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[G.R. No. L-9657. November 29, 1956.] LEOPOLDO T. BACANI and MATEO A. MATOTO, Plaintiffs-Appellees, vs. NATIONAL COCONUT CORPORATION, ET AL., Defendants, NATIONAL COCONUT CORPORATION and BOARD OF LIQUIDATORS, Defendants-Appellants.

DECISION BAUTISTA ANGELO, J.: Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First Instance of Manila. During the pendency of Civil Case No. 2293 of said court, entitled Francisco Sycip vs. National Coconut Corporation, Assistant Corporate Counsel Federico Alikpala, counsel for Defendant, requested said stenographers for copies of the transcript of the stenographic notes taken by them during the hearing. Plaintiffs complied with the request by delivering to Counsel Alikpala the needed transcript containing 714 pages and thereafter submitted to him their bills for the payment of their fees. The National Coconut Corporation paid the amount of P564 to Leopoldo T. Bacani and P150 to Mateo A. Matoto for said transcript at the rate of P1 per page. Upon inspecting the books of this corporation, the Auditor General disallowed the payment of these fees and sought the recovery of the amounts paid. On January 19, 1953, the Auditor General required the Plaintiffs to reimburse said amounts on the strength of a circular of the Department of Justice wherein the opinion was expressed that the National Coconut Corporation, being a government entity, was exempt from the payment of the fees in question. On February 6, 1954, the Auditor General issued an order directing the Cashier of the Department of Justice to deduct from the salary of Leopoldo T. Bacani the amount of P25 every payday and from the salary of Mateo A. Matoto the amount of P10 every payday beginning March 30, 1954. To prevent deduction of these fees from their salaries and secure a judicial ruling that the National Coconut Corporation is not a government entity within the purview of section 16, Rule 130 of the Rules of Court, this action was instituted in the Court of First Instance of Manila. Defendants set up as a defense that the National Coconut Corporation is a government entity within the purview of section 2 of the Revised Administrative Code of 1917 and, hence, it is exempt from paying the stenographers’ fees under Rule 130 of the Rules of Court. After trial, the court found for the Plaintiffs declaring (1) “that Defendant National Coconut Corporation is not a government entity within the purview of section 16, Rule 130 of the Rules of Court; (2) that the payments already made by said Defendant to Plaintiffs herein and received by the latter from the former in the total amount of P714, for copies of the stenographic transcripts in question, are valid, just and legal; and (3) that Plaintiffs are under no obligation whatsoever to make a refund of these payments already received by them.” This is an appeal from said decision. chan roble svirtualawlibrary

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Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is exempt from paying the legal fees provided for therein, and among these fees are those which stenographers may charge for the transcript of notes taken by them that may be requested by any interested person (section 8). The fees in question are for the transcript of notes taken during the hearing of a case in which the National Coconut Corporation is interested, and the transcript was requested by its assistant corporate counsel for the use of said corporation. On the other hand, section 2 of the Revised Administrative Code defines the scope of the term “Government of the Republic of the Philippines” as follows: chanroble svirtuallawlibrary

“‘The Government of the Philippine Islands’ is a term which refers to the corporate governmental entity through which the functions of government are exercised throughout the Philippine Islands, including, save as the contrary appears from the context, the various arms through which political authority is made effective in said Islands, whether pertaining to the central Government or to the provincial or municipal branches or other form of local government.” The question now to be determined is whether the National Coconut Corporation may be considered as included in the term “Government of the Republic of the Philippines” for the purposes of the exemption of the legal fees provided for in Rule 130 of the Rules of Court. As may be noted, the term “Government of the Republic of the Philippines” refers to a government entity through which the functions of government are exercised, including the various arms through which political authority is made effective in the Philippines, whether pertaining to the central government or to the provincial or municipal branches or other form of local government. This requires a little digression on the nature and functions of our government as instituted in our Constitution. To begin with, we state that the term “Government” may be defined as “that institution or aggregate of institutions by which an independent society makes and carries out those rules of action which are necessary to enable men to live in a social state, or which are imposed upon the people forming that society by those who possess the power or authority of prescribing them” (U.S. vs. Dorr, 2 Phil., 332). This institution, when referring to the national government, has reference to what our Constitution has established composed of three great departments, the legislative, executive, and the judicial, through which the powers and functions of government are exercised. These functions are twofold: constitute and ministrant. The former are those which constitute the very bonds of society and are compulsory in nature; the latter are those that are undertaken only by way of advancing the general interests of society, and are merely optional. President Wilson enumerates the constituent functions as follows: chanroblesvirtuallawlibrary

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“‘(1) The keeping of order and providing for the protection of persons and property from violence and robbery. ‘(2) The fixing of the legal relations between man and wife and between parents and children. ‘(3) The regulation of the holding, transmission, and interchange of property, and the determination of its liabilities for debt or for crime. ‘(4) The determination of contract rights between individuals. ‘(5) The definition and punishment of crime. ‘(6) The administration of justice in civil cases. ‘(7) The determination of the political duties, privileges, and relations of citizens. ‘(8) Dealings of the state with foreign powers: the preservation of the state from external danger or encroachment and the advancement of its international interests.’“ (Malcolm, The Government of the Philippine Islands, p. 19.) chanroblesvirtuallawlibrary

The most important of the ministrant functions are: public works, public education, public charity, health and safety regulations, and regulations of trade and industry. The principles deter mining whether or not a government shall exercise certain of these optional functions are: (1) that a government should do for the public welfare those things which private capital would not naturally undertake and (2) that a government should do these things which by its very nature it is better equipped to administer for the public welfare than is any private individual or group of individuals. (Malcolm, The Government of the Philippine Islands, pp. 19-20.) chanrobl esvirtuallawlibrary

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From the above we may infer that, strictly speaking, there are functions which our government is required to exercise to promote its objectives as expressed in our Constitution and which are exercised by it as an attribute of sovereignty, and those which it may exercise to promote merely the welfare, progress and prosperity of the people. To this latter class belongs the organization of those corporations owned or controlled by the government to promote certain aspects of the economic life of our people such as the National Coconut Corporation. These are what we call government-owned or controlled corporations which may take on the form of a private enterprise or one organized with powers and formal characteristics of a private corporations under the Corporation Law. The question that now arises is: Does the fact that these corporation perform certain functions of government make them a part of the Government of the Philippines? chanroble svirtuallawlibrary

The answer is simple: they do not acquire that status for the simple reason that they do not come under the classification of municipal or public corporation. Take for instance the National Coconut Corporation. While it was organized with the purpose of “adjusting the coconut industry to a position independent of trade preferences in the United States” and of providing “Facilities for the better curing of copra products and the proper utilization of coconut by-products”, a function which our government has chosen to exercise to promote the coconut industry, however, it was given a corporate power separate and distinct from our government, for it was made subject to the provisions of our Corporation Law in so far as its corporate existence and the powers that it may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in the same manner as any other private corporations, and in this sense it is an entity different from our government. As this Court has aptly said, “The mere fact that the Government happens to be a majority stockholder does not make it a public corporation” (National Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-587). “By becoming a stockholder in the National Coal Company, the Government divested itself of its sovereign character so far as respects the transactions of the corporation . Unlike the Government, the corporation may be sued without its consent, and is subject to taxation. Yet the National Coal Company remains an agency or instrumentality of government.” (Government of the Philippine Islands vs. Springer, 50 Phil., 288.) chanroble svirtuallawlibrary

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To recapitulate, we may mention that the term “Government of the Republic of the Philippines” used in section 2 of the Revised Administrative Code refers only to that government entity through which the functions of the government are exercised as an attribute of sovereignty, and in this are included those arms through which political authority is made effective whether they be provincial, municipal or other form of local government. These are what we call municipal corporations. They do not include government entities which are given a corporate personality separate and distinct from the government and which are governed by the Corporation Law. Their powers, duties and liabilities have to be determined in the light of that law and of their corporate charters. They do not therefore come within the exemption clause prescribed in section 16, Rule 130 of our Rules of Court. “Public corporations are those formed or organized for the government of a portion of the State.” (Section 3, Republic Act No. 1459, Corporation Law). “‘The generally accepted definition of a municipal corporation would only include organized cities and towns, and like organizations, with political and legislative powers for the local, civil government and police regulations of the inhabitants of the particular district included in the boundaries of the corporation.’ Heller vs. Stremmel, 52 Mo. 309, 312.” “In its more general sense the phrase ‘municipal corporation’ may include both towns and counties, and other public corporations created by government for political purposes. In its more common and limited signification, it embraces only incorporated villages, towns and cities. Dunn vs. Court of County Revenues, 85 Ala. 144, 146, 4 So. 661.” (McQuillin, Municipal Corporations, 2nd ed., Vol. 1, p. 385.)

“We may, therefore, define a municipal corporation in its historical and strict sense to be the incorporation, by the authority of the government, of the inhabitants of a particular place or district, and authorizing them in their corporate capacity to exercise subordinate specified powers of legislation and regulation with respect to their local and internal concerns. This power of local government is the distinctive purpose and the distinguishing feature of a municipal corporation proper.” (Dillon, Municipal Corporations, 5th ed., Vol. I, p. 59.) It is true that under section 8, Rule 130, stenographers may only charge as fees P0.30 for each page of transcript of not less than 200 words before the appeal is taken and P0.15 for each page after the filing of the appeal, but in this case the National Coconut Corporation has agreed and in fact has paid P1.00 per page for the services rendered by the Plaintiffs and has not raised any objection to the amount paid until its propriety was disputed by the Auditor General. The payment of the fees in question became therefore contractual and as such is valid even if it goes beyond the limit prescribed in section 8, Rule 130 of the Rules of Court. As regards the question of procedure raised by Appellants, suffice it to say that the same is insubstantial, considering that this case refers not to a money claim disapproved by the Auditor General but to an action of prohibition the purpose of which is to restrain the officials concerned from deducting from Plaintiffs’ salaries the amount paid to them as stenographers’ fees. This case does not come under section 1, Rule 45 of the Rules of Court relative to appeals from a decision of the Auditor General. Wherefore, the decision appealed from is affirmed, without pronouncement as to costs. Paras, C.J., Bengzon, Padilla, Montemayor, Labrador, Concepcion, Reyes, J. B. L., Endencia and Felix, JJ., concur.

G.R. No. L-45710 October 3, 1985 CENTRAL BANK OF THE PHILIPPINES and ACTING DIRECTOR ANTONIO T. CASTRO, JR. OF THE DEPARTMENT OF COMMERCIAL AND SAVINGS BANK, in his capacity as statutory receiver of Island Savings Bank, petitioners, vs. THE HONORABLE COURT OF APPEALS and SULPICIO M. TOLENTINO, respondents. I.B. Regalado, Jr., Fabian S. Lombos and Marino E. Eslao for petitioners. Antonio R. Tupaz for private respondent. MAKASIAR, CJ.: This is a petition for review on certiorari to set aside as null and void the decision of the Court of Appeals, in C.A.-G.R. No. 52253-R dated February 11, 1977, modifying the decision dated February 15, 1972 of the Court of First Instance of Agusan, which dismissed the petition of respondent Sulpicio M. Tolentino for injunction, specific performance or rescission, and damages with preliminary injunction. On April 28, 1965, Island Savings Bank, upon favorable recommendation of its legal department, approved the loan application for P80,000.00 of Sulpicio M. Tolentino, who, as a security for the loan, executed on the same day a real estate mortgage over his 100-hectare land located in Cubo, Las Nieves, Agusan, and covered by TCT No. T-305, and which mortgage was annotated on the said title the next day. The approved loan application called for a lump sum P80,000.00 loan, repayable in semi-annual installments for a period of 3 years, with 12% annual interest. It was required that Sulpicio M. Tolentino shall use the loan proceeds solely as an additional capital to develop his other property into a subdivision. On May 22, 1965, a mere P17,000.00 partial release of the P80,000.00 loan was made by the Bank; and Sulpicio M. Tolentino and his wife Edita Tolentino signed a promissory note for P17,000.00 at 12% annual interest, payable within 3 years from the date of execution of the contract at semiannual installments of P3,459.00 (p. 64, rec.). An advance interest for the P80,000.00 loan covering a 6-month period amounting to P4,800.00 was deducted from the partial release of P17,000.00. But this pre-deducted interest was refunded to Sulpicio M. Tolentino on July 23, 1965, after being informed by the Bank that there was no fund yet available for the release of the P63,000.00 balance (p. 47, rec.). The Bank, thru its vice-president and treasurer, promised repeatedly the release of the P63,000.00 balance (p. 113, rec.). On August 13, 1965, the Monetary Board of the Central Bank, after finding Island Savings Bank was suffering liquidity problems, issued Resolution No. 1049, which provides: In view of the chronic reserve deficiencies of the Island Savings Bank against its deposit liabilities, the Board, by unanimous vote, decided as follows: 1) To prohibit the bank from making new loans and investments [except investments in government securities] excluding extensions or renewals of already approved loans, provided that such extensions or renewals shall be subject to review by the Superintendent of Banks, who may impose such limitations as may be necessary to insure correction of the bank's deficiency as soon as possible;

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(p. 46, rec.). On June 14, 1968, the Monetary Board, after finding thatIsland Savings Bank failed to put up the required capital to restore its solvency, issued Resolution No. 967 which prohibited Island Savings Bank from doing business in the Philippines and instructed the Acting Superintendent of Banks to take charge of the assets of Island Savings Bank (pp. 48-49, rec). On August 1, 1968, Island Savings Bank, in view of non-payment of the P17,000.00 covered by the promissory note, filed an application for the extra-judicial foreclosure of the real estate mortgage covering the 100-hectare land of Sulpicio M. Tolentino; and the sheriff scheduled the auction for January 22, 1969. On January 20, 1969, Sulpicio M. Tolentino filed a petition with the Court of First Instance of Agusan for injunction, specific performance or rescission and damages with preliminary injunction, alleging that since Island Savings Bank failed to deliver the P63,000.00 balance of the P80,000.00 loan, he is entitled to specific performance by ordering Island Savings Bank to deliver the P63,000.00 with interest of 12% per annum from April 28, 1965, and if said balance cannot be delivered, to rescind the real estate mortgage (pp. 32-43, rec.). On January 21, 1969, the trial court, upon the filing of a P5,000.00 surety bond, issued a temporary restraining order enjoining the Island Savings Bank from continuing with the foreclosure of the mortgage (pp. 86-87, rec.). On January 29, 1969, the trial court admitted the answer in intervention praying for the dismissal of the petition of Sulpicio M. Tolentino and the setting aside of the restraining order, filed by the Central Bank and by the Acting Superintendent of Banks (pp. 65-76, rec.). On February 15, 1972, the trial court, after trial on the merits rendered its decision, finding unmeritorious the petition of Sulpicio M. Tolentino, ordering him to pay Island Savings Bank the amount of PI 7 000.00 plus legal interest and legal charges due thereon, and lifting the restraining order so that the sheriff may proceed with the foreclosure (pp. 135-136. rec. On February 11, 1977, the Court of Appeals, on appeal by Sulpicio M. Tolentino, modified the Court of First Instance decision by affirming the dismissal of Sulpicio M. Tolentino's petition for specific performance, but it ruled that Island Savings Bank can neither foreclose the real estate mortgage nor collect the P17,000.00 loan pp. 30-:31. rec.). Hence, this instant petition by the central Bank. The issues are: 1. Can the action of Sulpicio M. Tolentino for specific performance prosper? 2. Is Sulpicio M. Tolentino liable to pay the P17,000.00 debt covered by the promissory note? 3. If Sulpicio M. Tolentino's liability to pay the P17,000.00 subsists, can his real estate mortgage be foreclosed to satisfy said amount?

When Island Savings Bank and Sulpicio M. Tolentino entered into an P80,000.00 loan agreement on April 28, 1965, they undertook reciprocal obligations. In reciprocal obligations, the obligation or promise of each party is the consideration for that of the other (Penaco vs. Ruaya, 110 SCRA 46 [1981]; Vda. de Quirino vs, Pelarca 29 SCRA 1 [1969]); and when one party has performed or is ready and willing to perform his part of the contract, the other party who has not performed or is not ready and willing to perform incurs in delay (Art. 1169 of the Civil Code). The promise of Sulpicio M. Tolentino to pay was the consideration for the obligation of Island Savings Bank to furnish the P80,000.00 loan. When Sulpicio M. Tolentino executed a real estate mortgage on April 28, 1965, he signified his willingness to pay the P80,000.00 loan. From such date, the obligation of Island Savings Bank to furnish the P80,000.00 loan accrued. Thus, the Bank's delay in furnishing the entire loan started on April 28, 1965, and lasted for a period of 3 years or when the Monetary Board of the Central Bank issued Resolution No. 967 on June 14, 1968, which prohibited Island Savings Bank from doing further business. Such prohibition made it legally impossible for Island Savings Bank to furnish the P63,000.00 balance of the P80,000.00 loan. The power of the Monetary Board to take over insolvent banks for the protection of the public is recognized by Section 29 of R.A. No. 265, which took effect on June 15, 1948, the validity of which is not in question. The Board Resolution No. 1049 issued on August 13,1965 cannot interrupt the default of Island Savings Bank in complying with its obligation of releasing the P63,000.00 balance because said resolution merely prohibited the Bank from making new loans and investments, and nowhere did it prohibit island Savings Bank from releasing the balance of loan agreements previously contracted. Besides, the mere pecuniary inability to fulfill an engagement does not discharge the obligation of the contract, nor does it constitute any defense to a decree of specific performance (Gutierrez Repide vs. Afzelius and Afzelius, 39 Phil. 190 [1918]). And, the mere fact of insolvency of a debtor is never an excuse for the non-fulfillment of an obligation but 'instead it is taken as a breach of the contract by him (vol. 17A, 1974 ed., CJS p. 650) The fact that Sulpicio M. Tolentino demanded and accepted the refund of the pre-deducted interest amounting to P4,800.00 for the supposed P80,000.00 loan covering a 6-month period cannot be taken as a waiver of his right to collect the P63,000.00 balance. The act of Island Savings Bank, in asking the advance interest for 6 months on the supposed P80,000.00 loan, was improper considering that only P17,000.00 out of the P80,000.00 loan was released. A person cannot be legally charged interest for a non-existing debt. Thus, the receipt by Sulpicio M. 'Tolentino of the prededucted interest was an exercise of his right to it, which right exist independently of his right to demand the completion of the P80,000.00 loan. The exercise of one right does not affect, much less neutralize, the exercise of the other. The alleged discovery by Island Savings Bank of the over-valuation of the loan collateral cannot exempt it from complying with its reciprocal obligation to furnish the entire P80,000.00 loan. 'This Court previously ruled that bank officials and employees are expected to exercise caution and prudence in the discharge of their functions (Rural Bank of Caloocan, Inc. vs. C.A., 104 SCRA 151 [1981]). It is the obligation of the bank's officials and employees that before they approve the loan application of their customers, they must investigate the existence and evaluation of the properties being offered as a loan security. The recent rush of events where collaterals for bank loans turn out to be non-existent or grossly over-valued underscore the importance of this responsibility. The mere reliance by bank officials and employees on their customer's representation regarding the loan collateral being offered as loan security is a patent non-performance of this responsibility. If ever bank officials and employees totally reIy on the representation of their customers as to the valuation of the loan collateral, the bank shall bear the risk in case the collateral turn out to be over-valued. The representation made by the customer is immaterial to the bank's responsibility to conduct its own investigation. Furthermore, the lower court, on objections of' Sulpicio M. Tolentino, had enjoined petitioners from presenting proof on the alleged over-valuation because of their failure to raise the same in their pleadings (pp. 198-199, t.s.n. Sept. 15. 1971). The lower court's action is sanctioned

by the Rules of Court, Section 2, Rule 9, which states that "defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived." Petitioners, thus, cannot raise the same issue before the Supreme Court. Since Island Savings Bank was in default in fulfilling its reciprocal obligation under their loan agreement, Sulpicio M. Tolentino, under Article 1191 of the Civil Code, may choose between specific performance or rescission with damages in either case. But since Island Savings Bank is now prohibited from doing further business by Monetary Board Resolution No. 967, WE cannot grant specific performance in favor of Sulpicio M, Tolentino. Rescission is the only alternative remedy left. WE rule, however, that rescission is only for the P63,000.00 balance of the P80,000.00 loan, because the bank is in default only insofar as such amount is concerned, as there is no doubt that the bank failed to give the P63,000.00. As far as the partial release of P17,000.00, which Sulpicio M. Tolentino accepted and executed a promissory note to cover it, the bank was deemed to have complied with its reciprocal obligation to furnish a P17,000.00 loan. The promissory note gave rise to Sulpicio M. Tolentino's reciprocal obligation to pay the P17,000.00 loan when it falls due. His failure to pay the overdue amortizations under the promissory note made him a party in default, hence not entitled to rescission (Article 1191 of the Civil Code). If there is a right to rescind the promissory note, it shall belong to the aggrieved party, that is, Island Savings Bank. If Tolentino had not signed a promissory note setting the date for payment of P17,000.00 within 3 years, he would be entitled to ask for rescission of the entire loan because he cannot possibly be in default as there was no date for him to perform his reciprocal obligation to pay. Since both parties were in default in the performance of their respective reciprocal obligations, that is, Island Savings Bank failed to comply with its obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply with his obligation to pay his P17,000.00 debt within 3 years as stipulated, they are both liable for damages. Article 1192 of the Civil Code provides that in case both parties have committed a breach of their reciprocal obligations, the liability of the first infractor shall be equitably tempered by the courts. WE rule that the liability of Island Savings Bank for damages in not furnishing the entire loan is offset by the liability of Sulpicio M. Tolentino for damages, in the form of penalties and surcharges, for not paying his overdue P17,000.00 debt. The liability of Sulpicio M. Tolentino for interest on his PI 7,000.00 debt shall not be included in offsetting the liabilities of both parties. Since Sulpicio M. Tolentino derived some benefit for his use of the P17,000.00, it is just that he should account for the interest thereon. WE hold, however, that the real estate mortgage of Sulpicio M. Tolentino cannot be entirely foreclosed to satisfy his P 17,000.00 debt. The consideration of the accessory contract of real estate mortgage is the same as that of the principal contract (Banco de Oro vs. Bayuga, 93 SCRA 443 [1979]). For the debtor, the consideration of his obligation to pay is the existence of a debt. Thus, in the accessory contract of real estate mortgage, the consideration of the debtor in furnishing the mortgage is the existence of a valid, voidable, or unenforceable debt (Art. 2086, in relation to Art, 2052, of the Civil Code). The fact that when Sulpicio M. 'Tolentino executed his real estate mortgage, no consideration was then in existence, as there was no debt yet because Island Savings Bank had not made any release on the loan, does not make the real estate mortgage void for lack of consideration. It is not necessary that any consideration should pass at the time of the execution of the contract of real mortgage (Bonnevie vs. C.A., 125 SCRA 122 [1983]). lt may either be a prior or subsequent matter.

But when the consideration is subsequent to the mortgage, the mortgage can take effect only when the debt secured by it is created as a binding contract to pay (Parks vs, Sherman, Vol. 176 N.W. p. 583, cited in the 8th ed., Jones on Mortgage, Vol. 2, pp. 5-6). And, when there is partial failure of consideration, the mortgage becomes unenforceable to the extent of such failure (Dow. et al. vs. Poore, Vol. 172 N.E. p. 82, cited in Vol. 59, 1974 ed. CJS, p. 138). Where the indebtedness actually owing to the holder of the mortgage is less than the sum named in the mortgage, the mortgage cannot be enforced for more than the actual sum due (Metropolitan Life Ins. Co. vs. Peterson, Vol. 19, F(2d) p. 88, cited in 5th ed., Wiltsie on Mortgage, Vol. 1, P. 180). Since Island Savings Bank failed to furnish the P63,000.00 balance of the P8O,000.00 loan, the real estate mortgage of Sulpicio M. Tolentino became unenforceable to such extent. P63,000.00 is 78.75% of P80,000.00, hence the real estate mortgage covering 100 hectares is unenforceable to the extent of 78.75 hectares. The mortgage covering the remainder of 21.25 hectares subsists as a security for the P17,000.00 debt. 21.25 hectares is more than sufficient to secure a P17,000.00 debt. The rule of indivisibility of a real estate mortgage provided for by Article 2089 of the Civil Code is inapplicable to the facts of this case. Article 2089 provides: A pledge or mortgage is indivisible even though the debt may be divided among the successors in interest of the debtor or creditor. Therefore, the debtor's heirs who has paid a part of the debt can not ask for the proportionate extinguishment of the pledge or mortgage as long as the debt is not completely satisfied. Neither can the creditor's heir who have received his share of the debt return the pledge or cancel the mortgage, to the prejudice of other heirs who have not been paid. The rule of indivisibility of the mortgage as outlined by Article 2089 above-quoted presupposes several heirs of the debtor or creditor which does not obtain in this case. Hence, the rule of indivisibility of a mortgage cannot apply WHEREFORE, THE DECISION OF THE COURT OF APPEALS DATED FEBRUARY 11, 1977 IS HEREBY MODIFIED, AND 1. SULPICIO M. TOLENTINO IS HEREBY ORDERED TO PAY IN FAVOR OF HEREIN PETITIONERS THE SUM OF P17.000.00, PLUS P41,210.00 REPRESENTING 12% INTEREST PER ANNUM COVERING THE PERIOD FROM MAY 22, 1965 TO AUGUST 22, 1985, AND 12% INTEREST ON THE TOTAL AMOUNT COUNTED FROM AUGUST 22, 1985 UNTIL PAID; 2. IN CASE SULPICIO M. TOLENTINO FAILS TO PAY, HIS REAL ESTATE MORTGAGE COVERING 21.25 HECTARES SHALL BE FORECLOSED TO SATISFY HIS TOTAL INDEBTEDNESS; AND 3. THE REAL ESTATE MORTGAGE COVERING 78.75 HECTARES IS HEREBY DECLARED UNEN FORCEABLE AND IS HEREBY ORDERED RELEASED IN FAVOR OF SULPICIO M. TOLENTINO.

NO COSTS. SO ORDERED. G.R. No. 163072

April 2, 2009

MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner, vs. CITY OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY TREASURER OF PASAY, and CITY ASSESSOR OF PASAY, Respondents. DECISION CARPIO, J.: This is a petition for review on certiorari1 of the Decision2 dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. The Facts Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International Airport (NAIA) Complex under Executive Order No. 903 (EO 903),3 otherwise known as the Revised Charter of the Manila International Airport Authority. EO 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Under Sections 34 and 225 of EO 903, approximately 600 hectares of land, including the runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA Complex is located along the border between Pasay City and Parañaque City. On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001. MIAA’s real property tax delinquency for its real properties located in NAIA Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties) is tabulated as follows: TAX DECLARATION

TAXABLE YEAR

TAX DUE

PENALTY

TOTAL

A7-183-08346

1997-2001

243,522,855.00

123,351,728.18

366,874,583.18

A7-183-05224

1992-2001

113,582,466.00

71,159,414.98

184,741,880.98

A7-191-00843

1992-2001

54,454,800.00

34,115,932.20

88,570,732.20

A7-191-00140

1992-2001

1,632,960.00

1,023,049.44

2,656,009.44

A7-191-00139

1992-2001

6,068,448.00

3,801,882.85

9,870,330.85

A7-183-05409

1992-2001

59,129,520.00

37,044,644.28

96,174,164.28

A7-183-05410

1992-2001

20,619,720.00

12,918,254.58

33,537,974.58

A7-183-05413

1992-2001

7,908,240.00

4,954,512.36

12,862,752.36

A7-183-05412

1992-2001

18,441,981.20

11,553,901.13

29,995,882.33

A7-183-05411

1992-2001

109,946,736.00

68,881,630.13

178,828,366.13

A7-183-05245

1992-2001

7,440,000.00

4,661,160.00

12,101,160.00

GRAND TOTAL

₱642,747,726.20 ₱373,466,110.13 ₱1,016,213,836.33

On 24 August 2001, the City of Pasay, through its City Treasurer, issued notices of levy and warrants of levy for the NAIA Pasay properties. MIAA received the notices and warrants of levy on 28 August 2001. Thereafter, the City Mayor of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent real property taxes remain unpaid. On 29 October 2001, MIAA filed with the Court of Appeals a petition for prohibition and injunction with prayer for preliminary injunction or temporary restraining order. The petition sought to enjoin the City of Pasay from imposing real property taxes on, levying against, and auctioning for public sale the NAIA Pasay properties. On 30 October 2002, the Court of Appeals dismissed the petition and upheld the power of the City of Pasay to impose and collect realty taxes on the NAIA Pasay properties. MIAA filed a motion for reconsideration, which the Court of Appeals denied. Hence, this petition. The Court of Appeals’ Ruling The Court of Appeals held that Sections 193 and 234 of Republic Act No. 7160 or the Local Government Code, which took effect on 1 January 1992, withdrew the exemption from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under Republic Act No. 6938, non-stock and non-profit hospitals and educational institutions. Since MIAA is a government-owned corporation, it follows that its tax exemption under Section 21 of EO 903 has been withdrawn upon the effectivity of the Local Government Code. The Issue The issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property tax. The Court’s Ruling The petition is meritorious. In ruling that MIAA is not exempt from paying real property tax, the Court of Appeals cited Sections 193 and 234 of the Local Government Code which read: SECTION 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. SECTION 234. Exemptions from Real Property Tax. – The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes; (c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; (d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and (e) Machinery and equipment used for pollution control and environment protection. Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code. The Court of Appeals held that as a government-owned corporation, MIAA’s tax exemption under Section 21 of EO 903 has already been withdrawn upon the effectivity of the Local Government Code in 1992. In Manila International Airport Authority v. Court of Appeals6 (2006 MIAA case), this Court already resolved the issue of whether the airport lands and buildings of MIAA are exempt from tax under existing laws. The 2006 MIAA case originated from a petition for prohibition and injunction which MIAA filed with the Court of Appeals, seeking to restrain the City of Parañaque from imposing real property tax on, levying against, and auctioning for public sale the airport lands and buildings located in Parañaque City. The only difference between the 2006 MIAA case and this case is that the 2006 MIAA case involved airport lands and buildings located in Parañaque City while this case involved airport lands and buildings located in Pasay City. The 2006 MIAA case and this case raised the same threshold issue: whether the local government can impose real property tax on the airport lands, consisting mostly of the runways, as well as the airport buildings, of MIAA. In the 2006 MIAA case, this Court held: To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or nonstock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity. Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides: Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code.7 (Emphasis in the original) The definition of "instrumentality" under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987 uses the phrase "includes x x x government-owned or controlled corporations" which means that a government "instrumentality" may or may not be a "governmentowned or controlled corporation." Obviously, the term government "instrumentality" is broader than the term "government-owned or controlled corporation." Section 2(10) provides: SEC. 2. General Terms Defined.– x x x (10) Instrumentality refers to any agency of the national Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and governmentowned or controlled corporations. The term "government-owned or controlled corporation" has a separate definition under Section 2(13)8 of the Introductory Provisions of the Administrative Code of 1987: SEC. 2. General Terms Defined.– x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or nonstock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations. The fact that two terms have separate definitions means that while a government "instrumentality" may include a "government-owned or controlled corporation," there may be a government "instrumentality" that will not qualify as a "government-owned or controlled corporation." A close scrutiny of the definition of "government-owned or controlled corporation" in Section 2(13) will show that MIAA would not fall under such definition. MIAA is a government "instrumentality" that does not qualify as a "government-owned or controlled corporation." As explained in the 2006 MIAA case:

A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. x x x Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation. xxx MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation. Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use. Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a governmentowned or controlled corporation. What then is the legal status of MIAA within the National Government? MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. x x x When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."9 Thus, MIAA is not a government-owned or controlled corporation but a government instrumentality which is exempt from any kind of tax from the local governments. Indeed, the exercise of the taxing power of local government units is subject to the limitations enumerated in Section 133 of the Local Government Code.10 Under Section 133(o)11 of the Local Government Code, local government units have no power to tax instrumentalities of the national government like the MIAA. Hence, MIAA is not liable to pay real property tax for the NAIA Pasay properties. Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended for public use, and as such are exempt from real property tax under Section 234(a) of the Local

Government Code. However, under the same provision, if MIAA leases its real property to a taxable person, the specific property leased becomes subject to real property tax.12 In this case, only those portions of the NAIA Pasay properties which are leased to taxable persons like private parties are subject to real property tax by the City of Pasay. WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA Pasay properties of the Manila International Airport Authority EXEMPT from real property tax imposed by the City of Pasay. We declare VOID all the real property tax assessments, including the final notices of real property tax delinquencies, issued by the City of Pasay on the NAIA Pasay properties of the Manila International Airport Authority, except for the portions that the Manila International Airport Authority has leased to private parties. No costs. SO ORDERED. ANTONIO T. CARPIO Associate Justice WE CONCUR: REYNATO S. PUNO Chief Justice LEONARDO A. QUISUMBING Associate Justice

CONSUELO YNARES-SANTIAGO Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

RENATO C. CORONA Associate Justice

CONCHITA CARPIO MORALES Associate Justice

DANTE O. TINGA Associate Justice

MINITA V. CHICO-NAZARIO Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice

ANTONIO EDUARDO B. NACHURA Associate Justice

TERESITA J. LEONARDO-DE CASTRO Associate Justice

ARTURO D. BRION Associate Justice

DIOSDADO M. PERALTA Associate Justice

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

REYNATO S. PUNO Chief Justice

Footnotes 1

Under Rule 45 of the 1997 Rules of Civil Procedure.

Penned by Associate Justice Ruben T. Reyes (now retired Supreme Court Justice) with Associate Justices Remedios Salazar-Fernando and Edgardo F. Sundiam, concurring. 2

Providing for a Revision of Executive Order No. 778 Creating the Manila International Airport Authority, Transferring Existing Assets of the Manila International Airport to the Authority, and Vesting the Authority with Power to Administer and Operate the Manila International Airport. 3

4

Section 3 of EO 903 reads: SEC. 3. Creation of the Manila International Airport Authority. There is hereby established a body corporate to be known as the Manila International Airport Authority which shall be attached to the Ministry of Transportation and Communications. The principal office of the Authority shall be located at the New Manila International Airport. The Authority may establish such offices, branches, agencies or subsidiaries as it may deem proper and necessary; Provided, that any subsidiary that may be organized shall have the prior approval of the President. The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through the sale or through any other mode unless specifically approved by the President of the Philippines.

5

Section 22 of EO 903 reads: SEC. 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands, buildings and other property, movable and immovable, belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority.

6

G.R. No. 155650, 20 July 2006, 495 SCRA 591.

7

Id. at 644-645.

8

Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 reads: SEC. 2. General Terms Defined.– x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.

9

Supra note 6 at 615-618.

Philippine Fisheries Development Authority v. Court of Appeals, G.R. No. 150301, 2 October 2007, 534 SCRA 490. 10

11

Section 133(o) of the Local Government Code reads: SECTION 133. Common Limitations on the Taxing Powers of the Local Government Units. – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units.

12

Manila International Airport Authority v. Court of Appeals, supra note 6.

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DISSENTING OPINION YNARES-SANTIAGO, J.: Indeed, as pointed out by Justice Antonio T. Carpio, the Court has twice reaffirmed the ruling in Manila International Airport Authority v. Court of Appeals1 in the subsequent cases of Philippine Fisheries Development Authority v. Court of Appeals2 and Philippine Fisheries Development Authority v. Court of Appeals.3 However, upon further study of the issues presented in said cases, I agree with Justice Dante O. Tinga that the Manila International Airport Authority (MIAA) ruling was incorrectly rationalized, particularly on the unwieldy characterization of MIAA as a species of a government instrumentality. I submit that the present ponencia of Justice Carpio perpetuates the error which I find imperative for the Court to correct.

Nevertheless, unlike Justice Tinga’s rationalization, I find that there is no more need to belabor the issue of whether the MIAA is a government-owned or controlled corporation (GOCC) or a government instrumentality in order to resolve the issue of whether the airport properties are subject to real property tax. Instead, I subscribe to the "simple, direct and painless approach" proposed by Justice Antonio Eduardo B. Nachura that it is imperative to "fine tune" the Court’s ruling in Mactan Cebu International Airport Authority v. Marcos4 vis-à-vis that in Manila International Airport Authority v. Court of Appeals;5 and that what needs only to be ascertained is whether the airport properties are owned by the Republic; and if such, then said properties are exempt from real property tax, by applying Section 234 of Republic Act No. 7160 (R.A. No. 7160) or the Local Government Code (LGC). Pursuant to Section 232 of the LGC, a province or city or municipality within the Metropolitan Manila Area is vested with the power to levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereafter specifically exempted. Corollarily, Section 234 thereof provides an enumeration of certain properties which are exempt from payment of the real property tax, among which is "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person." Article 420 of the Civil Code enumerates the properties of public dominion, to wit: Art. 420: The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. There is no question that the airport and all its installations, facilities and equipment, are intended for public use and are, thus, properties of public dominion. Concededly, the Court ruled in Mactan Cebu International Airport Authority v. Marcos6 that: The crucial issues then to be addressed are: (a) whether the parcels of land in question belong to the Republic of the Philippines whose beneficial use has been granted to the petitioner, and (b) whether the petitioner is a "taxable persons." Section 15 of [MCIAA’s] Charter provides: Sec. 15. Transfer of Existing Facilities and Intangible Assets. – Al existing public airport facilities, runways, lands, buildings and other properties, movable or immovable, belonging to or presently administered by the airports, and all assets, powers, rights, interests and privileges relating on airport works or air operations, including all equipment which are necessary for the operations of air navigation, aerodome control towers, crash, fire, and rescue facilities are hereby transferred to the Authority: Provided, however, that the operations control of all equipment necessary for the operation of radio aids to air navigation, airways communication, the approach control office, and the area control center shall be retained by the Air Transportation Office. No equipment, however, shall be removed by the Air Transportation Office from Mactan without the concurrence of the Authority. The Authority may assist in the maintenance of the Air Transportation Office equipment.

The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan International Airport in the Province of Cebu," which belonged to the Republic of the Philippines, then under the Air Transportation Office (ATO). It may be reasonable to assume that the term "lands" refer to "lands" in Cebu City then administered by the Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on for real property taxes. This section involves a "transfer" of the "lands" among other thins, to the petitioner and not just the transfer of the beneficial use thereof, with the ownership being retained by the Republic of the Philippines. This "transfer" is actually an absolute conveyance of the ownership thereof because the petitioner’s authorized capital stock consists of, inter alia, "the value of such real estate owned and/or administered by the airports." Hence, the petitioner is now the owner of the land in question and the exception in Section 234© of the LGC is inapplicable. Meanwhile, Executive Order No. 9037 or the Revised Charter of the Manila International Airport Authority, provides in Section 3 thereof that – xxxx The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. Regardless of the apparent transfer of title of the said properties to MIAA, I submit that the latter is only holding the properties for the benefit of the Republic in its capacity as agent thereof. It is to be noted that despite the conveyance of the title to the said properties to the MIAA, however, the latter could not in any way dispose of the same through sale or through any other mode unless specifically approved by the President of the Republic.8 Even MIAA’s borrowing power is dictated upon by the President. Thus, MIAA could raise funds, either from local or international sources, by way of loans, credits or securities, and other borrowing instruments, create pledges, mortgages and other voluntary lines or encumbrances on any of its assets or properties, only after consultation with the Secretary of Finance and with the approval of the President. In addition, MIAA’s total outstanding indebtedness could exceed its net worth only upon express authorization by the President. 9 I fully agree with Justice Nachura that "even if MIAA holds the record title over the airport properties, such holding can only be for the benefit of the Republic, that MIAA exercises an essentially public function." In sum, the airport and all its installations, facilities and equipment of the MIAA, are properties of public dominion and should thus be exempted from payment of real property tax, except those properties where the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. ACCORDINGLY, I vote to grant the petition. CONSUELO YNARES-SANTIAGO Associate Justice

Footnotes 1

G.R. No. 155650, July 20, 2006, 495 SCRA 591.

2

G.R. No. 169836, July 31, 2007, 528 SCRA 707.

3

G.R. No. 151301, October 2, 2007, 534 SCRA 490.

4

330 Phil. 392 [1996].

5

Supra note 1.

6

Supra note 4.

7

July 21, 1983.

8

E.O. 903, Sec. 3.

9

E.O. 903, Sec. 16.

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DISSENTING OPINION TINGA, J.: I maintain my dissent expressed in the 2006 ruling in MIAA v. City of Parañaque1 (the "Parañaque case.") The majority relies on two main points drawn from the 2006 Parañaque case in this instance as it rules once again that the MIAA is exempt from realty taxes assessed by the City of Pasay. First, because MIAA is a government instrumentality, it somehow finds itself exempt from the said taxes, supposedly by operation of the Local Government Code. Second, the subject properties are allegedly owned by the Republic of the Philippines, notwithstanding that legal title thereto is in the name of the MIAA, which is a distinct and independent juridical personality from the Republic. I. Once again, attempts are drawn to classify MIAA as a government instrumentality, and not as a government owned or controlled corporation. Such characterization was apparently insisted upon in order to tailor-fit the MIAA to Section 133 of the Local Government Code, which reads:

Sec. 133. Common Limitations on the Taxing Powers of Local Government Units.— Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx 15. Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units. (emphasis and underscoring supplied). How was the Parañaque case able to define the MIAA as a instrumentality of the National Government? The case propounded that MIAA was not a GOCC: There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows: SEC. 2. General Terms Defined. — . . . (13) Government-owned or controlled corporation refers to any agency organized as a stock or nonstock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: . . . . (Emphasis supplied) A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. xxx Clearly, under its Charter, MIAA does not have capital stock that is divided into shares. Section 3 of the Corporation Code 10 defines a stock corporation as one whose "capital stock is divided into shares and . . . authorized to distribute to the holders of such shares dividends . . . ." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation. MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. 11 This prevents MIAA from qualifying as a non-stock corporation. Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is

not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.2 This "black or white" categorization of "stock" and "non-stock" corporations utterly disregards the fact that nothing in the Constitution prevents Congress from creating government owned or controlled corporations in whatever structure it deems necessary. Note that this definitions of "stock" and "nonstock" corporations are taken from the Administrative Code, and not the Constitution. The Administrative Code is a statute, and is thus not superior in hierarchy to any other subsequent statute created by Congress, including the charters for GOCCs. Since MIAA was presumed not to be a stock or non-stock corporation, the majority in the Parañaque case then strived to fit it into a category. Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a governmentowned or controlled corporation. What then is the legal status of MIAA within the National Government? MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows: SEC. 2. General Terms Defined. –– . . . (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. . . . (Emphasis supplied) When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."3 Unfortunately, this cited statutory definition of an "instrumentality" is incomplete. Worse, the omitted portion from Section 2(10) completely contradicts the premise of the ponente that an instrumentality is mutually exclusive from a GOCC. For the provision reads in full, with the omitted portion highlighted, thus: (10)Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government— owned or controlled corporations. This previous omission had not escaped the attention of the outside world. For example, lawyer Gregorio Batiller, Jr., has written a paper on the Parañaque case entitled "A Tale of Two Airports," which is published on the Internet.4He notes therein:

Also of interest was the dissenting opinion of Justice Dante Tinga to the effect that the majority opinion failed to quote in full the definition of "government instrumentality:" The Majority gives the impression that a government instrumentality is a distinct concept from a government corporation. Most tellingly, the majority selectively cites a portion of Section 2(10) of the Administrative Code of 1987, as follows: Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. xxx (emphasis omitted)" However, Section 2(10) of the Administrative Code, when read in full, makes an important clarification which the majority does not show. The portions omitted by the majority are highlighted below: xxx "(10)Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by, law endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government – owned or controlled corporations. So the majority opinion effectively begged the question in finding that the MIAA was not a GOCC but a mere government instrumentality, which is other than a GOCC.5 The Office of the President itself was alarmed by the redefinition made by the MIAA case of instrumentalities, causing it on 29 December 2006 to issue Executive Order No. 596 creating the unwieldy category of "Government Instrumentality Vested with Corporate Powers or Government Corporate Entities" just so that it was clear that these newly defined "instrumentalities" or "government corporate entities" still fell within the jurisdiction of the Office of the Government Corporate Counsel. The E.O. reads in part: EXECUTIVE ORDER NO. 596 DEFINING AND INCLUDING "GOVERNMENT INSTRUMENTRALITY VESTED WITH CORPORATE POWERS" OR "GOVERNMENT CORPORATE ENTITIES" UNDER THE JURISDICTION OF THE OFFICE OF THE GOVERNMENT CORPORATE COUNSEL (OGCC) AS PRINCIPAL LAW OFFICE OF GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCs) AND FOR OTHER PURPOSES. WHEREAS, the Office of the Government Corporate Counsel (OGCC), as the principal law office of all Government-Owned or Controlled Corporations (GOCCs), including their subsidiaries, other corporate offsprings and government acquired assets corporations, plays a very significant role in safeguarding the legal interests and providing the legal requirements of all GOCCs; WHEREAS, there is an imperative need to integrate, strengthen and rationalize the powers and jurisdiction of the OGCC in the light of the Decision of the Supreme Court dated July 20, 2006, in the case of "Manila International Airport Authority vs. Court of Appeals, City of Parañaque, et al" (G.R. No. 155650), where the High Court differentiated "government corporate entities" and government instrumentalities with corporate powers" from GOCCs for purposes of the provisions of the Local Government Code on real estate taxes, and other fees and charges imposed by local government units;

WHEREAS, in the interest of an effective administration of justice, the application and definition of the term "GOCCs" need to be further clarified and rationalized to have consistency in referring to the term and to avoid unintended conflicts and/or confusion’ NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Republic of the Philippines, by virtue of the powers vested in my by law, do hereby order: SECTION 1. The Office of the Government Corporate Counsel (OGCC) shall be the principal law office of all GOCCs, except as may otherwise be provided by their respective charter or authorized by the President, their subsidiaries, corporate offsprings, and government acquired asset corporations. The OGCC shall likewise be the principal law of the "government instrumentality vested with corporate powers" or "government corporate entity," as defined by the Supreme Court in the case of "MIAA v. Court of Appeals, City of Parañaque, et al.," supra, notable examples of which are: Manila International Airport Authority (MIAA), Mactan International Airport Authority, the Philippine Ports Authority (PPA), Philippine Deposit Insurance Corporation (PDIC), Metropolitan Water and Sewerage Services (MWSS), Philippine Rice Research Institute (PRRI), Laguna Lake Development Authority (LLDA), Fisheries Development Authority (FDA), Bases Conversion Development Authority (BCDA), Cebu Port Authority (CPA), Cagayan de Oro Port Authority, and San Fernando Port Authority. SECTION 2. As provided under PD 2029, series of 1986, the term GOCCs is defined as a stock or non-stock corporation, whether performing governmental or proprietary functions, which is directly chartered by a special law or if organized under the general corporation law, is owned or controlled by the government directly, or indirectly, through a parent corporation or subsidiary corporation, to the extent of at least majority of its outstanding capital stock or of its outstanding voting capital stock. Under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987, a government "instrumentality" refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some, if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. SECTION 3. The following corporations are considered GOCCs under the conditions and/or circumstances indicated: a) A corporation organized under the general corporation law under private ownership at least a majority of the shares of stock of which were conveyed to a government financial institution, whether by foreclosure or otherwise, or a subsidiary corporation of a government corporation organized exclusively to own and manage, or lease, or operate specific assets acquired by a government financial institution in satisfaction of debts incurred therewith and which in any case by enunciated policy of the government is required to be disposed of to private ownership within a specified period of time, shall not be considered a GOCC before such disposition and even if the ownership or control thereof is subsequently transferred to another GOCC; b) A corporation created by special law which is explicitly intended under that law for ultimate transfer to private ownership under certain specified conditions shall be considered a GOCC, until it is transferred to private ownership; c) A corporation that is authorized to be established by special law, but which is still required under that law to register with the Securities and Exchange Commission in

order to acquire a juridical personality, shall not, on the basis of the special law alone, be considered a GOCC. xxx Reading this Executive Order, one cannot help but get the impression that the Republic of the Philippines, ostensibly the victorious party in the Parañaque case, felt that the 2006 ponencia redefining "instrumentalities" was wrong. Ostensibly, the Office of the Government Corporate Counsel, the winning counsel in the MIAA case, cooperated in the drafting of this E.O. and probably also felt that the redefinition of "instrumentalities" was wrong. I had pointed out in my Dissent to the MIAA case that under the framework propounded in that case, GOCCs such as the Philippine Ports Authority, the Bases Conversion Development Authority, the Philippine Economic Zone Authority, the Light Rail Transit Authority, the Bangko Sentral ng Pilipinas, the National Power Corporation, the Lung Center of the Philippines, and even the Philippine Institute of Traditional and Alternative Health Care have been reclassified as instrumentalities instead of GOCCs. Notably, GOCCs are mandated by Republic Act No. 7656 to remit 50% of their annual net earnings as cash, stock or property dividends to the National Government. By denying categorization of those above-mentioned corporations as GOCCs, the Court in MIAA effectively gave its imprimatur to those entities to withhold remitting 50% of their annual net earnings to the National Government. Hence, the necessity of E.O. No. 596 to undo the destructive effects of the Parañaque case on the national coffers. In a welcome development, the majority now acknowledges the existence of that second clause in Section 2(10) of the Introductory Provisions of the Administrative Code, the clause which made explicit that government instrumentalities include GOCCs. In truth, I had never quite understood this hesitation in plainly saying that GOCCs are instrumentalities. That fact is really of little consequence in determining whether or not the MIAA or other government instrumentalities or GOCCs are exempt from real property taxes. As I had consistently explained, the liability of such entities is mandated by Section 232, in relation with Section 234 of the Local Government Code. Section 232 lays down the general rule that provinces, cities or municipalities within Metro Manila may levy an ad valorem tax on real property "not hereinafter specifically exempted." Such specific exemptions are enumerated in Section 234, and the only exemption tied to government properties extends to "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted…to a taxable person."6 Moreover, the final paragraph of Section 234 explains that "[e]xcept as provided herein [in Section 234], any exemption from payment of real property tax previously granted to, or presently enjoyed by all persons, whether natural or juridical, including all government-owned or –controlled corporations are hereby withdrawn upon the effectivity of this Code." What are the implications of Section 232 in relation to Section 234 as to the liability for real property taxes of government instrumentalities such as MIAA? 1) All persons, whether natural or juridical, including GOCCs are liable for real property taxes. 2) The only exempt properties are those owned by the Republic or any of its political subdivisions.

3) So-called "government corporate entities," so long as they have juridical personality distinct from the Republic of the Philippines or any of its political subdivisions, are liable for real property taxes. 4) After the enactment of the Local Government Code in 1991, Congress remained free to reenact tax exemptions from real property taxes to government instrumentalities, as it did with the Government Service Insurance System in 1997. It is that simple. The most honest intellectual argument favoring the exemption of the MIAA from real property taxes corresponds with the issue of whether its properties may be deemed as "owned by the Republic or any of its political subdivisions". The matter of whether MIAA is a GOCC or an instrumentality or a "government corporate entity" should in fact be irrelevant. However, the framework established by the ponente beginning with the Parañaque case has inexplicably and unnecessarily included the question of what is a GOCC? That issue, utterly irrelevant to settling the question of MIAA’s tax liability, has caused nothing but distraction and confusion. It should be remembered that prior to the Parañaque case, the prevailing rule on taxation of GOCCs was as enunciated in Mactan Cebu International Airport v. Hon. Marcos.7 That rule was a highly sensible rule that gave due respect to national government prerogatives and the devolution of taxing powers to local governments. Neither did Mactan Cebu prevent Congress from enacting legislation exempting selected GOCCs to be exempt from real property taxes. A significant portion of my Dissenting Opinion in the Parañaque case was devoted to explaining Mactan Cebu, and criticizing the ponencia for implicitly rejecting that doctrine without categorically saying so. In the years since, significant confusion has arisen on whether Mactan Cebu and the framework it established in real property taxation of GOCCs and instrumentalities, remains extant. Batiller makes the same point in his paper, expressly asking why "the Supreme Court did not explicitly declare that the Mactan Cebu International Airport case was deemed repealed." He added: Inevitably, the refusal of the Supreme Court to clarify whether its Decision in the Mactan Cebu International Airport case is deemed repealed would leave us with an ambiguous situation where two (2) of our major international airports are treated differently tax wise: one in Cebu which is deemed to be a GOCC subject to real estate taxes and the other in Manila which is not a GOCC and exempt from real estate taxes. Where lies the substantial difference between the two (2) airports? Your guess is as good as mine.8 There are no good reasons why the Court should not reassert the Mactan Cebu doctrine. Under that ruling, real properties owned by the Republic of the Philippines or any of its political subdivisions are exempted from the payment of real property taxes, while instrumentalities or GOCCs are generally exempted from local government taxes, save for real property taxes. At the same time, Congress is free should it so desire to exempt particular GOCCs or instrumentalities from real property taxes by enacting legislation for that purpose. This paradigm is eminently more sober than that created by the Parañaque case, which attempted to amend the Constitution by elevating as a constitutional principle, the real property tax exemption of all government instrumentalities, most of which also happen to be GOCCs. Considering that the Constitution itself is supremely deferential to the notion of local government rule and the power of local governments to generate revenue through local taxes, the idea that not even the local government code could subject such "instrumentalities" to local taxes is plainly absurd. II.

I do recognize that the present majority opinion has chosen to lay equal, if not greater emphasis on the premise that the MIAA properties are supposedly of public dominion, and as such are exempt from realty taxes under Section 234(a) of the Local Government Code. Again, I respectfully disagree. It is Article 420 of the Civil Code which defines what are properties of public dominion. I do not doubt that Article 420 can be interpreted in such a way that airport properties, such as its runways, hangars and the like, can be considered akin to ports or roads, both of which are among those properties considered as part of the public dominion under Article 420(1). It may likewise be possible that those properties considered as "property of public dominion" under Article 420 of the Civil Code are also "property owned by the Republic," which under Section 234 of the Local Government Code, are exempt from real property taxes. The necessary question to ask is whether properties which are similar in character to those enumerated under Article 420(1) may be considered still part of the public dominion if, by virtue of statute, ownership thereof is vested in a GOCC which has independent juridical personality from the Republic of the Philippines. The question becomes even more complex if, as in the case of MIAA, the law itself authorizes such GOCC to sell the properties in question. One of the most recognizable characteristics of public dominion properties is that they are placed outside the commerce of man and cannot be alienated or leased or otherwise be the subject matter of contracts.9 The fact is that the MIAA may, by law, alienate, lease or place the airport properties as the subject matter of contracts. The following provisions of the MIAA charter make that clear: SECTION 5. Functions, Powers, and Duties. — The Authority shall have the following functions, powers and duties: xxx xxx xxx (i) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any land, building, airport facility, or property of whatever kind and nature, whether movable or immovable, or any interest therein; xxx SECTION 16. Borrowing Power. — The Authority may, after consultation with the Minister of Finance and with the approval of the President of the Philippines, as recommended by the Minister of Transportation and Communications, raise funds, either from local or international sources, by way of loans, credits or securities, and other borrowing instruments, with the power to create pledges, mortgages and other voluntary liens or encumbrances on any of its assets or properties. There is thus that contradiction where property which ostensibly is classified as part of the public dominion under Article 420 of the Civil Code is nonetheless classified to lie within the commerce of man by virtue of a subsequent law such as the MIAA charter. In order for the Court to classify the MIAA properties as part of public dominion, it will be necessary to invalidate the provisions of the MIAA charter allowing the Authority to lease, sell, create pledges, mortgages and other voluntary liens or encumbrances on any of the airport properties. The provisions of the MIAA charter could not very well be invalidated with the Civil Code as basis, since the MIAA charter and the Civil Code are both statutes, and thus of equal rank in the hierarchy of laws, and more significantly the Civil Code was enacted earlier and therefore could not be the repealing law.

If there is a provision in the Constitution that adopted the definition of and limitations on public dominion properties as found in the Civil Code, then the aforequoted provisions from the MIAA charter allowing the Authority to place its properties within the commerce of man may be invalidated. The Constitution however does not do so, confining itself instead to a general statement that "all lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State." Note though that under Article 420, public dominion properties are not necessarily owned by the State, the two subsections thereto referring to (a) properties intended for public use; and (b) those which belong to the State and are intended for some public service or for the development of the national wealth.10 In Laurel v. Garcia,11 the Court notably acknowledged that "property of public dominion is not owned by the State but pertains to the State." Thus, there is no equivalence between the concept of public dominion under the Civil Code, and of public domain under the Constitution. Accordingly, the framework of public dominion properties is one that is statutory, rather than constitutional in design. That being the case, Congress is able by law to segregate properties which ostensibly are, by their nature, part of the public dominion under Article 420(1) of the Civil Code, and place them within the commerce of man by vesting title thereto in an independent juridical personality such as the MIAA, and authorizing their sale, lease, mortgage and other similar encumbrances. When Congress accomplishes that by law, the properties could no longer be considered as part of the public dominion. This point has been recognized by previous jurisprudence which I had cited in my dissent in the Parañaque case. For example, in Philippine Ports Authority v. City of Iloilo, the Court stated that "properties of public dominion are owned by the general public and cannot be declared to be owned by a public corporation, such as [the Philippine Ports Authority]."12 I had likewise previously explained: The second Public Ports Authority case, penned by Justice Callejo, likewise lays down useful doctrines in this regard. The Court refuted the claim that the properties of the PPA were owned by the Republic of the Philippines, noting that PPA's charter expressly transferred ownership over these properties to the PPA, a situation which similarly obtains with MIAA. The Court even went as far as saying that the fact that the PPA "had not been issued any torrens title over the port and port facilities and appurtenances is of no legal consequence. A torrens title does not, by itself, vest ownership; it is merely an evidence of title over properties. . . . It has never been recognized as a mode of acquiring ownership over real properties." The Court further added: . . . The bare fact that the port and its facilities and appurtenances are accessible to the general public does not exempt it from the payment of real property taxes. It must be stressed that the said port facilities and appurtenances are the petitioner's corporate patrimonial properties, not for public use, and that the operation of the port and its facilities and the administration of its buildings are in the nature of ordinary business. The petitioner is clothed, under P.D. No. 857, with corporate status and corporate powers in the furtherance of its proprietary interests . . . The petitioner is even empowered to invest its funds in such government securities approved by the Board of Directors, and derives its income from rates, charges or fees for the use by vessels of the port premises, appliances or equipment. . . . Clearly then, the petitioner is a profit-earning corporation; hence, its patrimonial properties are subject to tax.

There is no doubt that the properties of the MIAA, as with the PPA, are in a sense, for public use. A similar argument was propounded by the Light Rail Transit Authority in Light Rail Transit Authority v. Central Board of Assessment, 118 which was cited in Philippine Ports Authority and deserves renewed emphasis. The Light Rail Transit Authority (LRTA), a body corporate, "provides valuable transportation facilities to the paying public." 119 It claimed that its carriage-ways and terminal stations are immovably attached to government-owned national roads, and to impose real property taxes thereupon would be to impose taxes on public roads. This view did not persuade the Court, whose decision was penned by Justice (now Chief Justice) Panganiban. It was noted: Though the creation of the LRTA was impelled by public service — to provide mass transportation to alleviate the traffic and transportation situation in Metro Manila — its operation undeniably partakes of ordinary business. Petitioner is clothed with corporate status and corporate powers in the furtherance of its proprietary objectives. Indeed, it operates much like any private corporation engaged in the mass transport industry. Given that it is engaged in a service-oriented commercial endeavor, its carriageways and terminal stations are patrimonial property subject to tax, notwithstanding its claim of being a government-owned or controlled corporation. xxx xxx xxx Petitioner argues that it merely operates and maintains the LRT system, and that the actual users of the carriageways and terminal stations are the commuting public. It adds that the public use character of the LRT is not negated by the fact that revenue is obtained from the latter's operations. We do not agree. Unlike public roads which are open for use by everyone, the LRT is accessible only to those who pay the required fare. It is thus apparent that petitioner does not exist solely for public service, and that the LRT carriageways and terminal stations are not exclusively for public use. Although petitioner is a public utility, it is nonetheless profit-earning. It actually uses those carriageways and terminal stations in its public utility business and earns money therefrom. xxx xxx xxx Even granting that the national government indeed owns the carriageways and terminal stations, the exemption would not apply because their beneficial use has been granted to petitioner, a taxable entity. There is no substantial distinction between the properties held by the PPA, the LRTA, and the MIAA. These three entities are in the business of operating facilities that promote public transportation. The majority further asserts that MIAA's properties, being part of the public dominion, are outside the commerce of man. But if this is so, then why does Section 3 of MIAA's charter authorize the President of the Philippines to approve the sale of any of these properties? In fact, why does MIAA's charter in the first place authorize the transfer of these airport properties, assuming that indeed these are beyond the commerce of man?13 III. In the present case, the City of Pasay had issued notices of levy and warrants of levy for the NAIA Pasay properties, leading MIAA to file with the Court of Appeals a petition for prohibition and

injunction, seeking to enjoin the City of Pasay from imposing real property taxes, levying against and auctioning for public sale the NAIA Pasay properties. In the Parañaque case, I had expressed that while MIAA was liable for the realty taxes, its properties could not be foreclosed upon by the local government unit seeking the taxes. I explained then: Despite the fact that the City of Parañaque ineluctably has the power to impose real property taxes over the MIAA, there is an equally relevant statutory limitation on this power that must be fully upheld. Section 3 of the MIAA charter states that "[a]ny portion [of the [lands transferred, conveyed and assigned to the ownership and administration of the MIAA] shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines." Nothing in the Local Government Code, even with its wide grant of powers to LGUs, can be deemed as repealing this prohibition under Section 3, even if it effectively forecloses one possible remedy of the LGU in the collection of delinquent real property taxes. While the Local Government Code withdrew all previous local tax exemptions of the MIAA and other natural and juridical persons, it did not similarly withdraw any previously enacted prohibitions on properties owned by GOCCs, agencies or instrumentalities. Moreover, the resulting legal effect, subjecting on one hand the MIAA to local taxes but on the other hand shielding its properties from any form of sale or disposition, is not contradictory or paradoxical, onerous as its effect may be on the LGU. It simply means that the LGU has to find another way to collect the taxes due from MIAA, thus paving the way for a mutually acceptable negotiated solution. Accordingly, I believe that MIAA is entitled to a writ of prohibition and injunctive relief enjoining the City of Pasay from auctioning for public sale the NAIA Pasay properties. Thus, the Court of Appeals erred when it denied those reliefs to the MIAA. I VOTE to PARTIALLY GRANT the petition and to issue the Writ of Prohibition insofar as it would enjoin the City of Pasay from auctioning for public sale the NAIA Pasay properties. In all other respects, I respectfully dissent. DANTE O. TINGA Associate Justice

Footnotes 1

G.R. No. 155630, 20 July 2006, 495 SCRA 591.

2

Supra note 1 at 615-616.

3

Supra note 1 at 617-618.

4

See http://www.gbdlr.com/articles/pdf/A_TALE_OF_TWO_AIRPORTS_vol%5B1% 5D.pdf

5

Supra note 4.

6

Local Government Code, Sec. 234(a).

7

330 Phil. 392 (1996).

8

Supra note 4.

9

Villarico v. Sarmiento, G.R. No. 136438, 11 November 2004, 442 SCRA 110.

10

See Civil Code, Art. 420.

11

G.R. No. 92013, 25 July 1990, 187 SCRA 797.

12

G.R. No. 109791, 14 July 2003, 406 SCRA 88.

13

Supra note 1 at 694-696, J. Tinga, dissenting.

The Lawphil Project - Arellano Law Foundation

SEPARATE OPINION NACHURA, J.: Are airport properties subject to real property tax? The question seriously begs for a definitive resolution, in light of our ostensibly contradictory decisions1 that may have generated no small measure of confusion even among lawyers and magistrates. Hereunder, I propose a simple, direct and painless approach to arrive at an acceptable answer to the question. I. Real property tax is a direct tax on the ownership of lands and buildings or other improvements thereon, not specially exempted, and is payable regardless of whether the property is used or not, although the value may vary in accordance with such factor. The tax is usually single or indivisible, although the land and building or improvements erected thereon are assessed separately, except when the land and building or improvements belong to separate owners.2 The power to levy this tax is vested in local government units (LGUs). Thus, Republic Act (R.A.) No. 7160, or the Local Government Code (LGC) of 1991,3 provides: Under Book II, Title II, Chapter IV-Imposition of Real Property Tax Section 232. Power to Levy Real Property Tax.—A province or city or a municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted.4

A significant innovation in the LGC is the withdrawal, subject to some exceptions, of all tax exemption privileges of all natural or juridical persons, including government-owned and controlled corporations (GOCCs), thus: Under Book II, Title I, Chapter V-Miscellaneous Provisions Section 193. Withdrawal of Tax Exemption Privileges.—Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.5 This is where the controversy started. The airport authorities, formerly exempt from paying taxes, are now being obliged to pay real property tax on airport properties. To challenge the real property tax assessments, the airport authorities invoke two provisions of the LGC—one is stated in Book II, Title I, Chapter I on General Provisions, which reads: Section 133. Common Limitations on the Taxing Powers of Local Government Units.—Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: (a) Income tax, except when levied on banks and other financial institutions; (b) Documentary stamp tax; (c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided herein; (d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned; (e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees, or charges in any form whatsoever upon such goods or merchandise; (f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen; (g) Taxes on business enterprises certified to by the Board of Investments as pioneer or nonpioneer for a period of six (6) and four (4) years, respectively from the date of registration; (h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; (i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided herein;

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code; (k) Taxes on premiums paid by way of reinsurance or retrocession; (l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles; (m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided herein; (n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines" respectively; and (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units.6 and the other in Book II, Title I, Chapter IV on Imposition of Real Property Tax: Section 234. Exemptions from Real Property Tax.—The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes; (c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; (d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and (e) Machinery and equipment used for pollution control and environmental protection. Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.7 In Mactan Cebu International Airport Authority (MCIAA) v. Marcos,8 the Court ruled that Section 133(o) is qualified by Sections 232 and 234. Thus, MCIAA could not seek refuge in Section 133(o), but only in Section 234(a) provided it could establish that the properties were owned by the Republic of the Philippines. The Court ratiocinated, thus:

[R]eading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, "taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local government units"; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person," as provided in item (a) of the first paragraph of Section 234. As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section 234 which enumerates the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption insofar as real property taxes are concerned by limiting the retention only to those enumerated therein; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as to real property owned by the Republic of the Philippines or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or otherwise. Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by Sections 232 and 234. In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the local government units cannot extend to the levy of: (o) taxes, fees or charges of any kind on the National Government, its agencies or instrumentalities, and local government units.9 In addition, the Court went on to hold that the properties comprising the Lahug International Airport and the Mactan International Airport are no longer owned by the Republic, the latter having conveyed the same absolutely to MCIAA. About a decade later, however, the Court ruled in Manila International Airport Authority (MIAA) v. Court of Appeals,10 that the airport properties, this time comprising the Ninoy Aquino International Airport (NAIA), are exempt from real property tax. It justified its ruling by categorizing MIAA as a government instrumentality specifically exempted from paying tax by Section 133(o) of R.A. No. 7160. It further reasoned that the subject properties are properties of public dominion, owned by the Republic, and are only held in trust by MIAA, thus: Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation and status of government units, agencies and offices within the entire government machinery, MIAA is a government instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government

instrumentality is not a taxable person because it is not subject to "[t]axes, fees or charges of any kind" by local governments. The only exception is when MIAA leases its real property to a "taxable person" as provided in Section 234(a) of the Local Government Code, in which case the specific real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons like private parties are subject to real estate tax by the City of Parañaque. Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which includes public airports and seaports, as properties of public dominion and owned by the Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that properties of public dominion are not subject to execution or foreclosure sale.11 II. In this case, we are confronted by the very same issue. A basic principle in statutory construction decrees that, to discover the general legislative intent, the whole statute, and not only a particular provision thereof, should be considered. Every section, provision or clause in the law must be read and construed in reference to each other in order to arrive at the true intention of the legislature.12 Notably, Section 133 of the LGC speaks of the general limitations on the taxing power of LGUs. This is reinforced by its inclusion in Title I, Chapter I entitled "General Provisions" on "Local Government Taxation." On the other hand, Section 234, containing the enumeration of the specific exemptions from real property tax, is in Chapter IV entitled "Imposition of Real Property Tax" under Title II on "Real Property Taxation." When read together, Section 234, a specific provision, qualifies Section 133, a general provision. Indeed, whenever there is a particular enactment and a general enactment in the same statute, and the latter, taken in its most comprehensive sense, will overrule the former, the particular enactment must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply.13Otherwise stated, where there are two acts or provisions, one of which is special and particular, and certainly includes the matter in question, and the other general, which, if standing alone, will include the same matter and thus conflict with the special act or provision, the special must be taken as intended to constitute an exception to the general act or provision, especially when such general and special acts or provisions are contemporaneous, as the legislature is not to be presumed to have intended a conflict.14 Mactan Cebu therefore adheres to the intendment of the law insofar as it holds that MCIAA cannot seek refuge in Section 133(o); that it can only invoke Section 234(a) so long as it can establish that the properties were owned by the Republic of the Philippines. To repeat, Section 234, which specifies the properties exempted from real property tax, prevails over the general limitations on the taxing power of LGUs stated in Section 133. Thus, if Section 133(o) is not to be a haven, then, I respectfully submit that it is no longer necessary to dichotomize between a government instrumentality and a GOCC. As stressed by the Court in Mactan Cebu, what need only be ascertained is whether the airport properties are owned by the Republic if the airport Authority is to be freed from the burden of paying the real property tax.

Similarly, in MIAA, with the Court’s finding that the NAIA lands and buildings are owned by the Republic, the airport Authority does not have to pay real property tax to the City of Parañaque. III. As pointed out earlier, Mactan Cebu and MIAA ostensibly contradict each other. While the first considers airport properties as subject to real property tax, the second exempts the same from this imposition. The conflict, however, is more apparent than real. The divergent conclusions in the two cases proceed from different premises; hence, the resulting contradiction. To elucidate, in Mactan Cebu, the Court focused on the proper interpretation of Sections 133, 232 and 234 of the LGC, and emphasized the nature of the tax exemptions granted by law. Mactan Cebu categorized the exemptions as based on the ownership, character and use of the property, thus: (a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership are real properties owned by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v) a barangay, and (vi) registered cooperatives. (b) Character Exemptions. Exempted from real property taxes on the basis of their character are: (i) charitable institutions, (ii) houses and temples of prayer like churches, parsonages or convents appurtenant thereto, mosques, and (iii) non-profit or religious cemeteries. (c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and exclusive useto which they are devoted are: (i) all lands, buildings and improvements which are actually directly and exclusively used for religious, charitable or educational purposes; (ii) all machineries and equipment actually, directly and exclusively used by local water districts or by government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; and (iii) all machinery and equipment used for pollution control and environmental protection. To help provide a healthy environment in the midst of the modernization of the country, all machinery and equipment for pollution control and environmental protection may not be taxed by local governments.15 For the airport properties to be exempt from real property tax, they must fall within the mentioned categories. Logically, the airport properties can only qualify under the first exemption–by virtue of ownership. But, as already mentioned, the Court, nevertheless, ruled in Mactan Cebu that the said properties are no longer owned by the Republic having been conveyed absolutely to the airport Authority, thus: Section 15 of the petitioner’s Charter provides: Sec. 15. Transfer of Existing Facilities and Intangible Assets. — All existing public airport facilities, runways, lands, buildings and other properties, movable or immovable, belonging to or presently administered by the airports, and all assets, powers, rights, interests and privileges relating on airport works or air operations, including all equipment which are necessary for the operations of air navigation, aerodrome control towers, crash, fire, and rescue facilities are hereby transferred to the Authority: Provided, however, that the operations control of all equipment necessary for the operation of radio aids to air navigation, airways communication, the approach control office, and the area control center shall be retained by the Air Transportation Office. No equipment, however, shall be removed by the Air Transportation Office from Mactan without the concurrence of the Authority. The Authority may assist in the maintenance of the Air Transportation Office equipment.

The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan International Airport in the Province of Cebu," which belonged to the Republic of the Philippines, then under the Air Transportation Office (ATO). It may be reasonable to assume that the term "lands" refer to "lands" in Cebu City then administered by the Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on for real property taxes. This section involves a "transfer" of the "lands," among other things, to the petitioner and not just the transfer of the beneficial use thereof, with the ownership being retained by the Republic of the Philippines. This "transfer" is actually an absolute conveyance of the ownership thereof because the petitioner’s authorized capital stock consists of, inter alia, "the value of such real estate owned and/or administered by the airports." Hence, the petitioner is now the owner of the land in question and the exception in Section 234(c) of the LGC is inapplicable.16 In MIAA, a different conclusion was reached by the Court on two grounds. It first banked on the general provision limiting the taxing power of LGUs as stated in Section 133(o) of the LGC that, unless otherwise provided in the Code, the exercise of the taxing powers of LGUs shall not extend to the levy of taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and LGUs. The Court took pains in characterizing airport authorities as government instrumentalities, quite obviously, in order to apply the said provision. After doing so, the Court then shifted its attention and proceeded to focus on the issue of who owns the property to determine whether the case falls within the purview of Section 234(a). Ratiocinating that airport properties are of public dominion which pertain to the state and that the airport Authority is a mere trustee of the Republic, the Court ruled that the said properties are exempt from real property tax, thus: 2. Airport Lands and Buildings of MIAA are Owned by the Republic a. Airport Lands and Buildings are of Public Dominion The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. The Civil Code provides: xxxx No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like "roads, canals, rivers, torrents, ports and bridges constructed by the State," are owned by the State. The term "ports" includes seaports and airports. The MIAA Airport Lands and Buildings constitute a "port" constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines. The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the road. The tollway

system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads. The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one "intended for public use." Even if the government collects toll fees, the road is still "intended for public use" if anyone can use the road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public character of the road. The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed user’s tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. A user’s tax is more equitable — a principle of taxation mandated in the 1987 Constitution. The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for both international and domestic air traffic," are properties of public dominion because they are intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines. b. Airport Lands and Buildings are Outside the Commerce of Man The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man. The Court has ruled repeatedly that properties of public dominion are outside the commerce of man. As early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of man, thus: xxxx Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce of man: xxxx The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale. Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Parañaque can foreclose and compel the auction sale of the 600hectare runway of the MIAA for non-payment of real estate tax. Before MIAA can encumber the Airport Lands and Buildings, the President must first withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, which "remains to this day the existing general law governing the

classification and disposition of lands of the public domain other than timber and mineral lands," provide: xxxx Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present status as properties of public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains with the State or the Republic of the Philippines. The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states: xxxx There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from public use, they are properties of public dominion, owned by the Republic and outside the commerce of man. c. MIAA is a Mere Trustee of the Republic MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic, thus: xxxx In MIAA’s case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance. d. Transfer to MIAA was Meant to Implement a Reorganization The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air Transportation of the Department of Transportation and Communications. The MIAA Charter provides: xxxx The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory notes or even stock since MIAA is not a stock corporation. The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings to MIAA, thus: xxxx

The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAA’s assets adverse to the Republic. The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines." This only means that the Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only the "owner has the right to x x x dispose of a thing." Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings. At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic. e. Real Property Owned by the Republic is Not Taxable Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the Republic of the Philippines." Section 234(a) provides: xxxx This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing "[t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the "beneficial use thereof has been granted, for consideration or otherwise, to a taxable person." MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to real estate tax. However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to a taxable person and therefore such land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled: x x x x17

In the ultimate, I submit that the two rulings do not really contradict, but, instead, complement each one. Mactan Cebu provides the proper rule that, in order to determine whether airport properties are exempt from real property tax, it is Section 234, not Section 133, of the LGC that should be determinative of the properties exempt from the said tax. MIAA then lays down the correct doctrine that airport properties are of public dominion pertaining to the state, hence, falling within the ambit of Section 234(a) of the LGC. However, because of the confusion generated by the apparently conflicting decisions, a fine tuning of Mactan Cebu and MIAA is imperative. IV. Parenthetically, while the basis of a real property tax assessment is actual use,18 the tax itself is directed to the ownership of the lands and buildings or other improvements thereon.19 Public policy considerations dictate that property of the State and of its municipal subdivisions devoted to governmental uses and purposes is generally exempt from taxation although no express provision in the law is made therefor.20 In the instant case, the legislature specifically provided that real property owned by the Republic of the Philippines or any of its political subdivisions is exempt from real property tax, except, of course, when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. The principal basis of the exemption is likewise ownership.21 Indeed, emphasis should be made on the ownership of the property, rather than on the airport Authority being a taxable entity. This strategy makes it unnecessary to determine whether MIAA is an instrumentality or a GOCC, as painstakingly expounded by the ponente. Likewise, this approach provides a convenient escape from Justice Tinga’s proposition that the MIAA is a taxable entity liable to pay real property taxes, but the airport properties are exempt from levy on execution to satisfy the tax liability. I fear that this hypothesis may trench on the Constitutional principle of uniformity of taxation,22 because a tax lawfully levied and assessed against a taxable governmental entity will not be lienable while like assessments against all other taxable entities of the same tax district will be lienable.23 The better option, then, is for the Court to concentrate on the nature of the tax as a tax on ownership and to directly apply the pertinent real property tax provisions of the LGC, specifically those dealing with the exemption based on ownership, to the case at bar. The phrase, "property owned by the Republic" in Section 234, actually refers to those identified as public property in our laws. Following MIAA, we go to Articles 420 and 421 of the Civil Code which provide: Art. 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. Art. 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property.

From the afore-quoted, we readily deduce that airport properties are of public dominion. The "port" in the enumeration certainly includes an airport. With its beacons, landing fields, runways, and hangars, an airport is analogous to a harbor with its lights, wharves and docks; the one is the landing place and haven of ships that navigate the water, the other of those that navigate the air.24 Ample authority further supports the proposition that the term "roads" include runways and landing strips.25 Airports, therefore, being properties of public dominion, are of the Republic. At this point, I cannot help but air the observation that the legislature may have really intended the phrase "owned by the Republic" in Section 234 to refer to, among others, properties of public dominion. This is because "public dominion" does not carry the idea of ownership. Tolentino, an authority in civil law, explains: This article shows that there is a distinction between dominion and ownership. Private ownership is defined elsewhere in the Code; but the meaning of public dominion is nowhere defined. From the context of various provisions, it is clear that public dominion does not carry the idea of ownership; property of public dominion is not owned by the State, but pertains to the State, which as territorial sovereign exercises certain juridical prerogatives over such property. The ownership of such property, which has the special characteristics of a collective ownership for the general use and enjoyment, by virtue of their application to the satisfaction of the collective needs, is in the social group, whether national, provincial, or municipal. Their purpose is not to serve the State as a juridical person, but the citizens; they are intended for the common and public welfare, and so they cannot be the object of appropriation, either by the State or by private persons. The relation of the State to this property arises from the fact that the State is the juridical representative of the social group, and as such it takes care of them, preserves them and regulates their use for the general welfare.26 Be that as it may, the legislative intent to exempt from real property tax the properties of the Republic remains clear. The soil constituting the NAIA airport and the runways cannot be taxed, being properties of public dominion and pertaining to the Republic. This is true even if the title to the said property is in the name of MIAA. Practical ownership, rather than the naked legal title, must control, particularly because, as a matter of practice, the record title may be in the name of a government agency or department rather than in the name of the Republic. In this case, even if MIAA holds the record title over the airport properties, such holding can only be for the benefit of the Republic,27 especially when we consider that MIAA exercises an essentially public function.28 Further, where property, the title to which is in the name of the principal, is immune from taxes, it remains immune even if the title is standing in the name of an agent or trustee for such principal.29 Properties of public dominion are held in trust by the state or the Republic for the people.30 The national government and the bodies it has created that exercise delegated authority are, pursuant to the general principles of public law, mere agents of the Republic. Here, insofar as it deals with the subject properties, MIAA, a governmental creation exercising delegated powers, is a mere agent of the Republic, and the latter, to repeat, is the trustee of the properties for the benefit of all the people.31 Our ruling in MIAA, therefore, insofar as it holds that the airport Authority is a "trustee of the Republic," may not have been precise. It would have been more sound, legally that is, to consider the relationship between the Republic and the airport Authority as principal and agent, rather than as trustor and trustee. The history of the subject airport attests to this proposition, thus:

The country's premier airport was originally a US Air Force Base, which was turned over to the Philippine government in 1948. It started operations as a civil aviation airport with meager facilities, then consisting of the present domestic runway as its sole landing strip, and a small building northwest of this runway as its sole passenger terminal. The airport's international runway and associated taxiway were built in 1953; followed in 1961 by the construction of a control tower and a terminal building for the exclusive use of international passengers at the southwest intersection of the two runways. These structures formed the key components of an airport system that came to be known as the Manila International Airport (MIA). Like other national airports, the MIA was first managed and operated by the National Airports Corporation, an agency created on June 5, 1948 by virtue of Republic Act No. 224. This was abolished in 1951 and [in] its stead, the MIA Division was created under the Civil Aeronautics Administration (CAA) of the Department of Commerce and Industry. On October 19, 1956, the entire CAA, including the MIA Division, was transferred to the Department of Public Works, Transportation and Communications. In 1979, the CAA was renamed Bureau of Air Transportation following the creation of an exclusive Executive Department for Transportation and Communications. It is worthwhile to note at this point that while the MIA General Manager then carried the rank of a Division Chief only, it became a matter of policy and practice that he be appointed by no less than the President of the Philippines since the magnitude of its impact on the country's economy has acquired such national importance and recognition. During the seventies, the Philippine tourism and industry experienced a phenomenal upsurge in the country's manpower exports, resulting in more international flight frequencies to Manila which grew by more than four times. Executive Order No. 381 promulgated by then President Marcos authorized the development of Manila International Airport to meet the needs of the coming decades. A feasibility study/airport master plan was drawn up in 1973 by Airways Engineering Corporation, the financing of which was source[d] from a US$29.6 Million loan arranged with the Asian Development Bank (ADB). The detailed Engineering Design of the new MIA Development Project (MIADP) was undertaken by Renardet-Sauti/Transplan/F.F. Cruz Consultants while the design of the IPT building was prepared by Architect L.V. Locsin and Associates. In 1974, the final engineering design was adopted by the Philippine Government. This was concurred by the ADB on September 18, 1975 and became known as the "Scheme E-5 Modified Plan." Actual work on the project started in the second quarter of 1978. On March 4, 1982, EXECUTIVE ORDER NO. 778 was signed into law, abolishing the MIA Division under the BAT and creating in its stead the MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), vested with the power to administer and operate the Manila International Airport (MIA). Though MIAA was envisioned to be autonomous, Letter of Instructions (LOI) No. 1245, signed 31 May 1982, clarified that for purpose of policy integration and program coordination, the MIAA Management shall be under the general supervision but not control of the then Ministry of Transportation and Communications.

On July 21, 1983, Executive Order No. 903 was promulgated, providing that 65% of MIAA's annual gross operating income be reverted to the general fund for the maintenance and operation of other international and domestic airports in the country. It also scaled down the equity contribution of the National Government to MIAA: from PhP 10 billion to PhP 2.5 billion and removed the provision exempting MIAA from the payment of corporate tax. Another revision in the MIAA Charter followed with the promulgation of Executive Order No. 909, signed September 16, 1983, increasing the membership of the MIAA Board to nine (9) Directors with the inclusion of two other members to be appointed by the Philippine President. The last amendment to the MIAA Charter was made on July 26, 1987 through Executive Order No. 298 which provided for a more realistic income sharing arrangement between MIAA and the National Government. It provided that instead of the 65% of gross operating income, only 20% of MIAA's gross income, exclusive of income generated from the passenger terminal fees and utility charges, shall revert to the general fund of the National Treasury. EO 298 also reorganized the MIAA Board and raised the capitalization to its original magnitude of PhP 10 billion. The post 1986 Revolution period will not be complete without mention of the renaming of MIA to Ninoy Aquino International Airport with the enactment of Republic Act No. 6639 on August 17, 1987. While this legislation renamed the airport complex, the MIA Authority would still retain its corporate name since it did not amend the original or revised charters of MIAA.32 The MIAA Charter further provides that any portion of the airport cannot be disposed of by the Authority through sale or through any other mode unless specifically approved by the President of the Philippines.33 It is also noted that MIAA’s board of directors is practically controlled by the national government, the members thereof being officials of the executive branch.34 Likewise, the Authority cannot levy and collect dues, charges, fees or assessments for the use of the airport premises, works, appliances, facilities or concessions, or for any service provided by it, without the approval of several executive departments.35 These provisions are consistent with an agency relationship. Let it be remembered that one of the principal elements of an agency relationship is the existence of some degree of control by the principal over the conduct and activities of the agent. In this regard, while an agent undertakes to act on behalf of his principal and subject to his control, a trustee as such is not subject to the control of the beneficiary, except that he is under a duty to deal with the trust property for the latter’s benefit in accordance with the terms of the trust and can be compelled by the beneficiary to perform his duty.36 Finally, to consider MIAA as a "trustee of the Republic" will sanction the technical creation of a second trust in which the Republic, which is already a trustee, becomes the second trustor and the airport Authority a second trustee. Although I do not wish to belabor the point, I submit that the validity of such a scenario appears doubtful. Sufficient authority, however, supports the proposition that a trustee can delegate his duties to an agent provided he properly supervises and controls the agent’s conduct.37 In this case, we can rightly say that the Republic, as the trustee of the public dominion airport properties for the benefit of the people, has delegated to MIAA the administration of the said properties subject, as shown above, to the executive department’s supervision and control. In fine, the properties comprising the NAIA being of public dominion which pertain to the State, the same should be exempt from real property tax following Section 234(a) of the LGC. One last word. Given the foregoing disquisition, I find no necessity for this Court to abandon its ruling in Mactan. On the premise that the rationale for exempting airport properties from payment of real estate taxes is ownership thereof by the Republic, the Mactan ruling is impeccable in its logic and its

conclusion should remain undisturbed. Having harmonized the apparently divergent views, we need no longer fear any fierce disagreements in the future. I therefore vote to grant the petition. ANTONIO EDUARDO B. NACHURA Associate Justice G.R. No. 102976 October 25, 1995 IRON AND STEEL AUTHORITY, petitioner, vs. THE COURT OF APPEALS and MARIA CRISTINA FERTILIZER CORPORATION, respondents.

FELICIANO, J.: Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 dated 9 August 1973 in order, generally, to develop and promote the iron and steel industry in the Philippines. The objectives of the ISA are spelled out in the following terms: Sec. 2. Objectives — The Authority shall have the following objectives: (a) to strengthen the iron and steel industry of the Philippines and to expand the domestic and export markets for the products of the industry; (b) to promote the consolidation, integration and rationalization of the industry in order to increase industry capability and viability to service the domestic market and to compete in international markets; (c) to rationalize the marketing and distribution of steel products in order to achieve a balance between demand and supply of iron and steel products for the country and to ensure that industry prices and profits are at levels that provide a fair balance between the interests of investors, consumers suppliers, and the public at large; (d) to promote full utilization of the existing capacity of the industry, to discourage investment in excess capacity, and in coordination, with appropriate government agencies to encourage capital investment in priority areas of the industry; (e) to assist the industry in securing adequate and low-cost supplies of raw materials and to reduce the excessive dependence of the country on imports of iron and steel. The list of powers and functions of the ISA included the following: Sec. 4. Powers and Functions. — The authority shall have the following powers and functions: xxx xxx xxx

(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the companies involved if it is shown that such use of the State's power is necessary to implement the construction of capacity which is needed for the attainment of the objectives of the Authority; xxx xxx xxx (Emphasis supplied) P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August 1973.1 When ISA's original term expired on 10 October 1978, its term was extended for another ten (10) years by Executive Order No. 555 dated 31 August 1979. The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National Development Corporation which is itself an entity wholly owned by the National Government, embarked on an expansion program embracing, among other things, the construction of an integrated steel mill in Iligan City. The construction of such a steel mill was considered a priority and major industrial project of the Government. Pursuant to the expansion program of the NSC, Proclamation No. 2239 was issued by the President of the Philippines on 16 November 1982 withdrawing from sale or settlement a large tract of public land (totalling about 30.25 hectares in area) located in Iligan City, and reserving that land for the use and immediate occupancy of NSC. Since certain portions of the public land subject matter Proclamation No. 2239 were occupied by a non-operational chemical fertilizer plant and related facilities owned by private respondent Maria Cristina Fertilizer Corporation ("MCFC"), Letter of Instruction (LOI), No. 1277, also dated 16 November 1982, was issued directing the NSC to "negotiate with the owners of MCFC, for and on behalf of the Government, for the compensation of MCFC's present occupancy rights on the subject land." LOI No. 1277 also directed that should NSC and private respondent MCFC fail to reach an agreement within a period of sixty (60) days from the date of LOI No. 1277, petitioner ISA was to exercise its power of eminent domain under P.D. No. 272 and to initiate expropriation proceedings in respect of occupancy rights of private respondent MCFC relating to the subject public land as well as the plant itself and related facilities and to cede the same to the NSC.2 Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August 1983, petitioner ISA commenced eminent domain proceedings against private respondent MCFC in the Regional Trial Court, Branch 1, of Iligan City, praying that it (ISA) be places in possession of the property involved upon depositing in court the amount of P1,760,789.69 representing ten percent (10%) of the declared market values of that property. The Philippine National Bank, as mortgagee of the plant facilities and improvements involved in the expropriation proceedings, was also impleaded as party-defendant. On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA in turn placed NSC in possession and control of the land occupied by MCFC's fertilizer plant installation. The case proceeded to trial. While the trial was ongoing, however, the statutory existence of petitioner ISA expired on 11 August 1988. MCFC then filed a motion to dismiss, contending that no valid judgment could be rendered against ISA which had ceased to be a juridical person. Petitioner ISA filed its opposition to this motion. In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did dismiss the case. The dismissal was anchored on the provision of the Rules of Court stating that "only natural or juridical persons or entities authorized by law may be parties in a civil case."3 The

trial court also referred to non-compliance by petitioner ISA with the requirements of Section 16, Rule 3 of the Rules of Court.4 Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the expiration of its term, its juridical existence continued until the winding up of its affairs could be completed. In the alternative, petitioner ISA urged that the Republic of the Philippines, being the real party-in-interest, should be allowed to be substituted for petitioner ISA. In this connection, ISA referred to a letter from the Office of the President dated 28 September 1988 which especially directed the Solicitor General to continue the expropriation case. The trial court denied the motion for reconsideration, stating, among other things that: The property to be expropriated is not for public use or benefit [__] but for the use and benefit [__] of NSC, a government controlled private corporation engaged in private business and for profit, specially now that the government, according to newspaper reports, is offering for sale to the public its [shares of stock] in the National Steel Corporation in line with the pronounced policy of the present administration to disengage the government from its private business ventures.5 (Brackets supplied) Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court of Appeals affirmed the order of dismissal of the trial court. The Court of Appeals held that petitioner ISA, "a government regulatory agency exercising sovereign functions," did not have the same rights as an ordinary corporation and that the ISA, unlike corporations organized under the Corporation Code, was not entitled to a period for winding up its affairs after expiration of its legally mandated term, with the result that upon expiration of its term on 11 August 1987, ISA was "abolished and [had] no more legal authority to perform governmental functions." The Court of Appeals went on to say that the action for expropriation could not prosper because the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become ineffective as a result of the delegate's dissolution, and could not be continued in the name of Republic of the Philippines, represented by the Solicitor General: It is our considered opinion that under the law, the complaint cannot prosper, and therefore, has to be dismissed without prejudice to the refiling of a new complaint for expropriation if the Congress sees it fit." (Emphases supplied) At the same time, however, the Court of Appeals held that it was premature for the trial court to have ruled that the expropriation suit was not for a public purpose, considering that the parties had not yet rested their respective cases. In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted the action for expropriation in its capacity as agent of the Republic of the Philippines, the Republic, as principal of ISA, is entitled to be substituted and to be made a party-plaintiff after the agent ISA's term had expired. Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a law further extending the term of ISA after 11 August 1988 evinced a "clear legislative intent to terminate the juridical existence of ISA," and that the authorization issued by the Office of the President to the Solicitor General for continued prosecution of the expropriation suit could not prevail over such negative intent. It is also contended that the exercise of the eminent domain by ISA or the Republic is improper, since that power would be exercised "not on behalf of the National Government but for the benefit of NSC."

The principal issue which we must address in this case is whether or not the Republic of the Philippines is entitled to be substituted for ISA in view of the expiration of ISA's term. As will be made clear below, this is really the only issue which we must resolve at this time. Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action: Sec. 1. Who May Be Parties. — Only natural or juridical persons or entities authorized by law may be parties in a civil action. Under the above quoted provision, it will be seen that those who can be parties to a civil action may be broadly categorized into two (2) groups: (a) those who are recognized as persons under the law whether natural, i.e., biological persons, on the one hand, or juridical person such as corporations, on the other hand; and (b) entities authorized by law to institute actions. Examination of the statute which created petitioner ISA shows that ISA falls under category (b) above. P.D. No. 272, as already noted, contains express authorization to ISA to commence expropriation proceedings like those here involved: Sec. 4. Powers and Functions. — The Authority shall have the following powers and functions: xxx xxx xxx (j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the companies involved if it is shown that such use of the State's power is necessary to implement the construction of capacity which is needed for the attainment of the objectives of the Authority; xxx xxx xxx (Emphasis supplied) It should also be noted that the enabling statute of ISA expressly authorized it to enter into certain kinds of contracts "for and in behalf of the Government" in the following terms: xxx xxx xxx (i) to negotiate, and when necessary, to enter into contracts for and in behalf of the government, for the bulk purchase of materials, supplies or services for any sectors in the industry, and to maintain inventories of such materials in order to insure a continuous and adequate supply thereof and thereby reduce operating costs of such sector; xxx xxx xxx (Emphasis supplied)

Clearly, ISA was vested with some of the powers or attributes normally associated with juridical personality. There is, however, no provision in P.D. No. 272 recognizing ISA as possessing general or comprehensive juridical personality separate and distinct from that of the Government. The ISA in fact appears to the Court to be a non-incorporated agency or instrumentality of the Republic of the Philippines, or more precisely of the Government of the Republic of the Philippines. It is common knowledge that other agencies or instrumentalities of the Government of the Republic are cast in corporate form, that is to say, are incorporated agencies or instrumentalities, sometimes with and at other times without capital stock, and accordingly vested with a juridical personality distinct from the personality of the Republic. Among such incorporated agencies or instrumentalities are: National Power Corporation;6 Philippine Ports Authority;7 National Housing Authority;8 Philippine National Oil Company;9 Philippine National Railways; 10 Public Estates Authority; 11 Philippine Virginia Tobacco Administration,12 and so forth. It is worth noting that the term "Authority" has been used to designate both incorporated and non-incorporated agencies or instrumentalities of the Government. We consider that the ISA is properly regarded as an agent or delegate of the Republic of the Philippines. The Republic itself is a body corporate and juridical person vested with the full panoply of powers and attributes which are compendiously described as "legal personality." The relevant definitions are found in the Administrative Code of 1987: Sec. 2. General Terms Defined. — Unless the specific words of the text, or the context as a whole, or a particular statute, require a different meaning: (1) Government of the Republic of the Philippines refers to the corporate governmental entity through which the functions of government are exercised throughout the Philippines, including, save as the contrary appears from the context, the various arms through which political authority is made effective in the Philippines, whether pertaining to the autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms of local government. xxx xxx xxx (4) Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein. xxx xxx xxx (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations. xxx xxx xxx (Emphases supplied) When the statutory term of a non-incorporated agency expires, the powers, duties and functions as well as the assets and liabilities of that agency revert back to, and are re-assumed by, the Republic of the Philippines, in the absence of special provisions of law specifying some other disposition thereof such as, e.g., devolution or transmission of such powers, duties, functions, etc. to some

other identified successor agency or instrumentality of the Republic of the Philippines. When the expiring agency is an incorporated one, the consequences of such expiry must be looked for, in the first instance, in the charter of that agency and, by way of supplementation, in the provisions of the Corporation Code. Since, in the instant case, ISA is a non-incorporated agency or instrumentality of the Republic, its powers, duties, functions, assets and liabilities are properly regarded as folded back into the Government of the Republic of the Philippines and hence assumed once again by the Republic, no special statutory provision having been shown to have mandated succession thereto by some other entity or agency of the Republic. The procedural implications of the relationship between an agent or delegate of the Republic of the Philippines and the Republic itself are, at least in part, spelled out in the Rules of Court. The general rule is, of course, that an action must be prosecuted and defended in the name of the real party in interest. (Rule 3, Section 2) Petitioner ISA was, at the commencement of the expropriation proceedings, a real party in interest, having been explicitly authorized by its enabling statute to institute expropriation proceedings. The Rules of Court at the same time expressly recognize the role of representative parties: Sec. 3. Representative Parties. — A trustee of an expressed trust, a guardian, an executor or administrator, or a party authorized by statute may sue or be sued without joining the party for whose benefit the action is presented or defended; but the court may, at any stage of the proceedings, order such beneficiary to be made a party. . . . . (Emphasis supplied) In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or delegate or representative of the Republic of the Philippines pursuant to its authority under P.D. No. 272. The present expropriation suit was brought on behalf of and for the benefit of the Republic as the principal of ISA. Paragraph 7 of the complaint stated: 7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for the construction and installation of iron and steel manufacturing facilities that are indispensable to the integration of the iron and steel making industry which is vital to the promotion of public interest and welfare. (Emphasis supplied) The principal or the real party in interest is thus the Republic of the Philippines and not the National Steel Corporation, even though the latter may be an ultimate user of the properties involved should the condemnation suit be eventually successful. From the foregoing premises, it follows that the Republic of the Philippines is entitled to be substituted in the expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term of ISA having expired. Put a little differently, the expiration of ISA's statutory term did not by itself require or justify the dismissal of the eminent domain proceedings. It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration of ISA's statutory term, was not a ground for dismissal of such proceedings since a party may be dropped or added by order of the court, on motion of any party or on the court's own initiative at any stage of the action and on such terms as are just. 13 In the instant case, the Republic has precisely moved to take over the proceedings as party-plaintiff. In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, 14 the Court recognized that the Republic may initiate or participate in actions involving its agents. There the Republic of the Philippines was held to be a proper party to sue for recovery of possession of property although the

"real" or registered owner of the property was the Philippine Ports Authority, a government agency vested with a separate juridical personality. The Court said: It can be said that in suing for the recovery of the rentals, the Republic of the Philippines acted as principal of the Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as its agent. . . .15 (Emphasis supplied) In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again another proceeding, as the trial court and Court of Appeals had required, was to generate unwarranted delay and create needless repetition of proceedings: More importantly, as we see it, dismissing the complaint on the ground that the Republic of the Philippines is not the proper party would result in needless delay in the settlement of this matter and also in derogation of the policy against multiplicity of suits. Such a decision would require the Philippine Ports Authority to refile the very same complaint already proved by the Republic of the Philippines and bring back as it were to square one.16 (Emphasis supplied) As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the Philippines for the ISA upon the ground that the action for expropriation could not prosper because the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become legally ineffective by reason of the expiration of the statutory term of the agent or delegated i.e., ISA. Since, as we have held above, the powers and functions of ISA have reverted to the Republic of the Philippines upon the termination of the statutory term of ISA, the question should be addressed whether fresh legislative authority is necessary before the Republic of the Philippines may continue the expropriation proceedings initiated by its own delegate or agent. While the power of eminent domain is, in principle, vested primarily in the legislative department of the government, we believe and so hold that no new legislative act is necessary should the Republic decide, upon being substituted for ISA, in fact to continue to prosecute the expropriation proceedings. For the legislative authority, a long time ago, enacted a continuing or standing delegation of authority to the President of the Philippines to exercise, or cause the exercise of, the power of eminent domain on behalf of the Government of the Republic of the Philippines. The 1917 Revised Administrative Code, which was in effect at the time of the commencement of the present expropriation proceedings before the Iligan Regional Trial Court, provided that: Sec. 64. Particular powers and duties of the President of the Philippines. — In addition to his general supervisory authority, the President of the Philippines shall have such other specific powers and duties as are expressly conferred or imposed on him by law, and also, in particular, the powers and duties set forth in this Chapter. Among such special powers and duties shall be: xxx xxx xxx (h) To determine when it is necessary or advantageous to exercise the right of eminent domain in behalf of the Government of the Philippines; and to direct the Secretary of Justice, where such act is deemed advisable, to cause the condemnation proceedings to be begun in the court having proper jurisdiction. (Emphasis supplied)

The Revised Administrative Code of 1987 currently in force has substantially reproduced the foregoing provision in the following terms: Sec. 12. Power of eminent domain. — The President shall determine when it is necessary or advantageous to exercise the power of eminent domain in behalf of the National Government, and direct the Solicitor General, whenever he deems the action advisable, to institute expopriation proceedings in the proper court. (Emphasis supplied) In the present case, the President, exercising the power duly delegated under both the 1917 and 1987 Revised Administrative Codes in effect made a determination that it was necessary and advantageous to exercise the power of eminent domain in behalf of the Government of the Republic and accordingly directed the Solicitor General to proceed with the suit. 17 It is argued by private respondent MCFC that, because Congress after becoming once more the depository of primary legislative power, had not enacted a statute extending the term of ISA, such non-enactment must be deemed a manifestation of a legislative design to discontinue or abort the present expropriation suit. We find this argument much too speculative; it rests too much upon simple silence on the part of Congress and casually disregards the existence of Section 12 of the 1987 Administrative Code already quoted above. Other contentions are made by private respondent MCFC, such as, that the constitutional requirement of "public use" or "public purpose" is not present in the instant case, and that the indispensable element of just compensation is also absent. We agree with the Court of Appeals in this connection that these contentions, which were adopted and set out by the Regional Trial Court in its order of dismissal, are premature and are appropriately addressed in the proceedings before the trial court. Those proceedings have yet to produce a decision on the merits, since trial was still on going at the time the Regional Trial Court precipitously dismissed the expropriation proceedings. Moreover, as a pragmatic matter, the Republic is, by such substitution as party-plaintiff, accorded an opportunity to determine whether or not, or to what extent, the proceedings should be continued in view of all the subsequent developments in the iron and steel sector of the country including, though not limited to, the partial privatization of the NSC. WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to the extent that it affirmed the trial court's order dismissing the expropriation proceedings, is hereby REVERSED and SET ASIDE and the case is REMANDED to the court a quo which shall allow the substitution of the Republic of the Philippines for petitioner Iron and Steel Authority and for further proceedings consistent with this Decision. No pronouncement as to costs. SO ORDERED. Romero, Melo, Vitug and Panganiban, JJ., concur. Footnotes 1 Second paragraph, Section 1, P.D. No. 272. 2 The relevant terms of LOI No. 1277 read as follows: "(2) In the event that NSC and MCFC fail to agree on the foregoing within sixty (60) days from the date hereof, the Iron and Steel

Authority (ISA) shall exercise its authority under Presidential Decree (PD) No. 272, as amended, to initiate the expropriation of the aforementioned occupancy rights of MCFC on the subject lands as well as the plant, structures, equipment, machinery and related facilities, for and on behalf of NSC, and thereafter cede the same to NSC. During the pendency of the expopriation proceedings, NSC shall take possession of the property, subject to bonding and other requirements of P.D. No. 1533. xxx xxx xxx 3 Section 1, Rule 3. 4 Section 16, Rule 3 of the Rules of Court reads: "Sec. 16. Duty of attorney upon death, incapacity or incompetency of party. — Whenever a party to a pending case dies becomes incapacitated or incompetent, it shall be the duty of his attorney to inform the court promptly of such death, incapacity or incompetency, and to give the name and residence of his executor, administrator, guardian or other legal representative." 5 RTC Order dated 22 March 1989, p. 2; CA Rollo, p. 24. 6 Section 2, Republic Act No. 6395, 10 September 1971. 7 Section 4, Presidential Decree No. 857, 23 December 1975. 8 Section 2, Presidential Decree No. 757, 31 July 1975. 9 Section 3, Presidential Decree No. 334, 9 November 1973. 10 Section 1, Republic Act No. 4156, 20 June 1964. 11 Sections 3 and 5, Presidential Decree No. 1084, 4 February 1977. 12 Sections 3 and 4(k), Republic Act No. 2265, 19 June 1959. 13 Rule 3, Section 11, Rules of Court. See, in this connection, St. Anne Medical Center v. Parel (176 SCRA 755 [1989]), where the petition had been filed in the name of "St. Anne Medical Center" which was not a juridical person and where this Court invoked Rule 3, Section 11 and impleaded the real party-in-interest. 14 147 SCRA 276 (1987). 15 147 SCRA at 279. 16 146 SCRA at 279. In Lagazon v. Reyes (166 SCRA 386 [1988]), the Court said that

"the aim of [Rule 3, Section 11] is that all persons materially interested, legally or beneficially, in the subject matter of the suit should be made parties to it in order that the whole matter in dispute may be determined once and for all in one litigation, thus avoiding multiplicity of suits . . . ." (166 SCRA at 392) 17 Letter of 28 September 1988; Records, p. 1297.

The Lawphil Project - Arellano Law Foundation

G.R. No. L-55963 December 1, 1989 SPOUSES JOSE FONTANILLA AND VIRGINIA FONTANILLA, petitioners, vs. HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION ADMINISTRATION, respondents. G.R. No. L-61045 December 1, 1989 NATIONAL IRRIGATION ADMINISTRATION, appellant, vs. SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees. Cecilio V. Suarez, Jr. for Spouses Fontanilla. Felicisimo C. Villaflor for NIA.

PARAS, J.: In G.R. No. L-55963, the petition for review on certiorari seeks the affirmance of the decision dated March 20, 1980 of the then Court of First Instance of Nueva Ecija, Branch VIII, at San Jose City and its modification with respect to the denial of petitioner's claim for moral and exemplary damages and attorneys fees. In G.R. No. 61045, respondent National Irrigation Administration seeks the reversal of the aforesaid decision of the lower court. The original appeal of this case before the Court of Appeals was certified to this Court and in the resolution of July 7, 1982, it was docketed with the aforecited number. And in the resolution of April 3, this case was consolidated with G.R. No. 55963. It appears that on August 21, 1976 at about 6:30 P.M., a pickup owned and operated by respondent National Irrigation Administration, a government agency bearing Plate No. IN-651, then driven officially by Hugo Garcia, an employee of said agency as its regular driver, bumped a bicycle ridden by Francisco Fontanilla, son of herein petitioners, and Restituto Deligo, at Maasin, San Jose City along the Maharlika Highway. As a result of the impact, Francisco Fontanilla and Restituto Deligo were injured and brought to the San Jose City Emergency Hospital for treatment. Fontanilla was later transferred to the Cabanatuan Provincial Hospital where he died.

Garcia was then a regular driver of respondent National Irrigation Administration who, at the time of the accident, was a licensed professional driver and who qualified for employment as such regular driver of respondent after having passed the written and oral examinations on traffic rules and maintenance of vehicles given by National Irrigation Administration authorities. The within petition is thus an off-shot of the action (Civil Case No. SJC-56) instituted by petitionersspouses on April 17, 1978 against respondent NIA before the then Court of First Instance of Nueva Ecija, Branch VIII at San Jose City, for damages in connection with the death of their son resulting from the aforestated accident. After trial, the trial court rendered judgment on March 20, 1980 which directed respondent National Irrigation Administration to pay damages (death benefits) and actual expenses to petitioners. The dispositive portion of the decision reads thus: . . . . . Judgment is here rendered ordering the defendant National Irrigation Administration to pay to the heirs of the deceased P12,000.00 for the death of Francisco Fontanilla; P3,389.00 which the parents of the deceased had spent for the hospitalization and burial of the deceased Francisco Fontanilla; and to pay the costs. (Brief for the petitioners spouses Fontanilla, p. 4; Rollo, p. 132) Respondent National Irrigation Administration filed on April 21, 1980, its motion for reconsideration of the aforesaid decision which respondent trial court denied in its Order of June 13, 1980. Respondent National Irrigation Administration thus appealed said decision to the Court of Appeals (C.A.-G.R. No. 67237- R) where it filed its brief for appellant in support of its position. Instead of filing the required brief in the aforecited Court of Appeals case, petitioners filed the instant petition with this Court. The sole issue for the resolution of the Court is: Whether or not the award of moral damages, exemplary damages and attorney's fees is legally proper in a complaint for damages based on quasi-delict which resulted in the death of the son of herein petitioners. Petitioners allege: 1. The award of moral damages is specifically allowable. under paragraph 3 of Article 2206 of the New Civil Code which provides that the spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased. Should moral damages be granted, the award should be made to each of petitionersspouses individually and in varying amounts depending upon proof of mental and depth of intensity of the same, which should not be less than P50,000.00 for each of them. 2. The decision of the trial court had made an impression that respondent National Irrigation Administration acted with gross negligence because of the accident and the subsequent failure of the National Irrigation Administration personnel including the driver to stop in order to give assistance to the, victims. Thus, by reason of the gross negligence of respondent, petitioners become entitled to exemplary damages under Arts. 2231 and 2229 of the New Civil Code. 3. Petitioners are entitled to an award of attorney's fees, the amount of which (20%) had been sufficiently established in the hearing of May 23, 1979.

4. This petition has been filed only for the purpose of reviewing the findings of the lower court upon which the disallowance of moral damages, exemplary damages and attorney's fees was based and not for the purpose of disturbing the other findings of fact and conclusions of law. The Solicitor General, taking up the cudgels for public respondent National Irrigation Administration, contends thus: 1. The filing of the instant petition is rot proper in view of the appeal taken by respondent National Irrigation Administration to the Court of Appeals against the judgment sought to be reviewed. The focal issue raised in respondent's appeal to the Court of Appeals involves the question as to whether or not the driver of the vehicle that bumped the victims was negligent in his operation of said vehicle. It thus becomes necessary that before petitioners' claim for moral and exemplary damages could be resolved, there should first be a finding of negligence on the part of respondent's employee-driver. In this regard, the Solicitor General alleges that the trial court decision does not categorically contain such finding. 2. The filing of the "Appearance and Urgent Motion For Leave to File PlaintiffAppellee's Brief" dated December 28, 1981 by petitioners in the appeal (CA-G.R. No. 67237-R; and G. R. No.61045) of the respondent National Irrigation Administration before the Court of Appeals, is an explicit admission of said petitioners that the herein petition, is not proper. Inconsistent procedures are manifest because while petitioners question the findings of fact in the Court of Appeals, they present only the questions of law before this Court which posture confirms their admission of the facts. 3. The fact that the parties failed to agree on whether or not negligence caused the vehicular accident involves a question of fact which petitioners should have brought to the Court of Appeals within the reglementary period. Hence, the decision of the trial court has become final as to the petitioners and for this reason alone, the petition should be dismissed. 4. Respondent Judge acted within his jurisdiction, sound discretion and in conformity with the law. 5. Respondents do not assail petitioners' claim to moral and exemplary damages by reason of the shock and subsequent illness they suffered because of the death of their son. Respondent National Irrigation Administration, however, avers that it cannot be held liable for the damages because it is an agency of the State performing governmental functions and driver Hugo Garcia was a regular driver of the vehicle, not a special agent who was performing a job or act foreign to his usual duties. Hence, the liability for the tortious act should. not be borne by respondent government agency but by driver Garcia who should answer for the consequences of his act. 6. Even as the trial court touched on the failure or laxity of respondent National Irrigation Administration in exercising due diligence in the selection and supervision of its employee, the matter of due diligence is not an issue in this case since driver Garcia was not its special agent but a regular driver of the vehicle.

The sole legal question on whether or not petitioners may be entitled to an award of moral and exemplary damages and attorney's fees can very well be answered with the application of Arts. 2176 and 2180 of theNew Civil Code. Art. 2176 thus provides: Whoever by act omission causes damage to another, there being fault or negligence, is obliged to pay for damage done. Such fault or negligence, if there is no preexisting cotractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter Paragraphs 5 and 6 of Art. 21 80 read as follows: Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even the though the former are not engaged in any business or industry. The State is responsible in like manner when it acts through a special agent.; but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in Art. 2176 shall be applicable. The liability of the State has two aspects. namely: 1. Its public or governmental aspects where it is liable for the tortious acts of special agents only. 2. Its private or business aspects (as when it engages in private enterprises) where it becomes liable as an ordinary employer. (p. 961, Civil Code of the Philippines; Annotated, Paras; 1986 Ed. ). In this jurisdiction, the State assumes a limited liability for the damage caused by the tortious acts or conduct of its special agent. Under the aforequoted paragrah 6 of Art. 2180, the State has voluntarily assumed liability for acts done through special agents. The State's agent, if a public official, must not only be specially commissioned to do a particular task but that such task must be foreign to said official's usual governmental functions. If the State's agent is not a public official, and is commissioned to perform non-governmental functions, then the State assumes the role of an ordinary employer and will be held liable as such for its agent's tort. Where the government commissions a private individual for a special governmental task, it is acting through a special agent within the meaning of the provision. (Torts and Damages, Sangco, p. 347, 1984 Ed.) Certain functions and activities, which can be performed only by the government, are more or less generally agreed to be "governmental" in character, and so the State is immune from tort liability. On the other hand, a service which might as well be provided by a private corporation, and particularly when it collects revenues from it, the function is considered a "proprietary" one, as to which there may be liability for the torts of agents within the scope of their employment. The National Irrigation Administration is an agency of the government exercising proprietary functions, by express provision of Rep. Act No. 3601. Section 1 of said Act provides:

Section 1. Name and domicile.-A body corporate is hereby created which shall be known as the National Irrigation Administration, hereinafter called the NIA for short, which shall be organized immediately after the approval of this Act. It shall have its principal seat of business in the City of Manila and shall have representatives in all provinces for the proper conduct of its business. Section 2 of said law spells out some of the NIA's proprietary functions. ThusSec. 2. Powers and objectives.-The NIA shall have the following powers and objectives: (a) x x x x x x x x x x x x x x x x x x (b) x x x x x x x x x x x x x x x x x x (c) To collect from the users of each irrigation system constructed by it such fees as may be necessary to finance the continuous operation of the system and reimburse within a certain period not less than twenty-five years cost of construction thereof; and (d) To do all such other tthings and to transact all such business as are directly or indirectly necessary, incidental or conducive to the attainment of the above objectives. Indubitably, the NIA is a government corporation with juridical personality and not a mere agency of the government. Since it is a corporate body performing non-governmental functions, it now becomes liable for the damage caused by the accident resulting from the tortious act of its driveremployee. In this particular case, the NIA assumes the responsibility of an ordinary employer and as such, it becomes answerable for damages. This assumption of liability, however, is predicated upon the existence of negligence on the part of respondent NIA. The negligence referred to here is the negligence of supervision. At this juncture, the matter of due diligence on the part of respondent NIA becomes a crucial issue in determining its liability since it has been established that respondent is a government agency performing proprietary functions and as such, it assumes the posture of an ordinary employer which, under Par. 5 of Art. 2180, is responsible for the damages caused by its employees provided that it has failed to observe or exercise due diligence in the selection and supervision of the driver. It will be noted from the assailed decision of the trial court that "as a result of the impact, Francisco Fontanilla was thrown to a distance 50 meters away from the point of impact while Restituto Deligo was thrown a little bit further away. The impact took place almost at the edge of the cemented portion of the road." (Emphasis supplied,) [page 26, Rollo] The lower court further declared that "a speeding vehicle coming in contact with a person causes force and impact upon the vehicle that anyone in the vehicle cannot fail to notice. As a matter of fact, the impact was so strong as shown by the fact that the vehicle suffered dents on the right side of the radiator guard, the hood, the fender and a crack on the radiator as shown by the investigation report (Exhibit "E"). (Emphasis supplied) [page 29, Rollo]

It should be emphasized that the accident happened along the Maharlika National Road within the city limits of San Jose City, an urban area. Considering the fact that the victim was thrown 50 meters away from the point of impact, there is a strong indication that driver Garcia was driving at a high speed. This is confirmed by the fact that the pick-up suffered substantial and heavy damage as above-described and the fact that the NIA group was then "in a hurry to reach the campsite as early as possible", as shown by their not stopping to find out what they bumped as would have been their normal and initial reaction. Evidently, there was negligence in the supervision of the driver for the reason that they were travelling at a high speed within the city limits and yet the supervisor of the group, Ely Salonga, failed to caution and make the driver observe the proper and allowed speed limit within the city. Under the situation, such negligence is further aggravated by their desire to reach their destination without even checking whether or not the vehicle suffered damage from the object it bumped, thus showing imprudence and reckelessness on the part of both the driver and the supervisor in the group. Significantly, this Court has ruled that even if the employer can prove the diligence in the selection and supervision (the latter aspect has not been established herein) of the employee, still if he ratifies the wrongful acts, or take no step to avert further damage, the employer would still be liable. (Maxion vs. Manila Railroad Co., 44 Phil. 597). Thus, too, in the case of Vda. de Bonifacio vs. B.L.T. Bus Co. (L-26810, August 31, 1970, 34 SCRA 618), this Court held that a driver should be especially watchful in anticipation of others who may be using the highway, and his failure to keep a proper look out for reasons and objects in the line to be traversed constitutes negligence. Considering the foregoing, respondent NIA is hereby directed to pay herein petitioners-spouses the amounts of P12,000.00 for the death of Francisco Fontanilla; P3,389.00 for hospitalization and burial expenses of the aforenamed deceased; P30,000.00 as moral damages; P8,000.00 as exemplary damages and attorney's fees of 20% of the total award. SO ORDERED. G.R. Nos. 95122-23

May 31, 1991

BOARD OF COMMISSIONERS (COMMISSION ON IMMIGRATION AND DEPORTATION), BOARD OF SPECIAL INQUIRY, COMMISSIONER ANDREA D. DOMINGO, ASSOCIATE COMMISSIONER JORGE V. SARMIENTO, ACTING ASSOCIATE COMMISSIONER REGINO R. SANTIAGO, MEMBERS OF THE BOARD OF SPECIAL INQUIRY, ESTANISLAO CANTA, LEO MAGAHOM and BENJAMIN KALAW, petitioners, vs. HON. JOSELITO DELA ROSA, Presiding Judge, RTC Manila, Branch 29, WILLIAM T. GATCHALIAN,respondents. BOARD OF COMMISSIONERS (COMMISSION ON IMMIGRATION AND DEPORTATION), BOARD OF SPECIAL INQUIRY, COMMISSIONER ANDREA D. DOMINGO, ASSOCIATE COMMISSIONER JORGE V. SARMIENTO, ACTING ASSOCIATE COMMISSIONER REGINO R. SANTIAGO, MEMBERS OF THE BOARD OF SPECIAL INQUIRY, ESTANISLAO CANTA, LEO MAGAHOM and BENJAMIN KALAW, petitioners, vs. HON. TERESITA DIZON CAPULONG, Presiding Judge, RTC Branch 172, Valenzuela, Metro Manila, DEE HUA T. GATCHALIAN, SHERWING T. GATCHALIAN, KENNETH T. GATCHALIAN, REXLON T. GATCHALIAN, and WESLIE T. GATCHALIAN, respondents.

G.R. Nos. 95612-13

May 31, 1991

WILLIAM T. GATCHALIAN, petitioner, vs. BOARD OF COMMISSIONERS (COMMISSION ON IMMIGRATION AND DEPORTATION), et al., respondents. The Solicitor General for petitioners. edesma, Saludo & Associates for respondent William Gatchalian. Cervo and Tanay Law Office for respondent T.D. Capulong, D.H.T. Gatchalian, et al.

BIDIN, J.: This is a petition for certiorari and prohibition filed by the Solicitor General seeking 1) to set aside the Resolution/Temporary Restraining Order dated September 7, 1990, issued by respondent Judge de la Rosa in Civil Case No. 90-54214 which denied petitioners' motion to dismiss and restrained petitioners from commencing or continuing with any of the proceedings which would lead to the deportation of respondent William Gatchalian, docketed as D.C. No. 90-523, as well as the Order of respondent Judge Capulong dated September 6, 1990 in Civil Case No. 3431-V-90 which likewise enjoined petitioners from proceeding with the deportation charges against respondent Gatchalian, and 2) to prohibit respondent judges from further acting in the aforesaid civil cases. On October 23, 1990, respondent Gatchalian filed his Comment with Counter-Petition, docketed as G.R. Nos. 96512-13, alleging lack of jurisdiction on the part of respondent Board of Commissioners, et al., over his person with prayer that he be declared a Filipino citizen, or in the alternative, to remand the case to the trial court for further proceedings. On December 13, 1990, petitioners filed their comment to respondent Gatchalian's counter-petition. The Court considers the comment filed by respondent Gatchalian as answer to the petition and petitioners' comment as answer to the counter-petition and gives due course to the petitions. There is no dispute as to the following facts: On July 12, 1960, Santiago Gatchalian, grandfather of William Gatchalian, was recognized by the Bureau of Immigration as a native born Filipino citizen following the citizenship of his natural mother, Marciana Gatchalian (Annex "1", counter-petition). Before the Citizenship Evaluation Board, Santiago Gatchalian testified that he has five (5) children with his wife Chu Gim Tee, namely: Jose Gatchalian, Gloria Gatchalian, Francisco Gatchalian, Elena Gatchalian and Benjamin Gatchalian (Annex "2", counter-petition). On June 27, 1961, William Gatchalian, then a twelve-year old minor, arrived in Manila from Hongkong together with Gloria, Francisco, and Johnson, all surnamed Gatchalian. They had with them Certificates of Registration and Identity issued by the Philippine Consulate in Hongkong based on a cablegram bearing the signature of the then Secretary of Foreign Affairs, Felixberto Serrano, and sought admission as Filipino citizens. Gloria and Francisco are the daughter and son, respectively, of Santiago Gatchalian; while William and Johnson are the sons of Francisco.

After investigation, the Board of Special Inquiry No. 1 rendered a decision dated July 6, 1961, admitting William Gatchalian and his companions as Filipino citizens (Annex "C", petition). As a consequence thereof, William Gatchalian was issued Identification Certificate No. 16135 by the immigration authorities on August 16, 1961 (Annex "D", petition). On January 24, 1962, the then Secretary of Justice issued Memorandum No. 9 setting aside all decisions purporting to have been rendered by the Board of Commissioners on appeal or on review motu proprio of decisions of the Board of Special Inquiry. The same memorandum directed the Board of Commissioners to review all cases where entry was allowed on the ground that the entrant was a Philippine citizen. Among those cases was that of William and others. On July 6, 1962, the new Board of Commissioners, after a review motu proprio of the proceedings had in the Board of Special Inquiry, reversed the decision of the latter and ordered the exclusion of, among others, respondent Gatchalian (Annex "E", petition). A warrant of exclusion also dated July 6, 1962 was issued alleging that "the decision of the Board of Commissioners dated July 6, 1962 . . . has now become final and executory (Annex "F", petition). The actual date of rendition of said decision by the Board of Commissioners (whether on July 6, 1962 or July 20, 1962) became the subject of controversy in the 1967 case of Arocha vs. Vivo (21 SCRA 532) wherein this Court sustained the validity of the decision of the new Board of Commissioners having been promulgated on July 6, 1962, or within the reglementary period for review. Sometime in 1973, respondent Gatchalian, as well as the others covered by the July 6, 1962 warrant of exclusion, filed a motion for re-hearing with the Board of Special Inquiry where the deportion case against them was assigned. On March 14, 1973, the Board of Special Inquiry recommended to the then Acting Commissioner Victor Nituda the reversal of the July 6, 1962 decision of the then Board of Commissioners and the recall of the warrants of arrest issued therein (Annex "5", counter-petition). On March 15, 1973, Acting Commissioner Nituda issued an order reaffirming the July 6, 1961 decision of the Board of Special Inquiry thereby admitting respondent Gatchalian as a Filipino citizen and recalled the warrant of arrest issued against him (Annex "6", counter-petition). On June 7, 1990, the acting director of the National Bureau of Investigation wrote the Secretary of Justice recommending that respondent Gatchalian along with the other applicants covered by the warrant of exclusion dated July 6, 1962 be charged with violation of Sec. 37 (a), pars. 1 and 2, in relation to Secs. 45 (c), and (d) and (e) of Commonwealth Act No. 613, as amended, also known as the Immigration Act of 1940 (Annex "G", petition). On August 1, 1990, the Secretary of Justice indorsed the recommendation of the NBI to the Commissioner of Immigration for investigation and immediate action (Annex "20", counter-petition). On August 15, 1990, petitioner Commissioner Domingo of the Commission of Immigration and Deportation * issued a mission order commanding the arrest of respondent William Gatchalian (Annex "18", counter-petition). The latter appeared before Commissioner Domingo on August 20, 1990 and was released on the same day upon posting P200,000.00 cash bond. On August 29, 1990, William Gatchalian filed a petition for certiorari and prohibition with injunction before the Regional Trial Court of Manila, Br. 29, presided by respondent Judge dela Rosa, docketed as Civil Case No. 90-54214.

On September 4, 1990, petitioners filed a motion to dismiss Civil Case No. 90-54214 alleging that respondent judge has no jurisdiction over the Board of Commissioners and/or the Board of Special Inquiry. Nonetheless, respondent judge dela Rosa issued the assailed order dated September 7, 1990, denying the motion to dismiss. Meanwhile, on September 6, 1990, respondent Gatchalian's wife and minor children filed before the Regional Trial Court of Valenzuela, Metro Manila, Br. 172, presided by respondent judge Capulong Civil Case No. 3431-V-90 for injunction with writ of preliminary injunction. The complaint alleged, among others, that petitioners acted without or in excess of jurisdiction in the institution of deportation proceedings against William. On the same day, respondent Capulong issued the questioned temporary restraining order restraining petitioners from continuing with the deportation proceedings against William Gatchalian. The petition is anchored on the following propositions: 1) respondent judges have no jurisdiction over petitioners (Board of Commissioners, et al.,) and the subject matter of the case, appellate jurisdiction being vested by BP 129 with the Court of Appeals; 2) assuming respondent judges have jurisdiction, they acted with grave abuse of discretion in preempting petitioners in the exercise of the authority and jurisdiction to hear and determine the deportation case against respondent Gatchalian, and in the process determine also his citizenship; 3) respondent judge dela Rosa gravely abused his discretion in ruling that the issues raised in the deportation proceedings are beyond the competence and jurisdiction of petitioners, thereby disregarding the cases of Arocha vs. Vivo and Vivo vs. Arca (supra), which put finality to the July 6, 1962 decision of the Board of Commissioners that respondent Gatchalian is a Chinese citizen; and 4) respondent judge Capulong should have dismissed Civil Case No. 3431-V-90 for forum-shopping. In his counter-petition, William Gatchalian alleges among others that: 1) assuming that the evidence on record is not sufficient to declare him a Filipino citizen, petitioners have no jurisdiction to proceed with the deportation case until the courts shall have finally resolved the question of his citizenship; 2) petitioners can no longer judiciously and fairly resolve the question of respondent's citizenship in the deportation case because of their bias, pre-judgment and prejudice against him; and 3) the ground for which he is sought to be deported has already prescribed. For purposes of uniformity, the parties herein will be referred to in the order the petitions were filed. Petitioners argue that under Sec. 9 (3) of BP 129, it is the Court of Appeals which has exclusive appellate jurisdiction over all final judgments or orders of quasi-judicial agencies, boards or commissions, such as the Board of Commissioners and the Board of Special Inquiry. Respondent, on the other hand, contends that petitioners are not quasi-judicial agencies and are not in equal rank with Regional Trial Courts. Under Sec. 21 (1) of Batas Pambansa Blg. 129, the Regional Trial Courts have concurrent jurisdiction with this Court and the Court of Appeals to issue "writs of certiorari, prohibition, mandamus, quo warranto, habeas corpusand injunction which may be enforced in any part of their respective regions, . . ." Thus, the RTCs are vested with the power to determine whether or not there has been a grave abuse of discretion on the part of any branch or instrumentality of the government. It is true that under Sec. 9 (3) of Batas Pambansa Blg. 129, the Court of Appeals is vested with — (3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, order, or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, board or

commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the provisions of this Act, and of sub-paragraph (1) of the third paragraph of and sub-paragraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. It does not provide, however, that said exclusive appellate jurisdiction of the Court of Appeals extends to all quasi-judicial agencies. The quasi-judicial bodies whose decisions are exclusively appealable to the Court of Appeals are those which under the law, Republic Act No. 5434, or their enabling acts, are specifically appealable to the Court of Appeals (Presidential Anti-Dollar Salting Task Force vs. Court of Appeals, 171 SCRA 348 [1989]; Lupangco vs. Court of Appeals, 160 SCRA 848 [1988]). Thus, under Republic Act No. 5434, it is specifically provided that the decisions of the Land Registration Commission (LRC), the Social Security Commission (SSC), Civil Aeronautics Board (CAB), the Patent Office and the Agricultural Invention Board are appealable to the Court of Appeals. In the Presidential Anti-Dollar Salting Task Force (supra), this Court clarified the matter when We ruled: Under our Resolution dated January 11, 1983: . . . The appeals to the Intermediate Appellate Court (now Court of Appeals) from quasi-judicial bodies shall continue to be governed by the provisions of Republic Act No. 5434 insofar as the same is not inconsistent with the provisions of B.P. Blg. 129. The pertinent provisions of Republic Act No. 5434 are as follows: Sec. 1. Appeals from specified agencies.— Any provision of existing law or Rules of Court to the contrary notwithstanding, parties aggrieved by a final ruling, award, order, or decision, or judgment of the Court of Agrarian Relations; the Secretary of Labor under Section 7 of Republic Act Numbered Six hundred and two, also known as the "Minimum Wage Law"; the Department of Labor under Section 23 of Republic Act Numbered Eight hundred seventy-five, also known as the "Industrial Peace Act"; the Land Registration Commission; the Social Security Commission; the Civil Aeronautics Board; the Patent Office and the Agricultural Inventions Board, may appeal therefrom to the Court of Appeals, within the period and in the manner herein provided, whether the appeal involves questions of fact, mixed questions of fact and law, or questions of law, or all three kinds of questions. From final judgments or decisions of the Court of Appeals, the aggrieved party may appeal by certiorari to the Supreme Court as provided under Rule 45 of the Rules of Court. Because of subsequent amendments, including the abolition of various special courts, jurisdiction over quasi-judicial bodies has to be, consequently, determined by the corresponding amendatory statutes. Under the Labor Code, decisions and awards of the National Labor Relations Commission are final and executory, but, nevertheless, reviewable by this Court through a petition for certiorari and not by way of appeal. Under the Property Registration Decree, decision of the Commission of Land Registration, en consulta, are appealable to the Court of Appeals. The decisions of the Securities and Exchange Commission are likewise appealable to the Appellate Court, and so are decisions of the Social Security Commission.

As a rule, where legislation provides for an appeal from decisions of certain administrative bodies to the Court of Appeals, it means that such bodies are co-equal with the Regional Trial Courts, in terms of rank and stature, and logically, beyond the control of the latter. (Emphasis supplied) There are quasi-judicial agencies, as the National Labor Relations Commissions, whose decisions are directly appealable to this Court. It is only when a specific law, as Republic Act No. 5434, provides appeal from certain bodies or commissions to the Court of Appeals as the Land Registration Commission (LRC), Securities and Exchange Commission (SEC) and others, that the said commissions or boards may be considered co-equal with the RTCs in terms of rank, stature and are logically beyond the control of the latter. However, the Bureau of Immigration (or CID) is not among those quasi-judicial agencies specified by law whose decisions, orders, and resolutions are directly appealable to the Court of Appeals. In fact, its decisions are subject to judicial review in accordance with Sec. 25, Chapter 4, Book VII of the 1987 Administrative Code, which provides as follows: Sec. 25. Judicial Review.—(1) Agency decisions shall be subject to judicial review in accordance with this chapter and applicable laws. xxx

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(6) The review proceeding shall be filed in the court specified in the statute or, in the absence thereof, in any court of competent jurisdiction in accordance with the provisions on venue of the Rules of Court. Said provision of the Administrative Code, which is subsequent to B.P. Blg. 129 and which thus modifies the latter, provides that the decision of an agency like the Bureau of Immigration should be subject to review by the court specified by the statute or in the absence thereof, it is subject to review by any court of competent jurisdiction in accordance with the provisions on venue of the Rules of Court. B.P. Blg. 129 did not intend to raise all quasi-judicial bodies to the same level or rank of the RTC except those specifically provided for under the law as aforestated. As the Bureau of Immigration is not of equal rank as the RTC, its decisions may be appealable to, and may be reviewed through a special civil action for certiorari by, the RTC (Sec. 21, (1) BP 129). True, it is beyond cavil that the Bureau of Immigration has the exclusive authority and jurisdiction to try and hear cases against an alleged alien, and in the process, determine also their citizenship (Lao Gi vs. Court of Appeals, 180 SCRA 756 [1989]). And a mere claim of citizenship cannot operate to divest the Board of Commissioners of its jurisdiction in deportation proceedings (Miranda vs. Deportation Board, 94 Phil. 531 [1954]). However, the rule enunciated in the above-cases admits of an exception, at least insofar as deportation proceedings are concerned. Thus, what if the claim to citizenship of the alleged deportee is satisfactory? Should the deportation proceedings be allowed to continue or should the question of citizenship be ventilated in a judicial proceeding? In Chua Hiong vs. Deportation Board (96 Phil. 665 [1955]), this Court answered the question in the affirmative, and We quote: When the evidence submitted by a respondent is conclusive of his citizenship, the right to immediate review should also be recognized and the courts should promptly enjoin the deportation proceedings. A citizen is entitled to live in peace, without molestation from any

official or authority, and if he is disturbed by a deportation proceeding, he has the unquestionable right to resort to the courts for his protection, either by a writ of habeas corpus or of prohibition, on the legal ground that the Board lacks jurisdiction. If he is a citizen and evidence thereof is satisfactory, there is no sense nor justice in allowing the deportation proceedings to continue, granting him the remedy only after the Board has finished its investigation of his undesirability. . . . And if the right (to peace) is precious and valuable at all, it must also be protected on time, to prevent undue harassment at the hands of ill-meaning or misinformed administrative officials. Of what use is this much boasted right to peace and liberty if it can be availed of only after the Deportation Board has unjustly trampled upon it, besmirching the citizen's name before the bar of public opinion? (Emphasis supplied) The doctrine of primary jurisdiction of petitioners Board of Commissioners over deportation proceedings is, therefore, not without exception (Calacday vs. Vivo, 33 SCRA 413 [1970]; Vivo vs. Montesa, 24 SCRA 155 [1967]). Judicial intervention, however, should be granted only in cases where the "claim of citizenship is so substantial that there are reasonable grounds to believe that the claim is correct. In other words, the remedy should be allowed only on sound discretion of a competent court in a proper proceeding (Chua Hiong vs. Deportation Board, supra; Co. vs. Deportation Board, 78 SCRA 107 [1977]). It appearing from the records that respondent's claim of citizenship is substantial, as We shall show later, judicial intervention should be allowed. In the case at bar, the competent court which could properly take cognizance of the proceedings instituted by respondent Gatchalian would nonetheless be the Regional Trial Court and not the Court of Appeals in view of Sec. 21 (1), BP 129, which confers upon the former jurisdiction over actions for prohibition concurrently with the Court of Appeals and the Supreme Court and in line with the pronouncements of this Court in Chua Hiong and Co cases. Ordinarily, the case would then be remanded to the Regional Trial Court. But not in the case at bar. Considering the voluminous pleadings submitted by the parties and the evidence presented, We deem it proper to decide the controversy right at this instance. And this course of action is not without precedent for "it is a cherished rule of procedure for this Court to always strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation. No useful purpose will be served if this case is remanded to the trial court only to have its decision raised again to the Court of Appeals and from there to this Court" (Marquez vs. Marquez, 73 Phil. 74; Keramic Industries, Inc. vs. Guerrero, 61 SCRA 265 [1974]) Alger Electric, Inc. vs. Court of Appeals (135 SCRA 37 [1985]), citing Gayos vs. Gayos (67 SCRA 146 [1975]). 1âw phi 1

In Lianga Bay Logging Co., Inc. vs. Court of Appeals (157 SCRA 357 [1988]), We also stated: Remand of the case to the lower court for further reception of evidence is not necessary where the court is in a position to resolve the dispute based on the records before it. On many occasions, the Court, in the public interest and the expeditious administration of justice, has resolved actions on the merits instead of remanding them to the trial court for further proceedings, such as where the ends of justice would not be subserved by the remand of the case or when public interest demands an early disposition of the case or where the trial court had already received all the evidence of the parties (Quisumbing vs. CA, 112 SCRA 703; Francisco, et al., vs. The City of Davao, et al., supra; Republic vs. Security Credit & Acceptance Corp., et al., 19 SCRA 58; Samal vs. CA, supra; Republic vs. Central Surety & Insurance Co., 25 SCRA 641). Likewise in Tejones vs. Gironella (159 SCRA 100 [1988]), We said:

Sound practice seeks to accommodate the theory which avoids waste of time, effort and expense, both to the parties and the government, not to speak of delay in the disposal of the case (cf. Fernandez vs. Garcia, 92 Phil. 592, 297). A marked characterstic of our judicial setup is that where the dictates of justice so demand . . . the Supreme Court should act, and act with finality (Li Siu Liat vs. Republic, 21 SCRA 1039, 1046, citingSamal vs. CA, 99 Phil. 230 and US vs. Gimenez, 34 Phil. 74.) (Beautifont, Inc. vs. Court of appeals, et al., Jan. 29, 1988; See also Labo vs. Commission on Elections, 176 SCRA 1 [1989]). Respondent Gatchalian has adduced evidence not only before the Regional Trial Court but also before Us in the form of public documents attached to his pleadings. On the other hand, Special Prosecutor Renato Mabolo in his Manifestation (dated September 6, 1990; Rollo, p. 298, counterpetition) before the Bureau of Immigration already stated that there is no longer a need to adduce evidence in support of the deportation charges against respondent. In addition, petitioners invoke that this Court's decision in Arocha vs. Vivo and Vivo vs. Arca (supra), has already settled respondent's alienage. Hence, the need for a judicial determination of respondent's citizenship specially so where the latter is not seeking admission, but is already in the Philippines (for the past thirty [30] years) and is being expelled (Chua Hiong vs. Deportation Board, supra). According to petitioners, respondent's alienage has been conclusively settled by this Court in the Arocha and Vivocases, We disagree. It must be noted that in said cases, the sole issue resolved therein was the actual date of rendition of the July 6, 1962 decision of the then board of Commissioners, i.e., whether the decision was rendered on July 6, 1962 or on July 20, 1962 it appearing that the figure (date) "20" was erased and over it was superimposed the figure "6" thereby making the decision fall within the one-year reglementary period from July 6, 1961 within which the decision may be reviewed. This Court did not squarely pass upon any question of citizenship, much less that of respondent's who was not a party in the aforesaid cases. The said cases originated from a petition for a writ of habeas corpus filed on July 21, 1965 by Macario Arocha in behalf of Pedro Gatchalian. Well settled is the rule that a person not party to a case cannot be bound by a decision rendered therein. Neither can it be argued that the Board of Commissioners' decision (dated July 6, 1962) finding respondent's claim to Philippine citizenship not satisfactorily proved, constitute res judicata. For one thing, said decision did not make any categorical statement that respondent Gatchalian is a Chinese. Secondly, the doctrine of res judicata does not apply to questions of citizenship (Labo vs. Commission on Elections (supra); citing Soria vs. Commissioner of Immigration, 37 SCRA 213; Lee vs. Commissioner of Immigration, 42 SCRA 561 [1971]; Sia Reyes vs. Deportation Board, 122 SCRA 478 [1983]). In Moy Ya Lim vs. Commissioner of Immigration (41 SCRA 292 [1971]) and in Lee vs. Commissioner of Immigration (supra), this Court declared that: (e)verytime the citizenship of a person is material or indispensable in a judicial or administrative case, whatever the corresponding court or administrative authority decides therein as to such citizenship is generally not considered as res adjudicata, hence it has to be threshed out again and again as the occasion may demand. An exception to the above rule was laid by this Court in Burca vs. Republic (51 SCRA 248 [1973]), viz: We declare it to be a sound rule that where the citizenship of a party in a case is definitely resolved by a court or by an administrative agency, as a material issue in the controversy, after a full-blown hearing with the active participation of the Solicitor General or his

authorized representative, and this finding or the citizenship of the party is affirmed by this Court, the decision on the matter shall constitute conclusive proof of such party's citizenship in any other case or proceeding. But it is made clear that in no instance will a decision on the question of citizenship in such cases be considered conclusive or binding in any other case or proceeding, unless obtained in accordance with the procedure herein stated. Thus, in order that the doctrine of res judicata may be applied in cases of citizenship, the following must be present: 1) a person's citizenship must be raised as a material issue in a controversy where said person is a party; 2) the Solicitor General or his authorized representative took active part in the resolution thereof, and 3) the finding or citizenship is affirmed by this Court. Gauged by the foregoing, We find the pre-conditions set forth in Burca inexistent in the Arocha and Vivo cases relied upon by petitioners. Indeed, respondent William Gatchalian was not even a party in said cases. Coming now to the contention of petitioners that the arrest of respondent follows as a matter of consequence based on the warrant of exclusion issued on July 6, 1962, coupled with the Arocha and Vivo cases (Rollo, pp. 33), the Court finds the same devoid of merit. Sec. 37 (a) of Commonwealth Act No. 613, as amended, otherwise known as the Immigration Act of 1940, reads: Sec. 37. (a) The following aliens shall be arrested upon the warrant of the Commissioner of Immigration or of any other officer designated by him for the purpose and deported upon the warrant of the Commissioner of Immigration after a determination by the Board of Commissioner of the existence of the ground for deportation as charged against the alien. (Emphasis supplied) From a perusal of the above provision, it is clear that in matters of implementing the Immigration Act insofar as deportation of aliens are concerned, the Commissioner of Immigration may issue warrants of arrest only after a determination by the Board of Commissioners of the existence of the ground for deportation as charged against the alien. In other words, a warrant of arrest issued by the Commissioner of Immigration, to be valid, must be for the sole purpose of executing a final order of deportation. A warrant of arrest issued by the Commissioner of Immigration for purposes of investigation only, as in the case at bar, is null and void for being unconstitutional (Ang Ngo Chiong vs. Galang, 67 SCRA 338 [1975] citing Po Siok Pin vs. Vivo, 62 SCRA 363 [1975]; Vivo vs. Montesa, 24 SCRA 155; Morano vs. Vivo, 20 SCRA 562; Qua Chee Gan vs. Deportation Board, 9 SCRA 27 [1963]; Ng Hua To vs. Galang, 10 SCRA 411; see also Santos vs. Commissioner of Immigration, 74 SCRA 96 [1976]). As We held in Qua Chee Gan vs. Deportation Board (supra), "(t)he constitution does not distinguish warrants between a criminal case and administrative proceedings. And if one suspected of having committed a crime is entitled to a determination of the probable cause against him, by a judge, why should one suspected of a violation of an administrative nature deserve less guarantee?" It is not indispensable that the alleged alien be arrested for purposes of investigation. If the purpose of the issuance of the warrant of arrest is to determine the existence of probable cause, surely, it cannot pass the test of constitutionality for only judges can issue the same (Sec. 2, Art. III, Constitution). A reading of the mission order/warrant of arrest (dated August 15, 1990; Rollo, p. 183, counterpetition) issued by the Commissioner of Immigration, clearly indicates that the same was issued only for purposes of investigation of the suspects, William Gatchalian included. Paragraphs 1 and 3 of the mission order directs the Intelligence Agents/Officers to:

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1. Make a warrantless arrest under the Rules of Criminal Procedure, Rule 113, Sec. 5, for violation of the Immigration Act, Sec. 37, para. a; Secs. 45 and 46 Administrative Code; xxx

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3. Deliver the suspect to the Intelligence Division and immediately conduct custodial interrogation, after warning the suspect that he has a right to remain silent and a right to counsel; . . . Hence, petitioners' argument that the arrest of respondent was based, ostensibly, on the July 6, 1962 warrant of exclusion has obviously no leg to stand on. The mission order/warrant of arrest made no mention that the same was issued pursuant to a final order of deportation or warrant of exclusion. But there is one more thing that militates against petitioners' cause. As records indicate, which petitioners conveniently omitted to state either in their petition or comment to the counter-petition of respondent, respondent Gatchalian, along with others previously covered by the 1962 warrant of exclusion, filed a motion for re-hearing before the Board of Special Inquiry (BSI) sometime in 1973. On March 14, 1973, the Board of Special Inquiry, after giving due course to the motion for rehearing, submitted a memorandum to the then Acting Commissioner Victor Nituda (Annex "5", counter-petition) recommending 1 the reconsideration of the July 6, 1962 decision of the then Board of Commissioners which reversed the July 6, 1961 decision of the then Board of Special Inquiry No. 1 and 2 the lifting of the warrants of arrest issued against applicants. The memorandum inferred that the "very basis of the Board of Commissioners in reversing the decision of the Board of Special Inquiry was due to a forged cablegram by the then Secretary of Foreign Affairs, . . ., which was dispatched to the Philippine Consulate in Hong Kong authorizing the registration of applicants as P.I. citizens." The Board of Special Inquiry concluded that "(i)f at all, the cablegram only led to the issuance of their Certificate(s) of Identity which took the place of a passport for their authorized travel to the Philippines. It being so, even if the applicants could have entered illegally, the mere fact that they are citizens of the Philippines entitles them to remain in the country." On March 15, 1973, then Acting Commissioner Nituda issued an Order (Annex "6", counter-petition) which affirmed the Board of Special Inquiry No. 1 decision dated July 6, 1961 admitting respondent Gatchalian and others as Filipino citizens; recalled the July 6, 1962 warrant of arrest and revalidated their Identification Certificates. The above order admitting respondent as a Filipino citizen is the last official act of the government on the basis of which respondent William Gatchalian continually exercised the rights of a Filipino citizen to the present. Consequently, the presumption of citizenship lies in favor of respondent William Gatchalian. There should be no question that Santiago Gatchalian, grandfather of William Gatchalian, is a Filipino citizen. As a matter of fact, in the very order of the BOC of July 6, 1962, which reversed the July 6, 1961 BSI order, it is an accepted fact that Santiago Gatchalian is a Filipino. The opening paragraph of said order states: The claim to Filipino citizenship of abovenamed applicants is based on the citizenship of one Santiago Gatchalian whose Philippine citizenship was recognized by the Bureau of Immigration in an Order dated July 12, 1960. (Annex "37", Comment with Counter-Petition).

Nonetheless, in said order it was found that the applicants therein have not satisfactorily proven that they are the children and/or grandchildren of Santiago Gatchalian. The status of Santiago Gatchalian as a Filipino was reiterated in Arocha and Arca (supra) where advertence is made to the "applicants being the descendants of one Santiago Gatchalian, a Filipino." (at p. 539). In the sworn statement of Santiago Gatchalian before the Philippine Consul in Hongkong in 1961 (Annex "1" to the Comment of petitioners to Counter-Petition), he reiterated his status as a Philippine citizen being the illegitimate child of Pablo Pacheco and Marciana Gatchalian, the latter being a Filipino; that he was born in Manila on July 25, 1905; and that he was issued Philippine Passport No. 28160 (PA-No. A91196) on November 18, 1960 by the Department of Foreign Affairs in Manila. In his affidavit of January 23, 1961 (Annex "5", counter-petition), Santiago reiterated his claim of Philippine citizenship as a consequence of his petition for cancellation of his alien registry which was granted on February 18, 1960 in C.E.B. No. 3660-L; and that on July 20, 1960, he was recognized by the Bureau of Immigration as a Filipino and was issued Certificate No. 1-2123. The dissenting opinions of my esteemed brethrens, Messrs. Justices F.P. Feliciano and H.G. Davide, Jr., proposing to re-open the question of citizenship of Santiago Gatchalian at this stage of the case, where it is not even put in issue, is quite much to late. As stated above, the records of the Bureau of Immigration show that as of July 20, 1960, Santiago Gatchalian had been declared to be a Filipino citizen. It is a final decision that forecloses a re-opening of the same 30 years later. Petitioners do not even question Santiago Gatchalian's Philippine citizenship. It is the citizenship of respondent William Gatchalian that is in issue and addressed for determination of the Court in this case. Furthermore, petitioners' position is not enhanced by the fact that respondent's arrest came twentyeight (28) years after the alleged cause of deportation arose. Section 37 (b) of the Immigration Act states that deportation "shall not be effected . . . unless the arrest in the deportation proceedings is made within five (5) years after the cause of deportation arises." In Lam Shee vs. Bengzon (93 Phil. 1065 [1953]), We laid down the consequences of such inaction, thus: There is however an important circumstance which places this case beyond the reach of the resultant consequence of the fraudulent act committed by the mother of the minor when she admitted that she gained entrance into the Philippines by making use of the name of a Chinese resident merchant other than that of her lawful husband, and that is, that the mother can no longer be the subject of deportation proceedings for the simple reason that more than 5 years had elapsed from the date of her admission. Note that the above irregularity was divulged by the mother herself, who in a gesture of sincerity, made an spontaneous admission before the immigration officials in the investigation conducted in connection with the landing of the minor on September 24, 1947, and not through any effort on the part of the immigration authorities. And considering this frank admission, plus the fact that the mother was found to be married to another Chinese resident merchant, now deceased, who owned a restaurant in the Philippines valued at P15,000 and which gives a net profit of P500 a month, the immigration officials then must have considered the irregularity not serious enough when, inspire of that finding, they decided to land said minor "as a properly documented preference quota immigrant" (Exhibit D). We cannot therefore but wonder why two years later the immigration officials would reverse their attitude and would take steps to institute deportation proceedings against the minor. Under the circumstances obtaining in this case, we believe that much as the attitude of the mother would be condemned for having made use of an improper means to gain entrance into the Philippines and acquire permanent residence there, it is now too late, not to say unchristian, to deport the minor after having allowed the mother to remain even illegally to

the extent of validating her residence by inaction, thus allowing the period of prescription to set in and to elapse in her favor. To permit his deportation at this late hour would be to condemn him to live separately from his mother through no fault of his thereby leaving him to a life of insecurity resulting from lack of support and protection of his family. This inaction or oversight on the part of immigration officials has created an anomalous situation which, for reasons of equity, should be resolved in favor of the minor herein involved. (Emphasis supplied) In the case at bar, petitioners' alleged cause of action and deportation against herein respondent arose in 1962. However, the warrant of arrest of respondent was issued by Commissioner Domingo only on August 15, 1990 — 28 long years after. It is clear that petitioners' cause of action has already prescribed and by their inaction could not now be validly enforced by petitioners against respondent William Gatchalian. Furthermore, the warrant of exclusion dated July 6, 1962 was already recalled and the Identification certificate of respondent, among others, was revalidated on March 15, 1973 by the then Acting Commissioner Nituda. It is also proposed in the dissenting opinions of Messrs. Justices Feliciano and Davide, Jr., that the BOC decision dated July 6, 1962 and the warrant of exclusion which was found to be valid in Arocha should be applicable to respondent William Gatchalian even if the latter was not a party to said case. They also opined that under Sec. 37 (b) of the Immigration Act, the five (5) years limitation is applicable only where the deportation is sought to be effected under clauses of Sec. 37 (b) other than clauses 2, 7, 8, 11 and 12 and that no period of limitation is applicable in deportations under clauses 2, 7, 8, 11 and 12. The Court disagrees. Under Sec. 39 of the Immigration Act, it is reiterated that such deportation proceedings should be instituted within five (5) years. Section 45 of the same Act provides penal sanctions for violations of the offenses therein enumerated with a fine of "not more than P1,000.00 and imprisonment for not more than two (2) years and deportation if he is an alien." Thus: Penal Provisions Sec. 45. Any individual who— (a) When applying for an immigration document personates another individual, or falsely appears in the name of deceased individual, or evades the immigration laws by appearing under an assumed name; fictitious name; or (b) Issues or otherwise disposes of an immigration document, to any person not authorized by law to receive such document; or (c) Obtains, accepts or uses any immigration document, knowing it to be false; or (d) Being an alien, enters the Philippines without inspection and admission by the immigration officials, or obtains entry into the Philippines by wilful, false, or misleading representation or wilful concealment of a material fact; or (e) Being an alien shall for any fraudulent purpose represent himself to be a Philippine citizen in order to evade any requirement of the immigration laws; or (f) In any immigration matter shall knowingly make under oath any false statement or representations; or

(g) Being an alien, shall depart from the Philippines without first securing an immigration clearance certificates required by section twenty-two of this Act; or (h) Attempts or conspires with another to commit any of the foregoing acts, shall be guilty of an offense, and upon conviction thereof, shall be fined not more than one thousand pesos, and imprisoned for not more than two years, and deported if he is an alien. (Emphasis supplied) Such offenses punishable by correctional penalty prescribe in 10 years (Art. 90, Revised Penal Code); correctional penalties also prescribe in 10 years (Art. 92, Revised Penal Code). It must be noted, however, that under Sec. 1, Act No. 3326 [1926], as amended, (Prescription for Violations Penalized by Special Acts and Municipal Ordinances) "violations penalized by special acts shall, unless otherwise provided in such acts, prescribe in accordance with the following rules: . . .c) after eight years for those punished by imprisonment for two years or more, but less than six years; . . ." Consequently, no prosecution and consequent deportation for violation of the offenses enumerated in the Immigration Act can be initiated beyond the eight-year prescriptive period, the Immigration Act being a special legislation. The Court, therefore, holds that the period of effecting deportation of an alien after entry or a warrant of exclusion based on a final order of the BSI or BOC are not imprescriptible. The law itself provides for a period of prescription. Prescription of the crime is forfeiture or loss of the rights of the State to prosecute the offender after the lapse of a certain time, while prescription of the penalty is the loss or forfeiture by the government of the right to execute the final sentence after the lapse of a certain time (Padilla, Criminal Law, Vol. 1, 1974, at p. 855). "Although a deportation proceeding does not partake of the nature of a criminal action, however, considering that it is a harsh and extraordinary administrative proceeding affecting the freedom and liberty of a person, the constitutional right of such person to due process should not be denied. Thus, the provisions of the Rules of Court of the Philippines particularly on criminal procedure are applicable to deportation proceedings." (Lao Gi vs. Court of Appeals, supra). Under Sec. 6, Rule 39 of the Rules of Court, a final judgment may not be executed after the lapse of five (5) years from the date of its entry or from the date it becomes final and executory. Thereafter, it may be enforced only by a separate action subject to the statute of limitations. Under Art. 1144 (3) of the Civil Code, an action based on judgment must be brought within 10 years from the time the right of action accrues. In relation to Sec. 37 (b) of the Immigration Act, the rule, therefore, is: 1. Deportation or exclusion proceedings should be initiated within five (5) years after the cause of deportation or exclusion arises when effected under any other clauses other than clauses 2, 7, 8, 11 and 12 and of paragraph (a) of Sec. 37 of the Immigration Act; and 2. When deportation or exclusion is effected under clauses 2, 7, 8, 11 and 12 of paragraph (a) of Sec. 37, the prescriptive period of the deportation or exclusion proceedings is eight (8) years. In the case at bar, it took petitioners 28 years since the BOC decision was rendered on July 6, 1962 before they commenced deportation or exclusion proceedings against respondent William Gatchalian in 1990. Undoubtedly, petitioners' cause of action has already prescribed. Neither may an action to revive and/or enforce the decision dated July 6, 1962 be instituted after ten (10) years (Art. 1144 [3], Civil Code).

Since his admission as a Filipino citizen in 1961, respondent William Gatchalian has continuously resided in the Philippines. He married Ting Dee Hua on July 1, 1973 (Annex "8", counter-petition) with whom he has four (4) minor children. The marriage contract shows that said respondent is a Filipino (Annex "8"). He holds passports and earlier passports as a Filipino (Annexes "9", "10" & "11", counter-petition). He is a registered voter of Valenzuela, Metro Manila where he has long resided and exercised his right of suffrage (Annex 12, counter-petition). He engaged in business in the Philippines since 1973 and is the director/officer of the International Polymer Corp. and Ropeman International Corp. as a Filipino (Annexes, "13" & "14", counter-petition). He is a taxpayer. Respondent claims that the companies he runs and in which he has a controlling investment provides livelihood to 4,000 employees and approximately 25,000 dependents. He continuously enjoyed the status of Filipino citizenship and discharged his responsibility as such until petitioners initiated the deportation proceedings against him. "The power to deport an alien is an act of the State. It is an act by or under the authority of the sovereign power. It is a police measure against undesirable aliens whose presence in the country is found to be injurious to the public good and domestic tranquility of the people" (Lao Gi vs. Court of Appeals, supra). How could one who has helped the economy of the country by providing employment to some 4,000 people be considered undesirable and be summarily deported when the government, in its concerted drive to attract foreign investors, grants Special Resident Visa to any alien who invest at least US$50,000.00 in the country? Even assuming arguendo that respondent is an alien, his deportation under the circumstances is unjust and unfair, if not downright illegal. The action taken by petitioners in the case at bar is diametrically opposed to settled government policy. Petitioners, on the other hand, claim that respondent is an alien. In support of their position, petitioners point out that Santiago Gatchalian's marriage with Chu Gim Tee in China as well as the marriage of Francisco (father of William) Gatchalian to Ong Chiu Kiok, likewise in China, were not supported by any evidence other than their own self-serving testimony nor was there any showing what the laws of China were. It is the postulate advanced by petitioners that for the said marriages to be valid in this country, it should have been shown that they were valid by the laws of China wherein the same were contracted. There being none, petitioners conclude that the aforesaid marriages cannot be considered valid. Hence, Santiago's children, including Francisco, followed the citizenship of their mother, having been born outside of a valid marriage. Similarly, the validity of the Francisco's marriage not having been demonstrated, William and Johnson followed the citizenship of their mother, a Chinese national. After a careful consideration of petitioner's argument, We find that it cannot be sustained. In Miciano vs. Brimo (50 Phil. 867 [1924]; Lim and Lim vs. Collector of Customs, 36 Phil. 472; Yam Ka Lim vs. Collector of Customs, 30 Phil. 46 [1915]), this Court held that in the absence of evidence to the contrary, foreign laws on a particular subject are presumed to be the same as those of the Philippines. In the case at bar, there being no proof of Chinese law relating to marriage, there arises the presumption that it is the same as that of Philippine law. The lack of proof of Chinese law on the matter cannot be blamed on Santiago Gatchalian much more on respondent William Gatchalian who was then a twelve-year old minor. The fact is, as records indicate, Santiago was not pressed by the Citizenship Investigation Board to prove the laws of China relating to marriage, having been content with the testimony of Santiago that the Marriage Certificate was lost or destroyed during the Japanese occupation of China. Neither was Francisco Gatchalian's testimony subjected to the same scrutiny by the Board of Special Inquiry. Nevertheless, the testimonies of Santiago Gatchalian and Francisco Gatchalian before the Philippine consular and immigration authorities regarding their marriages, birth and relationship to each other are not selfserving but are admissible in evidence as statements or declarations regarding family reputation or

tradition in matters of pedigree (Sec. 34, Rule 130). Furtheremore, this salutary rule of evidence finds support in substantive law. Thus, Art. 267 of the Civil Code provides: Art. 267. In the absence of a record of birth, authentic document, final judgment or possession of status, legitimate filiation may be proved by any other means allowed by the Rules of Court and special laws. (See also Art. 172 of the Family Code) Consequently, the testimonies/affidavits of Santiago Gatchalian and Francisco Gatchalian aforementioned are not self-serving but are competent proof of filiation (Art. 172 [2], Family Code). Philippine law, following the lex loci celebrationis, adheres to the rule that a marriage formally valid where celebrated is valid everywhere. Referring to marriages contracted abroad, Art. 71 of the Civil Code (now Art. 26 of the Family Code) provides that "(a)ll marriages performed outside of the Philippines in accordance with the laws in force in the country where they were performed, and valid there as such, shall also be valid in this country . . ." And any doubt as to the validity of the matrimonial unity and the extent as to how far the validity of such marriage may be extended to the consequences of the coverture is answered by Art. 220 of the Civil Code in this manner: "In case of doubt, all presumptions favor the solidarity of the family. Thus, every intendment of law or facts leans toward the validity of marriage, the indissolubility of the marriage bonds, the legitimacy of children, the community of property during marriage, the authority of parents over their children, and the validity of defense for any member of the family in case of unlawful aggression." (Emphasis supplied). Bearing in mind the "processual presumption" enunciated in Miciano and other cases, he who asserts that the marriage is not valid under our law bears the burden of proof to present the foreign law. Having declared the assailed marriages as valid, respondent William Gatchalian follows the citizenship of his father Francisco, a Filipino, as a legitimate child of the latter. Francisco, in turn is likewise a Filipino being the legitimate child of Santiago Gatchalian who (the latter) is admittedly a Filipino citizen whose Philippine citizenship was recognized by the Bureau of Immigration in an order dated July 12, 1960. Finally, respondent William Gatchalian belongs to the class of Filipino citizens contemplated under Sec. 1, Article IV of the Constitution, which provides: Sec. 1. The following are citizens of the Philippines: (1) Those who are citizens of the Philippines at the time of the adoption of this Constitution. . .. This forecloses any further question about the Philippine citizenship of respondent William Gatchalian. The Court is not unaware of Woong Woo Yiu vs. Vivo (13 SCRA 552 [1965]) relied upon by petitioners. The ruling arrived thereat, however, cannot apply in the case at bar for the simple reason that the parties therein testified to have been married in China by a village leader, which undoubtedly is not among those authorized to solemnize marriage as provided in Art. 56 of the Civil Code (now Art. 7, Family Code). Premises considered, the Court deems it unnecessary to resolve the other issues raised by the parties.

WHEREFORE, G.R. Nos. 95122-23 is DISMISSED for lack of merit; G.R. Nos. 95612-13 is hereby GRANTED and respondent William Gatchalian is declared a Filipino citizen. Petitioners are hereby permanently enjoined from continuing with the deportation proceedings docketed as DC No. 90-523 for lack of jurisdiction over respondent Gatchalian, he being a Filipino citizen; Civil Cases No. 9054214 and 3431-V-90 pending before respondent judges are likewise DISMISSED. Without pronouncement as to costs. SO ORDERED. Gutierrez, Jr., Gancayco, Sarmiento, Griño-Aquino and Medialdea, JJ., concur. Fernan, C.J., and Narvasa, J., concur in the result.

Separate Opinions DAVIDE, JR., J., concurring-dissenting: I can easily agree with the summary of antecedent facts in the ponencia of Mr. Justice Bidin and the reiteration therein of the established doctrine that the Bureau of Immigration has the exclusive authority and jurisdiction to try and hear cases against alleged aliens, and in the process, determine also their citizenship, and that "a mere claim of citizenship cannot operate to divest the Board of Commissioners of its jurisdiction in deportation proceedings." I also agree with the conclusion that the petitioners in G.R. No. 95122-23, the Board of Commissioners and Board of Special Inquiry, hereinafter referred to as the Boards, are quasi-judicial bodies. However, I cannot go along with the view that the case of William Gatchalian should be treated as an exception to that doctrine and, above all, to the law which vests upon the Court of Appeals exclusive appellate jurisdiction over the Boards. Neither can I have solidarity with his opinion that this Court should, in this instance, rule on the citizenship of Mr. Gatchalian instead of remanding the case to the Regional Trial Court. To grant him these benefits would do violence to the law, liberally stretch the limits of the exceptions or misapply the exceptionary rule, and to unduly pollute the settled doctrine. No fact or circumstance exists to justify the application of the exceptions for the benefit of Mr. Gatchalian. On the contrary, substantial facts exist to render immutable the unqualified application of the law and the doctrine. To my mind, the questioned acts of the Boards were done absolutely within their quasi-judicial functions. Therefore, the rule laid down in Filipinas Engineering and Machine Shop vs. Ferrer (135 SCRA 25) and Lupangco vs. Court of Appeals (160 SCRA 848) does not apply. Consequently, pursuant to paragraph 3 of Section 9 of Batas Pambansa Blg. 129, and Our resolutions of 15 September 1987 and 2 April 1990 in G.R. No. 79635 (Commissioner of Customs vs. Court of Tax Appeals, et al.) and G.R. No. 80320 (Commissioner of Internal Revenue vs. Court of Tax Appeals, et al.), respectively, and Our decisions of 16 March 1989, 22 December 1989, and 6 June 1990 in G.R. No. 83578 (Presidential Anti-Dollar Salting Task Force vs. Court of Appeals, et al.), 171 SCRA 348, G.R. No. 86625 (Development Bank of the Philippines vs. Court of Tax Appeals, et al.), 180 SCRA 609, 617, and in G.R. No. L-48113 (Yang vs. Court of Appeals, et al.), respectively, the Gatchalians should have invoked the exclusive appellate jurisdiction of the Court of Appeals for appropriate redress instead of filing petitions for certiorari and prohibition with injunction before the Regional Trial Court of Manila (Civil Case No. 90-54214) and before the Regional Trial Court of Valenzuela, Metro Manila (Civil Case No. 3431-V-90). The trial courts should have

dismissed the cases. In issuing the questioned orders, respondents Judge Dela Rosa and Judge Capulong clearly acted without jurisdiction or with grave abuse of discretion. As to why William Gatchalian filed his petition before the former court and his wife and minor children filed a separate complaint before the latter has not been explained. It is to be noted that he is a registered voter of Valenzuela, Metro Manila where he has long resided and exercised his right of suffrage (Annex 12, Counter-Petition). Therefore, he should have filed his petition with the Regional Trial Court of Valenzuela. His wife and minor children are not parties to the case before the Commission on Immigration and Deportation. Their causes of action are based mainly on their claim that the acts of the Boards against William tend to deprive plaintiff mother consortium and connubium and the plaintiffs minors protection and support. At once, the viability of their causes of action is doubtful; however, if indeed they have valid causes of action, they could have been joined as co-plaintiffs in the case filed by William. It appears then that their filing of a separate complaint before another court was part of a strategy to frustrate the proceedings before the Boards. As correctly maintained by the petitioning Boards, we have here a clear case of forum-shopping, especially considering the fact that on September 4, 1990, or two days before the filing of the case before the Valenzuela court the government filed a motion to dismiss the case before the Manila court. Forum-shopping has long been condemned and proscribed. In People vs. Court of Appeals, et al. (101 SCRA 450, 463), promulgated on 28 November 1980, this Court held that a party "should not be allowed to pursue simultaneous remedies in two different forums." In the Resolution of 31 July 1986 in E. Razon Inc., et al. vs. Philippine Port Authority, et al., G.R. No. 75197, this Court held: The acts of petitioners constitute a clear case of forum-shopping, an act of malpractice that is proscribed and condemned as trifling with the courts and abusing their processes. It is improper conduct that tends to degrade the administration of justice. (See also Buan vs. Lopez, Jr., 145 SCRA 34; Palm Avenue Realty Development Corp. vs. PCGG, 153 SCRA 591; Minister of Natural Resources, et al. vs. Heirs of Orval Hughes, et al., 155 SCRA 566; Limpin vs. IAC, 161 SCRA 98; Collado vs. Hernando, 161 SCRA 639; Villanueva, et al. vs. Adre, et al., 172 SCRA 877; Danville Maritime, Inc. vs. COA, 175 SCRA 717; Crisostomo vs. SEC, 179 SCRA 154; Adlawan vs. Tomol, 179 SCRA 42; and Alonto vs. Memoracion, 185 SCRA 73). William Gatchalian did not stop in his forum-shopping in the regional trial courts. Under the guise of a counter-petition, he is now before this Court in an active offensive role. This is a very clever, albeit subtle, ploy to bang directly to this Court the issue of his deportation and to divest the Boards of their original jurisdiction thereon. He could have done this at the first instance; he did not. He and his wife and minor children deliberately chose, instead, to separately go to the wrong court, evidently to delay the proceedings before the Boards, which they accomplished when the two judges separately issued orders restraining said Boards from commencing or continuing with any of the proceedings which would lead to the deportation of William Gatchalian (Civil Case No. 90-54214) and from proceeding with the deportation charges against William Gatchalian (Civil Case No. 3431-V-90). Chua Hiong vs. Deportation Board (96 Phil. 665) cited in the ponencia as another authority which allows William Gatchalian to enjoy the protective mantle of the exceptionary rule affecting the exclusive power of the Commission on Immigration and Deportation to try and hear cases against aliens and in the process also determine their citizenship is either not applicable or is mis-applied. This case laid down the principle that "when the evidence submitted by a respondent is conclusive of his citizenship, the right to immediate review should also be recognized and the courts should promptly enjoin the deportation proceedings. . . . If he is a citizen and evidence thereof is satisfactory, there is no sense nor justice in allowing the deportation proceedings to continue, granting him the remedy only after the Board has finished its investigation of his undesirability. . . ." (emphasis supplied). The word courts should not now be interpreted to mean or to include the regional trial courts because, as stated above, said courts do not have any appellate jurisdiction over

the Commission on Immigration and Deportation, the Board of Commissioners and the Board of Special Inquiry. This case was decided in 1955 yet, or twenty-six years before the effectivity of Batas Pambansa Blg. 129. The condition sine qua non then to an authorized judicial intervention is that the evidence submitted by a respondent is conclusive of his citizenship, or as stated in Co vs. Deportation Board, (78 SCRA 104, 107), the claim of citizenship is so substantial that there are no reasonable grounds for the belief that the claim is correct. The facts before this Court do not constitute, or even show, a conclusive or substantial evidence that William Gatchalian is a Filipino citizen. On the contrary, very serious doubts surround such a claim from the beginning. His initial entry into the Philippines was made possible through a Certificate of Identity (as Filipino) which was issued on the basis of a forged cablegram by the then Secretary of Foreign Affairs. Then on 6 July 1962 the then new Board of Commissioners promulgated a written decision in I.C. Cases Nos. 61-2108-C to 61-2116-C inclusive (Application for admission as Philippine citizens of Jose, Elena, Benjamin, Juan, Pedro, Gloria, Francisco, William and Johnson, all surnamed Gatchalian) reversing the decision of the Board of Special Inquiry No. 1 of 6 July 1961 and ordering the exclusion of William Gatchalian and the others as aliens not properly documented. Accordingly, a warrant of exclusion, also dated 6 July 1962, was issued by the Commissioners commanding the deportation officer to exclude William Gatchalian, and others, and to cause their removal from the country on the first available transportation in accordance with law to the port of the country of which they were nationals. The pertinent portion of the Decision reads as follows: The claim to Philippine citizenship of above-named applicants is based on the citizenship of one Santiago Gatchalian whose Philippine citizenship was recognized by the Bureau of Immigration in an Order, dated July 12, 1960. It is alleged that applicants JOSE GATCHALIAN, FRANCISCO GATCHALIAN, ELENA GATCHALIAN and BENJAMIN GATCHALIAN are the legitimate children of Santiago Gatchalian with one Chiu Gim Tee. Except for the self-serving testimonies of Santiago Gatchalian and his alleged children, there has not been submitted any evidence of Santiago Gatchalian's marriage to Chiu Gim Tee and the birth of the alleged children of the couple. The personal records of Santiago Gatchalian on file with this office do not reflect the names of applicants as his children, and while two names listed in his Form 1 (ACR application), Jose and Elena, bear the same name as two of herein applicants, the difference in the ages of said applicants, casts serious doubt on their identity. Apropos, the applicants JOSE GATCHALIAN, GLORIA GATCHALIAN, FRANCISCO GATCHALIAN, ELENA GATCHALIAN and BENJAMIN GATCHALIAN, not having satisfactorily proved as the children of Santiago Gatchalian, determination of the citizenship of the other applicants, JUAN GATCHALIAN, PEDRO GATCHALIAN and JOHNSON GATCHALIAN, whose right to Filipino citizenship are merely drawn from their fathers, Jose Gatchalian and Francisco Gatchalian, is unnecessary. (Decision, Annex "E" of Petition). Looking back to the case of Santiago, William's alleged grandfather, I cannot find sufficient credible evidence to support his claim of Filipino citizenship. For a long time before 20 July 1960 he considered himself a Chinese citizen. The "conclusion" of the Bureau of Immigration that Santiago is a Filipino citizen is based on totally questionable and insufficient evidence which cannot inspire belief. The Order itself, signed by Associate Commissioner Felix Talabis, supports this conclusion. It reads in full as follows: This is a petition for the cancellation of an alien registry of SANTIAGO GATCHALIAN, registered as Chinese and holder of ACR No. A-219003 issued at Manila on 13 February

1951 and ICR No. 7501 dated 3 May 1946. He is alleged to be the son of Filipino parents who were not lawfully married. It is alleged that the petitioner was born in Binondo, Manila, on 25 July 1905, to Pablo Pacheco and Marciana Gatchalian. It is noted that in his application for alien registration filed with this Office on 13 January 1951, Santiago Gatchalian stated that his deceased parents were Pablo Pacheco and Marciana. He was identified by his only brother, Joaquin Pacheco, who insisted that he and petitioner are illegitimate. It is true that, on record, there is a certificate signed on 26 October 1902 by Maxima Gatchalian, their maternal grandmother, giving consent to the marriage of Marciana Gatchalian to Pablo Pacheco (Exh. B), but Joaquin said that his parents did not actually get married. In proof of this, the baptismal record of the petitioner expressly states that Santiago Gatchalian was born on 25 July 1905 and baptized on 6 October 1905, being the son of Marciana Gatchalian, "filipina", and an unknown father (verbatim copy dated 22 June 1907, Parish Priest of Binondo, Manila). The petitioner, apparently not completely certain about his civil status, has been interchangeably using his paternal and maternal surnames. In school he was known as Santiago Pacheco (Class card for 1920-21, Meisic, Manila; Certificates of completion of third and fourth grades, Meisic Primary School); but in his residence certificate dated 17 September 1937, and in Tax Clearance Certificate issued on 2 October 1937, he is referred to as Santiago Gatchalian; and in a communication dated 6 June 1941, he was addressed to as Santiago Pacheco by the Philippine Charity Sweepstakes office. Considering, however, the positive assertion by his elder brother who is better informed about their origin, the incontestable entry in his baptismal record that he is illegitimate and the entry in the marriage contract of his elder brother wherein the father's name is omitted and the mother, Marciana Gatchalian, is described as Filipina (marriage contract dated 29 November 1936) there is sufficient evidence to establish that Santiago Gatchalian is really Filipino at birth, being the legitimate child of a Filipino woman. WHEREFORE, the herein petition to cancel his alien registration is granted, petitioner shall henceforth be shown in the records of this office as a citizen of the Philippines and the issuance to him of the appropriate Identification certificate showing his correct status is hereby authorized. (Order of 12 July 1960, Annex "1" of Comment with Counter-Petition). As to his alleged marriage to Chu Gim Tee, and their five children, we only have his self-selling oral testimony, thus: Q What is the name of your wife? A Her name is Chu Gim Tee. Q Is she still alive? A No, she died in 1951, in Amoy. Q Do you have children with her, if so, mention their names, ages and sexes? A Yes. I have five children, all of them alive and they are as follows:

Jose Gatchalian, born on Jan. 2, 1927 in Amoy; Gloria Gatchalian, born February 20, 1929 in Amoy; Francisco Gatchalian, born on March 3, 1931 in Amoy; Elena Gatchalian, born on April 4, 1933 in Amoy; Benjamin Gatchalian, born on 31 March 1942 in Amoy. Q Where are they living now? A All of them are now living in Macao, with my sister-in-law by the name of Chu Lam Tee. (p. 4, Transcript of the proceedings before the Citizen Evaluation Board on 12 February 1960, Annex "2" of Comment with Counter-Petition). If indeed Santiago's parents, Pablo Pacheco and Marciana Gatchalian, were married, what was his reason for insisting, through his brother Joaquin, that he, is an illegitimate son? The only possible reason is that Pablo Pacheco is a Chinese citizen, in which case Santiago would follow the citizenship of Marciana, a "filipina." But to give full faith and credit to the oral insistence of illegitimacy is to do violence to the presumptions of validity of marriage, the indissolubility of the marriage bonds and the legitimacy of children. (Art. 220, Civil Code). These are among the presumptions which the ponencia precisely applied when it rejected the petitioners' claim that Santiago failed to establish his claimed marriage to Chu Gim Tee and Francisco's (father of William) claimed marriage to Ong Chiu Kiok, both of which were allegedly celebrated abroad. I cannot find any valid justification why these presumptions should be liberally applied in favor of claimed marriages allegedly celebrated abroad but denied to purported marriages celebrated in the Philippines. Interestingly, Santiago used the surname Pacheco during such proceedings and when he testified, he gave his name as Santiago Gatchalian Pacheco. This is an incontrovertible proof that he recognized the legitimate union of his father and mother. On 18 February 1960, Santiago was recalled to be confronted re his claim as to the number of his children; he testified thus: Q In your testimony on February 12, this year, you named as your children the following: Jose, Gloria, Francisco, Elena and Benjamin, all born in Amoy, arranged according to the order of their ages. However, in your Form 1 when you secured your ACR in 1951, you mentioned only Jose Gatchalian and Elena Gatchalian. Why, what is the reason why in this form that you filled up in 1951, you mentioned only Jose and Elena? A That form I am not the one who filled it because that is not my handwriting. It is the handwriting of my broker or the clerk of my broker. However, when they prepared that I mentioned my children named Jose, Gloria, Francisco, Elena in a piece of paper which I gave to him, except Benjamin. Q Why did you not mention Benjamin in the list? A Because he was not yet baptized then. (Transcript, p. 7, Annex "2" of Comment with Counter-Petition). The explanation is very flimsy and does not deserve the respect of a passing glance. There is no showing that Gatchalian took any immediate definite positive step against the 6 July 1962 decision and the warrant of exclusion.

It was only sometime in 1973, or eleven years after, that he and others covered by the warrant of expulsion filed a motion for re-hearing with the Board of Special Inquiry. There has been no explanation for the unreasonable delay in the filing of the motion. It may be surmised that it was due to his minority, considering that he was allegedly only twelve years old when he arrived in Manila from Hongkong on 27 June 1961. But, such minority was no obstacle to the filing of any remedial action for and in his behalf. The action taken by and the recommendation of the Board of Special Inquiry of 14 March 1973 to the then Acting Commissioner Victor Nituda for the reversal of the July 6, 1962 decision of the Board of Commissioners were not only highly anomalous, irregular and improper, it was done without any semblance of authority. The Board of Special Inquiry did not have the power to review, modify or reverse a Decision of the Board of Commissioners rendered about eleven years earlier. Then Acting Commissioner Victor Nituda, acting alone, did not likewise have the power or authority to approve the recommendation of said Board, to revive and/or reaffirm the July 6, 1961 decision of the Board of Special Inquiry, to reverse, and nullify, the Decision of 6 July 1962 of the Board of Commissioners, and to order the admission of William Gatchalian as a Filipino citizen. Pursuant to Sec. 26 (b) of C.A. No. 613, as amended (The Philippine Immigration Act of 1940), only the Board of Commissioners can act on the recommendation, if at all it was legally and validly done. The Board of Commissioners is composed of the Commissioner of Immigration and the two Deputy Commissioners. In the absence of any member of the Board, the Department Head shall designate an officer or employee in the Bureau of Immigration to serve as member thereof. In any case coming before it, the decision of any two members shall prevail. (Sec. 8, C.A. No. 613 as amended). The Department Head referred to is the Secretary of Justice since the Commission is, for administrative purposes, under the supervision and control of the Department of Justice. The decision then of Acting Commissioner Nituda was void and invalid ab initio. In view thereof, the rationalization in the ponencia that the issue could be re-opened since the decision of the Board of Commissioners of 6 July 1962 did not constitute res judicata is irrelevant. But even if it is to be conceded that the 6 July 1962 decision did not constitute res judicata, I find it both strange and illogical to give full faith and credit to the unilateral action of Mr. Nituda and to use it to bar the Boards from exercising its power and jurisdiction over William Gatchalian. Assuming that indeed William is the grandson of Santiago, I find it rather strange why Santiago did not mention him in his testimony before the Citizenship Evaluation Board. At that time William was already eleven years old. It is logical to presume that the proceeding initiated by Santiago was principally for the benefit of his alleged children and grandchildren. It was, as subsequent events proved, intended to prepare the legal basis for their entry into the country as Filipino citizens. Thus, eleven months after he obtained a favorable decision from the Board, and on two successive dates, his alleged children and grandchildren entered the country. On 25 June 1961 his alleged children Jose, Elena, Benjamin, and his alleged grandchildren Pedro and Juan arrived from Hongkong. On 27 June 1961, his alleged daughter Gloria and son Francisco with his alleged children William and Johnson also arrived from Hongkong. (pp. 4-5, Petition). That he has continuously resided in the Philippines since 1961; he is married to Ting Dee Hua on July 1, 1973, and his marriage contract shows that he is a Filipino citizen; he holds passports and earlier passports as a Filipino; he is a registered voter of Valenzuela, Metro Manila where he has long resided and exercised his right of suffrage; he is engaged in business in the Philippines since 1973, and is a director/officer of the International Polymer Corp. and Ropeman International Corp. as a Filipino, and that the companies he runs and in which he has a controlling investment provided a livelihood to 4,000 employees and approximately 25,000 dependents; he is a taxpayer; and he has continuously enjoyed the status of Filipino citizenship, discharged his responsibility as such until petitioning Boards initiated the deportation proceedings against him, are not of any help to William Gatchalian. For, they neither confer nor strengthen his claim of Filipino citizenship since they are all

rooted on the illegal and void decision of then Acting Commissioner Victor Nituda of 15 March 1973. A decision which is void and invalid ab initio cannot be a source of valid acts. Neither can such substantive infirmity be cured by salutary acts that tend to confirm the status conferred by the void decision. In the light of the foregoing, it follows that the warrant of exclusion issued against William Gatchalian pursuant to and by virtue of the 6 July 1962 Decision of the Board of Commissioners subsists and remains valid and enforceable. I disagree with the view advanced in the ponencia that the State can no longer enforce the warrant of exclusion because it is already barred by prescription considering that Section 37 (b) of the Immigration Act states that deportation "shall not be effected . . . unless the arrest in the deportation proceedings is made within five (5) years after the cause of deportation arises." Said paragraph (b) of Section 37 reads in full as follows: (b) Deportation may be effected under clauses 2, 7, 8, 11 and 12 paragraph (a) of this section at any time after entry, but shall not be effected under any other clause unless the arrest in the deportation proceedings is made within five years after the cause of deportation arises. Deportation under clauses 3 and 4 shall not be effected if the court or judge thereof, when sentencing the alien, shall recommend to the Commissioner of Immigration that the alien be not deported. (As amended by Sec. 13, R.A. No. 503). (Emphasis supplied). Note that the five-year period applies only to clauses other than 2, 7, 8, 11 and 12 of paragraph (a) of the Section. In respect to clauses 2, 7, 8, 11 and 12, the limitation does not apply. These clauses read as follows: (2) Any alien who enters the Philippines after the effective date of this Act, who was not lawfully admissible at the time of entry; xxx

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(7) Any alien who remains in the Philippines in violation of any limitation or condition under which he was admitted as a non- immigrant; (8) Any alien who believes in, advises, advocates or teaches the overthrow by force and violence of the Government of the Philippines, or of constituted law and authority, or who disbelieves in or is opposed to organized government, or who advises, advocates, or teaches the assault or assassination of public officials because of their office, or who advises, advocates, or teaches the unlawful destruction of property, or who is a member of or affiliated with any organization entertaining, advocating or teaching such doctrines, or who in any manner whatsoever lends assistance, financial or otherwise, to the dissemination of such doctrines; xxx

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(11) Any alien who engages in profiteering, hoarding, or black-marketing, independent of any criminal action which may be brought against him; (12) Any alien who is convicted of any offense penalized under Commonwealth Act Numbered Four Hundred and Seventy-Three, otherwise known as the Revised

Naturalization Laws of the Philippines, or any law relating to acquisition of Philippine citizenship; xxx

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Mr. Gatchalian is covered by clause (2); besides, the warrant for his exclusion was issued within a period of five years following his entry. Lam Shee vs. Bengzon (93 Phil. 1065) is not applicable to Mr. Gatchalian. In issue in that case was the deportation of a minor whose mother fraudulently entered the Philippines by using the name of a resident Chinese merchant who is not her lawful husband but against whom no deportation proceedings was initiated within five years following her entry. Said mother did in fact acquire permanent residence status. Furthermore, the minor's mother never claimed to be a Filipino citizen. IN VIEW OF ALL THE FOREGOING, I vote to GRANT the petition in G.R. Nos. 95122-23, SET ASIDE the questioned orders of respondents Judge Joselito Dela Rosa and Judge Teresita Dizon Capulong as having been issued beyond their jurisdiction, ORDER the DISMISSAL of Civil Case Nos. 90-54214 of the Regional Trial Court of Manila and 3431-V-90 of the Regional Trial Court of Valenzuela, Metro Manila and to DISMISS for lack of merit the COUNTER-PETITION.

FELICIANO, J., dissenting: I regret I am unable to join the opinion written by my distinguished brother in the Court, Mr. Justice A.A. Bidin, and I, therefore, undertake to submit this separate opinion. For convenience, the following is a precis of the matters discussed in detail below. 1. I agree that the Warrant of Arrest dated 14 August 1990 is defective in its language. The surrounding facts, however, make quite clear that an amended warrant of arrest or mission order, or a new one correctly worded, may be issued by Immigration Commissioner Domingo for the purpose of carrying out an existing and valid Warrant of Exclusion covering respondent William Gatchalian and his co-applicants for admission. 2. The 6 July 1962 Decision of the Board of Commissioners ("BOC") and Warrant of Exclusion remain valid and effective and enforceable against respondent William Gatchalian, and his coapplicants for that matter. That Decision reversed a 6 July 1961 decision of the Board of Special Inquiry ("BSI") and held that respondent William Gatchalian and his co-applicants failed to subtantiate and prove their claim to Philippine citizenship in 1961. Respondent William Gatchalian does not claim Philippine citizenship by any mode of entitlement subsequent to his application for entry as a citizen of the Philippines in 1961, i.e., by any act or circumstance subsequent to his birth and supposed filiation as a legitimate son of Francisco Gatchalian, also a supposed citizen of the Philippines. 3. In its Decision in Arocha vs. Vivo,1 the Supreme Court upheld the validity and legal effect of the 6 July 1962 Decision of the BOC and the Warrant of Exclusion not only against Pedro Gatchalian, the particular Gatchalian who was taken into custody by immigration authorities in 1965, but also against Pedro's co-applicants, which include respondent William Gatchalian. The validity of the claim to Philippine citizenship by Pedro Gatchalian, as a supposed descendant of Santiago Gatchalian,

allegedly a natural born citizen of the Philippines, was directly placed in issue in the 1961-1962 proceedings before the BSI and the BOC, and by the Solicitor General and Pedro Gatchalian in Arocha vs. Vivo (supra). In upholding the validity and legal effect of the 6 July 1962 BOC Decision that the Gatchalian applicants had not substantiated their claim to Philippine citizenship, this Court in effect ruled that the Gatchalian applicants were not Philippine citizens, whatever their true nationality might be. 4. Should this Court now determine to examine once more the claim to Philippine citizenship of respondent William Gatchalian, a detailed examination of the facts, including the supposed status of Santiago Gatchalian as a natural born Philippine citizenship, shows that those claims to Philippine citizenship were indeed not proven by respondent William Gatchalian and his co-applicants. Since respondent William Gatchalian does not claim to have been naturalized as a Philippine citizen after rendition of the 6 July 1962 BOC Decision, he must accordingly be held to be not a Philippine citizen. 5. Should the legal results thus reached seem harsh to some, I respectfully submit that the remedy lies not with this Court which is charged with the application of the law as it is in fact written, but with the political branches of the Government. It is those departments of Government which must consider the desirability and wisdom of enacting legislation providing for the legalization of the entry and stay of aliens who may be in the same situation as respondent William Gatchalian and his coapplicants. I 1. Petitioner argues that respondent William Gatchalian's arrest follows as a matter of "consequence" of the Warrant of Exclusion issued by the BOC on 6 July 1962. This is opposed by respondent Gatchalian upon the ground that the Mission Order or Warrant of Arrest does not mention that it is issued pursuant to a final order of deportation or Warrant of Exclusion. The Mission Order or Warrant of Arrest dated 14 August 1990 issued by petitioner Commissioner Domingo, CID, reads in part as follows: Intelligence Officers/Agents: All Teams Team No. Subject: William, Juan, Francisco, Jose, Benjamin, Jonathan, Pedro, Gloria, Elena, all surnamed Gatchalian Address: Bgy. Canumay, Valenzuela, M.M. xxx

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1. Make a warrantless arrest under the Rules of Criminal Procedure, Rule 113, Section 5, for violation of the Immigration Act, Section 37, para. a; Secs. 45 and 46 Administrative Code; 2. Make a warrantless search as an incident to a lawful arrest under Rule 125, Section 12. 3. Deliver the suspect to the Intelligence Division and immediately conduct custodial interrogation, after warning the suspect that he has a right to remain silent and a right to counsel;

4. Prepare and file an affidavit of arrest with the Special Prosecutor's Office and, in case of a search, prepare and file an inventory of the properties seized, verified under oath following Office Memorandum Order No. 45 xxx

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The above Mission Order merely referred to Section 37 (a) of the Immigration Act, as amended, and to Sections 45 and 46 of the Administrative Code (should be Immigration Law), and that its wording suggests that the arrest is sought to be carried out for the purpose of carrying out a preliminary investigation or custodial interrogation rather than for the purpose of enforcing a final order of deportation or warrant of exclusion. More specifically, the Mission Order failed to mention the 6 July 1962 BOC Decision and Warrant of Exclusion. At the same time, there is no gainsaying the fact that the 6 July 1962 BOC Decision and Warrant of Exclusion do exist and became final and, as discussed in detail below, remain valid and effective. It should be noted also that by 6 September 1990, Special Prosecutor Mabolo had filed a Manifestation or Motion before the Bureau of Immigration explicitly referring to the Warrant of Exclusion issued against respondent William Gatchalian and his original co-applicants for admission in 1961, which had been passed upon in Arocha vs. Vivo(supra), and argued that there was, therefore, no longer any need to adduce evidence in support of the charges against respondent William Gatchalian. Thus it appears to me that the Warrant of Arrest or Mission Order dated 15 August 1990, ineptly worded as it is, may be amended so as to refer explicitly to the mentioned Warrant of Exclusion, or a new warrant of arrest or mission order issued similarly explicitly referring to the Warrant of Exclusion. 2. It is indispensably necessary to refer to the Warrant of Exclusion of 6 July 1962 which read as follows: WHEREAS, upon review, motu proprio of the proceedings had on the application for admission as Philippine citizens of JOSE GATCHALIAN, ELENA GATCHALIAN, BENJAMIN GATCHALIAN, JUAN GATCHALIAN, PEDRO GATCHALIAN, GLORIA GATCHALIAN, FRANCISCO GATCHALIAN, WILLIAM GATCHALIAN, and JOHNSON GATCHALIAN, the Board of Commissioners found them not entitled to admission as Filipinos in a Decision, dated July 6, 1962, and ordered their exclusion as persons not properly documented; AND WHEREAS, the Decision of the Board of Commissioners, dated 6 July 1962, ordering the exclusion of above-named applicants, has now become final and executory. NOW THEREFORE, by virtue of the authority vested in the undersigned by law, you are hereby ordered to exclude the aforenamed individuals and cause their removal from this country to the port where they came or to the port of the country of which they are nationals, on the first available transportation, in accordance with law. (Emphasis supplied) It should be noted that respondent William Gatchalian was a party to the 1961-1962 proceedings before the Bureau of Immigration which proceedings culminated in the 6 July 1962 Decision of the BOC and the aforequoted Warrant of Exclusion. It is, however, insisted by respondent William Gatchalian that the Warrant of Exclusion may no longer be executed or implemented as against him in view of the passage of approximately twentyeight (28) years since the issuance of such Warrant. Respondent Gatchalian here relies upon Section 37 (b) of the Immigration Act which states that:

Sec. 37 (b). Deportation may be effected under clauses 2, 3, 7, 8, 11 and 12 of the Par. (a) of this Section at any time after entry, but shall not be effected under any other clauses unless the arrest in the deportation proceedings is made within five (5) years after the cause for deportation arises . . . (Emphasis supplied) Examination of the above quoted Section 37 (b) shows that the five (5) year-limitation is applicable only where deportation is sought to be effected under clauses of Section 37 (a) other than clauses 2, 7, 8, 11 and 12; that where deportation or exclusion is sought to be effected under clauses 2, 7, 8 11 and 12 of Section 37 (a), no period of limitation is applicable; and that, to the contrary, deportation or exclusion may be effected "at any time after entry." Examination of contemporaneous facts shows that the Government has sought to effect the exclusion and deportation of respondent William Gatchalian upon the ground that he had entered the country as a citizen of the Philippines when he was not lawfully admissible as such at the time of entry under Section 37 (a) (2), since the BOC had held him and the other Gatchalians there involved as not properly documented for admission, under Section 29 (a) (17) of the Immigration Act, as amended. On 7 July 1990, the Acting Director of the National Bureau of Investigation ("NBI") initiated the proceedings immediately before us by writing to the Secretary of Justice recommending that respondent William Gatchalian, and his co-applicants covered by the Warrant of Exclusion dated 6 July 1962, be charged with: "Violation of Section 37 (a), paragraphs 1 and 2, in relation to Section 45 (c), (d) and (e) of Commonwealth Act 613 as amended, also known as the Immigration Act of 1940." The Secretary of Justice endorsed this recommendation to Immigration Commissioner Domingo for investigation and immediate action. On 20 August 1990, Special Prosecutor Mabolo filed a charge sheet against respondent William Gatchalian which specified the following charges: The respondent is an alien national who unlawfully gained entry into the Philippines without valid travel document in violation of the Immigration Act; Sec. 37 par. a, sub pars. (1) and (2); That respondent being an alien misrepresented himself as Philippine Citizen by false statements and fraudulent documents in violation of the Immigration Act, Sec. 45, par. (c), (d) and (e). That respondent being an alien national is an undocumented person classified as excludable under the Immigration Act, Sec. 29 (a) sub par. (17). xxx

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(Emphasis supplied) Section 37 (a) (1) and (2), of Commonwealth Act No. 613, as amended, provides as follows: Sec. 37 (a). The following aliens shall be arrested upon the warrant of the Commissioner of Immigration or of any other officer designated by him for the purpose and deported upon the warrant of the Commissioner of Immigration after a determination by the Board of Commissioners of the existence of the ground for deportation as charged against the alien. (1) Any alien who enters the Philippines after the effective date of this act by means of false and misleading statements or without inspection and admission by the Immigration authorities at a designated port of entry or at any place other than at a designated port of entry; (As amended by Republic Act No. 503).

(2) An alien who enters the Philippines after the effective date of this act, who was not lawfully admissible at the time of entry. xxx

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(Emphasis supplied) Section 37 (a) (2), quoted above, relates back to Section 29 (a) of the Immigration Act, as amended, which lists the classes of alien excluded from entry in the Philippines, as follows: Sec. 29. (a). The following classes of aliens shall be excluded from entry into the Philippines; xxx

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(17) Persons not properly documented for admission as may be required under the provisions of this act. (Emphasis supplied) Thus, in the instant case, the net result is that no time limitation is applicable in respect of the carrying out of the Warrant of Exclusion issued in 1962. A little reflection suffices to show why this must be so. What was involved in 1961 when the supposed children and grandchildren of Santiago Gatchalian first descended upon the Philippines, was the right of a person claiming to be a Philippine citizen to enter for the first time and reside in the Philippines. On the part of the Government, what was at stake was the right to exclude from the country persons who had claimed the right to enter the country as Philippine citizens but who had failed to substantiate such claimed status. Aliens seeking entry into the Philippines do not acquire the right to be admitted into the country by the simple passage of time. Exclusion of persons found not to be entitled to admission as Philippine citizens, must be distinguished from the deportation of aliens, who, after having been initially lawfully admitted into the Philippines, committed acts which rendered them liable to deportation. Normally, aliens excluded are immediately sent back to their country of origin.2 This is so in cases where the alien has not yet gained a foothold into the country and is still seeking physical admittance. However, when the alien had already physically gained entry but such entry is later found unlawful or devoid of legal basis, the alien can be excluded any time after it is found that he was not lawfully admissible at the time of his entry. Technically, the alien in this case is being excluded; however, the rules on deportation can be made to apply to him in view of the fact that the cause for his exclusion is discovered only after he had gained physical entry. It is worth noting at this point that in Arocha vs. Vivo (supra), this Court upheld the 6 July 1962 Order of the BOC and the application of the Warrant of Exclusion, in respect of Pedro Gatchalian, even though more than five (5) years had elapsed by the time the Court's Decision was promulgated on 26 October 1967. Though respondent William Gatchalian is physically inside the country, it is the government's basic position that he was never lawfully admitted into the country, having failed to prove his claim of Philippine citizenship, and hence the Warrant of Exclusion of 6 July 1962, or a new Warrant of Exclusion for that matter, may be executed "at any time" under Section 37 (b). It is the correctness of that basic position which must be ascertained and in that ascertainment, the mere passage of time is quite peripheral in relevance considering the express language of Section 37 (b).

My distinguished brother, Bidin, J., finally invokes Act No. 3326, and on the basis of Section 1 thereof, would hold that where the arrest for purpose of deportation is made more than five (5) years after the cause for deportation arose, the prescriptive period of eight (8) years should be applied. Act No. 3326 which took effect on 4 December 1926, establishes prescriptive periods in respect of criminal prosecutions for violations penalized not by the Revised Penal Code but rather by special acts which do not otherwise establish a period of prescription. In other words, Act No. 3326 establishes a statute of limitations for the institution of criminal proceedings. It is, however, quite settled that deportation proceedings cannot be assimilated to criminal prosecutions for violation either of the Revised Penal Code or of special statutes.3 Moreover, Act No. 3326 purports to be applicable only where the special act itself has not established an applicable statute of limitations for criminal proceedings. It cannot, however, be said that Article 37 (b) of the Immigration Act (quoted earlier) has not established an applicable statute of limitations. For, precisely, Section 37 (b) of the Immigration Act states that deportation may be effected under certain clauses of Section 37 (a) "at any time after entry." One of those instances is, precisely, deportation upon the ground specified in Clause (2) of 37 (a) which relates to "any alien who enters the Philippines after the effective date of this act, who was not lawfully admissible at the time of entry." Thus, the Immigration Act, far from failing to specify a prescriptive period for deportation under Section 37 (a) (2), expressly authorizes deportation under such ground "at any time after entry." It is, thus, very difficult to see how Act No. 3326 could apply at all to the instant case. Finally, we must recall once more that what is actually involved in the case at bar is exclusion, not deportation. 3. It is urged by the government that Arocha vs. Vivo (supra) has already resolved the claim to Philippine citizenship of respondent William Gatchalian adversely to him and that such ruling constitutes res judicata. Upon the other hand, respondent William Gatchalian vehemently argues that neither the 6 July 1962 BOC's Decision nor Arochadefinitely settled the question of his citizenship. My respectful submission is that respondent William Gatchalian's argument constitutes a highly selective reading of both the BOC Decision and the Decision in Arocha Written by J.B.L. Reyes, J. for a unanimous court. The 6 July 1962 Decision of the BOC, in its dispositive portion, reads as follows: IN VIEW OF THE FOREGOING CONSIDERATIONS, this Board finds and hereby holds that the applicants[Jose Gatchalian, Elena Gatchalian, Benjamin Gatchalian, Juan Gatchalian, Pedro Gatchalian, Gloria Gatchalian, Francisco Gatchalian, William Gatchalian and Johnson Gatchalian] herein have not satisfactorily proved their claim to Philippine citizenship and therefore the Decision of the Board of Special Inquiry, dated July 6, 1961 admitting them as Filipinos is hereby reversed, and said applicants should be, as they are hereby ordered excluded as persons not properly documented. SO ORDERED. (Emphasis supplied) Since respondent William Gatchalian and his co-applicants in 1961 claimed the right to enter the country as Philippine citizens, determination of their right to enter the Philippines thus indispensably involved the resolution of their claim to Philippine citizenship. In other words, the determination of that citizenship in the instant case was not a mere incident of the case; it was rather the central and indeed the only issue that had to be resolved by the BOC. Review of the 1961 proceedings before the BSI shows that the sole issue before it was the supposed Philippine citizenship of the applicants. Thus, the very same issue of claimed Philippine citizenship was resolved by the BOC when it reversed the 6 July 1961 decision of the BSI. This case may be distinguished from other types of

cases, e.g., applications for public utility franchises, petitions for change of name, applications for registration as voter, filing of certificates of candidacy for an elective position, etc., where the central issue is not citizenship although resolution of that issue requires a determination of the citizenship of the applicant, candidate or petitioner. The ruling of the BOC that respondent William Gatchalian and his co-applicants for admission as Philippine citizens had not satisfactorily proved their claim to Philippine citizenship, can only be reasonably read as a holding that respondent William Gatchalian and his co-applicants were not Philippine citizens, whatever their true nationality or nationalities might be. Thus, it appears to be merely semantic play to argue, as respondent William Gatchalian argues, that the 1962 BOC Decision did not categorically hold him to be an "alien" and that the BOC had merely held him and his co-applicants as "not properly documented." The phrase "not properly documented" was strictly and technically correct. For William Gatchalian and his co-applicants had presented themselves as Philippine citizens and as such entitled to admission into the country. Since the BOC rejected their claims to Philippine citizenship, William Gatchalian and his co-applicants were non-Filipinos "not properly documented for admission" under Section 29 (a) (17), Immigration Act as amended. 4. In Arocha vs. Vivo (supra), the Supreme Court had before it the following items: 1. The 6 July 1961 Decision of the BSI which allowed the entry of respondent Gatchalian and his co-applicants as citizens of the Philippines; 2. A split BOC Decision approving the 6 July 1961 BSI decision, which had been "noted" by two (2) Commissioners but rejected by Commissioner Galang on 14 and 26 July 1961 and 21 August 1961, respectively; 3. The 6 July 1962 Decision of the BOC in which the BOC had reviewed motu proprio the Gatchalian proceedings before the BSI and reversed the BSI decision of 6 July 1961; 4. The Warrant of Exclusion dated 6 July 1962 issued pursuant to the 6 July 1962 Decision of the BOC; and 5. A decision of the Manila Court of First Instance dated 31 July 1965, rendered in a habeas corpusproceeding brought to effect the release of Pedro Gatchalian who had been taken into custody by immigration officials pursuant to the 6 July 1962 Warrant of Exclusion. The Court of First Instance ("CFI") decision ordered Pedro Gatchalian's release upon the ground that the 6 July 1962 BOC Decision had been issued beyond the one (1) year period for review of the BSI decision of 6 July 1961. The CFI decision was reversed and nullified by the Supreme Court. The Supreme Court held that the BOC Decision of 6 July 1962 had not been antedated and that it was valid and effective to reverse and nullify the BSI order granting admission to the Gatchalians as citizens of the Philippines. The Court also held that the split BOC decision of July-August 1961 did not operate to confirm and render final the BSI decision of 6 July 1961, the split decision being null and void because it had not been rendered by the BOC as a body. The Court further rejected Pedro Gatchalian's argument that he was not bound by the 6 July 1962 BOC Decision:

It is argued for the appellee that the minutes in Exh. 5-A refer only to the cases of Gloria, Francisco and Benjamin Gatchalian. But the designation of the case is "Gloria Gatchalian, et al." No reason is shown why the case of these three should be considered and voted upon separately, considering that the claims to citizenship and entry of all were based on the same circumstances, applicants being the descendants of one Santiago Gatchalian, a Filipino and that all their applications for entry were in fact jointly resolved by the Board of Inquiry in one single decision (Annex 1, petition, G.R. No. L-24844).4 I respectfully submit that the above-quoted ruling in Arocha disposes of the contention here being made by respondent William Gatchalian that he is not bound by the Decision in Arocha vs. Vivo, Arocha held that the 1962 BOC Decision was valid and effective and William was certainly one of the applicants for admission in the proceedings which began in 1961 before the BSI. Respondent William Gatchalian contends that the Court in Arocha did not find him nor any of his coapplicants to be aliens and that all the Court did was to hold that the 6 July 1962 Board of Commissioners decision had not been antedated. This contention cannot be taken seriously. As has already been pointed out several times, the 1962 Board of Commissioners decision held that William Gatchalian and his eight (8) other co-applicants for admission had not proved their claim to Philippine citizenship; not being Filipinos, they must have been aliens, to be excluded as persons not properly documented. Moreover, a review of the Rollo in Arocha vs. Vivo shows that the parties there had expressly raised the issue of the citizenship of Pedro Gatchalian in their pleadings. The Solicitor General, in his fifth assignment of error, argued that the Court of First Instance had erred in declaring Pedro Gatchalian a Filipino, and simultaneously urged that the 6 July 1962 decision of the Board of Commissioners was quite correct. Pedro Gatchalian, upon the other hand, contended that precisely because he was a Filipino, the Bureau of Immigration had no jurisdiction to exclude him.5 The Court also said in Arocha: Finally, it is well to note that appellee did not traverse the allegation of appellant Commissioners in their return to the writ of Habeas Corpus that appellee Pedro Gatchalian gained entry on the strength of a forged cablegram, purportedly signed by the former Secretary of Foreign Affairs Felixberto Serrano, and apparently authorizing appellee's documentation as a Filipino (par. 3[a] of Return, C.F.I. Rec., pp. 15-16). Such failure to deny imports admission of its truth by the appellee, establishes that his entry was irregular. Neither has he appealed the decision of the Commissioners of Immigration to the Department Head.6 Since the physical entry of Pedro Gatchalian was effected simultaneously with that of Francisco and William Gatchalian, on exactly the same basis and on the strength of the same forged cablegram allegedly from then Secretary of Foreign Affairs Felixberto Serrano, it must follow that the entry of Francisco and William Gatchalian was similarly irregular. The applications for admission of the nine (9) Gatchalians were all jointly resolved by the BSI on 6 July 1961 on the identical basis that they were all descendants of Santiago Gatchalian, a supposed natural born Philippine citizen. 5. The purported reversal of the 1962 BOC Decision by Commissioner Nituda in 1973, cannot be given any effect. A close examination of the same reveals that such purported reversal was highly irregular. Respondent William Gatchalian alleges that Mr. Nituda, being in 1973 Acting Commissioner of Immigration, had the authority to reverse the BOC Decision of 6 July 1962, since he (Nituda) had immediate control, direction and supervision of all officers, clerks and employees of the Bureau of Immigration. Control means, respondent Gatchalian continues, the power to alter or modify or nullify

or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for that of the latter.7 Respondent Gatchalian's view is obviously flawed. The Commissioner's power of control over the officers and employees of the Bureau of Immigration cannot be compared to the power of control and supervision vested by the Constitution in the President of the Philippines (which was what Ham was all about), for the Commissioner's general power of control cannot be said to include the power to review and set aside the prior final decision reached by the BOC. The Commissioner of Immigration, acting alone, cannot be regarded as an authority higher than the BOC itself (constituted by the Commissioner and the two [2] Associate Commissioners), in respect of matters vested by the governing statute in such Board itself. One of these matters is precisely the hearing and deciding of appeals from decisions of the BSI, and the motu proprio review of the entire proceedings of a case within one (1) year from the promulgation of a decision by the BSI.8 Respondent Gatchalian points to Section 29 (b) of the Immigration Act as amended, as empowering Nituda to reverse the 1962 BOC Decision. Section 29 (b) reads as follows: Section 29. . . . xxx

xxx

xxx

(b) Notwithstanding the provisions of this section, the Commissioner of Immigration, in his discretion, may permit to enter (sic) any alien properly documented, who is subject to exclusion under this section, but who is — (1) an alien lawfully resident in the Philippines who is returning from a temporary visit abroad; (2) an alien applying for temporary admission. It is difficult to understand respondent's argument. For one thing, Section 29 (b) relates to an "alien properly documented" while respondent Gatchalian precisely claims to be a citizen of the Philippines rather than a resident alien returning from a temporary visit abroad or an alien applying for temporary admission. It should be recalled that Nituda's 1973 Decision approved a ruling rendered by a Board of Special Inquiry in 1973 that respondent Gatchalian was properly documented, a ruling which was precipitated by a "Petition for Rehearing" filed by respondent Gatchalian and his coapplicants in 8 March 1972 before the BSI. There are a number of obvious defects in the action of the BSI. Firstly, the motion for rehearing was filed way out of time.Rule 3, B 22 of the Immigration Rules and Regulations of 1 January 1941 provides as follows: At any time before the alien is deported, but not later than seven days from the date he receives notice of the decision on appeal of the Board of Commissioners, the applicant or his attorney or counsel may file a petition for rehearing only on the ground of newly discovered evidence. Such petition shall be in writing and shall set forth the nature of the evidence discovered and the reason or reasons why it was not produced before. . . . (Emphasis supplied) Respondent Gatchalian's and his co-applicants' motion for rehearing was filed, not seven (7) days but rather ten (10) years after notice of the 1962 BOC Decision had been received by

them. Secondly, Rule 3, B 25 of the Immigration Rules and Regulations prescribed that any motion for rehearing shall be filed only with the Board of Commissioners; the Gatchalians' motion for rehearing was filed with the BSI which then purported to reopen the case "without first securing the consent in writing of the Commissioner of Immigration" as required by Rule 2, D 20. Furthermore, the purported reversal of the 1962 BOC Decision was made not by the duly constituted BOC in 1973, but only by its Chairman, then Acting Commissioner Nituda. Mr. Nituda's action flew in the face of Rule 3, B 22 of the Immigration Rules and Regulation, which mandates that the decision of any two (2) members of the BOC shall prevail. It thus appears that Mr. Nituda purported to act as if he were the entire BOC. Indeed, even the BOC itself in 1973 could not have lawfully reversed a final decision rendered by the BOC ten (10) years ago.9 We must, finally, not lose sight of the ruling in Arocha vs. Vivo (supra) where the Supreme Court expressly outlined the procedure to be followed by the BOC in resolving cases before them. This court was very explicit in holding that individual actions of members of the BOC are legally ineffective: . . . [T]he former Immigration Commissioners appeared to have acted individually in this particular instance and not as a Board. It is shown by the different dates affixed to their signatures that they did not actually meet to discuss and vote on the case. This was officially made to record by the Secretary of Justice in his Memorandum Order No. 9, on January 24, 1962, wherein he stated. that for the past several years, the Board of Commissioners of Immigration has not met collectively to discuss and deliberate in the cases coming before it. [Citation omitted] Individual action by members of a board plainly renders nugatory the purpose of its constitution as a Board. The Legislature organized the Board of Commissioners precisely in order that they should deliberate collectively and in order that their views and Ideas should be exchanged and examined before reaching a conclusion (See Ryan vs. Humphrise, LRA 1915F 1047). This process is of the essence of a board's action, save where otherwise provided by law, and the salutary effects of the rule would be lost were the members to act individually, without benefit of discussion. The powers and duties of boards and commissions may not be exercised by the individual members separately. Their acts are official only when done by the members convened in sessions, upon a concurrence of at least a majority and with at least a quorum present. [Citation omitted] Where the action needed is not of the individuals composing a board but of the official body, the members must be together and act in their official capacity, and the action should appear on the records of the board. [Citation omitted] Where a duty is entrusted to a board, composed of different individuals, that board can act officially only as such, in convened sessions, with the members, or a quorum thereof, present. [Citation omitted]10 (Emphasis supplied) The act of Mr. Nituda of reversing the 1962 Decision of the BOC could not hence be considered as the act of the BOC itself.

The pretended act of reversal 0of Mr. Nituda must, therefore, be stricken down and disregarded for having been made in excess of his lawful authority. The 1973 order of Nituda was ineffective to vest any right upon respondent Gatchalian who, it is worth nothing, did not pretend to submit any newly discovered evidence to support their claim to Philippine citizenship already rejected by the 1962 BOC. In essence, Mr. Nituda purported not merely to set aside the 1962 BOC Decision but also the 1967 Decision of this Court in Arocha vs. Vivo. II I turn to an examination of the underlying facts which make up the basis of the claim of William Gatchalian to Philippine citizenship. The most striking feature of this claim to Philippine citizenship is that it rests upon a fragile web constructed out of self-serving oral testimony, a total lack of official documentation whether Philippine or foreign, of negative facts and of invocation of presumptions without proof of essential factual premises. Put in summary terms, the claim of William Gatchalian to Philippine citizenship rests upon three (3) premises, to wit: a. that Santiago Gatchalian was a Philippine citizen; b. the supposed filiation of Francisco Gatchalian as a legitimate son of Santiago Gatchalian, which leads to the intermediate conclusion that Francisco was a Philippine citizen; and c. the supposed filiation of William Gatchalian as a legitimate son of Francisco Gatchalian leading to the final conclusion that William Gatchalian is a Philippine citizen. I respectfully submit that a careful examination of the facts made of record will show that the correctness and factual nature of each of these layered premises are open to very serious doubt, doubts which can only lead to the same conclusion which the BOC reached on 6 July 1962 when it reversed the BSI, that is, that there was failure to prove the Philippine citizenship of William Gatchalian and of his eight (8) alleged uncles, aunts and brother in 1961 when they first arrived in the Philippines. 1. The supposed Philippine citizenship of Santiago Gatchalian must be considered first. Santiago was allegedly born in Binondo, Manila, on 25 July 1905 to Pablo Pacheco and Marciana Gatchalian. The records do not disclose anything about Pablo Pacheco but everyone, including William Gatchalian, assumes that Pablo Pacheco was a Chinese subject and never became a citizen of the Philippine Islands. The basic claim of Santiago was that his mother Marciana Gatchalian was a Philippine citizen and that Marciana was not lawfully married to Pablo Pacheco and that consequently, he (Santiago) was an illegitimate son of Marciana Gatchalian. The first point that should be made in respect of Santiago's claim was that he had always regarded himself as a Chinese citizen until around 1958 or 1960, that is, when he reached the age of 53 or 55 years. Santiago, by his own testimony, lived the bulk of his adult life in China where he went in 1924 at age 19 and where he stayed for about 13 years returning to the Philippines for the first time in 1937. He returned in the same year to China, stayed there for another nine (9) years, and then came back to the Philippines again in 1946. He once more left the Philippines for China on 14 April 1947 and returned on 14 June 1947. Upon his second return to the Philippines in 1946, he documented himself as a Chinese national: he

was holder of ICR No. 7501 dated 3 May 1946. He continued to be documented as such, the record showing that he was also holder of an ACR No. A-219003 dated 13 January 1951. Santiago, again by his own statement, married in China a Chinese woman. This Chinese wife, however, Santiago never brought or attempted to bring to the Philippines and she allegedly died in China in 1951, or four (4) years after Santiago had permanently returned to the Philippines. In 1958, when he was 53 years of age, Santiago obtained a residence certificate where for the first time he described himself as a Filipino. It was also only in 1960, that is, when Santiago was 55 years of age, that he filed a petition for cancellation of his ACR obviously upon the theory that he had always been a Philippine citizen. It was at the hearing of his petition for cancellation of his ACR that Santiago made his oral statements concerning the supposed circumstances of his birth, parentage and marriage. Santiago's petition to cancel his ACR was apparently made in preparation for efforts to bring in, the succeeding year, a whole group of persons as his supposed descendants. The second point that needs to be made in respect of Santiago's claim of citizenship resting on his supposed status as an illegitimate son of a Filipina woman, is that no birth certificate bearing the name of Santiago Gatchalian was ever presented. Instead, a baptismal certificate bearing the name Santiago Gatchalian was presented showing the name of Marciana Gatchalian, Filipina, as mother, with the name of the father unknown. There was also presented a marriage certificate dated 1936 of Joaquin Pacheco, alleged brother of Santiago Gatchalian, also showing Marciana Gatchalian as mother with the name of the father similarly left blank. These two (2) pieces of paper, together with Santiago's own statements to the Citizenship Evaluation Board as well as the statements of Joaquin Pacheco to the same Board, constituted the sum total of the evidence supporting Santiago's claim to Philippine citizenship and on the basis of which an Order dated 12 July 1960, signed by Felix S. Talabis, Associate Commissioner, granted the petition to cancel Santiago's alien registry. In so issuing his Order granting cancellation of Santiago's ACR, Commissioner Talabis disregarded Santiago's failure to present a birth certificate, in obvious violation of rules of the Bureau of Immigration which expressly require the submission of a birth certificate, or a certified true copy thereof, in proceedings brought for cancellation of an ACR upon the ground that the petitioner is an illegitimate son of a Filipina mother.11 It is well-settled that a baptismal certificate is proof only of the administration of baptism to the person named therein, and that such certificate is not proof of anything else and certainly not proof of parentage nor of the status of legitimacy or illegitimacy.12 That Order also casually disregarded a number of other things, one of which was a document dated 1902 signed by Maxima Gatchalian, the mother of Marciana Gatchalian, stating that Maxima — . . . residing in the City of Manila, mother of Marciana Gatchalian, unmarried, of 18 years of age, her father being dead, do hereby freely consent to her marriage with Pablo C. Pacheco, of Manila, and that I know of no legal impediment to such marriage. (Emphasis supplied) Such parental consent indicated that a marriage ceremony would have taken place shortly thereafter as a matter of course; otherwise, the consent would have been totally pointless. Even more importantly, Commissioner Talabis' Order disregarded the testimony of Santiago

Gatchalian himself in the same cancellation proceedings that he (Santiago) believed that his parents had been married by the Justice of the Peace of Pasig, Rizal.13 In his Order, Commissioner Talabis referred to the fact that Santiago Gatchalian had been "interchangeably using his parental and maternal surnames. In school, he was known as Santiago Pacheco (Class Card for 1920-1921, Meisic Manila; Certificates of Completion of Third and Fourth Grades, Meisic Primary School). But in his Special Cedula Certificate No. 676812 dated 17 September 1937, and in tax clearance certificate issued on 2 October 1937, he is referred to as Santiago Gatchalian; and in a Communication dated 6 June 1941, he was addressed to as Santiago Pacheco by the Philippine Charity Sweepstakes Office." At the very least, such use of both paternal and maternal surnames indicated that Santiago was uncertain as to his supposed illegitimacy. In our case law, moreover, the use of a paternal surname may be regarded as an indication of possession of the status of a legitimate or acknowledged natural child.14 Perhaps the most important aspect of Commissioner Talabis Order granting cancellation of Santiago's ACR, is that such Order failed to give any weight to the presumption in law in favor of marriage, a presumption significantly reinforced by the parental consent given by Maxima Gatchalian to the marriage of her daughter Marciana Gatchalian to one Pablo C. Pacheco. A related presumption is that in favor of the legitimacy of offspring born of a man and woman comporting themselves as husband and wife.15 I respectfully submit that these presumptions cannot be successfully overthrown by the simple self-serving testimony of Santiago and of his alleged brother Joaquin Pacheco and by the two (2) pieces of paper (the baptismal certificate of Santiago and the marriage certificate of Joaquin Pacheco). It seems relevant to point out that Joaquin Pacheco, too, was unable to present any birth certificate to prove his supposed common parentage with Santiago Gatchalian; Joaquin was allegedly born in 1902, the same year that Maxima Gatchalian gave her consent to the marriage of Marciana Gatchalian and Pablo C. Pacheco. The third point that needs to be underscored is that Santiago Gatchalian did nothing to try to bring into the Philippines his supposed sons and daughters and grandchildren since 1947, when he returned permanently to the Philippines, and until 1960. The story given by the nine (9) supposed descendants of Santiago when they first arrived in the Philippines was that they had left the People's Republic of China and had gone to Macao in 1952 and there they stayed until they moved to Hongkong in 1958. It should also be noted that the youngest supposed child of Santiago, Benjamin Gatchalian, was said to have been born in China in 1942 and was consequently only five (5) years old when Santiago returned permanently to the Philippines in 1947. In other words, Santiago Gatchalian behaved as if the nine (9) supposed descendants did not exist until 1960 when Commissioner Talabis' Order cancelling Santiago's ACR was issued. It may also be noted that Santiago's 1951 ACR application mentioned only two (2) children of Santiago: Jose and Elena. In 1961, however, Santiago stated before the immigration investigator that he had a total of five (5) children: Jose, Elena, Francisco, Gloria and Benjamin. Santiago's explanation strongly echoes a common lawyer's excuse for failure to seasonably file some pleading, and, it is respectfully submitted, is equally contrived and unpersuasive; that he had his clerk fill up the ACR; that he gave his clerk four (4) names (not five [5]); that the clerk had simply failed to fill up the ACR correctly. In its 6 July 1962 Decision, the BOC noted that "while the two (2) names listed in [Santiago's] [ACR application] Jose and Elena, bear the same names as two of the [9] applicants, the difference in the ages of said persons compared to the said applicants, casts serious doubts on their Identity."16

It is suggested in the majority opinion that the question of citizenship of Santiago Gatchalian is a closed matter which cannot be reviewed by this Court; that per the records of the Bureau of Immigration, as of 20 July 1960, Santiago Gatchalian had been declared to be a Filipino citizen and that this forecloses re-opening of that question thirty (30) years later. I must, with respect, disagree with this suggestion. The administrative determination by the Bureau of Immigration as of 20 July 1960 certainly does not constitute res adjudicatathat forecloses this Court from examining the supposed Philippine citizenship of Santiago Gatchalian upon which private respondent William Gatchalian seeks to rely. The Court cannot avoid examining the Philippine nationality claimed by Santiago Gatchalian or, more accurately, claimed on his behalf by William Gatchalian, considering that one of the central issues here is the tanability or untenability of the claim of William Gatchalian to Philippine citizenship and hence to entry or admission to the Philippines as such citizen. 2. The second of the three (3) premises noted in the beginning of this section is: that Francisco Gatchalian was the legitimate son of Santiago Gatchalian and therefore followed the supposed Philippine citizenship of Santiago. This premise has in fact two (2) parts: (a) the physical filiation of Francisco Gatchalian as the son of Santiago Gatchalian; and (b) that Santiago Gatchalian was lawfully married to the Chinese mother of Francisco Gatchalian. This premise is remarkable for the total absence of documentary support for either of its two (2) parts. Francisco was born in Amoy, China in 1931, according to Santiago. The sum total of the evidence on this premise consists of Francisco Gatchalian's own statement and that of Santiago. No birth certificate or certified true copy thereof, or comparable documentation under Chinese law, was submitted by either Santiago or by Francisco. No secondary evidence of any kind was submitted. No testimony of a disinterested person was offered. Santiago Gatchalian claimed to have been married in China in 1926 to a Chinese woman, Chua Gim Tee, out of which marriage Francisco was allegedly born. No documentary proof of such marriage in China, whether primary or secondary, was ever submitted. Neither was there ever presented any proof of the contents of the Chinese law on marriage in 1926 and of compliance with its requirements. It is firmly settled in our jurisdiction that he who asserts and relies upon the existence of a valid foreign marriage must prove not only the foreign law on marriage and the fact of compliance with the requisites of such law, but also the fact of the marriage itself. In Yao Kee vs. Sy-Gonzales,17 the issue before the Court was whether the marriage of petitioner Yao Kee to the deceased Sy Kiat in accordance with Chinese law and custom had been adequately proven. In rendering a negative answer, this Court, speaking through Cortes, J., said: These evidence may very well prove the fact of marriage between Yao Kee and Sy Kiat. However, the same do not suffice to establish the validity of said marriage in accordance with Chinese law and custom. Custom is defined as "a rule of conduct formed by repetition of acts, uniformly observed (practiced) as a social rule, legally binding and obligatory." The law requires that "a custom must be proved as a fact, according to the rules of evidence" [Article 12, Civil Code]. On this score the Court had occasion to state that "a local custom as a source of right can not be considered by a court of justice unless such custom is properly established by competent evidence like any other fact" [Patriarca vs. Orato, 7 Phil. 390, 395 (1907)]. The same evidence, if not one of a higher degree, should be required of a foreign custom.

The law on foreign marriages is provided by Article 71 of the Civil Code which states that: Art. 71. All marriages performed outside the Philippines in accordance with the laws in force in the country where they were performed, and valid there as such, shall also be valid in this country, except bigamous, polygamous, or incestuous marriages, as determined by Philippine law. Construing this provision of law the Court has held that to establish a valid foreign marriage two things must be proven, namely: (1) the existence of the foreign law as a question of fact; and (2) the alleged foreign marriage by convincing evidence [Adong vs. Cheong Seng Gee, 43 Phil. 43, 49 (1922).18(Emphasis supplied) In the instant case, there was absolutely no proof other than Santiago's bare assertion that a marriage ceremony between Santiago and Chua Gim Tee had taken place in China in accordance with Chinese law. The contents of the relevant Chinese law on marriage at the time of the supposed marriage, was similarly not shown. Should it be assumed simply that the requirements of the 1926 Chinese law on marriage are identical with the requirements of the Philippine law on marriage, it must be pointed out that neither Santiago nor Francisco Gatchalian submitted proof that any of the requirements of a valid marriage under Philippine law had been complied with. I respectfully urge, therefore, that the reliance in the majority opinion upon our conflicts rule on marriage embodied in Article 71 of the Civil Code (now Article 26 of the Family Code; then Section 19 of Act No. 3630) is unwarranted. The rule that a foreign marriage valid in accordance with the law of the place where it was performed shall be valid also in the Philippines, cannot begin to operate until after the marriage performed abroad and its compliane with the requirements for validity under the marriage law of the place where performed, are first shown as factual matters. There is, in other words, no factual basis for a presumption that a lawful marriage under Chinese law had taken place in 1926 in China between Santiago Gatchalian and Chua Gim Tee. It must follow also that Francisco Gatchalian cannot simply rely upon a presumption of legitimacy of offspring of a valid marriage. As far as the record here is concerned, there could well have been no marriage at all in China between Santiago Gatchalian and Chua Gim Tee (just as Santiago had insisted that his father and mother had never married each other) and that consequently Francisco Gatchalian could just as well have followed the nationality of his admittedly Chinese mother. 1âw phi 1

3. The last premise noted earlier is the supposed filiation of William Gatchalian as a legitimate son of Francisco which resulted in William's following the supposed Philippine citizenship of Francisco Gatchalian. William was, according to Santiago Gatchalian, born in Amoy, China in 1949. Here again, just in the case of Francisco Gatchalian, there is a complete absence of contemporaneous documentary evidence of the supposed filiation of William Gatchalian as a legitimate son of Francisco Gatchalian.19 The only support ever presented for such alleged filiation consisted of the oral statements of Santiago Gatchalian, Francisco Gatchalian and William Gatchalian. It is difficult to resist the impression that there took place here a pyramiding of oral statements, each resting upon another oral statement and all going back to the supposed bastardy of Santiago, a status suddenly discovered or asserted by Santiago in his 55th year in life. No birth certificate, or comparable documentation under Chinese law, exhibiting the name of William Gatchalian was submitted. Francisco Gatchalian stated that he had married a Chinese woman, Ong Siu Kiok, in Amoy in 1947 according to Chinese custom. Once again, we must note that there was no proof submitted that a marriage ceremony satisfying the requirements of "Chinese custom" had ever taken place in China between Francisco and Ong Siu Kiok; neither was there any proof that a marriage "according to

Chinese custom" was valid and lawful under Chinese law in 1947 and of factual compliance with the requirements of the law and custom in China concerning marriage.20 Ong Siu Kiok was alleged to have died in Macau and never came to the Philippines. It must then follow, once again, that no presumption of a lawful marriage between Francisco Gatchalian and his alleged Chinese wife can be invoked by William Gatchalian. It follows still further that William Gatchalian cannot invoke any presumption of legitimacy in his own favor. As in the case of his putative father Francisco, William could as well have followed the nationality of his concededly Chinese mother. One final note: it might be thought that the result I have reached is unduly harsh considering the prolonged physical stay of William Gatchalian in the country. But this Court must apply the law as it is in fact written. I respectfully submit that the appropriate recourse of respondent William Gatchalian, should he feel that he has some humanitarian claim to a right to stay in the Philippines, is to the political departments of Government. Those departments of Government may then consider the wisdom and desirability, in the light of the interests of the country, of legislation permitting the legalization of the entry and stay in the Philippines of respondent William Gatchalian and those similarly situated. Unless and until such legislation is enacted, this Court really has no choice save to apply and enforce our immigration law and regulations and our law on citizenship. Accordingly, I vote to GRANT the Petition for Certiorari and Prohibition in G.R. Nos. 95122-23, and to SET ASIDE the Resolution/Temporary Restraining Order dated 7 September 1990 issued by respondent Judge Dela Rosa in Civil Case No. 90-5214, as well as the Order of respondent Judge Capulong dated 6 September 1990 in Civil Case No. 3431-V-90; and to RE-AFFIRM that respondent William Gatchalian is not a Philippine citizen. Melencio-Herrera, Cruz, Paras, Padilla, Regalado, JJ., concur

Footnotes * Renamed Bureau of Immigration as per Executive Order No. 292. FELICIANO, J.: dissenting: 1

21 SCRA 532 (1967); 128 Phil. 566 (1967).

2

Section 36, Commonwealth Act No. 613 as amended, or Immigration Law.

Tiu Chun Hai and Go Tam vs. Commission of Immigration and the Director of National Bureau of Investigation, 104 Phil. 949 (1958); La Tang Bun vs. Fabre, 81 Phil. 683 (1948). 3

4

21 SCRA at 539.

Rollo of G.R. No. 24844, p. 32 (Brief for the Respondents-Appellants, p. 28); Rollo of G.R. No. 24844, p. 41 (Brief for the Petitioner-Appellee, p. 8). 5

6

21 SCRA at 541.

7

Citing Ham vs. Bachrach, 109 Phil. 949 (1968).

8

Section 27 (d), Commonwealth Act No. 613, as amended.

9

See Commissioner of Immigration vs. Hon. Fernandez, et al., 120 Phil. 178 (1964).

10

21 SCRA at 540.

Memorandum Circular, Department of Justice, dated 28 August 1958; Administrative Memorandum, Bureau of Immigration, dated 17 March 1952, cited in E.F. Hernandez and O.A. Domingo, Philippine Immigration Law and Procedure, (1970 ed.,) p. 437. 11

See, e.g., People vs. Villeza, 127 SCRA 349 (1984); Macadangdang vs. Court of Appeals, 100 SCRA 73 (1980); Fortus vs. Novero, 23 SCRA 1331 (1968); Cid vs. Burnaman, 24 SCRA 434 (1968); Vidaurraza vs. Court of Appeals, 91 Phil. 492 (1952); and Capistrano vs. Gabino, 8 Phil. 135 (1907). 12

The transcript of the investigation conducted on 12 February 1960 in CEB No. 3860-R, In Re Petition to Cancel Alien Registry, Santiago Gatchalian, petitioner, Annex "2" of private respondent Gatchalian's "Comment with Counter-Petition" in G.R. Nos. 95612-13 states: 13

"[Immigration Investigator] Q It says here, "this is to certify that I, the undersigned, residing in the City of Manila, mother of Marciana Gatchalian, unmarried, of 18 years of age, her father being dead, do hereby freely consent to her marriage with Pablo C. Pacheco, of Manila, and that I know of no legal impediment to such marriage." Was your father, Pablo C. Pacheco, and mother, Marciana Gatchalian, ultimately or eventually married because of this consent of your grandmother? [Santiago Gatchalian] A Yes, I was informed by my brother Joaquin Pacheco that our parents were married by the justice of the peace of Pasig, Rizal." (Emphasis supplied) In his subsequent testimony in the same proceedings, Joaquin Pacheco, and a singularly accommodating immigration investigator who posed obviously leading questions, sought to soften the impact of Santiago's admission that his parents were married: "[Immigration Investigator] Q Or is it because [Santiago] was ashamed to admit that he was a legitimate child and that is the reason why he said your parents were married? [Joaquin Gatchalian] A It may be also that he is ashamed to make it be known that he is a legitimate child that is why he said our parents are married." (Annex "B-9" of private respondent Gatchalian's "Comment with Counter-Petition" in G.R. Nos. 95612-13) 14

E.g., In Re Mallare, 59 SCRA 45 (1974); and Adriano vs. De Jesus, 23 Phil. 350 (1912).

15

See, in this connection, Rule 131, Section 5 (cc) and (dd) of the Rules of Court.

16

Annex "37" of Comment with Counter-Petition, G.R. Nos. 95612-13.

17

167 SCRA 736 (1988).

18

167 SCRA at 743-744.

William Gatchalian presented his own marriage contract executed in 1973, which showed as his parents Francisco Gatchalian and Ong Siu Kiok. This, of course, has no probative value for present purposes. 19

20

Yao Kee vs. Sy-Gonzales, supra.

G.R. No. 128134

October 18, 2000

FE D. LAYSA, in her capacity as Regional Director of the Department of Agriculture, Regional Field Unit No. 5, petitioner, vs. COMMISSION ON AUDIT as represented by it Commissioner-Chairman, CELSO D. GANGAN, respondent. DECISION PURISIMA, J.: Petition for Certiorari assailing the Decision of the Commission on Audit (COA) of November 12, 1996, which affirmed the Special Audit Office (SAO) Report dated April 21, 1994 covering the Fishery Sector Program Fund of the Department of Agriculture (DAR) Regional Office No. V, Pili, Camarines Sur for the period 1991-1992. Records show that on April 26, 1993, COA directed an audit of the Fishery Sector Program Fund of the DAR Regional Office No. V, in Pili, Camarines Sur, specifically transactions relating to: (a) the purchase of equipment; (b) training and catering services; and (c) accounts payable. As a result of the audit, the special audit team submitted its report (SAO Report), replete with adverse findings and observations against the DAR Regional Office No. V, viz: 1. Transactions amounting to ₱3,247,494 relating to the purchase of equipment, training and catering services, construction of patrol boats, floating guard house and fish sanctuary markers were not subjected to bidding and were not covered with proper contracts and purchase orders, in violation of COA Circular No. 78-84, to the damage and prejudice of the government; 2. Charges to accounts payable were not founded on valid claims in violation of Section 46 of PD No. 1177; 3. Purchases of base and portable radio communications equipment were made without securing first the purchasers' and dealers' permits from the National Telecommunications Commission (NTC) in violation of Act No. 3846, otherwise known as the "Radio Control Law";

4. Honoraria for the first semester were paid without an appropriation for the purpose.1 On the basis of the aforesaid special audit team's findings and observations, the SAO Report, among others, recommended the refund of the disallowed/excessive disbursements and the filing of administrative cases against the officers and/or employees involved in the said irregularities. On August 4, 1993, the herein petitioner Fe D. Laysa, then Regional Director of the DAR Regional Field Unit No. V, submitted her Comment or "justification for the audit findings"2 as follows: 1. Their invitation to prospective bidders of motorcycles were disseminated not through publication in a newspaper of general publication but through postings in conspicuous places and thru personal delivery to known dealers in the locality; 2. Sealed canvass was the only means resorted to procure scuba diving equipments because according to Mr. Francisco Ombao, this type of equipment is not obtainable in the locality and no supplier in Manila is willing to participate in a formal bidding if it will be held in the Regional Office; 3. VHS Editing Recorder was procured thru direct purchase from a distributor in Manila but this was done after ensuring that no other outlet for said equipment was selling at a lower price; 4. Trainings for Scuba Diving, with package deals for instructions, board and lodging, transportation and other facilities were procured thru negotiated contracts with one Atty. Jose Yap because no other outfit in Bicol has the expertise and capability to undertake this specialized training. DAR Regional Office No. V and Atty. Jose Yap agreed to a 25% increase in the training fee because there was a dramatic increase of prices from 1991 to 1992. While there were no available funds from regular releases for these trainings, the above expenditures were charged against FSP funds because they support the FSP objectives; 5. Management, through oversight, failed to secure the required tax receipts and requests sufficient time for this; 6. Two cross visits (batch of scuba diving training) which were part of CY 1992 Work and Financial Plan were carried out in February and May of 1993 due to volume of work and weather conditions; 7. Their failure to secure purchase permit from NTC for communications equipment as well as to check on the dealer's permit to purchase was admittedly an oversight, being their first time to procure this equipment; 8. Their payment of honoraria was made in the belief that the submitted Work and Financial Plan for 1991 which provided personal services (honoraria) of ₱636,000.00 would be approved like in the previous year, 1990; 9. Their awarding the purchase contract to Annabel General Merchandise, which quoted ₱18,000.00 and ₱9,000.00 for base and portable radios, respectively, instead of to AMU Import/Export which quoted ₱15,200.00 and ₱8,000.00, respectively, was most

advantageous to the government because immediate available repair, warranty and registration of the units were also included in the offer. On April 21, 1994, after the Review Panel found the SAO Report to be in order, COA Chairman Celso D. Gangan directed the Director of COA, Regional Office No. V, to bring the proper charges before the Office of the Ombudsman against the petitioner and other officials and employees involved in the irregularities. The petitioner appealed the findings of the special audit team to the COA en banc but in its decision3 dated November 12, 1996, COA denied the appeal. Unable to accept the said decision, petitioner brought the present petition for certiorari, imputing grave abuse of discretion on the part of COA. Petitioner, in the main, asserts that the findings and recommendations of the SAO were made without fully appreciating the Fishery Sector Program which is a special program relating to research and development. Bureaucratic adherence to prescribed rules and procedures stifles research and development activities; petitioner pointed out. According to petitioner, since the Fishery Sector Program is funded, not by the regular or general appropriations but by the Asian Development Bank and the Overseas Economic Cooperative Fund of Japan, the generally stringent rules governing appropriations should not be strictly construed in the operation of subject program. 1âwphi 1

In its Comment, the Office of the Solicitor General agreed with COA that the petitioner and other officials and employees had violated COA rules and regulations. The petition is without merit. Petitioner is well aware of the agency's non-compliance with pertinent COA rules and regulations on the bidding process, submission of certain documents to support claims for disbursements, and charging of accounts on valid claims, reasoning out that after all, the government's best interest did not suffer.4 The responsibility for state audit is vested by the Constitution in the COA. Under the Constitution, the COA "xxx shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities xxx".5 In the exercise of its broad powers, particularly its auditing functions, the COA is guided by certain principles and state policies to assure that "government funds shall be managed, expended, utilized in accordance with law and regulations, and safeguarded against loss or wastage xxx with a view to ensuring efficiency, economy and effectiveness in the operations of government."6 As can be gleaned from the foregoing provisions of the Constitution, verification of whether officials of the agency properly discharged their fiscal responsibilities and whether the agency complied with internal auditing controls in the collection and/or disbursement of government funds, are parts of the functions of the COA. Given the COA findings in this case which were substantiated by evidence, the COA correctly decided to file the charges against the petitioner and the other officers and employees involved, leaving the ultimate resolution of the question (whether or not their handling of government funds fell short of pertinent COA rules and regulations) to be made after trial.

Findings of quasi-judicial agencies, such as the COA, which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but at times even finality if such findings are supported by substantial evidence, as in the case at bar.7 In this era of clogged court dockets, the need for specialized administrative boards or commissions with special knowledge, experience and capability to hear and determine promptly disputes on technical questions or essentially factual matters, subject to judicial review in case of grave abuse of discretion, is imperative.8 WHEREFORE, the Decision of the COA is AFFIRMED and the Petition DISMISSED for lack of merit. No pronouncement as to costs. SO ORDERED. Davide, Jr., C.J., (Chairman), Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago, and De Leon, Jr., JJ., concur.

Footnotes 1

Annex "C", Rollo, pp. 26-29.

2

Rollo, pp. 20-25.

3

Annex "A" Rollo, p. 17.

4

Rollo, pp. 43- 45.

5

Sec. 2 (1) Art. IX-D, 1987 Constitution

Sec. 7 Government Accounting and Auditing Manual, Vol. I; Sec. 2, 25 (1) PD 1445 cited in Osmena vs. COA , 238 SCRA 463, 469. 6

7

Alejandro vs. CA, 191 SCRA 709, 700.

8

Qualitrans Limousine Service, Inc. vs. Royal Class Limousine Service, 179 SCRA 569, 577.

[G.R. No. 125447. August 14, 1998]

MARINA PROPERTIES CORPORATION, petitioner, vs. COURT OF APPEALS and H.L. CARLOS CONSTRUCTION, INC., respondents.

[G.R. No. 125475. August 14, 1998]

H.L.

CARLOS CONSTRUCTION, INC., petitioner, vs. COURT OF APPEALS and MARINA PROPERTIES CORPORATION, respondents. DECISION

DAVIDE, JR., J.:

We resolve here two (2) separate appeals from the decision[1] of the Court of Appeals of 27 June 1996 in CA-G.R. SP No. 37927, which affirmed with modification the 15 March 1995 Order[2] of the Office of the President in O.P. Case No. 5462 which, in turn, affirmed in toto the 14 June 1993 decision[3] of the Housing and Land Use Regulatory Board (HLURB) in the case filed by H.L. Carlos Construction, Inc. (hereafter H.L. CARLOS) against MARINA Properties Corporation (hereafter MARINA) for Specific Performance with Damages and docketed as REM-A-1179.[4] The factual antecedents, as summarized by the Court of Appeals, are as follows:

Petitioner Marina Properties Corporation (MARINA for short) is a domestic corporation engaged in the business of real estate development. Among its projects is a condominium complex project, known as the MARINA BAYHOMES CONDOMINIUM PROJECT consisting of 10 building clusters with 31 housing units to be built on a parcel of land at Asiaworld City, Coastal Road in Paranaque, Metro Manila. The area is covered by T.C.T. No. (121211) 42201 of the Registry of Deeds of the same municipality. The construction of the project commenced sometime in 1988, with respondent H.L. Carlos Construction, Inc. (H.L. CARLOS for brevity) as the principal contractor, particularly of Phase III. As an incentive to complete the construction of Phase III, MARINA allowed H.L. CARLOS to purchase a condominium unit therein known as Unit B121. Thus, on October 9, 1988, the parties entered into a Contract to Purchase and to Sell covering Unit B-121 for P3,614,000.00. H.L. CARLOS paid P1,034,200.00 as downpayment, P50,000.00 as cash deposit and P67,024.22 equivalent to 13 monthly amortizations. After paying P1,810,330.70, which was more than half of the contract price, H.L. CARLOS demanded for the delivery of the unit, but MARINA refused. This prompted H.L. CARLOS to file with the Regional Trial Court of

Makati, Branch 61 a complaint for damages against MARINA, docketed as Civil Case No. 89-5870. Meanwhile, on April 20, 1990, MARINA wrote H.L. CARLOS that it was exercising its option under their Contract to Purchase and to Sell to take over the completion of the project due to its (H.L. CARLOS) abandonment of the construction of the Phase III project. In a letter dated March 15, 1991, H.L. CARLOS inquired from MARINA about the turn-over status of the condominium unit. MARINA replied that it was cancelling the Contract to Purchase and Sell due to H.L. CARLOS abandonment of the construction of the Phase III Project and its filing of baseless and harassment suits against MARINA and its officers. Forthwith, H.L. CARLOS filed the instant complaint for specific performance with damages against MARINA with the Housing and Land Use Regulatory Board (HLURB), alleging among others, that it has substantially complied with the terms and conditions of the Contract to Purchase and Sell, having paid more than 50% of the contract price of the condominium unit; and that MARINAs act of cancelling the contract was done with malice and bad faith. H.L. CARLOS prays that MARINA be ordered to deliver to it the subject unit, accept the monthly amortizations on the remaining balance, execute the final deed of sale and deliver the title of the unit upon full payment of the contract price. Also, H.L. CARLOS prays for the award of actual and exemplary damages as well as attorneys fees. In its answer, MARINA claimed that its cancellation of the Contract to Purchase and Sell is justified since H.L. CARLOS has failed to pay its monthly installment since October 1989 or for a period of almost two (2) years; that H.L. CARLOS abandoned its work on the project as of December 1989; and that the instant case should have been suspended in view of the pendency of Civil Case No. 89-5870 for damages in the Makati RTC involving the same issues. On February 21, 1992, the HLURB, through Atty. Abraham N. Vermudez, Arbiter, rendered a decision, the dispositive portion of which reads: WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered declaring the cancellation of the subject Contract to Sell as null and void and ordering respondent Marina Properties Corporation as follows:

1. To turn over the subject condominium unit to herein complainant, accept monthly amortization[s] on the remaining balance and to execute the final deed of sale and deliver title/ownership of the subject property to the complainant upon full payment of the contract price. 2. To pay complainant actual damages of P30,000.00 per month commencing from March 1990 until the delivery of the subject property and the amount of P50,000.00 as exemplary damages. 3. To pay complainant the amount of P50,000.00 as and by way of attorneys fees. 4. To pay to this Board the amount of P5,000.00 as [an] administrative fine. IT IS SO ORDERED. In ruling for H.L. CARLOS, the HLURB Arbiter held: x x x.

Respondents position that the case is a complex one is more imaginary than real. Clearly, the cancellation of the subject Contract to Purchase and to Sell was in violation of Republic Act No. 6552, otherwise known as the Realty Installment Buyers Protection Act, which prescribes the procedure for cancellation of installment contracts for the purchase of subdivision lots and/or condominium units. In the case at bar, the complainant had already paid P1,810,330.70 or more than 50% of the contract price of P3,614,000.00 and more than the total of two years (24 months) installments computed at the monthly installment of P67,024.22, inclusive of the downpayment, which is more than 24 installments. Under R.A. 6552, notarial cancellation of the installment contract becomes effective only upon payment of the cash surrender value to the purchaser, which however respondent did not do. Respondents cancellation of the subject contract was clearly illegal, void and cannot be sanctioned. Neither can this Office find merit in respondents contention that this case should be suspended because of the pending civil case between the parties, said pending case, Civil Case No. 89-5870 in the Regional Trial Court, Branch 61, Makati, Metro Manila, was filed by the same complainant herein against

the same respondent for collection of unpaid billings in the amount of about P10,000,000.00. On the other hand, this Office finds that respondents act in cancelling the subject installment sales contract without following the provisions of R.A. 6552 is an unsound real estate business practice for which respondent is fined the sum of P5,000.00. As to damages and attorneys fees claimed by complainant and borne out by the records, this Office finds that respondent should be held liable for unearned rental income of P30,000.00 per month, commencing from March 1990 when the condominium unit should have been delivered until actual delivery thereof, and attorneys fees of P50,000.00, both amounts to be deducted from the unpaid balance due on the subject condominium unit. Likewise, for its wanton breach of the subject contract, respondent is ordered to pay exemplary damages in the amount of P50,000.00 as an example for the public good, deductible from the balance due on the subject condominium unit. x x x. Whereupon, MARINA interposed an appeal to the Board of Commissioners of HLURB (First Division) which affirmed the assailed decision.

On further appeal to the Office of the President, the decision of the Board of Commissioners (First Division) was affirmed. MARINA filed a motion for reconsideration but was denied.[5] MARINA filed a petition for review with the Court of Appeals ascribing the following errors to the Office of the President: (1) In sustaining the award of actual damages for unrealized profits in favor of private respondent H.L. CARLOS which were unliquidated, speculative and patently unreasonable; (2) In declaring the motion for reconsideration filed by MARINA pro-forma and depriving it of the right of appeal; and

(3) In not dismissing the case on the grounds of litis pendentia, forum-shopping and splitting a single cause of action.[6] The Court of Appeals sustained MARINA as regards the award of actual damages, finding that no evidence was presented to prove the P30,000.00 award as monthly rental for the condominium unit. However, as to the pronouncement of the Office of the

President that MARINAs motion for reconsideration was merely pro-forma, the Court of Appeals noted that MARINA did not raise any new issue in its motion for reconsideration. In the same vein, respondent court ruled that MARINA was not deprived of its right to appeal. The Court of Appeals likewise brushed aside MARINAs assertion that the complaint should have been dismissed on the ground of litis pendentia thus: The requisites of lis pendens as a ground for dismissal of a complaint are: (1) identity of parties or at least such representing the same interest in both actions; (2) identity of rights asserted as prayed for, the reliefs being founded on the same facts; and (3) identity in both cases is such that the judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res judicata to the other case.

There is no dispute that the case at bench and Civil Case No. 89-5870 for damages at the Makati RTC involves the same parties although in the civil case, the officers of MARINA have been impleaded as co-defendants. While the first requisite obtains in this case, the last two are conspicuously absent. It will be observed that the two cases involve distinct and separate causes of action or rights asserted. Civil Case No. 89-5870 is for the collection of sums of money corresponding to unpaid billings and labor costs incurred by H.L. CARLOS in the construction of the project under the Construction Contract agreed upon by the parties. Upon the other hand, the case at bench is for specific performance (delivery of the condominium unit) and damages arising from the unilateral cancellation of the Contract to Purchase and to Sell by MARINA. Moreover, the reliefs sought are also different. In the civil case, H.L. CARLOS prays for the award of P7,065,885.03 representing unpaid labor costs, change orders and price escalations including the sum of P2,000,000.00 as additional compensatory damages. In the instant case, H.L. CARLOS seeks not only the awa[r]d of actual and exemplary damages but also the delivery of the condominium unit upon MARINAs acceptance of the monthly amortization on the remaining balance, the execution of a final deed of sale and the delivery of the title to the said private respondent. MARINAs claim that the present complaint should be dismissed on the ground of splitting a cause of action, deserves scant consideration. The two complaints did not arise from a single cause of action but from two separate causes of action. It bears emphasis that H.L. CARLOS cause of action in the civil case stemmed from the breach by MARINA of its contractual obligation under the Construction Contract, while in the

case at bench, H.L. CARLOS cause of action is premised on the unilateral cancellation of the Contract to Purchase and Sell by MARINA.[7] Accordingly, the Court of Appeals affirmed the Order of the Office of the President but deleted the award of actual damages. As such, the parties sought redress from this Court by way of separate petitions. In G.R. No. 125447, MARINA asserts that the Court of Appeals erred: (1) in finding that petitioner should turn over the subject condominium unit to H.L. CARLOS and accept monthly amortizations on the remaining balance; and (2) in not ordering the dismissal of the case on the grounds of litis pendentia, forum-shopping and splitting of a single cause of action. On the other hand, in G.R. No. 125475, H.L. CARLOS contends that the Court of Appeals gravely erred in: (1) finding that the award of actual damages equivalent to P30,000.00 in unearned monthly rentals was not sustained by evidence; (2) in not declaring that the petition for review was filed out of time and fatally defective for lack of verification and certification by MARINA Properties, and in not declaring the decision of the Office of the President final and executory; and 3) in not dismissing MARINAs appeal as without merit. MARINAs motion to consolidate both cases was granted in a resolution dated 27 January 1997.[8] We first address the lone procedural issue of the timeliness of the petition for review filed by MARINA with the Court of Appeals and the supposed lack of verification and certification. We find without merit the allegation that MARINAs petition for review before the Court of Appeals was filed out of time as MARINAs motion for reconsideration (of the order of the Office of the President) was found to be pro forma and, therefore, did not stop the running of its period to appeal. MARINA filed its Motion for Reconsideration[9] on the last day of its period to appeal, specifically, on 3 May 1995. However, the motion was found by the Office of the President to be pro forma as the issues of litis pendentia, forum-shopping and splitting of a cause of action as well as the issue of unliquidated, speculative and unreasonable damages raised therein were basically the same issues raised and discussed extensively in the Appeal Memorandum and which were already weighed, discussed and considered by this Office in its Order dated March 15, 1995.[10] As a consequence, the Office of the President declared its decision final and executory. Under our rules of procedure, a party adversely affected by a decision of a trial court may move for reconsideration thereof on the following grounds: (a) the damages awarded are excessive; (b) the evidence is insufficient to justify the decision; or (c) the decision is contrary to law.[11] A motion for reconsideration interrupts the running of the period to appeal, unless the motion is pro forma.[12] This is now expressly set forth in the last paragraph of Section 2, Rule 37, 1997 Rules of Civil Procedure.

A motion for reconsideration based on the foregoing grounds is deemed pro forma if the same does not specify the findings or conclusions in the judgment which are not supported by the evidence or contrary to law, making express reference to the pertinent evidence or legal provisions.[13] It is settled that although a motion for reconsideration may merely reiterate issues already passed upon by the court, that by itself does not make it pro forma and is immaterial because what is essential is ompliance with the requisites of the Rules.[14] Thus, in Guerra Enterprises, Co. Inc. v. CFI of Lanao del Sur,[15] we ruled:

Among the ends to which a motion for reconsideration is addressed, one is precisely to convince the court that its ruling is erroneous and improper, contrary to the law or the evidence; and in doing so, the movant has to dwell of necessity upon the issues passed upon by the court. If a motion for reconsideration may not discuss these issues, the consequence would be that after a decision is rendered, the losing party would be confined to filing only motions for reopening and new trial. We find in the Rules of Court no warrant for ruling to that effect, a ruling that would, in effect eliminate subsection (c) of Section 1 of Rule 37. On this note, it has also been fittingly observed that: Where the circumstances of a case do not show an intent on the part of the pleader to merely delay the proceedings, and his motion reveals a bona fide effort to present additional matters or to reiterate his arguments in a different light, the courts should be slow to declare the same outright as pro forma. The doctrine relating to pro forma motions has a direct bearing upon the movants valuable right to appeal. It would be in the interest of justice to accord the appellate court the opportunity to review the decision of the trial court on the merits than to abort the appeal by declaring the motion pro forma, such that the period to appeal was not interrupted and had consequently lapsed.[16] We are thus unable to hold that MARINAs motion for reconsideration was merely pro forma. Our review of the records reveals that said motion adequately pointed out the conclusions MARINA regarded as erroneous and contrary to law, and even referred to findings not supported by evidence as well as jurisprudence to sustain MARINAs claims. As to the justification proffered by the Office of the President that it had already passed upon the issues raised by MARINA in its motion, plainly, the authorities cited above readily refute such a position. It may be pointed out that under Supreme Court Circular No. 1-91 dated 27 February 1991 and Revised Administrative Circular No. 1-95 dated 16 May 1995, which took effect on 1 June 1995, an aggrieved party is allowed one motion for reconsideration of the assailed decision or final order before he may file a petition for review with the Court of Appeals. All told, MARINAs motion for reconsideration was but proper under the adjective rules extant in this jurisdiction.

The charge of a lack of verification or certification in MARINAs petition before the Court of Appeals is baseless. Even the most cursory of reviews will disclose that such may be found on pages 30 and 31 of the Petition.[17] We agree with the conclusion of the Court of Appeals that the award of P30,000.00 as actual damages for unearned monthly rental income starting from March 1990 until the delivery of the property to H.L. CARLOS was arbitrary. Article 2199 of the Civil Code provides that one is entitled to adequate compensation only for such pecuniary loss suffered by him as is duly proved.[18] Actual damages, to be recoverable, must not only be capable of proof, but must actually be proved with a reasonable degree of certainty.[19] Courts cannot simply rely on speculation, conjecture or guesswork in determining the fact and amount of damages.[20] As the Court of Appeals correctly found here that no proof was submitted by H.L. CARLOS to substantiate the recovery of actual damages in the form of monthly rentals, the deletion of such award was but appropriate. The issue of forum shopping raised by MARINA deserves scant consideration. H.L. CARLOS was not guilty of forum shopping when it sued MARINA before the HLURB to enforce their Contract To Purchase and To Sell. Forum shopping is the act of a party against whom an adverse judgment has been rendered in one forum, of seeking another (and possibly favorable) opinion in another forum other than by appeal or the special civil action of certiorari, or the institution of two (2) or more actions or proceedings grounded on the same cause on the supposition that one or the other court might look with favor upon the party.[21] Contrary to MARINAs assertion, H.L. CARLOS complaint was hardly a duplication of Civil Case No. 89-5870 which was filed to collect the sum of money corresponding to unpaid billings from their Construction Contract. The cause of action in the civil case was, therefore, totally distinct from the cause of action in the complaint before the HLURB. For this reason, neither could there have been splitting of a cause of action. Anent the absence of litis pendentia, the Court of Appeals meticulous analysis of this issue leaves no room for improvement and we adopt it as our own. We likewise uphold the finding that MARINAs cancellation of the Contract To Buy and To Sell was clearly illegal. Prior to MARINAs unilateral act of rescission, H.L. CARLOS had already paid P1,810,330.70, or more than 50% of the contract price of P3,614,000.00. Moreover, the sum H.L. CARLOS had disbursed amounted to more than the total of 24 installments, i.e., two years worth of installments computed at a monthly installment rate of P67,024.22, inclusive of the downpayment. As to the governing law, Section 24 of P.D. 957[22] provides:

SEC.24. Failure to pay installments. -- The rights of the buyer in the event of his failure to pay the installments due for reasons other than failure of the owner or developer to develop the project shall be governed by Republic Act No. 6552.

Then among the requirements of R.A. No. 6552, [23] in order to effect the cancellation of a contract, a notarial cancellation must first be had.[24] Therefore, absent this, MARINAs cancellation of its contract with H.L. CARLOS was void. In conclusion, cases involving specific performance of contractual and statutory obligations, filed by buyers of subdivision lots or condominium units against the owner, developer, dealer, broker or salesman fall under the jurisdiction of the HLURB. [25] It is incumbent upon said administrative agency, in the exercise of its powers and functions, to interpret and apply contracts, determine the rights of the parties under these contracts, and award damages whenever appropriate.[26] WHEREFORE, the petitions in these consolidated cases, G.R. No. 125447 and G.R. No. 125475 are DENIED and the assailed decision of respondent Court of Appeals of 27 June 1996 is hereby AFFIRMED. Costs against petitioner in each case. SO ORDERED. Bellosillo, Vitug and Panganiban, JJ., concur.

[G.R. No. 131683. June 19, 2000] JESUS LIM ARRANZA; LORENZO CINCO; QUINTIN TAN; JOSE ESCOBAR; ELBERT FRIEND; CLASSIC HOMES VILLAGE ASSOCIATION, INC.; BF NORTHWEST HOMEOWNERS ASSOCIATION, INC.; and UNITED BF HOMEOWNERS ASSOCIATIONS, INC., petitioners, vs. B.F. HOMES, INC. AND THE HONORABLE COURT OF APPEALS, respondent. DECISION DAVIDE, JR., C.J.: For resolution in this petition is the issue of whether it is the Securities and Exchange Commission (SEC) or the Housing and Land Use Regulatory Board (HLURB) that has jurisdiction over a complaint filed by subdivision homeowners against a subdivision developer that is under receivership for specific performance regarding basic homeowners needs such as water, security and open spaces. Respondent BF Homes, Inc. (BFHI), is a domestic corporation engaged in developing subdivisions and selling residential lots. One of the subdivisions that respondent developed was the BF Homes Paraaque Subdivision, which now sprawls across not only a portion of the City of Paraaque but also those of the adjoining cities of Las Pias and Muntinlupa.

When the Central Bank ordered the closure of Banco Filipino, which had substantial investments in respondent BFHI, respondent filed with the SEC a petition for rehabilitation and a declaration that it was in a state of suspension of payments. On 18 March 1985, the SEC placed respondent under a management committee. Upon that committees dissolution on 2 February 1988, the SEC appointed Atty. Florencio B. Orendain as a Receiver, and approved a Revised Rehabilitation Plan. As a Receiver, Orendain instituted a central security system and unified the sixty~five homeowners associations into an umbrella homeowners association called United BF Homeowners Associations, Inc. (UBFHAI), which was thereafter incorporated with the Home Insurance and Guaranty Corporation (HIGC). [1]

In 1989, respondent, through Orendain, turned over to UBFHAI control and administration of security in the subdivision, the Clubhouse and the open spaces along Concha Cruz Drive. Through the Philippine Waterworks and Construction Corporation (PWCC), respondents managing company for waterworks in the various BF Homes subdivisions, respondent entered into an agreement with UBFHAI for the annual collection of community assessment fund and for the purchase of eight new pumps to replace the over~capacitated pumps in the old wells. On 7 November 1994, Orendain was relieved by the SEC of his duties as a Receiver, and a new Board of Receivers consisting of eleven members of respondents Board of Directors was appointed for the implementation of Phases II and III of respondents rehabilitation. The new Board, through its Chairman, Albert C. Aguirre, revoked the authority given by Orendain to use the open spaces at Concha Cruz Drive and to collect community assessment funds; deferred the purchase of new pumps; recognized BF Paraaque Homeowners Association, Inc., (BFPHAI) as the representative of all homeowners in the subdivision; took over the management of the Clubhouse; and deployed its own security guards in the subdivision. [2]

Consequently, on 5 July 1995, herein petitioners filed with the HLURB a class suit "for and in behalf of the more than 7,000 homeowners in the subdivision" against respondent BFHI, BF Citiland Corporation, PWCC and A.C. Aguirre Management Corporation "to enforce the rights of purchasers of lots" in BF Homes Paraaque. They alleged that: [3]

1......The forty (40) wells, mostly located at different elevations in Phases 3 and 4 of the subdivision and with only twenty~seven

(27) productive, are the sources of the inter~connected water system in the 765~hectare subdivision; 2......There is only one drainage and sewer system; 3......There is one network of roads; 4......There are eight (8) entry and exit points to the subdivision and from three (3) municipalities (now cities), a situation obtaining in this subdivision only and nowhere else; 5......There was no security force for the entire subdivision until 1988; 6......There are not enough open spaces in the subdivision in relation to the total land area developed; and whatever open spaces are available have been left unkempt, undeveloped and neglected; 7......There are no zoning guidelines which resulted in unregulated constructions of structures and the proliferation of business establishments in residential areas; and 8......The BFPHAI became "moribund" sometime in 1980 on account of its failure to cope with the delivery of basic services except for garbage collection. Petitioners raised "issues" on the following basic needs of the homeowners: rights~of~way; water; open spaces; road and perimeter wall repairs; security; and the interlocking corporations that allegedly made it convenient for respondent "to compartmentalize its obligations as general developer, even if all of these are hooked into the water, roads, drainage and sewer systems of the subdivision." Thus, petitioners prayed that: [4]

A. A cease~and~desist order from selling any of the properties within the subdivision be issued against respondent BFHI, BF Citi, ACAMC, and/or any and all corporations acting as surrogates/alter~egos, sister companies of BFHI and/or its stockholders until the warranties, facilities and infrastructures shall have been complied with or put up (and) the advances of UBFHAI reimbursed, otherwise, to cease and desist from rescinding valid agreements or contracts for the benefit of complainants, or

committing acts diminishing, diluting or otherwise depriving complainants of their rights under the law as homeowners; B. .....After proper proceedings the bond or deposit put up by respondent BF Homes, Inc. be forfeited in favor of petitioners; C. .....Respondent BFHI be ordered to immediately turnover the roads, open spaces, and other facilities built or put up for the benefit of lot buyers/homeowners in the subdivision to complainant UBFHAI as representative of all homeowners in BF Homes Paraaque, free from all liens, encumbrances, and taxes in arrears; D. If the open spaces in the subdivision are not sufficient as required by law, to impose said penalties/sanctions against BFHI or the persons responsible therefor; E. .....Order the reimbursement of advances made by UBFHAI; F. .....Turn over all amounts which may have been collected from users fees of the strip of open space at Concha Cruz Drive; G. .....Order PWCC to effect and restore 24~hour water supply to all residents by adding new wells replacing over~capacitated pumps and otherwise improving water distribution facilities; H. Order PWCC to continue collecting the Community Development Fund and remit all amounts collected to UBFHAI; I......Order BFHI to immediately withdraw the guards at the clubhouse and the 8 entry and exit points to the subdivision, this being an act of usurpation and blatant display of brute force; J. .....The appropriate penalties/sanctions be imposed against BF Citi, ACAMC or any other interlocking corporation of BFHI or any of its principal stockholders in respect of the diminution/encroaching/violation on the rights of the residents of the subdivision to enjoy/avail of the facilities/services due them; and K......Respondents be made to pay attorneys fees and the costs of this suit. [5]

In its answer, respondent claimed that (a) it had complied with its contractual obligations relative to the subdivisions development; (b) respondent could not be compelled to abide by agreements resulting from Orendains ultra vires acts; and (c) petitioners were precluded from instituting the instant action on account of Section 6(c) of P.D. No. 902~A providing for the suspension of all actions for claims against a corporation under receivership. Respondent interposed counterclaims and prayed for the dismissal of the complaint. [6]

Petitioners thereafter filed an urgent motion for a cease~and~desist/status quo order. Acting on this motion, HLURB Arbiter Charito M. Bunagan issued a 20~day temporary restraining order to avoid rendering nugatory and ineffectual any judgment that could be issued in the case; and subsequently, an Order granting petitioners prayer for preliminary injunction was issued [7]

enjoining and restraining respondent BF Homes, Incorporated, its agents and all persons acting for and in its behalf from taking over/administering the Concha Garden Row, from issuing stickers to residents and non-residents alike for free or with fees, from preventing necessary improvements and repairs of infrastructures within the authority and administration of complainant UBFHAI, and from directly and indirectly taking over security in the eight (8) exit points of the subdivision or in any manner interfering with the processing and vehicle control in subject gates and otherwise to remove its guards from the gates upon posting of a bond of One Hundred Thousand Pesos (P100,000.00) which bond shall answer for whatever damages respondents may sustain by reason of the issuance of the writ of preliminary injunction if it turns out that complainant is not entitled thereto. [8]

Respondent thus filed with the Court of Appeals a petition for certiorari and prohibition docketed as CA~G.R. SP No. 39685. It contended in the main that the HLURB acted "completely without jurisdiction" in issuing the Order granting the writ of preliminary injunction considering that inasmuch as respondent is under receivership, the "subject matter of the case is one exclusively within the jurisdiction of the SEC." [9]

On 28 November 1997, the Court of Appeals rendered a decision annulling and setting aside the writ of preliminary injunction issued by the HLURB. It ruled that private respondents action may properly be regarded as a "claim" within the contemplation of PD No. 902~A which should be placed on equal footing with those of petitioners other creditor or creditors and which should be filed with the Committee of Receivers. In any event, pursuant to Section 6(c) [10]

of P.D. No. 902~A and SECs Order of 18 March 1985, petitioners action against respondent, which is under receivership, should be suspended. Hence, petitioners filed the instant petition for review on certiorari. On 26 January 1998, the Court issued a temporary restraining order (TRO) enjoining respondent, its officers, representatives and persons acting upon its orders from (a) taking over/administering the Concha Garden Row; (b) issuing stickers to residents and non~residents alike for free or with fees; (c) preventing necessary improvements and repairs of infrastructures within the authority and administration of complainant United BF Homeowners Association, Inc. (UBFHAI); (d) directly and indirectly taking over security in the eight (8) exit points of all of BF Homes Paraaque Subdivision or in any manner interfering with the processing and vehicle control in the subject gates; and (e) otherwise to remove its guards from the gates. [11]

Respondents motion to lift the TRO was denied. At the hearing on 1 July 1998, the primary issue in this case was defined as "which body has jurisdiction over petitioners claims, the Housing and Land Use Regulatory Board (HLURB) or the Securities and Exchange Commission (SEC)?" The collateral issue to be addressed is "assuming that the HLURB has jurisdiction, may the proceedings therein be suspended pending the outcome of the receivership before the SEC?" For their part, petitioners argue that the complaint referring to rights of way, water, open spaces, road and perimeter wall repairs, security and respondents interlocking corporations that facilitated circumvention of its obligation involves unsound real estate practices. The action is for specific performance of a real estate developers obligations under P.D. No. 957, and the relief sought is revocation of the subdivision projects registration certificate and license to sell. These issues are within the jurisdiction of the HLURB. Even if respondent is under receivership, its obligations as a real estate developer under P.D. No. 957 are not suspended. Section 6(c) of P.D. No. 902~A, as amended by P.D. No. 957, on "suspension of all actions for claims against corporations" refers solely to monetary claims which are but incidental to petitioners complaints against BFHI, and if filed elsewhere than the HLURB, it would result to splitting causes of action. Once determined in the HLURB, however, the monetary awards should be submitted to the SEC as established claims. Lastly, the acts enjoined by the HLURB are not related to

the disposition of BFHIs assets as a corporation undergoing its final phase of rehabilitation. On the other hand, respondent asserts that the SEC, not the HLURB, has jurisdiction over petitioners complaint based on the contracts entered into by the former receiver. The SEC, being the appointing authority, should be the one to take cognizance of controversies arising from the performance of the receivers duties. Since respondents properties are under the SECs custodia legis, they are exempt from any court process. Jurisdiction is the authority to hear and determine a cause the right to act in a case. It is conferred by law and not by mere administrative policy of any court or tribunal. It is determined by the averments of the complaint and not by the defense contained in the answer. Hence, the jurisdictional issue involved here shall be determined upon an examination of the applicable laws and the allegations of petitioners complaint before the HLURB. [12]

[13]

[14]

Presidential Decree No. 957 (The Subdivision and Condominium Buyers Protective Decree) was issued on 12 July 1976 in answer to the popular call for correction of pernicious practices of subdivision owners and/or developers that adversely affected the interests of subdivision lot buyers. Thus, one of the "whereas clauses" of P.D. No. 957 states: WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other similar basic requirements, thus endangering the health and safety of home and lot buyers. Section 3 of P.D. No. 957 empowered the National Housing Authority (NHA) with the "exclusive jurisdiction to regulate the real estate trade and business." On 2 April 1978, P.D. No. 1344 was issued to expand the jurisdiction of the NHA to include the following: SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature: A......Unsound real estate business practices;

B......Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and C......Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. (Italics supplied.) Thereafter, the regulatory and quasi~judicial functions of the NHA were transferred to the Human Settlements Regulatory Commission (HSRC) by virtue of Executive Order No. 648 dated 7 February 1981. Section 8 thereof specifies the functions of the NHA that were transferred to the HSRC including the authority to hear and decide "cases on unsound real estate business practices; claims involving refund filed against project owners, developers, dealers, brokers or salesmen and cases of specific performance." Executive Order No. 90 dated 17 December 1986 renamed the HSRC as the Housing and Land Use Regulatory Board (HLURB). [15]

The boom in the real estate business all over the country resulted in more litigation between subdivision owners/developers and lot buyers with the issue of the jurisdiction of the NHA or the HLURB over such controversies as against that of regular courts. In the cases that reached this Court, the ruling has consistently been that the NHA or the HLURB has jurisdiction over complaints arising from contracts between the subdivision developer and the lot buyer or those aimed at compelling the subdivision developer to comply with its contractual and statutory obligations to make the subdivision a better place to live in. [16]

Notably, in Antipolo Realty Corporation v. National Housing Authority, one of the issues raised by the homeowners was the failure of Antipolo Realty to develop the subdivision in accordance with its undertakings under the contract to sell. Such undertakings include providing the subdivision with concrete curbs and gutters, underground drainage system, asphalt paved roads, independent water system, electrical installation with concrete posts, landscaping and concrete sidewalks, developed park or amphitheater and 24~hour security guard service. The Court held that the complaint filed by the homeowners was within the jurisdiction of the NHA. [17]

Similarly, in Alcasid v. Court of Appeals, the Court ruled that the HLURB, not the RTC, has jurisdiction over the complaint of lot buyers for specific performance of alleged contractual and statutory obligations of the [18]

defendants, to wit, the execution of contracts of sale in favor of the plaintiffs and the introduction in the disputed property of the necessary facilities such as asphalting and street lights. In the case at bar, petitioners complaint is for specific performance to enforce their rights as purchasers of subdivision lots as regards rights of way, water, open spaces, road and perimeter wall repairs, and security. Indisputably then, the HLURB has jurisdiction over the complaint. The fact that respondent is under receivership does not divest the HLURB of that jurisdiction. A receiver is a person appointed by the court, or in this instance, by a quasi~judicial administrative agency, in behalf of all the parties for the purpose of preserving and conserving the property and preventing its possible destruction or dissipation, if it were left in the possession of any of the parties. It is the duty of the receiver to administer the assets of the receivership estate; and in the management and disposition of the property committed to his possession, he acts in a fiduciary capacity and with impartiality towards all interested persons. The appointment of a receiver does not dissolve a corporation, nor does it interfere with the exercise of its corporate rights. In this case where there appears to be no restraints imposed upon respondent as it undergoes rehabilitation receivership, respondent continues to exist as a corporation and hence, continues or should continue to perform its contractual and statutory responsibilities to petitioners as homeowners. [19]

[20]

[21]

[22]

Receivership is aimed at the preservation of, and at making more secure, existing rights; it cannot be used as an instrument for the destruction of those rights. [23]

No violation of the SEC order suspending payments to creditors would result as far as petitioners complaint before the HLURB is concerned. To reiterate, what petitioners seek to enforce are respondents obligations as a subdivision developer. Such claims are basically not pecuniary in nature although it could incidentally involve monetary considerations. All that petitioners claims entail is the exercise of proper subdivision management on the part of the SEC~appointed Board of Receivers towards the end that homeowners shall enjoy the ideal community living that respondent portrayed they would have when they bought real estate from it. Neither may petitioners be considered as having "claims" against respondent within the context of the following proviso of Section 6 (c) of P.D. No. 902~A,

as amended by P.D. Nos. 1653, 1758 and 1799, to warrant suspension of the HLURB proceedings: [U]pon appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly. (Italics supplied.) In Finasia Investments and Finance Corporation v. Court of Appeals, this Court defined and explained the term "claim" in Section 6 (c) of P.D. No. 902~A, as amended, as follows: [24]

We agree with the public respondent that the word "claim" as used in Sec. 6 (c) of P.D. 902~A, as amended, refers to debts or demands of a pecuniary nature. It means "the assertion of a right to have money paid. It is used in special proceedings like those before administrative court, on insolvency." (Emphasis supplied.) Hence, in Finasia Investments, the Court held that a civil case to nullify a special power of attorney because the principals signature was forged should not be suspended upon the appointment of a receiver of the mortgagee to whom a person mortgaged the property owned by such principal. The Court ruled that the cause of action in that civil case "does not consist of demand for payment of debt or enforcement of pecuniary liability." It added: It has nothing to do with the purpose of Section 6 (c) of P.D. 902~A, as amended, which is to prevent a creditor from obtaining an advantage or preference over another with respect to action against corporation, partnership, association under management or receivership and to protect and preserve the rights of party litigants as well as the interest of the investing public or creditors. Moreover, a final verdict on the question of whether the special power of attorney in question is a forgery or not will not amount to any preference or advantage to Castro who was not shown to be a creditor of FINASIA. [25]

In this case, under the complaint for specific performance before the HLURB, petitioners do not aim to enforce a pecuniary demand. Their claim for reimbursement should be viewed in the light of respondents alleged failure to

observe its statutory and contractual obligations to provide petitioners a "decent human settlement" and "ample opportunities for improving their quality of life." The HLURB, not the SEC, is equipped with the expertise to deal with that matter. [26]

On the other hand, the jurisdiction of the SEC is defined by P.D. No. 902~A, as amended, as follows: SEC. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: a).....Devices or schemes employed by or any act of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, members of associations or organizations registered with the Commission; b).....Controversies arising out of intra~corporate or partnership relations, between and among stockholders, members of associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members, or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchise or right to exist as such entity; [and] c).....Controversies in the election or appointments of directors, trustees, officers, or managers of such corporation, partnerships or associations. For the SEC to acquire jurisdiction over any controversy under these provisions, two elements must be considered: (1) the status or relationship of the parties; and (2) the nature of the question that is the subject of their controversy. The first element requires that the controversy must arise "out of intra~corporate or partnership relations between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or [27]

associates, respectively; and between such corporation, partnership or association and the State in so far as it concerns their individual franchises." Petitioners are not stockholders, members or associates of respondent. They are lot buyers and now homeowners in the subdivision developed by the respondent. [28]

The second element requires that the dispute among the parties be intrinsically connected with the regulation or the internal affairs of the corporation, partnership or association. The controversy in this case is remotely related to the "regulation" of respondent corporation or to respondents "internal affairs." [29]

It should be stressed that the main concern in this case is the issue of jurisdiction over petitioners complaint against respondent for specific performance. P.D. No. 902~A, as amended, defines the jurisdiction of the SEC; while P.D. No. 957, as amended, delineates that of the HLURB. These two quasi~judicial agencies exercise functions that are distinct from each other. The SEC has authority over the operation of all kinds of corporations, partnerships or associations with the end in view of protecting the interests of the investing public and creditors. On the other hand, the HLURB has jurisdiction over matters relating to observance of laws governing corporations engaged in the specific business of development of subdivisions and condominiums. The HLURB and the SEC being bestowed with distinct powers and functions, the exercise of those functions by one shall not abate the performance by the other of its own functions. As respondent puts it, "there is no contradiction between P.D. No. 902~A and P.D. No. 957." [30]

What complicated the jurisdictional issue in this case is the fact that petitioners are primarily praying for the retention of respondents obligations under the Memorandum of Agreement that Receiver Orendain had entered into with them but which the present Board of Receivers had revoked. In Figueroa v. SEC, this Court has declared that the power to overrule or revoke the previous acts of the management or Board of Directors of the entity under receivership is within a receivers authority, as provided for by Section 6 (d) (2) of P.D. No. 902~A. Indeed, when the acts of a previous receiver or management committee prove disadvantageous or inimical to the rehabilitation of a distressed corporation, the succeeding receiver or management committee may abrogate or cast aside such acts. However, that prerogative is not absolute. It should be exercised upon due consideration of all pertinent and relevant laws when public interest and welfare are involved. The business of developing subdivisions and corporations being imbued with [31]

public interest and welfare, any question arising from the exercise of that prerogative should be brought to the proper agency that has technical know~how on the matter. P.D. No. 957 was promulgated to encompass all questions regarding subdivisions and condominiums. It is aimed at providing for an appropriate government agency, the HLURB, to which all parties aggrieved in the implementation of its provisions and the enforcement of contractual rights with respect to said category of real estate may take recourse. Nonetheless, the powers of the HLURB may not in any way be deemed as in derogation of the SECs authority. P.D. Nos. 902~A and 957, as far as both are concerned with corporations, are laws in pari materia. P.D. No. 902~A relates to all corporations, while P.D. No. 957 pertains to corporations engaged in the particular business of developing subdivisions and condominiums. Although the provisions of these decrees on the issue of jurisdiction appear to collide when a corporation engaged in developing subdivisions and condominiums is under receivership, the same decrees should be construed as far as reasonably possible to be in harmony with each other to attain the purpose of an expressed national policy. [32]

Hence, the HLURB should take jurisdiction over petitioners complaint because it pertains to matters within the HLURBs competence and expertise. The HLURB should view the issue of whether the Board of Receivers correctly revoked the agreements entered into between the previous receiver and the petitioners from the perspective of the homeowners interests, which P.D. No. 957 aims to protect. Whatever monetary awards the HLURB may impose upon respondent are incidental matters that should be addressed to the sound discretion of the Board of Receivers charged with maintaining the viability of respondent as a corporation. Any controversy that may arise in that regard should then be addressed to the SEC. It is worth noting that the parties agreed at the 1 July 1998 hearing that should the HLURB establish and grant petitioners claims, the same should be referred to the SEC. Thus, the proceedings at the HLURB should not be suspended notwithstanding that respondent is still under receivership. The TRO that this Court has issued should accordingly continue until such time as the HLURB shall have resolved the controversy. The present members of the Board of Receivers should be reminded of their duties and responsibilities as an impartial Board that should serve the interests of both the homeowners and respondents creditors. Their interests, financial or otherwise, as members of respondents Board of Directors should be circumscribed by judicious and unbiased performance of their duties and responsibilities as members of

the Board of Receivers. Otherwise, respondents full rehabilitation may face a bleak future. Both parties should never give full rein to acts that could prove detrimental to the interests of the homeowners and eventually jeopardize respondents rehabilitation. WHEREFORE, the questioned Decision of the Court of Appeals is hereby REVERSED and SET ASIDE. This case is REMANDED to the Housing and Land Use Regulatory Board for continuation of proceedings with dispatch as the Securities and Exchange Commission proceeds with the rehabilitation of respondent BF Homes, Inc., through the Board of Receivers. Thereafter, any and all monetary claims duly established before the HLURB shall be referred to the Board of Receivers for proper disposition and thereafter, to the SEC, if necessary. No costs. SO ORDERED. G.R. No. 84811 August 29, 1989 SOLID HOMES, INC., petitioner, vs. TERESITA PAYAWAL and COURT OF APPEALS, respondents.

CRUZ, J.: We are asked to reverse a decision of the Court of Appeals sustaining the jurisdiction of the Regional Trial Court of Quezon City over a complaint filed by a buyer, the herein private respondent, against the petitioner, for delivery of title to a subdivision lot. The position of the petitioner, the defendant in that action, is that the decision of the trial court is null and void ab initio because the case should have been heard and decided by what is now called the Housing and Land Use Regulatory Board. The complaint was filed on August 31, 1982, by Teresita Payawal against Solid Homes, Inc. before the Regional Trial Court of Quezon City and docketed as Civil Case No. Q-36119. The plaintiff alleged that the defendant contracted to sell to her a subdivision lot in Marikina on June 9, 1975, for the agreed price of P 28,080.00, and that by September 10, 1981, she had already paid the defendant the total amount of P 38,949.87 in monthly installments and interests. Solid Homes subsequently executed a deed of sale over the land but failed to deliver the corresponding certificate of title despite her repeated demands because, as it appeared later, the defendant had mortgaged the property in bad faith to a financing company. The plaintiff asked for delivery of the title to the lot or, alternatively, the return of all the amounts paid by her plus interest. She also claimed moral and exemplary damages, attorney's fees and the costs of the suit. Solid Homes moved to dismiss the complaint on the ground that the court had no jurisdiction, this being vested in the National Housing Authority under PD No. 957. The motion was denied. The defendant repleaded the objection in its answer, citing Section 3 of the said decree providing that "the National Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and

business in accordance with the provisions of this Decree." After trial, judgment was rendered in favor of the plaintiff and the defendant was ordered to deliver to her the title to the land or, failing this, to refund to her the sum of P 38,949.87 plus interest from 1975 and until the full amount was paid. She was also awarded P 5,000.00 moral damages, P 5,000.00 exemplary damages, P 10,000.00 attorney's fees, and the costs of the suit.1 Solid Homes appealed but the decision was affirmed by the respondent court, 2 which also berated the appellant for its obvious efforts to evade a legitimate obligation, including its dilatory tactics during the trial. The petitioner was also reproved for its "gall" in collecting the further amount of P 1,238.47 from the plaintiff purportedly for realty taxes and registration expenses despite its inability to deliver the title to the land. In holding that the trial court had jurisdiction, the respondent court referred to Section 41 of PD No. 957 itself providing that: SEC. 41. Other remedies.-The rights and remedies provided in this Decree shall be in addition to any and all other rights and remedies that may be available under existing laws. and declared that "its clear and unambiguous tenor undermine(d) the (petitioner's) pretension that the court a quowas bereft of jurisdiction." The decision also dismissed the contrary opinion of the Secretary of Justice as impinging on the authority of the courts of justice. While we are disturbed by the findings of fact of the trial court and the respondent court on the dubious conduct of the petitioner, we nevertheless must sustain it on the jurisdictional issue. The applicable law is PD No. 957, as amended by PD No. 1344, entitled "Empowering the National Housing Authority to Issue Writs of Execution in the Enforcement of Its Decisions Under Presidential Decree No. 957." Section 1 of the latter decree provides as follows: SECTION 1. In the exercise of its function to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall haveexclusive jurisdiction to hear and decide cases of the following nature: A. Unsound real estate business practices; B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and C. Cases involving specific performance of contractuala statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. (Emphasis supplied.) The language of this section, especially the italicized portions, leaves no room for doubt that "exclusive jurisdiction" over the case between the petitioner and the private respondent is vested not in the Regional Trial Court but in the National Housing Authority. 3 The private respondent contends that the applicable law is BP No. 129, which confers on regional trial courts jurisdiction to hear and decide cases mentioned in its Section 19, reading in part as follows:

SEC. 19. Jurisdiction in civil cases.-Regional Trial Courts shall exercise exclusive original jurisdiction: (1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation; (2) In all civil actions which involve the title to, or possession of, real property, or any interest therein, except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts; xxx xxx xxx

(8) In all other cases in which the demand, exclusive of interest and cost or the value of the property in controversy, amounts to more than twenty thousand pesos (P 20,000.00). It stresses, additionally, that BP No. 129 should control as the later enactment, having been promulgated in 1981, after PD No. 957 was issued in 1975 and PD No. 1344 in 1978. This construction must yield to the familiar canon that in case of conflict between a general law and a special law, the latter must prevail regardless of the dates of their enactment. Thus, it has been held thatThe fact that one law is special and the other general creates a presumption that the special act is to be considered as remaining an exception of the general act, one as a general law of the land and the other as the law of the particular case. 4 xxx xxx xxx The circumstance that the special law is passed before or after the general act does not change the principle. Where the special law is later, it will be regarded as an exception to, or a qualification of, the prior general act; and where the general act is later, the special statute will be construed as remaining an exception to its terms, unless repealed expressly or by necessary implication. 5 It is obvious that the general law in this case is BP No. 129 and PD No. 1344 the special law. The argument that the trial court could also assume jurisdiction because of Section 41 of PD No. 957, earlier quoted, is also unacceptable. We do not read that provision as vesting concurrent jurisdiction on the Regional Trial Court and the Board over the complaint mentioned in PD No. 1344 if only because grants of power are not to be lightly inferred or merely implied. The only purpose of this section, as we see it, is to reserve. to the aggrieved party such other remedies as may be provided by existing law, like a prosecution for the act complained of under the Revised Penal Code. 6 On the competence of the Board to award damages, we find that this is part of the exclusive power conferred upon it by PD No. 1344 to hear and decide "claims involving refund and any other claims filed by subdivision lot or condominium unit buyers against the project owner, developer,

dealer, broker or salesman." It was therefore erroneous for the respondent to brush aside the welltaken opinion of the Secretary of Justice thatSuch claim for damages which the subdivision/condominium buyer may have against the owner, developer, dealer or salesman, being a necessary consequence of an adjudication of liability for non-performance of contractual or statutory obligation, may be deemed necessarily included in the phrase "claims involving refund and any other claims" used in the aforequoted subparagraph C of Section 1 of PD No. 1344. The phrase "any other claims" is, we believe, sufficiently broad to include any and all claims which are incidental to or a necessary consequence of the claims/cases specifically included in the grant of jurisdiction to the National Housing Authority under the subject provisions. The same may be said with respect to claims for attorney's fees which are recoverable either by agreement of the parties or pursuant to Art. 2208 of the Civil Code (1) when exemplary damages are awarded and (2) where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff 's plainly valid, just and demandable claim. xxx xxx xxx Besides, a strict construction of the subject provisions of PD No. 1344 which would deny the HSRC the authority to adjudicate claims for damages and for damages and for attorney's fees would result in multiplicity of suits in that the subdivision condominium buyer who wins a case in the HSRC and who is thereby deemed entitled to claim damages and attorney's fees would be forced to litigate in the regular courts for the purpose, a situation which is obviously not in the contemplation of the law. (Emphasis supplied.)7 As a result of the growing complexity of the modern society, it has become necessary to create more and more administrative bodies to help in the regulation of its ramified activities. Specialized in the particular fields assigned to them, they can deal with the problems thereof with more expertise and dispatch than can be expected from the legislature or the courts of justice. This is the reason for the increasing vesture of quasi-legislative and quasi-judicial powers in what is now not unreasonably called the fourth department of the government. Statutes conferring powers on their administrative agencies must be liberally construed to enable them to discharge their assigned duties in accordance with the legislative purpose. 8 Following this policy in Antipolo Realty Corporation v. National Housing Authority, 9 the Court sustained the competence of the respondent administrative body, in the exercise of the exclusive jurisdiction vested in it by PD No. 957 and PD No. 1344, to determine the rights of the parties under a contract to sell a subdivision lot. It remains to state that, contrary to the contention of the petitioner, the case of Tropical Homes v. National Housing Authority 10 is not in point. We upheld in that case the constitutionality of the procedure for appeal provided for in PD No. 1344, but we did not rule there that the National Housing Authority and not the Regional Trial Court had exclusive jurisdiction over the cases enumerated in Section I of the said decree. That is what we are doing now. It is settled that any decision rendered without jurisdiction is a total nullity and may be struck down at any time, even on appeal before this Court. 11 The only exception is where the party raising the issue is barred by estoppel, 12 which does not appear in the case before us. On the contrary, the issue was

raised as early as in the motion to dismiss filed in the trial court by the petitioner, which continued to plead it in its answer and, later, on appeal to the respondent court. We have no choice, therefore, notwithstanding the delay this decision will entail, to nullify the proceedings in the trial court for lack of jurisdiction. WHEREFORE, the challenged decision of the respondent court is REVERSED and the decision of the Regional Trial Court of Quezon City in Civil Case No. Q-36119 is SET ASIDE, without prejudice to the filing of the appropriate complaint before the Housing and Land Use Regulatory Board. No costs. SO ORDERED. G.R. No. 80916 November 9, 1990 C.T. TORRES ENTERPRISES, INC., petitioner, vs. HON. ROMEO J. HIBIONADA, EFREN DIONGON, and PLEASANTVILLE DEVELOPMENT CORPORATION, respondents. Federico T. Tabino Jr. for petitioner. Depasucat, Depasucat & Su Law Offices for Efren Diongon.

CRUZ, J.: The same issue of jurisdiction that was raised in Solid Homes v. Payawal 1 is raised in the case at bar. The same ruling laid down in that earlier case must be applied in the present controversy. The petitioner as agent of private respondent Pleasantville Development Corporation sold a subdivision lot on installment to private respondent Efren Diongon. The installment payments having been completed, Diongon demanded the delivery of the certificate of title to the subject land. When neither the petitioner nor Pleasantville complied, he filed a complaint against them for specific performance and damages in the Regional Trial Court of Negros Occidental. This was docketed as Civil Case No. 3514. The two defendants each filed an answer with cross-claim and counterclaim. The plaintiff filed a reply and answered the counterclaims. Pre-trial was scheduled and heard and trial briefs were submitted by Pleasantville and Diongon. The case was set for initial hearing. It was then that C.T. Torres Enterprises filed a motion to dismiss for lack of jurisdiction, contending that the competent body to hear and decide the case was the Housing and Land Use Regulatory Board. The motion was heard and Diongon later filed an opposition. On September 17, 1987, the trial court 2 denied the motion to dismiss in an order reading as follows: Before this Court for resolution is the Motion to Dismiss filed by defendant C.T. Torres Enterprises, Inc. alleging among other things, that this Court has no jurisdiction over the subject matter considering that the present action falls within the jurisdiction of the Housing and Land Use Regulatory Board by virtue of Executive Order No. 90 dated December 17, 1986. Plaintiff filed an opposition to the said motion to dismiss traversing the allegations therein stated. A perusal of both pleadings and the complaint filed by plaintiff, the

issue to be determined are basically governed by the provisions of the New Civil Code, particularly on contracts. The complaint is one for specific performance with damages which is a justiciable issue under the Civil Code and jurisdiction to hear the said issue is conferred on the regular Courts pursuant to Batas Pambansa Blg. 129. It is, therefore, the finding of this Court that jurisdiction as conferred by law is vested in the regular courts and not in the Housing and Land Use Regulatory Board. The Motion to Dismiss is, therefore, DENIED for lack of merit. SO ORDERED. The petitioner is now before this Court on certiorari to question this order. In holding that the complaint for specific performance with damages was justiciable under the Civil Code and so came under the jurisdiction of the regular courts under B.P. 129, the trial court failed to consider the express provisions of P.D. No. 1344 and related decrees. It also erred in supposing that only the regular courts can interpret and apply the provisions of the Civil Code, to the exclusion of the quasi-judicial bodies. P.D. No. 957, promulgated July 12, 1976 and otherwise known as "The Subdivision and Condominium Buyers' Protective Decree," provides that the National Housing Authority shall have exclusive authority to regulate the real estate trade and business. The scope of the regulatory authority lodged in the National Housing Authority is indicated in the second and third paragraphs of the preamble, thus: WHEREAS, the numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems and other similar basic requirements, thus endangering the health and safety of home and lot buyers; WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from hens and encumbrances, and to pay real estate taxes and fraudulent sales of the same subdivision lots to different innocent purchasers for value. (Emphasis supplied) P.D. No. 1344, which was promulgated April 2, 1978, and empowered the National Housing Authority to issue writs of execution in the enforcement of its decisions under P.D. No. 957, specified the quasi-judicial jurisdiction of the agency as follows: SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature: A. Unsound real estate business practices;

B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner developer, dealer, broker or salesman; and C. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lots or condominium units against the owner, developer, dealer, broker or salesman. (Emphasis supplied) Under E.O. No. 648 dated February 7, 1981, the regulatory functions conferred on the National Housing Authority under P.D. Nos. 957,1344 and other related laws were transferred to the Human Settlements Regulatory Commission, which was renamed Housing and Land Use Regulatory Board by E.O. No. 90 dated December 17, 1986. It is clear from Section 1(c) of the above quoted PD No. 1344 that the complaint for specific performance with damages filed by Diongon with the Regional Trial Court of Negros Occidental comes under the jurisdiction of the Housing and Land Use Regulatory Board. Diongon is a buyer of a subdivision lot seeking specific performance of the seller's obligation to deliver to him the corresponding certificate of title. The argument that only courts of justice can adjudicate claims resoluble under the provisions of the Civil Code is out of step with the fast-changing times. There are hundreds of administrative bodies now performing this function by virtue of a valid authorization from the legislature. This quasi-judicial function, as it is called, is exercised by them as an incident of the principal power entrusted to them of regulating certain activities falling under their particular expertise. In the Solid Homes case, for example, the Court affirmed the competence of the Housing and Land Use Regulatory Board to award damages although this is an essentially judicial power exercisable ordinarily only by the courts of justice. This departure from the traditional allocation of governmental powers is justified by expediency, or the need of the government to respond swiftly and competently to the pressing problems of the modem world. Thus we have held: It is by now commonplace learning that many administrative agencies exercise and perform adjudicatory powers and functions, though to a limited extent only. Limited delegation of judicial or quasi-judicial authority to administrative agencies (e.g. the Securities and Exchange Commission and the National Labor Relations Commission) is well recognized in our jurisdiction, basically because the need for special competence and experience has been recognized as essential in the resolution of questions of complex or specialized character and because of a companion recognition that the dockets of our regular courts have remained crowded and clogged. 3 xxx

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As a result of the growing complexity of the modern society, it has become necessary to create more and more administrative bodies to help in the regulation of its ramified activities. Specialized in the particular fields assigned to them, they can deal with the problems thereof with more expertise and dispatch than can be expected from the legislature or the courts of justice. This is the reason for the increasing vesture of quasi-legislative and quasi-judicial powers in what is now not unquestionably called the fourth department of the government. 4

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There is no question that a statute may vest exclusive original jurisdiction in an administrative agency over certain disputes and controversies falling within the agency's special expertise. The very definition of an administrative agency includes its being vested with quasi-judicial powers. The ever increasing variety of powers and functions given to administrative agencies recognizes the need for the active intervention of administrative agencies in matters calling for technical knowledge and speed in countless controversies which cannot possibly be handled by regular courts. 5 The argument of the private respondents that the petition is premature because no motion for reconsideration of the questioned order of trial court had been filed stresses the rule but disregards the exception. It is settled that the motion for reconsideration may be dispensed with if the issue raised is a question of law, 6 as in the case at bar. The issue pleaded here is lack of jurisdiction. It could therefore be raised directly and immediately with this Court without the necessity of an antecedent motion for reconsideration. We hold, in sum, that the complaint for specific performance and damages was improperly filed with the respondent court, jurisdiction over the case being exclusively vested in the Housing and Land Use Regulatory Board. We also hold that the order denying the motion to dismiss was subject to immediate challenge before this Court as the filing (and denial) of a motion for reconsideration was not an indispensable requirement. WHEREFORE, the petition is GRANTED. The questioned Order of September 17, 1987, is SET ASIDE and Civil Case No. 3514 in the Regional Trial Court of Negros Occidental is hereby DISMISSED, without prejudice to the filing of the proper complaint with the Housing and Land Use Regulatory Board if so desired. No costs. SO ORDERED. Narvasa (Chairman), Gancayco, Griño-Aquino and Medialdea, JJ., concur.