Republic of the Philippines SUPREME COURT Baguio City THIRD DIVISION G.R. No.

171542 April 6, 2011

ANGELITO P. MAGNO, Petitioner, vs. PEOPLE OF THE PHILIPPINES, MICHAEL MONSOD, ESTHER LUZ MAE GREGORIO, GIAN CARLO CAJOLES, NENETTE CASTILLON, DONATO ENABE and ALFIE FERNANDEZ, Respondents. DECISION BRION, J.: Through a petition for review on certiorari,1 petitioner Angelito P. Magno seeks the reversal of the Amended Decision of the Court of Appeals (CA), dated September 26, 20052 in "People of the Philippines, et al. v. Hon. Augustine A. Vestil, Presiding Judge, RTC Mandaue City, Br. 56, et al." (docketed as CA-G.R. SP No. 79809), and its Resolution dated February 6, 20063 denying respondents motion for reconsideration.4 The assailed rulings denied the petition for certiorari filed under Rule 65 of the Rules of Court and upheld the ruling5 of the Regional Trial Court (RTC) of Mandaue City, which precluded Atty. Adelino B. Sitoy from acting as private prosecutor in Criminal Case No. DU-10123.6 THE FACTUAL ANTECEDENTS On May 14, 2003, the Office of the Ombudsman filed an information for multiple frustrated murder and double attempted murder against several accused, including Magno, who were public officers working under the National Bureau of Investigation.7 During the scheduled arraignment, Magno, in open court, objected to the formal appearance and authority of Atty. Sitoy, who was there as private prosecutor to prosecute the case for and on behalf of the Office of the Ombudsman.8 The oral objection was reduced to writing on July 21, 2003 when Magno filed an opposition9 before Branch 56 of the RTC of Mandaue City, citing the provisions of Section 31 of Republic Act (RA) No. 6770.10 The Office of the Ombudsman submitted its comment,11 while the accused submitted their joint opposition.12 The respondents likewise submitted their comments to the opposition of the other co-accused.13 On September 25, 2003, the RTC issued an Order, ruling that "the Ombudsman is proper, legal and authorized entity to prosecute this case to the exclusion of any other entity/person other than those authorized under R.A. 6770."14

In open court, the Office of the Ombudsman moved for the reconsideration of the Order, which the RTC later denied in its October 1, 2003 Order.15 Proceedings before the CA On October 13, 2003, the respondents, through the Ombudsman for the Visayas and Atty. Sitoy, filed a petition for certiorari before the CA.16 They contended that the RTC committed a grave abuse of discretion in prohibiting the appearance of Atty. Sitoy as counsel for the private offended parties, as the Rules of Court expressly provides that a private offended party may intervene, by counsel, in the prosecution of offenses.17 Magno, in his comment18 filed on December 15, 2003, insisted that what he questioned before the RTC was the appearance and authority of the private prosecutor to prosecute the case in behalf of the Ombudsman.19 He stressed that while the Office of the Ombudsman can designate prosecutors to assist in the prosecution of criminal cases, its authority in appointing, deputizing or authorizing prosecutors to prosecute cases is confined only to fiscals, state prosecutors and government lawyers. It does not extend to private practitioners/private prosecutors.20 He further stressed that while the Order of the RTC states that the Office of the Ombudsman is the proper legal and authorized entity to prosecute the case, it did not affect the right to intervene personally, as the Office of the Ombudsman can take the cudgels for the private respondents in prosecuting the civil aspect of the case.21 On February 16, 2005, the CA, in its original Decision, declared that the private prosecutor may appear for the petitioner in the case, but only insofar as the prosecution of the civil aspect of the case is concerned.22 The respondents moved for the reconsideration23 of the CA decision. On September 26, 2005, the CA amended its decision,24 ruling that the private prosecutor may appear for the petitioner in Criminal Case No. DU-10123 to intervene in the prosecution of the offense charged in collaboration with any lawyer deputized by the Ombudsman to prosecute the case.25 Failing to obtain a reconsideration26 of the amended CA decision, Magno elevated the dispute to this Court through the present petition for review on certiorari27 filed under Rule 45 of the Rules of Procedure. PETITIONERS ARGUMENTS Magno submits that the CA did not have jurisdiction to entertain the petition for certiorari; the power to hear and decide that question is with the Sandiganbayan.28 To support this contention, Magno invokes Engr. Teodoto B. Abbot v. Hon. Judge Hilario I. Mapayo, etc., et al.29 where the Court held that the Sandiganbayan has the exclusive power to issue petitions for certiorari in aid of its appellate jurisdiction.30 Even if the Court were to set aside this procedural lapse, Magno adds, the private prosecutor cannot be allowed to intervene for the respondents as it would violate Section 31 of RA No. 6770.31 Section 31 limits the Ombudsmans prerogative to designate prosecutors to fiscals, state

prosecutors and government lawyers. It does not, Magno maintains, allow the Ombudsman to deputize private practitioners to prosecute cases for and on behalf of the Office of the Ombudsman.32 RESPONDENTS ARGUMENTS The Office of the Ombudsman, through the Office of the Special Prosecutor, submitted its memorandum on February 8, 2008. Substantively, the Ombudsman maintains that Atty. Sitoy may intervene in the case pursuant to Section 16, Rule 110 of the Rules of Court, which reads: Sec. 16. Intervention of the offended party in criminal action. Where the civil action for recovery of civil liability is instituted in the criminal action pursuant to Rule 111, the offended party may intervene by counsel in the prosecution of the offense. The Ombudsman maintains that Section 31 of RA No. 6770 did not amend Section 16, Rule 110 of the Rules of Court.33 Section 31 merely allows the Ombudsman to designate and deputize any fiscal, state prosecutor or lawyer in the government service to act as special investigator or prosecutor to assist in the investigation and prosecution in certain cases.34 The Ombudsman opines that the two provisions of law "are not diametrically opposed nor in conflict,"35 as "a private prosecutor may appear for the private offended complainants in the prosecution of an offense independent of the exclusive right of the Ombudsman to deputize."36 The Ombudsman, however, did not address the contention that the Sandiganbayan, not the CA, has appellate jurisdiction over the RTC in this case. THE COURTS RULING We resolve to grant the petition. The Sandiganbayan, not the CA, has appellate jurisdiction over the RTCs decision not to allow Atty. Sitoy to prosecute the case on behalf of the Ombudsman Presidential Decree (PD) No. 1606 created the Sandiganbayan. Section 4 thereof establishes the Sandiganbayans jurisdiction: Section 4. Jurisdiction. The Sandiganbayan shall exercise exclusive original jurisdiction in all cases involving: A. Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corruption Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII, of the Revised Penal Code, where one or more of the accused are officials occupying the following positions in the government, whether in a permanent, acting or interim capacity, at the time of the commission of the offense: xxxx

B. Other offenses or felonies whether simple or complexed with other crimes committed by the public officials and employees mentioned in subsection of this section in relation to their office. C. Civil and criminal cases filed pursuant to and in connection with Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986. In cases where none of the accused are occupying positions corresponding to Salary Grade "27" or higher, as prescribed in the said Republic Act No. 6758, or military or PNP officers mentioned above, exclusive original jurisdiction thereof shall be vested in the proper regional trial court, metropolitan trial court, municipal trial court, and municipal circuit trial court, as the case may be, pursuant to their respective jurisdictions as provided in Batas Pambansa Blg. 129, as amended. The Sandiganbayan shall exercise exclusive appellate jurisdiction over final judgments, resolutions or orders of regional trial courts whether in the exercise of their own original jurisdiction or of their appellate jurisdiction as herein provided. The Sandiganbayan shall have exclusive original jurisdiction over petitions for the issuance of the writs of mandamus, prohibition, certiorari, habeas corpus, injunctions, and other ancillary writs and processes in aid of its appellate jurisdiction and over petitions of similar nature, including quo warranto, arising or that may arise in cases filed or which may be filed under Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986: Provided, That the jurisdiction over these petitions shall not be exclusive of the Supreme Court. The procedure prescribed in Batas Pambansa Blg. 129, as well as the implementing rules that the Supreme Court has promulgated and may hereafter promulgate, relative to appeals/petitions for review to the Court of Appeals, shall apply to appeals and petitions for review filed with the Sandiganbayan. In all cases elevated to the Sandiganbayan and from the Sandiganbayan to the Supreme Court, the Office of the Ombudsman, through its special prosecutor, shall represent the People of the Philippines, except in cases filed pursuant to Executive Order Nos. 1, 2, 14 and 14A, issued in 1986. In case private individuals are charged as co-principals, accomplices or accessories with the public officers or employees, including those employed in government-owned or controlled corporations, they shall be tried jointly with said public officers and employees in the proper courts which shall exercise exclusive jurisdiction over them. Any provision of law or Rules of Court to the contrary notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability shall at all times be simultaneously instituted with, and jointly determined in, the same proceeding by the Sandiganbayan or to appropriate courts, the filing of the criminal action being deemed to necessarily carry with it the filing of civil action, and no right to reserve the filing of such civil action separately from the criminal action shall be recognized: Provided, however, That where the civil action had theretofore been filed separately but judgment therein has not yet been rendered, and the criminal case is hereafter filed with the Sandiganbayan or the appropriate court, said civil action shall be transferred to the Sandiganbayan or the appropriate court, as the

case may be, for consolidation and joint determination with the criminal action, otherwise the separate civil action shall be deemed abandoned." [emphasis and underscoring supplied] This is clear: the Sandiganbayan has exclusive appellate jurisdiction over resolutions issued by RTCs in the exercise of their own original jurisdiction or of their appellate jurisdiction. We reaffirmed this rule in Abbot.37 In that case, petitioner Engr. Abbot filed a petition for certiorari before the CA, claiming that the RTC gravely abused its discretion for not dismissing the information for Malversation thru Falsification of Public Document. The CA refused to take cognizance of the case, holding that the Sandiganbayan has jurisdiction over the petition. Recognizing the amendments made to PD No. 1606 by RA No. 7975,38 we sustained the CAs position since Section 4 of PD No. 1606 has expanded the Sandiganbayans jurisdiction to include petitions for "mandamus, prohibition, certiorari, habeas corpus, injunction, and other ancillary writs and processes in aid of its appellate jurisdiction."39 In the present case, the CA erred when it took cognizance of the petition for certiorari filed by Magno. While it is true that the interlocutory order issued by the RTC is reviewable by certiorari, the same was incorrectly filed with the CA. Magno should have filed the petition for certiorari with the Sandiganbayan, which has exclusive appellate jurisdiction over the RTC since the accused are public officials charged of committing crimes in their capacity as Investigators of the National Bureau of Investigation.40 The CA should have dismissed the petition outright. Since it acted without authority, we overrule the September 26, 2005 Amended Decision of the CA and the subsequent denial of Magnos motions for reconsideration. Jurisdiction is conferred by law, and the CAs judgment, issued without jurisdiction, is void. There is no rule in procedural law as basic as the precept that jurisdiction is conferred by law,41 and any judgment, order or resolution issued without it is void42 and cannot be given any effect.43 This rule applies even if the issue on jurisdiction was raised for the first time on appeal or even after final judgment.44 We reiterated and clarified the rule further in Felicitas M. Machado, et al. v. Ricardo L. Gatdula, et al.,45 as follows: Jurisdiction over a subject matter is conferred by law and not by the parties action or conduct. Estoppel generally does not confer jurisdiction over a cause of action to a tribunal where none, by law, exists. In Lozon v. NLRC, we declared that: Lack of jurisdiction over the subject matter of the suit is yet another matter.1avvphil Whenever it appears that the court has no jurisdiction over the subject matter, the action shall be dismissed. This defense may be interposed at any time, during appeal or even after final judgment. Such is

understandable, as this kind of jurisdiction is conferred by law and not within the courts, let alone the parties, to themselves determine or conveniently set aside. We note that Magno had already raised in his supplemental motion for reconsideration before the CA46 the ground of lack of jurisdiction before the CAs Decision became final. The CA did not even consider this submission, choosing instead to brush it aside for its alleged failure to raise new or substantial grounds for reconsideration.47 Clearly, however, its lack of jurisdiction is a new and substantial argument that the CA should have passed upon. The Office of the Ombudsman cannot rely on the principle of estoppel to cure the jurisdictional defect of its petition before the CA The Ombudsman cannot rely on the principle of estoppel in this case since Magno raised the issue of jurisdiction before the CAs decision became final. Further, even if the issue had been raised only on appeal to this Court, the CAs lack of jurisdiction could still not be cured. In Machado,48 citing People of the Philippines v. Rosalina Casiano,49 we held: In People v. Casiano, this Court, on the issue of estoppel, held: The operation of the principle of estoppel on the question of jurisdiction seemingly depends upon whether the lower court actually had jurisdiction or not. If it had no jurisdiction, but the case was tried and decided upon the theory that it had jurisdiction, the parties are not barred, on appeal, from assailing such jurisdiction, for the same "must exist as a matter of law, and may not be conferred by consent of the parties or by estoppel." However if the lower court had jurisdiction, and the case was heard and decided upon a given theory, such, for instance, as that the court had no jurisdiction, the party who induced it to adopt such theory will not be permitted, on appeal, to assume an inconsistent position that the lower court had jurisdiction. WHEREFORE, we DENY the petitioners petition for review on certiorari, and DECLARE the Amended Decision of the Court of Appeals in CA-G.R. SP No. 79809, promulgated on September 26, 2005, as well as its Resolution of February 6, 2006, NULL AND VOID for having been issued without jurisdiction. The respondents are hereby given fifteen (15) days from the finality of this Decision within which to seek recourse from the Sandiganbayan. No costs. SO ORDERED. ARTURO D. BRION Associate Justice Republic of the Philippines SUPREME COURT Baguio City THIRD DIVISION

A.M. No. P-10-2791 April 6, 2011 (formerly A.M. No. 10-3-91-RTC) JUDGE RENATO A. FUENTES, REGIONAL TRIAL COURT, BRANCH 17, DAVAO CITY, Complainant, vs. ATTY. ROGELIO F. FABRO, BRANCH CLERK OF COURT, SAME COURT, Respondent. D E CI S I O N BRION, J.: For the Courts resolution is the letter-complaint1 dated July 17, 2009 of Judge Renato A. Fuentes (Judge Fuentes), Regional Trial Court, 11th Judicial Region, Branch 17, Davao City, addressed to the Office of the Court Administrator (OCA). Judge Fuentes charged Branch Clerk of Court Atty. Rogelio F. Fabro (Atty. Fabro) and Civil Records In-Charge Ofelia Salazar (Salazar) with gross negligence of duty. This was the second letter of Judge Fuentes to the OCA on Atty. Fabro and Salazar. Background Facts On May 19, 2009, Judge Fuentes wrote the OCA to report the negligence committed by Atty. Fabro and Salazar in not elevating to the Court of Appeals, Cagayan de Oro City (CA) for more than six (6) years the records of Civil Case No. 29,537-2003, entitled Teodoro Polinar, et al. v. Hon. Antonio D. Laolao. In his second letter to the OCA, Judge Fuentes again reported the negligence of Atty. Fabro and Salazar for failing to elevate to the CA the records of Civil Case No. 29,019-2002, entitled Medardo E. Escarda v. Celso E. Escarda and the Register of Deeds of Davao City. Judge Fuentes claimed that he approved Medardo Escardas Notice of Appeal in his April 10, 2007 Order and directed the Branch Clerk of Court to elevate the entire records to the CA. Apparently, the records were not elevated because Medardo Escardas counsel, Atty. Santos E. Torrea, Jr., wrote Judge Fuentes on July 14, 20092 to inquire if their appeal and records have been forwarded to the CA. Atty. Torrea enclosed a CA letter3 stating that "[t]here is no showing that the case was elevated on appeal to this Court as per verification from the records and list of cases from 2007 until the present time." In his second letter to the OCA, Judge Fuentes related that: What is alarming in this second discovery, however, is the record consisting of the Notice of Appeal and the Order, elevating the case to the Honorable Court of Appeals, along with the other documents, such as Decision of the Court, Motion for Reconsideration and Order of denial, were not attached in the main record, consisting of pleadings and transcript of stenographic notes but after exerting pressure on the Civil Records In-Charge, to look for the remaining portion of the records, she turned-over the remaining records, after one week, but was observed by the

undersigned, purposely separated, so that the compliance of the Order to elevate the entire records to the Appellate Court, can be justified by her and the Branch Clerk of Court. The OCA required Atty. Fabro to comment on Judge Fuentes letter. Atty. Fabro filed his comment on August 8, 20094. He averred that the records of Civil Case No. 29,537-2003 have been elevated to the CA and that Salazar admitted that it was her own fault and that she found that the record, "already bounded for transmittal to the Court of Appeals, was indeed mixed up with the files of old cases transferred to the other store room" at a time when the staff of the RTC Branch 17 was decongesting the office store room to give way to newly filed cases. He also mentioned that his office was a very busy one, that he had his own duties, and that he could not "at all times" spend his time supervising subordinate employees to ensure their performance of their normal duties without prejudice to his own duties and responsibilities. On March 2, 2010, the OCA submitted a report and recommendation5 that: (1) the case be redocketed as a regular administrative matter; and (2) Atty. Fabro be fined P5,000.00 for the delay in transmitting the records of two cases to the CA, with a warning that a repetition of the same or similar act in the future shall be dealt with more severely. The OCA Report stated that although the records of the cases have already been transmitted to the CA, the OCA cannot tolerate the long delay in transmission nor give credence to Atty. Fabros reasons for the delay. The OCA stressed that the administrative functions of the Branch Clerk of Court are vital to the prompt and proper administration of justice and that the timely transmittal to the appellate court of the records of appealed cases ensures the speedy disposition of cases; any delay in the transmission of the case records would hamper the proper administration of justice. The OCA added that it has been held that the failure of the clerk of court to transmit the records of the case constitutes negligence and warrants disciplinary action. The Court's Ruling We agree with the OCA finding that Atty. Fabro was guilty of gross negligence of duty for being remiss in his duty to transmit to the CA the records of Civil Case Nos. 29,537-2003 and 29,0192002 within the required period. The Rules of Court in Section 10 of Rule 416 provides that within thirty (30) days after the perfection of appeal, the clerk of court of the lower court has the duty to transmit the records to the appellate court. Judge Fuentes gave due course to the appeals but the records were not transmitted to the CA within the 30-day period provided in the Rules. The records of Civil Case No. 29,019-2002 (Medardo E. Escarda v. Celso E. Escarda) were mailed on August 15, 20097 or two (2) years after the issuance of the Order directing their transmittal to the CA (April 10, 2007). The records of Civil Case No. 29,537-2003 (Teodoro Polinar, et al. vs. Hon. Antonio D. Laolao) were transmitted only after more than six (6) years as claimed by Judge Fuentes. Clearly, Atty. Fabro as the clerk of court of the lower court, was grossly remiss in his duty. We agree with the OCA recommendation of imposing a fine with warning on Atty. Fabro. We hold, however, that the fine should be increased to Twenty Thousand Pesos (P20,000.00) considering the number of incidents of delay and the considerable time involved.1avvphi1

WHEREFORE, we find Atty. Rogelio F. Fabro, Branch Clerk of Court, RTC Branch 17, Davao City, GUILTY of gross negligence of duty for the delay in transmitting to the Court of Appeals, Cagayan de Oro City, the records of Civil Case No. 29,019-2002, entitled Medardo E. Escarda v. Celso E. Escarda, and Civil Case No. 29,537-2003, entitled Teodoro Polinar, et al. v. Hon. Antonio D. Laolao. We hereby impose on him a FINE of Twenty Thousand Pesos (P20,000.00) with a WARNING that a repetition of the same or similar act shall be dealt with more severely. The Office of the Court Administrator is directed to inform the Court of the action taken against Civil Records In-Charge Ofelia Salazar. SO ORDERED. ARTURO D. BRION Associate Justice Republic of the Philippines SUPREME COURT Baguio City EN BANC G.R. No. 164195 April 5, 2011

APO FRUITS CORPORATION and HIJO PLANTATION, INC., Petitioners, vs. LAND BANK OF THE PHILIPPINES, Respondent. RESOLUTION BRION, J.: We resolve Land Bank of the Philippines (LBPs) 2nd Motion for Reconsideration of December 14, 2010 that addresses our Resolutions of October 12, 2010 and November 23, 2010. This motion prays as well for the holding of oral arguments. We likewise resolve the Office of the Solicitor Generals (OSG) Motion for Leave to Intervene and to Admit Motion for Reconsideration-in-Intervention dated February 15, 2011 in behalf of the Republic of the Philippines (Republic). The Motion for Reconsideration The LBP submits the following arguments in support of its 2nd motion for reconsideration: a) the test of "transcendental importance" does not apply to the present case;

b) the standard of "transcendental importance" cannot justify the negation of the doctrine of immutability of a final judgment and the abrogation of a vested right in favor of the Government that respondent LBP represents; c) the Honorable Court ignored the deliberations of the 1986 Constitutional Commission showing that just compensation for expropriated agricultural property must be viewed in the context of social justice; and d) granting arguendo that the interest payment has factual and legal bases, only six (6%) percent interest per annum may be validly imposed. We have more than amply addressed argument (d) above in our October 12, 2010 Resolution, and we see no point in further discussing it. Without in any way detracting from the overriding effect of our main and primary ruling that the present 2nd motion for reconsideration is a prohibited motion that the Court can no longer entertain, and if only to emphatically signal an unequivocal finis to this case, we examine for the last and final time the LBPs other arguments. In the course of the Courts deliberations, Mr. Justice Roberto A. Abad questioned the application of Section 3, Rule 15 of the Internal Rules of the Supreme Court to the present 2nd motion for reconsideration. He posited that instead of voting immediately on the present 2nd motion for reconsideration, the Court should instead first consider the validity of our October 12, 2010 Resolution; he claimed that this Resolution is null and void because the Court violated the above-cited provision of the Internal Rules when it did not first vote on whether the Resolutions underlying motion (itself a 3rd motion for reconsideration) should be entertained before voting on the motions merits. We shall lay to rest Mr. Justice Abads observation before dwelling on the merits of the present 2nd motion for reconsideration. Our Ruling We find no merit in the LBPs second motion for reconsideration, and reject as well the Mr. Justice Abads observation on how to approach the consideration of the present motion. Mr. Justice Abads Observations/Objections; The Rules on 2nd Motions for Reconsideration. Mr. Justice Abads observation apparently stemmed from the peculiar history of the present case. a. A recap of the history of the case. This case was originally handled by the Third Division of this Court. In its original Decision of February 6, 2007, the Division affirmed the RTCs decision setting the just compensation to be paid and fixing the interest due on the balance of the compensation due at 12% per annum. In its Resolution of December 19, 2007, the Third Division resolved the parties motions for reconsideration by deleting the 12% interest due on the balance of the awarded just

compensation. The parties subsequent motions to reconsider this Resolution were denied on April 30, 2008; on May 16, 2008, entry of judgment followed. Despite the entry of judgment, the present petitioners filed a second motion for reconsideration that prayed as well that the case be referred to the Court en banc. Finding merit in these motions, the Third Division referred the case to the En Banc for its disposition. On December 4, 2009, the Court en banc denied the petitioners second motion for reconsideration. Maintaining their belief in their demand to be granted 12% interest, the petitioners persisted in filing another motion for reconsideration. In the interim, the Court promulgated its Internal Rules that regulated, among others, 2nd motions for reconsideration. On October 12, 2010, the Court en banc granted by a vote of 8 for and 4 against the petitioners motion and awarded the 12% interests the petitioners prayed for, thus affirming the interests the RTC originally awarded. The Court subsequently denied the respondents motion for reconsideration, giving rise to the present 2nd motion for reconsideration. It was at this point that the OSG moved for leave to intervene. b. The governing rules on 2nd motions for reconsideration The basic rule governing 2nd motions for reconsideration is Section 2, Rule 52 (which applies to original actions in the Supreme Court pursuant to Section 2, Rule 56) of the Rules of Court. This Rule expressly provides: Sec. 2. Second Motion for Reconsideration. No second motion for reconsideration of a judgment or final resolution by the same party shall be entertained. The absolute terms of this Rule is tempered by Section 3, Rule 15 of the Internal Rules of the Supreme Court that provides: Sec. 3. Second Motion for Reconsideration. The Court shall not entertain a second motion for reconsideration and any exception to this rule can only be granted in the higher interest of justice by the Court en banc upon a vote of at least two-thirds of its actual membership. There is reconsideration "in the higher interest of justice" when the assailed decision is not only legally erroneous, but is likewise patently unjust and potentially capable of causing unwarranted and irremediable injury or damage to the parties. A second motion for reconsideration can only be entertained before the ruling sought to be reconsidered becomes final by operation of law or by the Courts declaration. [Emphases supplied.] Separately from these rules is Article VIII, Section 4 (2) of the 1987 Constitution which governs the decision-making by the Court en banc of any matter before it, including a motion for the reconsideration of a previous decision. This provision states: Section 4. xxxx (2) All cases involving the constitutionality of a treaty, international or executive agreement, or law, which shall be heard by the Supreme Court en banc, and all other cases which under the

Rules of Court are required to be heard en banc, including those involving the constitutionality, application, or operation of presidential decrees, proclamations, orders, instructions, ordinances, and other regulations, shall be decided with the concurrence of a majority of the Members who actually took part in the deliberations on the issues in the case and voted thereon. Thus, while the Constitution grants the Supreme Court the power to promulgate rules concerning the practice and procedure in all courts1 (and allows the Court to regulate the consideration of 2nd motions for reconsideration, including the vote that the Court shall require), these procedural rules must be consistent with the standards set by the Constitution itself. Among these constitutional standards is the above quoted Section 4 which applies to "all other cases which under the Rules of Court are required to be heard en banc," and does not make any distinction as to the type of cases or rulings it applies to, i.e, whether these cases are originally filed with the Supreme Court, or cases on appeal, or rulings on the merits of motions before the Court. Thus, rulings on the merits by the Court en banc on 2nd motions for reconsideration, if allowed by the Court to be entertained under its Internal Rules, must be decided with the concurrence of a majority of the Members who actually took part in the deliberations. When the Court ruled on October 12, 2010 on the petitioners motion for reconsideration by a vote of 12 Members (8 for the grant of the motion and 4 against), the Court ruled on the merits of the petitioners motion. This ruling complied in all respects with the Constitution requirement for the votes that should support a ruling of the Court. Admittedly, the Court did not make any express prior ruling accepting or disallowing the petitioners motion as required by Section 3, Rule 15 of the Internal Rules. The Court, however, did not thereby contravene its own rule on 2nd motions for reconsideration; since 12 Members of the Court opted to entertain the motion by voting for and against it, the Court simply did not register an express vote, but instead demonstrated its compliance with the rule through the participation by no less than 12 of its 15 Members.1avvphi1 Viewed in this light, the Court cannot even be claimed to have suspended the effectiveness of its rule on 2nd motions for reconsideration; it simply complied with this rule in a form other than by express and separate voting. Based on these considerations, arrived at after a lengthy deliberation, the Court thus rejected Mr. Justice Abads observations, and proceeded to vote on the question of whether to entertain the respondents present 2nd motion for reconsideration. The vote was 9 to 2, with 9 Members voting not to entertain the LBPs 2nd motion for reconsideration. By this vote, the ruling sought to be reconsidered for the second time was unequivocally upheld; its finality already declared by the Court in its Resolution of November 23, 2010 was reiterated. To quote the dispositive portion of the reiterated November 23, 2010 Resolution: On these considerations, we hereby DENY the Motion for Reconsideration with FINALITY. No further pleadings shall be entertained. Let entry of judgment be made in due course. Thus, this Court mandated a clear, unequivocal, final and emphatic finis to the present case.

Landowners right to just compensation: a matter of public interest In assailing our October 12, 2010 resolution, the LBP emphasizes the need to respect the doctrine of immutability of final judgments. The LBP maintains that we should not have granted the petitioners motion for reconsideration in our October 12, 2010 Resolution because the ruling deleting the 12% interest had already attained finality when an Entry of Judgment was issued. The LBP argues, too, that the present case does not involve a matter of transcendental importance, as it does not involve life or liberty. The LBP further contends that the Court mistakenly used the concept of transcendental importance to recall a final ruling; this standard should only apply to questions on the legal standing of parties. In his dissenting opinion, Mr. Justice Roberto Abad agrees with the LBPs assertion, positing that this case does not fall under any of the exceptions to the immutability doctrine since it only involves money and does not involve a matter of overriding public interest. We reject the basic premise of the LBP's and Mr. Justice Abads arguments for being flawed. The present case goes beyond the private interests involved; it involves a matter of public interest the proper application of a basic constitutionally-guaranteed right, namely, the right of a landowner to receive just compensation when the government exercises the power of eminent domain in its agrarian reform program. Section 9, Article III of the 1987 Constitution expresses the constitutional rule on eminent domain "Private property shall not be taken for public use without just compensation." While confirming the States inherent power and right to take private property for public use, this provision at the same time lays down the limitation in the exercise of this power. When it takes property pursuant to its inherent right and power, the State has the corresponding obligation to pay the owner just compensation for the property taken. For compensation to be considered "just," it must not only be the full and fair equivalent of the property taken;2 it must also be paid to the landowner without delay.3 To fully and properly appreciate the significance of this case, we have to consider it in its proper context. Contrary to the LBPs and Mr. Justice Abads assertions, the outcome of this case is not confined to the fate of the two petitioners alone. This case involves the governments agrarian reform program whose success largely depends on the willingness of the participants, both the farmers-beneficiaries and the landowners, to cooperate with the government. Inevitably, if the government falters or is seen to be faltering through lack of good faith in implementing the needed reforms, including any hesitation in paying the landowners just compensation, this reform program and its objectives would suffer major setbacks. That the governments agrarian reform program and its success are matters of public interest, to our mind, cannot be disputed as the program seeks to remedy long existing and widespread social justice and economic problems. In a last ditch attempt to muddle the issues, the LBP focuses on our use of the phrase "transcendental importance," and asserts that we erred in applying this doctrine, applicable only to legal standing questions, to negate the doctrine of immutability of judgment. This is a very myopic reading of our ruling as the context clearly shows that the phrase "transcendental

importance" was used only to emphasize the overriding public interest involved in this case. Thus, we said: That the issues posed by this case are of transcendental importance is not hard to discern from these discussions. A constitutional limitation, guaranteed under no less than the all-important Bill of Rights, is at stake in this case: how can compensation in an eminent domain case be "just" when the payment for the compensation for property already taken has been unreasonably delayed? To claim, as the assailed Resolution does, that only private interest is involved in this case is to forget that an expropriation involves the government as a necessary actor. It forgets, too, that under eminent domain, the constitutional limits or standards apply to government who carries the burden of showing that these standards have been met. Thus, to simply dismiss the case as a private interest matter is an extremely shortsighted view that this Court should not leave uncorrected. xxxx More than the stability of our jurisprudence, the matter before us is of transcendental importance to the nation because of the subject matter involved agrarian reform, a societal objective of that the government has unceasingly sought to achieve in the past half century.4 From this perspective, our Resolution of October 12, 2010 only had to demonstrate, as it did, that the higher interests of justice are duly served. All these, amply discussed in the Resolution of October 12, 2010, are briefly summarized and reiterated below. LBP at fault for twelveyear delay in payment In his dissenting opinion, Mr. Justice Abad insists that the LBPs initial valuation of the petitioners properties was fully in accord with Section 17 of the CARL. He posits that when the RTC gave a significantly higher value to these lands, the LBP acted well within its rights when it appealed the valuation. Thus, to him, it was wrong for this Court to characterize the LBPs appeal as malicious or in bad faith. A simple look at the attendant facts disproves the accuracy of this claim. First, Mr. Justice Abads allegation that the LBP correctly valued the petitioners properties is not at all accurate. Significantly, Mr. Justice Abad does not cite any evidence on record to support his claim that "the Land Bank valued the lands using the compensation formula that Section 17 of Republic Act 6657 and the DARs implementing rules provide."5 More to the point, this Court has already determined, in a final and executed judgment, that the RTCs valuation of the petitioners properties is the correct one. To recall, the LBP initially fixed the value of Apo Fruits Corporations (AFC) properties at P165,484.47 per hectare or P16.00 per square meter (sqm), while it valued Hijo Plantation Inc.s (HPI) properties at P201,929.97 per hectare, or approximately P20.00/sqm. In contrast, the Regional Trial Court fixed the

valuation of the petitioners properties at P103.33/sqm., or more than five times the initial valuation fixed by the LBP. After reviewing the records, this Court affirmed the RTCs valuation in its February 6, 2007 decision, noting that it was based on the following evidence: (a) the Commissioners reports, (b) the Cuervo appraisers report, (c) the schedule of market values of the City of Tagum per its 1993 and 1994 Revision of Assessment and Property Classification, (d) the value of the permanent improvements found on the expropriated properties, and (e) the comparative sales of adjacent lands from early 1995 to early 1997. The Court observed that the RTC valuation also took into consideration the lands nature as irrigated land, its location along the highway, market value, assessors value, and the volume and value of its produce. This valuation is fully in accordance with Section 17 of RA 6657, which states: Section 17. Determination of Just Compensation. - In determining just compensation, the cost of acquisition of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessment made by government assessors, shall be considered. The social and economic benefits contributed by the farmers and the farm workers and by government to the property as well as the non-payment of taxes or loans secured from any government financing institution on the said land shall be considered as additional factors to determine its valuation. On its face, the staggering difference between the LBPs initial valuation of the petitioners properties (totaling P251,379,104.02) and the RTCs valuation (totaling P1,383,179,000.00) a difference of P1,131,799,895.98 amounting to 81% of the total price betrays the lack of good faith on the part of the government in dealing with the landowners. The sheer enormity of the difference between the two amounts cannot but lead us to conclude that the LBPs error was grievous and amounted to nothing less than gross negligence in the exercise of its duty in this case, to properly ascertain the just compensation due to the petitioners. Mr. Justice Abad further argues that interest on just compensation is due only where there is delay in payment. In the present case, the petitioners allegedly did not suffer any delay in payment since the LBP made partial payments prior to the taking of their lands. This argument completely overlooks the definition of just compensation already established in jurisprudence. Apart from the requirement that compensation for expropriated land must be fair and reasonable, compensation, to be "just," must also be made without delay.6 In simpler terms, for the governments payment to be considered just compensation, the landowner must receive it in full without delay. In the present case, it is undisputed that the government took the petitioners lands on December 9, 1996; the petitioners only received full payment of the just compensation due on May 9, 2008. This circumstance, by itself, already confirms the unconscionable delay in the payment of just compensation. Admittedly, a grain of truth exists in Justice Abads observation that the petitioners received partial payments from the LBP before the titles to their landholdings were transferred to the

government. The full and exact truth, however, is that the partial payments at the time of the taking only amounted to a trifling five percent (5%) of the actual value of the expropriated properties, as determined with finality by this Court. Even taking into consideration the subsequent partial payments made totaling P411,769,168.32 (inclusive of the amounts deposited prior to the taking), these payments only constituted a mere one-third (1/3) of the actual value of the petitioners properties. It should be considered as highlighted in our October 12, 2010 Resolution that the properties the government took were fully operating and earning plantations at the time of the taking. Thus, the landowners lost not only their properties, but the fruits of these properties. These were all lost in 1996, leaving the landowners without any replacement income from their properties, except for the possible interest for the trifling payment made at the time of the taking that, together with the subsequent payment, only amounted to a third of the total amount due. Thus, for twelve long years, the amount of P971,409,831.68 was withheld from the landowners. An added dimension to this delayed payment is the impact of the delay. One impact as pointed out above is the loss of income the landowners suffered. Another impact that the LBP now glosses over is the income that the LBP earned from the sizeable sum it withheld for twelve long years. From this perspective, the unaccounted-for LBP income is unjust enrichment in its favor and an inequitable loss to the landowners. This situation was what the Court essentially addressed when it awarded the petitioners 12% interest. Mr. Justice Abad goes on to argue that the delay should not be attributed to the LBP as it could not have foreseen that it would take twelve years for the case to be resolved. Justice Abads stance could have been correct were it not for the fact that the delay in this case is ultimately attributable to the government. Two significant factors justify the attribution of the delay to the government. The first is the DARs gross undervaluation of the petitioners properties the government move that started the cycle of court actions. The second factor to consider is government inaction. Records show that after the petitioners received the LBPs initial valuation of their lands, they filed petitions with the DARAB, the responsible agency of the DAR, for the proper determination of just compensation. Instead of dismissing these petitions outright for lack of jurisdiction, the DARAB sat on these cases for three years. It was only after the petitioners resorted to judicial intervention, filing their petitions for the determination of just compensation with the RTC, that the petitioners case advanced. The RTC interpreted the DARABs inaction as reluctance of the government to pay the petitioners just compensation, a view this Court affirmed in its October 12, 2010 Resolution. Expropriation for agrarian reform requires the payment of just compensation The LBP claims that the just compensation in this case should be determined within the context of the article on social justice found in the 1987 Constitution. In the LBPs opinion, when we

awarded the petitioners 12% interest by way of potential income, we removed from the taking of agricultural properties for agrarian reform its main public purpose of righting the wrong inflicted on landless farmers. By this argument, the LBP effectively attempts to make a distinction between the just compensation given to landowners whose properties are taken for the governments agrarian reform program and properties taken for other public purposes. This perceived distinction, however, is misplaced and is more apparent than real. The constitutional basis for our agrarian reform program is Section 4, Article XIII of the 1987 Constitution, which mandates: Section 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farm workers, who are landless, to own directly or collectively the lands they till or, in the case of other farm workers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. This provision expressly provides that the taking of land for use in the governments agrarian reform program is conditioned on the payment of just compensation. Nothing in the wording of this provision even remotely suggests that the just compensation required from the taking of land for the agrarian reform program should be treated any differently from the just compensation required in any other case of expropriation. As explained by Commissioner Roberto R. Concepcion during the deliberations of the 1986 Constitutional Commission: [T]he term "just compensation" is used in several parts of the Constitution, and, therefore, it must have a uniform meaning. It cannot have in one part a meaning different from that which appears in the other portion. If, after all, the party whose property is taken will receive the real value of the property on just compensation, that is good enough.7 In fact, while a proposal was made during the deliberations of the 1986 Constitutional Commission to give a lower market price per square meter for larger tracts of land, the Commission never intended to give agricultural landowners less than just compensation in the expropriation of property for agrarian reform purposes.8 To our mind, nothing is inherently contradictory in the public purpose of land reform and the right of landowners to receive just compensation for the expropriation by the State of their properties. That the petitioners are corporations that used to own large tracts of land should not be taken against them. As Mr. Justice Isagani Cruz eloquently put it: [S]ocial justice - or any justice for that matter - is for the deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are called upon to tilt the balance in favor of the poor, to whom the Constitution fittingly extends its sympathy and compassion. But never is it justified to prefer the poor simply because they are

poor, or to reject the rich simply because they are rich, for justice must always be served, for poor and rich alike, according to the mandate of the law.9 Interest payments borne by government, not by farmers-beneficiaries Nor do we find any merit in the LBPs assertion that the large amount of just compensation that we awarded the petitioners, together with the amount of interest due, would necessarily result in making the farmers- beneficiaries endure another form of bondage the payment of an exorbitant amount for the rest of their lives. As the petitioners correctly pointed out, the governments liability for the payment of interest to the landowner for any delay attributable to it in paying just compensation for the expropriated property is entirely separate and distinct from the farmers-beneficiaries obligations to pay regular amortizations for the properties transferred to them. Republic Act No. 6657 (The Comprehensive Agrarian Reform Law, or CARL) provides for the specific source of funding to be used by the government in implementing the agrarian reform program; this funding does not come directly from the payments made by the farmersbeneficiaries.101avvphi1 More to the point, under the CARL, the amount the farmers-beneficiaries must pay the LBP for their land is, for the most part, subsidized by the State and is not equivalent to the actual cost of the land that the Department of Agrarian Reform paid to the original landowners. Section 26, Chapter VII of the CARL provides: SEC. 26. Payment by Beneficiaries. - Lands awarded pursuant to this Act shall be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations at six percent (6%) interest per annum. The payments for the first three (3) years after the award may be at reduced amounts as established by the PARC: Provided, That the first five (5) annual payments may not be more than five percent (5%) of the value of the annual gross productions paid as established by the DAR. Should the scheduled annual payments after the fifth year exceed ten percent (10) of the annual gross production and the failure to produce accordingly is not due to the beneficiary's fault, the LBP may reduce the interest rate or reduce the principal obligation to make the payment affordable. Interpreting this provision of the law, DAR Administrative Order No. 6, Series of 1993 provides: A. As a general rule, land awarded pursuant to E.O. 229 and R.A. 6657 shall be repaid by the Agrarian Reform Beneficiary (ARB) to LANDBANK in thirty (30) annual amortizations at six (6%) percent interest per annum. The annual amortization shall start one year from date of Certificate of Landownership Award (CLOA) registration. B. The payments by the ARBs for the first three (3) years shall be two and a half percent (2.5%) of AGP [Annual Gross Production] and five percent (5.0%) of AGP for the fourth and fifth years. To further make the payments affordable, the ARBs shall pay ten percent

(10%) of AGP or the regular amortization, whichever is lower, from the sixth (6th) to the thirtieth (30th) year. Clearly, the payments made by the farmers-beneficiaries to the LBP are primarily based on a fixed percentage of their annual gross production, or the value of the annual yield/produce of the land awarded to them.11 The cost of the land will only be considered as the basis for the payments made by the farmers-beneficiaries when this amount is lower than the amount based on the annual gross production. Thus, there is no basis for the LBP to claim that our ruling has violated the letter and spirit of the social justice provision of the 1987 Constitution. On the contrary, our ruling is made in accordance with the intent of the 1987 Constitution. Motion for Oral Arguments We deny as well the LBPs motion to set the case for oral arguments. The submissions of the parties, as well as the records of the case, have already provided this Court with enough arguments and particulars to rule on the issues involved. Oral arguments at this point would be superfluous and would serve no useful purpose. The OSGs Intervention The interest of the Republic, for whom the OSG speaks, has been amply protected through the direct action of petitioner LBP the government instrumentality created by law to provide timely and adequate financial support in all phases involved in the execution of needed agrarian reform. The OSG had every opportunity to intervene through the long years that this case had been pending but it chose to show its hand only at this very late stage when its presence can only serve to delay the final disposition of this case. The arguments the OSG presents, furthermore, are issues that this Court has considered in the course of resolving this case. Thus, every reason exists to deny the intervention prayed for. WHEREFORE, premises considered, the respondents second motion for reconsideration and the motion to set the case for oral arguments are hereby DENIED WITH ABSOLUTE FINALITY. The motion for intervention filed by the Office of the Solicitor General is, likewise, denied. We reiterate, under pain of contempt if our directive is disregarded or disobeyed, that no further pleadings shall be entertained. Let judgment be entered in due course. SO ORDERED. ARTURO D. BRION Associate Justice Republic of the Philippines SUPREME COURT Baguio City THIRD DIVISION

G.R. No. 167022

April 4, 2011

LICOMCEN INCORPORATED, Petitioner, vs. FOUNDATION SPECIALISTS, INC., Respondent. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 169678 FOUNDATION SPECIALISTS, INC., Petitioner, vs. LICOMCEN INCORPORATED, Respondent. DECISION BRION, J.: THE FACTS The petitioner, LICOMCEN Incorporated (LICOMCEN), is a domestic corporation engaged in the business of operating shopping malls in the country. In March 1997, the City Government of Legaspi awarded to LICOMCEN, after a public bidding, a lease contract over a lot located in the central business district of the city. Under the contract, LICOMCEN was obliged to finance the construction of a commercial complex/mall to be known as the LCC Citimall (Citimall). It was also granted the right to operate and manage Citimall for 50 years, and was, thereafter, required to turn over the ownership and operation to the City Government.1 For the Citimall project, LICOMCEN hired E.S. de Castro and Associates (ESCA) to act as its engineering consultant. Since the Citimall was envisioned to be a high-rise structure, LICOMCEN contracted respondent Foundation Specialists, Inc. (FSI) to do initial construction works, specifically, the construction and installation of bored piles foundation.2 LICOMCEN and FSI signed the Construction Agreement,3 and the accompanying Bid Documents4 and General Conditions of Contract5 (GCC) on September 1, 1997. Immediately thereafter, FSI purchased the materials needed for the Citimall6 project and began working in order to meet the 90-day deadline set by LICOMCEN. On December 16, 1997, LICOMCEN sent word to FSI that it was considering major design revisions and the suspension of work on the Citimall project. FSI replied on December 18, 1997, expressing concern over the revisions and the suspension, as it had fully mobilized its manpower and equipment, and had ordered the delivery of steel bars. FSI also asked for the payment of accomplished work amounting to P3,627,818.00.7 A series of correspondence between LICOMCEN and FSI then followed.

ESCA wrote FSI on January 6, 1998, stating that the revised design necessitated a change in the bored piles requirement and a substantial reduction in the number of piles. Thus, ESCA proposed to FSI that only 50% of the steel bars be delivered to the jobsite and the rest be shipped back to Manila.8 Notwithstanding this instruction, all the ordered steel bars arrived in Legaspi City on January 14, 1998.9 On January 15, 1998, LICOMCEN instructed FSI to "hold all construction activities on the project,"10 in view of a pending administrative case against the officials of the City Government of Legaspi and LICOMCEN filed before the Ombudsman (OMB-ADM-1-97-0622).11 On January 19, 1998, ESCA formalized the suspension of construction activities and ordered the constructions demobilization until the case was resolved.12 In response, FSI sent ESCA a letter, dated February 3, 1998, requesting payment of costs incurred on account of the suspension which totaled P22,667,026.97.13 FSI repeated its demand for payment on March 3, 1998.14 ESCA replied to FSIs demands for payment on March 24, 1998, objecting to some of the claims.15 It denied the claim for the cost of the steel bars that were delivered, since the delivery was done in complete disregard of its instructions. It further disclaimed liability for the other FSI claims based on the suspension, as its cause was not due to LICOMCENs fault. FSI rejected ESCAs evaluation of its claims in its April 15, 1998 letter.16 On March 14, 2001, FSI sent a final demand letter to LICOMCEN for payment of P29,232,672.83.17 Since LICOMCEN took no positive action on FSIs demand for payment,18 FSI filed a petition for arbitration with the Construction Industry Arbitration Commission (CIAC) on October 2, 2002, docketed as CIAC Case No. 37-2002.19 In the arbitration petition, FSI demanded payment of the following amounts: a. Unpaid accomplished work billings. P 1,264,404.12 b. Material costs at site.. 15,143,638.51 c. Equipment and labor standby costs.. 3,058,984.34 d. Unrealized gross profit.. 9,023,575.29 e. Attorneys fees.. 300,000.00 f. Interest expenses ... equivalent to 15% of the total claim

LICOMCEN again denied liability for the amounts claimed by FSI. It justified its decision to indefinitely suspend the Citimall project due to the cases filed against it involving its Lease Contract with the City Government of Legaspi. LICOMCEN also assailed the CIACs jurisdiction, contending that FSIs claims were matters not subject to arbitration under GC-61 of the GCC, but one that should have been filed before the regular courts of Legaspi City pursuant to GC-05.20 During the preliminary conference of January 28, 2003, LICOMCEN reiterated its objections to the CIACs jurisdiction, which the arbitrators simply noted. Both FSI and LICOMCEN then proceeded to draft the Terms of Reference.21

On February 4, 2003, LICOMCEN, through a collaborating counsel, filed its Ex Abundati Ad Cautela Omnibus Motion, insisting that FSIs petition before the CIAC should be dismissed for lack of jurisdiction; thus, it prayed for the suspension of the arbitration proceedings until the issue of jurisdiction was finally settled. The CIAC denied LICOMCENs motion in its February 20, 2003 order,22 finding that the question of jurisdiction depends on certain factual conditions that have yet to be established by ample evidence. As the CIACs February 20, 2003 order stood uncontested, the arbitration proceedings continued, with both parties actively participating. The CIAC issued its decision on July 7, 2003,23 ruling in favor of FSI and awarding the following amounts: a. Unpaid accomplished work billings. P 1,264,404.12 2,957,989.94

b. Material costs at site 14,643,638.51 c. Equipment and labor standby costs d. Unrealized gross profit 5,120,000.00 LICOMCEN was also required to bear the costs of arbitration in the total amount of P474,407.95. LICOMCEN appealed the CIACs decision before the Court of Appeals (CA). On November 23, 2004, the CA upheld the CIACs decision, modifying only the amounts awarded by (a) reducing LICOMCENs liability for material costs at site to P5,694,939.87, and (b) deleting its liability for equipment and labor standby costs and unrealized gross profit; all the other awards were affirmed.24 Both parties moved for the reconsideration of the CAs Decision; LICOMCENs motion was denied in the CAs February 4, 2005 Resolution, while FSIs motion was denied in the CAs September 13, 2005 Resolution. Hence, the parties filed their own petition for review on certiorari before the Court.25 LICOMCENs Arguments LICOMCEM principally raises the question of the CIACs jurisdiction, insisting that FSIs claims are non-arbitrable. In support of its position, LICOMCEN cites GC-61 of the GCC: GC-61. DISPUTES AND ARBITRATION Should any dispute of any kind arise between the LICOMCEN INCORPORATED and the Contractor [referring to FSI] or the Engineer [referring to ESCA] and the Contractor in connection with, or arising out of the execution of the Works, such dispute shall first be referred to and settled by the LICOMCEN, INCORPORATED who shall within a period of thirty (30) days after being formally requested by either party to resolve the dispute, issue a written decision to the Engineer and Contractor. Such decision shall be final and binding upon the parties and the Contractor shall proceed with the execution of the Works with due diligence notwithstanding any Contractor's objection to the

decision of the Engineer. If within a period of thirty (30) days from receipt of the LICOMCEN, INCORPORATED's decision on the dispute, either party does not officially give notice to contest such decision through arbitration, the said decision shall remain final and binding. However, should any party, within thirty (30) days from receipt of the LICOMCEN, INCORPORATED's decision, contest said decision, the dispute shall be submitted for arbitration under the Construction Industry Arbitration Law, Executive Order 1008. The arbitrators appointed under said rules and regulations shall have full power to open up, revise and review any decision, opinion, direction, certificate or valuation of the LICOMCEN, INCORPORATED. Neither party shall be limited to the evidence or arguments put before the LICOMCEN, INCORPORATED for the purpose of obtaining his said decision. No decision given by the LICOMCEN, INCORPORATED shall disqualify him from being called as a witness and giving evidence in the arbitration. It is understood that the obligations of the LICOMCEN, INCORPORATED, the Engineer and the Contractor shall not be altered by reason of the arbitration being conducted during the progress of the Works.26 LICOMCEN posits that only disputes "in connection with or arising out of the execution of the Works" are subject to arbitration. LICOMCEN construes the phrase "execution of the Works" as referring to the physical construction activities, since "Works" under the GCC specifically refer to the "structures and facilities" required to be constructed and completed for the Citimall project.27 It considers FSIs claims as mere contractual monetary claims that should be litigated before the courts of Legaspi City, as provided in GC-05 of the GCC: GC-05. JURISDICTION Any question between the contracting parties that may arise out of or in connection with the Contract, or breach thereof, shall be litigated in the courts of Legaspi City except where otherwise specifically stated or except when such question is submitted for settlement thru arbitration as provided herein.28 LICOMCEN also contends that FSI failed to comply with the condition precedent for arbitration laid down in GC-61 of the GCC. An arbitrable dispute under GC-61 must first be referred to and settled by LICOMCEN, which has 30 days to resolve it. If within a period of 30 days from receipt of LICOMCENs decision on the dispute, either party does not officially give notice to contest such decision through arbitration, the said decision shall remain final and binding. However, should any party, within 30 days from receipt of LICOMCENs decision, contest said decision, the dispute shall be submitted for arbitration under the Construction Industry Arbitration Law. LICOMCEN considers its March 24, 1998 letter as its final decision on FSIs claims, but declares that FSIs reply letter of April 15, 1998 is not the "notice to contest" required by GC-61 that authorizes resort to arbitration before the CIAC. It posits that nothing in FSIs April 15, 1998 letter states that FSI will avail of arbitration as a mode to settle its dispute with LICOMCEN. While FSIs final demand letter of March 14, 2001 mentioned its intention to refer the matter to arbitration, LICOMCEN declares that the letter was made three years after its March 24, 1998 letter, hence, long after the 30-day period provided in GC-61. Indeed, FSI filed

the petition for arbitration with the CIAC only on October 2, 2002.29 Considering FSIs delays in asserting its claims, LICOMCEN also contends that FSIs action is barred by laches. With respect to the monetary claims of FSI, LICOMCEM alleges that the CA erred in upholding its liability for material costs at site for the reinforcing steel bars in the amount of P5,694,939.87, computed as follows30: 2nd initial rebar requirements purchased from Pag-Asa Steel Works, Inc.. Reinforcing steel bars purchased from ARCA Industrial Sales (total net weight of 744,197.66 kilograms) 50% of net amount due. Subtotal. Less Purchase cost of steel bars by Ramon Quinquileria.. TOTAL LIABILITY OF LICOMCEN TO FSI FOR MATERIAL COSTS AT SITE... P 799,506.83 5,395,433.04 6,194,939.87

(500,000.00) 5,694,939.87

Citing GC-42(2) of the GCC, LICOMCEN says it shall be liable to pay FSI "[t]he cost of materials or goods reasonably ordered for the Permanent or Temporary Works which have been delivered to the Contractor but not yet used, and which delivery has been certified by the Engineer."31 None of these requisites were allegedly complied with. It contends that FSI failed to establish that the steel bars delivered in Legaspi City, on January 14, 1998, were for the Citimall project. In fact, the steel bars were delivered not at the site of the Citimall project, but at FSIs batching plant called Tuanzon compound, a few hundred meters from the site. Even if delivery to Tuanzon was allowed, the delivery was done in violation of ESCAs instruction to ship only 50% of the materials. Advised as early as December 1997 to suspend the works, FSI proceeded with the delivery of the steel bars in January 1998. LICOMCEN declared that it should not be made to pay for costs that FSI willingly incurred for itself.32 Assuming that LICOMCEN is liable for the costs of the steel bars, it argues that its liability should be minimized by the fact that FSI incurred no actual damage from the purchase and delivery of the steel bars. During the suspension of the works, FSI sold 125,000 kg of steel bars for P500,000.00 to a third person (a certain Ramon Quinquileria). LICOMCEN alleges that FSI sold the steel bars for a ridiculously low price of P 4.00/kilo, when the prevailing rate was P20.00/kilo. The sale could have garnered a higher price that would offset LICOMCENs liability. LICOMCEN also wants FSI to account for and deliver to it the remaining 744 metric tons of steel bars not sold. Otherwise, FSI would be unjustly enriched at LICOMCENs expense, receiving payment for materials not delivered to LICOMCEN.33 LICOMCEN also disagrees with the CA ruling that declared it solely liable to pay the costs of arbitration. The ruling was apparently based on the finding that LICOMCENs "failure or refusal to meet its obligations, legal, financial, and moral, caused FSI to bring the dispute to arbitration."34 LICOMCEN asserts that it was FSIs decision to proceed with the delivery of the

steel bars that actually caused the dispute; it insists that it is not the party at fault which should bear the arbitration costs.35 FSIs Arguments FSI takes exception to the CA ruling that modified the amount for material costs at site, and deleted the awards for equipment and labor standby costs and unrealized profits. Proof of damage to FSI is not required for LICOMCEN to be liable for the material costs of the steel bars. Under GC-42, it is enough that the materials were delivered to the contractor, although not used. FSI said that the 744 metric tons of steel bars were ordered and paid for by it for the Citimall project as early as November 1997. If LICOMCEN contends that these were procured for other projects FSI also had in Legaspi City, it should have presented proof of this claim, but it failed to do so.36 ESCAs January 6, 1998 letter simply suggested that only 50% of the steel bars be shipped to Legaspi City; it was not a clear and specific directive. Even if it was, the steel bars were ordered and paid for long before the notice to suspend was given; by then, it was too late to stop the delivery. FSI also claims that since it believed in good faith that the Citimall project was simply suspended, it expected work to resume soon after and decided to proceed with the shipment.37 Contrary to LICOMCENs arguments, GC-42 of the GCC does not require delivery of the materials at the site of the Citimall project; it only requires delivery to the contractor, which is FSI. Moreover, the Tuanzon compound, where the steel bars were actually delivered, is very close to the Citimall project site. FSI contends that it is a normal construction practice for contractors to set up a "staging site," to prepare the materials and equipment to be used, rather than stock them in the crowded job/project site. FSI also asserts that it was useless to have the delivery certified by ESCA because by then the Citimall project had been suspended. It would be unfair to demand FSI to perform an act that ESCA and LICOMCEN themselves had prevented from happening.38 The CA deleted the awards for equipment and labor standby costs on the ground that FSIs documentary evidence was inadequate. FSI finds the ruling erroneous, since LICOMCEN never questioned the list of employees and equipments employed and rented by FSI for the duration of the suspension.39 FSI also alleges that LICOMCEN maliciously and unlawfully suspended the Citimall project. While LICOMCEN cited several other cases in its petition for review on certiorari as grounds for suspending the works, its letters/notices of suspension only referred to one case, OMB-ADM-197-0622, an administrative case before the Ombudsman that was dismissed as early as October 12, 1998. LICOMCEN never notified FSI of the dismissal of this case. More importantly, no restraining order or injunction was issued in any of these cases to justify the suspension of the Citimall project.40 FSI posits that LICOMCENs true intent was to terminate its contract with it, but, to avoid paying damages for breach of contract, simply declared it as "indefinitely suspended." That LICOMCEN conducted another public bidding for the "new designs" is a telling indication of LICOMCENs intent to ease out FSI.41 Thus, FSI states that LICOMCENs

bad faith in indefinitely suspending the Citimall project entitles it to claim unrealized profit. The restriction under GC-41 that "[t]he contractor shall have no claim for anticipated profits on the work thus terminated,"42 will not apply because the stipulation refers to a contract lawfully and properly terminated. FSI seeks to recover unrealized profits under Articles 1170 and 2201 of the Civil Code. THE COURTS RULING The jurisdiction of the CIAC The CIAC was created through Executive Order No. 1008 (E.O. 1008), in recognition of the need to establish an arbitral machinery that would expeditiously settle construction industry disputes. The prompt resolution of problems arising from or connected with the construction industry was considered of necessary and vital for the fulfillment of national development goals, as the construction industry provides employment to a large segment of the national labor force and is a leading contributor to the gross national product.43 Section 4 of E.O. 1008 states: Sec. 4. Jurisdiction. The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof. These disputes may involve government or private contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration. The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and workmanship; violation of the terms of agreement; interpretation and/or application of contractual time and delays; maintenance and defects; payment, default of employer or contractor and changes in contract cost. Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall continue to be covered by the Labor Code of the Philippines. The jurisdiction of courts and quasi-judicial bodies is determined by the Constitution and the law.44 It cannot be fixed by the will of the parties to a dispute;45 the parties can neither expand nor diminish a tribunals jurisdiction by stipulation or agreement. The text of Section 4 of E.O. 1008 is broad enough to cover any dispute arising from, or connected with construction contracts, whether these involve mere contractual money claims or execution of the works.46 Considering the intent behind the law and the broad language adopted, LICOMCEN erred in insisting on its restrictive interpretation of GC-61. The CIACs jurisdiction cannot be limited by the parties stipulation that only disputes in connection with or arising out of the physical construction activities (execution of the works) are arbitrable before it. In fact, all that is required for the CIAC to acquire jurisdiction is for the parties to a construction contract to agree to submit their dispute to arbitration. Section 1, Article III of the 1988 CIAC Rules of Procedure (as amended by CIAC Resolution Nos. 2-91 and 3-93) states:

Section 1. Submission to CIAC Jurisdiction. An arbitration clause in a construction contract or a submission to arbitration of a construction dispute shall be deemed an agreement to submit an existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a different arbitration institution or arbitral body in such contract or submission. When a contract contains a clause for the submission of a future controversy to arbitration, it is not necessary for the parties to enter into a submission agreement before the claimant may invoke the jurisdiction of CIAC. An arbitration agreement or a submission to arbitration shall be in writing, but it need not be signed by the parties, as long as the intent is clear that the parties agree to submit a present or future controversy arising from a construction contract to arbitration. In HUTAMA-RSEA Joint Operations, Inc. v. Citra Metro Manila Tollways Corporation,47 the Court declared that "the bare fact that the parties x x x incorporated an arbitration clause in [their contract] is sufficient to vest the CIAC with jurisdiction over any construction controversy or claim between the parties. The arbitration clause in the construction contract ipso facto vested the CIAC with jurisdiction." Under GC-61 and GC-05 of the GCC, read singly and in relation with one another, the Court sees no intent to limit resort to arbitration only to disputes relating to the physical construction activities. First, consistent with the intent of the law, an arbitration clause pursuant to E.O. 1008 should be interpreted at its widest signification. Under GC-61, the voluntary arbitration clause covers any dispute of any kind, not only arising of out the execution of the works but also in connection therewith. The payments, demand and disputed issues in this case namely, work billings, material costs, equipment and labor standby costs, unrealized profits all arose because of the construction activities and/or are connected or related to these activities. In other words, they are there because of the construction activities. Attorneys fees and interests payment, on the other hand, are costs directly incidental to the dispute. Hence, the scope of the arbitration clause, as worded, covers all the disputed items. Second and more importantly, in insisting that contractual money claims can be resolved only through court action, LICOMCEN deliberately ignores one of the exceptions to the general rule stated in GC-05: GC-05. JURISDICTION Any question between the contracting parties that may arise out of or in connection with the Contract, or breach thereof, shall be litigated in the courts of Legaspi City except where otherwise specifically stated or except when such question is submitted for settlement thru arbitration as provided herein. The second exception clause authorizes the submission to arbitration of any dispute between LICOMCEM and FSI, even if the dispute does not directly involve the execution of physical construction works. This was precisely the avenue taken by FSI when it filed its petition for arbitration with the CIAC.

If the CIACs jurisdiction can neither be enlarged nor diminished by the parties, it also cannot be subjected to a condition precedent. GC-61 requires a party disagreeing with LICOMCENs decision to "officially give notice to contest such decision through arbitration" within 30 days from receipt of the decision. However, FSIs April 15, 1998 letter is not the notice contemplated by GC-61; it never mentioned FSIs plan to submit the dispute to arbitration and instead requested LICOMCEN to reevaluate its claims. Notwithstanding FSIs failure to make a proper and timely notice, LICOMCENs decision (embodied in its March 24, 1998 letter) cannot become "final and binding" so as to preclude resort to the CIAC arbitration. To reiterate, all that is required for the CIAC to acquire jurisdiction is for the parties to agree to submit their dispute to voluntary arbitration: [T]he mere existence of an arbitration clause in the construction contract is considered by law as an agreement by the parties to submit existing or future controversies between them to CIAC jurisdiction, without any qualification or condition precedent. To affirm a condition precedent in the construction contract, which would effectively suspend the jurisdiction of the CIAC until compliance therewith, would be in conflict with the recognized intention of the law and rules to automatically vest CIAC with jurisdiction over a dispute should the construction contract contain an arbitration clause.48 The CIAC is given the original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines.49 This jurisdiction cannot be altered by stipulations restricting the nature of construction disputes, appointing another arbitral body, or making that bodys decision final and binding. The jurisdiction of the CIAC to resolve the dispute between LICOMCEN and FSI is, therefore, affirmed. The validity of the indefinite suspension of the works on the Citimall project Before the Court rules on each of FSIs contractual monetary claims, we deem it important to discuss the validity of LICOMCENs indefinite suspension of the works on the Citimall project. We quote below two contractual stipulations relevant to this issue: GC-38. SUSPENSION OF WORKS The Engineer [ESCA] through the LICOMCEN, INCORPORATED shall have the authority to suspend the Works wholly or partly by written order for such period as may be deemed necessary, due to unfavorable weather or other conditions considered unfavorable for the prosecution of the Works, or for failure on the part of the Contractor to correct work conditions which are unsafe for workers or the general public, or failure or refusal to carry out valid orders, or due to change of plans to suit field conditions as found necessary during construction, or to other factors or causes which, in the opinion of the Engineer, is necessary in the interest of the Works and to the LICOMCEN, INCORPORATED. The Contractor [FSI] shall immediately comply with such order to suspend the work wholly or partly directed.

In case of total suspension or suspension of activities along the critical path of the approved PERT/CPM network and the cause of which is not due to any fault of the Contractor, the elapsed time between the effective order for suspending work and the order to resume work shall be allowed the Contractor by adjusting the time allowed for his execution of the Contract Works. The Engineer through LICOMCEN, INCORPORATED shall issue the order lifting the suspension of work when conditions to resume work shall have become favorable or the reasons for the suspension have been duly corrected.50 GC-41 LICOMCEN, INCORPORATED's RIGHT TO SUSPEND WORK OR TERMINATE THE CONTRACT xxxx 2. For Convenience of LICOMCEN, INCORPORATED If any time before completion of work under the Contract it shall be found by the LICOMCEN, INCORPORATED that reasons beyond the control of the parties render it impossible or against the interest of the LICOMCEN, INCORPORATED to complete the work, the LICOMCEN, INCORPORATED at any time, by written notice to the Contractor, may discontinue the work and terminate the Contract in whole or in part. Upon the issuance of such notice of termination, the Contractor shall discontinue to work in such manner, sequence and at such time as the LICOMCEN, INCORPORATED/Engineer may direct, continuing and doing after said notice only such work and only until such time or times as the LICOMCEN, INCORPORATED/Engineer may direct.51 Under these stipulations, we consider LICOMCENs initial suspension of the works valid. GC38 authorizes the suspension of the works for factors or causes which ESCA deems necessary in the interests of the works and LICOMCEN. The factors or causes of suspension may pertain to a change or revision of works, as cited in the December 16, 1997 and January 6, 1998 letters of ESCA, or to the pendency of a case before the Ombudsman (OMB-ADM-1-97-0622), as cited in LICOMCENs January 15, 1998 letter and ESCAs January 19, 1998 and February 17, 1998 letters. It was not necessary for ESCA/LICOMCEN to wait for a restraining or injunctive order to be issued in any of the cases filed against LICOMCEN before it can suspend the works. The language of GC-38 gives ESCA/LICOMCEN sufficient discretion to determine whether the existence of a particular situation or condition necessitates the suspension of the works and serves the interests of LICOMCEN.1avvphi1 Although we consider the initial suspension of the works as valid, we find that LICOMCEN wrongfully prolonged the suspension of the works (or "indefinite suspension" as LICOMCEN calls it). GC-38 requires ESCA/LICOMCEN to "issue an order lifting the suspension of work when conditions to resume work shall have become favorable or the reasons for the suspension have been duly corrected." The Ombudsman case (OMB-ADM-1-97-0622), which ESCA and LICOMCEN cited in their letters to FSI as a ground for the suspension, was dismissed as early as October 12, 1998, but neither ESCA nor LICOMCEN informed FSI of this development. The pendency of the other cases52 may justify the continued suspension of the works, but

LICOMCEN never bothered to inform FSI of the existence of these cases until the arbitration proceedings commenced. By May 28, 2002, the City Government of Legaspi sent LICOMCEN a notice instructing it to proceed with the Citimall project;53 again, LICOMCEN failed to relay this information to FSI. Instead, LICOMCEN conducted a rebidding of the Citimall project based on the new design.54 LICOMCENs claim that the rebidding was conducted merely to get cost estimates for the new design goes against the established practice in the construction industry. We find the CIACs discussion on this matter relevant: But what is more appalling and disgusting is the allegation x x x that the x x x invitation to bid was issued x x x solely to gather cost estimates on the redesigned [Citimall project] x x x. This Arbitral Tribunal finds said act of asking for bids, without any intention of awarding the project to the lowest and qualified bidder, if true, to be extremely irresponsible and highly unprofessional. It might even be branded as fraudulent x x x [since] the invited bidders [were required] to pay P2,000.00 each for a set of the new plans, which amount was non-refundable. The presence of x x x deceit makes the whole story repugnant and unacceptable.55 LICOMCENs omissions and the imprudent rebidding of the Citimall project are telling indications of LICOMCENs intent to ease out FSI and terminate their contract. As with GC-31, GC-42(2) grants LICOMCEN ample discretion to determine what reasons render it against its interest to complete the work in this case, the pendency of the other cases and the revised designs for the Citimall project. Given this authority, the Court fails to the see the logic why LICOMCEN had to resort to an "indefinite suspension" of the works, instead of outrightly terminating the contract in exercise of its rights under GC-42(2). We now proceed to discuss the effects of these findings with regard to FSIs monetary claims against LICOMCEN. The claim for material costs at site GC-42 of the GCC states: GC-42 PAYMENT FOR TERMINATED CONTRACT If the Contract is terminated as aforesaid, the Contractor will be paid for all items of work executed, satisfactorily completed and accepted by the LICOMCEN, INCORPORATED up to the date of termination, at the rates and prices provided for in the Contract and in addition: 1. The cost of partially accomplished items of additional or extra work agreed upon by the LICOMCEN, INCORPORATED and the Contractor. 2. The cost of materials or goods reasonably ordered for the Permanent or Temporary Works which have been delivered to the Contractor but not yet used and which delivery has been certified by the Engineer. 3. The reasonable cost of demobilization

For any payment due the Contractor under the above conditions, the LICOMCEN, INCORPORATED, however, shall deduct any outstanding balance due from the Contractor for advances in respect to mobilization and materials, and any other sum the LICOMCEN, INCORPORATED is entitled to be credited.56 For LICOMCEN to be liable for the cost of materials or goods, item two of GC-42 requires that a. the materials or goods were reasonably ordered for the Permanent or Temporary Works; b. the materials or goods were delivered to the Contractor but not yet used; and c. the delivery was certified by the Engineer. Both the CIAC and the CA agreed that these requisites were met by FSI to make LICOMCEN liable for the cost of the steel bars ordered for the Citimall project; the two tribunals differed only to the extent of LICOMCENs liability because the CA opined that it should be limited only to 50% of the cost of the steel bars. A review of the records compels us to uphold the CAs finding. Prior to the delivery of the steel bars, ESCA informed FSI of the suspension of the works; ESCAs January 6, 1998 letter reads: As per our information to you on December 16, 1997, a major revision in the design of the Legaspi Citimall necessitated a change in the bored piles requirement of the project. The change involved a substantial reduction in the number and length of piles. We expected that you would have suspended the deliveries of the steel bars until the new design has been approved. According to you[,] the steel bars had already been paid and loaded and out of Manila on said date. In order to avoid double handling, storage, security problems, we suggest that only 50% of the total requirement of steel bars be delivered at jobsite. The balance should be returned to Manila where storage and security is better. In order for us to consider additional cost due to the shipping of the excess steel bars, we need to know the actual dates of purchase, payments and loading of the steel bars. Obviously, we cannot consider the additional cost if you have had the chance to delay the shipping of the steel bars.57 From the above, it appears that FSI was informed of the necessity of suspending the works as early as December 16, 1997. Pursuant to GC-38 of the GCC, FSI was expected to immediately comply with the order to suspend the work.58 Though ESCAs December 16, 1997 notice may not have been categorical in ordering the suspension of the works, FSIs reply letter of December 18, 1997 indicated that it actually complied with the notice to suspend, as it said, "We hope for the early resolution of the new foundation plan and the resumption of work."59 Despite the

suspension, FSI claimed that it could not stop the delivery of the steel bars (nor found the need to do so) because (a) the steel bars were ordered as early as November 1997 and were already loaded in Manila and expected to arrive in Legaspi City by December 23, 1997, and (b) it expected immediate resumption of work to meet the 90-day deadline.60 Records, however, disclose that these claims are not entirely accurate. The memorandum of agreement and sale covering the steel bars specifically stated that these would be withdrawn from the Cagayan de Oro depot, not Manila61; indeed, the bill of lading stated that the steel bars were loaded in Cagayan de Oro on January 11, 1998, and arrived in Legaspi City within three days, on January 14, 1998.62 The loading and delivery of the steel bar thus happened after FSI received ESCAs December 16, 1997 and January 6, 1998 letters days after the instruction to suspend the works. Also, the same stipulation that authorizes LICOMCEN to suspend the works allows the extension of the period to complete the works. The relevant portion of GC-38 states: In case of total suspension x x x and the cause of which is not due to any fault of the Contractor [FSI], the elapsed time between the effective order for suspending work and the order to resume work shall be allowed the Contractor by adjusting the time allowed for his execution of the Contract Works.63 The above stipulation, coupled with the short period it took to ship the steel bars from Cagayan de Oro to Legaspi City, thus negates both FSIs argument and the CIACs ruling64 that there was no necessity to stop the shipment so as to meet the 90-day deadline. These circumstances prove that FSI acted imprudently in proceeding with the delivery, contrary to LICOMCENs instructions. The CA was correct in holding LICOMCEN liable for only 50% of the costs of the steel bars delivered. The claim for equipment and labor standby costs The Court upholds the CAs ruling deleting the award for equipment and labor standby costs. We quote in agreement pertinent portions of the CA decision: The CIAC relied solely on the list of 37 pieces of equipment respondent allegedly rented and maintained at the construction site during the suspension of the project with the prorated rentals incurred x x x. To the mind of this Court, these lists are not sufficient to establish the fact that indeed [FSI] incurred the said expenses. Reliance on said lists is purely speculative x x x the list of equipments is a mere index or catalog of the equipments, which may be utilized at the construction site. It is not the best evidence to prove that said equipment were in fact rented and maintained at the construction site during the suspension of the work. x x x [FSI] should have presented the lease contracts or any similar documents such as receipts of payments x x x. Likewise, the list of employees does not in anyway prove that those employees in the list were indeed at the construction site or were required to be on call should their services be needed and were being paid their salaries during the suspension of the project. Thus, in the absence of sufficient evidence, We deny the claim for equipment and labor standby costs.65

The claim for unrealized profit FSI contends that it is not barred from recovering unrealized profit under GC-41(2), which states: GC-41. LICOMCEN, INCORPORATEDs RIGHT TO SUSPEND WORK OR TERMINATE THE CONTRACT xxxx 2. For Convenience of the LICOMCEN, INCORPORATED x x x. The Contractor [FSI] shall not claim damages for such discontinuance or termination of the Contract, but the Contractor shall receive compensation for reasonable expenses incurred in good faith for the performance of the Contract and for reasonable expenses associated with termination of the Contract. The LICOMCEN, INCORPORATED will determine the reasonableness of such expenses. The Contractor [FSI] shall have no claim for anticipated profits on the work thus terminated, nor any other claim, except for the work actually performed at the time of complete discontinuance, including any variations authorized by the LICOMCEN, INCORPORATED/Engineer to be done. The prohibition, FSI posits, applies only where the contract was properly and lawfully terminated, which was not the case at bar. FSI also took pains in differentiating its claim for "unrealized profit" from the prohibited claim for "anticipated profits"; supposedly, unrealized profit is "one that is built-in in the contract price, while anticipated profit is not." We fail to see the distinction, considering that the contract itself neither defined nor differentiated the two terms. [A] contract must be interpreted from the language of the contract itself, according to its plain and ordinary meaning."66 If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of the stipulations shall control.67 Nonetheless, on account of our earlier discussion of LICOMCENs failure to observe the proper procedure in terminating the contract by declaring that it was merely indefinitely suspended, we deem that FSI is entitled to the payment of nominal damages. Nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, and not for indemnifying the plaintiff for any loss suffered by him.68 Its award is, thus, not for the purpose of indemnification for a loss but for the recognition and vindication of a right. A violation of the plaintiffs right, even if only technical, is sufficient to support an award of nominal damages.69 FSI is entitled to recover the amount of P100,000.00 as nominal damages. The liability for costs of arbitration Under the parties Terms of Reference, executed before the CIAC, the costs of arbitration shall be equally divided between them, subject to the CIACs determination of which of the parties shall eventually shoulder the amount.70 The CIAC eventually ruled that since LICOMCEN was the party at fault, it should bear the costs. As the CA did, we agree with this finding. Ultimately,

it was LICOMCENs imprudent declaration of indefinitely suspending the works that caused the dispute between it and FSI. LICOMCEN should bear the costs of arbitration. WHEREFORE, premises considered, the petition for review on certiorari of LICOMCEN INCORPORATED, docketed as G.R. No. 167022, and the petition for review on certiorari of FOUNDATION SPECIALISTS, INC., docketed as G.R. No. 169678, are DENIED. The November 23, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 78218 is MODIFIED to include the award of nominal damages in favor of FOUNDATION SPECIALISTS, INC. Thus, LICOMCEN INCORPORATED is ordered to pay FOUNDATION SPECIALISTS, INC. the following amounts: a. P1,264,404.12 for unpaid balance on FOUNDATION SPECIALISTS, INC. billings; b. P5,694,939.87 for material costs at site; and c. P100,000.00 for nominal damages. LICOMCEN INCORPORATED is also ordered to pay the costs of arbitration. No costs. SO ORDERED. ARTURO D. BRION Associate Justice Republic of the Philippines SUPREME COURT Baguio City THIRD DIVISION A.M. No. P-11-2922 April 4, 2011 (formerly A.M. OCA IPI No. 03-1778-P) MARY JANE ABANAG, Complainant, vs. NICOLAS B. MABUTE, Court Stenographer I, Municipal Circuit Trial Court (MCTC), Paranas, Samar, Respondent. D E CI S I O N BRION, J.: We resolve the administrative case against Nicolas B. Mabute (respondent), Court Stenographer I in the Municipal Circuit Trial Court (MCTC) of Paranas, Samar, filed by Mary Jane Abanag (complainant) for Disgraceful and Immoral Conduct.

In her verified letter-complaint dated September 19, 2003, the complainant, a 23-year old unmarried woman, alleged that respondent courted her and professed his undying love for her. Relying on respondents promise that he would marry her, she agreed to live with him. She became pregnant, but after several months into her pregnancy, respondent brought her to a "manghihilot" and tried to force her to take drugs to abort her baby. When she did not agree, the respondent turned cold and eventually abandoned her. She became depressed resulting in the loss of her baby. She also stopped schooling because of the humiliation that she suffered. In his comment on the complaint submitted to the Office of the Court Administrator, the respondent vehemently denied the complainants allegations and claimed that the charges against him were baseless, false and fabricated, and were intended to harass him and destroy his reputation. He further averred that Norma Tordesillas, the complainants co-employee, was using the complaint to harass him. Tordesillas resented him because he had chastised her for her arrogant behavior and undesirable work attitude. He believes that the complainants lettercomplaint, which was written in the vernacular, was prepared by Tordesillas who is from Manila and fluent in Tagalog; the respondent would have used the "waray" or English language if she had written the letter-complaint. The complainant filed a Reply, insisting that she herself wrote the letter-complaint. She belied the respondents claim that she was being used by Tordesillas who wanted to get even with him. In a Resolution dated July 29, 2005, the Court referred the letter-complaint to then Acting Executive Judge Carmelita T. Cuares of the Regional Trial Court (RTC) of Catbalogan City, Samar for investigation, report and recommendation. The respondent sought Judge Cuares inhibition from the case, alleging that the Judge was partial and had bias in favor of the complainant; the complainant herself had bragged that she personally knew Judge Cuares. The Court designated Judge Esteban V. dela Pea, who succeeded Judge Cuares as Acting Executive Judge, to continue with the investigation of the case.1 Eventually, Judge Agerico A. Avila took over the investigation when he was designated the Executive Judge of the RTC of Catbalogan City, Samar. In his Report/Recommendation dated June 7, 2010,2 Executive Judge Avila reported on the developments in the hearing of the case. The complainant testified that she met the respondent while she was a member of the Singles for Christ. They became acquainted and they started dating. The relationship blossomed until they lived together in a rented room near the respondents office. The respondent, for his part, confirmed that he met the complainant when he joined the Singles for Christ. He described their liaison as a dating relationship. He admitted that the complainant would join him at his rented room three to four times a week; when the complainant became pregnant, he asked her to stay and live with him. He vehemently denied having brought the complainant to a local "manghihilot" and that he had tried to force her to abort her baby. He surmised that the complainants miscarriage could be related to her epileptic attacks during her pregnancy. The respondent further testified that the complainants mother did not approve of him, but the complainant defied her mother and lived with him. He proposed marriage to the

complainant, but her mother did not like him as a son-in-law and ordered the complainant to return home. The complainant obeyed her mother. They have separated ways since then, but he pledged his undying love for the complainant. The Investigating Judge recommends the dismissal of the complaint against the respondent, reporting that: Normally the personal affair of a court employee who is a bachelor and has maintained an amorous relation with a woman equally unmarried has nothing to do with his public employment. The sexual liaison is between two consenting adults and the consequent pregnancy is but a natural effect of the physical intimacy. Mary Jane was not forced to live with Nicolas nor was she impelled by some devious means or machination. The fact was, she freely acceded to cohabit with him. The situation may-not-be-so-ideal but it does not give cause for administrative sanction. There appears no law which penalizes or prescribes the sexual activity of two unmarried persons. So, the accusation of Mary Jane that Nicolas initiated the abortion was calculated to bring the act within the ambit of an immoral, disgraceful and gross misconduct. Except however as to the self-serving assertion that Mary Jane was brought to a local midwife and forced to take the abortifacient, there was no other evidence to support that it was in fact so. All pointed to a harmonious relation that turned sour. In no small way Mary Jane was also responsible of what befell upon her.3 The Court defined immoral conduct as conduct that is willful, flagrant or shameless, and that shows a moral indifference to the opinion of the good and respectable members of the community.4 To justify suspension or disbarment, the act complained of must not only be immoral, but grossly immoral.5 A grossly immoral act is one that is so corrupt and false as to constitute a criminal act or an act so unprincipled or disgraceful as to be reprehensible to a high degree.6 Based on the allegations of the complaint, the respondents comment, and the findings of the Investigating Judge, we find that the acts complained of cannot be considered as disgraceful or grossly immoral conduct. We find it evident that the sexual relations between the complainant and the respondent were consensual.lawphi1 They met at the Singles for Christ, started dating and subsequently became sweethearts. The respondent frequently visited the complainant at her boarding house and also at her parents residence. The complainant voluntarily yielded to the respondent and they eventually lived together as husband and wife in a rented room near the respondents office. They continued their relationship even after the complainant had suffered a miscarriage. Mere sexual relations between two unmmaried and consenting adults are not enough to warrant administrative sanction for illicit behavior.7 The Court has repeatedly held that voluntary intimacy between a man and a woman who are not married, where both are not under any impediment to marry and where no deceit exists, is neither a criminal nor an unprincipled act that would warrant disbarment or disciplinary action.81avvphi1

While the Court has the power to regulate official conduct and, to a certain extent, private conduct, it is not within our authority to decide on matters touching on employees personal lives, especially those that will affect their and their familys future. We cannot intrude into the question of whether they should or should not marry.9 However, we take this occasion to remind judiciary employees to be more circumspect in their adherence to their obligations under the Code of Professional Responsibility. The conduct of court personnel must be free from any taint of impropriety or scandal, not only with respect to their official duties but also in their behavior outside the Court as private individuals. This is the best way to preserve and protect the integrity and the good name of our courts.10 WHEREFORE, the Court resolves to DISMISS the present administrative complaint against Nicolas B. Mabute, Stenographer 1 of the Municipal Circuit Trial Court, Paranas, Samar, for lack of merit. No costs. SO ORDERED. ARTURO D. BRION Associate Justice