Manila Electric Company vs. Philippine Consumers Foundation, Inc.

Where an issue has been previously adjudicated by a competent administrative body (Board of Energy) and affirmed by the Supreme Court in a final and executory judgment, the principle of res judicata bars its relitigation in a subsequent declaratory relief action; furthermore, lower courts lack the authority to declare Supreme Court decisions null and void, and declaratory relief is only available before a breach or violation of the statute occurs.

On September 11, 1974, President Ferdinand Marcos promulgated Presidential Decree No. 551 to reduce the franchise tax payable by electric companies from 5% to 2% of their gross receipts, with the objective of enabling grantees of electric franchises to reduce their rates within the reach of consumers. Section 4 of the decree mandated that all savings realized from the tax reduction "shall be passed on to the ultimate consumer," but authorized the Minister of Finance to promulgate implementing rules and regulations. The Minister of Finance subsequently issued rules allowing electric franchise holders whose rates of return were below the legal allowable level to defer passing on the benefits to consumers.

• On September 11, 1974, former President Ferdinand E. Marcos promulgated Presidential Decree No. 551, reducing the franchise tax payable by electric companies from 5% to 2% of their gross receipts to enable grantees to reduce rates within the reach of consumers.
• Section 4 of P.D. No. 551 mandates that "all the savings realized by electric franchise holders from the reduction of the franchise tax... shall be passed on to the ultimate consumer," and authorizes the Minister of Finance to promulgate implementing rules and regulations.
• The Minister of Finance issued a memorandum allowing grantees of electric franchises whose rates of return were below the legal allowable level to either ask for increased rates or defer the passing on of benefits to consumers until just and reasonable returns could be had.
• On March 10, 1980, the Board of Energy (BOE) issued an Order in BOE Case No. 79-692 authorizing Meralco to retain the savings realized under P.D. No. 551, which became final when the registered oppositors failed to seek relief or appeal.
• On February 5, 1982, PCFI filed a petition for specific performance with the BOE (Case No. 82-198) against Meralco, seeking immediate refund of the savings to consumers with interest, damages, and fines for alleged violation of P.D. No. 551.
• On November 25, 1982, the BOE dismissed PCFI's petition, ruling that Meralco had been duly authorized to retain the savings under the March 10, 1980 Order and that the Minister of Finance's rules were valid implementing measures.
• PCFI filed a motion for reconsideration which was denied, leading to the filing of a Petition for Certiorari with the Supreme Court in G.R. No. 63018.
• On October 22, 1985, the Supreme Court dismissed G.R. No. 63018 for lack of merit, holding that the BOE did not commit grave abuse of discretion and that the March 10, 1980 judgment in BOE Case No. 79-692 had long become final; the Resolution became final and executory on December 4, 1985.
• Four years thereafter, PCFI and Edgardo S. Isip filed a petition for declaratory relief with the RTC (Civil Case No. Q-89-3659), praying for a ruling on who should be entitled to the savings realized by Meralco under P.D. No. 551.
• In its Answer, Meralco prayed for dismissal on the ground of res judicata, citing the Supreme Court's Resolution in G.R. No. 63018 and the BOE's Decision in BOE Case No. 82-198.
• On January 16, 1991, the RTC rendered a Decision declaring null and void the Supreme Court's Resolution in G.R. No. 63018 and holding, based on the dissenting opinion of Justice Teehankee, that the disputed savings belong to the consumers.
• The RTC ruled that the BOE decision was ultra vires because Section 4 of P.D. No. 551 was clear and mandatory, leaving no room for administrative interpretation or amendment by the Minister of Finance.
• Meralco filed a motion for reconsideration which was denied by the RTC in its Order dated September 10, 1991.

• Civil Case No. Q-89-3659 is barred by prior judgments, specifically the Supreme Court's Resolution in G.R. No. 63018 sustaining the BOE's Decision in BOE Case No. 82-198, and the BOE's Order dated March 10, 1980 in BOE Case No. 79-692, both holding that Meralco is authorized to retain the savings realized under P.D. No. 551.
• The RTC cannot annul or declare null and void the Resolution of the Supreme Court in G.R. No. 63018 because trial courts cannot set aside decisions of a superior court, and such action violates the principle of hierarchy of courts.
• The remedy of declaratory relief is no longer available to private respondents because it should be filed before a violation of the statute occurs, whereas the petition was filed long after the alleged violation.
• The petition for declaratory relief should be dismissed on the ground of res judicata and improper availment of remedy.

• The Supreme Court's Resolution in G.R. No. 63018 cannot be a bar to Civil Case No. Q-89-3659 because it did not delve into the essential issue raised in the latter case, which is who is entitled to the savings realized under P.D. No. 551.
• The application of res judicata would defeat public interest, as the savings rightfully belong to the consumers under the clear mandate of Section 4 of P.D. No. 551.
• The BOE's decision and the Supreme Court's Resolution affirming it were ultra vires because Section 4 of P.D. No. 551 is clear and unequivocal, leaving no room for administrative interpretation or amendment by the Minister of Finance to allow deferment of passing on the benefits.

• Procedural Issues:
  • Whether the RTC has authority to declare a final and executory Resolution of the Supreme Court null and void.
  • Whether the principle of res judicata bars the filing of the subsequent petition for declaratory relief involving the same parties and subject matter.
  • Whether the remedy of declaratory relief is available to private respondents considering the timing of its filing.
• Substantive Issues:
  • Whether Meralco is duly authorized to retain the savings resulting from the reduction of the franchise tax under P.D. No. 551 as long as its rate of return falls below the 12% allowable rate.
  • Whether the Minister of Finance had authority under P.D. No. 551 to promulgate rules allowing deferment of passing on the tax savings to consumers.

• Procedural:
  • The RTC has no authority to declare a Resolution of the Supreme Court null and void; lower courts cannot reverse or set aside decisions or orders of a superior court, as this would negate the principle of hierarchy of courts and nullify the essence of review.
  • The principle of res judicata applies because all four requisites are present: (1) there is a final judgment (G.R. No. 63018 and BOE Case No. 82-198); (2) the courts had jurisdiction over the subject matter and parties; (3) the judgments were on the merits; and (4) there is identity of parties, subject matter, and causes of action between the prior cases and the present declaratory relief action.
  • The remedy of declaratory relief is not available because it must be entertained only before the breach or violation of the statute, deed, or contract to which it refers; here, private respondents brought the petition long after the alleged violation of P.D. No. 551 occurred.
• Substantive:
  • Meralco is duly authorized to retain the savings resulting from the reduction of the franchise tax under P.D. No. 551 as long as its rate of return falls below the 12% allowable rate, as previously determined by the BOE and affirmed by the Supreme Court in G.R. No. 63018.
  • The Minister of Finance had authority under P.D. No. 551 to issue implementing rules and regulations, including the memorandum allowing deferment of passing on benefits for companies with rates of return below allowable levels, which was approved by the President and became the basis for the BOE's authorization to Meralco.

• Res Judicata — A doctrine meaning "a matter adjudged" which bars the relitigation of matters that have been finally adjudicated; it requires: (1) a final judgment or order; (2) jurisdiction of the court over the subject matter and parties; (3) a judgment or order on the merits; and (4) identity of parties, subject matter, and causes of action. In this case, the Court applied the doctrine to bar the relitigation of the issue regarding the disposition of franchise tax savings, which had been finally settled in BOE Case No. 82-198 and affirmed in G.R. No. 63018.
• Hierarchy of Courts — A principle establishing the Supreme Court as the apex of the judicial system, from whose decisions all other courts should take their bearings; lower courts cannot reverse or set aside decisions of superior courts, and must render obeisance to the Supreme Court's status. The Court invoked this to condemn the RTC's declaration that the Supreme Court's Resolution was null and void.
• Declaratory Relief — A remedy to secure an authoritative statement of the rights and obligations of parties under a statute, deed, or contract for their guidance in enforcement or compliance, not to settle issues arising from an alleged breach; it may be entertained only before the breach or violation occurs. The Court held that private respondents could not avail of this remedy because they filed the action after the alleged violation.

• "Interest republicae ut sit finis litium - it is to the interest of the public that there should be an end to litigation by the same parties and their privies over a subject fully and fairly adjudicated."
• "There is only one Supreme Court from whose decisions all other courts should take their bearings."
• "A becoming modesty of inferior courts demands conscious realization of the position that they occupy in the interrelation and operation of the integrated judicial system of the nation."
• "A lower court cannot reverse or set aside decisions or orders of a superior court, especially of this Court, for to do so will negate the principle of hierarchy of courts and nullify the essence of review."
• "Although judicial determinations are not infallible, judicial error should be corrected through appeals, not through repeated suits on the same claim."

• G.R. No. 63018 (Philippine Consumers Foundation, Inc. v. Manila Electric Company) — Controlling precedent where the Supreme Court dismissed PCFI's petition for certiorari and upheld the BOE's authorization for Meralco to retain the savings, serving as the basis for the res judicata claim in the instant case.
• Aldovino v. National Labor Relations Commission — Cited as the source of the maxim "Interest republicae ut sit finis litium" regarding the public interest in ending litigation.
• Manalo v. Court of Appeals — Cited for the definition of res judicata as a matter adjudged that is conclusive as to every matter offered and received therein.
• Sta. Lucia and Development, Inc. v. Cabrigas; Mendiola v. Court of Appeals; Mangoma v. Court of Appeals — Cited for the four requisites that must concur for res judicata to apply.
• Nery v. Leyson — Cited for the principle that res judicata requires only substantial, not absolute, identity of parties.
• Regalado, Remedial Law Compendium — Cited for the definition of subject matter of an action.
• Rosello-Bentir v. Leanda; Herrera, Remedial Law III — Cited regarding the nature and purpose of declaratory relief and the requirement that it be filed before breach.
• Conducto v. Judge Monzon; Golangco v. Villanueva; People v. Vera; Albert v. Court of First Instance of Manila — Cited regarding the principle of hierarchy of courts and the duty of lower courts to obey Supreme Court decisions.
• Salud v. Court of Appeals — Cited for the principle that a final and executory decision can no longer be disturbed or reopened no matter how erroneous it may be.

• Presidential Decree No. 551, Sections 1 and 4 — Section 1 reduces the franchise tax from 5% to 2%, while Section 4 mandates that savings be passed on to consumers and authorizes the Minister of Finance to issue implementing rules; central to the determination of Meralco's authority to retain savings.
• Presidential Decree No. 1206, Section 9(c) (as amended by P.D. No. 1573) — Grants the Board of Energy authority to regulate and fix power rates charged by electric companies, establishing its jurisdiction over the subject matter.
• Presidential Decree No. 1573 — Amends P.D. No. 1206 regarding the powers and functions of the Board of Energy.