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Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. Nos. 154470-71September 24, 2012

BANK OF COMMERCE, Petitioner,vs.PLANTERS DEVELOPMENT BANK andBANGKO SENTRAL NG PILIPINAS,Respondent.

x - - - - - - - - - - - - - - - - - - - - - - - x

G.R. Nos. 154589-90

BANGKO SENTRAL NG PILIPINAS,Petitioner,vs.PLANTERS DEVELOPMENT BANK,Respondent.

D E C I S I O N

BRION, J.:

Before the Court are two consolidated petitions forreview on certiorari under Rule 45,1 on purequestions of law, filed by the petitioners Bank ofCommerce (BOC) and the Bangko Sentral ng Pilipinas(BSP). They assail the January 10, 2002 and July 23,2002 Orders (assailed orders) of the Regional Trial

Court (RTC) of Makati City, Branch 143, in Civil CaseNos. 94-3233 and 94-3254. These orders dismissed(i) the petition filed by the Planters DevelopmentBank (PDB), (ii) the "counterclaim" filed by the BOC,and (iii) the counter-complaint/cross-claim forinterpleader filed bythe BSP; and denied the BOCsand the BSPs motions for reconsideration.

THE ANTECEDENTS

The Central Bank bills

I. First set of CB bills

The Rizal Commercial Banking Corporation (RCBC)was the registered owner of seven Central Bank (CB)

bills with a total face value of P 70 million, issued onJanuary 2, 1994 and would mature on January 2,1995.2 As evidenced by a "Detached Assignment"dated April 8, 1994,3 the RCBC sold these CB bills tothe BOC.4 As evidenced by another "DetachedAssignment"5 of even date, the BOC, in turn, soldthese CB bills to the PDB.6 The BOC delivered theDetached Assignments to the PDB.7

On April 15, 1994 (April 15 transaction), the PDB, inturn, sold to the BOC Treasury Bills worth P 70million, with maturity date of June 29, 1994, as

evidenced by a Trading Order8 and a Confirmation ofSale.9 However, instead of delivering the TreasuryBills, the PDB delivered the seven CB bills to theBOC, as evidenced by a PDB Security DeliveryReceipt, bearing a "note: ** substitution in lieu of 06-29-94" referring to the Treasury Bills.10Nevertheless, the PDB retained possession of theDetached Assignments. It is basically the nature of

this April 15 transaction that the PDB and the BOCcannot agree on.

The transfer of the first set of seven CB bills

i. CB bill nos. 45351-53

On April 20, 1994, according to the BOC, it "soldback"11 to the PDB three of the seven CB bills. Inturn, the PDB transferred these three CB bills toBancapital Development Corporation (Bancap). OnApril 25, 1994, the BOC bought the three CB billsfrom Bancap so, ultimately, the BOC reacquiredthese three CB bills,12 particularly described asfollows:

Serial No.: 2BB XM 0453512BB XM 0453522BB XM 045353Quantity: Three (3)Denomination: Php 10 million

Total Face Value: Php 30 millionii. CB bill nos. 45347-50

On April 20, 1994, the BOC sold the remaining four(4) CB bills to Capital One Equities Corporation13which transferred them to All-Asia Capital and TrustCorporation (All Asia). On September 30, 1994, AllAsia further transferred the four CB bills back to theRCBC.14

On November 16, 1994, the RCBC sold back to AllAsia one of these 4 CB bills. When the BSP refused to

release the amount of this CB bill on maturity, theBOC purchased from All Asia this lone CB bill,15particularly described as follows:16

Serial No.: 2BB XM 045348Quantity: One (1)Denomination: Php 10 million

Total Face Value: Php 10 millionAs the registered owner of the remaining three CBbills, the RCBC sold them to IVI Capital and InsularSavings Bank. Again, when the BSP refused torelease the amount of this CB bill on maturity, theRCBC paid back its transferees, reacquired thesethree CB bills and sold them to the BOC ultimately,the BOC acquired these three CB bills.

All in all, the BOC acquired the first set of seven CBbills.

II. Second set of CB bills

On April 19, 1994, the RCBC, as registered owner, (i)sold two CB bills with a total face value of P 20million to the PDB and (ii) delivered to the PDB thecorresponding Detached Assignment.17 The two CBbills were particularly described as follows:

Serial No.: BB XM 045373

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BB XM 045374Issue date: January 3, 1994Maturity date: January 2, 1995Denomination: Php 10 million

Total Face value: Php 20 millionOn even date, the PDB delivered to Bancap the twoCB bills18 (April 19 transaction). In turn, Bancap soldthe CB bills to Al-Amanah Islamic Investment Bank of

the Philippines, which in turn sold it to the BOC.19

PDBs move against the transfer ofthe first and second sets of CB bills

On June 30, 1994, upon learning of the transfersinvolving the CB bills, the PDB informed20 theOfficer-in-Charge of the BSPs Government SecuritiesDepartment,21 Lagrimas Nuqui, of the PDBs claimover these CB bills, based on the DetachedAssignments in its possession. The PDB requestedthe BSP22 to record its claim in the BSPs books,explaining that its non-possession of the CB bills is"on account of imperfect negotiations thereof and/orsubsequent setoff or transfer."23

Nuqui denied the request, invoking Section 8 of CBCircular No. 28 (Regulations Governing Open MarketOperations, Stabilization of the Securities Market,Issue, Servicing and Redemption of the PublicDebt)24 which requires the presentation of the bondbefore a registered bond may be transferred on thebooks of the BSP.25

In a July 25, 1994 letter, the PDB clarified to Nuquithat it was not "asking for the transfer of the CBBills. rather it intends to put the BSP on formalnotice that whoever is in possession of said bills isnot a holder in due course," and, therefore the BSPshould not make payment upon the presentation ofthe CB bills on maturity.26 Nuqui responded that theBSP was "not in a position at that point in time todetermine who is and who is not the holder in due

course since it is not privy to all acts and timeinvolving the transfers or negotiation" of the CB bills.Nuqui added that the BSPs action shall be governedby CB Circular No. 28, as amended.27

On November 17, 1994, the PDB also asked BSPDeputy Governor Edgardo Zialcita that (i) a notationin the BSPs books be made against the transfer,exchange, or payment of the bonds and the paymentof interest thereon; and (ii) the presenter of thebonds upon maturity be required to submit proof as aholder in due course (of the first set of CB bills). ThePDB relied on Section 10 (d) 4 of CB Circular No.28.28 This provision reads:

(4) Assignments effected by fraud Where the

assignment of a registered bond is secured byfraudulent representations, the Central Bank cangrant no relief if the assignment has been honoredwithout notice of fraud. Otherwise, the Central Bank,upon receipt of notice that the assignment is claimedto have been secured by fraudulent representations,or payment of the bond the payment of interestthereon, and when the bond is presented, will callupon the owner and the person presenting the bondto substantiate their respective claims.If it thenappears that the person presenting the bond standsin the position of bonafide holder for value, the

Central Bank, after giving the owner an opportunityto assert his claim, will pass the bond for transfer,exchange or payments, as the case may be, withoutfurther question.

In a December 29, 1994 letter, Nuqui again deniedthe request, reiterating the BSPs previous stand.

In light of these BSP responses and the impendingmaturity of the CB bills, the PDB filed29 with the RTCtwo separate petitions for Mandamus, Prohibition andInjunction with prayer for Preliminary Injunction and

Temporary Restraining Order, docketed as Civil CaseNo. 94-3233 (covering the first set of CB bills) andCivil Case 94-3254 (covering the second set of CBbills) against Nuqui, the BSP and the RCBC.30

The PDB essentially claims that in both the April 15transaction (involving the first set of CB bills) and theApril 19 transaction (involving the second set of CBbills), there was no intent on its part to transfer titleof the CB bills, as shown by its non-issuance of adetached assignment in favor of the BOC andBancap, respectively. The PDB particularly allegesthat it merely "warehoused"31 the first set of CB billswith the BOC, as security collateral.

On December 28, 1994, the RTC temporarilyenjoined Nuqui and the BSP from paying the facevalue of the CB bills on maturity.32 On January 10,1995, the PDB filed an Amended Petition, additionallyimpleading the BOC and All Asia.33 In a January 13,1995 Order, the cases were consolidated.34 On

January 17, 1995, the RTC granted the PDBsapplication for a writ of preliminary prohibitoryinjunction.35 In both petitions, the PDB identicallyprayed:

WHEREFORE, it is respectfully prayed x x x that, afterdue notice and hearing, the Writs of Mandamus,Prohibition and Injunction, be issued; (i) commanding

the BSP and Nuqui, or whoever may take her place -

(a) to record forthwith in the books of BSP the claimof x x x PDB on the [two sets of] CB Bills inaccordance with Section 10 (d) (4) of revised C.B.Circular No. 28; and

(b) also pursuant thereto, when the bills arepresented on maturity date for payment, to call (i) xx x PDB, (ii) x x x RCBC x x x, (iii) x x x BOC x x x,and (iv) x x x ALL-ASIA x x x; or whoever will presentthe [first and second sets of] CB Bills for payment, tosubmit proof as to who stands as the holder in duecourse of said bills, and, thereafter, act accordingly;

and (ii) ordering the BSP and Nuqui to pay jointly and

severally to x x x PDB the following:

(a) the sum of P 100,000.00, as and for exemplarydamages;

(b) the sum of at least P 500,000.00, or such amountas shall be proved at the trial, as and for attorneysfees;

(c) the legal rate of interest from the filing of thisPetition until full payment of the sums mentioned inthis Petition; and

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(d) the costs of suit.36

After the petitions were filed, the BOCacquired/reacquired all the nine CB bills the firstand second sets of CB bills (collectively, subject CBbills).

Defenses of the BSP and of the BOC37

The BOC filed its Answer, praying for the dismissal ofthe petition. It argued that the PDB has no cause ofaction against it since the PDB is no longer the ownerof the CB bills. Contrary to the PDBs "warehousingtheory,"38 the BOC asserted that the (i) April 15transaction and the (ii) April 19 transaction covering both sets of CB bills - were valid contractsof sale, followed by a transfer of title (i) to the BOC(in the April 15 transaction) upon the PDBs deliveryof the 1st set of CB bills in substitution of the

Treasury Bills the PDB originally intended to sell, and(ii) to Bancap (in the April 19 transaction) upon thePDBs delivery of the 2nd set of CB bills to Bancap,likewise by way of substitution.

The BOC adds that Section 10 (d) 4 of CB Circular No.28 cannot apply to the PDBs case because (i) thePDB is not in possession of the CB bills and (ii) theBOC acquired these bills from the PDB, as to the 1stset of CB bills, and from Bancap, as to the 2nd set ofCB bills, in good faith and for value. The BOC alsoasserted a compulsory counterclaim for damagesand attorneys fees.

On the other hand, the BSP countered that the PDBcannot invoke Section 10 (d) 4 of CB Circular No. 28because this section applies only to an "owner" and a"person presenting the bond," of which the PDB isneither. The PDB has not presented to the BSP anyassignment of the subject CB bills, duly recorded inthe BSPs books, in its favor to clothe it with the

status of an "owner."39 According to the BSP

Section 10 d. (4) applies only to a registered bondwhich is assigned. And the issuance of CB Bills x x xare required to be recorded/registered in BSPsbooks. In this regard, Section 4 a. (1) of CB Circular28 provides that registered bonds "may betransferred only by an assignment thereon dulyexecuted by the registered owner or his dulyauthorized representative x x x and duly recorded onthe books of the Central Bank."

x x x x

The alleged assignment of subject CB Bills in PDBsfavor is not recorded/registered in BSPs books.40

(underscoring supplied)

Consequently, when Nuqui and the BSP refused thePDBs request (to record its claim), they were merelyperforming their duties in accordance with CBCircular No. 28.

Alternatively, the BSP asked that an interpleader suitbe allowed between and among the claimants to thesubject CB bills on the position that while it is ableand willing to pay the subject CB bills face value, itis duty bound to ensure that payment is made to the

rightful owner. The BSP prayed that judgment berendered:

a. Ordering the dismissal of the PDBs petition forlack of merit;

b. Determining which between/among [PDB] and theother claimants is/are lawfully entitled to the

ownership of the subject CB bills and the proceedsthereof;

c. x x x;

d. Ordering PDB to pay BSP and Nuqui suchactual/compensatory and exemplary damages asthe RTC may deem warranted; and

e. Ordering PDB to pay Nuqui moral damages andto pay the costs of the suit.41

Subsequent events

The PDB agreed with the BSPs alternative responsefor an interpleader

4. PDB agrees that the various claimants should nowinterplead and substantiate their respective claimson the subject CB bills. However, the total face valueof the subject CB bills should be deposited in escrowwith a private bank to be disposed of only upon orderof the RTC.42

Accordingly, on June 9, 199543 and August 4,1995,44 the BOC and the PDB entered into twoseparate Escrow Agreements.45 The first agreementcovered the first set of CB bills, while the secondagreement covered the second set of CB bills. Theparties agreed to jointly collect from the BSP thematurity proceeds of these CB bills and to depositsaid amount in escrow, "pending final determinationby Court judgment, or amicable settlement as to who

shall be eventually entitled thereto."46 The BOC andthe PDB filed a Joint Motion,47 submitting theseEscrow Agreements for court approval. The RTC gaveits approval to the parties Joint Motion.48Accordingly, the BSP released the maturity proceedsof the CB bills by crediting the Demand DepositAccount of the PDB and of the BOC with 50% each ofthe maturity proceeds of the amount in escrow.49

In view of the BOCs acquisition of all the CB bills, AllAsia50 moved to be dropped as a respondent (withthe PDBs conformity51), which the RTC granted.52

The RCBC subsequently followed suit.53

In light of the developments, on May 4, 1998, theRTC required the parties to manifest their intention

regarding the case and to inform the court of anyamicable settlement; "otherwise, th[e] case shall bedismissed for lack of interest."54 Complying with theRTCs order, the BOC moved (i) that the case be setfor pre-trial and (ii) for further proceeding to resolvethe remaining issues between the BOC and the PDB,particularly on "who has a better right over thesubject CB bills."55 The PDB joined the BOC in itsmotion.56

On September 28, 2000, the RTC granted the BSPsmotion to interplead and, accordingly, required the

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BOC to amend its Answer and for the conflictingclaimants to comment thereon.57 In October 2000,the BOC filed its Amended Consolidated Answer withCompulsory Counterclaim, reiterating its earlierarguments asserting ownership over the subject CBbills.58

In the alternative, the BOC added that even

assuming that there was no effective transfer of thenine CB bills ultimately to the BOC, the PDB remainsobligated to deliver to the BOC, as buyer in the April15 transaction and ultimate successor-in-interest ofthe buyer (Bancap) in the April 19 transaction, eitherthe original subjects of the sales or the value thereof,plus whatever income that may have been earnedduring the pendency of the case.59

That BOC prayed:

1. To declare BOC as the rightful owner of the nine(9) CB bills and as the party entitled to the proceedsthereof as well as all income earned pursuant to thetwo (2) Escrow Agreements entered into by BOC andPDB.

2. In the alternative, ordering PDB to deliver theoriginal subject of the sales transactions or the valuethereof and whatever income earned by way ofinterest at prevailing rate.

Without any opposition or objection from the PDB, onFebruary 23, 2001, the RTC admitted60 the BOCsAmended Consolidated Answer with CompulsoryCounterclaims.

In May 2001, the PDB filed an Omnibus Motion,61questioning the RTCs jurisdiction over the BOCs"additional counterclaims." The PDB argues that itspetitions pray for the BSP (not the RTC) to determinewho among the conflicting claimants to the CB billsstands in the position of the bona fide holder for

value. The RTC cannot entertain the BOCscounterclaim, regardless of its nature, because it isthe BSP which has jurisdiction to determine who isentitled to receive the proceeds of the CB bills.

The BOC opposed62 the PDBs Omnibus Motion. ThePDB filed its Reply.63

In a January 10, 2002 Order, the RTC dismissed thePDBs petition, the BOCs counterclaim and the BSPscounter-complaint/cross-claim for interpleader,holding that under CB Circular No. 28, it has no

jurisdiction (i) over the BOCs "counterclaims" and (ii)to resolve the issue of ownership of the CB bills.64With the denial of their separate motions forReconsideration,65 the BOC and the BSP separately

filed the present petitions for review on certiorari.66

THE BOCS and THE BSPS PETITIONS

The BOC argues that the present cases do not fallwithin the limited provision of Section 10 (d) 4 of CBCircular No. 28, which contemplates only of threesituations: first, where the fraudulent assignment isnot coupled with a notice to the BSP, it can grant norelief; second, where the fraudulent assignment iscoupled with a notice of fraud to the BSP, it will makea notation against the assignment and require the

owner and the holder to substantiate their claims;and third, where the case does not fall on either ofthe first two situations, the BSP will have to awaitaction on the assignment pending settlement of thecase, whether by agreement or by court order.

The PDBs case cannot fall under the first twosituations. With particular regard to the second

situation, CB Circular No. 28 requires that the conflictmust be between an "owner" and a "holder," for theBSP to exercise its limited jurisdiction to resolveconflicting claims; and the word "owner" here refersto the registered owner giving notice of the fraud tothe BSP. The PDB, however, is not the registeredowner nor is it in possession (holder) of the CBbills.67 Consequently, the PDBs case can only fallsunder the third situation which leaves the RTC, as acourt of general jurisdiction, with the authority toresolve the issue of ownership of a registered bond(the CB bills) not falling in either of the first twosituations.

The BOC asserts that the policy considerationsupportive of its interpretation of CB Circular No. 28is to have a reliable system to protect the registeredowner; should he file a notice with the BSP about afraudulent assignment of certain CB bills, the BSPsimply has to look at its books to determine who isthe owner of the CB bills fraudulently assigned. Sinceit is only the registered owner who complied with theBSPs requirement of recording an assignment in theBSPs books, then "the protective mantle ofadministrative proceedings" should necessarilybenefit him only, without extending the same benefitto those who chose to ignore the Circularsrequirement, like the PDB.68

Assuming arguendo that the PDBs case falls underthe second situation i.e., the BSP has jurisdiction toresolve the issue of ownership of the CB bills themore recent CB Circular No. 769-80 (Rules and

Regulations Governing Central Bank Certificates ofIndebtedness) already superseded CB Circular No.28, and, in particular, effectively amended Section 10(d) 4 of CB Circular No. 28. The pertinent provisionsof CB Circular No. 769-80 read:

Assignment Affected by Fraud. Any assignment fortransfer of ownership of registered certificateobtained through fraudulent representation ifhonored by the Central Bank or any of its authorizedservice agencies shall not make the Central Bank oragency liable therefore unless it has previous formalnotice of the fraud. The Central Bank, upon noticeunder oath that the assignment was secured throughfraudulent means, shall immediately issue andcircularize a "stop order" against the transfer,

exchange, redemption of the Certificate including thepayment of interest coupons. The Central Bank orservice agency concerned shall continue to withholdaction on the certificate until such time that theconflicting claims have been finally settled either byamicable settlement between the parties or by orderof the Court.

Unlike CB Circular No. 28, CB Circular No. 769-80limited the BSPs authority to the mere issuance andcircularization of a "stop order" against the transfer,exchange and redemption upon sworn notice of a

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fraudulent assignment. Under this Circular, the BSPshall only continue to withhold action until thedispute is ended by an amicable settlement or by

judicial determination. Given the more passivestance of the BSP the very agency tasked toenforce the circulars involved - under CB Circular No.769-80, the RTCs dismissal of the BOCscounterclaims is palpably erroneous.

Lastly, since Nuquis office (Government SecuritiesDepartment) had already been abolished,69 it can nolonger adjudicate the dispute under the secondsituation covered by CB Circular No. 28. The abolitionof Nuquis office is not only consistent with the BSPsCharter but, more importantly, with CB Circular No.769-80, which removed the BSPs adjudicativeauthority over fraudulent assignments.

THE PDBS COMMENT

The PDB claims that jurisdiction is determined by theallegations in the complaint/petition and not by thedefenses set up in the answer.70 In filing the petitionwith the RTC, the PDB merely seeks to compel theBSP to determine, pursuant to CB Circular No. 28, theparty legally entitled to the proceeds of the subjectCB bills, which, as the PDB alleged, have beentransferred through fraudulent representations anallegation which properly recognized the BSPs

jurisdiction to resolve conflicting claims of ownershipover the CB bills.

The PDB adds that under the doctrine of primaryjurisdiction, courts should refrain from determining acontroversy involving a question whose resolutiondemands the exercise of sound administrativediscretion. In the present case, the BSPs specialknowledge and experience in resolving disputes onsecurities, whose assignment and trading aregoverned by the BSPs rules, should be upheld.

The PDB counters that the BOCs tri-foldinterpretation of Section 10 (d) 4 of CB Circular No.28 sanctions split jurisdiction which is notfavored;but even this tri-fold interpretation which, inthe second situation, limits the meaning of the"owner" to the registered owner is flawed. Section 10(d) 4 aims to protect not just the registered ownerbut anyone who has been deprived of his bond byfraudulent representation in order to deter fraud inthe secondary trading of government securities.

The PDB asserts that the existence of CB Circular No.769-80 or the abolition of Nuquis office does notresult in depriving the BSP of its jurisdiction: first, CBCircular No. 769-80 expressly provides that CBCircular No. 28 shall have suppletory application to

CB Circular No. 769-80; and second, the BSP canalways designate an office to resolve the PDBs claimover the CB bills.

Lastly, the PDB argues that even assuming that theRTC has jurisdiction to resolve the issue of ownershipof the CB bills, the RTC has not acquired jurisdictionover the BOCs so-called "compulsory" counterclaims(which in truth is merely "permissive") because ofthe BOCs failure to pay the appropriate docket fees.

These counterclaims should, therefore, be dismissedand expunged from the record.

THE COURTS RULING

We grant the petitions.

At the outset, we note that the parties have notraised the validity of either CB Circular No. 28 or CBCircular No. 769-80 as an issue. What the parties

largely contest is the applicable circular in case of anallegedly fraudulently assigned CB bill. Theapplicable circular, in turn, is determinative of theproper remedy available to the PDB and/or the BOCas claimants to the proceeds of the subject CB bills.

Indisputably, at the time the PDB supposedly invokedthe jurisdiction of the BSP in 1994 (by requesting forthe annotation of its claim over the subject CB bills inthe BSPs books), CB Circular No. 769-80 has longbeen in effect. Therefore, the parties respectiveinterpretations of the provision of Section 10 (d) 4 ofCB Circular No. 28 do not have any significanceunless it is first established that that Circular governsthe resolution of their conflicting claims of ownership.

This conclusion is important, given the supposedrepeal or modification of Section 10 (d) 4 of CBCircular No. 28 by the following provisions of CBCircular No. 769-80:

ARTICLE XISUPPLEMENTAL RULES

Section 1. Central Bank Circular No. 28 Theprovisions of Central Bank Circular No. 28 shall havesuppletory application to matters not speciallycovered by these Rules.

ARTICLE XIIEFFECTIVITY

Effectivity The rules and regulations hereinprescribed shall take effect upon approval by the

Monetary Board, Central Bank of the Philippines, andall circulars, memoranda, or office ordersinconsistent herewith are revoked or modifiedaccordingly. (Emphases added)

We agree with the PDB that in view of CB Circular No.28s suppletory application, an attempt to harmonizethe apparently conflicting provisions is a prerequisitebefore one may possibly conclude that anamendment or a repeal exists.71 Interestingly,however, even the PDB itself failed to submit aninterpretation based on its own position ofharmonization.

The repealing clause of CB Circular No. 769-80obviously did not expressly repeal CB Circular No. 28;

in fact, it even provided for the suppletoryapplication of CB Circular No. 28 on "matters notspecially covered by" CB Circular No. 769-80. Whileno express repeal exists, the intent of CB Circular No.769-80 to operate as an implied repeal,72 or at leastto amend earlier CB circulars, is supported by its text"revoking" or "modif[ying" "all circulars" which areinconsistent with its terms.

At the outset, we stress that none of the partiesdisputes that the subject CB bills fall within thecategory of a certificate or evidence of indebtedness

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and that these were issued by the Central Bank, nowthe BSP. Thus, even without resorting to statutoryconstruction aids, matters involving the subject CBbills should necessarily be governed by CB CircularNo. 769-80. Even granting, however, that reliance onCB Circular No. 769-80 alone is not enough, we findthat CB Circular No. 769-80 impliedly repeals CBCircular No. 28.

An implied repeal transpires when a substantialconflict exists between the new and the prior laws. Inthe absence of an express repeal, a subsequent lawcannot be construed as repealing a prior law unlessan irreconcilable inconsistency and repugnancy existin the terms of the new and the old laws.73 Repealby implication is not favored, unless manifestlyintended by the legislature, or unless it isconvincingly and unambiguously demonstrated, thatthe laws or orders are clearly repugnant and patentlyinconsistent with one another so that they cannot co-exist; the legislature is presumed to know theexisting law and would express a repeal if one isintended.74

There are two instances of implied repeal. One takesplace when the provisions in the two acts on thesame subject matter are irreconcilably contradictory,in which case, the later act, to the extent of theconflict, constitutes an implied repeal of the earlierone. The other occurs when the later act covers thewhole subject of the earlier one and is clearlyintended as a substitute; thus, it will operate torepeal the earlier law.75

A general reading of the two circulars shows that thesecond instance of implied repeal is present in thiscase. CB Circular No. 28, entitled "RegulationsGoverning Open Market Operations, Stabilization ofSecurities Market, Issue, Servicing and Redemptionof Public Debt," is a regulation governing theservicing and redemption of public debt, including

the issue, inscription, registration, transfer, paymentand replacement of bonds and securitiesrepresenting the public debt.76 On the other hand,CB Circular No. 769-80, entitled "Rules andRegulations Governing Central Bank Certificate ofIndebtedness," is the governing regulation onmatters77 (i) involving certificate of indebtedness78issued by the Central Bank itself and (ii) which aresimilarly covered by CB Circular No. 28.

The CB Monetary Board issued CB Circular No. 28 toregulate the servicing and redemption of public debt,pursuant to Section 124 (now Section 119 of RepublicAct R.A. No. 7653) of the old Central Bank law79which provides that "the servicing and redemption ofthe public debt shall also be effected through the

Bangko Sentral." However, even as R.A. No. 7653continued to recognize this role by the BSP, the lawrequired a phase-out of all fiscal agency functions bythe BSP, including Section 119 of R.A. No. 7653.

In other words, even if CB Circular No. 28 appliesbroadly to both government-issued bonds andsecurities and Central Bank-issued evidence ofindebtedness, given the present state of law, CBCircular No. 28 and CB Circular No. 769-80 nowoperate on the same subject Central Bank-issuedevidence of indebtedness. Under Section 1, Article XI

of CB Circular No. 769-80, the continued relevanceand application of CB Circular No. 28 would dependon the need to supplement any deficiency or silencein CB Circular No. 769-80 on a particular matter.

In the present case, both CB Circular No. 28 and CBCircular No. 769-80 provide the BSP with a course ofaction in case of an allegedly fraudulently assigned

certificate of indebtedness. Under CB Circular No. 28,in case of fraudulent assignments, the BSP wouldhave to "call upon the owner and the personpresenting the bond to substantiate their respectiveclaims" and, from there, determine who has a betterright over the registered bond. On the other hand,under CB Circular No. 769-80, the BSP shall merely"issue and circularize a stop order against thetransfer, exchange, redemption of the [registered]certificate" without any adjudicative function (whichis the precise root of the present controversy). As thetwo circulars stand, the patent irreconcilability ofthese two provisions does not require elaboration.Section 5, Article V of CB Circular No. 769-80inescapably repealed Section 10 (d) 4 of CB CircularNo. 28.

The issue of BSPs jurisdiction, lay hidden

On that note, the Court could have written finis to thepresent controversy by simply sustaining the BSPshands-off approach to the PDBs problem under CBCircular No. 769-80. However, the jurisdictionalprovision of CB Circular No. 769-80 itself, in relationto CB Circular No. 28, on the matter of fraudulentassignment, has given rise to a question of

jurisdiction - the core question of law involved inthese petitions - which the Court cannot just treatsub-silencio.

Broadly speaking, jurisdiction is the legal power orauthority to hear and determine a cause.80 In theexercise of judicial or quasi-judicial power, it refers to

the authority of a court to hear and decide a case.81In the context of these petitions, we hark back to thebasic principles governing the question of jurisdictionover the subject matter.

First, jurisdiction over the subject matter isdetermined only by the Constitution and by law.82As a matter of substantive law, procedural rulesalone can confer no jurisdiction to courts oradministrative agencies.83 In fact, an administrativeagency, acting in its quasi-judicial capacity, is atribunal of limited jurisdiction and, as such, couldwield only such powers that are specifically grantedto it by the enabling statutes. In contrast, an RTC is acourt of general jurisdiction, i.e., it has jurisdictionover cases whose subject matter does not fall within

the exclusive original jurisdiction of any court,tribunal or body exercising judicial or quasi-judicialfunctions.84

Second, jurisdiction over the subject matter isdetermined not by the pleas set up by the defendantin his answer85 but by the allegations in thecomplaint,86 irrespective of whether the plaintiff isentitled to favorable judgment on the basis of hisassertions.87 The reason is that the complaint issupposed to contain a concise statement of the

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ultimate facts constituting the plaintiff's causes ofaction.88

Third, jurisdiction is determined by the law in force atthe time of the filing of the complaint.89

Parenthetically, the Court observes that none of theparties ever raised the issue of whether the BSP can

simply disown its jurisdiction, assuming it has, by thesimple expedient of promulgating a new circular(specially applicable to a certificate of indebtednessissued by the BSP itself), inconsistent with an oldcircular, assertive of its limited jurisdiction overownership issues arising from fraudulentassignments of a certificate of indebtedness. ThePDB, in particular, relied solely and heavily on CBCircular No. 28.

In light of the above principles pointing to jurisdictionas a matter of substantive law, the provisions of thelaw itself that gave CB Circular 769-80 its life and

jurisdiction must be examined.

The Philippine Central Bank

On January 3, 1949, Congress created the CentralBank of the Philippines (Central Bank) as a corporatebody with the primary objective of (i) maintaining theinternal and external monetary stability in thePhilippines; and (ii) preserving the international valueand the convertibility of the peso.90 In line withthese broad objectives, the Central Bank wasempowered to issue rules and regulations "necessaryfor the effective discharge of the responsibilities andexercise of the powers assigned to the MonetaryBoard and to the Central Bank."91 Specifically, theCentral Bank is authorized to organize (other)departments for the efficient conduct of its businessand whose powers and duties "shall be determinedby the Monetary Board, within the authority grantedto the Board and the Central Bank"92 under its

original charter.

With the 1973 Constitution, the then Central Bankwas constitutionally made as the countrys centralmonetary authority until such time that Congress93shall have established a central bank. The 1987Constitution continued to recognize this function ofthe then Central Bank until Congress, pursuant to theConstitution, created a new central monetaryauthority which later came to be known as theBangko Sentral ng Pilipinas.

Under the New Central Bank Act (R.A. No. 7653),94the BSP is given the responsibility of providing policydirections in the areas of money, banking and credit;it is given, too, the primary objective of maintaining

price stability, conducive to a balanced andsustainable growth of the economy, and of promotingand maintaining monetary stability and convertibilityof the peso.95

The Constitution expressly grants the BSP, as thecountrys central monetary authority, the power ofsupervision over the operation of banks, whileleaving with Congress the authority to define theBSPs regulatory powers over the operations offinance companies and other institutions performingsimilar functions. Under R.A. No. 7653, the BSPs

powers and functions include (i) supervision over theoperation of banks; (ii) regulation of operations offinance companies and non-bank financialinstitutions performing quasi banking functions; (iii)sole power and authority to issue currency within thePhilippine territory; (iv) engaging in foreign exchangetransactions; (v) making rediscounts, discounts,loans and advances to banking and other financial

institutions to influence the volume of creditconsistent with the objective of achieving pricestability; (vi) engaging in open market operations;and (vii) acting as banker and financial advisor of thegovernment.1wphi1

On the BSPs power of supervision over the operationof banks, Section 4 of R.A. No. 8791 (The GeneralBanking Law of 2000) elaborates as follows:

CHAPTER IIAUTHORITY OF THE BANGKO SENTRAL

SECTION 4. Supervisory Powers. The operationsand activities of banks shall be subject to supervisionof the Bangko Sentral. "Supervision" shall include thefollowing:

4.1. The issuance of rules of conduct or theestablishment of standards of operation for uniformapplication to all institutions or functions covered,taking into consideration the distinctive character ofthe operations of institutions and the substantivesimilarities of specific functions to which such rules,modes or standards are to be applied;

4.2. The conduct of examination to determinecompliance with laws and regulations if thecircumstances so warrant as determined by theMonetary Board;

4.3. Overseeing to ascertain that laws andregulations are complied with;

4.4. Regular investigation which shall not be oftenerthan once a year from the last date of examination todetermine whether an institution is conducting itsbusiness on a safe or sound basis: Provided, That thedeficiencies/irregularities found by or discovered byan audit shall be immediately addressed;

4.5. Inquiring into the solvency and liquidity of theinstitution (2-D); or

4.6. Enforcing prompt corrective action. (n)

The Bangko Sentral shall also have supervision overthe operations of and exercise regulatory powersover quasi-banks, trust entities and other financial

institutions which under special laws are subject toBangko Sentral supervision. (2-Ca)

For the purposes of this Act, "quasi-banks" shall referto entities engaged in the borrowing of funds throughthe issuance, endorsement or assignment withrecourse or acceptance of deposit substitutes asdefined in Section 95 of Republic Act No. 7653(hereafter the "New Central Bank Act") for purposesof relending or purchasing of receivables and otherobligations. [emphasis ours]

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While this provision empowers the BSP to overseethe operations and activities of banks to "ascertainthat laws and regulations are complied with," theexistence of the BSPs jurisdiction in the presentdispute cannot rely on this provision. The factremains that the BSP already made known to thePDB its unfavorable position on the latters claim offraudulent assignment due to the latters own failure

to comply96 with existing regulations:

In this connection, Section 10 (b) 2 also requires thata "Detached assignment will be recognized oraccepted only upon previous notice to the CentralBank x x x." In fact, in a memo dated September 23,1991 xxx then CB Governor Jose L. Cuisia advised allbanks (including PDB) xxx as follows:

In view recurring incidents ostensibly disregardingcertain provisions of CB circular No. 28 (as amended)covering assignments of registered bonds, all banksand all concerned are enjoined to observe strictly thepertinent provisions of said CB Circular as hereunderquoted:

x x x x

Under Section 10.b. (2)

x x x Detached assignment will be recognized oraccepted only upon previous notice to the CentralBank and its use is authorized only under thefollowing circumstances:

(a) x x x

(b) x x x

(c) assignments of treasury notes and certificates ofindebtedness in registered form which are notprovided at the back thereof with assignment form.

(d) Assignment of securities which have changedownership several times.

(e) x x x

Non-compliance herewith will constitute a basis fornon-action or withholding of action onredemption/payment of interest coupons/transfertransactions or denominational exchange that maybe directly affected thereby. [Boldfacing supplied]

Again, the books of the BSP do not show that thesupposed assignment of subject CB Bills was everrecorded in the BSPs books. [Boldfacing supplied]

However, the PDB faults the BSP for not recording

the assignment of the CB bills in the PDBs favordespite the fact that the PDB already requested theBSP to record its assignment in the BSPs books asearly as June 30, 1994.97

The PDBs claim is not accurate. What the PDBrequested the BSP on that date was not therecording of the assignment of the CB bills in itsfavor but the annotation of its claim over the CB billsat the time when (i) it was no longer in possession ofthe CB bills, having been transferred from one entityto another and (ii) all it has are the detached

assignments, which the PDB has not shown to becompliant with Section 10 (b) 2 above-quoted.Obviously, the PDB cannot insist that the BSP takecognizance of its plaint when the basis of the BSPsrefusal under existing regulation, which the PDB isbound to observe, is the PDBs own failure to complytherewith.

True, the BSP exercises supervisory powers (andregulatory powers) over banks (and quasi banks).The issue presented before the Court, however, doesnot concern the BSPs supervisory power over banksas this power is understood under the GeneralBanking Law. In fact, there is nothing in the PDBspetition (even including the letters it sent to the BSP)that would support the BSPs jurisdiction outside ofCB Circular No. 28, under its power of supervision,over conflicting claims to the proceeds of the CBbills.

BSP has quasi-judicial powers over aclass of cases which does not includethe adjudication of ownership of theCB bills in question

In United Coconut Planters Bank v. E. Ganzon, Inc.,98the Court considered the BSP as an administrativeagency,99 exercising quasi-judicial functions throughits Monetary Board. It held:

A quasi-judicial agency or body is an organ ofgovernment other than a court and other than alegislature, which affects the rights of private partiesthrough either adjudication or rule-making. The verydefinition of an administrative agency includes itsbeing vested with quasi-judicial powers. The everincreasing variety of powers and functions given toadministrative agencies recognizes the need for theactive intervention of administrative agencies inmatters calling for technical knowledge and speed incountless controversies which cannot possibly be

handled by regular courts. A "quasi-judicial function"is a term which applies to the action, discretion, etc.,of public administrative officers or bodies, who arerequired to investigate facts, or ascertain theexistence of facts, hold hearings, and drawconclusions from them, as a basis for their officialaction and to exercise discretion of a judicial nature.

Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial powers orfunctions. As aptly observed by the Court of Appeals,the BSP Monetary Board is an independent centralmonetary authority and a body corporate with fiscaland administrative autonomy, mandated to providepolicy directions in the areas of money, banking andcredit. It has power to issue subpoena, to sue for

contempt those refusing to obey the subpoenawithout justifiable reason, to administer oaths andcompel presentation of books, records and others,needed in its examination, to impose fines and othersanctions and to issue cease and desist order.Section 37 of Republic Act No. 7653, in particular,explicitly provides that the BSP Monetary Board shallexercise its discretion in determining whetheradministrative sanctions should be imposed on banksand quasi-banks, which necessarily implies that theBSP Monetary Board must conduct some form of

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investigation or hearing regarding the same.[citations omitted]

The BSP is not simply a corporate entity but qualifiesas an administrative agency created, pursuant toconstitutional mandate,100 to carry out a particulargovernmental function.101 To be able to perform itsrole as central monetary authority, the Constitution

granted it fiscal and administrative autonomy. Ingeneral, administrative agencies exercise powersand/or functions which may be characterized asadministrative, investigatory, regulatory, quasi-legislative, or quasi-judicial, or a mix of these five, asmay be conferred by the Constitution or bystatute.102

While the very nature of an administrative agencyand the raison d'tre for its creation103 andproliferation dictate a grant of quasi-judicial power toit, the matters over which it may exercise this powermust find sufficient anchorage on its enabling law,either by express provision or by necessaryimplication. Once found, the quasi-judicial powerpartakes of the nature of a limited and special

jurisdiction, that is, to hear and determine a class ofcases within its peculiar competence and expertise.In other words, the provisions of the enabling statuteare the yardsticks by which the Court would measurethe quantum of quasi-judicial powers anadministrative agency may exercise, as defined inthe enabling act of such agency.104

Scattered provisions in R.A. No. 7653 and R.A. No.8791, inter alia, exist, conferring jurisdiction on theBSP on certain matters.105 For instance, under thesituations contemplated under Section 36, par. 2106(where a bank or quasi bank persists in carrying onits business in an unlawful or unsafe manner) andSection 37107 (where the bank or its officers willfullyviolate the banks charter or by-laws, or the rules andregulations issued by the Monetary Board) of R.A. No.

7653, the BSP may place an entity underreceivership and/or liquidation or imposeadministrative sanctions upon the entity or itsofficers or directors.

Among its several functions under R.A. No. 7653, theBSP is authorized to engage in open marketoperations and thereby "issue, place, buy and sellfreely negotiable evidences of indebtedness of theBangko Sentral" in the following manner.

SEC. 90. Principles of Open Market Operations. Theopen market purchases and sales of securities by theBangko Sentral shall be made exclusively inaccordance with its primary objective of achievingprice stability.

x x x x

SEC. 92. Issue and Negotiation of Bangko SentralObligations. In order to provide the Bangko Sentralwith effective instruments for open marketoperations, the Bangko Sentral may, subject to suchrules and regulations as the Monetary Board mayprescribe and in accordance with the principlesstated in Section 90 of this Act, issue, place, buy andsell freely negotiable evidences of indebtedness ofthe Bangko Sentral: Provided, That issuance of such

certificates of indebtedness shall be made only incases of extraordinary movement in price levels.Said evidences of indebtedness may be issueddirectly against the international reserve of theBangko Sentral or against the securities which it hasacquired under the provisions of Section 91 of thisAct, or may be issued without relation to specifictypes of assets of the Bangko Sentral.

The Monetary Board shall determine the interestrates, maturities and other characteristics of saidobligations of the Bangko Sentral, and may, if itdeems it advisable, denominate the obligations ingold or foreign currencies.

Subject to the principles stated in Section 90 of thisAct, the evidences of indebtedness of the BangkoSentral to which this section refers may be acquiredby the Bangko Sentral before their maturity, eitherthrough purchases in the open market or throughredemptions at par and by lot if the Bangko Sentralhas reserved the right to make such redemptions.

The evidences of indebtedness acquired orredeemed by the Bangko Sentral shall not beincluded among its assets, and shall be immediatelyretired and cancelled.108 (italics supplied; emphasesours)

The primary objective of the BSP is to maintain pricestability.109 The BSP has a number of monetarypolicy instruments at its disposal to promote pricestability. To increase or reduce liquidity in thefinancial system, the BSP uses open marketoperations, among others.110 Open marketoperation is a monetary tool where the BSP publiclybuys or sells government securities111 from (or to)banks and financial institutions in order to expand orcontract the supply of money. By controlling themoney supply, the BSP is able to exert someinfluence on the prices of goods and services andachieve its inflation objectives.112

Once the issue and/or sale of a security is made, theBSP would necessarily make a determination, inaccordance with its own rules, of the entity entitledto receive the proceeds of the security upon itsmaturity. This determination by the BSP is anexercise of its administrative powers113 under thelaw as an incident to its power to prescribe rules andregulations governing open market operations toachieve the "primary objective of achieving pricestability."114 As a matter of necessity, too, the samerules and regulations facilitate transaction with theBSP by providing for an orderly manner of, amongothers, issuing, transferring, exchanging and payingsecurities representing public debt.

Significantly, when competing claims of ownershipover the proceeds of the securities it has issued arebrought before it, the law has not given the BSP thequasi-judicial power to resolve these competingclaims as part of its power to engage in open marketoperations. Nothing in the BSPs charter confers onthe BSP the jurisdiction or authority to determine thiskind of claims, arising out of a subsequent transfer orassignment of evidence of indebtedness a matterthat appropriately falls within the competence ofcourts of general jurisdiction. That the statutewithholds this power from the BSP is only consistent

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with the fundamental reasons for the creation of aPhilippine central bank, that is, to lay down stablemonetary policy and exercise bank supervisoryfunctions. Thus, the BSPs assumption of jurisdictionover competing claims cannot find even a stretched-out justification under its corporate powers "to doand perform any and all things that may benecessary or proper to carry out the purposes" of

R.A. No. 7653. 115

To reiterate, open market operation is a monetarypolicy instrument that the BSP employs, amongothers, to regulate the supply of money in theeconomy to influence the timing, cost and availabilityof money and credit, as well as other financialfactors, for the purpose of stabilizing the pricelevel.116 What the law grants the BSP is a continuingrole to shape and carry out the countrys monetarypolicy not the authority to adjudicate competingclaims of ownership over the securities it has issued since this authority would not fall under the BSPspurposes under its charter.

While R.A. No. 7653117 empowers the BSP toconduct administrative hearings and render

judgment for or against an entity under itssupervisory and regulatory powers and evenauthorizes the BSP Governor to "render decisions, orrulings x x x on matters regarding application orenforcement of laws pertaining to institutionssupervised by the BSP and laws pertaining to quasi-banks, as well as regulations, policies or instructionsissued by the Monetary Board," it is precisely the textof the BSPs own regulation (whose validity is nothere raised as an issue) that points to the BSPslimited role in case of an allegedly fraudulentassignment to simply (i) issuing and circularizing a"stop order" against the transfer, exchange,redemption of the certificate of indebtedness,including the payment of interest coupons, and (ii)withholding action on the certificate.

A similar conclusion can be drawn from the BSPsadministrative adjudicatory power in cases of "willfulfailure or refusal to comply with, or violation of, anybanking law or any order, instruction or regulationissued by the Monetary Board, or any order,instruction or ruling by the Governor."118 The non-compliance with the pertinent requirements underCB Circular No. 28, as amended, deprives a partyfrom any right to demand payment from the BSP.

In other words, the grant of quasi-judicial authority tothe BSP cannot possibly extend to situations whichdo not call for the exercise by the BSP of itssupervisory or regulatory functions over entitieswithin its jurisdiction.119

The fact alone that the parties involved are bankinginstitutions does not necessarily call for the exerciseby the BSP of its quasi-judicial powers under thelaw.120

The doctrine of primary jurisdictionargues against BSPs purportedauthority to adjudicate ownershipissues over the disputed CB bills

Given the preceding discussions, even the PDBsinvocation of the doctrine of primary jurisdiction ismisplaced.

In the exercise of its plenary legislative power,Congress may create administrative agenciesendowed with quasi-legislative and quasi-judicialpowers. Necessarily, Congress likewise defines the

limits of an agencys jurisdiction in the same manneras it defines the jurisdiction of courts.121 As a result,it may happen that either a court or anadministrative agency has exclusive jurisdiction overa specific matter or both have concurrent jurisdictionon the same. It may happen, too, that courts andagencies may willingly relinquish adjudicatory powerthat is rightfully theirs in favor of the other. One ofthe instances when a court may properly defer to theadjudicatory authority of an agency is theapplicability of the doctrine of primary

jurisdiction.122

As early as 1954, the Court applied the doctrine ofprimary jurisdiction under the following terms:

6. In the fifties, the Court taking cognizance of themove to vest jurisdiction in administrativecommissions and boards the power to resolvespecialized disputes xxx ruled that Congress inrequiring the Industrial Court's intervention in theresolution of labor-management controversies xxxmeant such jurisdiction to be exclusive, although itdid not so expressly state in the law. The Court heldthat under the "sense-making and expeditiousdoctrine of primary jurisdiction ... the courts cannotor will not determine a controversy involving aquestion which is within the jurisdiction of anadministrative tribunal, where the question demandsthe exercise of sound administrative discretionrequiring the special knowledge, experience, andservices of the administrative tribunal to determine

technical and intricate matters of fact, and auniformity of ruling is essential to comply with thepurposes of the regulatory statute administered."123(emphasis ours)

In Industrial Enterprises, Inc. v. Court of Appeals,124the Court ruled that while an action for rescission ofa contract between coal developers appears to be anaction cognizable by regular courts, the trial courtremains to be without jurisdiction to entertain thesuit since the contract sought to be rescinded is"inextricably tied up with the right to develop coal-bearing lands and the determination of whether ornot the reversion of the coal operating contract overthe subject coal blocks to [the plaintiff] would be inline with the countrys national program and

objective on coal-development and over-all coal-supply-demand balance." It then applied the doctrineof primary jurisdiction

In recent years, it has been the jurisprudential trendto apply the doctrine of primary jurisdiction in manycases involving matters that demand the specialcompetence of administrative agencies. It may occurthat the Court has jurisdiction to take cognizance of aparticular case, which means that the matterinvolved is also judicial in character. However, if thecase is such that its determination requires the

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expertise, specialized skills and knowledge of theproper administrative bodies because technicalmatters or intricate questions of facts are involved,then relief must first be obtained in an administrativeproceeding before a remedy will be supplied by thecourts even though the matter is within the proper

jurisdiction of a court. This is the doctrine of primaryjurisdiction. It applies "where a claim is originally

cognizable in the courts, and comes into playwhenever enforcement of the claim requires theresolution of issues which, under a regulatoryscheme, have been placed within the specialcompetence of an administrative body."

Clearly, the doctrine of primary jurisdiction findsapplication in this case since the question of whatcoal areas should be exploited and developed andwhich entity should be granted coal operatingcontracts over said areas involves a technicaldetermination by the Bureau of Energy Developmentas the administrative agency in possession of thespecialized expertise to act on the matter. The TrialCourt does not have the competence to decidematters concerning activities relative to theexploration, exploitation, development andextraction of mineral resources like coal. Theseissues preclude an initial judicial determination.[emphases ours]

The absence of any express or implied statutorypower to adjudicate conflicting claims of ownershipor entitlement to the proceeds of its certificates ofindebtedness finds complement in the similarabsence of any technical matter that would call forthe BSPs special expertise or competence.125 Infact, what the PDBs petitions bear out is essentiallythe nature of the transaction it had with thesubsequent transferees of the subject CB bills (BOCand Bancap) and not any matter more appropriatefor special determination by the BSP or anyadministrative agency.

In a similar vein, it is well-settled that theinterpretation given to a rule or regulation by thosecharged with its execution is entitled to the greatestweight by the courts construing such rule orregulation.126 While there are exceptions127 to thisrule, the PDB has not convinced us that a departureis warranted in this case. Given the non-applicabilityof the doctrine of primary jurisdiction, the BSPs ownposition, in light of Circular No. 769-80, deservesrespect from the Court.

Ordinarily, cases involving the application of doctrineof primary jurisdiction are initiated by an actioninvoking the jurisdiction of a court or administrativeagency to resolve the substantive legal conflict

between the parties. In this sense, the present caseis quite unique since the courts jurisdiction was,originally, invoked to compel an administrativeagency (the BSP) to resolve the legal conflict ofownership over the CB bills - instead of obtaining a

judicial determination of the same dispute.

The remedy of interpleader

Based on the unique factual premise of the presentcase, the RTC acted correctly in initially assuming

jurisdiction over the PDBs petition for mandamus,

prohibition and injunction.128 While the RTC agreed(albeit erroneously) with the PDBs view (that theBSP has jurisdiction), it, however, dismissed not onlythe BOCs/the BSPs counterclaims but the PDBspetition itself as well, on the ground that it lacks

jurisdiction.

This is plain error.

Not only the parties themselves, but more so thecourts, are bound by the rule on non-waiver of

jurisdiction.129 believes that jurisdiction over theBOCs counterclaims and the BSPscounterclaim/crossclaim for interpleader calls for theapplication of the doctrine of primary jurisdiction, theallowance of the PDBs petition even becomesimperative because courts may raise the issue ofprimary jurisdiction sua sponte.130

Of the three possible options available to the RTC,the adoption of either of these two would lead thetrial court into serious legal error: first, if it grantedthe PDBs petition, its decision would have to be setaside on appeal because the BSP has no jurisdictionas previously discussed; and second when itdismissed the PDBs petitions and the BOCscounterclaims on the ground that it lacks jurisdiction,the trial court seriously erred because precisely, theresolution of the conflicting claims over the CB billsfalls within its general jurisdiction.

Without emasculating its jurisdiction, the RTC couldhave properly dismissed the PDBs petition but onthe ground that mandamus does not lie against theBSP; but even this correct alternative is no longerplausible since the BSP, as a respondent below,already properly brought before the RTC theremaining conflicting claims over the subject CB billsby way of a counterclaim/crossclaim for interpleader.Section 1, Rule 62 of the Rules of Court provideswhen an interpleader is proper:

SECTION 1. When interpleader proper. Wheneverconflicting claims upon the same subject matter areor may be made against a person who claims nointerest whatever in the subject matter, or aninterest which in whole or in part is not disputed bythe claimants, he may bring an action against theconflicting claimants to compel them to interpleadand litigate their several claims among themselves.

The remedy of an action of interpleader131 isdesigned to protect a person against double vexationin respect of a single liability.7 It requires, as anindispensable requisite, that conflicting claims uponthe same subject matter are or may be made againstthe stakeholder (the possessor of the subject matter)

who claims no interest whatever in the subjectmatter or an interest which in whole or in part is notdisputed by the claimants.132

Through this remedy, the stakeholder can join allcompeting claimants in a single proceeding todetermine conflicting claims without exposing thestakeholder to the possibility of having to pay morethan once on a single liability.133

When the court orders that the claimants litigateamong themselves, in reality a new action arises,134

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where the claims of the interpleaders themselves arebrought to the fore, the stakeholder as plaintiff isrelegated merely to the role of initiating the suit. Inshort, the remedy of interpleader, when proper,merely provides an avenue for the conflicting claimson the same subject matter to be threshed out in anaction. Section 2 of Rule 62 provides:

SEC. 2. Order. Upon the filing of the complaint, thecourt shall issue an order requiring the conflictingclaimants to interplead with one another. If theinterests of justice so require, the court may direct insuch order that the subject matter be paid ordelivered to the court.

This is precisely what the RTC did by granting theBSPs motion to interplead. The PDB itself "agreedthat the various claimants should now interplead."

Thus, the PDB and the BOC subsequently enteredinto two separate escrow agreements, covering theCB bills, and submitted them to the RTC for approval.

In granting the BSPs motion, the RTC acted on thecorrect premise that it has jurisdiction to resolve theparties conflicting claims over the CB bills -consistent with the rules and the parties conduct -and accordingly required the BOC to amend itsanswer and for the PDB to comment thereon.Suddenly, however, the PDB made an about-face andquestioned the jurisdiction of the RTC. Swayed by thePDBs argument, the RTC dismissed even the PDBspetition - which means that it did not actually compelthe BSP to resolve the BOCs and the PDBs claims.

Without the motion to interplead and the ordergranting it, the RTC could only dismiss the PDBspetition since it is the RTC which has jurisdiction toresolve the parties conflicting claims not the BSP.Given that the motion to interplead has been actuallyfiled, the RTC could not have really granted the relieforiginally sought in the PDBs petition since the RTCs

order granting the BSPs motion to interplead - towhich the PDB in fact acquiesced into - effectivelyresulted in the dismissal of the PDBs petition. This isnot altered by the fact that the PDB additionallyprayed in its petition for damages, attorneys feesand costs of suit "against the public respondents"because the grant of the order to interpleadeffectively sustained the propriety of the BSPs resortto this procedural device.

Interpleader

1. as a special civil action

What is quite unique in this case is that the BSP didnot initiate the interpleader suit through an original

complaint but through its Answer. This circumstancebecomes understandable if it is considered thatinsofar as the BSP is concerned, the PDB does notpossess any right to have its claim recorded in theBSPs books; consequently, the PDB cannot properlybe considered even as a potential claimant to theproceeds of the CB bills upon maturity. Thus, theinterpleader was only an alternative position, madeonly in the BSPs Answer.135

The remedy of interpleader, as a special civil action,is primarily governed by the specific provisions in

Rule 62 of the Rules of Court and secondarily by theprovisions applicable to ordinary civil actions.136Indeed, Rule 62 does not expressly authorize thefiling of a complaint-in-interpleader as part of,although separate and independent from, theanswer. Similarly, Section 5, Rule 6, in relation toSection 1, Rule 9 of the Rules of Court137 does notinclude a complaint-in-interpleader as a claim,138 a

form of defense,139 or as an objection that adefendant may be allowed to put up in his answer orin a motion to dismiss. This does not mean, however,that the BSPs "counter-complaint/cross-claim forinterpleader" runs counter to general procedures.

Apart from a pleading,140 the rules141 allow a partyto seek an affirmative relief from the court throughthe procedural device of a motion. While captioned"Answer with counter complaint/cross-claim forinterpleader," the RTC understood this as in thenature of a motion,142 seeking relief whichessentially consists in an order for the conflictingclaimants to litigate with each other so that"payment is made to the rightful or legitimateowner"143 of the subject CB bills.

The rules define a "civil action" as "one by which aparty sues another for the enforcement or protectionof a right, or the prevention or redress of a wrong."Interpleader may be considered as a stakeholdersremedy to prevent a wrong, that is, from makingpayment to one not entitled to it, thereby renderingitself vulnerable to lawsuit/s from those legallyentitled to payment.

Interpleader is a civil action made special by theexistence of particular rules to govern theuniqueness of its application and operation. UnderSection 2, Rule 6 of the Rules of Court, governingordinary civil actions, a partys claim is asserted "in acomplaint, counterclaim, cross-claim, third (fourth,etc.)-party complaint, or complaint-in-intervention."

In an interpleader suit, however, a claim is notrequired to be contained in any of these pleadingsbut in the answer-(of the conflicting claimants)-in-interpleader. This claim is different from the counter-claim (or cross-claim, third party-complaint) which isseparately allowed under Section 5, par. 2 of Rule 62.

2. the payment of docket fees covering BOCscounterclaim

The PDB argues that, even assuming that the RTChas jurisdiction over the issue of ownership of the CBbills, the BOCs failure to pay the appropriate docketfees prevents the RTC from acquiring jurisdictionover the BOCs "counterclaims."

We disagree with the PDB.

To reiterate and recall, the order granting the "PDBsmotion to interplead," already resulted in thedismissal of the PDBs petition. The same orderrequired the BOC to amend its answer and for theconflicting claimants to comment, presumably toconform to the nature of an answer-in interpleader.Perhaps, by reason of the BOCs denomination of itsclaim as a "compulsory counterclaim" and the PDBsfailure to fully appreciate the RTCs order grantingthe "BSPs motion for interpleader" (with the PDBs

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conformity), the PDB mistakenly treated the BOCsclaim as a "permissive counterclaim" whichnecessitates the payment of docket fees.

As the preceding discussions would show, however,the BOCs "claim" - i.e., its assertion of ownershipover the CB bills is in reality just that, a "claim"against the stakeholder and not as a

"counterclaim,"144 whether compulsory145 orpermissive. It is only the BOCs alternative prayer(for the PDB to deliver to the BOC, as the buyer inthe April 15 transaction and the ultimate successor-in-interest of the buyer in the April 19 transaction,either the original subjects of the sales or the valuethereof plus whatever income that may have beenearned pendente lite) and its prayer for damagesthat are obviously compulsory counterclaims againstthe PDB and, therefore, does not require payment ofdocket fees.146

The PDB takes a contrary position through itsinsistence that a compulsory counterclaim should beone where the presence of third parties, of whom thecourt cannot acquire jurisdiction, is not required. Itreasons out that since the RCBC and All Asia (theintervening holders of the CB bills) have alreadybeen dropped from the case, then the BOCscounterclaim must only be permissive in nature andthe BOC should have paid the correct docket fees.

We see no reason to belabor this claim. Even if wegloss over the PDBs own conformity to the droppingof these entities as parties, the BOC correctly arguesthat a remedy is provided under the Rules. Section12, Rule 6 of the Rules of Court reads:

SEC. 12. Bringing new parties. When the presenceof parties other than those to the original action isrequired for the granting of complete relief in thedetermination of a counterclaim or cross-claim, thecourt shall order them to be brought in as

defendants, if jurisdiction over them can be obtained.

Even then, the strict characterization of the BOCscounterclaim is no longer material in disposing of thePDBs argument based on non-payment of docketfees.

When an action is filed in court, the complaint mustbe accompanied by the payment of the requisitedocket and filing fees by the party seekingaffirmative relief from the court. It is the filing of thecomplaint or appropriate initiatory pleading,accompanied by the payment of the prescribeddocket fee, that vests a trial court with jurisdictionover the claim or the nature of the action.147However, the non-payment of the docket fee at the

time of filing does not automatically cause thedismissal of the case, so long as the fee is paid withinthe applicable prescriptive or reglementary period,especially when the claimant demonstrates awillingness to abide by the rules prescribing suchpayment.148

In the present case, considering the lack of a clearguideline on the payment of docket fee by theclaimants in an interpleader suit, compounded by theunusual manner in which the interpleader suit wasinitiated and the circumstances surrounding it, we

surely cannot deduce from the BOCs mere failure tospecify in its prayer the total amount of the CB bills itlays claim to (or the value of the subjects of the salesin the April 15 and April 19 transactions, in itsalternative prayer) an intention to defraud thegovernment that would warrant the dismissal of itsclaim.149

At any rate, regardless of the nature of the BOCs"counterclaims," for purposes of payment of filingfees, both the BOC and the PDB, properly asdefendants-in-interpleader, must be assessed thepayment of the correct docket fee arising from theirrespective claims. The seminal case of Sun InsuranceOffice, Ltd. v. Judge Asuncion150 provides usguidance in the payment of docket fees, to wit:

1. x x x Where the filing of the initiatory pleading isnot accompanied by payment of the docket fee, thecourt may allow payment of the fee within areasonable time but in no case beyond the applicableprescriptive or reglementary period.

2. The same rule applies to permissivecounterclaims, third-party claims and similarpleadings, which shall not be considered filed untiland unless the filing fee prescribed therefor is paid.

The court may also allow payment of said fee withina reasonable time but also in no case beyond itsapplicable prescriptive or reglementary period.[underscoring ours]

This must be the rule considering that Section 7, Rule62 of which reads:

SEC. 7. Docket and other lawful fees, costs andlitigation expenses as liens. The docket and otherlawful fees paid by the party who filed a complaintunder this Rule, as well as the costs and litigationexpenses, shall constitute a lien or charge upon thesubject matter of the action, unless the court shall

order otherwise.

only pertain to the docket and lawful fees to be paidby the one who initiated the interpleader suit, andwho, under the Rules, actually "claims no interestwhatever in the subject matter." By constituting alien on the subject matter of the action, Section 7 ineffect only aims to actually compensate thecomplainant-in-interpleader, who happens to be thestakeholder unfortunate enough to get caught in alegal crossfire between two or more conflictingclaimants, for the faultless trouble it found itself into.Since the defendants-in-interpleader are actually theones who make a claim - only that it wasextraordinarily done through the procedural device ofinterpleader - then to them devolves the duty to pay

the docket fees prescribed under Rule 141 of theRules of Court, as amended.151

The importance of paying the correct amount ofdocket fee cannot be overemphasized:

The matter of payment of docket fees is not a meretriviality. These fees are necessary to defray courtexpenses in the handling of cases. Consequently, inorder to avoid tremendous losses to the judiciary,and to the government as well, the payment ofdocket fees cannot be made dependent on the

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outcome of the case, except when the claimant is apauper-litigant.152

WHEREFORE, premises considered the consolidatedPETITIONS are GRANTED. The Planters DevelopmentBank is hereby REQUIRED to file with the Regional

Trial Court its comment or answer-in-interpleader toBank of Commerces Amended Consolidated Answer

with Compulsory Counterclaim, as previously orderedby the Regional Trial Court. The Regional Trial Courtof Makati City, Branch 143, is hereby ORDERED toassess the docket fees due from PlantersDevelopment Bank and Bank of Commerce and ordertheir payment, and to resolve with DELIBERATEDISPATCH the parties conflicting claims of ownershipover the proceeds of the Central Bank bills.

The Clerk of Court of the Regional Trial Court ofMakati City, Branch 143, or his duly authorizedrepresentative is hereby ORDERED to assess andcollect the appropriate amount of docket feesseparately due the Bank of Commerce and PlantersDevelopment Bank as conflicting claimants in BangkoSentral ng Pilipinas interpleader suit, in accordancewith this decision.

SO ORDERED.

Republic of the Philippines

SUPREME COURTManila

THIRD DIVISION

G.R. No. 136409 March 14,2008

SUBHASH C. PASRICHA andJOSEPHINE A. PASRICHA, Petitioners,vs.DON LUIS DISON REALTY, INC.,Respondent.

D E C I S I O N

NACHURA, J.:

This is a petition for review on certiorari under Rule45 of the Rules of Court seeking the reversal of theDecision1 of the Court of Appeals (CA) dated May 26,1998 and its Resolution2 dated December 10, 1998in CA-G.R. SP No. 37739 dismissing the petition filedby petitioners Josephine and Subhash Pasricha.

The facts of the case, as culled from the records, areas follows:

Respondent Don Luis Dison Realty, Inc. andpetitioners executed two Contracts of Lease3whereby the former, as lessor, agreed to lease to thelatter Units 22, 24, 32, 33, 34, 35, 36, 37 and 38 ofthe San Luis Building, located at 1006 M.Y. Orosa cor.

T.M. Kalaw Streets, Ermita, Manila. Petitioners, inturn, agreed to pay monthly rentals, as follows:

For Rooms 32/35:

From March 1, 1991 to August 31, 1991 P5,000.00/P10,000.00

From September 1, 1991 to February 29, 1992 P5,500.00/P11,000.00

From March 1, 1992 to February 28, 1993 P6,050.00/P12,100.00

From March 1, 1993 to February 28, 1994 P6,655.00/P13,310.00

From March 1, 1994 to February 28, 1995 P7,320.50/P14,641.00

From March 1, 1995 to February 28, 1996 P8,052.55/P16,105.10

From March 1, 1996 to February 29, 1997 P8,857.81/P17,715.61

From March 1, 1997 to February 28, 1998 P9,743.59/P19,487.17

From March 1, 1998 to February 28, 1999 P10,717.95/P21,435.89

From March 1, 1999 to February 28, 2000 P11,789.75/P23,579.484

For Rooms 22 and 24:

Effective July 1, 1992 P10,000.00 with an incrementof 10% every two years.5

For Rooms 33 and 34:

Effective April 1, 1992 P5,000.00 with an incrementof 10% every two years.6

For Rooms 36, 37 and 38:

Effective when tenants vacate said premises P10,000.00 with an increment of 10% every twoyears.7

Petitioners were, likewise, required to pay for the

cost of electric consumption, water bills and the useof telephone cables.8

The lease of Rooms 36, 37 and 38 did not materializeleaving only Rooms 22, 24, 32, 33, 34 and 35 assubjects of the lease contracts.9 While the contractswere in effect, petitioners dealt with Francis Pacheco(Pacheco), then General Manager of privaterespondent. Thereafter, Pacheco was replaced byRoswinda Bautista (Ms. Bautista).10 Petitionersreligiously paid the monthly rentals until May1992.11 After that, however, despite repeated

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demands, petitioners continuously refused to pay thestipulated rent. Consequently, respondent wasconstrained to refer the matter to its lawyer who, inturn, made a final demand on petitioners for thepayment of the accrued rentals amounting toP916,585.58.12 Because petitioners still refused tocomply, a complaint for ejectment was filed byprivate respondent through its representative, Ms.

Bautista, before the Metropolitan Trial Court (MeTC)of Manila.13 The case was raffled to Branch XIX andwas docketed as Civil Case No. 143058-CV.

Petitioners admitted their failure to pay thestipulated rent for the leased premises starting Julyuntil November 1992, but claimed that such refusalwas justified because of the internal squabble inrespondent company as to the person authorized toreceive payment.14 To further justify their non-payment of rent, petitioners alleged that they wereprevented from using the units (rooms) subjectmatter of the lease contract, except Room 35.Petitioners eventually paid their monthly rent forDecember 1992 in the amount of P30,000.00, andclaimed that respondent waived its right to collectthe rents for the months of July to November 1992since petitioners were prevented from using Rooms22, 24, 32, 33, and 34.15 However, they againwithheld payment of rents starting January 1993because of respondents refusal to turn over Rooms36, 37 and 38.16 To show good faith and willingnessto pay the rents, petitioners alleged that theyprepared the check vouchers for their monthlyrentals from January 1993 to January 1994.17Petitioners further averred in their AmendedAnswer18 that the complaint for ejectment wasprematurely filed, as the controversy was notreferred to the barangay for conciliation.

For failure of the parties to reach an amicablesettlement, the pre-trial conference was terminated.

Thereafter, they submitted their respective position

papers.

On November 24, 1994, the MeTC rendered aDecision dismissing the complaint for ejectment.19 Itconsidered petitioners non-payment of rentals asunjustified. The court held that mere willingness topay the rent did not amount to payment of theobligation; petitioners should have deposited theirpayment in the name of respondent company. Onthe matter of possession of the subject premises, thecourt did not give credence to petitioners claim thatprivate respondent failed to turn over possession ofthe premises. The court, however, dismissed thecomplaint because of Ms. Bautistas alleged lack ofauthority to sue on behalf of the corporation.

Deciding the case on appeal, the Regional Trial Court(RTC) of Manila, Branch 1, in Civil Case No. 94-72515,reversed and set aside the MeTC Decision in thiswise:

WHEREFORE, the appealed decision is herebyreversed and set aside and another one is renderedordering defendants-appellees and all personsclaiming rights under them, as follows:

(1) to vacate the leased premised (sic) and restorepossession thereof to plaintiff-appellant;

(2) to pay plaintiff-appellant the sum of P967,915.80representing the accrued rents in arrears as ofNovember 1993, and the rents on the leasedpremises for the succeeding months in the amountsstated in paragraph 5 of the complaint until fullypaid; and

(3) to pay an additional sum equivalent to 25% of therent accounts as and for attorneys fees plus thecosts of this suit.

SO ORDERED.20

The court adopted the MeTCs finding on petitionersunjustified refusal to pay the rent, which is a validground for ejectment. It, however, faulted the MeTCin dismissing the case on the ground of lack ofcapacity to sue. Instead, it upheld Ms. Bautistasauthority to represent respondent notwithstandingthe absence of a board resolution to that effect, sinceher authority was implied from her power as ageneral manager/treasurer of the company.21

Aggrieved, petitioners elevated the matter to theCourt of Appeals in a petition for review oncertiorari.22 On March 18, 1998, petitioners filed anOmnibus Motion23 to cite Ms. Bautista for contempt;to strike down the MeTC and RTC Decisions as legalnullities; and to conduct hearings and ocularinspections or delegate the reception of evidence.Without resolving the aforesaid motion, on May 26,1998, the CA affirmed24 the RTC Decision butdeleted the award of attorneys fees.25

Petitioners moved for the reconsideration of theaforesaid decision.26 Thereafter, they filed severalmotions asking the Honorable Justice Ruben T. Reyesto inhibit from further proceeding with the caseallegedly because of his close association with Ms.

Bautistas uncle-in-law.27

In a Resolution28 dated December 10, 1998, the CAdenied the motions for lack of merit. The appellatecourt considered said motions as repetitive of theirprevious arguments, irrelevant and obviouslydilatory.29 As to the motion for inhibition of theHonorable Justice Reyes, the same was denied, asthe appellate court justice stressed that the decisionand the resolution were not affected by extraneousmatters.30 Lastly, the appellate court grantedrespondents motion for execution and directed theRTC to issue a new writ of execution of its decision,with the exception of the award of attorneys feeswhich the CA deleted.31

Petitioners now come before this Court in thispetition for review on certiorari raising the followingissues:

I.

Whether this ejectment suit should be dismissed andwhether petitioners are entitled to damages for theunauthorized and malicious filing by Rosario (sic)Bautista of this ejectment case, it being clear that[Roswinda] whether as general manager or byvirtue of her subsequent designation by the Board of

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Directors as the corporations attorney-in-fact hadno legal capacity to institute the ejectment suit,independently of whether Director Pacanas Ordersetting aside the SEC revocation Order is a merescrap of paper.

II.

Whether the RTCs and the Honorable Court ofAppeals failure and refusal to resolve the mostfundamental factual issues in the instant ejectmentcase render said decisions void on their face byreason of the complete abdication by the RTC andthe Honorable Justice Ruben Reyes of theirconstitutional duty not only to clearly and distinctlystate the facts and the law on which a decision isbased but also to resolve the decisive factual issuesin any given case.

III.

Whether the (1) failure and refusal of HonorableJustice Ruben Reyes to inhibit himself, despite hisadmission by reason of his silence of petitionersaccusation that the said Justice enjoyed a $7,000.00scholarship grant courtesy of the uncle-in-law ofrespondent "corporations" purported generalmanager and (2), worse, his act of ruling against thepetitioners and in favor of the respondent"corporation" constitute an unconstitutionaldeprivation of petitioners property without dueprocess of law.32

In addition to Ms. Bautistas lack of capacity to sue,petitioners insist that respondent company has nostanding to sue as a juridical person in view of thesuspension and eventual revocation of its certificateof registration.33 They likewise question the factualfindings of the court on the bases of their ejectmentfrom the subject premises. Specifically, they fault theappellate court for not finding that: 1) their non-

payment of rentals was justified; 2) they weredeprived of possession of all the units subject of thelease contract except Room 35; and 3) respondentviolated the terms of the contract by its continuedrefusal to turn over possession of Rooms 36, 37 and38. Petitioners further prayed that a TemporaryRestraining Order (TRO) be issued enjoining the CAfrom enforcing its Resolution directing the issuanceof a Writ of Execution. Thus, in a Resolution34 dated

January 18, 1999, this Court directed the parties tomaintain the status quo effective immediately untilfurther orders.

The petition lacks merit.

We uphold the capacity of respondent company to

institute the ejectment case. Although the Securitiesand Exchange Commission (SEC) suspended andeventually revoked respondents certificate ofregistration on February 16, 1995, records show thatit instituted the action for ejectment on December15, 1993. Accordingly, when the case wascommenced, its registration was not yet revoked.35Besides, as correctly held by the appellate court, theSEC later set aside its earlier orders of suspensionand revocation of respondents certificate, renderingthe issue moot and academic.36

We likewise affirm Ms. Bautistas capacity to sue onbehalf of the company despite lack of proof ofauthority to so represent it. A corporation has nopowers except those expressly conferred on it by theCorporation Code and those that are implied from orare incidental to its existence. In turn, a corporationexercises said powers through its board of directorsand/or its duly authorized officers and agents.

Physical acts, like the signing of documents, can beperformed only by natural persons duly authorizedfor the purpose by corporate by-laws or by a specificact of the board of directors.37 Thus, any personsuing on behalf of the corporation should presentproof of such authority. Although Ms. Bautista initiallyfailed to show that she had the capacity to sign theverification and institute the ejectment case onbehalf of the company, when confronted with suchquestion, she immediately presented the SecretarysCertificate38 confirming her authority to representthe company.

There is ample jurisprudence holding thatsubsequent and substantial compliance may call forthe relaxation of the rules of procedure in theinterest of justice.39 In Novelty Phils., Inc. v. Court ofAppeals,40 the Court faulted the appellate court fordismissing a petition solely on petitioners failure totimely submit proof of authority to sue on behalf ofthe corporation. In Pfizer, Inc. v. Galan,41 we upheldthe sufficiency of a petition verified by anemployment specialist despite the total absence of aboard resolution authorizing her to act for and onbehalf of the corporation. Lastly, in China BankingCorporation v. Mondragon International Philippines,Inc,42 we relaxed the rules of procedure because thecorporation ratified the managers status as anauthorized signatory. In all of the above cases, webrushed aside technicalities in the interest of justice.

This is not to say that we disregard the requirementof prior authority to act in the name of a corporation.

The relaxation of the rules applies only to highly

meritorious cases, and when there is substantialcompliance. While it is true that rules of procedureare intended to promote rather than frustrate theends of justice, and while the swift unclogging ofcourt dockets is a laudable objective, we should notinsist on strict adherence to the rules at the expenseof substantial justice.43 Technical and p