12. LAND BANK OF THE PHILIPPINES vs. SUNTAY  

G.R. No. 188376; December 14, 2011BERSAMIN, J.: 

In Land Bank v. Suntay,[1]  the Court has declared that the original and exclusive jurisdiction to determine just compensation under Republic Act No. 6657 (Comprehensive Agrarian Reform Law, or CARL) pertains to the Regional Trial Court (RTC) as a Special Agrarian Court; that any effort to transfer such jurisdiction to the adjudicators of the Department of Agrarian Reform Adjudication Board (DARAB) and to convert the original jurisdiction of the RTC into appellate jurisdiction is void for being contrary to the CARL; and that what DARAB adjudicators are empowered to do is only to determine in a preliminary manner the reasonable compensation to be paid to the landowners, leaving to the courts the ultimate power to decide this question.

 Bearing this pronouncement in mind, we grant the petition for review on certiorari and reverse the decision promulgated on June 5,

2009 by the Court of Appeals (CA) in CA-G.R. SP No. 106104 entitled Land Bank of the Philippines v. Hon. Conchita C. Miñas, Regional Agrarian Adjudicaor of Region IV, and Federico Suntay, as represented by his Assignee, Josefina Lubrica , dismissing the petition for certiorari of Land Bank of the Philippines (Land Bank) on the ground of its being moot and academic.

 ANTECEDENTS

  

          Respondent Federico Suntay (Suntay) owned land situated in Occidental Mindoro. In 1972, (DAR) expropriated 948.1911 hectares of Suntay’s land pursuant to Presidential Decree No. 27. [2]  Petitioner Land Bank and DAR fixed the value of the expropriated portion at P4,497.50/hectare, for a total valuation of P4,251,141.68.[3] Rejecting the valuation, however, Suntay filed a petition for determination of just compensation in the Office of the Regional Agrarian Reform Adjudicator (RARAD) of Region IV, DARAB. 

After summary administrative proceeding in DARAB Case No. V-0405-0001-00, RARAD Miñas rendered a decision fixing the total just compensation for the expropriated portion at P157,541,951.30. Land Bank moved for a reconsideration, but RARAD Miñas denied its motion on March 14, 2001. It received the denial on March 26, 2001.  

On April 20, 2001, Land Bank brought a petition for the judicial determination of just compensation in the RTC (Branch 46) in San Jose, Occidental Mindoro as a Special Agrarian Court, impleading Suntay and RARAD Miñas. The petition, docketed as Agrarian Case No. R-1241, essentially prayed that the total just compensation for the expropriated portion be fixed at only P4,251,141.67.[6]

 G.R. No. 159145

DARAB v. Lubrica On May 22, 2001, despite the pendency of Agrarian Case No. R-1241 in the RTC, RARAD Miñas issued an order in DARAB Case

No. V-0405-0001-00, declaring that her decision of January 24, 2001 had become final and executory. Land Bank contested the order through a motion for reconsideration, but RARAD Miñas denied the motion for reconsideration on July 10, 2001.

 On July 18, 2001, RARAD Miñas issued a writ of execution directing the Regional Sheriff of DARAB Region IV to implement

the decision of January 24, 2001.[7]

 On September 12, 2001, Land Bank filed in DARAB a petition for certiorari (with prayer for the issuance of temporary restraining

order (TRO)/preliminary injunction), docketed as DSCA No. 0252, seeking to nullify the following issuances of RARAD Miñas, to wit: (a) The decision of January 24, 2001 directing Land Bank to pay Suntay just compensation of P147,541,951.30; (b) The order dated May 22, 2001 declaring the decision of January 24, 2001 as final and executory; (c) The order dated July 10, 2001 denying Land Bank’s motion for reconsideration; and (d) The writ of execution dated July 18, 2001 directing the sheriff to enforce the decision of January 24, 2001.  On September 12, 2001, DARAB enjoined RARAD Miñas from proceeding with the implementation of the decision of January 24,

2001, and directed the parties to attend the hearing to determine the propriety of issuing a preliminary or permanent injunction. [8]

 On September 20, 2001, Josefina Lubrica (Lubrica), the assignee of Suntay, filed a petition for prohibition in the CA (CA-G.R. SP No.

66710) to prevent DARAB from proceeding in DSCA No. 0252 by mainly contending that the CARL did not grant to DARAB jurisdiction over special civil actions for certiorari. On the same day, the CA granted the prayer for TRO.

 On October 3, 2001, DARAB issued a writ of preliminary injunction enjoining RARAD Miñas from implementing the January 24,

2001 decision and the orders incidental to said decision.[9]

 DARAB submitted its own comment to the CA, arguing that it had issued the writ of injunction under its power of supervision over its

subordinates, like the PARADs and the RARADs. Land Bank also submitted its own comment, citing the prematurity of the petition for prohibition. [10]

 On August 22, 2002, the CA promulgated its decision in CA-G.R. SP No. 66710, holding that DARAB, being a mere formal party,

had no personality to file acomment vis-à-vis the petition for prohibition; and that DARAB had no jurisdiction to take cognizance of DSCA No. 1252, considering that its exercise of jurisdiction over a special civil action for certiorari had no constitutional or statutory basis. Accordingly, the CA granted the petition for prohibition and perpetually enjoined DARAB from proceeding in DSCA No. 1252, which the CA ordered dismissed.[11]

 Thence, DARAB appealed the adverse CA decision to this Court via petition for review on certiorari, docketed as G.R. No. 159145

entitled Department of Agrarian Reform Adjudication Board of the Department of Agrarian Reform, Represented by DAR Secretary Roberto M. Pagdanganan v. Josefina S. Lubrica, in her capacity as Assignee of the rights and interest of Federico Suntay  (DARAB v. Lubrica), insisting that the CA erred in declaring that DARAB had no personality to file a comment; in holding that DARAB had no jurisdiction over DSCA No. 0252; and in nullifying the writ of preliminary injunction issued by DARAB in DSCA No. 0252 for having been issued in violation of the CA’s TRO.

 On April 29, 2005, the Court promulgated its decision in DARAB v. Lubrica (G.R. No. 159145),[12] denying the petition for review. The

Court opined that DARAB’s limited jurisdiction as a quasi-judicial body did not include the authority to take cognizance of petitions for certiorari, in the absence of an express grant in R.A. No. 6657, Executive Order (E.O.) No. 229, and E.O. No. 129-A.

 G.R. No. 157903

Land Bank v. Suntay            In the meanwhile, in Agrarian Case No. R-1241, Suntay filed a motion to dismiss, claiming that Land Bank’s petition for judicial determination of just compensation had been filed beyond the 15-day reglementary period prescribed in Section 11, Rule XIII of the  New Rules of Procedure of DARAB; and that, by virtue of such tardiness, RARAD Miñas’ decision had become final and executory.[13]

The RTC granted Suntay’s motion to dismiss on August 6, 2001 on that ground. Land Bank sought reconsideration, maintaining that its petition for judicial determination of just compensation was a separate action

that did not emanate from the case in the RARAD. Nonetheless, the RTC denied Land Bank’s motion for reconsideration on August 31, 2001.[14]

 On September 10, 2001, Land Bank filed a notice of appeal in Agrarian Case No. R-1241, but the RTC denied due course to

the notice of appeal on January 18, 2002, pointing out that the proper mode of appeal was by petition for review pursuant to Section 60 of the CARL.

 The RTC denied Land Bank’s motion for reconsideration on March 8, 2002.[15]

 Thereupon, Land Bank assailed in the CA the RTC’s orders dated January 18, 2002 and March 8, 2002 via a special civil

action certiorari (CA-G.R. SP No. 70015), alleging that the RTC thereby committed grave abuse of discretion amounting to lack or excess of jurisdiction in denying due course to its notice of appeal; and contending that decisions or final orders of the RTCs, acting as Special Agrarian Courts, were not appealable to the CA through a petition for review but through a notice of appeal.

 On July 19, 2002, the CA promulgated its decision in CA-G.R. SP No. 70015, granting Land Bank’s petition for  certiorari; nullifying

the RTC’s orders dated January 18, 2002 and March 8, 2002; allowing due course to Land Bank’s notice of appeal; and permanently enjoining the RTC from enforcing the nullified orders, and the RARAD from enforcing the writ of execution issued in DARAB Case No. V-0405-0001-00.[16]

           Thereafter, upon Suntay’s motion for reconsideration, the CA reversed itself through the amended decision dated February 5, 2003,[17] and dismissed Land Bank’s petition for certiorari, thuswise: 

WHEREFORE, premises considered, the present Motion for Reconsideration is hereby GRANTED. Consequently, the present petition is hereby DISMISSED.

 The injunction issued by this Court enjoining (a) respondent Executive Judge from enforcing his Orders dated

January 18, 2002 and March 8, 2002 in Agrarian Case No. R-1241; and (b) respondent Regional Agrarian Reform Adjudicator Conchita S. Miñas from enforcing the Writ of Execution dated July 18, 2001 issued in DARAB Case No. V-0405-0001-00, are hereby REVOKED and SET ASIDE.

 SO ORDERED.

 On April 10, 2003, the CA denied the Land Bank’s motion for reconsideration.[18]

           On May 6, 2003, Land Bank appealed to the Court, docketed as G.R. No. 157903, entitled Land Bank of the Philippines v. Federico Suntay, Represented by his Assignee, Josefina Lubrica (Land Bank v. Suntay).[19]

 On October 12, 2005, the Court issued a TRO upon Land Bank’s urgent motion to stop the implementation of RARAD Miñas’

decision dated January 24, 2001 pending the final resolution of G.R. No. 157903.[20]

           On October 11, 2007, this Court promulgated its decision in Land Bank v. Suntay (G.R. No. 157903),[21] viz: 

The crucial issue for our resolution is whether the RTC erred in dismissing the Land Bank’s petition for the determination of just compensation.

 It is clear that the RTC treated the petition for the determination of just compensation as an appeal from the

RARAD Decision in DARAB Case No. V-0405-0001-00.   In dismissing the petition for being filed out of time, the RTC relied on Section 11, Rule XIII of the DARAB New Rules of Procedure which provides:

 Section 11. Land Valuation and Preliminary Determination and Payment of Just Compensation. –

The decision of the Adjudicator on land valuation and preliminary determination and payment of just compensation shall not be appealable to the Board [Department of Agrarian Reform Adjudication Board (DARAB)] but shall be brought directly to the Regional Trial Courts designated as Special Agrarian Courts within fifteen (15) days from receipt of the notice thereof.   Any party shall be entitled to only one motion for reconsideration.       

  The RTC erred in dismissing the Land Bank’s petition. It bears stressing that the petition is  not an appeal from the

RARAD final Decision but an original action for the determination of the just compensation for respondent’s expropriated property, over which the RTC has original and exclusive jurisdiction. This is clear from Section 57 of R.A. No. 6657 which provides:

 Section 57. Special Jurisdiction. – The Special Agrarian Courts [the designated Regional Trial

Courts] shall have original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners, and the prosecution of all criminal offenses under this Act.   The Rules of Court shall apply to all proceedings before the Special Agrarian Courts, unless modified by this Act.

                    The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction within

thirty (30) days from submission of the case for decision.  (Underscoring supplied) 

Parenthetically, the above provision is not in conflict with Section 50 of the same R.A. No. 6657 which states: 

Section 50. Quasi-judicial Powers of the DAR. – The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters involving the implementation of agrarian reform, except those falling under the exclusive jurisdiction

of the Department of Agriculture (DA) and the Department of Environment and Natural Resources (DENR) x x x. In Republic of the Philippines v. Court of Appeals, we held that Section 50 must be construed in harmony with

Section 57 by considering cases involving the determination of just compensation and criminal cases for violations of R.A. No. 6657 as excepted from the plenitude of power conferred upon the DAR. Indeed, there is a reason for this distinction.   The DAR is an administrative agency which cannot be granted jurisdiction over cases of eminent domain (such as taking of land under R.A. No. 6657) and over criminal cases.   Thus, in Land Bank of the Philippines v. Celada, Export Processing Zone Authority v. Dulay and Sumulong v. Guerrero, we held that the valuation of property in eminent domain is essentially a judicial functionwhich cannot be vested in administrative agencies. Also, in Scoty’s Department Store, et al. v. Micaller, we struck down a law granting the then Court of Industrial Relations jurisdiction to try criminal cases for violations of the Industrial Peace Act.

 The procedure for the determination of just compensation cases under R.A. No. 6657, as summarized in Landbank

of the Philippines v. Banal, is that initially, the Land Bank is charged with the responsibility of determining the value of lands placed under land reform and the compensation to be paid for their taking under the voluntary offer to sell or compulsory acquisition arrangement. The DAR, relying on the Land Bank’s determination of the land valuation and compensation, then makes an offer through a notice sent to the landowner. If the landowner accepts the offer, the Land Bank shall pay him the purchase price of the land after he executes and delivers a deed of transfer and surrenders the certificate of title in favor of the government.  In case the landowner rejects the offer or fails to reply thereto, the DAR adjudicator conducts summary administrative proceedings to determine the compensation for the land by requiring the landowner, the Land Bank and other interested parties to submit evidence as to the just compensation for the land. A party who disagrees with the Decision of the DAR adjudicator may bring the matter to the RTC designated as a Special Agrarian Court for the determination of just compensation. In determining just compensation, the RTC is required to consider several factors enumerated in Section 17 of R.A. No. 6657. These factors have been translated into a basic formula in DAR Administrative Order (A.O.) No. 6, Series of 1992, as amended by DAR A.O. No. 11, Series of 1994, issued pursuant to the DAR’s rule-making power to carry out the object and purposes of R.A. No. 6657.  

xxxObviously, these factors involve factual matters which can be established only during a hearing wherein the contending parties present their respective evidence. In fact, to underscore the intricate nature of determining the valuation of the land, Section 58 of the same law even authorizes the Special Agrarian Courts to appoint commissioners for such purpose. In the instant case, the Land Bank properly instituted its petition for the determination of just compensation before

the RTC in accordance with R.A. No. 6657. The RTC erred in dismissing the petition. To repeat, Section 57 of R.A. No. 6657 is explicit in vesting the RTC, acting as a Special Agrarian Court, “original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners.” As we held in Republic of the Philippines v. Court of Appeals:

 xxx. It would subvert this “original and exclusive” jurisdiction of the RTC for the DAR to vest original

jurisdiction in compensation cases in administrative officials and make the RTC an appellate court for the review of administrative decisions.  

 Consequently, although the new rules [Section 11, Rule XIII of the DARAB New Rules of Procedure] speak of directly appealing the decision of adjudicators to the RTCs sitting as Special Agrarian Courts, it is clear from Section 57 that the original and exclusive jurisdiction to determine such cases is in the RTCs. Any effort to transfer such jurisdiction to the adjudicators and to convert the original jurisdiction of the RTCs into appellate jurisdiction would be contrary to Section 57 and therefore would be void. What adjudicators are empowered to do is only to determine in a preliminary manner the reasonable compensation to be paid to landowners, leaving to the courts the ultimate power to decide this question.  (Underscoring supplied) WHEREFORE, we GRANT the instant Petition for Review on Certiorari.   The assailed Amended Decision dated

February 5, 2003 and Resolution dated April 10, 2003 of the Court of Appeals in CA-G.R. SP No. 70015 are REVERSED.  The Orders dated January 18, 2002 and March 8, 2002 issued by the RTC in Agrarian Case No. R-1241 areNULLIFIED.   The RTC is ORDERED to conduct further proceedings to determine the just compensation of respondent’s expropriated property in accordance with the guidelines set by this Court in Landbank of the Philippines v. Banal. 

 No pronouncement as to costs.

 SO ORDERED.[22]

 Suntay sought reconsideration, invoking the pronouncement in DARAB v. Lubrica (G.R. No. 159145) to the effect that “the RARAD

Decision had already attained finality in accordance with the above-quoted rule, notwithstanding Land Bank’s recourse to the special agrarian court.”[23]

 On January 30, 2008, however, the Court denied Suntay’s motion for reconsideration. [24] Accordingly, the decision in Land Bank v.

Suntay became final and executory. 

Second Execution inDARAB Case No. V-0405-0001-00

  

On September 14, 2005, notwithstanding the pendency of Land Bank v. Suntay (G.R. No. 157903) in this Court, RARAD Miñas granted Suntay’s ex partemotion for the issuance of an alias writ of execution by citing the pronouncement in DARAB v. Lubrica (G.R. No. 159145) to the effect that her decision dated January 24, 2001 had attained finality in accordance with DARAB’s rules of procedure. [25]

 Acting pursuant to the alias writ of execution, the DARAB sheriffs issued and served the following notices on the dates indicated

herein, to wit: (a)  A notice of demand to Land Bank on September 15, 2005;[26]

 (b)  A notice of levy to Land Bank on September 21, 2005;[27]

 (c)  A notice of levy to Bank of the Philippine Islands[28] and to Hongkong Shanghai Bank Corporation both on September

28, 2005;[29] and

 (d)  An order to deliver “so much of the funds” in its custody “sufficient to satisfy the final judgment” to Land Bank on

October 5, 2005.[30]

           The moves of the sheriffs compelled Land Bank to file an urgent verified motion for the issuance of a TRO or writ of preliminary injunction in Land Bank v. Suntay (G.R. No. 157903). 

On October 12, 2005, acting on Land Bank’s urgent motion, the Court resolved in Land Bank v. Suntay (G.R. No. 157903), viz: 

(a)      to issue a TEMPORARY RESTRAINING ORDER prayed for, effective immediately, enjoining and restraining Hon. Conchita C. Miñas or the Regional Agrarian Reform Adjudicator (RARAD) concerned, from issuing an alias writ of execution implementing the RARAD decision dated January 24, 2000, until further orders from this court; and 

(b)     to require the petitioner to POST a CASH BOND or a SURETY BOND from a reputable bonding company of indubitable solvency in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00), within five (5) days from notice, otherwise, the temporary restraining order herein issued shall AUTOMATICALLY be lifted. Unless and until the Court directs otherwise, the bond shall be effective from its approval by the Court until this case is finally decided, resolved or terminated. [31]

           On October 24, 2005, the Court directed the parties in Land Bank v. Suntay (G.R. No. 157903) to maintain the status quo ante,[32] thus: 

G.R. No. 157903 xxx - Acting on the petitioner’s very urgent manifestation and omnibus motion dated October 21, 2005, the Court Resolves to DIRECT the parties to maintain theSTATUS QUO prior to the issuance of the Alias Writ of Execution dated September 14, 2005. All actions done in compliance or in connection with the said Writ issued by Hon. Conchita C. Miñas, Regional Agrarian Reform Adjudicator (RARAD), are hereby DEEMED QUASHED, and therefore, of no force and effect.

            On the same day of October 24, 2005, however, the sheriffs held a public auction of Land Bank’s levied shares of stock in the Philippine Long Distance Telephone Company (PLDT) and Manila Electric Company (MERALCO) at the Office of the DARAB Regional Clerk in Mandaluyong City. In that public auction, Lubrica, the lone bidder, was declared the highest bidder. [33]

 On October 25, 2005, the same sheriffs resumed the public auction of Land Bank’s remaining PLDT shares of stock and First Gen

Corporation bonds. Lubrica was again declared the highest bidder.[34] The sheriffs then issued two certificates of sale in favor of Lubrica. On October 25, 2005, RARAD Miñas reversed herself and quashed all acts done pursuant to the writ of execution,[35] viz: 

This refers to the Resolution of the Third Division of the Supreme Court dated October 24, 2005 in G.R. No. 157903 (Land Bank of the Philippines vs. Federico Suntay, Represented by His Assignee, Josefina Lubrica) directing the parties to maintain the STATUS QUO prior to the issuance of the Alias Writ of Execution dated September 14, 2005; and that all actions done in compliance or in connection with said Writ issued by  Hon. Conchita C. Miñas, Regional Agrarian Reform Adjudicator (RARAD) are hereby DEEMED QUASHED, and therefore, of no force and effect.

 The Sheriffs and all parties in this case are ordered to strictly comply with this Order immediately. SO ORDERED.

            As earlier stated, on October 11, 2007, the Court resolved Land Bank v. Suntay (G.R. No. 157903) in favor of Land Bank.[36]

 This Case (G.R. No. 188376)

  On October 29, 2008, Suntay presented to RARAD Miñas in DARAB Case No. V-0405-0001-00 his urgent ex parte manifestation

and motion to resume interrupted execution,[37] citing Land Bank v. Martinez (G.R. No. 169008, July 31, 2008, 560 SCRA 776). Immediately, on October 30, 2008, RARAD Miñas granted Suntay’s urgent ex parte manifestation and motion, and ordered the

DARAB sheriffs to resume their implementation of the alias writ of execution issued in DARAB Case No. V-0405-0001-00, stating: 

The basis of the motion, the case of Land Bank vs. Raymunda Martinez (supra) indubitably clarified that “the adjudicator’s decision on land valuation attained finality after the lapse of the 15-day period citing the case of Department of Agrarian Reform Adjudication Board vs. Lubrica in GR No. 159145 promulgated on April 29, 2005. Movant in this case therefore is correct that the Decision in the Land Bank case of the Philippines vs. Raymunda Martinez resolved the conflict by rendering a Decision upholding the rulings of the Second Division of the Supreme Court in GR No. 159145 entitled Department of Agrarian Reform Adjudication Board (DARAB) of the Department of Agrarian Reform (DAR)  represented   by   DAR  Secretary,  Roberto M.  Pagdanganan  vs.

  

Josefina Lubrica in her capacity as Assignee of rights and interest of Federico Suntay and striking down as erroneous the rulings of the Third Division in GR No. 157903 entitled Land Bank of the Philippines vs. Federico Suntay, et. al.

 The ruling in the case of Land Bank of the Philippines vs. Raymunda Martinez which upheld the Decision in Lubrica

having attained finality, the Status Quo Order issued by the Third Division in GR No. 157903 is now rendered ineffective. WHEREFORE, premises considered, the instant motion is hereby GRANTED. Sheriffs Maximo Elejerio and Juanita Baylon are hereby ordered to resume the interrupted execution of the Alias Writ

issued in this case on September 14, 2005. SO ORDERED.[38]

 The DARAB sheriffs forthwith served a demand to comply dated October 30, 2008 on the Philippine Depository and Trust

Corporation (PDTC) and Securities Transfer Services, Inc. (STSI).[39]

 

By letter dated October 31, 2008, PDTC notified Land Bank about its being served with the demand to comply and about its action thereon, including an implied request for Land Bank to “uplift” the securities.[40]

 Also on October 31, 2008, PDTC filed a manifestation and compliance in the office of the RARAD, Region IV, stating that it had

already “issued a written notice” to Land Bank “to uplift the assets involved” and that “it ha(d) caused the subject assets to be outside the disposition” of Land Bank.[41]

 In response, Land Bank wrote back on November 3, 2008 to request PDTC to disregard the DARAB sheriffs’ demand to comply.[42]

 PDTC responded to Land Bank that it was not in the position to determine the legality of the demand to comply, and that it was

taking the necessary legal action.[43]

 On November 10, 2008, PDTC sent a supplemental letter to Land Bank reiterating its previous letter. [44]

 Given the foregoing, Land Bank commenced on November 12, 2008 a special civil action for certiorari in the CA (CA-G.R. SP No.

106104), alleging that RARAD Miñas had “committed grave abuse of discretion amounting to lack or in excess of jurisdiction in rendering  ex parte the assailed Order dated October 30, 2008 as it varies, modifies or alters the Supreme Court Decision dated October 11, 2007, which had become final and executory;” and that the DARAB sheriffs had “committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing to, and serving on, the Philippine Depository and Trust Corporation, a copy of the Demand to Comply dated  October 30, 2008 notwithstanding the unquestioned finality of the Supreme Court’s decision dated October 11, 2007.” [45]

 Suntay submitted a comment and opposed the issuance of a TRO.[46]

 On November 28, 2008, before the CA could act on Land Bank’s application for TRO, MERALCO cancelled Land Bank’s 42,002,750

shares of stock and issued new stock certificates in the name of Lubrica. MERALCO recorded the transfer of ownership of the affected stocks in its stock and transfer book. All such acts of MERALCO were done in compliance with the  demand to comply by the DARAB sheriffs pursuant to the certificate of sheriff’s sale dated October 24, 2005 and thecertificate authorizing registration dated November 20, 2008 (respecting Land Bank’s MERALCO shares) issued in favor of Lubrica.[47]

 Without yet being aware of the transfers, the CA issued a TRO on December 4, 2008 to prevent the implementation of RARAD

Miñas’ order dated October 30, 2008.[48]  Land Bank then sought the approval of its bond for that purpose.[49]  On December 4, 2008, MERALCO communicated to the CA its cancellation of Land Bank’s certificates of MERALCO stocks on

November 28, 2008 and its issuance of new stock certificates in the name of Lubrica.[50]

 Learning of the cancellation of its stock certificates and the transfer of its MERALCO shares in the name of Lubrica, Land Bank filed

on December 12, 2008 itsvery urgent manifestation and omnibus motion, praying that the CA’s TRO issued on December 4, 2008 be made to cover any and all acts done pursuant to the assailed order dated October 30, 2008 and the demand to comply dated October 30, 2008. Land Bank further prayed that the cancellation of its certificates of MERALCO shares be invalidated and the transfer of the shares in favor of Lubrica be quashed, and that the parties be directed to maintain the status quo ante.[51]

 On December 17, 2008, Land Bank presented a very urgent motion to resolve and supplemental motion, seeking to expand the

scope of the TRO earlier issued; to restrain the Philippine Stock Exchange (PSE) from allowing the trading of its (Land Bank) entire MERALCO shares, and the Corporate Secretary of MERALCO from recording or registering the transfer of ownership of Land Bank’s MERALCO shares to other parties in MERALCO’s stock and transfer book; to invalidate the cancellation of the certificates of MERALCO shares and to quash the transfer in favor of Lubrica and all subsequent transfers to other parties; to direct the parties and all concerned persons and entities to maintain the status quo; and to declare all acts done pursuant to the assailed order and the demand to comply null and void and of no force and effect.[52]

 On December 24, 2008, the CA denied Land Bank’s very urgent motion to resolve and supplemental motion.[53]

 In the meantime, DAR administratively charged and preventively suspended RARAD Miñas for issuing the October 30, 2008 order,

and replaced her with RARAD Marivic Casabar (RARAD Casabar) in RARAD Region IV.[54]

 On December 15, 2008, RARAD Casabar recalled RARAD Miñas order dated October 30, 2008.[55]

 On December 17, 2008, RARAD Casabar directed: (a)   MERALCO to cancel the stock certificates issued to Lubrica and to any of her transferees or assignees, and to restore the

ownership of the shares to Land Bank and to record the restoration in MERALCO’s stock and transfer book; and (b)   PSE, PDTC, STSI, the Philippine Dealing System Holdings Corporation and Subsidiaries (PDS Group), and any stockbroker,

dealer, or agent of MERALCO shares to stop trading or dealing on the shares.[56]

 On June 5, 2009, the CA promulgated a resolution  in CA-G.R. SP No. 106104, dismissing Land Bank’s petition for certiorari for

being moot and academic,[57]citing the recall by RARAD Casabar of RARAD Miñas’s order of October 30, 2008.         

On June 23, 2009, Land Bank, through the Office of the Government Corporate Attorney, filed in this Court a motion for extension of time to file petition for review on certiorari, seeking additional time of 30 days within which to file its petition for review on certiorari.[58] 

 On July 24, 2009, before the Court could take any action on its motion for extension of time to file petition for review, Land Bank

moved to withdraw themotion, allegedly because the CA still retained jurisdiction over CA-G.R. SP No. 106104 due to Lubrica’s having meanwhile filed the following motions and papers in CA-G.R. SP No. 106104, namely:

 (a) Motion for reconsideration or for clarificatory ruling dated June 23, 2009, a copy of which Land Bank received on July 2,

2009; (b)Additional arguments in support of the motion for reconsideration and for clarificatory ruling dated July 1, 2009, a copy of

which Land Bank received on July 8, 2009; (c) Motion for leave of court to file the attached manifestation dated July 8, 2009, a copy of which Land Bank received on

July 13, 2009; (d) Manifestation dated July 8, 2009, a copy of which Land Bank received on July 13, 2009; and 

(e)  Motion to direct RARAD Casabar to explain why she had issued her orders of December 15, 2008 and December 17, 2008, a copy of which Land Bank received on July 20, 2009.[59]

 On July 31, 2009, Land Bank filed a very urgent ex parte motion for execution dated July 30, 2009 in DARAB, seeking the execution

of RARAD Casabar’s orders of December 15, 2008 and December 17, 2008.[60]

 On August 7, 2009, Land Bank filed in this Court: (a) a motion to withdraw its motion to withdraw motion for extension of time to file

petition for review oncertiorari; and (b) a motion for leave to file and to admit[61] the attached petition for review on certiorari.[62]

           On September 9, 2009, the Court denied Land Bank’s motion to withdraw its motion to withdraw motion for extension of time to file petition for review oncertiorari, but granted Land Bank’s motion for leave to file and to admit the attached petition for review on certiorari. The Court required Lubrica to comment on the petition for review, and Land Bank to comply with A.M. No. 07-6-5-SC dated July 10, 2007.[63]

           On September 30, 2009, the CA denied Lubrica’s motion to direct RARAD Casabar to explain why she had issued her orders of December 15, 2008 andDecember 17, 2008, among others.[64]

           On October 14, 2009, Lubrica filed a motion for leave to file motion to dismiss,[65] stating that Land Bank’s petition for certiorari had been filed out of time and that the assailed order of RARAD Miñas had been affirmed by the final judgment in  DARAB v. Lubrica (G.R. No. 159145), and had been supported by the ruling inLand Bank v. Martinez, G.R. No. 169008, July 31, 2008, 560 SCRA 776. 

On May 5, 2010, Land Bank filed an urgent verified motion for the issuance of a TRO or writ of preliminary injunction, seeking thereby to enjoin MERALCO, its Corporate Secretary, and its Assistant Corporate Secretary, pending the proceedings and until the resolution of the case, from releasing on May 11, 2010 and thereafter the cash dividends pertaining to the disputed shares in favor of Lubrica or any person acting on her behalf.[66]

 Lubrica opposed Land Bank’s motion.[67]  Todate, the Court has taken no action on Land Bank’s urgent verified motion. 

ISSUES           Land Bank contends that: 

The Court of Appeals acted not in accord with law and with the applicable jurisprudence when it dismissed the petition a quo on purely technical grounds.

 A.                       

Contrary to the findings of the Court of Appeals, DARAB v. Lubrica is not the law of the case insofar as the issue on the proper procedure to follow in the determination of the just compensation is concerned. 

B.                        The issue before the Court of Appeals, whether the order dated 30 October 2008 was issued with grave abuse of discretion, has not been rendered moot and academic with the subsequent issuance of the order dated December 15, 2008. 

C.                        The Court of Appeals erred when in gave its implicit imprimatur to the irregular procedure for execution, which the RARAD and the DARAB sheriffs adopted, in gross violation of Republic Act No. 6657 and the DARAB Rules of Procedure.[68]

  

On the other hand, Lubrica proposes as issue: 

Is the January 24, 2001 Decision of RARAD Conchita Miñas final and executory?[69]

 As we see it, then, the Court has to resolve the following, to wit:

 1.     Whether or not RARAD Casabar’s orders dated December 15, 2008 and December 18, 2008 rendered Land Bank’s

petition for certiorari moot and academic; 

2.     Whether or not RARAD Miñas’ order dated October 30, 2008 was valid; and 

3.     Whether or not the manner of execution of RARAD Miñas’ order dated October 30, 2008 was lawful. 

 RULING

  

          The appeal has merit.  

I.Whether or not RARAD Casabar’s orders

dated December 15, 2008 and December 18, 2008rendered Land Bank’s petition for certiorari moot and academic

  

The CA rationalized its dismissal of Land Bank’s petition for certiorari in the following manner: 

It must be stressed that this Court is dismissing the instant petition not because it has lost jurisdiction over the case but because the case has already become moot and academic. In other words, this Court is dismissing the case out of practicality because proceeding with the merit of the case would only be an exercise in futility. This is because whichever way this Court would later decide the case would only be rendered immaterial and ineffectual by the foregoing new Orders of the RARAD. To elaborate, a denial of the instant petition would mean that We are sustaining the Miñas’ Order dated October 30, 2008 which, as matters stand right now, had been superseded by the two new orders of the RARAD. Will sustaining RARAD Miñas’ Order have the effect of nullifying the two new orders of RARAD

Casabar? The answer is still in the negative. On the other hand, the ultimate result of granting this petition would be that the two new Orders would still govern, which is already the prevailing situation at this point. Indeed, the dismissal of the case on this ground is in itself an exercise by the Court of its jurisdiction over the case.[70]     We cannot uphold the CA. To the extent that it nullified and recalled RARAD Miñas’ October 30, 2008 order, RARAD Casabar’s December 15,

2008 order seemingly mooted Land Bank’s petition for certiorari (whereby Land Bank contended that  RARAD Miñas, through her order dated October 30, 2008, could not disregard or invalidate the decision promulgated on October 11, 2007 in G.R. No. 157903, and that the monies, funds, shares of stocks, and accounts of Land Bank, which did not form part of the Agrarian Reform Fund (ARF), could not be levied upon, garnished, or transferred to Lubrica in satisfaction of RARAD Miñas’ January 24, 2000 decision).[71]

 At first glance, indeed, RARAD Casabar’s December 15, 2008 order seemingly rendered the reliefs prayed for by the petition

for certiorari unnecessary and moot. An issue is said to become moot and academic when it ceases to present a justiciable controversy, so that a declaration on the issue would be of no practical use or value.[72]

 However, the application of the moot-and-academic principle is subject to several exceptions already recognized in this jurisdiction.

In David v. Macapagal-Arroyo,[73] the Court has declared that the moot-and-academic principle is not a magical formula that automatically dissuades courts from resolving cases, because they will decide cases, otherwise moot and academic, if they find that:

 (a) There is a grave violation of the Constitution; (b) The situation is of exceptional character, and paramount public interest is involved; (a) The constitutional issue raised requires formulation of controlling principles to guide the Bench, the Bar, and the public;

or (b) A case is capable of repetition yet evading review. In addition, in Province of North Cotabato v. Government of the Republic of the Philippines Peace Panel on Ancestral Domain

(GRP),[74] the Court has come to consider a voluntary cessation by the defendant or the doer of the activity complained of as another exception to the moot-and-academic principle, the explanation for the exception being that:

 xxx once a suit is filed and the doer voluntarily ceases the challenged conduct, it does not automatically deprive

the tribunal of power to hear and determine the case and does not render the case moot especially when the plaintiff seeks damages or prays for injunctive relief against the possible recurrence of the violation. 

          The exception of voluntary cessation of the activity without assuring the non-recurrence of the violation squarely covers this case. Hence, the CA’s dismissal of CA-G.R. SP No. 106104 on the ground of mootness must be undone. 

Yet another reason why the Court should still resolve derives from the fact that the supervening RARAD Casabar’s recall order did not at all resolve and terminate the controversy between the parties. The CA itself conceded that Lubrica could still assail the validity of RARAD Casabar’s recall order.[75] That possibility underscores the need to definitely resolve the controversy between the parties to avoid further delay. As herein shown, this appeal is the third time that the intervention of the Court has been invoked regarding the controversy, the earlier ones being DARAB  v. Lubrica (G.R. No. 159145) and Land Bank v. Suntay (G.R. No. 157903). The need to put an end to the controversy thus becomes all the more pressing and practical.

 We further discern that the parties have heretofore acted to advance their respective interests and claims against each other by

relying on seemingly conflicting pronouncements made in DARAB v. Lubrica (G.R. No. 159145) and Land Bank v. Suntay (G.R. No. 157903). Their reliance has unavoidably spawned and will continue to spawn confusion about their rights and can occasion more delays in the settlement of their claims.

 The Court does not surely desire confusion and delay to intervene in any litigation, because the Court only aims to ensure to litigants

a just, speedy, and inexpensive administration of justice. Thus, the Court feels bound to undo the CA’s deeming Land Bank’s petition for certiorari mooted by RARAD Casabar’s recall order. Verily, RARAD Miñas’ assailed order, until and unless its legality is declared and settled by final judgment, may yet be revived, and the judicial dispute between the parties herein may then still resurrect itself.     

II.Whether or not RARAD Miñas’ order

dated October 30, 2008 was valid 

The controversy is traceable to the October 30, 2005 Order of RARAD Miñas directing the DARAB sheriffs to resume the implementation of the alias writ of execution she had issued in DARAB Case No. V-0405-0001-00. She predicated her order on the following pronouncement made in Land Bank v. Martinez,[76] viz:

 To resolve the conflict in the rulings of the Court, we now declare herein, for the guidance of the bench and the bar,

that the better rule is that stated in Philippine Veterans Bank, reiterated in Lubrica and in the August 14, 2007 Decision in this case. Thus, while a petition for the fixing of just compensation with the SAC is not an appeal from the agrarian reform adjudicator’s decision but an original action, the same has to be filed within the 15-day period stated in the DARAB Rules; otherwise, the adjudicator’s decision will attain finality. This rule is not only in accord with law and settled jurisprudence but also with the principles of justice and equity. Verily, a belated petition before the SAC, e.g., one filed a month, or a year, or even a decade after the land valuation of the DAR adjudicator, must not leave the dispossessed landowner in a state of uncertainty as to the true value of his property.[77]

 Land Bank contends, however, that Land Bank v. Martinez did not vary, alter, or disregard the judgment in Land Bank v.

Suntay (G.R. No. 157903). Lubrica counters that instead of Land Bank v. Suntay (G.R. No. 157903) being applicable, it was DARAB v. Lubrica (G.R. No.

159145) that had become immutable and unalterable. 

Lubrica is grossly mistaken. Through the resolution promulgated on January 30, 2008 in Land Bank v. Suntay (G.R. No. 157903), the Court denied with finality

Suntay’s motion for reconsideration filed against the October 11, 2007 decision. The decrees in  Land Bank v. Suntay (G.R. No. 157903) were to nullify the order dated January 18, 2002 (denying due course to Land Bank’s notice of appeal of the dismissal of its petition for determination of just compensation upon Suntay’s motion to dismiss) and the order dated March 8, 2002 (denying Land Bank’s motion for

reconsideration), both issued by the RTC in Agrarian Case No. R-1241; and to order the RTC to “conduct further proceedings to determine the just compensation of (Suntay)’s expropriated property in accordance with the guidelines set by this Court in  Landbank of the Philippines v. Banal.” 

 In effect, Land Bank v. Suntay (G.R. No. 157903) set aside the decision of RARAD Miñas dated January 24, 2000 fixing the just

compensation. The finality of the judgment in Land Bank v. Suntay (G.R. No. 157903) meant that the decrees thereof could no longer be altered, modified, or reversed even by the Court en banc. Nothing is more settled in law than that a judgment, once it attains finality, becomes immutable and unalterable, and can no longer be modified in any respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be made by the court rendering it or by the highest court of the land.[78] This rule rests on the principle that all litigation must come to an end, however unjust the result of error may appear; otherwise, litigation will become even more intolerable than the wrong or injustice it is designed to correct. [79]

 Resultantly, Lubrica cannot invoke the pronouncement in Land Bank v. Martinez in order to bar the conclusive effects of the judicial

result reached in Land Bank v. Suntay (G.R. No. 157903). 

II.a.Land Bank v. Suntay (G.R. No. 157903)

is now the law of the case We underscore that Land Bank v. Suntay (G.R. No. 157903) was the appropriate case for the determination of the issue of the

finality of the assailed RARAD Decision by virtue of its originating from Land Bank’s filing on April 20, 2001 of its  petition for judicial determination of just compensation against Suntay and RARAD Miñas in the RTC sitting as a Special Agrarian Court. Therein, Suntay filed a motion to dismiss mainly on the ground that the petition had been filed beyond the 15-day reglementary period as required by Section 11, Rule XIII of the Rules of Procedure of DARAB. After the RTC granted the motion to dismiss, Land Bank appealed to the CA, which sustained the dismissal. As a result, Land Bank came to the Court (G.R. No. 157903), and the Court then defined the decisive issue to be: “whether the RTC erred in dismissing the Land Bank’s petition for the determination of just compensation.”[80]

 The Court ruled in favor of Land Bank. For both Land Bank and Suntay (including his assignee Lubrica), the holding in Land Bank v.

Suntay (G.R. No. 157903) became the law of the case that now controlled the course of subsequent proceedings in the RTC as a Special Agrarian Court. In Cucueco v. Court of Appeals,[81] the Court defined law of the case as “the opinion delivered on a former appeal.”  Law of the case is a term applied to an established rule that when an appellate court passes on a question and remands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal.  It means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court.[82] With the pronouncement in G.R. No. 157903 having undeniably become the law of the case between the parties, we cannot pass upon and rule again on the same legal issue between the same parties.

 II.b.

Land Bank v. Martinez is neitherapplicable nor binding on the parties herein

  Suntay’s reliance on Land Bank v. Martinez (G.R. No. 169008, July 31, 2008, 560 SCRA 776) is unavailing for the simple reason that

the pronouncement was absolutely unrelated to the present controversy. Land Bank v. Martinez concerned a different set of facts, a different set of parties, and a different subject matter; it was extraneous to

the present matter, or toDARAB v. Lubrica (G.R. No. 159145) and Land Bank v. Suntay (G.R. No. 157903). Land Bank and Suntay (and his assignee Josefina Lubrica) were not parties inLand Bank v. Martinez, rendering the pronouncement inapplicable to them now.

 At best, Land Bank v. Martinez may only guide the resolution of similar controversies, but only prospectively. We note that Land

Bank v. Suntay (G.R. No. 157903) was promulgated in October 11, 2007, while Land Bank v. Martinez was promulgated on July 31, 2008. The rule followed in this jurisdiction is that a judicial interpretation that varies from or reverses another is applied prospectively   and should not apply to parties who relied on the old doctrine and acted in good faith. To hold otherwise is to deprive the law of its quality of fairness and justice, for, then, there is no recognition of what had transpired prior to such adjudication.[83]

 Accordingly, if posterior changes in doctrines of the Court cannot retroactively be applied to nullify a prior final ruling in the same

proceeding where the prior adjudication was had,[84] we have stronger reasons to hold that such changes could not apply to a different proceeding with a different set of parties and facts. 

 Suntay is also incorrect to insinuate that a modification or reversal of a final and executory decision rendered by a division of the

Court would be valid only if done by the Court en banc.[85] Such insinuation runs afoul of the well settled doctrine of immutability of judgments. Moreover, although Article VIII, Section 4 (1) of the Constitution gives the Court the discretion to sit either en banc or in divisions of three, five, or seven Members,[86] the divisions are not considered separate and distinct courts. Nor is a hierarchy of courts thereby established within the Supreme Court, which remains a unit notwithstanding that it also works in divisions. The actions taken and the decisions rendered by any of the divisions are those of the Court itself, considering that the divisions are not considered separate and distinct courts but as divisions of one and the same court.[87] Lastly, the only thing that the Constitution allows the banc to do in this regard is to reverse a doctrine or principleof law laid down by the Court en banc or in division.[88] 

 II.c.

Pronouncement in DARAB v. Lubrica(G.R. No. 159145) was a mere obiter dictum

 In Department of Agrarian Reform Adjudication Board (DARAB) v. Lubrica (G.R. No. 159145), the DARAB assigned as erroneous in

its petition the following rulings of the CA: (a) that DARAB, being a formal party, should not have filed a comment to the petition, for, instead, the comment should have been filed by co-respondent Land Bank as the financial intermediary of CARP; (b) that DARAB had no jurisdiction over DSCA 0252, a special civil action for certiorari; and (c) that the writ of preliminary injunction DARAB had issued in DSCA 0252 was null and void for having been in violation of the TRO of the CA.[89]

 It is evident that the only issues considered and resolved in DARAB v. Lubrica (G.R. No. 159145) were: (a) the personality of

DARAB to participate and file comment; (b) the jurisdiction of DARAB over petitions for certiorari; and (c) the validity of the preliminary injunction it issued. It is equally evident that at no time inDARAB v. Lubrica (G.R. No. 159145) did the finality of RARAD Miñas’ decision become the issue, precisely because the finality of RARAD Miñas’ decision had been put in issue instead in  Land Bank v. Suntay (G.R. No. 157903), a suit filed ahead of DARAB v. Lubrica (G.R. No. 159145). In short, the question about the finality of RARAD Miñas’ decision was itself the lis mota in Land Bank v. Suntay (G.R. No. 157903).

 

In view of the foregoing, Suntay’s invocation of the pronouncement in DARAB v. Lubrica (G.R. No. 159145), to the effect that RARAD Miñas’ decision had attained finality upon the failure of Land Bank to appeal within the 15-day reglementary period, was unfounded and ineffectual because the pronouncement was a mereobiter dictum.

 An obiter dictum has been defined as an opinion expressed by a court upon some question of law that is  not necessary in the

determination of the case before the court. It is a remark made, or opinion expressed, by a judge, in his decision upon a cause by the way, that is, incidentally or collaterally, and not directly upon the question before him, or upon a point not necessarily involved in the determination of the cause, or introduced by way of illustration, or analogy or argument. [90] It does not embody the resolution or determination of the court, and is made without argument, or full consideration of the point. [91] It lacks the force of an adjudication, being a mere expression of an opinion with no binding force for purposes of res judicata.[92]

 II.d.

Suntay was estopped from denyingbeing aware of existence of the judgmentin Land Bank v. Suntay (G.R. No. 157903)

 Suntay cannot deny or evade the adverse effect and conclusiveness of the adverse decision in Land Bank v. Suntay (G.R. No.

157903). He was aware of it due to his having actively participated therein. In the RTC, he had filed the motion to dismiss against Land Bank’s petition for determination of just compensation. In the CA, he filed a motion for reconsideration against the adverse decision of the CA, which ultimately favored him by reconsidering the adverse decision. In this Court, he actively defended the CA’s self-reversal, including filing an omnibus motion for partial reconsideration/clarification after the Court rendered its decision dated October 11, 2007. In view of his active participation in various stages, he cannot now turn his back on the judgment in Land Bank v. Suntay (G.R. No. 157903) simply because it was adverse to him in order to invoke instead the “favorable” ruling in DARAB v. Lubrica (G.R. No. 159145).

 III.

Whether or not the manner of execution ofRARAD Miñas’ order dated October 30, 2008 was lawful

           The writs of execution issued by RARAD Miñas and the manner of their enforcement by the DARAB sheriffs did not accord with the applicable law and the rules of DARAB; hence, they were invalid and ineffectual. 

III.a.Order of October 30, 2008 to resume execution

was invalid because there was nothing to resume 

In Land Bank v. Suntay (G.R. No. 157903), the Court directed the parties on October 24, 2005 to maintain the status quo prior to the issuance of the alias writ of execution, holding that all actions done in compliance or in connection with the alias writ of execution were “DEEMED QUASHED, and therefore, of no force and effect.”[93]

 On October 25, 2005, RARAD Miñas herself quashed the acts done pursuant to her writ of execution, declaring that “all actions done

in compliance or in connection with the xxx Writ” issued by  her “are DEEMED QUASHED, and therefore, of no force and effect.”[94]

           As a result, the following acts done in compliance with or pursuant to the writ of execution issued ex parte by RARAD Miñas on September 14, 2005 were expressly quashed and rendered of no force and effect, to wit: 

1.     The DARAB sheriffs’ issuance on September 15, 2005 of (a) the notice of demand against Land Bank; (b) the notice of levy on September 21, 2005 to Land Bank; (c) the notice of levy on September 28, 20005 to Bank of the Philippine Islands and to Hongkong Shanghai Bank Corporation; and (d) anorder to deliver on October 5, 2005, addressed to Land Bank, “so much of the funds” in its custody “sufficient to satisfy the final judgment;”

 2. The holding by the DARAB sheriffs of the public auction sale on October 24, 2005 involving the levied PLDT and

MERALCO shares of stock of Land Bank at the Office of the Regional Clerk of DARAB in Mandaluyong City, wherein Lubrica was the highest bidder;

 3. The resumption on October 25, 2005 by the DARAB sheriffs of the public auction sale of some of Land Bank’s remaining

PLDT shares and First Gen Corp. bonds, wherein Lubrica was also declared the highest bidder; and 4. The issuance on October 25, 2005 by the DARAB sheriffs of two certificates of sale in favor of Lubrica as the highest

bidder. 

In view of the foregoing, the order issued on October 30, 2008 by RARAD Miñas directing the DARAB sheriffs to “resume the interrupted executions of the Alias Writ issued xxx on September 14, 2005” [95] was not legally effective and valid because there was no longer any existing valid prior acts or proceedings to resume enforcement or execution of.

 Consequently, the following acts done by virtue of RARAD Miñas’ October 30, 2008 order to resume the implementation of the

September 15, 2005 writ of execution were bereft of factual and legal bases, to wit: 1.  The DARAB sheriffs’ service on PDTC and STSI of a demand to comply dated October 30, 2008; 2. Letter of PDTC dated October 31, 2008 informing Land Bank of the demand to comply and the action it had taken, and

requesting Land Bank to “uplift” the securities; 3. PDTC’s manifestation and compliance dated October 31, 2008 filed in the office of the RARAD, Region IV, stating,

among others, that PDTC had already “issued a written notice” to Land Bank “to uplift the assets involved” and that PDTC “has caused the subject assets to be outside the disposition” of Land Bank; and

 4.      MERALCO’s cancellation on November 28, 2008 of Land Bank’s 42,002,750 shares, its issuance of new stock

certificates in the name of Lubrica, and its subsequent recording of the transfer of ownership of the stocks in the company’s stock and transfer book.

  

III.b.Levy of Land Bank’s MERALCOshares was void and ineffectual

 

A further cause that invalidated the execution effected against Land Bank’s MERALCO shares derived from the statutory and reglementary provisions governing the payment of any award for just compensation. At the outset, we hold that Land Bank’s liability under the CARP was to be satisfied only from the ARF.

 The ARF was first envisioned in Proclamation No. 131 issued on July 22, 1987 by President Aquino to institute the Government’s

centerpiece Comprehensive Agrarian Reform Program, to wit: 

Section 2. Agrarian Reform Fund. - There is hereby created a special fund, to be known as the Agrarian Reform fund, an initial amount of FIFTY BILLION PESOS (P50,000,000,000.00) to cover the estimated cost of the Comprehensive Agrarian Reform Program from 1987 to 1992 which shall be sourced from the receipts of the sale of the assets of the Asset Privatization Trust receipts of ill-gotten wealth received through the Presidential Commission on Good Government and such other sources as government may deem appropriate. The amounts collected and accruing to this special fund shall be considered automatically appropriated for the purpose authorized in this proclamation. Executive Order No. 229 implemented the creation of the ARF, viz:

 Section 20.   Agrarian Reform Fund. - As provided in Proclamation No. 131 dated July 22, 1987, a special fund is

created, known as The Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS (P50 billion) to cover the estimated cost of the CARP from 1987 to 1992 which shall be sourced from the receipts of the sale of the assets of the Asset Privatization Trust (APT) and receipts of the sale of ill-gotten wealth recovered through the Presidential Commission on Good Government and such other sources as government may deem appropriate.  The amount collected and accruing to this special fund shall be considered automatically appropriated for the purpose authorized in this Order.

  

In enacting the CARL, Congress adopted and expanded the ARF, providing in its Section 63, as follows: 

Section 63. Funding Source.- The initial amount needed to implement this Act for the period of ten (10) years upon approval hereof shall be funded from the Agrarian Reform Fund created under Sections 20 and 21 of Executive Order No. 229. Additional amounts are hereby authorized to be appropriated as and when needed to augment the Agrarian Reform Fund in order to fully implement the provisions of this Act.

 Sources of funding or appropriations shall include the following:

 (a) Proceeds of the sales of the Assets Privatization Trust;   (b) All receipts from assets recovered and from sale of ill-gotten wealth recovered through the

Presidential Commission on Good Government; (c) Proceeds of the disposition of the properties of the Government in foreign countries;   (d) Portion of amounts accruing to the Philippines from all sources or official foreign aid grants and

concessional financing from all countries, to be used for the specific purposes of financing production credits, infrastructures, and other support services required by this Act;

   (e) Other government funds not otherwise appropriated.

          All funds appropriated to implement the provisions of this Act shall be considered continuing appropriations during the period of its implementation. (emphases supplied) Subsequently, Republic Act No. 9700 amended the CARL in order to strengthen and extend the CARP. It is notable that Section 21

of Republic Act No. 9700expressly provided that “all just compensation payments to landowners, including execution of judgments therefore, shall only be sourced from the Agrarian Reform Fund;” and that “just compensation payments that cannot be covered within the approved annual budget of the program shall be chargeable against the debt service program of the national government, or any unprogrammed item in the General Appropriations Act.”

The enactments of the Legislature decreed that the money to be paid to the landowner as just compensation for the taking of his land is to be taken only from the ARF. As such, the liability is not the personal liability of Land Bank, but its liability only as the administrator of the ARF. In fact, Section 10, Rule 19 of the 2003DARAB Rules of Procedure, reiterates that the satisfaction of a judgment for just compensation by writ of execution should be from the ARF in the custody of Land Bank, to wit:

 Section 10. Execution of judgments for Just Compensation which have become Final and Executory . – The Sheriff

shall enforce a writ of execution of a final judgment for compensation by demanding for the payment of the amount stated in the writ of execution in cash and bonds against the Agrarian Reform Fund in the custody of LBP [Land Bank of the Philippines] in accordance with RA 6657 xxx.  (Emphases supplied)

  

Consequently, the immediate and indiscriminate levy by the DARAB sheriffs of Land Bank’s MERALCO shares, without first determining whether or not such assets formed part of the ARF, disregarded Land Bank’s proprietary rights in its own funds and properties. 

 The prior determination of whether the asset of Land Bank sought to be levied to respond to a judgment liability under the CARP in

favor of the landowner was demanded by its being a banking institution created by law, [96] possessed with universal or expanded commercial banking powers[97] by virtue of Presidential Decree No. 251.[98] As a regular  bank, Land Bank isunder the supervision and regulation of the Bangko Sentral ng Pilipinas.[99] Being the official depository of Government funds, Land Bank is also invested with duties and responsibilities related to the implementation of the CARP, mainly as the administrator of the ARF. [100] Given its discrete functions and capacities under the laws, Land Bank’s assets and properties must necessarily come under segregation, namely: (a) those arising from its proprietary functions as a regular banking or financial institution; and (b) those arising from its being the administrator of the ARF. Indeed, Executive Order No. 267 has required Land Bank to segregate accounts,[101] to wit: (a) corporate funds, which are derived from its banking operations and are essentially moneys held in trust for its depositors as a financial banking institution; and ( b) ARF, which comprise funds and assets expressly earmarked for or appropriated under the CARL to pay final awards of just compensation under the CARP.[102]

 Suntay argues that the MERALCO shares of Land Bank were part of the ARF, submitting photocopied documents showing Land

Bank to be one of the top stockholders of MERALCO under Land Bank’s account number 1100052533.[103]

 Land Bank disputes Suntay’s argument, positing that its levied MERALCO shares, particularly those covered by Stock Certificate No.

87265, Stock Certificate No. 664638, Stock Certificate No. 0707447 and Stock Certificate No. 0707448 that were cancelled and transferred in favor of Lubrica, did not form part of the ARF. It explains that there are three different accounts relative to its MERALCO shares, to wit:

(a) Trust Account No. 03-141, which was the subject of a Custodianship Agreement it had with the Asset Privatization Trust (APT); (b) Account titled “FAO PCGG ITF MFI”, which was the subject of a Custodial Safekeeping Agreement between Land Bank and the Three-Man Board for the MERALCO Privatization (c/o PCGG); and (c) LBP Proprietary Account with PCD Nominee Corporation involving Stock Certificate No. 87265, Stock Certificate No. 664638, Stock Certificate No. 0707447 and Stock Certificate No. 0707448. It insists that the  LBP Proprietary Account was not part of the ARF, and that its shares covered by Stock Certificate No. 87265, Stock Certificate No. 664638, Stock Certificate No. 0707447, and Stock Certificate No. 0707448 had been acquired or obtained in the exercise of its proprietary function as a universal bank.[104]

 Land Bank presented copies of the Custodianship Agreement with the APT, the Custodial Safekeeping Agreement with the Three-

Man Board for the MERALCO Privatization (c/o PCGG), and the joint affidavit of Land Bank’s officers. In light of the clarifications by Land Bank, the Court concludes that the procedure of execution adopted by the DARAB sheriffs

thoroughly disregarded the existence of Land Bank’s proprietary account separate and distinct from the ARF. The procedure thereby contravened the various pertinent laws and rules earlier adverted to and which the DARAB sheriffs were presumed to be much aware of, denying to the DARAB sheriffs any presumption in the regularity of their performance of their duties. 

Also significant is that Section 20 of Executive Order No. 229 has mandated that the ARF “shall be  sourced from the receipts of the sale of the assets of the APT and receipts of the sale of ill-gotten wealth recovered through the PCGG and such other sources as government may deem appropriate;” and that Section 63 of the CARL has authorized that additional amounts be appropriated as and when needed to augment the ARF.

 It should not be difficult to see the marked distinction between proceeds or receipts, on one hand, and asset or wealth derived from

such proceeds or receipts, on the other hand. The term proceeds refers to “the amount proceeding or accruing from some possession or transaction,”[105] and is synonymous to product, income, yield, receipts, or returns.[106] Clearly, therefore, the ARF was sourced from the money or cash realized either from the sale of or as income from the assets or properties held by the APT or the PCGG. The levied MERALCO shares were neither proceeds nor receipts. Thus, the DARAB sheriffs had no authority to indiscriminately levy such shares because they were clearly not part of the ARF.

 Moreover, the DARAB sheriffs did not strictly comply with the rule in force at the time of their execution of the writ of execution and

the alias writ of execution, which was Section 10, Rule 19 of the 2003 DARAB Rules of Procedure, viz: 

Section 10. Execution of judgments for Just Compensation Which Have Become Final and Executory . – The Sheriff shall enforce a writ of execution of a final judgment for compensation by demanding for the payment of the amount stated in the writ of execution in cash and bonds against the Agrarian Reform Fund in the custody of LBP [Land Bank of the Philippines] in accordance with RA 6657, and the LBP shall pay the same in accordance with the final judgment and the writ of execution within five (5) days from the time the landowner accordingly executes and submits to the LBP the corresponding deed/s of transfer in favor of the government and surrenders the muniments of title to the property in accordance with Section 15 (c) of RA 6657. (Emphasis supplied) As the rule reveals, a condition was imposed before Land Bank could be made to pay the landowner by the sheriff. The condition

was for Suntay as the landowner to first submit to Land Bank the corresponding deed of transfer in favor of the Government and to surrender the muniments of the title to his affected property. Yet, by immediately and directly levying on the shares of stocks of Land Bank and forthwith selling them at a public auction to satisfy the amounts stated in the assailed writs without   first requiring Suntay to comply with the condition, the DARAB sheriffs unmitigatedly violated the 2003 DARAB Rules of Procedure.

 Relevantly, Section 18 of the CARL, which Section 10 of the 2003 DARAB Rules of Procedure implements, has expressly listed the

modes by which the landowner may choose to be paid his just compensation, thus: 

Section 18. Valuation and Mode of Compensation. - The LBP shall compensate the landowner in such amount as may be agreed upon by the landowner and the DAR and LBP or as may be finally determined by the court as just compensation for the land.

The compensation shall be paid in one of the following modes at the option of the landowner:(1) Cash payment, under the following terms and conditions:

(a) For lands above fifty (50) hectares, insofar as the excess hectarage is concerned - Twenty-five percent (25%) cash, the balance to be paid in government financial instruments negotiable at any time. (b) For lands above twenty-four hectares and up to fifty (50) hectares - Thirty percent (30%) cash, the balance to be paid in government financial instruments negotiable at any time. (c) For lands twenty-four (24) hectares and below - Thirty-five percent (35%) cash, the balance to be paid in government financial instruments negotiable at any time.

 (2) Shares of stock in government-owned or controlled corporations, LBP preferred shares, physical assets or other qualified

investments in accordance with guidelines set by the PARC;(3) Tax credits which can be used against any tax liability;(4) LBP bonds, which shall have the following features:

(a) Market interest rates aligned with 91-day treasury bill rates. Ten percent (10%) of the face value of the bonds shall mature every year from the date of issuance until the tenth (10th) year: Provided, That should the landowner choose to forego the cash portion, whether in full or in part, he shall be paid correspondingly in LBP bonds; (b) Transferability and negotiability. Such LBP bonds may be used by the landowner, his successors-in-interest or his assigns, up to the amount of their face value for any of the following: (i) Acquisition of land or other real properties of the government, including assets under the Assets Privatization Program and other assets foreclosed by government financial institution in the same province or region where the lands for which the bonds were paid are situated;

 (ii) Acquisition of shares of stock of government-owned or controlled corporations or shares or stock owned by the government in private corporations; (iii) Substitution for surety or bail bonds for the provisional release of accused persons, or for performance bonds; (iv) Security for loans with any government financial institution, provided the proceeds of the loans shall be invested in an economic enterprise, preferably in a small and medium-scale industry, in the same province or region as the land for which the bonds are paid; 

(v) Payment for various taxes and fees to the government: Provided, That the use of these bonds for these purposes will be limited to a certain percentage of the outstanding balance of the financial instrument: Provided, further, That the PARC shall determine the percentages mentioned above; (vi) Payment for tuition fees of the immediate family of the original bondholder in government universities, colleges, trade schools and other institutions; (vii) Payment for fees of the immediate family of the original bondholder in government hospitals; and (viii) Such other uses as the PARC may from time to time allow.

 In case of extraordinary inflation, the PARC shall take appropriate measures to protect the economy. (Emphases

supplied) 

 We note that the DARAB sheriffs’ method of execution did not adhere to any of the legally-authorized modes, to the extreme

detriment of Land Bank. Still, Suntay proposes that the resort to levying on the MERALCO shares of Land Bank was necessary, considering that it was Land

Bank alone that had the control of the ARF. The proposition is not only incorrect but also dangerous. To start with, Land Bank could not simply shirk from or evade discharging its obligations under the CARP because the law mandated

Land Bank with a positive duty.[107] The performance of its ministerial duty to fully pay a landowner the just compensation could subject its officials responsible for the non-performance to punishment for contempt of court.

 And, secondly, tolerating the irregular execution carried out by the DARAB sheriffs would be dangerous to the viability of Land Bank

as a regular banking institution as well as the administrator of the ARF. The total claim of Suntay under the assailed RARAD decision was only P157.5 million, but the worth of Land Bank’s 53,557,257 MERALCO shares, 912,230 PLDT shares and First Gen Corporation bonds auctioned off by the DARAB sheriffs at P1.00 /share for the total of only P53,557,257.00 was probably about P841 million. If that probable worth was true, the levy and execution were patently unconscionable and definitely worked against the interest of the Government represented by Land Bank.

 Further, Suntay complains of the delay in the payment of just compensation due to him. The Court finds that Suntay has only himself to blame. As early as in 2005 Land Bank v. Suntay (G.R. No. 157903) already opened

the way for the RTC to determine the just compensation in Agrarian Case No. R-1241. Had he ensured the speedy disposition of Agrarian Case No. R-1241 in the RTC, he would not now be complaining.

 IV.

Land Bank is entitled to alldividends pertaining to the

invalidly levied shares of MERALCO As earlier mentioned, Land Bank filed on May 5, 2010 an urgent verified motion for the issuance of a TRO or writ of preliminary

injunction to enjoin MERALCO, its Corporate Secretary, and its Assistant Corporate Secretary, pending the proceedings and until the resolution of the case, from releasing the cash dividends pertaining to the disputed shares in favor of Lubrica or any person acting on her behalf.

 Although the Court did not resolve the motion, it is time to look into the matter in light of the foregoing conclusions. The Court has to declare as a necessary consequence of the foregoing conclusions that Land Bank remained fully entitled to all the

cash and other dividends accruing to the MERALCO shares levied and sold by the DARAB sheriffs pursuant to the orders issued on September 14, 2005 and October 30, 2008 by RARAD Miñas, as if no levy and sale of them were made. In this connection, the Court affirms and reiterates the order issued on October 25, 2005 by RARAD Miñas (deeming to be quashed and of no force and effect “all actions done in compliance or in connection with” the writ of execution issued by her), [108] and the order issued on December 17, 2008 by RARAD Casabar directing:

 (c)       MERALCO to cancel the stock certificates issued to Lubrica and to any of her transferees or assignees, and to

restore the ownership of the shares to Land Bank and to record the restoration in MERALCO’s stock and transfer book; and

 (d)       PSE, PDTC, STSI, the Philippine Dealing System Holdings Corporation and Subsidiaries (PDS Group), and any

stockbroker, dealer, or agent of MERALCO shares to stop trading or dealing on the shares.[109]

 WHEREFORE, we GRANT the petition for review on certiorari, and REVERSE the Decision promulgated June 5, 2009 in CA-G.R.

SP No. 106104. ACCORDINGLY, the Court: (a) DIRECTS the Regional Trial Court, Branch 46, in San Jose, Occidental Mindoro to continue the proceedings for the

determination of the just compensation of Federico Suntay’s expropriated property in Agrarian Case No. R-1241; (b) QUASHES and NULLIFIES the orders issued in DARAB Case No. V-0405-0001-00 on September 14, 2005 (granting

Suntay’s ex parte motion for the issuance of an alias writ of execution) and October 30, 2008 by RARAD Conchita C. Miñas (directing the DARAB sheriffs “to resume the interrupted execution of the Alias Writ in this case on September 14, 2005”), and all acts performed pursuant thereto;

 (c)  AFFIRMS and REITERATES the order issued on October 25, 2005 by RARAD Miñas (deeming to be quashed and of no force

and effect “all actions done in compliance or in connection with” the writ of execution issued by her), and the order issued on December 17, 2008 by RARAD Marivic Casabar (directing MERALCO to cancel the stock certificates issued to Josefina Lubrica and to any of her transferees or assignees, and to restore the ownership of the shares to Land Bank and to record the restoration in MERALCO’s stock and transfer book; and the Philippine Stock Exchange, Philippine Depository and Trust Corporation, Securities Transfer Services, Inc., and the Philippine Dealing System Holdings Corporation and Subsidiaries (PDS Group), and any stockbroker, dealer, or  agent of MERALCO shares to stop trading or dealing on the shares);

 (d) DECLARES Land Bank fully entitled to all the dividends accruing to its levied MERALCO shares of stocks as if no levy on

execution and auction were made involving such shares of stocks; (e) COMMANDS the Integrated Bar of the Philippines to investigate the actuations of Atty. Conchita C. Miñas in DARAB Case No. V-

0405-0001-00, and to determine if she was administratively liable as a member of the Philippine Bar; and (f) ORDERS the Department of Agrarian Reform Adjudication Board to conduct a thorough investigation of the sheriffs who

participated in the irregularities noted in this Decision, and to proceed against them if warranted. Costs against the respondent. 

          SO ORDERED.

20. PHILIPPINE REALTY AND HOLDINGS CORPORATION (PRHC) VS. LEY CONSTRUCTION AND DEVELOPMENT CORPORATION

G. R. No. 165548; June 13, 2011SERENO, J.:

These are consolidated petitions for review under Rule 45 of the New Rules of Civil Procedure filed by both parties from a Court of Appeals (CA) Decision in CA-GR No. 71293. This Decision reversed a Decision of the (RTC), in Civil Case No. 96-160.

FACTS:

Ley Construction was the project contractor for the construction of several buildings for (PRHC), the project owner. Engineer (Abcede) was the project construction manager of PRHC, while (Santos) was its general manager and vice-president for operations.

Sometime between April 1988 and October 1989, the two corporations entered into four major construction projects, as evidenced by four duly notarized “construction agreements.” LCDC committed itself to the construction of the buildings needed by PRHC, which in turn committed itself to pay the contract price agreed upon. These were the four construction projects the parties entered into involving a Project 1, Project 2, Project 3 (all of which involve the Alexandra buildings) and a Tektite Building:

The agreement covering the construction of the Tektite Building was signed by a Mr. Campos under the words “Phil. Realty & Holdings Corp.” and by Santos as a witness. Manuel Ley, the president of LCDC, signed under the words “Ley Const. & Dev. Corp.”

The terms embodied in the afore-listed construction agreements were almost identical. Each agreement provided for a fixed price to be paid by PRHC for every project.

All the aforementioned agreements contain the following provisions:

ARTICLE IV – CONTRACT PRICE . . . . . . . . . The Contract Price shall not be subject to escalation except due to work addition, (approved by the OWNER and the ARCHITECT) and to official increase in minimum wage as covered by the Labor Adjustment Clause below. All costs and expenses over and above the Contract Price except as provided in Article V hereof shall be for the account of the CONTRACTOR. It is understood that there shall be no escalation on the price of materials. However, should there be any increase in minimum daily wage level, the adjustment on labor cost only shall be considered based on conditions as stipulated below. . . . . . . . . . ARTICLE VII – TIME OF COMPLETION . . . . . . . . .Should the work be delayed by any act or omission of the OWNER or any other person employed by or contracted by the OWNER in the project, including days in the delivery or (sic) materials furnished by the OWNER or others, or by any appreciable additions or alterations in the work ordered by the OWNER or the ARCHITECT, under Article V or by force majeure, war, rebellion, strikes, epidemics, fires, riots, or acts of the civil or military authorities, the CONTRACTOR shall be granted time extension.

Sometime after the execution of these agreements, two more were entered into by the parties:

1. Letter-agreement dated 24 August 1989 – Project 3 – for the construction of the drivers’ quarters in Project 3; and2. Agreement dated 7 January 1993 – Tektite Towers – for the concreting works on “GL, 5, 9, & A” (ground floor to the 5th floor) of the Tektite Towers.

Santos signed the letter-agreement on the construction of the drivers’ quarters in Project 3,[1] while both he and Abcede signed the letter-agreement on the concreting works on GL, 5, 9, and A, and also of Project 3.[2]

In order to jump-start the construction operations, LCDC was required to submit a performance bond as provided for in the construction agreements. As stated in these agreements, as soon as PRHC received the performance bond, it would deliver its initial payment to LCDC. The remaining balance was to be paid in monthly progress payments based on actual work completed. In practice, these monthly progress payments were used by LCDC to purchase the materials needed to continue the construction of the remaining parts of the building.

In the course of the construction of the Tektite Building, it became evident to both parties that LCDC would not be able to finish the project within the agreed period. Thus, through its president, LCDC met with Abcede to discuss the cause of the delay. LCDC explained that the unanticipated delay in construction was due mainly to the sudden, unexpected hike in the prices of cement and other construction materials. It claimed that, without a corresponding increase in the fixed prices found in the agreements, it would be impossible for it to finish the construction of the Tektite Building. In their analysis of the project plans for the building and of all the external factors affecting the completion of the project, the parties discovered that even if LCDC were able to collect the entire balance from the contract, the collected amount would still be insufficient to purchase all the materials needed to complete the construction of the building.

Both parties agreed that their foremost objective should be to ensure that the Tektite Building project would be completed. To achieve this goal, they entered into another agreement. Abcede asked LCDC to advance the amount necessary to complete construction. Its president acceded, on the absolute condition that it be allowed to escalate the contract price. It wanted PRHC to allow the escalation and to disregard the prohibition contained in Article VII of the agreements. Abcede replied that he would take this matter up with the board of directors of PRHC.

The board of directors turned down the request for an escalation agreement.[3] Neither PRHC nor Abcede gave notice to LCDC of the alleged denial of the proposal. However, on 9 August 1991 Abcede sent a formal letter to LCDC, asking for its conformity, to the effect that should it infuse P36 million into the project, a contract price escalation for the same amount would be granted in its favor by PRHC.[4]

This letter was signed by Abcede above the title “Construction Manager,” as well as by LCDC.[5] A plain reading of the letter-agreement will reveal that the blank above the words “PHIL. REALTY & HOLDINGS CORP.” was never signed.

Notwithstanding the absence of a signature above PRHC’s name, LCDC proceeded with the construction of the Tektite Building, expending the entire amount necessary to complete the project. From August to December 1991, it infused amounts totaling P 38,248,463.92. These amounts were not deposited into the joint account of LCDC and PRHC, but paid directly to the suppliers upon the instruction of Santos.[7]

LCDC religiously submitted to PRHC monthly reports[8] that contained the amounts of infusion it made from the period August 1991 to December 1991.

On 20 January 1992, LCDC wrote a letter addressed to Santos stating that it had already complied with its commitment as of 31 December 1991 and was requesting the release of P 2,248,463.92. It attached a 16 January 1992 letter written by D.A. Abcede & Associates, informing PRHC of the total cash infusion made by LCDC to the project, to wit:

in compliance with the commitment of Ley Construction and Dev’t Corp. to infuse P36.00M for the above subject project x x xx x x we would like to present the total cash infusion by LCDC for the period covering the month of August, 1991 to December 1991 broken down as follows: . . . . . . . . . T O T A L: P 38,248,463.92 PRHC never replied to this letter.

In another letter dated 7 September 1992, there was a reconciliation of accounts between the two corporations with respect to the balances due for Projects 1, 2, and 3.

In a letter dated 8 September 1992,[14] when 96.43% of Tektite Building had been completed, LCDC requested the release of the P 36 million escalation price. PRHC did not reply, but after the construction of the building was completed, it conveyed its decision in a letter on 7 December 1992.[15] That decision was to set off, in the form of liquidated damages, its claim to the supposed liability of LCDC, to wit:

. . . . . . . . .In this regard, please be advised that per owner’s decision; your claim of P 36,000,00.00 adjustment will be applied to the liquidated damages for concreting works computed in the amount of Thirty Nine Million Three Hundred Twenty Six Thousand Eight Hundred Seventeen & 15/100 (P39,326,817.15) as shown in the attached sheet.Further, the net difference P 3,326,817.15 will also be considered waived as additional consideration. . . . . . . . . . In a letter dated 18 January 1993, LCDC, through counsel, demanded payment of the agreed escalation price of P 36 million. In its reply on 16 February 1993, PRHC suddenly denied any liability for the escalation price. In the same letter, it claimed that LCDC had incurred 111 days of delay in the construction of the Tektite Building and demanded that the latter pay P 39,326,817.15 as liquidated damages. This claim was set forth in PRHC’s earlier 7 December 1992 letter.

LCDC countered that there were many times when its requests for time extension – although due to reasonable causes sanctioned by the construction agreement such as power failures, water supply interruption, and scarcity of construction materials – were unreasonably reduced to shorter periods by PRHC. In its letter dated 9 December 1992, LCDC claimed that in a period of over two years, out of the 618 days of extension it requested, only 256 days – or not even half the number of days originally requested – were considered. It further claimed that its president inquired from Abcede and Santos why its requests for extension of time were not granted in full. The two, however, assured him that LCDC would not be penalized with damages for even a single day of delay, because the fact that it was working hard on the Tektite Building project was known to PRHC.[16]

Thereafter, in a letter dated 18 January 1993, LCDC demanded payment of the agreed total balance for Projects 1, 2, and 3. Through a reply letter dated 16 February 1993, PRHC denied any liability. During the course of the proceedings, both parties conducted another reconciliation of their respective records. In addition to the agreed-upon outstanding balance in favor of LCDC, the latter claimed another outstanding balance of P 232,367.96 in its favor for the construction of the drivers’ quarters in Project 3.

It also further claimed the amount of P 7,112,738.82, representing the balance for the concreting works from the ground floor to the fifth floor of the Tektite Building.

Seeking to recover all the above-mentioned amounts, LCDC filed a Complaint with Application for the Issuance of a Writ of Preliminary Attachment on 2 February 1996 before the RTC in Makati City docketed as Civil Case No. 96-160: WHEREFORE, it is respectfully prayed that:1. Immediately upon the filing of this Complaint, an order of preliminary attachment be issued over defendant Philrealty’s properties as security for any judgment which plaintiff may recover against said defendant; and

2. After trial, judgment be rendered as follows:

2.1. On the first, second and third alternative causes of action,

(a) Ordering defendant Philrealty to pay plaintiff actual damages in the amount of P36,000,00.00 with legal interest thereon from the filing of this Complaint until fully paid;

(b) In the alternative, ordering defendants Abcede and Santos to jointly and severally, in the event that they acted without necessary authority, to pay plaintiff actual damages in the amount of P36,000,00.00 with legal interest thereon from the filing of this Complaint until fully paid; and

(c) Ordering defendant Philrealty or defendants Abcede and Santos to pay plaintiff exemplary damages in the amount to be determined by the Honorable Court but not less than P5,000,000.00

2.2. On the fourth cause of action, ordering defendant Philrealty to pay plaintiff

(a) Actual damages in the amount of P7,112,738.82 with legal interest thereon from the filing of this Complaint until fully paid; and(b) Exemplary damages in the amount to be determined by the Honorable Court but not less than P1,000,000.00

2.3. On the fifth cause of action, ordering defendant Philrealty to pay plaintiff

(a) Actual damages in the amount of P20,862,546.41 with legal interest thereon from the filing of this Complaint until fully paid; and(b) Exemplary damages in an amount to be determined by the Honorable Court but not less than P5,000,000.00.

2.4. On the sixth cause of action, ordering defendant Philrealty to pay plaintiff

(a) Actual damages in the amount of P232,367.96 with legal interest thereon from the filing of this Complaint until fully paid; and(b) Exemplary damages in the amount to be determined by the Honorable Court but not less than P100,000.00

2.5. On the seventh cause of action, ordering defendant Philrealty and/or defendants Abcede and Santos to pay plaintiff attorney’s fees in the amount of P750,000.00 and expenses of litigation in the amount of P50,000.00, plus costs.

Plaintiff prays for such other just and equitable reliefs as may be warranted by the circumstances. On 23 July 1999, a joint Stipulation of Facts[17] was filed by the parties. In the said stipulation, they reconciled their respective claims on the payments made and the balances due for the construction of the Tektite Building project, Project 1, and Project 2. Both parties agreed that the only remaining issues to be resolved by the court, with respect to the Tektite Building project and Projects 1 to 3, were as follows:

a) The validity of Ley Construction’s claim that Philrealty had granted the former a contract price escalation for Tektite Tower I in the amount of P36,000,000.00

b) The validity of the claim of Philrealty that the following amounts should be charged to Ley Construction:

Payments/Advances without LCDC’s conformity and recommendation of the Construction Manager, D.A. Abcede & Associates that subject items are LCDC’s account:a. Esicor, Inc. – waterproofing works Cluster B P1,121,000.00 b. Ideal Marketing, Inc. – waterproofing works at Cluster B, Quadrant 2 P885,000.00 P2,006,000.00

c) The claim of Philrealty for liquidated damages for delay in completion of the construction as follows:

d) Tektite Tower I - P39,326,817.15Alexandra Cluster B - 12,785,000.00Alexandra Cluster C - 1,100,000.00ande) The claim of Ley Construction for additional sum of P2,248,463.92 which it allegedly infused for the Tektite Tower I project over and above the original P36,000,000.00 it had allegedly bound itself to infuse.[18]On 31 January 2001, the RTC promulgated its Decision. LCDC filed a Motion for Partial Reconsideration, which was granted.

It must be noted that in the Stipulation of Facts, the parties had jointly agreed that the P7,112,738.82 unpaid account in the concreting of Tektite Building would no longer be included in the list of claims submitted to the RTC for decision. Nonetheless, this amount was still included as an award in the trial court’s 7 May 2001 amended Decision, the dispositive portion of which provides:

WHEREFORE, premises considered, judgment is hereby rendered:A. Dismissing the counter-claim of defendant DENNIS ABCEDE and the cross-claim of defendant JOSELITO SANTOS; and

B. Ordering defendant PHILIPPINE REALTY AND HOLDING CORPORATION to pay plaintiff LEY CONSTRUCTION AND DEVELOPMENT CORPORATION:

1. P33,601,316.17, for the Tektite Tower I Project with legal interest thereon from date of the filing of the complaint until fully paid;2. P13,251,152.61 for Alexandra Cluster B with legal interest thereon from date of the filing of the complaint until fully paid;3. P1,703,955.07 for Alexandra Cluster C with legal interest thereon from date of the filing of the complaint until fully paid;

4. P7,112,738.82 in actual damages for the concreting works of Tektite Tower I, with legal interest thereon from the date of the filing of the complaint until fully paid;

5. P5,529,495.76 in actual damages for the construction of Alexandra Cluster E, with legal interest thereon from the date of the filing of the complaint until fully paid;6. P232,367.96 in actual damages for the construction of the driver’s quarters of Alexandra Cluster E, with legal interest thereon from the date of the filing of the complaint until fully paid;7. P750,000.00 for attorney’s fees and expenses of litigation; and8. Costs.SO ORDERED.[19] PRHC filed a Notice of Appeal on 14 June 2001. The Court of Appeals, in CA-G.R. CV No. 71293,[20] reversed the lower court’s amended Decision on 30 September 2004 and ruled thus:

WHEREFORE, premises considered, the assailed January 31, 2001 decision and the May 7, 2001 amended decision are hereby REVERSED and SET ASIDE and a new one is entered:I. FINDING plaintiff-appellee LCDC LIABLE to defendant-appellant PRHC in the amount of Sixty million Four Hundred Sixty Four (Thousand) Seven Hundred Sixty Four 90/100 (P60,464,764.90) PESOS detailed as follows:

[1] P39,326,817.15 liquidated damages pursuant to contract for delay incurred by plaintiff-appellee LCDC in the construction of Tektite Tower Phase I, the length of delay having been signed and confirmed by LCDC;[2] P12,785,000.00 liquidated damages pursuant to contract for delay incurred by plaintiff-appellee LCDC in the construction of Alexandra Cluster B, the length of delay having been signed and confirmed by LCDC;[3] P1,700,000.00 liquidated damages pursuant to contract for delay incurred by plaintiff appellee LCDC in the construction of Alexandra Cluster C, the length of delay having been confirmed by LCDC;[4] P4,646,947.75 overpayment by defendant-appellant PRHC to plaintiff-appellee LCDC for the Tektite Tower Phase I Project;[5] P1,121,000.00 expenses incurred by defendant-appellant PRHC for corrective works to redo/repair allegedly defective Waterproofing construction work or plaintiff-appellee LCDC in the Alexander Cluster B Project which was paid by defendant-appellant PRHC to contractor Escritor, Inc.;[6] P885,000.00 expenses incurred by defendant-appellant PRHC for corrective works to redo/repair allegedly defective Waterproofing construction work of plaintiff-appellee LCDC at the Alexandra Cluster B Quadrant in the Alexander Cluster B Project which was paid by defendant-appellant PRHC to contractor Ideal Marketing Inc., andII. FINDING defendant-appellant PRHC LIABLE to plaintiff-appellee LCDC in the amount of Fifty Six million Seven Hundred Sixteen Thousand Nine Hundred Seventy One 40/100 (P56,716,971.40) detailed as follows:

[1] P36,000,000.00 as acknowledged and agreed to by PHRC as a loan by LCDC, reimbursable when the Tektite Tower I project was 95% completed, but this was not classified by this Court as an escalation for increase in price of materials because an escalation for price increase of cost of materials is expressly prohibited by 10 October 1989 original contract;[2] All expenditures for the projects are at the risk of the contractor LCDC who is to be paid, according to the contract, a fixed contract price so that there is no such thing as overinfusion of expenses by plaintiff-appellee LCDC guaranteed under the contract that it would pay all costs of materials irregardless (sic) of any increase in costs;[3] P13,251,152.61 balance yet unpaid by defendant-appellant in the Alexandra Cluster B Project;

[4] P1,703,955.07 balance yet unpaid by defendant-appellant in the Alexander Cluster C Project;[5] Defendant-appellant PRHC is hereby held not liable for P750,000.00 attorney’s fees;[6] Plaintiff-appellee LCDC is not entitled to claim P7,112,738.82 for concreting works for Tektite Towers Phase I which cause of action had already been dismissed by the parties in the 23 July 1999 Joint Stipulation of Facts that the contract price for the October 10, 1989 Construction Agreement had been fully paid;[7] P5,529,495.76 balance yet unpaid in the Alexandra Cluster E Project;[8] P232,367.96 balance yet unpaid for construction of the drivers’ quarters at the Alexandra Cluster E.

The respective liabilities of the parties as set forth above are hereby SET OFF against each other and plaintiff-appellee LCDC is hereby DIRECTED to pay defendant-appellant PRHC the net amount due of Three million Seven Hundred Forty Seven Thousand Seven Hundred Ninety Three 50/100 (P3,747,793.50) PESOS with legal interest from date of filing of complaint. SO ORDERED.

PRHC came directly to this Court and filed a petition for review on certiorari docketed as SC-G.R. No. 165548 to assail in part the appellate court’s Decision. LCDC, on the other hand, filed on 25 October 2004 a Motion for Reconsideration with the Court of Appeals. In its Resolution dated 12 April 2005, the appellate court denied the motion. LCDC then filed its own Petition for Review on certiorari, which was docketed as SC-G.R. No. 167879.

In a Resolution dated 6 August 2008, this Court consolidated G.R. Nos. 165548 and 16789.PRHC, in its Petition for Review[21] in G.R. No. 165548, submits the following issues for resolution:

1. Whether the finding and ruling of the Court of Appeals that the letter dated 07 December 1992 was a counter-offer on the part of LCDC and a confirmation to treat the P36,000,000.00 as a loan deductible from liquidated damages is contrary to the allegations in the pleadings and the evidence on record.

2. Whether the finding and ruling of the Court of Appeals that LCDC is liable to PRHC in the amount of P5,529,495.76 representing the balance of the contract price for the construction of Alexandra Cluster E Project is contrary to the Stipulation of Facts jointly submitted by the parties to the Trial Court.

3. Whether the finding and ruling of the Court of Appeals that LCDC is liable to PRHC in the amount of P232,367.96 representing the cost of the construction of the driver’s quarters at Alexandra Cluster E Project is contrary to the Stipulation of Facts jointly submitted by the parties to the trial court. [22]

For its part, LCDC submits the following grounds in support of its Petition for Review[23] docketed as G.R. No. 167879:

I. The Court of Appeals seriously erred in ruling that there is no P36 million escalation agreement between LCDC and PRHC. . . . . . . . . .II. The Court of Appeals seriously erred in ruling that PHRC is not obliged to pay LCDC the sum of P2,248,463.92 representing the cash infused by LCDC over and above the P36 million escalation price.

III. The Court of Appeals seriously erred in ruling that PRHC is not obliged to pay LCDC the P7,112,738.82 balance for the concreting works of the ground floor to the fifth floor of the PSE.

IV. The Court of Appeals seriously erred in awarding liquidated damages to PHRC under the TTI Project Agreement and the Alexandra-Clusters B and C agreements.

V. The Court of Appeals seriously erred in ruling that LCDC is liable for the corrective works in Alexandra-Cluster B.

VI. The Court of Appeals seriously erred in deleting the lower court’s award of P750,000.00 attorney’s fees and expenses of litigation to LCDC and holding the latter liable to pay costs.[24]

At the outset, it must be noted that PRHC does not question the following amounts granted by the Court of Appeals:

(a) P13,251,152.61 awarded to LCDC as balance yet unpaid by PRHC for Project 2;(b) P1,703,955.07 awarded to LCDC as balance yet unpaid by PRHC for Project 1; and(c) P4,646,947.75 awarded to PRHC for its overpayment to LCDC for the Tektite Building.

No appeal having been filed from the immediately preceding rulings, they attained finality.

We reduce the issues to the following:IWhether or not a valid escalation agreement was entered into by the parties and, if so, to what amount;

IIWhether or not LCDC was delayed in the performance of its obligation to construct the buildings for PRHC and, corollary thereto, whether or not the latter is entitled to liquidated damages for this supposed delay in the construction of the Tektite Building and Projects 1 and 2;

IIIWhether or not the CA can make an award or should have made an award for the following causes of action not alleged in the pleadings or omitted in the stipulation of facts:

a. The supposed remaining balance of P5,529,495.76 for Project 3, which was awarded by the appellate court;b. The supposed remaining balance of P232,367.96, which the appellate court also awarded, representing the cost of the construction of the drivers’ quarters in Project 3; andc. The supposed remaining balance of P7,112,738.82, the cost of the concreting works from the ground floor to the fifth floor of the Tektite Building, which was not awarded by the CA but was awarded by the lower court;

IVWhether or not LCDC should be held liable for the amount of P2,006,000 for the corrective works to redo or repair the defective waterproofing in Project 2; and

V

Whether or not LCDC is entitled to the appellate court’s award of P750,000 for attorney’s fees and expenses of litigation and costs.

We shall review the findings of fact of the Court of Appeals in view of some inconsistencies with those of the trial court and the evidence on record, and as a result of our analysis of the threshold legal issues.

A subsequent escalation agreement was validly entered into by the parties, but only to the extent of P 36 million.

The construction agreements, including the Tektite Building agreement, expressly prohibit any increase in the contracted price. It can be inferred from this prohibition that the parties agreed to place all expenses over and above the contracted price for the account of the contractor.[25] PRHC claims that since its board of directors never acceded to the proposed escalation agreement, the provision in the main agreement prohibiting any increase in the contract price stands.

LCDC, on the other hand, claims that the fact that any increase in the contract price is prohibited under the Tektite Building agreement does not invalidate the parties’ subsequent decision to supersede or disregard this prohibition. It argues that all the documentary and testimonial evidence it presented clearly established the existence of a P 36 million escalation agreement.[26]

LCDC now comes to this Court, asking that the escalation agreement with PRHC, as represented by Abcede and Santos, be declared to have effectively novated the prohibition in the Tektite Building agreement. After examining the extensive evidence presented by both parties, we resolve to rule in favor of LCDC.

LCDC relies in part on PRHC’s 19 August 1991 letter-agreement,[27] which provides as follows:

August 09, 1991 LEY CONSTRUCTION DEV. CORP.10th Flr., Pacific Star Bldg.Makati Avenue, MakatiMetro Manila Attention: Mr. Manuel LeySubject: TEKTITE TOWERS Gentlemen: Relative to your contract for subject project this will confirm agreement between your goodselves and Philippine Realty & Holdings Corporation as follows: 1.0 Ley Construction & Development Corporation shall put in funds for Tektite project with a total amount of THIRTY SIX MILLION PESOS (P36,000,000.00) ONLY in accordance with the following schedule: . . . . . . . . . 2.0 If Ley Construction & Dev. Corp. faithfully complies with above commitment then Philippine Realty & Holdings Corporation shall grant a contract price escalation to Ley Const. & Dev. Corp. in the amount of THIRTY SIX MILLION PESOS (P36,000,000.00) ONLY in view of the increase in cost of materials during the construction period which amount shall be payable to Ley Const. & Dev. Corp. when the LCDC contract work is at least 95% complete. (over) Very truly yours, (Signed)DENNIS A. ABCEDEConstruction Manager C O N F O R M E : (Signed) . LEY CONST. & DEV. CORP. APPROVED & ACCEPTED : .PHIL. REALTY & HOLDINGS CORP. It is apparent from its face that the letter was not signed by PRHC. This fact allegedly proves, according to PRHC, that it never expressed its consent to the letter and, hence, cannot and should not be bound by the contents thereof. It further claims that its internal rules require the signatures of at least two of its officers to bind the corporation.

LCDC, for its part, submits that the fact that the letter is unsigned by PRHC is insignificant, considering that other pieces of documentary and testimonial evidence were presented to prove the existence of the escalation agreement.[28]

The appellate court found for PRHC and ruled that an unsigned letter does not bind the party left out,[29] viz:

But it is patent on the face of that letter that PRHC did not sign the document. It is patent on its face that between the words: “APPROVED:” and the name “Philippine Realty & Holdings Corporation”, there is no signature. Apparent therefore on its face, there was no meeting of the minds between the parties LCDC and PRHC in the P36,000,000.00 escalation for materials.[30] The Court of Appeals further held that a simple letter cannot novate a notarized agreement.[31]

The appellate court is incorrect. The 9 August 1991 letter is not a simple letter, but rather a letter-agreement—a contract—which because of the existence of the consent of both parties become valid and binding. It is true that no representative of PRHC signed under its typewritten name, where a signature should traditionally appear, to show the company’s acceptance and approval of the contents of the letter-agreement.

This Court, however, finds that the signature of Abcede is sufficient to bind PRHC. As its construction manager, his very act of signing a letter embodying the P 36 million escalation agreement produced legal effect, even if there was a blank space for a higher officer of PHRC to indicate approval thereof. At the very least, he indicated authority to make such representation on behalf of PRHC.

On direct examination, Abcede admitted that, as the construction manager, he represented PRHC in running its affairs with regard to the execution of the aforesaid projects. He testified as follows:[32]

Q. What is your profession by the way?

A. I’m a Civil Engineer by profession and presently, I am engaged in the construction management.

Q. And what is your company engaged in the construction management?

A. We actually, as construction managers, we represent the owners, of the construction.[33]

All throughout the existence and execution of the construction agreements, it was the established practice of LCDC, each time it had concerns about the projects or something to discuss with PRHC, to approach Abcede and Santos as representatives of the latter corporation. As far as LCDC was concerned, these two individuals were the fully authorized representatives of PRHC. Thus, when they entered into the P 36 million escalation agreement with LCDC, PRHC effectively agreed thereto.

In fact, correspondences to the construction manager that were addressed to or that had to be noted by PRHC were most of the time coursed through and noted by Santos. Likewise, its correspondences to LCDC were signed by him alone.[34]

Santos testified that, as the vice president and general manager of PRHC, he was responsible for the implementation of the policies of the board,[35] to wit:

Q: Why do you know the defendant Philippine Realty and Holding Corporation?

A: I used to serve that company as Vice President and Director, sir.

Q: During what year did you serve as Vice President and Director of Philippine Realty.

A: I started serving that company as General Manager in 1987 and I resigned in 1993, sir.

Q: Will you state your duties and functions as General Manager and Director of the company?

A: I was responsible for the implementation of the policies approved by the board and the day to day general management of the company from operation to administration to finance and marketing, sir.[36]

In addition, LCDC was able to establish that Abcede and Santos had signed, on behalf of PRHC, other documents that were almost identical to the questioned letter-agreement.[37] Santos was actually the one who signed for PRHC in the letter-agreement for the construction of the drivers’ quarters in Project 3.[38] He signed under the words “Approved: Phil. Realty & Holdings Corp.”[39] While both he and Abcede signed the letter-agreement for concreting works on “GL, 5, 9, and A,”[40] Santos again signed under the word “Approved.”[41] PRHC does not question the validity of these agreements; it thereby effectively admits that these two individuals had actual authority to sign on its behalf with respect to these construction projects.

We cannot fault LCDC for relying on the representation of PRHC that the authority to contract with the former, in matters relating to the construction agreements, resided in Abcede and Santos.

Furthermore, PRHC does not question the validity of its 7 December 1992 letter to LCDC wherein it seeks to apply LCDC’s claim for the P 36 million escalation price to its counterclaim for liquidated damages, which was signed by Santos under the words “Approved: Phil. Realty & Holdings Corp.”:

07 December 1992LEY CONST. & DEV. CORP. 23rd Floor Pacific Star Bldg. Sen. Gil Puyat Ave. corner Makati Avenue, Makati, Metro Manila.Attention : MR. MANUEL T. LEYSubject : TEKTITE TOWERS Gentlemen :This is in connection with your previous request for materials cost adjustment in the amount of Thirty Six Million & 0/100 (P36,000,000.00).In this regard, please be advised that per owner’s decision; your claim of P36,000,00.00 adjustment will be applied to the liquidated damages for concreting works computed in the amount of Thirty Nine Million Three Hundred Twenty Six Thousand Eight Hundred Seventeen & 15/100 (P39,326,817.15) as shown in the attached sheet.Further, the net difference P3,326,817.15 will also be considered waived as additional consideration.We trust you will find the above fair and equitable. Very truly yours, (Signed)DENNIS A. ABCEDEConstruction Manager Approved: (Signed by Santos)PHIL. REALTY & HOLDINGS CORP. This letter was signed by Abcede, again as the construction manager, while Santos signed above “PHIL. REALTY & HOLDINGS CORP.,” which was notably the unsigned part in the 9 August 1991 letter. PRHC claims that neither one of them had the authority to sign on behalf of the corporation; yet, it is not questioning the validity of the above-quoted letter.

We consider this letter as additional evidence that PRHC had given Abcede and Santos the authority to act on its behalf in making such a decision or entering into such agreements with LCDC.

LCDC additionally argues that a subsequent escalation agreement was validly entered into, even on the following assumptions: (a) that Abcede and Santos had no authority to agree to the escalation of the contract price without the approval of the board of directors; and (b) that the 7 December 1992 letter cannot be construed as an acknowledgment by PRHC that it owed LCDC P36 million. It posits that the actions of Abcede and Santos, assuming they were beyond the authority given to them by PRHC which they were representing, still bound PRHC under the doctrine of apparent authority. [42] Thus, the lack of authority on their part should not be used to prejudice it, considering that the two were clothed with apparent authority to execute such agreements. In addition, PRHC is allegedly barred by promissory estoppel from denying the claims of the other corporation.

We agree with LCDC.

In Yao Ka Sin Trading v. Court of Appeals, et al,.[43] this Court discussed the applicable rules on the doctrine of apparent authority, to wit:

The rule is of course settled that “[a]lthough an officer or agent acts without, or in excess of, his actual authority if he acts within the scope of an apparent authority with which the corporation has clothed him by holding him out or permitting him to appear as having such authority, the corporation is bound thereby in favor of a person who deals with him in good faith in reliance on such apparent authority, as where an officer is allowed to exercise a particular authority with respect to the business, or a particular branch of it, continuously and publicly, for a considerable time.” Also, “if a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that such apparent authority is real, as to innocent third persons dealing in good faith with such officers or agents.” [44]

In People’s Aircargo and Warehousing Co. Inc. v. Court of Appeals, et al.,[45] we held that apparent authority is derived not merely from practice:

Its existence may be ascertained through (1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in other words, the apparent authority to act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers.

We rule that Santos and Abcede held themselves out as possessing the authority to act, negotiate and sign documents on behalf of PRHC; and that PRHC sanctioned these acts. It would be the height of incongruity to now allow PRHC to deny the extent of the authority with which it had clothed both individuals. We find that Abcede’s role as construction manager, with regard to the construction projects, was akin to that of a general manager with regard to the general operations of the corporation he or she is representing.

Consequently, the escalation agreement entered into by LCDC and Abcede is a valid agreement that PRHC is obligated to comply with. This escalation agreement – whether written or verbal – has lifted, through novation, the prohibition contained in the Tektite Building Agreement.

In order for novation to take place, the concurrence of the following requisites is indispensable:

1. There must be a previous valid obligation.2. The parties concerned must agree to a new contract.3. The old contract must be extinguished.4. There must be a valid new contract.[46]All the aforementioned requisites are present in this case. The obligation of both parties not to increase the contract price in the Tektite Building Agreement was extinguished, and a new obligation increasing the old contract price by P 36 million was created by the parties to take its place.

What makes this Court believe that it is incorrect to allow PRHC to escape liability for the escalation price is the fact that LCDC was never informed of the board of directors’ supposed non-approval of the escalation agreement until it was too late. Instead, PRHC, for its own benefit, waited for the former to finish infusing the entire amount into the construction of the building before informing it that the said agreement had never been approved by the board of directors. LCDC diligently informed PRHC each month of the partial amounts the former infused into the project. PRHC must be deemed estopped from denying the existence of the escalation agreement for having allowed LCDC to continue infusing additional money spending for its own project, when it could have promptly notified LCDC of the alleged disapproval of the proposed escalation price by its board of directors.

Estoppel is an equitable principle rooted in natural justice; it is meant to prevent persons from going back on their own acts and representations, to the prejudice of others who have relied on them.[47] Article 1431 of the Civil Code provides:

Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.Article 1431 is reflected in Rule 131, Section 2 (a) of the Rules of Court, viz.:Sec. 2. Conclusive presumptions. — The following are instances of conclusive presumptions:

(a) Whenever a party has by his own declaration, act or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission be permitted to falsify it.

This Court has identified the elements of estoppel as:[F]irst, the actor who usually must have knowledge, notice or suspicion of the true facts, communicates something to another in a misleading way, either by words, conduct or silence; second, the other in fact relies, and relies reasonably or justifiably, upon that communication; third, the other would be harmed materially if the actor is later permitted to assert any claim inconsistent with his earlier conduct; and fourth, the actor knows, expects or foresees that the other would act upon the information given or that a reasonable person in the actor's position would expect or foresee such action.[48]

This liability of PRHC, however, has a ceiling. The escalation agreement entered into was for P 36 million—the maximum amount that LCDC contracted itself to infuse and that PRHC agreed to reimburse. Thus, the Court of Appeals was correct in ruling that the P 2,248,463.92 infused by LCDC over and above the P 36 million should be for its account, since PRHC never agreed to pay anything beyond the latter amount. While PRHC benefited from this excess infusion, this did not result in its unjust enrichment, as defined by law.Unjust enrichment exists “when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.”[49] Under Art. 22 of the Civil Code, there is unjust enrichment when (1) a person is unjustly benefited, and (2) such benefit is derived at the expense of or with damages to another.[50] The term is further defined thus:

Unjust enrichment is a term used to depict result or effect of failure to make remuneration of or for property or benefits received under circumstances that give rise to legal or equitable obligation to account for them; to be entitled to remuneration, one must confer benefit by mistake, fraud, coercion, or request.[51]

In order for an unjust enrichment claim to prosper, one must not only prove that the other party benefited from one’s efforts or the obligations of others; it must also be shown that the other party was unjustly enriched in the sense that the term “unjustly” could mean “illegally” or “unlawfully.”[52] LCDC was aware that the escalation agreement was limited to P36 million. It is not entitled to remuneration of the excess, since it did not confer this benefit by mistake, fraud, coercion, or request. Rather, it voluntarily infused the excess amount with full knowledge that PRHC had no obligation to reimburse it.

Parenthetically, we note that the CA had ruled that the 7 December 1992 letter demonstrates that PRHC treated the P 36 million as a loan deductible from the liquidated damages for which LCDC is supposedly liable.[53] It ruled that when PRHC informed LCDC that it would apply the P 36 million to the liquidated damages, PRHC, in effect, acknowledged that it was in debt to LCDC in the amount of P 36 million, and that forms the basis for PRHC’s liability to LCDC for the said amount.

We disagree with this analysis.

In a contract of loan, ownership of the money is transferred from the lender to the borrower.[54] In this case, ownership of the P 36 million was never transferred to PRHC. As previously mentioned, such amount was paid directly to the suppliers.[55] We find that arrangement between PRHC and LCDC cannot be construed as a loan agreement but rather, it was an agreement to advance the costs of construction. In Liwanag v. Court of Appeals et al., we state:

Neither can the transaction be considered a loan, since in a contract of loan once the money is received by the debtor, ownership over the same is transferred. Being the owner, the borrower can dispose of it for whatever purpose he may deem proper. In the instant petition, however, it is evident that Liwanag could not dispose of the money as she pleased because it was only delivered to her for a single purpose, namely, for the purchase of cigarettes, and if this was not possible then to return the money to Rosales.

LCDC is not liable for liquidated damages for delay in the construction of the buildings for PRHC.

There is no question that LCDC was not able to fully construct the Tektite Building and Projects 1, 2, and 3 on time. It reasons that it should not be made liable for liquidated damages, because its rightful and reasonable requests for time extension were denied by PRHC.[56]It is important to note that PRHC does not question the veracity of the factual representations of LCDC to justify the latter’s requests for extension of time. It insists, however, that in any event LCDC agreed to the limits of the time extensions it granted.[57]

The practice of the parties is that each time LCDC requests for more time, an extension agreement is executed and signed by both parties to indicate their joint approval of the number of days of extension agreed upon.

The applicable provision in the parties’ agreements is as follows:

ARTICLE VII – TIME OF COMPLETION . . . . . . . . . Should the work be delayed by any act or omission of the OWNER or any other person employed by or contracted by the OWNER in the project, including days in the delivery or (sic) materials furnished by the OWNER or others, or by any appreciable additions or alterations in the work ordered by the OWNER or the ARCHITECT, under Article V or by force majeure, war, rebellion, strikes, epidemics, fires, riots, or acts of the civil or military authorities, the CONTRACTOR shall be granted time extension.In case the CONTRACTOR encounters any justifiable cause or reason for delay, the CONTRACTOR shall within ten (10) days, after encountering such cause of delay submit to the OWNER in writing a written request for time extension indicating therein the requested contract time extension. Failure by the CONTRACTOR to comply with this requirements (sic) will be adequate reason for the OWNER not to grant the time extension. The following table shows the dates of LCDC’s letter-requests, the supposed causes justifying them, the number of days requested, and the number of days granted by PRHC and supposedly conformed to by LCDC: Cause# of days requested# of days granted1 Mar 1990Due to additional works and shortage of supplies and cement301114 Apr 1990Shortage of cement supply18610 May 1990Frequent power failures1029 Jul 1990Bad weather which endangered the lives of the construction workers (“heavy winds”)1024 Sep 1990Inclement weather that endangered the lives of the construction workers10328 Feb 1991 Architectural and structural revisions of R.C. beams at the 8th floor level20828 Aug 1991For change order work and revisions in the plans initiated by the architect and Abcede’s delay in giving the revised plans to contractor2711362 Sep 1991Inclement weather and scarcity of cement

251713 Oct 1991Water supply interruption and power failures preventing the mixing of cement1565 Dec 1991Typhoon Uring and water supply interruption (typhoon Uring alone caused a delay for more than 10 days due to strong and continuous rains)1522 Apr 1992Inadequate supply of Portland cement and frequent power failures15125 May 1992Inadequate supply of cement and frequent power failures1712 456217 additions and alterations in the work ordered by the owner and architect10820 564237 As previously mentioned, LCDC sent a 9 December 1992 letter to PRHC claiming that, in a period of over two years, only 256 out of the 618 days of extension requested were considered. We disregard these numbers presented by LCDC because of its failure to present evidence to prove its allegation. The tally that we will accept—as reflected by the evidence submitted to the lower court—is as follows: out of the 564 days requested, only 237 were considered.

Essentially the same aforementioned reasons or causes are presented by LCDC as defense against liability for both Projects 1 and 2.[58] In this regard, the CA ruled:

Plaintiff-appellee’s allegation that determination by PHRC of extensions of time were unreasonable or arbitrary is untenable in the light of express provisions of the Construction Agreements which prescribed precise procedures for extensions of time. In fact the procedure is fool-proof because both OWNER and CONTRACTOR sign to indicate approval of the number of days of extension. Computation of the penalty becomes mechanical after that. Each extension as signed by the parties is a contract by itself and has the force of law between them.

In fact, the parties followed that prescribed procedure strictly – the CONTRACTOR first requested the OWNER to approve the number of days applied for as extension of time to finish the particular project and the OWNER will counter-offer by approving only a lower number of days extension of time for CONTRACTOR to finish the contract as recommended by the CONSTRUCTION MANAGER ABCEDE, and in the end, both CONTRACTOR and OWNER sign jointly the approved number of days agreed upon. That signed extension of time is taken to be the contract between the parties.[59]

The appellate court further ruled that each signed extension is a separate contract that becomes the law between the parties:[60]there is nothing arbitrary or unreasonable about the number of days extension of time because each extension is a meeting of the minds between the parties, each under joint signature OWNER and CONTRACTOR witnessed by the CONSTRUCTION MANAGER.[61]

Inasmuch as LCDC’s claimed exemption from liability are beyond the approved time extensions, LCDC, according to the majority of the CA, is liable therefor. Justice Juan Q. Enriquez, in his Dissenting Opinion, held that the reasons submitted by LCDC fell under the definition of force majeure.[62] This specific point was not refuted by the majority.We agree with Justice Enriquez on this point and thereby disagree with the majority ruling of the CA.

Article 1174 of the Civil Code provides: “Except in cases expressly specified by the law, or when it is otherwise declared by stipulation or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable.” A perusal of the construction agreements shows that the parties never agreed to make LCDC liable even in cases of force majeure. Neither was the assumption of risk required. Thus, in the occurrence of events that could not be foreseen, or though foreseen were inevitable, neither party should be held responsible. Under Article 1174 of the Civil Code, to exempt the obligor from liability for a breach of an obligation due to an “act of God” or force majeure, the following must concur:(a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor.[63] The shortage in supplies and cement may be characterized as force majeure.[64] In the present case, hardware stores did not have enough cement available in their supplies or stocks at the time of the construction in the 1990s. Likewise, typhoons, power failures and interruptions of water supply all clearly fall under force majeure. Since LCDC could not possibly continue constructing the building under the circumstances prevailing, it cannot be held liable for any delay that resulted from the causes aforementioned.Further, PRHC is barred by the doctrine of promissory estoppel from denying that it agreed, and even promised, to hold LCDC free and clear of any liquidated damages. Abcede and Santos also promised that the latter corporation would not be held liable for liquidated damages even for a single day of delay despite the non-approval of the requests for extension.[65] Mr. Ley testified to this fact as follows:

Q: So, Mr. Witness in all those requests for extension and whenever the D.A. Abcede & Associates did not grant you the actual number of days stated in your requests for extension, what did Ley construction and Development do, if any?

A: We talked to Dennis Abcede and Mr. Santos, Ma’am.

Q: And what did you tell them?

A: I will tell them why did you not grant the extension for us, Ma’am.

Q: What was the response of Mr. Abcede and Mr. Santos?

A: Mr. Abcede and Mr. Santos told me, Mr. Ley don’t worry, you will not be liquidated of any single day for this because we can see that you worked so hard for this project, Ma’am.

Q: And what did you do after you were given that response of Mr. Abcede and Mr. Santos?

A: They told me you just relax and finish the project, and we will pay you up to the last centavos, Ma’am.

Q: What did you do after taking that statement or assurance?

A: As gentleman’s agreement I just continued working without complaining anymore, Ma’am.[66]

The above testimony is uncontradicted. Even assuming that all the reasons LCDC presented do not qualify as fortuitous events, as contemplated by law, this Court finds that PRHC is estopped from denying that it had granted a waiver of the liquidated damages the latter corporation may collect from the former due to a delay in the construction of any of the buildings.

Courts may rule on causes of action not included in the Complaint, as long as these have been proven during trial without the objection of the opposing party.

PRHC argues that since the parties had already limited the issues to those reflected in their joint stipulation of facts, neither the trial court nor the appellate court has the authority to rule upon issues not included therein. Thus it was wrong for the trial court and the CA to have awarded the amounts of P 5,529,495.76 representing the remaining balance for Project 3 as well as for the P 232,367.96 representing the balance for the construction of the drivers’ quarters in Project 3. PRHC claims that in the Stipulation of Facts, all the issues regarding Project 3 were already made part of the computation of the balances for the other projects. It thus argues that the computation for the Tektite Building showed that the overpayment for Project 3 in the amount of P 9,531,181.80 was credited as payment for the Tektite Tower Project.[67] It reasons that, considering that it actually made an overpayment for Project 3, it should not be made liable for the remaining balances for Project 3 and the drivers’ quarters in Project 3.[68] It is LCDC’s position, however, that the Stipulation of Facts covers the balances due only for the Tektite Tower Project, Project 1, and Project 2.[69] Since Project 3 was not included in the reconciliation contained in the said stipulation, it maintains that the balance for Project 3 remains at P 5,529,495.76,[70] and that the balance for the construction of the drivers’ quarters in Project 3 remains at P 232,367.96. On its part, LCDC disputes the deletion by the CA of the lower court’s grant of the alleged P 7,112,738.82 unpaid balance for the concreting works in the Tektite Building. The CA had ruled that this cause of action was withdrawn by the parties when they did not include it in their Joint Stipulation of Facts. LCDC argues that to the contrary, the silence of the Stipulation of Facts on this matter proves that the claim still stands.[71]

Considering that the unpaid balances for Project 3, its driver’s quarters, and the concreting works in the Tektite Building were not covered by the Stipulation of Facts entered into by the parties, we rule that no judicial admission could have been made by LCDC regarding any issue involving the unpaid balances for those pieces of work.

We affirm in this case the doctrine that courts may rule or decide on matters that, although not submitted as issues, were proven during trial. The admission of evidence, presented to support an allegation not submitted as an issue, should be objected to at the time of its presentation by the party to be affected thereby; otherwise, the court may admit the evidence, and the fact that such evidence seeks to prove a matter not included or presented as an issue in the pleadings submitted becomes irrelevant, because of the failure of the appropriate party to object to the presentation.

No objection was raised when LCDC presented evidence to prove the outstanding balances for Project 3, its driver’s quarters, and the concreting works in the Tektite Building.

In Phil. Export and Foreign Loan Guarantee Corp. v. Phil. Infrastructures, et al.,[72] this Court held:

It is settled that even if the complaint be defective, but the parties go to trial thereon, and the plaintiff, without objection, introduces sufficient evidence to constitute the particular cause of action which it intended to allege in the original complaint, and the defendant voluntarily produces witnesses to meet the cause of action thus established, an issue is joined as fully and as effectively as if it had been previously joined by the most perfect pleadings. Likewise, when issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Considering the absence of timely and appropriate objections, the trial court did not err in admitting evidence of the unpaid balances for Project 3, its driver’s quarters, and the concreting works in the Tektite Building. Furthermore, both the lower and the appellate courts found that the supporting evidence presented by LCDC were sufficient to prove that the claimed amounts were due, but that they remained unpaid. LCDC should be held liable for the corrective works to redo or repair the defective waterproofing in Project 2.

The waterproofing of Project 2 was not undertaken by LCDC. Instead, Vulchem Corporation (Vulchem), which was recommended by Santos and Abcede, was hired for that task. Vulchem’s waterproofing turned out to be defective. In order to correct or repair the defective waterproofing, PRHC had to contract the services of another corporation, which charged it P2,006,000.Denying liability by alleging that PRHC forced it into hiring Vulchem Corporation for the waterproofing works in Project 2, LCDC argues that under Article 1892, an agent is responsible for the acts of the substitute if he was given the power to appoint a substitute. Conversely, if it is the principal and not the agent who appointed the substitute, the agent bears no responsibility for the acts of the sub-agent.[73] The provision reads:

“Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute:

(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent.”

LCDC argues that because PRHC, as the principal, had designated Vulchem as sub-agent, LCDC, as the agent, should not be made responsible for the acts of the substitute, even in the instance where the latter were notoriously incompetent.[74]LCDC’s reliance on Art. 1892 is misplaced. The principles of agency are not to be applied to this case, since the legal relationship between PRHC and LCDC was not one of agency, but was rather that between the owner of the project and an independent contractor under a

contract of service. Thus, it is the agreement between the parties and not the Civil Code provisions on agency that should be applied to resolve this issue.

Art. XIV of the Project 2 Agreement clearly states that if the contractor sublets any part of the agreement to a third party, who in effect becomes a sub-contractor, the losses or expenses that result from the acts/inactions of the sub-contractor should be for the contractor’s account, to wit:

ARTICLE XIV – ASSIGNMENT

This Agreement, and/or any of the payments to be due hereunder shall not be assigned in whole or in part by the CONTRACTOR nor shall any part of the works be sublet by CONTRACTOR without the prior written consent of OWNER, and such consent shall not relieve the CONTRACTOR from full responsibility and liability for the works hereunder shall not be granted in any event until CONTRACTOR has furnished OWNER with satisfactory evidence that the Sub-Contractor is carrying ample insurance to the same extent and in the same manner as herein provided to be furnished by CONTRACTOR. If the agreement is assigned or any part thereof is sublet, CONTRACTOR shall exonerate, indemnify and save harmless the OWNER from and against any and all losses or expenses caused thereby.[75]

LCDC had every right to reject Vulchem as sub-contractor for the waterproofing work of Project 2 but it did not do so and proceeded to hire the latter. It is not unusual for project owners to recommend sub-contractors, and such recommendations do not diminish the liability of contractors in the presence of an Article XIV-type clause in the construction agreement. The failure of LCDC to ensure that the work of its sub-contractor is satisfactory makes it liable for the expenses PRHC incurred in order to correct the defective works of the sub-contractor. The CA did not err in ruling that the contract itself gave PRHC the authority to recover the expenses for the “re-do” works arising from the defective work of Vulchem.[76]

LCDC is entitled to attorney’s fees and the expenses of litigation and costs.

According to the CA, LCDC was not entitled to attorney’s fees, because it was not the aggrieved party, but was the one that violated the terms of the construction agreements and should thus be made to pay costs.[77] LCDC claims, on the other hand, that the CA seriously erred in deleting the lower court’s award of P750,000 attorney’s fees and the expenses of litigation in its favor, since this award is justified under the law.[78] To support its claim, LCDC cites Article 2208(5), which provides:

ART. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except: . . . . . . . . .

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim;

. . . . . . . . .

Attorney's fees may be awarded when the act or omission of the defendant compelled the plaintiff to incur expenses to protect the latter’s interest.[79] In ABS-CBN Broadcasting Corp. v. CA,[80] we held thus:

The general rule is that attorney's fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate. They are not to be awarded every time a party wins a suit. The power of the court to award attorney's fees under Article 2208 demands factual, legal, and equitable justification. Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still attorney's fees may not be awarded where no sufficient showing of bad faith could be reflected in a party's persistence in a case other than an erroneous conviction of the righteousness of his cause. LCDC has failed to establish bad faith on the part of PRHC so as to sustain its position that it is entitled to attorney’s fees. Nevertheless, the CA erred in reversing the lower court’s Decision granting LCDC’s claim for attorney’s fees considering that the construction agreements contain a penal clause that deals with the award of attorney’s fees, as follows:In the event the OWNER/CONTRACTOR institutes a judicial proceeding in order to enforce any terms or conditions of this Agreement, the CONTRACTOR/OWNER should it be adjudged liable in whole or in part, shall pay the OWNER/CONTRACTOR reasonable attorney’s fees in the amount equivalent to Twenty Percent (20%) of the total amount claimed in addition to all expenses of litigation and costs of the suit. Equivalent to at least Twenty Percent (20%) of the total amount claimed in addition to all expenses of litigation and costs of the suit.

As long as a stipulation does not contravene the law, morals, and public order, it is binding upon the obligor.[81] Thus, LCDC is entitled to recover attorney’s fees. Nevertheless, this Court deems it proper to equitably reduce the stipulated amount. Courts have the power to reduce the amount of attorney’s fees when found to be excessive,[82] viz:We affirm the equitable reduction in attorney’s fees. These are not an integral part of the cost of borrowing, but arise only when collecting upon the Notes becomes necessary. The purpose of these fees is not to give respondent a larger compensation for the loan than the law already allows, but to protect it against any future loss or damage by being compelled to retain counsel – in-house or not—to institute judicial proceedings for the collection of its credit. Courts have has the power to determine their reasonableness based on quantum meruit and to reduce the amount thereof if excessive.[83]We reverse the appellate court’s Decision and reinstate the lower court’s award of attorney’s fees, but reduce the amount from P750,000 to P200,000.

WHEREFORE, we SET ASIDE the Decision of the Court of Appeals and RULE as follows:

I. We find Philippine Realty and Holdings Corporation (PRHC) LIABLE to Ley Construction Development Corporation (LCDC) in the amount of P 64,029,710.22, detailed as follows:1. P 13,251,152.61 as balance yet unpaid by PRHC for Project 2;

2. P 1,703,955.07 as balance yet unpaid by PRHC for Project 1;

3. P 5,529,495.76 as balance yet unpaid by PRHC for Project 3;

4. P 232,367.96 as balance yet unpaid by PRHC for the drivers’ quarters for Project 3;

5. P 36,000,000.00 as agreed upon in the escalation agreement entered into by PRHC’s representatives and LCDC for the Tektite Building;

6. P 7,112,738.82 as balance yet unpaid by PRHC for the concreting works from the ground floor to the fifth floor of the Tektite Building;

7. P 200,000.00 as LCDC’s reduced attorney’s fees.

II. Further, we find LCDC LIABLE to PRHC in the amount of P 6,652,947.75 detailed as follows:1. P 4,646,947.75 for the overpayment made by PRHC for the Tektite Building;

2. P 2,006,000.00 for the expenses incurred by PRHC for corrective works to redo/repair the allegedly defective waterproofing construction work done by LCDC in Project 2.

The respective liabilities of the parties as enumerated above are hereby SET OFF against each other, and PRHC is hereby DIRECTED to pay LCDC the net amount due, which is P 57,376,762.47, with legal interest from the date of the filing of Complaint.

SO ORDERED.

21. YUCHENGCO vs. THE MANILA CHRONICLE PUBLISHING CORPORATIONG.R. No. 184315; November 25, 2009

CHICO-NAZARIO, J.: When malice in fact is proven, assertions and proofs that the libelous articles are qualifiedly privileged communications are futile, since being qualifiedly privileged communications merely prevents the presumption of malice from attaching in a defamatory imputation. This is a Petition for Review on Certiorari assailing the Amended Decision[1] of the Court of Appeals in CA-G.R. CV No. 76995 dated 28 August 2008. The Amended Decision reversed on Motion for Reconsideration the 18 March 2008 Decision[2] of the same court, which in turn affirmed in toto the Decision of the Regional Trial Court (RTC) of Makati City in Civil Case No. 94-1114 dated 8 November 2002 finding herein respondents liable for damages. The facts of the case, as summarized by the RTC, are as follows: In his Complaint, plaintiff Alfonso T. Yuchengco alleges that in the last quarter of 1994, Chronicle Publishing Corporation (“Chronicle Publishing” for brevity) published in the Manila Chronicle a series of defamatory articles against him. In two of the subject articles (November 10 and 12, 1993 issues), he was imputed to be a “Marcos crony” or a “Marcos-Romualdez crony,” which term according to him is commonly used and understood in Philippine media to describe an individual who was a recipient of special and underserving favors from former President Ferdinand E. Marcos and/or his brother-in-law Benjamin “Kokoy” Romualdez due to special and extra-ordinary closeness to either or both, and which favors allowed an individual to engage in illegal and dishonorable business activities. The plaintiff claims that the said articles further branded him as a mere front or dummy for the Marcos and Romualdez clans in Benguet Corporation, which company sought to take-over the management of Oriental Petroleum Mineral Corporation (“Oriental” for brevity). He contends that such an imputation is untrue since his holdings in Benguet Corporation were legally acquired by him. Also, he was likewise accused of unsound and immoral business practices by insinuating that he wanted to take control of Oriental in order to divert its resources to rescue the debt-ridden Benguet Corporation. He claims that the accusation is untrue since he was merely interested in being represented in the board thereof so as to protect his and his companies’ interest therein as shareholders. The subject articles insinuated that he personally and intentionally caused the failure of Benguet Corporation and that if even if he ever assumed control of Oriental, it would suffer the same fate as the former. According to him, at the time he assumed chairmanship of Benguet Corporation, it was already experiencing financial downturns caused by plummeting world prices of gold and unprofitable investments it ventured into. Moreover, one of the articles portrayed him as being an unfair and uncaring employer when the employees of Grepalife Corporation, of which he is the Chairman, staged a strike, when the truth being that he had nothing to do with it. And that if his group takes over Oriental, it will experience the same labor problems as in Grepalife. Furthermore, the subject articles accused him of inducing Rizal Commercial Banking Corporation (“RCBC” for brevity) to violate the provisions of the General Banking Act on DOSRI loans. He denies the imputations believing that there is nothing irregular in the RCBC-Piedras transaction for the acquisition of shares of Oriental. Also, the plaintiff claims that the subject articles insinuated that he induced others to disobey lawful orders of the Securities and Exchange Commission (“SEC” for brevity) when the truth is that the officials of RCBC and Alcorn never defied any SEC order, and that if ever they did, he never induced them to do so. Finally, the plaintiff asserts that the subject articles imputed to him the derogatory tag of “corporate raider,” implying that he was seeking to profit for something he did not work for. He denies the imputation since he acquired his stake in Oriental for adequate and valuable consideration at the time when no one was willing to bailout the government from its difficult and losing position thereto. In their Answer, the defendants deny liability claiming that the subject articles were not defamatory since they were composed and published in good faith and only after having ascertained their contents. In any event, they claim that these articles are privileged and/or constitute reasonable and balance[d] comments on matters of legitimate public interest which cannot serve as basis for the finding of libel against them. They likewise alleged that they were acting within the bounds of constitutionally guaranteed freedom of speech and of the press. Furthermore, they contend that since plaintiff is a public figure, and assuming that the articles were indeed defamatory, they cannot be held liable for damages since they were not impelled by actual malice in the composition thereof. They did not compose and/or publish said articles with the knowledge that they contained falsehoods, or with reckless disregard on whether or not they contained falsehood. As to defendant Coyiuto, he claims that he had no participation in the publication of the subject articles nor consented or approved their publication. PLAINTIFF’S EVIDENCE During the trial, the plaintiff himself, ALFONSO T. YUCHENGCO, testified that prior to his appointment as Ambassador to Japan, he was the chairman of various business organizations notably: Benguet Corporation (“Benguet”), Philippine Long Distance Telephone Company, Rizal Commercial Banking Corporation (“RCBC”), Bank of America Savings Bank, House of Investments, Inc., Dole Philippines and Philippine Fuji Xerox Corporation. He was also the President of the Philippine Ambassadors; chairman or vice president of Bantayog ng Bayan; and chairman of AY Foundation, Inc. He was appointed Philippine Ambassador to People’s Republic of China after the EDSA Revolution. As regards the article referring to the November 10, 1993 issue of the Manila Chronicle (Exh. A), he stated that he had never been a Marcos crony nor had been a business partner of the Romualdezes or had personal dealings with them; that during the shareholders’ meeting, the two (2) sons of Benjamin “Kokoy” Romualdez were elected as directors of Benguet Corporation pursuant to a Court order; that he had no personal dealings with them; that he had no intention of taking over Oriental and that Benguet Corporation did not lose the amount as stated in the article; that Benguet Corporation experienced liquidity problems, and that before he joined the corporation, it had already diversified into many other financial ventures; that he denied having any business partnership with the Romualdezes at that time. Regarding the November 12, 1993 issue of the Manila Chronicle (Exh. B), he denied having any partnership with the Marcos family; that he denied responsibility for the losses incurred by Benguet Corporation, as the losses were due to the drop of the commodity market, and for having diversified into other non-profitable ventures; that he had no intention whatsoever of taking over Oriental; that although the Yuchengco family owns a substantial block of shares of RCBC, Sanwa Bank actually owns twenty-five percent (25%) thereof; that RCBC did not finance his fund but it extended a loan to Piedras Petroleum, a subsidiary of the Presidential Commission of Good Government (“PCGG” for brevity); admitted that Traders Royal Bank also granted a loan to PCGG but such was an independent transaction of RCBC.

About the November 15, 1993 issue of the Manila Chronicle (Exh. C), he denied any knowledge of what transpired at the Trust Department of RCBC because as Chairman he was not involved in many of the bank’s transactions. Referring to November 16, 1993 issue of the Manila Chronicle (Exh. D), he considered the attacks against him to be malicious considering that he does not see any connection between the labor strike at Grepalife with the case of Alcorn and RCBC; that the article would like to show that he was the reason for the huge losses incurred by Benguet Corporation. As regards the November 22, 1993 issue of the Manila Chronicle (Exh. E), he denied giving any interest free loan, the fact that they gave a loan to PCGG does not mean that they gave a loan to Benedicto since the latter had already turned over the shares of Piedras to PCGG at that time. Regarding the November 23, 1993 issue of the Manila Chronicle (Exh. F), he denied extending an interest free loan considering that he is not the only owner of RCBC; that these series of attacks against him and RCBC were intended to cause a “bank run”; that the article imputes that he was responsible for giving an interest free loan. About the December 5, 1993 issue of the Manila Chronicle (Exh. G), he said the article was intended to humiliate and embarrass him since he really had no intention of taking over Oriental; that the reason for the attack against his person was because he and defendant Coyiuto, Jr. were both rivals in the insurance business and that the latter has always been envious of his position for having owned Malayan Insurance Company. On cross-examination, plaintiff Yuchengco testified that he does not consider himself a public figure; and that he felt maligned by the references to him as a “Marcos crony”. [TSN, 07 February 1997; 10 February 1997; 12 February 1997] ROSAURO ZARAGOZA testified that he is the Executive Vice-President of RCBC; that the statement in Exhibits “D”, “E” and “F” with regard to the interest free loan allegedly granted to Piedras Petroleum Company, Inc. (“Piedras”) are false because the Piedras deal was a trust transaction which involved an advance in exchange for shares of stock; that plaintiff Yuchengco did not have a personal interest in the Piedras deal; that Piedras or Oriental Petroleum Mineral Corporation (“Oriental Petroleum”) shares were not transferred to plaintiff Yuchengco’s name by virtue of the transaction; and that the defendants did not approach him or RCBC to check the veracity of the subject articles. The affidavit of Mr. Zaragoza (Exhibit “H”) was adopted as part of his testimony. On cross-examination, Mr. Zaragoza testified that he volunteered to testify in the instant case because he was the most knowledgeable about the Piedras deal; that plaintiff Yuchengco was aggrieved upon reading the subject articles; that under the Memorandum of Agreement (“MOA”) between RCBC and Piedras, should the latter fail to comply with its obligations under the MOA, it will pay interest at the prevailing market interest rate from the date of advance until full payment; and that there was a complaint filed with the Bangko Sentral ng Pilipinas against RCBC by Mr. Felipe Remollo questioning the Piedras deal. [TSN 28 February 1997; 26 June 1997; 27 June 1997; 04 July 1997] JOSE REVILLA testified that he and Amb. Yuchengco were long time friends, where he (Revilla) worked for him (Yuchengco) for thirty-two (32) years in his (Yuchengco) credit card company – Industrial Finance Corporation Credit Cards; that knowing Amb. Yuchengco for a considerable period of time, he does not believe the truth of the contents of the subject articles; that plaintiff Yuchengco appeared distressed when he joked about the subject articles; that other people approached him to ask whether the subject articles are true [TSN 25 August 1997]. x x x x DEFENDANTS’ EVIDENCE On the other hand, defendants Zaragoza, Gatdula, Cabrera and Valino substantially testified on the following matters: GERRY ZARAGOZA testified that he was the Managing Editor of Manila Chronicle in charge of the national and political news; that defendant San Juan was the other Managing Editor in charge of the lifestyle section; that a story conference is conducted everyday where the articles, including the pages where they will appear, are discussed; that the editor-in-chief (defendant Cruz), executive editor (defendant Tolentino) and deputy editor (defendant Cabrera) were the ones responsible for the decisions of the story conference relative to the printing of the newspaper; that he was not involved in the writing and editing of the subject articles; that Exhibits “A” to “D” are classified as business news; that columns, specifically Exhibits “E” and “F” are not discussed during story conferences; and that Exhibit “G”, which appeared in the “Money Section” did not pass thru him. On cross-examination, defendant Zaragoza testified that except for the columns, Exhibits “A” to “D” and Exhibit “G” are considered hard news; that he handled the hard news, while defendant San Juan handled the soft news; and that defendant Valino was the business editor in charge of the business section (TSN 22 July 1998; 23 September 1998] DONNABELLE GATDULA claimed that she was a correspondent for Manila Chronicle assigned to the Securities and Exchange Commission (“SEC”) beat; that she had no participation in the writing or publication of Exhibits “A” to “C” and “G” to “E”; that she attended the hearing conducted by the SEC and interviewed the two lawyers of RCBC and SEC Chairman Rosario Lopez regarding the Oriental Petroleum case; that her name appears as a tag line in Exhibit “D”, because she only wrote part of the story; and that she did not write the entire article (Exhibit “D”) as some of the statements therein were added by the editor/s; and that she did not discuss Exhibit “D” with any of the editors. On cross-examination, defendant Gatdula testified that she does not have a copy of the original article which she wrote; that she read Exhibit “D” after it was published; that she did not compare her original story with Exhibit “D” nor question the authority of the editor to edit her story; and that she agreed to put her name on Exhibit “D”. (TSN 23 September 1998; 05 October 1998). NOEL CABRERA contended that after having gone through the subject articles, he believes that the news stories and commentaries were fair and that those who wrote the same followed the proper standards; that as regard the contents of Exhibits “E” and “F”, the opinion of Mr. Raul Valino, as written in the said articles, were valid and based on documentary facts; as to Exhibit “D”, pertaining to the article of Ms. Donnabelle Gatdula, she based her article on documents pertaining to the Oriental transaction, other documents, as well as interviews; that at the time the subject articles were written, Amb. Yuchengco was a public figure, being a very prominent businessman with vast interest in banks and other businesses; that during the year 1993, the word “crony” was more or less accepted to mean as a big businessman or close associate of the late President Marcos, and its use in the column was meant only to supply the perspective as to the figure or subject involved in the news story, and there is thus no malice or derogatory intent when the same was used. On cross-examination, defendant Cabrera testified that defendant Coyiuto is one of the owners of Manila Chronicle; and that he only saw the records of Exhibits “8” to “10” and “16” to “20” after the publication of Exhibits “A” to “G” (TSN 21 April 1999; 28 April 1999 05 May 1999; 10 May 1999).

RAUL VALINO stated that he was the Acting Business Manager and later Managing Editor and Business Editor-in-Chief of Manila Chronicle; that after having consulted several dictionaries as to the meaning of the word “crony”, he did not come across a definition describing the word to mean someone who is a recipient of any undeserving or special favor from anyone, that it merely refers to someone who is a friend or a special friend; there was no mention whatsoever in the subject article that Amb. Yuchengco was being accused of fronting for the late President Marcos (referring to par. 2.3.2 of the complaint); that nowhere in the said paragraph was Amb. Yuchengco accused of having acted as a front to facilitate the acquisition of a prohibited interest in a private corporation by a public official while occupying a public office; that nowhere in the article was Amb. Yuchengco accused of being directly or indirectly involved in unsound business practices (referring to par. 2.4 of the complaint); that whatever imputation of ill-will in par. 2.4.1 of the complaint was only in plaintiff’s mind; and as regards par. 2.6 of the complaint, that he was merely reporting on what transpired at the picket line and what the striking employees answered to him; and that he did not state in his columns (Exhibits “E” and “F”) that plaintiff Yuchengco violated banking laws. [TSN 23 February 2000][3] On 8 November 2002, the RTC rendered its Decision in favor of herein petitioner Alfonso T. Yuchengco, disposing of the case as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows: 1. On the First Cause of Action, ordering defendants Chronicle Publishing, Neil H. Cruz, Ernesto Tolentino, Noel Cabrera, Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino and Rodney Diola to pay plaintiff Yuchengco, jointly and severally: a. the amount of Ten Million Pesos (P10,000,000.00) as moral damages; andb. the amount of Ten Million Pesos (P10,000,000.00) as exemplary damages; 2. On the Second Cause of Action, ordering defendants Roberto Coyiuto, Jr. and Chronicle Publishing to pay plaintiff Yuchengco, jointly and severally: a. the amount of Fifty Million Pesos (P50,000,000.00) as moral damages; andb. the amount of Thirty Million Pesos (P30,000,000.00) as exemplary damages; 3. On the Third Cause of Action, ordering all defendants to pay plaintiff Yuchengco, jointly and severally, the amount of One Million Pesos (P1,000,000.00) as attorney’s fee and legal costs.[4] The respondents, namely the Manila Chronicle Publishing Corporation, Neal H. Cruz, Ernesto Tolentino, Noel Cabrera, Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino, Rodney P. Diola, and Roberto Coyiuto, Jr. appealed to the Court of Appeals. The appeal was docketed as CA-G.R. CV No. 76995 and was raffled to the Fifth Division. On 18 March 2008, the Court of Appeals promulgated its Decision affirming the RTC Decision: WHEREFORE, in consideration of the foregoing premises, judgment is hereby rendered DISMISSING the appeals of defendants-appellants and AFFIRMING the decision dated November 8, 2002 of the trial court IN TOTO.[5] Respondents filed a Motion for Reconsideration. On 28 August 2008, the Court of Appeals reversed itself in an Amended Decision: WHEREFORE, the appeal is GRANTED. The Decision of this Court dated March 18, 2008 is RECONSIDERED and SET ASIDE. The decision of the court a quo dated November 8, 2002 is REVERSED and SET ASIDE. The Amended Complaint for Damages against the defendants-appellants is DISMISSED. No pronouncement as to costs. Hence, this Petition for Review on Certiorari, where petitioner puts forth the following Assignments of Error: A. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR IN RULING THAT THE CASE OF ARTURO BORJAL, ET AL. V. COURT OF APPEALS, ET AL. CITED BY RESPONDENTS IN THEIR MOTION FOR RECONSIDERATION WARRANTED THE REVERSAL OF THE CA DECISION DATED MARCH 18, 2008. B. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR IN RULING THAT THE SUBJECT ARTICLES IN THE COMPLAINT FALL WITHIN THE CONCEPT OF PRIVILEGED COMMUNICATION. C. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR IN RULING THAT PETITIONER IS A PUBLIC OFFICIAL OR PUBLIC FIGURE.[6] Libel is defined in Article 353 of the Revised Penal Code, which provides: Art. 353. Definition of Libel. – A libel is a public and malicious imputation of a crime, or of a vice or defect, real or imaginary, or any act, omission, condition, status, or circumstance tending to cause the dishonor, discredit, or contempt of a natural or juridical person, or to blacken the memory of one who is dead. Based on this definition, this Court has held that four elements constitute the crime of libel, namely (a) defamatory imputation tending to cause dishonor, discredit or contempt; (b) malice, either in law or in fact; (c) publication; and (d) identifiability of the person defamed.[7] Despite being defined in the Revised Penal Code, libel can also be instituted, like in the case at bar, as a purely civil action, the cause of action for which is provided by Article 33 of the Civil Code, which provides: Article 33. In cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence. The above elements of libel were adopted as well in a purely civil action for damages. As held by this Court in GMA Network, Inc. v. Bustos[8]: An award of damages under the premises presupposes the commission of an act amounting to defamatory imputation or libel, which, in turn, presupposes malice. Libel is the public and malicious imputation to another of a discreditable act or condition tending to cause the dishonor, discredit, or contempt of a natural or juridical person. Liability for libel attaches present the following elements: (a) an allegation or imputation

of a discreditable act or condition concerning another; (b) publication of the imputation; (c) identity of the person defamed; and (d) existence of malice. Of these four elements, the most apparent in the case at bar would be the publication of the alleged imputation. Libel is published not only when it is widely circulated, but also when it is made known or brought to the attention or notice of another person other than its author and the offended party.[9] The circulation of an allegedly libelous matter in a newspaper is certainly sufficient publication. We are thus left with the determination of the existence of the three remaining elements of libel, namely: (1) the defamatory imputation; (2) the identity of the person defamed; and (3) the existence of malice. Defamatory Imputation Defamation, which includes libel and slander, means the offense of injuring a person's character, fame or reputation through false and malicious statements. It is that which tends to injure reputation or to diminish esteem, respect, goodwill or confidence in the plaintiff, or to excite derogatory feelings or opinions about the plaintiff. It is the publication of anything that is injurious to the good name or reputation of another or tends to bring him into disrepute.[10] In determining whether certain utterances are defamatory, the words used are to be construed in their entirety and taken in their plain, natural and ordinary meaning, as they would naturally be understood by persons hearing (or reading, as in libel) them, unless it appears that they were used and understood in another sense.[11] In order to fully appreciate whether the subject articles are, in fact, defamatory, an analysis thereof is in order. The following are what have been referred to as the subject articles: Manila Chronicle Issue Date (Author)TitleExhibit10 November 1993(no by-line)“Yuchengko joins forces with Kokoy”A, A-1 to A-512 November 1993(no by-line)“RCBC probed for violating CB rules”B, B-1 to B-215 November 1993(no by-line)“RCBC called to SEC”; subtitled “Yuchengco Bank defies government order”C, C-1 to C-316 November 1993(Donna Gatdula)“Alcorn, RCBC execs own guilt”D, D-1 to D-422 November 1993(Raul Valino)“Bank runs and RCBC free loans”E, E-1 to E-223 November 1993(Raul Valino)“RCBC case bugs Bangko Sentral”F, F-1 to F-35 December 1993(Rodney P. Diola)“The Battle for Oriental”G, G-1 to G-4 In two of the subject articles, respondents allegedly accused and labeled Yuchengco as a Marcos crony, who took advantage of his relationship with the former President to gain unwarranted benefits: Yuchengco joins forces with Kokoy[12] Alfonso Yuchengco, a Marcos crony who wants to takeover the ownership and management of the highly profitable Oriental Petroleum Minerals Corp. (OMPC), has tied up with Marcos brother-in-law Benjamin “Kokoy” Romualdez through two of his sons, records at the securities and Exchange Commission (SEC) showed yesterday. Kokoy’s two sons, Benjamin Philip Gomez Romualdez, 32, and Ferdinand Martin G. Romualdez, 29, are now members of the board of the debt-ridden and heavily losing Benguet Corp., a company taken over by Marcos during his dictatorship, but which was sequestered at the start of President Aquino’s term. x x x x Observers said they believed the elections of the Romualdez sons officially confirmed suspicions that the Marcos and Romualdez clans really owned Benguet. Benguet’s former president, Jaime Ongpin, employed by the company for 10 years before he was named finance secretary by then President Aquino, committed suicide after being accused of being a Marcos-Romualdez crony. Yuchengco Bank under CB probe[13] x x x x

The official said the case was recently brought to Bangko Sentral’s attention by an RCBC creditor who felt he was being cheated by the bank through interest-free loans granted to related interests. Under the interest-free loan scheme, Yuchengco was able to own OMPC shares of Piedras since they were the same shares RCBC financed and which were turned over to the bank as payment for the loan. The Central Bank official said that Bangko Sentral is now determining whether RCBC violated the rule on loans to directors, officers, stockholders and related interests (DOSRI). Yuchengco is both a director (chairman) officer, stockholder, and a related interest of RCBC. x x x x Violating the DOSRI rule is a criminal offense. The Bangko Sentral official stressed. “I believe that that is tantamount, not only to cheating the depositor, but also robbing the bank of its clients’ money.” “If Bangko Sentral does not act decisively on this matter,” the official asked “what will prevent the other banks from resorting to this kind of transactions to enrich their owners and enable them to acquire shares of stock from other companies?” The interest-free loan controversy also involves Traders Royal Bank (TRB), a sequestered bank, owned by Roberto Benedicto, a Marcos crony. x x x x The deal could be from one crony to another since Yuchengco is very much associated with the Marcoses and the Romualdezes, a source opined. Yuchengco owns Benguet Corp., which is heavily losing since he joined the Company as Chairman in 1989. x x x x Since Benguet is encountering all kinds of financial problems, losses and overdue debts, observers say they fear that Oriental may also suffer the same fate when and should Yuchengco and his partners assume management of OMPC. Already, it was noted the Oriental shares sold on the stock market are weakening, and stock observers say this could be attributed to the planned entry into the company of Yuchengco, Leonardo Siguion-Reyna and their minority partners. In another of the subject articles, respondents allegedly insinuated that Yuchengco induced others to disobey the lawful orders of the Securities and Exchange Commission (SEC): Alcorn, RCBC execs own guilt[14] Two officials of Alcorn Petroleum and Minerals Corporation (AMPC) and Rizal Commercial Banking Corporation (RCBC) admitted before the Securities and Exchange Commission (SEC) yesterday that they ignored the SEC order commanding them to process all Alcorn shares in the name of R. Coyiuto Securities Inc. and its investor clients such as Oriental Petroleum and Minerals Corporation (OMPC). x x x x RCBC is owned by Alfonso Yuchengco, chairman of the debt-ridden and heavily-losing Benguet Corp. He also owns Great Pacific Life Insurance Co., whose employees are on strike because of the company’s refusal to grant them better salaries and benefits. x x x x SEC insiders said that while Monreal and Ricalde should be punished for disobeying a lawful order from the SEC, people who masterminded the APMC order should also be penalized once proven guilty. x x x x Some observers said the APMC order to RCBC could be a ploy to prevent Robert Coyiuto, Jr., chairman and president of OPMC, from retaining his majority control of Oriental, and a scheme to put on the board members of the Yuchengco company. In fact, when Yuchengco created his own OPMC “board of directors,” he appointed Ricalde as corporate secretary, OPMC officials pointed out. “In our opinion,” observers following the OPMC developments stated, ‘this is a clear and simple case of criminal conspiracy whose perpetrators must be meted the harshest punishment to prevent corporate thieves from making a mockery of the law and from illegally taking over corporations which they do not own in the first place.” Yuchengco further presented the following articles which allegedly accused him of inducing Rizal Commercial Banking Corporation (RCBC) to violate the provisions of the General Banking Act on Directors, Officers, stockholders, and Related Interest (DOSRI) loans: Bank runs and RCBC free loans[15] The Bank runs that devastated the economy in the recent past were, first and foremost, instigated by rumors that bank owners were, themselves, using the public’s money to promote their own businesses and interests in violation of Central Bank rules and regulations. x x x x Now here comes Rizal Commercial Banking Corporation (RCBC) being charged with engaging in unsound banking by lending an interest-free loan of P101 million to one company, Piedras Petroleum Corporation, which Marcos crony Roberto Benedicto had surrendered to the Presidential Commission on Good Government (PCGG). x x x x

What would happen if all the other banks resort to this kind of lending activity, giving away loans without interest? The entire banking system would certainly be compromised. The owners or RCBC, therefore, should not be too liberal with their depositors’ money. They should also consider what fatal effects such a practice could inflict on the very system where RCBC operates. The country, at this time, cannot afford another series of bank runs, nor a run at RCBC. RCBC case bugs Bangko Sentral[16] x x x x The P101 million interest-free loan to Piedras is of national interest for not just one reason alone. First, the money involved came from the depositors, and not from the pockets of Yuchengco. Second, banking rules dictate that a bank must be prudent in lending out its clients’ money, so that its financial viability must never be put in question. Third, the money lent to a borrower must never end up in the pocket of the owner of the bank. Fourth, such a practice could lead to a bank run, which the economy cannot afford at this time, even if the run is confined to just one bank. Yuchengco further claims that the following article, in labeling him as a “corporate raider,” implies that he is seeking to profit from something he did not work for: The Battle for Oriental[17] Ledesma says Coyiuto will not wilt from Yuchengco’s fabled financial power. ‘Robert has a lot of friends that will help him fend off a raider like Yuchengco’, says Ledesma. x x x x Ledesma of OPMC says that even if Coyiuto loses in the bid, he’ll still remain a very significant player in OPMC given his substantial personal holdings and proxies in the company. Coyiuto’s investment in OPMC is now valued at more than a billion pesos compared to the Yuchengco block which, the Coyiuto group points out, has only minimal investments. That’s our moral ascendancy over their group. Coyiuto virtually made Oriental what it is today unlike Yuchengco who is just getting into the act now because Oriental has become an attractive cash cow’ says Ledesma. War of Families The fight for control of Oriental Petroleum gains particular poignancy given the long history of feuding between the families of Yuchengco and Coyiuto. Their families were bitter rivals in the insurance business way back in the seventies. The Yuchengcos own the Malayan Group of Insurance Companies while the Coyiutos used to control Pioneer Insurance. That rivalry seems to have come full circle with their battle in Oriental Petroleum. Pomento says the best arrangement would have been a modus vivendi between the two groups to stop their quarrel and work instead for the interest of the company. But given the bad blood that exists between the two families, that might be a difficult proposition, he says. The trial court and the Court of Appeals are in agreement that the above articles contain defamatory imputations. Even the Amended Decision of the Court of Appeals, wherein the appellate court reversed itself and held that respondents were not liable for damages, did not modify its earlier ruling affirming the defamatory character of the imputations in the above articles. The Court of Appeals merely reversed itself on account of the allegedly privileged nature of the articles, which goes into the element of malice. Malice, as an element of libel, and the defenses affecting the existence of the same shall be discussed later. In arguing that the subject articles are not really derogatory, respondent Cabrera explains that the word “crony” was more or less accepted to describe a big businessman or close associate of the late President Marcos, and its use in the column was meant only to supply the perspective as to the figure or subject involved in the news story. Respondent Valino further claimed that after consulting several dictionaries as to the meaning of the word “crony,” he did not come across a definition describing the word to mean someone who is a recipient of any undeserving or special favor from anyone. We are not swayed by the explanations of respondents Cabrera and Valino. In determining the defamatory character of words used, the explanation of the respondent should not prevail over what the utterances (or writing) convey to an ordinary listener (or reader).[18] Furthermore, as held by this Court in United States v. Sotto[19]: [F]or the purpose of determining the meaning of any publication alleged to be libelous “that construction must be adopted which will give to the matter such a meaning as is natural and obvious in the plain and ordinary sense in which the public would naturally understand what was uttered. The published matter alleged to be libelous must be construed as a whole. In applying these rules to the language of an alleged libel, the court will disregard any subtle or ingenious explanation offered by the publisher on being called to account. The whole question being the effect the publication had upon the minds of the readers, and they not having been assisted by the offered explanation in reading the article, it comes too late to have the effect of removing the sting, if any there be, from the word used in the publication.” (Emphasis supplied.) In finding that the phrase “Marcos crony” is derogatory, the trial court took judicial notice of the fact that the said phrase, as understood in Philippine context, refers to an individual who was the recipient of special and/or undeserved favors from the late President Marcos due to a special closeness to the latter. This finding, which was upheld by the Court of Appeals in its original Decision and was not tackled in the Amended Decision, is even supported by one of the subject articles. In particular, the 10 November 1993 article marked as Exhibit A mentioned that Benguet’s former president, Jaime Ongpin, committed suicide after being accused of being a Marcos-Romualdez crony.[20] This statement highlights the disgrace respondents wanted to associate with the term “crony,” which was used to describe Yuchengco in the very same article.

Even a cursory reading of the subject articles would show the intention of the writers to injure the reputation, credit and virtue of Yuchengco and expose him to public hatred, discredit, contempt and ridicule. The indirect manner in which the articles attributed the insults to Yuchengco (e.g., “the money involved came from depositors, and not from Yuchengco”) does not lessen the culpability of the writers and publishers thereof, but instead makes the defamatory imputations even more effective. Words calculated to induce suspicion are sometimes more effective to destroy reputation than false charges directly made. Ironical and metaphorical language is a favored vehicle for slander.[21] In sum, this Court upholds the ruling of the trial court and the Court of Appeals that the subject articles contain defamatory imputations. All of the following imputations: (1) the labeling of Yuchengco as a Marcos crony, who took advantage of his relationship with the former President to gain unwarranted benefits; (2) the insinuations that Yuchengco induced others to disobey the lawful orders of SEC; (3) the portrayal of Yuchengco as an unfair and uncaring employer due to the strike staged by the employees of Grepalife; (4) the accusation that he induced RCBC to violate the provisions of the General Banking Act on DOSRI loans; and (5) the tagging of Yuchengco as a “corporate raider” seeking to profit from something he did not work for, all exposed Yuchengco to public contempt and ridicule, for they imputed to him a condition that was dishonorable. Identification Defamatory words must refer to an ascertained or ascertainable person, and that person must be the plaintiff. Statements are not libelous unless they refer to an ascertained or ascertainable person.[22] However, the obnoxious writing need not mention the libeled party by name. It is sufficient if it is shown that the offended party is the person meant or alluded to.[23] In the case at bar, all but one of the subject articles explicitly mention the name of petitioner Yuchengco. The lone article, which does not mention Yuchengco at all, “Bank runs & RCBC free loans,”[24] nevertheless chided the owners of RCBC: The owners or RCBC, therefore, should not be too liberal with their depositors’ money. They should also consider what fatal effects such a practice could inflict on the very system where RCBC operates. The country, at this time, cannot afford another series of bank runs, nor a run at RCBC.[25] Identifying Yuchengco in said article by name was, however, not necessary, since the other subject articles, published a few days before and after this one, had already referred to Yuchengco as the owner of RCBC, sometimes explicitly (“Benguet started to bleed in 1989, the year Yuchengco, who owns Rizal Commercial Banking Corp. [RCBC], took over as chairman of the company”[26]), and sometimes implicitly (“the money involved came from depositors, and not from Yuchengco”). While the defamation of a large group does not give rise to a cause of action on the part of an individual, this is subject to exception when it can be shown that he is the target of the defamatory matter.[27] This Court therefore finds that Yuchengco was clearly identified as the libeled party in the subject defamatory imputations. Malice Malice connotes ill will or spite and speaks not in response to duty but merely to injure the reputation of the person defamed, and implies an intention to do ulterior and unjustifiable harm.[28] It is present when it is shown that the author of the libelous remarks made such remarks with knowledge that it was false or with reckless disregard as to the truth or falsity thereof.[29] Malice, however, does not necessarily have to be proven. There are two types of malice – malice in law and malice in fact.[30] Malice in law is a presumption of law. It dispenses with the proof of malice when words that raise the presumption are shown to have been uttered. It is also known as constructive malice, legal malice, or implied malice.[31] On the other hand, malice in fact is a positive desire and intention to annoy and injure. It may denote that the defendant was actuated by ill will or personal spite. It is also called express malice, actual malice, real malice, true malice, or particular malice.[32] In this jurisdiction, malice in law is provided in Article 354 of the Revised Penal Code, which also enumerates exceptions thereto: Art. 354. Requirement of publicity. - Every defamatory imputation is presumed to be malicious, even if it be true, if no good intention and justifiable motive for making it is shown, except in the following cases: 1. A private communication made by any person to another in the performance of any legal, moral or social duty; and 2. A fair and true report, made in good faith, without any comments or remarks, of any judicial, legislative or other official proceedings which are not of confidential nature, or of any statement, report or speech delivered in said proceedings, or of any other act performed by public officers in the exercise of their functions. There is, thus, a presumption of malice in the case of every defamatory imputation, where there is no showing of a good intention or justifiable motive for making such imputation. The exceptions provided in Article 354 are also known as qualifiedly privileged communications. The enumeration under said article is, however, not an exclusive list of qualifiedly privileged communications since fair commentaries on matters of public interest are likewise privileged.[33] They are known as qualifiedly privileged communications, since they are merely exceptions to the general rule requiring proof of actual malice in order that a defamatory imputation may be held actionable. In other words, defamatory imputations written or uttered during any of the three classes of qualifiedly privileged communications enumerated above – (1) a private communication made by any person to another in the performance of any legal, moral or social duty; (2) a fair and true report, made in good faith, without any comments or remarks, of any judicial, legislative or other official proceedings which are not of confidential nature, or of any statement, report or speech delivered in said proceedings, or of any other act performed by public officers in the exercise of their functions; and (3) fair commentaries on matters of public interest – may still be considered actionable if actual malice is proven. This is in contrast with absolutely privileged communications, wherein the imputations are not actionable, even if attended by actual malice: A communication is said to be absolutely privileged when it is not actionable, even if its author has acted in bad faith. This class includes statements made by members of Congress in the discharge of their functions as such, official communications made by public officers in the performance of their duties, and allegations or statements made by the parties or their counsel in their pleadings or motions or during the hearing of judicial proceedings, as well as the answers given by witnesses in reply to questions propounded to them, in the course of said proceedings, provided that said allegations or statements are relevant to the issues, and the answers are responsive or pertinent to the questions propounded to said witnesses. Upon the other hand, conditionally or qualifiedly privileged communications are those which, although containing defamatory imputations, would not be actionable unless made with malice or bad faith.[34] In the case at bar, both the trial court and the Court of Appeals found that the publication of the subject articles was attended by actual malice:

In the instant case, there is preponderance of evidence showing that there exists malice in fact in the writing and publication of the subject libelous articles. As correctly found by the trial court, [petitioner] was able to show that [respondents] were animated by a desire to inflict unjustifiable harm on his reputation as shown by the timing and frequency of the publication of the defamatory articles. Further, as previously stated, [respondents] failed to show that they had any good intention and justifiable motive for composing and publishing the vicious and malicious accusations against [petitioner]. Moreover, [respondents] published or caused the publication of the subject defamatory articles with reckless disregard as to the truth or falsity thereof. As previously stated, there is no proof that the contents of the subject articles are true or that the respondents exercised a reasonable degree of care before publishing the same. [Respondents] failed to present evidence showing that they verified the truth of any of the subject articles, especially in light of the categorical denial by [petitioner] of the accusations made against him. [Respondents] did not exercise reasonable degree of care or good faith efforts to arrive at the truth before publishing the subject defamatory articles. [Respondents] did not present any competent evidence to establish the truth of their allegations against [petitioner]. There was no showing that [respondents] made any attempt to talk to [petitioner] to verify the statements contained in the defamatory articles, especially considering the gravity of the accusations made against [petitioner]. At the very least, [respondents] should have exercised efforts to talk to [petitioner] to clarify the issues and get his side. [Respondents’] failure to verify the truth of the information from [petitioner] himself is in itself an evidence of their lack of bona fide efforts to verify the accuracy of her information. The incessant publication of the defamatory articles attacking the honor and reputation of [petitioner] is also proof of [respondents’] malicious scheme to malign and defame the name, honor and reputation of [petitioner]. As earlier pointed out, in a span of one (1) month, [respondents] wrote and published and/or caused the publication of seven (7) libelous articles against [petitioner] attacking his honor and reputation as a distinguished businessman, philanthropist, his political inclination, and as an employer in his insurance company. In fact, the presence of malice is made more evident by [respondents’] baseless and uncalled for attack on the person of [petitioner] as an employer. As aptly noted by the trial court in the assailed Decision: “Also in one of the articles, herein plaintiff was portrayed as an unfair and uncaring employer due to the strike staged by the employees of Grepalife suggesting that it was the [petitioner] who was the cause, and of insinuating that if [petitioner’s] group takes over control of Oriental, it would experience the same labor problem as in Grepalife. The Court finds that [respondents] failed to render an unbiased and fair report as to the real cause of the strike except to lay the blame to [petitioner], without stating, much less describing, his participation thereon, knowing fully well that Grepalife is an entity distinct from the plaintiff. In other words, the labor policies implemented by Grepalife as regards its employees are obviously not that of Yuchengco.” Such baseless and malicious accusation of [respondents] on [petitioner] only proves the intention of the [respondents] in publishing the defamatory articles was not to present an unbiased report on current issues but to launch a personal attack on the very person of [petitioner]. As earlier explained, as correctly found by the trial court, even the timing of the publication of these subject articles is highly suspicious inasmuch as the subject libelous articles came out in the Manila Chronicle, a newspaper owned and under the control of [respondent] Coyiuto, around November to December of 1993, a couple of months prior to the January stockholders meeting of Oriental Corporation. From this, it is logical to conclude that the publication of the subject defamatory articles defaming the good name and reputation of [petitioner] is but a part of [a] grand scheme to create a negative image of [petitioner] so as to negatively affect [petitioner’s] credibility to the public, more particularly, to the then stockholders of Oriental Corporation. Worth noting also is the fact that the subject articles did not only portray [petitioner] in a bad light. Curiously, in these articles, [respondent] Coyiuto, a known rival of [petitioner], was portrayed as the underdog, the “David” and [petitioner] as the “Goliath” in their battle for control over Oriental Corporation. This does not escape the Court’s attention. These circumstances clearly indicate the presence of actual malice on the part of [respondents] in the publication of the subject libelous articles.[35] (Emphases supplied.) When the Court of Appeals granted the Motion for Reconsideration, it did not touch upon its earlier finding of actual malice on the part of respondents in publishing the subject articles. Instead, the Court of Appeals merely held that the subject articles were fair commentaries on matters of public interest, and thus fell within the scope of the third type of qualifiedly privileged communications. This was a glaring error on the part of the Court of Appeals. As discussed above, whereas there is an absolute bar to an action in the case of absolutely privileged communication, the same is not true with respect to qualifiedly privileged communication, wherein the law merely raises a prima facie presumption in favor of the occasion. In the former, the freedom from liability is absolute, regardless of the existence of actual malice, as contrasted with the freedom in the latter, where it is conditioned on the want or absence of actual malice. Conditionally or qualifiedly privileged communications are actionable when made with actual malice.[36] When malice in fact is proven, assertions and proofs that the libelous articles are qualifiedly privileged communications are futile, since being qualifiedly privileged communications merely prevents the presumption of malice from attaching to a defamatory imputation. Neither is there any reason for this Court to reverse the findings of the trial court and the Court of Appeals that there was actual malice on the part of the respondents. As held by the courts a quo, Yuchengco was able to show by the attendant circumstances that respondents were animated by a desire to inflict unjustifiable harm on his reputation, as shown by the timing and frequency of the publication of the defamatory articles. The portrayal of then Chronicle Publishing Chairman Coyiuto as an underdog and his rival Yuchengco as the greedy Goliath in their battle for control over Oriental Corporation, taken with the timing of the publication of these subject articles a couple of months prior to the January stockholders’ meeting of Oriental Corporation, clearly indicate that the articles constituted an orchestrated attack to undermine the reputation of Yuchengco. Furthermore, respondents were shown to have acted with reckless disregard as to the truth or falsity of the articles they published, when they were unable to rebut the categorical denial by Yuchengco of the accusations made against him, and his allegation that he was not approached by respondents for his side of the stories before the publication thereof. Respondents’ failure to present evidence showing that they verified the truth of any of the subject articles is fatal to their cause. In In re: Emil P. Jurado,[37] this Court ruled that categorical denials of the truth of allegations in a publication place the burden upon the party publishing it, either of proving the truth of the imputations or of showing that the same was an honest mistake or error committed despite good efforts to arrive at the truth. There is actual malice when there is either (1) knowledge of the publication’s falsity; or (2) reckless disregard of whether the contents of the publication were false or not.[38] Failure to even get the side of Yuchengco in the published articles clearly constituted reckless disregard of the truth or falsity of said articles. Finally, even if we assume for the sake of argument that actual malice was not proven in the case at bar, we nevertheless cannot adhere to the finding of the Court of Appeals in the Amended Decision that the subject articles were fair commentaries on matters of public interest, and thus fell within the scope of the third type of qualifiedly privileged communications. In Philippine Journalists, Inc. (People’s Journal) v. Theonen,[39] this Court adopted the pronouncement in the United States Decision in Gertz v. Robert Welsch, Inc.[40] that, in order to be considered as fair commentaries on matters of public interest, the individual to whom the defamatory articles were imputed should either be a public officer or a public figure:

In Borjal v. Court of Appeals, we stated that “the enumeration under Art. 354 is not an exclusive list of qualifiedly privileged communications since fair commentaries on matters of public interest are likewise privileged. We stated that the doctrine of fair commentaries means “that while in general every discreditable imputation publicly made is deemed false, because every man is presumed innocent until his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless, when the discreditable imputation is directed against a public person in his public capacity, it is not necessarily actionable. In order that such discreditable imputation to a public official may be actionable, it must either be a false allegation of fact or a comment based on a false supposition.” Again, this argument is unavailing to the petitioners. As we said, the respondent is a private individual, and not a public official or public figure. We are persuaded by the reasoning of the United States Supreme Court in Gertz v. Robert Welch, Inc., [418 U. S. 323 (1974)] that a newspaper or broadcaster publishing defamatory falsehoods about an individual who is neither a public official nor a public figure may not claim a constitutional privilege against liability, for injury inflicted, even if the falsehood arose in a discussion of public interest. (Emphasis supplied.) Thus, in trying to prove that the subject articles delved on matters concerning public interest, the Court of Appeals insisted that Yuchengco was a public official or public figure, who “must not be too thin-skinned with reference to comment upon his official acts.”[41] The Court of Appeals then noted that Yuchengco was, at the time of the Amended Decision, appointed as a Presidential Adviser on Foreign Affairs with Cabinet rank, and proceeded to enumerate[42] the public positions held by Yuchengco through the years. However, an examination of the subject articles reveals that the allegations therein pertain to Yuchengco’s private business endeavors and do not refer to his duties, functions and responsibilities as a Philippine Ambassador to China and Japan, or to any of the other public positions he occupied. A topic or story should not be considered a matter of public interest by the mere fact that the person involved is a public officer, unless the said topic or story relates to his functions as such. Assuming a public office is not tantamount to completely abdicating one’s right to privacy. Therefore, for the purpose of determining whether or not a topic is a matter of public interest, Yuchengco cannot be considered a public officer. Neither is Yuchengco a public figure. The above case Philippine Journalists continues to cite the US case Gertz in describing who is a public figure: More commonly, those classed as public figures have thrust themselves to the forefront of particular public controversies in order to influence the resolution of the issues involved. In either event, they invite attention and comment. Third, this would impose an additional difficulty on trial court judges to decide which publications address issues of “general interest” and which do not. Even if the foregoing generalities do not obtain in every instance, the communications media are entitled to act on the assumption that public officials and public figures have voluntarily exposed themselves to increased risk of injury from defamatory falsehood concerning them. No such assumption is justified with respect to a private individual. He has not accepted public office or assumed an “influential role in ordering society.” (Curtis Publishing Co. v. Butts, 388 U.S., at 164) He has relinquished no part of his interest in the protection of his own good name, and consequently he has a more compelling call on the courts for redress of injury inflicted by defamatory falsehood. Thus, private individuals are not only more vulnerable to injury than public officials and public figures; they are also more deserving of recovery.[43] (Emphasis supplied.) The records in the case at bar do not disclose any instance wherein Yuchengco had voluntarily thrust himself to the forefront of particular public controversies in order to influence the resolution of the issues involved. He cannot, therefore, be considered a public figure. Since Yuchengco, the person defamed in the subject articles, is neither as public officer nor a public figure, said articles cannot be considered as qualifiedly privileged communications even if they deal with matters of public concern. In view of the foregoing, this Court is constrained to grant the instant Petition and reinstate the Decision of the trial court, as previously affirmed by the Court of Appeals in its original Decision. This Court, however, finds the award of damages in the total amount of One Hundred Million Pesos by the trial court to be rather excessive given the circumstances. This Court, thus, further resolves to reduce the award of damages, as follows: 1. The damages for which Chronicle Publishing, Neil H. Cruz, Ernesto Tolentino, Noel Cabrera, Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino and Rodney Diola shall be jointly and severally liable under the first cause of action shall be reduced as follows: a. The amount of moral damages shall be reduced from Ten Million Pesos (P10,000,000.00) to Two Million Pesos (P2,000,000.00); andb. The amount of exemplary damages shall be reduced from Ten Million Pesos (P10,000,000.00) to Five Hundred Thousand Pesos (P500,000.00); 2. The damages for which Roberto Coyuito, Jr. and Chronicle Publishing shall be jointly and severally liable under the second cause of action shall be reduced as follows: a. The amount of moral damages shall be reduced from Fifty Million Pesos (P50,000,000.00) to Twenty-Five Million Pesos (P25,000,000.00); andb. The amount of exemplary damages shall be reduced from Thirty Million Pesos (P30,000,000.00) Ten Million Pesos (P10,000,000.00). WHEREFORE, the Petition is PARTIALLY GRANTED. The Amended Decision of the Court of Appeals in CA-G.R. CV No. 76995 dated 28 August 2008, which reversed on Motion for Reconsideration the 18 March 2008 Decision of the same Court is hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Makati City in Civil Case No. 94-1114 dated 8 November 2002 finding herein respondents liable for damages, is hereby REINSTATED, but shall be MODIFIED to read as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows: 1. On the First Cause of Action, ordering defendants Chronicle Publishing, Neil H. Cruz, Ernesto Tolentino, Noel Cabrera, Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino and Rodney Diola to pay plaintiff Yuchengco, jointly and severally: a. the amount of Two Million Pesos (P2,000,000.00) as moral damages; andb. the amount of Five Hundred Thousand Pesos (P500,000.00) as exemplary damages; 2. On the Second Cause of Action, ordering defendants Roberto Coyuito, Jr. and Chronicle Publishing to pay plaintiff Yuchengco, jointly and severally: a. the amount of Twenty-Five Million Pesos (P25,000,000.00) as moral damages; andb. the amount of Ten Million Pesos (P10,000,000.00) as exemplary damages; 3. On the Third Cause of Action, ordering all defendants to pay plaintiff Yuchengco, jointly and severally, the amount of One Million Pesos (P1,000,000.00) as attorney’s fee and legal costs.

Costs against respondents. SO ORDERED.