CASE NO. 2011-0098: CORNELIA M. HERNANDEZ VS. CECILIO F. HERNANDEZ (G.R. NO. 158576, 9 MARCH 2011, PEREZ, J.) SUBJECTS: QUITCLAIM; WHEN CONSENT IN CONTRACT IS VOIDABLE. (BRIEF TITLE: HERNANDEZ VS. HERNANDEZ).

FIRST DIVISION

x  – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

PEREZ, J.:

Before Us is a Petition for Review^[1] of the Decision of the Court of Appeals in CA-G.R. CV No. 70184^[2] dated 29 May 2003.  The appellate court reversed the Decision of the Regional Trial Court of Makati, Branch 150 (RTC Branch 150), in Civil Case No. 00-1148^[3] dated 12 February 2001, declaring that the quitclaim signed by the petitioner is valid and incontrovertible.      

          The controversy between the parties began when the Republic of the Philippines, through the Department of Public Works and Highways (DPWH), offered to purchase a portion of a parcel of land with an area of 80,133 square meters, covered by TCT No. T-36751^[4] of the Registry of Deeds for Tanauan, Batangas, located at San Rafael, Sto. Tomas, Batangas,  for use in the expansion of the South Luzon Expressway.  The land is pro-indiviso owned by Cornelia M. Hernandez (Cornelia), petitioner herein, Atty. Jose M. Hernandez, deceased father of respondent Cecilio F. Hernandez (Cecilio),^[5] represented by Paciencia Hernandez (Paciencia) and Mena Hernandez (Mena), also deceased and represented by her heirs.^[6]

          The initial purchase price that was offered by the government was allegedly at Thirty-Five pesos (P35.00) per square meter for 14,643 square meters of the aforementioned land.^[7]  The Hernandez family rejected the offer.  After a series of negotiations with the DPWH, the last offer stood at Seventy Pesos (P70.00) per square meter.^[8]  They still did not accept the offer and the government was forced to file an expropriation case.

On 9 August 1993, an expropriation case was filed by the Republic of the Philippines, through the DPWH, before the Regional Trial Court, Branch 83 (RTC Branch 83), Tanauan, Batangas.^[9]  The case was first docketed as Civil Case No. T-859, then Civil Case No. C-023.  Branch Clerk of Court Francisco Q. Balderama, Jr., issued a Certification dated 10 January 2001 certifying that the docket numbers stated refers to one and the same case.^[10]

In Civil Case No. C-023, different parcels of land in Barangay Tripache, Tanauan Batangas, which belongs to thirty-four (34) families including the Hernandezes are affected by the expansion project of the DPWH.   A similar case, Civil Case No. C-022, was consolidated with the former as it affects the same DPWH endeavor.  Land in San Rafael, Sto. Tomas, Batangas, which belong to twenty-three (23) families, was also the subject of expropriation. 

On 11 November 1993, the owners of the Hernandez property executed a letter indicating: (1) Cecilio as the representative of the owners of the land; and (2) the compensation he gets in doing such job.  The letter reads:

November 11, 1993

Mr. Cecilio F. Hernandez

Tanauan, Batangas

Dear Cecilio:

This would confirm to give you twenty (20%) percent of any amount in excess of Seventy (P70.00) Pesos per square meter of our respective shares as success fee for your effort in representing us in Civil Case No. T-859 entitled, “Republic of the Philippines, represented by the Public Works and Highways v. Sto. Tomas Agri-Farms, Inc. and the Appellate Courts.”

Whatever excess beyond Three Hundred (P300.00) Pesos per square meter of the area shall likewise be given to you as additional incentive.

We will give you One Thousand Five Hundred (P8,500.00) (sic) Pesos each for the preparation of the pleading before the Regional Trial Court and such other reasonable expenses of litigation pro-indiviso.

                                                            Very Truly Yours,

                                             (Sgd.) PACENCIA F. HERNANDEZ

                                                        (Sgd.) CORNELIA M. HERNANDEZ

Conforme:

                                                         (Sgd.) PACITA M. HERNANDEZ

(Sgd.)CECILIO F. HERNANDEZ

                                                            HEIRS OF MENA M. HERNANDEZ

By: (Sgd.) MA. ANTONIA H. LLAMZON 

AND

                                                      (Sgd.) PERSEVERANDO M. HERNANDEZ^[11]

During the course of the expropriation proceedings, an Order dated 13 September 1996 was issued by the RTC Branch 83, informing the parties of the appointment of commissioners to help determine the just compensation. Cecilio was appointed as one of the commissioners to represent the defendants in Civil Case No. C-022. The Order reads:

In order to determine the fair market value of the lands subject of expropriation, the following are appointed as commissioners: Engr. Melchor Dimaano, as representative of the Department of Public Works and Highways (DPWH), Messrs. Magno Aguilar and Cecilio Hernandez, as representatives of the landowners, and Mr. Eric Faustino Esperanza as representative of the Court.^[12] (Emphasis ours)

On 18 October 1996, Cornelia, and her other co-owners who were also signatories of the 11 November 1993 letter, executed an irrevocable Special Power of Attorney (SPA) appointing Cecilio Hernandez as their “true and lawful attorney” with respect to the expropriation of the subject property.^[13] The SPA stated that the authority shall be irrevocable and continue to be binding all throughout the negotiation.  It further stated that the authority shall bind all successors and assigns in regard to any negotiation with the government until its consummation and binding transfer of a portion to be sold to that entity with Cecilio as the sole signatory in regard to the rights and interests of the signatories therein.  There was no mention of the compensation scheme for Cecilio, the attorney-in-fact.

The just compensation for the condemned properties was fixed in the Decision^[14] dated 7 January 1998, penned by Judge Voltaire Y. Rosales (Judge Rosales) of RTC Branch 83, Tanauan, Batangas.  The value of the land located at Barangay Tripache, Tanauan, Batangas, was pegged at One Thousand Five Hundred Pesos (P1,500.00) per square meter.  The total area that was condemned for the Hernandez family was Fourteen Thousand Six Hundred Forty-Three (14,643) square meters.  Thus, multiplying the values given, the Hernandez family will get a total of Twenty One Million, Nine Hundred Sixty-Four Thousand Five Hundred Pesos (P21,964,500.00) as just compensation.^[15]

Included in the decision is the directive of the court to pay the amount of P4,000.00 to Cecilio, as Commissioner’s fees.^[16]

On 6 October 1999, petitioner executed a Revocation of the SPA^[17] withdrawing the authority earlier granted to Cecilio in the SPA dated 18 October 1996.  After the revocation, on 28 December 1999, without the termination of counsel on record, Cornelia, with a new lawyer, moved for the withdrawal of her one-third (1/3) share of the just compensation, which is equivalent to Seven Million Three Hundred Twenty-One Thousand Five Hundred Pesos (P7,321,500.00) – the amount a pro-indiviso owner is to receive.

In the Order^[18] dated 24 January 2000, Judge Rosales, even with the irregularity that the motion to withdraw was not filed by the counsel of record, granted the motion of petitioner, with the condition that the money shall be released only to the attorney-in-fact, Mr. Cecilio F. Hernandez.  The trial court took cognizance of the irrevocable nature of the SPA dated 18 October 1996.^[19]Cecilio, therefore, was able to get not just one-third (1/3) of, but the entire sum of Twenty One Million, Nine Hundred Sixty-Four Thousand Five Hundred Pesos (P21,964,500.00).

On 7 February 2000, Cornelia received from Cecilio a Bank of the Philippine Islands Check amounting to One Million One Hundred Twenty-Three Thousand Pesos (P1,123,000.00).^[20] The check was however accompanied by a Receipt and Quitclaim^[21]document in favor of Cecilio.  In essence it states that: (1) the amount received will be the share of Cornelia in the just compensation paid by the government in the expropriated property; (2) in consideration of the payment, it will release and forever discharge Cecilio from any action, damages, claims or demands; and (3) Cornelia will not institute any action and will not pursue her complaint or opposition to the release to Cecilio or his heirs or assigns, of the entire amount deposited in the Land Bank of the Philippines, Tanauan, Batangas, or in any other account with any bank, deposited or will be deposited therein, in connection with Civil Case No C-023, representing the total just compensation of expropriated properties under the aforementioned case.

The check was received by Cornelia with a heavy heart.  She averred in her ex-parte testimony that she was forced to receive such amount because she needs the money immediately for medical expenses due to her frail condition.^[22]

Moreover, Cornelia averred that after a few days from her receipt of the check, she sought the help of her niece, Daisy Castillo, to get the decision in Civil Case No. C-022.^[23]  It was only then, when her niece got hold of the decision and explained its contents, that she learned that she was entitled to  receive Seven Million Three Hundred Twenty-One Thousand Five Hundred Pesos (P7,321,500.00).^[24]  In a Letter^[25] dated 22 June 2000, Cornelia demanded the accounting of the proceeds.  The letter was left unanswered.  She then decided to have the courts settle the issue.  A Complaint for the Annulment of Quitclaim and Recovery of Sum of Money and Damages^[26] was filed before the RTC Branch 150 of Makati on 18 September 2000.  The case was docketed as Civil Case No. 00-1184.

          Cecilio, despite the service of summons and copy of the complaint failed to file an answer.  The trial court explained further that Cecilio was present in the address supplied by the petitioner but refused to receive the copy.  The trial court even gave Cecilio ten (10) more days, from his refusal to accept the summons, to file his answer. Upon the motion of the petitioner, respondent Cecilio was declared in default.  The court allowed petitioner to adduce evidence ex parte.^[27]

          Cecilio tried to file a Motion for Reconsideration to lift the order of default. However, the trial court found that the leeway they have given Cecilio to file an answer was more than enough. 

In the Decision dated 12 February 2001, the RTC Branch 150 of Makati, through Judge Zeus C. Abrogar denied the motion and nullified the quitclaim in favor of Cecilio.  The fallo of the case reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, declaring the receipt and quitclaim signed by the plaintiff dated February 7, 2000 as null and void and ordering the defendant to pay the plaintiff the amount of;

1. P6,198,417.60, including the accrued interest thereon with 12% per annum, computed from the date of the filing hereof until the said amount is fully paid;

1. payment of P200,000.00 to the plaintiff by the defendant by way of moral damages;

1. attorney’s fees in the sum of P100,000.00 and;

1. cost of suit.^[28]

Aggrieved, Cecilio appealed the Decision of the trial court. The Court of Appeals did not discuss whether the default order was proper.  However, the appellate court, in its Decision dated 29 May 2003 reversed and set aside the ruling of the trial court.  The dispositive portion reads:

WHEREFORE, premises considered, the Decision dated February 12, 2001, of the Regional Trial Court of Makati, National Capital Judicial Region, Branch 150, in Civil Case No. 00-1148, is hereby REVERSED and SET ASIDE and a new one is entered ordering the dismissal of the complaint filed on September 13, 2000 by the appellee against the appellant.  No pronouncement as to costs.^[29]

Petitioner Cornelia now submits that the Court of Appeals erred in holding the validity of the receipt and quitclaim document contrary to law and jurisprudence.^[30]  She holds that the distribution of award that transpired is unjust and prays that the decision of the RTC Branch 150 of Makati be reinstated.

          We agree.

          The trial court awarded the Hernandez family, among others, a total amount of P21,964,500.00 for the expropriation of 14,643 square meters of land to be used as extension of the South Luzon Expressway.  The three co-owners of the said land, Cornelia, Mena and Paciencia were listed as item number twenty (20) in the decision dated 7 January 1998, as one of the recipients of the just compensation to be given by the government.^[31]  As pro-indiviso landowners of the property taken, each one of them ought to receive an equal share or one third (1/3) of the total amount which is equivalent to  P7,321,500.00.

          The equal division of proceeds, however, was contested by Cecilio.  He avers that he is the agent of the owners of the property.^[32]  He bound himself to render service on behalf of her cousins, aunt and mother, by virtue of the request of the latter.^[33]  As an agent, Cecilio insists that he be given the compensation he deserves based on the agreement made in the letter dated 11 November 1993, also called as the service contract,^[34] which was signed by all the parties.  This is the contract to which Cecilio anchors his claim of validity of the receipt and quitclaim that was signed in his favor.

I.

          A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable.^[35]  In determining whether consent is vitiated by any of the circumstances mentioned, courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in their favor what they believe to have actually occurred, considering the age, physical infirmity, intelligence, relationship, and the conduct of the parties at the time of the making of the contract and subsequent thereto, irrespective of whether the contract is in public or private writing.^[36]  And, in order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or those conditions which have principally moved one or both parties to enter the contract.^[37] 

          The compensation scheme of 20% of any amount over P70.00 per square meter and everything above P300.00 per square meter was granted in favor of Cecilio by the Hernandezes on 11 November 1993.  At that time, the Hernandezes had just rejected the government’s offer of P35.00 per square meter, which offer last stood at P70.00 per square meter.  It was the rejection likewise of the last offer that led to the filing of the expropriation case on 9 August 1993.  It was in this case, and for Cecilio’s representation in it of the Hernandezes, that he was granted the compensation scheme.  Clear as day, the conditions that moved the parties to the contract were the base price at P70.00 per square meter, the increase of which would be compensated by 20% of whatever may be added to the base price; and the ceiling price of P300.00 per square meter, which was considerably high reckoned from the base atP70.00, which would therefore, allow Cecilio to get all that which would be in excess of the elevated ceiling.  The ceiling was, from the base, extraordinarily high, justifying the extraordinary grant to Cornelio of all that would exceed the ceiling.

          It was on these base and ceiling prices, conditions which principally moved both parties to enter into the agreement on the scheme of compensation, that an obvious mistake was made.  The trial court, deviating from the principle that just compensation is determined by the value of the land at the time either of the taking or filing,^[38] which was in 1993, determined the compensation as the 1998 value of P1,500.00 per square meter. The trial court ratiocinated that the 1998 value was considered for the reason, among others that:

3.  It is common knowledge that prices of real estate in Batangas, including and/or particularly in Sto.Tomas and Tanauan have skyrocketed in the past two years;^[39] (Emphasis ours).

          This 1998 “skyrocketed” price of P1,500.00 per square meter was pounced upon by Cecilio as the amount against which the 1993 ceiling of P300.00 per square meter should be compared, thereby giving him the amount computed^[40] as follows:

CECILIO’S FEES    = (20% of anything over P70.00) + (everything in        excess of P300)

*If the land value is at P1,500.00 per square meter, then,

                                    = (20% of  P230.00) + (P1,500.00 – P300.00)

                                    = P46.00 + P1,200.00

= P1,246.00 per square meter

CORNELIA’S SHARE        = (land value at 1,500 less Cecilio’s fees)

                                                = P254.00 per square meter

*The total expropriated property is at 14,643 m², thus, Cecilio will get a   total of

                                    = P1,246.00 * 14,643

                                    = P18,245,178.00 total compensatinon

*One Third of the above value shows that Cecilio will get, from Cornelia

                             = P6,081,726.00

It must be noted that:

*The Hernandez’ family gets P21,964,500 for 14,643 m², at P1,500.00 per m²

*One-third (1/3) of that is P7,321,500 representing the share of a co-owner like Cornelia

*What will be left of Cornelia’s share if she pays Cecilio will be:

P1,239,774  less: 124,953.60 (Nominal Cost of Litigation as averred by Cecilio)

1,500.00 (Nominal payment for preparation of pleadings)

OVERALL TOTAL AMOUNT CORNELIA WILL RECEIVE:

P 1,113,320.4

As opposed to:

OVERALL TOTAL AMOUNT CECILIO WILL RECEIVE:  P6,081,726.00

          Cecilio’s position would give him 83.07% of the just compensation due Cornelia as a co-owner of the land.  No evidence on record would show that Cornelia agreed, by way of the 11 November 1993 letter, to give Cecilio 83.07% of the proceeds of the sale of her land.

          What is on record is that Cornelia asked for an accounting of the just compensation from Cecilio several times, but the request remained unheeded. Right at that point, it can be already said that Cecilio violated the fiduciary relationship of an agent and a principal. The relation of an agent to his principal is fiduciary and it is elementary that in regard to property subject matter of the agency, an agent is estopped from acquiring or asserting a title adverse to that of the principal. His position is analogous to that of a trustee and he cannot, consistently with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust.^[41]

          Instead of an accounting, what Cornelia received was a receipt and quitclaim document that was ready for signing.  As testified to by Cornelia, due to her frail condition and urgent need of money in order to buy medicines, she nevertheless signed the quitclaim in Cornelio’s favor.  Quitclaims are also contracts and can be voided if there was fraud or intimidation that leads to lack of consent.  The facts show that a simple accounting of the proceeds of the just compensation will be enough to satisfy the curiosity of Cornelia.  However, Cecilio did not disclose the truth and instead of coming up with the request of his aunt, he made a contract intended to bar Cornelia from recovering any further sum of money from the sale of her property.

          The preparation by Cecilio of the receipt and quitclaim document which he asked Cornelia to sign, indicate that even Cecilio doubted that he could validly claim 83.07% of the price of Cornelia’s land on the basis of the 11 November 1993 agreement.  Based on the attending circumstances, the receipt and quitclaim document is an act of fraud perpetuated by Cecilio.  Very clearly, both the service contract of 11 November 1993 letter- agreement, and the later receipt and quitclaim document, the first vitiated by mistake and the second being fraudulent, are void.

II.

          Cecilio’s last source of authority to collect payment from the proceeds of the expropriation is the SPA executed on 18 October 1996 by the Hernandezes in favor of Cecilio as their “true and lawful” attorney with respect to the expropriation of the Hernandez property.  At the outset, it must be underscored that the SPA did not specify the compensation of Cecilio as attorney-in-fact of the Hernandezes. 

          The SPA, however, must be appreciated in the light of the fact that Cecilio was appointed and acted as appraisal commissioner in the expropriation case under the provisions of Section 5, Rule 67 of the Rules of Court, which provides:

SEC. 5. Ascertainment of compensation. — Upon the rendition of the order of expropriation, the court shall appoint not more than three (3) competent and disinterested persons as commissioners to ascertain and report to the court the just compensation for the property sought to be taken.   The order of appointment shall designate the time and place of the first session of the hearing to be held by the commissioners and specify the time within which their report shall be submitted to the court. (Emphasis ours).

The commissioner to be appointed is specifically required to be disinterested.  As defined, such person must be free frombias, prejudice or partiality.^[42]  The record of performance by Cecilio of his duties as commissioner shows: (1) Order dated 13 September 1996 appointing Cecilio and three others as court commissioners; (2) Agreement on the course of action of the commissioners appointed 13 September 1996 whereby respondent Cecilio signed as a court commissioner; (3) Appraisal Commission Report dated 10 January 1997 signed by respondent and his fellow court commissioners; (4) Dissenting Opinion on the Lone Minority Report dated 14 February 1997 signed by respondent and two other court commissioners; and (5) Decision dated 7 February 1997 which sets the fees of the court commissioners.^[43]

When Cecilio accepted the position as commissioner and proceeded to perform the duties of such commissioner until the completion of his mandate as such, he created a barrier that prevented his performance of his duties under the SPA.  Due to the nature of his duties and functions as commissioner, Cecilio became an officer of the court. As stated in Section 5, Rule 67 of the Rules of Court, the commissioner’s duty is to “ascertain and report to the court the just compensation for the property to be taken.” The undertaking of a commissioner is further stated under the rules, to wit:

SEC. 6. Proceedings by commissioners.—Before entering upon the performance of their duties, the commissioners shall take and subscribe an oath that they will faithfully perform their duties as commissioners, which oath shall be filed in court with the other proceedings in the case. Evidence may be introduced by either party before the commissioners who are authorized to administer oaths on hearings before them, and the commissioners shall, unless the parties consent to the contrary, after due notice to the parties to attend, view and examine the property sought to be expropriated and its surroundings, and may measure the same, after which either party may, by himself or counsel, argue the case. The commissioners shall assess the consequential damages to the property not taken and deduct from such consequential damages the consequential benefits to be derived by the owner from the public use or purpose of the property taken, the operation of its franchise by the corporation or the carrying on of the business of the corporation or person taking the property.  But in no case shall the consequential benefits assessed exceed the consequential damages assessed, or the owner be deprived of the actual value of his property so taken.

Cecilio acted for the expropriation court.  He cannot be allowed to consider such action as an act for or in behalf of the defendant in the same case.  Cecilio could not have been a hearing officer and a defendant at the same time.  Indeed, Cecilio foisted fraud on both the Court and the Hernandezes when, after his appointment as commissioner, he accepted the appointment by the Hernandezes to “represent” and “sue for” them.

It should be noted, finally, that, as completion of his appointment as commissioner, compensation for the work he has done for the court was awarded, as stated in the decision rendered in the case, thus:

Finally, plaintiff is directed to pay the corresponding Commissioner’s fees of the following, to wit:

1. Eric Faustino J. Esperanza – Chairman                 P5,000.00
2. 2.      Cecilio F. Hernandez – Member                          4,000.00
3. Magno Aguilar – Member                           4,000.00
4. Melchor Dimaano – Member                                  4,000.00^[44]

III.

Cecilio breached an obligation that is neither a loan nor forbearance of money.  The decision of the lower court ordering Cecilio to pay the amount of P6,189,417.60 to Cornelia at 12% per annum until fully paid should be modified to 6% per annum from the time of the filing of the complaint up to the date of the decision, and at 12% per annum from  finality until fully paid, in order to conform to the doctrine enunciated by Eastern Shipping Lines, Inc. v. Court of Appeals,^[45] to wit:

2.         When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date of the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount of finally adjudged.

3.         When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

WHEREFORE, premises considered, the Decision of the Court of Appeals is hereby REVERSED and SET ASIDE.  The Decision of the RTC of Makati, Branch 150 is REINSTATED with the following MODIFICATIONS that the interest on the monetary awards should be at 6% per annum from the time of the filing of the complaint up to the date of the decision, and at 12% per annum from finality until fully paid.

SO ORDERED.

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

          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

^[1]               Under Rule 45 of the Rules of Court.

^[2]               Rollo, pp. 37-51.

^[3]               Decision of the RTC Branch 150, id. at 52-56.

^[4]               Transfer Certificate of Title, Annex “C,” id. at 57.

^[5]               TSN, 8 December 2000, pp. 4-6.

^[6]               Petition.  Rollo, p. 10.

^[7]               Brief for the Appellant.  CA rollo, p.72

^[8]               Id.

^[9]               Id.

^[10]             Id.

^[11]             Rollo, p. 58.

^[12]             Id. at 59.

^[13]             Id. at 60-62.

^[14]             Id. at 63-68.

^[15]             Just Compensation = (Area of land) * (Value per m²)

^[16]             Rollo, p. 67.

^[17]             Revocation of Special Power of Attorney, Annex “I.” Id. at 69-70.

^[18]             Order of Judge Voltaire Rosales, Branch 83.  Id. at 74.

^[19]             Petition.  Id. at 14.

^[20]             Id.

^[21]             Id. at 81-82.

^[22]             TSN, 8 December 2000, p. 10.

^[23]             Id. at 12-13.

^[24]             Id. at 13.

^[25]             Rollo, pp. 83-84.

^[26]             Complaint, Annex “O,” id. at 85-90.

^[27]             Id. at 15.

^[28]             Id. at 56.

^[29]             Decision of the Court of Appeals in CA G.R. CV. No. 70184, id. at 50.

^[30]             Id. at 18.

^[31]             Petition – Arguments and Discussion.  Id. at 66.

^[32]             Decision, RTC Branch 83.  Id. at 121.

^[33]             Art. 1868, Civil Code.

^[34]             Brief for the Appellant (Cecilio), CA rollo, p. 73.

^[35]             Art. 1330, Civil Code.

^[36]             TOLENTINO, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV, 1991, Art. 1330, p. 475 citing Transporte v. Beltran, 51 Off. Gaz. 1434, March, 1955.

^[37]             Art. 1331, Civil Code.

^[38]             Sec. 4, Rule 67 of the Rules of Court.

^[39]             Decision, RTC Branch 83, Tanauan Batangas in Civil Case No. C-023.  Rollo, p. 65.

^[40]             The computation herein is the correct application of the formula in the service contract. There was an error in the computation made by Cecilio in its Appellant’s Brief (CArollo, p. 172).  

^[41]             Thomas v. Pineda, G.R. No. L-2411, 28 June 1951, citing Severino v. Severino, 44 Phil. 343.

^[42]             Roget’s Thesaurus, Fourth ed., 2001, adj.: impartial, unbiased, neutral, free from bias, unprejudiced, fair, impersonal, outside, uninvolved, dispassionate, free from self-interest.

^[43]             Petition.  Rollo, p. 22.

^[44]             Decision, RTC Branch 83 in Civil Case No. C-023.  Rollo, p. 67.

^[45]             G.R. No. 97412, 12 July 1994, 234 SCRA 78, 96-97.

CASE 2011-0097: (DENIAL OF MOTION FOR RECONSIDERATION FILED BY LEAGUE OF CITIES VS. COMELEC) G.R. NOS. 176951, 177499, AND 178056: LEAGUE OF CITIES OF THE PHILIPPINES, ET AL. V. COMMISSION ON ELECTIONS, ET AL. (BERSAMIN, J, 12 APRIL 2011) SUBJECT: CITYHOOD LAWS. (BRIEF TITLE: LEAGUE OF CITIES VS. COMELEC).

Republic of the Philippines

Supreme Court

Baguio City

EN BANC

x—————————————————————————————–x

RESOLUTION

BERSAMIN, J.:

We consider and resolve the Ad Cautelam Motion for Reconsideration  filed by the petitioners vis-à-vis the Resolution promulgated on February 15, 2011.

To recall, the Resolution promulgated on February 15, 2011 granted the Motion for Reconsideration of the respondents presented against the Resolution dated August 24, 2010, reversed the Resolution dated August 24, 2010, and declared the 16 Cityhood Laws — Republic Acts Nos. 9389, 9390, 9391, 9392, 9393, 9394, 9398, 9404, 9405, 9407, 9408, 9409, 9434, 9435, 9436, and 9491 — constitutional.

Now, the petitioners anchor their Ad Cautelam Motion for Reconsideration  upon the primordial ground that the Court could no longer modify, alter, or amend its judgment declaring the Cityhood Laws unconstitutional due to such judgment having long become final and executory. They submit that the Cityhood Laws violated Section 6 and Section 10 of Article X of the Constitution, as well as the Equal Protection Clause. 

The petitioners specifically ascribe to the Court the following errors in its promulgation of the assailed February 15, 2011 Resolution, to wit:

I.       THE HONORABLE COURT HAS NO JURISDICTION TO PROMULGATE THE RESOLUTION OF 15 FEBRUARY 2011 BECAUSE THERE IS NO LONGER ANY ACTUAL CASE OR CONTROVERSY TO SETTLE.

II.    THE RESOLUTION CONTRAVENES THE 1997 RULES OF CIVIL PROCEDURE AND RELEVANT SUPREME COURT ISSUANCES.

III. THE RESOLUTION UNDERMINES THE JUDICIAL SYSTEM IN ITS DISREGARD OF THE PRINCIPLES OF RES JUDICATA AND THE DOCTRINE OF IMMUTABILITY OF FINAL JUDGMENTS.

IV. THE RESOLUTION ERRONEOUSLY RULED THAT THE SIXTEEN (16) CITYHOOD BILLS DO NOT VIOLATE ARTICLE X, SECTIONS 6 AND 10 OF THE 1987 CONSTITUTION.

V.    THE SIXTEEN (16) CITYHOOD LAWS VIOLATE THE EQUAL PROTECTION CLAUSE OF THE CONSTITUTION AND THE RIGHT OF LOCAL GOVERNMENTS TO A JUST SHARE IN THE NATIONAL TAXES.

Ruling

Upon thorough consideration, we deny the Ad Cautelam Motion for Reconsideration for its lack of merit.   

I.

Procedural Issues

          With respect to the first, second, and third assignments of errors, supra, it appears that the petitioners assail the jurisdiction of the Court in promulgating the February 15, 2011 Resolution, claiming that the decision herein had long become final and executory. They state that the Court thereby violated rules of procedure, and the principles of res judicata and immutability of final judgments.

          The petitioners posit that the controversy on the Cityhood Laws ended with the April 28, 2009 Resolution denying the respondents’ second motion for reconsideration vis-à-vis the November 18, 2008 Decision for being a prohibited pleading, and in view of the issuance of the entry of judgment on May 21, 2009.

          The Court disagrees with the petitioners.

          In the April 28, 2009 Resolution, the Court ruled:

By a vote of 6-6, the Motion for Reconsideration of the Resolution of 31 March 2009 is DENIED for lack of merit.  The motion is denied since there is no majority that voted to overturn the Resolution of 31 March 2009.

The Second Motion for Reconsideration of the Decision of 18 November 2008 is DENIED for being a prohibited pleading, and the Motion for Leave to Admit Attached Petition in Intervention dated 20 April 2009 and the Petition in Intervention dated 20 April 2009 filed by counsel for Ludivina T. Mas, et al. are also DENIED in view of the denial of the second motion for reconsideration.  No further pleadings shall be entertained.  Let entry of judgment be made in due course.

Justice Presbitero J. Velasco, Jr. wrote a Dissenting Opinion, joined by Justices Consuelo Ynares-Santiago, Renato C. Corona, Minita Chico-Nazario, Teresita Leonardo-De Castro, and Lucas P. Bersamin. Chief Justice Reynato S. Puno and Justice Antonio Eduardo B. Nachura took no part.  Justice Leonardo A. Quisumbing is on leave.^[1][1]

Within 15 days from receipt of the April 28, 2009 Resolution, the respondents filed a Motion To Amend Resolution Of April 28, 2009 By Declaring Instead That Respondents’ “Motion for Reconsideration Of the Resolution Of March 31, 2009” And “Motion For Leave To File, And To Admit Attached ‘Second Motion For Reconsideration Of The Decision Dated November 18, 2008’ Remain Unresolved And To Conduct Further Proceedings Thereon, arguing therein that a determination of the issue of constitutionality of the 16 Cityhood Laws upon a motion for reconsideration by an equally divided vote was not binding on the Court as a valid precedent, citing the separate opinion of then Chief Justice Reynato S. Puno in Lambino v. Commission on Elections.^[2][2]

Thus, in its June 2, 2009 Resolution, the Court issued the following clarification of the April 28, 2009 Resolution, viz:

As a rule, a second motion for reconsideration is a prohibited pleading pursuant to Section 2, Rule 52 of the Rules of Civil Procedure which provides that: “No second motion for reconsideration of a judgment or final resolution by the same party shall be entertained.”  Thus, a decision becomes final and executory after 15 days from receipt of the denial of the first motion for reconsideration.

However, when a motion for leave to file and admit a second motion for reconsideration is granted by the Court, the Court therefore allows the filing of the second motion for reconsideration.  In such a case, the second motion for reconsideration is no longer a prohibited pleading.

In the present case, the Court voted on the second motion for reconsideration filed by respondent cities.  In effect, the Court allowed the filing of the second motion for reconsideration.  Thus, the second motion for reconsideration was no longer a prohibited pleading.  However, for lack of the required number of votes to overturn the 18 November 2008 Decision and 31 March 2009 Resolution, the Court denied the second motion for reconsideration in its 28 April 2009 Resolution.^[3][3]

As the result of the aforecited clarification, the Court resolved to expunge from the records several pleadings and documents, including respondents’ Motion To Amend Resolution Of April 28, 2009 etc.

The respondents thus filed their Motion for Reconsideration of the Resolution of June 2, 2009, asseverating that their Motion To Amend Resolution Of April 28, 2009 etc. was not another motion for reconsideration of the November 18, 2008 Decision, because it assailed the April 28, 2009 Resolution with respect to the tie-vote on the respondents’ Second Motion For Reconsideration. They pointed out that the Motion To Amend Resolution Of April 28, 2009 etc. was filed on May 14, 2009, which was within the 15-day period from their receipt of the April 28, 2009 Resolution; thus, the entry of judgment had been prematurely made. They reiterated their arguments with respect to a tie-vote upon an issue of constitutionality.

In the September 29, 2009 Resolution,^[4][4] the Court required the petitioners to comment on the Motion for Reconsideration of the Resolution of June 2, 2009 within 10 days from receipt.

As directed, the petitioners filed their Comment Ad Cautelam With Motion to Expunge.

The respondents filed their Motion for Leave to File and to Admit Attached “Reply to Petitioners’ ‘Comment Ad Cautelam With Motion to Expunge’”, together with the Reply.

On November 17, 2009, the Court resolved to note the petitioners’ Comment Ad Cautelam With Motion to Expunge, to grant the respondents’ Motion for Leave to File and Admit Reply to Petitioners’ Comment Ad Cautelam with Motion to Expunge, and to note the respondents’ Reply to Petitioners’ Comment Ad Cautelam with Motion to Expunge.

On December 21, 2009, the Court, resolving the Motion To Amend Resolution Of April 28, 2009 etc. and voting anew on the Second Motion For Reconsideration in order to reach a concurrence of a majority, promulgated its Decision granting the motion and declaring the Cityhood Laws as constitutional,^[5][5] disposing thus: 

WHEREFORE, respondent LGUs’ Motion for Reconsideration dated June 2, 2009, their “Motion to Amend the Resolution of April 28, 2009 by Declaring Instead that Respondents’  ‘Motion for Reconsideration of the Resolution of March 31, 2009’ and ‘Motion for Leave to File and to Admit Attached Second Motion for Reconsideration of the Decision Dated November 18, 2008’ Remain Unresolved and to Conduct Further Proceedings,” dated May 14, 2009, and their second Motion for Reconsideration of the Decision dated November 18, 2008 are GRANTED. The June 2, 2009, the March 31, 2009, and April 31, 2009 Resolutions are REVERSED and SET ASIDE.  The entry of judgment made on May 21, 2009 must accordingly be RECALLED.

The instant consolidated petitions and petitions-in-intervention are DISMISSED. The cityhood laws, namely Republic Act Nos. 9389, 9390, 9391, 9392, 9393, 9394, 9398, 9404, 9405, 9407, 9408, 9409, 9434, 9435, 9436, and 9491 are declared VALID and CONSTITUTIONAL.

SO ORDERED.

On January 5, 2010, the petitioners filed an Ad Cautelam Motion for Reconsideration against the December 21, 2009 Decision.^[6][6]  On the same date, the petitioners also filed a Motion to Annul Decision of 21 December 2009.^[7][7]

On January 12, 2010, the Court directed the respondents to comment on the motions of the petitioners.^[8][8]

On February 4, 2010, petitioner-intervenors City of Santiago, City of Legazpi, and City of Iriga filed their separate Manifestations with Supplemental Ad Cautelam Motions for Reconsideration.^[9][9] Similar manifestations with supplemental motions for reconsideration were filed by other petitioner-intervenors, specifically: City of Cadiz on February 15, 2010;^[10][10]  City of Batangas on February 17, 2010;^[11][11] and City of Oroquieta on February 24, 2010.^[12][12]  The Court required the adverse parties to comment on the motions.^[13][13]  As directed, the respondents complied.

On August 24, 2010, the Court issued its Resolution reinstating the November 18, 2008 Decision.^[14][14]

            On September 14, 2010, the respondents timely filed a Motion for Reconsideration of the “Resolution” Dated August 24, 2010.^[15][15] They followed this by filing on September 20, 2010 a Motion to Set “Motion for Reconsideration of the ‘Resolution’ dated August 24, 2010” for Hearing.^[16][16] On November 19, 2010, the petitioners sent in their Opposition [To the “Motion for Reconsideration of ‘Resolution’ dated August 24, 2010”].^[17][17] On November 30, 2010,^[18][18] the Court noted, among others, the petitioners’ Opposition. 

On January 18, 2011,^[19][19] the Court denied the respondents’ Motion to Set “Motion for Reconsideration of the ‘Resolution’ dated August 24, 2010” for Hearing.

          Thereafter, on February 15, 2011, the Court issued the Resolution being now challenged.

          It can be gleaned from the foregoing that, as the June 2, 2009 Resolution clarified, the respondents’ Second Motion For Reconsideration was not a prohibited pleading in view of the Court’s voting and acting on it having the effect of allowing the Second Motion For Reconsideration; and that when the respondents filed their Motion for Reconsideration of the Resolution of June 2, 2009 questioning the expunging of their Motion To Amend Resolution Of April 28, 2009 etc. (which had been filed within the 15-day period from receipt of the April 28, 2009 Resolution), the Court opted to act on the Motion for Reconsideration of the Resolution of June 2, 2009 by directing the adverse parties through its September 29, 2009 Resolution to comment.  The same permitting effect occurred when the Court, by its November 17, 2009 Resolution, granted the respondents’ Motion for Leave to File and Admit Reply to Petitioners’ Comment Ad Cautelam with Motion to Expunge, and noted the attached Reply. 

Moreover, by issuing the Resolutions dated September 29, 2009 and November 17, 2009, the Court: (a) rendered ineffective the tie-vote under the Resolution of April 28, 2009 and the ensuing denial of the Motion for Reconsideration of the Resolution of March 31, 2009 for lack of a majority to overturn; (b), re-opened the Decision of November 18, 2008 for a second look under reconsideration; and (c) lifted the directive that no further pleadings would be entertained. The Court in fact entertained and acted on the respondents’ Motion for Reconsideration of the Resolution of June 2, 2009. Thereafter, the Court proceeded to deliberate anew on the respondents’ Second Motion for Reconsideration and ended up with the promulgation of the December 21, 2009 Decision (declaring the Cityhood Laws valid and constitutional).

          It is also inaccurate for the petitioners to insist that the December 21, 2009 Decision overturned the November 18, 2008 Decision on the basis of the mere Reflections of the Members of the Court. To be sure, the Reflections were the legal opinions of the Members and formed part of the deliberations of the Court. The reference in the December 21, 2009 Decision to the Reflections pointed out that there was still a pending incident after the April 28, 2009 Resolution that had been timely filed within 15 days from its receipt,^[20][20] pursuant to Section 10, Rule 51,^[21][21] in  relation to Section 1, Rule 52,^[22][22] of  the  Rules  of  Court. Again, the Court did act and deliberate upon this pending incident, leading to the issuance of the December 21, 2009 Decision (declaring the Cityhood Laws free from constitutional infirmity).  It was thereafter that the Court rendered its August 24, 2010 Resolution (reinstating the November 18, 2008 Decision), to correct which the respondents’ Motion for Reconsideration of the “Resolution” Dated August 24, 2010 was filed. And, finally, the Court issued its February 15, 2011 Resolution, reversing and setting aside the August 24, 2010 Resolution. 

          It is worth repeating that the actions taken herein were made by the Court en banc strictly in accordance with the Rules of Court and its internal procedures. There has been no irregularity attending or tainting the proceedings.

          It also relevant to state that the Court has frequently disencumbered itself under extraordinary circumstances from the shackles of technicality in order to render just and equitable relief.^[23][23]

On whether the principle of immutability of judgments and bar by res judicata apply herein, suffice it to state that the succession of the events recounted herein indicates that the controversy about the 16 Cityhood Laws has not yet been resolved with finality. As such, the operation of the principle of immutability of judgments did not yet come into play.  For the same reason is an adherence to the doctrine of res judicata not yet warranted, especially considering that the precedential ruling for this case needed to be revisited and set with certainty and finality.

II.

Substantive Issues

The petitioners reiterate their position that the Cityhood Laws violate Section 6 and Section 10 of Article X of the Constitution, the Equal Protection Clause, and the right of local governments to a just share in the national taxes.

The Court differs.

Congress clearly intended that the local government units covered by the Cityhood Laws be exempted from the coverage of R.A. No. 9009.  The apprehensions of the then Senate President with respect to the considerable disparity between the income requirement of P20 million under the Local Government Code (LGC) prior to its amendment, and the P100 million under the amendment introduced by R.A. No. 9009 were definitively articulated in his interpellation of Senator Pimentel during the deliberations on Senate Bill No. 2157.  The then Senate President was cognizant of the fact that there were municipalities that then had pending conversion bills

during the 11^th Congress prior to the adoption of Senate Bill No. 2157 as R.A. No. 9009,^[24][24] including the municipalities covered by the Cityhood Laws.  It is worthy of mention that the pertinent deliberations on Senate Bill No. 2157 occurred on October 5, 2000 while the 11^th Congress was in session, and the conversion bills were then pending in the Senate.  Thus, the responses of Senator Pimentel made it obvious that R.A. No. 9009 would not apply to the conversion bills then pending deliberation in the Senate during the 11^th Congress. 

R.A. No. 9009 took effect on June 30, 2001, when the 12^th Congress was incipient. By reason of the clear legislative intent to exempt the municipalities  covered  by  the   conversion   bills   pending  during  the 11^th

Congress, the House of Representatives adopted Joint Resolution No. 29, entitled Joint Resolution to Exempt Certain Municipalities Embodied in Bills Filed in Congress before June 30, 2001 from the coverage of Republic Act No. 9009.  However, the Senate failed to act on Joint Resolution No. 29. Even so, the House  of Representatives readopted Joint Resolution No. 29 as

Joint Resolution No. 1 during the 12^th Congress,^[25][25] and forwarded Joint Resolution No. 1 to the Senate for approval.  Again, the Senate failed to approve Joint Resolution No. 1. 

At this juncture, it is worthwhile to consider the manifestation of Senator Pimentel with respect to Joint Resolution No. 1, to wit:

MANIFESTATION OF SENATOR PIMENTEL

         House Joint Resolution No. 1 seeks to exempt certain municipalities seeking conversion into cities from the requirement that they must have at least P100 million in income of locally generated revenue, exclusive of the internal revenue share that they received from the central government as required under Republic Act No. 9009.

         The procedure followed by the House is questionable, to say the least. The House wants the Senate to do away with the income requirement of P100 million so that, en masse, the municipalities they want exempted could now file bills specifically converting them into cities.  The reason they want the Senate to do it first is that Cong. Dodo Macias, chair of the House Committee on Local Governments, I am told, will not entertain any bill for the conversion of municipalities into cities unless the issue of income requirement is first hurdled.  The House leadership therefore wants to shift the burden of exempting certain municipalities from the income requirement to the Senate rather than do it itself.

         That is most unusual because, in effect, the House wants the Senate to pass a blanket resolution that would qualify the municipalities concerned for conversion into cities on the matter of income alone.  Then, at a later date, the House would pass specific bills converting the municipalities into cities.  However, income is not only the requirement for municipalities to become cities.  There are also the requirements on population and land area.

         In effect, the House wants the Senate to tackle the qualification of the municipalities they want converted into cities piecemeal and separately, first is the income under the joint resolution, then the other requirements when the bills are file to convert specific municipalities into cities.  To repeat, this is a most unusual manner of creating cities.

         My respectful suggestion is for the Senate to request the House to do what they want to do regarding the applications of certain municipalities to become cities pursuant to the requirements of the Local Government Code.  If the House wants to exempt certain municipalities from the requirements of the Local Government Code to become cities, by all means, let them do their thing.  Specifically, they should act on specific bills to create cities and cite the reasons why the municipalities concerned are qualified to become cities.  Only after the House shall have completed what they are expected to do under the law would it be proper for the Senate to act on specific bills creating cities.

         In other words, the House should be requested to finish everything that needs to be done in the matter of converting municipalities into cities and not do it piecemeal as they are now trying to do under the joint resolution.

         In my long years in the Senate, this is the first time that a resort to this subterfuge is being undertaken to favor the creation of certain cities.  I am not saying that they are not qualified. All I am saying is, if the House wants to pass and create cities out of certain municipalities, by all means let them do that. But they should do it following the requirements of the Local Government Code and, if they want to make certain exceptions, they can also do that too.  But they should not use the Senate as a ploy to get things done which they themselves should do.

         Incidentally, I have recommended this mode of action verbally to some leaders of the House.  Had they followed the recommendation, for all I know, the municipalities they had envisioned to be covered by House Joint Resolution No. 1 would, by now – if not all, at least some – have been converted into cities.  House Joint Resolution No. 1, the House, in effect, caused the delay in the approval in the applications for cityhood of the municipalities concerned.

         Lastly, I do not have an amendment to House Joint Resolution No. 1.  What I am suggesting is for the Senate to request the House to follow the procedure outlined in the Local Government Code which has been respected all through  the  years.  By  doing  so, we  uphold the rule of law

and minimize the possibilities of power play in the approval of bills converting municipalities into cities.^[26][26]

          Thereafter, the conversion bills of the respondents were individually filed  in   the  House  of   Representatives,  and   were  all  unanimously  and

favorably voted upon by the Members of the House of Representatives.^[27][27]  The bills, when forwarded to the Senate, were likewise unanimously approved by the Senate.^[28][28]  The acts of both Chambers of Congress show that the exemption clauses ultimately incorporated in the Cityhood Laws are but the express articulations of the clear legislative intent to exempt the respondents, without exception, from the coverage of R.A. No. 9009.  Thereby, R.A. No. 9009, and, by necessity, the LGC, were amended, not by repeal but by way of the express exemptions being embodied in the exemption clauses.

          The petitioners further contend that the new income requirement of P100 million from locally generated sources is not arbitrary because it is not difficult to comply with; that there are several municipalities that have already complied with the requirement and have, in fact, been converted into cities, such as Sta. Rosa in Laguna (R.A. No 9264), Navotas (R.A. No. 9387) and San Juan (R.A. No. 9388) in Metro Manila, Dasmariñas in Cavite (R.A. No. 9723), and Biñan in Laguna (R.A. No. 9740); and that several other municipalities have supposedly reached the income of P100 million from locally generated sources, such as Bauan in Batangas, Mabalacat in Pampanga, and Bacoor in Cavite.

          The contention of the petitioners does not persuade. 

As indicated in the Resolution of February 15, 2011, fifty-nine (59) existing cities had failed as of 2006 to post an average annual income of P100 million based on the figures contained in the certification dated December 5, 2008 by the Bureau of Local Government. The large number of existing cities, virtually 50% of them, still unable to comply with the P100 million threshold income five years after R.A. No. 9009 took effect renders it fallacious and probably unwarranted for the petitioners to claim that the P100 million income requirement is not difficult to comply with.

          In this regard, the deliberations on Senate Bill No. 2157 may prove enlightening, thus:

Senator Osmeña III. And could the gentleman help clarify why a municipality would want to be converted into a city?

Senator Pimentel.  There is only one reason, Mr. President, and it is not hidden.  It is the fact that once converted into a city, the municipality will have roughly more than three times the share that it would be receiving over the internal revenue allotment than it would have if it were to remain a municipality.  So more or less three times or more.

Senator Osmeña III.  Is it the additional funding that they will be able to enjoy from a larger share from the internal revenue allocations?

Senator Pimentel.  Yes, Mr. President.

Senator Osmeña III.  Now, could the gentleman clarify, Mr. President, why in the original Republic Act No. 7160, known as the Local Government Code of 1991, such a wide gap was made between a municipality—what a municipality would earn—and a city?  Because essentially, to a person’s mind, even with this new requirement, if approved by Congress, if a municipality is earning P100 million and has a population of more than 150,000 inhabitants but has less than 100 square kilometers, it would not qualify as a city.

Senator Pimentel.  Yes.

Senator Osmeña III.  Now would that not be quite arbitrary on the part of the municipality?

Senator Pimentel.  In fact, Mr. President, the House version restores the “or”.  So, this is a matter that we can very well take up as a policy issue.  The chair of the committee does not say that we should, as we know, not listen to arguments for the restoration of the word “or” in the population or territorial requirement.

Senator Osmeña III.  Mr. President, my point is that, I agree with the gentleman’s “and”, but perhaps we should bring down the area.  There are certainly very crowded places in this country that are less than 10,000 hectares—100 square kilometers is 10,000 hectares.  There might only be 9,000 hectares or 8,000 hectares.  And it would be unfair if these municipalities already earning P100,000,000 in locally generated funds and have a population of over 150,000 would not be qualified because of the simple fact that the physical area does not cover 10,000 hectares.

Senator Pimentel.  Mr. President, in fact, in Metro Manila there are any number of municipalities.  San Juan is a specific example which, if we apply the present requirements, would not qualify: 100 square kilometers and a population of not less than 150,000.

            But my reply to that, Mr. President, is that they do not have to become a city?

Senator Osmeña III.  Because of the income.

Senator Pimentel.  But they are already earning a lot, as the gentleman said. Otherwise, the danger here, if we become lax in the requirements, is the metropolis-located local governments would have more priority in terms of funding because they would have more qualifications to become a city compared to far-flung areas in Mindanao or in the Cordilleras, or whatever.

            Therefore, I think we should not probably ease up on the requirements.  Maybe we can restore the word “or” so that if they do not have the 100 square kilometers of territory, then if they qualify in terms of population and income, that would be all right, Mr. President.

Senator Osmeña III.  Mr. President, I will not belabor the point at this time.  I know that the distinguished gentleman is considering several amendments to the Local Government Code.  Perhaps this is something that could be further refined at a later time, with his permission.

            So I would like to thank the gentleman for his graciousness in answering our questions.

Senator Pimentel.  I also thank the gentleman, Mr. President.^[29][29]

          The Court takes note of the fact that the municipalities cited by the petitioners as having generated the threshold income of P100 million from local sources, including those already converted into cities, are either in Metro Manila or in provinces close to Metro Manila. In comparison, the municipalities covered by the Cityhood Laws are spread out in the different provinces of the Philippines, including the Cordillera and Mindanao regions, and are considerably very distant from Metro Manila. This reality underscores the danger the enactment of R.A. No. 9009 sought to prevent, i.e., that “the metropolis-located local governments would have more priority in terms of funding because they would have more qualifications to become a city compared to the far-flung areas in Mindanao or in the Cordilleras, or whatever,” actually resulting from the abrupt increase in the income requirement. Verily, this result is antithetical to what the Constitution and LGC have nobly envisioned in favor of countryside development and national growth.  Besides, this result should be arrested early, to avoid the unwanted divisive effect on the entire country due to the local government units closer to the National Capital Region being afforded easier access to the bigger share in the national coffers than other local government units.

          There should also be no question that the local government units covered by the Cityhood Laws belong to a class of their own.  They have proven themselves viable and capable to become component cities of their respective provinces. They are and have been centers of trade and commerce, points of convergence of transportation, rich havens of agricultural, mineral, and other natural resources, and flourishing tourism spots. In his speech delivered on the floor of the Senate to sponsor House Joint Resolution No. 1, Senator Lim recognized such unique traits,^[30][30] viz:

It must be noted that except for Tandag and Lamitan, which are both second-class municipalities in terms of income, all the rest are categorized by the Department of Finance as first-class municipalities with gross income of at least P70 million as per Commission of Audit Report for 2005. Moreover, Tandag and Lamitan, together with Borongan, Catbalogan, and Tabuk, are all provincial capitals.

The more recent income figures of the 12 municipalities, which would have increased further by this time, indicate their readiness to take on the responsibilities of cityhood.

Moreover, the municipalities under consideration are leading localities in their respective provinces.  Borongan, Catbalogan, Tandag, Batac and Tabuk are ranked number one in terms of income among all the municipalities in their respective provinces; Baybay and Bayugan are number two; Bogo and Lamitan are number three; Carcar, number four; and Tayabas, number seven.  Not only are they pacesetters in their respective provinces, they are also among the frontrunners in their regions – Baybay, Bayugan and Tabuk are number two income-earners in Regions VIII, XIII, and CAR, respectively; Catbalogan and Batac are number three in Regions VIII and I, respectively; Bogo, number five in Region VII; Borongan and Carcar are both number six in Regions VIII and VII, respectively.  This simply shows that these municipalities are viable.

Petitioner League of Cities argues that there exists no issue with respect to the cityhood of its member cities, considering that they became cities in full compliance with the criteria for conversion at the time of their creation.

The Court considers the argument too sweeping.  What we pointed out was that the previous income requirement of P20 million was definitely not insufficient to provide the essential government facilities, services, and special functions vis-à-vis the population of a component city.  We also stressed that the increased income requirement of P100 million was not the  only conclusive  indicator for any municipality to survive and remain  viable  as a component city.  These observations were unerringly reflected in the respective incomes of the fifty-nine (59) members of the League of Cities that have still failed, remarkably enough, to be compliant with the new requirement of the P100 million threshold income five years after R.A. No. 9009 became law.

          Undoubtedly, the imposition of the income requirement of P100 million from local sources under R.A. No. 9009 was arbitrary. When the sponsor of the law chose the specific figure of P100 million, no research or empirical data buttressed the figure.  Nor was there proof that the proposal took into account the after-effects that were likely to arise. As already mentioned, even the danger the passage of R.A. No. 9009 sought to prevent might soon become a reality.  While the Constitution mandates that the creation of local government units must comply with the criteria laid down in the LGC, it cannot be justified to insist that the Constitution must have to yield to every amendment to the LGC despite such amendment imminently  producing effects contrary to the original thrusts of the LGC to promote autonomy, decentralization, countryside development, and the concomitant national growth.

          Moreover, if we were now to adopt the stringent interpretation of the Constitution the petitioners are espousing, we may have to apply the same restrictive yardstick against the recently converted cities cited by the petitioners, and find two of them whose conversion laws have also to be struck down for being unconstitutional.  The two laws are R.A. No. 9387^[31][31] and R.A. No. 9388,^[32][32] respectively converting the municipalities of San Juan and Navotas into highly urbanized cities.  A cursory reading of the laws indicates that there is no indication of compliance with the requirements imposed by the LGC, for, although the two local government units concerned presumably complied with the income requirement of P50 million under Section 452 of the LGC and the income requirement of P100 million under the amended Section 450 of the LGC, they obviously did not meet the requirements set forth under Section 453 of the LGC, to wit:

Section 453. Duty to Declare Highly Urbanized Status.—It shall be the duty of the President to declare a city as highly urbanized within thirty (30) days after it shall have met the minimum requirements prescribed in the immediately preceding Section, upon proper application therefor and ratification in a plebiscite by the qualified voters therein.

Indeed, R.A. No. 9387 and R.A. No. 9388 evidently show that the President had not classified San Juan and Navotas as highly urbanized cities upon proper application and ratification in a plebiscite by the qualified voters therein.  A further perusal of R.A. No. 9387 reveals that San Juan did not qualify as a highly urbanized city because it had a population of only 125,558, contravening the required minimum population of 200,000 under Section 452 of the LGC.  Such non-qualification as a component city was conceded even by Senator Pimentel during the deliberations on Senate Bill No. 2157.

The petitioners’ contention that the Cityhood Laws violated their right to a just share in the national taxes is not acceptable.

In this regard, it suffices to state that the share of local government units is a matter of percentage under Section 285 of the LGC, not a specific amount.  Specifically, the share of the cities is 23%, determined on the basis of population (50%), land area (25%), and equal sharing (25%).  This share is also dependent on the number of existing cities, such that when the number of cities increases, then more will divide and share the allocation for cities. However, we have to note that the allocation by the National Government is not a constant, and can either increase or decrease. With every newly converted city becoming entitled to share the allocation for cities, the percentage of internal revenue allotment (IRA) entitlement of each city will decrease, although the actual amount received may be more than that received in the preceding year.  That is a necessary consequence of Section 285 and Section 286 of the LGC. 

As elaborated here and in the assailed February 15, 2011 Resolution, the Cityhood Laws were not violative of the Constitution and the LGC.  The respondents are thus also entitled to their just share in the IRA allocation for cities. They have demonstrated their viability as component cities of their respective provinces and are developing continuously, albeit slowly, because they had previously to share the IRA with about 1,500 municipalities. With their conversion into component cities, they will have to share with only around 120 cities. 

Local government units do not subsist only on locally generated income, but also depend on the IRA to support their development.  They can spur their own developments and thereby realize their great potential of encouraging trade and commerce in the far-flung regions of the country.  Yet their potential will effectively be stunted if those already earning more will still receive a bigger share from the national coffers, and if commercial activity will be more or less concentrated only in and near Metro Manila.

III.

Conclusion

We should not ever lose sight of the fact that the 16 cities covered by the Cityhood Laws not only had conversion bills pending during the 11^th Congress, but have also complied with the requirements of the LGC prescribed prior to its amendment by R.A. No. 9009. Congress undeniably gave these cities all the considerations that justice and fair play demanded.  Hence, this Court should do no less by stamping its imprimatur to the clear and unmistakable legislative intent and by duly recognizing the certain collective wisdom of Congress.

WHEREFORE, the Ad Cautelam Motion for Reconsideration (of the Decision dated 15 February 2011) is denied with finality. 

            SO ORDERED.

                                                LUCAS P. BERSAMIN

                                                Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

MARIA LOURDES P. A.  SERENO

Associate Justice

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

          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.

                                                RENATO C. CORONA

                                                Chief Justice