Complete - Section 1 Cases.docx

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G.R. No. L-11390 March 26, 1918

EL BANCO ESPAOL-FILIPINO, plaintiff-appellant,vs.VICENTE PALANCA, administrator of the estate of Engracio PalancaTanquinyeng, defendant-appellant.

Aitken and DeSelms for appellant.

Hartigan and Welch for appellee.

STREET, J. :

This action was instituted upon March 31, 1908, by "El Banco Espanol-Filipino" to foreclose a mortgage upon various parcels of real propertysituated in the city of Manila. The mortgage in question is dated June 16,1906, and was executed by the original defendant herein, Engracio PalancaTanquinyeng y Limquingco, as security for a debt owing by him to the bank.Upon March 31, 1906, the debt amounted to P218,294.10 and was drawinginterest at the rate of 8 per centum per annum, payable at the end of eachquarter. It appears that the parties to this mortgage at that time estimated thevalue of the property in question at P292,558, which was about P75,000 inexcess of the indebtedness. After the execution of this instrument by themortgagor, he returned to China which appears to have been his nativecountry; and he there died, upon January 29, 1810, without again returning tothe Philippine Islands.

As the defendant was a nonresident at the time of the institution of thepresent action, it was necessary for the plaintiff in the foreclosure proceedingto give notice to the defendant by publication pursuant to section 399 of theCode of Civil Procedure. An order for publication was accordingly obtainedfrom the court, and publication was made in due form in a newspaper of thecity of Manila. At the same time that the order of the court should deposit inthe post office in a stamped envelope a copy of the summons and complaintdirected to the defendant at his last place of residence, to wit, the city of

Amoy, in the Empire of China. This order was made pursuant to the followingprovision contained in section 399 of the Code of Civil Procedure:

In case of publication, where the residence of a nonresident orabsent defendant is known, the judge must direct a copy of thesummons and complaint to be forthwith deposited by the clerk in thepost-office, postage prepaid, directed to the person to be served, athis place of residence

Whether the clerk complied with this order does not affirmatively appear.There is, however, among the papers pertaining to this case, an affidavit,

dated April 4, 1908, signed by Bernardo Chan y Garcia, an employee of theattorneys of the bank, showing that upon that date he had deposited in theManila post-office a registered letter, addressed to Engracio PalancaTanquinyeng, at Manila, containing copies of the complaint, the plaintiff'saffidavit, the summons, and the order of the court directing publication asaforesaid. It appears from the postmaster's receipt that Bernardo probablyused an envelope obtained from the clerk's office, as the receipt purports toshow that the letter emanated from the office.

The cause proceeded in usual course in the Court of First Instance; and thedefendant not having appeared, judgment was, upon July 2, 1908, takenagainst him by default. Upon July 3, 1908, a decision was rendered in favorof the plaintiff. In this decision it was recited that publication had beenproperly made in a periodical, but nothing was said about this notice havingbeen given mail. The court, upon this occasion, found that the indebtednessof the defendant amounted to P249,355. 32, with interest from March 31,1908. Accordingly it was ordered that the defendant should, on or before July6, 1908, deliver said amount to the clerk of the court to be applied to thesatisfaction of the judgment, and it was declared that in case of the failure ofthe defendant to satisfy the judgment within such period, the mortgage

property located in the city of Manila should be exposed to public sale. Thepayment contemplated in said order was never made; and upon July 8, 1908,the court ordered the sale of the property. The sale took place upon July 30,1908, and the property was bought in by the bank for the sum of P110,200.Upon August 7, 1908, this sale was confirmed by the court.

About seven years after the confirmation of this sale, or to the precise, uponJune 25, 1915, a motion was made in this cause by Vicente Palanca, asadministrator of the estate of the original defendant, Engracio PalancaTanquinyeng y Limquingco, wherein the applicant requested the court to setaside the order of default of July 2, 1908, and the judgment rendered uponJuly 3, 1908, and to vacate all the proceedings subsequent thereto. The

basis of this application, as set forth in the motion itself, was that the order ofdefault and the judgment rendered thereon were void because the court hadnever acquired jurisdiction over the defendant or over the subject of theaction.

At the hearing in the court below the application to vacate the judgment wasdenied, and from this action of the court Vicente Planca, as administrator ofthe estate of the original defendant, has appealed. No other feature of thecase is here under consideration than such as related to the action of thecourt upon said motion.

The case presents several questions of importance, which will be discussedin what appears to be the sequence of most convenient development. In thefirst part of this opinion we shall, for the purpose of argument, assume that


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It is suggested in the brief of the appellant that the judgment entered in thecourt below offends against the principle just stated and that this judgment isvoid because the court in fact entered a personal judgment against theabsent debtor for the full amount of the indebtedness secured by themortgage. We do not so interpret the judgment.

In a foreclosure proceeding against a nonresident owner it is necessary forthe court, as in all cases of foreclosure, to ascertain the amount due, as

prescribed in section 256 of the Code of Civil Procedure, and to make anorder requiring the defendant to pay the money into court. This step is anecessary precursor of the order of sale. In the present case the judgmentwhich was entered contains the following words:

Because it is declared that the said defendant Engracio PalancaTanquinyeng y Limquingco, is indebted in the amount ofP249,355.32, plus the interest, to the 'Banco Espanol-Filipino' . . .therefore said appellant is ordered to deliver the above amount etc.,etc.

This is not the language of a personal judgment. Instead it is clearly intendedmerely as a compliance with the requirement that the amount due shall beascertained and that the evidence of this it may be observed that accordingto the Code of Civil Procedure a personal judgment against the debtor for thedeficiency is not to be rendered until after the property has been sold and theproceeds applied to the mortgage debt. (sec. 260).

The conclusion upon this phase of the case is that whatever may be theeffect in other respects of the failure of the clerk of the Court of First Instanceto mail the proper papers to the defendant in Amoy, China, such irregularitycould in no wise impair or defeat the jurisdiction of the court, for in ouropinion that jurisdiction rest upon a basis much more secure than would besupplied by any form of notice that could be given to a resident of a foreigncountry.

Before leaving this branch of the case, we wish to observe that we are fullyaware that many reported cases can be cited in which it is assumed that thequestion of the sufficiency of publication or notice in a case of this kind is aquestion affecting the jurisdiction of the court, and the court is sometimessaid to acquire jurisdiction by virtue of the publication. This phraseology wasundoubtedly originally adopted by the court because of the analogy betweenservice by the publication and personal service of process upon thedefendant; and, as has already been suggested, prior to the decision ofPennoyer vs. Neff (supra) the difference between the legal effects of the twoforms of service was obscure. It is accordingly not surprising that the modesof expression which had already been molded into legal tradition before that

case was decided have been brought down to the present day. But it is clearthat the legal principle here involved is not effected by the peculiar languagein which the courts have expounded their ideas.

We now proceed to a discussion of the question whether the supposedirregularity in the proceedings was of such gravity as to amount to a denial ofthat "due process of law" which was secured by the Act of Congress in forcein these Islands at the time this mortgage was foreclosed. (Act of July 1,

1902, sec. 5.) In dealing with questions involving the application of theconstitutional provisions relating to due process of law the Supreme Court ofthe United States has refrained from attempting to define with precision themeaning of that expression, the reason being that the idea expressed thereinis applicable under so many diverse conditions as to make any attempt ayprecise definition hazardous and unprofitable. As applied to a judicialproceeding, however, it may be laid down with certainty that the requirementof due process is satisfied if the following conditions are present, namely; (1)There must be a court or tribunal clothed with judicial power to hear anddetermine the matter before it; (2) jurisdiction must be lawfully acquired overthe person of the defendant or over the property which is the subject of theproceeding; (3) the defendant must be given an opportunity to be heard; and

(4) judgment must be rendered upon lawful hearing.

Passing at once to the requisite that the defendant shall have an opportunityto be heard, we observe that in a foreclosure case some notification of theproceedings to the nonresident owner, prescribing the time within whichappearance must be made, is everywhere recognized as essential. Toanswer this necessity the statutes generally provide for publication, andusually in addition thereto, for the mailing of notice to the defendant, if hisresidence is known. Though commonly called constructive, or substitutedservice of process in any true sense. It is merely a means provided by lawwhereby the owner may be admonished that his property is the subject of

judicial proceedings and that it is incumbent upon him to take such steps as

he sees fit to protect it. In speaking of notice of this character a distinguishmaster of constitutional law has used the following language:

. . . if the owners are named in the proceedings, and personal noticeis provided for, it is rather from tenderness to their interests, and inorder to make sure that the opportunity for a hearing shall not be lostto them, than from any necessity that the case shall assume thatform. (Cooley on Taxation [2d. ed.], 527, quoted in Leigh vs. Green,193 U. S., 79, 80.)

It will be observed that this mode of notification does not involve any absoluteassurance that the absent owner shall thereby receive actual notice. Theperiodical containing the publication may never in fact come to his hands,and the chances that he should discover the notice may often be very slight.


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Even where notice is sent by mail the probability of his receiving it, thoughmuch increased, is dependent upon the correctness of the address to whichit is forwarded as well as upon the regularity and security of the mail service.It will be noted, furthermore, that the provision of our law relative to themailing of notice does not absolutely require the mailing of noticeunconditionally and in every event, but only in the case where thedefendant's residence is known. In the light of all these facts, it is evident thatactual notice to the defendant in cases of this kind is not, under the law, to beconsidered absolutely necessary.

The idea upon which the law proceeds in recognizing the efficacy of a meansof notification which may fall short of actual notice is apparently this: Propertyis always assumed to be in the possession of its owner, in person or byagent; and he may be safely held, under certain conditions, to be affectedwith knowledge that proceedings have been instituted for its condemnationand sale.

It is the duty of the owner of real estate, who is a nonresident, to takemeasures that in some way he shall be represented when hisproperty is called into requisition, and if he fails to do this, and fails to

get notice by the ordinary publications which have usually beenrequired in such cases, it is his misfortune, and he must abide theconsequences. (6 R. C. L., sec. 445 [p. 450]).

It has been well said by an American court:

If property of a nonresident cannot be reached by legal process uponthe constructive notice, then our statutes were passed in vain, andare mere empty legislative declarations, without either force, ormeaning; for if the person is not within the jurisdiction of the court, nopersonal judgment can be rendered, and if the judgment cannotoperate upon the property, then no effective judgment at all can berendered, so that the result would be that the courts would bepowerless to assist a citizen against a nonresident. Such a resultwould be a deplorable one. (Quarl vs. Abbett, 102 Ind., 233; 52 Am.Rep., 662, 667.)

It is, of course universally recognized that the statutory provisions relative topublication or other form of notice against a nonresident owner should becomplied with; and in respect to the publication of notice in the newspaper itmay be stated that strict compliance with the requirements of the law hasbeen held to be essential. In Guaranty Trust etc. Co. vs. Green Cove etc.,Railroad Co. (139 U. S., 137, 138), it was held that where newspaperpublication was made for 19 weeks, when the statute required 20, thepublication was insufficient.

With respect to the provisions of our own statute, relative to the sending ofnotice by mail, the requirement is that the judge shall direct that the notice bedeposited in the mail by the clerk of the court, and it is not in terms declaredthat the notice must be deposited in the mail. We consider this to be of somesignificance; and it seems to us that, having due regard to the principlesupon which the giving of such notice is required, the absent owner of themortgaged property must, so far as the due process of law is concerned,take the risk incident to the possible failure of the clerk to perform his duty,somewhat as he takes the risk that the mail clerk or the mail carrier mightpossibly lose or destroy the parcel or envelope containing the notice before itshould reach its destination and be delivered to him. This idea seems to bestrengthened by the consideration that placing upon the clerk the duty ofsending notice by mail, the performance of that act is put effectually beyondthe control of the plaintiff in the litigation. At any rate it is obvious that somuch of section 399 of the Code of Civil Procedure as relates to the sendingof notice by mail was complied with when the court made the order. Thequestion as to what may be the consequences of the failure of the record toshow the proof of compliance with that requirement will be discussed by usfurther on.

The observations which have just been made lead to the conclusion that thefailure of the clerk to mail the notice, if in fact he did so fail in his duty, is notsuch an irregularity, as amounts to a denial of due process of law; and hencein our opinion that irregularity, if proved, would not avoid the judgment in thiscase. Notice was given by publication in a newspaper and this is the onlyform of notice which the law unconditionally requires. This in our opinion is allthat was absolutely necessary to sustain the proceedings.

It will be observed that in considering the effect of this irregularity, it makes adifference whether it be viewed as a question involving jurisdiction or as aquestion involving due process of law. In the matter of jurisdiction there canbe no distinction between the much and the little. The court either has

jurisdiction or it has not; and if the requirement as to the mailing of noticeshould be considered as a step antecedent to the acquiring of jurisdiction,there could be no escape from the conclusion that the failure to take that stepwas fatal to the validity of the judgment. In the application of the idea of dueprocess of law, on the other hand, it is clearly unnecessary to be so rigorous.The jurisdiction being once established, all that due process of law thereafterrequires is an opportunity for the defendant to be heard; and as publicationwas duly made in the newspaper, it would seem highly unreasonable to holdthat failure to mail the notice was fatal. We think that in applying therequirement of due process of law, it is permissible to reflect upon thepurposes of the provision which is supposed to have been violated and theprinciple underlying the exercise of judicial power in these proceedings.

Judge in the light of these conceptions, we think that the provision of Act of


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him; and that he acquiesced in the consequences of those proceedings afterthey had been accomplished. Under these circumstances it is clear that themerit of this motion is, as we have already stated, adversely affected in ahigh degree by the delay in asking for relief. Nor is it an adequate reply tosay that the proponent of this motion is an administrator who only qualified afew months before this motion was made. No disability on the part of thedefendant himself existed from the time when the foreclosure was effecteduntil his death; and we believe that the delay in the appointment of theadministrator and institution of this action is a circumstance which isimputable to the parties in interest whoever they may have been. Of course ifthe minor heirs had instituted an action in their own right to recover theproperty, it would have been different.

It is, however, argued that the defendant has suffered prejudice by reason ofthe fact that the bank became the purchaser of the property at theforeclosure sale for a price greatly below that which had been agreed upon inthe mortgage as the upset price of the property. In this connection, it appearsthat in article nine of the mortgage which was the subject of this foreclosure,as amended by the notarial document of July 19, 1906, the parties to thismortgage made a stipulation to the effect that the value therein placed upon

the mortgaged properties should serve as a basis of sale in case the debtshould remain unpaid and the bank should proceed to a foreclosure. Theupset price stated in that stipulation for all the parcels involved in thisforeclosure was P286,000. It is said in behalf of the appellant that when thebank bought in the property for the sum of P110,200 it violated thatstipulation.

It has been held by this court that a clause in a mortgage providing for a tipo,or upset price, does not prevent a foreclosure, nor affect the validity of a salemade in the foreclosure proceedings. (Yangco vs. Cruz Herrera and WyPiaco, 11 Phil. Rep., 402; Banco-Espaol Filipino vs. Donaldson, Sim andCo., 5 Phil. Rep., 418.) In both the cases here cited the property was

purchased at the foreclosure sale, not by the creditor or mortgagee, but by athird party. Whether the same rule should be applied in a case where themortgagee himself becomes the purchaser has apparently not been decidedby this court in any reported decision, and this question need not here beconsidered, since it is evident that if any liability was incurred by the bank bypurchasing for a price below that fixed in the stipulation, its liability was apersonal liability derived from the contract of mortgage; and as we havealready demonstrated such a liability could not be the subject of adjudicationin an action where the court had no jurisdiction over the person of thedefendant. If the plaintiff bank became liable to account for the differencebetween the upset price and the price at which in bought in the property, thatliability remains unaffected by the disposition which the court made of this

case; and the fact that the bank may have violated such an obligation can in

no wise affect the validity of the judgment entered in the Court of FirstInstance.

In connection with the entire failure of the motion to show either a meritoriousdefense to the action or that the defendant had suffered any prejudice ofwhich the law can take notice, we may be permitted to add that in our opiniona motion of this kind, which proposes to unsettle judicial proceedings longago closed, can not be considered with favor, unless based upon grounds

which appeal to the conscience of the court. Public policy requires that judicial proceedings be upheld. The maximum here applicable is non quietamovere. As was once said by Judge Brewer, afterwards a member of theSupreme Court of the United States:

Public policy requires that judicial proceedings be upheld, and thattitles obtained in those proceedings be safe from the ruthless hand ofcollateral attack. If technical defects are adjudged potent to destroysuch titles, a judicial sale will never realize that value of the property,for no prudent man will risk his money in bidding for and buying thattitle which he has reason to fear may years thereafter be swept awaythrough some occult and not readily discoverable defect. (Martin vs.

Pond, 30 Fed., 15.)

In the case where that language was used an attempt was made to annulcertain foreclosure proceedings on the ground that the affidavit upon whichthe order of publication was based erroneously stated that the State ofKansas, when he was in fact residing in another State. It was held that thismistake did not affect the validity of the proceedings.

In the preceding discussion we have assumed that the clerk failed to sendthe notice by post as required by the order of the court. We now proceed toconsider whether this is a proper assumption; and the proposition which wepropose to establish is that there is a legal presumption that the clerkperformed his duty as the ministerial officer of the court, which presumptionis not overcome by any other facts appearing in the cause.

In subsection 14 of section 334 of the Code of Civil Procedure it is declaredthat there is a presumption "that official duty has been regularly performed;"and in subsection 18 it is declared that there is a presumption "that theordinary course of business has been followed." These presumptions are ofcourse in no sense novelties, as they express ideas which have always beenrecognized. Omnia presumuntur rite et solemniter esse acta donec probeturin contrarium. There is therefore clearly a legal presumption that the clerkperformed his duty about mailing this notice; and we think that strongconsiderations of policy require that this presumption should be allowed tooperate with full force under the circumstances of this case. A party to an


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action has no control over the clerk of the court; and has no right to meddleunduly with the business of the clerk in the performance of his duties. Havingno control over this officer, the litigant must depend upon the court to seethat the duties imposed on the clerk are performed.

Other considerations no less potent contribute to strengthen the conclusion just stated. There is no principle of law better settled than that after jurisdiction has once been required, every act of a court of general

jurisdiction shall be presumed to have been rightly done. This rule is appliedto every judgment or decree rendered in the various stages of theproceedings from their initiation to their completion (Voorhees vs. UnitedStates Bank, 10 Pet., 314; 35 U. S., 449); and if the record is silent withrespect to any fact which must have been established before the court couldhave rightly acted, it will be presumed that such fact was properly brought toits knowledge. (The Lessee of Grignon vs. Astor, 2 How., 319; 11 L. ed.,283.)

In making the order of sale [of the real state of a decedent] the courtare presumed to have adjudged every question necessary to justifysuch order or decree, viz: The death of the owners; that the

petitioners were his administrators; that the personal estate wasinsufficient to pay the debts of the deceased; that the private acts of Assembly, as to the manner of sale, were within the constitutionalpower of the Legislature, and that all the provisions of the law as tonotices which are directory to the administrators have been compliedwith. . . . The court is not bound to enter upon the record theevidence on which any fact was decided. (Florentine vs. Barton, 2Wall., 210; 17 L. ed., 785.) Especially does all this apply after longlapse of time.

Applegate vs. Lexington and Carter County Mining Co. (117 U. S., 255)contains an instructive discussion in a case analogous to that which is now

before us. It there appeared that in order to foreclose a mortgage in the Stateof Kentucky against a nonresident debtor it was necessary that publicationshould be made in a newspaper for a specified period of time, also be postedat the front door of the court house and be published on some Sunday,immediately after divine service, in such church as the court should direct. Ina certain action judgment had been entered against a nonresident, afterpublication in pursuance of these provisions. Many years later the validity ofthe proceedings was called in question in another action. It was proved fromthe files of an ancient periodical that publication had been made in itscolumns as required by law; but no proof was offered to show the publicationof the order at the church, or the posting of it at the front door of the court-house. It was insisted by one of the parties that the judgment of the court

was void for lack of jurisdiction. But the Supreme Court of the United Statessaid:

The court which made the decree . . . was a court of general jurisdiction. Therefore every presumption not inconsistent with therecord is to be indulged in favor of its jurisdiction. . . . It is to bepresumed that the court before making its decree took care of to seethat its order for constructive service, on which its right to make thedecree depended, had been obeyed.

It is true that in this case the former judgment was the subject of collateral ,

or indirect attack, while in the case at bar the motion to vacate the judgmentis direct proceeding for relief against it. The same general presumption,however, is indulged in favor of the judgment of a court of general

jurisdiction, whether it is the subject of direct or indirect attack the onlydifference being that in case of indirect attack the judgment is conclusivelypresumed to be valid unless the record affirmatively shows it to be void, whilein case of direct attack the presumption in favor of its validity may in certaincases be overcome by proof extrinsic to the record.

The presumption that the clerk performed his duty and that the court made itsdecree with the knowledge that the requirements of law had been compliedwith appear to be amply sufficient to support the conclusion that the notice

was sent by the clerk as required by the order. It is true that there ought to befound among the papers on file in this cause an affidavit, as required bysection 400 of the Code of Civil Procedure, showing that the order was in factso sent by the clerk; and no such affidavit appears. The record is thereforesilent where it ought to speak. But the very purpose of the law in recognizingthese presumptions is to enable the court to sustain a prior judgment in theface of such an omission. If we were to hold that the judgment in this case isvoid because the proper affidavit is not present in the file of papers which wecall the record, the result would be that in the future every title in the Islandsresting upon a judgment like that now before us would depend, for itscontinued security, upon the presence of such affidavit among the papersand would be liable at any moment to be destroyed by the disappearance of

that piece of paper. We think that no court, with a proper regard for thesecurity of judicial proceedings and for the interests which have by law beenconfided to the courts, would incline to favor such a conclusion. In ouropinion the proper course in a case of this kind is to hold that the legalpresumption that the clerk performed his duty still maintains notwithstandingthe absence from the record of the proper proof of that fact.

In this connection it is important to bear in mind that under the practiceprevailing in the Philippine Islands the word "record" is used in a loose andbroad sense, as indicating the collective mass of papers which contain thehistory of all the successive steps taken in a case and which are finallydeposited in the archives of the clerk's office as a memorial of the litigation. It

is a matter of general information that no judgment roll, or book of finalrecord, is commonly kept in our courts for the purpose of recording the


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prescribed in sections 113 and 513 are exclusive of all others, so far asrelates to the opening and continuation of a litigation which has been onceconcluded.

The motion in the present case does not conform to the requirements ofeither of these provisions; and the consequence is that in our opinion theaction of the Court of First Instance in dismissing the motion was proper.

If the question were admittedly one relating merely to an irregularity ofprocedure, we cannot suppose that this proceeding would have taken theform of a motion in the cause, since it is clear that, if based on such an error,the came to late for relief in the Court of First Instance. But as we havealready seen, the motion attacks the judgment of the court as void for want of

jurisdiction over the defendant. The idea underlying the motion therefore isthat inasmuch as the judgment is a nullity it can be attacked in any way andat any time. If the judgment were in fact void upon its face, that is, if it wereshown to be a nullity by virtue of its own recitals, there might possibly besomething in this. Where a judgment or judicial order is void in this sense itmay be said to be a lawless thing, which can be treated as an outlaw andslain at sight, or ignored wherever and whenever it exhibits its head.

But the judgment in question is not void in any such sense. It is entirelyregular in form, and the alleged defect is one which is not apparent upon itsface. It follows that even if the judgment could be shown to be void for wantof jurisdiction, or for lack of due process of law, the party aggrieved therebyis bound to resort to some appropriate proceeding to obtain relief. Underaccepted principles of law and practice, long recognized in American courts,a proper remedy in such case, after the time for appeal or review haspassed, is for the aggrieved party to bring an action to enjoin the judgment, ifnot already carried into effect; or if the property has already been disposed ofhe may institute suit to recover it. In every situation of this character anappropriate remedy is at hand; and if property has been taken without due

process, the law concedes due process to recover it. We accordingly oldthat, assuming the judgment to have been void as alleged by the proponentof this motion, the proper remedy was by an original proceeding and not bymotion in the cause. As we have already seen our Code of Civil Proceduredefines the conditions under which relief against a judgment may beproductive of conclusion for this court to recognize such a proceeding asproper under conditions different from those defined by law. Upon the pointof procedure here involved, we refer to the case of People vs. Harrison (84Cal., 607) wherein it was held that a motion will not lie to vacate a judgmentafter the lapse of the time limited by statute if the judgment is not void on itsface; and in all cases, after the lapse of the time limited by statute if the

judgment is not void on its face; and all cases, after the lapse of such time,

when an attempt is made to vacate the judgment by a proceeding in court for

that purpose an action regularly brought is preferable, and should berequired. It will be noted taken verbatim from the California Code (sec. 473).

The conclusions stated in this opinion indicate that the judgment appealedfrom is without error, and the same is accordingly affirmed, with costs. Soordered.

G.R. No. 111397 August 12, 2002

HON. ALFREDO LIM and RAFAELITO GARAYBLAS,petitioners,vs.THE COURT OF APPEALS, HON. WILFREDO REYES and BISTROPIGALLE, INC.,respondents.

CARPIO, J .:

The Case

Before us is a petition for review on certiorari 1 of the Decision of the Court of

Appeals dated March 25, 1993,2

and its Resolution dated July 13, 19933

which denied petitioners motion for reconsideration. The assailed Decisionsustained the orders dated December 29, 1992, January 20, 1993 and March2, 1993, 4 issued by Branch 36 of the Regional Trial Court of Manila. The trialcourts orders enjoined petitioner Alfredo Lim ("Lim" for brevity), then Mayorof Manila, from investigating, impeding or closing down the businessoperations of the New Bangkok Club and the Exotic Garden Restaurantowned by respondent Bistro Pigalle Inc. ("Bistro" for brevity).

The Antecedent Facts

On December 7, 1992 Bistro filed before the trial court a petition 5 for

mandamus and prohibition, with prayer for temporary restraining order or writof preliminary injunction, against Lim in his capacity as Mayor of the City ofManila. Bistro filed the case because policemen under Lims instructionsinspected and investigated Bistros license as well as the work permits andhealth certif icates of its staff. This caused the stoppage of work in Bistrosnight club and restaurant operations. 6 Lim also refused to accept Bistrosapplication for a business license, as well as the work permit applications ofBistros staff, for the year 1993. 7

In its petition, Bistro argued that Lims refusal to issue the business licenseand work permits violated the doctrine laid down this Court in De la Cruz vs.Paras, 8 to wit:


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"Municipal corporations cannot prohibit the operation of nightclubs.They may be regulated, but not prevented from carrying on theirbusiness."

Acting on Bistros application for injunctive relief, the trial court issued the firstassailed temporary restraining order on December 29, 1992, the dispositiveportion of which reads:

"WHEREFORE, respondent and/or his agents and representativesare ordered to refrain f rom inspecting or otherwise interfering in theoperation of the establishments of petitioner (Bistro Pigalle, Inc.)." 9

At the hearing, the parties submitted their evidence in support of theirrespective positions. On January 20, 1993, the trial court granted Bistrosapplication for a writ of prohibitory preliminary injunction. The dispositiveportion of the trial courts order declared:

"WHEREFORE, in view of all the foregoing, Pe titioners applicationfor a writ of prohibitory preliminary injunction is granted, andRespondent, and any/all persons acting under his authority, are and(sic) ordered to cease and desist from inspecting, investigating andotherwise closing or impeding the business operations of PetitionerCorporations establishments while the petition here is pendingresolution on the merits.

Considering that the Respondent is a government official and thisinjunction relates to his official duties, the posting of an injunctionbond by the Petitioners is not required.

On the other hand, Petitioners application for a writ of mandatoryinjunction is hereby denied, for to grant the same would amount to

granting the writ of mandamus prayed for. The Court reservesresolution thereof until the parties shall have been heard on themerits." 10

However, despite the trial courts order, Lim still issued a closure order onBistros operations effective January 23, 1993, even sending policemen tocarry out his closure order.

On January 25, 1993, Bistro f iled an "Urgent Motion for Contempt" againstLim and the policemen who stopped Bistros operations on January 23, 1993.

At the hearing of the motion for contempt on January 29, 1993, Bistrowithdrew its motion on condition that Lim wou ld respect the courts injunction.

However, on February 12, 13, 15, 26 and 27, and on March 1 and 2, 1993,Lim, acting through his agents and policemen, again disrupted Bistrosbusiness operations.

Meanwhile, on February 17, 1993, Lim filed a motion to dissolve theinjunctive order of January 20, 1993 and to dismiss the case. Lim insistedthat the power of a mayor to inspect and investigate commercialestablishments and their staff is implicit in the statutory power of the city

mayor to issue, suspend or revoke business permits and licenses. Thisstatutory power is expressly provided for in Section 11 (l), Article II of theRevised Charter of the City of Manila and in Section 455, paragraph 3 (iv) ofthe Local Government Code of 1991.

The trial court denied Lims motion to dissolve the injunction and to dismissthe case in an order dated March 2, 1993, the dispositive portion of whichstated:

"WHEREFORE, premises considered, the Court hereby orders:

(1) The denial of respondents motion to dissolve the writ ofpreliminary prohibitory injunction or the dismissal of the instant case;

(2) Petitioner-corporation is authorized to remove the wooden cross-bars or any other impediments which were placed at itsestablishments, namely, New Bangkok Club and Exotic GardenRestaurant on February 12, 1993 and February 15, 1993,respectively, and thereafter said establishments are allowed toresume their operations;

(3) All the other petitioners are allowed to continue working in theaforenamed establishments of petitioner-corporation if they have not

yet reported; and

(4) The hearing on the contempt proceedings is deferred to givesufficient time to respondent to elevate the matters assailed herein tothe Supreme Court." 11

On March 10, 1993, Lim filed with the Court of Appeals a petition forcertiorari, prohibition and mandamus against Bistro and Judge WilfredoReyes. Lim claimed that the trial judge committed grave abuse of discretionamounting to lack of jurisdiction in issuing the writ of prohibitory preliminaryinjunction.


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On March 25, 1993, the Court of Appeals rendered the assailed decision. 12 Ina resolution dated July 13, 1993, the Court of Appeals denied Lims motionfor reconsideration. 13

On July 1, 1993, Manila City Ordinance No. 7783 14 took effect. On the sameday, Lim ordered the Western Police District Command to permanently closedown the operations of Bistro, which order the police implemented at once. 15

The Ruling of the Court of Appeals

In denying Lims petition, the Court of Appeals held that the trial court did notcommit grave abuse of discretion since it issued the writ after hearing on thebasis of the evidence adduced.

The Court of Appeals reasoned thus:

"x x x. A writ of preliminary injunction may issue if the act sought tobe enjoined will cause irreparable injury to the movant or destroy thestatus quo before a full hearing can be had on the merits of the case.

A writ of preliminary injunction, as an ancillary or preventive remedy,may only be resorted to by a litigant to protect or preserve his rightsor interests and for no other purpose during the pendency of theprincipal action. It is primarily intended to maintain the status quobetween the parties existing prior to the filing of the case.

In the case at bar, We find that the respondent Judge did not actimprovidently in issuing the assailed orders granting the writ ofpreliminary injunction in order to maintain the status quo, while thepetition is pending resolution on the merits. The private respondentcorrectly points out that the questioned writ was regularly issued

after several hearings, in which the parties were allowed to adduceevidence, and argue their respective positions.

The issuance of a writ of preliminary injunction is within the limits ofthe sound exercise of discretion of the court and the appellate courtwill not interfere, except, in a clear case of abuse thereof. x x x.

WHEREFORE, the petition is DENIED DUE COURSE and isaccordingly DISMISSED." 16

Hence, this petition.

The Issues

In their Memorandum, petitioners raise the following issues:

1. "DID RESPONDENT JUDGE COMMIT GRAVE ABUSE OFDISCRETION AMOUNTING TO LACK OR EXCESS OFJURISDICTION IN ISSUING HIS SAID ASSAILED ORDERS OFDECEMBER 29, 1992, JANUARY 20, 1993 AND MARCH 2, 1993?"

2. "DID RESPONDENT COURT OF APPEALS COMMIT

REVERSIBLE ERRORS IN RENDERING ITS ASSAILED DECISIONOF MARCH 25, 1993 AND ITS ASSAILED RESOLUTION OF JULY13, 1993?"

3. "DID SAID CIVIL CASE NO. 92-63712 AND SAID CA-G.R. SPNO. 30381 BECOME MOOT AND ACADEMIC WHEN THE NEWBANGKOK CLUB AND THE EXOTIC GARDEN RESTAURANT OFPRIVATE RESPONDENT WERE CLOSED ON JULY 1, 1993PURSUANT TO ORDINANCE NO. 7783?"

The Ruling of the Court

The petition is without merit.

Considering that the constitutionality of Ordinance No. 7783 was not raisedbefore the trial court or the Court of Appeals, and this issue is still underlitigation in another case, 17 the Court will deal only with the first two issuesraised by petitioner.

Validi ty of the Prel iminary Injun ct ion

Bistros cause of action in the mandamus and prohibition proceedings beforethe trial court is the violation of its property right under its license to operate.

The violation consists of the work disruption in Bistros operations c aused byLim and his subordinates as well as Lims refusal to issue a business licenseto Bistro and work permits to its staff for the year 1993. The primary reliefprayed for by Bistro is the issuance of writs of mandatory and prohibitoryinjunction. The mandatory injunction seeks to compel Lim to accept Bistros1993 business license application and to issue Bistros business license.

Also, the mandatory injunction seeks to compel Lim to accept theapplications of Bistros staff for work permits. The writ of prohibitory injunctionseeks to enjoin Lim from interfering, impeding or otherwise closing downBistros operations.

The trial court granted only the prohibitory injunction. This enjoined Lim frominterfering, impeding or otherwise closing down Bistro s operations pending


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resolution of whether Lim can validly refuse to issue Bistros business licenseand its staffs work permits for the year 1993.

Lim contends that the Court of Appeals erred in upholding the prohibitoryinjunction. Lim relies primarily on his power, as Mayor of the City of Manila,to grant and refuse municipal licenses and business permits as expresslyprovided for in the Local Government Code and the Revised Charter of theCity of Manila. Lim argues that the powers granted by these laws implicitly

include the power to inspect, investigate and close down Bistros operationsfor violation of the conditions of its licenses and permits.

On the other hand, Bistro asserts that the legal provisions relied upon by Limdo not apply to the instant case. Bistro maintains that the Local GovernmentCode and the Revised Charter of the City of Manila do not expressly orimpliedly grant Lim any power to prohibit the operation of night clubs. Limfailed to specify any violation by Bistro of the conditions of its licenses andpermits. In refusing to accept Bistros business license application for theyear 1993, Bistro claims that Lim denied Bistro due process of law.

The Court of Appeals held that the trial court did not commit grave abuse of

discretion in issuing the prohibitory preliminary injunction.

We uphold the findings of the Court of Appeals.

The authority of mayors to issue business licenses and permits is beyondquestion. The law expressly provides for such authority. Section 11 (l), ArticleII of the Revised Charter of the City of Manila, reads:

"Sec. 11. General dut ies and powers of the mayor . The generalduties and powers of the mayor shall be:

x x x.

(l) To grant and refuse municipal licenses or permits of allclasses and to revoke the same for violation of the conditionsupon which they were granted , or if acts prohibited by law ormunicipal ordinances are being committed under the protection ofsuch licenses or in the premises in which the business for which thesame have been granted is carried on, or for any other reason ofgeneral interest." (Emphasis supplied)

On the other hand, Section 455 (3) (iv) of the Local Government Codeprovides:

"Sec. 455. Chief Executive, Powers , Duties and Com pensat ion :xxx.

(b) For efficient, effective and economical governance the purpose ofwhich is the general welfare of the City and its inhabitants pursuantto Section 16 of this Code, the City Mayor shall:

(3) x x x.

(iv) Issue licenses and permits and suspend or revokethe same for any violation of the condition upon whichsaid licenses or permits had been issued, pursuant tolaw or ordinance. " (Emphasis supplied)

From the language of the two laws, it is clear that the power of the mayor toissue business licenses and permits necessarily includes the corollary powerto suspend, revoke or even refuse to issue the same. However, the power tosuspend or revoke these licenses and permits is expressly premised on theviolation of the conditions of these permits and licenses. The laws specificallyrefer to the "violation of the condition(s)" on which the licenses and permitswere issued. Similarly, the power to refuse to issue such licenses andpermits is premised on non-compliance with the prerequisites for theissuance of such licenses and permits. The mayor must observe due processin exercising these powers, which means that the mayor must give theapplicant or licensee notice and opportunity to be heard.

True, the mayor has the power to inspect and investigate private commercialestablishments for any violation of the conditions of their licenses andpermits. However, the mayor has no power to order a police raid on theseestablishments in the guise of inspecting or investigating these commercialestablishments. Lim acted beyond his authority when he directed policemento raid the New Bangkok Club and the Exotic Garden Restaurant. Such act ofLim violated Ordinance No. 7716 18 which expressly prohibits police raids andinspections, to wit:

"Section 1. No member of the Western Police District shall conductinspection of food and other business establishments for the purposeof enforcing sanitary rules and regulations, inspecting licenses andpermits, and/or enforcing internal revenue and customs laws andregulations. This responsibility should be properly exercised by LocalGovernment Authorities and other concerned agencies." (Emphasissupplied)

These local government officials include the City Health Officer or hisrepresentative, pursuant to the Revised City Ordinances of the City of


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Manila, 19 and the City Treasurer pursuant to Section 470 of the LocalGovernment Code. 20

Lim has no authority to close down Bistros business or any businessestablishment in Manila without due process of law. Lim cannot take refugeunder the Revised Charter of the City of Manila and the Local GovernmentCode. There is no provision in these laws expressly or impliedly granting themayor authority to close down private commercial establishments without

notice and hearing, and even if there is, such provision would be void. Thedue process clause of the Constitution requires that Lim should have givenBistro an opportunity to rebut the allegations that it violated the conditions ofits licenses and permits.

The regulatory powers granted to municipal corporations must always beexercised in accordance with law, with utmost observance of the rights of thepeople to due process and equal protection of the law. 21 Such power cannotbe exercised whimsically, arbitrarily or despotically. In the instant case, wefind that Lims exercise of this power violated Bistros property rights that areprotected under the due process clause of the Constitution.

Lim did not charge Bistro with any specific violation of the conditions of itsbusiness license or permits. Still, Lim closed dow n Bistros operations evenbefore the expiration of its business license on December 31, 1992. Lim alsorefused to accept Bistros license application for 1993, in effect denying theapplication without examining whether it complies with legal prerequisites.

Lims zeal in his campaign against prostitution is commendable. Thepresumption is that he acted in good faith and was motivated by his concernfor his constituents when he implemented his campaign against prostitutionin the Ermita-Malate area. However, there is no excusing Lim for arbitrarilyclosing down, without due process of law, the business operations of Bistro.For this reason, the trial court properly restrained the acts of Lim.

Consequently, the Court of Appeals did not err in upholding the tr ial courtsorders. The sole objective of a writ of preliminary injunction is to preserve thestatus quo until the merits of the case can be heard fully. It is generallyavailed of to prevent actual or threatened acts, until the merits of the casecan be disposed of. 22 In the instant case, the issuance of the writ ofprohibitory preliminary injunction did not dispose of the main case formandamus . The trial court issued the injunction in view of the disruptions andstoppage in Bistros operations as a consequence of Lims closure orders.The injunction was intended to maintain the status quo while the petition hasnot been resolved on the merits.

WHEREFORE, the petition is denied for lack of merit. The assailed Decisionof the Court of Appeals in CA-G.R. SP NO. 30381 is AFFIRMEDin toto .

SO ORDERED.

G.R. No. 93891 March 11, 1991

POLLUTION ADJUDICATION BOARD,petitionervs.COURT OF APPEALS and SOLAR TEXTILE FINISHING CORPORATION,respondents .

Oscar A. Pascua and Charemon Clio L. Borre for petitioner.

Leonardo A. Aurelio for respondent Solar Textile Finishing Corp.

R E S O L U T I O N

FELICIANO,J.:p

Petitioner Pollution Adjudication Board ("Board") asks us to review theDecision and Resolution promulgated on 7 February 1990 and 10 May 1990,

respectively, by the Court of Appeals in C.A.-G R. No. SP 18821 entitled"Solar Textile Finishing Corporation v. Pollution Adjudication Board." In thatDecision and Resolution, the Court of Appeals reversed an order of theRegional Trial Court, Quezon City, Branch 77, in Civil Case No. Q-89-2287dismissing private respondent Solar Textile Finishing Corporation's ("Solar")petition for certiorari and remanded the case to the trial court for furtherproceedings.

On 22 September 1988, petitioner Board issued an ex parte Order directingSolar immediately to cease and desist from utilizing its wastewater pollutionsource installations which were discharging untreated wastewater directlyinto a canal leading to the adjacent Tullahan-Tinejeros River. The Order

signed by Hon. Fulgencio Factoran, Jr., as Board Chairman, reads in full asfollows:


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Respondent, Solar Textile Finishing Corporation with plantand place of business at 999 General Pascual Avenue,Malabon, Metro Manila is involved in bleaching, rinsing anddyeing textiles with wastewater of about 30 gpm. beingdirectly discharged untreated into the sewer. Based onfindings in the Inspections conducted on 05 November 1986and 15 November 1986, the volume of untreated wastewaterdischarged in the final out fall outside of the plant'scompound was even greater. The result of inspectionconducted on 06 September 1988 showed that respondent'sWastewater Treatment Plant was noted unoperational andthe combined wastewater generated from its operation wasabout 30 gallons per minute and 80% of the wastewater wasbeing directly discharged into a drainage canal leading to theTullahan-Tinejeros River by means of a by-pass and theremaining 20% was channelled into the plant's existingWastewater Treatment Plant (WTP). Result of the analysesof the sample taken from the by-pass showed that thewastewater is highly pollutive in terms of Color units, BODand Suspended Solids, among others. These acts ofrespondent in spite of directives to comply with therequirements are clearly in violation of Section 8 ofPresidential Decree No. 984 and Section 103 of itsImplementing Rules and Regulations and the 1982 EffluentRegulations.

WHEREFORE, pursuant to Section 7 of P.D. 984 andSection 38 of its Implementing Rules and Regulations,respondent is hereby ordered to cease and desist fromutilizing its wastewater pollution source installation anddischarging its untreated wastewater directly into the canalleading to the Tullahan-Tinejeros River effective immediatelyupon receipt hereof and until such time when it has fullycomplied with all the requirements and until further ordersfrom this Board.

SO ORDERED. 1

We note that the above Order was based on findings of several inspectionsof Solar's plant:

a. inspections conducted on 5 November 1986 and 12November 1986 by the National Pollution ControlCommission ("NPCC"), the predecessor of the Board ; 2 and

b. the inspection conducted on 6 September 1988 by theDepartment of Environment and Natural Resources("DENR").

The findings of these two (2) inspections were that Solar's wastewatertreatment plant was non-operational and that its plant generated about 30gallons per minute of wastewater, 80% of which was being directlydischarged into a drainage canal leading to the Tullahan-Tinejeros River. The

remaining 20% of the wastewater was being channeled through Solar's non-operational wastewater treatment plant. Chemical analysis of samples ofSolar's effluents showed the presence of pollutants on a level in excess ofwhat was permissible under P.D. No. 984 and its Implementing Regulations.

A copy of the above Order was received by Solar on 26 September 1988. AWrit of Execution issued by the Board was received by Solar on 31 March1989.

Meantime, Solar filed a motion for reconsideration/appeal with prayer for stayof execution of the Order dated 22 September 1988. Acting on this motion,the Board issued an Order dated 24 April 1989 allowing Solar to operate

temporarily, to enable the Board to conduct another inspection andevaluation of Solar's wastewater treatment facilities. In the same Order, theBoard directed the Regional Executive Director of the DENR/ NCR toconduct the inspection and evaluation within thirty (30) days.

On 21 April 1989, however, Solar went to the Regional Trial Court of QuezonCity, Branch 77, on petition for certiorari with preliminary injunction againstthe Board, the petition being docketed as Civil Case No. Q-89-2287.

On 21 July 1989, the Regional Trial Court dismissed Solar's petition upontwo (2) grounds, i.e., that appeal and not certiorari from the questioned Orderof the Board as well as the W rit of Execution was the proper remedy, andthat the Board's subsequent Order allowing Solar to operate temporarily hadrendered Solar's petition moot and academic.

Dissatisfied, Solar went on appeal to the Court of Appeals which, in theDecision here assailed, reversed the Order of dismissal of the trial court andremanded the case to that court for further proceedings. In addition, theCourt of Appeals declared the Writ of Execution null and void. At the sametime, the Court of Appeals said in the dispositive portion of its Decision that:

. . .. Still and all, this decision is without prejudice towhatever action the appellee [Board] may take relative to the

projected 'inspection and evaluation' of appellant's [Solar's]water treatment facilities. 3


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The Court of Appeals, in so ruling, held that certiorari was a proper remedysince the Orders of petitioner Board may result in great and irreparable injuryto Solar; and that while the case might be moot and academic, "largerissues" demanded that the question of due process be settled. PetitionerBoard moved for reconsideration, without success.

The Board is now before us on a Petition for Review basically arguing that:

1. its ex parte Order dated 22 September 1988 and the Writof Execution were issued in accordance with law and werenot violative of the requirements of due process; and

2. the ex parte Order and the Writ of Execution are not theproper subjects of a petition for certiorari.

The only issue before us at this time is whether or not the Court of Appealserred in reversing the trial court on the ground that Solar had been denieddue process by the Board.

Petitioner Board claims that under P.D. No. 984, Section 7(a), it has legalauthority to issue ex parte orders to suspend the operations of anestablishment when there is prima facie evidence that such establishment isdischarging effluents or wastewater, the pollution level of which exceeds themaximum permissible standards set by the NPCC (now, the Board).Petitioner Board contends that the reports before it concerning the effluentdischarges of Solar into the Tullahan-Tinejeros River provided prima facie evidence of violation by Solar of Section 5 of the 1982 Effluent Code.

Solar, on the other hand, contends that under the Board's own rules andregulations, an ex parte order may issue only if the eff luents discharged posean "immediate threat to life, public health, safety or welfare, or to animal andplant life." In the instant case, according to Solar, the inspection reportsbefore the Board made no finding that Solar's wastewater discharged posedsuch a threat.

The Court is not persuaded by Solar's contention. Section 7(a) of P.D. No.984 authorized petitioner Board to issue ex parte cease and desist ordersunder the following circumstances:

P.D. 984, Section 7, paragraph (a), provides:

(a) Public Hearing . . . . Provided , That whenever theCommission finds prima facie evidence that the discharged

sewage or wastes are of immediate threat to life, publichealth, safety or welfare, or to animal or plant life, or

exceeds the allowable standards set by the Commission, theCommissioner may issue an ex-parte order directing thediscontinuance of the same or the temporary suspension orcessation of operation of the establishment or persongenerating such sewage or wastes without the necessity of a

prior public hearing . The said ex-parte order shall beimmediately executory and shall remain in force until saidestablishment or person prevents or abates the saidpollution within the allowable standards or modified ornullified by a competent court. (Emphasis supplied)

We note that under the above-quoted portion of Section 7(a) of P.D. No. 984,an ex parte cease and desist order may be issued by the Board (a) wheneverthe wastes discharged by an establishment pose an "immediate threat to life,public health, safety or welfare, or to animal or plant life," or (b) wheneversuch discharges or wastes exceed "the allowable standards set by the[NPCC]." On the one hand, it is not essential that the Board prove that an"immediate threat to life, public health, safety or welfare, or to animal or plantlife" exists before an ex parte cease and desist order may be issued. It isenough if the Board finds that the wastes discharged do exceed "theallowable standards set by the [NPCC]." In respect of discharges of wastesas to which allowable standards have been set by the Commission, theBoard may issue an ex parte cease and desist order when there is primafacie evidence of an establishment exceeding such allowable standards.Where, however, the effluents or discharges have not yet been the subjectmatter of allowable standards set by the Commission, then the Board mayact on an ex parte basis when it finds at least prima facie proof that thewastewater or material involved presents an "immediate threat to life, publichealth, safety or welfare or to animal or plant life." Since the applicablestandards set by the Commission existing at any given time may well notcover every possible or imaginable kind of effluent or waste discharge, thegeneral standard of an "immediate threat to life, public health, safety orwelfare, or to animal and plant life" remains necessary.

Upon the other hand, the Court must assume that the extant allowablestandards have been set by the Commission or Board precisely in order toavoid or neutralize an "immediate threat to life, public health, safety orwelfare, or to animal or plant life.''

Section 5 of the Effluent Regulations of 1982 4 sets out the maximumpermissible levels of physical and chemical substances which effluents fromdomestic wastewater treatment plants and industrial plants" must not exceed"when discharged into bodies of water classified as Class A, B, C, D, SB andSC in accordance with the 1978 NPCC Rules and Regulations." The waters

of Tullahan-Tinejeros River are classified as inland waters Class D under


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Section 68 of the 1978 NPCC Rules and Regulations 5 which in part providesthat:

Sec. 68. Water Usage and Classification . The quality ofPhilippine waters shall be maintained in a safe andsatisfactory condition according to their best usages . For this

purpose, all water shall be classified according to thefollowing beneficial usages :

(a) Fresh Surface Water

Classification Best usage

xxx xxx xxx

Class D For agriculture, irrigation, livestock

watering and industrial cooling and

processing .

xxx xxx xxx

(Emphases supplied)

The reports on the inspections carried on Solar's wastewater treatmentfacilities on 5 and 12 November 1986 and 6 September 1988 set forth thefollowing Identical finding:

a. For legal action in [view of] implementing rules and

regulations of P.D. No. 984 and Section 5 of the EffluentRegulations of 1982. 6

Placing the maximum allowable standards set in Section 5 of the EffluentRegulations of 1982 alongside the findings of the November 1986 andSeptember 1988 inspection reports, we get the following results:

"Inland November SeptemberWaters 1986 1988(Class C & D 7 Report 8 Report 9 Station 1 Station 1

a) Color in 100 a) Color units 250 125platinum (Apparentcobalt Color)b) pH 6-8.5 b) pH 9.3 8.7c) Tempera- 40 c) Temperatureture in C (C)d) Phenols in 0.1 d) Phenols inmg./1. mg.1e) Suspended 75 e) Suspended 340 80solids in solids inmg./1. mg./1.f) BOD in 80 f) BOD (5-day) 1,100 152mg./1. mg./1g) oil/Grease 10 g) Oil/Greaseh) Detergents 5 h) Detergents 2.93in mg./1/" mg./1. MBASi) Dissolved 0oxygen, mg./1.

j) Settleable 0.4 1.5Matter, mg./1.k) Total Dis 800 610solved Solidsmg./1.l) Total Solids 1,400 690mg./1.m) Turbidity

NTU / ppm, SiO 3 70

The November 1986 inspections report concluded that:

Records of the Commission show that the plant under its

previous owner, Fine Touch Finishing Corporation, wasissued a Notice of Violation on 20 December 1985 directingsame to cease and desist from conducting dyeing operationuntil such time the waste treatment plant is alreadycompleted and operational. The new owner Solar TextileCorporation informed the Commission of the plantacquisition thru its letter dated March 1986 (sic).

The new owner was summoned to a hearing held on 13October 1986 based on the adverse findings during theinspection/water sampling test conducted on 08 August1986. As per instruction of the Legal Division a re-

inspection/sampling text should be conducted first before anappropriate legal action is instituted; hence, this inspection.


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Based on the above f indings, it is clear that the new ownercontinuously violates the directive of the Commission byundertaking dyeing operation without completing first andoperating its existing WTP. The analysis of results on watersamples taken showed that the untreated wastewater fromthe firm pollutes our water resources. In this connection, it isrecommended that appropriate legal action be institutedimmediately against the firm. . . . 10

The September 1988 inspection report's conclusions were:

1. The plant was undertaking dyeing, bleaching and rinsingoperations during the inspection. The combined wastewatergenerated from the said operations was estimated at about30 gallons per minute. About 80% of the wastewater wastraced directly discharged into a drainage canal leading tothe Tullahan-Tinejeros river by means of a bypass. Theremaining 20% was channeled into the plant's existingwastewater treatment plant (WTP).

2. The WTP was noted not yet fully operational- someaccessories were not yet installed. Only the sump pit and theholding/collecting tank are functional but appeared seldomused. The wastewater mentioned channeled was noted heldindefinitely into the collection tank for primary treatment.There was no effluent discharge [from such collection tank].

3. A sample from the bypass wastewater was collected forlaboratory analyses. Result of the analyses show that thebypass wastewater is polluted in terms of color units, BODand suspended solids, among others . (Please see attachedlaboratory resul .) 11

From the foregoing reports, it is clear to this Court that there was at least prima facie evidence before the Board that the effluents emanating fromSolar's plant exceeded the maximum allowable levels of physical andchemical substances set by the NPCC and that accordingly there wasadequate basis supporting the ex parte cease and desist order issued by theBoard. It is also well to note that the previous owner of the plant facility FineTouch Finishing Corporation had been issued a Notice of Violation on 20December 1985 directing it to cease and refrain from carrying out dyeingoperations until the water treatment plant was completed and operational.Solar, the new owner, informed the NPCC of the acquisition of the plant onMarch 1986. Solar was summoned by the NPCC to a hearing on 13 October1986 based on the results of the sampling test conducted by the NPCC on 8

August 1986. Petitioner Board refrained from issuing an ex parte cease anddesist order until after the November 1986 and September 1988 re-inspections were conducted and the violation of applicable standards wasconfirmed. In other words, petitioner Board appears to have been remarkablyforbearing in its efforts to enforce the applicable standards vis-a-vis Solar.Solar, on the other hand, seemed very casual about its continued dischargeof untreated, pollutive effluents into the Tullahan- Tinerejos River,presumably loath to spend the money necessary to put its WastewaterTreatment Plant ("WTP") in an operating condition.

In this connection, we note that in Technology Developers, Inc. v. Court ofappeals, et al., 12 the Court very recently upheld the summary closureordered by the Acting Mayor of Sta. Maria, Bulacan, of a pollution-causingestablishment, after finding that the records showed that:

1. No mayor's permit had been secured. While it is true thatthe matter of determining whether there is a pollution of theenvironment that requires control if not prohibition of theoperation of a business is essentially addressed to the thenNational Pollution Control Commission of the Ministry of

Human Settlements, now the Environmental ManagementBureau of the Department of Environment and NaturalResources, it must be recognized that the mayor of a townhas as much responsibility to protect its inhabitants frompollution, and by virtue of his police power, he may deny theapplication for a permit to operate a business or otherwiseclose the same unless appropriate measures are taken tocontrol and/or avoid injury to the health of the residents ofthe community from the emission in the operation of thebusiness.

2. The Acting Mayor, in a letter of February l6, 1989, called

the attention of petitioner to the pollution emitted by thefumes of its plant whose offensive odor "not only pollute theair in the locality but also affect the health of the residents inthe area," so that petitioner was ordered to stop its operationuntil further orders and it was required to bring the following:

xxx xxx xxx

(3) Region III-Department ofEnvironment and NaturalResources Anti-Pollutionpermit. (Annex A-2, petition)


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3. This action of the Acting Mayor was in response to thecomplaint of the residents of Barangay Guyong, Sta. Maria,Bulacan, directed to the Provincial Governor throughchannels (Annex A-B, petition).. . .

4. The closure order of the Acting Mayor was issued onlyafter an investigation was made by Marivic Guina who in herreport of December 8, 1988 observed that the fumes emittedby the plant of petitioner goes directly to the surroundinghouses and that no proper air pollution device has beeninstalled. (Annex A-9, petition)

xxx xxx xxx

6. While petitioner was able to present a temporary permit tooperate by the then National Pollution Control Commissionon December 15,1987, the permit was good only up to May25,1988 (Annex A-12, petition). Petitioner had not exertedany effort to extend or validate its permit much less to installany device to control the pollution and prevent any hazard to

the health of the residents of the community."

In the instant case, the ex parte cease and desist Order was issued not by alocal government official but by the Pollution Adjudication Board, the veryagency of the Government charged with the task of determining whether theeffluents of a particular industrial establishment comply with or violateapplicable anti-pollution statutory and regulatory provisions.

Ex parte cease and desist orders are permitted by law and regulations insituations like that here presented precisely because stopping the continuousdischarge of pollutive and untreated effluents into the rivers and other inlandwaters of the Philippines cannot be made to wait until protracted litigationover the ultimate correctness or propriety of such orders has run its fullcourse, including multiple and sequential appeals such as those which Solarhas taken, which of course may take several years. The relevant pollutioncontrol statute and implementing regulations were enacted and promulgatedin the exercise of that pervasive, sovereign power to protect the safety,health, and general welfare and comfort of the public, as well as theprotection of plant and animal life, commonly designated as the police power.It is a constitutional commonplace that the ordinary requirements ofprocedural due process yield to the necessities of protecting vital publicinterests like those here involved, through the exercise of police power. TheBoard's ex parte Order and Writ of Execution would, of course, havecompelled Solar temporarily to stop its plant operations, a state of affairsSolar could in any case have avoided by simply absorbing the bother and

burden of putting its WTP on an operational basis. Industrial establishmentsare not constitutionally entitled to reduce their capitals costs and operatingexpenses and to increase their profits by imposing upon the public threatsand risks to its safety, health, general welfare and comfort, by disregardingthe requirements of anti- pollution statutes and their implementingregulations.

It should perhaps be made clear the Court is not here saying that thecorrectness of the ex parte Order and Writ of Execution may not becontested by Solar in a hearing before the Board itself. Where theestablishment affected by an ex parte cease and desist order contests thecorrectness of the prima facie findings of the Board, the Board must hold apublic hearing where such establishment would have an opportunity tocontrovert the basis of such ex parte order. That such an opportunity issubsequently available is really all that is required by the due process clauseof the Constitution in situations like that we have here. The Board's decisionrendered after the public hearing may then be tested judicially by an appealto the Court of Appeals in accordance with Section 7(c) of P.D. No. 984 andSection 42 of the Implementing Rules and Regulations. A subsequent publichearing is precisely what Solar should have sought instead of going to courtto seek nullification of the Board's Order and Writ of Execution and instead ofappealing to the Court of Appeals. It will be recalled the at the Board in factgave Solar authority temporarily to continue operations until still anotherinspection of its wastewater treatment facilities and then another analysis ofeffluent samples could be taken and evaluated.

Solar claims finally that the petition for certiorari was the proper remedy asthe questioned Order and Writ of Execution issued by the Board were patentnullities. Since we have concluded that the Order and Writ of Execution wereentirely within the lawful authority of petitioner Board, the trial court did noterr when it dismissed Solar's petition for certiorari. It follows that the properremedy was an appeal from the trial court to the Court of Appeals, as Solar

did in fact appeal.

ACCORDINGLY, the Petition for Review is given DUE COURSE and theDecision of the Court of Appeals dated 7 February 1990 and its Resolutiondated 10 May 1990 in A.C.-G.R. No. SP 18821 are hereby SET ASIDE. TheOrder of petitioner Board dated 22 September 1988 and the Writ ofExecution, as well as the decision of the trial court dated 21 July 1989, arehereby REINSTATED, without prejudice to the right of Solar to contest thecorrectness of the basis of the Board's Order and Writ of Execution at apublic hearing before the Board.

G.R. No. L-61689 June 20, 1988


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Petitioners, through their counsel, filed an opposition to the motion to dismissdated June 17, 1980 averring that the petition alleged a valid cause of actionand that respondents have violated the due process clause of theConstitution (Rollo, p. 49).

Later, respondents filed a reply to the opposition dated July 1, 1980, claimingthat the petition is not proper; that Imelda del Rosario is not the properrepresentative of the bank; that the petition failed to state a cause of action;and, that the provisions of Section 29 of Republic Act No. 265 had beenfaithfully observed (Rollo, p. 57).

On August 22, 1980, the Central Bank Monetary Board issued a ResolutionNo. 1514 ordering the liquidation of the Rural Bank of Buhi (Rollo, p. 108).

On September 1, 1981, the Office of the Solicitor General, in accordancewith Republic Act No. 265, Section 29, filed in the same Court of FirstInstance of Camarines Sur, Branch VII, a petition for Assistance in theLiquidation of Buhi, which petition was docketed as SP-IR-553, pursuant tothe Monetary Board Resolution No. 1514 (Rollo, pp. 89; 264).

Meanwhile, respondent Central Bank filed on September 15, 1981, in CivilCase No. IR-428 a Supplemental Motion To Dismiss on the ground that thereceivership of Buhi, in view of the issuance of the Monetary BoardResolution No. 1514 had completely become moot and academic (Rollo, p.68) and the fact that Case SP-IR-553 for the liquidation of Buhi was alreadypending with the same Court (Rollo, p. 69).

On October 16, 1981, petitioners herein filed their amended complaint in CivilCase No. IR-428 alleging that the issuance of Monetary Board ResolutionNo. 583 was plainly arbitrary and in bad faith under aforequoted Section 29of Republic Act No. 265 as amended, among others (Rollo, p. 28). On thesame day, petitioner herein filed a rejoinder to its opposition to the motion todismiss (Rollo, p. 145).

On March 9,1982, herein petitioner Judge Buenviaje, issued an orderdenying the respondents' motion to dismiss, supplemental motion to dismissand granting a temporary restraining order enjoining respondents fromfurther managing and administering the Rural Bank of Buhi and to deliver thepossession and control thereof to the petitioner Bank under the sameconditions and with the same financial status as when the same was takenover by herein respondents (defendants) on April 16, 1980 and furtherenjoining petitioner to post a bond in the amount of three hundred thousandpesos (P300,000.00) (Rollo, p. 72).

The dispositive portion of said decision reads:

WHEREFORE, premises considered, the motion to dismissand supplemental motion to dismiss, in the light ofpetitioners' opposition, for want of sufficient merit is denied.Respondents are hereby directed to file their answer withinten (10) days from receipt of a copy of this order. (Rollo, p.4).

On March 11, 1982, petitioner Buhi through counsel, conformably with theabove-mentioned order, filed a Motion to Admit Bond in the amount ofP300,220.00 (Rollo, pp. 78-80).

On March 15,1982, herein petitioner Judge issued the order admitting thebond of P300,220.00 filed by the petitioner, and directing the respondents tosurrender the possession of the Rural Bank of Buhi, together with all itsequipments, accessories, etc. to the petitioners (Rollo, p. 6).

Consequently, on March 16, 1982, herein petitioner Judge issued the writ ofexecution directing the Acting Provincial Sheriff of Camarines Sur toimplement the Court's order of March 9, 1982 (Rollo, p. 268). Complying withthe said order of the Court, the Deputy Provincial Sheriff went to the Buhi

premises to implement the writ of execution but the vault of the petitionerbank was locked and no inventory was made, as evidenced by the SheriffsReport (Rollo, pp. 83-84). Thus, the petitioner herein filed with the Court an"Urgent Ex-Parte Motion to Allow Sheriff Calope to Force Open Bank Vault"on the same day (Rollo, p. 268). Accordingly, on March 17, 1982, hereinpetitioner Judge granted the aforesaid Ex-Parte Motion to Force Open theBank Vault (Rollo, p. 269).

On March 18, 1982, counsel for petitioner filed another "Urgent Ex-ParteMotion to Order Manager of City Trust to Allow Petitioner to Withdraw RuralBank Deposits" while a separate "Urgent Ex-Parte Motion to Order Managerof Metrobank to Release Deposits of Petitioners" was filed on the same date.

The motion was granted by the Court in an order directing the Manager ofMetro Bank-Naga City (Rollo, p. 269) to comply as prayed for.

In view thereof, herein respondents filed in the Court of Appeals a petition forcertiorari and prohibition with preliminary injunction docketed as CA-G.R. No.13944 against herein petitioners, seeking to set aside the restraining orderand reiterating therein that petitioner Buhi's complaint in the lower court bedismissed (Rollo, p. 270).

On March 19, 1982, the Court of Appeals issued a Resolution(KAPASIYAHAN) in tagalog, restraining the Hon. Judge Carlos R. Buenviaje,from enforcing his order of March 9,1982 and suspending furtherproceedings in Sp. Proc. No. IR-428 pending before him while giving the


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Central Bank counsel, Atty. Ricardo Quintos, authority to carry out personallysaid orders and directing the "Punong Kawani" of the Court of Appeals tosend telegrams to the Office of the President and the Supreme Court (Rollo,p. 168).

Herein petitioners did not comply with the Court of Appeals' order of March19, 1982, but filed instead on March 21, 1982 a motion for reconsideration ofsaid order of the Court of Appeals, claiming that the lower court's order ofMarch 9, 1982 referred only to the denial of therein respondents' motion todismiss and supplemental motion to dismiss and that the return of Buhi to thepetitioners was already an accomplished fact. The motion was denied by therespondent court in a resolution dated June 1, 1982 (Rollo, p. 301).

In view of petitioners' refusal to obey the Court of Appeals' Order of March19, 1982, herein respondents filed with the Court of Appeals a Motion to CitePetitioners in Contempt, dated April 22, 1982 (Rollo, p. 174).

The Court of Appeals issued on May 24, 1982 an order requiring hereinpetitioner Rural Bank of Buhi, Inc., through its then Acting Manager, Imeldadel Rosario and herein petitioner Judge Carlos Buenviaje, as well as Manuel

Genova and Rodolfo Sosa, to show cause within ten (10) days from noticewhy they should not be held in contempt of court and further directing theMinistry of National Defense or its representative to cause the return ofpossession and management of the Rural Bank to the respondents CentralBank and Consolacion Odra (Rollo, p. 180).

On June 9, 1982, petitioners filed their objection to respondents' motion forcontempt dated June 5, 1982 claiming that the properties, subject of theorder, had already been returned to the herein petitioners who are the lawfulowners thereof and that the returning could no longer be undone (Rollo, p.181).

Later, petitioners filed another motion dated June 17, 1982 for thereconsideration of the resolution of June 1, 1982 of the Court of Appealsalleging that the same contravened and departed from the rulings of theSupreme Court that consummated acts or acts already done could no longerbe the subject of mandatory injunction and that the respondent Court of

Appeals had no jurisdiction to issue the order unless it was in aid of itsappellate jurisdiction, claiming that the case (CA-G.R. No. 13944) did notcome to it on appeal (Rollo, p. 302).

As aforestated, on June 17, 1982, respondent Court of Appeals rendered itsdecision (HATOL) setting aside the lower court's restraining order datedMarch 9,1982 and ordering the dismissal of herein petitioners' amendedcomplaint in Civil Case No. IR-428 (Rollo, p. 186).

On July 9, 1982, petitioners (respondents in CA-G.R. No. 13944) filed aMotion for Reconsideration of the Decision dated June 17, 1982 insofar asthe complaint with the lower court (Civil Case No. IR-428 was ordereddismissed (Rollo, p. 305).

On August 23, 1982, the respondent Court of Appeals issued its Resolutiondenying for lack of merit, herein petitioners' motion for reconsideration of theresolution issued by the respondent Court of Appeals on June 1, 1982 andset on August 31, 1982 the hearing of the motion to cite the respondents inCA-G.R. No. SP-13944 (herein petitioner) for contempt (Rollo, p. 193).

At said hearing, counsel for Rural Bank of Buhi agreed and promised in opencourt to restore and return to the Central Bank the possession and control ofthe Bank within three (3) days from August 31, 1982.

However on September 3,1982, Rosalia Guevara, Manager thereof,vigorously and adamantly refused to surrender the premises unless shereceived a written order from the Court.

In a subsequent hearing of the contempt incident, the Court of Appealsissued its Order dated October 13,1982, but Rosalia Guevara still refused toobey, whereupon she was placed under arrest and the Court of Appealsordered her to be detained until she decided to obey the Court's Order(Rollo, pp. 273-274).

Earlier, on September 14, 1982 petitioners had filed this petition even while amotion for reconsideration of the decision of June 17,1982 was still pendingconsideration in the Court of Appeals.

In the resolution of October 20, 1982, the Second Division of this Courtwithout giving due course to the petition required respondents to COMMENT(Rollo, p. 225).

Counsel for respondents manifested (Rollo, p. 226) that they could not filethe required comment because they were not given a copy of the petition.Meanwhile, they filed an urgent motion dated October 28, 1982 with theCourt of Appeals to place the bank through its representatives in possessionof the Rural Bank of Buhi (Camarines Sur), Inc. (Rollo, p. 237).

On December 9, 1982, petitioners filed a Supplemental Petition with urgentmotion for the issuance of a restraining order dated December 2, 1982praying that the restraining order be issued against respondent court (Rollo,p. 229).


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In the resolution of December 15,1982, the Court resolved to requirepetitioners to furnish the respondents with a copy of the petition and torequire the respondents to comment on both the original and thesupplemental petitions (Rollo, p. 243).

In a resolution of February 21, 1983, the Court NOTED Rosalia V. Guevara'sletter dated February 4, 1983 (Rollo, p. 252) addressed to Hon. Chief JusticeEnrique M. Fernando, requesting that she be allowed to file a petition for theissuance of a writ of habeas corpus (Rollo, p. 256).

At the hearing of the said petition on February 23, 1983 where the counsel ofboth parties appeared, this Court noted the Return of the Writ of HabeasCorpus as well as the release of petitioner Rosalia V. Guevara fromdetention by the National Bureau of Investigation. After hearing aforesaidcounsel and petitioner herself, and it appearing that the latter had resignedsince January 18,1983 as Manager of the Rural Bank of Buhi, Inc. and thatthe Central Bank might avail of more than adequate legal measures to takeover the management, possession and control of the said bank (and notthrough contempt proceedings and detention and confinement of petitioner),with Assistant Solicitor General Andin manifesting that respondents were not

insisting on the continued detention of petitioner, the Court Resolved to SETthe petitioner at liberty and to consider the contempt incident closed (Rollo, p.339).

On April 11, 1983, respondents filed their comment on the original andsupplemental petitions.

Meanwhile, the Court of Appeals, acting on respondents' urgent motion filedon October 28, 1982 ordered on April 13, 1983 the return to the petitioners(herein respondents) or their duly authorized representatives of thepossession, management and control of subject Rural Bank (Rollo, p. 319),together with its properties.

On April 28, 1983, petitioner filed an urgent motion: (1) to give due course tothe petition and (2) for immediate issuance of a Restraining Order against therespondent court to prevent it from enforcing its aforesaid resolution dated

April 13, 1983 and from further proceeding in AC-G.R. No. 13944-SP (Rollo,p. 315).

On May 16, 1983, this Court resolved to deny the petition for lack of merit(Rollo, p. 321). On July 25, 1983, petitioners filed their verified Motion forReconsideration (Rollo, p. 337) praying that the HATOL dated June 17, 1982of the Court of Appeals be set aside as null and void and that SpecialProceedings No. IR-428 of CFI-Camarines Sur, Iriga City, Branch VII, be

ordered remanded to the RTC of Camarines Sur, Iriga City, for furtherproceedings.

A Motion for Early Resolution was filed by herein petitioners on March12,1984 (Rollo, p. 348).

Petitioners raised the following legal issues in their motion forreconsideration:

I. UNDER SEC. 29, R.A. 265, AS AMENDED, MAY THE MONETARYBOARD (MB) OF THE CENTRAL BANK (CB) PLACE A RURAL BANKUNDER RECEIVERSHIP WITHOUT PRIOR NOTICE TO SAID RURALBANK TO ENABLE IT TO BE HEARD ON THE GROUND RELIED UPONFOR SUCH RECEIVERSHIP?

II. UNDER THE SAME SECTION OF SAID LAW, WHERE THE MONETARYBOARD (MB) OF THE CENTRAL BANK (CB) HAS PLACED A RURALBANK UNDER RECEIVERSHIP, IS SUCH ACTION OF THE MONETARYBOARD (MB) SUBJECT TO JUDICIAL REVIEW? IF SO, WHICH COURTMAY EXERCISE SUCH POWER AND WHEN MAY IT EXERCISE THE

SAME?

III. UNDER THE SAID SECTION OF THE LAW, SUPPOSE A CIVIL CASEIS INSTITUTED SEEKING ANNULMENT OF THE RECEIVERSHIP ON THEGROUND OF ARBITRARINESS AND BAD FAITH ON THE PART OF THEMONETARY BOARD (MB), MAY SUCH CASE BE DISMISSED BY THE IAC(THEN CA) ON THE GROUND OF INSUFFICIENCY OF EVIDENCE EVENIF THE TRIAL COURT HAS NOT HAD A CHANCE YET TO RECEIVEEVIDENCE AND THE PARTIES HAVE NOT YET PRESENTED

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