G.R. No. 84295 ; July 18, 1991
PHILIPPINE VETERANS INVESTMENT DEVELOPMENT CORP. (PHIVIDEC) & PHIVIDEC INDUSTRIAL AUTHORITY, petitioners, vs. HON. ALEJANDRO M. VELEZ, as Judge, RTC of Cagayan de Oro City, Branch 20, and PHILIPPINE VETERANS ASSISTANCE COMMISSION (PVAC), respondents.

FACTS

Respondent Philippine Veterans Assistance Commission (PVAC) filed a complaint for foreclosure of mortgage against petitioners PHIVIDEC and PHIVIDEC Industrial Authority (PIA) before the Regional Trial Court. Petitioners moved to dismiss the case, asserting that the trial court lacked jurisdiction. They argued that the dispute, being solely between government-owned or controlled corporations, is governed by Presidential Decree No. 242. This law mandates the administrative settlement or adjudication of disputes between or among government offices, agencies, and instrumentalities, including government-owned or controlled corporations, through the Government Corporate Counsel, before judicial recourse.
Respondent Judge Alejandro M. Velez denied the motion to dismiss, declaring P.D. No. 242 unconstitutional. The judge ruled that the decree amounted to an emasculation and impairment of the judicial power of review vested in courts under the 1987 Constitution . Petitioners’ motion for reconsideration was subsequently denied, prompting them to file this petition for certiorari and prohibition with the Supreme Court.

ISSUE

Whether Presidential Decree No. 242 is unconstitutional for impairing the judicial power of courts.

RULING

The Supreme Court granted the petition, ruling that P.D. No. 242 is constitutional and valid. The Court clarified that the decree does not diminish or emasculate the jurisdiction of courts. Instead, it establishes a mandatory administrative procedure for the settlement of specific disputes—those arising from the interpretation and application of statutes, contracts, or agreements, and occurring solely between entities of the National Government, including government-owned or controlled corporations. This procedure serves as an alternative or preliminary step to traditional litigation, designed to avoid the delays, expenses, and clogging of court dockets associated with judicial actions.
The legal logic is grounded in the principle of exhaustion of administrative remedies. The law provides a specialized and efficient forum for resolving intra-governmental disputes under executive supervision before they reach the courts. Similar to arbitration mechanisms under the Arbitration Law or the Labor Code, it is a valid legislative policy choice for dispute resolution. Since the parties—PVAC, PHIVIDEC, and PIA—are all government entities, their foreclosure dispute falls squarely under P.D. No. 242. Consequently, PVAC’s filing of the court action without first undergoing the prescribed administrative arbitration was premature. The respondent judge committed grave abuse of discretion in denying the motion to dismiss. The Court annulled the challenged orders and dismissed the civil case.