J.A.B. Bulao & Associates

CASE 2011-0194: CITY GOVERNMENT OF TUGUEGARAO, REPRESENTED BY ROBERT P. GUZMAN VS. RANDOLPH S. TING (G.R. NOS. 192435-36, 14 SEPTEMBER 2011, VILLARAMA, J.) SUBJECT: PROPER PARTY TO APPEAL DISMISSAL ORDER OF THE SANDIGANYAYAN. (BRIEF TITLE: TUGUEGARAO CITY VS. TING).

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DISPOSITIVE:

WHEREFORE, the petition for review on certiorari is DENIED.  

With costs against petitioner Robert P. Guzman.

        SO ORDERED.

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SUBJECT/DOCTRINE/DIGEST:

POWER OF THE OFFICE OF THE OMBUDSMAN TO INVESTIGATE AND PROSECUTE

It is settled that the Office of the Ombudsman has the sole power to investigate and prosecute on its own or on complaint by any person, any act or omission of any public officer or employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient. The power to withdraw the Information already filed is a mere adjunct or consequence of the Ombudsman’s overall power to prosecute.^[1][20]  

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BUT ONCE CASE IS FILED IN SANDIGANBAYAN, IT IS THE LATTER AND NO LONGER THE OMBUDSMAN WHO HAS FULL CONTROL OF THE CASE

However, while it is the Ombudsman who has the full discretion to determine whether or not a criminal case should be filed in the Sandiganbayan, once the case has been filed with said court, it is the Sandiganbayan, and no longer the Ombudsman, which has full control of the case so much so that the Information may not be dismissed without the approval of said court.^[2][21]  Further, it does not matter whether such filing of a motion to dismiss by the prosecution is done before or after the arraignment of the accused or that the motion was filed after a reinvestigation.^[3][22] 

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PRIVATE PETITIONER FILED AN APPEAL FROM THE DISMISSAL ORDER OF THE SANDIGANBAYAN. IS THIS PROPER?

NO. IT IS THE OFFICE OF THE OMBUDSMAN WHO MUST FILE THE APPEAL.

We hold that petitioner is not the proper party to file the present action.  Section 4 (c) of P.D. No. 1606, as amended, clearly provides that “In all cases elevated to the Sandiganbayan and from the Sandiganbayan to the Supreme Court, the Office of the Ombudsman, through its special prosecutor, shall represent the People of the Philippines, except in cases filed pursuant to Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986.”

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GUZMAN, A PRIVATE INDIVIDUAL, WAS THE ONE WHO SIGNED THE COMPLAINT AFFIDAVIT. IS HE ALSO THE PRIVATE COMPLAINANT?

NO. PRIVATE COMPLAINANT IS TUGUEGARAO CITY BECAUSE IT WAS THE ONE WHO SUFFERED DAMAGE.

A private complainant in a criminal case before the Sandiganbayan is allowed to appeal only the civil aspect of the criminal case after its dismissal by said court.  While petitioner’s name was included in the caption of the cases as private complainant during the preliminary investigation and re-investigation proceedings in the Office of the Ombudsman, he is not the offended party or private complainant in the main case.  As evident from a reading of the informations, it is the City ofTuguegaraowhich suffered damage as a consequence of the subject purchase of lands by the respondent and hence is the private complainant in the main case.

As this Court declared in People v. Velez:^[4][26]

On the first issue, the Court agrees with the contention of the respondent Office of the Ombudsman that Salmingo is not the proper party as petitioner in this case.  The governing rule is Section 1, Rule 45 of the 1997 Rules of Civil Procedure, as amended, which reads:

SECTION 1. Filing of petition with Supreme Court. —  A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari.  The petition shall raise only questions of law which must be distinctly set forth.

The Court has previously held that the “party” referred to in the rule is the original party in the main case aggrieved by the order or decision in the main case.  Hence, only the aggrieved original party in the main case is the only proper party as petitioner.  One who has not been an original party in the main case has no personality to file a petition under said rule.

x x x x

The Court notes that Salmingo was not a party in the main case.  While it is true that he initiated the criminal complaint with the Office of the Ombudsman against respondents for various offenses, however, under the Information filed with the SB, the parties are the People of the Philippines as plaintiff and the respondents as the accused.  The private complainant is the City of Silay while Salmingo is merely a witness for the plaintiff.

The private complainant in a criminal case before the SB is also a proper party to file a petition under Rule 45 of the 1997 Rules of Civil Procedure, as amended, but only on the civil aspect of the case.  It must be noted that Salmingo was not the private complainant in the main case.  As gleaned from the Information, Silay City was the party which suffered damage as a consequence of the wrongful acts of the malefactors and hence is the private complainant in the main case.

Salmingo’s inclusion in the caption of his petition of the People of the Philippinesas a party petitioner is patently unauthorized.  The Court believes that it is a futile attempt in compliance with Section 1, Rule 45 of the 1997 Rules of Civil Procedure, as amended.^[5][27] (Emphasis supplied.)

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FIRST DIVISION

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DECISION

VILLARAMA, JR., J.:

           Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, which seeks to reverse and set aside the Resolutions^[6][1] dated May 26, 2009 and December 9, 2009 of the Sandiganbayan (First Division) in SB-09-CRM-0004 to 0005.  The Sandiganbayan directed the Ombudsman to resolve respondent’s motion for reinvestigation which was treated as a motion for reconsideration of the Ombudsman’s resolution finding probable cause against the respondent.   Subsequently, the Special Prosecutor filed a motion for withdrawal of informations which the Sandiganbayan granted.

          On June 12, 2008, the Office of the Ombudsman issued a resolution^[7][2] finding probable cause to charge respondent Randolph S. Ting, then Mayor of Tuguegarao City, with violation of Section 3(g)^[8][3] of Republic Act (R.A.) No. 3019 (Anti-Graft and Corrupt Practices Act) in connection with the purchase of three (3) parcels of land in the year 2004 under two separate deeds of sale. The City Government intended to use the properties as a public cemetery as these are situated near the existing public cemetery and traverse Barangays Atulayan Sur and Penque.

          In his complaint-affidavit,^[9][4] petitioner Robert P. Guzman alleged that the purchase of the subject lots was anomalous because it was done despite the lack of a project study on the suitability of the properties for their intended purpose, an Environmental Compliance Certificate (ECC) from the Department of Environment and Natural Resources (DENR), and initial clearance from the Department of Health (DOH) as required by Presidential Decree (P.D.) No. 856 (Sanitation Code).  Petitioner pointed out that the transaction was grossly disadvantageous to the city government considering that the area is flood-prone and the subject properties are situated along a waterway/floodway which are inundated during the rainy season. The purchased contiguous lots also adjoin a creek and a road where box culverts were constructed, and are lower than the elevation of the road.  Petitioner further claimed that respondent entered into the sale transaction knowing fully well that the purchase price was way above the properties’ fair market value, as reflected in the fair market value appraisal of Cuervo Appraisers, Inc. (Cuervo Report).

          Respondent filed his counter-affidavit^[10][5] asserting that the subject transaction was duly authorized by the Sangguniang Panlungsod of Tuguegarao City, its terms were above-board and did not violate any provision of R.A. No. 3019.  He pointed out that when the lots were offered for sale at P700 per square meter to the City Government, the City Appraisal Committee conducted an evaluation of the proposed acquisition of properties for the Tuguegarao City public cemetery expansion project which was included in the 2001-2005 City Comprehensive Development Plan/Comprehensive Land Use Plan (CCDP/CLUP) adopted by the Sanngguniang Panlungsod. Said committee, after a thorough study, recommended that the City Government negotiate for the price of P351.54 per square meter which it found as the just and reasonable market value of the offered properties as the average amount in the deeds of sale and sworn statements of property owners. As for the clearances from DOH and DENR, respondent thought that these requirements shall be secured at the time the intended cemetery will be constructed.  Respondent also explained that flooding occurs only when there is an unusually large volume of rainfall in the Cagayan Valley Region and for a short period.  Moreover, the various resolutions passed by the City Development Council (CDC) already factored in such possibility when it required the backfilling of the acquired area.  As to the price of P160 per square meter indicated in the Cuervo Report, this runs counter to the findings of the City Appraisal Committee also based on deeds of sale and sworn statements of lot owners.

          As already mentioned, the Ombudsman approved the recommendation of Graft Investigation & Prosecution Officer I Albert S. Almojuela to indict the respondent for violation of Section 3(g) of R.A. No. 3019. It was noted that respondent failed to attach copies of the deeds of sale and sworn statements supposedly used as basis for the resolution of the City Appraisal Committee recommending the price per square meter of the properties for acquisition as their fair market value.^[11][6] Consequently, on January 30, 2009, the corresponding informations^[12][7] were filed in the Sandiganbayan.

          Except for the names of the lot owners-sellers and specific properties subject of sale, the two (2) informations contain identical allegations, as follows:

That on or about May 05, 2004 or sometime prior or subsequent thereto, in the City of Tuguegarao, Cagayan, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused Randy (Randolph) S. Ting, a public officer, being then the City Mayor of Tuguegarao, Province of Cagayan, while in the performance of his official functions, did then and there willfully, unlawfully and feloniously purchase/enter into a Contract of Sale of two (2) parcels of land with a total area of24,816 square meters(Lot Nos. 5860 and 5861 of the Cadastral survey of Tuguegarao previously covered by TCT No. 36942, now TCT No. 144828 and TCT No. 36943 now TCT No. 144829, respectively), on behalf of the City Government of Tuguegarao from ANSELMO ALMAZAN, ANGELO ALMAZAN and ANSELMO ALMAZAN III, unsuitable for the intended purpose (public cemetery) as the said parcels of land are at least1.6 meterslower than the elevation of the Cabalza-Santol Road located along a waterway, adjacent to a box culvert and are periodically inundated during rainy season and overpriced by one hundred ninety one pesos and fifty four centavos (191.54) per square meter, which is manifestly and grossly disadvantageous to the City Government of Tuguegarao to the damage and prejudice of the aforesaid City.

CONTRARY TO LAW.^[13][8]

          Prior to his arraignment,^[14][9] respondent filed on March 3, 2009 a Motion For Reinvestigation^[15][10] alleging that the Ombudsman committed serious irregularity when it failed to consider that in the acquisition of the subject properties for the public cemetery expansion project, the City Appraisal Committee met and deliberated on the proposed purchase, and eventually passed a resolution adopting the average amount of P351.54 per sq. m.  Hence, the City Appraisal Committee should have been subpoenaed to produce those bunched deeds of sale and sworn statements (photocopies of which were attached to the motion) in its possession, which were used in the evaluation of the offered price for the subject lots, and for which the said body spent considerable time in determining the fair market value of the properties offered.  Respondent stressed that the Sangguniang Panlungsod  adopted the committee’s findings and authorized the respondent to enter into a contract of sale with the property owners at such price.  It was noted that the Ombudsman based its findings mainly on the Cuervo Report which contained errors and inaccuracies such as the acquisition cost by the property owners, ground elevation of fronting roads and zonal valuation figures. 

Respondent further emphasized the fact that petitioner himself is engaged in the cemetery business being the President of Tuguegarao Memorial, Inc. located near the subject properties as well as the old and “overloaded” public cemetery. Copies of five (5) contracts to sell involving petitioner’s burial lots were submitted by the respondent indicating the much higher selling price of petitioner’s burial lots compared with the fair market value of the acquired properties.  Respondent claimed that petitioner knew such expansion and development of the public cemetery would bring serious competition for the sales of burial lots in petitioner’s private cemetery. Finally, respondent called attention to his election as City Mayor of Tuguegarao for three consecutive terms, and the various government awards he received as community leader and for the City Government, that would attest to his integrity and honesty in governance.

          The Special Prosecutor, on behalf of the People of the Philippines, filed its Comment^[16][11] stating that there is no necessity to conduct a reinvestigation but respondent’s motion can instead be treated as a motion for reconsideration.

          On May 26, 2009, the Sandiganbayan issued a resolution^[17][12] ordering the prosecution to resolve respondent’s motion for re-investigation which was treated as a motion for reconsideration.         

By Resolution^[18][13] datedSeptember 8, 2009, the Ombudsman reversed her earlier ruling and found no probable cause to charge the respondent with violation of Section 3(g) of R.A. No. 3019.  On the issues of overpricing and unsuitability of the purchased properties, the Ombudsman made the following findings:

Accused, however, was able to submit documents which served as basis for the amount arrived at by the City Appraisal Committee.  In his Motion for Reinvestigation, accused submitted deeds of sale and tax declarations over properties in Barangay Atulayan Sur showing that some lots were sold for as much as P520 per sq. m. in the years 2002 to 2003.  Accused also submitted another set of deeds of sale and tax declarations showing that in Barangay Penque, the average selling price of lots is P647.80 for the years 2002 to 2004.  It would appear, therefore, that the City Appraisal Committee, relied on by [the] accused, had some basis in arriving at its recommendation.

The actions of the City Appraisal Committee, in the absence of any evidence of some illegality in its proceedings, should be accorded the presumption of regularity.  Their official findings and recommendations, based as they are on actual data, should prevail over the findings of a private appraisal firm which was hired by [the] complainant.  This private appraiser apparently used the so-called “Stripping Method” and the “Anticipated Development Approach” when it arrived at the price of P160.00 per sq. m.  When it came, however, to the “Market Data Approach,” the appraisal report stated that the buying and selling price of the lots within the vicinity was P800-P1000 per sq. m. – as gathered from local bank appraisers (Allied Bank and Chinabank).  In the final analysis, it would appear that the City Appraisal Committee’s recommendation is more realistic, being based on actual data and official records while that of the private appraiser – using the “Stripping Method” and “Anticipated Development Approach” – is more of a theory or an opinion.

Moreover, while the area did, at some time, experience some flooding, any doubts as to the propriety of putting up a cemetery thereon has been laid to rest by the findings of the Regional Offices of the Environmental Management Bureau and the Mines Geo Sciences Bureau of DENR.  The Mines and Geosciences Bureau, Region 2 Office reported that the “proposed site can be developed as a cemetery or memorial park, provided, that proper mitigating measures like a well-designed drainage system and proper foundation designs shall be incorporated in the development plan of the project.”  The Environmental Management Bureau, for its part, stated that the project does not require an Environmental Compliance Certificate under PD 1586 but echoed the need to put up mitigating measures.

Other regulatory agencies of the government also gave approval to the project such as the Regional Office of the Center for Health of the DOH who gave INITIAL CLEARANCE to the project on January 30, 2008.  The NWRB, in its letter dated July 21, 2008, stated that the “water table depth in the concerned area is within the permissible 4.5 metersbelow ground surface.^[19][14]  

          The Ombudsman thus concluded that the existence of the element of a “contract or transaction being grossly and manifestly disadvantageous to the government” had become doubtful since the buying price of the subject lots falls within the prevailing fair market value of the properties within the area.  It was also noted that there was no evidence of a better offer received by the City Government of Tuguegarao in terms of price, size and location that also meets its requirements.  Moreover, since the lots purchased have been shown to be suitable for use as a public cemetery by the DENR, it cannot be said that the transaction entered into by respondent is grossly and manifestly disadvantageous to the government. 

On October 12, 2009, the Office of the Special Prosecutor moved for the withdrawal of the informations.^[20][15] 

Petitioner filed his Opposition^[21][16] reiterating his arguments that the newly submitted evidence on the buying and selling price of lots in the area have no relevance while there is no comparison between lots in a fully developed memorial park and an undeveloped flood-prone land which forms part of a waterway.  As to the DENR reports, petitioner pointed out that it was clearly indicated that the properties are located in a flood-prone area and require backfilling as certified by DENR officials. Also, the City Appraisal Committee certified only as to the fair market value of the properties without the backfilling cost. There was also non-compliance with public hearing requirement on re-zoning as affected residents in the vicinity have objected to the construction of a new public cemetery on the subject lots. 

OnDecember 9, 2009, the Sandiganbayan granted the prosecution’s motion under the assailed resolution:

WHEREFORE, the instant Motion to Withdraw Informations is hereby GRANTED.  The Informations against accused Randolph S. Ting are hereby ordered WITHDRAWN and the instant cases are hereby ordered DISMISSED.

SO ORDERED.^[22][17]

          Petitioner claims that he learned of the dismissal of the cases against the respondent during the campaign for theMay 10, 2010elections.  Upon the request of his lawyer, petitioner was able to secure a certified copy of the above resolution from Executive Clerk IV Atty. Renato Bocar onJune 3, 2010.  Hence, he filed the present petition onJune 18, 2010.

          Petitioner argues that the Sandiganbayan departed from the accepted usual and prescribed course of judicial proceedings as to call for an exercise of the power of supervision when it:

1.   Acted upon the motion for reinvestigation by the accused and considered the same as a motion for reconsideration of the resolution of the ombudsman when the said resolution has already become final and the accused has been arraigned at the honorable Sandiganbayan and has pleaded not guilty.

2.   Dismissed prior to pre-trial the informations merely based on the Motion of the Ombudsman without a complete finding and/or discussion of all the issues raised in the pleadings in clear violation of Sec. 7 of P.D. 1486 creating the Sandiganbayan and totally ignoring the oppositions of the private complainant Guzman.

3.   Merely noted to appearance of the private complainant and totally ignored the pleadings filed by said private complainant Guzman.^[23][18]

          In his Comment,^[24][19] respondent contends that petitioner raised the correctness of the finding of absence of probable cause, a question of fact which is not proper in a Rule 45 petition. Moreover, the petition is time-barred.  Respondent points out that the Special Prosecutor did not file an appeal from the December 9, 2009 resolution of the Sandiganbayan within fifteen (15) days from receipt of a copy thereof; and necessarily so, because it was at their instance that the informations were withdrawn and pursuant thereto, the Sandiganbayan dismissed the criminal cases against the respondent.   In any case, the petitioner cannot represent Tuguegarao City before the courts as he is not a proper party and neither does he have locus standi to bring a derivative suit in representation ofTuguegaraoCity as a public corporation.

We deny the petition.

The crucial issue in this case concerns the petitioner’s legal personality to challenge before this Court the dismissal by the Sandiganbayan of the criminal cases against the respondent.

It is settled that the Office of the Ombudsman has the sole power to investigate and prosecute on its own or on complaint by any person, any act or omission of any public officer or employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient. The power to withdraw the Information already filed is a mere adjunct or consequence of the Ombudsman’s overall power to prosecute.^[25][20]  

However, while it is the Ombudsman who has the full discretion to determine whether or not a criminal case should be filed in the Sandiganbayan, once the case has been filed with said court, it is the Sandiganbayan, and no longer the Ombudsman, which has full control of the case so much so that the Information may not be dismissed without the approval of said court.^[26][21]  Further, it does not matter whether such filing of a motion to dismiss by the prosecution is done before or after the arraignment of the accused or that the motion was filed after a reinvestigation.^[27][22] 

In this case, the Sandiganbayan, ordered the Special Prosecutor to conduct a reinvestigation and subsequently granted his motion to withdraw the informations, after finding no probable cause against the latter on reinvestigation.  The Sandiganbayan thus gave its approval to the withdrawal of the informations and ordered the dismissal of the cases.  Since no appeal was taken by the Special Prosecutor from the order of dismissal within the reglementary period, the same had become final and executory pursuant to Section 7, paragraph 2^[28][23] of P.D. No. 1606,^[29][24] as amended by R.A. No. 8249^[30][25].

But disregarding for the moment the question of timeliness, does petitioner have the legal personality to prosecute this appeal from the Sandiganbayan’s dismissal of the criminal cases? 

We hold that petitioner is not the proper party to file the present action.  Section 4 (c) of P.D. No. 1606, as amended, clearly provides that “In all cases elevated to the Sandiganbayan and from the Sandiganbayan to the Supreme Court, the Office of the Ombudsman, through its special prosecutor, shall represent the People of the Philippines, except in cases filed pursuant to Executive Order Nos. 1, 2, 14 and 14-A, issued in1986.”

A private complainant in a criminal case before the Sandiganbayan is allowed to appeal only the civil aspect of the criminal case after its dismissal by said court.  While petitioner’s name was included in the caption of the cases as private complainant during the preliminary investigation and re-investigation proceedings in the Office of the Ombudsman, he is not the offended party or private complainant in the main case.  As evident from a reading of the informations, it is the City ofTuguegaraowhich suffered damage as a consequence of the subject purchase of lands by the respondent and hence is the private complainant in the main case.

As this Court declared in People v. Velez:^[31][26]

On the first issue, the Court agrees with the contention of the respondent Office of the Ombudsman that Salmingo is not the proper party as petitioner in this case.  The governing rule is Section 1, Rule 45 of the 1997 Rules of Civil Procedure, as amended, which reads:

SECTION 1. Filing of petition with Supreme Court. —  A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari.  The petition shall raise only questions of law which must be distinctly set forth.

The Court has previously held that the “party” referred to in the rule is the original party in the main case aggrieved by the order or decision in the main case.  Hence, only the aggrieved original party in the main case is the only proper party as petitioner.  One who has not been an original party in the main case has no personality to file a petition under said rule.

x x x x

The Court notes that Salmingo was not a party in the main case.  While it is true that he initiated the criminal complaint with the Office of the Ombudsman against respondents for various offenses, however, under the Information filed with the SB, the parties are the People of the Philippines as plaintiff and the respondents as the accused.  The private complainant is the City of Silay while Salmingo is merely a witness for the plaintiff.

The private complainant in a criminal case before the SB is also a proper party to file a petition under Rule 45 of the 1997 Rules of Civil Procedure, as amended, but only on the civil aspect of the case.  It must be noted that Salmingo was not the private complainant in the main case.  As gleaned from the Information, Silay City was the party which suffered damage as a consequence of the wrongful acts of the malefactors and hence is the private complainant in the main case.

Salmingo’s inclusion in the caption of his petition of the People of the Philippinesas a party petitioner is patently unauthorized.  The Court believes that it is a futile attempt in compliance with Section 1, Rule 45 of the 1997 Rules of Civil Procedure, as amended.^[32][27] (Emphasis supplied.)

In the light of the foregoing, the Court finds it unnecessary to discuss other matters raised in the petition.

WHEREFORE, the petition for review on certiorari is DENIED.  

With costs against petitioner Robert P. Guzman.

          SO ORDERED.

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

          Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

CASE 2011-0193: REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, THROUGH THE HON. SECRETARY, HERMOGENES EBDANE,          PETITIONER,  VERSUS  ALBERTO A. DOMINGO, RESPONDENT. (G.R. NO. 175299, 14 SEPTEMBER 2011, LEONARDO DE CASTRO, J.) SUBJECTS: SERVICE OF SUMMONS; SUIT AGAINST THE STATE. (BRIEF TITLE: REPUBLIC VS. DOMINGO)

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DISPOSITIVE:

WHEREFORE, the petition is GRANTED.  The Decision dated May 19, 2006 and the Resolution dated October 25, 2006 of the Court of Appeals in CA-G.R. SP No. 78813 are REVERSED.  The Decision dated February 18, 2003 of the Regional Trial Court of Malolos, Bulacan, Branch 18, in Civil Case No. 333-M-2002 is hereby ANNULLED and SET ASIDE, without prejudice to the filing of the original action in the proper Regional Trial Court.

SO ORDERED.

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Republic of the Philippines

Supreme Court

Manila

FIRST DIVISION

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D E C I S I O N

LEONARDO – DE CASTRO, J.:

          In this Petition for Review on Certiorari^[1][1] under Rule 45 of the Rules of Court, the Court is called upon to reverse and set aside the Decision^[2][2] dated May 19, 2006 and the Resolution^[3][3] dated October 25, 2006 of the Court of Appeals in CA-G.R. SP No. 78813, as well as to declare null and void the Decision^[4][4] dated February 18, 2003 of the Regional Trial Court (RTC) of Malolos, Bulacan, Branch 18, in Civil Case No. 333-M-2002.   

          As culled from the records, the factual antecedents of the case are as follows:

          On April 26, 2002, herein respondent Alberto A. Domingo filed a Complaint for Specific Performance with Damages^[5][5] against the Department of Public Works and Highways (DPWH), Region III, which was docketed as Civil Case No. 333-M-2002 in the RTC of Malolos, Bulacan, Branch 18.  Domingo averred that from April to September 1992, he entered into seven contracts with the DPWH Region III for the lease of his construction equipment to said government agency.^[6][6]  The lease contracts were allegedly executed in order to implement the emergency projects of the DPWH Region III, which aimed to control the flow of lahar from Mt. Pinatubo in the adjacent towns in the provinces of Tarlac and Pampanga.  After the completion of the projects, Domingo claimed that the unpaid rentals of the DPWH Region III amounted to P6,320,163.05.  Despite repeated demands, Domingo asserted that the DPWH Region III failed to pay its obligations.  Domingo was, thus, compelled to file the above case for the payment of the P6,320,163.05 balance, plus P200,000.00 as moral and compensatory damages, P100,000.00 as exemplary damages, and P200,000.00 as attorney’s fees.^[7][7]

          Thereafter, summons was issued by the RTC. The Proof of Service^[8][8] of the Sheriff dated May 9, 2002 stated, thus:

PROOF OF SERVICE

            The undersigned personally served the copy of the Summons together with the complaint issued in the above-entitled case upon defendant The Department of Public Works and Highways, Region III, San Fernando Pampanga on May 6, 2002 through Nora Cortez, Clerk III of said office as shown by her signature and stamped mark received by said office appearing on the original Summons.

            WHEREFORE, the original Summons respectfully returned to the Court “DULY SERVED”, for its record and information.

            Malolos, Bulacan, May 9, 2002.

            Subsequently, on July 30, 2002, Domingo filed a Motion to Declare Defendant in Default^[9][9] in view of the failure of the DPWH Region III to file a responsive pleading within the reglementary period as required under the Rules of Court.  During the hearing of the motion on August 8, 2002, the RTC directed the counsel of Domingo to submit proof of service of said motion on the DPWH Region III.  Thereafter, the motion was deemed submitted for resolution.^[10][10]  Counsel for Domingo timely filed a Manifestation,^[11][11] showing compliance with the order of the trial court.

          In an Order^[12][12] dated September 2, 2002, the RTC declared the DPWH Region III in default and thereafter set the date for the reception of Domingo’s evidence ex parte. 

After the ex parte presentation of Domingo’s evidence, the RTC rendered judgment on February 18, 2003, finding that:

          From the evidence presented by [Domingo], testimonial and documentary, it was convincingly proven that [Domingo] is entitled to the relief prayed for.

            In his seven causes of actions, [Domingo] has religiously undertaken what is incumbent upon him in the contracts of lease signed by both [Domingo] and [the DPWH Region III].  As a matter of course, the [DPWH Region III] has the duty to pay [Domingo] the amount equivalent to the services performed by [Domingo] which [in] this case now amount to P6,320,163.05 excluding interest.

            Considering that there was a long delay in the payment of the obligation on the part of the [DPWH Region III], Article 2209 of the New Civil Code finds application as to imputation of legal interest at six (6%) percent per annum, in the absence of stipulation of interest on the amount due.

            With respect to the claim for attorney’s fees, although as a general rule, attorney’s fees cannot be rewarded because of the policy that no premium should be placed on the right to litigate, this rule does not apply in the case at bar in the face of the stubborn refusal of [the DPWH Region III] to respect the valid claim of [Domingo] x x x.  Award of attorney’s fees in the amount of P30,000.00 appears proper.  Moreover, as to [the] demand for moral and exemplary damages, the same are hereby denied for lack of persuasive and sufficient evidence.^[13][13]

          Thus, the RTC disposed:

Wherefore, premises considered, judgment is hereby rendered in favor of plaintiff Alberto Domingo and against defendant DPWH Region III, ordering defendant to pay plaintiff:

1.  the sum of Six Million Three Hundred Twenty Thousand One Hundred Sixty[-]Three and 05/100 Pesos (P6,320,163.05) representing the principal obligation of the defendant plus interest at six percent (6%) per annum from 1993 until the obligation is fully paid;

2.  to pay attorney’s fees in the total amount of Thirty Thousand Pesos (P30,000.00) and

3.  to pay the costs of suit.^[14][14]

          On March 12, 2003, Domingo filed a Motion for Issuance of Writ of Execution,^[15][15] asserting that the DPWH Region III failed to file an appeal or a motion for new trial and/or reconsideration despite its receipt of a copy of the RTC decision on February 19, 2003.  On March 20, 2003, the RTC granted the aforesaid motion of Domingo.^[16][16]  A Writ of Execution^[17][17] was then issued on March 24, 2003, commanding the sheriff to enforce the RTC Decision dated February 18, 2003. 

          On August 27, 2003, the Republic of the Philippines, represented by the Office of the Solicitor General (OSG), filed with the Court of Appeals a Petition for Annulment of Judgment with Prayer for the Issuance of a Temporary Restraining Order and/or a Writ of Preliminary Injunction.^[18][18]  The petition was docketed as CA-G.R. SP No. 78813.  The Republic argued that it was not impleaded as an indispensable party in Civil Case No. 333-M-2002.  The seven contracts sued upon in the trial court stated that they were entered into by the Regional Director, Assistant Regional Director and/or Project Manager of the DPWH Region III for and in behalf of the Republic of thePhilippines, which purportedly was the real party to the contract.  Moreover, the Republic averred that, under the law, the statutory representatives of the government for purposes of litigation are either the Solicitor General or the Legal Service Branch of the Executive Department concerned.  Since no summons was issued to either of said representatives, the trial court never acquired jurisdiction over the Republic.  The absence of indispensable parties allegedly rendered null and void the subsequent acts of the trial court because of its lack of authority to act, not only as to the absent parties, but even as to those present.  The Republic prayed for the annulment of the RTC Decision dated February 18, 2003 and the dismissal of the said case, without prejudice to the original action being refiled in the proper court.

          On May 19, 2006, the Court of Appeals promulgated its decision, dismissing the Petition for Annulment of Judgment filed by the Republic.  The appellate court elaborated that:

          The hair-splitting distinction being made by [the Republic] between the DPWH as a department under the Republic, and the Regional Office of the DPWH fails to persuade Us.  Instead, We uphold [Domingo’s] position that the regional office is an extension of the department itself and service of summons upon the former is service upon the latter. x x x.

            x x x x

x x x [A] regional office of the DPWH is part of the composition of the department itself and is therefore, not an entity that is altogether separate from the department.  This conclusion lends credence to [Domingo’s] position that service of summons upon the regional office is service upon the department itself because the former is essentially part of the latter.  Indeed, what militates heavily against [the Republic’s] theory is the simple fact that the regional office is not a different entity at all, but, as can be gleaned from the manner of its creation, a part of the department itself, so much so that it does not even have a juridical personality of its own. x x x.

            Anent the claim that the procedure for service of summons upon the Republic was not followed because service should have been made on the OSG or the Legal Service Department of the DPWH, We are likewise not persuaded.  A perusal of the Revised Administrative Code of thePhilippinessuggests nothing of this import. x x x.

            x x x x

            Clearly, nothing [in the functions of the OSG] remotely suggests that service of summons upon the Republic should be made exclusively on the OSG.  What the [provisions] merely state is that the OSG will represent the government in all proceedings involving it.  It cannot be deduced nor implied from this, however, that summons should be served upon it alone.

            The same conclusion applies to the legal service branch of the DPWH, as there is also nothing in the law that suggests that service of summons on the DPWH should be made upon it alone. x x x.

            x x x x

            Obviously, petitioner’s conclusion that the proper procedure for service of summons was not observed is a mere conjecture because We find nothing in the provisions invoked by it that such indeed is the procedure sanctioned by law.  We are thus inclined to give more credence to [the Republic’s] argument that it was the regional office’s fault if it failed to bring the subject case to the attention of the OSG for proper representation.  To allow it to benefit from its own omission in order to evade its just and valid obligation would be the height of injustice.

            Finally, anent the argument that the Republic is estopped from questioning the jurisdiction of the trial court, We rule in the negative.  The existence of another case against the regional office of the DPWH where the OSG appeared is of no moment as it concerns a totally different transaction.  Thus, it would be erroneous for Us to rule on that basis alone, that the OSG is already acknowledging the service of summons upon the regional office, especially considering the categorical stand taken by the OSG on the matter in the case now before Us.  Be that as it may, however, We still rule, as We have discussed above, that [Domingo’s] position is more impressed with merit.

            WHEREFORE, in view of the foregoing, the instant Petition for Annulment of Judgment is hereby DISMISSED.^[19][19]

          The Republic filed a Motion for Reconsideration^[20][20] of the above decision, but the Court of Appeals denied the same in the assailed Resolution dated October 25, 2006.

Consequently, the Republic filed the instant petition before this Court.  In a Resolution^[21][21] dated February 19, 2007, we denied the Republic’s petition for failure to properly verify the petition and that the jurat in the verification and certification against forum shopping did not contain any competent evidence of the affiant’s identity.  In addition, the Integrated Bar of the Philippines (IBP) dues payment (under IBP O.R. No. 663485) of one of the counsels who signed the petition was not updated.  The Republic filed a Motion for Reconsideration^[22][22] of the above resolution.^[23][23]  On July 2, 2007, the Court resolved^[24][24] to grant the Republic’s motion, thereby reinstating its petition.

In assailing the judgment of the Court of Appeals, the Republic brings to fore the following arguments:

I.

If in the act by which the Republic consents to be sued, no designation is made as to the officer to be served with summons, then the process can only be served upon the Solicitor General.

[II.]

The State is not bound by the errors or mistakes of its agents.

III.

Respondent can recover on the government contracts sued upon in Civil Case No. [3]33-M-2002 only on a quantum meruit basis.^[25][25]

          In essence, the primary issue that must be resolved in the instant petition is whether the Court of Appeals correctly dismissed the Petition for Annulment of Judgment filed by the Republic.

          Section 1, Rule 47^[26][26] of the Rules of Court provides for the remedy of annulment by the Court of Appeals of judgments or final orders and resolutions of Regional Trial Courts for which the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the petitioner.

          Under the first paragraph of Section 2, Rule 47^[27][27] of the Rules of Court, the annulment may be based only on the grounds of extrinsic fraud and lack of jurisdiction.  As a ground for annulment of judgment, lack of jurisdiction refers to either lack of jurisdiction over the person of the defending party or over the subject matter of the claim.^[28][28]  

In the petition at bar, the Republic argues that the RTC failed to acquire jurisdiction over the former.  The Republic reiterates that the service of summons upon the DPWH Region III alone was insufficient.   According to the Republic, the applicable rule of procedure in this case is Section 13, Rule 14 of the Rules of Court, which mandates that when the defendant is the Republic of thePhilippines, the service of summons may be effected on the Office of the Solicitor General (OSG).  The DPWH and its regional office are simply agents of the Republic, which is the real party in interest in Civil Case No. 333-M-2002.  The Republic posits that, since it was not impleaded in the case below and the RTC did not acquire jurisdiction over it, the proceedings in Civil Case No. 333-M-2002 are null and void. 

On the other hand, Domingo argues that the DPWH Region III is part of the DPWH itself; hence, a suit against the regional office is a suit against the said department and the Republic as well.  Domingo stresses that the case he filed was against the Republic, that is, against the DPWH Region III, and it was clear that the summons and a copy of the complaint was duly served on the said regional office.  Likewise, Domingo submits that the Republic is estopped from raising the issue of jurisdiction in the instant case given that he has filed two other civil actions for specific performance and damages against the DPWH Region III and, in the said cases, the OSG formally entered its appearance for and in behalf of the Republic.  Domingo alleges that the foregoing action of the OSG proved that it recognized the validity of the service of summons upon the DPWH Region III and the jurisdiction of the trial court over the said regional office.

          The Court finds merit in the Republic’s petition.

Summons is a writ by which the defendant is notified of the action brought against him.  Service of such writ is the means by which the court acquires jurisdiction over his person.  Jurisdiction over the person of the defendant is acquired through coercive process, generally by the service of summons issued by the court, or through the defendant’s voluntary appearance or submission to the court.^[29][29]

Section 13, Rule 14 of the Rules of Court states that:

SEC. 13. Service upon public corporations. – When the defendant is the Republic of the Philippines, service may be effected on the Solicitor General; in case of a province, city or municipality, or like public corporations, service may be effected on its executive head, or on such other officer or officers as the law or the court may direct.  (Emphasis ours.)

          Jurisprudence further instructs that when a suit is directed against an unincorporated government agency, which, because it is unincorporated, possesses no juridical personality of its own, the suit is against the agency’s principal, i.e., the State.^[30][30]  In the similar case of Heirs of Mamerto Manguiat v. Court of Appeals,^[31][31] where summons was served on the Bureau of Telecommunications which was an agency attached to the Department of Transportation and Communications, we held that:

Rule 14, Section 13 of the 1997 Rules of Procedure provides:

SEC. 13.          Service upon public corporations. — When the defendant is the Republic of thePhilippines, service may be effected on the Solicitor General; in case of a province, city or municipality, or like public corporations, service may be effected on its executive head, or on such other officer or officers as the law or the court may direct.

It is clear under the Rules that where the defendant is the Republic of the Philippines, service of summons must be made on the Solicitor General. The BUTEL is an agency attached to the Department of Transportation and Communications created under E.O. No. 546 on July 23, 1979, and is in charge of providing telecommunication facilities, including telephone systems to government offices. It also provides its services to augment limited or inadequate existing similar private communication facilities. It extends its services to areas where no communication facilities exist yet; and assists the private sector engaged in telecommunication services by providing and maintaining backbone telecommunication network. It is indisputably part of the Republic, and summons should have been served on the Solicitor General.   

We now turn to the question of whether summons was properly served according to the Rules of Court. Petitioners rely solely on the sheriff’s return to prove that summons was properly served. We quote its contents, viz:

“THIS IS TO CERTIFY that on the 19th day of May 1999, the undersigned caused the service of Summons and Complaint upon defendant J.A. Development Corporation at the address indicated in the summons, the same having been received by a certain Jacqueline delos Santos, a person employed thereat, of sufficient age and discretion to receive such process, who signed on the lower portion of the Summons to acknowledge receipt thereof.

Likewise, copy of the Summons and Complaint was served upon defendant Bureau of Telecommunications at the address indicated in the Summons, a copy of the same was received by a certain Cholito Anitola, a person employed thereat, who signed on the lower portion of the Summons to acknowledge receipt thereof.”

It is incumbent upon the party alleging that summons was validly served to prove that all requirements were met in the service thereof. We find that this burden was not discharged by the petitioners. The records show that the sheriff served summons on an ordinary employee and not on the Solicitor General. Consequently, the trial court acquired no jurisdiction over BUTEL, and all proceedings therein are null and void.^[32][32]    (Emphases supplied.)

In the instant case, the Complaint for Specific Performance with Damages filed by Domingo specifically named as defendant the DPWH Region III.  As correctly argued by the Republic, the DPWH and its regional office are merely the agents of the former (the Republic), which is the real party in interest in Civil Case No. 333-M-2002.  Thus, as mandated by Section 13, Rule 14 of the Rules of Court, the summons in this case should have been served on the OSG.

          Quite inexplicably, the Court of Appeals failed to apply, nay, to even consider, the provisions of Section 13, Rule 14 of the Rules of Court in rendering its assailed Decision.  A perusal of the Decision dated May 19, 2006 shows that the appellate court mainly dissertated regarding the functions and organizational structures of the DPWH and the OSG, as provided for in the Revised Administrative Code of 1987, in an attempt to demonstrate the relationship between the DPWH and its regional offices, as well as to refute the claim that the service of summons upon the Republic should be made exclusively upon the OSG.  Such an oversight on the part of the Court of Appeals is most unfortunate given the relevance and materiality of Section 13, Rule 14 of the Rules of Court to the instant case, in addition to the fact that the Republic itself quoted the aforesaid provision in its petition before the appellate court.^[33][33]

The Court, nonetheless, subscribes to the ruling of the Court of Appeals that the Republic is not estopped from raising the issue of jurisdiction in the case at bar in view of the alleged entry of appearance of the OSG, in behalf of the Republic, in the other civil cases supposedly filed by Domingo against the DPWH Region III.  As held by the appellate court, the other civil cases presumably pertained to transactions involving Domingo and the DPWH Region III, which were totally different from the contracts involved in the instant case.  The fact that the OSG entered its appearance in the other civil cases, notwithstanding that the summons therein were only served upon the DPWH Region III, has no bearing in the case now before us.  All this indicates is that, despite the improper service of summons in these other civil cases, there appeared to be notice to the OSG and voluntary appearance on the latter’s part.

Here, there was no indication, and Domingo did not insist otherwise, that the OSG had any notice of the filing of Civil Case No. 333-M-2002.  Domingo speculates that, in the subsequent civil actions against the DPWH Region III, the latter most likely brought the said cases to the attention of the OSG.  On the other hand, Domingo opines that the DPWH Region III apparently neglected to inform the OSG of the pendency of Civil Case No. 333-M-2002.  Accordingly, Domingo asserted that he should not be faulted therefor.  The Court disagrees.  Domingo ought to bear in mind that it is the duty of the plaintiff to implead all the necessary or indispensable parties for the complete determination of the action.^[34][34]  It was, thus, incumbent upon him to name and implead the proper defendant in this case, i.e., the Republic, and cause the service of summons to be made upon the officer mandated by law, that is, the OSG.  As Domingo failed to discharge this burden, he cannot now be allowed to shift the blame on the DPWH Region III or hold in estoppel the OSG.   

In sum, the Court holds that the Republic was not validly served with summons in Civil Case No. 333-M-2002.  Hence, the RTC failed to acquire jurisdiction over the person of the Republic.  Consequently, the proceedings had before the trial court and its Decision dated February 18, 2003 are hereby declared void.

In accordance with Section 7, Rule 47^[35][35] of the Rules of Court, a judgment of annulment shall set aside the questioned judgment or final order or resolution and render the same null and void, without prejudice to the original action being refiled in the proper court.

In view of the above ruling of the Court declaring the nullity of the proceedings in the RTC, the Court shall no longer pass upon the other issues raised by the parties in the instant petition.

WHEREFORE, the petition is GRANTED.  The Decision dated May 19, 2006 and the Resolution dated October 25, 2006 of the Court of Appeals in CA-G.R. SP No. 78813 are REVERSED.  The Decision dated February 18, 2003 of the Regional Trial Court of Malolos, Bulacan, Branch 18, in Civil Case No. 333-M-2002 is hereby ANNULLED and SET ASIDE, without prejudice to the filing of the original action in the proper Regional Trial Court.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

  Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

CERTIFICATION

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

RENATO C. CORONA

Chief Justice

CASE 2011-0192: SERGIO I. CARBONILLA, EMILIO Y. LEGASPI IV, AND ADONAIS Y. REJUSO, PETITIONERS, – VERSUS – BOARD OF AIRLINES REPRESENTATIVES (MEMBER AIRLINES: ASIANA AIRLINES, CATHAY PACIFIC AIRWAYS, CHINA AIRLINES, CEBU PACIFIC AIRLINES, CHINA SOUTHERN AIRLINES, CONTINENTAL MICRONESIA AIRLINES, EMIRATES, ETIHAD AIRWAYS, EVA AIR AIRWAYS, FEDERAL EXPRESS CORPORATION, GULF AIR, JAPAN AIRLINES, AIR FRANCE-KLM ROYAL DUTCH AIRLINES, KOREAN AIR, KUWAIT AIRWAYS CORPORATION, LUFTHANSA GERMAN AIRLINES, MALAYSIA AIRLINES, NORTHWEST AIRLINES, PHILIPPINE AIRLINES, INC., QANTAS AIRWAYS, LTD., QATAR AIRLINES, ROYAL BRUNEI AIRLINES, SINGAPORE AIRLINES, SWISS INTERNATIONAL AIRLINES, LTD., SAUDI ARABIAN AIRLINES, AND THAI INTERNATIONAL AIRWAYS), RESPONDENTS. (G.R. NO. 193247); OFFICE OF THE PRESIDENT, REPRESENTED BY HON. PAQUITO N. OCHOA,^* IN HIS CAPACITY AS EXECUTIVE SECRETARY, DEPARTMENT OF FINANCE, REPRESENTED BY HON. CESAR V. PURISIMA^** IN HIS CAPACITY AS SECRETARY OF FINANCE, AND THE BUREAU OF CUSTOMS, REPRESENTED  BY HON. ANGELITO A. ALVAREZ^**** IN HIS CAPACITY AS COMMISSIONER OF CUSTOMS, PETITIONERS, – VERSUS – BOARD OF AIRLINES REPRESENTATIVES (MEMBER AIRLINES: ASIANA AIRLINES ET AL.) (G.R. NO. NO. 194276) (14 SEPTEMBER 2011, CARPIO J).  SUBJECTS: INTERVENTION, JURISDICTION OF CA, APPEAL TO OFFICE OF THE PREMISDENT, ESTOPPEL, FORUM SHOPPING, PAYMENT OF OVERTIME FEES FOR CUSTOMS EMPLOYEES. (BRIEF TITLE: CARBONILLA VS.  BOARD OF AIRLINES)

==============================================

DISPOSITIVE:

WHEREFORE, we DENY the petition in G.R. No. 193247. We GRANT the petition in G.R. No. 194276 and SET ASIDE the 9 July 2009 Decision and 26 October 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 103250. Petitioner Bureau of Customs is DIRECTED to implement CAO 1-2005 immediately.

SO ORDERED.

==============================================

SECOND DIVISION

SERGIO I. CARBONILLA,                                 G.R. No. 193247

EMILIO Y. LEGASPI IV, and

ADONAIS Y. REJUSO,

Petitioners,

– versus –

BOARD OF AIRLINES

REPRESENTATIVES

(MEMBER AIRLINES:

ASIANA AIRLINES, CATHAY

PACIFIC AIRWAYS, CHINA

AIRLINES, CEBU PACIFIC

AIRLINES, CHINA

SOUTHERN AIRLINES,

CONTINENTAL MICRONESIA

AIRLINES, EMIRATES,

ETIHAD AIRWAYS, EVA AIR

AIRWAYS, FEDERAL

EXPRESS CORPORATION,

GULF AIR, JAPAN AIRLINES,

AIR FRANCE-KLM ROYAL

DUTCH AIRLINES, KOREAN

AIR, KUWAIT AIRWAYS

CORPORATION, LUFTHANSA

GERMAN AIRLINES,

MALAYSIA AIRLINES,

NORTHWEST AIRLINES,

PHILIPPINE AIRLINES, INC.,

QANTAS AIRWAYS, LTD.,

QATAR AIRLINES, ROYAL

BRUNEI AIRLINES,

SINGAPORE AIRLINES,

SWISS INTERNATIONAL

AIRLINES, LTD., SAUDI

ARABIAN AIRLINES, and

THAI INTERNATIONAL

AIRWAYS),

Respondents.

x————————————–x

OFFICE OF THE PRESIDENT,                            G.R. No. 194276

represented by HON. PAQUITO

N. OCHOA,^* in his capacity as

EXECUTIVE SECRETARY,                                 Present:

DEPARTMENT OF FINANCE,

represented by HON. CESAR V.                          CARPIO, J., Chairperson,

PURISIMA^** in his capacity as                             BRION,

SECRETARY OF FINANCE,                                DEL CASTILLO,^***

and THE BUREAU OF CUSTOMS,                     PEREZ, and

represented by HON. ANGELITO                        SERENO, JJ.

A. ALVAREZ^**** in his capacity as

COMMISSIONER OF CUSTOMS,

Petitioners,

– versus –

BOARD OF AIRLINES

REPRESENTATIVES

(MEMBER AIRLINES:

ASIANA AIRLINES, CATHAY

PACIFIC AIRWAYS, CHINA

AIRLINES, CEBU PACIFIC

AIRLINES, CHINA

SOUTHERN AIRLINES,

CONTINENTAL MICRONESIA

AIRLINES, EMIRATES,

ETIHAD AIRWAYS, EVA AIR

AIRWAYS, FEDERAL

EXPRESS CORPORATION,

GULF AIR, JAPAN AIRLINES,

AIR FRANCE-KLM ROYAL

DUTCH AIRLINES, KOREAN

AIR, KUWAIT AIRWAYS

CORPORATION, LUFTHANSA

GERMAN AIRLINES,

MALAYSIA AIRLINES,

NORTHWEST AIRLINES,

PHILIPPINE AIRLINES, INC.,

QANTAS AIRWAYS, LTD.,

QATAR AIRLINES, ROYAL

BRUNEI AIRLINES,

SINGAPORE AIRLINES,

SWISS INTERNATIONAL

AIRLINES, LTD., SAUDI

ARABIAN AIRLINES, and

THAI INTERNATIONAL                                     Promulgated:

AIRWAYS),

Respondents.                                                         September 14, 2011

x- – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

CARPIO, J.:

The Cases

Before the Court are two petitions for review¹ assailing the Decision² promulgated on 9 July 2009 by the Court of Appeals in CA-G.R. SP No. 103250.

In G.R. No. 193247, petitioners Sergio I. Carbonilla, Emilio Y. Legaspi IV, and Adonais Y. Rejuso (Carbonilla, et al.) assail the Resolution³ promulgated on 5 August 2010 by the Court of Appeals in CA-G.R. SP No. 103250.

In G.R. No. 194276, petitioners Office of the President, represented by Paquito N. Ochoa in his capacity as Executive Secretary, Department of Finance, represented by Cesar V. Purisima in his capacity as Secretary of Finance, and the Bureau of Customs (BOC), represented by Angelito A. Alvarez in his capacity as Commissioner of Customs (Office of the President, et al.), assail the Resolution⁴ promulgated on 26 October 2010 by the Court of Appeals in CA-G.R. SP No. 103250.

The Antecedent Facts

The facts, as gathered from the assailed Decision of the Court of Appeals, are as follows:

The Bureau of Customs⁵ issued Customs Administrative Order No. 1-2005 (CAO 1-2005) amending CAO 7-92.⁶ The Department of Finance⁷ approved CAO 1-2005 on 9 February 2006. CAO 7-92 and CAO 1-2005 were promulgated pursuant to Section 3506⁸ in relation to Section 608⁹ of the Tariff and Customs Code of the Philippines (TCCP).

Petitioners Office of the President, et al. alleged that prior to the amendment of CAO 7-92, the BOC created on 23 April 2002 a committee to review the overtime pay of Customs personnel in Ninoy Aquino International Airport (NAIA) and to propose its adjustment from the exchange rate of P25 to US$1 to the then exchange rate of P55 to US$1. The Office of the President, et al. alleged that for a period of more than two years from the creation of the committee, several meetings were conducted with the agencies concerned, including respondent Board of Airlines Representatives (BAR), to discuss the proposed rate adjustment that would be embodied in an Amendatory Customs Administrative Order.

On the other hand, BAR alleged that it learned of the proposed increase in the overtime rates only sometime in 2004 and only through unofficial reports.

On 23 August 2004, BAR wrote a letter addressed to Edgardo L. De Leon, Chief, Bonded Warehouse Division, BOC-NAIA, informing the latter of its objection to the proposed increase in the overtime rates. BAR further requested for a meeting to discuss the matter.

BAR wrote the Secretary of Finance on 31 January 2005 and 21 February 2005 reiterating its concerns against the issuance of CAO 1-2005. In a letter dated 3 March 2005, the Acting District Collector of BOC informed BAR that the Secretary of Finance already approved CAO 1-2005 on 9 February 2005. As such, the increase in the overtime rates became effective on 16 March 2005. BAR still requested for an audience with the Secretary of Finance which was granted on 12 October 2005.

The BOC then sent a letter to BAR’s member airlines demanding payment of overtime services to BOC personnel in compliance with CAO 1-2005. The BAR’s member airlines refused and manifested their intention to file a petition with the Commissioner of Customs and/or the Secretary of Finance to suspend the implementation of CAO 1-2005.

In a letter dated 31 August 2006,¹⁰ Undersecretary Gaudencio A. Mendoza, Jr. (Usec. Mendoza), Legal and Revenue Operations Group, Department of Finance informed BAR, through its Chairman Felix J. Cruz (Cruz), that they “find no valid ground to disturb the validity of CAO 1-2005, much less to suspend its implementation or effectivity” and that its implementation effective 16 March 2005 is legally proper.

In separate letters both dated 4 December 2006,¹¹ Cruz requested the Office of the President and the Office of the Executive Secretary to review the decision of Usec. Mendoza. Cruz manifested the objection of the International Airlines operating in the Philippines to CAO 1-2005. On 13 December 2006, Deputy Executive Secretary Manuel B. Gaite (Deputy Exec. Sec. Gaite) issued an Order¹² requiring BAR to pay its appeal fee and submit an appeal memorandum within 15 days from notice. BAR paid the appeal fee and submitted its appeal memorandum on 19 January 2007.

The Decision of the Office of the President

In a Decision¹³ dated 12 March 2007, the Office of the President denied the appeal of BAR and affirmed the Decision of the Department of Finance.

The Office of the President ruled that the BOC was merely exercising its rule-making or quasi-legislative power when it issued CAO 1-2005. The Office of the President ruled that since CAO 1-2005 was issued in the exercise of BOC’s rule-making or quasi-legislative power, its validity and constitutionality may only be assailed through a direct action before the regular courts. The Office of the President further ruled that, assuming that BAR’s recourse before the Office of the President was proper and in order, the appeal was filed out of time because BAR received the letter-decision of the Secretary of Finance on 4 September 2006 but it filed its appeal only on 4 December 2006, beyond the 30-day period provided under Administrative Order No. 18 dated 12 February 1987.

The Office of the President also ruled that the grounds raised by BAR, namely, (1) the failure to comply with the publication requirement; (2) that the foreign exchange cannot be a basis for rate increase; and (3) that increase in rate was ill-timed, were already deliberated during the meetings held between the BOC and the stakeholders and were also considered by the Secretary of Finance. The Office of the President further adopted the position of the BOC that several public hearings and consultations were conducted by the BOC-NAIA Collection District, which were in substantial compliance with Section 9, Chapter I, Book VII of the Administrative Code of 1987. BAR did not oppose the exchange rate used in CAO 7-92 which was the exchange rate at that time and thus, the BOC-NAIA Collection District found it strange that BAR was questioning the fixing of the adjusted pay rates which were lower than the rate provided under Section 3506 of the TCCP. The Office of the President ruled that there is a legal presumption that the rates fixed by an administrative agency are reasonable, and that the fixing of the rates by the Government, through its authorized agents, involved the exercise of reasonable discretion.

BAR filed a motion for reconsideration. In its Resolution¹⁴ dated 14 March 2008, the Office of the President denied BAR’s motion for reconsideration.

BAR filed a petition for review under Rule 45 before the Court of Appeals.

Petitioners Carbonilla, et al. filed an Omnibus Motion to Intervene before the Court of Appeals on the ground that as customs personnel, they would be directly affected by the outcome of the case. Petitioners Carbonilla, et al. also adopted the Comment filed by the Office of the Solicitor General (OSG).

The Decision of the Court of Appeals

In its 26 February 2009 Resolution,¹⁵ the Court of Appeals denied the motion for intervention filed by Carbonilla, et al. The Court of Appeals ruled that the petition before it involved the resolution of whether the decision of the Office of the President was correctly rendered. The Court of Appeals held that the intervenors’ case was for collection of their unpaid overtime services and their interests could not be protected or addressed in the resolution of the case. The Court of Appeals ruled that Carbonilla, et al. should pursue their case in a separate proceeding against the proper respondents.

Carbonilla, et al. filed a motion for reconsideration of the 26 February 2009 resolution.

Without resolving Carbonilla, et al.’s motion for reconsideration, the Court of Appeals promulgated the assailed 9 July 2009 Decision which set aside the 12 March 2007 Decision and 14 March 2008 Resolution of the Office of the President and declared Section 3506 of the TCCP, CAO 7-92 and CAO 1-2005 unenforceable against BAR.

Ruling that it could take cognizance of BAR’s appeal, the Court of Appeals held that BAR could not be faulted for not filing a case before the Court of Tax Appeals (CTA) because the Office of the President admitted that it preempted any action before the CTA. Deputy Exec. Sec. Gaite treated the letters of BAR as an appeal and required it to pay appeal fee and to submit an appeal memorandum. The Court of Appeals further ruled that what the Office of the President treated as a decision of the Department of Finance was merely an advisory letter dated 31 August 2006 and to treat it as a decision from which an appeal could be taken and then rule that it was not perfected on time would deprive BAR of its right to due process.

The Court of Appeals further ruled that it has the power to resolve the constitutional issue raised against CAO 7-92 and CAO 1-2005. The Court of Appeals ruled that Section 8, Article IX(B) of the Constitution prohibits an appointive public officer or employee from receiving additional, double or indirect compensation, unless specifically authorized by law. The Court of Appeals ruled that Section 3506 of the TCCP only authorized payment of additional compensation for overtime work, and thus, the payment of traveling and meal allowances under CAO 7-92 and CAO 1-2005 are unconstitutional and could not be enforced against BAR members.

The Court of Appeals ruled that Section 3506 of the TCCP failed the completeness and sufficient standard tests to the extent that it attempted to cover BAR members through CAO 7-92 and CAO 1-2005. The Court of Appeals ruled that the phrase “other persons served” did not provide for descriptive terms and conditions that might be completely understood by the BOC. The Court of Appeals ruled that devoid of common distinguishable characteristic, aircraft owners and operators should not have been lumped together with importers and shippers. The Court of Appeals also ruled that Section 3506 of the TCCP failed the sufficient standard test because it does not contain adequate guidelines or limitations needed to map out the boundaries of the delegate’s authority.

The dispositive portion of the Court of Appeals’ Decision reads:

WHEREFORE, the petition is GRANTED. Declaring Section 3506 of the TCCP as well as CAO 7-92 and CAO 1-2005 to be unenforceable as against the petitioners, the appealed Decision dated March 12, 2007 and Resolution dated March 14, 2008 are hereby SET ASIDE.

SO ORDERED.¹⁶

Petitioners Carbonilla, et al. filed their motion for reconsideration of the 9 July 2009 Decision. In its 5 August 2010 Resolution, the Court of Appeals, among others, denied Carbonilla, et al.’s motion for reconsideration.

Carbonilla, et al. came to this Court via a petition for review, docketed as G.R. No. 193247, on the following grounds:

       I.            The Honorable Court of Appeals seriously erred in law in ruling that the Court of Tax Appeals did not have jurisdiction on the subject controversy.

    II.            The Honorable Court of Appeals seriously erred in law in ruling that Section 3506 of the TCCP failed the completeness and sufficient standard tests.

 III.            The Honorable Court of Appeals seriously erred in law in ruling that CAO 7-92 as amended by CAO 1-2005 as well as Section 3506 of the TCCP are not enforceable against BAR’s members.

 IV.            The Honorable Court of Appeals seriously erred in law in not ruling that estoppel and/or laches should have prevented the BAR from questioning CAO 1-2005.

    V.            The Honorable Court of Appeals seriously erred in law in issuing the decision dated July 9, 2009 in denying petitioners’ intervention and motion for reconsideration dated August 3, 2009.¹⁷

The Office of the President, et al. also filed a motion for reconsideration dated 28 July 2009 assailing the 9 July 2009 Decision of the Court of Appeals.

Meanwhile, in a Resolution promulgated on 12 May 2010,¹⁸ the Court of Appeals directed BAR to continue complying with the 12 March 2007 Decision of the Office of the President. The Court of Appeals ruled that BAR unlawfully withheld the rightful overtime payment of BOC employees when it stopped paying its obligations under CAO 7-92, as amended by CAO 1-2005, since the Court of Appeals’ 9 July 2009 Decision had not attained finality pending the resolution of the motion for reconsideration filed by the Office of the President, et al. BAR filed a motion for reconsideration dated 26 May 2010 for the reversal of the 12 May 2010 Resolution of the Court of Appeals.

In a Resolution promulgated on 26 October 2010, the Court of Appeals granted BAR’s 26 May 2010 motion for reconsideration and denied the 28 July 2009 motion for reconsideration of the Office of the President, et al.

The Office of the President, et al. filed a petition for review before this Court, docketed as G.R. No. 194276, raising the following grounds:

       I.            The Court of Appeals erred in giving due course to respondents BAR and its member airlines’ petition for review because it had no jurisdiction over the issues raised therein by respondents, to wit:

1.      CAO No. 1-2005 is invalid as the increased overtime pay rates and meal and transportation allowances fixed therein are unreasonable and confiscatory; and

2.      The act of the Bureau of Customs charging and/or collecting from BAR’s member airlines the cost of the overtime pay and meal and transportation allowances of Bureau of Customs (BOC) personnel in connection with the discharge of their government duties, functions and responsibilities is legally impermissible and, therefore, invalid.

These issues involve the validity and collection of money charges authorized by the Customs Law and thus the Court of Tax Appeals (CTA) has exclusive jurisdiction thereof.

       I.            Granting arguendo that the Court of Appeals has jurisdiction over the said issues raised by the BAR and its member airlines, the Court of Appeals should have dismissed their petition for review filed under Rule 45 of the Rules of Court on the following grounds:

1.      A petition for review under Ruled 43 of the Rules of Court cannot be filed to question the quasi-legislative or rule-making power of the Commissioner of Customs;

2.      BAR’s appeal to the Office of the President questioning the 31 August 2006 Decision of the Department of Finance (DOF), finding that CAO No. 1-2005 is valid, was filed out of time;

3.      Some of respondents BAR member airlines’ country managers who executed the verification and certification of non-forum shopping of their petition for review did not have the necessary authorization of the said member airlines for them to execute the same; and

4.      Administrative procedural due process was observed in the promulgation by the Commissioner of Customs of the questioned CAO No. 1-2005.

    II.            Respondents BAR and its member airlines are guilty of laches and estoppel and thus are effectively barred from questioning the authority of the Commissioner of Customs to promulgate pursuant to Section 608 in relation to Section 3506 of the Tariff and Customs Code (TCCP), as amended, not only CAO No. 1-2005, but also CAO No. 7-92.

 III.            The Court of Appeals erred in going beyond the issues raised by respondents BAR and its member airlines not only in the pleadings filed by them in the proceedings below but also in their petition for review.

 IV.            Section 3506 of the TCCP, CAO No. 1-2005 and CAO No. 7-92 are valid. Said law and its implementing regulations neither constitute undue delegation of legislative power nor authorize overpayment of BOC personnel.¹⁹

The Issues

For resolution in these cases are the following issues:

1.      Whether the Court of Appeals committed a reversible error in denying the intervention of Carbonilla, et al.;

2.      Whether the Court of Appeals has jurisdiction over BAR’s petition;

3.      Whether BAR’s appeal before the Office of the President was filed on time;

4.      Whether the officers of some of BAR’s member airlines who executed the verification and certification of non-forum shopping have the necessary authorization to execute them;

5.      Whether BAR was guilty of laches and/or estoppel; and

6.      Whether the Court of Appeals committed a reversible error in declaring Section 3506 of the TCCP, CAO 7-92, and CAO 1-2005 unenforceable against BAR.

The Ruling of this Court

The petition in G.R. No. 193247 has no merit while the petition in G.R. No. 194276 is meritorious.

Intervention in G.R. No. 193247

On the matter of the intervention of Carbonilla, et al., Section 1, Rule 19 of the 1997 Rules of Civil Procedure provides:

Section 1. Who may intervene. – A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor’s rights may be fully protected in a separate proceeding.

Intervention is not a matter of right but it may be permitted by the courts when the applicant shows facts which satisfy the requirements authorizing intervention.²⁰ In G.R. No. 193247, the Court of Appeals denied Carbonilla, et al.’s motion for intervention in its 26 February 2009 Resolution on the ground that the case was for collection of unpaid overtime services and thus should be pursued in a separate proceeding against the proper respondents. A reading of the Carbonilla, et al.’s Omnibus Motion²¹ supports the ground invoked by the Court of Appeals in denying the motion. The Omnibus Motion states:

3.      The said movants-intervenors all held offices or were stationed at theNinoyAquinoInternationalAirport[NAIA] and who have all been rendering overtime services thereat for so many years.

4.      Movant-Intervenor Carbonilla has retired from government service last September 2007 without his being paid the additional rates set by CAO No. 1-2005 which became effective on March 16, 2007. The effectivity and implementation of the said CAO No. 1-2005 is the main issue in this case.

5.      Thus, it is noteworthy to mention that all the movants-intervenors all rendered overtime services since March 16, 2005 or for all the time material to the issue in this case.

6.      Movants-Intervenors urgently need their respective [differential]/back payments representing overtime services rendered from 16 March 2005 to the present pursuant to the implementation of CAO No. 1-2005.

7.      Said differential/back payments pursuant to CAO No. 1-2005 would be of great help to the movants-intervenors considering that as of 24 January 2008, herein movants-intervenors were stripped of their respective overtime duties by the District Collector of Customs at NAIA for reasons only known to the latter.

8.      The full implementation of CAO No. 1-2005 would not only benefit the cause and financial needs of herein movants-intervenors but also that of the other 900 or so employees of the Bureau of Customs-NAIA who are rendering overtime services thereat up to the present.²²

Clearly, Carbonilla, et al. were really after the payment of their differential or back payments for services rendered. Hence, the Court of Appeals correctly denied the motion for intervention.

It should be stressed that the allowance or disallowance of a motion for intervention is addressed to the sound discretion of the courts.²³ The permissive tenor of the Rules of Court shows the intention to give the courts the full measure of discretion in allowing or disallowing the intervention.²⁴ Once the courts have exercised this discretion, it could not be reviewed by certiorari or controlled by mandamus unless it could be shown that the discretion was exercised in an arbitrary or capricious manner.²⁵ Carbonilla, et al. failed to show that the Court of Appeals rendered its resolution in an arbitrary or capricious manner.

In addition, Carbonilla, et al. admitted in their petition that their motion for reconsideration of the 26 February 2009 Resolution of the Court of Appeals had been denied in open court during the oral arguments held by the Court of Appeals on 16 December 2009.²⁶ Carbonilla, et al. did not act on the denial of this motion but only pursued their motion for reconsideration of the 9 July 2009 Decision of the Court of Appeals. Hence, the denial of Carbonilla, et al.’s motion for intervention had already attained finality.

Having ruled against the right of Carbonilla, et al. to intervene, we see no reason to rule on the other issues they raise unless raised in G.R. No. 194276.

We now discuss the issues raised in G.R. No. 194276.

Jurisdiction of the Court of Appeals

The Office of the President, et al. argue that the Court of Appeals should have denied BAR’s petition because it had no jurisdiction over the issues raised, involving the validity and collection of money charges authorized by Customs Law, which are under the jurisdiction of the CTA.

We do not agree.

The jurisdiction of the Court of Appeals over BAR’s petition stems from Section 1 in relation to Section 3, Rule 43 of the 1997 Rules of Civil Procedure which states that appeals from “awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi judicial functions[,]” which includes the Office of the President, may be taken to the Court of Appeals. BAR’s petition for review to the Court of Appeals from the 12 March 2007 Decision and 14 March 2008 Resolution of the Office of the President falls within the jurisdiction of the Court of Appeals.

As noted by the Court of Appeals, the Office of the President took cognizance of Cruz’s letter dated 4 December 2006 requesting for a review of the 31 August 2006 letter of Usec.Mendoza. Deputy Exec. Sec. Gaite required BAR to pay the appeal fee and submit its appeal memorandum. Thereafter, the Office of the President issued its 12 March 2007 Decision affirming the decision of the Department of Finance and then denied BAR’s motion for reconsideration in its 14 March 2008 Resolution. BAR’s only recourse is to file a petition for review before the Court of Appeals under Rule 43 of the 1997 Rules on Civil Procedure. The exercise by the Court of Appeals of its appellate jurisdiction over the decision of the Office of the President is entirely distinct from the issue of whether BAR committed a procedural error in elevating the case before the Office of the President instead of filing its appeal before the CTA.

Timeliness of the Appeal before the Office of the President

The Court of Appeals ruled that the question of whether BAR’s appeal before the Office of the President was filed on time was rendered academic when BAR paid the appeal fee and submitted its appeal memorandum on time. The Court of Appeals held that Deputy Exec. Sec. Gaite could not validly require BAR to perfect its appeal in his 13 December 2006 Order and then rule, after its perfection, that the appeal was not filed on time. The Court of Appeals ruled that the 13 December 2006 Order of Deputy Exec. Sec. Gaite stopped BAR from pursuing any recourse with the CTA. The Court of Appeals further ruled that the Office of the President did not explain how the 31 August 2006 letter of Usec.Mendozabecame a decision of the Secretary of Finance when it was only an advisory letter.

We do not agree with the Court of Appeals.

The Office of the President is not precluded from issuing the assailed decision in the same way that this Court is not proscribed from accepting a petition before it, requiring the payment of docket fees, directing the respondent to comment on the petition, and after studying the case, from ruling that the petition was filed out of time or that it lacks merit.

However, Cruz’s 4 December 2006 letters to then President Gloria Macapagal Arroyo and then Exec. Sec. Eduardo Ermita are not in the nature of an appeal provided for under Administrative Order No. 18, series of 1987 (AO 18).²⁷ Section 1 of AO 18 provides that an appeal to the Office of the President shall be taken within 30 days from receipt by the aggrieved party of the decision, resolution or order complained of or appealed from. Section 2 of AO 18 cites caption, docket number of the case as presented in the office of origin, and addresses of the parties. Section 3 mentions pauper litigants. In sum, the appeal provided under AO 18 refers to adversarial cases. It does not refer to a review of administrative rules and regulations, as what BAR asked the Office of the President to do in this case. BAR, in writing the Office of the President, was exhausting its administrative remedies. BAR could still go to the regular courts after the Office of the President acted on its request for a review of Usec.Mendoza’s 31 August 2006 letter. The decision of the Office of the President did not foreclose BAR’s remedy to bring the matter to the regular courts.

BAR is assailing the issuance and implementation of CAO 1-2005. CAO 1-2005 is an amendment to CAO 7-92. CAO 7-92 was issued “[b]y authority of Section 608, in relation to Section 3506, of the Tariff and Customs Code of the Philippinesx x x.” On this score, we do not agree with the Office of the President that BAR, instead of filing an appeal before its office, should have filed an appeal before the CTA in accordance with Section 7 of Republic Act No. 9282²⁸ (RA 9282) which reads:

Section 7. Jurisdiction. – The CTA shall exercise:

(a) Exclusive appellate jurisdiction, to review by appeal, as herein provided:

x x x x

4. Decisions of the Commissioner of Customs in vases involving liability for customs duties, fees and other money charges, seizure, detention or release of property affected, fines forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs.

Under Section 11 of RA 9282, an appeal to the CTA should be taken within 30 days from receipt of the assailed decision or ruling.

However, Section 2313, Book II of Republic Act No. 1937 (RA 1937)²⁹ provides:

Section 2313. Review of Commissioner. – The person aggrieved by the decision or action of the Collector in any matter presented upon protest or by his action in any case of seizure may, within fifteen (15) days after notification on writing by the Collector of his action or decision, file a written notice to the Collector with a copy furnished to the Commissioner of his intention to appeal the action or decision of the Collector to the Commissioner. Thereupon the Collector shall forthwith transmit all the records of the proceedings to the Commissioner, who shall approve, modify or reverse the action or decision of the Collector and take such steps and make such orders as may be necessary to give effect to his decision. Provided, That when an appeal is filed beyond the period herein prescribed, the same shall be deemed dismissed.

If in any seizure proceedings, the Collector renders a decision adverse to the Government, such decision shall automatically be reviewed by the Commissioner and the records of the case shall be elevated within five (5) days from the promulgation of the decision of the Collector. The Commissioner shall render a decision on the automatic appeal within thirty (30) days from receipts of the records of the case. If the Collector’s decision is reversed by the Commissioner, the decision of the Commissioner shall be final and executory. However, if the Collector’s decision is affirmed, or if within thirty (30) days from receipt of the record of the case by the Commissioner no decision is rendered of the decision involves imported articles whose published value is five million pesos (P5,000,000) or more, such decision shall be deemed automatically appealed to the Secretary of Finance and the records of the proceedings shall be elevated within five (5) days from the promulgation of the decision of the Commissioner or of the Collector under appeal, as the case may be. Provided, further, That if the decision of the Commissioner or of the Collector under appeal, as the case may be, is affirmed by the Secretary of Finance, or if within thirty (30) days from receipt of the records of the proceedings by the Secretary of Finance, no decision is rendered, the decision of the Secretary of Finance, or of the Commissioner, or of the Collector under appeal, as the case may be, shall become final and executory.

x x x x

Section 2402 of RA 1937 further provides:

Section 2402. Review by Court of Appeals. – The party aggrieved by a ruling of the Commissioner in any matter brought before him upon protest or by his action or ruling in any case of seizure may appeal to the Court of Tax Appeals, in the manner and within the period prescribed by law and regulations.

Clearly, what is appealable to the CTA are cases involving protest or seizure, which is not the subject of BAR’s appeal in these cases. BAR’s actions, including seeking an audience with the Secretary of Finance,³⁰ as well as writing to the Executive Secretary and the Office of the President, are part of the administrative process to question the validity of the issuance of an administrative regulation, that is, of CAO 1-2005, entitled Amendments to Customs Administrative Order No. 7-92 (Rules and Regulations Governing the Overtime Pay and Other Compensations Related Thereto Due to Customs Personnel at the NAIA).

CAO 1-2005 was issued pursuant to Section 608 of the TCCP which provides:

Section 608. Commissioner to Make Rules and Regulations. – The Commissioner shall, subject to the approval of the Secretary of Finance, promulgate all rules and regulations necessary to enforce the provisions of this Code. x x x

The jurisdiction over the validity and constitutionality of rules and regulations issued by the Commissioner under Section 608 of the TCCP lies before the regular courts. It is not within the jurisdiction of the Office of the President or the CTA. Hence, the Office of the President erred in holding that BAR’s appeal was filed late because BAR can still raise the issue before the regular courts.

Verification and Certification

of Non-Forum Shopping

The Office of the President, et al. allege that the Court of Appeals should have dismissed the petition because of BAR’s failure to comply fully with the requirements of verification and certification of non-forum shopping.

We agree with the Court of Appeals in its liberal interpretation of the Rules. Verification of a pleading is a formal, not jurisdictional, requirement.³¹ The requirement is simply a condition affecting the form of the pleading and non-compliance with the requirement does not render the pleading fatally defective.³²

As regards the certification of non-forum shopping, this Court may relax the rigid application of the rules to afford the parties the opportunity to fully ventilate their cases on the merits.³³ This is in line with the principle that cases should be decided only after giving all parties the chance to argue their causes and defenses.³⁴ Technicality and procedural imperfections should not serve as basis of decisions and should not be used to defeat the substantive rights of the other party.³⁵

Estoppel and Laches

The Office of the President, et al. allege that BAR is guilty of estoppel and laches because it did not question CAO 7-92 which had been in effect since 1992. The Office of the President, et al. argue that a direct attack of CAO 1-2005 is a collateral attack of CAO 7-92 since CAO 7-92 is the main administrative regulation enacted to implement Section 3506 of the TCCP.

The argument has no merit.

BAR is not questioning the validity of CAO 7-92 or Section 3506 of the TCCP. BAR is questioning the validity of CAO 1-2005 on the following grounds: (1) that it was approved in violation of BAR’s right to due process because its approval did not comply with the required publication notice under Section 9(2), Chapter I, Book VII, of the Administrative Code of the Philippines; (2) that CAO 1-2005 inappropriately based its justification on the declining value of the Philippine peso versus the U.S. dollar when services of the BOC are rendered without spending any foreign currency; and (3) that the increase in BOC rates aggravates the already high operating cost paid by the airlines which are still reeling from the impact of consecutive negative events such as SARS, Iraqi war, avian flu and the unprecedented increase in fuel prices. BAR’s objection to CAO 1-2005 could not be considered a direct attack on CAO 7-92 because BAR was merely objecting to the amendments to CAO 7-92. BAR did not question the validity of CAO 7-92 itself. Even during the pendency of these cases before the Court of Appeals, BAR members continued to pay the rates prescribed under CAO 7-92. It was only upon the promulgation of the Court of Appeals’ Decision declaring CAO 7-92 and CAO 1-2005 unconstitutional that BAR recommended to its members to stop paying the charges imposed by the BOC.

Hence, BAR is not estopped from questioning CAO 1-2005 on the ground alone that it did not question the validity of CAO 7-92.

Constitutionality of CAO 7-92, CAO 1-2005

and Section 3506 of the TCCP

The Office of the President, et al. allege that the Court of Appeals acted beyond its jurisdiction when it passed upon the validity of CAO 7-92 and Section 3506 of the TCCP.

We do not agree with the Office of the President, et al.

Section 8, Rule 51 of the 1997 Rules of Civil Procedure also states:

Section 8. Questions that may be decided. – No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed from or the proceedings therein, will be considered unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors.

The Court of Appeals deemed it necessary to rule on the issue for the proper determination of these cases. The Court has ruled that the Court of Appeals is imbued with sufficient authority and discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a complete and just resolution of the case or to serve the interests of justice or to avoid dispensing piecemeal justice.³⁶ Further, while it is true that the issue of constitutionality must be raised at the first opportunity, this Court, in the exercise of sound discretion, can take cognizance of the constitutional issues raised by the parties in accordance with Section 5(2)(a), Article VII of the 1987 Constitution.³⁷

The Court has further ruled:

When an administrative regulation is attacked for being unconstitutional or invalid, a party may raise its unconstitutionality or invalidity on every occasion that the regulation is being enforced. For the Court to exercise its power of judicial review, the party assailing the regulation must show that the question of constitutionality has been raised at the earliest opportunity. This requisite should not be taken to mean that the question of constitutionality must be raised immediately after the execution of the state action complained of. That the question of constitutionality has not been raised before is not a valid reason for refusing to allow it to be raised later. A contrary rule would mean that a law, otherwise unconstitutional, would lapse into constitutionality by the mere failure of the proper party to promptly file a case to challenge the same.³⁸

Section 3506 of the TCCP provides:

Section 3506. Assignment of Customs Employees to Overtime Work. – Customs employees may be assigned by a Collector to do overtime work at rates fixed by the Commissioner of Customs when the service rendered is to be paid by the importers, shippers or other persons served. The rates to be fixed shall not be less than that prescribed by law to be paid to employees of private enterprise.

We do not agree with the Court of Appeals in excluding airline companies, aircraft owners, and operators from the coverage of Section 3506 of the TCCP. The term “other persons served” refers to all other persons served by the BOC employees. Airline companies, aircraft owners, and operators are among other persons served by the BOC employees. As pointed out by the OSG, the processing of embarking and disembarking from aircrafts of passengers, as well as their baggages and cargoes, forms part of the BOC functions. BOC employees who serve beyond the regular office hours are entitled to overtime pay for the services they render.

The Court of Appeals ruled that, applying the principle of ejusdem generis, airline companies, aircraft owners, and operators are not in the same category as importers and shippers because an importer “brings goods to the country from a foreign country and pays custom duties” while a shipper is “one who ships goods to another; one who engages the services of a carrier of goods; one who tenders goods to a carrier for transportation.” However, airline passengers pass through the BOC to declare whether they are bringing goods that need to be taxed. The passengers cannot leave the airport of entry without going through the BOC. Clearly, airline companies, aircraft owners, and operators are among the persons served by the BOC under Section 3506 of the TCCP.

The overtime pay of BOC employees may be paid by any of the following: (1) all the taxpayers in the country; (2) the airline passengers; and (3) the airline companies which are expected to pass on the overtime pay to passengers. If the overtime pay is taken from all taxpayers, even those who do not travel abroad will shoulder the payment of the overtime pay. If the overtime pay is taken directly from the passengers or from the airline companies, only those who benefit from the overtime services will pay for the services rendered. Here, Congress deemed it proper that the payment of overtime services shall be shouldered by the “other persons served” by the BOC, that is, the airline companies. This is a policy decision on the part of Congress that is within its discretion to determine. Such determination by Congress is not subject to judicial review.

We do not agree with the Court of Appeals that Section 3506 of the TCCP failed the completeness and sufficient standard tests. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate, the only thing he will have to do is to enforce it.³⁹ The second test requires adequate guidelines or limitations in the law to determine the boundaries of the delegate’s authority and prevent the delegation from running riot.⁴⁰ Contrary to the ruling of the Court of Appeals, Section 3506 of the TCCP complied with these requirements. The law is complete in itself that it leaves nothing more for the BOC to do: it gives authority to the Collector to assign customs employees to do overtime work; the Commissioner of Customs fixes the rates; and it provides that the payments shall be made by the importers, shippers or other persons served. Section 3506 also fixed the standard to be followed by the Commissioner of Customs when it provides that the rates shall not be less than that prescribed by law to be paid to employees of private enterprise.

Contrary to the ruling of the Court of Appeals, BOC employees rendering overtime services are not receiving double compensation for the overtime pay, travel and meal allowances provided for under CAO 7-92 and CAO 1-2005. Section 3506 provides that the rates shall not be less than that prescribed by law to be paid to employees of private enterprise. The overtime pay, travel and meal allowances are payment for additional work rendered after regular office hours and do not constitute double compensation prohibited under Section 8, Article IX(B) of the 1987 Constitution⁴¹ as they are in fact authorized by law or Section 3506 of the TCCP.

BAR raises the alleged failure of BOC to publish the required notice of public hearing and to conduct public hearings to give all parties the opportunity to be heard prior to the issuance of CAO 1-2005 as required under Section 9(2), Chapter I, Book VII of the Administrative Code of thePhilippines. Section 9(2) provides:

Sec. 9. Public Participation. – (1) If not otherwise required by law, an agency shall, as far as practicable, publish or circulate notices of proposed rules and afford interested parties the opportunity to submit their views prior to the adoption of any rule.

(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been published in a newspaper of general circulation at least two (2) weeks before the first hearing thereon.

(3) In cases of opposition, the rules on contested cases shall be observed.

BAR’s argument has no merit.

The BOC created a committee to re-evaluate the proposed increase in the rate of overtime pay and for two years, several meetings were conducted with the agencies concerned to discuss the proposal. BAR and the Airline Operators Council participated in these meetings and discussions. Hence, BAR cannot claim that it was denied due process in the imposition of the increase of the overtime rate. CAO 1-2005 was published in the Manila Standard, a newspaper of general circulation in the Philippines on 18 February 2005⁴² and while it was supposed to take effect on 5 March 2005, or 15 days after its publication, the BOC-NAIA still deferred BAR’s compliance until 16 March 2005.

WHEREFORE, we DENY the petition in G.R. No. 193247. We GRANT the petition in G.R. No. 194276 and SET ASIDE the 9 July 2009 Decision and 26 October 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 103250. Petitioner Bureau of Customs is DIRECTED to implement CAO 1-2005 immediately.

SO ORDERED.

ANTONIO T. CARPIO

Associate Justice

WE CONCUR:

ARTURO D. BRION

Associate Justice

MARIANO C. DEL CASTILLO JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

ATTESTATION

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

ANTONIO T. CARPIO

Associate Justice

Chairperson

CERTIFICATION

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

RENATO C. CORONA

Chief Justice

* Originally represented by Hon. Eduardo Ermita.

** Originally represented by Hon. Margarito B. Teves.

*** Designated as Acting Member per Special Order No. 1077 dated 12 September 2011.

**** Originally represented by Hon. Napoleon Morales.

1 Under Rule 45 of the 1997 Rules of Civil Procedure.

2 Rollo (G.R. No. 193247), pp. 41-70. Penned by Associate Justice Vicente S.E. Veloso with Associate Justices Jose L. Sabio, Jr. and Ricardo R. Rosario, concurring.

3Id. at 79-80. Penned by Associate Justice Vicente S.E. Veloso with Associate Justices Normandie B. Pizarro and Ricardo R. Rosario, concurring.

4 Rollo (G.R. No. 194276), pp. 134-139. Penned by Associate Justice Vicente S.E. Veloso with Associate Justices Normandie B. Pizarro and Francisco P. Acosta, concurring.

5Id. at 198. Through then Commissioner George M. Jereos.

6 Rules and Regulations Governing the Overtime Services and Pay, Travelling, Board and Lodging Expenses and/or Meal Allowance at the NinoyAquinoInternationalAirport.

7 Through then Secretary Juanita P. Amatong.

8 Section 3506. Assignment of Customs Employees to Overtime Work. – Custom employees may be assigned by a Collector to do overtime work at rates fixed by the Commissioner of Customs when the service rendered is to be paid for by importers, shippers, or other persons served. The rates to be fixed shall not be less than that prescribed by law to be paid to employees of private enterprise.

9Section 608. Commissioner to Make Rules and Regulations. – The Commissioner shall, subject to the approval of the Secretary of Finance, promulgate all rules and regulations necessary to enforce the provisions of this Code. x x x

10 Rollo (G.R. No. 194276), pp. 167-168.

11Id. at 664-665, 211-218.

12Id. at 220-221.

13Id. at 159-166. Signed by Manuel B. Gaite, Deputy Executive Secretary for Legal Affairs by authority of the Executive Secretary.

14Id. at 156-157.

15 Rollo (G.R. No. 193247), pp. 653-655. Penned by Associate Justice Vicente S.E. Veloso with Associate Justice Edgardo P. Cruz and Ricardo R. Rosario, concurring.

16 Rollo (G.R. No. 194276), p. 132.

17 Rollo (G.R. No. 193247), pp. 22-23.

18 Rollo (G.R. No. 194276), pp. 241-243. Penned by Associate Justice Vicente S.E. Veloso with Associate Justices Normandie B. Pizarro and Ricardo R. Rosario, concurring.

19Id. at 41-43.

20 Francisco, Jr. v. The House of Representatives, 460 Phil. 830 (2003).

21 Rollo (G.R. No. 193247), pp. 642-647.

22Id. at 643-644.

23 Heirs of Geronimo Restivera v. De Guzman, 478 Phil. 592 (2004).

24Id.

25Id.

26 Rollo (G.R. No. 193247), p. 20.

27 Prescribing Rules and Regulations Governing Appeals to the Office of the President of thePhilippines.

28 An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership, Amending for the Purpose Certain Sections of Republic Act No. 1125, as Amended, Otherwise Known as The Law Creating the Court of Tax Appeals, And For Other Purposes.

29 An Act to Revise and Codify the Tariff and Customs Law of thePhilippines.

30 Rollo (G.R. No. 194276), p. 107.

31 Millennium Erectors Corporation v. Magallanes, G.R. No. 184362, 15 November 2010, 634 SCRA 708.

32Id.

33 Benedicto v. Lacson, G.R. No. 141508, 5 May 2010, 620 SCRA 82.

34Id.

35Id.

36 Demafelis v. Court of Appeals, G.R. No. 152164, 23 November 2007, 538 SCRA 305.

37 Section 5. The Supreme Court shall have the following powers:

x x x x

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question.

x x x x

38 Moldex Realty, Inc. v. Housing and Land Use Regulatory Board, G.R. No. 149719, 21 June 2007, 525 SCRA 198, 204.

39 Gerochi v. Department of Energy, G.R. No. 159796, 17 July 2007, 527 SCRA 696.

40Id.

41Section 8. No elective or appointive public officer or employee shall receive additional, double, or indirect compensation, unless specifically authorized by law, nor accept without the consent of the Congress, any present, emolument, office or title of any kind from any foreign government.

x x x x

42 Rollo (G.R. No. 194276), p. 198.