67. Pacific Wide Realty and Devt Corp vs. Puerto Azul Land, Inc.

FACTS:
In G.R. No. 180893
Puerto Azul Land, Inc. (PALI) is the owner and developer of the Puerto Azul Complex situated in
Ternate, Cavite. In order to finance its operations, it obtained loans from various banks. However, PALI
was unable to keep up with the payment of its obligations, both current and those that were about to fall
due. One of its creditors, the Export and Industry Bank (EIB) later substituted by Pacific Wide Realty
and Development Corporation (PWRDC) filed foreclosure proceedings on PALIs mortgaged properties.

PALI

filed a petition for suspension of payments and rehabilitation, accompanied by a proposed rehabilitation
plan and three (3) nominees for the appointment of a rehabilitation receiver.
On December 13, 2005, the RTC rendered a Decision approving PALIs petition for suspension of payments and
rehabilitation.
In G.R. No. 178768
On March 3, 2005, EIB filed an urgent motion to order PALI and/or the mortgagor TUI/rehabilitation
receiver to pay all the taxes due on Transfer Certificate of Title (TCT) No. 133164.

EIB claimed that

the property covered by TCT No. 133164, registered in the name of TUI, was one of the properties used to
secure PALIs loan from EIB.
PALI opposed the motion, arguing that the rehabilitation courts stay order stopped the enforcement of all
claims, whether for money or otherwise, against a debtor, its guarantors, and its sureties not solidarily
liable to the debtor; thus, TCT No. 133164 was covered by the stay order.
The court reiterated that TCT No. 133164, under the name of TUI, was excluded from the stay order. In
order to protect the interest of EIB as creditor of PALI, it may foreclose TCT No. 133164 and settle the
delinquency taxes of third-party mortgagor TUI with the local government of Pasay City.
PALI filed with the CA a petition for certiorari under Rule 65 of the Rules of Court, ascribing grave
abuse of discretion on the part of the rehabilitation court in allowing the foreclosure of a mortgage
constituted over the property of an accommodation mortgagor, to secure the loan obligations of a
corporation seeking relief in a rehabilitation proceeding.
On July 27, 2009, the Court ordered the consolidation of the two petitions.
ISSUE
whether the terms of the rehabilitation plan are unreasonable and in violation of the non-impairment
clause
RULING
No. The terms of the rehabilitation plan are reasonable and does not violate the non-impairment clause
Under the Rules of Procedure on Corporate Rehabilitation, rehabilitation is defined as the restoration of
the debtor to a position of successful operation and solvency, if it is shown that its continuance of
operation is economically feasible and its creditors can recover by way of the present value of payments

projected in the plan, more if the corporation continues as a going concern than if it is immediately
liquidated.
We find nothing onerous in the terms of PALIs rehabilitation plan.

The restructuring of the debts of

PALI is part and parcel of its rehabilitation. Moreover, per findings of fact of the RTC and as affirmed
by the CA, the restructuring of the debts of PALI would not be prejudicial to the interest of PWRDC as a
secured creditor.
We also find no merit in PWRDCs contention that there is a violation of the impairment clause. Section
10, Article III of the Constitution mandates that no law impairing the obligations of contract shall be
passed. This case does not involve a law or an executive issuance declaring the modification of the
contract among debtor PALI, its creditors and its accommodation mortgagors. Thus, the non-impairment
clause may not be invoked.

HON. HEHERSON T. ALVAREZ v. PICOP RESOURCES, INC.

G.R. No. 162243, December 3, 2009
Chico-Nazario, J.:
Doctrine:
A timber license is not a contract within the purview of the non-impairment clause.
Facts:
PICOP filed with the DENR an application to have its Timber License Agreement (TLA) No. 43 converted into an IFMA.
PICOP filed before the (RTC) City a Petition for Mandamus against then DENR Sec Alvarez for unlawfully refusing and/or
neglecting to sign and execute the IFMA contract of PICOP even as the latter has complied with all the legal requirements for the
automatic conversion of TLA No. 43, as amended, into an IFMA.
The cause of action of PICOP Resources, Inc. (PICOP) in its Petition for Mandamus with the trial court is clear: the government
is bound by contract, a 1969 Document signed by then President Ferdinand Marcos, to enter into an Integrated Forest
Management Agreement (IFMA) with PICOP.
Issue:
Whether the 1969 Document is a contract recognized under the non-impairment clause by which the government may be bound
(for the issuance of the IFMA)
Held:
NO. Our definitive ruling in Oposa v. Factoran that a timber license is not a contract within the purview of the non-impairment
clause is edifying. We declared: Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a
contract, property or a property right protected by the due process clause of the Constitution.
Since timber licenses are not contracts, the non-impairment clause, which reads: "SEC. 10. No law impairing the obligation of
contracts shall be passed." cannot be invoked.
The Presidential Warranty cannot, in any manner, be construed as a contractual undertaking assuring PICOP of exclusive
possession and enjoyment of its concession areas. Such an interpretation would result in the complete abdication by the State in
favor of PICOP of the sovereign power to control and supervise the exploration, development and utilization of the natural
resources in the area.

Diaz vs. Secretary of Finance (2011)

Facts:

Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed this petition for declaratory relief
assailing the validity of the impending imposition of value-added tax (VAT) by the Bureau of Internal
Revenue (BIR) on the collections of tollway operators. Court treated the case as one of prohibition.
Petitioners hold the view that Congress did not, when it enacted the NIRC, intend to include toll fees within
the meaning of "sale of services" that are subject to VAT; that a toll fee is a "user's tax," not a sale of
services; that to impose VAT on toll fees would amount to a tax on public service; and that, since VAT was
never factored into the formula for computing toll fees, its imposition would violate the non-impairment
clause of the constitution.
The government avers that the NIRC imposes VAT on all kinds of services of franchise grantees, including
tollway operations; that the Court should seek the meaning and intent of the law from the words used in
the statute; and that the imposition of VAT on tollway operations has been the subject as early as 2003 of
several BIR rulings and circulars.
The government also argues that petitioners have no right to invoke the non-impairment of contracts
clause since they clearly have no personal interest in existing toll operating agreements (TOAs) between the
government and tollway operators. At any rate, the non-impairment clause cannot limit the State's
sovereign taxing power which is generally read into contracts.
Issue:
May toll fees collected by tollway operators be subjected to VAT (Are tollway operations a franchise and/or
a service that is subject to VAT)?
Ruling:
When a tollway operator takes a toll fee from a motorist, the fee is in effect for the latter's use of the tollway
facilities over which the operator enjoys private proprietary rights that its contract and the law recognize.
In this sense, the tollway operator is no different from the service providers under Section 108 who allow
others to use their properties or facilities for a fee.
Tollway operators are franchise grantees and they do not belong to exceptions that Section 119 spares from
the payment of VAT. The word "franchise" broadly covers government grants of a special right to do an act
or series of acts of public concern. Tollway operators are, owing to the nature and object of their business,
"franchise grantees." The construction, operation, and maintenance of toll facilities on public
improvements are activities of public consequence that necessarily require a special grant of authority from
the state.
A tax is imposed under the taxing power of the government principally for the purpose of raising revenues
to fund public expenditures. Toll fees, on the other hand, are collected by private tollway operators as
reimbursement for the costs and expenses incurred in the construction, maintenance and operation of the
tollways, as well as to assure them a reasonable margin of income. Although toll fees are charged for the use
of public facilities, therefore, they are not government exactions that can be properly treated as a tax. Taxes
may be imposed only by the government under its sovereign authority, toll fees may be demanded by either
the government or private individuals or entities, as an attribute of ownership.

FREE ACCESS TO COURTS

RE: REQUEST OF NATIONAL COMMITTEE

ON LEGAL AID TO EXEMPT
Present: LEGAL AID CLIENTS FROM

PAYING

FILING, DOCKET AND OTHER FEE August 28, 2009

FACTS:
The Misamis Oriental Chapter of the Integrated Bar of the Philippines (IBP) promulgated Resolution No. 24, series of 2008.
The resolution requested the IBPs National Committee on Legal Aid (NCLA) to ask for the exemption from the payment of
filing, docket and other fees of clients of the legal aid offices in the various IBP chapters.
The Court noted Resolution No. 24, series of 2008 and required the IBP, through the NCLA, to comment thereon.
In a comment dated December 18, 2008, the IBP, through the NCLA, made the following comments:
(a)

Under Section 16-D of RA[7] 9406, clients of the Public Attorneys Office (PAO) are exempt from the payment
of docket and other fees incidental to the institution of action in court and other quasi-judicial bodies. On
the other hand, clients of legal aid offices in the various IBP chapters do not enjoy the same exemption.
IBPs indigent clients are advised to litigate as pauper litigants under Section 21, Rule 3 of the Rules of
Court;

(b)

They are further advised to submit documentary evidence to prove compliance with the requirements under
Section 21, Rule 3 of the Rules of Court, i.e., certifications from the barangay and the Department of
Social Welfare and Development. However, not only does the process involve some expense which
indigent clients could ill-afford, clients also lack knowledge on how to go about the tedious process of
obtaining these documents;

(c)

Although the IBP is given an annual legal aid subsidy, the amount it receives from the government is barely
enough to cover various operating expenses;

(d)

While each IBP local chapter is given a quarterly allocation (from the legal aid subsidy),said allocation covers
neither the incidental expenses defrayed by legal aid lawyers in handling legal aid cases nor the payment of
docket and other fees collected by the courts, quasi-judicial bodies and the prosecutors office, as well as
mediation fees and

(e)

Considering the aforementioned factors, a directive may be issued by the Supreme Court granting IBPs
indigent clients an exemption from the payment of docket and other fees similar to that given to PAO
clients under Section 16-D of RA 9406. In this connection, the Supreme Court previously issued a circular
exempting IBP clients from the payment of transcript of stenographic notes.

At the outset, we laud the Misamis Oriental Chapter of the IBP for its effort to help improve the administration of
justice, particularly, the access to justice by the poor. Its Resolution No. 24, series of 2008 in fact echoes one of the noteworthy
recommendations during the Forum on Increasing Access to Justice spearheaded by the Court last year. In promulgating
Resolution No. 24, the Misamis Oriental Chapter of the IBP has effectively performed its duty to participate in the development
of the legal system by initiating or supporting efforts in law reform and in the administration of justice.
ISSUE: WON RESOLUTION NO. 24 SHOULD BE APPROVED BY THE SC?

HELD: GRANTED

The Court recognizes the right of access to justice as the most important pillar of legal empowerment of the marginalized sectors
of our society.Among others, it has exercised its power to promulgate rules concerning the protection and enforcement of
constitutional rights to open the doors of justice to the underprivileged and to allow them to step inside the courts to be heard of
their plaints. In particular, indigent litigants are permitted under Section 21, Rule 3 and Section 19, Rule 141of the Rules of
Court to bring suits in forma pauperis.

Under the IBPs Guidelines Governing the Establishment and Operation of Legal Aid Offices in All Chapters of the IBP
(Guidelines on Legal Aid), the combined means and merit tests shall be used to determine the eligibility of an applicant for
legal aid (see full text for the provisions quoted).
The means and merit tests appear to be reasonable determinants of eligibility for coverage under the legal aid
program of the IBP. Nonetheless, they may be improved to ensure that any exemption from the payment of legal fees
that may be granted to clients of the NCLA and the legal aid offices of the various IBP chapters will really further the
right of access to justice by the poor. This will guarantee that the exemption will neither be abused nor trivialized.
Towards this end, A.M. No. 08-11-7-SC (IRR) (see full text) shall be observed by the NCLA and the legal aid
offices in IBP chapters nationwide in accepting clients and handling cases for the said clients.
The above rule, in conjunction with Section 21, Rule 3 and Section 19, Rule 141 of the Rules of Court, the Rule on Mandatory
Legal Aid Service and the Rule of Procedure for Small Claims Cases, shall form a solid base of rules upon which the right of
access to courts by the poor shall be implemented. With these rules, we equip the poor with the tools to effectively, efficiently
and easily enforce their rights in the judicial system.
Equity will not suffer a wrong to be without a remedy. Ubi jus ibi remedium. Where there is a right, there must be a remedy. The
remedy must not only be effective and efficient, but also readily accessible. For a remedy that is inaccessible is no remedy at all.
The Constitution guarantees the rights of the poor to free access to the courts and to adequate legal assistance. The
legal aid service rendered by the NCLA and legal aid offices of IBP chapters nationwide addresses only the right to adequate
legal assistance. Recipients of the service of the NCLA and legal aid offices of IBP chapters may enjoy free access to courts by
exempting them from the payment of fees assessed in connection with the filing of a complaint or action in court. With these
twin initiatives, the guarantee of Section 11, Article III of Constitution is advanced and access to justice is increased by bridging
a significant gap and removing a major roadblock.