SBDMC wins Php 100 million civil case versus SBMA; Court of Appeals affirms the ruling

In an Order dated 31 January 2013, the Regional Trial Court (RTC) of Olongapo City, Branch 75, presided by Judge Raymond C. Viray, pursuant to a motion for summary judgment filed by Subic Bay Development and Management Corp. (SBDMC), declared that Subic Bay Metropolitan Authority (SBMA) has no legal basis to collect and demand payment for the disputed billings, and that SBDMC is not and cannot be held liable for SBMA’s supposed claim, now amounting to more or less Php 100,000,000.00.

The case stemmed from SBMA's continued and repeated attempts to collect from SBDMC differential billings for power consumption of locators within the SBDMC-managed industrial park inside the Subic Bay Freeport Zone (SBFZ) between 1998 and 2002. During that period, SBMA was managing and operating the power distribution system within the Freeport. SBDMC then filed a petition for declaratory relief in 2010.

According to the Court, “The role of SBDMC in the scheme of things is clear: It is the managing agent of SBMA with respect to the industrial park. In line with this conclusion, and in the absence of express agreement between SBDMC and SBMA with regard to power billing and collection of all locators within the industrial park, it is clear that Petitioner (SBDMC) merely acted as an agent of SBMA when it billed and collected power usage from locators…”

“SBDMC paid and SBMA received the amount collected from the locators. This role of Petitioner as mere collecting agent was further confirmed when SBMA took over the billing and collection directly theretofore performed by the petitioner. And since Petitioner is a mere collecting agent of Respondent (SBMA) with respect to power usage of the Locators within the SBGP (industrial park), there is no basis, in the absence of clear express agreement, for Respondent to charge and demand payment from Petitioner for disputed billings. To hold otherwise will violate the intent and agreements of the parties under the Joint Venture and companion agreements, which all contain “Entire Agreement” clause and which bar the introduction of ‘any rights, interests, understandings, agreements and obligations of the respective parties’ outside said agreements…” declared the Court.

Update: In a decision dated 30 January 2015, the Special Seventeenth (17th) Division of the Court of Appeals (CA G.R.-CV No. 100289) denied the appeal of the SBMA and affirmed in toto the assailed Order of RTC Branch 75 of Olongapo. 

(Disclosure: subiclawyer is handling the case for SBDMC)

When local government officials may properly secure services of private counsel

Respondent Alayan was appointed in 2000 as Municipal Government Department Head (Municipal Assessor) on temporary status.  In May 2001, she applied for change of status from temporary to permanent, which the Civil Service Commission-Camarines Sur Field Office (CSC-CSFO) denied for lack of relevant experience.  On appeal, the CSC-Regional Office in its August 13, 2001 Order approved her application effective May 22, 2001.  Thus, she reported for work and sought recognition of her appointment and the grant of the emoluments of the position from petitioner, then incumbent Mayor Gontang, which the latter denied. This compelled respondent to sue Gontang for mandamus before the regional trial court of Naga City.

The sole issue was whether or not the petition for certiorari may be dismissed on the ground of unauthorized representation of petitioner by private lawyers.

According to the Supreme Court: “The present case stemmed from Special Civil Action No. 2002-0019 for mandamus and damages. The damages sought therein could have resulted in personal liability, hence, petitioner cannot be deemed to have been improperly represented by private counsel. In Alinsug v. RTC Br. 58, San Carlos City, Negros Occidental, the Court ruled that in instances like the present case where personal liability on the part of local government officials is sought, they may properly secure the services of private counsel, explaining: 

‘It can happen that a government official, ostensibly acting in his official capacity and sued in that capacity, is later held to have exceeded his authority.  On the one hand, his defense would have then been underwritten by the people’s money which ordinarily should have been his personal expense.  On the other hand, personal liability can attach to him without, however, his having had the benefit of assistance of a counsel of his own choice.  In Correa v. CFI, the Court held that in the discharge of governmental functions, ‘municipal corporations are responsible for the acts of its officers, except if and when, and only to the extent that, they have acted by authority of the law, and in conformity with the requirements thereof.

‘In such instance, this Court has sanctioned the representation by private counsel.  In one case, We held that where rigid adherence to the law on representation of local officials in court actions could deprive a party of his right to redress for a valid grievance, the hiring of a private counsel would be proper.  And in Albuera v. Torres, this Court also said that a provincial governor sued in his official capacity may engage the services of private counsel when “the complaint contains other allegations and a prayer for moral damages, which, if due from the defendants, must be satisfied by them in their private capacity.’

“Consequently Attys. Fandiño and Saulon had the authority to represent petitioner at the initial stages of the litigation and this authority continued even up to his appeal and the filing of the petition for certiorari with the CA respecting the execution of the RTC judgment. It was therefore an error for the CA to have dismissed the said petition for certiorari on the ground of unauthorized representation.” (G.R. No. 191691 [2013])

Estate tax in the Philippines: Rates, exclusions and deductions

Estate Tax is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to testamentary disposition. It is not a tax on property. It is a tax imposed on the privilege of transmitting property upon the death of the owner. The Estate Tax is based on the laws in force at the time of death notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary.

The current estate tax rates in the Philippines range from 5% to 20% of the net estate. This is more specifically outlined in the table below:

THE ESTATE TAX OF EXCESS SHALL BE PLUS OVER Exempt Below P200,000 5% P200,000 P15,000 8% 500,000 135,000 11% 2,000,000 465,000 15% 5,000,000 1,215,000 20% 10,000,000

1.   What are included in gross estate?

·          For resident alien decedents/citizens:

a)   Real or immovable property, wherever located

b)   Tangible personal property, wherever located

c)   Intangible personal property, wherever located

·         For non-resident decedent/non-citizens:

a)   Real or immovable property located in the Philippines

b)   Tangible personal property located in the Philippines

c)   Intangible personal property - with a situs in the Philippines such as:

-  Franchise which must be exercised in the Philippines

-  Shares, obligations or bonds issued by corporations organized or constituted in the Philippines

-  Shares, obligations or bonds issued by a foreign corporation 85% of the business of which is located in the Philippines

-  Shares, obligations or bonds issued by a foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines ( i.e., they are used in the furtherance of its business in the Philippines)

-  Shares, rights in any partnership, business or industry established in the Philippines

2.   What are excluded from gross estate?

·         GSIS proceeds/ benefits

·         Accruals from SSS

·         Proceeds of life insurance where the beneficiary is irrevocably appointed

·         Proceeds of life insurance under a group insurance taken by employer (not taken out upon his life)

·         War damage payments

·         Transfer by way of bona fide sales

·         Transfer of property to the National Government or to any of its political subdivisions

·         Separate property of the surviving spouse

·         Merger of usufruct in the owner of the naked title

·         Properties held in trust by the decedent

·         Acquisition and/or transfer expressly declared as not taxable

3.   What will be used as basis in the valuation of property?

·         The properties subject to Estate Tax shall be appraised based on its fair market value at the time of the decedent's death.

·         The appraised value of the real estate shall be whichever is higher of the fair market value, as determined by the Commissioner (zonal value) or the fair market value, as shown in the schedule of values fixed by the Provincial or City Assessor.

·         If there is no zonal value, the taxable base is the fair market value that appears in the latest tax declaration.

·         If there is an improvement, the value of improvement is the construction cost per building permit or the fair market value per latest tax declaration.

4.   What are the allowable deductions for Estate Tax purposes?

     For Resident Decedent

·          Expenses, losses, indebtedness and taxes

a)    Funeral Expenses

i)    CA 466 - 5 % of gross estate (up to Dec. 31, 1972)

ii)    PD 69 - 5 % of gross estate but not exceeding P 50,000 (Jan. 1, 1973 to July 27, 1992)

iii)   RA 7499 - 5 % of gross estate but not exceeding P 100,000 (July 28, 1992 to December 3l, 1997)

iv)   RA 8424 - 5% of gross estate but not exceeding P 200,000 (Jan. 1,1998)

b)   Judicial expenses of the testamentary/intestate proceedings

c)   Valid claims against the estate

d)   Claims against insolvent person

e)   Unpaid mortgages/indebtedness

f)    Unpaid taxes

g)   Casualty losses

h)   Property previously taxed or vanishing deductions

      Requisites:

·         Present decedent must have died within five (5) years from date of death of prior decedent or date of gift

·         The property with respect to which the deduction is claimed must have formed part of the gross estate situated in the Philippines of the prior decedent or taxable gift of the donor

·         The property must be identified as the same property received from prior decedent or donor or the one received in exchange therefore

·         The estate taxes on the transmission of the prior estate or the donors tax on the gift must have been finally determined and paid

·         No vanishing deduction on the property or the property given in exchange therefore was allowed to the prior estate

i)    Transfer for public purpose

j)    Share of surviving spouse

k)   Medical expenses - those incurred by the decedent within one (1) year prior to his/her death which shall be substantiated with receipts

l)    Family Home - fair market value but not to exceed P1,000,000.00

m)  Standard Deduction - an amount equivalent to P1,000,000.00 (applicable only for death occurring after the effectivity of RA 8424 which is January 1, 1998.)

n)  Amount received by the heirs under Republic Act No. 4917 (applicable only for death occurring after the effectivity of RA 8424 which is January 1, 1998)

      For Non-Resident Decedent, not a citizen of the Philippines

·         Expenses, losses, indebtedness, taxes

·         Property previously taxed

·         Transfer for public use

·         Share in the conjugal property

(Taken from the BIR website)

Premature campaigning and the 2013 Philippine elections

May a candidate be held liable for premature campaigning after the filing of the certificate of candidacy but even before the start of the campaign period?

This is the crux of the petition in the case of Penera vs. Comelec, et. al. (G.R. No.  181613, November 25, 2009)

In his resonant, incisive decision, Justice Antonio Carpio answers the question in the negative. In this case, Penera, who was running for a mayoral post in the 2007 elections, was initially disqualified by both the Comelec and the Supreme Court for violating the rules on premature campaigning when she held a motorcade upon and after the filing of her certificate of candidacy. Justice Carpio’s dissenting opinion in the main decision then became the opinion of the majority when Penera sought reconsideration.

According to Justice Carpio, “Section 79(a) of the Omnibus Election Code defines a “candidate” as “any person aspiring for or seeking an elective public office, who has filed a certificate of candidacy x x x.” The second sentence, third paragraph, Section 15 of RA 8436, as amended by Section 13 of RA 9369, provides that “[a]ny person who files his certificate of candidacy within [the period for filing] shall only be considered as a candidate at the start of the campaign period for which he filed his certificate of candidacy.”  The immediately succeeding proviso in the same third paragraph states that “unlawful acts or omissions applicable to a candidate shall take effect only upon the start of the aforesaid campaign period.”   These two provisions determine the resolution of this case."

He quoted his argument in the dissenting opinion: “The campaign period for local officials began on 30 March 2007 and ended on 12 May 2007.  Penera filed her certificate of candidacy on 29 March 2007.  Penera was thus a candidate on 29 March 2009 only for purposes of printing the ballots.  On 29 March 2007, the law still did not consider Penera a candidate for purposes other than the printing of ballots.  Acts committed by Penera prior to 30 March 2007, the date when she became a “candidate,” even if constituting election campaigning or partisan political activities, are not punishable under Section 80 of the Omnibus Election Code.  Such acts are within the realm of a citizen’s protected freedom of expression.  Acts committed by Penera within the campaign period are not covered by Section 80 as Section 80 punishes only acts outside the campaign period.”

“Congress has laid down the law — a candidate is liable for election offenses only upon the start of the campaign period. This Court has no power to ignore the clear and express mandate of the law that “any person who files his certificate of candidacy within [the filing] period shall only be considered a candidate at the start of the campaign period for which he filed his certificate of candidacy.”  Neither can this Court turn a blind eye to the express and clear language of the law that “any unlawful act or omission applicable to a candidate shall take effect only upon the start of the campaign period,” Justice Carpio concluded. (all emphases supplied by the Supreme Court.)

This notwithstanding, candidates must be mindful of Comelec Resolution No. 9476, or the “COMELEC Rules and Regulations Governing Campaign Finance and Disclosure,” which requires candidates to file their statements of contributions and expenditures in connection with the elections. The Resolution states that, “No person elected to any public office shall enter upon the duties of his office until he has filed the statement of contributions and expenditures herein required.” In addition, penalties range from fines to perpetual disqualification to hold public office.

Restraining Order or Preliminary Injunction: Can it benefit everyone?

There is a common misunderstanding that a temporary restraining order (TRO) or preliminary injunction may benefit even those who are not parties to the suit. On the contrary however, TRO/preliminary injunction, as a general rule, is in personam only and can bind only those who are parties to the litigation. In that regard, only the applicant/s for TRO/injunction can seek the court’s protection.

In the case of Pineda v. Santiago, “the INK sought from the RTC a second alias writ of execution to implement the judgment in Calalang against Conrado Pineda (Pineda), et. al.  In opposing the issuance of such writ, Pineda, et al., asserted that they held titles to Lot 671 adverse to those of Lucia and INK and that they were not parties in De la Cruz or in Calalang.  In its assailed order, the RTC granted the second alias writ of execution on the basis that the issue of ownership of Lot 671 was already determined with finality in favor of Lucia and INK.  The writ ordered the deputy sheriff to eject Pineda, et al., from Lot 671.  When the matter was brought before us (the Supreme Court), we annulled the assailed order as the writ of execution issued was against Pineda, et al., who were not parties to Civil Case No. Q-45767, the ejectment suit instituted by De Leon, et al.  We elaborated in Pineda that:

Being a suit for injunction, Civil Case No. Q-45767 partakes of an action in personam.  In Domagas v. Jensen, we have explained the nature of an action in personam and enumerated some actions and proceedings which are in personam, viz:

“The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought against the person and is based on the jurisdiction of the person, although it may involve his right to, or the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in accordance with the mandate of the court. The purpose of a proceeding in personam is to impose, through the judgment of a court, some responsibility or liability directly upon the person of the defendant.  Of this character are suits to compel a defendant to specifically perform some act or actions to fasten a pecuniary liability on him.  An action in personam is said to be one which has for its object a judgment against the person, as distinguished from a judgment against the propriety to determine its state. It has been held that an action in personam is a proceeding to enforce personal rights or obligations; such action is brought against the person. As far as suits for injunctive relief are concerned, it is well-settled that it is an injunctive act in personam. In Combs v. Combs, the appellate court held that proceedings to enforce personal rights and obligations and in which personal judgments are rendered adjusting the rights and obligations between the affected parties is in personam. Actions for recovery of real property are in personam.”

The respondent judge's jurisdiction is, therefore, limited to the parties in the injunction suit. To stress, the petition for injunction, docketed as Civil Case No. Q-45767, was filed only by therein petitioners Augusto M. de Leon, Jose de Castro, Jose A. Panlilio, Felicidad Vergara Vda. De Pineda, Fernando L. Vitug I, Fernando M. Vitug II, Fernando M. Vitug III, and Faustino Tobia, and later amended to include Elena Ostrea and Feliza C. Cristobal-Generoso as additional petitioners therein, against Bishop Eraño Manalo, in his capacity as titular and spiritual head of I.N.K. Herein petitioners Conrado Pineda, et al. never became parties thereto. Any and all orders and writs of execution, which the respondent judge may issue in that case can, therefore, be enforced only against those parties and not against the herein petitioners Conrado Pineda, et al. In issuing the assailed Order dated 22 April 1998, which directed the issuance of the 2nd Alias Writ of Execution to eject non-parties (herein petitioners), the respondent judge clearly went out of bounds and committed grave abuse of discretion.

The nature of the injunction suit — Civil Case No. Q-45767 — as an action in personam in the RTC remains to be the same whether it is elevated to the CA or to this Court for review.  An action in personam does not become an action in rem just because a pronouncement confirming I.N.K.'s title to Lot 671 was made by this Court in the Calalang decision.  Final rulings may be made by this Court, as the Highest Court of the Land, in actions in personam but such rulings are binding only as against the parties therein and not against the whole world.  Here lies another grave abuse of discretion on the part of the respondent judge when he relied on the Calalang decision in his assailed Order dated 07 May 1998 as if it were binding against the whole world, saying:

“After evaluating the arguments of both parties, decisive on the incident is the decision of the Supreme Court in favor of the respondent I.N.K., represented by its titular and spiritual head Bishop Eraño G. Manalo, sustaining its ownership over the subject Lot 671. This Court could do no less but to follow and give substantial meaning to its ownership which shall include all dominical rights by way of a Writ of Execution. To delay the issuance of such writ is a denial of justice due the I.N.K.” 

As a final word, this decision shall not be misinterpreted as disturbing or modifying our ruling in Calalang.  The final ruling on I.N.K.'s ownership and title is not at all affected. Private respondent I.N.K., as the true and lawful owner of Lot 671 as ruled by the Court in Calalang, simply has to file the proper action against the herein petitioners to enforce its property rights within the bounds of the law and our rules.  I.N.K.'s recourse of asking for the issuance of an alias writ of execution against the petitioners in Civil Case No. Q-45767 and the respondent judge's orders in said case, granting I.N.K.'s prayer and enforcing the alias writ of execution against the present petitioners, constitutes blatant disregard of very fundamental rules and must therefore be stricken down.” (Emphases by the Supreme Court.)

To summarize and as a general rule then, a restraining order, like injunction, operates upon a person as it is granted in exercise of equity jurisdiction; it has no in rem effect.

Business as usual in jail

In 1996, Rolito Go was sentenced by the Pasig Regional Trial Court to reclusion perpetua, or a maximum of 30 years imprisonment for the death of Eldon Maguan, a La Salle Engineering student, in Greenhills, San Juan. Fast forward to 2012 (or sixteen years later): News reports say that Go has been engaging in various business activities, ranging from moneylending to mining, while staying inside the New Bilibid Prison (NBP) in Muntinlupa City. (http://newsinfo.inquirer.net/251456/go-business-ranges-from-lending-firm-to-mining)

Now the question is, “Can he actually and legally engage in business while in prison and serving his sentence?”

The Revised Penal Code explicitly provides that the penalties of reclusion perpetua (20 years and 1 day to 40 years) and reclusion temporal (12 years and 1 day to 20 years) carry with them the accessory penalty, among others, of civil interdiction.

The Revised Penal Code states that, “Civil interdiction shall deprive the offender during the time of his sentence of the rights of parental authority, or guardianship, either as to the person or property of any ward, of marital authority, of the right to manage his property and of the right to dispose of such property by any act or any conveyance intervivos.” Civil interdiction is a restriction on capacity to act, according to the New Civil Code. A person suffering from the penalty of civil interdiction is deemed, declares the Revised Rules of Court, an “incompetent.”

With the deprivation of his right to manage his property or business being absolute and mandatory, how and why Go was able to build and conduct his businesses inside the NBP, if indeed it is true, is something that only its officials can explain.

The non-impairment clause and government contracts

Section 10, Article III of the Constitution provides:

"SECTION 10. NO LAW IMPAIRING THE OBLIGATION OF CONTRACTS SHALL BE PASSED."

According to a ruling of the Supreme Court, the purpose of the non-impairment clause is to safeguard the integrity of contracts against unwarranted interference by the State. As a rule, contracts should not be tampered with by subsequent laws that would change or modify the rights and obligations of the parties. 

It includes statutes enacted by the national legislature, executive orders and administrative regulations promulgated under a valid delegation of power, and municipal ordinances passed by the local legislative bodies.

There is impairment if a subsequent law changes the terms of a contract between the parties, imposes new conditions, dispenses with those agreed upon or withdraws remedies for the enforcement of the rights of the parties. It is anything that diminishes the efficacy of the contract.

However, it applies only to previously perfected contracts and is limited in application to laws that derogate from prior acts or contracts by enlarging, abridging or in any manner changing the intention of the parties.

Interestingly, Republic Act No. 3019 considers as a corrupt practice and unlawful the act by any public officer, “Causing any undue injury to any party, including the Government, or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence.”


It behooves all concerned officers of government agencies and instrumentalities then, especially those bestowed with rule-making powers, to observe and be mindful of this section of the Bill of Rights when entering into contracts and subsequently crafting rules and regulations affecting the former, to avert and avoid any legal bind.