Province of Leyte vs. Energy Development Corporation

A petition for certiorari filed before the CA may not be dismissed for incomplete proof of service where the CA has already acquired jurisdiction over the respondent and the respondent has been notified of and participated in the proceedings; procedural rules are liberally construed to promote substantial justice.

The Province of Leyte, a local government unit represented by its ICO-Provincial Treasurer, and Energy Development Corporation (EDC) were engaged in a dispute over franchise tax assessments. EDC maintained that it does not have a franchise and therefore could not be validly assessed franchise taxes. The present case reaches the Supreme Court on the procedural issue of the CA’s dismissal of the Province’s certiorari petition for lack of proof of service.

The Province of Leyte, through its ICO-Provincial Treasurer Rodolfo Badiable, issued four separate franchise tax assessments against Energy Development Corporation (EDC) sometime in 2006 and 2007. EDC protested each assessment separately. When the Province effectively denied all protests, EDC appealed the denials to the Regional Trial Court of Tacloban City, Branch 6, where the cases were docketed as Civil Case Nos. 2006-05-48, 2006-05-49, 2006-07-77, and 2007-08-03. On EDC’s motion, the RTC consolidated the appeals in an Order dated February 4, 2008.

While the consolidated cases remained pending, the Province issued another tax assessment against EDC on February 27, 2008. The Assistant Provincial Treasurer verbally told EDC that he was under strict instruction from the Governor to enforce collection through available administrative remedies once the sixty-day period stated in the assessment lapsed. This prompted EDC to file a Motion for Issuance of Writ of Preliminary Injunction dated April 4, 2008, asking the RTC to enjoin the Province from assessing or attempting to assess, collecting or attempting to collect franchise taxes from EDC, and from availing itself of enforcement remedies or actions until the pending cases were resolved with finality.

In support of its motion, EDC averred that it does not have a franchise, so the Province’s assessment of franchise taxes was contrary to law and would result in payment of illegally exacted taxes if not enjoined. EDC further claimed that if the Province’s actions continued, its operations would be seriously imperiled and would altogether cease, causing loss of substantial revenues amounting to approximately Twenty One Million Pesos (₱21,000,000.00) per day and loss of jobs for its employees. EDC also contended that the damage it would suffer was irreparable because there was no assurance it could recover such losses.

In an Order dated April 18, 2008, the RTC denied EDC’s motion on the ground that granting it would in effect dispose of the cases before it. However, on EDC’s motion, the RTC issued an Order dated July 17, 2009 setting aside its earlier order and directing the issuance of a writ of preliminary injunction in EDC’s favor. The RTC held that the main action would not be disposed of even if the Province were enjoined from collecting franchise taxes in the meantime; that if EDC were ultimately held liable, the injunction bond would initially and substantially answer the Province’s claim; and that if EDC were compelled to pay pending resolution and later adjudged not liable, there was no assurance it could recover its operational losses. The Province then elevated the matter to the CA by petition for certiorari. The CA dismissed the petition on the ground, among others, that there was no proper proof of service of the petition on EDC, stating that registry receipts can hardly be considered sufficient proof of receipt by the addressee of registered mail. The Province moved for reconsideration, but the CA denied it. This led to the present petition for review on certiorari.

• Proof of Service / Jurisdiction over Respondent: Whether the CA correctly dismissed the Province of Leyte’s certiorari petition due to its failure to provide proof of service of the same on EDC.

• Proof of Service / Jurisdiction over Respondent: No. The CA incorrectly dismissed the petition. It had acquired jurisdiction over EDC when it served its November 4, 2009 Resolution directing EDC to file a comment, and EDC complied; the purpose of proof of service was served, and the procedural lapse should be excused in the interest of substantial justice.

• Proof of Service / Jurisdiction over Respondent: A petition for certiorari before the CA is an original and independent action, not part of the trial that produced the assailed order. Because it is an original action, the CA must acquire jurisdiction over the person of the respondent. Under Section 4, Rule 46 of the Rules of Court, the CA acquires jurisdiction over the respondent either by service on him of the order or resolution indicating the CA’s initial action on the petition or by his voluntary submission. Here, the CA served its Resolution dated November 4, 2009 directing EDC to file a comment, and EDC complied by filing its comment dated December 14, 2009. The CA therefore had already acquired jurisdiction over EDC. Although Section 3, Rule 46 requires proof of service and Section 13, Rule 13 prescribes the proof for registered mail, the purpose of the requirement is to apprise the adverse party of the pendency of the action. Since EDC had actual notice and participated, that purpose was served. The CA thus erred in dismissing the petition for failure to include the registry return card. Relying on Barra vs. Civil Service Commission, the Court reiterated that procedural rules are liberally construed and should not be applied unduly strictly where no impairment of the proper administration of justice results. The demands of justice, especially involving taxes as the nation’s lifeblood, warranted resolving the case on the merits. The case was remanded to the CA.

• Certiorari as an original and independent action — A petition for certiorari under Rule 65 is an original and independent action, not part of the trial that resulted in the rendition of the judgment or order complained of. Because it is original, the CA must acquire jurisdiction over the person of the respondent. The Court applied this principle to analyze how the CA acquired jurisdiction over EDC.
• Acquisition of jurisdiction over the person of the respondent in original actions before the CA — Under Section 4, Rule 46 of the Rules of Court, the CA acquires jurisdiction over the respondent by (a) service on him of the order or resolution indicating the CA’s initial action on the petition, or (b) his voluntary submission to such jurisdiction. The Court found that the CA served its November 4, 2009 Resolution directing EDC to comment, and EDC filed its comment, so jurisdiction was acquired.
• Purpose of proof of service — The requirement of proof of service is intended to apprise the adverse party of the pendency of an action in the CA. Once the adverse party has been notified and has participated in the proceedings, the purpose is served, and dismissal for incomplete proof of service is not warranted. Applied: EDC had actual notice and filed a comment.
• Liberal construction of procedural rules / substantial justice — Procedural rules are tools designed to facilitate the attainment of justice and should be liberally construed. Courts should not be unduly strict in cases involving procedural lapses that do not impair the proper administration of justice; every litigant should be afforded the amplest opportunity for the proper and just determination of his case. The Court applied this to excuse the Province’s failure to include the registry return card.
• Taxes as the nation’s lifeblood — Taxes, including locally imposed taxes, are the nation’s lifeblood through which government agencies continue to operate and the State discharges its functions for the welfare of its constituents. The Court considered this in requiring the CA to resolve the case on the merits rather than dismiss on technical grounds.
• Proof of service by registered mail — Under Section 13, Rule 13 of the Rules of Court, proof of service by registered mail consists of the affidavit of the person mailing and the registry receipt issued by the mailing office; the registry return card must be filed immediately upon receipt or, in lieu thereof, the unclaimed letter together with the certified or sworn copy of the notice given by the postmaster to the addressee. The Court acknowledged the rule but held non-compliance not fatal under the circumstances.

• "Thus, in petitions for certiorari filed before the CA, the latter acquires jurisdiction over the person of the respondent upon: (a) the service of the order or resolution indicating the CA’s initial action on the petition to the respondent; or (b) the voluntary submission of the respondent to the CA’s jurisdiction." — States the controlling rule on how the CA acquires jurisdiction over the respondent in original actions.
• "Considering that in this case, the CA had already issued a Resolution dated November 4, 2009 directing EDC to file a comment which the latter had complied with, it cannot be denied that EDC was already aware of the certiorari proceedings before the CA and that jurisdiction had been acquired over its person." — Applies the rule to the facts and establishes that EDC had actual notice and submitted to jurisdiction.
• "Courts should not be unduly strict in cases involving procedural lapses that do not really impair the proper administration of justice. Since litigation is not a game of technicalities, every litigant should be afforded the amplest opportunity for the proper and just determination of his case, free from the constraints of technicalities." — Articulates the liberal-construction principle relied upon to excuse the incomplete proof of service.
• "Verily, the demands of justice require the CA to resolve the issues before it, considering that what is at stake here are taxes, albeit locally imposed in this case, which are the nation’s lifeblood through which government agencies continue to operate and with which the State discharges its functions for the welfare of its constituents." — Explains why the merits should be resolved rather than the petition dismissed on a technical ground.

• Aramburo vs. CA, 189 Phil. 125 (1980) — Cited by the CA for the requirements of proof of service by registered mail, including the registry return card. The Supreme Court found the CA’s reliance on it insufficient to justify dismissal because jurisdiction over EDC had already been acquired and the purpose of service had been served.
• Barra vs. Civil Service Commission, G.R. No. 205250, March 18, 2013, 693 SCRA 563 — Relied on by the Court for the doctrine that courts should not be unduly strict with procedural lapses that do not impair the administration of justice and that procedural rules should be liberally construed.
• Reicon Realty Builders Corporation vs. Diamond Dragon Realty and Management, Inc., G.R. No. 204796, February 4, 2015 — Cited for the principle that a petition for certiorari is an original and independent action, not part of the trial that resulted in the assailed judgment or order.
• Visayas Geothermal Power Company vs. Commissioner of Internal Revenue, G.R. No. 197525, June 4, 2014 — Cited for the principle that taxes are the nation’s lifeblood, supporting the resolution of the case on the merits.
• Commissioner of Internal Revenue vs. Petron Corporation, G.R. No. 185568, March 21, 2012, 668 SCRA 735, 764 — Cited within the Visayas Geothermal Power Company citation for the same principle that taxes are the nation’s lifeblood.

• Section 4, Rule 46, Rules of Court — Provides that the court acquires jurisdiction over the person of the respondent by service on him of its order or resolution indicating its initial action on the petition or by his voluntary submission. Applied: the CA served its November 4, 2009 Resolution directing EDC to file a comment, and EDC filed its comment, so jurisdiction was acquired.
• Section 3, Rule 46, Rules of Court — Requires the petition to include proof of service on the respondent and states that failure to comply is a sufficient ground for dismissal. Applied: although the Province failed to include the registry return card, the Court held dismissal improper because the purpose of service had been served and jurisdiction had been acquired.
• Section 13, Rule 13, Rules of Court — Prescribes proof of service. For registered mail, proof consists of the affidavit of the person mailing and the registry receipt; the registry return card must be filed immediately upon receipt or, in lieu thereof, the unclaimed letter together with the certified or sworn copy of the notice given by the postmaster to the addressee. Applied: the CA relied on the absence of the registry return card, but the Court excused the lapse.

Maria Lourdes P.A. Sereno (Chief Justice, Chairperson), Teresita J. Leonardo-De Castro, Lucas P. Bersamin, and Jose Portugal Perez.