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FREEDOM OF ASSOCIATION Case Digests

attainder, the following requisites must be present: 1.) The statute specifies persons, groups. 2.) the statute is applied retroactively and reach past conduct. (A bill of attainder relatively is also an ex post facto law.) In the case at bar, the statute simply declares the CPP as an organized conspiracy for the overthrow of the Government for purposes of example of SECTION 4 of the Act. The Act applies not only to the CPP but also to other organizations having the same purpose and their successors. The Acts focus is on the conduct not person. Membership to this organizations, to be UNLAWFUL, it must be shown that membership was acquired with the intent to further the goals of the organization by overt acts. This is the element of MEMBERSHIP with KNOWLEDGE that is punishable. This is the required proof of a members direct participation. Why is membership punished. Membership renders aid and encouragement to the organization. Membership makes himself party to its unlawful acts. Furthermore, the statute is PROSPECTIVE in nature. Section 4 prohibits acts committed after approval of the act. The members of the subversive organizations before the passing of this Act is given an opportunity to escape liability by renouncing membership in accordance with Section 8. The statute applies the principle of mutatis mutandis or that the necessary changes having been made. The declaration of that the CPP is an organized conspiracy to overthrow the Philippine Government should not be the basis of guilt. This declaration is only a basis of Section 4 of the Act. The EXISTENCE OF SUBSTANTIVE EVIL justifies the limitation to the exercise of Freedom of Expression and Association in this matter. Before the enactment of the statute and statements in the preamble, careful investigations by the Congress were done. The court further stresses that whatever interest in freedom of speech and association is excluded in the prohibition of membership in the CPP are weak considering NATIONAL SECURITY and PRESERVATION of DEMOCRACY. The court set basic guidelines to be observed in the prosecution under RA1700. In addition to proving circumstances/ evidences of subversion, the following elements must also be established: 1. Subversive Organizations besides the CPP, it must be proven that the organization purpose is to overthrow the present Government of the Philippines and establish a domination of a FOREIGN POWER. Membership is willfully and knowingly done by overt acts. 2. In case of CPP, the continued pursuance of its subversive purpose. Membership is willfully and knowingly done by overt acts. The court did not make any judgment on the crimes of the accused under the Act. The Supreme Court set aside the resolution of the TRIAL COURT.

PEOPLE VS. FERRER [48 SCRA 382; NOS.L-3261314; 27 DEC 1972]

Facts: Hon. Judge Simeon Ferrer is the Tarlac trial court judge that declared RA1700 or the AntiSubversive Act of 1957 as a bill of attainder. Thus, dismissing the information of subversion against the following: 1.) Feliciano Co for being an officer/leader of the Communist Party of the Philippines (CPP) aggravated by circumstances of contempt and insult to public officers, subversion by a band and aid of armed men to afford impunity. 2.) Nilo Tayag and 5 others, for being members/leaders of the NPA, inciting, instigating people to unite and overthrow the Philippine Government. Attended by Aggravating Circumstances of Aid or Armed Men, Craft, and Fraud. The trial court is of opinion that 1.) The Congress usurped the powers of the judge 2.) Assumed judicial magistracy by pronouncing the guilt of the CPP without any forms of safeguard of a judicial trial. 3.) It created a presumption of organizational guilt by being members of the CPP regardless of voluntariness. The Anti Subversive Act of 1957 was approved 20June1957. It is an act to outlaw the CPP and similar associations penalizing membership therein, and for other purposes. It defined the Communist Party being although a political party is in fact an organized conspiracy to overthrow the Government, not only by force and violence but also by deceit, subversion and other illegal means. It declares that the CPP is a clear and present danger to the security of the Philippines. Section 4 provided that affiliation with full knowledge of the illegal acts of the CPP is punishable. Section 5 states that due investigation by a designated prosecutor by the Secretary of Justice be made prior to filing of information in court. Section 6 provides for penalty for furnishing false evidence. Section 7 provides for 2 witnesses in open court for acts penalized by prision mayor to death. Section 8 allows the renunciation of membership to the CCP through writing under oath. Section 9 declares the constitutionality of the statute and its valid exercise under freedom if thought, assembly and association. Issues: (1) Whether or not RA1700 is a bill of attainder/ ex post facto law. (2) Whether or Not RA1700 violates freedom of expression. Held: The court holds the VALIDITY Of the AntiSubversion Act of 1957. A bill of attainder is solely a legislative act. It punishes without the benefit of the trial. It is the substitution of judicial determination to a legislative determination of guilt. In order for a statute be measured as a bill of

UNITED PEPSI-COLA SUPERVISORY UNION (UPSU), vs. HON. BIENVENIDO E. LAGUESMA FACTS: Petitioner is a union of supervisory employees. It appears that on March 20, 1995 the union fileda petition for certification election on behalf of the route managers at Pepsi-Cola Products Philippines, Inc.However, its petition was denied by the med-arbiter and, on appeal, by the Secretary of Labor andEmployment, on the ground that the route managers are managerial employees and, therefore, ineligible for union membership under the first sentence of Art. 245 of the Labor Code, which provides: Ineligibility of managerial employees to join any labor organization ; right of supervisory employees . Managerial employees are not eligible to join, assist or form any labor organization. Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist or form separate labor organizations of their own. Petitioner filed a motion for reconsideration, pressing for resolution its contention that the first sentence of Art. 245 of the Labor Code, so far as it declares managerial employees to be ineligible to form, assist or join unions, contravenes Art. III, Sec. 8 of the Constitution which provides: The right of the people, including those employed in the public and private sectors, to form unions, associations, or societies for purposes not contrary to law shall not be abridged. ISSUES: 1) whether or not the route managers at Pepsi-Cola Products Philippines, Inc. are managerial employees and 2) whether or not Art. 245, insofar as it prohibits managerial employees from forming, joining or assisting labor unions, violates Art. III, 8 of the Constitution. RULING: 1) YES. The route managers cannot thus possibly be classified as mere supervisors because their work does not only involve, but goes far beyond, the simple direction or supervision of operating employees to accomplish objectives set by those above them. They are not mere functionaries with simple oversight functions but business administrators in their own right. Supervisory employees are those who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment." Thus, their only power is to recommend. Certainly, the route managers in this case more than merely recommend effective management action. They perform operational, human resource, financial and marketing functions for the company, all of which involve the laying down of operating policies for themselves and their teams. The term "manager" generally refers to "anyone

who is responsible for subordinates and other organizational resources." Managers constitute three levels of a pyramid: FIRST-LINE MANAGERS: The lowest level in an organization at which individuals are responsible for the work of others is called first-line or first-level management. First-line managers direct operating employees only; they do not supervise other managers MIDDLE MANAGERS: Middle managers direct the activities of other managers and sometimes also those of operating employees. Middle managers' principal responsibilities are to direct the activities that implement their organizations' policies and to balance the demands of their superiors with the capacities of their subordinates TOP MANAGERS: Composed of a comparatively small group of executives, top management is responsible for the overall management of the organization. It establishes operating policies and guides the organization's interactions with its environment. In the Case, entitled Worker's Alliance Trade Union (WATU) v . Pepsi-Cola Products Philippines, Inc., d e c i d e d o n N o v e m b e r 13, 1991, the Secretary of Labor found: we find that only those employees occupying the position of route manager and accounting manager are managerial employees. 2)NO. The real intent of Art. III, 8 is evident in Lerums proposal. The Commission intended the absolute right to organize of government workers, supervisory employees, and security guards to be constitutionally guaranteed. By implication, no similar absolute constitutional right to organize for labor purposes should be deemed to have been granted to top-level and middle managers. Nor is the guarantee of organizational right in Art. III, 8 infringed by a ban against managerial employees forming a union. The right guaranteed in Art. III, 8 is subject to the condition that its exercise should be for purposes "not contrary to law." In the case of Art. 245, there is a rational basis for prohibiting managerial employees from forming or joining labor organizations. In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez, this Court elaborated on this rationale, thus: The rationale for this inhibition has been s t a t e d t o b e , b e c a u s e i f t h e s e managerial employees would belong to or be affiliated with a Union, the latter might not be assured of their loyalty to the Union in view of evident conflict of interests. The Union can also become company-dominated with the presence of managerial employees in Union membership.

G.R. No. L-18467

September 30, 1963

VICTORIAS MILLING CO., INC., petitioner, vs. VICTORIAS-MANAPLA WORKERS ORGANIZATION PAFLU, FREE VISAYAN WORKERS (FFW), ET AL., respondents.

The above-entitled cases originated from a complaint for unfair labor practice against the Victorias Milling Company, Inc., filed by the acting prosecutor of the Court of Industrial Relations on March 2, 1960. At the hearing of the charges the parties entered into a stipulation of facts, the most important provisions of which are as follows: On April 6, 1957, the Victorias Milling Company, Inc. and the Free Visayan Workers entered into a collective bargaining agreement which was to expire on December 31, 1959. The agreement contains an automatic renewal clause after December 31. 1959. The duration of the agreement and the automatic renewal clause are contained in the following paragraphs of the agreement: DURATION OF AGREEMENT This agreement shall remain in full force and effect until midnight of December 31, 1959, continuing, from year to year from the date of the signing hereof, unless either party gives written notice by registered mail no more than seventy (75) days nor less than thirty (30) days prior to December 31, 1959, or each subsequent renewal anniversary date the after to the effect that said party shall modify or terminate the entire agreement, in which event this agreement shall considered terminated or open for negotiation. If the notice sent in accordance with the above paragraph affects a portion or portions of the agreement, the portion portions not affected shall remain in force during the renewal period. Twenty (20) days after receipt of the notice of modification or termination, the parties shall meet for the purpose bargaining with respect to the provisions of this agreement parts thereof which have been terminated by either party. Sometime in October, 1957, a petition for certification of elections in the Victories Milling Company, Inc. filed by Victorina A. Combate and 318 others. In this case before the Industrial Court in May, 1959, the Philippine Association of Free Labor Unions (PAFLU) intervened. And on August 12, 1960, the Court of Industrial Relations in the case for certification of elections order the holding of a certification of elections. It does not appear from the record that the election has already been made. Neither does the result thereof appear. On October 26, 1959 Vicente Convito, President of the Victorias-Manapla Workers Organization (PAFLU) wrote a communication to the respondent Victorias Milling Company, Inc., requesting that the company desist from entering into anew agreement with any union until the question of representation has been determined by the court; that the majority of the workers of the Victorias Milling Company, Inc. have joined the said organization (PAFLU). Again on October 29, 1959, Vicente Convito representing the same Philippine Association of Free Labor Unions wrote a

letter to the respondent company alleging that in view of the affiliation of the workers and laborers with the Free Visayan Workers and in view of the fact that latter's agreement with the respondent company is bound to expire, certain proposals be taken up for the purpose of collective bargaining. In answer to the above two communications sent by the President of the PAFLU, the respondent company wrote the representative of the PAFLU as follows: That in view of the fact that the petition for the certification of elections is still pending and the issue of the majority representation has not been resolved yet, the respondent company could not take action on the request for collective bargaining presented by the PAFLU. The complaint for unfair labor practice arose from the dismissal of 10 employees, namely, Felino Dalipe, Donato Anazarias, Prudencio Parcon, Celestino Bernila, Remegio Seballos, Belarmino Bartico, Agustin Dulano, Ignacio Lozano, Loreto Undar, and William Cevero. These employees were on or before December 31, 1959 members of the Free Farmers Union or the Federation of Free Workers. On January 11, 1960, a supplemental agreement having been entered into by the Victorias Milling Company, Inc. and the Free Visayan Workers of providing for wage increases, the above-named ten dismissed employees had received increases in their pay. But on February 10, 1960, they resigned or separated from the Free Farmers or Workers Union and joined the Philippine Association of Free labor Unions (PAFLU). In view of this change in their affiliation from the Free Farmers Union to the Philippine Association of Free Labor Unions (PAFLU),which change became known to the respondent company, an investigation of their membership and change in membership was made. The Free Visayan Workers Union conducted an investigation of the 10 dismissed employees prior to their expulsion from the respondent union and its recommendation was for their dismissal. In this investigation it was found out that they received the wage increases on January 14, 1960, but changed their affiliation on February 10, 1960 (from the Free Visayan Union to the Philippine Association of Free Labor (PAFLU). Consequently, with this finding of the change in their membership and in view of the following of the existing agreement between the Free Farmers Union and the respondent Company: Section 5(a). All employees who are covered by this agreement as provided for in Section 4 hereof, who, at the date of the signing of the agreement, are Members of the union, shall members in good standing as a condition of continued employment. Those covered employees who, at the date of the signing of this agreement, are not members of the Union, shall be rendered to join and remain members of the Union in good standing as a condition of continued employment.... Any laborer or employee who shall join the union in pursuance of the above requirement and who thereafter shall from the union or is expelled therefrom for any act

contrary to the by-laws, rules and regulations of the Union, shall upon advise of the Union to the management of the company be dismissed from his employment. It is to be understood, however, that the company reserves it's right to look into the merits the expulsion of the laborer or employee concerned where dismissal from the Company is sought by the Union.... which agreement is a closed-shop agreement, the respondent company, upon advice of the Free Farmers Union dismissed the above-mentioned 10 employees. Their dismissal is the subject of the complaint for unfair labor practice filed by the prosecutor of the Court of Industrial Relations in these two cases now before the Court.1awphl.nt The facts found by the hearing officer regarding previous affiliation of the above-mentioned ten dismissed employees are as follows: With respect to the individual complainants, except Santiago Palomo and Pedro Moran, the charges in regard to said persons having been withdrawn (t.s.n. pp. 6869), all former members of the respondent union. On February 1, 1960, they severed their affiliation with respondent union (Exhibits "M" to M-9). Immediately thereafter the investigating committee of the Victorias Milling Company Unit of the respondent union started an investigation and its finding forwarded to the Central Board of said respondent union. (Exhibit P). The latter accepted the resignation of the complainants and recommended their dismissal. (Exhibit G). The respondent company in similarly worded letters dismissed the said complainants based upon on the union security provisions of the Collective Bargaining agreement in question (Exhibits B to B-9), after proper investigation. (Stipulation No. 9) It must be noted that the circumstances mentioned in the preceding paragraph occurred after the execution of the supplementary agreement and after the period of the modification and/or termination of the agreement has expired. It is also a fact that the herein complainants before their dismissal were members of the respondent union. The hearing officer in arriving at its recommendation to the court reasoned as follows: There reasons for those express prohibitions are apparent. Should the closed shop provisions for a collective bargaining agreement given absolute effect, it will maintain any labor to organization in perpetuity despite the manifest wishes of the employees concerned, which is contrary to the letter and spirit the of Republic Act No. 875. Just as our very own system of life guarantees

a periodical gauge to determine the people's free wishes in those they have elected to govern them through a system of political election, so must the bargaining representative of the employees be equally determined at an appropriate time and the Court of Industrial Relations by law is the agency charged with such function, and the exercise of such choice should likewise be free from discrimination. While this Court is fully aware of the possible levelling of the accusation that we must not interfere with the closed shop provisions of any validly entered collective bargaining as the same might constitute internal union matters, yet such matters do constitute relations going deeply into the roots of the right to self-organization which this Court is duty bound by law to Protect and uphold. We do not agree with the court below in its ruling that the recognition and enforcement of the closed-shop agreement between the Free Farmers Union and the Victorias Milling Company, Inc. would tend to perpetuate the labor organization which secured it. This claim cannot be true because the closed-shop agreement is to be enforced after December 31, 1959 only and up to the time that a new agreement can be entered into. The ruling of the court below suspending the operation of the agreement automatically renewed, would produce as a result a period of interregnum in which no agreement would govern at all. There would be a void if we do not authorize enforcement of the automatic clause adopted in the agreement. Such a situation no agreement is in force to govern the relations be laborers and capitalists is unwise, as it would give party an opportunity to commit a breach of the law. Another reason for enforcing the closed-shop a is the principle of sanctity or inviolability of contracts guaranteed by the Constitution. As a matter of principle the provision of the Industrial Peace Act granting dom to employees to organize themselves and select representative for entering into bargaining agreement should be subordinated to the constitutional provision protecting the sanctity of contracts. We can not conceive how freedom to contract, which should be allowed to exercised without limitation may be subordinated to freedom of laborers to choose the organization they desire to represent them. And even if the legislature had intended to do so and made such freedom of the laborer paramount to the sanctity of obligation of contracts, such attempt to override the constitutional provision would necessarily and ipso facto be null and void. A case brought on a writ of certiorari to the Supreme Court of the United States presented the same problem that we now have before us, namely, the effectivity of a closed-shop agreement as against the freedom of the laborers or employees to choose the labor organization they want to affiliate with. There

it was said that the granting the employer and employees the privilege to enter into a closed-shop agreement, also recognized the right the workers to choose their union, but that said right choose a labor union is limited by the proviso authorizing parties to enter into a closed-shop agreement. Herein low is a summary of the facts involved in said case and the reasons adduced by the court in arriving at its conclusion: Petitioner was engaged in producing glycerin for war purposes. Its employees were at first represented by a union affiliated with the American Federation of Labor. In 1938 the International Longshoremen's and Warehousemen's Union, affiliated with the Congress of Industrial Organizations, became the representative of petitioner's employees. On July 9, 1941, the C.I.O. entered into a collective bargaining contract with petitioner which contained a closed-shop provision to the effect that new employees shall be hired through the offices of the Union, provided the latter shall be able to furnish competent workers for the work required; otherwise, the employer may hire from outside sources, provided that employees so hired shall make application for membership in the Union within 15 days of their employment; and that employees covered by the agreement shall be members in good standing of the Union. This contract was entered in good faith by the parties and was of indefinite duration. On July 24, 1945, the C.I.O. and petitioner entered into a supplemental agreement that their contract of July 9, 1941, shall remain in full force and effect pending approval of certain agreed-upon items, other than the closed-shop provision, by the War Labor Board. Shortly after the making of the supplemental agreement, open agitation for a change of a bargaining representative began at a period during which the National Labor Relations believed was appropriate to seek a re-determination of representatives. On July 31 an authorized strike occurred which lasted two and one-half days, although the C.I.O. had pledged its membership not to strike during war-time. A group of employees formed an independent organization which later sought to affiliate with the American Federation of Labor. Because they were unmindful of the warnings issued by the C. I. O. that disciplinary action against members would be taken for rival union activity, some 37 employees were suspended and expelled by the C. I. O. and discharged by petitioner upon demand by the C. I. O., on the ground that they were no longer members in good standing of the C. I. O. as required by the closed-shop contract. Petitioner was charged with violation of Dec. 8(1) and Sec. 8(3) of the National Labor Relations Act and found by the National Labor Relations Board guilty thereof and ordered to reinstate the discharged employees. The Court

of Appeals having entered a decree enforcing the Board's order, a petition for a writ of certiorari against the judgment of said court was brought before the Supreme Court of the United States. Sec. 8(3) referred to above considers as unfair labor practice for an employer to discriminate in regard to hire or tenure of employment to encourage or discourage membership in any labor organization, but does not prelude an employer from making an agreement with labor organization to require as a condition of employment membership therein, if such labor organ the representative of the employees. Recognizing that the discharges had the effect of interfering with the employees' right given by Sec. 7 of the National Labor Relations Act to self-organization and to bargaining through representatives of their own choosing, that the discharges had the effect of discriminating, contrary to the Prohibition of Sec. 8(3) of said Act, the Supreme Court nevertheless found that a closed-shop agreement was valid under California law, and the California Supreme Court, in the case of James v. Marinship (155 P2d 32), explicitly that a union may expel persons who have interest to the union because of the right of the union to reject or expel persons who refuse to abide by any reasonable regulation or lawful policy adopted by the union. Citing the case of Davis v. International Alliance 141 P2d 486, it stated that under California law, "an organization has the natural right of self-preservation, and may with propriety expel hers who show their disloyalty by joining a rival organization." The contract was held to be valid under the Act and under state law. Upholding the validity of closed-shop agreements the Supreme Court further held that such agreements protect the interest of the union and Provides stability to labor relations, to achieve which was the primary objective of Congress in enacting the National Labor Relations Act. Congress knew that a shop agreement would interfere with freedom of employment organize in another union and would, if used, lead inevitably to discrimination in tenure of employment. Nevertheless, Congress inserted the proviso of Sec. 8(3) allowing closed-shop contracts with full realization that it would be a limitation on Sec. 7 granting employees the right to selforganization collective bargaining. (ColgatePalmolive Peet Co. v. Nat. Labor Relations Bd., et. al., 338 U.S. 355-365, 94 L. ed. 161). The above U.S. Supreme Court decision cleared an employer which discharged employees expelled from the union because of activities for a rival union, from charges of unfair labor practice, where its action was based on a closed-shop contract, with a bona fide

labor union entered into and performed in good faith and valid in the state where made. Returning now to the case at bar, as we have found that the dismissal of the employees by the respondent Victorias Milling Company, Inc. was in pursuance of a clause of a agreement between said company and the Free Farmers Union, which agreement became automatically renewed upon its expiration on December 31, 1959, and before a new bargaining agreement could be arrived at, the action of the respondent company in enforcing the terms of the closed-shop agreement is a valid exercise for its rights and obligations under the contract. The dismissal by virtue of thereof cannot constitute an unfair labor practice, as it was in pursuance of an agreement that has been found to be regular and of a closed-shop agreement which under our laws is valid and binding. The decision of the lower court declaring that the respondent company was guilty of unfair labor practice should therefore, be set aside and the complaint for the said unfair labor practice dismissed. The Victorias-Manapla Organization (PAFLU) had also appealed from the decision of the court below for the reason that it did not grant them pay during the period of the dismissal of the laborers in question. In view of our ruling that the dismissal was valid, the appeal for back wages must also be denied. Without costs. So ordered.

HELD: The right to religion prevails over contractual or legal rights. As such, an INC member may refuse to join a labor union and despite the fact that there is a close shop agreement in the factory where he was employed, his employment could not be validly terminated for his non-membership in the majority therein. Further, the right to join a union includes the right not to join a union. The law is not unconstitutional. It recognizes both the rights of unions and employers to enforce terms of contracts and at the same time it recognizes the workers right to join or not to join union. But the RA recognizes as well the primacy of a constitutional right over a contractual right. Victoriano v Elizalde Rope Workers Union 59 SCRA 54 (1974) Facts: Plaintiff is a member of the Elizalde Rope Workers Union who later resigned from his affiliation to the said union by reason of the prohibition of his religion for its members to become affiliated with any labor organization. The union has subsisting closed shop agreement in their collective bargaining agreement with their employer that all permanent employees of the company must be a member of the union and later was amended by Republic Act No. 3350 with the provision stating "but such agreement shall not cover members of any religious sects which prohibit affiliation of their members in any such labor organization".. By his resignation, the union wrote a letter to the company to separate the plaintiff from the service after which he was informed by the company that unless he makes a satisfactory arrangement with the union he will be dismissed from the service. The union contends that RA 3350 impairs obligation of contract stipulated in their CBA and discriminatorily favors religious sects in providing exemption to be affiliated with any labor unions.

Victoriano vs Elizalde Rope Workers Union On December 5, 2011 Political Law Primacy of the Constitution over Contractual Rights Victoriano, an Iglesia ni Cristo member, has been an employee of the Elizalde Rope Factory since 1958. He was also a member of the EPWU. Under the CBA between ERF and EPWU, a close shop agreement is being enforced which means that employment in the factory relies on the membership in the EPWU; that in order to retain employment in the said factory one must be a member of the said Union. In 1962, Victoriano tendered his resignation from EPWU claiming that as per RA 3350 he is an exemption to the close shop agreement by virtue of his being a member of the INC because apparently in the INC, one is forbidden from being a member of any labor union. It was only in 1974 that his resignation from the Union was acted upon by EPWU which notified ERF about it. ERF then moved to terminate Victoriano due to his non-membership from the EPWU. EPWU and ERF reiterated that he is not exempt from the close shop agreement because RA 3350 is unconstitutional and that said law violates the EPWUs and ERFs legal/contractual rights. ISSUE: Whether or not RA 3350 is unconstitutional.

Issue: WON RA 3350 impairs the right to form association. Held: The court held that what the Constitution and the Industrial Peace Act recognize and guarantee is the "right" to form or join associations which involves two broad notions, namely: first, liberty or freedom, i.e., the absence of legal restraint, whereby an employee may act for himself without being prevented by law; and second, power, whereby an employee may join or refrain from joining an association. Therefore the right to join a union includes the right to abstain from joining any union. The exceptions provided by the assailed Republic Act is that members of said religious sects cannot be compelled or coerced to join labor unions even when said unions have closed shop agreements with the employers; that in spite of any closed shop agreement, members of said religious sects cannot be refused employment or dismissed from their jobs on the sole ground that they are not members of the collective bargaining union. Thus this exception does not infringe upon the constitutional provision on freedom of association but instead reinforces it.

In re Edilion In the Matter of the IBP Membership Dues Delinquency of Atty. MARCIAL A. EDILION A.M. No. 1928 August 3, 1978 Facts: The respondent Marcial A. Edillon is a duly licensed practicing attorney in the Philippines. The IBP Board of Governors recommended to the Court the removal of the name of the respondent from its Roll of Attorneys for stubborn refusal to pay his membership dues to the IBP since the latters constitution notwithstanding due notice. Edilion contends that the provision providing for the IBP dues constitute an invasion of his constitutional rights in the sense that he is being compelled, as a precondition to maintaining his status as a lawyer in good standing, to be a member of the IBP and to pay the corresponding dues, and that as a consequence of this compelled financial support of the said organization to which he is admittedly personally antagonistic, he is being deprived of the rights to liberty and property guaranteed to him by the Constitution. Hence, the respondent concludes, the above provisions of the Court Rule and of the IBP By-Laws are void and of no legal force and effect. Issue: WON the payment of IBP dues suffers constitutional infirmity? NO Held: All legislation directing the integration of the Bar have been uniformly and universally sustained as a valid exercise of the police power over an important profession. The practice of law is not a vested right but a privilege, a privilege moreover clothed with public interest because a lawyer owes substantial duties not only to his client, but also to his brethren in the profession, to the courts, and to the nation, and takes part in one of the most important functions of the State the administration of justice as an officer of the court. When the respondent Edillon entered upon the legal profession, his practice of law and his exercise of the said profession, which affect the society at large, were (and are) subject to the power of the body politic to require him to conform to such regulations as might be established by the proper authorities for the common good, even to the extent of interfering with some of his liberties. If he did not wish to submit himself to such reasonable interference and regulation, he should not have clothed the public with an interest in his concerns. To compel a lawyer to be a member of the Integrated Bar is not violative of his constitutional freedom to associate. 6 Bar integration does not compel the lawyer to associate with anyone. He is free to attend or not attend the meetings of his Integrated Bar Chapter or

vote or refuse to vote in its elections as he chooses. The only compulsion to which he is subjected is the payment of annual dues. The Supreme Court, in order to further the States legitimate interest in elevating the quality of professional legal services, may require that the cost of improving the profession in this fashion be shared by the subjects and beneficiaries of the regulatory program the lawyers. Such compulsion is justified as an exercise of the police power of the State. Why? The right to practise law before the courts of this country should be and is a matter subject to regulation and inquiry. And, if the power to impose the fee as a regulatory measure is recognize, then a penalty designed to enforce its payment, which penalty may be avoided altogether by payment, is not void as unreasonable or arbitrary.

Padcom Condominium Corporation vs. Ortigas Center Association Case Digest Padcom Condominium Corporation vs. Ortigas Center Association [GR 146807, 9 May 2002] Facts: Padcom Condominium Corporation (PADCOM) owns and manages the Padilla Office Condominium Building (PADCOM Building) located at Emerald Avenue, Ortigas Center, Pasig City. The land on which the building stands was originally acquired from the Ortigas & Company, Limited Partnership (OCLP), by Tierra Development Corporation (TDC) under a Deed of Sale dated 4 September 1974. Among the terms and conditions in the deed of sale was the requirement that the transferee and its successor-in-interest must become members of an association for realty owners and long-term lessees in the area later known as the Ortigas Center. Subsequently, the said lot, together with improvements thereon, was conveyed by TDC in favor of PADCOM in a Deed of Transfer dated 25 February 1975. In 1982, Ortigas Center Association, Inc. was organized to advance the interests and promote the general welfare of the real estate owners and long-term lessees of lots in the Ortigas Center. It sought the collection of membership dues in the amount of P2,724.40 per month from PADCOM. The corporate books showed that PADCOM owed the Association P639,961.47, representing membership dues, interests and penalty charges from April 1983 to June 1993. The letters exchanged between the parties through the years showed repeated demands for payment, requests for extensions of payment, and even a settlement scheme proposed by PADCOM in September 1990. In view of PADCOM's failure and refusal to pay its arrears in monthly dues, including interests and penalties thereon, the Association filed a complaint for collection of sum of money before the Regional Trial Court of Pasig City, Branch 264 (Civil Case No. 63801). The Association averred that purchasers of lands within the Ortigas Center complex from OCLP are obligated under their contracts of sale to become members of the Association, and that this obligation was allegedly passed on to PADCOM when it bought the lot from TDC,

its predecessor-in-interest. In its answer, PADCOM contended that it is a non-stock, non-profit association, and for it to become a special member of the Association, it should first apply for and be accepted for membership by the latter's Board of Directors; that no automatic membership was apparently contemplated in the Association's By-laws. PADCOM added that it could not be compelled to become a member without violating its right to freedom of association; and that since it was not a member of the Association, it was not liable for membership dues, interests and penalties. On 1 September 1997, the trial court rendered a decision dismissing the complaint. The Association appealed the case to the Court of Appeals (CA-GR CV 60099). In its decision of 30 June 2000, the Court of Appeals reversed and set aside the trial court's decision, and entered a new one ordering PADCOM to pay the Association (1) P639,961.47 as and for membership dues in arrears inclusive of earned interests and penalties; and (2) P25,000.00 as and for attorney's fees; with costs against PADCOM; on the ground that PADCOM automatically became a member of the Association when the land was sold to TDC; and that the intent to pass the obligation to prospective transferees was evident from the annotation of the same clause at the back of the Transfer Certificate of Title covering the lot. The appellate court held that despite disavowal of membership, PADCOM's membership in the Association was evident from these facts: (1) PADCOM was included in the Association's list of bona fide members as of 30 March 1995; (2) Narciso Padilla, PADCOM's President, was one of the Association's incorporators; and (3) having received the demands for payment, PADCOM not only acknowledged them, but asked for and was granted repeated extensions, and even proposed a scheme for the settlement of its obligation. PADCOM filed the petition for review. Issue: Whether PADCOM can be compelled to join the association pursuant to the provision on automatic membership appearing as a condition in the Deed of Sale of 4 September 1974 and the annotation thereof on Transfer Certificate of Title 457308. Held: When the land in question was bought by PADCOM's predecessor-in-interest, TDC, from OCLP, the sale bound TDC to comply with panragraph (G) of the covenants, conditions and restrictions of the Deed of Sale. It was agreed by the parties that dues shall be collected from an automatic member and such fees or assessments shall be a lien on the property. The stipulation was likewise annotated at the back of Transfer Certificate of Title 457308 issued to TDC. When the latter sold the lot to PADCOM on 25 February 1975, the Deed of Transfer expressly stated that "for and in consideration of the foregoing premises, the DEVELOPER, by these presents, cedes, transfers and conveys unto the CORPORATION the above-described parcel of land evidenced by Transfer Certificate of Title 457308, as well as the Common and Limited Common Areas of the Condominium project mentioned and described in the Master Deed with Declaration of Restrictions, free from all liens and encumbrances, except those already annotated at the back of said Transfer Certificate of Title 457308." As the provision

on automatic membership was annotated in the Certificate of Title and made a condition in the Deed of Transfer in favor of PADCOM; consequently, PADCOM is bound by and must comply with the covenant. Moreover, Article 1311 of the Civil Code provides that contracts take effect between the parties, their assigns and heirs. Since PADCOM is the successor-in-interest of TDC, it follows that the stipulation on automatic membership with the Association is also binding on the former. Further, as lot owner, PADCOM is a regular member of the Association. No application for membership is necessary. If at all, acceptance by the Board of Directors is a ministerial function considering that PADCOM is deemed to be a regular member upon the acquisition of the lot pursuant to the automatic membership clause annotated in the Certificate of Title of the property and the Deed of Transfer. Furthermore, the automatic membership clause is not a violation of its freedom of association. PADCOM was never forced to join the association. It could have avoided such membership by not buying the land from TDC. Nobody forced it to buy the land when it bought the building with the annotation of the condition or lien on the Certificate of Title thereof and accepted the Deed. PADCOM voluntarily agreed to be bound by and respect the condition, and thus to join the Association. Lastly, under the principle of estoppel, from the facts or circumstances it enumerated in the appellate court's decision, PADCOM is barred from disclaiming membership in the Association. Padcom Condominium Corporation vs. Ortigas Center Association, Inc. G.R. No. 146807. May 9, 2002. Facts: Petitioner Padcom Condominium Corporation (PADCOM) owns and manages the Padilla Office Condominium Building (PADCOM BUILDING). The land on which the building stands was originally acquired from the Ortigas & Company, Limited Partnership, by Tierra Development Corporation (TDC) under a Deed of Sale with a condition that the transferee and its successor-in-interest must become members of an association for realty owners and long-term lessees in the area later known as the Ortigas Center. Subsequently, the said lot, together with the improvements thereon, was conveyed by TDC in favor of PADCOM in a Deed of Transfer. Thereafter, respondent Ortigas Center Association, Inc. (ASSOCIATION) was organized to advance the interests and promote the general welfare of the real estate owners and long-term lessees of the lots in the Ortigas Center and sought the collection of membership dues from PADCOM. In view of PADCOM'S failure and refusal to pay its arrears in monthly dues, the Association filed a complaint for collection of sum of money before the trial court, but the same was dismissed. On appeal, the Court of Appeals reversed and set aside the trial court's dismissal. Hence, this petition. Issue: Whether or not PADCOM is unjustly enriched by the improvements made by the Association, thus requiring the former to pay dues to the latter.

Held: Yes. The Supreme Court held that as resident and lot owner in the Ortigas area, PADCOM was definitely benefited by the Association's acts and activities to promote the interests and welfare of those who acquire property therein or benefit from the acts or activities of the Association. Generally, it may be said that a quasi-contract is based on the presumed will or intent of the obligor dictated by equity and by the principles of absolute justice. Examples of these principles are: (1) it is presumed that a person agrees to that which will benefit him; (2) nobody wants to enrich himself unjustly at the expense of another; or (3) one must do unto others what he would want others to do unto him under the same circumstances. Finally, PADCOM's argument that the collection of monthly dues has no basis since there was no board resolution defining how much fees are to be imposed deserves scant consideration. Suffice it is to say that PADCOM never protested upon receipt of the earlier demands for payment of membership dues. In fact, by proposing a scheme to pay its obligation, PADCOM cannot belatedly question the Association's authority to assess and collect the fees in accordance with the total land area owned or occupied by the members, which finds support in a resolution dated 6 November 1982 of the Association's incorporating directors and Section 2 of its By-laws.

Sta. Clara Homeowners' Association vs. Spouses Gaston Case Digest Sta. Clara Homeowners' Association vs. Spouses Gaston [GR 141961, 23 January 2002] Facts: Spouses Victor Ma. Gaston and Lydia M. Gaston were residents of San Jose Avenue, Sta. Clara Subdivision, Mandalagan, Bacolod City. They purchased their lots in the said subdivision sometime in 1974, and at the time of purchase, there was no mention or requirement of membership in any homeowners' association. From that time on, they have remained non-members of SCHA. They also stated that an arrangement was made wherein homeowners who were non-members of the association were issued "non-member" gatepass stickers for their vehicles for identification by the security guards manning the subdivision's entrances and exits. This arrangement remained undisturbed until sometime in the middle of March 1998, when SCHA disseminated a board resolution which decreed that only its members in good standing were to be issued stickers for use in their vehicles. Thereafter, on three separate incidents, Victor M. Gaston, the son of the spouses Gaston who lives with them, was required by the guards on duty employed by SCHA to show his driver's license as a prerequisite to his entrance to the subdivision and to his residence therein despite their knowing him personally and the exact location of his residence.

On 29 March 1998, Victor Ma. Gaston was himself prevented from entering the subdivision and proceeding to his residential abode when security guards Roger Capillo and a "John Doe" lowered the steel bar of the KAMETAL gate of the subdivision and demanded from him his driver's license for identification. On 1 April 1998, Spouses Victor Ma. Gaston and Lydia M. Gaston filed a complaint for damages with preliminary injunction/preliminary mandatory injunction and temporary restraining order before the Regional Trial Court in Negros Occidental at Bacolod City against Santa Clara Homeowners Association (SCHA) thru its Board of Directors, namely: Arneil Chua, Luis Sarrosa, Jocelyn Garcia, Ma. Milagros Vargas, Lorenzo Lacson, Ernesto Piccio, Dindo Ilagan, Danilo Gamboa, Jr., Rizza de la Rama and Security Guard Capillo and 'John Doe', and Santa Clara Estate, Incorporated (Civil Case 98-10217, RTC-Branch 49, Bacolod City); alleging that the acts of SCHA, et al., done in the presence of other subdivision owners had caused the spouses Gaston to suffer moral damage. On 8 April 1998, SCHA, et al. filed a motion to dismiss arguing that the trial court had no jurisdiction over the case as it involved an intra-corporate dispute between SCHA and its members pursuant to Republic Act 580, as amended by Executive Orders 535 and 90, much less, to declare as null and void the subject resolution of the board of directors of SCHA, the proper forum being the Home insurance and Guaranty Corporation (HIGC). To support their claim of intra-corporate controversy, SCHA, et al. stated that the Articles of Incorporation of SCHA, which was duly approved by the Securities and Exchange Commission (SEC) on 4 October 1973, provides "that the association shall be a non-stock corporation with all homeowners of Sta. Clara constituting its membership"; and that its by-laws contains a provision that "all real estate owners in Sta. Clara Subdivision automatically become members of the association"; among others. On 6 July 1998, the lower court resolved to deny SCHA et al.'s motion to dismiss, finding that there existed no intra-corporate controversy since the Spouses Gaston alleged that they had never joined the association. On 18 July 1998, SCHA, et al. submitted a Motion for Reconsideration, adding lack of cause of action as ground for the dismissal of the case. On 17 August 1998, the trial court denied the said motion without however ruling on the additional ground of lack of cause of action. On 18 August 1998, SCHA, et al. filed a motion to resolve its motion to dismiss on ground of lack of cause of action. On 8 September 1998, the trial court issued an order denying the motion. On 24 September 1998, SCHA. et al. elevated the matter to the Court of Appeals via a Petition for Certiorari. On 31 August 1999, the Court of Appeals dismissed the Petition and ruled that the RTC had jurisdiction over the dispute. The appellate court likewise denied SCHA, et al.'s motion for reconsideration in a resolution dated 11 February 2000. SCHA, et al. filed the petition for review. Issue: Whether the Spouses Gaston are members of the SCHA. Held: The constitutionally guaranteed freedom of association includes the freedom not to associate. The right to choose with whom one will associate oneself is

the very foundation and essence of that partnership. Further, the Spouses Gaston cannot be compelled to become members of the SCHA by the simple expedient of including them in its Articles of Incorporation and By-laws without their express or implied consent. True, it may be to the mutual advantage of lot owners in a subdivision to band themselves together to promote their common welfare, but that is possible only if the owners voluntarily agree, directly or indirectly, to become members of the association. True also, memberships in homeowners' associations may be acquired in various ways often through deeds of sale, Torrens certificates or other forms of evidence of property ownership. Herein, however, other than the said Articles of Incorporation and By-laws, there is no showing that the Spouses Gaston have agreed to be SCHA members. The approval by the SEC of the said documents is not an operative act which bestows membership on the Spouses Gaston because the right to associate partakes of the nature of freedom of contract which can be exercised by and between the homeowners amongst themselves, the homeowners' association and a homeowner, and the subdivision owner and a homeowner/lot buyer. Clearly, there is no privity of contract exists between SCHA and Spouses Gaston. When the Spouses Gaston purchased their property in 1974 and obtained Transfer Certificates of Titles T-126542 and T-127462 for Lots 11 and 12 of Block 37 along San Jose Avenue in Sta. Clara Subdivision, there was no annotation showing their automatic membership in the SCHA. Furthermore, the records are bereft of any evidence that would indicate that the Spouses Gaston intended to become members of the SCHA. Prior to the implementation of the aforesaid Resolution, they and the other homeowners who were not members of the association were issued non-member gate pass stickers for their vehicles; a fact not disputed by SCHA. Thus, the SCHA recognized that there were subdivision landowners who were not members thereof, notwithstanding the provisions of its Articles of Incorporation and By-laws. STA CLARA HOA VS GASTON JAN. 23, 2002 (CASE DIGEST) Facts: Spouses Victor Ma. Gaston and Lydia Gaston, the private respondents, filed a complaint for damages with preliminary injunction/preliminary mandatory injunction and temporary restraining order before the Regional Trial Court against petitioners Sta Clara Homeowners Association (SCHA). The complaint alleged that the private respondents purchased their lots in Sta. Clara Subdivision and at the time of the purchase, there was no mention or requirement of membership in any homeowners association. From that time on, they have remained non-members of the SCHA. They also stated that an arrangement was made wherein homeowners who were non-members of the association were issued non-member gate pass stickers for their vehicles for identification by the security guards manning the subdivisions entrances and exits. This arrangement remained undisturbed until sometime in the middle of March 1998, when SCHA disseminated a board resolution which decreed

that only its members in good standing were to be issued stickers for use in their vehicles. Petitioners filed a motion to dismiss arguing that the trial court had no jurisdiction over the case as it involved an intra-corporate dispute between SCHA and its members. The proper forum must be the Home Insurance and Guarantee Corporation (HIGC). They stated that that the Articles of Incorporation of SCHA, which was duly approved by the Securities and Exchange Commission , provides that the association shall be a non-tock corporation with all the homeowners of Sta. Clara constituting its membership. Its by-laws also contains a provision that all real estate owners automatically become members of the association. Moreover, the private respondents allegedly enjoyed the privileges of membership and abided by the rules of the association, and even attended the general special meeting of the association members. Issue: Whether or not the private respondents are members of SCHA Ruling: The constitutionally guaranteed freedom of association includes the freedom not to associate. The right to choose with whom one will associate oneself is the very foundation and essence of the partnership. It should be noted that the provision guarantees the right to form an association. It does not compel others to form or join one. Private respondents cannot be compelled to become members of SCHA by the simple expedient of including them in its Articles of Incorporation and ByLaws without their express or implied consent. True, it may be to the mutual advantage of lot owners in a subdivision to band themselves together to promote their common welfare. But that is possible only if the owners voluntarily agree, directly or indirectly, to become members of the association. True also, membership in homeowners association may be acquired in various ways often through deeds of sale, Torrens certificates or other forms of evidence of property ownership. However, when private respondents purchased their property and obtained Transfer Certificates of Title, there was no annotation showing automatic membership in the SCHA. Thus, no privity of contract arising from the title certificate exists between petitioners and private respondents.

G.R. No. L- 24548 October 27, 1983 WENCESLAO VlNZONS TAN, THE DIRECTOR OF FORESTRY, APOLONIO THE SECRETARY OF AGRICULTURE AND NATURAL RESOURCES JOSE Y. FELICIANO, respondents-appelllees, vs. THE DIRECTOR OF FORESTRY, APOLONIO RIVERA, THE SECRETARY OF AGRICULTURE AND N ATURAL RESOURCES JOSE Y. FELICIANO, respon dentsappellees,RAVAGO COMMERCIAL CO., JORGE LAO HAPPICK and ATANACIO MALLARI, intervenors,

This is an appeal from the order dated January 20, 1965 of the then Court of First Instance of Manila, Branch VII, in Civil Case No. 56813, a petition for certiorari, prohibition and mandamus with preliminary prohibitory injunction (p. 2. rec.), which dismissed the petition of petitioner-appellant Wenceslao Vinzons Tan on the ground that it does not state a sufficient cause of action, and upon the respondents-appellees' (Secretary of Agriculture and Natural resources and the Director of Forestry) motion to dismiss (p. 28, rec.). Sometime in April 1961, the Bureau of Forestry issued Notice No. 2087, advertising for public bidding a certain tract of public forest land situated in Olongapo, Zambales, provided tenders were received on or before May 22, 1961 (p. 15, CFI rec.). This public forest land, consisting of 6,420 hectares, is located within the former U.S. Naval Reservation comprising 7,252 hectares of timberland, which was turned over by the United States Government to the Philippine Government (P. 99, CFI rec.). On May 5, 1961, petitioner-appellant Wenceslao Vinzons Tan submitted his application in due form after paying the necessary fees and posting tile required bond therefor. Nine other applicants submitted their offers before the deadline (p. 29, rec.). Thereafter, questions arose as to the wisdom of having the area declared as a forest reserve or allow the same to be awarded to the most qualified bidder. On June 7, 1961, then President Carlos P. Garcia issued a directive to the Director of the Bureau of Forestry, which read as follows: It is desired that the area formerly covered by the Naval Reservation be made a forest reserve for watershed purposes. Prepare and submit immediately a draft of a proclamation establishing the said area as a watershed forest reserve for Olongapo, Zambales. It is also desired that the bids received by the Bureau of Forestry for the issuance of the timber license in the area during the public bidding conducted last May 22, 1961 be rejected in order that the area may be reserved as above stated. ... (pp. 98, CFI rec.). On August 3, 1961, Secretary Cesar M. Fortich of Agriculture and Natural Resources sustained the findings and re comendations of the Director of Forestry who concluded that "it would be beneficial to the public interest if the area is made available for exploitation under certain conditions," and We quote: Respectfully forwarded to the honorable, the Executive Secretary Malacanang. Manila inviting particular attention to the comment and recommendation of the Director of Forestry in the proceeding in

indorsement in which this Of fice fully concurs. The observations of responsible forest officials are most revealing of their zeal to promote forest conservation and watershed protection especially in Olongapo, Zambales area. In convincing fashion, they have demonstrated that to declare the forest area involved as a forest reserve ratify than open it for timber exploitation under license and regulation would do more harm than of to the public interest. To convert the area into a forest reserve without an adequate forest protection force, would make of it a 'Free Zone and Logging Paradise,' to the ever 'Problem Loggers' of Dinalupihan, Bataan . . . an open target of timber smugglers, kaingineros and other forms of forest vandals and despoilers. On the other hand, to award the area, as planned, to a reputable and responsible licensee who shall conduct logging operations therein under the selective logging method and who shall be obliged to employ a sufficient number of forest guards to patrol and protect the forest consecration and watershed protection. Worthy of mention is the fact that the Bureau of Forestry had already conducted a public bidding to determine the most qualified bidder to whom the area advertised should be awarded. Needless to stress, the decision of the Director of Forestry to dispose of the area thusly was arrived at after much thought and deliberation and after having been convinced that to do so would not adversely affect the watershed in that sector. The result of the bidding only have to be announced. To be sure, some of the participating bidders like Mr. Edgardo Pascual, went to much expense in the hope of winning a virgin forest concession. To suddenly make a turn about of this decision without strong justifiable grounds, would cause the Bureau of Forestry and this Office no end of embarrassment. In view of the foregoing, it is earnestly urged that the Director of Forestry be allowed to proceed with the announcement of the results of the bidding for the subject forest area (p. 13, CFI rec.). The Office of the President in its 4th Indorsement dated February 2, 1962, signed by Atty. Juan Cancio, Acting Legal Officer, "respectfully returned to the Honorable Secretary of the Department of Agriculture and Natural Resources for appropriate action," the papers subject

of Forestry Notice No. 2087 which was referred to the Bureau of Forestry for decision (p. 14, CFI rec.). Finally, of the ten persons who submitted proposed the area was awarded to herein petitioner-appellant Wenceslao Vinzons Tan, on April 15, 1963 by the Bureau of Forestry (p. 17, CFI rec.). Against this award, bidders Ravago Commercial Company and Jorge Lao Happick filed motions for reconsideration which were denied by the Director of Forestry on December 6, 1963. On May 30, 1963, the Secretary of Agriculture and Natural Resources Benjamin M. Gozon who succeeded Secretary Cesar M. Fortich in office issued General Memorandum Order No. 46, series of 1963, pertinent portions of which state: xxx xxx xxx SUBJECT: ... ... ... (D)elegation of authority to the Director of Forestry to grant ordinary timber licenses. 1. ... ... ... 2. The Director of Forestry is hereby authorized to grant (a) new ordinary timber licenses where the area covered thereby is not more than 3,000 hectares each; and (be the extension of ordinary timber licenses for areas not exceeding 5,000 hectares each; 3. This Order shall take effect immediately (p. 267, CFI rec.). Thereafter, Jose Y. Feliciano was appointed as Acting secretary of Agriculture and Natural Resources, replacing secretary Benjamin M. Gozon. Upon assumption of office he Immediately promulgate on December 19, 19b3 General memorandum Order No. 60, revoking the authority delegated to the Director of Forestry, under General Memorandum order No. 46, to grant ordinary timber licenses, which order took effect on the same day, December 19, 1963. Pertinent portions of the said Order read as follows: xxx xxx xxx SUBJECT: Revocation of General Memorandum Order No 46 dated May 30, 1963 1. In order to acquaint the undersigned with the volume and Nature of the work of the Department, the authority delegated to the Director of forestry under General Memorandum Order No. 46, dated May 30, 1963, to grant (a) new ordinary timber licenses where the area covered thereby is not more than

3,000 hectares each; and (b) the extension of ordinary timber licenses for areas not exceeding 3,000 hectares each is hereby revoked. Until further notice, the issuance of' new licenses , including amendments thereto, shall be signed by the secretary of Agriculture and Natural Resources. 2. This Order shall take effect immediately and all other previous orders, directives, circulars, memoranda, rules and regulations inconsistent with this Order are hereby revoked (p. 268, CFl rec.; Emphasis supplied). On the same date that the above-quoted memorandum took effect, December 19, 1963, Ordinary Timber License No. 20-'64 (NEW) dated April 22, 1963, in the name of Wenceslao Vinzons Tan, was signed by then Acting Director of Forestry Estanislao R. Bernal without the approval of the Secretary of Agriculture and Natural Resources. On January 6, 1964, the license was released by the Office of the Director of Forestry (p. 30, CFI rec.; p. 77, rec.). It was not signed by the Secretary of Agriculture and Natural Resources as required by Order No. 60 aforequoted. On February 12, 1964, Ravago Commercial Company wrote a letter to the Secretary of Agriculture and Natural Resources shall be considered by tile Natural Resources praying that, pending resolution of the appeal filed by Ravago Commercial Company and Jorge Lao Happick from the order of the Director of Forestry denying their motion for reconsideration, OTI No. 20-'64 in the name of Wenceslao V. Tan be cancelled or revoked on the ground that the grant thereof was irregular, anomalous and contrary to existing forestry laws, rules and regulations. On March 9, 1964, acting on the said representation made by Ravago Commercial Company, the Secretary of Agriculture and Natural Resources promulgated an order declaring Ordinary Timber License No. 20-'64 issued in the name of Wenceslao Vinzons Tan, as having been issued by the Director of Forestry without authority, and is therefore void ab initio. The dispositive portion of said order reads as follows: WHEREFORE, premises considered, this Office is of the opinion and so holds that O.T. License No. 20-'64 in the name of Wenceslao Vinzons Tan should be, as hereby it is, REVOKED AND DECLARED without force and effect whatsoever from the issuance thereof. The Director of Forestry is hereby directed to stop the logging operations of Wenceslao Vinzons Tan, if there be any, in the area in question and shall see to it that the appellee shall not introduce any further improvements thereon pending the disposition of the appeals filed by Ravago Commercial

Company and Jorge lao Happick in this case" (pp. 30-31, CFI rec.). Petitioner-appellant moved for a reconsideration of the order, but the Secretary of Agriculture and Natural Resources denied the motion in an Order dated March 25, 1964, wherein this paragraph appears: In this connection, it has been observed by the Acting Director of Forestry in his 2nd indorsement of February 12, 1964, that the area in question composes of water basin overlooking Olongapo, including the proposed Olongapo watershed Reservation; and that the United States as well as the Bureau of Forestry has earmarked this entire watershed for a watershed pilot forest for experiment treatment Concerning erosion and water conservation and flood control in relation to wise utilization of the forest, denudation, shifting cultivation, increase or decrease of crop harvest of agricultural areas influenced by the watershed, etc. .... (pp. 3839, CFI rec.; p. 78, rec.). On April 11, 1964, the Secretary of Agriculture and Natural Resources, acting on the separate appeals filed by Jorge Lao Happick and Ravago Commercial Company, from the order of the Director of Forestry dated April 15, 1963, awarding to Wenceslao Vinzons Tan the area under Notive No. 2087, and rejecting the proposals of the other applicants covering the same area, promulgated an order commenting that in view of the observations of the Director of Forestry just quoted, "to grant the area in question to any of the parties herein, would undoubtedly adversely affect public interest which is paramount to private interests," and concluding that, "for this reason, this Office is of the opinion and so holds, that without the necessity of discussing the appeals of the herein appellants, the said appeals should be, as hereby they are, dismissed and this case is considered a closed matter insofar as this Office is concerned" (p. 78, rec.). On April 18, 1964, on the basis of the denial of his motion for reconsideration by the Secretary of Agriculture and Natural Resources, petitioner-appellant filed the instant case before tile court a quo (Court of First Instance, Manila), Special Civil Action No. 56813, a petition for certiorari, prohibition and mandamus with preliminary prohibitory injunction (pp. 1-12, CFI rec.). Petitioner-appellant claims that the respondentsappellees "unlawfully, illegally whimsically, capriciously and arbitrarily acted without or in excess of their jurisdiction, and/or with grave abuse of discretion by revoking a valid and existing timber license without just cause, by denying petitioner-appellant of the equal protection of the laws, by depriving him of his constitutional right to property without due process of law, and in effect, by impairing the obligation of contracts" (P. 6, CFI rec.). Petitioner-appellant prayed for judgment making permanent the writ of preliminary injunction against the respondents- appellees; declaring the orders of the Secretary of Agriculture and

Natural Resources dated March 9, March 25, and April 11, 1964, as well as all his acts and those of the Director of Forestry implementing said orders, and all the proceedings in connection therewith, null and void, unlawful and of no force and effect; ordering the Director of Forestry to renew OTI No. 20-'64 upon expiration, and sentencing the respondents, jointly and severally, to pay the petitioner-appellant the sum of Two Hundred Thousand Pesos (P200,000.000) by way of pecuniary damage, One Hundred Thousand Pesos (P100,000.00) by way of moral and exemplary damages, and Thirty Thousand Pesos (P30,000-00) as attorney's fees and costs. The respondents-appellees separately filed oppositions to the issuance of the writ of preliminary injunction, Ravago Commercial Company, Jorge Lao, Happick and Atanacio Mallari, presented petitions for intervention which were granted, and they too opposed the writ. The Director of Forestry in his motion to dismiss dated April 24, 1964, alleges the following grounds: (1) that the court has no jurisdiction; (2) that the respondents may not be sued without their consent; (3) that the petitioner has not exhausted all available administrative remedies; (4) that the petition does not state a cause of action; and (5) that purely administrative and discretionary functions of administrative officials may not be interfered with by the courts. The Secretary of Agriculture and Natural Resources joined the motion to dismiss when in his answer of May 18, 1964, he avers the following special and affirmative defenses: (1) that the court has no jurisdiction to entertain the action for certiorari, prohibition and mandamus; (2) that the petitioner has no cause of action; (3) that venue is improperly laid; (4) that the State is immune from suit without its consent; (5) that the court has no power to interfere in purely administrative functions; and (6) that the cancellation of petitioner's license was dictated by public policy (pp. 172-177, rec.). Intervenors also filed their respective answers in intervention with special and affirmative defenses (pp. 78-79, rec.). A hearing was held on the petition for the issuance of writ of preliminary injunction, wherein evidence was submitted by all the parties including the intervenors, and extensive discussion was held both orally and in writing. After the said hearing, on January 20, 1965, the court a quo, from the evidence received, resolved not only the question on the issuance of a writ of preliminary injunction but also the motion to dismiss, declared that the petition did not state a sufficient cause of action, and dismissed the same accordingly. To justify such action, the trial court, in its order dismissing the petition, stated that "the court feels that the evidence presented and the extensive discussion on the issuance of the writ of preliminary mandatory and prohibitory injunction should also be taken into consideration in resolving not only this question but also the motion to dismiss, because there is no reason to believe that the parties will change their stand, arguments and evidence" (p. 478, CFI rec.). His motion for reconsideration having been denied (p. 488, CFI rec.), petitioner-appellant Wenceslao Vinzons Tan appealed directly to this Court.

I Petitioner-appellant now comes before this Court, claiming that the trial court erred in: (1) holding that the petition does not state a sufficient cause of action: and (2) dismissing the petition [p.27,rec. ]. He argues that the sole issue in the present case is, whether or not the facts in the petition constitute a sufficient cause of action (p. 31, rec.). Petitionerappellant, in his brief, presented a lengthy discussion on the definition of the term cause of action wherein he contended that the three essential elements thereon, namely, the legal right of the plaintiff, the correlative obligation of the defendants and the act or omission of the defendant in violation of that right are satisfied in the averments of this petition (pp. 3132, rec.). He invoked the rule that when the ground for dismissal is that the complaint states no cause of action, such fact can be determined only from the facts alleged in the complaint and from no other, and the court cannot consider other matters aliunde He further invoked the rule that in a motion to dismiss based on insufficiency of cause of action, the facts alleged in the complaint are deemed hypothetically admitted for the purpose of the motion (pp. 32-33, rec.). A perusal of the records of the case shows that petitioner-appellant's contentions are untenable. As already observed, this case was presented to the trial court upon a motion to dismiss for failure of the petition to state a claim upon which relief could be granted (Rule 16 [g], Revised Rules of Court), on the ground that the timber license relied upon by the petitioner- appellant in his petition was issued by the Director of Forestry without authority and is therefore void ab initio. This motion supplanted the general demurrer in an action at law and, as a rule admits, for the purpose of the motion, ail facts which are well pleaded however while the court must accept as true all well pleaded facts, the motion does not admit allegations of which the court will take judicial notice are not true, nor does the rule apply to legally impossible facts, nor to facts inadmissible in evidence, nor to facts which appear by record or document included in the pleadings to be unfounded (Vol. 1, Moran's Comments on the Rules of Court, 1970 ed., p. 505, citing cases). It must be noted that there was a hearing held in the instant case wherein answers were interposed and evidence introduced. In the course of the hearing, petitioner-appellant had the opportunity to introduce evidence in support of tile allegations iii his petition, which he readily availed of. Consequently, he is estopped from invoking the rule that to determine the sufficiency of a cause of action on a motion to dismiss, only the facts alleged in the complaint must be considered. If there were no hearing held, as in the case of Cohen vs. U.S. CCA Minn 1942,129 F. 2d 733), "where the case was presented to District Court upon a motion to dismiss because of alleged failure of complaint to state a claim upon which relief could be

granted, and no answer was interposed and no evidence introduced, the only facts which the court could properly consider in passing upon the motion were those facts appearing in the complaint, supplemented be such facts as the court judicially knew. In Llanto vs. Ali Dimaporo, et al. (16 SCRA 601, March 31, 1966), this Court, thru Justice Conrado V. Sanchez, held that the trial court can properly dismiss a complaint on a motion to dismiss due to lack of cause of action even without a hearing, by taking into consideration the discussion in said motion and the opposition thereto. Pertinent portion of said decision is hereby quoted: Respondents moved to dismiss. Ground therefor is lack of cause of action. The Court below granted the motion, dismissed the petition. The motion to reconsider failed. Offshoot is this appeal. 1. The threshold questions are these: Was the dismissal order issued without any hearing on the motion to dismiss? Is it void? WE go to the record. The motion to dismiss was filed on February 1, 1961 and set for hearing on February 10 following. On February 8, 1961 petitioner's counsel telegraphed the court, (r)equest postponement motion dismissal till written opposition filed.' He did not appear at the scheduled hearing. But on March 4, 1961, he followed up his wire, with his written opposition to the motion to dismiss. Adverting to the 5-page motion to dismiss and the 6-page opposition thereto, We find that the arguments pro and con on the question of the board's power to abolish petitioner's position to discussed the problem said profusely cited authorities. The May 15, 1961 8-page court order recited at length the said arguments and concluded that petitioner made no case. One good reason for the statutory requirement of hearing on a motion as to enable the suitors to adduce evidence in support of their opposing claims. But here the motion to dismiss is grounded on lack of cause of action. Existence of a cause of action or lack of it is determined be a reference to the facts averred in the challenged pleading. The question raised in the motion is purely one of law. This legal issue was fully discussed in said motion

and the opposition thereto. In this posture, oral arguments on the motion are reduced to an unnecessary ceremony and should be overlooked. And, correctly so, because the other intendment of the law in requiring hearing on a motion, i.e., 'to avoid surprises upon the opposite party and to give to the latter time to study and meet the arguments of the motion,' has been sufficiently met. And then, courts do not exalt form over substance (Emphasis supplied). Furthermore even if the complaint stated a valid cause of action, a motion to dismiss for- insufficiency of cause of action will be granted if documentary evidence admitted by stipulation disclosing facts sufficient to defeat the claim enabled the court to go beyond disclosure in the complaint (LOCALS No. 1470, No. 1469, and No. 1512 of the International Longshoremen's Association vs. Southern Pacific Co., 6 Fed. Rules Service, p. 107; U.S. Circuit Court of Appeals, Fifth Circuit, Dec. 7, 1952; 131 F. 2d 605). Thus, although the evidence of the parties were presented on the question of granting or denying petitioner-appellant's application for a writ of preliminary injunction, the trial court correctly applied said evidence in the resolution of the motion to dismiss. Moreover, in applying said evidence in the resolution of the motion to dismiss, the trial court, in its order dismissing the petition, pointed out that, "there is no reason to believe that the parties will change their stand, arguments and evidence" (p. 478, CFI rec.). Petitioner-appellant did not interpose any objection thereto, nor presented new arguments in his motion for reconsideration (pp. 482-484, CFI rec.). This omission means conformity to said observation, and a waiver of his right to object, estopping him from raising this question for the first time on appeal. " I question not raised in the trial court cannot be raised for the first time on appeal" (Matienzo vs. Servidad, Sept. 10, 1981, 107 SCRA 276). Moreover, petitioner-appellant cannot invoke the rule that, when the ground for asking dismissal is that the complaint states no cause of action, its sufficiency must be determined only from the allegations in the complaint. "The rules of procedure are not to be applied in a very rigid, technical sense; rules of procedure are used only to help secure substantial justice. If a technical and rigid enforcement of the rules is made, their aim would be defeated. Where the rules are merely secondary in importance are made to override the ends of justice; the technical rules had been misapplied to the prejudice of the substantial right of a party, said rigid application cannot be countenanced" (Vol. 1, Francisco, Civil Procedure, 2 ed., 1973, p. 157, citing cases). What more can be of greater importance than the interest of the public at large, more particularly the welfare of the inhabitants of Olongapo City and Zambales province, whose lives and properties are directly and immediately imperilled by forest denudation.

The area covered by petitioner-appellant's timber license practically comprises the entire Olongapo watershed (p. 265, CFI rec.). It is of public knowledge that watersheds serves as a defense against soil erosion and guarantees the steady supply of water. As a matter of general policy, the Philippine Constitution expressly mandated the conservation and proper utilization of natural resources, which includes the country's watershed. Watersheds in the Philippines had been subjected to rampant abusive treatment due to various unscientific and destructive land use practices. Once lush watersheds were wantonly deforested due to uncontrolled timber cutting by licensed concessionaries and illegal loggers. This is one reason why, in paragraph 27.of the rules and regulations included in the ordinary timber license it is stated: The terms and conditions of this license are subject to change at the discretion of the Director of Forestry, and that this license may be made to expire at an earlier date, when public interests so require (Exh. D, p. 22, CFI rec.). Considering the overriding public interest involved in the instant case, We therefore take judicial notice of the fact that, on April 30, 1964, the area covered by petitioner-appellant's timber license has been established as the Olongapo Watershed Forest Reserve by virtue of Executive Proclamation No. 238 by then President Diosdado Macapagal which in parts read as follows: Pursuant to the provisions of Section 1824 of the Revised Administrative Code, as amended, 1, Diosdado Macapagal, President of the Philippines do hereby withdraw from entry, sale, or settlement and establish as Olongapo Watershed Forest Reserve for watershed, soil protection, and timber production purposes, subject to private rights, if any there be, under the administration and control of the Director of Forestry, xx the following parcels of land of the public domain situated in the municipality of Olongapo, province of Zambales, described in the Bureau of Forestry map No. FR-132, to wit: ... ... (60 O.G. No. 23, 3198). Petitioner-appellant relies on Ordinary Timber License No. 20-'64 (NEW) for his alleged right over the timber concession in question. He argues thus: "The facts alleged in the petition show: (1) the legal right of the petitioner to log in the area covered by his timber license; (2) the legal or corresponding obligation on the part of the respondents to give effect, recognize and respect the very timber license they issued to the petitioner; and (3) the act of the respondents in arbitrarily revoking the timber license of the petitioner without giving him his day in court and in preventing him from using and enjoying the timber license issued to him in the regular course of official business" (p. 32, rec.).

In the light of petitioner-appellant's arguments, it is readily seen that the whole controversy hinges on the validity or invalidity of his timber license. WE fully concur with the findings of the trial court that petitioner- appellant's timber license was signed and released without authority by then Acting Director Estanislao R. Bernal of Forestry, and is therefore void ab initio. WE hereby quote such findings: In the first place, in general memorandum order No. 46 dated May 30, 1963, the Director of Forestry was authorized to grant a new ordinary timber license only where the area covered thereby was not more than 3,000 hectares; the tract of public forest awarded to the petitioner contained 6,420 hectares (Exhs. 2-A and 2-B Ravago, embodied in Annex B; Exh. B). The petitioner contends that only 1,756 hectares of the said area contain commercial and operable forest; the authority given to the Director of Forestry to grant a new ordinary timber license of not more than 3,000 hectares does not state that the whole area should be commercial and operable forest. It should be taken into consideration that the 1,756 hectares containing commercial and operable forest must have been distributed in the whole area of 6,420 hectares. Besides the license states, 'Please see attached sketch and technical description,' gives an area of 6,420 hectares and does not state what is the area covered of commmercial and operable forest (Exh. Ravago Also Annex B of the petition, which was marked as Exhibit B, states: Under Notice No. 2087, a tract of public forest containing 6,420 hectares located in Olongapo, Zambales was declared available for timber utilization and development. Pursuant to this Notice, there were received bid proposals from the following persons: ... Wherefore, confirming the findings of said Committee, the area described in Notice No. 2087 shall be awarded, as it is hereby awarded to Wenceslao Vinzons Tan, subject to the following conditions: ... ... In the second place, at the time it was released to the petitioner, the Acting Director of Forestry had no more authority to grant any license. The

license was signed by the Acting Director of Forestry on December 19, 1963, and released to the petitioner on January 6, 1964 (Exh. RavaGo The authority delegated to the Director of Forestry to grant a new ordinary timber license was contained in general memorandum order No. 46 dated May 30, 1963. This was revoked by general memorandum order No. 60, which was promulgated on December 19, 1963. In view thereof, the Director of Forestry had no longer any authority to release the license on January 6, 1964, and said license is therefore void ab initio (pp. 479480, CFI rec.). The release of the license on January 6, 1964, gives rise to the impression that it was ante-dated to December 19, 1963 on which date the authority of the Director of Forestry was revoked. But, what is of greatest importance is the date of the release or issuance, and not the date of the signing of the license. While petitioner-appellant's timber license might have been signed on December 19, 1963 it was released only on January 6, 1964. Before its release, no right is acquired by the licensee. As pointed out by the trial court, the Director of Forestry had no longer any authority to release the license on January 6, 1964. Therefore, petitioner-appellant had not acquired any legal right under such void license. This is evident on the face of his petition as supplemented by its annexes which includes Ordinary Timber License No. 20-'64 (NEW). Thus, in the case of World Wide Insurance & Surety Co., Inc. vs. Macrohon, et al. (105 Phil. 250, Feb. 28, 1959), this Court held that if from the face of the complaint, as supplemented by its annexes, plaintiff is not the owner, or entitled to the properties it claims to have been levied upon and sold at public auction by the defendants and for which it now seeks indemnity, the said complaint does not give plaintiff any right of action against the defendants. In the same case, this Court further held that, in acting on a motion to dismiss, the court cannot separate the complaint from its annexes where it clearly appears that the claim of the plaintiff to be the A owner of the properties in question is predicated on said annexes. Accordingly, petitioner-appellant's petition must be dismissed due to lack of cause of action. II Petitioner-appellant, in his petition, alleged that he has exhausted all his administrative remedies to no avail as respondents-appellees have failed, neglected, refused and continue to refuse to allow petitionerappellant to continue operation in the area covered by his timber license. He further alleged that he has neither recourse by way of appeal, nor any plain, speedy and adequate remedy in the ordinary course of law except thru this special civil action, as the last official act of the respondent-appellee Secretary of Agriculture and Natural Resources in declaring void the timber license referred to above after denying petitioner-appellant's motion for reconsideration, is the last administrative act. Petitioner-appellant relies on the case of Demaisip vs. The Court of Appeals, et al.

(106 Phil. 237, Sept. 24, 1959), wherein it was held that the failure of the plaintiff to appeal from the adverse decision of the Secretary to the President cannot preclude the plaintiff from taking court action in view of the theory that the Secretary of a department is merely an alter-ego of the President. The presumption is that the action of the Secretary bears the implied sanction of the President unless the same is disapproved by the latter (Villena vs. the Secretary of Interior, 67 Phil. 451; p. 7, CFI rec.). To this We cannot agree. Petitioner-appellant did not appeal the order of the respondent Secretary of Agriculture and Natural Resources to the President of the Philippines, who issued Executive Proclamation No. 238 withdrawing the area from private exploitation, and establishing it as the Olongapo Watershed Forest Reserve. Considering that the President has the power to review on appeal the orders or acts of the respondents-appellees, the failure of the petitionerappellant to take that appeal is failure on his part to exhaust his administrative remedies. Thus, this Court, in the case of Calo vs. Fuertes (5 SCRA 399, 400, June 29, 1962), held that: At any rate, the appellant's contention that, as the Secretary of Agriculture and Natural Resources is the alter ego of the President and his acts or decisions are also those of the latter, he need not appeal from the decision or opinion of the former to the latter, and that, such being the case, after he had appealed to the Secretary of Agriculture and Natural Resources from the decision or opinion of the Director of Lands he had exhausted the administrative remedies, is untenable. The withdrawal of the appeal taken to the President of the Philippines is tantamount to not appealing all thereto. Such withdrawal is fatal, because the appeal to the President is the last step he should take in an administrative case. In 1912, in the case of Lamb vs. Phipps (22 Phil. 49192, July 22, 1912), this Court stressed the doctrine of exhaustion of administrative remedies, thus: When a plain, adequate and speedy remedy is afforded by and within the executive department of the government the courts will not interfere until at least that remedy has been exhausted. Jao Igco vs. Shuster, 10 Phil. Rep. 448; Ekiu vs. U.S., 142 U.S. 651; U.S. vs. Sing Tuck, 194 U.S. 161; U.S. vs. Ju Toy 198 U.S. 253; Chill Yow vs. U.S., 28 Sup. Ct. Rep. 201). The administrative remedies afforded by law must first be exhausted before resort can be had to the courts, especially when the administrative remedies are by law exclusive and

final. Some matters and some questions are by law delegated entirely and absolutely to the discretion of particular branches of the executive department of the government. When the law confers exclusive and final jurisdiction upon the executive department of the government to dispose of particular questions, their judgments or the judgments of that particular department are no more reviewable by the courts than the final judgment or decisions of the courts are subject to be reviewed and modified by them" (emphasis supplied). Moreover, this being a special civil action, petitionerappellant must allege and prove that he has no other speedy and adequate remedy (Diego vs. The Court of Appeals, et al., 54 Off. Gaz., No. 4, 956). In the case at bar, petitioner- appellant's speedy and adequate remedy is an appeal to the President of the Philippines. Accordingly, "it is settled to the point of being elementary that the only question involved n certiorari is jurisdiction, either want of jurisdiction or excess thereof, and abuse of discretion shall warrant the issuance of the extraordinary remedy of certiorari when the same is so grave as when the power is exercised in an arbitrary or despotic manner by reason of passion, prejudice or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty, or to a virtual refusal to perform a duty enjoined, or to act at all in contemplation of law" FS Divinagracia Agro-Commercial Inc. vs. Court of Appeals, 104 SCRA 191 [April .1, 1981]). The foregoing is on the assumption that there is any irregularity, albeit there is none in the acts or omissions of the respondents-appellees. certiorari is not a substitute for appeal as held time and again by this Court (People vs. Villanueva, 110 SCRA 465), "it being a time honored and well known principle that before seeking judicial redress, a party must first exhaust the administrative remedies available" (Garcia vs. Teehankee, 27 SCRA 944, April 18, 1969). Moreover, from the decision of the Secretary of Agriculture and Natural Resources complained of, petitioners had a plain, speedy and adequate remedy by appealing therefrom to the Chief Executive. In other words, before filing the present action for certiorari in the court below, they should have availed of this administrative remedy and their failure to do so must be deemed fatal to their case [Calo vs. Fuertes, et al., G.R. No. L-16537, June 29,1962]. To place petitioners' case beyond the pale of this rule, they must show that their case falls which it does not within the cases where, in accordance with our decisions, the aggrieved party need not exhaust administrative remedies within his reach in the ordinary course of the law [Tapales vs. The President and the Board of Regents of the U.P., G.R. No. L-17532, March 30, 1963; Mangubat vs. Osmena, G.R. No. L- 12837, April 30, 1959; Baguio vs. Hon. Jose Rodriguez, G. R. No. L-11078, May 27, 1959; Pascual vs. Provincial Board, G.R. No. L-11959, Oct. 31, 1959; Marinduque Iron Mines, etc. vs. Secretary of Public Works, G.R. No. L-15982, May 31, 1963; Alzate

vs. Aldaba, G.R. No. L-14407, Feb. 29, 1960 and Demaisip vs. Court of Appeals, G.R. No. L- 13000, Sept. 25, 1959] (Ganob vs. Ramas, 27 SCRA 1178, April 28, 1969). III Petitioner-appellant not only failed to exhaust his administrative remedies, but also failed to note that his action is a suit against the State which, under the doctrine of State immunity from suit, cannot prosper unless the State gives its consent to be sued Kawananakoa vs. Polybank, 205 U.S. 349; Siren vs. U.S., 7 Wall. 152; Sec. 16, Art. XV, 1973 Constitution). The respondents-appellees, in revoking the petitionerappellant's timber license, were acting within the scope of their authority. Petitioner-appellant contends that "this case is not a suit against the State but an application of a sound principle of law whereby administrative decisions or actuations may be reviewed by the courts as a protection afforded the citizens against oppression" (p. 122, CFI rec.). But, piercing the shard of his contention, We find that petitioner-appellant's action is just an attempt to circumvent the rule establishing State exemption from suits. He cannot use that principle of law to profit at the expense and prejudice of the State and its citizens. The promotion of public welfare and the protection of the inhabitants near the public forest are property, rights and interest of the State. Accordingly, "the rule establishing State exeraiption from suits may not be circumvented by directing the action against the officers of the State instead of against the State itself. In such cases the State's immunity may be validly invoked against the action as long as it can be shown that the suit really affects the property, rights, or interests of the State and not merely those of the officer nominally made party defendant" (SINCO, Phil. Political Law, 10th ed., p. 35; Salgado vs. Ramos, 64 Phil. 724; see also Angat River Irrigation System vs. Angat River Workers' Union, G.R. No. L-10943-44, Dec. 28, 1957, 102 Phil. 789, 800-802; Mobil PhiL vs. Customs Arrastre Service, 18 SCRA 1120, 1121-1125; Bureau of Printing vs. Bureau of Printing Employees' Association, 1 SCRA 340, 341, 343). Both the Secretary of Agriculture and Natural Resources and the Director of Forestry acted in their capacity as officers of the State, representatives of the sovereign authority discharging governmental powers. A private individual cannot issue a timber license. Consequently, a favorable judgment for the petitionerappellant would result in the government losing a substantial part of its timber resources. This being the case, petitioner-appellant's action cannot prosper unless the State gives its consent to be sued. IV Granting arguendo, that petitioner-appellant's timber license is valid, still respondents-appellees can validly revoke his timber license. As pointed out earlier, paragraph 27 of the rules and regulations included in the ordinary timber license states: "The terms and

conditions of this license are subject to change at the discretion of the Director of Forestry, and that this license may be made to expire at an earlier date, when public interests so require" (Exh. D, p. 22, CFI rec.). A timber license is an instrument by which the State regulates the utilization and disposition of forest resources to the end that public welfare is promoted. A timber license is not a contract within the purview of the due process clause; it is only a license or privilege, which can be validly withdrawn whenever dictated by public interest or public welfare as in this ceise "A license is merely a permit or privilege to do what otherwise would be unlawful, and is not a contract between the authority, federal, state, or municipal, granting it and the person to whom it is granted; neither is it property or a property right, nor does it create a vested right; nor is it taxation" (37 C.J. 168). Thus, this Court held that the granting of license does not create irrevocable rights, neither is it property or property rights (People vs. Ong Tin 54 O.G. 7576). In the case of Pedro vs. Provincial Board of Rizal (56 Phil. 123), it was held that: A license authorizing the operation and exploitation of a cockpit is not property of which the holder may not be deprived without due process of law, but a mere privilege which may be revoked when public interests so require. The welfare of the people is the supreme law. Thus, no franchise or right can be availed of to defeat the proper exercise of police power (Surigao Electric Co., Inc. vs. Municipality of Surigao, 24 SCRA 898, Aug. 30, 1968). The State has inherent power enabling it to prohibit all things hurtful to comfort, safety, and welfare of society (Edu vs. Ericta, 35 SCRA 481, Oct. 24,1970). V As provided in the aforecited provision, timber licenses are subject to the authority of the Director of Forestry. The utilization and disposition of forest resources is directly under the control and supervision of the Director of Forestry. However, "while Section 1831 of the Revised Administrative Code provides that forest products shall be cut, gathered and removed from any forest only upon license from the Director of Forestry, it is no less true that as a subordinate officer, the Director of Forestry is subject to the control of the Department Head or the Secretary of Agriculture and Natural Resources (See. 79[c], Rev. Adm. Code), who, therefore, may impose reasonable regulations in the exercise of the powers of the subordinate officer" (Director of Forestry vs. Benedicto, 104 SCRA 309, May 5, 1981). The power of control of the Department Head over bureaus and offices includes the power to modify, reverse or set aside acts of subordinate officials (Province of Pangasinan vs. Secretary of Public Works and Communications, 30 SCRA 134, Oct. 31, 1969; Montano vs. Silvosa, 97 Phil. 143, 144, 147-148). Accordingly, respondent-appellee Secretary of Agriculture and Natural Resources has the authority to revoke, on valid grounds, timber licenses issued by the

Director of Forestry. There being supporting evidence, the revocation of petitioner-appellant's timber license was a wise exercise of the power of the respondentappellee (Secretary of Agriculture and Natural Resources) and therefore, valid. Thus, "this Court had rigorously adhered to the principle of conserving forest resources, as corollary to which the alleged right to them of private individuals or entities was meticulously inquired into and more often than not rejected. We do so again" (Director of Forestry vs. Benedicto, supra). WE reiterate Our fidelity to the basic policy of conserving the national patrimony as ordained by the Constitution. WHEREFORE, IN VIEW OF ALL THE FOREGOING, THE ORDER APPEALED FROM IS HEREBY .AFFIRMED IN TOTO. COSTS AGAINST PETITIONER-APPELLANT. SO ORDERED,

as a contractual undertaking assuring PICOP of exclusive possession and enjoyment of its concession areas. Such an interpretation would result in the complete abdication by the State in favor of PICOP of the sovereign power to control and supervise the exploration, development and utilization of the natural resources in the area.

Digest: Manila Electric Co, Inc. vs Province of Laguna Manila Electric Co, Inc. vs Province of Laguna G.R. No. 131359 Subject: Public Corporation Doctrine: Power to generate revenues Facts: MERALCO was granted franchise for the supply of electric light, heat and power by certain municipalities of the Province of Laguna including, Bian, Sta Rosa, San Pedro, Luisiana, Calauan and Cabuyao. On 19 January 1983, MERALCO was likewise granted a franchise by the National Electrification Administration to operate an electric light and power service in the Municipality of Calamba, Laguna. On 12 September 1991, Republic Act No. 7160, otherwise known as the Local Government Code of 1991, was enacted to take effect on 01 January 1992 enjoining local government units to create their own sources of revenue and to levy taxes, fees and charges, subject to the limitations expressed therein, consistent with the basic policy of local autonomy. Pursuant to the provisions of the Code, respondent province enacted Laguna Provincial Ordinance providing for franchise tax at a rate of 50% of 1% of the gross annual receipts. Provincial Treasurer, then sent a demand letter to MERALCO for the corresponding tax payment. Petitioner MERALCO paid the tax, which then amounted to P19,520,628.42, under protest. A formal claim for refund was thereafter sent by MERALCO to the Provincial Treasurer of Laguna claiming that the franchise tax it had paid and continued to pay to the National Government pursuant to P.D. 551 already included the franchise tax imposed by the Provincial Tax Ordinance. MERALCO contended that the imposition of a franchise tax under Section 2.09 of Laguna Provincial Ordinance No. 01-92, insofar as it concerned MERALCO, contravened the provisions of Section 1 of P.D. 551 which provides Any provision of law or local ordinance to the contrary notwithstanding, the franchise tax payable by all grantees of franchises to generate, distribute and sell electric current for light, heat and power shall be two per cent (2%) of their gross receipts received from the sale of electric current and from transactions incident to the generation, distribution and sale of electric current Such franchise tax shall be payable to the Commissioner of Internal Revenue or his duly authorized representative. On 28 August 1995, the claim for refund of petitioner was denied in a letter signed by Governor Jose D. Lina. In denying the claim, respondents relied on a more

HON. HEHERSON T. ALVAREZ v. PICOP RESOURCES, INC.G.R. No. 162243, December 3, 2009 Chico-Nazario, J.: Doctrine: A timber license is not a contract within the purview of the non-impairment clause. Facts: PICOP filed with the DENR an application to have its Timber License Agreement (TLA) No. 43converted into an IFMA.PICOP filed before the (RTC) City a Petition for Mandamus against then DENR Sec Alvarez for unlawfully refusing and/or neglecting to sign and execute the IFMA contract of PICOP even as the latter has complied with all the legal requirements for the automatic conversion of TLA No. 43, as amended, into an IFMA. The cause of action of PICOP Resources, Inc. (PICOP) in its Petition for Mandamus with the trial court is clear: the government is bound by contract, a 1969 Document signed by then President Ferdinand Marcos, to enter into an Integrated Forest Management Agreement (IFMA) with PICOP. Issue: Whether the 1969 Document is a contract recognized under the non-impairment clause by which the government may be bound (for the issuance of the IFMA) Held: NO. Our definitive ruling in Oposa v. Factoran that a timber license is not a contract within the purview of the non-impairment clause is edifying. We declared: Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a contract, property or a property right protected by the due process clause of the Constitution. Since timber licenses are not contracts, the nonimpairment clause, which reads: "SEC. 10. No law impairing the obligation of contracts shall be passed." cannot be invoked. The Presidential Warranty cannot, in any manner, be construed

recent law, i.e., Republic Act No. 7160 or the Local Government Code of 1991, than the old decree invoked by petitioner. On 14 February 1996, petitioner MERALCO filed with the RTC a complaint for refund against the Province of Laguna and also Benito R. Balazo in his capacity as the Provincial Treasurer of Laguna. RTC dismissed the complaint holding that the power to tax exercised by the province of Laguna was valid. ISSUE: Whether or not the power to tax was validly exercised. HELD: Prefatorily, it might be well to recall that local governments do not have the inherent power to tax except to the extent that such power might be delegated to them either by the basic law or by statute. Presently, under Article X of the 1987 Constitution, a general delegation of that power has been given in favor of local government units. Under the regime of the 1935 Constitution no similar delegation of tax powers was provided, and local government units instead derived their tax powers under a limited statutory authority. Whereas, then, the delegation of tax powers granted at that time by statute to local governments was confined and defined (outside of which the power was deemed withheld), the present constitutional rule (starting with the 1973 Constitution), however, would broadly confer such tax powers subject only to specific exceptions that the law might prescribe. Under the now prevailing Constitution, where there is neither a grant nor a prohibition by statute, the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines. The basic rationale for the current rule is to safeguard the viability and self-sufficiency of local government units by directly granting them general and broad tax powers. Nevertheless, the fundamental law did not intend the delegation to be absolute and unconditional; the constitutional objective obviously is to ensure that, while the local government units are being strengthened and made more autonomous,[6] the legislature must still see to it that (a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions; (b) each local government unit will have its fair share of available resources; (c) the resources of the national government will not be unduly disturbed; and (d) local taxation will be fair, uniform, and just. The 1991 Code explicitly authorizes provincial governments, notwithstanding any exemption granted by any law or other special law, x x x (to) impose a tax on businesses enjoying a franchise. Indicative of the legislative intent to carry out the Constitutional mandate of vesting broad tax powers to local government units, the Local Government Code has effectively withdrawn under Section 193 thereof, tax exemptions or incentives theretofore enjoyed by certain entities. The Code, in addition, contains a general repealing clause in its Section 534 which states that All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly.

WHEREFORE, the instant petition is hereby DISMISSED. No costs.

G.R. No. 131359 May 5, 1999 MANILA ELECTRIC COMPANY, petitioner, vs. PROVINCE OF LAGUNA and BENITO R. BALAZO, in his capacity as Provincial Treasurer of Laguna, respondents.

VITUG, J.: On various dates, certain municipalities of the Province of Laguna, including, Bian, Sta. Rosa, San Pedro, Luisiana, Calauan and Cabuyao, by virtue of existing laws then in effect, issued resolutions through their respective municipal councils granting franchise in favor of petitioner Manila Electric Company ("MERALCO") for the supply of electric light, heat and power within their concerned areas. On 19 January 1983, MERALCO was likewise granted a franchise by the National Electrification Administration to operate an electric light and power service in the Municipality of Calamba, Laguna. On 12 September 1991, Republic Act No. 7160, otherwise known as the "Local Government Code of 1991," was enacted to take effect on 01 January 1992 enjoining local government units to create their own sources of revenue and to levy taxes, fees and charges, subject to the limitations expressed therein, consistent with the basic policy of local autonomy. Pursuant to the provisions of the Code, respondent province enacted Laguna Provincial Ordinance No. 0192, effective 01 January 1993, providing, in part, as follows: Sec. 2.09. Franchise Tax. There is hereby imposed a tax on businesses enjoying a franchise, at a rate of fifty percent (50%) of one percent (1%) of the gross annual receipts, which shall include both cash sales and sales on account realized during the preceding calendar year within this province, including the territorial limits on any city located in the province. On the basis of the above ordinance, respondent Provincial Treasurer sent a demand letter to MERALCO for the corresponding tax payment. Petitioner MERALCO paid the tax, which then amounted to P19,520.628.42, under protest. A formal claim for refund was thereafter sent by MERALCO to the Provincial Treasurer of Laguna claiming that the franchise tax it had paid and continued to pay to the National Government pursuant to P.D. 551 already included the franchise tax imposed by the Provincial Tax Ordinance. MERALCO, contended that the imposition of a franchise tax under Section 2.09 of

Laguna Provincial Ordinance No. 01-92, insofar as it concerned MERALCO, contravened the provisions of Section 1 of P.D. 551 which read: Any provision of law or local ordinance to the contrary notwithstanding, the franchise tax payable by all grantees of franchises to generate, distribute and sell electric current for light, heat and power shall be two per cent (2%) of their gross receipts received from the sale of electric current and from transactions incident to the generation, distribution and sale of electric current. Such franchise tax shall be payable to the Commissioner of Internal Revenue or his duly authorized representative on or before the twentieth day of the month following the end of each calendar quarter or month, as may be provided in the respective franchise or pertinent municipal regulation and shall, any provision of the Local Tax Code or any other law to the contrary notwithstanding, be in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on earnings, receipts, income and privilege of generation, distribution and sale of electric current. On 28 August 1995, the claim for refund of petitioner was denied in a letter signed by Governor Jose D. Lina relied on a more recent law, i.e. Republic Act No. 7160 or the Local Government Code of 1991, than the old decree invoked by petitioner. On 14 February 1996, petitioner MERALCO filed with the Regional Trial Court of Sta. Cruz, Laguna, a complaint for refund, with a prayer for the issuance of a writ of preliminary injunction and/or temporary restraining order, against the Province of Laguna and also Benito R. Balazo in his capacity as the Provincial Treasurer of Laguna. Aside from the amount of P19,520,628.42 for which petitioner MERALCO had priorly made a formal request for refund, petitioner thereafter likewise made additional payments under protest on various dates totaling P27,669,566.91. The trial court, in its assailed decision of 30 September 1997, dismissed the complaint and concluded: WHEREFORE, IN THE LIGHT OF ALL THE FOREGOING CONSIDERATIONS, JUDGMENT is hereby rendered in favor of the defendants and against the plaintiff, by: 1. Ordering the dismissal of the Complaint; and 2. Declaring Laguna Provincial Tax Ordinance No. 01-92 as valid, binding, reasonable and enforceable. 2

In the instant petition, MERALCO assails the above ruling and brings up the following issues; viz: 1. Whether the imposition of a franchise tax under Section 2.09 of Laguna Provincial Ordinance No. 01-92, insofar as petitioner is concerned, is violative of the non-impairment clause of the Constitution and Section 1 of Presidential Decree No. 551. 2. Whether Republic Act No. 7160, otherwise known Local Government Code of 1991, has repealed, amended or modified Presidential Decree No. 551. 3. Whether the doctrine of administrative remedies is applicable in this case. 3 The petition lacks merit. Prefatorily, it might be well to recall that local governments do not have the inherent power to tax 4 except to the extent that such power might be delegated to them either by the basic law or by statute. Presently, under Article X of the 1987 Constitution, a general delegation of that power has been given in favor of local government units. Thus: Sec. 3. The Congress shall enact a local government code which shall provide for a more responsive and accountable local government structure instituted through a system of decentralization with effective mechanisms of recall, initiative, and referendum, allocate among the different local government units their powers, responsibilities, and resources, and provide for the qualifications, election, appointment and removal, term, salaries, powers and functions, and duties of local officials, and all other matters relating to the organization and operation of the local units. xxx xxx xxx Sec. 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments. The 1987 Constitution has a counterpart provision in the 1973 Constitution which did come out with a similar delegation of revenue making powers to local governments. 5

Under regime of the 1935 Constitution no similar delegation of tax powers was provided, and local government units instead derived their tax powers under a limited statutory authority. Whereas, then, the delegation of tax powers granted at that time by statute to local governments was confined and defined (outside of which the power was deemed withheld), the present constitutional rule (starting with the 1973 Constitution), however, would broadly confer such tax powers subject only to specific exceptions that the law might prescribe. Under the now prevailing Constitution, where there is neither a grant nor a prohibition by statute, the tax power must be deemed to exist although Congress may provide statutory limitations and guidelines. The basic rationale for the current rule is to safeguard the viability and self-sufficiency of local government units by directly granting them general and broad tax powers. Nevertheless, the fundamental law did not intend the delegation to be absolute and unconditional; the constitutional objective obviously is to ensure that, while the local government units are being strengthened and made more autonomous, 6 the legislature must still see to it that (a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions; (b) each local government unit will have its fair share of available resources; (c) the resources of the national government will not be unduly disturbed; and (d) local taxation will be fair, uniform, and just. The Local Government Code of 1991 has incorporated and adopted, by and large, the provisions of the now repealed Local Tax Code, which had been in effect since 01 July 1973, promulgated into law by Presidential Decree No. 231 7 pursuant to the then provisions of Section 2, Article XI, of the 1973 Constitution. The 1991 Code explicitly authorizes provincial governments, notwithstanding "any exemption granted by any law or other special law, . . . (to) impose a tax on businesses enjoying a franchise." Section 137 thereof provides: Sec. 137. Franchise Tax Notwithstanding any exemption granted by any law or other special law, the province may impose a tax on businesses enjoying a franchise, at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized, within its territorial jurisdiction. In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the capital investment. In the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction thereof, as provided herein. (Underscoring supplied for emphasis)

Indicative of the legislative intent to carry out the Constitutional mandate of vesting broad tax powers to local government units, the Local Government Code has effectively withdrawn under Section 193 thereof, tax exemptions or incentives theretofore enjoyed by certain entities. This law states: Sec. 193. Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. (Underscoring supplied for emphasis) The Code, in addition, contains a general repealing clause in its Section 534; thus: Sec. 534. Repealing Clause. . . . (f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. (Underscoring supplied for emphasis) 8 To exemplify, in Mactan Cebu International Airport Authority vs. Marcos, 9 the Court upheld the withdrawal of the real estate tax exemption previously enjoyed by Mactan Cebu International Airport Authority. The Court ratiocinated: . . . These policy considerations are consistent with the State policy to ensure autonomy to local governments and the objective of the LGC that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them effective partners in the attainment of national goals. The power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities if local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. It may also be relevant to recall that the original reasons for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other units of government were that such

privilege resulted in serious tax base erosion and distortions in the tax treatment of similarity situated enterprises, and there was a need for these entities to share in the requirements of development, fiscal or otherwise, by paying the taxes and other charges due from them. 10 Petitioner in its complaint before the Regional Trial Court cited the ruling of this Court in Province of Misamis Oriental vs. Cagayan Electric Power and Light Company, Inc.; 11 thus: In an earlier case, the phrase "shall be in lieu of all taxes and at any time levied, established by, or collected by any authority" found in the franchise of the Visayan Electric Company was held to exempt the company from payment of the 5% tax on corporate franchise provided in Section 259 of the Internal Revenue Code (Visayan Electric Co. vs. David, 49 O.G. [No. 4] 1385) Similarly, we ruled that the provision: "shall be in lieu of all taxes of every name and nature" in the franchise of the Manila Railroad (Subsection 12, Section 1, Act No. 1510) exempts the Manila Railroad from payment of internal revenue tax for its importations of coal and oil under Act No. 2432 and the Amendatory Acts of the Philippine Legislature (Manila Railroad vs. Rafferty, 40 Phil. 224). The same phrase found in the franchise of the Philippine Railway Co. (Sec. 13, Act No. 1497) justified the exemption of the Philippine Railway Company from payment of the tax on its corporate franchise under Section 259 of the Internal Revenue Code, as amended by R.A. No. 39 (Philippine Railway Co vs. Collector of Internal Revenue, 91 Phil. 35). Those magic words, "shall be in lieu of all taxes" also excused the Cotabato Light and Ice Plant Company from the payment of the tax imposed by Ordinance No. 7 of the City of Cotabato (Cotabato Light and Power Co. vs. City of Cotabato, 32 SCRA 231). So was the exemption upheld in favor of the Carcar Electric and Ice Plant Company when it was required to pay the corporate franchise tax under Section 259 of the Internal Revenue Code, as amended by R.A. No. 39 (Carcar Electric & Ice Plant vs. Collector of Internal Revenue, 53 O.G. [No. 4]. 1068). This Court pointed out that such exemption is part of the inducement

for the acceptance of the franchise and the rendition of public service by the grantee. 2 In the recent case of the City Government of San Pablo, etc., et al. vs. Hon. Bienvenido V. Reyes, et al., 13 the Court has held that the phrase in lieu of all taxes "have to give way to the peremptory language of the Local Government Code specifically providing for the withdrawal of such exemptions, privileges," and that "upon the effectivity of the Local Government Code all exemptions except only as provided therein can no longer be invoked by MERALCO to disclaim liability for the local tax." In fine, the Court has viewed its previous rulings as laying stress more on the legislative intent of the amendatory law whether the tax exemption privilege is to be withdrawn or not rather than on whether the law can withdraw, without violating the Constitution, the tax exemption or not. While the Court has, not too infrequently, referred to tax exemptions contained in special franchises as being in the nature of contracts and a part of the inducement for carrying on the franchise, these exemptions, nevertheless, are far from being strictly contractual in nature. Contractual tax exemptions, in the real sense of the term and where the nonimpairment clause of the Constitution can rightly be invoked, are those agreed to by the taxing authority in contracts, such as those contained in government bonds or debentures, lawfully entered into by them under enabling laws in which the government, acting in its private capacity, sheds its cloak of authority and waives its governmental immunity. Truly, tax exemptions of this kind may not be revoked without impairing the obligations of contracts. 14 These contractual tax exemptions, however, are not to be confused with tax exemptions granted under franchises. A franchise partakes the nature of a grant which is beyond the purview of the non-impairment clause of the Constitution. 15 Indeed, Article XII, Section 11, of the 1987 Constitution, like its precursor provisions in the 1935 and the 1973 Constitutions, is explicit that no franchise for the operation of a public utility shall be granted except under the condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and when the common good so requires. WHEREFORE, the instant petition is hereby DISMISSED. No costs.1wphi1.nt

G.R. No. L-17959

January 24, 1922

ROBERT S. CLEMONS, petitioner, vs. WILLIAM T. NOLTING, as Auditor of the Government of the Philippine Islands, respondent. Fisher & DeWitt for Petitioner. Acting Attorney-General Tuason for respondent. JOHNSON, J.:

This is an original action commenced in the Supreme Court for the writ of mandamus. Its purposes to compel the respondent "to countersign or cause to be countersigned the original warrant, a copy of which is set forth in paragraph 10 of the complaint, and to deliver the same to the plaintiff so that he may present it to the Treasurer of the Philippine Islands and receive payment thereon in the sum of P73.33, an amount which is alleged to be due him by the Government of the Philippine Islands." The cause was submitted to the court upon the following stipulated as facts: 1. That plaintiff is a citizen of the United States, temporarily residing in the city of Manila, Philippine Islands. 2. That defendant, William T. Nolting, is the duly appointed, qualified and acting Auditor of the Government of the Philippine Islands. 3. That on June 18, 1920, the Honorable Charles E. Yeater, then Acting GovernorGeneral of the Philippine Islands, cabled the Secretary of War of the United States, of Washington, D. C., as follows: Appointed as early as possible after June 30th, 1920, John Deering and Robert S. Clemons each to position mechanical and electrical engineer, effective the date of departure from residence, under special contracts to expire December 31st, 1921. Straight salary $4,000 per annum, with transportation from residence to the Philippine Islands and return, without civil service privileges. Advance transportation and request them to sail first available vessel. 4. That in accordance with the authority contained in the said cablegram, above cited, the Secretary of War, through the Bureau of Insular Affairs, employed plaintiff on behalf of the Government of the Philippine Islands, and under date of August 6, 1920, wrote plaintiff, confirming the agreement entered into, as follows: WAR DEPARTMENT BUREAU OF INSULAR AFFAIRS WASHINGTON, August 6, 1920. Major, R. S. CLEMONS, Air Photo Detachment, Tucson, Arizona. Sir: In accordance with specific authority contained in a cablegram from the GovernorGeneral of the Philippine Islands, dated June 18, 1920,

you are hereby provisionally appointed to the position of electrical and mechanical engineer in the Philippine Bureau of Public Works, under special contract to expire December 31, 1921, at a straight salary of $4,000 per annum. This appointment is effective as of date of departure from your residence. You will be furnished transportation from your place of residence in the United States to the Philippine Islands and return upon the completion of the contract period, but you will not be entitled to civil service privileges of leaves, etc. Upon your arrival in Manila you should report at the office of the Director of Public Works. Kindly acknowledge your acceptance of this appointment by signing the inclosed copy hereof and returning it to this bureau at once. We are unable at this time to give you definite information concerning the date of the vessel on which we will be able to secure accommodations for you, but you will be advised by wire as soon as a reservation is obtainable. Very respectfully, CHAS. C. WALCUTT, JR., Assistant to Chief of Bureau. Incl.: Copy of this letter. 5. That plaintiff received the letter set forth in the paragraph next preceding, at Tucson, Arizona, and immediately replied in writing, accepting employment by the Philippine Government under the terms of the said letter, and promptly sailed for Manila and entered upon and is still engaged in the discharge of his duties in Bureau of Public Works of the Insular Government of the Philippine Islands under the terms of the said contract. 6. That on the 1st day of February, 1921, at the rates of exchange then prevailing as fixed by the Insular Government of the Philippine Islands, the equivalent of $333.33, United States currency, in Philippine currency was P739.99, and no sum of money in Philippine currency less than P739.99 would at that time purchase $333.33 in United States currency.

7. That on or about the 1st day of February, 1921, the chief accountant of the Bureau of Public Works of the Government of the Philippine Islands tendered plaintiff a warrant on the Treasurer of the Philippine Islands in the sum of P666.66, Philippine currency, in full payment of his salary for the month of January, 1921. 8. That plaintiff declined to accept the said sum in full discharge of his January, 1921, salary, but insisted that under his contract with the Philippine Government he was and is entitled to receive each month as compensation for his services the sum of $333.33 in United States currency, or a sum in Philippine currency sufficient to enable him to purchase the sum of $333.33 in United States currency at the rates of exchange prevailing on the date of each payment, and demanded that he be paid an additional sum of P73.33, which, with the sum of P666.66, would be the equivalent at the then prevailing official rates of exchange of the sum of $333.33, United States currency. 9. That the said chief accountant of the Bureau of Public Works, notwithstanding plaintiff's demand, declined and refused to issue plaintiff a warrant for the payment of his January, 1921, salary in any sum in excess of the sum of P666.66, whereupon plaintiff accepted the said sum of P666.66, under protest, and as constituting only a partial payment of his salary for the said month of January, 1921. That plaintiff insistently continued his demands upon the chief accountant of the Bureau of Public Works for a warrant on the Treasurer of the Philippine Islands for the payment of the sum of P73.33 to complete the payment of plaintiff's salary for January, 1921, whereupon the said chief accountant, on August 8, 1921, upon such demand, issued in favor of plaintiff a warrant on the Treasurer of the Philippine Islands in words and figures as follows, to wit:

Chief Accountant, Bureau of Public Works/dp. "D. Treasury Warrant. No. 833906. THE GOVERNMENT OF THE PHILIPPINE ISLANDS. Issued under sec. 616, Adm. Code. To the TREASURER OF THE PHILIPPINE ISLANDS: MANILA, P. I., August 8, 1921. Pay to Robert S. Clemons --- or order the sum of seventy-three and 33/100 ---- pesos (P73.33). Payable from the appropriation for Bureau of Public Works. Countersigned: Not valid unless countersigned, R . R E I N O S O , C h i e f A c c o u n t a n t , B u r e a u

THE GOVERNMENT OF THE PHILIPPINE ISLANDS. TO ROBERT S. CLEMONS, C/o Design. Division, B. P. W. "Date, Aug. 8, 1921. "Appropriation, Bureau of Public Works. Aug. 8, 1921. For premium on P666.66 Jan.salary of Maj. Robert S. Clemons at the rate of 11% to cover the difference between dollars and Philippine currency. 5-E-g 1459 4

I certify that the foregoing account is correct, just and payable in accordance with law and regulations. R. REINOSO,

o f P u b l i c W o r k s . ......................................... For the Insular Auditor.

the time the payment in question was offered, Philippine currency was at a discount; that two pesos in Philippine currency was not equivalent to one "dollar" and the petitioner insisted that his salary should be paid in "dollars" or their equivalent value. The petitioner in his first proposition contends that "the use of the dollar sign '$' in a written contract executed in the United States, signifies dollars in the United States money." That proposition is admitted by the respondent. The respondent admits that the dollar sign, as found in the contract, stands for dollars in money of the United States. Both the petitioner and the respondent admit that the mark used to denote dollar has obtained general currency and conveys the idea of dollars as definitely as the word "dollars" itself; hence it is not a valid objection to a judgment when the amount thereof is expressed only in figures, preceded by the dollar mark before the word "dollars" written in the judgment. (Kelley vs. Sullivan, 201 Mass., 34; Devenney vs. Devenney, 70 Ohio St., 96; United States vs. Van Auken, 96 U.S., 366, 368.) The petitioner further contends that a contract for the payment of money, expressed in terms of the United States dollars, made in the United States, to be performed in the Philippine Islands, can be discharged only by the payment of the required amount in United States money or in Philippine pesos of an equivalent commercial value. The respondent contends that under the laws in force in the Philippine Islands a debt of the Government, payable in "dollars," may be paid in Philippine currency at the rate of two to one even though the debt grew out of a special contract which provided that the same should be paid in "dollars." It is true that the Legislature of the Philippine Islands has provided, by section 1613 of Act No. 2711, as amended by Act No. 2776, that "the Philippine silver pesos and the gold coins of the United States, at the rate of one dollar for two pesos, shall be legal tender in the Philippine Islands for all debts, public and private" . . . . To arrive at a better understanding of the purposes of the section just quoted, it might be well to trace the history of the legislation on the question of the legal tender character of Philippine currency. As early as March 2, 1903, the Congress of the United States adopted an act establishing a unit of value for the money currency of the Philippine Islands. Said Act provided, among other things, "that the unit of value in the Philippine Islands shall be the gold peso, consisting of twelve and nine-tenths grains of gold, nine-tenths fine, etc.; and the gold coins of the United States at the rate of one dollar for two pesos . . . shall be legal tender for all debts, public and private, in the Philippine Islands; that the silver Philippine peso, authorized by this Act, shall be legal tender in the Philippine Islands for all debts, public and private, unless otherwise specifically provided by contract ." Later, by an Act of the Philippine Legislature (section 1771 of Act No. 2657) it was provided that "the Philippine silver peso shall be a legal tender for all debts, public and private, unless otherwise specially provided by contract ." That provision of Act No. 2657 was carried forward and made section 1613 of Act No. 2711 as above quoted,

For premium on P666.66 Jan. salary at the rate of 11% to cover the diff. between dollars and Phil. currency. 10. That plaintiff caused the said warrant, a copy of which is set forth in the paragraph next preceding, to be presented to the defendant herein, William T. Nolting, for audit by him in his official capacity as Auditor of the Philippine Government, in accordance with the laws and regulations governing the auditing department of the Philippine Government; but the said defendant refused and still refuses to audit the said warrant or to countersign the same, upon the ground that notwithstanding the terms of plaintiff's contract with the Philippine Government, his salary is payable in Philippine currency at the rate of two pesos for each dollar in United States currency due plaintiff regardless of the real value of such pesos or the rate at which they may be exchangeable into United States currency. 11. That unless the defendant countersigns or causes to be countersigned the said warrant, hereinabove mentioned, the same will not be paid by the Treasurer of the Philippine Islands, and plaintiff will be unable to collect and receive the said sum of P73.33 from the Philippine Government, although the necessary funds for the payment thereof are available in the hands of the Insular Treasurer and may be disbursed upon the presentation of the warrant above set forth, when countersigned by the defendant. The only question presented under said stipulated facts is, may the Government of the Philippine Islands, when it enters into a contract with an officer or employee under a promise to pay his salary in "dollars," pay such salary in Philippine currency at the rate of two one if the officer or employee insists that his salary should be paid in the terms (specie) of his contract? From the stipulated facts it is seen that the Government promised to pay to the petitioner his salary in "dollars;" that the contract was made in the United States; that the Government offered to pay the petitioner in "Philippine currency" at the rate of two to one; that at

without change. The unit of value fixed by the said Act of Congress for the Philippine Islands was again fixed by section 1770 of Act No. 2657, which was carried forward and made section 1612 of Act No. 2711. The unit of monetary value in the Philippine Islands, as defined by the Act of Congress of March 2, 1903, was carried forward and adopted by the Philippine Legislature in the said Acts Nos. 2657, 2711, and 2776. Act No. 2776, however, omitted the phrase which was found in the former legislation "unless otherwise specially provided by contract." The purpose of the omission of that phrase does not clearly appear. All of the legislation both by Congress and by the Philippine Legislature, prior to Act No. 2776. limited the legal tender character of the "silver peso" to the payment of debts, public and private, when the contract did not otherwise provide. Did the omission of that provision in Act No. 2776 make the tender of the Philippine silver peso, at the rate provided for in defining the unit of value, a legal tender for the payment of debts, public and private, when the contract expressly provided for payment of other specie? Could the Legislature of the Philippine Islands or even Congress alter or change the obligation of the contract as the Jones Act of August 29, 1916, prohibit absolutely the Legislature of the Philippine Islands from adopting any legislation which would impair the "obligations of contracts." The right of the legislative department of the state to adopt legislation changing or altering the obligation of contract has been answered in the negative so many times that it scarcely merits the citation of authorities now in its support. (Casanovas vs. Hord, 8 Phil., 125; Trustees of Dartmouth College vs. Woodward, 4 Wheaton [U.S.], 518; McGee vs. Mathis, 4 Wallace, 143.) It is the utmost importance to note that neither in the cited Act of Congress nor in section 1613 of the Administrative Code, as amended, is any attempt made to determine the ratio at which debts, expressed in terms of United States money and payable in the Philippine Islands, may be discharged by the tender and payment of Philippine silver pesos. Both the Act of Congress and section 1613 of the Administrative Code provide that debts due in Philippine silver pesos may be discharged by the payment of "gold coins of the United States at the rate of one dollar for two pesos," but the converse proposition is nowhere to be found in the law. The reason for this is very plain. Congress by its own act had so limited the maximum value of the gold peso that in no event could it be worth more than half a United States gold dollar; but Congress had not itself undertaken to maintain the parity of the Philippine peso at the theoretical ratio of two for one. Congress did not provide for the establishment of a gold standard fund, or prescribe any other method by which the artificial parity between the Philippine silver peso and United States money should be maintained. It merely authorized the Government of the Philippine Islands to ". . . adopt such measures as it may deem proper, not inconsistent with said Act of July 1st, 1902, to maintain the value of the silver Philippine peso at the rate of one gold peso . . . ." The "measures" which were adopted by the Philippine Government for the purpose of maintaining the parity

of the silver peso with the theoretical gold peso and United States currency, were embodied in Act No. 938 of the Philippine Commission, adopted October 10th, 1903, the purpose of which was stated by the late Governor Ide, then Secretary of Finance and Justice of the Philippine Government, in his official report for the year 1903, as follows: The theory of the Act of Congress referred to and of the gold-standard act passed by the Commission is substantially that a goldstandard circulating medium may be maintained at a parity with gold without any large use of a gold currency by the aid of the means provided for maintaining the parity between the two currencies. The essential elements of the system are based upon the maintenance of a reasonable gold-standard fund, the rigid restriction of the amount of new coinage so as to meet only the demand of commerce, the retirement of a sufficient amount of such coinage whenever it shall become apparent that there is more in circulation than the demands of commerce require, the issuance of more of the new currency whenever it becomes apparent that there is a shortage of such currency in circulation, and the furnishing of reasonable facilities for the conversion of gold coin or other money of the United States into Philippine currency, or the reverse, as the demands of commerce may require. . . . The procedure relied upon to accomplish the purpose of maintaining the party as stated in Act No. 938 was the creation in the Insular Treasury of a "gold standard fund," which, as provided by section 7 of the Act, was to be used as follows: First. To exchange on demand at the Insular Treasury in Manila for Philippine currency offered in sums of not less than ten thousand pesos, or United States currency offered in sums of not less than five thousand dollars, drafts on the gold-standard fund deposited in the United States or elsewhere to the credit of the Insular Treasury, charging for the same a premium of three-quarters of one per centum for demand drafts and of one and one-eighth per centum for telegraphic transfers, and it is further made the duty of the Insular Treasure to direct the depositories of the funds of the Philippine Government in the United States to sell on demand, in sums of not less than ten thousand pesos, exchange against the goldstandard fund in the Philippine Islands, charging for the same a premium of threequarters of one per centum for demand drafts and of one and one-eight per centum for telegraphic transfers, rendering accounts therefor to the Insular Treasurer and Insular Auditor. But the premium charge for drafts and telegraphic transfers in this paragraph mentioned may be temporarily increased or decreased by order issued by the Secretary of Finance and Justice should the conditions at

any time existing, in his judgment, require such action. . . . It will be noted that the possibility that the peso might not be kept at all times at par was contemplated from the beginning. The last paragraph of the quoted section of Act No. 938 of the Philippine Commission required the Insular Treasurer to sell gold drafts on the United States in exchange for Philippine currency at a nominal charge of three-fourths of one per cent; but provided that this premium charge might be "temporarily increased or decreased by order issued by the Secretary of Finance and Justice should the conditions at any time existing, in his judgment, require such action." This provision has been carried through successive enactments into section 1621 of the Administrative Code, which, as amended first by Act No. 2776 and again by Act No. 2939, now provides as follows: For the purpose of maintaining the parity of the Philippine silver peso with the Philippine gold peso, and of keeping the currency equal in volume only to the demands of trade, the Insular Treasurer is hereby authorized and directed (a) To exchange on demand at the Insular Treasury in Manila for Philippine currency offered in sums of not less than ten thousand pesos or United States currency offered in sums of not less than five thousand dollars, drafts on the currency reserve fund deposited in the United States or elsewhere to the credit of the Insular Treasury, charging for the same a premium of three-quarters of one per centum for demand drafts and of one and one-eighth per centum for telegraphic transfers, and it is further made the duty of the Insular Treasurer to direct the depositories of the funds of the Philippine Government in the United States to sell on demand, in sums of not less than ten thousand pesos, exchange against the currency reserve fund in the Philippine Islands, charging or paying for the same a premium of three-quarters of one per centum for demand drafts and of one and one-eighth per centum for telegraphic transfers, rendering accounts therefor to the Insular Treasurer and Insular Auditor. But the premium rate for drafts and telegraphic transfers in this paragraph mentioned may be temporarily increased or decreased by order issued by the Secretary of Finance should the conditions at any time existing, in his judgment, require such action, and the Governor-General, upon recommendation of the Secretary of Finance, may suspend for such time as he sees fit, the sale of exchange to any individual, firm, company, or corporation, or he may require before selling any exchange, such proofs and affidavits as he deems sufficient that such exchange is needed in legitimate Philippine business and could not have been legitimately supplied by proceeds of Philippine exports. . . .

As the maintenance of the parity of the Philippine silver peso depends wholly upon the ability and willingness of the Philippine Government to accept its own money in payment for drafts payable in gold dollars in the United States, and as the normal nominal rate of exchange intended to maintain and establish that parity has not been fixed by Congress or the Philippine Legislature, but may be increased at any time by order of the Secretary of Finance of the Philippine Government, whenever existing conditions, in his judgment, require such action, it is obvious that it must have been evident from the very inception of our present system of currency that while the Philippine peso could never be worth more than the United States gold dollar, it might be worth very much less. That no doubt is the reason why Congress, while providing that debts due here in pesos might be discharged by the payment of gold coin of the United States, at the rate of one dollar for two pesos, did not provide that a debt, due here in United States gold dollars, might be paid in Philippine pesos at the rate of two pesos for one dollar. The breakdown of the gold reserve fund, and the consequent depreciation of the Philippine peso, are now matters of history. Under existing conditions, to compel a creditor to whom a debt in United States currency is owing, to accept two Philippine paper pesos in satisfaction of every gold dollar of that debt is nothing short of a discount, and pro tanto a partial repudiation of a legal obligation. In the opinion of the Acting Attorney-General, of which mentioned has been made, it is said, in referring to the cited section of the Administrative Code, as amended: This Act established two kinds of lawful money with which debts may be paid: pesos and dollars. An ordinary debtor is at liberty to pay his debt with either. This statement is undoubtedly correct; but the fact that a debtor may at his option discharge his debt either in dollars or in pesos is by no means equivalent to the statement that he may at his option pay one dollar or two pesos. The contention is that he may at his option pay one dollar in the United States gold coin or as many Philippine pesos as at the prevailing rate of exchange are the equivalent in value of one dollar. While the respondent contends, under the laws in force in the Philippine Islands, that a debt of the Government payable in dollars may be paid in Philippine currency at the rate of two to one, he overlooks the fact that section 1613 makes the Philippine silver peso and the gold coins of the United States at the rate of one dollar for two pesos, a legal tender in the Philippine Islands for all debts, public and private, and not the Philippine paper peso. If the Government can discharge a contract, payable in dollars, by tendering Philippine paper pesos, then merchants and others who contract debts payable expressly in dollars may also discharge their debts in a like manner. If such doctrine should be announced, then no manufacturer or person would take the risk of contracting obligations here for future payments. They would insist in every instance upon cash transactions. They would not run the risk of future fluctuations in the value of the paper peso. That would immediately produce an impossible condition in

commercial and business circles in the Philippine Islands. It is a well-known fact that the Government has not been willing to accept the Philippine paper peso at the rate of two to one for gold or dollars. Does it not seem at least strange that it should insist that its creditors must be satisfied with such a settlement of its debt? The issue is precisely the same as it would be had the Philippine Government executed a bond in the United States, in terms of the United States "dollars," payable in Manila, but without an express stipulation that it should be paid in gold dollars or in any particular kind of the United States money. If the Government may pay plaintiff in depreciated pesos at the nominal instead of the real par of exchange, then it might pay its dollar bond in the same way. If the Government can do this, then Manila merchants can pay their dollar drafts in depreciated pesos at the nominal par, regardless of their real value; American seamen may have their dollar pay in this port in forty-cent pesos; the United States may pay its soldiers stationed here in the cheap money, and effect a considerable saving at their expense. This, of course, would be repudiation, in part, of a just debt; but if repudiation is permissible as to the debt of the Insular Government to this plaintiff, then it is permissible, legally at least, to all other debtors, and must be endured, at least as to existing debts by all other creditors. We submit that the mere statement of the results which must flow from the recognition of the principle contended for by the respondent, and involved in a denial of the plaintiff's claim, is sufficient to refute every argument which may be advanced to support it. Plaintiff, and the hundreds of teachers and other employees of the Insular Government affected by the depreciation of the Philippine paper peso, are merely asking for fair treatment, for an honest compliance on the part of the Government with its part of the agreement. We do not doubt that, as a matter of fact, the defendant herein and every responsible official of the Philippine Government recognizes the justice of the plaintiff's contention, and that the necessity for this rule has arisen from an apprehension lest their natural tendency to do what they know to be right and fair may constitute a technical violation of the law. The contention on the part of the respondent that the Philippine paper peso is a legal tender for the payment of a contract debt, when some other specie has not been provided, is not tenable for the reason that it violates the terms of the express contracts A contract to pay a certain sum in money, without any stipulation as to the kind of money in which it shall be paid, may always be satisfied by payment of that sum in any currency which is lawful money at the place and time at which payment is to be made. That is the general rule, under both the common and the civil law. But when the contract stipulates the specie or kind or character of money for the performance of the contract, it must be satisfied in the medium of payment mentioned in the contract.

That doctrine is established and affirmed by the law in force in the Philippine Islands. The Civil Code, still in force in the Philippine Islands, by article 1170, provides expressly that "payments of debts of money shall be made in the specie stipulated and, should it not be possible to deliver such specie, in silver or gold coin legally current in Spain." Article 1754 of the Civil Code provides that the obligations of persons who borrow money shall be governed by the provisions of said article 1170 of the same Code. (Serrales vs. Esbri, 200 U. S., 103; City of San Juan vs. St. John's Gas Co., 195 U. S., 510.) Contracts are made for things, not names or sounds, and the obligation of the contract arises from its terms and the means which the law affords for its enforcement. Under the Civil Code the contract constitutes the law of the parties unless it violates some provision of law or public policy. The parties themselves make the law by which they shall be governed, and it is the business of the courts to see that the parties to a legal contract comply with its terms. A law which changes the terms of a legal contract between parties, either in the time or mode of performance, or imposes new conditions, or dispenses with those expressed, or authorizes for its satisfaction something different from that provided in its terms, is law which impairs the obligation of a contract and is therefore null and void. An interference with the terms of a legal contract by legislation is unwarranted and illegal. A contract is not fulfilled by the delivery of one thing which is different from the thing the contract provides for. Words in contracts are to be given the meaning which they were understood to have by the parties at the time of the making of the contract. There cannot exist in this jurisdiction one law for debtors and another law for creditors. The genius, the nature, and the spirit of our Government amount to a prohibition of such acts of legislation, and the general principles of law and reason forbid them. The Legislature may enjoin, permit, forbid, and punish; it may declare new crimes and establish rules of conduct for all its citizens in future cases; it may command what is right and forbid what is wrong, but it cannot change innocence into guilt and punish innocence as a crime, or violate the rights of an antecedent lawful private contract or the right of private property. (Calder vs. Bul, 3 Dallas, 388.) The fundamental maxims of a free government seem to require that the rights of personal liberty and private property should be held sacred, and that includes contractual rights. (Wilkinson vs. Leland, 2 Peters, 657.) It would be ruinous to the commercial interests of the Philippine Islands to declare that the payment of debts of money could be made in other specie than that stipulated in the contract. For all of the foregoing facts and the law, we are fully persuaded that the remedy prayed for should be, and is hereby, granted. And it is hereby ordered and decreed that the writ of mandamus be issued to the defendant herein, commanding him to countersign, or

cause to the countersigned the original of the warrant set forth in paragraph 9 of the complaint, and to deliver the same to the plaintiff so that he may present it to the Treasurer of the Philippine Islands and receive payment of said sum of P73.33 due him as averred in the complaint; and without any finding as to costs. So ordered.

25 and 32, with greater force and reason considering that said Orders contain no limitation whatsoever in point of time as regards the suspension of the enforcement and effectivity of monetary obligations.

G.R. No. L-56450 July 25, 1983 RODOLFO T. GANZON and GREGORIO L. LIRA, in his capacity as Ex-Oficio Provincial Sheriff of Iloilo, petitioners, vs. THE HONORABLE SANCHO Y. INSERTO, Presiding Judge, Branch I of the Court of First Instance of Iloilo, RANDOLPH C. TAJANLANGIT and ESTEBAN C. TAJANLANGIT, respondents. Salvador A. Cabaluna, Jr. and Jose W. Diokno for petitioners. Hannibal de los Reyes for private respondent.

RUTTER VS. ESTEBAN [93 PHIL 68; NO.L-3708; 18 MAY 1953] Monday, February 09, 2009 Posted by Coffeeholic Writes Labels: Case Digests, Political Law Facts: On August 20,1941 Rutter sold to Esteban two parcels of land situated in the Manila for P9,600 of which P4,800 were paid outright, and the balance was made payable as follows: P2,400 on or before August 7, 1942, and P2,400 on or before August 27, 1943, with interest at the rate of 7 percent per annum. To secure the payment of said balance of P4,800, a first mortgage has been constituted in favor of the plaintiff. Esteban failed to pay the two installments as agreed upon, as well as the interest that had accrued and so Rutter instituted an action to recover the balance due, the interest due and the attorney's fees. The complaint also contains a prayer for sale of the properties mortgaged in accordance with law. Esteban claims that this is a prewar obligation contracted and that he is a war sufferer, having filed his claim with the Philippine War Damage Commission for the losses he had suffered as a consequence of the last war; and that under section 2 of RA 342(moratorium law), payment of his obligation cannot be enforced until after the lapse of eight years. The complaint was dismissed. A motion for recon was made which assails the constitutionality of RA 342. Issue: Whether or Not RA 342 unconstitutional on nonimpairment clause grounds. Held: Yes. The moratorium is postponement of fulfillment of obligations decreed by the state through the medium of the courts or the legislature. Its essence is the application of police power. The economic interests of the State may justify the exercise of its continuing and dominant protective power notwithstanding interference with contracts. The question is not whether the legislative action affects contracts incidentally, or directly or indirectly, but whether the legislation is addressed to a legitimate end and the measures taken are reasonable and appropriate to that end. However based on the Presidents general SONA and consistent with what the Court believes to be as the only course dictated by justice, fairness and righteousness, declared that the continued operation and enforcement of RA 342 at the present time is unreasonable and oppressive, and should not be prolonged should be declared null and void and without effect. This holds true as regards Executive Orders Nos.

GUTIERREZ, JR., J.: May the respondent court order that a mortgage on real property be substituted by a surety bond and direct the Register of Deeds to cancel the mortgage lien annotated on the Torrens Title since the surety bond already secures the obligation earlier secured by the cancelled mortgage? The petitioner comes to us stating that the lower court acted with grave abuse of discretion and in excess of its jurisdiction in so ruling. On August 28, 1979, petitioner Rodolfo Ganzon initiated proceedings to extra-judicially foreclose a real estate mortgage executed by the private respondents in his favor. The Deed of Real Estate Mortgage executed on March 19, 1979 (Annex "A", Petition) between Randolph Tajanlangit and Esteban Tajanlangit as mortgagors on one hand and Rodolfo Ganzon as mortgagee on the other hand was to secure the payment by the Tajanlangits of a promissory note amounting to P40,000.00 in favor of Ganzon, to wit: xxx xxx xxx That whereas, the MORTGAGORS are justly indebted to the MORTGAGEE in the amount of FORTY THOUSAND (P40,000.00) PESOS, Philippine Currency, as evidenced by their promissory note for said sum, in the words and figures as follows: P40,000.00 Iloilo City March 19, 1979

For value received, we promise to pay RODOLFO T. GANZON, or order, at his residence in Molo, Iloilo City, the sum of FORTY THOUSAND (P40,000.00) PESOS, Philippine Currency, in two (2) installments as follows: P20,000.00 on or before 25 May 1979; and P20,000.00 on or before 25 August 1979. This note shall not draw interest. (Annex "A", Rollo, p. 15) The mortgage covered a parcel of residential land, Lot No. 1901-E-61-B-1- F of the subdivision plan Psd274802, located in the District of Molo, Iloilo City covered by Transfer Certificate of Title No. T-50324. Thereafter, petitioner Gregorio Lira, in his capacity as ex-oficio provincial sheriff of Iloilo served personal notice of the foreclosure proceedings on the private respondents. Lira also caused the publication in a newspaper of general circulation in the City and Province of Iloilo of a Notice of Extra Judicial Sale of Mortgaged Property, setting the sale at public auction of the mortgaged property at 10:00 a.m. on September 28, 1979, at his office at the Provincial Capitol, Iloilo City. On September 27, 1979, a day before the scheduled public auction, the private respondents filed a civil action for specific performance, damages, and prohibition with preliminary injunction against the petitioners with the respondent court. The action, docketed as CFI Case No. 13053, sought to declare the extrajudicial foreclosure proceedings and all proceedings taken in connection therewith null and void. The private respondents asked for the issuance of a writ of preliminary injunction to enjoin the petitioners from proceeding with the foreclosure and public auction sale. Acting on the urgent ex-parte motion of private respondents, the trial court issued an order enjoining the provincial sheriff from proceeding with the scheduled auction sale on September 28, 1979. On October 31, 1979, the private respondents filed an amended complaint. For purposes of the instant petition, the pertinent allegations in the amended complaint are the following: (1) On August 25, 1978, defendant, now petitioner Rodolfo Ganzon executed a deed of absolute sale of a parcel of land in favor of plaintiff, now respondent Esteban Tajanlangit. The parcel of land, subject of the sale is described as Lot No. 1900 of the Cadastral Survey of Iloilo located at Molo, Iloilo City covered by Transfer Certificate of Title No. T- 39579 with an area of 24,442 square meters, more or less; (2) The deed of real estate mortgage which is the subject of the extra-judicial proceedings initiated by defendant Rodolfo Ganzon executed by plaintiffs Esteban Tajanlangit and Randolph Tajanlangit in his favor was for the purpose of securing the payment of P40,000.00 which formed part of the purchase price of Lot No. 1900; (3) Incorporated in the aforesaid deed of absolute sale was a proviso to the effect that vendor-defendant Rodolfo Ganzon guaranteed to have the occupants of the lot to vacate the premises within 120 days after the execution thereof, to wit:

xxx xxx xxx The vendor warrants to the vendee peaceful possession of the abovementioned parcel of land and that the said vendor shall see to it that all occupants thereof at the execution of this deed shall vacate the premises within a period of one hundred twenty (120) days computed from the date of the execution of this document. (4) The aforestated guaranty was violated by defendant Ganzon since the occupants of the said lot up to the present are still within the premises of the lot; and (5) The extra-judicial foreclosure is illegal since defendant Ganzon committed a breach in his warranty and the deed of real estate mortgage does not contain any stipulation authorizing mortgagee Ganzon to extrajudicially foreclose the mortgaged property. On March 28, 1980 the petitioners filed their answer to the amended complaint. They admitted the veracity of the deed of absolute sale covering said Lot No. 1900 but denied that the real estate mortgage covering Lot No. 1901 subject of the extra-judicial foreclosure proceedings was executed by Esteban Tajanlangit and Randolph Tajanlangit in favor of Rodolfo Ganzon to secure the payment of the balance of the purchase price of Lot No. 1900. They maintained that the real estate mortgage was an entirely different transaction between the Tajanlangits and Ganzon from the sale of Lot No. 1900 embodied in the absolute deed of sale of realty. They further maintained that the extra-judicial foreclosure proceedings would be in accordance with the terms and conditions of the said mortgage. After the issues had been joined but before actual trial, the private respondents filed a "Motion For Release Of Real Estate And For The Clerk Of Court To Accept Bond Or Cash In Lieu Thereof," to which the petitioners interposed an Opposition. In an order dated November 20, 1980, the respondent court granted the respondents' motion. The order states: This is a Motion for Release of Real Estate Mortgage and for the Clerk of Court to Accept Bond or Cash in Lieu Thereof. It appears that defendant sold to Esteban Tajanlangit, Jr. Lot No. 1900 of the Cadastral Survey of Iloilo under Transfer Certificate of Title No. T39579. The document of sale provides that the vendee who is the defendant herein, promised to exclude from the premises the occupants. To secure the unpaid balance of P40,000.00, plaintiffs executed a real estate mortgage on their Lot No. 1901-4-61-B-1-1 of the subdivision plan Psd-274802. Because defendant failed to clear the occupants of Lot No. 1900, as provided for in the

contract of sale, plaintiffs withheld payment of the P40,000.00. To clear the title of Lot No. 1901-E-61-B-1-1 plaintiffs are willing to submit a bond in the sum of P80,000.00 which is double the consideration of the mortgage. WHEREFORE, in the interest of justice, considering that plaintiffs are willing and able to pay the P40,000.00 and considering further that defendant has not yet cleared the premises he sold to plaintiffs of tenants, the Register of Deeds of Iloilo City is ordered to cancel the mortgage lien on Transfer Certificate of Title No. T-50324, upon showing by the plaintiffs that they have put up the surety bond in the sum of P80,000.00. " (Annex "F", Rollo, p. 58) On January 28, 1981, the respondents after receipt of the aforesaid order, put up a surety bond in the amount of P80,000.00 with the Summa Insurance Corporation as surety (Annex " G ") for the approval of the respondent court, On February 14, 1981, the petitioners filed an Urgent Motion for Reconsideration Of The Order Dated November 20, 1980, And Opposition To The Approval of Surety Bond. The respondent court in its order dated February 24, 1981, denied the aforesaid motion. The order states: Finding the motion filed by plaintiff through counsel for approval of surety bond well taken and considering that the opposition filed by defendants does not question the validity of the surety bond itself but is anchored upon grounds that had already been passed upon by this Court in the order dated November 20, 1980, the surety bond in the amount of P80,000.00 issued by Summa Insurance Corporation is hereby approved. The defendant Rodolfo T. Ganzon, through Atty. Salvador Cabaluna, Jr., is hereby ordered to surrender to the plaintiffs, through Atty. Hannibal de los Reyes the owner's copy of TCT No. 50324, so that the mortgage annotated therein in favor of defendant Rodolfo T. Ganzon could be duly cancelled. (Annex "I", Rollo, p. 65). Hence, the instant petition. On March 18, 198 1, we issued a temporary restraining order enjoining the respondents from enforcing the orders dated November 20, 1980 and February 24, 1981 of the Court of First Instance of Iloilo, Branch I at Iloilo City.

On July 8, 1981, we gave due course to the petition and required the parties to submit their respective memoranda. As stated earlier, the issue raised before us is whether or not the trial court may order the cancellation of a mortgage lien annotated in a Torrens Certificate of Title to secure the payment of a promissory note and substitute such mortgage lien with a surety bond approved by the same court to secure the payment of the promissory note. In issuing its November 20, 1980 order, the trial court before trial on the merits of the case assumed that the real estate mortgage subject of the extra- judicial foreclosure proceedings was indeed a security for the payment of a P40,000.00 promissory note which answered for the balance of the purchase price of the sale between Ganzon as vendor and Esteban Tajanlangit was vendee of Lot No. 1900. With this assumption, the trial court concluded that Rodolfo Ganzon violated his warranty that he would clear the parcel of land of its occupants within 120 days after the execution of the deed of absolute sale of realty. On this premise and upon motion of the private respondents, the court ordered the Register of Deeds to cancel the mortgage lien annotated in the Transfer Certificate of Title covering the mortgaged parcel of land and to substitute therein a surety bond approved by the trial court. It must be noted that petitioner Rodolfo Ganzon vehemently denied the allegation that the P 40,000.00, consideration of the promissory note which resulted in the execution of the real estate mortgage to secure its payment was a balance of the purchase price of Lot No. 1900. As earlier stated, Ganzon maintained in his Answer that the real estate mortgage arose from a different transaction. At the pre-trial, what the parties admitted were the existence and due execution of the documents, including the absolute deed of sale of realty and the subject real estate mortgage. In connection with the documents, the issues per the pretrial order were "... whether or not the documents express the true intention of the parties, and whether or not they complied with the provisions of the document. (Rollo, p. 78) Hence, at that stage of the case, the trial court's order dated November 20, 1980 had no factual basis. Even on the assumption that the factual bases of the trial court's questioned orders were justified by evidence in the records the same would still not be proper. A mortgage is but an accessory contract. "The consideration of the mortgage is the same consideration of the principal contract without which it cannot exist as an independent contract." (Banco de Oro v. Bayuga, 93 SCRA 443, citing China Banking Corporation v. Lichauco, 46 Phil. 460). On the effects of a mortgage we ruled in Philippine National Bank v. Mallorca (21 SCRA 694): xxx xxx xxx

... By Article 2126 of the Civil Code, (Formerly Article 1876 of the Civil Code of Spain of 1889.) a 'mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted.' Sale or transfer cannot affect or release the mortgage. A purchaser is necessarily bound to acknowledge and respect the encumbrance to which is subject the purchased thing and which is at the disposal of the creditor 'in order that he, under the terms of the contract, may recover the amount of his credit therefrom.' (Bischoff vs. Pomar, 12 Phil. 690, 700) For, a recorded real estate is a right in rem, a lien on the property whoever its owner may be. (Altavas, The Law of Mortgages in the Philippine Islands, 1924 ed., p. 2) Because the personality of the owner is disregarded; the mortgage subsists notwithstanding changes of ownership; the last transferee is just as much of a debtor as the first one; and this, independent of whether the transferee knows or not the person of the mortgagee. (Id., at p. 6) So it is, that a mortgage lien is inseparable from the property mortgaged. All subsequent purchasers thereof must respect the mortgage, whether the transfer to them be with or without the consent of the mortgagee. For, the mortgage, until discharge, follows the property. (Pea, Registration of Land Titles and Deeds, 1961 ed., p. 225; emphasis supplied. See also V. Tolentino, Civil Code of the Philippines, 1962 ed., p. 477) Applying the principles underlying the nature of a mortgage, the real estate mortgage constituted on Lot No. 1901-E-61-B-lF of the subdivision plan Psd-27482, located in the District of Molo, Iloilo City covered by Transfer Certificate of Title No. T-50324 can not be substituted by a surety bond as ordered by the trial court. The mortgage lien in favor of Petitioner Rodolfo Ganzon is inseparable from the mortgaged property. It is a right in rem, a lien on the property. To substitute the mortgage with a surety bond would convert such lien from a right in rem, to a right in personam. This conversion can not be ordered for it would abridge the rights of the mortgagee under the mortgage contract. Moreover, the questioned orders violate the nonimpairment of contracts clause guaranteed under the Constitution. Substitution of the mortgage with a surety bond to secure the payment of the P40,000.00 note would in effect change the terms and conditions of the mortgage contract. Even before trial on the very issues affecting the contract, the respondent court has directed a deviation from its terms, diminished its efficiency, and dispensed with a primary condition.

WHEREFORE, the instant petition is hereby GRANTED. The Orders dated November 20, 1980 and February 24, 1981 of the trial court are SET ASIDE. Our March 18, 1981 Temporary Restraining Order is made PERMANENT. No costs. SO ORDERED.

NDC v Agrix G.R. Nos. 84132-33 December 10, 1990 J. Cruz Facts: Pres. Decree No. 1717, which ordered the rehabilitation of the Agrix Group of Companies to be administered mainly by the National Development Company, outlined the procedure for filing claims against the Agrix companies and created a Claims Committee to process these claims. Especially relevant to this case is Sec. 4(1) thereof providing that "all mortgages and other liens presently attaching to any of the assets of the dissolved corporations are hereby extinguished." Before this, the Agrix Marketing had executed in favor of petitioner Philippine Veterans Bank a real estate mortgage dated July 7, 1978, over three (3) parcels of land situated in Los Baos, Laguna. During the existence of the mortgage, AGRIX went bankrupt. It was for the expressed purpose of salvaging this and the other Agrix companies that the aforementioned decree was issued by President Marcos. Petitioner filed a claim with the AGRIX Claims Committee for the payment of its loan credit. In the meantime, the New Agrix, Inc. and the National Development Company, invoking Sec. 4 (1) of the decree, filed a petition with the Regional Trial Court of Calamba, Laguna, for the cancellation of the mortgage lien in favor of Philippine Veterans. For its part, the Philippine Veterans took steps to extrajudicially foreclose the mortgage, prompting Agrix to file a second case with the same court to stop the foreclosure. In the trial court, the judge annulled not only the challenged provision of Sec. 4 (1), but the entire Pres. Decree No. 1717 on the grounds that: (1) the presidential exercise of legislative power was a violation of the principle of separation of powers; (2) the law impaired the obligation of contracts; and (3) the decree violated the equal protection clause. The motion for reconsideration of this decision having been denied, the present petition was filed in the Supreme Court. The petitioners contend that the private respondent is now estopped from contesting the validity of the decree. They cited Mendoza v. Agrix Marketing, Inc.,1 where the constitutionality of Pres. Decree No. 1717 was also raised but not resolved. Moreover the claims committee dismissed the filing of the petition by Philippine Veterans on the ground of the aforementioned estoppel. The petitioners stress that in that the private respondent also invoked the provisions of Pres. Decree No. 1717 by filing a claim with the AGRIX Claims Committee. Failing to get results, it sought to foreclose

the real estate mortgage executed by AGRIX in its favor, which had been extinguished by the decree. It was only when the petitioners challenged the foreclosure on the basis of Sec. 4 (1) of the decree, that the private respondent attacked the validity of the provision. At that stage, however, consistent with Mendoza, the petitioners alleged that private respondent was already estopped from questioning the constitutionality of the decree. Issues: 1. Is estoppel applicable? 2. Is PD 1717 constitutional? Held: No. Yes. petition dismissed Ratio: 1. To rule now that the private respondent is estopped for having abided with the decree instead of boldly assailing it is to close our eyes to a cynical fact of life during the Marcos time. This case must be distinguished from Mendoza, where the petitioners, after filing their claims with the AGRIX Claims Committee, received in settlement shares of stock valued at P40,000.00 without protest or reservation. The private respondent has not been paid a single centavo on its claim, which was kept pending for more than seven years for alleged lack of supporting papers. Significantly, the validity of that claim was not questioned by the petitioner when it sought to restrain the extrajudicial foreclosure of the mortgage by the private respondent. The petitioner limited itself to the argument that the private respondent was estopped from questioning the decree because of its earlier compliance with its provisions. 2. The Court is especially disturbed by Section 4(1) of the decree, quoted above, extinguishing all mortgages and other liens attaching to the assets of AGRIX. It also notes, the restriction in Subsection (ii) thereof that all "unsecured obligations shall not bear interest" and in Subsection (iii) that "all accrued interests, penalties or charges as of date hereof pertaining to the obligations, whether secured or unsecured, shall not be recognized." These provisions must be read with the Bill of Rights, where it is clearly provided in Section 1 that "no person shall be deprived of life, liberty or property without due course of law nor shall any person be denied the equal protection of the law" and in Section 10 that "no law impairing the obligation of contracts shall be passed. Petitioners argue that property rights, like all rights, are subject to regulation under the police power for the promotion of the common welfare. Hence justification of the provision. Court- The police power is not a panacea for all constitutional maladies. Neither does its mere invocation conjure an instant and automatic justification for every act of the government depriving a person of his life, liberty or property. A legislative act based on the police power requires the concurrence of a lawful subject and a lawful method. In more familiar words, a) the interests of the public generally, as distinguished from those of a particular class, should justify the interference of the state; and b) the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals

The case is not applicable to these requirements because the interests of the public are not sufficiently involved to warrant the interference of the government with the private contracts of AGRIX. The decree speaks vaguely of the "public, particularly the small investors," who would be prejudiced if the corporation were not to be assisted. There was no record of these investors. Also, there was no public interest to be protected. The decree was to the benefit of an exclusive set of investors. The oppressiveness is patent on the face of the decree to rehabilitate Agrix. No consideration is paid for the extinction of the mortgage rights. The accrued interests and other charges are simply rejected by the decree. A mortgage lien is a property right derived from contract and so comes under the protection of the Bill of Rights. Private property cannot simply be taken by law from one person and given to another without compensation and any known public purpose. This is plain arbitrariness and is not permitted under the Constitution. And not only is there arbitrary taking, there is discrimination as well. In extinguishing the mortgage and other liens, the decree lumps the secured creditors with the unsecured creditors and places them on the same level in the prosecution of their respective claims. Under the equal protection clause, all persons or things similarly situated must be treated alike, both in the privileges conferred and the obligations imposed. Conversely, all persons or things differently situated should be treated differently. In the case at bar, persons differently situated are similarly treated, in disregard of the principle that there should be equality only among equals. One may also well wonder why AGRIX was singled out for government help, among other corporations where the stockholders or investors were also swindled. It is not clear why other companies entitled to similar concern were not similarly treated. On top of all this, New Agrix, Inc. was created by special decree notwithstanding the provision of Article XIV, Section 4 of the 1973 Constitution, then in force, that: SEC. 4. The Batasang Pambansa shall not, except by general law, provide for the formation, organization, or regulation of private corporations, unless such corporations are owned or controlled by the Government or any subdivision or instrumentality thereof. The new corporation is neither owned nor controlled by the government. The Court also feels that the decree impairs the obligation of the contract between AGRIX and the private respondent without justification. While it is true that the police power is superior to the impairment clause, the principle will apply only where the contract is so related to the public welfare that it will be considered congenitally susceptible to change by the legislature in the interest of the greater number. It can be seen that the contracts of loan and mortgage executed by AGRIX are purely private transactions and have not been shown to be affected with public interest.

G.R. No. L-57424 December 18, 1987 ROBIDANTE L. KABILING, PRUDENCIO C. CARBON, POLICARPIO S. SEGUI RAFAEL C. CARBON, ANTONIO C. BOLASOC, LOLITA C. CASTRO, SOTERO S. FERRER, PERFECTO C. MAMAAT, VICENTE M. MORTERA, et. al., petitioners, vs. THE NATIONAL HOUSING AUTHORITY AND THE REPUBLIC OF THE PHILIPPINES, respondents. RESOLUTION Facts: Petitioners' are among the landowners whose title to their respective lots have already been transferred to respondent NHA pursuant to the provisions of P.D. No. 1808. Wherein said petitioners assailed the constitutionality of P.D . No. 1808. Alleging that said P.D . No. 1808 deprives them of their property without due process of law and without just compensation and of their right to protection of the laws. They further alleged that their properties are not the proper subject of expropriation by the government. 1. Issue/s: Is P.D. No. 1808 unconstitutional due to the deprivation of due process and just compensation? Ruling: The petitioners' challenge to the constitutionality of P.D. No. 1808 cannot be sustained. The objective of the decree, namely, to resolve the land tenure problem in the Agno-Leveriza area to allow the implementation of the comprehensive development plans for this depressed community, provides the justification for the exercise of the police power of the State. The police power of the State has been described as "the most essential, insistent and illimitable of powers. It is a power inherent in the State, plenary, "suitably vague and far from precisely defined, rooted in the conception that man in organizing the state and imposing upon the government limitations to safeguard constitutional rights did not intend thereby to enable individual citizens or group of citizens to obstruct unreasonably the enactment of such salutary measure to ensure communal peace, safety, good order and welfare. Petitioners also cannot complain that they are being deprived of their property without due process of law and just compensation since Sec. 3 of P.D. No. 1808 provides for just compensation to lot owners who have fully paid their obligations to the City of Manila under their respective contracts before the issuance of the decree, and while including petitioners Robidante L. Kabiling, et al. to those have not yet claimed the compensation for their respective lots. The motion for reconsideration was DENIED.

VICENTE M. MORTERA, et. al., petitioners, vs. THE NATIONAL HOUSING AUTHORITY AND THE REPUBLIC OF THE PHILIPPINES, respondents. RESOLUTION

YAP, J.: This is a motion for reconsideration of the resolution of July 22, 1985 dismissing the amended petition for lack of merit. In the original petition, dated July 14, 1981, petitioners assailed the constitutionality of P.D. No. 1808 on the grounds that 1) it deprives them of their property without due process of law and without just compensation and of their right to equal protection of the law; and 2) it violates the constitutional prohibition against impairment of the obligation of contracts. Petitioners further alleged that their properties are not proper subject of expropriation by the government. Required to comment on the petition, the respondent National Housing Authority (NHA for brevity) filed its comment on September 4, 1981 and the respondent Republic of the Philippines on September 17, 1981. In its resolution dated September 24, 1981, the Court Resolved to consider the comment of the respondent Republic of the Philippines as Answer to the petition and required the parties to submit their respective memoranda. The memorandum of the respondent Republic of the Philippines was submitted on October 28, 1981, and that of the petitioners on January 6, 1983. Meanwhile, on February 24, 1982, petitioners filed an urgent petition to resolve their prayer for a temporary restraining order, which the Court denied on April 28, 1982. A motion for reconsideration of said denial was filed by petitioners and respondents were required to comment thereon. On May 21, 1986, petitioners filed an Amended Petition, accompanied by a motion to admit said amended petition. In the Amended Petition, the petitioners (only four of whom are original petitioners, the rest being newly impleaded) invoke as an additional ground the alleged non-publication of P.D. No. 1808. On May 29,1981, the Court admitted the Amended Petition and required respondents to comment thereon. The Court further required the Republic of the Philippines to move in the premises within ten (10) days from notice, considering the supervening events that had transpired since the filing of the respective memoranda of the petitioners and the respondent Republic of the Philippines. Respondent NHA submitted its comment on June 11, 1986, stating that contrary to petitioners' allegation in the Amended Petition, P.D. No. 1808 was published in the Official Gazette of October 4, 1982 (Volume 78, No. 40, pp. 5481-4 to 5486-8) and reiterating its arguments discussed in its comment dated September 4, 1981 on the original petition and its later comment/opposition dated March 19, 1982. On July 2, 1986, the NHA filed a manifestation by way of report on the current status of the subject property, stating inter alia 1) that all available workable areas in the subject property,

G.R. No. L-57424 December 18, 1987 ROBIDANTE L. KABILING, PRUDENCIO C. CARBON, POLICARPIO S. SEGUI RAFAEL C. CARBON, ANTONIO C. BOLASOC, LOLITA C. CASTRO, SOTERO S. FERRER, PERFECTO C. MAMAAT,

totalling approximately 3.1 hectares and consisting of 378 lots averaging 50 square meters each, have been substantially developed, except for some minor repair work still to be undertaken; 2) that the NHA has already invested P3 million representing the cost of implementing the development plans in the workable areas of the project site; 3) that in accordance with the provisions of P.D. No. 1808, the N HA has already deposited with the Philippine National Bank the amount equivalent to the cost of all subdivision lots in the project site; 4) that 76 landowners have already withdrawn the corresponding compensation for their respective lots, totalling Pl,919,402.44, while 72 landowners including the petitioners Robidante L. Kabiling, et al. have not yet claimed the compensation for their respective lots totalling Pl,581,676.52; and 5) that all titles to the homelots, except the lost title of Cresencio Deboma, which is undergoing reconstitution, have already been transferred to respondent NHA pursuant to the provision of P.D. No. 1808. On July 11, 1986, the new Solicitor General filed on behalf of the respondent Republic of the Philippines a comment and manifestation on the Amended Petition, stating that he was maintaining the position taken by his predecessor in office and reiterating the prayer that the petition be dismissed for lack of merit. In its resolution of July 22, 1986, the Court Resolved to dismiss the Amended Petition for lack of merit. A motion for reconsideration was filed by the petitioners on August 30, 1986, reiterating the grounds discussed in their memorandum and praying that the resolution dismissing the Amended Petition be reconsidered and set aside. Petitioners pray that the case be decided with " a visible disposition of its merits." After deliberation, the Court Resolved to DENY the motion for reconsideration, it appearing that no new substantial and compelling ground has been alleged which warrant reconsideration of the Court's resolution. The petitioners' challenge to the constitutionality of P.D. No. 1808 can not be sustained. The decree, entitled "DIRECTING THE CANCELLATION OF AWARDS, CONTRACTS OF SALE, TITLES OF LOTS WITHIN THE AGNOLEVERIZA TENANT ASSOCIATION SUBDIVISION AND THE RECONVEYANCE OF THE SAME TO THE GOVERNMENT UPON PAYMENT OF JUST COMPENSATION AND ORDERING THE EXPROPRIATION OF VACANT LOTS ADJACENT THERETO WHICH ARE COVERED BY TRANSFER CERTIFICATE OF TITLES NOS. 70406, 31713, 132081 and 134314 ALL SITUATED AT MALATE, MANILA FOR UPGRADING UNDER THE ZONAL IMPROVEMENT PROGRAM (ZIP) AND THE DISPOSAL OF LOTS GENERATED THEREIN TO THEIR PRESENT BONAFIDE OCCUPANTS AND OTHER QUALIFIED SQUATTER FAMILIES AND AUTHORIZING THE APPROPRIATION OF FUNDS FOR THE PURPOSE," is a valid exercise by the State of its police power. Explaining the objective of the decree, P.D. No. 1808 states: WHEREAS, the government has adopted and implemented the announced policy that slum improvement and resettlement,

otherwise known as upgrading of sites and services, is an accepted approach to meeting the housing needs and the primary strategy in dealing with slums and other blighted communities; WHEREAS, under Proclamation No. 1967, a portion of Lot 62 and Lot 76, both of Block 573 of the Cadastral Survey of Manila which were developed into the Agno-Leveriza Tenant Association (ALTA) Subdivision by the City of Manila pursuant to Republic Act No. 4145, was Identified as a depressed area for priority development (A PD) under the Zonal Improvement Program; WHEREAS, Republic Act No. 4145 did not resolve the land tenure problem in the area to the extent that nonresident awardees have to eject bonafide residents in order to acquire physical possession of their awarded lots, and an extensive displacement of structures of resident families has to be undertaken to allow each awardee resident family to have physical possession of the awarded lot; WHEREAS, there is an urgent need to resolve the land tenure problem in the Agno-Leveriza area to allow the implementation of the comprehensive development plans for this depress community as provided under the Zonal Improvement Program. The stated objective of the decree, namely, to resolve the land tenure problem in the Agno-Leveriza area to allow the implementation of the comprehensive development plans for this depressed community, provides the justification for the exercise of the police power of the State. The police power of the State has been described as "the most essential, insistent and illimitable of powers.1 It is a power inherent in the State, plenary, "suitably vague and far from precisely defined, rooted in the conception that man in organizing the state and imposing upon the government limitations to safeguard constitutional rights did not intend thereby to enable individual citizens or group of citizens to obstruct unreasonably the enactment of such salutary measure to ensure communal peace, safety, good order and welfare. 2 The objection raised by petitioners that P.D. No. 1808 impairs the obligations of contract is without merit. The constitutional guaranty of non-impairment of obligations of contract is limited by and subject to the exercise of the police power of the State in the interest of public health, safety, morals and general welfare. 3 For the same reason, petitioners can not complain that they are being deprived of their property without due process of law.

Nor can petitioners claim that their properties are being expropriated without just compensation, since Sec. 3 of P.D. No. 1808 provides for just compensation to lot owners who have fully paid their obligations to the City of Manila under their respective contracts before the issuance of the decree. However, in accordance with our decision in Export Processing Zone Authority vs. Hon. Ceferino Dulay, etc., et al., G.R. No. 59603, April 29, 1987, which declared P.D. No. 1533 unconstitutional, those lot owners who have not yet received compensation under the decree are entitled to a judicial determination of the just compensation for their lots. SO ORDERED.

5. Valentin Pacheco 6. Gonzalo Santiago 7. Salvador Santiago 8. Emiliano Pacheco 9. Santiago Pangilinan 10. Jose Sta. Ana 11. Graciano Mangalindan 12. Ricardo Balmero 13. Ireneo dela Cruz 14. Jose Mallari

9.37 5.59 13.24 9.21 25.86 21.99 17.05 17.25 16.05 11.06 10.29

" " " " " " " " " " "

G.R. No. L-20344

May 16, 1966

15. Artemio Gabriel

POTENCIANO ILUSORIO and TERESA ILUSORIO, petitioners, vs. THE COURT OF AGRARIAN RELATIONS, PASCUAL MANALILI, SANTIAGO PANGILINAN, IRENEO DE LA CRUZ, GONZALO SANTIAGO, GRACIANO MANGALINDAN, JOSE MALLARI, RICARDO BALMEO, SALVADOR SANTIAGO, VALENTIN PACHECO LEANDRO MANINGAS, EMILIANO PACHECO, TIMOTEO MAGCALAS, ARTEMIO GABRIEL and MIGUEL STA. ANA, respondents. Juan F. Gomez for petitioners. Mateo J. Lorenzo for respondents. N. G. Nostratis and R. S. Fajardo for respondent Court of Agrarian Relations. CONCEPCION, J.: Appeal from a decision of the Court of Agrarian Relations; the dispositive part of the which reads: IN VIEW OF ALL THE FOREGOING, the Court hereby holds that Section 14 of Republic Act No. 1199, as amended, is constitutional and the leasehold system of tenancy shall govern the relationship of the parties, except Nicodemus Magcalas and Miguel Santiago, starting with the 1961-1962 agri-year. Petitioners are hereby ordered to pay per agriyear to respondent-landholders rentals in the amount appearing opposite their names: RENT IN CAVANS OF PALAY 17.66 cavans 15.88 17.46 13.77 " " "

Respondent-landholders are hereby ordered to return to petitioners the following amounts of palay of the variety harvested appearing opposite their names: 22.2 cava 8 ns 12.7 3 11.6 10.1 4 15.2 6 6.01 11.9 3 11.9 2 16.6 2 10.6 5 17.2 1 17.5 8 17.7 12.8 5 13.3 8 " " " " " " " " " " " " " "

1. Miguel Sta. Ana 2. Domingo Santiago 3. Timoteo Magcalas 4. Leandro Maningas 5. Valentin Pacheco 6. Gonzalo Santiago 7. Salvador Santiago 8. Emiliano Pacheco 9. Santiago Pangilinan 10. Jose Sta. Ana 11. Graciano Mangalindan 12. Ricardo Balmeo 13. Ireneo de la Cruz 14. Jose Mallari 15. Artemio Gabriel

NAMES 1. Miguel Sta. Ana 2. Domingo Santiago 3. Timoteo Magcalas 4. Leandro Maningas

TOTAL

208.38 cavans

control them. (Ongsiako vs. Gamboa, et al., 86 Phil. 50.) Although mainly concerned with the constitutionality of Sections 9 and 50 of Republic Act No. 1199, as amended the validity of this law in its entirely was upheld in Primero vs. Court of Agrarian Relations, L10594 (May 2, 1957), in the following language: ... We find no merit in this contention. The provisions of law assailed as unconstitutional do not impair the right of the landowner to dispose or alienate his property nor prohibit him to make such transfer or alienation; they only provide that in case of transfer or in case of lease, as in the instant case, the tenancy relationship between the landowner and his tenant should be preserved in order to insure the well-being of the tenant or protect him from being unjustly dispossessed by the transferee or purchaser of the land; in other words, the purpose of the law in question is to maintain the tenants in the peaceful possession and cultivation of the land or afford them protection against unjustified dismissal from their landholdings. Republic Act 1199 is unquestionably a remedial legislation promulgated pursuant to the social justice precepts of the Constitution and in the exercise of the police power of the State to promote the common weal. It is a statute relating to public subjects within the domain of the general legislative powers of the State and involving the public rights and public welfare of the entire community affected by it. Republic Act 1199, like the previous tenancy law enacted by our law-making body, was passed by Congress in compliance with the constitutional mandate that "the promotion of social justice to insure the well-being and economic security of all the people should be the concern of the State" (Art. II, sec. 5) and that "the State shall regulate the relations between landlord and tenant ... in agriculture ... ." (Art. XIV, see. 6). (Emphasis supplied.) As regards, particularly, Section 14 of Republic Act No. 1199, as amended, which is the main object of petitioners' appeal, its validity has been repeatedly sustained by this Court in Mateo de Ramas vs. Court of Agrarian Relations, L-19555 (May 29, 1964), Macasaet vs. Court of Agrarian Relations, L-19750 (July 17, 1964), and Uichanco vs. Gutierrez, L-20275-9 (May 31, 1965). We find no cogent reason to depart from the view we have so far adhered to, which is in consonance with our consistent jurisprudence on the police power of the State. As regards the second issue, it is urged that respondent court has acted arbitrarily in fixing, in its decision, dated June 27, 1962, the rentals to be paid by respondents herein on the basis of the average harvest for the three (3) preceding agricultural years, for said rentals, petitioners maintain, should be determined from year to year. This pretense is refuted by Section 46 (a) of Republic Act No. 1199, as amended by Republic Act No. 2263, pursuant to which:

The petition with respect to Nicodemus Magcalas and Miguel Santiago is hereby dismissed. The prayer of Pascual Manalili for the determination of the rent he is to pay is likewise dismissed for lack of evidence. All other claims are dismissed. Petitioners herein, Potenciano Ilusorio and Teresa Ilusorio, are co-owners of a parcel of land situated in the Barrio of Bantug, Municipality of San Miguel, Province of Bulacan. The main respondents herein i.e. the fifteen (15) winning tenants named in the dispositive part above-quoted have for years worked on said land under the share tenancy system. Before the beginning of the agricultural year 1960-1961, they gave notice to the petitioners, in conformity with the provisions of Section 14 of Republic Act No. 1199, as amended, that they (respondents) wanted to change their tenancy contract from said system to leasehold tenancy. The Ilusorios having refused to agree thereto, said respondents and three other tenants whose claims were dismissed by the Court of Agrarian Relations instituted this proceedings, in said court, on November 16, 1960. The main defense set up by petitioners herein, as respondents in said court, is that the aforementioned Section 14 of Republic Act No. 1199, as amended, is unconstitutional, which was rejected by the lower court. Hence this appeal in which the Ilusorios maintain: (1) that said provision is unconstitutional; and (2) that the lower court had acted arbitrarily in fixing the rentals collectible by them from respondents herein at 20% of the average harvest for the agricultural years 1959-1960, 1960-1961, and 1961-1962. Petitioners assail the constitutionality of Section 14 of Republic Act No. 1199, as amended, upon the ground that it violates the freedom of contract and impairs property rights, as well as the obligation of contracts. The Court has already held, however, that: The prohibition contained in constitutional provisions against impairing the obligation of contracts is not an absolute one and is not to be read with literal exactness like a mathematical formula. Such provisions are restricted to contracts with respect property, or some object of value, and confer rights which may be asserted in a court of justice, and have no application to statute relating to public subjects within the domain of the general legislative powers of the State, and involving the public right and public welfare of the entire community affected by it. They do not prevent proper exercise by the State of its police powers. By enacting regulations reasonably necessary to secure the health, safety, morals, comfort, or general welfare of the community, even the contracts may thereby be affected; for such matter cannot be placed by contract beyond the power of the State to regulate and

The fixed consideration for the use of ricelands, shall not be more than the equivalent of twenty-five per centum in case of first class land and twenty per centum in case of second class land of the average gross produce, after deducting the same amount of palay used as seed and the cost of harvesting and threshing of the past three normal harvests. It should be noted, also, that the rental thus fixed is subject to the qualification found in a proviso to the effect: That, if the landholder introduced improvements on the farm which increase its productivity, he may demand for an, increase in the rental proportionate to the increase in production resulting from such improvements. In case of disagreement the court shall determine the reasonable increase in rental. Classification of ricelands shall be determined by productivity; first class lands being those which yield more than forty cavans per hectare and second class lands being those which yield forty cavans or less, the same to be computed upon the normal average harvest of the three preceding years.1wph1.t Wherefore, the decision appealed from is hereby affirmed, with costs against petitioners herein. It is so ordered.

from Republic Flour Mills. Plaintiff claims that the restrictions were imposed as part of its general building scheme designed for the beautification and development of the Highway Hills Subdivision which forms part of its big landed estate where commercial and industrial sites are also designated or established. Defendant maintains that the area along the western part of EDSA from Shaw Boulevard to the Pasig River, has been declared a commercial and industrial zone, per Resolution No.27 of the Municipal Council of Mandaluyong. It alleges that plaintiff completely sold and transferred to third persons all lots in said subdivision facing EDSA and the subject lots thereunder were acquired by it only on June 23, 1962 or more than 2 years after the area xxx had been declared a commercial and industrial zone. On or about May 5, 1963, defendant-appellee began construction of a building devoted to banking purposes but which it claims could also be used exclusively for residential purposes. The following day, the plaintiff demanded in writing that the construction of the commercial building be stopped but the defendant refused to comply contending that the construction was in accordance with the zoning regulations. Issues: 1. Whether Resolution No. 27 s-1960 is a valid exercise of police power. 2. Whether the said Resolution can nullify or supersede the contractual obligations assumed by defendantappellee. Held: 1. Yes. The validity of Resolution No.27 was never questioned. In fact, it was impliedly admitted in the stipulation of facts, when plaintiff-appellant did not dispute the same. Having admitted the validity of the subject resolution, plaintiff-appellant cannot now change its position on appeal. However, assuming that it is not yet too late to question the validity of the said resolution, the posture is unsustainable. Municipalities are empowered by law through Sec.3 of RA 2264 (Local Autonomy Act) to to adopt zoning and subdivision ordinances or regulations for the municipality. The law does not restrict the exercise of the power through an ordinance. Therefore, granting that Resolution No.27 is not an ordinance, it certainly is a regulatory measure within the intendment of the word regulation under the provision. An examination of Sec.12 of the same law reveals that the implied power of a municipality should be liberally construed in its favor and that any fair and reasonable doubt as to the existence of the power should be interpreted in favor of the local government and it shall be presumed to exist. An exception to the general welfare powers delegated to municipalities is when the exercise of its powers will conflict with vested rights arising from contracts. The exception does not apply to the case at bar. 2. While non-impairment of contacts is constitutionally guaranteed, the rule is not absolute since it has to be reconciled with the legitimate exercise of police power. Invariably described as the most essential, insistent and illimitable of powers and the greatest and most

Ortigas & Co., Limited Partnership vs. Feati Bank and Trust Co. Posted on October 23, 2012 G.R. No. L-24670 December 14, 1979 Facts: Plaintiff is engaged in real estate business, developing and selling lots to the public, particularly the Highway Hills Subdivision along EDSA, Mandaluyong, Rizal. On March 4, 1952, plaintiff entered into separate agreements of sale with Augusto Padilla y Angeles and Natividad Angeles over 2 parcels of land (Lots Nos. 5 and 6, Block 31, of the Highway Hills Subdivision). On July 19, 1962 the vendees transferred their rights and interests over the said lots to Emma Chavez. The plaintiff executed the corresponding deeds of sale in favor of Emma Chavez upon payment of the purchase price. Both the agreements and the deeds of sale thereafter executed contained the stipulation that the parcels of land subject of the deeds of sale shall be used by the Buyer exclusively for residential purposes. The restrictions were later annotated in the Transfer Certificates of Titles covering the said lots issued in the name of Chavez. Eventually, defendant-appellee acquired Lots No. 5 and 6 with the building restrictions also annotated in their corresponding TCTs. Lot No.5 was bought directly from Chavez free from all liens and encumbrances while Lot No.6 was acquired through a Deed of Exchange

powerful attribute of government, the exercise of police power may be judicially inquired into and corrected only if it is capricious, whimsical, unjust or unreasonable, there having been a denial of due process or a violation of any other applicable constitutional guarantee. Resolution No.27, S-1960 declaring the western part of EDSA from Shaw Boulevard to the Pasig River as an industrial or commercial zone was passed by the Municipal Council of Mandaluyong in the exercise of police power to safeguard/promote the health, safety, peace, good order and general welfare of the people in the locality. Judicial notice may be taken of the conditions prevailing in the area, especially where Lots Nos. 5 and 6 are located. EDSA supports an endless stream of traffic and the resulting activity, noise and pollution which are hardly conducive to the health, safety or welfare of the residents in its route. The Municipality of Mandaluyong was reasonably justified under the circumstances in passing the subject resolution. Thus, the state, in order to promote the general welfare, may interfere with personal liberty, with property, and with business and occupations. Persons may be subjected to all kinds of restraint and burdens, in order to secure the general comfort, health and prosperity of the state, and to this fundamental aim of the Government, the rights of the individual are subordinated.

Held: Resolution No. 27 prevails over the contract stipulations. Section 3 of RA 2264 of the Local Autonomy Act empowers a Municipal Council to adopt zoning and subdivision ordinances or regulations for the Municipality. Section 12 or RA 2264 states that implied power of the municipality should be liberally construed in its favour, to give more power to the local government in promoting economic conditions, social welfare, and material progress in the community. This is found in the General Welfare Clause of the said act. Although non-impairment of contracts is constitutionally guaranteed, it is not absolute since it has to be reconciled with the legitimate exercise of police power, e.g. the power to promote health, morals, peace, education, good order or safety and general welfare of the people. Resolution No. 27 was obviously passed in exercise of police power to safeguard health, safety, peace and order and the general welfare of the people in the locality as it would not be a conducive residential area considering the amount of traffic, pollution, and noise which results in the surrounding industrial and commercial establishments.

G.R. No. L-32312 November 25, 1983 AURELIO TIRO, as City Superintendent of Schools of Cebu City, petitioner-appellant, vs. HONORABLE AGAPITO HONTANOSAS, Judge of the Court of First Instance of Cebu, Branch XI, ZAFRA FINANCING ENTERPRISE and MARCELINO ZAFRA, respondents-appellees. Nazareno R. Pacquiao and Medudio P. Belarmino for petitioner-appellant. The Solicitor General and Amadeo Seno and Teodoro Almase for respondents-appellees.

Case Digest: Ortigas & Co. vs Feati Bank & Trust Co. Facts: On March 4, 1952, Ortigas sold Lot 5 and 6, Block 31 of the Highway Hills Subdivision at Mandaluyong to Augusto Padilla y Angeles and Natividad Angeles. The latter transferred their rights in favour of Emma Chavez, upon completion of payment a deed was executed with stipulations, one of which is that the use of the lots are to be exclusive for residential purposes only. This was annotated in the Transfer Certificate of Titles No. 101509 and 101511. Feati then acquired Lot 5 directly from Emma Chavez and Lot 6 from Republic Flour Mills. On May 5, 1963, Feati started construction of a building on both lots to be devoted for banking purposes but could also be for residential use. Ortigas sent a written demand to stop construction but Feati continued contending that the building was being constructed according to the zoning regulations as stated in Municipal Resolution 27 declaring the area along the West part of EDSA to be a commercial and industrial zone. Civil case No. 7706 was made and decided in favour of Feati. Issue: Whether or not Resolution number 27 declaring Lot 5 and 6 to be part of an industrial and commercial zone is valid considering the contract stipulation in the Transfer Certificate of Titles.

ABAD SANTOS, J,: In Civil Case No. 11616 of the defunct Court of First Instance of Cebu, Zafra Financing Enterprise sued Aurelio Tiro in his official capacity as Superintendent of Schools in Cebu City. It appears that Zafra had extended loans to public school teachers in Cebu City and the teachers concerned executed promissory notes and special powers of attorney in favor of Zafra to take and collect their salary checks from the Division Office in Cebu City of the Bureau of Public Schools. However, Tiro forbade the collection of the checks on the basis of Circular No. 21, series 1969, dated December 5, 1969, of the Director of Public Schools which reads as follows: t.hqw

PROHIBITING PAYMENT OF SALARY TO PERSONS OTHER THAN THE EMPLOYEE CONCERNED To Superintendents: 1. Quoted hereunder is Memorandum Order No. 93 dated February 5, 1968, of the Executive Office entitled "Prohibiting Payment of Salary to Any Person Other Than the Employees Concerned, Except As Provided Herein."t.hqw It has been observed that some employees delegate the collection of their salaries to attorneys-in-fact on the strength of powers of attorney or other forms of authority in favor of other persons, evidently in satisfaction of obligations contracted by them. This practice should be discouraged in view of its adverse effects on the efficiency and morale of employees whose incentive to work is necessarily impaired, since their salary or a portion thereof goes to other persons. To curb this unwholesome practice, it is hereby directed that henceforth no cashier or disbursing officer shall pay to attorneys-in-fact or other persons who may be authorized under a power of attorney or other forms of authority to collect the salary of an employee, except when the persons so designated and authorized is an immediate member of the family of the employee concerned, and in all other cases, except upon proper authorization of the Assistant Executive Secretary for Legal and Administrative Matters, with the recommendation of the Financial Assistant.

All orders or regulations inconsistent herewith are hereby revoked. This order shall take effect immediately. 2. Accordingly, it is desired that, henceforth, cashiers or disbursing officers pay the salary due any school employee or issue the treasury warrant of any teacher direct to such employee or teacher, except when authority to collect the salary or treasury warrant has been given to another person, and the person so authorized is an immediate member of the family of the employee or teacher concerned. 3. Any previous regulation issued by this Office inconsistent with this Circular is hereby revoked. Zafra sought to compel Tiro to honor the special powers of attorney; to declare Circular No. 21 to be illegal; and to make Tiro pay attorney's fees and damages. The trial court granted the prayer of Zafra but the claim for money was disallowed on the ground that he acted in good faith in implementing Circular No. 21. Tiro now seeks in this petition for review a reversal of the trial court's decision. The petition is highly impressed with merit. The core issue is whether or not Circular No. 21 is valid and enforceable and the answer is definitely in the affirmative. The salary check of a government officer or employee such as a teacher does not belong to him before it is physically delivered to him. Until that time the check belongs to the Government. Accordingly, before there is actual delivery of the check, the payee has no power over it; he cannot assign it without the consent of the Government. On this basis Circular No. 21 stands on firm legal footing. The Circular in question is authorized by relevant statutes extant when it was issued such as the following: t.hqw SEC. 79(b). Power to regulate. The Department Head shall have power to promulgate, whoever he may see fit to do so, all rules, regulations, orders, circular, memorandums, not contrary to law, necessary to regulate the proper working and harmonious and efficient administration of each and all of the offices and dependencies of his Department, and for the strict enforcement and proper execution of

the laws relative to matters under the jurisdiction of said Department; but none of said rules or orders shall prescribe penalties. All rules, regulations, orders or instructions of a general and permanent character promulgated in conformity with this section shall be numbered by each Department consecutively each year, and shall be duly published. Chiefs of Bureaus or offices may, however, be authorized to promulgate circulars of information or instructions for the government of the officers and employees in the interior administration of the business of each Bureau or office, and in such case said circulars shall not be required to be published. (Revised Administrative Code.) SEC. 21. Deductions Prohibited. No person shall make any deduction whatsoever from the salaries of teachers except under specific authority of law authorizing such deductions: Provided, however, that upon written authority executed by the teacher concerned, (1) lawful dues and fees owing to the Philippine Public School Teachers Association, and (2) premiums properly due on insurance policies, shall be deductible. (Magna Carta For Teachers, R.A. No. 4670.) Zafra's claim that the Circular impairs the obligation of contracts with the teachers is baseless. For the Circular does not prevent Zafra from collecting the loans. The Circular merely makes the Government a nonparticipant in their collection which is within its competence to do. WHEREFORE, the petition is granted; the judgment of the court a quo is hereby set aside; costs against the private respondent. SO ORDERED.1wph1.t