G.R. No. 223865 - Silahis International Hotel, Inc. vs. Court of Appeals and Pacific Wide Holdings, Inc.

Case Summary (G.R. No. 223865)

Factual Background

SIHI leased the second and third stories of the Grand Boulevard Hotel to PAGCOR by a Contract of Lease executed December 23, 1999, effective March 15, 2000, which obliged PAGCOR to pay a restoration cost. SIHI terminated the lease effective July 2006 and notified PAGCOR that the restoration cost amounted to PHP115,200,000.00. The parties failed to agree on an appraiser pursuant to the lease.

Contract Terms on Restoration Cost

Paragraph four of the Contract of Lease provided for a cash deposit of PHP2,250,000.00 to answer for restoration costs, directed the parties to hire a mutually acceptable independent appraiser to set a fair restoration cost based on the original make-up, required the appraiser’s fee to be shared equally, and required payment or remittance based on the appraiser’s determination before vacation of the premises.

Trial Court Proceedings and 2006 Decision

SIHI filed a Complaint for Specific Performance dated July 6, 2006, and after trial the RTC rendered judgment on December 27, 2006, directing the appointment of Asian Appraisal, Inc. as independent appraiser and ordering compliance with the appraisal procedure. The RTC clarified that PAGCOR’s obligation was to pay a sum of money constituting the restoration cost and not to physically restore the premises.

Court of Appeals Decision of 2012

On appeal the Court of Appeals affirmed with modifications in a Decision dated May 3, 2012. The CA deleted the RTC’s designation of Asian Appraisal, Inc., directed PAGCOR to nominate its appraiser by following the bidding process under Republic Act No. 9184, allowed SIHI to select its appraiser under its company rules, imposed time limits for appointment and appraisal, and ordered compliance with the Contract of Lease within ten days from receipt of the joint appraisal report. The CA Decision became final and executory on May 25, 2012.

Tax Sale to Pacific Wide and Delay in Title Transfer

Pacific Wide Holdings, Inc. purchased the Grand Boulevard Hotel and the lots therefor in a tax delinquency sale on November 7, 2007 for PHP106,650,000.00. Due to legal controversies the purchaser obtained the final deed of sale only on September 19, 2013 and transfer certificates of title on October 23, 2013.

Execution Proceedings, Pacific Wide's Intervention, and RTC Orders

During execution proceedings to enforce the judgment, SIHI and PAGCOR agreed on a restoration cost amount of PHP102,114,040.00. Pacific Wide moved to be awarded the restoration cost as successor-in-interest and argued that it was the new owner entitled to the fund; the RTC denied Pacific Wide’s Verified Motion in an Order dated February 21, 2014, and denied reconsideration on April 24, 2014. The RTC issued a Writ of Execution dated February 25, 2014, but later set aside the writ and directed SIHI to file a monetary claim before the Commission on Audit following PAGCOR’s invocation of Administrative Circular No. 10-2000.

Court of Appeals' 2015 Decision and Rationale

Pacific Wide filed a petition for certiorari in the CA challenging the RTC's denial of intervention. The CA granted the petition and held on June 30, 2015, that Pacific Wide, as registered owner, was an indispensable party with the right to litigate entitlement to the restoration cost and that the absence of an indispensable party rendered the RTC’s actions void. The CA therefore annulled the 2006 RTC Decision as modified by the 2012 CA Decision and remanded the case with instructions to implead Pacific Wide.

COA Proceedings and Decision No. 2017-015

SIHI filed a Petition Ad Cautelam with the Commission on Audit seeking payment of PHP102,114,040.00. The COA dismissed the petition in Decision No. 2017-015 dated February 16, 2017, reasoning that COA’s jurisdiction over money claims extended only to liquidated claims and that SIHI’s claim was not liquidated because, at that time, there was no final and executory court adjudication after the CA had declared the RTC decision void. The COA dismissed SIHI’s petition without prejudice to refiling once the decision became final and executory.

Procedural Posture and Consolidation of Petitions

SIHI filed two separate petitions to the Supreme Court: a Petition for Review on Certiorari dated May 26, 2016 (G.R. No. 223865) contesting the CA Decision that nullified the RTC judgment, and a Petition dated April 3, 2017 (G.R. No. 230631) assailing the COA Decision. Pacific Wide later filed Notices to Withdraw its oppositions in both proceedings dated August 20, 2019, attaching Waivers, Releases, and Quitclaims and disavowing any claim to the restoration cost.

Issues Presented to the Supreme Court

The consolidated matters raised two principal questions: whether the Court of Appeals erred in nullifying the 2006 RTC Decision as modified by the 2012 CA Decision; and whether the COA acted with grave abuse of discretion in dismissing SIHI’s Petition Ad Cautelam on the ground that the monetary claim was not liquidated.

Parties' Contentions in the Supreme Court

SIHI argued that the RTC judgment had become final and executory and thus immutable; that Pacific Wide was not an indispensable party and could not intervene at the execution stage; and that PAGCOR’s obligation was monetary and accrued before Pacific Wide acquired title. Pacific Wide initially contended it was successor-in-interest entitled to the restoration cost and that the CA correctly required its joinder; it later withdrew its claims and opposition. PAGCOR and COA defended the COA’s dismissal, asserting that COA jurisdiction extends only to liquidated claims and that, in the absence of a final and executory judgment after the CA annulment, SIHI’s claim was not liquidated. COA and Pacific Wide also argued that SIHI failed to pursue available remedies such as motion for reconsideration before filing certiorari.

Supreme Court's Ruling on the CA's Nullification

The Court held that the CA erred in nullifying the 2006 RTC Decision as modified by the 2012 CA Decision. The Court found that Pacific Wide was not an indispensable party because it was not a party to the Contract of Lease, it did not own the property when the lease terminated and when SIHI’s right to payment accrued, and there was no contractual stipulation making any subsequent owner an automatic assignee of SIHI’s contractual right. The Court emphasized that transfer of interest under Rule 3, Section 19 allows the original party to continue the action and that non-joinder of an indispensable party does not justify dismissal but only impleader. The Court concluded that the proper remedy was to permit Pacific Wide to intervene in execution proceedings if necessary, not to annul a final and executory judgment. Accordingly, the Court reversed the 2015 CA Decision and reinstated the RTC Decision of December 27, 2006, as modified by the CA Decision of May 3, 2012, which had become final and executory on May 25, 2012.

Supreme Court's Ruling on COA's Denial and Rule 65 Requirements

The Court dismissed SIHI’s certiorari petition against the COA for failure to comply with procedural prerequisites and for lack of proof of grave abuse of discretion. The Court reiterated the limited scope of an extraordinary remedy under Rule 65, the requirement to show patent and gross abuse amounting to lack or excess of jurisdiction, and the imperative that petitioners exhaust available remedies, notably filing a motion for reconsideration with the COA before seeking certior

Case Syllabus (G.R. No. 223865)

Parties and Procedural Posture

Silahis International Hotel, Inc. (SIHI) filed two consolidated petitions before the Supreme Court identified as G.R. Nos. 223865 and 230631.
Court of Appeals and Pacific Wide Holdings, Inc. were respondents in G.R. No. 223865.
Commission on Audit (COA) and Philippine Amusement and Gaming Corporation (PAGCOR) and Pacific Wide Holdings, Inc. were respondents in G.R. No. 230631.
SIHI sought review of the Court of Appeals Decision dated June 30, 2015 and its April 5, 2016 resolution in CA-G.R. SP No. 136085 in G.R. No. 223865.
SIHI sought review of COA Decision No. 2017-015 dated February 16, 2017 in G.R. No. 230631.
The Supreme Court consolidated the matters to resolve whether the CA correctly nullified the RTC judgment and whether the COA properly dismissed SIHI’s Petition Ad Cautelam.

Key Factual Allegations

SIHI and PAGCOR entered into a Contract of Lease on December 23, 1999 which became effective on March 15, 2000 for PAGCOR’s casino operations.
The Contract of Lease required PAGCOR to provide a cash deposit and to pay the restoration cost upon termination of the lease.
SIHI notified PAGCOR on April 1, 2006 that the lease would be terminated effective July 2006 and asserted PAGCOR’s obligation to pay restoration cost.
Pacific Wide purchased the Grand Boulevard Hotel in a tax delinquency sale on November 7, 2007 and obtained a final deed of sale on September 19, 2013 with title transfers on October 23, 2013.
SIHI’s right to the restoration cost accrued before Pacific Wide acquired and registered title to the property.

Contract Terms Relevant

Paragraph 4 of the Contract of Lease provided for a non-interest-bearing deposit of PHP 2,250,000 as partial security for restoration cost and required appointment of a mutually acceptable independent appraiser.
The Contract contemplated payment by PAGCOR of any excess restoration cost as determined by the appraiser and remittance of any shortfall by SIHI to PAGCOR.
The Contract did not contain an express stipulation appointing third-party successors or beneficiaries such as Pacific Wide to receive restoration payments.

Lower Court Proceedings

SIHI filed a Complaint for Specific Performance with preliminary injunctive relief on July 6, 2006.
The RTC, Branch 15, Manila rendered a Decision on December 27, 2006 directing appointment of an independent appraiser and payment of restoration cost.
The Court of Appeals affirmed with modifications in a Decision dated May 3, 2012 by deleting the trial court’s appraiser designation and ordering separate nomination and joint appraisal procedures.
The 2012 CA Decision became final and executory on May 25, 2012 and the case proceeded to execution where parties agreed on PHP 102,114,040 as the restoration cost.

Pacific Wide’s Intervention and CA Ruling

Pacific Wide moved in the execution proceedings to be awarded the restoration cost as successor-in-interest by virtue of its property acquisition.
The RTC denied Pacific Wide’s Verified Motion on February 21, 2014 and denied reconsideration on April 24, 2014.
Pacific Wide petitioned the Court of Appeals for certiorari, and the CA annulled the 2006 RTC Decision as modified by the 2012 CA Decision on June 30, 2015, ruling that Pacific Wide was an indispensable party that must be impleaded.
The CA held that nonjoinder of an indispensable party rendered the trial court’s actions null and void and remanded the case to the RTC to implead Pacific Wide.

COA Proceedings and Decision

Execution was stayed and SIHI filed a Petition Ad Cautelam with COA seeking approval of the monetary claim of PHP 102,114,040 against PAGCOR.
COA dismissed SIHI’s Petition Ad Cautelam in COA Decision No. 2017-015 on the ground that COA’s jurisdiction over money claims covers only liquidated claims and that no final and executory judgment existed because the CA had annulled the trial court decision.
COA held that the matter was a justiciable question for the courts rather than a claim ripe for COA settlement.

Issues Presented

Whether the Court of Appeals erred in annulling the 2006 RTC Decision as modified by the 2012 CA Decision.
Whether the COA acted with grave abuse of discretion in denying SIHI’s Petition Ad Cautelam for lack of a liquidated money claim.

Petitioner’s Contentions

SIHI argued that the 2006 RTC Decision, as modified by the 2012 CA Decision, became immutable and binding and could not be reopened by the CA.
SIHI co