Republic of the Philippines vs. Court of Appeals

Consolidation of a civil collection case with criminal cases before the Sandiganbayan cannot be ordered where the Sandiganbayan lacks jurisdiction over the civil collection case; the civil case must instead be suspended pending termination of the criminal cases.

Navotas Industrial Corporation is a corporation engaged in dredging operations throughout the Philippines. The DPWH awarded NIC ₱194,454,000.00 worth of dredging work under four contracts for completion within 350 calendar days. The Sandiganbayan is a special court created to hear graft cases against government officials of a particular salary grade for violations of specific laws, with its jurisdiction defined by Presidential Decree No. 1606, as amended by Republic Act No. 8249. Rule 111 of the Rules of Court governs the institution of criminal and civil actions and the treatment of counterclaims in criminal cases.

Navotas Industrial Corporation is a corporation engaged in dredging operations throughout the Philippines. On 27 November 1985, then Public Works and Highways Minister Jesus Hipolito requested former President Ferdinand E. Marcos to release ₱800 million to finance the immediate implementation of dredging, flood control and related projects in Metro Manila, Bulacan, Pampanga and Leyte. Of the total funds approved for release, ₱615 million went to the National Capital Region of the Ministry of Public Works and Highways (DPWH). The DPWH allocated the ₱615 million to several projects covered by twenty-one contracts. The DPWH awarded NIC ₱194,454,000.00 worth of dredging work in four contracts for completion within 350 calendar days.

NIC alleges that the dredging work proceeded pursuant to specific work schedules and plan approved by DPWH. NIC contends that it accomplished 95.06 percent of the required total volume of work or ₱184,847,970.00 worth of services based on an alleged evaluation by DPWH. However, NIC maintains that DPWH paid only 79.22 percent of the accomplished work, leaving a balance of ₱30,799,676.00.

In its Answer, petitioner contends that NIC is not entitled to the amount claimed. Soon after the February 1986 Revolution, DPWH created a fact-finding committee to audit the flood control projects in the National Capital Region, Bulacan, Pampanga and Leyte. Then DPWH Minister Rogaciano Mercado, who replaced Minister Jesus Hipolito, ordered the suspension of all projects funded by special budget released or issued before the snap elections on February 1986, pending inventory and evaluation of these projects. Petitioner contends that upon verification and investigation, the DPWH fact-finding committee discovered that the dredging contracts of NIC with DPWH were null and void. Petitioner claims that NIC worked on the project five or six months before the award of the dredging contracts to NIC. The contracts of NIC were awarded without any public bidding. Moreover, DPWH discovered that NIC, through its corporate officers, connived with some DPWH officials in falsifying certain public documents to make it appear that NIC had completed a major portion of the project, when no dredging work was actually performed. The scheme enabled NIC to collect from DPWH ₱146,962,072.47 as payment for work allegedly accomplished. Petitioner thus filed a counterclaim for the return of the ₱146,962,072.47 plus interest and exemplary damages of ₱100 million.

On 14 July 1986, the DPWH fact-finding committee filed with the Office of the Tanodbayan a case for estafa thru falsification of public documents and for violation of Republic Act No. 3019 against former Minister Hipolito. Other DPWH officials involved in awarding the dredging contracts to NIC, as well as Cipriano Bautista, president of NIC, were also named respondents. The charges were for four counts corresponding to the four contracts that DPWH entered into with NIC. The case was docketed as TBP Case No. 86-01163. However, it was only on 17 June 1991 that former Ombudsman Conrado Vasquez approved the resolution of the Office of the Special Prosecutor finding probable cause for estafa thru falsification of public documents and for violation of Section 3(e) and (g) of RA No. 3019. Subsequently, the Ombudsman filed the corresponding Informations with the First Division of the Sandiganbayan against all the respondents in TBP Case No. 86-01163. The cases were docketed as Criminal Cases Nos. 16889-16900.

On 20 September 1988, NIC filed a complaint for sum of money with the Malabon trial court against the Republic of the Philippines, thru the DPWH. The case, docketed as Civil Case No. 1153-MN, was raffled to Branch 73 of the court, presided by Judge Amanda Valera-Cabigao. On 14 April 1993, petitioner filed before the Malabon trial court a Motion to Consolidate Civil Case No. 1153-MN with Criminal Cases Nos. 16889-16900 in the Sandiganbayan. Petitioner argued that the civil case for collection and the criminal cases arose from the same incidents and involve the same facts. Thus, these cases should be consolidated as mandated by Section 4(b) of Presidential Decree No. 1606, as amended. On 18 June 1993, the Malabon trial court issued a Resolution denying petitioner’s Motion for Consolidation. Thereafter, petitioner filed a Motion for Reconsideration which the Malabon trial court denied on 7 November 1993.

On 19 January 1994, petitioner filed a Petition for Certiorari, Prohibition and Mandamus with the Court of Appeals docketed as CA-G.R. CV No. 33094. In a Decision dated 18 July 1994, the Court of Appeals dismissed the petition. On 12 September 1994, petitioner filed with the Court this petition for review. On 26 September 1994, the Court resolved to issue the temporary restraining order prayed for by petitioner. Consequently, the Malabon trial court desisted from hearing further Civil Case No. 1153-MN.

• Consolidation under Section 4(b) of P.D. 1606: Petitioner argued that the civil case for collection of sum of money and the criminal cases for estafa thru falsification of public documents and for violation of RA No. 3019 arose from the same transaction and involved similar questions of fact and law. Petitioner claimed that all these cases pertained to only one issue, that is, whether NIC performed dredging work. A determination in the civil case that NIC performed dredging work would entitle NIC to the balance of the contract price, while the criminal cases also involved the same issue because petitioner charged that the accused connived in falsifying documents and in fraudulently collecting payments for non-existing dredging work. Since the issues in all these cases were the same, the parties would have to present the same evidence, and consolidation was in order.
• Naguiat vs. Intermediate Appellate Court: Petitioner invoked Naguiat vs. Intermediate Appellate Court in claiming that a civil action not arising from the offense charged may be consolidated with the criminal action.

• Timeliness of Petition: NIC sought dismissal of the petition on the ground that it was not served on time. Petitioner admittedly filed two motions for extension of time, each for fifteen days; the last day for filing the second motion for extension was on 11 September 1994, but a copy of the petition was sent by registered mail to NIC’s counsel only on 12 September 1994, or a day after the last day for filing. NIC asked the Court to consider the petition as not having been filed, making the Court of Appeals Resolution final and executory.

• Timeliness: Whether the petition was filed on time.
• Consolidation: Whether the Court of Appeals erred in not ordering the consolidation of Civil Case No. 1153-MN with Criminal Cases Nos. 16889-16900 with the Sandiganbayan as required by Section 4(b) of P.D. 1606.

• Timeliness: Yes. The petition was filed on time because the last day for filing, 11 September 1994, fell on a Sunday; under Section 1, Rule 22 of the Rules of Court, the time did not run until the next working day, and petitioner filed on 12 September 1994.
• Consolidation: No. The Court of Appeals did not err. Consolidation requires that the court have jurisdiction over all cases to be consolidated; the Sandiganbayan has no jurisdiction over a civil action for collection of sum of money, and the Rules prohibit counterclaims or third-party complaints in criminal cases. The civil collection case must be suspended until termination of the criminal cases, and petitioner’s counterclaim is deemed abandoned.

• Timeliness: NIC asserted that the petition was sent by registered mail only on 12 September 1994, when the last day for filing was on 11 September 1994. NIC, however, overlooked that 11 September 1994 fell on a Sunday. Based on Section 1, Rule 22 of the Rules of Court, and as applied in several cases, where the last day for doing any act required or permitted by law falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next working day. Thus, petitioner filed on time its petition on 12 September 1994, the next working day, following the last day for filing which fell on a Sunday.
• Consolidation: Consolidation is a matter of discretion with the court. It becomes a matter of right only when the cases sought to be consolidated involve similar questions of fact and law, provided certain requirements are met. The purpose of consolidation is to avoid multiplicity of suits, prevent delay, clear congested dockets, simplify the work of the trial court, and save unnecessary expense. The Court could not order consolidation for two reasons. First, the Sandiganbayan has no jurisdiction over the collection case. The Sandiganbayan was created as a special court to hear graft cases against government officials of a particular salary grade for violations of specific laws. Presidential Decree No. 1606, as amended by Republic Act No. 8249, outlines the Sandiganbayan’s jurisdiction, which covers violations of Republic Act No. 3019, Republic Act No. 1379, and Chapter II, Section 2, Title VII, Book II of the Revised Penal Code where one or more accused are officials occupying specified positions; other offenses or felonies committed by public officials in relation to their office; and civil and criminal cases filed pursuant to and in connection with Executive Order Nos. 1, 2, 14 and 14-A. The law does not include civil cases for collection of sum of money among the cases falling under the Sandiganbayan’s jurisdiction. If the collection case were consolidated with the criminal cases, the Sandiganbayan would have no jurisdiction to hear and decide it; even if NIC proved entitlement to payment, the Sandiganbayan could not award a money judgment, and NIC would still have to file a separate case in the regular court. Thus, the avowed purpose of consolidation would not be achieved. Petitioner invoked Naguiat vs. Intermediate Appellate Court, which allowed consolidation of a criminal case with a civil case arising ex contractu and relied on Canos vs. Peralta, where the Court consolidated a civil action for recovery of wage differential with a criminal action for violation of the Minimum Wage Law. Canos, however, qualified that a court may order several actions pending before it to be tried together where they arise from the same act, event or transaction, involve the same or like issues, and depend largely or substantially on the same evidence, provided that the court has jurisdiction over the cases to be consolidated. An essential requisite of consolidation is that the court must have jurisdiction over all the cases consolidated before it. Since the Sandiganbayan does not have jurisdiction over the collection case, the same cannot be consolidated with the criminal cases even if these cases involve similar questions of fact and law; consolidation would be a useless and empty formality. Second, the Court could not order consolidation because the civil case amounts to a counterclaim or a third-party complaint in a criminal case. While NIC, as a corporate entity, is not an accused in the criminal cases, a consolidation of NIC’s collection case with the criminal cases will have the same effect of a counterclaim or a third-party complaint against petitioner and DPWH. The rule against counterclaims and third-party complaints in criminal cases may be applied by analogy. Section 1, Rule 111 of the 2000 Rules on Criminal Procedure expressly requires the accused to litigate his counterclaim separately from the criminal action and provides that no counterclaim, cross-claim or third-party complaint may be filed by the accused in the criminal case, but any cause of action which could have been the subject thereof may be litigated in a separate civil action. This paragraph was incorporated to address the lacuna mentioned in Cabaero vs. Cantos, where the Court noted the absence of clear-cut rules governing the prosecution of impliedly instituted civil action and clarified that the counterclaim of the accused cannot be tried together with the criminal case because it will unnecessarily complicate and confuse the criminal proceedings; the trial court should confine itself to the criminal aspect and the possible civil liability of the accused arising out of the crime, and the counterclaim should be set aside or refused cognizance without prejudice to its filing in separate proceedings at the proper time. The same rationale applies to NIC’s collection case, which must be litigated separately before the Malabon trial court to avoid confusion in resolving the criminal cases with the Sandiganbayan. Petitioner lodged its own counterclaim in the collection case, praying for the return of the payment DPWH made to NIC arising from the dredging contracts. However, petitioner’s counterclaim is deemed abandoned by virtue of Section 4 of PD No. 1606, as amended. The last paragraph of Section 4 provides that the criminal action and the corresponding civil action for the recovery of civil liability shall at all times be simultaneously instituted with, and jointly determined in, the same proceeding by the Sandiganbayan or the appropriate courts, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, and no right to reserve the filing of such civil action separately from the criminal action shall be recognized; provided, however, that where the civil action had heretofore been filed separately but judgment therein has not yet been rendered, and the criminal case is hereafter filed with the Sandiganbayan or the appropriate court, said civil action shall be transferred to the Sandiganbayan or the appropriate court for consolidation and joint determination with the criminal action, otherwise the separate civil action shall be deemed abandoned. Petitioner’s counterclaim in the civil case pending with the Malabon trial court for the return of the amount DPWH paid NIC is an action to recover civil liability ex delicto. However, this action to recover civil liability ex delicto is by operation of law included in the criminal cases filed with the Sandiganbayan. By mandate of RA No. 8249, the counterclaim filed earlier in the separate civil action with the Malabon trial court shall be deemed abandoned. The only question left was whether NIC’s civil case before the Malabon trial court for collection of sum of money can proceed independently of the criminal cases filed with the Sandiganbayan. NIC’s collection case for unpaid services from its dredging contracts with DPWH obviously does not fall under Articles 32, 33 or 34 (on Human Relations) of the Civil Code, nor under Article 2176 (on quasi-delict). Under Section 3 of Rule 111, civil actions falling under Articles 32, 33, 34 or 2176 may proceed independently and separately from the criminal case, but NIC cannot invoke any of these articles. The only other possibility is for NIC’s civil action to fall under Article 31 of the Civil Code, which provides that when the civil action is based on an obligation not arising from the act or omission complained of as a felony, such civil action may proceed independently of the criminal proceedings and regardless of the result of the latter. An example is a civil action to recover the proceeds of sale of goods covered by a trust receipt, which can proceed independently of the criminal action for violation of the trust receipt law; in such a case, the validity of the contract on which the civil action is based is not at issue, and what is at issue is the violation of an obligation arising from a valid contract. However, when the civil action is based on a purported contract that is assailed as illegal per se, as when the execution of the contract is alleged to violate the Anti-Graft and Corrupt Practices Act, Article 31 does not apply. In such a situation, the contract if proven illegal cannot create any valid obligation that can be the basis of a cause of action in a civil case. Under Article 1409 of the Civil Code, a contract whose cause, object or purpose is contrary to law, or a contract that is expressly prohibited or declared void by law, is void from the very beginning, and no party to such void contract can claim any right under such contract or enforce any of its provisions. Under Section 3(g) of the Anti-Graft and Corrupt Practices Act, entering into a contract that is manifestly and grossly disadvantageous to the government is declared to be unlawful. If the act of entering into the contract is assailed as a crime in itself, then the issue of whether the contract is illegal must first be resolved before any civil action based on the contract can proceed. Only the Sandiganbayan has the jurisdiction to decide whether the act of entering into such contract is a crime, where the salary grade of one of the accused is grade 27 or higher, as in Criminal Cases Nos. 16889-16900 filed with the Sandiganbayan. Article 31 speaks of a civil action based on an obligation not arising from the act complained of as a felony; this clearly means that the obligation must arise from an act not constituting a crime. In the instant case, the act purporting to create the obligation is assailed as a crime in itself. That act, which is prohibited by law, is the entering into dredging contracts that are manifestly and grossly disadvantageous to the government. A contract executed against the provisions of prohibitory laws is void. If the dredging contracts are declared illegal, then no valid obligation can arise from such contracts; consequently, no civil action based on such contracts can proceed independently of the criminal action. In contrast, where the civil action is based on a contract that can remain valid even if its violation may constitute a crime, the civil action can proceed independently. Thus, in estafa thru violation of the trust receipt law, the violation of the trust receipt constitutes a crime, but the trust receipt itself remains valid, allowing a civil action based on the trust receipt to proceed independently of the criminal case. Clearly, NIC’s civil case before the Malabon trial court does not fall under Article 31 of the Civil Code. This calls for the application of the second paragraph of Section 2 of Rule 111, which states that if the criminal action is filed after the said civil action has already been instituted, the latter shall be suspended in whatever stage it may be found before judgment on the merits. Consequently, the civil case for collection pending in the Malabon trial court must be suspended until after the termination of the criminal cases filed with the Sandiganbayan. The suspension of the civil case for collection of sum of money will avoid the possibility of conflicting decisions between the Sandiganbayan and the Malabon trial court on the validity of NIC’s dredging contracts. If the Sandiganbayan declares the dredging contracts illegal and void ab initio, and such declaration becomes final, then NIC’s civil case for collection of sum of money will have no legal leg to stand on. However, if the Sandiganbayan finds the dredging contracts valid, then NIC’s collection case before the Malabon trial court can then proceed to trial.

• Consolidation requires jurisdiction over all cases — Consolidation is a matter of discretion; it becomes a matter of right only when the cases involve similar questions of fact and law, provided certain requirements are met. Its purposes are to avoid multiplicity of suits, prevent delay, clear congested dockets, simplify the work of the trial court, and save unnecessary expense. An essential requisite is that the court must have jurisdiction over all the cases to be consolidated. The Court applied this by denying consolidation because the Sandiganbayan lacks jurisdiction over a civil action for collection of sum of money.
• No counterclaim or third-party complaint in criminal cases — Section 1, Rule 111 of the 2000 Rules on Criminal Procedure provides that no counterclaim, cross-claim or third-party complaint may be filed by the accused in the criminal case, but any cause of action which could have been the subject thereof may be litigated in a separate civil action. The rationale is to avoid complication and confusion in the criminal proceedings. The Court applied this by analogy to NIC’s collection case, which would have the same effect as a counterclaim or third-party complaint against petitioner and DPWH.
• Civil liability ex delicto is included in the criminal action; separate civil action deemed abandoned — Under Section 4 of PD No. 1606, as amended, the criminal action and the corresponding civil action for recovery of civil liability shall be simultaneously instituted with and jointly determined in the same proceeding; the filing of the criminal action carries with it the filing of the civil action, and no right to reserve a separate civil action is recognized. Where a separate civil action was filed before the criminal case and judgment has not been rendered, it must be transferred for consolidation and joint determination; otherwise, it is deemed abandoned. The Court applied this to DPWH’s counterclaim in the Malabon civil case, which was an action to recover civil liability ex delicto and was therefore deemed abandoned.
• Article 31 Civil Code independent civil action — A civil action based on an obligation not arising from the act or omission complained of as a felony may proceed independently of the criminal proceedings and regardless of the result of the latter. The obligation must arise from an act not constituting a crime. The doctrine does not apply where the contract itself is assailed as illegal per se or as a crime, such as entering into a contract manifestly and grossly disadvantageous to the government under Section 3(g) of RA No. 3019; in that case, the validity of the contract must first be resolved by the Sandiganbayan.
• Suspension of civil action pending criminal case — Under the second paragraph of Section 2, Rule 111, if the criminal action is filed after the civil action has already been instituted, the civil action shall be suspended in whatever stage it may be found before judgment on the merits. The Court applied this to order the suspension of Civil Case No. 1153-MN until the termination of Criminal Cases Nos. 16889-16900.
• Computation of time — Under Section 1, Rule 22 of the Rules of Court, if the last day for doing an act falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next working day. The Court applied this to hold that the petition filed on 12 September 1994 was timely because 11 September 1994 was a Sunday.

• "A court may order several actions pending before it to be tried together where they arise from the same act, event or transaction, involve the same or like issues, and depend largely or substantially on the same evidence, provided that the court has jurisdiction over the cases to be consolidated x x x." — States the essential requisite of consolidation, which the Court used to deny consolidation because the Sandiganbayan lacks jurisdiction over the collection case.
• "No counterclaim, cross-claim or third-party complaint may be filed by the accused in the criminal case, but any cause of action which could have been the subject thereof may be litigated in a separate civil action." — Section 1, Rule 111 of the 2000 Rules on Criminal Procedure, which the Court applied by analogy to NIC’s collection case.
• "Article 31 speaks of a civil action "based on an obligation not arising from the act x x x complained of as a felony." This clearly means that the obligation must arise from an act not constituting a crime." — Defines the scope of Article 31 of the Civil Code and explains why NIC’s collection case cannot proceed independently where the dredging contracts themselves are assailed as illegal.
• "Consequently, the civil case for collection pending in the Malabon trial court must be suspended until after the termination of the criminal cases filed with the Sandiganbayan." — The Court’s ultimate directive on the civil collection case, applying the suspension rule in Rule 111.

• Naguiat vs. Intermediate Appellate Court, G.R. No. 73836, 18 August 1988, 164 SCRA 505 — Invoked by petitioner; allowed consolidation of a criminal case with a civil case arising ex contractu, but the Court here limited its application by holding that consolidation still requires jurisdiction over all cases.
• Canos vs. Peralta, 201 Phil. 422 (1982) — Relied on in Naguiat; stated the essential requisite that the court must have jurisdiction over the cases to be consolidated; applied to deny consolidation because the Sandiganbayan lacks jurisdiction over the collection case.
• Cabaero vs. Cantos, 338 Phil. 105 (1997) — Cited for the rule that a counterclaim cannot be tried together with a criminal case because it would complicate and confuse the criminal proceedings; the Court applied the same rationale by analogy to NIC’s collection case.
• People vs. Mejia, 341 Phil. 118 (1997) — Cited for the purposes of consolidation: to avoid multiplicity of suits, prevent delay, clear congested dockets, simplify the work of the trial court, and save unnecessary expense.

• Section 1, Rule 22, Rules of Court — Computation of time; if the last day falls on a Saturday, Sunday, or legal holiday, the time does not run until the next working day. Applied to hold the petition filed on time on 12 September 1994 because 11 September 1994 was a Sunday.
• Section 4, Presidential Decree No. 1606, as amended by Republic Act No. 8249 — Defines Sandiganbayan jurisdiction; does not include civil cases for collection of sum of money. Its last paragraph provides that the criminal action carries the civil action for recovery of civil liability and that a separate civil action is deemed abandoned if not transferred for consolidation. Applied to deny consolidation and deem DPWH’s counterclaim abandoned.
• Section 1, Rule 111, 2000 Rules on Criminal Procedure — No counterclaim, cross-claim, or third-party complaint may be filed by the accused in a criminal case; the cause of action may be litigated separately. Applied by analogy to NIC’s collection case.
• Section 3, Rule 111, Rules of Court — Civil actions under Articles 32, 33, 34, or 2176 of the Civil Code may proceed independently. NIC’s collection case does not fall under these.
• Second paragraph of Section 2, Rule 111, Rules of Court — If the criminal action is filed after the civil action has been instituted, the civil action shall be suspended before judgment on the merits. Applied to suspend Civil Case No. 1153-MN.
• Article 31, Civil Code — A civil action based on an obligation not arising from the act complained of as a felony may proceed independently. Not applicable because NIC’s contract is assailed as illegal per se or as a crime.
• Article 1409, Civil Code — Contracts whose cause, object or purpose is contrary to law, or expressly prohibited or declared void by law, are inexistent and void from the beginning. Applied to contracts allegedly violating RA No. 3019.
• Article 5, Civil Code — Acts executed against mandatory or prohibitory laws are void except when the law authorizes their validity. Cited in relation to contracts executed against prohibitory laws.
• Section 3(g), Republic Act No. 3019 — Declares unlawful entering into any contract or transaction manifestly and grossly disadvantageous to the government. The act of entering into the dredging contracts was assailed as a crime, so its validity must first be resolved by the Sandiganbayan.
• Articles 32, 33, 34, and 2176, Civil Code — Independent civil actions; NIC’s collection case does not fall under any of these.

Davide, Jr., C.J. (Chairman), Vitug, Ynares-Santiago, and Azcuna, JJ., concur.