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G.R. No. 171673 May 30, 2011

BANAHAW BROADCASTING CORPORATION, Petitioner,vs.

CAYETANO PACANA III, NOE U. DACER, JOHNNY B.

RACAZA, LEONARDO S. OREVILLO, ARACELI T. LIBRE,

GENOVEVO E. ROMITMAN, PORFERIA M. VALMORES,

MENELEO G. LACTUAN, DIONISIO G. BANGGA,FRANCISCO D. MANGA, NESTOR A. AMPLAYO, LEILANI

B. GASATAYA, LORETA G. LACTUAN, RICARDO B. PIDO,

RESIGOLO M. NACUA and ANACLETO C. REMEDIO, Respondents.

D E C I S I O N

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the 1997

Rules of Civil Procedure assailing the Decision1 dated April 15, 2005

of the Court of Appeals in CA-G.R. SP No. 57847, and itsResolution2 dated January 27, 2006 denying petitioner’s Motion for

Reconsideration.

The factual and procedural antecedents of this case are as follows:

Respondents in the case at bar, Cayetano Pacana III, Noe U. Dacer,

Johnny B. Racaza, Leonardo S. Orevillo, Araceli T. Libre, GenovevoE. Romitman, Porferia M. Valmores, Meneleo G. Lactuan, DionisioG. Bangga, Francisco D. Manga, Nestor A. Amplayo, Leilani B.

Gasataya, Loreta G. Lactuan, Ricardo B. Pido, Resigolo M. Nacuaand Anacleto C. Remedio (collectively, the DXWG personnel), are

supervisory and rank and file employees of the DXWG-Iligan Cityradio station which is owned by petitioner Banahaw BroadcastingCorporation (BBC), a corporation managed by Intercontinental

Broadcasting Corporation (IBC).

On August 29, 1995, the DXWG personnel filed with the Sub-

regional Arbitration Branch No. XI, Iligan City a complaint forillegal dismissal, unfair labor practice, reimbursement of unpaidCollective Bargaining Agreement (CBA) benefits, and attorney’s

fees against IBC and BBC.

On June 21, 1996, Labor Arbiter Abdullah L. Alug rendered his

Decision3 awarding the DXWG personnel a total of P12,002,157.28

as unpaid CBA benefits consisting of unpaid wages and increases,13th month pay, longevity pay, sick leave cash conversion, rice and

sugar subsidy, retirement pay, loyalty reward and separation pay.4

The Labor Arbiter denied the other claims of the DXWG personnelfor Christmas bonus, educational assistance, medical check-up and

optical expenses. Both sets of parties appealed to the National LaborRelations Commission (NLRC).

On May 15, 1997, a Motion to Dismiss, Release, Waiver andQuitclaim,5 was jointly filed by IBC and the DXWG personnel based

on the latter’s admission that IBC is not their employer as it does notown DXWG-Iligan City. On April 21, 1997, the NLRC granted theMotion and dismissed the case with respect to IBC.6

BBC filed a Motion for Reconsideration alleging that (1) neitherBBC nor its duly authorized representatives or officers were served

with summons and/or a copy of the complaint when the case was pending before the Labor Arbiter or a copy of the Decision therein;

(2) since the liability of IBC and BBC is solidary, the release andquitclaim issued by the DXWG personnel in favor of IBC totallyextinguished BBC’s liability; (3) it was IBC that effected thetermination of the DXWG personnel’s employment; (4) the DXWG

personnel are members of the IBC union and are not employees ofBBC; and (5) the sequestered properties of BBC cannot be levied

upon.

On December 12, 1997, the NLRC issued a Resolution vacating the

Decision of Labor Arbiter Alug and remanding the case to the

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arbitration branch of origin on the ground that while the complaint

was filed against both IBC and BBC, only IBC was served withsummons, ordered to submit a position paper, and furnished a copy

of the assailed decision.7

On October 15, 1998, Labor Arbiter Nicodemus G. Palanganrendered a Decision adjudging BBC to be liable for the same amount

discussed in the vacated Decision of Labor Arbiter Alug:

WHEREFORE, premises considered, judgment is hereby renderedordering the respondent Banahaw Broadcasting Corporation to pay

complainants the following:

1. Cayetano Pacana III P 1,730,535.75

2. Noe U. Dacer 886,776.43

3. Johnny B. Racaza 1,271,739.34

4. Leonardo S. Orevillo 1,097,752.70

5. Araceli T. Libre 543,467.22

6. Genovevo E. Romitman 716,455.72

7. Porferia M. Valmores 562,564.78

8. Meneleo G. Lactuan 678,995.91

9. Dionisio G. Bangga 580,873.78

10. Francisco D. Manga 29,286.65

11. Nestor A. Amplayo 583,798.51

12. Leilani B. Gasataya 42,669.75

13. Loreta G. Lactuan 757,252.52

14. Ricardo B. Pido 756,835.64

15. Resigolo M. Nacua 887,344.75

16. Anacleto C. Remedio 887,345.39

GRAND TOTAL P 12,002,157.28

Respondent is likewise ordered to pay 10% of the total award asattorney’s fee.8

Both BBC and respondents appealed to the NLRC anew. The appealwas docketed as NLRC CA No. M-004419-98. In their appeal, theDXWG personnel reasserted their claim for the remaining CBA

benefits not awarded to them, and alleged error in the reckoning dateof the computation of the monetary award. BBC, in its ownMemorandum of Appeal, challenged the monetary award itself,

claiming that such benefits were only due to IBC, not BBC,employees.9 In the same Memorandum of Appeal, BBC incorporateda Motion for the Recomputation of the Monetary Award (of the

Labor Arbiter),10 in order that the appeal bond may be reduced.

On September 16, 1999, the NLRC issued an Order 11 denying the

Motion for the Recomputation of the Monetary Award. According tothe NLRC, such recomputation would result in the premature

resolution of the issue raised on appeal. The NLRC ordered BBC to post the required bond within 10 days from receipt of said Order,with a warning that noncompliance will cause the dismissal of theappeal for non-perfection.12 Instead of complying with the Order to

post the required bond, BBC filed a Motion for Reconsideration,13

alleging this time that since it is wholly owned by the Republic of the

Philippines, it need not post an appeal bond.

On November 22, 1999, the NLRC rendered its Decision14 in NLRC

CA No. M-004419-98. In said Decision, the NLRC denied the

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Motion for Reconsideration of BBC on its September 16, 1999 Order

and accordingly dismissed the appeal of BBC for non-perfection.The NLRC likewise dismissed the appeal of the DXWG personnel

for lack of merit in the same Decision.

BBC filed a Motion for Reconsideration of the above Decision. OnJanuary 13, 2000, the NLRC issued a Resolution15 denying the

Motion.

BBC filed with the Court of Appeals a Petition for Certiorari underRule 65 of the Rules of Court assailing the above dispositions by the

NLRC. The Petition was docketed as CA-G.R. SP No. 57847.

On April 15, 2005, the Court of Appeals rendered the assailedDecision denying BBC’s Petition for Certiorari. The Court ofAppeals held that BBC, though owned by the government, is a

corporation with a personality distinct from the Republic or any of itsagencies or instrumentalities, and therefore do not partake in the

latter’s exemption from the posting of appeal bonds. The dispositive portion of the Decision states:

WHEREFORE, finding no grave abuse of discretion on the part of public respondents, We DENY the petition. The challenged decisionof public respondent dated November 22, 1999, as well as itssubsequent resolution dated January 13, 2000, in NLRC Case No. M-004419-98 are hereby AFFIRMED. The decision of the Labor

Arbiter dated October 15, 1998 in RAB Case No. 12-09-00309-95 ishereby declared FINAL AND EXECUTORY.16

On January 27, 2006, the Court of Appeals rendered the assailedResolution denying the Motion for Reconsideration. Hence, this

Petition for Review.

As stated above, both the NLRC and the Court of Appeals dealt withonly one issue – whether BBC is exempt from posting an appeal

bond. To recall, the NLRC issued an Order denying BBC’s Motion

for the Recomputation of the Monetary Award and ordered BBC to

post the required bond within 10 days from receipt of said Order,with a warning that noncompliance will cause the dismissal of theappeal for non-perfection.17 However, instead of heeding the

warning, BBC filed a Motion for Reconsideration, alleging that it

need not post an appeal bond since it is wholly owned by theRepublic of the Philippines.

There is no dispute as regards the history of the ownership of BBCand IBC. Both BBC and IBC, together with Radio Philippines

Network (RPN-9), were formerly owned by Roberto S. Benedicto(Benedicto). In the aftermath of the 1986 people power revolution,the three companies, collectively denominated as Broadcast City,

were sequestered and placed under the control and management ofthe Board of Administrators (BOA).

18 The BOA was tasked to

operate and manage its business and affairs subject to the control and

supervision of the Presidential Commission on Good Government(PCGG).19 In December 1986, Benedicto and PCGG allegedlyexecuted a Management Agreement whereby the Boards of Directors

of BBC, IBC and RPN-9 were agreed to be reconstituted. Under theagreement, 2/3 of the membership of the Boards of Directors will bePCGG nominees, and 1/3 will be Benedicto nominees. A reorganized

Board of Directors was thus elected for each of the threecorporations. The BOA, however, refused to relinquish its function,

paving for the filing by Benedicto of a Petition for Prohibition withthis Court in 1989, which was docketed as G.R. No. 87710.

In the meantime, it was in 1987 when the Republic, represented bythe PCGG, filed the case for recovery/reconveyance/reversion anddamages against Benedicto. Following our ruling in Bataan Shipyard& Engineering Co., Inc. (BASECO) v. Presidential Commission onGood Government,20 the institution of this suit necessarily placed

BBC, IBC and RPN-9 under custodia legis of the Sandiganbayan.

On November 3, 1990, Benedicto and the Republic executed a

Compromise Agreement whereby Benedicto, in exchange for

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immunity from civil and criminal actions, "ceded to the government

certain pieces of property listed in Annex A of the agreement andassigned or transferred whatever rights he may have, if any, to thegovernment over all corporate assets listed in Annex B of the

agreement."21

BBC is one of the properties listed in Annex B.22

Annex A, on the other hand, includes the following entry:

CESSION TO THE GOVERNMENT:

I. PHILIPPINE ASSETS:

x x x x

7. Inter-Continental Broadcasting Corporation (IBC), 100% of totalassets estimated at P450 million, consisting of 41,000 sq.mtrs. of

land, more or less, located at Broadcast City Quezon City, other landand buildings in various Provinces, and operates the following TV

stations:

a. TV 13 (Manila)

b. DY/TV 13 (Cebu)

c. DX/TV 13 (Davao)

d. DYOB/TV 12 (Iloilo)

e. DWLW/TV 13 (Laoag)

as well as the following Radio Stations

a. DZMZ-FM Manila

b. DYBQ Iloilo

c. DYOO Roxas

d. DYRG Kalibo

e. DWLW Laoag

f. DWGW Legaspi

g. DWDW Dagupan

h. DWNW Naga

i. DXWG Iligan . . . . . . . . . . P352,455,286.0023

(Emphasis supplied.)

Then Senator Teofisto T. Guingona, Jr. filed a Petition for Certiorariand Prohibition seeking to invalidate the Compromise Agreement,which was docketed as G.R. No. 96087. The Petition was

consolidated with G.R. No. 87710.

On March 31, 1992, this Court, in Benedicto v. Board ofAdministrators of Television Stations RPN, BBC and IBC,

24

promulgated its Decision on the consolidated petitions in G.R. No.87710 and G.R. No. 96087. Holding that the authority of the BOAhad become functus oficio, we granted the Petition in G.R. No.

87710, ordering the BOA to "cease and desist from further exercising

management, operation and control of Broadcast City and is herebydirected to surrender the management, operation and control of

Broadcast City to the reorganized Board of Directors of each of theBroadcast City television stations."

25 We denied the Petition in G.R.

No. 96087 for being premature, since the approval of the

Compromise Agreement was still pending in the Sandiganbayan.26

The Sandiganbayan subsequently approved the Compromise

Agreement on October 31, 1992, and the approval was affirmed bythis Court on September 10, 1993 in Republic v. Sandiganbayan.

27

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Thus, both BBC and IBC were government-owned and controlled

during the time the DXWG personnel filed their original complainton August 29, 1995.

In the present Petition, BBC reiterates its argument that since it is

now wholly and solely owned by the government, the posting of theappeal bond was unnecessary on account of the fact that it is

presumed that the government is always solvent.28

Citing the 1975case of Republic (Bureau of Forestry) v. Court of Appeals,

29 BBC

adds before us that it is not even necessary for BBC to raise its

exempt status as the NLRC should have taken cognizance of thesame.30

When the Court of Appeals affirmed the dismissal by the NLRC ofBBC’s appeal for failure of the latter to post an appeal bond, it reliedto the ruling of this Court in Republic v. Presiding Judge, Branch

XV, Court of First Instance of Rizal.31 The appellate court, notingthat BBC’s primary purpose as stated in its Articles of Incorporation

is to engage in commercial radio and television broadcasting, heldthat BBC did not meet the criteria enunciated in Republic v.Presiding Judge for exemption from the appeal bond.32

We pertinently held in Republic v. Presiding Judge:

The sole issue implicit in this petition is whether or not the RCA is

exempt from paying the legal fees and from posting an appeal bond.

We find merit in the petition.

To begin with, We have to determine whether the RCA is agovernmental agency of the Republic of the Philippines without a

separate, distinct and independent legal personality from the latter.We maintain the affirmative. The legal character of the RCA as agovernmental agency had already been passed upon in the case of

Ramos vs. Court of Industrial Relations wherein this Court held:

"Congress, by said Republic Act 3452 approved on June 14, 1962,

created RCA, in pursuance of its declared policy, viz :

‘SECTION 1. It is hereby declared to be the policy of theGovernment that in order to stabilize the price of palay, rice and

corn, it shall engage in the 'purchase of these basic foods directlyfrom those tenants, farmers, growers, producers and landowners in

the Philippines who wish to dispose of their produce at a price thatwill afford them a fair and just return for their labor and capitalinvestment and whenever circumstances brought about by any cause,

natural or artificial, should so require, shall sell and dispose of thesecommodities to the consumers at areas of consumption at a price

that is within their reach.’

"RCA is, therefore, a government machinery to carry out a declared

government policy just noted, and not for profit.

"And more. By law, RCA depends for its continuous operation on

appropriations yearly set aside by the General Appropriations Act.So says Section 14 of Republic Act 3452:

‘SECTION 14. The sum of one hundred million pesos is herebyappropriated, out of any funds in the National Treasury not otherwiseappropriated, for the capitalization of the Administration: Provided , That the annual operational expenses of the Administration shall notexceed three million pesos of the said amount: Provided further ,

That the budget of the Rice and Corn Administration for the fiscalyear nineteen hundred and sixty-three to nineteen hundred and sixty-four and the years thereafter shall be included in the General

appropriations submitted to Congress.’

"RCA is not possessed of a separate and distinct corporate existence.

On the contrary, by the law of its creation, it is an office directlyunder the Office of the President of the Philippines."

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Respondent, however, contends that the RCA has been created to

succeed to the corporate assets, liabilities, functions and powers ofthe abolished National Rice & Corn Corporation which is agovernment-owned and controlled corporation separate and distinct

from the Government of the Republic of the Philippines. He further

contends that the RCA, being a duly capitalized entity doingmercantile activity engaged in the buying and selling of palay, rice,

and corn cannot be the same as the Republic of the Philippines;rather, it is an entity separate and distinct from the Republic of thePhilippines. These contentions are patently erroneous.

x x x x

The mercantile activity of RCA in the buying and selling of palay,rice, and corn is only incident to its primary governmental functionwhich is to carry out its declared policy of subsidizing and stabilizing

the price of palay, rice, and corn in order to make it well within thereach of average consumers, an object obviously identified with the

primary function of government to serve the well-being of the

people.

As a governmental agency under the Office of the President the RCAis thus exempt from the payment of legal fees as well as the postingof an appeal bond. Under the decisional laws which form part of the

legal system of the Philippines the Republic of the Philippines isexempt from the requirement of filing an appeal bond on taking anappeal from an adverse judgment, since there could be no doubt, as

to the solvency of the Government. This well-settled doctrine of theGovernment's exemption from the requirement of posting an appeal

bond was first enunciated as early as March 7, 1916 in Government

of the Philippine Island vs. Judge of the Court of First Instance of Iloilo and has since been so consistently enforced that it has become practically a matter of public knowledge and certainly a matter of

judicial notice on the part of the courts of the land.33

In the subsequent case of Badillo v. Tayag,34

we further discussed

that:

Created by virtue of PD No. 757, the NHA is a government-ownedand controlled corporation with an original charter. As a general rule,

however, such corporations -- with or without independent charters -- are required to pay legal fees under Section 21 of Rule 141 of the

1997 Rules of Civil Procedure:

"SEC. 21. Government Exempt. - The Republic of the Philippines, itsagencies and instrumentalities, are exempt from paying the legal fees

provided in this rule. Local governments and government-owned or

controlled corporations with or without independent charters are notexempt from paying such fees."

On the other hand, the NHA contends that it is exempt from paying

all kinds of fees and charges, because it performs governmentalfunctions. It cites Public Estates Authority v. Yujuico, which holds

that the Public Estates Authority (PEA), a government-owned andcontrolled corporation, is exempt from paying docket fees whenever

it files a suit in relation to its governmental functions.

We agree. x x x.35

We can infer from the foregoing jurisprudential precedents that, as ageneral rule, the government and all the attached agencies with no

legal personality distinct from the former are exempt from postingappeal bonds, whereas government-owned and controlledcorporations (GOCCs) are not similarly exempted. This distinction is

brought about by the very reason of the appeal bond itself: to protectthe presumptive judgment creditor against the insolvency of the

presumptive judgment debtor. When the State litigates, it is not

required to put up an appeal bond because it is presumed to bealways solvent.

36 This exemption, however, does not, as a general

rule, apply to GOCCs for the reason that the latter has a personality

distinct from its shareholders. Thus, while a GOCC’s majority

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stockholder, the State, will always be presumed solvent, the

presumption does not necessarily extend to the GOCC itself.However, when a GOCC becomes a "government machinery to carryout a declared government policy,"37 it becomes similarly situated as

its majority stockholder as there is the assurance that the government

will necessarily fund its primary functions. Thus, a GOCC that issued in relation to its governmental functions may be, under

appropriate circumstances, exempted from the payment of appeal

fees.

In the case at bar, BBC was organized as a private corporation,sequestered in the 1980’s and the ownership of which wassubsequently transferred to the government in a compromise

agreement. Further, it is stated in its Amended Articles ofIncorporation that BBC has the following primary function:

To engage in commercial radio and television broadcasting, and forthis purpose, to establish, operate and maintain such stations, both

terrestrial and satellite or interplanetary, as may be necessary for

broadcasting on a network wide or international basis.38

It is therefore crystal clear that BBC’s function is purely commercialor proprietary and not governmental. As such, BBC cannot be

deemed entitled to an exemption from the posting of an appeal bond.

Consequently, the NLRC did not commit an error, and much less

grave abuse of discretion, in dismissing the appeal of BBC onaccount of non-perfection of the same. In doing so, the NLRC wasmerely applying Article 223 of the Labor Code, which provides:

ART. 223. Appeal. - Decisions, awards, or orders of the LaborArbiter are final and executory unless appealed to the Commission

by any or both parties within ten (10) calendar days from receipt ofsuch decisions, awards, or orders. Such appeal may be entertained

only on any of the following grounds:

(a) If there is prima facie evidence of abuse of discretion on

the part of the Labor Arbiter;

(b) If the decision, order or award was secured through fraud

or coercion, including graft and corruption;

(c) If made purely on questions of law; and

(d) If serious errors in the findings of facts are raised whichwould cause grave or irreparable damage or injury to the

appellant.

In case of a judgment involving a monetary award, an appeal by theemployer may be perfected only upon the posting of a cash or surety

bond issued by a reputable bonding company duly accredited by the

Commission in the amount equivalent to the monetary award in the judgment appealed from. (Italization supplied.)

The posting of the appeal bond within the period provided by law isnot merely mandatory but jurisdictional. The failure on the part ofBBC to perfect the appeal thus had the effect of rendering the

judgment final and executory.39

Neither was there an interruption of the period to perfect the appealwhen BBC filed (1) its Motion for the Recomputation of theMonetary Award in order to reduce the appeal bond, and (2) its

Motion for Reconsideration of the denial of the same. In Lamzon v. National Labor Relations Commission,

40 where the petitioner argued

that the NLRC gravely abused its discretion in dismissing her appeal

on the ground of non-perfection despite the fact that she filed a

Motion for Extension of Time to File an Appeal Bond, we held:

The pertinent provision of Rule VI, NLRC Rules of Procedure, as

amended, provides as follows:

x x x x

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Section 6. Bond. - In case the decision of a Labor Arbiter, POEA

Administrator and Regional Director or his duly authorized hearingofficer involves a monetary award, an appeal by the employer shall

be perfected only upon the posting of a cash or surety bond issued by

a reputable bonding company duly accredited by the Commission or

the Supreme Court in an amount equivalent to the monetary award,exclusive of moral and exemplary damages and attorney's fees.

The employer as well as counsel shall submit a joint declarationunder oath attesting that the surety bond posted is genuine and that it

shall be in effect until final disposition of the case.

The Commission may, in meritorious cases and upon Motion of theAppellant, reduce the amount of the bond. The filing, however, ofthe motion to reduce bond shall not stop the running of the period to

perfect appeal.1awphil

Section 7. No Extension of Period. - No motion or request for

extension of the period within which to perfect an appeal shall beallowed."

As correctly observed by the NLRC, petitioner is presumptuous inassuming that the 10-day period for perfecting an appeal, duringwhich she was to post her appeal bond, could be easily extended bythe mere filing of an appropriate motion for extension to file the

bond and even without the said motion being granted. It bears

emphasizing that an appeal is only a statutory privilege and it mayonly be exercised in the manner provided by law. Nevertheless, incertain cases, we had occasion to declare that while the rule treats the

filing of a cash or surety bond in the amount equivalent to themonetary award in the judgment appealed from, as a jurisdictionalrequirement to perfect an appeal, the bond requirement on appeals

involving monetary awards is sometimes given a liberalinterpretation in line with the desired objective of resolvingcontroversies on the merits. However, we find no cogent reason to

apply this same liberal interpretation in this case. Considering that

the motion for extension to file appeal bond remained unacted upon,

petitioner, pursuant to the NLRC rules, should have seasonably filedthe appeal bond within the ten (10) day reglementary periodfollowing receipt of the order, resolution or decision of the NLRC to

forestall the finality of such order, resolution or decision. Besides,

the rule mandates that no motion or request for extension of the period within which to perfect an appeal shall be allowed. The

motion filed by petitioner in this case is tantamount to an extensionof the period for perfecting an appeal. As payment of the appeal

bond is an indispensable and jurisdictional requisite and not a meretechnicality of law or procedure, we find the challenged NLRC

Resolution of October 26, 1993 and Order dated January 11, 1994 inaccordance with law. The appeal filed by petitioner was not

perfected within the reglementary period because the appeal bondwas filed out of time. Consequently, the decision sought to bereconsidered became final and executory. Unless there is a clear and

patent grave abuse of discretion amounting to lack or excess of jurisdiction, the NLRC's denial of the appeal and the motion for

reconsideration may not be disturbed.41

(Underscoring supplied.)

In the case at bar, BBC already took a risk when it filed its Motionfor the Recomputation of the Monetary Award without posting the

bond itself. The Motion for the Recomputation of the MonetaryAward filed by BBC, like the Motion for Extension to File the

Appeal Bond in Lamzon, was itself tantamount to a motion forextension to perfect the appeal, which is prohibited by the rules. The

NLRC already exhibited leniency when, instead of dismissing the

appeal outright, it merely ordered BBC to post the required bondwithin 10 days from receipt of said Order, with a warning thatnoncompliance will cause the dismissal of the appeal for non-

perfection. When BBC further demonstrated its unwillingness bycompletely ignoring this warning and by filing a Motion forReconsideration on an entirely new ground, the NLRC cannot be

said to have committed grave abuse of discretion by making good itswarning to dismiss the appeal. Therefore, the Court of Appeals

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committed no error when it upheld the NLRC’s dismissal of

petitioner’s appeal.

WHEREFORE, the instant Petition for Review on Certiorari isDENIED. The Decision of the Court of Appeals dated April 15, 2005

in CA-G.R. SP No. 57847, and its Resolution dated January 27, 2006are hereby AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 182431 November 17, 2010

LAND BANK OF THE PHILIPPINES, Petitioner,

vs.ESTHER ANSON RIVERA, ANTONIO G. ANSON AND

CESAR G. ANSON, Respondents.

D E C I S I O N

PEREZ, J.:

This is a petition for review on certiorari under Rule 45 of the 1997Rules of Civil Procedure filed by Petitioner Land Bank of the

Philippines (LBP) assailing the Decision1 of the Court of Appeals

dated 9 October 2007 in CA G.R. SP No. 87463, ordering the payment by LBP of just compensation and interest in favor of

respondents Esther Anson Rivera, Antonio G. Anson and Cesar G.Anson, and at the same time directed LBP to pay the costs of suit.Likewise assailed is the Resolution2 of the Court of Appeals dated 18

March 2008 denying the Motion for Reconsideration of LBP.3

The respondents are the co-owners of a parcel of agricultural land

embraced by Original Certificate of Title No. P-082, and latertransferred in their names under Transfer Certificate of Title No. T-

95690 that was placed under the coverage of Operation Land

Transfer pursuant to Presidential Decree No. 27 in 1972. Only18.8704 hectares of the total are of 20.5254 hectares were subject of

the coverage.

After the Department of Agrarian Reform (DAR) directed payment,LBP approved the payment of P265,494.20, exclusive of the advance

payments made in the form of lease rental amounting to P75,415.88 but inclusive of 6% increment of P191,876.99 pursuant to DAR

Administrative Order No. 13, series of 1994.4

On 1 December 1994, the respondents instituted Civil Case No. 94-

03 for determination and payment of just compensation before theRegional Trial Court (RTC), Branch 3 of Legaspi City,

5 claiming

that the landholding involved was irrigated with two croppingseasons a year with an average gross production per season of 100

cavans of 50 kilos/hectare, equivalent of 200 cavans/year/hectare;and that the fair market value of the property was not less that

P130,000.00/hectare, or P2,668,302.00 for the entire landholding of

20.5254 hectares.

LBP filed its answer ,6 stating that rice and corn lands placed under

the coverage of Presidential Decree No. 277 were governed and

valued in accordance with the provisions of Executive Order No.

2288 as implemented by DAR Administrative Order No. 2, Series of

1987 and other statutes and administrative issuances; that theadministrative valuation of lands covered by Presidential Decree No.

27 and Executive Order No. 228 rested solely in DAR and LBP wasthe only financing arm; that the funds that LBP would use to paycompensation were public funds to be disbursed only in accordance

with existing laws and regulations; that the supporting documentswere not yet received by LBP; and that the constitutionality ofPresidential Decree No. 27 and Executive Order No. 228 was already

settled.

On 6 October 2004, the RTC rendered its decision, holding:

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ACCORDINGLY, the just compensation of the land partly covered

by TCT No. T-95690 is fixed at Php1,297,710.63. Land Bank of thePhilippines is hereby ordered to pay Esther Anson, Cesar Anson andAntonio Anson the aforesaid value of the land, plus interest of 12%

per annum or Php194.36 per day effective October 7, 2004, until the

value is fully paid, in cash or in bond or in any other mode of payment at the option of the landowners in accordance with Sec. 18,

RA 6657.9

LBP filed a Motion for Reconsideration10 which the RTC denied in

its Order dated 29 October 2004.11

LBP next filed a petition for Review to the Court of Appealsdocketed as CA G.R. SP No. 87463. The Court of Appeals rendered

a decision dated 9 October 2007, the fallo of which reads:12

WHEREFORE, the DECISION DATED OCTOBER 6, 2004 isMODIFIED, ordering petitioner LAND BANK OF THE

PHILIPPINES to pay to the respondents just compensation(inclusive of interests as of October 6, 2004) in the amount ofP823,957.23, plus interest of 12% per annum on the amount of

P515,777.57, or P61,893.30 per annum, beginning October 7, 2004until the just compensation is fully paid in accordance with this

decision.

In arriving at its computation, the Court of Appeals explained:

In computing the just compensation of the property, pursuant to

Executive Order No. 228, Sec. 2 thereof, the formula is –

LV = AGP x 2.5 x GSP x A

(LV is Land Valuation; AGP is Average Gross Production; GSP is

Government Support Price and A is the Area of the Land)

WHERE: AGP = 99.36 cavans per hectare

GSP = Php 35.00 per cavan

A = 18.8704 hectares

COMPUTATION:

LV = (99.36 x2.5 x 35.00) 18.8704

LV = 8,694 x 18.8704

LV = Php 164,059.26

With increment of 6% interest per annum compounded annually beginning October 21, 1972 until October 21, 1994 and immediatelyafter said date with 12% interest per annum until the value is fully

paid in accordance with extant jurisprudence, computed as follows:

To be compounded annually at 6% per annum from October 21,

1972 up to October 24, 1994. The formula is –

CA = P(1+R)n

(CA is Compounded Amount; P is Principal; R is Rate; and n is the

number of years)

WHERE: P = Php 164,059.26

R = 6% per annum

N = 22 years

COMPUTATION:

CA = 164,059.26 x (1+06) 22

CA = 164,059.26 x (1.06) 22

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CA = 164,059.26 x 3.60353741

CA = Php 591,193.68

Plus simple interest of 12% per annum from October 22, 1994 up toOctober 21, 2003, the formula of which is:

I = P x R x T

(I is the Interest; P is the Principal; R is the Rate and T is the time)

WHERE: P = Php591,193.68

R = 12% per annum

T = 9 years

COMPUTATION:

I = 591,193.68 x 12 x 9

I = 70,943.24 x 9

I = Php638,489.18

(Plus interest of 12% per annum from October 22, 2003 up to

October 6, 2004 or a period of 350 days)

COMPUTATION:

I = (591,193.68 x .12) x 350

350

I = 194.3605 x 350

I = Php68,027.77

Total Interest Php 706,516.95

RECAPITULATION:

Compounded Amount Php 591,193.68

Total Interest 706,516.95

TOTAL AMOUNT Php 1,297,710.63

The Court of Appeals pointed out that:

Pursuant to AO 13, considering that the landholding involved hereinwas tenanted prior to October 21, 1972, the rate of 6% per annum isimposed, compounded annually from October 21, 1972 until October21, 1994, the date of the effectivity of AO 13. Beyond October 21,

1994, only the simple rate of 6% per annum interest is imposableuntil October 6, 2004 (the date of the rendition of the decision of theRTC) on the total value (that is, P164,059.26 plus the compounded

increments up to October 21, 1994) but minus the lease rentals ofP75,415.88. Only the simple rate of 6% is applicable up to then

because the obligation to pay was not founded on a written

agreement that stipulated a different rate of interest. From October 7,

2004 until the full payment, the simple interest rate is raised to 12% per annum. The reason is that the amount thus determined had by

then acquired the character of a forbearance in money.13

LBP disagreed with the imposition of 12% interest and its liability to

pay the costs of suit. It filed a Motion for Reconsideration which was

denied in the Court of Appeals’ Resolution dated 18 March 2008.

The Court of Appeals held:

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We DENY the petitioner’s motion for partial reconsideration for the

following reasons, to wit:

1. Anent the first ground, the decision of October 9, 2007has explained in detail why the obligation of the petitioner

should be charged 12% interest. Considering that the motionfails to persuasively show that a modification of the decision

thereon would be justified, we reject such ground for lack ofmerit.

2. Regarding costs of suit, they are allowed to the prevailing party as a matter of course, unless there be special reasons

for the court to decree otherwise (Sec. 1, Rule 43, Rules ofCourt). In appeals, the Court has the power to render

judgment for costs as justice may require (Sec. 2, Rule 142,

Rules of Court).

In view of the foregoing, the award of costs to the respondents was

warranted under the circumstances.14

Before this Court, LBP raises the same issues for resolution:

I. Is it valid or lawful to award 12% rate of interest perannum in favor of respondents notwithstanding the 6% rate

of interest per annum compounded annually prescribedunder DAR A.O. No. 13, series of 1994, DAR A.O. No. 02,

series of 2004, and DAR A.O. No. 06, series of 2008, "xxxfrom November 1994 up to the time of actual payment?

II. Is it valid or lawful to adjudge petitioner LBP, which is performing a governmental function, liable for costs of

suit?15

At the outset, the Court notes that the parcels of land subject matterof this case were acquired under Presidential Decree No. 27, but the

complaint for just compensation was filed in the RTC on 1

December 1994 after Republic Act No. 6657 already took into

effect.16

Thus, our pronouncement in LBP v. Soriano17

findsapplication. We quote:

x x x [I]f just compensation is not settled prior to the passage of

Republic Act No. 6657, it should be computed in accordance withthe said law, although the property was acquired under Presidential

Decree No. 27. The fixing of just compensation should therefore be based on the parameters set out in Republic Act No. 6657, withPresidential Decree No. 27 and Executive Order No. 228 having only

suppletory effect.

In the instant case, while the subject lands were acquired underPresidential Decree No. 27, the complaint for just compensation wasonly lodged before the court on 23 November 2000 or long after the

passage of Republic Act No. 6657 in 1998. Therefore, Section 17 of

Republic Act No. 6657 should be the principal basis of thecomputation for just compensation. As a matter of fact, the factors

enumerated therein had already been translated into a basic formula by the DAR pursuant to its rule-making power under Section 49 ofRepublic Act No. 6657. The formula outlines in DAR Administrative

Order No. 5, series of 1998 should be applied in computing just

compensation, thus:

LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

Where: LV = Land Value

CNI = Capitalized Net Income

CS = Comparable Sales

MV = Market Value per Tax Declaration

In the case before Us, the just compensation was computed based onExecutive Order No. 228, which computation the parties do not

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contest. Consequently, we reiterate our rule in LBP v. Soriano that

"while we uphold the amount derived from the old formula, since theapplication of the new formula is a matter of law and thus, should bemade applicable, the parties are not precluded from asking for any

additional amount as may be warranted by the new formula."18

That settled, we now proceed to resolve the issue of the propriety of

the imposition of 12% interest on just compensation awarded to therespondents. The Court of Appeals imposed interest of 12% perannum on the amount of P515,777.57 beginning 7 October 2004,

until full payment.

We agree with the Court of Appeals.

In Republic v. Court of Appeals,19 we affirmed the award of 12%interest on just compensation due to the landowner. The court

decreed:

The constitutional limitation of "just compensation" is considered to be the sum equivalent to the market value of the property, broadlydescribed to be the price fixed by the seller in open market in theusual and ordinary course of legal action and competition or the fairvalue of the property as between one who receives, and one whodesires to sell, if fixed at the time of the actual taking by thegovernment. Thus, if property is taken for public use beforecompensation is deposited with the court having jurisdiction over the

case, the final compensation must include interest on its just value to be computed from the time the property is taken to the time whencompensation is actually paid or deposited with the court. In fine,

between the taking of the property and the actual payment, legalinterests accrue in order to place the owner in a position as good as(but not better than) the position he was in before the taking

occurred.

The Bulacan trial court, in its 1979 decision, was correct in imposing

interest on the zonal value of the property to be computed from the

time petitioner instituted condemnation proceedings and "took" the

property in September 1969. This allowance of interest on theamount found to be the value of the property as of the time of thetaking computed, being an effective forbearance, at 12% per annum

should help eliminate the issue of the constant fluctuation and

inflation of the value of the currency over time.20

We similarly upheld Republic’s 12% per annum interest rate on theunpaid expropriation compensation in the following cases: Reyes v.

National Housing Authority,21 Land Bank of the Philippines v.

Wycoco,22

Republic v. Court of Appeals,23

Land Bank of thePhilippines v. Imperial,

24 Philippine Ports Authority v. Rosales-

Bondoc,25 Nepomuceno v. City of Surigao,26 and Curata v.

Philippine Ports Authority.27

Conformably with the foregoing resolution, this Court rules that a

12% interest per annum on just compensation, due to therespondents, from the finality of this decision until its satisfaction, is

proper .28

We now proceed to the issue of whether or not the Court of Appeals

correctly adjudged LBP liable to pay the cost of suit.

According to LBP, it performs a governmental function when itdisburses the Agrarian Reform Fund to satisfy awards of justcompensation. Hence, it cannot be made to pay costs in eminent

domain proceedings.1avvphi1

LBP cites Sps. Badillo v. Hon. Tayag,29 to further bolster its claim

that it is exempt from the payment of costs of suit. The Court in thatcase made the following pronouncement:

On the other hand, the NHA contends that it is exempt from payingall kinds of fees and charges, because it performs governmentalfunctions. It cites Public Estates Authority v. Yujuico, which holdsthat the Public Estates Authority (PEA), a government-owned and

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controlled corporation, is exempt from paying docket fees whenever

it files a suit in relation to its governmental functions.

We agree. People's Homesite and Housing Corporation v. Court of Industrial Relations declares that the provision of mass housing is a

governmental function:

Coming now to the case at bar, We note that since 1941 when the National Housing Commission (predecessor of PHHC, which is nowknown as the National Housing Authority [NHA] was created, thePhilippine government has pursued a mass housing and resettlement

program to meet the needs of Filipinos for decent housing. The

agency tasked with implementing such governmental program wasthe PHHC.

These can be gleaned from the provisions of Commonwealth Act

648, the charter of said agency.

We rule that the PHHC is a governmental institution performing

governmental functions.

This is not the first time We are ruling on the proper characterizationof housing as an activity of the government. In the 1985 case of

National Housing Corporation v. Juco and the NLRC (No. L-64313,

January 17, 1985, 134 SCRA 172), We ruled that housing is a

governmental function.

While it has not always been easy to distinguish governmental from proprietary functions, the Court's declaration in the Decision quoted

above is not without basis. Indeed, the characterization ofgovernmental functions has veered away from the traditional

constituent-ministrant classification that has become unrealistic, ifnot obsolete. Justice Isagani A. Cruz avers: "[I]t is now obligatoryupon the State itself to promote social justice, to provide adequatesocial services to promote a rising standard of living, to afford

protection to labor to formulate and implement urban and agrarian

reform programs, and to adopt other measures intended to ensure the

dignity, welfare and security of its citizens.....These functions, whiletraditionally regarded as merely ministrant and optional, have been

made compulsory by the Constitution."30

We agree with the LBP. The relevant provision of the Rules of Courtstates:

Rule 142

Costs

Section 1. Costs ordinarily follow results of suit. – Unless otherwise

provided in these rules, costs shall be allowed to the prevailingparty as a matter of course but the court shall have power, forspecial reasons adjudge that either party shall pay the costs of anaction, or that the same be divided, as may be equitable. No costs

shall be allowed against the Republic of the Philippines unless

otherwise provided by law.

In Heirs of Vidad v. Land Bank of the Philippines,31

this Courtextensively discussed the role of LBP in the implementation of the

agrarian reform program.

LBP is an agency created primarily to provide financial support

in all phases of agrarian reform pursuant to Section 74 of

Republic Act (RA) No. 3844 and Section 64 of RA No. 6657. It is

vested with the primary responsibility and authority in thevaluation and compensation of covered landholdings to carry outthe full implementation of the Agrarian Reform Program. It may

agree with the DAR and the land owner as to the amount of justcompensation to be paid to the latter and may also disagree with

them and bring the matter to court for judicial determination.

x x x x

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To the contrary, the Court had already recognized in Sharp

International Marketing v. Court of Appeals that the LBP plays asignificant role under the CARL and in the implementation of the

CARP, thus:

As may be gleaned very clearly from EO 229, the LBP is anessential part of the government sector with regard to the payment

of compensation to the landowner. It is, after all, the instrumentalitythat is charged with the disbursement of public funds for purposes ofagrarian reform. It is therefore part, an indispensable cog, in the

governmental machinery that fixes and determines the amountcompensable to the landowner. Were LBP to be excluded from thatintricate, if not sensitive, function of establishing the compensable

amount, there would be no amount "to be established by thegovernment" as required in Sec. 6, EO 229. This is precisely why thelaw requires the [Deed of Absolute Sale (DAS)], even if already

approved and signed by the DAR Secretary, to be transmitted stillto the LBP for its review, evaluation and approval.

It needs no exceptional intelligence to understand the implications ofthis transmittal. It simply means that if LBP agrees on the amount

stated in the DAS, after its review and evaluation, it becomes its dutyto sign the deed. But not until then. For, it is only in that event thatthe amount to be compensated shall have been "established"

according to law. Inversely, if the LBP, after review and evaluation,refuses to sign, it is because as a party to the contract it does not give

its consent thereto. This necessarily implies the exercise of

judgment on the part of LBP, which is not supposed to be a mererubber stamp in the exercise. Obviously, were it not so, LBP couldnot have been made a distinct member of [Presidential AgrarianReform Council (PARC)], the super body responsible for thesuccessful implementation of the CARP. Neither would it have been

given the power to review and evaluate the DAS already signed bythe DAR Secretary. If the function of the LBP in this regard ismerely to sign the DAS without the concomitant power of reviewand evaluation, its duty to "review/evaluate" mandated in Adm.

Order No. 5 would have been a mere surplus age, meaningless, and a

useless ceremony.

x x x x

Even more explicit is R.A. 6657 with respect to the indispensablerole of LBP in the determination of the amount to be compensated to

the landowner. Under Sec. 18 thereof, "the LBP shall compensate thelandowner in such amount as may be agreed upon by the

landowner and the DAR and LBP, in accordance with the criteria provided in Secs. 16 and 17, and other pertinent provisions hereof, oras may be finally determined by the court, as the just compensation

for the land."

x x x x

It must be observed that once an expropriation proceeding for theacquisition of private agricultural lands is commenced by the DAR,

the indispensable role of Land Bank begins.

x x x x

It is evident from the afore-quoted jurisprudence that the role of LBP

in the CARP is more than just the ministerial duty of keeping anddisbursing the Agrarian Reform Funds. As the Court had previouslydeclared, the LBP is primarily responsible for the valuation and

determination of compensation for all private lands. It has thediscretion to approve or reject the land valuation and justcompensation for a private agricultural land placed under the CARP.

In case the LBP disagrees with the valuation of land anddetermination of just compensation by a party, the DAR, or even the

courts, the LBP not only has the right, but the duty, to challenge thesame, by appeal to the Court of Appeals or to this Court, if

appropriate.32

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It is clear from the above discussions that since LBP is performing a

governmental function in agrarian reform proceeding, it is exemptfrom the payment of costs of suit as provided under Rule 142,

Section 1 of the Rules of Court.

WHEREFORE, premises considered, the petition is GRANTED. Thedecision of the Court of Appeals in CA G.R. SP No. 87463 dated 9

October 2007 is AFFIRMED with the MODIFICATION that LBPis hereby held exempted from the payment of costs of suit. In allother respects, the Decision of the Court of Appeals is AFFIRMED.

No costs.

SO ORDERED.

G.R. No. 167000 June 8, 2011

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner,

vs.

GROUP MANAGEMENT CORPORATION (GMC) AND

LAPU-LAPU DEVELOPMENT & HOUSING Corporation(LLDHc), Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 169971

GROUP MANAGEMENT CORPORATION (GMC), Petitioner,vs.

LAPU-LAPU DEVELOPMENT & HOUSING Corporation

(LLDHc) and GOVERNMENT SERVICE INSURANCESYSTEM (GSIS), Respondents.

D E C I S I O N

LEONARDO-DE CASTRO, J.:

At bar are two consolidated Petitions for Review on Certiorari

concerning 78 parcels of land located in Barrio Marigondon, Lapu-Lapu City. The parties in both cases have been in litigation overthese lots for the last two decades in what seems to be an endless

exercise of filing repetitious suits before the Court of Appeals and

even this Court, questioning the various decisions and resolutionsissued by the two separate trial courts involved. With this decision, it

is intended that all legal disputes among the parties concerned, particularly over all the issues involved in these cases, will finallycome to an end

In the Petition in G.R. No. 167000, the Government ServiceInsurance System (GSIS) seeks to reverse and set aside the

November 25, 2004 Decision1 and January 20, 2005 Resolution

2 of

the Twentieth Division of the Court of Appeals in CA-G.R. SP No.85096 and to annul and set aside the March 11, 2004 3 and May 7,

20044 Orders of the Regional Trial Court (RTC) of Lapu-Lapu City(Lapu-Lapu RTC) in Civil Case No. 2203-L.

In the Petition in G.R. No. 169971, Group Management Corporation(GMC) seeks to reverse and set aside the September 23, 2005

Decision5 in CA-G.R. SP No. 84382 wherein the Special Nineteenth

Division of the Court of Appeals annulled and set aside the March11, 2004 Order of the Lapu-Lapu RTC in Civil Case No. 2203-L.

Both these cases stem from the same undisputed factual antecedents

as follows:

Lapu-Lapu Development & Housing Corporation6 (LLDHC) was the

registered owner of seventy-eight (78) lots (subject lots), situated in

Barrio Marigondon, Lapu-Lapu City.

On February 4, 1974, LLDHC and the GSIS entered into a Projectand Loan Agreement for the development of the subject lots. GSISagreed to extend a Twenty-Five Million Peso-loan (P25,000,000.00)

to LLDHC, and in return, LLDHC will develop, subdivide, and sell

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its lots to GSIS members. To secure the payment of the loan,

LLDHC executed a real estate mortgage over the subject lots in favorof GSIS.

For LLDHC’s failure to fulfill its obligations, GSIS foreclosed the

mortgage. As the lone bidder in the public auction sale, GSISacquired the subject lots, and eventually was able to consolidate its

ownership over the subject lots with the corresponding transfercertificates of title (TCTs) issued in its name.

On November 19, 1979, GMC offered to purchase on installmentsthe subject lots from GSIS for a total price of One Million One

Hundred Thousand Pesos (P1,100,000.00), with the aggregate areaspecified as 423,177 square meters. GSIS accepted the offer and onFebruary 26, 1980, executed a Deed of Conditional Sale over thesubject lots. However, when GMC discovered that the total area of

the subject lots was only 298,504 square meters, it wrote GSIS and proposed to proportionately reduce the purchase price to conform to

the actual total area of the subject lots. GSIS approved this proposaland an Amendment to the Deed of Conditional Sale was executed toreflect the final sales agreement between GSIS and GMC.

On April 23, 1980, LLDHC filed a complaint for Annulment ofForeclosure with Writ of Mandatory Injunction against GSIS before

the RTC of Manila (Manila RTC). This became Civil Case No. R-82-34297 and was assigned to Branch 38.

On November 3, 1989, GMC filed its own complaint against GSISfor Specific Performance with Damages before the Lapu-Lapu RTC.

The complaint was docketed as Civil Case No. 2203-L and it soughtto compel GSIS to execute a Final Deed of Sale over the subject lotssince the purchase price had already been fully paid by GMC. GSIS,

in defense, submitted to the court a Commission on Audit (COA)Memorandum dated April 3, 1989, purportedly disallowing in auditthe sale of the subject lots for "apparent inherent irregularities," the

sale price to GMC being lower than GSIS’s purchase price at the

public auction. LLDHC, having been allowed to intervene, filed a

Motion to Dismiss GMC’s complaint. When this motion was denied,LLDHC filed its Answer-in-Intervention and participated in the

ensuing proceedings as an intervenor.

GMC, on February 1, 1992, filed its own Motion to Intervene with aComplaint-in-Intervention in Civil Case No. R-82-3429. This was

dismissed on February 17, 1992 and finally denied on March 23,1992 by the Manila RTC on the ground that GMC can protect its

interest in another proceeding.8

On February 24, 1992, after a full-blown trial, the Lapu-Lapu RTC

rendered its Decision9 in Civil Case No. 2203-L, the dispositive

portion of which reads:

WHEREFORE, judgment is hereby rendered ordering defendant to:

1. Execute the final deed of absolute sale and deliver the

seventy-eight (78) certificates of title covering said seventy-eight (78) parcels of land to the [Group Management

Corporation (GMC)];

2. Pay [GMC] actual damages, plus attorney’s fees andexpenses of litigation, in the amount of P285,638.88 and

P100,000.00 exemplary damages;

3. [D]ismissing in toto intervenor’s complaint-in-intervention for lack of evidence of legal standing and legalinterest in the suit, as well as failure to substantiate any

cause of action against either [GMC] or [GSIS].10

In deciding in favor of GMC, the Lapu-Lapu RTC held that there

existed a valid and binding sales contract between GSIS and GMC,which GSIS could not continue to ignore without any justifiablereason especially since GMC had already fully complied with its

obligations. 11

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The Lapu-Lapu RTC found GSIS’s invocation of COA’s alleged

disapproval of the sale belated and self-serving. The Lapu-Lapu RTCsaid that COA, in disapproving GSIS’s sale of the subject lots toGMC, violated its own circular which excludes the disposal by a

government owned and/or controlled corporation of its "acquired

assets" (e.g ., foreclosed assets or collaterals acquired in the regularcourse of business).

12 The Lapu-Lapu RTC also held that COA may

not intrude into GSIS’s charter -granted power to dispose of itsacquired assets within five years from acquisition by"preventing/aborting the sale in question by refusing to pass it inaudit."13 Moreover, the Lapu-Lapu RTC held that the GSIS-proferred

COA Memorandum was inadmissible in evidence not only becauseas a mere photocopy it failed to measure up to the "best evidence"

rule under the Revised Rules of Court, but also because no one fromCOA, not even the auditor who supposedly prepared it, was ever

presented to testify to the veracity of its contents or its due

execution.14

In dismissing LLDHC’s complaint-in-intervention, the Lapu-Lapu

RTC held that LLDHC failed to prove its legal personality as a party-intervenor and all it was able to establish was a "suggestion ofright for [GSIS] to renege [on] the sale for reasons peculiar to [GSIS]

but not transmissible nor subject to invocation by [LLDHC]."15

LLDHC and GSIS filed their separate Notices of Appeal but these

were dismissed by the Lapu-Lapu RTC on December 6, 1993.16

On May 10, 1994, the Manila RTC rendered a Decision 17 in CivilCase No. R-82-3429. The Manila RTC held that GSIS was unable to

prove the alleged violations committed by LLDHC to warrant the

foreclosure of the mortgage over the subject lots. Thus, the ManilaRTC annulled the foreclosure made by GSIS and ordered LLDHC to

pay GSIS the balance of its loan with interest, to wit:

WHEREFORE, judgment is hereby rendered:

1. ANNULLING the foreclosure by the defendant GSIS of

the mortgage over the seventy-eight (78) parcels of land hereinvolved:

2. CANCELLING the consolidated certificates of [title]

issued in the name of GSIS and directing the Register ofDeeds of Lapu-Lapu City to issue new certificates of [title]

over those seventy-eight (78) parcels of land in the name ofthe plaintiff, in exactly the same condition as they were

before the foreclosure;

3. ORDERING the plaintiff to pay the GSIS the amount of

P9,200,000.00 with interest thereon at the rate of twelve(12%) percent per annum commencing from October 12,

1989 until fully paid; and

4. ORDERING defendant GSIS to execute a properlyregistrable release of discharge of mortgage over the parcels

of land here involved after full payment of such amount bythe plaintiff.

All claims and counterclaims by the parties as against each other are

hereby dismissed.

No pronouncement as to costs.18

Armed with the Manila RTC decision, LLDHC, on July 27, 1994,filed before the Court of Appeals a Petition for Annulment ofJudgment of the Lapu-Lapu RTC Decision in Civil Case No. 2203-

L.19

LLDHC alleged that the Manila RTC decision nullified the saleof the subject lots to GMC and consequently, the Lapu-Lapu RTC

decision was also nullified.

This petition, docketed as CA-G.R. SP No. 34696, was dismissed bythe Court of Appeals on December 29, 1994.20 The Court of Appeals,

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in finding that the grounds LLDHC relied on were without merit,

said:

In fine, there being no showing from the allegations of the petitionthat the respondent court is without jurisdiction over the subject

matter and of the parties in Civil Case No. 2309 [2203-L], petitionerhas no cause of action for the annulment of judgment. The complaint

must allege ultimate facts for the annulment of the decision(Avendana v. B

Poli Law Cases 1

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