R. SP No. 119458, have lapsed to finality and are
beyond our power to review.
SO ORDERED.
92
[G.R. No. 138884. June 6, 2002]
RODOLFO DE LEON, petitioner, vs. COURT OF APPEALS and
SPOUSES ESTELITA and AVELINO
BATUNGBACAL, respondents.
DECISION
QUISUMBING, J.:
Before us is a special civil action for certiorari and prohibition under
Rule 65 of the Rules of Court. It seeks to annul and set aside the
resolution[1] dated January 13, 1999 of the Court of Appeals, in CA-G.R. CV
No. 57989, denying petitioners motion (a) to dismiss the appeals of private
respondents, and (b) to suspend the period to file appellees brief. Also assailed
is the CA resolution[2] dated April 19, 1999, denying petitioners motion for
reconsideration.
The antecedent facts are as follows:
On March 11, 1996, petitioner Rodolfo de Leon filed with the Regional
Trial Court of Bataan, Branch 3, a complaint[3] for a sum of money plus
damages, with a prayer for preliminary attachment, against herein private
respondents Avelino and Estelita Batungbacal. The complaint averred that
private respondent Estelita Batungbacal executed a promissory note[4] in favor
of herein petitioner for her P500,000 loan with stipulated interest at 5 percent
monthly. The loan and interest remained unpaid allegedly because the check
issued by Estelita was dishonored. Private respondents filed an answer with
counterclaim. Estelita admitted the loan obligation, but Avelino denied liability
on the ground that his wife was not the designated administrator and therefore
had no authority to bind the conjugal partnership. Avelino further averred that
his wife contracted the debt without his knowledge and consent.
Based on Estelitas admission, petitioner filed a motion for partial
judgment against Estelita, which the trial court granted in an order[5] dated May
14, 1996:
WHEREFORE, the Motion for Partial Judgment on the Pleadings is hereby
granted in accordance with Sec. 4 of Rule 36, Rules of Court. As prayed for,
judgment is hereby rendered against Estelita Q. Batungbacal, ordering her to
pay plaintiff Rodolfo de Leon the principal amount of the loan obligation of
P500,000.00 plus the stipulated interest which has accrued thereon at 5% per
month since May 1995 until now, plus interest at the legal rate on said accrued
interest from date of judicial demand until the obligation is fully paid.
SO ORDERED.
Counsel for private respondent spouses received a copy of the partial
judgment on May 21, 1996, but no appeal was taken therefrom. Thus, petitioner
filed a motion for execution of said judgment on June 6, 1996.Counsel for
private respondents was furnished a copy of the motion on the same date. As
private respondents interposed no objection, a writ of execution was
correspondingly issued. The sheriff then proceeded to execute the writ and
partially satisfied the judgment award against the paraphernal property of
Estelita and the conjugal properties of the private respondents with due notice
to the latter and their counsel. Again, private respondents interposed no
objection.
Pre-trial was held and trial proceeded on two main issues: (1) whether
the loan was secured with the knowledge and consent of the husband and
whether the same redounded to the benefit of the conjugal partnership; and (2)
whether the capital of the husband would be liable if the conjugal assets or the
paraphernal property of the wife were insufficient to satisfy the loan
obligation. On June 2, 1997, the trial court rendered judgment [6]ordering private
respondent Avelino Batungbacal to pay the amount of the loan plus interest and
other amounts in accordance with Article 121 of the Family Code.
Counsel for private respondent spouses received a copy of the decision
on June 6, 1997. Avelino through counsel, filed a notice of appeal[7] on June 19,
1997. In a notice of appearance[8] dated June 25, 1997 bearing the conformity
solely of Estelita, a new counsel appeared in collaboration with the counsel of
record for the private respondents. On the same date, Estelita through said new
counsel, served a notice that she is appealing both decisions promulgated on
May 14, 1996, and June 2, 1997, to the Court of Appeals. However, the trial
court, in an order[9] dated July 7, 1997 denied the notice of appeal[10] filed by
Estelita on the ground that said notice was filed beyond the reglementary period
to appeal.
Private respondents appeal was docketed with the respondent Court of
Appeals as CA-G.R. CV No. 57989. Petitioner then filed with the Court of
Appeals a Motion to Dismiss the Appeal with Motion to Suspend period to file
Appellees Brief[11] on October 21, 1998. Petitioner based his motion to dismiss
on the following grounds: (1) that the statement of the case as well as the
statement of the facts in the appellants brief do not have page references to the
record, and that the authorities relied upon in the arguments are not cited by the
page of the report at which the case begins and the page of the report on which
the citation is found; (2) that no copy of the appealed decision of the lower court
was attached to the appellants brief, in violation of the Internal Rules of the
Court of Appeals; (3) that private respondents furnished only one copy of the
appellants brief to the petitioner, also in violation of the Rules of Court; (4) that
the decision promulgated against Estelita on May 14, 1996 is no longer
appealable; and (5) that the notice of appeal filed on June 25, 1996 by Estelita
concerning the decision of the trial court against Avelino was filed beyond the
reglementary period to appeal.[12] The motion also prayed that the period for
filing the appellees brief be suspended in view of the pendency of the motion to
dismiss.[13]
Private respondents, in their opposition,[14] insisted that the statements of
the case as well as the statement of facts in their brief contained page references
to the record, and that Estelita had seasonably filed her appeal. Private
respondent spouses also stated that they had filed an Amended Appellants
Brief[15] on November 27, 1998 and that two copies thereof had been served on
petitioner together with copies of the trial courts decisions.
On January 13, 1999, the Court of Appeals issued the assailed
resolution[16] denying petitioners motion to dismiss and virtually admitting the
Amended Appellants Brief as follows:
As submitted by appellants, they adopted pertinent portions of the appealed
Decision in the Statement of the Case, indicated specific pages in the appealed
decision where the quoted portions are found. In the bottom of page 2 of the
brief, is the quoted portions of the decision, referring to pages 1 and 2
thereof. On page 3 of the brief is the dispositive portion, taken on page 11 of
the decision. The rest of the narration in the Statement of the Case are the
specific dates of the pleadings, orders, and portions of the decision citing the
page references where they are found.
Two (2) copies of the Amended Brief were served upon appellee with the
appealed Decision attached as Annex A, and B.
Appellant Estellita Batungbacal explained that her appeal was filed on
time. She cited Guevarra, et. al. vs. Court of Appeals, et. al., L-49017 and
49024, that a partial judgment may be appealed only together with the
judgment in the main case. She personally received a copy of the main
Decision, dated June 2, 1997 on June 10, 1997, and filed her notice of appeal
dated June 25, 1995 (sic) sent by registered mail on even date, per Registry
Receipt No. 2618, attached as Annex C hereof, thereby showing that the
notice of appeal was filed within 15 days from receipt of the Decision
appealed from. At any rate, the merit of appellees contention that appellant
Estellita Batungbacal can no longer appeal from the decision may be resolved
after the case is considered ready for study and report.
WHEREFORE, the motion to dismiss is hereby DENIED, and appellee is
required to file his appellees brief within forty-five (45) days from receipt
hereof.
SO ORDERED.
On January 22, 1999, petitioner filed a Motion for Reconsideration[17] of
the aforesaid resolution but said motion was denied by the Court of Appeals in
a resolution[18] dated April 19, 1999, the pertinent portion of which reads as
follows:
93
The resolution promulgated on January 13, 1999 required appellee to file his
appellees brief within forty-five (45) days from receipt of that resolution, or
up to March 4, 1999. Up to this date no appellees brief has been submitted.
WHEREFORE, the appeal by appellants is deemed submitted for decision
without the benefit of appellees brief, and the records of this case is hereby
transmitted to the Raffle Committee, for re-raffle, for study and report.
SO ORDERED.
Hence, this Petition for Certiorari and Prohibition[19] wherein petitioner
contends that respondent Court of Appeals acted:
(1) WITHOUT JURISDICTION IN ENTERTAINING THE
APPEAL OF PRIVATE RESPONDENT ESTELITA
BATUNGBACAL;
(2) WITH GRAVE ABUSE OF DISCRETION AND IN
DISREGARD OF THE EXPRESS MANDATORY
REQUIREMENTS OF THE RULES AS WELL AS
AGAINST SETTLED JURISPRUDENCE WHEN IT
DENIED THE PETITIONERS MOTION TO DISMISS
THE APPEAL OF THE PRIVATE RESPONDENT
SPOUSES;
(3) WITH GRAVE ABUSE OF DISCRETION AND IN GRAVE
VIOLATION OF DUE PROCESS OF LAW IN
ADMITTING THE AMENDED APPELLANTS BRIEF
FILED BY PRIVATE RESPONDENTS AND IN
REQUIRING THE PETITIONER AS APPELLEE TO FILE
HIS APPELLEES BRIEF;
(4) WITHOUT DUE PROCESS OF LAW WHEN IT
RESOLVED TO HAVE THE APPEAL OF THE
APPELLANT PRIVATE RESPONDENTS DEEMED
SUBMITTED FOR DECISION WITHOUT BENEFIT OF
APPELLEES BRIEF.[20]
Simply put, the following are the issues presented before this Court for
resolution: (1) whether or not the appellate court erred in taking cognizance of
the appeal; and (2) whether or not the appellate court erred or committed grave
abuse of discretion when it considered the appeal as submitted for decision
without petitioners brief.
On the first issue, petitioner contends that the decisions of the trial court
in Civil Case No. 6480 promulgated on May 14, 1996 and June 2, 1997 had
become final and executory as to private respondent Estelita Batungbacal. This
is because Estelita never appealed the partial judgment promulgated on May 14,
1996. In fact, there has been a partial execution of said judgment with notice to
and without objection from private respondent spouses. As regards the decision
dated June 2, 1997, petitioner contends that the same had become final for
failure to file the notice of appeal within 15 days, counted from the time counsel
of record for private respondent spouses received a copy on June 6, 1997 and
not from the time Estelita received a copy on June 10, 1997. Petitioner points
to Section 2 of Rule 13 of the Rules of Court and argues that since the trial court
never ordered that service of the judgment be made upon Estelita, she was not
entitled to service of the judgment. The fact that she received a copy of the
judgment separately from her counsel cannot prejudice the legal consequences
arising out of prior receipt of copy of the decision by her counsel. It was thus
clear error for the Court of Appeals to accept Estelitas argument that the
reglementary period commenced not from receipt of a copy of the decision by
counsel of record but from the time she received a copy of the decision. The
appeal having been filed out of time, the Court of Appeals did not have
jurisdiction to entertain the appeal of Estelita.
Petitioner also assails the appellants brief for certain formal defects. As
pointed out in his motion to dismiss filed before the public respondent, there are
no page references to the record in the statements of the case and of the facts in
the appellants brief submitted by private respondents. Petitioner asserts that
while there are many pleadings and orders mentioned in said statements, only
the decision dated June 2, 1997 is cited, and the citation is limited only to the
particular page or pages in said decision where the citation or quotation is taken,
without any reference to the pages in the record where the decision can be
found. Neither is there reference to the pages in the record where the particular
cited or quoted portions of the decision can be found.
Petitioner likewise alleges that the authorities relied upon in the
appellants brief of private respondents are also not cited by the page on which
the citation is found, as required in Sec. 13 (f) of Rule 44 of the Rules of
Court. Page references to the record are also required in Section 13, paragraphs
(c), (d) and (f) of Rule 44 and absence thereof is a ground for dismissal of the
appeal, pursuant to Sec. 1 (f) of Rule 50 of the Rules of Court. Petitioner also
harps on the failure of private respondents to furnish petitioner with two copies
of the original appellants brief, to submit proof of service of two copies of the
brief on the appellee, and to furnish the petitioner with two copies of the
amended appellants brief as required by the Rules of Court. Additionally,
petitioner asserts that the failure of private respondents to append copies of the
appealed decisions to their appellants brief constitutes a violation of the Internal
Rules of the Court of Appeals and is likewise a ground for dismissal under
Section 1 of Rule 50 of the Rules of Court.
Lastly, petitioner contends that the virtual admission into the record by
the respondent court of the amended appellants brief of the private respondents
under the resolution dated January 13, 1999 and its corresponding action to
require the petitioner to respond thereto, constitute grave abuse of discretion
and blatant disregard of due process of law because the amended brief was filed
without leave of court.
Private respondents, for their part, argue that the resolutions being
assailed by petitioner are interlocutory in character because the Court of
Appeals still has to decide the appeal on the merits; hence, certiorari does not
lie in his favor. Private respondents allege that petitioner has another adequate
and speedy remedy, i.e., to file his brief raising all issues before the Court of
Appeals. Once the appeal is resolved on the merits, all proper issues may be
elevated to the Supreme Court. An order denying a motion to dismiss being
merely interlocutory, it cannot be the basis of a petition for certiorari. The
proper remedy is to appeal in due course after the case is decided on the merits.
We find the petition devoid of merit.
On the first issue, we find that the Court of Appeals did not act without
jurisdiction in entertaining the appeal filed by private respondent Estelita
Batungbacal. Contrary to petitioners apparent position, the judgments rendered
by the trial court in this case are not several judgments under the Rules of Court
so that there would be multiple periods of finality.
A several judgment is proper only when the liability of each party is
clearly separable and distinct from that of his co-parties, such that the claims
against each of them could have been the subject of separate suits, and judgment
for or against one of them will not necessarily affect the other.[21] Where a
common cause of action exists against the defendants, as in actions against
solidary debtors, a several judgment is not proper. In this case, private
respondents are sued together under a common cause of action and are sought
to be held liable as solidary debtors for a loan contracted by Estelita. This is the
clear import of the allegation in the complaint that the proceeds of the loan
benefited the conjugal partnership.
Thus, between the two judgments rendered by the trial court, there could
only be one judgment that finally disposes of the case on the merits. Receipt of
notice of this final judgment marks the point when the reglementary period is
to begin running. In this case, that judgment is the decision[22] rendered by the
trial court on June 2, 1997 and it is only from the date of notice of this decision
that the reglementary period began to run. The partial judgment dated May 14,
1996 was rendered only with respect to one issue in the case and is not the final
and appealable order or judgment that finally disposes of the case on the
merits.[23] It must, therefore, only be appealed together with the decision dated
June 2, 1997.
A final order is that which gives an end to the litigation.[24] When the
order or judgment does not dispose of the case completely but leaves something
to be done upon the merits, it is merely interlocutory. [25] Quite obviously, the
partial judgment ordering Estelita to pay petitioner is an interlocutory order
because it leaves other things for the trial court to do and does not decide with
finality the rights and obligations of the parties.Specifically, at the time the
partial judgment was rendered, there remained other issues including whether
the husband Avelino had any liability under Article 121 of the Family
Code. However, as the partial judgment disposed of one of the issues involved
in the case, it is to be taken in conjunction with the decision dated June 2,
1997. Together, these two issuances form one integrated decision.
The question now is when the period to appeal should actually
commence, from June 6, 1997, as petitioner contends; or from June 10, 1997,
as private respondent Estelita Batungbacal claims? We hold that the period
94
began to run on June 6, 1997 when counsel for private respondents received a the appellees brief. Petitioner was therefore properly deemed to have waived
copy of the decision dated June 2, 1997. When a party is represented by counsel his right to file appellees brief.
of record, service of orders and notices must be made upon said attorney and
notice to the client and to any other lawyer, not the counsel of record, is not WHEREFORE, the petition is DENIED. The resolutions dated January
notice in law.[26] The exception to this rule is when service upon the party 13, 1999 and April 19, 1999 of the Court of Appeals in CA-G.R. CV No. 57989
himself has been ordered by the court.[27] In this case, it does not appear that are AFFIRMED, and the Court of Appeals is ordered to proceed with the appeal
there was any substitution of counsel or that service upon private respondent and decide the case with dispatch. No pronouncement as to costs.
Estelita Batungbacal had been specifically ordered by the trial court; hence, the
counsel of record for the private respondents is presumed to be their counsel on SO ORDERED.
appeal and the only one authorized to receive court processes. Notice of the
judgment upon such counsel, therefore, was notice to the clients for all legal
intents and purposes.

Private respondents appeal had been taken within the reglementary

period since Avelino Batungbacal had filed a notice of appeal on June 19, 1997
or 13 days from their counsels receipt of the decision on June 6,
1997. Respondent spouses having been jointly sued under a common cause of
action, an appeal made by the husband inures to the benefit of the wife. The
notice of appeal filed by Estelita was a superfluity, the appeal having been
perfected earlier by her husband.

We come now to petitioners contention that the appellants brief suffers

from fatal defects.

Worth stressing, the grounds for dismissal of an appeal under Section 1

of Rule 50[28] of the Rules of Court are discretionary upon the Court of
Appeals. This can be seen from the very wording of the Rules which uses the
word may instead of shall. This Court has held in Philippine National Bank vs.
Philippine Milling Co., Inc.[29] that Rule 50, Section 1 which provides specific
grounds for dismissal of appeal manifestly confers a power and does not impose
a duty. What is more, it is directory, not mandatory. [30] With the exception of
Sec. 1(b), the grounds for the dismissal of an appeal are directory and not
mandatory, and it is not the ministerial duty of the court to dismiss the
appeal.[31] The discretion, however, must be a sound one to be exercised in
accordance with the tenets of justice and fair play having in mind the
circumstances obtaining in each case.[32]

The Court of Appeals rightly exercised its discretion when, in denying

petitioners motion to dismiss, it ruled that the citations contained in the
appellants brief were in substantial compliance with the rules. Where the
citations found in the appellants brief could sufficiently enable the appellate
court to locate expeditiously the portions of the record referred to, there is
substantial compliance with the requirements of Section 13(c) and (d), Rule 46
of the Rules of Court. Such determination was properly within the appellate
courts discretion. Nothing in the records indicate that it was exercised
capriciously, whimsically, or with a view of permitting injury upon a party
litigant. For the same reasons, we hold that the respondent Court of Appeals
also did not err when it did not dismiss the appeal based on the allegation that
appellants brief failed to comply with the internal rules of said court.

However, the Court of Appeals erred in requiring petitioner to file the

appellees brief in response to the amended appellants brief. Note that the
amended brief was filed without the proper motion for leave to do so and
corresponding order from the respondent court. Even more significant, it was
filed beyond the extensions of time granted to appellants. The discretion in
accepting late briefs conferred upon respondent court which this Court applied
in the cases of Maqui vs. CA[33] and Vda. de Haberer vs. CA,[34] finds no
application under the present circumstances because, unlike in these two cases,
here no valid reason was advanced for the late filing of the amended
brief. While the amended brief[35] might contain no substantial and prejudicial
changes, it was error for the respondent court to accept the amended brief as
filed and then require petitioner to file appellees brief because admittedly the
amended brief was filed beyond August 31, 1998, the last period of extension
granted to private respondents.

On the second issue, we hold that the Court of Appeals did not commit
grave abuse of discretion in considering the appeal submitted for decision. The
proper remedy in case of denial of the motion to dismiss is to file the appellees
brief and proceed with the appeal. Instead, petitioner opted to file a motion for
reconsideration which, unfortunately, was pro forma. All the grounds raised
therein have been discussed in the first resolution of the respondent Court of
Appeals. There is no new ground raised that might warrant reversal of the
resolution. A cursory perusal of the motion would readily show that it was a
near verbatim repetition of the grounds stated in the motion to dismiss; hence,
the filing of the motion for reconsideration did not suspend the period for filing

95