MRM Asset Holdings 2 Inc. vs. Standard Chartered Bank, G.R. No. 202761 (Resolution), [February 10, 2021]

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MRM ASSET HOLDINGS 2 INC. VS. STANDARD CHARTERED BANK

 G.R. No. 202761 (Resolution), [February 10, 2021]

SECOND, LOPEZ, M.V

 

RTC as rehabilitation court; Judicial Review; Mootness; Moot and Academic Issue

 

A case or issue is considered moot and academic when it ceases to present a justiciable controversy by virtue of supervening events, so that an adjudication of the case or a declaration on the issue would be of no practical value or use. The Court will refrain from delving into the merits of the case when legal relief was no longer necessary. Hence, Courts generally decline jurisdiction over such case or dismiss it on the ground of mootness. 

The case involves a complex financial arrangement between Standard Chartered Bank (SCB) and Lehman Brothers Holdings, Inc. (LBHI), leading to loans for Philippine Investment Two (PI Two). Due to LBHI's bankruptcy in the U.S., PI Two underwent rehabilitation. LBHI's bankruptcy triggered rehabilitation proceedings in the Philippines, where SCB intervened. Disputes arose, including SCB's alleged concealment of collaterals and a disagreement over SCB's representation in the Management Committee (ManCom). The Rehabilitation Court issued orders, including one directing SCB to surrender collaterals. The Court of Appeals (CA) later nullified these orders, leading to the current appeal. In CA level, SCB's was excluded from its list of creditor and rehabilitation proceedings are terminated. Despite these events, MRM persisted in seeking the surrender of pledged collaterals.

 

The main issues are whether the CA erred in nullifying the order for SCB to surrender collaterals and in reinstating SCB's membership in the ManCom.

NO. The Supreme Court dismissed the petition as moot and academic. The dissolution of the ManCom, SCB's exclusion as a creditor in the Rehabilitation Plan, and the termination of rehabilitation proceedings rendered the issues moot. The surrender of collaterals was also deemed moot due to a prior CA decision recognizing the sale or transfer of collaterals to another entity. The court declined to pass upon the merits, given the absence of legal relief necessity. The decision emphasized that exceptional circumstances or constitutional issues necessitate addressing moot cases, which were not present in this instance.

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Metropolitan Waterworks and Sewerage System v. Central Board of Assessment Appeals, G.R. No. 215955, [January 13, 2021]

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Metropolitan Waterworks and Sewerage System v. Central Board of Assessment Appeals, G.R. No. 215955, [January 13, 2021]

SECOND, LOPEZ, M.V 

Local Taxation; Real Property Taxation; Remedies of Taxpayer in Local Tax Disputes (RPT); Exhaustion of Administrative Remedies

 

The tax-exempt status of a government instrumentality is not lost when it grants the beneficial use of its real property to a taxable person; only the exemption of the real property ceases in such case. Indeed, it is a fundamental principle in real property taxation that the assessment of real property shall be based on its actual use. The Court has consistently ruled that while the liability for taxes generally rests on the owner of the real property, personal liability for real property taxes may also expressly rest on the entity with the beneficial use of the real property at the time the tax accrues.

 

The case involves MWSS (Metropolitan Waterworks and Sewerage System) disputing the imposition of real property taxes by Pasay City for the taxable year 2008. Established by RA No. 6234 in 1971, MWSS was granted authority over waterworks and sewerage systems in Metro Manila, Rizal, and part of Cavite. In 1997, under RA No. 8041, MWSS entered a concessionaire agreement with Maynilad to service the West Zone, including Pasay City. Pasay City demanded P166,629.36 in real property taxes, prompting MWSS to protest, claiming exemption as a government instrumentality under the Local Government Code (LGC). The LBAA ruled against MWSS, asserting it is a government-owned corporation (GOCC) and subject to taxation. Despite acknowledging MWSS as a government instrumentality, the CBAA upheld the tax, arguing that MWSS's tax exemption under RA No. 6234 had been withdrawn by Section 234 of the LGC. The CA dismissed MWSS's appeal for failure to exhaust administrative remedies. Hence this petition. 

 

Whether it is correct to dismiss the appeal for failure to exhaust administrative remedies.

NO. The CA erred in dismissing MWSS's appeal solely on the ground of the alleged non-exhaustion of administrative remedies under the LGC. Administrative remedies are inapplicable when the issue presented is a pure question of law. A careful reading of MWSS's arguments and allegations reveals that it is assailing the authority of the city assessor and treasurer to assess and collect real property taxes against it. The issue of whether a local government is authorized to assess and collect real property taxes from a government entity is a pure question of law, which is beyond the LBAA and CBAA's jurisdiction. The protest contemplated under Section 252 of the LGC is required when there is question as to the reasonableness or correctness of the amount assessed, while an appeal to the LBAA under Section 226 is fruitful only where questions of fact are involved. When the very authority and power of the assessor to impose the assessment, and of the treasurer to collect real property taxes are in question, the proper recourse is a judicial action. Thus, despite the alleged non-exhaustion of administrative remedies, the Court gives due course to this petition on the ground that the controversy only involves a question of law.

 

Whether the City of Pasay is authorized to assess and collect real property taxes from MWSS.

NO. MWSS is a government instrumentality with corporate powers, not liable to the local government of Pasay City for real property taxes. The tax exemption that its properties carry, however, ceases when their beneficial use has been extended to a taxable person. The liability to pay real property taxes on government-owned properties, the beneficial or actual use of which was granted to a taxable entity, devolves on the taxable beneficial user. Beneficial use means actual use or possession of the property. Actual use refers to the purpose for which the property is principally or predominantly utilized by the person in possession thereof.

The respondents have not alleged that the beneficial use of any of MWSS’s properties was extended to a taxable person. In the absence of any allegation to the contrary, MWSS’s properties in Quezon City are not subject to the levy of real property taxes. Although there was an allegation that the beneficial use of MWSS's properties in Pasay were given to Maynilad by virtue of a concession agreement, this however, was not proved and was merely based on a sweeping conclusion that when MWSS entered into a concession agreement, all its properties were effectively turned over to the concessionaires for their operations. At any rate, the tax-exempt status of a government instrumentality is not lost when it grants the beneficial use of its real property to a taxable person; only the exemption of the real property ceases in such case.

Indeed, it is a fundamental principle in real property taxation that the assessment of real property shall be based on its actual use. The Court has consistently ruled that while the liability for taxes generally rests on the owner of the real property, personal liability for real property taxes may also expressly rest on the entity with the beneficial use of the real property at the time the tax accrues.

 

 

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Central Bay Reclamation and Development Corp. v. Commission on Audit, G.R. No. 252940, [April 5, 2022]

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Central Bay Reclamation and Development Corp. v. Commission on Audit

G.R. No. 252940, [April 5, 2022]

EN BANC, LOPEZ, M.V

 

Property Reclamation; Inalienable lands of Public Domain; Quantum Meruit Principle in Void Government Contracts

Payment for services rendered on account of the government, although based on a void contract, may be granted on the basis of quantum meruit. The principle of quantum meruit allows recovery of an amount to the extent of the reasonable value of the thing or services rendered.

 

This case revolves around the nullification of an Amended Joint Venture Agreement (JVA) between the Philippine Reclamation Authority (PRA) and Central Bay Reclamation and Development Corporation (Central Bay) regarding the acquisition of reclaimed lands. PRA entered an Amended JVA with Central Bay to develop reclaimed islands known as the "Freedom Islands" and reclaim submerged areas in Manila Bay. The Supreme Court nullified this agreement, citing violations of the Constitution which prohibits private corporations from acquiring alienable land of the public domain. Now, Central Bay sought reimbursement from PRA for costs incurred prior to the nullification, eventually agreeing to a Compromise Agreement transferring reclaimed land to Central Bay's qualified assignee to settle the money claims. The Commission on Audit (COA) disapproves of the Compromise Agreement, as it contravened the letter and intent of the constitutional ban against corporate ownership of land. What cannot be done directly cannot be done indirectly. Thus, COA disallow Central Bay’s money claims. 

 

Whether the COA's disapproval of the Compromise Agreement and disallowance of other money claims were proper. 

Yes. The Supreme Court reiterated that the Compromise Agreement allowing Central Bay to assign the reclaimed land is void. It emphasized that the transfer of land to Central Bay's assignee granted Central Bay beneficial ownership violates the constitutional prohibition banning corporation to acquire alienable land of public domain. As the COA aptly observed, the qualified assignee mentioned in the Compromise Agreement can only acquire rights which Central Bay can lawfully exercise. However, Central Bay is a private corporation that cannot own land in the Philippines. Consequently, Central Bay cannot transfer ownership of any land to another party.

However, the Court held that Central Bay is not precluded to recover from PEA the costs incurred in implementing the agreement prior to its declaration of nullity on a quantum meruit basis. It is settled that payment for services rendered on account of the government, although based on a void contract, may be granted on the basis of quantum meruit. The principle of quantum meruit allows recovery of an amount to the extent of the reasonable value of the thing or services rendered, regardless of any agreement as to the value. Similarly, Central Bay may claim reimbursement for the actual costs it incurred in implementing the Amended JVA, provided that the claim is substantiated by supporting documents.

In sum, the COA did not commit grave abuse of discretion when it disapproved the Compromise Agreement and disallowed the money claims, except the amount of ₱714,937,790.29 that was properly established with documentary evidence. The Court reminds that a contract which violates the Constitution is void, and it will not permit to be done indirectly which, because of public policy, cannot be done directly.

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De Lima v. Court of Appeals, G.R. Nos. 199972 & 206118, [August 15, 2022]

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DE LIMA V. COURT OF APPEALS

 G.R. Nos. 199972 & 206118, [August 15, 2022]

SECOND, LOPEZ, M.V 

Gambling licenses; Games and Amusement Board Regulatory Powers 

The Supreme Court ruled that Games and Amusements Board (GAB) had regulatory authority over Meridien's jai alai activities but clarified that it lacked authority within the Cagayan Special Economic Zone and Freeport (CSEZFP). Any enforcement of GAB’s powers and functions inside CSEZFP are enjoined as it were beyond their territorial jurisdiction.

 

Meridien Vista Gaming Corporation (Meridien) was granted a license by the Cagayan Economic Zone Authority (CEZA) to conduct gaming operations, including jai alai, within the Cagayan Special Economic Zone and Freeport (CSEZFP). However, the Office of the Government Corporate Counsel (OGCC) informed CEZA that it lacked the power to authorize jai alai operations without an express legislative franchise. CEZA later revoked the license, citing the absence of an express legislative franchise to authorize jai alai. Meanwhile, Games and Amusements Board (GAB) initiated an investigation into Meridien's jai alai betting stations outside CSEZFP without GAB permits. It discovered Meridien is operating jai alai off-frontons without a permit and issued a Cease-and-Desist Order (CDO). Meridien filed a Complaint for Injunction against the CDO, arguing that GAB had has no regulatory authority over them as they operate under a CEZA-given license. 

 

Whether or not GAB has regulatory authority over Meridien's gaming operations under the CEZA-given authority. 

The Supreme Court ruled that Games and Amusements Board (GAB) had regulatory authority over Meridien's jai alai activities but clarified that it lacked authority within the Cagayan Special Economic Zone and Freeport (CSEZFP). This meant that GAB’s Cease and Desist Order against Meridiens is only valid against its Jai-Alai off-fronton betting stations within Metro Manila and in certain parts of Rizal Province, and no such enforcement is to be validly implemented in Meridien's operations inside the CSEZFP. Any enforcement of GAB’s powers and functions inside CSEZFP are enjoined as it were beyond their territorial jurisdiction.

Examining the text of the assailed CDO, it covers only off-fronton betting stations of Meridien and evidently not the actual conduct and operation of jai alai games inside the CSEZFP. Clearly it was issued for the sole purpose of regulating the off-fronton betting stations outside the economic zone.  In accordance with the purpose of its issuance, the CDO remains to be intended only against off-frontons, was never directed against the holding of Jai Alai games in the CSEZFP. Therefore, CDO is valid.

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Metro Laundry Services v. The Commission Proper, G.R. No. 252411 (Resolution), [February 15, 2022]

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METRO LAUNDRY SERVICES V. THE COMMISSION PROPER

G.R. No. 252411 (Resolution), [February 15, 2022]

EN BANC, LOPEZ, M.V

 

Money Claim against COA; Government acquired service under Void Contract; Payment based on Quantum Meruit 

 

Nullity of contract do not preclude payment of government liability based on quantum meruit. The Court partially granted Metro Laundry's petition, setting aside the COA's decision, and directed the COA to determine the reasonable amount for payment to Metro Laundry Services. It also emphasized that this ruling did not preclude any civil, criminal, or administrative actions against the officials responsible for the contract's irregularities. 

Metro Laundry Services won a public bidding to provide laundry services to Ospital ng Maynila Medical Center (OMMC) for the third and fourth quarters of 2010. The contract ended on December 31, 2010, but OMMC extended the services from January 1, 2011, to December 2011 without a written contract due to lack of funds. Metro Laundry's claim for payment was included in the City of Manila's budget for 2013, but remained unsettled despite various justifications and endorsements affirming the debt. The Commission on Audit (COA) eventually denied Metro Laundry's claim due to the irregularities in the extended contract. 

 

Whether the COA properly denied Metro Laundry's money claim due to the irregularities in the extended contract for laundry services provided to OMMC. 

NO. Here, Supreme Court acknowledged the irregularities in the contract, which violated procurement laws. However, it emphasized that the government, represented by OMMC and the City of Manila, acknowledged Metro Laundry's entitlement to payment for the services rendered despite the contract's invalidity.

Various jurisprudence held where compensation was granted to contractors even with void contracts based on quantum meruit. Quantum meruit refers to the reasonable value of services rendered, irrespective of the agreement's value. The Court held that Metro Laundry fulfilled its services without evidence of bad faith or collusion, and the government had benefitted from these services. While acknowledging the contract's nullity, the Court directed the COA to determine the reasonable value of the services provided by Metro Laundry. This determination would be based on evidence presented, considering the conflicting claims regarding the amount owed. The decision remanded the case to the COA for a post-audit to ascertain the precise amount Metro Laundry should receive. But this ruling did not preclude any civil, criminal, or administrative actions against the officials responsible for the contract's irregularities.

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Republic v. Maneja, G.R. No. 209052, [June 23, 2021]

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REPUBLIC V. MANEJA

G.R. No. 209052, [June 23, 2021]

SECOND, LOPEZ, M.V

 

Dismissal from Service; CSC Rule-making Powers; Administrative law; Finality of CSC Decisions 

The premature of a dismissal from the service entitles the employee to the payment of backwages, even if the employee is not fully exonerated on appeal. The decision of Civil Service Commission Regional Office is not immediately executory and in subject to review by the Civil Service Commission (CSC). The CSC has the power to classify offenses and impose corresponding penalties through its rule-making powers.

  

Lyn Galarrita Cutamora (Cutamora) authorized Eulalia T. Maneja, a Secondary School Teacher, to process her salary loan application with the Manila Teachers Mutual Aid System (MTMAS) for P68,000. Maneja processed the loan but deposited the net proceeds of P13,021 into her own account without Cutamora's endorsement and appropriated the amount. Cutamora filed a complaint against Maneja for dishonesty before the Civil Service Commission Regional Office No. 10 (CSCRO No. X). The CSCRO No. X found Maneja guilty and imposed the penalty of dismissal, which was implemented by the DepEd pending Maneja’s appeal. However, the CSC later modified the penalty to three months' suspension. Maneja then filed for back wages, and questions CSC Resolution No. 06-0538 for invalidly classifying offenses of dishonesty with corresponding penalties of dismissal. 

 

Whether CSC Resolution No. 06-0538, which classified offenses of dishonesty with corresponding penalties, is a valid exercise of the Civil Service Commission's rule-making powers. 

YES. The resolution classifying offenses of dishonesty with corresponding penalties is a valid exercise of the Civil Service Commission's rule-making powers. The CSC is a constitutionally created administrative agency that possesses executive, quasi-judicial and quasi-legislative or rule-making powers. The CSC's rule-making power as a constitutional grant is an aspect of its independence as a constitutional commission. However, as an administrative agency, the rules that the CSC formulates must not override, but must be in harmony with, the law it seeks to apply and implement. In this case, CSC Resolution No. 06-0538 does not contradict EO No. 292 (the law which the CSC seeks to enforce), rather it harmonizes with the law, and is within the CSC's constitutional mandate as the central personnel agency. Hence it is valid.

 

Whether Maneja is entitled to backwages despite not being fully exonerated.

YES. Maneja is entitled to backwages due to the premature execution of the CSCRO No. X decision. The premature execution, while Maneja's appeal was pending, rendered her suspension unjustified. The decision executed was not yet final and executory, making her dismissal illegal. Citing precedent, the court ruled that premature execution of dismissal could warrant an award of back salaries, even if the employee was not completely exonerated from the charges. Maneja's dismissal was unjustified due to the premature execution of CSCRO No. X's decision. Accordingly, Maneja is entitled to backwages.

 

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PNOC-Exploration Corp. v. Commission on Audit, G.R. No. 244461, [September 28, 2021]

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PNOC-EXPLORATION CORP. V. COMMISSION ON AUDIT

G.R. No. 244461 [September 28, 2021]

EN BANC, LOPEZ, M.V

 

Prohibition of Hiring Private Counsels by GOCC and its exceptions; Conformitity of OSG; COA's written concurrence on disbursment of legal fees

 

As a rule, a government agency is provided by law with a legal officer or office who or which can handle its legal requirements or cases in courts. It may not be allowed to hire the services of private lawyers for a fee, chargeable against public funds, unless exceptional or extraordinary circumstances obtain with the written concurrence of the Commission on Audit secured before the employment of a private lawyer or law firm. 

 

PNOC-Exploration Corporation (PNOC-EC) engaged in a dispute with Wilson International Trading Private Limited over demurrage charges and losses amounting to US$1,392,064.53 regarding a steam coal purchase. Wilson initiated arbitration in Singapore, prompting PNOC-EC to seek legal representation in the arbitration proceedings.

PNOC-EC, facing the urgent need for an international legal counsel experienced in arbitration and Singapore law, engaged Baker Botts LLP without securing prior written concurrence from the Commission on Audit (COA). COA suspended the legal fees paid to Baker Botts due to the lack of COA's written concurrence and required PNOC-EC to settle or face disallowance of the amount paid. PNOC-EC post-facto requested COA's written concurrence, but it was denied for being filed more than a year after engaging Baker Botts. 

 

Whether the COA gravely abused its discretion in denying PNOC-EC's belated request for COA's written concurrence in hiring private counsels and the suspension of legal fees. 

NO. Government-owned or controlled corporations (GOCCs) are generally prohibited from hiring private counsels, but exceptions exist under COA Circulars 86-255 and 95-011, requiring written concurrence from the COA in exceptional cases. COA Circular 2021-003, recognizing the impracticality of rigid compliance in urgent situations, exempts GOCCs from the written concurrence requirement under certain conditions. The case was remanded to COA for determination whether PNOC-EC meets the criterion for such exemption, since COA was still in its "initial review" of the retainer agreement when the request for concurrence was denied. The propriety of exempting PNOC-EC from the written concurrence requirement entails the evaluation of purely factual and evidentiary matters, not available on record and beyond the purview of this judicial review.

On the suspension of legal fees, the Court held that compliance or non-compliance with COA's written concurrence is not the sole factor in determining disallowance of legal fees, and liabilities arising from disallowance are subject to post-audit based on existing rules and regulations. The COA Chairperson Aguinaldo mandates for a further post-audit to ascertain the proper disallowance and liabilities.

Therefore, the petition was dismissed without prejudice to COA's determination of exempting PNOC-Exploration Corporation from the written concurrence requirement and conducting a post-audit in accordance with COA Circular 2021-003.

 

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