JURISDICTION CONFERRED BY LAW NOT BY AGREEMENT OF PARTIES

MAGNO VS. PEOPLE OF THE PHILS.GR No. 171542, April 6, 2011; Brion, J.

FACTS:

>The Office of the Ombudsman filed an information for multiple frustrated murder and double attempted murder against several accused, including MAGNO, who were public officers working under the NBI

>Magno, in open court, objected to the formal appearance and authority of Atty. Sitoy, who was there as private prosecutor to prosecute the case for and on behalf of the Office of the Ombudsman

>The RTC issued an Order, ruling that “the Ombudsman is proper, legal and authorized entity to prosecute this case to the exclusion of any other entity/person other than those authorized under R.A. 6770. This prompted the respondents to file a petition for certiorari before the CA.

>CA original decision: Declared that the private prosecutor may appear for the petitioner in the case, but only insofar as the prosecution of the civil aspect of the case is concerned.

>CA AMENDED decision: Ruling that the private prosecutor may appear for the petitioner in Criminal Case to intervene in the prosecution of the offense charged in collaboration with any lawyer deputized by the Ombudsman to prosecute the case. This amended CA decision in turn made Magno file for a review on certiorari under Rule 45 of the Rules of Procedure before the SC.

PETITIONER”S ARGUMENTS

>CA did not have jurisdiction to entertain the petition for certiorari; the power to hear and decide that question is with the Sandiganbayan

>The private prosecutor cannot be allowed to intervene for the respondents. Section 31 of RA No. 6770 does not allow the Ombudsman to deputize private practitioners to prosecute cases for and on behalf of the Office of the Ombudsman.

RESPONDENT’S ARGUMENTS

>The Ombudsman did not address the contention that the Sandiganbayan, not the CA, has appellate jurisdiction over the RTC in this case.

>The Ombudsman maintains that Atty. Sitoy may intervene in the case pursuant to Section 16, Rule 110 of the Rules of Court (Where the civil action for recovery of civil liability is instituted in the criminal action pursuant to Rule 111, the offended party may intervene by counsel in the prosecution of the offense.)

ISSUE: Whether or not the Court of Appeals has the appellate jurisdiction over the RTC’c decision in not allowing Atty. Sitoy to prosecute the case on behalf of the Ombudsman – NONE

DECISION:

The Amended Decision of the Court of Appeals, as well as its Resolution is NULL AND VOID for having been issued without jurisdiction

REASON:

> PD No. 1606 created the Sandiganbayan.  Section 4 thereof establishes the Sandiganbayan’s jurisdiction:

“B. Other offenses or felonies whether simple or complex with other crimes committed by the public officials and employees mentioned in subsection of this section in relation to their office.”

>In the present case, the CA erred when it took cognizance of the petition for certiorari. The OMBUDSMAN SHOULD HAVE FILED THE PETITION FOR CERTIORARI WITH THE SANDIGANBAYAN, which has EXCLUSIVE APPELLATE JURISDICTION over the RTC since the accused are public officials charged of committing crimes in their capacity as Investigators of the NBI

>JURISDICTION IS CONFERRED BY LAW, and the CA’s judgment, issued without jurisdiction, is VOID. There is no rule in procedural law as basic as the precept that jurisdiction is conferred by law and any judgment, order or resolution issued without it is void and cannot be given any effect . This rule applies even if the issue on jurisdiction was raised for the first time on appeal or even after final judgment

JURISDICTION DETERMINED BY THE LAW IN FORCE AT THE TIME OF COMMENCEMENT

PEOPLE OF THE PHILS. VS. CA

GR No. 154557, February 13, 2008; Velasco, Jr. J

DOCTRINE: Where a court acquired jurisdiction over an action, its jurisdiction continues to the final conclusion of the case. Such jurisdiction is not affected by new legislation placing jurisdiction over such dispute in another court or tribunal unless the statute provides for retroactivity

FACTS:

>Private respondents Rico and Rickson Lipao were indicted for and pleaded not guilty to violation of Sec. 68 of PD 705, as amended by EO 277 (Illegal logging) by possession without license eight (8) pieces of round timbers and 160 bundles of firewood before the RTC of Surigao City.

>Accordingly, the offense charged is punishable by Prisiόn correccional in its medium period is imprisonment from 2 years, 4 months and 1 day to 4 years and 2 months while prisiόn correccional in its maximum period is imprisonment from 4 years, 2 months and 1 day to 6 years.

>During the proceedings in Criminal Case No. 551 and before the RTC rendered its Judgment RA 7691 took effect. It expanded the exclusive original jurisdiction of the MeTCs, MTCs, and MCTCs in CRIMINAL cases to cover all offenses punishable with imprisonment not exceeding six years irrespective of the amount of fine.

>RTC: Found private respondents guilty beyond reasonable doubt of the offense charged. To this, private respondents interposed an appeal with the CA.

>CA: Granted the appeal of private respondents and dismissing the case before it on the ground of lack of jurisdiction of the RTC. This decision is despite the fact that the issue of lack of jurisdiction was never raised by private respondents in their Brief for the Accused-Appellants, but was considered motu proprio by the CA. Hence, this petition.

ISSUE: Whether or not the RTC retained jurisdiction over the criminal case against private respondents despite the effectivity of RA 7691

DECISION: Petition is GRANTED. The assailed CA Decision is hereby REVERSED and SET ASIDE. The CA is directed to resolve the appeal of private respondents on the merits and with dispatch.

REASON:

>It has been consistently held as a GENERAL RULE that the jurisdiction of a court to try a criminal action is to be determined by the law IN FORCE AT THE TIME OF THE INSTITUTION OF THE ACTION. Where a court has already obtained and is exercising jurisdiction over a controversy, its jurisdiction to proceed to the final determination of the cause is not affected by new legislation placing jurisdiction over such proceedings in another tribunal.

>The EXCEPTION to the rule is where the statute expressly provides, or is construed to the effect that it is intended to operate as to actions pending before its enactment.

>Jurisdiction attached upon the commencement of the action and could not be ousted by the passage of R.A. 7691 reapportioning the jurisdiction of inferior courts, the application of which to criminal cases is, to stress, prospective in nature.

>Thus, where private respondents had been charged with illegal logging punishable under Articles 309 and 310 of the RPC with imprisonment ranging from 4 years, 2 months, and 1 day of prision correccional, as minimum, to 9 years, 4 months, and 1 day of prision mayor, as maximum, the RTC clearly had jurisdiction at the inception of the criminal case.

DETERMINED BY THE ALLEGATIONS OF THE COMPLAINT OR OTHER INITIATORY PLEADING

TIME, INC. vs. REYES39 SCRA 303; May 31, 1971; REYES, J.B.L., J.:

FACTS:

>Petitioner Time, Inc., is an American corporation with principal offices at Rocketfeller Center, New York City, N. Y., and is the publisher of "Time”

>In a Civil Case, therein plaintiffs (herein respondents) Antonio J. Villegas (Manila Mayor) and Juan Ponce Enrile (Undersecretary of Finance) seek to recover from the herein petitioner damages upon an alleged LIBEL arising from a publication of Time (Asia Edition) magazine, in its issue of 18 August 1967, of an essay, entitled "Corruption in Asia", more specifically, they alleged that “Time, published a libelous article, publicly, falsely and maliciously imputing to Plaintiffs the commission of the crimes of graft, corruption and nepotism. (NOTE that the Civil Case was filed in the RTC of Rizal)

> Upon receipt of summons and a copy of the complaint, Time, Inc. filed a motion to dismiss the complaint for lack of jurisdiction and improper venue,

>The RTC of Rizal deferred the determination of the motion to dismiss until after trial of the case on the merits. Thus, petitioner filed the instant petition for certiorari and prohibition.

ISSUE: Whether or not, the respondent CFI of Rizal has jurisdiction to take cognizance of the civil suit for damages arising from an allegedly libelous publication, considering that the action was instituted by public officers whose offices were in the City of Manila at the time of the publication – RTC of Rizal has NO jurisdiction

DECISION: CFI of Rizal is declared without jurisdiction to take cognizance of the Civil Case; and its orders issued in connection therewith are hereby annulled and set aside,

REASON:

>The criminal and civil action for damages in cases of written defamations, shall be filed simultaneously or separately with the CFI of the province or city where the libelous article is printed and first published or where any of the offended parties actually resides at the time of the commission of the offense.

>However, provided that where one of the offended parties is a public officer whose office is in the City of Manila at the time of the commission of the offense, the action shall be filed in the CFI of the City of Manila or of the city or province where the libelous article is printed and first published, and in case such public officer does not hold office in the City of Manila, the action shall be filed in the CFI of the province or city where he held office at the time of the commission of the offense or where the libelous article is printed and first published.

>In case one of the offended parties is a private individual, the action shall be filed in the Court of First Instance of the

province or city where he actually resides at the time of the commission of the offense or where the libelous matter is printed and first published.

>If the offended party is a public officer in the office in the City of Manila, the proviso limits him to 2 choices of venue, namely, in the CFI of the City of Manila OR in the city or province where the libelous article is printed and first published."

> The complaint lodged in the court of Rizal by respondents does not allege that the libelous article was printed and first published in the province of Rizal and since the respondents-plaintiffs are public officers with offices in Manila at the time of the commission of the alleged offense, it is clear that the only place left for them wherein to file their action, is the CFI of Manila.

EFFECT OF LACK OF JURISDICTION

[G.R. No. 165423, January 19, 2011]

NILO PADRE, PETITIONER, VS. FRUCTOSA BADILLO, FEDILA BADILLO, PRESENTACION CABALLES, EDWINA

VICARIO (D) REPRESENTED BY MARY JOY VICARIO-ORBETA AND NELSON BADILLO, RESPONDENTS.

FACTS:

- On October 13, 1986, the RTC of Allen, Northern Samar, Branch 23, rendered judgment in Civil Case No. A-514 for Ownership and Recovery of Possession with Damages in favor of therein plaintiffs Fructosa Badillo, Fedila Badillo, Edwina Badillo, Presentacion Badillo and Nelson Badillo and against therein defendants, including Consesa Padre. 

- This Decision became FINAL AND EXECUTORY on November 5, 1986.

- On December 29, 1997, the Badillo family filed another complaint against those who occupy their property which included some of the defendants in Civil Case No. A-514.

- The case was filed with the MTC of San Isidro, Northern Samar and was docketed as Civil Case No. 104.

- As Consesa Padre had already died in 1989, her heir, Nilo Padre (Nilo), was impleaded as one of the defendants. 

- While some of the defendants filed their respective answers, Nilo was one of those who were declared in default for failure to file their answer to the complaint.

- Although denominated as one for "Ownership and Possession," the Badillo family alleged in their complaint in Civil Case No. 104 viz:

7. That despite the service of the writ of execution and vacating the properties x xx illegally occupied by the afore-mentioned defendants, [said defendants] re-entered the property in 1990 after the execution and refused to vacate the same [thereby] reasserting their claims of ownership x xx despite repeated demands;

RULING OF THE MUNICIPAL TRIAL COURT

- The MTC rendered judgment on (7/17/2003).  Interpreting the suit of the Badillo family as an action to revive the dormant judgment in Civil Case No. A-514, the court recognized the right of the plaintiffs to finally have such judgment enforced. 

- Nilo thereafter appeared and moved to reconsider the MTC judgment. 

- Nilo argued that the MTC is without jurisdiction over the case, opining that the action for REVIVAL OF JUDGMENT is a real action and should be filed with the same court, i.e., the RTC, which rendered the decision sought to be revived.  - Or, assuming arguendo that the MTC has jurisdiction over real actions, it must be noted that the subject property is assessed at P26,940.00, an amount beyond the P20,000.00 limit for the MTC to have jurisdiction over real actions, in accordance with RA No. 7691.

- The MTC denied the motion for reconsideration.

- It held that the case is an action for revival of judgment and NOT an action for ownership and possession, which had already long been settled. 

- To the MTC, the former is a personal action under Section 2, Rule 4 of the Rules of Court which may be filed, at the election of plaintiffs, either at the court of the place where they reside or where the defendants reside. 

RULING OF THE REGIONAL TRIAL COURT

- By way of a special civil action for certiorari, Nilo elevated the case to the RTC to question the MTC's jurisdiction, reiterating the same grounds he had raised before the MTC.  The case was docketed as Special Civil Action No. A-927.

- On July 21, 2004, however, the RTC dismissed said petition on the ground that it was filed late.

- Moreover, the RTC upheld the MTC's jurisdiction over the case, affirming the MTC's ratiocination that an action for enforcement of a dormant judgment is a personal action, and hence may be filed either at the court of the place where plaintiffs reside or where the defendants reside.

- In his Motion for Reconsideration, Nilo contended that his petition with the RTC was timely filed as shown by the registry receipt dated March 1, 2004, stamped on the mailing envelope he used in filing said petition.  He argued that this date of mailing is also the date of filing. 

- In its Order dated September 20, 2004, the RTC denied the motion for reconsideration.  Hence, this petition.

ISSUE: Whether the petition was filed on time – YES

RULING: The petition for certiorari before the RTC was timely filed.  If the pleading filed was not done personally, the date of mailing, as stamped on the envelope or the registry receipt, is considered as the date of filing.

- From the time Nilo received on December 30, 2003 the MTC's denial of his motion for reconsideration, the last day for him to file his petition with the RTC fell on February 28, 2004, a Saturday. 

- Under the Rules, should the last day of the period to file a pleading fall on a Saturday, a Sunday, or a legal holiday, a litigant is allowed to file his or her pleading on the next working day, which in the case at bar, fell on a Monday, i.e., March 1, 2004.

ISSUE: whether the MTC has jurisdiction over Civil Case No. 104. – NO

RULING: Under paragraph 6 of their complaint, the Badillos alleged that judgment in Civil Case No. A-514 had become final and had been executed.  In paragraph 7, they alleged that in 1990, the defendants re-entered the property and despite repeated demands they refused to vacate the same. 

- Thus, the Badillos were not at all seeking a revival of the judgment.   In reality, they were asking the MTC to legally oust the occupants from their lots.

- The Badillo family would have been correct in seeking judicial recourse from the MTC had the case been an action for ejectment, i.e., one of forcible entry under Rule 70 of the Rules of Court wherein essential facts constituting forcible entry have been averred and the suit filed within one year from the time of unlawful deprivation or withholding of possession, as the MTC has exclusive original jurisdiction over such suit. However, as the alleged dispossession occurred in 1990, the one-year

period to bring a case for forcible entry had expired since the Badillos filed their suit only in December 1997.   - We thus construe that the remedy they availed of is the plenary action of accion publiciana, which may be instituted within 10 years. "It is an ordinary civil proceeding to determine the better right of possession of realty independently of title. It also refers to an ejectment suit filed after the expiration of one year from the accrual of the cause of action or from the unlawful withholding of possession of the realty."- Whether the case filed by the Badillo family is a real or a personal action is irrelevant.  Determining whether an action is real or personal is for the purpose only of determining venue.  In the case at bar, the question raised concerns jurisdiction, not venue.

- Although the Badillo family correctly filed a case for accion publiciana, they pleaded their case before the wrong court. 

- In civil cases involving realty or interest therein not within Metro Manila, the MTC has exclusive original jurisdiction only if the assessed value of the subject property or interest therein does not exceed P20,000. As the assessed value of the property subject matter of this case is P26,940.00, and since more than one year had expired after the dispossession, jurisdiction properly belongs to the RTC.

- Hence, the MTC has no judicial authority at all to try the case in the first place.  "A decision of the court without jurisdiction is null and void; hence, it could never logically become final and executory. Such a judgment may be attacked directly or collaterally."

WHEREFORE, the petition is GRANTED.  The Orders dated July 21 and September 20, 2004 of the Regional Trial Court of Allen, Northern Samar, Branch 23 in Special Civil Action No. A-927 are hereby SET ASIDE.  The Municipal Trial Court of San Isidro, Northern Samar is DIRECTED to dismiss Civil Case No. 104 for lack of jurisdiction.

SIMEON ESTOESTA SR. and LUCIA ESTOESTA, petitioners,

vs.COURT OF APPEALS, respondents.

FACTS:

This is a petition for certiorari, prohibition, mandamus, with a prayer for a restraining order seeking to annul and set aside the Orders dated May 21, 1986 denying the "Urgent Motion to Quash Writ of Execution" and dated May 29, 1986 denying plaintiffs' (herein petitioners') motions for reconsideration in Civil Case No. 19319

Spouses Simeon Estoesta Sr. and Lucia Estoesta, herein petitioners, filed an action for the annulment of the sale of a house and lot made by petitioners' daughter Trinidad Estoesta in favor of private respondent Luis Villamor.

o petitioners alleged that the Philippine Homesite and Housing Corporation (PHHC) awarded to them the said house

o petitioners transferred to Davao City leaving the occupancy of the house and Lot to Trinidad Estoesta

o for convenience and in order to facilitate transactions with the PHHC, petitioners acceded to Trinidad Estoesta's request that the house and lot be transferred in her name

o that annotated in the title, TCT obtained by Trinidad Estoesta, is the restriction that within a period of five (5) years from the issuance of the title, the property cannot be sold or transferred by the purchaser without the written consent of the PHHC

o as relief petitioners prayed for the annulment of the sale in favor of Luis Villamor, the cancellation of TCT No. 202855, and as the rightful owners of the subject property the issuance of title in their names. Also they prayed for the payment of moral and exemplary damages, attorney's fees, plus costs of suit

Private respondent Luis Villamor filed his Answer with Counterclaim

o he claimed that the sale made in his favor by co-defendant Trinidad Estoesta is valid and legal, because the registration of the transaction was outside the five (5) year prohibitory period; that he was a buyer in good faith

Defendant Trinidad Estoesta filed a motion to dismiss but it was denied in the order of the Court.

For failure to file an Answer defendant Trinidad Estoesta was declared in default in the trial court's order

Her Answer, was stricken from the record in the order of the trial court

In the complaint GSIS was impleaded as a defendant, but by agreement of the parties during the pre-trial conference, the trial court dropped GSIS in its order

After hearing the trial court rendered a decision in favor of plaintiffs and against Trinidad Estoesta.

Faustino Tugade, counsel of record for private respondent, Luis Villamor, received a copy of the trial court's decision on September 5, 1978

On October 3, 1978 the law firm of De Santos, Balgos and Perez entered its appearance as counsel for Luis Villamor in collaboration with Villamor's counsel of record Atty. Faustino Tugade

o on even date it filed a motion for extension of fifteen (15) days to be computed from October 5, 1978 to file a motion for reconsideration of the trial court's decision

Judge Ricardo Tensuan, granted the law firm's motion in his order

On October 3, 1978 Atty. Faustino Tugade filed a motion for reconsideration of the trial Court's decision

On October 5, 1978 the law firm also representing Luis Villamor filed its motion for reconsideration of the trial court's decision

Said motions for reconsideration were denied by the said court in its order dated May 2, 1979

Atty. Faustino Tugade received copy of the order of denial on July 26, 1979, while Attys. De Santos et al., received their copy on July 31, 1979

On August 7, 1979, Luis Villamor thru counsel filed a notice of appeal and paid the appeal bond

o also on even date Luis Villamor thru counsel filed a motion for extension of thirty (30) days to be computed from August 16, 1979 to file Record on Appeal

The trial court, in its order dated August 14, 1979, granted the motion for extension to file record on appeal.

Petitioners, thru counsel, filed a motion to set aside the Order of August 14, 1979 and to dismiss the appeal on the ground that the appeal was not perfected on time and the decision dated August 15, 1978 had become final and executory.

Private respondent thru Attys. De Santos et al. filed his opposition

On September 7, 1979, private respondent, thru counsel, filed his second motion for reconsideration of the trial court's decision

o on said date he also filed a motion to suspend the filing of the record on appeal

On September 18, 1979 petitioners filed their consolidated reply to private respondent's opposition to the motion to dismiss appeal and opposition to the second motion for reconsideration

o on said date petitioner also filed a motion for reconsideration

In its order dated September 27, 1979, the trial court denied for lack of merit the following:

o the Motion to Dismiss Appeal and to set aside the order dated August 14, 1979

o Second motion of Reconsiderationo Motion for Execution

On October 16, 1979, private respondent Villamor filed a second motion for extension of time to file Record on Appeal.

o Petitioners filed an Opposition October 24, 1979, petitioners filed a motion for partial

reconsideration of the Order dated September 27, 1979

In its order dated November 13, 1979, the trial court opined that the record on appeal was filed out of time and accordingly dismissed the appeal

However, on private respondents' motion, the trial court reconsidered said order of November 13, 1979 in its order dated January 3, 1980

Petitioners sought the reconsideration of the January 3, 1980 order, but the trial court denied petitioners' motion and, instead ordered on December 16, 1980 the transmittal of the Amended record on Appeal together with the evidence to the Court of Appeals

On October 30, 1984, the appellate court promulgated its decision in favor of private respondent

Petitioners filed a motion for reconsideration on November 8, 1984, but the appellate court denied it in its resolution dated October 29, 1985

Petitioners elevated the matter to the Supreme Court. This Court in a minute resolution (bv!!!) dated January 6, 1986 denied for lack of merit the petition for review on certiorari in G.R. No. 72662, (Simeon Estoesta et al. v. IAC et al.)

This Court denied petitioners' second motion for reconsideration.

To enforce the judgment of the appellate court, upon respondent’s motion, the trial court issued a writ of execution.

o On the same date, petitioners filed an urgent motion to quash writ of execution

The trial court denied petitioners' motion to quash writ of execution.

Also in its May 21, 1986 order it granted private respondent's motion to break open the property in litigation

o Likewise, the trial court denied petitioner's motion for reconsideration in its order dated May 29, 1986

Hence this petition (sa wakas)

ISSUE: W/N the appeal was not perfected on time, so that the decision of the trial court by operation of law became final and executory hence, beyond the jurisdiction of the appellate courts to review

RATIO:

Summary of the pertinent facts regarding the appeal

It is not controverted that private respondent thru his counsel of record Atty. Faustino Tugade received a copy of the trial court decision on September 5, 1978. Twenty eight (28) days thereafter, or on October 3, 1978, private respondent's counsel filed a motion for reconsideration. Another motion for reconsideration was filed on October 5, 1978 by Attys. De Santos et al. who entered their appearance on October 3, 1978 in collaboration with private respondents counsel of record. On July 26, 1979 Atty. Tugade received a copy of the Order of denial, while Attys. De Santos received their copy on July 31, 1979. Of the thirty (30) days reglementary period to perfect his appeal under Section 3 of the Rule 41 of the Rules of Court (now 15 days under Section 39 of BP 129) private respondent had two (2) days left or up to July 28, 1979 to file his notice of appeal, appeal bond and record of appeal. Private respondent filed his notice of appeal, appeal bond and motion for extension of time to file record on appeal only on August 7, 1979, hence, clearly the appeal was not perfected within the reglementary period. All these notwithstanding petitioners' motion to dismiss the appeal was denied by the trial court and when reiterated in the Court of Appeals, it was not acted upon, even when said Appellate Court promulgated it decision adverse to petitioners.

Error of the CA

On motion for reconsideration of said decision, on the ground among others that the appeal should have been dismissed for having been filed out of time the Court of Appeals ruled that failure of petitioners to question or assail the non-dismissal of the appeal by the trial court, in the form of certiorari, prohibition and mandamus constitutes not only laches but also waiver of their alleged right

On the contrary however, jurisprudence abound supporting the view in such case the then lntermediate Appellate Court had no jurisdiction to entertain the appeal much less to alter, modify or reverse the final and executory judgment of the trial court.

The CA’s judgment being null and void

Well-settled is the rule that perfection of an appeal in the manner and within the reglementary period allowed by law is not only mandatory but also jurisdictional. Thus, if no appeal is perfected on time, the decision becomes final and executory by operation of law after the lapse of the

reglementary period of appeal. final and executory the decision in question can no longer be altered, modified, or reversed by the trial court nor by the appellate court. Accordingly, the prevailing party is entitled as a matter of right to a writ of execution the issuance of which is a ministerial duty compellable by mandamus.

A null and void judgment is susceptible to direct as well as collateral attack. Directly a void judgment may be questioned thru an action for annulment or it may be attacked collaterally by assailing its validity in another action where it is invoked. This is because a judgment rendered by a court without jurisdiction has no binding force and effect

The judgment of the Court of Appeals sought to be implemented in Civil Case No. 19319 being null and void, it cannot therefore, be legally executed. Hence, the trial court acted with grave abuse of discretion tantamount to lack of jurisdiction when it issued the writ of execution

G. R. No. 162322REPUBLIC OF THE PHILIPPINES, vs BANTIGUE POINT

DEVELOPMENT CORPORATION,

FACTS:- On 17 July 1997, respondent Bantigue Point Development Corporation filed with the RTC of Rosario, Batangas an application for ORIGINAL REGISTRATION of TITLE over a parcel of land with an assessed value of P4,330, P1,920 and P8,670, or a total ASSESSED VALUE of P14,920 for the entire property, more particularly described as Lot 8060 of Cad 453-D, San Juan Cadastre, with an area of more or less 10,732 square meters, located at Barangay Barualte, San Juan, Batangas.

- On 18 July 1997, the RTC issued an Order setting the case for initial hearing on 22 October 1997.

- On 7 August 1997, it issued a second Order setting the initial hearing on 4 November 1997.- Petitioner Republic filed its Opposition to the application for registration on 8 January 1998 while the records were still with the RTC.

- On 31 March 1998, the RTC Clerk of Court transmitted motu proprio the records of the case to the MTC of San Juan, because the assessed value of the property was allegedly less than P100,000.

- Thereafter, the MTC entered an Order of General Default and commenced with the reception of evidence and awarded the land to respondent Corporation.

- Acting on an appeal filed by the Republic, the CA RULED that since the former had actively participated in the proceedings before the lower court, but failed to raise the jurisdictional challenge therein, petitioner is thereby estopped from questioning the jurisdiction of the lower court on appeal.

- The CA further found that respondent Corporation had sufficiently established the latter’s registrable title over the subject property after having proven open, continuous, exclusive and notorious possession and occupation of the

subject land by itself and its predecessors-in-interest even before the outbreak of World War II.

- Dissatisfied with the CA’s ruling, petitioner Republic filed this instant Rule 45 Petition and raised the following arguments in support of its appeal: 

ISSUE: Whether the Republic can be estopped from questioning the jurisdiction of the municipal trial court over the application for original registration of land title even for the first time on appeal – NO

RULING: The Republic is not estopped from raising the issue of jurisdiction in this case.

- At the outset, we rule that petitioner Republic is not estopped from questioning the jurisdiction of the lower court, even if the former raised the jurisdictional question only on appeal.

- The rule is settled that lack of jurisdiction over the subject matter may be raised at any stage of the proceedings. Jurisdiction over the subject matter is conferred only by the Constitution or the law. It cannot be acquired through a waiver or enlarged by the omission of the parties or conferred by the acquiescence of the court. Consequently, questions of jurisdiction may be cognizable even if raised for the first time on appeal.

- The ruling of the Court of Appeals that “a party may be estopped from raising such [jurisdictional] question if he has actively taken part in the very proceeding which he questions, belatedly objecting to the court’s jurisdiction in the event that the judgment or order subsequently rendered is adverse to him” is not applicable. (Tijam v. Sibonghanoy.)

- In this case, petitioner Republic has not displayed such unreasonable failure or neglect that would lead us to conclude that it has abandoned or declined to assert its right to question the lower court's jurisdiction. ISSUE: Whether THE MUNICIPAL TRIAL COURT FAILED TO ACQUIRE JURISDICTION OVER THE APPLICATION FOR ORIGINAL REGISTRATION OF LAND TITLE. – NO

RULING: The Municipal Trial Court properly acquired jurisdiction over the case. First, petitioner argued that the lower court failed to acquire jurisdiction over the application, because the RTC set the date and hour of the initial hearing beyond the 90-day period provided under the Property Registration Decree.

The Property Registration Decree provides:Sec. 23. Notice of initial hearing, publication, etc. - The court shall, within five days from filing of the application, issue an order setting the date and hour of the initial hearing which shall not be earlier than forty-five days nor later than ninety days from the date of the order. x xx.

 - We ruled that the lapse of time between the issuance of the Order setting the date of initial hearing and the date of the initial hearing itself was not fatal to the application. Indeed, it would be the height of injustice to penalize respondent Corporation by dismissing its application for registration on account of events beyond its control.   - The RTC’s failure to issue the Order setting the date and hour of the initial hearing within five days from the filing of

the application for registration, as provided in the Property Registration Decree, did not affect the court’s its jurisdiction. Observance of the five-day period was merely directory, and failure to issue the Order within that period did not deprive the RTC of its jurisdiction over the case.

- To rule that compliance with the five-day period is mandatory would make jurisdiction over the subject matter dependent upon the trial court. Jurisdiction over the subject matter is conferred only by the Constitution or the law. It cannot be contingent upon the action or inaction of the court.

- This does not mean that courts may disregard the statutory periods with impunity. We cannot assume that the law deliberately meant the provision “to become meaningless and to be treated as a dead letter.” However, the records of this case do not show such blatant disregard for the law. In fact, the RTC immediately set the case for initial hearing a day after the filing of the application for registration, except that it had to issue a second Order because the initial hearing had been set beyond the 90-day period provided by law.

- Sec. 34. Delegated Jurisdiction in Cadastral and Land Registration Cases. - Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts may be assigned by the Supreme Court to hear and determine cadastral or land registration cases covering lots where there is no controversy or opposition, or contested lots where the value of which does not exceed P100,000.00, such value to be ascertained by the affidavit of the claimant or by agreement of the respective claimants if there are more than one, or from the corresponding tax declaration of the real property. Their decision in these cases shall be appealable in the same manner as decisions of the Regional Trial Courts. (As amended by R.A. No. 7691)

- Thus, the MTC has delegated jurisdiction in cadastral and land registration cases in two instances: first, where there is no controversy or opposition; OR, second, over contested lots, the value of which does not exceed P 100,000 .

- The case at bar does not fall under the first instance, because petitioner opposed respondent Corporation’s application for registration on 8 January 1998. However, the MTC had jurisdiction under the second instance, because the value of the lot in this case does not exceed P 100,000 .

- Contrary to petitioner’s contention, the value of the land should not be determined with reference to its selling price.

- Section 34 of the Judiciary Reorganization Act provides that the value of the property sought to be registered may be ascertained in three ways:

First, by the affidavit of the claimant; Second, by agreement of the respective claimants, if there are more than one; or, Third, from the corresponding tax declaration of the real property.

- The value of the property must therefore be ascertained with reference to the corresponding Tax Declarations submitted by respondent Corporation together with its application for registration.

         WHEREFORE, premises considered, the instant Petition for Review is DENIED. Let this case be REMANDED to the Municipal Trial Court of San Juan, Batangas, for reception

of evidence to prove that the property sought to be registered is alienable and disposable land of the public domain.

[G.R. No. 170251, June 01, 2011]CELIA S. VDA. DE HERRERA, PETITIONER, VS. EMELITA

BERNARDO, EVELYN BERNARDO AS GUARDIAN OF ERLYN, CRISLYN AND CRISANTO BERNARDO,*

RESPONDENTS.

FACTS:- Respondents heirs of Crisanto S. Bernardo, represented by Emelita Bernardo, filed a complaint before the Commission on the Settlement of Land Problems (COSLAP) against Alfredo Herrera (Alfredo) for interference, disturbance, unlawful claim, harassment and trespassing over a portion of a parcel of land situated at Barangay Dalig, Cardona, Rizal, with an area of 7,993 square meters. The complaint was docketed as COSLAP Case No. 99-221.

- RESPONDENTS: claimed that said parcel of land was originally owned by their predecessor-in-interest, Crisanto Bernardo, and was later on acquired by Crisanto S. Bernardo.  The parcel of land was later on covered by Tax Declaration No. CD-006-0828 under the name of the respondents.

- PETITIONER: alleged that the portion of the subject property consisting of about 700 square meters was bought by Diosdado Herrera, Alfredo's father, from a certain Domingo Villaran. Upon the death of Diosdado Herrera, Alfredo inherited the 700-square-meter lot.

- The COSLAP, in a Resolution dated December 6, 1999, ruled that RESPONDENTS have a rightful claim over the subject property. 

MR – Denied CA Dismissed the petition

- The CA RULED that the COSLAP has exclusive jurisdiction over the present case and, even assuming that the COSLAP has no jurisdiction over the land dispute of the parties herein, petitioner is already estopped from raising the issue of jurisdiction because Alfredo failed to raise the issue of lack of jurisdiction before the COSLAP and he actively participated in the proceedings before the said body. 

- MR – denied Hence this petition

ISSUE: WHETHER OR NOT COSLAP HAD JURISDICTION TO DECIDE THE QUESTION OF OWNERSHIP – NO

RULING:

- The COSLAP was created by virtue of E.O. No. 561, issued on September 21, 1979.  It is an administrative body established as a means of providing a mechanism for the expeditious settlement of land problems among small settlers, landowners and members of the cultural minorities to avoid social unrest.

- COSLAP has no jurisdiction over the subject matter of respondents' complaint.  The present case does not fall under any of the cases enumerated under Section 3, paragraph 2 (a) to (e) of E.O. No. 561. 

- It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government agency, over the nature and subject matter of a petition or complaint is determined by

the material allegations therein and the character of the relief prayed for, irrespective of whether the petitioner or complainant is entitled to any or all such reliefs.

- Respondents' cause of action before the COSLAP pertains to their claim of ownership over the subject property, which is an action involving title to or possession of real property, or any interest therein, the jurisdiction of which is vested with the Regional Trial Courts or the Municipal Trial Courts depending on the assessed value of the subject property.

- Since the COSLAP has no jurisdiction over the action, all the proceedings therein, including the decision rendered, are NULL AND VOID. A judgment issued by a quasi-judicial body without jurisdiction is void. It cannot be the source of any right or create any obligation. All acts performed pursuant to it and all claims emanating from it have no legal effect. Having no legal effect, the situation is the same as it would be as if there was no judgment at all. It leaves the parties in the position they were before the proceedings.

- Petitioner is not estopped from raising the jurisdictional issue, because it may be raised at any stage of the proceedings, even on appeal, and is not lost by waiver or by estoppel. The fact that a person attempts to invoke unauthorized jurisdiction of a court does not estop him from thereafter challenging its jurisdiction over the subject matter, since such jurisdiction must arise by law and not by mere consent of the parties.

WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals, dated April 28, 2005 and October 17, 2005, respectively, in CA-G.R. SP No. 73674 are REVERSED and SET ASIDE. The Decision and Order of the Commission on the Settlement of Land Problems, dated December 6, 1999 and August 21, 2002, respectively, in COSLAP Case No. 99-221, are declared NULL and VOID for having been issued without jurisdiction.

G.R. No. 187256CONSTANCIO F. MENDOZA and SANGGUNIANG

BARANGAY OF BALATASAN, BULALACAO, ORIENTAL MINDORO, versus

MAYOR ENRILO VILLAS and BRGY. KAGAWAD LIWANAG HERATO and MARLON DE CASTRO, Manager, Pinamalayan

Branch, Land Bank of the Philippines

FACTS:

- In the 2007 barangay elections, Mendoza obtained the highest votes for the position of Punong Barangay of Barangay Balatasan, Bulalacao, Oriental Mindoro

- Respondent Liwanag Herato obtained the highest number of votes for the position of Barangay Kagawad.

- Notably, Mayor Enrilo Villas was the incumbent Mayor of Bulalacao, Oriental Mindoro at the time of the barangay elections.

- After the elections, the COMELEC proclaimed Mendoza as the duly-elected Punong Barangay of Balatasan . - The losing candidate, Thomas Pajanel, filed a petition for QUO WARRANTO with the Municipal Trial Court (MTC) of Mansalay-Bulalacao

The MTC issued a Decision dated February 23, 2008, disqualifying Mendoza and declaring that Herato was entitled to succeed him as Punong Barangay with Herato

- Mendoza appealed the MTC Decision to the COMELEC. On February 28, 2008, Villas administered the Oath of Office to Herato. Then, Villas issued Memorandum No. 2008-03-010 dated March 3, 2008, directing all department heads of the Municipal Government to act only on documents signed or authorized by Herato.

- Mendoza sought the advice of the DILG as to who should exercise the powers of Punong Barangay of Balatasan given the prevailing controversy.

- In a letter dated April 11, 2008, DILG Undersecretary Austere A. Panadero responded to Mendoza’s inquiry informing Villas that Mendoza should occupy the post of Punong Barangay there was NO WRIT OF EXECUTION Pending Appeal of the MTC Decision dated February 23, 2008.

- The Bulalacao Municipal Administrator, Edezer Aceron, by the authority of Villas, issued a letter dated April 23, 2008 to respondent Marlon de Castro, Manager, Pinamalayan Branch, Land Bank of the Philippines (LBP), requesting that transactions entered into by Mendoza in behalf of Barangay Bulalacao should not be honored.

- Aceron dismissed the DILG letter dated April 11, 2008, saying that it is merely advisory and not binding on the municipal government of Bulalacao and the LBP.

- De Castro issued Villas and Mendoza a letter dated April 24, 2008, advising both parties that the LBP shall not honor any transaction with regard the accounts of Barangay Balatasan.

- Petitioners filed a Petition dated May 5, 2008 for Mandamus with Damages and Prayer for the Writ of Preliminary Mandatory Injunction , in the Regional Trial Court, Branch 43 in Roxas, Oriental Mindoro.

- Petitioners prayed that the LBP be directed to release the funds of Barangay Balatasan to them in order to render necessary, basic public services to the inhabitants of the barangay.

- Villas and Herato filed a Motion to Dismiss dated November 7, 2008. In the Motion, a copy of the COMELEC Resolution dated September 8, 2008 in COMELEC Case No. SPA-07-243-BRGY was attached.

- This case originated from a disqualification case against Mendoza filed with the COMELEC by Senen Familara before the conduct of the 2007 barangay elections. 

- In the Resolution, the COMELEC disqualified Mendoza as a candidate for Punong Barangay of Barangay Balatasan in the 2007 barangay elections for having already served 3 consecutive terms for the same position.

- In response, Mendoza presented a Certification dated February 27, 2009 from the COMELEC which stated that COMELEC Case No. SPA-07-243-BRGY is still pending with the Commission.- Mendoza again sought the opinion of the DILG regarding the controversy.

- the DILG issued another letter reiterating its stance that the MTC Decision dated February 23, 2008 has not yet become final and executory.

- the RTC issued the assailed order dated February 2, 2009 dismissing the petition on the strength of the COMELEC

Resolution dated September 8, 2008 disqualifying Mendoza from running in the 2007 elections.

- Petitioners’ motion for reconsideration of the Order dated February 2, 2009 was denied in an Order dated March 17, 2009.

- From such orders the petitioners went directly to this Court.

ISSUE: Whether the petitioners filed in the proper court – NO RULING:

The instant petition is a direct recourse to this Court from the assailed orders of the RTC. Notably, petitioners did not cite the rule under the Rules of Court by which the petition was filed.

- If the petition is to be treated as a petition filed under Rule 65 of the Rules of Court, the petition must be dismissed outright for having been filed prematurely. Similarly, there are no special and important reasons that petitioners cite to justify their direct recourse to this Court under Rule 65.

- Direct recourse to this Court has been allowed for petitions filed under Rule 45 when only questions of law are raised, as in this case.  Thus, the Court ruled in Barcenas v. Tomas:

Section 1 of Rule 45 clearly states that the following may be appealed to the Supreme Court through a petition for review by certiorari:

1) Judgments; 2) Final orders; or 3) Resolutions of the CA, the Sandiganbayan, the RTC

or similar courts, whenever authorized by law. The appeal must involve only questions of law, not of fact.

- Under the PRINCIPLE OF THE HIERARCHY OF COURTS, decisions, final orders or resolutions of an MTC should be appealed to the RTC exercising territorial jurisdiction over the former. On the other hand, RTC judgments, final orders or resolutions are appealable to the CA through either of the following: an ordinary appeal if the case was originally decided by the RTC; or a petition for review under Rule 42, if the case was decided under the RTC's appellate jurisdiction.

- Procedurally then, petitioners could have appealed the RTC Decision affirming the MTC (1) to this Court on questions of law only; OR (2) if there are factual questions involved, to the CA -- as they in fact did. Unfortunately for petitioners, the CA properly dismissed their petition for review because of serious procedural defects. This action foreclosed their only available avenue for the review of the factual findings of the RTC.

Nevertheless, even providing that the petition was not filed prematurely, it must still be dismissed for having become moot and academic.

- In Gunsi, Sr. v. Commissioners, The COMELEC, the Court defined a moot and academic case as follows:

A moot and academic case is one that ceases to present a justiciable controversy by virtue of supervening events, so that a declaration thereon would be of no practical value. As a rule, courts decline jurisdiction over such case, or dismiss it on ground of mootness.

- With the conduct of the 2010 barangay elections , a supervening event has transpired that has rendered this case moot and academic and subject to dismissal.  This is because, as stated in Fernandez v. Commission on Elections, “whatever judgment is reached, the same can no longer have any practical legal effect or, in the nature of things, can no longer be enforced.”  Mendoza’s term of office has expired with the conduct of last year’s local elections. As such, Special Civil Action No. 08-10, where the assailed Orders were issued, can no longer prosper.  Mendoza no longer has any legal standing to further pursue the case, rendering the instant petition moot and academic.

WHEREFORE, the Petition is DENIED.

ADHERENCE TO JURISDICATION; JURISDICTION CANNOT BE OUSTED

G.R. No. L-29352 October 4, 1971

EMERITO M. RAMOS, SUSANA B. RAMOS, EMERITO B. RAMOS, JR., JOSEFA RAMOS DE LA RAMA, HORACIO DE

LA RAMA, ANTONIO B. RAMOS, FILOMENA RAMOS LEDESMA, RODOLFO RAMOS, VICTORIA RAMOS

TANJUATCO, and TEOFILO TANJUATCO, petitioners, vs.

CENTRAL BANK OF THE PHILIPPINES, respondent.

REYES, J.B.L., J.:

This is a petition for Certiorari , Prohibition and Mandamus with prayer for the issuance of a writ of preliminary injunction to restrain respondent Central Bank of the Philippines from enforcing and implementing the Monetary Board Resolution No. 1263, adopted on 30 July 1968, excluding the Overseas Bank of Manila (hereinafter termed the OBM) from clearing with the Central Bank, that was ordered implemented on 31 July 1968 (Annex "11"), and Resolution No. 1290, adopted on 1 August 1968, granting authority to the OBM Board of Directors to suspend operations thereof, which was implemented on 2 August 1968 (Annex "13").

The herein petition is based on the following grounds:

(a) That the aforesaid resolutions were not legally issued and were promulgated by respondent CB through the Monetary Board in excess of jurisdiction and with grave abuse of discretion;

(b) That the said resolutions are prejudicial to the national interest and against public policy, as they would erode confidence in the banking system and undermine the integrity and stability thereof, contrary to the purpose and spirit of the Central Bank Act;

(c) That said resolutions have caused and will cause further irreparable losses, damages and injuries to the depositors, creditors and stockholders of the OBM;

(d) That said resolutions were promulgated without due process of law, would constitute deprivation of property likewise without due process of law, and will amount to impairment of the obligations of contract; and

(e) That there is no appeal nor any plain, speedy and adequate remedy in the ordinary course of law.

From the pleadings and annexes, the following appears:

The OBM is a commercial banking corporation duly organized and existing under the laws of the Philippines with principal office at Rosario Street, Manila.

PETITIONERS are the majority and controlling stockholders thereof. The OBM was opened for business on 6 January 1964 with authorized capital of P30 million, P10 million subscribed and P8 million thereof paid, but had been suspended by respondent from clearing with the

CB and from lending operations for various violations of the banking laws and implementing regulations.

Petitioners charged that the OBM became financially distressed because of this suspension and the deprivation by the CB of all the usual credit facilities and accommodations accorded to the other banks. The alleged exactions of onerous fines and penalties by respondent was likewise blamed for the aggravated situation. For its deficiencies it was made subject to penalties of 12% interest on overdrawings and 36% per annum on reserve deficiencies, which by 1968 amounted to several millions.

By April, 1967, the financial situation of the OBM had caused mounting concern in the CB. Petitioner Ramos and the OBM management finally met with respondent CB on the necessity and urgency of rehabilitating the OBM through the extension of necessary financial assistance.

The upshot of these conferences appears from the correspondence exchanged between the CB and the OBM.

On 2 May 1967, the Governor of the Central Bank, Andres Castillo, upon instructions of the Monetary Board, wrote a letter (Petition, Annex "B") stating:

This is with reference to the conference had between Mr. Emerito Ramos, Sr., Chairman of your Board, and the undersigned, the Deputy Governor, the Acting Superintendent of Banks, and the Officer-in-Charge, Accounting Department of this Bank, last Friday evening on the present very precarious condition of the Overseas. In the conference, we described to Mr. Ramos at length the circumstances which led to the present precarious conditions of the bank. We stressed the imminent danger of the bank's being thrown out of clearing, in accordance with existing Central Bank regulations, on account of its continuous adverse clearing balances, and of the immediate necessity of putting up additional capital in the amount of at least P3 million, which Mr. Ramos promised to put up when he last appeared before the Monetary Board.

I informed Mr. Ramos that if his bank is thrown out of clearing, the Central Bank will proceed in accordance with the existing policy under which he and other stockholders representing a majority will have to sign a trusteeship agreement with the Philippine National Bank pursuant to which the Overseas Bank will be managed by the Philippine National Bank. If the PNB takes over management in such eventuality, the Central Bank could also announce that it is ready to support the Philippine National Bank in order to allay the fears of depositors and creditors.

In view of the OBM stockholders' reluctance to execute the Voting Trust suggested, the Monetary Board adopted Resolution No. 2015 dated 16 October 1967, having the following terms (Petition, Annex "F"):

(1) To require Mr. Emerito M. Ramos, Sr., the principal stockholder of the Overseas Bank of Manila, to submit a listing of his properties and to mortgage or assign the same to the Central Bank to cover the overdraft balance therewith of the Overseas Bank of Manila;

(2) To require the stockholders of the Overseas Bank of Manila to subscribe to an appropriate voting trust agreement so that the Central Bank may be able to effect a complete reorganization and/or transfer the management of the bank to a nominee of the Monetary Board;

Further conference ensued, and on 30 October 1967 Governor Castillo of the CB wrote again (Petition, Annex "G" ):

I wish to refer to the conference had between your good self and the members of the Monetary Board at Malacañang of 16 October 1967, relative to the financial condition and state of affairs of the Overseas Bank of Manila, of which the

substantial majority of stock is owned by you and your family and corporations controlled by you.

Among other things, the Monetary Board, having in mind the overdrawing in your deposit account with the Central Bank which, on that date, stood at P22.3 million, together with the balance of your past due emergency loan with the Central Bank amounting to P10.3 million exclusive of accumulated interest, decided that, as a

measure to stave off liquidation, a voting trust agreement should be executed by you and your family and the corporations controlled by you in favor of Superintendent of Banks, in an instrument similar to the one executed by stockholders of the Republic Bank in favor of the Philippine National Bank. On 23 October 1967, the Legal Counsel of this Bank submitted to you a draft of such "Voting Trust Agreement" desired by the Monetary Board. However, on 25 October 1967, you handed the legal Counsel your own draft of a "Trust Agreement" which, in essence, is not a voting trust agreement as desired by the Monetary Board and reiterated in its Resolution No. 2020 dated 20 October 1967 and confirmed on 24 October 1967.

This was followed up by another letter of 8 November 1967 (Petition, Annex "H"):

In line with the conference this morning between your goodself and the undersigned, the Deputy Governor, the Acting Superintendent of Banks, and the Central Bank Legal Counsel, and your manifestation of readiness to abide by the decisions of the Monetary Board on all matters involving the Overseas Bank of Manila, it is requested that the voting trust agreement prepared by the Legal Counsel of this Bank be now signed by you and other members of your family and by the proper officials of the corporations which are stockholders of the bank and which are controlled by you and your family.

It is also requested that the execution of the mortgages on the properties you offered as security for the obligations of the Overseas Bank of Manila to the Central Bank be finalized, and the shares of stock belonging to you and your family in your corporations and enterprises be endorsed in favor of the Central Bank and delivered to us as soon as possible.

Finally, on 20 November 1967, the petitioners herein executed the Voting Trust Agreement prepared by attorneys of the CB (Petition, Annex "A") with petitioners as Cestuis Que Trust 1 and respondent CB's Superintendent of Banks as the Trustee. The Trustee entered into the agreement pursuant to the authority given by respondent's Monetary Board under M. B. Resolution No. 2017, dated 17 October 1967. The salient features of the said Voting Trust Agreement are the following:

(a) Objectives. The objectives are stated in the "Whereas Clauses", the pertinent portions of which read: "... the abovenamed stockholders of the Overseas Bank of Manila believe that it is for and/or the interest and benefit of the bank depositors, creditors and stockholders that this trust agreement should be entered into by them for the rehabilitation, normalization and stabilization of the Overseas Bank of Manila; " and "... TRUSTEE has likewise signified his willingness to accept such trust in pursuance of the objectives above-mentioned;"

(b) Term. The life of the trust shall be for three (3) years from 20 November 1967, but the Trustee at its option, may relinquish the trust upon approval of the Monetary Board. It is provided further that if, at the expiration of the three-year

period the purposes for which the trust has been constituted have not as yet been fully achieved, the trust agreement shall be considered automatically extended for such period to be determined by the Monetary Board, similarly terminable within such further period at the discretion of the Monetary Board;

(c) Powers and authority. The trustee is given all and full authority, subject to the limitations set forth in the law and other conditions in the contract to: (1) direct the management of the affairs and accounts and properties of the OBM; (2) vote its directors and choose the officers and employees; (3) improve, modify, reorganize its operation policies, standards, systems, methods, structure, organization, personnel, staffing pattern, etc.; (4) hold and vote on the shares of stocks transferred to him as trustee; (5) safeguard the interests of depositors, creditors and stockholders; and (6) in general, to exercise all such powers and discharge all such functions as inherently pertain to the cestui que trust as owners, and/or for the sound management of a banking institution;

(d) Consideration. The cestui que trust hound themselves, among others, to pay the trustee during the life of the trust an annual honorarium subject to certain conditions.

Petitioners likewise conveyed by way of mortgage to the CB all their private properties and holdings to secure the obligations of the OBM to the CB, but there is no agreement as to the value of these properties, petitioners contending that they are worth over 141 million, but the CB appraised them at around 67 million (Petition, Annexes "B" and "C").

But as early as 25 September 1967, Mr. Martin Oliva, who had become president of OBM only since 13 March 1967, had written to the Superintendent of Banks that transactions worth around P48 million, of which over P43 million were time deposits, at usurious rates of interest, had not been incorporated in the Bank's books nor reported to the Board of Directors. It was explained 2

that the OBM management had resorted to these unrecorded transactions because the suspension of its lending activities after 14 months of operation reduced OBM to virtual inactivity, and it had to agree to pay high premiums or interests on such deposits because this high costs is comparatively cheaper than the Central Bank's interests on overdrawings at the rate of 12% per annum and a penalty of 36% per annum on reserve deficiencies.

Oliva's letter prompted a further investigation of OBM records by the CB examiners that revealed allegedly unrecorded deposits and transactions

o (which is disputed by Petitioners) amounting to 48,007,211 as of 13 September 1967 (reduced to P35 million when petition was filed);

o diversion of deposits to accounts controlled by certain OBM officials (so-called COFICO and EMRACO accounts) and loans to the Ramos family and firms controlled by them. 3

Petitioners contend that these transactions were recorded in subsidiary ledger accounts that were linked to the general ledger accounts of the Bank under the so-called EMRACO and COFICO accounts, and finally incorporated in OBM's regular books in September, 1967 upon instructions of President Martin Oliva. 4 And as to the loans to the Ramos family and firms, the same had been written off when around 31 July 1967 the Ramoses conveyed to the OBM properties worth P54.096 million.

On 27 October 1967, the Superintendent of Banks reported that the condition of the OBM was one of insolvency, calling for application of Section 29 of the Central Bank Act and liquidation of OBM. However, with the listing of Ramos properties worth 100 million, it was added, a new possibility emerged to recapitalize the OBM in 100 million. 5

2. However, with the letter dated October 26, 1967 of Mr. Martin R. Oliva, President of the Overseas Bank of Manila, giving a list of the Ramos properties worth P100 million (?), a radically different possibility has emerged.

If the valuation of the P100 million (net of encumbrances to the parties other than the CB and TOBM) to the properties is true, or substantially true, then the new "possibility" may be briefly stated thus:

A Recapitalization of the Overseas Bank of Manila on the amount of P100 million will save the bank, because — as a general proposition, subject of course to

corroborative quantification — such a magnitude of capital can make good the bad loans as well as the funds that cannot be legitimately accounted for, and can absorb the losses in bad debts, can provide it with funds for viable operations, and thus ultimately give adequate protection to depositors and creditors.

In the same memorandum report, considering the need for liquid funds, the Superintendent of Banks suggested the following alternatives:

(1) The OBM be required to acquire the properties in payment for frozen or bad loans or for unaccountable funds, and then mortgage the properties to CB for emergency advances, or

(2) The owners be required to mortgage the properties to the CB directly, and for CB to extend loans to OBM depending on the needs.

Three days later, 30 October 1967, the Central Bank governor wrote to the petitioner, Emerito Ramos, reiterating the need for the OBM stockholders to execute a voting trust agreement "to stave of liquidation", which letter was followed by another of 8 November 1967, requiring the execution of the Voting Trust Agreement by the OBM stockholders and of the mortgage of their properties to secure OBM obligations to the Central Bank and the endorsement of the shares of stock held by them in their corporations and enterprises (Petition, Annexes "G" and "H", quoted previously). Petitioners duly complied (Annexes "A", "C" and "S") in November, 1967.

On 5 December 1967, new directors and officers drafted from the CB itself, the PNB and DBP were elected and installed and they took over the management and control of the Overseas bank.

On 14 June 1968, the CB announced that only P10 million were available as emergency loan to OBM and requested the management of the latter (appointed under the Voting Trust Agreement to replace the old Board elected by the stockholders) to project how it could help bail out OBM.

OBM president, Mr. Orosa, submitted a "Projected Cash Flow Statement" 6, concluding —

It is pointed out here that with the P10 million loan from the CB, the extremely distressed financial condition of TOBM will continue to prevail. At best, the P10 million loan will enable TOBM to resume limited lending operations on a highly selected basis and diminish its estimated loss by some P492.5 thousand assuming that the loans to be extended have a high turnover rate and a 100% repayment ratio. Thus, with the P10 million CB loan, the annual loss has been estimated to be P8.9 million. To be able to breakdown in operations, therefore, TOBM needs loanable funds estimated at P196 million, placing the cost of such funds at 1½ %.

In a memorandum submitted to Governor Calalang 12 days later, 22 July, Mr. Orosa unburdened himself and deployed CB for hemming and hawing. This caused, he said the loss of "psychological advantage" initially gained by PNB's take over of the OBM management. He reminded the CB Governor about the OBM management's request on 6 January 1968 for a P20 million loan to enable OBM to get on its feet. "At that time", he said, "the aid we are recommending, properly used, would have staved off panic and restored some confidence."

Eight months of indecision has made depositors lose faith and as a result, we are faced with more court suits and withdrawals than ever before and more obligations have matured. 7

The next day, 23 July 1968, the Superintendent of Banks recommended to the Monetary Board that OBM be

liquidated under Section 29, Republic Act 265, if its "capital structure cannot be strengthened to meet the requirements of Section 22 of RA 337", 8 and if "massive financing cannot be given to enable the bank to expand its risk assets." He concluded that:

... The bank's continuance in business under its present extremely precarious financial condition, without the necessary capital injection and financial aid, will involve not merely probable, but certain further losses to its depositors and other creditors and may have further adverse effects on the banking system.

Thereafter, on 13 August 1968, as heretofore stated, the CB Monetary Board adopted Resolution No. 1333, ordering the Superintendent of Banks to proceed to the liquidation of the OBM, under Section 29 of the Central Bank Act. As already noted, implementation of this resolution was restrained by this Court.

Petitioners aver that no adequate financial assistance was granted to the OBM after the execution of the Voting Trust Agreement. They further ]claim that the said agreement is not only bilateral, imposing reciprocal obligations for valuable consideration, but was also entered into by respondent CB in the performance of its duties under the law; and that under said agreement the obligation of the CB was to act and work for the "rehabilitation, normalization and stabilization" of the OBM, through the extension of adequate and necessary financial assistance to stave off liquidation, is legally demandable, as well as a duty specifically enjoined and imposed by law. And that in violation of its obligations, the CB, "after eight months of delay", adopted the questioned resolutions, without notice to or hearing the petitioners.

By resolution of this Court, the respondents were required to answer the petition and set for hearing the petition for a writ of injunction. However, on 13 August 1968, the CB adopted Resolution No. 1333 (Annex "12", Answer) forbidding the OBM from doing business and instructing the Superintendent of Banks to take charge of the Bank's assets and to take action under Section 29 of the Central Bank Act (Republic Act 265), which amounted to a directive for the liquidation of the OBM. Implementation of the resolution was, upon petitioners' motion, restrained by the Court on 14 August 1968.

Justifying Resolutions 1263 and 1290, CB in its answer cited specific instances of OBM's "unusual and irregular transactions" discovered by examiners or "revealed by OBM officials themselves". By way of affirmative defenses, CB averred that:

1. The CB is not a party to the Voting Trust agreement, and therefore cannot be compelled to implement it.

2. Assuming that CB is obliged to rehabilitate OBM, it cannot give more loans to the latter than that already given to it as of 30 July 1968, without violating Section

90 of the Central Bank Act since neither OBM nor its stockholders could put up additional capital and additional collaterals to secure CB's future advances.

3. It would be illegal and contrary to public interest to construe the voting trust agreement as imposing upon CB the duty to rescue OBM at all cost.

4. No bank has an absolute right to take part in inter-bank clearing, because

Section 100, Republic Act 265, requires a bank as a condition to such participation to keep deposit reserves, which the OBM does not have — in fact it had overdrawn its reserve account with the CB beyond the maximum fixed by law.

Several petitions for intervention were denied by the Court.

The ISSUES involved appear to be:

(a) Whether or not this Supreme Court has jurisdiction to restrain the implementation of CB Resolution No. 1333;

(b) Whether or not the CB had agreed to rehabilitate, normalize and stabilize OBM;

(c) Whether or not CB Resolutions Nos. 1263, 1290 and 1333 were adopted in abuse of discretion.

On the FIRST ISSUE OF JURISDICTION , the respondent Central Bank defines its position in its Rejoinder Memorandum, pages 3-5, as follows:

"We respectfully maintain,"..., that even as this Honorable Court had ample jurisdiction over the said petition, any action based on the approval and implementation of the third resolution, Res. 1333 on 13 August 1968 comes already within the exclusive original jurisdiction of the Court of First

Instance, in accordance with the provisions itself of Section 29 of the Central Bank Act, Rep. Act 265, under which said resolution was promulgated.

xxx xxx xxx

The point ... is that the situation has changed entirely because of the approval of Res. 1333 on August 13, 1968, after the main petition had already been filed and given due course. This resolution has made the two previous questioned resolutions academic and the main petition pointless.

The CB stand is that to assail Resolution 1333 of the Monetary Board ordering the liquidation of the Overseas Bank, an action must be filed in the Court of First Instance of Manila by the Bank itself, and not by petitioning stockholders, allegedly in view of the provisions of Section 29, Republic Act No. 265, paragraph 3, reading:

At any time within ten days after the Monetary Board has taken charge of the assets of any banking institution, such institution may

apply to the Court of First Instance for an order requiring the Monetary Board to show cause why it should not be enjoined from continuing such charge of its assets, and the court may direct the Board to refrain from further proceedings and to surrender charge of its assets.

This argument must be rejected, for it overlooks the fact that before the Central Bank adopted said Resolution No. 1333 on 13 August 1968 this Court had already taken cognizance of the petition herein, assailing Resolutions Nos. 1263 and 1290 of the Monetary Board as "patent acts of liquidation," violative of its alleged commitment to rehabilitate the overseas Bank; and the Court, in fact, already had required the Central Bank to answer the petition on 12 August 1962, prior to the adoption of Resolution No. 1333. The latter resolution is clearly an act in pursuance of the policy outlined in the previous resolutions (1263 and 1290) enjoined by this Court. Hence, if jurisdiction was already acquired to delve into the validity of Resolutions 1263 and 1290 (and this the Central Bank admits), there is no cogent reason why, after such jurisdiction had been acquired, the Court should be deprived thereof by the subsequent adoption of Resolution 1333, particularly because the latter, in relation to the antecedent facts, appears to be no more than a deliberate effort to evade the jurisdiction of this Court, and have the case thrown back to the Court of First Instance.

In People vs. Pegarum, this Court quoted with approval the rule that:

... the jurisdiction of a court depends upon the state of facts existing at the time it is invoked, and if the jurisdiction once attaches to the person and subject matter of the litigation , the subsequent happening of events, although they are of such a character as

would have prevented jurisdiction from attaching in the first instance, will not operate to oust jurisdiction already attached.

This rule coincides with well-established principles of American law 9 to the same effect.

The basic guidelines in the exercise of this Court's original jurisdiction to issue prerogative writs were expressed in Dimayuga vs. Fernandez, 43 Phil. 306-307, thus:

... It is true, as respondents contend, that as a general rule, a court of equity will not restrain the authorities of either a state or municipality from the enforcement of a criminal law, and among the earlier decisions, there was no exception to that

rule. By the modern authorities, an EXCEPTION is sometimes made, and the

writ is granted, where it is necessary for the orderly administration of justice, or to prevent the use of the strong arm of the law in an oppressive or vindictive manner, or a multiplicity of actions.

In legal effect, that was the decision of this court in Kwong Sing vs. City of Manila. (41 Phil. 103)

The writ of prohibition is somewhat sui generis, and is more or less in the sound legal discretion of the court and is intended to prevent the unlawful and oppressive exercise of legal authority, and to bring about the orderly administration of justice.

Nor would it serve the interest of justice to dismiss the case at this stage and let a new petition be filed in another court. In Bay View vs. Manila Hotel Worker's Union (L-21803, 17 December 1966), this Court, through Mr. Justice Conrado V. Sanchez, pointed out the evils attending split jurisdictions, saying:

To draw a tenuous jurisdiction al line is to undermine stability in ... litigations.

A piece meal resort to one Court and another gives rise to multiplicity of suits. ... The time to be lost, effort wasted, anxiety augmented, additional expense incurred — these are considerations which weigh heavily against split jurisdiction. Indeed it is more in keeping with orderly administration of justice that all the causes of action here be cognizable and heard by only one court... (Cas. cit., 18 SCRA 953).

On Previous occasions, this Court has overruled the defense of jurisdiction in the interest of public welfare and for the advanced agreement of public policy, where, as in this case, an extraordinary situation existed. 10 There is no denying that creditors, depositors and the banking community are all interested in a quick determination whether the Overseas Bank may, under the circumstances, be closed or allowed to continue operating at the exclusive discretion of respondent Central Bank.

The plea that the Overseas Bank is not a party to the case at bar need not give concern. The petitioners are the controlling stockholders of that Bank, and are qualified to represent its interests, so that a judgment may be enforced for or against it, although it is not impleaded by name in the suits (V. Albert vs. Court of First Instance, L-26361, 29 May 1968, 23 SCRA 948, 964). This is particularly true considering that the present management of the OBM (Overseas Bank of Manila) is at present composed of respondent's nominees, pursuant to the Trust Agreement, and they can hardly be expected to resist the plans and actions of respondent Central Bank (CB).

On the second issue, whether or not the respondent CB agreed to rehabilitate the OBM, Of which petitioner are the majority stockholders, it is believed that a review of the letters from the CB to the petitioners (hereinbefore quoted), considered together with the terms of the Voting Trust Agreement, leaves no doubt that the CB did agree and commit itself to the continued operation of, and rehabilitation of, the OBM. As early as 2 May 1967, the respondent CB, through its Monetary Board, caused then Governor Castillo to advise petitioners that —

he and other stockholders representing a majority will have to sign a trusteeship agreement with the Philippine National Bank pursuant to which the Overseas Bank will be managed by the Philippine National Bank. If the PNB takes over management in such eventuality, the Central Bank could also announce that it is ready to support the Philippine National Bank in order to allay the fears of depositors and creditors. (Pet., Annex "B") (Emphasis supplied)

CB Resolution No. 2015 of 16 October 1967 (Petition, Annex "F"), in addition to requiring a mortgage or assignment of petitioners' personal properties to CB, confirmed the quoted memorandum by requiring the stockholders of OBM to subscribe to an appropriate trust agreement, with the only difference that instead of the Philippine National Bank, the trust would be executed in favor of the CB as trustee to enable it to reorganize and transfer management to a nominee of the Monetary Board." Two weeks later, on 30 October 1967, after a conference at Malacañang, the CB governor once more wrote to Ramos that the Monetary Board —

decided that, as a measure to stave off liquidation, a voting trust agreement should be executed by you and your family and the corporations controlled by you in favor of the Superintendent of Banks, in an instrument similar to the one executed by stockholders of the Republic Bank in favor of the Philippine National Bank (Petition, Annex "G") (Emphasis supplied)

The reference to the case of the Republic Bank clarifies the purpose and scope of the demand for a voting trust agreement "as a measure to stave off liquidation"; for it is well-known, and it is not denied, that when the Republic Bank previously became distressed, the CB had advanced funds, to rehabilitate it and allow it to resume operating.

Accordingly, the voting trust agreement that was finally executed (Annex "A"), and which was admittedly prepared by the Legal Counsel of the Central Bank, recited in its preamble as an objective of the voting trust agreement, that:

... the above named stockholders of the Overseas Bank of Manila believe that it is for and/or interest and benefit of the bank depositors, creditors, and stockholders, that this trust agreement should be entered into by them for the rehabilitation, normalization and stabilization of the Overseas Bank of Manila.

and that the Superintendent of Banks as

... Trustee has likewise signified his willingness to accept such trust in pursuance of the objectives above mentioned. ... (Emphasis supplied)

While the trust agreement on its face creates obligations only for the Superintendent of Banks as trustee, his commitments were undeniably those of the Central Bank itself, since it was the latter that had from the very beginning insisted upon such voting trust being executed. For the Superintendent of Banks was an officer of the CB, the chief of its Department of Supervision and Examination of all banking institutions operating in the country, subject to the instructions of the Monetary Board at all times, pursuant to Section 25 of the CB charter, Republic Act No. 265; and it is not credible that he should have understand that he was entering into the trust agreement in his personal capacity.

Bearing in mind that the communications, Annexes "B" and "G," as well as the voting trust agreement, Annex "A," had been prepared by the CB, and the well-known rule that ambiguities therein are to be construed against the party that caused them, 11 the record becomes clear that, in consideration of the execution of the voting trust agreement by the petitioner stockholders of OBM, and of the mortgage or assignment of their personal properties to the CB (Res. No. 2015, 16 October 1967, Annex "F," Petition), the CB had agreed to announce its readiness to support the new management "in order to allay the fears of depositors and creditors." (Annex "B"), and to stave off liquidation" by providing adequate funds for "the rehabilitation, normalization and stabilization" of the OBM, in a manner similar to what the CB had previously done with the Republic Bank (Portion, Annex "G," ante). While no express terms in the documents refer to the provision of funds by CB for the purpose, the same is necessarily implied, for in no other way could it rehabilitate, normalize and stabilize a distressed bank.

Even in the absence of contract, the record plainly shows that the CB made express representations to petitioners herein that it would support the OBM, and avoid its liquidation if the petitioners would execute (a) the Voting Trust Agreement turning over the management of OBM to the CB or its nominees, and (b) mortgage or assign their properties to the Central Bank to cover the overdraft balance of OBM. The petitioners having complied with these conditions and parted with value to the profit of the CB (which thus acquired additional security for its own advances), the CB may not now renege on its representations and liquidate the OBM, to the detriment of its stockholders, depositors and other creditors, under the rule of promissory estoppel (19 Am. Jur., pages 657-658; 28 Am. Jur. 2d, 656-657; Ed. Note, 115 ALR, 157).

The broad general rule to the effect that a promise to do or not to do something in the future does not work an estoppel must be qualified, since there are numerous cases in which an estoppel has been predicated on promises or assurances as to future conduct. The doctrine of "promissory estoppel" is by no means new, although the name has been adopted only in comparatively recent years. According to that doctrine, an estoppel may arise from the making of a promise, even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice. In this respect, the reliance by the promisee is generally evidenced by action or forbearance on his part, and the idea has been expressed that such action or forbearance would reasonably have been expected by the promissor. Mere omission by the promisee to do whatever the promisor promised to do has been held insufficient "forbearance" to give rise to a promissory estoppel. (19 Am. Jur., loc. cit.)

Disingenuously, the CB pleaded that the Voting Trust agreement was binding only upon the trustee, the Superintendent of Banks. But as already pointed out this proposition is unacceptable since the trust could have no private interest in the matters. Not only that, but CB subsequently caused its own team of nominees to take over the direction and management of the OBM, through the voting of the shares conveyed to the trustee. Even more, in August, 1970, the CB gave notice that it would not extend or renew the voting trust, and attempted to turn back the shares covered by it to the petitioners, thereby recognizing the obligations under the agreement as its own, and repudiating its original disclaimer thereof.

How did the CB subsequently treat its commitments?

After execution of the Voting Trust Agreement, on 20 November 1967, the CB elected and installed new directors and officers drafted from the Central Bank itself, the Philippine National Bank and the Development Bank of the Philippines.

The new team assumed the management and control of the OBM and elected Augusto E. Orosa as bank president. On 6 January 1968, the new management requested for a thirty million peso loan to enable the OBM to get on its feet. How this request for aid was treated appears in a memorandum to the new CB governor, dated 22 July 1968 (Petitioner's Reply Memorandum, Annex "X," Record, pages 526-527). Mr. Orosa stated:

MEMORANDUM TO:

Governor Alfonso Calalang

SUBJECT: POSITION PAPER OF THE OVERSEAS BANK OF MANILA

BACKGROUND

A selected PNB team formally took over the management of the Overseas Bank of Manila on December 7, 1967.

On January 16, 1968 we completed a report on the financial standing of the Bank, the original of which is in your possession. In that report, we recommended that the balance of the unpaid capital stock of P11 million be fully paid and P20 million be advanced by the Central Bank to enable the Bank to resume normal operations. At that time, we gathered from the books of account that the Bank faced obligations to be immediately met amounting to about P30 million as against liquid assets of more than P12 million or an immediate cash requirement of about P17 million. Nevertheless, and this is a very important point, our feeling was that at that time the aid we are recommending, properly used, would have staved off panic and restored some confidence.

The entrance of the PNB team actually was a great initial psychological advantage; we have used that advantage to full extent: the advantage has faded.

PRESENT POSITION

Eight months of indecision has made depositors lose faith and as a result, we are faced with more court suits and withdrawals than ever before and more obligations have matured.

We are made to understand that an advance of P19 million has been approved for the Bank and that an initial release of P10 million is under study. Last July 10, 1968, we wrote the Superintendent of Banks complying with his request to render a projection of what we can do with P10 million.

There is a great leeway with what we can do with P10 million depending on the conditions which will accompany its grant. Even under the most liberal conditions that we can imagine, P10 million will not save the Bank. We are, however, not aware whether this proposed P10 million will be the start of a series of advances nor as to how much ultimately the Central Bank will be willing to finance the rehabilitation.

We are faced with both internal and external problems that are daily increasing in difficulty. If we are requested to make a projection which we believe is a reasonable request, the present management should be made privy to the following:

(1) What is the real policy of the Central Bank regarding the future of TOBM;

(2) What is the policy of the Central Bank regarding present rates of interest and penalties on prevailing deficiencies;

(3) What is the rate of interest to be charged on the fresh advances;

(4) What are the conditions to be meted out regarding leeway and operations of TOBM;

(5) Any other strings that may be attached.

(6) What is the policy of Central Banking regarding unrecorded time deposits.

All these points will greatly affect any projection.

REQUEST:

That the PNB management team be withdrawn from TOBM.

It is obvious from this memorandum that far from heeding the request of its own team for an advance of P30 million (or P17 million in cash) to enable the OBM to resume normal operations, the Central Bank did nothing to support the OBM between 6 January to 14 June, for almost six months, and kept even its own management team largely in the dark as to what to expect. 0n 14 June, CB advised that only P10 million were to be made available (i.e., one third of the requirements estimated necessary by its own representatives). This amount was naturally considered insufficient to normalize, much less rehabilitate, the OBM. And yet all this while, the CB was holding petitioners' mortgages on their private properties worth at least P67 million in 1967 by the CB's own appraisal. Petitioners claimed they were worth P100 million which can not be very far from the truth, considering the continual rise in real estate values.

Not content with procrastinating for 6 months, without taking positive steps to normalize OBM as it had agreed to do, nor even announcing its support of its own management team or disclosing its policy regarding the future of OBM, (the CB finally adopted the resolutions now attacked by herein petitioner stockholders. On 30 July 1968, it excluded the OBM from clearing with the CB (Resol. No. 1263) the contingency that the Voting Trust and the mortgage of the petitioners' private properties were to guard against. On 1 August 1968, CB authorized (and virtually directed) its nominee Board of Directors to suspend operations (Resol. No. 1290); and thirteen days thereafter (13 August 1968), the CB directed its Superintendent of Banks to proceed to liquidate OBM (Resol. No. 1333) under Section 29 of Republic Act No. 265 (Central Bank Charter), providing that —

SEC. 29. Proceedings upon insolvency. — Whenever, upon examination by the Superintendent or his examiners or agents into the condition of any banking institution, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the Superintendent forthwith, in writing, to inform the Monetary Board of the facts, and the Board, upon finding the statements of the Superintendent to be true, shall forthwith forbid the institution to do business in the Philippines and shall take charge of its assets and proceeds according to law.

If the Monetary Board shall determine that the banking institution cannot resume business with safety to its creditors, it shall, by the Solicitor General, file a petition in the Court of First Instance reciting the proceedings which have been taken and praying the assistance and supervision of the court in the liquidation of the affairs of the same. The Superintendent shall thereafter, upon order of the Monetary Board and under the supervision of the court and with all convenient speed, convert the assets of the banking institution to money.

We are constrained to agree with petitioners that the conduct of the CB from and after January, 1968, reveals a calculated attempt to evade rehabilitating OBM despite its promises. What is more aggravating is that by the ordered liquidation, depositors and other creditors would have to share in the assets of the OBM, while the CB's own credits for advances were secured by the new mortgages it had obtained from the petitioners, thereby gaining for it what amounts to an illegal preference. To cap it all, the CB disregarded its representations and promises to rehabilitate and normalize the financial condition of OBM, as it had previously done with the Republic Bank, without even offering to discharge the mortgages, given by petitioners in consideration for its promises, or notifying petitioners that it desired to rescind its contract, or bringing action in court for the purpose. And all the while CB knew that the situation of the OBM was deteriorating

daily, with penalties at 3% per month continually accumulating, while its creditors, depositors and stockholders awaited the promised aid that never came, and which apparently CB never intended to give.

The deception practiced by the Central Bank, not only on petitioners but on its own management team, was in violation of Articles 1159 and 1315 of the Civil Code of the Philippines:

ART. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

ART. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. (Emphasis supplied)

The Supreme Court expounded the import of these legal provisions in Abelarde vs. Lopez, 74 Phil. 344, 348, stating:

Cleverness should never take the place of the loyal, upright and straightforward observance of plighted undertakings.

The CB excuses itself by pleading that the OBM officers had resorted to non-recording of time deposits in the Bank's books and diverting such deposits to accounting controlled by certain bank officials, and other irregularities. It is well to note, however, that these "unrecorded" deposits were revealed to the CB as early as 25 September 1967 by the then President of the OBM, Mr. Martin Oliva, who had no hand in such irregularities and who informed the Superintendent of Banks that time deposits worth P43,188,009.29 had not been carried in the books and had not been reported to the OBM directors. 12

In fact, on 29 September 1967, the CB had already ordered its examiners to investigate the Bank's records and determine the parties responsible. 13 Notwithstanding knowledge of these irregularities, the CB did not withdraw its promised support, and insisted on the execution of the Voting Trust Agreement on 20 November 1967. Such attitude imports that, in its opinion, the irregularities disclosed were not to be blamed on the OBM itself or its depositors and creditors, but on the officials responsible; and further, that the OBM could still be saved by adequate aid and management reform, which was required by CB's duty to maintain the stability of the banking system and the preservation of public confidence in it.

Respondent CB likewise urges in its defense that the rehabilitation of the OBM has become impossible, and points out to the reports of the Superintendent of Banks and of Mr. Augusto Orosa (the President of OBM elected by the CB nominees under the Voting Trust) that the Bank's loanable funds had to be expanded to P136 million to break even. 14 It is to be borne in mind, however, that these reports were made in July, 1968, after six months of inaction on the part of the CB, without positive action on its part to comply with its previous commitments. Furthermore, while the stabilization of the OBM required injections of capital, it would be erroneous to assume that such capital would have to reach P130 million, or that it would have to be advanced all at once. For had the CB furnished the original aid of 30 million asked by the Orosa team early in January, 1968, and the OBM allowed to resume operations with CB support, the restored confidence would have stimulated new deposits, which, as is well-known, become in turn a source of loanable funds. It thus becomes apparent that most of the difficulties invoked now by the CB are of its own making, and are not a lawful excuse for its refusal to comply with its commitments. Finally, in the computations by the CB examiners, there are included a total

of P16.994 million for estimated losses, interests and penalties 15 that did not represent amounts to be disbursed. More concretely, even in July, 1968, after six months of CB dilly-dallying, the actual amount needed to be loaned to the OBM for capital requirements "to support the necessary expansion in risk assets of P126.334 million in order to break even in its operations" was estimated by the Superintendent of Banks at no more than P40.730 million. 16 This amount tallies with Mr. A. Orosa's estimate that an advance of P30 million in January, 1968 would have saved OBM. 17 There is no showing that these amounts were beyond the capacity of CB to make, 18 nor is it proved that they exceeded the amounts supplied for the rehabilitation of the Republic Bank (the CB, for reasons of its own, refused to disclose the latter amounts despite requests from the court). Certainly, the ten million increase in advance capital requirements between January and July of 1968 can not be blamed on the petitioners herein, and was not of their own making.

The respondent CB cites American cases to the effect that the courts can not interfere with CB's discretion in determining whether or not a distressed bank should be supported or liquidated. In none of the cases cited, however, does it appear that the CB engaged to support the distressed bank in exchange for control of its management and additional mortgages in its favor, and, therefore, the authorities cited are not in point. Discretion has its limits and has never been held to include arbitrariness, discrimination or bad faith.

We conclude that having induced the petitioners to part with additional security in reliance upon its (CB's) promises and commitments to avert liquidation and to support, normalize and rehabilitate the OBM, the respondent CB is duty bound to comply in good faith with such promises. Consequently, being contrary thereto, CB Resolutions Nos. 1263, 1290 and 1333 should be annulled and set aside for having been adopted in abuse of discretion, equivalent to excess of jurisdiction. And never having attempted to comply, nor even to begin compliance, with its commitments and promises, the respondent CB is precluded to invoke the expiration of the period specified for the duration of its obligations under the Voting Trust Agreement. Such period should, in justice and equity, be deemed to start running from and after the CB begins due performance of its commitments, promises and representations in good faith.

WHEREFORE, the writs prayed for in the petition are hereby granted, and respondent Central Bank's resolutions Nos. 1263, 1290 and 1333 (that prohibit the Overseas Bank of Manila to participate in clearing, direct the suspension of its operations, and ordering liquidation of said bank) are hereby annulled and set aside; and said respondent Central Bank of the Philippines is directed to comply with it obligations under the Voting Trust Agreement, and to desist from taking action in violation thereof. Costs against respondent Central Bank of the Philippines.

Dizon, Teehankee, and Villamor, JJ., concur.

Concepcion, Barredo and Makasiar, C.J., took no part.

Zaldivar, J., concurs in the result.