SECOND DIVISION

G.R. No. 166993 December 19, 2005

DSM CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner,

vs.
COURT OF APPEALS and MEGAWORLD GLOBUS, Respondents.

DECISION

Tinga, J.:

This case springs from this Court’s Decision dated 2 March 2004 in G.R. No. 153310, Megaworld Globus Asia Inc.
v. DSM Construction and Development Corp. (Megaworld), decided in favor of herein petitioner DSM Construction.
Said Decision having become final and executory, the corresponding entry of judgment was made on 12 August
2004. This petition centers on attempts, regrettably entertained by respondent Court of Appeals, to thwart the
execution of a final and executory decision of this Court.

The Petition for Certiorari assails the Resolution dated 21 February 2005 of the Court of Appeals in CA-G.R. SP
1 2

No. 88314. Said Resolution ordered the issuance of a temporary restraining order (TRO) enjoining the enforcement
3 4

of an Alias Writ of Execution issued by the Construction Industry Arbitration Commission (CIAC) in CIAC Case No.
5 6

22-2000 and ordering them to cease and desist from proceeding with the scheduled execution sale on 1 March
2005 of levied condominium units of the Salcedo Park condominium project owned by Megaworld Globus Asia, Inc.
(respondent).

The antecedent facts follow.

As can be gleaned from Megaworld, petitioner and respondent entered into agreements for the construction of a
condominium project owned by respondent called "The Salcedo Park", with petitioner as contractor. In the course
of the project’s construction, differences with respect to billings arose between the parties. Petitioner thus filed a
complaint for compulsory arbitration before the CIAC claiming payment for approximately ₱97 Million as the
outstanding balance due from respondent pursuant to the agreements. On 19 October 2001, the CIAC rendered a
decision partially granting both petitioner’s and respondent’s claims, with a net award of Sixty Two Million Seven
Hundred Sixty Thousand Five Hundred Fifty Eight Pesos and Forty Nine Centavos (₱62,760,558.49) in favor of
petitioner.

This award was affirmed by the Court of Appeals, which however permanently enjoined petitioner from registering
its contractor’s lien on all except six (6) units of the condominium project. This step was in line with respondent’s
7

manifestation that the principal award of ₱62,760,558.49 in petitioner’s favor can be covered by the value of six (6)
condominium units. Seven (7) condominium units, however, were eventually levied upon as a result of respondent’s
act of substituting two (2) units for the one already paid for by the buyer-spouses, Shaul and Rina Golan. The
8

execution sale of the levied properties did not push through after this Court issued a TRO dated 12 July 2002 upon
respondent’s filing of a petition in G.R. No. 153310.

Thereafter, the Court promulgated its Decision dated 2 March 2004 affirming the judgment of the Court of Appeals
9

and lifting the TRO that was then still in effect. Finding no merit in respondent’s motions for reconsideration, the
10

Court subsequently issued an entry of judgment dated 12 August 2004.

Its judgment having become final and executory, the CIAC issued an Order dated 3 November 2004 giving the
11

parties ten (10) working days within which to agree on the satisfaction of the arbitral award, otherwise a writ of
execution will be issued. As the parties could not come to terms, the CIAC issued an alias writ of execution on 22
November 2004. The alias writ of execution provides in part:

You are hereby commanded, that of the goods and chattels of the MEGAWORLD GLOBUS ASIA, INC.,
Respondent, you cause to be made the amount of ₱62,760,558.49 with interest of 6% due on any balance
remaining until the award becomes executory. Thereafter, interest of 12% per annum shall be applied on
any balance remaining until the full amount is paid; which Claimant recovered pursuant to the Award
promulgated by this Arbitral Tribunal on 19 October 2001 in Case No. 22-2000 of the Construction Instrusty
Arbitration Commission, together with your lawful fees for the services of this execution, all in Philippine currency,
and that you render the same to said Claimant, aside from your own fees on this execution, and that you likewise
return this Writ unto this Commission within fifteen (15) days from date of receipt hereof, with your proceedings
endorsed thereon. But if sufficient personal property cannot be found whereof to satisfy this execution and lawful
fees thereon, then you are commanded that of the lands and buildings of the said Respondent you make the said
sum of money in the manner required by the Rules of Court, and make return of your proceedings with this Writ
within thirty (30) days from receipt hereof. (Emphasis in the original.)
12

On 26 November 2004, respondent sought to clarify if the writ of execution shall be limited to six condominium units
in consonance with the Court of Appeals’ observation in its decision in the first case that the petitioner’s claims can
be satisfied by the value of only six units. The CIAC replied in the negative. In an Order dated 3 December 2003, it
13
stated that nowhere in its Decision or in its Order dated 3 November 2004 did it provide that the payment of the
judgment debt should be made in the form of six condominium units. It expounded that the mention of the six units
was only brought up by the appellate court in relation to the provisional remedy of securing the judgment debt
which is interim/temporary in nature.

In addition to the initial levy of seven units, which transpired during the pendency of G.R. No 153310, three 14

additional units were levied upon on 20 December 2004 by Sheriffs Villamor R. Villegas and Norberto R. Magsajo
of the Regional Trial Court (RTC) of Makati. Subsequently, a Notice of Sheriff’s Sale was published, setting the
auction sale of all ten units on 1 March 2005.

On 25 January 2005, respondent filed a Petition with the Court of Appeals to restrain the scheduled execution sale
15

and to nullify the orders of the CIAC issued pursuant thereto. In said Petition, respondent claimed that the sheriffs
16

exceeded their authority when they included in the notice of execution sale five condominium units fully paid for by
its buyers. Respondent also asserted that the inclusion of three additional units in the levy on execution was
excessive, thereby rendering the same void.

On 21 February 2005, the Court of Appeals issued the questioned Resolution restraining the implementation of the
alias writ, as well as the holding of the auction sale for a period of sixty days from notice thereof. Petitioner filed the
instant petition imputing grave abuse of discretion on the part of the Court of Appeals in taking cognizance of
respondent’s petition and in issuing the assailed Resolution. Petitioner prayed for the issuance of a temporary
restraining order and/or a writ of preliminary injunction to enjoin the Court of Appeals from acting on respondent’s
petition.

The Court of Appeals rendered a Decision granting respondent’s petition and declaring the CIAC’s assailed order
17

null and void. This decision was rendered on 19 April 2005, three days before the expiration of the TRO. Such
Decision of the Court of Appeals was brought to the attention of this Court only on 23 May 2005. 18

On 27 April 2005, we issued a Resolution directing the parties to maintain the status quo effective 22 April 2005,
19

the date of the expiration of the TRO issued by the Court of Appeals and continuing until further orders from this
Court. Since the main case had already been resolved, however, the Court of Appeals merely held in abeyance the
resolution of respondent’s motion for clarification as well as petitioner’s motion for reconsideration of its decision.
20 21

In its Comment [to petitioner’s] Supplemental Petition, respondent contends that since the main case had already
22

been resolved by the Court of Appeals, petitioner’s remedy is to file a petition for review under Rule 45 of the
Revised Rules of Civil Procedure. Respondent further asserts that prematurity, multiplicity of suit and lack of
respect for the hierarchy of courts afflict this petition, thereby necessitating its dismissal.
23

We need not dwell on this peripheral issue. Petitioner filed the instant case precisely to question the Court of
Appeal’s very jurisdiction over respondent’s petition. In evoking this Court’s authority by means of the special civil
action for certiorari, petitioner asserts that respondent court committed a patently unlawful act amounting to lack or
excess of jurisdiction when it (i) entertained a petition which was obviously dilatory and amounted to an obstruction
of justice, and (ii) restrained the CIAC without any valid ground. Obviously, if the Court of Appeals has no
24

jurisdiction over respondent’s petition in the first place, it would not have the capacity to render judgment on the
petition.

Even assuming that the rules of procedure had somehow not been observed in this case, the Court finds that these
objections can be quelled in the higher ends of justice. Rule 1, Section 6 of the Rules of Court provides that the
Rules shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive
disposition of every action and proceeding. We have at times relaxed procedural rules in the interest of substantial
justice and in so doing, we have pronounced that:

A rigid adherence to the technical rules of procedure disregards the fundamental aim of procedure to serve as an
aid to justice, not as a means for its frustration, and the objective of the Rules of Court to afford litigants just,
speedy and inexpensive determination of their controversy. Thus, excusable imperfections of form and
technicalities of procedure or lapses in the literal or rigid observance of a procedural rule or non-jurisdictional
deadline provided therein should be overlooked and brushed aside as trivial and indecisive in the interest of fair
play and justice when public policy is not involved, no prejudice has been caused the adverse party and the court
has not been deprived of its authority or jurisdiction. (Citations omitted)25

Respondent itself admits that the issues in CA-G.R. SP. No. 88314 and in the present case are the same. The suit 26

is already before us under Rule 65. To dismiss this petition on technical grounds and wait for it to be elevated
27

anew under the same grounds and arguments would be to sanction a circuitous procedure that would serve no
purpose except prolong its resolution.

The disposition of the case on the merits is now in order. Generally, the main question for resolution pertains to the
validity of the Alias Writ of Execution dated 22 November 2004. The particular issues are: (i) whether the alias writ
should have been expressly qualified in limiting the execution to just six condominium units; (ii) whether the alias
writ conformed to the requirement under Section 8(e), Rule 39 of the Rules of Civil Procedure that the specific
amount due must be stated; (iii) whether the 6% interest as specified in the alias writ should be applied on a per
annum basis, or on a flat rate. The Court shall also resolve whether the Makati City RTC sheriffs acted correctly in
levying the 10 condominium units, pursuant to such writ of execution.

From the outset, it bears stressing that the subject of petitioner and respondent’s petitions is the execution of a final
judgment affirmed by no less than this Court. This being so, the appellate court should have been doubly careful
about entertaining an obviously dilatory petition intended merely to delay the satisfaction of the judgment. Any lower
court or tribunal that trifles with the execution of a final and executory judgment of the Supreme Court flirts with
insulting the highest court of the land. While we do not diminish the availability of judicial remedies to the execution
of final judgments of this Court, as may be sanctioned under the Rules of Court, such actions could only prosper if
they have basis in fact and in law. Any court or tribunal that entertains such baseless actions designed to thwart the
execution of final judgments acts with grave abuse of discretion tantamount to lack of jurisdiction. It is the positive
28

duty of every court of the land to give full recognition and effect to final and executory decisions, much less those
rendered by the Supreme Court.

The abuse of discretion amounting to lack or excess of jurisdiction in this case was made manifest by the fact that
the appellate court not only took cognizance of the case and issued the assailed restraining order. It eventually
decided the case in petitioner’s (respondent herein) favor as well notwithstanding the dearth of any basis for doing
so.

We first examine the Alias Writ of Execution dated 22 November 2004. As stated earlier, the said writ made no
qualification as to specific classes of property, such as condominium units, which should be executed upon, much
less any denominated quantity of properties. For this, respondent imputed grave abuse of discretion on the part of
the CIAC. It contends that the Decision dated 14 February 2004 of the Court of Appeals as affirmed by this Court
limited petitioner to six condominium units for the purpose of satisfying the arbitral award rendered by the CIAC.
The CIAC, in issuing the alias writ which enabled the sheriffs to levy upon three additional units, was said to have
committed grave abuse of discretion it varied its own judgment as against that affirmed by the Court of Appeals.

Respondent’s argument is absurd. It anchors its proposition on the last sentence of the Decision dated 14 February
2002 of the Court of Appeals which provides:

WHEREFORE, the herein petition is DISMISSED for lack of merit and the appealed decision of the Construction
Industry Arbitration Commission is hereby AFFIRMED. The writ of preliminary injunction issued against the
enforcement of the September 28, 2001 decision of the Construction Industry Arbitration Commission (CIAC) is
hereby LIFTED. The writ of preliminary mandatory injunction ordering private respondent to withdraw its
contractor’s lien on all, except six of private respondent’s condominium units is hereby
made permanent. (Emphasis supplied.)
29

By concentrating on the last sentence of the above dispositive portion, respondent ignored the paragraph which
precedes it where the Court of Appeals stated:

However, justice and fair play dictate that the annotation of private respondent’s lien should be limited to six (6)
units of its choice and not to all of the condominium units. As we noted in our January 17, 2002 Resolution, as
clarified by the January 18, 2002 Resolution, private respondent’s claim against petitioner in the amount of ₱62
Million can be covered by the value of six (6) units of the condominium project. 30

As petitioner correctly argues, there is no ambiguity in the Court of Appeal’s pronouncement, that is, that the
principal award of ₱62 million can be covered by six condominium units. However, such pronouncement did not
make allowances for the interests of 6% and 12% imposed by the CIAC because the alleged limit related merely to
the provisional remedy, not the eventual execution of the judgment. The six unit limit was never intended by the
Court of Appeals to operate in perpetuity as to sanction recovery of the principal award sans legal interest.

The reason for the imposition of the six unit limit can be better understood when viewed in the context of the
circumstances which led the Court of Appeals to make such pronouncement. In fact, respondent itself supplied the
rationale when it narrated in its Comment, thus:
31

DSM, through its counsel, caused the publication in the November 20, 2001 issue of the Philippine Daily Inquirer a
paid advertisement announcing that all units of the Salcedo Park Towers Condominium are subject to its
contractor’s lien.

In addition, DSM also caused to be annotated on all condominium certificates of title of the Salcedo Park Towers
Condominium Entry No. 62921/T denominated as a "contractor’s lien."

Reacting on this adverse and damaging publicity, causes (sic) by DSM, private respondent filed a Supplemental
Petition with the Court of Appeals for the cancellation of said entry.

One of petitioner’s [respondent herein] argument in the Supplemental Petition was that the price range of its units is
from ₱11 million to ₱13 million. Thus, just five or six units would suffice to cover payment of the ₱62.7 million
award.
The Court of Appeals granted the application for preliminary mandatory injunction and noted in its Resolution dated
January 17, 2002 that:

"x x x petitioner manifested that respondent’s claim of ₱62 million can be covered by the sale of six (6) units. It is
also worth noting that petitioner was in fact willing to allow respondent to choose the units upon which to effect the
annotation of its lien."
32

In making the writ of preliminary mandatory injunction permanent, the Court of Appeals was protecting respondent’s
business standing from damage caused by petitioner’s act of annotating its lien on all 209 condominium units.
There is therefore no justification for respondent’s claim that in satisfying the award in favor of petitioner, the latter
and the CIAC are limited to only six units.

Moreover, as correctly pointed out by petitioner, if there was indeed a six unit limit, respondent itself breached the
same. In a letter to the Register of Deeds of Makati City dated 6 May 2004, respondent asked that the Notice of
33

Levy/Attachment with Entry No. 70814/T-65317 as well as the Decision with Entry No. 74154/65317 annotated at
the back of Condominium Certificate of Title No. 65320 (Unit 25A) of the Salcedo Park condominium project be
transferred to Condominium Certificates of Title Nos. 65389 and 65395 (Units 14C and 16C, respectively) of the
same project. The substitution was made so that the unit already paid for by its buyers can be transferred in the
latter’s name free from all liens and encumbrances.

The replacement increased the number of units levied upon from six (6) to seven (7). This weakens respondent’s
reliance on the purported six (6)-unit limit since its own act renders it in estoppel. By estoppel is meant that an
admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved
as against the person relying thereon. Since respondent instigated the resultant increase of the units levied upon,
34

both petitioner and the CIAC cannot be faulted for assuming that the rest of the condominium units may also be
levied upon on execution.

Next, respondent ascribes to the alias writ is the supposed failure to state the specific amount due. This allegedly
35

vests the sheriffs the judicial function of determining the total amount ought to be satisfied by the judgment.

We reiterate the questioned portion of the alias writ of execution:

You are hereby commanded, that of the goods and chattels of the MEGAWORLD GLOBUS ASIA, INC.,
Respondent, you cause to be made the amount of ₱62,760,558.49 with interest of 6% due on any balance
remaining until the award becomes executory. Thereafter, interest of 12% per annum shall be applied on
any balance remaining until the full amount is paid; . . . .

Your lawful fees for the services of this execution shall not exceed four per centum (4%) on the first ₱4,000.00 of
the amount recovered and two per centum (2%) in excess of ₱4,000.00 in accordance with Section 9(10), Rule 141
of the revised Rules of Court. (Emphasis in the original.)

The validity of the alias writ of execution hinges on its conformity to Section 8(e), Rule 39 of the Revised Rules of
Civil Procedure which states, relative to the amount that should be specified in the writ of execution:

Sec. 8 (e). In all cases, the writ of execution shall specifically state the amount of the interest, costs, damages,
rents or profits due as of the date of the issuance of the writ, aside from the principal obligation under the judgment.
For this purpose, the motion for execution shall specify the amounts of the foregoing reliefs sought by the movant.

A perusal of the alias writ convinces this Court that it complies substantially with the requirements of law. It states
the principal award sought to be satisfied, as well as the percentage to be imposed thereon as interest. It even
specifies the lawful fees that are due to the sheriffs for the satisfaction of the judgment. Respondent makes much
36

of the fact that petitioner made its own computation of the amount to be satisfied which the sheriffs allegedly
followed.

Rule 39, Sec. 8(e) cited above precisely requires the movant to specify the amount sought to be satisfied so the
Court fails to see why petitioner should be faulted for doing so. If the objection hinges on the fact that the exact
mathematical computation did not appear in the alias writ itself, respondent could easily have moved that said
computation be incorporated by the CIAC thereon. Such perceived deficiency is certainly not sufficient to justify
recourse to a special civil action for certiorari to have the alias writ declared null and void in its entirety.

As to the controversy on the application of the 6% rate of interest, the proper forum for clarifying the same is the
CIAC, not the Court of Appeals. After all, the CIAC imposed said rate so it puzzles this Court why respondent did
not seek enlightenment therefrom when it filed its Motion for Clarification relative to the purported six-unit limit. Be
that as it may, this Court herein notes that nowhere in any of its jurisprudence had a legal rate of interest been
imposed as a flat rate rather than on a per annum basis.

Our conclusions on the validity of the Alias Writ of Execution stand utterly apart from those propounded by the
Court of Appeals in its 19 April 2005 Decision. Its rationale, briefly explained in 4 pages, does not appear to
consider the flip side of the arguments raised by respondent. It does not even bother to cite, much less contest, the
arguments raised therein by respondents.

The 19 April 2005 Decision did not dwell on the other arguments posited by respondent in support of its petition
before the Court of Appeals relative to the acts of the sheriffs in levying particular condominium units in preparation
to the auction sale. To give full resolution to this case, these arguments should be disposed with at this juncture.

Respondents claimed before the Court of Appeals is that the sheriffs exceeded their authority when they included
five condominium units fully paid for by buyers in the notice of execution sale. According to respondent, the
37

unrecorded contracts to buy and sell take precedence over the recorded levy of execution by virtue of the
Subdivision and Condominium Buyers’ Protective Decree (PD 957).

The Court is baffled why respondent is raising this issue and not the purported buyers themselves. Rule 39, Section
16 of the Revised Rules of Civil Procedure lays down the procedure in cases where properties levied upon are
38

claimed by third persons. It is the third person claiming the property who has to make an affidavit of his title or right
to possession thereof. Nowhere is it stated in said section that the judgment obligor (respondent in this case) has to
make the claim on the third person’s behalf. It is peculiar that respondent is belaboring the point when the
supposed buyers themselves did not even appear to lay claim to the levied properties.

Moreover, respondent’s contention that the unregistered buyers’ right over the property is superior to that of the
judgment obligor has no basis. The fact that the contracts to buy and sell are unregistered and the properties in
question are still in the name of respondent underlines the fact that the sales are not absolute. The units are clearly
still owned by respondent and not by the alleged buyers. Under Section 51 of the Property Registration Decree (PD
1529), the act of registration is the operative act which conveys or affects the land in so far as third persons are
concerned. As provided by said law:

Sec. 51. . . . no deed, mortgage, lease or other voluntary instrument, except a will purporting to convey or affect
registered land, shall take effect as a conveyance or bind the land but shall operate only as a contract between the
parties and as evidence of authority to the Register of Deeds to make registration.

...

Respondent’s reliance on jurisprudence holding that buyers’ rights of ownership over condominium units even if
unregistered are superior over registered encumbrances is misplaced. The cases cited clearly indicated that the
parties involved were the condominium buyers and mortgage creditors. A mortgage creditor is not synonymous to a
judgment creditor contrary to what respondent asserts. While the law expects a mortgage creditor to inquire as a
reasonably prudent man would regarding the encumbrances on the property in question, no such knowledge is
imputed to a judgment creditor who merely seeks the satisfaction of the judgment awarded in his favor.

Based on the foregoing, the appellate court clearly had no authority to take cognizance of the petition filed by
respondent. By acting on the petition rather than dismissing the case outright, it committed grave abuse of
discretion amounting to lack of jurisdiction.

One last point. The Court has noted the various dilatory tactics employed by lawyers to resist the execution of
judgments which had already attained finality. In fact, the Court has been all too willing to discipline counsels who
engage in such behavior, either through penalization for contempt or referral for administrative investigation with
39

the Integrated Bar of the Philippines . Lawyers must be reminded that in their zeal to protect the interests of their
40

clients, they must not overreach their commitment to the extent of frustrating the ends of justice. The Court does
not regard with favor lawyers who try to delay the execution of cases which are already final and executory.

WHEREFORE, premises considered, the petition is GRANTED. The Resolution dated 21 February 2005 and
the Decision of the Court of Appeals dated 19 April 2005 are VOIDED and SET ASIDE. Costs against respondent.

The Construction Industry Arbitration Commission is ordered to proceed with the execution of its Decision dated 19
October 2001 in CIAC Case No. 22-2000.

SO ORDERED.

DANTE O. TINGA
Associate Justice

WE CONCUR:

SECOND DIVISION

G.R. No. 148318 November 22, 2004

NATIONAL POWER CORPORATION, petitioner,
vs.
HON. ROSE MARIE ALONZO-LEGASTO, as Presiding Judge, RTC of Quezon City, Branch 99, JOSE
MARTINEZ, Deputy Sheriff, RTC of Quezon City, CARMELO V. SISON, Chairman, Arbitration Board, and
FIRST UNITED CONSTRUCTORS CORPORATION, respondents.

DECISION

TINGA, J.:

National Power Corporation (NPC) filed the instant Petition for Review dated July 19, 2001, assailing the
1

Decision of the Court of Appeals dated May 28, 2001 which affirmed with modification the Order and Writ of
2 3

Execution respectively dated May 22, 2000 and June 9, 2000 issued by the Regional Trial Court. In its assailed
4

Decision, the appellate court declared respondent First United Constructors Corporation (FUCC) entitled to just
compensation for blasting works it undertook in relation to a contract for the construction of power facilities it
entered into with petitioner. The Court of Appeals, however, deleted the award for attorney's fees having found no
basis therefor.

The facts culled from the Decision of the Court of Appeals are undisputed:

On April 14, 1992, NPC and FUCC entered into a contract for the construction of power facilities (civil
works) – Schedule 1 – 1x20 MW Bacon-Manito II Modular Geothermal Power Plant (Cawayan area) and
Schedule 1A – 1x20 MW Bacon-Manito II Modular Geothermal Power Plant (Botong area) in Bacon,
Sorsogon (BACMAN II). The total contract price for the two schedules is P108,493,966.30, broken down as
follows:

SCHEDULE

1 – Cawayan area P 52,081,421.00

1A – Botong area P 56,412,545.30

P 108,493,966.30

Appended with the Contract is the contract price schedule which was submitted by the respondent FUCC
during the bidding. The price for grading excavation was P76.00 per cubic meter.

Construction activities commenced in August 1992. In the latter part of September 1992 and after
excavating 5.0 meters above the plant elevation, FUCC requested NPC that it be allowed to blast to the
design grade of 495 meters above sea level as its dozers and rippers could no longer excavate. It further
requested that it be paid P1,346.00 per cubic meter similar to the rate of NPC's project in Palinpinon.

While blasting commenced on October 6, 1992, NPC and FUCC were discussing the propriety of an extra
work order and if such is in order, at what price should FUCC be paid.

Sometime in March 1993, NPC Vice President for Engineering Construction, Hector Campos, created a
task force to review FUCC's blasting works. The technical task force recommended that FUCC be paid
P458.07 per cubic meter as such being the price agreed upon by FUCC.

The matter was further referred to the Department of Public [W]orks and Highways (DPWH), which in a
letter dated May 19, 1993, recommended the price range of P500.00 to P600.00 per cubic meter as
reasonable. It further opined that the price of P983.75 per cubic meter proposed by Lauro R. Umali, Project
Manager of BACMAN II was high. A copy of the DPWH letter is attached as Annex "C", FUCC's Exhibit
EEE-Arbitration.

In a letter dated June 28, 1993, FUCC formally informed NPC that it is accepting the proposed price of
P458.07 per cubic meter. A copy of the said letter is attached as Annex "D", FUCC's Exhibit L Arbitration.

In the meantime, by March 1993, the works in Botong area were in considerable delay. By May 1993, civil
works in Botong were kept at a minimum until on November 1, 1993, the entire operation in the area
completely ceased and FUCC abandoned the project.
Several written and verbal warnings were given by NPC to FUCC. On March 14, 1994, NPC's Board of
Directors passed Resolution No. 94-63 approving the recommendation of President Francisco L. Viray to
take over the contract. President Viray's recommendation to take over the project was compelled by the
need to stave-off huge pecuniary and non-monetary losses, namely:

(a) Generation loss estimated to be at P26,546,400/month;

(b) Payment of steam penalties to PNOC-EDC the amount estimated to be at

P10,206,048.00/month;

(c) Payment of liquidated damages due to the standby of electromechanical contractor;

(d) Loss of guaranteed protection (warranties) of all delivered plant equipment and
accessories as Mitsubishi Corporation, electromechanical contractor, will not be liable after
six months of delivery.

To prevent NPC from taking over the project, on March 28, 1994, FUCC filed an action for Specific
Performance and Damages with Preliminary Injunction and Temporary Restraining Order before Branch
99, Regional Trial Court, Quezon City.

Under paragraph 19 of its Complaint, FUCC admitted that it agreed to pay the price of P458.07 per cubic
meter.

On April 5, 1994, Judge de Guzman issued a temporary restraining order and on April 21, 1994, the trial
court resolved to grant the application for issuance of a writ of preliminary injunction.

On July 7, 1994, NPC filed a Petition for Certiorari with Prayer for Temporary Restraining Order and
Preliminary Injunction before the First Division of the Court of Appeals asserting that no injunction may
issue against any government projects pursuant to Presidential Decree 1818.

On July 8, 1994, the Court of Appeals through then Associate Justice Bernardo Pardo issued a temporary
restraining order and on October 20, 1994, the said court rendered a Decision granting NPC's Petition for
Certiorari and setting aside the lower court's Order dated April 21, 1994 and the Writ of Preliminary
Injunction dated May 5, 1994.

However, notwithstanding the dissolution by the Court of Appeals of the said injunction, on July 15, 1995,
FUCC filed a Complaint before the Office of the Ombudsman against several NPC employees for alleged
violation of Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act. Together
with the complaint was an Urgent Ex-Parte Motion for the issuance of a cease and [d]esist [o]rder to
restrain NPC and other NPC officials involved in the BACMAN II project from canceling and/or from taking
over FUCC's contract for civil works of said project.

Then on November 16, 1994, FUCC filed before the Supreme Court a Petition for Review assailing the
Decision of the Court of [A]ppeals dated October 20, 1994. In its Comment, NPC raised the issue that
FUCC resorted to forum shopping as it applied for a cease and desist order before the National
Ombudsman despite the dissolution of the injunction by the Court of Appeals.

Pending the petition filed by FUCC before the Supreme Court, on April 20, 1995 the NPC and FUCC
entered into a Compromise Agreement.

Under the Compromise Agreement, the parties agreed on the following:

1. Defendant shall process and pay the undisputed unpaid billings of Plaintiff in connection with the
entire project fifteen (15) days after a reconciliation of accounts by both Plaintiff and Defendant or
thirty (30) days from the date of approval of this Compromise Agreement by the Court whichever
comes first. Both parties agree to submit and include those accounts which could not be reconciled
among the issues to be arbitrated as hereunder provided;

2. Plaintiff accepts and acknowledges that Defendant shall have the right to proceed with the works
by re-bidding or negotiating the project immediately upon the signing of herein Compromise
Agreement;

3. This Compromise Agreement shall serve as the Supplemental Agreement for payment of
plaintiff's blasting works at the Botong site;

4. Upon approval of this Compromise Agreement by the Court or Plaintiff's receipt of payment of
this undisputed unpaid billings from Defendant whichever comes first, the parties shall immediately
file a Joint Manifestation and Motion for the withdrawal of the following Plaintiff's petition from the
 Supreme Court, Plaintiff's Complaint from the National Ombudsman, the Complaint and Amended
Complaint from the RTC, Br. 99 of Quezon City;

5. Upon final resolution of the Arbitration, as hereunder prescribed, the parties shall immediately
execute the proper documents mutually terminating Plaintiff's contract for the civil works of the
BACMAN II Project (Contract No. Sp90DLM-918 (I & A);

6. Such mutual termination of Plaintiff's contract shall have the following effects and/or
consequences: (a) the construction works of Plaintiff at the Kawayan and Bolong sites, at its
present stage of completion, shall be accepted and/or deemed to have been accepted by
defendant; (b) Plaintiff shall have no more obligation to Defendant in respect of the BACMAN II
Project except as provided in clause (e) below; (c) Defendant shall release all retention moneys of
plaintiff within a maximum period of thirty (30) days from the date of final Resolution of the
Arbitration; (d) no retention money shall thenceforth be withheld by Defendant in its payment to
Plaintiff under this Compromise Agreement, and (e) Plaintiff shall put up a one-year guaranty bond
for its completed civil works at the Kawayan site, retroactive to the date of actual use of the plant by
defendant;

7. Plaintiff's blasting works claims and other unresolved claims, as well as the claims of damages
of both parties shall be settled through a two stage process to wit:

STAGE 1

7.1 Plaintiff and Defendant shall execute and sign this Compromise Agreement which they
will submit for approval by this Court. Under this Compromise Agreement both parties
agree that:

xxx xxx

STAGE 2

7.1 The parties shall submit for arbitration to settle: (a) the price of blasting, (b) both
parties' claims for damages, delays, interests, and (c) all other unresolved claims of both
parties, including the exact volume of blasted rocks;

7.2 The arbitration shall be through a three-member commission to be appointed by the

Honorable Court. Each party shall nominate one member. The Chairman of the Arbitration
Board shall be [a] person mutually acceptable to both parties, preferably from the
academe;

7.3 The parties shall likewise agree upon the terms under which the arbitrable issues shall
be referred to the Arbitration Board. The terms of reference shall form part of the
Compromise Agreement and shall be submitted by the parties to the Honorable Court
within a period of seven (7) days from the signing of the Compromise Agreement;

7.4 The Arbitration Board shall have a non-extendible period of three (3) months within
which to complete the arbitration process and submit its Decision to the Honorable Court;

7.5 The parties agree that the Decision of the Arbitration Board shall be final and
executory;

7.6 By virtue of this Compromise Agreement, except as herein provided, the parties shall
mutually waive, forgo and dismiss all of their other claims and/or counterclaim in this case.
Plaintiff and defendant warrant that after approval by the Court of this Compromise
Agreement neither party shall file Criminal or Administrative cases or suits against each
other or its Board or member of its officials on grounds arising from the case.

The Compromise Agreement was subsequently approved by the Court on May 24, 1995.

The case was subsequently referred by the parties to the arbitration board pursuant to their Compromise
Agreement. On December 9, 1999 the Arbitration Board rendered its ruling the dispositive portion of which
states:

WHEREFORE, claimant is hereby declared entitled to an award of P118,681,328.28 as just compensation

for blasting works, plus ten percent (10%) thereof for attorney's fees and expenses of litigation.
 Considering that payment in the total amount of P36,550,000.00 had previously been made, respondent is
hereby ordered to pay claimant the remaining sum of P82,131,328.28 for attorney's fees and expenses of
litigation.

Pursuant to the Compromise Agreement approved by this Honorable Court, the parties have agreed that
the decision of the Arbitration Board shall be final and executory.

SO ORDERED.

On December 10, 1999 plaintiff FUCC filed a Motion for Execution while defendant NPC filed a Motion to
Vacate Award by the Arbitration Board on December 20, 1999.

On May 22, 2000 Presiding Judge Rose Marie Alonzo Legasto issued an order the dispositive portion of
which states:

"WHEREFORE, the Arbitration Award issued by the Arbitration Board is hereby APPROVED and the
Motion for Execution filed by plaintiff hereby GRANTED. The Motion to Vacate Award filed by defendant is
hereby DENIED for lack of merit.

Accordingly, let a writ of execution be issued to enforce the Arbitration Award.

SO ORDERED." (Bracketed words supplied)

5

NPC went to the Court of Appeals on the lone issue of whether respondent judge acted with grave abuse of
discretion in issuing the Order dated May 22, 2000 and directing the issuance of a Writ of Execution.

In its assailed Decision, the appellate court declared that the court a quo did not commit grave abuse of discretion
considering that the Arbitration Board acted pursuant to its powers under the Compromise Agreement and that its
award has factual and legal bases.

The Court of Appeals gave primacy to the court-approved Compromise Agreement entered into by the parties and
concluded that they intended the decision of the arbitration panel to be final and executory. Said the court:

For one, what the price agreed to be submitted for arbitration are pure issues of fact (i.e., the price of
blasting; both parties' claims for damages, delay, interests and all other unresolved claims of both parties,
including the exact volume of blasted rocks). Also, the manner by which the Arbitration Board was formed
and the terms under which the arbitrable issues were referred to said Board are specified in the agreement.
Clearly, the parties had left to the Arbitration Board the final adjudication of their remaining claims and
waived their right to question said Decision of the Board. Hence, they agreed in clear and unequivocal
terms in the Compromise Agreement that said Decision would be immediately final and executory. Plaintiff
relied upon this stipulation in complying with its various obligations under the agreement. To allow
defendant to now go back on its word and start questioning the Decision would be grossly unfair
considering that the latter was also a party to the Compromise Agreement entered into part of which dealt
with the creation of the Arbitration Board.6

The appellate court likewise held that petitioner failed to present evidence to prove its claim of bias and partiality on
the part of the Chairman of the Arbitration Board, Mr. Carmelo V. Sison (Mr. Sison).

Further, the Court of Appeals found that blasting is not part of the unit price for grading and structural excavation
provided for in the contract for the BACMAN II Project, and that there was no perfected contract between the
parties for an extra work order for blasting. Nonetheless, since FUCC relied on the representation of petitioner's
officials that the extra work order would be submitted to its Board of Directors for approval and that the blasting
works would be paid, the Court of Appeals ruled that FUCC is entitled to just compensation on grounds of equity
and promissory estoppel.

Anent the issue of just compensation, the appellate court took into account the estimate prepared by a certain Mr.
Lauro R. Umali (Mr. Umali), Project Manager of the BACMAN II Project, which itemized the various costs involved
in blasting works and came up with P1,310.82 per cubic meter, consisting of the direct cost for drilling, blasting
excavation, stockpiling and hauling, and a 30% mark up for overhead, contractor's tax and contingencies. This
estimate was later changed to P983.75 per cubic meter to which FUCC agreed. The Court of Appeals, however,
held that just compensation should cover only the direct costs plus 10% for overhead expenses. Thus, it declared
that the amount of P763.00 per cubic meter is sufficient. Since the total volume of blasted rocks as computed by
7

Dr. Benjamin Buensuceso, Jr. of the U.P. College of Engineering is 97,032.16 cubic meters, FUCC is entitled to the
8

amount of P74,035,503.50 as just compensation.

Although the Court of Appeals adjudged FUCC entitled to interest, the dispositive portion of the assailed
9

Decision did not provide for the payment of interest. Moreover, the award of attorney's fees was deleted as there
10

was no legal and factual ground for its imposition.

Petitioner, represented by the Office of the Solicitor General in the instant Petition, rehashes its submissions before
the Court of Appeals. It claims that the appellate court failed to pass upon the following issues:

1. The Chairman of the Arbitration Board showed extreme bias in prejudging the case.

2. The Chairman of the Arbitration Board greatly exceeded his powers when he mediated for settlement in
the court of arbitration proceedings.

3. The Chairman of the Arbitration Board committed serious irregularity in hastily convening the Board in
two days, which thereafter released its report.

4. The Arbitration Board Committed manifest injustice prejudicial to petitioner based on the following:

a. It rendered an award based on equity despite the mandatory provision of the law.

b. The Board's decision to justify that equity applies herein despite the fact that FUCC never
submitted its own actual costs for blasting and PHESCO, INC., the succeeding contractor, did not
employ blasting but used ordinary excavation method at P75.59 per cubic meter which is
approximately the same unit price of plaintiff (FUCC).

c. It gravely erred when the Board claimed that an award of just compensation must be given to
respondent FUCC for what it has actually spent and yet instead of using as basis P458.07 which is
the price agreed upon by FUCC, it chose an estimate made by an NPC employee.

d. It gravely erred when it relied heavily on the purported letter of NPC Project Manager Lauro R.
Umali, when the same has not been identified nor were the handwritten entries in Annex ii
established to be made by him.

5. The Arbitration Board gravely erred in computing interest at 12% and from the time of plaintiff's
extrajudicial claim despite the fact that herein case is an action for specific performance and not for
payment of loan or forbearance of money, and despite the fact that it has resolved that there was no
perfected contract and there was no bad faith on the part of defendant.

6. On June 25, 2000, NPC discovered the Sub-Contract Agreement of FUCC with a unit price of only
P430/per cubic meter. [Emphasis in the original]
11

Specifically, petitioner asserts that Mr. Sison exhibited bias and prejudgment when he exhorted it to pay FUCC for
the blasting works after concluding that the latter was allowed to blast. Moreover, Mr. Sison allegedly attempted to
mediate the conflict between the parties in violation of Section 20, paragraph 2 of Republic Act No. 876 (R.A. 876)
12

otherwise known as the Arbitration Law. Petitioner also questions the abrupt manner by which the decision of the
Arbitration Board was released.

Petitioner avers that FUCC's claim for blasting works was not approved by authorized officials in accordance with
Presidential Decree No. 1594 (P.D. 1594) and its implementing rules which specifically require the approval of the
extra work by authorized officials before an extra work order may be issued in favor of the contractor. Thus, it
should not be held liable for the claim. If at all, only the erring officials should be held liable. Further, FUCC did not
present evidence to prove the actual expenses it incurred for the blasting works. What the Arbitration Board relied
upon was the memorandum of Mr. Umali which was neither identified or authenticated during the arbitration
proceedings nor marked as evidence for FUCC. Moreover, the figures indicated in Mr. Umali's memorandum were
allegedly mere estimates and were recommendatory at most.

Petitioner likewise claims that its succeeding contractor, Phesco, Inc. (Phesco), was able to excavate the same
rock formation without blasting.

Finally, it asserts that the award of P763.00 per cubic meter has no factual and legal basis as the sub-contract
between FUCC and its blasting sub-contractor, Dynamic Blasting Specialists of the Philippines (Dynamic), was only
P430.00 per cubic meter.

In its Comment dated October 15, 2001, FUCC points out that petitioner's arguments are exactly the same as the
13

ones it raised before the Arbitration Board, the trial court and the Court of Appeals. Moreover, in the Compromise
Agreement between the parties, petitioner committed to abide by the decision of the Arbitration Board. It should not
now be allowed to question the decision.

FUCC likewise notes that Atty. Jose G. Samonte (Atty. Samonte), one of the members of the Arbitration Board, was
nominated by petitioner itself. If there was any irregularity in its proceedings such as the bias and prejudgment
petitioner imputes upon Mr. Sison, Atty. Samonte would have complained. As it is, Atty. Samonte concurred in the
decision of the Arbitration Board and dissented only as to the award of attorney's fees.
As regards the issue of interest, FUCC claims that the case involves forbearance of money and not a claim for
damages for breach of an obligation in which case interest on the amount of damages awarded may be imposed at
the rate of six percent (6%) per annum.

Finally, FUCC asserts that its sub-contract agreement with Dynamic is not newly-discovered evidence. Petitioner's
lawyers allegedly had a copy of the sub-contract in their possession. In any event, the unit price of P430.00 per
cubic meter appearing in the sub-contract represents only a fraction of the costs incurred by FUCC for the blasting
works.

Petitioner filed a Reply dated March 18, 2002 reiterating its earlier submissions.
14

The parties in the present case mutually agreed to submit to arbitration the settlement of the price of blasting, the
parties' claims for damages, delay and interests and all other unresolved claims including the exact volume of
blasted rocks. They further mutually agreed that the decision of the Arbitration Board shall be final and immediately
15

executory.16

A stipulation submitting an ongoing dispute to arbitration is valid. As a rule, the arbitrator's award cannot be set
aside for mere errors of judgment either as to the law or as to the facts. Courts are generally without power to
amend or overrule merely because of disagreement with matters of law or facts determined by the arbitrators. They
will not review the findings of law and fact contained in an award, and will not undertake to substitute their judgment
for that of the arbitrators. A contrary rule would make an arbitration award the commencement, not the end, of
litigation. Errors of law and fact, or an erroneous decision on matters submitted to the judgment of the arbitrators,
are insufficient to invalidate an award fairly and honestly made. Judicial review of an arbitration award is, thus,
more limited than judicial review of a trial. 17

However, an arbitration award is not absolute and without exceptions. Where the conditions described in Articles
2038, 2039 and 2040 of the Civil Code applicable to both compromises and arbitrations are obtaining, the
18

arbitrators' award may be annulled or rescinded. Additionally, judicial review of an arbitration award is warranted
19

when the complaining party has presented proof of the existence of any of the grounds for vacating, modifying or
correcting an award outlined under Sections 24 and 25 of R.A. 876, viz:

Section 24. Grounds for vacating an award. — In any of the following cases, the court must make an order
vacating the award upon the petition of any party to the controversy when such party proves affirmatively
that in the arbitration proceedings:

(a) The award was procured by corruption, fraud, or other undue means; or

(b) That there was evident partiality or corruption in the arbitrators or any of them; or

(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient
cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or
more of the arbitrators was disqualified to act as such under section nine hereof, and willfully
refrained from disclosing such disqualifications or of any other misbehavior by which the rights of
any party have been materially prejudiced; or

(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final
and definite award upon the subject matter submitted to them was not made.

When an award is vacated, the court, in its discretion, may direct a new hearing either before the same
arbitrators or before a new arbitrator or arbitrators to be chosen in the manner provided in the submission
or contract for the selection of the original arbitrator or arbitrators, and any provision limiting the time in
which the arbitrators may make a decision shall be deemed applicable to the new arbitration to commence
from the date of the court's order.

Where the court vacates an award, costs not exceeding fifty pesos and disbursements may be awarded to
the prevailing party and the payment thereof may be enforced in like manner as the payment of costs upon
the motion in an action.

Section 25. Grounds for modifying or correcting an award. — In any one of the following cases, the court
must make an order modifying or correcting the award, upon the application of any party to the controversy
which was arbitrated:

(a) Where there was an evident miscalculation of figures, or an evident mistake in the description of
any person, thing or property referred to in the award; or

(b) Where the arbitrators have awarded upon a matter not submitted to them, not affecting the
merits of the decision upon the matter submitted; or
 (c) Where the award is imperfect in a matter of form not affecting the merits of the controversy, and
if it had been a commissioner's report, the defect could have been amended or disregarded by the
court.

The order may modify and correct the award so as to effect the intent thereof and promote justice between
the parties.

In this case, petitioner does not specify which of the foregoing grounds it relies upon for judicial review. Petitioner
avers that "if and when the factual circumstances referred to in the provisions aforementioned are present, judicial
review of the award is warranted." From its presentation of issues, however, it appears that the alleged evident
20

partiality of Mr. Sison is singled out as a ground to vacate the board's decision.

We note, however, that the Court of Appeals found that petitioner did not present any proof to back up its claim of
evident partiality on the part of Mr. Sison. Its averments to the effect that Mr. Sison was biased and had prejudged
the case do not suffice to establish evident partiality. Neither does the fact that a party was disadvantaged by the
decision of the arbitration committee prove evident partiality.21

According to the appellate court, "[p]etitioner was never deprived of the right to present evidence nor was there any
showing that the Board showed signs of any bias in favor of FUCC. As correctly found by the trial court, this Court
cannot find its way to support petitioner's contention that there was evident partiality in the assailed Award of the
Arbitrator in favor of the respondent because the conclusion of the Board, which the Court found to be well-
founded, is fully supported by substantial evidence." 22

There is no reason to depart from this conclusion.

However, we take exception to the arbitrators' determination that based on promissory estoppel per se or alone,
FUCC is entitled to just compensation for blasting works for the reasons discussed hereunder.

Section 9 of P.D. No. 1594, entitled Prescribing Policies, Guidelines, Rules and Regulations for Government
Infrastructure Contracts, provides:

SECTION 9. Change Order and Extra Work Order.—A change order or extra work order may be issued
only for works necessary for the completion of the project and, therefore, shall be within the general scope
of the contract as bid[ded] and awarded. All change orders and extra work orders shall be subject to the
approval of the Minister of Public Works, Transportation and Communications, the Minister of Public
Highways, or the Minister of Energy, as the case may be.

The pertinent portions of the Implementing Rules and Regulations of P.D. 1594 provide:

CI - Contract Implementation:

These Provisions Refer to Activities During Project Construction, i.e., After Contract Award Until
Completion, Except as May Otherwise be Specifically Referred to Provisions Under Section II. IB -
Instructions to Bidders.

CI 1 - Variation Orders - Change Order/Extra Work Order/Supplemental Agreement

4. An Extra Work Order may be issued by the implementing official to cover the introduction of new work
items after the same has been found to strictly comply with Section CI-1-1 and approved by the appropriate
official if the amount of the Extra Work Order is within the limits of the former's authority to approve original
contracts and under the following conditions:

a. Where there are additional works needed and necessary for the completion, improvement or protection
of the project which were not included as items of work in the original contract.

b. Where there are subsurface or latent physical conditions at the site differing materially from those
indicated in the contract.

c. Where there are duly unknown physical conditions at the site of an unusual nature differing materially
from those ordinarily encountered and generally recognized as inherent in the work or character provided
for in the contract.

d. Where there are duly approved construction drawings or any instruction issued by the implementing
office/agency during the term of contract which involve extra cost.

…
 6. A separate Supplemental Agreement may be entered into for all Change Orders and Extra Work Orders
if the aggregate amount exceeds 25% of the escalated original contract price. All change orders/extra work
orders beyond 100% of the escalated original contract cost shall be subject to public bidding except where
the works involved are inseparable from the original scope of the project in which case negotiation with the
incumbent contractor may be allowed, subject to approval by the appropriate authorities.

7. Any Variation Order (Change Order, Extra Work Order or Supplemental Agreement) shall be subject to
the escalation formula used to adjust the original contract price less the cost of mobilization. In claiming for
any Variation Order, the contractor shall, within seven (7) calendar days after such work has been
commenced or after the circumstances leading to such condition(s) leading to the extra cost, and within 28
calendar days deliver a written communication giving full and detailed particulars of any extra cost in order
that it may be investigated at that time. Failure to provide either of such notices in the time stipulated shall
constitute a waiver by the contractor for any claim. The preparation and submission of Change Orders,
Extra Work Orders or Supplemental Agreements are as follows:

a. If the Project Engineer believes that a Change Order, Extra Work Order or Supplemental Agreement
should be issued, he shall prepare the proposed Order or Supplemental Agreement accompanied with the
notices submitted by the contractor, the plans therefore, his computations as to the quantities of the
additional works involved per item indicating the specific stations where such works are needed, the date of
his inspections and investigations thereon, and the log book thereof, and a detailed estimate of the unit
cost of such items of work, together with his justifications for the need of such Change Order, Extra Work
Order or Supplemental Agreement, and shall submit the same to the Regional Director of
office/agency/corporation concerned.

b. The Regional Director concerned, upon receipt of the proposed Change Order, Extra Work Order or
Supplemental Agreement shall immediately instruct the technical staff of the Region to conduct an on-the-
spot investigation to verify the need for the work to be prosecuted. A report of such verification shall be
submitted directly to the Regional Director concerned.

c. The Regional Director concerned after being satisfied that such Change Order, Extra Work Order or
Supplemental Agreement is justified and necessary, shall review the estimated quantities and prices and
forward the proposal with the supporting documentation to the head of office/agency/corporation for
consideration.

d. If, after review of the plans, quantities and estimated unit cost of the items of work involved, the proper
office/agency/corporation committee empowered to review and evaluate Change Orders, Extra Work
Orders or Supplemental Agreements recommends approval thereof, the head of office/agency/corporation,
believing the Change Order, Extra Work Order or Supplemental Agreement to be in order, shall approve
the same. The limits of approving authority for any individual, and the aggregate of, Change Orders, Extra
Work Orders or Supplemental Agreements for any project of the head of office/agency/corporation shall not
be greater than those granted for an original project.

CI 3 - Conditions under which Contractor is to Start Work under Variation Orders and Receive Payments

1. Under no circumstances shall a contractor proceed to commence work under any Change Order, Extra
Work Order or Supplemental Agreement unless it has been approved by the Secretary or his duly
authorized representative. Exceptions to the preceding rule are the following:

a. The Regional Director, or its equivalent position in agencies/offices/corporations without plantilla position
for the same, may, subject to the availability of funds, authorize the immediate start of work under any
Change or Extra Work Order under any or all of the following conditions:

(1) In the event of an emergency where the prosecution of the work is urgent to avoid detriment to public
service, or damage to life and/or property; and/or

(2) When time is of the essence; provided, however, that such approval is valid on work done up to the
point where the cumulative increase in value of work on the project which has not yet been duly fully
approved does not exceed five percent (5%) of the adjusted original contract price, or P500,000 whichever
is less; provided, further, that immediately after the start of work, the corresponding Change/Extra Work
Order shall be prepared and submitted for approval in accordance with the above rules herein set.
Payments for works satisfactorily accomplished on any Change/Extra Work Order may be made only after
approval of the same by the Secretary or his duly authorized representative.

b. For a Change/Extra Work Order involving a cumulative amount exceeding five percent (5%) of the
original contract price or original adjusted contract price no work thereon may be commenced unless said
Change/Extra Work Order has been approved by the Secretary or his duly authorized representative.
[Emphasis supplied]

It is petitioner's submission, and FUCC does not deny, that the claim for payment of blasting works in Botong alone
was approximately P170,000,000.00, a figure which far exceeds the original contract price of P80,000,000.00 for
two (2) project sites. Under the foregoing implementing rules, for an extra work order which exceeds 5% of the
original contract price, no blasting work may be commenced without the approval of the Secretary or his duly
authorized representative. Moreover, the procedure for the preparation and approval of the extra work order
outlined under Contract Implementation (CI) 1(7) above should have been complied with. Accordingly, petitioner's
officials should not have authorized the commencement of blasting works nor should FUCC have proceeded with
the same.

The following events, culled from the decision of the Arbitration Board and the assailed Decision, are made the
bases for the finding of promissory estoppel on the part of petitioner:

1. After claimant [respondent herein] encountered what it claimed to be massive hard rock formation
(Testimony of witness Dumaliang, TSN, 28 October 1996, pp. 41-42; Testimony of witness Lataquin, 28
November 1996, pp. 2-3; 20-23; Exh. "JJJ" and sub-markings) and informed respondent [petitioner herein]
about it, respondent's own geologists went to the Botong site to investigate and confirmed the rock
formation and recommended blasting (Cf. Memorandum of Mr. Petronilo E. Pana, Acting Manager of the
Geoscience Services Department and the report of the geologists who conducted the site investigation;
Exhs. "F" and "F-1").

2. Claimant asked for clearance to blast the rock formation to the design grade (Letter dated 28 September
1992; Exh. "UU"). The engineers of respondent at the project site advised claimant to proceed with its
suggested method of extraction (Order/Instruction given by Mr. Reuel R. Declaro and Mr. Francis A.
Paderna dated 29 September 1992; Exh. "C").

3. Claimant requested that the intended blasting works be confirmed as extra work order by responsible
officials of respondent directly involved in the BACMAN II Project (i.e., then BACMAN II Project Manager,
Mr. Lauro R. Umali and Mr. Angelito G. Senga, Section Chief, Civil Engineering Design of respondent's
Design Department which bidded the project). These officials issued verbal instructions to the effect: (a)
that claimant could blast the rock formation down to the design grade of 495 masl; (b) that said blasting
works would be an extra work order; and (c) that claimant would be paid for said blasting works using the
price per cubic meter for similar blasting works at Palinpinon, or at P1,346.00 per cubic meter.

4. Claimant sent two (2) confirmatory letters to respondent, both addressed to its President, one dated 30
September 1992, and sent through Mr. Angelito Senga, Chief Civil Design – Thermal, the other dated 02
October 1992, and sent through Mr. Lauro R. Umali, Project Manager–BacMan II (Exhs. "D" and "E";
Testimony of witness Dumaliang, TSN, 28 October 1996, pp. 43-49). The identical letters read:

We wish to confirm your instruction for us to proceed with the blasting of the Botong Plant site to the design
grade pending issuance of the relevant variation order. This is to avoid delay in the implementation of this
critical project due to the urgent need to blast rocks on the plant site.

We are confirming further your statement that the said blasting works is an extra work order and that we
will be paid using the price established in your Palinpinon contract with Phesco.

Thank you for your timely action and we look forward to the immediate issuance of the extra work order.

We are now mobilizing equipment and manpower for the said work and hope to start blasting next week.

5. Respondent received the letters but did not reply thereto nor countermand the earlier instructions given
to claimant to proceed with the blasting works. The due execution and authenticity of these letters (Exhs.
"D-1" and "E-1") and the fact of receipt (Exhs. "D-2" and "E-2") were duly proved by claimant (Testimony of
witness Dumaliang, TSN, 28 October 1996, 43-49).

6. In mid-October 1992, three (3) Vice-Presidents of respondent visited the project site and were informed
of claimant's blasting activities. While respondent claims that one of the Vice-Presidents, Mr. Rodrigo
Falcon, raised objections to claimant's blasting works as an extra work order, they instructed claimant to
speed up the works because of the power crisis then hounding the country. Stipulation no. 24 of the Joint
Stipulation of Facts of the parties which reads: "24. In mid-October 1992, three (3) Vice-Presidents of
respondent, namely: Mr. Hector N. Campos, Sr., of Engineering Construction, Mr. C.A. Pastoral of
Engineering Design, and Mr. Rodrigo P. Falcon, visited the project site and were likewise apprised of
claimant's blasting activities. They never complained about the blasting works, much less ordered its
cessation. In fact, no official of respondent ever ordered that the blasting works be stopped."

7. After visiting Botong, Mr. Hector N. Campos, Sr., then Vice President of Engineering Construction,
instructed Mr. Fernando A. Magallanes then Manager of the Luzon Engineering Projects Department, to
evaluate claimant's blasting works and to submit his recommendations on the proper price therefor. In a
memorandum dated 17 November 1992 (Exh. "G" and sub-markings), Mr. Magallanes confirmed that
claimant's blasting works was an extra work order and recommended that it be paid at the price for similar
blasting works at Palinpinon, or at P1,346.00 per cubic meter. Mr. Campos concurred with the findings and
recommendations of Mr. Magallanes and instructed Mr. Lauro R. Umali, then Project Manager of BacMan
II, to implement the same as shown by his instructions scribbled on the memorandum.
 8. Mr. Umali and the project team prepared proposed Extra Work Order No. 2 – Blasting (Exh. "DDD" –
Memorandum of Mr. Umali to Mr. Campos dated 20 January 1993 forwarding proposed Extra Work Order
No. 2), recommending a price of P983.75 per cubic meter for claimant's blasting works. Claimant agreed to
this price (Testimony of witness Dumaliang, 7 November 1996, p. 48).

9. On 19 February 1993, claimant brought the matter of its unpaid blasting works to the attention of the
then NPC Chairman [also Secretary of the Department of Energy then] Delfin L. Lazaro during a meeting
with the multi-sectoral task force monitoring the implementation of power plant projects, who asked then
NPC President Pablo B. Malixi what he was doing about the problem. President Malixi thereafter convened
respondent's vice-presidents and ordered them to quickly document the variation order and pay claimant.
The vice-president, and specifically Mr. Campos, pledged that the variation order for claimant's blasting
works would be submitted for the approval of the NPC Board during the first week of March 1993. Claimant
thereafter sent respondent a letter dated 22 February 1993 (Ex. "K") to confirm this pledge (Testimony of
witness Dumaliang, 7 November 1996, pp. 28-30).

10. Mr. Campos created a task force (i.e., the Technical Task Force on the Study and Review of Extra
Work Order No. 2; Exh. "FFF") to review claimant's blasting works. After several meetings with the task
force, claimant agreed to the lower price of P458.07 per cubic meter, in exchange for quick payment
(Testimony of witness Dumaliang, 7 November 1996, p. 30).

11. However, no variation order was issued and no payment came, although it appears from two (2)
radiograms sent by Mr. Campos to Mr. Paderna at the project site that the variation order was being
processed and that payment to claimant was forthcoming (Exhs. "AAA" and "BBB").

12. Respondent asked the Department of Public Works and Highways (DPWH) about the standard prices
for blasting in the projects of the DPWH. The DPWH officially replied to respondent's query in a letter dated
19 May 1993 but the task force still failed to seek Board approval for claimant's variation order. The task
force eventually recommended that the issue of grading excavation and structural excavation and the unit
prices therefor be brought into voluntary arbitration (Testimony of witness Dumaliang, 7 November 1996,
pp. 30-57).

13. Claimant thereafter saw Mr. Francisco L. Viray, the new NPC President, who proposed that claimant
accept the price of P458.07 per cubic meter for its blasting works with the balance of its claim to be the
subject of arbitration. Claimant accepted the offer and sent the letter dated 28 September 1993 (Exh. "O")
to formalize said acceptance. However, no variation order was issued and the promised payment never
came. (Testimony of witness Dumaliang, 7 November 1996, p. 58).

14. After some time, claimant met Mr. Viray on 19 October 1993 at the project site, and with some NPC
officers in attendance, particularly Mr. Gilberto A. Pastoral, Vice-President for Engineering Design, who
was instructed by Mr. Viray to prepare the necessary memorandum (i.e., that claimant would be paid
P458.07 per cubic meter with the balance of its claim to be the subject of arbitration) for the approval of the
NPC Board. Claimant formalized what transpired during this meeting in its letter to Mr. Pastoral dated 22
October 1993 (Exhibit "R"). But no action was taken by Mr. Pastoral and no variation order was issued by
respondent (Testimony of witness Dumaliang, 7 November 1996, pp. 57-58). [Emphasis supplied and
23

bracketed words]

Promissory 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." Promissory estoppel presupposes the
24

existence of a promise on the part of one against whom estoppel is claimed. The promise must be plain and
unambiguous and sufficiently specific so that the court can understand the obligation assumed and enforce the
promise according to its terms. 25

In the present case, the foregoing events clearly evince that the promise that the blasting works would be paid was
predicated on the approval of the extra work order by petitioner's Board. Even FUCC acknowledged that the
blasting works should be an extra work order and requested that the extra work order be confirmed as such and
approved by the appropriate officials. Notably, even as the extra work order allegedly promised to it was not yet
forthcoming, FUCC commenced blasting.

The alleged promise to pay was therefore conditional and up to this point, promissory estoppel cannot be
established as the basis of petitioner's liability especially in light of P.D. 1594 and its implementing rules of which
both parties are presumed to have knowledge. In Mendoza v. Court of Appeals, supra, we ruled that "[a] cause of
action for promissory estoppel does not lie where an alleged oral promise was conditional, so that reliance upon it
was not reasonable. It does not operate to create liability where it does not otherwise exist."

Petitioner's argument that it is not bound by the acts of its officials who acted beyond the scope of their authority in
allowing the blasting works is correct. Petitioner is a government agency with a juridical personality separate and
distinct from the government. It is not a mere agency of the government but a corporate entity performing
proprietary functions. It has its own assets and liabilities and exercises corporate powers, including the power to
enter into all contracts, through its Board of Directors.
In this case, petitioner's officials exceeded the scope of their authority when they authorized FUCC to commence
blasting works without an extra work order properly approved in accordance with P.D. 1594. Their acts cannot bind
petitioner unless it has ratified such acts or is estopped from disclaiming them. 26

However, the Compromise Agreement entered into by the parties, petitioner being represented by its President, Mr.
Guido Alfredo A. Delgado, acting pursuant to its Board Resolution No. 95-54 dated April 3, 1995, is a confirmatory
act signifying petitioner's ratification of all the prior acts of its officers. Significantly, the parties agreed that "[t]his
Compromise Agreement shall serve as the Supplemental Agreement for the payment of plaintiff's blasting works at
the Botong site" in accordance with CI 1(6) afore-quoted. In other words, it is primarily by the force of this
27

Compromise Agreement that the Court is constrained to declare FUCC entitled to payment for the blasting works it
undertook.

Moreover, since the blasting works were already rendered by FUCC and accepted by petitioner and in the absence
of proof that the blasting was done gratuitously, it is but equitable that petitioner should make compensation
therefor, pursuant to the principle that no one should be permitted to enrich himself at the expense of another. 28

This brings us to the issue of just compensation.

The parties proposed in the terms of reference jointly submitted to the Arbitration Board that should FUCC be
adjudged entitled to just compensation for its blasting works, the price therefor should be determined based on the
payment for blasting works in similar projects of FUCC and the amount it paid to its blasting subcontractor. They 29

agreed further that "the price of the blasting at the Botong site . . . shall range from Defendant's position of P76.00
per cubic meter as per contract to a maximum of P1,144.00" 30

Petitioner contends that the Arbitration Board, trial court and the appellate court unduly relied on the memorandum
of Mr. Umali which was allegedly not marked as an exhibit. We note, however, that this memorandum actually
forms part of the record of the case as Exhibit "DDD." Moreover, both the Arbitration Board and the Court of
31

Appeals found that Mr. Umali's proposal is the best evidence on record as it is supported by detailed cost estimates
that will serve as basis to determine just compensation.

While the Arbitration Board found that FUCC did not present evidence showing the amount it paid to its blasting
sub-contractor, it did present testimony to the effect that it incurred other costs and expenses on top of the actual
blasting cost. Hence, the amount of P430.00 per cubic meter indicated in FUCC's Contract of Agreement with
Dynamic is not controlling.

Moreover, FUCC presented evidence showing that in two (2) other projects where blasting works were undertaken,
petitioner paid the contractors P1,346 per cubic meter for blasting and disposal of solid rocks in the Palinpinon
project and P1,144.51 per cubic meter for rock excavation in the Hermosa Balintawak project. Besides, while
petitioner claims that in a contract with Wilper Construction for the construction of the Tayabas sub-station, the
price agreed for blasting was only P96.13, petitioner itself did not present evidence in support of this claim. 32

Parenthetically, the point raised by petitioner that its subsequent contractor, Phesco, did not undertake blasting
works in excavating the same rock formation is extraneous and irrelevant. The fact is that petitioner allowed FUCC
to blast and undertook to pay for the blasting works.

At this point, we hearken to the rule that the findings of the Arbitration Board, affirmed by the trial court and the
Court of Appeals and supported as they are by substantial evidence, should be accorded not only respect but
finality. Accordingly, the amount of P763.00 per cubic meter fixed by the Arbitration Board and affirmed by the
33

appellate court as just compensation should stand.

As regards the issue of interest, while the appellate court declared in the body of its Decision "that interest which
would represent the cost of the money spent be imposed on the money actually spent by claimant for the blasting
works," there is no pronouncement as to the payment of interest in the dispositive portion of the Decision even as it
34

specifically deleted the award of attorney's fees.

Despite its knowledge of the appellate court's omission, FUCC did not file a motion for reconsideration or appeal
from its Decision. In failing to do so, FUCC allowed the Decision to become final as to it.

In Edwards v. Arce, we ruled that in a case decided by a court, the true judgment of legal effect is that entered by
35

the clerk of said court pursuant to the dispositive part of its decision. The only portion of the decision that may be
the subject of execution is that which is ordained or decreed in the dispositive portion. Whatever may be found in
the body of the decision can only be considered as part of the reasons or conclusions of the court and serve only
as guides to determine the ratio decidendi. 36

Even so, the Court allows a judgment which had become final and executory to be clarified when there is an
ambiguity caused by an omission or mistake in the dispositive portion of the decision. In Reinsurance Company of
37

the Orient, Inc. v. Court of Appeals, we held:

38
 In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court, the Court applying the
above doctrine said:

"xxx We clarify, in other words, what we did affirm. What is involved here is not what is ordinarily regarded
as a clerical error in the dispositive part of the decision of the Court of First Instance, which type of error is
perhaps best typified by an error in arithmetical computation. At the same time, what is involved here is not
a correction of an erroneous judgment or dispositive portion of a judgment. What we believe is involved
here is in the nature of an inadvertent omission on the part of the Court of First Instance (which should
have been noticed by private respondent's counsel who had prepared the complaint), of what might be
described as a logical follow-through of something set forth both in the body of the decision and in the
dispositive portion thereof: the inevitable follow-through, or translation into, operational or behavioral terms,
of the annulment of the Deed of Sale with Assumption of Mortgage, from which petitioners' title or claim of
title embodied in TCT 133153 flows." (Italics supplied) 39

In this case, the omission of the award of interest was obviously inadvertent. Correction is therefore in order.
However, we do not agree with the Arbitration Board that the interest should be computed at 12%. Since the case
does not involve a loan or forbearance of money, goods or credit and court judgments thereon, the interest due
shall be computed at 6% per annum computed from the time the claim was made in 1992 as determined by the
Arbitration Board and in accordance with Articles 2209 and 1169 of the Civil Code. The actual base for the
computation of legal interest shall be on the amount finally adjudged. Further, when the judgment awarding a sum
40

of money becomes final and executory, the rate of legal interest shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. 41

WHEREFORE, the petition is GRANTED in part. The appealed decision is MODIFIED in that the amount of
P74,035,503.50 shall earn legal interest of six percent (6%) from 1992. A twelve percent (12%) interest, in lieu of
six percent (6%), shall be imposed on such amount upon finality of this decision until the payment thereof.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

THIRD DIVISION

G.R. No. 73123 September 2, 1991

IN RE: PETITION FOR DECLARATION OF INSOLVENCY OF [A] FILAND MANUFACTURING AND ESTATE
DEVELOPMENT COMPANY; [B] TOP CONSTRUCTION ENTERPRISES, INC. AND [C] SPOUSES EMILIO
CHING AND INAI TEH; EMILIO CHING, petitioner, LAND BANK OF THE PHILIPPINES, oppositor. LAND
BANK OF THE PHILIPPINES, petitioner,
vs.
HON. DIONISIO N. CAPISTRANO, JUDGE OF THE REGIONAL TRIAL COURT OF PASAY CITY, EMILIO
CHING AND FILAND MANUFACTURING AND ESTATE DEVELOPMENT CO., INC., respondents.

Lily K. Gruba and Florencio S. Jimenez for Land Bank of the Philippines.

FERNAN, C.J.:

Assailed in this petition for review on certiorari is the jurisdiction of the Regional Trial Court (RTC) of Pasay City
over a petition for declaration of insolvency of two (2) private corporations.

The antecedent facts are undisputed:

On September 19, 1980, private respondents Filand Manufacturing and Estate Development Co., Inc. (hereafter,
Filand Manufacturing) and Emilio Ching obtained from petitioner Land Bank of the Philippines a loan in the amount
of Ten Million Pesos (P10,000,000.00). Private respondents having failed to pay the loan on its due date, petitioner
instituted before the RTC of Manila a complaint for recovery thereof, docketed as Civil Case No. 0184-P.

During the pendency of the collection suit on December 29, 1984, private respondents Filand Manufacturing, Emilio
Ching and his spouse Inai Teh and Top Construction Enterprises, Inc., thru Emilio Ching, filed before the
respondent RTC of Pasay City a petition docketed as Special Proceedings No. 3232P for declaration of insolvency.
Cited as ground therefor was their inability to pay the various debts and liabilities incurred by them, either jointly or
solidarily or guaranteed by one for the other, in the course of their businesses, such inability being due to business
reserves brought about by the fire on January 2, 1984 which gutted the old Holiday Plaza Building then owned and
operated by Filand Manufacturing, as well as the economic crisis which gripped the country following the
assassination of former Senator Benigno S. Aquino in 1983. 1
Acting on said petition, respondent court on January 29, 1985 issued an Order of Adjudication declaring private
respondents insolvent pursuant to Section 18 of the Insolvency Law (Act No. 1956). The Sheriff of Pasay City was
"directed to take possession of, and safely keep, until the appointment of a receiver or assignee, all the deeds,
vouchers, books of account, papers, notes, bonds, bills and securities of (therein) petitioners, and all the real and
personal properties, estates and effects of the same petitioners, except such as may, by law, be exempt from
execution." Respondent court set "March 25, 1985 at 9:00 A.M. in its premises ... as the date of the meeting of the
creditors of the petitioners for them to choose an assignee/assignees of the estates of the petitioners." 2

Petitioner bank moved for a reconsideration of the Order of Adjudication on two (2) grounds, namely: (1) that the
court has no jurisdiction over the subject matter of the petition insofar as petitioning corporations are concerned;
and (2) the petition is defective in form and substance. After an exchange of pleadings between petitioner and
3

private respondents, respondent court issued on July 19, 1985 an Order upholding its jurisdiction over the petition
and appointing petitioner bank as the assignee for and in behalf of all the creditors without bond, thus:

WHEREFORE, all motions seeking to have this Court make a declaration that it has no jurisdiction over the
above-entitled proceeding are hereby DENIED, and the Land Bank of the Philippines is appointed as the
assignee for and in behalf of all the creditors of the petitioners, without bond, to which assignee the Clerk of
Court, thru the Branch Sheriff, shall deliver any and all real and personal properties, estates and effects, as
well as the pertinent papers and all deeds, vouchers, books of accounts, papers, notes, bonds, bills and
securities taken by him pursuant to the order of this Court of January 29, 1985.

The assignee is hereby ordered to comply with the time limit provided for in Sec. 43 of Act 1956, and for
this purpose, hereby sets his report for hearing on October 29, 1985, at 9:00 A.M.

SO ORDERED. 4

Petitioner bank declined the appointment and the City Treasurer of Pasay City, being the second biggest creditor of
private respondents, was appointed in its stead Petitioner bank then filed a Notice of Appeal and a Record on
Appeal on August 19, 1985, on the basis of which the respondent court forwarded the records of the case directly
to this Court.

By resolution dated September 23, 1985, the Court resolved to "REQUIRE the Branch Clerk of Court of the
(respondent court) to EXPLAIN why he forwarded to this Court the aforesaid records when the mode of seeking
review by this Court of a lower court's judgment under R.A. 5440 is by petition for review on certiorari; and the
Presiding Judge of said trial court is also directed to EXPLAIN why he accepted and approved the forwarding to this
Court of the aforesaid records, both within ten (10) days from notice hereof." Petitioner bank and/or counsel were
also "REQUIRED to EXPLAIN within ten (10) days from notice ..., since they failed to pay timely the docket and
legal research fund fees and to file timely a petition for review on certiorari under R.A. 5440 why the judgment
sought to be reviewed should not be now deemed final and executory and the records returned for execution of
judgment". Upon submission of the required explanations, the Court on December 4, 1985 resolved to require the
5

petitioner bank to file a petition for review on certiorari and to pay the docket and legal research fund fees, both
within a non-extendible period of ten (10) days from notice. This Order was seasonably complied with.
6

After the private respondents had submitted their comment on the petition, petitioner bank filed on March 24, 1986
a "Manifestation with motion for issuance of writ of preliminary injunction" informing the Court that on March 3,
1986, the respondent court rendered a decision in Special Proceedings No. 3232-P, providing in its dispositive
portion as follows:

WHEREFORE, judgment is hereby rendered, as follows:

1. Petitioners Filand Manufacturing & Estate Development Co., Inc., and Top Construction Enterprises,
Inc., are declared by this Court as insolvent and, pursuant to Sec. 52 of Act 1956, as amended, their
properties and assets shall be distributed to the creditors in the proceeding with respect to the appointment
of the City Treasurer of Pasay City as receiver of their estates and effects. However, they are not
discharged from their liabilities in accordance with Sec. 52 of Act 1956, as amended.

2. Petitioners spouses Emilio Ching and Inai Teh are likewise declared insolvent and their application for
discharge is hereby approved, and they are hereby ordered discharged and released from all claims, debts,
liabilities and demands, whether actual or contingent, and whether personally or as guarantors or in a joint
and solidary capacity, with respect to the obligations set forth in the schedule and inventory of accounts
due and payable, Annex 'A' of the petition, as well as with respect to the obligations and creditors listed in
the manifestation of April 29, 1985, and the supplemental manifestation dated May 22, 1985, in the above-
entitled proceedings.

The other aspect of the above-entitled proceedings as regards the receiver and all incidents and matters in
connection with his functions and duties are hereby considered as mere interlocutory matters in the
process of winding up this proceeding.

SO ORDERED. 7
Acting on said manifestation and motion, the Court on April 14, 1986 issued a temporary restraining order enjoining
the respondent court from enforcing its decision of March 3, 1986. The temporary restraining order was however
8

lifted insofar as private respondents spouses Emilio Ching and Inai Teh were concerned, the latter being natural
persons over whom the jurisdiction of the respondent court is not being questioned. 9

In its petition, given due course by the Court per resolution dated January 28, 1987, petitioner bank advances the
argument that it is the Securities and Exchange Commission (SEC), rather than the Regional Trial Court (RTC)
which has jurisdiction over the petition for declaration of insolvency filed by private respondent corporations. This
theory is allegedly anchored on specific provisions of Presidential Decree No. 902-A, as amended, namely:
Sections 3, 5(d) and 6(c) and (d), which petitioner bank construes as having repealed the Insolvency Law (Act
1956), which confers jurisdiction over insolvency proceedings on the regular courts. Private respondents maintain
the opposite view, contending simply that a petition for declaration of insolvency is not one of those cases
enumerated under Section 5, P.D. No. 902-A, as amended, over which the SEC has original and exclusive
jurisdiction.

In view of the far reaching importance of the issue presented before the Court, both from a legal and economic
standpoint, we resolved to implead the SEC as a party to this case and to require it to inform the Court of its
practice regarding insolvency proceedings. The SEC thru the Solicitor General, filed its memorandum on
10

December 13, 1989.

After deliberating on the SEC's memorandum, the Court resolved to set the case for hearing on May 14, 1990 at
10:00 o'clock in the morning. A senior and knowledgeable officer of the SEC was requested to "appear and inform
the Court of the law and practice actually applied and followed by the SEC in respect of suspension of payments
by, and voluntary and involuntary insolvencies of Philippine corporations . ..." Former SEC Chairman Julito Sulit, Jr.
was appointed amicus curiae and was requested to appear at the hearing in that capacity. 11

Before addressing the principal issue in the instant petition, the Court notes with dismay that the petitioner and the
lower court appear to be still in the dark as to the proper mode of appeal to this Court. Hence, for their elucidation
as well as the others similarly misinformed, we deem it proper to quote the following resolution dated March 1, 1990
of the Court en banc in UDK 9748, "Murillo v. Consul":

R.A. No. 5440 changed the mode of appeal from courts of first instance (now Regional Trial Courts) to the
Supreme Court in cases involving only questions of law, or the constitutionality or validity of any treaty, law,
ordinance, etc. or the legality of any tax, impost, assessment or toll, etc., or the jurisdiction of any inferior
court, from ordinary appeal — i.e., by notice of appeal, record on appeal and appeal bond, under Rule 41—
to appeal by certiorari, under Rule 45.

xxx xxx xxx

At present then, except in criminal cases where the penalty imposed is life imprisonment or reclusion
perpetua, there is no way by which judgments of regional trial courts may be appealed to this Court except
by petition for review on certiorari in accordance with Rule 45 of the Rules of Court, in relation to Section 17
of the Judiciary Act of 1948, as amended. The proposition is clearly stated in the Interim Rules: 'Appeals to
the Supreme Court shall be taken by petition for certiorari which shall be governed by Rule 45 of the Rules
of Court.

xxx xxx xxx

... To repeat, appeals to this Court cannot now be made by petition for review or by notice of appeal (and,
in certain instances, by record on appeal), but only by petition for review on certiorari under Rule 45. As
was stressed by this Court as early as 1980 in Buenbrazo v. Marave, 101 SCRA 848, all the members of
the bench and bar are charged with knowledge, not only that since the enactment of Republic Act No. 6031
in 1969,' 'the review of the decision of the Court of First Instance in a case exclusively cognizable by the
inferior court ... cannot be made in an ordinary appeal or by record on appeal but also that 'appeal by
record on appeal to the Supreme Court under Rule 42 of the Rules of Court was abolished by Republic Act
No. 5440 which, as already stated, took effect on September 9, 1968.' Similarly, in Santos, Jr. v. C.A., 152
SCRA 378, this Court declared that 'Republic Act No. 5440 had long superseded Rule 41 and Section 1,
Rule 122 of the Rules of Court on direct appeals from the court of first instance to the Supreme Court in
civil and criminal cases,' ... and that 'direct appeals to this Court from the trial court on questions of law had
to be through the filing of a petition for review on certiorari, wherein this Court could either give due course
to the proposed appeal or deny it outright to prevent the clogging of its docket with unmeritorious and
dilatory appeals.

Going now to the issue of jurisdiction raised in this petition and considering the arguments proferred by the parties'
respective counsel, the view spoused by the amicus curiae as well as the submissions of the SEC thru the Office of
the Solicitor General and its Assistant Executive Director, we find for private respondents.

Under Act 1956, otherwise known as the Insolvency Law, jurisdiction over proceedings for suspension of payments,
voluntary and involuntary insolvency is exclusively vested in the regular courts. However, P.D. No. 1758 issued in
1981 added to the exclusive and original jurisdiction of the SEC defined and delineated in Section 5 of P.D. 902-
A, the following:
12

d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of

payments in cases where the corporation, partnership or association possesses sufficient property to cover
all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases
where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under
the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree.

It is petitioner's contention that said additional par. (d) effectively repealed the Insolvency Law so as to transfer and
confer upon the SEC jurisdiction theretofore enjoyed by the regular courts over proceedings for suspension of
payments and voluntary and involuntary insolvency. We do not share such interpretation.

The SEC like any other administrative body, is a tribunal of limited jurisdiction and as such, could wield only such
powers as are specifically granted to it by its enabling statute. Its jurisdiction should be interpreted in strictissimi
13

juris. 14

Section 5, par. (d) should be construed as vesting upon the SEC original and exclusive jurisdiction only over
petitions to be declared in a state of suspension of payments, which may either be: (a) a simple petition for
suspension of payments based on the provisions of the Insolvency Law, or (b) a similar petition accompanied by a
prayer for the creation/appointment of a management committee and/or rehabilitation receiver based on the
provisions of P.D. No. 902-A. Said provision cannot be stretched to include petitions for insolvency. The reason is
that under said Section 5, par. (d) above-quoted, the jurisdiction of the SEC over cases where the corporation,
partnership or association has no sufficient assets to cover its liabilities, (and therefore insolvent) is qualified by the
conjunctive phrase "but is under the management of a Rehabilitation Receiver or Management Committee created
pursuant to this Decree." This qualification effectively circumscribes the jurisdiction of the SEC over insolvent
corporations, partnerships and associations, and consequently, over proceedings for the declaration of insolvency.
It demonstrates beyond doubt that jurisdiction over insolvency proceedings pertains neither in the first instance nor
exclusively to the SEC but only in continuation of or as an incident to the exercise of its jurisdiction over petitions to
be declared in a state of suspension of payments wherein the petitioning corporation, partnership or association
had previously been placed under a rehabilitation receiver or management committee by the SEC itself.

Viewed differently, where the petition filed is one for declaration of a state of suspension of payments due to a
recognition of the inability to pay one's debts and liabilities, and where the petitioning corporation either: (a) has
sufficient property to cover all its debts but foresees the impossibility of meeting them when they fall due (solvent
but illiquid or (b) has no sufficient property (insolvent) but is under the management of a rehabilitation receiver or a
management committee, the applicable law is P.D. No. 902-A pursuant to Sec. 5 par. (d) thereof. However, if the
petitioning corporation has no sufficient assets to cover its liabilities and is not under a rehabilitation receiver or a
management committee created under P.D. No. 902-A and does not seek merely to have the payments of its debts
suspended, but seeks a declaration of insolvency, as in this case, the applicable law is Act 1956 on voluntary
insolvency, specifically section 14 thereof, which provides:

Sec. 14. — An insolvent debtor, owing debts exceeding in amount the sum of one thousand pesos, may
apply to be discharged from his debts and liabilities by petition to the Court of First Instance of the province
or city in which he has resided for six month next preceding the filing of such petition. In his petition, he
shall set forth his place of residence, the period of his residence therein immediately prior to filing said
petition, his inability to pay all his debts in full, his willingness to surrender all his property, estate, and
effects not exempt from execution for the benefit of his creditors, and an application to be adjudged an
insolvent. He shall annex to his petition a schedule and inventory in the form hereinafter provided. The filing
of such petition shall be an act of insolvency.

Neither could the grant of additional powers to SEC under Section 6(c) and (d) of P.D. No. 902- A, as amended, be
construed as vesting upon it exclusive and original jurisdiction over insolvency proceedings. The pertinent
provisions read:

SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following
powers:

xxx xxx xxx

c) To appoint one or more receivers of the property, real and personal, which is the subject of the action
pending before the Commission in accordance with the pertinent provisions of the Rules of Court in such
other cases whenever necessary to preserve the rights of the parties-litigants to and/or protect the interest
of the investing public and creditors; Provided, however, that the Commission may, in appropriate cases,
appoint a rehabilitation receiver of corporations, partnerships or other associations not supervised or
regulated by other government agencies who shall have, in addition to the powers of a regular receiver
under the provisions of the Rules of Court, such functions and powers as are provided for in the
succeeding paragraph (d) hereof; Provided, further that the Commission may appoint a rehabilitation
receiver of corporations, partnerships or other nations supervised or regulated by other government
agencies, such as banks and insurance companies, upon request of the government agency concerned;
 Provided, finally that upon appointment of a management committee, rehabilitation receiver, board or body
pursuant to this Decree, all actions for claims against corporations, partnerships or nations under
management or receivership pending before any court, tribunal, board or body shall be suspended
accordingly.

d) To create and appoint a management committee, board, or body upon petition or motu proprio to
undertake the management of corporations, partnerships or other associations not supervised or regulated
by other government agencies in appropriate cases when there is imminent danger of dissipation, loss,
wastage or destruction of assets or other properties or paralization of business operations of such
corporations or entities which may be prejudicial to the interest of minority stockholders, parties-litigants or
the general public; Provided, further, that the Commission may create or appoint a management
committee, board or body to undertake the management of corporations, partnerships or other associations
supervised or regulated by other government agencies, such as banks and insurance companies, upon
request of the government agency concerned.

The management committee or rehabilitation receiver, board or body shall have the power to take custody
of, and control over, all the existing assets and property of such entities under management; to evaluate
the existing assets and liabilities, earnings and operations of such corporations, partnerships or other
associations, to determine the best way to wage and protect the interest of the investors and creditors; to
study, review and evaluate the feasibility of continuing operations and restructure and rehabilitate such
entities if determined to be feasible by the Commission. It shall report and be responsible to the
Commission until dissolved by order of the Commission: Provided, however, that the Commission may, on
the basis of the findings and recommendation of the management committee, or rehabilitation receiver,
board or body, or on its own findings, determine that the continuance in business of such corporation or
entity would not be feasible or profitable nor work to the best interest of the stockholders, parties-litigants,
creditors, or the general public, order the dissolution of such corporation entity and its remaining assets
liquidated accordingly.

The management committee or rehabilitation receiver, board or body may overrule or revoke the actions of
the previous management and board of directors of the entity or entities under management
notwithstanding any provision of law, articles of incorporation or by-laws to the contrary.

The management committee, or rehabilitation receiver, board or body shall not be subject to any action,
claim or demand for, or in connection with any act done or omitted to be done by it in good faith in the
exercise of its functions, or in connection with the exercise of its powers herein conferred.

As declared by the law itself, these are merely ancillary powers to enable the SEC to effectively exercise its
jurisdiction. These additional ancillary powers can be exercised only in connection with an action pending before
the SEC and therefore had to be viewed in relation to Section 5 which defines the SEC's original and exclusive
jurisdiction. Section 6 does not enlarge or add to the exclusive and original jurisdiction of the SEC as particularly
enumerated under Section 5 of said Presidential Decree, as amended.

A well-recognized rule in statutory construction is that repeals by implication are not favored and will not be so
declared unless it be manifest that the legislature so intended. When statutes are in pari material they should be
15

construed together. In construing them the old statutes relating to the same subject matter should be compared
with the new provisions and if possible by reasonable construction, both should be so construed that effect may be
given to every provision of each. 16

Construing P.D. 902-A, as amended, in relation to Act 1956, we rule that insofar as petitions for declaration of
insolvency of private corporations are concerned, it is the regular court that has exclusive and original jurisdiction
thereon. The SEC may entertain such petitions only as an incident of and in continuation of its already acquired
jurisdiction over petitions to be declared in the state of suspension of payments in the two (2) cases provided in
Section 5 (d) of P.D. 902-A, as amended.

WHEREFORE, the instant petition for review on certiorari is DENIED. The temporary restraining order issued on
April 14, 1986 is LIFTED. No pronouncement as to costs.

SO ORDERED.

Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur.

Feliciano, J., is on leave.