MALACAÑANG "(d) The interest due on such unclaimed balance, if any, and the
Manila amount thereof.
PRESIDENTIAL DECREE No. 679 April 2, 1975
AMENDING ACT NUMBERED THIRTY NINE HUNDRED
AND THIRTY SIX, AN ACT REQUIRING BANKS, TRUST
CORPORATIONS, AND BUILDING AND LOAN
ASSOCIATIONS, TO TRANSFER UNCLAIMED BALANCES
HELD BY THEM TO THE TREASURER OF THE
PHILIPPINES AND FOR OTHER PURPOSES.
WHEREAS, Act No. 3936 requires the publication of a sworn
statement of unclaimed balances in banks once a week of three
consecutive weeks in at least two newspapers of general circulation
in the locality where the banks are situated, if there be any, and if
there is none, in the City of Manila, one in English and one in
Spanish, the cost of which shall be paid by the Bureau of Treasury,
which shall be reimbursed out of the escheated funds;
WHEREAS, the law also provides for the publication of summons
and a notice upon the commencement of the prescribed judicial
proceedings for the escheat of unclaimed balances;
WHEREAS, past experience has shown that the cost of publication
required by law, the increase of which has been substantial the past
few years, is more than the aggregate amount of the unclaimed
balances to be escheated, the average amount of which is small;
WHEREAS, there is a felt need to simplify the procedure for the
escheat of unclaimed balances for the purpose of reducing the
expenses therefor;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of
the Philippines, by virtue of the powers in me vested by the
Constitution, do hereby decree and order:
Section 1. Sections 1, 2, 3, 4, and 5 of Act No. 3936 are hereby
amended to read as follows:
"Sec. 1. "Unclaimed balances", within the meaning of this Act, shall
include credits or deposits of money, bullion, security or other
evidence of indebtedness of any kind, and interest thereon with banks,
buildings and loan associations, and trust corporations, as hereinafter
defined, in favor of any person known to be dead or who has not
made further deposits or withdrawals during the preceding ten years
or more. Such unclaimed balances, together with the increase and
proceeds thereof, shall be deposited with the Treasurer of the
Philippines to the credit of the Government of the Republic of the
Philippines to be used as the National Assembly may direct.
"Banks", "building and loan associations" and "trust corporations",
within the meaning of this Act, shall refer to institutions defined
under Section two, thirty-nine and fifty-six, respectively, of Republic
Act Numbered Three Hundred Thirty Seven, otherwise known as the
General Banking Act, as amended, whether organized under special
charters or not.
"Sec. 2. Immediately after the taking effect of this Act and within the
month of January of every odd year, all banks, building and loan
associations, and trust corporations shall forward to the Treasurer of
the Philippines a statement, under oath, of their respective managing
officers, of all credits and deposits held by them in favor of persons
known to be dead, or who have not made further deposits or
withdrawals during the preceding ten years or more, arranged in
alphabetical order according to the names of creditors and depositors,
and showing:
"(a) The names and last known place of residence or post office
addresses of the persons in whose favor such unclaimed balances
stand;
"(b) The amount and the date of the outstanding unclaimed balance
and whether the same is in money or in security, and if the latter, the
nature of the same;
"(c) The date when the person in whose favor the unclaimed balance
stands died, if known, or the date when he made his last deposit or
withdrawal; and
"A copy of the above sworn statement shall be posted in a
conspicuous place in the premises of the bank, building and loan
association, or trust corporation concerned for at least sixty days
from the date of filing thereof: Provided, That immediately before
filing the above sworn statement, the bank, building and loan
association, and trust corporation shall communicate with the person
in whose favor the unclaimed balance stands at his last known place
of residence or post office address.
"It shall be the duty of the Treasurer of the Philippines to inform the
Solicitor General from time to time the existence of unclaimed
balances held by banks, building and loan associations, and trust
corporations.
"Sec. 3. Whenever the Solicitor General shall be informed of such
unclaimed balances, he shall commence an action or actions in the
name of the People of the Republic of the Philippines in the Court of
First Instance of the province or city where the bank, building and
loan association or trust corporation is located, in which shall be
joined as parties the bank, building and loan association or trust
corporation and all such creditors or depositors. All or any of such
creditors or depositors or banks, building and loan association or
trust corporations may be included in one action. Service of process
in such action or actions shall be made by delivery of a copy of the
complaint and summons to the president, cashier, or managing
officer of each defendant bank, building and loan association or trust
corporation and by publication of a copy of such summons in a
newspaper of general circulation, either in English, in Filipino, or in
a local dialect, published in the locality where the bank, building and
loan association or trust corporation is situated, if there be any, and in
case there is none, in the City of Manila, at such time as the court
may order. Upon the trial, the court must hear all parties who have
appeared therein, and if it be determined that such unclaimed
balances in any defendant bank, building and loan association or trust
corporation are unclaimed as hereinbefore stated, then the court shall
render judgment in favor of the Government of the Republic of the
Philippines, declaring that said unclaimed balances have escheated to
the Government of the Republic of the Philippines and commanding
said bank, building and loan association or trust corporation to
forthwith deposit the same with the Treasurer of the Philippines to
credit of the Government of the Republic of the Philippines to be
used as the National Assembly may direct.
"At the time of issuing summons in the action above provided for,
the clerk of court shall also issue a notice signed by him, giving the
title and number of said action, and referring to the complaint therein,
and directed to all persons, other than those named as defendants
therein, claiming any interest in any unclaimed balance mentioned in
said complaint, and requiring them to appear within sixty days after
the publication or first publication, if there are several, of such
summons, and show cause, if they have any, why the unclaimed
balances involved in said action should not be deposited with the
Treasurer of the Philippines as in this Act provided and notifying
them that if they do not appear and show cause, the Government of
the Republic of the Philippines will apply to the court for the relief
demanded in the complaint. A copy of said notice shall be attached to,
and published with the copy of, said summons required to be
published as above, and at the end of the copy of such notice so
published, there shall be a statement of the date of publication, or
first publication, if there are several, of said summons and notice.
Any person interested may appear in said action and become a party
thereto. Upon the publication or the completion of the publication, if
there are several, of the summons and notice, and the service of the
summons on the defendant banks, building and loan associations or
trust corporations, the court shall have full and complete jurisdiction
in the Republic of the Philippines over the said unclaimed balances
and over the persons having or claiming any interest in the said
unclaimed balances, or any of them, and shall have full and complete
jurisdiction to hear and determine the issues herein, and render the
appropriate judgment thereon.
"Sec. 4. If the president, cashier or managing officer of the bank,
building and loan association, or trust corporation neglects or refuses
to make and file the sworn statement required by this action, such
bank, building and loan association, or trust corporation shall pay to
the Government the sum of five hundred pesos a month for each
month or fraction thereof during which such default shall continue.
"Sec. 5. Any bank, building and loan association or trust corporation
which shall make any deposit with the Treasurer of the Philippines in
conformity with the provisions of this Act shall not thereafter be
liable to any person for the same and any action which may be
brought by any person against in any bank, building and loan
association, or trust corporation for unclaimed balances so deposited
with the Treasurer of the Philippines shall be defended by the
Solicitor General without cost to such bank, building and loan
association or trust corporation."
Section 2. This Decree shall take effect immediately.
DONE in the City of Manila, this 2nd day of April, in the year of Our
Lord, nineteen hundred and seventy-five.
FIRST DIVISION
[G.R. No. 95533. November 20, 2000]
REPUBLIC OF THE PHILIPPINES, petitioner, vs. COURT OF
APPEALS and PHILIPPINE COMMERCIAL AND
INTERNATIONAL BANK (Santa Ana Branch Davao
City),* respondents.
DECISION
YNARES-SANTIAGO, J.:
On December 28, 1988, a complaint for escheat[1]was filed by
petitioner, Republic of the Philippines, with the Regional Trial Court
of Davao City against several banks which had branches within the
jurisdiction of the said court.[2]
The complaint alleged that pursuant to Act No. 3936 as
amended by P.D. 679,[3] the respective managers of the defendant
banks submitted to the Treasurer of the Republic of the Philippines
separate statements prepared under oath which listed all deposits and
credits held by them in favor of depositors or creditors either known
to be dead, have not been heard from, or have not made depositors or
withdrawals for ten years or more since December 31, 1970.
The complaint prayed that after due notice to the defendant
banks, and after hearing, judgment be rendered declaring that the
deposits, credits and unpaid balances in question be escheated to
petitioner, commanding defendant banks to forthwith deposit the
same with the Treasurer of the Philippines.[4]
On April 12, 1989, the lower court issued an order directing
petitioner to show cause why the complaint should not be dismissed
for failure to state a cause of action. According to the order, the
complaint contained no allegation that defendant banks have
complied with two of the conditions in Section 2 of Act No.
3936,[5] compliance with the requirements being necessary for the
complaint to prosper.[6]
On April 27, 1989, petitioner submitted its manifestation and
motion to allow amendment of the petition to allege compliance with
the conditions set forth in Section 2 of Act. No. 3936 as amended by
P.D. 679 (Unclaimed Balances Law).[7]
The amended complaint prayed that judgment be rendered
ordering that the amount of P97,263.38, deposited with the defendant
banks by depositors who are known to be dead or have not made
further deposits or withdrawals during the preceding ten years or
more be escheated in favor of the Republic of the Philippines in
accordance with Section 1, Act 3936 as amended by P.D. 679.
The trial court found the amendment sufficient and issued an
order dated June 7, 1989 requiring petitioner to publish a notice in
the Mindanao Forum Standard once a week for two consecutive
weeks, containing the summons, notice to the public, the amended
petition incorporated in the summons and the list of unclaimed
balances. The notice was estimated to occupy 27 pages of the said
newspaper at an estimated cost of P50,000.00.[8]
On July 11, 1989, petitioner submitted a manifestation to the
lower court praying that the publication of the list of the unclaimed
balances be dispensed with. Petitioner posited that under Section 3,
Act No. 3936, only the following are required to be published: (1)
summons to respondent banks; and (2) notice to all persons other
than those named defendants therein.Petitioner submitted that to
require it to publish the names and list of unclaimed balances would
only result in additional and unnecessary expense to the
government.[9]
On August 1, 1989, the trial court issued the following Order:
WHEREFORE, this Court will not dispense with the publication of
the list of unclaimed balances and, unless the plaintiff, through the
Office of the Solicitor General, agrees to the publication thereof as
stated in the Order of this Court dated June 7, 1989, and shoulder the
cost thereof as also mentioned in said Order, and manifests its
agreement to this Court in writing within thirty (30) days from
receipt thereof, this case will be DISMISSED WITHOUT
PREJUDICE.
SO ORDERED.
Petitioner filed a motion for reconsideration of the above
Order,[10] which was denied by the lower court for lack of merit.[11]
Subsequently, the trial court issued an Order dated October 31,
1989 dismissing Civil Case No. 19488-89 without prejudice for
plaintiffs failure to agree to the required publication and shoulder the
costs thereof.[12]
Petitioner received a copy of the aforesaid Order on November
15, 1989. On January 10, 1990, petitioner filed with the Court of
Appeals a petition for mandamus and certiorari, alleging grave abuse
of discretion on the part of respondent judge in ordering the
publication of the list of unclaimed balances.[13] The petition for
certiorari and mandamus was dismissed by the Court of Appeals, on
the ground that the proper remedy was ordinary appeal. Thus:[14]
It is axiomatic that the extraordinary remedy of certiorari is available
only in the absence of a plain, speedy and adequate remedy like
appeal. The order of the respondent court dated October 31, 1989
dismissing the case is final and appealable (Monares vs. CWA
Enterpises, 105 Phil. 1333; Vol. I, Francisco, Rules of Court, at pp.
967-968). No timely appeal having been taken therefrom, the same
became final and executory and this petition for certiorari filed on
January 10, 1989 to review the interlocutory orders issued by the
court before the case was dismissed can no longer be entertained.
WHEREFORE, the petition for certiorari is dismissed for lack of
merit.
SO ORDERED.
Aggrieved, petitioner filed an appeal under Rule 45 of the
Rules of Court raising the following issues:[15]
(1) Whether or not respondent RTC judge committed
grave abuse of discretion tantamount to lack of
jurisdiction in ordering the publication of the list of
unclaimed balances listed under annexes A to P of
the complaint.
(2) Whether or not the remedy of appeal, though
available, was the speedy and adequate remedy.
(3) Whether or not respondent RTC judge in issuing the
interlocutory orders dated June 7, 1989 and August 1,
1990 which are contrary to Sec. 1, Act 3936, as
amended by PD 679, otherwise known as the
Unclaimed Balances Law acted in excess of and
without jurisdiction; consequently thus making the
Orders of Sept. 1, 1989 (denying the motion for
reconsideration) and the Order dated October 31,
1989 dismissing the case, patently null and void.
(4) Whether or not the decision of the Honorable Court
of Appeals is in accord with law.
The petition is without merit.
The Order of the trial court dismissing the complaint, albeit
without prejudice, was a final order in the sense that it finally
disposed of the case. As such, petitioners remedy was to file an
ordinary appeal to the Court of Appeals within fifteen (15) days from
receipt hereof.
This Court has previously held that an order dismissing a case
without prejudice is a final order if no motion for reconsideration or
appeal therefrom is timely filed.
In Olympia International vs. Court of Appeals,[16] we stated thus:
The dismissal without prejudice of a complaint does not however
mean that said dismissal order was any less final. Such order of
dismissal is complete in all details, and though without prejudice,
nonetheless finally disposed of the matter. It was not merely an
interlocutory order but a final disposition of the complaint.
The law grants an aggrieved party a period of fifteen (15) days from
his receipt of the courts decision or order disposing of the action or
proceeding to appeal or move to reconsider the same.
After the lapse of the fifteen-day period, an order becomes final and
executory and is beyond the power or jurisdiction of the court which
rendered it to further amend or revoke. A final judgment or order
cannot be modified in any respect, even if the modification sought is
for the purpose of correcting an erroneous conclusion by the court
which rendered the same.
Hence, the Court of Appeals did not err when it dismissed the
petition for certiorari and mandamus, on the ground that the proper
remedy was to appeal within fifteen (15) days. The lapse of the
reglementary period was of no moment. A basic requisite for the
special civil action of certiorari to lie is that there be no appeal nor
plain, speedy and adequate remedy in the ordinary course of
law. Certiorari is a remedy of last recourse and is a limited form of
review. Its principal function is to keep inferior tribunals within their
jurisdiction. It cannot be used as a substitute for a lost appeal. It is
not intended to correct errors of procedure or mistakes in the judges
findings or conclusions.[17]
In a more recent case,this Court held:
xxx xxx xxx. Apparently, petitioner resorted to this special civil
action because it had failed to take an appeal within the 15-day
reglementary period which expired on June 20, 1997. This, of course,
cannot be done. The special civil action of certiorari cannot be used
as a substitute for an appeal which petitioner has lost. Nor can it be
contended that the only question raised in this case is a jurisdictional
question. Certiorari lies only where there is no appeal nor any plain,
speedy, and adequate remedy in the ordinary course of law. There is
no reason why the question being raised by petitioner, i.e., whether
the appellate court committed a grave abuse of discretion in
dismissing petitions, could not have been raised by it on appeal. [18]
Admittedly, this Court, in accordance with the liberal spirit
pervading the Rules of Court and in the interest of justice, has the
discretion to treat a petition for certiorari as having been filed under
Rule 45, especially if filed within the reglementary period for filing a
petition for review.[19] In the case at bar, there is no compelling
reason for the Court of Appeals to have treated the petition for
certiorari and mandamus as an ordinary appeal. Aside from being
filed beyond the fifteen (15) day period, the petition failed to show
that the trial court committed grave abuse of discretion or want or
excess of jurisdiction in issuing the assailed Order dismissing the
complaint. If at all, any mistake therein was an error of judgment or
procedure, which is correctible in an ordinary appeal filed in due
time.
The publication of the list of unclaimed balances is intended to
safeguard the right of the depositors, their heirs and successors to due
process.[20] This was made clear by the lower court in its assailed
Order, to wit:[21]
Moreover, how would other persons who may have an interest in any
of the unclaimed balances know what this case is all about and
whether they have an interest in this case if the amended complaint
and list of unclaimed balances are not published? Such other persons
may be heirs of the bank depositors named in the list of unclaimed
balances.
xxxxxxxxx
The fact that the government is in a tight financial situation is not a
justification for this Court to dispense with the elementary rule of
due process.
As declared by the trial court in its Order dated August 1, 1989,
the dismissal of the petition for escheat is without prejudice. In other
words, the State can refile the said petition, notwithstanding the lapse
of time. Prescription of action does not run against the
government.[22]
WHEREFORE, the petition is DENIED. The decision of the
Court of Appeals dated August 14, 1990 is AFFIRMED.
SO ORDERED.
Davide, Jr., C.J. (Chairman), Puno, Kapunan, and Pardo,
JJ., concur.
*
All banks impleaded were ordered by the /court of Appeals to
comment on the petition, but only private respondent Philippine
Commercial and International Bank filed comment (Rollo, Court of
Appeals Decision, p. 29).
[1] Rollo, p. 36; Civil Case Nos. 19488-89.
[2] Impleaded
were Philippine Commercial International Bank, Sta.
Ana Branch; Citytrust Banking Corporation, Davao Branch;
consolidated Bank and Trust Co., Davao Ext. Office; Manila Bank,
Davao Branch; Pacific Banking Corporation, Davao Branch; Phil.
Commercial International Bank, Davao Branch; Philippine National
Bank, Davao Branch; Prudential Bank and Trust Company, Davao
Main Branch; Consolidated Bank and Trust Company, Sta. Ana Ext.
Office; Rizal Commercial Banking Corporation, Davao Branch;
Philippine Veterans Bank, Davao Branch; Comtrust Bank, Davao
Branch; Davao City Development Bank, Davao City; Bank of the
Philippine Islands, Digos Branch; and Rural Bank of Digos, Inc.
[3] Sec.
2 of the law provides: Immediately after the taking effect of
this act and within the month of January of every odd year, all banks,
building and loan associations, and trust corporations shall forward to
the Treasurer of the Philippines a statement, under oath, of their
respective managing officers, of all credits and deposits held by them
in favor of persons known to be dead, or who have not made further
deposits or withdrawals during the preceding ten years or more,
arranged in alphabetical order according to the names of creditors
and depositors. xxx.
[4] Rollo, p. 39.
[5] The
conditions referred to are:
(1) A copy of the sworn statement shall be posted in a conspicuous
place in th premises of the bank, building and loan association,
or trust corporation concerned for at least sixty days from the
date of filing thereof;
(2) Immediately before filing the above sworn statement, the bank,
building and loan association, and trust corporation shall
communicate with the person in whose favor the unclaimed balance
stands at his last known place of residence or post office address.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 183905 April 16, 2009
GOVERNMENT SERVICE, INSURANCE SYSTEM, Petitioner,
vs.
THE HON. COURT OF APPEALS, (8TH DIVISION),
ANTHONY V. ROSETE, MANUEL M. LOPEZ, FELIPE B.
ALFONSO, JESUS F. FRANCISCO, CHRISTIAN S. MONSOD,
ELPIDIO L. IBAÑEZ, and FRANCIS GILES
PUNO, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 184275 April 16, 2009
SECURITIES AND EXCHANGE COMMISSION,
COMMISSIONER JESUS ENRIQUE G. MARTINEZ IN HIS
CAPACITY AS OFFICER-IN-CHARGE OF THE
SECURITIES AND EXCHANGE COMMISSION and HUBERT
G. GUEVARA IN HIS CAPACITY AS DIRECTOR OF THE
COMPLIANCE AND ENFORCEMENT DEPT. OF
SECURITIES Petitioners,
vs.
ANTHONY V. ROSETE, MANUEL M. LOPEZ, FELIPE B.
ALFONSO, JESUS F. FRANCISCO, CHRISTIAN S. MONSOD,
ELPIDIO L. IBAÑEZ, and FRANCIS GILES Respondents.
 DECISION
TINGA, J.:
These are the undisputed facts.
The annual stockholders’ meeting (annual meeting) of the Manila
Electric Company (Meralco) was scheduled on 27 May 2008. 1 In
connection with the annual meeting, proxies2 were required to be
submitted on or before 17 May 2008, and the proxy validation was
slated for five days later, or 22 May.3
In view of the resignation of Camilo Quiason,4 the position of
corporate secretary of Meralco became vacant.5 On 15 May 2008, the
board of directors of Meralco designated Jose Vitug6 to act as
corporate secretary for the annual meeting.7 However, when the
proxy validation began on 22 May, the proceedings were presided
over by respondent Anthony Rosete (Rosete), assistant corporate
secretary and in-house chief legal counsel of Meralco.8 Private
respondents nonetheless argue that Rosete was the acting corporate
secretary of Meralco.9 Petitioner Government Service Insurance
System (GSIS), a major shareholder in Meralco, was distressed over
the proxy validation proceedings, and the resulting certification of
proxies in favor of the Meralco management.10
On 23 May 2008, GSIS filed a complaint with the Regional Trial
Court (RTC) of Pasay City, docketed as R-PSY-08-05777-C4
seeking the declaration of certain proxies as invalid.11 Three days
later, on 26 May, GSIS filed a Notice with the RTC manifesting the
dismissal of the complaint.12 On the same day, GSIS filed an Urgent
Petition13 with the Securities and Exchange Commission (SEC)
seeking to restrain Rosete from "recognizing, counting and tabulating,
directly or indirectly, notionally or actually or in whatever way, form,
manner or means, or otherwise honoring the shares covered by" the
proxies in favor of respondents Manuel Lopez,14 Felipe
Alfonso,15 Jesus Francisco,16 Oscar Lopez, Christian
Monsod,17 Elpidio Ibañez,18 Francisco Giles-Puno19 "or any officer
representing MERALCO Management," and to annul and declare
invalid said proxies.20 GSIS also prayed for the issuance of a Cease
and Desist Order (CDO) to restrain the use of said proxies during the
annual meeting scheduled for the following day.21 A CDO22 to that
effect signed by SEC Commissioner Jesus Martinez was issued on 26
May 2008, the same day the complaint was filed. During the annual
meeting held on the following day, Rosete announced that the
meeting would push through, expressing the opinion that the CDO is
null and void.23
On 28 May 2008, the SEC issued a Show Cause Order
(SCO)24 against private respondents, ordering them to appear before
the Commission on 30 May 2008 and explain why they should not be
cited in contempt. On 29 May 2008, respondents filed a petition for
certiorari with prohibition25 with the Court of Appeals, praying that
the CDO and the SCO be annulled. The petition was docketed as
CA-G.R. SP No. 103692.
Many developments involving the Court of Appeals’ handling of
CA-G.R. SP No. 103692 and the conduct of several of its individual
justices are recounted in our Resolution dated 9 September 2008 in
A.M. No. 08-8-11-CA (Re: Letter Of Presiding Justice Conrado M.
Vasquez, Jr. On CA-G.R. SP No. 103692).26 On 23 July 2008, the
Court of Appeals Eighth Division promulgated a decision in the case
with the following dispositive portion:
WHEREFORE, premises considered, the May 26, 2008 complaint
filed by GSIS in the SEC is hereby DISMISSED due to SEC’s lack
of jurisdiction, due to forum shopping by respondent GSIS, and due
to splitting of causes of action by respondent GSIS. Consequently,
the SEC’s undated cease and desist order and the SEC’s May 28,
2008 show cause order are hereby DECLARED VOID AB INITIO
and without legal effect and their implementation are hereby
permanently restrained.
The May 26, 2008 complaint filed by GSIS in the SEC is hereby
barred from being considered, out of equitable considerations, as an
election contest in the RTC, because the prescriptive period of 15
days from the May 27, 2008 Meralco election to file an election
contest in the RTC had already run its course, pursuant to Sec. 3,
Rule 6 of the interim Rules of Procedure Governing Intra-Corporate
Controversies under R.A. No. 8799, due to deliberate act of GSIS in
filing a complaint in the SEC instead of the RTC.
Let seventeen (17) copies of this decision be officially
TRANSMITTED to the Office of the Chief Justice and three (3)
copies to the Office of the Court Administrator:
(1) for sanction by the Supreme Court against the "GSIS LAW
OFFICE" for unauthorized practice of law,
(2) for sanction and discipline by the Supreme Court of GSIS
lawyers led by Atty. Estrella Elamparo-Tayag, Atty. Marcial C.
Pimentel, Atty. Enrique L. Tandan III, and other GSIS lawyers for
violation of Sec. 27 of Rule 138 of the Revised Rules of Court,
pursuant to Santayana v. Alampay, A.C. No. 5878, March 21, 2005
454 SCRA 1, and pursuant to Land Bank of the Philippines v.
Raymunda Martinez, G.R. No. 169008, August 14, 2007:
(a) for violating express provisions of law and defying public policy
in deliberately displacing the Office of the Government Corporate
Counsel (OGCC) from its duty as the exclusive lawyer of GSIS, a
government owned and controlled corporation (GOCC), by
admittedly filing and defending cases as well as appearing as counsel
for GSIS, without authority to do so, the authority belonging
exclusively to the OGCC;
(b) for violating the lawyer’s oath for failing in their duty to act as
faithful officers of the court by engaging in forum shopping;
(c) for violating express provisions of law most especially those on
jurisdiction which are mandatory; and
(d) for violating Sec. 3, Rule 2 of the 1997 Rules of Civil Procedure
by deliberately splitting causes of action in order to file multiple
complaints: (i) in the RTC of Pasay City and (ii) in the SEC, in order
to ensure a favorable order.27
The promulgation of the said decision provoked a searing
controversy, as detailed in our Resolution in A.M. No. 08-8-11-CA.
Nonetheless, the appellate court’s decision spawned three different
actions docketed with their own case numbers before this Court. One
of them, G.R. No. 183933, was initiated by a Motion for Extension
of Time to File Petition for Review filed by the Office of the
Solicitor General (OSG) in behalf of the SEC, Commissioner
Martinez in his capacity as officer-in-charge of the SEC, and Hubert
Guevarra in his capacity as Director of the Compliance and
Enforcement Department of the SEC.28 However, the OSG did not
follow through with the filing of the petition for review adverted to;
thus, on 19 January 2009, the Court resolved to declare G.R. No.
183933 closed and terminated.29
The two remaining cases before us are docketed as G.R. No. 183905
and 184275. G.R. No. 183905 pertains to a petition for certiorari and
prohibition filed by GSIS, against the Court of Appeals, and
respondents Rosete, Lopez, Alfonso, Francisco, Monsod, Ibañez and
Puno, all of whom serve in different corporate capacities with
Meralco or First Philippines Holdings Corporation, a major
stockholder of Meralco and an affiliate of the Lopez Group of
Companies. This petition seeks of the Court to declare the 23 July
2008 decision of the Court of Appeals null and void, affirm the
SEC’s jurisdiction over the petition filed before it by GSIS, and
pronounce that the CDO and the SCO orders are valid. This petition
was filed in behalf of GSIS by the "GSIS Law Office;" it was signed
by the Chief Legal Counsel and Assistant Legal Counsel of GSIS,
and three self-identified "Attorney[s]," presumably holding lawyer
positions in GSIS.30
The OSG also filed the other petition, docketed as G.R. No. 184275.
It identifies as its petitioners the SEC, Commissioner Martinez in his
capacity as OIC of the SEC, and Hubert Guevarra in his capacity as
Director of the Compliance and Enforcement Department of the SEC
– the same petitioners in the aborted petition for review initially
docketed as G.R. No. 183933. Unlike what was adverted to in the
motion for extension filed by the same petitioners in G.R. No.
183933, the petition in G.R. No. 184275 is one for certiorari under
Rule 65 as indicated on page 3 thereof,31 and not a petition for review.
Interestingly, save for the first page which leaves the docket number
blank, all 86 pages of this petition for certiorari carry a header
wrongly identifying the pleading as the non-existent petition for
review under G.R. No. 183933. This petition seeks the "reversal" of
the assailed decision of the Court of Appeals, the recognition of the
jurisdiction of the SEC over the petition of GSIS, and the affirmation
of the CDO and SCO.
 II.
Private respondents seek the expunction of the petition filed by the
SEC in G.R. No. 184275. We agree that the petitioners therein,
namely: the SEC, Commissioner Marquez and Guevarra, are not real
parties-in-interest to the dispute and thus bereft of capacity to file the
petition. By way of simple illustration, to argue otherwise is to say
that the trial court judge, the National Labor Relations Commission,
or any quasi-judicial agency has the right to seek the review of an
appellate court decision reversing any of their rulings. That prospect,
as any serious student of remedial law knows, is zero.
The Court, through the Resolution of the Third Division dated 2
September 2008, had resolved to treat the petition in G.R. No.
184275 as a petition for review on certiorari, but withheld giving due
course to it.32 Under Section 1 of Rule 45, which governs appeals by
certiorari, the right to file the appeal is restricted to "a party,"
meaning that only the real parties-in-interest who litigated the
petition for certiorari before the Court of Appeals are entitled to
appeal the same under Rule 45. The SEC and its two officers may
have been designated as respondents in the petition for certiorari filed
with the Court of Appeals, but under Section 5 of Rule 65 they are
not entitled to be classified as real parties-in-interest. Under the
provision, the judge, court, quasi-judicial agency, tribunal,
corporation, board, officer or person to whom grave abuse of
discretion is imputed (the SEC and its two officers in this case) are
denominated only as public respondents. The provision further states
that "public respondents shall not appear in or file an answer or
comment to the petition or any pleading therein."33 Justice Regalado
explains:
[R]ule 65 involves an original special civil action specifically
directed against the person, court, agency or party a quo which had
committed not only a mistake of judgment but an error of jurisdiction,
hence should be made public respondents in that action brought to
nullify their invalid acts. It shall, however be the duty of the party
litigant, whether in an appeal under Rule 45 or in a special civil
action in Rule 65, to defend in his behalf and the party whose
adjudication is assailed, as he is the one interested in sustaining the
correctness of the disposition or the validity of the proceedings.
xxx The party interested in sustaining the proceedings in the lower
court must be joined as a co-respondent and he has the duty to defend
in his own behalf and in behalf of the court which rendered the
questioned order. While there is nothing in the Rules that prohibit the
presiding judge of the court involved from filing his own answer and
defending his questioned order, the Supreme Court has reminded
judges of the lower courts to refrain from doing so unless
ordered by the Supreme Court.34 The judicial norm or mode of
conduct to be observed in trial and appellate courts is now
prescribed in the second paragraph of this section.
xxx
A person not a party to the proceedings in the trial court or in
the Court of Appeals cannot maintain an action for certiorari in
the Supreme Court to have the judgment reviewed.35
Rule 65 does recognize that the SEC and its officers should have
been designated as public respondents in the petition for certiorari
filed with the Court of Appeals. Yet their involvement in the instant
petition is not as original party-litigants, but as the quasi-judicial
agency and officers exercising the adjudicative functions over the
dispute between the two contending factions within Meralco. From
the onset, neither the SEC nor Martinez or Guevarra has been
considered as a real party-in-interest. Section 2, Rule 3 of the 1997
Rules of Civil Procedure provides that every action must be
prosecuted or defended in the name of the real party in interest, that
is "the party who stands to be benefited or injured by the judgment in
the suit, or the party entitled to the avails of the suit." It would be
facetious to assume that the SEC had any real interest or stake in the
intra-corporate dispute within Meralco.
We find our ruling in Hon. Santiago v. Court of Appeals 36 quite
apposite to the question at hand. Petitioner therein, a trial court judge,
had presided over an expropriation case. The litigants had arrived at
an amicable settlement, but the judge refused to approve the same,
even declaring it invalid. The matter was elevated to the Court of
Appeals, which promptly reversed the trial court and approved the
amicable settlement. The judge took the extraordinary step of filing
in his own behalf a petition for review on certiorari with this Court,
assailing the decision of the Court of Appeals which had reversed
him. In disallowing the judge’s petition, the Court explained:
While the issue in the Court of Appeals and that raised by petitioner
now is whether the latter abused his discretion in nullifying the deeds
of sale and in proceeding with the expropriation proceeding, that
question is eclipsed by the concern of whether Judge Pedro T.
Santiago may file this petition at all.
And the answer must be in the negative, Section 1 of Rule 45 allows
a party to appeal by certiorari from a judgment of the Court of
Appeals by filing with this Court a petition for review on certiorari.
But petitioner judge was not a party either in the expropriation
proceeding or in the certiorari proceeding in the Court of Appeals.
His being named as respondent in the Court of Appeals was merely
to comply with the rule that in original petitions for certiorari, the
court or the judge, in his capacity as such, should be named as party
respondent because the question in such a proceeding is the
jurisdiction of the court itself (See Mayol v. Blanco, 61 Phil. 547
[19351, cited in Comments on the Rules of Court, Moran, Vol. II,
1979 ed., p. 471). "In special proceedings, the judge whose order is
under attack is merely a nominal party; wherefore, a judge in his
official capacity, should not be made to appear as a party seeking
reversal of a decision that is unfavorable to the action taken by him.
A decent regard for the judicial hierarchy bars a judge from suing
against the adverse opinion of a higher court,. . . ." (Alcasid v.
Samson, 102 Phil. 785, 740 [1957])
ACCORDINGLY, this petition is DENIED for lack of legal capacity
to sue by the petitioner.37
Justice Isagani Cruz added, in a Concurring Opinion in Santiago:
"The judge is not an active combatant in such proceeding and must
leave it to the parties themselves to argue their respective positions
and for the appellate court to rule on the matter without his
participation."38
Note that in Santiago, the Court recognized the good faith of the
judge, who perceived the amicable settlement "as a manifestly
iniquitous and illegal contract."39 The SEC could have similarly felt
in good faith that the assailed Court of Appeals decision had unduly
impaired its prerogatives or caused some degree of hurt to it. Yet
assuming that there are rights or prerogatives peculiar to the SEC
itself that the appellate court had countermanded, these can be
vindicated in the petition for certiorari filed by GSIS, whose legal
capacity to challenge the Court of Appeals decision is without
question. There simply is no plausible reason for this Court to deviate
from a time-honored rule that preserves the purity of our judicial and
quasi-judicial offices to accommodate the SEC’s distrust and
resentment of the appellate court’s decision. The expunction of the
petition in G.R. No. 184275 is accordingly in order.
At this point, only one petition remains—the petition for certiorari
filed by GSIS in G.R. No. 183905. Casting off the uncritical and
unimportant aspects, the two main issues for adjudication are as
follows: (1) whether the SEC has jurisdiction over the petition filed
by GSIS against private respondents; and (2) whether the CDO and
SCO issued by the SEC are valid.
II.
It is our resolute inclination that this case, which raises interesting
questions of law, be decided solely on the merits, without regard to
the personalities involved or the well-reported drama preceding the
petition. To that end, the Court has taken note of reports in the media
that GSIS and the Lopez group have taken positive steps to divest or
significantly reduce their respective interests in Meralco.40 These are
developments that certainly ease the tension surrounding this case,
not to mention reason enough for the two groups to make an internal
reassessment of their respective positions and interests in relation to
this case. Still, the key legal questions raised in the petition do not
depend at all on the identity of any of the parties, and would obtain
the same denouement even if this case was lodged by unknowns as
petitioners against similarly obscure respondents.
With the objective to resolve the key questions of law raised in the
petition, some of the issues raised diminish as peripheral. For
example, petitioners raise arguments tied to the behavior of
individual justices of the Court of Appeals, particularly former
Justice Vicente Roxas, in relation to this case as it was pending
before the appellate court. The Court takes cognizance of our
Resolution in A.M. No. 08-8-11-CA dated 9 September 2008, which
duly recited the various anomalous or unbecoming acts in relation to
this case performed by two of the justices who decided the case in
behalf of the Court of Appeals—former Justice Roxas (the ponente)
and Justice Bienvenido L. Reyes (the Chairman of the 8th Division)
– as well as three other members of the Court of Appeals. At the
same time, the consensus of the Court as it deliberated on A.M. No.
08-8-11-CA was to reserve comment or conclusion on the assailed
decision of the Court of Appeals, in recognition of the reality that
however stigmatized the actions and motivations of Justice Roxas are,
the decision is still the product of the Court of Appeals as a collegial
judicial body, and not of one or some rogue justices. The penalties
levied by the Court on these appellate court justices, in our
estimation, redress the unwholesome acts which they had committed.
At the same time, given the jurisprudential importance of the
questions of law raised in the petition, any result reached without
squarely addressing such questions would be unsatisfactory, perhaps
derelict even.
III.
We now examine whether the SEC has jurisdiction over the petition
filed by GSIS. To recall, SEC has sought to enjoin the use and annul
the validation, of the proxies issued in favor of several of the private
respondents, particularly in connection with the annual meeting.
A.
Jurisdiction is conferred by no other source but law. Both sides have
relied upon provisions of Rep. Act No. 8799, otherwise known as the
Securities Regulation Code (SRC), its implementing rules (Amended
Implementing Rules or AIRR-SRC), and other related rules to
support their competing contentions that either the SEC or the trial
courts has exclusive original jurisdiction over the dispute.
GSIS primarily anchors its argument on two correlated provisions of
the SRC. These are Section 53.1 and Section 20.1, which we cite:
SEC. 53. Investigations, Injunctions and Prosecution of Offenses . -
53.1. The Commission may, in its discretion, make such
investigations as it deems necessary to determine whether any
person has violated or is about to violate any provision of
this Code, any rule, regulation or order thereunder, or any rule
of an Exchange, registered securities association, clearing agency,
other self-regulatory organization, and may require or permit any
person to file with it a statement in writing, under oath or otherwise,
as the Commission shall determine, as to all facts and circumstances
concerning the matter to be investigated. The Commission may
publish information concerning any such violations, and to
investigate any fact, condition, practice or matter which it may
deem necessary or proper to aid in the enforcement of the
provisions of this Code, in the prescribing of rules and
regulations thereunder, or in securing information to serve as a
basis for recommending further legislation concerning the
matters to which this Code relates: xxx (emphasis supplied)
SEC. 20. Proxy Solicitations. – 20.1. Proxies must be issued and
proxy solicitation must be made in accordance with rules and
regulations to be issued by the Commission;
The argument, stripped of extravagance, is that since proxy
solicitations following Section 20.1 have to be made in accordance
with rules and regulations issued by the SEC, it is the SEC under
Section 53.1 that has the jurisdiction to investigate alleged violations
of the rules on proxy solicitations. The GSIS petition invoked
AIRR-AIRR-SRC Rule 20, otherwise known as "The Proxy Rule,"
which enumerates the requirements as to form of proxy and delivery
of information to security holders. According to GSIS, the
information statement Meralco had filed with the SEC in connection
with the annual meeting did not contain any proxy form as required
under AIRR-SRC Rule 20.
On the other hand, private respondents argue before us that under
Section 5.2 of the SRC, the SEC’s jurisdiction over all cases
enumerated in Section 5 of Presidential Decree No. 902-A was
transferred to the courts of general jurisdiction or the appropriate
regional trial court. The two particular classes of cases in the
enumeration under Section 5 of Presidential Decree No. 902-A which
private respondents especially refer to are as follows:
xxx
(2) Controversies arising out of intra-corporate, partnership, or
association relations, between and among stockholders, members, or
associates; or association of which they are stockholders, members,
or associates, respectively;
3) Controversies in the election or appointment of directors, trustees,
officers or managers of corporations, partnerships, or associations;
xxx
In addition, private respondents cite the Interim Rules on
Intra-Corporate Controversies (Interim Rules) promulgated by this
Court in 2001, most pertinently, Section 2 of Rule 6 (on Election
Contests), which defines "election contests" as follows:
SEC. 2. Definition. – An election contest refers to any controversy or
dispute involving title or claim to any elective office in a stock or
nonstock corporation, the validation of proxies, the manner and
validity of elections and the qualifications of candidates, including
the proclamation of winners, to the office of director, trustee or other
officer directly elected by the stockholders in a close corporation or
by members of a nonstock corporation where the articles of
incorporation or bylaws so provide. (emphasis supplied)
The correct answer is not clear-cut, but there is one. In private
respondents’ favor, the provisions of law they cite pertain directly
and exclusively to the statutory jurisdiction of trial courts acquired by
virtue of the transfer of jurisdiction following the passage of the SRC.
In contrast, the SRC provisions relied upon by GSIS do not
immediately or directly establish that body’s jurisdiction over the
petition, since it necessitates the linkage of Section 20 to Section
53.1 of the SRC before the point can bear on us.
On the other hand, the distinction between "proxy solicitation" and
"proxy validation" cannot be dismissed offhand. The right of a
stockholder to vote by proxy is generally established by the
Corporation Code,41 but it is the SRC which specifically regulates the
form and use of proxies, more particularly the procedure of proxy
solicitation, primarily through Section 20.42 AIRR-SRC Rule 20
defines the terms solicit and solicitation:
The terms solicit and solicitation include:
A. any request for a proxy whether or not accompanied by or
included in a form of proxy
B. any request to execute or not to execute, or to revoke, a proxy; or
C. the furnishing of a form of proxy or other communication to
security holders under circumstance reasonably calculated to result in
the procurement, withholding or revocation of a proxy.
It is plain that proxy solicitation is a procedure that antecedes proxy
validation. The former involves the securing and submission of
proxies, while the latter concerns the validation of such secured and
submitted proxies. GSIS raises the sensible point that there was no
election yet at the time it filed its petition with the SEC, hence no
proper election contest or controversy yet over which the regular
courts may have jurisdiction. And the point ties its cause of action to
alleged irregularities in the proxy solicitation procedure, a process
that precedes either the validation of proxies or the annual meeting
itself.
Under Section 20.1, the solicitation of proxies must be in accordance
with rules and regulations issued by the SEC, such as AIRR-SRC
Rule 4. And by virtue of Section 53.1, the SEC has the discretion "to
make such investigations as it deems necessary to determine whether
any person has violated" any rule issued by it, such as AIRR-SRC
Rule 4. The investigatory power of the SEC established by Section
53.1 is central to its regulatory authority, most crucial to the public
interest especially as it may pertain to corporations with publicly
traded shares. For that reason, we are not keen on pursuing private
respondents’ insistence that the GSIS complaint be viewed as rooted
in an intra-corporate controversy solely within the jurisdiction of the
trial courts to decide. It is possible that an intra-corporate controversy
may animate a disgruntled shareholder to complain to the SEC a
corporation’s violations of SEC rules and regulations, but that motive
alone should not be sufficient to deprive the SEC of its investigatory
and regulatory powers, especially so since such powers are
exercisable on a motu proprio basis.
At the same time, Meralco raises the substantial point that nothing in
the SRC empowers the SEC to annul or invalidate improper proxies
issued in contravention of Section 20. It cites that the penalties
defined by the SEC itself for violation of Section 20 or AIRR-SRC
Rule 20 are limited to a reprimand/warning for the first offense, and
pecuniary fines for succeeding offenses.43 Indeed, if the SEC does
not have the power to invalidate proxies solicited in violation of its
promulgated rules, serious questions may be raised whether it has the
power to adjudicate claims of violation in the first place, since the
relief it may extend does not directly redress the cause of action of
the complainant seeking the exclusion of the proxies.
There is an interesting point, which neither party raises, and it
concerns Section 6(g) of Presidential Decree No. 902-A, which
states:
SEC. 6. In order to effectively exercise such jurisdiction, the
Commission shall possess the following powers:
xxx
(g) To pass upon the validity of the issuance and use of proxies and
voting trust agreements for absent stockholders or members;
xxx
As promulgated then, the provision would confer on the SEC the
power to adjudicate controversies relating not only to proxy
solicitation, but also to proxy validation. Should the proposition hold
true up to the present, the position of GSIS would have merit,
especially since Section 6 of Presidential Decree No. 902-A was not
expressly repealed or abrogated by the SRC.44
Yet a closer reading of the provision indicates that such power of the
SEC then was incidental or ancillary to the "exercise of such
jurisdiction." Note that Section 6 is immediately preceded by Section
5, which originally conferred on the SEC "original and exclusive
jurisdiction to hear and decide cases" involving "controversies in the
election or appointments of directors, trustees, officers or managers
of such corporations, partnerships or associations." The cases
referred to in Section 5 were transferred from the jurisdiction of the
SEC to the regular courts with the passage of the SRC, specifically
Section 5.2. Thus, the SEC’s power to pass upon the validity of
proxies in relation to election controversies has effectively been
withdrawn, tied as it is to its abrogated jurisdictional powers.
Based on the foregoing, it is evident that the linchpin in deciding the
question is whether or not the cause of action of GSIS before the
SEC is intimately tied to an election controversy, as defined under
Section 5(c) of Presidential Decree No. 902-A. To answer that, we
need to properly ascertain the scope of the power of trial courts to
resolve controversies in corporate elections.
B.
Shares of stock in corporations may be divided into voting shares and
non-voting shares, which are generally issued as "preferred" or
"redeemable" shares.45 Voting rights are exercised during regular or
special meetings of stockholders; regular meetings to be held
annually on a fixed date, while special meetings may be held at any
time necessary or as provided in the by-laws, upon due notice.46 The
Corporation Code provides for a whole range of matters which can
be voted upon by stockholders, including a limited set on which even
non-voting stockholders are entitled to vote on.47 On any of these
matters which may be voted upon by stockholders, the proxy device
is generally available.48
Under Section 5(c) of Presidential Decree No. 902-A, in relation to
the SRC, the jurisdiction of the regular trial courts with respect to
election-related controversies is specifically confined to
"controversies in the election or appointment of directors, trustees,
officers or managers of corporations, partnerships, or associations."
Evidently, the jurisdiction of the regular courts over so-called
election contests or controversies under Section 5(c) does not extend
to every potential subject that may be voted on by shareholders, but
only to the election of directors or trustees, in which stockholders are
authorized to participate under Section 24 of the Corporation Code.49
This qualification allows for a useful distinction that gives due effect
to the statutory right of the SEC to regulate proxy solicitation, and
the statutory jurisdiction of regular courts over election contests or
controversies. The power of the SEC to investigate violations of its
rules on proxy solicitation is unquestioned when proxies are obtained
to vote on matters unrelated to the cases enumerated under Section 5
of Presidential Decree No. 902-A. However, when proxies are
solicited in relation to the election of corporate directors, the
resulting controversy, even if it ostensibly raised the violation of the
SEC rules on proxy solicitation, should be properly seen as an
election controversy within the original and exclusive jurisdiction of
the trial courts by virtue of Section 5.2 of the SRC in relation to
Section 5(c) of Presidential Decree No. 902-A.
The conferment of original and exclusive jurisdiction on the regular
courts over such controversies in the election of corporate directors
must be seen as intended to confine to one body the adjudication of
all related claims and controversy arising from the election of such
directors. For that reason, the aforequoted Section 2, Rule 6 of the
Interim Rules broadly defines the term "election contest" as
encompassing all plausible incidents arising from the election of
corporate directors, including: (1) any controversy or dispute
involving title or claim to any elective office in a stock or nonstock
corporation, (2) the validation of proxies, (3) the manner and
validity of elections and (4) the qualifications of candidates,
including the proclamation of winners. If all matters anteceding the
holding of such election which affect its manner and conduct, such as
the proxy solicitation process, are deemed within the original and
exclusive jurisdiction of the SEC, then the prospect of overlapping
and competing jurisdictions between that body and the regular courts
becomes frighteningly real. From the language of Section 5(c) of
Presidential Decree No. 902-A, it is indubitable that controversies as
to the qualification of voting shares, or the validity of votes cast in
favor of a candidate for election to the board of directors are properly
cognizable and adjudicable by the regular courts exercising original
and exclusive jurisdiction over election cases. Questions relating to
the proper solicitation of proxies used in such election are
indisputably related to such issues, yet if the position of GSIS were
to be upheld, they would be resolved by the SEC and not the regular
courts, even if they fall within "controversies in the election" of
directors.
The Court recognizes that GSIS’s position flirts with the abhorrent
evil of split jurisdiction,50 allowing as it does both the SEC and the
regular courts to assert jurisdiction over the same controversies
surrounding an election contest. Should the argument of GSIS be
sustained, we would be perpetually confronted with the spectacle of
election controversies being heard and adjudicated by both the SEC
and the regular courts, made possible through a mere allegation that
the anteceding proxy solicitation process was errant, but the
competing cases filed with one objective in mind – to affect the
outcome of the election of the board of directors. There is no
definitive statutory provision that expressly mandates so untidy a
framework, and we are disinclined to construe the SRC in such a
manner as to pave the way for the splitting of jurisdiction.
Unlike either Section 20.1 or Section 53.1, which merely alludes to
the rule-making or investigatory power of the SEC, Section 5 of Pres.
Decree No. 902-A sets forth a definitive rule on jurisdiction,
expressly granting as it does "original and exclusive jurisdiction"
first to the SEC, and now to the regular courts. The fact that the
jurisdiction of the regular courts under Section 5(c) is confined to the
voting on election of officers, and not on all matters which may be
voted upon by stockholders, elucidates that the power of the SEC to
regulate proxies remains extant and could very well be exercised
when stockholders vote on matters other than the election of
directors.
That the proxy challenge raised by GSIS relates to the election of the
directors of Meralco is undisputed. The controversy was engendered
by the looming annual meeting, during which the stockholders of
Meralco were to elect the directors of the corporation. GSIS very
well knew of that fact. On 17 March 2008, the Meralco board of
directors adopted a board resolution stating:
RESOLVED that the board of directors of the Manila Electric
Company (MERALCO) delegate, as it hereby delegates to the
Nomination & Governance Committee the authority to approve and
adopt appropriate rules on: (1) nomination of candidates for
election to the board of directors; (2) appreciation of ballots
during the election of members of the board of directors; and (3)
validation of proxies for regular or special meetings of the
stockholders.51
In addition, the Information Statement/Proxy form filed by First
Philippine Holdings Corporation with the SEC pursuant to Section
20 of the SRC, states:
REASON FOR SOLICITATION OF VOTES
The Solicitor is soliciting proxies from stockholders of the
Company for the purpose of electing the directors named under
the subject headed ‘Directors’ in this Statement as well as to vote
the matters in the agenda of the meeting as provided for in the
Information Statement of the Company. All of the nominees are
current directors of the Company.52
Under the circumstances, we do not see it feasible for GSIS to posit
that its challenge to the solicitation or validation of proxies bore no
relation at all to the scheduled election of the board of directors of
Meralco during the annual meeting. GSIS very well knew that the
controversy falls within the contemplation of an election controversy
properly within the jurisdiction of the regular courts. Otherwise, it
would have never filed its original petition with the RTC of Pasay.
GSIS may have withdrawn its petition with the RTC on a new
assessment made in good faith that the controversy falls within the
jurisdiction of the SEC, yet the reality is that the reassessment is
precisely wrong as a matter of law.
IV.
The lack of jurisdiction of the SEC over the subject matter of GSIS’s
petition necessarily invalidates the CDO and SDO issued by that
body. However, especially with respect to the CDO, there is need for
this Court to squarely rule on the question pertaining to its validity, if
only for jurisprudential value and for the guidance of the SEC.
To recount the facts surrounding the issuance of the CDO, GSIS filed
its petition with the SEC on 26 May 2008. The CDO, six (6) pages in
all with three (3) pages devoted to the tenability of granting the
injunctive relief, was issued on the very same day, 26 May 2008,
without notice or hearing. The CDO bore the signature of
Commissioner Jesus Martinez, identified therein as
"Officer-in-Charge," and nobody else’s.
The provisions of the SRC relevant to the issuance of a CDO are as
follows:
SEC. 5. Powers and Functions of the Commission.- 5.1. The
Commission shall act with transparency and shall have the powers
and functions provided by this Code, Presidential Decree No. 902-A,
the Corporation Code, the Investment Houses Law, the Financing
Company Act and other existing laws. Pursuant thereto the
Commission shall have, among others, the following powers and
functions:
xxx
(i) Issue cease and desist orders to prevent fraud or injury to the
investing public;
xxx
[SEC.] 53.3. Whenever it shall appear to the Commission that any
person has engaged or is about to engage in any act or practice
constituting a violation of any provision of this Code, any rule,
regulation or order thereunder, or any rule of an Exchange, registered
securities association, clearing agency or other self-regulatory
organization, it may issue an order to such person to desist from
committing such act or practice: Provided, however, That the
Commission shall not charge any person with violation of the rules
of an Exchange or other self regulatory organization unless it appears
to the Commission that such Exchange or other self-regulatory
organization is unable or unwilling to take action against such person.
After finding that such person has engaged in any such act or practice
and that there is a reasonable likelihood of continuing, further or
future violations by such person, the Commission may issue ex-parte
a cease and desist order for a maximum period of ten (10) days,
enjoining the violation and compelling compliance with such
provision. The Commission may transmit such evidence as may be
available concerning any violation of any provision of this Code, or
any rule, regulation or order thereunder, to the Department of Justice,
which may institute the appropriate criminal proceedings under this
Code.
SEC. 64. Cease and Desist Order. – 64.1. The Commission, after
proper investigation or verification, motu proprio, or upon verified
complaint by any aggrieved party, may issue a cease and desist order
without the necessity of a prior hearing if in its judgment the act or
practice, unless restrained, will operate as a fraud on investors or is
otherwise likely to cause grave or irreparable injury or prejudice to
the investing public.
64.2. Until the Commission issues a cease and desist order, the fact
that an investigation has been initiated or that a complaint has been
filed, including the contents of the complaint, shall be confidential.
Upon issuance of a cease and desist order, the Commission shall
make public such order and a copy thereof shall be immediately
furnished to each person subject to the order.
64.3. Any person against whom a cease and desist order was issued
may, within five (5) days from receipt of the order, file a formal
request for a lifting thereof. Said request shall be set for hearing by
the Commission not later than fifteen (15) days from its filing and the
resolution thereof shall be made not later than ten (10) days from the
termination of the hearing. If the Commission fails to resolve the
request within the time herein prescribed, the cease and desist order
shall automatically be lifted.
There are three distinct bases for the issuance by the SEC of the
CDO. The first, allocated by Section 5(i), is predicated on a necessity
"to prevent fraud or injury to the investing public". No other requisite
or detail is tied to this CDO authorized under Section 5(i).
The second basis, found in Section 53.3, involves a determination by
the SEC that "any person has engaged or is about to engage in any
act or practice constituting a violation of any provision of this Code,
any rule, regulation or order thereunder, or any rule of an Exchange,
registered securities association, clearing agency or other
self-regulatory organization." The provision additionally requires a
finding that "there is a reasonable likelihood of continuing [or
engaging in] further or future violations by such person." The
maximum duration of the CDO issued under Section 53.3 is ten (10)
days.
The third basis for the issuance of a CDO is Section 64. This CDO is
founded on a determination of an act or practice, which unless
restrained, "will operate as a fraud on investors or is otherwise likely
to cause grave or irreparable injury or prejudice to the investing
public". Section 64.1 plainly provides three segregate instances upon
which the SEC may issue the CDO under this provision: (1) after
proper investigation or verification, (2) motu proprio, or (3) upon
verified complaint by any aggrieved party. While no lifetime is
expressly specified for the CDO under Section 64, the respondent to
the CDO may file a formal request for the lifting thereof, which the
SEC must hear within fifteen (15) days from filing and decide within
ten (10) days from the hearing.
It appears that the CDO under Section 5(i) is similar to the CDO
under Section 64.1. Both require a common finding of a need to
prevent fraud or injury to the investing public. At the same time, no
mention is made whether the CDO defined under Section 5(i) may be
issued ex-parte, while the CDO under Section 64.1 requires "grave
and irreparable" injury, language absent in Section 5(i).
Notwithstanding the similarities between Section 5(i) and Section
64.1, it remains clear that the CDO issued under Section 53.3 is a
distinct creation from that under Section 64.
The Court of Appeals cited the CDO as having been issued in
violation of the constitutional provision on due process, which
requires both prior notice and prior hearing.53 Yet interestingly, the
CDO as contemplated in Section 53.3 or in Section 64, may be issued
"ex-parte" (under Section 53.3) or "without necessity of hearing"
(under Section 64.1). Nothing in these provisions impose a requisite
hearing before the CDO may be issued thereunder. Nonetheless,
there are identifiable requisite actions on the part of the SEC that
must be undertaken before the CDO may be issued either under
Section 53.3 or Section 64. In the case of Section 53.3, the SEC must
make two findings: (1) that such person has engaged in any such act
or practice, and (2) that there is a reasonable likelihood of continuing,
(or engaging in) further or future violations by such person. In the
case of Section 64, the SEC must adjudge that the act, unless
restrained, will operate as a fraud on investors or is otherwise likely
to cause grave or irreparable injury or prejudice to the investing
public."
Noticeably, the CDO is not precisely clear whether it was issued on
the basis of Section 5.1, Section 53.3 or Section 64 of the SRC. The
CDO actually refers and cites all three provisions, yet it is apparent
that a singular CDO could not be founded on Section 5.1, Section
53.3 and Section 64 collectively. At the very least, the CDO under
Section 53.3 and under Section 64 have their respective requisites
and terms.
GSIS was similarly cagey in its petition before the SEC, it demurring
to state whether it was seeking the CDO under Section 5.1, Section
53.3, or Section 64. Considering that injunctive relief generally avails
upon the showing of a clear legal right to such relief, the inability or
unwillingness to lay bare the precise statutory basis for the prayer for
injunction is an obvious impediment to a successful
application. Nonetheless, the error of the SEC in granting the CDO
without stating which kind of CDO it was issuing is more
unpardonable, as it is an act that contravenes due process of law.
We have particularly required, in administrative proceedings, that the
body or tribunal "in all controversial questions, render its decision in
such a manner that the parties to the proceeding can know the various
issues involved, and the reason for the decision rendered."54 This
requirement is vital, as its fulfillment would afford the adverse party
the opportunity to interpose a reasoned and intelligent appeal that is
responsive to the grounds cited against it. The CDO extended by the
SEC fails to provide the needed reasonable clarity of the rationale
behind its issuance.
The subject CDO first refers to Section 64, citing its provisions, then
stating: "[p]rescinding from the aforequoted, there can be no doubt
whatsoever that the Commission is in fact mandated to take up, if
expeditiously, any verified complaint praying for the provisional
remedy of a cease and desist order."55 The CDO then discusses the
nature of the right of GSIS to obtain the CDO, as well as "the urgent
and paramount necessity to prevent serious damage because the
stockholders’ meeting is scheduled on May 28, 2008 x x x" Had the
CDO stopped there, the unequivocal impression would have been
that the order is based on Section 64.
But the CDO goes on to cite Section 5.1, quoting paragraphs (i) and
(n) in full, ratiocinating that under these provisions, the SEC had "the
power to issue cease and desist orders to prevent fraud or injury to
the public and such other measures necessary to carry out the
Commission’s role as regulator."56 Immediately thence, the CDO
cites Section 53.3 as providing "that whenever it shall appear to the
Commission that nay person has engaged or is about to engage in any
act or practice constituting a violation of any provision, any rule,
regulation or order thereunder, the Commission may issue ex-parte a
cease and desist order for a maximum period of ten (10) days,
enjoining the violation and compelling compliance therewith."57
The citation in the CDO of Section 5.1, Section 53.3 and Section 64
together may leave the impression that it is grounded on all three
provisions, and that may very well have been the intention of the
SEC. Assuming that is so, it is legally impermissible for the SEC to
have utilized both Section 53.3 and Section 64 as basis for the CDO
at the same time. The CDO under Section 53.3 is premised on
distinctly different requisites than the CDO under Section 64. Even
more crucially, the lifetime of the CDO under Section 53.3 is
confined to a definite span of ten (10) days, which is not the case
with the CDO under Section 64. This CDO under Section 64 may be
the object of a formal request for lifting within five (5) days from its
issuance, a remedy not expressly afforded to the CDO under Section
53.3.
Any respondent to a CDO which cites both Section 53.3 and Section
64 would not have an intelligent or adequate basis to respond to the
same. Such respondent would not know whether the CDO would
have a determinate lifespan of ten (10) days, as in Section 53.3, or
would necessitate a formal request for lifting within five (5) days, as
required under Section 64.1. This lack of clarity is to the obvious
prejudice of the respondent, and is in clear defiance of the
constitutional right to due process of law. Indeed, the veritable
mélange that the assailed CDO is, with its jumbled mixture of
premises and conclusions, the antithesis of due process.
Had the CDO issued by the SEC expressed the length of its term,
perhaps greater clarity would have been offered on what Section of
the SRC it is based. However, the CDO is precisely silent as to its
lifetime, thereby precluding much needed clarification. In view of the
statutory differences among the three CDOs under the SRC, it is
essential that the SEC, in issuing such injunctive relief, identify the
exact provision of the SRC on which the CDO is founded. Only by
doing so could the adversely affected party be able to properly
evaluate whatever his responses under the law.
To make matters worse for the SEC, the fact that the CDO was
signed, much less apparently deliberated upon, by only by one
commissioner likewise renders the order fatally infirm.
The SEC is a collegial body composed of a Chairperson and four (4)
Commissioners.58 In order to constitute a quorum to conduct business,
the presence of at least three (3) Commissioners is required.59 In the
leading case of GMCR v. Bell,60 we definitively explained the nature
of a collegial body, and how the act of one member of such body,
even if the head, could not be considered as that of the entire body
itself. Thus:
We hereby declare that the NTC is a collegial body requiring a
majority vote out of the three members of the commission in order to
validly decide a case or any incident therein. Corollarily, the vote
alone of the chairman of the commission, as in this case, the vote of
Commissioner Kintanar, absent the required concurring vote coming
from the rest of the membership of the commission to at least arrive
at a majority decision, is not sufficient to legally render an NTC
order, resolution or decision.
Simply put, Commissioner Kintanar is not the National
Telecommunications Commission. He alone does not speak for and
in behalf of the NTC. The NTC acts through a three-man body, and
the three members of the commission each has one vote to cast in
every deliberation concerning a case or any incident therein that is
subject to the jurisdiction of the NTC. When we consider the
historical milieu in which the NTC evolved into the quasi-judicial
agency it is now under Executive Order No. 146 which organized the
NTC as a three-man commission and expose the illegality of all
memorandum circulars negating the collegial nature of the NTC
under Executive Order No. 146, we are left with only one logical
conclusion: the NTC is a collegial body and was a collegial body
even during the time when it was acting as a one-man regime.61
We can adopt a virtually word-for-word observation with respect to
former Commissioner Martinez and the SEC. Simply put,
Commissioner Martinez is not the SEC. He alone does not speak for
and in behalf of the SEC. The SEC acts through a five-person body,
and the five members of the commission each has one vote to cast in
every deliberation concerning a case or any incident therein that is
subject to the jurisdiction of the SEC.
GSIS attempts to defend former Commissioner Martinez’s action,
but its argument is without merit. It cites SEC Order No. 169, Series
of 2008, whereby Martinez was designated as "Officer-in-Charge of
the Commission for the duration of the official travel of the
Chairperson to Paris, France, to attend the 33rd Annual Conference
of the [IOSCO] from May 26-30, 2008."62 As officer-in-charge
(OIC), Martinez was "authorized to sign all documents and papers
and perform all other acts and deeds as may be necessary in the
day-to-day operation of the Commission".1avvphi1
It is clear that Martinez was designated as OIC because of the official
travel of only one member, Chairperson Fe Barin. Martinez was not
commissioned to act as the SEC itself. At most, he was to act in place
of Chairperson Barin in the exercise of her duties as Chairperson of
the SEC. Under Section 4.3 of the SRC, the Chairperson is the chief
executive officer of the SEC, and thus empowered to "execute and
administer the policies, decisions, orders and resolutions approved by
the Commission," as well as to "have the
general executive direction and supervision of the work and
operation of the Commission."63 It is in relation to the exercise of
these duties of the Chairperson, and not to the functions of the
Commission, that Martinez was "authorized to sign all documents
and papers and perform all other acts and deeds as may be necessary
in the day-to-day operation of the Commission."
GSIS likewise cites, as authority for Martinez’s unilateral issuance of
the CDO, Section 4.6 of the SRC, which states that the SEC "may,
for purposes of efficiency, delegate any of its functions to any
department or office of the Commission, an individual Commissioner
or staff member of the Commission except its review or appellate
authority and its power to adopt, alter and supplement any rule or
regulation." Reliance on this provision is inappropriate. First, there is
no convincing demonstration that the SEC had delegated to Martinez
the authority to issue the CDO. The SEC Order designating Martinez
as OIC only authorized him to exercise the functions of the absent
Chairperson, and not of the Commission. If the Order is read as
enabling Martinez to issue the CDO in behalf of the Commission, it
would be akin to conceding that the SEC Chairperson, acting alone,
can issue the CDO in behalf of the SEC itself. That again
contravenes our holding in GMCR v. Bell.
In addition, it is clear under Section 4.6 that the ability to delegate
functions to a single commissioner does not extend to the exercise of
the review or appellate authority of the SEC. The issuance of the
CDO is an act of the SEC itself done in the exercise of its original
jurisdiction to review actual cases or controversies. If it has not been
clear to the SEC before, it should be clear now that its power to issue
a CDO can not, under the SRC, be delegated to an individual
commissioner.
V.
In the end, even assuming that the events narrated in our Resolution
in A.M. No. 08-8-11-CA constitute sufficient basis to nullify the
assailed decision of the Court of Appeals, still it remains clear that
the reliefs GSIS seeks of this Court have no basis in law.
Notwithstanding the black mark that stains the appellate court’s
decision, the first paragraph of its fallo, to the extent that it dismissed
the complaint of GSIS with the SEC for lack of jurisdiction and
consequently nullified the CDO and SDO, defies unbiased scrutiny
and deserves affirmation.
A.
In its dispositive portion, the Court of Appeals likewise pronounced
that the complaint filed by GSIS with the SEC should be barred from
being considered "as an election contest in the RTC", given that the
fifteen (15) day prescriptive period to file an election contest with the
RTC, under Section 3, Rule 6 of the Interim Rules, had already run
its course.64 Yet no such relief was requested by private respondents
in their petition for certiorari filed with the Court of Appeals65 .
Without disputing the legal predicates surrounding this
pronouncement, we note that its tenor, if not the text, unduly suggests
an unwholesome pre-emptive strike. Given our observations in A.M.
No. 08-8-11-CA of the "undue interest" exhibited by the author of
the appellate court decision, such declaration is best deleted.
Nonetheless, we do trust that any court or tribunal that may be
confronted with that premise adverted to by the Court of Appeals
would know how to properly treat the same.
B.
Finally, we turn to the sanction on the lawyers of GSIS imposed by
the Court of Appeals.
Nonetheless, we find that as a matter of law the sanctions are
unwarranted. The charter of GSIS66 is unique among government
owned or controlled corporations with original charter in that it
allocates a role for its internal legal counsel that is in conjunction
with or complementary to the Office of the Government Corporate
Counsel (OGCC), which is the statutory legal counsel for GOCCs.
Section 47 of GSIS charter reads:
SEC. 47. Legal Counsel.—The Government Corporate Counsel shall
be the legal adviser and consultant of GSIS, but GSIS may assign to
the Office of the Government Corporate Counsel (OGCC) cases for
legal action or trial, issues for legal opinions, preparation and review
of contracts/agreements and others, as GSIS may decide or determine
from time to time: Provided, however, That the present legal services
group in GSIS shall serve as its in-house legal counsel.
The GSIS may, subject to approval by the proper court, deputize any
personnel of the legal service group to act as special sheriff in the
enforcement of writs and processes issued by the court, quasi-judicial
agencies or administrative bodies in cases involving GSIS.67
The designation of the OGCC as the legal counsel for GOCCs is set
forth by statute, initially by Rep. Act No. 3838, then reiterated by the
Administrative Code of 1987.68 Given that the designation is
statutory in nature, there is no impediment for Congress to impose a
different role for the OGCC with respect to particular GOCCs it may
charter. Congress appears to have done so with respect to GSIS,
designating the OGCC as a "legal adviser and consultant," rather
than as counsel to GSIS. Further, the law clearly vests unto GSIS the
discretion, rather than the duty, to assign cases to the OGCC for legal
action, while designating the present legal services group of GSIS as
"in-house legal counsel." This situates GSIS differently from the
Land Bank of the Philippines, whose own in-house lawyers have
persistently argued before this Court to no avail on their alleged right
to file petitions before us instead of the OGCC.69 Nothing in the
Land Bank charter70 vested it with the discretion to choose when to
assign
cases to the OGCC, notwithstanding the establishment of its own
Legal Department.71
Congress is not bound to retain the OGCC as the primary or
exclusive legal counsel of GSIS even if it performs such a role for
other GOCCs. To bind Congress to perform in that manner would be
akin to elevating the OGCC’s statutory role to irrepealable status,
and it is basic that Congress is barred from passing irrepealable
laws.72
C.
We close by acknowledging that the surrounding circumstances
behind these petitions are unfortunate, given the events as narrated in
A.M. No. 08-8-11-CA. While due punishment has been meted on the
errant magistrates, the corporate world may very well be reminded
that the members of the judiciary are not to be viewed or treated as
mere pawns or puppets in the internecine fights businessmen and
their associates wage against other businessmen in the quest for
corporate dominance. In the end, the petitions did afford this Court to
clarify consequential points of law, points rooted in principles which
will endure long after the names of the participants in these cases
have been forgotten.
WHEREFORE, the petition in G.R. No. 184275
is EXPUNGED for lack of capacity of the petitioner to bring forth
the suit.
The petition in G.R. No. 183905 is DISMISSED for lack of merit
except that the second and third paragraphs of the fallo of the
assailed decision dated 23 July 2008 of the Court of Appeals,
including subparagraphs (1), (2), 2(a), 2(b), 2(c) and 2(d) under the
second paragraph, are hereby DELETED.
No pronouncements as to costs.
SO ORDERED.
RIZAL COMMERCIAL BANKING CORPORATION,
Petitioner,
versus
HI-TRI DEVELOPMENT CORPORATION and LUZ R.
BAKUNAWA,
Respondents.
G.
R. No. 192413
Promulgated:
June 13, 2012
x---------------------------------------------x
DECISION
SERENO, J.:
 Before the Court is a Rule 45 Petition for Review on
Certiorari filed by petitioner Rizal Commercial Banking Corporation
(RCBC) against respondents Hi-Tri Development Corporation
(Hi-Tri) and Luz R. Bakunawa (Bakunawa). Petitioner seeks to
appeal from the 26 November 2009 Decision and 27 May 2010
Resolution of the Court of Appeals (CA),[1] which reversed and set
aside the 19 May 2008 Decision and 3 November 2008 Order of the
Makati City Regional Trial Court (RTC) in Civil Case No.
06-244.[2] The case before the RTC involved the Complaint for
Escheat filed by the Republic of the Philippines (Republic) pursuant
to Act No. 3936, as amended by Presidential Decree No. 679 (P.D.
679), against certain deposits, credits, and unclaimed balances held
by the branches of various banks in the Philippines. The trial court
declared the amounts, subject of the special proceedings, escheated
to the Republic and ordered them deposited with the Treasurer of the
Philippines (Treasurer) and credited in favor of the Republic.[3] The
assailed RTC judgments included an unclaimed balance in the
amount of ₱1,019,514.29, maintained by RCBC in its Ermita
Business Center branch.
We quote the narration of facts of the CA[4] as follows:
x x x Luz [R.] Bakunawa and her
husband Manuel, now deceased (Spouses
Bakunawa) are registered owners of six (6)
parcels of land covered by TCT Nos. 324985 and
324986 of the Quezon City Register of Deeds,
and TCT Nos. 103724, 98827, 98828 and 98829
of the Marikina Register of Deeds. These lots
were sequestered by the Presidential Commission
on Good Government [(PCGG)].
Sometime in 1990, a certain Teresita
Millan (Millan), through her representative, Jerry
Montemayor, offered to buy said lots for
₱6,724,085.71, with the promise that she will
take care of clearing whatever preliminary
obstacles there may[]be to effect a completion of
the sale. The Spouses Bakunawa gave to Millan
the Owners Copies of said TCTs and in turn,
Millan made a down[]payment of ₱1,019,514.29
for the intended purchase. However, for one
reason or another, Millan was not able to clear
said obstacles. As a result, the Spouses
Bakunawa rescinded the sale and offered to
return to Millan her down[]payment of
₱1,019,514.29. However, Millan refused to
accept back the ₱1,019,514.29 down[]payment.
Consequently, the Spouses Bakunawa, through
their company, the Hi-Tri Development
Corporation (Hi-Tri) took out on October 28,
1991, a Managers Check from RCBC-Ermita in
the amount of ₱1,019,514.29, payable to Millans
company Rosmil Realty and Development
Corporation (Rosmil) c/o Teresita Millan and
used this as one of their basis for a complaint
against Millan and Montemayor which they filed
with the Regional Trial Court of Quezon City,
Branch 99, docketed as Civil Case No.
Q-91-10719 [in 1991], praying that:
1. That the defendants
Teresita Mil[l]an and
Jerry Montemayor may
be ordered to return to
plaintiffs spouses the
Owners Copies of
Transfer Certificates of
Title Nos. 324985,
324986, 103724, 98827,
98828 and 98829;
2. That the defendant
Teresita Mil[l]an be
correspondingly ordered
to receive the amount of
One Million Nineteen
Thousand Five Hundred
Fourteen Pesos and
Twenty Nine Centavos
(₱1,019,514.29);
3. That the defendants be
ordered to pay to
plaintiffs spouses moral
damages in the amount
of ₱2,000,000.00; and
4. That the defendants be
ordered to pay plaintiffs
attorneys fees in the
amount of ₱50,000.00.
Being part and parcel of said complaint,
and consistent with their prayer in Civil Case No.
Q-91-10719 that Teresita Mil[l]an be
correspondingly ordered to receive the amount of
One Million Nineteen Thousand Five Hundred
Fourteen Pesos and Twenty Nine [Centavos]
(₱1,019,514.29)[], the Spouses Bakunawa, upon
advice of their counsel, retained custody of
RCBC Managers Check No. ER 034469 and
refrained from canceling or negotiating it.
All throughout the proceedings in Civil
Case No. Q-91-10719, especially during
negotiations for a possible settlement of the case,
Millan was informed that the Managers Check
was available for her withdrawal, she being the
payee.
On January 31, 2003, during the
pendency of the abovementioned case and
without the knowledge of [Hi-Tri and Spouses
Bakunawa], x x x RCBC reported the
₱1,019,514.29-credit existing in favor of Rosmil
to the Bureau of Treasury as among its
unclaimed balances as of January 31, 2003.
Allegedly, a copy of the Sworn Statement
executed by Florentino N. Mendoza, Manager
and Head of RCBCs Asset Management,
Disbursement & Sundry Department (AMDSD)
was posted within the premises of RCBC-Ermita.
On December 14, 2006, x x x Republic,
through the [Office of the Solicitor General
(OSG)], filed with the RTC the action below for
Escheat [(Civil Case No. 06-244)].
On April 30, 2008, [Spouses
Bakunawa] settled amicably their dispute with
Rosmil and Millan. Instead of only the amount of
₱1,019,514.29, [Spouses Bakunawa] agreed to
pay Rosmil and Millan the amount of
₱3,000,000.00, [which is] inclusive [of] the
amount of []₱1,019,514.29. But during
negotiations and evidently prior to said
settlement, [Manuel Bakunawa, through Hi-Tri]
inquired from RCBC-Ermita the availability of
the ₱1,019,514.29 under RCBC Managers Check
No. ER 034469. [Hi-Tri and Spouses Bakunawa]
were however dismayed when they were
informed that the amount was already subject of
the escheat proceedings before the RTC.
On April 17, 2008, [Manuel Bakunawa,
through Hi-Tri] wrote x x x RCBC, viz:
We understand that the
deposit corresponding to the
amount of Php 1,019,514.29
stated in the Managers Check
is currently the subject of
escheat proceedings pending
before Branch 150 of the
Makati Regional Trial Court.
Please note that it was our
impression that the deposit
would be taken from [Hi-Tris]
RCBC bank account once an
order to debit is issued upon
the payees presentation of the
Managers Check. Since the
payee rejected the negotiated
Managers Check,
presentation of the Managers
Check was never made.
Consequently, the deposit
that was supposed to be
allocated for the payment of
the Managers Check was
 supposed to remain part of
the Corporation[s] RCBC
bank account, which,
thereafter, continued to be
actively maintained and
operated. For this reason, We
hereby demand your
confirmation that the amount
of Php 1,019,514.29
continues to form part of the
funds in the Corporations
RCBC bank account, since
pay-out of said amount was
never ordered. We wish to
point out that if there was
any attempt on the part of
RCBC to consider the
amount indicated in the
Managers Check separate
from the Corporations bank
account, RCBC would have
issued a statement to that
effect, and repeatedly
reminded the Corporation
that the deposit would be
considered dormant absent
any fund movement. Since
the Corporation never
received any statements of
account from RCBC to that
effect, and more importantly,
never received any single
letter from RCBC noting the
absence of fund movement
and advising the Corporation
that the deposit would be
treated as dormant.
On April 28, 2008, [Manuel Bakunawa]
sent another letter to x x x RCBC reiterating their
position as above-quoted.
In a letter dated May 19, 2008, x x x
RCBC replied and informed [Hi-Tri and Spouses
Bakunawa] that:
The Banks Ermita BC
informed Hi-Tri and/or its
principals regarding the
inclusion of Managers Check
No. ER034469 in the escheat
proceedings docketed as
Civil Case No. 06-244, as
well as the status thereof,
between 28 January 2008 and
1 February 2008.
xxx xxx xxx
Contrary to what Hi-Tri
hopes for, the funds covered
by the Managers Check No.
ER034469 does not form part
of the Banks own account.
By simple operation of law,
the funds covered by the
managers check in issue
became a deposit/credit
susceptible for inclusion in
the escheat case initiated by
the OSG and/or Bureau of
Treasury.
xxx xxx xxx
Granting arguendo that the
Bank was duty-bound to
make good the check, the
Banks obligation to do so
prescribed as early as
October 2001.
(Emphases, citations, and annotations were
omitted.)
The RTC Ruling
The escheat proceedings before the Makati City RTC continued. On
19 May 2008, the trial court rendered its assailed Decision declaring
the deposits, credits, and unclaimed balances subject of Civil Case
No. 06-244 escheated to the Republic. Among those included in the
order of forfeiture was the amount of ₱1,019,514.29 held by RCBC
as allocated funds intended for the payment of the Managers Check
issued in favor of Rosmil. The trial court ordered the deposit of the
escheated balances with the Treasurer and credited in favor of the
Republic. Respondents claim that they were not able to participate in
the trial, as they were not informed of the ongoing escheat
proceedings.
Consequently, respondents filed an Omnibus Motion dated
11 June 2008, seeking the partial reconsideration of the RTC
Decision insofar as it escheated the fund allocated for the payment of
the Managers Check. They asked that they be included as
party-defendants or, in the alternative, allowed to intervene in the
case and their motion considered as an answer-in-intervention.
Respondents argued that they had meritorious grounds to ask
reconsideration of the Decision or, alternatively, to seek intervention
in the case. They alleged that the deposit was subject of an ongoing
dispute (Civil Case No. Q-91-10719) between them and Rosmil since
1991, and that they were interested parties to that case.[5]
On 3 November 2008, the RTC issued an Order denying
the motion of respondents. The trial court explained that the Republic
had proven compliance with the requirements of publication and
notice, which served as notice to all those who may be affected and
prejudiced by the Complaint for Escheat. The RTC also found that
the motion failed to point out the findings and conclusions that were
not supported by the law or the evidence presented, as required by
Rule 37 of the Rules of Court. Finally, it ruled that the alternative
prayer to intervene was filed out of time.
The CA Ruling
On 26 November 2009, the CA issued its assailed Decision
reversing the 19 May 2008 Decision and 3 November 2008 Order of
the RTC. According to the appellate court,[6] RCBC failed to prove
that the latter had communicated with the purchaser of the Managers
Check (Hi-Tri and/or Spouses Bakunawa) or the designated payee
(Rosmil) immediately before the bank filed its Sworn Statement on
the dormant accounts held therein. The CA ruled that the banks
failure to notify respondents deprived them of an opportunity to
intervene in the escheat proceedings and to present evidence to
substantiate their claim, in violation of their right to due process.
Furthermore, the CA pronounced that the Makati City RTC Clerk of
Court failed to issue individual notices directed to all persons
claiming interest in the unclaimed balances, as well as to require
them to appear after publication and show cause why the unclaimed
balances should not be deposited with the Treasurer of the
Philippines. It explained that the jurisdictional requirement of
individual notice by personal service was distinct from the
requirement of notice by publication. Consequently, the CA held that
the Decision and Order of the RTC were void for want of
jurisdiction.
Issue
After a perusal of the arguments presented by the parties,
we cull the main issues as follows:
I. Whether the Decision and Order of the RTC
were void for failure to send separate notices to
respondents by personal service
II. Whether petitioner had the obligation to notify
respondents immediately before it filed its Sworn
Statement with the Treasurer
III. Whether or not the allocated funds may be
escheated in favor of the Republic
Discussion
Petitioner bank assails[7] the CA judgments insofar as they
ruled that notice by personal service upon respondents is a
jurisdictional requirement in escheat proceedings. Petitioner contends
that respondents were not the owners of the unclaimed balances and
were thus not entitled to notice from the RTC Clerk of Court. It
hinges its claim on the theory that the funds represented by the
Managers Check were deemed transferred to the credit of the payee
or holder upon its issuance.
We quote the pertinent provision of Act No. 3936, as
amended, on the rule on service of processes, to wit:
Sec. 3. Whenever the Solicitor General shall be
informed of such unclaimed balances, he shall
commence an action or actions in the name of
the People of the Republic of the Philippinesin
the Court of First Instance of the province or city
where the bank, building and loan association or
trust corporation is located, in which shall be
joined as parties the bank, building and loan
 association or trust corporation and all such
creditors or depositors. All or any of such
creditors or depositors or banks, building and
loan association or trust corporations may be
included in one action. Service of process in
such action or actions shall be made by delivery
of a copy of the complaint and summons to the
president, cashier, or managing officer of each
defendant bank, building and loan association
or trust corporation and by publication of a copy
of such summons in a newspaper of general
circulation, either in English, in Filipino, or in a
local dialect, published in the locality where the
bank, building and loan association or trust
corporation is situated, if there be any, and in
case there is none, in the City of Manila, at such
time as the court may order. Upon the trial,
the court must hear all parties who have
appeared therein, and if it be determined that
such unclaimed balances in any defendant
bank, building and loan association or trust
corporation are unclaimed as hereinbefore
stated, then the court shall render judgment in
favor of the Government of the Republic of
the Philippines, declaring that said unclaimed
balances have escheated to the Government of
the Republic of the Philippines and commanding
said bank, building and loan association or trust
corporation to forthwith deposit the same with
the Treasurer of the Philippines to credit of the
Government of the Republic of the Philippines to
be used as the National Assembly may direct.
At the time of issuing summons in the action
above provided for, the clerk of court shall also
issue a notice signed by him, giving the title and
number of said action, and referring to the
complaint therein, and directed to all persons,
other than those named as defendants therein,
claiming any interest in any unclaimed
balance mentioned in said complaint,
and requiring them to appear within sixty
days after the publication or first publication, if
there are several, of such summons, and show
cause, if they have any, why the unclaimed
balances involved in said action should not be
deposited with the Treasurer of the
Philippines as in this Act provided and notifying
them that if they do not appear and show
cause, the Government of the Republic of the
Philippines will apply to the court for the
relief demanded in the complaint. A copy of
said notice shall be attached to, and published
with the copy of, said summons required to be
published as above, and at the end of the copy of
such notice so published, there shall be a
statement of the date of publication, or first
publication, if there are several, of said summons
and notice. Any person interested may appear
in said action and become a party
thereto. Upon the publication or the
completion of the publication, if there are
several, of the summons and notice, and the
service of the summons on the defendant banks,
building and loan associations or trust
corporations, the court shall have full and
complete jurisdiction in the Republic of the
Philippines over the said unclaimed balances
and over the persons having or claiming any
interest in the said unclaimed balances, or any
of them, and shall have full and complete
jurisdiction to hear and determine the issues
herein, and render the appropriate judgment
thereon. (Emphasis supplied.)
Hence, insofar as banks are concerned, service of
processes is made by delivery of a copy of the complaint and
summons upon the president, cashier, or managing officer of the
defendant bank.[8] On the other hand, as to depositors or other
claimants of the unclaimed balances, service is made by publication
of a copy of the summons in a newspaper of general circulation in
the locality where the institution is situated.[9] A notice about the
forthcoming escheat proceedings must also be issued and published,
directing and requiring all persons who may claim any interest in the
unclaimed balances to appear before the court and show cause why
the dormant accounts should not be deposited with the Treasurer.
Accordingly, the CA committed reversible error when it
ruled that the issuance of individual notices upon respondents was a
jurisdictional requirement, and that failure to effect personal service
on them rendered the Decision and the Order of the RTC void for
want of jurisdiction. Escheat proceedings are actions in
rem,[10] whereby an action is brought against the thing itself instead
of the person.[11] Thus, an action may be instituted and carried to
judgment without personal service upon the depositors or other
claimants.[12] Jurisdiction is secured by the power of the court over
the res.[13] Consequently, a judgment of escheat is conclusive upon
persons notified by advertisement, as publication is considered a
general and constructive notice to all persons interested.[14]
Nevertheless, we find sufficient grounds to affirm the CA
on the exclusion of the funds allocated for the payment of the
Managers Check in the escheat proceedings.
Escheat proceedings refer to the judicial process in which
the state, by virtue of its sovereignty, steps in and claims abandoned,
left vacant, or unclaimed property, without there being an interested
person having a legal claim thereto.[15] In the case of dormant
accounts, the state inquires into the status, custody, and ownership of
the unclaimed balance to determine whether the inactivity was
brought about by the fact of death or absence of or abandonment by
the depositor.[16] If after the proceedings the property remains
without a lawful owner interested to claim it, the property shall be
reverted to the state to forestall an open invitation to self-service by
the first comers.[17] However, if interested parties have come forward
and lain claim to the property, the courts shall determine whether the
credit or deposit should pass to the claimants or be forfeited in favor
of the state.[18] We emphasize that escheat is not a proceeding to
penalize depositors for failing to deposit to or withdraw from their
accounts. It is a proceeding whereby the state compels the surrender
to it of unclaimed deposit balances when there is substantial ground
for a belief that they have been abandoned, forgotten, or without an
owner.[19]
Act No. 3936, as amended, outlines the proper procedure to
be followed by banks and other similar institutions in filing a sworn
statement with the Treasurer concerning dormant accounts:
Sec. 2. Immediately after the taking effect of this
Act and within the month of January of every
odd year, all banks, building and loan
associations, and trust corporations shall
forward to the Treasurer of the Philippines a
statement, under oath, of their respective
managing officers, of all credits and deposits
held by them in favor of persons known to be
dead, or who have not made further deposits
or withdrawals during the preceding ten years
or more, arranged in alphabetical order
according to the names of creditors and
depositors, and showing:
(a) The names and last known place of
residence or post office addresses of the
persons in whose favor such unclaimed
balances stand;
(b) The amount and the date of the outstanding
unclaimed balance and whether the same is
in money or in security, and if the latter, the
nature of the same;
(c) The date when the person in whose favor
the unclaimed balance stands died, if
known, or the date when he made his last
deposit or withdrawal; and
(d) The interest due on such unclaimed balance,
if any, and the amount thereof.
A copy of the above sworn statement shall be
posted in a conspicuous place in the premises
of the bank, building and loan association, or
trust corporation concerned for at least sixty days
from the date of filing thereof: Provided,
That immediately before filing the above
sworn statement, the bank, building and loan
association, and trust corporation shall
communicate with the person in whose favor
the unclaimed balance stands at his last
known place of residence or post office
address.
It shall be the duty of the Treasurer of the
Philippines to inform the Solicitor General from
time to time the existence of unclaimed balances
held by banks, building and loan associations,
and trust corporations. (Emphasis supplied.)
As seen in the afore-quoted provision, the law sets a
detailed system for notifying depositors of unclaimed balances. This
notification is meant to inform them that their deposit could be
escheated if left unclaimed. Accordingly, before filing a sworn
statement, banks and other similar institutions are under obligation to
communicate with owners of dormant accounts. The purpose of this
initial notice is for a bank to determine whether an inactive account
has indeed been unclaimed, abandoned, forgotten, or left without an
owner. If the depositor simply does not wish to touch the funds in the
meantime, but still asserts ownership and dominion over the dormant
account, then the bank is no longer obligated to include the account
in its sworn statement.[20] It is not the intent of the law to force
depositors into unnecessary litigation and defense of their rights, as
the state is only interested in escheating balances that have been
abandoned and left without an owner.
In case the bank complies with the provisions of the law
and the unclaimed balances are eventually escheated to the Republic,
the bank shall not thereafter be liable to any person for the same and
any action which may be brought by any person against in any bank
xxx for unclaimed balances so deposited xxx shall be defended by
the Solicitor General without cost to such bank.[21] Otherwise, should
it fail to comply with the legally outlined procedure to the prejudice
of the depositor, the bank may not raise the defense provided under
Section 5 of Act No. 3936, as amended.
Petitioner asserts[22] that the CA committed a reversible
error when it required RCBC to send prior notices to respondents
about the forthcoming escheat proceedings involving the funds
allocated for the payment of the Managers Check. It explains that,
pursuant to the law, only those whose favor such unclaimed balances
stand are entitled to receive notices. Petitioner argues that, since the
funds represented by the Managers Check were deemed transferred
to the credit of the payee upon issuance of the check, the proper party
entitled to the notices was the payee Rosmil and not respondents.
Petitioner then contends that, in any event, it is not liable for failing
to send a separate notice to the payee, because it did not have the
address of Rosmil. Petitioner avers that it was not under any
obligation to record the address of the payee of a Managers Check.
In contrast, respondents Hi-Tri and Bakunawa
allege[23] that they have a legal interest in the fund allocated for the
payment of the Managers Check. They reason that, since the funds
were part of the Compromise Agreement between respondents and
Rosmil in a separate civil case, the approval and eventual execution
of the agreement effectively reverted the fund to the credit of
respondents. Respondents further posit that their ownership of the
funds was evidenced by their continued custody of the Managers
Check.
An ordinary check refers to a bill of exchange drawn by a
depositor (drawer) on a bank (drawee),[24] requesting the latter to pay
a person named therein (payee) or to the order of the payee or to the
bearer, a named sum of money.[25] The issuance of the check does not
of itself operate as an assignment of any part of the funds in the bank
to the credit of the drawer.[26] Here, the bank becomes liable only
after it accepts or certifies the check.[27] After the check is accepted
for payment, the bank would then debit the amount to be paid to the
holder of the check from the account of the depositor-drawer.
There are checks of a special type
called managers or cashiers checks. These are bills of exchange
drawn by the banks manager or cashier, in the name of the bank,
against the bank itself.[28] Typically, a managers or a cashiers check
is procured from the bank by allocating a particular amount of funds
to be debited from the depositors account or by directly paying or
depositing to the bank the value of the check to be drawn. Since the
bank issues the check in its name, with itself as the drawee, the check
is deemed accepted in advance.[29] Ordinarily, the check becomes the
primary obligation of the issuing bank and constitutes its written
promise to pay upon demand.[30]
Nevertheless, the mere issuance of a managers check does
not ipso facto work as an automatic transfer of funds to the account
of the payee. In case the procurer of the managers or cashiers check
retains custody of the instrument, does not tender it to the intended
payee, or fails to make an effective delivery, we find the following
provision on undelivered instruments under the Negotiable
Instruments Law applicable:[31]
Sec. 16. Delivery; when effectual;
when presumed. Every contract on a negotiable
instrument is incomplete and revocable until
delivery of the instrument for the purpose of
giving effect thereto. As between immediate
parties and as regards a remote party other than a
holder in due course, the delivery, in order to be
effectual, must be made either by or under the
authority of the party making, drawing,
accepting, or indorsing, as the case may be; and,
in such case, the delivery may be shown to have
been conditional, or for a special purpose only,
and not for the purpose of transferring the
property in the instrument. But where the
instrument is in the hands of a holder in due
course, a valid delivery thereof by all parties
prior to him so as to make them liable to him is
conclusively presumed. And where the
instrument is no longer in the possession of a
party whose signature appears thereon, a valid
and intentional delivery by him is presumed until
the contrary is proved. (Emphasis supplied.)
Petitioner acknowledges that the Managers Check was procured by
respondents, and that the amount to be paid for the check would be
sourced from the deposit account of Hi-Tri.[32] When Rosmil did not
accept the Managers Check offered by respondents, the latter
retained custody of the instrument instead of cancelling it. As the
Managers Check neither went to the hands of Rosmil nor was it
further negotiated to other persons, the instrument remained
undelivered. Petitioner does not dispute the fact that respondents
retained custody of the instrument.[33]
Since there was no delivery, presentment of the check to
the bank for payment did not occur. An order to debit the account of
respondents was never made. In fact, petitioner confirms that the
Managers Check was never negotiated or presented for payment to
its Ermita Branch, and that the allocated fund is still held by the
bank.[34] As a result, the assigned fund is deemed to remain part of
the account of Hi-Tri, which procured the Managers Check. The
doctrine that the deposit represented by a managers check
automatically passes to the payee is inapplicable, because the
instrument although accepted in advance remains undelivered. Hence,
respondents should have been informed that the deposit had been left
inactive for more than 10 years, and that it may be subjected to
escheat proceedings if left unclaimed.
After a careful review of the RTC records, we find that it is
no longer necessary to remand the case for hearing to determine
whether the claim of respondents was valid. There was no contention
that they were the procurers of the Managers Check. It is undisputed
that there was no effective delivery of the check, rendering the
instrument incomplete. In addition, we have already settled that
respondents retained ownership of the funds. As it is obvious from
their foregoing actions that they have not abandoned their claim over
the fund, we rule that the allocated deposit, subject of the Managers
Check, should be excluded from the escheat proceedings. We
reiterate our pronouncement that the objective of escheat proceedings
is state forfeiture of unclaimed balances. We further note that there is
nothing in the records that would show that the OSG appealed the
assailed CA judgments. We take this failure to appeal as an
indication of disinterest in pursuing the escheat proceedings in favor
of the Republic.
WHEREFORE the Petition is DENIED. The 26
November 2009 Decision and 27 May 2010 Resolution of the Court
of Appeals in CA-G.R. SP No. 107261 are hereby AFFIRMED.
SO ORDERED.
FIRST DIVISION
G.R. No. 202651 August 28, 2013
LUCENA B. RALLOS, PETITIONER,
vs.
CITY OF CEBU, HONORABLE MICHAEL RAMA,
HONORABLE JOY AUGUSTUS YOUNG, HONORABLE
SISINIO ANDALES, HONORABLE RODRIGO
ABELLANOSA, HONORABLE ALVIN ARCILLA,
HONORABLE RAUL ALCOSEBA, HONORABLE MA. NIDA
CABRERA, HONORABLE ROBERTO CABARRUBIAS,
HONORABLE ALVIN DIZON, HONORABLE RONALD
CUENCO, HONORABLE LEA JAPSON, HONORABLE JOSE
DALUZ III, HONORABLE EDGARDO LABELLA,
HONORABLE MARGARITA OSMEÑA, HONORABLE
AUGUSTUS PE, HONORABLE RICHARD OSMEÑA,
HONORABLE NOEL WENCESLAO, HONORABLE
EDUARDO RAMA, JR., HONORABLE MICHAEL RALOTA,
HONORABLE JOHN PHILIP ECHAVEZ-PO, ATTY. JOSEPH
BERNALDEZ, ATTY. JUNE MARATAS, ATTY. JERONE
CASTILLO, ATTY. MARY ANN SUSON, ATTY. LESLIE ANN
REYES, ATTY. CARLO VINCENT GIMENA, ATTY.
FERDINAND CAÑETE, ATTY. ISMAEL GARAYGAY III,
ATTY. LECEL LLAMEDO AND ATTY. MARIE VELLE
ABELLA, RESPONDENTS.
RESOLUTION
REYES, J.:
One of the Heirs of Reverend Father Vicente Rallos (Heirs of Fr.
Rallos), Lucena B. Rallos1 (Lucena), is now before this Court with a
petition2 praying for the citation for indirect contempt of the City of
Cebu, Mayor Michael Rama (Mayor Rama), the presiding officer and
members of the Sangguniang Panlungsod, and lawyers from the
Office of the City Attorney (respondents). The instant petition is
anchored on Lucena's allegation that the respondents impede the
execution of final and executory judgments rendered by this Court in
G.R. Nos. 1796623 and 1941114. G.R. Nos. 179662 and 194111 were
among a string of suits which originated from a Complaint for
Forfeiture of Improvements or Payment of Fair Market Value with
Moral and Exemplary Damages5 filed in 1997 by the Heirs of Fr.
Rallos before the Regional Trial Court (RTC) of Cebu City, Branch 9,
against the City of Cebu relative to two parcels of land6 with a total
area of 4,654 square meters located in Barangay Sambag I which
were expropriated in 1963 for road construction purposes.
Antecedent Facts
At the root of the controversy are Lots 485-D and 485-E of the
Banilad Estate, Sambag I, Cebu City, which were expropriated to be
used as a public road in 1963. The Heirs of Fr. Rallos alleged that the
City of Cebu occupied the lots in bad faith sans the authority of the
former's predecessors-in-interest, who were the registered owners of
the subject parcels of land.
On June 11, 1997, the Heirs of Fr. Rallos filed before the RTC a
Complaint for Forfeiture of Improvements or Payment of Fair
Market Value with Moral and Exemplary Damages against the City
of Cebu.
In its Answer filed on October 6, 1997, the City of Cebu contended
that the subject parcels of land are road lots and are not residential in
character. They have been withdrawn from the commerce of men and
were occupied by the City of Cebu without expropriation
proceedings pursuant to Ordinance No. 416 which was enacted in
1963 or more than 35 years before the Heirs of Fr. Rallos instituted
their complaint.
On January 14, 2000, the RTC rendered a Decision,7 which found the
City of Cebu liable to pay the Heirs of Fr. Rallos just compensation
in the amount still to be determined by a board of three
commissioners, one each to be designated by the contending parties
and the court.
To assail the Decision rendered on January 14, 2000, the City of
Cebu filed a Motion for Reconsideration, which was however denied
by the RTC on February 5, 2001.8
The members of the Board of Commissioners thereafter submitted
their respective appraisal reports. On July 24, 2001, the RTC
rendered a Decision,9 the dispositive portion of which, in part, reads:
WHEREFORE, the [RTC] hereby renders
judgment, ordering [the City of Cebu] to pay [the
Heirs of Fr. Rallos] as just compensation for Lots
485-D and 485-E the amount of
Php34,905,000.00 plus interest at 12% per
annum to start 40 days from [the] date of this
decision and to continue until the whole amount
shall have been fully paid. [The City of Cebu] is
further ordered to pay [the Heirs of Fr. Rallos]
the following amounts:
1. Php50,000.00 as reimbursement for attorney's
fees;
2. Php50,000.00 as reimbursement for litigation
expenses.10
The contending parties both moved for the reconsideration of the
Decision rendered on July 24, 2001. The City of Cebu argued that the
reckoning period for the computation of just compensation should be
at least not later than 1963 when the said lots were initially occupied.
On the other hand, the Heirs of Fr. Rallos insisted that the amount of
just compensation payable by the City of Cebu should be increased
from Php 7,500.00 to Php 12,500.00 per sq m, the latter being the fair
market value of the subject lots. They also prayed for the award of
damages in the amount of Php 16,186,520.00, which was allegedly
the value of the loss of usage of the properties involved from 1963 to
1997 as computed by Atty. Fidel Kwan, the commissioner appointed
by the RTC.
On March 21, 2002, the RTC issued a Consolidated Order11 denying
the Motion for Reconsideration filed by the City of Cebu, but
modifying the Decision rendered on July 24, 2001. Through the said
order, the RTC increased the amount of just compensation payable to
the Heirs of Fr. Rallos from Php 7,500.00 to Php 9,500.00 per sq m.
The City of Cebu filed with the RTC a Notice of Appeal, which was
opposed by the Heirs of Fr. Rallos.
In the Decision12 rendered on May 29, 2007, which resolved the
appeal13 filed by the City of Cebu, the CA opined that the RTC erred
in holding that the reckoning point for the determination of the
amount of just compensation should be from 1997, the time the
complaint for just compensation was filed by the Heirs of Fr. Rallos.
Notwithstanding the foregoing, the CA still dismissed on procedural
grounds the appeal filed by the City of Cebu. The CA pointed out
that pursuant to Sections 214 and 9,15 Rule 41 and Section 1,16 Rule
50 of the Rules of Court, a record on appeal and not a notice of
appeal should have been filed before it by the City of Cebu to assail
the RTC's Decisions rendered on January 14, 2000 and July 24, 2001
and the Orders issued on February 5, 2001 and March 21, 2002.
The City of Cebu filed before this Court a Petition for Review on
Certiorari17 to assail the Decision rendered by the CA on May 29,
2007. This Court denied the same through a Minute
Resolution18 issued on December 5, 2007. The said Minute
Resolution was recorded in the Book of Entries of Judgments on
April 21, 2008.19
The Heirs of Fr. Rallos thereafter filed before the RTC a Motion for
Execution relative to the Decision rendered on July 24, 2001. They
claimed that in 2001, the City of Cebu paid them Php 34,905,000.00,
but there remained a balance of Php 46,546,920.00 left to be paid,
computed as of September 2, 2008. On its part, the City of Cebu
admitted still owing the Heirs of Fr. Rallos but only in the amount of
Php 16,893,162.08.20
On December 4, 2008, the RTC issued a writ of execution in favor of
the Heirs of Fr. Rallos, which in part, reads:
NOW, THEREFORE, you are hereby
commanded to serve a copy hereof to judgment
obligor City of Cebu and demand for the
immediate payment of Php 44,213,000.00, less
the partial payment of Php 34,905,000.00 plus
interest at 12% per annum to start 40 days from
date of the July 24, 2001 Decision and to
continue until the whole amount has been fully
paid; Php 50,000.00 as attorney's fees; and Php
50,000.00 as litigation expenses. x x x.21
Sheriff Antonio Bellones (Sheriff Bellones) then served upon the
City of Cebu a demand letter, dated December 4, 2008, and which
was amended on January 26, 2009, indicating that:
DEMAND is hereby made for the judgment
obligor City of Cebu x x x to facilitate the
prompt payment of the following: (a) just
compensation of Lots 485-D and 485-E in the
amount of Php 44,213,000.00 plus interest of
12% per annum starting 40 days from the July 24,
2001 Decision and to continue until the whole
amount has been duly paid less partial payment
of Php 34,905,000.00 x x x.22
The City of Cebu sought the reiteration of the directives stated in the
Writ of Execution issued on December 4, 2008 and the setting aside
of the amended demand letter served upon it by Sheriff Bellones.
On March 16, 2009, the RTC issued an Order23 denying the City of
Cebu's motion for the reiteration of the writ of execution. The RTC,
however, set aside the demand letter served upon the City of Cebu by
Sheriff Bellones and interpreted the directives of the writ of
execution issued on December 4, 2008 as:
 [T]he entire amount of Php 44,213,000.00 shall
be subjected to a 12% interest per annum to start
40 days from the date the decision on July 24,
2001 [was rendered] until the amount of Php
34,905,000.00 was partially paid by the City of
Cebu. After the payment by the City of Cebu of a
partial amount, the balance shall again be
subjected to 12% interest until the same shall
have been fully paid.24
The Heirs of Fr. Rallos assailed the abovementioned order on the
ground that it effectively modified the final and executory Decision
rendered on July 24, 2001. They likewise sought the application of
Article 221225 of the New Civil Code and jurisprudence so as to
entitle them to legal interest on the interest due to them pursuant to
the Decision rendered on July 24, 2001. In the Order issued on May
20, 2009, the RTC did not favorably consider the preceding claims.
A Petition for Certiorari and Mandamus26 was then filed by the Heirs
of Fr. Rallos before the CA to challenge the Orders issued by the
RTC on March 16, 2009 and May 20, 2009. The CA granted the
petition after finding that the two assailed orders effectively modified
the final and executory disposition made by the RTC on March 21,
2002. The CA likewise ruled that the case calls for the application of
Article 2212 of the New Civil Code, hence, it directed the City of
Cebu to pay interest at the rate of 12% per annum upon the interest
due, to be computed from the date of the filing of the complaint until
full satisfaction of the obligation. The CA stated:
Note that the final and executory consolidated
decision of July 24, 2001 as modified by the final
and executory order of March 21, 2002, clearly
directed herein respondent Cebu City to pay
interest at the rate of 12% per annum based on
the amount of [Php]9,500.00 per square meter
starting 40 days from the date of the decision and
to continue until the entire amount shall have
been fully paid. Yet, the assailed orders x x x,
now directed that the 12% interest per annum be
paid on the declining balance contrary to the
directive in the final and executory judgment x x
x.
xxxx
x x x [The Heirs of Fr. Rallos] are without a
doubt entitled to 12% interest per annum on the
interest due from finality until its satisfaction x x
x. The same is proper even if not expressly stated
in the final and executory judgment x x x.27
The City of Cebu assailed the Decision in CA-G.R. SP No. 04418 by
way of a Petition for Review on Certiorari28filed before this Court.
The same was denied through a Minute Resolution 29 issued on
December 6, 2010. The said resolution was recorded in this Court's
Book of Entries of Judgments on June 16, 2011. 30
The Heirs of Fr. Rallos then moved for execution relative to Civil
Case No. CEB-20388. The RTC granted the motion through the
Order31 issued on September 23, 2011.
The City of Cebu thereafter filed the following: (1) Urgent Omnibus
Motions to Quash the Writ of Execution, and to Set Aside the Notice
of Garnishment; (2) Supplemental Urgent Omnibus Motions to
Quash the Writ of Execution, and to Set Aside the Notice of
Garnishment; (3) Motion for Issuance of Status Quo Order Pending
Resolution of [the City of Cebu's] Urgent Omnibus Motions to
Quash the Writ of Execution and to Set Aside the Notice of
Garnishment;32 and (4) Motion to Strike out or Expunge Urgent
Omnibus Motion and Supplemental Urgent Omnibus Motion with
Manifestation and Reservation. The RTC denied the four motions in
the Order33 issued on October 26, 2011. The RTC's Order34 issued on
January 26, 2012 likewise did not favorably consider the motion for
reconsideration filed by the City of Cebu. The RTC emphasized that
the Convenio35 already existed way back in 1940, hence, it cannot be
considered as a supervening event which transpired after the
judgment in Civil Case No. CEB-20388 had become final and
executory. The City of Cebu no longer filed any motion or action to
assail the RTC Orders issued on October 26, 2011 and January 26,
2012.
Meanwhile, in response to Mayor Rama's query, the Commission on
Audit's (COA) Regional Director Delfin P. Aguilar wrote the former
a letter36 dated October 27, 2011 opining that:
Under Administrative Circular No.
10-200037 issued by the Supreme Court, it was
clearly stated that the prosecution, enforcement
or satisfaction of state liability must be pursued
in accordance with the rules and procedures laid
down in Presidential Decree No. 1445, otherwise
known as the Government Auditing Code of the
Philippines, wherein it is provided that all money
claims against the government must first be filed
with the [COA]. x x x.
Clearly, based on the aforementioned Supreme
Court issuance and in the line with the rulings of
the Supreme Court in various cases against
garnishment of public funds or property to satisfy
money judgment against the government, we are
of the view that the issuance of the writ of
execution for the satisfaction of the money
judgment against the City of Cebu may be
considered beyond the powers of the court.
On the other hand, Section 1, Rule VIII of the
2009 Revised Rules of Procedure of the COA
provides that a money judgment is considered as
a money claim which is within the original
jurisdiction of the Commission Proper (CP) of
the COA and which shall be filed directly with
the Commission Secretary x x x.38
On February 27, 2012, the RTC issued another Order39 directing
under pain of contempt the Cebu branches of Philippine Veterans
Bank and Postal Savings Bank to release to the concerned RTC
sheriff certifications indicating the correct account names and
numbers maintained by the City of Cebu in the said banks. The Order
also directed the Sangguniang Panlungsod to enact an appropriation
ordinance relative to the money judgment. Upon presentment of the
ordinance, the above-mentioned banks were expected to release the
amounts stated therein to satisfy the judgment rendered in favor of
the Heirs of Fr. Rallos. The City of Cebu filed a Motion for
Reconsideration40 against the Order dated February 27, 2012.
Even before the Motion for Reconsideration to the Order dated
February 27, 2012 can be resolved by the RTC, the City of Cebu
filed before the CA a Petition for Annulment of Final Decision/s and
Order/s with prayer for the issuance of injunctive reliefs.41 The City
of Cebu claimed that the act of the Heirs of Fr. Rallos of suppressing
the existence of the Convenio amounted to extrinsic fraud which
would justify the annulment of the RTC's decisions and orders
relative to Civil Case No. CEB-20388. In praying for the issuance of
injunctive reliefs, the City of Cebu stressed that it had already paid
the Heirs of Fr. Rallos Php 56,196,369.42 for a 4,654 sq m property
or at a price of Php 12,074.85 per sq m. Further, the procedures
prescribed in Presidential Decree (P.D.) No. 1445, this Court's
Administrative Circular (Admin. Circular) No. 10-2000 and Rule
VIII of the COA's Revised Rules of Procedure were not yet complied
with, hence, public funds cannot be released notwithstanding the
rendition of the decisions and issuance of the orders by the RTC
relative to Civil Case No. CEB-20388.
On April 13, 2012, the CA, through a Resolution,42 granted the City
of Cebu's application for the issuance of a temporary restraining
order (TRO) relative to CA-G.R. SP No. 06676. Subsequently, a writ
of preliminary injunction was likewise issued through the
Resolution43 dated June 26, 2012.
Lucena then filed the following petitions for indirect contempt, all of
which in relation with Civil Case No. CEB-20388:
Docket
Title Date Filed Forum
Number
Lucina C.
Rallos v. SCA No. October 3, RTC of Cebu
Mayor CEB-38121 2011 City Branch 10
Michael Rama,
Eileen
 making execution unjust or inequitable, or when the judgment debt
Mangubat and
has been paid or satisfied; (f) it would unduly overburden the City of
Doris
Cebu to pay Php 133,469,962.55 for the subject lots the huge
Bongac44
portions of which are now occupied by settlers and establishments
claiming to be owners, practically leaving a very small and
Lucina B. insignificant area for use; (g) in the case of City of Caloocan v. Hon.
Rallos v. Allarde,53 this Court ruled that government funds maintained in any
Nicanor official depository may not be garnished in the absence of a
Valles, RTC of Cebu corresponding appropriation as required by law; and (h) the
SCA No. October 25,
Ricardo City, Branch Sangguniang Panlungsod cannot be compelled to pass an
CEB-38196 2011
Balbido, Jr., 14 appropriations ordinance to satisfy the claims of the Heirs of Fr.
and Mayor Rallos for to do otherwise would be to intrude into the exercise of a
Michael discretionary authority to decide a political question.
Rama45
This Court's Disquisition
Lucina B.
Rallos v. The instant petition lacks merit.
SCA No. November 4, RTC of Cebu
Philippine
CEB-3812 2011 City, Branch 7
Veterans Bank, Lucena engaged in forum shopping.
et al.
"Forum shopping is the act of litigants who repetitively avail
Lucina B. themselves of multiple judicial remedies in different fora,
Rallos v. City RTC of Cebu simultaneously or successively, all substantially founded on the same
SCA No. December 6,
of Cebu, City, Branch transactions and the same essential facts and circumstances; and
CEB-38292 2011
Michael Rama, 14 raising substantially similar issues either pending in or already
et al.46 resolved adversely by some other court; or for the purpose of
increasing their chances of obtaining a favorable decision, if not in
one court, then in another."54
Lucena B.
Rallos v.
Honorable "Forum shopping exists when the elements of litis pendentia are
Justices present or where a final judgment in one case will amount to res
Gabriel T. judicata in another. Litis pendentia requires the concurrence of the
G.R. No. following requisites: (1) identity of parties, or at least such parties as
Ingles, Pamela July 19, 2012 This Court
202515 those representing the same interests in both actions; (2) identity of
Ann Abella
Maximo and rights asserted and reliefs prayed for, the reliefs being founded on the
Carmelita same facts; and (3) identity with respect to the two preceding
Salandanan particulars in the two cases, such that any judgment that may be
Manahan47 rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other case."55

The instant G.R. No.

August 1, 2012 This Court In the Verification and Non-Forum Shopping Certification56 attached
petition 202651
to the instant petition and executed by Lucena, she admitted that
there are five other pending actions for indirect contempt which she
filed relative to Civil Case No. CEB-20388. She, however, claims
Issue and the Contending Parties' Claims that the issues in the other five petitions are different from that raised
before this Court now.
Lucena anchors the instant petition on the sole issue of whether or
not the City of Cebu, Mayor Rama, the presiding officer and Lucena's claim cannot be sustained.
members of the Sangguniang Panlungsod and the lawyers from the
Office of the City Attorney committed several acts of indirect A comparison of the instant petition with SCA No.
contempt all geared towards preventing the execution of final and CEB-3829257 filed before the RTC of Cebu City, Branch 14 follows:
executory judgments rendered by this Court in G.R. Nos. 179662 and
194111.
Instant Petition SCA No. CEB-38292
Lucena enumerates the allegedly contumacious acts of the
respondents as the filing: (a) with the CA of a Petition for Annulment Nature of Petition for Indirect Petition for Indirect
of Final Decision/s and Order/s48 again on the basis of the Convenio, Action Contempt of Court Contempt
which was already presented and considered in the proceedings
before the RTC, and despite the finality of the decisions and orders
rendered or issued relative to Civil Case No. CEB-20388; and (b) of Petitioner Lucena B. Rallos Lucina B. Rallos
several motions49 before the RTC in Civil Case No. CEB-20388 for
the purpose of preventing or delaying the execution of decisions and City of Cebu City of Cebu
orders which had already attained finality. Mayor Michael Rama Mayor Michael Rama
City Councilors City Councilors
The respondents, on the other hand, seek the dismissal of the instant Joy Augustus Young Joy Augustus Young
action contending that: (a) the rules on litis pendentia and forum Sisinio Andales Sisinio Andales
shopping bar this Court from giving due course to Lucena's petition Rodrigo Abellanosa Rodrigo Abellanosa
since there are five other contempt proceedings filed involving the Alvin Arcilla Alvin Arcilla
same issues and parties; (b) the injunctive writs granted to the City of Raul Alcoseba Raul Alcoseba
Cebu by the CA in CA-G-R. SP No. 06676 relative to the execution Ma. Nida Cabrera Ma. Nida Cabrera
of the decisions and orders in Civil Case No. CEB-20388 rendered Respondents Roberto Cabarrubias Roberto Cabarrubias
the instant action as moot and academic; (c) the legal remedies they Alvin Dizon Alvin Dizon
availed of were all pursued to protect public funds; (d) the RTC Ronald Cuenco Ronald Cuenco
sheriff, in attempting to execute the decisions and orders in Civil Lea Japson Lea Japson
Case No. CEB-20388, miserably failed to comply with the Jose Daluz III Jose Daluz III
requirements provided for by law, to wit, Section 305(a) 50 of the Edgardo Labella Edgardo Labella
Local Government Code, this Court's Admin. Circular No. Margarita Osmena Margarita Osmena
10-2000,51 P.D. No. 1445 and Rule VIII of COA's Revised Rules of Augustus Pe Augustus Pe
Procedure; (e) in Parel v. Heirs of Simeon Prudencio, 52 this Court Richard Osmena Richard Osmena
declared that a writ of execution may be assailed when it varies the Noel Wenceslao Noel Wenceslao
judgment, where there has been a change in the situation of parties
 to compliance with the requirements provided for by law to protect
Eduardo Rama, Jr. Eduardo Rama, Jr.
public funds.
Michael Ralota Michael Ralota
John Philip Echavez-Po John Philip
City Attorney Echavez-Po Lucena avers that the respondents willfully and maliciously defy the
Atty. Joseph Bernaldez execution of final and executory decisions and orders rendered or
Atty. Jun Maratas issued relative to Civil Case No. CEB-20388.
Atty. Jerone Castillo
Atty. Mary Ann Suson Such averment is untenable.
Atty. Leslie Ann Reyes
Atty. Carlo Vincent The respondents allege and Lucena does not refute, that the City of
Gimena Cebu had already paid the Heirs of Fr. Rallos Php 56,196,369.42 for
Atty. Ferdinand Canete a 4,654 sq m property or at a price of Php 12,074.85 per sq m. The
Atty. Ismael Garaygay controversy remains and the parties resort to all legal maneuverings
III because the Heirs of Fr. Rallos obdurately insist that they are still
Atty. Lecel Llamedo entitled to collect from the City of Cebu a balance of Php
Atty. Marie Velle 133,469,962.55.
Abella
The Heirs of Fr. Rallos are bent on collecting the amount allegedly
Prayer Respondents be Respondents, except still unpaid by the City of Cebu in accordance with the computations
declared guilty of the City of Cebu, be stated in the decisions and orders in Civil Case No. CEB-20388.
indirect contempt in imprisoned until they However, the Heirs of Fr. Rallos are impervious to the requisites laid
relation to their perform the said act of down by law in enforcing their claims. The requisites are two-fold as
non-compliance with complying or causing discussed below.
the directives contained the compliance with
Prayer in the dispositive the specific directives An appropriation ordinance should be passed prior to the
portion of the contained in the disbursement of public funds.
Consolidated Order dispositive portion of
issued on March 21, the final and executory
"Even though the rule as to immunity of a state from suit is relaxed,
2002 by the RTC in Consolidated Order
the power of the courts ends when the judgment is rendered.
Civil Case No. dated March 21,
Although the liability of the state has been judicially ascertained, the
CEB-20388.58 2002.59
state is at liberty to determine for itself whether to pay the judgment
or not, and execution cannot issue on a judgment against the state.
Such statutes do not authorize a seizure of state property to satisfy
In Arevalo,60 this Court enumerated the three requisites of litis judgments recovered, and only convey an implication that the
pendentia. There is a confluence of these requisites relative to the legislature will recognize such judgment as final and make provision
instant petition and SCA No. CEB-38292. for the satisfaction thereof."63

Litis pendentia does not require the exact identity of parties involved
in the actions. Although the lawyers from the Office of the City
Attorney are parties herein but are not made respondents in SCA No.
CEB-38292, they do not in any way represent any interest distinct or
separate from that of the City of Cebu and the public officers
involved. Further, the instant petition superficially makes reference
to the Minute Resolutions rendered by this Court in G.R. Nos.
179662 and 194111 which Lucena claims had lapsed into finality and
should thus be executed. However, stripped of the unnecessary
details, the reliefs saliently sought in both the instant petition and
SCA No. CEB-38292 are founded on the same set of facts, to wit, the
alleged non compliance by the respondents with the directives
contained in the dispositive portion of the Consolidated Order issued
by the RTC on March 21, 2002 relative to Civil Case No.
CEB-20388. Finally, citation for indirect contempt in either the
instant petition or SCA No. CEB-38292 would amount to res judicata
in the other considering the identities of the parties and issues
involved.
Since the elements of litis pendentia concur in the instant petition and
SCA No. CEB-38292, this Court so holds Lucena guilty of forum
shopping.
"[T]he grave evil sought to be avoided by the rule against forum
shopping is the rendition by two competent tribunals of two separate
and contradictory decisions. To avoid any confusion, this Court
adheres strictly to the rules against forum shopping, and any
violation of these rules results in the dismissal of a case."61
Further, "once there is a finding of forum shopping, the penalty is
summary dismissal not only of the petition pending before this Court,
but also of the other case that is pending in a lower court. This is so
because twin dismissal is a punitive measure to those who trifle with
the orderly administration of justice."62
Section 4(1) of P.D. No. 1445 and Section 305(a) of the Local
Government Code both categorically state that no money shall be
paid out of any public treasury or depository except in pursuance of
an appropriation law or other specific statutory authority. Based on
considerations of public policy, government funds and properties
may not be seized under writs of execution or garnishment to satisfy
judgments rendered by the courts and disbursements of public funds
must be covered by the corresponding appropriation as required by
law.64
In the case at bar, no appropriation ordinance had yet been passed
relative to the claims of the Heirs of Fr. Rallos. Such being the case,
the respondents, as public officers, are acting within lawful bounds in
refusing the execution of the decisions and orders in Civil Case No.
CEB-20388.
Despite the rendition of a final and executory judgment validating a
money claim against an agency or instrumentality of the Government,
its filing with the COA is a sine qua non condition before payment
can be effected.
Section 26 of P.D. No. 1445 states that the COA has jurisdiction to
examine, audit and settle all debts and claims of any sort due from or
owing to the Government or any of its subdivisions, agencies and
instrumentalities. Under Section 5(b), Rule II of COA's Revised
Rules of Procedure, local government units are expressly included as
among the entities within the COA's jurisdiction. Section 2,65 Rule
VIII lays down the procedure in filing money claims against the
Government. Section 4, Rule X provides that any case brought to the
COA shall be decided within 60 days from the date it is submitted for
decision or resolution. Section 1, Rule XII allows the aggrieved party
to file a petition for certiorari before this Court to assail any decision,
order or resolution of the COA within 30 days from receipt of a copy
thereof.

Even if in the higher interest of justice, this Court were to be
exceptionally liberal and gloss over Lucena's act of forum shopping,
the instant petition would still be susceptible to dismissal.
While this Court does not intend to downplay the rights accruing to
the owners of properties expropriated by the government, it bears
stressing that the exercise and enforcement of those rights are subject
This Court, in the case of University of the Philippines v.
Dizon,66 thus held that despite the existence of a final and executory
judgment validating the claim against an agency or instrumentality of
the Government, the settlement of the said claim is still subject to the
primary jurisdiction of the COA. Ineluctably, the claimant has to first
seek the COA's approval of the monetary claim.67
Without compliance by Lucena and the Heirs of Fr. Rallos with the
provisions of P.D. No. 1445 and the COA's Revised Rules of
Procedure, their lamentations that the respondents are unjustly
refusing the execution of the decisions and orders in Civil Case No.
CEB-20388 do not hold any water.

IN VIEW OF THE FOREGOING, the instant petition is

DISMISSED. Further, on account of Lucena Rallos' act of forum
shopping, the Regional Trial Court of Cebu City, Branch 14, is
likewise directed to dismiss her petition for contempt, docketed as
SCA No. CEB-38292, which she filed against the respondents.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

WE CONCUR: