Philippine Veterans Investment Development Corp. v. Velez
REITERATIONFacts
The Antecedents: The Philippine Veterans Assistance Commission (PVAC) filed a complaint for foreclosure of mortgage against the Philippine Veterans Investment Development Corporation (PHIVIDEC) and PHIVIDEC Industrial Authority (PIA) in the Regional Trial Court (RTC) of Cagayan de Oro City. Procedural History: PHIVIDEC and PIA filed an answer with counterclaim, alleging that the RTC lacked jurisdiction because the dispute was covered by the arbitration powers of the Government Corporate Counsel under Presidential Decree No. 242. The RTC, through Judge Alejandro M. Velez, denied their motion to dismiss, deeming P.D. No. 242 unconstitutional for allegedly emasculating judicial power. The RTC also denied their motion for reconsideration. The Petition: PHIVIDEC and PIA filed a petition for certiorari and prohibition with preliminary injunction before the Supreme Court, assailing the RTC's orders. The case was initially referred to the Court of Appeals but was later returned to the Supreme Court. The Supreme Court required the parties to manifest if they were government agencies or government-owned or controlled corporations. PHIVIDEC and PIA confirmed they were government-owned and controlled corporations, and PVAC confirmed it was a government office or agency.
Issue(s)
Whether Presidential Decree No. 242 is unconstitutional. Whether the RTC gravely abused its discretion in denying the motion to dismiss based on the alleged unconstitutionality of P.D. No. 242.
Ruling
The petition for certiorari and prohibition is granted. The order dated March 15, 1988, of respondent Judge Alejandro M. Velez is annulled and set aside, and he is enjoined from further proceeding in Civil Case No. 11157, which is hereby dismissed.
Ratio Decidendi
On the constitutionality of Presidential Decree No. 242: The Supreme Court held that P.D. No. 242 is constitutional. It clarified that the decree does not diminish the jurisdiction of courts but rather prescribes an administrative procedure for the settlement of disputes between or among government entities, including government-owned or controlled corporations. This administrative settlement is an alternative to traditional litigation, aimed at avoiding delays and expenses. The Court likened this procedure to arbitration provided for in Republic Act No. 876 and Section 26 of R.A. 6715, emphasizing that it is a valid mechanism for resolving inter-agency controversies. The Court noted that Section 1, Rule 20 of the Rules of Court even mandates pre-trial conferences to explore possibilities like arbitration, underscoring the policy favoring alternative dispute resolution. On the RTC's grave abuse of discretion: The Supreme Court found that respondent Judge Velez gravely abused his discretion in denying the motion to dismiss. Since the foreclosure proceeding arose from the interpretation and application of a mortgage contract between government entities, P.D. No. 242 was applicable. The PVAC's resort to judicial action without first availing of the administrative remedies provided under P.D. No. 242 rendered the judicial action premature due to non-exhaustion of administrative remedies. Therefore, the case should have been dismissed on this ground.
Main Doctrine
Presidential Decree No. 242, which prescribes an administrative procedure for the settlement of disputes between government-owned or controlled corporations, is constitutional and does not diminish the jurisdiction of courts. Failure to exhaust administrative remedies under P.D. 242 renders a subsequent judicial action premature.