Jurisprudence

G.R. No.

SUPREME COURT
Manila

EN BANC

DECISION

May 31, 2006

G.R. No.
, ,
vs.
, .

, J.:

Assailed and sought to be set aside in this petition for review under Rule 45 of the Rules of Court with prayer for a temporary restraining order (TRO) and writ of preliminary mandatory injunction, are the following issuances of the Court of Appeals (CA) in CA-G.R. SP No. 72590, to wit:

1. Decision1 dated November 22, 2002, affirming an earlier decision of the Regional Trial Court (RTC) of Quezon City declaring the appointment of petitioner Sr. Supt. Josue G. Engaño to the position of Chief, Bureau of Jail Management and Penology (BJMP), as null and void for petitioner?s failure to meet the minimum qualification standards set by the Civil Service Commission (CSC); and

2. Resolution2 dated January 21, 2003, denying petitioner’s motion for reconsideration.

Stripped to the bare essentials, the material facts may be stated as follows:

Private respondent Arturo W. Alit occupied, since July 1999, the position of Jail/Chief Superintendent, Deputy Chief, Bureau of Jail Management and Penology (BJMP), Department of the Interior and Local Government (DILG). On March 29, 2001, he was designated Officer-in-Charge (OIC) of the Bureau in view of the resignation of then BJMP Director, P/Maj. Gen. Aquilino G. Jacob, Jr.

Petitioner Josue G. Engaño, on the other hand, held during the period material the position of Jail Senior Superintendent of the BJMP.

Pursuant to Memorandum Circular No. 4 of the Office of the President, the Chief Directorate for Personnel of the BJMP submitted to the DILG Selection Board for Senior Executive Positions (SB-SEP) a seniority lineal list from which were culled the names of eligible candidates for the position of Director, BJMP.

Of the eleven (11) candidates interviewed, the Board ranked private respondent Alit first, being the only one who fully met the CSC Qualification Standards for the position in question, more particularly, the one-year experience requirement as Chief Superintendent. Consequently, then DILG Secretary Jose D. Lina recommended the appointment of private respondent Alit to the interested position.

However, despite Secretary Lina’s recommendation, the President, on September 6, 2001, appointed petitioner Engaño instead.3 After being sworn into office, Engaño appeared to have assumed the post of BJMP Chief on September 27, 2001.4

On September 28, 2001, in the Regional Trial Court (RTC) of Quezon City, private respondent Alit instituted quo warranto proceedings against petitioner Engaño claiming that the latter?s appointment was highly irregular and illegal due to his lack of the minimum qualifications required for the position.

After due hearing, the trial court denied private respondent Alit’s plea for a TRO and set the case for hearing on his application for prohibition and injunction.

In a Memorandum5 of October 2, 2001, the Executive Secretary informed Secretary Lina that petitioner Engaño’s appointment as head of the BJMP was being held in abeyance pending resolution of the legal issues raised by the DILG involving his qualifications.

Subsequently, the trial court, in an Order6 dated October 8, 2001, directed the Office of the President to take a definite stand as to whether or not it is appointing petitioner Engaño as permanent BJMP Chief or retaining private respondent Alit as OIC thereof. In the same order, the trial court additionally directed as follows:

In the interest of public service and in the exercise of judicial activism, a cease and desist order is hereby issued restraining both parties, Arturo W. Alit and Josue G. Engaño from performing and discharging the duties of the Office of Director BJMP, and in order not to prejudice the operation and control of the said office, the Court hereby designate[s] Jose Lina in his capacity as Secretary of DILG to perform the duties of the Director, BJMP for a period of twenty (20) days.

In the meantime, set the Application for Preliminary Injunction and Prohibition and Quo Warranto on October 24, 2001 at 8:30 A.M.7

In compliance with the aforequoted directive, Secretary Lina assumed the duties and functions of Director, BJMP.

Eventually, the trial court rendered on October 29, 2001 judgment in favor of private respondent Alit, disposing as follows:

Viewed from the foregoing considerations it appears that [petitioner] Engaño does not possess the minimum qualifications required by law for the position of Director, Bureau of Jail Management and Penology (BJMP) and as such his appointment thereto is hereby declared null and void. There being no valid appointment to the contested position [respondent] Alit’s prior designation as Officer-in-Charge, Bureau of Jail Management and Penology (BJMP) remains unless revoked by the President or a permanent and valid appointment is made.

SO ORDERED.8 (Word in bracket added.)

Following the trial court?s denial of his motion for reconsideration, petitioner Engaño elevated the case to the CA whereat his appellate recourse was docketed as CA-G.R. SP No. 72590.

As stated at the outset hereof, the CA, in its decision9 of November 22, 2002, affirmed that of the trial court. With his motion for reconsideration having been denied by the appellate court in its equally challenged Resolution of January 21, 2003, petitioner is now with us via this petition for review with prayer for a TRO and writ of preliminary injunction.

In its Resolution of March 17, 2003, the Court issued a TRO enjoining public respondent DILG Secretary Jose D. Lina, Jr., his agents, representatives, or anyone acting in his behalf, from enforcing DILG Department Circular No. 2001-25 and performing the duties and functions as concurrent Director of the BJMP.

Meanwhile, May 13, 2003 marked petitioner Engaño’s last day of government service, he having reached compulsory retirement age as of that date. Subsequently, President Gloria Macapagal-Arroyo appointed private respondent Alit BJMP Director.

Petitioner Engaño, in his Memorandum, raises eight issues, foremost of which are the following:

1.) Whether the prerogative of the President xxx to appoint persons of his/her trust and confidence to certain positions in government duly classified as presidential appointees can be declared null and void by the court;

2.) Whether a nominee to a presidential appointive position can validly maintain an action for quo warranto against the person appointed thereto by the President;

3.) Whether a mere nominee can acquire a vested right to an appointment to the contested post upon a court finding that the person appointed lacks the minimum qualifications;

4.) Whether the compulsory retirement of petitioner Engaño has rendered this petition moot and academic;

5.) Whether petitioner Engaño is entitled to salary differential, emoluments, rata, allowances, rank of director and all benefits attached to the position of Chief, BJMP, being unlawfully and arbitrarily deprived by public respondent DILG Secretary Lina; and

6.) Whether petitioner Engaño is entitled to moral, nominal, exemplary and corrective damages as provided particularly in Articles 2218, 2219, 2220, 2221, 2222, 2223, and 2229 of the Civil Code due to the alleged deliberate, willful, arbitrary, baseless, unfounded and wrongful acts of private respondent Alit and public respondent DILG Secretary Lina.

The petition must fail.

Indeed, on issue No. 4 alone, the present petition must be dismissed for having become moot and academic due to supervening events, namely, the compulsory retirement of petitioner Engaño from the service, and the appointment of private respondent Alit as Director of the BJMP. Since then, Alit has also taken his oath of office and has assumed and performed the duties of the position.

Time and again, courts have refrained from even expressing an opinion in a case where the issues have become moot and academic, there being no more justiciable controversy to speak of, so that a determination thereof would be of no practical use or value.10

The suit commenced at the RTC was one for quo warranto, which, by its nature, is an action against the usurpation of a public office or position.11 The issue thereat thus turns on who, between petitioner Engaño and private respondent Alit, is entitled to the position of BJMP Director. Petitioner Engaño having retired in the meantime, and private respondent Alit having been subsequently appointed by President Gloria Macapagal-Arroyo to the contested position, all questions on the validity of the previous appointment of Engaño have become moot.

In his Memorandum, petitioner raised two additional issues, namely, his entitlement to salary differential, representation and transportation allowances (RATA), and other benefits which he allegedly lost due to the loss of the contested position, as well as damages owing to the alleged deliberate, arbitrary and wrongful acts of both the public and private respondents.

Petitioner?s money claim allegedly arising from his failure to assume the position of Director, BJMP and damages is untenable.

A public office is not a property within the context of the due process guarantee of the Constitution. There is no such thing as a vested interest in a public office, let alone an absolute right to hold it. Except constitutional offices which provide for special immunity as regards salary and tenure, no one can be said to have any vested right in a public office or its salary.12 It is only when salary has already been earned or accrued that said salary becomes private property and entitled to the protection of due process.

The right to salary and other emoluments arising from public employment is based on one?s valid appointment or election to the office itself and accrues from the date of actual commencement of the discharge of official duties. As may be recalled, petitioner Engaño, albeit lacking in qualifications, was nonetheless appointed as Director of the BJMP and appeared to have entered upon the performance of the duties of the position from September 27, 2001 to October 2, 2001 when the appointing authority recalled his appointment owing to some legal issues respecting his qualification. Subsequently, however, the appointment was peremptorily nullified. In all, therefore, petitioner Engano served as head of the BJMP for six (6) days only, but as a de facto officer at best. And while a de facto officer is entitled to some form of compensation, respondents Secretary Lina and Alit cannot be held personally liable for petitioner?s claim for salary, RATA and other benefits.13 The BJMP cannot also be compelled to pay since it was not a party in the petition below for quo warranto, nor in the appellate proceedings before the CA.14

Neither is petitioner Engaño entitled to any damages. As it were, the records are bereft of any showing that either respondent Alit or Secretary Lina acted in a willful, arbitrary, baseless, or wrongful manner, as Engaño alleges. It is obvious that both, in good faith, believed that Engaño was unqualified for the contested position, as was subsequently found to be the case by the trial court and then by the CA. Secretary Lina’s assumption of the post in a temporary capacity during the pendency of the quo warranto suit was valid as it was, in fact, pursuant to the trial?s court order. Private respondent Alit, needless

to stress, was also well within his rights in challenging petitioner’s eligibility to the post.

Further, the two courts below were correct in asserting their respective jurisdictions over void appointments. While an appointment is an essentially discretionary executive power, it is subject to the limitation that the appointee should possess none of the disqualifications but all the qualifications required by law.15 Where the law prescribes certain qualifications for a given office or position, courts may determine whether the appointee has the requisite qualifications, absent which, his right or title thereto may be declared void.16

WHEREFORE, this petition is DENIED.

Cost against petitioner.

SO ORDERED.

CANCIO C. GARCIAAssociate Justice

WE CONCUR:

REYNATO S. PUNOAssociate JusticeChairperson

ANGELINA SANDOVAL-GUTIERREZAssociate Justice

RENATO C. CORONAAsscociate Justice

ADOLFO S. AZCUNAAssociate Justice

A T T E S T A T I O N

I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.

REYNATO S .PUNOAssociate JusticeChairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

ARTEMIO V. PANGANIBANChief Justice

Footnotes

1 Penned by Associate Justice Martin S. Villarama, Jr. with Associate Justices Godardo A. Jacinto and Mario L. Guarina III, concurring; Rollo, pp. 45-57.

2 Id. at 60.

3 See Annex "G" of the Petition; Id. at 127.

4 See Annex "H" of the Petition; Id. at 129.

5 Annex "K" of the Petition; Id. at 135.

6 Annex "N" of the Petition; Id. at 142-143.

7 Ibid, p. 143.

8 Annex "P," Petition, Rollo pp. 147-153.

9 Supra note 1.

10 Garcia v. Commission on Elections, 258 SCRA 754, G.R. No. 121139, July 12, 1996; Jaafar v. Commission on Elections, 304 SCRA 672, G.R. No. 134188, March 15, 1999.

11 Section 1, Rule 66, The Rules of Court.

12 National Land Titles and Deeds Registration Administration v. Civil Service Commission, G.R. No. 84301, April 7, 1993, 221 SCRA 145.

13 Mendoza v. Allas, G.R. No. 131977, February 4, 1999, 302 SCRA 623.

14 Ibid.

15 Luego v. Civil Service Commission, G.R. No. L-69137, August 5, 1986, 143 SCRA 327; Central Bank v. Civil Service Commission, G.R. Nos. 80455-56, April 10, 1989, 171 SCRA 744.

16 Javellana v. Executive Secretary, G.R. No. L-36142, March 31, 1973, 50 SCRA 30, 87.

G.R. No.

SUPREME COURT
Manila

EN BANC

DECISION

May 31, 2006

G.R. No.
, ,
vs.
, .

, J.:

Alfonso Magpantay (respondent) was employed as a machine operator with Genuino Ice Company, Inc. (petitioner) from March 1988 to December 1995. On November 18, 1996, respondent filed against petitioner a complaint for illegal dismissal with prayer for moral and exemplary damages.1 In his Position Paper, respondent alleged that he was dismissed from service effective immediately by virtue of a memorandum, after which he was not allowed anymore to enter the company premises. Respondent bewailed that his termination from employment was done without due process.2

Petitioner countered that he was not illegally dismissed, since the dismissal was based on a valid ground, i.e., he led an illegal strike at petitioner?s sister company, Genuino Agro Industrial Development Corporation, which lasted from November 18 to 22, 1995, resulting in big operation losses on the latter?s part. Petitioner also maintained that respondent?s dismissal was made after he was accorded due process.3

Respondent replied, however, that assuming that he led such illegal strike, he could not be liable therefore because it was done in petitioner?s sister company which is a separate and distinct entity from petitioner.4

Petitioner initially claimed that respondent?s acts were tantamount to serious misconduct or willful disobedience, gross and habitual neglect of duties, and breach of trust. Subsequently, petitioner amended its position paper to include insubordination among the grounds for his dismissal, since it came out during respondent?s cross-examination, and the matter was reported only after the new personnel manager assumed his position in August 1996.5

On August 14, 1998, the Labor Arbiter of the National Labor Relations Commission (NLRC) dismissed the case for lack of merit6 finding that petitioner had valid cause to dismiss respondent.

Respondent appealed from the Labor Arbiter?s Decision. The NLRC, in its Decision dated June 30, 1999, sustained the findings of the Labor

Arbiter and denied the appeal for lack of merit.7

Respondent filed a motion for reconsideration of the NLRC Decision, which was denied in a Resolution dated August 31, 1999.8

On October 29, 1999, entry of judgment was made on the NLRC Resolution dated August 31, 1999.9

On February 7, 2000, respondent filed a special civil action for certiorari with the Court of Appeals (CA), docketed as CA-G.R. SP No. 57105. Respondent?s counsel stated that it was on December 20, 1999 that he received the NLRC Resolution dated August 31, 1999.10

In his petition before the CA, respondent alleged that the Labor Arbiter committed an error in ruling that his dismissal was for a valid cause; and reiterated his claim that his dismissal was made without due process.11

Petitioner filed its Comment, contending that the petition was filed out of time, considering that contrary to respondent?s claim that the NLRC Resolution dated August 31, 1999 was received on December 20, 1999, it was actually received on September 15, 1999, as shown in the registry return card. Petitioner also reiterated its arguments that respondent was dismissed for cause and with due process.

On August 3, 2000, the CA12 rendered the assailed Decision granting the petition and declaring respondent?s dismissal as illegal. The dispositive

portion of the Decision reads:

WHEREFORE, the petition is GRANTED. The dismissal of petitioner is hereby declared as illegal. Respondent company is ORDERED to pay to petitioner separation pay and full backwages. Let this case be remanded to the labor arbiter for the computation of the aforesaid awards.

SO ORDERED.13

Petitioner filed a motion for reconsideration which the CA denied per its Resolution dated March 16, 2001.14

Hence, herein petition for review on certiorari under Rule 45 of the Rules of Court stating the following issues:

1. Whether or not the Court of Appeals erred and committed grave abuse of discretion in giving due course to the respondent?s Petition for Certiorari?

2. Whether or not the Court a quo erred and committed grave abuse of discretion in declaring that the respondent was illegally dismissed from employment?

3. Whether or not the Court a quo erred and committed grave abuse of discretion in ordering the payment of separation pay and full backwages to the respondent?15

At the outset, it should be stated that under Rule 45 of the Rules of Court, only questions of law may be raised, the reason being that this Court is not a trier of facts. It is not for this Court to reexamine and reevaluate the evidence on record.16 However, considering that the CA came up with an opinion different from that of the Labor Arbiter and the NLRC, the Court is

now constrained to review the evidence on record.17

On the first issue, petitioner argues that the CA should have dismissed respondent?s petition for having been filed out of time. According to petitioner, since the registry return receipt shows that the NLRC Resolution dated August 31, 1999 denying respondent?s motion for reconsideration was received on September 15, 1999, the petition filed on February 7, 2000 was, therefore, 85 days late.

Respondent, however, counters that the person who received the NLRC Resolution dated August 31, 1999 on September 15, 1999, a certain Mirela G. Ducut of the Computer Services Department, was not a duly-authorized representative of the FEU Legal Aid Bureau, as it is only Ellen Dela Paz, who is authorized to receive all communications addressed to the office.

The CA sustained respondent?s contention that since the service was not made to an authorized person, it was not legally effective, and the counting of the period should be reckoned from the date of actual receipt by counsel, which was on December 20, 1999.

The New Rules of Procedure of the NLRC provides the rule for the service of notices and resolutions in NLRC cases, to wit:

Sec. 4. Service of notices and resolutions. ? a) Notices or summons and copies of orders, resolutions or decisions shall be served on the parties to the case personally by the bailiff or the duly authorized public officer within three (3) days from receipt thereof by registered mail; Provided, that where a party is represented by counsel or authorized representative, service shall be made on such counsel or authorized representative; x x x

The presumption is that the decision was delivered to a person in his office, who was duly authorized to receive papers for him, in the absence of proof to the contrary.18 It is likewise a fundamental rule that unless the contrary is proven, official duty is presumed to have been performed regularly and judicial proceedings regularly conducted, which includes the presumption of regularity of service of summons and other notices.19 The registry return of the registered mail as having been received is prima facie proof of the facts indicated therein. Thus, it was necessary for respondent to rebut that legal presumption with competent and proper evidence.

In an attempt to disprove that there was proper receipt of the Resolution, respondent?s counsel presented an Affidavit executed by Ellen dela Paz, who attested that she is the only person authorized to receive communications for and in behalf of the FEU Legal Aid Bureau; that she never received the NLRC Resolution dated August 31, 1999 on September 15, 1999; and that it was only on December 20, 1999, through respondent, that they learned of said Resolution.20

Records show that Ducut is not an employee of the FEU Legal Aid Bureau, but is connected with the Computer Services Department. The FEU Legal Aid Bureau has its own personnel which include Ms. dela Paz who is the one authorized to receive communications in behalf of the office. It has been ruled that a service of a copy of a decision on a person who is neither a clerk nor one in charge of the attorney?s office is invalid.21 This was the Court?s ruling in Cañete v. National Labor Relations Commission,22 to wit:

We have ruled that where a copy of the decision is served on a person who is neither a clerk nor one in charge of the attorney?s office, such service is invalid. In the case at bar, it is undisputed that Nenette Vasquez, the person who received a copy of the labor arbiter?s Decision, was neither a clerk of Atty. Chua, respondent?s counsel, nor a person in charge of Atty. Chua?s office. Hence, her receipt of said Decision on March 15, 1993 cannot be considered as notice to Atty. Chua. Since a copy of the Decision was actually delivered by Vasquez to Atty. Chua?s clerk only on March 16, 1993, it was only on this date that the ten-day period for the filing of respondent?s appeal commenced to run. Thus, respondent?s March 26, 1993 appeal to the NLRC was seasonably filed.23

This was recently reiterated in Prudential Bank v. Business Assistance Group, Inc.,24 where the Court accepted the affidavit executed by Arlan Cayno denying that he was an employee of Gella, Danguilan, Nabaza & Associates law firm authorized to receive legal or judicial processes. Cayno likewise disclaimed knowledge of the whereabouts of the notice. According to the Court, since Mr. Cayno was not an employee of the said law firm authorized to receive notices in its behalf, his alleged receipt of the notice is without any effect in law.

Hence, the CA was correct in ruling that the reckoning period should be the date when respondent?s counsel actually received the NLRC Resolution dated August 31, 1999, which was on December 20, 1999.

Petitioner, however, pointed out that a certain Ruby D.G. Sayat received a copy of their Motion for Reconsideration filed by registered mail on August 16, 2000.25 Respondent contended that at the time Sayat received the motion, she was then detailed at the office and was authorized to receive said pleading, and that it was an isolated and exceptional instance.26 On this matter, the FEU Acting Postmaster certified that Sayat is a permanent employee of the FEU Legal Aid Bureau.27 As such, she is authorized to receive communications in behalf of the office and need not possess an express authority to do so.

More importantly, the Court has consistently frowned upon the dismissal of an appeal on purely technical grounds. While the right to appeal is a statutory, not a natural right, it is, nonetheless, an essential part of our judicial system. Courts should proceed with caution so as not to deprive a party of the right to appeal, but rather, ensure amplest opportunity for the proper and just disposition of a cause, free from the constraints of technicalities.28

On the issue of illegal dismissal, both the Labor Arbiter and the NLRC were one in concluding that petitioner had just cause for dismissing respondent, as his act of leading a strike at petitioner?s company for four days, his absence from work during such time, and his failure to perform his duties during such absence, make up a cause for habitual neglect of duties, while his failure to comply with petitioner?s order for him to transfer to the GMA, Cavite Plant constituted insubordination or willful disobedience. The CA, however, differed with said conclusion and found that respondent?s attitude "has not been proved to be visited with any wrongdoing", and that his four-day absence does not appear to be both gross and habitual.

The Court sustains the CA?s finding that respondent?s four-day absence does not amount to a habitual neglect of duty; however, the Court finds that respondent was validly dismissed on ground of willful disobedience or insubordination.

Under Article 282 of the Labor Code, as amended, an employer may terminate an employment for any of the following causes: (a) serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and, (e) other causes analogous to the foregoing.29 The employer has the burden of proving that the dismissal was for a just cause; failure to show this would necessarily mean that the dismissal was unjustified and, therefore, illegal.30

Neglect of duty, to be a ground for dismissal, must be both gross and habitual.31 Gross negligence connotes want of care in the performance of one?s duties. Habitual neglect implies repeated failure to perform one?s duties for a period of time, depending upon the circumstances. On the other hand, fraud and willful neglect of duties imply bad faith on the part of the employee in failing to perform his job to the detriment of the employer and the latter?s business.32 Thus, the single or isolated act of negligence does not constitute a just cause for the dismissal of the employee.33

Thus, the Court agrees with the CA that respondent?s four-day absence is not tantamount to a gross and habitual neglect of duty. As aptly stated by the CA, "(W)hile he may be found by the labor courts to be grossly negligent of his duties, he has never been proven to be habitually absent in a span of seven (7) years as GICI?s employee. The factual circumstances and evidence do not clearly demonstrate that petitioner?s [respondent] absences contributed to the detriment of GICI?s operations and caused irreparable damage to the company."34

Petitioner, however, insists that during his four-day absence, respondent was leading an illegal strike in its sister company. In the first place, there is no showing that the strike held at the Genuino Agro Industrial Development Corporation is illegal. It is a basic rule in evidence that each party must prove his affirmative allegation. Since the burden of evidence lies with the party who asserts the affirmative allegation, the plaintiff or complainant has to prove his affirmative allegations in the complaint and the defendant or the respondent has to prove the affirmative allegation in his affirmative defenses and counterclaim.35 Since it was petitioner who alleged that such strike is illegal, petitioner must, therefore, prove it. Except for such bare allegation, there is a dearth of evidence in this case proving the illegality of said strike.

However, as previously stated, the Court finds that respondent was validly dismissed on the ground of insubordination or willful disobedience.

On this point, the CA opined that petitioner included insubordination as a "mere after-thought." It noted that petitioner seemed to be "irresolute" in stating the cause of respondent?s dismissal, as in its Position Paper, it originally relied on respondent?s four-day absence or participation in the illegal strike as a cause for dismissal but later on amended its Position Paper to include insubordination.36 Thus, the CA did not make any factual finding or conclusion in its Decision vis-à-vis petitioner?s allegation of respondent?s insubordination.

While its perception may be true, it should not have deterred the CA from making any resolution on the matter. For one, respondent was able to argue against petitioner?s allegation of insubordination before the Labor Arbiter37 and the NLRC.38 For another, it was respondent himself who raised the subject before the CA, wherein he stated in his Petition, inter alia, viz.:

37. Miserably, public respondent [NLRC] justified the validity of his dismissal by holding that the 12 December 1995 Memorandum showed that it was effected with due process. x x x

x x x x

38. How could the foregoing memorandum justify petitioner?s dismissal for allegedly joining the four (4) days strike when it refers to his alleged refusal to transfer? This memorandum shows glaring violations of his right to substantive and procedural due process and reveal the true circumstances of his dismissal, to wit: 1) petitioner was dismissed because of his failure to abide with the management?s decision to transfer him, andnot on his alleged participation in the four (4) day strike or his absence on those dates; x x x; 3) while the true cause of his dismissal is his failure to abide with the decision to transfer, private respondent belatedly and self-servingly claimed that he was dismissed because of the alleged strike; 4) the Labor Arbiter?s decision that the dismissal is valid is based on speculation in that while it was clear that petitioner was actually dismissed for refusing the transfer, he held that the dismissal is justified because petitioner absented for four (4) days to join the strike elsewhere; x x x 39 (Emphasis supplied)

Further, the proceedings before the Labor Arbiter and the NLRC are non-litigious in nature.40 As such, the proceedings before it are not bound by the technical niceties of the law and procedure and the rules obtaining in courts of law,41 as dictated by Article 221 of the Labor Code:

ART. 221. Technical rules not binding and prior resort to amicable settlement. ? In any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process.

This rule applies equally to both the employee and the employer. In the interest of due process, the Labor Code directs labor officials to use all reasonable means to ascertain the facts speedily and objectively, with little regard to technicalities or formalities.42 What is essential is that every litigant is given reasonable opportunity to appear and defend his right, introduce witnesses and relevant evidence in his favor,43 which undoubtedly, was done in this case.

Willful disobedience, or insubordination as otherwise branded in this case, as a just cause for dismissal of an employee, necessitates the concurrence of at least two requisites: (1) the employee’s assailed conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he had been engaged to discharge.44

In Coca-Cola Bottlers, Phils. Inc v. Kapisanan ng Malayang Manngagawa sa Coca-Cola-FFW, it was held that an employer enjoys a wide latitude of discretion in the promulgation of policies, rules and regulations on work-related activities of the employees so long as they are exercised in good faith for the advancement of the employer?s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements. Company policies and regulations are generally valid and binding on the parties and must be complied with until finally revised or amended, unilaterally or preferably through negotiation, by competent authority. For misconduct or improper behavior to be a just cause for dismissal, the same must be related to the performance of the employee?s duties and must show that he has become unfit to continue working for the employer.45

In the case at bench, petitioner informed respondent, through a Memorandum dated November 14, 1995, that he was being transferred to its GMA, Cavite operations effective November 20, 1995, to wit:

We have considered you to fill-up the maintenance position urgently required in our GMA, Cavite business operations. After thorough evaluation of qualified candidates, we find your qualifications most suited to satisfactorily perform the maintenance activities at GMA, Cavite.

x x x x46

Due to his refusal to report to the Cavite plant, petitioner reiterated its order transferring respondent in its Memorandum dated November 24, 1995,47 where respondent was also warned that his failure to report to the Cavite plant will be considered as an absence without leave (AWOL) and insubordination. Respondent was required to comply with the order within 24 hours from receipt, otherwise, disciplinary action will be imposed on respondent. Respondent replied with a request that he remain in the Otis plant since a transfer to the Cavite plant will entail additional expenditure and travel time on his part.48

Petitioner again wrote respondent inviting him to appear before the Plant Level Investigation on December 11, 1995 for the latter to be able to clarify his reasons for refusing the transfer.49

Finally, petitioner issued its Memorandum dated December 12, 1995 informing respondent of its decision to terminate his services. The Memorandum reads, in part:

The management panel has discussed and deliberated thoroughly on your case regarding your transfer to GMA Plant in GMA, Cavite which was supposed to be effective on 20 November, 1995 but unfortunately you refused to comply despite our repeated instructions to you to assume your new assignment while your case had been under grievance machinery.

On 09 December, 1995 a letter memorandum was served to you informing you to appear at plant level investigation to be conducted on 11 December, 1995. The management panel in consideration to (sic) your reasons for not transferring to GMA Plant as stated in your reply dated December 07, 1995, offered you to provide monetary allowance to at least compensate for your assumed additional expenses. However, you turned down this action of good faith from the management.

x x x x

Your written explanation and the outcome of the plant level investigation clearly showed your willful or intentional disobedience. It was insubordination in its highest order. In this regard, much to our regret, we have no other recourse but to terminate your services with us for cause and causes cited in the foregoing effective 13 December 1995.

x x x x50

The rule is that the transfer of an employee ordinarily lies within the ambit of the employer?s prerogatives. The employer exercises the prerogative to transfer an employee for valid reasons and according to the requirement of its business, provided the transfer does not result in demotion in rank or diminution of the employee?s salary, benefits and other privileges.51

In this case, petitioner?s order for respondent to transfer to the GMA, Cavite Plant is a reasonable and lawful order was made known to him and pertains to his duties as a machine operator. There was no demotion involved or diminution of salary, benefits and other privileges, and in fact, petitioner was even willing to provide respondent with monetary allowance to defray whatever additional expenses he may incur with the transfer.

In Allied Banking Corporation v. Court of Appeals,52 the Court ruled that an employee cannot validly refuse a transfer order on the ground of parental obligations, additional expenses, and the anguish he would suffer if assigned away from his family. Citing Homeowners Savings and Loan Association, Inc. v. National Labor Relations Commission,53 the Court stated:

The acceptability of the proposition that transfer made by an employer for an illicit or underhanded purpose ? i.e., to defeat an employee?s right to self-organization, to rid himself of an undesirable worker, or to penalize an employee for union activities ? cannot be upheld is self-evident and cannot be gainsaid. The difficulty lies in the situation where no such illicit, improper or underhanded purpose can be ascribed to the employer, the objection to the transfer being grounded solely upon the personal inconvenience or hardship that will be caused to the employee by reason of the transfer. What then?

This was the very same situation we faced in Phil. Telegraph and Telephone Corp. v. Laplana. In that case, the employee, Alicia Laplana, was a cashier at the Baguio City Branch of PT&T who was directed to transfer to the company?s branch office at Laoag City. In refusing the transfer, the employee averred that she had established Baguio City as her permanent residence and that such transfer will involve additional expenses on her part, plus the fact that an assignment to a far place will be a big sacrifice for her as she will be kept away from her family which might adversely affect her efficiency. In ruling for the employer, the Court upheld the transfer from one city to another within the country as valid as long as there is no bad faith on the part of the employer. We held then:

"Certainly the Court cannot accept the proposition that when an employee opposes his employer?s decision to transfer him to another work place, there being no bad faith or underhanded motives on the part of either party, it is the employee?s wishes that should be made to prevail."

Such being the case, respondent cannot adamantly refuse to abide by the order of transfer without exposing himself to the risk of being dismissed. Hence, his dismissal was for just cause in accordance with Article 282 (a) of the Labor Code. Consequently, respondent is not entitled to reinstatement or separation pay and backwages.

Lastly, on the issue of due process, Section 2 (d), Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code provides for the standards of due process, which shall be substantially observed, to wit:

For termination of employment based on just causes as defined in Article 282 of the Labor Code:

(i) A written notice served on the employee specifying the ground or grounds of termination, and giving said employee reasonable opportunity within which to explain his side.

(ii) A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented against him.

(iii) A written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination.

Simply stated, the employer must furnish the employee a written notice containing a statement of the cause for termination and to afford said employee ample opportunity to be heard and defend himself with the assistance of his representative, if he so desires, and the employee must be notified in writing of the decision dismissing him, stating clearly the reasons therefor.54

The CA found that petitioner failed to observe the twin requirements of notice and hearing, stating that its Memorandum dated December 13, 1995 does not squarely meet the standards of due process. The circumstances surrounding respondent?s dismissal, however, prove the contrary. The CA failed to take into account that prior to the Memorandum dated December 13, 1995, petitioner sent respondent several memoranda apprising him of the possible implications of his refusal to comply with the order of transfer. Thus, in its Memorandum dated November 24, 1995, petitioner notified respondent that his continued non-compliance with the order of transfer might bring about disciplinary action.55 Respondent replied to this memorandum, stating the reasons for his refusal, i.e., additional expenses, longer travel time, and union concerns.56 Petitioner sent another Memorandum on December 9, 1995, asking respondent to appear on December 11, 1995, for further clarification of his reasons for refusing the transfer.57 Despite the meeting, and since respondent, apparently, stubbornly refused to heed petitioner?s order, it was then that the Memorandum dated December 13, 1995 was issued to respondent informing him of the management?s decision to terminate his services. Clearly, respondent?s right to due process was not violated.

WHEREFORE, the petition is GRANTED. The CA Decision dated August 3, 2000 and Resolution dated March 16, 2001 are SET ASIDE, and the NLRC Decision dated June 30, 1999 is REINSTATED.

No costs.

SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZAssociate Justice

WE CONCUR:

ARTEMIO V. PANGANIBANChief JusticeChairperson

CONSUELO YNARES-SANTIAGOAssociate Justice

ROMEO J. CALLEJO, SR.Asscociate Justice

MINITA V. CHICO-NAZARIOAssociate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.

ARTEMIO V. PANGANIBANChief Justice

Footnotes

1 Records, p. 2.

2 Id. at 10-16.

3 Id. at 17-19.

4 Id. at 22-24.

5 Id. at 68-69.

6 Id. at 79-84.

7 Id. at 183-189.

8 Id. at 216-217.

9 Id. at 225.
10 CA rollo, p. 3.
11 Id. at 7-13.
12 Penned by Associate Justice Oswaldo D. Agcaoili (retired), with Associate Justices Angelina Sandoval-Gutierrez (now a Member of this Court) and Mercedes Gozo-Dadole (retired), concurring.
13 Penned by Associate Justice Oswaldo D. Agcaoili (retired), with Associate Justices Mercedes Gozo-Dadole (retired) and Josefina Guevarra-Salonga, concurring, CA rollo, at 127.
14 Id. at 176-180.
15 Rollo, p. 18.
16 Becton Dickinson Phils., Inc. v. National Labor Relations Commission, G.R. Nos. 159969 & 160116, November 15, 2005.
17 Mendoza v. National Labor Relations Commission, 369 Phil. 1113, 1122 (1999); Caingat v. National Labor Relations Commission, G.R. No. 154308, March 10, 2005, 453 SCRA 142, 149; Equitable PCIBank v. Caguioa, G.R. No. 159170, August 12, 2005, 466 SCRA 686, 693-694.
18 Flores v. National Labor Relations Commission, 326 Phil. 750, 756 (1996).
19 Columbus Philippines Bus Corporation v. National Labor Relations Commission, 417 Phil. 81, 96 (2001).
20 CA rollo, p. 149.
21 Pangilinan v. General Milling Corporation, G.R. No. 149329, July 12, 2004, 434 SCRA 159, 169.
22 320 Phil. 313 (1995).
23 Id. at 320-321.
24 G.R. No. 158806, December 16, 2004, 447 SCRA 187, 194.
25 See CA rollo, p. 136, registry return receipt no. 72200; Postmaster Certification dated October 16, 2000, p. 166.
26 Rollo, p. 334.
27 CA rollo, p. 166.
28 Supra note 24, at 196.
29 AHS/Philippines, Inc. v. Court of Appeals, 327 Phil. 129, 139 (1996).
30 Pascua v. National Labor Relations Commission, 351 Phil. 48, 62.
31 National Sugar Refineries Corporation v. National Labor Relations Commission, 350 Phil. 119, 127 (1998).
32 JGB & Associates v. National Labor Relations Commission, 324 Phil. 747, 754 (1996); Chua v. National Labor Relations Commission, G.R. No. 146780, March 11, 2005, 453 SCRA 244, 254.
33 National Bookstore, Inc. v. Court of Appeals, 428 Phil. 235, 246 (2002).
34 Rollo, pp. 164-165.
35 Aklan Electric Cooperative, Inc. v. National Labor Relations Commission, 380 Phil. 225, 245 (2000).
36 Rollo, p. 162.
37 Records, pp. 78-79.
38 Id. at 116.
39 Rollo, pp. 135-136.
40 Philippine Airlines, Inc. v. Tongson, 459 Phil. 742, 752 (2003).
41 China Banking Corporation v. Borromeo, G.R. No. 156515, October 19, 2004, 440 SCRA 621, 635; San Miguel Corporation v. Aballa, G.R. No. 149011, June 28, 2005, 461 SCRA 392, 417-418.
42 Tanjuan v. Philippine Postal Savings Bank, Inc., G.R. No. 155278, September 16, 2003, 411 SCRA 168, 176.
43 Supra note 40, at 753.
44 Bascon v. Court of Appeals, G.R. No. 144899, February 5, 2004, 422 SCRA 122, 131.
45 G.R. No. 148205, February 28, 2005, 452 SCRA 480, 496-497.
46 Rollo, p. 213.
47 Id. at 214.
48 Id. at 215.
49 Id. at 216.
50 Id. at 217.
51 Allied Banking Corporation v. Court of Appeals, G.R. No. 144412, November 18, 2003, 416 SCRA 65, 78.
52 Id.
53 330 Phil. 979, 999-1000 (1996).
54 Aquinas School v. Magnaye, 344 Phil. 145, 156 (1997).
55 Rollo, p. 214.
56 Id. at 214.
57 Id. at 216.

G.R. No.

SUPREME COURT
Manila

EN BANC

DECISION

May 31, 2006

G.R. No.
, ,
vs.
, .

, J.:

This is a petition for review under Rule 45 of the 1997 Rules of Court assailing the resolution of the Court of Appeals (CA) dated July 20, 1995, which in toto reversed its own decision dated January 14, 1994 in CA-G.R. CV. No. 38504 entitled National Trucking and Forwarding Corporation v. Solomon Shauf and Right Forwarders Corporation (RFC).

Petitioner National Trucking and Forwarding Corporation owned a trailer tractor for the transport of textile carpets from Olongapo to Manila. On January 27, 1989, the tractor was traversing the national highway in Lubao, Pampanga when it was hit by a Nissan Pursar car owned and driven by respondent Solomon Shauf who was then on his way to Olongapo. Immediately after the collision, the Nissan car exploded while the trailer tractor caught fire, destroying all the textile carpets it was carrying.

During investigation, authorities found that the 10-wheeler truck of respondent RFC hit the Nissan car?s rear causing the latter to swerve to its left and collide with petitioner?s trailer.

Petitioner filed before the Regional Trial Court of Manila, Branch 16, a complaint for damages against respondents Shauf and RFC, including the latter?s President and Manager, respectively, spouses Roberto and Shirley Cruz Pagotan. On the other hand, Shauf filed a cross-claim against RFC and in turn, RFC filed a counterclaim against Shauf.

After trial, the court a quo found RFC liable for the collision. It ruled that the driver of RFC?s 10-wheeler truck tried to overtake Shauf but slowed down upon seeing petitioner?s trailer coming from the opposite direction. It was in the driver?s attempt to regain his position on the road that RFC?s truck hit Shauf. The latter then lost control of the steering wheel and bumped onto petitioner?s trailer.

The trial court held:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:

I. On plaintiff?s complaint:

xxx xxx xxx

a. The amount of P157,070.81 representing actual damages for the repair of the trailer-tractor;

b. The amount of P7,000.00 as attorney?s fees; and

c. Costs of suit.

II. On defendant Solomon Shauf?s cross-claim, to pay the latter:

a. P70,000 representing actual damages for the loss of the Nissan Pulsar car;

b. P7,000.00 as attorney?s fees; and

c. Costs of Suit.

III. DISMISSING the counterclaims of defendants RF/Pagotan/Cruz.

SO ORDERED.1

RFC elevated the case to the CA. In a decision2 dated January 14, 1994, the CA affirmed in toto the assailed decision of the trial court but when RFC filed its motion for reconsideration, it (the CA) vacated its prior ruling and granted the appeal. It found that the trial court overlooked the police report on the incident stating that Shauf overtook the 10-wheeler truck and sideswiped it. In a resolution dated July 20, 1995, the CA ruled:

AFTER carefully considering the grounds or contentions of the appellant-movant xxx, We are persuaded [to believe] that the points raised in this motion for reconsideration are meritorious.

ACCORDINGLY, in the light of the foregoing disquisitions and finding merit in the motion for reconsideration, the same is hereby GRANTED. Consequently, the decision promulgated on January 14, 1994 is hereby RECONSIDERED, so as to correct an honest oversight or misapprehension of facts. The complaint filed by plaintiff-appellee as well as the claim of the cross-claimant is hereby ordered DISMISSED.

FOR lack of basis of supporting evidence, the counter-claim cannot however be given due course. We make no pronouncement as to costs.3

In this petition, petitioner faults the CA for reversing its decision of January 14, 1994, thus leaving no one to answer for the damages it sustained.

We find for petitioner.

This case falls under one of the exceptions to the rule that this Court does not review the findings of fact of the lower courts. There being contradictory factual findings as to who was responsible for the collision and who should pay damages to petitioners, we pass on the facts and evidence of the case.4

The records without doubt reveal that the RFC truck first hit the rear of Shauf?s Nissan car which in turn caused it to collide with petitioner?s trailer. The testimony of RFC?s witnesses that the Nissan car tried to overtake RFC?s truck was self-serving. The driver, for one, was expected to point the accusing finger at anyone but himself. The picture that he depicted of the accident was unbelievable and contrary to ordinary human experience. The trial court correctly ruled that:

II. The claim of RFC truck driver Romeo Bunto that it was the car that tried to overtake him does not inspire much belief. If the car were [sic] the one that tried to overtake the RFC truck from the right side traveling at 60KPH while the RFC truck at 20KPH, per Romeo?s testimony itself, in all probability, there would not have been accident at all. At such rates of speed, if Romeo [was] really [a] careful driver, common sense dictates that he should have given way to the overtaking car even if the car was overtaking on the wrong side. xxx

For another thing, the photos of the RFC truck clearly evince that it is rather new and sturdily built 10-wheeler truck. It emerged from the accident almost without a scratch. If indeed the car was the one that overtook, it would have been no match for [sic] the bulkier and sturdier RFC truck, either it would have been crushed to a pulp inclusive of the passengers or at the most have been severely damaged.5

We defer to the foregoing evaluation of the trial court.6 It was in a better position to observe the witnesses? truthfulness, honesty, candor and demeanor.7

Moreover, the police report relied upon by the CA could hardly be given any probative value as the person who prepared it never testified as to the truthfulness of the facts recited therein.8 While it is true that a report rendered in the fulfillment of public duties may be admitted in evidence without proof of genuineness,9 it is also true that it is only a prima facie evidence of the facts stated there and the same may be negated by clear and convincing evidence to the contrary.10

With the foregoing, we are constrained to set aside the assailed resolution of the CA.

WHEREFORE, the petition is hereby GRANTED. The assailed resolution of the Court of Appeals in CA-G.R. CV. No. 38504 is SET ASIDE. The decision of the Regional Trial Court of Manila, Branch 16, is REINSTATED.

No costs.

SO ORDERED.

RENATO C. CORONAAssociate Justice

WE CONCUR:

REYNATO S. PUNOAssociate JusticeChairperson

ANGELINA SANDOVAL-GUTIERREZAssociate Justice

ADOLFO S. AZCUNAAsscociate Justice

CANCIO C. GARCIAAssociate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.

REYNATO S. PUNOAssociate JusticeChairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson?s Attestation, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.

ARTEMIO V. PANGANIBANChief Justice

Footnotes

* The Court of Appeals was impleaded as public respondent in this case. However, under Rule 45 of the Rules of Court, the petition for review on certiorari shall be filed without impleading the lower courts either as petitioners or respondents. Hence, the CA was deleted from the title.

1 Decided by Judge Ramon O. Santiago; rollo, p. 88.

2 Penned by Associate Justice Jainal D. Rasul and concurred in by Associate Justices Gloria C. Paras and Ramon Mabutas, Jr., of the Seventh Division of the Court of Appeals; rollo, pp. 57-66.

3 Penned by Justice Jainal Rasul, concurred in by Justice Gloria C. Paras, of the Former Seventh Division of the Court of Appeals; rollo, pp. 51-52.

4 Chiang Yia Min v. Court of Appeals, G.R. No. 137932, 28 March 2001, 355 SCRA 608.

5 Decided by Judge Ramon O. Santiago; rollo, p. 86.

6 People v. Preciados, G.R. No. 122934, 5 January 2001, 349 SCRA 1.

7 Republic v. Court of Appeals, G.R. No. 116373, 18 January 2001, 349 SCRA 451.

8 TSN, April 25, 1991, pp. 2-7.

9 Francisco, Evidence 3rd Edition (1996) (Rex Printing Company, Inc., Quezon City, Philippines).

10 Id.; see also People v. Mejia, 341 Phil. 118 (1997).

A.M. No.

SUPREME COURT
Manila

EN BANC

DECISION

May 31, 2006

A.M. No.
, ,
vs.
, .

, J.:

This is an administrative complaint against Judge Oscar E. Dinopol of the Regional Trial Court of Koronadal City, Branch 24, for Gross Ignorance of the Law, relative to his issuance of Search Warrant No. 01-03. The complainant is Atty. Hugolino V. Balayon, Jr., a private practicing lawyer.

Complainant alleged that on 6 January 2003, Filoteo B. Arcallo, a public school teacher, submitted his sworn statement before SPO2 Carlito Lising accusing Tito Cantor of Illegal Possession of Firearms. Based on the said sworn statement, P/S Insp. Virgilio Carreon, Intelligence and Investigation Officer of the South Cotabato Police Provincial Office, filed an application for search warrant against Tito Cantor. On 13 January 2003, respondent Judge issued the search warrant. In the evening of the same day, a team of policemen headed by P/Supt. Fred Juan Bartolome implemented the search warrant. After the search conducted by the raiding team, a written report/information was submitted by P/S Insp. Virgilio Carreon, where it was stated therein that the search was negative, meaning not a single firearm was found inside the house of Tito Cantor.

Claiming that the search warrant was issued in violation of Sections 4 and 5 of Rule 126 of the Rules of Court and A.M. No. 02-1-06-SC,1 the instant complaint2 was filed.

In his comment3 dated 22 March 2005, respondent Judge denied the charge of gross ignorance of the law. He alleged that complainant is not the proper party to file the instant complaint as the aggrieved party in said case should have been Tito Cantor, and not the complainant, who was not authorized by the former to file the complaint in his behalf. Respondent Judge likewise negated the fact that he issued the search warrant based alone on the sworn statement of complainant and the application of P/S Insp. Carreon for the issuance thereof. He maintained that it was only after he made exhaustive clarificatory interviews of Filoteo B. Arcallo in his chambers that the subject search warrant was issued on 13 January 2003. He alleged further that complainant is not privy nor does he have actual knowledge of the implementation of the search warrant in question.

Respondent Judge surmised that the instant complaint was the result of the ill-will and hatred the complainant had against him due to his dismissal, without prejudice, for nonpayment of docket fees, of the Petition for Issuance of Writ of Possession filed by the same complainant, in behalf of Sta. Teresita Multi-Purpose Cooperative, in another unrelated case.

In his Reply4 dated 26 August 2005, complainant emphasized the alleged highly reprehensible attitude of respondent Judge when he requested for an extension of ten days to file his comment without informing complainant. Respondent Judge did not also bother to furnish complainant a copy of his comment when he did finally file one. Moreover, respondent Judge failed to comply with the directives of the Honorable Court Administrator to file his comment within ten days from receipt of the Order granting his request for extension. Complainant believes this constitute additional grounds to warrant respondent Judge?s administrative liability.

As to respondent Judge?s allegation that complainant had no legal personality to file the instant complaint against him as the complainant is neither the aggrieved party nor a relative of Tito Cantor, complainant counters that whether or not he is a relative of Tito Cantor, he can file this administrative complaint against the respondent Judge. Allegedly, Tito Cantor already filed a criminal complaint against Filoteo Arcallo and P/S Insp. Virgilio Carreon for perjury before the City Court of Koronadal City, on the basis of malicious lies they made in their sworn statements involving the issuance of the search warrant by the respondent Judge.

Additionally, complainant reiterated in his reply respondent Judge?s noncompliance with Sections 4 and 5 of Rule 126 of the Rules of Court by not conducting and attaching the written searching questions and answers he made before issuing the search warrant.

On 22 November 2005,5 the Office of the Court Administrator (OCA) submitted its recommendation, thus:

Respectfully submitted for the consideration of the Honorable Court is our recommendation that the instant administrative complaint be:

1. RE?DOCKETED as regular administrative matter;

2. That Judge Oscar E. Dinopol of Regional Trial Court, Branch 24, Koronadal City be found GUILTY of Gross Ignorance of the Rules, in which case, he should be meted with a penalty of a FINE in the amount P20,000.00, with a STERN WARNING that a repetition of similar infraction in the future should be dealt with more severely.

We must first resolve the propriety of the filing of the instant administrative complaint by the complainant. Respondent Judge alleged that complainant is not the proper party to file the instant administrative complaint, as he was not the person aggrieved by the issuance of the search warrant nor a relative thereof.

We rule in the negative.

Section 1, Rule 140 of the Rules of Court (as amended by A.M. No. 01-8-10-SC, which took effect on 1 October 2001) provides that:

Section 1. How instituted. ? Proceedings for the discipline of Judges of regular and special courts and Justices of the Court of Appeals and the Sandiganbayan may be instituted motu proprio by the Supreme Court or upon a verified complaint, supported by affidavits of persons who have personal knowledge of the facts alleged therein or by documents which may substantiate said allegations, or upon an anonymous complaint, supported by public records of indubitable integrity. The complaint shall be in writing and shall state clearly and concisely the acts and omissions constituting violations of standards of conduct prescribed for Judges by law, the Rules of Court, or the Code of Judicial Conduct. (Underscoring supplied)

A careful perusal of the above-cited provision shows that the complainant need not be the person allegedly aggrieved by the actuations of a court officer or employee or someone related thereto. The rule does not mention that the complainant must be the aggrieved party or his relative so as to initiate the prosecution of an administrative case. As correctly observed by the OCA, the above-quoted rule allows the filing by even an anonymous complainant as the rule merely requires that it should be supported by public records of indubitable integrity.

We shall now discuss the liability of respondent Judge in issuing the search warrant without complying with the requirements of the law.

Section 4, Rule 126 of the Rules of Criminal Procedure provides that:

Section 4. Requisites for issuing search warrant. ? A search warrant shall not issue except upon probable cause in connection with one specific offense to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized which may be anywhere in the Philippines. (Underscoring supplied)

Corollarily, Section 5 of the same rule further states that:

Section 5. Examination of complainant; record. ? The judge must, before issuing the warrant, personally examine in the form of searching questions and answers, in writing and under oath, the complainant and the witnesses he may produce on facts personally known to them and attach to the record their sworn statements, together with the affidavits submitted. (Underscoring supplied)

The foregoing provisions provides that the judge must, before issuing the warrant, personally examine, under oath or affirmation, the complainant and any witnesses he may produce and take their testimonies in writing, and attach them to the record, in addition to any affidavits presented to him.

Mere affidavits of the complainant and his witnesses are thus not sufficient. The examining Judge has to make searching questions and elicit answers of the complainant and the witnesses he may produce in writing and to attach them to the record. 6

The searching questions propounded to the applicant of the search warrant and his witnesses must depend to a large extent upon the discretion of the Judge just as long as the answers establish a reasonable ground to believe the commission of a specific offense, and that the applicant is one authorized by law, and that said answers particularly described with certainty the place to be searched and the persons or things to be seized. The examination or investigation which must be under oath may not be in public. It may even be held in the secrecy of his chambers. Far more important is that the examination is not merely routinary but one that is thorough and elicits the required information. To repeat, it must be under oath and must be in writing.7 Such searching questions and answers are necessary in order that the judge may be able to properly determine the existence or non-existence of the probable cause, to hold for perjury the person giving it if it will be found later that his declarations are false.8

In the case at bar, respondent Judge failed to observe his mandate as required by the rules. There was no record of searching questions and answers attached to the records of the case in palpable disregard of the statutory requirement previously quoted. This was admitted by respondent Judge in his comment to the effect that there were no written searching questions and answers to support the issuance of the search warrant because the peace officer who accompanied the complainant requested not to take down the exhaustive searching inquiry of Filoteo Arcallo, thus:

It (sic) no written searching questions were done to support the issuance of a search warrant, it did not mean that no searching questions were accomplished. The peace officer who accompanied the complainant personally requested that court personnel as much as possible not take down the exhaustive searching inquiry of the respondent upon Filoteo Arcallo due to the past experiences of the police that given the texting technology and as it had been proven by respondent that old time residents of Koronadal City know each other, the impending search can reach the attention of the person to be searched before the search warrant can be implemented. Respondent found wisdom and practicability in the request of the police officer. x x x9 (Underscoring supplied).

Also, Filoteo Arcallo, in his affidavit dated 24 February 2005, confirmed the fact that the inquiry conducted by the respondent was an oral one, pertinent portion of which reads:

On January 13, 2003, with P/Insp. Bing Carreon we went to the Hall of Justice to file the application for search warrant. Judge Oscar Dinopol instructed us to have my statement and that of P/Insp. Bing Carreon subscribed first by the City Prosecutor, but he already left home. When we returned to the Chamber of the Executive Judge, he interviewed P/Insp. Carreon and asked me to narrate in detail the history and I narrated to him the above information. The Executive Judge asked further questions and mentioned of securing further written questions and answer from P/Insp. Bing Carreon and I, but the former proposed instead an oral one as he had previous experiences that the search team returned empty handed because it was easy for court staff to text the person to be searched if the staff knows the person. The Executive Judge concurred to the request because, other police members he said also shared the same experience; x x x10 (Underscoring Supplied).

We uphold the OCA?s findings that respondent Judge professed gross ignorance of the law for his failure to reduce the examination in writing. When the law is so elementary, such as the provisions of the Constitution and the Rules of Court on search warrant issuance, not to know it or as if one does not know it constitutes gross ignorance of the law. Specifically, respondent Judge failed to conform to the high standards of competence required of judges under the Code of Judicial Conduct, which mandates that:

Rule 1.01. – A judge should be the embodiment of competence, integrity, and independence.

Rule 3.01- A judge shall x x x maintain professional competence.

Competence is a mark of a good judge. When a judge displays an utter lack of familiarity with the rules, he erodes the public?s confidence in the competence of our courts.11 It is highly imperative that judges be conversant with the law and basic legal principles.12 Basic legal procedures must be at the palm of a judge?s hands.13

A judge owes it to himself and his office to know by heart basic legal principles and to harness his legal know-how correctly and justly. When a judge displays utter unfamiliarity with the law and the rules, he erodes the confidence of the public in the courts. Ignorance of the law by a judge can easily be the mainspring of injustice. As an advocate of justice and a visible representation of the law, a judge is expected to be proficient in the interpretation of our laws. When the law is so elementary, not to know it constitutes gross ignorance of the law. Ignorance of the law, which everyone is bound to know, excuses no one – not even judges. Ignorantia juris quod quisque scire tenetur non excusdat.14 As we held in Monterola v. Judge Caoibes, Jr.15 :

Observance of the law, which respondent ought to know, is required of every judge. When the law is sufficiently basic, a judge owes it to his office to simply apply it; anything les than that is either deliberate disregard thereof or gross ignorance of the law. It is a continuing pressing responsibility of judges to keep abreast with the law and changes therein. Ignorance of the law, which everyone is bound to know, excuses no one -not even judges – from compliance therewith x x x. Canon 4 of the Canons of Judicial Ethics requires that the judge should be studious in the principles of law. Canon 18 mandates that he should administer his office with due regard to the integrity of the system of the law itself, remembering that he is not a depository of arbitrary power, but a judge under the sanction of law. Indeed, it has been said that when the inefficiency springs from a failure to consider a basic and elementary rule, a law or principle in the discharge of his duties, a judge is either too incompetent and undeserving of the position and the title he holds or is to vicious that the oversight or omission was deliberately done in bad faith and in grave abuse of judicial authority.16

Clearly then, the respondent Judge displayed gross ignorance of the law in failing to observe the requirements in issuing a search warrant. He was ignorant of the basic and simple procedural rules in issuing the said warrant. Verily, respondent Judge?s actions visibly indicate his lack of sufficient grasp of the law.

Under Rule 140, Section 8, of the Rules of Court, as amended by A.M. No. 01-8-10 SC, gross ignorance of the law or procedure is classified as a serious charge. As to the penalty imposed, Section 11 of the same Rule provides:

SEC. 11. Sanctions. – A. If the respondent is guilty of a serious charge, any of the following sanctions may be imposed:

1. Dismissal from the service, forfeiture of all or part of the benefits as the Court may determine, and disqualification from reinstatement or appointment to any public office, including government-owned or controlled corporations: Provided, however, that the forfeiture of benefits shall in no case include accrued leave credits;

2. Suspension from office without salary and other benefits for more than three (3) but not exceeding six (6) months; or

3. A fine of more than P20,000.00 but not exceeding P40,000.00.

Guided by our rulings in Gamas v. Oco,17 and Sule v. Biteng,18 a fine of P20,000.00 is justified in the case at bar.

WHEREFORE, the Court finds respondent Judge Oscar E. Dinopol, of the Regional Trial Court, Br. 24, Koronadal City, guilty of gross ignorance of the law. He is ordered to pay a fine of P20,000.00 with the WARNING that a repetition of the same or similar acts in the future will be dealt with more severely.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice

WE CONCUR:

ARTEMIO V. PANGANIBANChief JusticeChairperson

CONSUELO YNARES-SANTIAGOAssociate Justice

MA. ALICIA AUSTRIA-MARTINEZAsscociate Justice

ROMEO J. CALLEJO, SR.Associate Justice

Footnotes

1 Rule on Search and Seizure in Civil Action for Infringement of Intellectual Property Rights.

2 Rollo, pp. 2-3.

3 Rollo, pp. 24-30.

4 Rollo, pp. 85-86.

5 Rollo, pp. 91-95.

6 Mata v. Hon. Bayona, 213 Phil. 348, 352 (1984).

7 Id., p. 354.

8 Id., p. 352.

9 Rollo, p. 26.

10 Id., p. 29.

11 Fr. Guillen v. Judge Cañon, 424 Phil. 81, 88 (2002).

12 Borja-Manzano v. Sanchez, A.M. No. MTJ-00-1329, 8 March 2001, 354 SCRA 1, 6.

13 Pesayco v. Layague, A.M. No. RTJ-04-1889, 22 December 2004, 447 SCRA 450, 459.

14 Español v. Mupas, A.M. No. MTJ-01-1348, 11 November 2004, 442 SCRA 13, 44-45.

15 429 Phil. 509.

16 Id., pp. 66-67.

17 A.M. No. MTJ-99-1231, 17 March 2004, 425 SCRA 588. In this case, respondent Judge was found guilty of gross ignorance of the law for failure to comply with the requirements of Section 1(a) of Rule 116 of the Revised Rules of Criminal Procedure, by failing to furnish complainants therein a copy of the information with the list of the witnesses and was meted a fine of P20,000.00.

18 313 Phil. 399 (1995). In this case, respondent Judge was found guilty of gross ignorance of the law when he granted bail solely on account of the voluntary surrender of the accused and was meted a fine of P20,000.00.

G.R. No.

SUPREME COURT
Manila

EN BANC

DECISION

May 31, 2006

G.R. No.
, ,
vs.
, .

, J.:

This petition for review on certiorari with motion for contempt,1 assails the April 8, 2005 Decision2 and the August 3, 2005 Resolution3 of the Court of Appeals in CA-G.R. SP No. 85876 which set aside the December 16, 2003 Order4 of the Regional Trial Court of Mandaluyong City, Branch 210 dismissing Civil Case No. MC00-1260, for failure of respondent Pilhino Sales Corporation to prosecute.

Petitioners are spouses Dan Paguirigan and Mary Jane Paguirigan, doing business under the name and style of Danny Boy Liner and/or Dalmatian Lines. A controversy arose between petitioners and respondent Pilhino Sales Corporation in connection with an alleged transaction involving three buses.

It appears from the records that there are two civil cases involving petitioners and respondent corporation, namely: (1) Civil Case No. MC98-214 before the Regional Trial Court of Mandaluyong City, Branch 214; and (2) Civil Case No. MC00-1260, before the Regional Trial Court of Mandaluyong City, Branch 210, both entitled Pilhino Sales Corporation vs. Spouses Dan Paguirigan and Mary Jane Paguirigan, and Jose T. Paguirigan, doing business under the name and style of Danny Boy Liner and/or Dalmatian Lines.

Civil Case No. MC98-214 raffled to Branch 214 is a complaint for sum of money filed by respondent corporation against petitioners but was dismissed on March 26, 1999 for respondent?s failure to submit its pre-trial brief and to appear in the scheduled pre-trial conference despite proper notice.5 On June 2, 2000, the court denied respondent?s motion for reconsideration on the ground that the March 26, 1999 Order had attained finality. Nevertheless, the court stated that respondent corporation is not precluded from re-filing the complaint against petitioners.6

On September 19, 2000,7 respondent corporation re-filed its complaint for sum of money against petitioner before the Regional Trial Court of Mandaluyong City. The case was docketed as Civil Case No. MC00-1260 and was raffled to Branch 210. In an Order dated June 6, 2002,8 the trial court brushed aside petitioners? allegations of res judicata and want of jurisdiction holding that the March 26, 1999 Order of Branch 214 dismissing Civil Case No. MC98-214 was not on the merits as it was not rendered after a consideration of the evidence or stipulations submitted by the parties. The trial court found that no trial was conducted in that case. Thus, Civil Case No. MC00-1260 was set for further proceedings and pre-trial was set on July 2, 2002.

Petitioners moved for reconsideration of the June 6, 2002 Order which the trial court granted in its Order dated January 29, 2003.9 This time, the trial court held that March 26, 1999 Order dismissing the first complaint was a dismissal with prejudice and an adjudication on the merits. Consequently, the trial court recalled and set aside its Order dated June 6, 2002 and entered a new one dismissing Civil Case No. MC00-1260 on ground of res judicata.

However, on November 18, 2003, the trial court reversed its Order of January 29, 2003. It held that the dismissal of Civil Case No. MC98-214 was meant to be without prejudice; that the dismissal did not have the effect of an adjudication upon the merits for the failure of respondent to comply with the Rules was not due to unjustifiable cause. The trial court thus required petitioners to file their pre-trial brief and scheduled the pre-trial conference on December 16, 2003.10

During the scheduled pre-trial conference on December 16, 2003, respondent and counsel failed to appear hence Civil Case No. MC00-1260 was dismissed for failure to prosecute. With the denial of its motion for reconsideration,11 respondent appealed to the Court of Appeals which granted its petition, set aside the December 16, 2003 Order of the trial court and directed the presiding judge to conduct further proceedings in the case.12 Petitioners? motion for reconsideration was denied,13 hence this petition on the following grounds:

I. THE COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING SECTION 3, RULE 17 OF THE RULES OF CIVIL PROCEDURE AND THE LEGAL EFFECTS OF THE ORDERS OF DISMISSAL DATED 26 MARCH 1999 AND 02 JUNE 2000 OF BRANCH 214, RTC MANDALUYONG OUSTING BRANCH 210, RTC-MANDALUYONG AND THE COURT OF APPEALS TO TRY THE RE-FILED CASE.14

II. THE COURT OF APPEALS SERIOUSLY ERRED IN GRANTING RESPONDENT?S PETITION FOR CERTIORARI UNDER RULE 65 IN LIEU OF LOST APPEAL ON THE ORDER OF DISMISSAL OF THE RE-FILED CASE WHERE RESPONDENT AND COUNSEL ARE ADMITTEDLY AGAIN ABSENT IN THE PRE-TRIAL.15

III. THE COURT OF APPEALS SERIOUSLY ERRED IN ALLOWING THE RE-FILED CASE TO PROCEED AS IT UNDERMINES THE RULE PROHIBITING FORUM SHOPPING AND ALLOWS INTERFERENCE WITH A JUDGMENT OF A CO-EQUAL COURT.16

Petitioners contend that the orders dated March 26, 1999 and June 2, 2000 of Branch 214 in Civil Case No. MC98-214 had the effect of adjudication on the merits. They argue that respondent?s failure to appeal the foregoing orders resulted in the same having become final, thus Branch 210 and the Court of Appeals are without jurisdiction to entertain the re-filed case or Civil Case No. MC00-1260.17 In taking cognizance of the re-filed case, petitioners claim that Branch 210 interfered with the judgment of a co-equal court and accuse respondent of trifling with legal processes and forum shopping.

In its comment, respondent admits that the orders of dismissal of Branch 214 have become final but claims that the dismissal was without prejudice and not an adjudication on the merits.

The issues for resolution in this case are as follows: (1) whether Branch 210 and the Court of Appeals have jurisdiction to entertain Civil Case No. MC00-1260; and (2) whether respondent?s absence during the pre-trial conference on December 16, 2003 warranted the dismissal of Civil Case No. MC00-1260 for failure to prosecute.

The petition lacks merit.

Section 3, Rule 17 of the Rules of Court provides:

Sec. 3. Dismissal due to plaintiff. ? If, for no justifiable cause, the plaintiff fails to appear on the date of the presentation of his evidence in chief on the complaint, or to prosecute his action for an unreasonable length of time, or to comply with these Rules or any order of the court, the complaint may be dismissed upon motion of the defendant or upon the court?s own motion, without prejudice to the right of the defendant to prosecute his counterclaim in the same or in a separate action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise declared by the court. (Emphasis added)

As correctly observed by respondent, the June 2, 2000 Order clearly stated that the dismissal was without prejudice and that respondent is not precluded from re-filing the complaint should it desire to pursue its claim against the petitioners. Further, petitioners actively participated in the proceedings before Branch 210 and even sought positive relief during the pre-trial on December 16, 2003 when it moved for the dismissal of the case. Petitioners cannot invoke the jurisdiction of Branch 210 when it suits them and then argue before the Court of Appeals and before this Court that it does not have jurisdiction to entertain the re-filed case. Petitioners? belated attempt at raising the issue of want of jurisdiction after having taken part in the proceedings before Branch 210 cannot be allowed.

Anent the second issue, it must be emphasized that a pre-trial is mandatory and plaintiff?s absence therein can result to the dismissal of the case. Section 5, Rule 18 of the Rules of Court provides:

Sec. 5. Effect of failure to appear. ? The failure of the plaintiff to appear when so required pursuant to the next preceding section shall be cause for dismissal of the action. The dismissal shall be with prejudice, unless otherwise ordered by the court. x x x.

However, the rule is not absolute; it admits of certain exceptions. We agree with the observation of the Court of Appeals that ?

In this case, We find that the dismissal of the cased (sic) based on the failure of petitioner?s counsel to appear during the 16 December 2003 was done in erroneous haste, to the extreme prejudice of the petitioner.

For one, there is nothing in the record to demonstrate that petitioner had manifested lack of interest to prosecute. It neither abandoned the suit nor needlessly delayed the proceedings. Rather, what is self-evident is that in all the six (6) previously scheduled pre-trial conference, petitioner?s counsel was in attendance and had demonstrated his vigorous resolve to prosecute the case with reasonable promptitude. In fact, the cancellation of all the previously scheduled pre-trial was the result of either the court?s inability to conduct the pre-trial or respondent?s motion to the same effect. It was only in the seventh (7th) scheduled pre-trial conference when petitioner?s counsel was absent, and for good reasons, i.e. petitioner counsel?s medical condition (allergic dermatitis with infection of left scrotum) that even necessitated his confinement on the day immediately following the scheduled pre-trial conference.

If such absence had upset the court a quo?s schedule or its intention to promptly prosecute the case, a mere admonition for petitioner?s counsel, instead of outright dismissal, would have been sufficient for the parties to be informed of the public respondent judge?s intolerance of any display of tardiness and laxity in the observance of his orders from the part of the contending parties.

The pronouncement of the Supreme Court in the case of Calalang vs. Court of Appeals, applies strongly in this case, viz:

"x x x though it is within the discretion of the trial court to declare a party non-suited for non appearance in the pre-trial conference, such discretion must not be abused. The precipitate haste of the lower court in declaring the respondent bank non-suited was uncalled for and deserved a second look.

x x x x x x x x x

Unless a party?s conduct is so negligent, irresponsible, contumacious, or dilatory as to provide substantial grounds for dismissal for non-appearance, the courts should consider lesser sanctions which would still amount into achieving the desired end. ?Inconsiderate dismissals, even if without prejudice, do not constitute a panacea nor a solution to the congestion of court dockets, while they lend a deceptive aura of efficiency to records of the individual judges, they merely postpone the ultimate reckoning between the parties. In the absence of clear lack of merit or intention to delay, justice is better served by a brief continuance, trial on the merits, and final disposition of the cases before the court.? (Ruiz vs. Estenzo, 186 SCRA 8 [1990] citing Macasa vs. Herrera, 101 Phil. 44 [1957]). And there is authority that an order dismissing a plaintiff?s complaint without prejudice for failure of his counsel to appear at a pre-trial conference must be reversed as too severe a sanction to visit on a litigant where the record is devoid of evidence reflecting the litigant?s willful or flagrant disregard for the Court?s authority."

In this case, the dismissal was based solely on respondent?s absence during the pre-trial conference on December 16, 2003. A single instance of non-appearance at the pre-trial due to medical reasons does not amount to willful disregard of the orders of the lower court and will not justify the dismissal of the complaint. That respondent vigorously prosecuted the case before Branch 210 was not contested by petitioners. Likewise, the Court of Appeals noted that respondent had not manifested a lack of interest to prosecute. In fact, respondent?s counsel was present at all the previously scheduled pre-trial conferences. Moreover, the cancellations, re-settings and delays were not caused by respondent?s inordinate refusal or laxity in prosecuting the case. In Marahay v. Melicor,18 we ruled that:

While a court can dismiss a case on the ground of non prosequitur, the real test for the exercise of such power is whether, under the circumstances, plaintiff is chargeable with want of due diligence in failing to proceed with reasonable promptitude. In the absence of a pattern or scheme to delay the disposition of the case or a wanton failure to observe the mandatory requirement of the rules on the part of the plaintiff, as in the case at bar, courts should decide to dispense with rather than wield their authority to dismiss.

So it is with the case at bar. Respondent has not shown culpable negligence warranting the dismissal of its complaint. The ends of justice and fairness would best be served if the issues involved in the case are threshed out in a full-blown trial.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 85876 dated April 8, 2005 which set aside the December 16, 2003 Order of the Regional Trial Court of Mandaluyong City, Branch 210 dismissing Civil Case No. MC00-1260 for respondent?s failure to prosecute, and directing the Regional Trial Court of Mandaluyong City, Branch 210 to conduct further proceedings, and its Resolution dated August 3, 2005, denying petitioners? motion for reconsideration are AFFIRMED.

SO ORDERED.

CONSUELO YNARES-SANTIAGOAssociate Justice

WE CONCUR:

(On Official Leave)ARTEMIO V. PANGANIBANChief JusticeChairperson

MA. ALICIA AUSTRIA-MARTINEZAssociate Justice

ROMEO J. CALLEJO, SR.Asscociate Justice

MINITA V. CHICO-NAZARIOAssociate Justice

A T T E S T A T I O N

I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.

CONSUELO YNARES-SANTIAGOAssociate JusticeActing Chairman, First Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.

REYNATO S. PUNOActing Chief Justice

Footnotes

1 Rollo, pp. 9-47.

2 Id. at 69-78. Penned by Associate Justice Andres B. Reyes, Jr. and concurred in by Associate Justices Lucas P. Bersamin and Celia C. Librea-Leagogo.

3 Id. at 80.

4 Id. at 60. Penned by Judge Maria A. Cancino-Erum.

5 Id. at 50. Penned by Judge Edwin D. Sorongon.

6 Id. at 51.

7 Id. at 15.

8 Id. at 52-54. Penned by Judge Maria A. Cancino-Erum.

9 Id. at 55-57.

10 Id. at 58-59.

11 Id. at 61-63.

12 Id. at 78.

13 Id. at 80.

14 Id. at 28.

15 Id. at 34.

16 Id. at 41.

17 Id. at 36.

18 G.R. No. 44980, February 6, 1990, 181 SCRA 811, 817.

G.R. No.

SUPREME COURT
Manila

EN BANC

DECISION

May 31, 2006

G.R. No.
, ,
vs.
, .

, J.:

In this Petition for Certiorari1 dated June 7, 2004, Inocencio Alimboboyog (Alimboboyog) assails the Decision2 of the Court of Appeals in CA-G.R. SP. No. 73861 dated March 12, 2004 as it was allegedly rendered without jurisdiction, there having been no prior valid service of pleadings and court orders upon him.

In October 1995, private respondent Paz Noble-Noblefranca (Noblefranca) instituted an action before the Department of Agrarian Reform Adjudication Board (DARAB) Office of the Provincial Adjudicator against Alimboboyog for collection of rentals and ejectment with damages. The complaint was later amended to reflect the correct technical description of the property. Noblefranca prayed therein that Alimboboyog be directed to pay back rentals representing her share as landowner amounting to 156 cavans of palay or its money equivalent covering the period from 1988-1995.

Alimboboyog filed an answer claiming that he was no longer obliged to remit the landowner?s share because he had already acquired the property by operation of law through the issuance of a Certificate of Land Transfer (CLT) in the name of his father, Domingo Alimboboyog.

On December 5, 1996, the Provincial Adjudicator rendered a decision in favor of Noblefranca, ordering Alimboboyog to vacate the landholding, turn over its peaceful possession to Noblefranca, and pay the latter back rentals consisting of 156 cavans of palay or its monetary equivalent.

Alimboboyog?s Notice of Appeal was denied due course in an Order dated April 7, 1997 for having been filed out of time. Subsequently, on April 14, 1997, the writ of execution was implemented and Noblefranca was placed in possession of the land.

Four (4) years later or on January 10, 2001, the DARAB Central Office reversed the decision of the Provincial Adjudicator. According to the DARAB in its Resolution3 dated October 7, 2002 disposing of Noblefranca?s motion for reconsideration, despite the fact that Alimboboyog?s Notice of Appeal was filed beyond the reglementary period, it opted to relax the application of the rules and admit the appeal in order to achieve agrarian justice.

Noblefranca questioned the reversal on petition for review with the Court of Appeals, arguing that the DARAB was devoid of authority to assume appellate jurisdiction over a case which had already attained finality. The appellate court granted Noblefranca?s petition and set aside the decision of the DARAB for being contrary to the facts of the case as found by the Provincial Adjudicator. This Decision is the subject of the instant case.

According to Alimboboyog, despite the fact that he was represented by counsel in the proceedings before the Provincial Adjudicator and the DARAB, Noblefranca deliberately omitted to serve a copy of her petition for review on Alimboboyog?s counsel. Instead, she served it upon the DARAB and Alimboboyog himself at his address in Camarines Sur. Consequently, he was allegedly deprived of his day in court.

Noblefranca filed a Comment4 dated August 16, 2004, arguing that recourse to this Court via the instant Rule 65 petition is improper because the remedy of appeal under Rule 45 of the Rules of Court is still available to Alimboboyog. However, he allegedly let the period for filing a petition for review lapse. Besides, the petition puts in issue alleged errors in judgment on the part of the appellate court and not grave abuse of discretion. Noblefranca further points out that Alimboboyog actually received a copy of the petition filed with the Court of Appeals.

Alimboboyog filed a Reply5 dated January 24, 2005, reiterating his arguments.

The records reveal that Alimboboyog was represented by counsel in the proceedings before the Provincial Adjudicator. It was, in fact, a lawyer from the Bureau of Agrarian Legal Assistance of the Department of Agrarian Reform who filed on Alimboboyog?s behalf an answer to Noblefranca?s complaint. It also appears that the same counsel represented Alimboboyog in his appeal before the DARAB.

Noblefranca, however, served a copy of her petition with the Court of Appeals on Alimboboyog himself and not the latter?s counsel.6 She insists that Rule 43 of the Rules of Court, under which her petition was filed, does not require that the same be served upon respondent?s (petitioner Alimboboyog) counsel but merely that it be served on the adverse party, which is what she did.

This was a flawed procedural step in view of the requirement under Sec. 2, Rule 13 of the Rules of Court7 and pertinent jurisprudence that service of notice when a party is represented by counsel should be made upon counsel and not upon the party.8 However, we cannot close our eyes to the fact that Alimboboyog had not previously brought this matter to the attention of the Court of Appeals prior to filing the instant petition.

By his own admission, Alimboboyog actually received a copy of the appellate court?s Decision in late March 2004 and communicated his receipt thereof to his counsel on May 20, 2004. If, as he posits in this petition, the period to file a pleading or motion questioning the Decision of the Court of Appeals should be reckoned from counsel?s receipt thereof, he should have filed through counsel a motion for reconsideration with the Court of Appeals within 15 days from such notice. Instead of filing a motion for reconsideration, however, Alimboboyog filed the present petition for certiorari.

The unquestioned rule in this jurisdiction is that certiorari will lie only if there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law against the acts of respondent. In this case, the plain and adequate remedy was a motion for reconsideration of the assailed Decision and the resolution thereof, which was not only expected to be but would actually have provided an adequate and more speedy remedy than the present petition for certiorari.9

The filing of a motion for reconsideration would have afforded the Court of Appeals the opportunity to correct the errors attributed to it and allowed Alimboboyog to ventilate his side. His failure to file such motion deprived the appellate court of its right and opportunity to review and purge its decision of any oversight.10

In view of the fact that Alimboboyog failed to take advantage of the procedural remedy of filing a motion for reconsideration without any concrete, compelling and valid explanation, we cannot allow him to now seek relief by certiorari.

As a final note, we add that although the merits of the case are not in issue in this petition, the same having been filed solely to question Noblefranca?s failure to serve a copy of the petition which she filed with the Court of Appeals on Alimboboyog?s counsel, we nonetheless reviewed the substantive conclusions reached by the appellate court and found them to be in accord with the facts of the case, law and pertinent jurisprudence.

It appears that Alimboboyog, as affirmed by the Provincial Adjudicator?s Decision, pins his cause on the CLT issued to his father. However, a CLT merely evinces that the grantee thereof is qualified to avail of the statutory mechanisms for the acquisition of ownership of the land tilled by him as provided under Pres. Decree No. 27. It is not a muniment of title that vests upon the farmer/grantee absolute ownership of his tillage.11 Moreover, the subsequent cancellation of the said CLT on the ground that Noblefranca?s property is exempt from the coverage of Operation Land Transfer invalidates Alimboboyog?s claim of full ownership of the property.

WHEREFORE, the instant petition is DISMISSED. No pronouncement as to costs.

SO ORDERED.

DANTE O. TINGAAssociate Justice

WE CONCUR:

LEONARDO A. QUISUMBINGAssociate JusticeChairman

ANTONIO T. CARPIOAssociate Justice

CONCHITA CARPIO MORALESAsscociate Justice

PRESBITERO J. VELASCO, JR.Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.

LEONARDO A. QUISUMBINGAssociate JusticeChairman, Third Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairman?s Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.

ARTEMIO V. PANGANIBANChief Justice

Footnotes

1 Rollo, pp. 3-20.

2 Id. at 118-129; Penned by Associate Justice Andres B. Reyes, Jr. and concurred in by Associate Justices Buenaventura J. Guerrero and Regalado E. Maambong.

3 Id. at 55-58.

4 Id. at 137-142.

5 Id. at 145-148.

6 Id. at 67-81. The Affidavit of Service attached to the Petition filed by private respondent with the Court of Appeals indicates that the pleading was served on petitioner himself at his address in San Francisco, Buhi, Camarines Sur.

7 Sec. 2. Filing and service, defined.?Filing is the act of presenting the pleading or other paper to the clerk of court.

Service is the act of providing a party with a copy of the pleading or paper concerned. If any party has appeared by counsel, service upon him shall be made upon his counsel or one of them, unless service upon the party himself is ordered by the court. Where one counsel appears for several parties, he shall only be entitled to one copy of any paper served upon him by the opposite side.

8 Mancenido v. Court of Appeals, 386 Phil. 627 (2000); See also National Power Corporation v. Tac-an, 445 Phil. 515 (2003).

9 Pure Foods Corporation v. NLRC, G.R. No. 78591, March 21, 1989, 171 SCRA 415, 424; See also D.C. Crystal, Inc. v. Laya, G.R. No. 53597, February 28, 1989, 170 SCRA 734.

10 Pure Foods Corporation v. NLRC, G.R. No. 78591, March 21, 1989, 171 SCRA 415, 425.

11 Martillano v. Court of Appeals, G.R. No. 148277, June 29, 2004, 433 SCRA 195.

G.R. No.

SUPREME COURT
Manila

EN BANC

DECISION

May 31, 2006

G.R. No.
, ,
vs.
, .

, J.:

On 27 February 1931, Governor General Dwight F. Davis issued Proclamation No. 369, establishing the Agusan-Davao-Surigao Forest Reserve consisting of approximately 1,927,400 hectares.1

The disputed area, a rich tract of mineral land, is inside the forest reserve located at Monkayo, Davao del Norte, and Cateel, Davao Oriental, consisting of 4,941.6759 hectares.2 This mineral land is encompassed by Mt. Diwata, which is situated in the municipalities of Monkayo and Cateel. It later became known as the "Diwalwal Gold Rush Area." It has since the early 1980?s been stormed by conflicts brought about by the numerous mining claimants scrambling for gold that lies beneath its bosom.

On 21 November 1983, Camilo Banad and his group, who claimed to have first discovered traces of gold in Mount Diwata, filed a Declaration of Location (DOL) for six mining claims in the area.

Camilo Banad and some other natives pooled their skills and resources and organized the Balite Communal Portal Mining Cooperative (Balite).3

On 12 December 1983, Apex Mining Corporation (Apex) entered into operating agreements with Banad and his group.

From November 1983 to February 1984, several individual applications for mining locations over mineral land covering certain parts of the Diwalwal gold rush area were filed with the Bureau of Mines and Geo-Sciences (BMG).

On 2 February 1984, Marcopper Mining Corporation (MMC) filed 16 DOLs or mining claims for areas adjacent to the area covered by the DOL of Banad and his group. After realizing that the area encompassed by its mining claims is a forest reserve within the coverage of Proclamation No. 369 issued by Governor General Davis, MMC abandoned the same and instead applied for a prospecting permit with the Bureau of Forest Development (BFD).

On 1 July 1985, BFD issued a Prospecting Permit to MMC covering an area of 4,941.6759 hectares traversing the municipalities of Monkayo and Cateel, an area within the forest reserve under Proclamation No. 369. The permit embraced the areas claimed by Apex and the other individual mining claimants.

On 11 November 1985, MMC filed Exploration Permit Application No. 84-40 with the BMG. On 10 March 1986, the BMG issued to MCC Exploration Permit No. 133 (EP 133).

Discovering the existence of several mining claims and the proliferation of small-scale miners in the area covered by EP 133, MMC thus filed on 11 April 1986 before the BMG a Petition for the Cancellation of the Mining Claims of Apex and Small Scale Mining Permit Nos. (x-1)-04 and (x-1)-05 which was docketed as MAC No. 1061. MMC alleged that the areas covered by its EP 133 and the mining claims of Apex were within an established and existing forest reservation (Agusan-Davao-Surigao Forest Reserve) under Proclamation No. 369 and that pursuant to Presidential Decree No. 463,4 acquisition of mining rights within a forest reserve is through the application for a permit to prospect with the BFD and not through registration of a DOL with the BMG.

On 23 September 1986, Apex filed a motion to dismiss MMC?s petition alleging that its mining claims are not within any established or proclaimed forest reserve, and as such, the acquisition of mining rights thereto must be undertaken via registration of DOL with the BMG and not through the filing of application for permit to prospect with the BFD.

On 9 December 1986, BMG dismissed MMC?s petition on the ground that the area covered by the Apex mining claims and MMC?s permit to explore was not a forest reservation. It further declared null and void MMC?s EP 133 and sustained the validity of Apex mining claims over the disputed area.

MMC appealed the adverse order of BMG to the Department of Environment and Natural Resources (DENR).

On 15 April 1987, after due hearing, the DENR reversed the 9 December 1996 order of BMG and declared MMC?s EP 133 valid and subsisting.

Apex filed a Motion for Reconsideration with the DENR which was subsequently denied. Apex then filed an appeal before the Office of the President. On 27 July 1989, the Office of the President, through Assistant Executive Secretary for Legal Affairs, Cancio C. Garcia,5 dismissed Apex?s appeal and affirmed the DENR ruling.

Apex filed a Petition for Certiorari before this Court. The Petition was docketed as G.R. No. 92605 entitled, "Apex Mining Co., Inc. v. Garcia."6 On 16 July 1991, this Court rendered a Decision against Apex holding that the disputed area is a forest reserve; hence, the proper procedure in acquiring mining rights therein is by initially applying for a permit to prospect with the BFD and not through a registration of DOL with the BMG.

On 27 December 1991, then DENR Secretary Fulgencio Factoran, Jr. issued Department Administrative Order No. 66 (DAO No. 66) declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest lands and open to small-scale mining purposes.

As DAO No. 66 declared a portion of the contested area open to small scale miners, several mining entities filed applications for Mineral Production Sharing Agreement (MPSA).

On 25 August 1993, Monkayo Integrated Small Scale Miners Association (MISSMA) filed an MPSA application which was denied by the BMG on the grounds that the area applied for is within the area covered by MMC EP 133 and that the MISSMA was not qualified to apply for an MPSA under DAO No. 82,7 Series of 1990.

On 5 January 1994, Rosendo Villaflor and his group filed before the BMG a Petition for Cancellation of EP 133 and for the admission of their MPSA Application. The Petition was docketed as RED Mines Case No. 8-8-94. Davao United Miners Cooperative (DUMC) and Balite intervened and likewise sought the cancellation of EP 133.

On 16 February 1994, MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), a domestic corporation which is alleged to be a 100% -owned subsidiary of MMC.

On 14 June 1994, Balite filed with the BMG an MPSA application within the contested area that was later on rejected.

On 23 June 1994, SEM filed an MPSA application for the entire 4,941.6759 hectares under EP 133, which was also denied by reason of the pendency of RED Mines Case No. 8-8-94. On 1 September 1995, SEM filed another MPSA application.

On 20 October 1995, BMG accepted and registered SEM?s MPSA application and the Deed of Assignment over EP 133 executed in its favor by MMC. SEM?s application was designated MPSA Application No. 128 (MPSAA 128). After publication of SEM?s application, the following filed before the BMG their adverse claims or oppositions:

a) MAC Case No. 004 (XI) ? JB Management Mining Corporation;

b) MAC Case No. 005(XI) ? Davao United Miners Cooperative;

c) MAC Case No. 006(XI) ? Balite Integrated Small Scale Miner?s Cooperative;

d) MAC Case No. 007(XI) ? Monkayo Integrated Small Scale Miner?s Association, Inc. (MISSMA);

e) MAC Case No. 008(XI) ? Paper Industries Corporation of the Philippines;

f) MAC Case No. 009(XI) ? Rosendo Villafor, et al.;

g) MAC Case No. 010(XI) ? Antonio Dacudao;

h) MAC Case No. 011(XI) ? Atty. Jose T. Amacio;

i) MAC Case No. 012(XI) ? Puting-Bato Gold Miners Cooperative;

j) MAC Case No. 016(XI) ? Balite Communal Portal Mining Cooperative;

k) MAC Case No. 97-01(XI) ? Romeo Altamera, et al.8

To address the matter, the DENR constituted a Panel of Arbitrators (PA) to resolve the following:

(a) The adverse claims on MPSAA No. 128; and

(b) The Petition to Cancel EP 133 filed by Rosendo Villaflor docketed as RED Case No. 8-8-94.9

On 13 June 1997, the PA rendered a resolution in RED Mines Case No. 8-8-94. As to the Petition for Cancellation of EP 133 issued to MMC, the PA relied on the ruling in Apex Mining Co., Inc. v. Garcia,10 and opined that EP 133 was valid and subsisting. It also declared that the BMG Director, under Section 99 of the Consolidated Mines Administrative Order implementing Presidential Decree No. 463, was authorized to issue exploration permits and to renew the same without limit.

With respect to the adverse claims on SEM?s MPSAA No. 128, the PA ruled that adverse claimants? petitions were not filed in accordance with the existing rules and regulations governing adverse claims because the adverse claimants failed to submit the sketch plan containing the technical description of their respective claims, which was a mandatory requirement for an adverse claim that would allow the PA to determine if indeed there is an overlapping of the area occupied by them and the area applied for by SEM. It added that the adverse claimants were not claim owners but mere occupants conducting illegal mining activities at the contested area since only MMC or its assignee SEM had valid mining claims over the area as enunciated in Apex Mining Co., Inc. v. Garcia.11 Also, it maintained that the adverse claimants were not qualified as small-scale miners under DENR Department Administrative Order No. 34 (DAO No. 34),12 or the Implementing Rules and Regulation of Republic Act No. 7076 (otherwise known as the "People?s Small-Scale Mining Act of 1991"), as they were not duly licensed by the DENR to engage in the extraction or removal of minerals from the ground, and that they were large-scale miners. The decretal portion of the PA resolution pronounces:

VIEWED IN THE LIGHT OF THE FOREGOING, the validity of Expoloration Permit No. 133 is hereby reiterated and all the adverse claims against MPSAA No. 128 are DISMISSED.13

Undaunted by the PA ruling, the adverse claimants appealed to the Mines Adjudication Board (MAB). In a Decision dated 6 January 1998, the MAB considered erroneous the dismissal by the PA of the adverse claims filed against MMC and SEM over a mere technicality of failure to submit a sketch plan. It argued that the rules of procedure are not meant to defeat substantial justice as the former are merely secondary in importance to the latter. Dealing with the question on EP 133?s validity, the MAB opined that said issue was not crucial and was irrelevant in adjudicating the appealed case because EP 133 has long expired due to its non-renewal and that the holder of the same, MMC, was no longer a claimant of the Agusan-Davao-Surigao Forest Reserve having relinquished its right to SEM. After it brushed aside the issue of the validity of EP 133 for being irrelevant, the MAB proceeded to treat SEM?s MPSA application over the disputed area as an entirely new and distinct application. It approved the MPSA application, excluding the area segregated by DAO No. 66, which declared 729 hectares within the Diwalwal area as non-forest lands open for small-scale mining. The MAB resolved:

WHEREFORE, PREMISES CONSIDERED, the decision of the Panel of Arbitrators dated 13 June 1997 is hereby VACATED and a new one entered in the records of the case as follows:

1. SEM?s MPSA application is hereby given due course subject to the full and strict compliance of the provisions of the Mining Act and its Implementing Rules and Regulations;

2. The area covered by DAO 66, series of 1991, actually occupied and actively mined by the small-scale miners on or before August 1, 1987 as determined by the Provincial Mining Regulatory Board (PMRB), is hereby excluded from the area applied for by SEM;

3. A moratorium on all mining and mining-related activities, is hereby imposed until such time that all necessary procedures, licenses, permits, and other requisites as provided for by RA 7076, the Mining Act and its Implementing Rules and Regulations and all other pertinent laws, rules and regulations are complied with, and the appropriate environmental protection measures and safeguards have been effectively put in place;

4. Consistent with the spirit of RA 7076, the Board encourages SEM and all small-scale miners to continue to negotiate in good faith and arrive at an agreement beneficial to all. In the event of SEM?s strict and full compliance with all the requirements of the Mining Act and its Implementing Rules and Regulations, and the concurrence of the small-scale miners actually occupying and actively mining the area, SEM may apply for the inclusion of portions of the areas segregated under paragraph 2 hereof, to its MPSA application. In this light, subject to the preceding paragraph, the contract between JB [JB Management Mining Corporation] and SEM is hereby recognized.14

Dissatisfied, the Villaflor group and Balite appealed the decision to this Court. SEM, aggrieved by the exclusion of 729 hectares from its MPSA application, likewise appealed. Apex filed a Motion for Leave to Admit Petition for Intervention predicated on its right to stake its claim over the Diwalwal gold rush which was granted by the Court. These cases, however, were remanded to the Court of Appeals for proper disposition pursuant to Rule 43 of the 1997 Rules of Civil Procedure. The Court of Appeals consolidated the remanded cases as CA-G.R. SP No. 61215 and No. 61216.

In the assailed Decision15 dated 13 March 2002, the Court of Appeals affirmed in toto the decision of the PA and declared null and void the MAB decision.

The Court of Appeals, banking on the premise that the SEM is the agent of MMC by virtue of its assignment of EP 133 in favor of SEM and the purported fact that SEM is a 100% subsidiary of MMC, ruled that the transfer of EP 133 was valid. It argued that since SEM is an agent of MMC, the assignment of EP 133 did not violate the condition therein prohibiting its transfer except to MMC?s duly designated agent. Thus, despite the non-renewal of EP 133 on 6 July 1994, the Court of Appeals deemed it relevant to declare EP 133 as valid since MMC?s mining rights were validly transferred to SEM prior to its expiration.

The Court of Appeals also ruled that MMC?s right to explore under EP 133 is a property right which the 1987 Constitution protects and which cannot be divested without the holder?s consent. It stressed that MMC?s failure to proceed with the extraction and utilization of minerals did not diminish its vested right to explore because its failure was not attributable to it.

Reading Proclamation No. 369, Section 11 of Commonwealth Act 137, and Sections 6, 7, and 8 of Presidential Decree No. 463, the Court of Appeals concluded that the issuance of DAO No. 66 was done by the DENR Secretary beyond his power for it is the President who has the sole power to withdraw from the forest reserve established under Proclamation No. 369 as non-forest land for mining purposes. Accordingly, the segregation of 729 hectares of mining areas from the coverage of EP 133 by the MAB was unfounded.

The Court of Appeals also faulted the DENR Secretary in implementing DAO No. 66 when he awarded the 729 hectares segregated from the coverage area of EP 133 to other corporations who were not qualified as small-scale miners under Republic Act No. 7076.

As to the petitions of Villaflor and company, the Court of Appeals argued that their failure to submit the sketch plan to the PA, which is a jurisdictional requirement, was fatal to their appeal. It likewise stated the Villaflor and company?s mining claims, which were based on their alleged rights under DAO No. 66, cannot stand as DAO No. 66 was null and void. The dispositive portion of the Decision decreed:

WHEREFORE, premises considered, the Petition of Southeast Mindanao Gold Mining Corporation is GRANTED while the Petition of Rosendo Villaflor, et al., is DENIED for lack of merit. The Decision of the Panel of Arbitrators dated 13 June 1997 is AFFIRMED in toto and the assailed MAB Decision is hereby SET ASIDE and declared as NULL and VOID.16

Hence, the instant Petitions for Review on Certiorari under Rule 45 of the Rules of Court filed by Apex, Balite and MAB.

During the pendency of these Petitions, President Gloria Macapagal-Arroyo issued Proclamation No. 297 dated 25 November 2002. This proclamation excluded an area of 8,100 hectares located in Monkayo, Compostela Valley, and proclaimed the same as mineral reservation and as environmentally critical area. Subsequently, DENR Administrative Order No. 2002-18 was issued declaring an emergency situation in the Diwalwal gold rush area and ordering the stoppage of all mining operations therein. Thereafter, Executive Order No. 217 dated 17 June 2003 was issued by the President creating the National Task Force Diwalwal which is tasked to address the situation in the Diwalwal Gold Rush Area.

In G.R. No. 152613 and No. 152628, Apex raises the following issues:

I

WHETHER OR NOT SOUTHEAST MINDANAO GOLD MINING?S [SEM] E.P. 133 IS NULL AND VOID DUE TO THE FAILURE OF MARCOPPER TO COMPLY WITH THE TERMS AND CONDITIONS PRESCRIBED IN EP 133.

II

WHETHER OR NOT APEX HAS A SUPERIOR AND PREFERENTIAL RIGHT TO STAKE IT?S CLAIM OVER THE ENTIRE 4,941 HECTARES AGAINST SEM AND THE OTHER CLAIMANTS PURSUANT TO THE TIME-HONORED PRINCIPLE IN MINING LAW THAT "PRIORITY IN TIME IS PRIORITY IN RIGHT."17

In G.R. No. 152619-20, Balite anchors its petition on the following grounds:

I

WHETHER OR NOT THE MPSA OF SEM WHICH WAS FILED NINE (9) DAYS LATE (JUNE 23, 1994) FROM THE FILING OF THE MPSA OF BALITE WHICH WAS FILED ON JUNE 14, 1994 HAS A PREFERENTIAL RIGHT OVER THAT OF BALITE.

II

WHETHER OR NOT THE DISMISSAL BY THE PANEL OF ARBITRATORS OF THE ADVERSE CLAIM OF BALITE ON THE GROUND THAT BALITE FAILED TO SUBMIT THE REQUIRED SKETCH PLAN DESPITE THE FACT THAT BALITE, HAD IN FACT SUBMITTED ON TIME WAS A VALID DISMISSAL OF BALITE?S ADVERSE CLAIM.

III

WHETHER OR NOT THE ACTUAL OCCUPATION AND SMALL-MINING OPERATIONS OF BALITE PURSUANT TO DAO 66 IN THE 729 HECTARES WHICH WAS PART OF THE 4,941.6759 HECTARES COVERED BY ITS MPSA WHICH WAS REJECTED BY THE BUREAU OF MINES AND GEOSCIENCES WAS ILLEGAL.18

In G.R. No. 152870-71, the MAB submits two issues, to wit:

I

WHETHER OR NOT EP NO. 133 IS STILL VALID AND SUBSISTING.

II

WHETHER OR NOT THE SUBSEQUENT ACTS OF THE GOVERNMENT SUCH AS THE ISSUANCE OF DAO NO. 66, PROCLAMATION NO. 297, AND EXECUTIVE ORDER 217 CAN OUTWEIGH EP NO. 133 AS WELL AS OTHER ADVERSE CLAIMS OVER THE DIWALWAL GOLD RUSH AREA.19

The common issues raised by petitioners may be summarized as follows:

I. Whether or not the Court of Appeals erred in upholding the validity and continuous existence of EP 133 as well as its transfer to SEM;

II. Whether or not the Court of Appeals erred in declaring that the DENR Secretary has no authority to issue DAO No. 66; and

III. Whether or not the subsequent acts of the executive department such as the issuance of Proclamation No. 297, and DAO No. 2002-18 can outweigh Apex and Balite?s claims over the Diwalwal Gold Rush Area.

On the first issue, Apex takes exception to the Court of Appeals? ruling upholding the validity of MMC?s EP 133 and its subsequent transfer to SEM asserting that MMC failed to comply with the terms and conditions in its exploration permit, thus, MMC and its successor-in-interest SEM lost their rights in the Diwalwal Gold Rush Area. Apex pointed out that MMC violated four conditions in its permit. First, MMC failed to comply with the mandatory work program, to complete exploration work, and to declare a mining feasibility. Second, it reneged on its duty to submit an Environmental Compliance Certificate. Third, it failed to comply with the reportorial requirements. Fourth, it violated the terms of EP 133 when it assigned said permit to SEM despite the explicit proscription against its transfer.

Apex likewise emphasizes that MMC failed to file its MPSA application required under DAO No. 8220 which caused its exploration permit to lapse because DAO No. 82 mandates holders of exploration permits to file a Letter of Intent and a MPSA application not later than 17 July 1991. It said that because EP 133 expired prior to its assignment to SEM, SEM?s MPSA application should have been evaluated on its own merit.

As regards the Court of Appeals recognition of SEM?s vested right over the disputed area, Apex bewails the same to be lacking in statutory bases. According to Apex, Presidential Decree No. 463 and Republic Act No. 7942 impose upon the claimant the obligation of actually undertaking exploration work within the reserved lands in order to acquire priority right over the area. MMC, Apex claims, failed to conduct the necessary exploration work, thus, MMC and its successor-in-interest SEM lost any right over the area.

In its Memorandum, Balite maintains that EP 133 of MMC, predecessor-in-interest of SEM, is an expired and void permit which cannot be made the basis of SEM?s MPSA application.

Similarly, the MAB underscores that SEM did not acquire any right from MMC by virtue of the transfer of EP 133 because the transfer directly violates the express condition of the exploration permit stating that "it shall be for the exclusive use and benefit of the permittee or his duly authorized agents." It added that while MMC is the permittee, SEM cannot be considered as MMC?s duly designated agent as there is no proof on record authorizing SEM to represent MMC in its business dealings or undertakings, and neither did SEM pursue its interest in the permit as an agent of MMC. According to the MAB, the assignment by MMC of EP 133 in favor of SEM did not make the latter the duly authorized agent of MMC since the concept of an agent under EP 133 is not equivalent to the concept of assignee. It finds fault in the assignment of EP 133 which lacked the approval of the DENR Secretary in contravention of Section 25 of Republic Act No. 794221 requiring his approval for a valid assignment or transfer of exploration permit to be valid.

SEM, on the other hand, counters that the errors raised by petitioners Apex, Balite and the MAB relate to factual and evidentiary matters which this Court cannot inquire into in an appeal by certiorari.

The established rule is that in the exercise of the Supreme Court?s power of review, the Court not being a trier of facts, does not normally embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the Court of Appeals are conclusive and binding on the Court.22 This rule, however, admits of exceptions as recognized by jurisprudence, to wit:

(1) [w]hen the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner?s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.23

Also, in the case of Manila Electric Company v. Benamira,24 the Court in a Petition for Review on Certiorari, deemed it proper to look deeper into the factual circumstances of the case since the Court of Appeal?s findings are at odds to those of the National Labor Relations Commission (NLRC). Just like in the foregoing case, it is this Court?s considered view that a re-evaluation of the attendant facts surrounding the present case is appropriate considering that the findings of the MAB are in conflict with that of the Court of Appeals.

I

At the threshold, it is an undisputed fact that MMC assigned to SEM all its rights under EP 133 pursuant to a Deed of Assignment dated 16 February 1994.25

EP 133 is subject to the following terms and conditions26 :

1. That the permittee shall abide by the work program submitted with the application or statements made later in support thereof, and which shall be considered as conditions and essential parts of this permit;

2. That permittee shall maintain a complete record of all activities and accounting of all expenditures incurred therein subject to periodic inspection and verification at reasonable intervals by the Bureau of Mines at the expense of the applicant;

3. That the permittee shall submit to the Director of Mines within 15 days after the end of each calendar quarter a report under oath of a full and complete statement of the work done in the area covered by the permit;

4. That the term of this permit shall be for two (2) years to be effective from this date, renewable for the same period at the discretion of the Director of Mines and upon request of the applicant;

5. That the Director of Mines may at any time cancel this permit for violation of its provision or in case of trouble or breach of peace arising in the area subject hereof by reason of conflicting interests without any responsibility on the part of the government as to expenditures for exploration that might have been incurred, or as to other damages that might have been suffered by the permittee; and

6. That this permit shall be for the exclusive use and benefit of the permittee or his duly authorized agents and shall be used for mineral exploration purposes only and for no other purpose.

Under Section 9027 of Presidential Decree No. 463, the applicable statute during the issuance of EP 133, the DENR Secretary, through Director of BMG, is charged with carrying out the said law. Also, under Commonwealth Act No. 136, also known as "An Act Creating The Bureau of Mines," which was approved on 7 November 1936, the Director of Mines has the direct charge of the administration of the mineral lands and minerals, and of the survey, classification, lease or any other form of concession or disposition thereof under the Mining Act.28 This power of administration includes the power to prescribe terms and conditions in granting exploration permits to qualified entities. Thus, in the grant of EP 133 in favor of the MMC, the Director of the BMG acted within his power in laying down the terms and conditions attendant thereto.

Condition number 6 categorically states that the permit shall be for the exclusive use and benefit of MMC or its duly authorized agents. While it may be true that SEM, the assignee of EP 133, is a 100% subsidiary corporation of MMC, records are bereft of any evidence showing that the former is the duly authorized agent of the latter. For a contract of agency to exist, it is essential that the principal consents that the other party, the agent, shall act on its behalf, and the agent consents so as to act.29 In the case of Yu Eng Cho v. Pan American World Airways, Inc.,30 this Court had the occasion to set forth the elements of agency, viz:

(1) consent, express or implied, of the parties to establish the relationship;

(2) the object is the execution of a juridical act in relation to a third person;
(3) the agent acts as a representative and not for himself;
(4) the agent acts within the scope of his authority.

The existence of the elements of agency is a factual matter that needs to be established or proven by evidence. The burden of proving that agency is extant in a certain case rests in the party who sets forth such allegation. This is based on the principle that he who alleges a fact has the burden of proving it.31 It must likewise be emphasized that the evidence to prove this fact must be clear, positive and convincing.32
In the instant Petitions, it is incumbent upon either MMC or SEM to prove that a contract of agency actually exists between them so as to allow SEM to use and benefit from EP 133 as the agent of MMC. SEM did not claim nor submit proof that it is the designated agent of MMC to represent the latter in its business dealings or undertakings. SEM cannot, therefore, be considered as an agent of MMC which can use EP 133 and benefit from it. Since SEM is not an authorized agent of MMC, it goes without saying that the assignment or transfer of the permit in favor of SEM is null and void as it directly contravenes the terms and conditions of the grant of EP 133.
Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts not on his own behalf but on behalf of his principal.33 While in assignment, there is total transfer or relinquishment of right by the assignor to the assignee.34 The assignee takes the place of the assignor and is no longer bound to the latter. The deed of assignment clearly stipulates:
1. That for ONE PESO (P1.00) and other valuable consideration received by the ASSIGNOR from the ASSIGNEE, the ASSIGNOR hereby ASSIGNS, TRANSFERS and CONVEYS unto the ASSIGNEE whatever rights or interest the ASSIGNOR may have in the area situated in Monkayo, Davao del Norte and Cateel, Davao Oriental, identified as Exploration Permit No. 133 and Application for a Permit to Prospect in Bunawan, Agusan del Sur respectively.35
Bearing in mind the just articulated distinctions and the language of the Deed of Assignment, it is readily obvious that the assignment by MMC of EP 133 in favor of SEM did not make the latter the former?s agent. Such assignment involved actual transfer of all rights and obligations MMC have under the permit in favor of SEM, thus, making SEM the permittee. It is not a mere grant of authority to SEM, as an agent of MMC, to use the permit. It is a total abdication of MMC?s rights over the permit. Hence, the assignment in question did not make SEM the authorized agent of MMC to make use and benefit from EP 133.
The condition stipulating that the permit is for the exclusive use of the permittee or its duly authorized agent is not without any reason. Exploration permits are strictly granted to entities or individuals possessing the resources and capability to undertake mining operations. Without such a condition, non-qualified entities or individuals could circumvent the strict requirements under the law by the simple expediency acquiring the permit from the original permittee.
We cannot lend recognition to the Court of Appeals? theory that SEM, being a 100% subsidiary of MMC, is automatically an agent of MMC.
A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence.36 It is an artificial being invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related.37 Resultantly, absent any clear proof to the contrary, SEM is a separate and distinct entity from MMC.
The Court of Appeals pathetically invokes the doctrine of piercing the corporate veil to legitimize the prohibited transfer or assignment of EP 133. It stresses that SEM is just a business conduit of MMC, hence, the distinct legal personalities of the two entities should not be recognized. True, the corporate mask may be removed when the corporation is just an alter ego or a mere conduit of a person or of another corporation.38 For reasons of public policy and in the interest of justice, the corporate veil will justifiably be impaled only when it becomes a shield for fraud, illegality or inequity committed against a third person.39 However, this Court has made a caveat in the application of the doctrine of piercing the corporate veil. Courts should be mindful of the milieu where it is to be applied. Only in cases where the corporate fiction was misused to such an extent that injustice, fraud or crime was committed against another, in disregard of its rights may the veil be pierced and removed. Thus, a subsidiary corporation may be made to answer for the liabilities and/or illegalities done by the parent corporation if the former was organized for the purpose of evading obligations that the latter may have entered into. In other words, this doctrine is in place in order to expose and hold liable a corporation which commits illegal acts and use the corporate fiction to avoid liability from the said acts. The doctrine of piercing the corporate veil cannot therefore be used as a vehicle to commit prohibited acts because these acts are the ones which the doctrine seeks to prevent.
To our mind, the application of the foregoing doctrine is unwarranted. The assignment of the permit in favor of SEM is utilized to circumvent the condition of non-transferability of the exploration permit. To allow SEM to avail itself of this doctrine and to approve the validity of the assignment is tantamount to sanctioning illegal act which is what the doctrine precisely seeks to forestall.
Quite apart from the above, a cursory consideration of the mining law pertinent to the case, will, indeed, demonstrate the infraction committed by MMC in its assignment of EP 133 to SEM.
Presidential Decree No. 463, enacted on 17 May 1974, otherwise known as the Mineral Resources Development Decree, which governed the old system of exploration, development, and utilization of mineral resources through "license, concession or lease" prescribed:
SEC. 97. Assignment of Mining Rights. ? A mining lease contract or any interest therein shall not be transferred, assigned, or subleased without the prior approval of the Secretary: Provided, That such transfer, assignment or sublease may be made only to a qualified person possessing the resources and capability to continue the mining operations of the lessee and that the assignor has complied with all the obligations of the lease: Provided, further, That such transfer or assignment shall be duly registered with the office of the mining recorder concerned. (Emphasis supplied.)
The same provision is reflected in Republic Act No. 7942, otherwise known as the Philippine Mining Act of 1995, which is the new law governing the exploration, development and utilization of the natural resources, which provides:
SEC. 25. Transfer or Assignment. – An exploration permit may be transferred or assigned to a qualified person subject to the approval of the Secretary upon the recommendation of the Director.
The records are bereft of any indication that the assignment bears the imprimatur of the Secretary of the DENR. Presidential Decree No. 463, which is the governing law when the assignment was executed, explicitly requires that the transfer or assignment of mining rights, including the right to explore a mining area, must be with the prior approval of the Secretary of DENR. Quite conspicuously, SEM did not dispute the allegation that the Deed of Assignment was made without the prior approval of the Secretary of DENR. Absent the prior approval of the Secretary of DENR, the assignment of EP 133, was, therefore, without legal effect for violating the mandatory provision of Presidential Decree No. 463.
An added significant omission proved fatal to MMC/SEM?s cause. While it is true that the case of Apex Mining Co., Inc. v. Garcia40 settled the issue of which between Apex and MMC validly acquired mining rights over the disputed area, such rights, though, had been extinguished by subsequent events. Records indicate that on 6 July 1993, EP 133 was extended for 12 months or until 6 July 1994.41 MMC never renewed its permit prior and after its expiration. Thus, EP 133 expired by non-renewal.
With the expiration of EP 133 on 6 July 1994, MMC lost any right to the Diwalwal Gold Rush Area. SEM, on the other hand, has not acquired any right to the said area because the transfer of EP 133 in its favor is invalid. Hence, both MMC and SEM have not acquired any vested right over the 4,941.6759 hectares which used to be covered by EP 133.
II
The Court of Appeals theorizes that DAO No. 66 was issued beyond the power of the DENR Secretary since the power to withdraw lands from forest reserves and to declare the same as an area open for mining operation resides in the President.
Under Proclamation No. 369 dated 27 February 1931, the power to convert forest reserves as non-forest reserves is vested with the DENR Secretary. Proclamation No. 369 partly states:
From this reserve shall be considered automatically excluded all areas which had already been certified and which in the future may be proclaimed as classified and certified lands and approved by the Secretary of Agriculture and Natural Resources.42
However, a subsequent law, Commonwealth Act No. 137, otherwise known as "The Mining Act" which was approved on 7 November 1936 provides:
Sec. 14. Lands within reservations for purposes other than mining, which, after such reservation is made, are found to be more valuable for their mineral contents than for the purpose for which the reservation was made, may be withdrawn from such reservations by the President with the concurrence of the National Assembly, and thereupon such lands shall revert to the public domain and be subject to disposition under the provisions of this Act.
Unlike Proclamation No. 369, Commonwealth Act No. 137 vests solely in the President, with the concurrence of the National Assembly, the power to withdraw forest reserves found to be more valuable for their mineral contents than for the purpose for which the reservation was made and convert the same into non-forest reserves. A similar provision can also be found in Presidential Decree No. 463 dated 17 May 1974, with the modifications that (1) the declaration by the President no longer requires the concurrence of the National Assembly and (2) the DENR Secretary merely exercises the power to recommend to the President which forest reservations are to be withdrawn from the coverage thereof. Section 8 of Presidential Decree No. 463 reads:
SEC. 8. Exploration and Exploitation of Reserved Lands. ? When lands within reservations, which have been established for purposes other than mining, are found to be more valuable for their mineral contents, they may, upon recommendation of the Secretary be withdrawn from such reservation by the President and established as a mineral reservation.
Against the backdrop of the applicable statutes which govern the issuance of DAO No. 66, this Court is constrained to rule that said administrative order was issued not in accordance with the laws. Inescapably, DAO No. 66, declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest land open to small-scale mining operations, is null and void as, verily, the DENR Secretary has no power to convert forest reserves into non-forest reserves.
III
It is the contention of Apex that its right over the Diwalwal gold rush area is superior to that of MMC or that of SEM because it was the first one to occupy and take possession of the area and the first to record its mining claims over the area.
For its part, Balite argues that with the issuance of DAO No. 66, its occupation in the contested area, particularly in the 729 hectares small-scale mining area, has entitled it to file its MPSA. Balite claims that its MPSA application should have been given preference over that of SEM because it was filed ahead.
The MAB, on the other hand, insists that the issue on who has superior right over the disputed area has become moot and academic by the supervening events. By virtue of Proclamation No. 297 dated 25 November 2002, the disputed area was declared a mineral reservation.
Proclamation No. 297 excluded an area of 8,100 hectares located in Monkayo, Compostela Valley, and proclaimed the same as mineral reservation and as environmentally critical area, viz:
WHEREAS, by virtue of Proclamation No. 369, series of 1931, certain tracts of public land situated in the then provinces of Davao, Agusan and Surigao, with an area of approximately 1,927,400 hectares, were withdrawn from settlement and disposition, excluding, however, those portions which had been certified and/or shall be classified and certified as non-forest lands;
WHEREAS, gold deposits have been found within the area covered by Proclamation No. 369, in the Municipality of Monkayo, Compostela Valley Province, and unregulated small to medium-scale mining operations have, since 1983, been undertaken therein, causing in the process serious environmental, health, and peace and order problems in the area;
WHEREAS, it is in the national interest to prevent the further degradation of the environment and to resolve the health and peace and order problems spawned by the unregulated mining operations in the said area;
WHEREAS, these problems may be effectively addressed by rationalizing mining operations in the area through the establishment of a mineral reservation;
WHEREAS, after giving due notice, the Director of Mines and Geoxciences conducted public hearings on September 6, 9 and 11, 2002 to allow the concerned sectors and communities to air their views regarding the establishment of a mineral reservation in the place in question;
WHEREAS, pursuant to the Philippine Mining Act of 1995 (RA 7942), the President may, upon the recommendation of the Director of Mines and Geosciences, through the Secretary of Environment and Natural Resources, and when the national interest so requires, establish mineral reservations where mining operations shall be undertaken by the Department directly or thru a contractor;
WHEREAS, as a measure to attain and maintain a rational and orderly balance between socio-economic growth and environmental protection, the President may, pursuant to Presidential Decree No. 1586, as amended, proclaim and declare certain areas in the country as environmentally critical;
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Philippines, upon recommendation of the Secretary of the Department of Environment and Natural Resources (DENR), and by virtue of the powers vested in me by law, do hereby exclude certain parcel of land located in Monkayo, Compostela Valley, and proclaim the same as mineral reservation and as environmentally critical area, with metes and bound as defined by the following geographical coordinates;
x x x x
with an area of Eight Thousand One Hundred (8,100) hectares, more or less. Mining operations in the area may be undertaken either by the DENR directly, subject to payment of just compensation that may be due to legitimate and existing claimants, or thru a qualified contractor, subject to existing rights, if any.
The DENR shall formulate and issue the appropriate guidelines, including the establishment of an environmental and social fund, to implement the intent and provisions of this Proclamation.
Upon the effectivity of the 1987 Constitution, the State assumed a more dynamic role in the exploration, development and utilization of the natural resources of the country.43 With this policy, the State may pursue full control and supervision of the exploration, development and utilization of the country?s natural mineral resources. The options open to the State are through direct undertaking or by entering into co-production, joint venture, or production-sharing agreements, or by entering into agreement with foreign-owned corporations for large-scale exploration, development and utilization.44 Thus, Article XII, Section 2, of the 1987 Constitution, specifically states:
SEC. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. x x x
x x x x
The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. x x x (Underscoring supplied.)
Recognizing the importance of the country?s natural resources, not only for national economic development, but also for its security and national defense, Section 5 of Republic Act No. 7942 empowers the President, when the national interest so requires, to establish mineral reservations where mining operations shall be undertaken directly by the State or through a contractor.
To implement the intent and provisions of Proclamation No. 297, the DENR Secretary issued DAO No. 2002-18 dated 12 August 2002 declaring an emergency situation in the Diwalwal Gold Rush Area and ordering the stoppage of all mining operations therein.
The issue on who has priority right over the disputed area is deemed overtaken by the above subsequent developments particularly with the issuance of Proclamation 297 and DAO No. 2002-18, both being constitutionally-sanctioned acts of the Executive Branch. Mining operations in the Diwalwal Mineral Reservation are now, therefore, within the full control of the State through the executive branch. Pursuant to Section 5 of Republic Act No. 7942, the State can either directly undertake the exploration, development and utilization of the area or it can enter into agreements with qualified entities, viz:
SEC 5. Mineral Reservations. ? When the national interest so requires, such as when there is a need to preserve strategic raw materials for industries critical to national development, or certain minerals for scientific, cultural or ecological value, the President may establish mineral reservations upon the recommendation of the Director through the Secretary. Mining operations in existing mineral reservations and such other reservations as may thereafter be established, shall be undertaken by the Department or through a contractor x x x .
It is now up to the Executive Department whether to take the first option, i.e., to undertake directly the mining operations of the Diwalwal Gold Rush Area. As already ruled, the State may not be precluded from considering a direct takeover of the mines, if it is the only plausible remedy in sight to the gnawing complexities generated by the gold rush. The State need be guided only by the demands of public interest in settling on this option, as well as its material and logistic feasibility.45 The State can also opt to award mining operations in the mineral reservation to private entities including petitioners Apex and Balite, if it wishes. The exercise of this prerogative lies with the Executive Department over which courts will not interfere.
WHEREFORE, premises considered, the Petitions of Apex, Balite and the MAB are PARTIALLY GRANTED, thus:

1. We hereby REVERSE and SET ASIDE the Decision of the Court of Appeals, dated 13 March 2002, and hereby declare that EP 133 of MMC has EXPIRED on 7 July 1994 and that its subsequent transfer to SEM on 16 February 1994 is VOID.
2. We AFFIRM the finding of the Court of Appeals in the same Decision declaring DAO No. 66 illegal for having been issued in excess of the DENR Secretary?s authority.

Consequently, the State, should it so desire, may now award mining operations in the disputed area to any qualified entity it may determine. No costs.
SO ORDERED.
MINITA V. CHICO-NAZARIOAssociate Justice
WE CONCUR:
ARTEMIO V. PANGANIBANChief JusticeChairperson

CONSUELO YNARES-SANTIAGOAssociate Justice
MA. ALICIA AUSTRIA-MARTINEZAsscociate Justice
ROMEO J. CALLEJO, SR.Associate Justice
C E R T I F I C A T I O N
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.
ARTEMIO V. PANGANIBANChief Justice

Footnotes

1 Records, Vol. 2, pp. 7-11.
2 Id., Vol.1, p. 90.
3 Rollo of G.R. No. 152619-20, p. 68.
4 Sec. 13. Areas Closed to Mining Location. – No prospecting and exploration shall be allowed:

a) In military, or other Government reservations except when authorized by the proper Government agency concerned; x x x. (Apex Mining Co., Inc. v. Garcia, G.R. No. 92605, 16 July 1991, 199 SCRA 278, 284.)

5 Now Associate Justice of the Supreme Court.
6 Supra note 4.
7 It provides for the procedural guidelines on the award of MPSA through negotiation. It further sets forth the requirements that applicants for MPSA applications shall comply and submit before the proper authority.
8 Rollo of G.R. No. 152870-71, pp. 144-146.
9 Id. at 76.
10 Supra note 4.
11 Id.
12 DAO No. 34 defines small-scale miners as "Filipino citizens who individually or in the company of other Filipino citizens, voluntarily form a cooperative duly licensed by the DENR to engage, under the terms and conditions of a contract/license in the extraction or removal of minerals or ore-bearing materials from the ground."
13 Rollo of G.R. No. 152870-71, p. 161.
14 Rollo of G.R. No. 152870-71, pp. 141-142.
15 Penned by Associate Justice Alicia L. Santos with Associate Justices Cancio C. Garcia and Marina L. Buzon, concurring.
16 Rollo of G.R. No. 152619-20, p. 55.
17 Rollo of G.R. No. 152613 and No. 152628, p. 731.
18 Id. at 703-704.
19 Rollo of G.R. No. 152870-71, p. 916.
20 Otherwise known as the Procedural Guidelines On the Award Of Mineral Production Sharing Agreement (MPSA) Through Negotiation provides:

Section 3. Submission of Letter of Intent (LOIs) and MPSAs.
The following shall submit their LOIs and MPSAs within two (2) years from the effectivity of DENR A.O. 57 or until July 17, 1991.

1. Declaration of Location (DOL) holders, mining lease applicants, exploration permitees, quarry applicants and other mining applicants whose mining/quarry applications have not been perfected prior to the effectivity of DENR Administrative Order No. 57.
2. All holders of DOL acquired after the effectivity of DENR A.O. No. 57.

x x x x
Failure to submit letters of intent and MPSA applications/proposals within the prescribed period shall cause the abandonment of mining, quarry and sand and gravel claims.

21 Republic Act No. 7942 is also known as the "Philippine Mining Act of 1995."
22 New City Builders, Inc. v. National Labor Relations Commission, G.R. No. 149281, 15 June 2005, 460 SCRA 220, 227.
23 The Insular Life Assurance Company, Ltd. v. Court of Appeals, G.R. No. 126850, 28 April 2004, 428 SCRA 79, 86; Manila Electric Company v. Benamira, G.R. No. 145271, 14 July 2005, 463 SCRA 331, 347-348; Aguirre v. Court of Appeals, G.R. No. 122249, 29 January 2004, 421 SCRA 310, 319.
24 Manila Electric Company v. Benamira, id.
25 Records, Vol. 2, pp. 351-353.
26 Id. at 84-85.
27 Executive Officer.- The Secretary, through the Director, shall be the Executive Officer charged with carrying out the provisions of this Decree. x x x.
28 Commonwealth Act No. 136, Section 3.
29 People v. Yabut, G.R. No. L-42902, 29 April 1977, 76 SCRA 624, 630.
30 G.R. No. 123560, 27 March 2000, 328 SCRA717, 728.
31 Asia Traders Insurance Corporation v. Court of Appeals, G.R. No. 152537, 16 February 2004, 423 SCRA 114, 120.
32 Id.
33 Yu Eng Cho v. Pan American World Airways, Inc., supra note 30.
34 Philippine National Bank v. Court of Appeals, 338 Phil. 795, 817-818 (1997).
35 Records, Vol. 2, p. 352.
36 Corporation Code, Section 2.
37 Yu v. National Labor Relations Commission, 315 Phil. 107, 123 (1995).
38 Lim v. Court of Appeals, 380 Phil. 60, 76 (2000).
39 Philippine National Bank v. Andrada Electric & Engineering Company, 430 Phil. 882, 894 (2002).
40 Supra note 4.
41 Records, Vol. 2, p. 255.
42 Id. at 7.
43 Miners Association of the Philippines, Inc. v. Hon. Factoran, Jr., 310 Phil. 113, 130-131 (1995).
44 Id.; Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining Cooperative, 429 Phil. 668, 683 (2002).
45 Id.

G.R. No.

SUPREME COURT
Manila

EN BANC

DECISION

May 31, 2006

G.R. No.
, ,
vs.
, .

, J.:

This special civil action for certiorari under Rule 65 of the Rules of Court assails the August 25, 2000 resolution1 of the Court of Appeals in CA-G.R. CV No. 66451 (1) granting the motion for writ of execution/writ of possession pending appeal of private respondent Second Bulacan Development Bank (SBDB) and (2) the September 20, 2000 resolution denying petitioner?s motion for reconsideration.

On April 30, 1999, SBDB filed an amended ex-parte petition for issuance of writ of possession over a parcel of land2 purchased by SBDB in a public auction held on August 26, 1999. It was raffled to Branch 148 of the Regional Trial Court (RTC) of Makati City and docketed as Civil Case No. 99-443.

The ex-parte petition alleged that petitioners, spouses Constantino Espiridion and Remedios Espiridion and spouses Renato Ramos and Erlinda Ramos, mortgaged the subject property to SBDB as security for a P4,200,000 loan. They failed to comply with the terms and conditions of the mortgage, hence, SBDB extrajudicially foreclosed the property. SBDB subsequently acquired the property as the lone bidder in the public auction held on August 26, 1997. Petitioners failed to redeem the property within the one-year redemption period. As a consequence, ownership of the property was consolidated in the name of SBDB.

Petitioners anchored their defense on the alleged nullity of the extrajudicial foreclosure sale. They claimed that SBDB failed to comply with several requirements of extrajudicial foreclosure: no application for extrajudicial foreclosure was filed with the office of the clerk of court of the RTC of Makati City; the docket fees were not paid and no raffle of the publication of the notice of foreclosure sale was made.

The trial court declared that it could not rule on the propriety or validity of the foreclosure sale and, as such, presumed that the extrajudicial foreclosure sale was done in a regular manner. It only resolved the issue of SBDB?s entitlement to a writ of possession. Invoking the rule that the purchaser in a foreclosure sale of mortgaged property is entitled to a writ of possession and that it is ministerial on the court to issue such writ upon ex-parte petition by the purchaser, the court a quo granted SBDB?s petition.

Aggrieved, petitioners filed a notice of appeal and elevated the case to the Court of Appeals. SBDB filed a motion for writ of execution/writ of possession pending appeal which the appellate court granted in its August 25, 2000 resolution. Petitioners moved for its reconsideration but the same was denied. Hence, this petition.

Petitioners claim that the Court of Appeals erred or gravely abused its discretion in issuing the writ of execution/possession pending appeal on two grounds: (a) the extrajudicial foreclosure sale was void and (b) no justifiable basis was shown and no bond was posted.

The petition has no merit.

No abuse of discretion may properly be imputed to the appellate court. The issuance of a writ of possession to a purchaser in a public auction is a ministerial act. After the consolidation of title in the buyer?s name for failure of the mortgagor to redeem the property, the writ of possession becomes a matter of right.3 Its issuance to a purchaser in an extrajudicial foreclosure sale is merely a ministerial function.4 The trial court has no discretion on this matter.5 Hence, any talk of discretion in connection with such issuance is misplaced.

A clear line demarcates a discretionary act from a ministerial one. Thus:

The distinction between a ministerial and discretionary act is well delineated. A purely ministerial act or duty is one which an officer or tribunal performs in a given state of facts, in a prescribed manner, in obedience to the mandate of a legal authority, without regard to or the exercise of his own judgment upon the propriety or impropriety of the act done. If the law imposes a duty upon a public officer and gives him the right to decide how or when the duty shall be performed, such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the same requires neither the exercise of official discretion or judgment.6

Clearly, the use of discretion and the performance of a ministerial act are mutually exclusive.

Where the court acts on a matter that is within its jurisdiction, grave abuse of discretion must be shown to nullify the act. In this case, since the issuance of the writ of possession did not involve an exercise of discretion, no abuse of discretion could have been committed by the trial court. Thus, the instant petition for certiorari has no leg to stand on.

The issue of nullity of the extrajudicial foreclosure sale was of no moment. It could not bar the issuance of the writ of possession. As a rule, any question regarding the validity of the mortgage or its foreclosure is not a legal ground for refusing the issuance of a writ of execution/writ of possession.7

The fact that no bond was posted by SBDB was also of no consequence. Since ownership of the property had already been consolidated in the name of the bank, there was nothing legally questionable in the issuance of the writ of possession even if no bond was posted. The posting of a bond as a condition for the issuance of the writ of possession becomes necessary only if it is applied for within one year from the registration of the sale with the register of deeds, i.e., during the redemption period8 inasmuch as ownership has not yet vested on the creditor-mortgagee. After the one-year period, however, the mortgagor loses all interest over it.9 The purchaser, who has a right to possession that extends after the expiration of the redemption period, becomes the absolute owner of the property when no redemption is made.10 Thus, the posting of a bond is no longer needed.11

WHEREFORE, the petition is hereby DISMISSED.

Costs against petitioners.

SO ORDERED.

RENATO C. CORONAAssociate Justice

WE CONCUR:

REYNATO S. PUNOAssociate JusticeChairperson

ANGELINA SANDOVAL-GUTIERREZAssociate Justice

ADOLFO S. AZCUNAAsscociate Justice

CANCIO C. GARCIAAssociate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.

REYNATO S. PUNOAssociate JusticeChairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson?s Attestation, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.

ARTEMIO V. PANGANIBANChief Justice

Footnotes

1 Penned by Associate Justice Eloy R. Bello, Jr. and concurred in by Associate Justices Delilah Vidallon-Magtolis and Elvi John S. Asuncion of the 13th Division of the Court of Appeals; rollo, pp. 23-24.

2 Registered under TCT No. 170136.

3 De Vera v. Agloro, G.R. No. 155673, 14 January 2005, 448 SCRA 203.

4 Id.

5 China Banking Corporation v. Spouses Ordinario, 447 Phil. 557 (2003).

6 Codilla, Sr. v. de Venecia, 442 Phil. 139 (2002).

7 Supra at note 3.

8 Section 7, Act No. 3135.

9 Sps. Yulienco v. Court of Appeals, 441 Phil. 397 (2002).

10 Samson v. Rivera, G.R. No. 154355, 20 May 2004, 498 SCRA 759.

11 Cf. De Vera v. Agloro, supra.

G.R. No.

SUPREME COURT
Manila

EN BANC

DECISION

May 31, 2006

G.R. No.
, ,
vs.
, .

, J.:

Felipe Buenaventura, who was twice married, died intestate on January 10, 1954. He was survived by his children, one of whom is Atty. Beethoven Buenaventura, a recognized natural son.1

The inventory of Felipe’s estate showed that he owned twenty (20) parcels of land located in Ilog, Negros Occidental and a building of strong materials:

I N V E N T O R Y

LOTS NOS.LOCATIONASSESSED VALUE

1.Lot #238 Rizal St., Dancalan, Ilog, Neg. Occ. P 390.00

2. 1809 Vista Alegre, Ilog, Neg. Occ. 2,780.00

3. 1863-A " " " " " 4,830.00

4. 1863-B " " " " " 10,360.00

5. 1869 " " " " " 1,590.00

6. 1871-B " " " " " 37,460.00

7. 1882 Dancalan, Ilog, Neg. Occ. 110.00

8. 1894 " " " " 2,240.00

9. 1902 Vista Alegre, Ilog, Neg. Occ. 70.00

10. 1933 " " " " " 6,600.00

11. 2046 " " " " " 5,030.00

12. 2048 Dancalan, Ilog, Neg. Occ. 5,830.00

13. 2073 " " " " 9,280.00

14. 2194 Calubang, Ilog, Neg. Occ. 5,530.00

15. 2270 " " " " 1,250.00

16. 2380 Gusa, Calubang, Ilog, Neg. Occ. 110.00

17. 2655 Hda. Rosario, Ilog, Neg. Occ. 650.00

18. 2653 Vista Alegre, Ilog, Neg. Occ. 110.00

19. 1046 Camansi, Ilog, Neg. Occ. 1,280.00

20. 2271 Dancalan, Ilog, Neg. Occ. 200.00

B U I L D I N G

1.House of strong materials situated in Dancalan, Ilog, Neg. Occ. 7,000.00

COLLECTIBLE ACCOUNT

From Alcibiades Mombay, La Carlota, Neg. Occ. 1,425.00

Total P104,125.002

Lot No. 2194 was being cultivated by two agricultural tenants.

Anacoreta B. Francisco, one of the children of the deceased by his first wife, filed a Petition in the Regional Trial Court (RTC) of Kabankalan, Negros Occidental, for the settlement of the estate and for appointment as administratrix. In due course, the intestate court appointed her as administratrix. She, in turn, appointed her son, Michael Francisco, as her "encargado."3 Anacoreta left for the United States in 1987.

On October 24, 1966, the RTC issued an Order listing and declaring the children and lawful heirs of the deceased by his first wife, namely:

1. Pedro Buenaventura; aged 57; Dancalan, Ilog, Negros Occidental.

2. Nicasia Buenaventura; aged 55; Dancalan, Ilog, Negros Occidental.

3. Flora Buenaventura; aged 54; Dancalan, Ilog, Negros Occidental.

4. Anacor[e]ta Buenaventura; aged 53; 2-B, Urma Drive, Baltao Subdiv., Parañaque, Rizal.

5. Luz Buenaventura; aged 52; Dancalan, Ilog, Negros Occidental.

6. Emilia Buenaventura; aged 51; Dancalan, Ilog, Negros Occidental.

7. Simon Buenaventura, Sr.; who died during the Japanese Occupation; represented by his widow and children, to wit:

(a) Carmen Meñez; widow; aged 66; Center St., Sampaloc, Manila.

(b) Simon Buenaventura, Jr.; aged 37; Center St., Sampaloc, Manila.

(c) Agnes Buenaventura; aged 36; Center St., Sampaloc, Manila.

(d) Teresita Buenaventura; aged 35; Center St., Sampaloc, Manila.

(e) Mila Buenaventura; aged 26; Center St., Sampaloc, Manila.4

The RTC also listed the children and lawful heirs of the deceased by his second wife:

1. Purisima Buenaventura; aged 38; Dancalan, Ilog, Negros Occidental.

2. Rodolfo Buenaventura; aged 37; Central Bacolod-Murcia, Bacolod City.

3. Thelma Buenaventura; aged 36; Aguisan, Himamaylan, Negros Occidental.

4. Phoebe Buenaventura; aged 35; San Jose, Antique.

5. Jose Buenaventura; aged 34; Central Bacolod-Murcia, Bacolod City.

6. Antonio Buenaventura; aged 33; c/o Rodolfo Buenaventura, Bacolod-Murcia, Bacolod City.

7. Sally Buenaventura; aged 26; San Jose, Antique.5

In the meantime, some of the heirs sold their undivided shares in the estate. One of the vendees was the Ilog Agricultural Corporation (IAC) which acquired an undivided 18/29 portion in the share of nine of the heirs, including Lot Nos. 2194 and 2380.6 Another assignee, Manuel A. Gomez, who, along with IAC, intervened in the case, and the intestate court ordered the substitution of parties.7

Appointed as Joint Special Administrators were Arnulfo Nono and Angel Gabriel, who submitted a Project of Partition8 of the estate dated October 9, 1972 indicating the respective share of each heir:

1. To NICASIA BUENAVENTURA 2/29 shares

2. To FLORA BUENAVENTURA 2/29 shares

3. To ANACOR[E]TA BUENAVENTURA 2/29 shares

4. To LUZ BUENAVENTURA 2/29 shares

5. To EMILIA BUENAVENTURA 2/29 shares

6. To PEDRO BUENAVENTURA 2/29 shares from which shall be taken 4 has. of sugar land and 2 has. of rice land he sold to intervenor, Manuel A. Gomez, and which shall go to the latter.

7. To BEETHOVEN BUENAVENTURA 1/29 share

8. To the intervenor MANUEL A. GOMEZ 16/29 shares to which shall be added 4 has. of sugar land and 2 has. of rice land to be taken from the 2/29 shares of Pedro Buenaventura.9

On March 6, 1973, the RTC issued an Order10 approving the Project of Partition, subject to the submission of the report of accounts of said special administrators.

In an Order dated December 21, 1990, the RTC appointed Michael B. Francisco, Atty. Beethoven Buenaventura, and Atty. Nilo Sorbito, the counsel of the IAC, as "Commissioners or Special Administrators for the purpose of preparing a physical partition of the estate" based on the already approved project of partition.

On November 27, 1991, Attys. Sorbito and Buenaventura submitted a Joint Motion for the approval of the physical partition of the estate as shown in the sketch plan appended thereto, where Nicasia Buenaventura was allotted Lot No. 1871-B, while Lot No. 2194 was allotted to the IAC:

REAL PROPERTIES

TOTAL AREA 98.6676 hectares, more or less.

NAME OF HEIRSHARE IN HECTARES

1. Nicasia Buenaventura2/29th shares 7.7247 hectares, more or less.

2/29th shares 7.7247 hectares, more or less.

(per deed of sale executed byher late sister, Flora, while yet alive)

TOTAL – 15.4494 hectares, more or less.

2.Anacoreta Buenaventura 2/29th shares 7.7247 hectares, more or less.

3.Emilia Buenaventura 2/29th shares 7.7247 hectares, more or less.

4.Pedro Buenaventura Unsold share 1.6132 hectares, more or less.

5.Simon, Purisima, Rodolfo, Thelma, Jose, Febe, Sally & Antonio (all surnamed Buenaventura) 1/8th share each (.6132 hectares) (their shares from deceased sister, Luz Buenaventura 4.9051 hectares, more or less.

6.Beethoven Buenaventura1/29th share 3.8657 hectares, more or less.

7.Ilog Agricultural Corporation18/29th shares(Shares bought from the nine (9)surviving legal heirs, namely,Simon, Pedro, Purisima, Rodolfo,Thelma, Jose, Febe, Sally & Antonio 57.3840 hectares, more or less.11

In an Order12 dated December 20, 1991, the intestate court declared that, while Special Administrator Michael Francisco did not sign the Joint Motion, it was taking judicial notice of the fact that he actively participated in the preparation of the sketch plan.

Michael, however, objected to the partition on the ground that it was incomplete and erroneous. In his Compliance13 to the intestate court’s directive to state his objections in writing, he alleged that IAC had occupied Lot No. 2194 long before the approval of the project of partition, and that the agreement was for IAC to cede Lot Nos. 2194 and 2380 in favor of Anacoreta and Beethoven in exchange for the latter’s share in Lot No. 1863-B. He also claimed that IAC had already harvested the produce therefrom. The pleading contained the following prayer:

WHEREFORE, in view of the foregoing premises, it is respectfully prayed of the Honorable Court that the Order of December 20, 1991 be set aside and that the special administrators be ordered to submit a new project of partition as reflected in a new sketch plan after all the foregoing grounds for objection as enumerated in this COMPLIANCE are threshed and ironed out.14

In view of this objection, Attys. Sorbito and Buenaventura submitted a new parcellary map for the physical partition of the estate. On October 30, 1992, a conference was held among the parties, during which Francisco manifested to the court that the share of Nicasia Buenaventura in Lot No. 1871-B, with an area of 7? hectares, was to be swapped with Lot No. 2194 which IAC had assigned to Anacoreta and Beethoven. The conferees agreed to partition the estate as follows: Lot No. 1871-A, originally allotted to Nicasia Buenaventura, to be swapped for an equivalent area in Lot No. 2194; a portion of Lot No. 1871-A and the residue of Lot No. 2194 to be allotted to Atty. Beethoven Buenaventura; and Lot No. 1871-B to be assigned to the IAC.

Portion of Lot No. 2073, colored BLUE, is assigned to EMILIA VAIL.

Portion of Lot No. 2073, colored BLACK, which is supposed to be share of Luz Buenaventura who is already dead, goes to the HEIRS OF LUZ BUENAVENTURA.

Lot Nos. 1709, 2655, 1869, 1894, 2270, 1882, 238 and 2653, colored GREEN, are allotted to NICASIA, except for Lot No. 1871-A, colored green, which is supposed to be part of Nicasia’s share, will be swapped to Lot No. 2380 and portion of Lot No. 2194, colored RED and YELLOW, equivalent to the share of Nicasia in Lot No. 1871, colored green.

Lot Nos. 1863-B, 1871-B, 2048, 2046, 1046-A and 1982, colored ORANGE, are assigned to Ilog Agricultural Corporation.

And in exchange for Lot No. 1871, colored GREEN, this will now become the share of ANACORETA B. FRANCISCO, which will be colored RED, together with Lot No. 1933.

Portion of Lot No. 1871-A, colored YELLOW, and whatever remains in Lot No. 2194 which is estimated to be not less than one (1) hectare after deducting the share of Nicasia in lieu of Lot No. 1871-A, shall become the share of BEETHOVEN BUENAVENTURA, to be colored YELLOW. (Emphasis supplied)15

The Joint Commissioners and the counsels present signed the stenographic notes taken during the conference.

However, the parties, through counsel, revised the October 30, 1992 Partition Agreement on December 10, 1992. In this amended project of partition, Nicasia was allotted portions of Lot Nos. 2194 and 2380, consisting of 6.6529 and 1.7050 hectares, respectively. The rest of Lot No. 2194, a tenanted lot with an area of 1.2500 hectares, was allotted to Beethoven.16

Nicasia later engaged the services of Atty. Beethoven Buenaventura as counsel and told him of her objection to the "swapping" of the two lots under the revised project of partition. Nicasia, through counsel, filed a Manifestation on January 15, 1993, informing the court of her objection to the physical partition of the property, to wit:

x x x x

2. That during the hearing of [the] above-entitled case last October 30, 1992, one of the special administrators, Mr. Michael Francisco, manifested that the share of Nicasia Buenaventura which has been colored green in Annex "A" and within Lot No. 1871-B of the Intestate Estate consisting of about seven and a half (7?) hectares, more or less, was to be swapped to the whole of Lot No. 2194. This Lot 2194 supposedly would be the share of the Intervenor but was later assigned by said Intervenor in equal shares in favor of Anacoreta Buenaventura and Beethoven Buenaventura as their compromise agreement;

3. That when this swapping of the share of Nicasia Buenaventura from Lot 1871-B to Lot 2194 was brought to her attention, she vehemently denied that she has ever consented or ever authorized Michael Francisco to swap her share in Lot 1871-B with that of Lot 2194. All what (sic) Nicasia Buenaventura wants is that her share in Lot 1871-B as shown in Annex "A" (marked Green) of the Joint Motion aforesaid and approved already by this Honorable Court should be the one to prevail but not to be swapped to Lot 2194;

4. That also during the October 30, 1992 hearing, it was provisionally agreed that the area to be assigned to Beethoven Buenaventura in Lot 2194 should only be from one (1) to two (2) hectares in area. However, it has come to the attention of Beethoven Buenaventura that the whole of this Lot 2194 is being tenanted by no less than nine (9) tenants, so that in order that a definite area could be effected insofar as the tenants are concerned, he hereby manifests that the portions of Lot 2194 as tenanted by tenants Fausto Vingno and Pedro Epondo be the ones to be assigned to him by the Intervenor, of course, the whole area won’t exceed two (2) hectares.17

Nicasia insisted that she should retain Lot No. 1871-B which was originally allotted to her, and prayed that the "swapping" of said lot for Lot No. 2194 be set aside.

On February 2, 1993, the intervenor IAC, through counsel, filed a Motion18 for the Approval of the Project of Partition dated October 30, 1992 as revised on December 10, 1992.

The intestate court set another conference of the parties at 8:30 a.m., August 13, 1993.19 During the conference, it noted that the parties had agreed on the partition of the estate on October 30, 1992, as revised on December 10, 1992 except Nicasia’s share.20

In the Manifestation21 filed by Nicasia through counsel Atty. Beethoven Buenaventura on August 19, 1993, she alleged that she had not authorized Michael Francisco to swap Lot No. 1871-B for that of Lot No. 2194 considering that Lot No. 2194 had been already assigned to Anacoreta Francisco and Beethoven Buenaventura. She also filed a Motion22 on September 13, 1993, praying that Lot No. 1871-B be restored to her as her share in the estate.

On November 9, 1993, the RTC issued an Order23 indicating therein the shares of the heirs in the estate. However, it declared that the distribution of Lot No. 1871-B and the portion of Lot No. 2194 be held in abeyance.
During the hearing on November 25, 1993, IAC, through counsel, and Nicasia Buenaventura agreed that should a portion of the latter’s share in Lot No. 1871-B comprising an area of 77,335 square meters be leased by intervenor IAC, she would no longer interpose further objection to the swapping as previously agreed on October 30, 1992. IAC, represented by Atty. Sorbito, manifested the corporation’s willingness to lease Nicasia’s share in Lot No. 1871-B with an area of 77,335 square meters in such an amount as may be agreed upon later. Nicasia agreed to a lease rate of P3,000.00 per hectare payable in advance for three years. Atty. Sorbito prayed to be allowed to confer with IAC as to the exact amount and manner of payment of the lease rental, and promised to inform the intestate court within three days, on or before November 27, 1993.24
On December 10, 1993, a hearing on the issue as to whether Nicasia Buenaventura agreed to swap Lot No. 1871-B for that of Lot No. 2194 was held, during which Nicasia Buenaventura, Michael Francisco and Atty. Beethoven Buenaventura testified.
On December 13, 1993, the intestate court issued an Order25 disposing of the disputed share in the estate of Felipe Buenaventura, to wit:
WHEREFORE, premises considered, this Court rules that Lot No. 1871-B belongs to Ilog Agricultural Corporation, the entire share of Nicasia Buenaventura in Lot No. 1871, colored green, belongs to Anacoreta B. Francisco, and Lot No. 2194, colored red, belongs to Nicasia Buenaventura, in accordance with the swapping agreement of October 30, 1992 and the supplemental agreement of December 10, 1992.
SO ORDERED.
The intestate court gave credence and full probative weight to the testimony of Michael Francisco, and to the fact that he was a member of the Joint Commissioners designated to prepare a physical partition of the estate.26
Nicasia appealed the order to the Court of Appeals (CA), and raised the following issues:

1. WHETHER OR NOT THE HONORABLE TRIAL COURT ERRED WHEN IT RULED THAT THE ENTIRE SHARE OF NICASIA BUENAVENTURA IN LOT NO. 1871-B BELONGS TO ANACORETA B. FRANCISCO AND LOT 2194 BELONGS TO NICASIA BUENAVENTURA; and
2. WHETHER OR NOT THE HEIR-MOVANT-APPELLANT IS ENTITLED TO HER MONETARY CLAIMS.27

Nicasia averred that she never knew of the swapping of the two lots before October 30, 1992, and maintained that she never spoke with Michael Francisco about it. She also claimed that the trial court erred in its finding that she objected to the arrangement only when she learned that the rental for Lot No. 2194 was low. She maintained that she and her brother, Atty. Beethoven Buenaventura, declared before the trial court that it was only in October 1992 that she learned of the proposed swapping of the two lots.
On July 31, 1997, the CA rendered judgment in favor of Nicasia. The fallo of the decision reads:
WHEREFORE, the lower court’s order dated December 13, 1993 is hereby SET ASIDE and another order is entered declaring the swapping of the lots involved null and void. The Court orders the restoration of the share of appellant Nicasia Buenaventura to Lot 1871-B.
No pronouncements as to costs.
SO ORDERED.28
The CA declared that under the December 20, 1991 project of partition of the estate, Lot No. 1871-B had already been allotted to Nicasia; she could thus not be deprived of her right over the lot. It pointed out that, based on the records, Michael Francisco was not authorized with a special power of attorney as to bind Nicasia to the amended agreement. The appellate court stressed that, under Article 1878 of the New Civil Code, a written authorization from Nicasia was needed.29
Anacoreta, as the Judicial Administratrix, thereafter filed a petition for review on certiorari with this Court on the following issues: (a) whether the factual findings of the trial court, as affirmed by the CA, may be raised in this Court; (b) whether a special power of attorney is required for respondents’ counsel, Atty. Beethoven Buenaventura, to bind her to the new agreement, that is, the swapping of Lot No. 1871-B with that of Lot No. 2194; (c) whether such authority is required for the Joint Commissioners to bind respondent to the new agreement; and (d) whether respondent had agreed, through Atty. Beethoven Buenaventura and Michael Francisco, to the agreement.
Petitioner submits that the findings of the trial court on the credibility of Michael Francisco and its disquisitions on the agreement of respondent to the swapping of the lots should be accorded due respect by the CA. She avers that no less than Atty. Beethoven Buenaventura, respondent’s brother and counsel, had agreed to the swapping of the lots before the hearing on October 30, 1992. She knew that Michael Francisco and Beethoven Buenaventura represented the heirs, including herself, in the negotiation for the allotment of the estate. After Michael Francisco and Beethoven Buenaventura informed her of the terms and conditions of the settlement of the estate, she never objected nor disavowed their authority to bind her to a swapping of the lots or the settlement of the estate. Atty. Buenaventura even signed the stenographic notes taken on October 30, 1992 for and in behalf of respondent. Petitioner insists that respondent objected to the swapping, for the first time, only when she learned of the low rate of rental of Lot No. 2194. As against the recommendation of the Joint Commissioners and a judicial consideration by the trial court of all the circumstances, such belated objection to the amended agreement should not prevail. She pointed out that the findings of facts of the Joint Commissioners, duly approved by the court, are those of the court and are presumptively correct.
Petitioner avers that it was not necessary for Atty. Beethoven Buenaventura, as respondent’s counsel to be authorized in writing to agree to a swapping of the two lots for and in behalf of respondent, especially as the respective shares of the other heirs under the partition had already been delivered. Petitioner points out that a partition is not a conveyance but simply a separation and designation of that part of the estate which belongs to each heir, and cites the ruling in Vda. de Reyes v. Court of Appeals30 to support her claim.
Respondent, for her part, avers that her counsel, Atty. Buenaventura, had never agreed to the swapping of the two lots for and in her behalf. She found out about the proposed swapping for the first time only when the IAC’s counsel, Atty. Nilo Sorbito, proposed the swapping; and when she learned of it, she vigorously objected to the proposal. She insists that although her counsel signed the stenographic notes, he did so in his behalf as heir and not as her counsel.
The petition has no merit.
The general rule is that the findings of facts of the CA are conclusive on the Court. However, the rule does not apply if the trial court’s factual findings and those of the CA are contradictory or conflicting.31 While Rule 45 of the Rules of Court mandates that only questions of law should be raised, where the factual findings of the trial court and those of the appellate court are contradictory, the Court must perforce to review the records and make its own findings.
A careful perusal of the records show that petitioner failed to prove that, before October 30, 1992, respondent already knew, through Michael Francisco and Beethoven Buenaventura, that Lot No. 1871-B which was assigned to her would be swapped for a portion of Lot No. 2194. Nor did petitioner adduce in evidence that respondent had authorized Michael Francisco or Beethoven Buenaventura to agree, in her behalf, to the swapping of the two lots. While it is true that respondent engaged the services of Atty. Beethoven Buenaventura as her counsel, she did so only after December 10, 1992, upon learning that the Joint Commissioners had agreed to revise the October 30, 1992 partition of the estate during the December 10, 1992 conference. This prompted respondent to secure the services of counsel and file a Manifestation on January 15, 1993 informing the trial court of her objection to the swapping.
It bears stressing that Michael Francisco was merely the encargado of the administratrix, a member of the Joint Commissioners tasked to effect a physical partition of the estate. Any recommendation made in such capacity is still subject to the action of the court after due notice to the heirs; unless and until all the parties are notified of any report/recommendation, thereafter duly heard by the court, the heirs cannot thereby be bound.
Moreover, respondent is not bound by the agreement of Atty. Beethoven Buenaventura on the partition of the estate agreed upon on October 30 and December 10, 1992 because the latter did so in his personal capacity as heir of the deceased and not for and in behalf of respondent. This is gleaned from his testimony:
ATTY. GARAYGAY:
That as one of the co-administrators during the hearing on September 30, 1992, whether he has placed his signature for approval and that a conference was held on October 12, 1982 and their respective shares were being distinguished with identifying colors, and I would like to ask him whether he affirms the partition plan on October 12, 1982 and affixes his signature. I mean, did he affix his signature on the transcript of the stenographic notes report of October 10, 1992 hearing. I think, Your Honor, the signature was not on the parcellary plan but to the transcript of record.
COURT:
Are you willing to answer the manifestation before this Court?
ATTY. BUENAVENTURA:
I have already admitted that, Your Honor, if, at all, I have agreed to the partition relative to the hearing on October 10, 1992, it was because during that time, I was only acting in my behalf and in my capacity as co-special administrator but not for Nicasia Buenaventura.
COURT:
I am asking you about your signature?
ATTY. BUENAVENTURA:
I admit that, Your Honor.
DIRECT EXAMINATION CONDUCTED BY ATTY. VICENTE T. GARAYGAY, JR. ON WITNESS ATTY. BEETHOVEN BUENAVENTURA
ATTY. GARAYGAY:
Did you attach your signature in the December 10, 1992 proposal wherein there was a swapping, Atty. Buenaventura?
WITNESS:
Not approved yet.
Q: And wherein the 3 of you have to agree on that proposal made on October 10, 1992?
A: Myself, Michael Francisco, and Atty. Nilo Sorbito were the ones who affixed our signatures regarding the hearing.
Q: On December 10, 1992, there was a swapping, will you agree with me?
A: I will clarify my answer, Your Honor, I have affixed my signature therein, however, if I have attached my signature thereon, I was only representing as co-special administrator and was not representing this share of Nicasia Buenaventura. I also fully believed (sic) that this Michael Francisco was duly authorized by his aunt to do the swapping but a week later, I was surprised when my sister went to Bacolod and I asked her what transpired in the conference in October 1992 but immediately upon hearing this, she vehemently opposed having authorized Michael Francisco to the swapping for her and later on she said that I will prepare to represent her in this case. She vehemently denied Michael Francisco to do the swapping of her share over Lot No. 1871-B with that of Lot No. 2194.
Q: Now, according to you since 1991, you already knew that Nicasia Buenaventura has already vehemently opposed, is that correct?
A: No. In 1991, there was no swapping yet. The swapping was made in 1992.
Q: When you were examining the heir Nicasia Buenaventura and she told you in answer to your question that, in 1991, she already knew about the swapping and she objected to the proposed swapping now, the question is, since 1991, she was already opposing to the swapping, did she ?
A: That is misleading, Your Honor, because actually during the hearing in 1992 that the swapping was made.
(TSN, Dec. 10, 1993, pp. 12-16, R.C. Hollero)32
The evidence on record negates petitioner’s claim that respondent had knowledge of the planned swapping of lots even before October 30, 1992, and agreed to the same. As gleaned from the testimony of Francisco, sometime in 1990, respondent merely asked for a certain amount as an advance of her inheritance which she needed for the expenses for the death anniversary of her father, and that he (Michael) agreed to give only a portion of the amount she was asking:
ATTY. GARAYGAY:
Before the swapping, Your Honor, there was already a communication.
COURT:
What was that communication about – that she authorized you or did she not authorize you?
WITNESS:
Before the swapping, Your Honor, as I have said, she approached me because it was her desire to have the fishpond.
COURT:
Alright, next question?
ATTY. GARAYGAY:
I think that is all for the witness, Your Honor.
x x x x
COURT:
But the question is, when did she authorize you to swap, before you signed the agreement or after?
WITNESS:
Way back in 1990.
COURT:
So, before the signing?
WITNESS:
Yes, Sir.
COURT:
Proceed.
ATTY. BUENAVENTURA:
Now, where did you meet her and talked of the swapping of her share with that Lot 1871-B and Lot 2194?
WITNESS:
It was herself (sic) who went to our house and asked me for a favor, and it was that time when she asked for a certain amount to be spent for the anniversary of my grandfather and I said, I will only give you a part but for the amount that she was asking I said, I will give you the amount as soon as I have it.
Q: More or less, what month was that in 1990?
A: I cannot remember anymore.
(TSN, Dec. 10, 1993, pp. 37-38, R.C. Hollero)33
A careful reading of Michael Francisco’s Compliance filed with the trial court on January 24, 1992 will show that he objected to the partition of the estate as approved by the trial court on December 20, 1991 only because the sketch plan submitted by Attys. Sorbito and Buenaventura was incomplete, in that the area was assigned only to Pedro Buenaventura and Luz Buenaventura, and Emilia Vail was not indicated therein, and that Lot Nos. 2380 and 2194 assigned to the IAC (which the latter had assigned to Anacoreta Buenaventura and Beethoven Buenaventura) were not colored with the color code agreed upon by the Joint Commissioners. Michael Francisco did not interpose any objection to the December 20, 1991 partition relative to the allocation of Lot No. 2187-B to respondent.
As admitted by the IAC in its Manifestation34 filed on September 3, 1992, the technical plan prepared by Technical Assistant Pamposo Juanola was merely to satisfy the desire of Michael Francisco and to comply with his orders without any objection of the two other administrators and the IAC. This is gleaned from the affidavit of Juanola:
That sometime on May 7, 1991, our firm headed by Engr. Antonio Y. Bincal, as Geodetic Engineer, was hired to conduct a survey over the property of the late Felipe Buenaventura, subject matter of Spec. Proc. No. 053 (130-3139), to determine the respective shares and the actual area of the heirs of the late Felipe Buenaventura and that of Ilog Agricultural Corporation;
That pursuant to the instructions and agreement of the three (3) co-administrators, Michael B. Francisco, Beethoven Buenaventura, and Nilo Sorbito, and in accordance with the instructions of Michael B. Francisco, I conducted the survey of the area and prepared a parcellary plan in accordance with the instructions of Michael B. Francisco with conformity of the two (2) co-administrators Beethoven Buenaventura and Nilo Sorbito;
That the plan was submitted to the Court last November 25, 1991, however, correction was made pursuant to the instructions of Michael B. Francisco, particularly as to the actual site/location of the area pertaining to Beethoven Buenaventura; vis-a-vis that of his mother Anacoreta B. Francisco;
That as instructed, I have prepared a new parcellary plan, copy of which is hereto attached as Annex "A" of this affidavit;
That when I prepared the parcellary plan, it is all in accordance with the instructions of Michael B. Francisco, with the conformity of [the] other co-administrators Beethoven Buenaventura and Nilo Sorbito.35
Michael Francisco’s Comment36 dated November 26, 1993 even states that the swapping was approved by the co-administrators and the trial court on December 10, 1992. Respondent was not present therein and could not thus have agreed to any swapping of the lots.
Even the IAC to which Lot No. 1871-B was assigned under the December 10, 1992 Order of the trial court, finally agreed to the lease by it of Lot No. 1871-B should the lot be assigned to respondent. What is so worrisome is that in its Order dated November 9, 1993, the trial court allotted Lot No. 1871-B to the IAC and, at the same time, declared that the distribution of Lot No. 1871-B and a portion of Lot No. 1294 would be held in abeyance.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED. Costs against petitioner.
SO ORDERED.
ROMEO J. CALLEJO, SR.Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBANChief JusticeChairperson

On leaveCONSUELO YNARES-SANTIAGOAssociate Justice
MA. ALICIA AUSTRIA-MARTINEZAsscociate Justice
MINITA V. CHICO-NAZARIOAssociate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
ARTEMIO V. PANGANIBANChief Justice

Footnotes

1 Records, p. 122.
2 Id. at 120-121.
3 Id. at 14.
4 Id. at 121-122.
5 Id. at 122.
6 Id. at 30.
7 Id. at 123.
8 Id. at 120-124.
9 Id. at 123.
10 Id. at 118.
11 Id. at 29-30.
12 Id. at 33-34.
13 Id. at 41-43.
14 Id. at 42.
15 Id. at 141.
16 Id. at 141-142.
17 Id. at 54-55.
18 Id. at 68-69.
19 Id. at 84.
20 Id. at 91.
21 Id. at 94-97.
22 Id. at 105-106.
23 Id. at 139-144.
24 Id. at 134-135.
25 Id. at 145-147.
26 Id. at 146-147.
27 CA rollo, p. 28.
28 Rollo, p. 29.
29 Id. at 27-29.
30 G.R. No. 92436, July 26, 1991, 199 SCRA 646, 659, citing Hernandez v. Andal, 78 Phil. 196 (1947).
31 Litonjua v. Fernandez, G.R. No. 148116, April 14, 2004, 427 SCRA 478, 489.
32 Rollo, see Comment of Respondent, pp. 7-9.
33 Id. at 13-14.
34 Records, pp. 63-65.
35 Id. at 66.
36 Id. at 136.

G.R. No.

SUPREME COURT
Manila

EN BANC

DECISION

May 31, 2006

G.R. No.
, ,
vs.
, .

, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 69200 and its Resolution2 denying petitioners? motion for reconsideration thereof.

The factual and procedural antecedents are as follows:

Primelink Properties and Development Corporation (Primelink for brevity) is a domestic corporation engaged in real estate development. Rafaelito W. Lopez is its President and Chief Executive Officer.3

Ma. Clara T. Lazatin-Magat and her brothers, Jose Serafin T. Lazatin, Jaime T. Lazatin and Jose Marcos T. Lazatin (the Lazatins for brevity), are co-owners of two (2) adjoining parcels of land, with a combined area of 30,000 square meters, located in Tagaytay City and covered by Transfer Certificate of Title (TCT) No. T-108484 of the Register of Deeds of Tagaytay City.

On March 10, 1994, the Lazatins and Primelink, represented by Lopez, in his capacity as President, entered into a Joint Venture Agreement5 (JVA) for the development of the aforementioned property into a residential subdivision to be known as "Tagaytay Garden Villas." Under the JVA, the Lazatin siblings obliged themselves to contribute the two parcels of land as their share in the joint venture. For its part, Primelink undertook to contribute money, labor, personnel, machineries, equipment, contractor?s pool, marketing activities, managerial expertise and other needed resources to develop the property and construct therein the units for sale to the public. Specifically, Primelink bound itself to accomplish the following, upon the execution of the deed:

a.) Survey the land, and prepare the projects master plans, engineering designs, structural and architectural plans, site development plans, and such other need plans in accordance with existing laws and the rules and regulations of appropriate government institutions, firms or agencies;

b.) Secure and pay for all the licenses, permits and clearances needed for the projects;

c.) Furnish all materials, equipment, labor and services for the development of the land in preparation for the construction and sale of the different types of units (single-detached, duplex/twin, cluster and row house);

d.) Guarantee completion of the land development work if not prevented by force majeure or fortuitous event or by competent authority, or other unavoidable circumstances beyond the DEVELOPER?S control, not to exceed three years from the date of the signing of this Joint Venture Agreement, except the installation of the electrical facilities which is solely MERALCO?S responsibility;

e.) Provide necessary manpower resources, like executive and managerial officers, support personnel and marketing staff, to handle all services related to land and housing development (administrative and construction) and marketing (sales, advertising and promotions).6

The Lazatins and Primelink covenanted that they shall be entitled to draw allowances/advances as follows:

1. During the first two years of the Project, the DEVELOPER and the LANDOWNER can draw allowances or make advances not exceeding a total of twenty percent (20%) of the net revenue for that period, on the basis of sixty percent (60%) for the DEVELOPER and forty percent (40%) for the LANDOWNERS.

The drawing allowances/advances are limited to twenty percent (20%) of the net revenue for the first two years, in order to have sufficient reserves or funds to protect and/or guarantee the construction and completion of the different types of units mentioned above.

2. After two years, the DEVELOPER and the LANDOWNERS shall be entitled to drawing allowances and/or advances equivalent to sixty percent (60%) and forty percent (40%), respectively, of the total net revenue or income of the sale of the units.7

They also agreed to share in the profits from the joint venture, thus:

1. The DEVELOPER shall be entitled to sixty percent (60%) of the net revenue or income of the Joint Venture project, after deducting all expenses incurred in connection with the land development (such as administrative management and construction expenses), and marketing (such as sales, advertising and promotions), and

2. The LANDOWNERS shall be entitled to forty percent (40%) of the net revenue or income of the Joint Venture project, after deducting all the above-mentioned expenses.8

Primelink submitted to the Lazatins its Projection of the Sales-Income-Cost of the project:

SALES-INCOME-COST PROJECTION

SELLING PRICE

COST PRICE

DIFFERENCE

INCOME

CLUSTER:

A1 3,200,000

-

A2 1,260,000

=

1,940,000 x 24

=

P 46,560,000.00

TWIN:

B1 2,500,000

-

B2 960,000

=

1,540,000 x 24

=

36,960,000.00

SINGLE:

C1 3,500,000

-

C2 1,400,000

=

2,100,000 x 16

=

33,600,000.00

ROW-TYPE TOWNHOMES:

D1 1,600,000

-

D2 700,000

=

900,000 x 24

=

21,600,000.00

P138,720,000.00

(GROSS)

Total Cash Price (A1+B1+C1+D1)

=

P231,200,000.00

Total Building Expense (A2+B2+C2+D2)

=

92,480,000.00

COMPUTATION OF ADD?L. INCOME ON INTEREST

TCP x 30% D/P

=

P 69,360,000

P 69,360,000.00

Balance = 70%

=

161,840,000

x .03069 x 48

=

P238,409,740

238,409,740.00

Total Amount (TCP + int. earn.)

P307,769,740.00

EXPENSES:

less: A

Building expenses

P 92,480,000.00

B

Commission (8% of TCP)

18,496,000.00

C

Admin. & Mgmt. expenses (2% of TCP)

4,624,000.00

D

Advertising & Promo exp. (2% of TCP)

4,624,000.00

E

Building expenses for the open spaces and Amenities (Development cost not incl. Housing) 400 x 30,000 sqms.

12,000,000.00

TOTAL EXPENSES (A+B+C+D+E)

P132,224,000.00

RECONCILIATION OF INCOME VS. EXPENSES

Total Projected Income (incl. income from interest earn.)
P307,769,740.00

less:
132,224,000.00

Total Expenses
P175,545,740.009

The parties agreed that any unsettled or unresolved misunderstanding or conflicting opinions between the parties relative to the interpretation, scope and reach, and the enforcement/implementation of any provision of the agreement shall be referred to Voluntary Arbitration in accordance with the Arbitration Law.10
The Lazatins agreed to subject the title over the subject property to an escrow agreement. Conformably with the escrow agreement, the owner?s duplicate of the title was deposited with the China Banking Corporation.11 However, Primelink failed to immediately secure a Development Permit from Tagaytay City, and applied the permit only on August 30, 1995. On October 12, 1995, the City issued a Development Permit to Primelink.12
In a Letter13 dated April 10, 1997, the Lazatins, through counsel, demanded that Primelink comply with its obligations under the JVA, otherwise the appropriate action would be filed against it to protect their rights and interests. This impelled the officers of Primelink to meet with the Lazatins and enabled the latter to review its business records/papers. In another Letter14 dated October 22, 1997, the Lazatins informed Primelink that they had decided to rescind the JVA effective upon its receipt of the said letter. The Lazatins demanded that Primelink cease and desist from further developing the property.
Subsequently, on January 19, 1998, the Lazatins filed, with the Regional Trial Court (RTC) of Tagaytay City, Branch 18, a complaint for rescission accounting and damages, with prayer for temporary restraining order and/or preliminary injunction against Primelink and Lopez. The case was docketed as Civil Case No. TG-1776. Plaintiffs alleged, among others, that, despite the lapse of almost four (4) years from the execution of the JVA and the delivery of the title and possession of the land to defendants, the land development aspect of the project had not yet been completed, and the construction of the housing units had not yet made any headway, based on the following facts, namely: (a) of the 50 housing units programmed for Phase I, only the following types of houses appear on the site in these condition: (aa) single detached, one completed and two units uncompleted; (bb) cluster houses, one unit nearing completion; (cc) duplex, two units completed and two units unfinished; and (dd) row houses, two units, completed; (b) in Phase II thereof, all that was done by the defendants was to grade the area; the units so far constructed had been the object of numerous complaints by their owners/purchasers for poor workmanship and the use of sub-standard materials in their construction, thus, undermining the project?s marketability. Plaintiffs also alleged that defendants had, without justifiable reason, completely disregarded previously agreed accounting and auditing procedures, checks and balances system installed for the mutual protection of both parties, and the scheduled regular meetings were seldom held to the detriment and disadvantage of plaintiffs. They averred that they sent a letter through counsel, demanding compliance of what was agreed upon under the agreement but defendants refused to heed said demand. After a succession of letters with still no action from defendants, plaintiffs sent a letter on October 22, 1997, a letter formally rescinding the JVA.
Plaintiffs also claimed that in a sales-income-costs projection prepared and submitted by defendants, they (plaintiffs) stood to receive the amount of P70,218,296.00 as their net share in the joint venture project; to date, however, after almost four (4) years and despite the undertaking in the JVA that plaintiffs shall initially get 20% of the agreed net revenue during the first two (2) years (on the basis of the 60%-40% sharing) and their full 40% share thereafter, defendants had yet to deliver these shares to plaintiffs which by conservative estimates would amount to no less than P40,000,000.00.15
Plaintiffs prayed that, after due proceedings, judgment be rendered in their favor, thus:
WHEREFORE, it is respectfully prayed of this Honorable Court that a temporary restraining order be forthwith issued enjoining the defendants to immediately stop their land development, construction and marketing of the housing units in the aforesaid project; after due proceedings, to issue a writ of preliminary injunction enjoining and prohibiting said land development, construction and marketing of housing units, pending the disposition of the instant case.
After trial, a decision be rendered:

1. Rescinding the Joint Venture Agreement executed between the plaintiffs and the defendants;
2. Immediately restoring to the plaintiffs possession of the subject parcels of land;
3. Ordering the defendants to render an accounting of all income generated as well as expenses incurred and disbursement made in connection with the project;
4. Making the Writ of Preliminary Injunction permanent;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount Forty Million Pesos (P40,000,000.00) in actual and/or compensatory damages;
6. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of Two Million Pesos (P2,000,000.00) in exemplary damages;
7. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount equivalent to ten percent (10%) of the total amount due as and for attorney?s fees; and
8. To pay the costs of this suit.

Other reliefs and remedies as are just and equitable are likewise being prayed for.16
Defendants opposed plaintiffs? plea for a writ of preliminary injunction on the ground that plaintiffs? complaint was premature, due to their failure to refer their complaint to a Voluntary Arbitrator pursuant to the JVA in relation to Section 2 of Republic Act No. 876 before filing their complaint in the RTC. They prayed for the dismissal of the complaint under Section 1(j), Rule 16 of the Rules of Court:
WHEREFORE, it is respectfully prayed that an Order be issued:

a) dismissing the Complaint on the basis of Section 1(j), Rule 16 of the aforecited Rules of Court, or, in the alternative,
b) requiring the plaintiffs to make initiatory step for arbitration by filing the demand to arbitrate, and then asking the parties to resolve their controversies, pursuant to the Arbitration Law, or in the alternative;
c) staying or suspending the proceedings in captioned case until the completion of the arbitration, and
d) denying the plaintiffs? prayer for the issuance of a temporary restraining order or writ of preliminary injunction.

Other reliefs and remedies just and equitable in the premises are prayed for.17
In the meantime, before the expiration of the reglementary period to answer the complaint, defendants, invoking their counsel?s heavy workload, prayed for a 15-day extension18 within which to file their answer. The additional time prayed for was granted by the RTC.19 However, instead of filing their answer, defendants prayed for a series of 15-day extensions in eight (8) successive motions for extensions on the same justification.20 The RTC again granted the additional time prayed for, but in granting the last extension, it warned against further extension.21 Despite the admonition, defendants again moved for another 15-day extension,22 which, this time, the RTC denied. No answer having been filed, plaintiffs moved to declare the defendants in default,23 which the RTC granted in its Order24 dated June 24, 1998.
On June 25, 1998, defendants filed, via registered mail, their "Answer with Counterclaim and Opposition to the Prayer for the Issuance of a Writ of Preliminary Injunction."25 On July 8, 1998, defendants filed a Motion to Set Aside the Order of Default.26 This was opposed by plaintiffs.27 In an Order28 dated July 14, 1998, the RTC denied defendants? motion to set aside the order of default and ordered the reception of plaintiffs? evidence ex parte. Defendants filed a motion for reconsideration29 of the July 14, 1998 Order, which the RTC denied in its Order30 dated October 21, 1998.
Defendants thereafter interposed an appeal to the CA assailing the Order declaring them in default, as well as the Order denying their motion to set aside the order of default, alleging that these were contrary to facts of the case, the law and jurisprudence.31 On September 16, 1999, the appellate court issued a Resolution32 dismissing the appeal on the ground that the Orders appealed from were interlocutory in character and, therefore, not appealable. No motion for reconsideration of the Order of the dismissal was filed by defendants.
In the meantime, plaintiffs adduced ex parte their testimonial and documentary evidence. On April 17, 2000, the RTC rendered a Decision, the dispositive part of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows:

1. Ordering the rescission of the Joint Venture Agreement as of the date of filing of this complaint;
2. Ordering the defendants to return possession, including all improvements therein, of the real estate property belonging to the plaintiffs which is described in, and covered by Transfer Certificate of Title No. T-10848 of the Register of Deeds of Tagaytay City, and located in Barangay Anulin, City of Tagaytay;
3. Ordering the defendants to turn over all documents, records or papers that have been executed, prepared and retained in connection with any contract to sell or deed of sale of all lots/units sold during the effectivity of the joint venture agreement;
4. Ordering the defendants to pay the plaintiffs the sum of P1,041,524.26 representing their share of the net income of the P2,603,810.64 as of September 30, 1995, as stipulated in the joint venture agreement;
5. Ordering the defendants to pay the plaintiffs? attorney?s fees in the amount of P104,152.40;
6. Ordering the defendants to pay the costs.

SO ORDERED.33
The trial court anchored its decision on the following findings:
x x x Evidence on record have shown patent violations by the defendants of the stipulations particularly paragraph II covering Developer?s (defendant) undertakings, as well as paragraph III and paragraph V of the JVA. These violations are not limited to those made against the plaintiffs alone as it appears that some of the unit buyers themselves have their own separate gripes against the defendants as typified by the letters (Exhibits "G" and "H") of Mr. Emmanuel Enciso.
x x x x
Rummaging through the evidence presented in the course of the testimony of Mrs. Maminta on August 6, 1998 (Exhibits "N," "O," "P," "Q" and "R" as well as submarkings, pp. 60 to 62, TSN August 6, 1998) this court has observed, and is thus convinced, that a pattern of what appears to be a scheme or plot to reduce and eventually blot out the net income generated from sales of housing units by defendants, has been established. Exhibit "P-2" is explicit in declaring that, as of September 30, 1995, the joint venture project earned a net income of about P2,603,810.64. This amount, however, was drastically reduced in a subsequent financial report submitted by the defendants to P1,954,216.39. Shortly thereafter, and to the dismay of the plaintiffs, the defendants submitted an income statement and a balance sheet (Exhibits "R" and "R-1") indicating a net loss of P5,122,906.39 as of June 30, 1997.
Of the reported net income of P2,603,810.64 (Exhibit "P-2") the plaintiffs should have received the sum of P1,041,524.26 representing their 40% share under paragraph II and V of the JVA. But this was not to be so. Even before the plaintiffs could get hold of their share as indicated above, the defendants closed the chance altogether by declaring a net loss. The court perceives this to be one calculated coup-de-grace that would put to thin air plaintiffs? hope of getting their share in the profit under the JVA.
That this matter had reached the court is no longer a cause for speculation. The way the defendants treated the JVA and the manner by which they handled the project itself vis-à-vis their partners, the plaintiffs herein, there is bound to be certain conflict as the latter repeatedly would received the losing end of the bargain.
Under the intolerable circumstances, the plaintiffs could not have opted for some other recourse but to file the present action to enforce their rights. x x x34
On May 15, 2000, plaintiffs filed a Motion for Execution Pending Appeal35 alleging defendants? dilatory tactics for its allowance. This was opposed by defendants.36
On May 22, 2000, the RTC resolved the motion for execution pending appeal in favor of plaintiffs.37 Upon posting a bond of P1,000,000.00 by plaintiffs, a writ of execution pending appeal was issued on June 20, 2000.38
Defendants appealed the decision to the CA on the following assignment of errors:

I
THE TRIAL COURT ERRED IN DECIDING THE CASE WITHOUT FIRST REFERRING THE COMPLAINT FOR VOLUNTARY ARBITRATION (RA NO. 876), CONTRARY TO THE MANDATED VOLUNTARY ARBITRATION CLAUSE UNDER THE JOINT VENTURE AGREEMENT, AND THE DOCTRINE IN "MINDANAO PORTLAND CEMENT CORPORATION V. MCDONOUGH CONSTRUCTION COMPANY OF FLORIDA" (19 SCRA 814-815).
II
THE TRIAL COURT ERRED IN ISSUING A WRIT OF EXECUTION PENDING APPEAL EVEN IN THE ABSENCE OF GOOD AND COMPELLING REASONS TO JUSTIFY SAID ISSUANCE, AND DESPITE PRIMELINK?S STRONG OPPOSITION THERETO.
III
THE TRIAL COURT ERRED IN REFUSING TO DECIDE PRIMELINK?S MOTION TO QUASH THE WRIT OF EXECUTION PENDING APPEAL AND THE MOTION FOR RECONSIDERATION, ALTHOUGH THE COURT HAS RETAINED ITS JURISDICTION TO RULE ON ALL QUESTIONS RELATED TO EXECUTION.
IV
THE TRIAL COURT ERRED IN RESCINDING THE JOINT VENTURE AGREEMENT ALTHOUGH PRIMELINK HAS SUBSTANTIALLY DEVELOPED THE PROJECT AND HAS SPENT MORE OR LESS FORTY MILLION PESOS, AND DESPITE APPELLEES? FAILURE TO PRESENT SUFFICIENT EVIDENCE JUSTIFYING THE SAID RESCISSION.
V
THE TRIAL COURT ERRED IN DECIDING THAT THE APPELLEES HAVE THE RIGHT TO TAKE OVER THE SUBDIVISION AND TO APPROPRIATE FOR THEMSELVES ALL THE EXISTING IMPROVEMENTS INTRODUCED THEREIN BY PRIMELINK, ALTHOUGH SAID RIGHT WAS NEITHER ALLEGED NOR PRAYED FOR IN THE COMPLAINT, MUCH LESS PROVEN DURING THE EX PARTE HEARING, AND EVEN WITHOUT ORDERING APPELLEES TO FIRST REIMBURSE PRIMELINK OF THE SUBSTANTIAL DIFFERENCE BETWEEN THE MARKET VALUE OF APPELLEES? RAW, UNDEVELOPED AND UNPRODUCTIVE LAND (CONTRIBUTED TO THE PROJECT) AND THE SUM OF MORE OR LESS FORTY MILLION PESOS WHICH PRIMELINK HAD SPENT FOR THE HORIZONTAL AND VERTICAL DEVELOPMENT OF THE PROJECT, THEREBY ALLOWING APPELLEES TO UNJUSTLY ENRICH THEMSELVES AT THE EXPENSE OF PRIMELINK.39

The appeal was docketed in the CA as CA-G.R. CV No. 69200.
On August 9, 2004, the appellate court rendered a decision affirming, with modification, the appealed decision. The fallo of the decision reads:
WHEREFORE, in view of the foregoing, the assailed decision of the Regional Trial Court of Tagaytay City, Branch 18, promulgated on April 17, 2000 in Civil Case No. TG-1776, is hereby AFFIRMED. Accordingly, Transfer Certificate of Title No. T-10848 held for safekeeping by Chinabank pursuant to the Escrow Agreement is ordered released for return to the plaintiffs-appellees and conformably with the affirmed decision, the cancellation by the Register of Deeds of Tagaytay City of whatever annotation in TCT No. 10848 by virtue of the Joint Venture Agreement, is now proper.
SO ORDERED.40
Citing the ruling of this Court in Aurbach v. Sanitary Wares Manufacturing Corporation,41 the appellate court ruled that, under Philippine law, a joint venture is a form of partnership and is to be governed by the laws of partnership. The aggrieved parties filed a motion for reconsideration,42 which the CA denied in its Resolution43 dated March 7, 2005.
Petitioners thus filed the instant Petition for Review on Certiorari, alleging that:

1) DID THE HONORABLE COURT OF APPEALS COMMIT A FATAL AND REVERSIBLE LEGAL ERROR AND/OR GRAVE ABUSE OF DISCRETION IN ORDERING THE RETURN TO THE RESPONDENTS OF THE PROPERTY WITH ALL IMPROVEMENTS THEREON, EVEN WITHOUT ORDERING/REQUIRING THE RESPONDENTS TO FIRST PAY OR REIMBURSE PRIMELINK OF ALL EXPENSES INCURRED IN DEVELOPING AND MARKETING THE PROJECT, LESS THE ORIGINAL VALUE OF THE PROPERTY, AND THE SHARE DUE RESPONDENTS FROM THE PROFITS (IF ANY) OF THE JOINT VENTURE PROJECT?
2) IS THE AFORESAID ORDER ILLEGAL AND CONFISCATORY, OPPRESSIVE AND UNCONSCIONABLE, CONTRARY TO THE TENETS OF GOOD HUMAN RELATIONS AND VIOLATIVE OF EXISTING LAWS AND JURISPRUDENCE ON JUDICIAL NOTICE, DEFAULT, UNJUST ENRICHMENT AND RESCISSION OF CONTRACT WHICH REQUIRES MUTUAL RESTITUTION, NOT UNILATERAL APPROPRIATION, OF PROPERTY BELONGING TO ANOTHER?44

Petitioners maintain that the aforesaid portion of the decision which unconditionally awards to respondents "all improvements" on the project without requiring them to pay the value thereof or to reimburse Primelink for all expenses incurred therefore is inherently and essentially illegal and confiscatory, oppressive and unconscionable, contrary to the tenets of good human relations, and will allow respondents to unjustly enrich themselves at Primelink?s expense. At the time respondents contributed the two parcels of land, consisting of 30,000 square meters to the joint venture project when the JVA was signed on March 10, 1994, the said properties were worth not more than P500.00 per square meter, the "price tag" agreed upon the parties for the purpose of the JVA. Moreover, before respondents rescinded the JVA sometime in October/November 1997, the property had already been substantially developed as improvements had already been introduced thereon; petitioners had likewise incurred administrative and marketing expenses, among others, amounting to more or less P40,000,000.00.45
Petitioners point out that respondents did not pray in their complaint that they be declared the owners and entitled to the possession of the improvements made by petitioner Primelink on the property; neither did they adduce evidence to prove their entitlement to said improvements. It follows, petitioners argue, that respondents were not entitled to the improvements although petitioner Primelink was declared in default.
They also aver that, under Article 1384 of the New Civil Code, rescission shall be only to the extent necessary to cover the damages caused and that, under Article 1385 of the same Code, rescission creates the obligation to return the things which were not object of the contract, together with their fruits, and the price with its interest; consequently, it can be effected only when respondents can return whatever they may be obliged to return. Respondents who sought the rescission of the JVA must place petitioner Primelink in the status quo. They insist that respondents cannot rescind and, at the same time, retain the consideration, or part of the consideration received under the JVA. They cannot have the benefits of rescission without assuming its burden. All parties must be restored to their original positions as nearly as possible upon the rescission of a contract. In the event that restoration to the status quo is impossible, rescission may be granted if the Court can balance the equities and fashion an appropriate remedy that would be equitable to both parties and afford complete relief.
Petitioners insist that being defaulted in the court a quo would in no way defeat their claim for reimbursement because "[w]hat matters is that the improvements exist and they cannot be denied."46 Moreover, they point out, the ruling of this Court in Aurbach v. Sanitary Wares Manufacturing Corporation47 cited by the CA is not in point.
On the other hand, the CA ruled that although respondents therein (plaintiffs below) did not specifically pray for their takeover of the property and for the possession of the improvements on the parcels of land, nevertheless, respondents were entitled to said relief as a necessary consequence of the ruling of the trial court ordering the rescission of the JVA. The appellate court cited the ruling of this Court in the Aurbach case and Article 1838 of the New Civil Code, to wit:
As a general rule, the relation of the parties in joint ventures is governed by their agreement. When the agreement is silent on any particular issue, the general principles of partnership may be resorted to.48
Respondents, for their part, assert that Articles 1380 to 1389 of the New Civil Code deal with rescissible contracts. What applies is Article 1191 of the New Civil Code, which reads:
ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.
They insist that petitioners are not entitled to rescission for the improvements because, as found by the RTC and the CA, it was petitioner Primelink that enriched itself at the expense of respondents. Respondents reiterate the ruling of the CA, and argue as follows:
PRIMELINK argued that the LAZATINs in their complaint did not allege, did not prove and did not pray that they are and should be entitled to take over the development of the project, and that the improvements and existing structures which were introduced by PRIMELINK after spending more or less Forty Million Pesos ? be awarded to them. They merely asked in the complaint that the joint venture agreement be rescinded, and that the parcels of land they contributed to the project be returned to them.
PRIMELINK?s argument lacks merit. The order of the court for PRIMELINK to return possession of the real estate property belonging to the LAZATINs including all improvements thereon was not a judgment that was different in kind than what was prayed for by the LAZATINs. The order to return the property with all the improvements thereon is just a necessary consequence to the order of rescission.
As a general rule, the relation of the parties in joint ventures is governed by their agreement. When the agreement is silent on any particular issue, the general principles of partnership may be resorted to. In Aurbach v. Sanitary Wares Manufacturing Corporation, the Supreme Court discussed the following points regarding joint ventures and partnership:
The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been generally understood to mean an organization formed for some temporary purpose. (Gates v. Megargel, 266 Fed. 811 [1920]) It is, in fact, hardly distinguishable from the partnership, since elements are similar ? community of interest in the business, sharing of profits and losses, and a mutual right of control. (Blackner v. McDermott, 176 F.2d 498 [1949]; Carboneau v. Peterson, 95 P.2d 1043 [1939]; Buckley v. Chadwick, 45 Cal.2d 183, 288 P.2d 12, 289 P.2d 242 [1955]) The main distinction cited by most opinions in common law jurisdictions is that the partnership contemplates a general business with some degree of continuity, while the joint venture is formed for the execution of a single transaction, and is thus of a temporary nature. (Tuffs v. Mann, 116 Cal.App. 170, 2 P.2d 500 [1931]; Harmon v. Martin, 395 III. 595, 71 N.E.2d 74 [1947]; Gates v. Megargel, 266 Fed. 811 [1920]) This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or universal, and a particular partnership may have for its object a specific undertaking. (Art. 1783, Civil Code). It would seem therefore that, under Philippine law, a joint venture is a form of partnership and should thus be governed by the laws of partnership. The Supreme Court has, however, recognized a distinction between these two business forms, and has held that although a corporation cannot enter into a partnership contract, it may, however, engage in a joint venture with others. (At p. 12, Tuazon v. Bolanos, 95 Phil. 906 [1954]; Campos and Lopez ? Campos Comments, Notes and Selected Cases, Corporation Code 1981) (Emphasis Supplied)
The LAZATINs were able to establish fraud on the part of PRIMELINK which, in the words of the court a quo, was a pattern of what appears to be a scheme or plot to reduce and eventually blot out the net incomes generated from sales of housing units by the defendants. Under Article 1838 of the Civil Code, where the partnership contract is rescinded on the ground of the fraud or misrepresentation of one of the parties thereto, the party entitled to rescind is, without prejudice to any other right is entitled to a lien on, or right of retention of, the surplus of the partnership property after satisfying the partnership liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership and for any capital or advance contributed by him. In the instant case, the joint venture still has outstanding liabilities to third parties or the buyers of the property.
It is not amiss to state that title to the land or TCT No. T-10848 which is now held by Chinabank for safekeeping pursuant to the Escrow Agreement executed between Primelink Properties and Development Corporation and Ma. Clara T. Lazatin-Magat should also be returned to the LAZATINs as a necessary consequence of the order of rescission of contract. The reason for the existence of the Escrow Agreement has ceased to exist when the joint venture agreement was rescinded.49
Respondents stress that petitioners must bear any damages or losses they may have suffered. They likewise stress that they did not enrich themselves at the expense of petitioners.
In reply, petitioners assert that it is unjust and inequitable for respondents to retain the improvements even if their share in the P1,041,524.26 of the net income of the property and the sale of the land were to be deducted from the value of the improvements, plus administrative and marketing expenses in the total amount of P40,000,000.00. Petitioners will still be entitled to an accounting from respondents. Respondents cannot deny the existence and nature of said improvements as they are visible to the naked eye.
The threshold issues are the following: (1) whether respondents are entitled to the possession of the parcels of land covered by the JVA and the improvements thereon introduced by petitioners as their contribution to the JVA; (2) whether petitioners are entitled to reimbursement for the value of the improvements on the parcels of land.
The petition has no merit.
On the first issue, we agree with petitioners that respondents did not specifically pray in their complaint below that possession of the improvements on the parcels of land which they contributed to the JVA be transferred to them. Respondents made a specific prayer in their complaint that, upon the rescission of the JVA, they be placed in possession of the parcels of land subject of the agreement, and for other "reliefs and such other remedies as are just and equitable in the premises." However, the trial court was not precluded from awarding possession of the improvements on the parcels of land to respondents in its decision. Section 2(c), Rule 7 of the Rules of Court provides that a pleading shall specify the relief sought but it may add as general prayer for such further or other relief as may be deemed just and equitable. Even without the prayer for a specific remedy, proper relief may be granted by the court if the facts alleged in the complaint and the evidence introduced so warrant.50 The court shall grant relief warranted by the allegations and the proof even if no such relief is prayed for.51 The prayer in the complaint for other reliefs equitable and just in the premises justifies the grant of a relief not otherwise specifically prayed for.52
The trial court was not proscribed from placing respondents in possession of the parcels of land and the improvements on the said parcels of land. It bears stressing that the parcels of land, as well as the improvements made thereon, were contributed by the parties to the joint venture under the JVA, hence, formed part of the assets of the joint venture.53 The trial court declared that respondents were entitled to the possession not only of the parcels of land but also of the improvements thereon as a consequence of its finding that petitioners breached their agreement and defrauded respondents of the net income under the JVA.
On the second issue, we agree with the CA ruling that petitioner Primelink and respondents entered into a joint venture as evidenced by their JVA which, under the Court?s ruling in Aurbach, is a form of partnership, and as such is to be governed by the laws on partnership.
When the RTC rescinded the JVA on complaint of respondents based on the evidence on record that petitioners willfully and persistently committed a breach of the JVA, the court thereby dissolved/cancelled the partnership.54 With the rescission of the JVA on account of petitioners? fraudulent acts, all authority of any partner to act for the partnership is terminated except so far as may be necessary to wind up the partnership affairs or to complete transactions begun but not yet finished.55 On dissolution, the partnership is not terminated but continues until the winding up of partnership affairs is completed.56 Winding up means the administration of the assets of the partnership for the purpose of terminating the business and discharging the obligations of the partnership.
The transfer of the possession of the parcels of land and the improvements thereon to respondents was only for a specific purpose: the winding up of partnership affairs, and the partition and distribution of the net partnership assets as provided by law.57 After all, Article 1836 of the New Civil Code provides that unless otherwise agreed by the parties in their JVA, respondents have the right to wind up the partnership affairs:
Art. 1836. Unless otherwise agreed, the partners who have not wrongfully dissolved the partnership or the legal representative of the last surviving partner, not insolvent, has the right to wind up the partnership affairs, provided, however, that any partner, his legal representative or his assignee, upon cause shown, may obtain winding up by the court.
It must be stressed, too, that although respondents acquired possession of the lands and the improvements thereon, the said lands and improvements remained partnership property, subject to the rights and obligations of the parties, inter se, of the creditors and of third parties under Articles 1837 and 1838 of the New Civil Code, and subject to the outcome of the settlement of the accounts between the parties as provided in Article 1839 of the New Civil Code, absent any agreement of the parties in their JVA to the contrary.58 Until the partnership accounts are determined, it cannot be ascertained how much any of the parties is entitled to, if at all.
It was thus premature for petitioner Primelink to be demanding that it be indemnified for the value of the improvements on the parcels of land owned by the joint venture/partnership. Notably, the JVA of the parties does not contain any provision designating any party to wind up the affairs of the partnership.
Thus, under Article 1837 of the New Civil Code, the rights of the parties when dissolution is caused in contravention of the partnership agreement are as follows:

(1) Each partner who has not caused dissolution wrongfully shall have:

(a) All the rights specified in the first paragraph of this article, and
(b) The right, as against each partner who has caused the dissolution wrongfully, to damages for breach of the agreement.

(2) The partners who have not caused the dissolution wrongfully, if they all desire to continue the business in the same name either by themselves or jointly with others, may do so, during the agreed term for the partnership and for that purpose may possess the partnership property, provided they secure the payment by bond approved by the court, or pay to any partner who has caused the dissolution wrongfully, the value of his interest in the partnership at the dissolution, less any damages recoverable under the second paragraph, No. 1(b) of this article, and in like manner indemnify him against all present or future partnership liabilities.
(3) A partner who has caused the dissolution wrongfully shall have:

(a) If the business is not continued under the provisions of the second paragraph, No. 2, all the rights of a partner under the first paragraph, subject to liability for damages in the second paragraph, No. 1(b), of this article.
(b) If the business is continued under the second paragraph, No. 2, of this article, the right as against his co-partners and all claiming through them in respect of their interests in the partnership, to have the value of his interest in the partnership, less any damage caused to his co-partners by the dissolution, ascertained and paid to him in cash, or the payment secured by a bond approved by the court, and to be released from all existing liabilities of the partnership; but in ascertaining the value of the partner?s interest the value of the good-will of the business shall not be considered.

And under Article 1838 of the New Civil Code, the party entitled to rescind is, without prejudice to any other right, entitled:

(1) To a lien on, or right of retention of, the surplus of the partnership property after satisfying the partnership liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership and for any capital or advances contributed by him;
(2) To stand, after all liabilities to third persons have been satisfied, in the place of the creditors of the partnership for any payments made by him in respect of the partnership liabilities; and
(3) To be indemnified by the person guilty of the fraud or making the representation against all debts and liabilities of the partnership.

The accounts between the parties after dissolution have to be settled as provided in Article 1839 of the New Civil Code:
Art. 1839. In settling accounts between the partners after dissolution, the following rules shall be observed, subject to any agreement to the contrary:

(1) The assets of the partnership are:

(a) The partnership property,
(b) The contributions of the partners necessary for the payment of all the liabilities specified in No. 2.

(2) The liabilities of the partnership shall rank in order of payment, as follows:

(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.

(3) The assets shall be applied in the order of their declaration in No. 1 of this article to the satisfaction of the liabilities.
(4) The partners shall contribute, as provided by article 1797, the amount necessary to satisfy the liabilities.
(5) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce the contributions specified in the preceding number.
(6) Any partner or his legal representative shall have the right to enforce the contributions specified in No. 4, to the extent of the amount which he has paid in excess of his share of the liability.
(7) The individual property of a deceased partner shall be liable for the contributions specified in No. 4.
(8) When partnership property and the individual properties of the partners are in possession of a court for distribution, partnership creditors shall have priority on partnership property and separate creditors on individual property, saving the rights of lien or secured creditors.
(9) Where a partner has become insolvent or his estate is insolvent, the claims against his separate property shall rank in the following order:

(a) Those owing to separate creditors;
(b) Those owing to partnership creditors;
(c) Those owing to partners by way of contribution.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 69200 are AFFIRMED insofar as they conform to this Decision of the Court.
Costs against petitioners.
SO ORDERED.
ROMEO J. CALLEJO, SR.Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBANChief JusticeChairperson

CONSUELO YNARES-SANTIAGOAssociate Justice
MA. ALICIA AUSTRIA-MARTINEZAsscociate Justice
MINITA V. CHICO-NAZARIOAssociate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court?s Division.
ARTEMIO V. PANGANIBANChief Justice

Footnotes

1 Penned by Associate Justice Regalado E. Maambong, with Associate Justices Eloy R. Bello, Jr. and Lucenito N. Tagle, concurring; rollo, pp. 33-53.
2 Rollo, pp. 72-74.
3 Id. at 12.
4 Records, pp. 12-13.
5 Id. at 14.
6 Id. at 15.
7 Id. at 16.
8 Id.
9 Id. at 23.
10 Id. at 16.
11 Id. at 15.
12 Id. at 70.
13 Id. at 20.
14 Id. at 22.
15 Id. at 6.
16 Id. at 6.
17 Id. at 34.
18 Id. at 37.
19 Id. at 38.
20 March 3, 1998; March 17, 1998; March 31, 1998; April 15, 1998; April 29, 1998; May 14, 1998; May 28, 1998; June 11, 1998. Records, pp. 39, 55, 90, 104, 107, 110, 115 and 117, respectively.
21 Records, p. 119.
22 Id. at 120.
23 Id. at 122.
24 Id. at 125.
25 Id. at 126.
26 Id. at 134.
27 Id. at 139.
28 Id. at 143.
29 Id. at 146.
30 Id. at 164.
31 Id. at 165.
32 Id. at 204-205.
33 Id. at 215.
34 Id. at 212-214.
35 Id. at 216-220.
36 Id. at 221-228.
37 Id. at 231-232.
38 Id. at 236.
39 CA rollo, pp. 63-65.
40 Rollo, p. 53.
41 G.R. Nos. 75875, 75951 and 75975-76, December 15, 1989, 180 SCRA 130, 147.
42 Rollo, p. 55.
43 Id. at 72-74.
44 Id. at 14.
45 Id. at 21-22.
46 Id. at 26.
47 Supra note 41.
48 Rollo, pp. 50-51.
49 Id. at 50-52.
50 Eugenio v. Velez, G.R. No. 85140, May 17, 1990, 185 SCRA 425, 432-433.
51 Banco Filipino Savings and Mortgage Bank v. Court of Appeals, 388 Phil. 27, 41 (2000).
52 Arroyo, Jr. v. Taduran, G.R. No. 147012, January 29, 2004, 421 SCRA 423, 427.
53 Lipscomb v. Aulenbacker, 272 S.W. 363, 168 Ark. 1066.
54 Article 1831 in relation to Article 1831(4)(b), New Civil Code.
55 Article 1832 in relation to Article 1834, New Civil Code.
56 Article 1829, New Civil Code.
57 Sy v. Court of Appeals, 372 Phil. 207, 299 (1999).
58 Ortega v. Court of Appeals, 315 Phil. 573, 581-582 (1995).