G.R. No. 165001. January 31, 2007.*

NEW FRONTIER SUGAR CORPORATION, petitioner, vs. REGIONAL TRIAL

COURT, BRANCH 39, ILOILO CITY and EQUITABLE PCI BANK, respondents.

Corporation Law; Corporate Rehabilitation;Rehabilitation contemplates a continuance

of corporate life and activities in an effort to restore and reinstate the corporation to its

former position of successful operation and solvency.Rehabilitation contemplates a

continuance of corporate life and activities in an effort to restore and reinstate the corporation

to its former position of successful operation and solvency. Presently, the applicable law on

rehabilitation petitions filed by corporations, partnerships or associations, including

rehabilitation cases transferred from the Securities and Exchange Commission to the RTCs

pursuant to Republic Act No. 8799 or the Securities Regulation Code, is the Interim Rules of

Procedure on Corporate Rehabilitation (2000).

Same; Same; Fact that there is a pending case for the annulment of the foreclosure

proceedings and auction sales is of no moment; CA was correct in upholding the RTCs

dismissal of the petition for rehabilitation in view of the fact that the titles to petitioners

properties have already passed on to respondent bank and petitioner has no more assets to

speak of.The fact that there is a pending case for the annulment of the foreclosure

proceedings and auction sales is of no moment. Until a court of competent jurisdiction, which

in this case is the RTC of Dumangas, Iloilo, Branch 68, annuls the foreclosure sale of the

properties involved, petitioner is bereft of a valid title over the properties. In fact, it is the trial

courts ministerial duty to grant a possessory writ over the properties. Consequently, the CA

was correct in upholding the RTCs dismissal of the petition for rehabilitation in view of the

fact that the titles to petitioners properties have already passed on to respondent bank and

petitioner has no more assets to speak of, specially since petitioner does not dispute the fact

that the properties which were foreclosed by respondent bank comprise the bulk, if not the

entirety, of its assets.

Same; Same; Appeals; All decisions and final orders in cases falling under the Interim

Rules of Corporate Rehabilitation and the Interim Rules of Procedure Governing Intra-

Corporate Controversies under Republic Act No. 8799 shall be appealed to the CA through a

petition for review under Rule 43 of the Rules of Court to be filed within fifteen (15) days from

notice of the decision or final order of the RTC.A.M. No. 00-8-10-SC promulgated by the

Court on September 4, 2001 provides that a petition for rehabilitation is considered a special

proceeding given that it seeks to establish the status of a party or a particular fact.

Accordingly, the period of appeal provided in paragraph 19 (b) of the Interim Rules Relative

to the Implementation ofBatas Pambansa Blg. 129 for special proceedings shall apply. Under

said paragraph 19 (b), the period of appeal shall be thirty (30) days, a record of appeal being

required. However, it should be noted that the Court issued A.M. No. 04-9-07-SC on

September 14, 2004, clarifying the proper mode of appeal in cases involving corporate

rehabilitation and intra-corporate controversies. It is provided therein that all decisions and

final orders in cases falling under the Interim Rules of Corporate Rehabilitation and the

Interim Rules of Procedure Governing Intra-Corporate Controversies under Republic Act No.

8799 shall be appealed to the CA through a petition for review under Rule 43 of the Rules of

Court to be filed within fifteen (15) days from notice of the decision or final order of the RTC.

Remedial Law; Certiorari; Certiorari is a remedy for the correction of errors of

jurisdiction, not errors of judgment; Since the issue is jurisdiction, an original action for

certiorari may be directed against an interlocutory order of the lower court prior to an appeal

from the judgment or where there is no appeal or any plain, speedy or adequate remedy.

The CA also correctly ruled that petitioner availed of the wrong remedy when it filed a special

civil action for certiorariwith the CA under Rule 65 of the Rules of Court. Certiorari is a

remedy for the correction of errors of jurisdiction, not errors of judgment. It is an original and

independent action that was not part of the trial that had resulted in the rendition of the

judgment or order complained of. More importantly, since the issue is jurisdiction, an original

action for certiorari may be directed against an interlocutory order of the lower court prior to

an appeal from the judgment; or where there is no appeal or any plain, speedy or adequate

remedy. A petition for certiorari should be filed not later than sixty days from the notice of

judgment, order, or resolution, and a motion for reconsideration is generally required prior to

the filing of a petition for certiorari, in order to afford the tribunal an opportunity to correct

the alleged errors.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Cornelio P. Panes for petitioner.

Darwin R. Bawar for respondent.

AUSTRIA-MARTINEZ, J.:

In the present petition for review under Rule 45 of the Rules of Court, petitioner assails the

decision of the Court of Appeals (CA)1 in CA-G.R. SP No. 78673, dismissing its special civil

action for certiorari and affirming the dismissal orders dated January 13, 2003 and April 14,

2003 issued by the Regional Trial Court (RTC) of Iloilo City, Branch 39, acting as a special

commercial court, in Civil Case No. 02-27278.

As borne by the records, New Frontier Sugar Corporation (petitioner) is a domestic

corporation engaged in the business of raw sugar milling. Foreseeing that it cannot meet its

obligations with its creditors as they fell due, petitioner filed a Petition for the Declaration of

State of Suspension of Payments with Approval of Proposed Rehabilitation Plan under the

Interim Rules of Procedure on Corporate Rehabilitation (2000) some time in August

2002.2Finding the petition to be sufficient in form and substance, the RTC issued a Stay Order

dated August 20, 2002, appointing Manuel B. Clemente as rehabilitation receiver, ordering the

latter to put up a bond, and setting the initial hearing on the petition.3

One of petitioners creditors, the Equitable PCI Bank (respondent bank), filed a

Comment/Opposition with Motion to Exclude Property, alleging that petitioner is not qualified

for corporate rehabilitation, as it can no longer operate because it has no assets left.

Respondent bank also alleged that the financial statements, schedule of debts and liabilities,

inventory of assets, affidavit of general financial condition, and rehabilitation plan submitted

by petitioner are misleading and inaccurate since its properties have already been foreclosed

and transferred to respondent bank before the petition for rehabilitation was filed, and

petitioner, in fact, still owes respondent bank deficiency liability.4

On January 13, 2003, the RTC issued an Omnibus Order terminating the proceedings and

dismissing the case.5 Petitioner filed an Omnibus Motion but this was denied by the RTC in its

Order dated April 14, 2003.6

Petitioner then filed with the CA a special civil action for certiorari, which was denied by

the CA per assailed Decision dated July 19, 2004, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us

DISMISSING the petition filed in this case and AFFIRMING the orders assailed by the

petitioner.

SO ORDERED.7

In dismissing the petition, the CA sustained the findings of the RTC that since petitioner no

longer has sufficient assets and properties to continue with its operations and answer its

corresponding liabilities, it is no longer eligible for rehabilitation. The CA also ruled that even

if the RTC erred in dismissing the petition, the same could not be corrected anymore because

what petitioner filed before the CA was a special civil action for certiorari under Rule 65 of

the Rules of Court instead of an ordinary appeal.8

Hence, herein petition based on the following reasons:

(a)

THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN

UPHOLDING THE FINDINGS OF THE SPECIAL COMMERCIAL COURT (RTC BR. 39,

ILOILO CITY), PREMATURELY EXCLUDING THE FORECLOSED PROPERTY OF

PETITIONER AND DECLARING THAT PETITIONER HAS NO SUBSTANTIAL

PROPERTY LEFT TO MAKE CORPORATE REHABILITATION FEASIBLE AS THERE

IS AN ONGOING LITIGATION FOR THE ANNULMENT OF SUCH FORECLOSURE IN

ANOTHER PROCEEDING.

(b)

THE COURT OF APPEALS ERRED IN DISMISSING THE PETITION FOR

CERTIORARI FILED BEFORE IT AS IMPROPER, APPEAL BEING AN AVAILABLE

REMEDY.9

The Court denies the petition.

Rehabilitation contemplates a continuance of corporate life and activities in an effort to

restore and reinstate the corporation to its former position of successful operation and

solvency.10 Presently, the applicable law on rehabilitation petitions filed by corporations,

partnerships or associations,11 including rehabilitation cases transferred from the Securities

and Exchange Commission to the RTCs pursuant to Republic Act No. 8799 or the Securities

Regulation Code,12 is the Interim Rules of Procedure on Corporate Rehabilitation (2000).

Under the Interim Rules, the RTC, within five (5) days from the filing of the petition for

rehabilitation and after finding that the petition is sufficient in form and substance, shall issue

a Stay Order appointing a Rehabilitation Receiver, suspending enforcement of all claims,

prohibiting transfers or encumbrances of the debtors properties, prohibiting payment of

outstanding liabilities, and prohibiting the withholding of supply of goods and services from

the debtor.13 Any transfer of property or any other conveyance, sale, payment, or agreement

made in violation of the Stay Order or in violation of the Rules may be declared void by the

court upon motion ormotu proprio.14

Further, the Stay Order is effective both against secure and unsecured creditors. This is in

harmony with the principle of equality is equity first enunciated in Alemars Sibal & Sons,

Inc. v. Elbinias,15thus:

During rehabilitation receivership, the assets are held in trust for the equal benefit of all

creditors to preclude one from obtaining an advantage or preference over another by the

expediency of an attachment, execution or otherwise. For what would prevent an alert creditor,

upon learning of the receivership, from rushing posthaste to the courts to secure judgments for

the satisfaction of its claims to the prejudice of the less alert creditors.

As between creditors, the key phrase is equality is equity. When a corporation

threatened by bankruptcy is taken over by a receiver, all the creditors should stand on an equal

footing. Not anyone of them should be given any preference by paying one or some of them

ahead of the others. This is precisely the reason for the suspension of all pending claims

against the corporation under receivership. Instead of creditors vexing the courts with suits

against the distressed firm, they are directed to file their claims with the receiver who is a duly

appointed officer of the SEC. (Emphasis supplied)

Nevertheless, the suspension of the enforcement of all claims against the corporation is subject

to the rule that it shall commence only from the time the Rehabilitation Receiver is

appointed. Thus, inRizal Commercial Banking Corporation v. Intermediate Appellate

Court,16 the Court upheld the right of RCBC to extrajudicially foreclose the mortgage on some

of BF Homes properties, and reinstated the trial courts judgment ordering the sheriff to

execute and deliver to RCBC the certificate of auction sale involving the properties. The Court

vacated its previous Decision rendered on September 14, 1992 in the same case, finding that

RCBC can rightfully move for the extrajudicial foreclosure of the mortgage since it was done

on October 16, 1984, while the management committee was appointed only on March 18,

1985. The Court also took note of the SECs denial of the petitioners consolidated motion to

cite the sheriff and RCBC for contempt and to annul the auction proceedings and sale.

In this case, respondent bank instituted the foreclosure proceedings against petitioners

properties on March 13, 2002 and a Certificate of Sale at Public Auction was issued on May 6,

2002, with respondent bank as the highest bidder. The mortgage on petitioners chattels was

likewise foreclosed and the Certificate of Sale was issued on May 14, 2002. It also appears

that titles over the properties have already been transferred to respondent bank.17

On the other hand, the petition for corporate rehabilitation was filed only on August 14,

2002 and the Rehabilitation Receiver appointed on August 20, 2002. Respondent bank,

therefore, acted within its prerogatives when it foreclosed and bought the property, and had

title transferred to it since it was made prior to the appointment of a rehabilitation receiver.

The fact that there is a pending case for the annulment of the foreclosure proceedings and

auction sales18 is of no moment. Until a court of competent jurisdiction, which in this case is

the RTC of Dumangas, Iloilo, Branch 68, annuls the foreclosure sale of the properties

involved, petitioner is bereft of a valid title over the properties.19 In fact, it is the trial courts

ministerial duty to grant a possessory writ over the properties.20

Consequently, the CA was correct in upholding the RTCs dismissal of the petition for

rehabilitation in view of the fact that the titles to petitioners properties have already passed on

to respondent bank and petitioner has no more assets to speak of, specially since petitioner

does not dispute the fact that the properties which were foreclosed by respondent bank

comprise the bulk, if not the entirety, of its assets.

It should be stressed that the Interim Rules was enacted to provide for a summary and

non-adversarial rehabilitation proceedings.21 This is in consonance with the commercial nature

of a rehabilitation case, which is aimed to be resolved expeditiously for the benefit of all the

parties concerned and the economy in general.

As provided in the Interim Rules, the basic procedure is as follows:

1. (1)The petition is filed with the appropriate Regional Trial Court;22

2. (2)If the petition is found to be sufficient in form and substance, the trial court shall

issue a Stay Order, which shall provide, among others, for the appointment of a

Rehabilitation Receiver; the fixing of the initial hearing on the petition; a directive

to the petitioner to publish the Order in a newspaper of general circulation in the

Philippines once a week for two (2) consecutive weeks; and a directive to all

creditors and all interested parties (including the Securities and Exchange

Commission) to file and serve on the debtor a verified comment on or opposition

to the petition, with supporting affidavits and documents.23

1. 3)Publication of the Stay Order;

2. 4)Initial hearing on any matter relating to the petition or on any comment and/or

opposition filed in connection therewith. If the trial court is satisfied that there

is merit in the petition, it shall give due course to the petition;24

3. 5)Referral for evaluation of the rehabilitation plan to the rehabilitation receiver who

shall submit his recommendations to the court;25

4. 6)Modifications or revisions of the rehabilitation plan as necessary;26

5. 7)Submission of final rehabilitation plan to the trial court for approval;27

6. 8)Approval/disapproval of rehabilitation plan by the trial court;28

In the present case, the petition for rehabilitation did not run its full course but was dismissed

by the RTC after due consideration of the pleadings filed before it. On this score, the RTC

cannot be faulted for its summary dismissal, as it is tantamount to a finding that there is no

merit to the petition. This is in accord with the trial courts authority to give due course to the

petition or not under Rule 4, Section 9 of the Interim Rules. Letting the petition go through the

process only to be dismissed later on because there are no assets to be conserved will not only

defeat the reason for the rules but will also be a waste of the trial courts time and resources.

The CA also correctly ruled that petitioner availed of the wrong remedy when it filed a

special civil action for certiorari with the CA under Rule 65 of the Rules of Court.

Certiorari is a remedy for the correction of errors of jurisdiction, not errors of judgment.

It is an original and independent action that was not part of the trial that had resulted in the

rendition of the judgment or order complained of. More importantly, since the issue is

jurisdiction, an original action for certiorari may be directed against an interlocutory order of

the lower court prior to an appeal from the judgment; or where there is no appeal or any plain,

speedy or adequate remedy. A petition for certiorari should be filed not later than sixty days

from the notice of judgment, order, or resolution, and a motion for reconsideration is generally

required prior to the filing of a petition forcertiorari, in order to afford the tribunal an

opportunity to correct the alleged errors.29

The Omnibus Order dated January 13, 2003 issued by the RTC is a final order since it

terminated the proceedings and dismissed the case before the trial court; it leaves nothing

more to be done. As such, petitioners recourse is to file an appeal from the Omnibus Order.

In this regard, A.M. No. 00-8-10-SC promulgated by the Court on September 4, 2001

provides that a petition for rehabilitation is considered a special proceeding given that it seeks

to establish the status of a party or a particular fact. Accordingly, the period of appeal provided

in paragraph 19 (b) of the Interim Rules Relative to the Implementation of Batas Pambansa

Blg. 129 for special proceedings shall apply. Under said paragraph 19 (b), the period of appeal

shall be thirty (30) days, a record of appeal being required.

However, it should be noted that the Court issued A.M. No. 04-9-07-SC on September 14,

2004, clarifying the proper mode of appeal in cases involving corporate rehabilitation and

intra-corporate controversies. It is provided therein that all decisions and final orders in cases

falling under the Interim Rules of Corporate Rehabilitation and the Interim Rules of Procedure

Governing Intra-Corporate Controversies under Republic Act No. 8799 shall be appealed to

the CA through a petition for review under Rule 43 of the Rules of Court to be filed within

fifteen (15) days from notice of the decision or final order of the RTC.

In any event, as previously stated, since what petitioner filed was a petition

for certiorari under Rule 65 of the Rules, the CA rightly dismissed the petition and affirmed

the assailed Orders.

WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.

SO ORDERED.

Ynares-Santiago (Chairperson), Callejo, Sr. andChico-Nazario, JJ., concur.

Petition denied.

Note.A petition for certiorari seeks to correct errors of jurisdiction while a petition for

review seeks to correct errors of judgment committed by the court. (Microsoft Corporation vs.

Best Deal Computer Center Corporation, 389 SCRA 615 [2002])

o0o

G.R. No. 171545. December 19, 2007.*

EQUITABLE PCI BANK,** AIMEE YU and BEJAN LIONEL APAS,

petitioners, vs. NG SHEUNG NGOR***doing business under the name and style KEN

MARKETING, KEN APPLIANCE DIVISION, INC. and BENJAMIN E. GO,

respondents.

Actions; Forum Shopping; There is no forum shopping where a partys petition for

relief in the Regional Trial Court (RTC) and its petition for certiorari in the CA did not have

identical causes of action; In a petition for relief, the judgment or final order is rendered by a

court with competent jurisdiction, while in a petition for certiorari, the order is rendered by a

court without or in excess of its jurisdiction.Forum shopping exists when two or more

actions involving the same transactions, essential facts and circumstances are filed and those

actions raise identical issues, subject matter and causes of action. The test is whether, in two or

more pending cases, there is identity of parties, rights or causes of actions and reliefs.

Equitables petition for relief in the RTC and its petition for certiorari in the CA did not have

identical causes of action. The petition for relief from the denial of its notice of appeal was

based on the RTCs judgment or final order preventing it from taking an appeal by fraud,

accident, mistake or excusable negligence. On the other hand, its petition for certiorar ri in

the CA, a special civil action, sought to correct the grave abuse of discretion amounting to lack

of jurisdiction committed by the RTC. In a petition for relief, the judgment or final order is

rendered by a court with competent jurisdiction. In a petition for certiorari, the order is

rendered by a court without or in excess of its jurisdiction.

Same; Same; A party substantially complied with the rule on non-forum shopping when

it moved to withdraw its petition for relief in the Regional Trial Court (RTC) on the same day

it filed the petition for certiorari in the Court of Appeals.Equitable substantially complied

with the rule on non-forum shopping when it moved towithdraw its petition for relief in the

RTC on the same day (in fact just four hours and forty minutes after) it filed the petition for

certiorari in the CA. Even if Equitable failed to disclose that it had a pending petition for relief

in the RTC, it rectified what was doubtlessly a careless oversight by withdrawing the petition

for relief just a few hours after it filed its petition for certiorari in the CAa clear indication

that it had no intention of maintaining the two actions at the same time.

Certiorari; Two Substantial Requirements in a Petition for Certiorari.There are two

substantial requirements in a petition for certiorari. These are: 1. that the tribunal, board or

officer exercising judicial or quasi-judicial functions acted without or in excess of his or its

jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction; and

2. that there is no appeal or any plain, speedy and adequate remedy in the ordinary course of

law. For a petition for certiorari premised on grave abuse of discretion to prosper, petitioner

must show that the public respondent patently and grossly abused his discretion and that abuse

amounted to an evasion of positive duty or a virtual refusal to perform a duty enjoined by law

or to act at all in contemplation of law, as where the power was exercised in an arbitrary and

despotic manner by reason of passion or hostility.

Petitions for Relief; A petition for relief under Rule 38 is an equitable remedy allowed

only in exceptional circumstances or where there is no other available or adequate remedy.

Although Equitable filed a petition for relief from the March 24, 2004 order, that petition was

not a plain, speedy and adequate remedy in the ordinary course of law. A petition for relief

under Rule 38 is an equitable remedy allowed only in exceptional circumstances or where

there is no other available or adequate remedy.

Certiorari; Appeals; The jurisdiction of the Supreme Court in Rule 45 petitions is

limited to questions of law.The jurisdiction of this Court in Rule 45 petitions is limited to

questions of law. There is a question of law when the doubt or controversy concerns the

correct application of law or jurisprudence to a certain set of facts; or when the issue does not

call for the probative value of the evidence presented, the truth or falsehood of facts being

admitted.

Contracts; Contracts of Adhesion; Words and Phrases; A contract of adhesion is a

contract whereby almost all of its provisions are drafted by one party and the participation of

the other party is limited to affixing his signature or his adhesion to the contract; It is

erroneous to conclude that contracts of adhesion are invalid per sethey are as binding as

ordinary contracts.A contract of adhesion is a contract whereby almost all of its provisions

are drafted by one party. The participation of the other party is limited to affixing his signature

or his adhesion to the contract. For this reason, contracts of adhesion are strictly construed

against the party who drafted it. It is erroneous, however, to conclude that contracts of

adhesion are invalid per se. They are, on the contrary, as binding as ordinary contracts. A

party is in reality free to accept or reject it. A contract of adhesion becomes void only when

the dominant party takes advantage of the weakness of the other party, completely depriving

the latter of the opportunity to bargain on equal footing.

Same; Escalation Clauses; Principle of Mutuality of Contracts; Escalation clauses are

not void per se but one which grants the creditor an unbridled right to adjust the interest

independently and upwardly, completely depriving the debtor of the right to assent to an

important modification in the agreement is voidclauses of that nature violate the principle

of mutuality of contracts.Escalation clauses are not void per se. However, one which grants

the creditor an unbridled right to adjust the interest independently and upwardly, completely

depriving the debtor of the right to assent to an important modification in the agreement is

void. Clauses of that nature violate the principle of mutuality of contracts. Article 1308 of the

Civil Code holds that a contract must bind both contracting parties; its validity or compliance

cannot be left to the will of one of them. For this reason, we have consistently held that a valid

escalation clause provides: 1. that the rate of interest will only be increased if the applicable

maximum rate of interest is increased by law or by the Monetary Board; and 2. that the

stipulated rate of interest will be reduced if the applicable maximum rate of interest is reduced

by law or by the Monetary Board (de-escalation clause).

Same; Same; Where the escalation clause is annulled, the principal amount of the loan

is subject to the original or stipulated rate of interest.With regard to the proper rate of

interest, in New Sampaguita Builders v. Philippine National Bank, 435 SCRA 565 (2004), we

held that, because the escalation clause was annulled, the principal amount of the loan was

subject to the original or stipulated rate of interest. Upon maturity, the amount due was subject

to legal interest at the rate of 12% per annum.

Same; Same; Extraordinary Inflation or Deflation;Words and Phrases; Extraordinary

Inflation and Extraordinary Deflation, Defined.Extraordinary inflation exists when

there is an unusual decrease in the purchasing power of currency (that is, beyond the common

fluctuation in the value of currency) and such decrease could not be reasonably foreseen or

was manifestly beyond the contemplation of the parties at the time of the obligation.

Extraordinary deflation, on the other hand, involves an inverse situation.

Same; Same; Same; Requisites; Despite the devaluation of the peso, the Bangko Sentral

ng Pilipinas (BSP) never declared a situation of extraordinary inflation. Moreover, although

the obligation in this instance arose out of a contract, the parties did not agree to recognize

the effects of extraordinary inflation (or deflation).For extraordinary inflation (or deflation)

to affect an obligation, the following requisites must be proven: 1. that there was an official

declaration of extraordinary inflation or deflation from the Bangko Sentral ng Pilipinas (BSP);

2. that the obligation was contractual in nature; and 3. that the parties expressly agreed to

consider the effects of the extraordinary inflation or deflation. Despite the devaluation of the

peso, the BSP never declared a situation of extraordinary inflation. Moreover, although the

obligation in this instance arose out of a contract, the parties did not agree to recognize the

effects of extraordinary inflation (or deflation). The RTC never mentioned that there was a

such stipulation either in the promissory note or loan agreement. Therefore, respondents

should pay their dollar-denominated loans at the exchange rate fixed by the BSP on the date of

maturity.

Damages; Moral damages are in the category of an award designed to compensate the

claimant for actual injury suffered, not to impose a penalty to the wrongdoer.Moral

damages are in the category of an award designed to compensate the claimant for actual injury

suffered, not to impose a penalty to the wrongdoer. To be entitled to moral damages, a

claimant must prove: 1. That he or she suffered besmirched reputation, or physical, mental or

psychological suffering sustained by the claimant; 2. That the defendant committed a wrongful

act or omission; 3. That the wrongful act or omission was the proximate cause of the damages

the claimant sustained; 4. The case is predicated on any of the instances expressed or

envisioned by Article 2219 and 2220.

Banks and Banking; The relationship between a bank and its depositor is that of

creditor and debtora bank has the right to setoff the deposits in its hands for the payment of

a depositors indebtedness.The relationship between a bank and its depositor is that of

creditor and debtor. For this reason, a bank has the right to set-off the deposits in its hands for

the payment of a depositors indebtedness. Respondents indeed defaulted on their obligation.

For this reason, Equitable had the option to exercise its legal right to set-off or compensation.

However, the RTC mistakenly (or, as it now appears, deliberately) concluded that Equitable

acted fraudulently or in bad faith or in wanton disregard of its contractual obligations

despite the absence of proof. The undeniable fact was that, whatever damage respondents

sustained was purely the consequence of their failure to pay their loans. There was therefore

absolutely no basis for the award of moral damages to them.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Angara, Abello, Concepcion, Regala & Cruz for petitioners.

Hilario P. Davide III for respondents.

CORONA, J.:

This petition for review on certiorari1 seeks to set aside the decision2 of the Court of Appeals

(CA) in CA-G.R. SP No. 83112 and its resolution3 denying reconsideration.

On October 7, 2001, respondents Ng Sheung Ngor,4Ken Appliance Division, Inc. and

Benjamin E. Go filed an action for annulment and/or reformation of documents and

contracts5 against petitioner Equitable PCI Bank (Equitable) and its employees, Aimee Yu and

Bejan Lionel Apas, in the Regional Trial Court (RTC), Branch 16 of Cebu City.6 They

claimed that Equitable induced them to avail of its peso and dollar credit facilities by offering

low interest rates7 so they accepted Equitables proposal and signed the banks preprinted

promissory notes on various dates beginning 1996. They, however, were unaware that the

documents contained identical escalation clauses granting Equitable authority to increase

interest rates without their consent.8

Equitable, in its answer, asserted that respondents knowingly accepted all the terms and

conditions contained in the promissory notes.9 In fact, they continuously availed of and

benefited from Equitables credit facilities for five years.10

After trial, the RTC upheld the validity of the promissory notes. It found that, in 2001

alone, Equitable restructured respondents loans amounting to US$228,200 and P 1,000,000.11

__The trial court, however, invalidated the escalation clause contained therein because it

violated the principle of mutuality of contracts.12 Nevertheless, it took judicial notice of the

steep depreciation of the peso during the intervening period13 and declared the existence of

extraordinary deflation.14 Consequently, the RTC ordered the use of the 1996 dollar exchange

rate in computing respondents dollar-denominated loans.15 Lastly, because the business

reputation of respondents was (allegedly) severely damaged when Equitable froze their

accounts,16 the trial court awarded moral and exemplary damages to them.17

The dispositive portion of the February 5, 2004 RTC decision18 provided:

WHEREFORE, premises considered, judgment is hereby rendered:

1. A)Ordering [Equitable] to reinstate and return the amount of [respondents] deposit

placed on hold status;

2. B)Ordering [Equitable] to pay [respondents] the sum of P12 [m]illion [p]esos as

moral damages;

3. C)Ordering [Equitable] to pay [respondents] the sum of P10 [m]illion [p]esos as

exemplary damages;

4. D)Ordering defendants Aimee Yu and Bejan [Lionel] Apas to pay [respondents],

jointly and severally, the sum of [t]wo [m]illion [p]esos as moral and exemplary

damages;

5. E)Ordering [Equitable, Aimee Yu and Bejan Lionel Apas], jointly and severally, to

pay [respondents] attorneys fees in the sum of P300,000; litigation expenses in

the sum of P50,000 and the cost of suit;

6. F)Directing plaintiffs Ng Sheung Ngor and Ken Marketing to pay [Equitable] the

unpaid principal obligation for the peso loan as well as the unpaid obligation for

the dollar denominated loan;

7. G)Directing plaintiff Ng Sheung Ngor and Ken 1)12% per annum for the peso

loans;

1. 2)8% per annum for the dollar loans. The basis for the payment of the dollar

obligation is the conversion rate of P26.50 per dollar availed of at the time of

incurring of the obligation in accordance with Article 1250 of the Civil Code of the

Philippines;

1. H)Dismissing [Equitables] counterclaim except the payment of the aforestated

unpaid principal loan obligations and interest.

SO ORDERED.19

Equitable and respondents filed their respective notices of appeal.20

In the March 1, 2004 order of the RTC, both notices were denied due course because

Equitable and respondents failed to submit proof that they paid their respective appeal

fees.21

WHEREFORE, premises considered, the appeal interposed by defendants from the Decision

in the above-entitled case isDENIED due course. As of February 27, 2004, the Decision

dated February 5, 2004, is considered final and executory in so far as [Equitable, Aimee

Yu and Bejan Lionel Apas] are concerned.22 (emphasis supplied)

Equitable moved for the reconsideration of the March 1, 2004 order of the RTC23 on the

ground that it did in fact pay the appeal fees. Respondents, on the other hand, prayed for the

issuance of a writ of execution.24

On March 24, 2004, the RTC issued an omnibus order denying Equitables motion for

reconsideration for lack of merit25 and ordered the issuance of a writ of execution in favor of

respondents.26 According to the RTC, because respondents did not move for the

reconsideration of the previous order (denying due course to the parties notices of

appeal),27 the February 5, 2004 decision became final and executory as to both parties and a

writ of execution against Equitable was in order.28

A writ of execution was thereafter issued29 and three real properties of Equitable were

levied upon.30

On March 26, 2004, Equitable filed a petition for relief in the RTC from the March 1,

2004 order.31 It, however, withdrew that petition on March 30, 200432and instead filed a

petition for certiorari with an application for an injunction in the CA to enjoin the

implementation and execution of the March 24, 2004 omnibus order.33

On June 16, 2004, the CA granted Equitables application for injunction. A writ of preliminary

injunction was correspondingly issued.34

Notwithstanding the writ of injunction, the properties of Equitable previously levied upon

were sold in a public auction on July 1, 2004. Respondents were the highest bidders and

certificates of sale were issued to them.35

On August 10, 2004, Equitable moved to annul the July 1, 2004 auction sale and to cite

the sheriffs who conducted the sale in contempt for proceeding with the auction despite the

injunction order of the CA.36

On October 28, 2005, the CA dismissed the petition for certiorari.37 It found Equitable

guilty of forum shopping because the bank filed its petition for certiorari in the CA several

hours before withdrawing its petition for relief in the RTC.38 Moreover, Equitable failed to

disclose, both in the statement of material dates and certificate of non-forum shopping

(attached to its petition for certiorari in the CA), that it had a pending petition for relief in the

RTC.39

Equitable moved for reconsideration40 but it was denied.41 Thus, this petition.

Equitable asserts that it was not guilty of forum shopping because the petition for relief was

withdrawn on the same day the petition for certiorari was filed.42 It likewise avers that its

petition for certiorari was meritorious because the RTC committed grave abuse of discretion in

issuing the March 24, 2004 omnibus order which was based on an erroneous assumption. The

March 1, 2004 order denying its notice of appeal for non payment of appeal fees was

erroneous because it had in fact paid the required fees.43 Thus, the RTC, by issuing its March

24, 2004 omnibus order, effectively prevented Equitable from appealing the patently wrong

February 5, 2004 decision.44

This petition is meritorious.

Equitable Was Not Guilty

of Forum Shopping

Forum shopping exists when two or more actions involving the same transactions, essential

facts and circumstances are filed and those actions raise identical issues, subject matter and

causes of action.45The test is whether, in two or more pending cases, there is identity of

parties, rights or causes of actions and reliefs.46

Equitables petition for relief in the RTC and its petition for certiorari in the CA did not

have identical causes of action. The petition for relief from the denial of its notice of appeal

was based on the RTCs judgment or final order preventing it from taking an appeal by fraud,

accident, mistake or excusable negligence.47 On the other hand, its petition for certiorari in

the CA, a special civil action, sought to correct the grave abuse of discretion amounting to lack

of jurisdiction committed by the RTC.48

In a petition for relief, the judgment or final order is rendered by a court with competent

jurisdiction. In a petition for certiorari, the order is rendered by a court without or in excess of

its jurisdiction.

Moreover, Equitable substantially complied with the rule on non-forum shopping when it

moved to withdraw its petition for relief in the RTC on the same day (in fact just four hours

and forty minutes after) it filed the petition for certiorari in the CA. Even if Equitable failed to

disclose that it had a pending petition for relief in the RTC, it rectified what was doubtlessly a

careless oversight by withdrawing the petition for relief just a few hours after it filed its

petition for certiorari in the CAa clear indication that it had no intention of maintaining the

two actions at the same time.

The Trial Court Committed Grave Abuse

of Discretion in Issuing its March 1, 2004

and March 24, 2004 Orders

Section 1, Rule 65 of the Rules of Court provides:

Section 1. Petition for Certiorari.When any tribunal, board or officer exercising judicial

or quasi-judicial function has acted without or in excess of its or his jurisdiction, or with

grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no

appeal, nor any plain, speedy or adequate remedy in the ordinary course of law, a person

aggrieved thereby may file a verified petition in the proper court, alleging the facts with

certainty and praying that judgment be rendered annulling or modifying the proceedings of

such tribunal, board or officer, and granting such incidental reliefs as law and justice may

require.

The petition shall be accompanied by a certified true copy of the judgment, order or

resolution subject thereof, copies of all pleadings and documents relevant and pertinent

thereto, and a sworn certificate of non-forum shopping as provided in the third paragraph of

Section 3, Rule 46.

There are two substantial requirements in a petition for certiorari. These are:

1. 1.that the tribunal, board or officer exercising judicial or quasi-judicial functions

acted without or in excess of his or its jurisdiction or with grave abuse of

discretion amounting to lack or excess of jurisdiction; and

2. 2.that there is no appeal or any plain, speedy and adequate remedy in the ordinary

course of law.

For a petition for certiorari premised on grave abuse of discretion to prosper, petitioner must

show that the public respondent patently and grossly abused his discretion and that abuse

amounted to an evasion of positive duty or a virtual refusal to perform a duty enjoined by law

or to act at all in contemplation of law, as where the power was exercised in an arbitrary and

despotic manner by reason of passion or hostility.49

The March 1, 2004 order denied due course to the notices of appeal of both Equitable and

respondents. However, it declared that the February 5, 2004 decision was final and executory

only with respect to Equitable.50 As expected, the March 24, 2004 omnibus order denied

Equitables motion for reconsideration and granted respondents motion for the issuance of a

writ of execution.51

The March 1, 2004 and March 24, 2004 orders of the RTC were obviously intended to

prevent Equitable, et al. from appealing the February 5, 2004 decision. Not only that. The

execution of the decision was undertaken with indecent haste, effectively obviating or

defeating Equitables right to avail of possible legal remedies. No matter how we look at it, the

RTC committed grave abuse of discretion in rendering those orders.

With regard to whether Equitable had a plain, speedy and adequate remedy in the ordinary

course of law, we hold that there was none. The RTC denied due course to its notice of appeal

in the March 1, 2004 order. It affirmed that denial in the March 24, 2004 omnibus order.

Hence, there was no way Equitable could have possibly appealed the February 5, 2004

decision.52

Although Equitable filed a petition for relief from the March 24, 2004 order, that petition was

not a plain, speedy and adequate remedy in the ordinary course of law.53 A petition for relief

under Rule 38 is an equitable remedy allowed only in exceptional circumstances or where

there is no other available or adequate remedy.54

Thus, we grant Equitables petition for certiorari and consequently give due course to its

appeal.

Equitable Raised Pure Questions

of Law in its Petition For Review

The jurisdiction of this Court in Rule 45 petitions is limited to questions of law.55 There is a

question of law when the doubt or controversy concerns the correct application of law or

jurisprudence to a certain set of facts; or when the issue does not call for the probative value of

the evidence presented, the truth or falsehood of facts being admitted.56

Equitable does not assail the factual findings of the trial court. Its arguments essentially

focus on the nullity of the RTCs February 5, 2004 decision. Equitable points out that that

decision was patently erroneous, specially the exorbitant award of damages, as it was

inconsistent with existing law and jurisprudence.57

The Promissory Notes Were Valid

The RTC upheld the validity of the promissory notes despite respondents assertion that those

documents were contracts of adhesion.

A contract of adhesion is a contract whereby almost all of its provisions are drafted by one

party.58 The participation of the other party is limited to affixing his signature or his

adhesion to the contract.59 For this reason, contracts of adhesion are strictly construed

against the party who drafted it.60

It is erroneous, however, to conclude that contracts of adhesion are invalid per se. They

are, on the contrary, as binding as ordinary contracts. A party is in reality free to accept or

reject it. A contract of adhesion becomes void only when the dominant party takes advantage

of the weakness of the other party, completely depriving the latter of the opportunity to

bargain on equal footing.61

That was not the case here. As the trial court noted, if the terms and conditions offered by

Equitable had been truly prejudicial to respondents, they would have walked out and

negotiated with another bank at the first available instance. But they did not. Instead, they

continuously availed of Equitables credit facilities for five long years.

While the RTC categorically found that respondents had outstanding dollar- and peso-

denominated loans with Equitable, it, however, failed to ascertain the total amount due

(principal, interest and penalties, if any) as of July 9, 2001. The trial court did not explain how

it arrived at the amounts of US$228,200 and P 1,000,000.62 In Metro Manila Transit

Corporation v. D.M. Consortium,63 we reiterated that this Court is not a trier of facts and it

shall pass upon them only for compelling reasons which unfortunately are not present in this

case.64 Hence, we ordered the partial remand of the case for the sole purpose of determining

the amount of actual damages.65

Escalation Clause Violated the Prin

ciple of Mutuality of Contracts

Escalation clauses are not void per se. However, one which grants the creditor an unbridled

right to adjust the interest independently and upwardly, completely depriving the debtor of the

right to assent to an important modification in the agreement is void. Clauses of that nature

violate the principle of mutuality of contracts.66 Article 130867 of the Civil Code holds that a

contract must bind both contracting parties; itsvalidity or compliance cannot be left to the will

of one of them.68

For this reason, we have consistently held that a valid escalation clause provides:

1. 1.that the rate of interest will only be increased if the applicable maximum rate of

interest is increased by law or by the Monetary Board; and

2. 2.that the stipulated rate of interest will be reduced if the applicable maximum rate

of interest is reduced by law or by the Monetary Board (de-escalation clause).69

The RTC found that Equitables promissory notes uniformly stated:

If subject promissory note is extended, the interest for subsequent extensions shall be at such

rate as shall be determined by the bank.70

Equitable dictated the interest rates if the term (or period for repayment) of the loan was

extended. Respondents had no choice but to accept them. This was a violation of Article 1308

of the Civil Code. Furthermore, the assailed escalation clause did not contain the necessary

provisions for validity, that is, it neither provided that the rate of interest would be increased

only if allowed by law or the Monetary Board, nor allowed deescalation. For these reasons, the

escalation clause was void.

With regard to the proper rate of interest, in New Sampaguita Builders v. Philippine

National Bank71 we held that, because the escalation clause was annulled, the principal

amount of the loan was subject to the original or stipulated rate of interest. Upon maturity, the

amount due was subject to legal interest at the rate of 12% per annum.72

Consequently, respondents should pay Equitable the interest rates of 12.66% p.a. for their

dollar-denominated loans and 20% p.a. for their peso-denominated loans from January 10,

2001 to July 9, 2001. Thereafter, Equitable was entitled to legal interest of 12% p.a. on all

amounts due.

There Was No Extraordinary Deflation

Extraordinary inflation exists when there is an unusual decrease in the purchasing power of

currency (that is, beyond the common fluctuation in the value of currency) and such decrease

could not be reasonably foreseen or was manifestly beyond the contemplation of the parties at

the time of the obligation. Extraordinary deflation, on the other hand, involves an inverse

situation.73

Article 1250 of the Civil Code provides:

Article 1250. In case an extraordinary inflation or deflation of the currency stipulated should

intervene, the value of the currency at the time of the establishment of the obligation shall be

the basis of payment, unless there is an agreement to the contrary.

For extraordinary inflation (or deflation) to affect an obligation, the following requisites must

be proven:

1. 1.that there was an official declaration of extraordinary inflation or deflation from

the Bangko Sentral ng Pilipinas (BSP);74

1. 2.that the obligation was contractual in nature;75and

2. 3.that the parties expressly agreed to consider the effects of the extraordinary

inflation or deflation.76

Despite the devaluation of the peso, the BSP never declared a situation of extraordinary

inflation. Moreover, although the obligation in this instance arose out of a contract, the parties

did not agree to recognize the effects of extraordinary inflation (or deflation).77 The RTC

never mentioned that there was a such stipulation either in the promissory note or loan

agreement. Therefore, respondents should pay their dollar-denominated loans at the exchange

rate fixed by the BSP on the date of maturity.78

The Award of Moral and Exemplary

Damages Lacked Basis

Moral damages are in the category of an award designed to compensate the claimant for actual

injury suffered, not to impose a penalty to the wrongdoer.79 To be entitled to moral damages, a

claimant must prove:

1. 1.That he or she suffered besmirched reputation, or physical, mental or

psychological suffering sustained by the claimant;

2. 2.That the defendant committed a wrongful act or omission;

3. 3.That the wrongful act or omission was the proximate cause of the damages the

claimant sustained;

1. 4.The case is predicated on any of the instances expressed or envisioned by Article

221980 and 222081. 82

In culpa contractual or breach of contract, moral damages are recoverable only if the

defendant acted fraudulently or in bad faith or in wanton disregard of his contractual

obligations.83 The breach must be wanton, reckless, malicious or in bad faith, and oppressive

or abusive.84

The RTC found that respondents did not pay Equitable the interest due on February 9, 2001

(or any month thereafter prior to the maturity of the loan)85 or the amount due (principal plus

interest) due on July 9, 2001.86 Consequently, Equitable applied respondents deposits to their

loans upon maturity.

The relationship between a bank and its depositor is that of creditor and debtor.87 For this

reason, a bank has the right to set-off the deposits in its hands for the payment of a depositors

indebtedness.88

Respondents indeed defaulted on their obligation. For this reason, Equitable had the

option to exercise its legal right to set-off or compensation. However, the RTC mistakenly (or,

as it now appears, deliberately) concluded that Equitable acted fraudulently or in bad faith or

in wanton disregard of its contractual obligations despite the absence of proof. The

undeniable fact was that, whatever damage respondents sustained was purely the

consequence of their failure to pay their loans. There was therefore absolutely no basis for

the award of moral damages to them.

Neither was there reason to award exemplary damages. Since respondents were not

entitled to moral damages, neither should they be awarded exemplary damages.89 And if

respondents were not entitled to moral and exemplary damages, neither could they be awarded

attorneys fees and litigation expenses.90

ACCORDINGLY, the petition is hereby GRANTED.

The October 28, 2005 decision and February 3, 2006 resolution of the Court of Appeals in

CA-G.R. SP No. 83112 are hereby REVERSED and SET ASIDE.

The March 24, 2004 omnibus order of the Regional Trial Court, Branch 16, Cebu City in

Civil Case No. CEB-26983 is hereby ANNULLED for being rendered with grave abuse of

discretion amounting to lack or excess of jurisdiction. All proceedings undertaken pursuant

thereto are likewise declared null and void.

The March 1, 2004 order of the Regional Trial Court, Branch 16 of Cebu City in Civil

Case No. CEB-26983 is hereby SET ASIDE. The appeal of petitioners Equitable PCI Bank,

Aimee Yu and Bejan Lionel Apas is therefore given due course.

The February 5, 2004 decision of the Regional Trial Court, Branch 16 of Cebu City in

Civil Case No. CEB-26983 is accordingly SET ASIDE. New judgment is hereby entered:

1. 1.ordering respondents Ng Sheung Ngor, doing business under the name and style of

Ken Marketing, Ken Appliance Division, Inc. and Benjamin E. Go to pay

petitioner Equitable PCI Bank the principal amount of their dollar-and peso-

denominated loans;

2. 2.ordering respondents Ng Sheung Ngor, doing business under the name and style of

Ken Marketing, Ken Appliance Division, Inc. and Benjamin E. Go to pay

petitioner Equitable PCI Bank interest at:

1. a)12.66% p.a. with respect to their dollar-denominated loans from January 10, 2001

to b)20% p.a. with respect to their pesodenominated loans from January 10, 2001

to July 9, 2001;91

1. c)pursuant to our ruling in Eastern Shipping Lines v. Court of Appeals,92 the total

amount due on July 9, 2001 shall earn legal interest at 12% p.a. from the time

petitioner Equitable PCI Bank demanded payment, whether judicially or extra-

judicially; and

2. d)after this Decision becomes final and executory, the applicable rate shall be 12%

p.a. until full satisfaction;

1. 3.all other claims and counterclaims are dismissed.

As a starting point, the Regional Trial Court, Branch 16 of Cebu City shall compute the exact

amounts due on the respective dollar-denominated and peso-denominated loans, as of July 9,

2001, of respondents Ng Sheung Ngor, doing business under the name and style of Ken

Marketing, Ken Appliance Division and Benjamin E. Go.

SO ORDERED.

Puno (C.J., Chairperson), Sandoval-Gutierrez,Azcuna and Leonardo-De Castro, JJ.,

concur.

Petition granted.

Notes.A contractual stipulation providing for an upward adjustment in the purchase

price the moment there is a deterioration of the Philippine peso vis--visthe U.S. dollar

violates R.A. No. 529. (Palanca vs. Court of Appeals, 238 SCRA 593 [1994])

A party violates the rule against forum shopping if he files a petition for certiorari and

prohibition before the Court of Appeals without waiting for the resolution of his motion to

dismiss and to dissolve the writ filed before the trial court. (Tantoy, Sr. vs. Abrogar, 458

SCRA 301 [2005])

o0o

G.R. No. 192908. August 22, 2012.*

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC

WORKS AND HIGHWAYS (DPWH), petitioner, vs. ST. VINCENT DE PAUL

COLLEGES, INC., respondent.

Remedial Law; Special Civil Actions; Certiorari; The general rule is that a petition for

certiorari must be filed within sixty (60) days from notice of the judgment, order, or resolution

sought to be assailed. Under exceptional circumstances, however, and subject to the sound

discretion of the Court, said period may be extended pursuant to Domdom, Labao and Mid-

Islands Power cases.Under Section 4, Rule 65 of the Rules of Court and as applied

in Laguna Metts Corporation, 594 SCRA 139 (2009), the general rule is that a petition

for certiorari must be filed within sixty (60) days from notice of the judgment, order, or

resolution sought to be assailed. Under exceptional circumstances, however, and subject to the

sound discretion of the Court, said period may be extended pursuant to Domdom, Labao and

Mid-Islands Power cases. Accordingly, the CA should have admitted the Republics

petition: first, due to its own lapse when it granted the extension sought by the Republic per

Resolution dated April 30, 2009; second, because of the public interest involved, i.e.,

expropriation of private property for public use (MCTEP); and finally, no undue prejudice or

delay will be caused to either party in admitting the petition.

PETITION for review on certiorari of the resolutions of the Court of Appeals.

The facts are stated in the decision of the Court.

Office of the Solicitor General for petitioner.

Triste, Nalda & Associates for respondent.

REYES, J.:

Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of

Court, where petitioner Republic of the Philippines (Republic), represented by the Department

of Public Works and Highways through the Office of the Solicitor General, questions the

resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 108499, to wit:

1. Resolution dated October 30, 20092 dismissing petitioners petition for certiorari

under Rule 65 for being filed out of time; and

2. Resolution dated July 15, 20103 denying petitioners motion for reconsideration.

Antecedent Facts

The instant case arose from two cases filed by the Republic seeking expropriation of

certain properties in the name of St. Vincent de Paul Colleges, Inc. (St. Vincent). In Civil Case

No. 0062-04, the Republic sought to expropriate 1,992 square meters out of a total area of

6,068 square meters of land for the construction of the Manila-Cavite Toll Expressway Project

(MCTEP). Said property belongs to St. Vincent covered by TCT No. T-821169 and located in

Binakayan, Kawit, Cavite. In Civil Case No. 0100-04, on the other hand, the Republic sought

to expropriate 2,450 square meters out of a total area of 9,039 square meters, also belonging to

St. Vincent and covered by TCT No. T-821170. Said property adjoins the property subject of

Civil Case No. 0062-04.

Subsequently, the Republic filed in both cases an amended complaint alleging that the

subject land originated from a free patent title and should be adjudicated to it without payment

of just compensation pursuant to Section 112 of Commonwealth Act No. 141.

On August 9, 2005, the Republic filed in Civil Case No. 0062-04 a motion for the

issuance of an order of expropriation.4 It was granted by the trial court per Order5 dated

August 16, 2005, ruling that the Republic has a lawful right to take the 1,992 square meters

portion of the subject property, with no pronouncement as to just compensation since the

subject property originated from a free patent.6 A motion for the issuance of an order of

expropriation was likewise filed by the Republic in Civil Case No. 0100-04 but before this

could be resolved, the Republic moved to consolidate the two cases, which was granted by the

trial court.7

On November 16, 2006, the trial court denied St. Vincents motion for reconsideration of

its Order dated August 16, 2005 granting expropriation.8 As alleged in the petition, no appeal

was taken by St. Vincent from said orders.9

After almost 2 years, or on July 28, 2008, St. Vincent filed a Manifestation with Motion

for Clarification of the Order dated August 16, 2005,10contending that although it does not

oppose the ruling regarding the determination of public purpose and the Republics right to

expropriate the subject land, it, however, claims that it is entitled to just compensation.

Meanwhile, the Republic attempted to implement the Order dated August 16, 2005 by

entering the subject portion of St. Vincents property. Aggrieved, the latter demanded upon the

Republic and its agents to immediately vacate, and remove any and all equipment or structures

they introduced on its property in a demand-letter11 dated October 3, 2008.

Due to St. Vincents refusal to honor the order of expropriation, the Republic filed an

urgent motion for the issuance of a writ of possession, which was denied by the lower court in

its Order12 dated November 25, 2006 [2008]. The lower court, however, modified its Order

dated August 16, 2005 and required the Republic to immediately pay St. Vincent in an amount

equivalent to one hundred percent (100%) of the value of the property sought to be

expropriated. The Republic moved for reconsideration but it was denied by the lower court per

Order13 dated January 29, 2009 for lack of factual and legal basis.

Seeking to avail the extra ordinary remedy ofcertiorari under Rule 65 of the Rules of

Court, the Republic filed with the CA a motion for additional time of fifteen (15) days within

which to file its petition. The CA granted the motion in its Resolution14 dated April 30, 2009

and the Republic was given a non-extensible period of fifteen (15) days or until May 4, 2009

within which to file its petition for certiorari.

On April 30, 2009, the Republic filed its petition forcertiorari assailing the lower courts

orders dated November 25, 2008 and January 29, 2009 for having been issued with grave

abuse of discretion amounting to lack or in excess of jurisdiction.

On June 19, 2009, the CA, motu proprio, issued a Resolution15 ordering the Republic to

show cause why its petition for certiorari should not be dismissed for being filed out of time,

pursuant to A.M. No. 07-7-12- SC.

The Republic filed its Compliance with Explanation16 dated July 1, 2009 pleading for the

relaxation of the rules by reason of the transcendental importance of the issues involved in the

case and in consideration of substantial justice. St. Vincent filed its

Comment/Opposition17 dated July 15, 2009 alleging among others that the said explanation is

merely pro forma due to the Republics failure to justify its explanation.

On October 30, 2009, the CA rendered the assailed resolution dismissing the Republics

petition forcertiorari on the ground that the petition was filed out of time inasmuch as

extensions of time are now disallowed by A.M. No. 07-7-12-SC18 and as applied inLaguna

Metts Corporation v. Court of Appeals.19

On November 26, 2009, the Republic filed its motion for reconsideration alleging that it

merely relied in good faith on the appellate courts resolution granting the former an additional

period of fifteen (15) days within which to file the subject petition.

On July 15, 2010, the CA rendered the assailed resolution denying the Republics motion

for reconsideration, stating that it cannot disobey the ruling in Laguna Metts Corporation.20

Hence, this petition.

_______________

The Republic relies on the CA resolution granting its motion for extension of time and

upon the strength of the substantial merits of its petition. The Republic also invokes Domdom

v. Third and Fifth Divisions of the Sandiganbayan,21 where the Court ruled that absent a

prohibition, motions for extensions are allowed, subject to the Courts sound discretion.

St. Vincent, however, contends that the present petition fails to neither allege any

circumstance nor state any justification for the deliberate disregard of a very elementary rule

of procedure like Section 4 of Rule 65 of the Rules of Court. And in the absence of any such

circumstance or justification, the general rule on pro forma motions/pleadings must apply.

The Issue

The Republic discussed the substantial merits of its case; however, the CA did no more

than include such matters in its narration of facts, and neither did St. Vincent dwell on said

issues. Hence, the only issue to be resolved in this petition is whether the CA committed a

reversible error when it dismissed the Republics petition for certiorari for being filed out of

time, pursuant to A.M. No. 07-7-12-SC.

The Courts Ruling

We GRANT the petition.

The Court notes that the CA Resolution dated April 30, 2009, which initially granted the

Republics motion for extension, was premised on the mistaken notion that the petition filed

by the latter was one for petition for review as a mode of appeal. The CA resolution stated,

among others: [P]rovided that this Motion for Extension of Time to File Petition for Review

is seasonably filed, as prayed for, x x x.22Thus, the CA granted extension inasmuch as

motions for this purpose are allowed by the rules.23 On this score alone, the CA should have

admitted the petition filed by the Republic since the latter merely relied on its Resolution

dated April 30, 2009 granting the extension prayed for.

Nevertheless, the CA subsequently dismissed the petition filed by the Republic on the

ground that the same was filed out of time, following A.M. No. 07-7-12-SC. In its Resolution

dated July 15, 2010, which dismissed the Republics motion for reconsideration, the CA also

relied on the ruling in Laguna Metts Corporation that the sixty (60)-day period within which

to file a petition for certiorari is non-extendible. The petitioner, however, insists

that Domdom allows extensions of time to file a petition.

In order to resolve the instant controversy, the Court deems it necessary to discuss the

relationship between its respective rulings in Laguna Metts Corporation and Domdom with

respect to the application of the amendment introduced by A.M. No. 07-7-12-SC to Section 4,

Rule 65 of the Rules of Court.

Before said amendment, Section 4 of Rule 65 originally provides:

Sec. 4. When and where petition filed.The petition shall be filed not later than sixty

(60) days from notice of the judgment, order or resolution. In case a motion for

reconsideration or new trial is timely filed, whether such motion is required or not, the sixty

(60) day period shall be counted from notice of the denial of said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of

a lower court or of a corporation, board, officer or person, in the Regional Trial Court

exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be

filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or

in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the acts or

omissions of a quasi-judicial agency, unless otherwise provided by law or these rules, the

petition shall be filed in and cognizable only by the Court of Appeals.

No extension of time to file the petition shall be granted except for compelling reason and

in no case exceeding fifteen (15) days.

As amended by A.M. No. 07-7-12-SC, Section 4 of Rule 65 now reads:

Sec. 4. When and where petition filed.The petition shall be filed not later than sixty

(60) days from notice of the judgment or resolution. In case a motion for reconsideration or

new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall

be counted from notice of the denial of said motion.

If the petition relates to an act or an omission of a municipal trial court or of a corporation,

a board, an officer or a person, it shall be filed with the Regional Trial Court exercising

jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed with

the Court of Appeals or with the Sandiganbayan, whether or not the same is in aid of the

courts appellate jurisdiction. If the petition involves an act or an omission of a quasi-judicial

agency, unless otherwise provided by law or these rules, the petition shall be filed with and be

cognizable only by the Court of Appeals.

In election cases involving an act or an omission of a municipal or a regional trial court,

the petition shall be filed exclusively with the Commission on Elections, in aid of its appellate

jurisdiction.

In interpreting said amendment, the Court, inLaguna Metts Corporation, held that:

As a rule, an amendment by the deletion of certain words or phrases indicates an intention

to change its meaning. It is presumed that the deletion would not have been made if there had

been no intention to effect a change in the meaning of the law or rule. The amended law or

rule should accordingly be given a construction different from that previous to its amendment.

If the Court intended to retain the authority of the proper courts to grant extensions under

Section 4 of Rule 65, the paragraph providing for such authority would have been preserved.

The removal of the said paragraph under the amendment by A.M. No. 07-7-12-SC of Section

4, Rule 65 simply meant that there can no longer be any extension of the 60- day period within

which to file a petition forcertiorari.

The rationale for the amendments under A.M. No. 07-7-12-SC is essentially to prevent the

use (or abuse) of the petition for certiorari under Rule 65 to delay a case or even defeat the

ends of justice. Deleting the paragraph allowing extensions to file petition on compelling

grounds did away with the filing of such motions. As the Rule now stands, petitions

for certiorari must be filed strictly within 60 days from notice of judgment or from the

order denying a motion for reconsideration.24 (Citation omitted and emphasis ours)

Nevertheless, Domdom later stated:

On the Peoples argument that a motion for extension of time to file a petition

for certiorari is no longer allowed, the same rests on shaky grounds. Supposedly, the deletion

of the following provision in Section 4 of Rule 65 by A.M. No. 07-7-12-SC evinces an

intention to absolutely prohibit motions for extension:

No extension of time to file the petition shall be granted except for the most

compelling reason and in no case exceeding fifteen (15) days.

The full text of Section 4 of Rule 65, as amended by A.M. No. 07-7-12-SC, reads:

x x x x

That no mention is made in the above-quoted amended Section 4 of Rule 65 of a

motion for extension, unlike in the previous for formulation, does not make the filing of

such pleading absolutely prohibited. If such were the intention, the deleted portion could

just have simply been reworded to state that no extension of time to file the petition

shall be granted. Absent such prohibition, motions for extensions are allowed, subject to

the Courts sound discretion. The present petition may thus be allowed, having been filed

within the extension sought and, at all events, given its merits.25 (Citation omitted and

emphasis and underscoring ours)

What seems to be a conflict is actually more apparent than real. A reading of the

foregoing rulings leads to the simple conclusion that Laguna Metts Corporation involves a

strict application of the general rule that petitions for certiorari must be filed strictly within

sixty (60) days from notice of judgment or from the order denying a motion for

reconsideration. Domdom, on the other hand,relaxed the rule and allowed an extension of

the sixty (60)-day period subject to the Courts sound discretion.26

Labao v. Flores27 subsequently laid down some of the exceptions to the strict application

of the rule, viz.:

Under Section 4 of Rule 65 of the 1997 Rules of Civil Procedure, certiorari should be

instituted within a period of 60 days from notice of the judgment, order, or resolution sought

to be assailed. The 60-day period is inextendible to avoid any unreasonable delay that

would violate the constitutional rights of parties to a speedy disposition of their case.

x x x x

However, there are recognized exceptions to their strict observance, such as: (1) most

persuasive and weighty reasons; (2) to relieve a litigant from an injustice not commensurate

with his failure to comply with the prescribed procedure; (3) good faith of the defaulting party

by immediately paying within a reasonable time from the time of the default; (4) the existence

of special or compelling circumstances; (5) the merits of the case; (6) a cause not entirely

attributable to the fault or negligence of the party favored by the suspension of the rules; (7) a

lack of any showing that the review sought is merely frivolous and dilatory; (8) the other party

will not be unjustly prejudiced thereby; (9) fraud, accident, mistake or excusable negligence

without appellants fault; (10) peculiar legal and equitable circumstances attendant to each

case; (11) in the name of substantial justice and fair play; (12) importance of the issues

involved; and (13) exercise of sound discretion by the judge guided by all the attendant

circumstances. Thus, there should be an effort on the part of the party invoking liberality to

advance a reasonable or meritorious explanation for his/her failure to comply with the

rules.28 (Citations omitted and emphasis ours)

Note that Labao explicitly recognized the general rule that the sixty (60)-day period

within which to file a petition for certiorari under Rule 65 is non-extendible, only that there

are certain exceptional circumstances, which may call for its non-observance. Even more

recently, in Mid-Islands Power Generation Corporation v. Court of Appeals,29 the Court,

taking into consideration Laguna Metts Corporation and Domdom, relaxed the procedural

technicalities introduced under A.M. No. 07-7-12-SC in order to serve substantial justice and

safeguard strong public interest and affirmed the extension granted by the CA to the

respondent Power One Corporation due to the exceptional nature of the case and the strong

public interest involved.

In Laguna Metts Corporation v. Court of Appeals, we explained that the reason behind

the amendments under A.M. No. 07-7-12-SC was to prevent the use or abuse of the remedy of

petition for certiorari in order to delay a case or even defeat the ends of justice. We thus

deleted the clause that allowed an extension of the period to file a Rule 65 petition for

compelling reasons. Instead, we deemed the 60-day period to file as reasonable and

sufficient time for a party to mull over the case and to prepare a petition that asserts

grave abuse of discretion by a lower court. The period was specifically set and limited in

order to avoid any unreasonable delay in the dispensation of justice, a delay that could violate

the constitutional right of the parties to a speedy disposition of their case. x x x.

Nevertheless, in the more recent case of Domdom v. Sandiganbayan, we ruled that the

deletion of the clause in Section 4, Rule 65 by A.M. No. 07-7-12-SC did not, ipso facto,

make the filing of a motion for extension to file a Rule 65 petition absolutely prohibited.

We held in Domdom that if absolute proscription were intended, the deleted portion could

have just simply been reworded to specifically prohibit an extension of time to file such

petition. Thus, because of the lack of an express prohibition, we held that motions for

extension may be allowed, subject to this Courts sound discretion, and only under

exceptional and meritorious cases.

Indeed, we have relaxed the procedural technicalities introduced under A.M. No. 07-7-12-

SC in order to serve substantial justice and safeguard strong public interest. x x x:

x x x x

The present Petition involves one of those exceptional cases in which relaxing the

procedural rules would serve substantial justice and safeguard strong public interest. x x x

Consequently, in order to protect strong public interest, this Court deems it appropriate and

justifiable to relax the amendment of Section 4, Rule 65 under A.M. No. 07-7-12-SC,

concerning the reglementary period for the filing of a Rule 65 petition. Considering that the

imminent power crisis is an exceptional and meritorious circumstance, the parties herein

should be allowed to litigate the issues on the merits. Furthermore, we find no significant

prejudice to the substantive rights of the litigants as respondent was able to file the

Petition before the CA within the 15-day extension it asked for. We therefore find no grave

abuse of discretion attributable to the CA when it granted respondent Power Ones Motion for

Extension to file its Petition for Certiorari.30 (Citations omitted and emphasis ours)

To reiterate, under Section 4, Rule 65 of the Rules of Court and as applied in Laguna

Metts Corporation, the general rule is that a petition for certiorari must be filed within sixty

(60) days from notice of the judgment, order, or resolution sought to be assailed. Under

exceptional circumstances, however, and subject to the sound discretion of the Court, said

period may be extended pursuant to Domdom, Labao and Mid-Islands Powercases.

Accordingly, the CA should have admitted the Republics petition: first, due to its own

lapse when it granted the extension sought by the Republic per Resolution dated April 30,

2009; second, because of the public interest involved, i.e., expropriation of private property for

public use (MCTEP); and finally, no undue prejudice or delay will be caused to either party in

admitting the petition.

WHEREFORE, premises considered, the petition is GRANTED. The Resolutions dated

October 30, 2009 and July 15, 2010 of the Court of Appeals in CA-G.R. SP No. 108499 are

NULLIFIED. The Court of Appeals is hereby ORDERED to REINSTATE and ADMIT the

petition for certiorari filed by the Republic of the Philippines in CA-G.R. SP No. 108499 and

to proceed with the case with dispatch.

SO ORDERED.

Carpio (Chairperson), Leonardo-De Castro,** Perezand Sereno, JJ., concur.

Petition granted, resolutions nullified.

Notes.While the proper courts previously had discretion to extend the period for filing a

petition for certiorari beyond the 60-day period, the amendments to Rule 65 under A.M. No.

07-7-12-SC disallowed extensions of time to file a petition for certiorari with the deletion of

the paragraph that previously permitted such extensions. (Laguna Metts Corporation vs. Court

of Appeals, 594 SCRA 139 [2009])

Under Supreme Court Circular No. 56-2000, in case a motion for reconsideration of the

judgment, order, or resolution sought to be assailed has been filed, the 60-day period to file a

petition for certiorari shall be computed from notice of the denial of such motion. (Coca-Cola

Bottlers Philippines, Inc. vs. Del Villar, 632 SCRA 293 [2010])

o0o

G.R. No. 154282. April 7, 2006.*

VANGIE BARRAZONA, petitioner, vs. REGIONAL TRIAL COURT, BRANCH 61,

BAGUIO CITY and SAN-AN REALTY AND DEVELOPMENT CORPORATION,

herein represented by RODRIGO CHUA TIU, respondents.

Actions; Jurisdictions; Jurisdiction of the court over the subject matter of the action is

determined by the allegations of the complaint at the time of its filing, irrespective of whether

or not the plaintiff is entitled to recover upon all or some of the claims asserted therein.

In Herrera, et al. v. Bollos, et al., 374 SCRA 107 (2002), we emphasized the basic rule that

jurisdiction of the court over the subject matter of the action is determined by the allegations

of the complaint at the time of its filing, irrespective of whether or not the plaintiff is entitled

to recover upon all or some of the claims asserted therein. What determines the jurisdiction of

the court is the nature of the action pleaded as appearing from the allegations in the complaint.

The averments therein and the character of the relief sought are the ones to be consulted.

Same; Same; Ejectment; All ejectment cases are within the jurisdiction of the Municipal

Trial Court.This allegation clearly shows that respondent made several demands upon

petitioner to pay her overdue rentals and to vacate the premises; and that the last demand to

pay and vacate in writing was on March 27, 2002. Respondent thus complied with Section 2,

Rule 70 of the 1997 Rules of Civil Procedure, as amended, which provides: Sec. 2. Lessor to

proceed against lessee only after demand.Unless otherwise stipulated, such action by the

lessor shall be commenced only after demand to pay or comply with the conditions of the

lease and to vacate is made upon the lessee, or by serving written notice of such demand upon

the person found on the premises, or by posting such notice on the premises if no person be

found thereon, and the lessee fails to comply therewith after fifteen (15) days in the case of

land or five (5) days in the case of buildings. (2a) Indeed, while the complaint is captioned

Collection of Sum of Money with Damages, the allegations therein show that respondents

action is for ejectment. All ejectment cases are within the jurisdiction of the MTC.

Courts; Judgments; Orders; A trial court should state in its order the reasons for

dismissal of the complaint so that when the order is appealed, the appellate court can readily

determine from a casual perusal thereof whether there is a prima facie justification for the

dismissal; Section 3, Rule 16 of the 1997 Rules of Civil Procedure proscribes the common

practice of perfunctorily dismissing a motion to dismiss for lack of merit, a cavalier

disposition can often pose difficulty and misunderstanding on the part of the aggrieved party

in taking recourse therefrom and likewise on the higher court called upon to resolve the same,

usually on certiorari.We have admonished the trial courts not to issue a minute order or

resolution like the one specified above. A trial court should state in its order the reasons for the

dismissal of the complaint so that when the order is appealed, the appellate court can readily

determine from a casual perusal thereof whether there is aprima facie justification for the

dismissal. Under Section 3, Rule 16 of the 1997 Rules of Civil Procedure, as amended, we

require that resolutions disposing of a motion to dismiss shall state clearly and distinctly the

reasons therefor, thus: Sec. 3.Resolution of motion.After the hearing, the court may dismiss

the action or claim, deny the motion, or order the amendment of the pleading. The court shall

not defer the resolution of the motion for the reason that the ground relied upon is not

indubitable. In every case, the resolution shall state clearly and distinctly the reasons therefor.

This requirement proscribes the common practice of perfunctorily dismissing a motion to

dismiss for lack of merit. Such cavalier dispositions can often pose difficulty and

misunderstanding on the part of the aggrieved party in taking recourse therefrom and likewise

on the higher court called upon to resolve the same, usually on certiorari.

Certiorari; The writ of certiorari is granted to keep an inferior court within the bounds

of its jurisdiction or to prevent it from committing such a grave abuse of discretion amounting

to lack or excess of jurisdiction.While an order denying a motion to dismiss is interlocutory

and non-appeallable, however, if the denial is without or in excess of jurisdiction, certiorari

and prohibition are proper remedies from such order of denial. In Time, Inc. v. Reyes, 39

SCRA 303 (1971), this Court, speaking through Justice J.B.L. Reyes, held: The motion to

dismiss was predicated on the respondent courts lack of jurisdiction to entertain the action;

and the rulings of this Court are that writs of certiorari or prohibition, or both, may issue in

case of a denial or deferment of an action or on the basis of a motion to dismiss for lack of

jurisdiction. Verily, the writ of certiorari is granted to keep an inferior court within the bounds

of its jurisdiction or to prevent it