J.A.B. Bulao & Associates

CASE 2013-0006: ATONG PAGLAUM, INC. VS. COMMISSION ON ELECTION AND OTHER CASES  (G.R. NO. 203766 ETC., 02 APRIL 2013, CARPIO, J.) SUBJECT/S: PARTY LIST (BRIEF TITLE: ATONG PAGLAUM VS COMELEC)

SUBJECTS/DOCTRINES

WHAT ESSENTIALLY WAS THE  RULING OF THE COURT:

We hold that the COMELEC did not commit grave abuse of discretion in following prevailing decisions of this Court in disqualifying petitioners from participating in the coming 13 May 2013 party-list elections. However, since the Court adopts in this Decision new parameters in the qualification of national, regional, and sectoral parties under the party-list system, thereby abandoning the rulings in the decisions applied by the COMELEC in disqualifying petitioners, we remand to the COMELEC all the present petitions for the COMELEC to determine who are qualified to register under the partylist system, and to participate in the coming 13 May 2013 party-list elections, under the new parameters prescribed in this Decision.

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WHAT IS THE OBJECTIVE OF  THE PARTY LIST SYSTEM UNDER THE 1987 CONSTITUTION?

TO DEMOCRATIZE POLITICAL POWER BY GIVING POLITICAL PARTIES THAT CANNOT WIN IN LEGISLATIVE DISTRICT ELECTIONS A CHANCE TO WIN SEATS IN THE HOUSE OF REPRESENTATIVES.

The 1987 Constitution provides the basis for the party-list system ofrepresentation. Simply put, the party-list system is intended to democratize political power by giving political parties that cannot win in legislative district elections a chance to win seats in the House of Representatives.50 The voter elects two representatives in the House of Representatives: one for his or her legislative district, and another for his or her party-list group or organization of choice.

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WHO ARE INCLUDED IN THE PARTY LIST SYSTEM?

SECTORAL AND WELL AS NON-SECTORAL PARTIES.

Indisputably, the framers of the 1987 Constitution intended the party-listsystem to include not only sectoral parties but also non-sectoral parties. The framers intended the sectoral parties to constitute a part, but not the entirety, of the party-list system. As explained by Commissioner Wilfredo Villacorta, political parties can participate in the party-list system “[F]or as long as they field candidates who come from the different marginalized sectors that we shall designate in this Constitution.”53

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Thus, in the end, the proposal to give permanent reserved seats to certain sectors was outvoted. Instead, the reservation of seats to sectoral representatives was only allowed for the first three consecutive terms.55

There can be no doubt whatsoever that the framers of the 1987 Constitution expressly rejected the proposal to make the party-list system exclusively for sectoral parties only, and that they clearly intended the party-list system to include both sectoral and non-sectoral parties.

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WHAT IS THE COMMON DENOMINATOR BETWEEN SECTORAL AND NON-SECTORAL PARTIES?

THEY CANNOT EXPECT TO WIN IN LEGISLATIVE DISTRICT ELECTIONS BUT THEY CAN GARNER, IN NATIONWIDE ELECTIONS.

The common denominator between sectoral and non-sectoral parties is that they cannot expect to win in legislative district elections but they can garner, in nationwide elections, at least the same number of votes that winning candidates can garner in legislative district elections. The party-list system will be the entry point to membership in the House of Representatives for both these non-traditional parties that could not compete in legislative district elections.

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WHAT COMPOSE THE PARTY LIST SYSTEM?

THREE DIFFERENT GROUPS: (1) NATIONAL PARTIES OR ORGANIZATIONS; (2) REGIONAL PARTIES OR ORGANIZATIONS; AND (3) SECTORAL PARTIES OR ORGANIZATIONS.

Thus, the party-list system is composed of three different groups: (1) national parties or organizations; (2) regional parties or organizations; and (3) sectoral parties or organizations. National and regional parties or organizations are different from sectoral parties or organizations. National and regional parties or organizations need not be organized along sectoral lines and need not represent any particular sector.

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WHAT IS THE PROOF THAT THE PARTY LIST SYSTEM IS NOT EXCLUSIVELY FOR SECTORAL PARTIES?

SECTION 5(2), ARTICLE VI OF THE 1987 CONSTITUTION WHICH MANDATES THAT, DURING THE FIRST THREE CONSECUTIVE TERMS OF CONGRESS AFTER THE RATIFICATION OF THE 1987 CONSTITUTION, “ONE-HALF OF THE SEATS ALLOCATED TO PARTY-LIST REPRESENTATIVES SHALL BE FILLED, AS PROVIDED BY LAW, BY SELECTION OR ELECTION FROM THE LABOR, PEASANT, URBAN POOR, INDIGENOUS CULTURAL COMMUNITIES, WOMEN, YOUTH, AND SUCH OTHER SECTORS AS MAY BE PROVIDED BY LAW, EXCEPT THE RELIGIOUS SECTOR.”

Moreover, Section 5(2), Article VI of the 1987 Constitution mandates that, during the first three consecutive terms of Congress after the ratification of the 1987 Constitution, “one-half of the seats allocated to party-list representatives shall be filled, as provided by law, by selection or election from the labor, peasant, urban poor, indigenous cultural communities, women, youth, and such other sectors as may be provided by law, except the religious sector.” This provision clearly shows again that the party-list system is not exclusively for sectoral parties for two obvious reasons.

First, the other one-half of the seats allocated to party-list representatives would naturally be open to non-sectoral party-list representatives, clearly negating the idea that the party-list system is exclusively for sectoral parties representing the “marginalized and underrepresented.” Second, the reservation of one-half of the party-list seats to sectoral parties applies only for the first “three consecutive terms after the ratification of this Constitution,” clearly making the party-list system fully

open after the end of the first three congressional terms. This means that, after this period, there will be no seats reserved for any class or type of party that qualifies under the three groups constituting the party-list system.

Hence, the clear intent, express wording, and party-list structure ordained in Section 5(1) and (2), Article VI of the 1987 Constitution cannot be disputed: the party-list system is not for sectoral parties only, but also for non-sectoral parties.

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WHAT IS THE DIFFERENCE BETWEEN A POLITICAL PARTY AND A SECTORAL PARTY.

THE DIFFERENCE IS STATED IN R.A. NO. 7941.

POLITICAL PARTY REFERS TO AN ORGANIZED GROUP OF CITIZENS ADVOCATING AN IDEOLOGY OR PLATFORM, PRINCIPLES AND POLICIES FOR THE GENERAL CONDUCT OF GOVERNMENT.”

A SECTORAL PARTY REFERS TO AN ORGANIZED GROUP OF CITIZENS BELONGING TO ANY OF THE SECTORS ENUMERATED IN SECTION 5 HEREOF WHOSE PRINCIPAL ADVOCACY PERTAINS TO THE SPECIAL INTEREST AND CONCERNS OF THEIR SECTOR.”

Section 3(a) of R.A. No. 7941 defines a “party” as “either a political party or a sectoral party or a coalition of parties.” Clearly, a political party is different from a sectoral party. Section 3(c) of R.A. No. 7941 further provides that a “political party refers to an organized group of citizens advocating an

ideology or platform, principles and policies for the general conduct of government.” On the other hand, Section 3(d) of R.A. No. 7941 provides that a “sectoral party refers to an organized group of citizens belonging to any of the sectors enumerated in Section 5 hereof whose principal advocacy pertains to the special interest and concerns of their sector.” R.A. No. 7941 provides different definitions for a political and a sectoral party. Obviously, they are separate and distinct from each other.

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DOES R.A. NO. 7941 REQUIRE NATIONAL AND REGIONAL PARTIES TO REPRESENT THE MARGINALIZED AND UNDERREPRESENTED SECTORS?

NO. TO REQUIRE ALL NATIONAL AND REGIONAL PARTIES UNDER THE PARTY-LIST SYSTEM TO REPRESENT THE “MARGINALIZED AND UNDERREPRESENTED” IS TO DEPRIVE AND EXCLUDE, BY JUDICIAL FIAT, IDEOLOGY-BASED AND CAUSE-ORIENTED PARTIES FROM THE PARTY-LIST SYSTEM.

R.A. No. 7941 does not require national and regional parties or organizations to represent the “marginalized and underrepresented” sectors. To require all national and regional parties under the party-list system to represent the “marginalized and underrepresented” is to deprive and exclude, by judicial fiat, ideology-based and cause-oriented parties from the party-list system. How will these ideology-based and cause-oriented parties, who cannot win in legislative district elections, participate in the electoral process if they are excluded from the party-list system? To exclude them from the partylist system is to prevent them from joining the parliamentary struggle, leaving as their only option the armed struggle. To exclude them from the party-list system is, apart from being obviously senseless, patently contrary to the clear intent and express wording of the 1987 Constitution and R.A. No. 7941. Under the party-list system, an ideology-based or cause-oriented political party is clearly different from a sectoral party. A political party need not be organized as a sectoral party and need not represent any particular sector. There is no requirement in R.A. No. 7941 that a national or regional political party must represent a “marginalized and underrepresented” sector. It is sufficient that the political party consists of citizens who advocate the same ideology or platform, or the same governance principles and policies, regardless of their economic status as citizens.

Section 5 of R.A. No. 7941 states that “the sectors shall include labor, peasant, fisherfolk, urban poor, indigenous cultural communities, elderly, handicapped, women, youth, veterans, overseas workers, and professionals.”56 The sectors mentioned in Section 5 are not all necessarily “marginalized and underrepresented.” For sure, “professionals” are not by definition “marginalized and underrepresented,” not even the elderly, women, and the youth. However, professionals, the elderly, women, and the youth may “lack well-defined political constituencies,” and can thus organize themselves into sectoral parties in advocacy of the special interests andconcerns of their respective sectors.

Section 6 of R.A. No. 7941 provides another compelling reason for holding that the law does not require national or regional parties, as well as certain sectoral parties in Section 5 of R.A. No. 7941, to represent the “marginalized and underrepresented.” Section 6 provides the grounds for the COMELEC to refuse or cancel the registration of parties or organizations after due notice and hearing.

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WHAT IS THE CONSEQUENCE IF WE INTERPRET THAT ALL THE SECTORS MENTIONED IN SECTION 5 ARE MARGINALIZED AND UNDERREPRESENTED?

IT  WOULD LEAD TO ABSURDITIES.

On the contrary, to even interpret that all the sectors mentioned in Section 5 are “marginalized and underrepresented” would lead to absurdities.

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TO WHAT DOES THE PHRASE MARGINALIZED AND UNDERREPRESENTED REFER TO TAKING INTO ACCOUNT THE BROAD POLICY DECLARATION IN SECTION 2OF R.A. NO. 7941 WITH ITS SPECIFIC IMPLEMENTING PROVISIONS, BEARING IN MIND THE APPLICABLE PROVISIONS OF THE 1987 CONSTITUTION ON THE MATTER?

THE PHRASE SHOULD REFER ONLY TO THE SECTORS IN SECTION 5 THAT ARE, BY THEIR NATURE, ECONOMICALLY “MARGINALIZED AND UNDERREPRESENTED.”

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WHAT ARE THESE SECTORS?

THESE SECTORS ARE: LABOR, PEASANT, FISHERFOLK, URBAN POOR, INDIGENOUS CULTURAL COMMUNITIES, HANDICAPPED, VETERANS, OVERSEAS WORKERS, AND OTHER SIMILAR SECTORS.

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SHOULD ALL OF THE MEMBERS OF THE SECTORAL PARTY BELONG TO THE MARGINALIZED AND UNDERREPRESENTED?

ONLY A MAJORITY.

For these sectors, a majority of the members of the sectoral party must belong to the “marginalized and underrepresented.”

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HOW ABOUT THE NOMINEES OF THE THE SECTORAL PARTY?

EITHER THEY MUST BELONG TO THE SECTOR OR MUST HAVE A TRACK RECORD OF ADVOCACY FOR THAT SECTOR.

The nominees of the sectoral party either must belong to the sector, or must have a track record of advocacy for the sector represented. Belonging to the “marginalized and underrepresented” sector does not mean one must “wallow in poverty, destitution or infirmity.” It is sufficient that one, or his or her sector, is below the middle class. More specifically, the economically “marginalized and underrepresented” are those who fall in the low income group as classified by the National Statistical Coordination Board.58

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HOW ABOUT SECTORAL PARTIES OF PROFESSIONALS, THE ELDERLY, WOMEN AND THE YOUTH, DO THEY NEED TO BE MARGINALIZED?

NO. THEY BELONG TO  IDEOLOGY-BASED AND CAUSE ORIENTED PARTIES. ALLOWING THEM TO RUN AS PARTY LIST WILL GIVE GIVE SMALL IDEOLOGY-BASED   AND CAUSE-ORIENTED PARTIES WHO LACK “WELL-DEFINED POLITICAL CONSTITUENCIES” A CHANCE TO WIN SEATS IN THE HOUSE OF REPRESENTATIVES.

The recognition that national and regional parties, as well as sectoral parties of professionals, the elderly, women and the youth, need not be “marginalized and underrepresented” will allow small ideology-based and cause-oriented parties who lack “well-defined political constituencies” a chance to win seats in the House of Representatives. On the other hand, limiting to the “marginalized and underrepresented” the sectoral parties for labor, peasant, fisherfolk, urban poor, indigenous cultural communities, handicapped, veterans, overseas workers, and other sectors that by their nature are economically at the margins of society, will give the “marginalized and underrepresented” an opportunity to likewise win seats in the House of Representatives. This interpretation will harmonize the 1987 Constitution and R.A. No. 7941 and will give rise to a multi-party system where those “marginalized and underrepresented,” both in economic and ideological status, will have the opportunity to send their own members to the House of Representatives.

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WHAT IS ONE RESULT OF THIS INTERPRETATION?

IT WILL MAKE THE PARTY-LIST SYSTEM HONEST AND TRANSPARENT.

This interpretation will also make the party-list system honest and transparent, eliminating the need for relatively well-off party-list representatives to masquerade as “wallowing in poverty, destitution and infirmity,” even as they attend sessions in Congress riding in SUVs.

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CAN  POLITICAL PARTIES  PARTICIPATE  IN THE PARTY-LIST ELECTIONS?

NO, EXCEPT THROUGH THEIR SECTORAL WINGS.

THEY CANNOT DIRECTLY PARTICIPATE BECAUSE THEY NEITHER LACK WELL DEFINED POLITICAL CONSTITUENCIES NOR REPRESENT MARGINALIZED AND UNDDERPRESENTED SECTORS.

The major political parties are those that field candidates in the legislative district elections. Major political parties cannot participate in the party-list elections since they neither lack “well-defined political constituencies” nor represent “marginalized and underrepresented” sectors. Thus, the national or regional parties under the party-list system are

necessarily those that do not belong to major political parties. This automatically reserves the national and regional parties under the party-list system to those who “lack well-defined political constituencies,” giving them the opportunity to have members in the House of Representatives.

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WHY ARE POLITICAL PARTIES ALLOWED TO PARTICIPATE IN THE PARTY LIST ELECTIONS THROUGH THEIR SECTORAL WINGS?

TO ENCOURAGE THEM TO WORK ASSIDUOUSLY IN EXTENDING THEIR CONSTITUENCIES TO THE “MARGINALIZED AND UNDERREPRESENTED” AND TO THOSE WHO “LACK WELL-DEFINED POLITICAL CONSTITUENCIES.”

The 1987 Constitution and R.A. No. 7941 allow major political parties to participate in party-list elections so as to encourage them to work assiduously in extending their constituencies to the “marginalized and underrepresented” and to those who “lack well-defined political constituencies.” The participation of major political parties in party-list elections must be geared towards the entry, as members of the House of Representatives, of the “marginalized and underrepresented” and those who “lack well-defined political constituencies,” giving them a voice in lawmaking.

Thus, to participate in party-list elections, a major political party that fields candidates in the legislative district elections must organize a sectoral wing, like a labor, peasant, fisherfolk, urban poor, professional, women or youth wing, that can register under the party-list system.

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WHAT IS THE REQUIREMENT FOR A SECTORAL WING?

IT MUST MUST HAVE ITS OWN CONSTITUTION, BY-LAWS, PLATFORM OR PROGRAM OF GOVERNMENT, OFFICERS AND MEMBERS, A MAJORITY OF WHOM MUST BELONG TO THE SECTOR REPRESENTED.

Such sectoral wing of a major political party must have its own

constitution, by-laws, platform or program of government, officers and members, a majority of whom must belong to the sector represented. The sectoral wing is in itself an independent sectoral party, and is linked to a major political party through a coalition. This linkage is allowed by Section 3 of R.A. No. 7941, which provides that “component parties or organizations of a coalition may participate independently (in party-list elections) provided the coalition of which they form part does not participate in the party-list system.”

Section 9 of R.A. No. 7941 prescribes the qualifications of party-list nominees. This provision prescribes a special qualification only for the nominee from the youth sector.

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WHAT IS THE QUALIFICATION OF A PARTY-LIST NOMINEE?

HE MUST BE A BONA-FIDE MEMBER OF THE PARTY OR ORGANIZATION WHICH HE OR SHE SEEKS TO REPRESENT.

IN THE CASE OF SECTORAL PARTIES, TO BE A BONA FIDE PARTY-LIST NOMINEE ONE MUST EITHER BELONG TO THE SECTOR REPRESENTED, OR HAVE A TRACK RECORD OF ADVOCACY FOR SUCH SECTOR.

A party-list nominee must be a bona fide member of the party or organization which he or she seeks to represent. In the case of sectoral parties, to be a bona fide party-list nominee one must either belong to the sector represented, or have a track record of advocacy for such sector.

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WHAT ARE NOW THE NEW PARAMETERS TO BE FOLLOWED BY COMELEC?

THEY ARE AS FOLLOWS:

1. THREE DIFFERENT GROUPS MAY PARTICIPATE IN THE PARTY-LIST SYSTEM: (1) NATIONAL PARTIES OR ORGANIZATIONS, (2) REGIONAL PARTIES OR ORGANIZATIONS, AND (3) SECTORAL PARTIES OR ORGANIZATIONS.

2. NATIONAL PARTIES OR ORGANIZATIONS AND REGIONAL PARTIES OR ORGANIZATIONS DO NOT NEED TO ORGANIZE ALONG SECTORAL LINES AND DO NOT NEED TO REPRESENT ANY “MARGINALIZED AND UNDERREPRESENTED” SECTOR.

3. POLITICAL PARTIES CAN PARTICIPATE IN PARTY-LIST ELECTIONS PROVIDED THEY REGISTER UNDER THE PARTY-LIST SYSTEM AND DO NOT FIELD CANDIDATES IN LEGISLATIVE DISTRICT ELECTIONS. A POLITICAL PARTY, WHETHER MAJOR OR NOT, THAT FIELDS CANDIDATES IN LEGISLATIVE DISTRICT ELECTIONS CAN PARTICIPATE IN PARTYLIST ELECTIONS ONLY THROUGH ITS SECTORAL WING THAT CAN SEPARATELY REGISTER UNDER THE PARTY-LIST SYSTEM. THE SECTORAL WING IS BY ITSELF AN INDEPENDENT SECTORAL PARTY, AND IS LINKED TO A POLITICAL PARTY THROUGH A COALITION.

4. SECTORAL PARTIES OR ORGANIZATIONS MAY EITHER BE “MARGINALIZED AND UNDERREPRESENTED” OR LACKING IN “WELL-DEFINED POLITICAL CONSTITUENCIES.” IT IS ENOUGH THAT THEIR PRINCIPAL ADVOCACY PERTAINS TO THE SPECIAL INTEREST AND CONCERNS OF THEIR SECTOR. THE SECTORS THAT ARE “MARGINALIZED AND UNDERREPRESENTED” INCLUDE LABOR, PEASANT, FISHERFOLK, URBAN POOR, INDIGENOUS CULTURAL COMMUNITIES, HANDICAPPED, VETERANS, AND OVERSEAS

62 RULE 64 IN RELATION TO RULE 65, 1997 RULES OF CIVIL PROCEDURE. WORKERS. THE SECTORS THAT LACK “WELL-DEFINED POLITICAL CONSTITUENCIES” INCLUDE PROFESSIONALS, THE ELDERLY, WOMEN, AND THE YOUTH.

5. A MAJORITY OF THE MEMBERS OF SECTORAL PARTIES OR ORGANIZATIONS THAT REPRESENT THE “MARGINALIZED AND UNDERREPRESENTED” MUST BELONG TO THE “MARGINALIZED AND UNDERREPRESENTED” SECTOR THEY REPRESENT. SIMILARLY, A MAJORITY OF THE MEMBERS OF SECTORAL PARTIES OR ORGANIZATIONS THAT LACK “WELL-DEFINED POLITICAL CONSTITUENCIES” MUST BELONG TO THE SECTOR THEY REPRESENT. THE NOMINEES OF SECTORAL PARTIES OR ORGANIZATIONS THAT REPRESENT THE “MARGINALIZED AND UNDERREPRESENTED,” OR THAT REPRESENT THOSE WHO LACK “WELL-DEFINED POLITICAL CONSTITUENCIES,” EITHER MUST BELONG TO THEIR RESPECTIVE SECTORS, OR MUST HAVE A TRACK RECORD OF ADVOCACY FOR THEIR RESPECTIVE SECTORS. THE NOMINEES OF NATIONAL AND REGIONAL PARTIES OR ORGANIZATIONS MUST BE BONA-FIDE MEMBERS OF SUCH

PARTIES OR ORGANIZATIONS.

6. NATIONAL, REGIONAL, AND SECTORAL PARTIES OR ORGANIZATIONS SHALL NOT BE DISQUALIFIED IF SOME OF THEIR NOMINEES ARE DISQUALIFIED, PROVIDED THAT

THEY HAVE AT LEAST ONE NOMINEE WHO REMAINS QUALIFIED.

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SCD-2013-0006-APR 2013 – PAGLAUM

CASE 2013-0005: MAYOR EMMANUEL L. MALIKSI VS. COMMISSION ON ELECTIONS AND HOMER T. SAQUILA (G.R. NO. 203302, 12, MARCH 2013, CARPIO, J.) SUBJECT/S: WHEN IS THERE DENIAL OF DUE PROCESS; PICTURE IMAGES OF THE BALLOTS AS OFFICIAL BALLOTS; BALLOT IMAGES NOT SECONDARY EVIDENCE  (BRIEF TITLE: MALIKSI VS. COMELEC ET AL.)

DISPOSITIVE:

WHEREFORE, we DISMISS the petition. We AFFIRM the Resolution promulgated on 14 September 2012 by the Commission on Elections En Bane which affirmed the 15 August 2012 Resolution of the Commission on Elections First Division declaring HOMER T. SAQUILA Y AN as the duly-elected Municipal Mayor of Imus, Cavite. We LIFT the temporary restraining order issued on 11 October 2012. This decision is IMMEDIATELY EXECUTORY considering that the remainder of Saquilayan’ s term of office is only less than five ( 5) months.

SO ORDERED.

SUBJECTS/DOCTRINES/DIGEST:

There is no denial of due process where there is opportunity to be heard, either through oral arguments or pleadings.29 It is settled that “opportunity to be heard” does not only mean oral arguments in court but also written arguments through pleadings.30 Thus, the fact that a party was heard on his motion for reconsideration negates any violation of the right to due process.31 The Court has ruled that denial of due process cannot be invoked where a party was given the chance to be heard on his motion for reconsideration.”

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In the recent consolidated cases of Vinzons-Chato v. House of Representatives Electoral Tribunal and Panotes and Panotes v. House of Representatives Electoral Tribunal and Vinzons-Chato,33 the Court ruled that “the picture images of the ballots, as scanned and recorded by the PCOS, are likewise ‘official ballots’ that faithfully capture in electronic form the votes cast by the voter, as defined by Section 2 (3) of R.A. No. 9369.”34 The Court declared that the printouts of the ballot images in the CF cards “are the functional equivalent of the paper ballots filled out by the voters and, thus, may be used for purposes of revision of votes in an electoral protest.” In short, both the ballot images in the CF cards and the printouts of such images have the same evidentiary value as the official physical ballots filled up by the voters.

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In Vinzons-Chato and Panotes, the Court explained in ength:

Section 2 (3) of R.A. No. 9369 defines “official ballot” where AES is utilized as the “paper ballot, whether printed or generated by the technologyapplied, that faithfully captures or represents the votes cast by a voter recorded or to be recorded in electronic form.”

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The ballot images, which are digital, are electronically generated and written in the CF cards when the ballots are fed into the PCOS machine. The ballot images are the counterparts produced by electronic recording which accurately reproduce the original, and thus are the equivalent of the original. As pointed out by the COMELEC, “[t]he digital images of the physical ballots are electronically and instantaneously generated by the PCOS machines once the physical ballots are fed into and read by the machines.”37 Hence, the ballot images are not secondary evidence. The official physical ballots and the ballot images in the CF cards are both original documents. The ballot images in the CF cards have the same evidentiary weight as the official physical ballots.

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SCD-2013-0005-MAR 2013 – MALIKSI

CASE 2013-0003: THE MANILA INSURANCE COMPANY, INC. VS. SPOUSES ROBERTO AND AIDA AMURAO (G.R. NO. 179628, 16 JANUARY 2013, DEL CASTILLO, J.) SUBJECT/S: JURISDICTION OF CIAC; LIABILITY OF SURETY; (BRIEF TITLE: MANILA INSURANCE VS. AMURAO)

DISPOSITIVE:

WHEREFORE, the petition is hereby GRANTED. The Decision dated June 7, 2007 and the Resolution dated September 7, 2007 of the Court of Appeals in CA-G.R. SP No. 96815 are hereby ANNULLED and SET ASIDE. The Presiding Judge of the Regional Trial Court of Quezon City, Branch 217 1s DIRECTED to dismiss Civil Case No. Q-01-45573 for lack of jurisdiction.

SO ORDERED.

SUBJECTS/DOCTRINES/DIGEST:

SPOUSES AMURAO ENTERED INTO A CONSTRUCTION AGREEMENT WITH AEGEAN DEVELOPMENT CORP WHEREBY THE LATTER WAS TO CONSTRUCT A 6 STOREY COMMERCIAL BUILDING. AGEAN POSTED PERFORMANCE BOND SECURED BY PETITIONER MANILA INSURANCE COMPANY INC AND INTRA STRATA ASSURANCE CORP. WHEN AGEAN FAILED TO FINISH THE CONSTRUCTION, SPOUSES AMURAO FILED A CASE AGAINST  MANILA INSURANCE AND INTRA STRATA. MANILA INSURANCE MOVED TO DISMISS THE CASE BECAUSE THERE IS AN ARBITRATION CLAUSE IN THE CONSTRUCTION AGREEMENT WHICH PROVIDES THAT ANY DISPUTE ON THE INTERPRETATION OF THE CONTRACT DOCUMENTS SHALL BE BROUGHT BEFORE THE CIAC. RTC DENIED THE MOTION TO DISMISS. CA SUSTAINED THE MOTION TO DISMISS. IS CA CORRECT.

NO. THE CASE SHOULD BE DISMISSED FOR LACK OF JURISDICTION. CIAC HAS JURISDICTION OVER THE CASE.

IN  ORDER FOR THE CIAC TO ACQUIRE JURISDICTION TWO REQUISITES MUST CONCUR: “FIRST, THE DISPUTE MUST BE SOMEHOW CONNECTED TO A CONSTRUCTION CONTRACT; AND SECOND, THE PARTIES MUST HAVE AGREED TO SUBMIT THE DISPUTE TO ARBITRATION PROCEEDINGS.” IN THIS CASE, BOTH REQUISITES ARE PRESENT.

 Section 4 of E.O. No. 1008 provides that:

 SEC. 4. Jurisdiction. – The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof. These disputes may involve government or private contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration. The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and workmanship, violation of the terms of agreement, interpretation and/or application of contractual time and delays, maintenance and defects, payment, default of employer or contractor, and changes in contract cost. Excluded from the coverage of the law are disputes arising from employer-employee relationships which shall continue to be covered by the Labor Code of the Philippines.

. . . the issue of whether respondent-spouses are entitled to collect on the performance bond issued by petitioner is a “dispute arising in the course of the execution and performance of [the CCA] by reason of difference in the interpretation of the contract documents.”

The fact that petitioner is not a party to the CCA cannot remove the dispute from the jurisdiction of the CIAC because the issue of whether respondent spouses are entitled to collect on the performance bond, as we have said, is a dispute arising from or connected to the CCA.

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MANILA INSURANCE ARGUED THAT WHEN IT EXECUTED THE SURETY AGREEMENT THE CONSTRUCTION CONTRACT WAS NOT YET SIGNED. THEREFORE SPOUSES AMURAO HAVE NO CAUSE OF ACTION AGAINST THEM. IS THIS ARGUMENT CORRECT.

 NO.

A CAREFUL READING OF THE PERFORMANCE BOND REVEALS THAT THE “BOND IS COTERMINOUS WITH THE FINAL ACCEPTANCE OF THE PROJECT.”53 THUS, THE FACT THAT IT WAS ISSUED PRIOR TO THE EXECUTION OF THE CCA DOES NOT AFFECT ITS VALIDITY OR EFFECTIVITY.

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 WHAT IS A CONTRACT OF SURETYSHIP?

A CONTRACT OF SURETYSHIP IS DEFINED AS “AN AGREEMENT WHEREBY A PARTY, CALLED THE SURETY, GUARANTEES THE PERFORMANCE BY ANOTHER PARTY, CALLED THE PRINCIPAL OR OBLIGOR, OF AN OBLIGATION OR UNDERTAKING IN FAVOR OF A THIRD PARTY, CALLED THE OBLIGEE. IT INCLUDES OFFICIAL RECOGNIZANCES, STIPULATIONS, BONDS OR UNDERTAKINGS ISSUED BY ANY COMPANY BY VIRTUE OF AND UNDER THE PROVISIONS OF ACT NO. 536, AS AMENDED BY ACT NO. 2206.”50

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WHAT IS THE NATURE OF THE SURETY’S LIABILITY?

IT IS JOINT AND SEVERAL, LIMITED TO THE AMOUNT OF THE BOND, AND DETERMINED STRICTLY BY THE TERMS OF CONTRACT OF SURETYSHIP IN RELATION TO THE PRINCIPAL CONTRACT BETWEEN THE OBLIGOR AND THE OBLIGEE.

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 TO WHAT EXTENT IS THE LIABILITY OF THE SURETY.

 IT IS DIRECT, PRIMARY AND ABSOLUTE.

 It bears stressing, however, that although the contract of suretyship is secondary to the principal contract, the surety’s liability to the oblige is nevertheless direct, primary, and absolute.

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SCD-2013-0003- JAN 2013 – MANILA INSURANCE