Declaratory Relief Cases
Content
G.R. No. 150806
January 28, 2008
EUFEMIA ALMEDA and ROMEL ALMEDA, petitioners, vs. BATHALA MARKETING INDUSTRIES, INC., respondent. INC., respondent. DECISION NACHURA, J .: This is a Petition for Review on Certiorari under under Rule 45 of the Rules of Court, of the Decision Decisio n1 of the Court of Appeals (CA), dated September 3, 2001, in CA-G.R. CV No. 67784, and its Resolution 2 dated November 19, 2001. The assailed Decision affirmed with modification the Decision Decisio n 3 of the Regional Trial Court (RTC), Makati City, Branch 136, dated May 9, 2000 in Civil Case No. 98-411. Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as lessee, represented by its president Ramon H. Garcia, renewed its Contract of Lease 4 with Ponciano L. Almeda (Ponciano), as lessor, husband of petitioner Eufemia and father of petitioner Romel Almeda. Under the said contract, Ponciano agreed to lease a portion of the Almeda Compound, located at 2208 Pasong Tamo Street, Makati City, consisting of 7,348.25 square meters, for a monthly rental of P1,107,348.69, for a term of four (4) years from May 1, 1997 unless sooner terminated as provided in the contract. contract .5 The contract of lease contained the following pertinent provisions which gave rise to the instant case: SIXTH - It is expressly understood by the parties hereto that the rental rate stipulated is based on the present rate of assessment on the property, and that in case the assessment should hereafter be increased or any new tax, charge or burden be imposed by authorities on the lot and building where the leased premises are located, LESSEE shall pay, when the rental herein provided becomes due, the additional rental or charge corresponding to the portion hereby leased; provided, however, that in the event that the present assessment or tax on said property should be reduced, LESSEE shall be entitled to reduction in the stipulated rental, likewise in proportion to the portion leased by him; SEVENTH - In case an extraordinary inflation or devaluation of Philippine Currency should supervene, the value of Philippine peso at the time of the establishment of the obligation shall be the basis of payment; payment ;6
During the effectivity of the contract, Ponciano died. Thereafter, respondent dealt with petitioners. In a lette r 7dated December 29, 1997, petitioners advised respondent that the former shall assess and collect Value Added Tax (VAT) on its monthly rentals. In response, respondent contended that VAT may not be imposed as the rentals fixed in the contract of lease were supposed to include the VAT therein, considering that their contract was executed on May 1, 1997 when the VAT law had long been in effect. effect .8 On January 26, 1998, respondent received another letter from petitioners informing the former that its monthly rental should be increased by 73% pursuant to condition No. 7 of the contract and Article 1250 of the Civil Code. Respondent opposed petitioners' demand and insisted that there was no extraordinary inflation to warrant the application of Article 1250 in light of the pronouncement of this Court in various cases .9 Respondent refused to pay the VAT and adjusted rentals as demanded by petitioners but continued to pay the stipulated amount set forth in their contract. On February 18, 1998, respondent instituted an action for declaratory relief for purposes of determining the correct interpretation of condition Nos. 6 and 7 of the lease contract to prevent damage and prejudice .10 The case was docketed as Civil Case No. 98-411 before the RTC of Makati. On March 10, 1998, petitioners in turn filed an action for ejectment, rescission and damages against respondent for failure of the latter to vacate the premises after the demand made by the former . former .11 Before respondent could file an answer, petitioners filed a Notice of Dismissal. Dismissal.12 They subsequently refiled the complaint before the Metropolitan Trial Court of Makati; the case was raffled to Branch 139 and was docketed as Civil Case No. 53596. Petitioners later moved for the dismissal of the declaratory relief case for being an improper remedy considering that respondent was already in breach of the obligation and that the case would not end the litigation and settle the rights of the parties. The trial court, however, was not persuaded, and consequently, denied the motion. After trial on the merits, on May 9, 2000, the RTC ruled in favor of respondent and against petitioners. The pertinent portion of the decision reads:
WHEREFORE, premises considered, this Court renders judgment on the case as follows:
No pronouncement as to costs. SO ORDERED. ORDERED.14
1) declaring that plaintiff is not liable for the payment of Value Added Tax (VAT) of 10% of the rent for [the] use of the leased premises; 2) declaring that plaintiff is not liable for the payment of any rental adjustment, there being no [extraordinary] inflation or devaluation, as provided in the Seventh Condition of the lease contract, to justify the same; same; 3) holding defendants liable to plaintiff for the total amount of P1,119,102.19, said amount representing payments erroneously made by plaintiff as VAT charges and rental adjustment for the months of January, February and March, 1999; and 4) holding defendants liable to plaintiff for the amount of P1,107,348.6 9, said amount representing r epresenting the balanc e of plaintiff's rental deposit still with defendants. SO ORDERED. ORDERED.13 The trial court denied petitioners their right to pass on to respondent the burden of paying the VAT since it was not a new tax that would call for the application of the sixth clause of the contract. The court, likewise, denied their right to collect the demanded increase in rental, there being no extraordinary inflation or devaluation as provided for in the seventh clause of the contract. Because of the payment made by respondent of the rental adjustment demanded by petitioners, the court ordered the restitution by the latter to the former of the amounts paid, notwithstanding the wellestablished rule that in an action for declaratory relief, other than a declaration of rights and obligations, affirmative reliefs are not sought by or awarded to the parties. Petitioners elevated the aforesaid case to the Court of Appeals which affirmed with modification the RTC decision. The fallo reads: WHEREFORE, premises considered, the present appeal is DISMISSED and the appealed appealed decision in Civil Case No. 98-411 is hereby AFFIRMED with MODIFICATION in that the order for the return of the balance of the rental deposits and of the amounts representing the 10% VAT and rental adjustment, is hereby DELETED.
The appellate court agreed with the conclusions of law and the application of the decisional rules on the matter made by the RTC. However, it found that the trial court exceeded its jurisdiction in granting affirmative relief to the respondent, particularly the restitution of its excess payment. Petitioners now come before this Court raising the following issues: I. WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE IS APPLICABLE TO THE CASE AT BAR. II. WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO PIPE AND FOUNDRY CORP. VS. NAWASA CASE, 161 SCRA 32 AND COMPANION COMPANION CASES ARE (sic) APPLICABLE IN THE CASE AT BAR. III. WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE CASE OF DEL ROSARIO VS. THE SHELL COMPANY OF THE PHILIPPINES, 164 SCRA 562, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED ERRED ON A QUESTION QUESTION OF LAW. LAW. IV. WHETHER OR NOT THE FINDING OF THE HONORABLE COURT OF APPEALS THAT RESPONDENT IS NOT LIABLE TO PAY THE 10% VALUE ADDED TAX IS IN ACCORDANCE WITH THE MANDATE OF RA 7716. V. WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE PLAINTIFF-APPELLEE WAS IN BREACH WHEN THE PETITION FOR DECLARATORY RELIEF WAS FILED BEFORE THE TRIAL COURT.
WHEREFORE, premises considered, this Court renders judgment on the case as follows:
No pronouncement as to costs. SO ORDERED. ORDERED.14
1) declaring that plaintiff is not liable for the payment of Value Added Tax (VAT) of 10% of the rent for [the] use of the leased premises; 2) declaring that plaintiff is not liable for the payment of any rental adjustment, there being no [extraordinary] inflation or devaluation, as provided in the Seventh Condition of the lease contract, to justify the same; same; 3) holding defendants liable to plaintiff for the total amount of P1,119,102.19, said amount representing payments erroneously made by plaintiff as VAT charges and rental adjustment for the months of January, February and March, 1999; and 4) holding defendants liable to plaintiff for the amount of P1,107,348.6 9, said amount representing r epresenting the balanc e of plaintiff's rental deposit still with defendants. SO ORDERED. ORDERED.13 The trial court denied petitioners their right to pass on to respondent the burden of paying the VAT since it was not a new tax that would call for the application of the sixth clause of the contract. The court, likewise, denied their right to collect the demanded increase in rental, there being no extraordinary inflation or devaluation as provided for in the seventh clause of the contract. Because of the payment made by respondent of the rental adjustment demanded by petitioners, the court ordered the restitution by the latter to the former of the amounts paid, notwithstanding the wellestablished rule that in an action for declaratory relief, other than a declaration of rights and obligations, affirmative reliefs are not sought by or awarded to the parties. Petitioners elevated the aforesaid case to the Court of Appeals which affirmed with modification the RTC decision. The fallo reads: WHEREFORE, premises considered, the present appeal is DISMISSED and the appealed appealed decision in Civil Case No. 98-411 is hereby AFFIRMED with MODIFICATION in that the order for the return of the balance of the rental deposits and of the amounts representing the 10% VAT and rental adjustment, is hereby DELETED.
The appellate court agreed with the conclusions of law and the application of the decisional rules on the matter made by the RTC. However, it found that the trial court exceeded its jurisdiction in granting affirmative relief to the respondent, particularly the restitution of its excess payment. Petitioners now come before this Court raising the following issues: I. WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE IS APPLICABLE TO THE CASE AT BAR. II. WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO PIPE AND FOUNDRY CORP. VS. NAWASA CASE, 161 SCRA 32 AND COMPANION COMPANION CASES ARE (sic) APPLICABLE IN THE CASE AT BAR. III. WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE CASE OF DEL ROSARIO VS. THE SHELL COMPANY OF THE PHILIPPINES, 164 SCRA 562, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED ERRED ON A QUESTION QUESTION OF LAW. LAW. IV. WHETHER OR NOT THE FINDING OF THE HONORABLE COURT OF APPEALS THAT RESPONDENT IS NOT LIABLE TO PAY THE 10% VALUE ADDED TAX IS IN ACCORDANCE WITH THE MANDATE OF RA 7716. V. WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE PLAINTIFF-APPELLEE WAS IN BREACH WHEN THE PETITION FOR DECLARATORY RELIEF WAS FILED BEFORE THE TRIAL COURT.
In fine, the issues for our resolution are as follows: 1) whether the action for declaratory relief is proper; 2) whether respondent is liable to pay 10% VAT pursuant to Republic Act (RA) 7716; and 3) whether the amount of rentals due the petitioners should be adjusted by reason of extraordinary inflation or devaluation. Declaratory relief is defined as an action by any person interested in a deed, will, contract or other written instrument, executive order or resolution, to determine any question of construction or validity arising from the instrument, executive order or regulation, or statute, and for a declaration of his rights and duties thereunder. The only issue that may be raised in such a petition is the question of construction or validity of provisions in an instrument or statute. Corollary is the general rule that such an action must be justified, as no other adequate relief or remedy is available under the ci rcumstances. 15 Decisional law enumerates the requisites of an action for declaratory relief, as follows: 1) the subject matter of the controversy must be a deed, will, contract or other written instrument, statute, executive order or regulation, or ordinance; 2) the terms of said documents and the validity thereof are doubtful and require judicial construction; 3) there must have been no breach of the documents in question; 4) there must be an actual justiciable controversy or the "ripening seeds" of one between persons whose interests are adverse; 5) the issue must be ripe for judicial determination; and 6) adequate relief is not available through other means or other forms of action or proceeding. proceeding.16 It is beyond cavil that the foregoing requisites are present in the instant case, except that petitioners insist that respondent was already in breach of the contract when the petition was filed.
before another court; thus, the construction of the subject contractual provisions should be ventilated in the same forum. We are not convinced. It is true that in Panganiban v. Pilipinas Shell Petroleum Corporation Corporatio n17 we held that the petition for declaratory relief should be dismissed in view of the pendency of a separate action for unlawful detainer. However, we cannot apply the same ruling to the instant case. In Panganiban, Panganiban , the unlawful detainer case had already been resolved by the trial court before the dismissal of the declaratory relief case; and it was petitioner in that case who insisted that the action for declaratory relief be preferred over the action for unlawful detainer. Conversely, in the case at bench, the trial court had not yet resolved the rescission/ejectment case during the pendency of the declaratory relief petition. In fact, the trial court, where the rescission case was on appeal, itself initiated the suspension of the proceedings pending the resolution of the action for declaratory relief. We are not unmindful of the doctrine enunciated in Teodoro, Jr. v. Mirasol Mirasol 18 where the declaratory relief action was dismissed because the issue therein could be threshed out in the unlawful detainer suit. Yet, again, in that case, there was already a breach of contract at the time of the filing of the declaratory relief petition. This dissimilar factual milieu proscribes the Court from applying Teodoro to Teodoro to the instant case. Given all these attendant circumstances, circumstances, the Court is disposed to entertain the instant declaratory relief action instead of dismissing it, notwithstanding notwithstanding the pendency of the ejectment/rescission case before the trial court. The resolution of the present petition would write finis to finis to the parties' dispute, as it would settle once and for all the question of the proper interpretation of the two contractual stipulations subject of this controversy.
We do not agree. Now, on the substantive law issues. After petitioners demanded demanded payment of adjusted rentals and in the months that followed, respondent complied with the terms and conditions set forth in their contract of lease by paying the rentals stipulated therein. Respondent Respondent religiously fulfilled its obligations to petitioners even during the pendency of the present suit. There is no showing that respondent committed an act constituting a breach of the subject contract of lease. Thus, respondent is not barred from instituting before the trial court the petition for declaratory relief. Petitioners claim that the instant petition is not proper because a separate action for rescission, ejectment and damages had been commenced
Petitioners repeatedly made a demand on respondent for the payment of VAT and for rental adjustment allegedly brought about by extraordinary inflation or devaluation. Both the trial court and the appellate court found no merit in petitioners' claim. We see no reason to depart from such findings. As to the liability of respondent respondent for the payment of VAT, we cite with approval the ratiocination of the appellate court, viz.:
Clearly, the person primarily liable for the payment of VAT is the lessor who may choose to pass it on to the lessee or absorb the same. Beginning January 1, 1996, the lease of real property in the ordinary course of business, whether for commercial or residential use, when the gross annual receipts exceed P500,000.00, is subject to 10% VAT. Notwithstanding the mandatory payment of the 10% VAT by the lessor, the actual shifting of the said tax burden upon the lessee is clearly optional on the part of the lessor, under the terms of the statute. The word "may" in the statute, generally speaking, denotes that it is directory in nature. It is generally permissive only and operates to confer discretion. In this case, despite the applicability of the rule under Sec. 99 of the NIRC, as amended by R.A. 7716, granting the lessor the option to pass on to the lessee the 10% VAT, to existing contracts of lease as of January 1, 1996, the original lessor, Ponciano L. Almeda did not charge the lessee-appellee the 10% VAT nor provided for its additional imposition when they renewed the contract of lease in May 1997. More significantly, said lessor did not actually collect a 10% VAT on the monthly rental due from the lessee-appellee after the execution of the May 1997 contract of lease. The inevitable implication is that the lessor intended not to avail of the option granted him by law to shift the 10% VAT upon the lessee-appellee. x x x.19 In short, petitioners are estopped from shifting to respondent the burden of paying the VAT. Petitioners' reliance on the sixth condition of the contract is, likewise, unavailing. This provision clearly states that respondent can only be held liable for new taxes imposed after the effectivity of the contract of lease, that is, after May 1997, and only if they pertain to the lot and the building where the leased premises are located. Considering that RA 7716 took effect in 1994, the VAT cannot be considered as a "new tax" in May 1997, as to fall within the coverage of the sixth stipulation. Neither can petitioners legitimately demand rental adjustment because of extraordinary inflation or devaluation. Petitioners contend that Article 1250 of the Civil Code does not apply to this case because the contract stipulation speaks of extraordinary inflation or devaluation while the Code speaks of extraordinary inflation or deflation. They insist that the doctrine pronounced in Del Rosario v. The Shell Company, Phils. Limited 20 should apply.
Essential to contract construction is the ascertainment of the intention of the contracting parties, and such determination must take into account the contemporaneous and subsequent acts of the parties. This intention, once ascertained, is deemed an integral part of the contract .21 While, indeed, condition No. 7 of the contract speaks of "extraordinary inflation or devaluation" as compared to Article 1250's "extraordinary inflation or deflation," we find that when the parties used the term "devaluation," they really did not intend to depart from Article 1250 of the Civil Code. Condition No. 7 of the contract should, thus, be read in harmony with the Civil Code provision. That this is the intention of the parties is evident from petitioners' letter 22 dated January 26, 1998, where, in demanding rental adjustment ostensibly based on condition No. 7, petitioners made explicit reference to Article 1250 of the Civil Code, even quoting the law verbatim. Thus, the application of Del Rosario is not warranted. Rather, jurisprudential rules on the application of Article 1250 should be considered. Article 1250 of the Civil Code states: In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary. Inflation has been defined as the sharp increase of money or credit, or both, without a corresponding increase in business transaction. There is inflation when there is an increase in the volume of money and credit relative to available goods, resulting in a substantial and continuing rise in the general price level.23 In a number of cases, this Court had provided a discourse on what constitutes extraordinary inflation, thus: [E]xtraordinary inflation exists when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value of said currency, and such increase or decrease could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation .24 The factual circumstances obtaining in the present case do not make out a case of extraordinary inflation or devaluation as would justify the application of Article 1250 of the Civil Code. We would like to stress that the erosion of the value of the Philippine peso in the past three or four
decades, starting in the mid-sixties, is characteristic of most currencies. And while the Court may take judicial notice of the decline in the purchasing power of the Philippine currency in that span of time, such downward trend of the peso cannot be considered as the extraordinary phenomenon contemplated by Article 1250 of the Civil Code. Furthermore, absent an official pronouncement or declaration by competent authorities of the existence of extraordinary inflation during a given period, the effects of extraordinary inflation are not to be applied. 25 WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 67784, dated September 3, 2001, and its Resolution dated November 19, 2001, are AFFIRMED. SO ORDERED.
G.R. No. 126911
April 30, 2003
PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS and JOSE ABAD, LEONOR ABAD, SABINA ABAD, JOSEPHINE "JOSIE" BEATA ABAD-ORLINA, CECILIA ABAD, PIO ABAD, DOMINIC ABAD, TEODORA ABAD, respondents. CARPIO MORALES, J .: The present petition for review assails the decision of the Court of Appeals affirming that of the Regional Trial Court of Iloilo City, Branch 30, finding petitioner Philippine Deposit Insurance Corporation (PDIC) liable, as statutory insurer, for the value of 20 Golden Time Deposits belonging to respondents Jose Abad, Leonor Abad, Sabina Abad, Josephine "Josie" Beata Abad-Orlina, Cecilia Abad, Pio Abad, Dominic Abad, and Teodora Abad at the Manila Banking Corporation (MBC), Iloilo Branch. Prior to May 22, 1997, respondents had, individually or jointly with each other, 71 certificates of time deposits denominated as "Golden Time Deposits" (GTD) with an aggregate face value of P1,115,889.96. 1
Iloilo, submitted a report to the PDIC 7 that there was massive conversion and substitution of trust and deposit accounts on May 25, 1987 at MBCIloilo.8 The pertinent portions of the report stated: xxx
On May 25, 1987, the next banking day following the issuance of the MB Resolution, respondent Jose Abad was at the MBC at 9:00 a.m. for the purpose of pre-terminating the 71 aforementioned GTDs and re-depositing the fund represented thereby into 28 new GTDs in denominations of P40,000.00 or less under the names of herein respondents individually or jointly with each other.4 Of the 28 new GTDs, Jose Abad pre-terminated 8 and withdrew the value thereof in the total amount of P320,000.00. 5
xxx
On May 25, 1987 (Monday) or a day prior to the official announcement and take-over by CB of the assets and liabilities of The Manila Banking Corporation, the Iloilo Branch was found to have recorded an unusually heavy movements in terms of volume and amount for all types of deposits and trust accounts. It appears that the impending receivership of TMBC was somehow already known to many depositors on account of the massive withdrawals paid on this day which practically wiped out the branch's entire cash position. . . . xxx
xxx
xxx
. . . The intention was to maximize the availment of PDIC coverage limited to P40,000 by spreading out big accounts to as many certificates under various nominees. . . . 9 xxx
On May 22, 1987, a Friday, the Monetary Board (MB) of the Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, issued Resolution 5052 prohibiting MBC to do business in the P hilippines, and placing its assets and affairs under receivership. The Resolution, however, was not served on MBC until Tuesday the following week, or on May 26, 1987, when the designated Receiver took over. 3
xxx
xxx
xxx
Because of the report, PDIC entertained serious reservation in recognizing respondents' GTDs as deposit liabilities of MBC-Iloilo. Thus, on August 30, 1991, it filed a petition for declaratory relief against respondents with the Regional Trial Court (RTC) of Iloilo City, for a judicial declaration determination of the insurability of respondents' GTDs at MBC-Iloilo.10 In their Answer filed on October 24, 1991 and Amended Answer 11 filed on January 9, 1992, respondents set up a counterclaim against PDIC whereby they asked for payment of their insured deposits. 12 In its Decision of February 22, 1994, 13 Branch 30 of the Iloilo RTC declared the 20 GTDs of respondents to be deposit liabilities of MBC, hence, are liabilities of PDIC as statutory insurer. It accordingly disposed as follows:
Respondents thereafter filed their claims with the PDIC for the payment of the remaining 20 insured GTDs. 6
WHEREFORE, rendered:
On February 11, 1988, PDIC paid respondents the value of 3 claims in the total amount of P120,000.00. PDIC, however, withheld payment of the 17 remaining claims after Washington Solidum, Deputy Receiver of MBC-
1. Declaring the 28 GTDs of the Abads which were issued by the TMBC-Iloilo on May 25, 1987 as deposits or deposit liabilities of the
premises
considered,
judgment
is
hereby
bank as the term is defined under Section 3 (f) of R.A. No. 3591, as amended; 2. Declaring PDIC, being the statutory insurer of bank deposits, liable to the Abads for the value of the remaining 20 GTDs, the other 8 having been paid already by TMBC Iloilo on May 25,1987; 3. Ordering PDIC to pay the Abads the value of said 20 GTDs less the value of 3 GTDs it paid on February 11, 1988, and the amounts it may have paid the Abads pursuant to the Order of this Court dated September 8, 1992; 4. Ordering PDIC to pay immediately the Abads the balance of its admitted liability as contained in the aforesaid Order of September 8, 1992, should there be any, subject to liquidation when this case shall have been finally decide; and 5. Ordering PDIC to pay legal interest on the remaining insured deposits of the Abads from February 11, 1988 until they are fully paid. SO ORDERED. On appeal, the Court of Appeals, by the assailed Decision of October 21, 1996, 14 affirmed the trial court's decision except as to the award of legal interest which it deleted. Hence, PDIC's present Petition for Review which sets forth this lone assignment of error: THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE HOLDING OF THE TRIAL COURT THAT THE AMOUNT REPRESENTED IN THE FACES OF THE SO CALLED "GOLDEN TIME DEPOSITS" WERE INSURED DEPOSITS EVEN AS THEY WERE MERE DERIVATIVES OF RESPONDENTS' PREVIOUS ACCOUNT BALANCES WHICH WERE PRE-TERMINATED/TERMINATED AT THE TIME THE MANILA BANKING CORPORATION WAS ALREADY IN SERIOUS FINANCIAL DISTRESS. In its supplement to the petition, PDIC adds the following assignment of error: THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE HOLDING OF THE TRIAL COURT ORDERING PETITIONER TO PAY RESPONDENTS' CLAIMS FOR PAYMENT OF INSURED DEPOSITS
FOR THE REASON THAT AN ACTION FOR DECLARATORY RELIEF DOES NOT ESSENTIALLY ENTAIL AN EXECUTORY PROCESS AS THE ONLY RELIEF THAT SHOULD HAVE BEEN GRANTED BY THE TRIAL COURT IS A DECLARATION OF THE RIGHTS AND DUTIES OF PETITIONER UNDER R.A. 3591, AS AMENDED, PARTICULARLY SECTION 3(F) THEREOF AS CONSIDERED AGAINST THE SURROUNDING CIRCUMSTANCES OF THE MATTER IN ISSUE SOUGHT TO BE CONSTRUED WITHOUT PREJUDICE TO OTHER MATTERS THAT NEED TO BE CONSIDERED BY PETITIONER IN THE PROCESSING OF RESPONDENTS' CLAIMS. Under its charter, 15 PDIC (hereafter petitioner) is liable only for deposits received by a bank "in the usual course of business." 16 Being of the firm conviction that, as the reported May 25, 1987 bank transactions were so massive, hence, irregular, petitioner essentially seeks a judicial declaration that such transactions were not made "in the usual course of business" and, therefore, it cannot be made liable for deposits subject thereof. 17 Petitioner points that as MBC was prohibited from doing further business by MB Resolution 505 as of May 22, 1987, all transactions subsequent to such date were not done "in the usual course of business." Petitioner further posits that there was no consideration for the 20 GTDs subject of respondents' claim. In support of this submission, it states that prior to March 25, 1987, when the 20 GTDs were made, MBC had been experiencing liquidity problems, e.g., at the start of banking operations on March 25, 1987, it had only P2,841,711.90 cash on hand and at the end of the day it was left with P27,805.81 consisting mostly of mutilated bills and coins.18 Hence, even if respondents had wanted to convert the face amounts of the GTDs to cash, MBC could not have complied with i t. Petitioner theorizes that after MBC had exhausted its cash and could no longer sustain further withdrawal transactions, it instead issued new GTDs as "payment" for the pre-terminated GTDs of respondents to make sure that all the newly-issued GTDs have face amounts which are within the statutory coverage of deposit insurance. Petitioner concludes that since no cash was given by respondents and none was received by MBC when the new GTDs were transacted, there was no consideration therefor and, thus, they were not validly transacted "in the usual course of business" and no liability for deposit insurance was created.19 Petitioner's position does not persuade.
While the MB issued Resolution 505 on May 22, 1987, a copy thereof was served on MBC only on May 26, 1987. MBC and its clients could be given the benefit of the doubt that they were not aware that the MB resolution had been passed, given the necessity of confidentiality of placing a banking institution under receivership. 20 The evident implication of the law, therefore, is that the appointment of a receiver may be made by the Monetary Board without notice and hearing but its action is subject to judicial inquiry to insure the protection of the banking institution. Stated otherwise, due process does not necessarily require a prior hearing; a hearing or an opportunity to be heard may be subsequent to the closure. One can just imagine the dire consequences of a prior hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the process, fortunes may be wiped out, and disillusionment will run the gamut of the entire banking community . (Emphasis supplied).21 Mere conjectures that MBC had actual knowledge of its impending closure do not suffice. The MB resolution could not thus have nullified respondents' transactions which occurred prior to May 26, 1987. That no actual money in bills and/or coins was handed by respondents to MBC does not mean that the transactions on the new GTDs did not i nvolve money and that there was no consideration therefor. For the outstanding balance of respondents' 71 GTDs in MBC prior to May 26, 1987 22 in the amount of P1,115,889.15 as earlier mentioned was re-deposited by respondents under 28 new GTDs. Admittedly, MBC had P2,841,711.90 cash on hand — more than double the outstanding balance of respondent's 71 GTDs — at the start of the banking day on May 25, 1987. Since respondent Jose Abad was at MBC soon after it opened at 9:00 a.m. of that day, petitioner should not presume that MBC had no cash to cover the new GTDs of respondents and conclude that there was no consideration for said GTDs. Petitioner having failed to overcome the presumption that the ordinary course of business was followed, 23 this Court finds that the 28 new GTDs were deposited "in the usual course of business" of MBC. In its second assignment of error, petitioner posits that the trial court erred in ordering it to pay the balance of the deposit insurance to respondents, maintaining that the instant petition stemmed from a petition for declaratory relief which does not essentially entail an executory process, and the only relief that should have been granted by the trial court is a declaration of the parties' rights and duties. As such, petitioner continues, no order of
payment may arise from the case as this is beyond the office of declaratory relief proceedings.24 Without doubt, a petition for declaratory relief does not essentially entail an executory process. There is nothing in its nature, however, that prohibits a counterclaim from being set-up in the same action. 25 Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing of a counterclaim based on the same transaction, deed or contract subject of the complaint. A special civil action is after all not essentially different from an ordinary civil action, which is generally governed by Rules 1 to 56 of the Rules of Court, except that the former deals with a special subject matter which makes necessary some special regulation. But the identity between their fundamental nature is such that the same rules governing ordinary civil suits may and do apply to special civil actions if not inconsistent with or if they may serve to supplement the provisions of the peculiar rules governing special civil actions.26 Petitioner additionally submits that the issue of determining the amount of deposit insurance due respondents was never tried on the merits since the trial dwelt only on the "determination of the viability or validity of the deposits" and no evidence on record sustains the holding that the amount of deposit due respondents had been finally determined. 27 This issue was not raised in the court a quo, however, hence, it cannot be raised for the first time in the petition at bar. 28 Finally, petitioner faults respondents for availing of the statutory limits of the PDIC law, presupposing that, based on the conduct of respondent Jose Abad on March 25, 1987, he and his co respondents "somehow knew" of the impending closure of MBC. Petitioner ascribes bad faith to respondent Jose Abad in transacting the questioned deposits, and seeks to disqualify him from availing the benefits under the law. 29 Good faith is presumed. This, petitioner failed to overcome since it offered mere presumptions as evidence of bad faith. WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED. SO ORDERED.
Constabulary (PC) as the nucleus and the integrated police forces as components thereof. Complementing P.D. No. 765 was P.D. No. 11843 dated August 26, 1977 (INP Law, hereinafter) issued to professionalize the INP and promote career development therein.
G.R. No. 169466
May 9, 2007
DEPARTMENT OF BUDGET AND MANAGEMENT, represented by SECRETARY ROMULO L. NERI, PHILIPPINE NATIONAL POLICE, represented by POLICE DIRECTOR GENERAL ARTURO L. LOMIBAO, NATIONAL POLICE COMMISSION, represented by CHAIRMAN ANGELO T. REYES, AND CIVIL SERVICE COMMISSION, represented by CHAIRPERSON KARINA C. DAVID, Petitioners, vs. MANILA’S FINEST RETIREES ASSOCIATION, INC., represented by P/COL. FELICISIMO G. LAZARO (RET.), AND ALL THE OTHER INP RETIREES, Respondents. DECISION GARCIA, J .: Assailed and sought to be set aside in this petition for review on certiorari under Rule 45 of the Rules of Court are the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 78203, to wit: 1. Decision1 dated July 7, 2005 which affirmed in toto the decision of the Regional Trial Court of Manila, Branch 32, in Civil Case No. 02-103702, a suit for declaratory relief, declaring the herein respondents entitled to the same retirement benefits accorded upon retirees of the Philippine National Police (PNP) under Republic Act (R.A.) No. 6975, as amended by R.A. No. 8551, and ordering the herein petitioners to implement the proper adjustments on respondents’ retirement benefits; and 2. Resolution2 dated August 24, 2005 which denied the p etitioners’ motion for reconsideration. The antecedent facts: In 1975, Presidential Decree (P.D.) No. 765 was issued constituting the Integrated National Police (INP) to be composed of the Philippine
On December 13, 1990, Republic Act (R.A.) No. 6975, entitled "AN ACT ESTABLISHING THE PHILIPPINE NATIONAL POLICE UNDER A REORGANIZED DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT, AND FOR OTHER PURPOSES," hereinafter referred to as PNP Law, was enacted. Under Section 23 of said law, the Philippine National Police (PNP) would initially consist of the members of the INP, created under P.D. No. 765, as well as the officers and enlisted personnel of the PC. In part, S ection 23 reads: SEC. 23. Composition. – Subject to the limitation provided for in this Act, the Philippine National Police, hereinafter referred to as the PNP, is hereby established, initially consisting of the members of the police forces who were integrated into the Integrated National Police (INP) pursuant to Presidential Decree No. 765, and the officers and enlisted personnel of the Philippine Constabulary (PC). A little less than eight (8) years l ater, or on February 25, 1998, R.A. No. 6975 was amended by R.A. No. 8551, otherwise known as the "PHILIPPINE NATIONAL POLICE REFORM AND REORGANIZATION ACT OF 1998." Among other things, the amendatory law reengineered the retirement scheme in the police organization. Relevantly, PNP personnel, under the new law, stood to collect more retirement benefits than what INP members of equivalent rank, who had retired under the INP Law, received. The INP retirees illustrated the resulting disparity i n the retirement benefits between them and the PNP retirees as follows :4 Retirement Rank
Monthly Pension
INP
PNP
INP
PNP
Corporal
SPO3
P 3,225.00
P 11,310.00
P 8,095.00
Captain
P. Sr. Insp.
P 5,248.00
P 15,976.00
P10,628.00
Brig. Gen.
P. Supt.
P 18,088.00
P 8,033.76
Chief P 10,054.24
Difference
Hence, on June 3, 2002, in the Regional Trial Court (RTC) of Manila, all INP retirees, spearheaded by the Manila’s Finest Retirees Association, Inc., or the MFRAI (hereinafter collectively referred to as the INP Retirees), filed a petition for declaratory relief ,5 thereunder impleading, as respondents, the Department of Budget and Management (DBM), the PNP, the National Police Commission (NAPOLCOM), the Civil Service Commission (CSC) and the Government Service Insurance System (GSIS). Docketed in the RTC as Civil Case No. 02-103702, which was raffled to Branch 22 thereof, the petition alleged in gist that INP retirees were equally situated as the PNP retirees but whose retirement benefits prior to the enactment of R.A. No. 6975, as amended by R.A. No. 8551, were unconscionably and arbitrarily excepted from the higher rates and adjusted benefits accorded to the PNP retirees. Accordingly, in their petition, the petitioning INP retirees pray that a –
The respondents Government Departments and Agencies shall IMMEDIATELY EFFECT and IMPLEMENT the proper adjustments on the INP Retirees’ retirement and such other benefits, RETROACTIVE to its date of effectivity, and RELEASE and PAY to the INP Retirees the due payments of the amounts. SO ORDERED. On April 2, 2003, the trial court i ssued what it denominated as Supplement to the Decision whereunder it granted the GSIS’ motion to dismiss and thus considered the basic petition as withdrawn with respect to the latter. From the adverse decision of the trial court, the remaining respondents, namely, DBM, PNP, NAPOLCOM and CSC, interposed an appeal to the CA whereat their appellate recourse was docketed as CA-G.R. CV No. 78203.
DECLARATORY JUDGMENT be rendered in their favor, DECLARING with certainty that they, as INP-retirees, are truly absorbed and equally considered as PNP-retirees and thus, entitled to enjoy the SAME or IDENTICAL retirement benefits being bestowed to PNP-retirees by virtue of said PNP Law or Republic Act No. 6975, as amended by Republic Act 8551, with the corollary mandate for the respondents-government agencies to effect the immediate adjustment on their previously received disparate retirement benefits, retroactive to its effectivity, and with due payment thereof.
As stated at the threshold hereof, the CA, in its decision of July 7, 2005,7 affirmed that of the trial court upholding the entitlement of the INP retirees to the same or identical retirement benefits accorded upon PNP retirees under R.A. No. 6975, as amended.
The GSIS moved to dismiss the petition on grounds of lack of jurisdiction and cause of action. On the other hand, the CSC, DBM, NAPOLCOM and PNP, in their respective answers, asserted that the petitioners could not claim the more generous retirement benefits under R.A. No. 6975 because at no time did they become PNP members, having retired prior to the enactment of said law. DBM, NAPOLCOM and PNP afterwards filed their respective pre-trial briefs.
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN LAW IN AFFIRMING THE DECISION OF THE TRIAL COURT NOTWITHSTANDING THAT IT IS CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE.
The ensuing legal skirmish is not relevant to the disposition of the instant case. The bottom line is that, on March 21, 2003, the RTC came out with its decision6 holding that R.A. No. 6975, as amended, did not abolish the INP but merely provided for the absorption of its police functions by the PNP, and accordingly rendered judgment for the INP retirees, to wit: WHEREFORE, this Court hereby renders JUDGMENT DECLARING the INP Retirees entitled to the same or identical retirement benefits and such other benefits being granted, accorded and bestowed upon the PNP Retirees under the PNP Law (RA No. 6975, as amended).
Their motion for reconsideration having been denied by the CA in` its equally assailed resolution of August 24, 2005,8 herein petitioners are now with this Court via the instant recourse on their singular submission that -
We DENY. In the main, it is petitioners’ posture that R.A. No. 6975 clearly abolished the INP and created in its stead a new police force, the PNP. Prescinding therefrom, petitioners contend that since the PNP is an organization entirely different from the INP, it follows that INP retirees never became PNP members. Ergo, they cannot avail themselves of the retirement benefits accorded to PNP members under R.A. No. 6975 and its amendatory law, R.A. No. 8551. A flashback at history is proper.
As may be recalled, R.A. No. 6975 was enacted into law on December 13, 1990, or just about four (4) years after the 1986 Edsa Revolution toppled down the dictatorship regime. Egged on by the current sentiment of the times generated by the long period of martial rule during which the police force, the PC-INP, had a military character, being then a major service of the Armed Forces of the Philippines, and invariably moved by a fresh constitutional mandate for the establishment of one police force which should be national in scope and, most importantly, purely civilian in character ,9 Congress enacted R.A. No. 6975 establishing the PNP and placing it under the Department of Interior and Local Government. To underscore the civilian character of the PNP, R.A. No. 6975 made it emphatically clear in its declaration of policy the following: Section 2. Declaration of policy - It is hereby declared to be the policy of the State to promote peace and order, ensure public safety and further strengthen local government capability aimed towards the effective delivery of the basic services to the citizenry through the establishment of a highly efficient and competent police force that is national in scope and civilian in character. xxx. The police force shall be organized, trained and equipped primarily for the performance of police functions. Its national scope and civilian character shall be paramount. No element of the police force shall be military nor shall any position thereof be occupied by active members of the [AFP]. (Emphasis and word in bracket supplied.) Pursuant to Section 23, supra, of R.A. No. 6975, the PNP initially consisted of the members of the police forces who were integrated into the INP by virtue of P.D. No. 765, while Section 86 10 of the same law provides for the assumption by the PNP of the police functions of the INP and its absorption by the former, including its appropriations, funds, records, equipment, etc., as well as its personnel.11 And to govern the statute’s implementation, Section 85 of the Act spelled out the following absorption phases: Phase I – Exercise of option by the uniformed members of the [PC], the PC elements assigned with the Narcotics Command, CIS, and the personnel of the technical services of the AFP assigned with the PC to include the regular CIS investigating agents and the operatives and agents of the NAPOLCOM Inspection. Investigation and Intelligence Branch, and the personnel of the absorbed National Action Committee on Anti-Hijacking (NACAH) of the Department of National Defense to be completed within six (6) months from the date of the effectivity of this Act. At the end of this phase, all personnel from the INP, PC, AFP Technical Services, NACAH, and NAPOLCOM Inspection, Investigation and Intelligence Branch shall
have been covered by official orders assigning them to the PNP, Fire and Jail Forces by their respective units. Phase II – Approval of the table of organization and equipment of all bureaus and offices created under this Act, preparation and filling up of their staffing pattern, transfer of assets to the [DILG] and organization of the Commission, to be completed within twelve (12) months from the effectivity date hereof. At the end of this phase, all personnel to be absorbed by the [DILG] shall have been issued appointment papers, and the organized Commission and the PNP shall be fully operational. The PC officers and enlisted personnel who have not opted to join the PNP shall be reassigned to the Army, Navy or Air Force, or shall be allowed to retire under existing AFP rules and regulations. Any PC-INP officer or enlisted personnel may, within the twelve-month period from the effectivity of this Act, retire and be paid retirement benefits corresponding to a position two (2) ranks higher than his present grade, subject to the conditions that at the time he applies for retirement, he has rendered at least twenty (20) years of service and still has, at most, twenty-four (24) months of service remaining before the compulsory retirement age as provided by existing law for his office. Phase III – Adjustment of ranks and establishment of one (1) lineal roster of officers and another for non-officers, and the rationalization of compensation and retirement systems; taking into consideration the existing compensation schemes and retirement and separation benefit systems of the different components of the PNP, to ensure that no member of the PNP shall suffer any diminution in basic longevity and incentive pays, allowances and retirement benefits due them before the creations of the PNP, to be completed within eighteen (18) months from the effectivity of this Act. xxx. Upon the effectivity of this Act, the [DILG] Secretary shall exercise administrative supervision as well as operational control over the transferred, merged and/or absorbed AFP and INP units. The incumbent Director General of the PC-INP shall continue to act as Director General of the PNP until … replaced …. (Emphasis and words in brackets supplied.) From the foregoing, it appears clear to us that the INP was never, as posited by the petitioners, abolished or terminated out of existence by R.A. No. 6975. For sure, nowhere in R.A. No. 6975 does the words "abolish" or "terminate" appear in reference to the INP. Instead, what the law provides is for the "absorption," "transfer," and/or "merger" of the INP, as well as the other offices comprising the PC-INP, with the PNP. To "abolish" is to do away with, to annul, abrogate or destroy completely ;12 to "absorb" is to
assimilate, incorporate or to take in.13 "Merge" means to cause to combine or unite to become legally absorbed or extinguished by merge r 14 while "transfer" denotes movement from one position to another. Clearly, "abolition" cannot be equated with "absorption." True it is that Section 90 15 of R.A. No. 6975 speaks of the INP "[ceasing] to exist" upon the effectivity of the law. It ought to be stressed, however, that such cessation is but the logical consequence of the INP being absorbed by the PNP. 1a\^/phi1.net
Far from being abolished then, the INP, at the most, was merely transformed to become the PNP, minus of course its military character and complexion. Even the petitioners’ effort at disclosing the legislative intent behind the enactment of R.A. No. 6975 cannot support their theory of abolition. Rather, the Senate and House deliberations on the bill that eventually became R.A. No. 6975 reveal what has correctly been held by the CA in its assailed decision: that the PNP was precisely created to erase the stigma spawned by the militarization of the police force under the PC-INP structure. The rationale behind the passage of R.A. No. 6975 was adequately articulated by no less than the sponso r 16 of the corresponding House bill in his sponsorship speech, thus: By removing the police force from under the control and supervision of military officers, the bill seeks to restore and underscore the civilian character of police work - an otherwise universal concept that was muddled up by the martial law years. Indeed, were the legislative intent was for the INP’s abolition such that nothing would be left of it, the word "abolish" or what passes for it could have easily found its way into the very text of the law itself, what with the abundant use of the word during the legislative deliberations. But as can be gleaned from said deliberations, the lawmakers’ concern centered on the fact that if the entire PC-INP corps join the PNP, then the PC-INP will necessarily be abolished, for who then would be its members? Of more consequence, the lawmakers were one in saying that there should never be two national police agencies at the same time. With the conclusion herein reached that the INP was not in fact abolished but was merely transformed to become the PNP, members of the INP which include the herein respondents are, therefore, not excluded from availing themselves of the retirement benefits accorded to PNP retirees under Sections 7417 and 7518 of R.A. No. 6975, as amended by R.A. No.
8551. It may be that respondents were no longer in the government service at the time of the enactment of R.A. No. 6975. This fact, however, without more, would not pose as an impediment to the respondents’ entitlement to the new retirement scheme set forth under the aforecited sections. As correctly ratiocinated by the CA to which we are in full accord: For sure, R.A. No. 6975 was not a retroactive statute since it did not impose a new obligation to pay the INP retirees the difference between what they received when they retired and what would now be due to them after R. A. No. 6975 was enacted. Even so, that did not render the RTC’s interpretation of R.A. No. 6975 any less valid. The [respondents’] retirement prior to the passage of R.A. No. 6975 did not exclude them from the benefits provided by R.A. No. 6975, as amended by R.A. No. 8551, since their membership in the INP was an antecedent fact that nonetheless allowed them to avail themselves of the benefits of the subsequent laws. R.A. No. 6975 considered them as PNP members, always referring to their membership and service in the INP in providing for their retirement benefits. 19 Petitioners maintain, however, that NAPOLCOM Resolution No. 8,20 particularly Section 1121 thereof, bars the payment of any differential in retirement pay to officers and non-officers who are already retired prior to the effectivity of R.A. No. 6975. The contention does not commend itself for concurrence. Under the amendatory law (R.A. No. 8551), the application of rationalized retirement benefits to PNP members who have meanwhile retired before its (R.A. No. 8551) enactment was not prohibited. In fact, its Section 3822 explicitly states that the rationalized retirement benefits schedule and program "shall have retroactive effect in favor of PNP members and officers retired or separated from the time specified in the law ." To us, the aforesaid provision should be made applicable to INP members who had retired prior to the effectivity of R.A. No. 6975. For, as afore-held, the INP was, in effect, merely absorbed by the PNP and not abolished. Indeed, to bar payment of retirement pay differential to INP members who were already retired before R.A. No. 6975 became effective would even run counter to the purpose of NAPOLCOM Resolution No. 8 itself, as expressed in its preambulatory clause, which is to rationalize the retirement system of the PNP taking into consideration existing retirement and benefit systems (including R.A. No. 6975 and P.D. No. 1184) of the different components thereof "to ensure that no member of the PNP shall suffer any diminution in the retirement benefits due them before the creation of the PNP."23
Most importantly, the perceived restriction could not plausibly preclude the respondents from asserting their entitlement to retirement benefits adjusted to the level when R.A. No. 6975 took effect. Such adjustment hews with the constitutional warrant that "the State shall, from time to time, review to upgrade the pensions and other benefits due to retirees of both the government and private sectors,"24 and the implementing mandate under the Senior Citizen’s Law25 that "to the extent practicable and feasible, retirement benefits xxx shall be upgraded to be at par with the current scale enjoyed by those in actual service." 1awphi1.nét
Certainly going for the respondents in their bid to enjoy the same retirement benefits granted to PNP retirees, either under R.A. No. 6975 or R.A. No. 8551, is Section 34 of the latter law which amended Section 75 of R.A. No. 6975 by adding thereto the following proviso: Section 75. Retirement benefits. x x x: Provided, finally, That retirement pay of the officers/non-officers of the PNP shall be subject to adjustments based on the prevailing scale of base pay of police personnel in the active service. Then, too, is the all familiar rule that: Retirement laws should be liberally construed in favor of the retiree because their intention is to provide for his sustenance and hopefully, even comfort, when he no longer has the stamina to continue earning his livelihood. The liberal approach aims to achieve the humanitarian purposes of the law in order that efficiency, security and well-being of government employees may be enhanced.26 The petitioners parlay the notion of prospective application of statutes, noting in this regard that R.A. No. 6975, as amended, cannot be applied retroactively, there being no provision to that effect. We are not persuaded. As correctly found by the appellate court, R.A. No. 6975 itself contextually provides for its retroactive application to cover those who had retired prior to its effectivity. In this regard, we invite attention to the three (3) phases of implementation under Section 85 for the absorption and continuation in the service of, among others, the INP members under the newly-established PNP. In a further bid to scuttle respondents’ entitlement to the desired retirement benefits, the petitioners fault the trial court for ordering the immediate
adjustments of the respondents’ retirement benefits when the basic petition filed before it was one for declaratory relief. To the petitioners, such petition does not essentially entail an executory process, the only relief proper under that setting being a declaration of the parties’ rights and duties. Petitioners’ above posture is valid to a point. However, the execution of judgments in a petition for declaratory relief is not necessarily indefensible. In Philippine Deposit Insurance Corporation[PDIC] v. Court of Appeals,27wherein the Court affirmed the order for the petitioners therein to pay the balance of the deposit insurance to the therein respondents, we categorically ruled: Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing of a counterclaim based on the same transaction, deed or contract subject of the complaint. A special civil action is after all not essentially different from an ordinary civil action, which is generally governed by Rules 1 to 56 of the Rules of Court, except that the former deals with a special subject matter which makes necessary some special regulation. But the identity between their fundamental nature is such that the same rules governing ordinary civil suits may and do apply to special civil actions if not inconsistent with or if they may serve to supplement the provisions of the peculiar rules governing special civil actions.28 Similarly, in Matalin Coconut Co., Inc. v. Municipal Council of Malabang, Lanao del Sur :29 the Court upheld the lower court’s order for a party to refund the amounts paid by the adverse party under the municipal ordinance therein questioned, stating: x x x Under Sec. 6 of Rule 64, the action for declaratory relief may be converted into an ordinary action and the parties allowed to file such pleadings as may be necessary or proper, if before the final termination of the case "a breach or violation of an … ordinance, should take place." In the present case, no breach or violation of the ordinance occurred. The petitioner decided to pay "under protest" the fees imposed by the ordinance. Such payment did not affect the case; the declaratory relief action was still proper because the applicability of the ordinance to future transactions still remained to be resolved, although the matter could also be threshed out in an ordinary suit for the recovery of taxes paid …. In its petition for declaratory relief, petitioner-appellee alleged that by reason of the enforcement of the municipal ordinance by respondents it was forced to pay under protest the fees imposed pursuant to the said ordinance, and accordingly, one of the reliefs prayed for by the petitioner was that the respondents be ordered to refund all the amounts it paid to respondent
Municipal Treasurer during the pendency of the case. The inclusion of said allegation and prayer in the petition was not objected to by the respondents in their answer. During the trial, evidence of the payments made by the petitioner was introduced. Respondents were thus fully aware of the petitioner's claim for refund and of what would happen if the ordinance were to be declared invalid by the court. The Court sees no reason for treating this case differently from PDIC and Matalin. This disposition becomes all the more appropriate considering that the respondents, as petitioners in the RTC, pleaded for the immediate adjustment of their retirement benefits which, significantly, the herein petitioners, as respondents in the same court, did not object to. Being aware of said prayer, the petitioners then already knew the logical consequence if, as it turned out, a declaratory judgment is rendered in the respondents’ favor. 1awphi1.nét
At bottom then, the trial court’s judgment forestalled multiplicity of suits which, needless to stress, would only entail a long and arduous process. Considering their obvious advanced years, the respondents can hardly afford another protracted proceedings. It is thus for this Court to already write finis to this case. WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the CA, respectively dated July 7, 2005 and August 24, 2005, are AFFIRMED. No costs. SO ORDERED.
G.R. No. 170656
August 15, 2007
THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI FERNANDO as Chairman of the Metropolitan Manila Development Authority, petitioners, vs. VIRON TRANSPORTATION CO., INC., respondent. x --------------------------------------------- x G.R. No. 170657
August 15, 2007
HON. ALBERTO G. ROMULO, Executive Secretary, the METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI FERNANDO as Chairman of the Metropolitan Manila Development Authority,petitioners, vs. MENCORP TRANSPORTATION SYSTEM, INC., respondent. DECISION CARPIO MORALES, J .: The following conditions in 1969, as observed by this Court: Vehicles have increased in number. Traffic congestion has moved from bad to worse, from tolerable to critical. The number of people who use the thoroughfares has multiplied x x x ,1 have remained unchecked and have reverberated to this day. Traffic jams continue to clog the streets of Metro Manila, bringing vehicles to a standstill at main road arteries during rush hour traffic and sapping people’s energies and patience in the process. The present petition for review on certiorari, rooted in the traffic congestion problem, questions the authority of the Metropolitan Manila Development Authority (MMDA) to order the closure of provincial bus terminals along Epifanio de los Santos Avenue (EDSA) and major thoroughfares of Metro Manila.
Specifically challenged are two Orders issued by Judge Silvino T. Pampilo, Jr. of the Regional Trial Court (RTC) of Manila, Branch 26 in Civil Case Nos. 03-105850 and 03-106224. The first assailed Order of September 8, 2005 ,2 which resolved a motion for reconsideration filed by herein respondents, declared Executive Order (E.O.) No. 179, hereafter referred to as the E.O., "unconstitutional as it constitutes an unreasonable exercise of police power." The second assailed Order of November 23, 2005 3 denied petitioners’ motion for reconsideration. The following facts are not disputed: President Gloria Macapagal Arroyo issued the E.O. on February 10, 2003, "Providing for the Establishment of Greater Manila Mass Transport System," the pertinent portions of which read: WHEREAS, Metro Manila continues to be the center of employment opportunities, trade and commerce of the Greater Metro Manila area; WHEREAS, the traffic situation in Metro Manila has affected the adjacent provinces of Bulacan, Cavite, Laguna, and Rizal, owing to the continued movement of residents and industries to more affordable and economically viable locations in these provinces; WHEREAS, the Metropolitan Manila Development Authority (MMDA) is tasked to undertake measures to ease traffic congestion in Metro Manila and ensure the convenient and efficient travel of commuters within its jurisdiction; WHEREAS, a primary cause of traffic congestion in Metro Manila has been the numerous buses plying the streets that impedes [sic] the flow of vehicles and commuters due to the inefficient connectivity of the different transport modes; WHEREAS, the MMDA has recommended a plan to decongest traffic by eliminating the bus terminals now located along major Metro Manila thoroughfares and providing more convenient access to the mass transport system to the commuting public through the provision of
mass transport terminal facilities that would integrate the existing transport modes, namely the buses, the rail-based systems of the LRT, MRT and PNR and to facilitate and ensure efficient travel through the improved connectivity of the different transport modes; WHEREAS, the nati onal government must provide the necessary funding requirements to immediately implement and render operational these projects; and extent to MMDA such other assistance as may be warranted to ensure their expeditious prosecution. NOW, THEREFORE, I, GLORIA MACAPAGALARROYO, President of the Philippines, by virtue of the powers vested in me by law, do hereby order: Section 1. THE PROJECT . – The project shall be identified as GREATER MANILA TRANSPORT SYSTEM Project. Section 2. PROJECT OBJECTIVES . – In accordance with the plan proposed by MMDA, the project aims to develop four (4) interim intermodal mass transport terminals to integrate the different transport modes, as well as those that shall hereafter be developed, to serve the commuting public in the northwest, north, east, south, and southwest of Metro Manila. Initially, the project shall concentrate on immediately establishing the mass transport terminals for the north and south Metro Manila commuters as hereinafter described. Section 3. PROJECT IMPLEMENTING AGENCY . – The Metropolitan Manila Development Authority (MMDA), is hereby designated as the implementing Agency for the project. For this purpose, MMDA is directed to undertake such infrastructure development work as may be necessary and, thereafter, manage the project until it may be turned-over to more appropriate agencies, if found suitable and convenient. Specifically, MMDA shall have the following functions and responsibilities: a) Cause the preparation of the Master Plan for the projects, including the designs and costing;
b) Coordinate the use of the land and/or properties needed for the project with the respective agencies and/or entities owning them; c) Supervise and manage the construction of the necessary structures and facilities; d) Execute such contracts or agreements as may be necessary, with the appropriate government agencies, entities, and/or private persons, in accordance with existing laws and pertinent regulations, to facilitate the implementation of the project; e) Accept, manage and disburse such funds as may be necessary for the construction and/or implementation of the projects, in accordance with prevailing accounting and audit polices and practice in government. f) Enlist the assistance of any national government agency, office or department, including local government units, government-owned or controlled corporations, as may be necessary; g) Assign or hire the necessary personnel for the above purposes; and h) Perform such other related functions as may be necessary to enable it to accomplish the objectives and purposes of this Executive Order .4 (Emphasis in the original; underscoring supplied) As the above-quoted portions of the E.O. noted, the primary cause of traffic congestion in Metro Manila has been the numerous buses plying the streets and the inefficient connectivity of the different transport modes;5 and the MMDA had "recommended a plan to decongest traffic by eliminating the bus terminals now located along major Metro Manila thoroughfares and providing more and convenient access to the mass transport system to the commuting public through the provision of mass
transport terminal facilities"6 which plan is referred to under the E.O. as the Greater Manila Mass Transport System Project (the Project). The E.O. thus designated the MMDA as the implementing agency for the Project. Pursuant to the E.O., the Metro Manila Council (MMC), the governing board and policymaking body of the MMDA, issued Resolution No. 03-07 series of 2003 7 expressing full support of the Project. Recognizing the imperative to integrate the different transport modes via the establishment of common bus parking terminal areas, the MMC cited the need to remove the bus terminals located along major thoroughfares of Metro Manila.8 On February 24, 2003, Viron Transport Co., Inc. (Viron), a domestic corporation engaged in the business of public transportation with a provincial bus operation,9 filed a petition for declaratory relief 10 before the RTC11 of Manila. In its petition which was docketed as Civil Case No. 03-105850, Viron alleged that the MMDA, through Chairman Fernando, was "poised to issue a Circular, Memorandum or Order closing, or tantamount to closing, all provincial bus terminals along EDSA and in the whole of the Metropolis under the pretext of traffic regulation. "12 This impending move, it stressed, would mean the closure of its bus terminal in Sampaloc, Manila and two others in Quezon City. Alleging that the MMDA’s authority does not include the power to direct provincial bus operators to abandon their existing bus terminals to thus deprive them of the use of their property, Viron asked the court to construe the scope, extent and limitation of the power of the MMDA to regulate traffic under R.A. No. 7924, "An Act Creating the Metropolitan Manila Development Authority, Defining its Powers and Functions, Providing Funds Therefor and For Other Purposes." Viron also asked for a ruling on whether the planned closure of provincial bus terminals would contravene the Public Service Act and related laws which mandate public utilities to provide and maintain their own terminals as a requisite for the privilege of operating as common carriers.13 Mencorp Transportation System, Inc. (Mencorp), another provincial bus operator, later filed a similar petition for declaratory relief 14 against Executive Secretary Alberto G. Romulo and MMDA Chairman Fernando.
Mencorp asked the court to declare the E.O. unconstitutional and illegal for transgressing the possessory rights of owners and operators of public land transportation units over their respective terminals. Averring that MMDA Chairman Fernando had begun to implement a plan to close and eliminate all provincial bus terminals along EDSA and in the whole of the metropolis and to transfer their operations to common bus terminals,15 Mencorp prayed for the issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction to restrain the impending closure of its bus terminals which it was leasing at the corner of EDSA and New York Street in Cubao and at the intersection of B lumentritt, Laon Laan and Halcon Streets in Quezon City. The petition was docketed as Civil Case No. 03-106224 and was raffled to Branch 47 of the RTC of Manila. Mencorp’s petition was consolidated on June 19, 2003 with Vi ron’s petition which was raffled to Branch 26 of the RTC, Manila. Mencorp’s prayer for a TRO and/or writ of injunction was denied as was its application for the issuance of a preliminary injunction.16 In the Pre-Trial Order 17 issued by the trial court, the issues were narrowed down to whether 1) the MMDA’s power to regulate traffic in Metro Manila included the power to direct provincial bus operators to abandon and close their duly established and existing bus terminals in order to conduct business in a common terminal; (2) the E.O. is consistent with the Public Service Act and the Constitution; and (3) provincial bus operators would be deprived of their real properties without due process of law should they be required to use the common bus terminals. Upon the agreement of the parties, they filed their respective position papers in lieu of hearings. By Decision18 of January 24, 2005, the trial court sustained the constitutionality and legality of the E.O. pursuant to R.A. No. 7924, which empowered the MMDA to administer Metro Manila’s basic services including those of transport and traffic management. The trial court held that the E.O. was a valid exercise of the police power of the State as it satisfied the two tests of lawful subject matter and lawful means, hence, Viron’s and Mencorp’s property rights must yield to police power. On the separate motions for reconsideration of Viron and Mencorp, the trial court, by Order of September 8, 2005, reversed its Decision, this time
holding that the E.O. was "an unreasonable exercise of police power"; that the authority of the MMDA under Section (5)(e) of R.A. No. 7924 does not include the power to order the closure of Viron’s and Mencorp’s existing bus terminals; and that the E.O. is inconsistent with the provisions of the Public Service Act.
The following are the essential requisites for a declaratory relief petition: (a) there must be a justiciable controversy; (b) the controversy must be between persons whose interests are adverse; (c) the party seeking declaratory relief must have a legal interest in the controversy; and (d) the issue invoked must be ripe for j udicial determination.25
Petitioners’ motion for reconsideration was denied by Resolution of November 23, 2005.
The requirement of the presence of a justiciable controversy is satisfied when an actual controversy or the ripening seeds thereof exist between the parties, all of whom are sui juris and before the court, and the declaration sought will help in ending the controversy.26 A question becomes justiciable when it is translated into a claim of right which is actually contested.27
Hence, this petition, which faults the trial court for failing to rule that: (1) the requisites of declaratory relief are not present, there being no justiciable controversy in Civil Case Nos. 03-105850 and 03-106224; and (2) the President has the authority to undertake or cause the implementation of the Project.19 Petitioners contend that there is no justiciable controversy in the cases for declaratory relief as nothing in the body of the E .O. mentions or orders the closure and elimination of bus terminals along the major thoroughfares of Metro Manila. Viron and Mencorp, they argue, failed to produce any letter or communication from the Executive Department apprising them of an immediate plan to close down their bus terminals. And petitioners maintain that the E.O. is only an administrative directive to government agencies to coordinate with the MMDA and to make available for use government property along EDSA and South Expressway corridors. They add that the only relation created by the E.O. is that between the Chief Executive and the implementing officials, but not between third persons. The petition fails. It is true, as respondents have pointed out, that the alleged deficiency of the consolidated petitions to meet the requirement of justiciability was not among the issues defined for resolution in the Pre-Trial Order of January 12, 2004. It is equally true, however, that the question was repeatedly raised by petitioners in their Answer to Viron’s petition,20 their Comment of April 29, 2003 opposing Mencorp’s prayer for the issuance of a TRO,21 and their Position Paper of August 23, 2004.22 In bringing their petitions before the trial court, both respondents pleaded the existence of the essential requisites for their respective petitions for declaratory relief ,23 and refuted petitioners’ contention that a justiciable controversy was lacking.24 There can be no denying, therefore, that the issue was raised and discussed by the parties before the trial court.
In the present cases, respondents’ resort to court was prompted by the issuance of the E.O. The 4th Whereas clause of the E.O. sets out in clear strokes the MMDA’s plan to "decongest traffic by eliminating the bus terminals now located along major Metro Manila thoroughfares and providing more convenient access to the mass transport system to the commuting public through the provision of mass transport terminal facilities x x x." (Emphasis supplied) Section 2 of the E.O. thereafter lays down the immediate establishment of common bus terminals for north- and south-bound commuters. For this purpose, Section 8 directs the Department of Budget and Management to allocate funds of not more than one hundred million pesos (P100,000,000) to cover the cost of the construction of the north and south terminals. And the E.O. was made effective immediately. The MMDA’s resolve to immediately implement the Pr oject, its denials to the contrary notwithstanding, is also evident from telltale circumstances, foremost of which was the passage by the MMC of Resolution No. 03-07, Series of 2003 expressing its full support of the immediate implementation of the Project. Notable from the 5th Whereas clause of the MMC Resolution is the plan to "remove the bus terminals located along major thoroughfares of Metro Manila and an urgent need to integrate the different transport modes." The 7th Whereas clause proceeds to mention the establishment of the North and South terminals. As alleged in Viron’s petition, a diagram of the GMA-MTS North Bus/Rail Terminal had been drawn up, and construction of the terminal is already in progress. The MMDA, in its Answer 28 and Position Paper ,29 in fact affirmed that the government had begun to implement the Project.
It thus appears that the issue has already transcended the boundaries of what is merely conjectural or anticipatory.
and/or E.O. No. 292, otherwise known as the Administrative Code of 1987. They add that the E.O. is also a valid exercise of the police power.
Under the circumstances, for respondents to wait for the actual issuance by the MMDA of an order for the closure of respondents’ bus terminals would be foolhardy for, by then, the proper action to bring would no longer be for declaratory relief which, under Section 1, Rule 63 30 of the Rules of Court, must be brought before there is a breach or violation of rights.
E.O. No. 125,32 which former President Corazon Aquino issued in the exercise of legislative powers, reorganized the then Ministry (now Department) of Transportation and Communications. Sections 4, 5, 6 and 22 of E.O. 125, as amended by E.O. 125-A,33 read:
lawphil
As for petitioners’ contention that the E.O. is a mere administrative issuance which creates no relation with third persons, it does not persuade. Suffice it to stress that to ensure the success of the Project for which the concerned government agencies are directed to coordinate their activities and resources, the existing bus terminals owned, operated or leased by third persons like respondents would have to be eliminated; and respondents would be forced to operate from the common bus terminals. It cannot be gainsaid that the E.O. would have an adverse effect on respondents. The closure of their bus terminals would mean, among other things, the loss of income from the operation and/or rentals of stalls thereat. Precisely, respondents claim a deprivation of their constitutional right to property without due process of law.
SECTION 4. Mandate. — The Ministry shall be the primary policy, planning, programming, coordinating, implementing, regulating and administrative entity of the Executive Branch of the government in the promotion, development and regulation of dependable and coordinated networks of transportation and communication systems as well as in the fast, safe, efficient and reliable postal, transportation and c ommunications services. To accomplish such mandate, the Ministry shall have the following objectives: (a) Promote the development of dependable and coordinated networks of transportation and communications systems;
Respondents have thus amply demonstrated a "personal and substantial interest in the case such that [they have] sustained, or will sustain, direct injury as a result of [the E.O.’s] enforcement. "31 Consequently, the established rule that the constitutionality of a law or administrative issuance can be challenged by one who will sustain a direct injury as a result of its enforcement has been satisfied by respondents.
(b) Guide government and private investment in the development of the country’s intermodal transportation and communications systems in a most practical, expeditious, and orderly fashion for maximum safety, service, and cost effectiveness; (Emphasis and underscoring supplied)
On to the merits of the case. xxxx Respondents posit that the MMDA is devoid of authority to order the elimination of their bus terminals under the E.O. which, they argue, is unconstitutional because it violates both the Constitution and the Public Service Act; and that neither is the MMDA clothed with such authority under R.A. No. 7924. Petitioners submit, however, that the real issue concerns the President’s authority to undertake or to cause the implementation of the Project. They assert that the authority of the President is derived from E.O. No. 125, "Reorganizing the Ministry of Transportation and Communications Defining its Powers and Functions and for Other Purposes," her residual power
SECTION 5. Powers and Functions. — To accomplish its mandate, the Ministry shall have the following powers and functions: (a) Formulate and recommend national policies and guidelines for the preparation and implementation of i ntegrated and comprehensive transportation and communications systems at the national, regional and local levels; (b) Establish and administer comprehensive and integrated programs for transportation and
communications , and for this purpose, may call on any agency, corporation, or organization, whether public or private, whose development programs include transportation and communications as an integral part thereof, to participate and assist in the preparation and implementation of such program;
such orders, rules, regulations and other issuances as may be necessary to ensure the effective implementation of the law. Since, under the law, the DOTC is authorized to establish and administer programs and projects for transportation, it follows that the President may exercise the same power and authority to order the implementation of the Project, which admittedly is one for transportation.
(c) Assess, review and provide direction to transportation and communications research and development programs of the government in coordination with other institutions concerned;
Such authority springs from the President’s power of control over all executive departments as well as the obligation for the faithful execution of the laws under Article VII, Section 17 of the Constitution which provides:
(d) Administer all laws, rules and regulations in the field of transportation and communications; (Emphasis and underscoring supplied)
SECTION 17. The President shall have control of all the executive departments, bureaus and offices. He shall ensure that the laws be faithfully executed.
xxxx SECTION 6. Authority and Responsibility. — The authority and responsibility for the exercise of the mandate of the Ministry and for the discharge of its powers and functions shall be vested in the Minister of Transportation and Communications , hereinafter referred to as the Minister, who shall have supervision and control over the Ministry and shall be appointed by the President. (Emphasis and underscoring supplied) SECTION 22. Implementing Authority of Minister. — The Minister shall issue such orders, rules, regulations and other issuances as may be necessary to ensure the effective implementation of the provisions of this Executive Order . (Emphasis and underscoring supplied) It is readily apparent from the abovequoted provisions of E.O. No. 125, as amended, that the President, then possessed of and exercising legislative powers, mandated the DOTC to be the primary policy, planning, programming, coordinating, implementing, regulating and administrative entity to promote, develop and regulate networks of transportation and communications. The grant of authority to the DOTC includes the power toestablish and administer comprehensive and i ntegrated programs for transportation and communications. As may be seen further, the Minister (now Secretary) of the DOTC is vested with the authority and responsibility to exercise the mandate given to the department. Accordingly, the DOTC Secretary is authorized to issue
This constitutional provision is echoed in Section 1, Book III of the Administrative Code of 1987. Notably, Section 38, Chapter 37, Book IV of the same Code defines the President’s power of supervision and control over the executive departments, viz: SECTION 38. Definition of Administrative Relationships. — Unless otherwise expressly stated in the Code or in other laws defining the special relationships of particular agencies, administrative relationships shall be categorized and defined as follows: (1) Supervision and Control. — Supervision and control shall include authority to act directly whenever a specific function is entrusted by law or regulation to a subordinate ; direct the performance of duty; restrain the commission of acts; review, approve, reverse or modify acts and decisions of subordinate officials or units; determine priorities in the execution of plans and programs. Unless a different meaning is explicitly provided in the specific law governing the relationship of particular agencies the word "control" shall encompass supervision and control as defined in this paragraph. x x x (Emphasis and underscoring supplied) Thus, whenever a specific function is entrusted by law or regulation to a subordinate, the President may act directly or merely direct the performance of a duty.34 Respecting the President’s authority to order the implementation of the Project in the exercise of the police power of the State, suffice it to stress
that the powers vested in the DOTC Secretary to establish and administer comprehensive and integrated programs for transportation and communications and to issue orders, rules and regulations to implement such mandate (which, as previously discussed, may also be exercised by the President) have been so delegated for the good and welfare of the people. Hence, these powers partake of the nature of police power. Police power is the plenary power vested in the legislature to make, ordain, and establish wholesome and reasonable laws, statutes and ordinances, not repugnant to the Constitution, for the good and welfare of the people.35 This power to prescribe regulations to promote the health, morals, education, good order or safety, and general welfare of the people flows from the recognition that salus populi est suprema lex ─ the welfare of the people is the supreme law. While police power rests primarily with the legislature, such power may be delegated, as it is in fact increasingly being delegated.36 By virtue of a valid delegation, the power may be exercised by the President and administrative boards37 as well as by the lawmaking bodies of municipal corporations or local governments under an express delegation by the Local Government Code of 1991 .38 The authority of the President to order the implementation of the Project notwithstanding, the designation of the MMDA as the implementing agency for the Project may not be sustained. It is ultra vires, there being no legal basis therefor. It bears stressing that under the provisions of E.O. No. 125, as amended, it is the DOTC, and not the MMDA, which is authorized to establish and implement a project such as the one subject of the cases at bar. Thus, the President, although authorized to establish or cause the implementation of the Project, must exercise the authority through the instrumentality of the DOTC which, by law, is the primary implementing and administrative entity in the promotion, development and regulation of networks of transportation, and the one so authorized to establish and implement a project such as the Project in question. By designating the MMDA as the implementing agency of the Project, the President clearly overstepped the limits of the authority conferred by law, rendering E.O. No. 179 ultra vires. In another vein, the validity of the designation of MMDA flies in the absence of a specific grant of authority to it under R.A. No. 7924.
To recall, R.A. No. 7924 declared the Metropolitan Manila area 39 as a "special development and administrative region" and placed the administration of "metro-wide" basic services affecting the region under the MMDA. Section 2 of R.A. No. 7924 specifically authorizes the MMDA to perform "planning, monitoring and coordinative functions, and in the process exercise regulatory and supervisory authority over the delivery of metrowide services," including transport and traffic management .40 Section 5 of the same law enumerates the powers and functions of the MMDA as follows: (a) Formulate, coordinate and regulate the implementation of medium and long-term plans and programs for the delivery of metro-wide services, land use and physical development within Metropolitan Manila, consistent with national development objectives and priorities; (b) Prepare, coordinate and regulate the implementation of medium-term investment programs for metro-wide services which shall indicate sources and uses of funds for priority programs and projects, and which shall include the packaging of projects and presentation to funding institutions; (c) Undertake and manage on its own metro-wide programs and projects for the delivery of specific services under its jurisdiction, subject to the approval of the Council. For this purpose, MMDA can create appropriate project management offices; (d) Coordinate and monitor the implementation of such plans, programs and projects in Metro Manila; identify bottlenecks and adopt solutions to problems of implementation; (e) The MMDA shall set the policies concerning traffic in Metro Manila, and shall coordinate and regulate the implementation of all programs and projects concerning traffic management, specifically pertaining to enforcement, engineering and education. Upon request, it shall be extended assistance and cooperation, including but not limited to, assignment of personnel, by all other government agencies and offices concerned;
(f) Install and administer a single ticketing system, fix, impose and collect fines and penalties for all kinds of violations of traffic rules and regulations , whether moving or non-moving in nature, and confiscate and suspend or revoke drivers’ licenses in the enforcement of such traffic laws and regulations, the provisions of RA 4136 and PD 1605 to the contrary notwithstanding. For this purpose, the Authority shall impose all traffic laws and regulations in Metro Manila, through its traffic operation center, and may deputize members of the PNP, traffic enforcers of local government units, duly licensed security guards, or members of non-governmental organizations to whom may be delegated certain authority, subject to such conditions and requirements as the Authority may impose; and (g) Perform other related functions required to achieve the objectives of the MMDA, including the undertaking of delivery of basic services to the local government units, when deemed necessary subject to prior coordination with and consent of the local government unit concerned." (Emphasis and underscoring supplied) The scope of the function of MMDA as an administrative, coordinating and policy-setting body has been settled in Metropolitan Manila Development Authority (MMDA) v. Bel-Air Village Association, Inc .41 In that case, the Court stressed: Clearly, the scope of the MMDA’s function is limited to the delivery of the seven (7) basic services. One of these is transport and traffic management which management which i ncludes the formulation and monitoring of policies, standards and projects to rationalize the existing transport operations, infrastructure requirements, the use of thoroughfares and promotion of the safe movement of persons and goods. It also covers the mass transport system and the institution of a system of road regulation, the administration of all traffic enforcement operations, traffic engineering services and traffic education programs, including the institution of a single ticketing system in Metro Manila for traffic violations. Under this service, the MMDA is expressly authorized to "to set the policies concerning traffic" and "coordinate "coordinate and regulate the implementation of all traffic management programs." In addition, the MMDA may install and administer a single ticketing system," fix, impose and collect fines and penalties for all traffic violations.
It will be noted t hat the powers of the MMDA are li mited to the following acts: formulation, coordination, regulation, implementation, preparation, management, monitoring, setting of policies, installation of a system and administration. administration. There i s no syllable in R.A. No. 7924 that grants the MMDA police power, let alone legislative power. Even the Metro Manila Council has not been delegated any legislative power. Unlike the legislative bodies of the local government units, there is no provision in R.A. No. 79 24 that empow ers the MMDA or its Council to ‘enact ‘enact ordinances, approve resolutions and appropriate funds for the general welfare’ of the inhabitants of Metro Manila. The MMDA is, as termed in the charter itself, a ‘development authority.’ authority.’ It is an agency created for the purpose of laying down policies and coordinating coordinating with the various national government agencies, people’s organizations, non-governmental organizations and the private sector for the efficient and expeditious delivery of basic services in the vast metropolitan area. All its functions are administrative in nature and these are actually summed up in the charter itself , viz: ‘SECTION 2. Creation of the Metropolitan Manila Development Authority. — . . . The MMDA shall perform planning, p lanning, monitoring and coordinative coordinat ive functions , and in th e process exercise regulatory and supervisory authority over the delivery of metro-wide services within Metro Manila , without diminution of the autonomy of the local government units concerning purely local matters.’ matters. ’42 (Emphasis and underscoring supplied) In light of the administrative nature of its powers and functions, the MMDA is devoid of authority to implement the Project as envisioned by the E.O; hence, it could not have been validly designated by the President to undertake the Project. It follows that the MMDA cannot validly order the elimination of respondents’ terminals. Even the MMDA’s claimed authority under the police power must necessarily fail in consonance with the above-quoted ruling in MMDA v. Bel-Air Village Association, Inc . and this Court’s subsequent ruling in Metropolitan Manila Development Development Authority v. Garin 43 that the MMDA is not vested with police power.
Even assuming arguendo arguendo that police power was delegated to the MMDA, its exercise of such power does not satisfy the two tests of a valid police power measure, viz: (1) the interest of the public generally, as distinguished from that of a particular class, requires its exercise; and (2) the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals .44 Stated differently, the police power legislation must be firmly grounded on public interest and welfare and a reasonable relation must exist between the purposes and the means. As early as Calalang v. Williams, Williams,45 this Court recognized that traffic congestion is a public, not merely a private, concern. The Court therein held that public welfare underlies the contested statute authorizing the Director of Public Works to promulgate rules and regulations to regulate and control traffic on national roads. Likewise, in Luque v. Villegas, Villegas,46 this Court emphasized that public welfare lies at the bottom of any regulatory measure designed "to relieve congestion of traffic, which is, to say the least, a menace to public safety." safety."47 As such, measures calculated to promote the safety and convenience of the people using the thoroughfares by the regulation of vehicular traffic present a proper subject for the exercise of police power. Notably, the parties herein concede that traffic congestion is a public concern that needs to be addressed immediately. Indeed, the E.O. was issued due to the felt need to address the worsening traffic congestion in Metro Manila which, the MMDA so determined, is caused by the increasing volume of buses plying the major thoroughfares and the inefficient connectivity of existing transport systems. It is thus beyond cavil that the motivating force behind the issuance of the E.O. is the interest of the public in general. Are the means employed appropriate and reasonably necessary for the accomplishment accomplishment of the purpose. Are they not duly oppressive? With the avowed objective of decongesting traffic in Metro Manila, the E.O. seeks to "eliminate[e] the bus terminals now located along major Metro Manila thoroughfares and provid[e] more convenient access to the mass transport system to the commuting public through the provision of mass transport terminal facilities x x x." x. "48 Common carriers with terminals along the major thoroughfares of Metro Manila would thus be compelled to close down their existing bus terminals and use the MMDA-designated common parking areas.
In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc . Inc .,49 two city ordinances were passed by the Sangguniang Panlungsod of Panlungsod of Lucena, directing public utility vehicles to unload and load passengers at the Lucena Grand Central Terminal, which was given the exclusive franchise to operate a single common terminal. Declaring that no other terminals shall be situated, constructed, maintained or established inside or within the city of Lucena, thesanggunian the sanggunian declared as inoperable all temporary terminals therein. The ordinances were challenged before this Court for being unconstitutional on the ground that, inter alia, alia, the measures constituted an invalid exercise of police power, an undue taking of private property, and a violation of the constitutional prohibition against monopolies. Citing De la Cruz v. Paras Paras50 and Lupangco v. Court of Appeals ,51 this Court held that the assailed ordinances were characterized by overbreadth, as they went beyond what was reasonably necessary to solve the traffic problem in the city. And it found that the compulsory use of the Lucena Grand Terminal was unduly oppressive because it would subject its users to fees, rentals and charges. The true role of Constitutional Law is to effect an equilibrium between authority and liberty so that rights are exercised within the framework of the law and the laws are enacted with due deference to rights. A due deference to the rights rights of the individual thus requires a more more careful formulation of solutions to societal problems. From the memorandum filed before this Court by petitioner, it is gathered that the Sangguniang Panlungsod had identified the cause of traffic congestion to be the indiscriminate loading and unloading of passengers by buses on the streets of the city proper, hence, the conclusion that the terminals contributed to the proliferation of buses obstructing traffic on the city streets. Bus terminals per se do not, however, impede or help impede the flow of traffic. How the outright proscription proscription against the existence of all terminals, apart from that franchised to petitioner, petition er, can be considered as reasonably necessary to solve the traffic problem, this Court has not been enlightened enlightened . If terminals lack adequate space such that bus drivers are compelled to load and unload passengers on the streets instead of inside the terminals, then reasonable specifications for the size of
terminals could be instituted, with permits to operate the same denied those which are unable to meet the specifications. In the subject ordinances, ordinances, however, the scope of the proscription against th e maintena nce of terminals i s so broad that even entities which might be able to provide facilities better than the franchised terminal are barred from operating at all. all . (Emphasis and underscoring supplied) As in Lucena, Lucena , this Court fails to see how the prohibition against the existence of respondents’ terminals can be considered a reasonable necessity to ease traffic congestion in the metropolis. On the contrary, the elimination of respondents’ bus terminals brings forth the distinct possibility and the equally harrowing reality of traffic congestion in the common parking areas, a case of transference from one site to another. Less intrusive measures such as curbing the proliferation of "colorum" buses, vans and taxis entering Metro Manila and using the streets for parking and passenger pick-up points, as respondents respondents suggest, might even be more effective in easing the traffic situation. So would the strict enforcement of traffic rules and the removal of obstructions from major thoroughfares. As to the alleged confiscatory character of the E.O., it need only to be stated that respondents’ certificates of public convenience confer no property right, and are mere licenses or privileges .52 As such, these must yield to legislation safeguarding the interest of the people. Even then, for reasons which bear reiteration, the MMDA cannot order the closure of respondents’ terminals termin als not only because no authority to implement the Project has been granted nor legislative or police power been delegated to it, but also because the elimination of the terminals does not satisfy the standards of a valid police power measure. Finally, an order for the closure of respondents’ terminals is not in line with the provisions of the Public Service Act. Paragraph (a), Section 13 of Chapter II of the Public Service Act (now Section 5 of Executive Order No. 202, creating the Land Transportation Franchising and Regulatory Board or LFTRB) vested the Public Service Commission (PSC, now the LTFRB) with "x x x jurisdiction, supervision and control over all public services and their franchises, equipment and other properties x x x."
Consonant with such grant of authority, the PSC was empowered to "impose such conditions as to construction, equipment, maintenance, service, service , or operation as the public interests and convenience may reasonably require" require "53 in approving any franchise or privilege. Further, Section 16 (g) and (h) of the Public Service Ac t54 provided that the Commission shall have the power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary: (g) To compel any public service to furnish safe, adequate, and proper service as service as regards the manner of furnishing the same as well as the maintenance of the necessary material and equipment. (h) To require any public service to establish, construct, maintain, and operate any reasonable extension of its existing facilities, facilities, where in the judgment of said Commission, such extension is reasonable and practicable and will furnish sufficient business to justify the construction and maintenance of the same and when the financial condition of the said public service reasonably warrants the original expenditure required in making and operating such extension.(Emphasis and underscoring supplied) The establishment, as well as the maintenance of vehicle parking areas or passenger terminals, is generally considered a necessary service to be provided by provincial bus operators like respondents, hence, the investments they have poured into the acquisition or lease of suitable terminal sites. Eliminating the terminals would thus run counter to the provisions of the Public Service Act. This Court commiserates with the MMDA for the roadblocks thrown in the way of its efforts at solving the pestering problem of traffic congestion in Metro Manila. These efforts are commendable, to say the least, in the face of the abominable traffic situation of our roads day in and day out. This Court can only interpret, not change, the law, however. It needs only to be reiterated that it is the DOTC ─ DOTC ─ as the primary policy, planning, programming, coordinating, implementing, regulating and administrative entity to promote, develop and regulate networks of transportation and communications communications ─ which ─ which has the power to establish and administer a transportation transportation project like the Project subject of the case at bar . bar .
No matter how noble the intentions of the MMDA may be then, any plan, strategy or project which it is not authorized to implement cannot pass muster. WHEREFORE, the Petition is, in light of the foregoing disquisition, DENIED. E.O. No. 179 is declared NULL and VOID for being ultra vires .
G.R. No. 175527
December 8, 2008
HON. GABRIEL LUIS QUISUMBING, HON. ESTRELLA P. YAPHA, HON. VICTORIA G. COROMINAS, HON. RAUL D. BACALTOS (Members of the Sangguniang Panlalawigan of Cebu), petitioners, vs. HON. GWENDOLYN F. GARCIA (In her capacity as Governor of the Province of Cebu), HON. DELFIN P. AGUILAR (in his capacity as Director IV (Cluster Director) of COA), Cluster IV – Visayas Local Government Sector, HON. HELEN S. HILAYO (In her capacity as Regional Cluster Director of COA), and HON. ROY L. URSAL (In his capacity as Regional Legal and Adjudication Director of COA), respondents. DECISION TINGA, J .: Gabriel Luis Quisumbing (Quisumbing), Estrella P. Yapha, Victoria G. Corominas, and Raul D. Bacaltos (Bacaltos), collectively petitioners, assail the Decision1 of the Regional Trial Court (RTC) of Cebu City, Branch 9, in Civil Case No. CEB-31560, dated July 11, 2006, which declared that under the pertinent provisions of Republic Act No. 7160 (R.A. No. 7160), or the Local Government Code, and Republic Act No. 9184 (R.A. No. 9184), or the Government Procurement Reform Act, respondent Cebu Provincial Governor Gwendolyn F. Garcia (Gov. Garcia), need not secure the prior authorization of the Sangguniang Panlalawigan before entering into contracts committing the province to monetary obligations. The undisputed facts gathered from the assailed Decision and the pleadings submitted by the parties are as follows: The Commission on Audit (COA) conducted a financial audit on the Province of Cebu for the period ending December 2004. Its audit team rendered a report, Part II of which states: "Several contracts in the total amount ofP102,092,841.47 were not supported with a Sangguniang Panlalawigan resolution authorizing the Provincial Governor to enter into a contract, as required under Section 22 of R.A. No. 7160."2 The audit team then recommended that, "Henceforth, the local chief executive must secure a sanggunian resolution authorizing the former to enter into a contract as provided under Section 22 of R.A. No. 7160."3
Gov. Garcia, in her capacity as the Provincial Governor of Cebu, sought the reconsideration of the findings and recommendation of the COA. However, without waiting for the resolution of the reconsideration sought, she instituted an action for Declaratory Relief before the RTC of Cebu City, Branch 9. Impleaded as respondents were Delfin P. Aguilar, Helen S. Hilayo and Roy L. Ursal in their official capacities as Cluster Director IV, Regional Cluster Director and Regional Legal and Adjudication Director of the COA, respectively. The Sangguniang Panlalawigan of the Province of Cebu, represented by Vice-Governor Gregorio Sanchez, Jr., was also impleaded as respondent. Alleging that the infrastructure contracts4 subject of the audit report complied with the bidding procedures provided under R.A. No. 9184 and were entered into pursuant to the general and/or supplemental appropriation ordinances passed by the Sangguniang Panlalawigan, Gov. Garcia alleged that a separate authority to enter into such contracts was no longer necessary. On the basis of the parties’ respective memoranda, the trial court rendered the assailed Decision dated July 11, 2006, declaring that Gov. Garcia need not secure prior authorization from the Sangguniang Panlalawigan of Cebu before entering into the questioned contracts. The dispositive portion of the Decision provides: WHEREFORE, premises considered, this court hereby renders judgment in favor of Petitioner and against the Respondent COA officials and declares that pursuant to Sections 22 paragraph © in relation to Sections 306 and 346 of the Local Government Code and Section 37 of the Government Procurement Reform Act, the Petitioner Governor of Cebu need not secure prior authorization by way of a resolution from theSangguniang Panlalawigan of the Province of Cebu before she enters into a contract involving monetary obligations on the part of the Province of Cebu when there is a prior appropriation ordinance enacted. Insofar as Respondent Sangguniang Panlalawigan, this case is hereby dismissed.5 In brief, the trial court declared that the Sangguniang Panlalawigan does not have juridical personality nor is it vested by R.A. No. 7160 with authority to sue and be sued. The trial court accordingly dismissed the case against respondent members of the Sangguniang Panlalawigan. On the question of the remedy of declaratory relief being improper because a breach had already been committed, the trial court held that the case would ripen into and be treated as an ordinary civil action. The trial court
further ruled that it is only when the contract (entered into by the local chief executive) involves obligations which are not backed by prior ordinances that the prior authority of the sanggunian concerned is required. In this case, the Sangguniang Panlalawigan of Cebu had already given its prior authorization when it passed the appropriation ordinances which authorized the expenditures in the questioned contracts. The trial court denied the motion for reconsideration 6 filed by Quisumbing, Bacaltos, Carmiano Kintanar, Jose Ma. Gastardo, and Agnes Magpale, in their capacities as members of the Sangguniang Panlalawigan of Cebu, in an Order 7 dated October 25, 2006. In the Petition for Review 8 dated November 22, 2006, petitioners insisted that the RTC committed reversible error in granting due course to Gov. Garcia’s petition for declaratory relief des pite a breach of the law subject of the petition having already been committed. This breach was allegedly already the subject of a pending investigation by the Deputy Ombudsman for the Visayas. Petitioners further maintained that prior authorization from theSangguniang Panlalawigan should be secured before Gov. Garcia could validly enter into contracts involving monetary obligations on the part of the province. Gov. Garcia, in her Comment9 dated April 10, 2007, notes that the RTC had already dismissed the case against the members of the Sangguniang Panlalawigan of Cebu on the ground that they did not have legal personality to sue and be sued. Since the COA officials also named as respondents in the petition for declaratory relief neither filed a motion for reconsideration nor appealed the RTC Decision, the said Decision became final and executory. Moreover, only two of the members of the Sangguniang Panlalawigan, namely, petitioners Quisumbing and Bacaltos, originally named as respondents in the petition for declaratory relief, filed the instant petition before the Court. Respondent Governor insists that at the time of the filing of the petition for declaratory relief, there was not yet any breach of R.A. No. 7160. She further argues that the questioned contracts were executed after a public bidding in implementation of specific items in the regular or supplemental appropriation ordinances passed by theSangguniang Panlalawigan. These ordinances allegedly serve as the authorization required under R.A. No. 7160, such that the obtention of another authorization becomes not only redundant but also detrimental to the speedy delivery of basic services. Gov. Garcia also claims that in its Comment to the petition for declaratory relief, the Office of the Solicitor General (OSG) took a stand supportive of
the governor’s arguments. The OSG’s official position allegedly binds the COA. Expressing gratitude for having been allowed by this Court to file a comment on the petition, respondent COA officials in their Comment10 dated March 8, 2007, maintain that Sections 306 and 346 of R.A. No. 7160 cannot be considered exceptions to Sec. 22(c) of R.A. No. 7160. Sec. 346 allegedly refers to disbursements which must be made in accordance with an appropriation ordinance without need of approval from the sanggunian concerned. Sec. 306, on the other hand, refers to the authorization for the effectivity of the budget and should not be mistaken for the specific authorization by the Sangguniang Panlalawigan for the local chief executive to enter into contracts under Sec. 22(c) of R.A. No. 7160. The question that must be resolved by the Court should allegedly be whether the appropriation ordinance referred to in Sec. 346 in relation to Sec. 306 of R.A. No. 7160 is the same prior authorization required under Sec. 22(c) of the same law. To uphold the assailed Decision would allegedly give the local chief executive unbridled authority to enter into any contract as long as an appropriation ordinance or budget has been passed by the sanggunianconcerned. Respondent COA officials also claim that the petition for declaratory relief should have been dismissed for the failure of Gov. Garcia to exhaust administrative remedies, rendering the petition not ripe for judicial determination. The OSG filed a Comment11 dated March 12, 2007, pointing out that the instant petition raises factual issues warranting its denial. For instance, petitioners, on one hand, claim that there was no appropriation ordinance passed for 2004 but only a reenacted appropriations ordinance and that the unauthorized contracts did not proceed from a public bidding pursuant to R.A. No. 9184. Gov. Garcia, on the other hand, claims that the contracts were entered into in compliance with the bidding procedures in R.A. No. 9184 and pursuant to the general and/or supplemental appropriations ordinances passed by the Sangguniang Panlalawigan. She further asserts that there were ordinances allowing the expenditures made. On the propriety of the action for declaratory relief filed by Gov. Garcia, the OSG states in very general terms that such an action must be brought before any breach or violation of the statute has been committed and may be treated as an ordinary action only if the breach occurs after the filing of the action but before the termination thereof. However, it does not say in this case whether such recourse is proper.
Nonetheless, the OSG goes on to discuss that Sec. 323 of R.A. No. 7160 allows disbursements for salaries and wages of existing positions, statutory and contractual obligations and essential operating expenses authorized in the annual and supplemental budgets of the preceding year (which are deemed reenacted in case the sanggunianconcerned fails to pass the ordinance authorizing the annual appropriations at the beginning of the ensuing fiscal year). Contractual obligations not included in the preceding year’s annual and supplemental budgets allegedly require the prior approval or authorization of the local sanggunian. In their Consolidated Repl y12 dated August 8, 2007, petitioners insist that the instant petition raises only questions of law not only because the parties have agreed during the proceedings before the trial court that the case involves purely legal questions, but also because there is no dispute that the Province of Cebu was operating under a reenacted budget in 2004. They further defend their standing to bring suit not only as members of the sanggunian whose powers Gov. Garcia has allegedly usurped, but also as taxpayers whose taxes have been illegally spent. Petitioners plead leniency in the Court’s ruling regarding their legal standing, as this case involves a matter of public policy. Petitioners finally draw attention to the OSG’s seeming change of heart and adoption of their argument that Gov. Garcia has violated R.A. No. 7160. It should be mentioned at the outset that a reading of the OSG’s Comment13 on the petition for declaratory relief indeed reveals its view that Sec. 22(c) of R.A. No. 7160 admits of exceptions. It maintains, however, that the said law is clear and leaves no room for interpretation, only application. Its Comment on the instant petition does not reflect a change of heart but merely an amplification of its original position. Although we agree with the OSG that there are factual matters that have yet to be settled in this case, the records disclose enough facts for the Court to be able to make a definitive ruling on the basic legal arguments of the parties. The trial court’s pronouncement that "the parties in this case all agree that the contracts referred to in the above findings are contracts entered into pursuant to the bidding procedures allowed in Republic Act No. 9184 or the ‘Government Procurement Reform Act’–i.e., public bidding, and negotiated bid. The biddings were made pursuant to the general and/or supplemental
appropriation ordinances passed by the Sangguniang Panlalawigan of Cebu x x x"14 is clearly belied by the Answer 15 filed by petitioners herein. Petitioners herein actually argue in their Answer that the contracts subject of the COA’s findings did not proceed from a public bidding. Further, there was no budget passed in 2004. What was allegedly in force was the reenacted 2003 budget.16 Gov. Garcia’s contention that the questioned contracts complied with the bidding procedure in R.A. No. 9184 and were entered into pursuant to the general and supplemental appropriation ordinances allowing these expenditures is diametrically at odds with the facts as presented by petitioners in this case. It is notable, however, that while Gov. Garcia insists on the existence of appropriation ordinances which allegedly authorized her to enter into the questioned contracts, she does not squarely deny that these ordinances pertain to the previous year’s budget which was reenacted in 2004. Thus, contrary to the trial court’s finding, there was no agreement among the parties with regard to the operative facts under which the case was to be resolved. Nonetheless, we can gather from Gov. Garcia’s silence on the matter and the OSG’s own discussion on the effect of a reenacted budget on the local chief executive’s ability to enter into contracts, that during the year in question, the Province of Cebu was indeed operating under a reenacted budget. Note should be taken of the fact that Gov. Garcia, both in her petition for declaratory relief and in her Comment on the instant petition, has failed to point out the specific provisions in the general and supplemental appropriation ordinances copiously mentioned in her pleadings which supposedly authorized her to enter into the questioned contracts. Based on the foregoing discussion, there appear two basic premises from which the Court can proceed to discuss the question of whether prior approval by the Sangguniang Panlalawigan was required before Gov. Garcia could have validly entered into the questioned contracts. First , the Province of Cebu was operating under a reenacted budget in 2004. Second , Gov. Garcia entered into contracts on behalf of the province while this reenacted budget was in force. Sec. 22(c) of R.A. No. 7160 provides: Sec. 22. Corporate Powers. –(a) Every local government unit, as a corporation, shall have the following powers:
xxx (c) Unless otherwise provided in this Code, no contract may be entered into by the local chief executive in behalf of the local government unit without prior authorization by the sanggunian concerned. A legible copy of such contract shall be posted at a conspicuous place in the provincial capitol or the city, municipal or barangay hall. As it clearly appears from the foregoing provision, prior authorization by the sanggunian concerned is required before the local chief executive may enter into contracts on behalf of the local government unit. Gov. Garcia posits that Sections 306 and 346 of R.A. No. 7160 are the exceptions to Sec. 22(c) and operate to allow her to enter into contracts on behalf of the Province of Cebu without further authority from the Sangguniang Panlalawigan other than that already granted in the appropriation ordinance for 2003 and the supplemental ordinances which, however, she did not care to elucidate on. The cited provisions state: Sec. 306. Definition of Terms. –When used in this Title, the term: (a) "Annual Budget" refers to a financial plan embodying the estimates of income and expenditures for one (1) fiscal year; (b) "Appropriation" refers to an authorization made by ordinance, directing the payment of goods and services from local government funds under specified conditions or for specific purposes; (c) "Budget Document" refers to the instrument used by the local chief executive to present a comprehensive financial plan to the sanggunian concerned; (d) "Capital Outlays" refers to appropriations for the purchase of goods and services, the benefits of which extend beyond the fiscal year and which add to the assets of the local government unit concerned, including investments in public utilities such as public markets and slaughterhouses; (e) "Continuing Appropriation" refers to an appropriation available to support obligations for a specified purpose or projects, such as those for the construction of physical structures or for the
acquisition of real property or equipment, even when these obligations are incurred beyond the budget year; (f) "Current Operating Expenditures" refers to appropriations for the purchase of goods and services for the conduct of normal government operations within the fiscal year, including goods and services that will be used or consumed during the budget year; (g) "Expected Results" refers to the services, products, or benefits that will accrue to the public, estimated in terms of performance measures or physical targets; (h) "Fund" refers to a sum of money, or other assets convertible to cash, set aside for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations, and constitutes an independent fiscal and accounting entity; (i) "Income" refers to all revenues and receipts collected or received forming the gross accretions of funds of the local government unit; (j) "Obligations" refers to an amount committed to be paid by the local government unit for any lawful act made by an accountable officer for and in behalf of the local government unit concerned; (k) "Personal Services" refers to appropriations for the payment of salaries, wages and other compensation of permanent, temporary, contractual, and casual employees of the local government unit; (l) "Receipts" refers to income realized from operations and activities of the local government or are received by it in the exercise of its corporate functions, consisting of charges for services rendered, conveniences furnished, or the price of a commodity sold, as well as loans, contributions or aids from other entities, except provisional advances for budgetary purposes; and (m) "Revenue" refers to income derived from the regular system of taxation enforced under authority of law or ordinance and, as such, accrue more or less regularly every year. xxx
Sec. 346. Disbursements of Local Funds and Statement of Accounts. –Disbursements shall be made in accordance with the ordinance authorizing the annual or supplemental appropriations without the prior approval of the sanggunian concerned. Within thirty (3) days after the close of each month, the local accountant shall furnish the sanggunian with such financial statements as may be prescribed by the COA. In the case of the year-end statement of accounts, the period shall be sixty (60) days after the thirty-first (31st) of December. Sec. 306 of R.A. No. 7160 merely contains a definition of terms. Read in conjunction with Sec. 346, Sec. 306 authorizes the local chief executive to make disbursements of funds in accordance with the ordinance authorizing the annual or supplemental appropriations. The "ordinance" referred to in Sec. 346 pertains to that which enacts the l ocal government unit’s budget, for which reason no further authorization from the local council is required, the ordinance functioning, as it does, as the legislative authorization of the budget.17 To construe Sections 306 and 346 of R.A. No. 7160 as exceptions to Sec. 22(c) would render the requirement of prior sanggunian authorization superfluous, useless and irrelevant. There would be no instance when such prior authorization would be required, as in contracts involving the disbursement of appropriated funds. Yet, this is obviously not the effect Congress had in mind when it required, as a condition to the local chief executive’s representation of the local government unit in business transactions, the prior authorization of the sanggunianconcerned. The requirement was deliberately added as a measure of check and balance, to temper the authority of the local chief executive, and in recognition of the fact that the corporate powers of the local government unit are wielded as much by its chief executive as by its council.18 However, as will be discussed later, the sanggunianauthorization may be in the form of an appropriation ordinance passed for the year which specifically covers the project, cost or contract to be entered into by the local government unit. The fact that the Province of Cebu operated under a reenacted budget in 2004 lent a complexion to this case which the trial court did not apprehend. Sec. 323 of R.A. No. 7160 provides that in case of a reenacted budget, "only the annual appropriations for salaries and wages of existing positions, statutory and contractual obligations, and essential operating expenses authorized in the annual and supplemental budgets for the preceding year shall be deemed reenacted and disbursement of funds shall be in accordance therewith."19
It should be observed that, as indicated by the word "only" preceding the above enumeration in Sec. 323, the items for which di sbursements may be made under a reenacted budget are exclusive. Clearly, contractual obligations which were not included in the previous year’s annual and supplemental budgets cannot be disbursed by the local government unit. It follows, too, that new contracts entered into by the local chief executive require the prior approval of the sanggunian. We agree with the OSG that the words "disbursement" and "contract" separately referred to in Sec. 346 and 22(c) of R.A. No. 7160 should be understood in their common signification. Disbursement is defined as "To pay out, commonly from a fund. To make payment in settlement of a debt or account payable."20 Contract, on the other hand, is defined by our Civil Code as "a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service."21 And so, to give life to the obvious intendment of the law and to avoid a construction which would render Sec. 22(c) of R.A. No. 7160 meaningless,22 disbursement, as used in Sec. 346, should be understood to pertain to payments for statutory and contractual obligations which the sanggunian has already authorized thru ordinances enacting the annual budget and are therefore already subsisting obligations of the local government unit. Contracts, as used in Sec. 22(c) on the other hand, are those which bind the local government unit to new obligations, with their corresponding terms and conditions, for which the local chief executive needs prior authority from the sanggunian. Elsewhere in R.A. No. 7160 are found provisions which buttress the stand taken by petitioners against Gov. Garcia’s seemingly heedless actions. Sec. 465, Art. 1, Chapter 3 of R.A. No. 7160 states that the provincial governor shall "[r]epresent the province in all its business transactions and sign in its behalf all bonds, contracts, and obligations, and such other documents upon authority of the Sangguniang Panlalawigan or pursuant to law or ordinances." Sec. 468, Art. 3 of the same chapter also establishes the sanggunian’s power, as the province’s legislative body, to authorize the provincial governor to negotiate and contract loans, lease public buildings held in a proprietary capacity to private parties, among other things. The foregoing inexorably confirms the indispensability of the sanggunian’s authorization in the execution of contracts which bind the local government unit to new obligations. Note should be taken of the fact that R.A. No. 7160 does not expressly state the form that the authorization by the sanggunian has to take. Such authorization may be done by resolution
enacted in the same manner prescribed by ordinances, except that the resolution need not go through a third reading for final consideration unless the majority of all the members of the sangguniandecides otherwise.23
cause of action has already accrued in favor of one or the other party, there is nothing more for the court to explain or clarify, short of a judgment or final order.
As regards the trial court’s pronouncement that R.A. No. 9184 does not require the head of the procuring entity to secure a resolution from the sanggunian concerned before entering into a contract, attention should be drawn to the very same provision upon which the trial court based its conclusion. Sec. 37 provides: "The Procuring Entity shall issue the Notice to Proceed to the winning bidder not later than seven (7) calendar days from the date of approval of the contract by the appropriate authority x x x."
Thus, the trial court erred in assuming jurisdiction over the action despite the fact that the subject thereof had already been breached by Gov. Garcia prior to the filing of the action. Nonetheless, the conversion of the petition into an ordinary civil action is warranted under Sec. 6, Rule 63 25 of the Rules of Court.
R.A. No. 9184 establishes the law and procedure for public procurement. Sec. 37 thereof explicitly makes the approval of the appropriate authority which, in the case of l ocal government units, is the sanggunian, the point of reference for the notice to proceed to be issued to the winning bidder. This provision, rather than being in conflict with or providing an exception to Sec. 22(c) of R.A. No. 7160, blends seamlessly with the latter and even acknowledges that in the exercise of the local government unit’s corporate powers, the chief executive acts merely as an instrumentality of the local council. Read together, the cited provisions mandate the local chief executive to secure the sanggunian’s approval before entering into procurement contracts and to transmit the notice to proceed to the winning bidder not later than seven (7) calendar days therefrom. Parenthetically, Gov. Garcia’s petition for declaratory relief should have been dismissed because it was instituted after the COA had already found her in violation of Sec. 22(c) of R.A. No. 7160. One of the important requirements for a petition for declaratory relief under Sec. 1, Rule 63 of the Rules of Court is that it be filed before breach or violation of a deed, will, contract, other written instrument, statute, executive order, regulation, ordinance or any other governmental regulation. In Martelino v. National Home Mortgage Finance Corporation ,24 we held that the purpose of the action i s to secure an authoritative statement of the rights and obligations of the parties under a statute, deed, contract, etc ., for their guidance in its enforcement or compliance and not to settle issues arising from its alleged breach. It may be entertained only before the breach or violation of the statute, deed, contract, etc . to which it refers. Where the law or contract has already been contravened prior to the filing of an action for declaratory relief, the court can no longer assume jurisdiction over the action. Under such circumstances, inasmuch as a
Erroneously, however, the trial court did not treat the COA report as a breach of the law and proceeded to resolve the issues as it would have in a declaratory relief action. Thus, it ruled that prior authorization is not required if there exist ordinances which authorize the local chief executive to enter into contracts. The problem with this ruling is that it fails to take heed of the incongruent facts presented by the parties. What the trial court should have done, instead of deciding the case based merely on the memoranda submitted by the parties, was to conduct a full-blown trial to thresh out the facts and make an informed and complete decision. As things stand, the declaration of the trial court to the effect that no prior authorization is required when there is a prior appropriation ordinance enacted does not put the controversy to rest. The question which should have been answered by the trial court, and which it failed to do was whether, during the period in question, there did exist ordinances (authorizing Gov. Garcia to enter into the questioned contracts) which rendered the obtention of another authorization from the Sangguniang Panlalawigan superfluous. It should also have determined the character of the questioned contracts, i.e., whether they were, as Gov. Garcia claims, mere disbursements pursuant to the ordinances supposedly passed by the sanggunian or, as petitioners claim, new contracts which obligate the province without the provincial board’s authority. It cannot be overemphasized that the paramount consideration in the present controversy is the fact that the Province of Cebu was operating under a re-enacted budget in 2004, resulting in an altogether different set of rules as directed by Sec. 323 of R.A. 7160. This Decision, however, should not be so construed as to proscribe any and all contracts entered into by the local chief executive without formal sanggunian authorization. In cases, for instance, where the local government unit operates under an annual as opposed to a re-enacted budget, it should be acknowledged that the appropriation passed by the sanggunian may validly serve as the authorization required under Sec. 22(c) of R.A. No. 7160. After all, an appropriation is an authorization made by ordinance, directing the payment of goods and services from local government funds under specified
conditions or for specific purposes. The appropriation covers the expenditures which are to be made by the local government unit, such as current operating expenditures26 and capital outlays.27 The question of whether a sanggunian authorization separate from the appropriation ordinance is required should be resolved depending on the particular circumstances of the case. Resort to the appropriation ordinance is necessary in order to determine if there is a provision therein which specifically covers the expense to be incurred or the contract to be entered into. Should the appropriation ordinance, for instance, already contain in sufficient detail the project and cost of a capital outlay such that all that the local chief executive needs to do after undergoing the requisite public bidding is to execute the contract, no further authorization is required, the appropriation ordinance already being sufficient. On the other hand, should the appropriation ordinance describe the projects in generic terms such as "infrastructure projects," "inter-municipal waterworks, drainage and sewerage, flood control, and irrigation systems projects," "reclamation projects" or "roads and bridges," there is an obvious need for a covering contract for every specific project that in turn requires approval by the sanggunian. Specific sanggunian approval may also be required for the purchase of goods and services which are neither specified in the appropriation ordinance nor encompassed within the regular personal services and maintenance operating expenses. In view of the foregoing, the instant case should be treated as an ordinary civil action requiring for its complete adjudication the confluence of all relevant facts. Guided by the framework laid out in this Decision, the trial court should receive further evidence in order to determine the nature of the questioned contracts entered into by Gov. Garcia, and the existence of ordinances authorizing her acts. WHEREFORE, the petition is GRANTED IN PART. The Decision dated July 11, 2006, of the Regional Trial Court of Cebu City, Branch 9, in Civil Case No. CEB-31560, and its Order dated October 25, 2006, are REVERSED andSET ASIDE. The case is REMANDED to the court a quo for further proceedings in accordance with this Decision. No pronouncement as to costs. SO ORDERED.
G.R. No. 172457
December 24, 2008
CJH DEVELOPMENT CORPORATION, petitioner, vs. BUREAU OF INTERNAL REVENUE, BUREAU OF CUSTOMS, and DISTRICT COLLECTOR OF CUSTOMS EDWARD O. BALTAZAR, respondents. DECISION TINGA, J .: Before us is a petition for review on certiorar i1 seeking the reversal of the orders dated 14 October 20052 and 04 April 2006 3 of the Regional Trial Court (RTC) of Baguio City, Branch 5. The RTC dismissed the petition for declaratory relief filed by petitioner CJH Development Corporation (CJH). This petition was brought directly to this Court since it involves a pure question of law in accordance with Rule 50 of the 1997 Revised Rules of Court. Proclamation No. 420 (the Proclamation) was issued by then President Fidel V. Ramos to create a Special Economic Zone (SEZ) in a portion of Camp John Hay in Baguio City. Section 3 4 of the Proclamation granted to the newly created SEZ the same incentives then already enjoyed by the Subic SEZ. Among these incentives are the exemption from the payment of taxes, both local and national, for businesses located inside the SEZ, and the operation of the SEZ as a special customs territory providing for tax and duty free importations of raw materials, capital and equipment .5 In line with the Proclamation, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 12-976 while the Bureau of Customs (BOC) issued Customs Administrative Order No. 2-98.7 The two issuances provided the rules and regulations to be implemented within the Camp John Hay SEZ. Subsequently, however, Section 3 of the Proclamation was declared unconstitutional in part by the Court en banc in John Hay Peoples Alternative Coalition v. Lim, 8 when it ruled that: WHEREORE, the second sentence of Section 3 of Proclamation No. 420 is hereby declared NULL and VOID and is accordingly declared of no legal force and effect. Public respondents are hereby enjoined from implementing the aforesaid void provision.
Proclamation No. 420, without the invalidated portion, remains valid and effective.9 The decision attained finality when the Court en banc denied the motion for reconsideration through a resolution dated 29 March 2005 .10 While the motion for reconsideration was pending with the Court, on 16 January 2004 the Office of the City Treasurer of Baguio sent a demand letter 11 which stated that: In view of the Supreme Court decision dated October 24, 2003 on G.R. No. 119775, declaring null and void Section 3 of Proclamation 420 on applicable incentives of Special Economic Zones, we are sending you updated statements of real property taxes due on real estate properties declared under the names of the Bases Conversion and Development Authority and Camp John Hay Development Corporation totalingP101,935,634.17 inclusive of penalties, as of January 10, 2004. May we request for the immediate settlement of the above indebtedness, otherwise this office shall be constrained to hold the processing of your business permit pursuant to Section 2 C c.1 of Tax Ordinance 2000-001 of Baguio City. Five months later, on 26 May 2005, the BOC followed suit and demanded 12 of CJH the payment ofP71,983,753.00 representing the duties and taxes due on all the importations made by CJH from 1998 to 2004. For its part, the BIR sent a letter dated 23 May 2005 to CJH wherein it treated CJH as an ordinary corporation subject to the regular corporate income tax as well as to the Value Added Tax of 1997 .13 CJH questioned the retroactive application by the BOC of the decision of this Court in G.R. No. 119775. It claimed that the assessment was null and void because it violated the non-retroactive principle under the Tariff and Customs Code.14 The Office of the Solicitor General (OSG) filed a motion to dismiss.15 The OSG claimed that the remedy of declaratory relief is inapplicable because an assessment is not a proper subject of such petition. It further alleged that there are administrative remedies which were available to CJH. In an Order 16 dated 28 June 2005, the RTC dropped the City of Baguio as a party to the case. The remaining parties were required to submit their respective memoranda. On 14 October 2005, the RTC rendered its
assailed order .17 It held that the decision in G.R. No. 119775 applies retroactively because the tax exemption granted by Proclamation No. 420 is null and void from the beginning. The RTC also ruled that the petition for declaratory relief is not the appropriate remedy. A judgment of the court cannot be the proper subject of a petition for declaratory relief; the enumeration in Rule 64 is exclusive. Moreover, the RTC held that Commonwealth Act No. 55 (CA No. 55) which proscribes the use of declaratory relief in cases where a taxpayer questions his tax liability is still in force and effect. CJH filed a motion for reconsideration but the RTC denied it .18 Hence this petition, which, as earlier stated, was filed directly to this Court, raising as it does only pure questions of law. There are two issues raised in this petition, one procedural and the other substantive. First, is the remedy of declaratory relief proper in this case? Second, can the decision in G.R. No. 119775 be applied retroactively? The requisites for a petition for declaratory relief to prosper are: (1) there must be a justiciable controversy; (2) the controversy must be between persons whose interests are adverse; (3) the party seeking declaratory relief must have a legal interest in the controversy; and (4) the issue involved must be ripe for judicial determination.19 CJH alleges that CA No. 5520 has already been repealed by the Rules of Court; thus, the remedy of declaratory relief against the assessment made by the BOC is proper. It cited the commentaries of Moran allegedly to the effect that declaratory relief lies against assessments made by the BIR and BOC. Yet in National Dental Supply Co. v. Meer ,21 this Court held that: From the opinion of the former Chief Justice Moran may be deduced that the failure to incorporate the above proviso [CA No. 55] in section 1, rule 66, [now Rule 64] is not due to an intention to repeal it but rather to the desire to leave its application to the sound discretion of the court, which is the sole arbiter to determine whether a case is meritorious or not. And even if it be desired to incorporate it in rule 66, it is doubted if it could be done under the rule-making power of the Supreme Court considering that the nature of said proviso is substantive and not adjective, its purpose being to lay down a policy as to the right of a taxpayer to contest the collection of taxes on the part of a revenue officer or of the Government. With the adoption of said proviso, our law-making body has asserted its policy on the matter, which is to prohibit a taxpayer to question his liability for the payment of any tax that may be collected by the Bureau of Internal Revenue. As this Court well
said, quoting from several American cases, "The Government may fix the conditions upon which it will consent to litigate the validity of its original taxes..." "The power of taxation being legislative, all incidents are within the control of the Legislature." In other words, it is our considered opinion that the proviso contained in Commonwealth Act No. 55 is still in full force and effect and bars the plaintiff from filing the present action .22 (Emphasis supplied) (Citations omitted.) As a substantive law that has not been repealed by another statute, CA No. 55 is still in effect and holds sway. Precisely, it has removed from the courts’ jurisdiction over petitions for declaratory relief involving tax assessments. The Court cannot repeal, modify or alter an act of the Legislature. Moreover, the proper subject matter of a declaratory relief is a deed, will, contract, or other written instrument, or the construction or validity of statute or ordinance.23 CJH hinges its petition on the demand letter or assessment sent to it by the BOC. However, it is really not the demand letter which is the subject matter of the petition. Ultimately, this Court is asked to determine whether the decision of the Court en banc in G.R. No. 119775 has a retroactive effect. This approach cannot be countenanced. A petition for declaratory relief cannot properly have a court decision as its subject matter. In Tanda v. Aldaya,24 we ruled that: x x x [A] court decision cannot be interpreted as included within the purview of the words "other written instrument," as contended by appellant, for the simple reason that the Rules of Court already provide[s] for the ways by which an ambiguous or doubtful decision may be corrected or clarified without need of resorting to the expedient prescribed by Rule 66 [now Rule 64] .25 There are other remedies available to a party who is not agreeable to a decision whether it be a question of law or fact. If it involves a decision of an appellate court, the party may file a motion for reconsideration or new trial in order that the defect may be corrected.26 In case of ambiguity of the decision, a party may file a motion for a clarificatory judgment.27 One of the requisites of a declaratory relief is that the issue must be ripe for judicial determination. This means that litigation is inevitable 28 or there is no adequate relief available in any other form or proceeding .29 However, CJH is not left without recourse. The Tariff and Customs Code (TCC) provides for the administrative and judicial remedies available to a taxpayer who is minded to contest an assessment, subject of course to certain reglementary periods. The TCC provides that a protest can be
raised provided that payment first be made of the amount due .30 The decision of the Collector can be reviewed by the Commissioner of Customs who can approve, modify or reverse the decision or action of the Collector .31 If the party is not satisfied with the ruling of the Commissioner, he may file the necessary appeal to the Court of Tax Appeals.32 Afterwards, the decision of the Court of Tax Appeals can be appealed to this Court. With the foregoing disquisition on the first issue, there is no need to delve into the second issue at this juncture. It should be noted though, as admitted by CJH in its Certificate of Non-Forum Shopping ,33 that even before the filing of this petition, it already had a pending petition for review with this Court, docketed as G.R. No. 16923 434 and entitled, Camp John Hay Development Corporation v. Central Board of Assessment Appeals, et al. That case emanated from assessments made in 2002 for real estate taxes on CJH by the City of Baguio. Said assessments were duly challenged before the Local Board of Assessment Appeals, the Central Board of Assessment Appeals and the Court of Tax Appeals. The petition in G.R. No. 169234 was filed with this Court in September 2005, or after our 2003 Decision in John Hay Peoples Alternative Coalition had attained finality. CJH therein raised the same question of law, as in this case, whether the doctrine of operative fact applies to G.R. No. 119775. Clearly, the Court in G.R. No. 169234 is better positioned to resolve that question of law, there being no antecedent jurisdictional defects that would preclude the Court from squarely deciding that particular issue. CJH is free to reiterate this current point of clarification as it litigates the petition in G.R. No. 169234. WHEREFORE, the Petition is DENIED. SO ORDERED.
G.R. No. 144570 September 21, 2005 VIVENCIO V. JUMAMIL, Petitioners, vs. JOSE J. CAFE, GLICERIO L. ALERIA, RUDY G. ADLAON, DAMASCENO AGUIRRE, RAMON PARING, MARIO ARGUELLES, ROLANDO STA. ANA, NELLIE UGDANG, PEDRO ATUEL, RUBY BONSOBRE, RUTH FORNILLOS, DANIEL GATCHALIAN, RUBEN GUTIERREZ, JULIET GATCHALIAN, ZENAIDA POBLETE, ARTHUR LOUDY, LILIAN LU, ISABEL MEJIA, EDUARDO ARGUELLES, LAO SUI KIEN, SAMUEL CONSOLACION, DR. ARTURO MONTERO, DRA. LILIOSA MONTERO, PEDRO LACIA, CIRILA LACIA, EVELYN SANGALANG, DAVID CASTILLO, ARSENIO SARMIENTO, ELIZABETH SY, METODIO NAVASCA, HELEN VIRTUDAZO, IRENE LIMBAGA, SYLVIA BUSTAMANTE, JUANA DACALUS, NELLIE RICAMORA, JUDITH ESPINOSA, PAZ KUDERA, EVELYN PANES, AGATON BULICATIN, PRESCILLA GARCIA, ROSALIA OLITAO, LUZVIMINDA AVILA, GLORIA OLAIR, LORITA MENCIAS, RENATO ARIETA, EDITHA ACUZAR, LEONARDA VILLACAMPA, ELIAS JARDINICO, BOBINO NAMUAG, FELIMON NAMUAG, EDGAR CABUNOC, HELEN ARGUELLES, HELEN ANG, FELECIDAD PRIETO, LUISITO GRECIA, LILIBETH PARING, RUBEN CAMACHO, ROSALINDA LALUNA, LUZ YAP, ROGELIO LAPUT, ROSEMARIE WEE, TACOTCHE RANAIN, AVELINO DELOS REYES and ROGASIANO OROPEZA, Respondent. DECISION
In 1989, petitioner Jumami l4 filed before the Regional Trial Court (RTC) of Panabo, Davao del Norte a petition for declaratory relief with prayer for preliminary injunction and writ of restraining order against public respondents Mayor Jose J. Cafe and the members of the Sangguniang Bayan of Panabo, Davao del Norte. He questioned the constitutionality of Municipal Resolution No. 7, Series of 1989 (Resolution No. 7). Resolution No. 7, enacting Appropriation Ordinance No. 111, provided for an initial appropriation of P765,000 for the construction of stalls around a proposed terminal fronting the Panabo Public Marke t5 which was destroyed by fire. Subsequently, the petition was amended due to the passage of Resolution No. 49, series of 1989 (Resolution No. 49), denominated as Ordinance No. 10, appropriating a further amount of P1,515,000 for the construction of additional stalls in the same public market.6 Prior to the passage of these resolutions, respondent Mayor Cafe had already entered into contracts with those who advanced and deposited (with the municipal treasurer) from their personal funds the sum of P40,000 each. Some of the parties were close friends and/or relatives of the public respondents.7 The construction of the stalls which petitioner sought to stop through the preliminary injunction in the RTC was nevertheless finished, rendering the prayer therefor moot and academic. The leases of the stalls were then awarded by public raffle which, however, was limited to those who had deposited P40,000 each .8 Thus, the petition was amended anew to include the 57 awardees of the stalls as private respondents.9
CORONA, J .: In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Vivencio V. Jumamil seeks to reverse the decision of the Court of Appeals dated July 24, 20001 in CA-G.R. CV No. 35082, the dispositive portion of which read: With the foregoing, the assailed Decision of B ranch 4, Regional Trial Court of Panabo Davao dated 26 November 1990 in Sp. Civil Action No. 89-1 is hereby AFFIRMED.2 The Regional Trial Court dismissed petitioner’s petition for declaratory relief with prayer for preliminary injunction and writ of restraining order, and ordered the petitioner to pay attorney’s fees in the amount of P1,000 to each of the 57 private respondents .3 The factual antecedents follow.
Petitioner alleges that Resolution Nos. 7 and 49 were unconstitutional because they were: …passed for the business, occupation, enjoyment and benefit of private respondents who deposited the amount ofP40,000.00 for each stall, and with whom also the mayor had a prior contract to award the would be constructed stalls to all private respondents.… As admitted by public respondents some of the private respondents are close friends and/or relatives of some of the public respondents which makes the questioned acts discriminatory. The questioned resolutions and ordinances did not provide for any notice of publication that the special privilege and unwarranted benefits conferred on the private respondents maybe ( sic ) availed of by anybody who can deposit the amount of P40,000.00.10 Neither was there any prior notice or publication pertaining to contracts entered into by public and private respondents for the construction of stalls
to be awarded to private respondents that the same can be availed of by anybody willing to deposit P40,000.00.11
interest in it that the rule requires as a basis for declaratory reliefs (PLUM vs. Santos, 45 SCRA 147).
In this petition, petitioner prays for the reversal of the decision of the Court of Appeals (CA) and a declaration of the unconstitutionality, illegality and nullity of the questioned resolutions/ordinances and lease contracts entered into by the public and private respondents; for the declaration of the illegality of the award of the stalls during the pendency of this action and for the re-raffling and award of the stalls in a manner that is fair and just to all interested applicants;12 for the issuance of an order to the local government to admit any and all interested persons who can deposit the amount of P40,000 for a stall and to order a re-raffling for the award of the stalls to the winners of the re-raffle; for the nullification of the award of attorney’s fees to private respondents on the ground that it was erro neous and unmeritorious; and for the award of damages in favor of petitioner in the form of attorney’s fees .13
Following this ruling, the petitioners were not parties in the agreement for the award of the market stalls by the public respondents, in the public market of Panabo, Davao, and since the petitioners were not parties to the award of the market stalls and whose rights are never affected by merely stating that they are taxpayers, they have no legal interest in the controversy and they are not, therefore, entitled to bring an action for declaratory relief .18
At the outset, we must point out that the issue of the constitutionality of the questioned resolutions was never ruled upon by both the RTC and the CA. It appears that on May 21, 1990, both parties agree d14 to await the decision in CA G.R. SP No. 20424,15 which involved similar facts, issues and parties. The RTC, consequently, deferred the resolution of the pending petition. The appellate court eventually rendered its decision in that case finding that the petitioners were not entitled to the declaratory relief prayed for as they had no legal interest in the controversy. Upon elevation to the Supreme Court as UDK Case No. 9948, the petition for review on certiorari was denied for being insufficient in form and substance.16 The RTC, after receipt of the entry of the SC judgment ,17 dismissed the pending petition on November 26, 1990. It adopted the ruling in CA G.R. SP No. 20424: xxxxxxxxx We find petitioners’ aforesaid submi ssion utterly devoid of merit. It is, to say the least, questionable whether or not a special civil action for declaratory relief can be filed in relation to a contract by persons who are not parties thereto. Under Sec. 1 of Rule 64 of the Rules of Court, any person interested under a deed, will, contract, or other written instruments may bring an action to determine any question of the contract, or validly arising under the instrument for a declaratory ( sic ) of his rights or duties thereunder. Since contracts take effect only between the parties (Art. 1311) it is quite plain that one who is not a party to a contract can not have the
WHEREFORE, the petition of the petitioners as taxpayers being without merit and not in consonance with law, is hereby ordered DISMISSED. As to the counterclaim for damages, the same not having been actually and fully proven, the Court gives no award as to the same. It is not amiss to state here that the petitioners agreed to be bound by the outcome of Special Civil Case No. 89-10. However, for unnecessarily dragging into Court the fifty-seven (57) private respondents who are bonafide businessmen and stall holders in the public market of Panabo, it is fitting and proper for the petitioners to be ordered payment of attorney’s fees. Accordingly, the herein petitioners are ordered to pay ONE THOUSAND (P1,000.00) PESOS EACH to the 57 private respondents, as attorney’s fees, jointly and severally, and for them to pay the costs of this suit. SO ORDERED.19 From this adverse decision, petitioner again appealed to the Court of Appeals in CA-G.R. CV No. 35082 which is now before us for review. The appellate court, yet again, affirmed the RTC decision and held that: Res judicata does not set in a case dismissed for lack of capacity to sue, because there has been no determination on the merits. Neither does the law of the case apply. However, the court a quo took judicial notice of the fact that petitioners agreed to be bound by the outcome of Special Civil Case No. 89-10. Allegans contraria non est audiendus. (He is not to be heard who alleges things contradictory to each other.) It must be here observed that petitioners-appellants were the ones who manifested that it would be practical to await the decision of the Supreme Court in their petition for certiorari, for after all the facts, circumstances and issues in that
case, are exactly the same as in the case that is here appealed. Granting that they may evade such assumption, a careful evaluation of the case would lead Us to the same conclusion: that the case for declaratory relief is dismissible. As enumerated by Justice Regalado in his "Remedial Law Compendium", the requisites of an action for declaratory relief are: (a) The subject matter of the controversy must be a deed, will, contract or other written instrument, statute, executive order or regulation, or ordinance; (b) The terms of said documents and the validity thereof are doubtful and require judicial construction; (c) There must have been no breach of the documents in question; (d) There must be an actual justiciable controversy or the "ripening seeds" of one between persons whose interests are adverse; (e) The issue must be ripe for judicial determination; and (f) Adequate relief is not available through other means or other forms of action or proceeding. In Tolentino vs. Board of Accountancy, et al , 90 Phil. 83, 88, the Supreme Court ratiocinated the requisites of justiciability of an action for declaratory relief by saying that the court must be "satisfied that an actual controversy, or the ripening seeds of one, exists between parties, all of whom are sui juris and before the court, and that the declaration sought will be a practical help in ending the controversy." The petition must show "an active antagonistic assertion of a legal right on one side and a denial thereof on the other concerning a real, and not a mere theoretical question or issue. The question is whether the facts alleged a substantial controversy between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory relief. In GSISEA and GSISSU vs. Hon. Alvendia etc. and GSIS, 108 Phil. 505, the Supreme Court ruled a declaratory relief improper or unnecessary when it appears to be a moot case, since it seeks to get a judgment on a pretended controversy, when in reality there is none. In Kawasaki Port Service Corporation vs. Amores, 199 SCRA 230, citing Dy Poco vs. Commissioner of Immigration, et al. , 16 SCRA 618, the rule was stated: "where a declaratory judgment as to a disputed fact would be determinative of issues rather than a construction of definite stated
rights, statuses and other relations, commonly expressed in a written instrument, the case is not one for declaratory judgment." Indeed, in its true light, the present petition for declaratory relief seems to be no more than a request for an advisory opinion to which courts in this and other jurisdiction have cast a definite aversion. The ordinances being assailed are appropriation ordinances. The passage of the ordinances were pursuant to the public purpose of constructing market stalls. For the exercise of judicial review, the governmental act being challenged must have had an adverse effect on the person challenging it, and the person challenging the act, must have "standing" to challenge, i.e., in the categorical and succinct language of Justice Laurel, he must have a "personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement." Standing is a special concern in constitutional law because in some cases suits are brought not by parties who have been personally injured by the operation of a law or by official action taken, but by concerned citizens, taxpayers or voters who actually sue in the public interest. Hence the question in standing is whether such parties have "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court largely depends for illumination of difficult constitutional questions. A careful analysis of the records of the case at bar would disclose that petitioners-appellants have suffered no wrong under the terms of the ordinances being assailed – and, naturally need no relief in the form they now seek to obtain. Judicial exercise cannot be exercised in vacuo. The policy of the courts is to avoid ruling on a constitutional question and to presume that the acts of the political departments are valid in the absence of a clear and unmistakable showing to the contrary. To doubt is to sustain. The issue is not the ordinances themselves, but the award of the market stalls to the private respondents on the strength of the contracts individually executed by them with Mayor Cafe. To reiterate, a person who is not a party to a contract cannot file a petition for declaratory relief and seek judicial interpretation of such contract (Atlas Consolidated Mining Corp. vs. Court of Appeals, 182 SCRA 166). Not having established their locus standi , we see no error committed by the court a quo warranting reversal of the appealed decision. With the foregoing, the assailed Decision of Branch 4, Regional Trial Court of Panabo Davao dated 26 November 1990 in Sp. Civil Action No. 89-1 is hereby AFFIRMED. SO ORDERED.20
Thus, both the RTC and the CA dismissed the case on the ground of petitioner’s lack of legal standing and the parties’ agreement to be bound by the decision in CA G.R. SP. No. 20424.
ruled that petitioner, who was not a party to the lease contracts, had no standing to file the petition for declaratory relief and seek judicial interpretation of the agreements.
The issues to be resolved are the following:
We do not agree. Petitioner brought the petition in his capacity as taxpayer of the Municipality of Panabo, Davao del Norte 23 and not in his personal capacity. He was questioning the official acts of the public respondents in passing the ordinances and entering into the lease contracts with private respondents. A taxpayer need not be a party to the contract to challenge its validity.24 Atlas Consolidated Mining & Development Corporation v. Court of Appeal s25 cited by the CA does not apply because it involved contracts between two private parties.
(1) whether the parties were bound by the outcome in CA G.R. SP. No. 20424; (2) whether petitioner had the legal standing to bring the petition for declaratory relief; (3) whether Resolution Nos. 7 and 49 were unconstitutional; and (4) whether petitioner should be held liable for damages. L o c u s S t an d i and the
Constitutionality Issue We will first consider the second issue. The petition for declaratory relief challenged the constitutionality of the subject resolutions. There is an unbending rule that courts will not assume jurisdiction over a constitutional question unless the following requisites are satisfied: (1) there must be an actual case calling for the exercise of judicial review; (2) the question before the Court must be ripe for adjudication; (3) the person challenging the validity of the act must have standing to do so; (4) the question of constitutionality must have been raised at the earliest opportunity, and (5) the issue of constitutionality must be the very lis mota of the case.21 Legal standing or locus standi is a party’s personal and substantial interest in a case such that he has sustained or will sustain direct injury as a result of the governmental act being challenged. It calls for more than just a generalized grievance. The term "interest" means a material interest, an interest in issue affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest .22 Unless a person’s constitutional rights are adversely affected by the statute or ordinance, he has no legal standing. The CA held that petitioner had no standing to challenge the two resolutions/ordinances because he suffered no wrong under their terms. It also concluded that "the issue (was) not the ordinances themselves but the award of the market stalls to the private respondents on the strength of the contracts individually executed by them with Mayor Cafe." Consequently, it
Parties suing as taxpayers must specifically prove sufficient interest in preventing the illegal expenditure of money raised by taxation.26 The expenditure of public funds by an officer of the State for the purpose of executing an unconstitutional act constitutes a misapplication of such funds.27 The resolutions being assailed were appropriations ordinances. Petitioner alleged that these ordinances were "passed for the business, occupation, enjoyment and benefit of private respondents "28 (that is, allegedly for the private benefit of respondents) because even before they were passed, respondent Mayor Cafe and private respondents had already entered into lease contracts for the construction and award of the market stalls.29 Private respondents admitted they deposited P40,000 each with the municipal treasurer, which amounts were made available to the municipality during the construction of the stalls. The deposits, however, were needed to ensure the speedy completion of the stalls after the public market was gutted by a series of fires .30 Thus, the award of the stalls was necessarily limited only to those who advanced their personal funds for their construction.31 Petitioner did not seasonably allege his interest in preventing the illegal expenditure of public funds or the specific injury to him as a result of the enforcement of the questioned resolutions and contracts. It was only in the "Remark to Comment" he filed in this Court did he first assert that "he (was) willing to engage in business and (was) interested to occupy a market stall."32 Such claim was obviously an afterthought. Be that as i t may, we have on several occasions relaxed the application of these rules on legal standing:
In not a few cases, the Court has liberalized the locus standi requirement when a petition raises an issue of transcendental significance or paramount importance to the people. Recently, after holding that the IBP had no locus standi to bring the suit, the Court in IBP v. Zamora nevertheless entertained the Petition therein. It noted that "the IBP has advanced constitutional issues which deserve the attention of this Court in view of their seriousness, novelty and weight as precedents."33 ―oOo― Objections to a taxpayer's suit for lack of sufficient personality, standing or interest are procedural matters. Considering the importance to the public of a suit assailing the constitutionality of a tax law, and in keeping with the Court's duty, specially explicated in the 1987 Constitution, to determine whether or not the other branches of the Government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them, the Supreme Court may brush aside technicalities of procedure and take cognizance of the suit .34 ―oOo―
We note that the foregoing was a disputed fact which the courts below did not resolve because the case was dismissed on the basis of petitioner’s lack of legal standing. Nevertheless, petitioner failed to prove the subject ordinances and agreements to be discriminatory. Considering that he was asking this Court to nullify the acts of the local political department of Panabo, Davao del Norte, he should have clearly established that such ordinances operated unfairly against those who were not notified and who were thus not given the opportunity to make their deposits. His unsubstantiated allegation that the public was not notified did not suffice. Furthermore, there was the time-honored presumption of regularity of official duty, absent any showing to the contrary .39 And this is not to mention that: The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid, absent a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine of separation of powers. This means that the measure had first been carefully studied by the legislative and executive departments and found to be in accord with the Constitution before it was finally enacted and approved.40
There being no doctrinal definition of transcendental importance, the following determinants formulated by former Supreme Court Justice Florentino P. Feliciano are instructive: (1) the character of the funds or other assets involved in the case; (2) the presence of a clear case of disregard of a constitutional or statutory prohibition by the public respondent agency or instrumentality of the government; and (3) the lack of any other party with a more direct and specific interest in raising the questions being raised.35
Therefore, since petitioner had no locus standi to
But, even if we disregard petitioner’s lack of legal standing, this petition must still fail. The subject resolutions/ordinances appropriated a total of P2,280,000 for the construction of the public market stalls. Petitioner alleges that these ordinances were discriminatory because, even prior to their enactment, a decision had already been made to award the market stalls to the private respondents who deposited P40,000 each and who were either friends or relatives of the public respondents. Petitioner asserts that "there (was) no publication or invitation to the public that this contract (was) available to all who (were) interested to own a stall and (were) willing to depositP40,000."36 Respondents, however, counter that the "public respondents’ act of entering into this agreement was authorized by the Sangguniang Bayan of Panabo per Resolution No. 180 dated October 10, 1988"37 and that "all the people interested were invited to participate in investing their savings."38
Adverting to the first issue, we observe that petitioner was the one who wanted the parties to await the decision of the Supreme Court in UDK Case No. 9948 since the facts and issues in that case were similar to this. Petitioner, having expressly agreed to be bound by our decision in the aforementioned case, should be reined in by the dismissal order we issued, now final and executory. In addition to the fact that nothing prohibits parties from committing to be bound by the results of another case, courts may take judicial notice of a judgment in another case as l ong as the parties give
question the ordinances, there is no need for us to discuss the constitutionality of said enactments. Were the Parties Bound by the Outcome in CA G.R. SP. No. 20424?
their consent or do not object .41 As opined by Justice Edgardo L. Paras: A court will take judicial notice of its own acts and records in the same case, of facts established in prior proceedings in the same case, of the
authenticity of its own records of another case between the same parties, of the files of related cases in the same court, and of public records on file in the same court. In addition, judicial notice will be taken of the record, pleadings or judgment of a case in another court between the same parties or involving one of the same parties, as well as of the record of another case between different parties in the same court.42 Damages Finally, on the issue of damages, petitioner asserts that he impleaded the 57 respondents in good faith since the award of the stalls to them was made during the pendency of the action .43 Private respondents refute this assertion and argue that petitioner filed this action in bad faith and with the intention of harassing them inasmuch as he had already filed CA G.R. SP. No. 20424 even before then .44 The RTC, affirmed by the CA, held that petitioner should pay attorney’s fees "for unnecessarily dragging into Court the 57 private respondents who (were) bonafide businessmen and stall holders in the public market of Panabo."45 We do not agree that petitioner should be held liable for damages. It is not sound public policy to put a premium on the right to litigate where such right is exercised in good faith, albeit erroneously.46 The alleged bad faith of petitioner was never established. The special circumstances in Article 2208 of the Civil Code justifying the award of attorney’s fees are not present in this case. WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 35082 is hereby AFFIRMED with theMODIFICATION that the award of attorney's fees to private respondents is deleted. Costs against petitioner. SO ORDERED.
G.R. No. 159357
April 28, 2004
Brother MARIANO "MIKE" Z. vs. SOCIAL JUSTICE SOCIETY, respondent.
VELARDE, petitioner,
DECISION PANGANIBAN, J . : A decision that does not conform to the form and substance required by the Constitution and the law is void and deemed legally inexistent. To be valid, decisions should comply with the form, the procedure and the substantive requirements laid out in the Constitution, the Rules of Court and relevant circulars/orders of the Supreme Court. For the guidance of the bench and the bar, the Court hereby discusses these forms, procedures and requirements. The Case Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, assailing the June 12, 2003 Decision 2 and July 29, 2003 Order 3 of the Regional Trial Court (RTC) of Manila (Branch 49). 4 The challenged Decision was the offshoot of a Petition for Declaratory Relief 5 filed before the RTC-Manila by herein Respondent Social Justice Society (SJS) against herein Petitioner Mariano "Mike" Z. Velarde, together with His Eminence, Jaime Cardinal Sin, Executive Minister Eraño Manalo, Brother Eddie Villanueva and Brother Eliseo F. Soriano as co-respondents. The Petition prayed for the resolution of the question "whether or not the act of a religious leader like any of herein respondents, in endorsing the candidacy of a candidate for elective office or in urging or requiring the members of his flock to vote for a specified candidate, is violative of the letter or spirit of the constitutional provisions x x x." 6 Alleging that the questioned Decision did not contain a statement of facts and a dispositive portion, herein petitioner filed a Clarificatory Motion and Motion for Reconsideration before the trial court. Soriano, his corespondent, similarly filed a separate Motion for Reconsideration. In response, the trial court issued the assailed Order, which held as follows: "x x x [T]his Court cannot reconsider, because what it was asked to do, was only to clarify a Constitutional provision and to declare whether acts are violative thereof. The Decision did not make a
dispositive portion because a dispositive portion is required only in coercive reliefs, where a redress from wrong suffered and the benefit that the prevailing party wronged should get. The step that these movants have to take, is direct appeal under Rule 45 of the Rules of Court, for a conclusive interpretation of the Constitutional provision to the Supreme Court."7 The Antecedent Proceedings On January 28, 2003, SJS filed a Petition for Declaratory Relief ("SJS Petition") before the RTC-Manila against Velarde and his aforesaid corespondents. SJS, a registered political party, sought the interpretation of several constitutional provisions,8 specifically on the separation of church and state; and a declaratory judgment on the constitutionality of the acts of religious leaders endorsing a candidate for an elective office, or urging or requiring the members of their flock to vote for a specified candidate. The subsequent proceedings were recounted in the challenged Decision in these words: "x x x. Bro. Eddie Villanueva submitted, within the original period [to file an Answer], a Motion to Dismiss. Subsequently, Executive Minister Eraño Manalo and Bro. Mike Velarde, filed their Motions to Dismiss. While His Eminence Jaime Cardinal L. Sin, filed a Comment and Bro. Eli Soriano, filed an Answer within the extended period and similarly prayed for the dismissal of the Petition. All sought the dismissal of the Petition on the common grounds that it does not state a cause of action and that there is no justiciable controversy. They were ordered to submit a pleading by way of advisement, which was closely followed by another Order denying all the Motions to Dismiss. Bro. Mike Velarde, Bro. Eddie Villanueva and Executive Minister Eraño Manalo moved to reconsider the denial. His Eminence Jaime Cardinal L. Sin, asked for extension to file memorandum. Only Bro. Eli Soriano complied with the first Order by submitting his Memorandum. x x x . "x x x the Court denied the Motions to Dismiss, and the Motions for Reconsideration filed by Bro. Mike Velarde, Bro. Eddie Villanueva and Executive Minister Eraño Manalo, which raised no new arguments other than those already considered in the motions to dismiss x x x."9 After narrating the above incidents, the trial court said that it had jurisdiction over the Petition, because "in praying for a determination as to
whether the actions imputed to the respondents are violative of Article II, Section 6 of the Fundamental Law, [the Petition] has raised only a question of law."10 It then proceeded to a lengthy discussion of the issue raised in the Petition – the separation of church and state – even tracing, to some extent, the historical background of the principle. Through its discourse, the court a quo opined at some point that the "[e]ndorsement of specific candidates in an election to any public office is a clear violation of the separation clause." 11 After its essay on the legal issue, however, the trial court failed to include a dispositive portion in its assailed Decision. Thus, Velarde and Soriano filed separate Motions for Reconsideration which, as mentioned earlier, were denied by the lower court. Hence, this Petition for Review.12 This Court, in a Resolution 13 dated September 2, 2003, required SJS and the Office of the Solicitor General (OSG) to submit their respective comments. In the same Resolution, the Court gave the other parties -impleaded as respondents in the original case below --the opportunity to comment, if they so desired. On April 13, 2004, the Court en banc conducted an Oral Argument. 14 The Issues In his Petition, Brother Mike Velarde submits the following issues for this Court’s resolution: "1. Whether or not the Decision dated 12 June 2003 rendered by the court a quo was proper and valid; "2. Whether or not there exists justiceable controversy in herein respondent’s Petition for declaratory relief; "3. Whether or not herein respondent has legal i nterest in filing the Petition for declaratory relief; "4. Whether or not the constitutional question sought to be resolved by herein respondent is ripe for judicial determination; "5. Whether or not there is adequate remedy other than the declaratory relief; and,
"6. Whether or not the court a quo has jurisdiction over the Petition for declaratory relief of herein respondent." 15 During the Oral Argument, the issues were narrowed down and classified as follows: "A. Procedural Issues "Did the Petition for Declaratory Relief raise a justiciable controversy? Did it state a cause of action? Did respondent have any legal standing to file the Petition for Declaratory Relief? "B. Substantive Issues "1. Did the RTC Decision conform to the form and substance required by the Constitution, the law and the Rules of Court? "2. May religious leaders like herein petitioner, Bro. Mike Velarde, be prohibited from endorsing candidates for public office? Corollarily, may they be banned from campaigning against said candidates?" The Court’s Ruling The Petition of Brother Mike Velarde is meritorious. Procedural Issues: Requisites of Petitions fo r Declaratory Relief
Section 1 of Rule 63 of the Rules of Court, which deals with petitions for declaratory relief, provides in part: "Section 1. Who may file petition.- Any person interested under a deed, will, contract or other written instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties thereunder."
Based on the foregoing, an action for declaratory relief should be filed by a person interested under a deed, a will, a contract or other written instrument, and whose rights are affected by a statute, an executive order, a regulation or an ordinance. The purpose of the remedy is to interpret or to determine the validity of the written instrument and to seek a judicial declaration of the parties’ rights or duties thereunder. 16 The essential requisites of the action are as follows: (1) there is a justiciable controversy; (2) the controversy is between persons whose interests are adverse; (3) the party seeking the relief has a legal interest in the controversy; and (4) the issue is ripe for judicial determination.17
Indeed, SJS merely speculated or anticipated without factual moorings that, as religious leaders, the petitioner and his co-respondents below had endorsed or threatened to endorse a candidate or candidates for elective offices; and that such actual or threatened endorsement "will enable [them] to elect men to public office who [would] in turn be forever beholden to their leaders, enabling them to control the government"[;] 21 and "pos[ing] a clear and present danger of serious erosion of the people’s faith in the electoral process[;] and reinforc[ing] their belief that religious leaders determine the ultimate result of elections," 22 which would then be violative of the separation clause.
Justiciable Controversy
Such premise is highly speculative and merely theoretical, to say the least. Clearly, it does not suffice to constitute a justiciable controversy. The Petition does not even allege any indication or manifest intent on the part of any of the respondents below to champion an electoral candidate, or to urge their so-called flock to vote for, or not to vote for, a particular candidate. It is a time-honored rule that sheer speculation does not give rise to an actionable right.
Brother Mike Velarde contends that the SJS Petition failed to allege, much less establish before the trial court, that there existed a justiciable controversy or an adverse legal interest between them; and that SJS had a legal right that was being violated or threatened to be violated by petitioner. On the contrary, Velarde alleges that SJS premised its action on mere speculations, contingent events, and hypothetical issues that had not yet ripened into an actual controversy. Thus, its Petition for Declaratory Relief must fail. A justiciable controversy refers to an existing case or controversy that is appropriate or ripe for judicial determination, not one that is conjectural or merely anticipatory.18 The SJS Petition for Declaratory Relief fell short of this test. It miserably failed to allege an existing controversy or dispute between the petitioner and the named respondents therein. Further, the Petition did not sufficiently state what specific legal right of the petitioner was violated by the respondents therein; and what particular act or acts of the latter were in breach of its rights, the law or the Constitution. As pointed out by Brother Eliseo F. Soriano in his Comment, 19 what exactly has he done that merited the attention of SJS? He confesses that he does not know the answer, because the SJS Petition (as well as the assailed Decision of the RTC) "yields nothing in this respect." His Eminence, Jaime Cardinal Sin, adds that, at the time SJS filed its Petition on January 28, 2003, the election season had not even started yet; and that, in any event, he has not been actively involved in partisan politics. An initiatory complaint or petition filed with the trial court should contain "a plain, concise and direct statement of the ultimate facts on which the party pleading relies for his claim x x x."20 Yet, the SJS Petition stated no ultimate facts.
Obviously, there is no factual allegation that SJS’ rights are being subjected to any threatened, imminent and inevitable violation that should be prevented by the declaratory relief sought. The judicial power and duty of the courts to settle actual controversies involving rights that are legally demandable and enforceable 23 cannot be exercised when there is no actual or threatened violation of a legal right. All that the 5-page SJS Petition prayed for was "that the question raised in paragraph 9 hereof be resolved." 24 In other words, it merely sought an opinion of the trial court on whether the speculated acts of religious leaders endorsing elective candidates for political offices violated the constitutional principle on the separation of church and state. SJS did not ask for a declaration of its rights and duties; neither did it pray for the stoppage of any threatened violation of its declared rights. Courts, however, are proscribed from rendering an advisory opinion. 25 Cause of Action Respondent SJS asserts that in order to maintain a petition for declaratory relief, a cause of action need not be alleged or proven. Supposedly, for such petition to prosper, there need not be any violation of a right, breach of duty or actual wrong committed by one party against the other. Petitioner, on the other hand, argues that the subject matter of an action for declaratory relief should be a deed, a will, a contract (or other written
instrument), a statute, an executive order, a regulation or an ordinance. But the subject matter of the SJS Petition is "the constitutionality of an act of a religious leader to endorse the candidacy of a candidate for elective office or to urge or require the members of the flock to vote for a specified candidate."26 According to petitioner, this subject matter is "beyond the realm of an action for declaratory relief." 27 Petitioner avers that in the absence of a valid subject matter, the Petition fails to state a cause of action and, hence, should have been dismissed outright by the court a quo. A cause of action is an act or an omission of one party in violation of the legal right or rights of another, causing injury to the latter. 28 Its essential elements are the following: (1) a right in favor of the plaintiff; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) such defendant’s act or omission that is violative of the right of the plaintiff or constituting a breach of the obligation of the former to the latter.29 The failure of a complaint to state a cause of action is a ground for its outright dismissal.30 However, in special civil actions for declaratory relief, the concept of a cause of action under ordinary civil actions does not strictly apply. The reason for this exception is that an action for declaratory relief presupposes that there has been no actual breach of the instruments involved or of rights arising thereunder. 31 Nevertheless, a breach or violation should be impending, imminent or at least threatened. A perusal of the Petition filed by SJS before the RTC discloses no explicit allegation that the former had any legal right in its favor that it sought to protect. We can only infer the interest, supposedly in its favor, from its bare allegation that it "has thousands of members who are citizens-taxpayersregistered voters and who are keenly interested in a judicial clarification of the constitutionality of the partisan participation of religious leaders in Philippine politics and in the process to insure adherence to the Constitution by everyone x x x." 32 Such general averment does not, however, suffice to constitute a legal right or interest. Not only is the presumed interest not personal in character; it is likewise too vague, highly speculative and uncertain. 33 The Rules require that the interest must be material to the issue and affected by the questioned act or instrument, as distinguished from simple curiosity or incidental interest in the question raised. 34 To bolster its stance, SJS cites the Corpus Juris Secundum and submits that the "[p]laintiff in a declaratory judgment action does not seek to enforce a claim against [the] defendant, but seeks a judicial declaration of [the] rights of the parties for the purpose of guiding [their] future conduct,
and the essential distinction between a ‘declaratory judgment action’ and the usual ‘action’ is that no actual wrong need have been committed or loss have occurred in order to sustain the declaratory judgment action, although there must be no uncertainty that the loss will occur or that the asserted rights will be invaded." 35 SJS has, however, ignored the crucial point of its own reference – that there must be no uncertainty that the loss will occur or that the asserted rights will be invaded . Precisely, as discussed earlier, it merely conjectures that herein petitioner (and his co-respondents below) might actively participate in partisan politics, use "the awesome voting strength of its faithful flock [to] enable it to elect men to public office x x x, enabling [it] to control the government."36 During the Oral Argument, though, Petitioner Velarde and his corespondents below all strongly asserted that they had not in any way engaged or intended to participate in partisan politics. They all firmly assured this Court that they had not done anything to trigger the issue raised and to entitle SJS to the relief sought. Indeed, the Court finds in the Petition for Declaratory Relief no single allegation of fact upon which SJS could base a right of relief from the named respondents. In any event, even granting that it sufficiently asserted a legal right it sought to protect, there was nevertheless no certainty that such right would be invaded by the said respondents. Not even the alleged proximity of the elections to the time the Petition was filed below (January 28, 2003) would have provided the certainty that it had a legal right that would be jeopardized or violated by any of those respondents. Legal Standing Legal standing or locus standi has been defined as a personal and substantial interest in the case, such that the party has sustained or will sustain direct injury as a result of the challenged act. 37 Interest means a material interest in issue that is affected by the questioned act or instrument, as distinguished from a mere incidental interest in the question involved.38 Petitioner alleges that "[i]n seeking declaratory relief as to the constitutionality of an act of a religious leader to endorse, or require the members of the religious flock to vote for a specific candidate, herein Respondent SJS has no legal interest in the controversy"; 39 it has failed to establish how the resolution of the proffered question would benefit or injure it.
Parties bringing suits challenging the constitutionality of a law, an act or a statute must show "not only that the law [or act] is invalid, but also that [they have] sustained or [are] in immediate or imminent danger of sustaining some direct injury as a result of its enforcement, and not merely that [they] suffer thereby in some indefinite way." 40They must demonstrate that they have been, or are about to be, denied some right or privilege to which they are lawfully entitled, or that they are about to be subjected to some burdens or penalties by reason of the statute or act complained of. 41 First, parties suing as taxpayers must specifically prove that they have sufficient interest in preventing the illegal expenditure of money raised by taxation.42 A taxpayer’s action may be properly brought only when there is an exercise by Congress of its taxing or spending power. 43 In the present case, there is no allegation, whether express or implied, that taxpayers’ money is being illegally disbursed. Second, there was no showing in the Petition for Declaratory Relief that SJS as a political party or its members as registered voters would be adversely affected by the alleged acts of the respondents below, if the question at issue was not resolved. There was no allegation that SJS had suffered or would be deprived of votes due to the acts imputed to the said respondents. Neither did it allege that any of its members would be denied the right of suffrage or the privilege to be voted for a public office they are seeking. Finally, the allegedly keen interest of its "thousands of members who are citizens-taxpayers-registered voters" is too general 44 and beyond the contemplation of the standards set by our jurisprudence. Not only is the presumed interest impersonal in character; it is likewise too vague, highly speculative and uncertain to satisfy the requirement of standing. 45 Transcendental Imp ortance
In any event, SJS urges the Court to take cognizance of the Petition, even sans legal standing, considering that "the issues raised are of paramount public interest." In not a few cases, the Court has liberalized the locus standi requirement when a petition raises an issue of transcendental significance or paramount importance to the people. 46 Recently, after holding that the IBP had nolocus standi to bring the suit, the Court in IBP v. Zamora47 nevertheless entertained the Petition therein. It noted that "the IBP has advanced constitutional issues which deserve the attention of this Court in view of their seriousness, novelty and weight as precedents." 48
Similarly in the instant case, the Court deemed the constitutional issue raised in the SJS Petition to be of paramount interest to the Filipino people. The issue did not simply concern a delineation of the separation between church and state, but ran smack into the governance of our country. The issue was both transcendental in importance and novel in nature, since it had never been decided before. The Court, thus, called for Oral Argument to determine with certainty whether it could resolve the constitutional issue despite the barren allegations in the SJS Petition as well as the abbreviated proceedings in the court below. Much to its chagrin, however, counsels for the parties -particularly for Respondent SJS -- made no satisfactory allegations or clarifications that would supply the deficiencies hereinabove discussed. Hence, even if the Court would exempt this case from the stringent locus standi requirement, such heroic effort would be futile because the transcendental issue cannot be resolved anyway. Proper Proceedings B efore the Trial Court
To prevent a repetition of this waste of precious judicial time and effort, and for the guidance of the bench and the bar, the Court reiterates the elementary procedure49 that must be followed by trial courts in the conduct of civil cases.50 Prefatorily, the trial court may -- motu proprio or upon motion of the defendant -- dismiss a complaint51 (or petition, in a special civil action) that does not allege the plaintiff’s (or petitioner’s) cause or causes of action. 52 A complaint or petition should contain "a plain, concise and direct statement of the ultimate facts on which the party pleading relies for his claim or defense."53 It should likewise clearly specify the relief sought.54 Upon the filing of the complaint/petition and the payment of the requisite legal fees, the clerk of court shall forthwith issue the corresponding summons to the defendants or the respondents, with a directive that the defendant answer 55 within 15 days, unless a different period is fixed by the court.56 The summons shall also contain a notice that if such answer is not filed, the plaintiffs/petitioners shall take a judgment by default and may be granted the relief applied for. 57 The court, however, may -- upon such terms as may be just -- allow an answer to be filed after the time fixed by the Rules.58 If the answer sets forth a counterclaim or cross-claim, it must be answered within ten (10) days from service. 59 A reply may be filed within ten (10) days from service of the pleading responded to. 60
When an answer fails to tender an issue or admits the material allegations of the adverse party’s pleading, the court may, on motion of that party, direct judgment on such pleading (except in actions for declaration of nullity or annulment of marriage or for legal separation). 61 Meanwhile, a party seeking to recover upon a claim, a counterclaim or crossclaim -- or to obtain a declaratory relief -- may, at any time after the answer thereto has been served, move for a summary judgment in its favor. 62 Similarly, a party against whom a claim, a counterclaim or crossclaim is asserted -- or a declaratory relief sought -- may, at any time, move for a summary judgment in its favor.63 After the motion is heard, the judgment sought shall be rendered forthwith if there is a showing that, except as to the amount of damages, there is no genuine issue as to any material fact; and that the moving party is entitled to a j udgment as a matter of law. 64 Within the time for -- but before -- filing the answer to the complaint or petition, the defendant may file a motion to dismiss based on any of the grounds stated in Section 1 of Rule 16 of the Rules of Court. During the hearing of the motion, the parties shall submit their arguments on the questions of law, and their evidence on the questions of fact. 65 After the hearing, the court may dismiss the action or claim, deny the motion, or order the amendment of the pleadings. It shall not defer the resolution of the motion for the reason that the ground relied upon is not indubitable. In every case, the resolution shall state clearly and distinctly the reasons therefor.66 If the motion is denied, the movant may file an answer within the balance of the period originally prescribed to file an answer, but not less than five (5) days in any event, computed from the receipt of the notice of the denial. If the pleading is ordered to be amended, the defendant shall file an answer within fifteen (15) days, counted from the service of the amended pleading, unless the court provides a longer period. 67 After the last pleading has been served and filed, the case shall be set for pretrial,68 which is a mandatory proceeding.69 A plaintiff’s/ petitioner’s (or its duly authorized representative’s) non-appearance at the pretrial, if without valid cause, shall result in the dismissal of the action with prejudice, unless the court orders otherwise. A similar failure on the part of the defendant shall be a cause for allowing the plaintiff/petitioner to present evidence ex parte, and the court to render judgment on the basis thereof. 70 The parties are required to file their pretrial briefs; failure to do so shall have the same effect as failure to appear at the pretrial. 71 Upon the termination thereof, the court shall issue an order reciting in detail the matters taken up at the conference; the action taken on them, the amendments allowed to the pleadings; and the agreements or admissions,
if any, made by the parties regarding any of the matters considered. 72 The parties may further avail themselves of any of the modes of discovery, 73 if they so wish. Thereafter, the case shall be set for trial, 74 in which the parties shall adduce their respective evidence in support of their claims and/or defenses. By their written consent or upon the application of either party, or on its own motion, the court may also order any or all of the issues to be referred to a commissioner, who is to be appointed by it or to be agreed upon by the parties. 75 The trial or hearing before the commissioner shall proceed in all respects as i t would if held before the court. 76 Upon the completion of such proceedings, the commissioner shall file with the court a written report on the matters referred by the parties. 77 The report shall be set for hearing, after which the court shall issue an order adopting, modifying or rejecting it in whole or in part; or recommitting it with instructions; or requiring the parties to present further evidence before the commissioner or the court. 78 Finally, a judgment or final order determining the merits of the case shall be rendered. The decision 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 the issuing magistrate, and filed with the clerk of court.79 Based on these elementary guidelines, let us examine the proceedings before the trial court in the i nstant case. First, with respect to the initiatory pleading of the SJS. Even a cursory perusal of the Petition immediately reveals its gross inadequacy. It contained no statement of ultimate facts upon which the petitioner relied for its claim. Furthermore, it did not specify the relief it sought from the court, but merely asked it to answer a hypothetical question. Relief, as contemplated in a legal action, refers to a specific coercive measure prayed for as a result of a violation of the rights of a plaintiff or a petitioner.80 As already discussed earlier, the Petition before the trial court had no allegations of fact 81 or of any specific violation of the petitioner’s rights, which the respondents had a duty to respect. Such deficiency amounted to a failure to state a cause of action; hence, no coercive relief could be sought and adjudicated. The Petition evidently lacked substantive requirements and, we repeat, should have been dismissed at the outset.
Second, with respect to the trial court proceedings. Within the period set to file their respective answers to the SJS Petition, Velarde, Villanueva and Manalo filed Motions to Dismiss; Cardinal Sin, a Comment; and Soriano, within a priorly granted extended period, an Answer in which he likewise prayed for the dismissal of the Petition. 82 SJS filed a Rejoinder to the Motion of Velarde, who subsequently filed a Sur-Rejoinder. Supposedly, there were "several scheduled settings, in which the "[c]ourt was apprised of the respective positions of the parties." 83 The nature of such settings -whether pretrial or trial hearings -- was not disclosed in the records. Before ruling on the Motions to Dismiss, the trial court issued an Order 84 dated May 8, 2003, directing the parties to submit their memoranda. Issued shortly thereafter was another Order 85 dated May 14, 2003, denying all the Motions to Dismiss. In the latter Order, the trial court perfunctorily ruled: "The Court now resolves to deny the Motions to Dismiss, and after all the memoranda are submitted, then, the case shall be deemed as submitted for resolution." 86 Apparently, contrary to the requirement of Section 2 of Rule 16 of the Rules of Court, the Motions were not heard. Worse, the Order purportedly resolving the Motions to Dismiss did not state any reason at all for their denial, in contravention of Section 3 of the said Rule 16. There was not even any statement of the grounds relied upon by the Motions; much less, of the legal findings and conclusions of the trial court. Thus, Velarde, Villanueva and Manalo moved for reconsideration. Pending the resolution of these Motions for Reconsideration, Villanueva filed a Motion to suspend the filing of the parties’ memoranda. But instead of separately resolving the pending Motions fairly and squarely, the trial court again transgressed the Rules of Court when it immediately proceeded to issue its Decision, even before tackling the issues raised in those Motions. Furthermore, the RTC issued its "Decision" without allowing the parties to file their answers. For this reason, there was no joinder of the issues. If only it had allowed the filing of those answers, the trial court would have known, as the Oral Argument revealed, that the petitioner and his corespondents below had not committed or threatened to commit the act attributed to them (endorsing candidates) -- the act that was supposedly the factual basis of the suit.
Parenthetically, the court a quo further failed to give a notice of the Petition to the OSG, which was entitled to be heard upon questions involving the constitutionality or validity of statutes and other measures. 87 Moreover, as will be discussed in more detail, the questioned Decision of the trial court was utterly wanting in the requirements prescribed by the Constitution and the Rules of Court. All in all, during the loosely abbreviated proceedings of the case, the trial court indeed acted with inexplicable haste, with total ignorance of the law -or, worse, in cavalier disregard of the rules of procedure -- and with grave abuse of discretion. Contrary to the contentions of the trial judge and of SJS, proceedings for declaratory relief must still follow the process described above -- the petition must state a cause of action; the proceedings must undergo the procedure outlined in the Rules of Court; and the decision must adhere to constitutional and legal requirements. First Substantive Issue: Fundamental Requirements of a Decision
The Constitution commands that "[n]o 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 basis therefor." 88 Consistent with this constitutional mandate, Section 1 of Rule 36 of the Rules on Civil Procedure similarly provides: "Sec. 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 court." In the same vein, Section 2 of Rule 120 of the Rules of Court on Criminal Procedure reads as follows: "Sec. 2. Form and contents of judgments. -- The judgment must be written in the official language, personally and directly prepared by the judge and signed by him and shall contain clearly and distinctly
a statement of the facts proved or admitted by the accused and the law upon which the judgment is based. "x x x
xxx
x x x."
Pursuant to the Constitution, this Court also issued on January 28, 1988, Administrative Circular No. 1, prompting all judges "to make complete findings of facts in their decisions, and scrutinize closely the legal aspects of the case in the light of the evidence presented. They should avoid the tendency to generalize and form conclusions without detailing the facts from which such conclusions are deduced." In many cases, 89 this Court has time and time again reminded "magistrates to heed the demand of Section 14, Article VIII of the Constitution." The Court, through Chief Justice Hilario G. Davide Jr. in Yao v. Court of Appeals,90discussed at length the implications of this provision and strongly exhorted thus: "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 i t 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." In People v. Bugarin, 91 the Court also explained:
"The requirement that the decisions of courts must be in writing and that they must set forth clearly and distinctly the facts and the law on which they are based serves many functions. It is intended, among other things, to inform the parties of the reason or reasons for the decision so that if any of them appeals, he can point out to the appellate court the finding of facts or the rulings on points of law with which he disagrees. 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. x x x." Indeed, elementary due process demands that the parties to a litigation be given information on how the case was decided, as well as an explanation of the factual and legal reasons that led to the conclusions of the court. 92 In Madrid v. Court of Appeals, 93 this Court had instructed magistrates to exert effort to ensure that their decisions would present a comprehensive analysis or account of the factual and legal f indings that would substantially address the issues raised by the parties. In the present case, it is starkly obvious that the assailed Decision contains no statement of facts -- much less an assessment or analysis thereof -- or of the court’s findings as to the probable facts. The assailed Decision begins with a statement of the nature of the action and the question or issue presented. Then follows a brief explanation of the constitutional provisions involved, and what the Petition sought to achieve. Thereafter, the ensuing procedural incidents before the trial court are tracked. The Decision proceeds to a full-length opinion on the nature and the extent of the separation of church and state. Without expressly stating the final conclusion she has reached or specifying the relief granted or denied, the trial judge ends her "Decision" with the clause "SO ORDERED." What were the antecedents that necessitated the filing of the Petition? What exactly were the distinct facts that gave rise to the question sought to be resolved by SJS? More important, what were the factual findings and analysis on which the trial court based its legal findings and conclusions? None were stated or implied. Indeed, the RTC’s Decision cannot be upheld for its failure to express clearly and distinctly the facts on which it was based. Thus, the trial court clearly transgressed the constitutional directive. The significance of factual findings lies in the value of the decision as a precedent. How can it be so if one cannot apply the ruling to similar circumstances, simply because such circumstances are unknown? Otherwise stated, how will the ruling be applied in the future, if there is no point of factual comparison?
Moreover, the court a quo did not include a resolutory or di spositive portion in its so-called Decision. The importance of such portion was explained in the early case Manalang v. Tuason de Rickards, 94 from which we quote: "The resolution of the Court on a given issue as embodied in the dispositive part of the decision or order is the investitive or controlling factor that determines and settles the rights of the parties and the questions presented therein, notwithstanding the existence of statements or declaration in the body of said order that may be confusing." The assailed Decision in the present case leaves us in the dark as to its final resolution of the Petition. To recall, the original Petition was for declaratory relief. So, what relief did the trial court grant or deny? What rights of the parties did it conclusively declare? Its final statement says, "SO ORDERED." But what exactly did the court order? It had the temerity to label its issuance a "Decision," when nothing was in fact decided. Respondent SJS insists that the dispositive portion can be found in the body of the assailed Decision. It claims that the issue is disposed of and the Petition finally resolved by the statement of the trial court found on page 10 of its 14-page Decision, which reads: "Endorsement of specific candidates in an election to any public office is a clear violation of the separation clause." 95 We cannot agree. In Magdalena Estate, Inc. v. Caluag ,96 the obligation of the party imposed by the Court was allegedly contained in the text of the original Decision. The Court, however, held: "x x x The quoted finding of the lower court cannot supply deficiencies in the dispositive portion. It is a mere opinion of the court and the rule is settled that where there is a conflict between the dispositive part and the opinion, the former must prevail over the latter on the theory that the dispositive portion is the final order while the opinion is merely a statement ordering nothing." (Italics in the original) Thus, the dispositive portion cannot be deemed to be the statement quoted by SJS and embedded in the last paragraph of page 10 of the assailed 14page Decision. If at all, that statement is merely an answer to a hypothetical legal question and just a part of the opinion of the trial court. It does not conclusively declare the rights (or obligations) of the parties to the
Petition. Neither does it grant any -- much less, the proper -- relief under the circumstances, as required of a dispositive portion. Failure to comply with the constitutional injunction is a grave abuse of discretion amounting to lack or excess of jurisdiction. Decisions or orders issued in careless disregard of the constitutional mandate are a patent nullity and must be struck down as void.97 Parts of a Decision In general, the essential parts of a good decision consist of the following: (1) statement of the case; (2) statement of facts; (3) issues or assignment of errors; (4) court ruling, in which each issue is, as a rule, separately considered and resolved; and, finally, (5) dispositive portion. The ponente may also opt to include an introduction or a prologue as well as an epilogue, especially in cases in which controversial or novel issues are involved.98 An introduction may consist of a concise but comprehensive statement of the principal factual or legal issue/s of the case. In some cases -particularly those concerning public interest; or involving complicated commercial, scientific, technical or otherwise rare subject matters -- a longer introduction or prologue may serve to acquaint readers with the specific nature of the controversy and the issues involved. An epilogue may be a summation of the important principles applied to the resolution of the issues of paramount public interest or significance. It may also lay down an enduring philosophy of law or guiding principle. Let us now, again for the guidance of the bench and the bar, discuss the essential parts of a good decision. 1. Statement of the Case The Statement of the Case consists of a legal definition of the nature of the action. At the first instance, this part states whether the action is a civil case for collection, ejectment, quieting of title, foreclosure of mortgage, and so on; or, if it is a criminal case, this part describes the specific charge -quoted usually from the accusatory portion of the information -- and the plea of the accused. Also mentioned here are whether the case is being decided on appeal or on a petition for certiorari, the court of origin, the case number in the trial court, and the dispositive portion of the assailed decision.
In a criminal case, the verbatim reproduction of the criminal information serves as a guide in determining the nature and the gravity of the offense for which the accused may be found culpable. As a rule, the accused cannot be convicted of a crime different from or graver than that charged. Also, quoting verbatim the text of the information is especially important when there is a question on the sufficiency of the charge, or on whether qualifying and modifying circumstances have been adequately alleged therein. To ensure that due process is accorded, it is important to give a short description of the proceedings regarding the plea of the accused. Absence of an arraignment, or a serious irregularity therein, may render the judgment void, and further consideration by the appellate court would be futile. In some instances, especially in appealed cases, it would also be useful to mention the fact of the appellants’ detention, in order to dispose of the preliminary query -- whether or not they have abandoned their appeal by absconding or jumping bail. Mentioning the court of origin and the case number originally assigned helps in facilitating the consolidation of the records of the case in both the trial and the appellate courts, after entry of final judgment.
resolution of most criminal cases, unlike civil and other cases, depends to a large extent on the factual issues and the appreciation of the evidence. The plausibility or the implausibility of each version can sometimes be initially drawn from a reading of the facts. Thereafter, the bases of the court in arriving at its findings and conclusions should be explained. On appeal, the fact that the assailed decision of the lower court fully, intelligently and correctly resolved all factual and legal issues involved may partly explain why the reviewing court finds no reason to reverse the findings and conclusions of the former. Conversely, the lower court’s patent misappreciation of the facts or misapplication of the law would aid in a better understanding of why its ruling is reversed or modified. In appealed civil cases, the opposing sets of facts no longer need to be presented. Issues for resolution usually involve questions of law, grave abuse of discretion, or want of jurisdiction; hence, the facts of the case are often undisputed by the parties. With few exceptions, factual issues are not entertained in non-criminal cases. Consequently, the narration of facts by the lower court, if exhaustive and clear, may be reproduced; otherwise, the material factual antecedents should be restated in the words of the reviewing magistrate.
Finally, the reproduction of the decretal portion of the assailed decision informs the reader of how the appealed case was decided by the court a quo.
In addition, the reasoning of the lower court or body whose decision is under review should be laid out, in order that the parties may clearly understand why the lower court ruled in a certain way, and why the reviewing court either finds no reason to reverse it or concludes otherwise.
2. Statement of Facts
3. Issues or Assignment of Errors
There are different ways of relating the facts of the case. First, under the objective or reportorial method, the judge summarizes -- without comment - the testimony of each witness and the contents of each exhibit. Second,under the synthesis method, the factual theory of the plaintiff or prosecution and then that of the defendant or defense is summarized according to the judge’s best light. Third, in the subjective method, the version of the facts accepted by the judge is simply narrated without explaining what the parties’ versions are. Finally, through a combination of objective and subjective means, the testimony of each witness is reported and the judge then formulates his or her own version of the facts.
Both factual and legal issues should be stated. On appeal, the assignment of errors, as mentioned in the appellant’s brief, may be reproduced in toto and tackled seriatim, so as to avoid motions for reconsideration of the final decision on the ground that the court failed to consider all assigned errors that could affect the outcome of the case. But when the appellant presents repetitive issues or when the assigned errors do not strike at the main issue, these may be restated in clearer and more coherent terms.
In criminal cases, it is better to present both the version of the prosecution and that of the defense, in the interest of fairness and due process. A detailed evaluation of the contentions of the parties must follow. The
Though not specifically questioned by the parties, additional issues may also be included, if deemed important for substantial justice to be rendered. Note that appealed criminal cases are given de novo review, in contrast to noncriminal cases in which the reviewing court is generally limited to issues specifically raised in the appeal. The few exceptions are errors of jurisdiction; questions not raised but necessary in arriving at a just decision on the case; or unassigned errors that are closely related to those
properly assigned, or upon which depends the determination of the question properly raised.
Second Substantive Issue: Re ligious Leaders’ Endorsement
4. The Court’s Ruling of Candidates for Public Office
This part contains a full discussion of the specific errors or issues raised in the complaint, petition or appeal, as the case may be; as well as of other issues the court deems essential to a just disposition of the case. Where there are several issues, each one of them should be separately addressed, as much as practicable. The respective contentions of the parties should also be mentioned here. When procedural questions are raised in addition to substantive ones, it is better to resolve the former preliminarily. 5. The Disposition or Dispositive Portion In a criminal case, the disposition should include a finding of innocence or guilt, the specific crime committed, the penalty imposed, the participation of the accused, the modifying circumstances if any, and the civil liability and costs. In case an acquittal is decreed, the court must order the immediate release of the accused, if detained, (unless they are being held for another cause) and order the director of the Bureau of Corrections (or wherever the accused is detained) to report, within a maximum of ten (10) days from notice, the exact date when the accused were set free. In a civil case as well as in a special civil action, the disposition should state whether the complaint or petition is granted or denied, the specific relief granted, and the costs. The following test of completeness may be applied.First, the parties should know their rights and obligations. Second, they should know how to execute the decision under alternative contingencies. Third, there should be no need for further proceedings to dispose of the issues.Fourth, the case should be terminated by according the proper relief. The "proper relief" usually depends upon what the parties seek in their pleadings. It may declare their rights and duties, command the performance of positive prestations, or order them to abstain from specific acts. The disposition must also adjudicate costs. The foregoing parts need not always be discussed in sequence. But they should all be present and plainly i dentifiable in the decision. Depending on the writer’s character, genre and style, the language should be fresh and free-flowing, not necessarily stereotyped or in a fixed form; much less highfalutin, hackneyed and pretentious. At all times, however, the decision must be clear, concise, complete and correct.
The basic question posed in the SJS Petition -- WHETHER ENDORSEMENTS OF CANDIDACIES BY RELIGIOUS LEADERS IS UNCONSTITUTIONAL -- undoubtedly deserves serious consideration. As stated earlier, the Court deems this constitutional issue to be of paramount interest to the Filipino citizenry, for it concerns the governance of our country and its people. Thus, despite the obvious procedural transgressions by both SJS and the trial court, this Court still called for Oral Argument, so as not to leave any doubt that there might be room to entertain and dispose of the SJS Petition on the merits. Counsel for SJS has utterly failed, however, to convince the Court that there are enough factual and legal bases to resolve the paramount issue. On the other hand, the Office of the Solicitor General has sided with petitioner insofar as there are no facts supporting the SJS Petition and the assailed Decision. We reiterate that the said Petition failed to state directly the ultimate facts that it relied upon for its claim. During the Oral Argument, counsel for SJS candidly admitted that there were no factual allegations in its Petition for Declaratory Relief. Neither were there factual findings in the assailed Decision. At best, SJS merely asked the trial court to answer a hypothetical question. In effect, it merely sought an advisory opinion, the rendition of which was beyond the court’s constitutional mandate and jurisdiction. 99 Indeed, the assailed Decision was rendered in clear violation of the Constitution, because it made no findings of facts and final disposition. Hence, it is void and deemed legally inexistent. Consequently, there is nothing for this Court to review, affirm, reverse or even just modify. Regrettably, it is not legally possible for the Court to take up, on the merits, the paramount question involving a constitutional principle. It is a timehonored rule that "the constitutionality of a statute [or act] will be passed upon only if, and to the extent that, it is directly and necessarily i nvolved in a justiciable controversy and is essential to the protection of the rights of the parties concerned."100 WHEREFORE, the Petition for Review of Brother Mike Velarde is GRANTED . The assailed June 12, 2003 Decision and July 29, 2003
Order of the Regional Trial Court of Manila (Branch 49) are hereby DECLARED NULL A ND VOID and thus SET ASIDE . The SJS Petition for Declaratory Relief is DISMISSED for failure to state a cause of action. Let a copy of this Decision be furnished the Office of the Court Administrator to evaluate and recommend whether the trial judge may, after observing due process, be held administratively liable for rendering a decision violative of the Constitution, the Rules of Court and relevant circulars of this Court. No costs. SO ORDERED.
G.R. No. L-5101
November 28, 1953
ANGELES S. SANTOS, petitioner-appellant, vs. PATERIO AQUINO, as Municipal Mayor of Malabon, THE MUNICIPAL COUNCIL OF MALABON, A.A. OLIVEROS, as Municipal Treasurer of Malabon, Province of Rizal, respondents-appellees. Arsenio Paez Ireneo V. Bernardo for appellees.
for
appellant.
PADILLA, J .: This action purports to obtain a declaratory relief but the prayer of the petition seeks to have Ordinance No. 61, series of 1946, and Ordinance No. 10, series of 1947, of the Municipality of Malabon, Province of Rizal, declared null and void; to prevent the collection of surcharges and penalties for failure to pay the taxes imposed by the ordinances referred to, except for such failure from and after the taxpayer shall have been served with the notice of the effectivity of the ordinances; and to enjoin the respondents, their agents and all other persons acting for and in their behalf from enforcing the ordinances referred to and from making any collection thereunder. Further, petitioner prays for such other remedy and relief as may be deemed just and equitable and asks that costs be taxed against the respondents. The petitioner is the manager of a theater known as "Cine Concepcion," located and operated in the Municipality of Malabon, Province of Rizal, and the respondents are the Municipal Mayor, the Municipal Council and the Municipal Treasurer, of Malabon. The petitioner avers that Ordinance No. 61, series of 1946, adopted by the Municipal Council of Malabon on 8 December 1946, imposes a license tax of P1,000 per annum on the said theater in addition to a license tax on all tickets sold in theaters and cinemas in Malabon, pursuant to the Ordinance No. 58, series of 1946, adopted on the same date as Ordinance No. 61, the same series; that prior to 8 December 1946 the municipal license tax paid by the petitioner on "Cine Concepcion" was P180, pursuant to the Ordinance No. 9, series of 1945; that on 6 December 1947, the Municipal Council of Malabon adopted Ordinance No. 10, series of 1947, imposing a graduated municipal license tax on theaters and cinematographs from P200 to P9,000 per annum; that the ordinance was submitted for approval to the Department of Finance, which reduced the rate of taxes provided therein, and the ordinance with the reduced rate of taxes was approved on 3 November 1948; that notice of reduction of the tax rate and approval by the Department of Finance of said graduated municipal license tax provided for in said Ordinance No. 10,
as reduced, was served on the petitioner on 12 February 1949 when the respondent Municipal Treasurer presented a bill for collection thereof; that Ordinance No. 61, series of 1946, is ultra vires and repugnant to the provisions of the Constitution on taxation; that its approval was not in accordance with law; that Ordinance No. 10, series of 1947, is all null and void, because the Department of Finance that approved it acted in excess and against the powers granted it by law, and is unjust, oppressive and confiscatory; and that the adoption of both ordinances was the result of prosecution of the petitioner by the respondents because from 20 July 1946 to 8 December 1947, or within a period of less than one and a half years, the Municipal Council of Malabon adopted four ordinances increasing the taxes on cinematographs and theaters and imposing a penalty of 20 per cent surcharges for late payment. A motion to dismiss was filed by the Assistant Provincial Fiscal of Rizal, but upon suggestion of the Court at the hearing thereof, the respondents were prevailed upon to file their answer. In their answer the respondents allege that both ordinances adopted by the Municipal Council of Malabon are notultra vires, the same not being under any of the exceptions provided for in section 3 of Commonwealth Act No. 472; that the ordinances were adopted pursuant to the policy enunciated by the Secretary of the Interior in a circular issued on 20 June 1946 which in substance suggested and urged the municipal councils to increase their revenues and not to rely on the National Government which was not in a position to render any help and to make such increase dependent upon the taxpayer's ability to pay; that both ordinances assailed by the petitioner had been submitted to, and approved by, the Department of Finance, as required by section 4 of Commonwealth Act No. 472, and took effect on 1 January 1947 and 1 January 1948, respectively; that the petitioner had filed a protest with the Secretary of Finance against such increase of taxes, as fixed by the municipal ordinances in question but the Department of Finance although reducing the amount of taxes imposed in Ordinance No. 10, series of 1947, and changing the date of effectivity of both ordinances, upheld the legality thereof; and that the petitioner brought this action for declaratory relief with the evident purpose of evading payment of the unpaid balance of taxes due from the "Cine Concepcion." By way of special defense the respondents allege that the petition does not state facts sufficient to constitute a cause of action; that the Court has no jurisdiction over the subject matter of the petition for declaratory relief; that the petitioner should have paid under protests the taxes imposed by the ordinances in question on "Cine Concepcion" and after payment thereof should bring an action under section 1579 of the Revised Administrative Code; that this being an action for declaratory relief, the Provincial Fiscal of Rizal should have been notified thereof but the petitioner failed to do so;
that the petition does not join all the necessary parties and, therefore, a judgment rendered in the case will not terminate the uncertainty or the controversy that is sought to be settled and determined. After hearing the Court rendered judgment holding that the ordinances in question are valid and constitutional and dismissing the petition with costs against the petitioner. The latter has appealed. This is not an action for declaratory relief, because the terms of the ordinances assailed are not ambiguous or of doubtful meaning which require a construction thereof by the Court. And granting that the validity or legality of an ordinance may be drawn in question in an action for declaratory relief, such relief must be asked before a violation of the ordinance be committed. 1 When this action was brought on 12 May 1949, payment of the municipal license taxes imposed by both ordinances, the tax rate of the last having been reduced by the Department of Finance, was already due, and the prayer of the petition shows that the petitioner had not paid them. In those circumstances the petitioner cannot bring an action for declaratory relief. Angeles S. Santos, the petitioner, does not aver nor does he testify that he is the owner or part-owner of "Cine-Concepcion." He alleges that he is only the manager thereof. For that reason he is not an interested party. He has no interest in the theater known as "Cine Concepcion" which may be affected by the municipal ordinances in question and for that reason he is not entitled to bring this action either for declaratory relief or for prohibition, which apparently is the purpose of the action as may be gleaned from the prayer of the petition. The rule that actions must be brought in the name of the real party in interest2 applies to actions brought under Rule 66 for declaratory relief.3 The fact that he is the manager of the theater does not make him a real party in interest.4 Nevertheless, laying aside these procedural defects, we are of the opinion and so hold that under Commonwealth Act No. 472 the Municipal Council of Malabon is authorized and empowered to adopt the ordinances in question, and there being no showing, as the evidence does not show, that the rate of the municipal taxes therein provided is excessive, unjust, oppressive and confiscatory, their validity and legality must be upheld. The rate of the taxes in both ordinances, to wit: P1,000 a year for "Class A Cinematographs having orchestra, balcony and loge seats" in Ordinance No. 61, series of 1946, 5 and P2,000 for each theater or cinematograph with gross annual receipts amounting to P130,000 or more in Ordinance No. 10, series of 1947, 6 under which the "Cine Concepcion" falls, is not excessive but fair and just. It is far from being oppressive and confiscatory. Pursuant to said Commonwealth Act if the increase of the municipal taxes
is more than 50 per cent over the previous ones already in existence, the Municipal Council adopting such increase must submit it for approval to the Department of Finance which, although it cannot increase it, may reduce it and may approve it as reduced, or may disapprove it. It is contended that as only municipal councils are authorized by law to adopt ordinances, after the reduction by the Department of Finance of the tax rate imposed in Ordinance No. 10, series of 1947, duly adopted by the Municipal Council of Malabon, the latter should adopt another ordinance accepting or fixing the rate tax as reduced by the Department of Finance. The contention is without merit, because the rate of taxes imposed in theaters or cinematographs in Ordinance No. 10, series of 1947, was the only one reduced by the Department of Finance and the reduction was for the benefit of the taxpayer as it was very much lower than the rate fixed by the Municipal Council. The authority and discretion to fix the amount of the tax was exercised by the Municipal Council of Malabon when it fixed the same at P9,000 a year. Certainly, the Municipal Council of Malabon that fixed the tax at P9,000 a year also approved the tax at P2,000 a year, this being very much less than that fixed in the ordinance. The power and discretion exercised by the Municipal Council of Malabon when it fixed the tax at P9,000 a year must be deemed to have been exercised also by it when the Department of Finance reduced it to P2,000 a year, for the greater includes the lesser. The adoption of another ordinance fixing the tax at P2,000 a year would be an idle ceremony and waste of time. Moreover, it must be borne in mind that municipal councils are not constitutional bodies but creatures of the Congress. The latter may even abolish or replace them with other government instrumentalities. Commonwealth Act No. 472 grants to the Department of Finance the authority to disapprove, implied in the power to approve, an ordinance imposing a tax which is more than 50 per cent of the existing tax, or to reduce it, also implied in the same power. This, of course, is to forestall abuse of power by the municipal councils. If the Congress has granted to the Department of Finance the power to reduce such tax, implied in the power to approve or disapprove, there seems to be no cogent reason for requiring the municipal council concerned to adopt another ordinance fixing the tax as reduced by the Department of Finance. Therefore, the action of the Department of Finance in approving Ordinance No. 10, series of 1947, at a reduced rate, is not excess of the powers granted it by law. The evidence does not show that the adoption of the ordinances in question by the Municipal Council of Malabon was the result of persecution of the petitioner. The judgment appealed from is affirmed, with costs against the appellant.
G.R. No. L-11357
May 31, 1962
FELIPE B. OLLADA, etc., petitioner-appellant, vs. CENTRAL BANK OF THE PHILIPPINES, respondent-appellee. Antonio V. Sanchez as amicus curiae. Felipe B. Ollada for and in his own behalf as petitioner-appellant. Nat. M. Balboa for respondent-appellee. DIZON, J .: Felipe B. Ollada is a certified public accountant, having passed the examination given by the Board of Accountancy, and is duly qualified to practice his profession. On July 22, 1952, his name was placed in the rolls of certified public accountants authorized and accredited to practice accountancy in the office of the Central Bank of the Philippines. In December, 1955, by reason of a requirement of the Import-Export Department of said bank that CPAs submit to an accreditation under oath before they could certify financial statements of their clients applying for import dollar allocations with its office, Ollada's previous accreditation was nullified. Pursuant to the new requirement, the Import-Export Department of the Central Bank issued APPLICATION FOR ACCREDITATION OF CERTIFIED PUBLIC ACCOUNTANTS (CB-IED Form No. 5) and ACCREDITATION CARD FOR CERTIFIED PUBLIC ACCOUNTANTS (CB-IED, Form No. 6) for CPAs to accomplish under oath. Assailing said accreditation requirement on the ground that it was (a) an unlawful invasion of the jurisdiction of the Board of Accountancy, (b) in excess of the powers of the Central Bank and (c) unconstitutional in that it unlawfully restrained the legitimate pursuit of one's trade, Ollada, for himself and allegedly on behalf of numerous other CPAs, filed a petition for Declaratory Relief in the Court of First Instance of Manila to nullify said accreditation requirement. On April 16, 1956 the Central Bank filed a motion to dismiss the petition for Declaratory Relief for lack of cause of action. Its main contention was that the Central Bank has the responsibility of administering the Monetary Banking System of the Republic and is authorized to prepare and issue, through its Monetary Board, rules and regulations to make effective the discharge of such responsibility; that the accreditation requirement alleged
in the petition was issued in the exercise of such power and authority; that the purpose of such requirement is not to regulate the practice of accountancy in the Philippines but only the manner in which certified public accountants should transact business with the Central Bank. On May 3, 1956, petitioner Ollada applied for a writ of preliminary injunction to restrain the respondent Central Bank of the Philippines from enforcing the accreditation requirement aforesaid until final adjudication of the case. In a memorandum submitted by said respondent opposing the issuance of the writ, it manifested that it was willing to delete paragraph 13 from its CB-IED Form No. 5 (Application for ac creditation of certified public accountants), which required CPAs to answer the query whether they agreed, if accredited with the Import-Export Department, Central Bank of the Philippines, to follow strictly the rules and regulations promulgated by the Philippine Institute of Accountants and, if not, to state their reasons therefor, and that it was also willing to modify paragraph 14 of the same form to read as follows: 14. Do you agree, if accredited with the Import-Export Department, to follow strictly the rules and regulations of the Central Bank of the Philippines concerning the practice of your profession as CPA, with reference to its importing licensing functions which may hereinafter be promulgated and which are not inconsistent with the rules and regulations promulgated by the Board of Accountancy of the Philippines, and to give written notice(s) of any change(s) in your professional status as practitioner, or the name and style under which you practice your profession as Certified Public Accountant(s)? . . . If not, state your reasons: . . . On May 22, 1956 the trial court required respondent to submit within ten days from notice, proof that it had deleted paragraph 13 and modified paragraph 14 of its CB-IED Form No. 5, as manifested in its memorandum, otherwise the writ of preliminary injunction prayed for by petitioner would be granted. Having complied with said order by submitting CB-ID Form No. 5 (formerly CB-IED Form No. 5) showing that paragraph 13 of CB-IED Form No. 5 had been deleted, and paragraph 14 thereof had been modified, the court, on June 27, 1956, denied the petition for preliminary injunction. On June 29, 1956, petitioner filed a motion for reconsideration alleging that, despite the deletion of paragraph 13 from respondent's CBIED Form No. 5, it was still enforcing the rules and regulations of the Philippine Institute of Accountants in its CB-IED Form No. 6 (ACCREDITATION CARD FOR CERTIFIED PUBLIC ACCOUNTANTS) which was still a part of the questioned accreditation requirement. All this notwithstanding, however, on July 5, 1956 petitioner, in the interests of its clients, filed his application for accreditation with the CB under protest. 1äwphï1.ñët
On July 7, 1956, the court reconsidered its previous order and issued another granting the petition for the writ of preliminary injunction upon the filing of a bond in the sum of P2,000.00 on the ground that CPAs applying for accreditation with respondent were still required to execute under oath CB-IED Form No. 6 (Accreditation card for certified public accountants) to be governed by the rules and regulations of the Philippine Institute of Accountants. In a motion for the reconsideration of this last order, respondent stated that CB-IED Form No. 6 of its Import-Export Department had been modified by CB-ID Form No. 6 wherein the requirement that the applicant should sign a statement under oath has been eliminated, and that, upon accreditation, a CPA would be governed by the rules and regulations of the Central Bank and not by those of the Philippine Institute of Accountants. The modified form (CB-ID Form No. 6) read as follows: I/We hereby agree to be governed by your rules and regulations relating to the practice of my/our profession as Certified Public Accountant(s), particularly Memorandum to Accredited CPAs No. 1 of the Central Bank of the Philippines dated June 15, 1956. Please recognize my/our certification(s) of exhibit(s), of statement(s), schedule(s), or other form(s) of accountancy work issued in behalf of my/our clients under the following signature(s). Consequently, on July 12, 1956, the court set aside its order of July 7, 1956 granting the writ of preliminary injunction. Finally, on July 31, 1956, the lower court, resolving the motion to dismiss filed by respondent, dismissed the complaint. The order to that effect says, in part, the following: The only issue in this case is whether or not the respondent Central Bank of the Philippines has the authority under its charter to require petitioner and all other certified public accountants to accredit themselves before they can transact business with respondent's Import and Export Department. This Court is of the opinion that the respondent is not barred from promulgating internal rules and regulations necessary to carry out its purpose pursuant to the charter creating it provided, however, that such rules and regulations are not contrary to law, public morals or public policy. The only objectionable features of respondent's aforementioned requirement have already been eliminated by said respondent having deleted from its CB-IED Form No. 5, known as Application
for Accreditation of Certified Public Accountants (Annex B of petitioner's Petition), paragraph 13 and modified paragraph 14 thereof, as well as by modifying CB-IED Form No. 6 known as Accreditation Card for Certified Public Accountants (Annex C of Petitioner's Petition). It appears, therefore, that after respondent had eliminated said objectionable features, the petition for declaratory relief has become groundless and should be dismissed. Upon motion of petitioner, We issued a resolution dated November 5, 1956 granting a writ of preliminary injunction restraining respondent from requiring CPAs to comply with the accreditation requirement of its ImportExport Department, on the ground that there was nothing in the record showing that the same was issued by its Monetary Board or by someone else duly authorized by the latter. The main issue involved in this appeal is whether upon the facts alleged in the petition for Declaratory Relief and others elicited from the parties and made of record by them prior to the issuance of the order appealed from, this case was properly dismissed. The Monetary Board of the Central Bank has authority to prepare and issue such rules and regulations it may consider necessary for the effective discharge of the responsibilities and exercise of the powers assigned to it and to the Central Bank under the provisions of Section 1 (a), Republic Act No. 265. The Governor of the Central Bank is also authorized to delegate his power to represent the Bank "to other officers of the Bank upon his own responsibility" (See. 17[d], Rep. Act 265). To implement its authority to temporarily suspend or restrict sales of exchange by the Central Bank and subject all transactions in gold and foreign exchange to license by the latter (Sec. 74, Rep. Act 265), the Monetary Board, approved Resolution No. 1528, Minutes No. 80 dated August 30, 1955 authorizing the Import-Export Department to revise quota allocations and to prepare revised procedures for the determination of violations of Central Bank Import-Export regulations. Among the revised procedures adopted by the aforesaid Department was its accreditation system, the purpose of which was to correct certain irregularities committed by some CPAs in their certification of the financial statements of their clients applying for dollar allocations. As held by the lower court, "the only objectionable feature of respondent's aforementioned requirement had already been eliminated . . . from its CB-
IED Form No. 5" and that CB-IED form No. 6 had also been modified. For this reason, the court held that "the petition for declaratory relief has become groundless" and, as a result, ordered its dismissal. Without deciding the question of whether the petition under consideration has, in reality "become groundless", we believe that, upon the facts appearing of record, said petition was correctly dismissed. As stated heretofore, in connection with the motion to dismiss filed by respondent, petitioner filled a written opposition in which he alleged that his petition has sufficiently alleged ultimate facts which violated his right as a duly qualified and accredited Certified Public Accountant by the Board of Accountancy (which is the only Government body with absolute powers to regulate the practice of CPAs), and in addition to such allegations, he has also alleged that by virtue of the violation of his right and that of numerous CPAs, he has suffered serious injury in that the questioned requirement which is collaterally attacked by this action (in the honest belief of the petitioner that the same) is an unlawful restraint of the fee pursuit and practice of petitioner's profession as a CPA; and also that the action of the respondent Central Bank of the Philippines complained of, is also an unlawful invasion into the exclusive jurisdiction of the Board of Accountancy as the sole body vested by our laws to lay down rules and regulations for the practice of public accountancy in the Philippines. . . . In order to dismiss an action under the aforecited ground, Sutherland, Code of Pleadings, Practice and Form, 167, has laid down the essential test which should serve as the controlling guide in determining whether a petition states a cause of action, to wit: 1. Does the complaint show the plaintiff suffered an injury? 2. Is it an injury the law recognizes as a wrong? 3. Is the defendant liable for the alleged wrong? 4. If the defendant is liable, to what extent is he liable and what will be the legal remedy from such injury? (Sutherland, Code of Pleadings, supra.)
It is clear from the allegations of the petition that the petitioner has sufficiently stated facts to satisfy the foregoing requisites of a pleading in order that petitioner's action should be given due course by this Court . Petitioner submits that the respondent's requirement complained of (CB-IED Forms Nos. 5 and 6) is an act of constituting a violation of the Constitution and also a violation of the petitioners right to freely practice his profession anywhere and in any government office in the Philippines .... It is undisputed that the only body that can regulate the practice of accountancy in the Philippines is the Board of Accountancy. The action thus of the respondent in requiring the accreditation of CPAs before they can practice with the Central Bank of the Philippines is an unlawful invasion into the exclusive jurisdiction of the said Board of Accountancy.Why was petitioner's right as a CPA violated by the respondent? Because the respondent's placing of a ban to CPAs including the petitioner with respect to certification of financial statements of their clients applying for dollar(s) allocation in the Central Bank of the Philippines has resulted in the unlawful restraint in the practice of CPAs in the office of the Central Bank of the Philippines . (Emphasis supplied.) (Rec. on Appeal, pp. 17, 18-20.) Again, in his brief petitioner reiterates the same view in the following language: On April 20, 1956, petitioner-appellant filed his opposition to respondent's motion to dismiss on the simple and fundamental ground that, from its face, the complaint's allegations of facts make clear showing of petitioner's rights having been violated by respondent, and that the (petitioner) has suffered serious injury therefrom that such injury is recognized by law as a wrong, and that the respondent is liable therefrom to a great extent. (Emphasis supplied .) (Petitioner's brief, p. 5.) Petitioner commenced this action as, and clearly intended it to be one for Declaratory Relief under the provisions of Rule 66 of the Rules of Court. On the question of when a special civil action of this nature would prosper, we have already held that the complaint for declaratory relief will not prosper if filed after a contract, statute or right has been breached or violated. In the present case such is precisely the situation arising from the facts alleged in the petition for declaratory relief. As vigorously claimed by petitioner himself, respondent had already invaded or violated his right and caused him injury — all these giving him a complete cause of action enforceable in an appropriate ordinary civil action or proceeding. The
dismissal of the action was, therefore, proper in the light of our ruling in De Borja vs. Villadolid , 47 O.G. (5) p. 2315, and Samson vs. Andal , G.R. No. L-3439, July 31, 1951, where we held that an action for declaratory relief should be filed before there has been a breach of a contract, statutes or right, and that it is sufficient to bar such action, that there had been a breach — which would constitute actionable violation. The rule is that an action for Declaratory Relief is proper only i f adequate relief is not available through the means of other existing forms of action or proceeding (1 C.J.S. 1027-1028). WHEREFORE, the order of dismissal appealed from is hereby affirmed, without prejudice to the aggrieved party seeking relief in another appropriate action. The writ of preliminary injunction issued by Us on November 5, 1956 is hereby set aside, and the motion for contempt filed by petitioner on September 30, 1957 is denied. With costs against appellant.
G.R. No. L-58340 July 16, 1991 KAWASAKI PORT SERVICE CORPORATION, NAIKAI SHIPPING CO. LTD., NAIKAI TUG BOAT SERVICE CO., THE PORT SERVICE CORPORATION, LICENSED LAND SEA PILOTS ASSOCIATION, HAYAKOMA UNYU K.K., TOKYO KISEN COMPANY, LTD., OMORI KAISOTEN, LTD., TOHOKU UNYU CO., LTD. AND SEITETSU UNYU CO., LTD., petitioners, vs. THE HON. AUGUSTO M. AMORES, Judge of Br. XXIV, Court of First Instance of Manila, and C.F. SHARP & CO., INC., respondents. Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioners. Chuidian Law Office for private respondent. BIDIN, J .: p This is a petition for certiorari seeking to set aside the orders of the then Court of First Instance of Manila, *Branch XXIV in Civil Case No. 132077: (a) dated July 13, 1981 denying the special appearances of petitioners as defendants in said case to question the court's jurisdiction over the persons of the defendants and (b) dated September 22, 1981, denying the motion for reconsideration of said order. The antecedents of this case are as follows: On May 7, 1980, the private respondent C.F. Sharp & Co., Inc. filed a complaint for injunction and/or declaratory relief in the then Court of First Instance of Manila against seventy-nine (79) Japanese corporations as defendants, among which are the petitioners herein. Said complaint was docketed as Civil Case No. 132077. The complaint alleges, among others, that the plaintiff is a corporation organized and existing under the laws of the Philippines; that there is another corporation organized under the law of Japan with the corporate name C.F. Sharp Kabushiki Kaisha; that the plaintiff and C.F. Sharp Kabushiki Kaisha are in all respects separate and distinct from each other; that C.F. Sharp Kabushiki Kaisha appears to have incurred obligations to several creditors amongst which are defendants, also foreign corporations organized and existing under the laws of Japan; that due to financial difficulties, C.F. Sharp Kabushiki Kaisha failed and/or refused to pay its creditors; and that in view of the failure and/or refusal of said C.F. Sharp Kabushiki Kaisha to pay its alleged obligations to defendants, the latter have been demanding or have been attempting to demand from C.F. Sharp & Co., Inc., the payment of the alleged
obligations to them of C.F. Sharp Kabushiki Kaisha, notwithstanding that C.F. Sharp & Co., Inc. is a corporation separate and distinct from that of C.F. Sharp Kabushiki Kaisha and that the former had no participation whatsoever or liability in connection with the transactions between the latter and the defendants. As alleged in the complaint, the private respondent prayed for injunctive relief against the petitioners' demand from the private respondent for the payment of C.F. Sharp Kabushiki Kaisha's liabilities to the petitioners. As an alternative to injunction, the private respondent prayed that a judicial declaration be made that, as a separate and independent corporation, it is not liable for the obligations and liabilities of C.F. Sharp Kabushiki Kaisha. Since the defendants are non-residents, without business addresses in the Philippines but in Japan, the private respondent prayed for leave of court to effect extraterritorial service of summons. On June 11, 1980, the respondent judge issued an order authorizing the private respondent to effect extraterritorial service of summons on defendants therein. Subsequently, private respondent filed an urgent ex-parte motion dated June 23, 1980 for Extraterritorial Service of Summons Upon Defendants by registered mail with return cards pursuant to Section 17 of Rule 14 of the Rules of Court. Acting on said motion, the respondent judge i ssued an order dated June 30, 1980 granting the motion and authorizing extraterritorial service of summons upon defendants to be effected by registered mail with return cards. On March 11, 1981, five of the petitioners, Kawasaki Port Service Corporation, Naikai Shipping Co., Ltd., Naikai Tug Boat Service Co., Ltd., The Port Service Corporation and Licensed Land Sea Pilots Association filed their "Special Appearance to Question Jurisdiction of This Honorable Court Over Persons of Defendants" contending that the lower court does not and cannot acquire jurisdiction over the persons of defendants on the grounds that private respondent's action does not refer to its personal status; that the action does not have for subject matter property contemplated in Section 17 of Rule 14 of the Rules of Court, that the action does not pray that defendants be excluded from any interest or property in the Philippines; that no property of the defendants has been attached; that
the action is in personam; and that the action does not fall within any of the four cases mentioned in Section 17, Rule 14 of the Rules of Court.
cannot be availed of because Section 17 of Rule 14 authorized this mode of service only in actions in rem or quasi in rem.
On March 17, 1981, another three of herein petitioners, Hayakoma Unyu K.K., Tokyo Kisen Company, Ltd. and Omori Kaisoten, Ltd. also filed their special appearance adopting the same arguments as that of the first five.
For its part, the private respondent countered that (1) the action refers to its status because the basic issue presented to the lower court for determination is its status as a corporation which has a personality that is separate, distinct and independent from the personality of another corporation, i .e., C.F. Sharp Kabushiki Kaisha of Japan; (2) under Section 17 of Rule 14, the subject matter or property involved in the action does not have to belong to the defendants. The provisions of said section contemplate of a situation where the property belongs to the plaintiff but the defendant has a claim over said property, whether that claim be actual or contingent; (3) the prayer of the plaintiff that the defendants be excluded from any interest in the properties of the plaintiff within the Philippines has the effect of excluding the defendants from the properties of the plaintiff in the Philippines for the purpose of answering for the debts of C.F. Sharp Kabushiki Kaisha of Japan to the defendants in accordance with Section 17 of Rule 14; and (4) the action before the lower court is an action quasi in rem as the remedies raised in the complaint affect the personal status of the plaintiff as a separate, distinct and independent corporation and relates to the properties of the plaintiff in the Philippines over which the petitioners have or claim an interest, actual or contingent.
On April 28, 1981, the two other petitioners, Tohoku Unyu Co., Ltd. and Seitetsu Unyu Co., Ltd., filed their "Special Appearance to Question the Jurisdiction of the Honorable Court" over their persons adopting in toto as theirs the "Special Appearance" dated March 11, 1981 of Kawasaki Port Service. On July 13, 1981, the respondent Court issued its order denying said special appearances. The motion for reconsideration of said order filed by the petitioners was also denied on September 22, 1981. Hence, the present petition. After the required pleadings were filed, the First Division of this Court, in the resolution of April 14, 1982, gave due course to the petition and required both parties to submit simultaneous memoranda within thirty (30) days from notice. Both parties complied by submitting the required memoranda. The main issue in this case is whether or not private respondent's complaint for injunction and/or declaratory relief is within the purview of the provisions of Section 17, Rule 14 of the Rules of Court. The petitioners contend that the respondent judge acted contrary to the provisions of Section 17 of Rule 14 for the following reasons: (1) private respondent's prayer for injunction, as a consequence of its alleged nonliability to the petitioners for debts of C.F. Sharp Kabushiki Kaisha of Japan, conclusively establishes that private respondent's cause of action does not affect its status; (2) the respondent court cannot take jurisdiction of actions against the petitioners as they are non-residents and own no property within the state; (3) the petitioners have not as yet claimed a lien or interest in the property within the Philippines at the time the action was filed which is a requirement under Section 17 of Rule 14; (4) extraterritorial service on a non-resident defendant is authorized, among others, when the subject of the action is property within the Philippines in which the relief demanded consists in excluding defendant from any interest therein; and (5) inasmuch as the reliefs prayed for by the private respondent in the complaint are in personam, service by registered mail
The petition is impressed with merit. Section 17, Rule 14 of the Rules of Court provides: Section 17. Extraterritorial service. — When the defendant does not reside and is not found in the Philippines and the action affects the personal status of the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under section 7; or by publication in a newspaper of general circulation in such places and for such times as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time,
January 28, 2008
EUFEMIA ALMEDA and ROMEL ALMEDA, petitioners, vs. BATHALA MARKETING INDUSTRIES, INC., respondent. INC., respondent. DECISION NACHURA, J .: This is a Petition for Review on Certiorari under under Rule 45 of the Rules of Court, of the Decision Decisio n1 of the Court of Appeals (CA), dated September 3, 2001, in CA-G.R. CV No. 67784, and its Resolution 2 dated November 19, 2001. The assailed Decision affirmed with modification the Decision Decisio n 3 of the Regional Trial Court (RTC), Makati City, Branch 136, dated May 9, 2000 in Civil Case No. 98-411. Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as lessee, represented by its president Ramon H. Garcia, renewed its Contract of Lease 4 with Ponciano L. Almeda (Ponciano), as lessor, husband of petitioner Eufemia and father of petitioner Romel Almeda. Under the said contract, Ponciano agreed to lease a portion of the Almeda Compound, located at 2208 Pasong Tamo Street, Makati City, consisting of 7,348.25 square meters, for a monthly rental of P1,107,348.69, for a term of four (4) years from May 1, 1997 unless sooner terminated as provided in the contract. contract .5 The contract of lease contained the following pertinent provisions which gave rise to the instant case: SIXTH - It is expressly understood by the parties hereto that the rental rate stipulated is based on the present rate of assessment on the property, and that in case the assessment should hereafter be increased or any new tax, charge or burden be imposed by authorities on the lot and building where the leased premises are located, LESSEE shall pay, when the rental herein provided becomes due, the additional rental or charge corresponding to the portion hereby leased; provided, however, that in the event that the present assessment or tax on said property should be reduced, LESSEE shall be entitled to reduction in the stipulated rental, likewise in proportion to the portion leased by him; SEVENTH - In case an extraordinary inflation or devaluation of Philippine Currency should supervene, the value of Philippine peso at the time of the establishment of the obligation shall be the basis of payment; payment ;6
During the effectivity of the contract, Ponciano died. Thereafter, respondent dealt with petitioners. In a lette r 7dated December 29, 1997, petitioners advised respondent that the former shall assess and collect Value Added Tax (VAT) on its monthly rentals. In response, respondent contended that VAT may not be imposed as the rentals fixed in the contract of lease were supposed to include the VAT therein, considering that their contract was executed on May 1, 1997 when the VAT law had long been in effect. effect .8 On January 26, 1998, respondent received another letter from petitioners informing the former that its monthly rental should be increased by 73% pursuant to condition No. 7 of the contract and Article 1250 of the Civil Code. Respondent opposed petitioners' demand and insisted that there was no extraordinary inflation to warrant the application of Article 1250 in light of the pronouncement of this Court in various cases .9 Respondent refused to pay the VAT and adjusted rentals as demanded by petitioners but continued to pay the stipulated amount set forth in their contract. On February 18, 1998, respondent instituted an action for declaratory relief for purposes of determining the correct interpretation of condition Nos. 6 and 7 of the lease contract to prevent damage and prejudice .10 The case was docketed as Civil Case No. 98-411 before the RTC of Makati. On March 10, 1998, petitioners in turn filed an action for ejectment, rescission and damages against respondent for failure of the latter to vacate the premises after the demand made by the former . former .11 Before respondent could file an answer, petitioners filed a Notice of Dismissal. Dismissal.12 They subsequently refiled the complaint before the Metropolitan Trial Court of Makati; the case was raffled to Branch 139 and was docketed as Civil Case No. 53596. Petitioners later moved for the dismissal of the declaratory relief case for being an improper remedy considering that respondent was already in breach of the obligation and that the case would not end the litigation and settle the rights of the parties. The trial court, however, was not persuaded, and consequently, denied the motion. After trial on the merits, on May 9, 2000, the RTC ruled in favor of respondent and against petitioners. The pertinent portion of the decision reads:
WHEREFORE, premises considered, this Court renders judgment on the case as follows:
No pronouncement as to costs. SO ORDERED. ORDERED.14
1) declaring that plaintiff is not liable for the payment of Value Added Tax (VAT) of 10% of the rent for [the] use of the leased premises; 2) declaring that plaintiff is not liable for the payment of any rental adjustment, there being no [extraordinary] inflation or devaluation, as provided in the Seventh Condition of the lease contract, to justify the same; same; 3) holding defendants liable to plaintiff for the total amount of P1,119,102.19, said amount representing payments erroneously made by plaintiff as VAT charges and rental adjustment for the months of January, February and March, 1999; and 4) holding defendants liable to plaintiff for the amount of P1,107,348.6 9, said amount representing r epresenting the balanc e of plaintiff's rental deposit still with defendants. SO ORDERED. ORDERED.13 The trial court denied petitioners their right to pass on to respondent the burden of paying the VAT since it was not a new tax that would call for the application of the sixth clause of the contract. The court, likewise, denied their right to collect the demanded increase in rental, there being no extraordinary inflation or devaluation as provided for in the seventh clause of the contract. Because of the payment made by respondent of the rental adjustment demanded by petitioners, the court ordered the restitution by the latter to the former of the amounts paid, notwithstanding the wellestablished rule that in an action for declaratory relief, other than a declaration of rights and obligations, affirmative reliefs are not sought by or awarded to the parties. Petitioners elevated the aforesaid case to the Court of Appeals which affirmed with modification the RTC decision. The fallo reads: WHEREFORE, premises considered, the present appeal is DISMISSED and the appealed appealed decision in Civil Case No. 98-411 is hereby AFFIRMED with MODIFICATION in that the order for the return of the balance of the rental deposits and of the amounts representing the 10% VAT and rental adjustment, is hereby DELETED.
The appellate court agreed with the conclusions of law and the application of the decisional rules on the matter made by the RTC. However, it found that the trial court exceeded its jurisdiction in granting affirmative relief to the respondent, particularly the restitution of its excess payment. Petitioners now come before this Court raising the following issues: I. WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE IS APPLICABLE TO THE CASE AT BAR. II. WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO PIPE AND FOUNDRY CORP. VS. NAWASA CASE, 161 SCRA 32 AND COMPANION COMPANION CASES ARE (sic) APPLICABLE IN THE CASE AT BAR. III. WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE CASE OF DEL ROSARIO VS. THE SHELL COMPANY OF THE PHILIPPINES, 164 SCRA 562, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED ERRED ON A QUESTION QUESTION OF LAW. LAW. IV. WHETHER OR NOT THE FINDING OF THE HONORABLE COURT OF APPEALS THAT RESPONDENT IS NOT LIABLE TO PAY THE 10% VALUE ADDED TAX IS IN ACCORDANCE WITH THE MANDATE OF RA 7716. V. WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE PLAINTIFF-APPELLEE WAS IN BREACH WHEN THE PETITION FOR DECLARATORY RELIEF WAS FILED BEFORE THE TRIAL COURT.
WHEREFORE, premises considered, this Court renders judgment on the case as follows:
No pronouncement as to costs. SO ORDERED. ORDERED.14
1) declaring that plaintiff is not liable for the payment of Value Added Tax (VAT) of 10% of the rent for [the] use of the leased premises; 2) declaring that plaintiff is not liable for the payment of any rental adjustment, there being no [extraordinary] inflation or devaluation, as provided in the Seventh Condition of the lease contract, to justify the same; same; 3) holding defendants liable to plaintiff for the total amount of P1,119,102.19, said amount representing payments erroneously made by plaintiff as VAT charges and rental adjustment for the months of January, February and March, 1999; and 4) holding defendants liable to plaintiff for the amount of P1,107,348.6 9, said amount representing r epresenting the balanc e of plaintiff's rental deposit still with defendants. SO ORDERED. ORDERED.13 The trial court denied petitioners their right to pass on to respondent the burden of paying the VAT since it was not a new tax that would call for the application of the sixth clause of the contract. The court, likewise, denied their right to collect the demanded increase in rental, there being no extraordinary inflation or devaluation as provided for in the seventh clause of the contract. Because of the payment made by respondent of the rental adjustment demanded by petitioners, the court ordered the restitution by the latter to the former of the amounts paid, notwithstanding the wellestablished rule that in an action for declaratory relief, other than a declaration of rights and obligations, affirmative reliefs are not sought by or awarded to the parties. Petitioners elevated the aforesaid case to the Court of Appeals which affirmed with modification the RTC decision. The fallo reads: WHEREFORE, premises considered, the present appeal is DISMISSED and the appealed appealed decision in Civil Case No. 98-411 is hereby AFFIRMED with MODIFICATION in that the order for the return of the balance of the rental deposits and of the amounts representing the 10% VAT and rental adjustment, is hereby DELETED.
The appellate court agreed with the conclusions of law and the application of the decisional rules on the matter made by the RTC. However, it found that the trial court exceeded its jurisdiction in granting affirmative relief to the respondent, particularly the restitution of its excess payment. Petitioners now come before this Court raising the following issues: I. WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE IS APPLICABLE TO THE CASE AT BAR. II. WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO PIPE AND FOUNDRY CORP. VS. NAWASA CASE, 161 SCRA 32 AND COMPANION COMPANION CASES ARE (sic) APPLICABLE IN THE CASE AT BAR. III. WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE CASE OF DEL ROSARIO VS. THE SHELL COMPANY OF THE PHILIPPINES, 164 SCRA 562, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED ERRED ON A QUESTION QUESTION OF LAW. LAW. IV. WHETHER OR NOT THE FINDING OF THE HONORABLE COURT OF APPEALS THAT RESPONDENT IS NOT LIABLE TO PAY THE 10% VALUE ADDED TAX IS IN ACCORDANCE WITH THE MANDATE OF RA 7716. V. WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE PLAINTIFF-APPELLEE WAS IN BREACH WHEN THE PETITION FOR DECLARATORY RELIEF WAS FILED BEFORE THE TRIAL COURT.
In fine, the issues for our resolution are as follows: 1) whether the action for declaratory relief is proper; 2) whether respondent is liable to pay 10% VAT pursuant to Republic Act (RA) 7716; and 3) whether the amount of rentals due the petitioners should be adjusted by reason of extraordinary inflation or devaluation. Declaratory relief is defined as an action by any person interested in a deed, will, contract or other written instrument, executive order or resolution, to determine any question of construction or validity arising from the instrument, executive order or regulation, or statute, and for a declaration of his rights and duties thereunder. The only issue that may be raised in such a petition is the question of construction or validity of provisions in an instrument or statute. Corollary is the general rule that such an action must be justified, as no other adequate relief or remedy is available under the ci rcumstances. 15 Decisional law enumerates the requisites of an action for declaratory relief, as follows: 1) the subject matter of the controversy must be a deed, will, contract or other written instrument, statute, executive order or regulation, or ordinance; 2) the terms of said documents and the validity thereof are doubtful and require judicial construction; 3) there must have been no breach of the documents in question; 4) there must be an actual justiciable controversy or the "ripening seeds" of one between persons whose interests are adverse; 5) the issue must be ripe for judicial determination; and 6) adequate relief is not available through other means or other forms of action or proceeding. proceeding.16 It is beyond cavil that the foregoing requisites are present in the instant case, except that petitioners insist that respondent was already in breach of the contract when the petition was filed.
before another court; thus, the construction of the subject contractual provisions should be ventilated in the same forum. We are not convinced. It is true that in Panganiban v. Pilipinas Shell Petroleum Corporation Corporatio n17 we held that the petition for declaratory relief should be dismissed in view of the pendency of a separate action for unlawful detainer. However, we cannot apply the same ruling to the instant case. In Panganiban, Panganiban , the unlawful detainer case had already been resolved by the trial court before the dismissal of the declaratory relief case; and it was petitioner in that case who insisted that the action for declaratory relief be preferred over the action for unlawful detainer. Conversely, in the case at bench, the trial court had not yet resolved the rescission/ejectment case during the pendency of the declaratory relief petition. In fact, the trial court, where the rescission case was on appeal, itself initiated the suspension of the proceedings pending the resolution of the action for declaratory relief. We are not unmindful of the doctrine enunciated in Teodoro, Jr. v. Mirasol Mirasol 18 where the declaratory relief action was dismissed because the issue therein could be threshed out in the unlawful detainer suit. Yet, again, in that case, there was already a breach of contract at the time of the filing of the declaratory relief petition. This dissimilar factual milieu proscribes the Court from applying Teodoro to Teodoro to the instant case. Given all these attendant circumstances, circumstances, the Court is disposed to entertain the instant declaratory relief action instead of dismissing it, notwithstanding notwithstanding the pendency of the ejectment/rescission case before the trial court. The resolution of the present petition would write finis to finis to the parties' dispute, as it would settle once and for all the question of the proper interpretation of the two contractual stipulations subject of this controversy.
We do not agree. Now, on the substantive law issues. After petitioners demanded demanded payment of adjusted rentals and in the months that followed, respondent complied with the terms and conditions set forth in their contract of lease by paying the rentals stipulated therein. Respondent Respondent religiously fulfilled its obligations to petitioners even during the pendency of the present suit. There is no showing that respondent committed an act constituting a breach of the subject contract of lease. Thus, respondent is not barred from instituting before the trial court the petition for declaratory relief. Petitioners claim that the instant petition is not proper because a separate action for rescission, ejectment and damages had been commenced
Petitioners repeatedly made a demand on respondent for the payment of VAT and for rental adjustment allegedly brought about by extraordinary inflation or devaluation. Both the trial court and the appellate court found no merit in petitioners' claim. We see no reason to depart from such findings. As to the liability of respondent respondent for the payment of VAT, we cite with approval the ratiocination of the appellate court, viz.:
Clearly, the person primarily liable for the payment of VAT is the lessor who may choose to pass it on to the lessee or absorb the same. Beginning January 1, 1996, the lease of real property in the ordinary course of business, whether for commercial or residential use, when the gross annual receipts exceed P500,000.00, is subject to 10% VAT. Notwithstanding the mandatory payment of the 10% VAT by the lessor, the actual shifting of the said tax burden upon the lessee is clearly optional on the part of the lessor, under the terms of the statute. The word "may" in the statute, generally speaking, denotes that it is directory in nature. It is generally permissive only and operates to confer discretion. In this case, despite the applicability of the rule under Sec. 99 of the NIRC, as amended by R.A. 7716, granting the lessor the option to pass on to the lessee the 10% VAT, to existing contracts of lease as of January 1, 1996, the original lessor, Ponciano L. Almeda did not charge the lessee-appellee the 10% VAT nor provided for its additional imposition when they renewed the contract of lease in May 1997. More significantly, said lessor did not actually collect a 10% VAT on the monthly rental due from the lessee-appellee after the execution of the May 1997 contract of lease. The inevitable implication is that the lessor intended not to avail of the option granted him by law to shift the 10% VAT upon the lessee-appellee. x x x.19 In short, petitioners are estopped from shifting to respondent the burden of paying the VAT. Petitioners' reliance on the sixth condition of the contract is, likewise, unavailing. This provision clearly states that respondent can only be held liable for new taxes imposed after the effectivity of the contract of lease, that is, after May 1997, and only if they pertain to the lot and the building where the leased premises are located. Considering that RA 7716 took effect in 1994, the VAT cannot be considered as a "new tax" in May 1997, as to fall within the coverage of the sixth stipulation. Neither can petitioners legitimately demand rental adjustment because of extraordinary inflation or devaluation. Petitioners contend that Article 1250 of the Civil Code does not apply to this case because the contract stipulation speaks of extraordinary inflation or devaluation while the Code speaks of extraordinary inflation or deflation. They insist that the doctrine pronounced in Del Rosario v. The Shell Company, Phils. Limited 20 should apply.
Essential to contract construction is the ascertainment of the intention of the contracting parties, and such determination must take into account the contemporaneous and subsequent acts of the parties. This intention, once ascertained, is deemed an integral part of the contract .21 While, indeed, condition No. 7 of the contract speaks of "extraordinary inflation or devaluation" as compared to Article 1250's "extraordinary inflation or deflation," we find that when the parties used the term "devaluation," they really did not intend to depart from Article 1250 of the Civil Code. Condition No. 7 of the contract should, thus, be read in harmony with the Civil Code provision. That this is the intention of the parties is evident from petitioners' letter 22 dated January 26, 1998, where, in demanding rental adjustment ostensibly based on condition No. 7, petitioners made explicit reference to Article 1250 of the Civil Code, even quoting the law verbatim. Thus, the application of Del Rosario is not warranted. Rather, jurisprudential rules on the application of Article 1250 should be considered. Article 1250 of the Civil Code states: In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary. Inflation has been defined as the sharp increase of money or credit, or both, without a corresponding increase in business transaction. There is inflation when there is an increase in the volume of money and credit relative to available goods, resulting in a substantial and continuing rise in the general price level.23 In a number of cases, this Court had provided a discourse on what constitutes extraordinary inflation, thus: [E]xtraordinary inflation exists when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value of said currency, and such increase or decrease could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation .24 The factual circumstances obtaining in the present case do not make out a case of extraordinary inflation or devaluation as would justify the application of Article 1250 of the Civil Code. We would like to stress that the erosion of the value of the Philippine peso in the past three or four
decades, starting in the mid-sixties, is characteristic of most currencies. And while the Court may take judicial notice of the decline in the purchasing power of the Philippine currency in that span of time, such downward trend of the peso cannot be considered as the extraordinary phenomenon contemplated by Article 1250 of the Civil Code. Furthermore, absent an official pronouncement or declaration by competent authorities of the existence of extraordinary inflation during a given period, the effects of extraordinary inflation are not to be applied. 25 WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 67784, dated September 3, 2001, and its Resolution dated November 19, 2001, are AFFIRMED. SO ORDERED.
G.R. No. 126911
April 30, 2003
PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS and JOSE ABAD, LEONOR ABAD, SABINA ABAD, JOSEPHINE "JOSIE" BEATA ABAD-ORLINA, CECILIA ABAD, PIO ABAD, DOMINIC ABAD, TEODORA ABAD, respondents. CARPIO MORALES, J .: The present petition for review assails the decision of the Court of Appeals affirming that of the Regional Trial Court of Iloilo City, Branch 30, finding petitioner Philippine Deposit Insurance Corporation (PDIC) liable, as statutory insurer, for the value of 20 Golden Time Deposits belonging to respondents Jose Abad, Leonor Abad, Sabina Abad, Josephine "Josie" Beata Abad-Orlina, Cecilia Abad, Pio Abad, Dominic Abad, and Teodora Abad at the Manila Banking Corporation (MBC), Iloilo Branch. Prior to May 22, 1997, respondents had, individually or jointly with each other, 71 certificates of time deposits denominated as "Golden Time Deposits" (GTD) with an aggregate face value of P1,115,889.96. 1
Iloilo, submitted a report to the PDIC 7 that there was massive conversion and substitution of trust and deposit accounts on May 25, 1987 at MBCIloilo.8 The pertinent portions of the report stated: xxx
On May 25, 1987, the next banking day following the issuance of the MB Resolution, respondent Jose Abad was at the MBC at 9:00 a.m. for the purpose of pre-terminating the 71 aforementioned GTDs and re-depositing the fund represented thereby into 28 new GTDs in denominations of P40,000.00 or less under the names of herein respondents individually or jointly with each other.4 Of the 28 new GTDs, Jose Abad pre-terminated 8 and withdrew the value thereof in the total amount of P320,000.00. 5
xxx
On May 25, 1987 (Monday) or a day prior to the official announcement and take-over by CB of the assets and liabilities of The Manila Banking Corporation, the Iloilo Branch was found to have recorded an unusually heavy movements in terms of volume and amount for all types of deposits and trust accounts. It appears that the impending receivership of TMBC was somehow already known to many depositors on account of the massive withdrawals paid on this day which practically wiped out the branch's entire cash position. . . . xxx
xxx
xxx
. . . The intention was to maximize the availment of PDIC coverage limited to P40,000 by spreading out big accounts to as many certificates under various nominees. . . . 9 xxx
On May 22, 1987, a Friday, the Monetary Board (MB) of the Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, issued Resolution 5052 prohibiting MBC to do business in the P hilippines, and placing its assets and affairs under receivership. The Resolution, however, was not served on MBC until Tuesday the following week, or on May 26, 1987, when the designated Receiver took over. 3
xxx
xxx
xxx
Because of the report, PDIC entertained serious reservation in recognizing respondents' GTDs as deposit liabilities of MBC-Iloilo. Thus, on August 30, 1991, it filed a petition for declaratory relief against respondents with the Regional Trial Court (RTC) of Iloilo City, for a judicial declaration determination of the insurability of respondents' GTDs at MBC-Iloilo.10 In their Answer filed on October 24, 1991 and Amended Answer 11 filed on January 9, 1992, respondents set up a counterclaim against PDIC whereby they asked for payment of their insured deposits. 12 In its Decision of February 22, 1994, 13 Branch 30 of the Iloilo RTC declared the 20 GTDs of respondents to be deposit liabilities of MBC, hence, are liabilities of PDIC as statutory insurer. It accordingly disposed as follows:
Respondents thereafter filed their claims with the PDIC for the payment of the remaining 20 insured GTDs. 6
WHEREFORE, rendered:
On February 11, 1988, PDIC paid respondents the value of 3 claims in the total amount of P120,000.00. PDIC, however, withheld payment of the 17 remaining claims after Washington Solidum, Deputy Receiver of MBC-
1. Declaring the 28 GTDs of the Abads which were issued by the TMBC-Iloilo on May 25, 1987 as deposits or deposit liabilities of the
premises
considered,
judgment
is
hereby
bank as the term is defined under Section 3 (f) of R.A. No. 3591, as amended; 2. Declaring PDIC, being the statutory insurer of bank deposits, liable to the Abads for the value of the remaining 20 GTDs, the other 8 having been paid already by TMBC Iloilo on May 25,1987; 3. Ordering PDIC to pay the Abads the value of said 20 GTDs less the value of 3 GTDs it paid on February 11, 1988, and the amounts it may have paid the Abads pursuant to the Order of this Court dated September 8, 1992; 4. Ordering PDIC to pay immediately the Abads the balance of its admitted liability as contained in the aforesaid Order of September 8, 1992, should there be any, subject to liquidation when this case shall have been finally decide; and 5. Ordering PDIC to pay legal interest on the remaining insured deposits of the Abads from February 11, 1988 until they are fully paid. SO ORDERED. On appeal, the Court of Appeals, by the assailed Decision of October 21, 1996, 14 affirmed the trial court's decision except as to the award of legal interest which it deleted. Hence, PDIC's present Petition for Review which sets forth this lone assignment of error: THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE HOLDING OF THE TRIAL COURT THAT THE AMOUNT REPRESENTED IN THE FACES OF THE SO CALLED "GOLDEN TIME DEPOSITS" WERE INSURED DEPOSITS EVEN AS THEY WERE MERE DERIVATIVES OF RESPONDENTS' PREVIOUS ACCOUNT BALANCES WHICH WERE PRE-TERMINATED/TERMINATED AT THE TIME THE MANILA BANKING CORPORATION WAS ALREADY IN SERIOUS FINANCIAL DISTRESS. In its supplement to the petition, PDIC adds the following assignment of error: THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE HOLDING OF THE TRIAL COURT ORDERING PETITIONER TO PAY RESPONDENTS' CLAIMS FOR PAYMENT OF INSURED DEPOSITS
FOR THE REASON THAT AN ACTION FOR DECLARATORY RELIEF DOES NOT ESSENTIALLY ENTAIL AN EXECUTORY PROCESS AS THE ONLY RELIEF THAT SHOULD HAVE BEEN GRANTED BY THE TRIAL COURT IS A DECLARATION OF THE RIGHTS AND DUTIES OF PETITIONER UNDER R.A. 3591, AS AMENDED, PARTICULARLY SECTION 3(F) THEREOF AS CONSIDERED AGAINST THE SURROUNDING CIRCUMSTANCES OF THE MATTER IN ISSUE SOUGHT TO BE CONSTRUED WITHOUT PREJUDICE TO OTHER MATTERS THAT NEED TO BE CONSIDERED BY PETITIONER IN THE PROCESSING OF RESPONDENTS' CLAIMS. Under its charter, 15 PDIC (hereafter petitioner) is liable only for deposits received by a bank "in the usual course of business." 16 Being of the firm conviction that, as the reported May 25, 1987 bank transactions were so massive, hence, irregular, petitioner essentially seeks a judicial declaration that such transactions were not made "in the usual course of business" and, therefore, it cannot be made liable for deposits subject thereof. 17 Petitioner points that as MBC was prohibited from doing further business by MB Resolution 505 as of May 22, 1987, all transactions subsequent to such date were not done "in the usual course of business." Petitioner further posits that there was no consideration for the 20 GTDs subject of respondents' claim. In support of this submission, it states that prior to March 25, 1987, when the 20 GTDs were made, MBC had been experiencing liquidity problems, e.g., at the start of banking operations on March 25, 1987, it had only P2,841,711.90 cash on hand and at the end of the day it was left with P27,805.81 consisting mostly of mutilated bills and coins.18 Hence, even if respondents had wanted to convert the face amounts of the GTDs to cash, MBC could not have complied with i t. Petitioner theorizes that after MBC had exhausted its cash and could no longer sustain further withdrawal transactions, it instead issued new GTDs as "payment" for the pre-terminated GTDs of respondents to make sure that all the newly-issued GTDs have face amounts which are within the statutory coverage of deposit insurance. Petitioner concludes that since no cash was given by respondents and none was received by MBC when the new GTDs were transacted, there was no consideration therefor and, thus, they were not validly transacted "in the usual course of business" and no liability for deposit insurance was created.19 Petitioner's position does not persuade.
While the MB issued Resolution 505 on May 22, 1987, a copy thereof was served on MBC only on May 26, 1987. MBC and its clients could be given the benefit of the doubt that they were not aware that the MB resolution had been passed, given the necessity of confidentiality of placing a banking institution under receivership. 20 The evident implication of the law, therefore, is that the appointment of a receiver may be made by the Monetary Board without notice and hearing but its action is subject to judicial inquiry to insure the protection of the banking institution. Stated otherwise, due process does not necessarily require a prior hearing; a hearing or an opportunity to be heard may be subsequent to the closure. One can just imagine the dire consequences of a prior hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the process, fortunes may be wiped out, and disillusionment will run the gamut of the entire banking community . (Emphasis supplied).21 Mere conjectures that MBC had actual knowledge of its impending closure do not suffice. The MB resolution could not thus have nullified respondents' transactions which occurred prior to May 26, 1987. That no actual money in bills and/or coins was handed by respondents to MBC does not mean that the transactions on the new GTDs did not i nvolve money and that there was no consideration therefor. For the outstanding balance of respondents' 71 GTDs in MBC prior to May 26, 1987 22 in the amount of P1,115,889.15 as earlier mentioned was re-deposited by respondents under 28 new GTDs. Admittedly, MBC had P2,841,711.90 cash on hand — more than double the outstanding balance of respondent's 71 GTDs — at the start of the banking day on May 25, 1987. Since respondent Jose Abad was at MBC soon after it opened at 9:00 a.m. of that day, petitioner should not presume that MBC had no cash to cover the new GTDs of respondents and conclude that there was no consideration for said GTDs. Petitioner having failed to overcome the presumption that the ordinary course of business was followed, 23 this Court finds that the 28 new GTDs were deposited "in the usual course of business" of MBC. In its second assignment of error, petitioner posits that the trial court erred in ordering it to pay the balance of the deposit insurance to respondents, maintaining that the instant petition stemmed from a petition for declaratory relief which does not essentially entail an executory process, and the only relief that should have been granted by the trial court is a declaration of the parties' rights and duties. As such, petitioner continues, no order of
payment may arise from the case as this is beyond the office of declaratory relief proceedings.24 Without doubt, a petition for declaratory relief does not essentially entail an executory process. There is nothing in its nature, however, that prohibits a counterclaim from being set-up in the same action. 25 Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing of a counterclaim based on the same transaction, deed or contract subject of the complaint. A special civil action is after all not essentially different from an ordinary civil action, which is generally governed by Rules 1 to 56 of the Rules of Court, except that the former deals with a special subject matter which makes necessary some special regulation. But the identity between their fundamental nature is such that the same rules governing ordinary civil suits may and do apply to special civil actions if not inconsistent with or if they may serve to supplement the provisions of the peculiar rules governing special civil actions.26 Petitioner additionally submits that the issue of determining the amount of deposit insurance due respondents was never tried on the merits since the trial dwelt only on the "determination of the viability or validity of the deposits" and no evidence on record sustains the holding that the amount of deposit due respondents had been finally determined. 27 This issue was not raised in the court a quo, however, hence, it cannot be raised for the first time in the petition at bar. 28 Finally, petitioner faults respondents for availing of the statutory limits of the PDIC law, presupposing that, based on the conduct of respondent Jose Abad on March 25, 1987, he and his co respondents "somehow knew" of the impending closure of MBC. Petitioner ascribes bad faith to respondent Jose Abad in transacting the questioned deposits, and seeks to disqualify him from availing the benefits under the law. 29 Good faith is presumed. This, petitioner failed to overcome since it offered mere presumptions as evidence of bad faith. WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED. SO ORDERED.
Constabulary (PC) as the nucleus and the integrated police forces as components thereof. Complementing P.D. No. 765 was P.D. No. 11843 dated August 26, 1977 (INP Law, hereinafter) issued to professionalize the INP and promote career development therein.
G.R. No. 169466
May 9, 2007
DEPARTMENT OF BUDGET AND MANAGEMENT, represented by SECRETARY ROMULO L. NERI, PHILIPPINE NATIONAL POLICE, represented by POLICE DIRECTOR GENERAL ARTURO L. LOMIBAO, NATIONAL POLICE COMMISSION, represented by CHAIRMAN ANGELO T. REYES, AND CIVIL SERVICE COMMISSION, represented by CHAIRPERSON KARINA C. DAVID, Petitioners, vs. MANILA’S FINEST RETIREES ASSOCIATION, INC., represented by P/COL. FELICISIMO G. LAZARO (RET.), AND ALL THE OTHER INP RETIREES, Respondents. DECISION GARCIA, J .: Assailed and sought to be set aside in this petition for review on certiorari under Rule 45 of the Rules of Court are the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 78203, to wit: 1. Decision1 dated July 7, 2005 which affirmed in toto the decision of the Regional Trial Court of Manila, Branch 32, in Civil Case No. 02-103702, a suit for declaratory relief, declaring the herein respondents entitled to the same retirement benefits accorded upon retirees of the Philippine National Police (PNP) under Republic Act (R.A.) No. 6975, as amended by R.A. No. 8551, and ordering the herein petitioners to implement the proper adjustments on respondents’ retirement benefits; and 2. Resolution2 dated August 24, 2005 which denied the p etitioners’ motion for reconsideration. The antecedent facts: In 1975, Presidential Decree (P.D.) No. 765 was issued constituting the Integrated National Police (INP) to be composed of the Philippine
On December 13, 1990, Republic Act (R.A.) No. 6975, entitled "AN ACT ESTABLISHING THE PHILIPPINE NATIONAL POLICE UNDER A REORGANIZED DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT, AND FOR OTHER PURPOSES," hereinafter referred to as PNP Law, was enacted. Under Section 23 of said law, the Philippine National Police (PNP) would initially consist of the members of the INP, created under P.D. No. 765, as well as the officers and enlisted personnel of the PC. In part, S ection 23 reads: SEC. 23. Composition. – Subject to the limitation provided for in this Act, the Philippine National Police, hereinafter referred to as the PNP, is hereby established, initially consisting of the members of the police forces who were integrated into the Integrated National Police (INP) pursuant to Presidential Decree No. 765, and the officers and enlisted personnel of the Philippine Constabulary (PC). A little less than eight (8) years l ater, or on February 25, 1998, R.A. No. 6975 was amended by R.A. No. 8551, otherwise known as the "PHILIPPINE NATIONAL POLICE REFORM AND REORGANIZATION ACT OF 1998." Among other things, the amendatory law reengineered the retirement scheme in the police organization. Relevantly, PNP personnel, under the new law, stood to collect more retirement benefits than what INP members of equivalent rank, who had retired under the INP Law, received. The INP retirees illustrated the resulting disparity i n the retirement benefits between them and the PNP retirees as follows :4 Retirement Rank
Monthly Pension
INP
PNP
INP
PNP
Corporal
SPO3
P 3,225.00
P 11,310.00
P 8,095.00
Captain
P. Sr. Insp.
P 5,248.00
P 15,976.00
P10,628.00
Brig. Gen.
P. Supt.
P 18,088.00
P 8,033.76
Chief P 10,054.24
Difference
Hence, on June 3, 2002, in the Regional Trial Court (RTC) of Manila, all INP retirees, spearheaded by the Manila’s Finest Retirees Association, Inc., or the MFRAI (hereinafter collectively referred to as the INP Retirees), filed a petition for declaratory relief ,5 thereunder impleading, as respondents, the Department of Budget and Management (DBM), the PNP, the National Police Commission (NAPOLCOM), the Civil Service Commission (CSC) and the Government Service Insurance System (GSIS). Docketed in the RTC as Civil Case No. 02-103702, which was raffled to Branch 22 thereof, the petition alleged in gist that INP retirees were equally situated as the PNP retirees but whose retirement benefits prior to the enactment of R.A. No. 6975, as amended by R.A. No. 8551, were unconscionably and arbitrarily excepted from the higher rates and adjusted benefits accorded to the PNP retirees. Accordingly, in their petition, the petitioning INP retirees pray that a –
The respondents Government Departments and Agencies shall IMMEDIATELY EFFECT and IMPLEMENT the proper adjustments on the INP Retirees’ retirement and such other benefits, RETROACTIVE to its date of effectivity, and RELEASE and PAY to the INP Retirees the due payments of the amounts. SO ORDERED. On April 2, 2003, the trial court i ssued what it denominated as Supplement to the Decision whereunder it granted the GSIS’ motion to dismiss and thus considered the basic petition as withdrawn with respect to the latter. From the adverse decision of the trial court, the remaining respondents, namely, DBM, PNP, NAPOLCOM and CSC, interposed an appeal to the CA whereat their appellate recourse was docketed as CA-G.R. CV No. 78203.
DECLARATORY JUDGMENT be rendered in their favor, DECLARING with certainty that they, as INP-retirees, are truly absorbed and equally considered as PNP-retirees and thus, entitled to enjoy the SAME or IDENTICAL retirement benefits being bestowed to PNP-retirees by virtue of said PNP Law or Republic Act No. 6975, as amended by Republic Act 8551, with the corollary mandate for the respondents-government agencies to effect the immediate adjustment on their previously received disparate retirement benefits, retroactive to its effectivity, and with due payment thereof.
As stated at the threshold hereof, the CA, in its decision of July 7, 2005,7 affirmed that of the trial court upholding the entitlement of the INP retirees to the same or identical retirement benefits accorded upon PNP retirees under R.A. No. 6975, as amended.
The GSIS moved to dismiss the petition on grounds of lack of jurisdiction and cause of action. On the other hand, the CSC, DBM, NAPOLCOM and PNP, in their respective answers, asserted that the petitioners could not claim the more generous retirement benefits under R.A. No. 6975 because at no time did they become PNP members, having retired prior to the enactment of said law. DBM, NAPOLCOM and PNP afterwards filed their respective pre-trial briefs.
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN LAW IN AFFIRMING THE DECISION OF THE TRIAL COURT NOTWITHSTANDING THAT IT IS CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE.
The ensuing legal skirmish is not relevant to the disposition of the instant case. The bottom line is that, on March 21, 2003, the RTC came out with its decision6 holding that R.A. No. 6975, as amended, did not abolish the INP but merely provided for the absorption of its police functions by the PNP, and accordingly rendered judgment for the INP retirees, to wit: WHEREFORE, this Court hereby renders JUDGMENT DECLARING the INP Retirees entitled to the same or identical retirement benefits and such other benefits being granted, accorded and bestowed upon the PNP Retirees under the PNP Law (RA No. 6975, as amended).
Their motion for reconsideration having been denied by the CA in` its equally assailed resolution of August 24, 2005,8 herein petitioners are now with this Court via the instant recourse on their singular submission that -
We DENY. In the main, it is petitioners’ posture that R.A. No. 6975 clearly abolished the INP and created in its stead a new police force, the PNP. Prescinding therefrom, petitioners contend that since the PNP is an organization entirely different from the INP, it follows that INP retirees never became PNP members. Ergo, they cannot avail themselves of the retirement benefits accorded to PNP members under R.A. No. 6975 and its amendatory law, R.A. No. 8551. A flashback at history is proper.
As may be recalled, R.A. No. 6975 was enacted into law on December 13, 1990, or just about four (4) years after the 1986 Edsa Revolution toppled down the dictatorship regime. Egged on by the current sentiment of the times generated by the long period of martial rule during which the police force, the PC-INP, had a military character, being then a major service of the Armed Forces of the Philippines, and invariably moved by a fresh constitutional mandate for the establishment of one police force which should be national in scope and, most importantly, purely civilian in character ,9 Congress enacted R.A. No. 6975 establishing the PNP and placing it under the Department of Interior and Local Government. To underscore the civilian character of the PNP, R.A. No. 6975 made it emphatically clear in its declaration of policy the following: Section 2. Declaration of policy - It is hereby declared to be the policy of the State to promote peace and order, ensure public safety and further strengthen local government capability aimed towards the effective delivery of the basic services to the citizenry through the establishment of a highly efficient and competent police force that is national in scope and civilian in character. xxx. The police force shall be organized, trained and equipped primarily for the performance of police functions. Its national scope and civilian character shall be paramount. No element of the police force shall be military nor shall any position thereof be occupied by active members of the [AFP]. (Emphasis and word in bracket supplied.) Pursuant to Section 23, supra, of R.A. No. 6975, the PNP initially consisted of the members of the police forces who were integrated into the INP by virtue of P.D. No. 765, while Section 86 10 of the same law provides for the assumption by the PNP of the police functions of the INP and its absorption by the former, including its appropriations, funds, records, equipment, etc., as well as its personnel.11 And to govern the statute’s implementation, Section 85 of the Act spelled out the following absorption phases: Phase I – Exercise of option by the uniformed members of the [PC], the PC elements assigned with the Narcotics Command, CIS, and the personnel of the technical services of the AFP assigned with the PC to include the regular CIS investigating agents and the operatives and agents of the NAPOLCOM Inspection. Investigation and Intelligence Branch, and the personnel of the absorbed National Action Committee on Anti-Hijacking (NACAH) of the Department of National Defense to be completed within six (6) months from the date of the effectivity of this Act. At the end of this phase, all personnel from the INP, PC, AFP Technical Services, NACAH, and NAPOLCOM Inspection, Investigation and Intelligence Branch shall
have been covered by official orders assigning them to the PNP, Fire and Jail Forces by their respective units. Phase II – Approval of the table of organization and equipment of all bureaus and offices created under this Act, preparation and filling up of their staffing pattern, transfer of assets to the [DILG] and organization of the Commission, to be completed within twelve (12) months from the effectivity date hereof. At the end of this phase, all personnel to be absorbed by the [DILG] shall have been issued appointment papers, and the organized Commission and the PNP shall be fully operational. The PC officers and enlisted personnel who have not opted to join the PNP shall be reassigned to the Army, Navy or Air Force, or shall be allowed to retire under existing AFP rules and regulations. Any PC-INP officer or enlisted personnel may, within the twelve-month period from the effectivity of this Act, retire and be paid retirement benefits corresponding to a position two (2) ranks higher than his present grade, subject to the conditions that at the time he applies for retirement, he has rendered at least twenty (20) years of service and still has, at most, twenty-four (24) months of service remaining before the compulsory retirement age as provided by existing law for his office. Phase III – Adjustment of ranks and establishment of one (1) lineal roster of officers and another for non-officers, and the rationalization of compensation and retirement systems; taking into consideration the existing compensation schemes and retirement and separation benefit systems of the different components of the PNP, to ensure that no member of the PNP shall suffer any diminution in basic longevity and incentive pays, allowances and retirement benefits due them before the creations of the PNP, to be completed within eighteen (18) months from the effectivity of this Act. xxx. Upon the effectivity of this Act, the [DILG] Secretary shall exercise administrative supervision as well as operational control over the transferred, merged and/or absorbed AFP and INP units. The incumbent Director General of the PC-INP shall continue to act as Director General of the PNP until … replaced …. (Emphasis and words in brackets supplied.) From the foregoing, it appears clear to us that the INP was never, as posited by the petitioners, abolished or terminated out of existence by R.A. No. 6975. For sure, nowhere in R.A. No. 6975 does the words "abolish" or "terminate" appear in reference to the INP. Instead, what the law provides is for the "absorption," "transfer," and/or "merger" of the INP, as well as the other offices comprising the PC-INP, with the PNP. To "abolish" is to do away with, to annul, abrogate or destroy completely ;12 to "absorb" is to
assimilate, incorporate or to take in.13 "Merge" means to cause to combine or unite to become legally absorbed or extinguished by merge r 14 while "transfer" denotes movement from one position to another. Clearly, "abolition" cannot be equated with "absorption." True it is that Section 90 15 of R.A. No. 6975 speaks of the INP "[ceasing] to exist" upon the effectivity of the law. It ought to be stressed, however, that such cessation is but the logical consequence of the INP being absorbed by the PNP. 1a\^/phi1.net
Far from being abolished then, the INP, at the most, was merely transformed to become the PNP, minus of course its military character and complexion. Even the petitioners’ effort at disclosing the legislative intent behind the enactment of R.A. No. 6975 cannot support their theory of abolition. Rather, the Senate and House deliberations on the bill that eventually became R.A. No. 6975 reveal what has correctly been held by the CA in its assailed decision: that the PNP was precisely created to erase the stigma spawned by the militarization of the police force under the PC-INP structure. The rationale behind the passage of R.A. No. 6975 was adequately articulated by no less than the sponso r 16 of the corresponding House bill in his sponsorship speech, thus: By removing the police force from under the control and supervision of military officers, the bill seeks to restore and underscore the civilian character of police work - an otherwise universal concept that was muddled up by the martial law years. Indeed, were the legislative intent was for the INP’s abolition such that nothing would be left of it, the word "abolish" or what passes for it could have easily found its way into the very text of the law itself, what with the abundant use of the word during the legislative deliberations. But as can be gleaned from said deliberations, the lawmakers’ concern centered on the fact that if the entire PC-INP corps join the PNP, then the PC-INP will necessarily be abolished, for who then would be its members? Of more consequence, the lawmakers were one in saying that there should never be two national police agencies at the same time. With the conclusion herein reached that the INP was not in fact abolished but was merely transformed to become the PNP, members of the INP which include the herein respondents are, therefore, not excluded from availing themselves of the retirement benefits accorded to PNP retirees under Sections 7417 and 7518 of R.A. No. 6975, as amended by R.A. No.
8551. It may be that respondents were no longer in the government service at the time of the enactment of R.A. No. 6975. This fact, however, without more, would not pose as an impediment to the respondents’ entitlement to the new retirement scheme set forth under the aforecited sections. As correctly ratiocinated by the CA to which we are in full accord: For sure, R.A. No. 6975 was not a retroactive statute since it did not impose a new obligation to pay the INP retirees the difference between what they received when they retired and what would now be due to them after R. A. No. 6975 was enacted. Even so, that did not render the RTC’s interpretation of R.A. No. 6975 any less valid. The [respondents’] retirement prior to the passage of R.A. No. 6975 did not exclude them from the benefits provided by R.A. No. 6975, as amended by R.A. No. 8551, since their membership in the INP was an antecedent fact that nonetheless allowed them to avail themselves of the benefits of the subsequent laws. R.A. No. 6975 considered them as PNP members, always referring to their membership and service in the INP in providing for their retirement benefits. 19 Petitioners maintain, however, that NAPOLCOM Resolution No. 8,20 particularly Section 1121 thereof, bars the payment of any differential in retirement pay to officers and non-officers who are already retired prior to the effectivity of R.A. No. 6975. The contention does not commend itself for concurrence. Under the amendatory law (R.A. No. 8551), the application of rationalized retirement benefits to PNP members who have meanwhile retired before its (R.A. No. 8551) enactment was not prohibited. In fact, its Section 3822 explicitly states that the rationalized retirement benefits schedule and program "shall have retroactive effect in favor of PNP members and officers retired or separated from the time specified in the law ." To us, the aforesaid provision should be made applicable to INP members who had retired prior to the effectivity of R.A. No. 6975. For, as afore-held, the INP was, in effect, merely absorbed by the PNP and not abolished. Indeed, to bar payment of retirement pay differential to INP members who were already retired before R.A. No. 6975 became effective would even run counter to the purpose of NAPOLCOM Resolution No. 8 itself, as expressed in its preambulatory clause, which is to rationalize the retirement system of the PNP taking into consideration existing retirement and benefit systems (including R.A. No. 6975 and P.D. No. 1184) of the different components thereof "to ensure that no member of the PNP shall suffer any diminution in the retirement benefits due them before the creation of the PNP."23
Most importantly, the perceived restriction could not plausibly preclude the respondents from asserting their entitlement to retirement benefits adjusted to the level when R.A. No. 6975 took effect. Such adjustment hews with the constitutional warrant that "the State shall, from time to time, review to upgrade the pensions and other benefits due to retirees of both the government and private sectors,"24 and the implementing mandate under the Senior Citizen’s Law25 that "to the extent practicable and feasible, retirement benefits xxx shall be upgraded to be at par with the current scale enjoyed by those in actual service." 1awphi1.nét
Certainly going for the respondents in their bid to enjoy the same retirement benefits granted to PNP retirees, either under R.A. No. 6975 or R.A. No. 8551, is Section 34 of the latter law which amended Section 75 of R.A. No. 6975 by adding thereto the following proviso: Section 75. Retirement benefits. x x x: Provided, finally, That retirement pay of the officers/non-officers of the PNP shall be subject to adjustments based on the prevailing scale of base pay of police personnel in the active service. Then, too, is the all familiar rule that: Retirement laws should be liberally construed in favor of the retiree because their intention is to provide for his sustenance and hopefully, even comfort, when he no longer has the stamina to continue earning his livelihood. The liberal approach aims to achieve the humanitarian purposes of the law in order that efficiency, security and well-being of government employees may be enhanced.26 The petitioners parlay the notion of prospective application of statutes, noting in this regard that R.A. No. 6975, as amended, cannot be applied retroactively, there being no provision to that effect. We are not persuaded. As correctly found by the appellate court, R.A. No. 6975 itself contextually provides for its retroactive application to cover those who had retired prior to its effectivity. In this regard, we invite attention to the three (3) phases of implementation under Section 85 for the absorption and continuation in the service of, among others, the INP members under the newly-established PNP. In a further bid to scuttle respondents’ entitlement to the desired retirement benefits, the petitioners fault the trial court for ordering the immediate
adjustments of the respondents’ retirement benefits when the basic petition filed before it was one for declaratory relief. To the petitioners, such petition does not essentially entail an executory process, the only relief proper under that setting being a declaration of the parties’ rights and duties. Petitioners’ above posture is valid to a point. However, the execution of judgments in a petition for declaratory relief is not necessarily indefensible. In Philippine Deposit Insurance Corporation[PDIC] v. Court of Appeals,27wherein the Court affirmed the order for the petitioners therein to pay the balance of the deposit insurance to the therein respondents, we categorically ruled: Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing of a counterclaim based on the same transaction, deed or contract subject of the complaint. A special civil action is after all not essentially different from an ordinary civil action, which is generally governed by Rules 1 to 56 of the Rules of Court, except that the former deals with a special subject matter which makes necessary some special regulation. But the identity between their fundamental nature is such that the same rules governing ordinary civil suits may and do apply to special civil actions if not inconsistent with or if they may serve to supplement the provisions of the peculiar rules governing special civil actions.28 Similarly, in Matalin Coconut Co., Inc. v. Municipal Council of Malabang, Lanao del Sur :29 the Court upheld the lower court’s order for a party to refund the amounts paid by the adverse party under the municipal ordinance therein questioned, stating: x x x Under Sec. 6 of Rule 64, the action for declaratory relief may be converted into an ordinary action and the parties allowed to file such pleadings as may be necessary or proper, if before the final termination of the case "a breach or violation of an … ordinance, should take place." In the present case, no breach or violation of the ordinance occurred. The petitioner decided to pay "under protest" the fees imposed by the ordinance. Such payment did not affect the case; the declaratory relief action was still proper because the applicability of the ordinance to future transactions still remained to be resolved, although the matter could also be threshed out in an ordinary suit for the recovery of taxes paid …. In its petition for declaratory relief, petitioner-appellee alleged that by reason of the enforcement of the municipal ordinance by respondents it was forced to pay under protest the fees imposed pursuant to the said ordinance, and accordingly, one of the reliefs prayed for by the petitioner was that the respondents be ordered to refund all the amounts it paid to respondent
Municipal Treasurer during the pendency of the case. The inclusion of said allegation and prayer in the petition was not objected to by the respondents in their answer. During the trial, evidence of the payments made by the petitioner was introduced. Respondents were thus fully aware of the petitioner's claim for refund and of what would happen if the ordinance were to be declared invalid by the court. The Court sees no reason for treating this case differently from PDIC and Matalin. This disposition becomes all the more appropriate considering that the respondents, as petitioners in the RTC, pleaded for the immediate adjustment of their retirement benefits which, significantly, the herein petitioners, as respondents in the same court, did not object to. Being aware of said prayer, the petitioners then already knew the logical consequence if, as it turned out, a declaratory judgment is rendered in the respondents’ favor. 1awphi1.nét
At bottom then, the trial court’s judgment forestalled multiplicity of suits which, needless to stress, would only entail a long and arduous process. Considering their obvious advanced years, the respondents can hardly afford another protracted proceedings. It is thus for this Court to already write finis to this case. WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the CA, respectively dated July 7, 2005 and August 24, 2005, are AFFIRMED. No costs. SO ORDERED.
G.R. No. 170656
August 15, 2007
THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI FERNANDO as Chairman of the Metropolitan Manila Development Authority, petitioners, vs. VIRON TRANSPORTATION CO., INC., respondent. x --------------------------------------------- x G.R. No. 170657
August 15, 2007
HON. ALBERTO G. ROMULO, Executive Secretary, the METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI FERNANDO as Chairman of the Metropolitan Manila Development Authority,petitioners, vs. MENCORP TRANSPORTATION SYSTEM, INC., respondent. DECISION CARPIO MORALES, J .: The following conditions in 1969, as observed by this Court: Vehicles have increased in number. Traffic congestion has moved from bad to worse, from tolerable to critical. The number of people who use the thoroughfares has multiplied x x x ,1 have remained unchecked and have reverberated to this day. Traffic jams continue to clog the streets of Metro Manila, bringing vehicles to a standstill at main road arteries during rush hour traffic and sapping people’s energies and patience in the process. The present petition for review on certiorari, rooted in the traffic congestion problem, questions the authority of the Metropolitan Manila Development Authority (MMDA) to order the closure of provincial bus terminals along Epifanio de los Santos Avenue (EDSA) and major thoroughfares of Metro Manila.
Specifically challenged are two Orders issued by Judge Silvino T. Pampilo, Jr. of the Regional Trial Court (RTC) of Manila, Branch 26 in Civil Case Nos. 03-105850 and 03-106224. The first assailed Order of September 8, 2005 ,2 which resolved a motion for reconsideration filed by herein respondents, declared Executive Order (E.O.) No. 179, hereafter referred to as the E.O., "unconstitutional as it constitutes an unreasonable exercise of police power." The second assailed Order of November 23, 2005 3 denied petitioners’ motion for reconsideration. The following facts are not disputed: President Gloria Macapagal Arroyo issued the E.O. on February 10, 2003, "Providing for the Establishment of Greater Manila Mass Transport System," the pertinent portions of which read: WHEREAS, Metro Manila continues to be the center of employment opportunities, trade and commerce of the Greater Metro Manila area; WHEREAS, the traffic situation in Metro Manila has affected the adjacent provinces of Bulacan, Cavite, Laguna, and Rizal, owing to the continued movement of residents and industries to more affordable and economically viable locations in these provinces; WHEREAS, the Metropolitan Manila Development Authority (MMDA) is tasked to undertake measures to ease traffic congestion in Metro Manila and ensure the convenient and efficient travel of commuters within its jurisdiction; WHEREAS, a primary cause of traffic congestion in Metro Manila has been the numerous buses plying the streets that impedes [sic] the flow of vehicles and commuters due to the inefficient connectivity of the different transport modes; WHEREAS, the MMDA has recommended a plan to decongest traffic by eliminating the bus terminals now located along major Metro Manila thoroughfares and providing more convenient access to the mass transport system to the commuting public through the provision of
mass transport terminal facilities that would integrate the existing transport modes, namely the buses, the rail-based systems of the LRT, MRT and PNR and to facilitate and ensure efficient travel through the improved connectivity of the different transport modes; WHEREAS, the nati onal government must provide the necessary funding requirements to immediately implement and render operational these projects; and extent to MMDA such other assistance as may be warranted to ensure their expeditious prosecution. NOW, THEREFORE, I, GLORIA MACAPAGALARROYO, President of the Philippines, by virtue of the powers vested in me by law, do hereby order: Section 1. THE PROJECT . – The project shall be identified as GREATER MANILA TRANSPORT SYSTEM Project. Section 2. PROJECT OBJECTIVES . – In accordance with the plan proposed by MMDA, the project aims to develop four (4) interim intermodal mass transport terminals to integrate the different transport modes, as well as those that shall hereafter be developed, to serve the commuting public in the northwest, north, east, south, and southwest of Metro Manila. Initially, the project shall concentrate on immediately establishing the mass transport terminals for the north and south Metro Manila commuters as hereinafter described. Section 3. PROJECT IMPLEMENTING AGENCY . – The Metropolitan Manila Development Authority (MMDA), is hereby designated as the implementing Agency for the project. For this purpose, MMDA is directed to undertake such infrastructure development work as may be necessary and, thereafter, manage the project until it may be turned-over to more appropriate agencies, if found suitable and convenient. Specifically, MMDA shall have the following functions and responsibilities: a) Cause the preparation of the Master Plan for the projects, including the designs and costing;
b) Coordinate the use of the land and/or properties needed for the project with the respective agencies and/or entities owning them; c) Supervise and manage the construction of the necessary structures and facilities; d) Execute such contracts or agreements as may be necessary, with the appropriate government agencies, entities, and/or private persons, in accordance with existing laws and pertinent regulations, to facilitate the implementation of the project; e) Accept, manage and disburse such funds as may be necessary for the construction and/or implementation of the projects, in accordance with prevailing accounting and audit polices and practice in government. f) Enlist the assistance of any national government agency, office or department, including local government units, government-owned or controlled corporations, as may be necessary; g) Assign or hire the necessary personnel for the above purposes; and h) Perform such other related functions as may be necessary to enable it to accomplish the objectives and purposes of this Executive Order .4 (Emphasis in the original; underscoring supplied) As the above-quoted portions of the E.O. noted, the primary cause of traffic congestion in Metro Manila has been the numerous buses plying the streets and the inefficient connectivity of the different transport modes;5 and the MMDA had "recommended a plan to decongest traffic by eliminating the bus terminals now located along major Metro Manila thoroughfares and providing more and convenient access to the mass transport system to the commuting public through the provision of mass
transport terminal facilities"6 which plan is referred to under the E.O. as the Greater Manila Mass Transport System Project (the Project). The E.O. thus designated the MMDA as the implementing agency for the Project. Pursuant to the E.O., the Metro Manila Council (MMC), the governing board and policymaking body of the MMDA, issued Resolution No. 03-07 series of 2003 7 expressing full support of the Project. Recognizing the imperative to integrate the different transport modes via the establishment of common bus parking terminal areas, the MMC cited the need to remove the bus terminals located along major thoroughfares of Metro Manila.8 On February 24, 2003, Viron Transport Co., Inc. (Viron), a domestic corporation engaged in the business of public transportation with a provincial bus operation,9 filed a petition for declaratory relief 10 before the RTC11 of Manila. In its petition which was docketed as Civil Case No. 03-105850, Viron alleged that the MMDA, through Chairman Fernando, was "poised to issue a Circular, Memorandum or Order closing, or tantamount to closing, all provincial bus terminals along EDSA and in the whole of the Metropolis under the pretext of traffic regulation. "12 This impending move, it stressed, would mean the closure of its bus terminal in Sampaloc, Manila and two others in Quezon City. Alleging that the MMDA’s authority does not include the power to direct provincial bus operators to abandon their existing bus terminals to thus deprive them of the use of their property, Viron asked the court to construe the scope, extent and limitation of the power of the MMDA to regulate traffic under R.A. No. 7924, "An Act Creating the Metropolitan Manila Development Authority, Defining its Powers and Functions, Providing Funds Therefor and For Other Purposes." Viron also asked for a ruling on whether the planned closure of provincial bus terminals would contravene the Public Service Act and related laws which mandate public utilities to provide and maintain their own terminals as a requisite for the privilege of operating as common carriers.13 Mencorp Transportation System, Inc. (Mencorp), another provincial bus operator, later filed a similar petition for declaratory relief 14 against Executive Secretary Alberto G. Romulo and MMDA Chairman Fernando.
Mencorp asked the court to declare the E.O. unconstitutional and illegal for transgressing the possessory rights of owners and operators of public land transportation units over their respective terminals. Averring that MMDA Chairman Fernando had begun to implement a plan to close and eliminate all provincial bus terminals along EDSA and in the whole of the metropolis and to transfer their operations to common bus terminals,15 Mencorp prayed for the issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction to restrain the impending closure of its bus terminals which it was leasing at the corner of EDSA and New York Street in Cubao and at the intersection of B lumentritt, Laon Laan and Halcon Streets in Quezon City. The petition was docketed as Civil Case No. 03-106224 and was raffled to Branch 47 of the RTC of Manila. Mencorp’s petition was consolidated on June 19, 2003 with Vi ron’s petition which was raffled to Branch 26 of the RTC, Manila. Mencorp’s prayer for a TRO and/or writ of injunction was denied as was its application for the issuance of a preliminary injunction.16 In the Pre-Trial Order 17 issued by the trial court, the issues were narrowed down to whether 1) the MMDA’s power to regulate traffic in Metro Manila included the power to direct provincial bus operators to abandon and close their duly established and existing bus terminals in order to conduct business in a common terminal; (2) the E.O. is consistent with the Public Service Act and the Constitution; and (3) provincial bus operators would be deprived of their real properties without due process of law should they be required to use the common bus terminals. Upon the agreement of the parties, they filed their respective position papers in lieu of hearings. By Decision18 of January 24, 2005, the trial court sustained the constitutionality and legality of the E.O. pursuant to R.A. No. 7924, which empowered the MMDA to administer Metro Manila’s basic services including those of transport and traffic management. The trial court held that the E.O. was a valid exercise of the police power of the State as it satisfied the two tests of lawful subject matter and lawful means, hence, Viron’s and Mencorp’s property rights must yield to police power. On the separate motions for reconsideration of Viron and Mencorp, the trial court, by Order of September 8, 2005, reversed its Decision, this time
holding that the E.O. was "an unreasonable exercise of police power"; that the authority of the MMDA under Section (5)(e) of R.A. No. 7924 does not include the power to order the closure of Viron’s and Mencorp’s existing bus terminals; and that the E.O. is inconsistent with the provisions of the Public Service Act.
The following are the essential requisites for a declaratory relief petition: (a) there must be a justiciable controversy; (b) the controversy must be between persons whose interests are adverse; (c) the party seeking declaratory relief must have a legal interest in the controversy; and (d) the issue invoked must be ripe for j udicial determination.25
Petitioners’ motion for reconsideration was denied by Resolution of November 23, 2005.
The requirement of the presence of a justiciable controversy is satisfied when an actual controversy or the ripening seeds thereof exist between the parties, all of whom are sui juris and before the court, and the declaration sought will help in ending the controversy.26 A question becomes justiciable when it is translated into a claim of right which is actually contested.27
Hence, this petition, which faults the trial court for failing to rule that: (1) the requisites of declaratory relief are not present, there being no justiciable controversy in Civil Case Nos. 03-105850 and 03-106224; and (2) the President has the authority to undertake or cause the implementation of the Project.19 Petitioners contend that there is no justiciable controversy in the cases for declaratory relief as nothing in the body of the E .O. mentions or orders the closure and elimination of bus terminals along the major thoroughfares of Metro Manila. Viron and Mencorp, they argue, failed to produce any letter or communication from the Executive Department apprising them of an immediate plan to close down their bus terminals. And petitioners maintain that the E.O. is only an administrative directive to government agencies to coordinate with the MMDA and to make available for use government property along EDSA and South Expressway corridors. They add that the only relation created by the E.O. is that between the Chief Executive and the implementing officials, but not between third persons. The petition fails. It is true, as respondents have pointed out, that the alleged deficiency of the consolidated petitions to meet the requirement of justiciability was not among the issues defined for resolution in the Pre-Trial Order of January 12, 2004. It is equally true, however, that the question was repeatedly raised by petitioners in their Answer to Viron’s petition,20 their Comment of April 29, 2003 opposing Mencorp’s prayer for the issuance of a TRO,21 and their Position Paper of August 23, 2004.22 In bringing their petitions before the trial court, both respondents pleaded the existence of the essential requisites for their respective petitions for declaratory relief ,23 and refuted petitioners’ contention that a justiciable controversy was lacking.24 There can be no denying, therefore, that the issue was raised and discussed by the parties before the trial court.
In the present cases, respondents’ resort to court was prompted by the issuance of the E.O. The 4th Whereas clause of the E.O. sets out in clear strokes the MMDA’s plan to "decongest traffic by eliminating the bus terminals now located along major Metro Manila thoroughfares and providing more convenient access to the mass transport system to the commuting public through the provision of mass transport terminal facilities x x x." (Emphasis supplied) Section 2 of the E.O. thereafter lays down the immediate establishment of common bus terminals for north- and south-bound commuters. For this purpose, Section 8 directs the Department of Budget and Management to allocate funds of not more than one hundred million pesos (P100,000,000) to cover the cost of the construction of the north and south terminals. And the E.O. was made effective immediately. The MMDA’s resolve to immediately implement the Pr oject, its denials to the contrary notwithstanding, is also evident from telltale circumstances, foremost of which was the passage by the MMC of Resolution No. 03-07, Series of 2003 expressing its full support of the immediate implementation of the Project. Notable from the 5th Whereas clause of the MMC Resolution is the plan to "remove the bus terminals located along major thoroughfares of Metro Manila and an urgent need to integrate the different transport modes." The 7th Whereas clause proceeds to mention the establishment of the North and South terminals. As alleged in Viron’s petition, a diagram of the GMA-MTS North Bus/Rail Terminal had been drawn up, and construction of the terminal is already in progress. The MMDA, in its Answer 28 and Position Paper ,29 in fact affirmed that the government had begun to implement the Project.
It thus appears that the issue has already transcended the boundaries of what is merely conjectural or anticipatory.
and/or E.O. No. 292, otherwise known as the Administrative Code of 1987. They add that the E.O. is also a valid exercise of the police power.
Under the circumstances, for respondents to wait for the actual issuance by the MMDA of an order for the closure of respondents’ bus terminals would be foolhardy for, by then, the proper action to bring would no longer be for declaratory relief which, under Section 1, Rule 63 30 of the Rules of Court, must be brought before there is a breach or violation of rights.
E.O. No. 125,32 which former President Corazon Aquino issued in the exercise of legislative powers, reorganized the then Ministry (now Department) of Transportation and Communications. Sections 4, 5, 6 and 22 of E.O. 125, as amended by E.O. 125-A,33 read:
lawphil
As for petitioners’ contention that the E.O. is a mere administrative issuance which creates no relation with third persons, it does not persuade. Suffice it to stress that to ensure the success of the Project for which the concerned government agencies are directed to coordinate their activities and resources, the existing bus terminals owned, operated or leased by third persons like respondents would have to be eliminated; and respondents would be forced to operate from the common bus terminals. It cannot be gainsaid that the E.O. would have an adverse effect on respondents. The closure of their bus terminals would mean, among other things, the loss of income from the operation and/or rentals of stalls thereat. Precisely, respondents claim a deprivation of their constitutional right to property without due process of law.
SECTION 4. Mandate. — The Ministry shall be the primary policy, planning, programming, coordinating, implementing, regulating and administrative entity of the Executive Branch of the government in the promotion, development and regulation of dependable and coordinated networks of transportation and communication systems as well as in the fast, safe, efficient and reliable postal, transportation and c ommunications services. To accomplish such mandate, the Ministry shall have the following objectives: (a) Promote the development of dependable and coordinated networks of transportation and communications systems;
Respondents have thus amply demonstrated a "personal and substantial interest in the case such that [they have] sustained, or will sustain, direct injury as a result of [the E.O.’s] enforcement. "31 Consequently, the established rule that the constitutionality of a law or administrative issuance can be challenged by one who will sustain a direct injury as a result of its enforcement has been satisfied by respondents.
(b) Guide government and private investment in the development of the country’s intermodal transportation and communications systems in a most practical, expeditious, and orderly fashion for maximum safety, service, and cost effectiveness; (Emphasis and underscoring supplied)
On to the merits of the case. xxxx Respondents posit that the MMDA is devoid of authority to order the elimination of their bus terminals under the E.O. which, they argue, is unconstitutional because it violates both the Constitution and the Public Service Act; and that neither is the MMDA clothed with such authority under R.A. No. 7924. Petitioners submit, however, that the real issue concerns the President’s authority to undertake or to cause the implementation of the Project. They assert that the authority of the President is derived from E.O. No. 125, "Reorganizing the Ministry of Transportation and Communications Defining its Powers and Functions and for Other Purposes," her residual power
SECTION 5. Powers and Functions. — To accomplish its mandate, the Ministry shall have the following powers and functions: (a) Formulate and recommend national policies and guidelines for the preparation and implementation of i ntegrated and comprehensive transportation and communications systems at the national, regional and local levels; (b) Establish and administer comprehensive and integrated programs for transportation and
communications , and for this purpose, may call on any agency, corporation, or organization, whether public or private, whose development programs include transportation and communications as an integral part thereof, to participate and assist in the preparation and implementation of such program;
such orders, rules, regulations and other issuances as may be necessary to ensure the effective implementation of the law. Since, under the law, the DOTC is authorized to establish and administer programs and projects for transportation, it follows that the President may exercise the same power and authority to order the implementation of the Project, which admittedly is one for transportation.
(c) Assess, review and provide direction to transportation and communications research and development programs of the government in coordination with other institutions concerned;
Such authority springs from the President’s power of control over all executive departments as well as the obligation for the faithful execution of the laws under Article VII, Section 17 of the Constitution which provides:
(d) Administer all laws, rules and regulations in the field of transportation and communications; (Emphasis and underscoring supplied)
SECTION 17. The President shall have control of all the executive departments, bureaus and offices. He shall ensure that the laws be faithfully executed.
xxxx SECTION 6. Authority and Responsibility. — The authority and responsibility for the exercise of the mandate of the Ministry and for the discharge of its powers and functions shall be vested in the Minister of Transportation and Communications , hereinafter referred to as the Minister, who shall have supervision and control over the Ministry and shall be appointed by the President. (Emphasis and underscoring supplied) SECTION 22. Implementing Authority of Minister. — The Minister shall issue such orders, rules, regulations and other issuances as may be necessary to ensure the effective implementation of the provisions of this Executive Order . (Emphasis and underscoring supplied) It is readily apparent from the abovequoted provisions of E.O. No. 125, as amended, that the President, then possessed of and exercising legislative powers, mandated the DOTC to be the primary policy, planning, programming, coordinating, implementing, regulating and administrative entity to promote, develop and regulate networks of transportation and communications. The grant of authority to the DOTC includes the power toestablish and administer comprehensive and i ntegrated programs for transportation and communications. As may be seen further, the Minister (now Secretary) of the DOTC is vested with the authority and responsibility to exercise the mandate given to the department. Accordingly, the DOTC Secretary is authorized to issue
This constitutional provision is echoed in Section 1, Book III of the Administrative Code of 1987. Notably, Section 38, Chapter 37, Book IV of the same Code defines the President’s power of supervision and control over the executive departments, viz: SECTION 38. Definition of Administrative Relationships. — Unless otherwise expressly stated in the Code or in other laws defining the special relationships of particular agencies, administrative relationships shall be categorized and defined as follows: (1) Supervision and Control. — Supervision and control shall include authority to act directly whenever a specific function is entrusted by law or regulation to a subordinate ; direct the performance of duty; restrain the commission of acts; review, approve, reverse or modify acts and decisions of subordinate officials or units; determine priorities in the execution of plans and programs. Unless a different meaning is explicitly provided in the specific law governing the relationship of particular agencies the word "control" shall encompass supervision and control as defined in this paragraph. x x x (Emphasis and underscoring supplied) Thus, whenever a specific function is entrusted by law or regulation to a subordinate, the President may act directly or merely direct the performance of a duty.34 Respecting the President’s authority to order the implementation of the Project in the exercise of the police power of the State, suffice it to stress
that the powers vested in the DOTC Secretary to establish and administer comprehensive and integrated programs for transportation and communications and to issue orders, rules and regulations to implement such mandate (which, as previously discussed, may also be exercised by the President) have been so delegated for the good and welfare of the people. Hence, these powers partake of the nature of police power. Police power is the plenary power vested in the legislature to make, ordain, and establish wholesome and reasonable laws, statutes and ordinances, not repugnant to the Constitution, for the good and welfare of the people.35 This power to prescribe regulations to promote the health, morals, education, good order or safety, and general welfare of the people flows from the recognition that salus populi est suprema lex ─ the welfare of the people is the supreme law. While police power rests primarily with the legislature, such power may be delegated, as it is in fact increasingly being delegated.36 By virtue of a valid delegation, the power may be exercised by the President and administrative boards37 as well as by the lawmaking bodies of municipal corporations or local governments under an express delegation by the Local Government Code of 1991 .38 The authority of the President to order the implementation of the Project notwithstanding, the designation of the MMDA as the implementing agency for the Project may not be sustained. It is ultra vires, there being no legal basis therefor. It bears stressing that under the provisions of E.O. No. 125, as amended, it is the DOTC, and not the MMDA, which is authorized to establish and implement a project such as the one subject of the cases at bar. Thus, the President, although authorized to establish or cause the implementation of the Project, must exercise the authority through the instrumentality of the DOTC which, by law, is the primary implementing and administrative entity in the promotion, development and regulation of networks of transportation, and the one so authorized to establish and implement a project such as the Project in question. By designating the MMDA as the implementing agency of the Project, the President clearly overstepped the limits of the authority conferred by law, rendering E.O. No. 179 ultra vires. In another vein, the validity of the designation of MMDA flies in the absence of a specific grant of authority to it under R.A. No. 7924.
To recall, R.A. No. 7924 declared the Metropolitan Manila area 39 as a "special development and administrative region" and placed the administration of "metro-wide" basic services affecting the region under the MMDA. Section 2 of R.A. No. 7924 specifically authorizes the MMDA to perform "planning, monitoring and coordinative functions, and in the process exercise regulatory and supervisory authority over the delivery of metrowide services," including transport and traffic management .40 Section 5 of the same law enumerates the powers and functions of the MMDA as follows: (a) Formulate, coordinate and regulate the implementation of medium and long-term plans and programs for the delivery of metro-wide services, land use and physical development within Metropolitan Manila, consistent with national development objectives and priorities; (b) Prepare, coordinate and regulate the implementation of medium-term investment programs for metro-wide services which shall indicate sources and uses of funds for priority programs and projects, and which shall include the packaging of projects and presentation to funding institutions; (c) Undertake and manage on its own metro-wide programs and projects for the delivery of specific services under its jurisdiction, subject to the approval of the Council. For this purpose, MMDA can create appropriate project management offices; (d) Coordinate and monitor the implementation of such plans, programs and projects in Metro Manila; identify bottlenecks and adopt solutions to problems of implementation; (e) The MMDA shall set the policies concerning traffic in Metro Manila, and shall coordinate and regulate the implementation of all programs and projects concerning traffic management, specifically pertaining to enforcement, engineering and education. Upon request, it shall be extended assistance and cooperation, including but not limited to, assignment of personnel, by all other government agencies and offices concerned;
(f) Install and administer a single ticketing system, fix, impose and collect fines and penalties for all kinds of violations of traffic rules and regulations , whether moving or non-moving in nature, and confiscate and suspend or revoke drivers’ licenses in the enforcement of such traffic laws and regulations, the provisions of RA 4136 and PD 1605 to the contrary notwithstanding. For this purpose, the Authority shall impose all traffic laws and regulations in Metro Manila, through its traffic operation center, and may deputize members of the PNP, traffic enforcers of local government units, duly licensed security guards, or members of non-governmental organizations to whom may be delegated certain authority, subject to such conditions and requirements as the Authority may impose; and (g) Perform other related functions required to achieve the objectives of the MMDA, including the undertaking of delivery of basic services to the local government units, when deemed necessary subject to prior coordination with and consent of the local government unit concerned." (Emphasis and underscoring supplied) The scope of the function of MMDA as an administrative, coordinating and policy-setting body has been settled in Metropolitan Manila Development Authority (MMDA) v. Bel-Air Village Association, Inc .41 In that case, the Court stressed: Clearly, the scope of the MMDA’s function is limited to the delivery of the seven (7) basic services. One of these is transport and traffic management which management which i ncludes the formulation and monitoring of policies, standards and projects to rationalize the existing transport operations, infrastructure requirements, the use of thoroughfares and promotion of the safe movement of persons and goods. It also covers the mass transport system and the institution of a system of road regulation, the administration of all traffic enforcement operations, traffic engineering services and traffic education programs, including the institution of a single ticketing system in Metro Manila for traffic violations. Under this service, the MMDA is expressly authorized to "to set the policies concerning traffic" and "coordinate "coordinate and regulate the implementation of all traffic management programs." In addition, the MMDA may install and administer a single ticketing system," fix, impose and collect fines and penalties for all traffic violations.
It will be noted t hat the powers of the MMDA are li mited to the following acts: formulation, coordination, regulation, implementation, preparation, management, monitoring, setting of policies, installation of a system and administration. administration. There i s no syllable in R.A. No. 7924 that grants the MMDA police power, let alone legislative power. Even the Metro Manila Council has not been delegated any legislative power. Unlike the legislative bodies of the local government units, there is no provision in R.A. No. 79 24 that empow ers the MMDA or its Council to ‘enact ‘enact ordinances, approve resolutions and appropriate funds for the general welfare’ of the inhabitants of Metro Manila. The MMDA is, as termed in the charter itself, a ‘development authority.’ authority.’ It is an agency created for the purpose of laying down policies and coordinating coordinating with the various national government agencies, people’s organizations, non-governmental organizations and the private sector for the efficient and expeditious delivery of basic services in the vast metropolitan area. All its functions are administrative in nature and these are actually summed up in the charter itself , viz: ‘SECTION 2. Creation of the Metropolitan Manila Development Authority. — . . . The MMDA shall perform planning, p lanning, monitoring and coordinative coordinat ive functions , and in th e process exercise regulatory and supervisory authority over the delivery of metro-wide services within Metro Manila , without diminution of the autonomy of the local government units concerning purely local matters.’ matters. ’42 (Emphasis and underscoring supplied) In light of the administrative nature of its powers and functions, the MMDA is devoid of authority to implement the Project as envisioned by the E.O; hence, it could not have been validly designated by the President to undertake the Project. It follows that the MMDA cannot validly order the elimination of respondents’ terminals. Even the MMDA’s claimed authority under the police power must necessarily fail in consonance with the above-quoted ruling in MMDA v. Bel-Air Village Association, Inc . and this Court’s subsequent ruling in Metropolitan Manila Development Development Authority v. Garin 43 that the MMDA is not vested with police power.
Even assuming arguendo arguendo that police power was delegated to the MMDA, its exercise of such power does not satisfy the two tests of a valid police power measure, viz: (1) the interest of the public generally, as distinguished from that of a particular class, requires its exercise; and (2) the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals .44 Stated differently, the police power legislation must be firmly grounded on public interest and welfare and a reasonable relation must exist between the purposes and the means. As early as Calalang v. Williams, Williams,45 this Court recognized that traffic congestion is a public, not merely a private, concern. The Court therein held that public welfare underlies the contested statute authorizing the Director of Public Works to promulgate rules and regulations to regulate and control traffic on national roads. Likewise, in Luque v. Villegas, Villegas,46 this Court emphasized that public welfare lies at the bottom of any regulatory measure designed "to relieve congestion of traffic, which is, to say the least, a menace to public safety." safety."47 As such, measures calculated to promote the safety and convenience of the people using the thoroughfares by the regulation of vehicular traffic present a proper subject for the exercise of police power. Notably, the parties herein concede that traffic congestion is a public concern that needs to be addressed immediately. Indeed, the E.O. was issued due to the felt need to address the worsening traffic congestion in Metro Manila which, the MMDA so determined, is caused by the increasing volume of buses plying the major thoroughfares and the inefficient connectivity of existing transport systems. It is thus beyond cavil that the motivating force behind the issuance of the E.O. is the interest of the public in general. Are the means employed appropriate and reasonably necessary for the accomplishment accomplishment of the purpose. Are they not duly oppressive? With the avowed objective of decongesting traffic in Metro Manila, the E.O. seeks to "eliminate[e] the bus terminals now located along major Metro Manila thoroughfares and provid[e] more convenient access to the mass transport system to the commuting public through the provision of mass transport terminal facilities x x x." x. "48 Common carriers with terminals along the major thoroughfares of Metro Manila would thus be compelled to close down their existing bus terminals and use the MMDA-designated common parking areas.
In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc . Inc .,49 two city ordinances were passed by the Sangguniang Panlungsod of Panlungsod of Lucena, directing public utility vehicles to unload and load passengers at the Lucena Grand Central Terminal, which was given the exclusive franchise to operate a single common terminal. Declaring that no other terminals shall be situated, constructed, maintained or established inside or within the city of Lucena, thesanggunian the sanggunian declared as inoperable all temporary terminals therein. The ordinances were challenged before this Court for being unconstitutional on the ground that, inter alia, alia, the measures constituted an invalid exercise of police power, an undue taking of private property, and a violation of the constitutional prohibition against monopolies. Citing De la Cruz v. Paras Paras50 and Lupangco v. Court of Appeals ,51 this Court held that the assailed ordinances were characterized by overbreadth, as they went beyond what was reasonably necessary to solve the traffic problem in the city. And it found that the compulsory use of the Lucena Grand Terminal was unduly oppressive because it would subject its users to fees, rentals and charges. The true role of Constitutional Law is to effect an equilibrium between authority and liberty so that rights are exercised within the framework of the law and the laws are enacted with due deference to rights. A due deference to the rights rights of the individual thus requires a more more careful formulation of solutions to societal problems. From the memorandum filed before this Court by petitioner, it is gathered that the Sangguniang Panlungsod had identified the cause of traffic congestion to be the indiscriminate loading and unloading of passengers by buses on the streets of the city proper, hence, the conclusion that the terminals contributed to the proliferation of buses obstructing traffic on the city streets. Bus terminals per se do not, however, impede or help impede the flow of traffic. How the outright proscription proscription against the existence of all terminals, apart from that franchised to petitioner, petition er, can be considered as reasonably necessary to solve the traffic problem, this Court has not been enlightened enlightened . If terminals lack adequate space such that bus drivers are compelled to load and unload passengers on the streets instead of inside the terminals, then reasonable specifications for the size of
terminals could be instituted, with permits to operate the same denied those which are unable to meet the specifications. In the subject ordinances, ordinances, however, the scope of the proscription against th e maintena nce of terminals i s so broad that even entities which might be able to provide facilities better than the franchised terminal are barred from operating at all. all . (Emphasis and underscoring supplied) As in Lucena, Lucena , this Court fails to see how the prohibition against the existence of respondents’ terminals can be considered a reasonable necessity to ease traffic congestion in the metropolis. On the contrary, the elimination of respondents’ bus terminals brings forth the distinct possibility and the equally harrowing reality of traffic congestion in the common parking areas, a case of transference from one site to another. Less intrusive measures such as curbing the proliferation of "colorum" buses, vans and taxis entering Metro Manila and using the streets for parking and passenger pick-up points, as respondents respondents suggest, might even be more effective in easing the traffic situation. So would the strict enforcement of traffic rules and the removal of obstructions from major thoroughfares. As to the alleged confiscatory character of the E.O., it need only to be stated that respondents’ certificates of public convenience confer no property right, and are mere licenses or privileges .52 As such, these must yield to legislation safeguarding the interest of the people. Even then, for reasons which bear reiteration, the MMDA cannot order the closure of respondents’ terminals termin als not only because no authority to implement the Project has been granted nor legislative or police power been delegated to it, but also because the elimination of the terminals does not satisfy the standards of a valid police power measure. Finally, an order for the closure of respondents’ terminals is not in line with the provisions of the Public Service Act. Paragraph (a), Section 13 of Chapter II of the Public Service Act (now Section 5 of Executive Order No. 202, creating the Land Transportation Franchising and Regulatory Board or LFTRB) vested the Public Service Commission (PSC, now the LTFRB) with "x x x jurisdiction, supervision and control over all public services and their franchises, equipment and other properties x x x."
Consonant with such grant of authority, the PSC was empowered to "impose such conditions as to construction, equipment, maintenance, service, service , or operation as the public interests and convenience may reasonably require" require "53 in approving any franchise or privilege. Further, Section 16 (g) and (h) of the Public Service Ac t54 provided that the Commission shall have the power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary: (g) To compel any public service to furnish safe, adequate, and proper service as service as regards the manner of furnishing the same as well as the maintenance of the necessary material and equipment. (h) To require any public service to establish, construct, maintain, and operate any reasonable extension of its existing facilities, facilities, where in the judgment of said Commission, such extension is reasonable and practicable and will furnish sufficient business to justify the construction and maintenance of the same and when the financial condition of the said public service reasonably warrants the original expenditure required in making and operating such extension.(Emphasis and underscoring supplied) The establishment, as well as the maintenance of vehicle parking areas or passenger terminals, is generally considered a necessary service to be provided by provincial bus operators like respondents, hence, the investments they have poured into the acquisition or lease of suitable terminal sites. Eliminating the terminals would thus run counter to the provisions of the Public Service Act. This Court commiserates with the MMDA for the roadblocks thrown in the way of its efforts at solving the pestering problem of traffic congestion in Metro Manila. These efforts are commendable, to say the least, in the face of the abominable traffic situation of our roads day in and day out. This Court can only interpret, not change, the law, however. It needs only to be reiterated that it is the DOTC ─ DOTC ─ as the primary policy, planning, programming, coordinating, implementing, regulating and administrative entity to promote, develop and regulate networks of transportation and communications communications ─ which ─ which has the power to establish and administer a transportation transportation project like the Project subject of the case at bar . bar .
No matter how noble the intentions of the MMDA may be then, any plan, strategy or project which it is not authorized to implement cannot pass muster. WHEREFORE, the Petition is, in light of the foregoing disquisition, DENIED. E.O. No. 179 is declared NULL and VOID for being ultra vires .
G.R. No. 175527
December 8, 2008
HON. GABRIEL LUIS QUISUMBING, HON. ESTRELLA P. YAPHA, HON. VICTORIA G. COROMINAS, HON. RAUL D. BACALTOS (Members of the Sangguniang Panlalawigan of Cebu), petitioners, vs. HON. GWENDOLYN F. GARCIA (In her capacity as Governor of the Province of Cebu), HON. DELFIN P. AGUILAR (in his capacity as Director IV (Cluster Director) of COA), Cluster IV – Visayas Local Government Sector, HON. HELEN S. HILAYO (In her capacity as Regional Cluster Director of COA), and HON. ROY L. URSAL (In his capacity as Regional Legal and Adjudication Director of COA), respondents. DECISION TINGA, J .: Gabriel Luis Quisumbing (Quisumbing), Estrella P. Yapha, Victoria G. Corominas, and Raul D. Bacaltos (Bacaltos), collectively petitioners, assail the Decision1 of the Regional Trial Court (RTC) of Cebu City, Branch 9, in Civil Case No. CEB-31560, dated July 11, 2006, which declared that under the pertinent provisions of Republic Act No. 7160 (R.A. No. 7160), or the Local Government Code, and Republic Act No. 9184 (R.A. No. 9184), or the Government Procurement Reform Act, respondent Cebu Provincial Governor Gwendolyn F. Garcia (Gov. Garcia), need not secure the prior authorization of the Sangguniang Panlalawigan before entering into contracts committing the province to monetary obligations. The undisputed facts gathered from the assailed Decision and the pleadings submitted by the parties are as follows: The Commission on Audit (COA) conducted a financial audit on the Province of Cebu for the period ending December 2004. Its audit team rendered a report, Part II of which states: "Several contracts in the total amount ofP102,092,841.47 were not supported with a Sangguniang Panlalawigan resolution authorizing the Provincial Governor to enter into a contract, as required under Section 22 of R.A. No. 7160."2 The audit team then recommended that, "Henceforth, the local chief executive must secure a sanggunian resolution authorizing the former to enter into a contract as provided under Section 22 of R.A. No. 7160."3
Gov. Garcia, in her capacity as the Provincial Governor of Cebu, sought the reconsideration of the findings and recommendation of the COA. However, without waiting for the resolution of the reconsideration sought, she instituted an action for Declaratory Relief before the RTC of Cebu City, Branch 9. Impleaded as respondents were Delfin P. Aguilar, Helen S. Hilayo and Roy L. Ursal in their official capacities as Cluster Director IV, Regional Cluster Director and Regional Legal and Adjudication Director of the COA, respectively. The Sangguniang Panlalawigan of the Province of Cebu, represented by Vice-Governor Gregorio Sanchez, Jr., was also impleaded as respondent. Alleging that the infrastructure contracts4 subject of the audit report complied with the bidding procedures provided under R.A. No. 9184 and were entered into pursuant to the general and/or supplemental appropriation ordinances passed by the Sangguniang Panlalawigan, Gov. Garcia alleged that a separate authority to enter into such contracts was no longer necessary. On the basis of the parties’ respective memoranda, the trial court rendered the assailed Decision dated July 11, 2006, declaring that Gov. Garcia need not secure prior authorization from the Sangguniang Panlalawigan of Cebu before entering into the questioned contracts. The dispositive portion of the Decision provides: WHEREFORE, premises considered, this court hereby renders judgment in favor of Petitioner and against the Respondent COA officials and declares that pursuant to Sections 22 paragraph © in relation to Sections 306 and 346 of the Local Government Code and Section 37 of the Government Procurement Reform Act, the Petitioner Governor of Cebu need not secure prior authorization by way of a resolution from theSangguniang Panlalawigan of the Province of Cebu before she enters into a contract involving monetary obligations on the part of the Province of Cebu when there is a prior appropriation ordinance enacted. Insofar as Respondent Sangguniang Panlalawigan, this case is hereby dismissed.5 In brief, the trial court declared that the Sangguniang Panlalawigan does not have juridical personality nor is it vested by R.A. No. 7160 with authority to sue and be sued. The trial court accordingly dismissed the case against respondent members of the Sangguniang Panlalawigan. On the question of the remedy of declaratory relief being improper because a breach had already been committed, the trial court held that the case would ripen into and be treated as an ordinary civil action. The trial court
further ruled that it is only when the contract (entered into by the local chief executive) involves obligations which are not backed by prior ordinances that the prior authority of the sanggunian concerned is required. In this case, the Sangguniang Panlalawigan of Cebu had already given its prior authorization when it passed the appropriation ordinances which authorized the expenditures in the questioned contracts. The trial court denied the motion for reconsideration 6 filed by Quisumbing, Bacaltos, Carmiano Kintanar, Jose Ma. Gastardo, and Agnes Magpale, in their capacities as members of the Sangguniang Panlalawigan of Cebu, in an Order 7 dated October 25, 2006. In the Petition for Review 8 dated November 22, 2006, petitioners insisted that the RTC committed reversible error in granting due course to Gov. Garcia’s petition for declaratory relief des pite a breach of the law subject of the petition having already been committed. This breach was allegedly already the subject of a pending investigation by the Deputy Ombudsman for the Visayas. Petitioners further maintained that prior authorization from theSangguniang Panlalawigan should be secured before Gov. Garcia could validly enter into contracts involving monetary obligations on the part of the province. Gov. Garcia, in her Comment9 dated April 10, 2007, notes that the RTC had already dismissed the case against the members of the Sangguniang Panlalawigan of Cebu on the ground that they did not have legal personality to sue and be sued. Since the COA officials also named as respondents in the petition for declaratory relief neither filed a motion for reconsideration nor appealed the RTC Decision, the said Decision became final and executory. Moreover, only two of the members of the Sangguniang Panlalawigan, namely, petitioners Quisumbing and Bacaltos, originally named as respondents in the petition for declaratory relief, filed the instant petition before the Court. Respondent Governor insists that at the time of the filing of the petition for declaratory relief, there was not yet any breach of R.A. No. 7160. She further argues that the questioned contracts were executed after a public bidding in implementation of specific items in the regular or supplemental appropriation ordinances passed by theSangguniang Panlalawigan. These ordinances allegedly serve as the authorization required under R.A. No. 7160, such that the obtention of another authorization becomes not only redundant but also detrimental to the speedy delivery of basic services. Gov. Garcia also claims that in its Comment to the petition for declaratory relief, the Office of the Solicitor General (OSG) took a stand supportive of
the governor’s arguments. The OSG’s official position allegedly binds the COA. Expressing gratitude for having been allowed by this Court to file a comment on the petition, respondent COA officials in their Comment10 dated March 8, 2007, maintain that Sections 306 and 346 of R.A. No. 7160 cannot be considered exceptions to Sec. 22(c) of R.A. No. 7160. Sec. 346 allegedly refers to disbursements which must be made in accordance with an appropriation ordinance without need of approval from the sanggunian concerned. Sec. 306, on the other hand, refers to the authorization for the effectivity of the budget and should not be mistaken for the specific authorization by the Sangguniang Panlalawigan for the local chief executive to enter into contracts under Sec. 22(c) of R.A. No. 7160. The question that must be resolved by the Court should allegedly be whether the appropriation ordinance referred to in Sec. 346 in relation to Sec. 306 of R.A. No. 7160 is the same prior authorization required under Sec. 22(c) of the same law. To uphold the assailed Decision would allegedly give the local chief executive unbridled authority to enter into any contract as long as an appropriation ordinance or budget has been passed by the sanggunianconcerned. Respondent COA officials also claim that the petition for declaratory relief should have been dismissed for the failure of Gov. Garcia to exhaust administrative remedies, rendering the petition not ripe for judicial determination. The OSG filed a Comment11 dated March 12, 2007, pointing out that the instant petition raises factual issues warranting its denial. For instance, petitioners, on one hand, claim that there was no appropriation ordinance passed for 2004 but only a reenacted appropriations ordinance and that the unauthorized contracts did not proceed from a public bidding pursuant to R.A. No. 9184. Gov. Garcia, on the other hand, claims that the contracts were entered into in compliance with the bidding procedures in R.A. No. 9184 and pursuant to the general and/or supplemental appropriations ordinances passed by the Sangguniang Panlalawigan. She further asserts that there were ordinances allowing the expenditures made. On the propriety of the action for declaratory relief filed by Gov. Garcia, the OSG states in very general terms that such an action must be brought before any breach or violation of the statute has been committed and may be treated as an ordinary action only if the breach occurs after the filing of the action but before the termination thereof. However, it does not say in this case whether such recourse is proper.
Nonetheless, the OSG goes on to discuss that Sec. 323 of R.A. No. 7160 allows disbursements for salaries and wages of existing positions, statutory and contractual obligations and essential operating expenses authorized in the annual and supplemental budgets of the preceding year (which are deemed reenacted in case the sanggunianconcerned fails to pass the ordinance authorizing the annual appropriations at the beginning of the ensuing fiscal year). Contractual obligations not included in the preceding year’s annual and supplemental budgets allegedly require the prior approval or authorization of the local sanggunian. In their Consolidated Repl y12 dated August 8, 2007, petitioners insist that the instant petition raises only questions of law not only because the parties have agreed during the proceedings before the trial court that the case involves purely legal questions, but also because there is no dispute that the Province of Cebu was operating under a reenacted budget in 2004. They further defend their standing to bring suit not only as members of the sanggunian whose powers Gov. Garcia has allegedly usurped, but also as taxpayers whose taxes have been illegally spent. Petitioners plead leniency in the Court’s ruling regarding their legal standing, as this case involves a matter of public policy. Petitioners finally draw attention to the OSG’s seeming change of heart and adoption of their argument that Gov. Garcia has violated R.A. No. 7160. It should be mentioned at the outset that a reading of the OSG’s Comment13 on the petition for declaratory relief indeed reveals its view that Sec. 22(c) of R.A. No. 7160 admits of exceptions. It maintains, however, that the said law is clear and leaves no room for interpretation, only application. Its Comment on the instant petition does not reflect a change of heart but merely an amplification of its original position. Although we agree with the OSG that there are factual matters that have yet to be settled in this case, the records disclose enough facts for the Court to be able to make a definitive ruling on the basic legal arguments of the parties. The trial court’s pronouncement that "the parties in this case all agree that the contracts referred to in the above findings are contracts entered into pursuant to the bidding procedures allowed in Republic Act No. 9184 or the ‘Government Procurement Reform Act’–i.e., public bidding, and negotiated bid. The biddings were made pursuant to the general and/or supplemental
appropriation ordinances passed by the Sangguniang Panlalawigan of Cebu x x x"14 is clearly belied by the Answer 15 filed by petitioners herein. Petitioners herein actually argue in their Answer that the contracts subject of the COA’s findings did not proceed from a public bidding. Further, there was no budget passed in 2004. What was allegedly in force was the reenacted 2003 budget.16 Gov. Garcia’s contention that the questioned contracts complied with the bidding procedure in R.A. No. 9184 and were entered into pursuant to the general and supplemental appropriation ordinances allowing these expenditures is diametrically at odds with the facts as presented by petitioners in this case. It is notable, however, that while Gov. Garcia insists on the existence of appropriation ordinances which allegedly authorized her to enter into the questioned contracts, she does not squarely deny that these ordinances pertain to the previous year’s budget which was reenacted in 2004. Thus, contrary to the trial court’s finding, there was no agreement among the parties with regard to the operative facts under which the case was to be resolved. Nonetheless, we can gather from Gov. Garcia’s silence on the matter and the OSG’s own discussion on the effect of a reenacted budget on the local chief executive’s ability to enter into contracts, that during the year in question, the Province of Cebu was indeed operating under a reenacted budget. Note should be taken of the fact that Gov. Garcia, both in her petition for declaratory relief and in her Comment on the instant petition, has failed to point out the specific provisions in the general and supplemental appropriation ordinances copiously mentioned in her pleadings which supposedly authorized her to enter into the questioned contracts. Based on the foregoing discussion, there appear two basic premises from which the Court can proceed to discuss the question of whether prior approval by the Sangguniang Panlalawigan was required before Gov. Garcia could have validly entered into the questioned contracts. First , the Province of Cebu was operating under a reenacted budget in 2004. Second , Gov. Garcia entered into contracts on behalf of the province while this reenacted budget was in force. Sec. 22(c) of R.A. No. 7160 provides: Sec. 22. Corporate Powers. –(a) Every local government unit, as a corporation, shall have the following powers:
xxx (c) Unless otherwise provided in this Code, no contract may be entered into by the local chief executive in behalf of the local government unit without prior authorization by the sanggunian concerned. A legible copy of such contract shall be posted at a conspicuous place in the provincial capitol or the city, municipal or barangay hall. As it clearly appears from the foregoing provision, prior authorization by the sanggunian concerned is required before the local chief executive may enter into contracts on behalf of the local government unit. Gov. Garcia posits that Sections 306 and 346 of R.A. No. 7160 are the exceptions to Sec. 22(c) and operate to allow her to enter into contracts on behalf of the Province of Cebu without further authority from the Sangguniang Panlalawigan other than that already granted in the appropriation ordinance for 2003 and the supplemental ordinances which, however, she did not care to elucidate on. The cited provisions state: Sec. 306. Definition of Terms. –When used in this Title, the term: (a) "Annual Budget" refers to a financial plan embodying the estimates of income and expenditures for one (1) fiscal year; (b) "Appropriation" refers to an authorization made by ordinance, directing the payment of goods and services from local government funds under specified conditions or for specific purposes; (c) "Budget Document" refers to the instrument used by the local chief executive to present a comprehensive financial plan to the sanggunian concerned; (d) "Capital Outlays" refers to appropriations for the purchase of goods and services, the benefits of which extend beyond the fiscal year and which add to the assets of the local government unit concerned, including investments in public utilities such as public markets and slaughterhouses; (e) "Continuing Appropriation" refers to an appropriation available to support obligations for a specified purpose or projects, such as those for the construction of physical structures or for the
acquisition of real property or equipment, even when these obligations are incurred beyond the budget year; (f) "Current Operating Expenditures" refers to appropriations for the purchase of goods and services for the conduct of normal government operations within the fiscal year, including goods and services that will be used or consumed during the budget year; (g) "Expected Results" refers to the services, products, or benefits that will accrue to the public, estimated in terms of performance measures or physical targets; (h) "Fund" refers to a sum of money, or other assets convertible to cash, set aside for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations, and constitutes an independent fiscal and accounting entity; (i) "Income" refers to all revenues and receipts collected or received forming the gross accretions of funds of the local government unit; (j) "Obligations" refers to an amount committed to be paid by the local government unit for any lawful act made by an accountable officer for and in behalf of the local government unit concerned; (k) "Personal Services" refers to appropriations for the payment of salaries, wages and other compensation of permanent, temporary, contractual, and casual employees of the local government unit; (l) "Receipts" refers to income realized from operations and activities of the local government or are received by it in the exercise of its corporate functions, consisting of charges for services rendered, conveniences furnished, or the price of a commodity sold, as well as loans, contributions or aids from other entities, except provisional advances for budgetary purposes; and (m) "Revenue" refers to income derived from the regular system of taxation enforced under authority of law or ordinance and, as such, accrue more or less regularly every year. xxx
Sec. 346. Disbursements of Local Funds and Statement of Accounts. –Disbursements shall be made in accordance with the ordinance authorizing the annual or supplemental appropriations without the prior approval of the sanggunian concerned. Within thirty (3) days after the close of each month, the local accountant shall furnish the sanggunian with such financial statements as may be prescribed by the COA. In the case of the year-end statement of accounts, the period shall be sixty (60) days after the thirty-first (31st) of December. Sec. 306 of R.A. No. 7160 merely contains a definition of terms. Read in conjunction with Sec. 346, Sec. 306 authorizes the local chief executive to make disbursements of funds in accordance with the ordinance authorizing the annual or supplemental appropriations. The "ordinance" referred to in Sec. 346 pertains to that which enacts the l ocal government unit’s budget, for which reason no further authorization from the local council is required, the ordinance functioning, as it does, as the legislative authorization of the budget.17 To construe Sections 306 and 346 of R.A. No. 7160 as exceptions to Sec. 22(c) would render the requirement of prior sanggunian authorization superfluous, useless and irrelevant. There would be no instance when such prior authorization would be required, as in contracts involving the disbursement of appropriated funds. Yet, this is obviously not the effect Congress had in mind when it required, as a condition to the local chief executive’s representation of the local government unit in business transactions, the prior authorization of the sanggunianconcerned. The requirement was deliberately added as a measure of check and balance, to temper the authority of the local chief executive, and in recognition of the fact that the corporate powers of the local government unit are wielded as much by its chief executive as by its council.18 However, as will be discussed later, the sanggunianauthorization may be in the form of an appropriation ordinance passed for the year which specifically covers the project, cost or contract to be entered into by the local government unit. The fact that the Province of Cebu operated under a reenacted budget in 2004 lent a complexion to this case which the trial court did not apprehend. Sec. 323 of R.A. No. 7160 provides that in case of a reenacted budget, "only the annual appropriations for salaries and wages of existing positions, statutory and contractual obligations, and essential operating expenses authorized in the annual and supplemental budgets for the preceding year shall be deemed reenacted and disbursement of funds shall be in accordance therewith."19
It should be observed that, as indicated by the word "only" preceding the above enumeration in Sec. 323, the items for which di sbursements may be made under a reenacted budget are exclusive. Clearly, contractual obligations which were not included in the previous year’s annual and supplemental budgets cannot be disbursed by the local government unit. It follows, too, that new contracts entered into by the local chief executive require the prior approval of the sanggunian. We agree with the OSG that the words "disbursement" and "contract" separately referred to in Sec. 346 and 22(c) of R.A. No. 7160 should be understood in their common signification. Disbursement is defined as "To pay out, commonly from a fund. To make payment in settlement of a debt or account payable."20 Contract, on the other hand, is defined by our Civil Code as "a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service."21 And so, to give life to the obvious intendment of the law and to avoid a construction which would render Sec. 22(c) of R.A. No. 7160 meaningless,22 disbursement, as used in Sec. 346, should be understood to pertain to payments for statutory and contractual obligations which the sanggunian has already authorized thru ordinances enacting the annual budget and are therefore already subsisting obligations of the local government unit. Contracts, as used in Sec. 22(c) on the other hand, are those which bind the local government unit to new obligations, with their corresponding terms and conditions, for which the local chief executive needs prior authority from the sanggunian. Elsewhere in R.A. No. 7160 are found provisions which buttress the stand taken by petitioners against Gov. Garcia’s seemingly heedless actions. Sec. 465, Art. 1, Chapter 3 of R.A. No. 7160 states that the provincial governor shall "[r]epresent the province in all its business transactions and sign in its behalf all bonds, contracts, and obligations, and such other documents upon authority of the Sangguniang Panlalawigan or pursuant to law or ordinances." Sec. 468, Art. 3 of the same chapter also establishes the sanggunian’s power, as the province’s legislative body, to authorize the provincial governor to negotiate and contract loans, lease public buildings held in a proprietary capacity to private parties, among other things. The foregoing inexorably confirms the indispensability of the sanggunian’s authorization in the execution of contracts which bind the local government unit to new obligations. Note should be taken of the fact that R.A. No. 7160 does not expressly state the form that the authorization by the sanggunian has to take. Such authorization may be done by resolution
enacted in the same manner prescribed by ordinances, except that the resolution need not go through a third reading for final consideration unless the majority of all the members of the sangguniandecides otherwise.23
cause of action has already accrued in favor of one or the other party, there is nothing more for the court to explain or clarify, short of a judgment or final order.
As regards the trial court’s pronouncement that R.A. No. 9184 does not require the head of the procuring entity to secure a resolution from the sanggunian concerned before entering into a contract, attention should be drawn to the very same provision upon which the trial court based its conclusion. Sec. 37 provides: "The Procuring Entity shall issue the Notice to Proceed to the winning bidder not later than seven (7) calendar days from the date of approval of the contract by the appropriate authority x x x."
Thus, the trial court erred in assuming jurisdiction over the action despite the fact that the subject thereof had already been breached by Gov. Garcia prior to the filing of the action. Nonetheless, the conversion of the petition into an ordinary civil action is warranted under Sec. 6, Rule 63 25 of the Rules of Court.
R.A. No. 9184 establishes the law and procedure for public procurement. Sec. 37 thereof explicitly makes the approval of the appropriate authority which, in the case of l ocal government units, is the sanggunian, the point of reference for the notice to proceed to be issued to the winning bidder. This provision, rather than being in conflict with or providing an exception to Sec. 22(c) of R.A. No. 7160, blends seamlessly with the latter and even acknowledges that in the exercise of the local government unit’s corporate powers, the chief executive acts merely as an instrumentality of the local council. Read together, the cited provisions mandate the local chief executive to secure the sanggunian’s approval before entering into procurement contracts and to transmit the notice to proceed to the winning bidder not later than seven (7) calendar days therefrom. Parenthetically, Gov. Garcia’s petition for declaratory relief should have been dismissed because it was instituted after the COA had already found her in violation of Sec. 22(c) of R.A. No. 7160. One of the important requirements for a petition for declaratory relief under Sec. 1, Rule 63 of the Rules of Court is that it be filed before breach or violation of a deed, will, contract, other written instrument, statute, executive order, regulation, ordinance or any other governmental regulation. In Martelino v. National Home Mortgage Finance Corporation ,24 we held that the purpose of the action i s to secure an authoritative statement of the rights and obligations of the parties under a statute, deed, contract, etc ., for their guidance in its enforcement or compliance and not to settle issues arising from its alleged breach. It may be entertained only before the breach or violation of the statute, deed, contract, etc . to which it refers. Where the law or contract has already been contravened prior to the filing of an action for declaratory relief, the court can no longer assume jurisdiction over the action. Under such circumstances, inasmuch as a
Erroneously, however, the trial court did not treat the COA report as a breach of the law and proceeded to resolve the issues as it would have in a declaratory relief action. Thus, it ruled that prior authorization is not required if there exist ordinances which authorize the local chief executive to enter into contracts. The problem with this ruling is that it fails to take heed of the incongruent facts presented by the parties. What the trial court should have done, instead of deciding the case based merely on the memoranda submitted by the parties, was to conduct a full-blown trial to thresh out the facts and make an informed and complete decision. As things stand, the declaration of the trial court to the effect that no prior authorization is required when there is a prior appropriation ordinance enacted does not put the controversy to rest. The question which should have been answered by the trial court, and which it failed to do was whether, during the period in question, there did exist ordinances (authorizing Gov. Garcia to enter into the questioned contracts) which rendered the obtention of another authorization from the Sangguniang Panlalawigan superfluous. It should also have determined the character of the questioned contracts, i.e., whether they were, as Gov. Garcia claims, mere disbursements pursuant to the ordinances supposedly passed by the sanggunian or, as petitioners claim, new contracts which obligate the province without the provincial board’s authority. It cannot be overemphasized that the paramount consideration in the present controversy is the fact that the Province of Cebu was operating under a re-enacted budget in 2004, resulting in an altogether different set of rules as directed by Sec. 323 of R.A. 7160. This Decision, however, should not be so construed as to proscribe any and all contracts entered into by the local chief executive without formal sanggunian authorization. In cases, for instance, where the local government unit operates under an annual as opposed to a re-enacted budget, it should be acknowledged that the appropriation passed by the sanggunian may validly serve as the authorization required under Sec. 22(c) of R.A. No. 7160. After all, an appropriation is an authorization made by ordinance, directing the payment of goods and services from local government funds under specified
conditions or for specific purposes. The appropriation covers the expenditures which are to be made by the local government unit, such as current operating expenditures26 and capital outlays.27 The question of whether a sanggunian authorization separate from the appropriation ordinance is required should be resolved depending on the particular circumstances of the case. Resort to the appropriation ordinance is necessary in order to determine if there is a provision therein which specifically covers the expense to be incurred or the contract to be entered into. Should the appropriation ordinance, for instance, already contain in sufficient detail the project and cost of a capital outlay such that all that the local chief executive needs to do after undergoing the requisite public bidding is to execute the contract, no further authorization is required, the appropriation ordinance already being sufficient. On the other hand, should the appropriation ordinance describe the projects in generic terms such as "infrastructure projects," "inter-municipal waterworks, drainage and sewerage, flood control, and irrigation systems projects," "reclamation projects" or "roads and bridges," there is an obvious need for a covering contract for every specific project that in turn requires approval by the sanggunian. Specific sanggunian approval may also be required for the purchase of goods and services which are neither specified in the appropriation ordinance nor encompassed within the regular personal services and maintenance operating expenses. In view of the foregoing, the instant case should be treated as an ordinary civil action requiring for its complete adjudication the confluence of all relevant facts. Guided by the framework laid out in this Decision, the trial court should receive further evidence in order to determine the nature of the questioned contracts entered into by Gov. Garcia, and the existence of ordinances authorizing her acts. WHEREFORE, the petition is GRANTED IN PART. The Decision dated July 11, 2006, of the Regional Trial Court of Cebu City, Branch 9, in Civil Case No. CEB-31560, and its Order dated October 25, 2006, are REVERSED andSET ASIDE. The case is REMANDED to the court a quo for further proceedings in accordance with this Decision. No pronouncement as to costs. SO ORDERED.
G.R. No. 172457
December 24, 2008
CJH DEVELOPMENT CORPORATION, petitioner, vs. BUREAU OF INTERNAL REVENUE, BUREAU OF CUSTOMS, and DISTRICT COLLECTOR OF CUSTOMS EDWARD O. BALTAZAR, respondents. DECISION TINGA, J .: Before us is a petition for review on certiorar i1 seeking the reversal of the orders dated 14 October 20052 and 04 April 2006 3 of the Regional Trial Court (RTC) of Baguio City, Branch 5. The RTC dismissed the petition for declaratory relief filed by petitioner CJH Development Corporation (CJH). This petition was brought directly to this Court since it involves a pure question of law in accordance with Rule 50 of the 1997 Revised Rules of Court. Proclamation No. 420 (the Proclamation) was issued by then President Fidel V. Ramos to create a Special Economic Zone (SEZ) in a portion of Camp John Hay in Baguio City. Section 3 4 of the Proclamation granted to the newly created SEZ the same incentives then already enjoyed by the Subic SEZ. Among these incentives are the exemption from the payment of taxes, both local and national, for businesses located inside the SEZ, and the operation of the SEZ as a special customs territory providing for tax and duty free importations of raw materials, capital and equipment .5 In line with the Proclamation, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 12-976 while the Bureau of Customs (BOC) issued Customs Administrative Order No. 2-98.7 The two issuances provided the rules and regulations to be implemented within the Camp John Hay SEZ. Subsequently, however, Section 3 of the Proclamation was declared unconstitutional in part by the Court en banc in John Hay Peoples Alternative Coalition v. Lim, 8 when it ruled that: WHEREORE, the second sentence of Section 3 of Proclamation No. 420 is hereby declared NULL and VOID and is accordingly declared of no legal force and effect. Public respondents are hereby enjoined from implementing the aforesaid void provision.
Proclamation No. 420, without the invalidated portion, remains valid and effective.9 The decision attained finality when the Court en banc denied the motion for reconsideration through a resolution dated 29 March 2005 .10 While the motion for reconsideration was pending with the Court, on 16 January 2004 the Office of the City Treasurer of Baguio sent a demand letter 11 which stated that: In view of the Supreme Court decision dated October 24, 2003 on G.R. No. 119775, declaring null and void Section 3 of Proclamation 420 on applicable incentives of Special Economic Zones, we are sending you updated statements of real property taxes due on real estate properties declared under the names of the Bases Conversion and Development Authority and Camp John Hay Development Corporation totalingP101,935,634.17 inclusive of penalties, as of January 10, 2004. May we request for the immediate settlement of the above indebtedness, otherwise this office shall be constrained to hold the processing of your business permit pursuant to Section 2 C c.1 of Tax Ordinance 2000-001 of Baguio City. Five months later, on 26 May 2005, the BOC followed suit and demanded 12 of CJH the payment ofP71,983,753.00 representing the duties and taxes due on all the importations made by CJH from 1998 to 2004. For its part, the BIR sent a letter dated 23 May 2005 to CJH wherein it treated CJH as an ordinary corporation subject to the regular corporate income tax as well as to the Value Added Tax of 1997 .13 CJH questioned the retroactive application by the BOC of the decision of this Court in G.R. No. 119775. It claimed that the assessment was null and void because it violated the non-retroactive principle under the Tariff and Customs Code.14 The Office of the Solicitor General (OSG) filed a motion to dismiss.15 The OSG claimed that the remedy of declaratory relief is inapplicable because an assessment is not a proper subject of such petition. It further alleged that there are administrative remedies which were available to CJH. In an Order 16 dated 28 June 2005, the RTC dropped the City of Baguio as a party to the case. The remaining parties were required to submit their respective memoranda. On 14 October 2005, the RTC rendered its
assailed order .17 It held that the decision in G.R. No. 119775 applies retroactively because the tax exemption granted by Proclamation No. 420 is null and void from the beginning. The RTC also ruled that the petition for declaratory relief is not the appropriate remedy. A judgment of the court cannot be the proper subject of a petition for declaratory relief; the enumeration in Rule 64 is exclusive. Moreover, the RTC held that Commonwealth Act No. 55 (CA No. 55) which proscribes the use of declaratory relief in cases where a taxpayer questions his tax liability is still in force and effect. CJH filed a motion for reconsideration but the RTC denied it .18 Hence this petition, which, as earlier stated, was filed directly to this Court, raising as it does only pure questions of law. There are two issues raised in this petition, one procedural and the other substantive. First, is the remedy of declaratory relief proper in this case? Second, can the decision in G.R. No. 119775 be applied retroactively? The requisites for a petition for declaratory relief to prosper are: (1) there must be a justiciable controversy; (2) the controversy must be between persons whose interests are adverse; (3) the party seeking declaratory relief must have a legal interest in the controversy; and (4) the issue involved must be ripe for judicial determination.19 CJH alleges that CA No. 5520 has already been repealed by the Rules of Court; thus, the remedy of declaratory relief against the assessment made by the BOC is proper. It cited the commentaries of Moran allegedly to the effect that declaratory relief lies against assessments made by the BIR and BOC. Yet in National Dental Supply Co. v. Meer ,21 this Court held that: From the opinion of the former Chief Justice Moran may be deduced that the failure to incorporate the above proviso [CA No. 55] in section 1, rule 66, [now Rule 64] is not due to an intention to repeal it but rather to the desire to leave its application to the sound discretion of the court, which is the sole arbiter to determine whether a case is meritorious or not. And even if it be desired to incorporate it in rule 66, it is doubted if it could be done under the rule-making power of the Supreme Court considering that the nature of said proviso is substantive and not adjective, its purpose being to lay down a policy as to the right of a taxpayer to contest the collection of taxes on the part of a revenue officer or of the Government. With the adoption of said proviso, our law-making body has asserted its policy on the matter, which is to prohibit a taxpayer to question his liability for the payment of any tax that may be collected by the Bureau of Internal Revenue. As this Court well
said, quoting from several American cases, "The Government may fix the conditions upon which it will consent to litigate the validity of its original taxes..." "The power of taxation being legislative, all incidents are within the control of the Legislature." In other words, it is our considered opinion that the proviso contained in Commonwealth Act No. 55 is still in full force and effect and bars the plaintiff from filing the present action .22 (Emphasis supplied) (Citations omitted.) As a substantive law that has not been repealed by another statute, CA No. 55 is still in effect and holds sway. Precisely, it has removed from the courts’ jurisdiction over petitions for declaratory relief involving tax assessments. The Court cannot repeal, modify or alter an act of the Legislature. Moreover, the proper subject matter of a declaratory relief is a deed, will, contract, or other written instrument, or the construction or validity of statute or ordinance.23 CJH hinges its petition on the demand letter or assessment sent to it by the BOC. However, it is really not the demand letter which is the subject matter of the petition. Ultimately, this Court is asked to determine whether the decision of the Court en banc in G.R. No. 119775 has a retroactive effect. This approach cannot be countenanced. A petition for declaratory relief cannot properly have a court decision as its subject matter. In Tanda v. Aldaya,24 we ruled that: x x x [A] court decision cannot be interpreted as included within the purview of the words "other written instrument," as contended by appellant, for the simple reason that the Rules of Court already provide[s] for the ways by which an ambiguous or doubtful decision may be corrected or clarified without need of resorting to the expedient prescribed by Rule 66 [now Rule 64] .25 There are other remedies available to a party who is not agreeable to a decision whether it be a question of law or fact. If it involves a decision of an appellate court, the party may file a motion for reconsideration or new trial in order that the defect may be corrected.26 In case of ambiguity of the decision, a party may file a motion for a clarificatory judgment.27 One of the requisites of a declaratory relief is that the issue must be ripe for judicial determination. This means that litigation is inevitable 28 or there is no adequate relief available in any other form or proceeding .29 However, CJH is not left without recourse. The Tariff and Customs Code (TCC) provides for the administrative and judicial remedies available to a taxpayer who is minded to contest an assessment, subject of course to certain reglementary periods. The TCC provides that a protest can be
raised provided that payment first be made of the amount due .30 The decision of the Collector can be reviewed by the Commissioner of Customs who can approve, modify or reverse the decision or action of the Collector .31 If the party is not satisfied with the ruling of the Commissioner, he may file the necessary appeal to the Court of Tax Appeals.32 Afterwards, the decision of the Court of Tax Appeals can be appealed to this Court. With the foregoing disquisition on the first issue, there is no need to delve into the second issue at this juncture. It should be noted though, as admitted by CJH in its Certificate of Non-Forum Shopping ,33 that even before the filing of this petition, it already had a pending petition for review with this Court, docketed as G.R. No. 16923 434 and entitled, Camp John Hay Development Corporation v. Central Board of Assessment Appeals, et al. That case emanated from assessments made in 2002 for real estate taxes on CJH by the City of Baguio. Said assessments were duly challenged before the Local Board of Assessment Appeals, the Central Board of Assessment Appeals and the Court of Tax Appeals. The petition in G.R. No. 169234 was filed with this Court in September 2005, or after our 2003 Decision in John Hay Peoples Alternative Coalition had attained finality. CJH therein raised the same question of law, as in this case, whether the doctrine of operative fact applies to G.R. No. 119775. Clearly, the Court in G.R. No. 169234 is better positioned to resolve that question of law, there being no antecedent jurisdictional defects that would preclude the Court from squarely deciding that particular issue. CJH is free to reiterate this current point of clarification as it litigates the petition in G.R. No. 169234. WHEREFORE, the Petition is DENIED. SO ORDERED.
G.R. No. 144570 September 21, 2005 VIVENCIO V. JUMAMIL, Petitioners, vs. JOSE J. CAFE, GLICERIO L. ALERIA, RUDY G. ADLAON, DAMASCENO AGUIRRE, RAMON PARING, MARIO ARGUELLES, ROLANDO STA. ANA, NELLIE UGDANG, PEDRO ATUEL, RUBY BONSOBRE, RUTH FORNILLOS, DANIEL GATCHALIAN, RUBEN GUTIERREZ, JULIET GATCHALIAN, ZENAIDA POBLETE, ARTHUR LOUDY, LILIAN LU, ISABEL MEJIA, EDUARDO ARGUELLES, LAO SUI KIEN, SAMUEL CONSOLACION, DR. ARTURO MONTERO, DRA. LILIOSA MONTERO, PEDRO LACIA, CIRILA LACIA, EVELYN SANGALANG, DAVID CASTILLO, ARSENIO SARMIENTO, ELIZABETH SY, METODIO NAVASCA, HELEN VIRTUDAZO, IRENE LIMBAGA, SYLVIA BUSTAMANTE, JUANA DACALUS, NELLIE RICAMORA, JUDITH ESPINOSA, PAZ KUDERA, EVELYN PANES, AGATON BULICATIN, PRESCILLA GARCIA, ROSALIA OLITAO, LUZVIMINDA AVILA, GLORIA OLAIR, LORITA MENCIAS, RENATO ARIETA, EDITHA ACUZAR, LEONARDA VILLACAMPA, ELIAS JARDINICO, BOBINO NAMUAG, FELIMON NAMUAG, EDGAR CABUNOC, HELEN ARGUELLES, HELEN ANG, FELECIDAD PRIETO, LUISITO GRECIA, LILIBETH PARING, RUBEN CAMACHO, ROSALINDA LALUNA, LUZ YAP, ROGELIO LAPUT, ROSEMARIE WEE, TACOTCHE RANAIN, AVELINO DELOS REYES and ROGASIANO OROPEZA, Respondent. DECISION
In 1989, petitioner Jumami l4 filed before the Regional Trial Court (RTC) of Panabo, Davao del Norte a petition for declaratory relief with prayer for preliminary injunction and writ of restraining order against public respondents Mayor Jose J. Cafe and the members of the Sangguniang Bayan of Panabo, Davao del Norte. He questioned the constitutionality of Municipal Resolution No. 7, Series of 1989 (Resolution No. 7). Resolution No. 7, enacting Appropriation Ordinance No. 111, provided for an initial appropriation of P765,000 for the construction of stalls around a proposed terminal fronting the Panabo Public Marke t5 which was destroyed by fire. Subsequently, the petition was amended due to the passage of Resolution No. 49, series of 1989 (Resolution No. 49), denominated as Ordinance No. 10, appropriating a further amount of P1,515,000 for the construction of additional stalls in the same public market.6 Prior to the passage of these resolutions, respondent Mayor Cafe had already entered into contracts with those who advanced and deposited (with the municipal treasurer) from their personal funds the sum of P40,000 each. Some of the parties were close friends and/or relatives of the public respondents.7 The construction of the stalls which petitioner sought to stop through the preliminary injunction in the RTC was nevertheless finished, rendering the prayer therefor moot and academic. The leases of the stalls were then awarded by public raffle which, however, was limited to those who had deposited P40,000 each .8 Thus, the petition was amended anew to include the 57 awardees of the stalls as private respondents.9
CORONA, J .: In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Vivencio V. Jumamil seeks to reverse the decision of the Court of Appeals dated July 24, 20001 in CA-G.R. CV No. 35082, the dispositive portion of which read: With the foregoing, the assailed Decision of B ranch 4, Regional Trial Court of Panabo Davao dated 26 November 1990 in Sp. Civil Action No. 89-1 is hereby AFFIRMED.2 The Regional Trial Court dismissed petitioner’s petition for declaratory relief with prayer for preliminary injunction and writ of restraining order, and ordered the petitioner to pay attorney’s fees in the amount of P1,000 to each of the 57 private respondents .3 The factual antecedents follow.
Petitioner alleges that Resolution Nos. 7 and 49 were unconstitutional because they were: …passed for the business, occupation, enjoyment and benefit of private respondents who deposited the amount ofP40,000.00 for each stall, and with whom also the mayor had a prior contract to award the would be constructed stalls to all private respondents.… As admitted by public respondents some of the private respondents are close friends and/or relatives of some of the public respondents which makes the questioned acts discriminatory. The questioned resolutions and ordinances did not provide for any notice of publication that the special privilege and unwarranted benefits conferred on the private respondents maybe ( sic ) availed of by anybody who can deposit the amount of P40,000.00.10 Neither was there any prior notice or publication pertaining to contracts entered into by public and private respondents for the construction of stalls
to be awarded to private respondents that the same can be availed of by anybody willing to deposit P40,000.00.11
interest in it that the rule requires as a basis for declaratory reliefs (PLUM vs. Santos, 45 SCRA 147).
In this petition, petitioner prays for the reversal of the decision of the Court of Appeals (CA) and a declaration of the unconstitutionality, illegality and nullity of the questioned resolutions/ordinances and lease contracts entered into by the public and private respondents; for the declaration of the illegality of the award of the stalls during the pendency of this action and for the re-raffling and award of the stalls in a manner that is fair and just to all interested applicants;12 for the issuance of an order to the local government to admit any and all interested persons who can deposit the amount of P40,000 for a stall and to order a re-raffling for the award of the stalls to the winners of the re-raffle; for the nullification of the award of attorney’s fees to private respondents on the ground that it was erro neous and unmeritorious; and for the award of damages in favor of petitioner in the form of attorney’s fees .13
Following this ruling, the petitioners were not parties in the agreement for the award of the market stalls by the public respondents, in the public market of Panabo, Davao, and since the petitioners were not parties to the award of the market stalls and whose rights are never affected by merely stating that they are taxpayers, they have no legal interest in the controversy and they are not, therefore, entitled to bring an action for declaratory relief .18
At the outset, we must point out that the issue of the constitutionality of the questioned resolutions was never ruled upon by both the RTC and the CA. It appears that on May 21, 1990, both parties agree d14 to await the decision in CA G.R. SP No. 20424,15 which involved similar facts, issues and parties. The RTC, consequently, deferred the resolution of the pending petition. The appellate court eventually rendered its decision in that case finding that the petitioners were not entitled to the declaratory relief prayed for as they had no legal interest in the controversy. Upon elevation to the Supreme Court as UDK Case No. 9948, the petition for review on certiorari was denied for being insufficient in form and substance.16 The RTC, after receipt of the entry of the SC judgment ,17 dismissed the pending petition on November 26, 1990. It adopted the ruling in CA G.R. SP No. 20424: xxxxxxxxx We find petitioners’ aforesaid submi ssion utterly devoid of merit. It is, to say the least, questionable whether or not a special civil action for declaratory relief can be filed in relation to a contract by persons who are not parties thereto. Under Sec. 1 of Rule 64 of the Rules of Court, any person interested under a deed, will, contract, or other written instruments may bring an action to determine any question of the contract, or validly arising under the instrument for a declaratory ( sic ) of his rights or duties thereunder. Since contracts take effect only between the parties (Art. 1311) it is quite plain that one who is not a party to a contract can not have the
WHEREFORE, the petition of the petitioners as taxpayers being without merit and not in consonance with law, is hereby ordered DISMISSED. As to the counterclaim for damages, the same not having been actually and fully proven, the Court gives no award as to the same. It is not amiss to state here that the petitioners agreed to be bound by the outcome of Special Civil Case No. 89-10. However, for unnecessarily dragging into Court the fifty-seven (57) private respondents who are bonafide businessmen and stall holders in the public market of Panabo, it is fitting and proper for the petitioners to be ordered payment of attorney’s fees. Accordingly, the herein petitioners are ordered to pay ONE THOUSAND (P1,000.00) PESOS EACH to the 57 private respondents, as attorney’s fees, jointly and severally, and for them to pay the costs of this suit. SO ORDERED.19 From this adverse decision, petitioner again appealed to the Court of Appeals in CA-G.R. CV No. 35082 which is now before us for review. The appellate court, yet again, affirmed the RTC decision and held that: Res judicata does not set in a case dismissed for lack of capacity to sue, because there has been no determination on the merits. Neither does the law of the case apply. However, the court a quo took judicial notice of the fact that petitioners agreed to be bound by the outcome of Special Civil Case No. 89-10. Allegans contraria non est audiendus. (He is not to be heard who alleges things contradictory to each other.) It must be here observed that petitioners-appellants were the ones who manifested that it would be practical to await the decision of the Supreme Court in their petition for certiorari, for after all the facts, circumstances and issues in that
case, are exactly the same as in the case that is here appealed. Granting that they may evade such assumption, a careful evaluation of the case would lead Us to the same conclusion: that the case for declaratory relief is dismissible. As enumerated by Justice Regalado in his "Remedial Law Compendium", the requisites of an action for declaratory relief are: (a) The subject matter of the controversy must be a deed, will, contract or other written instrument, statute, executive order or regulation, or ordinance; (b) The terms of said documents and the validity thereof are doubtful and require judicial construction; (c) There must have been no breach of the documents in question; (d) There must be an actual justiciable controversy or the "ripening seeds" of one between persons whose interests are adverse; (e) The issue must be ripe for judicial determination; and (f) Adequate relief is not available through other means or other forms of action or proceeding. In Tolentino vs. Board of Accountancy, et al , 90 Phil. 83, 88, the Supreme Court ratiocinated the requisites of justiciability of an action for declaratory relief by saying that the court must be "satisfied that an actual controversy, or the ripening seeds of one, exists between parties, all of whom are sui juris and before the court, and that the declaration sought will be a practical help in ending the controversy." The petition must show "an active antagonistic assertion of a legal right on one side and a denial thereof on the other concerning a real, and not a mere theoretical question or issue. The question is whether the facts alleged a substantial controversy between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory relief. In GSISEA and GSISSU vs. Hon. Alvendia etc. and GSIS, 108 Phil. 505, the Supreme Court ruled a declaratory relief improper or unnecessary when it appears to be a moot case, since it seeks to get a judgment on a pretended controversy, when in reality there is none. In Kawasaki Port Service Corporation vs. Amores, 199 SCRA 230, citing Dy Poco vs. Commissioner of Immigration, et al. , 16 SCRA 618, the rule was stated: "where a declaratory judgment as to a disputed fact would be determinative of issues rather than a construction of definite stated
rights, statuses and other relations, commonly expressed in a written instrument, the case is not one for declaratory judgment." Indeed, in its true light, the present petition for declaratory relief seems to be no more than a request for an advisory opinion to which courts in this and other jurisdiction have cast a definite aversion. The ordinances being assailed are appropriation ordinances. The passage of the ordinances were pursuant to the public purpose of constructing market stalls. For the exercise of judicial review, the governmental act being challenged must have had an adverse effect on the person challenging it, and the person challenging the act, must have "standing" to challenge, i.e., in the categorical and succinct language of Justice Laurel, he must have a "personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement." Standing is a special concern in constitutional law because in some cases suits are brought not by parties who have been personally injured by the operation of a law or by official action taken, but by concerned citizens, taxpayers or voters who actually sue in the public interest. Hence the question in standing is whether such parties have "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court largely depends for illumination of difficult constitutional questions. A careful analysis of the records of the case at bar would disclose that petitioners-appellants have suffered no wrong under the terms of the ordinances being assailed – and, naturally need no relief in the form they now seek to obtain. Judicial exercise cannot be exercised in vacuo. The policy of the courts is to avoid ruling on a constitutional question and to presume that the acts of the political departments are valid in the absence of a clear and unmistakable showing to the contrary. To doubt is to sustain. The issue is not the ordinances themselves, but the award of the market stalls to the private respondents on the strength of the contracts individually executed by them with Mayor Cafe. To reiterate, a person who is not a party to a contract cannot file a petition for declaratory relief and seek judicial interpretation of such contract (Atlas Consolidated Mining Corp. vs. Court of Appeals, 182 SCRA 166). Not having established their locus standi , we see no error committed by the court a quo warranting reversal of the appealed decision. With the foregoing, the assailed Decision of Branch 4, Regional Trial Court of Panabo Davao dated 26 November 1990 in Sp. Civil Action No. 89-1 is hereby AFFIRMED. SO ORDERED.20
Thus, both the RTC and the CA dismissed the case on the ground of petitioner’s lack of legal standing and the parties’ agreement to be bound by the decision in CA G.R. SP. No. 20424.
ruled that petitioner, who was not a party to the lease contracts, had no standing to file the petition for declaratory relief and seek judicial interpretation of the agreements.
The issues to be resolved are the following:
We do not agree. Petitioner brought the petition in his capacity as taxpayer of the Municipality of Panabo, Davao del Norte 23 and not in his personal capacity. He was questioning the official acts of the public respondents in passing the ordinances and entering into the lease contracts with private respondents. A taxpayer need not be a party to the contract to challenge its validity.24 Atlas Consolidated Mining & Development Corporation v. Court of Appeal s25 cited by the CA does not apply because it involved contracts between two private parties.
(1) whether the parties were bound by the outcome in CA G.R. SP. No. 20424; (2) whether petitioner had the legal standing to bring the petition for declaratory relief; (3) whether Resolution Nos. 7 and 49 were unconstitutional; and (4) whether petitioner should be held liable for damages. L o c u s S t an d i and the
Constitutionality Issue We will first consider the second issue. The petition for declaratory relief challenged the constitutionality of the subject resolutions. There is an unbending rule that courts will not assume jurisdiction over a constitutional question unless the following requisites are satisfied: (1) there must be an actual case calling for the exercise of judicial review; (2) the question before the Court must be ripe for adjudication; (3) the person challenging the validity of the act must have standing to do so; (4) the question of constitutionality must have been raised at the earliest opportunity, and (5) the issue of constitutionality must be the very lis mota of the case.21 Legal standing or locus standi is a party’s personal and substantial interest in a case such that he has sustained or will sustain direct injury as a result of the governmental act being challenged. It calls for more than just a generalized grievance. The term "interest" means a material interest, an interest in issue affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest .22 Unless a person’s constitutional rights are adversely affected by the statute or ordinance, he has no legal standing. The CA held that petitioner had no standing to challenge the two resolutions/ordinances because he suffered no wrong under their terms. It also concluded that "the issue (was) not the ordinances themselves but the award of the market stalls to the private respondents on the strength of the contracts individually executed by them with Mayor Cafe." Consequently, it
Parties suing as taxpayers must specifically prove sufficient interest in preventing the illegal expenditure of money raised by taxation.26 The expenditure of public funds by an officer of the State for the purpose of executing an unconstitutional act constitutes a misapplication of such funds.27 The resolutions being assailed were appropriations ordinances. Petitioner alleged that these ordinances were "passed for the business, occupation, enjoyment and benefit of private respondents "28 (that is, allegedly for the private benefit of respondents) because even before they were passed, respondent Mayor Cafe and private respondents had already entered into lease contracts for the construction and award of the market stalls.29 Private respondents admitted they deposited P40,000 each with the municipal treasurer, which amounts were made available to the municipality during the construction of the stalls. The deposits, however, were needed to ensure the speedy completion of the stalls after the public market was gutted by a series of fires .30 Thus, the award of the stalls was necessarily limited only to those who advanced their personal funds for their construction.31 Petitioner did not seasonably allege his interest in preventing the illegal expenditure of public funds or the specific injury to him as a result of the enforcement of the questioned resolutions and contracts. It was only in the "Remark to Comment" he filed in this Court did he first assert that "he (was) willing to engage in business and (was) interested to occupy a market stall."32 Such claim was obviously an afterthought. Be that as i t may, we have on several occasions relaxed the application of these rules on legal standing:
In not a few cases, the Court has liberalized the locus standi requirement when a petition raises an issue of transcendental significance or paramount importance to the people. Recently, after holding that the IBP had no locus standi to bring the suit, the Court in IBP v. Zamora nevertheless entertained the Petition therein. It noted that "the IBP has advanced constitutional issues which deserve the attention of this Court in view of their seriousness, novelty and weight as precedents."33 ―oOo― Objections to a taxpayer's suit for lack of sufficient personality, standing or interest are procedural matters. Considering the importance to the public of a suit assailing the constitutionality of a tax law, and in keeping with the Court's duty, specially explicated in the 1987 Constitution, to determine whether or not the other branches of the Government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them, the Supreme Court may brush aside technicalities of procedure and take cognizance of the suit .34 ―oOo―
We note that the foregoing was a disputed fact which the courts below did not resolve because the case was dismissed on the basis of petitioner’s lack of legal standing. Nevertheless, petitioner failed to prove the subject ordinances and agreements to be discriminatory. Considering that he was asking this Court to nullify the acts of the local political department of Panabo, Davao del Norte, he should have clearly established that such ordinances operated unfairly against those who were not notified and who were thus not given the opportunity to make their deposits. His unsubstantiated allegation that the public was not notified did not suffice. Furthermore, there was the time-honored presumption of regularity of official duty, absent any showing to the contrary .39 And this is not to mention that: The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid, absent a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine of separation of powers. This means that the measure had first been carefully studied by the legislative and executive departments and found to be in accord with the Constitution before it was finally enacted and approved.40
There being no doctrinal definition of transcendental importance, the following determinants formulated by former Supreme Court Justice Florentino P. Feliciano are instructive: (1) the character of the funds or other assets involved in the case; (2) the presence of a clear case of disregard of a constitutional or statutory prohibition by the public respondent agency or instrumentality of the government; and (3) the lack of any other party with a more direct and specific interest in raising the questions being raised.35
Therefore, since petitioner had no locus standi to
But, even if we disregard petitioner’s lack of legal standing, this petition must still fail. The subject resolutions/ordinances appropriated a total of P2,280,000 for the construction of the public market stalls. Petitioner alleges that these ordinances were discriminatory because, even prior to their enactment, a decision had already been made to award the market stalls to the private respondents who deposited P40,000 each and who were either friends or relatives of the public respondents. Petitioner asserts that "there (was) no publication or invitation to the public that this contract (was) available to all who (were) interested to own a stall and (were) willing to depositP40,000."36 Respondents, however, counter that the "public respondents’ act of entering into this agreement was authorized by the Sangguniang Bayan of Panabo per Resolution No. 180 dated October 10, 1988"37 and that "all the people interested were invited to participate in investing their savings."38
Adverting to the first issue, we observe that petitioner was the one who wanted the parties to await the decision of the Supreme Court in UDK Case No. 9948 since the facts and issues in that case were similar to this. Petitioner, having expressly agreed to be bound by our decision in the aforementioned case, should be reined in by the dismissal order we issued, now final and executory. In addition to the fact that nothing prohibits parties from committing to be bound by the results of another case, courts may take judicial notice of a judgment in another case as l ong as the parties give
question the ordinances, there is no need for us to discuss the constitutionality of said enactments. Were the Parties Bound by the Outcome in CA G.R. SP. No. 20424?
their consent or do not object .41 As opined by Justice Edgardo L. Paras: A court will take judicial notice of its own acts and records in the same case, of facts established in prior proceedings in the same case, of the
authenticity of its own records of another case between the same parties, of the files of related cases in the same court, and of public records on file in the same court. In addition, judicial notice will be taken of the record, pleadings or judgment of a case in another court between the same parties or involving one of the same parties, as well as of the record of another case between different parties in the same court.42 Damages Finally, on the issue of damages, petitioner asserts that he impleaded the 57 respondents in good faith since the award of the stalls to them was made during the pendency of the action .43 Private respondents refute this assertion and argue that petitioner filed this action in bad faith and with the intention of harassing them inasmuch as he had already filed CA G.R. SP. No. 20424 even before then .44 The RTC, affirmed by the CA, held that petitioner should pay attorney’s fees "for unnecessarily dragging into Court the 57 private respondents who (were) bonafide businessmen and stall holders in the public market of Panabo."45 We do not agree that petitioner should be held liable for damages. It is not sound public policy to put a premium on the right to litigate where such right is exercised in good faith, albeit erroneously.46 The alleged bad faith of petitioner was never established. The special circumstances in Article 2208 of the Civil Code justifying the award of attorney’s fees are not present in this case. WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 35082 is hereby AFFIRMED with theMODIFICATION that the award of attorney's fees to private respondents is deleted. Costs against petitioner. SO ORDERED.
G.R. No. 159357
April 28, 2004
Brother MARIANO "MIKE" Z. vs. SOCIAL JUSTICE SOCIETY, respondent.
VELARDE, petitioner,
DECISION PANGANIBAN, J . : A decision that does not conform to the form and substance required by the Constitution and the law is void and deemed legally inexistent. To be valid, decisions should comply with the form, the procedure and the substantive requirements laid out in the Constitution, the Rules of Court and relevant circulars/orders of the Supreme Court. For the guidance of the bench and the bar, the Court hereby discusses these forms, procedures and requirements. The Case Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, assailing the June 12, 2003 Decision 2 and July 29, 2003 Order 3 of the Regional Trial Court (RTC) of Manila (Branch 49). 4 The challenged Decision was the offshoot of a Petition for Declaratory Relief 5 filed before the RTC-Manila by herein Respondent Social Justice Society (SJS) against herein Petitioner Mariano "Mike" Z. Velarde, together with His Eminence, Jaime Cardinal Sin, Executive Minister Eraño Manalo, Brother Eddie Villanueva and Brother Eliseo F. Soriano as co-respondents. The Petition prayed for the resolution of the question "whether or not the act of a religious leader like any of herein respondents, in endorsing the candidacy of a candidate for elective office or in urging or requiring the members of his flock to vote for a specified candidate, is violative of the letter or spirit of the constitutional provisions x x x." 6 Alleging that the questioned Decision did not contain a statement of facts and a dispositive portion, herein petitioner filed a Clarificatory Motion and Motion for Reconsideration before the trial court. Soriano, his corespondent, similarly filed a separate Motion for Reconsideration. In response, the trial court issued the assailed Order, which held as follows: "x x x [T]his Court cannot reconsider, because what it was asked to do, was only to clarify a Constitutional provision and to declare whether acts are violative thereof. The Decision did not make a
dispositive portion because a dispositive portion is required only in coercive reliefs, where a redress from wrong suffered and the benefit that the prevailing party wronged should get. The step that these movants have to take, is direct appeal under Rule 45 of the Rules of Court, for a conclusive interpretation of the Constitutional provision to the Supreme Court."7 The Antecedent Proceedings On January 28, 2003, SJS filed a Petition for Declaratory Relief ("SJS Petition") before the RTC-Manila against Velarde and his aforesaid corespondents. SJS, a registered political party, sought the interpretation of several constitutional provisions,8 specifically on the separation of church and state; and a declaratory judgment on the constitutionality of the acts of religious leaders endorsing a candidate for an elective office, or urging or requiring the members of their flock to vote for a specified candidate. The subsequent proceedings were recounted in the challenged Decision in these words: "x x x. Bro. Eddie Villanueva submitted, within the original period [to file an Answer], a Motion to Dismiss. Subsequently, Executive Minister Eraño Manalo and Bro. Mike Velarde, filed their Motions to Dismiss. While His Eminence Jaime Cardinal L. Sin, filed a Comment and Bro. Eli Soriano, filed an Answer within the extended period and similarly prayed for the dismissal of the Petition. All sought the dismissal of the Petition on the common grounds that it does not state a cause of action and that there is no justiciable controversy. They were ordered to submit a pleading by way of advisement, which was closely followed by another Order denying all the Motions to Dismiss. Bro. Mike Velarde, Bro. Eddie Villanueva and Executive Minister Eraño Manalo moved to reconsider the denial. His Eminence Jaime Cardinal L. Sin, asked for extension to file memorandum. Only Bro. Eli Soriano complied with the first Order by submitting his Memorandum. x x x . "x x x the Court denied the Motions to Dismiss, and the Motions for Reconsideration filed by Bro. Mike Velarde, Bro. Eddie Villanueva and Executive Minister Eraño Manalo, which raised no new arguments other than those already considered in the motions to dismiss x x x."9 After narrating the above incidents, the trial court said that it had jurisdiction over the Petition, because "in praying for a determination as to
whether the actions imputed to the respondents are violative of Article II, Section 6 of the Fundamental Law, [the Petition] has raised only a question of law."10 It then proceeded to a lengthy discussion of the issue raised in the Petition – the separation of church and state – even tracing, to some extent, the historical background of the principle. Through its discourse, the court a quo opined at some point that the "[e]ndorsement of specific candidates in an election to any public office is a clear violation of the separation clause." 11 After its essay on the legal issue, however, the trial court failed to include a dispositive portion in its assailed Decision. Thus, Velarde and Soriano filed separate Motions for Reconsideration which, as mentioned earlier, were denied by the lower court. Hence, this Petition for Review.12 This Court, in a Resolution 13 dated September 2, 2003, required SJS and the Office of the Solicitor General (OSG) to submit their respective comments. In the same Resolution, the Court gave the other parties -impleaded as respondents in the original case below --the opportunity to comment, if they so desired. On April 13, 2004, the Court en banc conducted an Oral Argument. 14 The Issues In his Petition, Brother Mike Velarde submits the following issues for this Court’s resolution: "1. Whether or not the Decision dated 12 June 2003 rendered by the court a quo was proper and valid; "2. Whether or not there exists justiceable controversy in herein respondent’s Petition for declaratory relief; "3. Whether or not herein respondent has legal i nterest in filing the Petition for declaratory relief; "4. Whether or not the constitutional question sought to be resolved by herein respondent is ripe for judicial determination; "5. Whether or not there is adequate remedy other than the declaratory relief; and,
"6. Whether or not the court a quo has jurisdiction over the Petition for declaratory relief of herein respondent." 15 During the Oral Argument, the issues were narrowed down and classified as follows: "A. Procedural Issues "Did the Petition for Declaratory Relief raise a justiciable controversy? Did it state a cause of action? Did respondent have any legal standing to file the Petition for Declaratory Relief? "B. Substantive Issues "1. Did the RTC Decision conform to the form and substance required by the Constitution, the law and the Rules of Court? "2. May religious leaders like herein petitioner, Bro. Mike Velarde, be prohibited from endorsing candidates for public office? Corollarily, may they be banned from campaigning against said candidates?" The Court’s Ruling The Petition of Brother Mike Velarde is meritorious. Procedural Issues: Requisites of Petitions fo r Declaratory Relief
Section 1 of Rule 63 of the Rules of Court, which deals with petitions for declaratory relief, provides in part: "Section 1. Who may file petition.- Any person interested under a deed, will, contract or other written instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties thereunder."
Based on the foregoing, an action for declaratory relief should be filed by a person interested under a deed, a will, a contract or other written instrument, and whose rights are affected by a statute, an executive order, a regulation or an ordinance. The purpose of the remedy is to interpret or to determine the validity of the written instrument and to seek a judicial declaration of the parties’ rights or duties thereunder. 16 The essential requisites of the action are as follows: (1) there is a justiciable controversy; (2) the controversy is between persons whose interests are adverse; (3) the party seeking the relief has a legal interest in the controversy; and (4) the issue is ripe for judicial determination.17
Indeed, SJS merely speculated or anticipated without factual moorings that, as religious leaders, the petitioner and his co-respondents below had endorsed or threatened to endorse a candidate or candidates for elective offices; and that such actual or threatened endorsement "will enable [them] to elect men to public office who [would] in turn be forever beholden to their leaders, enabling them to control the government"[;] 21 and "pos[ing] a clear and present danger of serious erosion of the people’s faith in the electoral process[;] and reinforc[ing] their belief that religious leaders determine the ultimate result of elections," 22 which would then be violative of the separation clause.
Justiciable Controversy
Such premise is highly speculative and merely theoretical, to say the least. Clearly, it does not suffice to constitute a justiciable controversy. The Petition does not even allege any indication or manifest intent on the part of any of the respondents below to champion an electoral candidate, or to urge their so-called flock to vote for, or not to vote for, a particular candidate. It is a time-honored rule that sheer speculation does not give rise to an actionable right.
Brother Mike Velarde contends that the SJS Petition failed to allege, much less establish before the trial court, that there existed a justiciable controversy or an adverse legal interest between them; and that SJS had a legal right that was being violated or threatened to be violated by petitioner. On the contrary, Velarde alleges that SJS premised its action on mere speculations, contingent events, and hypothetical issues that had not yet ripened into an actual controversy. Thus, its Petition for Declaratory Relief must fail. A justiciable controversy refers to an existing case or controversy that is appropriate or ripe for judicial determination, not one that is conjectural or merely anticipatory.18 The SJS Petition for Declaratory Relief fell short of this test. It miserably failed to allege an existing controversy or dispute between the petitioner and the named respondents therein. Further, the Petition did not sufficiently state what specific legal right of the petitioner was violated by the respondents therein; and what particular act or acts of the latter were in breach of its rights, the law or the Constitution. As pointed out by Brother Eliseo F. Soriano in his Comment, 19 what exactly has he done that merited the attention of SJS? He confesses that he does not know the answer, because the SJS Petition (as well as the assailed Decision of the RTC) "yields nothing in this respect." His Eminence, Jaime Cardinal Sin, adds that, at the time SJS filed its Petition on January 28, 2003, the election season had not even started yet; and that, in any event, he has not been actively involved in partisan politics. An initiatory complaint or petition filed with the trial court should contain "a plain, concise and direct statement of the ultimate facts on which the party pleading relies for his claim x x x."20 Yet, the SJS Petition stated no ultimate facts.
Obviously, there is no factual allegation that SJS’ rights are being subjected to any threatened, imminent and inevitable violation that should be prevented by the declaratory relief sought. The judicial power and duty of the courts to settle actual controversies involving rights that are legally demandable and enforceable 23 cannot be exercised when there is no actual or threatened violation of a legal right. All that the 5-page SJS Petition prayed for was "that the question raised in paragraph 9 hereof be resolved." 24 In other words, it merely sought an opinion of the trial court on whether the speculated acts of religious leaders endorsing elective candidates for political offices violated the constitutional principle on the separation of church and state. SJS did not ask for a declaration of its rights and duties; neither did it pray for the stoppage of any threatened violation of its declared rights. Courts, however, are proscribed from rendering an advisory opinion. 25 Cause of Action Respondent SJS asserts that in order to maintain a petition for declaratory relief, a cause of action need not be alleged or proven. Supposedly, for such petition to prosper, there need not be any violation of a right, breach of duty or actual wrong committed by one party against the other. Petitioner, on the other hand, argues that the subject matter of an action for declaratory relief should be a deed, a will, a contract (or other written
instrument), a statute, an executive order, a regulation or an ordinance. But the subject matter of the SJS Petition is "the constitutionality of an act of a religious leader to endorse the candidacy of a candidate for elective office or to urge or require the members of the flock to vote for a specified candidate."26 According to petitioner, this subject matter is "beyond the realm of an action for declaratory relief." 27 Petitioner avers that in the absence of a valid subject matter, the Petition fails to state a cause of action and, hence, should have been dismissed outright by the court a quo. A cause of action is an act or an omission of one party in violation of the legal right or rights of another, causing injury to the latter. 28 Its essential elements are the following: (1) a right in favor of the plaintiff; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) such defendant’s act or omission that is violative of the right of the plaintiff or constituting a breach of the obligation of the former to the latter.29 The failure of a complaint to state a cause of action is a ground for its outright dismissal.30 However, in special civil actions for declaratory relief, the concept of a cause of action under ordinary civil actions does not strictly apply. The reason for this exception is that an action for declaratory relief presupposes that there has been no actual breach of the instruments involved or of rights arising thereunder. 31 Nevertheless, a breach or violation should be impending, imminent or at least threatened. A perusal of the Petition filed by SJS before the RTC discloses no explicit allegation that the former had any legal right in its favor that it sought to protect. We can only infer the interest, supposedly in its favor, from its bare allegation that it "has thousands of members who are citizens-taxpayersregistered voters and who are keenly interested in a judicial clarification of the constitutionality of the partisan participation of religious leaders in Philippine politics and in the process to insure adherence to the Constitution by everyone x x x." 32 Such general averment does not, however, suffice to constitute a legal right or interest. Not only is the presumed interest not personal in character; it is likewise too vague, highly speculative and uncertain. 33 The Rules require that the interest must be material to the issue and affected by the questioned act or instrument, as distinguished from simple curiosity or incidental interest in the question raised. 34 To bolster its stance, SJS cites the Corpus Juris Secundum and submits that the "[p]laintiff in a declaratory judgment action does not seek to enforce a claim against [the] defendant, but seeks a judicial declaration of [the] rights of the parties for the purpose of guiding [their] future conduct,
and the essential distinction between a ‘declaratory judgment action’ and the usual ‘action’ is that no actual wrong need have been committed or loss have occurred in order to sustain the declaratory judgment action, although there must be no uncertainty that the loss will occur or that the asserted rights will be invaded." 35 SJS has, however, ignored the crucial point of its own reference – that there must be no uncertainty that the loss will occur or that the asserted rights will be invaded . Precisely, as discussed earlier, it merely conjectures that herein petitioner (and his co-respondents below) might actively participate in partisan politics, use "the awesome voting strength of its faithful flock [to] enable it to elect men to public office x x x, enabling [it] to control the government."36 During the Oral Argument, though, Petitioner Velarde and his corespondents below all strongly asserted that they had not in any way engaged or intended to participate in partisan politics. They all firmly assured this Court that they had not done anything to trigger the issue raised and to entitle SJS to the relief sought. Indeed, the Court finds in the Petition for Declaratory Relief no single allegation of fact upon which SJS could base a right of relief from the named respondents. In any event, even granting that it sufficiently asserted a legal right it sought to protect, there was nevertheless no certainty that such right would be invaded by the said respondents. Not even the alleged proximity of the elections to the time the Petition was filed below (January 28, 2003) would have provided the certainty that it had a legal right that would be jeopardized or violated by any of those respondents. Legal Standing Legal standing or locus standi has been defined as a personal and substantial interest in the case, such that the party has sustained or will sustain direct injury as a result of the challenged act. 37 Interest means a material interest in issue that is affected by the questioned act or instrument, as distinguished from a mere incidental interest in the question involved.38 Petitioner alleges that "[i]n seeking declaratory relief as to the constitutionality of an act of a religious leader to endorse, or require the members of the religious flock to vote for a specific candidate, herein Respondent SJS has no legal interest in the controversy"; 39 it has failed to establish how the resolution of the proffered question would benefit or injure it.
Parties bringing suits challenging the constitutionality of a law, an act or a statute must show "not only that the law [or act] is invalid, but also that [they have] sustained or [are] in immediate or imminent danger of sustaining some direct injury as a result of its enforcement, and not merely that [they] suffer thereby in some indefinite way." 40They must demonstrate that they have been, or are about to be, denied some right or privilege to which they are lawfully entitled, or that they are about to be subjected to some burdens or penalties by reason of the statute or act complained of. 41 First, parties suing as taxpayers must specifically prove that they have sufficient interest in preventing the illegal expenditure of money raised by taxation.42 A taxpayer’s action may be properly brought only when there is an exercise by Congress of its taxing or spending power. 43 In the present case, there is no allegation, whether express or implied, that taxpayers’ money is being illegally disbursed. Second, there was no showing in the Petition for Declaratory Relief that SJS as a political party or its members as registered voters would be adversely affected by the alleged acts of the respondents below, if the question at issue was not resolved. There was no allegation that SJS had suffered or would be deprived of votes due to the acts imputed to the said respondents. Neither did it allege that any of its members would be denied the right of suffrage or the privilege to be voted for a public office they are seeking. Finally, the allegedly keen interest of its "thousands of members who are citizens-taxpayers-registered voters" is too general 44 and beyond the contemplation of the standards set by our jurisprudence. Not only is the presumed interest impersonal in character; it is likewise too vague, highly speculative and uncertain to satisfy the requirement of standing. 45 Transcendental Imp ortance
In any event, SJS urges the Court to take cognizance of the Petition, even sans legal standing, considering that "the issues raised are of paramount public interest." In not a few cases, the Court has liberalized the locus standi requirement when a petition raises an issue of transcendental significance or paramount importance to the people. 46 Recently, after holding that the IBP had nolocus standi to bring the suit, the Court in IBP v. Zamora47 nevertheless entertained the Petition therein. It noted that "the IBP has advanced constitutional issues which deserve the attention of this Court in view of their seriousness, novelty and weight as precedents." 48
Similarly in the instant case, the Court deemed the constitutional issue raised in the SJS Petition to be of paramount interest to the Filipino people. The issue did not simply concern a delineation of the separation between church and state, but ran smack into the governance of our country. The issue was both transcendental in importance and novel in nature, since it had never been decided before. The Court, thus, called for Oral Argument to determine with certainty whether it could resolve the constitutional issue despite the barren allegations in the SJS Petition as well as the abbreviated proceedings in the court below. Much to its chagrin, however, counsels for the parties -particularly for Respondent SJS -- made no satisfactory allegations or clarifications that would supply the deficiencies hereinabove discussed. Hence, even if the Court would exempt this case from the stringent locus standi requirement, such heroic effort would be futile because the transcendental issue cannot be resolved anyway. Proper Proceedings B efore the Trial Court
To prevent a repetition of this waste of precious judicial time and effort, and for the guidance of the bench and the bar, the Court reiterates the elementary procedure49 that must be followed by trial courts in the conduct of civil cases.50 Prefatorily, the trial court may -- motu proprio or upon motion of the defendant -- dismiss a complaint51 (or petition, in a special civil action) that does not allege the plaintiff’s (or petitioner’s) cause or causes of action. 52 A complaint or petition should contain "a plain, concise and direct statement of the ultimate facts on which the party pleading relies for his claim or defense."53 It should likewise clearly specify the relief sought.54 Upon the filing of the complaint/petition and the payment of the requisite legal fees, the clerk of court shall forthwith issue the corresponding summons to the defendants or the respondents, with a directive that the defendant answer 55 within 15 days, unless a different period is fixed by the court.56 The summons shall also contain a notice that if such answer is not filed, the plaintiffs/petitioners shall take a judgment by default and may be granted the relief applied for. 57 The court, however, may -- upon such terms as may be just -- allow an answer to be filed after the time fixed by the Rules.58 If the answer sets forth a counterclaim or cross-claim, it must be answered within ten (10) days from service. 59 A reply may be filed within ten (10) days from service of the pleading responded to. 60
When an answer fails to tender an issue or admits the material allegations of the adverse party’s pleading, the court may, on motion of that party, direct judgment on such pleading (except in actions for declaration of nullity or annulment of marriage or for legal separation). 61 Meanwhile, a party seeking to recover upon a claim, a counterclaim or crossclaim -- or to obtain a declaratory relief -- may, at any time after the answer thereto has been served, move for a summary judgment in its favor. 62 Similarly, a party against whom a claim, a counterclaim or crossclaim is asserted -- or a declaratory relief sought -- may, at any time, move for a summary judgment in its favor.63 After the motion is heard, the judgment sought shall be rendered forthwith if there is a showing that, except as to the amount of damages, there is no genuine issue as to any material fact; and that the moving party is entitled to a j udgment as a matter of law. 64 Within the time for -- but before -- filing the answer to the complaint or petition, the defendant may file a motion to dismiss based on any of the grounds stated in Section 1 of Rule 16 of the Rules of Court. During the hearing of the motion, the parties shall submit their arguments on the questions of law, and their evidence on the questions of fact. 65 After the hearing, the court may dismiss the action or claim, deny the motion, or order the amendment of the pleadings. It shall not defer the resolution of the motion for the reason that the ground relied upon is not indubitable. In every case, the resolution shall state clearly and distinctly the reasons therefor.66 If the motion is denied, the movant may file an answer within the balance of the period originally prescribed to file an answer, but not less than five (5) days in any event, computed from the receipt of the notice of the denial. If the pleading is ordered to be amended, the defendant shall file an answer within fifteen (15) days, counted from the service of the amended pleading, unless the court provides a longer period. 67 After the last pleading has been served and filed, the case shall be set for pretrial,68 which is a mandatory proceeding.69 A plaintiff’s/ petitioner’s (or its duly authorized representative’s) non-appearance at the pretrial, if without valid cause, shall result in the dismissal of the action with prejudice, unless the court orders otherwise. A similar failure on the part of the defendant shall be a cause for allowing the plaintiff/petitioner to present evidence ex parte, and the court to render judgment on the basis thereof. 70 The parties are required to file their pretrial briefs; failure to do so shall have the same effect as failure to appear at the pretrial. 71 Upon the termination thereof, the court shall issue an order reciting in detail the matters taken up at the conference; the action taken on them, the amendments allowed to the pleadings; and the agreements or admissions,
if any, made by the parties regarding any of the matters considered. 72 The parties may further avail themselves of any of the modes of discovery, 73 if they so wish. Thereafter, the case shall be set for trial, 74 in which the parties shall adduce their respective evidence in support of their claims and/or defenses. By their written consent or upon the application of either party, or on its own motion, the court may also order any or all of the issues to be referred to a commissioner, who is to be appointed by it or to be agreed upon by the parties. 75 The trial or hearing before the commissioner shall proceed in all respects as i t would if held before the court. 76 Upon the completion of such proceedings, the commissioner shall file with the court a written report on the matters referred by the parties. 77 The report shall be set for hearing, after which the court shall issue an order adopting, modifying or rejecting it in whole or in part; or recommitting it with instructions; or requiring the parties to present further evidence before the commissioner or the court. 78 Finally, a judgment or final order determining the merits of the case shall be rendered. The decision 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 the issuing magistrate, and filed with the clerk of court.79 Based on these elementary guidelines, let us examine the proceedings before the trial court in the i nstant case. First, with respect to the initiatory pleading of the SJS. Even a cursory perusal of the Petition immediately reveals its gross inadequacy. It contained no statement of ultimate facts upon which the petitioner relied for its claim. Furthermore, it did not specify the relief it sought from the court, but merely asked it to answer a hypothetical question. Relief, as contemplated in a legal action, refers to a specific coercive measure prayed for as a result of a violation of the rights of a plaintiff or a petitioner.80 As already discussed earlier, the Petition before the trial court had no allegations of fact 81 or of any specific violation of the petitioner’s rights, which the respondents had a duty to respect. Such deficiency amounted to a failure to state a cause of action; hence, no coercive relief could be sought and adjudicated. The Petition evidently lacked substantive requirements and, we repeat, should have been dismissed at the outset.
Second, with respect to the trial court proceedings. Within the period set to file their respective answers to the SJS Petition, Velarde, Villanueva and Manalo filed Motions to Dismiss; Cardinal Sin, a Comment; and Soriano, within a priorly granted extended period, an Answer in which he likewise prayed for the dismissal of the Petition. 82 SJS filed a Rejoinder to the Motion of Velarde, who subsequently filed a Sur-Rejoinder. Supposedly, there were "several scheduled settings, in which the "[c]ourt was apprised of the respective positions of the parties." 83 The nature of such settings -whether pretrial or trial hearings -- was not disclosed in the records. Before ruling on the Motions to Dismiss, the trial court issued an Order 84 dated May 8, 2003, directing the parties to submit their memoranda. Issued shortly thereafter was another Order 85 dated May 14, 2003, denying all the Motions to Dismiss. In the latter Order, the trial court perfunctorily ruled: "The Court now resolves to deny the Motions to Dismiss, and after all the memoranda are submitted, then, the case shall be deemed as submitted for resolution." 86 Apparently, contrary to the requirement of Section 2 of Rule 16 of the Rules of Court, the Motions were not heard. Worse, the Order purportedly resolving the Motions to Dismiss did not state any reason at all for their denial, in contravention of Section 3 of the said Rule 16. There was not even any statement of the grounds relied upon by the Motions; much less, of the legal findings and conclusions of the trial court. Thus, Velarde, Villanueva and Manalo moved for reconsideration. Pending the resolution of these Motions for Reconsideration, Villanueva filed a Motion to suspend the filing of the parties’ memoranda. But instead of separately resolving the pending Motions fairly and squarely, the trial court again transgressed the Rules of Court when it immediately proceeded to issue its Decision, even before tackling the issues raised in those Motions. Furthermore, the RTC issued its "Decision" without allowing the parties to file their answers. For this reason, there was no joinder of the issues. If only it had allowed the filing of those answers, the trial court would have known, as the Oral Argument revealed, that the petitioner and his corespondents below had not committed or threatened to commit the act attributed to them (endorsing candidates) -- the act that was supposedly the factual basis of the suit.
Parenthetically, the court a quo further failed to give a notice of the Petition to the OSG, which was entitled to be heard upon questions involving the constitutionality or validity of statutes and other measures. 87 Moreover, as will be discussed in more detail, the questioned Decision of the trial court was utterly wanting in the requirements prescribed by the Constitution and the Rules of Court. All in all, during the loosely abbreviated proceedings of the case, the trial court indeed acted with inexplicable haste, with total ignorance of the law -or, worse, in cavalier disregard of the rules of procedure -- and with grave abuse of discretion. Contrary to the contentions of the trial judge and of SJS, proceedings for declaratory relief must still follow the process described above -- the petition must state a cause of action; the proceedings must undergo the procedure outlined in the Rules of Court; and the decision must adhere to constitutional and legal requirements. First Substantive Issue: Fundamental Requirements of a Decision
The Constitution commands that "[n]o 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 basis therefor." 88 Consistent with this constitutional mandate, Section 1 of Rule 36 of the Rules on Civil Procedure similarly provides: "Sec. 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 court." In the same vein, Section 2 of Rule 120 of the Rules of Court on Criminal Procedure reads as follows: "Sec. 2. Form and contents of judgments. -- The judgment must be written in the official language, personally and directly prepared by the judge and signed by him and shall contain clearly and distinctly
a statement of the facts proved or admitted by the accused and the law upon which the judgment is based. "x x x
xxx
x x x."
Pursuant to the Constitution, this Court also issued on January 28, 1988, Administrative Circular No. 1, prompting all judges "to make complete findings of facts in their decisions, and scrutinize closely the legal aspects of the case in the light of the evidence presented. They should avoid the tendency to generalize and form conclusions without detailing the facts from which such conclusions are deduced." In many cases, 89 this Court has time and time again reminded "magistrates to heed the demand of Section 14, Article VIII of the Constitution." The Court, through Chief Justice Hilario G. Davide Jr. in Yao v. Court of Appeals,90discussed at length the implications of this provision and strongly exhorted thus: "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 i t 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." In People v. Bugarin, 91 the Court also explained:
"The requirement that the decisions of courts must be in writing and that they must set forth clearly and distinctly the facts and the law on which they are based serves many functions. It is intended, among other things, to inform the parties of the reason or reasons for the decision so that if any of them appeals, he can point out to the appellate court the finding of facts or the rulings on points of law with which he disagrees. 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. x x x." Indeed, elementary due process demands that the parties to a litigation be given information on how the case was decided, as well as an explanation of the factual and legal reasons that led to the conclusions of the court. 92 In Madrid v. Court of Appeals, 93 this Court had instructed magistrates to exert effort to ensure that their decisions would present a comprehensive analysis or account of the factual and legal f indings that would substantially address the issues raised by the parties. In the present case, it is starkly obvious that the assailed Decision contains no statement of facts -- much less an assessment or analysis thereof -- or of the court’s findings as to the probable facts. The assailed Decision begins with a statement of the nature of the action and the question or issue presented. Then follows a brief explanation of the constitutional provisions involved, and what the Petition sought to achieve. Thereafter, the ensuing procedural incidents before the trial court are tracked. The Decision proceeds to a full-length opinion on the nature and the extent of the separation of church and state. Without expressly stating the final conclusion she has reached or specifying the relief granted or denied, the trial judge ends her "Decision" with the clause "SO ORDERED." What were the antecedents that necessitated the filing of the Petition? What exactly were the distinct facts that gave rise to the question sought to be resolved by SJS? More important, what were the factual findings and analysis on which the trial court based its legal findings and conclusions? None were stated or implied. Indeed, the RTC’s Decision cannot be upheld for its failure to express clearly and distinctly the facts on which it was based. Thus, the trial court clearly transgressed the constitutional directive. The significance of factual findings lies in the value of the decision as a precedent. How can it be so if one cannot apply the ruling to similar circumstances, simply because such circumstances are unknown? Otherwise stated, how will the ruling be applied in the future, if there is no point of factual comparison?
Moreover, the court a quo did not include a resolutory or di spositive portion in its so-called Decision. The importance of such portion was explained in the early case Manalang v. Tuason de Rickards, 94 from which we quote: "The resolution of the Court on a given issue as embodied in the dispositive part of the decision or order is the investitive or controlling factor that determines and settles the rights of the parties and the questions presented therein, notwithstanding the existence of statements or declaration in the body of said order that may be confusing." The assailed Decision in the present case leaves us in the dark as to its final resolution of the Petition. To recall, the original Petition was for declaratory relief. So, what relief did the trial court grant or deny? What rights of the parties did it conclusively declare? Its final statement says, "SO ORDERED." But what exactly did the court order? It had the temerity to label its issuance a "Decision," when nothing was in fact decided. Respondent SJS insists that the dispositive portion can be found in the body of the assailed Decision. It claims that the issue is disposed of and the Petition finally resolved by the statement of the trial court found on page 10 of its 14-page Decision, which reads: "Endorsement of specific candidates in an election to any public office is a clear violation of the separation clause." 95 We cannot agree. In Magdalena Estate, Inc. v. Caluag ,96 the obligation of the party imposed by the Court was allegedly contained in the text of the original Decision. The Court, however, held: "x x x The quoted finding of the lower court cannot supply deficiencies in the dispositive portion. It is a mere opinion of the court and the rule is settled that where there is a conflict between the dispositive part and the opinion, the former must prevail over the latter on the theory that the dispositive portion is the final order while the opinion is merely a statement ordering nothing." (Italics in the original) Thus, the dispositive portion cannot be deemed to be the statement quoted by SJS and embedded in the last paragraph of page 10 of the assailed 14page Decision. If at all, that statement is merely an answer to a hypothetical legal question and just a part of the opinion of the trial court. It does not conclusively declare the rights (or obligations) of the parties to the
Petition. Neither does it grant any -- much less, the proper -- relief under the circumstances, as required of a dispositive portion. Failure to comply with the constitutional injunction is a grave abuse of discretion amounting to lack or excess of jurisdiction. Decisions or orders issued in careless disregard of the constitutional mandate are a patent nullity and must be struck down as void.97 Parts of a Decision In general, the essential parts of a good decision consist of the following: (1) statement of the case; (2) statement of facts; (3) issues or assignment of errors; (4) court ruling, in which each issue is, as a rule, separately considered and resolved; and, finally, (5) dispositive portion. The ponente may also opt to include an introduction or a prologue as well as an epilogue, especially in cases in which controversial or novel issues are involved.98 An introduction may consist of a concise but comprehensive statement of the principal factual or legal issue/s of the case. In some cases -particularly those concerning public interest; or involving complicated commercial, scientific, technical or otherwise rare subject matters -- a longer introduction or prologue may serve to acquaint readers with the specific nature of the controversy and the issues involved. An epilogue may be a summation of the important principles applied to the resolution of the issues of paramount public interest or significance. It may also lay down an enduring philosophy of law or guiding principle. Let us now, again for the guidance of the bench and the bar, discuss the essential parts of a good decision. 1. Statement of the Case The Statement of the Case consists of a legal definition of the nature of the action. At the first instance, this part states whether the action is a civil case for collection, ejectment, quieting of title, foreclosure of mortgage, and so on; or, if it is a criminal case, this part describes the specific charge -quoted usually from the accusatory portion of the information -- and the plea of the accused. Also mentioned here are whether the case is being decided on appeal or on a petition for certiorari, the court of origin, the case number in the trial court, and the dispositive portion of the assailed decision.
In a criminal case, the verbatim reproduction of the criminal information serves as a guide in determining the nature and the gravity of the offense for which the accused may be found culpable. As a rule, the accused cannot be convicted of a crime different from or graver than that charged. Also, quoting verbatim the text of the information is especially important when there is a question on the sufficiency of the charge, or on whether qualifying and modifying circumstances have been adequately alleged therein. To ensure that due process is accorded, it is important to give a short description of the proceedings regarding the plea of the accused. Absence of an arraignment, or a serious irregularity therein, may render the judgment void, and further consideration by the appellate court would be futile. In some instances, especially in appealed cases, it would also be useful to mention the fact of the appellants’ detention, in order to dispose of the preliminary query -- whether or not they have abandoned their appeal by absconding or jumping bail. Mentioning the court of origin and the case number originally assigned helps in facilitating the consolidation of the records of the case in both the trial and the appellate courts, after entry of final judgment.
resolution of most criminal cases, unlike civil and other cases, depends to a large extent on the factual issues and the appreciation of the evidence. The plausibility or the implausibility of each version can sometimes be initially drawn from a reading of the facts. Thereafter, the bases of the court in arriving at its findings and conclusions should be explained. On appeal, the fact that the assailed decision of the lower court fully, intelligently and correctly resolved all factual and legal issues involved may partly explain why the reviewing court finds no reason to reverse the findings and conclusions of the former. Conversely, the lower court’s patent misappreciation of the facts or misapplication of the law would aid in a better understanding of why its ruling is reversed or modified. In appealed civil cases, the opposing sets of facts no longer need to be presented. Issues for resolution usually involve questions of law, grave abuse of discretion, or want of jurisdiction; hence, the facts of the case are often undisputed by the parties. With few exceptions, factual issues are not entertained in non-criminal cases. Consequently, the narration of facts by the lower court, if exhaustive and clear, may be reproduced; otherwise, the material factual antecedents should be restated in the words of the reviewing magistrate.
Finally, the reproduction of the decretal portion of the assailed decision informs the reader of how the appealed case was decided by the court a quo.
In addition, the reasoning of the lower court or body whose decision is under review should be laid out, in order that the parties may clearly understand why the lower court ruled in a certain way, and why the reviewing court either finds no reason to reverse it or concludes otherwise.
2. Statement of Facts
3. Issues or Assignment of Errors
There are different ways of relating the facts of the case. First, under the objective or reportorial method, the judge summarizes -- without comment - the testimony of each witness and the contents of each exhibit. Second,under the synthesis method, the factual theory of the plaintiff or prosecution and then that of the defendant or defense is summarized according to the judge’s best light. Third, in the subjective method, the version of the facts accepted by the judge is simply narrated without explaining what the parties’ versions are. Finally, through a combination of objective and subjective means, the testimony of each witness is reported and the judge then formulates his or her own version of the facts.
Both factual and legal issues should be stated. On appeal, the assignment of errors, as mentioned in the appellant’s brief, may be reproduced in toto and tackled seriatim, so as to avoid motions for reconsideration of the final decision on the ground that the court failed to consider all assigned errors that could affect the outcome of the case. But when the appellant presents repetitive issues or when the assigned errors do not strike at the main issue, these may be restated in clearer and more coherent terms.
In criminal cases, it is better to present both the version of the prosecution and that of the defense, in the interest of fairness and due process. A detailed evaluation of the contentions of the parties must follow. The
Though not specifically questioned by the parties, additional issues may also be included, if deemed important for substantial justice to be rendered. Note that appealed criminal cases are given de novo review, in contrast to noncriminal cases in which the reviewing court is generally limited to issues specifically raised in the appeal. The few exceptions are errors of jurisdiction; questions not raised but necessary in arriving at a just decision on the case; or unassigned errors that are closely related to those
properly assigned, or upon which depends the determination of the question properly raised.
Second Substantive Issue: Re ligious Leaders’ Endorsement
4. The Court’s Ruling of Candidates for Public Office
This part contains a full discussion of the specific errors or issues raised in the complaint, petition or appeal, as the case may be; as well as of other issues the court deems essential to a just disposition of the case. Where there are several issues, each one of them should be separately addressed, as much as practicable. The respective contentions of the parties should also be mentioned here. When procedural questions are raised in addition to substantive ones, it is better to resolve the former preliminarily. 5. The Disposition or Dispositive Portion In a criminal case, the disposition should include a finding of innocence or guilt, the specific crime committed, the penalty imposed, the participation of the accused, the modifying circumstances if any, and the civil liability and costs. In case an acquittal is decreed, the court must order the immediate release of the accused, if detained, (unless they are being held for another cause) and order the director of the Bureau of Corrections (or wherever the accused is detained) to report, within a maximum of ten (10) days from notice, the exact date when the accused were set free. In a civil case as well as in a special civil action, the disposition should state whether the complaint or petition is granted or denied, the specific relief granted, and the costs. The following test of completeness may be applied.First, the parties should know their rights and obligations. Second, they should know how to execute the decision under alternative contingencies. Third, there should be no need for further proceedings to dispose of the issues.Fourth, the case should be terminated by according the proper relief. The "proper relief" usually depends upon what the parties seek in their pleadings. It may declare their rights and duties, command the performance of positive prestations, or order them to abstain from specific acts. The disposition must also adjudicate costs. The foregoing parts need not always be discussed in sequence. But they should all be present and plainly i dentifiable in the decision. Depending on the writer’s character, genre and style, the language should be fresh and free-flowing, not necessarily stereotyped or in a fixed form; much less highfalutin, hackneyed and pretentious. At all times, however, the decision must be clear, concise, complete and correct.
The basic question posed in the SJS Petition -- WHETHER ENDORSEMENTS OF CANDIDACIES BY RELIGIOUS LEADERS IS UNCONSTITUTIONAL -- undoubtedly deserves serious consideration. As stated earlier, the Court deems this constitutional issue to be of paramount interest to the Filipino citizenry, for it concerns the governance of our country and its people. Thus, despite the obvious procedural transgressions by both SJS and the trial court, this Court still called for Oral Argument, so as not to leave any doubt that there might be room to entertain and dispose of the SJS Petition on the merits. Counsel for SJS has utterly failed, however, to convince the Court that there are enough factual and legal bases to resolve the paramount issue. On the other hand, the Office of the Solicitor General has sided with petitioner insofar as there are no facts supporting the SJS Petition and the assailed Decision. We reiterate that the said Petition failed to state directly the ultimate facts that it relied upon for its claim. During the Oral Argument, counsel for SJS candidly admitted that there were no factual allegations in its Petition for Declaratory Relief. Neither were there factual findings in the assailed Decision. At best, SJS merely asked the trial court to answer a hypothetical question. In effect, it merely sought an advisory opinion, the rendition of which was beyond the court’s constitutional mandate and jurisdiction. 99 Indeed, the assailed Decision was rendered in clear violation of the Constitution, because it made no findings of facts and final disposition. Hence, it is void and deemed legally inexistent. Consequently, there is nothing for this Court to review, affirm, reverse or even just modify. Regrettably, it is not legally possible for the Court to take up, on the merits, the paramount question involving a constitutional principle. It is a timehonored rule that "the constitutionality of a statute [or act] will be passed upon only if, and to the extent that, it is directly and necessarily i nvolved in a justiciable controversy and is essential to the protection of the rights of the parties concerned."100 WHEREFORE, the Petition for Review of Brother Mike Velarde is GRANTED . The assailed June 12, 2003 Decision and July 29, 2003
Order of the Regional Trial Court of Manila (Branch 49) are hereby DECLARED NULL A ND VOID and thus SET ASIDE . The SJS Petition for Declaratory Relief is DISMISSED for failure to state a cause of action. Let a copy of this Decision be furnished the Office of the Court Administrator to evaluate and recommend whether the trial judge may, after observing due process, be held administratively liable for rendering a decision violative of the Constitution, the Rules of Court and relevant circulars of this Court. No costs. SO ORDERED.
G.R. No. L-5101
November 28, 1953
ANGELES S. SANTOS, petitioner-appellant, vs. PATERIO AQUINO, as Municipal Mayor of Malabon, THE MUNICIPAL COUNCIL OF MALABON, A.A. OLIVEROS, as Municipal Treasurer of Malabon, Province of Rizal, respondents-appellees. Arsenio Paez Ireneo V. Bernardo for appellees.
for
appellant.
PADILLA, J .: This action purports to obtain a declaratory relief but the prayer of the petition seeks to have Ordinance No. 61, series of 1946, and Ordinance No. 10, series of 1947, of the Municipality of Malabon, Province of Rizal, declared null and void; to prevent the collection of surcharges and penalties for failure to pay the taxes imposed by the ordinances referred to, except for such failure from and after the taxpayer shall have been served with the notice of the effectivity of the ordinances; and to enjoin the respondents, their agents and all other persons acting for and in their behalf from enforcing the ordinances referred to and from making any collection thereunder. Further, petitioner prays for such other remedy and relief as may be deemed just and equitable and asks that costs be taxed against the respondents. The petitioner is the manager of a theater known as "Cine Concepcion," located and operated in the Municipality of Malabon, Province of Rizal, and the respondents are the Municipal Mayor, the Municipal Council and the Municipal Treasurer, of Malabon. The petitioner avers that Ordinance No. 61, series of 1946, adopted by the Municipal Council of Malabon on 8 December 1946, imposes a license tax of P1,000 per annum on the said theater in addition to a license tax on all tickets sold in theaters and cinemas in Malabon, pursuant to the Ordinance No. 58, series of 1946, adopted on the same date as Ordinance No. 61, the same series; that prior to 8 December 1946 the municipal license tax paid by the petitioner on "Cine Concepcion" was P180, pursuant to the Ordinance No. 9, series of 1945; that on 6 December 1947, the Municipal Council of Malabon adopted Ordinance No. 10, series of 1947, imposing a graduated municipal license tax on theaters and cinematographs from P200 to P9,000 per annum; that the ordinance was submitted for approval to the Department of Finance, which reduced the rate of taxes provided therein, and the ordinance with the reduced rate of taxes was approved on 3 November 1948; that notice of reduction of the tax rate and approval by the Department of Finance of said graduated municipal license tax provided for in said Ordinance No. 10,
as reduced, was served on the petitioner on 12 February 1949 when the respondent Municipal Treasurer presented a bill for collection thereof; that Ordinance No. 61, series of 1946, is ultra vires and repugnant to the provisions of the Constitution on taxation; that its approval was not in accordance with law; that Ordinance No. 10, series of 1947, is all null and void, because the Department of Finance that approved it acted in excess and against the powers granted it by law, and is unjust, oppressive and confiscatory; and that the adoption of both ordinances was the result of prosecution of the petitioner by the respondents because from 20 July 1946 to 8 December 1947, or within a period of less than one and a half years, the Municipal Council of Malabon adopted four ordinances increasing the taxes on cinematographs and theaters and imposing a penalty of 20 per cent surcharges for late payment. A motion to dismiss was filed by the Assistant Provincial Fiscal of Rizal, but upon suggestion of the Court at the hearing thereof, the respondents were prevailed upon to file their answer. In their answer the respondents allege that both ordinances adopted by the Municipal Council of Malabon are notultra vires, the same not being under any of the exceptions provided for in section 3 of Commonwealth Act No. 472; that the ordinances were adopted pursuant to the policy enunciated by the Secretary of the Interior in a circular issued on 20 June 1946 which in substance suggested and urged the municipal councils to increase their revenues and not to rely on the National Government which was not in a position to render any help and to make such increase dependent upon the taxpayer's ability to pay; that both ordinances assailed by the petitioner had been submitted to, and approved by, the Department of Finance, as required by section 4 of Commonwealth Act No. 472, and took effect on 1 January 1947 and 1 January 1948, respectively; that the petitioner had filed a protest with the Secretary of Finance against such increase of taxes, as fixed by the municipal ordinances in question but the Department of Finance although reducing the amount of taxes imposed in Ordinance No. 10, series of 1947, and changing the date of effectivity of both ordinances, upheld the legality thereof; and that the petitioner brought this action for declaratory relief with the evident purpose of evading payment of the unpaid balance of taxes due from the "Cine Concepcion." By way of special defense the respondents allege that the petition does not state facts sufficient to constitute a cause of action; that the Court has no jurisdiction over the subject matter of the petition for declaratory relief; that the petitioner should have paid under protests the taxes imposed by the ordinances in question on "Cine Concepcion" and after payment thereof should bring an action under section 1579 of the Revised Administrative Code; that this being an action for declaratory relief, the Provincial Fiscal of Rizal should have been notified thereof but the petitioner failed to do so;
that the petition does not join all the necessary parties and, therefore, a judgment rendered in the case will not terminate the uncertainty or the controversy that is sought to be settled and determined. After hearing the Court rendered judgment holding that the ordinances in question are valid and constitutional and dismissing the petition with costs against the petitioner. The latter has appealed. This is not an action for declaratory relief, because the terms of the ordinances assailed are not ambiguous or of doubtful meaning which require a construction thereof by the Court. And granting that the validity or legality of an ordinance may be drawn in question in an action for declaratory relief, such relief must be asked before a violation of the ordinance be committed. 1 When this action was brought on 12 May 1949, payment of the municipal license taxes imposed by both ordinances, the tax rate of the last having been reduced by the Department of Finance, was already due, and the prayer of the petition shows that the petitioner had not paid them. In those circumstances the petitioner cannot bring an action for declaratory relief. Angeles S. Santos, the petitioner, does not aver nor does he testify that he is the owner or part-owner of "Cine-Concepcion." He alleges that he is only the manager thereof. For that reason he is not an interested party. He has no interest in the theater known as "Cine Concepcion" which may be affected by the municipal ordinances in question and for that reason he is not entitled to bring this action either for declaratory relief or for prohibition, which apparently is the purpose of the action as may be gleaned from the prayer of the petition. The rule that actions must be brought in the name of the real party in interest2 applies to actions brought under Rule 66 for declaratory relief.3 The fact that he is the manager of the theater does not make him a real party in interest.4 Nevertheless, laying aside these procedural defects, we are of the opinion and so hold that under Commonwealth Act No. 472 the Municipal Council of Malabon is authorized and empowered to adopt the ordinances in question, and there being no showing, as the evidence does not show, that the rate of the municipal taxes therein provided is excessive, unjust, oppressive and confiscatory, their validity and legality must be upheld. The rate of the taxes in both ordinances, to wit: P1,000 a year for "Class A Cinematographs having orchestra, balcony and loge seats" in Ordinance No. 61, series of 1946, 5 and P2,000 for each theater or cinematograph with gross annual receipts amounting to P130,000 or more in Ordinance No. 10, series of 1947, 6 under which the "Cine Concepcion" falls, is not excessive but fair and just. It is far from being oppressive and confiscatory. Pursuant to said Commonwealth Act if the increase of the municipal taxes
is more than 50 per cent over the previous ones already in existence, the Municipal Council adopting such increase must submit it for approval to the Department of Finance which, although it cannot increase it, may reduce it and may approve it as reduced, or may disapprove it. It is contended that as only municipal councils are authorized by law to adopt ordinances, after the reduction by the Department of Finance of the tax rate imposed in Ordinance No. 10, series of 1947, duly adopted by the Municipal Council of Malabon, the latter should adopt another ordinance accepting or fixing the rate tax as reduced by the Department of Finance. The contention is without merit, because the rate of taxes imposed in theaters or cinematographs in Ordinance No. 10, series of 1947, was the only one reduced by the Department of Finance and the reduction was for the benefit of the taxpayer as it was very much lower than the rate fixed by the Municipal Council. The authority and discretion to fix the amount of the tax was exercised by the Municipal Council of Malabon when it fixed the same at P9,000 a year. Certainly, the Municipal Council of Malabon that fixed the tax at P9,000 a year also approved the tax at P2,000 a year, this being very much less than that fixed in the ordinance. The power and discretion exercised by the Municipal Council of Malabon when it fixed the tax at P9,000 a year must be deemed to have been exercised also by it when the Department of Finance reduced it to P2,000 a year, for the greater includes the lesser. The adoption of another ordinance fixing the tax at P2,000 a year would be an idle ceremony and waste of time. Moreover, it must be borne in mind that municipal councils are not constitutional bodies but creatures of the Congress. The latter may even abolish or replace them with other government instrumentalities. Commonwealth Act No. 472 grants to the Department of Finance the authority to disapprove, implied in the power to approve, an ordinance imposing a tax which is more than 50 per cent of the existing tax, or to reduce it, also implied in the same power. This, of course, is to forestall abuse of power by the municipal councils. If the Congress has granted to the Department of Finance the power to reduce such tax, implied in the power to approve or disapprove, there seems to be no cogent reason for requiring the municipal council concerned to adopt another ordinance fixing the tax as reduced by the Department of Finance. Therefore, the action of the Department of Finance in approving Ordinance No. 10, series of 1947, at a reduced rate, is not excess of the powers granted it by law. The evidence does not show that the adoption of the ordinances in question by the Municipal Council of Malabon was the result of persecution of the petitioner. The judgment appealed from is affirmed, with costs against the appellant.
G.R. No. L-11357
May 31, 1962
FELIPE B. OLLADA, etc., petitioner-appellant, vs. CENTRAL BANK OF THE PHILIPPINES, respondent-appellee. Antonio V. Sanchez as amicus curiae. Felipe B. Ollada for and in his own behalf as petitioner-appellant. Nat. M. Balboa for respondent-appellee. DIZON, J .: Felipe B. Ollada is a certified public accountant, having passed the examination given by the Board of Accountancy, and is duly qualified to practice his profession. On July 22, 1952, his name was placed in the rolls of certified public accountants authorized and accredited to practice accountancy in the office of the Central Bank of the Philippines. In December, 1955, by reason of a requirement of the Import-Export Department of said bank that CPAs submit to an accreditation under oath before they could certify financial statements of their clients applying for import dollar allocations with its office, Ollada's previous accreditation was nullified. Pursuant to the new requirement, the Import-Export Department of the Central Bank issued APPLICATION FOR ACCREDITATION OF CERTIFIED PUBLIC ACCOUNTANTS (CB-IED Form No. 5) and ACCREDITATION CARD FOR CERTIFIED PUBLIC ACCOUNTANTS (CB-IED, Form No. 6) for CPAs to accomplish under oath. Assailing said accreditation requirement on the ground that it was (a) an unlawful invasion of the jurisdiction of the Board of Accountancy, (b) in excess of the powers of the Central Bank and (c) unconstitutional in that it unlawfully restrained the legitimate pursuit of one's trade, Ollada, for himself and allegedly on behalf of numerous other CPAs, filed a petition for Declaratory Relief in the Court of First Instance of Manila to nullify said accreditation requirement. On April 16, 1956 the Central Bank filed a motion to dismiss the petition for Declaratory Relief for lack of cause of action. Its main contention was that the Central Bank has the responsibility of administering the Monetary Banking System of the Republic and is authorized to prepare and issue, through its Monetary Board, rules and regulations to make effective the discharge of such responsibility; that the accreditation requirement alleged
in the petition was issued in the exercise of such power and authority; that the purpose of such requirement is not to regulate the practice of accountancy in the Philippines but only the manner in which certified public accountants should transact business with the Central Bank. On May 3, 1956, petitioner Ollada applied for a writ of preliminary injunction to restrain the respondent Central Bank of the Philippines from enforcing the accreditation requirement aforesaid until final adjudication of the case. In a memorandum submitted by said respondent opposing the issuance of the writ, it manifested that it was willing to delete paragraph 13 from its CB-IED Form No. 5 (Application for ac creditation of certified public accountants), which required CPAs to answer the query whether they agreed, if accredited with the Import-Export Department, Central Bank of the Philippines, to follow strictly the rules and regulations promulgated by the Philippine Institute of Accountants and, if not, to state their reasons therefor, and that it was also willing to modify paragraph 14 of the same form to read as follows: 14. Do you agree, if accredited with the Import-Export Department, to follow strictly the rules and regulations of the Central Bank of the Philippines concerning the practice of your profession as CPA, with reference to its importing licensing functions which may hereinafter be promulgated and which are not inconsistent with the rules and regulations promulgated by the Board of Accountancy of the Philippines, and to give written notice(s) of any change(s) in your professional status as practitioner, or the name and style under which you practice your profession as Certified Public Accountant(s)? . . . If not, state your reasons: . . . On May 22, 1956 the trial court required respondent to submit within ten days from notice, proof that it had deleted paragraph 13 and modified paragraph 14 of its CB-IED Form No. 5, as manifested in its memorandum, otherwise the writ of preliminary injunction prayed for by petitioner would be granted. Having complied with said order by submitting CB-ID Form No. 5 (formerly CB-IED Form No. 5) showing that paragraph 13 of CB-IED Form No. 5 had been deleted, and paragraph 14 thereof had been modified, the court, on June 27, 1956, denied the petition for preliminary injunction. On June 29, 1956, petitioner filed a motion for reconsideration alleging that, despite the deletion of paragraph 13 from respondent's CBIED Form No. 5, it was still enforcing the rules and regulations of the Philippine Institute of Accountants in its CB-IED Form No. 6 (ACCREDITATION CARD FOR CERTIFIED PUBLIC ACCOUNTANTS) which was still a part of the questioned accreditation requirement. All this notwithstanding, however, on July 5, 1956 petitioner, in the interests of its clients, filed his application for accreditation with the CB under protest. 1äwphï1.ñët
On July 7, 1956, the court reconsidered its previous order and issued another granting the petition for the writ of preliminary injunction upon the filing of a bond in the sum of P2,000.00 on the ground that CPAs applying for accreditation with respondent were still required to execute under oath CB-IED Form No. 6 (Accreditation card for certified public accountants) to be governed by the rules and regulations of the Philippine Institute of Accountants. In a motion for the reconsideration of this last order, respondent stated that CB-IED Form No. 6 of its Import-Export Department had been modified by CB-ID Form No. 6 wherein the requirement that the applicant should sign a statement under oath has been eliminated, and that, upon accreditation, a CPA would be governed by the rules and regulations of the Central Bank and not by those of the Philippine Institute of Accountants. The modified form (CB-ID Form No. 6) read as follows: I/We hereby agree to be governed by your rules and regulations relating to the practice of my/our profession as Certified Public Accountant(s), particularly Memorandum to Accredited CPAs No. 1 of the Central Bank of the Philippines dated June 15, 1956. Please recognize my/our certification(s) of exhibit(s), of statement(s), schedule(s), or other form(s) of accountancy work issued in behalf of my/our clients under the following signature(s). Consequently, on July 12, 1956, the court set aside its order of July 7, 1956 granting the writ of preliminary injunction. Finally, on July 31, 1956, the lower court, resolving the motion to dismiss filed by respondent, dismissed the complaint. The order to that effect says, in part, the following: The only issue in this case is whether or not the respondent Central Bank of the Philippines has the authority under its charter to require petitioner and all other certified public accountants to accredit themselves before they can transact business with respondent's Import and Export Department. This Court is of the opinion that the respondent is not barred from promulgating internal rules and regulations necessary to carry out its purpose pursuant to the charter creating it provided, however, that such rules and regulations are not contrary to law, public morals or public policy. The only objectionable features of respondent's aforementioned requirement have already been eliminated by said respondent having deleted from its CB-IED Form No. 5, known as Application
for Accreditation of Certified Public Accountants (Annex B of petitioner's Petition), paragraph 13 and modified paragraph 14 thereof, as well as by modifying CB-IED Form No. 6 known as Accreditation Card for Certified Public Accountants (Annex C of Petitioner's Petition). It appears, therefore, that after respondent had eliminated said objectionable features, the petition for declaratory relief has become groundless and should be dismissed. Upon motion of petitioner, We issued a resolution dated November 5, 1956 granting a writ of preliminary injunction restraining respondent from requiring CPAs to comply with the accreditation requirement of its ImportExport Department, on the ground that there was nothing in the record showing that the same was issued by its Monetary Board or by someone else duly authorized by the latter. The main issue involved in this appeal is whether upon the facts alleged in the petition for Declaratory Relief and others elicited from the parties and made of record by them prior to the issuance of the order appealed from, this case was properly dismissed. The Monetary Board of the Central Bank has authority to prepare and issue such rules and regulations it may consider necessary for the effective discharge of the responsibilities and exercise of the powers assigned to it and to the Central Bank under the provisions of Section 1 (a), Republic Act No. 265. The Governor of the Central Bank is also authorized to delegate his power to represent the Bank "to other officers of the Bank upon his own responsibility" (See. 17[d], Rep. Act 265). To implement its authority to temporarily suspend or restrict sales of exchange by the Central Bank and subject all transactions in gold and foreign exchange to license by the latter (Sec. 74, Rep. Act 265), the Monetary Board, approved Resolution No. 1528, Minutes No. 80 dated August 30, 1955 authorizing the Import-Export Department to revise quota allocations and to prepare revised procedures for the determination of violations of Central Bank Import-Export regulations. Among the revised procedures adopted by the aforesaid Department was its accreditation system, the purpose of which was to correct certain irregularities committed by some CPAs in their certification of the financial statements of their clients applying for dollar allocations. As held by the lower court, "the only objectionable feature of respondent's aforementioned requirement had already been eliminated . . . from its CB-
IED Form No. 5" and that CB-IED form No. 6 had also been modified. For this reason, the court held that "the petition for declaratory relief has become groundless" and, as a result, ordered its dismissal. Without deciding the question of whether the petition under consideration has, in reality "become groundless", we believe that, upon the facts appearing of record, said petition was correctly dismissed. As stated heretofore, in connection with the motion to dismiss filed by respondent, petitioner filled a written opposition in which he alleged that his petition has sufficiently alleged ultimate facts which violated his right as a duly qualified and accredited Certified Public Accountant by the Board of Accountancy (which is the only Government body with absolute powers to regulate the practice of CPAs), and in addition to such allegations, he has also alleged that by virtue of the violation of his right and that of numerous CPAs, he has suffered serious injury in that the questioned requirement which is collaterally attacked by this action (in the honest belief of the petitioner that the same) is an unlawful restraint of the fee pursuit and practice of petitioner's profession as a CPA; and also that the action of the respondent Central Bank of the Philippines complained of, is also an unlawful invasion into the exclusive jurisdiction of the Board of Accountancy as the sole body vested by our laws to lay down rules and regulations for the practice of public accountancy in the Philippines. . . . In order to dismiss an action under the aforecited ground, Sutherland, Code of Pleadings, Practice and Form, 167, has laid down the essential test which should serve as the controlling guide in determining whether a petition states a cause of action, to wit: 1. Does the complaint show the plaintiff suffered an injury? 2. Is it an injury the law recognizes as a wrong? 3. Is the defendant liable for the alleged wrong? 4. If the defendant is liable, to what extent is he liable and what will be the legal remedy from such injury? (Sutherland, Code of Pleadings, supra.)
It is clear from the allegations of the petition that the petitioner has sufficiently stated facts to satisfy the foregoing requisites of a pleading in order that petitioner's action should be given due course by this Court . Petitioner submits that the respondent's requirement complained of (CB-IED Forms Nos. 5 and 6) is an act of constituting a violation of the Constitution and also a violation of the petitioners right to freely practice his profession anywhere and in any government office in the Philippines .... It is undisputed that the only body that can regulate the practice of accountancy in the Philippines is the Board of Accountancy. The action thus of the respondent in requiring the accreditation of CPAs before they can practice with the Central Bank of the Philippines is an unlawful invasion into the exclusive jurisdiction of the said Board of Accountancy.Why was petitioner's right as a CPA violated by the respondent? Because the respondent's placing of a ban to CPAs including the petitioner with respect to certification of financial statements of their clients applying for dollar(s) allocation in the Central Bank of the Philippines has resulted in the unlawful restraint in the practice of CPAs in the office of the Central Bank of the Philippines . (Emphasis supplied.) (Rec. on Appeal, pp. 17, 18-20.) Again, in his brief petitioner reiterates the same view in the following language: On April 20, 1956, petitioner-appellant filed his opposition to respondent's motion to dismiss on the simple and fundamental ground that, from its face, the complaint's allegations of facts make clear showing of petitioner's rights having been violated by respondent, and that the (petitioner) has suffered serious injury therefrom that such injury is recognized by law as a wrong, and that the respondent is liable therefrom to a great extent. (Emphasis supplied .) (Petitioner's brief, p. 5.) Petitioner commenced this action as, and clearly intended it to be one for Declaratory Relief under the provisions of Rule 66 of the Rules of Court. On the question of when a special civil action of this nature would prosper, we have already held that the complaint for declaratory relief will not prosper if filed after a contract, statute or right has been breached or violated. In the present case such is precisely the situation arising from the facts alleged in the petition for declaratory relief. As vigorously claimed by petitioner himself, respondent had already invaded or violated his right and caused him injury — all these giving him a complete cause of action enforceable in an appropriate ordinary civil action or proceeding. The
dismissal of the action was, therefore, proper in the light of our ruling in De Borja vs. Villadolid , 47 O.G. (5) p. 2315, and Samson vs. Andal , G.R. No. L-3439, July 31, 1951, where we held that an action for declaratory relief should be filed before there has been a breach of a contract, statutes or right, and that it is sufficient to bar such action, that there had been a breach — which would constitute actionable violation. The rule is that an action for Declaratory Relief is proper only i f adequate relief is not available through the means of other existing forms of action or proceeding (1 C.J.S. 1027-1028). WHEREFORE, the order of dismissal appealed from is hereby affirmed, without prejudice to the aggrieved party seeking relief in another appropriate action. The writ of preliminary injunction issued by Us on November 5, 1956 is hereby set aside, and the motion for contempt filed by petitioner on September 30, 1957 is denied. With costs against appellant.
G.R. No. L-58340 July 16, 1991 KAWASAKI PORT SERVICE CORPORATION, NAIKAI SHIPPING CO. LTD., NAIKAI TUG BOAT SERVICE CO., THE PORT SERVICE CORPORATION, LICENSED LAND SEA PILOTS ASSOCIATION, HAYAKOMA UNYU K.K., TOKYO KISEN COMPANY, LTD., OMORI KAISOTEN, LTD., TOHOKU UNYU CO., LTD. AND SEITETSU UNYU CO., LTD., petitioners, vs. THE HON. AUGUSTO M. AMORES, Judge of Br. XXIV, Court of First Instance of Manila, and C.F. SHARP & CO., INC., respondents. Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioners. Chuidian Law Office for private respondent. BIDIN, J .: p This is a petition for certiorari seeking to set aside the orders of the then Court of First Instance of Manila, *Branch XXIV in Civil Case No. 132077: (a) dated July 13, 1981 denying the special appearances of petitioners as defendants in said case to question the court's jurisdiction over the persons of the defendants and (b) dated September 22, 1981, denying the motion for reconsideration of said order. The antecedents of this case are as follows: On May 7, 1980, the private respondent C.F. Sharp & Co., Inc. filed a complaint for injunction and/or declaratory relief in the then Court of First Instance of Manila against seventy-nine (79) Japanese corporations as defendants, among which are the petitioners herein. Said complaint was docketed as Civil Case No. 132077. The complaint alleges, among others, that the plaintiff is a corporation organized and existing under the laws of the Philippines; that there is another corporation organized under the law of Japan with the corporate name C.F. Sharp Kabushiki Kaisha; that the plaintiff and C.F. Sharp Kabushiki Kaisha are in all respects separate and distinct from each other; that C.F. Sharp Kabushiki Kaisha appears to have incurred obligations to several creditors amongst which are defendants, also foreign corporations organized and existing under the laws of Japan; that due to financial difficulties, C.F. Sharp Kabushiki Kaisha failed and/or refused to pay its creditors; and that in view of the failure and/or refusal of said C.F. Sharp Kabushiki Kaisha to pay its alleged obligations to defendants, the latter have been demanding or have been attempting to demand from C.F. Sharp & Co., Inc., the payment of the alleged
obligations to them of C.F. Sharp Kabushiki Kaisha, notwithstanding that C.F. Sharp & Co., Inc. is a corporation separate and distinct from that of C.F. Sharp Kabushiki Kaisha and that the former had no participation whatsoever or liability in connection with the transactions between the latter and the defendants. As alleged in the complaint, the private respondent prayed for injunctive relief against the petitioners' demand from the private respondent for the payment of C.F. Sharp Kabushiki Kaisha's liabilities to the petitioners. As an alternative to injunction, the private respondent prayed that a judicial declaration be made that, as a separate and independent corporation, it is not liable for the obligations and liabilities of C.F. Sharp Kabushiki Kaisha. Since the defendants are non-residents, without business addresses in the Philippines but in Japan, the private respondent prayed for leave of court to effect extraterritorial service of summons. On June 11, 1980, the respondent judge issued an order authorizing the private respondent to effect extraterritorial service of summons on defendants therein. Subsequently, private respondent filed an urgent ex-parte motion dated June 23, 1980 for Extraterritorial Service of Summons Upon Defendants by registered mail with return cards pursuant to Section 17 of Rule 14 of the Rules of Court. Acting on said motion, the respondent judge i ssued an order dated June 30, 1980 granting the motion and authorizing extraterritorial service of summons upon defendants to be effected by registered mail with return cards. On March 11, 1981, five of the petitioners, Kawasaki Port Service Corporation, Naikai Shipping Co., Ltd., Naikai Tug Boat Service Co., Ltd., The Port Service Corporation and Licensed Land Sea Pilots Association filed their "Special Appearance to Question Jurisdiction of This Honorable Court Over Persons of Defendants" contending that the lower court does not and cannot acquire jurisdiction over the persons of defendants on the grounds that private respondent's action does not refer to its personal status; that the action does not have for subject matter property contemplated in Section 17 of Rule 14 of the Rules of Court, that the action does not pray that defendants be excluded from any interest or property in the Philippines; that no property of the defendants has been attached; that
the action is in personam; and that the action does not fall within any of the four cases mentioned in Section 17, Rule 14 of the Rules of Court.
cannot be availed of because Section 17 of Rule 14 authorized this mode of service only in actions in rem or quasi in rem.
On March 17, 1981, another three of herein petitioners, Hayakoma Unyu K.K., Tokyo Kisen Company, Ltd. and Omori Kaisoten, Ltd. also filed their special appearance adopting the same arguments as that of the first five.
For its part, the private respondent countered that (1) the action refers to its status because the basic issue presented to the lower court for determination is its status as a corporation which has a personality that is separate, distinct and independent from the personality of another corporation, i .e., C.F. Sharp Kabushiki Kaisha of Japan; (2) under Section 17 of Rule 14, the subject matter or property involved in the action does not have to belong to the defendants. The provisions of said section contemplate of a situation where the property belongs to the plaintiff but the defendant has a claim over said property, whether that claim be actual or contingent; (3) the prayer of the plaintiff that the defendants be excluded from any interest in the properties of the plaintiff within the Philippines has the effect of excluding the defendants from the properties of the plaintiff in the Philippines for the purpose of answering for the debts of C.F. Sharp Kabushiki Kaisha of Japan to the defendants in accordance with Section 17 of Rule 14; and (4) the action before the lower court is an action quasi in rem as the remedies raised in the complaint affect the personal status of the plaintiff as a separate, distinct and independent corporation and relates to the properties of the plaintiff in the Philippines over which the petitioners have or claim an interest, actual or contingent.
On April 28, 1981, the two other petitioners, Tohoku Unyu Co., Ltd. and Seitetsu Unyu Co., Ltd., filed their "Special Appearance to Question the Jurisdiction of the Honorable Court" over their persons adopting in toto as theirs the "Special Appearance" dated March 11, 1981 of Kawasaki Port Service. On July 13, 1981, the respondent Court issued its order denying said special appearances. The motion for reconsideration of said order filed by the petitioners was also denied on September 22, 1981. Hence, the present petition. After the required pleadings were filed, the First Division of this Court, in the resolution of April 14, 1982, gave due course to the petition and required both parties to submit simultaneous memoranda within thirty (30) days from notice. Both parties complied by submitting the required memoranda. The main issue in this case is whether or not private respondent's complaint for injunction and/or declaratory relief is within the purview of the provisions of Section 17, Rule 14 of the Rules of Court. The petitioners contend that the respondent judge acted contrary to the provisions of Section 17 of Rule 14 for the following reasons: (1) private respondent's prayer for injunction, as a consequence of its alleged nonliability to the petitioners for debts of C.F. Sharp Kabushiki Kaisha of Japan, conclusively establishes that private respondent's cause of action does not affect its status; (2) the respondent court cannot take jurisdiction of actions against the petitioners as they are non-residents and own no property within the state; (3) the petitioners have not as yet claimed a lien or interest in the property within the Philippines at the time the action was filed which is a requirement under Section 17 of Rule 14; (4) extraterritorial service on a non-resident defendant is authorized, among others, when the subject of the action is property within the Philippines in which the relief demanded consists in excluding defendant from any interest therein; and (5) inasmuch as the reliefs prayed for by the private respondent in the complaint are in personam, service by registered mail
The petition is impressed with merit. Section 17, Rule 14 of the Rules of Court provides: Section 17. Extraterritorial service. — When the defendant does not reside and is not found in the Philippines and the action affects the personal status of the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under section 7; or by publication in a newspaper of general circulation in such places and for such times as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time,
