Pelizloy Realty Corp vs.

The Province of Benguet

LEONEN, J.:
The principal issue in this case is the scope of
authority of a province to impose an amusement tax.
This is a Petition for Review on Certiorari under Rule
45 of the Rules of Court praying that the December
10, 2007 decision of the Regional Trial Comi,- Branch
62, La Trinidad, Benguet in Civil Case No. 06-CV2232 be reversed and set aside and a new one
issued in which: ( 1) respondent
Province of Benguet is declared as having no
authority to levy amusement taxes on admission fees
for resorts, swimming pools, bath houses, hot springs,
tourist spots, and other places for recreation; (2)
Section 59, Article X of the Benguet Provincial
Revenue Code of 2005 is declared null and void; and
(3) the respondent Province of Benguet is
permanently enjoined from enforcing Section 59,
Article X of the Benguet Provincial Revenue Code of
2005.
Petitioner Pelizloy Realty Corporation (Pelizloy)
owns Palm Grove Resort, which is designed for
recreation and which has facilities like swimming
pools, a spa and function halls. It is located at Asin,
Angalisan, Municipality of Tuba, Province of Benguet.
On December 8, 2005, the Provincial Board of the
Province of Benguet approved Provincial Tax
Ordinance No. 05-107, otherwise known as the
Benguet Revenue Code of 2005 (Tax Ordinance).
Section 59, Article X of the Tax Ordinance levied a ten
percent (10%) amusement tax on gross receipts from
admissions to resorts, swimming pools, bath houses,
hot springs and tourist spots. Specifically, it provides
the following:
Article Ten: Amusement Tax on Admission
Section 59. Imposition of Tax. There is hereby levied a
tax to be collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls,
circuses, cockpits, dancing halls, dancing schools,
night or day clubs, and other places of amusement at
the rate of thirty percent (30%) of the gross receipts
from admission fees; and

A tax of ten percent (10%) of gross receipts from

admission fees for boxing, resorts, swimming pools,
bath houses, hot springs, and tourist spots is likewise
levied. [Emphasis and underscoring supplied]
Section 162 of the Tax Ordinance provided that the
Tax Ordinance shall take effect on January 1, 2006.
It was Pelizloy's position that the Tax Ordinance's
imposition of a 10% amusement tax on gross receipts
from admission fees for resorts, swimming pools, bath
houses, hot springs, and tourist spots is an ultra vires
act on the part of the Province of Benguet. Thus, it
filed an appeal/petition before the Secretary of Justice
on January 27, 2006.
The appeal/petition was filed within the thirty (30)-day
period from the effectivity of a tax ordinance allowed
by Section 187 of Republic Act No. 7160, otherwise
known as the Local Government Code (LGC).1 The
appeal/petition was docketed as MSO-OSJ Case No.
03-2006.
Under Section 187 of the LGC, the Secretary of
Justice has sixty (60) days from receipt of the appeal
to render a decision. After the lapse of which, the
aggrieved party may file appropriate proceedings with
a court of competent jurisdiction.
Treating the Secretary of Justice's failure to decide on
its appeal/petition within the sixty (60) days provided
by Section 187 of the LGC as an implied denial of
such appeal/petition, Pelizloy filed a Petition for
Declaratory Relief and Injunction before the Regional
Trial Court, Branch 62, La Trinidad, Benguet. The
petition was docketed as Civil Case No. 06-CV-2232.
Pelizloy argued that Section 59, Article X of the Tax
Ordinance imposed a percentage tax in violation of
the limitation on the taxing powers of local
government units (LGUs) under Section 133 (i) of the
LGC. Thus, it was null and void ab initio. Section 133
(i) of the LGC provides:
Section 133. Common Limitations on the Taxing
Powers of Local Government Units. - Unless
otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the
following:

(i) Percentage or value-added tax (VAT) on sales,

barters or exchanges or similar transactions on goods
or services except as otherwise provided herein
The Province of Benguet assailed the Petition for
Declaratory Relief and Injunction as an improper
remedy. It alleged that once a tax liability has
attached, the only remedy of a taxpayer is to pay the
tax and to sue for recovery after exhausting
administrative remedies.2
On substantive grounds, the Province of Benguet
argued that the phrase other places of amusement in
Section 140 (a) of the LGC3encompasses resorts,
swimming pools, bath houses, hot springs, and tourist
spots since Article 220 (b) (sic) of the LGC defines
amusement as pleasurable diversion and
entertainment x x x synonymous to relaxation,
avocation, pastime, or fun.4 However, the Province
of Benguet erroneously cited Section 220 (b) of the
LGC. Section 220 of the LGC refers to valuation of
real property for real estate tax purposes. Section 131
(b) of the LGC, the provision which actually defines
amusement, states:
Section 131. Definition of Terms. - When used in this
Title, the term:
(b) "Amusement" is a pleasurable diversion and
entertainment. It is synonymous to relaxation,
avocation, pastime, or fun
On December 10, 2007, the RTC rendered the
assailed Decision dismissing the Petition for
Declaratory Relief and Injunction for lack of merit.
Procedurally, the RTC ruled that Declaratory Relief
was a proper remedy. On the validity of Section 59,
Article X of the Tax Ordinance, the RTC noted that,
while Section 59, Article X imposes a percentage tax,
Section 133 (i) of the LGC itself allowed for
exceptions. It noted that what the LGC prohibits is not
the imposition by LGUs of percentage taxes in
general but the imposition and levy of percentage tax
on sales, barters, etc., on goods and services only.5
It further gave credence to the Province of Benguet's
assertion that resorts, swimming pools, bath houses,
hot springs, and tourist spots are encompassed by
the phrase other places of amusement in Section
140 of the LGC.

On May 21, 2008, the RTC denied Pelizloys Motion

for Reconsideration.
Aggrieved, Pelizloy filed the present petition on June
10, 2008 on pure questions of law. It assailed the
legality of Section 59, Article X of the Tax Ordinance
as being a (supposedly) prohibited percentage tax per
Section 133 (i) of the LGC.
In its Comment, the Province of Benguet, erroneously
citing Section 40 of the LGC, argued that Section 59,
Article X of the Tax Ordinance does not levy a
percentage tax because the imposition is not based
on the total gross receipts of services of the petitioner
but solely and actually limited on the gross receipts of
the admission fees collected.6 In addition, it argued
that provinces can validly impose amusement taxes
on resorts, swimming pools, bath houses, hot springs,
and tourist spots, these being amusement places.
For resolution in this petition are the following issues:
1. Whether or not Section 59, Article X of Provincial
Tax Ordinance No. 05-107, otherwise known as the
Benguet Revenue Code of 2005, levies a percentage
tax.
2. Whether or not provinces are authorized to impose
amusement taxes on admission fees to resorts,
swimming pools, bath houses, hot springs, and tourist
spots for being amusement places under the Local
Government Code.
The power to tax is an attribute of sovereignty,7 and
as such, inheres in the State. Such, however, is not
true for provinces, cities, municipalities and
barangays as they are not the sovereign;8 rather, they
are mere territorial and political subdivisions of the
Republic of the Philippines.9

ambiguity arising out of the term used in granting that

power must be resolved against the municipality.
Inferences, implications, deductions all these have
no place in the interpretation of the taxing power of a
municipal corporation.11 [Underscoring supplied]

c. not be unjust, excessive, oppressive, or

confiscatory;

Therefore, the power of a province to tax is limited to

the extent that such power is delegated to it either by
the Constitution or by statute. Section 5, Article X of
the 1987 Constitution is clear on this point:

3. The collection of local taxes, fees, charges and

other impositions shall in no case be let to any private
person.

Section 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. [Underscoring
supplied]
Per Section 5, Article X of the 1987 Constitution, the
power to tax is no longer vested exclusively on
Congress; local legislative bodies are now given
direct authority to levy taxes, fees and other
charges.12 Nevertheless, such authority is subject
to such guidelines and limitations as the Congress
may provide.13
In conformity with Section 3, Article X of the 1987
Constitution,14Congress enacted Republic Act No.
7160, otherwise known as the Local Government
Code of 1991. Book II of the LGC governs local
taxation and fiscal matters.
Relevant provisions of Book II of the LGC establish
the parameters of the taxing powers of LGUS found
below.
First, Section 130 provides for the following
fundamental principles governing the taxing powers of
LGUs:

The rule governing the taxing power of provinces,

cities, muncipalities and barangays is summarized in
Icard v. City Council of Baguio:10

1. Taxation shall be uniform in each LGU.

It is settled that a municipal corporation unlike a

sovereign state is clothed with no inherent power of
taxation. The charter or statute must plainly show an
intent to confer that power or the municipality,
cannot assume it. And the power when granted is to
be construed in strictissimi juris. Any doubt or

a. be equitable and based as far as practicable on the

taxpayer's ability to pay;

2. Taxes, fees, charges and other impositions shall:

b. be levied and collected only for public purposes;

d. not be contrary to law, public policy, national

economic policy, or in the restraint of trade.

4. The revenue collected pursuant to the provisions of

the LGC shall inure solely to the benefit of, and be
subject to the disposition by, the LGU levying the tax,
fee, charge or other imposition unless otherwise
specifically provided by the LGC.
5. Each LGU shall, as far as practicable, evolve
a progressive system of taxation.
Second, Section 133 provides for the common
limitations on the taxing powers of LGUs. Specifically,
Section 133 (i) prohibits the levy by LGUs of
percentage or value-added tax (VAT) on sales, barters
or exchanges or similar transactions on goods or
services except as otherwise provided by the LGC.
As it is Pelizloys contention that Section 59, Article X
of the Tax Ordinance levies a prohibited percentage
tax, it is crucial to understand first the concept of a
percentage tax.
In Commissioner of Internal Revenue v. Citytrust
Investment Phils. Inc.,15 the Supreme Court defined
percentage tax as a tax measured by a certain
percentage of the gross selling price or gross value in
money of goods sold, bartered or imported; or of the
gross receipts or earnings derived by any person
engaged in the sale of services. Also, Republic Act
No. 8424, otherwise known as the National Internal
Revenue Code (NIRC), in Section 125, Title V,16 lists
amusement taxes as among the (other) percentage
taxes which are levied regardless of whether or not a
taxpayer is already liable to pay value-added tax
(VAT).
Amusement taxes are fixed at a certain percentage of
the gross receipts incurred by certain specified
establishments.

Thus, applying the definition in CIR v. Citytrust and

drawing from the treatment of amusement taxes by
the NIRC, amusement taxes are percentage taxes as
correctly argued by Pelizloy.
However, provinces are not barred from levying
amusement taxes even if amusement taxes are a
form of percentage taxes. Section 133 (i) of the LGC
prohibits the levy of percentage taxes except as
otherwise provided by the LGC.
Section 140 of the LGC provides:
SECTION 140. Amusement Tax - (a) The province
may levy an amusement tax to be collected from
the proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, boxing stadia, and
other places of amusement at a rate of not more than
thirty percent (30%) of the gross receipts from
admission fees.
(b) In the case of theaters of cinemas, the tax shall
first be deducted and withheld by their proprietors,
lessees, or operators and paid to the provincial
treasurer before the gross receipts are divided
between said proprietors, lessees, or operators and
the distributors of the cinematographic films.
(c) The holding of operas, concerts, dramas, recitals,
painting and art exhibitions, flower shows, musical
programs, literary and oratorical presentations, except
pop, rock, or similar concerts shall be exempt from
the payment of the tax herein imposed.
(d) The Sangguniang Panlalawigan may prescribe the
time, manner, terms and conditions for the payment of
tax. In case of fraud or failure to pay the tax, the
Sangguniang Panlalawigan may impose such
surcharges, interests and penalties.
(e) The proceeds from the amusement tax shall be
shared equally by the province and the municipality
where such amusement places are located.
[Underscoring supplied]
Evidently, Section 140 of the LGC carves a clear
exception to the general rule in Section 133 (i).
Section 140 expressly allows for the imposition by
provinces of amusement taxes on the proprietors,
lessees, or operators of theaters, cinemas, concert

halls, circuses, boxing stadia, and other places of

amusement.

analogous to Section 140 of the LGC) providing the

following:

However, resorts, swimming pools, bath houses, hot

springs, and tourist spots are not among those places
expressly mentioned by Section 140 of the LGC as
being subject to amusement taxes. Thus, the
determination of whether amusement taxes may be
levied on admissions to resorts, swimming pools, bath
houses, hot springs, and tourist spots hinges on
whether the phrase other places of amusement
encompasses resorts, swimming pools, bath houses,
hot springs, and tourist spots.

Section 13. Amusement tax on admission. - The

province shall impose a tax on admission to be
collected from the proprietors, lessees, or operators of
theaters, cinematographs, concert halls, circuses and
other places of amusement xxx.

Under the principle of ejusdem generis, where a

general word or phrase follows an enumeration of
particular and specific words of the same class or
where the latter follow the former, the general word or
phrase is to be construed to include, or to be
restricted to persons, things or cases akin to,
resembling, or of the same kind or class as those
specifically mentioned.17
The purpose and rationale of the principle was
explained by the Court in National Power Corporation
v. Angas18 as follows:
The purpose of the rule on ejusdem generis is to give
effect to both the particular and general words, by
treating the particular words as indicating the class
and the general words as including all that is
embraced in said class, although not specifically
named by the particular words. This is justified on the
ground that if the lawmaking body intended the
general terms to be used in their unrestricted sense, it
would have not made an enumeration of particular
subjects but would have used only general terms. [2
Sutherland, Statutory Construction, 3rd ed., pp. 395400]. 19
In Philippine Basketball Association v. Court of
Appeals,20 the Supreme Court had an opportunity to
interpret a starkly similar provision or the counterpart
provision of Section 140 of the LGC in the Local Tax
Code then in effect. Petitioner Philippine Basketball
Association (PBA) contended that it was subject to
the imposition by LGUs of amusement taxes (as
opposed to amusement taxes imposed by the national
government). In support of its contentions, it cited
Section 13 of Presidential Decree No. 231, otherwise
known as the Local Tax Code of 1973, (which is

Applying the principle of ejusdem generis, the

Supreme Court rejected PBA's assertions and noted
that:
[I]n determining the meaning of the phrase 'other
places of amusement', one must refer to the prior
enumeration of theaters, cinematographs, concert
halls and circuses withartistic expression as their
common characteristic. Professional basketball
games do not fall under the same category as
theaters, cinematographs, concert halls and circuses
as the latter basically belong to artistic forms of
entertainment while the former caters to sports and
gaming.21 [Underscoring supplied]
However, even as the phrase other places of
amusement was already clarified in Philippine
Basketball Association, Section 140 of the LGC adds
to the enumeration of 'places of amusement' which
may properly be subject to amusement tax. Section
140 specifically mentions 'boxing stadia' in addition to
theaters, cinematographs, concert halls [and]
circuses which were already mentioned in PD No.
231. Also, 'artistic expression' as a characteristic does
not pertain to 'boxing stadia'.
In the present case, the Court need not embark on a
laborious effort at statutory construction. Section 131
(c) of the LGC already provides a clear definition of
amusement places:
Section 131. Definition of Terms. - When used in this
Title, the term:
(c) "Amusement Places" include theaters, cinemas,
concert halls, circuses and other places of
amusement where one seeks admission to entertain
oneself by seeing or viewing the show or
performances[Underscoring supplied]
Indeed, theaters, cinemas, concert halls, circuses,
and boxing stadia are bound by a common typifying

characteristic in that they are all venues primarily for

the staging of spectacles or the holding of public
shows, exhibitions, performances, and other events
meant to be viewed by an audience. Accordingly,
other places of amusement must be interpreted in
light of the typifying characteristic of being venues
where one seeks admission to entertain oneself by
seeing or viewing the show or performances or being
venues primarily used to stage spectacles or hold
public shows, exhibitions, performances, and other
events meant to be viewed by an audience.
As defined in The New Oxford American Dictionary,22
show means a spectacle or display of something,
typically an impressive one;23 while performance
means an act of staging or presenting a play, a
concert, or other form of entertainment.24 As such,
the ordinary definitions of the words show and
performance denote not only visual engagement
(i.e., the seeing or viewing of things) but also active
doing (e.g., displaying, staging r presenting) such that
actions are manifested to, and (correspondingly)
perceived by an audience.
Considering these, it is clear that resorts, swimming
pools, bath houses, hot springs and tourist spots
cannot be considered venues primarily where one
seeks admission to entertain oneself by seeing or
viewing the show or performances. While it is true
that they may be venues where people are visually
engaged, they are not primarily venues for their
proprietors or operators to actively display, stage or
present shows and/or performances.
Thus, resorts, swimming pools, bath houses, hot
springs and tourist spots do not belong to the same
category or class as theaters, cinemas, concert halls,
circuses, and boxing stadia. It follows that they cannot
be considered as among the other places of
amusement contemplated by Section 140 of the LGC
and which may properly be subject to amusement
taxes.
At this juncture, it is helpful to recall this Courts
pronouncements in Icard:
[T]he power [to tax] when granted [to a province] is to
be construed in strictissimi juris. Any doubt or
ambiguity arising out of the term used in granting that
power must be resolved against the [province].
Inferences, implications, deductions all these have

no place in the interpretation of the taxing power of a

[province].25
In this case, the definition of' amusement places' in
Section 131 (c) of the LGC is a clear basis for
determining what constitutes the 'other places of
amusement' which may properly be subject to
amusement tax impositions by provinces. There is no
reason for going beyond such basis. To do otherwise
would be to countenance an arbitrary
interpretation/application of a tax law and to inflict an
injustice on unassuming taxpayers.
The previous pronouncements notwithstanding, it will
be noted that it is only the second paragraph of
Section 59, Article X of the Tax Ordinance which
imposes amusement taxes on "resorts, swimming
pools, bath houses, hot springs, and tourist spots".
The first paragraph of Section 59, Article X of the Tax
Ordinance refers to "theaters, cinemas, concert halls,
cir-cuses, cockpits, dancing halls, dancing schools,
night or day clubs, and other places of amusement".
In any case, the issues raised by Pelizloy are
pertinent only with respect to the second paragraph of
Section 59, Article X of the Tax Ordinance. Thus,
there is no reason to invalidate the first paragraph of
Section 59, Article X of the Tax Ordinanc.e. Any
declaration as to the Province of Benguet's lack of
authority to levy amusement taxes must be limited to
admission fees to resorts, swimming pools, bath
houses, hot springs and tourist spots.
Moreover, the second paragraph of Section 59, Article
X of the Tax Ordinance is not limited to resorts,
swimming pools, bath houses, hot springs, and tourist
spots but also covers admission fees for boxing. As
Section 140 of the LGC allows for the imposition of
amusement taxes on gross receipts from admission
fees to boxing stadia, Section 59, Article X of the Tax
Ordinance must be sustained with respect to
admission fees from boxing stadia.
WHEREFORE, the petition for review on certiorari
is GRANTED. The second paragraph of Section 59,
Article X of the Benguet Provincial Revenue Code of
2005, in so far as it imposes amusement taxes on
admission fees to resorts, swimming pools, bath
houses, hot springs and tourist spots, is declared null
and void. Respondent Province of Benguet is
permanently enjoined from enforcing the second
paragraph of Section 59, Article X of the Benguet

Provincial Revenue Code of 2005 with respect to

resorts, swimming pools, bath houses, hot springs
and tourist spots.
Gamboa vs. Teves
CARPIO, J.:
This resolves the motions for reconsideration of
the 28 June 2011 Decision filed by (1) the
Philippine Stock Exchange's (PSE) President, 1
(2) Manuel V. Pangilinan (Pangilinan),2 (3)
Napoleon L. Nazareno (Nazareno ),3 and ( 4) the
Securities and Exchange Commission (SEC)"~
(collectively, movants ).
The Office of the Solicitor General (OSG) initially
filed a motion for reconsideration on behalfofthe
SEC,5 assailing the 28 June 2011 Decision.
However, it subsequently filed a Consolidated
Comment on behalf of the State,6 declaring
expressly that it agrees with the Court's definition
of the term "capital" in Section 11, Article XII of the
Constitution. During the Oral Arguments on 26 June
2012, the OSG reiterated its position consistent with
the Court's 28 June 2011 Decision.
We deny the motions for reconsideration.
I.
Far-reaching implications of the legal issue justify
treatment of petition for declaratory relief as one for
mandamus.
As we emphatically stated in the 28 June 2011
Decision, the interpretation of the term "capital"
in Section 11, Article XII of the Constitution has
far-reaching implications to the national economy. In
fact, a resolution of this issue will determine whether
Filipinos are masters, or second-class citizens, in their
own country. What is at stake here is whether
Filipinos or foreigners will have effective control of the
Philippine national economy. Indeed, if ever there
is a legal issue that has far-reaching implications
to the entire nation, and to future generations of
Filipinos, it is the threshold legal issue presented in
this case.
Contrary to Pangilinan's narrow view, the serious
economic consequences resulting in the

interpretation of the term "capital" in Section 11,

Article XII of the Constitution undoubtedly
demand an immediate adjudication of this issue.
Simply put, the far-reaching implications of this issue
justify the treatment of the petition as one for
mandamus.7

adopted this particular definition in its numerous

opinions. Movants point out that with the 28 June
2011 Decision, the Court in effect introduced a
"new" definition or "midstream redefinition"9 of the
term "capital" in Section 11, Article XII of the
Constitution.

voting stock, although when the non-voting stock is

added, Filipinos would own 60% of the combined
voting and non-voting stock. This ownership
structure is remarkably similar to the current
ownership structure of PLDT. Minister Mendoza
ruled:

In Luzon Stevedoring Corp. v. Anti-Dummy

Board,8 the Court deemed it wise and expedient to
resolve the case although the petition for declaratory
relief could be outrightly dismissed for being
procedurally defective. There, appellant admittedly
had already committed a breach of the Public Service
Act in relation to the Anti-Dummy Law since it had
been employing nonAmerican aliens long before the
decision in a prior similar case. However, the main
issue in Luzon Stevedoring was of transcendental
importance, involving the exercise or enjoyment
of rights, franchises, privileges, properties and
businesses which only Filipinos and qualified
corporations could exercise or enjoy under the
Constitution and the statutes. Moreover, the same
issue could be raised by appellant in an appropriate
action. Thus, in Luzon Stevedoring the Court deemed
it necessary to finally dispose of the case for the
guidance of all concerned, despite the apparent
procedural flaw in the petition.

This is egregious error.

Thus, the Filipino group still owns sixty (60%) of the

entire subscribed capital stock (common and
preferred) while the Japanese investors control sixty
percent (60%) of the common (voting) shares.

The circumstances surrounding the present case,

such as the supposed procedural defect of the
petition and the pivotal legal issue involved,
resemble those in Luzon Stevedoring.
Consequently, in the interest of substantial justice
and faithful adherence to the Constitution, we opted to
resolve this case for the guidance of the public and all
concerned parties.
II.
No change of any long-standing rule;
thus, no redefinition of the term "capital."
Movants contend that the term "capital" in Section 11,
Article XII of the Constitution has long been settled
and defined to refer to the total outstanding
shares of stock, whether voting or non-voting. In fact,
movants claim that the SEC, which is the
administrative agency tasked to enforce the 60-40
ownership requirement in favor of Filipino citizens in
the Constitution and various statutes, has consistently

For more than 75 years since the 1935 Constitution,

the Court has not interpreted or defined the term
"capital" found in various economic provisions of
the 1935, 1973 and 1987 Constitutions. There has
never been a judicial precedent interpreting the term
"capital" in the 1935, 1973 and 1987 Constitutions,
until now. Hence, it is patently wrong and utterly
baseless to claim that the Court in defining the term
"capital" in its 28 June 2011 Decision modified,
reversed, or set aside the purported long-standing
definition of the term "capital," which supposedly
refers to the total outstanding shares of stock,
whether voting or non-voting. To repeat, until the
present case there has never been a Court ruling
categorically defining the term "capital" found in the
various economic provisions of the 1935, 1973 and
1987 Philippine Constitutions.
The opinions of the SEC, as well as of the
Department of Justice (DOJ), on the definition of the
term "capital" as referring to both voting and nonvoting shares (combined total of common and
preferred shares) are, in the first place, conflicting and
inconsistent. There is no basis whatsoever to the
claim that the SEC and the DOJ have consistently
and uniformly adopted a definition of the term "capital"
contrary to the definition that this Court adopted in its
28 June 2011 Decision.
In DOJ Opinion No. 130, s. 1985,10 dated 7 October
1985, the scope of the term "capital" in Section 9,
Article XIV of the 1973 Constitution was raised, that
is, whether the term "capital" includes "both
preferred and common stocks." The issue was
raised in relation to a stock-swap transaction
between a Filipino and a Japanese corporation, both
stockholders of a domestic corporation that owned
lands in the Philippines. Then Minister of Justice
Estelito P. Mendoza ruled that the resulting ownership
structure of the corporation would be unconstitutional
because 60% of the voting stock would be owned by
Japanese while Filipinos would own only 40% of the

It is your position that x x x since Section 9, Article

XIV of the Constitution uses the word "capital," which
is construed "to include both preferred and common
shares" and "that where the law does not distinguish,
the courts shall not distinguish."
In light of the foregoing jurisprudence, it is my opinion
that the stock-swap transaction in question may
not be constitutionally upheld. While it may be
ordinary corporate practice to classify corporate
shares into common voting shares and preferred nonvoting shares, any arrangement which attempts to
defeat the constitutional purpose should be
eschewed. Thus, the resultant equity arrangement
which would place ownership of 60 of the common
(voting) shares in the Japanese group, while retaining
60% of the total percentage of common and preferred
shares in Filipino hands would amount to
circumvention of the principle of control by Philippine
stockholders that is implicit in the 60% Philippine
nationality requirement in the
Constitution. (Emphasis supplied)
In short, Minister Mendoza categorically rejected the
theory that the term "capital" in Section 9, Article XIV
of the 1973 Constitution includes "both preferred and
common stocks" treated as the same class of shares
regardless of differences in voting rights and
privileges. Minister Mendoza stressed that the 60-40
ownership requirement in favor of Filipino
citizens in the Constitution is not complied with
unless the corporation "satisfies the criterion of
beneficial ownership" and that in applying the
same "the primordial consideration is situs of
control."
On the other hand, in Opinion No. 23-10 dated 18
August 2010, addressed to Castillo Laman Tan
Pantaleon & San Jose, then SEC General Counsel

Vernette G. Umali-Paco applied the Voting Control

Test, that is, using only the voting stock to
determine whether a corporation is a Philippine
national. The Opinion states:

office of the Commission, an individual Commissioner

or staff member of the Commission except its review
or appellate authority and its power to adopt, alter
and supplement any rule or regulation.

Can the Commission En Banc delegate this function

to an SEC officer?

Applying the foregoing, particularly the Control Test,

MLRC is deemed as a Philippine national because:
(1) sixty percent (60%) of its outstanding capital
stock entitled to vote is owned by a Philippine
national, the Trustee; and (2) at least sixty percent
(60%) of the ERF will accrue to the benefit of
Philippine nationals. Still pursuant to the Control
Test, MLRC's investment in 60% of BFDC's
outstanding capital stock entitled to vote shall be
deemed as of Philippine nationality, thereby
qualifying BFDC to own private land.

The Commission may review upon its own initiative or

upon the petition of any interested party any action of
any department or office, individual Commissioner, or
staff member of the Commission.

Yes, Your Honor, we have delegated it to the General

Counsel.

SEC. 5. Powers and Functions of the Commission.5.1. The Commission shall act with transparency
and shall have the powers and functions provided
by this Code, Presidential Decree No. 902-A, the
Corporation Code, the Investment Houses Law, the
Financing Company Act and other existing laws.
Pursuant thereto the Commission shall have, among
others, the following powers and functions:

It can be delegated. What cannot be delegated by

the Commission En Banc to a commissioner or an
individual employee of the Commission?

Further, under, and for purposes of, the FIA, MLRC

and BFDC are both Philippine nationals, considering
that: (1) sixty percent (60%) of their respective
outstanding capital stock entitled to vote is owned
by a Philippine national (i.e., by the Trustee, in the
case of MLRC; and by MLRC, in the case of BFDC);
and (2) at least 60% of their respective board of
directors are Filipino citizens. (Boldfacing and
italicization supplied)
Clearly, these DOJ and SEC opinions are compatible
with the Court's interpretation of the 60-40
ownership requirement in favor of Filipino citizens
mandated by the Constitution for certain economic
activities. At the same time, these opinions
highlight the conflicting, contradictory, and
inconsistent positions taken by the DOJ and the SEC
on the definition of the term "capital" found in the
economic provisions of the Constitution.
The opinions issued by SEC legal officers do not have
the force and effect of SEC rules and regulations
because only the SEC en banc can adopt rules and
regulations. As expressly provided in Section 4.6 of
the Securities Regulation Code,12 the SEC cannot
delegate to any of its individual Commissioner or
staff the power to adopt any rule or regulation.
Further, under Section 5.1 of the same Code, it is the
SEC as a collegial body, and not any of its legal
officers, that is empowered to issue opinions and
approve rules and regulations. Thus:
4.6. The Commission may, for purposes of efficiency,
delegate any of its functions to any department or

(g) Prepare, approve, amend or repeal rules,

regulations and orders, and issue opinions and
provide guidance on and supervise compliance with
such rules, regulations and orders;
Thus, the act of the individual Commissioners or legal
officers of the SEC in issuing opinions that have the
effect of SEC rules or regulations is ultra vires. Under
Sections 4.6 and 5.1(g) of the Code, only the SEC en
banc can "issue opinions" that have the force and
effect of rules or regulations. Section 4.6 of the
Code bars the SEC en banc from delegating to any
individual Commissioner or staff the power to
adopt rules or regulations. In short, any opinion of
individual Commissioners or SEC legal officers does
not constitute a rule or regulation of the SEC.
The SEC admits during the Oral Arguments that only
the SEC en banc, and not any of its individual
commissioners or legal staff, is empowered to
issue opinions which have the same binding effect as
SEC rules and regulations, thus:
JUSTICE CARPIO:
So, under the law, it is the Commission En Banc that
can issue an SEC Opinion, correct?
COMMISSIONER GAITE:13
That's correct, Your Honor.
JUSTICE CARPIO:

COMMISSIONER GAITE:

JUSTICE CARPIO:

COMMISSIONER GAITE:
Novel opinions that [have] to be decided by the En
Banc ...
JUSTICE CARPIO:
What cannot be delegated, among others, is the
power to adopt or amend rules and regulations,
correct?
COMMISSIONER GAITE:
That's correct, Your Honor.
JUSTICE CARPIO:
So, you combine the two (2), the SEC officer, if
delegated that power, can issue an opinion but that
opinion does not constitute a rule or regulation,
correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
So, all of these opinions that you mentioned they are
not rules and regulations, correct?
COMMISSIONER GAITE:
They are not rules and regulations.
JUSTICE CARPIO:

If they are not rules and regulations, they apply

only to that particular situation and will not constitute
a precedent, correct?
COMMISSIONER GAITE:
Yes, Your Honor.14
(Emphasis supplied)
Significantly, the SEC en banc, which is the collegial
body statutorily empowered to issue rules and
opinions on behalf of the SEC, has adopted even the
Grandfather Rule in determining compliance with
the 60-40 ownership requirement in favor of
Filipino citizens mandated by the Constitution for
certain economic activities. This prevailing SEC ruling,
which the SEC correctly adopted to thwart any
circumvention of the required Filipino "ownership
and control," is laid down in the 25 March 2010 SEC
en banc ruling in Redmont Consolidated Mines,
Corp. v. McArthur Mining, Inc., et al.,15 to wit:
The avowed purpose of the Constitution is to place in
the hands of Filipinos the exploitation of our natural
resources. Necessarily, therefore, the Rule
interpreting the constitutional provision should not
diminish that right through the legal fiction of
corporate ownership and control. But the
constitutional provision, as interpreted and practiced
via the 1967 SEC Rules, has favored foreigners
contrary to the command of the Constitution. Hence,
the Grandfather Rule must be applied to
accurately determine the actual participation, both
direct and indirect, of foreigners in a corporation
engaged in a nationalized activity or business.
Compliance with the constitutional limitation(s) on
engaging in nationalized activities must be
determined by ascertaining if 60% of the investing
corporation's outstanding capital stock is owned by
"Filipino citizens", or as interpreted, by natural or
individual Filipino citizens. If such investing
corporation is in turn owned to some extent by
another investing corporation, the same process must
be observed. One must not stop until the citizenships
of the individual or natural stockholders of layer after
layer of investing corporations have been
established, the very essence of the Grandfather
Rule.

Lastly, it was the intent of the framers of the 1987

Constitution to adopt the Grandfather Rule. In one of
the discussions on what is now Article XII of the
present Constitution, the framers made the following
exchange:
MR. NOLLEDO. In Sections 3, 9 and 15, the
Committee stated local or Filipino equity and foreign
equity; namely, 60-40 in Section 3, 60-40 in Section 9,
and 2/3-1/3 in Section 15.
MR. VILLEGAS. That is right.
MR. NOLLEDO. In teaching law, we are always faced
with the question: 'Where do we base the equity
requirement, is it on the authorized capital stock, on
the subscribed capital stock, or on the paid-up capital
stock of a corporation'? Will the Committee please
enlighten me on this?
MR. VILLEGAS. We have just had a long discussion
with the members of the team from the UP Law
Center who provided us a draft. The phrase that is
contained here which we adopted from the UP draft
is '60 percent of voting stock.'
MR. NOLLEDO. That must be based on the
subscribed capital stock, because unless declared
delinquent, unpaid capital stock shall be entitled to
vote.
MR. VILLEGAS. That is right.

MR. NOLLEDO. Thank you. With respect to an

investment by one corporation in another corporation,
say, a corporation with 60-40 percent equity invests in
another corporation which is permitted by the
Corporation Code, does the Committee adopt the
grandfather rule?
MR. VILLEGAS. Yes, that is the understanding of the
Committee.
MR. NOLLEDO. Therefore, we need additional
Filipino capital?
MR. VILLEGAS. Yes. (Boldfacing and underscoring
supplied; italicization in the original)

This SEC en banc ruling conforms to our 28 June

2011 Decision that the 60-40 ownership
requirement in favor of Filipino citizens in the
Constitution to engage in certain economic activities
applies not only to voting control of the corporation,
but also to the beneficial ownership of the corporation.
Thus, in our 28 June 2011 Decision we stated:
Mere legal title is insufficient to meet the 60 percent
Filipinoowned "capital" required in the Constitution.
Full beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60 percent of
the voting rights, is required. The legal and beneficial
ownership of 60 percent of the outstanding capital
stock must rest in the hands of Filipino nationals
in accordance with the constitutional mandate.
Otherwise, the corporation is "considered as nonPhilippine national[s]." (Emphasis supplied)
Both the Voting Control Test and the Beneficial
Ownership Test must be applied to determine whether
a corporation is a "Philippine national."
The interpretation by legal officers of the SEC of the
term "capital," embodied in various opinions which
respondents relied upon, is merely preliminary and
an opinion only of such officers. To repeat, any
such opinion does not constitute an SEC rule or
regulation. In fact, many of these opinions contain a
disclaimer which expressly states: "x x x the
foregoing opinion is based solely on facts disclosed in
your query and relevant only to the particular issue
raised therein and shall not be used in the nature of a
standing rule binding upon the Commission in other
cases whether of similar or dissimilar
circumstances."16 Thus, the opinions clearly make a
caveat that they do not constitute binding precedents
on any one, not even on the SEC itself.
Likewise, the opinions of the SEC en banc, as well as
of the DOJ, interpreting the law are neither conclusive
nor controlling and thus, do not bind the Court. It is
hornbook doctrine that any interpretation of the law
that administrative or quasi-judicial agencies make is
only preliminary, never conclusive on the Court. The
power to make a final interpretation of the law, in this
case the term "capital" in Section 11, Article XII of the
1987 Constitution, lies with this Court, not with any
other government entity.

In his motion for reconsideration, the PSE President

cites the cases of National Telecommunications
Commission v. Court of Appeals17 and Philippine
Long Distance Telephone Company v. National
Telecommunications Commission18 in arguing that
the Court has alreadydefined the term "capital" in
Section 11, Article XII of the 1987 Constitution.19
The PSE President is grossly mistaken. In both cases
of National Telecommunications v. Court of
Appeals20 and Philippine Long Distance Telephone
Company v. National Telecommunications
Commission,21 the Court did not define the term
"capital" as found in Section 11, Article XII of the 1987
Constitution. In fact, these two cases never
mentioned, discussed or cited Section 11, Article XII
of the Constitution or any of its economic provisions,
and thus cannot serve as precedent in the
interpretation of Section 11, Article XII of the
Constitution. These two cases dealt solely with the
determination of the correct regulatory fees under
Section 40(e) and (f) of the Public Service Act, to wit:
(e) For annual reimbursement of the expenses
incurred by the Commission in the supervision of
other public services and/or in the regulation or
fixing of their rates, twenty centavos for each one
hundred pesos or fraction thereof, of the capital stock
subscribed or paid, or if no shares have been issued,
of the capital invested, or of the property and
equipment whichever is higher.
(f) For the issue or increase of capital stock, twenty
centavos for each one hundred pesos or fraction
thereof, of the increased capital. (Emphasis supplied)
The Court's interpretation in these two cases of the
terms "capital stock subscribed or paid," "capital
stock" and "capital" does not pertain to, and cannot
control, the definition of the term "capital" as used in
Section 11, Article XII of the Constitution, or any of the
economic provisions of the Constitution where the
term "capital" is found. The definition of the term
"capital" found in the Constitution must not be taken
out of context. A careful reading of these two
cases reveals that the terms "capital stock
subscribed or paid," "capital stock" and "capital" were
defined solely to determine the basis for computing
the supervision and regulation fees under Section
40(e) and (f) of the Public Service Act.

III.
Filipinization of Public Utilities
The Preamble of the 1987 Constitution, as the
prologue of the supreme law of the land, embodies
the ideals that the Constitution intends to
achieve.22 The Preamble reads:
We, the sovereign Filipino people, imploring the aid of
Almighty God, in order to build a just and
humane society, and establish a Government that
shall embody our ideals and aspirations, promote the
common good, conserve and develop our
patrimony, and secure to ourselves and our
posterity, the blessings of independence and
democracy under the rule of law and a regime of
truth, justice, freedom, love, equality, and peace,
do ordain and promulgate this Constitution.
(Emphasis supplied)
Consistent with these ideals, Section 19, Article II
of the 1987 Constitution declares as State policy the
development of a national economy "effectively
controlled" by Filipinos:

The State shall regulate and exercise authority

over foreign investments within its national
jurisdiction and in accordance with its national
goals and priorities.23
Under Section 10, Article XII of the 1987 Constitution,
Congress may "reserve to citizens of the Philippines
or to corporations or associations at least sixty per
centum of whose capital is owned by such citizens, or
such higher percentage as Congress may
prescribe, certain areas of investments." Thus, in
numerous laws Congress has reserved certain areas
of investments to Filipino citizens or to corporations at
least sixty percent of the "capital" of which is owned
by Filipino citizens. Some of these laws are: (1)
Regulation of Award of Government Contracts or R.A.
No. 5183; (2) Philippine Inventors Incentives Act or
R.A. No. 3850; (3) Magna Carta for Micro, Small and
Medium Enterprises or R.A. No. 6977; (4) Philippine
Overseas Shipping Development Act or R.A. No.
7471; (5) Domestic Shipping Development Act of
2004 or R.A. No. 9295; (6) Philippine Technology
Transfer Act of 2009 or R.A. No. 10055; and (7) Ship
Mortgage Decree or P.D. No. 1521.
With respect to public utilities, the 1987
Constitution specifically ordains:

Section 19. The State shall develop a self-reliant and

independent national
economy effectively controlled by Filipinos.
Fortifying the State policy of a Filipino-controlled
economy, the Constitution decrees:
Section 10. The Congress shall, upon
recommendation of the economic and planning
agency, when the national interest dictates,
reserve to citizens of the Philippines or to
corporations or associations at least sixty per centum
of whose capital is owned by such citizens, or such
higher percentage as Congress may prescribe,
certain areas of investments. The Congress shall
enact measures that will encourage the formation
and operation of enterprises whose capital is wholly
owned by Filipinos.
In the grant of rights, privileges, and concessions
covering the national economy and patrimony, the
State shall give preference to qualified Filipinos.

Section 11. No franchise, certificate, or any other

form of authorization for the operation of a public
utility shall be granted except to citizens of the
Philippines or to corporations or
associations organized under the laws of the
Philippines, at least sixty per centum of whose capital
is owned by such citizens; nor shall such franchise,
certificate, or authorization be exclusive in character
or for a longer period than fifty years. Neither shall
any such franchise or right be granted except under
the condition that it shall be subject to amendment,
alteration, or repeal by the Congress when the
common good so requires. The State shall
encourage equity participation in public utilities
by the general public. The participation of foreign
investors in the governing body of any public utility
enterprise shall be limited to their proportionate share
in its capital, and all the executive and managing
officers of such corporation or association must be
citizens of the Philippines. (Emphasis supplied)
This provision, which mandates the Filipinization of
public utilities, requires that any form of authorization

for the operation of public utilities shall be granted

only to "citizens of the Philippines or to corporations
or associations organized under the laws of the
Philippines at least sixty per centum of whose capital
is owned by such citizens." "The provision is [an
express] recognition of the sensitive and vital position
of public utilities both in the national economy and for
national security."24
The 1987 Constitution reserves the ownership and
operation of public utilities exclusively to (1) Filipino
citizens, or (2) corporations or associations at
least 60 percent of whose "capital" is owned by
Filipino citizens. Hence, in the case of individuals,
only Filipino citizens can validly own and operate a
public utility. In the case of corporations or
associations, at least 60 percent of their "capital" must
be owned by Filipino citizens. In other words, under
Section 11, Article XII of the 1987 Constitution, to own
and operate a public utility a corporation's capital
must at least be 60 percent owned by Philippine
nationals
IV.
Definition of "Philippine National"
Pursuant to the express mandate of Section 11,
Article XII of the 1987 Constitution, Congress
enacted Republic Act No. 7042 or the Foreign
Investments Act of 1991 (FIA), as amended, which
defined a "Philippine national" as follows:
SEC. 3. Definitions. - As used in this Act:
a. The term "Philippine national" shall mean a citizen
of the Philippines; or a domestic partnership or
association wholly owned by citizens of the
Philippines; or a corporation organized under the
laws of the Philippines of which at least sixty
percent (60%) of the capital stock outstanding and
entitled to vote is owned and held by citizens of
the Philippines; or a corporation organized abroad
and registered as doing business in the Philippines
under the Corporation Code of which one hundred
percent (100%) of the capital stock outstanding and
entitled to vote is wholly owned by Filipinos or a
trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is
a Philippine national and at least sixty percent (60%)
of the fund will accrue to the benefit of Philippine

nationals: Provided, That where a corporation and its

non-Filipino stockholders own stocks in a Securities
and Exchange Commission (SEC) registered
enterprise, at least sixty percent (60%) of the capital
stock outstanding and entitled to vote of each of
both corporations must be owned and held by
citizens of the Philippines and at least sixty percent
(60%) of the members of the Board of Directors of
each of both corporations must be citizens of the
Philippines, in order that the corporation, shall be
considered a "Philippine national." (Boldfacing,
italicization and underscoring supplied)

Under Article 48(3)26 of the Omnibus Investments

Code of 1987, "no corporation x x x which is not a
'Philippine national' x x x shall do business x x x in the
Philippines x x x without first securing from the Board
of Investments a written certificate to the effect that
such business or economic activity x x x would
not conflict with the Constitution or laws of the
Philippines."27 Thus, a "non-Philippine national"
cannot own and operate a reserved economic activity
like a public utility. This means, of course, that only a
"Philippine national" can own and operate a public
utility

Thus, the FIA clearly and unequivocally defines

a "Philippine national" as a Philippine citizen, or a
domestic corporation at least "60% of the capital stock
outstanding and entitled to vote" is owned by
Philippine citizens.

In turn, the definition of a "Philippine national" under

Article 15 of the Omnibus Investments Code of 1987
was a reiteration of the meaning of such term as
provided in Article 14 of the Omnibus Investments
Code of 1981,28to wit:

The definition of a "Philippine national" in the FIA

reiterated the meaning of such term as provided in its
predecessor statute, Executive Order No. 226 or the
Omnibus Investments Code of 1987,25 which was
issued by then President Corazon C. Aquino. Article
15 of this Code states:

Article 14. "Philippine national" shall mean a

citizen of the Philippines; or a domestic partnership
or association wholly owned by citizens of the
Philippines; or a corporation organized under the laws
of the Philippines of which at least sixty per cent
(60%) of the capital stock outstanding and entitled to
vote is owned and held by citizens of the Philippines;
or a trustee of funds for pension or other
employee retirement or separation benefits, where
the trustee is a Philippine national and at least sixty
per cent (60%) of the fund will accrue to the benefit of
Philippine nationals: Provided, That where a
corporation and its non-Filipino stockholders own
stock in a registered enterprise, at least sixty per cent
(60%) of the capital stock outstanding and entitled to
vote of both corporations must be owned and held by
the citizens of the Philippines and at least sixty per
cent (60%) of the members of the Board of Directors
of both corporations must be citizens of the
Philippines in order that the corporation shall be
considered a Philippine national. (Boldfacing,
italicization and underscoring supplied)

Article 15. "Philippine national" shall mean a citizen of

the Philippines or a diplomatic partnership or
association wholly-owned by citizens of the
Philippines; or a corporation organized under the
laws of the Philippines of which at least sixty per
cent (60%) of the capital stock outstanding and
entitled to vote is owned and held by citizens of
the Philippines; or a trustee of funds for pension or
other employee retirement or separation benefits,
where the trustee is a Philippine national and at least
sixty per cent (60%) of the fund will accrue to
the benefit of Philippine nationals: Provided, That
where a corporation and its non Filipino
stockholders own stock in a registered enterprise, at
least sixty per cent (60%) of the capital stock
outstanding and entitled to vote of both corporations
must be owned and held by the citizens of the
Philippines and at least sixty per cent (60%) of the
members of the Board of Directors of both
corporations must be citizens of the Philippines in
order that the corporation shall be considered a
Philippine national. (Boldfacing, italicization and
underscoring supplied)

Under Article 69(3) of the Omnibus Investments

Code of 1981, "no corporation x x x which is not a
'Philippine national' x x x shall do business x x x in the
Philippines x x x without first securing a written
certificate from the Board of Investments to the
effect that such business or economic activity x x
x would not conflict with the Constitution or laws

of the Philippines."29 Thus, a "non-Philippine

national" cannot own and operate a reserved
economic activity like a public utility. Again, this
means that only a "Philippine national" can own and
operate a public utility
Prior to the Omnibus Investments Code of 1981,
Republic Act No. 518630 or the Investment
Incentives Act, which took effect on 16
September 1967, contained a similar definition of a
"Philippine national," to wit:

(f) "Philippine National" shall mean a citizen of

the Philippines; or a partnership or association
wholly owned by citizens of the Philippines;
or a corporation organized under the laws of the
Philippines of which at least sixty per cent of the
capital stock outstanding and entitled to vote is owned
and held by citizens of the Philippines; or a trustee of
funds for
pension or other employee retirement or separation
benefits, where the trustee is a Philippine National
and at least sixty per cent of the fund will accrue to
the benefit of Philippine Nationals: Provided, That
where a corporation and its non-Filipino stockholders
own stock in a registered enterprise, at least sixty
per cent of the capital stock outstanding and
entitled to vote of both corporations must be owned
and held by the citizens of the Philippines and at least
sixty per cent of the members of the Board of
Directors of both corporations must be citizens of the
Philippines in order that the corporation shall be
considered a Philippine National. (Boldfacing,
italicization and underscoring supplied)
Under Section 3 of Republic Act No. 5455 or the
Foreign Business Regulations Act, which took effect
on 30 September 1968, if the investment in a
domestic enterprise by non-Philippine nationals
exceeds 30% of its outstanding capital stock, such
enterprise must obtain prior approval from the Board
of Investments before accepting such investment.
Such approval shall not be granted if the
investment "would conflict with existing
constitutional provisions and laws regulating the
degree of required ownership by Philippine
nationals in the enterprise."31 A "non-Philippine
national" cannot own and operate a reserved

economic activity like a public utility. Again, this

means that only a "Philippine national" can own and
operate a public utility.
The FIA, like all its predecessor statutes, clearly
defines a "Philippine national" as a Filipino citizen, or
a domestic corporation "at least sixty percent (60%) of
the capital stock outstanding and entitled tovote" is
owned by Filipino citizens. A domestic corporation is
a "Philippine national" only if at least 60% of its
voting stock is owned by Filipino citizens. This
definition of a "Philippine national" is crucial in the
present case because the FIA reiterates and clarifies
Section 11, Article XII of the 1987 Constitution, which
limits the ownership and operation of public
utilities to Filipino citizens or to corporations or
associations at least 60% Filipino-owned.
The FIA is the basic law governing foreign
investments in the Philippines, irrespective of the
nature of business and area of investment. The FIA
spells out the procedures by which non-Philippine
nationals can invest in the Philippines. Among the
key features of this law is the concept of a negative
list or the Foreign Investments Negative List.32
Section 8 of the law states:
SEC. 8. List of Investment Areas Reserved to
Philippine Nationals [Foreign Investment Negative
List]. - The Foreign Investment Negative List shall
have two [2] component lists: A and B:
a. List A shall enumerate the areas of activities
reserved to Philippine nationals by mandate of the
Constitution and specific laws.
b. List B shall contain the areas of activities and
enterprises regulated pursuant to law:
1. which are defense-related activities, requiring
prior clearance and authorization from the
Department of National Defense [DND] to engage in
such activity, such as the manufacture, repair, storage
and/or distribution of firearms, ammunition, lethal
weapons, military ordinance, explosives, pyrotechnics
and similar materials; unless such manufacturing or
repair activity is specifically authorized, with a
substantial export component, to a non-Philippine
national by the Secretary of National Defense; or

2. which have implications on public health and

morals, such as the manufacture and distribution of
dangerous drugs; all forms of gambling; nightclubs,
bars, beer houses, dance halls, sauna and steam
bathhouses and massage clinics. (Boldfacing,
underscoring and italicization supplied)
Section 8 of the FIA enumerates the investment areas
"reserved to Philippine nationals." Foreign
Investment Negative List A consists of "areas of
activities reserved to Philippine nationals by mandate
of the Constitution and specific laws," where foreign
equity participation in any enterprise shall be limited
to the maximum percentage expressly prescribed
by the Constitution and other specific laws. In short,
to ownand operate a public utility in the Philippines
one must be a "Philippine national" as defined in the
FIA. The FIA is abundant notice to foreign investors
to what extent they can invest in public utilities
in the Philippines.
To repeat, among the areas of investment covered by
the Foreign Investment Negative List A is the
ownership and operation of public utilities, which the
Constitution expressly reserves to Filipino citizens
and to corporations at least 60% owned by Filipino
citizens. In other words, Negative List A of the FIA
reserves the ownership and operation of public
utilities only to "Philippine nationals," defined in
Section 3(a) of the FIA as "(1) a citizen of the
Philippines; x x x or (3) acorporation organized
under the laws of the Philippines of which at
least sixty percent (60%) of the capital stock
outstanding and entitled to vote is owned and held
by citizens of the Philippines; or (4) a
corporation organized abroad and registered as
doing business in the Philippines under the
Corporation Code of which one hundred percent
(100%) of the capital stock outstanding and entitled to
vote is wholly owned by Filipinos or a trustee of funds
for pension or other employee retirement or
separation benefits, where the trustee is a Philippine
national and at least sixty percent (60%) of the fund
will accrue to the benefit of Philippine nationals."
Clearly, from the effectivity of the Investment
Incentives Act of 1967 to the adoption of the Omnibus
Investments Code of 1981, to the enactment of the
Omnibus Investments Code of 1987, and to the
passage of the present Foreign Investments Act of
1991, or for more than four decades, the statutory

definition of the term "Philippine national" has been

uniform and consistent: it means a Filipino citizen, or
a domestic corporation at least 60% of the voting
stock is owned by Filipinos. Likewise, these
same statutes have uniformly and consistently
required that only "Philippine nationals" could own
and operate public utilities in the Philippines. The
following exchange during the Oral Arguments is
revealing:

(60%) of the capital stock of that corporation must be

owned by citizens of the Philippines, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:

Counsel, I have some questions. You are aware of

the Foreign Investments Act of 1991, x x x? And the
FIA of 1991 took effect in 1991, correct? That's over
twenty (20) years ago, correct?

And even prior to the Omnibus Investments Act of

1987, under the Omnibus Investments Act of 1981,
the same rules apply: x x x only a Philippine national
can own and operate a public utility and a Philippine
national, if it is a corporation, sixty percent (60%) of its
x x x voting stock, must be owned by citizens of the
Philippines, correct?

COMMISSIONER GAITE:

COMMISSIONER GAITE:

Correct, Your Honor.

Correct, Your Honor.

JUSTICE CARPIO:

JUSTICE CARPIO:

And Section 8 of the Foreign Investments Act of 1991

states that []only Philippine nationals can own and
operate public utilities[], correct?

And even prior to that, under [the]1967 Investments

Incentives Act and the Foreign Company Act of 1968,
the same rules applied, correct?

COMMISSIONER GAITE:

COMMISSIONER GAITE:

Yes, Your Honor.

Correct, Your Honor.

JUSTICE CARPIO:

JUSTICE CARPIO:

And the same Foreign Investments Act of 1991

defines a "Philippine national" either as a citizen of
the Philippines, or if it is a corporation at least sixty
percent (60%) of the voting stock is owned by
citizens of the Philippines, correct?

So, for the last four (4) decades, x x x, the law has
been very consistent - only a Philippine national can
own and operate a public utility, and a Philippine
national, if it is a corporation, x x x at least sixty
percent (60%) of the voting stock must be owned by
citizens of the Philippines, correct?

JUSTICE CARPIO:

COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
And, you are also aware that under the predecessor
law of the Foreign Investments Act of 1991, the
Omnibus Investments Act of 1987, the same
provisions apply: x x x only Philippine nationals can
own and operate a public utility and the Philippine
national, if it is a corporation, x x x sixty percent

COMMISSIONER GAITE: Correct, Your

Honor.33 (Emphasis supplied)
Government agencies like the SEC cannot simply
ignore Sections 3(a) and 8 of the FIA which
categorically prescribe that certain economic
activities, like the ownership and operation of public
utilities, are reserved to corporations "at least sixty
percent (60%) of the capital stock outstanding and
entitled to vote is owned and held by citizens of
the Philippines." Foreign Investment Negative List
A refers to "activities reserved to Philippine

nationals by mandate of the Constitution and specific

laws." The FIA is the basic statute regulating
foreign investments in the Philippines. Government
agencies tasked with regulating or monitoring foreign
investments, as well as counsels of foreign investors,
should start with the FIA in determining to what extent
a particular foreign investment is allowed in the
Philippines. Foreign investors and their counsels who
ignore the FIA do so at their own peril. Foreign
investors and their counsels who rely on opinions of
SEC legal officers that obviously contradict the FIA do
so also at their own peril.
Occasional opinions of SEC legal officers that
obviously contradict the FIA should immediately raise
a red flag. There are already numerous opinions of
SEC legal officers that cite the definition of a
"Philippine national" in Section 3(a) of the FIA in
determining whether a particular corporation is
qualified to own and operate a nationalized or
partially nationalized business in the Philippines.
This shows that SEC legal officers are not only aware
of, but also rely on and invoke, the provisions of the
FIA in ascertaining the eligibility of a corporation
to engage in partially nationalized industries. The
following are some of such opinions:
1. Opinion of 23 March 1993, addressed to Mr.
Francis F. How;
2. Opinion of 14 April 1993, addressed to Director
Angeles T. Wong of the Philippine Overseas
Employment Administration;
3. Opinion of 23 November 1993, addressed to
Messrs. Dominador Almeda and Renato S. Calma;
4. Opinion of 7 December 1993, addressed to
Roco Bunag Kapunan Migallos & Jardeleza;
5. SEC Opinion No. 49-04, addressed to Romulo
Mabanta Buenaventura Sayoc & De Los Angeles;
6. SEC-OGC Opinion No. 17-07, addressed to Mr.
Reynaldo G. David; and
7. SEC-OGC Opinion No. 03-08, addressed to Attys.
Ruby Rose J. Yusi and Rudyard S. Arbolado.
The SEC legal officers' occasional but blatant
disregard of the definition of the term "Philippine
national" in the FIA signifies their lack of integrity and

competence in resolving issues on the 60-40

ownership requirement in favor of Filipino citizens in
Section 11, Article XII of the Constitution.

The PSE President argues that the term "Philippine

national" defined in the FIA should be limited and
interpreted to refer to corporations seeking to avail of
tax and fiscal incentives under investment incentives
laws and cannot be equated with the term "capital" in
Section 11, Article XII of the 1987 Constitution.
Pangilinan similarly contends that the FIA and its
predecessor statutes do not apply to "companies
which have not registered and obtained special
incentives under the schemes established by
those laws."
Both are desperately grasping at straws. The FIA
does not grant tax or fiscal incentives to any
enterprise. Tax and fiscal incentives to investments
are granted separately under the Omnibus
Investments Code of 1987, not under the FIA. In fact,
the FIA expressly repealed Articles 44 to 56 of Book II
of the Omnibus Investments Code of 1987, which
articles previously regulated foreign investments in
nationalized or partially nationalized industries.
The FIA is the applicable law regulating foreign
investments in nationalized or partially nationalized
industries. There is nothing in the FIA, or even in the
Omnibus Investments Code of 1987 or its
predecessor statutes, that states, expressly or
impliedly, that the FIA or its predecessor statutes do
not apply to enterprises not availing of tax and fiscal
incentives under the Code. The FIA and its
predecessor statutes apply to investments in all
domestic enterprises, whether or not such enterprises
enjoy tax and fiscal incentives under the Omnibus
Investments Code of 1987 or its predecessor statutes.
The reason is quite obvious - mere non-availment of
tax and fiscal incentives by a non-Philippine national
cannot exempt it from Section 11, Article XII of the
Constitution regulating foreign investments in public
utilities. In fact, the Board of Investments'
Primer on Investment Policies in the
Philippines,34 which is given out to foreign investors,
provides:
PART III. FOREIGN INVESTMENTS WITHOUT
INCENTIVES

Investors who do not seek incentives and/or whose

chosen activities do not qualify for incentives, (i.e., the
activity is not listed in the IPP, and they are not
exporting at least 70% of their production) may go
ahead and make the investments without seeking
incentives. They only have to be guided by the
Foreign Investments Negative List (FINL).
The FINL clearly defines investment areas requiring at
least 60% Filipino ownership. All other areas outside
of this list are fully open to foreign investors.
(Emphasis supplied)
V.
Right to elect directors, coupled with beneficial
ownership,
translates to effective control.
The 28 June 2011 Decision declares that the 60
percent Filipino ownership required by the
Constitution to engage in certain economic
activities applies not only to voting control of the
corporation, but also to the beneficial ownership of the
corporation. To repeat, we held:
Mere legal title is insufficient to meet the 60 percent
Filipino owned "capital" required in the
Constitution. Full beneficial ownership of 60 percent
of the outstanding capital stock, coupled with 60
percent of the voting rights, is required. The legal and
beneficial ownership of 60 percent of the
outstanding capital stock must rest in the hands
of Filipino nationals in accordance with the
constitutional mandate. Otherwise, the corporation is
"considered as non-Philippine national[s]." (Emphasis
supplied)
This is consistent with Section 3 of the FIA which
provides that where 100% of the capital stock is held
by "a trustee of funds for pension or other employee
retirement or separation benefits," the trustee is
a Philippine national if "at least sixty percent (60%)
of the fund will accrue to the benefit of Philippine
nationals." Likewise, Section 1(b) of the
Implementing Rules of the FIA provides that "for
stocks to be deemed owned and held by Philippine
citizens or Philippine nationals, mere legal title is not

enough to meet the required Filipino equity. Full

beneficial ownership of the stocks, coupled with
appropriate voting rights, is essential."
Since the constitutional requirement of at least 60
percent Filipino ownership applies not only to voting
control of the corporation but also to the beneficial
ownership of the corporation, it is therefore imperative
that such requirement apply uniformly and across the
board to all classes of shares, regardless of
nomenclature and category, comprising the capital of
a corporation. Under the Corporation Code, capital
stock35 consists of all classes of shares issued to
stockholders, that is, common shares as well as
preferred shares, which may have different rights,
privileges or restrictions as stated in the articles of
incorporation.36
The Corporation Code allows denial of the right to
vote to preferred and redeemable shares, but
disallows denial of the right to vote in specific
corporate matters. Thus, common shares have
the right to vote in the election of directors, while
preferred shares may be denied such right.
Nonetheless, preferred shares, even if denied the
right to vote in the election of directors, are entitled
to vote on the following corporate matters: (1)
amendment of articles of incorporation; (2) increase
and decrease of capital stock; (3) incurring,
creating or increasing bonded indebtedness; (4)
sale, lease, mortgage or other disposition of
substantially all corporate assets; (5) investment of
funds in another business or corporation or for a
purpose other than the primary purpose for which
the corporation was organized; (6) adoption,
amendment and repeal of by-laws; (7) merger and
consolidation; and (8) dissolution of corporation.37
Since a specific class of shares may have rights and
privileges or restrictions different from the rest of the
shares in a corporation, the 60-40 ownership
requirement in favor of Filipino citizens in Section 11,
Article XII of the Constitution must apply not only to
shares with voting rights but also to shares without
voting rights. Preferred shares, denied the right to
vote in the election of directors, are anyway still
entitled to vote on the eight specific corporate
matters mentioned above. Thus, if a
corporation, engaged in a partially nationalized
industry, issues a mixture of common and preferred
non-voting shares, at least 60 percent of the common

shares and at least 60 percent of the preferred

non-voting shares must be owned by Filipinos. Of
course, if a corporation issues only a single class of
shares, at least 60 percent of such shares must
necessarily be owned by Filipinos. In short, the 6040 ownership requirement in favor of Filipino citizens
must apply separately to each class of
shares, whether common, preferred non-voting,
preferred voting or any other class of shares. This
uniform application of the 60-40 ownership
requirement in favor of Filipino citizens clearly
breathes life to the constitutional command that the
ownership and operation of public utilities shall be
reserved exclusively to corporations at least 60
percent of whose capital is Filipino-owned. Applying
uniformly the 60-40 ownership requirement in favor
of Filipino citizens to each class of shares, regardless
of differences in voting rights, privileges and
restrictions, guarantees effective Filipino control of
public utilities, as mandated by the Constitution.
Moreover, such uniform application to each class of
shares insures that the "controlling interest" in public
utilities always lies in the hands of Filipino citizens.
This addresses and extinguishes Pangilinan's worry
that foreigners, owning most of the non-voting
shares, will exercise greater control over
fundamental corporate matters requiring two-thirds or
majority vote of all shareholders.
VI.
Intent of the framers of the Constitution

While Justice Velasco quoted in his Dissenting

Opinion38 a portion of the deliberations of the
Constitutional Commission to support his claim that
the term "capital" refers to the total outstanding
shares of stock, whether voting or non-voting, the
following excerpts of the deliberations reveal
otherwise. It is clear from the following exchange that
the term "capital" refers to controlling interest of a
corporation, thus:

MR. NOLLEDO. In Sections 3, 9 and 15, the

Committee stated local or Filipino equity and foreign

equity; namely, 60-40 in Section 3, 60-40 in Section 9

and 2/3-1/3 in Section 15.
MR. VILLEGAS. That is right.

MR. AZCUNA. Hence, without the Davide

amendment, the committee report would read:
"corporations or associations at least sixty percent of
whose CAPITAL is owned by such citizens."

MR. NOLLEDO. In teaching law, we are always faced

with this question: "Where do we base the equity
requirement, is it on the authorized capital stock, on
the subscribed capital stock, or on the paid-up capital
stock of a corporation"? Will the Committee please
enlighten me on this?

MR. VILLEGAS. Yes.

MR. VILLEGAS. We have just had a long discussion

with the members of the team from the UP Law
Center who provided us a draft. The phrase that is
contained here which we adopted from the UP draft is
"60 percent of voting stock."

MR. VILLEGAS. That is right.

MR. NOLLEDO. That must be based on the

subscribed capital stock, because unless declared
delinquent, unpaid capital stock shall be entitled to
vote.
MR. VILLEGAS. That is right.
MR. NOLLEDO. Thank you.
With respect to an investment by one corporation
in another corporation, say, a corporation with 6040 percent equity invests in another corporation
which is permitted by the Corporation Code, does the
Committee adopt the grandfather rule?
MR. VILLEGAS. Yes, that is the understanding of the
Committee.
MR. NOLLEDO. Therefore, we need additional
Filipino capital?
MR. VILLEGAS. Yes.39
MR. AZCUNA. May I be clarified as to that portion
that was accepted by
the Committee.

MR. VILLEGAS. The portion accepted by the

Committee is the deletion of the phrase "voting stock
or controlling interest."

MR. AZCUNA. So if the Davide amendment is lost,

we are stuck with 60
percent of the capital to be owned by citizens.

MR. AZCUNA. But the control can be with the

foreigners even if they are the minority. Let us say 40
percent of the capital is owned by them, but it is the
voting capital, whereas, the Filipinos own
the nonvoting shares. So we can have a situation
where the corporation is controlled by foreigners
despite being the minority because they have the
voting capital. That is the anomaly that would result
here.
MR. BENGZON. No, the reason we eliminated the
word "stock" as stated in the 1973 and 1935
Constitutions is that according to Commissioner
Rodrigo, there are associations that do not have
stocks. That is why we say "CAPITAL."
MR. AZCUNA. We should not eliminate the
phrase "controlling interest."
MR. BENGZON. In the case of stock corporations, it
is assumed.40 (Boldfacing and underscoring
supplied)
Thus, 60 percent of the "capital" assumes, or
should result in, a "controlling interest" in the
corporation.
The use of the term "capital" was intended to
replace the word "stock" because associations
without stocks can operate public utilities as long as
they meet the 60-40 ownership requirement in favor
of Filipino citizens prescribed in Section 11, Article XII
of the Constitution. However, this did not change the
intent of the framers of the Constitution to reserve
exclusively to Philippine nationals the "controlling
interest" in public utilities.

During the drafting of the 1935 Constitution, economic

protectionism was "the battle-cry of the nationalists in
the Convention."41The same battle cry resulted in the
nationalization of the public utilities.42This is also
the same intent of the framers of the 1987
Constitution who adopted the exact formulation
embodied in the 1935 and 1973 Constitutions on
foreign equity limitations in partially nationalized
industries.
The OSG, in its own behalf and as counsel for the
State,43 agrees fully with the Court's interpretation of
the term "capital." In its Consolidated Comment, the
OSG explains that the deletion of the phrase
"controlling interest" and replacement of the word
"stock" with the term "capital" were intended
specifically to extend the scope of the entities
qualified to operate public utilities to include
associations without stocks. The framers'
omission of the phrase "controlling interest" did not
mean the inclusion ofall shares of stock, whether
voting or non-voting. The OSG reiterated
essentially the Court's declaration that the
Constitution reserved exclusively to Philippine
nationals the ownership and operation of public
utilities consistent with the State's policy to "develop
a self-reliant and independent national
economyeffectively controlled by Filipinos."
As we held in our 28 June 2011 Decision, to construe
broadly the term "capital" as the total outstanding
capital stock, treated as a single class regardless of
the actual classification of shares, grossly
contravenes the intent and letter of the Constitution
that the "State shall develop a self-reliant and
independent national economyeffectively
controlled by Filipinos." We illustrated the glaring
anomaly which would result in defining the term
"capital" as the total outstanding capital stock of a
corporation, treated as a single class of shares
regardless of the actual classification of shares, to wit:
Let us assume that a corporation has 100 common
shares owned by foreigners and 1,000,000 nonvoting preferred shares owned by Filipinos, with
both classes of share having a par value of one peso
(P1.00) per share. Under the broad definition of
the term "capital," such corporation would be
considered compliant with the 40 percent
constitutional limit on foreign equity of public
utilities since the overwhelming majority, or more

than 99.999 percent, of the total outstanding

capital stock is Filipino owned. This is obviously
absurd.
In the example given, only the foreigners holding the
common shares have voting rights in the election of
directors, even if they hold only 100 shares. The
foreigners, with a minuscule equity of less than 0.001
percent, exercise control over the public utility. On the
other hand, the Filipinos, holding more than 99.999
percent of the equity, cannot vote in the election of
directors and hence, have no control over the public
utility. This starkly circumvents the intent of the
framers of the Constitution, as well as the clear
language of the Constitution, to place the control of
public utilities in the hands of Filipinos. x x x
Further, even if foreigners who own more than forty
percent of the voting shares elect an all-Filipino board
of directors, this situation does not guarantee Filipino
control and does not in any way cure the violation of
the Constitution. The independence of the Filipino
board members so elected by such foreign
shareholders is highly doubtful. As the OSG pointed
out,quoting Justice George Sutherland's words in
Humphrey's Executor v. US,44"x x x it is quite
evident that one who holds his office only during the
pleasure of another cannot be depended upon to
maintain an attitude of independence against the
latter's will." Allowing foreign shareholders to elect a
controlling majority of the board, even if all the
directors are Filipinos, grossly circumvents the letter
and intent of the Constitution and defeats the very
purpose of our nationalization laws.
VII.
Last sentence of Section 11, Article XII of the
Constitution
The last sentence of Section 11, Article XII of the
1987 Constitution reads:

The participation of foreign investors in the governing

body of any public utility enterprise shall be limited to
their proportionate share in its capital, and all the
executive and managing officers of such
corporation or association must be citizens of the
Philippines.

During the Oral Arguments, the OSG emphasized

that there was never a question on the intent of the
framers of the Constitution to limit foreign ownership,
and assure majority Filipino ownership and control of
public utilities. The OSG argued, "while the delegates
disagreed as to the percentage threshold to adopt,
x x x the records show they clearly understood
that Filipino control of the public utility corporation can
only be and is obtained only through the election of a
majority of the members of the board."
Indeed, the only point of contention during the
deliberations of the Constitutional Commission on 23
August 1986 was the extent of majority Filipino
control of public utilities. This is evident from the
following exchange:
THE PRESIDENT. Commissioner Jamir is
recognized
MR. JAMIR. Madam President, my proposed
amendment on lines 20 and 21 is to delete the phrase
"two thirds of whose voting stock or controlling
interest," and instead substitute the words "SIXTY
PERCENT OF WHOSE CAPITAL" so that the
sentence will read: "No franchise, certificate, or any
other form of authorization for the operation of a
public utility shall be granted except to citizens of
the Philippines or to corporations or associations
organized under the laws of the Philippines at least
SIXTY PERCENT OF WHOSE CAPITAL is owned by
such citizens."
THE PRESIDENT: Will Commissioner Jamir first
explain?
MR. JAMIR. Yes, in this Article on National Economy
and Patrimony, there were two previous sections in
which we fixed the Filipino equity to 60 percent as
against 40 percent for foreigners. It is only in this
Section 15 with respect to public utilities that the
committee proposal was increased to two-thirds. I
think it would be better to harmonize this
provision by providing that even in the case of public
utilities, the minimum equity for Filipino citizens
should be 60 percent.
MR. ROMULO. Madam President.
THE PRESIDENT. Commissioner Romulo is
recognized.MR. ROMULO. My reason for supporting

the amendment is based on the discussions I have

had with representatives of the Filipino majority
owners of the international record carriers, and the
subsequent memoranda they submitted to me. x x x
Their second point is that under the Corporation
Code, the management and control of a corporation is
vested in the board of directors, not in the officers but
in the board of directors. The officers are only agents
of the board. And they believe that with 60 percent of
the equity, the Filipino majority stockholders
undeniably control the board. Only on important
corporate acts can the 40-percent foreign equity
exercise a veto, x x x.
MS. ROSARIO BRAID. Madam President.
THE PRESIDENT. Commissioner Rosario Braid is
recognized.
MS. ROSARIO BRAID. Yes, in the interest of equal
time, may I also read from a memorandum by the
spokesman of the Philippine Chamber of
Communications on why they would like to maintain
the present equity, I am referring to the 66 2/3. They
would prefer to have a 75-25 ratio but would settle for
66 2/3. x x x
THE PRESIDENT. Just to clarify, would
Commissioner Rosario Braid support the proposal of
two-thirds rather than the 60 percent?
MS. ROSARIO BRAID. I have added a clause that
will put management in the hands of Filipino citizens.x
x x x46
While they had differing views on the percentage
of Filipino ownership of capital, it is clear that the
framers of the Constitution intended public utilities to
be majority Filipino-owned and controlled. To ensure
that Filipinos control public utilities, the framers of the
Constitution approved, as additional safeguard, the
inclusion of the last sentence of Section 11, Article XII
of the Constitution commanding that "[t]he
participation of foreign investors in the governing
body of any public utility enterprise shall be limited to
their proportionate share in its capital, and all the
executive and managing officers of such corporation
or association must be citizens of the Philippines." In
other words, the last sentence of Section 11, Article
XII of the Constitution mandates that (1) the

participation of foreign investors in the governing body

of the corporation or association shall be limited to
their proportionate share in the capital of such entity;
and (2) all officers of the corporation or association
must be Filipino citizens.

Thank you.

Commissioner Rosario Braid proposed the inclusion

of the phrase requiring the managing officers of
the corporation or association to be Filipino
citizens specifically to prevent management contracts,
which were designed primarily to circumvent the
Filipinization of public utilities, and to assure Filipino
control of public utilities, thus:

MS. ROSARIO BRAID. Yes.

MS. ROSARIO BRAID. x x x They also like to suggest

that we amend this provision by adding a phrase
which states: "THE MANAGEMENT BODY OF
EVERY CORPORATION OR ASSOCIATION
SHALL IN ALL CASES BE CONTROLLED BY
CITIZENS OF THE PHILIPPINES." I have with me
their position paper.
THE PRESIDENT. The Commissioner may proceed.
MS. ROSARIO BRAID. The three major international
record carriers in the Philippines, which
Commissioner Romulo mentioned - Philippine
Global Communications, Eastern
Telecommunications, Globe Mackay Cable - are 40percent owned by foreign multinational companies
and 60-percent owned by their respective Filipino
partners. All three, however, also have management
contracts with these foreign companies - Philcom with
RCA, ETPI with Cable and Wireless PLC, and GMCR
with ITT. Up to the present time, the general
managers of these carriers are foreigners. While the
foreigners in these common carriers are only minority
owners, the foreign multinationals are the ones
managing and controlling their operations by virtue
of their management contracts and by virtue of their
strength in the governing bodies of these carriers.47
MR. OPLE. I think a number of us have agreed to ask
Commissioner Rosario Braid to propose an
amendment with respect to the operating
management of public utilities, and in this
amendment, we are associated with Fr. Bernas,
Commissioners Nieva and Rodrigo.
Commissioner Rosario Braid will state this
amendment now.

MS. ROSARIO BRAID. Madam President.

THE PRESIDENT. This is still on Section 15.

MR. VILLEGAS. Yes, Madam President.

MS. ROSARIO BRAID. Madam President, I propose
a new section to read: 'THE MANAGEMENT BODY
OF EVERY CORPORATION OR ASSOCIATION
SHALL IN ALL CASES BE CONTROLLED BY
CITIZENS OF THE PHILIPPINES."
This will prevent management contracts and assure
control by Filipino citizens. Will the committee assure
us that this amendment will insure that past activities
such as management contracts will no longer be
possible under this amendment?
FR. BERNAS. Madam President.
THE PRESIDENT. Commissioner Bernas is
recognized.
FR. BERNAS. Will the committee accept a
reformulation of the first part?
MR. BENGZON. Let us hear it.
FR. BERNAS. The reformulation will be essentially
the formula of the 1973 Constitution which reads:
"THE PARTICIPATION OF FOREIGN INVESTORS
IN THE GOVERNING BODY OF ANY PUBLIC
UTILITY ENTERPRISE SHALL BE LIMITED TO
THEIR PROPORTIONATE SHARE IN THE
CAPITAL THEREOF AND..."

MR. VILLEGAS. "ALL THE EXECUTIVE AND

MANAGING OFFICERS OF SUCH
CORPORATIONS AND ASSOCIATIONS MUST BE
CITIZENS OF THE PHILIPPINES."
MR. BENGZON. Will Commissioner Bernas read the
whole thing again?
FR. BERNAS. "THE PARTICIPATION OF FOREIGN
INVESTORS IN THE GOVERNING BODY OF ANY

PUBLIC UTILITY ENTERPRISE SHALL BE LIMITED

TO THEIR PROPORTIONATE SHARE IN THE
CAPITAL THEREOF..." I do not have the rest of the
copy.
MR. BENGZON. "AND ALL THE EXECUTIVE AND
MANAGING OFFICERS OF SUCH CORPORATIONS
OR ASSOCIATIONS MUST BE CITIZENS OF THE
PHILIPPINES." Is that correct?
MR. VILLEGAS. Yes.
MR. BENGZON. Madam President, I think that was
said in a more elegant language. We accept the
amendment. Is that all right with Commissioner
Rosario Braid?

PERCENT OF WHOSE CAPITAL is owned by such

citizens." May I request Commissioner Bengzon to
please continue reading.
MR. BENGZON. "THE PARTICIPATION OF
FOREIGN INVESTORS IN THE GOVERNING
BODY OF ANY PUBLIC UTILITY ENTERPRISE
SHALL BE LIMITED TO THEIR
PROPORTIONATE SHARE IN THE CAPITAL
THEREOF AND ALL THE EXECUTIVE AND
MANAGING OFFICERS OF SUCH
CORPORATIONS OR ASSOCIATIONS MUST BE
CITIZENS OF THE PHILIPPINES."

MR. BENGZON. Yes, the governing body refers to

the board of directors.

MR. VILLEGAS. "NOR SHALL SUCH FRANCHISE,

CERTIFICATE OR AUTHORIZATION BE
EXCLUSIVE IN CHARACTER OR FOR A PERIOD
LONGER THAN TWENTY-FIVE YEARS
RENEWABLE FOR NOT MORE THAN TWENTYFIVE YEARS. Neither shall any such franchise or
right be granted except under the condition that it
shall be subject to amendment, alteration, or repeal
by Congress when the common good so requires.
The State shall encourage equity participation in
public utilities by the general public."

MR. REGALADO. It is accepted.

VOTING

MR. RAMA. The body is now ready to vote, Madam

President.

The results show 29 votes in favor and 4 against;

Section 15, as amended, is approved.48 (Emphasis
supplied)

MS. ROSARIO BRAID. Yes.

MR. DE LOS REYES. The governing body refers to
the board of directors and trustees.
MR. VILLEGAS. That is right.

VOTING
The results show 29 votes in favor and none against;
so the proposed amendment is approved.
THE PRESIDENT. All right. Can we proceed now to
vote on Section 15?MR. RAMA. Yes, Madam
President.

particularly the provision on the limited participation of

foreign investors in the governing body of public
utilities, is a reiteration of the last sentence of Section
5, Article XIV of the 1973 Constitution,49 signifying its
importance in reserving ownership and control of
public utilities to Filipino citizens.

VIII.
THE PRESIDENT. Will the chairman of the
committee please read Section 15?

The undisputed facts

MR. VILLEGAS. The entire Section 15, as

amended, reads: "No franchise, certificate, or any
other form of authorization for the operation of a
public utility shall be granted except to citizens of the
Philippines or to corporations or associations
organized under the laws of the Philippines at least 60

There is no dispute, and respondents do not claim

the contrary, that(1) foreigners own 64.27% of the
common shares of PLDT, which class of shares
exercises the sole right to vote in the election of
directors, and thus foreigners control PLDT; (2)
Filipinos own only 35.73% of PLDT's common
shares, constituting a minority of the voting

stock, and thus Filipinos do not control PLDT; (3)

preferred shares, 99.44% owned by Filipinos,
have no voting rights; (4) preferred shares earn only
1/70 of the dividends that common shares earn;50 (5)
preferred shares have twice the par value of common
shares; and (6) preferred shares constitute 77.85% of
the authorized capital stock of PLDT and common
shares only 22.15%.
Despite the foregoing facts, the Court did not decide,
and in fact refrained from ruling on the question of
whether PLDT violated the 60-40 ownership
requirement in favor of Filipino citizens in Section 11,
Article XII of the 1987 Constitution. Such question
indisputably calls for a presentation and
determination of evidence through a hearing,
which is generally outside the province of the Court's
jurisdiction, but well within the SEC's statutory
powers. Thus, for obvious reasons, the Court limited
its decision on the purely legal and threshold issue on
the definition of the term "capital" in Section 11, Article
XII of the Constitution and directed the SEC to apply
such definition in determining the exact
percentage of foreign ownership in PLDT.
IX.
PLDT is not an indispensable party;
SEC is impleaded in this case.
In his petition, Gamboa prays, among others:
5. For the Honorable Court to issue a declaratory
relief that ownership of common or voting shares is
the sole basis in determining foreign equity in a public
utility and that any other government rulings, opinions,
and regulations inconsistent with this declaratory
relief be declared unconstitutional and a violation of
the intent and spirit of the 1987 Constitution;
6. For the Honorable Court to declare null and void
all sales of common stocks to foreigners in excess
of 40 percent of the total subscribed common
shareholdings; and
7. For the Honorable Court to direct the
Securities and Exchange Commission and Philippine
Stock Exchange to require PLDT to make a public
disclosure of all of its foreign shareholdings and
their actual and real beneficial owners.

Other relief(s) just and equitable are likewise

prayed for. (Emphasis supplied)
As can be gleaned from his prayer, Gamboa clearly
asks this Court to compel the SEC to perform its
statutory duty to investigate whether "the required
percentage of ownership of the capital stock to
be owned by citizens of the Philippines has been
complied with [by PLDT] as required by x x x the
Constitution."51 Such plea clearly negates SEC's
argument thatit was not impleaded.
Granting that only the SEC Chairman was impleaded
in this case, the Court has ample powers to order the
SEC's compliance with its directive contained in the
28 June 2011 Decision in view of the farreaching implications of this case. In Domingo v.
Scheer,52 the Court dispensed with the amendment
of the pleadings to implead the Bureau of
Customs considering (1) the unique backdrop of the
case; (2) the utmost need to avoid further delays; and
(3) the issue of public interest involved. The Court
held:
The Court may be curing the defect in this case by
adding the BOC as party-petitioner. The petition
should not be dismissed because the second
action would only be a repetition of the first. In
Salvador, et al., v. Court of Appeals, et al., we held
that this Court has full powers, apart from that power
and authority which is inherent, to amend the
processes, pleadings, proceedings and decisions by
substituting as party-plaintiff the real party-ininterest. The Court has the power to avoid delay in
the disposition of this case, to order its amendment as
to implead the BOC as party-respondent. Indeed, it
may no longer be necessary to do so taking into
account the unique backdrop in this case, involving as
it does an issue of public interest. After all, the Office
of the Solicitor General has represented the petitioner
in the instant proceedings, as well as in the appellate
court, and maintained the validity of the deportation
order and of the BOC's Omnibus Resolution. It
cannot, thus, be claimed by the State that the BOC
was not afforded its day in court, simply because only
the petitioner, the Chairperson of the BOC, was the
respondent in the CA, and the petitioner in the instant
recourse. In Alonso v. Villamor, we had the occasion
to state:

There is nothing sacred about processes or

pleadings, their forms or contents. Their sole
purpose is to facilitate the application of justice to
the rival claims of contending parties. They were
created, not to hinder and delay, but to facilitate and
promote, the administration of justice. They do not
constitute the thing itself, which courts are always
striving to secure to litigants. They are designed as
the means best adapted to obtain that thing. In other
words, they are a means to an end. When they lose
the character of the one and become the other, the
administration ofjustice is at fault and courts are
correspondingly remiss in the performance of their
obvious duty.53 (Emphasis supplied)
In any event, the SEC has expressly
manifested54 that it will abide by the Court's decision
and defer to the Court's definition of the term "capital"
in Section 11, Article XII of the Constitution. Further,
the SEC entered its special appearance in this case
and argued during the Oral Arguments, indicating its
submission to the Court's jurisdiction. It is clear,
therefore, that there exists no legal impediment
against the proper and immediate implementation of
the Court's directive to the SEC.
PLDT is an indispensable party only insofar as
the other issues, particularly the factual questions,
are concerned. In other words, PLDT must be
impleaded in order to fully resolve the issues on (1)
whether the sale of 111,415 PTIC shares to First
Pacific violates the constitutional limit on foreign
ownership of PLDT; (2) whether the sale of common
shares to foreigners exceeded the 40 percent limit on
foreign equity in PLDT; and (3) whether the total
percentage of the PLDT common shares with voting
rights complies with the 60-40 ownership requirement
in favor of Filipino citizens under the Constitution for
the ownership and operation of PLDT. These issues
indisputably call for an examination of the parties'
respective evidence, and thus are clearly within the
jurisdiction of the SEC. In short, PLDT must be
impleaded, and must necessarily be heard, in the
proceedings before the SEC where the factual issues
will be thoroughly threshed out and resolved.
Notably, the foregoing issues were left untouched by
the Court. The Court did not rule on the factual issues
raised by Gamboa, except the single and purely
legal issue on the definition of the term "capital"
in Section 11, Article XII of the Constitution. The

Court confined the resolution of the instant case to

this threshold legal issue in deference to the factfinding power of the SEC.
Needless to state, the Court can validly, properly, and
fully dispose of the fundamental legal issue in this
case even without the participation of PLDT since
defining the term "capital" in Section 11, Article XII of
the Constitution does not, in any way, depend on
whether PLDT was impleaded. Simply put, PLDT is
not indispensable for a complete resolution of the
purely legal question in this case.55 In fact, the
Court, by treating the petition as one for
mandamus,56 merely directed the SEC to apply the
Court's definition of the term "capital" in Section 11,
Article XII of the Constitution in determining whether
PLDT committed any violation of the said
constitutional provision. The dispositive portion of the
Court's ruling is addressed not to PLDT but solely
to the SEC, which is the administrative agency
tasked to enforce the 60-40
ownership requirement in favor of Filipino citizens in
Section 11, Article XII of the Constitution.
Since the Court limited its resolution on the purely
legal issue on the definition of the term "capital" in
Section 11, Article XII of the 1987 Constitution,
and directed the SEC to investigate any violation by
PLDT of the 60-40 ownership requirement in favor of
Filipino citizens under the Constitution,57 there is no
deprivation of PLDT's property or denial of
PLDT's right to due process, contrary to
Pangilinan and Nazareno's misimpression. Due
process will be afforded to PLDT when it presents
proof to the SEC that it complies, as it claims here,
with Section 11, Article XII of the Constitution.
X.
Foreign Investments in the Philippines
Movants fear that the 28 June 2011 Decision would
spell disaster to our economy, as it may result in a
sudden flight of existing foreign investors to
"friendlier" countries and simultaneously deterring
new foreign investors to our country. In particular, the
PSE claims that the 28 June 2011 Decision may result
in the following: (1) loss of more than P630 billion in
foreign investments in PSE-listed shares; (2) massive
decrease in foreign trading transactions; (3) lower

PSE Composite Index; and (4) local investors not

investing in PSE-listed shares.58
Dr. Bernardo M. Villegas, one of the amici curiae
in the Oral Arguments, shared movants'
apprehension. Without providing specific details,
he pointed out the depressing state of the
Philippine economy compared to our neighboring
countries which boast of growing economies. Further,
Dr. Villegas explained that the solution to our
economic woes is for the government to "take-over"
strategic industries, such as the public utilities sector,
thus:

In any event, the experience of our neighboring

countries cannot be used as argument to decide the
present case differently for two reasons. First, the
governments of our neighboring countries have, as
claimed by Dr. Villegas, taken over ownership and
control of their strategic public utilities like the
telecommunications industry. Second, our
Constitution has specific provisions limiting foreign
ownership in public utilities which the Court is sworn
to uphold regardless of the experience of our
neighboring countries.

I would like also to get from you Dr. Villegas if you

have additional information on whether this high
FDI59 countries in East Asia have allowed foreigners
x x x control [of] their public utilities, so that we can
compare apples with apples.

In our jurisdiction, the Constitution expressly reserves

the ownership and operation of public utilities to
Filipino citizens, or corporations or associations at
least 60 percent of whose capital belongs to
Filipinos. Following Dr. Villegas's claim, the
Philippines appears to be more liberal in allowing
foreign investors to own 40 percent of public utilities,
unlike in other Asian countries whose governments
own and operate such industries.

DR. VILLEGAS:

XI.

Correct, but let me just make a comment. When

these neighbors of ours find an industry strategic,
their solution is not to "Filipinize" or "Vietnamize"
or "Singaporize." Their solution is to make sure that
those industries are in the hands of state enterprises.
So, in these countries, nationalization means the
government takes over. And because their
governments are competent and honest enough to
the public, that is the solution. x x x 60 (Emphasis
supplied)

Prospective Application of Sanctions

JUSTICE CARPIO:

If government ownership of public utilities is the

solution, then foreign investments in our public
utilities serve no purpose. Obviously, there can never
be foreign investments in public utilities if, as Dr.
Villegas claims, the "solution is to make sure that
those industries are in the hands of state enterprises."
Dr. Villegas's argument that foreign investments
in telecommunication companies like PLDT are
badly needed to save our ailing economy
contradicts his own theory that the solution is for
government to take over these companies. Dr.
Villegas is barking up the wrong tree since State
ownership of public utilities and foreign investments in
such industries are diametrically opposed
concepts, which cannot possibly be reconciled.

In its Motion for Partial Reconsideration, the SEC

sought to clarify the reckoning period of the
application and imposition of appropriate sanctions
against PLDT if found violating Section 11, Article XII
of the Constitution.
As discussed, the Court has directed the SEC to
investigate and determine whether PLDT violated
Section 11, Article XII of the Constitution. Thus,
there is no dispute that it is only after the SEC has
determined PLDT's violation, if any exists at the time
of the commencement of the administrative case or
investigation, that the SEC may impose the statutory
sanctions against PLDT. In other words, once the 28
June 2011 Decision becomes final, the SEC shall
impose the appropriate sanctions only if it finds after
due hearing that, at the start of the administrative
case or investigation, there is an existing violation of
Section 11, Article XII of the Constitution. Under
prevailing jurisprudence, public utilities that fail to
comply with the nationality requirement under Section
11, Article XII and the FIA can cure their deficiencies
prior to the start of the administrative case or
investigation.

XII.
Final Word
The Constitution expressly declares as State policy
the development of an economy "effectively
controlled" by Filipinos. Consistent with such State
policy, the Constitution explicitly reserves the
ownership and operation of public utilities to
Philippine nationals, who are defined in the Foreign
Investments Act of 1991 as Filipino citizens, or
corporations or associations at least 60 percent of
whose capital with voting rights belongs to Filipinos.
The FIA's implementing rules explain that "[f]or stocks
to be deemed owned and held by Philippine citizens
or Philippine nationals, mere legal title is not enough
to meet the required Filipino equity. Full beneficial
ownership of the stocks, coupled with appropriate
voting rights is essential." In effect, the FIA clarifies,
reiterates and confirms the interpretation that the term
"capital" in Section 11, Article XII of the 1987
Constitution refers to shares with voting rights, as
well as with full beneficial ownership. This is
precisely because the right to vote in the election of
directors, coupled with full beneficial ownership of
stocks, translates to effective control of a
corporation.
Any other construction of the term "capital" in Section
11, Article XII of the Constitution contravenes the
letter and intent of the Constitution. Any other
meaning of the term "capital" openly invites
alien domination of economic activities reserved
exclusively to Philippine nationals. Therefore,
respondents' interpretation will ultimately result in
handing over effective control of our national
economy to foreigners in patent violation of the
Constitution, making Filipinos second-class citizens in
their own country.
Filipinos have only to remind themselves of how this
country was exploited under the Parity Amendment,
which gave Americans the same rights as Filipinos
in the exploitation of natural resources, and in
the ownership and control of public utilities, in the
Philippines. To do this the 1935 Constitution, which
contained the same 60 percent Filipino ownership and
control requirement as the present 1987 Constitution,
had to be amended to give Americans parity rights
with Filipinos. There was bitter opposition to the
Parity Amendment62 and many Filipinos eagerly

awaited its expiration. In late 1968, PLDT was one of

the American-controlled public utilities that became
Filipino-controlled when the controlling American
stockholders divested in anticipation of the expiration
of the Parity Amendment on 3 July 1974.63 No
economic suicide happened when control of public
utilities and mining corporations passed to Filipinos'
hands upon expiration of the Parity Amendment.
Movants' interpretation of the term "capital" would
bring us back to the same evils spawned by the
Parity Amendment, effectively giving foreigners
parity rights with Filipinos, but this time even without
any amendment to the present Constitution. Worse,
movants' interpretation opens up our national
economy to effectivecontrol not only by Americans but
also by all foreigners, be they Indonesians,
Malaysians or Chinese, even in the absence of
reciprocal treaty arrangements. At least the Parity
Amendment, as implemented by the Laurel-Langley
Agreement, gave the capital-starved Filipinos
theoretical parity - the same rights as Americans to
exploit natural resources, and to own and control
public utilities, in the United States of America.
Here, movants' interpretation would effectively mean
a unilateralopening up of our national economy to all
foreigners, without any reciprocal arrangements. That
would mean that Indonesians, Malaysians and
Chinese nationals could effectively control our
mining companies and public utilities while Filipinos,
even if they have the capital, could not control similar
corporations in these countries.
The 1935, 1973 and 1987 Constitutions have the
same 60 percent Filipino ownership and control
requirement for public utilities like PLOT. Any
deviation from this requirement necessitates an
amendment to the Constitution as exemplified by
the Parity Amendment. This Court has no power
to amend the Constitution for its power and duty is
only to faithfully apply and interpret the Constitution.
WHEREFORE, we DENY the motions for
reconsideration WITH FINALITY. No further
pleadings shall be entertained.
Estrada vs. People of the Philippines
BELLOSILLO, J.:

JOHN STUART MILL, in his essay On Liberty,

unleashes the full fury of his pen in defense of the
rights of the individual from the vast powers of the
State and the inroads of societal pressure. But even
as he draws a sacrosanct line demarcating the limits
on individuality beyond which the State cannot tread asserting that "individual spontaneity" must be
allowed to flourish with very little regard to social
interference - he veritably acknowledges that the
exercise of rights and liberties is imbued with a civic
obligation, which society is justified in enforcing at all
cost, against those who would endeavor to withhold
fulfillment. Thus he says The sole end for which mankind is warranted,
individually or collectively, in interfering with the liberty
of action of any of their number, is self-protection. The
only purpose for which power can be rightfully
exercised over any member of a civilized community,
against his will, is to prevent harm to others.
Parallel to individual liberty is the natural and
illimitable right of the State to self-preservation. With
the end of maintaining the integrity and cohesiveness
of the body politic, it behooves the State to formulate
a system of laws that would compel obeisance to its
collective wisdom and inflict punishment for nonobservance.
The movement from Mill's individual liberalism to
unsystematic collectivism wrought changes in the
social order, carrying with it a new formulation of
fundamental rights and duties more attuned to the
imperatives of contemporary socio-political ideologies.
In the process, the web of rights and State
impositions became tangled and obscured, enmeshed
in threads of multiple shades and colors, the skein
irregular and broken. Antagonism, often outright
collision, between the law as the expression of the will
of the State, and the zealous attempts by its members
to preserve their individuality and dignity, inevitably
followed. It is when individual rights are pitted against
State authority that judicial conscience is put to its
severest test.
Petitioner Joseph Ejercito Estrada, the highestranking official to be prosecuted under RA 7080 (An
Act Defining and Penalizing the Crime of Plunder),1
as amended by RA 7659,2 wishes to impress upon us
that the assailed law is so defectively fashioned that it
crosses that thin but distinct line which divides the

valid from the constitutionally infirm. He therefore

makes a stringent call for this Court to subject the
Plunder Law to the crucible of constitutionality mainly
because, according to him, (a) it suffers from the vice
of vagueness; (b) it dispenses with the "reasonable
doubt" standard in criminal prosecutions; and, (c) it
abolishes the element of mens rea in crimes already
punishable under The Revised Penal Code, all of
which are purportedly clear violations of the
fundamental rights of the accused to due process and
to be informed of the nature and cause of the
accusation against him.
Specifically, the provisions of the Plunder Law claimed
by petitioner to have transgressed constitutional
boundaries are Secs. 1, par. (d), 2 and 4 which are
reproduced hereunder:
Section 1. x x x x (d) "Ill-gotten wealth" means any
asset, property, business, enterprise or material
possession of any person within the purview of
Section Two (2) hereof, acquired by him directly or
indirectly through dummies, nominees, agents,
subordinates and/or business associates by any
combination or series of the following means or
similar schemes:
(1) Through misappropriation, conversion, misuse, or
malversation of public funds or raids on the public
treasury;
(2) By receiving, directly or indirectly, any commission,
gift, share, percentage, kickbacks or any other form of
pecuniary benefit from any person and/or entity in
connection with any government contract or project or
by reason of the office or position of the public office
concerned;
(3) By the illegal or fraudulent conveyance or
disposition of assets belonging to the National
Government or any of its subdivisions, agencies or
instrumentalities, or government owned or controlled
corporations and their subsidiaries;
(4) By obtaining, receiving or accepting directly or
indirectly any shares of stock, equity or any other form
of interest or participation including the promise of
future employment in any business enterprise or
undertaking;

(5) By establishing agricultural, industrial or

commercial monopolies or other combinations and/or
implementation of decrees and orders intended to
benefit particular persons or special interests; or
(6) By taking advantage of official position, authority,
relationship, connection or influence to unjustly enrich
himself or themselves at the expense and to the
damage and prejudice of the Filipino people and the
Republic of the Philippines.
Section 2. Definition of the Crime of Plunder,
Penalties. - Any public officer who, by himself or in
connivance with members of his family, relatives by
affinity or consanguinity, business associates,
subordinates or other persons, amasses,
accumulates or acquires ill-gotten wealth through
a combination or series of overt or criminal acts as
described in Section 1 (d) hereof, in the aggregate
amount or total value of at least fifty million pesos
(P50,000,000.00) shall be guilty of the crime of
plunder and shall be punished by reclusion perpetua
to death. Any person who participated with the said
public officer in the commission of an offense
contributing to the crime of plunder shall likewise be
punished for such offense. In the imposition of
penalties, the degree of participation and the
attendance of mitigating and extenuating
circumstances as provided by the Revised Penal
Code shall be considered by the court. The court shall
declare any and all ill-gotten wealth and their interests
and other incomes and assets including the properties
and shares of stocks derived from the deposit or
investment thereof forfeited in favor of the State
(underscoring supplied).
Section 4. Rule of Evidence. - For purposes of
establishing the crime of plunder, it shall not be
necessary to prove each and every criminal act done
by the accused in furtherance of the scheme or
conspiracy to amass, accumulate or acquire ill-gotten
wealth, it being sufficient to establish beyond
reasonable doubt a pattern of overt or criminal acts
indicative of the overall unlawful scheme or
conspiracy (underscoring supplied).
On 4 April 2001 the Office of the Ombudsman filed
before the Sandiganbayan eight (8) separate
Informations, docketed as: (a) Crim. Case No. 26558,
for violation of RA 7080, as amended by RA 7659; (b)
Crim. Cases Nos. 26559 to 26562, inclusive, for

violation of Secs. 3, par. (a), 3, par. (a), 3, par. (e) and

3, par. (e), of RA 3019 (Anti-Graft and Corrupt
Practices Act), respectively; (c) Crim. Case No.
26563, for violation of Sec. 7, par. (d), of RA 6713
(The Code of Conduct and Ethical Standards for
Public Officials and Employees); (d) Crim. Case No.
26564, for Perjury (Art. 183 of The Revised Penal
Code); and, (e) Crim. Case No. 26565, for Illegal Use
Of An Alias (CA No. 142, as amended by RA 6085).
On 11 April 2001 petitioner filed an Omnibus Motion
for the remand of the case to the Ombudsman for
preliminary investigation with respect to specification
"d" of the charges in the Information in Crim. Case
No. 26558; and, for reconsideration/reinvestigation of
the offenses under specifications "a," "b," and "c" to
give the accused an opportunity to file counteraffidavits and other documents necessary to prove
lack of probable cause. Noticeably, the grounds raised
were only lack of preliminary investigation,
reconsideration/reinvestigation of offenses, and
opportunity to prove lack of probable cause. The
purported ambiguity of the charges and the
vagueness of the law under which they are charged
were never raised in that Omnibus Motion thus
indicating the explicitness and comprehensibility of
the Plunder Law.
On 25 April 2001 the Sandiganbayan, Third Division,
issued a Resolution in Crim. Case No. 26558 finding
that "a probable cause for the offense of PLUNDER
exists to justify the issuance of warrants for the arrest
of the accused." On 25 June 2001 petitioner's motion
for reconsideration was denied by the
Sandiganbayan.
On 14 June 2001 petitioner moved to quash the
Information in Crim. Case No. 26558 on the ground
that the facts alleged therein did not constitute an
indictable offense since the law on which it was based
was unconstitutional for vagueness, and that the
Amended Information for Plunder charged more than
one (1) offense. On 21 June 2001 the Government
filed its Opposition to the Motion to Quash, and five
(5) days later or on 26 June 2001 petitioner submitted
his Reply to the Opposition. On 9 July 2001 the
Sandiganbayan denied petitioner's Motion to Quash.
As concisely delineated by this Court during the oral
arguments on 18 September 2001, the issues for
resolution in the instant petition for certiorari are: (a)

The Plunder Law is unconstitutional for being vague;

(b) The Plunder Law requires less evidence for
proving the predicate crimes of plunder and therefore
violates the rights of the accused to due process; and,
(c) Whether Plunder as defined in RA 7080 is a
malum prohibitum, and if so, whether it is within the
power of Congress to so classify it.
Preliminarily, the whole gamut of legal concepts
pertaining to the validity of legislation is predicated on
the basic principle that a legislative measure is
presumed to be in harmony with the Constitution.3
Courts invariably train their sights on this fundamental
rule whenever a legislative act is under a
constitutional attack, for it is the postulate of
constitutional adjudication. This strong predilection for
constitutionality takes its bearings on the idea that it is
forbidden for one branch of the government to
encroach upon the duties and powers of another.
Thus it has been said that the presumption is based
on the deference the judicial branch accords to its
coordinate branch - the legislature.
If there is any reasonable basis upon which the
legislation may firmly rest, the courts must assume
that the legislature is ever conscious of the borders
and edges of its plenary powers, and has passed the
law with full knowledge of the facts and for the
purpose of promoting what is right and advancing the
welfare of the majority. Hence in determining whether
the acts of the legislature are in tune with the
fundamental law, courts should proceed with judicial
restraint and act with caution and forbearance. Every
intendment of the law must be adjudged by the courts
in favor of its constitutionality, invalidity being a
measure of last resort. In construing therefore the
provisions of a statute, courts must first ascertain
whether an interpretation is fairly possible to sidestep
the question of constitutionality.
In La Union Credit Cooperative, Inc. v. Yaranon4 we
held that as long as there is some basis for the
decision of the court, the constitutionality of the
challenged law will not be touched and the case will
be decided on other available grounds. Yet the force
of the presumption is not sufficient to catapult a
fundamentally deficient law into the safe environs of
constitutionality. Of course, where the law clearly and
palpably transgresses the hallowed domain of the
organic law, it must be struck down on sight lest the

positive commands of the fundamental law be unduly

eroded.
Verily, the onerous task of rebutting the presumption
weighs heavily on the party challenging the validity of
the statute. He must demonstrate beyond any tinge of
doubt that there is indeed an infringement of the
constitution, for absent such a showing, there can be
no finding of unconstitutionality. A doubt, even if wellfounded, will hardly suffice. As tersely put by Justice
Malcolm, "To doubt is to sustain."5 And petitioner has
miserably failed in the instant case to discharge his
burden and overcome the presumption of
constitutionality of the Plunder Law.

As it is written, the Plunder Law contains

ascertainable standards and well-defined parameters
which would enable the accused to determine the
nature of his violation. Section 2 is sufficiently explicit
in its description of the acts, conduct and conditions
required or forbidden, and prescribes the elements of
the crime with reasonable certainty and particularity.
Thus 1. That the offender is a public officer who acts by
himself or in connivance with members of his family,
relatives by affinity or consanguinity, business
associates, subordinates or other persons;
2. That he amassed, accumulated or acquired illgotten wealth through a combination or series of the
following overt or criminal acts: (a) through
misappropriation, conversion, misuse, or malversation
of public funds or raids on the public treasury; (b) by
receiving, directly or indirectly, any commission, gift,
share, percentage, kickback or any other form of
pecuniary benefits from any person and/or entity in
connection with any government contract or project or
by reason of the office or position of the public officer;
(c) by the illegal or fraudulent conveyance or
disposition of assets belonging to the National
Government or any of its subdivisions, agencies or
instrumentalities of Government owned or controlled
corporations or their subsidiaries; (d) by obtaining,
receiving or accepting directly or indirectly any shares
of stock, equity or any other form of interest or
participation including the promise of future
employment in any business enterprise or
undertaking; (e) by establishing agricultural, industrial

or commercial monopolies or other combinations

and/or implementation of decrees and orders
intended to benefit particular persons or special
interests; or (f) by taking advantage of official position,
authority, relationship, connection or influence to
unjustly enrich himself or themselves at the expense
and to the damage and prejudice of the Filipino
people and the Republic of the Philippines; and,
3. That the aggregate amount or total value of the illgotten wealth amassed, accumulated or acquired is at
least P50,000,000.00.
As long as the law affords some comprehensible
guide or rule that would inform those who are subject
to it what conduct would render them liable to its
penalties, its validity will be sustained. It must
sufficiently guide the judge in its application; the
counsel, in defending one charged with its violation;
and more importantly, the accused, in identifying the
realm of the proscribed conduct. Indeed, it can be
understood with little difficulty that what the assailed
statute punishes is the act of a public officer in
amassing or accumulating ill-gotten wealth of at
leastP50,000,000.00 through a series or combination
of acts enumerated in Sec. 1, par. (d), of the Plunder
Law.
In fact, the amended Information itself closely tracks
the language of the law, indicating with reasonable
certainty the various elements of the offense which
petitioner is alleged to have committed:
"The undersigned Ombudsman, Prosecutor and OICDirector, EPIB, Office of the Ombudsman, hereby
accuses former PRESIDENT OF THE REPUBLIC OF
THE PHILIPPINES, Joseph Ejercito Estrada,
a.k.a. 'ASIONG SALONGA' and a.k.a. 'JOSE
VELARDE,' together with Jose 'Jinggoy' Estrada,
Charlie 'Atong' Ang, Edward Serapio, Yolanda T.
Ricaforte, Alma Alfaro, JOHN DOE a.k.a. Eleuterio
Tan OR Eleuterio Ramos Tan or Mr. Uy, Jane Doe
a.k.a. Delia Rajas, and John DOES & Jane Does, of
the crime of Plunder, defined and penalized under
R.A. No. 7080, as amended by Sec. 12 of R.A. No.
7659, committed as follows:
That during the period from June, 1998 to January
2001, in the Philippines, and within the jurisdiction of
this Honorable Court, accused Joseph Ejercito
Estrada,THEN A PRESIDENT OF THE REPUBLIC

OF THE PHILIPPINES, by
himself AND/OR in CONNIVANCE/CONSPIRACY wit
h his co-accused, WHO ARE MEMBERS OF HIS
FAMILY, RELATIVES BY AFFINITY OR
CONSANGUINITY, BUSINESS ASSOCIATES,
SUBORDINATES AND/OR OTHER PERSONS, BY
TAKING UNDUE ADVANTAGE OF HIS OFFICIAL
POSITION, AUTHORITY, RELATIONSHIP,
CONNECTION, OR INFLUENCE, did then and there
willfully, unlawfully and criminally amass, accumulate
and acquire BY HIMSELF, DIRECTLY OR
INDIRECTLY, ill-gotten wealth in the aggregate
amount or TOTAL VALUE of FOUR BILLION NINETY
SEVEN MILLION EIGHT HUNDRED FOUR
THOUSAND ONE HUNDRED SEVENTY THREE
PESOS AND SEVENTEEN
CENTAVOS (P4,097,804,173.17), more or
less,THEREBY UNJUSTLY ENRICHING HIMSELF
OR THEMSELVES AT THE EXPENSE AND TO THE
DAMAGE OF THE FILIPINO PEOPLE AND THE
REPUBLIC OF THE PHILIPPINES, through ANY OR
A combination OR A series of overt OR criminal
acts, OR SIMILAR SCHEMES OR MEANS, described
as follows:
(a) by receiving OR collecting, directly or indirectly,
on SEVERAL INSTANCES, MONEY IN THE
AGGREGATE AMOUNT OF FIVE HUNDRED
FORTY-FIVE MILLION PESOS (P545,000,000.00),
MORE OR LESS, FROM ILLEGAL GAMBLING IN
THE FORM OF GIFT, SHARE, PERCENTAGE,
KICKBACK OR ANY FORM OF PECUNIARY
BENEFIT, BY HIMSELF AND/OR in connection with
co-accused CHARLIE 'ATONG' ANG, Jose 'Jinggoy'
Estrada, Yolanda T. Ricaforte, Edward Serapio, AND
JOHN DOES AND JANE DOES, in consideration OF
TOLERATION OR PROTECTION OF ILLEGAL
GAMBLING;
(b) by DIVERTING, RECEIVING, misappropriating,
converting OR misusing DIRECTLY OR INDIRECTLY,
for HIS OR THEIR PERSONAL gain and benefit,
public funds in the amount of ONE HUNDRED
THIRTY MILLION PESOS (P130,000,000.00), more
or less, representing a portion of the TWO HUNDRED
MILLION PESOS (P200,000,000.00) tobacco excise
tax share allocated for the province of Ilocos Sur
under R.A. No. 7171, by himself and/or in connivance
with co-accused Charlie 'Atong' Ang, Alma
Alfaro, JOHN DOE a.k.a. Eleuterio Ramos Tan or Mr.

Uy, Jane Doe a.k.a. Delia Rajas,AND OTHER JOHN

DOES & JANE DOES; (italic supplied).
(c) by directing, ordering and compelling, FOR HIS
PERSONAL GAIN AND BENEFIT, the Government
Service Insurance System (GSIS) TO PURCHASE
351,878,000 SHARES OF STOCKS, MORE OR
LESS, and the Social Security System (SSS),
329,855,000 SHARES OF STOCK, MORE OR LESS,
OF THE BELLE CORPORATION IN THE AMOUNT
OF MORE OR LESS ONE BILLION ONE HUNDRED
TWO MILLION NINE HUNDRED SIXTY FIVE
THOUSAND SIX HUNDRED SEVEN PESOS AND
FIFTY CENTAVOS (P1,102,965,607.50) AND MORE
OR LESS SEVEN HUNDRED FORTY FOUR
MILLION SIX HUNDRED TWELVE THOUSAND AND
FOUR HUNDRED FIFTY PESOS (P744,612,450.00),
RESPECTIVELY, OR A TOTAL OF MORE OR LESS
ONE BILLION EIGHT HUNDRED FORTY SEVEN
MILLION FIVE HUNDRED SEVENTY EIGHT
THOUSAND FIFTY SEVEN PESOS AND FIFTY
CENTAVOS (P1,847,578,057.50); AND BY
COLLECTING OR RECEIVING, DIRECTLY OR
INDIRECTLY, BY HIMSELF AND/OR IN
CONNIVANCE WITH JOHN DOES AND JANE
DOES, COMMISSIONS OR PERCENTAGES BY
REASON OF SAID PURCHASES OF SHARES OF
STOCK IN THE AMOUNT OF ONE HUNDRED
EIGHTY NINE MILLION SEVEN HUNDRED
THOUSAND PESOS (P189,700,000.00) MORE OR
LESS, FROM THE BELLE CORPORATION WHICH
BECAME PART OF THE DEPOSIT IN THE
EQUITABLE-PCI BANK UNDER THE ACCOUNT
NAME 'JOSE VELARDE;'

proof, these factual assertions clearly show that the

elements of the crime are easily understood and
provide adequate contrast between the innocent and
the prohibited acts. Upon such unequivocal
assertions, petitioner is completely informed of the
accusations against him as to enable him to prepare
for an intelligent defense.
Petitioner, however, bewails the failure of the law to
provide for the statutory definition of the terms
"combination" and "series" in the key phrase "a
combination or series of overt or criminal acts" found
in Sec. 1, par. (d), and Sec. 2, and the word "pattern"
in Sec. 4. These omissions, according to petitioner,
render the Plunder Law unconstitutional for being
impermissibly vague and overbroad and deny him the
right to be informed of the nature and cause of the
accusation against him, hence, violative of his
fundamental right to due process.
The rationalization seems to us to be pure sophistry. A
statute is not rendered uncertain and void merely
because general terms are used therein, or because
of the employment of terms without defining them;6
much less do we have to define every word we use.
Besides, there is no positive constitutional or statutory
command requiring the legislature to define each and
every word in an enactment. Congress is not
restricted in the form of expression of its will, and its
inability to so define the words employed in a statute
will not necessarily result in the vagueness or
ambiguity of the law so long as the legislative will is
clear, or at least, can be gathered from the whole act,
which is distinctly expressed in the Plunder Law.

(d) by unjustly enriching himself FROM

COMMISSIONS, GIFTS, SHARES, PERCENTAGES,
KICKBACKS, OR ANY FORM OF PECUNIARY
BENEFITS, IN CONNIVANCE WITH JOHN DOES
AND JANE DOES, in the amount of MORE OR
LESS THREE BILLION TWO HUNDRED THIRTY
THREE MILLION ONE HUNDRED FOUR
THOUSAND ONE HUNDRED SEVENTY THREE
PESOS AND SEVENTEEN CENTAVOS
(P3,233,104,173.17) AND DEPOSITING THE SAME
UNDER HIS ACCOUNT NAME 'JOSE VELARDE' AT
THE EQUITABLE-PCI BANK."

Moreover, it is a well-settled principle of legal

hermeneutics that words of a statute will be
interpreted in their natural, plain and ordinary
acceptation and signification,7 unless it is evident that
the legislature intended a technical or special legal
meaning to those words.8 The intention of the
lawmakers - who are, ordinarily, untrained philologists
and lexicographers - to use statutory phraseology in
such a manner is always presumed. Thus, Webster's
New Collegiate Dictionary contains the following
commonly accepted definition of the words
"combination" and "series:"

We discern nothing in the foregoing that is vague or

ambiguous - as there is obviously none - that will
confuse petitioner in his defense. Although subject to

Combination - the result or product of combining; the

act or process of combining. To combine is to bring

into such close relationship as to obscure individual

characters.
Series - a number of things or events of the same
class coming one after another in spatial and
temporal succession.
That Congress intended the words "combination" and
"series" to be understood in their popular meanings is
pristinely evident from the legislative deliberations on
the bill which eventually became RA 7080 or the
Plunder Law:
DELIBERATIONS OF THE BICAMERAL
COMMITTEE ON JUSTICE, 7 May 1991
REP. ISIDRO: I am just intrigued again by our
definition of plunder. We say THROUGH A
COMBINATION OR SERIES OF OVERT OR
CRIMINAL ACTS AS MENTIONED IN SECTION ONE
HEREOF. Now when we say combination, we actually
mean to say, if there are two or more means, we
mean to say that number one and two or number one
and something else are included, how about a series
of the same act? For example, through
misappropriation, conversion, misuse, will these be
included also?
REP. GARCIA: Yeah, because we say a series.
REP. ISIDRO: Series.
REP. GARCIA: Yeah, we include series.
REP. ISIDRO: But we say we begin with a
combination.
REP. GARCIA: Yes.
REP. ISIDRO: When we say combination, it seems
that REP. GARCIA: Two.
REP. ISIDRO: Not only two but we seem to mean that
two of the enumerated means not twice of one
enumeration.
REP. GARCIA: No, no, not twice.
REP. ISIDRO: Not twice?

REP. GARCIA: Yes. Combination is not twice - but

combination, two acts.
REP. ISIDRO: So in other words, thats it. When we
say combination, we mean, two different acts. It
cannot be a repetition of the same act.
REP. GARCIA: That be referred to series, yeah.
REP. ISIDRO: No, no. Supposing one act is repeated,
so there are two.
REP. GARCIA: A series.
REP. ISIDRO: Thats not series. Its a combination.
Because when we say combination or series, we
seem to say that two or more, di ba?

REP. GARCIA: Yes, this distinguishes it really from

ordinary crimes. That is why, I said, that is a very
good suggestion because if it is only one act, it may
fall under ordinary crime but we have here a
combination or series of overt or criminal acts. So x x
xx
REP. GARCIA: Series. One after the other eh di....
SEN. TANADA: So that would fall under the term
"series?"
REP. GARCIA: Series, oo.
REP. ISIDRO: Now, if it is a combination, ano, two
misappropriations....
REP. GARCIA: Its not... Two misappropriations will
not be combination. Series.
REP. ISIDRO: So, it is not a combination?
REP. GARCIA: Yes.
REP. ISIDRO: When you say combination, two
different?
REP. GARCIA: Yes.
SEN. TANADA: Two different.
REP. ISIDRO: Two different acts.

REP. GARCIA: For example, ha...

REP. ISIDRO: Now a series, meaning, repetition...
DELIBERATIONS ON SENATE BILL NO. 733, 6 June
1989
SENATOR MACEDA: In line with our interpellations
that sometimes "one" or maybe even "two" acts may
already result in such a big amount, on line 25, would
the Sponsor consider deleting the words "a series of
overt or," to read, therefore: "or conspiracy
COMMITTED by criminal acts such as." Remove the
idea of necessitating "a series." Anyway, the criminal
acts are in the plural.
SENATOR TANADA: That would mean a combination
of two or more of the acts mentioned in this.

THE PRESIDENT: Probably two or more would be....

SENATOR MACEDA: Yes, because "a series" implies
several or many; two or more.
SENATOR TANADA: Accepted, Mr. President x x x x
THE PRESIDENT: If there is only one, then he has to
be prosecuted under the particular crime. But when
we say "acts of plunder" there should be, at least, two
or more.
SENATOR ROMULO: In other words, that is already
covered by existing laws, Mr. President.
Thus when the Plunder Law speaks of "combination,"
it is referring to at least two (2) acts falling under
different categories of enumeration provided in Sec.
1, par. (d), e.g., raids on the public treasury in Sec. 1,
par. (d), subpar. (1), and fraudulent conveyance of
assets belonging to the National Government under
Sec. 1, par. (d), subpar. (3).
On the other hand, to constitute a series" there must
be two (2) or more overt or criminal acts falling under
the same category of enumeration found in Sec. 1,
par. (d), say, misappropriation, malversation and raids
on the public treasury, all of which fall under Sec. 1,
par. (d), subpar. (1). Verily, had the legislature
intended a technical or distinctive meaning for

"combination" and "series," it would have taken

greater pains in specifically providing for it in the law.
As for "pattern," we agree with the observations of the
Sandiganbayan9 that this term is sufficiently defined
in Sec. 4, in relation to Sec. 1, par. (d), and Sec. 2 x x x x under Sec. 1 (d) of the law, a 'pattern' consists
of at least a combination or series of overt or criminal
acts enumerated in subsections (1) to (6) of Sec. 1
(d). Secondly, pursuant to Sec. 2 of the law, the
pattern of overt or criminal acts is directed towards a
common purpose or goal which is to enable the public
officer to amass, accumulate or acquire ill-gotten
wealth. And thirdly, there must either be an 'overall
unlawful scheme' or 'conspiracy' to achieve said
common goal. As commonly understood, the term
'overall unlawful scheme' indicates a 'general plan of
action or method' which the principal accused and
public officer and others conniving with him follow to
achieve the aforesaid common goal. In the
alternative, if there is no such overall scheme or
where the schemes or methods used by multiple
accused vary, the overt or criminal acts must form part
of a conspiracy to attain a common goal.
Hence, it cannot plausibly be contended that the law
does not give a fair warning and sufficient notice of
what it seeks to penalize. Under the circumstances,
petitioner's reliance on the "void-for-vagueness"
doctrine is manifestly misplaced. The doctrine has
been formulated in various ways, but is most
commonly stated to the effect that a statute
establishing a criminal offense must define the
offense with sufficient definiteness that persons of
ordinary intelligence can understand what conduct is
prohibited by the statute. It can only be invoked
against that specie of legislation that is utterly vague
on its face, i.e., that which cannot be clarified either
by a saving clause or by construction.
A statute or act may be said to be vague when it lacks
comprehensible standards that men of common
intelligence must necessarily guess at its meaning
and differ in its application. In such instance, the
statute is repugnant to the Constitution in two (2)
respects - it violates due process for failure to accord
persons, especially the parties targeted by it, fair
notice of what conduct to avoid; and, it leaves law
enforcers unbridled discretion in carrying out its
provisions and becomes an arbitrary flexing of the

Government muscle.10 But the doctrine does not

apply as against legislations that are merely couched
in imprecise language but which nonetheless specify
a standard though defectively phrased; or to those
that are apparently ambiguous yet fairly applicable to
certain types of activities. The first may be "saved" by
proper construction, while no challenge may be
mounted as against the second whenever directed
against such activities.11 With more reason, the
doctrine cannot be invoked where the assailed statute
is clear and free from ambiguity, as in this case.
The test in determining whether a criminal statute is
void for uncertainty is whether the language conveys
a sufficiently definite warning as to the proscribed
conduct when measured by common understanding
and practice.12 It must be stressed, however, that the
"vagueness" doctrine merely requires a reasonable
degree of certainty for the statute to be upheld - not
absolute precision or mathematical exactitude, as
petitioner seems to suggest. Flexibility, rather than
meticulous specificity, is permissible as long as the
metes and bounds of the statute are clearly
delineated. An act will not be held invalid merely
because it might have been more explicit in its
wordings or detailed in its provisions, especially
where, because of the nature of the act, it would be
impossible to provide all the details in advance as in
all other statutes.
Moreover, we agree with, hence we adopt, the
observations of Mr. Justice Vicente V. Mendoza
during the deliberations of the Court that the
allegations that the Plunder Law is vague and
overbroad do not justify a facial review of its validity The void-for-vagueness doctrine states that "a statute
which either forbids or requires the doing of an act in
terms so vague that men of common intelligence must
necessarily guess at its meaning and differ as to its
application, violates the first essential of due process
of law."13 The overbreadth doctrine, on the other
hand, decrees that "a governmental purpose may not
be achieved by means which sweep unnecessarily
broadly and thereby invade the area of protected
freedoms."14
A facial challenge is allowed to be made to a vague
statute and to one which is overbroad because of
possible "chilling effect" upon protected speech. The
theory is that "[w]hen statutes regulate or proscribe

speech and no readily apparent construction suggests

itself as a vehicle for rehabilitating the statutes in a
single prosecution, the transcendent value to all
society of constitutionally protected expression is
deemed to justify allowing attacks on overly broad
statutes with no requirement that the person making
the attack demonstrate that his own conduct could not
be regulated by a statute drawn with narrow
specificity."15 The possible harm to society in
permitting some unprotected speech to go
unpunished is outweighed by the possibility that the
protected speech of others may be deterred and
perceived grievances left to fester because of
possible inhibitory effects of overly broad statutes.
This rationale does not apply to penal statutes.
Criminal statutes have general in terrorem effect
resulting from their very existence, and, if facial
challenge is allowed for this reason alone, the State
may well be prevented from enacting laws against
socially harmful conduct. In the area of criminal law,
the law cannot take chances as in the area of free
speech.
The overbreadth and vagueness doctrines then have
special application only to free speech cases. They
are inapt for testing the validity of penal statutes. As
the U.S. Supreme Court put it, in an opinion by Chief
Justice Rehnquist, "we have not recognized an
'overbreadth' doctrine outside the limited context of
the First Amendment."16 In Broadrick v. Oklahoma,17
the Court ruled that "claims of facial overbreadth have
been entertained in cases involving statutes which, by
their terms, seek to regulate only spoken words" and,
again, that "overbreadth claims, if entertained at all,
have been curtailed when invoked against ordinary
criminal laws that are sought to be applied to
protected conduct." For this reason, it has been held
that "a facial challenge to a legislative act is the most
difficult challenge to mount successfully, since the
challenger must establish that no set of
circumstances exists under which the Act would be
valid."18 As for the vagueness doctrine, it is said that
a litigant may challenge a statute on its face only if it
is vague in all its possible applications. "A plaintiff who
engages in some conduct that is clearly proscribed
cannot complain of the vagueness of the law as
applied to the conduct of others."19
In sum, the doctrines of strict scrutiny, overbreadth,
and vagueness are analytical tools developed for

testing "on their faces" statutes in free speech cases

or, as they are called in American law, First
Amendment cases. They cannot be made to do
service when what is involved is a criminal statute.
With respect to such statute, the established rule is
that "one to whom application of a statute is
constitutional will not be heard to attack the statute on
the ground that impliedly it might also be taken as
applying to other persons or other situations in which
its application might be unconstitutional."20 As has
been pointed out, "vagueness challenges in the First
Amendment context, like overbreadth challenges
typically produce facial invalidation, while statutes
found vague as a matter of due process typically are
invalidated [only] 'as applied' to a particular
defendant."21 Consequently, there is no basis for
petitioner's claim that this Court review the AntiPlunder Law on its face and in its entirety.
Indeed, "on its face" invalidation of statutes results in
striking them down entirely on the ground that they
might be applied to parties not before the Court
whose activities are constitutionally protected.22 It
constitutes a departure from the case and controversy
requirement of the Constitution and permits decisions
to be made without concrete factual settings and in
sterile abstract contexts.23 But, as the U.S. Supreme
Court pointed out in Younger v. Harris24
[T]he task of analyzing a proposed statute, pinpointing
its deficiencies, and requiring correction of these
deficiencies before the statute is put into effect, is
rarely if ever an appropriate task for the judiciary. The
combination of the relative remoteness of the
controversy, the impact on the legislative process of
the relief sought, and above all the speculative and
amorphous nature of the required line-by-line analysis
of detailed statutes, . . . ordinarily results in a kind of
case that is wholly unsatisfactory for deciding
constitutional questions, whichever way they might be
decided.
For these reasons, "on its face" invalidation of
statutes has been described as "manifestly strong
medicine," to be employed "sparingly and only as a
last resort,"25 and is generally disfavored.26 In
determining the constitutionality of a statute,
therefore, its provisions which are alleged to have
been violated in a case must be examined in the light
of the conduct with which the defendant is charged.27

In light of the foregoing disquisition, it is evident that

the purported ambiguity of the Plunder Law, so
tenaciously claimed and argued at length by
petitioner, is more imagined than real. Ambiguity,
where none exists, cannot be created by dissecting
parts and words in the statute to furnish support to
critics who cavil at the want of scientific precision in
the law. Every provision of the law should be
construed in relation and with reference to every other
part. To be sure, it will take more than nitpicking to
overturn the well-entrenched presumption of
constitutionality and validity of the Plunder Law. A
fortiori, petitioner cannot feign ignorance of what the
Plunder Law is all about. Being one of the Senators
who voted for its passage, petitioner must be aware
that the law was extensively deliberated upon by the
Senate and its appropriate committees by reason of
which he even registered his affirmative vote with full
knowledge of its legal implications and sound
constitutional anchorage.
The parallel case of Gallego v. Sandiganbayan28
must be mentioned if only to illustrate and emphasize
the point that courts are loathed to declare a statute
void for uncertainty unless the law itself is so
imperfect and deficient in its details, and is
susceptible of no reasonable construction that will
support and give it effect. In that case, petitioners
Gallego and Agoncillo challenged the constitutionality
of Sec. 3, par. (e), of The Anti-Graft and Corrupt
Practices Act for being vague. Petitioners posited,
among others, that the term "unwarranted" is highly
imprecise and elastic with no common law meaning or
settled definition by prior judicial or administrative
precedents; that, for its vagueness, Sec. 3, par. (e),
violates due process in that it does not give fair
warning or sufficient notice of what it seeks to
penalize. Petitioners further argued that the
Information charged them with three (3) distinct
offenses, to wit: (a) giving of "unwarranted" benefits
through manifest partiality; (b) giving of "unwarranted"
benefits through evident bad faith; and, (c) giving of
"unwarranted" benefits through gross inexcusable
negligence while in the discharge of their official
function and that their right to be informed of the
nature and cause of the accusation against them was
violated because they were left to guess which of the
three (3) offenses, if not all, they were being charged
and prosecuted.

In dismissing the petition, this Court held that Sec. 3,

par. (e), of The Anti-Graft and Corrupt Practices Act
does not suffer from the constitutional defect of
vagueness. The phrases "manifest partiality," "evident
bad faith," and "gross and inexcusable negligence"
merely describe the different modes by which the
offense penalized in Sec. 3, par. (e), of the statute
may be committed, and the use of all these phrases in
the same Information does not mean that the
indictment charges three (3) distinct offenses.
The word 'unwarranted' is not uncertain. It seems
lacking adequate or official support; unjustified;
unauthorized (Webster, Third International Dictionary,
p. 2514); or without justification or adequate reason
(Philadelphia Newspapers, Inc. v. US Dept. of Justice,
C.D. Pa., 405 F. Supp. 8, 12, cited in Words and
Phrases, Permanent Edition, Vol. 43-A 1978,
Cumulative Annual Pocket Part, p. 19).
The assailed provisions of the Anti-Graft and Corrupt
Practices Act consider a corrupt practice and make
unlawful the act of the public officer in:
x x x or giving any private party any unwarranted
benefits, advantage or preference in the discharge of
his official, administrative or judicial functions through
manifest partiality, evident bad faith or gross
inexcusable negligence, x x x (Section 3 [e], Rep. Act
3019, as amended).
It is not at all difficult to comprehend that what the
aforequoted penal provisions penalize is the act of a
public officer, in the discharge of his official,
administrative or judicial functions, in giving any
private party benefits, advantage or preference which
is unjustified, unauthorized or without justification or
adequate reason, through manifest partiality, evident
bad faith or gross inexcusable negligence.
In other words, this Court found that there was
nothing vague or ambiguous in the use of the term
"unwarranted" in Sec. 3, par. (e), of The Anti-Graft and
Corrupt Practices Act, which was understood in its
primary and general acceptation. Consequently, in
that case, petitioners' objection thereto was held
inadequate to declare the section unconstitutional.
On the second issue, petitioner advances the highly
stretched theory that Sec. 4 of the Plunder Law
circumvents the immutable obligation of the

prosecution to prove beyond reasonable doubt the

predicate acts constituting the crime of plunder when
it requires only proof of a pattern of overt or criminal
acts showing unlawful scheme or conspiracy SEC. 4. Rule of Evidence. - For purposes of
establishing the crime of plunder, it shall not be
necessary to prove each and every criminal act done
by the accused in furtherance of the scheme or
conspiracy to amass, accumulate or acquire ill-gotten
wealth, it being sufficient to establish beyond
reasonable doubt a pattern of overt or criminal acts
indicative of the overall unlawful scheme or
conspiracy.
The running fault in this reasoning is obvious even to
the simplistic mind. In a criminal prosecution for
plunder, as in all other crimes, the accused always
has in his favor the presumption of innocence which is
guaranteed by the Bill of Rights, and unless the State
succeeds in demonstrating by proof beyond
reasonable doubt that culpability lies, the accused is
entitled to an acquittal.29 The use of the "reasonable
doubt" standard is indispensable to command the
respect and confidence of the community in the
application of criminal law. It is critical that the moral
force of criminal law be not diluted by a standard of
proof that leaves people in doubt whether innocent
men are being condemned. It is also important in our
free society that every individual going about his
ordinary affairs has confidence that his government
cannot adjudge him guilty of a criminal offense
without convincing a proper factfinder of his guilt with
utmost certainty. This "reasonable doubt" standard
has acquired such exalted stature in the realm of
constitutional law as it gives life to the Due Process
Clause which protects the accused against conviction
except upon proof beyond reasonable doubt of every
fact necessary to constitute the crime with which he is
charged.30 The following exchanges between Rep.
Rodolfo Albano and Rep. Pablo Garcia on this score
during the deliberations in the floor of the House of
Representatives are elucidating DELIBERATIONS OF THE HOUSE OF
REPRESENTATIVES ON RA 7080, 9 October 1990
MR. ALBANO: Now, Mr. Speaker, it is also elementary
in our criminal law that what is alleged in the
information must be proven beyond reasonable doubt.
If we will prove only one act and find him guilty of the

other acts enumerated in the information, does that

not work against the right of the accused especially so
if the amount committed, say, by falsification is less
than P100 million, but the totality of the crime
committed is P100 million since there is malversation,
bribery, falsification of public document, coercion,
theft?
MR. GARCIA: Mr. Speaker, not everything alleged in
the information needs to be proved beyond
reasonable doubt. What is required to be proved
beyond reasonable doubt is every element of the
crime charged. For example, Mr. Speaker, there is an
enumeration of the things taken by the robber in the
information three pairs of pants, pieces of jewelry.
These need not be proved beyond reasonable doubt,
but these will not prevent the conviction of a crime for
which he was charged just because, say, instead of 3
pairs of diamond earrings the prosecution proved two.
Now, what is required to be proved beyond
reasonable doubt is the element of the offense.
MR. ALBANO: I am aware of that, Mr. Speaker, but
considering that in the crime of plunder the totality of
the amount is very important, I feel that such a series
of overt criminal acts has to be taken singly. For
instance, in the act of bribery, he was able to
accumulate only P50,000 and in the crime of
extortion, he was only able to accumulate P1 million.
Now, when we add the totality of the other acts as
required under this bill through the interpretation on
the rule of evidence, it is just one single act, so how
can we now convict him?
MR. GARCIA: With due respect, Mr. Speaker, for
purposes of proving an essential element of the
crime, there is a need to prove that element beyond
reasonable doubt. For example, one essential
element of the crime is that the amount involved is
P100 million. Now, in a series of defalcations and
other acts of corruption in the enumeration the total
amount would be P110 or P120 million, but there are
certain acts that could not be proved, so, we will sum
up the amounts involved in those transactions which
were proved. Now, if the amount involved in these
transactions, proved beyond reasonable doubt, is
P100 million, then there is a crime of plunder
(underscoring supplied).
It is thus plain from the foregoing that the legislature
did not in any manner refashion the standard

quantum of proof in the crime of plunder. The burden

still remains with the prosecution to prove beyond any
iota of doubt every fact or element necessary to
constitute the crime.
The thesis that Sec. 4 does away with proof of each
and every component of the crime suffers from a
dismal misconception of the import of that provision.
What the prosecution needs to prove beyond
reasonable doubt is only a number of acts sufficient to
form a combination or series which would constitute a
pattern and involving an amount of at least
P50,000,000.00. There is no need to prove each and
every other act alleged in the Information to have
been committed by the accused in furtherance of the
overall unlawful scheme or conspiracy to amass,
accumulate or acquire ill-gotten wealth. To illustrate,
supposing that the accused is charged in an
Information for plunder with having committed fifty
(50) raids on the public treasury. The prosecution
need not prove all these fifty (50) raids, it being
sufficient to prove by pattern at least two (2) of the
raids beyond reasonable doubt provided only that
they amounted to at least P50,000,000.00.31
A reading of Sec. 2 in conjunction with Sec. 4, brings
us to the logical conclusion that "pattern of overt or
criminal acts indicative of the overall unlawful scheme
or conspiracy" inheres in the very acts of
accumulating, acquiring or amassing hidden wealth.
Stated otherwise, such pattern arises where the
prosecution is able to prove beyond reasonable doubt
the predicate acts as defined in Sec. 1, par. (d).
Pattern is merely a by-product of the proof of the
predicate acts. This conclusion is consistent with
reason and common sense. There would be no other
explanation for a combination or series of overt or
criminal acts to stash P50,000,000.00 or more, than
"a scheme or conspiracy to amass, accumulate or
acquire ill gotten wealth." The prosecution is therefore
not required to make a deliberate and conscious effort
to prove pattern as it necessarily follows with the
establishment of a series or combination of the
predicate acts.
Relative to petitioner's contentions on the purported
defect of Sec. 4 is his submission that "pattern" is "a
very important element of the crime of plunder;" and
that Sec. 4 is "two pronged, (as) it contains a rule of
evidence and a substantive element of the crime,"

such that without it the accused cannot be convicted

of plunder JUSTICE BELLOSILLO: In other words, cannot an
accused be convicted under the Plunder Law without
applying Section 4 on the Rule of Evidence if there is
proof beyond reasonable doubt of the commission of
the acts complained of?
ATTY. AGABIN: In that case he can be convicted of
individual crimes enumerated in the Revised Penal
Code, but not plunder.
JUSTICE BELLOSILLO: In other words, if all the
elements of the crime are proved beyond reasonable
doubt without applying Section 4, can you not have a
conviction under the Plunder Law?
ATTY. AGABIN: Not a conviction for plunder, your
Honor.
JUSTICE BELLOSILLO: Can you not disregard the
application of Sec. 4 in convicting an accused
charged for violation of the Plunder Law?
ATTY. AGABIN: Well, your Honor, in the first place
Section 4 lays down a substantive element of the law
xxxx
JUSTICE BELLOSILLO: What I said is - do we have
to avail of Section 4 when there is proof beyond
reasonable doubt on the acts charged constituting
plunder?
ATTY. AGABIN: Yes, your Honor, because Section 4
is two pronged, it contains a rule of evidence and it
contains a substantive element of the crime of
plunder. So, there is no way by which we can avoid
Section 4.
JUSTICE BELLOSILLO: But there is proof beyond
reasonable doubt insofar as the predicate crimes
charged are concerned that you do not have to go
that far by applying Section 4?
ATTY. AGABIN: Your Honor, our thinking is that
Section 4 contains a very important element of the
crime of plunder and that cannot be avoided by the
prosecution.32
We do not subscribe to petitioner's stand. Primarily, all
the essential elements of plunder can be culled and

understood from its definition in Sec. 2, in relation to

Sec. 1, par. (d), and "pattern" is not one of them.
Moreover, the epigraph and opening clause of Sec. 4
is clear and unequivocal:
SEC. 4. Rule of Evidence. - For purposes of
establishing the crime of plunder x x x x
It purports to do no more than prescribe a rule of
procedure for the prosecution of a criminal case for
plunder. Being a purely procedural measure, Sec. 4
does not define or establish any substantive right in
favor of the accused but only operates in furtherance
of a remedy. It is only a means to an end, an aid to
substantive law. Indubitably, even without invoking
Sec. 4, a conviction for plunder may be had, for what
is crucial for the prosecution is to present sufficient
evidence to engender that moral certitude exacted by
the fundamental law to prove the guilt of the accused
beyond reasonable doubt. Thus, even granting for the
sake of argument that Sec. 4 is flawed and vitiated for
the reasons advanced by petitioner, it may simply be
severed from the rest of the provisions without
necessarily resulting in the demise of the law; after all,
the existing rules on evidence can supplant Sec. 4
more than enough. Besides, Sec. 7 of RA 7080
provides for a separability clause Sec. 7. Separability of Provisions. - If any provisions
of this Act or the application thereof to any person or
circumstance is held invalid, the remaining provisions
of this Act and the application of such provisions to
other persons or circumstances shall not be affected
thereby.
Implicit in the foregoing section is that to avoid the
whole act from being declared invalid as a result of
the nullity of some of its provisions, assuming that to
be the case although it is not really so, all the
provisions thereof should accordingly be treated
independently of each other, especially if by doing so,
the objectives of the statute can best be achieved.
As regards the third issue, again we agree with
Justice Mendoza that plunder is a malum in se which
requires proof of criminal intent. Thus, he says, in his
Concurring Opinion x x x Precisely because the constitutive crimes are
mala in se the element of mens rea must be proven in
a prosecution for plunder. It is noteworthy that the

amended information alleges that the crime of plunder

was committed "willfully, unlawfully and criminally." It
thus alleges guilty knowledge on the part of petitioner.
In support of his contention that the statute eliminates
the requirement of mens rea and that is the reason he
claims the statute is void, petitioner cites the following
remarks of Senator Taada made during the
deliberation on S.B. No. 733:
SENATOR TAADA . . . And the evidence that will be
required to convict him would not be evidence for
each and every individual criminal act but only
evidence sufficient to establish the conspiracy or
scheme to commit this crime of plunder.33
However, Senator Taada was discussing 4 as
shown by the succeeding portion of the transcript
quoted by petitioner:
SENATOR ROMULO: And, Mr. President, the
Gentleman feels that it is contained in Section 4, Rule
of Evidence, which, in the Gentleman's view, would
provide for a speedier and faster process of attending
to this kind of cases?
SENATOR TAADA: Yes, Mr. President . . .34
Senator Taada was only saying that where the
charge is conspiracy to commit plunder, the
prosecution need not prove each and every criminal
act done to further the scheme or conspiracy, it being
enough if it proves beyond reasonable doubt a pattern
of overt or ciminal acts indicative of the overall
unlawful scheme or conspiracy. As far as the acts
constituting the pattern are concerned, however, the
elements of the crime must be proved and the
requisite mens rea must be shown.
Indeed, 2 provides that Any person who participated with the said public
officer in the commission of an offense contributing to
the crime of plunder shall likewise be punished for
such offense. In the imposition of penalties, the
degree of participation and the attendance of
mitigating and extenuating circumstances, as
provided by the Revised Penal Code, shall be
considered by the court.
The application of mitigating and extenuating
circumstances in the Revised Penal Code to

prosecutions under the Anti-Plunder Law indicates

quite clearly that mens rea is an element of plunder
since the degree of responsibility of the offender is
determined by his criminal intent. It is true that 2
refers to "any person who participates with the said
public officer in the commission of an offense
contributing to the crime of plunder." There is no
reason to believe, however, that it does not apply as
well to the public officer as principal in the crime. As
Justice Holmes said: "We agree to all the generalities
about not supplying criminal laws with what they omit,
but there is no canon against using common sense in
construing laws as saying what they obviously
mean."35

Finally, any doubt as to whether the crime of plunder

is a malum in se must be deemed to have been
resolved in the affirmative by the decision of Congress
in 1993 to include it among the heinous crimes
punishable by reclusion perpetua to death. Other
heinous crimes are punished with death as a straight
penalty in R.A. No. 7659. Referring to these groups of
heinous crimes, this Court held in People v.
Echegaray:36
The evil of a crime may take various forms. There are
crimes that are, by their very nature, despicable,
either because life was callously taken or the victim is
treated like an animal and utterly dehumanized as to
completely disrupt the normal course of his or her
growth as a human being . . . . Seen in this light, the
capital crimes of kidnapping and serious illegal
detention for ransom resulting in the death of the
victim or the victim is raped, tortured, or subjected to
dehumanizing acts; destructive arson resulting in
death; and drug offenses involving minors or resulting
in the death of the victim in the case of other crimes;
as well as murder, rape, parricide, infanticide,
kidnapping and serious illegal detention, where the
victim is detained for more than three days or serious
physical injuries were inflicted on the victim or threats
to kill him were made or the victim is a minor, robbery
with homicide, rape or intentional mutilation,
destructive arson, and carnapping where the owner,
driver or occupant of the carnapped vehicle is killed or
raped, which are penalized by reclusion perpetua to
death, are clearly heinous by their very nature.

There are crimes, however, in which the abomination

lies in the significance and implications of the subject
criminal acts in the scheme of the larger socio-political
and economic context in which the state finds itself to
be struggling to develop and provide for its poor and
underprivileged masses. Reeling from decades of
corrupt tyrannical rule that bankrupted the
government and impoverished the population, the
Philippine Government must muster the political will to
dismantle the culture of corruption, dishonesty, greed
and syndicated criminality that so deeply entrenched
itself in the structures of society and the psyche of the
populace. [With the government] terribly lacking the
money to provide even the most basic services to its
people, any form of misappropriation or
misapplication of government funds translates to an
actual threat to the very existence of government, and
in turn, the very survival of the people it governs over.
Viewed in this context, no less heinous are the effects
and repercussions of crimes like qualified bribery,
destructive arson resulting in death, and drug
offenses involving government officials, employees or
officers, that their perpetrators must not be allowed to
cause further destruction and damage to society.
The legislative declaration in R.A. No. 7659 that
plunder is a heinous offense implies that it is a malum
in se. For when the acts punished are inherently
immoral or inherently wrong, they are mala in se37
and it does not matter that such acts are punished in
a special law, especially since in the case of plunder
the predicate crimes are mainly mala in se. Indeed, it
would be absurd to treat prosecutions for plunder as
though they are mere prosecutions for violations of
the Bouncing Check Law (B.P. Blg. 22) or of an
ordinance against jaywalking, without regard to the
inherent wrongness of the acts.
To clinch, petitioner likewise assails the validity of RA
7659, the amendatory law of RA 7080, on
constitutional grounds. Suffice it to say however that it
is now too late in the day for him to resurrect this long
dead issue, the same having been eternally
consigned by People v. Echegaray38 to the archives
of jurisprudential history. The declaration of this Court
therein that RA 7659 is constitutionally valid stands as
a declaration of the State, and becomes, by
necessary effect, assimilated in the Constitution now
as an integral part of it.

Our nation has been racked by scandals of corruption

and obscene profligacy of officials in high places
which have shaken its very foundation. The anatomy
of graft and corruption has become more elaborate in
the corridors of time as unscrupulous people
relentlessly contrive more and more ingenious ways
to bilk the coffers of the government. Drastic and
radical measures are imperative to fight the
increasingly sophisticated, extraordinarily methodical
and economically catastrophic looting of the national
treasury. Such is the Plunder Law, especially
designed to disentangle those ghastly tissues of
grand-scale corruption which, if left unchecked, will
spread like a malignant tumor and ultimately consume
the moral and institutional fiber of our nation. The
Plunder Law, indeed, is a living testament to the will of
the legislature to ultimately eradicate this scourge and
thus secure society against the avarice and other
venalities in public office.
These are times that try men's souls. In the checkered
history of this nation, few issues of national
importance can equal the amount of interest and
passion generated by petitioner's ignominious fall
from the highest office, and his eventual prosecution
and trial under a virginal statute. This continuing saga
has driven a wedge of dissension among our people
that may linger for a long time. Only by responding to
the clarion call for patriotism, to rise above
factionalism and prejudices, shall we emerge
triumphant in the midst of ferment.
PREMISES CONSIDERED, this Court holds that RA
7080 otherwise known as the Plunder Law, as
amended by RA 7659, is CONSTITUTIONAL.
Consequently, the petition to declare the law
unconstitutional is DISMISSED for lack of merit.
Jalosjos vs. COMELEC

representation. In G.R. No. 193536, Agapito J.

Cardino (Cardino) challenges the 11 August 2010
Resolution of the COMELEC En Banc, which applied
the rule on succession under the Local Government
Code in filling the vacancy in the Office of the Mayor
of Dapitan City, Zamboanga del Norte created by the
cancellation of Jalosjos certificate of candidacy.
The Facts
Both Jalosjos and Cardino were candidates for Mayor
of Dapitan City, Zamboanga del Norte in the May
2010 elections. Jalosjos was running for his third
term. Cardino filed on 6 December 2009 a petition
under Section 78 of the Omnibus Election Code to
deny due course and to cancel the certificate of
candidacy of Jalosjos. Cardino asserted that Jalosjos
made a false material representation in his certificate
of candidacy when he declared under oath that he
was eligible for the Office of Mayor.
Cardino claimed that long before Jalosjos filed his
certificate of candidacy, Jalosjos had already been
convicted by final judgment for robbery and
sentenced to prisin mayor by the Regional Trial
Court, Branch 18 (RTC) of Cebu City, in Criminal
Case No. CCC-XIV-140-CEBU. Cardino asserted that
Jalosjos has not yet served his sentence. Jalosjos
admitted his conviction but stated that he had already
been granted probation. Cardino countered that the
RTC revoked Jalosjos probation in an Order dated 19
March 1987. Jalosjos refuted Cardino and stated that
the RTC issued an Order dated 5 February 2004
declaring that Jalosjos had duly complied with the
order of probation. Jalosjos further stated that during
the 2004 elections the COMELEC denied a petition
for disqualification filed against him on the same
grounds.4

CARPIO, J.:

The COMELEC En Banc narrated the circumstances

of Jalosjos criminal record as follows:

These are two special civil actions for

certiorari1 questioning the resolutions of the
Commission on Elections (COMELEC) in SPA No. 09076 (DC). In G.R. No. 193237, Dominador G.
Jalosjos, Jr. (Jalosjos) seeks to annul the 10 May
2010 Resolution2 of the COMELEC First Division and
the 11 August 2010 Resolution3 of the COMELEC En
Banc, which both ordered the cancellation of his
certificate of candidacy on the ground of false material

As backgrounder, Jalosjos and three (3) others were

accused of the crime of robbery on January 22, 1969
in Cebu City. On April 30, 1970, Judge Francisco Ro.
Cupin of the then Circuit Criminal Court of Cebu City
found him and his co-accused guilty of robbery and
sentenced them to suffer the penalty of prision
correccional minimum to prision mayor maximum.
Jalosjos appealed this decision to the Court of
Appeals but his appeal was dismissed on August 9,

1973. It was only after a lapse of several years or

more specifically on June 17, 1985 that Jalosjos filed
a Petition for Probation before the RTC Branch 18 of
Cebu City which was granted by the court. But then,
on motion filed by his Probation Officer, Jalosjos
probation was revoked by the RTC Cebu City on
March 19, 1987 and the corresponding warrant for his
arrest was issued. Surprisingly, on December 19,
2003, Parole and Probation Administrator Gregorio F.
Bacolod issued a Certification attesting that
respondent Jalosjos, Jr., had already fulfilled the
terms and conditions of his probation. This
Certification was the one used by respondent Jalosjos
to secure the dismissal of the disqualification case
filed against him by Adasa in 2004, docketed as SPA
No. 04-235.

This prompted Cardino to call the attention of the

Commission on the decision of the Sandiganbayan
dated September 29, 2008 finding Gregorio F.
Bacolod, former Administrator of the Parole and
Probation Administration, guilty of violating Section
3(e) of R.A. 3019 for issuing a falsified Certification on
December 19, 2003 attesting to the fact that
respondent Jalosjos had fully complied with the terms
and conditions of his probation. A portion of the
decision of the Sandiganbayan is quoted hereunder:
The Court finds that the above acts of the accused
gave probationer Dominador Jalosjos, Jr.,
unwarranted benefits and advantage because the
subject certification, which was issued by the accused
without adequate or official support, was
subsequently utilized by the said probationer as basis
of the Urgent Motion for Reconsideration and to Lift
Warrant of Arrest that he filed with the Regional Trial
Court of Cebu City, which prompted the said court to
issue the Order dated February 5, 2004 in Crim. Case
No. CCC-XIV-140-CEBU, declaring that said
probationer has complied with the order of probation
and setting aside its Order of January 16, 2004
recalling the warrant or [sic] arrest; and that said
Certification was also used by the said probationer
and became the basis for the Commission on
Elections to deny in its Resolution of August 2, 2004
the petition or [sic] private complainant James Adasa
for the disqualification of the probationer from running
for re-election as Mayor of Dapitan City in the
National and Local Elections of 2004.5

The COMELECs Rulings

On 10 May 2010, the COMELEC First Division
granted Cardinos petition and cancelled Jalosjos
certificate of candidacy. The COMELEC First Division
concluded that "Jalosjos has indeed committed
material misrepresentation in his certificate of
candidacy when he declared, under oath, that he is
eligible for the office he seeks to be elected to when
in fact he is not by reason of a final judgment in a
criminal case, the sentence of which he has not yet
served."6 The COMELEC First Division found that
Jalosjos certificate of compliance of probation was
fraudulently issued; thus, Jalosjos has not yet served
his sentence. The penalty imposed on Jalosjos was
the indeterminate sentence of one year, eight months
and twenty days of prisin correccional as minimum,
to four years, two months and one day of prisin
mayor as maximum. The COMELEC First Division
ruled that Jalosjos "is not eligible by reason of his
disqualification as provided for in Section 40(a) of
Republic Act No. 7160."7
On 11 August 2010, the COMELEC En Banc denied
Jalosjos motion for reconsideration. The pertinent
portions of the 11 August 2010 Resolution read:
With the proper revocation of Jalosjos earlier
probation and a clear showing that he has not yet
served the terms of his sentence, there is simply no
basis for Jalosjos to claim that his civil as well as
political rights have been violated. Having been
convicted by final judgment, Jalosjos is disqualified to
run for an elective position or to hold public office. His
proclamation as the elected mayor in the May 10,
2010 election does not deprive the Commission of its
authority to resolve the present petition to its finality,
and to oust him from the office he now wrongfully
holds.
WHEREFORE, in view of the foregoing, the Motion
for Reconsideration is denied for utter lack of merit.
Jalosjos is hereby OUSTED from office and ordered
to CEASE and DESIST from occupying and
discharging the functions of the Office of the Mayor of
Dapitan City, Zamboanga. Let the provisions of the
Local Government Code on succession apply.
SO ORDERED.8

Jalosjos filed his petition on 25 August 2010,

docketed as G.R. No. 193237, while Cardino filed his
petition on 17 September 2010, docketed as G.R. No.
193536.
On 22 February 2011, this Court issued a Resolution
dismissing G.R. No. 193237.
WHEREFORE, the foregoing premises considered,
the Petition for Certiorari is DISMISSED. The assailed
Resolution dated May 10, 2010 and Resolution dated
August 11, 2010 of the Commission on Elections in
SPA Case No. 09-076 (DC) are hereby AFFIRMED.9
Cardino filed a Manifestation on 17 March 2011
praying that this Court take judicial notice of its
resolution in G.R. No. 193237. Jalosjos filed a Motion
for Reconsideration10 on 22 March 2011. On 29
March 2011, this Court resolved11 to consolidate G.R.
No. 193536 with G.R. No. 193237.Jalosjos then filed
a Manifestation on 1 June 2012 which stated that "he
has resigned from the position of Mayor of the City of
Dapitan effective 30 April 2012, which resignation was
accepted by the Provincial Governor of Zamboanga
del Norte, Atty. Rolando E. Yebes."12Jalosjos
resignation was made "in deference with the provision
of the Omnibus Election Code in relation to his
candidacy as Provincial Governor of Zamboanga del
Sur in May 2013."13
These cases are not rendered moot by Jalosjos
resignation. In resolving Jalosjos Motion for
Reconsideration in G.R. No. 193237 and Cardinos
Petition in G.R. No. 193536, we address not only
Jalosjos eligibility to run for public office and the
consequences of the cancellation of his certificate of
candidacy, but also COMELECs constitutional duty to
enforce and administer all laws relating to the conduct
of elections.
The Issues
In G.R. No. 193237, Jalosjos argues that the
COMELEC committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it (1)
ruled that Jalosjos probation was revoked; (2) ruled
that Jalosjos was disqualified to run as candidate for
Mayor of Dapitan City, Zamboanga del Norte; and (3)
cancelled Jalosjos certificate of candidacy without
making a finding that Jalosjos committed a deliberate
misrepresentation as to his qualifications, as Jalosjos

relied in good faith upon a previous COMELEC

decision declaring him eligible for the same position
from which he is now being ousted. Finally, the
Resolutions dated 10 May 2010 and 11 August 2010
were issued in violation of the COMELEC Rules of
Procedure.
In G.R. No. 193536, Cardino argues that the
COMELEC acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when it
added to the dispositive portion of its 11 August 2010
Resolution that the provisions of the Local
Government Code on succession should apply.
This Courts Ruling
Sec. 78. Petition to deny due course to or cancel a
certificate of candidacy. A verified petition seeking to
deny due course or to cancel a certificate of
candidacy may be filed by the person exclusively on
the ground that any material representation contained
therein as required under Section 74 hereof is
false. The petition may be filed at any time not later
than twenty-five days from the time of the filing of the
certificate of candidacy and shall be decided, after
due notice and hearing, not later than fifteen days
before the election. (Emphasis supplied)

Section 40, Local Government Code:

Sec. 40. Disqualifications. - The following persons are
disqualified from running for any elective local
position:
(a) Those sentenced by final judgment for an offense
involving moral turpitude or for an offense punishable
by one (1) year or more of imprisonment, within two
(2) years after serving sentence;
(b) Those removed from office as a result of an
administrative case;
(c) Those convicted by final judgment for violating the
oath of allegiance to the Republic;
(d) Those with dual citizenship;
(e) Fugitives from justice in criminal or non-political
cases here or abroad;
(f) Permanent residents in a foreign country or those
who have acquired the right to reside abroad and
continue to avail of the same right after the effectivity
of this Code; and
(g) The insane or feeble-minded.

Section 74 requires the candidate to state under oath

in his certificate of candidacy "that he is eligible for
said office." A candidate is eligible if he has a right to
run for the public office.14 If a candidate is not
actually eligible because he is barred by final
judgment in a criminal case from running for public
office, and he still states under oath in his certificate
of candidacy that he is eligible to run for public office,
then the candidate clearly makes a false material
representation that is a ground for a petition under
Section 78.

Section 12, Omnibus Election Code:

A sentence of prisin mayor by final judgment is a

ground for disqualification under Section 40 of the
Local Government Code and under Section 12 of the
Omnibus Election Code. It is also a material fact
involving the eligibility of a candidate under Sections
74 and 78 of the Omnibus Election Code. Thus, a
person can file a petition under Section 40 of the
Local Government Code or under either Section 12 or
Section 78 of the Omnibus Election Code. The
pertinent provisions read:

The disqualifications to be a candidate herein

provided shall be deemed removed upon the
declaration by competent authority that said insanity
or incompetence had been removed or after the
expiration of a period of five years from his service of
sentence, unless within the same period he again
becomes disqualified.

Sec. 12. Disqualifications. Any person who has

been declared by competent authority insane or
incompetent, or has been sentenced by final
judgmentfor subversion, insurrection, rebellion or for
any offense for which he was sentenced to a penalty
of more than eighteen months or for a crime involving
moral turpitude, shall be disqualified to be a candidate
and to hold any office, unless he has been given
plenary pardon or granted amnesty.

Section 68, Omnibus Election Code:

Sec. 68. Disqualifications. Any candidate who, in

an action or protest in which he is a party is declared
by final decision by a competent court guilty of, or
found by the Commission of having (a) given money
or other material consideration to influence, induce or
corrupt the voters or public officials performing
electoral functions; (b) committed acts of terrorism to
enhance his candidacy; (c) spent in his election
campaign an amount in excess of that allowed by this
Code; (d) solicited, received or made any contribution
prohibited under Sections 89, 95, 96, 97 and 104; or
(e) violated any of Sections 80, 83, 85, 86 and 261,
paragraphs d, e, k, v, and cc, sub-paragraph 6, shall
be disqualified from continuing as a candidate, or if he
has been elected, from holding the office. Any person
who is a permanent resident of or an immigrant to a
foreign country shall not be qualified to run for any
elective office under this Code, unless said person
has waived his status as permanent resident or
immigrant of a foreign country in accordance with the
residence requirement provided for in the election
laws.
Revised Penal Code:
Art. 27. Reclusion perpetua. x x x
Prisin mayor and temporary disqualification. The
duration of the penalties of prisin mayor and
temporary disqualification shall be from six years and
one day to twelve years, except when the penalty of
disqualification is imposed as an accessory penalty, in
which case, it shall be that of the principal penalty.
Art. 30. Effects of the penalties of perpetual or
temporary absolute disqualification. The penalties
of perpetual or temporary absolute disqualification for
public office shall produce the following effects:
1. The deprivation of the public offices and
employments which the offender may have held, even
if conferred by popular election.
2. The deprivation of the right to vote in any election
for any popular elective office or to be elected to such
office.
3. The disqualification for the offices or public
employments and for the exercise of any of the rights
mentioned.

In case of temporary disqualification, such

disqualification as is comprised in paragraphs 2 and 3
of this article shall last during the term of the
sentence.
4. The loss of all rights to retirement pay or other
pension for any office formerly held.
Art. 31. Effects of the penalties of perpetual or
temporary special disqualification. The penalties
of perpetual or temporary special disqualification for
public office, profession or calling shall produce the
following effects:
1. The deprivation of the office, employment,
profession or calling affected.
2. The disqualification for holding similar offices or
employments either perpetually or during the term of
the sentence, according to the extent of such
disqualification.
Art. 32. Effects of the penalties of perpetual or
temporary special disqualification for the exercise of
the right of suffrage. The perpetual or temporary
special disqualification for the exercise of the right of
suffrage shall deprive the offender perpetually or
during the term of the sentence, according to the
nature of said penalty, of the right to vote in any
popular election for any public office or to be elected
to such office. Moreover, the offender shall not be
permitted to hold any public office during the period of
his disqualification.
Art. 42. Prisin mayor its accessory
penalties. The penalty of prisin mayor shall carry
with it that of temporary absolute disqualification and
that of perpetual special disqualification from the right
of suffrage which the offender shall suffer although
pardoned as to the principal penalty, unless the same
shall have been expressly remitted in the pardon.
(Emphasis supplied)
The penalty of prisin mayor automatically carries
with it, by operation of law,15 the accessory penalties
of temporary absolute disqualification and perpetual
special disqualification. Under Article 30 of the
Revised Penal Code, temporary absolute
disqualification produces the effect of "deprivation of
the right to vote in any election for any popular
elective office or to be elected to such office." The

duration of the temporary absolute disqualification is

the same as that of the principal penalty. On the other
hand, under Article 32 of the Revised Penal
Code perpetual special disqualification means that
"the offender shall not be permitted to hold any public
office during the period of his disqualification," which
is perpetually. Both temporary absolute
disqualification and perpetual special disqualification
constitute ineligibilities to hold elective public office. A
person suffering from these ineligibilities is ineligible
to run for elective public office, and commits a false
material representation if he states in his certificate of
candidacy that he is eligible to so run.
In Lacuna v. Abes,16 the Court, speaking through
Justice J.B.L. Reyes, explained the import of the
accessory penalty of perpetual special
disqualification:
On the first defense of respondent-appellee Abes, it
must be remembered that appellees conviction of a
crime penalized with prisin mayor which carried the
accessory penalties of temporary absolute
disqualification and perpetual special disqualification
from the right of suffrage (Article 42, Revised Penal
Code); and Section 99 of the Revised Election Code
disqualifies a person from voting if he had been
sentenced by final judgment to suffer one year or
more of imprisonment.

suffrage shall deprive the offender perpetually or

during the term of the sentence, according to the
nature of said penalty, of the right to vote in any
popular election for any public office or to be elected
to such office. Moreover, the offender shall not be
permitted to hold any public office during the period of
disqualification.
The word "perpetually" and the phrase "during the
term of the sentence" should be applied distributively
to their respective antecedents; thus, the word
"perpetually" refers to the perpetual kind of special
disqualification, while the phrase "during the term of
the sentence" refers to the temporary special
disqualification. The duration between the perpetual
and the temporary (both special) are necessarily
different because the provision, instead of merging
their durations into one period, states that such
duration is "according to the nature of said penalty"
which means according to whether the penalty is the
perpetual or the temporary special disqualification.
(Emphasis supplied
Clearly, Lacuna instructs that the accessory penalty of
perpetual special disqualification "deprives the convict
of the right to vote or to be elected to or hold public
office perpetually."

But this does not hold true with respect to the other
accessory penalty of perpetual special disqualification
for the exercise of the right of suffrage. This
accessory penalty deprives the convict of the right to
vote or to be elected to or hold public office
perpetually, as distinguished from temporary special
disqualification, which lasts during the term of the
sentence. Article 32, Revised Penal Code, provides:

The accessory penalty of perpetual special

disqualification takes effect immediately once the
judgment of conviction becomes final. The effectivity
of this accessory penalty does not depend on the
duration of the principal penalty, or on whether the
convict serves his jail sentence or not. The last
sentence of Article 32 states that "the offender shall
not be permitted to hold any public office during the
period of his perpetual special disqualification." Once
the judgment of conviction becomes final, it is
immediately executory. Any public office that the
convict may be holding at the time of his conviction
becomes vacant upon finality of the judgment, and the
convict becomes ineligible to run for any elective
public office perpetually. In the case of Jalosjos, he
became ineligible perpetually to hold, or to run for,
any elective public office from the time his judgment
of conviction became final.

Art. 32. Effects of the penalties of perpetual or

temporary special disqualification for the exercise of
the right of suffrage. The perpetual or temporary
special disqualification for the exercise of the right of

Perpetual special disqualification is a ground for a

petition under Section 78 of the Omnibus Election
Code because this accessory penalty is an ineligibility,
which means that the convict is not eligible to run for

The accessory penalty of temporary absolute

disqualification disqualifies the convict for public office
and for the right to vote, such disqualification to last
only during the term of the sentence (Article 27,
paragraph 3, & Article 30, Revised Penal Code) that,
in the case of Abes, would have expired on 13
October 1961.

public office, contrary to the statement that Section 74

requires him to state under oath. As used in Section
74, the word "eligible" means having the right to run
for elective public office, that is, having all the
qualifications and none of the ineligibilities to run for
public office. As this Court held in Fermin v.
Commission on Elections,17 the false material
representation may refer to "qualifications or
eligibility." One who suffers from perpetual special
disqualification is ineligible to run for public office. If a
person suffering from perpetual special
disqualification files a certificate of candidacy stating
under oath that "he is eligible to run for (public)
office," as expressly required under Section 74, then
he clearly makes a false material representation that
is a ground for a petition under Section 78. As this
Court explained in Fermin:
Lest it be misunderstood, the denial of due course to
or the cancellation of the CoC is not based on the lack
of qualifications but on a finding that the candidate
made a material representation that is false, which
may relate to the qualifications required of the public
office he/she is running for. It is noted that the
candidate states in his/her CoC that he/she is eligible
for the office he/she seeks. Section 78 of the OEC,
therefore, is to be read in relation to the constitutional
and statutory provisions on qualifications or eligibility
for public office. If the candidate subsequently states
a material representation in the CoC that is false, the
COMELEC, following the law, is empowered to deny
due course to or cancel such certificate. Indeed, the
Court has already likened a proceeding under Section
78 to a quo warranto proceeding under Section 253 of
the OEC since they both deal with the eligibility or
qualification of a candidate, with the distinction mainly
in the fact that a "Section 78" petition is filed before
proclamation, while a petition for quo warranto is filed
after proclamation of the winning
candidate.18(Emphasis supplied)
Conviction for robbery by final judgment with the
penalty of prisin mayor, to which perpetual special
disqualification attaches by operation of law, is not a
ground for a petition under Section 68
because robbery is not one of the offenses
enumerated in Section 68. Insofar as crimes are
concerned, Section 68 refers only to election offenses
under the Omnibus Election Code and not to crimes
under the Revised Penal Code. For ready reference,

we quote again Section 68 of the Omnibus Election

Code:
Sec. 68. Disqualifications. Any candidate who, in
an action or protest in which he is a party is declared
by final decision by a competent court guilty of, or
found by the Commission of having (a) given money
or other material consideration to influence, induce or
corrupt the voters or public officials performing
electoral functions;(b) committed acts of terrorism to
enhance his candidacy; (c) spent in his election
campaign an amount in excess of that allowed by this
Code; (d) solicited, received or made any contribution
prohibited under Sections 89, 95, 96, 97 and 104; or
(e) violated any of Sections 80, 83, 85, 86 and 261,
paragraphs d, e, k, v, and cc, sub-paragraph 6, shall
be disqualified from continuing as a candidate, or if he
has been elected, from holding the office. Any person
who is a permanent resident of or an immigrant to a
foreign country shall not be qualified to run for any
elective office under this Code, unless said person
has waived his status as permanent resident or
immigrant of a foreign country in accordance with the
residence requirement provided for in the election
laws. (Emphasis supplied)
There is absolutely nothing in the language of Section
68 that will justify including the crime of robbery as
one of the offenses enumerated in this Section. All the
offenses enumerated in Section 68 refer to offenses
under the Omnibus Election Code. The dissenting
opinion of Justice Reyes gravely errs when it holds
that Jalosjos conviction for the crime of robbery under
the Revised Penal Code is a ground for "a petition for
disqualification under Section 68 of the OEC and not
for cancellation of COC under Section 78 thereof."
This Court has already ruled that offenses punished in
laws other than in the Omnibus Election Code cannot
be a ground for a petition under Section 68. In Codilla,
Sr. v. de Venecia,19 the Court declared:
The jurisdiction of the COMELEC to disqualify
candidates is limited to those enumerated in Section
68 of the Omnibus Election Code. All other election
offenses are beyond the ambit of COMELEC
jurisdiction.They are criminal and not administrative in
nature. (Emphasis supplied)
A candidate for mayor during the 2010 local elections
certifies under oath four statements: (1) a statement
that the candidate is a natural born or naturalized

Filipino citizen; (2) a statement that the candidate is

not a permanent resident of, or immigrant to, a foreign
country; (3) a statement that the candidate is eligible
for the office he seeks election; and (4) a statement of
the candidates allegiance to the Constitution of the
Republic of the Philippines.20
We now ask: Did Jalosjos make a false statement of a
material fact in his certificate of candidacy when he
stated under oath that he was eligible to run for
mayor? The COMELEC and the dissenting opinions
all found that Jalosjos was not eligible to run for public
office. The COMELEC concluded that Jalosjos made
a false material representation that is a ground for a
petition under Section 78. The dissenting opinion of
Justice Reyes, however, concluded that the
ineligibility of Jalosjos is a disqualification which is a
ground for a petition under Section 68 and not under
Section 78. The dissenting opinion of Justice Brion
concluded that the ineligibility of Jalosjos is a
disqualification that is not a ground under Section 78
without, however, saying under what specific
provision of law a petition against Jalosjos can be
filed to cancel his certificate of candidacy.
What is indisputably clear is that the false material
representation of Jalosjos is a ground for a petition
under Section 78. However, since the false material
representation arises from a crime penalized by
prisin mayor, a petition under Section 12 of the
Omnibus Election Code or Section 40 of the Local
Government Code can also be properly filed. The
petitioner has a choice whether to anchor his petition
on Section 12 or Section 78 of the Omnibus Election
Code, or on Section 40 of the Local Government
Code. The law expressly provides multiple remedies
and the choice of which remedy to adopt belongs to
the petitioner.
The COMELEC properly cancelled Jalosjos certificate
of candidacy. A void certificate of candidacy on the
ground of ineligibility that existed at the time of the
filing of the certificate of candidacy can never give rise
to a valid candidacy, and much less to valid
votes.21 Jalosjos certificate of candidacy was
cancelled because he was ineligible from the start to
run for Mayor. Whether his certificate of candidacy is
cancelled before or after the elections is immaterial
because the cancellation on such ground means he
was never a valid candidate from the very beginning,
his certificate of candidacy being void ab initio.

Jalosjos ineligibility existed on the day he filed his

certificate of candidacy, and the cancellation of his
certificate of candidacy retroacted to the day he filed
it. Thus, Cardino ran unopposed. There was only one
qualified candidate for Mayor in the May 2010
elections Cardino who received the highest
number of votes.
Decisions of this Court holding that the second-placer
cannot be proclaimed winner if the first-placer is
disqualified or declared ineligible22 should be limited
to situations where the certificate of candidacy of the
first-placer was valid at the time of filing but
subsequently had to be cancelled because of a
violation of law that took place, or a legal impediment
that took effect, after the filing of the certificate of
candidacy. If the certificate of candidacy is void ab
initio, then legally the person who filed such void
certificate of candidacy was never a candidate in the
elections at any time. All votes for such non-candidate
are stray votes and should not be counted. Thus,
such non-candidate can never be a first-placer in the
elections. If a certificate of candidacy void ab initio is
cancelled on the day, or before the day, of the
election, prevailing jurisprudence holds that all votes
for that candidate are stray votes.23 If a certificate of
candidacy void ab initio is cancelled one day or more
after the elections, all votes for such candidate should
also be stray votes because the certificate of
candidacy is void from the very beginning. This is the
more equitable and logical approach on the effect of
the cancellation of a certificate of candidacy that is
void ab initio. Otherwise, a certificate of candidacy
void ab initio can operate to defeat one or more valid
certificates of candidacy for the same position.
Even without a petition under either Section 12 or
Section 78 of the Omnibus Election Code, or under
Section 40 of the Local Government Code, the
COMELEC is under a legal duty to cancel the
certificate of candidacy of anyone suffering from the
accessory penalty of perpetual special disqualification
to run for public office by virtue of a final judgment of
conviction. The final judgment of conviction is notice
to the COMELEC of the disqualification of the convict
from running for public office. The law itself bars the
convict from running for public office, and the
disqualification is part of the final judgment of
conviction. The final judgment of the court is
addressed not only to the Executive branch, but also

to other government agencies tasked to implement

the final judgment under the law.
Whether or not the COMELEC is expressly mentioned
in the judgment to implement the disqualification, it is
assumed that the portion of the final judgment on
disqualification to run for elective public office is
addressed to the COMELEC because under the
Constitution the COMELEC is duty bound to "enforce
and administer all laws and regulations relative to the
conduct of an election."24 The disqualification of a
convict to run for public office under the Revised
Penal Code, as affirmed by final judgment of a
competent court, is part of the enforcement and
administration of "all laws" relating to the conduct of
elections.
To allow the COMELEC to wait for a person to file a
petition to cancel the certificate of candidacy of one
suffering from perpetual special disqualification will
result in the anomaly that these cases so grotesquely
exemplify. Despite a prior perpetual special
disqualification, Jalosjos was elected and served
twice as mayor. The COMELEC will be grossly remiss
in its constitutional duty to "enforce and administer all
laws" relating to the conduct of elections if it does not
motu proprio bar from running for public office those
suffering from perpetual special disqualification by
virtue of a final judgment.
WHEREFORE, the Motion for Reconsideration in
G.R. No. 193237 is DENIED, and the Petition in G.R.
No. 193536 is GRANTED. The Resolutions dated 10
May 2010 and 11 August 2010 of the COMELEC First
Division and the COMELEC En Bane, respectively, in
SPA No. 09-076 (DC), are AFFIRMED with
theMODIFICATION that Agapito J. Cardino ran
unopposed in the May 2010 elections and thus
received the highest number of votes for Mayor. The
COMELEC En Bane is DIRECTED to constitute a
Special City Board of Canvassers to proclaim Agapito
J. Cardino as the duly elected Mayor of Dapitan City,
Zamboanga del Norte.
Let copies of this Decision be furnished the
Secretaries of the Department of Justice and the
Department of Interior and Local Government so they
can cause the arrest of, and enforce the jail sentence
on, Dominador G. Jalosjos, Jr. due to his conviction
for the crime of robbery in a final judgment issued by

the Regional Trial Court (Branch 18) of Cebu City in

Criminal Case No. CCC-XIV-140-CEBU.

GULF AIR COMPANY, PHILIPPINE BRANCH (GF),

Petitioner, versus COMMISSIONER OF INTERNAL
REVENUE, Respondent.
MENDOZA, J.:
Before the. Court is a Petition for Review on Certiorari
under Rule 45 of the 1997 Revised Rules of Civil
Procedure assailing the January 30, 2008 Decision1
and the March 12, 2008 Resolution2 of the Court of
Tax Appeals (CTA) En Bane in C.T.A. E.B. No. 302
(C.T.A. Case No. 7030) entitled "Gulf Air Company,
Philippine Branch (GF) v. Commissioner of Internal
Revenue."
The Facts
Petitioner Gulf Air Company Philippine Branch (GF) is
a branch of Gulf Air Company, a foreign corporation
duly organized in accordance with the laws of the
Kingdom of Bahrain.3
On October 25, 2001, GF availed of the Voluntary
Assessment Program of the Bureau of Internal
Revenue (BIR) under Revenue Regulations 8-2001
for its 1999 and 2000 Income Tax and Documentary
Stamp Tax and its Percentage Tax for the third quarter
of 2000, paying a total of P11,964,648.00.4
GF also made a claim for refund of percentage taxes
for the first, second and fourth quarters of 2000. In
connection with this, a letter of authority was issued
by the BIR authorizing its revenue officers to examine
GF's books of accounts and other records to verify its
claim.5
After its submission of several documents and an
informal conference with BIR representatives, GF
received its Preliminary Assessment Notice on
November 4, 2003 for deficiency percentage tax
amounting to P32,745,141.93. On the same day, GF
also received a letter denying its claim for tax credit or
refund of excess percentage tax remittance for the
first, second and fourth quarters of 2000, and
requesting the immediate settlement of the deficiency
tax assessment.6

GF then received the Formal Letter of Demand, dated

December 10, 2003, for the payment of the total
amount of P33,864,186.62. In response, it filed a
letter on December 29, 2003 to protest the
assessment and to reiterate its request for
reconsideration on the denial of its claim for refund.7

GF relies upon the following grounds for the

allowance of its petition:

On June 30, 2004, the Deputy Commissioner, Officerin-Charge of the Large Taxpayers Service of the BIR,
denied GF's written protest for lack of factual and
legal basis and requested the immediate payment of
the P33,864,186.62 deficiency percentage tax
assessment.8

1. That the correct basis of the 3% Percentage Tax

imposed under Section 118(A) of the 1997 NIRC on
the quarterly gross receipts of international air carriers
doing business in the Philippines is the fare approved
by the CAB pursuant to Revenue Regulations 6-66;
that Revenue Regulations 6-66 is the applicable
implementing regulation and it is clearly provided
therein that gross receipt shall be computed on the
cost of the single one way fare as approved by the
CAB on the continuous and uninterrupted flight of
passengers, excess baggage, freight or cargo
including mail, as reflected on the plane manifest of
the carrier; and

Aggrieved, GF filed a petition for review with the

CTA.9 On March 21, 2007, the Second Division of the
CTA dismissed the petition, finding that Revenue
Regulations No. 6-66 was the applicable rule
providing that gross receipts should be computed
based on the cost of the single one-way fare as
approved by the Civil Aeronautics Board (CAB). In
addition, it noted that GF failed to include in its gross
receipts the special commissions on passengers and
cargo. Finally, it ruled that Revenue Regulations No.
15-2002, allowing the use of the net net rate in
determining the gross receipts, could not be given any
or a retroactive effect. Thus, the CTA affirmed the
decision of the BIR and ordered the payment of
P41,117,734.01 plus 20% delinquency interest.10
GF elevated the case to the CTA En Banc which
promulgated its Decision on January 30, 2008
dismissing the petition and affirming the decision of
the CTA in Division. It found that Revenue
Regulations No. 6-66 was the applicable rule because
the period involved in the assessment covered the
first, second and fourth quarters of 2000 and the
amended percentage tax returns were filed on
October 25, 2001. Revenue Regulations No. 15-2002,
which took effect on October 26, 2002, could not be
given retroactive effect because it was declarative of a
new right as it provided a different rule in determining
gross receipts.11
GF subsequently filed a motion for reconsideration
but the same was denied by the CTA En Banc in its
March 12, 2008 Resolution.
Hence, this petition.
The Issue

The honorable CTA En Banc erred in affirming the

ruling of the Court in Division summarized on pages 8
to 9 of the January 30, 2008 decision, as follows:

2. That the respondent was correct in adding back the

special commissions on passengers and cargo to the
gross receipt per return of petitioner in order to come
up with the gross receipts subject to tax under Section
118(A) of the 1997 NIRC.12

GF also insists that its construction of "gross receipts"

to mean the "net net" amount actually received, rather
than the CAB approved rates as mandated by
Revenue Regulations No. 6-66, has been validated by
the issuance of Revenue Regulations No. 15-2002
which expressly superseded the former.
Finally, GF contends that because the definition of
gross receipts under the questioned regulations is
contrary to that given under the other sections of the
NIRC on value-added tax and percentage taxes, the
legislative intention was to collect the percentage tax
based solely on the actual receipts derived and
collected by the taxpayer. Given that Revenue
Regulations No. 6-66 allegedly conflicts with Section
118 of the NIRC as well as with the other sections on
percentage tax, GF concludes that the former was
effectively repealed, amended or modified by the
NIRC.15
Section 118(A) of the NIRC states that:
Sec. 118. Percentage Tax on International Carriers. (A) International air carriers doing business in the
Philippines shall pay a tax of three percent (3%) of
their quarterly gross receipts.

The sole issue to be resolved by the Court, as

identified by the tax court, is whether the definition of
"gross receipts," for purposes of computing the 3%
Percentage Tax under Section 118(A) of the 1997
National Internal Revenue Code (NIRC), should
include special commissions on passengers and
special commissions on cargo based on the rates
approved by the CAB.13

Pursuant to this, the Secretary of Finance

promulgated Revenue Regulations No. 15-2002,
which prescribes that "gross receipts" for the purpose
of determining Common Carrier's Tax shall be the
same as the tax base for calculating Gross Philippine
Billings Tax.16 Section 5 of the same provides for the
computation of "Gross Philippine Billings":

The Court's Ruling

Sec. 5. Determination of Gross Philippine Billings. -

The petition has no merit.

(a) In computing for "Gross Philippine Billings," there

shall be included the total amount of gross revenue
derived from passage of persons, excess baggage,
cargo and/or mail, originating from the Philippines in a
continuous and uninterrupted flight, irrespective of the
place of sale or issue and the place of payment of the
passage documents.

GF questions the validity of Revenue Regulations No.

6-66, claiming that it is not a correct interpretation of
Section 118(A) of the NIRC, and insisting that the
gross receipts should be based on the "net net"
amount -the amount actually received, derived,
collected, and realized by the petitioner from
passengers, cargo and excess baggage. It further
argues that the CAB approved fares are merely
notional and not reflective of the actual revenue or
receipts derived by it from its business as an
international air carrier.14

The gross revenue for passengers whose tickets are

sold in the Philippines shall be the actual amount
derived for transportation services, for a first class,
business class or economy class passage, as the
case may be, on its continuous and uninterrupted

flight from any port or point in the Philippines to its

final destination in any port or point of a foreign
country, as reflected in the remittance area of the tax
coupon forming an integral part of the plane ticket.
For this purpose, the Gross Philippine Billings shall be
determined by computing the monthly average net
fare of all the tax coupons of plane tickets issued for
the month per point of final destination, per class of
passage (i.e., first class, business class, or economy
class) and per classification of passenger (i.e., adult,
child or infant) and multiplied by the corresponding
total number of passengers flown for the month as
declared in the flight manifest.
For tickets sold outside the Philippines, the gross
revenue for passengers for first class, business class
or economy class passage, as the case may be, on a
continuous and uninterrupted flight from any port of
point in the Philippines to final destination in any port
or point of a foreign country shall be determined using
the locally available net fares applicable to such flight
taking into consideration the seasonal fare rate
established at the time of the flight, the class of
passage (whether first class, business class,
economy class or non-revenue), the classification of
passenger (whether adult, child or infant), the date of
embarkation, and the place of final destination.
Correspondingly, the Gross Philippine Billing for
tickets sold outside the Philippines shall be
determined in the manner as provided in the
preceding paragraph.
Passage documents revalidated, exchanged and/or
endorsed to another on-line international airline shall
be included in the taxable base of the carrying airline
and shall be subject to Gross Philippine Billings tax if
the passenger is lifted/boarded on an aircraft from any
port or point in the Philippines towards a foreign
destination.
The gross revenue on excess baggage which
originated from any port or point in the Philippines and
destined to any part of a foreign country shall be
computed based on the actual revenue derived as
appearing on the official receipt or any similar
document for the said transaction.
The gross revenue for freight or cargo and mail shall
be determined based on the revenue realized from
the carriage thereof. The amount realized for freight
or cargo shall be based on the amount appearing on

the airway bill after deducting therefrom the amount of

discounts granted which shall be validated using the
monthly cargo sales reports generated by the IATA
Cargo Accounts Settlement System (IATA CASS) for
airway bills issued through their cargo agents or the
monthly reports prepared by the airline themselves or
by their general sales agents for direct issues made.
The amount realized for mails shall, on the other
hand, be determined based on the amount as
reflected in the cargo manifest of the carrier.
xxx [Emphasis and underscoring supplied]
This expressly repealed Revenue Regulations No. 666 that stipulates a different manner of calculating the
gross receipts:
Sec. 5. Gross Receipts, how determined. - The total
amount of gross receipts derived from passage of
persons, excess baggage, freight or cargo, including,
mail cargo, originating from the Philippines in a
continuous and uninterrupted flight, irrespective of the
place of sale or issue and the place of payment of the
ticket, shall be subject to the common carrier's
percentage tax (Sec. 192, Tax Code). The gross
receipts shall be computed on the cost of the single
one way fare as approved by the Civil Aeronautics
Board on the continuous and uninterrupted flight of
passengers, excess baggage, freight or cargo,
including mail, as reflected on the plane manifest of
the carrier.
Tickets revalidated, exchanged and/or indorsed to
another international airline are subject to percentage
tax if lifted from a passenger boarding a plane in a
port or point in the Philippines.
In case of a flight that originates from the Philippines
but transhipment of passenger takes place elsewhere
on another airline, the gross receipts reportable for
Philippine tax purposes shall be the portion of the cost
of the ticket corresponding to the leg of the flight from
port of origin to the point of transhipment.
In case of passengers, the taxable base shall be
gross receipts less 25% thereof. [Emphasis and
underscoring supplied]
There is no doubt that prior to the issuance of
Revenue Regulations No. 15-2002 which became
effective on October 26, 2002, the prevailing rule then

for the purpose of computing common carrier's tax

was Revenue Regulations No. 6-66. While the
petitioner's interpretation has been vindicated by the
new rules which compute gross revenues based on
the actual amount received by the airline company as
reflected on the plane ticket, this does not change the
fact that during the relevant taxable period involved in
this case, it was Revenue Regulations No. 6-66 that
was in effect.
GF itself is adamant that it does not seek the
retroactive application of Revenue Regulations No.
15-2002.17 Even if it were inclined to do so, it cannot
insist on the application of the said rules because tax
laws, including rules and regulations, operate
prospectively unless otherwise legislatively intended
by express terms or by necessary implication.18
Although GF does not dispute that Revenue
Regulations No. 6-66 was the applicable rule covering
the taxable period involved, it puts in issue the
wisdom of the said rule as it pertains to the definition
of gross receipts.
GF is reminded that rules and regulations interpreting
the tax code andpromulgated by the Secretary of
Finance, who has been granted the authority to do so
by Section 244 of the NIRC, "deserve to be given
weight and respect by the courts in view of the rulemaking authority given to those who formulate them
and their specific expertise in their respective
fields."19
As such, absent any showing that Revenue
Regulations No. 6-66 is inconsistent with the
provisions of the NIRC, its stipulations shall be upheld
and applied accordingly. This is in keeping with our
primary duty of interpreting and applying the law.
Regardless of our reservations as to the wisdom or
the perceived ill-effects of a particular legislative
enactment, the court is without authority to modify the
same as it is the exclusive province of the law-making
body to do so.20 As aptly stated in Saguiguit v.
People,21
xxx Even with the best of motives, the Court can only
interpret and apply the law and cannot, despite
doubts about its wisdom, amend or repeal it. Courts of
justice have no right to encroach on theprerogatives
of lawmakers, as long as it has not been shown that
they have acted with grave abuse of discretion. And

while the judiciary may interpret laws and evaluate

them for constitutional soundness and to strike them
down if they are proven to be infirm, this solemn
power and duty does not include the discretion to
correct by reading into the law what is not written
therein.22
Moreover, the validity of the questioned rules can be
sustained by the application of the principle of
legislative approval by re-enactment. Under the
aforementioned legal concept, "where a statute is
susceptible of the meaning placed upon it by a ruling
of the government agency charged with its
enforcement and the Legislature thereafter re-enacts
the provisions without substantial change, such action
is to some extent confirmatory that the ruling carries
out the legislative purpose."23 Thus, there is tacit
approval of a prior executive construction of a statute
which was re-enacted with no substantial changes.24
In this case, Revenue Regulations No. 6-66 was
promulgated to enforce the provisions of Title V,
Chapter I (Tax on Business) of Commonwealth Act
No. 466 (National Internal Revenue Code of 1939),
under which Section 192, pertaining to the common
carrier's tax, can be found:
Sec. 192. Percentage tax on carriers and keepers of
garages. -Keepers of garages, transportation
contractors, persons who transport passenger or
freight for hire, and common carriers by land, air, or
water, except owners of bancas, and owners of
animaldrawn two-wheeled vehicles, shall pay a tax
equivalent to two per centum of their monthly gross
receipts. [Emphasis supplied]
This provision has, over the decades, been
substantially reproduced with every amendment of the
NIRC, up until its recent reincarnation in Section 118
of the NIRC.
The legislature is presumed to have full knowledge of
the existing revenue regulations interpreting the
aforequoted provision of law and, with its subsequent
substantial re-enactment, there is a presumption that
the lawmakers have approved and confirmed the
rules in question as carrying out the legislative
purpose.25 Hence, it can be concluded that with the
continued duplication of the NIRC provision on
common carrier's tax, the law-making body was
aware of the existence of Revenue Regulations No. 6-

66 and impliedly endorsed its interpretation of the

NIRC and its definition of gross receipts.
Although the Court commiserates with GF in its
predicament, it is left with no choice but to uphold the
validity of Revenue Regulations No. 6-66 and apply it
to the case at bench, thus upholding the ruling of the
CT A. There is no cause to reverse the decision of the
tax court. As a specialized court dedicated exclusively
to the study and resolution of tax issues, the CTA has
developed an expertise on the subject of taxation.26
The Court cannot be compelled to set aside its
decisions, unless there is a finding that the
questioned decision is not supported by substantial
evidence or there is a showing of abuse or
improvident exercise of authority.27 Therefore, its
findings are accorded the highest respect and are
generally conclusive upon this court, in the absence
of grave abuse of discretion or palpable error.28
On a final note, it is incumbent on the Court to
emphasize that tax refunds partake the nature of tax
exemptions which are a derogation of the power of
taxation of the State. Consequently, they are
construed strictly against a taxpayer and liberally in
favor of the State such that he who claims a refund or
exemption must justify it by words too plain to be
mistaken and too categorical to be misinterpreted.29
Regrettably, the petitioner in the case at bench failed
to unequivocally prove that it is entitled to a refund.
WHEREFORE, the petition is DENIED. The January
30, 2008 Decision and the March 12, 2008 Resolution
ofthe Court of Tax Appeals in C.T.A. E.B. No. 302
(C.T.A. Case No. 7030) are hereby AFFIRMED.
ABAKADA VS. THE HONORABLE EXECUTIVE
SECRETARY EDUARDO ERMITA
AUSTRIA-MARTINEZ, J.:
The expenses of government, having for their object
the interest of all, should be borne by everyone, and
the more man enjoys the advantages of society, the
more he ought to hold himself honored in contributing
to those expenses.
-Anne Robert Jacques Turgot (1727-1781)
French statesman and economist

Mounting budget deficit, revenue generation,

inadequate fiscal allocation for education, increased
emoluments for health workers, and wider coverage
for full value-added tax benefits ' these are the
reasons why Republic Act No. 9337 (R.A. No. 9337)
[1] was enacted. Reasons, the wisdom of which, the
Court even with its extensive constitutional power of
review, cannot probe. The petitioners in these cases,
however, question not only the wisdom of the law, but
also perceived constitutional infirmities in its
passage.
Every law enjoys in its favor the presumption of
constitutionality. Their arguments notwithstanding,
petitioners failed to justify their call for the invalidity of
the law. Hence, R.A. No. 9337 is not unconstitutional.
LEGISLATIVE HISTORY
R.A. No. 9337 is a consolidation of three legislative
bills namely, House Bill Nos. 3555 and 3705, and
Senate Bill No. 1950.
House Bill No. 3555[2] was introduced on first reading
on January 7, 2005. The House Committee on Ways
and Means approved the bill, in substitution of House
Bill No. 1468, which Representative (Rep.) Eric D.
Singson introduced on August 8, 2004. The President
certified the bill on January 7, 2005 for immediate
enactment. On January 27, 2005, the House of
Representatives approved the bill on second and third
reading.
House Bill No. 3705[3] on the other hand, substituted
House Bill No. 3105 introduced by Rep. Salacnib F.
Baterina, and House Bill No. 3381 introduced by Rep.
Jacinto V. Paras. Its 'mother bill' is House Bill No.
3555. The House Committee on Ways and Means
approved the bill on February 2, 2005. The President
also certified it as urgent on February 8, 2005. The
House of Representatives approved the bill on
second and third reading on February 28, 2005.
Meanwhile, the Senate Committee on Ways and
Means approved Senate Bill No. 1950[4] on March 7,
2005, 'in substitution of Senate Bill Nos. 1337, 1838
and 1873, taking into consideration House Bill Nos.
3555 and 3705.' Senator Ralph G. Recto sponsored
Senate Bill No. 1337, while Senate Bill Nos. 1838 and
1873 were both sponsored by Sens. Franklin M.
Drilon, Juan M. Flavier and Francis N. Pangilinan. The

President certified the bill on March 11, 2005, and was

approved by the Senate on second and third reading
on April 13, 2005.
On the same date, April 13, 2005, the Senate agreed
to the request of the House of Representatives for a
committee conference on the disagreeing provisions
of the proposed bills.

10% uniformly isn't it?

ATTY. BANIQUED : No, Your Honor.
J. PANGANIBAN : It is not?
ATTY. BANIQUED : It's not, because, Your Honor,
there is an Executive Order that granted the
Petroleum companies some subsidy . . . interrupted

Before long, the Conference Committee on the

Disagreeing Provisions of House Bill No. 3555, House
Bill No. 3705, and Senate Bill No. 1950, 'after having
met and discussed in full free and conference,'
recommended the approval of its report, which the
Senate did on May 10, 2005, and with the House of
Representatives agreeing thereto the next day, May
11, 2005.

J. PANGANIBAN : That's correct . . .

On May 23, 2005, the enrolled copy of the

consolidated House and Senate version was
transmitted to the President, who signed the same
into law on May 24, 2005. Thus, came R.A. No.
9337.

J. PANGANIBAN : As a matter of fact a part of the

mitigating measures would be the elimination of the
Excise Tax and the import duties. That is why, it is not
correct to say that the VAT as to petroleum dealers
increased prices by 10%.

July 1, 2005 is the effectivity date of R.A. No. 9337.[5]

When said date came, the Court issued a temporary
restraining order, effective immediately and continuing
until further orders, enjoining respondents from
enforcing and implementing the law.

ATTY. BANIQUED : Yes, Your Honor.

Oral arguments were held on July 14, 2005.

Significantly, during the hearing, the Court speaking
through Mr. Justice Artemio V. Panganiban, voiced the
rationale for its issuance of the temporary restraining
order on July 1, 2005, to wit:
J. PANGANIBAN : . . . But before I go into the details
of your presentation, let me just tell you a little
background. You know when the law took effect on
July 1, 2005, the Court issued a TRO at about 5
o'clock in the afternoon. But before that, there was a
lot of complaints aired on television and on radio.
Some people in a gas station were complaining that
the gas prices went up by 10%. Some people were
complaining that their electric bill will go up by 10%.
Other times people riding in domestic air carrier were
complaining that the prices that they'll have to pay
would have to go up by 10%. While all that was being
aired, per your presentation and per our own
understanding of the law, that's not true. It's not true
that the e-vat law necessarily increased prices by

ATTY. BANIQUED : . . . and therefore that was meant

to temper the impact . . . interrupted
J. PANGANIBAN : . . . mitigating measures . . .
ATTY. BANIQUED : Yes, Your Honor.

J. PANGANIBAN : And therefore, there is no

justification for increasing the retail price by 10% to
cover the E-Vat tax. If you consider the excise tax and
the import duties, the Net Tax would probably be in
the neighborhood of 7%? We are not going into exact
figures I am just trying to deliver a point that different
industries, different products, different services are hit
differently. So it's not correct to say that all prices
must go up by 10%.
ATTY. BANIQUED : You're right, Your Honor.
J. PANGANIBAN : Now. For instance, Domestic
Airline companies, Mr. Counsel, are at present
imposed a Sales Tax of 3%. When this E-Vat law took
effect the Sales Tax was also removed as a mitigating
measure. So, therefore, there is no justification to
increase the fares by 10% at best 7%, correct?
ATTY. BANIQUED : I guess so, Your Honor, yes.
J. PANGANIBAN : There are other products that the
people were complaining on that first day, were being
increased arbitrarily by 10%. And that's one reason
among many others this Court had to issue TRO

because of the confusion in the implementation.

That's why we added as an issue in this case, even if
it's tangentially taken up by the pleadings of the
parties, the confusion in the implementation of the Evat. Our people were subjected to the mercy of that
confusion of an across the board increase of 10%,
which you yourself now admit and I think even the
Government will admit is incorrect. In some cases, it
should be 3% only, in some cases it should be 6%
depending on these mitigating measures and the
location and situation of each product, of each
service, of each company, isn't it?
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : Alright. So that's one reason why
we had to issue a TRO pending the clarification of all
these and we wish the government will take time to
clarify all these by means of a more detailed
implementing rules, in case the law is upheld by this
Court. . . .[6]
The Court also directed the parties to file their
respective Memoranda.
G.R. No. 168056
Before R.A. No. 9337 took effect, petitioners
ABAKADA GURO Party List, et al., filed a petition for
prohibition on May 27, 2005. They question the
constitutionality of Sections 4, 5 and 6 of R.A. No.
9337, amending Sections 106, 107 and 108,
respectively, of the National Internal Revenue Code
(NIRC). Section 4 imposes a 10% VAT on sale of
goods and properties, Section 5 imposes a 10% VAT
on importation of goods, and Section 6 imposes a
10% VAT on sale of services and use or lease of
properties. These questioned provisions contain a
uniform proviso authorizing the President, upon
recommendation of the Secretary of Finance, to raise
the VAT rate to 12%, effective January 1, 2006, after
any of the following conditions have been satisfied, to
wit:
. . . That the President, upon the recommendation of
the Secretary of Finance, shall, effective January 1,
2006, raise the rate of value-added tax to twelve
percent (12%), after any of the following conditions
has been satisfied:

(i) Value-added tax collection as a percentage of

Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of
GDP of the previous year exceeds one and one-half
percent (1 '%).
Petitioners argue that the law is unconstitutional, as it
constitutes abandonment by Congress of its exclusive
authority to fix the rate of taxes under Article VI,
Section 28(2) of the 1987 Philippine Constitution.
G.R. No. 168207
On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al.,
filed a petition for certiorari likewise assailing the
constitutionality of Sections 4, 5 and 6 of R.A. No.
9337.
Aside from questioning the so-called stand-by
authority of the President to increase the VAT rate to
12%, on the ground that it amounts to an undue
delegation of legislative power, petitioners also
contend that the increase in the VAT rate to 12%
contingent on any of the two conditions being satisfied
violates the due process clause embodied in Article
III, Section 1 of the Constitution, as it imposes an
unfair and additional tax burden on the people, in that:
(1) the 12% increase is ambiguous because it does
not state if the rate would be returned to the original
10% if the conditions are no longer satisfied; (2) the
rate is unfair and unreasonable, as the people are
unsure of the applicable VAT rate from year to year;
and (3) the increase in the VAT rate, which is
supposed to be an incentive to the President to raise
the VAT collection to at least 2 4/5 of the GDP of the
previous year, should only be based on fiscal
adequacy.
Petitioners further claim that the inclusion of a standby authority granted to the President by the Bicameral
Conference Committee is a violation of the "noamendment rule" upon last reading of a bill laid down
in Article VI, Section 26(2) of the Constitution.
G.R. No. 168461
Thereafter, a petition for prohibition was filed on June
29, 2005, by the Association of Pilipinas Shell

Dealers, Inc., et al., assailing the following provisions

of R.A. No. 9337:
1) Section 8, amending Section 110 (A)(2) of the
NIRC, requiring that the input tax on depreciable
goods shall be amortized over a 60-month period, if
the acquisition, excluding the VAT components,
exceeds One Million Pesos (P1, 000,000.00);
2) Section 8, amending Section 110 (B) of the NIRC,
imposing a 70% limit on the amount of input tax to be
credited against the output tax; and
3) Section 12, amending Section 114 (c) of the NIRC,
authorizing the Government or any of its political
subdivisions, instrumentalities or agencies, including
GOCCs, to deduct a 5% final withholding tax on gross
payments of goods and services, which are subject to
10% VAT under Sections 106 (sale of goods and
properties) and 108 (sale of services and use or lease
of properties) of the NIRC.
Petitioners contend that these provisions are
unconstitutional for being arbitrary, oppressive,
excessive, and confiscatory.

Petitioners' argument is premised on the constitutional

right of non-deprivation of life, liberty or property
without due process of law under Article III, Section 1
of the Constitution. According to petitioners, the
contested sections impose limitations on the amount
of input tax that may be claimed. Petitioners also
argue that the input tax partakes the nature of a
property that may not be confiscated, appropriated, or
limited without due process of law. Petitioners further
contend that like any other property or property right,
the input tax credit may be transferred or disposed of,
and that by limiting the same, the government gets to
tax a profit or value-added even if there is no profit or
value-added.
Petitioners also believe that these provisions violate
the constitutional guarantee of equal protection of the
law under Article III, Section 1 of the Constitution, as
the limitation on the creditable input tax if: (1) the
entity has a high ratio of input tax; or (2) invests in
capital equipment; or (3) has several transactions with
the government, is not based on real and substantial
differences to meet a valid classification.

Lastly, petitioners contend that the 70% limit is

anything but progressive, violative of Article VI,
Section 28(1) of the Constitution, and that it is the
smaller businesses with higher input tax to output tax
ratio that will suffer the consequences thereof for it
wipes out whatever meager margins the petitioners
make.
G.R. No. 168463
Several members of the House of Representatives
led by Rep. Francis Joseph G. Escudero filed this
petition for certiorari on June 30, 2005. They question
the constitutionality of R.A. No. 9337 on the following
grounds:
1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an
undue delegation of legislative power, in violation of
Article VI, Section 28(2) of the Constitution;
2) The Bicameral Conference Committee acted
without jurisdiction in deleting the no pass on
provisions present in Senate Bill No. 1950 and House
Bill No. 3705; and

3) Insertion by the Bicameral Conference Committee

of Sections 27, 28, 34, 116, 117, 119, 121, 125,[7]
148, 151, 236, 237 and 288, which were present in
Senate Bill No. 1950, violates Article VI, Section 24(1)
of the Constitution, which provides that all
appropriation, revenue or tariff bills shall originate
exclusively in the House of Representatives
G.R. No. 168730
On the eleventh hour, Governor Enrique T. Garcia
filed a petition for certiorari and prohibition on July 20,
2005, alleging unconstitutionality of the law on the
ground that the limitation on the creditable input tax in
effect allows VAT-registered establishments to retain a
portion of the taxes they collect, thus violating the
principle that tax collection and revenue should be
solely allocated for public purposes and expenditures.
Petitioner Garcia further claims that allowing these
establishments to pass on the tax to the consumers is
inequitable, in violation of Article VI, Section 28(1) of
the Constitution.
RESPONDENTS' COMMENT

The Office of the Solicitor General (OSG) filed a

Comment in behalf of respondents. Preliminarily,
respondents contend that R.A. No. 9337 enjoys the
presumption of constitutionality and petitioners failed
to cast doubt on its validity.

violate the following provisions of the Constitution:

Relying on the case of Tolentino vs. Secretary of

Finance, 235 SCRA

2. Whether Section 8 of R.A. No. 9337, amending

Sections 110(A)(2) and 110(B) of the NIRC; and
Section 12 of R.A. No. 9337, amending Section
114(C) of the NIRC, violate the following provisions of
the Constitution:

630 (1994), respondents argue that the procedural

issues raised by petitioners, i.e., legality of the
bicameral proceedings, exclusive origination of
revenue measures and the power of the Senate
concomitant thereto, have already been settled. With
regard to the issue of undue delegation of legislative
power to the President, respondents contend that the
law is complete and leaves no discretion to the
President but to increase the rate to 12% once any of
the two conditions provided therein arise.
Respondents also refute petitioners' argument that
the increase to 12%, as well as the 70% limitation on
the creditable input tax, the 60-month amortization on
the purchase or importation of capital goods
exceeding P1,000,000.00, and the 5% final
withholding tax by government agencies, is arbitrary,
oppressive, and confiscatory, and that it violates the
constitutional principle on progressive taxation,
among others.
Finally, respondents manifest that R.A. No. 9337 is
the anchor of the government's fiscal reform agenda.
A reform in the value-added system of taxation is the
core revenue measure that will tilt the balance
towards a sustainable macroeconomic environment
necessary for economic growth.
ISSUES
The Court defined the issues, as follows:
PROCEDURAL ISSUE
Whether R.A. No. 9337 violates the following
provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
SUBSTANTIVE ISSUES
1. Whether Sections 4, 5 and 6 of R.A. No. 9337,
amending Sections 106, 107 and 108 of the NIRC,

a. Article VI, Section 28(1), and

b. Article VI, Section 28(2)

a. Article VI, Section 28(1), and

b. Article III, Section 1
RULING OF THE COURT
As a prelude, the Court deems it apt to restate the
general principles and concepts of value-added tax
(VAT), as the confusion and inevitably, litigation,
breeds from a fallacious notion of its nature.

The VAT is a tax on spending or consumption. It is

levied on the sale, barter, exchange or lease of goods
or properties and services.[8] Being an indirect tax on
expenditure, the seller of goods or services may pass
on the amount of tax paid to the buyer,[9] with the
seller acting merely as a tax collector.[10] The burden
of VAT is intended to fall on the immediate buyers and
ultimately, the end-consumers.
In contrast, a direct tax is a tax for which a taxpayer is
directly liable on the transaction or business it
engages in, without transferring the burden to
someone else.[11] Examples are individual and
corporate income taxes, transfer taxes, and residence
taxes.[12]
In the Philippines, the value-added system of sales
taxation has long been in existence, albeit in a
different mode. Prior to 1978, the system was a
single-stage tax computed under the 'cost deduction
method' and was payable only by the original sellers.
The single-stage system was subsequently modified,
and a mixture of the 'cost deduction method' and 'tax
credit method' was used to determine the valueadded tax payable.[13] Under the 'tax credit method,'
an entity can credit against or subtract from the VAT

charged on its sales or outputs the VAT paid on its

purchases, inputs and imports.[14]
It was only in 1987, when President Corazon C.
Aquino issued Executive Order No. 273, that the VAT
system was rationalized by imposing a multi-stage tax
rate of 0% or 10% on all sales using the 'tax credit
method.'[15]
E.O. No. 273 was followed by R.A. No. 7716 or the
Expanded VAT Law,[16] R.A. No. 8241 or the
Improved VAT Law,[17] R.A. No. 8424 or the Tax
Reform Act of 1997,[18] and finally, the presently
beleaguered R.A. No. 9337, also referred to by
respondents as the VAT Reform Act.
The Court will now discuss the issues in logical
sequence.
PROCEDURAL ISSUE
I.
Whether R.A. No. 9337 violates the following
provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
A. The Bicameral Conference Committee
Petitioners Escudero, et al., and Pimentel, et al.,
allege that the Bicameral Conference Committee
exceeded its authority by:
1) Inserting the stand-by authority in favor of the
President in Sections 4, 5, and 6 of R.A. No. 9337;
2) Deleting entirely the no pass-on provisions found in
both the House and Senate bills;
3) Inserting the provision imposing a 70% limit on the
amount of input tax to be credited against the output
tax; and
4) Including the amendments introduced only by
Senate Bill No. 1950 regarding other kinds of taxes in
addition to the value-added tax.
Petitioners now beseech the Court to define the
powers of the Bicameral Conference Committee.
It should be borne in mind that the power of internal
regulation and discipline are intrinsic in any legislative

body for, as unerringly elucidated by Justice Story, '[i]f

the power did not exist, it would be utterly
impracticable to transact the business of the nation,
either at all, or at least with decency, deliberation, and
order.'[19]Thus, Article VI, Section 16 (3) of the
Constitution provides that 'each House may determine
the rules of its proceedings.' Pursuant to this inherent
constitutional power to promulgate and implement its
own rules of procedure, the respective rules of each
house of Congress provided for the creation of a
Bicameral Conference Committee.
Thus, Rule XIV, Sections 88 and 89 of the Rules of
House of Representatives provides as follows:
Sec. 88. Conference Committee. ' In the event that
the House does not agree with the Senate on the
amendment to any bill or joint resolution, the
differences may be settled by the conference
committees of both chambers.

In resolving the differences with the Senate, the

House panel shall, as much as possible, adhere to
and support the House Bill. If the differences with the
Senate are so substantial that they materially impair
the House Bill, the panel shall report such fact to the
House for the latter's appropriate action.
Sec. 89. Conference Committee Reports. ' . . . Each
report shall contain a detailed, sufficiently explicit
statement of the changes in or amendments to the
subject measure.
The Chairman of the House panel may be
interpellated on the Conference Committee Report
prior to the voting thereon. The House shall vote on
the Conference Committee Report in the same
manner and procedure as it votes on a bill on third
and final reading.
Rule XII, Section 35 of the Rules of the Senate
states:
Sec. 35. In the event that the Senate does not agree
with the House of Representatives on the provision of
any bill or joint resolution, the differences shall be
settled by a conference committee of both Houses
which shall meet within ten (10) days after their
composition. The President shall designate the

members of the Senate Panel in the conference

committee with the approval of the Senate.
Each Conference Committee Report shall contain a
detailed and sufficiently explicit statement of the
changes in, or amendments to the subject measure,
and shall be signed by a majority of the members of
each House panel, voting separately.
A comparative presentation of the conflicting House
and Senate provisions and a reconciled version
thereof with the explanatory statement of the
conference committee shall be attached to the report.
The creation of such conference committee was
apparently in response to a problem, not addressed
by any constitutional provision, where the two houses
of Congress find themselves in disagreement over
changes or amendments introduced by the other
house in a legislative bill. Given that one of the most
basic powers of the legislative branch is to formulate
and implement its own rules of proceedings and to
discipline its members, may the Court then delve into
the details of how Congress complies with its internal
rules or how it conducts its business of passing
legislation? Note that in the present petitions, the
issue is not whether provisions of the rules of both
houses creating the bicameral conference committee
are unconstitutional, but whether the bicameral
conference committee has strictly complied with the
rules of both houses, thereby remaining within the
jurisdiction conferred upon it by Congress.
In the recent case of Fari'as vs. The Executive
Secretary,[20] the Court En Banc, unanimously
reiterated and emphasized its adherence to the
'enrolled bill doctrine,' thus, declining therein
petitioners' plea for the Court to go behind the
enrolled copy of the bill. Assailed in said case was
Congress's creation of two sets of bicameral
conference committees, the lack of records of said
committees' proceedings, the alleged violation of said
committees of the rules of both houses, and the
disappearance or deletion of one of the provisions in
the compromise bill submitted by the bicameral
conference committee. It was argued that such
irregularities in the passage of the law nullified R.A.
No. 9006, or the Fair Election Act.
Striking down such argument, the Court held thus:

Under the 'enrolled bill doctrine,' the signing of a bill

by the Speaker of the House and the Senate
President and the certification of the Secretaries of
both Houses of Congress that it was passed are
conclusive of its due enactment. A review of cases
reveals the Court's consistent adherence to the
rule. The Court finds no reason to deviate from the
salutary rule in this case where the irregularities
alleged by the petitioners mostly involved the internal
rules of Congress, e.g., creation of the 2nd or 3rd
Bicameral Conference Committee by the House. This
Court is not the proper forum for the enforcement of
these internal rules of Congress, whether House or
Senate. Parliamentary rules are merely procedural
and with their observance the courts have no
concern. Whatever doubts there may be as to the
formal validity of Rep. Act No. 9006 must be resolved
in its favor. The Court reiterates its ruling in Arroyo vs.
De Venecia, viz.:
But the cases, both here and abroad, in varying forms
of expression, all deny to the courts the power to
inquire into allegations that, in enacting a law, a
House of Congress failed to comply with its own rules,
in the absence of showing that there was a violation
of a constitutional provision or the rights of private
individuals. In Osme'a v. Pendatun, it was held: 'At
any rate, courts have declared that 'the rules adopted
by deliberative bodies are subject to revocation,
modification or waiver at the pleasure of the body
adopting them.' And it has been said that
'Parliamentary rules are merely procedural, and with
their observance, the courts have no concern. They
may be waived or disregarded by the legislative body.'
Consequently, 'mere failure to conform to
parliamentary usage will not invalidate the action
(taken by a deliberative body) when the requisite
number of members have agreed to a particular
measure.'[21] (Emphasis supplied)
The foregoing declaration is exactly in point with the
present cases, where petitioners allege irregularities
committed by the conference committee in introducing
changes or deleting provisions in the House and
Senate bills. Akin to the Fari'as case,[22] the present
petitions also raise an issue regarding the actions
taken by the conference committee on matters
regarding Congress' compliance with its own internal
rules. As stated earlier, one of the most basic and
inherent power of the legislature is the power to
formulate rules for its proceedings and the discipline

of its members. Congress is the best judge of how it

should conduct its own business expeditiously and in
the most orderly manner. It is also the sole
concern of Congress to instill discipline among the
members of its conference committee if it believes
that said members violated any of its rules of
proceedings. Even the expanded jurisdiction of this
Court cannot apply to questions regarding only the
internal operation of Congress, thus, the Court is wont
to deny a review of the internal proceedings of a coequal branch of government.
Moreover, as far back as 1994 or more than ten years
ago, in the case of Tolentino vs. Secretary of Finance,
[23] the Court already made the pronouncement that
'[i]f a change is desired in the practice [of the
Bicameral Conference Committee] it must be sought
in Congress since this question is not covered by any
constitutional provision but is only an internal rule of
each house.' [24] To date, Congress has not seen it fit
to make such changes adverted to by the Court. It
seems, therefore, that Congress finds the practices of
the bicameral conference committee to be very useful
for purposes of prompt and efficient legislative action.
Nevertheless, just to put minds at ease that no blatant
irregularities tainted the proceedings of the bicameral
conference committees, the Court deems it necessary
to dwell on the issue. The Court observes that there
was a necessity for a conference committee because
a comparison of the provisions of House Bill Nos.
3555 and 3705 on one hand, and Senate Bill No.
1950 on the other, reveals that there were indeed
disagreements. As pointed out in the petitions, said
disagreements were as follows:
With regard to 'Stand-By Authority' in favor of
President
House Bill No. 3555

manufactured goods and petroleum products and raw

materials to be used in the manufacture thereof
(amending Sec. 106 of NIRC); 12% VAT on
importation of goods and reduced rates for certain
imported products including petroleum products
(amending Sec. 107 of NIRC); and 12% VAT on sale
of services and use or lease of properties and a
reduced rate for certain services including power
generation (amending Sec. 108 of NIRC)
Senate Bill No. 1950
Provides for a single rate of 10% VAT on sale of
goods or properties (amending Sec. 106 of NIRC),
10% VAT on sale of services including sale of
electricity by generation companies, transmission and
distribution companies, and use or lease of properties
(amending Sec. 108 of NIRC)
With regard to the 'no pass-on' provision
No similar provision
Provides that the VAT imposed on power generation
and on the sale of petroleum products shall be
absorbed by generation companies or sellers,
respectively, and shall not be passed on to
consumers
Provides that the VAT imposed on sales of electricity
by generation companies and services of
transmission companies and distribution companies,
as well as those of franchise grantees of electric
utilities shall not apply to residential
end-users. VAT shall be absorbed by generation,
transmission, and distribution companies.
With regard to 70% limit on input tax credit

House Bill No.3705

Provides that the input tax credit for capital goods on

which a VAT has been paid shall be equally
distributed over 5 years or the depreciable life of such
capital goods; the input tax credit for goods and
services other than capital goods shall not exceed 5%
of the total amount of such goods and services; and
for persons engaged in retail trading of goods, the
allowable input tax credit shall not exceed 11% of the
total amount of goods purchased.

Provides for 12% VAT in general on sales of goods or

properties and reduced rates for sale of certain locally

With regard to amendments to be made to NIRC

provisions regarding income and excise taxes

Provides for 12% VAT on every sale of goods or

properties (amending Sec. 106 of NIRC); 12% VAT on
importation of goods (amending Sec. 107 of NIRC);
and 12% VAT on sale of services and use or lease of
properties (amending Sec. 108 of NIRC)

No similar provision provided

for amendments to several NIRC provisions
regarding corporate income, percentage,
franchise and excise taxes
The disagreements between the provisions in the
House bills and the Senate bill were with regard to (1)
what rate of VAT is to be imposed; (2) whether only
the VAT imposed on electricity generation,
transmission and distribution companies should not
be passed on to consumers, as proposed in the
Senate bill, or both the VAT imposed on electricity
generation, transmission and distribution companies
and the VAT imposed on sale of petroleum products
should not be passed on to consumers, as proposed
in the House bill; (3) in what manner input tax credits
should be limited; (4) and whether the NIRC
provisions on corporate income taxes, percentage,
franchise and excise taxes should be amended.
There being differences and/or disagreements on the
foregoing provisions of the House and Senate bills,
the Bicameral Conference Committee was mandated
by the rules of both houses of Congress to act on the
same by settling said differences and/or
disagreements. The Bicameral Conference
Committee acted on the disagreeing provisions by
making the following changes:
1. With regard to the disagreement on the rate of VAT
to be imposed, it would appear from the Conference
Committee Report that the Bicameral Conference
Committee tried to bridge the gap in the difference
between the 10% VAT rate proposed by the Senate,
and the various rates with 12% as the highest VAT
rate proposed by the House, by striking a compromise
whereby the present 10% VAT rate would be retained
until certain conditions arise, i.e., the value-added tax
collection as a percentage of gross domestic product
(GDP) of the previous year exceeds 2 4/5%, or
National Government deficit as a percentage of GDP
of the previous year exceeds 1'%, when the
President, upon recommendation of the Secretary of
Finance shall raise the rate of VAT to 12% effective
January 1, 2006.
2. With regard to the disagreement on whether only
the VAT imposed on electricity generation,
transmission and distribution companies should not
be passed on to consumers or whether both the VAT
imposed on electricity generation, transmission and

distribution companies and the VAT imposed on sale

of petroleum products may be passed on to
consumers, the Bicameral Conference Committee
chose to settle such disagreement by altogether
deleting from its Report any no pass-on provision.
3. With regard to the disagreement on whether input
tax credits should be limited or not, the Bicameral
Conference Committee decided to adopt the position
of the House by putting a limitation on the amount of
input tax that may be credited against the output tax,
although it crafted its own language as to the amount
of the limitation on input tax credits and the manner of
computing the same by providing thus:
(A) Creditable Input Tax. ' . . .
...
Provided, The input tax on goods purchased or
imported in a calendar month for use in trade or
business for which deduction for depreciation is
allowed under this Code, shall be spread evenly over
the month of acquisition and the fifty-nine (59)
succeeding months if the aggregate acquisition cost
for such goods, excluding the VAT component thereof,
exceeds one million Pesos (P1,000,000.00):
PROVIDED, however, that if the estimated useful life
of the capital good is less than five (5) years, as used
for depreciation purposes, then the input VAT shall be
spread over such shorter period: . . .
(B) Excess Output or Input Tax. ' If at the end of any
taxable quarter the output tax exceeds the input tax,
the excess shall be paid by the VAT-registered
person. If the input tax exceeds the output tax, the
excess shall be carried over to the succeeding quarter
or quarters: PROVIDED that the input tax inclusive of
input VAT carried over from the previous quarter that
may be credited in every quarter shall not exceed
seventy percent (70%) of the output VAT: PROVIDED,
HOWEVER, THAT any input tax attributable to zerorated sales by a VAT-registered person may at his
option be refunded or credited against other internal
revenue taxes, . . .
4. With regard to the amendments to other provisions
of the NIRC on corporate income tax, franchise,
percentage and excise taxes, the conference
committee decided to include such amendments and
basically adopted the provisions found in Senate Bill

No. 1950, with some changes as to the rate of the tax

to be imposed.
Under the provisions of both the Rules of the House
of Representatives and Senate Rules, the Bicameral
Conference Committee is mandated to settle the
differences between the disagreeing provisions in the
House bill and the Senate bill. The term 'settle' is
synonymous to 'reconcile' and 'harmonize.'[25] To
reconcile or harmonize disagreeing provisions, the
Bicameral Conference Committee may then (a) adopt
the specific provisions of either the House bill or
Senate bill, (b) decide that neither provisions in the
House bill or the provisions in the Senate bill would be
carried into the final form of the bill, and/or (c) try to
arrive at a compromise between the disagreeing
provisions.
In the present case, the changes introduced by the
Bicameral Conference Committee on disagreeing
provisions were meant only to reconcile and
harmonize the disagreeing provisions for it did not
inject any idea or intent that is wholly foreign to the
subject embraced by the original provisions.
The so-called stand-by authority in favor of the
President, whereby the rate of 10% VAT wanted by
the Senate is retained until such time that certain
conditions arise when the 12% VAT wanted by the
House shall be imposed, appears to be a compromise
to try to bridge the difference in the rate of VAT
proposed by the two houses of Congress.
Nevertheless, such compromise is still totally within
the subject of what rate of VAT should be imposed on
taxpayers.
The no pass-on provision was deleted altogether. In
the transcripts of the proceedings of the Bicameral
Conference Committee held on May 10, 2005, Sen.
Ralph Recto, Chairman of the Senate Panel,
explained the reason for deleting the no pass-on
provision in this wise:
. . . the thinking was just to keep the VAT law or the
VAT bill simple. And we were thinking that no sector
should be a beneficiary of legislative grace, neither
should any sector be discriminated on. The VAT is an
indirect tax. It is a pass on-tax. And let's keep it plain
and simple. Let's not confuse the bill and put a no
pass-on provision. Two-thirds of the world have a VAT
system and in this two-thirds of the globe, I have yet

to see a VAT with a no pass-though provision. So, the

thinking of the Senate is basically simple, let's keep
the VAT simple.[26] (Emphasis supplied)
Rep. Teodoro Locsin further made the manifestation
that the no pass-on provision 'never really enjoyed the
support of either House.'[27]
With regard to the amount of input tax to be credited
against output tax, the Bicameral Conference
Committee came to a compromise on the percentage
rate of the limitation or cap on such input tax credit,
but again, the change introduced by the Bicameral
Conference Committee was totally within the intent of
both houses to put a cap on input tax that may be
credited against the output tax. From the inception of
the subject revenue bill in the House of
Representatives, one of the major objectives was to
'plug a glaring loophole in the tax policy and
administration by creating vital restrictions on the
claiming of input VAT tax credits . . .' and '[b]y
introducing limitations on the claiming of tax credit, we
are capping a major leakage that has placed our
collection efforts at an apparent disadvantage.'[28]
As to the amendments to NIRC provisions on taxes
other than the value-added tax proposed in Senate
Bill No. 1950, since said provisions were among those
referred to it, the conference committee had to act on
the same and it basically adopted the version of the
Senate.
Thus, all the changes or modifications made by the
Bicameral Conference Committee were germane to
subjects of the provisions referred to it for
reconciliation. Such being the case, the Court does
not see any grave abuse of discretion amounting to
lack or excess of jurisdiction committed by the
Bicameral Conference Committee. In the earlier
cases of Philippine Judges Association vs. Prado[29]
and Tolentino vs. Secretary of Finance,[30] the Court
recognized the long-standing legislative practice of
giving said conference committee ample latitude for
compromising differences between the Senate and
the House. Thus, in the Tolentino case, it was held
that:
. . . it is within the power of a conference committee to
include in its report an entirely new provision that is
not found either in the House bill or in the Senate bill.
If the committee can propose an amendment

consisting of one or two provisions, there is no reason

why it cannot propose several provisions, collectively
considered as an 'amendment in the nature of a
substitute,' so long as such amendment is germane to
the subject of the bills before the committee. After all,
its report was not final but needed the approval of
both houses of Congress to become valid as an act of
the legislative department. The charge that in this
case the Conference Committee acted as a third
legislative chamber is thus without any basis.[31]
(Emphasis supplied)
B. R.A. No. 9337 Does Not Violate Article VI, Section
26(2) of the Constitution on the 'No-Amendment Rule'
Article VI, Sec. 26 (2) of the Constitution, states:
No bill passed by either House shall become a law
unless it has passed three readings on separate days,
and printed copies thereof in its final form have been
distributed to its Members three days before its
passage, except when the President certifies to the
necessity of its immediate enactment to meet a public
calamity or emergency. Upon the last reading of a bill,
no amendment thereto shall be allowed, and the vote
thereon shall be taken immediately thereafter, and the
yeas and nays entered in the Journal.
Petitioners' argument that the practice where a
bicameral conference committee is allowed to add or
delete provisions in the House bill and the Senate bill
after these had passed three readings is in effect a
circumvention of the 'no amendment rule' (Sec. 26
(2), Art. VI of the 1987 Constitution), fails to convince
the Court to deviate from its ruling in the Tolentino
case that:
Nor is there any reason for requiring that the
Committee's Report in these cases must have
undergone three readings in each of the two houses.
If that be the case, there would be no end to
negotiation since each house may seek modification
of the compromise bill. . . .
Art. VI. ' 26 (2) must, therefore, be construed as
referring only to bills introduced for the first time in
either house of Congress, not to the conference
committee report.[32] (Emphasis supplied)
The Court reiterates here that the 'no-amendment
rule' refers only to the procedure to be followed by

each house of Congress with regard to bills initiated in

each of said respective houses, before said bill is
transmitted to the other house for its concurrence or
amendment. Verily, to construe said provision in a
way as to proscribe any further changes to a bill after
one house has voted on it would lead to absurdity as
this would mean that the other house of Congress
would be deprived of its constitutional power to
amend or introduce changes to said bill. Thus, Art. VI,
Sec. 26 (2) of the Constitution cannot be taken to
mean that the introduction by the Bicameral
Conference Committee of amendments and
modifications to disagreeing provisions in bills that
have been acted upon by both houses of Congress is
prohibited.
C. R.A. No. 9337 Does Not Violate Article VI, Section
24 of the Constitution on Exclusive Origination of
Revenue Bills

151

Excise Tax on mineral products

236

Registration requirements

237
Issuance of receipts or sales or
commercial invoices
288

Disposition of Incremental Revenue

Section 27 Rates of Income Tax on Domestic

Corporation

Petitioners claim that the amendments to these

provisions of the NIRC did not at all originate from the
House. They aver that House Bill No. 3555 proposed
amendments only regarding Sections 106, 107, 108,
110 and 114 of the NIRC, while House Bill No. 3705
proposed amendments only to Sections 106, 107,108,
109, 110 and 111 of the NIRC; thus, the other sections
of the NIRC which the Senate amended but which
amendments were not found in the House bills are not
intended to be amended by the House of
Representatives. Hence, they argue that since the
proposed amendments did not originate from the
House, such amendments are a violation of Article VI,
Section 24 of the Constitution.

28(A)(1)

Tax on Resident Foreign Corporation

The argument does not hold water.

28(B)(1)

Inter-corporate Dividends

34(B)(1)

Inter-corporate Dividends

116

Tax on Persons Exempt from VAT

Coming to the issue of the validity of the amendments

made regarding the NIRC provisions on corporate
income taxes and percentage, excise taxes.
Petitioners refer to the following provisions, to wit:

Article VI, Section 24 of the Constitution reads:

117
Percentage Tax on domestic carriers and
keepers of Garage
119

Tax on franchises

121
Tax on banks and Non-Bank Financial
Intermediaries
148
Excise Tax on manufactured oils and
other fuels

Sec. 24. All appropriation, revenue or tariff bills, bills

authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively
in the House of Representatives but the Senate may
propose or concur with amendments.
In the present cases, petitioners admit that it was
indeed House Bill Nos. 3555 and 3705 that initiated
the move for amending provisions of the NIRC
dealing mainly with the value-added tax. Upon
transmittal of said House bills to the Senate, the
Senate came out with Senate Bill No. 1950 proposing
amendments not only to NIRC provisions on the
value-added tax but also amendments to NIRC
provisions on other kinds of taxes. Is the introduction
by the Senate of provisions not dealing directly with
the value- added tax, which is the only kind of tax
being amended in the House bills, still within the
purview of the constitutional provision authorizing the

Senate to propose or concur with amendments to a

revenue bill that originated from the House?

amendments that may be introduced by the Senate to

the House revenue bill.

The foregoing question had been squarely answered

in the Tolentino case, wherein the Court held, thus:

Furthermore, the amendments introduced by the

Senate to the NIRC provisions that had not been
touched in the House bills are still in furtherance of
the intent of the House in initiating the subject
revenue bills. The Explanatory Note of House Bill No.
1468, the very first House bill introduced on the floor,
which was later substituted by House Bill No. 3555,
stated:

. . . To begin with, it is not the law ' but the revenue bill
' which is required by the Constitution to 'originate
exclusively' in the House of Representatives. It is
important to emphasize this, because a bill originating
in the House may undergo such extensive changes in
the Senate that the result may be a rewriting of the
whole. . . . At this point, what is important to note is
that, as a result of the Senate action, a distinct bill
may be produced. To insist that a revenue statute '
and not only the bill which initiated the legislative
process culminating in the enactment of the law ' must
substantially be the same as the House bill would be
to deny the Senate's power not only to 'concur with
amendments' but also to 'propose amendments.' It
would be to violate the coequality of legislative power
of the two houses of Congress and in fact make the
House superior to the Senate.
'Given, then, the power of the Senate to propose
amendments, the Senate can propose its own version
even with respect to bills which are required by the
Constitution to originate in the House.
Indeed, what the Constitution simply means is that the
initiative for filing revenue, tariff or tax bills, bills
authorizing an increase of the public debt, private bills
and bills of local application must come from the
House of Representatives on the theory that, elected
as they are from the districts, the members of the
House can be expected to be more sensitive to the
local needs and problems. On the other hand, the
senators, who are elected at large, are expected to
approach the same problems from the national
perspective. Both views are thereby made to bear on
the enactment of such laws.[33] (Emphasis supplied)
Since there is no question that the revenue bill
exclusively originated in the House of
Representatives, the Senate was acting within its
constitutional power to introduce amendments to the
House bill when it included provisions in Senate Bill
No. 1950 amending corporate income taxes,
percentage, excise and franchise taxes. Verily, Article
VI, Section 24 of the Constitution does not contain
any prohibition or limitation on the extent of the

One of the challenges faced by the present

administration is the urgent and daunting task of
solving the country's serious financial problems. To do
this, government expenditures must be strictly
monitored and controlled and revenues must be
significantly increased. This may be easier said than
done, but our fiscal authorities are still optimistic the
government will be operating on a balanced budget
by the year 2009. In fact, several measures that will
result to significant expenditure savings have been
identified by the administration. It is supported with a
credible package of revenue measures that include
measures to improve tax administration and control
the leakages in revenues from income taxes and the
value-added tax (VAT). (Emphasis supplied)
Rep. Eric D. Singson, in his sponsorship speech for
House Bill No. 3555, declared that:
In the budget message of our President in the year
2005, she reiterated that we all acknowledged that on
top of our agenda must be the restoration of the
health of our fiscal system.
In order to considerably lower the consolidated public
sector deficit and eventually achieve a balanced
budget by the year 2009, we need to seize windows
of opportunities which might seem poignant in the
beginning, but in the long run prove effective and
beneficial to the overall status of our economy. One
such opportunity is a review of existing tax rates,
evaluating the relevance given our present conditions.
[34] (Emphasis supplied)
Notably therefore, the main purpose of the bills
emanating from the House of Representatives is to
bring in sizeable revenues for the government

to supplement our country's serious financial

problems, and improve tax administration and control
of the leakages in revenues from income taxes and
value-added taxes. As these house bills were
transmitted to the Senate, the latter, approaching the
measures from the point of national perspective, can
introduce amendments within the purposes of those
bills. It can provide for ways that would soften the
impact of the VAT measure on the consumer, i.e., by
distributing the burden across all sectors instead of
putting it entirely on the shoulders of the consumers.
The sponsorship speech of Sen. Ralph Recto on why
the provisions on income tax on corporation were
included is worth quoting:
All in all, the proposal of the Senate Committee on
Ways and Means will raise P64.3 billion in additional
revenues annually even while by mitigating prices of
power, services and petroleum products.
However, not all of this will be wrung out of VAT. In
fact, only P48.7 billion amount is from the VAT on
twelve goods and services. The rest of the tab ' P10.5
billion- will be picked by corporations.
What we therefore prescribe is a burden sharing
between corporate Philippines and the consumer.
Why should the latter bear all the pain? Why should
the fiscal salvation be only on the burden of the
consumer?
The corporate world's equity is in form of the increase
in the corporate income tax from 32 to 35 percent, but
up to 2008 only. This will raise P10.5 billion a year.
After that, the rate will slide back, not to its old rate of
32 percent, but two notches lower, to 30 percent.
Clearly, we are telling those with the capacity to pay,
corporations, to bear with this emergency provision
that will be in effect for 1,200 days, while we put our
fiscal house in order. This fiscal medicine will have an
expiry date.
For their assistance, a reward of tax reduction awaits
them. We intend to keep the length of their sacrifice
brief. We would like to assure them that not because
there is a light at the end of the tunnel, this
government will keep on making the tunnel long.

The responsibility will not rest solely on the weary

shoulders of the small man. Big business will be there
to share the burden.[35]
As the Court has said, the Senate can propose
amendments and in fact, the amendments made on
provisions in the tax on income of corporations are
germane to the purpose of the house bills which is to
raise revenues for the government.
Likewise, the Court finds the sections referring to
other percentage and excise taxes germane to the
reforms to the VAT system, as these sections would
cushion the effects of VAT on consumers. Considering
that certain goods and services which were subject to
percentage tax and excise tax would no longer be
VAT-exempt, the consumer would be burdened more
as they would be paying the VAT in addition to these
taxes. Thus, there is a need to amend these sections
to soften the impact of VAT. Again, in his sponsorship
speech, Sen. Recto said:
However, for power plants that run on oil, we will
reduce to zero the present excise tax on bunker fuel,
to lessen the effect of a VAT on this product.

For electric utilities like Meralco, we will wipe out the

franchise tax in exchange for a VAT.
And in the case of petroleum, while we will levy the
VAT on oil products, so as not to destroy the VAT
chain, we will however bring down the excise tax on
socially sensitive products such as diesel, bunker, fuel
and kerosene.
What do all these exercises point to? These are not
contortions of giving to the left hand what was taken
from the right. Rather, these sprang from our concern
of softening the impact of VAT, so that the people can
cushion the blow of higher prices they will have to pay
as a result of VAT.[36]
The other sections amended by the Senate pertained
to matters of tax administration which are necessary
for the implementation of the changes in the VAT
system.
To reiterate, the sections introduced by the Senate
are germane to the subject matter and purposes of
the house bills, which is to supplement our country's

fiscal deficit, among others. Thus, the Senate acted

within its power to propose those amendments.
SUBSTANTIVE ISSUES
I.

Whether Sections 4, 5 and 6 of R.A. No. 9337,

amending Sections 106, 107 and 108 of the NIRC,
violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)
A. No Undue Delegation of Legislative Power
Petitioners ABAKADA GURO Party List, et al.,
Pimentel, Jr., et al., and Escudero, et al. contend in
common that Sections 4, 5 and 6 of R.A. No. 9337,
amending Sections 106, 107 and 108, respectively, of
the NIRC giving the President the stand-by authority
to raise the VAT rate from 10% to 12% when a certain
condition is met, constitutes undue delegation of the
legislative power to tax.

(i) value-added tax collection as a percentage of

Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of
GDP of the previous year exceeds one and one-half
percent (1 '%).
SEC. 5. Section 107 of the same Code, as amended,
is hereby further amended to read as follows:
SEC. 107. Value-Added Tax on Importation of Goods.
(A) In General. ' There shall be levied, assessed and
collected on every importation of goods a valueadded tax equivalent to ten percent (10%) based on
the total value used by the Bureau of Customs in
determining tariff and customs duties, plus customs
duties, excise taxes, if any, and other charges, such
tax to be paid by the importer prior to the release of
such goods from customs custody: Provided, That
where the customs duties are determined on the
basis of the quantity or volume of the goods, the
value-added tax shall be based on the landed cost
plus excise taxes, if any: provided, further, that the
President, upon the recommendation of the Secretary
of Finance, shall, effective January 1, 2006, raise the
rate of value-added tax to twelve percent (12%) after
any of the following conditions has been satisfied.

The assailed provisions read as follows:

SEC. 4. Sec. 106 of the same Code, as amended, is
hereby further amended to read as follows:
SEC. 106. Value-Added Tax on Sale of Goods or
Properties. '
(A) Rate and Base of Tax. ' There shall be levied,
assessed and collected on every sale, barter or
exchange of goods or properties, a value-added tax
equivalent to ten percent (10%) of the gross selling
price or gross value in money of the goods or
properties sold, bartered or exchanged, such tax to be
paid by the seller or transferor:provided, that the
President, upon the recommendation of the Secretary
of Finance, shall, effective January 1, 2006, raise the
rate of value-added tax to twelve percent (12%), after
any of the following conditions has been satisfied.

(i) value-added tax collection as a percentage of

Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of
GDP of the previous year exceeds one and one-half
percent (1 '%).
SEC. 6. Section 108 of the same Code, as amended,
is hereby further amended to read as follows:
SEC. 108. Value-added Tax on Sale of Services and
Use or Lease of Properties '
(A) Rate and Base of Tax. ' There shall be levied,
assessed and collected, a value-added tax equivalent
to ten percent (10%) of gross receipts derived from
the sale or exchange of services: provided, that the
President, upon the recommendation of the Secretary
of Finance, shall, effective January 1, 2006, raise the

rate of value-added tax to twelve percent (12%), after

any of the following conditions has been satisfied.

conditions provided by the law to bring about either or

both the conditions precedent.

(i) value-added tax collection as a percentage of

Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%) or

On the other hand, petitioners Escudero, et al. find

bizarre and revolting the situation that the imposition
of the 12% rate would be subject to the whim of the
Secretary of Finance, an unelected bureaucrat,
contrary to the principle of no taxation without
representation. They submit that the Secretary of
Finance is not mandated to give a favorable
recommendation and he may not even give his
recommendation. Moreover, they allege that no
guiding standards are provided in the law on what
basis and as to how he will make his
recommendation. They claim, nonetheless, that any
recommendation of the Secretary of Finance can
easily be brushed aside by the President since the
former is a mere alter ego of the latter, such that,
ultimately, it is the President who decides whether to
impose the increased tax rate or not.

(ii) national government deficit as a percentage of

GDP of the previous year exceeds one and one-half
percent (1 '%). (Emphasis supplied)
Petitioners allege that the grant of the stand-by
authority to the President to increase the VAT rate is a
virtual abdication by Congress of its exclusive power
to tax because such delegation is not within the
purview of Section 28 (2), Article VI of the
Constitution, which provides:
The Congress may, by law, authorize the President to
fix within specified limits, and may impose, tariff rates,
import and export quotas, tonnage and wharfage
dues, and other duties or imposts within the
framework of the national development program of
the government.
They argue that the VAT is a tax levied on the sale,
barter or exchange of goods and properties as well as
on the sale or exchange of services, which cannot be
included within the purview of tariffs under the
exempted delegation as the latter refers to customs
duties, tolls or tribute payable upon merchandise to
the government and usually imposed on goods or
merchandise imported or exported.
Petitioners ABAKADA GURO Party List, et al., further
contend that delegating to the President the
legislative power to tax is contrary to republicanism.
They insist that accountability, responsibility and
transparency should dictate the actions of Congress
and they should not pass to the President the
decision to impose taxes. They also argue that the
law also effectively nullified the President's power of
control, which includes the authority to set aside and
nullify the acts of her subordinates like the Secretary
of Finance, by mandating the fixing of the tax rate by
the President upon the recommendation of the
Secretary of Finance.
Petitioners Pimentel, et al. aver that the President has
ample powers to cause, influence or create the

A brief discourse on the principle of non-delegation of

powers is instructive.
The principle of separation of powers ordains that
each of the three great branches of government has
exclusive cognizance of and is supreme in matters
falling within its own constitutionally allocated sphere.
[37] A logical corollary to the doctrine of separation of
powers is the principle of non-delegation of powers,
as expressed in the Latin maxim: potestas delegata
non delegari potest which means 'what has been
delegated, cannot be delegated.'[38] This doctrine is
based on the ethical principle that such as delegated
power constitutes not only a right but a duty to be
performed by the delegate through the instrumentality
of his own judgment and not through the intervening
mind of another.[39]
With respect to the Legislature, Section 1 of Article VI
of the Constitution provides that 'the Legislative power
shall be vested in the Congress of the Philippines
which shall consist of a Senate and a House of
Representatives.' The powers which Congress is
prohibited from delegating are those which are strictly,
or inherently and exclusively, legislative. Purely
legislative power, which can never be delegated, has
been described as the authority to make a complete
law ' complete as to the time when it shall take effect
and as to whom it shall be applicable ' and to
determine the expediency of its enactment.[40] Thus,

the rule is that in order that a court may be justified in

holding a statute unconstitutional as a delegation of
legislative power, it must appear that the power
involved is purely legislative in nature ' that is, one
appertaining exclusively to the legislative department.
It is the nature of the power, and not the liability of its
use or the manner of its exercise, which determines
the validity of its delegation.
Nonetheless, the general rule barring delegation of
legislative powers is subject to the following
recognized limitations or exceptions:
(1) Delegation of tariff powers to the President under
Section 28 (2) of Article VI of the Constitution;
(2) Delegation of emergency powers to the President
under Section 23 (2) of Article VI of the Constitution;
(3) Delegation to the people at large;
(4) Delegation to local governments; and
(5) Delegation to administrative bodies.
In every case of permissible delegation, there must be
a showing that the delegation itself is valid. It is valid
only if the law (a) is complete in itself, setting forth
therein the policy to be executed, carried out, or
implemented by the delegate;[41] and (b) fixes a
standard ' the limits of which are sufficiently
determinate and determinable ' to which the delegate
must conform in the performance of his functions.[42]
A sufficient standard is one which defines legislative
policy, marks its limits, maps out its boundaries and
specifies the public agency to apply it. It indicates the
circumstances under which the legislative command
is to be effected.[43] Both tests are intended to
prevent a total transference of legislative authority to
the delegate, who is not allowed to step into the
shoes of the legislature and exercise a power
essentially legislative.[44]
In People vs. Vera,[45] the Court, through eminent
Justice Jose P. Laurel, expounded on the concept and
extent of delegation of power in this wise:
In testing whether a statute constitutes an undue
delegation of legislative power or not, it is usual to
inquire whether the statute was complete in all its
terms and provisions when it left the hands of the
legislature so that nothing was left to the judgment of

any other appointee or delegate of the legislature.

'The true distinction', says Judge Ranney, 'is between
the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be,
and conferring an authority or discretion as to its
execution, to be exercised under and in pursuance of
the law. The first cannot be done; to the latter no valid
objection can be made.'

It is contended, however, that a legislative act may be

made to the effect as law after it leaves the hands of
the legislature. It is true that laws may be made
effective on certain contingencies, as by proclamation
of the executive or the adoption by the people of a
particular community. In Wayman vs. Southard, the
Supreme Court of the United States ruled that the
legislature may delegate a power not legislative which
it may itself rightfully exercise. The power to ascertain
facts is such a power which may be delegated. There
is nothing essentially legislative in ascertaining the
existence of facts or conditions as the basis of the
taking into effect of a law. That is a mental process
common to all branches of the
government. Notwithstanding the apparent tendency,
however, to relax the rule prohibiting delegation of
legislative authority on account of the complexity
arising from social and economic forces at work in this
modern industrial age, the orthodox pronouncement
of Judge Cooley in his work on Constitutional
Limitations finds restatement in Prof. Willoughby's
treatise on the Constitution of the United States in the
following language ' speaking of declaration of
legislative power to administrative agencies: The
principle which permits the legislature to provide that
the administrative agent may determine when the
circumstances are such as require the application of a
law is defended upon the ground that at the time this
authority is granted, the rule of public policy, which is
the essence of the legislative act, is determined by
the legislature. In other words, the legislature, as it is
its duty to do, determines that, under given
circumstances, certain executive or administrative
action is to be taken, and that, under other
circumstances, different or no action at all is to be
taken. What is thus left to the administrative official is
not the legislative determination of what public policy
demands, but simply the ascertainment of what the
facts of the case require to be done according to the

terms of the law by which he is governed. The

efficiency of an Act as a declaration of legislative will
must, of course, come from Congress, but the
ascertainment of the contingency upon which the Act
shall take effect may be left to such agencies as it
may designate. The legislature, then, may provide
that a law shall take effect upon the happening of
future specified contingencies leaving to some other
person or body the power to determine when the
specified contingency has arisen. (Emphasis
supplied).[46]
In Edu vs. Ericta,[47] the Court reiterated:
What cannot be delegated is the authority under the
Constitution to make laws and to alter and repeal
them; the test is the completeness of the statute in all
its terms and provisions when it leaves the hands of
the legislature. To determine whether or not there is
an undue delegation of legislative power, the inquiry
must be directed to the scope and definiteness of the
measure enacted. The legislative does not abdicate
its functions when it describes what job must be done,
who is to do it, and what is the scope of his authority.
For a complex economy, that may be the only way in
which the legislative process can go forward. A
distinction has rightfully been made between
delegation of power to make the laws which
necessarily involves a discretion as to what it shall be,
which constitutionally may not be done, and
delegation of authority or discretion as to its execution
to be exercised under and in pursuance of the law, to
which no valid objection can be made. The
Constitution is thus not to be regarded as denying the
legislature the necessary resources of flexibility and
practicability. (Emphasis supplied).[48]
Clearly, the legislature may delegate to executive
officers or bodies the power to determine certain facts
or conditions, or the happening of contingencies, on
which the operation of a statute is, by its terms, made
to depend, but the legislature must prescribe sufficient
standards, policies or limitations on their authority.[49]
While the power to tax cannot be delegated to
executive agencies, details as to the enforcement and
administration of an exercise of such power may be
left to them, including the power to determine the
existence of facts on which its operation depends.
[50]

The rationale for this is that the preliminary

ascertainment of facts as basis for the enactment of
legislation is not of itself a legislative function, but is
simply ancillary to legislation. Thus, the duty of
correlating information and making recommendations
is the kind of subsidiary activity which the legislature
may perform through its members, or which it may
delegate to others to perform. Intelligent legislation on
the complicated problems of modern society is
impossible in the absence of accurate information on
the part of the legislators, and any reasonable method
of securing such information is proper.[51] The
Constitution as a continuously operative charter of
government does not require that Congress find for
itself
every fact upon which it desires to base legislative
action or that it make for itself detailed determinations
which it has declared to be prerequisite to application
of legislative policy to particular facts and
circumstances impossible for Congress itself properly
to investigate.[52]
In the present case, the challenged section of R.A.
No. 9337 is the common proviso in Sections 4, 5 and
6 which reads as follows:
That the President, upon the recommendation of the
Secretary of Finance, shall, effective January 1, 2006,
raise the rate of value-added tax to twelve percent
(12%), after any of the following conditions has been
satisfied:

(i) Value-added tax collection as a percentage of

Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of
GDP of the previous year exceeds one and one-half
percent (1 1/2%).
The case before the Court is not a delegation of
legislative power. It is simply a delegation of
ascertainment of facts upon which enforcement and
administration of the increase rate under the law is
contingent. The legislature has made the operation of
the 12% rate effective January 1, 2006, contingent
upon a specified fact or condition. It leaves the entire

operation or non-operation of the 12% rate upon

factual matters outside of the control of the executive.
No discretion would be exercised by the President.
Highlighting the absence of discretion is the fact that
the word shall is used in the common proviso. The
use of the word shall connotes a mandatory order. Its
use in a statute denotes an imperative obligation and
is inconsistent with the idea of discretion.[53] Where
the law is clear and unambiguous, it must be taken to
mean exactly what it says, and courts have no choice
but to see to it that the mandate is obeyed.[54]
Thus, it is the ministerial duty of the President to
immediately impose the 12% rate upon the existence
of any of the conditions specified by Congress. This is
a duty which cannot be evaded by the President.
Inasmuch as the law specifically uses the word shall,
the exercise of discretion by the President does not
come into play. It is a clear directive to impose the
12% VAT rate when the specified conditions are
present. The time of taking into effect of the 12% VAT
rate is based on the happening of a certain specified
contingency, or upon the ascertainment of certain
facts or conditions by a person or body other than the
legislature itself.
The Court finds no merit to the contention of
petitioners ABAKADA GURO Party List, et al. that the
law effectively nullified the President's power of
control over the Secretary of Finance by mandating
the fixing of the tax rate by the President upon the
recommendation of the Secretary of Finance. The
Court cannot also subscribe to the position of
petitioners
Pimentel, et al. that the word shall should be
interpreted to mean may in view of the phrase 'upon
the recommendation of the Secretary of Finance.'
Neither does the Court find persuasive the
submission of petitioners Escudero, et al. that any
recommendation by the Secretary of Finance can
easily be brushed aside by the President since the
former is a mere alter ego of the latter.
When one speaks of the Secretary of Finance as the
alter ego of the President, it simply means that as
head of the Department of Finance he is the assistant
and agent of the Chief Executive. The multifarious
executive and administrative functions of the Chief
Executive are performed by and through the

executive departments, and the acts of the

secretaries of such departments, such as the
Department of Finance, performed and promulgated
in the regular course of business, are, unless
disapproved or reprobated by the Chief Executive,
presumptively the acts of the Chief Executive. The
Secretary of Finance, as such, occupies a political
position and holds office in an advisory capacity, and,
in the language of Thomas Jefferson, "should be of
the President's bosom confidence" and, in the
language of Attorney-General Cushing, is 'subject to
the direction of the President."[55]
In the present case, in making his recommendation to
the President on the existence of either of the two
conditions, the Secretary of Finance is not acting as
the alter ego of the President or even her subordinate.
In such instance, he is not subject to the power of
control and direction of the President. He is acting as
the agent of the legislative department, to determine
and declare the event upon which its expressed will is
to take effect.[56] The Secretary of Finance becomes
the means or tool by which legislative policy is
determined and implemented, considering that he
possesses all the facilities to gather data and
information and has a much broader perspective to
properly evaluate them. His function is to gather and
collate statistical data and other pertinent information
and verify if any of the two conditions laid out by
Congress is present. His personality in such instance
is in reality but a projection of that of Congress. Thus,
being the agent of Congress and not of the President,
the President cannot alter or modify or nullify, or set
aside the findings of the Secretary of Finance and to
substitute the judgment of the former for that of the
latter.

Congress simply granted the Secretary of Finance the

authority to ascertain the existence of a fact, namely,
whether by December 31, 2005, the value-added tax
collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth
percent (24/5%) or the national government deficit as
a percentage of GDP of the previous year exceeds
one and one-half percent (1'%). If either of these two
instances has occurred, the Secretary of Finance, by
legislative mandate, must submit such information to
the President. Then the 12% VAT rate must be
imposed by the President effective January 1,

2006. There is no undue delegation of legislative

power but only of the discretion as to the execution of
a law. This is constitutionally permissible.[57]
Congress does not abdicate its functions or unduly
delegate power when it describes what job must be
done, who must do it, and what is the scope of his
authority; in our complex economy that is frequently
the only way in which the legislative process can go
forward.[58]
As to the argument of petitioners ABAKADA GURO
Party List, et al. that delegating to the President the
legislative power to tax is contrary to the principle of
republicanism, the same deserves scant
consideration. Congress did not delegate the power to
tax but the mere implementation of the law. The intent
and will to increase the VAT rate to 12% came from
Congress and the task of the President is to simply
execute the legislative policy. That Congress chose
to do so in such a manner is not within the province of
the Court to inquire into, its task being to interpret the
law.[59]
The insinuation by petitioners Pimentel, et al. that the
President has ample powers to cause, influence or
create the conditions to bring about either or both the
conditions precedent does not deserve any merit as
this argument is highly speculative. The Court does
not rule on allegations which are manifestly
conjectural, as these may not exist at all. The Court
deals with facts, not fancies; on realities, not
appearances. When the Court acts on appearances
instead of realities, justice and law will be short-lived.

B. The 12% Increase VAT Rate Does Not Impose an

Unfair and Unnecessary Additional Tax Burden
Petitioners Pimentel, et al. argue that the 12%
increase in the VAT rate imposes an unfair and
additional tax burden on the people. Petitioners also
argue that the 12% increase, dependent on any of the
2 conditions set forth in the contested provisions, is
ambiguous because it does not state if the VAT rate
would be returned to the original 10% if the rates are
no longer satisfied. Petitioners also argue that such
rate is unfair and unreasonable, as the people are
unsure of the applicable VAT rate from year to year.
Under the common provisos of Sections 4, 5 and 6 of
R.A. No. 9337, if any of the two conditions set forth

therein are satisfied, the President shall increase the

VAT rate to 12%. The provisions of the law are clear. It
does not provide for a return to the 10% rate nor does
it empower the President to so revert if, after the rate
is increased to 12%, the VAT collection goes below
the 24/5 of the GDP of the previous year or that the
national government deficit as a percentage of GDP
of the previous year does not exceed 1 1/2%.
Therefore, no statutory construction or interpretation
is needed. Neither can conditions or limitations be
introduced where none is provided for. Rewriting the
law is a forbidden ground that only Congress may
tread upon.[60]
Thus, in the absence of any provision providing for a
return to the 10% rate, which in this case the Court
finds none, petitioners' argument is, at best, purely
speculative. There is no basis for petitioners' fear of a
fluctuating VAT rate because the law itself does not
provide that the rate should go back to 10% if the
conditions provided in Sections 4, 5 and 6 are no
longer present. The rule is that where the provision of
the law is clear and unambiguous, so that there is no
occasion for the court's seeking the legislative intent,
the law must be taken as it is, devoid of judicial
addition or subtraction.[61]

Petitioners also contend that the increase in the VAT

rate, which was allegedly an incentive to the
President to raise the VAT collection to at least 2 4/5
of the GDP of the previous year, should be based on
fiscal adequacy.

Petitioners obviously overlooked that increase in VAT

collection is not the only condition. There is another
condition, i.e., the national government deficit as a
percentage of GDP of the previous year exceeds one
and one-half percent (1 1/2%).
Respondents explained the philosophy behind these
alternative conditions:
1. VAT/GDP Ratio > 2.8%
The condition set for increasing VAT rate to 12% have
economic or fiscal meaning. If VAT/GDP is less than
2.8%, it means that government has weak or no

capability of implementing the VAT or that VAT is not

effective in the function of the tax collection.
Therefore, there is no value to increase it to 12%
because such action will also be ineffectual.
2. Nat'l Gov't Deficit/GDP >1.5%
The condition set for increasing VAT when deficit/GDP
is 1.5% or less means the fiscal condition of
government has reached a relatively sound position
or is towards the direction of a balanced budget
position. Therefore, there is no need to increase the
VAT rate since the fiscal house is in a relatively
healthy position. Otherwise stated, if the ratio is more
than 1.5%, there is indeed a need to increase the VAT
rate.[62]
That the first condition amounts to an incentive to the
President to increase the VAT collection does not
render it unconstitutional so long as there is a public
purpose for which the law was passed, which in this
case, is mainly to raise revenue. In fact, fiscal
adequacy dictated the need for a raise in revenue.
The principle of fiscal adequacy as a characteristic of
a sound tax system was originally stated by Adam
Smith in his Canons of Taxation (1776), as:
IV. Every tax ought to be so contrived as both to take
out and to keep out of the pockets of the people as
little as possible over and above what it brings into the
public treasury of the state.[63]
It simply means that sources of revenues must be
adequate to meet government expenditures and their
variations.[64]
The dire need for revenue cannot be ignored. Our
country is in a quagmire of financial woe. During the
Bicameral Conference Committee hearing, then
Finance Secretary Purisima bluntly depicted the
country's gloomy state of economic affairs, thus:
First, let me explain the position that the Philippines
finds itself in right now. We are in a position where 90
percent of our revenue is used for debt service. So,
for every peso of revenue that we currently raise, 90
goes to debt service. That's interest plus amortization
of our debt. So clearly, this is not a sustainable
situation. That's the first fact.

The second fact is that our debt to GDP level is way

out of line compared to other peer countries that
borrow money from that international financial
markets. Our debt to GDP is approximately equal to
our GDP. Again, that shows you that this is not a
sustainable situation.
The third thing that I'd like to point out is the
environment that we are presently operating in is not
as benign as what it used to be the past five years.
What do I mean by that?
In the past five years, we've been lucky because we
were operating in a period of basically global growth
and low interest rates. The past few months, we have
seen an inching up, in fact, a rapid increase in the
interest rates in the leading economies of the world.
And, therefore, our ability to borrow at reasonable
prices is going to be challenged. In fact, ultimately, the
question is our ability to access the financial markets.
When the President made her speech in July last
year, the environment was not as bad as it is now, at
least based on the forecast of most financial
institutions. So, we were assuming that raising 80
billion would put us in a position where we can then
convince them to improve our ability to borrow at
lower rates. But conditions have changed on us
because the interest rates have gone up. In fact, just
within this room, we tried to access the market for a
billion dollars because for this year alone, the
Philippines will have to borrow 4 billion dollars. Of that
amount, we have borrowed 1.5 billion. We issued last
January a 25-year bond at 9.7 percent cost. We were
trying to access last week and the market was not as
favorable and up to now we have not accessed and
we might pull back because the conditions are not
very good.
So given this situation, we at the Department of
Finance believe that we really need to front-end our
deficit reduction. Because it is deficit that is causing
the increase of the debt and we are in what we call a
debt spiral. The more debt you have, the more deficit
you have because interest and debt service eats and
eats more of your revenue. We need to get out of this
debt spiral. And the only way, I think, we can get out
of this debt spiral is really have a front-end adjustment
in our revenue base.[65]

The image portrayed is chilling. Congress passed the

law hoping for rescue from an inevitable catastrophe.
Whether the law is indeed sufficient to answer the
state's economic dilemma is not for the Court to
judge. In the Fari'as case, the Court refused to
consider the various arguments raised therein that
dwelt on the wisdom of Section 14 of R.A. No. 9006
(The Fair Election Act), pronouncing that:
. . . policy matters are not the concern of the Court.
Government policy is within the exclusive dominion of
the political branches of the government. It is not for
this Court to look into the wisdom or propriety of
legislative determination. Indeed, whether an
enactment is wise or unwise, whether it is based on
sound economic theory, whether it is the best means
to achieve the desired results, whether, in short, the
legislative discretion within its prescribed limits should
be exercised in a particular manner are matters for
the judgment of the legislature, and the serious
conflict of opinions does not suffice to bring them
within the range of judicial cognizance.[66]
In the same vein, the Court in this case will not
dawdle on the purpose of Congress or the executive
policy, given that it is not for the judiciary to "pass
upon questions of wisdom, justice or expediency of
legislation.'[67]
II.
Whether Section 8 of R.A. No. 9337, amending
Sections 110(A)(2) and 110(B) of the NIRC; and
Section 12 of R.A. No. 9337, amending Section
114(C) of the NIRC, violate the following provisions of
the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
A. Due Process and Equal Protection Clauses
Petitioners Association of Pilipinas Shell Dealers, Inc.,
et al. argue that Section 8 of R.A. No. 9337,
amending Sections 110 (A)(2), 110 (B), and Section
12 of R.A. No. 9337, amending Section 114 (C) of the
NIRC are arbitrary, oppressive, excessive and
confiscatory. Their argument is premised on the
constitutional right against deprivation of life, liberty of

property without due process of law, as embodied in

Article III, Section 1 of the Constitution.
Petitioners also contend that these provisions violate
the constitutional guarantee of equal protection of the
law.
The doctrine is that where the due process and equal
protection clauses are invoked, considering that they
are not fixed rules but rather broad standards, there is
a need for proof of such persuasive character as
would lead to such a conclusion. Absent such a
showing, the presumption of validity must prevail.[68]
Section 8 of R.A. No. 9337, amending Section 110(B)
of the NIRC imposes a limitation on the amount of
input tax that may be credited against the output tax.
It states, in part: '[P]rovided, that the input tax
inclusive of the input VAT carried over from the
previous quarter that may be credited in every quarter
shall not exceed seventy percent (70%) of the output
VAT: ''
Input Tax is defined under Section 110(A) of the
NIRC, as amended, as the value-added tax due from
or paid by a VAT-registered person on the importation
of goods or local purchase of good and services,
including lease or use of property, in the course of
trade or business, from a VAT-registered person, and
Output Tax is the value-added tax due on the sale or
lease of taxable goods or properties or services by
any person registered or required to register under
the law.
Petitioners claim that the contested sections impose
limitations on the amount of input tax that may be
claimed. In effect, a portion of the input tax that has
already been paid cannot now be credited against the
output tax.
Petitioners' argument is not absolute. It assumes that
the input tax exceeds 70% of the output tax, and
therefore, the input tax in excess of 70% remains
uncredited. However, to the extent that the input tax is
less than 70% of the output tax, then 100% of such
input tax is still creditable.
More importantly, the excess input tax, if any, is
retained in a business's books of accounts and
remains creditable in the succeeding quarter/s. This is
explicitly allowed by Section 110(B), which provides

that 'if the input tax exceeds the output tax, the
excess shall be carried over to the succeeding quarter
or quarters.' In addition, Section 112(B) allows a VATregistered person to apply for the issuance of a tax
credit certificate or refund for any unused input taxes,
to the extent that such input taxes have not been
applied against the output taxes. Such unused input
tax may be used in payment of his other internal
revenue taxes.
The non-application of the unutilized input tax in a
given quarter is not ad infinitum, as petitioners
exaggeratedly contend. Their analysis of the effect of
the 70% limitation is incomplete and one-sided. It
ends at the net effect that there will be
unapplied/unutilized inputs VAT for a given quarter. It
does not proceed further to the fact that such
unapplied/unutilized input tax may be credited in the
subsequent periods as allowed by the carry-over
provision of Section 110(B) or that it may later on be
refunded through a tax credit certificate under Section
112(B).
Therefore, petitioners' argument must be rejected.
On the other hand, it appears that petitioner Garcia
failed to comprehend the operation of the 70%
limitation on the input tax. According to petitioner, the
limitation on the creditable input tax in effect allows
VAT-registered establishments to retain a portion of
the taxes they collect, which violates the principle that
tax collection and revenue should be for public
purposes and expenditures

As earlier stated, the input tax is the tax paid by a

person, passed on to him by the seller, when he buys
goods. Output tax meanwhile is the tax due to the
person when he sells goods. In computing the VAT
payable, three possible scenarios may arise:
First, if at the end of a taxable quarter the output
taxes charged by the seller are equal to the input
taxes that he paid and passed on by the suppliers,
then no payment is required;
Second, when the output taxes exceed the input
taxes, the person shall be liable for the excess, which

has to be paid to the Bureau of Internal Revenue

(BIR);[69] and
Third, if the input taxes exceed the output taxes, the
excess shall be carried over to the succeeding quarter
or quarters. Should the input taxes result from zerorated or effectively zero-rated transactions, any
excess over the output taxes shall instead be
refunded to the taxpayer or credited against other
internal revenue taxes, at the taxpayer's option.[70]
Section 8 of R.A. No. 9337 however, imposed a 70%
limitation on the input tax. Thus, a person can credit
his input tax only up to the extent of 70% of the output
tax. In layman's term, the value-added taxes that a
person/taxpayer paid and passed on to him by a
seller can only be credited up to 70% of the valueadded taxes that is due to him on a taxable
transaction. There is no retention of any tax collection
because the person/taxpayer has already previously
paid the input tax to a seller, and the seller will
subsequently remit such input tax to the BIR. The
party directly liable for the payment of the tax is the
seller.[71] What only needs to be done is for the
person/taxpayer to apply or credit these input taxes,
as evidenced by receipts, against his output taxes.
Petitioners Association of Pilipinas Shell Dealers, Inc.,
et al. also argue that the input tax partakes the nature
of a property that may not be confiscated,
appropriated, or limited without due process of law.
The input tax is not a property or a property right
within the constitutional purview of the due process
clause. A VAT-registered person's entitlement to the
creditable input tax is a mere statutory privilege.

The distinction between statutory privileges and

vested rights must be borne in mind for persons have
no vested rights in statutory privileges. The state may
change or take away rights, which were created by
the law of the state, although it may not take away
property, which was vested by virtue of such rights.
[72]
Under the previous system of single-stage taxation,
taxes paid at every level of distribution are not
recoverable from the taxes payable, although it
becomes part of the cost, which is deductible from the

gross revenue. When Pres. Aquino issued E.O. No.

273 imposing a 10% multi-stage tax on all sales, it
was then that the crediting of the input tax paid on
purchase or importation of goods and services by
VAT-registered persons against the output tax was
introduced.[73] This was adopted by the Expanded
VAT Law (R.A. No. 7716),[74] and The Tax Reform
Act of 1997 (R.A. No. 8424).[75] The right to credit
input tax as against the output tax is clearly a privilege
created by law, a privilege that also the law can
remove, or in this case, limit.
Petitioners also contest as arbitrary, oppressive,
excessive and confiscatory, Section 8 of R.A. No.
9337, amending Section 110(A) of the NIRC, which
provides:

amounts to a 4-year interest-free loan to the

government.[76] In the same breath, Congress also
justified its move by saying that the provision was
designed to raise an annual revenue of 22.6 billion.
[77] The legislature also dispelled the fear that the
provision will fend off foreign investments, saying that
foreign investors have other tax incentives provided
by law, and citing the case of China, where despite a
17.5% non-creditable VAT, foreign investments were
not deterred.[78] Again, for whatever is the purpose of
the 60-month amortization, this involves executive
economic policy and legislative wisdom in which the
Court cannot intervene.

SEC. 110. Tax Credits. '

With regard to the 5% creditable withholding tax

imposed on payments made by the government for
taxable transactions, Section 12 of R.A. No. 9337,
which amended Section 114 of the NIRC, reads:

(A) Creditable Input Tax. ' '

SEC. 114. Return and Payment of Value-added Tax. '

Provided, That the input tax on goods purchased or

imported in a calendar month for use in trade or
business for which deduction for depreciation is
allowed under this Code, shall be spread evenly over
the month of acquisition and the fifty-nine (59)
succeeding months if the aggregate acquisition cost
for such goods, excluding the VAT component thereof,
exceeds One million pesos (P1,000,000.00):
Provided, however, That if the estimated useful life of
the capital goods is less than five (5) years, as used
for depreciation purposes, then the input VAT shall be
spread over such a shorter period: Provided, finally,
That in the case of purchase of services, lease or use
of properties, the input tax shall be creditable to the
purchaser, lessee or license upon payment of the
compensation, rental, royalty or fee.

(C) Withholding of Value-added Tax. ' The

Government or any of its political subdivisions,
instrumentalities or agencies, including governmentowned or controlled corporations (GOCCs) shall,
before making payment on account of each purchase
of goods and services which are subject to the valueadded tax imposed in Sections 106 and 108 of this
Code, deduct and withhold a final value-added tax at
the rate of five percent (5%) of the gross payment
thereof: Provided, That the payment for lease or use
of properties or property rights to nonresident owners
shall be subject to ten percent (10%) withholding tax
at the time of payment. For purposes of this Section,
the payor or person in control of the payment shall be
considered as the withholding agent.

The foregoing section imposes a 60-month period

within which to amortize the creditable input tax on
purchase or importation of capital goods with
acquisition cost of P1 Million pesos, exclusive of the
VAT component. Such spread out only poses a delay
in the crediting of the input tax. Petitioners' argument
is without basis because the taxpayer is not
permanently deprived of his privilege to credit the
input tax.
It is worth mentioning that Congress admitted that the
spread-out of the creditable input tax in this case

The value-added tax withheld under this Section shall

be remitted within ten (10) days following the end of
the month the withholding was made.
Section 114(C) merely provides a method of
collection, or as stated by respondents, a more
simplified VAT withholding system. The government in
this case is constituted as a withholding agent with
respect to their payments for goods and services.
Prior to its amendment, Section 114(C) provided for
different rates of value-added taxes to be withheld -3% on gross payments for purchases of goods; 6%
on gross payments for services supplied by

contractors other than by public works contractors;

8.5% on gross payments for services supplied by
public work contractors; or 10% on payment for the
lease or use of properties or property rights to
nonresident owners. Under the present Section
114(C), these different rates, except for the 10% on
lease or property rights payment to nonresidents,
were deleted, and a uniform rate of 5% is applied.
The Court observes, however, that the law the used
the word final. In tax usage, final, as opposed to
creditable, means full. Thus, it is provided in Section
114(C): 'final value-added tax at the rate of five
percent (5%).'
In Revenue Regulations No. 02-98, implementing
R.A. No. 8424 (The Tax Reform Act of 1997), the
concept of final withholding tax on income was
explained, to wit:
SECTION 2.57. Withholding of Tax at Source
(A) Final Withholding Tax. ' Under the final withholding
tax system the amount of income tax withheld by the
withholding agent is constituted as full and final
paymentof the income tax due from the payee on the
said income. The liability for payment of the tax rests
primarily on the payor as a withholding agent. Thus, in
case of his failure to withhold the tax or in case of
underwithholding, the deficiency tax shall be collected
from the payor/withholding agent. '
(B) Creditable Withholding Tax. ' Under the creditable
withholding tax system, taxes withheld on certain
income payments are intended to equal or at least
approximate the tax due of the payee on said income.
' Taxes withheld on income payments covered by the
expanded withholding tax (referred to in Sec. 2.57.2
of these regulations) and compensation income
(referred to in Sec. 2.78 also of these regulations) are
creditable in nature.
As applied to value-added tax, this means that
taxable transactions with the government are subject
to a 5% rate, which constitutes as full payment of the
tax payable on the transaction. This represents the
net VAT payable of the seller. The other 5% effectively
accounts for the standard input VAT (deemed input
VAT), in lieu of the actual input VAT directly or
attributable to the taxable transaction.[79]

The Court need not explore the rationale behind the

provision. It is clear that Congress intended to treat
differently taxable transactions with the government.
[80] This is supported by the fact that under the old
provision, the 5% tax withheld by the government
remains creditable against the tax liability of the seller
or contractor, to wit:
SEC. 114. Return and Payment of Value-added Tax. '
(C) Withholding of Creditable Value-added Tax. ' The
Government or any of its political subdivisions,
instrumentalities or agencies, including governmentowned or controlled corporations (GOCCs) shall,
before making payment on account of each purchase
of goods from sellers and services rendered by
contractors which are subject to the value-added tax
imposed in Sections 106 and 108 of this Code, deduct
and withhold the value-added tax due at the rate of
three percent (3%) of the gross payment for the
purchase of goods and six percent (6%) on gross
receipts for services rendered by contractors on every
sale or installment payment which shall be creditable
against the value-added tax liability of the seller or
contractor: Provided, however, That in the case of
government public works contractors, the withholding
rate shall be eight and one-half percent (8.5%):
Provided, further, That the payment for lease or use of
properties or property rights to nonresident owners
shall be subject to ten percent (10%) withholding tax
at the time of payment. For this purpose, the payor or
person in control of the payment shall be considered
as the withholding agent.

The valued-added tax withheld under this Section

shall be remitted within ten (10) days following the
end of the month the withholding was made.
(Emphasis supplied)
As amended, the use of the word final and the
deletion of the word creditable exhibits Congress's
intention to treat transactions with the government
differently. Since it has not been shown that the class
subject to the 5% final withholding tax has been
unreasonably narrowed, there is no reason to
invalidate the provision. Petitioners, as petroleum
dealers, are not the only ones subjected to the 5%
final withholding tax. It applies to all those who deal
with the government.

Moreover, the actual input tax is not totally lost or

uncreditable, as petitioners believe. Revenue
Regulations No. 14-2005 or the Consolidated ValueAdded Tax Regulations 2005 issued by the BIR,
provides that should the actual input tax exceed 5% of
gross payments, the excess may form part of the
cost. Equally, should the actual input tax be less than
5%, the difference is treated as income.[81]
Petitioners also argue that by imposing a limitation on
the creditable input tax, the government gets to tax a
profit or value-added even if there is no profit or
value-added.
Petitioners' stance is purely hypothetical,
argumentative, and again, one-sided. The Court will
not engage in a legal joust where premises are what
ifs, arguments, theoretical and facts, uncertain. Any
disquisition by the Court on this point will only be, as
Shakespeare describes life in Macbeth,[82] 'full of
sound and fury, signifying nothing.'
What's more, petitioners' contention assumes the
proposition that there is no profit or value-added. It
need not take an astute businessman to know that it
is a matter of exception that a business will sell goods
or services without profit or value-added. It cannot be
overstressed that a business is created precisely for
profit.
The equal protection clause under the Constitution
means that 'no person or class of persons shall be
deprived of the same protection of laws which is
enjoyed by other persons or other classes in the
same place and in like circumstances.'[83]
The power of the State to make reasonable and
natural classifications for the purposes of taxation has
long been established. Whether it relates to the
subject of taxation, the kind of property, the rates to
be levied, or the amounts to be raised, the methods of
assessment, valuation and collection, the State's
power is entitled to presumption of validity. As a rule,
the judiciary will not interfere with such power absent
a clear showing of unreasonableness, discrimination,
or arbitrariness.[84]
Petitioners point out that the limitation on the
creditable input tax if the entity has a high ratio of
input tax, or invests in capital equipment, or has
several transactions with the government, is not

based on real and substantial differences to meet a

valid classification.

the same class everywhere with all people at all

times.[86]

The argument is pedantic, if not outright baseless.

The law does not make any classification in the
subject of taxation, the kind of property, the rates to
be levied or the amounts to be raised, the methods of
assessment, valuation and collection. Petitioners'
alleged distinctions are based on variables that bear
different consequences. While the implementation of
the law may yield varying end results depending on
one's profit margin and value-added, the Court cannot
go beyond what the legislature has laid down and
interfere with the affairs of business.

In this case, the tax law is uniform as it provides a

standard rate of 0% or 10% (or 12%) on all goods and
services. Sections 4, 5 and 6 of R.A. No. 9337,
amending Sections 106, 107 and 108, respectively, of
the NIRC, provide for a rate of 10% (or 12%) on sale
of goods and properties, importation of goods, and
sale of services and use or lease of properties. These
same sections also provide for a 0% rate on certain
sales and transaction.

The equal protection clause does not require the

universal application of the laws on all persons or
things without distinction. This might in fact
sometimes result in unequal protection. What the
clause requires is equality among equals as
determined according to a valid classification. By
classification is meant the grouping of persons or
things similar to each other in certain particulars and
different from all others in these same particulars.[85]
Petitioners brought to the Court's attention the
introduction of Senate Bill No. 2038 by Sens. S.R.
Osme'a III and Ma. Ana Consuelo A.S. ' Madrigal on
June 6, 2005, and House Bill No. 4493 by Rep. Eric
D. Singson. The proposed legislation seeks to amend
the 70% limitation by increasing the same to 90%.
This, according to petitioners, supports their stance
that the 70% limitation is arbitrary and confiscatory.
On this score, suffice it to say that these are still
proposed legislations. Until Congress amends the
law, and absent any unequivocal basis for its
unconstitutionality, the 70% limitation stays.
B. Uniformity and Equitability of Taxation
Article VI, Section 28(1) of the Constitution reads:
The rule of taxation shall be uniform and equitable.
The Congress shall evolve a progressive system of
taxation.
Uniformity in taxation means that all taxable articles or
kinds of property of the same class shall be taxed at
the same rate. Different articles may be taxed at
different amounts provided that the rate is uniform on

Neither does the law make any distinction as to the

type of industry or trade that will bear the 70%
limitation on the creditable input tax, 5-year
amortization of input tax paid on purchase of capital
goods or the 5% final withholding tax by the
government. It must be stressed that the rule of
uniform taxation does not deprive Congress of the
power to classify subjects of taxation, and only
demands uniformity within the particular class.[87]
R.A. No. 9337 is also equitable. The law is equipped
with a threshold margin. The VAT rate of 0% or 10%
(or 12%) does not apply to sales of goods or services
with gross annual sales or receipts not exceeding
P1,500,000.00.[88] Also, basic marine and agricultural
food products in their original state are still not subject
to the tax,[89] thus ensuring that prices at the
grassroots level will remain accessible. As was stated
in Kapatiran ng mga Naglilingkod sa Pamahalaan ng
Pilipinas, Inc. vs. Tan:[90]

The disputed sales tax is also equitable. It is imposed

only on sales of goods or services by persons
engaged in business with an aggregate gross annual
sales exceeding P200,000.00. Small corner sari-sari
stores are consequently exempt from its application.
Likewise exempt from the tax are sales of farm and
marine products, so that the costs of basic food and
other necessities, spared as they are from the
incidence of the VAT, are expected to be relatively
lower and within the reach of the general public.
It is admitted that R.A. No. 9337 puts a premium on
businesses with low profit margins, and unduly favors
those with high profit margins. Congress was not
oblivious to this. Thus, to equalize the weighty burden

the law entails, the law, under Section 116, imposed a

3% percentage tax on VAT-exempt persons under
Section 109(v), i.e., transactions with gross annual
sales and/or receipts not exceeding P1.5 Million. This
acts as a equalizer because in effect, bigger
businesses that qualify for VAT coverage and VATexempt taxpayers stand on equal-footing.
Moreover, Congress provided mitigating measures to
cushion the impact of the imposition of the tax on
those previously exempt. Excise taxes on petroleum
products[91] and natural gas[92] were reduced.
Percentage tax on domestic carriers was removed.
[93] Power producers are now exempt from paying
franchise tax.[94]
Aside from these, Congress also increased the
income tax rates of corporations, in order to distribute
the burden of taxation. Domestic, foreign, and nonresident corporations are now subject to a 35%
income tax rate, from a previous 32%.[95]
Intercorporate dividends of non-resident foreign
corporations are still subject to 15% final withholding
tax but the tax credit allowed on the corporation's
domicile was increased to 20%.[96] The Philippine
Amusement and Gaming Corporation (PAGCOR) is
not exempt from income taxes anymore.[97] Even the
sale by an artist of his works or services performed for
the production of such works was not spared.
All these were designed to ease, as well as spread
out, the burden of taxation, which would otherwise
rest largely on the consumers. It cannot therefore be
gainsaid that R.A. No. 9337 is equitable.

C. Progressivity of Taxation
Lastly, petitioners contend that the limitation on the
creditable input tax is anything but regressive. It is the
smaller business with higher input tax-output tax ratio
that will suffer the consequences.
Progressive taxation is built on the principle of the
taxpayer's ability to pay. This principle was also lifted
from Adam Smith's Canons of Taxation, and it states:
I. The subjects of every state ought to contribute
towards the support of the government, as nearly as
possible, in proportion to their respective abilities; that

is, in proportion to the revenue which they

respectively enjoy under the protection of the state.
Taxation is progressive when its rate goes up
depending on the resources of the person affected.
[98]
The VAT is an antithesis of progressive taxation. By
its very nature, it is regressive. The principle of
progressive taxation has no relation with the VAT
system inasmuch as the VAT paid by the consumer or
business for every goods bought or services enjoyed
is the same regardless of income. In
other words, the VAT paid eats the same portion of an
income, whether big or small. The disparity lies in the
income earned by a person or profit margin marked
by a business, such that the higher the income or
profit margin, the smaller the portion of the income or
profit that is eaten by VAT. A converso, the lower the
income or profit margin, the bigger the part that the
VAT eats away. At the end of the day, it is really the
lower income group or businesses with low-profit
margins that is always hardest hit.
Nevertheless, the Constitution does not really prohibit
the imposition of indirect taxes, like the VAT. What it
simply provides is that Congress shall "evolve a
progressive system of taxation." The Court stated in
the Tolentino case, thus:
The Constitution does not really prohibit the
imposition of indirect taxes which, like the VAT, are
regressive. What it simply provides is that Congress
shall 'evolve a progressive system of taxation.' The
constitutional provision has been interpreted to mean
simply that 'direct taxes are . . . to be preferred [and]
as much as possible, indirect taxes should be
minimized.' (E. FERNANDO, THE CONSTITUTION
OF THE PHILIPPINES 221 (Second ed. 1977))
Indeed, the mandate to Congress is not to prescribe,
but to evolve, a progressive tax system. Otherwise,
sales taxes, which perhaps are the oldest form of
indirect taxes, would have been prohibited with the
proclamation of Art. VIII, '17 (1) of the 1973
Constitution from which the present Art. VI, '28 (1)
was taken. Sales taxes are also regressive.
Resort to indirect taxes should be minimized but not
avoided entirely because it is difficult, if not
impossible, to avoid them by imposing such taxes

according to the taxpayers' ability to pay. In the case

of the VAT, the law minimizes the regressive effects of
this imposition by providing for zero rating of certain
transactions (R.A. No. 7716, '3, amending '102 (b) of
the NIRC), while granting exemptions to other
transactions. (R.A. No. 7716, '4 amending '103 of the
NIRC)[99]
CONCLUSION
It has been said that taxes are the lifeblood of the
government. In this case, it is just an enema, a firstaid measure to resuscitate an economy in distress.
The Court is neither blind nor is it turning a deaf ear
on the plight of the masses. But it does not have the
panacea for the malady that the law seeks to remedy.
As in other cases, the Court cannot strike down a law
as unconstitutional simply because of its yokes.
Let us not be overly influenced by the plea that for
every wrong there is a remedy, and that the judiciary
should stand ready to afford relief. There are
undoubtedly many wrongs the judicature may not
correct, for instance, those involving political
questions. . . .
Let us likewise disabuse our minds from the notion
that the judiciary is the repository of remedies for all
political or social ills; We should not forget that the
Constitution has judiciously allocated the powers of
government to three distinct and separate
compartments; and that judicial interpretation has
tended to the preservation of the independence of the
three, and a zealous regard of the prerogatives of
each, knowing full well that one is not the guardian of
the others and that, for official wrong-doing, each may
be brought to account, either by impeachment, trial or
by the ballot box.[100]
The words of the Court in Vera vs. Avelino[101] holds
true then, as it still holds true now. All things
considered, there is no raison d''tre for the
unconstitutionality of R.A. No. 9337.
WHEREFORE, Republic Act No. 9337 not being
unconstitutional, the petitions in G.R. Nos. 168056,
168207, 168461, 168463, and 168730, are hereby
DISMISSED.
There being no constitutional impediment to the full
enforcement and implementation of R.A. No. 9337,

the temporary restraining order issued by the Court

on July 1, 2005 is LIFTED upon finality of herein
decision.

COMMISSIONER OF CUSTOMS, petitioner, vs. LT.

COL. LEOPOLDO RELUNIA, respondent.
MONTEMAYOR, J.:
This is an appeal by the Commissioner of Customs
from the decision of the Court of Tax Appeals, the
dispositive portion which reads:
"FOR THE FOREGOING CONSIDERATION, we are
of the opinion that the forfeiture of the electric range in
question under Section 1363(g.) is illegal. Accordingly,
it is hereby ordered that the said article be released to
the herein petitioner upon payment of the
corresponding customs duties, taxes or charges.
Without pronouncement as to costs."
On December 10, 1953, the RPS "MISAMIS
ORIENTAL", a unit of the Philippine Navy was
dispatched to Japan to transport contingents of the
14th BCT bound for Pusan, Korea, and carry
Christmas gifts for our soldiers there. It seems that
thereafter, it was used for transportation purposes in
connection with the needs of our soldiers there and
made trips between Korea and Japan, so that it did
not return to the Philippines until September 2, 1954.
While in Japan, it loaded 180 cases containing
various articles subject to customs duties. These
articles have been classified into three groups, to wit:
"(1) those supposed to be for the Philippine Army Post
Exchange, with an appraised value of $24,197.53, (2)
those pertaining to the Philippine Navy Officers Base
Commissary, Cavite, with an appraised value
$1,590.04, and (3) those belonging to individuals,
consisting of nine Philippine Army and Navy officers
and crew and two private persons, with an appraised
value of $1,772.00."
The rest of the facts which are not in dispute, as well
as the issues involved, particularly the legal ones, are
well stated in the decision of the Court of Tax Appeals
now before us on appeal. we are reproducing
pertinent portions of said decision:
". . . . All these articles were declared forfeited by the

Collector of Customs of Manila for violations of the

Customs Law in a decision rendered on March 18,
1955.
"One of the cases containing an electric range 'GE'
with four burners, brought by the RPS 'MISAMIS
ORIENTAL' is consigned to petitioner herein. The said
article was forfeited pursuant to Section 1363 (g) of
the Administrative Code as an unmanifested cargo.
On appeal to the Commissioner of Customs, the
dispositive portion of the decision of the Collector of
Customs of Manila was affirmed in toto; hence this
appeal.
"Section 1363 (g) of the Administrative Code, upon
which the decree of forfeiture is based, reads as
follows:
'SEC. 1363. Property subject to forfeiture under
customs laws. - Vessels, cargo, merchandise, and
other objects and things shall, under the conditions
hereinbelow specified, be subject to forfeiture :
'(g) Unmanifested merchandise found on any vessel,
a manifest therefore being required.'
"The only question to be decided is whether or not a
manifest is required of the RPS 'MISAMIS ORIENTAL'
and, if so, whether or not the aforesaid electric range
is an unmanifested merchandise within the meaning
of Section 1363 (g) of the Administrative Code.
"The law provides that an 'unmanifested merchandise
found on any vessel, a manifest therefor being
required' is subject to forfeiture. The means that
where a vessel is required by law, or by regulations
promulgated pursuant to law, to make and submit a
manifest of its cargo to the custom authorities and it
fails to do so, merchandise not manifested shall be
forfeited. Is the RPS 'MISAMIS ORIENTAL' required
under the Customs Law to make and submit to the
customs authorities a manifest of its cargo? The
Collector of Customs of Manila says it is, and he has
been sustained by respondent Commissioner of
Customs.
"It is argued that Sections 1221, 1225 and 1228 of the
Administrative Code require masters of Government
vessels to submit cargo manifests. Section 1221
provides:

'SEC. 1221. Ports open to vessels engaged in foreign

trade-duty of vessel to make entry. - Vessels engaged
in the foreign carrying trade shall touch at ports of
entry only, except as otherwise specially allowed; and
every such vessel arriving within a customs collection
district of the Philippines from a foreign port shall
make entry at the port of entry for such district and
shall be subject to the authority of the collector of
customs of the port while within his jurisdiction.
"The master of any war vessel or vessel employed by
any foreign government shall be required to report
and enter on arrival in the Philippines, unless
engaged in the transportation of merchandise in the
way of trade.'
"The term 'report and enter' appearing in the last
paragraph of Section 1221 means, according to the
Collector of Customs, 'the entrance of a vessel from a
foreign port into a Philippine port of entry as
contemplated in Section 1225' which reads in part:
'SEC. 1225. Documents to be produced by master
upon entry of vessel. - For the purpose of making
entry of a vessel engaged in foreign trade, the master
thereof shall present the following documents, duly
certified by him, to the boarding officer of customs.
xxx xxx xxx
'(a) The original manifest of all cargo destined for the
port to be returned with boarding officer's
indorsement.
"And section 1228 provides:
'SEC. 1228. Manifest required of vessel from the
foreign port. - Every vessel from a foreign port or
place must have on board complete written or
typewritten manifest of all her cargo.
'All of the cargo intended to be landed at a port in the
Philippines must be described in separate manifests
for each port of call therein. Each manifest shall
include the port of departure and the port of delivery
with the marks, numbers, quantity, and description of
the packages and the names of the consignees
thereof. Every vessel from a foreign port or place
must have on board complete manifests of

passengers, immigrants, and their baggage in the

prescribed form, setting forth their destination and all
particulars required by the immigration laws; and
every such vessel shall have prepared for
presentation to the proper customs official upon
arrival in ports of the Philippines a complete list of all
ship's stores then on board. If the vessel does not
carry cargo, passengers, or immigrants, there must
still be a manifest showing that no cargo is carried
from the port of departure to the port of destination in
the Philippines.
'A cargo manifest shall in no case be changed or
altered, except after entry of the vessel, by means of
an amendment by the master, consignee, or agent
thereof, under oath, and attached to the original
manifest.'"
One, if not the main, reason given by the Court of Tax
Appeals in holding that the RPS "MISAMIS
ORIENTAL" was not required to present any manifest
to the customs authorities upon its arrival in Manila
was that Sections 1221, 1225 and 1228 of the
Administrative Code aforequoted are found under
Article VI of the Customs Law, the title of which reads:
"Entrance of vessels in foreign trade"; that the said
article lays down rules governing entry of vessels
engaged in foreign trade; and that inasmuch as the
navy vessel in question was not engaged in foreign
trade it was not required to submit the manifest
provided for in section 1225. The Tax Court took the
view that under Article VI of the Customs Law
including the different sections of the Administrative
Code under it, only vessels engaged in foreign trade
are required to submit manifests upon entering any
Philippine port. The Tax Court apparently overlooked
the reason behind the requirement of presenting a
manifest and allowed itself to be swayed by the title of
the law. Resort to the title of a statute as an aid in
interpretation thereof is an unsafe criterion, and is not
entitled to much weight. (50 Am. Jur. 301). The title
can be resorted to as an aid where there is doubt as
to the meaning of the law or the intention of the
legislature in enacting it, not otherwise.
The Tax Court also overlooked or failed to give due
consideration to the provisions of Section 1228 which
requires that every vessel from a foreign port or place
must have on board complete written or typewritten
manifests of all her cargoes. Said provision is quite

comprehensive, if not all inclusive, with the exception

perhaps of vessels mentioned in the second
paragraph of Section 1221, namely, war vassels or
vessels employed by any foreign government. This is
presumably out of international practice. In our
opinion all other vessels coming from foreign ports,
whether or not engaged in foreign trade arriving or
touching upon any port in the Philippines should be
provided with a manifest which must be presented to
the customs authorities. The reason for requiring a
manifest is well stated in the brief for the
Commissioner of Customs which we quote with
favor:
"Whether the vessel engaged in foreign trade
(Sections 1221 and 1225, Revised Administrative
Code) or not (Section 1228), and even when the
vessel belongs to the army or the army or the navy
(Section 1234), the universal requirement from a
reading of all the foregoing provisions is that they be
provided with a manifest. The reason is obvious, and
must stem from marine experience. As the name of
the documents suggest, a manifest is obviously
meant to place beyond doubt the nature of the load or
of the cargo that a vessel carries. The manifest is
therefore intended to be an indication, if not an open
declaration, that the vessel is not engaged in
smuggling or in surreptitious practices and activities. If
the making of a manifest were to be a monopoly of
vessels engaged in foreign trade, it is plain that other
vessels would be understood as licensed to engage in
undesirable marine activities, a consequence so
absurd as to need no further explanation."
The reason for requiring a manifest in the United
States is also stated in the case of U. S. vs. Sischo,
262 U.S. 165:
"The collection of duties is not the only purpose of a
manifest, as is shown by the requirement of one for
outward-bound cargoes and from vessels in the
coasting trade bound for a port in another collection *
* * A government wants to know, without being put to
a search, what articles are brought into the country,
and to make up its own mind not only what duties it
will demand, but whether it will allow the goods enter
at all. It would seem strange if it should except from
the manifest demanded those thing about which it has
the greatest need to be informed,- if in that one case it
should take a chance of being able to find what it

forbids to come in, without requiring the master to tell

what he knows. It would seem doubly strange when,
at the same time, it required any other person who
had knowledge that the forbidden article was on the
vessel to report the fact to the master." 19 USCA. p.
821.
Were we to confine the requirement about the
preparation and presentation of a manifest to vessels,
yacht, pleasure boats or cruisers or steamships on a
world cruise for tourists, and ships chartered for a
special mission or purpose, all of which though not
engaged in foreign trade, nevertheless could bring
into the country not only dutiable goods, but also
articles of prohibited importation? The customs laws
could not have intended to exempt all these vessels
from the requirement to present a manifest. Then we
have Section 1234 of the Revised Administrative
Code which we quote below:
"SEC. 1234. Entry of transport or supply ships of the
United States Army or Navy. - The master or other
officer in charge of a transport or supply ship of the
United States Army or Navy, arriving from a foreign
port at any port in the Philippines, shall, for the
purpose of making entry of his vessel, present a
manifest in duplicate, containing the following
information, duly certified by him to the boarding
officer or collector of customs:
"(a) A list of all supplies of the United States
Government for use of the Army, Navy, or Public
Health Service, or of the Government of the Republic
of the Philippines.
"(b) A list of all property of officers and enlisted men
aboard, or of civilians carried as passengers.
"(c ) A list of all other goods, wares, merchandise, or
effects on board.
"(d) A list of all passengers on board, other than
enlisted men of the Army, Navy, or other department
of service, giving the name, sex, age, occupation,
status, or rank, last permanent residence, port of
embarkation, and destination, of each such
passenger. The number of enlisted men on board
should be stated, giving their designation, regiment,
or department."

In connection with this legal provision above quoted,

the Commissioner of Customs in his decision
appealed to the Court of Tax Appeals said the
following:
". . . . Even before our country attained its
independence, and while the United States
sovereignty was supreme over the Philippines, the
master or other officers in charge of a transport or
supply ship of the United States Army and Navy was
required by law (Sec. 1234 of the Revised
Administrative Code) to present to the boarding officer
or the Collector of Customs, a duly certified manifest
in duplicate, containing, among others, a list of all
properties of officers and enlisted men, or of civilians
carried as passengers, and a list of all other goods,
wares, merchandise, or effects on board. To sustain
the proposition that vessels owned by the government
are are not within the pale of the customs laws and
regulation is not only absurd but also fraught with
serious implications, for the irony thereof is that such
vessels may bring, unhampered, into this country
dutiable and/or prohibited merchandise and goods, or,
to state it bluntly, they may engage in the every
activity which they are called upon to prevent and
suppress."
But the Court of Tax Appeals equally held that Section
1234 is not applicable to vessels of the Philippine
Navy for the reason that said section applies only to
ships of the United States Army or Navy, and that if
our legislature had really wanted or intended to make
its provisions applicable to our navy ships, it should
have made the corresponding change or amendment
of the section. We agree that it should have been
done. But we believe that there was no necessity
where as in the present case the application of said
section to our navy ships is so clear and manifest,
considering that the reasons for requiring a manifest
from transport and supply ships of the army and navy
of the United States are and with more reason
applicable to our way ships to carry out the policy of
the government, and because we have complete
control over them.
We therefore believe and hold that the RPS
"MISAMIS ORIENTAL" was required to present a
manifest upon its arrival in Manila on September 2,
1954.

The Court of Tax Appeals, however, believed and

found that even if a manifest were requires of the
RPS "MISAMIS ORIENTAL", still, one was actually
presented by one of its officers to customs authorities
through one Mr. Casimiro de la Ysla on September 3,
1954. This, Ysla denied. And after carefully studying
the evidence on record and considering the
circumstances attending the case, we are inclined to
agree with the Collector of Customs and the
Commissioner of Customs who upheld him that no
such manifest required by law was submitted to the
customs authorities upon the arrival of the RPS
"MISAMIS ORIENTAL".
If a manifest had really been delivered to the customs
authorities upon the arrival of the RPS "MISAMIS
ORIENTAL" there was no reason whatsoever for Ysla
to deny receipt thereof; and there would have been no
occasion or reason for the Acting Collector of
Customs on September 17, 1954 to write to the
Collector of Staff of the Armed Forces of the
Philippine stating that according to his information "a
copy of the ship's manifest covering said cargo had
been secured by that office from the Commanding
Officer of the vessel" and request that two copies
thereof furnished the Bureau of Customs. Why should
the Bureau of Customs ask for copies of the manifest
if as claimed by the navy authorities such manifest
had already been delivered to them?
Again, it had always been the contention and the
belief of the navy authorities that Philippine navy
vessels were not required to prepare and deliver this
manifest upon their arrival in the Philippines from
foreign ports. In fact there is evidence to the effect
that on two different occasions prior to the arrival of
RPS "MISAMIS ORIENTAL" on September 2, 1954,
Philippine navy vessels had arrived from abroad with
merchandise presumably for personal use of officers
and men of the Philippine navy and that no manifest
had been presented covering said goods, which
goods never went through customs. This belief and
attitude of the Philippine navy authorities is reflected
in the letter Commodore Francisco, dated October 9,
1954, answering the letter of inquiry and request of
the Acting Collector of Customs, dated September 17,
1954 wherein he said:
"In this connection, this Command feels that the
pertinent provisions of the Revised Administrative

Code relative to vessels coming from foreign ports are

not applicable to vessels of the Philippine Navy as the
same are war vessels, exempted under a clarification
of this matter is requested."

Policeman Consorcio Javier of a truckload of case

leaving the customs zone from the navy boat. We
further quote from the decision of the Collector of
Customs:

With this belief and attitude of the Philippine navy

authorities, it was not likely that a manifest of the
goods carried by the RPS "MISAMIS ORIENTAL" was
prepared on board while the boat was still in Japan,
much less was a copy of the manifest if made, was
delivered to customs authorities.

". . . To verify the truth of this information, Col. Manuel

Turingan, then General Supervisor of the Security
Division of the Bureau of Customs, and Atty. Salvador
Mascardo, Chief of the Investigation Section of the
Port Patrol Division, went to Pier 5 on September 6,
1954 where the Philippine Navy boat mentioned
above was then docked. Upon arrival thereat, they
were met by the Commanding Officer of the abovenamed vessel, who, when asked, informed them that
there were really commercial goods on board his ship.
When the merchandise were brought to and
examined at the customhouse, they were found to be
not covered by the required cargo manifest, bills of
lading, consular invoices, and Central Bank licenses
and release certificates. Hence, the seizure."

Furthermore, according to the Commissioner of

Customs, we quote from his decision:
". . . The record of that the officers of the RPS
'MISAMIS ORIENTAL' insistently pleaded for the
exemption of their vessel from customs requirements
regarding the presentation of cargo manifest, perhaps
not realizing that laws must be equally enforcedamong public officers and private citizens alike.
Besides, to accord the vessels with such exceptional
privilege may result in government vessels with
comprising public trust and duty and serving two
incompatible masters - the government on one hand,
and the taxevader on the other. Thus the government
is rendered helpless in such cases to prevent its
being defrauded of lawful duties and taxes."
If a manifest had already been prepared by the
officers of the ship, and that a copy thereof had been
presented to the customs, why all this insistence and
plea, that they be excused from and relieved of the
duty of presenting a manifest when they were found
to be without one?
Moreover, if said manifest had actually been delivered
of customs authorities upon the arrival of the RPS
"MISAMIS ORIENTAL" in Manila, then in the regular
course of things the customs authorities would have
inspected the same, assessed customs duties on
them if found dutiable, or released them if otherwise.
And yet the only time when the customs authorities
learned of the existence of the goods and
merchandise on board the RPS "MISAMIS
ORIENTAL" was when according to the decision of
the Collector of Customs a confidential information
was received in the office of the presence of
commercial goods on board the RPS "MISAMIS
ORIENTAL" and after interception by the Port Patrol

Besides, according to the regulation of the Bureau of

Customs, as well as the practice of that office, when a
vessel arrives from a foreign port, a customs boarding
officer boards the ship and a copy or copies of the
cargo manifests are delivered to him by the master of
the vessel, and he makes a proper indorsement
thereof including the date of delivery to him (boarding
officer). And according to Section 1229 of the Revised
Administrative Code, the master of the vessel shall
immediately mail to the Auditor General a copy of the
cargo manifest properly indorsed by the boarding
officer. If as claimed by the navy authorities, the law
about cargo manifest had been fully complied with
and that a copy of said manifest was delivered to an
officer of the Bureau of Customs who had the duty of
indorsing and dating the same and that a copy thereof
had been mailed to the Auditor General, it was not
explained why said navy authorities failed to produce
at the hearing their copy of said manifest duly
indorsed by the boarding officer; produce the copy
which should have been mailed to him. All these point
to the conclusion that no such cargo manifest was
ever delivered to the customs authorities upon the
arrival of the RPS "MISAMIS ORIENTAL".
In conclusion, we hold that all vessels whether private
or government owned, including ships of the Philipine
navy, coming from a foreign port, with the possible
exception of war vessels or vessels employed by any

foreign government, not engaged in the transportation

of merchandise in the way of trade, as provided for in
the second paragraph of Section 1221 of the Revised
Administrative Code, are required to prepare and
present a manifest to the customs authorities upon
arrival at any Philippine port.
In view of the foregoing, the appealed decision of the
Court of Tax Appeals as regards the forfeiture of the
electric range in question in set aside, and the
decision of the Commissioner of Customs affirming
that of the Collector of Customs, as regards the same
article is hereby affirmed. No costs.
ATTY. HONESTO L. CUEVA, Petitioner, versus
COURT OF APPEALS
These are consolidated petitions for review under
Rule 45 of the Revised Rules of Civil Procedure
assailing the December 29, 2006 Decision1 of the
Court of Appeals (CA) in CA-G.R. SP No. 95293,
entitled "Dr. Dante G. Guevarra and Atty. Augustus
Cezar v. Civil Service Commission and Atty. Honesto
L. Cueva."
The Facts
Respondents Dante G. Guevarra (Guevarra) and
Augustus F. Cezar (Cezar) were the Officer-inCharge/President and the Vice President for
Administration, respectively, of the Polytechnic
University of the Philippines (PUP)2 in 2005.

On September 27, 2005, petitioner Honesto L. Cueva

(Cueva), then PUP Chief Legal Counsel, filed an
administrative case against Guevarra and Cezar for
gross dishonesty, grave misconduct, falsification of
official documents, conduct prejudicial to the best
interest of the service, being notoriously undesirable,
and for violating Section 4 of Republic Act (R.A.) No.
6713.3 Cueva charged Guevarra with falsification of a
public document, specifically the Application for Bond
of Accountable Officials and Employees of the
Republic of the Philippines, in which the latter denied
the existence of his pending criminal and
administrative cases. As the head of the school,
Guevarra was required to be bonded in order to be
able to engage in financial transactions on behalf of
PUP.4 In his Application for Bond of Accountable

Officials and Employees of the Republic of the

Philippines (General Form No. 58-A), he answered
Question No. 11 in this wise:
11. Do you have any criminal or administrative
records? NO. If so, state briefly the nature thereof
NO.5
This was despite the undisputed fact that, at that time,
both Guevarra and Cezar admittedly had 17 pending
cases for violation of Section 3(e) of R.A. No. 3019
before the Sandiganbayan.6 Cezar, knowing fully well
that both he and Guevarra had existing cases before
the Sandiganbayan, endorsed and recommended the
approval of the application.7
The respondents explained that they believed
"criminal or administrative records" to mean final
conviction in a criminal or administrative case.8 Thus,
because their cases had not yet been decided by the
Sandiganbayan, they asserted that Guevarra
responded to Question No. 11 in General Form No.
58-A correctly and in good faith.9
On March 24, 2006, the Civil Service Commission
(CSC) issued Resolution No. 06052110 formally
charging Guevarra with Dishonesty and Cezar with
Conduct Prejudicial to the Best Interest of the Service
after a prima facie finding that they had committed
acts punishable under the Civil Service Law and
Rules.

Subsequently, the respondents filed their Motion for

Reconsideration and Motion to Declare Absence of
Prima Facie Case11 praying that the case be
suspended immediately and that the CSC declare a
complete absence of a prima facie case against them.
Cueva, on the other hand, filed an Urgent Ex-Parte
Motion for the Issuance of Preventive
Suspension12 and an Omnibus Motion13 seeking the
issuance of an order of preventive suspension against
Guevarra and Cezar and the inclusion of the following
offenses in the formal charge against them: Grave
Misconduct, Falsification of Official Document,
Conduct Prejudicial to the Best Interest of the Service,
Being Notoriously Undesirable, and Violation of
Section 4 of R.A. No. 6713.

In Resolution No. 061141, dated June 30, 2006,14 the

CSC denied the motion for reconsideration filed by
the respondents for being a non-responsive pleading,
akin to a motion to dismiss, which was a prohibited
pleading under Section 16 of the Uniform Rules on
Administrative Cases in the Civil Service
Commission.15 It also denied Cuevas motion to
include additional charges against the respondents.
The CSC, however, placed Guevarra under
preventive suspension for ninety (90) days, believing
it to be necessary because, as the officer-in-charge of
PUP, he was in a position to unduly influence possible
witnesses against him.
Aggrieved, Guevarra and Cezar filed a petition
for certiorari and prohibition before the CA essentially
questioning the jurisdiction of the CSC over the
administrative complaint filed against them by Cueva.
On December 29, 2006, the CA rendered its Decision
granting the petition and nullifying and setting aside
the questioned resolutions of the CSC for having
been rendered without jurisdiction. According to the
CA, Section 47, Chapter 7, Subtitle A, Title I, Book V
of Executive Order No. 292 (The Administrative Code
of 1987), the second paragraph of which states that
heads of agencies and instrumentalities "shall have
jurisdiction to investigate and decide matters involving
disciplinary action against officers and employees
under their jurisdiction," bestows upon the Board of
Regents the jurisdiction to investigate and decide
matters involving disciplinary action against
respondents Guevarra and Cezar. In addition, the CA
noted that the CSC erred in recognizing the complaint
filed by Cueva, reasoning out that the latter should
have exhausted all administrative remedies by first
bringing his grievances to the attention of the PUP
Board of Regents.
Hence, these petitions.
THE ISSUE
In G.R. No. 176162, petitioner CSC raises the sole
issue of:
Whether or not the Civil Service Commission has
original concurrent jurisdiction over administrative
cases falling under the jurisdiction of heads of
agencies.

The same issue is among those raised by petitioner

Cueva in G.R. No. 178845.

including government-owned or controlled

corporations with original charters.

The Court agrees that the only question which must

be addressed in this case is whether the CSC has
jurisdiction over administrative cases filed directly with
it against officials of a chartered state university.

By virtue of Presidential Decree (P.D.) No.

1341,18 PUP became a chartered state university,
thereby making it a government-owned or controlled
corporation with an original charter whose employees
are part of the Civil Service and are subject to the
provisions of E.O. No. 292.19

The Courts Ruling

The petitions are meritorious.
Both CSC and Cueva contend that because the CSC
is the central personnel agency of the government, it
has been expressly granted by Executive Order
(E.O.) No. 292 the authority to assume original
jurisdiction over complaints directly filed with it. The
CSC explains that under the said law, it has appellate
jurisdiction over all administrative disciplinary
proceedings and original jurisdiction over complaints
against government officials and employees filed
before it by private citizens.16 Accordingly, the CSC
has concurrent original jurisdiction, together with the
PUP Board of Regents, over the administrative case
against Guevarra and Cezar and it can take
cognizance of a case filed directly with it, despite the
fact that the Board of Regents is the disciplining
authority of university employees.
Respondents Guevarra and Cezar, on the other hand,
fully adopted the position of the CA in its questioned
decision and propounded the additional argument that
the passage of R.A. No. 8292 has effectively removed
from the CSC the authority to hear and decide on
cases filed directly with it.

CSC has jurisdiction over cases

filed directly with it, regardless of
who initiated the complaint
The CSC, as the central personnel agency of the
government, has the power to appoint and discipline
its officials and employees and to hear and decide
administrative cases instituted by or brought before it
directly or on appeal.17 Section 2(1), Article IX(B) of
the 1987 Constitution defines the scope of the civil
service:
The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,

The parties in these cases do not deny that Guevarra

and Cezar are government employees and part of the
Civil Service. The controversy, however, stems from
the interpretation of the disciplinary jurisdiction of the
CSC as specified in Section 47, Chapter 7, Subtitle A,
Title I, Book V of E.O. No. 292:
SECTION 47. Disciplinary Jurisdiction. (1) The
Commission shall decide upon appeal all
administrative disciplinary cases involving the
imposition of a penalty of suspension for more than
thirty days, or fine in an amount exceeding thirty days
salary, demotion in rank or salary or transfer, removal
or dismissal from office. A complaint may be filed
directly with the Commission by a private
citizen against a government official or employee in
which case it may hear and decide the case or it may
deputize any department or agency or official or group
of officials to conduct the investigation. The results of
the investigation shall be submitted to the
Commission with recommendation as to the penalty
to be imposed or other action to be taken.
(2) The Secretaries and heads of agencies and
instrumentalities, provinces, cities and municipalities
shall have jurisdiction to investigate and decide
matters involving disciplinary action against officers
and employees under their jurisdiction. Their
decisions shall be final in case the penalty imposed is
suspension for not more than thirty days or fine in an
amount not exceeding thirty days salary. In case the
decision rendered by a bureau or office head is
appealable to the Commission, the same may be
initially appealed to the department and finally to the
Commission and pending appeal, the same shall be
executory except when the penalty is removal, in
which case the same shall be executory only after
confirmation by the Secretary concerned. [Emphases
and underscoring supplied]

While in its assailed decision, the CA conceded that

paragraph one of the same provision abovequoted
allows the filing of a complaint directly with the CSC, it
makes a distinction between a complaint filed by a
private citizen and that of an employee under the
jurisdiction of the disciplining authority involved. The
CA resolved that because Cueva was then the Dean
of the College of Law and the Chief Legal Counsel of
PUP when he filed the complaint with the CSC, he
was under the authority of the PUP Board of Regents.
Thus, it is the Board of Regents which had exclusive
jurisdiction over the administrative case he initiated
against Guevarra and Cezar.
The Court finds itself unable to sustain the reading of
the CA.
The issue is not novel.
The understanding by the CA of Section 47, Chapter
7, Subtitle A, Title I, Book V of E.O. No. 292 which
states that "a complaint may be filed directly with the
Commission by a private citizen against a government
official or employee" is that the CSC can only take
cognizance of a case filed directly before it if the
complaint was made by a private citizen.
The Court is not unaware of the use of the words
"private citizen" in the subject provision and the plain
meaning rule of statutory construction which requires
that when the law is clear and unambiguous, it must
be taken to mean exactly what it says. The Court,
however, finds that a simplistic interpretation is not in
keeping with the intention of the statute and prevailing
jurisprudence. It is a well-established rule that laws
should be given a reasonable interpretation so as not
to defeat the very purpose for which they were
passed. As such, "a literal interpretation is to be
rejected if it would be unjust or lead to absurd
results."20 In Secretary of Justice v. Koruga,21 the
Court emphasized this principle and cautioned us on
the overzealous application of the plain meaning rule:
The general rule in construing words and phrases
used in a statute is that in the absence of legislative
intent to the contrary, they should be given their plain,
ordinary, and common usage meaning. However, a
literal interpretation of a statute is to be rejected if it
will operate unjustly, lead to absurd results, or
contract the evident meaning of the statute taken as a
whole. After all, statutes should receive a sensible

construction, such as will give effect to the legislative

intention and so as to avoid an unjust or an absurd
conclusion. Indeed, courts are not to give words
meanings that would lead to absurd or unreasonable
consequences.22
A literal interpretation of E.O. 292 would mean that
only private citizens can file a complaint directly with
the CSC. For administrative cases instituted by
government employees against their fellow public
servants, the CSC would only have appellate
jurisdiction over those. Such a plain reading of the
subject provision of E.O. 202 would effectively divest
CSC of its original jurisdiction, albeit shared, provided
by law. Moreover, it is clearly unreasonable as it
would be tantamount to disenfranchising government
employees by removing from them an alternative
course of action against erring public officials.
There is no cogent reason to differentiate between a
complaint filed by a private citizen and one filed by a
member of the civil service, especially in light of
Section 12(11), Chapter 3, Subtitle A, Title I, Book V of
the same E.O. No. 292 which confers upon the CSC
the power to "hear and decide administrative cases
instituted by or brought before it directly or on appeal"
without any qualification.
In the case of Camacho v. Gloria,23 the Court stated
that "under E.O. No. 292, a complaint against a state
university official may be filed with either the
universitys Board of Regents or directly with the Civil
Service Commission."24 It is important to note that
the Court did not interpret the Administrative Code as
limiting such authority to exclude complaints filed
directly with it by a member of the civil service.

Moreover, as early as in the case of Hilario v. Civil

Service Commission,25 the Court interpreted Section
47, Chapter 7, Subtitle A, Title I, Book V of E.O. No.
292 as allowing the direct filing with the CSC by a
public official of a complaint against a fellow
government employee. In the said case, Quezon City
Vice-Mayor Charito Planas directly filed with the CSC
a complaint for usurpation, grave misconduct, being
notoriously undesirable, gross insubordination, and
conduct prejudicial to the best interest of the service
against the City Legal Officer of Quezon City. The
CSC issued a resolution ruling that the respondent

official should not be allowed to continue holding the

position of legal officer. In a petition to the Supreme
Court, the official in question asserted that the City
Mayor was the only one who could remove him from
office directly and not the CSC. The Court upheld the
decision of the CSC, citing the same provision of the
Administrative Code:
Although respondent Planas is a public official, there
is nothing under the law to prevent her from filing a
complaint directly with the CSC against petitioner.
Thus, when the CSC determined that petitioner was
no longer entitled to hold the position of City Legal
Officer, it was acting within its authority under the
Administrative Code to hear and decide complaints
filed before it.26 [Underscoring supplied]
It has been argued that Hilario is not squarely in
point.27 While it is true that the circumstances
present in the two cases are not identical, a careful
reading of Hilario reveals that petitioner therein
questioned the authority of the CSC to hear the
disciplinary case filed against him, alleging that the
CSCs jurisdiction was only appellate in nature.
Hence, the reference to the abovequoted passage in
Hilario is very appropriate in this case as respondents
herein pose a similar query before us.
It cannot be overemphasized that the identity of the
complainant is immaterial to the acquisition of
jurisdiction over an administrative case by the CSC.
The law is quite clear that the CSC may hear and
decide administrative disciplinary cases brought
directly before it or it may deputize any department or
agency to conduct an investigation.
CSC has concurrent original jurisdiction
with the Board of Regents over
administrative cases

The Uniform Rules on Administrative Cases in the

Civil Service28 (the Uniform Rules) explicitly allows
the CSC to hear and decide administrative cases
directly brought before it:
Section 4. Jurisdiction of the Civil Service
Commission. The Civil Service Commission shall
hear and decide administrative cases instituted by, or
brought before it, directly or on appeal, including

contested appointments, and shall review decisions

and actions of its offices and of the agencies attached
to it.
Except as otherwise provided by the Constitution or
by law, the Civil Service Commission shall have
the final authority to pass upon the removal,
separation and suspension of all officers and
employees in the civil service and upon all matters
relating to the conduct, discipline and efficiency of
such officers and employees. [Emphases and
underscoring supplied]
The CA construed the phrase "the Civil Service
Commission shall have the final authority to pass
upon the removal, separation and suspension of all
officers and employees in the civil service" to mean
that the CSC could only step in after the relevant
disciplinary authority, in this case the Board of
Regents of PUP, had investigated and decided on the
charges against the respondents. Regrettably, the CA
failed to take into consideration the succeeding
section of the same rules which undeniably granted
original concurrent jurisdiction to the CSC and belied
its suggestion that the CSC could only take
cognizance of cases on appeal:
Section 7. Jurisdiction of Heads of Agencies. Heads
of Departments, agencies, provinces, cities,
municipalities and other instrumentalities shall
haveoriginal concurrent jurisdiction, with the
Commission, over their respective officers and
employees.29 [Emphasis supplied]
It was also argued that although Section 4 of the
Uniform Rules is silent as to who can file a complaint
directly with the CSC, it cannot be construed to
authorize one who is not a private citizen to file a
complaint directly with the CSC. This is because a
rule issued by a government agency pursuant to its
law-making power cannot modify, reduce or enlarge
the scope of the law which it seeks to implement.30
Following the earlier disquisition, it can be said that
the Uniform Rules does not contradict the
Administrative Code. Rather, the former simply
provides a reasonable interpretation of the latter.
Such action is perfectly within the authority of the
CSC, pursuant to Section 12(2), Chapter 3, Subtitle A,
Title I, Book V of E.O. No. 292, which gives it the
power to "prescribe, amend and enforce rules and

regulations for carrying into effect the provisions of the

Civil Service Law and other pertinent laws."
Another view has been propounded that the original
jurisdiction of the CSC has been further limited by
Section 5 of the Uniform Rules, such that the CSC
can only take cognizance of complaints filed directly
with it which: (1) are brought against personnel of the
CSC central office, (2) are against third level officials
who are not presidential appointees, (3) are against
officials and employees, but are not acted upon by the
agencies themselves, or (4) otherwise require direct
or immediate action in the interest of justice:
Section 5. Jurisdiction of the Civil Service
Commission Proper. The Civil Service Commission
Proper shall have jurisdiction over the following
cases:
A. Disciplinary
1. Decisions of the Civil Service Regional Offices
brought before it on petition for review;
2. Decisions of heads of departments, agencies,
provinces, cities, municipalities and other
instrumentalities, imposing penalties exceeding thirty
days suspension or fine in an amount exceeding thirty
days salary brought before it on appeal;
3. Complaints brought against Civil Service
Commission Proper personnel;
4. Complaints against third level officials who are not
presidential appointees;
5. Complaints against Civil Service officials and
employees which are not acted upon by the agencies
and such other complaints requiring direct or
immediate action, in the interest of justice;
6. Requests for transfer of venue of hearing on cases
being heard by Civil Service Regional Offices;
7. Appeals from the Order of Preventive Suspension;
and
8. Such other actions or requests involving issues
arising out of or in connection with the foregoing
enumerations.

It is the Courts position that the Uniform Rules did not

supplant the law which provided the CSC with original
jurisdiction. While the Uniform Rules may have so
provided, the Court invites attention to the cases of
Civil Service Commission v. Alfonso31 and Civil
Service Commission v. Sojor,32 to be further
discussed in the course of this decision, both of which
buttressed the pronouncement that the Board of
Regents shares its authority to discipline erring school
officials and employees with the CSC. It can be
presumed that, at the time of their promulgation, the
members of this Court, in Alfonso and Sojor, were
fully aware of all the existing laws and applicable rules
and regulations pertaining to the jurisdiction of the
CSC, including the Uniform Rules. In fact, Sojor
specifically cited the Uniform Rules in support of its
ruling allowing the CSC to take cognizance of an
administrative case filed directly with it against the
president of a state university. As the Court, in the two
cases, did not consider Section 5 of the Uniform
Rules as a limitation to the original concurrent
jurisdiction of the CSC, it can be stated that Section 5
is merely implementary. It is merely directory and not
restrictive of the CSCs powers. The CSC itself is of
this view as it has vigorously asserted its jurisdiction
over this case through this petition.

xxx. Admittedly, the CSC has appellate jurisdiction

over disciplinary cases decided by government
departments, agencies and
instrumentalities. However, a complaint may be filed
directly with the CSC, and the Commission has the
authority to hear and decide the case, although it may
opt to deputize a department or an agency to conduct
the investigation. x x

The case of Alfonso33 is on all fours with the case at

bench. The case involved a complaint filed before the
CSC against a PUP employee by two employees of
the same university. The CA was then faced with the
identical issue of whether it was the CSC or the PUP
Board of Regents which had jurisdiction over the
administrative case filed against the said PUP
employee. The CA similarly ruled that the CSC could
take cognizance of an administrative case if the
decisions of secretaries or heads of agencies,
instrumentalities, provinces, cities and municipalities
were appealed to it or if a private citizen directly filed
with the CSC a complaint against a government
official or employee. Because the complainants in the
said case were PUP employees and not private
citizens, the CA held that the CSC had no jurisdiction
to hear the administrative case. It further posited that
even assuming the CSC had the authority to do so,
immediate resort to the CSC violated the doctrine of
exhaustion of administrative remedies as the
complaint should have been first lodged with the PUP
Board of Regents to allow them the opportunity to
decide on the matter. This Court, however, reversed
the said decision and declared the following:

But it is not only for this reason that Alfonsos

argument must fail. Equally significant is the fact that
he had already submitted himself to the jurisdiction of
the CSC when he filed his counter-affidavit and his
motion for reconsideration and requested for a
change of venue, not from the CSC to the BOR of
PUP, but from the CSC-Central Office to the CSCNCR. It was only when his motion was denied that he
suddenly had a change of heart and raised the
question of proper jurisdiction. This cannot be allowed
because it would violate the doctrine of res judicata, a
legal principle that is applicable to administrative
cases as well. At the very least, respondents active
participation in the proceedings by seeking affirmative
relief before the CSC already bars him from
impugning the Commissions authority under the
principle of estoppel by laches.

We are not unmindful of certain special laws that

allow the creation of disciplinary committees and
governing bodies in different branches, subdivisions,
agencies and instrumentalities of the government to
hear and decide administrative complaints against
their respective officers and employees. Be that as it
may, we cannot interpret the creation of such bodies
nor the passage of laws such as R.A. Nos. 8292
and 4670 allowing for the creation of such disciplinary
bodies as having divested the CSC of its inherent
power to supervise and discipline government
employees, including those in the academe. To hold
otherwise would not only negate the very purpose for
which the CSC was established, i.e. to instill
professionalism, integrity, and accountability in our
civil service, but would also impliedly amend the
Constitution itself.

In this case, the complaint-affidavits were filed by two

PUP employees. These complaints were not lodged
before the disciplinary tribunal of PUP, but were
instead filed before the CSC, with averments detailing
respondents alleged violation of civil service laws,
rules and regulations. After a fact-finding

investigation, the Commission found that a prima

facie case existed against Alfonso, prompting the
Commission to file a formal charge against the
latter.Verily, since the complaints were filed directly
with the CSC, and the CSC has opted to assume
jurisdiction over the complaint, the CSCs exercise of
jurisdiction shall be to the exclusion of other tribunals
exercising concurrent jurisdiction. To repeat, it may,
however, choose to deputize any department or
agency or official or group of officials such as the
BOR of PUP to conduct the investigation, or to
delegate the investigation to the proper regional
office. But the same is merely permissive and not
mandatory upon the Commission.34 [Emphases and
underscoring supplied]
It has been opined that Alfonso does not apply to the
case at bar because respondent therein submitted
himself to the jurisdiction of the CSC when he filed his
counter-affidavit before it, thereby preventing him
from later questioning the jurisdiction of the CSC.
Such circumstance is said to be totally absent in this
case.35
The records speak otherwise. As in Alfonso,
respondents herein submitted themselves to the
jurisdiction of the CSC when they filed their Joint
Counter-Affidavit.36 It was only when their Motion for
Reconsideration and Motion to Declare Absence of
Prima Facie Case37 was denied by the CSC that they
thought to put in issue the jurisdiction of the CSC
before the CA, clearly a desperate attempt to evade
prosecution by the CSC. As in Alfonso, respondents
are also estopped from questioning the jurisdiction of
the CSC.
Based on all of the foregoing, the inescapable
conclusion is that the CSC may take cognizance of an
administrative case filed directly with it against an
official or employee of a chartered state college or
university. This is regardless of whether the
complainant is a private citizen or a member of the
civil service and such original jurisdiction is shared
with the Board of Regents of the school
Gaoiran not applicable
In its decision, the CA relied heavily on Gaoiran v.
Alcala38 to support its judgment that it is the Board of
Regents, and not the CSC, which has jurisdiction over

the administrative complaint filed against the

respondents.

the CSC itself as the disciplining authority, the CSC

properly acquired jurisdiction over the case.

A thorough study of the said case, however, reveals

that it is irrelevant to the issues discussed in the case
at bench. Gaoiran speaks of a complaint filed against
a high school teacher of a state-supervised school by
another employee of the same school. The complaint
was referred to the Legal Affairs Service of the
Commission on Higher Education (LAS-CHED). After
a fact-finding investigation established the existence
of a prima facie case against the teacher, the Officerin-Charge of the Office of the Director of LAS-CHED
issued a formal charge for Grave Misconduct and
Conduct Prejudicial to the Best Interest of the Service,
together with the Order of Preventive Suspension.
The newly-appointed Director of LAS-CHED,
however, dismissed the administrative complaint on
the ground that the letter-complaint was not made
under oath. Unaware of this previous resolution, the
Chairman of the CHED issued another resolution
finding petitioner therein guilty of the charges against
him and dismissing him from the service. The trial
court upheld the resolution of the director of LASCHED but on appeal, this was reversed by the CA,
affirming the decision of the CHED chairman
removing petitioner from service. One of the issues
raised therein before this Court was whether the CA
erred in disregarding the fact that the complaint was
not made under oath as required by the Omnibus
Rules Implementing Book V of E.O. 292.

R.A. No. 8292 is not in conflict

with E.O. No. 292.

In the said case, the Court concurred with the findings

of the CA that it was the formal charge issued by the
LAS-CHED which constituted the complaint, and
because the same was initiated by the appropriate
disciplining authority, it need not be subscribed and
sworn to and CHED acquired jurisdiction over the
case. The Court further affirmed the authority of the
heads of agencies to investigate and decide matters
involving disciplinary action against their officers and
employees. It bears stressing, at this point, that there
is nothing in the case that remotely implies that this
Court meant to place upon the Board of Regent
exclusive jurisdiction over administrative cases filed
against their employees.
In fact, following the ruling in Gaoiran, it can be
argued that it was CSC Resolution No. 060521 which
formally charged respondents that constituted the
complaint, and since the complaint was initiated by

In addition, the respondents argue that R.A. No. 8292,

which granted to the board of regents or board of
trustees disciplinary authority over school employees
and officials of chartered state colleges and
universities, should prevail over the provisions of E.O.
No. 292.39 They anchor their assertion that the Board
of Regents has exclusive jurisdiction over
administrative cases on Section 4 of R.A. No.
8292,40 to wit:
Section 4. Powers and duties of Governing Boards.
The governing board shall have the following specific
powers and duties in addition to its general powers of
administration and the exercise of all the powers
granted to the board of directors of a corporation
under Section 36 of Batas Pambansa Blg. 68
otherwise known as the Corporation Code of the
Philippines;
(h) to fix and adjust salaries of faculty members and
administrative officials and employees subject to the
provisions of the revised compensation and
classification system and other pertinent budget and
compensation laws governing hours of service, and
such other duties and conditions as it may deem
proper; to grant them, at its discretion, leaves of
absence under such regulations as it may
promulgate, any provisions of existing law to the
contrary not with standing; and to remove them for
cause in accordance with the requirements of due
process of law. [Emphasis supplied]
The respondents are mistaken.
Basic is the principle in statutory construction that
interpreting and harmonizing laws is the best method
of interpretation in order to form a uniform, complete,
coherent, and intelligible system of jurisprudence, in
accordance with the legal maxim interpretare et
concordare leges legibus est optimus interpretandi
modus.41 Simply because a later statute relates to a
similar subject matter as that of an earlier statute
does not result in an implied repeal of the latter.42

A perusal of the abovequoted provision clearly reveals

that the same does not indicate any intention to
remove employees and officials of state universities
and colleges from the ambit of the CSC. What it
merely states is that the governing board of a school
has the authority to discipline and remove faculty
members and administrative officials and employees
for cause. It neither supersedes nor conflicts with E.O.
No. 292 which allows the CSC to hear and decide
administrative cases filed directly with it or on appeal.
In addition to the previously cited case of Alfonso, the
case of The Civil Service Commission v. Sojor43 is
likewise instructive. In the said case, this Court ruled
that the CSC validly took cognizance of the
administrative complaints directly filed with it
concerning violations of civil service rules committed
by a university president. This Court acknowledged
that the board of regents of a state university has the
sole power of administration over a university, in
accordance with its charter and R.A. No. 8292. With
regard to the disciplining and removal of its
employees and officials, however, such authority is
not exclusive to it because all members of the civil
service fall under the jurisdiction of the CSC:
Verily, the BOR of NORSU has the sole power of
administration over the university. But this power is
not exclusive in the matter of disciplining and
removing its employees and officials.
Although the BOR of NORSU is given the specific
power under R.A. No. 9299 to discipline its
employees and officials, there is no showing that such
power is exclusive. When the law bestows upon a
government body the jurisdiction to hear and decide
cases involving specific matters, it is to be presumed
that such jurisdiction is exclusive unless it be proved
that another body is likewise vested with the same
jurisdiction, in which case, both bodies have
concurrent jurisdiction over the matter
All members of the civil service are under the
jurisdiction of the CSC, unless otherwise provided by
law. Being a non-career civil servant does not remove
respondent from the ambit of the CSC. Career or noncareer, a civil service official or employee is within the
jurisdiction of the CSC.44[Emphases and
underscoring supplied]

It has been pointed out that the case of Sojor is not

applicable to the case at bar because the distinction
between a complaint filed by a private citizen and one
filed by a government employee was not taken into
consideration in the said case.45 The dissent fails to
consider that Sojor is cited in the ponencia to support
the ruling that R.A. No. 8292 is not in conflict with
E.O. No. 292 and to counter respondents flawed
argument that the passage of R.A. No. 8292 granted
the Board of Regents exclusive jurisdiction over
administrative cases against school employees and
officials of chartered state colleges and universities.
Also noteworthy is the fact that the complainants
before the CSC in Sojor were faculty members of a
state university and were, thus, government
employees. Nevertheless, despite this, the Court
allowed the CSC to assert jurisdiction over the
administrative case, proclaiming that the power of the
Board of Regents to discipline its officials and
employees is not exclusive but is concurrent with the
CSC.46
The case of University of the Philippines v.
Regino47 was also cited to bolster the claim that
original jurisdiction over disciplinary cases against
government officials is vested upon the department
secretaries and heads of agencies and
instrumentalities, provinces, cities and municipalities,
whereas the CSC only enjoys appellate jurisdiction
over such cases.48 The interpretation therein of the
Administrative Code supposedly renders effectual the
provisions of R.A. No. 8292 and does not "deprive the
governing body of the power to discipline its own
officials and employees and render inutile the legal
provisions on disciplinary measures which may be
taken by it."49
The Court respectfully disagrees. Regino is obviously
inapplicable to this case because there, the school
employee had already been found guilty and
dismissed by the Board of Regents of the University
of the Philippines. Therefore, the issue put forth
before this Court was whether the CSC had appellate
jurisdiction over cases against university employees,
considering the university charter which gives it
academic freedom allegedly encompassing
institutional autonomy. In contrast, no administrative
case was filed before the Board of Regents of PUP
because the case was filed directly with the CSC and
so, the question here is whether the CSC has original
concurrent jurisdiction over disciplinary cases.

Rationally, the quoted portions in Regino find no

application to the case at bench because those
statements were made to uphold the CSCs appellate
jurisdiction which was being contested by petitioner
therein. At the risk of being repetitive, it is hereby
stressed that the authority of the CSC to hear cases
on appeal has already been established in this case.
What is in question here is its original jurisdiction over
administrative cases.
A different interpretation of the Administrative Code
was suggested in order to harmonize the provisions of
R.A. No. 8292 and E.O. 292. By allowing only a
private citizen to file a complaint directly with the
CSC, the CSC maintains its power to review on
appeal decisions of the Board of Regents while at the
same time the governing board is not deprived of its
power to discipline its officials and employees.50
To begin with, there is no incongruity between R.A.
No. 8292 and E.O. No. 292, as previously explained
in Sojor. Moreover, the Court fails to see how a
complaint filed by a private citizen is any different from
one filed by a government employee. If the grant to
the CSC of concurrent original jurisdiction over
administrative cases filed by private citizens against
public officials would not deprive the governing bodies
of the power to discipline their own officials and
employees and would not be violative of R.A. No.
8292, it is inconceivable that a similar case filed by a
government employee would do so. Such a distinction
between cases filed by private citizens and those by
civil servants is simply illogical and unreasonable. To
accede to such a mistaken interpretation of the
Administrative Code would be a great disservice to
our developing jurisprudence.
It is therefore apparent that despite the enactment of
R.A. No. 8292 giving the board of regents or board of
trustees of a state school the authority to discipline its
employees, the CSC still retains jurisdiction over the
school and its employees and has concurrent original
jurisdiction, together with the board of regents of a
state university, over administrative cases against
state university officials and employees.
Finally, with regard to the concern that the CSC may
be overwhelmed by the increase in number of cases
filed before it which would result from our ruling,51 it
behooves us to allay such worries by highlighting two
important facts. Firstly, it should be emphasized that

the CSC has original concurrent jurisdiction shared

with the governing body in question, in this case, the
Board of Regents of PUP. This means that if the
Board of Regents first takes cognizance of the
complaint, then it shall exercise jurisdiction to the
exclusion of the CSC.52 Thus, not all administrative
cases will fall directly under the CSC. Secondly,
Section 47, Chapter 7, Subtitle A, Title I, Book V of the
Administrative Code affords the CSC the option of
whether to decide the case or to deputize some other
department, agency or official to conduct an
investigation into the matter, thereby considerably
easing the burden placed upon the CSC.
Having thus concluded, the Court sees no need to
discuss the other issues raised in the petitions.
WHEREFORE, the petitions are GRANTED. The
December 29, 2006 Decision of the Court of Appeals
is herebyREVERSED and SET ASIDE. Resolution
Nos. 060521 and 061141 dated March 24, 2006 and
June 30, 2006, respectively, of the Civil Service
Commission are REINSTATED.
THEODORE and NANCY ANG, represented by
ELDRIGE MARVIN B. ACERON, Petitioners, vs.
SPOUSES ALAN and EM ANG, Respondents.
REYES, J.:
Before this Court is a petition for review on certiorari
under Rule 45 of the Rules of Court seeking to annul
and set aside the Decision1 dated August 28, 2008
and the Resolution2 dated February 20, 2009
rendered by the Court of Appeals (CA) in CA-G.R. SP
No. 101159. The assailed decision annulled and set
aside the Orders dated April 12, 20073 and August
27, 20074 issued by the Regional Trial Court (RTC) of
Quezon City, Branch 81 in Civil Case No. Q-0658834.
The Antecedent Facts

On September 2, 1992, spouses Alan and Em Ang

(respondents) obtained a loan in the amount of Three
Hundred Thousand U.S. Dollars (US$300,000.00)
from Theodore and Nancy Ang (petitioners). On even
date, the respondents executed a promissory note5 in
favor of the petitioners wherein they promised to pay

the latter the said amount, with interest at the rate of

ten percent (10%) per annum, upon demand.
However, despite repeated demands, the
respondents failed to pay the petitioners.
Thus, on August 28, 2006, the petitioners sent the
respondents a demand letter asking them to pay their
outstanding debt which, at that time, already
amounted to Seven Hundred Nineteen Thousand, Six
Hundred Seventy-One U.S. Dollars and Twenty-Three
Cents (US$719,671.23), inclusive of the ten percent
(10%) annual interest that had accumulated over the
years. Notwithstanding the receipt of the said demand
letter, the respondents still failed to settle their loan
obligation.
On August 6, 2006, the petitioners, who were then
residing in Los Angeles, California, United States of
America (USA), executed their respective Special
Powers of Attorney6 in favor of Attorney Eldrige
Marvin B. Aceron (Atty. Aceron) for the purpose of
filing an action in court against the respondents. On
September 15, 2006, Atty. Aceron, in behalf of the
petitioners, filed a Complaint7 for collection of sum of
money with the RTC of Quezon City against the
respondents.
On November 21, 2006, the respondents moved for
the dismissal of the complaint filed by the petitioners
on the grounds of improper venue and prescription.8
Insisting that the venue of the petitioners' action was
improperly laid, the respondents asserted that the
complaint against them may only be filed in the court
of the place where either they or the petitioners
reside. They averred that they reside in Bacolod City
while the petitioners reside in Los Angeles, California,
USA. Thus, the respondents maintain, the filing of the
complaint against them in the RTC of Quezon City
was improper.
The RTC Orders

On April 12, 2007, the RTC of Quezon City issued an

Order9 which, inter alia, denied the respondents'
motion to dismiss. In ruling against the respondents'
claim of improper venue, the court explained that:
Attached to the complaint is the Special Power of
Attorney x x x which clearly states that plaintiff Nancy

Ang constituted Atty. Eldrige Marvin Aceron as her

duly appointed attorney-in-fact to prosecute her claim
against herein defendants. Considering that the
address given by Atty. Aceron is in Quezon City,
hence, being the plaintiff, venue of the action may lie
where he resides as provided in Section 2, Rule 4 of
the 1997 Rules of Civil Procedure.10
The respondents sought reconsideration of the RTC
Order dated April 12, 2007, asserting that there is no
law which allows the filing of a complaint in the court
of the place where the representative, who was
appointed as such by the plaintiffs through a Special
Power of Attorney, resides.11
The respondents' motion for reconsideration was
denied by the RTC of Quezon City in its Order12
dated August 27, 2007.
The respondents then filed with the CA a petition for
certiorari13 alleging in the main that, pursuant to
Section 2, Rule 4 of the Rules of Court, the
petitioners' complaint may only be filed in the court of
the place where they or the petitioners reside.
Considering that the petitioners reside in Los Angeles,
California, USA, the respondents assert that the
complaint below may only be filed in the RTC of
Bacolod City, the court of the place where they reside
in the Philippines.
The respondents further claimed that, the petitioners'
grant of Special Power of Attorney in favor of Atty.
Aceron notwithstanding, the said complaint may not
be filed in the court of the place where Atty. Aceron
resides, i.e., RTC of Quezon City. They explained that
Atty. Aceron, being merely a representative of the
petitioners, is not the real party in interest in the case
below; accordingly, his residence should not be
considered in determining the proper venue of the
said complaint.
The CA Decision

On August 28, 2008, the CA rendered the herein

Decision,14 which annulled and set aside the Orders
dated April 12, 2007 and August 27, 2007 of the RTC
of Quezon City and, accordingly, directed the
dismissal of the complaint filed by the petitioners. The

CA held that the complaint below should have been

filed in Bacolod City and not in Quezon City. Thus:
As maybe clearly gleaned from the foregoing, the
place of residence of the plaintiff's attorney-in-fact is
of no moment when it comes to ascertaining the
venue of cases filed in behalf of the principal since
what should be considered is the residence of the real
parties in interest, i.e., the plaintiff or the defendant,
as the case may be. Residence is the permanent
home - the place to which, whenever absent for
business or pleasure, one intends to return.
Residence is vital when dealing with venue. Plaintiffs,
herein private respondents, being residents of Los
Angeles, California, U.S.A., which is beyond the
territorial jurisdiction of Philippine courts, the case
should have been filed in Bacolod City where the
defendants, herein petitioners, reside. Since the case
was filed in Quezon City, where the representative of
the plaintiffs resides, contrary to Sec. 2 of Rule 4 of
the 1997 Rules of Court, the trial court should have
dismissed the case for improper venue.15
The petitioners sought a reconsideration of the
Decision dated August 28, 2008, but it was denied by
the CA in its Resolution dated February 20, 2009.16
Hence, the instant petition.
Issue
In the instant petition, the petitioners submit this lone
issue for this Court's resolution:
WHETHER OR NOT THE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR OF LAW WHEN
IT RULED THAT THE COMPLAINT MUST BE
DISMISSED ON THE GROUND THAT VENUE WAS
NOT PROPERLY LAID.17
The Court's Ruling
The petition is denied.
Contrary to the CA's disposition, the petitioners
maintain that their complaint for collection of sum of
money against the respondents may be filed in the
RTC of Quezon City. Invoking Section 3, Rule 3 of the
Rules of Court, they insist that Atty. Aceron, being
their attorney-in-fact, is deemed a real party in interest
in the case below and can prosecute the same before
the RTC. Such being the case, the petitioners assert,

the said complaint for collection of sum of money may

be filed in the court of the place where Atty. Aceron
resides, which is the RTC of Quezon City.

On the other hand, the respondents in their

Comment18 assert that the petitioners are proscribed
from filing their complaint in the RTC of Quezon City.
They assert that the residence of Atty. Aceron, being
merely a representative, is immaterial to the
determination of the venue of the petitioners'
complaint.
The petitioners' complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.
It is a legal truism that the rules on the venue of
personal actions are fixed for the convenience of the
plaintiffs and their witnesses. Equally settled,
however, is the principle that choosing the venue of
an action is not left to a plaintiff's caprice; the matter is
regulated by the Rules of Court.19
The petitioners' complaint for collection of sum of
money against the respondents is a personal action
as it primarily seeks the enforcement of a contract.
The Rules give the plaintiff the option of choosing
where to file his complaint. He can file it in the place
(1) where he himself or any of them resides, or (2)
where the defendant or any of the defendants resides
or may be found. The plaintiff or the defendant must
be residents of the place where the action has been
instituted at the time the action is commenced.20
However, if the plaintiff does not reside in the
Philippines, the complaint in such case may only be
filed in the court of the place where the defendant
resides. In Cohen and Cohen v. Benguet Commercial
Co., Ltd.,21 this Court held that there can be no
election as to the venue of the filing of a complaint
when the plaintiff has no residence in the Philippines.
In such case, the complaint may only be filed in the
court of the place where the defendant resides. Thus:

Section 377 provides that actions of this character

"may be brought in any province where the defendant
or any necessary party defendant may reside or be
found, or in any province where the plaintiff or one of
the plaintiffs resides, at the election of the
plaintiff." The plaintiff in this action has no residence
in the Philippine Islands. Only one of the parties to the
action resides here. There can be, therefore, no
election by plaintiff as to the place of trial. It must be
in the province where the defendant resides. x x x.22
(Emphasis ours)
Here, the petitioners are residents of Los Angeles,
California, USA while the respondents reside in
Bacolod City. Applying the foregoing principles, the
petitioners' complaint against the respondents may
only be filed in the RTC of Bacolod City - the court of
the place where the respondents reside. The
petitioners, being residents of Los Angeles, California,
USA, are not given the choice as to the venue of the
filing of their complaint.
Thus, the CA did not commit any reversible error
when it annulled and set aside the orders of the RTC
of Quezon City and consequently dismissed the
petitioners' complaint against the respondents on the
ground of improper venue.
In this regard, it bears stressing that the situs for
bringing real and personal civil actions is fixed by the
Rules of Court to attain the greatest convenience
possible to the litigants and their witnesses by
affording them maximum accessibility to the courts.23
And even as the regulation of venue is primarily for
the convenience of the plaintiff, as attested by the fact
that the choice of venue is given to him, it should not
be construed to unduly deprive a resident defendant
of the rights conferred upon him by the Rules of
Court.24
Atty. Aceron is not a real party in
interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.
Contrary to the petitioners' claim, Atty. Aceron, despite
being the attorney-in-fact of the petitioners, is not a

real party in interest in the case below. Section 2,

Rule 3 of the Rules of Court reads:
Sec. 2. Parties in interest. - A real party in interest is
the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails
of the suit. Unless otherwise authorized by law or
these Rules, every action must be prosecuted or
defended in the name of the real party in interest.
(Emphasis ours)

capacity, the beneficiary shall be included in the title

of the case and shall be deemed to be the real
property in interest. A representative may be a trustee
of an expert trust, a guardian, an executor or
administrator, or a party authorized by law or these
Rules. An agent acting in his own name and for the
benefit of an undisclosed principal may sue or be
sued without joining the principal except when the
contract involves things belonging to the principal.
(Emphasis ours)

Interest within the meaning of the Rules of Court

means material interest or an interest in issue to be
affected by the decree or judgment of the case, as
distinguished from mere curiosity about the question
involved.25 A real party in interest is the party who, by
the substantive law, has the right sought to be
enforced.26

Nowhere in the rule cited above is it stated or, at the

very least implied, that the representative is likewise
deemed as the real party in interest. The said rule
simply states that, in actions which are allowed to be
prosecuted or defended by a representative, the
beneficiary shall be deemed the real party in interest
and, hence, should be included in the title of the case.

Applying the foregoing rule, it is clear that Atty. Aceron

is not a real party in interest in the case below as he
does not stand to be benefited or injured by any
judgment therein. He was merely appointed by the
petitioners as their attorney-in-fact for the limited
purpose of filing and prosecuting the complaint
against the respondents. Such appointment, however,
does not mean that he is subrogated into the rights of
petitioners and ought to be considered as a real party
in interest.

Indeed, to construe the express requirement of

residence under the rules on venue as applicable to
the attorney-in-fact of the plaintiff would abrogate the
meaning of a "real party in interest", as defined in
Section 2 of Rule 3 of the 1997 Rules of Court vis-a vis Section 3 of the same Rule.28

Being merely a representative of the petitioners, Atty.

Aceron in his personal capacity does not have the
right to file the complaint below against the
respondents. He may only do so, as what he did, in
behalf of the petitioners - the real parties in interest.
To stress, the right sought to be enforced in the case
below belongs to the petitioners and not to Atty.
Aceron. Clearly, an attorney-in-fact is not a real party
in interest.27
The petitioner's reliance on Section 3, Rule 3 of the
Rules of Court to support their conclusion that Atty.
Aceron is likewise a party in interest in the case below
is misplaced. Section 3, Rule 3 of the Rules of Court
provides that:

Sec. 3. Representatives as parties. - Where the action

is allowed to be prosecuted and defended by a
representative or someone acting in a fiduciary

On this score, the CA aptly observed that:

As may be unerringly gleaned from the foregoing
provisions, there is nothing therein that expressly
allows, much less implies that an action may be filed
in the city or municipality where either a
representative or an attorney-in-fact of a real party in
interest resides. Sec. 3 of Rule 3 merely provides that
the name or names of the person or persons being
represented must be included in the title of the case
and such person or persons shall be considered the
real party in interest. In other words, the principal
remains the true party to the case and not the
representative. Under the plain meaning rule, or verba
legis, if a statute is clear, plain and free from
ambiguity, it must be given its literal meaning and
applied without interpretation. xxx29 (Citation
omitted)
At this juncture, it bears stressing that the rules on
venue, like the other procedural rules, are designed to
insure a just and orderly administration of justice or
the impartial and even-handed determination of every
action and proceeding. Obviously, this objective will
not be attained if the plaintiff is given unrestricted

freedom to choose the court where he may file his

complaint or petition. The choice of venue should not
be left to the plaintiff's whim or caprice. He may be
impelled by some ulterior motivation in choosing to file
a case in a particular court even if not allowed by the
rules on venue.30
WHEREFORE, in consideration of the foregoing
disquisitions, the petition is DENIED. The Decision
dated August 28, 2008 and Resolution dated
February 20, 2009 rendered by the Court of Appeals
in CA-G.R. SP No. 101159 are AFFIRMED.
Kida vs. Senate
BRION, J.:
We resolve: (a) the motion for reconsideration filed by
petitioners Datu Michael Abas Kida, et al. in G.R. No.
196271; (b) the motion for reconsideration filed by
petitioner Rep. Edcel Lagman in G.R. No. 197221; (c)
the ex abundante ad cautelam motion for
reconsideration filed by petitioner Basari Mapupuno in
G.R. No. 196305; (d) the motion for reconsideration
filed by petitioner Atty. Romulo Macalintal in G.R. No.
197282; (e) the motion for reconsideration filed by
petitioners Almarim Centi Tillah, Datu Casan Conding
Cana and Partido Demokratiko Pilipino Lakas ng
Bayan in G.R. No. 197280; (f) the manifestation and
motion filed by petitioners Almarim Centi Tillah, et al.
in G.R. No. 197280; and (g) the very urgent motion to
issue clarificatory resolution that the temporary
restraining order (TRO) is still existing and effective.
These motions assail our Decision dated October 18,
2011, where we upheld the constitutionality of
Republic Act (RA) No. 10153. Pursuant to the
constitutional mandate of synchronization, RA No.
10153 postponed the regional elections in the
Autonomous Region in Muslim Mindanao (ARMM)
(which were scheduled to be held on the second
Monday of August 2011) to the second Monday of
May 2013 and recognized the Presidents power to
appoint officers-in-charge (OICs) to temporarily
assume these positions upon the expiration of the
terms of the elected officials.
The Motions for Reconsideration

The petitioners in G.R. No. 196271 raise the following

grounds in support of their motion:
I. THE HONORABLE COURT ERRED IN
CONCLUDING THAT THE ARMM ELECTIONS ARE
LOCAL ELECTIONS, CONSIDERING THAT THE
CONSTITUTION GIVES THE ARMM A SPECIAL
STATUS AND IS SEPARATE AND DISTINCT FROM
ORDINARY LOCAL GOVERNMENT UNITS.
II.
R.A. 10153 AND R.A. 9333 AMEND THE
ORGANIC ACT.
III. THE SUPERMAJORITY PROVISIONS OF THE
ORGANIC ACT (R.A. 9054) ARE NOT
IRREPEALABLE LAWS.
IV. SECTION 3, ARTICLE XVII OF R.A. 9054
DOES NOT VIOLATE SECTION 18, ARTICLE X OF
THE CONSTITUTION.
V.
BALANCE OF INTERESTS TILT IN FAVOR OF
THE DEMOCRATIC PRINCIPLE[.][1]
The petitioner in G.R. No. 197221 raises similar
grounds, arguing that:

III. THE PRESIDENTS APPOINTING POWER IS

LIMITED TO APPOINTIVE OFFICIALS AND DOES
NOT EXTEND TO ELECTIVE OFFICIALS EVEN AS
THE PRESIDENT IS ONLY VESTED WITH
SUPERVISORY POWERS OVER THE ARMM,
THEREBY NEGATING THE AWESOME POWER TO
APPOINT AND REMOVE OICs OCCUPYING
ELECTIVE POSITIONS.
IV. THE CONSTITUTION DOES NOT PROSCRIBE
THE HOLDOVER OF ARMM ELECTED OFFICIALS
PENDING THE ELECTION AND QUALIFICATION OF
THEIR SUCCESSORS.
V.
THE RULING IN OSMENA DOES NOT APPLY
TO ARMM ELECTED OFFICIALS WHOSE TERMS
OF OFFICE ARE NOT PROVIDED FOR BY THE
CONSTITUTION BUT PRESCRIBED BY THE
ORGANIC ACTS.
VI.
THE REQUIREMENT OF A SUPERMAJORITY
OF VOTES IN THE HOUSE OF
REPRESENTATIVES AND THE SENATE FOR THE
VALIDITY OF A SUBSTANTIVE AMENDMENT OR
REVISION OF THE ORGANIC ACTS DOES NOT
IMPOSE AN IRREPEALABLE LAW.

I.
THE ELECTIVE REGIONAL EXECUTIVE AND
LEGISLATIVE OFFICIALS OF ARMM CANNOT BE
CONSIDERED AS OR EQUATED WITH THE
TRADITIONAL LOCAL GOVERNMENT OFFICIALS
IN THE LOCAL GOVERNMENT UNITS (LGUs)
BECAUSE (A) THERE IS NO EXPLICIT
CONSTITUTIONAL PROVISION ON SUCH PARITY;
AND (B) THE ARMM IS MORE SUPERIOR THAN
LGUs IN STRUCTURE, POWERS AND AUTONOMY,
AND CONSEQUENTLY IS A CLASS OF ITS OWN
APART FROM TRADITIONAL LGUs.

VII. THE REQUIREMENT OF A PLEBISCITE FOR

THE EFFECTIVITY OF A SUBSTANTIVE
AMENDMENT OR REVISION OF THE ORGANIC
ACTS DOES NOT UNDULY EXPAND THE
PLEBISCITE REQUIREMENT OF THE
CONSTITUTION.

II.
THE UNMISTAKABLE AND UNEQUIVOCAL
CONSTITUTIONAL MANDATE FOR AN ELECTIVE
AND REPRESENTATIVE EXECUTIVE
DEPARTMENT AND LEGISLATIVE ASSEMBLY IN
ARMM INDUBITABLY PRECLUDES THE
APPOINTMENT BY THE PRESIDENT OF
OFFICERS-IN-CHARGE (OICs), ALBEIT
MOMENTARY OR TEMPORARY, FOR THE
POSITIONS OF ARMM GOVERNOR, VICE
GOVERNOR AND MEMBERS OF THE REGIONAL
ASSEMBLY.

IX. THE COMELEC HAS THE AUTHORITY TO

HOLD AND CONDUCT SPECIAL ELECTIONS IN
ARMM, AND THE ENACTMENT OF AN
IMPROVIDENT AND UNCONSTITUTIONAL
STATUTE IS AN ANALOGOUS CAUSE
WARRANTING COMELECS HOLDING OF SPECIAL
ELECTIONS.[2] (italics supplied)

VIII.
SYNCHRONIZATION OF THE ARMM
ELECTION WITH THE NATIONAL AND LOCAL
ELECTIONS IS NOT MANDATED BY THE
CONSTITUTION.

The petitioner in G.R. No. 196305 further asserts that:

I. BEFORE THE COURT MAY CONSTRUE OR

INTERPRET A STATUTE, IT IS A CONDITION SINE
QUA NON THAT THERE BE DOUBT OR AMBIGUITY
IN ITS LANGUAGE.
THE TRANSITORY PROVISIONS HOWEVER
ARE CLEAR AND UNAMBIGUOUS: THEY REFER
TO THE 1992 ELECTIONS AND TURN-OVER OF
ELECTIVE OFFICIALS.
IN THUS RECOGNIZING A SUPPOSED INTENT
OF THE FRAMERS, AND APPLYING THE SAME TO
ELECTIONS 20 YEARS AFTER, THE HONORABLE
SUPREME COURT MAY HAVE VIOLATED THE
FOREMOST RULE IN STATUTORY
CONSTRUCTION.
II. THE HONORABLE COURT SHOULD HAVE
CONSIDERED THAT RA 9054, AN ORGANIC ACT,
WAS COMPLETE IN ITSELF. HENCE, RA 10153
SHOULD BE CONSIDERED TO HAVE BEEN
ENACTED PRECISELY TO AMEND RA 9054.
III. THE HONORABLE COURT MAY HAVE
COMMITTED A SERIOUS ERROR IN DECLARING
THE 2/3 VOTING REQUIREMENT SET FORTH IN
RA 9054 AS UNCONSTITUTIONAL.

IV. THE HONORABLE COURT MAY HAVE

COMMITTED A SERIOUS ERROR IN HOLDING
THAT A PLEBISCITE IS NOT NECESSARY IN
AMENDING THE ORGANIC ACT
V.
THE HONORABLE COURT COMMITTED A
SERIOUS ERROR IN DECLARING THE HOLDOVER OF ARMM ELECTIVE OFFICIALS
UNCONSTITUTIONAL.
VI.
THE HONORABLE COURT COMMITTED A
SERIOUS ERROR IN UPHOLDING THE
APPOINTMENT OF OFFICERS-IN-CHARGE.[3]
(italics and underscoring supplied)
The petitioner in G.R. No. 197282 contends that:
A.

ASSUMING WITHOUT CONCEDING THAT THE

APPOINTMENT OF OICs FOR THE REGIONAL
GOVERNMENT OF THE ARMM IS NOT
UNCONSTITUTIONAL TO BEGIN WITH, SUCH
APPOINTMENT OF OIC REGIONAL OFFICIALS
WILL CREATE A FUNDAMENTAL CHANGE IN THE
BASIC STRUCTURE OF THE REGIONAL
GOVERNMENT SUCH THAT R.A. NO. 10153
SHOULD HAVE BEEN SUBMITTED TO A
PLEBISCITE IN THE ARMM FOR APPROVAL BY ITS
PEOPLE, WHICH PLEBISCITE REQUIREMENT
CANNOT BE CIRCUMVENTED BY SIMPLY
CHARACTERIZING THE PROVISIONS OF R.A. NO.
10153 ON APPOINTMENT OF OICs AS AN
INTERIM MEASURE.
B.
THE HONORABLE COURT ERRED IN RULING
THAT THE APPOINTMENT BY THE PRESIDENT OF
OICs FOR THE ARMM REGIONAL GOVERNMENT
IS NOT VIOLATIVE OF THE CONSTITUTION.
C.

b) RA No. 10153 negates the basic principle of

republican democracy which, by constitutional
mandate, guides the governance of the Republic;

The Courts Ruling

c) RA No. 10153 amends the Organic Act (RA No.

9054) and, thus, has to comply with the 2/3 vote from
the House of Representatives and the Senate, voting
separately, and be ratified in a plebiscite;

Synchronization mandate includes ARMM elections

d) if the choice is between elective officials continuing

to hold their offices even after their terms are over
and non-elective individuals getting into the vacant
elective positions by appointment as OICs, the
holdover option is the better choice;
e) the President only has the power of supervision
over autonomous regions, which does not include the
power to appoint OICs to take the place of ARMM
elective officials; and
f) it would be better to hold the ARMM elections
separately from the national and local elections as
this will make it easier for the authorities to implement
election laws.

THE HOLDOVER PRINCIPLE ADOPTED IN R.A.

NO. 9054 DOES NOT VIOLATE THE
CONSTITUTION, AND BEFORE THEIR
SUCCESSORS ARE ELECTED IN EITHER AN
ELECTION TO BE HELD AT THE SOONEST
POSSIBLE TIME OR IN MAY 2013, THE SAID
INCUMBENT ARMM REGIONAL OFFICIALS MAY
VALIDLY CONTINUE FUNCTIONING AS SUCH IN A
HOLDOVER CAPACITY IN ACCORDANCE WITH
SECTION 7, ARTICLE VII OF R.A. NO. 9054.

In essence, the Court is asked to resolve the following

questions:

D.

(c) Is the holdover provision in RA No. 9054

constitutional?

WITH THE CANCELLATION OF THE AUGUST 2011

ARMM ELECTIONS, SPECIAL ELECTIONS MUST
IMMEDIATELY BE HELD FOR THE ELECTIVE
REGIONAL OFFICIALS OF THE ARMM WHO SHALL
SERVE UNTIL THEIR SUCCESSORS ARE
ELECTED IN THE MAY 2013 SYNCHRONIZED
ELECTIONS.[4]
Finally, the petitioners in G.R. No. 197280 argue that:
a) the Constitutional mandate of synchronization does
not apply to the ARMM elections;

(a) Does the Constitution mandate the

synchronization of ARMM regional elections with
national and local elections?
(b) Does RA No. 10153 amend RA No. 9054? If so,
does RA No. 10153 have to comply with the
supermajority vote and plebiscite requirements?

(d) Does the COMELEC have the power to call for

special elections in ARMM?
(e) Does granting the President the power to appoint
OICs violate the elective and representative nature of
ARMM regional legislative and executive offices?
(f) Does the appointment power granted to the
President exceed the Presidents supervisory powers
over autonomous

We deny the motions for lack of merit.

The Court was unanimous in holding that the

Constitution mandates the synchronization of national
and local elections. While the Constitution does not
expressly instruct Congress to synchronize the
national and local elections, the intention can be
inferred from the following provisions of the Transitory
Provisions (Article XVIII) of the Constitution, which
state:
Section 1. The first elections of Members of the
Congress under this Constitution shall be held on the
second Monday of May, 1987.
The first local elections shall be held on a date to be
determined by the President, which may be
simultaneous with the election of the Members of the
Congress. It shall include the election of all Members
of the city or municipal councils in the Metropolitan
Manila area.
Section 2. The Senators, Members of the House of
Representatives, and the local officials first elected
under this Constitution shall serve until noon of June
30, 1992.
Of the Senators elected in the elections in 1992, the
first twelve obtaining the highest number of votes
shall serve for six years and the remaining twelve for
three years.
Section 5. The six-year term of the incumbent
President and Vice-President elected in the February
7, 1986 election is, for purposes of synchronization of
elections, hereby extended to noon of June 30, 1992.
The first regular elections for the President and VicePresident under this Constitution shall be held on the
second Monday of May, 1992.
To fully appreciate the constitutional intent behind
these provisions, we refer to the discussions of the
Constitutional Commission:
MR. MAAMBONG. For purposes of identification, I will
now read a section which we will temporarily indicate
as Section 14. It reads: THE SENATORS,

MEMBERS OF THE HOUSE OF

REPRESENTATIVES AND THE LOCAL OFFICIALS
ELECTED IN THE FIRST ELECTION SHALL SERVE
FOR FIVE YEARS, TO EXPIRE AT NOON OF JUNE
1992.
This was presented by Commissioner Davide, so may
we ask that Commissioner Davide be recognized.
THE PRESIDING OFFICER (Mr. Rodrigo).
Commissioner Davide is recognized.
MR. DAVIDE. Before going to the proposed
amendment, I would only state that in view of the
action taken by the Commission on Section 2 earlier, I
am formulating a new proposal. It will read as follows:
THE SENATORS, MEMBERS OF THE HOUSE OF
REPRESENTATIVES AND THE LOCAL OFFICIALS
FIRST ELECTED UNDER THIS CONSTITUTION
SHALL SERVE UNTIL NOON OF JUNE 30, 1992.
I proposed this because of the proposed section of
the Article on Transitory Provisions giving a term to
the incumbent President and Vice-President until
1992. Necessarily then, since the term provided by
the Commission for Members of the Lower House and
for local officials is three years, if there will be an
election in 1987, the next election for said officers will
be in 1990, and it would be very close to 1992. We
could never attain, subsequently, any synchronization
of election which is once every three years.
So under my proposal we will be able to begin actual
synchronization in 1992, and consequently, we should
not have a local election or an election for Members
of the Lower House in 1990 for them to be able to
complete their term of three years each. And if we
also stagger the Senate, upon the first election it will
result in an election in 1993 for the Senate alone, and
there will be an election for 12 Senators in 1990. But
for the remaining 12 who will be elected in 1987, if
their term is for six years, their election will be in
1993. So, consequently we will have elections in
1990, in 1992 and in 1993. The later election will be
limited to only 12 Senators and of course to the local
officials and the Members of the Lower House. But,
definitely, thereafter we can never have an election
once every three years, therefore defeating the very
purpose of the Commission when we adopted the
term of six years for the President and another six
years for the Senators with the possibility of

staggering with 12 to serve for six years and 12 for

three years insofar as the first Senators are
concerned. And so my proposal is the only way to
effect the first synchronized election which would
mean, necessarily, a bonus of two years to the
Members of the Lower House and a bonus of two
years to the local elective officials.

MR. DAVIDE. It works both ways, Mr. Presiding

Officer. The attempt here is on the assumption that
the provision of the Transitory Provisions on the term
of the incumbent President and Vice-President would
really end in 1992.

THE PRESIDING OFFICER (Mr. Rodrigo). What does

the committee say?

MR. DAVIDE. In other words, there will be a single

election in 1992 for all, from the President up to the
municipal officials.[5] (emphases and underscoring
ours)

MR. DE CASTRO. Mr. Presiding Officer.

THE PRESIDING OFFICER (Mr. Rodrigo).
Commissioner de Castro is recognized.
MR. DE CASTRO. Thank you.
During the discussion on the legislative and the
synchronization of elections, I was the one who
proposed that in order to synchronize the elections
every three years, which the body approved the
first national and local officials to be elected in 1987
shall continue in office for five years, the same thing
the Honorable Davide is now proposing. That means
they will all serve until 1992, assuming that the term
of the President will be for six years and continue
beginning in 1986. So from 1992, we will again have
national, local and presidential elections. This time, in
1992, the President shall have a term until 1998 and
the first 12 Senators will serve until 1998, while the
next 12 shall serve until 1995, and then the local
officials elected in 1992 will serve until 1995. From
then on, we shall have an election every three years.
So, I will say that the proposition of Commissioner
Davide is in order, if we have to synchronize our
elections every three years which was already
approved by the body.
Thank you, Mr. Presiding Officer.
MR. GUINGONA. What will be synchronized,
therefore, is the election of the incumbent President
and Vice-President in 1992.
MR. DAVIDE. Yes.
MR. GUINGONA. Not the reverse. Will the committee
not synchronize the election of the Senators and local
officials with the election of the President?

MR. GUINGONA. Yes.

The framers of the Constitution could not have

expressed their objective more clearly there was to
be a single election in 1992 for all elective officials
from the President down to the municipal officials.
Significantly, the framers were even willing to
temporarily lengthen or shorten the terms of elective
officials in order to meet this objective, highlighting the
importance of this constitutional mandate.
We came to the same conclusion in Osmea v.
Commission on Elections,[6] where we unequivocally
stated that the Constitution has mandated
synchronized national and local elections."[7] Despite
the length and verbosity of their motions, the
petitioners have failed to convince us to deviate from
this established ruling.
Neither do we find any merit in the petitioners
contention that the ARMM elections are not covered
by the constitutional mandate of synchronization
because the ARMM elections were not specifically
mentioned in the above-quoted Transitory Provisions
of the Constitution.
That the ARMM elections were not expressly
mentioned in the Transitory Provisions of the
Constitution on synchronization cannot be interpreted
to mean that the ARMM elections are not covered by
the constitutional mandate of synchronization. We
have to consider that the ARMM, as we now know it,
had not yet been officially organized at the time the
Constitution was enacted and ratified by the people.
Keeping in mind that a constitution is not intended to
provide merely for the exigencies of a few years but is
to endure through generations for as long as it
remains unaltered by the people as ultimate
sovereign, a constitution should be construed in the
light of what actually is a continuing instrument to

govern not only the present but also the unfolding

events of the indefinite future. Although the principles
embodied in a constitution remain fixed and
unchanged from the time of its adoption, a
constitution must be construed as a dynamic process
intended to stand for a great length of time, to be
progressive and not static.[8]
To reiterate, Article X of the Constitution, entitled
Local Government, clearly shows the intention of the
Constitution to classify autonomous regions, such as
the ARMM, as local governments. We refer to Section
1 of this Article, which provides:
Section 1. The territorial and political subdivisions of
the Republic of the Philippines are the provinces,
cities, municipalities, and barangays. There shall be
autonomous regions in Muslim Mindanao and the
Cordilleras as hereinafter provided.
The inclusion of autonomous regions in the
enumeration of political subdivisions of the State
under the heading Local Government indicates quite
clearly the constitutional intent to consider
autonomous regions as one of the forms of local
governments.
That the Constitution mentions only the national
government and the local governments, and does
not make a distinction between the local government
and the regional government, is particularly
revealing, betraying as it does the intention of the
framers of the Constitution to consider the
autonomous regions not as separate forms of
government, but as political units which, while having
more powers and attributes than other local
government units, still remain under the category of
local governments. Since autonomous regions are
classified as local governments, it follows that
elections held in autonomous regions are also
considered as local elections.
The petitioners further argue that even assuming that
the Constitution mandates the synchronization of
elections, the ARMM elections are not covered by this
mandate since they are regional elections and not
local elections.
In construing provisions of the Constitution, the first
rule is verba legis, that is, wherever possible, the
words used in the Constitution must be given their

ordinary meaning except where technical terms are

employed.[9] Applying this principle to determine the
scope of local elections, we refer to the meaning of
the word local, as understood in its ordinary sense.
As defined in Websters Third New International
Dictionary Unabridged, local refers to something
that primarily serves the needs of a particular limited
district, often a community or minor political
subdivision. Obviously, the ARMM elections, which
are held within the confines of the autonomous region
of Muslim Mindanao, fall within this definition.
To be sure, the fact that the ARMM possesses more
powers than other provinces, cities, or municipalities
is not enough reason to treat the ARMM regional
elections differently from the other local elections. Ubi
lex non distinguit nec nos distinguire debemus. When
the law does not distinguish, we must not distinguish.
[10]
RA No. 10153 does not amend RA No. 9054
The petitioners are adamant that the provisions of RA
No. 10153, in postponing the ARMM elections, amend
RA No. 9054.
We cannot agree with their position.
A thorough reading of RA No. 9054 reveals that it
fixes the schedule for only the first ARMM elections;
[11] it does not provide the date for the succeeding
regular ARMM elections. In providing for the date of
the regular ARMM elections, RA No. 9333 and RA No.
10153 clearly do not amend RA No. 9054 since these
laws do not change or revise any provision in RA No.
9054. In fixing the date of the ARMM elections
subsequent to the first election, RA No. 9333 and RA
No. 10153 merely filled the gap left in RA No. 9054.
We reiterate our previous observations:
This view that Congress thought it best to leave the
determination of the date of succeeding ARMM
elections to legislative discretion finds support in
ARMMs recent history.
To recall, RA No. 10153 is not the first law passed that
rescheduled the ARMM elections. The First Organic
Act RA No. 6734 not only did not fix the date of
the subsequent elections; it did not even fix the
specific date of the first ARMM elections, leaving the

date to be fixed in another legislative enactment.

Consequently, RA No. 7647, RA No. 8176, RA No.
8746, RA No. 8753, and RA No. 9012 were all
enacted by Congress to fix the dates of the ARMM
elections. Since these laws did not change or modify
any part or provision of RA No. 6734, they were not
amendments to this latter law. Consequently, there
was no need to submit them to any plebiscite for
ratification.
The Second Organic Act RA No. 9054 which
lapsed into law on March 31, 2001, provided that the
first elections would be held on the second Monday of
September 2001. Thereafter, Congress passed RA
No. 9140 to reset the date of the ARMM elections.
Significantly, while RA No. 9140 also scheduled the
plebiscite for the ratification of the Second Organic
Act (RA No. 9054), the new date of the ARMM
regional elections fixed in RA No. 9140 was not
among the provisions ratified in the plebiscite held to
approve RA No. 9054. Thereafter, Congress passed
RA No. 9333, which further reset the date of the
ARMM regional elections. Again, this law was not
ratified through a plebiscite.
From these legislative actions, we see the clear
intention of Congress to treat the laws which fix the
date of the subsequent ARMM elections as separate
and distinct from the Organic Acts. Congress only
acted consistently with this intent when it passed RA
No. 10153 without requiring compliance with the
amendment prerequisites embodied in Section 1 and
Section 3, Article XVII of RA No. 9054.[12]
(emphases supplied)
The petitioner in G.R. No. 196305 contends, however,
that there is no lacuna in RA No. 9054 as regards the
date of the subsequent ARMM elections. In his
estimation, it can be implied from the provisions of RA
No. 9054 that the succeeding elections are to be held
three years after the date of the first ARMM regional
elections.
We find this an erroneous assertion. Well-settled is
the rule that the court may not, in the guise of
interpretation, enlarge the scope of a statute and
include therein situations not provided nor intended by
the lawmakers. An omission at the time of enactment,
whether careless or calculated, cannot be judicially
supplied however later wisdom may recommend the
inclusion.[13] Courts are not authorized to insert into

the law what they think should be in it or to supply

what they think the legislature would have supplied if
its attention had been called to the omission.[14]
Providing for lapses within the law falls within the
exclusive domain of the legislature, and courts, no
matter how well-meaning, have no authority to intrude
into this clearly delineated space.
Since RA No. 10153 does not amend, but merely fills
in the gap in RA No. 9054, there is no need for RA
No. 10153 to comply with the amendment
requirements set forth in Article XVII of RA No. 9054.
Supermajority vote requirement makes RA No. 9054
an irrepealable law
Even assuming that RA No. 10153 amends RA No.
9054, however, we have already established that the
supermajority vote requirement set forth in Section 1,
Article XVII of RA No. 9054[15] is unconstitutional for
violating the principle that Congress cannot pass
irrepealable laws.
The power of the legislature to make laws includes
the power to amend and repeal these laws. Where
the legislature, by its own act, attempts to limit its
power to amend or repeal laws, the Court has the
duty to strike down such act for interfering with the
plenary powers of Congress. As we explained
in Duarte v. Dade:[16]
A state legislature has a plenary law-making power
over all subjects, whether pertaining to persons or
things, within its territorial jurisdiction, either to
introduce new laws or repeal the old, unless
prohibited expressly or by implication by the federal
constitution or limited or restrained by its own. It
cannot bind itself or its successors by enacting
irrepealable laws except when so restrained. Every
legislative body may modify or abolish the acts
passed by itself or its predecessors. This power of
repeal may be exercised at the same session at
which the original act was passed; and even while a
bill is in its progress and before it becomes a law. This
legislature cannot bind a future legislature to a
particular mode of repeal. It cannot declare in
advance the intent of subsequent legislatures or the
effect of subsequent legislation upon existing
statutes. [emphasis ours]

Under our Constitution, each House of Congress has

the power to approve bills by a mere majority vote,
provided there is quorum.[17] In requiring all laws
which amend RA No. 9054 to comply with a higher
voting requirement than the Constitution provides (2/3
vote), Congress, which enacted RA No. 9054, clearly
violated the very principle which we sought to
establish in Duarte. To reiterate, the act of one
legislature is not binding upon, and cannot tie the
hands of, future legislatures.[18]
We also highlight an important point raised by Justice
Antonio T. Carpio in his dissenting opinion, where he
stated: Section 1, Article XVII of RA 9054 erects a
high vote threshold for each House of Congress to
surmount, effectively and unconstitutionally, taking RA
9054 beyond the reach of Congress amendatory
powers. One Congress cannot limit or reduce the
plenary legislative power of succeeding Congresses
by requiring a higher vote threshold than what the
Constitution requires to enact, amend or repeal
laws. No law can be passed fixing such a higher vote
threshold because Congress has no power, by
ordinary legislation, to amend the Constitution.[19]
Plebiscite requirement in RA No. 9054 overly broad
Similarly, we struck down the petitioners contention
that the plebiscite requirement[20] applies to all
amendments of RA No. 9054 for being an
unreasonable enlargement of the plebiscite
requirement set forth in the Constitution.
Section 18, Article X of the Constitution provides that
[t]he creation of the autonomous region shall be
effective when approved by majority of the votes cast
by the constituent units in a plebiscite called for the
purpose[.] We interpreted this to mean that only
amendments to, or revisions of, the Organic Act
constitutionally-essential to the creation of
autonomous regions i.e., those aspects specifically
mentioned in the Constitution which Congress must
provide for in the Organic Act[21] require ratification
through a plebiscite. We stand by this interpretation.
The petitioners argue that to require all amendments
to RA No. 9054 to comply with the plebiscite
requirement is to recognize that sovereignty resides
primarily in the people.

While we agree with the petitioners underlying

premise that sovereignty ultimately resides with the
people, we disagree that this legal reality necessitates
compliance with the plebiscite requirement
for all amendments to RA No. 9054. For if we were to
go by the petitioners interpretation of Section 18,
Article X of the Constitution that all amendments to
the Organic Act have to undergo the plebiscite
requirement before becoming effective, this would
lead to impractical and illogical results hampering
the ARMMs progress by impeding Congress from
enacting laws that timely address problems as they
arise in the region, as well as weighing down the
ARMM government with the costs that unavoidably
follow the holding of a plebiscite.
Interestingly, the petitioner in G.R. No. 197282 posits
that RA No. 10153, in giving the President the power
to appoint OICs to take the place of the elective
officials of the ARMM, creates a fundamental change
in the basic structure of the government, and thus
requires compliance with the plebiscite requirement
embodied in RA No. 9054.
Again, we disagree.
The pertinent provision in this regard is Section 3 of
RA No. 10153, which reads:
Section 3. Appointment of Officers-in-Charge. The
President shall appoint officers-in-charge for the
Office of the Regional Governor, Regional Vice
Governor and Members of the Regional Legislative
Assembly who shall perform the functions pertaining
to the said offices until the officials duly elected in the
May 2013 elections shall have qualified and assumed
office.
We cannot see how the above-quoted provision has
changed the basic structure of the ARMM regional
government. On the contrary, this provision clearly
preserves the basic structure of the ARMM regional
government when it recognizes the offices of the
ARMM regional government and directs the OICs who
shall temporarily assume these offices to perform the
functions pertaining to the said offices.
Unconstitutionality of the holdover provision
The petitioners are one in defending the
constitutionality of Section 7(1), Article VII of RA No.

9054, which allows the regional officials to remain in

their positions in a holdover capacity. The petitioners
essentially argue that the ARMM regional officials
should be allowed to remain in their respective
positions until the May 2013 elections since there is
no specific provision in the Constitution which
prohibits regional elective officials from performing
their duties in a holdover capacity.
The pertient provision of the Constitution is Section 8,
Article X which provides:

Section 8. The term of office of elective local officials,

except barangay officials, which shall be determined
by law, shall be three years and no such official shall
serve for more than three consecutive terms.
[emphases ours]
On the other hand, Section 7(1), Article VII of RA No.
9054 provides:
Section 7. Terms of Office of Elective Regional
Officials. (1) Terms of Office. The terms of office of
the Regional Governor, Regional Vice Governor and
members of the Regional Assembly shall be for a
period of three (3) years, which shall begin at noon on
the 30th day of September next following the day of
the election and shall end at noon of the same date
three (3) years thereafter. The incumbent elective
officials of the autonomous region shall continue in
effect until their successors are elected and qualified.
The clear wording of Section 8, Article X of the
Constitution expresses the intent of the framers of the
Constitution to categorically set a limitation on the
period within which all elective local officials can
occupy their offices. We have already established that
elective ARMM officials are also local officials; they
are, thus, bound by the three-year term limit
prescribed by the Constitution. It, therefore, becomes
irrelevant that the Constitution does not expressly
prohibit elective officials from acting in a holdover
capacity. Short of amending the Constitution,
Congress has no authority to extend the three-year
term limit by inserting a holdover provision in RA No.
9054. Thus, the term of three years for local officials
should stay at three (3) years, as fixed by the
Constitution, and cannot be extended by holdover by
Congress.

Admittedly, we have, in the past, recognized the

validity of holdover provisions in various laws. One
significant difference between the present case and
these past cases[22] is that while these past cases all
refer to elective barangay or sangguniang
kabataan officials whose terms of office are not
explicitly provided for in the Constitution, the present
case refers to local elective officials - the ARMM
Governor, the ARMM Vice Governor, and the
members of the Regional Legislative Assembly whose terms fall within the three-year term limit set by
Section 8, Article X of the Constitution.
Even assuming that a holdover is constitutionally
permissible, and there had been statutory basis for it
(namely Section 7, Article VII of RA No. 9054), the
rule of holdover can only apply as an available option
where no express or implied legislative intent to the
contrary exists; it cannot apply where such contrary
intent is evident.[23]
Congress, in passing RA No. 10153 and removing the
holdover option, has made it clear that it wants to
suppress the holdover rule expressed in RA No. 9054.
Congress, in the exercise of its plenary legislative
powers, has clearly acted within its discretion when it
deleted the holdover option, and this Court has no
authority to question the wisdom of this decision,
absent any evidence of unconstitutionality or grave
abuse of discretion. It is for the legislature and the
executive, and not this Court, to decide how to fill the
vacancies in the ARMM regional government which
arise from the legislature complying with the
constitutional mandate of synchronization.
COMELEC has no authority to hold special elections
Neither do we find any merit in the contention that the
Commission on Elections (COMELEC) is sufficiently
empowered to set the date of special elections in the
ARMM. To recall, the Constitution has merely
empowered the COMELEC to enforce and administer
all laws and regulations relative to the conduct of an
election.[24] Although the legislature, under the
Omnibus Election Code (Batas Pambansa Bilang [BP]
881), has granted the COMELEC the power to
postpone elections to another date, this power is
confined to the specific terms and circumstances

provided for in the law. Specifically, this power falls

within the narrow confines of the following provisions:
Section 5. Postponement of election. - When for any
serious cause such as violence, terrorism, loss or
destruction of election paraphernalia or records,force
majeure, and other analogous causes of such a
nature that the holding of a free, orderly and honest
election should become impossible in any political
subdivision, the Commission, motu proprio or upon a
verified petition by any interested party, and after due
notice and hearing, whereby all interested parties are
afforded equal opportunity to be heard, shall postpone
the election therein to a date which should be
reasonably close to the date of the election not held,
suspended or which resulted in a failure to elect but
not later than thirty days after the cessation of the
cause for such postponement or suspension of the
election or failure to elect.
Section 6. Failure of election. - If, on account of force
majeure, violence, terrorism, fraud, or other
analogous causes the election in any polling place
has not been held on the date fixed, or had been
suspended before the hour fixed by law for the closing
of the voting, or after the voting and during the
preparation and the transmission of the election
returns or in the custody or canvass thereof, such
election results in a failure to elect, and in any of such
cases the failure or suspension of election would
affect the result of the election, the Commission shall,
on the basis of a verified petition by any interested
party and after due notice and hearing, call for the
holding or continuation of the election not held,
suspended or which resulted in a failure to elect on a
date reasonably close to the date of the election not
held, suspended or which resulted in a failure to elect
but not later than thirty days after the cessation of the
cause of such postponement or suspension of the
election or failure to elect. [emphases and
underscoring ours]
As we have previously observed in our assailed
decision, both Section 5 and Section 6 of BP 881
address instances where elections have already been
scheduled to take place but do not occur or had to be
suspended because
of unexpected and unforeseen circumstances, such
as violence, fraud, terrorism, and other analogous
circumstances.

In contrast, the ARMM elections were postponed by

law, in furtherance of the constitutional mandate of
synchronization of national and local elections.
Obviously, this does not fall under any of the
circumstances contemplated by Section 5 or Section
6 of BP 881.
More importantly, RA No. 10153 has already fixed the
date for the next ARMM elections and the COMELEC
has no authority to set a different election date.
Even assuming that the COMELEC has the authority
to hold special elections, and this Court can compel
the COMELEC to do so, there is still the problem of
having to shorten the terms of the newly elected
officials in order to synchronize the ARMM elections
with the May 2013 national and local elections.
Obviously, neither the Court nor the COMELEC has
the authority to do this, amounting as it does to an
amendment of Section 8, Article X of the Constitution,
which limits the term of local officials to three years.
Presidents authority to appoint OICs
The petitioner in G.R. No. 197221 argues that the
Presidents power to appoint pertains only to
appointive positions and cannot extend to positions
held by elective officials.
The power to appoint has traditionally been
recognized as executive in nature.[25] Section 16,
Article VII of the Constitution describes in broad
strokes the extent of this power, thus:
Section 16. The President shall nominate and, with
the consent of the Commission on Appointments,
appoint the heads of the executive departments,
ambassadors, other public ministers and consuls, or
officers of the armed forces from the rank of colonel
or naval captain, and other officers whose
appointments are vested in him in this
Constitution. He shall also appoint all other officers of
the Government whose appointments are not
otherwise provided for by law, and those whom he
may be authorized by law to appoint. The Congress
may, by law, vest the appointment of other officers
lower in rank in the President alone, in the courts, or
in the heads of departments, agencies, commissions,
or boards. [emphasis ours]

The 1935 Constitution contained a provision similar to

the one quoted above. Section 10(3), Article VII of the
1935 Constitution provides:
(3) The President shall nominate and with the consent
of the Commission on Appointments, shall appoint the
heads of the executive departments and bureaus,
officers of the Army from the rank of colonel, of the
Navy and Air Forces from the rank of captain or
commander, and all other officers of the Government
whose appointments are not herein otherwise
provided for, and those whom he may be authorized
by law to appoint; but the Congress may by law vest
the appointment of inferior officers, in the President
alone, in the courts, or in the heads of departments.
[emphasis ours]
The main distinction between the provision in the
1987 Constitution and its counterpart in the 1935
Constitution is the sentence construction; while in the
1935 Constitution, the various appointments the
President can make are enumerated in a single
sentence, the 1987 Constitution enumerates the
various appointments the President is empowered to
make and divides the enumeration in two sentences.
The change in style is significant; in providing for this
change, the framers of the 1987 Constitution clearly
sought to make a distinction between the first group of
presidential appointments and the second group of
presidential appointments, as made evident in the
following exchange:
MR. FOZ. Madame President x x x I propose to put a
period (.) after captain and x x x delete and all and
substitute it with HE SHALL ALSO APPOINT ANY.
MR. REGALADO. Madam President, the Committee
accepts the proposed amendment because it makes it
clear that those other officers mentioned therein do
not have to be confirmed by the Commission on
Appointments.[26]
The first group of presidential appointments, specified
as the heads of the executive departments,
ambassadors, other public ministers and consuls, or
officers of the Armed Forces, and other officers whose
appointments are vested in the President by the
Constitution, pertains to the appointive officials who
have to be confirmed by the Commission on
Appointments.

The second group of officials the President can

appoint are all other officers of the Government
whose appointments are not otherwise provided for
by law, and those whom he may be authorized by law
to appoint.[27] The second sentence acts as the
catch-all provision for the Presidents appointment
power, in recognition of the fact that the power to
appoint is essentially executive in nature.[28] The
wide latitude given to the President to appoint is
further demonstrated by the recognition of the
Presidents power to appoint officials whose
appointments are not even provided for by law. In
other words, where there are offices which have to be
filled, but the law does not provide the process for
filling them, the Constitution recognizes the power of
the President to fill the office by appointment.
Any limitation on or qualification to the exercise of the
Presidents appointment power should be strictly
construed and must be clearly stated in order to be
recognized.[29] Given that the President derives his
power to appoint OICs in the ARMM regional
government from law, it falls under the classification of
presidential appointments covered by the second
sentence of Section 16, Article VII of the Constitution;
the Presidents appointment power thus rests on clear
constitutional basis.
The petitioners also jointly assert that RA No. 10153,
in granting the President the power to appoint OICs in
elective positions, violates Section 16, Article X of the
Constitution,[30] which merely grants the President
the power of supervision over autonomous regions.
This is an overly restrictive interpretation of the
Presidents appointment power. There is no
incompatibility between the Presidents power of
supervision over local governments and autonomous
regions, and the power granted to the President,
within the specific confines of RA No. 10153, to
appoint OICs.
The power of supervision is defined as the power of
a superior officer to see to it that lower officers
perform their functions in accordance with law.[31]
This is distinguished from the power of control or the
power of an officer to alter or modify or set aside what
a subordinate officer had done in the performance of

his duties and to substitute the judgment of the former

for the latter.[32]
The petitioners apprehension regarding the
Presidents alleged power of control over the OICs is
rooted in their belief that the Presidents appointment
power includes the power to remove these officials at
will. In this way, the petitioners foresee that the
appointed OICs will be beholden to the President, and
act as representatives of the President and not of the
people
Section 3 of RA No. 10153 expressly contradicts the
petitioners supposition. The provision states:
Section 3. Appointment of Officers-in-Charge. The
President shall appoint officers-in-charge for the
Office of the Regional Governor, Regional Vice
Governor and Members of the Regional Legislative
Assembly who shall perform the functions pertaining
to the said offices until the officials duly elected in the
May 2013 elections shall have qualified and assumed
office.
The wording of the law is clear. Once the President
has appointed the OICs for the offices of the
Governor, Vice Governor and members of the
Regional Legislative Assembly, these same officials
will remain in office until they are replaced by the duly
elected officials in the May 2013 elections. Nothing in
this provision even hints that the President has the
power to recall the appointments he already made.
Clearly, the petitioners fears in this regard are more
apparent than real.
RA No. 10153 as an interim measure
We reiterate once more the importance of considering
RA No. 10153 not in a vacuum, but within the context
it was enacted in. In the first place, Congress enacted
RA No. 10153 primarily to heed the constitutional
mandate to synchronize the ARMM regional elections
with the national and local elections. To do this,
Congress had to postpone the scheduled ARMM
elections for another date, leaving it with the problem
of how to provide the ARMM with governance in the
intervening period, between the expiration of the term
of those elected in August 2008 and the assumption
to office twenty-one (21) months away of those
who will win in the synchronized elections on May 13,
2013.

In our assailed Decision, we already identified the

three possible solutions open to Congress to address
the problem created by synchronization (a) allow
the incumbent officials to remain in office after the
expiration of their terms in a holdover capacity; (b) call
for special elections to be held, and shorten the terms
of those to be elected so the next ARMM regional
elections can be held on May 13, 2013; or (c)
recognize that the President, in the exercise of his
appointment powers and in line with his power of
supervision over the ARMM, can appoint interim OICs
to hold the vacated positions in the ARMM regional
government upon the expiration of their terms. We
have already established the unconstitutionality of the
first two options, leaving us to consider the last
available option.
In this way, RA No. 10153 is in reality an interim
measure, enacted to respond to the adjustment that
synchronization requires. Given the context, we have
to judge RA No. 10153 by the standard of
reasonableness in responding to the challenges
brought about by synchronizing the ARMM elections
with the national and local elections. In other
words, given the plain unconstitutionality of providing
for a holdover and the unavailability of constitutional
possibilities for lengthening or shortening the term of
the elected ARMM officials, is the choice of the
Presidents power to appoint for a fixed and specific
period as an interim measure, and as allowed under
Section 16, Article VII of the Constitution an
unconstitutional or unreasonable choice for Congress
to make?[33]
We admit that synchronization will temporarily disrupt
the election process in a local community, the ARMM,
as well as the communitys choice of leaders.
However, we have to keep in mind that the adoption
of this measure is a matter of necessity in order to
comply with a mandate that the Constitution itself has
set out for us. Moreover, the implementation of the
provisions of RA No. 10153 as an interim measure is
comparable to the interim measures traditionally
practiced when, for instance, the President appoints
officials holding elective offices upon the creation of
new local government units.
The grant to the President of the power to appoint
OICs in place of the elective members of the Regional
Legislative Assembly is neither novel nor innovative.
The power granted to the President, via RA No.

10153, to appoint members of the Regional

Legislative Assembly is comparable to the power
granted by BP 881 (the Omnibus Election Code) to
the President to fill any vacancy for any cause in the
Regional Legislative Assembly (then called
the Sangguniang Pampook).[34]
Executive is not bound by the principle of judicial
courtesy
The petitioners in G.R. No. 197280, in their
Manifestation and Motion dated December 21, 2011,
question the propriety of the appointment by the
President of Mujiv Hataman as acting Governor and
Bainon Karon as acting Vice Governor of the ARMM.
They argue that since our previous decision was
based on a close vote of 8-7, and given the numerous
motions for reconsideration filed by the parties, the
President, in recognition of the principle of judicial
courtesy, should have refrained from implementing
our decision until we have ruled with finality on this
case.
We find the petitioners reasoning specious.
Firstly, the principle of judicial courtesy is based on
the hierarchy of courts and applies only to lower
courts in instances where, even if there is no writ of
preliminary injunction or TRO issued by a higher
court, it would be proper for a lower court to suspend
its proceedings for practical and ethical
considerations.[35] In other words, the principle of
judicial courtesy applies where there is a strong
probability that the issues before the higher court
would be rendered moot and moribund as a result of
the continuation of the proceedings in the lower court
or court of origin.[36] Consequently, this principle
cannot be applied to the President, who represents a
co-equal branch of government. To suggest otherwise
would be to disregard the principle of separation of
powers, on which our whole system of government is
founded upon.
Secondly, the fact that our previous decision was
based on a slim vote of 8-7 does not, and cannot,
have the effect of making our ruling any less effective
or binding. Regardless of how close the voting is, so
long as there is concurrence of the majority of the
members of the en banc who actually took part in the
deliberations of the case,[37] a decision garnering
only 8 votes out of 15 members is still a decision of

the Supreme Court en banc and must be respected

as such. The petitioners are, therefore, not in any
position to speculate that, based on the voting, the
probability exists that their motion for reconsideration
may be granted.[38]
Similarly, the petitioner in G.R. No. 197282, in his
Very Urgent Motion to Issue Clarificatory Resolution,
argues that since motions for reconsideration were
filed by the aggrieved parties challenging our October
18, 2011 decision in the present case, the TRO we
initially issued on September 13, 2011 should remain
subsisting and effective. He further argues that any
attempt by the Executive to implement our October
18, 2011 decision pending resolution of the motions
for reconsideration borders on disrespect if not
outright insolence[39] to this Court.
In support of this theory, the petitioner cites Samad v.
COMELEC,[40] where the Court held that while it had
already issued a decision lifting the TRO, the lifting of
the TRO is not yet final and executory, and can also
be the subject of a motion for reconsideration. The
petitioner also cites the minute resolution issued by
the Court in Tolentino v. Secretary of Finance,[41]
where the Court reproached the Commissioner of the
Bureau of Internal Revenue for manifesting its
intention to implement the decision of the Court,
noting that the Court had not yet lifted the TRO
previously issued.[42]
We agree with the petitioner that the lifting of a TRO
can be included as a subject of a motion for
reconsideration filed to assail our decision. It does not
follow, however, that the TRO remains effective until
after we have issued a final and executory decision,
especially considering the clear wording of the
dispositive portion of our October 18, 2011 decision,
which states:
WHEREFORE, premises considered,
we DISMISS the consolidated petitions assailing the
validity of RA No. 10153 for lack of merit, and
UPHOLD the constitutionality of this law. We likewise
LIFT the temporary restraining order we issued in our
Resolution of September 13, 2011. No costs.[43]
(emphases ours)
In this regard, we note an important distinction
between Tolentino and the present case. While it may
be true that Tolentino and the present case are similar

in that, in both cases, the petitions assailing the

challenged laws were dismissed by the Court, an
examination of the dispositive portion of the decision
in Tolentinoreveals that the Court did not categorically
lift the TRO. In sharp contrast, in the present case, we
expressly lifted the TRO issued on September 13,
2011. There is, therefore, no legal impediment to
prevent the President from exercising his authority to
appoint an acting ARMM Governor and Vice Governor
as specifically provided for in RA No. 10153.
Conclusion
As a final point, we wish to address the bleak picture
that the petitioner in G.R. No. 197282 presents in his
motion, that our Decision has virtually given the
President the power and authority to appoint 672,416
OICs in the event that the elections
of barangay and Sangguniang Kabataan officials are
postponed or cancelled.
We find this speculation nothing short of fearmongering.
This argument fails to take into consideration the
unique factual and legal circumstances which led to
the enactment of RA No. 10153. RA No. 10153 was
passed in order to synchronize the ARMM elections
with the national and local elections. In the course of
synchronizing the ARMM elections with the national
and local elections, Congress had to grant the
President the power to appoint OICs in the ARMM, in
light of the fact that: (a) holdover by the incumbent
ARMM elective officials is legally impermissible; and
(b) Congress cannot call for special elections and
shorten the terms of elective local officials for less
than three years.
Unlike local officials, as the Constitution does not
prescribe a term limit for barangay and Sangguniang
Kabataan officials, there is no legal proscription which
prevents these specific government officials from
continuing in a holdover capacity should some
exigency require the postponement
of barangay or Sangguniang Kabataan elections.
Clearly, these fears have neither legal nor factual
basis to stand on.

For the foregoing reasons, we deny the petitioners

motions for reconsideration.
WHEREFORE, premises considered,
we DENY with FINALITY the motions for
reconsideration for lack of merit and UPHOLD the
constitutionality of RA No. 10153.
PHILIP L. GO, PACIFICO Q. LIM and ANDREW Q.
LIM Petitioners, vs. DISTINCTION PROPERTIES
DEVELOPMENT AND CONSTRUCTION, INC.
Respondent.
MENDOZA, J.:
Before the Court is a petition for review on certiorari
under Rule 45 of the 1997 Rules of Civil Procedure
assailing the March 17, 2010 Decision[1] and October
7, 2010 Resolution[2] of the Court of Appeals (CA) in
CA-G.R. SP No. 110013 entitled Distinction
Properties Development & Construction, Inc.
v. Housing Land Use Regulatory Board (NCR), Philip
L. Go, Pacifico Q. Lim and Andrew Q. Lim.
Factual and Procedural Antecedents:
Philip L. Go, Pacifico Q. Lim and Andrew Q.
Lim (petitioners) are registered individual owners of
condominium units in Phoenix Heights Condominium
located at H. Javier/Canley Road, Bo. Bagong
Ilog, Pasig City, Metro Manila.
Respondent Distinction Properties Development and
Construction, Inc. (DPDCI) is a corporation existing
under the laws of the Philippines with principal office
at No. 1020 Soler Street, Binondo, Manila. It was
incorporated as a real estate developer, engaged in
the development of condominium projects, among
which was the Phoenix Heights
Condominium.
In February 1996, petitioner Pacifico Lim, one of the
incorporators and the then president of DPDCI,
executed a Master Deed and Declaration of
Restrictions (MDDR)[3]of Phoenix Heights
Condominium, which was filed with the Registry of
Deeds. As the developer, DPDCI undertook, among
others, the marketing aspect of the project, the sale of
the units and the release of flyers and brochures.
Thereafter, Phoenix Heights Condominium
Corporation (PHCC) was formally organized and

incorporated. Sometime in 2000, DPDCI turned over

to PHCC the ownership and possession of the
condominium units, except for the two saleable
commercial units/spaces:
1.
G/F Level BAS covered by Condominium
Certificate of Title (CCT) No. 21030 utilized as the
PHCCs administration office, and
2.
G/F Level 4-A covered by CCT No. PT27396/C-136-II used as living quarters by the building
administrator.
Although used by PHCC, DPDCI was assessed
association dues for these two units.
Meanwhile, in March 1999, petitioner Pacifico Lim, as
president of DPDCI, filed an Application for Alteration
of Plan[4] pertaining to the construction of 22 storage
units in the spaces adjunct to the parking area of the
building. The application, however, was disapproved
as the proposed alteration would obstruct light and
ventilation.
In August 2004, through its Board,[5] PHCC approved
a settlement offer from DPDCI for the set-off of the
latters association dues arrears with the assignment
of title over CCT Nos. 21030 and PT-27396/C-136-II
and their conversion into common areas. Thus, CCT
Nos. PT-43400 and PT-43399 were issued by the
Registrar of Deeds of Pasig City in favor of PHCC in
lieu of the old titles. The said settlement between the
two corporations likewise included the reversion of the
22 storage spaces into common areas. With the
conformity of PHCC, DPDCIs application for
alteration (conversion of unconstructed 22 storage
units and units GF4-A and BAS from saleable to
common areas) was granted by the Housing and
Land Use Regulatory Board (HLURB).[6]
In August 2008, petitioners, as condominium unitowners, filed a complaint[7] before the HLURB
against DPDCI for unsound business practices and
violation of the MDDR. The case was docketed as
REM- 080508-13906. They alleged that DPDCI
committed misrepresentation in their circulated flyers
and brochures as to the facilities or amenities that
would be available in the condominium and failed to
perform its obligation to comply with the MDDR.

In defense, DPDCI denied that it had breached its

promises and representations to the public
concerning the facilities in the condominium. It alleged
that the brochure attached to the complaint was a
mere preparatory draft and not the official one
actually distributed to the public, and that the said
brochure contained a disclaimer as to the binding
effect of the supposed offers therein. Also, DPDCI
questioned the petitioners personality to sue as the
action was a derivative suit.
After due hearing, the HLURB rendered its
decision[8] in favor of petitioners. It held as invalid
the agreement entered into between DPDCI and
PHCC, as to the alteration or conversion of the
subject units into common areas, which it previously
approved, for the reason that it was not approved by
the majority of the members of PHCC as required
under Section 13 of the MDDR. It stated that
DPDCIs defense, that the brochure was a mere draft,
was against human experience and a convenient
excuse to avoid its obligation to provide the facility of
the project. The HLURB further stated that the case
was not a derivative suit but one which involved
contracts of sale of the respective units between the
complainants and DPDCI, hence, within its jurisdiction
pursuant to Section 1, Presidential Decree (P.D.) No.
957 (The Subdivision and Condominium Buyers
Protective Decree),as amended. The decretal portion
of the HLURB decision reads:
WHEREFORE, in view of the foregoing, judgment is
hereby rendered:
1.
Ordering respondent to restore/provide
proper gym facilities, to restore the hallway at the
mezzanine floor.
2.
Declaring the conversion/alteration of 22
storage units and Units GF4-A and BAS as illegal,
and consequently, and ordering respondent to
continue paying the condominium dues for these
units, with interest and surcharge.
3.
Ordering the Respondent to pay the sum of
Php998,190.70, plus interests and surcharges, as
condominium dues in arrears and turnover the
administration office to PHCC without any charges
pursuant to the representation of the respondent in
the brochures it circulated to the public with a
corresponding credit to complainants individual

shares as members of PHCC entitled to such refund

or reimbursements.
4.
Ordering the Respondent to refund to the
PHCC the amount of Php1,277,500.00, representing
the cost of the deep well, with interests and
surcharges with a corresponding credit to
complainants individual shares as members of PHCC
entitled to such refund or reimbursements.
5.
Ordering the Respondent to pay the
complainants moral and exemplary damages in the
amount of P10,000.00 and attorneys fees in the
amount of P10,000.00.
All other claims and counterclaims are hereby
dismissed accordingly.
Aggrieved, DPDCI filed with the CA its Petition for
Certiorari and Prohibition[10] dated August 11, 2009,
on the ground that the HLURB decision was a patent
nullity constituting an act without or beyond its
jurisdiction and that it had no other plain, speedy and
adequate remedy in the course of law.
On March 17, 2010, the CA rendered the assailed
decision which disposed of the case in favor of
DPDCI as follows:
WHEREFORE, in view of the foregoing, the petition is
GRANTED. Accordingly, the assailed Decision of the
HLURB in Case No. REM-0800508-13906 is
ANNULLED and SET ASIDE and a new one is
entered DISMISSING the Complaint a quo.
The CA ruled that the HLURB had no jurisdiction over
the complaint filed by petitioners as the controversy
did not fall within the scope of the administrative
agencys authority under P.D. No. 957. The HLURB
not only relied heavily on the brochures which,
according to the CA, did not set out an enforceable
obligation on the part of DPDCI, but also erroneously
cited Section 13 of the MDDR to support its finding of
contractual
violation.
The CA held that jurisdiction over PHCC, an
indispensable party, was neither acquired nor waived
by estoppel. Citing Carandang v. Heirs of De
Guzman,[12] it held that, in any event, the action
should be dismissed because the absence of PHCC,

an indispensable party, rendered all subsequent

actuations of the court void, for want of authority to
act, not only as to the absent parties but even as to
those present.
Finally, the CA held that the rule on exhaustion of
administrative remedies could be relaxed. Appeal
was not a speedy and adequate remedy as
jurisdictional questions were continuously raised but
ignored by the HLURB. In the present case, however,
[t]he bottom line is that the challenged decision is
one that had been rendered in excess of jurisdiction, if
not with grave abuse of discretion amounting to lack
or excess of jurisdiction.[13]
Petitioners filed a motion for reconsideration[14] of the
said decision. The motion, however, was denied by
the CA in its Resolution dated October 7, 2010.
Hence, petitioners interpose the present petition
before this Court anchored on the following
GROUNDS
(1)
THE COURT OF APPEALS ERRED IN HOLDING
THAT THE HLURB HAS NO JURISDICTION OVER
THE INSTANT CASE;
(2)
THE COURT OF APPEALS ALSO ERRED IN
FINDING THAT PHCC IS AN INDISPENSABLE
PARTY WHICH WARRANTED THE DISMISSAL OF
THE CASE BY REASON OF IT NOT HAVING BEEN
IMPLEADED IN THE CASE;
(3)
THE COURT OF APPEALS HAS LIKEWISE ERRED
IN RELAXING THE RULE ON NON-EXHAUSTION
OF ADMINISTRATIVE REMEDIES BY DECLARING
THAT THE APPEAL MAY NOT BE A SPEEDY AND
ADEQUATE REMEDY WHEN JURISDICTIONAL
QUESTIONS WERE CONTINUOUSLY RAISED BUT
IGNORED BY THE HLURB; and
(4)

THAT FINALLY, THE COURT A QUO ALSO ERRED

IN NOT GIVING DUE RESPECT OR EVEN FINALITY
TO THE FINDINGS OF THE HLURB.[15]
Petitioners contend that the HLURB has jurisdiction
over the subject matter of this case. Their complaint
with the HLURB clearly alleged and demanded
specific performance upon DPDCI of the latters
contractual obligation under their individual contracts
to provide a back-up water system as part of the
amenities provided for in the brochure, together with
an administration office, proper gym facilities,
restoration of a hallway, among others. They point out
that the violation by DPDCI of its obligations
enumerated in the said complaint squarely put their
case within the ambit of Section 1, P.D. No. 957, as
amended, enumerating the cases that are within the
exclusive jurisdiction of the HLURB. Likewise,
petitioners argue that the case was not a derivative
suit as they were not suing for and in behalf of
PHCC. They were suing, in their individual capacities
as condominium unit buyers, their developer for
breach of contract. In support of their view that PHCC
was not an indispensable party, petitioners even
quoted the dispositive portion of the HLURB decision
to show that complete relief between or among the
existing parties may be obtained without the presence
of PHCC as a party to this case. Petitioners further
argue that DPDCIs petition before the CA should
have been dismissed outright for failure to comply
with Section 1, Rule XVI of the 2004 Rules of
Procedure of the HLURB providing for an appeal to
the Board of Commissioners by a party aggrieved by
a decision of a regional officer.
DPDCI, in its Comment,[16] strongly objects to the
arguments of petitioners and insists that the CA did
not err in granting its petition. It posits that the
HLURB has no jurisdiction over the complaint filed by
petitioners because the controversies raised therein
are in the nature of intra-corporate disputes. Thus,
the case does not fall within the jurisdiction of the
HLURB under Section 1, P.D. No. 957 and P.D. No.
1344. According to DPDCI, petitioners sought to
address the invalidation of the corporate acts duly
entered and executed by PHCC as a corporation of
which petitioners are admittedly members of, and not
the acts pertaining to their ownership of the units.
Such being the case, PHCC should have been
impleaded as a party to the complaint. Its noninclusion as an indispensable party warrants the

dismissal of the case. DPDCI further avers that the

doctrine of exhaustion is inapplicable inasmuch as the
issues raised in the petition with the CA are purely
legal; that the challenged administrative act is patently
illegal; and that the procedure of the HLURB does not
provide a plain, speedy and adequate remedy and its
application may cause great and irreparable
damage. Finally, it claims that the decision of the
HLURB Arbiter has not attained finality, the same
having been issued without jurisdiction.
Essentially, the issues to be resolved are: (1) whether
the HLURB has jurisdiction over the complaint filed by
the petitioners; (2) whether PHCC is an indispensable
party; and (3) whether the rule on exhaustion of
administrative remedies applies in this case.
The petition fails.
Basic as a hornbook principle is that jurisdiction over
the subject matter of a case is conferred by law and
determined by the allegations in the complaint which
comprise a concise statement of the ultimate facts
constituting the plaintiff's cause of action. The nature
of an action, as well as which court or body has
jurisdiction over it, is determined based on the
allegations contained in the complaint of the plaintiff,
irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted
therein. The averments in the complaint and
the character of the relief sought are the ones to be
consulted. Once vested by the allegations in the
complaint, jurisdiction also remains vested
irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted
therein.[17] Thus, it was ruled that the jurisdiction of
the HLURB to hear and decide cases is determined
by the nature of the cause of action, the subject
matter or property involved and the parties.[18]
Generally, the extent to which an administrative
agency may exercise its powers depends largely, if
not wholly, on the provisions of the statute creating or
empowering such agency.[19] With respect to the
HLURB, to determine if said agency has jurisdiction
over petitioners cause of action, an examination of
the laws defining the HLURBs jurisdiction and
authority becomes imperative. P.D. No. 957,
[20] specifically Section 3, granted the National
Housing Authority (NHA) the "exclusive jurisdiction to
regulate the real estate trade and business." Then

came P.D. No. 1344[21] expanding the jurisdiction of

the NHA (now HLURB), as follows:
SECTION 1. In the exercise of its functions to
regulate the real estate trade and business and in
addition to its powers provided for in Presidential
Decree No. 957, the National Housing Authority shall
have exclusive jurisdiction to hear and decide cases
of the following nature:
(a) Unsound real estate business practices;
(b) Claims involving refund and any other claims filed
by subdivision lot or condominium unit buyer against
the project owner, developer, dealer, broker or
salesman; and
(c) Cases involving specific performance of
contractual and statutory obligations filed by buyers of
subdivision lot or condominium unit against the owner,
developer, dealer, broker or salesman.
This provision must be read in light of the laws
preamble, which explains the reasons for enactment
of the law or the contextual basis for its interpretation.
[22] A statute derives its vitality from the purpose for
which it is enacted, and to construe it in a manner that
disregards or defeats such purpose is to nullify or
destroy the law.[23] P.D. No. 957, as amended, aims
to protect innocent subdivision lot and condominium
unit buyers against fraudulent real estate practices.
[24]
The HLURB is given a wide latitude in characterizing
or categorizing acts which may constitute unsound
business practice or breach of contractual obligations
in the real estate trade. This grant of expansive
jurisdiction to the HLURB does not mean, however,
that all cases involving subdivision lots or
condominium units automatically fall under its
jurisdiction. The CA aptly quoted the case
of Christian General Assembly, Inc. v. Ignacio,
[25] wherein the Court held that:
The mere relationship between the parties, i.e., that of
being subdivision owner/developer and subdivision lot
buyer, does not automatically vest jurisdiction in the
HLURB. For an action to fall within the exclusive
jurisdiction of the HLURB, the decisive element is
the nature of the action as enumerated in Section 1 of
P.D. 1344. On this matter, we have consistently held

that the concerned administrative agency, the

National Housing Authority (NHA) before and now the
HLURB, has jurisdiction over complaints aimed at
compelling the subdivision developer to comply with
its contractual and statutory obligations.
[26] [Emphases supplied]

PHP3,000.00 for every hearing scheduled by the

Honorable Office.[29]

In this case, the complaint filed by petitioners alleged

causes of action that apparently are not cognizable by
the HLURB considering the nature of the action and
the reliefs sought. A perusal of the complaint
discloses that petitioners are actually seeking to
nullify and invalidate the duly constituted acts
of PHCC - the April 29, 2005 Agreement[27]entered
into by PHCC with DPDCI and its Board
Resolution[28] which authorized the acceptance of
the proposed offsetting/settlement of DPDCIs
indebtedness and approval of the conversion of
certain units from saleable to common areas. All
these were approved by the HLURB. Specifically, the
reliefs sought or prayers are the following:

An indispensable party is defined as one who has

such an interest in the controversy or subject matter
that a final adjudication cannot be made, in his
absence, without injuring or affecting that interest.
[30] In the recent case of Nagkakaisang Lakas ng
Manggagawa sa Keihin (NLMK-OLALIA-KMU) v.
Keihin Philippines Corporation,[31] the Court had the
occasion to state that:

1.
Ordering the respondent to restore the gym to
its original location;
2.
Ordering the respondent to restore the hallway
at the second floor;
3.
Declaring the conversion/alteration of 22
storage units and Units GF4-A and BAS as illegal,
and consequently, ordering respondent to continue
paying the condominium dues for these units, with
interest and surcharge;
4.
Ordering the respondent to pay the sum of
PHP998,190.70, plus interest and surcharges, as
condominium dues in arrears and turnover the
administration office to PHCC without any charges
pursuant to the representation of the respondent in
the brochures it circulated to the public;
5.
Ordering the respondent to refund to the PHCC
the amount of PHP1,277,500.00, representing the
cost of the deep well, with interests and surcharges;
6.
Ordering the respondent to pay the
complainants moral/exemplary damages in the
amount of PHP100,000.00; and
7.
Ordering the respondent to pay the complainant
attorneys fees in the amount of PHP100,000.00, and

As it is clear that the acts being assailed are those of

PHHC, this case cannot prosper for failure to implead
the proper party, PHCC.

Under Section 7, Rule 3 of the Rules of Court, "parties

in interest without whom no final determination can be
had of an action shall be joined as plaintiffs or
defendants." If there is a failure to implead an
indispensable party, any judgment rendered would
have no effectiveness. It is "precisely when an
indispensable party is not before the court (that) an
action should be dismissed. The absence of an
indispensable party renders all subsequent actions of
the court null and void for want of authority to act, not
only as to the absent parties but even to those
present." The purpose of the rules on joinder of
indispensable parties is a complete determination of
all issues not only between the parties themselves,
but also as regards other persons who may be
affected by the judgment. A decision valid on its face
cannot attain real finality where there is want of
indispensable parties.[32](Underscoring supplied)
Similarly, in the case of Plasabas v. Court of
Appeals,[33] the Court held that a final decree would
necessarily affect the rights of indispensable parties
so that the Court could not proceed without their
presence. In support thereof, the Court
in Plasabas cited the following authorities, thus:
"The general rule with reference to the making of
parties in a civil action requires the joinder of all
indispensable parties under any and all conditions,
their presence being a sine qua non of the exercise of
judicial power. (Borlasa v. Polistico, 47 Phil. 345, 348)
For this reason, our Supreme Court has held that
when it appears of record that there are other persons
interested in the subject matter of the litigation, who
are not made parties to the action, it is the duty of the

court to suspend the trial until such parties are made

either plaintiffs or defendants. (Pobre, et al. v. Blanco,
17 Phil. 156). x x x Where the petition failed to join as
party defendant the person interested in sustaining
the proceeding in the court, the same should be
dismissed. x x x When an indispensable party is not
before the court, the action should be dismissed.
(People, et al. v. Rodriguez, et al., G.R. Nos. L-1405962, September 30, 1959) (sic)
"Parties in interest without whom no final
determination can be had of an action shall be joined
either as plaintiffs or defendants. (Sec. 7, Rule 3,
Rules of Court). The burden of procuring the
presence of all indispensable parties is on the plaintiff.
(39 Amjur [sic] 885). The evident purpose of the rule is
to prevent the multiplicity of suits by requiring the
person arresting a right against the defendant to
include with him, either as co-plaintiffs or as codefendants, all persons standing in the same position,
so that the whole matter in dispute may be
determined once and for all in one litigation. (Palarca
v. Baginsi, 38 Phil. 177, 178).
From all indications, PHCC is an indispensable party
and should have been impleaded, either as a plaintiff
or as a defendant,[34] in the complaint filed before the
HLURB as it would be directly and adversely affected
by any determination therein. To belabor the point,
the causes of action, or the acts complained of, were
the acts of PHCC as a corporate body. Note that in
the judgment rendered by the HLURB, the dispositive
portion in particular, DPDCI was ordered (1) to pay
P998,190.70, plus interests and surcharges, as
condominium dues in arrears and turnover the
administration office to PHCC; and (2) to refund to
PHCC P1,277,500.00, representing the cost of the
deep well, with interests and surcharges. Also, the
HLURB declared as illegal the agreement regarding
the conversion of the 22 storage units and Units GF4A and BAS, to which agreement PHCC was a party.
Evidently, the cause of action rightfully pertains to
PHCC. Petitioners cannot exercise the same except
through a derivative suit. In the complaint, however,
there was no allegation that the action was a
derivative suit. In fact, in the petition, petitioners claim
that their complaint is not a derivative suit.[35] In the
cited case of Chua v. Court of Appeals,[36] the Court
ruled:

For a derivative suit to prosper, it is required

that the minority stockholder suing for and on behalf
of the corporation must allege in his complaint that he
is suing on a derivative cause of action on behalf of
the corporation and all other stockholders similarly
situated who may wish to join him in the suit. It is a
condition sine qua non that the corporation be
impleaded as a party because not only is the
corporation an indispensable party, but it is also the
present rule that it must be served with process. The
judgment must be made binding upon the corporation
in order that the corporation may get the benefit of the
suit and may not bring subsequent suit against the
same defendants for the same cause of action. In
other words, the corporation must be joined as party
because it is its cause of action that is being
litigated and because judgment must be a res
adjudicata against it. (Underscoring supplied)
Without PHCC as a party, there can be no final
adjudication of the HLURBs judgment. The CA was,
thus, correct in ordering the dismissal of the case for
failure to implead an indispensable party.
To justify its finding of contractual violation, the
HLURB cited a provision in the MDDR, to wit:
Section 13. Amendment. After the corporation shall
have been created, organized and operating, this
MDDR may be amended, in whole or in part, by the
affirmative vote of Unit owners constituting at least
fifty one (51%) percent of the Unit shares in the
Project at a meeting duly called pursuant to the
Corporation By Laws and subject to the provisions of
the Condominium Act.
This citation, however, is misplaced as the
above-quoted provision pertains to the amendment of
the MDDR. It should be stressed that petitioners are
not asking for any change or modification in the terms
of the MDDR. What they are really praying for is a
declaration that the agreement regarding the
alteration/conversion is illegal. Thus, the Court
sustains the CAs finding that:
There was nothing in the records to suggest
that DPDCI sought the amendment of a part or the
whole of such MDDR. The cited section is somewhat
consistent only with the principle that an amendment

of a corporations Articles of Incorporation must be

assented to by the stockholders holding more than
50% of the shares. The MDDR does not
contemplate, by such provision, that all corporate acts
ought to be with the concurrence of a majority of the
unit owners.[37]
Moreover, considering that petitioners, who are
members of PHCC, are ultimately challenging the
agreement entered into by PHCC with DPDCI, they
are assailing, in effect, PHCCs acts as a body
corporate. This action, therefore, partakes the nature
of an intra-corporate controversy, the jurisdiction
over which used to belong to the Securities and
Exchange Commission (SEC), but transferred to the
courts of general jurisdiction or the appropriate
Regional Trial Court (RTC), pursuant to Section 5b of
P.D. No. 902-A,[38]as amended by Section 5.2 of
Republic Act (R.A.) No. 8799.[39]
An intra-corporate controversy is one which "pertains
to any of the following relationships: (1) between the
corporation, partnership or association and the public;
(2) between the corporation, partnership or
association and the State in so far as its franchise,
permit or license to operate is concerned; (3) between
the corporation, partnership or association and its
stockholders, partners, members or officers; and (4)
among the stockholders, partners or associates
themselves."[40]
Based on the foregoing definition, there is no doubt
that the controversy in this case is essentially intracorporate in character, for being between a
condominium corporation and its members-unit
owners. In the recent case of Chateau De Baie
Condominium Corporation v. Sps. Moreno,[41] an
action involving the legality of assessment dues
against the condominium owner/developer, the Court
held that, the matter being an intra-corporate dispute,
the RTC had jurisdiction to hear the same pursuant to
R.A. No. 8799.
As to the alleged failure to comply with the rule on
exhaustion of administrative remedies, the Court
again agrees with the position of the CA that the
circumstances prevailing in this case warranted a
relaxation of the rule.
The doctrine of exhaustion of administrative remedies
is a cornerstone of our judicial system. The thrust of

the rule is that courts must allow administrative

agencies to carry out their functions and discharge
their responsibilities within the specialized areas of
their respective competence.[42] It has been held,
however, that the doctrine of exhaustion of
administrative remedies and the doctrine of primary
jurisdiction are not ironclad rules. In the case
of Republic of the Philippines v. Lacap,[43] the Court
enumerated the numerous exceptions to these rules,
namely: (a) where there is estoppel on the part of the
party invoking the doctrine; (b) where the challenged
administrative act is patently illegal, amounting to lack
of jurisdiction; (c) where there is unreasonable delay
or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is
relatively so small as to make the rule impractical and
oppressive; (e) where the question involved is purely
legal and will ultimately have to be decided by the
courts of justice; (f) where judicial intervention is
urgent; (g) where the application of the doctrine may
cause great and irreparable damage; (h) where the
controverted acts violate due process; (i) where the
issue of non-exhaustion of administrative remedies
has been rendered moot; (j) where there is no other
plain, speedy and adequate remedy; (k) where strong
public interest is involved; and (l) in quo warranto
proceedings.[44] [Underscoring supplied]

and experience but one that would involve the

interpretation and application of law.

The situations (b) and (e) in the foregoing

enumeration obtain in this case.

WHEREFORE, the petition is DENIED.

The challenged decision of the HLURB is

patently illegal having been rendered in excess of
jurisdiction, if not with grave abuse of discretion
amounting to lack or excess of jurisdiction. Also, the
issue on jurisdiction is purely legal which will have to
be decided ultimately by a regular court of law. As the
Court wrote in Vigilar v. Aquino:[45]
It does not involve an examination of the
probative value of the evidence presented by the
parties. There is a question of law when the doubt or
difference arises as to what the law is on a certain
state of facts, and not as to the truth or the falsehood
of alleged facts. Said question at best could be
resolved only tentatively by the administrative
authorities. The final decision on the matter rests not
with them but with the courts of justice. Exhaustion of
administrative remedies does not apply, because
nothing of an administrative nature is to be or can be
done. The issue does not require technical knowledge

Finally, petitioners faulted the CA in not giving

respect and even finality to the findings of fact of the
HLURB. Their reliance on the case of Dangan v.
NLRC,[46]reiterating the well-settled principles
involving decisions of administrative agencies,
deserves scant consideration as the decision of the
HLURB in this case is manifestly not supported by law
and jurisprudence.
Petitioners, therefore, cannot validly invoke DPDCIs
failure to fulfill its obligation on the basis of a plain
draft leaflet which petitioners were able to obtain,
specifically Pacifico Lim, having been a president of
DPDCI. To accord petitioners the right to demand
compliance with the commitment under the said
brochure is to allow them to profit by their own
act. This, the Court cannot tolerate.
In sum, inasmuch as the HLURB has no jurisdiction
over petitioners complaint, the Court sustains the
subject decision of the CA that the HLURB decision is
null and voidab initio. This disposition, however, is
without prejudice to any action that the parties may
rightfully file in the proper forum.

JULIO AGCAOILI, plaintiff-appellant, vs. ALBERTO

SUGUITAN, defendant-appellee.
JOHNSON, J.:
This action was commenced in the Court of First
Instance of the Province of Ilocos Norte. Its purpose
was to obtain the extraordinary legal writ of quo
warranto. The petition was denied by the trial court
and the plaintiff appealed. The questions presented
by the appeal are:
(a) Is the provision of Act No. 3107, in so far as it
provides that "justices of the peace shall be appointed
to serve until they have reached the age of 65 years,"
valid and constitutional, when applied to justices of
the peace appointed under Act No. 2041, section 1, to
serve "during good behavior?" And,
(b) Is the present action barred by the statutes of
limitations?

The facts involved in the decision of those questions

are as follows:
(a) That the said Julio Agcaoili was appointed as
justice of the peace of the municipality of Laoag, of
the Province of Ilocos Norte, by His Excellency,
Francis Burton Harrison, on the 25th day of March,
1916, with authority "to have and to hold the said
office with all the powers, privileges, and emoluments
thereunto of right appertaining unto him, subject to the
conditions prescribed by law."
"The conditions prescribed by law" to which the
appointee was "subject" at the time of his
appointment, are found in section 1 of Act No. 2041
(vol. 8, Public Laws, 153). Said section is an
amendment to section 67 of Act No. 136, and
provides among other things for the "appointment and
term of justices of the peace." It provides that one
justice of the peace and one auxiliary justice shall be
appointed by the Governor-General, etc., for each
municipality organized according to the Municipal
Code. Said section further provides that "All justices
of the peace and auxiliary justices shall hold office
during good behavior . . ." Said Act No. 2041 took
effect on the 1st day of July, 1911. At the time Act No.
2041 was adopted, the Philippine Legislature was
composed of the United States Commission and the
House of Representatives.
(b) That on the 17th day of March, 1923, the
Philippine Legislature, composed of the Senate and
House of Representatives, adopted Act No. 3107,
which was "an Act to amend and repeal certain
provisions of the Administrative Code relative to the
judiciary in order to reorganize the latter; increasing
the number of judges for certain judicial districts;
increasing the salaries of judges of Courts of First
Instance; vesting the Secretary of Justice with
authority to detail a district judge temporarily to a
district or province other than his own; regulating the
salaries of justices of the peace; abolishing the
municipal court and justice of the peace court of the
City of Manila and creating in lieu thereof a municipal
court with three branches; regulating the salaries of
clerks of court and other subordinate employees of
Courts of First Instance, and for other purposes."
Notwithstanding the fact that the title of said Act

(3107), so far as the same relates to justice of the

peace, provides only for "regulating the salaries of
justices of the peace," said Act in section 203
provides for "the appointment and distribution of
justices of the peace" with the proviso in said section
". . .That justices and auxiliary justices of the peace
shall be appointed to serve until they have reached
the age of sixty-five years." Attention is here called to
the fact again that there is nothing in the title of the
Act, which, in the slightest degree, indicates that said
Act contains provisions for "the appointment of
justices of the peace" nor as to the period during
which they may serve after appointment. Attention is
also invited to the fact that the same section (203)
contains provisions for the jurisdiction of justices of
the peace while section 207 contains provisions
defining the "qualifications for justices of the peace.''
Section 210 of said Act provides for the "filling of
vacancies in the office of justices of the peace." There
is nothing in the title of the Act which in any way
indicates that the Act contains said provisions.
Attention is here called to the provision of the Act of
Congress of the 29th day of August, 1916, and to
section 3 thereof, which provides "That no bill which
may be enacted into law shall embrace more than
one subject, and that subject shall be expressed in
the title of the bill." The effect of a violation of said
provision of said Act of Congress will be discussed
later.
(c ) That on the 9th day of April, 1923, the
Undersecretary of Justice sent the following letter to
the said Julio Agcaoili, through the Judge of the Court
of First Instance of the Third Judicial District, of the
Province of Ilocos Sur. Said letter is in the words and
figures following:
"MANILA, April 9, 1923
"SIR: In view of the provision of section 203 of the
Administrative Code as amended by section 1 of Act
No. 3107, which, in part, provides that 'justices and
auxiliary justices of the peace shall be appointed to
serve until they have reached the age of sixty-five
years,' and in view of the fact that the record shows
that you are over sixty-five years of age already, I
have the honor to hereby advise you that, upon
receipt hereof, you cease to be a justice of the peace
by operation of said amendment of the Administrative
Code.

"Respectfully,
(Sgd.) "LUIS P. TORRES
"Undersecretary of Justice"
Said letter was received by Julio Agcaoili, the justice
of the peace, on the 26th day of April, 1923. It was
handed to him by the clerk of the Court of First
Instance of the Province of Ilocos Norte.
(d) It will be noted that in the letter of April 9, 1923, the
Secretary of Justice directed or ordered Julio Agcaoili,
then justice of the peace, "upon receipt of said letter,
to cease to be a justice of the peace." Against the
order contained in said letter of April 9th, Julio Agcaoili
entered a protest dated April 28, 1923, in the following
language:
"JUSTICE OF THE PEACE COURT OF LAOAG,
ILOCOS NORTE
"P. I.
"April 28, 1923
"The Hon. LUIS TORRES
"Undersecretary of Justice of
the Philippine Islands
"SIR: The undersigned, Julio Agcaoili, justice of the
peace of Laoag, capital of the Province of Ilocos
Norte, has the honor to state that on April 26, 1923,
he received, through the clerk of the Court of First
Instance of Ilocos Norte, your communication of April
9, 1923, informing the undersigned that, having
attained the age of 65 years, he ceased to be justice
of the peace of Laoag under the provision of section 1
of Act No. 3107, amending section 203 of the
Administrative Code, which is Act No. 2711 enacted in
the year 1919, and which section 1 of said Act No.
3107 provides in part that the justices of the peace
and auxiliary justices of the peace shall be appointed
to serve until they attain the age of 65 years.
"With all due respect, the undersigned has the honor
to state that he believes that the aforecited part of the
provision of section 1 of Act No. 3107 does not
include those justices of the peace who had already

been appointed justices of the peace, like the

undersigned, before the passage and enactment of
said Act No. 3107 and the amended Administrative
Code, nor can this be the intention of the legislator, for
if it were so, it should have so stated in order that the
justices of the peace already appointed, who were
discharging the functions of the office and who had
attained the age of 65 years when said Act was
passed and enacted, should cease from their office.
"The undersigned was appointed justice of the peace
of Laoag on March 25, 1916, and therefore under Act
No. 2041, enacted February 3, 1911. Section 1 of this
Act, which amended section 67 of Act No. 136, was
not amended by any subsequent Act and provides:
'All justices of the peace and auxiliary justices shall
hold office during good behavior and those now in
office who have not the qualifications required by this
Act shall continue in office until their successors are
appointed.'
"Has section 203 of the Administrative Code amended
or repealed section 1 of Act No. 2041? The
undersigned believes that it has not, judging from the
context of both laws, nor was it repealed because if
this were the case the Governor-General would have
renewed the appointments of all the justices of the
peace and auxiliary justices of the peace under said
section 203 of the Administrative Code.
"The undersigned was appointed justice of the peace
of Laoag on March 25, 1916, under the said Act No.
2041 and continues in the discharge of the duties of
the office up to the present time, without the
Governor-General having renewed his appointment
under said section 203 of the Administrative Code.
"Then Act No. 3107 came, section 1 of which amends
section 203 of the Administrative Code.
"Has this amendment retroactive effect 7 In the first
place the legislature could not give or have given this
Act such a character, and if it had intended to do so, it
would have so stated; and in the second place,
because not only is such express declaration lacking
in the law but Act No. 3107 very clearly provides that
the justices of the peace and auxiliary justices of the
peace to be appointed shall hold office until they
attain the age of 65 years.

"Very respectfully,
(Sgd.) ''JULIO AGCAOILI
"Justice of the Peace of Laoag, Ilocos Norte"
A further protest against the said order of the
Secretary of Justice was made by Julio Agcaoili on
the 7th day of July, 1923, and is couched in the
following language:
"I, Julio Agcaoili, Justice of the Peace of the
Municipality of Laoag, Ilocos Norte, do hereby state
that on this day, July 7, 1923, Mr. Buenaventura
Ocampo, Provincial Fiscal of Ilocos Norte, appeared
at my office and thereupon showed me the telegram
of Undersecretary of Justice Torres, addressed to said
provincial fiscal. After reading said telegram I asked
the provincial fiscal to furnish me a copy thereof and
he furnished me a copy of the telegram.
"Said telegram of the Undersecretary of Justice in
substance orders the provincial fiscal to cause me to
deliver the office and all the documents and records
thereof to the auxiliary justice of the peace, because
according, to said Undersecretary of Justice I must
cease from the office under Act No. 3107, and that I
be prosecuted for violation of article 370 of the Penal
Code should I fail to comply with the telegram sent to
me on the 2d instant by the same Undersecretary of
Justice.
"I do also state that I have never had any malicious
intention to disobey the orders of the Undersecretary
of Justice, Hon. Torres, one given by telegram and the
other by letter. I only desired to study the spirit of the
law and this is the reason why I did not leave the
office until the present time, because I was and am of
the opinion that I must not cease from the office of the
justice of the peace under the provision of Act No.
2041 under which I was appointed justice of the
peace of the capital, and which Act was not repealed
by any subsequent one, nor by Act No. 3107, which
Act No. 2041 provides that the justices of the peace to
be appointed under it, should hold office during good
behavior. This Act does not say anything as to
limitation of age, and therefore I believe myself
entitled to continue in, and retain the office.
"I do also state that lest the Undersecretary of Justice
should think that I do not duly respect the constituted

authorities, I now deliver under protest the office of

the justice of the peace of Laoag and all its
documents and records, as well as the furniture
therein contained, to Mr. Alberto Suguitan, auxiliary
justice of the peace, in the presence of the provincial
fiscal, in compliance with the telegram of the
Undersecretary of Justice, Hon. Torres, received by
me through the provincial fiscal of Ilocos Norte. I
make under protest the delivery of the office and its
documents and records because I think, as I have
stated, that I must not cease from the office of justice
of the peace, and in order that my right may be
defined, I shall institute an action in the proper court
of justice to decide the case.
(Sgd.) "JULIO AGCAOILI
"I received the things of the office.
(Sgd.) "ALBERTO SUGUITAN
"In the presence of:
(Sgd.) "BUENAV. OCAMPO
"Provincial Fiscal"
Julio Agcaoili patiently waited in vain for a resolution
by the Secretary of Justice of the protest which he
presented on the 28th day of April and on the 7th day
of July, 1923; and not having received any reply to his
protest, filed a petition for a writ of quo warranto in the
Court of First Instance of the Province of Ilocos Norte
on the 23d day of April, 1925, which petition was
amended by the filing of another petition in the same
court on the 8th day of September, 1925.
A careful reading of the two protests (April 28, 1923,
and July 7, 1923) shows that they contain arguments
in support thereof which, in all equity and justice,
demanded a reply, but no reply was forthcoming. The
arguments in support of his protests find a counterpart
and are fully supported in the decision of this court in
the case of Segovia vs. Noel, of March 4, 1925 (47
Phil., 543), wherein the Supreme Court held that Act
No. 3107 could not be applied to and enforced
against justices of the peace who had been appointed
prior to the 17th day of March, 1923. Had the
Secretary of Justice answered said protest, the great
injustice which has been done to Julio Agcaoili
perhaps might have been avoided.
(e) That Julio Agcaoili being threatened with a criminal

prosecution unless he turned his office over to the

auxiliary justice of the peace, and to avoid scandal,
disgrace and humiliation which might come to him by
virtue of said prosecution, on the 7th day of July,
1923, still protesting, delivered the possession of his
office, as justice of the peace, to the auxiliary justice
of the peace of the municipality of Laoag. It is a
matter of common knowledge that Julio Agcaoili had
been entrusted with the highest office in his province
which the people could confer upon him.
The petitions presented by Julio Agcaoili in the Court
of First Instance, the first on the 23d day of July,
1925, and the second on the 8th day of September,
1925. contain, in resume, the foregoing facts. To the
petition the respondent Alberto Suguitan answered
and set up the defense of prescription. Upon the issue
thus presented, the Honorable Fermin Mariano,
judge, sustained the defense of prescription and
denied the petition for the extraordinary legal remedy
of quo warranto. From that judgment Julio Agcaoili
appealed, and now contends in a vigorous and logical
argument that his remedy has not prescribed.
Considering the first question suggested above,
attention is again called to one of the provisions of
section 3 of the Jones Law (Act of Congress, August
29, 1916, vol. 12, Public Laws of the Philippine
Islands). The "Jones Law" is the constitution of the
Philippine Islands providing a government therefor.
Subparagraph 16 of section 3 of the Jones Law
provides "That no bill which may be enacted into law
shall embrace more than one subject, and that
subject shall be expressed in the title of the bill."
Under said provision, may the legislature adopt a law
which contains important provisions to which no
reference is made in the title of the Act? The effect of
violating said provision of the Jones Law has been
brought before the courts many times. The effect of
violating said provision has already been passed
upon by this court. (Central Capiz vs. Ramirez, 40
Phil., 883, 889.)
In the case of Central Capiz vs. Ramirez, supra, it
was decided that said provision of the Jones Law was
mandatory and not directory and its violation was fatal
to any provision of the law to which no reference was
made in the title. In the decision of this court in the
case of Central Capiz vs. Ramirez, the decisions of
the courts of many of the states of the Union were

followed. Many of the constitutions of the states of the

Union contain similar provision to that quoted above
from the Jones Law. Among such states may be
mentioned Alabama, California, Georgia, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana,
Maryland, Michigan, Minnesota, Missouri, Montana,
Nebraska, Nevada, New Jersey, New York, Ohio,
Oregon, Pennsylvania, South Carolina, Texas,
Tennessee, Virginia, West Virginia, Wisconsin and
Wyoming.
Mr. Justice Sutherland, now an Associate Justice of
the Supreme Court of the United States, in his
valuable work on "Statutory Construction," vol. 1, 2nd
ed.) at section 111, states the reason and the purpose
of such a constitutional provision. He says:
"In the construction and application of this
constitutional restriction the courts have kept steadily
in view the correction of the mischief against which it
was aimed. The object is to prevent the practice,
which was common in all legislative bodies where no
such restriction existed, of embracing in the same bill
incongruous matters having no relation to each other,
or to the subject specified in the title, by which
measures were often adopted without attracting
attention. Such distinct subjects represented diverse
interests, and were combined in order to unite the
members of the legislature who favor either in support
of all. These combinations were corruptive of the
legislature and dangerous to the state. Such omnibus
bills sometimes included more than a hundred
sections on as many different subjects, with a title
appropriate to the first section, 'and for other
purposes.'
"The failure to indicate in the title of the bill the object
intended to be accomplished by the legislation often
resulted in members voting ignorantly for measures
which they would not knowingly have approved. And
not only were legislators thus misled, but the public
also; so that legislative provisions were stealthily
pushed through in the closing hours of a session,
which, having no merit to commend them, would have
been made odious by popular discussion and
remonstrance if their pendency had been seasonably
announced. The constitutional clause under
discussion is intended to correct these evils; to
prevent such corrupting aggregations of incongruous
measures, by confining each act to one subject or

object; to prevent surprise and inadvertence by

requiring that subject or object to be expressed in the
title."
The Supreme Court of the State of Alabama, in
discussing the effect of the violation of a similar
provision of the constitution of that state in the cases
of Walker vs. State (49 Ala., 329) and Lindsay vs.
United States Savings & Loan Association (120 Ala.,
156), had the following to say, quoting with approval,
what Mr. Justice Cooley in his Constitutional
Limitations, at page 143, had said upon that
question:
"The object sought to be accomplished, and the
mischief proposed to be remedied by this provision,
are well known. . . . Legislative assemblies for the
dispatch of business often pass bills by their titles
only, without requiring them to be read. A specious
title sometimes covered a legislation which, if its real
character had been disclosed, would not have
commanded assent. To prevent surprise and fraud on
the legislature is one of the purposes this provision
was intended to accomplish. Before the adoption of
this provision, the title of a statute was often no
indication of its subject or contents. . . .
"An evil this constitutional requirement was intended
to correct was the blending in one and the same
statute of such things as were diverse in their nature,
and were connected only to combine in favor of all the
advocates of each, thus often securing the passage of
several measures, no one of which could have
succeeded on its own merits. Mr. Cooley thus sums
up his review of the authorities, defining the objects of
this provision: 'It may, therefore, be assumed as
settled, that the purpose of these provisions was:
First, to prevent hodge-podge, or log-rolling
legislation; second, to prevent surprise or fraud upon
the legislature, by means of provisions in bills of
which the titles gave no information, and which might
therefore be overlooked and carelessly and
unintentionally adopted; and, third, to fairly apprise
the people, through such publication of legislative
proceedings as is usually made, of the subjects of
legislation that are being considered, in order that
they may have opportunity of being heard thereon, by
petition or otherwise if they shall so desire.' " (49 Ala.,
330, 331.)

"The purposes of the constitutional requirement must

be borne steadily in mind, when it becomes
necessary to determine whether there has been
legislative observance of it. The exposition of these
purposes by Judge Cooley is accepted, we believe, in
all the states in which a like limitation prevails. . . ."
(120 Ala., 172.)
In the case of People vs. Parks (58 Cal., 624) the
Supreme Court of the State of California had occasion
to discuss the question now before us and said:
"At the least, then, two heterogeneous subjects are
embraced in the act, one of which is not expressed in
the title, and they cannot be segregated. The title
does not express the objects of legislation embodied
in the provisions of the act. It is, therefore, narrower
than the body of the act, and fails to impart that notice
of the measures enacted, which the Constitution
requires. To prohibit such legislation was the sole end
and aim of the constitutional requirement. 'The
practice,' says the Supreme Court of Missouri, 'of
comprising in one bill subjects of a diverse and
antagonistic nature, in order to combine in its support
members who were in favor of particular measures,
but neither of which could command the requisite
majority on its own merits, was found to be not a
corruptive influence in the Legislature itself, but
destructive of the best interests of the State. But this
was not more detrimental than that other pernicious
practice, by which, through dexterous and
unscrupulous management, designing men inserted
clauses in the bodies of bills, of the true meaning of
which the titles gave no indication, and by skillful
maneuvering urged them on to their passage. These
things led to fraud and injury, and it was found
necessary to apply a corrective in the shape of a
constitutional provision.' (City of St. Louis vs. Tiefel,
42 Mo., 590.) This provision has been framed in the
constitutions of many of the States of the Union; and
courts, whenever it has come before them, have
liberally construed it as the will of the people in the
interests of honest legislation."
Decisions to the same effect are found in the following
cases: City of St. Louis vs. Tiefel (42 Mo., 578);
Cannon vs. Mathes (8 Heisk. [Tenn.] , 504); Ryerson
vs. Utley (16 Mich., 269); Board of Public Education
for the City of Americus Its. Barlow (49 Ga., 232);
Spier vs. Baker (120 Cal., 370).

Mr. Justice Sutherland, in a further discussion of the

question, at section 112 of his work on Statutory
Construction, said:
"The efficiency of this constitutional remedy to cure
the evil and mischief which has been pointed out
depends on judicial enforcement; on this
constitutional injunction being regarded as mandatory,
and compliance with it essential to the validity of
legislation. The mischief existed notwithstanding the
sworn official obligation of legislators; it might be
expected to continue notwithstanding that the
obligation is formulated and emphasized in this
constitutional injunction, if it be construed as
addressed exclusively to them, and only directory. It
would, in a general sense, be a dangerous doctrine to
announce that any of the provisions of the constitution
may be obeyed or disregarded at the mere will or
pleasure of the legislature, unless it is clear beyond all
question that such was the intention of the framers of
that instrument. It would seem to be a lowering of the
proper dignity of the fundamental law to say that it
descends to prescribing rules of order in unessential
matters which may be followed or disregarded at
pleasure. The fact is this: That whatever constitutional
provision can be looked upon as directory merely is
very likely to be treated by the legislature as if it was
devoid of moral obligation, and to be therefore
habitually disregarded."
In the case of Cannon vs. Mathes, supra, Mr. Chief
Justice Nicholson, in discussing the effect of the
violation of a constitutional provision like the one
before us, said:
". . . This is a direct, positive, and imperative limitation
upon the power of the Legislature. It matters not that
a bill has passed through three readings in each
house, on three different days, and has received the
approval of the Governor; still it is not a law of the
State if it embraces more than one subject. . ."
The Supreme Court of Alabama, in the case of Walker
vs. State, supra, said:
"It is the settled law of this court, founded on
reasoning which seems to us unanswerable, that this
provision of the Constitution is not a mere rule of
legislative procedure, directory to the general

assembly, but that it is mandatory, and it is the duty of

courts to declare void any statute not conforming to it.
. ."
Mr. Justice Cooley in his valuable work on
Constitutional Limitations (pp. 179, 180) states that
our courts have held, without exception, that such
constitutional provision is mandatory.
Considering that the great weight of authority is to the
effect that the provision like the one above quoted
from the Jones Law is mandatory; and considering
that there is nothing in the title of Act No. 3107 which
indicates in the slightest degree that said Act contains
a provision "that justices and auxiliary justices of the
peace shall be appointed to serve until they have
reached the age of sixty-five years," we are forced to
the conclusion that, that provision is illegal, void and
contrary to the mandatory provision of the Jones Law,
and that said law (3107) cannot be applied to justices
and auxiliary justices of the peace who were
appointed prior to the 17th day of March, 1923; and
that when Julio Agcaoili was forcibly, by means of
threats and intimidation, ordered to leave his office as
justice of the peace, he was forced to do so illegally,
without just cause, and should therefore be restored
to his position as justice of the peace of the
municipality of Laoag, without delay.
With reference to the second question above
suggested, in re prescription or limitation of the action,
it may be said that originally there was no limitation or
prescription of action in an action for quo warranto,
neither could there be, for the reason that it was an
action by the Government and prescription could not
be plead as a defense to an action by the
Government. The ancient writ of quo warranto was a
high prerogative writ in the nature of a writ of right by
the King against any one who usurped or claimed any
office, franchise or liberty of the crown, to inquire by
what authority the usurper supported his claim, in
order to determine the right. Even at the present time
in many of the civilized countries of the world the
action is still regarded as a prerogative writ and no
limitation or prescription is permitted to bar the action.
As a general principle it may be stated that ordinary
statutes of limitation, civil or penal, have no
application to quo warranto proceeding brought to
enforce a public right. (McPhail vs. People ex rel.
Lambert, 160 Ill., 77; 52 Am. St. Rep., 306; People ex

rel. Moloney vs. Pullman's Palace Car Co., 175 Ill.,

125; 64 L. R. A., 366.)
In all public matters a writ of quo warranto is a writ of
right at the suit of the state, and issues as a matter of
course upon demand of the proper officer ( State ex
rel . Washington County vs. Stone, 25 Mo., 555;
Commonwealth vs. Allen, 128 Mass., 308), and the
court has no authority to withhold leave to file a
petition therefor.
If the statutes of limitation or prescription cannot run
against the state, it is difficult to understand how in
the same action they may be used as a defense
against a public officer who has been forcibly, with
threats and intimidation, ousted from a public office by
the Government itself as was done in the present
case. The principle that acts of limitation do not bind
the King (the State) or the people, applies to
proceeding by quo warranto, the rule being that the
representative of the state may file an information on
behalf of the people at any time; and the lapse of time
constitutes no bar to the proceeding, in conformity
with the maxim Nullum tempus occurrit regi. (Catlett
vs. People ex rel. State's Attorney, 151 Ill., 16.) For
the state to claim that the statutes of limitation do not
apply to it and yet insist that it may plead such
statutes to bar the action of quo warranto brought by
one of its public officials whom it itself has ousted
from office, appears to us to be unjust, unfair,
unreasonable, and not within the contemplation of
sound jurisprudence.
So much for the general rule concerning limitation of
action in quo warranto proceedings. Is there a statute
in the Philippine Islands of limitation, limiting the
action of a public official of the Government who has
been duly appointed and qualified, and who has, by
force and intimidation, been ousted from such office,
to defeat his action of quo warranto?
On the 7th day of August, 1901, the United States
Philippine Commission adopted Act No. 190 which
had been considered privately and publicly for several
months theretofore. Its provisions were published
throughout the Philippine Islands long prior to its
adoption. While said Act was adopted on the 7th day
of August, 1901, it did not take effect, even though it
had been published, until the 1st day of October,
1901. (Act No. 212.) An examination of said Act (190)

shows that it provides remedies for the usurpation of

office or franchise, etc. (secs. 197-216). Said Act No.
190 was published in both English and Spanish
Section 216, in English, provided that "Nothing herein
contained shall authorize an action against a
corporation for forfeiture of charter, unless the same
be commenced within five years after the act
complained of was done or committed; nor shall an
action be brought against an officer to be ousted from
his office unless within one year after the cause of
such ouster, or the right to hold the office, arose." The
same section (216), as published in Spanish, reads
as follows: "Ninguna de estas disposiciones facultara
la iniciacion de un juicio contra una corporacion por la
perdida de sus derechos d.e concesion, a menos que
el juicio se lleve a efecto dentro de los cinco aos
siguientes a la comision u omision del hecho objeto
de la accion. Tampoco se podra iniciar un juicio
contra la persona que ejerza un cargo en una
corporacion para desposeerla, a menos que se lleve
a efecto dentro del ao seguiente a la fecha de la
comision del hecho que dio motivo a su privacion, o
que se puso en duda su derecho para ocupar el
cargo."
Said section (216), as published in Spanish and
translated into English, reads as follows: "Nothing
herein contained shall authorize an action against a
corporation for forfeiture of its corporate rights, unless
the same be commenced within five years after the
commission or omission complained of took place.
Neither may an action be brought against an officer to
oust him from office, unless the same is commenced
within one year after the commission of the act which
caused the deprivation thereof, or after the right to
hold the office arose."
Said section 216, as above quoted in Spanish, was
published in vol. 1 of the Public Laws of the Philippine
Islands and distributed to the public officers
throughout the Philippine Islands. It is a fact of
general information that even now, in 1926, the
Spanish copy of the Public Laws are consulted by the
people in remote parts of the Philippine Islands for the
purpose of knowing what the law is. It is not strange,
therefore, that the appellant did not believe that said
section 216 applied to public officers; that it only
applied to officers of corporations as it appeared in
the Spanish translation. Is it just and fair and
reasonable for the Government of the Philippine

Islands to oust one of its officers from an office to

which he had been legally appointed, by force and
intimidation and without just cause, and then to defeat
his action in quo warranto by invoking the provisions
of a public statute, different from the one which the
Government itself had furnished its public officers?
The appellant is familiar with the Spanish but not with
the English language. He naturally relied upon the
Spanish version of the law for his information as to
what the law really was. Not only had the appellant
the right to rely upon the provisions of section 216 as
they appeared in Spanish in the Public Laws of the
Philippine Islands, but the reading of the three or four
sections immediately preceding section 216 will show
that they refer specifically to corporations only. The
appellant, therefore, was justified in believing that said
section 216 as it appeared in Spanish was correct. At
least the Government should give him credit with
having acted in good faith.
But, even granting that the appellant is bound by the
provisions of section 216 as it appears in English, is
the same applicable to the appellant ? By reference to
said section above quoted in English, it will be seen
that after the word "committed" there is a semicolon.
Does that which follows the semicolon have reference
to the same subject matter which precedes it? A
semicolon is a mark of grammatical punctuation, in
the English language, to indicate a separation in the
relation of the thought, a degree greater than that
expressed by a comma, and what follows the
semicolon must have relation to the same matter
which precedes it. What follows a semicolon always
has relation to the same subject matter of that which
precedes it. A semicolon is not used for the purpose
of introducing a new idea. A semicolon is used for the
purpose of continuing the expression of a thought, a
degree greater than that expressed by a mere
comma. It is never used for the purpose of introducing
a new idea. The comma and semicolon are both used
for the same purpose, namely, to divide sentences
and parts of sentences, the only difference being that
the semicolon makes the division a little more
pronounced than the comma. The punctuation used in
a law may always be referred to for the purpose of
ascertaining the true meaning of a doubtful statute. It
follows therefore that, inasmuch as all of the
provisions of said section 216 which precede the
semicolon refer to corporations only, that which
follows the semicolon has reference to the same

subject matter, or to officers of a corporation.

But even granting, for the sake of the argument, that
the word "officer" as used in the latter part of said
section applies to public officers who have been
ousted from their position, and not only to officers of
corporations, then we have the question presented:
Had the one year mentioned in said section expired
on the 23d day of April, 1925, when the first complaint
was filed in the present action? When did the year
begin to run if said section is applicable to the
appellant?
It will be remembered that on the 7th day of July,
1923, the appellant was ousted from his office as
justice of the peace of the municipality of Laoag. Not
only did he surrender his office on that date under
protest, but also on the 28th day of April, 1923, when
he was notified by the Secretary of Justice that he
cease to be a justice of the peace of his municipality,
he then protested and gave a long and lucid argument
in support of his protest. In all justice to him, did he
not have a right, without any legal action to protect his
right, to await the solution of his protest of the 28th
day of April, 1923? He had a right to believe that the
grounds upon which his protest was based would be
convincing to the Secretary of Justice and that he
would not be removed. Until this very hour the record
contains no reply from the Secretary of Justice and no
answer whatever to the legal grounds presented by
the appellant upon his right to continue as justice of
the peace and not to be ousted.
In our opinion, even granting that section 216 is
applicable to the appellant, the period of prescription
had not begun to run at the time of the
commencement of the present action. He was
justified in delaying the commencement of his action
until an answer to his protest had been made. He had
a right to await the answer to his protest, in the
confident belief that it would be resolved in his favor
and that action would be unnecessary.
It is contended, however, that the question before us
was answered and resolved against the contention of
the appellant in the case of Bautista vs. Fajardo (38
Phil., 624). In that case no question was raised nor
was it even suggested that said section 216 did not
apply to a public officer. That question was not
discussed nor referred to by any of the parties

interested in that case. It has been frequently decided

that the fact that a statute has been accepted as valid,
and invoked and applied for many years in cases
where its validity was not raised or passed on, does
not prevent a court from later passing on its validity,
where that question is squarely and properly raised
and presented. Where a question passes the court
sub silentio, the case in which the question was so
passed is not binding on the Court (McGirr vs.
Hamilton and Abreu, 30 Phil., 563), nor should it be
considered as a precedent. (U. S. vs. Noriega and
Tobias, 31 Phil., 310; Chicote vs. Acasio, 31 Phil.,
401; U. S. vs. More, 3 Cranch [U. S.], 159, 172; U. S.
vs. Sanges, 144 U. S., 310, 319; Cross vs. Burke, 146
U. S., 82.) For the reasons given in the case of McGirr
vs. Hamilton and Abreu, supra, the decision in the
case of Bautista vs. Fajardo, supra, can have no
binding force in the interpretation of the question
presented here.
The present case is anomalous under American
sovereignty. An officer was appointed in accordance
with the law to the judiciary to serve "during good
behavior." After he had faithfully and honestly served
the Government for a number of years the legislature
adopted a new law which arbitrarily, without giving any
reason therefor, provided that said officer cease to be
such when he should reach the age of 65 years. Said
law contained no express provision or method for its
enforcement. The Executive Department, through its
Undersecretary of Justice, without any authority given
in said law, notified the said officer that he was no
longer an officer in the judicial department of the
Government and must vacate his office and turn the
same over to another, who was designated by said
Undersecretary. When the officer protested against
such arbitrary action, giving reasons therefor, and
without answering said protest, he was threatened
with a criminal prosecution if he did not immediately
vacate his office. The history of this case reads more
like a story of the Arabian Nights than like a procedure
under a well-organized Government. It seems
impossible to believe, and we could not believe it,
were the facts not actually supported by the record.
Why the undersecretary of Justice did not follow the
orderly procedure marked out by Act No. 190 is not
explained. The appellant was given no hearing. Even
his protest, couched in most humble and respectful
language, fell upon deaf ears. Absolute indifference

was shown to the respectful protest and the able

argument given in support thereof. The only answer to
his protest was a threat of a criminal prosecution if he
did not vacate his office. His humility was met with
austereness. His humble petition was met with a
threat. His patient waiting for a reply to his protest
was ended by a demand that he be prosecuted for
refusing to comply with an order by one who was not
willing to follow the well-defined and well-beaten road
of "due process of law" by preferring charges and
giving the appellant an opportunity to be heard and to
defend his right. Nothing of that character took place.
The whole procedure, from beginning to end, in
ousting the appellant from an office to which he had
been legally appointed and against whom no
complaint has been made, is anomalous in the
jurisprudence under the American flag.

without reason and without authority of law, refuse to

consider a protest, and then permit the application of
a law to prevent a recovery of that which he has lost
illegally and without reason.

Believing as I do, that the success of free institutions

depends upon a rigid adherence to the fundamentals
of the law, I have never yielded, and I hope that I may
never yield, to considerations of expediency in
expounding it. There is also some plausible reason for
the latitudinarian constructions which are resorted to
for the purpose of acquiring power - some evil to be
avoided, or some good to be attained by pushing the
powers of the Government beyond their legitimate
boundary. It is by yielding to such influences that the
courts and legislatures are gradually undermining and
finally overthrowing constitutions. It is by yielding to
such influences that constitutions are gradually
undermined and finally overthrown. It has been, and
is my purpose, so far as it is possible for me, to follow
the fundamental law of the land regardless of
consequences. If a particular law does not work well
the people or the legislature may amend it. If,
however, the legislature or the courts undertake to
cure defects in the law by forced and unnatural
constructions, they inflict a wound upon the
constitution of the state which nothing can cure. One
step taken by the legislature or the judiciary in
enlarging the powers of the Government, opens the
door for another which will be sure to follow; and so
the process goes on until all respect for the
fundamental law is lost and the powers of the
Government are just what those in authority are
pleased to call them. (Oakley vs. Aspinwall, 3
Comstock [N. Y.], 547, 568.) I cannot give my consent
to a rule or doctrine which will permit a Government to
throw an honest and efficient official out of office

MALCOLM, J., concurring and dissenting:

The judgment appealed from should be revoked, and

a judgment should be entered ordering the restoration
of the appellant to the office from which he was
illegally ejected. We should follow the effect of the
doctrine announced solemnly by this court in the case
of Segovia vs. Noel (47 Phil., 543). So ordered.
Villamor, Romualdez and Villa-Real, JJ., concur.
Johns, J., concurs in the result.
Separate Opinions

(1) I concur in so much of the opinion of Mr. Justice

Johnson as relates to the legal issue presented in the
lower court and here, pertaining to the question of
whether or not the present action was barred by the
Statute of Limitations, and am in entire accord with
the reversal of the judgment and the reinstatement of
Julio Agcaoili, the appellant, in his office as justice of
the peace of Laoag, Ilocos Norte. My reasons are
these:
(A) Act No. 3107, providing that justices and auxiliary
justices of the peace shall be appointed to serve until
they have reached the age of 65 years, should not be
given retroactive effect. That was expressly decided in
the analogous case of Segovia vs. Noel ( [1925], 47
Phil., 543).
(B) Plaintiff's action is not barred by the provisions of
section 216 of the Code of Civil Procedure. That
section particularly confines itself to an action "against
a corporation." Thereafter following a semicolon,
comes the clause "nor shall an action be brought
against an officer," which plainly relates back to
"corporation." Otherwise, the new idea would either
have been expressed in a separate section or in a
separate sentence. That this is true is further borne
out by the Spanish translation, making use of the
phrase "la persona que ejerza un cargo en una
corporacion," which we are privileged to consult to
explain an ambiguity in the English text.

(C) Even under the supposition that section 216 of the

Code of Civil Procedure applies, still it is not clear that
one year has elapsed "after the cause of such
ouster, . . . arose." In reality, no cause for ouster has
arisen since it was an erroneous interpretation of the
law which met with the disapproval of the Supreme
Court, which resulted in the attempt to force Mr.
Agcaoili out of office and to place the auxiliary justice
of the peace in office. The most that could be said of
the attempted ouster is that the auxiliary justice of the
peace merely became a justice of the peace de facto.
(2) I dissent from so much of the opinion of Mr.
Justice Johnson as discusses the question of whether
or not the provisions of Act No. 3107 are
constitutional, as unnecessary to a decision, as not
submitted for decision, and so as entirely uncalled
for.
The complaint for quo warranto presented in the
Court of First Instance contained the usual allegations
without, however, making any reference at all to the
constitutionality of Act No. 3107. The answer set up
prescription. The trial judge announcing the theories
of the parties said: "The defense of the defendant is
that the action brought by the plaintiff has prescribed
because since July 7, 1923, when he left his office, no
complaint was filed until April 23, 1925, and,
therefore, more than one year had elapsed. The
plaintiff in turn alleges that there is no such
prescription," and then proceeded to deny the petition.
On appeal to this court, the errors assigned by Mr.
Agcaoili as appellant are these:
"(1) The lower court erred in holding that the action of
the petitioner had prescribed on account of the same
not having been brought within one year from July 7,
1923, when by an illegal order of the Honorable, the
Secretary of Justice, the petitioner forcibly ceased to
discharge the duties of the office of justice of the
peace of Laoag, Ilocos Norte, and the respondent
assumed said office and began to act as such justice
of the peace.
"(2) The lower court erred in applying to the instant
case the provisions of section 216 of Act No. 190
(Code of Civil Procedure).
"(3) The lower court erred in finding that the period of

prescription must be counted from July 7, 1923,

instead of March 4, 1925.
"(4) The lower court finally erred in not granting the
relief invoked by the petitioner; in not ousting the
respondent from the office of justice of the peace of
Laoag, Ilocos Norte, in not reinstating the petitioner in
said office and in not sentencing the respondent to
pay the costs and damages caused to the petitioner in
the sum of P5,000."
There is not one word either in appellant's brief or in
appellee's brief on the subject of the constitutionality
of Act No. 3107.
Had not the constitutional question been discussed
and decided without it being suggested anywhere in
the bill of exceptions, in the assignments of error, or in
the briefs, it would hardly be necessary to cite such
well known principles as these:
"It must be evident to any one that the power to
declare a legislative enactment void is one which the
judge, conscious of the fallibility of the human
judgment, will shrink from exercising in any case
where he can conscientiously and with due regard to
duty and official oath decline the responsibility . . .
". . . The task . . . is a delicate one, and only to be
entered upon with reluctance and hesitation . . .
"Neither will a court, as a general rule, pass upon a
constitutional question, and decide a statute to be
invalid, unless a decision upon that very point
becomes necessary to the determination of the
cause. 'While courts cannot shun the discussion of
constitutional questions when fairly presented, they
will not go out of their way to find such topics. They
will not seek to draw in such weighty matters
collaterally, nor on trivial occasions. It is both more
proper and more respectful to a coordinate
department to discuss constitutional questions only
when that is the very lis mota. . . .' " (Cooley's
Constitutional Limitations, 7th ed., pp. 227, 228, 231.)
STREET, J., dissenting:
This is an action of quo warranto instituted in the
Court of First Instance of Ilocos Norte by Julio Agcaoili
for the purpose of securing his restoration to the office

of justice of the peace of Laoag and to secure the

removal of the defendant, Alberto Suguitan, from the
present enjoyment of the same office. Upon hearing
the cause the trial judge, while recognizing the
theoretical right of the plaintiff to the office in question,
nevertheless held that the plaintiff's right of action had
been barred by the limitation prescribed in section
216 of the Code of Civil Procedure. He therefore
denied the writ, with half costs, and the plaintiff
appealed.
It appears that on March 25, 1916, the plaintiff was
appointed by the Governor-General to the office of
justice of the peace of Laoag, in the Province of Ilocos
Norte, effective from April 10, 1916, subject to the
conditions prescribed by law. This appointment was
approved by the Philippine Senate, and the plaintiff
entered upon the discharge of his duties in due
course. At that time there was no age limit upon the
tenure of office of justices of the peace, but on March
17, 1923, Act No. 3107 of the Philippine Legislature
went into effect. By this Act, section 203 of the
Administrative Code, covering the appointment of
justices of the peace, was amended by the addition of
a proviso to the first paragraph of said section to the
effect: "That justices and auxiliary justices of the
peace shall be appointed to serve until they have
reached the age of sixty-five years."
In the year 1923 the plaintiff herein had attained the
age of 65; and the Secretary of Justice, supposing
that the new proviso to section 203 of the
Administrative Code was applicable to the case,
brought administrative pressure to bear upon the
plaintiff, with the result that the plaintiff ceased to
exercise the functions of justice of the peace for
Laoag and the defendant, Alberto Suguitan, was duly
appointed by the Governor-General to the same
office. This appointment having been approved by the
Senate, the said Suguitan entered upon the discharge
of the duties thereof.
On March 4, 1925, this court promulgated the
decision in the case of Segovia vs. Noel (47 Phil.,
543), wherein we decided that the amendment
contained in Act No. 3107 to section 203 of the
Administrative Code should be given prospective
application only, with the result that said provision is
not applicable to a justice of the peace appointed prior
to the enactment of the amendatory law. When this

decision was promulgated it came to the attention of

the plaintiff, and the present action was instituted by
him shortly thereafter for the purpose of obtaining his
restoration to the office. Practically the only defense
insisted upon in the court below was to the effect that
the action had prescribed under the one-year
limitation contained in section 216 of the Code of Civil
Procedure; and the only question made in this appeal
arises upon the application of said section.
It appears from the record that the plaintiff was ousted
from office on July 7, 1923, and that the defendant, as
auxiliary justice of the peace, then entered upon the
discharge of the duties of the office, by direction of
Governor-General Wood, in the character of a
temporary appointee to the vacancy. Later, as already
stated, Suguitan entered upon the discharge of the
duties of the office under commission from the
Governor-General, approved by the Philippine
Senate, effective from December 13, 1923. It is
therefore apparent that more than a full year had
elapsed between the removal of the plaintiff from
office and the date of the institution of the present
action; and more than a year had also elapsed after
the defendant began the discharge of the duties of the
office as a regularly commissioned justice of the
peace.
The section of the Code of Civil Procedure, the
application of which is here in question, reads, in
English, as follows:
"SEC. 216. Limitations. - Nothing herein contained
shall authorize an action against a corporation for
forfeiture of charter, unless the same be commenced
within five years after the act complained of was done
or committed; nor shall an action be brought against
an officer to be ousted from his office unless within
one year after the cause of such ouster, or the right to
hold the office, arose."
The same section as it stands in a current version of
the Spanish translation differs somewhat, in the
second member from the English version, as will be
seen by comparing the Spanish version, which is as
follows:
"ART. 216. De las limitaciones. - Ninguna de estas
disposiciones facultara la iniciacion de un juicio contra
una corporacion por la perdida de sus derechos de
concesion, a menos que el juicio se lleve a efecto

dentro de los cinco aos siguientes a la comision u

omision del hecho objeto de la accion. Tampoco se
podra iniciar un juicio contra la persona que ejerza un
cargo en una corporacion para desposeerla, a menos
que se lleve a efecto dentro del ano siguiente a la
fecha de la comisi6n del hecho que dio motivo a su
privacion, o que se puso en duda su derecho para
ocupar el cargo."
Upon comparison of these versions it will be seen that
the word office (cargo) in the second sentence of the
Spanish version is qualified by the expression "en una
corporacion." The plaintiff, relying upon the Spanish
version, insists that the provision is not applicable to a
public office, like that of justice of the peace; and it is
further insisted that the whole section deals
exclusively with the subject of the writ of quo warranto
as used against a corporation or against a person in
possession of a corporate office.
I am unable to accede to this view of the law. Upon
examination of sections 197 to 216, inclusive, of the
Code of Civil Procedure, it will be found that two
subjects are there treated, namely, usurpation of
franchise by corporation and usurpation of office; and
the evident purpose of this part of the Code is to
define the conditions under which the writ of quo
warranto may be used in both kinds of cases.
Accordingly in the final section (sec. 216) dealing with
the subject, a limitation is prescribed for both. The first
member of the section, down as far as the semicolon
in the English version, prescribes a limitation of five
years upon any action instituted against a corporation
for forfeiture of its charter. In the matter following the
semicolon is found the limitation appropriate to the
case where an office is involved and the action of quo
warranto is instituted to oust the incumbent and to
secure the office for the person unlawfully kept from
the occupancy thereof. The prescription established
for this case is one year.
A careful perusal of the section, in connection with
related provisions of the Code, leaves no room for
doubt that the second member of the section was
intended to apply to actions over public offices as well
as corporate offices; and in this sense said provision
has been applied by this court. (Bautista vs. Fajardo,
38 Phil., 624.) The author, or authors, of the Code of
Civil Procedure could hardly have intended for this
provision to be applied only to corporate officers,

since there is a public interest in public offices which

requires there should be a prescriptive provision
applicable to actions over these offices no less than to
actions over the offices of corporations. The insertion
by the translator into the Spanish version of the
expression "en una corporacion" after the word
"cargo" was evidently a mere mistake, resulting from
a superficial attention to the context; and it will be
found that in the Spanish edition of the Code of Civil
Procedure edited by C. M. Recto this phrase has
been dropped. It goes without saying that the English
version of the Code of Civil Procedure is controlling,
and in case of conflict the courts must be governed by
this version. The suggestion contained in the opinion
of the court that the Spanish version ought to be
accepted as controlling in this case for the reason that
the plaintiff knows only the Spanish language is novel
and if followed by us in the future will be the source of
much uncertainty in the interpretation and application
of our statutes. The opinion of the court contains a
lengthy dissertation intended to demonstrate that the
amendment of section 203 of the Administrative Code
contained in Act No. 3107 is unconstitutional, for
defect in the title of the Act. With this proposition I am
also unable to agree. The title to Act No. 3107 begins
with these words: "An Act to amend and repeal certain
provisions of the Administrative Code relative to the
judiciary." These words are general and in my opinion
broad enough to include the amendment of section
203 relating to the appointment of justices of the
peace. By examining the analysis of Title IV of the
Administrative Code it will be found that justices of the
peace are there treated as a part of the judiciary, as in
fact they are; and although the provisions of Act No.
3107 are various, they have this in common, that they
deal with different parts of the judiciary establishment
and are intended to effect changes in this system
alone. It will be noted that a pronouncement as to the
constitutionality of the amendment in question was by
no means called for in this case, not only because the
point was not raised in the discussion of the case but
for the further reason that we are all agreed that said
amendment is not applicable to the plaintiff.
Avancea, C.J. and Ostrand, J., concur.
RESOLUTION UPON PETITION FOR
RECONSIDERATION
February 26, 1926

The Clerk having before it for consideration, (a) the

motion of Alberto Suguitan for a reconsideration of the
decision of the court promulgated on February 13,
1926, and (b) the motion of the Secretary of Justice,
praying for leave to appear in said cause as amicus
curiae; and after a careful review of said decision in
relation with said motions, it is hereby ordered and
decreed that said decision, heretofore announced, be
modified, to the end that the decision of all the
questions involved in said decision be limited to the
following alone:
(a) That said Act No. 3107 can have no application to
the petitioner herein, following the doctrine heretofore
announced in the case of Segovia vs. Noel (47 Phil.,
543); and,
(b) That the defense of limitation or prescription
contended for by the respondent does not apply to the
petitioner under the particular facts of this cause.
Modifying the decision heretofore announced, as
herein indicated, and basing the decision upon the
two grounds above-mentioned only and eliminating all
remarks made about the action and conduct of the
Acting Secretary of Justice, said motions are hereby
denied. Avancea, C. J., Street and Ostrand, JJ.,
adhering to the dissenting opinion heretofore
promulgated, concur nevertheless in this resolution.
HOSPICIO DE SAN JOSE DE BARILI, CEBU CITY,
Petitioner, versus DEPARTMENT OF AGRARIAN
REFORM, Respondent.
Tinga, J.:
At the core of this case is an obscure old special law.
The issue is whether a provision in the law prohibiting
the sale of the properties donated to the charitable
organization that was incorporated by the same law
bars the implementation of agrarian reform laws as
regards said properties.
Petitioner Hospicio de San Jose de Barili ("Hospicio")
is a charitable organization created as a body
corporate in 1925 by Act No. 3239. The law was
enacted in order to formally accept the offer made by
Pedro Cui and Benigna Cui to establish a home for
the care and support, free of charge, of indigent
invalids and incapacitated and helpless persons.[1]

The Hospicio was to be maintained with the revenues

of the personal and real properties to be endowed by
the Cuis and other donors.[2]
Section 4 of Act No. 3239 provides that "[t]he personal
and real property donated to the [Hospicio] by its
founders or by other persons shall not be sold under
any consideration."[3]
On 10 October 1987, the Department of Agrarian
Reform Regional Office (DARRO) Region VII issued
an order ordaining that two parcels of land owned by
the Hospicio be placed under Operation Land
Transfer in favor of twenty-two (22) tillers thereof as
beneficiaries. Presidential Decree (P.D.) No. 27, a
land reform law, was cited as legal basis for the order.
The Hospicio filed a motion for the reconsideration of
the order with the Department of Agrarian Reform
(DAR) Secretary, citing the aforementioned Section 4
of Act No. 3239. It argued that Act No. 3239 is a
special law, which could not have been repealed by
P.D. No. 27, a general law, or by the latter's general
repealing clause.
The DAR Secretary rejected the motion for
reconsideration in an Order dated 30 March 1997.
Therein, the DAR Secretary held that P.D. No. 27 was
a special law, as it applied only to particular
individuals in the State, specifically the tenants of rice
and corn lands. Moreover, P.D. No. 27, which covered
all rice and corn lands, provides no exemptions based
on the manner of acquisition of the land by the
landowner.[4]
The Order of the DAR Secretary was assailed in a
Petition for Certiorari filed with the Court of Appeals.
In a Decision[5] dated 9 July 1999, the Court of
Appeals Special Eleventh Division affirmed the DAR
Secretary's issuance. It sustained the position of the
Office of the Solicitor General (OSG) position that
Section 4 of Act No. 3239 was expressly repealed not
only by P.D. No. 27, but also by Republic Act No.
6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988, both laws being explicit
in mandating the distribution of agricultural lands to
qualified beneficiaries. The Court of Appeals further
noted that the subject lands did not fall among the
exemptions provided under Section 10 of Rep. Act
No. 6657. Finally, the appellate court brought into play
the aims of land reform, affirming as it did "the need to
distribute and create an economic equilibrium among

the inhabitants of this land, most especially those with

less privilege in life, our peasant farmer."[6]
Unsatisfied with the Court of Appeals' Decision, the
Hospicio lodged the present Petition for Review. The
Hospicio alleges that P.D. No. 27, the CARL, and
Executive Order No. 407[7] all violate Section 10,
Article III of the Constitution, which provides that "no
law impairing the obligation of contracts shall be
passed." More sedately, the Hospicio also argues that
Act No. 3239 was not repealed either by P.D. No. 27
or Rep. Act No. 6657 and that the forced disposition
of the Hospicio's landholdings would incapacitate the
discharge of its charitable functions, which equally
promote social justice and the upliftment of the lives
of the less fortunate.
On the other hand, the OSG, representing respondent
DAR, bluntly replies that Act No. 3239 was repealed
by P.D. No. 27 and Rep. Act No. 6657, which do not
exempt lands owned by eleemosynary or charitable
institutions from the coverage of those agrarian
reform laws.
A brief recapitulation of the relevant laws is in order.
P.D. No. 27, "Decreeing the Emancipation of Tenants
from the Bondage of the Soil, Transferring to Them
Ownership of the Land they Till, and Providing the
Instrument and Mechanism Therefor," has once been
touted as perhaps "a radical solution in its pristine
sense, one that goes at the root [of the problem of
land tenancy]."[8] Its constitutionality was upheld in
De Chavez v. Zobel.[9] The law generally "ordains the
emancipation of tenants and confers on them
ownership of the lands they till."[10] The following
provisions of P.D. No. 27 have concretized this policy:
NOW, THEREFORE, I, FERDINAND E. MARCOS,
President of the Philippines, by virtue of the powers
vested in me by the Constitution as Commander-inChief of all the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September
21, 1972, and General Order No. 1 dated September
22, 1972, as amended do hereby decree and order
the emancipation of all tenant farmers as of this day,
October 21, 1972;
This shall apply to tenant farmers of private
agricultural lands[[11]] primarily devoted to rice and

corn under a system of sharecrop or lease-tenancy,

whether classified as landed estate or not;
The tenant farmer, whether in land classified as
landed estate or not, shall be deemed owner of a
portion constituting a family-size farm of five (5)
hectares if not irrigated and three (3) hectares if
irrigate;
In all cases, the landowner may retain an area of not
more than seven (7) hectares if such landowner is
cultivating such area or will now cultivate it;
The CARL was not yet in effect when the DARRO and
the DAR issued their respective orders. Said law
vests P.D. No. 27 with suppletory effect insofar as the
earlier law does not run inconsistent with the later law.
[12] Under Section 4 of the CARL, placed under
coverage are all public and private agricultural lands
regardless of tenurial arrangement and commodity
produced, subject to the exempted lands listed in
Section 10 thereof.
We agree with the Court of Appeals that neither P.D.
No. 27 nor the CARL exempts the lands of the
Hospicio or other charitable institutions from the
coverage of agrarian reform. Ultimately, the result
arrived at in the assailed issuances should be
affirmed. Nonetheless, both the DAR Secretary and
the appellate court failed to appreciate what to this
Court is indeed the decisive legal dimension of the
case.
Section 4 of Act No. 3239 prohibits the sale "under
any consideration" of the lands donated to the
Hospicio. But the land transfers mandated under P.D.
No. 27 cannot be considered a conventional sale
under our civil laws.
Generally, sale arises out of a contractual obligation.
Thus, it must meet the first essential requisite of every
contract that is the presence of consent.[13] Consent
implies an act of volition in entering into the
agreement.[14] The absence or vitiation of consent
renders the sale either void or voidable.
In this case, the deprivation of the Hospicio's property
did not arise as a consequence of the Hospicio's
consent to the transfer. There was no meeting of
minds between the Hospicio, on one hand, and the
DAR or the tenants, on the other, on the properties

and the cause which are to constitute the contract[15]

that is to serve ultimately as the basis for the transfer
of ownership of the subject lands.[16] Instead, the
obligation to transfer arises by compulsion of law,
particularly P.D. No. 27.[17]
Agrarian reform is justified under the State's inherent
power of eminent domain that enables it to forcibly
acquire private lands intended for public use upon
payment of just compensation to the owner.[18] It has
even been characterized as beyond the traditional
exercise of eminent domain, but a revolutionary kind
of expropriation. As expounded in the landmark case
of Association of Small Landowners in the Philippines,
Inc. v. Secretary of Agrarian Reform, thus:
. . . . However, we do not deal here with the traditional
exercise of the power of eminent domain. This is not
an ordinary expropriation where only a specific
property of relatively limited area is sought to be taken
by the State from its owner for a specific and perhaps
local purpose. What we deal with here is a
revolutionary kind of expropriation.
The expropriation before us affects all private
agricultural lands whenever found and of whatever
kind as long as they are in excess of the maximum
retention limits allowed their owners. This kind of
expropriation is intended for the benefit not only of a
particular community or of a small segment of the
population but of the entire Filipino nation, from all
levels of our society, from the impoverished farmer to
the land-glutted owner. Its purpose does not cover
only the whole territory of this country but goes
beyond in time to the foreseeable future, which it
hopes to secure and edify with the vision and the
sacrifice of the present generation of Filipinos.
Generations yet to come are as involved in this
program as we are today, although hopefully only as
beneficiaries of a richer and more fulfilling life we will
guarantee to them tomorrow through our
thoughtfulness today. And, finally, let it not be
forgotten that it is no less than the Constitution itself
that has ordained this revolution in the farms, calling
for "a just distribution" among the farmers of lands
that have heretofore been the prison of their dreams
but can now become the key at least to their
deliverance.[19]
This characterization is warranted whether the
expropriation is operative under the CARL or P.D. No.

27, as both laws are keyed into the same

governmental objective. Moreover, under both laws,
the landowner is entitled to just compensation for the
properties taken.
The twin process of expropriation of lands under
agrarian reform and the payment of just
compensation is akin to a forced sale, which has been
aptly described in common law jurisdictions as "sale
made under the process of the court, and in the mode
prescribed by law," and "which is not the voluntary act
of the owner, such as to satisfy a debt, whether of a
mortgage, judgment, tax lien, etc."[20] The term has
not been precisely defined in this jurisdiction, but
reference to the phrase itself is made in Articles 223,
232, 237 and 243 of the Civil Code, which uniformly
exempt the family home "from execution, forced sale,
or attachment."[21] Yet a forced sale is clearly
different from the sales described under Book V of the
Civil Code which are conventional sales, as it does
not arise from the consensual agreement of the
vendor and vendee, but by compulsion of law. Still,
since law is recognized as one of the sources of
obligation, there can be no dispute on the efficacy of a
forced sale, so long as it is authorized by law.
The crucial question now arises, whether the sale
prohibited under Section 4 of Act No. 3239 includes
even a forced sale. Of course an overly literal reading
of the provision would justify such inclusion, but
appropriately a more sophisticated approach to
statutory construction is warranted.
No seance is required to discern the intent of Section
4. It ensures that the properties received by the
Hospicio are not alienated for profit by the officers or
administrators, in contravention of the charitable
purpose for which the Hospicio was created. To an
extent, it makes possible the perpetual operation of
the Hospicio, which was empowered by law to
operate for an indefinite period, by assuring the
existence of the property on which the Hospicio could
operate. We also do not doubt that whatever fruits of
the forcibly retained property would also serve a
source of funding for the operations of the Hospicio.
The salutariness of these objectives is beyond doubt.
The interests they seek to protect are present whether
the prohibition encompasses only conventional sales,
or even forced sales. Yet to insist that Section 4
likewise prohibits sales or dispositions by operation of

law would necessarily imply that the Hospicio is also

beyond the reach of any form of judicial execution.
The charitable nature of the Hospicio does not shield
it from susceptibility to civil liability, and an absolute
prohibition on sales, whether forced or conventional,
deprives whatever judgment creditors of the Hospicio
from any effective means of enforcing relief.
Was it the intent of the framers of Act No. 3239 to
exempt the Hospicio from all judicial processes, even
those arising from civil transactions? We do not think
so. The contemporaneous construction of Section 4
indicates that the prohibition intended by the crafters
of the law pertained only to conventional sales, and
not forced sales. The law was promulgated in 1925,
or when the Spanish Civil Code of 1889 was in effect.
The provisions in the Civil Code referring to "forced
sales" were not derived from the Spanish Civil Code.
On the other hand, the consensual nature of the
contract of sale, and of contracts in general, is
recognized under the Spanish Civil Code. Under
Article 1261 of the Spanish Civil Code, there is no
contract unless the consent of the contracting parties
exists.[22]
Evidently, the word "sale," as contemplated by the
framers of the law in 1925, pertains to its concept in
civil law, with the requisite of consent being present. It
cannot refer to sales or dispositions that arise by
operation of law, such as through judicial execution,
or, as in this case, expropriation.
Thus, we can hardly characterize the acquisition of
the subject properties from the Hospicio for the
benefit of the tenants as a sale, within the
contemplation of Section 4 of Act No. 3239. The
transfer arises from compulsion of law, and not the
desire of any parties. Even if the Hospicio had
voluntarily offered to surrender its properties to
agrarian reform, the resulting transaction would not be
considered as a conventional sale, since the
obligation is created not out of the mandate of the
parties, but the will of the law.
The DARRO Order did note that Section 4 of Act No.
3239 is not applicable in this case, since the transfer
is compulsory on the part of the landowner, unlike
in ordinary sale.[23] Regrettably, the DAR Secretary
and the Court of Appeals failed to apply that sound
principle, preferring to rely instead on the conclusion

that Section 4 was repealed by P.D. No. 27 and the

CARL.
Nonetheless, even assuming for the nonce that
Section 4 contemplates even forced sales such as
those through expropriation, we would agree with the
DAR Secretary and the Court of Appeals that Section
4 is deemed repealed by P.D. No. 27 and the CARL.
The scope of lands subjected to agrarian reform
under these two laws is overwhelming. P.D. No. 27
applies to all private agricultural lands primarily
devoted to rice and corn with tenant farmers under a
system of sharecrop or lease-tenancy,[24] while the
CARL is even broader in scope, generally covering all
public and private agricultural lands regardless of
tenurial arrangement and commodity produced.
Under Section 10 of the CARL, the only exempted
lands are:
Lands actually, directly and exclusively used and
found to be necessary for parks, wildlife, forest
reserves, reforestation, fish sanctuaries and breeding
grounds, watersheds, and mangroves, national
defense, school sites and campuses including
experimental farm stations operated by public or
private schools for educational purposes, seeds and
seedlings research and pilot production centers,
church sites and convents appurtenant thereto,
mosque sites and Islamic centers appurtenant
thereto, communal burial grounds and cemeteries,
penal colonies and penal farms actually worked by
the inmates, government and private research and
quarantine centers and all lands with eighteen percent
(18%) slope and over, except those already
developed . . . .
Arguing against "too literal an interpretation" of
Section 10, the Hospicio claims that "a serious
reading" of the provision is revelatory of the spirit and
intent of the exemptions. It argues that there are three
categories of exemption as: "(1) those needed by the
nation, such as parks, wildlife and forest reserves,
fishponds and for national defense, etc.; (2) those for
educational purposes such as school sites; and (3) for
religious and charitable purposes like church sites,
etc."[25] The Hospicio then claims it falls under the
third category of "religious and charitable
purposes."[26]

To begin with, the terms "charitable purposes" and

"charitable organizations" do not appear in Section 10
of the CARL. For its part, Hospicio unduly assumes
that charity is integrally wedded to religiosity, despite
the fact that there are charitable institutions that are
avowedly secular in orientation. We disagree that
there is a clear intent or spirit to include properties
held by charitable institutions, even those directly
utilized for charitable purposes, in the list of exempted
properties under the CARL. Section 10 does not
include properties which are generally used for
charitable purposes, such as orphanages, from the
exemption. Not even all properties owned by religious
institutions are exempt, save for those places of
worship and the convents/Islamic centers appurtenant
thereto. Even assuming that the Hospicio were
actually owned and operated by the Catholic Church,
it still would not be exempted from the CARL.
It is axiomatic that where a general rule is established
by a statute with exceptions, the Court will not curtail
nor add to the latter by implication, and it is a rule that
an express exception excludes all others.[27] We
cannot simply impute into a statute an exception
which the Congress did not incorporate. Moreover,
general welfare legislation such as land reform laws is
to be construed in favor of the promotion of social
justice to ensure the well-being and economic security
of the people.[28] Since a broad construction of the
provision listing the properties exempted under the
CARL would tend to denigrate the aims of agrarian
reform, a strict application of these exceptions is in
order.
The crafters of P.D. No. 27 and the CARL were
presumably aware of the radical scale of the intended
legislation, and the massive effects on property
relations nationwide. Considering the magnitude of
the changes ordained in these laws, it would be
foolhardy to require or expect the legislature to
denominate each and every law that would be
consequently or logically amended or repealed by the
new laws. Hence, the viability of general repealing
clauses, which are existent in both P.D. No. 27[29]
and the CARL,[30] as a means of repealing all
previous enactments inconsistent with revolutionary
new laws. The presence of such general repealing
clause in a later statute clearly indicates the
legislative intent to repeal all prior inconsistent laws
on the subject matter, whether the prior law is a
general law or a special law, or as in this case, a

special private law. Without such clause, a later

general law will ordinarily not repeal a prior special
law on the same subject. But with such clause
contained in the subsequent general law, the prior
special law will be deemed repealed, as the clause is
a clear legislative intent to bring about that result.[31]

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.

Should we construe Section 4 of Act No. 3239 as

barring forced sales through expropriation of the
properties of the Hospicio, such prohibition would
irreconcilably countermand both P.D. No. 27 and the
CARL and their mandate to subject the properties to
agrarian reform. The general repealing clauses of the
two later laws would then sufficiently repeal Section 4
of Act No. 3239, to the extent that it may prohibit
expropriation of agricultural lands for agrarian reform.

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.[34]

Still, in light of our earlier determinative

pronouncement that Section 4 of Act No. 3239 does
not contemplate forced sales as part of the prohibition
therein, there ultimately is no need to make an abject
declaration that Section 4 has indeed been repealed.
Indeed, the Court considers the prohibition on Section
4 as still effectual, but only insofar as it relates to
conventional sales under the Civil Code.
The other arguments raised by the Hospicio are
similarly bereft of merit. It wants us to hold that P.D.
No. 27 and the CARL, both enacted to implement the
urgently needed policy of agrarian reform, violate the
non-impairment of contracts clause under the Bill of
Rights. Yet the broad sweep of this argument ignores
the nuances adopted by this Court in interpreting
Section 10 of Article III. We have held that the State's
exercise of police powers may prevail over obligations
imposed by private contracts.[32] Especially in point
is Kabiling v. NHA,[33] wherein a law authorizing the
expropriation of properties in favor of qualified
squatter families was challenged on the basis of the
non-impairment clause. The Court held:
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." It is a power inherent in the
State, plenary, "suitably vague and far from precisely
defined, rooted in the conception that man in

More pertinently, what the Hospicio alleges would be

impaired is not actually a contract, but a legislative
act, Act No. 3239. The Hospicio admits just as much
in its petition, "[Act No. 3239] is not merely an
ordinary contract but a contract enacted into law . . .
Act No. 3239 is thus a contract within the purview of
the impairment clause of the Constitution."[35]
The inanity of this argument is palpable. The nonimpairment clause reads: "No law impairing the
obligation of contracts shall be passed." If, as the
Hospicio argues, the constitutional provision applies
as well to the impairment of obligations created by
law, then Section 10, Article III operates to bar the
legislature from amending or repealing its own
enactments. This is of course not the case, as the
provision was intended to shield the impairment of
obligations created by private agreements, and not by
legislative fiat. Certainly, Congress can at any time
expressly amend or repeal any and all sections of Act
No. 3239 without fear of violating the non-impairment
clause of the Constitution. In fine, Section 10[36] of
Act 3239 provides that the privileges granted by the
Act to the Hospicio are subject to the conditions on
the grant of franchises as provided in the Jones Law.
Section 28 of the Jones Law in turn provides in part,
thus:
No franchise or right shall be granted to any
individual, firm, or corporation except under the
conditions that it shall be subject to amendment,
alteration, or repeal by the Congress of the United
States, and that lands or right of use and occupation
of lands thus granted shall revert to the government
by which they were respectively granted upon the
termination of the franchises and rights under which

they were granted or upon their revocation or repeal.

(Emphasis supplied.)
Finally, the Hospicio alludes to its functions as a
charitable institution, which equally promote social
justice and the upliftment of lives of the less fortunate.
It notes that these purposes are no less noble than
giving land to the landless, whom they, with perhaps a
touch of contempt, suggest are "perfectly healthy to
care for themselves."[37]
The rationale for holding that the properties of the
Hospicio are covered by P.D. No. 27 and Rep. Act No.
6657 is so well-grounded in law that it obviates any
resort to the sordid game of choosing which of the two
competing aspirations is nobler. The body which
would have unquestionable discretion in assigning
hierarchical values on the modalities by which social
justice may be implemented is the legislature. Land
reform affords the opportunity for the landless to
break away from the vicious cycle of having to
perpetually rely on the kindness of others. By refusing
to exempt properties owned by charitable institutions
or maintained for charitable purposes from agrarian
reform, the legislature has indicated a policy choice
which the Court is bound to implement.
WHEREFORE, the Petition is DENIED. No
pronouncement as to costs.
REPUBLIC OF THE PHILIPPINES, represented by
the DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS (DPWH), Petitioner, vs. ST. VINCENT
DE PAUL COLLEGES, INC., Respondent.
REYES, J.:
Before the Court is a petition for review on certiorari1
under Rule 45 of the Rules of Court, where petitioner
Republic of the Philippines (Republic), represented by
the Department of Public Works and Highways
through the Office of the Solicitor General, questions
the resolutions of the Court of Appeals (CA) in CAG.R. SP No. 108499, to wit:
1. Resolution dated October 30, 20092 dismissing
petitioner's petition for certiorari under Rule 65 for
being filed out of time; and
2. Resolution dated July 15, 20103 denying
petitioner's motion for reconsideration.

Antecedent Facts
The instant case arose from two cases filed by the
Republic seeking expropriation of certain properties in
the name of St. Vincent de Paul Colleges, Inc. (St.
Vincent). In Civil Case No. 0062-04, the Republic
sought to expropriate 1,992 square meters out of a
total area of 6,068 square meters of land for the
construction of the Manila-Cavite Toll Expressway
Project (MCTEP). Said property belongs to St.
Vincent covered by TCT No. T-821169 and located in
Binakayan, Kawit, Cavite. In Civil Case No. 0100-04,
on the other hand, the Republic sought to expropriate
2,450 square meters out of a total area of 9,039
square meters, also belonging to St. Vincent and
covered by TCT No. T-821170. Said property adjoins
the property subject of Civil Case No. 0062-04.
Subsequently, the Republic filed in both cases an
amended complaint alleging that the subject land
originated from a free patent title and should be
adjudicated to it without payment of just
compensation pursuant to Section 112 of
Commonwealth Act No. 141.
On August 9, 2005, the Republic filed in Civil Case
No. 0062-04 a motion for the issuance of an order of
expropriation.4 It was granted by the trial court per
Order5 dated August 16, 2005, ruling that the
Republic has a lawful right to take the 1,992 square
meters portion of the subject property, with "no
pronouncement as to just compensation" since the
subject property originated from a free patent.6 A
motion for the issuance of an order of expropriation
was likewise filed by the Republic in Civil Case No.
0100-04 but before this could be resolved, the
Republic moved to consolidate the two cases, which
was granted by the trial court.7
On November 16, 2006, the trial court denied St.
Vincent's motion for reconsideration of its Order dated
August 16, 2005 granting expropriation.8 As alleged
in the petition, no appeal was taken by St. Vincent
from said orders.9
After almost 2 years, or on July 28, 2008, St. Vincent
filed a Manifestation with Motion for Clarification of the
Order dated August 16, 2005,10 contending that
although it does not oppose the ruling regarding the
determination of public purpose and the Republic's

right to expropriate the subject land, it, however,

claims that it is entitled to just compensation.
Meanwhile, the Republic attempted to implement the
Order dated August 16, 2005 by entering the subject
portion of St. Vincent's property. Aggrieved, the latter
demanded upon the Republic and its agents to
immediately vacate, and remove any and all
equipment or structures they introduced on its
property in a demand-letter11 dated October 3, 2008.
Due to St. Vincent's refusal to honor the order of
expropriation, the Republic filed an urgent motion for
the issuance of a writ of possession, which was
denied by the lower court in its Order12 dated
November 25, 2006 2008. The lower court, however,
modified its Order dated August 16, 2005 and
required the Republic to immediately pay St. Vincent
in an amount equivalent to one hundred percent
(100%) of the value of the property sought to be
expropriated. The Republic moved for reconsideration
but it was denied by the lower court per Order13
dated January 29, 2009 for lack of factual and legal
basis.
Seeking to avail the extra ordinary remedy of
certiorari under Rule 65 of the Rules of Court, the
Republic filed with the CA a motion for additional time
of fifteen (15) days within which to file its petition. The
CA granted the motion in its Resolution14 dated April
30, 2009 and the Republic was given a nonextensible period of fifteen (15) days or until May 4,
2009 within which to file its petition for certiorari.
On April 30, 2009, the Republic filed its petition for
certiorari assailing the lower court's orders dated
November 25, 2008 and January 29, 2009 for having
been issued with grave abuse of discretion amounting
to lack or in excess of jurisdiction.
On June 19, 2009, the CA, motu proprio, issued a
Resolution15 ordering the Republic to show cause
why its petition for certiorari should not be dismissed
for being filed out of time, pursuant to A.M. No. 07-712-SC.
The Republic filed its Compliance with Explanation16
dated July 1, 2009 pleading for the relaxation of the
rules by reason of the transcendental importance of
the issues involved in the case and in consideration of
substantial justice. St. Vincent filed its

Comment/Opposition17 dated July 15, 2009 alleging

among others that the said explanation is merely pro
forma due to the Republic's failure to justify its
explanation.
On October 30, 2009, the CA rendered the assailed
resolution dismissing the Republic's petition for
certiorari on the ground that the petition was filed out
of time inasmuch as extensions of time are now
disallowed by A.M. No. 07-7-12-SC18 and as applied
in Laguna Metts Corporation v. Court of Appeals.19
On November 26, 2009, the Republic filed its motion
for reconsideration alleging that it merely relied in
good faith on the appellate court's resolution granting
the former an additional period of fifteen (15) days
within which to file the subject petition.
On July 15, 2010, the CA rendered the assailed
resolution denying the Republic's motion for
reconsideration, stating that it cannot disobey the
ruling in Laguna Metts Corporation.20
Hence, this petition.
The Republic relies on the CA resolution granting its
motion for extension of time and upon the strength of
the substantial merits of its petition. The Republic also
invokes Domdom v. Third and Fifth Divisions of the
Sandiganbayan,21 where the Court ruled that absent
a prohibition, motions for extensions are allowed,
subject to the Court's sound discretion.
St. Vincent, however, contends that the present
petition fails to neither allege any circumstance nor
state any justification for the deliberate disregard of a
very elementary rule of procedure like Section 4 of
Rule 65 of the Rules of Court. And in the absence of
any such circumstance or justification, the general
rule on pro forma motions/pleadings must apply.
The Issue
The Republic discussed the substantial merits of its
case; however, the CA did no more than include such
matters in its narration of facts, and neither did St.
Vincent dwell on said issues. Hence, the only issue to
be resolved in this petition is whether the CA
committed a reversible error when it dismissed the
Republic's petition for certiorari for being filed out of
time, pursuant to A.M. No. 07-7-12-SC.

The Court's Ruling

We GRANT the petition.
The Court notes that the CA Resolution dated April
30, 2009, which initially granted the Republic's motion
for extension, was premised on the mistaken notion
that the petition filed by the latter was one for petition
for review as a mode of appeal. The CA resolution
stated, among others: "Provided that this Motion for
Extension of Time to File Petition for Review is
seasonably filed, as prayed for, x x x."22 Thus, the CA
granted extension inasmuch as motions for this
purpose are allowed by the rules.23 On this score
alone, the CA should have admitted the petition filed
by the Republic since the latter merely relied on its
Resolution dated April 30, 2009 granting the
extension prayed for.
Nevertheless, the CA subsequently dismissed the
petition filed by the Republic on the ground that the
same was filed out of time, following A.M. No. 07-712-SC. In its Resolution dated July 15, 2010, which
dismissed the Republic's motion for reconsideration,
the CA also relied on the ruling in Laguna Metts
Corporation that the sixty (60)-day period within which
to file a petition for certiorari is non-extendible. The
petitioner, however, insists that Domdom allows
extensions of time to file a petition.
In order to resolve the instant controversy, the Court
deems it necessary to discuss the relationship
between its respective rulings in Laguna Metts
Corporation and Domdom with respect to the
application of the amendment introduced by A.M. No.
07-7-12-SC to Section 4, Rule 65 of the Rules of
Court.
Before said amendment, Section 4 of Rule 65
originally provides:
Sec. 4. When and where petition filed. - The petition
shall be filed not later than sixty (60) days from notice
of the judgment, order or resolution. In case a motion
for reconsideration or new trial is timely filed, whether
such motion is required or not, the sixty (60) day
period shall be counted from notice of the denial of
said motion.
The petition shall be filed in the Supreme Court or, if it
relates to the acts or omissions of a lower court or of

a corporation, board, officer or person, in the Regional

Trial Court exercising jurisdiction over the territorial
area as defined by the Supreme Court. It may also be
filed in the Court of Appeals whether or not the same
is in aid of its appellate jurisdiction, or in the
Sandiganbayan if it is in aid of its appellate
jurisdiction. If it involves the acts or omissions of a
quasi-judicial agency, unless otherwise provided by
law or these rules, the petition shall be filed in and
cognizable only by the Court of Appeals.
No extension of time to file the petition shall be
granted except for compelling reason and in no case
exceeding fifteen (15) days.
As amended by A.M. No. 07-7-12-SC, Section 4 of
Rule 65 now reads:
Sec. 4. When and where petition filed. - The petition
shall be filed not later than sixty (60) days from notice
of the judgment or resolution. In case a motion for
reconsideration or new trial is timely filed, whether
such motion is required or not, the sixty (60) day
period shall be counted from notice of the denial of
said motion.
If the petition relates to an act or an omission of a
municipal trial court or of a corporation, a board, an
officer or a person, it shall be filed with the Regional
Trial Court exercising jurisdiction over the territorial
area as defined by the Supreme Court. It may also be
filed with the Court of Appeals or with the
Sandiganbayan, whether or not the same is in aid of
the court's appellate jurisdiction. If the petition
involves an act or an omission of a quasi-judicial
agency, unless otherwise provided by law or these
rules, the petition shall be filed with and be cognizable
only by the Court of Appeals.
In election cases involving an act or an omission of a
municipal or a regional trial court, the petition shall be
filed exclusively with the Commission on Elections, in
aid of its appellate jurisdiction.
In interpreting said amendment, the Court, in Laguna
Metts Corporation, held that:
As a rule, an amendment by the deletion of certain
words or phrases indicates an intention to change its
meaning. It is presumed that the deletion would not
have been made if there had been no intention to

effect a change in the meaning of the law or rule. The

amended law or rule should accordingly be given a
construction different from that previous to its
amendment.
If the Court intended to retain the authority of the
proper courts to grant extensions under Section 4 of
Rule 65, the paragraph providing for such authority
would have been preserved. The removal of the said
paragraph under the amendment by A.M. No. 07-712-SC of Section 4, Rule 65 simply meant that there
can no longer be any extension of the 60-day period
within which to file a petition for certiorari.
The rationale for the amendments under A.M. No. 077-12-SC is essentially to prevent the use (or abuse) of
the petition for certiorari under Rule 65 to delay a
case or even defeat the ends of justice. Deleting the
paragraph allowing extensions to file petition on
compelling grounds did away with the filing of such
motions. As the Rule now stands, petitions for
certiorari must be filed strictly within 60 days from
notice of judgment or from the order denying a motion
for reconsideration.24 (Citation omitted and emphasis
ours)
Nevertheless, Domdom later stated:
On the People's argument that a motion for extension
of time to file a petition for certiorari is no longer
allowed, the same rests on shaky grounds.
Supposedly, the deletion of the following provision in
Section 4 of Rule 65 by A.M. No. 07-7-12-SC evinces
an intention to absolutely prohibit motions for
extension:
"No extension of time to file the petition shall be
granted except for the most compelling reason and in
no case exceeding fifteen (15) days."
The full text of Section 4 of Rule 65, as amended by
A.M. No. 07-7-12-SC, reads:
That no mention is made in the above-quoted
amended Section 4 of Rule 65 of a motion for
extension, unlike in the previous for formulation, does
not make the filing of such pleading absolutely
prohibited. If such were the intention, the deleted
portion could just have simply been reworded to state
that "no extension of time to file the petition shall be
granted." Absent such prohibition, motions for

extensions are allowed, subject to the Court's sound

discretion. The present petition may thus be allowed,
having been filed within the extension sought and, at
all events, given its merits.25 (Citation omitted and
emphasis and underscoring ours)
What seems to be a "conflict" is actually more
apparent than real. A reading of the foregoing rulings
leads to the simple conclusion that Laguna Metts
Corporation involves a strict application of the general
rule that petitions for certiorari must be filed strictly
within sixty (60) days from notice of judgment or from
the order denying a motion for reconsideration.
Domdom, on the other hand, relaxed the rule and
allowed an extension of the sixty (60)-day period
subject to the Court's sound discretion.26
Labao v. Flores27 subsequently laid down some of
the exceptions to the strict application of the rule, viz:
Under Section 4 of Rule 65 of the 1997 Rules of Civil
Procedure, certiorari should be instituted within a
period of 60 days from notice of the judgment, order,
or resolution sought to be assailed. The 60-day period
is inextendible to avoid any unreasonable delay that
would violate the constitutional rights of parties to a
speedy disposition of their case.
However, there are recognized exceptions to their
strict observance, such as: (1) most persuasive and
weighty reasons; (2) to relieve a litigant from an
injustice not commensurate with his failure to comply
with the prescribed procedure; (3) good faith of the
defaulting party by immediately paying within a
reasonable time from the time of the default; (4) the
existence of special or compelling circumstances; (5)
the merits of the case; (6) a cause not entirely
attributable to the fault or negligence of the party
favored by the suspension of the rules; (7) a lack of
any showing that the review sought is merely frivolous
and dilatory; (8) the other party will not be unjustly
prejudiced thereby; (9) fraud, accident, mistake or
excusable negligence without appellant's fault; (10)
peculiar legal and equitable circumstances attendant
to each case; (11) in the name of substantial justice
and fair play; (12) importance of the issues involved;
and (13) exercise of sound discretion by the judge
guided by all the attendant circumstances. Thus,
there should be an effort on the part of the party
invoking liberality to advance a reasonable or
meritorious explanation for his/her failure to comply

with the rules.28 (Citations omitted and emphasis

ours)

serve substantial justice and safeguard strong public

interest. x x x:

Note that Labao explicitly recognized the general rule

that the sixty (60)-day period within which to file a
petition for certiorari under Rule 65 is non-extendible,
only that there are certain exceptional circumstances,
which may call for its non-observance. Even more
recently, in Mid-Islands Power Generation Corporation
v. Court of Appeals,29 the Court, taking into
consideration Laguna Metts Corporation and
Domdom, "relaxed the procedural technicalities
introduced under A.M. No. 07-7-12-SC in order to
serve substantial justice and safeguard strong public
interest" and affirmed the extension granted by the CA
to the respondent Power One Corporation due to the
exceptional nature of the case and the strong public
interest involved.

The present Petition involves one of those exceptional

cases in which relaxing the procedural rules would
serve substantial justice and safeguard strong public
interest. x x x Consequently, in order to protect strong
public interest, this Court deems it appropriate and
justifiable to relax the amendment of Section 4, Rule
65 under A.M. No. 07-7-12-SC, concerning the
reglementary period for the filing of a Rule 65 petition.
Considering that the imminent power crisis is an
exceptional and meritorious circumstance, the parties
herein should be allowed to litigate the issues on the
merits. Furthermore, we find no significant prejudice
to the substantive rights of the litigants as respondent
was able to file the Petition before the CA within the
15-day extension it asked for. We therefore find no
grave abuse of discretion attributable to the CA when
it granted respondent Power One's Motion for
Extension to file its Petition for Certiorari.30 (Citations
omitted and emphasis ours)

In Laguna Metts Corporation v. Court of Appeals, we

explained that the reason behind the amendments
under A.M. No. 07-7-12-SC was to prevent the use or
abuse of the remedy of petition for certiorari in order
to delay a case or even defeat the ends of justice. We
thus deleted the clause that allowed an extension of
the period to file a Rule 65 petition for compelling
reasons. Instead, we deemed the 60-day period to file
as reasonable and sufficient time for a party to mull
over the case and to prepare a petition that asserts
grave abuse of discretion by a lower court. The period
was specifically set and limited in order to avoid any
unreasonable delay in the dispensation of justice, a
delay that could violate the constitutional right of the
parties to a speedy disposition of their case.
Nevertheless, in the more recent case of Domdom v.
Sandiganbayan, we ruled that the deletion of the
clause in Section 4, Rule 65 by A.M. No. 07-7-12-SC
did not, ipso facto, make the filing of a motion for
extension to file a Rule 65 petition absolutely
prohibited. We held in Domdom that if absolute
proscription were intended, the deleted portion could
have just simply been reworded to specifically prohibit
an extension of time to file such petition. Thus,
because of the lack of an express prohibition, we held
that motions for extension may be allowed, subject to
this Court's sound discretion, and only under
exceptional and meritorious cases.
Indeed, we have relaxed the procedural technicalities
introduced under A.M. No. 07-7-12-SC in order to

To reiterate, under Section 4, Rule 65 of the Rules of

Court and as applied in Laguna Metts Corporation,
the general rule is that a petition for certiorari must be
filed within sixty (60) days from notice of the
judgment, order, or resolution sought to be assailed.
Under exceptional circumstances, however, and
subject to the sound discretion of the Court, said
period may be extended pursuant to Domdom, Labao
and Mid-Islands Power cases.
Accordingly, the CA should have admitted the
Republic's petition: first, due to its own lapse when it
granted the extension sought by the Republic per
Resolution dated April 30, 2009; second, because of
the public interest involved, i.e., expropriation of
private property for public use (MCTEP); and finally,
no undue prejudice or delay will be caused to either
party in admitting the petition.
WHEREFORE, premises considered, the petition
is GRANTED. The Resolutions dated October 30,
2009 and July 15, 2010 of the Court of Appeals in CAG.R. SP No. 108499 are NULLIFIED. The Court of
Appeals is
hereby ORDERED to REINSTATE and ADMIT the
petition for certiorari filed by the Republic of the
Philippines in CA-G.R. SP No. 108499 and to proceed
with the case with dispatch.

DUMAGUETE CATHEDRAL CREDIT

COOPERATIVE [DCCCO], Represented by
Felicidad L. Ruiz, its General Manager, Petitioner,
versus COMMISSIONER OF INTERNAL REVENUE,
Respondent
DEL CASTILLO, J.:
The clashing interests of the State and the taxpayers
are again pitted against each other. Two basic
principles, the State's inherent power of taxation and
its declared policy of fostering the creation and growth
of cooperatives come into play. However, the one that
embodies the spirit of the law and the true intent of
the legislature prevails.
This Petition for Review on Certiorari under Section
11 of Republic Act (RA) No. 9282,[1] in relation to
Rule 45 of the Rules of Court, seeks to set aside the
December 18, 2007 Decision[2] of the Court of Tax
Appeals (CTA), ordering petitioner to pay deficiency
withholding taxes on interest from savings and time
deposits of its members for taxable years 1999 and
2000, pursuant to Section 24(B)(1) of the National
Internal Revenue Code of 1997 (NIRC), as well as the
delinquency interest of 20% per annum under Section
249(C) of the same Code. It also assails the April 11,
2008 Resolution[3] denying petitioner's Motion for
Reconsideration.
Factual Antecedents
Petitioner Dumaguete Cathedral Credit Cooperative
(DCCCO) is a credit cooperative duly registered with
and regulated by the Cooperative Development
Authority (CDA).[4] It was established on February 17,
1968[5] with the following objectives and purposes:
(1) to increase the income and purchasing power of
the members; (2) to pool the resources of the
members by encouraging savings and promoting thrift
to mobilize capital formation for development
activities; and (3) to extend loans to members for
provident and productive purposes.[6] It has the
power (1) to draw, make, accept, endorse, guarantee,
execute, and issue promissory notes, mortgages, bills
of exchange, drafts, warrants, certificates and all
kinds of obligations and instruments in connection
with and in furtherance of its business operations; and
(2) to issue bonds, debentures, and other obligations;
to contract indebtedness; and to secure the same with
a mortgage or deed of trust, or pledge or lien on any

or all of its real and personal properties.[7]

On November 27, 2001, the Bureau of Internal
Revenue (BIR) Operations Group Deputy
Commissioner, Lilian B. Hefti, issued Letters of
Authority Nos. 63222 and 63223, authorizing BIR
Officers Tomas Rambuyon and Tarcisio Cubillan of
Revenue Region No. 12, Bacolod City, to examine
petitioner's books of accounts and other accounting
records for all internal revenue taxes for the taxable
years 1999 and 2000.[8]
Proceedings before the BIR Regional Office
On June 26, 2002, petitioner received two PreAssessment Notices for deficiency withholding taxes
for taxable years 1999 and 2000 which were
protested by petitioner on July 23, 2002.[9]
Thereafter, on October 16, 2002, petitioner received
two other Pre-Assessment Notices for deficiency
withholding taxes also for taxable years 1999 and
2000.[10] The deficiency withholding taxes cover the
payments of the honorarium of the Board of Directors,
security and janitorial services, legal and professional
fees, and interest on savings and time deposits of its
members.

taxes on the payments for the compensation,

honorarium of the Board of Directors, security and
janitorial services, and legal and professional
services, for the years 1999 and 2000, respectively.
On April 24, 2003, petitioner received from the BIR
Regional Director, Sonia L. Flores, Letters of Demand
Nos. 00027-2003 and 00026-2003, with attached
Transcripts of Assessment and Audit
Results/Assessment Notices, ordering petitioner to
pay the deficiency withholding taxes, inclusive of
penalties, for the years 1999 and 2000 in the amounts
of P1,489,065.30 and P1,462,644.90, respectively.
[14]
Proceedings before the Commissioner of Internal
Revenue
On May 9, 2003, petitioner protested the Letters of
Demand and Assessment Notices with the
Commissioner of Internal Revenue (CIR).[15]
However, the latter failed to act on the protest within
the prescribed 180-day period. Hence, on December
3, 2003, petitioner filed a Petition for Review before
the CTA, docketed as C.T.A. Case No. 6827.[16]
Proceedings before the CTA First Division

On October 22, 2002, petitioner informed BIR

Regional Director Sonia L. Flores that it would only
pay the deficiency withholding taxes corresponding to
the honorarium of the Board of Directors, security and
janitorial services, legal and professional fees for the
year 1999 in the amount of P87,977.86, excluding
penalties and interest.[11]
In another letter dated November 8, 2002, petitioner
also informed the BIR Assistant Regional Director,
Rogelio B. Zambarrano, that it would pay the
withholding taxes due on the honorarium and per
diems of the Board of Directors, security and janitorial
services, commissions and legal & professional fees
for the year 2000 in the amount of P119,889.37,
excluding penalties and interest, and that it would
avail of the Voluntary Assessment and Abatement
Program (VAAP) of the BIR under Revenue
Regulations No. 17-2002.[12]
On November 29, 2002, petitioner availed of the
VAAP and paid the amounts of P105,574.62 and
P143,867.24[13] corresponding to the withholding

The case was raffled to the First Division of the CTA

which rendered its Decision on February 6, 2007,
disposing of the case in this wise:
IN VIEW OF ALL THE FOREGOING, the Petition for
Review is hereby PARTIALLY GRANTED.
Assessment Notice Nos. 00026-2003 and 000272003 are hereby MODIFIED and the assessment for
deficiency withholding taxes on the honorarium and
per diems of petitioner's Board of Directors, security
and janitorial services, commissions and legal and
professional fees are hereby CANCELLED. However,
the assessments for deficiency withholding taxes on
interests are hereby AFFIRMED.
Accordingly, petitioner is ORDERED TO PAY the
respondent the respective amounts of P1,280,145.89
and P1,357,881.14 representing deficiency
withholding taxes on interests from savings and time
deposits of its members for the taxable years 1999
and 2000. In addition, petitioner is ordered to pay the
20% delinquency interest from May 26, 2003 until the

amount of deficiency withholding taxes are fully paid

pursuant to Section 249 (C) of the Tax Code.

Petitioner argues that Section 24(B)(1) of the NIRC

which reads in part, to wit:

out that the deficiency tax assessments were issued

against petitioner not as a taxpayer but as a
withholding agent.

SECTION 24. Income Tax Rates. -

Our Ruling

SO ORDERED.[17]
Dissatisfied, petitioner moved for a partial
reconsideration, but it was denied by the First Division
in its Resolution dated May 29, 2007.[18]
Proceedings before the CTA En Banc
On July 3, 2007, petitioner filed a Petition for Review
with the CTA En Banc,[19] interposing the lone issue
of whether or not petitioner is liable to pay the
deficiency withholding taxes on interest from savings
and time deposits of its members for taxable years
1999 and 2000, and the consequent delinquency
interest of 20% per annum.[20]
Finding no reversible error in the Decision dated
February 6, 2007 and the Resolution dated May 29,
2007 of the CTA First Division, the CTA En Banc
denied the Petition for Review[21] as well as
petitioner's Motion for Reconsideration.[22]
The CTA En Banc held that Section 57 of the NIRC
requires the withholding of tax at source. Pursuant
thereto, Revenue Regulations No. 2-98 was issued
enumerating the income payments subject to final
withholding tax, among which is "interest from any
peso bank deposit and yield, or any other monetary
benefit from deposit substitutes and from trust funds
and similar arrangements x x x". According to the CTA
En Banc, petitioner's business falls under the phrase
"similar arrangements;" as such, it should have
withheld the corresponding 20% final tax on the
interest from the deposits of its members.
Issue
Hence, the present recourse, where petitioner raises
the issue of whether or not it is liable to pay the
deficiency withholding taxes on interest from savings
and time deposits of its members for the taxable
years 1999 and 2000, as well as the delinquency
interest of 20% per annum.
Petitioner's Arguments

The petition has merit.

(B) Rate of Tax on Certain Passive Income: (1) Interests, Royalties, Prizes, and Other Winnings. A final tax at the rate of twenty percent (20%) is
hereby imposed upon the amount of interest from any
currency bank deposit and yield or any other
monetary benefit from deposit substitutes and from
trust funds and similar arrangements; x x x
applies only to banks and not to cooperatives, since
the phrase "similar arrangements" is preceded by
terms referring to banking transactions that have
deposit peculiarities. Petitioner thus posits that the
savings and time deposits of members of
cooperatives are not included in the enumeration, and
thus not subject to the 20% final tax. To bolster its
position, petitioner cites BIR Ruling No. 551-888[23]
and BIR Ruling [DA-591-2006][24] where the BIR
ruled that interests from deposits maintained by
members of cooperative are not subject to withholding
tax under Section 24(B)(1) of the NIRC. Petitioner
further contends that pursuant to Article XII, Section
15 of the Constitution[25] and Article 2 of Republic Act
No. 6938 (RA 6938) or the Cooperative Code of the
Philippines,[26] cooperatives enjoy a preferential tax
treatment which exempts their members from the
application of Section 24(B)(1) of the NIRC.
Respondent's Arguments
As a counter-argument, respondent invokes the legal
maxim "Ubi lex non distinguit nec nos distinguere
debemos" (where the law does not distinguish, the
courts should not distinguish). Respondent maintains
that Section 24(B)(1) of the NIRC applies to
cooperatives as the phrase "similar arrangements" is
not limited to banks, but includes cooperatives that
are depositaries of their members. Regarding the
exemption relied upon by petitioner, respondent
adverts to the jurisprudential rule that tax exemptions
are highly disfavored and construed strictissimi juris
against the taxpayer and liberally in favor of the taxing
power. In this connection, respondent likewise points

Petitioner's invocation of BIR Ruling No. 551-888,

reiterated in BIR Ruling [DA-591-2006], is proper.
On November 16, 1988, the BIR declared in BIR
Ruling No. 551-888 that cooperatives are not required
to withhold taxes on interest from savings and time
deposits of their members. The pertinent BIR Ruling
reads:
November 16, 1988
BIR RULING NO. 551-888
24 369-88 551-888
Gentlemen:
This refers to your letter dated September 5, 1988
stating that you are a corporation established under
P.D. No. 175 and duly registered with the Bureau of
Cooperatives Development as full fledged cooperative
of good standing with Certificate of Registration No.
FF 563-RR dated August 8, 1985; and that one of
your objectives is to provide and strengthen
cooperative endeavor and extend assistance to
members and non-members through credit scheme
both in cash and in kind.
Based on the foregoing representations, you now
request in effect a ruling as to whether or not you are
exempt from the following:
1. Payment of sales tax
2. Filing and payment of income tax
3. Withholding taxes from compensation of
employees and savings account and time deposits of
members. (Underscoring ours)
In reply, please be informed that Executive Order No.
93 which took effect on March 10, 1987 withdrew all
tax exemptions and preferential privileges e.g.,

income tax and sales tax, granted to cooperatives

under P.D. No. 175 which were previously withdrawn
by P.D. No. 1955 effective October 15, 1984 and
restored by P.D. No. 2008 effective January 8, 1986.
However, implementation of said Executive Order
insofar as electric, agricultural, irrigation and
waterworks cooperatives are concerned was
suspended until June 30, 1987. (Memorandum Order
No. 65 dated January 21, 1987 of the President)
Accordingly, your tax exemption privilege expired as
of June 30, 1987. Such being the case, you are now
subject to income and sales taxes.
Moreover, under Section 72(a) of the Tax Code, as
amended, every employer making payment of wages
shall deduct and withhold upon such wages a tax at
the rates prescribed by Section 21(a) in relation to
section 71, Chapter X, Title II, of the same Code as
amended by Batas Pambansa Blg. 135 and
implemented by Revenue Regulations No. 6-82 as
amended. Accordingly, as an employer you are
required to withhold the corresponding tax due from
the compensation of your employees.
Furthermore, under Section 50(a) of the Tax Code, as
amended, the tax imposed or prescribed by Section
21(c) of the same Code on specified items of income
shall be withheld by payor-corporation and/or person
and paid in the same manner and subject to the same
conditions as provided in Section 51 of the Tax Code,
as amended. Such being the case, and since interest
from any Philippine currency bank deposit and yield
or any other monetary benefit from deposit substitutes
are paid by banks, you are not the party required to
withhold the corresponding tax on the aforesaid
savings account and time deposits of your members.
(Underscoring ours)
Very truly yours,
(SGD.) BIENVENIDO A. TAN, JR.
Commissioner
The CTA First Division, however, disregarded the
above quoted ruling in determining whether petitioner
is liable to pay the deficiency withholding taxes on
interest from the deposits of its members. It
ratiocinated in this wise:
This Court does not agree. As correctly pointed out by

respondent in his Memorandum, nothing in the above

quoted resolution will give the conclusion that savings
account and time deposits of members of a
cooperative are tax-exempt. What is entirely clear is
the opinion of the Commissioner that the proper party
to withhold the corresponding taxes on certain
specified items of income is the payor-corporation
and/or person. In the same way, in the case of
interests earned from Philippine currency deposits
made in a bank, then it is the bank which is liable to
withhold the corresponding taxes considering that the
bank is the payor-corporation. Thus, the ruling that a
cooperative is not the proper party to withhold the
corresponding taxes on the aforementioned accounts
is correct. However, this ruling does not hold true if
the savings and time deposits are being maintained in
the cooperative, for in this case, it is the cooperative
which becomes the payor-corporation, a separate
entity acting no more than an agent of the
government for the collection of taxes, liable to
withhold the corresponding taxes on the interests
earned. [27] (Underscoring ours)
The CTA En Banc affirmed the above-quoted Decision
and found petitioner's invocation of BIR Ruling No.
551-88 misplaced. According to the CTA En Banc, the
BIR Ruling was based on the premise that the
savings and time deposits were placed by the
members of the cooperative in the bank.[28]
Consequently, it ruled that the BIR Ruling does not
apply when the deposits are maintained in the
cooperative such as the instant case.
We disagree.
There is nothing in the ruling to suggest that it applies
only when deposits are maintained in a bank. Rather,
the ruling clearly states, without any qualification, that
since interest from any Philippine currency bank
deposit and yield or any other monetary benefit from
deposit substitutes are paid by banks, cooperatives
are not required to withhold the corresponding tax on
the interest from savings and time deposits of their
members. This interpretation was reiterated in BIR
Ruling [DA-591-2006] dated October 5, 2006, which
was issued by Assistant Commissioner James H.
Roldan upon the request of the cooperatives for a
confirmatory ruling on several issues, among which is
the alleged exemption of interest income on members'
deposit (over and above the share capital holdings)

from the 20% final withholding tax. In the said ruling,

the BIR opined that:
3. Exemption of interest income on members' deposit
(over and above the share capital holdings) from the
20% Final Withholding Tax.
The National Internal Revenue Code states that a
"final tax at the rate of twenty percent (20%) is hereby
imposed upon the amount of interest on currency
bank deposit and yield or any other monetary benefit
from the deposit substitutes and from trust funds and
similar arrangement x x x" for individuals under
Section 24(B)(1) and for domestic corporations under
Section 27(D)(1). Considering the members' deposits
with the cooperatives are not currency bank deposits
nor deposit substitutes, Section 24(B)(1) and Section
27(D)(1), therefore, do not apply to members of
cooperatives and to deposits of primaries with
federations, respectively.
It bears stressing that interpretations of administrative
agencies in charge of enforcing a law are entitled to
great weight and consideration by the courts, unless
such interpretations are in a sharp conflict with the
governing statute or the Constitution and other laws.
[29] In this case, BIR Ruling No. 551-888 and BIR
Ruling [DA-591-2006] are in perfect harmony with the
Constitution and the laws they seek to implement.
Accordingly, the interpretation in BIR Ruling No. 551888 that cooperatives are not required to withhold the
corresponding tax on the interest from savings and
time deposits of their members, which was reiterated
in BIR Ruling [DA-591-2006], applies to the instant
case.
Members of cooperatives deserve a preferential tax
treatment pursuant to RA 6938, as amended by RA
9520.
Given that petitioner is a credit cooperative duly
registered with the Cooperative Development
Authority (CDA), Section 24(B)(1) of the NIRC must
be read together with RA 6938, as amended by RA
9520.
Under Article 2 of RA 6938, as amended by RA 9520,
it is a declared policy of the State to foster the
creation and growth of cooperatives as a practical
vehicle for promoting self-reliance and harnessing

people power towards the attainment of economic

development and social justice. Thus, to encourage
the formation of cooperatives and to create an
atmosphere conducive to their growth and
development, the State extends all forms of
assistance to them, one of which is providing
cooperatives a preferential tax treatment.
The legislative intent to give cooperatives a
preferential tax treatment is apparent in Articles 61
and 62 of RA 6938, which read:
ART. 61. Tax Treatment of Cooperatives. - Duly
registered cooperatives under this Code which do not
transact any business with non-members or the
general public shall not be subject to any government
taxes and fees imposed under the Internal Revenue
Laws and other tax laws. Cooperatives not falling
under this article shall be governed by the succeeding
section.
ART. 62. Tax and Other Exemptions. - Cooperatives
transacting business with both members and
nonmembers shall not be subject to tax on their
transactions to members. Notwithstanding the
provision of any law or regulation to the contrary, such
cooperatives dealing with nonmembers shall enjoy
the following tax exemptions; x x x.
This exemption extends to members of cooperatives.
It must be emphasized that cooperatives exist for the
benefit of their members. In fact, the primary objective
of every cooperative is to provide goods and services
to its members to enable them to attain increased
income, savings, investments, and productivity.[30]
Therefore, limiting the application of the tax
exemption to cooperatives would go against the very
purpose of a credit cooperative. Extending the
exemption to members of cooperatives, on the other
hand, would be consistent with the intent of the
legislature. Thus, although the tax exemption only
mentions cooperatives, this should be construed to
include the members, pursuant to Article 126 of RA
6938, which provides:
ART. 126. Interpretation and Construction. - In case of
doubt as to the meaning of any provision of this Code
or the regulations issued in pursuance thereof, the
same shall be resolved liberally in favor of the
cooperatives and their members.

We need not belabor that what is within the spirit is

within the law even if it is not within the letter of the
law because the spirit prevails over the letter.[31]
Apropos is the ruling in the case of Alonzo v.
Intermediate Appellate Court,[32] to wit:
But as has also been aptly observed, we test a law by
its results; and likewise, we may add, by its purposes.
It is a cardinal rule that, in seeking the meaning of the
law, the first concern of the judge should be to
discover in its provisions the intent of the lawmaker.
Unquestionably, the law should never be interpreted
in such a way as to cause injustice as this is never
within the legislative intent. An indispensable part of
that intent, in fact, for we presume the good motives
of the legislature, is to render justice.
Thus, we interpret and apply the law not
independently of but in consonance with justice. Law
and justice are inseparable, and we must keep them
so. To be sure, there are some laws that, while
generally valid, may seem arbitrary when applied in a
particular case because of its peculiar circumstances.
In such a situation, we are not bound, because only of
our nature and functions, to apply them just the same,
[is] slavish obedience to their language. What we do
instead is find a balance between the word and the
will, that justice may be done even as the law is
obeyed.
As judges, we are not automatons. We do not and
must not unfeelingly apply the law as it is worded,
yielding like robots to the literal command without
regard to its cause and consequence. "Courts are apt
to err by sticking too closely to the words of a law," so
we are warned, by Justice Holmes again, "where
these words import a policy that goes beyond them."
While we admittedly may not legislate, we
nevertheless have the power to interpret the law in
such a way as to reflect the will of the legislature.
While we may not read into the law a purpose that is
not there, we nevertheless have the right to read out
of it the reason for its enactment. In doing so, we
defer not to "the letter that killeth" but to "the spirit that
vivifieth," to give effect to the lawmaker's will.
The spirit, rather than the letter of a statute
determines its construction, hence, a statute must be
read according to its spirit or intent. For what is within

the spirit is within the statute although it is not within

the letter thereof, and that which is within the letter but
not within the spirit is not within the statute. Stated
differently, a thing which is within the intent of the
lawmaker is as much within the statute as if within the
letter; and a thing which is within the letter of the
statute is not within the statute unless within the intent
of the lawmakers. (Underscoring ours)
It is also worthy to note that the tax exemption in RA
6938 was retained in RA 9520. The only difference is
that Article 61 of RA 9520 (formerly Section 62 of RA
6938) now expressly states that transactions of
members with the cooperatives are not subject to any
taxes and fees. Thus:
ART. 61. Tax and Other Exemptions. Cooperatives
transacting business with both members and nonmembers shall not be subjected to tax on their
transactions with members. In relation to this, the
transactions of members with the cooperative shall
not be subject to any taxes and fees, including but not
limited to final taxes on members' deposits and
documentary tax. Notwithstanding the provisions of
any law or regulation to the contrary, such
cooperatives dealing with nonmembers shall enjoy
the following tax exemptions: (Underscoring ours)
xxxx
This amendment in Article 61 of RA 9520, specifically
providing that members of cooperatives are not
subject to final taxes on their deposits, affirms the
interpretation of the BIR that Section 24(B)(1) of the
NIRC does not apply to cooperatives and confirms
that such ruling carries out the legislative intent.
Under the principle of legislative approval of
administrative interpretation by reenactment, the
reenactment of a statute substantially unchanged is
persuasive indication of the adoption by Congress of
a prior executive construction.[33]
Moreover, no less than our Constitution guarantees
the protection of cooperatives. Section 15, Article XII
of the Constitution considers cooperatives as
instruments for social justice and economic
development. At the same time, Section 10 of Article II
of the Constitution declares that it is a policy of the
State to promote social justice in all phases of
national development. In relation thereto, Section 2 of

Article XIII of the Constitution states that the

promotion of social justice shall include the
commitment to create economic opportunities based
on freedom of initiative and self-reliance. Bearing in
mind the foregoing provisions, we find that an
interpretation exempting the members of cooperatives
from the imposition of the final tax under Section
24(B)(1) of the NIRC is more in keeping with the letter
and spirit of our Constitution.
All told, we hold that petitioner is not liable to pay the
assessed deficiency withholding taxes on interest
from the savings and time deposits of its members, as
well as the delinquency interest of 20% per annum.
In closing, cooperatives, including their members,
deserve a preferential tax treatment because of the
vital role they play in the attainment of economic
development and social justice. Thus, although taxes
are the lifeblood of the government, the State's power
to tax must give way to foster the creation and growth
of cooperatives. To borrow the words of Justice
Isagani A. Cruz: "The power of taxation, while
indispensable, is not absolute and may be
subordinated to the demands of social justice."[34]

Branch 25), in Criminal Case No. 1652, finding

petitioner guilty beyond reasonable doubt of illegal
possession of lumber in violation of Section 68[3] of
the Revised Forestry Code (Forestry Code).[4]
The Facts
Petitioner was charged with the offense of illegal
possession of premium hardwood lumber in violation
of Section 68 of the Forestry Code, in an
Information[5] which reads:
That on or about the 17th day of June 1992, in the
(M)unicipality of Maasin, (P)rovince of Southern
Leyte, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, with
intent of gain, did then and there willfully, unlawfully
and feloniously possess 96.14 board ft. of the
following species of flat lumber:
1. Six (6) pcs. 1x10x7 Molave;
2. One (1) pc. 2x6x6 Molave;
3. Two (2) pcs. 2x4x6 Molave;

WHEREFORE, the Petition is hereby GRANTED. The

assailed December 18, 2007 Decision of the Court of
Tax Appeals and the April 11, 2008 Resolution are
REVERSED and SET ASIDE. Accordingly, the
assessments for deficiency withholding taxes on
interest from the savings and time deposits of
petitioner's members for the taxable years 1999 and
2000 as well as the delinquency interest of 20% per
annum are hereby CANCELLED.

4. Two (2) pcs. 1x10x6 Narra;

OLYMPIO REVALDO, Petitioner, versus PEOPLE

OF THE PHILIPPINES, Respondent.

with a total value of P1,730.52, Philippine Currency,

without any legal document as required under existing
forest laws and regulations from proper government
authorities, to the damage and prejudice of the
government.

DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review by petitioner
Olympio Revaldo (petitioner) seeking to reverse the
Decision[1] dated 23 August 2004 of the Court of
Appeals in CA-G.R. CR No. 22031 affirming the
Decision[2] dated 5 September 1997 of the Regional
Trial Court, Branch 25, Maasin, Southern Leyte (RTC-

section of the Philippine National Police (PNP) in

Maasin, Southern Leyte, testified that on 18 June
1992, at around 11:00 in the morning, he went with
Chief Alejandro Rojas (Rojas), SPO3 Melquiades
Talisic (Talisic) and SPO3 Nicasio Sunit (Sunit) to the
house of petitioner to verify the report of Sunit that
petitioner had in his possession lumber without the
necessary documents. They were not armed with a
search warrant on that day. They confiscated 20
pieces of lumber of different varieties lying around the
vicinity of the house of petitioner. Maceda asked
petitioner who the owner of the lumber was and
petitioner replied that he owned the lumber. Petitioner
stated that he would use the lumber to repair his
house and to make furniture for sale. Maceda also
testified that the lumber were freshly cut. Maceda
loaded the lumber on the patrol jeep and brought
them to the police station. For coordination purposes,
Maceda informed the office of the Department of
Environment and Natural Resources (DENR) of the
confiscated lumber. The DENR entrusted to the police
custody of the lumber.[6]

5. Two (2) pcs. 2x8x7 Bajong;

6. One (1) pc. 1x6x6 Bajong;
7. Four (4) pcs. 1x6x6 Magkalipay; and
8. Three (3) pcs. 1x6x5 Magkalipay;

Upon arraignment, petitioner, assisted by counsel,

pleaded not guilty. Trial ensued.
The prosecution presented SPO4 Constantino
Maceda (Maceda), Sulpicio Saguing (Saguing), and
SPO4 Daniel Paloma Lasala (Lasala) as witnesses.
Maceda, the person in charge of the operations

Saguing, Forester II, CENRO-DENR, Maasin,

Southern Leyte, testified that he went to the office of
the PNP in Maasin, Leyte to scale the confiscated
lumber which were of different varieties. The total
volume was 96.14 board feet belonging to the first
group of hardwood lumber.[7]
Lasala, Responsible Supply Sergeant, Finance
Sergeant and Evidence Custodian, PNP, Maasin,
Southern Leyte, testified that he received the 20
pieces of assorted sizes and varieties of lumber from
the Clerk of Court of the Municipal Trial Court, but
only ten pieces remained because some were
damaged due to lack of storage space.[8]
For the defense, petitioner presented Dionisio
Candole (Candole), Apolonio Caalim (Caalim), and
himself as witnesses.
Petitioner testified that he is a carpenter specializing
in furniture making. He was in his house working on
an ordered divider for a customer in the morning of 18
June 1992 when policemen arrived and inspected his
lumber. Maceda, Sunit and Rojas entered his house
while Talisic stayed outside. Petitioner admitted to the
policemen that he had no permit to possess the
lumber because those were only given to him by his

uncle Felixberto Bug-os (Bug-os), his aunt Gliceria

Bolo (Bolo), his mother-in-law Cecilia Tenio (Tenio).
The seven pieces of "magkalipay" lumber were left
over from a divider he made for his cousin Jose Epiz.
He explained further that the lumber were intended for
the repair of his dilapidated house.[9] The defense
presented Caalim to corroborate the testimony of
petitioner.[10]
Defense witness Candole testified that it was Bug-os
who hired him to cut a "tugas" tree on his land, sawed
it into lumber and delivered the same to petitioner
who paid for the labor transporting the sawn lumber.
Candole further testified that while they were on their
way to Barangay Combado, Sunit stopped them but
allowed the lumber to be brought to the house of
petitioner.[11]

The 21 pieces of flat lumber of different varieties,

scaled at 96.14 board feet and valued at P1,730.52
are hereby ordered CONFISCATED and FORFEITED
in favor of the government particularly the CENRO,
Maasin, Southern Leyte which shall sell the same at
public auction and the proceeds turned over to the
National Treasury.[12]
Petitioner appealed to the Court of Appeals.
The Ruling of the Court of Appeals
On 23 August 2004, the Court of Appeals affirmed the
judgment of the trial court. The Court of Appeals ruled
that motive or intention is immaterial for the reason
that mere possession of the lumber without the legal
documents gives rise to criminal liability.

The Ruling of the Trial Court

Hence, the present petition.
The trial court stated that petitioner failed to present
Bug-os, Bolo, and Tenio to attest to the fact that they
sought prior DENR permission before cutting the
trees and sawing them into lumber. The trial court
further stated that the Forestry Code is a special law
where criminal intent is not necessary. The Secretary
of the DENR may issue a Special Private Land
Timber Permit to landowners to cut, gather, collect or
remove narra or other premium hardwood species
found in private lands. Transportation of timber or
other forest products without authority or without the
legal documents required under forest rules and
regulations is punishable under Section 68 of the
Forestry Code. Petitioner did not present any
document as required by law.
The RTC-Branch 25 rendered judgment on 5
September 1997 convicting petitioner of the offense
charged and sentencing him as follows:
WHEREFORE, judgment is rendered finding the
accused OLYMPIO REVALDO GUILTY beyond
reasonable doubt of the offense charged and,
crediting him with one mitigating circumstance before
applying the Indeterminate Sentence Law hereby
SENTENCES him to an indeterminate imprisonment
term of FOUR (4) YEARS and TWO (2) MONTHS of
PRISION CORRECCIONAL as minimum to EIGHT
(8) YEARS and ONE (1) DAY of PRISION MAYOR, as
maximum, and to pay the costs.

The Court's Ruling

Petitioner contends that the warrantless search and
seizure conducted by the police officers was illegal
and thus the items seized should not have been
admitted in evidence against him. Petitioner argues
that the police officers were not armed with a search
warrant when they went to his house to verify the
report of Sunit that petitioner had in his possession
lumber without the corresponding license. The police
officers who conducted the search in the premises of
petitioner acted on the basis only on the verbal order
of the Chief of Police. Sunit had already informed the
team of the name of petitioner and the location the
day before they conducted the search. Petitioner
argues that, with that information on hand, the police
officers could have easily convinced a judge that there
was probable cause to justify the issuance of a search
warrant, but they did not. Because the search was
illegal, all items recovered from petitioner during the
illegal search were prohibited from being used as
evidence against him. Petitioner therefore prays for
his acquittal.
In its Comment, respondent People of the Philippines
(respondent) contends that even without a search
warrant, the personnel of the PNP can seize the
forest products cut, gathered or taken by an offender
pursuant to Section 80[13] of the Forestry Code.

There is no question that the police officers went to

the house of petitioner because of the information
relayed by Sunit that petitioner had in his possession
illegally cut lumber. When the police officers arrived at
the house of petitioner, the lumber were lying around
the vicinity of petitioner's house. The lumber were in
plain view. Under the plain view doctrine, objects
falling in "plain view" of an officer who has a right to
be in the position to have that view are subject to
seizure and may be presented as evidence. This
Court had the opportunity to summarize the rules
governing plain view searches in the case of People v.
Doria,[14] to wit:
The "plain view" doctrine applies when the following
requisites concur: (a) the law enforcement officer in
search of the evidence has a prior justification for an
intrusion or is in a position from which he can view a
particular area; (b) the discovery of the evidence in
plain view is inadvertent; (c) it is immediately apparent
to the officer that the item he observes may be
evidence of a crime, contraband or otherwise subject
to seizure. The law enforcement officer must lawfully
make an initial intrusion or properly be in a position
from which he can particularly view the area. In the
course of such lawful intrusion, he came inadvertently
across a piece of evidence incriminating the accused.
The object must be open to eye and hand and its
discovery inadvertent.[15]
When asked whether he had the necessary permit to
possess the lumber, petitioner failed to produce one.
Petitioner merely replied that the lumber in his
possession was intended for the repair of his house
and for his furniture shop. There was thus probable
cause for the police officers to confiscate the lumber.
There was, therefore, no necessity for a search
warrant.
The seizure of the lumber from petitioner who did not
have the required permit to possess the forest
products cut is sanctioned by Section 68 of the
Forestry Code which provides:
Sec. 68. Cutting, Gathering and/or Collecting Timber,
or Other Forest Products Without License. - Any
person who shall cut, gather, collect, remove timber or
other forest products from any forest land, or timber
from alienable or disposable public land, or from

private land without any authority, or possess timber

or other forest products without the legal documents
as required under existing forest laws and regulations,
shall be punished with the penalties imposed under
Articles 309 and 310 of the Revised Penal Code:
Provided, That in the case of partnerships,
associations, or corporations, the officers who ordered
the cutting, gathering, collection or possession shall
be liable, and if such officers are aliens, they shall, in
addition to the penalty, be deported without further
proceedings on the part of the Commission on
Immigration and Deportation.
The Court shall further order the confiscation in favor
of the government of the timber or any forest products
cut, gathered, collected, removed, or possessed, as
well as the machinery, equipment, implements and
tools illegally used in the area where the timber or
forest products are found. (Emphasis supplied)
There are two distinct and separate offenses
punished under Section 68 of the Forestry Code, to
wit:
(1) Cutting, gathering, collecting and removing timber
or other forest products from any forest land, or timber
from alienable or disposable public land, or from
private land without any authority; and
(2) Possession of timber or other forest products
without the legal documents required under existing
forest laws and regulations.[16]
As the Court held in People v. Que,[17] in the first
offense, one can raise as a defense the legality of the
acts of cutting, gathering, collecting, or removing
timber or other forest products by presenting the
authorization issued by the DENR. In the second
offense, however, it is immaterial whether the cutting,
gathering, collecting and removal of the forest
products are legal or not. Mere possession of forest
products without the proper documents consummates
the crime. Whether or not the lumber comes from a
legal source is immaterial because the Forestry Code
is a special law which considers mere possession of
timber or other forest products without the proper
documentation as malum prohibitum.
On whether the police officers had the authority to
arrest petitioner, even without a warrant, Section 80 of

the Forestry Code authorizes the forestry officer or

employee of the DENR or any personnel of the PNP
to arrest, even without a warrant, any person who has
committed or is committing in his presence any of the
offenses defined by the Forestry Code and to seize
and confiscate the tools and equipment used in
committing the offense or the forest products
gathered or taken by the offender. Section 80 reads:
Sec. 80. Arrest; Institution of Criminal Actions. - A
forest officer or employee of the Bureau or any
personnel of the Philippine Constabulary/Philippine
National Police shall arrest even without warrant any
person who has committed or is committing in his
presence any of the offenses defined in this chapter.
He shall also seize and confiscate, in favor of the
Government, the tools and equipment used in
committing the offense, and the forest products cut,
gathered or taken by the offender in the process of
committing the offense. x x x (Emphasis supplied)
Petitioner was in possession of the lumber without the
necessary documents when the police officers
accosted him. In open court, petitioner categorically
admitted the possession and ownership of the
confiscated lumber as well as the fact that he did not
have any legal documents therefor and that he merely
intended to use the lumber for the repair of his
dilapidated house. Mere possession of forest products
without the proper documentation consummates the
crime. Dura lex sed lex. The law may be harsh but
that is the law.
On the penalty imposed by the lower courts, we deem
it necessary to discuss the matter. Violation of Section
68 of the Forestry Code is punished as Qualified Theft
with the penalties imposed under Articles 309 and 310
of the Revised Penal Code,[18] thus:
Art. 309. Penalties. - Any person guilty of theft shall
be punished by:
1. The penalty of prisin mayor in its minimum and
medium periods, if the value of the thing stolen is
more than 12,000 pesos but does not exceed 22,000
pesos; but if the value of the thing stolen exceeds the
latter amount, the penalty shall be the maximum
period of the one prescribed in this paragraph, and
one year for each additional ten thousand pesos, but
the total of the penalty which may be imposed shall

not exceed twenty years. In such cases, and in

connection with the accessory penalties which may
be imposed and for the purpose of the other
provisions of this Code, the penalty shall be termed
prisin mayor or reclusin temporal, as the
case may be.
2. The penalty of prisin correccional in its medium
and maximum periods, if the value of the thing stolen
is more than 6,000 pesos but does not exceed 12,000
pesos.
3. The penalty of prisin correccional in its
minimum and medium periods, if the value of the
property stolen is more than 200 pesos but does not
exceed 6,000 pesos.
4. Arresto mayor in its medium period to prisin
correccional in its minimum period, if the value of the
property stolen is over 50 pesos but does not exceed
200 pesos.
5. Arresto mayor to its full extent, if such value is over
5 pesos but does not exceed 50 pesos.
6. Arresto mayor in its minimum and medium periods,
if such value does not exceed 5 pesos.
7. Arresto menor or a fine not exceeding 200 pesos, if
the theft is committed under the circumstances
enumerated in paragraph 3 of the next preceding
article and the value of the thing stolen does not
exceed 5 pesos. If such value exceeds said amount,
the provisions of any of the five preceding
subdivisions shall be made applicable.
8. Arresto menor in its minimum period or a fine not
exceeding 50 pesos, when the value of the thing
stolen is not over 5 pesos, and the offender shall have
acted under the impulse of hunger, poverty, or the
difficulty of earning a livelihood for the support of
himself or his family.
Art. 310. Qualified theft. - The crime of qualified theft
shall be punished by the penalties next higher by two
degrees than those respectively specified in the next
preceding articles, x x x.
The trial court applied Article 309(3), in relation to
Article 310 of the Revised Penal Code, considering

that the amount involved was P1,730.52. However,

except for the amount stated in the Information, the
prosecution did not present any proof as to the value
of the lumber. What the prosecution presented were
the Seizure Receipt[19] and Confiscation Receipt[20]
stating the number of pieces of lumber, their species,
dimensions and volumes, with "no pertinent
supporting document." These do not suffice.
As we have held in Merida v. People,[21] to prove the
amount of the property taken for fixing the penalty
imposable against the accused under Article 309 of
the Revised Penal Code, the prosecution must
present more than a mere uncorroborated "estimate"
of such fact. In the absence of independent and
reliable corroboration of such estimate, the courts
may either apply the minimum penalty under Article
309 or fix the value of the property taken based on the
attendant circumstances of the case.
Accordingly, the prescribed penalty under Article
309(6) of the Revised Penal Code is arresto mayor in
its minimum and medium periods. However,
considering that violation of Section 68 of the Forestry
Code is punished as qualified theft under Article 310
of the Revised Penal Code pursuant to the Forestry
Code, the prescribed penalty shall be increased by
two degrees,[22] that is, to prision correccional in its
medium and maximum periods or two (2) years, four
(4) months and one (1) day to six (6) years. Taking
into account the Indeterminate Sentence Law, the
minimum term shall be taken from anywhere within
the range of four (4) months and one (1) day to two
(2) years and four (4) months of arresto mayor, which
is the penalty next lower to the prescribed penalty. We
find it proper to impose upon petitioner, under the
circumstances obtaining here, the indeterminate
penalty of four (4) months and one (1) day of arresto
mayor, as minimum, to two (2) years, four (4) months
and one (1) day of prision correccional, as maximum.
WHEREFORE, we AFFIRM the appealed Decision
convicting petitioner for violation of Section 68 (now
Section 77) of the Forestry Code, as amended, with
MODIFICATION as regards the penalty in that
petitioner Olympio Revaldo is sentenced to suffer the
indeterminate penalty of four (4) months and one (1)
day of arresto mayor, as minimum, to two (2) years,
four (4) months and one (1) day of prision
correccional, as maximum.

ISABELITA S. LAHOM, Petitioner, vs. JOSE

MELVIN SIBULO (previously referred to as "DR.
MELVIN S. LAHOM", Respondent.
VITUG, J.:
The bliss of marriage and family would be to most
less than complete without children. The realization
could have likely prodded the spouses Dr. Diosdado
Lahom and Isabelita Lahom to take into their care
Isabelita's nephew Jose Melvin Sibulo and to bring
him up as their own. At the tender age of two, Jose
Melvin enjoyed the warmth, love and support of the
couple who treated the child like their own. Indeed, for
years, Dr. and Mrs. Lahom fancied on legally adopting
Jose Melvin. Finally, in 1971, the couple decided to
file a petition for adoption. On 05 May 1972, an order
granting the petition was issued that made all the
more intense than before the feeling of affection of the
spouses for Melvin. In keeping with the court order,
the Civil Registrar of Naga City changed the name
"Jose Melvin Sibulo" to "Jose Melvin Lahom."
A sad turn of events came many years later.
Eventually, in December of 1999, Mrs. Lahom
commenced a petition to rescind the decree of
adoption before the Regional Trial Court (RTC),
Branch 22, of Naga City. In her petition, she averred "7. That x x x despite the proddings and pleadings of
said spouses, respondent refused to change his
surname from Sibulo to Lahom, to the frustrations of
petitioner particularly her husband until the latter died,
and even before his death he had made known his
desire to revoke respondent's adoption, but was
prevented by petitioner's supplication, however with
his further request upon petitioner to give to charity
whatever properties or interest may pertain to
respondent in the future.
"10. That respondent continued using his surname
Sibulo to the utter disregard of the feelings of herein
petitioner, and his records with the Professional
Regulation Commission showed his name as Jose
Melvin M. Sibulo originally issued in 1978 until the
present, and in all his dealings and activities in
connection with his practice of his profession, he is
Jose Melvin M. Sibulo.

"13. That herein petitioner being a widow, and living

alone in this city with only her household helps to
attend to her, has yearned for the care and show of
concern from a son, but respondent remained
indifferent and would only come to Naga to see her
once a year.
"14. That for the last three or four years, the medical
check-up of petitioner in Manila became more
frequent in view of a leg ailment, and those were the
times when petitioner would need most the care and
support from a love one, but respondent all the more
remained callous and utterly indifferent towards
petitioner which is not expected of a son.
"15. That herein respondent has recently been jealous
of petitioner's nephews and nieces whenever they
would find time to visit her, respondent alleging that
they were only motivated by their desire for some
material benefits from petitioner.
"16. That in view of respondent's insensible attitude
resulting in a strained and uncomfortable relationship
between him and petitioner, the latter has suffered
wounded feelings, knowing that after all respondent's
only motive to his adoption is his expectancy of his
alleged rights over the properties of herein petitioner
and her late husband, clearly shown by his recent
filing of Civil Case No. 99-4463 for partition against
petitioner, thereby totally eroding her love and
affection towards respondent, rendering the decree of
adoption, considering respondent to be the child of
petitioner, for all legal purposes, has been negated for
which reason there is no more basis for its existence,
hence this petition for revocation."[1]
Prior to the institution of the case, specifically on 22
March 1998, Republic Act (R.A.) No. 8552, also
known as the Domestic Adoption Act, went into effect.
The new statute deleted from the law the right of
adopters to rescind a decree of adoption.
Section 19 of Article VI of R.A. No. 8552 now reads:
"SEC. 19. Grounds for Rescission of Adoption. - Upon
petition of the adoptee, with the assistance of the
Department if a minor or if over eighteen (18) years of
age but is incapacitated, as guardian/counsel, the
adoption may be rescinded on any of the following
grounds committed by the adopter(s): (a) repeated
physical and verbal maltreatment by the adopter(s)

despite having undergone counseling; (b) attempt on

the life of the adoptee; (c) sexual assault or violence;
or (d) abandonment and failure to comply with
parental obligations.
"Adoption, being in the best interest of the child, shall
not be subject to rescission by the adopter(s).
However, the adopter(s) may disinherit the adoptee
for causes provided in Article 919 of the Civil
Code." (emphasis supplied)
Jose Melvin moved for the dismissal of the petition,
contending principally (a) that the trial court had no
jurisdiction over the case and (b) that the petitioner
had no cause of action in view of the aforequoted
provisions of R.A. No. 8552. Petitioner asseverated,
by way of opposition, that the proscription in R.A. No.
8552 should not retroactively apply, i.e., to cases
where the ground for rescission of the adoption
vested under the regime of then Article 348[2] of the
Civil Code and Article 192[3] of the Family Code.
In an order, dated 28 April 2000, the trial court held
thusly:
"On the issue of jurisdiction over the subject matter of
the suit, Section 5(c) of R.A. No. 8369 confers
jurisdiction to this Court, having been designated
Family Court in A.M. No. 99-11-07 SC.
"On the matter of no cause of action, the test on the
sufficiency of the facts alleged in the complaint, is
whether or not, admitting the facts alleged, the Court
could render a valid judgment in accordance with the
prayer of said complaint (De Jesus, et al. vs.
Belarmino, et al., 95 Phil. 365).
"Admittedly, Section 19, Article VI of R.A. No. 8552
deleted the right of an adopter to rescind an adoption
earlier granted under the Family Code. Conformably,
on the face of the petition, indeed there is lack of
cause of action.
"Petitioner however, insists that her right to rescind
long acquired under the provisions of the Family Code
should be respected. Assuming for the sake of
argument, that petitioner is entitled to rescind the
adoption of respondent granted on May 5, 1972, said
right should have been exercised within the period
allowed by the Rules. From the averments in the
petition, it appears clear that the legal grounds for the

petition have been discovered and known to petitioner

for more than five (5) years, prior to the filing of the
instant petition on December 1, 1999, hence, the
action if any, had already prescribed. (Sec. 5, Rule
100 Revised Rules of Court)
"WHEREFORE, in view of the foregoing
consideration, the petition is ordered dismissed."[4]
Via a petition for review on certiorari under Rule 45 of
the 1997 Rules of Court, petitioner raises the
following questions; viz:
1. May the subject adoption, decreed on 05 May
1972, still be revoked or rescinded by an adopter after
the effectivity of R.A. No. 8552?
2. In the affirmative, has the adopter's action
prescribed?
A brief background on the law and its origins could
provide some insights on the subject. In ancient
times, the Romans undertook adoption to assure
male heirs in the family.[5] The continuity of the
adopter's family was the primary purpose of adoption
and all matters relating to it basically focused on the
rights of the adopter. There was hardly any mention
about the rights of the adopted.[6] Countries, like
Greece, France, Spain and England, in an effort to
preserve inheritance within the family, neither allowed
nor recognized adoption.[7] It was only much later
when adoption was given an impetus in law and still
later when the welfare of the child became a
paramount concern.[8] Spain itself which previously
disfavored adoption ultimately relented and accepted
the Roman law concept of adoption which,
subsequently, was to find its way to the archipelago.
The Americans came and introduced their own ideas
on adoption which, unlike most countries in Europe,
made the interests of the child an overriding
consideration.[9] In the early part of the century just
passed, the rights of children invited universal
attention; the Geneva Declaration of Rights of the
Child of 1924 and the Universal Declaration of Human
Rights of 1948,[10] followed by the United Nations
Declarations of the Rights of the Child,[11] were
written instruments that would also protect and
safeguard the rights of adopted children. The Civil
Code of the Philippines[12] of 1950 on adoption, later
modified by the Child and Youth Welfare Code[13]
and then by the Family Code of the Philippines,[14]

gave immediate statutory acknowledgment to the

rights of the adopted. In 1989, the United Nations
initiated the Convention of the Rights of the Child. The
Philippines, a State Party to the Convention, accepted
the principle that adoption was impressed with social
and moral responsibility, and that its underlying intent
was geared to favor the adopted child. R.A. No. 8552
secured these rights and privileges for the adopted.
Most importantly, it affirmed the legitimate status of
the adopted child, not only in his new family but also
in the society as well. The new law withdrew the right
of an adopter to rescind the adoption decree and
gave to the adopted child the sole right to sever the
legal ties created by adoption.
Petitioner, however, would insist that R.A. No. 8552
should not adversely affect her right to annul the
adoption decree, nor deprive the trial court of its
jurisdiction to hear the case, both being vested under
the Civil Code and the Family Code, the laws then in
force.
The concept of "vested right" is a consequence of the
constitutional guaranty of due process[15] that
expresses a present fixed interest which in right
reason and natural justice is protected against
arbitrary state action;[16] it includes not only legal or
equitable title to the enforcement of a demand but
also exemptions from new obligations created after
the right has become vested.[17] Rights are
considered vested when the right to enjoyment is a
present interest,[18] absolute, unconditional, and
perfect[19] or fixed and irrefutable.
In Republic vs. Court of Appeals,[20] a petition to
adopt Jason Condat was filed by Zenaida C. Bobiles
on 02 February 1988 when the Child and Youth
Welfare Code (Presidential Decree No. 603) allowed
an adoption to be sought by either spouse or both of
them. After the trial court had rendered its decision
and while the case was still pending on appeal, the
Family Code of the Philippines (Executive Order No.
209), mandating joint adoption by the husband and
wife, took effect. Petitioner Republic argued that the
case should be dismissed for having been filed by
Mrs. Bobiles alone and without being joined by the
husband. The Court concluded that the jurisdiction of
the court is determined by the statute in force at the
time of the commencement of the action. The petition
to adopt Jason, having been filed with the court at the
time when P.D. No. 603 was still in effect, the right of

Mrs. Bobiles to file the petition, without being joined

by her husband, according to the Court had become
vested. InRepublic vs. Miller,[21] spouses Claude and
Jumrus Miller, both aliens, sought to adopt Michael
Madayag. On 29 July 1988, the couple filed a petition
to formalize Michael's adoption having theretofore
been taken into their care. At the time the action was
commenced, P.D. No. 603 allowed aliens to adopt.
After the decree of adoption and while on appeal
before the Court of Appeals, the Family Code was
enacted into law on 08 August 1988 disqualifying
aliens from adopting Filipino children. The Republic
then prayed for the withdrawal of the adoption decree.
In discarding the argument posed by the Republic, the
Supreme Court ruled that the controversy should be
resolved in the light of the law governing at the time
the petition was filed.
It was months after the effectivity of R.A. No. 8552
that herein petitioner filed an action to revoke the
decree of adoption granted in 1975. By then, the new
law,[22] had already abrogated and repealed the right
of an adopter under the Civil Code and the Family
Code to rescind a decree of adoption. Consistently
with its earlier pronouncements, the Court should now
hold that the action for rescission of the adoption
decree, having been initiated by petitioner after R.A.
No. 8552 had come into force, no longer could be
pursued.
Interestingly, even before the passage of the statute,
an action to set aside the adoption is subject to the
five-year bar rule under Rule 100[23] of the Rules of
Court and that the adopter would lose the right to
revoke the adoption decree after the lapse of that
period. The exercise of the right within a prescriptive
period is a condition that could not fulfill the
requirements of a vested right entitled to protection. It
must also be acknowledged that a person has no
vested right in statutory privileges.[24] While adoption
has often been referred to in the context of a "right,"
the privilege to adopt is itself not naturally innate or
fundamental but rather a right merely created by
statute.[25] It is a privilege that is governed by the
state's determination on what it may deem to be for
the best interest and welfare of the child.[26] Matters
relating to adoption, including the withdrawal of the
right of an adopter to nullify the adoption decree, are
subject to regulation by the State.[27]
Concomitantly, a right of action given by statute may

be taken away at anytime before it has been

exercised.[28]
While R.A. No. 8552 has unqualifiedly withdrawn from
an adopter a consequential right to rescind the
adoption decree even in cases where the adoption
might clearly turn out to be undesirable, it remains,
nevertheless, the bounden duty of the Court to apply
the law. Dura lex sed lex would be the hackneyed
truism that those caught in the law have to live with. It
is still noteworthy, however, that an adopter, while
barred from severing the legal ties of adoption, can
always for valid reasons cause the forfeiture of certain
benefits otherwise accruing to an undeserving child.
For instance, upon the grounds recognized by law, an
adopter may deny to an adopted child his legitime
and, by a will and testament, may freely exclude him
from having a share in the disposable portion of his
estate.
WHEREFORE, the assailed judgment of the court a
quo is AFFIRMED. No costs.

IN RE: PETITION FOR ADOPTION OF MICHELLE P.

LIM, MONINA P. LIM, Petitioner.
The Case
This is a petition for review on certiorari filed by
Monina P. Lim (petitioner) seeking to set aside the
Decision[1] dated 15 September 2004 of the Regional
Trial Court, General Santos City, Branch 22 (trial
court), in SPL. PROC. Case Nos. 1258 and 1259,
which dismissed without prejudice the consolidated
petitions for adoption of Michelle P. Lim and Michael
Jude P. Lim.

eleven days old when brought to the clinic of

petitioner. She was born on 15 March 1977.[3]
Michael was 11 days old when Ayuban brought him to
petitioner's clinic. His date of birth is 1 August 1983.[4]
The spouses reared and cared for the children as if
they were their own. They sent the children to
exclusive schools. They used the surname "Lim" in all
their school records and documents. Unfortunately, on
28 November 1998, Lim died. On 27 December 2000,
petitioner married Angel Olario (Olario), an American
citizen.
Thereafter, petitioner decided to adopt the children by
availing of the amnesty[5] given under Republic Act
No. 8552[6] (RA 8552) to those individuals who
simulated the birth of a child. Thus, on 24 April 2002,
petitioner filed separate petitions for the adoption of
Michelle and Michael before the trial court docketed
as SPL PROC. Case Nos. 1258 and 1259,
respectively. At the time of the filing of the petitions for
adoption, Michelle was 25 years old and already
married, while Michael was 18 years and seven
months old.
Michelle and her husband gave their consent to the
adoption as evidenced by their Affidavits of Consent.
[7] Michael also gave his consent to his adoption as
shown in his Affidavit of Consent.[8] Petitioner's
husband Olario likewise executed an Affidavit of
Consent[9] for the adoption of Michelle and Michael.
In the Certification issued by the Department of Social
Welfare and Development (DSWD), Michelle was
considered as an abandoned child and the
whereabouts of her natural parents were unknown.
[10] The DSWD issued a similar Certification for
Michael.[11]

The Facts
The following facts are undisputed. Petitioner is an
optometrist by profession. On 23 June 1974, she
married Primo Lim (Lim). They were childless. Minor
children, whose parents were unknown, were
entrusted to them by a certain Lucia Ayuban
(Ayuban). Being so eager to have a child of their own,
petitioner and Lim registered the children to make it
appear that they were the children's parents. The
children[2] were named Michelle P. Lim (Michelle) and
Michael Jude P. Lim (Michael). Michelle was barely

The Ruling of the Trial Court

On 15 September 2004, the trial court rendered
judgment dismissing the petitions. The trial court ruled
that since petitioner had remarried, petitioner should
have filed the petition jointly with her new husband.
The trial court ruled that joint adoption by the husband
and the wife is mandatory citing Section 7(c), Article
III of RA 8552 and Article 185 of the Family Code.

Petitioner filed a Motion for Reconsideration of the

decision but the motion was denied in the Order dated
16 June 2005. In denying the motion, the trial court
ruled that petitioner did not fall under any of the
exceptions under Section 7(c), Article III of RA 8552.
Petitioner's argument that mere consent of her
husband would suffice was untenable because, under
the law, there are additional requirements, such as
residency and certification of his qualification, which
the husband, who was not even made a party in this
case, must comply.
As to the argument that the adoptees are already
emancipated and joint adoption is merely for the joint
exercise of parental authority, the trial court ruled that
joint adoption is not only for the purpose of exercising
parental authority because an emancipated child
acquires certain rights from his parents and assumes
certain obligations and responsibilities.
Hence, the present petition.
Issue
Petitioner appealed directly to this Court raising the
sole issue of whether or not petitioner, who has
remarried, can singly adopt.
The Court's Ruling
Petitioner contends that the rule on joint adoption
must be relaxed because it is the duty of the court
and the State to protect the paramount interest and
welfare of the child to be adopted. Petitioner argues
that the legal maxim "dura lex sed lex" is not
applicable to adoption cases. She argues that joint
parental authority is not necessary in this case since,
at the time the petitions were filed, Michelle was 25
years old and already married, while Michael was
already 18 years of age. Parental authority is not
anymore necessary since they have been
emancipated having attained the age of majority.
We deny the petition.
Joint Adoption by Husband and Wife
It is undisputed that, at the time the petitions for
adoption were filed, petitioner had already remarried.
She filed the petitions by herself, without being joined

by her husband Olario. We have no other recourse

but to affirm the trial court's decision denying the
petitions for adoption. Dura lex sed lex. The law is
explicit. Section 7, Article III of RA 8552 reads:
SEC. 7. Who May Adopt. - The following may adopt:
(a) Any Filipino citizen of legal age, in possession of
full civil capacity and legal rights, of good moral
character, has not been convicted of any crime
involving moral turpitude, emotionally and
psychologically capable of caring for children, at least
sixteen (16) years older than the adoptee, and who is
in a position to support and care for his/her children in
keeping with the means of the family. The requirement
of sixteen (16) year difference between the age of the
adopter and adoptee may be waived when the
adopter is the biological parent of the adoptee, or is
the spouse of the adoptee's parent;
(b) Any alien possessing the same qualifications as
above stated for Filipino nationals: Provided, That
his/her country has diplomatic relations with the
Republic of the Philippines, that he/she has been
living in the Philippines for at least three (3)
continuous years prior to the filing of the application
for adoption and maintains such residence until the
adoption decree is entered, that he/she has been
certified by his/her diplomatic or consular office or any
appropriate government agency that he/she has the
legal capacity to adopt in his/her country, and that
his/her government allows the adoptee to enter
his/her country as his/her adopted son/daughter:
Provided, further, That the requirements on residency
and certification of the alien's qualification to adopt in
his/her country may be waived for the following:
(i) a former Filipino citizen who seeks to adopt a
relative within the fourth (4th) degree of consanguinity
or affinity; or
(ii) one who seeks to adopt the legitimate
son/daughter of his/her Filipino spouse; or
(iii) one who is married to a Filipino citizen and seeks
to adopt jointly with his/her spouse a relative within
the fourth (4th) degree of consanguinity or affinity of
the Filipino spouses; oR

(c) The guardian with respect to the ward after the

termination of the guardianship and clearance of
his/her financial accountabilities.
Husband and wife shall jointly adopt, except in the
following cases:
(i) if one spouse seeks to adopt the legitimate
son/daughter of the other; or
(ii) if one spouse seeks to adopt his/her own
illegitimate son/daughter: Provided, however, That the
other spouse has signified his/her consent thereto; or
(iii) if the spouses are legally separated from each
other.
In case husband and wife jointly adopt, or one spouse
adopts the illegitimate son/daughter of the other, joint
parental authority shall be exercised by the spouses.
(Emphasis supplied)
The use of the word "shall" in the above-quoted
provision means that joint adoption by the husband
and the wife is mandatory. This is in consonance with
the concept of joint parental authority over the child
which is the ideal situation. As the child to be adopted
is elevated to the level of a legitimate child, it is but
natural to require the spouses to adopt jointly. The
rule also insures harmony between the spouses.[12]
The law is clear. There is no room for ambiguity.
Petitioner, having remarried at the time the petitions
for adoption were filed, must jointly adopt. Since the
petitions for adoption were filed only by petitioner
herself, without joining her husband, Olario, the trial
court was correct in denying the petitions for adoption
on this ground.
Neither does petitioner fall under any of the three
exceptions enumerated in Section 7. First, the
children to be adopted are not the legitimate children
of petitioner or of her husband Olario. Second, the
children are not the illegitimate children of petitioner.
And third, petitioner and Olario are not legally
separated from each other.
The fact that Olario gave his consent to the adoption
as shown in his Affidavit of Consent does not suffice.
There are certain requirements that Olario must
comply being an American citizen. He must meet the
qualifications set forth in Section 7 of RA 8552 such

as: (1) he must prove that his country has diplomatic

relations with the Republic of the Philippines; (2) he
must have been living in the Philippines for at least
three continuous years prior to the filing of the
application for adoption; (3) he must maintain such
residency until the adoption decree is entered; (4) he
has legal capacity to adopt in his own country; and (5)
the adoptee is allowed to enter the adopter's country
as the latter's adopted child. None of these
qualifications were shown and proved during the trial.
These requirements on residency and certification of
the alien's qualification to adopt cannot likewise be
waived pursuant to Section 7. The children or
adoptees are not relatives within the fourth degree of
consanguinity or affinity of petitioner or of Olario.
Neither are the adoptees the legitimate children of
petitioner.
Effects of Adoption
Petitioner contends that joint parental authority is not
anymore necessary since the children have been
emancipated having reached the age of majority. This
is untenable.
Parental authority includes caring for and rearing the
children for civic consciousness and efficiency and the
development of their moral, mental and physical
character and well-being.[13] The father and the
mother shall jointly exercise parental authority over
the persons of their common children.[14] Even the
remarriage of the surviving parent shall not affect the
parental authority over the children, unless the court
appoints another person to be the guardian of the
person or property of the children.[15]
It is true that when the child reaches the age of
emancipation - that is, when he attains the age of
majority or 18 years of age[16] - emancipation
terminates parental authority over the person and
property of the child, who shall then be qualified and
responsible for all acts of civil life.[17] However,
parental authority is merely just one of the effects of
legal adoption. Article V of RA 8552 enumerates the
effects of adoption, thus:
ARTICLE V
EFFECTS OF ADOPTION

SEC. 16. Parental Authority. - Except in cases where

the biological parent is the spouse of the adopter, all
legal ties between the biological parent(s) and the
adoptee shall be severed and the same shall then be
vested on the adopter(s).
SEC. 17. Legitimacy. - The adoptee shall be
considered the legitimate son/daughter of the
adopter(s) for all intents and purposes and as such is
entitled to all the rights and obligations provided by
law to legitimate sons/daughters born to them without
discrimination of any kind. To this end, the adoptee is
entitled to love, guidance, and support in keeping with
the means of the family.
SEC. 18. Succession. - In legal and intestate
succession, the adopter(s) and the adoptee shall
have reciprocal rights of succession without
distinction from legitimate filiation. However, if the
adoptee and his/her biological parent(s) had left a will,
the law on testamentary succession shall govern.
Adoption has, thus, the following effects: (1) sever all
legal ties between the biological parent(s) and the
adoptee, except when the biological parent is the
spouse of the adopter; (2) deem the adoptee as a
legitimate child of the adopter; and (3) give adopter
and adoptee reciprocal rights and obligations arising
from the relationship of parent and child, including but
not limited to: (i) the right of the adopter to choose the
name the child is to be known; and (ii) the right of the
adopter and adoptee to be legal and compulsory heirs
of each other.[18] Therefore, even if emancipation
terminates parental authority, the adoptee is still
considered a legitimate child of the adopter with all
the rights[19] of a legitimate child such as: (1) to bear
the surname of the father and the mother; (2) to
receive support from their parents; and (3) to be
entitled to the legitime and other successional rights.
Conversely, the adoptive parents shall, with respect to
the adopted child, enjoy all the benefits to which
biological parents are entitled[20] such as support[21]
and successional rights.[22]
We are mindful of the fact that adoption statutes,
being humane and salutary, hold the interests and
welfare of the child to be of paramount consideration.
They are designed to provide homes, parental care
and education for unfortunate, needy or orphaned
children and give them the protection of society and

family, as well as to allow childless couples or persons

to experience the joys of parenthood and give them
legally a child in the person of the adopted for the
manifestation of their natural parental instincts. Every
reasonable intendment should be sustained to
promote and fulfill these noble and compassionate
objectives of the law.[23] But, as we have ruled in
Republic v. Vergara:[24]
We are not unmindful of the main purpose of adoption
statutes, which is the promotion of the welfare of the
children. Accordingly, the law should be construed
liberally, in a manner that will sustain rather than
defeat said purpose. The law must also be applied
with compassion, understanding and less severity in
view of the fact that it is intended to provide homes,
love, care and education for less fortunate children.
Regrettably, the Court is not in a position to affirm the
trial court's decision favoring adoption in the case at
bar, for the law is clear and it cannot be modified
without violating the proscription against judicial
legislation. Until such time however, that the law on
the matter is amended, we cannot sustain the
respondent-spouses' petition for adoption. (Emphasis
supplied)
Petitioner, being married at the time the petitions for
adoption were filed, should have jointly filed the
petitions with her husband. We cannot make our own
legislation to suit petitioner.
Petitioner, in her Memorandum, insists that
subsequent events would show that joint adoption
could no longer be possible because Olario has filed
a case for dissolution of his marriage to petitioner in
the Los Angeles Superior Court.
We disagree. The filing of a case for dissolution of the
marriage between petitioner and Olario is of no
moment. It is not equivalent to a decree of dissolution
of marriage. Until and unless there is a judicial decree
for the dissolution of the marriage between petitioner
and Olario, the marriage still subsists. That being the
case, joint adoption by the husband and the wife is
required. We reiterate our ruling above that since, at
the time the petitions for adoption were filed,
petitioner was married to Olario, joint adoption is
mandatory.
WHEREFORE, we DENY the petition.

We AFFIRM the Decision dated 15 September 2004

of the Regional Trial Court, General Santos City,
Branch 22 in SPL. PROC. Case Nos. 1258 and 1259.
Costs against petitioner.
DANTE M. POLLOSO, petitioner, vs. HON. CELSO
D. GANGAN, Chairman, COMMISSION ON AUDIT,
HON. RAUL C. FLORES, COMMISSIONER,
COMMISSION ON AUDIT, HON. EMMANUEL M.
DALMAN, COMMISSIONER, COMMISSION ON
AUDIT. respondents.
KAPUNAN, J.:
Before this Court is a petition for review from the
decision of the Commission on Audit (COA), dated 28
September 1999 of herein petitioner Dante M.
Polloso, from the disallowance by the COA Unit
Auditor of the amount of P283,763.39 representing
payment of legal services rendered by Atty.
Benemerito A. Satorre to the National Power
Corporation (NPC).
The facts of the case are undisputed.
In 1994, the National Power Corporation (NPC),
represented by its President Dr. Francisco L. Viray
entered into a service contract with Atty. Benemerito
A. Satorre. Under said contract, Satorre was to
perform the following services for the Leyte-Cebu and
Leyte-Luzon Interconnection Projects of the NPC:
1. Provide services on administrative and legal
matters.
2. Facilitate, coordinate between the Office of the
Project Director and the Project Manager, and the
Office of the Regional Legal Counsel and other NPC
Offices, Local Government Units and Agencies of
Government involving administrative cases and legal
problems.
3. Provide direction, supervision, coordination and
control of right-of-way activities in the project.
4. Perform other pertinent services as may be
assigned him by the Project Director and Project
Manager from time to time.1 [Rollo, pp. 21-22.]
The contract provided that in consideration for
services rendered, Satorre would receive a monthly

salary P21,749.00 plus representation and

transportation allowance of P5,300.2 [Id., at 22.]

Regional Office No. VII;7 [Id., at 33-37.] the latter

denied the same.8 [Id., at 38.]

On 12 January 1995, Unit Auditor Alexander A. Tan,

NPC-VRC, Cebu City issued Notice of Disallowance
No. 95-0001-135-94 for the payment of the services
rendered by Atty. Satorre for the period covering
March to December 1995 in the total amount of
P283,763.39. The following reasons were cited for
said disallowance:

On 29 June 1998, a petition for review was filed

before the Commission Proper, Commission on Audit,
Central Office.9 [Id., at 39-53.] On 29 October 1999,
the COA issued the decision assailed before this
Court. The dispositive portion thereof, reads:

1).The contract for services did not have the written

conformity and acquiescence of the Solicitor General
or the Corporate Counsel and concurrence of the
Commission on Audit as required under COA Circular
No. 86-255 dated April 2, 1986.
2).The contract was not supported with Certificate of
Availability of Funds as required under Sec. 86 of P.D.
1445.
3).The contract was not submitted to the Civil Service
Commission for final review and was not forwarded to
the Compensation and Position Confirmation and
Classification Bureau, DBM for appropriate action as
required in CSC MC # 5 Series of 1985.3 [Id., at 25.]
Accordingly, the following were held to be personally
liable for the amounts due to Atty. Satorre: Dr.
Francisco Viray, NPC contracting party; Manolo C.
Marquez, for certifying the claim as necessary, lawful
and authorized; Andrea B. Roa and Romeo Gallego,
for verifying the supporting documents to be complete
and proper; Jesus Alio, for reviewing the supporting
documents to be complete and proper; Dante M.
Polloso, Project Manager II, Leyte-Cebu
Interconnection Project (LCIP), National Power
Corporation-Visayas Regional Center, for approving
the claim; and Benemerito Satorre, as the payee.4
[Id., at 25-27.]
On 27 January 1995, only petitioner Dante Polloso
submitted a letter-explanation refuting the alleged
violation contained in the Notice of Disallowance and
sought reconsideration thereof.5 [Id., at 28.] This was
denied by the Unit Auditor in a resolution, dated 30
March 1995.6 [Id., at 30-32.]
On 10 October 1995, petitioner appealed the denial of
the Unit Auditor to the Regional Director, COA

Thus, it is crystal clear from the aforequoted provision

of law and regulations that the service contract
entered into by and between the National Power
Corporation and Atty. Satorre is in contravention
thereof.
Upon the foregoing considerations, the instant appeal
of MR. DANTE M. POLLOSO, has to be, as it is
hereby denied. Accordingly, the disallowance of
P283,763.39 is hereby affirmed.10 [Id., at 56.]
Hence, this appeal, petitioner raising the following
issues:
I
DOES THE PROHIBITION UNDER COA CIRCULAR
NO. 86-255 DATED APRIL 2, 1986 AND SEC. 212
OF THE GOVERNMENT ACCOUNTING AND
AUDITING MANUAL IMPOSED ON GOVERNMENT
AGENCIES FROM HIRING PRIVATE LAWYERS "TO
HANDLE THEIR LEGAL CASES" APPLY TO A
LAWYER HIRED BY VIRTUE OF A SERVICE
CONTRACT BUT WHO ACTUALLY HANDLE
PURELY RIGHT-OF-WAY MATTERS (EXCLUDING
HANDLING OF COURT CASES)?
II
WILL COA CIRCULAR NO. 86-255 DATED APRIL 2,
1986 AND SEC. 212, VOLUME I OF THE
GOVERNMENT ACCOUNTING AND AUDITING
MANUAL OPERATE TO RESTRICT THE PRACTICE
OF THE LAW PROFESSION AND THEREFORE
REPUGNANT TO SEC. 5, ARTICLE VII OF THE 1987
PHILIPPINE CONSTITUTION?
III
DOES SECTION 38, CHAPTER 9, BOOK I OF
EXECUTIVE ORDER NO. 292, OTHERWISE

KNOWN AS THE ADMINISTRATIVE CODE OF 1987

APPLY TO PETITIONER FOR HAVING ACTED IN
GOOD FAITH AND WITHOUT MALICE AND
MERELY IMPLEMENTED A VALID CONTRACT
ENTERED INTO BY THE PRESIDENT OF THE
NATIONAL POWER CORPORATION?
IV
DOES THE PRINCIPLE OF "QUANTUM MERUIT"
APPLY TO THE SERVICES RENDERED BY ATTY.
SATORRE WHICH BENEFITTED THE NATIONAL
POWER CORPORATION?11 [Id., at 10.]
The petition is without merit.
In the main, petitioner posits that the phrase "handling
of legal cases" should be construed to mean as
conduct of cases or handling of court cases or
litigation and not to other legal matters, such as legal
documentation, negotiations, counseling or right of
way matters.
To test the accuracy of such an interpretation, an
examination of the subject COA Circular is in order:
SUBJECT: Inhibition against employment by
government agencies and instrumentalities, including
government-owned or controlled corporations, of
private lawyers to handle their legal cases.
It has come to the attention of this Commission that
notwithstanding restrictions or prohibitions on the
matter under existing laws, certain government
agencies, instrumentalities, and government-owned
and/or controlled corporations, notably government
banking and financing institutions, persist in hiring or
employing private lawyers or law practitioners to
render legal services for them and/or to handle their
legal cases in consideration of fixed retainer fees, at
times in unreasonable amounts, paid from public
funds. In keeping with the retrenchment policy of the
present administration, this Commission frowns upon
such a practice.
Accordingly, it is hereby directed that, henceforth, the
payment out of public funds of retainer fees to private
law practitioners who are so hired or employed
without the prior written conformity and acquiescence
of the Office of the Solicitor General or the

Government Corporate Counsel, as the case may be,

as well as the written concurrence of the Commission
on Audit shall be disallowed in audit and the same
shall be a personal liability of the officials concerned.
[underscoring supplied]
What can be gleaned from a reading of the above
circular is that government agencies and
instrumentalities are restricted in their hiring of private
lawyers to render legal services or handle their cases.
No public funds will be disbursed for the payment to
private lawyers unless prior to the hiring of said
lawyer, there is a written conformity and acquiescence
from the Solicitor General or the Government
Corporate Counsel.
Contrary to the view espoused by petitioner, the
prohibition covers the hiring of private lawyers to
render any form of legal service. It makes no
distinction as to whether or not the legal services to
be performed involve an actual legal controversy or
court litigation. Petitioner insists that the prohibition
pertains only to "handling of legal cases," perhaps
because this is what is stated in the title of the
circular. To rely on the title of the circular would go
against a basic rule in statutory construction that a
particular clause should not be studied as a detached
and isolated expression, but the whole and every part
of the statute must be considered in fixing the
meaning of any of its part.12 [Sarcos v. Castillo 26
SCRA 853, 862 (1969)] Petitioner, likewise, insists
that the service contract in question falls outside the
ambit of the circular as what is being curtailed is the
payment of retainer fees and not the payment of fees
for legal services actually rendered.
A retainer fee has been defined as a "preliminary fee
to an attorney or counsel to insure and secure his
future services, and induce him to act for the client. It
is intended to remunerate counsel for being deprived,
by being retained by one party, of the opportunity of
rendering services to the other and of receiving pay
from him, and payment of such fee, in the absence of
an express understanding to the contrary, is neither
made nor received in payment of the services
contemplated; its payment has no relation to the
obligation of the client to pay his attorney for the
services for which he has retained him to perform."13
[Ernesto L. Pineda, CODE OF PROFESSIONAL
RESPONSIBILITY, (citing 7 C.J.S. 1019; Hilado vs.

David, 84 Phil. 579) p. 225.] To give such a technical

interpretation to the term "retainer fees" would go
against the purpose of the circular and render the
same ineffectual. In his resolution, Unit Auditor
Alexander Tan expounded on the purpose of the
circular, as enunciated therein:
On the claim that COA Circular 86-255 is not
applicable in this case because the inhibition provided
for in said Circular relates to the handling of legal
cases of a government agency and that the contractor
was not hired in that capacity but to handle legal
matters (sic) involving right-of-way, it is maintained
that the contracted service falls within the scope of
the inhibition which clearly includes "the hiring or
employing private lawyers or law practitioners to
render legal services for them and/or to handle their
legal cases..." Moreover, it is important to mention
that the intention of said Circular is to curb the
observed and persistent violation of existing laws and
regulations, including CSC MC # 5 series of 1985
pertaining to the employment of private lawyers on a
contractual basis in government agencies which
involves the disbursement of public funds by
subjecting the same to the conformity and
concurrence requirements of said Circular. Being so,
the manner of agreed payment or consideration,
whether termed as a fixed retainer basis or a fixed
contract price patterned after existing salary scale of
existing and comparable positions in NPC-VRC is
immaterial as both still involve the outlay of public
funds and also the contractual employment/hiring of a
private lawyer.
Hence, while the circular uses the phrase "retainer
fees," such should not be given its technical
interpretation but should mean any "fee" paid for any
legal service rendered. As pointed out by the Office of
the Solicitor General, any interpretation of subject
circular to the contrary would open the floodgate to
future circumventions thereof by the simple
expedience of hiring private lawyers to service the
legal needs of the government not on a retainer basis
but by way of service contract akin to that which Atty.
Satorre and the NPC entered into.14 [Rollo, p. 79.] No
dictum is more fundamental in statutory interpretation
than that the intent of the law must prevail over the
letter thereof, for whatever is within the spirit of the
statute is within the statute, since adherence to the
letter would result in an absurdity, injustice and

contradictions and would defeat the plain and vital

purpose of the statute.15 [Peralta vs. Civil Service
Commission, 212 SCRA 425 (1992), citing Hidalgo vs.
Hidalgo, 33 SCRA 105 (1970)]
It bears repeating that the purpose of the circular is to
curtail the unauthorized and unnecessary
disbursement of public funds to private lawyers for
services rendered to the government. This is in line
with the Commission on Audit's constitutional
mandate to promulgate accounting and auditing rules
and regulations including those for the prevention and
disallowance of irregular, unnecessary, excessive,
extravagant or unconscionable expenditures or uses
of government funds and properties.16 [Section 2(2),
Article X-D, 1987 CONSTITUTION.] Having
determined the intent of the law, this Court has the
imperative duty to give it effect even if the policy goes
beyond the letter or words of the statute.17 [Luzon
Stevedoring Corporation vs. Anti-Dummy Board, 46
SCRA 474, 488 (1972)]
Hence, as the hiring of Atty. Satorre was clearly done
without the prior conformity and acquiescence of the
Office of the Solicitor General or the Government
Corporate Counsel, as well as the written
concurrence of the Commission on Audit, the
payment of fees to Atty. Satorre was correctly
disallowed in audit by the COA.
Thus being said, it is no longer necessary to delve
into whether or not the hiring of Atty. Satorre is in
accord with the rules of the Civil Service
Commission.
Petitioner's claim that the Circular is unconstitutional
for being an invalid restriction to the practice of the
law profession, is clearly bereft of any merit. The
Government has its own counsel, which is the Office
of the Solicitor General headed by the Solicitor
General,18 [Sections. 34-37, Chapter 12, Title III,
Book IV, ADMINISTRATIVE CODE OF 1987.] while
the Office of the Government Corporate Counsel
(OGCC) acts as the principal law office of the
government-owned or controlled corporations.19
[Section 10, Chapter 3, Title III, Book IV,
ADMINISTRATIVE CODE OF 1987.] It is only in
special cases where these government entities may
engage the services of private lawyers because of
their expertise in certain fields. The questioned COA

circular simply sets forth the prerequisites for a

government agency instrumentality in hiring a private
lawyer, which are reasonable safeguards to prevent
irregular, unnecessary, excessive, extravagant or
unconscionable expenditures or uses of government
funds and properties. We fail to see how the
restrictions contained in the COA circular can be
considered as a curtailment on the practice of the
legal profession.
Anent petitioner's argument that he cannot be held
liable for effecting payment of the disallowed amount
because he is not privy to the service contract, we
find the same to be unmeritorious. This is because
petitioner's liability arose from the fact that as project
manager, he approved the said claim. In addition, his
assertion that a refusal on his part to certify payment
of the same would subject him to criminal and civil
liabilities cannot hold water simply because it was his
duty not to approve the same for payment upon
finding that such was irregular and in contravention of
COA Circular No. 86-255, dated 2 April 1986.
We cannot grant the prayer of the petitioner that Atty.
Satorre should be compensated based on the
principle of quantum meruit, on the ground that the
government will be unjustly enriched at the expense
of another. We do not deny that Atty. Satorre has
indeed rendered legal services to the government.
However to allow the disbursement of public funds to
pay for his services, despite the absence of requisite
consent to his hiring from the OSG or OGCC would
precisely allow circumvention of COA Circular No. 86255. In any event, it is not Atty. Satorre who is liable to
return the money already paid him, rather the same
shall be the responsibility of the officials concerned,
among whom include herein petitioner.
WHEREFORE, the petition is hereby DENIED for lack
of showing that the respondents committed a
reversible error.
GEOFFREY F. GRIFFITH, petitioner, vs. HON.
COURT OF APPEALS, RTC JUDGE EDWIN A.
VILLASOR, MTC JUDGE MANUEL D.L.
VILLAMAYOR and PHELPS DODGE PHILS., INC.,
respondents.
QUISUMBING, J.:

Assailed in this petition is the decision[1] dated March

14, 1997 of the Court of Appeals in CA-G.R. SP No.
19621, affirming the Regional Trial Court's decision[2]
finding petitioner Geoffrey F. Griffith guilty on two
counts for violation of Batas Pambansa Blg. 22 (the
Bouncing Checks Law), and sentencing him to suffer
imprisonment for a period of six months on each
count, to be served consecutively. Also assailed is the
Court of Appeals' resolution[3] dated July 8, 1997
denying petitioner's motion for reconsideration.
The facts are as follows:
In 1985, Phelps Dodge Philippines, Inc. leased its lot
and factory building to Lincoln Gerard, Inc. for a term
of two years at a monthly rental of P75,000. When
Lincoln Gerard, Inc. incurred rental arrearages,
Geoffrey F. Griffith, in his capacity as president of
Lincoln Gerard, Inc., issued the following checks:
Far East Bank and Trust Co. Check No. 06B-C075065, dated April 15, 1986 for P100,000.00,
payable to Phelps Dodge Phils. Inc.; and
Far East Bank and Trust Co. Check No. 06B-C075066, dated May 1, 1986 for P115,442.65, payable
to Phelps Dodge Phils. Inc.[4]
The voucher for these checks contained the following
instruction:
These checks are not to be presented without prior
approval from this Corporation to be given not later
than May 30, 1986.
Also written on the face of the voucher was the
following note:
However, if written approval of Lincoln Gerard, Inc. is
not given before May 30, 1986, Phelps Dodge, Phils.
shall present the cheques for payment. This is final
and irrevocable.[5]
On May 29, 1986, Griffith wrote Phelps Dodge not to
present the said checks for payment on May 30, 1986
because they could not be funded due to a four-week
labor strike that had earlier paralyzed the business
operations of Lincoln Gerard.[6]
Previously, in a letter dated May 20, 1986, Phelps

Dodge, through its treasurer Ricardo R. Manarang,

advised Lincoln Gerard that it was transferring the
contents of the Lincoln Gerard warehouse in the
leased premises since a new tenant was moving in.
Phelps Dodge told Lincoln Gerard that its properties
would be placed "in our compound and under our
custody."[7]
On June 2, 1986,[8] when no further communication
was received from Lincoln Gerard, Phelps Dodge
presented the two checks for payment but these were
dishonored by the bank for having been drawn
against insufficient funds. Three days later, Phelps
Dodge sent a demand letter to Lincoln Gerard,
apprising Griffith of the dishonor of the checks and
asking him to fund them within the time prescribed by
law.[9] Lincoln Gerard still failed to fund the checks
but Griffith sent a letter to Phelps Dodge, explaining
Lincoln's inability to fund said checks due to the strike.
[10] Subsequently, on June 19, 1986, Phelps Dodge
notified Lincoln Gerard that its properties would be
foreclosed. Phelps Dodge went ahead with the
foreclosure and auction sale on June 20, 1986,[11]
despite Lincoln Gerard's protest.[12]
On May 10, 1988, two informations for violation of
B.P. 22 docketed as Criminal Cases Nos. 73260 and
73261 were filed against petitioner before the
Regional Trial Court. The motion for reconsideration
filed by Griffith was dismissed, and so were his
petition for review filed before the Department of
Justice and later on his motion to quash filed before
the RTC. Griffith then filed a petition for certiorari
before the Court of Appeals that was likewise denied.
Meanwhile, on November 6, 1987, Lincoln Gerard
lodged a complaint for damages docketed as Civil
Case No. 55276 before the Regional Trial Court of
Pasig, Branch 69, against Phelps Dodge and the
notary public who conducted the auction sale.[13] On
July 19, 1991, the trial court ruled that the foreclosure
and auction sale were invalid, but applied the
proceeds thereof to Lincoln Gerard's arrearages. It
also ordered Phelps Dodge to return to Lincoln
Gerard the P1,072,586.88 as excess.[14] The court
stated:
The evidence shows that defendant corporation had
already received the amount of P254,600 as a result
of the invalid auction sale. The latter amount should

be applied to the rental in arrears owed by the plaintiff

corporation to the defendant corporation
(P301,953.12). Thus, the plaintiff corporation still
owes the defendant corporation the amount of
P47,953.12 as rental arrears. In order to get the true
and real damages that defendant corporation should
pay the plaintiff corporation, the balance of the rental
arrears should be deducted from the amount of
P1,120,540.00, the total value of the items belonging
to the plaintiff corporation and sold by the defendant
corporation at a public auction. The net result is
P1,072,586.88. [15]
On appeal, the Court of Appeals affirmed the RTC
decision, and this became final and executory.[16]
On August 25, 1994, the criminal cases against
Griffith pending before the RTC were remanded to the
Metropolitan Trial Court (MeTC), in view of Republic
Act No. 7691 that expanded the jurisdiction of the
MeTC.
On July 25, 1995, the MeTC, in Criminal Cases Nos.
41678 and 41679, found Griffith guilty on both counts
for violation of B.P. 22,[17] and sentenced him to
suffer imprisonment for six months on each count, to
be served consecutively. Thus:
WHEREFORE, premises considered, this court finds
the accused GEOFFREY F. GRIFFITH, GUILTY OF
VIOLATION of Section 1 of Batas Pambansa Blg. 22,
otherwise known as the Bouncing Checks Law on two
counts.
The accused is therefore hereby sentence (sic) to
suffer imprisonment for a period of SIX (6) MONTHS
in Criminal Case No. 41678 and another SIX (6)
MONTHS in Criminal Case No. 41679, both of which
shall be served consecutively.
Considering that the civil aspect of these cases has
already been decided by the Regional Trial Court
Branch 69, Pasig, regardless of its finality, of which
this court has no record, this Court shall not resolve
the same because they are either "Res Judicata" or
"Pendente Litis".
SO ORDERED.[18]
On appeal, the RTC affirmed in toto the lower court's

decision.
Petitioner then appealed his conviction to the Court of
Appeals. In a consolidated decision dated March 14,
1997, the appellate court ruled:
WHEREFORE, absent any prima facie merit in it, the
Petition for Review under consideration is hereby
DENIED DUE COURSE. Costs against petitioner.
SO ORDERED. [19]
Petitioner moved for a reconsideration of said
decision but this was denied by the appellate court in
a resolution dated July 8, 1997.[20] Hence, this
petition seeking reversal of the CA decision and
resolution on the criminal cases, anchored on the
following grounds:
I. THE COURT OF APPEALS' DECISION DATED 14
MARCH 1997 AND ITS RESOLUTION DATED 8
JULY 1997 ARE CONTRARY TO THE RULING IN
MAGNO V. COURT OF APPEALS, WHERE THIS
HONORABLE COURT LAID DOWN THE DOCTRINE
THAT A CONVICTION UNDER B.P. 22 CANNOT BE
BASED ON AN INVERSE APPLICATION OF THE
ELEMENT OF KNOWLEDGE.
II. THE COURT OF APPEALS' DECISION DATED 14
MARCH 1997 AND ITS RESOLUTON DATED 8 JULY
1997 RESULT IN AN UNCONSTITUTIONAL
APPLICATION OF THE PROVISIONS OF B.P. 22.
III. THE COURT OF APPEALS' DECISION DATED 14
MARCH 1997 AND ITS RESOLUTION DATED 8
JULY 1997 STATING THAT PAYMENT THROUGH
NOTARIAL FORECLOSURE BEFORE THE FILING
OF THE CRIMINAL INFORMATIONS UNDER B.P. 22
DOES NOT ABATE CRIMINAL LIABILITY, ARE
ERRONEOUS AND RESULT IN THE INIQUITOUS
INTERPRETATION OF THE LAW.
IV. THE COURT OF APPEALS' DECISION DATED 14
MARCH 1997 AND ITS RESOLUTION DATED 8
JULY 1997 ARE INCONSISTENT WITH ITS OWN
FINDINGS AND CONCLUSIONS IN A RELATED
CASE (CA-G.R. NO. 20980) INVOLVING THE SAME
PETITIONER AND RESPONDENT AND THE SAME
TRANSACTION SUBJECT OF THIS CASE.

V. THE COURT OF APPEALS' DECISION DATED 14

MARCH 1997 AND ITS RESOLUTION DATED 8
JULY 1997 WHICH RELIED ON THE RULING IN
THE CASE OF LIM V. COURT OF APPEALS ON
VENUE TO JUSTIFY ITS FINDING THAT
PETITIONER HAS COMMITTED TWO COUNTS OF
VIOLATION OF B.P. 22, ARE CONTRAY TO LAW
AND JURISPRUDENCE. [21]
Petitioner points out that he communicated to Phelps
Dodge through a note on the voucher attached to the
checks, the fact that said checks were unfunded at
the time of their issuance. Petitioner contends that
this good faith on his part negates any intent to put
worthless checks in circulation, which is what B.P. 22
seeks to penalize. Moreover, as regards the second
check that was postdated, petitioner contends that
there could not be any violation of B.P. 22 with said
check since the element of knowledge of insufficiency
of funds is absent. Petitioner could not have known at
the time of its issuance that the postdated check
would be dishonored when presented for payment
later on.
Petitioner argues that his conviction in this case would
be violative of the constitutional proscription against
imprisonment for failure to pay a debt, since petitioner
would be punished not for knowingly issuing an
unfunded check but for failing to pay an obligation
when it fell due.
Petitioner also asserts that the payment made by
Lincoln Gerard through the proceeds of the notarial
foreclosure and auction sale extinguished his criminal
liability.
On the other hand, private respondent contends that
all the elements that comprise violation of B.P. 22 are
present in this case. Moreover, the payment in this
case was made beyond the five-day period, counted
from notice of dishonor, provided by the law and thus
did not extinguish petitioner's criminal liability.
For the State, the Solicitor General contends that
Lincoln Gerard assured Phelps Dodge, through the
note on the voucher attached to the checks, that said
checks would be covered with sufficient funds by May
30, 1996, which assurance was "final and
irrevocable".[22] The OSG also argues that B.P. 22
does not distinguish between a check that is

postdated and one that is not, for as long as the

drawer issued the checks with knowledge of his
insufficient funds and the check is dishonored upon
presentment.
There is no unconstitutional punishment for failure to
pay a debt in this case, since according to the OSG,
what B.P. 22 penalizes is the act of making and
issuing a worthless check that is dishonored upon
presentation for payment, not the failure to pay a
debt.[23]
The OSG asserts that the supposed payment that
resulted from Phelps Dodge's notarial foreclosure of
Lincoln Gerard's properties could not bar prosecution
under B.P. 22, since damage or prejudice to the
payee is immaterial. Moreover, said payment was
made only after the violation of the law had already
been committed. It was made beyond the five-day
period, from notice of dishonor of the checks,
provided under B.P. 22.
The principal issue in this case is whether petitioner
Geoffrey F. Griffith, president of Lincoln Gerard, Inc.,
has been erroneously convicted and sentenced for
violation of the Bouncing Checks Law (Batas
Pambansa Blg. 22). His conviction on two counts and
sentence of six months imprisonment for each count
by the respondent MTC Judge Manuel Villamayor was
upheld by respondent RTC Judge Edwin Villasor and
affirmed by the respondent Court of Appeals. But
private respondent appears to have collected more
than the value of the two checks in question before
the filing in the trial court of the case for violation of
B.P. 22. Hence, petitioner insists he has been
wrongfully convicted and sentenced. To resolve this
issue, we must determine whether the alleged
payment of the amount of the checks two years prior
to the filing of the information for violation of B.P. 22
justifies his acquittal.
Whether there is an unconstitutional application of the
provisions of B.P. 22 in this case, however, does not
appear to us an appropriate issue for consideration
now. A purported constitutional issue raised by
petitioner may only be resolved if essential to the
decision of a case and controversy. But here we find
that this case can be resolved on other grounds. Well
to remember, courts do not pass upon constitutional
questions that are not the very lis mota of a case.[24]

In the present case, the checks were conditionally

issued for arrearages on rental payments incurred by
Lincoln Gerard, Inc. The checks were signed by
petitioner, the president of Lincoln Gerard. It was a
condition written on the voucher for each check that
the check was not to be presented for payment
without clearance from Lincoln Gerard, to be given at
a specific date. However, Lincoln Gerard was unable
to give such clearance owing to a labor strike that
paralyzed its business and resulted to the company's
inability to fund its checks. Still, Phelps Dodge
deposited the checks, per a note on the voucher
attached thereto that if written approval was not
received from Lincoln Gerard before May 30, 1986,
the checks would be presented for payment. "This is
final and irrevocable", according to the note that was
written actually by an officer of Phelps Dodge, not by
petitioner. The checks were dishonored and Phelps
Dodge filed criminal cases for violation of B.P. 22
against petitioner. But this filing took place only after
Phelps Dodge had collected the amount of the
checks, with more than one million pesos to spare,
through notarial foreclosure and auction sale of
Lincoln Gerard's properties earlier impounded by
Phelps Dodge.
In our view, considering the circumstances of the
case, the instant petition is meritorious.
The Bouncing Checks Law "was devised to safeguard
the interest of the banking system and the legitimate
public checking account user."[25] It was not designed
to favor or encourage those who seek to enrich
themselves through manipulation and circumvention
of the purpose of the law.[26] Noteworthy, in
Administrative Circular No. 12-2000, this Court has
expressed a policy preference for fine as penalty in
cases of B.P. 22 violations rather than imprisonment
to "best serve the ends of criminal justice."
Moreover, while the philosophy underlying our penal
system leans toward the classical school that imposes
penalties for retribution,[27] such retribution should be
aimed at "actual and potential wrongdoers".[28] Note
that in the two criminal cases filed by Phelps Dodge
against petitioner, the checks issued were corporate
checks that Lincoln Gerard allegedly failed to fund for
a valid reason duly communicated to the payee.
Further, it bears repeating that Phelps Dodge, through

a notarial foreclosure and auction that were later on

judicially declared invalid, sold Lincoln Gerard's
property for cash amounting to P1,120,540[29] to
satisfy Phelps Dodge claim for unpaid rentals. Said
property was already in Phelps Dodge's custody
earlier, purportedly because a new tenant was moving
into the leased premises. The obligation of Lincoln
Gerard to Phelps Dodge for said rentals was only
P301,953.12.[30] Thus, by resorting to the remedy of
foreclosure and auction sale, Phelps Dodge was able
to collect the face value of the two checks, totalling
P215,442.65. In fact, it impounded items owned by
Lincoln Gerard valued far in excess of the debt or the
checks. This was the situation when, almost two years
after the auction sale, petitioner was charged with two
counts of violation of B.P. 22. By that time, the civil
obligation of Lincoln Gerard, Inc. to Phelps Dodge
Phils. Inc. was no longer subsisting, though
respondent Court of Appeals calls the payment
thereof as involuntary.[31] That the money value of
the two checks signed by petitioner was already
collected, however, could not be ignored in
appreciating the antecedents of the two criminal
charges against petitioner. Because of the invalid
foreclosure and sale, Phelps Dodge was ordered to
pay or return P1,072,586.88 to Lincoln Gerard, per
decision of the Regional Trial Court of Pasig, Branch
69, which became final after it was affirmed by the
appellate court. We cannot, under these
circumstances, see how petitioner's conviction and
sentence could be upheld without running afoul of
basic principles of fairness and justice. For Phelps
Dodge has, in our view, already exacted its proverbial
pound of flesh through foreclosure and auction sale
as its chosen remedy.
That is why we find quite instructive the reasoning of
the Court of Appeals earlier rendered in deciding the
petition for Certiorari and Injunction, Griffith v. Judge
Milagros Caguioa, CA-G.R. SP No. 20980, in
connection with the petitioner's motion to quash the
charges herein before they were tried on the merits.
[32]
Said Justice C. Francisco with the concurrence of
Justices Reynato S. Puno and Asaali S. Isnani:
"We are persuaded that the defense has good and
solid defenses against both charges in Criminal
Cases Nos. 73260-61. We can even say that the

decision rendered in Branch 69 in Civil Case No.

55276, well-written as it is, had put up a formidable
obstacle to any conviction in the criminal cases with
the findings therein made that the sale by public
auction of the properties of Lincoln was illegal and
had no justification under the facts; that also the
proceeds realized in the said sale should be deducted
from the account of Lincoln with Phelps, so that only
P47,953.12 may only be the rentals in arrears which
Lincoln should pay, computed at P301,953.12 less
P254,600.00; that out of what had happened in the
case as the trial court had resolved in its decision,
Phelps is duty bound to pay Lincoln in damages
P1,072,586.88 from which had been deducted the
amount of P47,953.12 representing the balance of the
rental in arrearages; and that consequently, there is
absolutely no consideration remaining in support of
the two (2) subject checks."[33]
Petitioner's efforts to quash in the Court of Appeals
the charges against him was frustrated on procedural
grounds because, according to Justice Francisco,
appeal and not certiorari was the proper remedy.[34]
In a petition for certiorari, only issues of jurisdiction
including grave abuse of discretion are considered,
but an appeal in a criminal case opens the entire case
for review.
While we agree with the private respondent that the
gravamen of violation of B.P. 22 is the issuance of
worthless checks that are dishonored upon their
presentment for payment, we should not apply penal
laws mechanically.[35] We must find if the application
of the law is consistent with the purpose of and
reason for the law. Ratione cessat lex, et cessat lex.
(When the reason for the law ceases, the law
ceases.) It is not the letter alone but the spirit of the
law also that gives it life. This is especially so in this
case where a debtor's criminalization would not serve
the ends of justice but in fact subvert it. The creditor
having collected already more than a sufficient
amount to cover the value of the checks for payment
of rentals, via auction sale, we find that holding the
debtor's president to answer for a criminal offense
under B.P. 22 two years after said collection, is no
longer tenable nor justified by law or equitable
considerations.
In sum, considering that the money value of the two
checks issued by petitioner has already been

effectively paid two years before the informations

against him were filed, we find merit in this petition.
We hold that petitioner herein could not be validly and
justly convicted or sentenced for violation of B.P. 22.
Whether the number of checks issued determines the
number of violations of B.P. 22, or whether there
should be a distinction between postdated and other
kinds of checks need no longer detain us for being
immaterial now to the determination of the issue of
guilt or innocence of petitioner.
WHEREFORE, the petition is hereby GRANTED. The
decision of the Court of Appeals in CA-G.R. No.
19621 dated March 14, 1997, and its resolution dated
July 8, 1997, are REVERSED and SET ASIDE.
Petitioner Geoffrey F. Griffith is ACQUITTED of the
charges of violation of B.P. 22 in Criminal Cases Nos.
41678 and 41679.

MANUEL T. DE GUIA, in his capacity as Councilor

of the Municipality of Para?aque, Metro Manila,
petitioner, vs. HON. COMMISSION ON
ELECTIONS, respondent.
BELLOSILLO, J.:
This is a petition for certiorari and prohibition assailing
the validity and the enforcement by respondent
Commission on Elections (COMELEC) of its
RESOLUTION NO. 2313, adopting rules and
guidelines in the apportionment, by district, of the
number of elective members of the Sangguniang
Panlalawigan in provinces with only one (1) legislative
district and the Sangguniang Bayan of municipalities
in the Metro Manila Area for the preparation of the
Project of District Apportionment by the Provincial
Election Supervisors and Election Registrars (Annex
"A", Petition). RESOLUTION NO. 2379, approving the
Project of District Apportionment submitted pursuant
to Resolution No. 2313 (Annex "B", Petition), and
RESOLUTION UND. 92-010 holding that pars. (a), (b)
and (c), and the first sentence of par. (d), all of Sec. 3,
R.A. 7166, apply to the May 11, 1992 elections
(Annex "C", Petition).
Petitioner Manuel T. De Guia is an incumbent
Member of the Sangguniang Bayan of the
Municipality of Paraaque, Metro Manila, having been
elected in the January 1988 local elections. He prays,

more particularly, for reversal of the position of

respondent insofar as it affects the municipality of
Paraaque and all the other municipalities in the
Metro Manila Area. He claims that the second proviso
of par. (c), Sec. 3 of R.A. 7166, which requires the
apportionment into districts of said municipalities does
not specify when the members of their Sangguniang
Bayan will be elected by district. He would
consequently lean on par. (d) of Sec. 3, which
immediately succeeds par. (c), to support his view
that the elected members of these municipalities
mentioned in par. (c) should continue to be elected at
large in the May 11, 1992 elections.

President on November 26, 1991. It is "An Act

Providing for Synchronized National and Local
Elections and for Electoral Reforms, Authorizing
Appropriations Therefor, and for Other Purposes". At
issue in this case is the proper interpretation of Sec. 3
thereof which provides:

Paragraph (d) states that "[F]or purposes of the

regular elections on May 11,
1992, elective members of the Sangguniang
Panlungsod and Sangguniang Bayan shall be elected
at large in accordance with existing laws. However,
beginning with the regular elections in 1995, they
shall be elected by district."
Petitioner therefore insists that the elected members
of the Sangguniang Bayan of Paraaque fall under
this category so that they should continue to be
elected at large until the 1995 regular elections.

'(a) For provinces with two (2) or more legislative

districts, the elective members of the Sangguniang
Panlalawigan shall be elected by legislative districts . .
.

Before addressing the crux of the controversy the

Court observes that petitioner does not allege that he
is running for reelection, much less, that he is
prejudiced by the election, by district in Paraaque.
As such, he does not" appear to have a locus standi,
a standing in law, a personal or substantial interest. 1
He does not also allege any legal right that has been
violated by respondent. If for this alone, petitioner
does not appear to have any cause of action.
However, considering the importance of the issue
involved, concerning as it does the political exercise
of qualified voters affected by the apportionment, and
petitioner alleging abuse of discretion and violation of
the Constitution by respondent, We resolve to brush
aside the question of procedural infirmity, even as We
perceive the petition to be one of declaratory relief.
We so held similarly through Mr. Justice Edgardo L.
Paras in Osmea v. Commission on Elections. 2

"Section 3. Election of Members of the Sangguniang

Panlalawigan, Sangguniang Panlungsod and
Sangguniang Bayan. The elective members of the
Sangguniang Panlalawigan, Sangguniang
Panlungsod and Sangguniang Bayan shall be elected
as follows:

'(b) For provinces with only one (1) legislative district,

the Commission shall divide them into two (2) districts
for purposes of electing the members of the
Sangguniang Panlalawigan . . .
'(c) The number and election of elective members of
the Sangguniang Panlungsod and Sangguniang
Bayan in the Metro Manila Area, City of Cebu, City of
Davao and any other city with two (2) or more
legislative districts shall continue to be governed by
the provisions of Sections 2 and 3 of Republic Act No.
6636 . . . Provided, further, That, the Commission
shall divide each of the municipalities in Metro Manila
Area into two (2) districts by barangay for purposes of
representation in the Sangguniang Bayan . . . and,
'(d) For purposes of the regular elections on May 11,
1992, elective members of the Sangguniang
Panlungsod and Sangguniang Bayan shall be elected
at large in accordance with existing laws. However,
beginning with the regular elections in 1995, they
shall be elected by district . . ."

Now on the meat of the dispute.

On November 20, 1991, respondent COMELEC,

invoking authority of the Constitution, the Omnibus
Election Code, R.A. 6636, R.A. 6646 and R.A. 7166,
3 issued Resolution No. 2313 and the subsequent
resolutions in question.

On November 18, 1991, Congress passed R.A. 7166,

signed into law by the

On February 20, 1992, in view of the perceived

ambiguity in the meaning of par: (d), particularly in

relation to par. (c), Sec. 3, R.A. 7166, petitioner filed

with COMELEC a Motion for Clarification of its
Resolution No. 2313 inquiring whether the members
of the Sangguniang Bayan of Paraaque and the
other municipalities of Metro Manila enumerated
therein, which are all single-district municipalities,
would be elected by district in the May 11, 1992 or in
the 1995 regular elections.
Meanwhile, on March 3, 1992, COMELEC issued
Resolution No. 2379 approving the guidelines
submitted by the Provincial Election Supervisors and
Municipal Election Registrars concerned pursuant to
Resolution No. 2313, and stating therein its purpose
in recommending to Congress the
districting/apportionment of Sangguniang Panlungsod
and Sangguniang Bayan seats. i.e., to reduce the
number of candidates to be voted for in the May 11,
1992 synchronized elections. In this Project of
Apportionment, Paraaque together with the other
twelve (12) municipalities in the Metro Manila Area
was divided into two (2) districts with six (6) elective
councilors for each district.
On March 10, 1992, COMELEC resolved petitioner's
Motion for Clarification by interpreting Sec. 3, R.A.
7166, to mean that the election of elective members
of the Sangguniang Bayan, by district, of the thirteen
(13) municipalities in the Metro Manila Area shall
apply in the May 11, 1992 elections (Resolution UND.
92-010, prom. March 10, 1992). Petitioner says that
he received copy of Resolution UND 92-010 on March
13, 1992.
On April 7, 1992, apparently not satisfied with this
third Resolution of COMELEC, petitioner filed the
instant petition asserting that under par. (d), Sec. 3 of
R.A. 7166 the elective members of the Sangguniang
Panlungsod and the Sangguniang Bayan, for
purposes of the May 11, 1992 regular elections, shall
be elected at large in accordance with existing laws.
He would include in this class of sanggunian
members to be elected at large those of the
municipality of Paraaque.
Petitioner therefore imputes grave abuse of discretion
to COMELEC in promulgating Resolution No. 2313,
Resolution No. 2379 and Resolution UND. 92-010
which clarifies, contrary to his view, that the district
apportionment of the municipalities in the Metro

Manila Area is applicable to the May 11, 1992 regular

elections.
We have carefully examined pars. (a), (b), (c) and (d)
of Sec. 3, R.A. 7166, and its precursor bills on
synchronized elections, Senate Bill No. 1861 and
House Bill No. 34811, and We realize the web of
confusion generated by the seeming abstruseness in
the language of the law. Some framers of the law
were even fazed at the empirical implications of some
of its provisions,
particularly Sec. 3 thereof, and they admitted in fact
that said provisions were susceptible of varied
interpretations, as borne by the sponsorship and
explanatory speeches now spread in the Journals of
Congress. Hence, We can understand why petitioner
would interpret Sec. 3 as he would. But if we pursue
his course, we may conclude in absurdity because
then there would have been no reason for R.A. 7166
to single out the single-district provinces referred to in
par. (b), and the municipalities in the Metro Manila
Area mentioned in the second proviso of par. (c), to
be apportioned at once into two (2) districts each if
the members of their respective sanggunian after all
would still be elected at large as they were in the
1988 elections.
No law is ever enacted that is intended to be
meaningless, much less inutile. We must therefore, as
far as we can, divine its meaning, its significance, its
reason for being. As it has oft been held, the key to
open the door to what the legislature intended which
is vaguely expressed in the language of a statute is its
purpose or the reason which induced it to enact the
statute. If the statute needs construction, as it does in
the present case, the most dominant in that process is
the purpose of the act. 4 Statutes should be
construed in the light of the object to be achieved and
the evil or mischief to be suppressed, 5 and they
should be given such construction as will advance the
object, suppress the mischief, and secure the benefits
intended. 6 A construction should be rejected that
gives to the language used in a statute a meaning
that does not accomplish the purpose for which the
statute was enacted, and that tends to defeat the
ends which are sought to be attained by the
enactment. 7
The reason for the Promulgation of R.A. 7166 is
shown in the explanatory note of Senate Bill No. 1861

which states in part:

apportioned into different districts."

"This bill proposes to set the national and local

elections for May 11, 1992, and provide for the
necessary implementing details. It also endorses
reforms and measures to ensure the conduct of free,
orderly, honest, peaceful and credible elections.
Specifically, it seeks to: (1) Reduce the number of
positions to be voted for by providing therein that the
members of the Sangguniang Panlalawigan,
Sangguniang Panlungsod and Sangguniang Bayan
be elected not at large, but by district . . ."

This avowed policy of having sanggunian members

elected by district is also
manifest from the four corners of Sec. 3 of R A. 7166.
8 Thus, a careful analysis of the provisions of Sec. 3
shows that the purpose of districting/apportionment of
the sanggunian seats is to reduce the number of
positions to be voted for in the May 11, 1992,
synchronized elections and ensure the efficiency of
electoral process. Considering that the single-district
provinces and the municipalities in the Metro Manila
Area, which are all single-districts, and under pars. (b)
and (c) have already been apportioned into two (2)
districts, they will henceforth be electing the members
of their Sangguniang Panlalawigan and Sangguniang
Bayan by district in the coming May 11, 1992,
elections, although under par (d), the single-district
cities and all the municipalities outside the Metro
Manila Area which are all likewise single-districts, will
have to continue electing at large the members of
their Sangguniang Panlungsod and Sangguniang
Bayan as they have yet to be apportioned. But
beginning the regular elections of 1995, they will all
have to be elected by district. By then, COMELEC
would have had enough time to apportion the singledistrict cities and the municipalities outside the Metro
Manila Area.

That respondent COMELEC is cognizant of this

legislative intent of R.A. 7166 is reflected in the
"WHEREAS" clauses constituting the preamble to
Resolution No. 2379. Thus
"WHEREAS, the Commission on Elections, in order to
reduce the number of candidates to be voted for in
the May 11, 1992 synchronized elections
recommended, among others, to the Congress of the
Philippines, the districting/apportionment of
sangguniang panlungsod and sangguniang bayan
seats;
"WHEREAS, the Congress of the Philippines passed
Republic Act 7166, and approved by the President of
the Philippines on November 26, 1991, adopting
among others, the recommendation of the
Commission on Elections aforestated;
"WHEREAS, pursuant to, and in implementation of
Republic Act 7166, particularly Section 3 thereof, the
Commission promulgated Resolution No. 2313,
directing the Provincial Election Supervisors and
Election Registrars concerned to submit, after
consultation, public hearings, and consensus-taking
with the different sectors in the community, the Project
of District Apportionment of single legislative-district
provinces and municipalities in the Metro Manila
area;
"WHEREAS, the established criteria/guidelines in the
determination of the district apportionment are as
follows: a. compactness, contiguity and adjacentness
of territory; b. apportionment shall be based on the
1990 census of population; c. no municipality, in the
case of provinces, and no barangay, in the case of
cities and municipalities, shall be fragmented or

As they now stand in relation to the

districting/apportionment of local government units for
purposes of election under Sec. 3 of R.A. 7166, it is
clear that: (1) for provinces with two (2) or more
legislative districts contemplated in par. (a), they shall
continue to be elected by district; (2) for provinces
with single legislative districts, as they have already
been apportioned into two (2) districts each under par.
(b), they shall henceforth be elected likewise by
district; (3) for cities with two (2) or more legislative
districts, e.g., the cities of Manila, Cebu and Davao,
they shall also continue to be elected by district under
the first part of par. (c); and, (4) for the thirteen (13)
municipalities in the Metro Manila Area, which have
already been apportioned into two (2) districts each
under the second proviso of par. (c), they shall
likewise be elected by district in the regular elections
of May 11, 1992.
Then, that should leave us the Sangguniang
Panlungsod of the single - district cities and the

Sangguniang Bayan of the municipalities outside

Metro Manila, which remain single-districts not having
been ordered apportioned under Sec. 3 of R.A. 7166.
They will have to continue to be elected at large in the
May 11, 1992, elections, although starting 1995 they
shall all be elected by district to affect the full
implementation of the letter and spirit of R.A. 7166.
That is the true import of par. (d). Consequently, as
We view it, where he stands, petitioner must fall.
WHEREFORE, finding no abuse of discretion, much
less grave, on the part of respondent, and for lack of
merit, the instant petition is DISMISSED. No costs.
FEDERATION OF PHILIPPINE INDUSTRIES, INC.,
Petitioner,
vs.
COMMISSION ON ELECTIONS
REYES, J.:
The Case
At bench are consolidated1 petitions for certiorari
under Rule 65 of the Rules of Court, with prayer for
the issuance of a temporary restraining order, seeking
the annulment of the Resolutions of the Commission
on Elections (COMELEC) dated August 5, 20102 and
September 6, 2010.3
The first assailed resolution denied the complaint filed
by petitioners Antonio D. Dayao, Rolando P. Ramirez,
Adelio R. Capco and Federation of Philippine
Industries, Inc. (FPII) for the cancellation of the
registration of private respondent LPG Marketers
Association, Inc. (LPGMA) as a sectoral organization
under the Party-List System of Representation. The
second assailed resolution denied reconsideration.
The Facts
The individual petitioners are dealers of different
brands of liquefied petroleum gas (LPG)4 while
petitioner FPII is an association comprised of entities
engaged in various industries in the country.5
Private respondent LPGMA is a non-stock, non-profit
association of consumers and small industry players
in the LPG and energy sector who have banded
together in order to pursue their common objective of
providing quality, safe and reasonably priced gas and

oil products.6 The group advocates access to

reasonably priced LPG by household consumers.7
On May 21, 2009, LPGMA sought to advance its
cause by seeking party-list accreditation with the
COMELEC, through a petition for registration as a
sectoral organization for the purpose of participating
in the May 10, 2010 elections under Republic Act
(R.A.) No. 7941 or the Party-List System Act. LPGMA
claimed that it has special interest in the LPG industry
and other allied concerns. It averred that one of its
programs is the promotion of fair trade practices and
prevention of re-entry of cartels and monopolies by
actively pursuing the initial gains of oil deregulation,
and vigilant advocacy for the curtailment of
bureaucratic and regulatory procedures and
governmental practices detrimental to the entry,
development and well-being of small LPG
entrepreneurs.8
After the requisite publication, verification and
hearing,9 and without any apparent opposition,
LPGMA's petition was approved by the COMELEC in
its Resolution dated January 5, 2010.10
Four (4) months thereafter, individual petitioners
lodged before the COMELEC a complaint for the
cancellation of LPGMA's registration as a party-list
organization.11 They were later on joined by FPII as a
complainant-in-intervention.12
The complaint was docketed as SPP No. 10-010 and
it proffered in essence that LPGMA does not
represent a marginalized sector of the society
because its incorporators, officers and members are
not marginalized or underrepresented citizens since
they are actually marketers and independent re-fillers
of LPG that control 45% of the national LPG retail
market and have significant ownership interests in
various LPG refilling plants. To buttress the complaint,
FPII emphasized that the business of marketing and
refilling LPG requires substantial working capital as it
involves the purchase of LPG from importers or big oil
players in the country, establishment of refilling plants
and safety auxiliary equipments, purchase or lease of
thousands of LPG containers, mobilization of a
marketing, distribution and delivery network. FPII also
alleged that LPGMA is a mere lobby group that
espouses their own interests before the Congress and
the Department of Energy.

In response, LPGMA countered that Section 5(2),

Article VI of the 1987 Constitution does not require
that party-list representatives must be members of the
marginalized and/or underrepresented sector of the
society. It also averred that the ground cited by the
petitioners is not one of those mentioned in Section 6
of R.A. No. 7941 and that petitioners are just trying to
resurrect their lost chance to oppose the petition for
registration.13
In its first assailed Resolution dated August 5,
2010,14 the COMELEC dismissed the complaint for
two reasons. First, the ground for cancellation cited by
the petitioners is not among the exclusive
enumeration in Section 6 of R.A. No. 7941. Second,
the complaint is actually a belated opposition to
LPGMA's petition for registration which has long been
approved with finality on January 5, 2010. The ruling
was reiterated in the COMELEC Resolution dated
September 6, 201015 denying the petitioners' motions
for reconsideration.16
Pivotal to the said resolutions are the ensuing
ratiocinations of the COMELEC, viz:
LPGMA's registration was approved x x x as early as
05 January 2010. Instead of opposing said
registration or intervening therein after having been
constructively notified thereof by its publication,
petitioners waited almost four (4) entire months before
filing the instant complaint. The purpose of publication
in these kinds of cases is similar to that of land
registration cases, which is "to apprise the whole
world that such a petition has been filed and that
whoever is minded to oppose it for good cause may
do so." This belated filing x x x is an unfortunate
attempt to circumvent the obviously final and
executory nature of the Resolution dated 05 January
2010. Granting the present complaint will only reward
petitioners' inaction x x x.17 (Citations omitted)
The petitioners must be reminded that the matter has
already been ruled upon. In the Resolution
promulgated on January 5, 2010 x x x, this
Commission (First Division) has resolved to grant the
Petition for Registration of LPGMA as a sectoral
organization under the party-list system of
representation. After a thorough evaluation of the
Petition, the Commission (First Division) has

concluded that LPGMA truly represents a

marginalized and underrepresented sector. With
respect to the said conclusion, absent any
circumstance subsequent to the promulgation of the
mentioned Resolution which would call for the
cancellation of registration of LPGMA, the same can
no longer be disturbed by this Commission. To
warrant a cancellation of LPGMA's registration, there
should be a strong showing that there has been a
change in the relevant factual matters surrounding the
Petition x x x.18
Ascribing grave abuse of discretion to the COMELEC,
the petitioners now implore the Court to determine the
correctness of the COMELEC resolutions dated
August 5, 2010 and September 6, 2010.

The Arguments of the Parties

After directing the respondents to comment on the
petitions,19 the Court received on March 17, 2011
from the Office of the Solicitor General (OSG), a
Manifestation and Motion to Remand (In Lieu of
Comment).20 According to the OSG, since the
COMELEC failed to resolve the factual issue on the
qualifications of LPGMA as a registered party-list
organization, the case must be remanded to the
electoral body for summary hearing and reception of
evidence on the matter.
For its part, LPGMA retorted that another hearing
would be a superfluity because the COMELEC has
already heard and verified LPGMA's qualifications
during the proceedings for its petition for registration.
LPGMA asserts that the petitions should instead be
dismissed as they involve factual questions that
cannot be entertained in a petition for certiorari under
Rule 65 of the Rules of Court.21
On December 26, 2012, LPGMA manifested22 to the
Court that pursuant to COMELEC Resolution dated
December 13, 2012, LPGMA passed the recent
automatic review conducted by the COMELEC on the
qualifications of party-list groups. LPGMA was found
compliant with the guidelines set by law and
jurisprudence and its accreditation was retained for
purposes of the 2013 party-list elections.
Ruling of the Court

There was no valid justification for the dismissal of the

complaint for cancellation. However, in light of
COMELEC Resolution dated December 13, 2012, the
present petitions ought to be dismissed.
An opposition to a petition for registration is not a
condition precedent to the filing of a complaint for
cancellation.
Section 6, R.A. No. 7941 lays down the grounds and
procedure for the cancellation of party-list
accreditation, viz:
Sec. 6. Refusal and/or Cancellation of Registration.
The COMELEC may, motu propio or upon verified
complaint of any interested party, refuse or cancel,
after due notice and hearing, the registration of any
national, regional or sectoral party, organization or
coalition on any of the following grounds:
(1) It is a religious sect or denomination, organization
or association, organized for religious purposes;
(2) It advocates violence or unlawful means to seek
its goal;
(3) It is a foreign party or organization;
(4) It is receiving support from any foreign
government, foreign political party, foundation,
organization, whether directly or through any of its
officers or members or indirectly through third parties
for partisan election purposes;
(5) It violates or fails to comply with laws, rules or
regulations relating to elections;
(6) It declares untruthful statements in its petition;
(7) It has ceased to exist for at least one (1) year; or
(8) It fails to participate in the last two (2) preceding
elections or fails to obtain at least two per centum
(2%) of the votes cast under the party-list system in
the two (2) preceding elections for the constituency in
which it has registered.
For the COMELEC to validly exercise its statutory
power to cancel the registration of a party-list group,
the law imposes only two (2) conditions: (1) due
notice and hearing is afforded to the party-list group

concerned; and (2) any of the enumerated grounds

for disqualification in Section 6 exists.
Section 6 clearly does not require that an opposition
to the petition for registration be previously interposed
so that a complaint for cancellation can be
entertained. Since the law does not impose such a
condition, the COMELEC, notwithstanding its
delegated administrative authority to promulgate rules
for the implementation of election laws, cannot read
into the law that which it does not provide. The poll
body is mandated to enforce and administer electionrelated laws. It has no power to contravene or amend
them.23
Moreover, an opposition can be reasonably expected
only during the petition for registration proceedings
which involve the COMELEC's power to register a
party-list group, as distinguished from the entirely
separate power invoked by the complaint, which is the
power to cancel.
The distinctiveness of the two powers is immediately
apparent from their basic definitions. To refuse is to
decline or to turn down,24 while to cancel is to annul
or remove.25 Adopting such meanings within the
context of Section 6, refusal of registration happens
during the inceptive stage when an organization
seeks admission into the roster of COMELECregistered party-list organizations through a petition
for registration. Cancellation on the other hand, takes
place after the fact of registration when an inquiry is
done by the COMELEC, motu propio or upon a
verified complaint, on whether a registered party-list
organization still holds the qualifications imposed by
law. Refusal is handed down to a petition for
registration while cancellation is decreed on the
registration itself after the petition has been approved.
A resort to the rules of statutory construction yields a
similar conclusion.
The legal meaning of the term "and/or" between
"refusal" and "cancellation" should be taken in its
ordinary significance " "refusal and/or cancellation"
means "refusal and cancellation" or "refusal or
cancellation". It has been held that the intention of the
legislature in using the term "and/or" is that the word
"and" and the word "or" are to be used
interchangeably.26

The term "and/or" means that effect shall be given to

both the conjunctive "and" and the disjunctive "or" or
that one word or the other may be taken accordingly
as one or the other will best effectuate the purpose
intended by the legislature as gathered from the
whole statute. The term is used to avoid a
construction which by the use of the disjunctive "or"
alone will exclude the combination of several of the
alternatives or by the use of the conjunctive "and" will
exclude the efficacy of any one of the alternatives
standing alone.27

which involve the COMELEC's power to register, it is

wrong to impose it as a condition for the exercise of
the COMELEC's entirely separate power to cancel. As
such, the absence of an opposition to a petition for
registration cannot serve to bar any interested party
from questioning, through a complaint for
cancellation, the qualifications of a party-list group.

Hence, effect shall be given to both "refusal and

cancellation" and "refusal or cancellation" according
to how Section 6 intended them to be employed. The
word "and" is a conjunction used to denote a joinder
or union; it is pertinently defined as meaning "together
with", "joined with", "along or together with."28 The
use of "and" in Section 6 was necessitated by the fact
that refusal and cancellation of party-list registration
share similar grounds, manner of initiation and
procedural due process requirements of notice and
hearing. With respect to the said matters, "refusal"
and "cancellation" must be taken together. The word
"or", on the other hand, is a disjunctive term signifying
disassociation and independence of one thing from
the other things enumerated; it should, as a rule, be
construed in the sense in which it ordinarily implies,
as a disjunctive word.29 As such, "refusal or
cancellation", consistent with their disjunctive
meanings, must be taken individually to mean that
they are separate instances when the COMELEC can
exercise its power to screen the qualifications of
party-list organizations for purposes of participation in
the party-list system of representation.

There is no arguing that the COMELEC Resolution

dated January 5, 2010 granting LPGMA's registration
has since become final. Such finality, however,
pertains only to the Resolution itself and not to the
accreditation of LPGMA as a party-list organization.

That this is the clear intent of the law is bolstered by

the use simply of the word "or" in the first sentence of
Section 6 that "the COMELEC may, motu propio or
upon verified complaint of any interested party, refuse
or cancel, after due notice and hearing, the
registration of any national, regional or sectoral party,
organization or coalition."
Consequently, the COMELEC's conclusion that the
complaint for cancellation, filed four (4) months after
the petition was approved, is actually a belated
opposition, obliterates the distinction between the
power to register/refuse and the power to cancel.
Since an opposition may only be sensibly interposed
against a petition for registration, the proceedings for

II. The accreditation of a party-list group can never

attain perpetual and irrefutable conclusiveness
against the granting authority.

The said Resolution, as in any other resolution

granting the registration of any other organization
desirous of party-list accreditation, did nothing more
but to vest with LPGMA the right to participate in the
party- list elections, i.e. file a manifestation of its intent
to participate and have the same given due course by
the COMELEC, the right to field its nominees, the
right to exercise all that is bestowed by our election
laws to election candidates (hold campaigns, question
the canvass of election returns, etc.), and the right to
assume office should it obtain the required number of
votes. With respect to such matters, the COMELEC
resolution was already final. LPGMA's right to run, as
it did so run, during the 2010 party-list elections is
already beyond challenge.
However, the Resolution did not create in LPGMA's
favor a perpetual and indefeasible right to its
accreditation as a party-list organization. Neither did it
grant finality and indefeasibility to the factual findings
of the COMELEC on the qualifications of the group.
Both the accreditation and the facts substantiating the
same, can be reviewed and revoked at any time by
the COMELEC, motu propio, or upon the instance of
any interested party thru a complaint for cancellation,
as set forth in Section 6 of R.A. No. 7941.
Each accreditation handed by the COMELEC to
party-list organizations can be likened to the franchise
granted by Congress, thru the Securities and
Exchange Commission (SEC), to corporations or
associations created under the Corporation Code.

Franchise is a right or privilege conferred by law. It

emanates from a sovereign power and the grant is
inherently a legislative power. It may, however, be
derived indirectly from the state through an agency to
which the power has been clearly and validly
delegated. In such cases, Congress prescribes the
conditions on which the grant of a franchise may be
made.30
The power to pass upon, refuse or deny the
application for registration of any corporation or
partnership is vested with the SEC by virtue of
Presidential Decree (P.D.) No. 902-A. R.A. No 7941,
on the other hand, is the legislative act that delegates
to the COMELEC the power to grant franchises in the
form of accreditation to people's organization desirous
of participating in the party-list system of
representation.

Corporations formed under the Corporation Code

become juridical entities only when they are granted
registration by the SEC in the same way that people's
organizations obtain legal existence as a party-list
group only upon their accreditation with the
COMELEC. A party-list organization, like a
corporation, owes its legal existence to the
concession of its franchise from the State, thru the
COMELEC.

Being a mere concession, it may be revoked by the

granting authority upon the existence of certain
conditions. The power to revoke and grounds for
revocation are aptly provided in Section 6(1) of P.D.
No. 902-A,31 for corporations and Section 6 of R.A.
No. 7941 for party-list organizations.

The fact that a franchise/accreditation may be

revoked means that it can never be final and
conclusive. A fortiori, the factual findings leading to
the grant of the franchise/accreditation can never
attain finality as well. Both the accreditation and the
facts substantiating it can never attain perpetual and
irrefutable conclusiveness as against the power that

grants it. The circumstances of the grantee are

subject to constant review and the
franchise/accreditation from which it derives its
existence may be suspended or revoked at the will of
the granting authority.

The separate instances when the COMELEC can

check the qualifications of party-list groups entail
distinct statutory powers' the power to register which
includes the power to refuse registration, and the
power to cancel the registration so granted.
Necessarily then, proceedings involving the exercise
of one power is independent of the other such that
factual findings in the proceedings for a petition for
registration are not conclusive with respect to the
factual issues that may be raised in a complaint for
cancellation.

Further, it must be noted that refusal and cancellation

share similar grounds. The registration of a putative
party-list group can only be granted if none of the
disqualifications in Section 6 exists. Conversely, a
complaint for cancellation will prosper if any of the
same grounds in Section 6 is present. Inevitably then,
a negative finding of disqualification in a petition for
registration is the very same fact that will be
questioned in a complaint for cancellation. Hence, to
say that the findings leading to the grant of
registration are final and conclusive with respect to
the qualification of the party-list group will effectively
put in vain any complaint for cancellation that may be
filed. It leads to the perilous conclusion that the
registration of a party-list group, once granted, is
unassailable and perpetual which, in turn, will render
nugatory the equally existing power of the COMELEC
to cancel the same. R.A. No. 7941 could not have
contemplated such an absurdity.

The Court has recognized the COMELEC's

cancellation power in several occasions.

In Bello v. COMELEC,32 the Court confirmed that a

complaint for the cancellation of party-list registration,

aside from a petition for the disqualification of the

party-list nominee, provides a "plain, speedy and
adequate remedy", against a party-list organization
alleged to have failed to comply with Section 6 of
COMELEC Resolution No. 880733 which requires a
party-list group and its nominees to submit
documentary evidence to prove that they belong to a
marginalized and underrepresented sector.

In the recent ABC (Alliance for Barangay Concerns)

Party-List v. COMELEC,34 the Court reiterated that
Section 6 of R.A. No. 7941 validates the authority of
the COMELEC, not only to register political parties,
organizations or coalitions, but also to cancel their
registration based on the same legal grounds. Such
authority emanates from no less than Section 2(5),
Article IX-C of the Constitution, which states:

Sec. 2. The Commission on Elections shall exercise

the following powers and functions:

xxxx

(5) Register, after sufficient publication, political

parties, organizations, or coalitions which, in addition
to other requirements, must present their platform or
program of government; and accredit citizens' arms of
the Commission on Elections. Religious
denominations and sects shall not be registered.
Those which seek to achieve their goals through
violence or unlawful means, or refuse to uphold and
adhere to this Constitution, or which are supported by
any foreign government shall likewise be refused
registration.

Financial contributions from foreign governments and

their agencies to political parties, organizations,
coalitions, or candidates related to elections constitute
interference in national affairs, and, when accepted,
shall be an additional ground for the cancellation of
their registration with the Commission, in addition to

other penalties that may be prescribed by law.

(Underscoring ours)

It is the role of the COMELEC to ensure the

realization of the intent of the Constitution to give
genuine power to those who have less in life by
enabling them to become veritable lawmakers
themselves, by seeing to it that only those Filipinos
who are marginalized and underrepresented become
members of Congress under the party-list system.35
To effectively discharge this role, R.A. No. 7941
grants the COMELEC the power not only to register
party-list groups but also to review and cancel their
registration.

In ruling that the finality of its Resolution dated

January 5, 2010 stretched to the accreditation of
LPGMA, the COMELEC practically enfeebled and
denied its own power to cancel what it is exclusively
empowered to grant.

Under paragraph 5 of Section 6, a party-list

organization may be disqualified on the ground that its
officers and members do not belong to the
marginalized and underrepresented sector.

The allegation in the complaint for cancellation, that

the incorporators, officers and members of LPGMA do
not belong to the marginalized or underrepresented
sector, is within the ambit of paragraph 5 of Section 6.

In Ang Bagong Bayani-OFW Labor Party v.

COMELEC,36 the Court explained that the "laws,
rules or regulations relating to elections" referred to in
paragraph 5 include Section 2 of R.A. No. 7941,37
which declares the underlying policy for the law that
marginalized and underrepresented Filipino citizens
become members of the House of Representatives,
viz:

Note should be taken of paragraph 5, which

disqualifies a party or group for violation of or failure
to comply with election laws and regulations. These
laws include Section 2 of RA 7941, which states that
the party-list system seeks to "enable Filipino citizens
belonging to marginalized and underrepresented
sectors, organizations and parties x x x to become
members of the House of Representatives." A party or
an organization, therefore, that does not comply with
this policy must be disqualified.38

The party-list system of representation was crafted for

the marginalized and underrepresented and their
alleviation is the ultimate policy of the law. In fact,
there is no need to categorically mention that "those
who are not marginalized and underrepresented are
disqualified." As state policy, it must permeate every
discussion of the qualification of political parties and
other organizations under the party-list system.39

All told, the COMELEC committed grave abuse of

discretion in dismissing the complaint for cancellation
of LPGMA's party-list accreditation. In the ordinary
course of procedure, the herein complaint should be
remanded to the COMELEC considering that the poll
body did not proceed to make a proximate
determination of the present circumstances of
LPGMA's qualifications. In view, however of
superseding incidents, the issue involved in the
complaint for cancellation can be deemed to have
been already settled and a remand to the COMELEC
would only be circuitous and dilatory.

On August 2, 2012, the COMELEC issued Resolution

No. 951340 which subjected to summary evidentiary
hearings all existing and registered party-list groups,
including LPGMA, to assess their continuing
compliance with the requirements of R.A. No. 7941
and the guidelines set in Ang Bagong Bayani. The
Resolution stated, among others, that the registration
of all non-compliant groups shall be cancelled.
LPGMA submitted to a factual and evidentiary hearing
before the COMELEC en banc on August 28, 2012.

On December 13, 2012, the COMELEC issued a

Resolution41 identifying and listing the party-list
groups found to have complied with the qualifications
set by law and jurisprudence. The list of retained
party-list groups included LPGMA. Pertinent portions
of the Resolution read:

After exhaustive deliberation and careful review of the

records, the Commission en bane finds the following
groups accredited with the party-list system compliant
with the law and jurisprudence, and thus resolves to
retain their registration for purposes of allowing them
to participate in the 2013 elections. These groups and
organizations, as well as their respective nominees,
possess all the qualifications and none of the
disqualifications under the law. Moreover, these
groups belong to the marginalized and
underrepresented sectors they seek to represent;
they have genuinely and continuously supported their
members and constituents, as shown by their track
records.

In order to streamline the list of accredited groups that

will be allowed to participate in the 2013 elections,
both the existing groups retained, and the new
applicants whose petitions for registration have been
granted, shall be listed herein. The Commission
however finds it necessary to identify the groups
retained or allowed but with dissent from some of the
Commissioners, thus:

35 LPG Marketers Association, Inc.

LPGMA
x x x x42

Evidently, the COMELEC has already determined and

declared that the present factual circumstances of
LPGMA meet the qualifications imposed by law on
party-list groups. It will be a needless roundabout to
still remand the complaint to the COMELEC for it to
determine anew the present state of LPGMA's
qualifications. No useful purpose will be served
thereby and it will just be a tedious process of hearing
the factual and evidentiary matters of LPGMA's
qualifications again. The COMELEC in its Resolution
dated December 13, 2012 has passed upon the issue
and all other relevant questions raised in the
complaint.

WHEREFORE, in view of all the foregoing, the

consolidated petitions are hereby DISMISSED.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

xxxx

WE CONCUR:

Table 2

MARIA LOURDES P. A. SERENO

Chief Justice

EXISTING PARTY-LIST RETAINED (With dissent)

PARTY-LIST
ACRONYM
xxxx

ANTONIO T. CARPIO
Associate Justice

PRESBITERO J. VELASCO, JR.

JOSE CATRAL MENDOZA*

Associate Justice

Associate Justice

3 Id. at 85-90.

TERESITA J. LEONARDO-DE CASTRO

ESTELA M. PERLAS-BERNABE

Associate Justice

Associate Justice

4 Total Gas for Antonio Dayao, Petron Gasul for

Adelio Capco and Shellane for Rolando Ramirez; id.
at 260.

ARTURO D. BRION

MARVIC MARIO VICTOR F. LEONEN

5 Rollo (G.R. No. 193704), p. 678.

Associate Justice

Associate Justice
6 Id. at 192.

DIOSDADO M. PERALTA
Associate Justice

C E R T I F I C AT I O N

7 Rollo (G.R. No. 193643), p. 148.

LUCAS P. BERSAMIN

Pursuant to Section 13, Article VIII of the Constitution,

I certify that the conclusions in the above Decision
had been reached in consultation before the case was
assigned to the writer of the opinion of the Court.

8 Rollo (G.R. No. 193704), pp. 77-190.

Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

9 Rollo (G.R. No. 193643), pp. 1163-1168, 12381244.

MARIA LOURDES P. A. SERENO

Chief Justice

10 Id. at 246-252.

ROBERTO A. ABAD
11 Id. at 260-269.

Associate Justice
Footnotes
MARTIN S. VILLARAMA, JR.
Associate Justice

JOSE PORTUGAL PEREZ

* On leave.

12 Rollo (G.R. No. 193704), pp. 678-688. The motion

for intervention was approved in COMELEC
Resolution dated August 5, 2010, rollo (G.R. No.
193643), pp. 65-70.

1 Per Resolution dated October 12, 2010; rollo (G.R.

No. 193704), p. 835.

13 Rollo (G.R. No. 193643), pp. 601-609.

2 Rollo (G.R. No. 193643), pp. 65-70.

14 Id. at 65-70.

Associate Justice

15 Id. at 85-90.

27 Agpalo, STATU TO RY CONSTRUCTION, p. 206

(2003), citing A.E. Davidson v. F. W. Wollworth Co.,
198 SE 738, 118 ALR 1363 (1938); Annotations, 118
ALR 1367 (1939); China Banking Corporation v.
HDMF, id. at 928.

16 For the individual petitioners, id. at 105-117; For

petitioner FPII, rollo (G.R. No. 193704), pp. 711-718.

17 Id. at 68-69.

18 Id. at 89.

which would amount to a grave violation of its

franchise;

[4] Continuous inoperation for a period of at least five

(5) years;

28 Id., citing the concurring opinion of Justice Castro,

Phil. Constitution Ass'n., Inc. v. Mathay, 124 Phil. 890,
924 (1966).

[5] Failure to file by-laws within the required period;

29 Id. at 204; see also Heirs of George Y. Poe v.

Malayan Insurance Company, Inc., G.R. No. 156302,
April 7, 2009, 584 SCRA 152, 168.

[6] Failure to file required reports in appropriate forms

as determined by the Commission within the
prescribed period;

30 Del Mar v. PAGCOR, 400 Phil. 307, 330 (2000).

(Citations omitted)

32 G.R. No. 191998, December 7, 2010, 637 SCRA

59, 71.

31 P.D. No. 902-A, Sec. 6.

33 Section 6 of the Resolution provides that the partylist group and the nominees must submit
documentary evidence to duly prove that the
nominees truly belong to the marginalized and
underrepresented sector/s, and to the sectoral party,
organization, political party or coalition they seek to
represent. It likewise provides that the COMELEC
Law Department shall require party-list groups and
nominees to make the required documentary
submissions, if not already complied with prior to the
effectivity of the Resolution, not later than three (3)
days from the last day of filing of the list of nominees.

19 Id. at 1109-1110.

20 Id. at 1212-1224.

21 Id. at 1120-1142.
xxxx
22 Id. at 1364-1369.

23 Veterans Federation Party v. Commission on

Elections, 396 Phil. 419, 424-425 (2000).

(i) To suspend, or revoke, after proper notice and

hearing, the franchise or certificate of registration of
corporations, partnerships or associations, upon any
of the grounds provided by law, including the
following:

24 ROGET'S II, The New Thesaurus (1988), p. 400.

[1] Fraud in procuring its certificate of registration;

34 G.R. No. 193256, March 22, 2011, 646 SCRA 93,

103-104.

[2] Serious misrepresentation as to what the

corporation can do or is doing to the great prejudice of
or damage to the general public;

35 Ang Bagong Bayani-OFW Labor Party v.

COMELEC, 412 Phil. 308, 334 (2001).

25 Id. at 72.

26 See China Banking Corporation v. HDMF, 366 Phil.

913, 929 (1999).

[3] Refusal to comply or defiance of any lawful order

of the Commission restraining commission of acts

36 Id.

37 R.A. No. 7941, Sec. 2. Declaration of Policy. The

State shall promote proportional representation in the
election of representatives to the House of
Representatives through a party-list system of
registered national, regional and sectoral parties or
organizations or coalitions thereof, which will enable
Filipino citizens belonging to the marginalized and
underrepresented sectors, organizations and parties,
and who lack well-defined political constituencies but
who could contribute to the formulation and
enactment of appropriate legislation that will benefit
the nation as a whole, to become members of the
House of Representatives . Towards this end, the
State shall develop and guarantee a full, free and
open party system in order to attain the broadest
possible representation of party, sectoral or group
interests in the House of Representatives by
enhancing their chances to compete for and win seats
in the legislature, and shall provide the simplest
scheme possible.

38 Supra note 35, at 344.

39 Id.

40 In the matter of: (1) the automatic review by the

Commission En Banc of Pending Petitions for
Registration of Party-List Groups; and (2) setting for
hearing the accredited party-list groups or
organizations which are existing and which have filed
manifestations of intent to participate in the 2013
national and local elections.

41 A certified true copy thereof was submitted to the

Court by LPGMA on December 26, 2012; rollo (G.R.
No. 193643), pp. 1370-1384.

SEPARATE OPINION

ABAD, J.:

I vote to dismiss the petitions but for other reasons.

On May 21, 2009 respondent LPG Marketers
Association, Inc. (LPGMA) filed with respondent
Commission on Elections (COMELEC) a petition for
registration as a sectoral organization1 so it could
take part in the 2010 party-list elections.2 LPGMA
claimed that it is an organization of both consumers
and small industry players who- advocate, among
others, an equal and level playing field in the liquefied
petroleum gas or LPG industry with the view to
making quality, safe, and reasonably priced gas and
oil products accessible to the people.

In due course, the COMELEC verified, through its

Regional Election Director in the National Capital
Region, LPGMA's existence in the constituency for
which it seeks registration. Following this, the
COMELEC ordered the publication of LPGMA's
petition for registration to give interested parties the
opportunity to be heard on the registration. Following
such publication, the COMELEC conducted a hearing
in which it verified the legitimacy and existence of
LPGMA, its track record and past activities, the
qualifications of its members, and its financial
capability to launch and sustain a nationwide
campaign in the 2010 party-list elections. On January
5, 2010 the COMELEC's First Division granted
LPGMA's petition for registration.3

42 Id. at 1381-1382.
Over three months later or on April 12, 2010
petitioners Antonio D. Dayao, Rolando P. Ramirez,
and Adelio R. Capco filed with the COMELEC a

complaint for cancellation of LPGMA's party-list

registration.4 Petitioners alleged that the
incorporators, trustees, and officers of LPGMA were
marketers and independent LPG refillers who had a
45% share in the national LPG retail market. Hence,
the COMELEC could not consider LPGMA members
marginalized and constituted an underrepresented
sector of society. On May 6, 2010, four days before
the elections, petitioner

Federation of Philippine Industries, Inc. intervened

and adopted petitioners' complaint.5

On August 5, 2010 the COMELEC First Division

dismissed petitioners' complaint on the grounds,6
first, that petitioners failed to cite any of the grounds
for cancellation of registration enumerated in Section
6 of Republic Act (R.A.) 7941;7 and second, that
petitioners filed a late opposition to LPGMA's
registration despite notice by publication of its petition
in two newspapers of general circulation. Petitioners
waited more than three months after the approval of
registration before filing their opposition.

Petitioners moved for reconsideration of the First

Division's ruling but the COMELEC En Banc denied
the same on September 6, 2010,8 hence, these
consolidated petitions.

The Issue Presented

The issue presented in these consolidated petitions

is: whether or not the COMELEC gravely abused its
discretion in dismissing petitioners' complaint for the
cancellation of the party-list registration of LPGMA for
the reasons a) that the complaint failed to state a
proper ground for cancellation of registration; and b)
the complaint was filed out of time.

Discussion

In his ponencia, Justice Bienvenido L. Reyes would

have the Court remand the case to the COMELEC for
it to conduct summary evidentiary hearings on the
qualifications of LPGMA as a party-list organization
had it not been for the fact that the COMELEC issued
a Resolution dated

December 13, 2012 finding LPGMA compliant with

the qualifications set by law and jurisprudence. The
ponencia theorizes that the factual findings in the
petition for registration of LPGMA are not final and
conclusive on the factual issues raised in the
complaint for the cancellation of its registration.

The ponencia points out that it did not matter that

petitioners failed to file from the beginning an
opposition to LPGMA's application for registration as
party-list organization. The ponencia explains that (a)
since Section 6 of R.A. 7941 does not require that the
party who initiates an action for cancellation of
registration must have previously opposed the
registration and (b) since the same Section 6 sets no
period for the filing of a complaint for cancellation of
registration, it follows that petitioners could file their
complaint for cancellation at any time and that the
COMELEC was duty bound to hear and adjudicate
the same.

Section 6 of R.A. 7941 provides:

Section 6. Refusal and/or Cancellation of

Registration. The COMELEC may, motu propio or
upon verified complaint of any interested party, refuse
or cancel, after due notice and hearing, the
registration of any national, regional or sectoral party,
organization or coalition on any of the following
grounds:

(1) It is a religious sect or denomination, organization

or association, organized for religious purposes;

(2) It advocates violence or unlawful means to seek

its goal;

(3) It is a foreign party or organization;

(4) It is receiving support from any foreign

government, foreign political party, foundation,
organization, whether directly or through any of its
officers or members or indirectly through third parties
for partisan election purposes;

the power to refuse registration or order its

cancellation on specified grounds. The detailed rules
that govern refusal or cancellation of registration are
found in the COMELEC Rules of Procedure.

Obviously, the power to refuse registration provided in

Section 6 above refers to the action that the
COMELEC may take in relation to an original petition
for registration as party-list organization under Section
5 of R.A. 7941.9 To "refuse" registration is to presume
that a petition for registration has been made. On the
other hand, it is implicit that the power to cancel
registration refers to the action that the COMELEC
may take after it has already granted registration. The
ponencia is right that an action for cancellation of
registration previously granted is allowed under
Section 6.

(7) It has ceased to exist for at least one (1) year; or

But it cannot be implied from the right to bring an

action to cancel registration under Section 6 that a
COMELEC resolution granting registration can never
become final. The COMELEC exercises adjudicative
power when it grants or refuses registration or
cancels one that it has previously granted.10
Consequently, like the exercise of any adjudicative
power that the law vests in the COMELEC, its ruling,
which either grants or refuses registration or cancels
one previously granted, can attain finality after 15
days following its promulgation.11

(8) It fails to participate in the last two (2) preceding

elections or fails to obtain at least two per centum
(2%) of the votes cast under the party-list system in
the two (2) preceding elections for the constituency in
which it has registered.

Can the finality of a ruling granting registration be

reconciled with the provision of R.A. 7941 which
allows the filing of an action for cancellation of
registration that the COMELEC has previously
granted?

But Section 6 above does not, contrary to the

ponencia's thesis, set rules of procedure from which
one can draw inferences based on what such rules
fail to expressly provide. Section 6 is pure substantive
law. It does not pretend to prescribe a comprehensive
and unique procedure designed for the cancellation of
registration of a party-list organization. What it
substantially does is simply vest on the COMELEC

The answer is yes. The grounds for cancellation of

registration assume that the grantee committed fraud
or misrepresentation in obtaining registration. For
instance, the COMELEC rules require a party-list
applicant to state in its verified petition "(8) That it is
not a religious sect or denomination," a ground for
refusing or cancelling registration. Religious sects or

(5) It violates or fails to comply with laws, rules or

regulations relating to elections;

(6) It declares untruthful statements in its petition;

denominations are disqualified from running as partylist organizations. If it turns out that the grantee of
registration lied in its petition because it in fact merely
fronts for a religious sect, any voter can file an action
for the cancellation of its registration. A decision
fraudulently obtained cannot become final.

Here, LPGMA, as an applicant in the original petition

for registration, carried the burden of proving the
affirmative of its claim that it was entitled to
registration as a party-list organization since it
represented a marginalized and underrepresented
sector. Thus, although petitioners did not intervene to
oppose LPGMA's application for registration, the
COMELEC heard the affirmative issue, which the law
itself tendered, regarding the marginalized and
underrepresented status of LPGMA's members. The
COMELEC received evidence on that issue and
resolved the same with a ruling that LPGMA met the
requirement. And, when no one appealed from that
ruling, the same became final and executory.

SOLID HOMES, INC., Petitioner, versus SPOUSES

ANCHETA K. TAN and CORAZON DE JESUS TAN,
Respondents.
GARCIA, J.:

In this appeal by way of a petition for review

on certiorari under Rule 45 of the Rules of Court,
petitioner Solid Homes, Inc. urges us to nullify and set
aside the following issuances of the Court of Appeals
in CA-G.R. SP No. 53443 and 55324, to wit:

1. Decision dated May 23, 2000,[1] setting aside an

earlier decision of the Office of the President in a
complaint for breach of obligation filed by the herein
respondents against the petitioner in connection with
the sale of a subdivision lot; and

2. Resolution dated September 12, 2000,[2] denying

petitioner's motion for reconsideration.
Notably, petitioners did not claim in its complaint for
cancellation that LPGMA submitted falsified evidence
that misled the COMELEC in granting its registration.
Petitioners simply wanted the COMELEC to reopen
the registration proceeding, retry an issue it had
already adjudicated based on evidence, require
LPGMA to once again prove its qualifications, and
allow petitioners to present evidence which, ironically,
were already available to them at the time the original
registration was being heard.

The LPGMA won in the May 10, 2010 elections, the

18th nationwide among the great number of sectoral
party-list organizations that ran. This is the clearest
affirmation of its qualification.

ACCORDINGLY, I vote to DISMISS the consolidated

petitions for failure to show that the COMELEC
committed grave abuse of discretion in issuing its
challenged orders.

The material facts, undisputed by the parties, may be

briefly stated, as follows:

On April 7, 1980, petitioner Solid Homes, Inc., sold to

the spouses Joe Uy and Myrna Uy a subdivision lot
with an area of 1,069 square meters, more particularly
identified as Lot 18, Block 2, located at petitioner's
Loyola Grand Villas Subdivision, Quezon City.
Thereafter, the lot was registered in the name of the
Uys under Transfer Certificate of Title (TCT) No.
280963/T-1409 of the Register of Deeds of Quezon
City.

Sometime in February, 1985, the spouses Uy sold the

same lot to herein respondents, the spouses Ancheta
K. Tan and Corazon de Jesus-Tan, by reason of which
the former title covering the lot was cancelled and
replaced by TCT No. RT-14465 (327754) in
respondents' name.

From then on, respondents visited their property a

number of times, only to find out the sad state of
development thereat. There was no infrastructure and
utility systems for water, sewerage, electricity and
telephone, as announced in the approved plans and
advertisements of the subdivision. Worse, squatters
occupy their lot and its surrounding areas. In short,
there has been no development at all.

Accordingly, in a letter dated December 18, 1995,

respondents demanded on petitioner to provide the
needed utility systems and clear the area of squatters
and other obstructions by the end of January, 1996 to
enable them to start the construction of their house
thereon and to allow other lot owners in the area a full
access to and peaceful possession of their respective
lots, conformably with P.D. No. 957 which requires an
owner or developer of a subdivision project to develop
the same within one year from the issuance of its
license.

Having received no reply from petitioner, respondents

filed with the Field Office of the Housing and Land
Use Regulatory Board (HLURB), NCR a complaint for
specific performance and damages therein praying,
inter alia, that petitioner be ordered to provide the
needed facilities in the premises and rid the same of
squatters; or, in the alternative, for petitioner to
replace respondents' property with another lot in the
same subdivision where there are facilities and sans
squatters.

After due proceedings, the Housing and Land Use

Arbiter, in a decision dated September 17, 1996,[3]
rendered judgment for the respondents by directing
petitioner:

a. to perform its obligation to provide subdivision

facilities in the subject premises and to rid the
premises of squatters. In the alternative, at the option
of complainants xxx to replace subject lot with a lot of

similar size and with available facilities, located in the

subject subdivision.

b. to pay complainants P20,000.00 as and by way of

attorney's fees.

In the same decision, the Arbiter dismissed the

complaint against petitioner's co-defendant, Purita
Soliven.

Dissatisfied, petitioner went on appeal to the HLURB

Board of Commissioners, which, in a decision dated
April 16, 1997,[4] affirmed that of the Arbiter.

From there, petitioner elevated the case to the Office

of the President (O.P.).

In a decision[5] dated June 3, 1999, the O.P., thru

then Executive Secretary Ronaldo B. Zamora,
affirmed with modification the appealed decision of
the HLURB Board of Commissioners, thus:

WHEREFORE, premises considered, the first

paragraph of the decision appealed from is
hereby AFFIRMED with the modification that in case
Solid Homes, Inc. fails to replace subject lot with a lot
of similar size and with available facilities located in
the subdivision, because it had already sold or
transferred all of its properties in the subdivision, it
shall pay spouses Ancheta Tan and Corazon Tan the
total amount received from them as purchase price,
with legal rate of interest from February 1985, until
fully paid. Save for this modification, the decision
appealed from is hereby AFFIRMED.

SO ORDERED (Italics, ours).

On June 25, 1999, respondents filed a motion for

partial reconsideration of the aforementioned
decision, praying for the deletion of that portion
thereof giving petitioner the option of merely paying
them the purchase price with interest in the event
petitioner "fails to replace subject lot with a lot of
similar size and with available facilities located in the
subdivision, because it had already sold or transferred
all of its properties in the subdivision." Respondents
argued that it would be more in accord with equity and
fair play if they will be paid the fair market value of the
lot in question and not merely its purchase price,
should there be no available lot with facilities in the
area.

However, in a resolution dated September 22, 1999,

[6] O.P. denied respondents' motion.

Both parties then went to the Court of Appeals via

their respective petitions for review, thereat separately
docketed as CA- G.R. SP No. 53443 (for petitioners)
and CA-G.R. SP No. 55324 (for respondent).
Pursuant to Section 1, Rule 31 of the Rules of the
Court, the appellate court ordered the consolidation of
the two (2) petitions.

As stated at the threshold hereof, the Court of

Appeals, in its consolidated decision dated May 23,
2000,[7] set aside that of the O.P. and affirmed the
earlier decision dated April 16, 1997 of the HLURB
Board of Commissioners, but subject to the
modification that petitioner shall pay respondents
the current market value of the lot, not merely its
purchase price, should there be no more available
lots with facilities in petitioner's Loyola Grand Villas
Subdivision. We quote the decretal portion of the
appellate court's decision:

WHEREFORE, Premises Considered, the assailed

Decision dated 03 June 1999 is hereby SET
ASIDE and the Decision of the HLURB dated 16 April
1997 is herebyAFFIRMED subject to the
modification that if there is no more available lot in

Loyola Grand Villas to replace subject lot, Solid

Homes, Inc. should pay the spouses Tan the current
market value of their lot.

SO ORDERED.

This time, petitioner moved for reconsideration but its

motion was denied by the same court in its resolution
of September 12, 2000.[8]

Hence, petitioner's present recourse, contending that

the Court of Appeals erred -

1. XXX IN RULING THAT PRESCRIPTION HAS NOT

SET-IN;

2. XXX IN APPLYING THE PRINCIPLE ON EQUITY

AS AGAINST POSITIVE LAW TO THE PREJUDICE
OF HEREIN PETITIONER; AND

3. XXX IN RULING THAT PETITIONER SHOULD

PAY RESPONDENTS THE CURRENT MARKET
VALUE OF THE LOT IN QUESTION.

We DENY.

The errors assigned actually simmered down to only

two (2) issues, namely: (1) whether or not
respondents' right to bring the instant case against
petitioner has already prescribed; and (2) in the event
respondents opt to rescind the contract, should
petitioner pay them merely the price they paid for the
lot plus interest or the current market value thereof.

In the matter of prescription, it is petitioner's posture

that respondents' right to bring the action against it
has already prescribed, arguing that the 10-year
prescriptive period therefor should be reckoned from
April 7, 1980 when petitioner originally sold the lot in
question to the spouses Joe Uy and Myrna Uy, or, at
the latest from February, 1985, when respondents
acquired the same lot from the Uy spouses. Hence,
and as respondents' action was filed with the HLURB
Field Office only on April 1, 1996 or after more than
ten (10) years, it follows that the same was filed out of
time and, therefore, ought to have been dismissed.

We disagree.

There can be no debate at all on the legal postulate

that the prescriptive period for bringing action for
specific performance, as here, prescribes in ten (10)
years. This is so provided in Article 1144 of the Civil
Code. What we cannot agree on with the petitioner,
and about which petitioner is in serious error, is its
submission that the 10-year prescriptive period should
commence either on April 7, 1980, when petitioner
originally sold the lot to spouses Uy; or in February,
1985, when the respondents thereafter bought the
same lot from the Uy couple. Obviously, petitioner
misread Article 1144 which specifically provides that
the 10-year period therein referred to commences to
run only from the time the right of action accrues. We
quote in full the codal provision relied upon by
petitioner:

Article 1144. The following actions must be brought

within ten years from the time the right of action
accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

If not on a written contract, petitioner's obligation to

introduce improvements on the area in question
arises from law, more specifically P.D. 957, as
amended by P.D. 1216, Section 31 of which
pertinently reads:

SECTION 31. Roads, Alleys, Sidewalks and Open

Spaces. - The owner as developer of a subdivision
shall provide adequate roads, alleys and sidewalks.
For subdivision projects one (1) hectare or more, the
owner or developer shall reserve thirty percent (30%)
of the gross area for open space.

The next inquiry, then, is when the respondents'

cause of action accrued. Our earlier ruling in Banco
Filipino Savings and Mortgage Bank vs. CA[9]
provides the answer:

Thus, the period of prescription of any action is

reckoned only from the date the cause of action
accrued. And a cause of action arises when that
which should have been done is not done, or that
which should not have been done is done. The period
should not be made to retroact to the date of
execution of the contract on January 15, 1975 as
claimed by the petitioner for at that time, there would
be no way for the respondents to know of the violation
of their rights. The Court of Appeals therefore
correctly found that respondents' cause of action
accrued on October 30, 1978, the date they received
the statement of account showing the increased rate
of interest, for it was only from that moment that they
discovered the petitioner's unilateral increase thereof.
We quote with approval the pertinent portions of the
Court of Appeals decision as follows:

It is the legal possibility of bringing the action that

determines the starting point for the computation of
the period of prescription.[10] In fine, the ten-year
prescriptive period is to be reckoned from the accrual

of the Appellee's right of action, not necessarily on the

very date of the execution of the contracts subject of
the action[11]

In law, a cause of action exists when the following

requisites concur, to wit: (1) a right in favor of the
plaintiff by whatever means and under whatever law it
arises or is created; (2) an obligation on the part on
the defendant to respect such right; and (3) an act or
omission on the part of such defendant violative of the
right of the plaintiff.[12]

Time and again, we have emphasized that it is only

upon the happening of the last element when it can
be said that a cause of action has arisen. In short, it is
from the time an act is performed or an omission
incurred which is violative of the plaintiff's right, that
signals the accrual of a cause of action. And it is from
that time that the 10-year prescriptive period
commences to run.

Here, it was only on December 18, 1995 when

respondents made a written demand upon petitioner
to construct subdivision roads, put up utility facilities
and rid the premises of squatters, obligations which
are unquestionably in the nature of an obligation to
do. And under Article 1169[13] of the Code, a party
who is under obligation to do something incurs delay
only from the time that the obligee demands, either
judicially or extrajudicially, for the fulfillment of the
obligation.

Parenthetically, and as we have said in Social

Security System vs. Moonwalk Development and
Housing Corporation, et al.,[14] an obligor violates his
obligation to the obligee from the time the latter made
a demand for performance, which demand also marks
the point of time when the former incurs mora or
delay:

The debtor, therefore, violates the obligation in point

of time if there is mora or delay. Now, there is no mora

or delay unless there is a demand. It is noteworthy

that in the present case during all the period when the
principal obligation was still subsisting, although there
were late amortizations there was no demand made
by the creditor, plaintiff-appellant for the payment of
the penalty. Therefore up to the time of the letter of
plaintiff-appellant there was no demand for the
payment of the penalty, hence the debtor was not in
mora in the payment of the penalty.

Hence, absent any demand from the obligee, the

obligor does not incur delay. And so long as the
obligor does not incur in delay, he cannot be said to
be guilty of some omission violative of the obligee's
rights. Consequently, as long as the obligor is not
guilty of some omission violative of the obligee's
rights, the latter has no cause of action against the
former. As a result, the prescriptive period within
which the obligee may bring an action against the
obligor does not commence to run until a demand is
made.

With the reality that in this case, respondents made

their written demand upon petitioner to perform what
is incumbent upon it only on December 18, 1995, it
was only from that date when the 10-year prescriptive
period under Article 1144 commenced to run. And
since respondents' complaint for specific performance
was filed with the Field Office of the HLURB only on
April 1, 1996, or less than four (4) months after the
date of their demand, petitioner's reliance on
prescription of action is simply without any leg to
stand on.

availed of only in the absence of and never against

statutory law or judicial rules of procedure. It then
invokes Article 1385 of the New Civil Code, which
provides:

Article 1385. Rescission creates the obligation to

return the things which were the object of the
contract, together with their fruits, and the price with
its interests; consequently, it can be carried out only
when he who demands rescission can return
whatever he may be obliged to restore.

On surface, petitioner's argument appears infallible.

However, a closer look at our laws and the reason
and spirit behind their enactment, as well as
established jurisprudence, negates petitioner's thesis.

It is true that this Court have, in the past, applied the

provision of Article 1385 to cases of rescission due to
breach of obligation under Article 1191.[15] But this
notwithstanding, the Court finds no reason to alter the
ruling of the Court of Appeals.

In many instances, this Court has refused to apply the

literal import of a particular provision of law when to
do so would lead to unjust, unfair and absurd results.
After all, it is the function of courts to see to it that
justice is dispensed, fairness is observed and
absurdity prevented. So it is that in Commissioner of
Internal Revenue vs. Solidbank Corporation,[16] we
made the following pronouncement:

This brings us to the second question.

Petitioner submits as erroneous the appellate court's

ruling that "[e]quity and justice dictate that the injured
party should be paid the market value of the lot,
otherwise, respondents Solid Homes, Inc. & Purita
Soliven would enrich themselves at the expense of
herein lot owners when they sell the same lot at the
present market value". To petitioner, equity may be

A literal application of any part of a statute is to be

rejected if it will operate unjustly, lead to absurd
results, or contradict the evident meaning of the
statute taken as a whole. Unlike the CA, we find that
the literal application of the aforesaid sections of the
Tax Code and its implementing regulations does not
operate unjustly or contradict the evident meaning of
the statute taken as a whole. Neither does it lead to
absurd results. Indeed, our courts are not to give
words meanings that would lead to absurd or

unreasonable consequences. We have repeatedly

held thus:

xxx [Statutes should receive a sensible construction,

such as will give effect to the legislative intention and
so as to avoid an unjust or an absurd conclusion.

Were we to follow the letter of Article 1385, we will in

effect be paving the way to an absurd situation
whereby subdivision developers who have reneged
on their contractual and legal obligation to provide
utility systems and facilities for the use of subdivision
lot owners may themselves profit from their very own
wrongs and shortcomings. In the curt language of the
Court of Appeals, to which we are in full accord:

Indeed, there would be unjust enrichment if

respondents Solid Homes, Inc. & Purita Soliven are
made to pay only the purchase price plus interest. It is
definite that the value of the subject property already
escalated after almost two decades from the time the
petitioner paid for it. Equity and justice dictate that the
injured party should be paid the market value of the
lot, otherwise, respondents Solid Homes, Inc. & Purita
Soliven would enrich themselves at the expense of
herein lot owners when they sell the same lot at the
present market value. Surely, such a situation should
not be countenanced for to do so would be contrary to
reason and therefore, unconscionable. Over time,
courts have recognized with almost pedantic
adherence that what is inconvenient or contrary to
reason is not allowed in law.

The foregoing scenario becomes even more

intolerable when it is considered that P.D. 959 was
issued precisely as a measure against subdivision
owners, developers, operators and/or sellers who
reneged on their obligation to provide the needed
utility systems and facilities in their subdivisions. As
expressed in one of the decree's whereas clauses:

WHEREAS, numerous reports reveal that many real

estate subdivision owners, developers, operators
and/or sellers have reneged on their representations
and obligations to provide and maintain properly
subdivision roads, drainage, sewerage, water
systems, lighting systems, and other similar basic
requirements, thus endangering the health and safety
of home and lot buyers.

WHEREFORE, the instant petition is DENIED and the

assailed decision and resolution of the Court of
Appeals AFFIRMED.

SOUTHERN CROSS CEMENT CORPORATION,

Petitioner, versus THE PHILIPPINE CEMENT
MANUFACTURERS CORP., THE SECRETARY OF
THE DEPARTMENT OF TRADE & INDUSTRY, THE
SECRETARY OF THE DEPARTMENT OF FINANCE,
and THE COMMISSIONER OF THE BUREAU OF
CUSTOMS, Respondents.
Tinga, J.:
"Good fences make good neighbors," so observed
Robert Frost, the archetype of traditional New
England detachment. The Frost ethos has been
heeded by nations adjusting to the effects of the
liberalized global market.[1] The Philippines, for one,
enacted Republic Act (Rep. Act) No. 8751 (on the
imposition of countervailing duties), Rep. Act No.
8752 (on the imposition of anti-dumping duties) and,
finally, Rep. Act No. 8800, also known as the
Safeguard Measures Act ("SMA")[2] soon after it
joined the General Agreement on Tariff and Trade
(GATT) and the World Trade Organization (WTO)
Agreement.[3]
The SMA provides the structure and mechanics for
the imposition of emergency measures, including
tariffs, to protect domestic industries and producers
from increased imports which inflict or could inflict
serious injury on them.[4] The wisdom of the policies
behind the SMA, however, is not put into question by
the petition at bar. The questions submitted to the
Court relate to the means and the procedures
ordained in the law to ensure that the determination of
the imposition or non-imposition of a safeguard

measure is proper.
Antecedent Facts
Petitioner Southern Cross Cement Corporation
("Southern Cross") is a domestic corporation engaged
in the business of cement manufacturing, production,
importation and exportation. Its principal stockholders
are Taiheiyo Cement Corporation and Tokuyama
Corporation, purportedly the largest cement
manufacturers in Japan.[5]
Private respondent Philippine Cement Manufacturers
Corporation[6] ("Philcemcor") is an association of
domestic cement manufacturers. It has eighteen (18)
members,[7] per Record. While Philcemcor heralds
itself to be an association of domestic cement
manufacturers, it appears that considerable equity
holdings, if not controlling interests in at least twelve
(12) of its member-corporations, were acquired by the
three largest cement manufacturers in the world,
namely Financiere Lafarge S.A. of France, Cemex
S.A. de C.V. of Mexico, and Holcim Ltd. of
Switzerland (formerly Holderbank Financiere Glaris,
Ltd., then Holderfin B.V.).[8]
On 22 May 2001, respondent Department of Trade
and Industry ("DTI") accepted an application from
Philcemcor, alleging that the importation of gray
Portland cement[9] in increased quantities has
caused declines in domestic production, capacity
utilization, market share, sales and employment; as
well as caused depressed local prices. Accordingly,
Philcemcor sought the imposition at first of
provisional, then later, definitive safeguard measures
on the import of cement pursuant to the SMA.
Philcemcor filed the application in behalf of twelve
(12) of its member-companies.[10]
After preliminary investigation, the Bureau of Import
Services of the DTI, determined that critical
circumstances existed justifying the imposition of
provisional measures.[11] On 7 November 2001, the
DTI issued an Order, imposing a provisional measure
equivalent to Twenty Pesos and Sixty Centavos
(P20.60) per forty (40) kilogram bag on all
importations of gray Portland cement for a period not
exceeding two hundred (200) days from the date of
issuance by the Bureau of Customs (BOC) of the
implementing Customs Memorandum Order.[12] The

corresponding Customs Memorandum Order was

issued on 10 December 2001, to take effect that
same day and to remain in force for two hundred
(200) days.[13]
In the meantime, the Tariff Commission, on 19
November 2001, received a request from the DTI for
a formal investigation to determine whether or not to
impose a definitive safeguard measure on imports of
gray Portland cement, pursuant to Section 9 of the
SMA and its Implementing Rules and Regulations. A
notice of commencement of formal investigation was
published in the newspapers on 21 November 2001.
Individual notices were likewise sent to concerned
parties, such as Philcemcor, various importers and
exporters, the Embassies of Indonesia, Japan and
Taiwan, contractors/builders associations, industry
associations, cement workers' groups, consumer
groups, non-government organizations and
concerned government agencies.[14] A preliminary
conference was held on 27 November 2001, attended
by several concerned parties, including Southern
Cross.[15] Subsequently, the Tariff Commission
received several position papers both in support and
against Philcemcor's application.[16] The Tariff
Commission also visited the corporate offices and
manufacturing facilities of each of the applicant
companies, as well as that of Southern Cross and two
other cement importers.[17]
On 13 March 2002, the Tariff Commission issued its
Formal Investigation Report ("Report"). Among the
factors studied by the Tariff Commission in its Report
were the market share of the domestic industry,
[18] production and sales,[19] capacity utilization,
[20] financial performance and profitability,[21] and
return on sales.[22]The Tariff Commission arrived at
the following conclusions:

1. The circumstances provided in Article XIX of GATT

1994 need not be demonstrated since the product
under consideration (gray Portland cement) is not the
subject of any Philippine obligation or tariff concession
under the WTO Agreement. Nonetheless, such inquiry
is governed by the national legislation (R.A. 8800)
and the terms and conditions of the Agreement on
Safeguards.
2. The collective output of the twelve (12) applicant

companies constitutes a major proportion of the total

domestic production of gray Portland cement and
blended Portland cement.
3. Locally produced gray Portland cement and
blended Portland cement (Pozzolan) are "like" to
imported gray Portland cement.
4. Gray Portland cement is being imported into the
Philippines in increased quantities, both in absolute
terms and relative to domestic production, starting in
2000. The increase in volume of imports is recent,
sudden, sharp and significant.
5. The industry has not suffered and is not suffering
significant overall impairment in its condition, i.e.,
serious injury.
6. There is no threat of serious injury that is imminent
from imports of gray Portland cement.
7. Causation has become moot and academic in view
of the negative determination of the elements of
serious injury and imminent threat of serious injury.
[23]
Accordingly, the Tariff Commission made the following
recommendation, to wit:
The elements of serious injury and imminent threat of
serious injury not having been established, it is
hereby recommended that no definitive general
safeguard measure be imposed on the importation of
gray Portland cement.[24]

or finding that a definitive safeguard measure should

not be imposed.[26]
On 5 April 2002, the DTI Secretary promulgated a
Decision. After quoting the conclusions of the Tariff
Commission, the DTI Secretary noted the DTI's
disagreement with the conclusions. However, he also
cited the DOJ Opinion advising the DTI that it was
bound by the negative finding of the Tariff
Commission. Thus, he ruled as follows:
The DTI has no alternative but to abide by the [Tariff]
Commission's recommendations.
IN VIEW OF THE FOREGOING, and in accordance
with Section 13 of RA 8800 which states:

"In the event of a negative final determination; or if the

cash bond is in excess of the definitive safeguard duty
assessed, the Secretary shall immediately issue,
through the Secretary of Finance, a written instruction
to the Commissioner of Customs, authorizing the
return of the cash bond or the remainder thereof, as
the case may be, previously collected as provisional
general safeguard measure within ten (10) days from
the date a final decision has been made; Provided,
that the government shall not be liable for any interest
on the amount to be returned. The Secretary shall not
accept for consideration another petition from the
same industry, with respect to the same imports of the
product under consideration within one (1) year after
the date of rendering such a decision."
The DTI hereby issues the following:

The DTI received the Report on 14 March 2002. After

reviewing the report, then DTI Secretary Manuel
Roxas II ("DTI Secretary") disagreed with the
conclusion of the Tariff Commission that there was no
serious injury to the local cement industry caused by
the surge of imports.[25] In view of this disagreement,
the DTI requested an opinion from the Department of
Justice ("DOJ") on the DTI Secretary's scope of
options in acting on the Commission's
recommendations. Subsequently, then DOJ Secretary
Hernando Perez rendered an opinion stating that
Section 13 of the SMA precluded a review by the DTI
Secretary of the Tariff Commission's negative finding,

The application for safeguard measures against the

importation of gray Portland cement filed by
PHILCEMCOR (Case No. 02-2001) is hereby denied.
[27](Emphasis in the original)
Philcemcor received a copy of the DTI Decision on 12
April 2002. Ten days later, it filed with the Court of
Appeals a Petition for Certiorari, Prohibition and
Mandamus[28] seeking to set aside the DTI Decision,
as well as the Tariff Commission's Report. Philcemcor

likewise applied for a Temporary Restraining

Order/Injunction to enjoin the DTI and the BOC from
implementing the questioned Decision and Report. It
prayed that the Court of Appeals direct the DTI
Secretary to disregard the Report and to render
judgment independently of the Report. Philcemcor
argued that the DTI Secretary, vested as he is under
the law with the power of review, is not bound to
adopt the recommendations of the Tariff Commission;
and, that the Report is void, as it is predicated on a
flawed framework, inconsistent inferences and
erroneous methodology.[29]
On 10 June 2002, Southern Cross filed its Comment.
[30] It argued that the Court of Appeals had no
jurisdiction over Philcemcor's Petition, for it is on the
Court of Tax Appeals ("CTA") that the SMA conferred
jurisdiction to review rulings of the Secretary in
connection with the imposition of a safeguard
measure. It likewise argued that Philcemcor's resort to
the special civil action of certiorari is improper,
considering that what Philcemcor sought to rectify is
an error of judgment and not an error of jurisdiction or
grave abuse of discretion, and that a petition for
review with the CTA was available as a plain, speedy
and adequate remedy. Finally, Southern Cross
echoed the DOJ Opinion that Section 13 of the SMA
precludes a review by the DTI Secretary of a negative
finding of the Tariff Commission.
After conducting a hearing on 19 June 2002 on
Philcemcor's application for preliminary injunction, the
Court of Appeals' Twelfth Division[31] granted the writ
sought in its Resolution dated 21 June 2002.
[32] Seven days later, on 28 June 2002, the twohundred (200)-day period for the imposition of the
provisional measure expired. Despite the lapse of the
period, the BOC continued to impose the provisional
measure on all importations of Portland cement made
by Southern Cross. The uninterrupted assessment of
the tariff, according to Southern Cross, worked to its
detriment to the point that the continued imposition
would eventually lead to its closure.[33]
Southern Cross timely filed a Motion for
Reconsideration of the Resolution on 9 September
2002. Alleging that Philcemcor was not entitled to
provisional relief, Southern Cross likewise sought a
clarificatory order as to whether the grant of the writ of
preliminary injunction could extend the earlier

imposition of the provisional measure beyond the two

hundred (200)-day limit imposed by law. The appeals'
court failed to take immediate action on Southern
Cross's motion despite the four (4) motions for early
resolution the latter filed between September of 2002
and February of 2003. After six (6) months, on 19
February 2003, the Court of Appeals directed
Philcemcor to comment on Southern Cross's Motion
for Reconsideration.[34] After Philcemcor filed its
Opposition[35] on 13 March 2003, Southern Cross
filed another set of four (4) motions for early
resolution.

petition, assailing the appellate court's Decision for

departing from the accepted and usual course of
judicial proceedings, and not deciding the substantial
questions in accordance with law and jurisprudence.
The petition argues in the main that the Court of
Appeals has no jurisdiction over Philcemcor's petition,
the proper remedy being a petition for review with the
CTA conformably with the SMA, and; that the factual
findings of the Tariff Commission on the existence or
non-existence conditions warranting the imposition of
general safeguard measures are binding upon the
DTI Secretary.

Despite the efforts of Southern Cross, the Court of

Appeals failed to directly resolve the Motion for
Reconsideration. Instead, on 5 June 2003, it rendered
a Decision,[36] granting in part Philcemcor's petition.
The appellate court ruled that it had jurisdiction over
the petition for certiorari since it alleged grave abuse
of discretion. It refused to annul the findings of the
Tariff Commission, citing the rule that factual findings
of administrative agencies are binding upon the courts
and its corollary, that courts should not interfere in
matters addressed to the sound discretion and
coming under the special technical knowledge and
training of such agencies.[37] Nevertheless, it held
that the DTI Secretary is not bound by the factual
findings of the Tariff Commission since such findings
are merely recommendatory and they fall within the
ambit of the Secretary's discretionary review. It
determined that the legislative intent is to grant the
DTI Secretary the power to make a final decision on
the Tariff Commission's recommendation.[38] The
dispositive portion of the Decision reads:

The timely filing of Southern Cross's petition before

this Court necessarily prevented the Court of Appeals
Decision from becoming final.[40] Yet on 25 June
2003, the DTI Secretary issued a new Decision, ruling
this time that that in light of the appellate court's
Decision there was no longer any legal impediment to
his deciding Philcemcor's application for definitive
safeguard measures.[41] He made a determination
that, contrary to the findings of the Tariff Commission,
the local cement industry had suffered serious injury
as a result of the import surges.[42] Accordingly, he
imposed a definitive safeguard measure on the
importation of gray Portland cement, in the form of a
definitive safeguard duty in the amount of P20.60/40
kg. bag for three years on imported gray Portland
Cement.[43]

WHEREFORE, based on the foregoing premises,

petitioner's prayer to set aside the findings of the Tariff
Commission in its assailed Report dated March 13,
2002 is DENIED. On the other hand, the assailed
April 5, 2002 Decision of the Secretary of the
Department of Trade and Industry is hereby SET
ASIDE. Consequently, the case is REMANDED to the
public respondent Secretary of Department of Trade
and Industry for a final decision in accordance with
RA 8800 and its Implementing Rules and Regulations.
SO ORDERED.[39]
On 23 June 2003, Southern Cross filed the present

before the CTA prays for the annulment of the same

decision.[44]
Reiterating its Comment on Southern Cross's Petition
for Review, Philcemcor also argues that the CTA,
being a special court of limited jurisdiction, could only
review the ruling of the DTI Secretary when a
safeguard measure is imposed, and that the factual
findings of the Tariff Commission are not binding on
the DTI Secretary.[45]
After giving due course to Southern Cross's Petition,
the Court called the case for oral argument on 18
February 2004.[46] At the oral argument, attended by
the counsel for Philcemcor and Southern Cross and
the Office of the Solicitor General, the Court simplified
the issues in this wise: (i) whether the Decision of the
DTI Secretary is appealable to the CTA or the Court of
Appeals; (ii) assuming that the Court of Appeals has
jurisdiction, whether its Decision is in accordance with
law; and, (iii) whether a Temporary Restraining Order
is warranted.[47]
During the oral arguments, counsel for Southern
Cross manifested that due to the imposition of the
general safeguard measures, Southern Cross was
forced to cease operations in the Philippines in
November of 2003.[48]
Propriety of the Temporary Restraining Order

On 7 July 2003, Southern Cross filed with the Court a

"Very Urgent Application for a Temporary Restraining
Order and/or A Writ of Preliminary Injunction" ("TRO
Application"), seeking to enjoin the DTI Secretary
from enforcing his Decision of 25 June 2003 in view of
the pending petition before this Court. Philcemcor
filed an opposition, claiming, among others, that it is
not this Court but the CTA that has jurisdiction over
the application under the law.
On 1 August 2003, Southern Cross filed with the CTA
a Petition for Review, assailing the DTI Secretary's 25
June 2003 Decision which imposed the definite
safeguard measure. Prescinding from this action,
Philcemcor filed with this Court a Manifestation and
Motion to Dismiss in regard to Southern Cross's
petition, alleging that it deliberately and willfully
resorted to forum-shopping. It points out that
Southern Cross's TRO Application seeks to enjoin the
DTI Secretary's second decision, while its Petition

Before the merits of the Petition, a brief comment on

Southern Cross's application for provisional relief. It
sought to enjoin the DTI Secretary from enforcing the
definitive safeguard measure he imposed in his 25
June 2003 Decision. The Court did not grant the
provisional relief for it would be tantamount to
enjoining the collection of taxes, a peremptory judicial
act which is traditionally frowned upon,[49] unless
there is a clear statutory basis for it.[50] In that regard,
Section 218 of the Tax Reform Act of 1997 prohibits
any court from granting an injunction to restrain the
collection of any national internal revenue tax, fee or
charge imposed by the internal revenue code.[51] A
similar philosophy is expressed by Section 29 of the
SMA, which states that the filing of a petition for
review before the CTA does not stop, suspend, or
otherwise toll the imposition or collection of the
appropriate tariff duties or the adoption of other
appropriate safeguard measures.[52] This evinces a

clear legislative intent that the imposition of safeguard

measures, despite the availability of judicial review,
should not be enjoined notwithstanding any timely
appeal of the imposition.
The Forum-Shopping Issue
In the same breath, we are not convinced that the
allegation of forum-shopping has been duly proven, or
that sanction should befall upon Southern Cross and
its counsel. The standard by Section 5, Rule 7 of the
1997 Rules of Civil Procedure in order that sanction
may be had is that "the acts of the party or his
counsel clearly constitute willful and deliberate forum
shopping."[53] The standard implies a malicious intent
to subvert procedural rules, and such state of mind is
not evident in this case.
The Jurisdictional Issue
On to the merits of the present petition.
In its assailed Decision, the Court of Appeals, after
asserting only in brief that it had jurisdiction over
Philcemcor's Petition, discussed the issue of whether
or not the DTI Secretary is bound to adopt the
negative recommendation of the Tariff Commission on
the application for safeguard measure. The Court of
Appeals maintained that it had jurisdiction over the
petition, as it alleged grave abuse of discretion on the
part of the DTI Secretary, thus:
A perusal of the instant petition reveals allegations of
grave abuse of discretion on the part of the DTI
Secretary in rendering the assailed April 5, 2002
Decision wherein it was ruled that he had no
alternative but to abide by the findings of the
Commission on the matter of safeguard measures for
the local cement industry. Abuse of discretion is
admittedly within the ambit of certiorari.
Grave abuse of discretion implies such capricious and
whimsical exercise of judgment as is equivalent to
lack of jurisdiction. It is alleged that, in the assailed
Decision, the DTI Secretary gravely abused his
discretion in wantonly evading to discharge his duty to
render an independent determination or decision in
imposing a definitive safeguard measure.[54]

We do not doubt that the Court of Appeals' certiorari

powers extend to correcting grave abuse of discretion
on the part of an officer exercising judicial or quasijudicial functions.[55] However, the special civil action
of certiorari is available only when there is no plain,
speedy and adequate remedy in the ordinary course
of law.[56] Southern Cross relies on this limitation,
stressing that Section 29 of the SMA is a plain,
speedy and adequate remedy in the ordinary course
of law which Philcemcor did not avail of. The Section
reads:
Section 29. Judicial Review. - Any interested party
who is adversely affected by the ruling of the
Secretary in connection with the imposition of a
safeguard measure may file with the CTA, a petition
for review of such ruling within thirty (30) days from
receipt thereof. Provided, however, that the filing of
such petition for review shall not in any way stop,
suspend or otherwise toll the imposition or collection
of the appropriate tariff duties or the adoption of other
appropriate safeguard measures, as the case may be.
The petition for review shall comply with the same
requirements and shall follow the same rules of
procedure and shall be subject to the same
disposition as in appeals in connection with adverse
rulings on tax matters to the Court of Appeals.
[57] (Emphasis supplied)
It is not difficult to divine why the legislature singled
out the CTA as the court with jurisdiction to review the
ruling of the DTI Secretary in connection with the
imposition of a safeguard measure. The Court has
long recognized the legislative determination to vest
sole and exclusive jurisdiction on matters involving
internal revenue and customs duties to such a
specialized court.[58] By the very nature of its
function, the CTA is dedicated exclusively to the study
and consideration of tax problems and has
necessarily developed an expertise on the subject.
[59]
At the same time, since the CTA is a court of limited
jurisdiction, its jurisdiction to take cognizance of a
case should be clearly conferred and should not be

deemed to exist on mere implication.[60] Concededly,

Rep. Act No. 1125, the statute creating the CTA, does
not extend to it the power to review decisions of the
DTI Secretary in connection with the imposition of
safeguard measures.[61] Of course, at that time
which was before the advent of trade liberalization the
notion of safeguard measures or safety nets was not
yet in vogue.
Undeniably, however, the SMA expanded the
jurisdiction of the CTA by including review of the
rulings of the DTI Secretary in connection with the
imposition of safeguard measures. However,
Philcemcor and the public respondents agree that the
CTA has appellate jurisdiction over a decision of the
DTI Secretary imposing a safeguard measure, but not
when his ruling is not to impose such measure.
In a related development, Rep. Act No. 9282, enacted
on 30 March 2004, expressly vests unto the CTA
jurisdiction over "[d]ecisions of the Secretary of Trade
and Industry, in case of nonagricultural product,
commodity or article xxx involving xxx safeguard
measures under Republic Act No. 8800, where either
party may appeal the decision to impose or not to
impose said duties."[62] Had Rep. Act No. 9282
already been in force at the beginning of the incidents
subject of this case, there would have been no need
to make any deeper inquiry as to the extent of the
CTA's jurisdiction. But as Rep. Act No. 9282 cannot
be applied retroactively to the present case, the
question of whether such jurisdiction extends to a
decision not to impose a safeguard measure will have
to be settled principally on the basis of the SMA.
Under Section 29 of the SMA, there are three
requisites to enable the CTA to acquire jurisdiction
over the petition for review contemplated therein: (i)
there must be a ruling by the DTI Secretary; (ii) the
petition must be filed by an interested party adversely
affected by the ruling; and (iii) such ruling must be in
connection with the imposition of a safeguard
measure. The first two requisites are clearly present.
The third requisite deserves closer scrutiny.
Contrary to the stance of the public respondents and
Philcemcor, in this case where the DTI Secretary
decides not to impose a safeguard measure, it is the
CTA which has jurisdiction to review his decision. The
reasons are as follows:

First. Split jurisdiction is abhorred.

Essentially, respondents' position is that judicial
review of the DTI Secretary's ruling is exercised by
two different courts, depending on whether or not it
imposes a safeguard measure, and in either case the
court exercising jurisdiction does so to the exclusion
of the other. Thus, if the DTI decision involves the
imposition of a safeguard measure it is the CTA which
has appellate jurisdiction; otherwise, it is the Court of
Appeals. Such setup is as novel and unusual as it is
cumbersome and unwise. Essentially, respondents
advocate that Section 29 of the SMA has established
split appellate jurisdiction over rulings of the DTI
Secretary on the imposition of safeguard measure.
This interpretation cannot be favored, as the Court
has consistently refused to sanction split jurisdiction.
[63] The power of the DTI Secretary to adopt or
withhold a safeguard measure emanates from the
same statutory source, and it boggles the mind why
the appeal modality would be such that one appellate
court is qualified if what is to be reviewed is a positive
determination, and it is not if what is appealed is a
negative determination. In deciding whether or not to
impose a safeguard measure, provisional or general,
the DTI Secretary would be evaluating only one body
of facts and applying them to one set of laws. The
reviewing tribunal will be called upon to examine the
same facts and the same laws, whether or not the
determination is positive or negative.
In short, if we were to rule for respondents we would
be confirming the exercise by two judicial bodies of
jurisdiction over basically the same subject matter -precisely the split-jurisdiction situation which is
anathema to the orderly administration of justice.
[64] The Court cannot accept that such was the
legislative motive especially considering that the law
expressly confers on the CTA, the tribunal with the
specialized competence over tax and tariff matters,
the role of judicial review without mention of any other
court that may exercise corollary or ancillary
jurisdiction in relation to the SMA. The provision refers
to the Court of Appeals but only in regard to
procedural rules and dispositions of appeals from the
CTA to the Court of Appeals.[65]
The principle enunciated in Tejada v. Homestead

Property Corporation[66] is applicable to the case at

bar:

safeguard measure, but all other rulings related or

have reference to the application for such measure.

The Court agrees with the observation of the [that]

when an administrative agency or body is conferred
quasi-judicial functions, all controversies relating to
the subject matter pertaining to its specialization are
deemed to be included within the jurisdiction of said
administrative agency or body. Split jurisdiction is not
favored.[67]

Now, let us determine the maximum scope and reach

of the phrase "in connection with" as used in Section
29 of the SMA. A literalist reading or linguistic survey
may not satisfy. Even the US Supreme Court in New
York State Blue Cross Plans v. Travelers Ins.
[70] conceded that the phrases "relate to" or "in
connection with" may be extended to the farthest
stretch of indeterminacy for, universally, relations or
connections are infinite and stop nowhere.[71] Thus,
in the case the US High Court, examining the same
phrase of the same provision of law involved in Shaw,
resorted to looking at the statute and its objectives as
the alternative to an "uncritical literalism."[72] A similar
inquiry into the other provisions of the SMA is in order
to determine the scope of review accorded therein to
the CTA.[73]

Second. The interpretation of the provisions of the

SMA favors vesting untrammeled appellate
jurisdiction on the CTA.
A plain reading of Section 29 of the SMA reveals that
Congress did not expressly bar the CTA from
reviewing a negative determination by the DTI
Secretary nor conferred on the Court of Appeals such
review authority. Respondents note, on the other
hand, that neither did the law expressly grant to the
CTA the power to review a negative determination.
However, under the clear text of the law, the CTA is
vested with jurisdiction to review the ruling of the DTI
Secretary "in connection with the imposition of a
safeguard measure." Had the law been couched
instead to incorporate the phrase "the ruling imposing
a safeguard measure," then respondent's claim would
have indisputable merit. Undoubtedly, the phrase "in
connection with" not only qualifies but clarifies the
succeeding phrase "imposition of a safeguard
measure." As expounded later, the phrase also
encompasses the opposite or converse ruling which is
the non-imposition of a safeguard measure.
In the American case of Shaw v. Delta Air Lines, Inc.,
[68] the United States Supreme Court, in interpreting
a key provision of the Employee Retirement Security
Act of 1974, construed the phrase "relates to" in its
normal sense which is the same as "if it has
connection with or reference to."[69] There is no
serious dispute that the phrase "in connection with" is
synonymous to "relates to" or "reference to," and that
all three phrases are broadly expansive. This is
affirmed not just by jurisprudential fiat, but also the
acquired connotative meaning of "in connection with"
in common parlance. Consequently, with the use of
the phrase "in connection with," Section 29 allows the
CTA to review not only the ruling imposing a

The authority to decide on the safeguard measure is

vested in the DTI Secretary in the case of nonagricultural products, and in the Secretary of the
Department of Agriculture in the case of agricultural
products.[74] Section 29 is likewise explicit that only
the rulings of the DTI Secretary or the Agriculture
Secretary may be reviewed by the CTA.[75] Thus, the
acts of other bodies that were granted some powers
by the SMA, such as the Tariff Commission, are not
subject to direct review by the CTA.
Under the SMA, the Department Secretary concerned
is authorized to decide on several matters. Within
thirty (30) days from receipt of a petition seeking the
imposition of a safeguard measure, or from the date
he made motu proprio initiation, the Secretary shall
make a preliminary determination on whether the
increased imports of the product under consideration
substantially cause or threaten to cause serious injury
to the domestic industry.[76] Such ruling is crucial
since only upon the Secretary's positive preliminary
determination that a threat to the domestic industry
exists shall the matter be referred to the Tariff
Commission for formal investigation, this time, to
determine whether the general safeguard measure
should be imposed or not.[77] Pursuant to a positive
preliminary determination, the Secretary may also
decide that the imposition of a provisional safeguard
measure would be warranted under Section 8 of the

SMA.[78] The Secretary is also authorized to decide,

after receipt of the report of the Tariff Commission,
whether or not to impose the general safeguard
measure, and if in the affirmative, what general
safeguard measures should be applied.[79] Even
after the general safeguard measure is imposed, the
Secretary is empowered to extend the safeguard
measure,[80] or terminate, reduce or modify his
previous rulings on the general safeguard measure.
[81]
With the explicit grant of certain powers involving
safeguard measures by the SMA on the DTI
Secretary, it follows that he is empowered to rule on
several issues. These are the issues which arise in
connection with, or in relation to, the imposition of a
safeguard measure. They may arise at different
stages - the preliminary investigation stage, the postformal investigation stage, or the post-safeguard
measure stage - yet all these issues do become ripe
for resolution because an initiatory action has been
taken seeking the imposition of a safeguard measure.
It is the initiatory action for the imposition of a
safeguard measure that sets the wheels in motion,
allowing the Secretary to make successive rulings,
beginning with the preliminary determination.
Clearly, therefore, the scope and reach of the phrase
"in connection with," as intended by Congress, pertain
to all rulings of the DTI Secretary or Agriculture
Secretary which arise from the time an application or
motu proprio initiation for the imposition of a
safeguard measure is taken. Indeed, the incidents
which require resolution come to the fore only
because there is an initial application or action
seeking the imposition of a safeguard measure. From
the legislative standpoint, it was a matter of sense
and practicality to lump up the questions related to the
initiatory application or action for safeguard measure
and to assign only one court and; that is the CTA to
initially review all the rulings related to such initiatory
application or action. Both directions Congress put in
place by employing the phrase "in connection with" in
the law.
Given the relative expanse of decisions subject to
judicial review by the CTA under Section 29, we do
not doubt that a negative ruling refusing to impose a
safeguard measure falls within the scope of its

jurisdiction. On a literal level, such negative ruling is

"a ruling of the Secretary in connection with the
imposition of a safeguard measure," as it is one of the
possible outcomes that may result from the initial
application or action for a safeguard measure. On a
more critical level, the rulings of the DTI Secretary in
connection with a safeguard measure, however
diverse the outcome may be, arise from the same
grant of jurisdiction on the DTI Secretary by the SMA.
[82] The refusal by the DTI Secretary to grant a
safeguard measure involves the same grant of
authority, the same statutory prescriptions, and the
same degree of discretion as the imposition by the
DTI Secretary of a safeguard measure.
The position of the respondents is one of "uncritical
literalism"[83] incongruent with the animus of the law.
Moreover, a fundamentalist approach to Section 29 is
not warranted, considering the absurdity of the
consequences.
Third. Interpretatio Talis In Ambiguis Semper Fienda
Est, Ut Evitur Inconveniens Et Absurdum.[84]
Even assuming arguendo that Section 29 has not
expressly granted the CTA jurisdiction to review a
negative ruling of the DTI Secretary, the Court is
precluded from favoring an interpretation that would
cause inconvenience and absurdity.[85] Adopting the
respondents' position favoring the CTA's minimal
jurisdiction would unnecessarily lead to illogical and
onerous results.
Indeed, it is illiberal to assume that Congress had
intended to provide appellate relief to rulings imposing
a safeguard measure but not to those declining to
impose the measure. Respondents might argue that
the right to relief from a negative ruling is not lost
since the applicant could, as Philcemcor did, question
such ruling through a special civil action for certiorari
under Rule 65 of the 1997 Rules of Civil Procedure, in
lieu of an appeal to the CTA. Yet these two reliefs are
of differing natures and gravamen. While an appeal
may be predicated on errors of fact or errors of law, a
special civil action for certiorari is grounded on grave
abuse of discretion or lack of or excess of jurisdiction
on the part of the decider. For a special civil action for
certiorari to succeed, it is not enough that the
questioned act of the respondent is wrong. As the
Court clarified in Sempio v. Court of Appeals

A tribunal, board or officer acts without jurisdiction if

it/he does not have the legal power to determine the
case. There is excess of jurisdiction where, being
clothed with the power to determine the case, the
tribunal, board or officer oversteps its/his authority as
determined by law. And there is grave abuse of
discretion where the tribunal, board or officer acts in a
capricious, whimsical, arbitrary or despotic manner in
the exercise of his judgment as to be said to be
equivalent to lack of jurisdiction. Certiorari is often
resorted to in order to correct errors of jurisdiction.
Where the error is one of law or of fact, which is a
mistake of judgment, appeal is the remedy.[86]
It is very conceivable that the DTI Secretary, after
deliberate thought and careful evaluation of the
evidence, may either make a negative preliminary
determination as he is so empowered under Section 7
of the SMA, or refuse to adopt the definitive safeguard
measure under Section 13 of the same law. Adopting
the respondents' theory, this negative ruling is
susceptible to reversal only through a special civil
action for certiorari, thus depriving the affected party
the chance to elevate the ruling on appeal on the
rudimentary grounds of errors in fact or in law.
Instead, and despite whatever indications that the DTI
Secretary acted with measure and within the bounds
of his jurisdiction are, the aggrieved party will be
forced to resort to a gymnastic exercise, contorting
the straight and narrow in an effort to discombobulate
the courts into believing that what was within was
actually beyond and what was studied and deliberate
actually whimsical and capricious. What then would
be the remedy of the party aggrieved by a negative
ruling that simply erred in interpreting the facts or the
law? It certainly cannot be the special civil action for
certiorari, for as the Court held in Silverio v. Court of
Appeals: "Certiorari is a remedy narrow in its scope
and inflexible in its character. It is not a general utility
tool in the legal workshop."[87]
Fortunately, this theoretical quandary need not come
to pass. Section 29 of the SMA is worded in such a
way that it places under the CTA's judicial review all
rulings of the DTI Secretary, which are connected with
the imposition of a safeguard measure. This is sound
and proper in light of the specialized jurisdiction of the
CTA over tax matters. In the same way that a question
of whether to tax or not to tax is properly a tax matter,

so is the question of whether to impose or not to

impose a definitive safeguard measure.
On another note, the second paragraph of Section 29
similarly reveals the legislative intent that rulings of
the DTI Secretary over safeguard measures should
first be reviewed by the CTA and not the Court of
Appeals. It reads:
The petition for review shall comply with the same
requirements and shall follow the same rules of
procedure and shall be subject to the same
disposition as in appeals in connection with adverse
rulings on tax matters to the Court of Appeals.
This is the only passage in the SMA in which the
Court of Appeals is mentioned. The express wish of
Congress is that the petition conform to the
requirements and procedure under Rule 43 of the
Rules of Civil Procedure. Since Congress mandated
that the form and procedure adopted be analogous to
a review of a CTA ruling by the Court of Appeals, the
legislative contemplation could not have been that the
appeal be directly taken to the Court of Appeals.
Issue of Binding Effect of Tariff
Commission's Factual Determination
on DTI Secretary.
The next issue for resolution is whether the factual
determination made by the Tariff Commission under
the SMA is binding on the DTI Secretary. Otherwise
stated, the question is whether the DTI Secretary may
impose general safeguard measures in the absence
of a positive final determination by the Tariff
Commission.
The Court of Appeals relied upon Section 13 of the
SMA in ruling that the findings of the Tariff
Commission do not necessarily constitute a final
decision. Section 13 details the procedure for the
adoption of a safeguard measure, as well as the steps
to be taken in case there is a negative final
determination. The implication of the Court of Appeals'
holding is that the DTI Secretary may adopt a
definitive safeguard measure, notwithstanding a
negative determination made by the Tariff
Commission.
Undoubtedly, Section 13 prescribes certain limitations

and restrictions before general safeguard measures

may be imposed. However, the most fundamental
restriction on the DTI Secretary's power in that
respect is contained in Section 5 of the SMA, "that
there should first be a positive final determination of
the Tariff Commission" which the Court of Appeals
curiously all but ignored. Section 5 reads:
Sec. 5. Conditions for the Application of General
Safeguard Measures. - The Secretary shall apply a
general safeguard measure upon a positive final
determination of the [Tariff] Commission that a
product is being imported into the country in
increased quantities, whether absolute or relative to
the domestic production, as to be a substantial cause
of serious injury or threat thereof to the domestic
industry; however, in the case of non-agricultural
products, the Secretary shall first establish that the
application of such safeguard measures will be in the
public interest. (emphasis supplied)
The plain meaning of Section 5 shows that it is the
Tariff Commission that has the power to make a
"positive final determination." This power lodged in the
Tariff Commission, must be distinguished from the
power to impose the general safeguard measure
which is properly vested on the DTI Secretary.[88]
All in all, there are two condition precedents that must
be satisfied before the DTI Secretary may impose a
general safeguard measure on grey Portland cement.
First, there must be a positive final determination by
the Tariff Commission that a product is being imported
into the country in increased quantities (whether
absolute or relative to domestic production), as to be
a substantial cause of serious injury or threat to the
domestic industry. Second, in the case of nonagricultural products the Secretary must establish that
the application of such safeguard measures is in the
public interest.[89] As Southern Cross argues,
Section 5 is quite clear-cut, and it is impossible to
finagle a different conclusion even through
overarching methods of statutory construction. There
is no safer nor better settled canon of interpretation
that when language is clear and unambiguous it must
be held to mean what it plainly expresses:[90] In the
quotable words of an illustrious member of this Court,
thus:

[I]f a statute is clear, plain and free from ambiguity, it

must be given its literal meaning and applied without
attempted interpretation. The verba legis or plain
meaning rule rests on the valid presumption that the
words employed by the legislature in a statute
correctly express its intent or will and preclude the
court from construing it differently. The legislature is
presumed to know the meaning of the words, to have
used words advisedly, and to have expressed its
intent by the use of such words as are found in the
statute.[91]
Moreover, Rule 5 of the Implementing Rules and
Regulations of the SMA,[92] which interprets Section
5 of the law, likewise requires a positive final
determination on the part of the Tariff Commission
before the application of the general safeguard
measure.
The SMA establishes a distinct allocation of functions
between the Tariff Commission and the DTI Secretary.
The plain meaning of Section 5 shows that it is the
Tariff Commission that has the power to make a
"positive final determination." This power, which
belongs to the Tariff Commission, must be
distinguished from the power to impose general
safeguard measure properly vested on the DTI
Secretary. The distinction is vital, as a "positive final
determination" clearly antecedes, as a condition
precedent, the imposition of a general safeguard
measure. At the same time, a positive final
determination does not necessarily result in the
imposition of a general safeguard measure. Under
Section 5, notwithstanding the positive final
determination of the Tariff Commission, the DTI
Secretary is tasked to decide whether or not that the
application of the safeguard measures is in the public
interest.
It is also clear from Section 5 of the SMA that the
positive final determination to be undertaken by the
Tariff Commission does not entail a mere gathering of
statistical data. In order to arrive at such
determination, it has to establish causal linkages from
the statistics that it compiles and evaluates: after
finding there is an importation in increased quantities
of the product in question, that such importation is a
substantial cause of serious threat or injury to the
domestic industry.

The Court of Appeals relies heavily on the legislative

record of a congressional debate during deliberations
on the SMA to assert a purported legislative intent
that the findings of the Tariff Commission do not bind
the DTI Secretary.[93] Yet as explained earlier, the
plain meaning of Section 5 emphasizes that only if the
Tariff Commission renders a positive determination
could the DTI Secretary impose a safeguard
measure. Resort to the congressional records to
ascertain legislative intent is not warranted if a statute
is clear, plain and free from ambiguity. The legislature
is presumed to know the meaning of the words, to
have used words advisedly, and to have expressed its
intent by the use of such words as are found in the
statute.[94]
Indeed, the legislative record, if at all to be availed of,
should be approached with extreme caution, as
legislative debates and proceedings are powerless to
vary the terms of the statute when the meaning is
clear.[95] Our holding in Civil Liberties Union v.
Executive Secretary[96] on the resort to deliberations
of the constitutional convention to interpret the
Constitution is likewise appropriate in ascertaining
statutory intent:
While it is permissible in this jurisdiction to consult the
debates and proceedings of the constitutional
convention in order to arrive at the reason and
purpose of the resulting Constitution, resort thereto
may be had only when other guides fail as said
proceedings are powerless to vary the terms of the
Constitution when the meaning is clear. Debates in
the constitutional convention "are of value as showing
the views of the individual members, and as indicating
the reasons for their votes, but they give us no light as
to the views of the large majority who did not talk xxx.
We think it safer to construe the constitution from
what appears upon its face."[97]
Moreover, it is easy to selectively cite passages,
sometimes out of their proper context, in order to
assert a misleading interpretation. The effect can be
dangerous. Minority or solitary views, anecdotal
ruminations, or even the occasional crude witticisms,
may improperly acquire the mantle of legislative intent
by the sole virtue of their publication in the
authoritative congressional record. Hence, resort to

legislative deliberations is allowable when the statute

is crafted in such a manner as to leave room for doubt
on the real intent of the legislature.
Section 5 plainly evinces legislative intent to restrict
the DTI Secretary's power to impose a general
safeguard measure by preconditioning such
imposition on a positive determination by the Tariff
Commission. Such legislative intent should be given
full force and effect, as the executive power to impose
definitive safeguard measures is but a delegated
power, the power of taxation, by nature and by
command of the fundamental law, being a preserve of
the legislature.[98] Section 28(2), Article VI of the
1987 Constitution confirms the delegation of
legislative power, yet ensures that the prerogative of
Congress to impose limitations and restrictions on the
executive exercise of this power:

The Congress may, by law, authorize the President to

fix within specified limits, and subject to
such limitations and restrictions as it may impose,
tariff rates, import and export quotas, tonnage and
wharfage dues, and other duties or imposts within the
framework of the national development program of
the Government.99

The safeguard measures which the DTI Secretary

may impose under the SMA may take the following
variations, to wit: (a) an increase in, or imposition of
any duty on the imported product; (b) a decrease in or
the imposition of a tariff-rate quota on the product; (c)
a modification or imposition of any quantitative
restriction on the importation of the product into the
Philippines; (d) one or more appropriate adjustment
measures, including the provision of trade adjustment
assistance; and (e) any combination of the abovedescribed actions. Except for the provision of trade
adjustment assistance, the measures enumerated by
the SMA are essentially imposts, which precisely are
the subject of delegation under Section 28(2), Article
VI of the 1987 Constitution.100

This delegation of the taxation power by the

legislative to the executive is authorized by the

Constitution itself.101 At the same time, the

Constitution also grants the delegating authority
(Congress) the right to impose restrictions and
limitations on the taxation power delegated to the
President.102 The restrictions and limitations
imposed by Congress take on the mantle of a
constitutional command, which the executive branch
is obliged to observe.

The SMA empowered the DTI Secretary, as alter

ego of the President,103 to impose definitive general
safeguard measures, which basically are tariff imposts
of the type spoken of in the Constitution. However, the
law did not grant him full, uninhibited discretion to
impose such measures. The DTI Secretary authority
is derived from the SMA; it does not flow from any
inherent executive power. Thus, the limitations
imposed by Section 5 are absolute, warranted as they
are by a constitutional fiat.104

Philcemcor cites our 1912 ruling in Lamb v.

Phipps105 to assert that the DTI Secretary, having
the final decision on the safeguard measure, has the
power to evaluate the findings of the Tariff
Commission and make an independent judgment
thereon. Given the constitutional and statutory
limitations governing the present case, the citation is
misplaced. Lamb pertained to the discretion of the
Insular Auditor of the Philippine Islands, whom, as the
Court recognized, "[t]he statutes of the United States
require[d] xxx to exercise his judgment upon the
legality xxx [of] provisions of law and resolutions of
Congress providing for the payment of money, the
means of procuring testimony upon which he may
act."106

Thus in Lamb, while the Court recognized the wide

latitude of discretion that may have been vested on
the Insular Auditor, it also recognized that such
latitude flowed from, and is consequently limited by,
statutor110 y grant. However, in this case, the
provision of the Constitution in point expressly
recognizes the authority of Congress to prescribe
limitations in the case of tariffs, export/import quotas
and other such safeguard measures. Thus, the broad

discretion granted to the Insular Auditor of the

Philippine Islands cannot be analogous to the
discretion of the DTI Secretary which is circumscribed
by Section 5 of the SMA.

For that matter, Cario v. Commissioner on Human

Rights,107 likewise cited by Philcemcor, is also
inapplicable owing to the different statutory regimes
prevailing over that case and the present petition.
In Cario, the Court ruled that the constitutional power
of the Commission on Human Rights (CHR) to
investigate human rights' violations did not extend to
adjudicating claims on the merits.108 Philcemcor
claims that the functions of the Tariff Commission
being "only investigatory," it could neither decide nor
adjudicate.109

The applicable law governing the issue in Cario is

Section 18, Article XIII of the Constitution, which
delineates the powers and functions of the CHR. The
provision does not vest on the CHR the power to
adjudicate cases, but only to investigate all forms of
human rights violations.Yet, without modifying the
thorough disquisition of the Court inCario on the
general limitations on the investigatory power, the
precedent is inapplicable because of the difference in
the involved statutory frameworks. The Constitution
does not repose binding effect on the results of the
CHR's investigation.111 On the other hand, through
Section 5 of the SMA and under the authority of
Section 28(2), Article VI of the Constitution, Congress
did intend to bind the DTI Secretary to the
determination made by the Tariff Commission.112 It is
of no consequence that such determination results
from the exercise of investigatory powers by the Tariff
Commission since Congress is well within its
constitutional mandate to limit the authority of the DTI
Secretary to impose safeguard measures in the
manner that it sees fit.

The Court of Appeals and Philcemcor also rely on

Section 13 of the SMA and Rule 13 of the SMA's
Implementing Rules in support of the view that the
DTI Secretary may decide independently of the
determination made by the Tariff Commission.

Admittedly, there are certain infelicities in the

language of Section 13 and Rule 13. But reliance
should not be placed on the textual imprecisions.
Rather, Section 13 and Rule 13 must be viewed in
light of the fundamental prescription imposed by
Section 5. 113

Section 13 of the SMA lays down the procedure to be

followed after the Tariff Commission renders its report.
The provision reads in full:

SEC. 13. Adoption of Definitive Measures. Upon its

positive determination, the Commission shall
recommend to the Secretary an appropriate definitive
measure, in the form of:

(a) An increase in, or imposition of, any duty on the

imported product;
(b) A decrease in or the imposition of a tariff-rate
quota (MAV) on the product;
(c) A modification or imposition of any quantitative
restriction on the importation of the product into the
Philippines;
(d) One or more appropriate adjustment measures,
including the provision of trade adjustment
assistance;
(e) Any combination of actions described in
subparagraphs (a) to (d).

The Commission may also recommend other actions,

including the initiation of international negotiations to
address the underlying cause of the increase of
imports of the product, to alleviate the injury or threat
thereof to the domestic industry, and to facilitate
positive adjustment to import competition.

The general safeguard measure shall be limited to the

extent of redressing or preventing the injury and to

facilitate adjustment by the domestic industry from the

adverse effects directly attributed to the increased
imports: Provided, however, That when quantitative
import restrictions are used, such measures shall not
reduce the quantity of imports below the average
imports for the three (3) preceding representative
years, unless clear justification is given that a different
level is necessary to prevent or remedy a serious
injury.

A general safeguard measure shall not be applied to a

product originating from a developing country if its
share of total imports of the product is less than three
percent (3%): Provided, however, That developing
countries with less than three percent (3%) share
collectively account for not more than nine percent
(9%) of the total imports.

The decision imposing a general safeguard measure,

the duration of which is more than one (1) year, shall
be reviewed at regular intervals for purposes of
liberalizing or reducing its intensity. The industry
benefiting from the application of a general safeguard
measure shall be required to show positive
adjustment within the allowable period. A general
safeguard measure shall be terminated where the
benefiting industry fails to show any improvement, as
may be determined by the Secretary.

The Secretary shall issue a written instruction to the

heads of the concerned government agencies to
implement the appropriate general safeguard
measure as determined by the Secretary within fifteen
(15) days from receipt of the report.

In the event of a negative final determination, or if the

cash bond is in excess of the definitive safeguard duty
assessed, the Secretary shall immediately issue,
through the Secretary of Finance, a written instruction
to the Commissioner of Customs, authorizing the
return of the cash bond or the remainder thereof, as
the case may be, previously collected as provisional
general safeguard measure within ten (10) days from

the date a final decision has been

made: Provided, That the government shall not be
liable for any interest on the amount to be returned.
The Secretary shall not accept for consideration
another petition from the same industry, with respect
to the same imports of the product under
consideration within one (1) year after the date of
rendering such a decision.

When the definitive safeguard measure is in the form

of a tariff increase, such increase shall not be subject
or limited to the maximum levels of tariff as set forth in
Section 401(a) of the Tariff and Customs Code of the
Philippines.

To better comprehend Section 13, note must be taken

of the distinction between the investigatory and
recommendatory functions of the Tariff Commission
under the SMA.

The word "determination," as used in the SMA,

pertains to the factual findings on whether there are
increased imports into the country of the product
under consideration, and on whether such increased
imports are a substantial cause of serious injury or
threaten to substantially cause serious injury to the
domestic industry.114 The SMA explicitly authorizes
the DTI Secretary to make a preliminary
determination,115 and the Tariff Commission to make
the final determination.116 The distinction is
fundamental, as these functions are not
interchangeable. The Tariff Commission makes its
determination only after a formal investigation
process, with such investigation initiated only if there
is a positive preliminary determination by the DTI
Secretary under Section 7 of the SMA.117 On the
other hand, the DTI Secretary may impose definitive
safeguard measure only if there is a positive final
determination made by the Tariff Commission.118

In contrast, a "recommendation" is a suggested

remedial measure submitted by the Tariff Commission
under Section 13 after making a positive final

determination in accordance with Section 5. The Tariff

Commission is not empowered to make a
recommendation absent a positive final determination
on its part.119 Under Section 13, the Tariff
Commission is required to recommend to the [DTI]
Secretary an "appropriate definitive
measure."120 The Tariff Commission "may also
recommend other actions, including the initiation of
international negotiations to address the underlying
cause of the increase of imports of the products, to
alleviate the injury or threat thereof to the domestic
industry and to facilitate positive adjustment to import
competition."121

The recommendations of the Tariff Commission, as

rendered under Section 13, are not obligatory on the
DTI Secretary. Nothing in the SMA mandates the DTI
Secretary to adopt the recommendations made by the
Tariff Commission. In fact, the SMA requires that the
DTI Secretary establish that the application of such
safeguard measures is in the public interest,
notwithstanding the Tariff Commission's
recommendation on the appropriate safeguard
measure based on its positive final
determination.122 The non-binding force of the Tariff
Commission's recommendations is congruent with the
command of Section 28(2), Article VI of the 1987
Constitution that only the President may be
empowered by the Congress to impose appropriate
tariff rates, import/export quotas and other similar
measures.123 It is the DTI Secretary, as alter ego of
the President, who under the SMA may impose such
safeguard measures subject to the limitations
imposed therein. A contrary conclusion would in
essence unduly arrogate to the Tariff Commission the
executive power to impose the appropriate tariff
measures. That is why the SMA empowers the DTI
Secretary to adopt safeguard measures other than
those recommended by the Tariff Commission.

Unlike the recommendations of the Tariff Commission,

its determination has a different effect on the DTI
Secretary. Only on the basis of a positive final
determination made by the Tariff Commission under
Section 5 can the DTI Secretary impose a general
safeguard measure. Clearly, then the DTI Secretary

isbound by the determinationmade by the Tariff

Commission.

Some confusion may arise because the sixth

paragraph of Section 13124 uses the variant word
"determined" in a different context, as it contemplates
"the appropriate general safeguard measure as
determined by the Secretary within fifteen (15) days
from receipt of the report." Quite plainly, the word
"determined" in this context pertains to the DTI
Secretary's power of choice of the appropriate
safeguard measure, as opposed to the Tariff
Commission's power to determine the existence of
conditions necessary for the imposition of any
safeguard measure. In relation to Section 5, such
choice also relates to the mandate of the DTI
Secretary to establish that the application of
safeguard measures is in the public interest, also
within the fifteen (15) day period. Nothing in Section
13 contradicts the instruction in Section 5 that the DTI
Secretary is allowed to impose the general safeguard
measures only if there is a positive determination
made by the Tariff Commission.

Unfortunately, Rule 13.2 of the Implementing Rules of

the SMA is captioned "Final Determination by the
Secretary." The assailed Decision and Philcemcor
latch on this phraseology to imply that the factual
determination rendered by the Tariff Commission
under Section 5 may be amended or reversed by the
DTI Secretary. Of course, implementing rules should
conform, not clash, with the law that they seek to
implement, for a regulation which operates to create a
rule out of harmony with the statute is a nullity.125 Yet
imperfect draftsmanship aside, nothing in Rule 13.2
implies that the DTI Secretary can set aside the
determination made by the Tariff Commission under
the aegis of Section 5. This can be seen by examining
the specific provisions of Rule 13.2, thus:

RULE 13.2. Final Determination by the Secretary

RULE 13.2.a. Within fifteen (15) calendar days from

receipt of the Report of the Commission, the
Secretary shall make a decision, taking into
consideration the measures recommended by the
Commission.

RULE 13.2.b. If the determination is affirmative, the

Secretary shall issue, within two (2) calendar days
after making his decision, a written instruction to the
heads of the concerned government agencies to
immediately implement the appropriate general
safeguard measure as determined by him. Provided,
however, that in the case of non-agricultural products,
the Secretary shall first establish that the imposition of
the safeguard measure will be in the public interest.

RULE 13.2.c. Within two (2) calendar days after

making his decision, the Secretary shall also order its
publication in two (2) newspapers of general
circulation. He shall also furnish a copy of his Order to
the petitioner and other interested parties, whether
affirmative or negative. (Emphasis supplied.)

Moreover, the DTI Secretary does not have the power

to review the findings of the Tariff Commission for it is
not subordinate to the Department of Trade and
Industry ("DTI"). It falls under the supervision, not of
the DTI nor of the Department of Finance (as
mistakenly asserted by Southern Cross),126 but of
theNational Economic Development Authority, an
independent planning agency of the government of
co-equal rank as the DTI.127As the supervision and
control of a Department Secretary is limited to the
bureaus, offices, and agencies under him,128 the DTI
Secretary generally cannot exercise review authority
over actions of the Tariff Commission. Neither does
the SMA specifically authorize the DTI Secretary to
alter, amend or modify in any way the determination
made by the Tariff Commission. The most that the DTI
Secretary could do to express displeasure over the
Tariff Commission's actions is to ignore its
recommendation, but not its determination.

The word "determination" as used in Rule 13.2 of the

Implementing Rules is dissonant with the same word
as employed in the SMA, which in the latter case is
undeviatingly in reference to the determination made
by the Tariff Commission. Beyond the resulting
confusion, however, the divergent use in Rule 13.2 is
explicable as the Rule textually pertains to the power
of the DTI Secretary to review the recommendations
of the Tariff Commission, not the latter's
determination. Indeed, an examination of the specific
provisions show that there is no real conflict to
reconcile. Rule 13.2 respects the logical order
imposed by the SMA. The Rule does not remove the
essential requirement under Section 5 that a positive
final determination be made by the Tariff Commission
before a definitive safeguard measure may be
imposed by the DTI Secretary.

The assailed Decision characterizes the findings of

the Tariff Commission as merely recommendatory and
points to the DTI Secretary as the authority who
renders the final decision.129 At the same time,
Philcemcor asserts that the Tariff Commission's
functions are merely investigatory, and as such do not
include the power to decide or adjudicate. These
contentions, viewed in the context of the fundamental
requisite set forth by Section 5, are untenable. They
run counter to the statutory prescription that a positive
final determination made by the Tariff Commission
should first be obtained before the definitive
safeguard measures may be laid down.

Was it anomalous for Congress to have provided for a

system whereby the Tariff Commission may preclude
the DTI, an office of higher rank, from imposing a
safeguard measure? Of course, this Court does not
inquire into the wisdom of the legislature but only
charts the boundaries of powers and functions set in
its enactments. But then, it is not difficult to see the
internal logic of this statutory framework.

For one, as earlier stated, the DTI cannot exercise

review powers over the Tariff Commission which is not
its subordinate office.

Moreover, the mechanism established by Congress

establishes a measure of check and balance involving
two different governmental agencies with disparate
specializations. The matter of safeguard measures is
of such national importance that a decision either to
impose or not to impose then could have ruinous
effects on companies doing business in the
Philippines. Thus, it is ideal to put in place a system
which affords all due deliberation and calls to fore
various governmental agencies exercising their
particular specializations.

Finally, if this arrangement drawn up by Congress

makes it difficult to obtain a general safeguard
measure, it is because such safeguard measure is the
exception, rather than the rule. The Philippines is
obliged to observe its obligations under the GATT,
under whose framework trade liberalization, not
protectionism, is laid down. Verily, the GATT actually
prescribes conditions before a member-country may
impose a safeguard measure. The pertinent portion of
the GATT Agreement on Safeguards reads:

2. A Member may only apply a safeguard measure to

a product only if that member has determined,
pursuant to the provisions set out below, that such
product is being imported into its territory in such
increased quantities, absolute or relative to domestic
production, and under such conditions as to cause or
threaten to cause serious injury to the domestic
industry that produces like or directly competitive
products.130

3. (a) A Member may apply a safeguard measure only

following an investigation by the competent authorities
of that Member pursuant to procedures previously
established and made public in consonance with
Article X of the GATT 1994. This investigation shall
include reasonable public notice to all interested
parties and public hearings or other appropriate
means in which importers, exporters and other
interested parties could present evidence and their
views, including the opportunity to respond to the

presentations of other parties and to submit their

views, inter alia, as to whether or not the application
of a safeguard measure would be in the public
interest. The competent authorities shall publish a
report setting forth their findings and reasoned
conclusions reached on all pertinent issues of fact
and law.131

The SMA was designed not to contradict the GATT,

but to complement it. The two requisites laid down in
Section 5 for a positive final determination are the
same conditions provided under the GATT Agreement
on Safeguards for the application of safeguard
measures by a member country. Moreover, the
investigatory procedure laid down by the SMA
conforms to the procedure required by the GATT
Agreement on Safeguards. Congress has chosen the
Tariff Commission as the competent authority to
conduct such investigation. Southern Cross stresses
that applying the provision of the GATT Agreement on
Safeguards, the Tariff Commission is clearly
empowered to arrive at binding conclusions.132 We
agree: binding on the DTI Secretary is the Tariff
Commission's determinations on whether a product is
imported in increased quantities, absolute or relative
to domestic production and whether any such
increase is a substantial cause of serious injury or
threat thereof to the domestic industry.133

Satisfied as we are with the proper statutory paradigm

within which the SMA should be analyzed, the flaws in
the reasoning of the Court of Appeals and in the
arguments of the respondents become apparent. To
better understand the dynamics of the procedure set
up by the law leading to the imposition of definitive
safeguard measures, a brief step-by-step recount
thereof is in order.

1. After the initiation of an action involving a general

safeguard measure,134 the DTI Secretary makes a
preliminary determination whether the increased
imports of the product under consideration
substantially cause or threaten to substantially cause
serious injury to the domestic industry,135 and
whether the imposition of a provisional measure is

warranted under Section 8 of the SMA.136 If the

preliminary determination is negative, it is implied that
no further action will be taken on the application.

2. When his preliminary determination is positive, the

Secretary immediately transmits the records covering
the application to the Tariff Commission for immediate
formal investigation.137

3. The Tariff Commission conducts its formal

investigation, keyed towards making a final
determination. In the process, it holds public hearings,
providing interested parties the opportunity to present
evidence or otherwise be heard.138 To repeat,
Section 5 enumerates what the Tariff Commission is
tasked to determine: (a) whether a product is being
imported into the country in increased quantities,
irrespective of whether the product is absolute or
relative to the domestic production; and (b) whether
the importation in increased quantities is such that it
causes serious injury or threat to the domestic
industry.139 The findings of the Tariff Commission as
to these matters constitute the final determination,
which may be either positive or negative.

4. Under Section 13 of the SMA, if the Tariff

Commission makes a positive determination, the Tariff
Commission "recommends to the [DTI] Secretary an
appropriate definitive measure." The Tariff
Commission "may also recommend other actions,
including the initiation of international negotiations to
address the underlying cause of the increase of
imports of the products, to alleviate the injury or threat
thereof to the domestic industry, and to facilitate
positive adjustment to import competition."140

5. If the Tariff Commission makes a positive final

determination, the DTI Secretary is then to decide,
within fifteen (15) days from receipt of the report, as to
what appropriate safeguard measures should he
impose.

6. However, if the Tariff Commission makes a

negative final determination, the DTI Secretary cannot
impose any definitive safeguard measure. Under
Section 13, he is instructed instead to return whatever
cash bond was paid by the applicant upon the
initiation of the action for safeguard measure.

The Effect of the Court's Decision

The Court of Appeals erred in remanding the case

back to the DTI Secretary, with the instruction that the
DTI Secretary may impose a general safeguard
measure even if there is no positive final
determination from the Tariff Commission. More
crucially, the Court of Appeals could not have
acquired jurisdiction over Philcemcor's petition for
certiorari in the first place, as Section 29 of the SMA
properly vests jurisdiction on the CTA. Consequently,
the assailed Decision is an absolute nullity, and we
declare it as such.

What is the effect of the nullity of the

assailed Decision on the 5 June 2003 Decision of the
DTI Secretary imposing the general safeguard
measure? We have recognized that any initial judicial
review of a DTI ruling in connection with the
imposition of a safeguard measure belongs to the
CTA. At the same time, the Court also recognizes the
fundamental principle that a null and void judgment
cannot produce any legal effect. There is sufficient
cause to establish that the 5 June 2003Decision of
the DTI Secretary resulted from the assailed Court of
Appeals Decision, even if the latter had not yet
become final. Conversely, it can be concluded that it
was because of the putative imprimatur of the Court
of Appeals' Decision that the DTI Secretary issued his
ruling imposing the safeguard measure. Since the 5
June 2003 Decision derives its legal effect from the
void Decision of the Court of Appeals, this ruling of
the DTI Secretary is consequently void. The spring
cannot rise higher than the source.

The DTI Secretary himself acknowledged that he

drew stimulating force from the appellate
court's Decision for in his own 5 June 2003 Decision,
he declared:

From the aforementioned ruling, the CA has

remanded the case to the DTI Secretary for a final
decision. Thus, there is no legal impediment for the
Secretary to decide on the application.141

The inescapable conclusion is that the DTI Secretary

needed the assailed Decision of the Court of Appeals
to justify his rendering a second Decision. He
explicitly invoked the Court of Appeals' Decision as
basis for rendering his 5 June 2003 ruling, and
implicitly recognized that without such Decision he
would not have the authority to revoke his previous
ruling and render a new, obverse ruling.

It is clear then that the 25 June 2003 Decision of the

DTI Secretary is a product of the void Decision, it
being an attempt to carry out such null judgment.
There is therefore no choice but to declare it void as
well, lest we sanction the perverse existence of a fruit
from a non-existent tree. It does not even matter what
the disposition of the 25 June 2003 Decision was, its
nullity would be warranted even if the DTI Secretary
chose to uphold his earlier ruling denying the
application for safeguard measures.

It is also an unfortunate spectacle to behold the DTI

Secretary, seeking to enforce a judicial decision which
is not yet final and actually pending review on appeal.
Had it been a judge who attempted to enforce a
decision that is not yet final and executory, he or she
would have readily been subjected to sanction by this
Court. The DTI Secretary may be beyond the ambit of
administrative review by this Court, but we are
capacitated to allocate the boundaries set by the law
of the land and to exact fealty to the legal order,
especially from the instrumentalities and officials of
government.

WHEREFORE, the petition is GRANTED. The

assailed Decision of the Court of Appeals is
DECLARED NULL AND VOID and SET ASIDE.
The Decision of the DTI Secretary dated 25 June
2003 is also DECLARED NULL AND VOID and SET
ASIDE. No Costs.

ANN BRIGITT LEONARDO as represented by her

parents GLORIA LEONARDO and EDDIE
FERNANDEZ, petitioners, vs. COURT OF APPEALS,
HON. TOMAS AFRICA, et al., respondents.
CARPIO-MORALES, J.:
Being assailed in the present petition for review on
certiorari is the Court of Appeals Decision of March
11, 1996 and Resolution of May 27, 1996.
Petitioner Ann Brigitt Leonardo was on July 14, 1993
born in Manila to common-law-spouses Eddie B.
Fernandez and Gloria C. Leonardo.[1] In her birth
certificate, her given surname is that of her mother,
Leonardo.[2]
As petitioner's parents later wanted her to carry the
surname of her father, the latter executed an
affidavit[3] of July 29, 1994 to this effect and wrote a
letter[4] of August 1, 1994 to the Local Civil Registrar
of Manila requesting for the change of petitioner's
registered surname.
The Local Civil Registrar of Manila Lucena D. Dacuan
denied the request of petitioner's parents on the
ground that petitioner, being illegitimate, should carry
her mother's surname as provided under Article 176
of the Family Code[5] which took effect on August 3,
1988.[6] Dacuan also cited Article 412 of the New
Civil Code which provides that no entry in the civil
register shall be changed or corrected without a
judicial order.
Petitioner's parents appealed the denial of their
request for change of petitioner's surname to the Civil
Registrar General, they citing, among others, the
following provision of Title XIII (Use of Surnames),
Book I of the New Civil Code:
Article 366. A natural child acknowledged by both
parents shall principally use the surname of the father.

If recognized by only one of the parents, a natural

child shall employ the surname of the recognizing
parent. (Emphasis and underscoring supplied)
Though conceding that the appeal had valid
arguments, Civil Registrar General Tomas P. Africa,
by letter[7] of December 26, 1994, denied the appeal
on the ground that neither the Office of the Civil
Registrar General nor any of the Civil Registry Offices
in the country is given the power or discretion to effect
an administrative change of entry in the civil register.
Petitioner's parents thus sought before the National
Economic and Development Authority (NEDA) the
review of the Civil Registrar General's decision
denying their appeal. NEDA Director-General Cielito
F. Habito, by letter[8] of March 21, 1995, replied,
however, that functionally, his office has no power or
authority to review the decision of the Civil Registrar
General on matters pertaining to a local Civil
Registry.
Undaunted, petitioner's parents appealed to the Office
of the President which, by letter[9] of May 11, 1995,
upheld the decision of the Civil Registrar General and
the Local Civil Registrar of Manila that the
cancellation or correction of entries in the Civil
Registry must be brought directly before courts of
law.
Petitioner, represented by her parents, thereupon filed
before the Court of Appeals a Petition for Review[10]
under Rule 43 of the Revised Rules of Court raising
the following issues:
1. Whether or not Article 176 of the Family Code be
given a mandatory application in case a child was
born outside of wedlock even though the putative
father acknowledges said child as his and agrees and
allows his child to bear his surname [and]
2. Whether or not a judicial proceeding is required for
the use of [petitioner's] surname.
By Decision[11] of March 11, 1996, the Court of
Appeals held that Title XIII, Book I of the New Civil
Code on the Use of Surnames was not repealed by
the Family Code, citing its repealing clause or Article
254. It held, however, that the Local Civil Registrar of

Manila is not allowed to administratively correct the

entry in the Civil Registry of the City by deleting and
changing petitioner's family name LEONARDO to
FERNANDEZ upon the submission of an affidavit of
her father recognizing her. It went on to declare that
petitioner could change her surname by judicial action
pursuant to Rule 108 of the Rules of Court.
Petitioner's motion for reconsideration of the appellate
court's decision having been denied by Resolution[12]
of May 27, 1996, the present petition raising the
following issue was filed:
IF PETITIONER, AS HELD IN THE 11 MARCH 1996
DECISION OF THE HONORABLE COURT OF
APPEALS, MAY USE HER NATURAL FATHER'S
SURNAME, THE COROLLARY MATTER TO
DETERMINE IN THIS CASE IS WHETHER OR NOT
RESORT TO RULE 108 OF THE RULES OF COURT
REQUIRING JUDICIAL PROCEEDING AND
PUBLICATION, IS THE PROPER ACTION TO BE
TAKEN - AS DIRECTED IN THE COURT OF
APPEALS' DECISION - TO ENABLE THE
PETITIONER TO USE HER NATURAL FATHER'S
SURNAME.[13]
Ubi jus, ibi remedium.[14] When there is a right, there
is a remedy. Conversely, if there is no right, there is
no remedy as every remedial right is based on a
substantive right.
In the case at bar, the primary issue to be resolved
before determining petitioner's available remedy
under the facts of the case is whether an illegitimate
child born after the effectivity of the Family Code has
the right to use her father's surname. This Court rules
in the negative.
Article 176 of the Family Code reads:
Article 176. Illegitimate children shall use the surname
and shall be under the parental authority of their
mother, and shall be entitled to support in conformity
with this Code. The legitime of each illegitimate child
shall consist of one-half of the legitime of a legitimate
child. (Emphasis and underscoring supplied)
The rule applies even if petitioner's father admits
paternity. So Mossesgeld v. Court of Appeals holds:
[15]

Article 176 of the Family Code of the Philippines

provides that "illegitimate children shall use the
surname and shall be under the parental authority of
their mother, and shall be entitled to support in
conformity with this Code." This is the rule regardless
of whether or not the father admits paternity.
Consequently, the Local Civil Registrar correctly
refused to register the certificate of live birth of
petitioner's illegitimate child using the surname of the
alleged father, even with the latter's consent . . .
(Emphasis and underscoring supplied)
Contrary to the ruling of the Court of Appeals, Article
176 of the Family Code repealed Title XIII, Book I of
the New Civil Code regarding the Use of Surnames.
Article 254 of the Family Code reads:
Article 254. Titles III, IV, V, VI, VII, VIII, IX, XI and XV
of Book I Republic Act 386, otherwise known as the
Civil Code of the Philippines, as amended, and
Articles 17, 18, 19, 27, 28, 29, 30, 31, 39, 40, 41 and
42 of Presidential Decree No. 603, otherwise known
as the Child and Youth Welfare Code, as amended
and all laws, decrees, executive orders,
proclamations, rules and regulations, or parts thereof,
inconsistent herewith are hereby repealed. (Emphasis
and underscoring supplied)
Thus this Court declared in Mossesgeld:
The Family Code has effectively repealed the
provisions of Article 366 of the Civil Code of the
Philippines giving a natural child acknowledged by
both parents the right to use the surname of the
father. The Family Code has limited the classification
of children to legitimate and illegitimate, thereby
eliminating the category of acknowledged natural
children and natural children by legal fiction.
(Emphasis and underscoring supplied)
Since petitioner was born an illegitimate child after the
Family Code took effect, she has no right to use her
father's surname.
WHEREFORE, upon the ground discussed above,
the petition is hereby DENIED.
SO ORDERED.

BPI LEASING CORPORATION, petitioner, vs. THE

HONORABLE COURT OF APPEALS, COURT OF
TAX APPEAL AND COMMISSIONER OF INTERNAL
REVENUE, respondents.
AZCUNA, J.:
The present petition for review on certiorari assails
the decision[1] of the Court of Appeals in CA-G.R. SP
No. 38223 and its subsequent resolution[2] denying
the motion for reconsideration. The assailed decision
and resolution affirmed the decision of the Court of
Tax Appeals (CTA) which denied petitioner BPI
Leasing Corporation's (BLC) claim for tax refund in
CTA Case No. 4252.
The facts are not disputed.
BLC is a corporation engaged in the business of
leasing properties.[3] For the calendar year 1986,
BLC paid the Commissioner of Internal Revenue
(CIR) a total of P1,139,041.49 representing 4%
"contractor's percentage tax" then imposed by Section
205 of the National Internal Revenue Code (NIRC),
based on its gross rentals from equipment leasing for
the said year amounting to P27,783,725.42.[4]
On November 10, 1986, the CIR issued Revenue
Regulation 19-86. Section 6.2 thereof provided that
finance and leasing companies registered under
Republic Act 5980 shall be subject to gross receipt tax
of 5%-3%-1% on actual income earned. This means
that companies registered under Republic Act 5980,
such as BLC, are not liable for "contractor's
percentage tax" under Section 205 but are, instead,
subject to "gross receipts tax" under Section 260 (now
Section 122) of the NIRC. Since BLC had earlier paid
the aforementioned "contractor's percentage tax," it
re-computed its tax liabilities under the "gross receipts
tax" and arrived at the amount of P361,924.44.
On April 11, 1988, BLC filed a claim for a refund with
the CIR for the amount of P777,117.05, representing
the difference between the P1,139,041.49 it had paid
as "contractor's percentage tax" and P361,924.44 it
should have paid for "gross receipts tax."[5] Four days
later, to stop the running of the prescriptive period for
refunds, petitioner filed a petition for review with the
CTA.[6]
In a decision dated May 13, 1994,[7] the CTA

dismissed the petition and denied BLC's claim of

refund. The CTA held that Revenue Regulation 19-86,
as amended, may only be applied prospectively such
that it only covers all leases written on or after
January 1, 1987, as stated under Section 7 of said
revenue regulation:
Section 7. Effectivity - These regulations shall take
effect on January 1, 1987 and shall be applicable to
all leases written on or after the said date.
The CTA ruled that, since BLC's rental income was all
received prior to 1986, it follows that this was derived
from lease transactions prior to January 1, 1987, and
hence, not covered by the revenue regulation.
A motion for reconsideration of the CTA's decision
was filed, but was denied in a resolution dated July
26, 1995.[8] BLC then appealed the case to the Court
of Appeals, which issued the aforementioned assailed
decision and resolution.[9] Hence, the present
petition.
In seeking to reverse the denial of its claim for tax
refund, BLC submits that the Court of Appeals and the
CTA erred in not ruling that Revenue Regulation 1986 may be applied retroactively so as to allow BLC's
claim for a refund of P777,117.05.
Respondents, on the other hand, maintain that the
provision on the date of effectivity of Revenue
Regulation 19-86 is clear and unequivocal, leaving no
room for interpretation on its prospective application.
In addition, respondents argue that the petition should
be dismissed on the ground that the
Verification/Certification of Non-Forum Shopping was
signed by the counsel of record and not by BLC,
through a duly authorized representative, in violation
of Supreme Court Circular 28-91.
In a resolution dated March 29, 2000,[10] the petition
was given due course and the Court required the
parties to file their respective Memoranda. Upon
submission of the Memoranda, the issues in this case
were delineated, as follows:[11]
WHETHER THE INSTANT PETITION FOR REVIEW
ON CERTIORARI SUBSTANTIALLY COMPLIES
WITH SUPREME COURT CIRCULAR 28-91.

WHETHER REVENUE REGULATION 19-86, AS

AMENDED, IS LEGISLATIVE OR INTERPRETATIVE
IN NATURE.
WHETHER REVENUE REGULATION 19-86, AS
AMENDED, IS PROSPECTIVE OR RETROACTIVE
IN ITS APPLICATION.
WHETHER PETITIONER, AS FOUND BY THE
COURT OF APPEALS, FAILED TO MEET THE
QUANTUM OF EVIDENCE REQUIRED IN REFUND
CASES.
WHETHER PETITIONER, AS FOUND BY THE
COURT OF APPEALS, IS ESTOPPED FROM
CLAIMING ITS PRESENT REFUND.
As to the first issue, the Court agrees with
respondents' contention that the petition should be
dismissed outright for failure to comply with Supreme
Court Circular 28-91, now incorporated as Section 2
of Rule 42 of the Rules of Court. The records plainly
show, and this has not been denied by BLC, that the
certification was executed by counsel who has not
been shown to have specific authority to sign the
same for BLC.
In BA Savings Bank v. Sia,[12] it was held that the
certificate of non-forum shopping may be signed, for
and on behalf of a corporation, by a specifically
authorized lawyer who has personal knowledge of the
facts required to be disclosed in such document. This
ruling, however, does not mean that any lawyer,
acting on behalf of the corporation he is representing,
may routinely sign a certification of non-forum
shopping. The Court emphasizes that the lawyer must
be "specifically authorized" in order validly to sign the
certification.
Corporations have no powers except those expressly
conferred upon them by the Corporation Code and
those that are implied by or are incidental to its
existence. These powers are exercised through their
board of directors and/or duly authorized officers and
agents. Hence, physical acts, like the signing of
documents, can be performed only by natural persons
duly authorized for the purpose by corporate bylaws
or by specific act of the board of directors.[13]
The records are bereft of the authority of BLC's

counsel to institute the present petition and to sign the

certification of non-forum shopping. While said
counsel may be the counsel of record for BLC, the
representation does not vest upon him the authority to
execute the certification on behalf of his client. There
must be a resolution issued by the board of directors
that specifically authorizes him to institute the petition
and execute the certification, for it is only then that his
actions can be legally binding upon BLC.
BLC however insists that there was substantial
compliance with SC Circular No. 28-91 because the
verification/certification was issued by a counsel who
had full personal knowledge that no other petition or
action has been filed or is pending before any other
tribunal. According to BLC, said counsel's law firm has
handled this case from the very beginning and could
very well attest and/or certify to the absence of an
instituted or pending case involving the same or
similar issues.
The argument of substantial compliance deserves no
merit, given the Court's ruling in Mendigorin v.
Cabantog:[14]
...The CA held that there was substantial compliance
with the Rules of Court, citing Dimagiba vs. Montalvo,
Jr. [202 SCRA 641] to the effect that a lawyer who
assumes responsibility for a client's cause has the
duty to know the entire history of the case, especially
if any litigation is commenced. This view, however, no
longer holds authoritative value in the light of Digital
Microwave Corporation vs. CA [328 SCRA 286],
where it was held that the reason the certification
against forum shopping is required to be
accomplished by petitioner himself is that only the
petitioner himself has actual knowledge of whether or
not he has initiated similar actions or proceedings in
other courts or tribunals. Even counsel of record may
be unaware of such fact. To our mind, this view is
more in accord with the intent and purpose of Revised
Circular No. 28-91.
Clearly, therefore, the present petition lacks the
proper certification as strictly required by
jurisprudence and the Rules of Court.
Even if the Court were to ignore the aforesaid
procedural infirmity, a perusal of the arguments raised
in the petition indicates that a resolution on the merits
would nevertheless yield the same outcome.

BLC attempts to convince the Court that Revenue

Regulation 19-86 is legislative rather than
interpretative in character and hence, should retroact
to the date of effectivity of the law it seeks to
interpret.
Administrative issuances may be distinguished
according to their nature and substance: legislative
and interpretative. A legislative rule is in the matter of
subordinate legislation, designed to implement a
primary legislation by providing the details thereof. An
interpretative rule, on the other hand, is designed to
provide guidelines to the law which the administrative
agency is in charge of enforcing.[15]
The Court finds the questioned revenue regulation to
be legislative in nature. Section 1 of Revenue
Regulation 19-86 plainly states that it was
promulgated pursuant to Section 277 of the NIRC.
Section 277 (now Section 244) is an express grant of
authority to the Secretary of Finance to promulgate all
needful rules and regulations for the effective
enforcement of the provisions of the NIRC. In Paper
Industries Corporation of the Philippines v. Court of
Appeals,[16] the Court recognized that the application
of Section 277 calls for none other than the exercise
of quasi-legislative or rule-making authority. Verily, it
cannot be disputed that Revenue Regulation 19-86
was issued pursuant to the rule-making power of the
Secretary of Finance, thus making it legislative, and
not interpretative as alleged by BLC.
BLC further posits that, assuming the revenue
regulation is legislative in nature, it is invalid for want
of due process as no prior notice, publication and
public hearing attended the issuance thereof. To
support its view, BLC cited CIR v. Fortune Tobacco, et
al.,[17] wherein the Court nullified a revenue
memorandum circular which reclassified certain
cigarettes and subjected them to a higher tax rate,
holding it invalid for lack of notice, publication and
public hearing.
The doctrine enunciated in Fortune Tobacco, and
reiterated in CIR v. Michel J. Lhuillier Pawnshop, Inc.,
[18] is that when an administrative rule goes beyond
merely providing for the means that can facilitate or
render less cumbersome the implementation of the
law and substantially increases the burden of those

governed, it behooves the agency to accord at least

to those directly affected a chance to be heard and,
thereafter, to be duly informed, before the issuance is
given the force and effect of law. In Lhuillier and
Fortune Tobacco, the Court invalidated the revenue
memoranda concerned because the same increased
the tax liabilities of the affected taxpayers without
affording them due process. In this case, Revenue
Regulation 19-86 would be beneficial to the taxpayers
as they are subjected to lesser taxes. Petitioner, in
fact, is invoking Revenue Regulation 19-86 as the
very basis of its claim for refund. If it were invalid,
then petitioner all the more has no right to a refund.
After upholding the validity of Revenue Regulation 1986, the Court now resolves whether its application
should be prospective or retroactive.
The principle is well entrenched that statutes,
including administrative rules and regulations, operate
prospectively only, unless the legislative intent to the
contrary is manifest by express terms or by necessary
implication.[19] In the present case, there is no
indication that the revenue regulation may operate
retroactively. Furthermore, there is an express
provision stating that it "shall take effect on January 1,
1987," and that it "shall be applicable to all leases
written on or after the said date." Being clear on its
prospective application, it must be given its literal
meaning and applied without further interpretation.[20]
Thus, BLC is not in a position to invoke the provisions
of Revenue Regulation 19-86 for lease rentals it
received prior to January 1, 1987.
It is also apt to add that tax refunds are in the nature
of tax exemptions. As such, these are regarded as in
derogation of sovereign authority and are to be strictly
construed against the person or entity claiming the
exemption. The burden of proof is upon him who
claims the exemption and he must be able to justify
his claim by the clearest grant under Constitutional or
statutory law, and he cannot be permitted to rely upon
vague implications.[21] Nothing that BLC has raised
justifies a tax refund.
It is not necessary to rule on the remaining issues.
WHEREFORE, the petition for review is hereby
DENIED, and the assailed decision and resolution of

the Court of Appeals are AFFIRMED. No

pronouncement as to costs.
EMILIO A. GONZALES III, PETITIONER, VS.
PAQUITO N. OCHOA, JR
BRION, J.:
We resolve the Office of the Presidents (OPs) motion
for reconsideration of our September 4, 2012
Decision1 which ruled on the petitions filed by Deputy
Ombudsman Emilio Gonzales III and Special
Prosecutor Wendell Barreras-Sulit. Their petitions
challenged the constitutionality of Section 8(2) of
Republic Act (RA) No. 6770.2

In the challenged Decision, the Court upheld the

constitutionality of Section 8(2) of RA No. 6770 and
ruled that the President has disciplinary jurisdiction
over a Deputy Ombudsman and a Special Prosecutor.
The Court, however, reversed the OP ruling that: (i)
found Gonzales guilty of Gross Neglect of Duty and
Grave Misconduct constituting betrayal of public trust;
and (ii) imposed on him the penalty of dismissal.

Sulit, who had not then been dismissed and who

simply sought to restrain the disciplinary proceedings
against her, solely questioned the jurisdiction of the
OP to subject her to disciplinary proceedings. The
Court affirmed the continuation of the proceedings
against her after upholding the constitutionality of
Section 8(2) of RA No. 6770.

The fallo of our assailed Decision reads:

WHEREFORE, in G.R. No. 196231, the decision of
the Office of the President in OP Case No. 10-J-460 is
REVERSED and SET ASIDE. Petitioner Emilio A.
Gonzales III is ordered REINSTATED with payment of
backwages corresponding to the period of suspension
effective immediately, even as the Office of the
Ombudsman is directed to proceed with the
investigation in connection with the above case
against petitioner. In G.R. No. 196232, We AFFIRM

the continuation of OP-DC Case No. 11-B-003 against

Special Prosecutor Wendell Barreras-Sulit for alleged
acts and omissions tantamount to culpable violation of
the Constitution and a betrayal of public trust, in
accordance with Section 8(2) of the Ombudsman Act
of 1989.3

In view of the Courts ruling, the OP filed the present

motion for reconsideration through the Office of the
Solicitor General (OSG).
We briefly narrate the facts that preceded the filing of
the petitions and the present motion for
reconsideration.

records of Mendozas case to his office. The Office of

the Regional Director of the NAPOLCOM duly
complied on July 24, 2008.6 Mendoza, et al. filed
their position papers with Gonzales, in compliance
with his Order. 7

Pending Gonzales action on Mendoza, et al.s case

(on August 26, 2008), the Office of the City
Prosecutor of Manila City dismissed Kalaws
complaint against Mendoza, et al. for his failure to
substantiate his allegations.8 Similarly, on October
17, 2008, the PNP-IAS recommended the dismissal
without prejudice of the administrative case against
Mendoza, et al. for Kalaws failure to prosecute.9

I. ANTECEDENTS

A. Gonzales petition (G.R. No. 196231)

a. Factual antecedents

On May 26, 2008, Christian Kalaw filed separate

charges with the Philippine National Police Internal
Affairs Service (PNP-IAS) and with the Manila City
Prosecutors Office against Manila Police District
Senior Inspector Rolando Mendoza and four others
(Mendoza, et al.) for robbery, grave threat, robbery
extortion and physical injury.4

On May 29, 2008, Police Senior Superintendent Atty.

Clarence Guinto filed an administrative charge for
grave misconduct with the National Police
Commission (NAPOLCOM) PNP-NCRPO against
Mendoza, et al. based on the same allegations made
by Kalaw before the PNP-IAS.5

On July 2, 2008, Gonzales, Deputy Ombudsman for

Military and Other Law Enforcement Officers
(MOLEO), directed the NAPOLCOM to turn over the

On February 16, 2009, after preparing a draft decision

on Mendoza, et al.s case, Gonzales forwarded the
entire records to the Office of then Ombudsman
Merceditas Gutierrez for her review.10 In his draft
decision, Gonzales found Mendoza, et al. guilty of
grave misconduct and imposed on them the penalty
of dismissal from the service.11

Mendoza, et al. received a copy of the Ombudsmans

decision that approved Gonzales recommendation on
October 30, 2009. Mendoza, et al. filed a motion for
reconsideration12 on November 5, 2009, followed by
a Supplement to the Motion for Reconsideration.13

On December 10, 2009, the MOLEO-Records Section

forwarded Mendoza, et al.s case records to the
Criminal Investigation, Prosecution and Administrative
Bureau-MOLEO. On December 14, 2009, the case
was assigned to Graft Investigation and Prosecution
Officer (GIPO) Dennis Garcia for review and
recommendation.14

GIPO Garcia released a draft order15 to his

immediate superior, Director Eulogio S. Cecilio, for
appropriate action on April 5, 2010. Dir. Cecilio
signed and forwarded the draft order to Gonzales
office on April 27, 2010. Gonzales reviewed the draft

and endorsed the order, together with the case

records, on May 6, 2010 for the final approval by the
Ombudsman.16

On August 23, 2010, pending final action by the

Ombudsman on Mendoza, et al.s case, Mendoza
hijacked a tourist bus and held the 21 foreign tourists
and the four Filipino tour assistants on board as
hostages. While the government exerted earnest
attempts to peacefully resolve the hostage-taking, it
ended tragically, resulting in the deaths of Mendoza
and several others on board the hijacked bus.

In the aftermath, President Benigno C. Aquino III

directed the Department of Justice and the
Department of Interior and Local Government to
conduct a joint thorough investigation of the incident.
The two departments issued Joint Department Order
No. 01-2010, creating an Incident Investigation and
Review Committee (IIRC).

In its September 16, 2010 First Report, the IIRC found

the Ombudsman and Gonzales accountable for their
gross negligence and grave misconduct in handling
the case against Mendoza.17 The IIRC stated that
the Ombudsman and Gonzales failure to promptly
resolve Mendozas motion for reconsideration,
without justification and despite repeated pleas xxx
precipitated the desperate resort to hostagetaking.18 The IIRC recommended the referral of its
findings to the OP for further determination of possible
administrative offenses and for the initiation of the
proper administrative proceedings.19

Accordingly, on October 15, 2010, Gonzales was

formally charged before the OP for Gross Neglect of
Duty and/or Inefficiency in the Performance of Official
Duty and for Misconduct in Office.20

b. The OP ruling

On March 31, 2011, the OP found Gonzales guilty as

charged and dismissed him from the
service.21 According to the OP, the inordinate and
unjustified delay in the resolution of [Mendozas]
Motion for Reconsideration [that spanned for nine (9)
long months] xxx amounted to gross neglect of duty
and constituted a flagrant disregard of the Office of
the Ombudsmans own Rules of Procedure.22

c. The Petition

On February 25, 2010, the Office of the Ombudsman,

through Sulit and her prosecutorial staff, entered into
a plea bargaining agreement (Agreement) with
Garcia.24 Garcia thereby agreed to: (i) withdraw his
plea of not guilty to the charge of plunder and enter a
plea of guilty to the lesser offense of indirect bribery;
and (ii) withdraw his plea of not guilty to the charge of
money laundering and enter a guilty plea to the lesser
offense of facilitating money laundering. In exchange,
he would convey to the government his ownership,
rights and other interests over the real and personal
properties enumerated in the Agreement and the bank
deposits alleged in the information.25

Gonzales posited in his petition that the OP has no

administrative disciplinary jurisdiction over a Deputy
Ombudsman. Under Section 21 of RA No. 6770, it is
the Ombudsman who exercises administrative
disciplinary jurisdiction over the Deputy Ombudsman.

The Sandiganbayan approved the Agreement on May

4, 201026 based on the parties submitted Joint
Motion for Approval.27

On the merits, Gonzales argued that his office

received the draft order from GIPO Garcia on April 27,
2010. On May 6, 2010, he completed his review of
the draft, approved it, and transmitted it to the Office
of the Ombudsman for final approval. Since the draft
order on Mendozas motion for reconsideration had to
undergo different levels of preparation, review and
approval, the period it took to resolve the motion
could not be unjustified, since he himself acted on the
draft order only within nine (9) calendars days from
his receipt of the order.23

The apparent one-sidedness of the Agreement drew

public outrage and prompted the Committee on
Justice of the House of Representatives to conduct an
investigation. After public hearings, the Committee
found that Sulit, her deputies and assistants
committed culpable violations of the Constitution and
betrayal of public trust grounds for removal under
Section 8(2) of RA No. 6770.28 The Committee
recommended to the President the dismissal from the
service of Sulit and the filing of appropriate charges
against her deputies and assistants before the
appropriate government office.

B. Sulits petition (G.R. No. 196232)

In April 2005, the Office of the Ombudsman charged

Major General Carlos F. Garcia and several others,
before the Sandiganbayan, with plunder and money
laundering. On May 7, 2007, Garcia filed an Urgent
Petition for Bail which the prosecution opposed. The
Sandiganbayan denied Garcia's urgent petition for
bail on January 7, 2010, in view of the strength of the
prosecutions evidence against Garcia.

Accordingly, the OP initiated an administrative

disciplinary proceeding against Sulit.29 On March 24,
2011, Sulit filed her Written Explanation, questioning
the OPs jurisdiction.30 The question of jurisdiction
notwithstanding, the OP set the case for preliminary
investigation on April 15, 2011, prompting Sulit to seek
relief from this Court.
II. COURTS RULING

On motion for reconsideration and further reflection,

the Court votes to grant Gonzales petition and to

declare Section 8(2) of RA No. 6770 unconstitutional

with respect to the Office of the Ombudsman. (As the
full explanation of the Courts vote describes below,
this conclusion does not apply to Sulit as the grant of
independence is solely with respect to the Office of
the Ombudsman which does not include the Office of
the Special Prosecutor under the Constitution. The
prevailing ruling on this latter point is embodied in the
Concurring and Dissenting Opinion of J. Marvic Mario
Victor Leonen).

A. Preliminary considerations:

a. Absence of motion for reconsideration

on the part of the petitioners

At the outset, the Court notes that Gonzales and Sulit

did not file a motion for reconsideration of the Courts
September 4, 2012 Decision; only the OP, through the
OSG, moved for the reconsideration of our ruling
reinstating Gonzales.

This omission, however, poses no obstacle for the

Courts review of its ruling on the whole case since a
serious constitutional question has been raised and is
one of the underlying bases for the validity or
invalidity of the presidential action. If the President
does not have any constitutional authority to discipline
a Deputy Ombudsman and/or a Special Prosecutor in
the first place, then any ruling on the legal correctness
of the OPs decision on the merits will be an empty
one.

In other words, since the validity of the OPs decision

on the merits of the dismissal is inextricably anchored
on the final and correct ruling on the constitutional
issue, the whole case including the constitutional
issue remains alive for the Courts consideration on
motion for reconsideration.

b. The justiciability of the constitutional

issue raised in the petitions

We clarify, too, that the issue of whether a Deputy

Ombudsman may be subjected to the administrative
disciplinary jurisdiction of the President (concurrently
with that of the Ombudsman) is a justiciable not a
political question. A justiciable question is one
which is inherently susceptible of being decided on
grounds recognized by law,31 as where the court
finds that there are constitutionally-imposed limits on
the exercise of the powers conferred on a political
branch of the government.32

In resolving the petitions, we do not inquire into the

wisdom of the Congress choice to grant concurrent
disciplinary authority to the President. Our inquiry is
limited to whether such statutory grant violates the
Constitution, particularly whether Section 8(2) of RA
No. 6770 violates the core constitutional principle of
the independence of the Office of the Ombudsman as
expressed in Section 5, Art. XI of the Constitution.

To be sure, neither the Executive nor the Legislative

can create the power that Section 8(2) of RA No.
6770 grants where the Constitution confers none.
When exercised authority is drawn from a vacuum,
more so when the authority runs counter to a core
constitutional principle and constitutional intents, the
Court is duty-bound to intervene under the powers
and duties granted and imposed on it by Article VIII of
the Constitution.

serve as the people's medium for airing grievances

and for direct redress against abuses and misconduct
in the government. Ultimately, however, these
agencies failed to fully realize their objective for lack
of the political independence necessary for the
effective performance of their function as government
critic.33

It was under the 1973 Constitution that the Office of

the Ombudsman became a constitutionallymandated office to give it political independence and
adequate powers to enforce its mandate. Pursuant to
the 1973 Constitution, President Ferdinand Marcos
enacted Presidential Decree (PD) No. 1487, as
amended by PD No. 1607 and PD No. 1630, creating
the Office of the Ombudsman to be known as
Tanodbayan. It was tasked principally to investigate,
on complaint or motu proprio, any administrative act
of any administrative agency, including any
government-owned or controlled corporation. When
the Office of the Tanodbayan was reorganized in
1979, the powers previously vested in the Special
Prosecutor were transferred to the Tanodbayan
himself. He was given the exclusive authority to
conduct preliminary investigation of all cases
cognizable by the Sandiganbayan, file the
corresponding information, and control the
prosecution of these cases.34

With the advent of the 1987 Constitution, a new Office

of the Ombudsman was created by constitutional
fiat. Unlike in the 1973 Constitution, its independence
was expressly and constitutionally guaranteed. Its
objectives are to enforce the state policy in Section
27, Article II35 and the standard of accountability in
public service under Section 1, Article XI of the 1987
Constitution. These provisions read:

B. The Deputy Ombudsman: Constitutional Issue

a. The Philippine Ombudsman

Section 27. The State shall maintain honesty and

integrity in the public service and take positive and
effective measures against graft and corruption.

Prior to the 1973 Constitution, past presidents

established several Ombudsman-like agencies to

Section 1. Public office is a public trust. Public officers

and employees must, at all times, be accountable to

the people, serve them with utmost responsibility,

integrity, loyalty, and efficiency; act with patriotism and
justice, and lead modest lives.

Under Section 12, Article XI of the 1987 Constitution,

the Office of the Ombudsman is envisioned to be the
protector of the people against the inept, abusive,
and corrupt in the Government, to function essentially
as a complaints and action bureau.36 This
constitutional vision of a Philippine Ombudsman
practically intends to make the Ombudsman an
authority to directly check and guard against the ills,
abuses and excesses of the bureaucracy. Pursuant
to Section 13(8), Article XI of the 1987 Constitution,
Congress enacted RA No. 6770 to enable it to further
realize the vision of the Constitution. Section 21 of RA
No. 6770 provides:
Section 21. Official Subject to Disciplinary Authority;
Exceptions. The Office of the Ombudsman shall
have disciplinary authority over all elective and
appointive officials of the Government and its
subdivisions, instrumentalities and agencies, including
Members of the Cabinet, local government,
government-owned or controlled corporations and
their subsidiaries, except over officials who may be
removed only by impeachment or over Members of
Congress, and the Judiciary. [emphasis ours, italics
supplied]

As the Ombudsman is expected to be an activist

watchman,37 the Court has upheld its actions,
although not squarely falling under the broad powers
granted it by the Constitution and by RA No. 6770, if
these actions are reasonably in line with its official
function and consistent with the law and the
Constitution.38

The Ombudsmans broad investigative and

disciplinary powers include all acts of malfeasance,
misfeasance, and nonfeasance of all public
officials, including Members of the Cabinet and key
Executive officers, during their tenure. To support
these broad powers, the Constitution saw it fit to

insulate the Office of the Ombudsman from the

pressures and influence of officialdom and partisan
politics and from fear of external reprisal by making it
an independent office. Section 5, Article XI of the
Constitution expressed this intent, as follows:

framers of the Constitution intended that these

independent bodies be insulated from political
pressure to the extent that the absence of
independence would result in theimpairment of their
core functions.

fiscal autonomy is granted to the constitutional

commissions. The lack of fiscal autonomy
notwithstanding, the framers of the 1987 Constitution
clearly expressed their desire to keep the
Commission independent from the executive branch
and other political leaders:

Section 5. There is hereby created

the independent Office of the Ombudsman,
composed of the Ombudsman to be known as
Tanodbayan, one overall Deputy and at least one
Deputy each for Luzon, Visayas, and Mindanao. A
separate Deputy for the military establishment may
likewise be appointed. [emphasis ours]

In Bengzon v. Drilon,42 involving the fiscal autonomy

of the Judiciary, we ruled against the interference that
the President may bring and maintained that the
independence and the flexibility of the Judiciary, the
Constitutional Commissions and the Office of the
Ombudsman are crucial to our legal system.

MR. MONSOD. We see the merits of the arguments

of Commissioner Rodrigo. If we explain to him our
concept, he can advise us on how to reconcile his
position with ours. The position of the committee is
that we need a body that would be able to work and
cooperate with the executive because the
Commissioner is right. Many of the services needed
by this commission would need not only the
cooperation of the executive branch of the
government but also of the judicial branch of
government. This is going to be a permanent
constitutional commission over time. We also want a
commission to function even under the worst
circumstance when the executive may not be very
cooperative. However, the question in our mind is:
Can it still function during that time? Hence, we are
willing to accept suggestions from Commissioner
Rodrigo on how to reconcile this. We realize the need
for coordination and cooperation. We also would like
to build in some safeguards that it will not be rendered
useless by an uncooperative executive.

Given the scope of its disciplinary authority, the Office

of the Ombudsman is a very powerful government
constitutional agency that is considered a notch
above other grievance-handling investigative
bodies.39 It has powers, both constitutional and
statutory, that are commensurate with its daunting
task of enforcing accountability of public officers.40

b. Independence of constitutional bodies

The Judiciary, the Constitutional Commissions, and

the Ombudsman must have the independence and
flexibility needed in the discharge of their
constitutional duties. The imposition of restrictions
and constraints on the manner the independent
constitutional offices allocate and utilize the funds
appropriated for their operations is anathema to fiscal
autonomy and violative not only the express mandate
of the Constitution but especially as regards the
Supreme Court, of the independence and separation
of powers upon which the entire fabric of our
constitutional system is based.

vis-a-vis the Ombudsmans independence

Under the Constitution, several constitutional bodies

have been expressly labelled as
independent. 41 The extent of the independence
enjoyed by these constitutional bodies however varies
and is to be interpreted with two significant
considerations in mind: first, the functions performed
or the powers involved in a given case; and second,
consistency of any allowable interference to these
powers and functions, with the principle of checks and
balances.

The constitutional deliberations explain the

Constitutional Commissions need for independence.
In the deliberations of the 1973 Constitution, the
delegates amended the 1935 Constitution by
providing for a constitutionally-created Civil Service
Commission, instead of one created by law, on the
premise that the effectivity of this body is dependent
on its freedom from the tentacles of politics.43 In a
similar manner, the deliberations of the 1987
Constitution on the Commission on Audit highlighted
the developments in the past Constitutions geared
towards insulating the Commission on Audit from
political pressure.44

Notably, the independence enjoyed by the Office of

the Ombudsman and by the Constitutional
Commissions shares certain characteristics they do
not owe their existence to any act of Congress, but
are created by the Constitution itself; additionally, they
all enjoy fiscal autonomy. In general terms, the

Notably, the Constitution also created an

independent Commission on Human Rights,
although it enjoys a lesser degree of independence
since it is not granted fiscal autonomy in the manner

xxxx

MR. GARCIA. xxx Very often, when international

commissions or organizations on human rights go to a
country, the most credible organizations are
independent human rights bodies. Very often these
are private organizations, many of which are
prosecuted, such as those we find in many countries
in Latin America. In fact, what we are proposing is an
independent body on human rights, which would
provide governments with credibility precisely
because it is independent of the present
administration. Whatever it says on the human rights
situation will be credible because it is not subject to
pressure or control from the present political
leadership.

Secondly, we all know how political fortunes come

and go. Those who are in power yesterday are in
opposition today and those who are in power today
may be in the opposition tomorrow. Therefore, if we
have a Commission on Human Rights that would
investigate and make sure that the rights of each one
is protected, then we shall have a body that could
stand up to any power, to defend the rights of
individuals against arrest, unfair trial, and so on.45

These deliberative considerations abundantly show

that the independent constitutional commissions have
been consistently intended by the framers to be
independent from executive control or supervision or
any form of political influence. At least insofar as
these bodies are concerned, jurisprudence is not
scarce on how the independence granted to these
bodies prevents presidential interference.

In Brillantes, Jr. v. Yorac,46 we emphasized that the

Constitutional Commissions, which have been
characterized under the Constitution as
independent, are not under the control of the
President, even if they discharge functions that are
executive in nature. The Court declared as
unconstitutional the Presidents act of temporarily
appointing the respondent in that case as Acting
Chairman of the Comelec however wellmeaning47 it might have been.

In Bautista v. Senator Salonga,48 the Court

categorically stated that the tenure of the
commissioners of the independent Commission on
Human Rights could not be placed under the
discretionary power of the President:
Indeed, the Court finds it extremely difficult to
conceptualize how an office conceived and created by
the Constitution to be independent as the
Commission on Human Rights and vested with the
delicate and vital functions of investigating violations
of human rights, pinpointing responsibility and
recommending sanctions as well as remedial
measures therefor, can truly function with

independence and effectiveness, when the tenure in

office of its Chairman and Members is made
dependent on the pleasure of the
President. Executive Order No. 163-A, being
antithetical to the constitutional mandate of
independence for the Commission on Human Rights
has to be declared unconstitutional.

Again, in Atty. Macalintal v. Comelec,49 the Court

considered even the mere review of the rules of the
Commission on Elections by Congress a trampling
of the constitutional mandate of independence of this
body. Obviously, the mere review of rules places
considerably less pressure on a constitutional body
than the Executives power to discipline and remove
key officials of the Office of the Ombudsman, yet the
Court struck down the law as unconstitutional.

The kind of independence enjoyed by the Office of the

Ombudsman certainly cannot be inferior but is
similar in degree and kind to the independence
similarly guaranteed by the Constitution to the
Constitutional Commissions since all these offices fill
the political interstices of a republican democracy that
are crucial to its existence and proper functioning.50

c. Section 8(2) of RA No. 6770 vesting

disciplinary authority in the President
over the Deputy Ombudsman violates
the independence of the Office of the
Ombudsman and is thus
unconstitutional

Our discussions, particularly the Courts expressed

caution against presidential interference with the
constitutional commissions, on one hand, and those
expressed by the framers of the 1987 Constitution, on
the other, in protecting the independence of the
Constitutional Commissions, speak for themselves as
overwhelming reasons to invalidate Section 8(2) of
RA No. 6770 for violating the independence of the
Office of the Ombudsman.

In more concrete terms, we rule that subjecting the

Deputy Ombudsman to discipline and removal by the
President, whose own alter egos and officials in the
Executive Department are subject to the
Ombudsmans disciplinary authority, cannot but
seriously place at risk the independence of the Office
of the Ombudsman itself. The Office of the
Ombudsman, by express constitutional mandate,
includes its key officials, all of them tasked to support
the Ombudsman in carrying out her mandate.
Unfortunately, intrusion upon the constitutionallygranted independence is what Section 8(2) of RA No.
6770 exactly did. By so doing, the law directly
collided not only with the independence that the
Constitution guarantees to the Office of the
Ombudsman, but inevitably with the principle of
checks and balances that the creation of an
Ombudsman office seeks to revitalize.

What is true for the Ombudsman must be equally and

necessarily true for her Deputies who act as agents of
the Ombudsman in the performance of their
duties. The Ombudsman can hardly be expected to
place her complete trust in her subordinate officials
who are not as independent as she is, if only because
they are subject to pressures and controls external to
her Office. This need for complete trust is true in an
ideal setting and truer still in a young democracy like
the Philippines where graft and corruption is still a
major problem for the government. For these
reasons, Section 8(2) of RA No. 6770 (providing that
the President may remove a Deputy
Ombudsman) should be declared void.

The deliberations of the Constitutional Commission on

the independence of the Ombudsman fully support
this position. Commissioner Florenz Regalado of the
Constitutional Commission expressed his
apprehension that any form of presidential control
over the Office of the Ombudsman would diminish its
independence.51 The following exchanges between
Commissioners Blas Ople and Christian Monsod
further reveal the constitutional intent to keep the
Office of the Ombudsman independent from the
President:

MR. OPLE. xxx

May I direct a question to the Committee? xxx [W]ill

the Committee consider later an amendment xxx, by
way of designating the office of the Ombudsman as a
constitutional arm for good government, efficiency of
the public service and the integrity of the President of
the Philippines, instead of creating another agency in
a kind of administrative limbo which would be
accountable to no one on the pretext that it is a
constitutional body?

MR. MONSOD. The Committee discussed that during

our committee deliberations and when we prepared
the report, it was the opinion of the Committee and
I believe it still is that it may not contribute to the
effectiveness of this office of the Ombudsman
precisely because many of the culprits in inefficiency,
injustice and impropriety are in the executive
department. Therefore, as we saw the wrong
implementation of the Tanodbayan which was under
the tremendous influence of the President, it was an
ineffectual body and was reduced to the function of a
special fiscal. The whole purpose of our proposal is
precisely to separate those functions and to produce
a vehicle that will give true meaning to the concept of
Ombudsman. Therefore, we regret that we cannot
accept the proposition.52

The statements made by Commissioner Monsod

emphasized a very logical principle: the Executive
power to remove and discipline key officials of the
Office of the Ombudsman, or to exercise any power
over them, would result in an absurd situation wherein
the Office of the Ombudsman is given the duty to
adjudicate on the integrity and competence of the
very persons who can remove or suspend its
members. Equally relevant is the impression that
would be given to the public if the rule were
otherwise. A complainant with a grievance against a
high-ranking official of the Executive, who appears to
enjoy the Presidents favour, would be discouraged
from approaching the Ombudsman with his complaint;
the complainants impression (even if misplaced), that

the Ombudsman would be susceptible to political

pressure, cannot be avoided. To be sure, such an
impression would erode the constitutional intent of
creating an Office of the Ombudsman as champion of
the people against corruption and bureaucracy.

d. The mutual-protection argument for

crafting Section 8(2)of RA No. 6770

In crafting Section 8(2) of RA No. 6770, Congress

apparently addressed the concern that a lack of an
external check against the Deputy Ombudsman would
result in mutual protection between the Ombudsman
and her Deputies.

While the preceding discussion already suffices to

address this concern, it should be added that this
concern stands on shaky grounds since it ignores the
existing checks and balances already in place. On
the one hand, the Ombudsmans Deputies cannot
protect the Ombudsman because she is subject to the
impeachment power of Congress. On the other hand,
the Ombudsmans attempt to cover up the misdeeds
of her Deputies can be questioned before the Court
on appeal or certiorari. The same attempt can
likewise subject her to impeachment.

The judicial recourse available is only consistent with

the nature of the Supreme Court as a non-political
independent body mandated by the Constitution to
settle judicial and quasi-judicial disputes, whose
judges and employees are not subject to the
disciplinary authority of the Ombudsman and whose
neutrality would be less questionable. The Members
of the Court themselves may be subjected to the
impeachment power of Congress.

In these lights, the appeal, if any, of the mutual

protection argument becomes distinctly implausible.
At the same time, the Court remains consistent with
its established rulings - that the independence

granted to the Constitutional Commissions bars any

undue interference from either the Executive or
Congress and is in full accord with constitutional
intent.

e. Congress power determines the

manner and causes for the removal
of non-impeachable officers is not
a carte blanch authority

Under Section 2, Article XI of the 1987

Constitution,53 Congress is empowered to determine
the modes of removal from office of all public officers
and employees except the President, the VicePresident, the Members of the Supreme Court, the
Members of the Constitutional Commissions, and the
Ombudsman, who are all impeachable officials.

The intent of the framers of the Constitution in

providing that [a]ll other public officers and
employees may be removed from office as provided
by law, but not by impeachment in the second
sentence of Section 2, Article XI is to prevent
Congress from extending the more stringent rule of
removal only by impeachment to favoured public
officers.54 Understandably so, impeachment is the
most difficult and cumbersome mode of removing a
public officer from office. It is, by its nature, a sui
generis politico-legal process55 that signals the need
for a judicious and careful handling as shown by the
process required to initiate the proceeding;56 the oneyear limitation or bar for its initiation;57 the limited
grounds for impeachment;58 the defined
instrumentality given the power to try impeachment
cases;59 and the number of votes required for a
finding of guilt.60 All these argue against the
extension of this removal mechanism beyond those
mentioned in the Constitution.

On the practical side, our nation has witnessed the

complications and problems an impeachment
proceeding entails, thus justifying its limited
application only to the officials occupying the highest

echelons of responsibility in our government. To

name a few, some of the negative practical effects of
impeachment are: it stalls legislative work; it is an
expensive process in terms of the cost of prosecution
alone; and, more importantly, it is inherently divisive of
the nation.61 Thus, in a cost-benefit analysis of
adopting impeachment as a mechanism, limiting
Congress power to otherwise legislate on the matter
is far more advantageous to the country.

It is in these lights that the second sentence in

Section 2, Article XI of the 1987 Constitution should
be read. Contrary to the implied view of the minority,
in no way can this provision be regarded as blanket
authority for Congress to provide for any ground of
removal it deems fit. While the manner and cause of
removal are left to congressional determination, this
must still be consistent with constitutional guarantees
and principles, namely: the right to procedural and
substantive due process; the constitutional guarantee
of security of tenure; the principle of separation of
powers; and the principle of checks and balances.62

In short, the authority granted by the Constitution to

Congress to provide for the manner and cause of
removal of all other public officers and employees
does not mean that Congress can ignore the basic
principles and precepts established by the
Constitution.

In the same manner, the congressional determination

of the identity of the disciplinary authority is not a
blanket authority for Congress to repose it on
whomsoever Congress chooses without running afoul
of the independence enjoyed by the Office of the
Ombudsman and without disrupting the delicate
check and balance mechanism under the
Constitution. Properly viewed from this perspective,
the core constitutional principle of independence is
observed and any possible absurdity resulting from a
contrary interpretation is avoided. In other words,
while the Constitution itself vested Congress with the
power to determine the manner and cause of removal
of all non-impeachable officials, this power must be
interpreted consistent with the core constitutional

principle of independence of the Office of the

Ombudsman. Our observation in Macalintal v.
Comelec63 is apt:

carefully tried to avoid by making these offices

independent constitutional bodies.

The ambit of legislative power under Article VI of the

Constitution is circumscribed by other constitutional
provisions. One such provision is Section 1 of Article
IX-A of the 1987 Constitution ordaining that
constitutional commissions such as the COMELEC
shall be independent.

At any rate, even assuming that the OP has

disciplinary authority over the Deputy Ombudsman, its
decision finding Gonzales guilty of Gross Neglect of
Duty and Grave Misconduct constituting betrayal of
public trust is patently erroneous. The OPs decision
perfectly illustrates why the requirement of
impeachment-grounds in Section 8(2) of RA No. 6770
cannot be considered, even at a minimum, a measure
of protection of the independence of the Office of the
Ombudsman.

While one may argue that the grounds for

impeachment under Section 8(2) of RA No. 6770 is
intended as a measure of protection for the Deputy
Ombudsman and Special Prosecutor since these
grounds are not intended to cover all kinds of official
wrongdoing and plain errors of judgment - this
argument seriously overlooks the erosion of the
independence of the Office of the Ombudsman that it
creates. The mere fact that a statutorily-created
sword of Damocles hangs over the Deputy
Ombudsmans head, by itself, opens up all the
channels for external pressures and influence of
officialdom and partisan politics. The fear of external
reprisal from the very office he is to check for
excesses and abuses defeats the very purpose of
granting independence to the Office of the
Ombudsman.

That a judicial remedy is available (to set aside

dismissals that do not conform to the high standard
required in determining whether a Deputy
Ombudsman committed an impeachable offense) and
that the Presidents power of removal is limited to
specified grounds are dismally inadequate when
balanced with the constitutional principle of
independence. The mere filing of an administrative
case against the Deputy Ombudsman and the Special
Prosecutor before the OP can already result in their
suspension and can interrupt the performance of their
functions, in violation of Section 12, Article XI of the
Constitution. With only one term allowed under
Section 11, a Deputy Ombudsman or Special
Prosecutor, if removable by the President, can be
reduced to the very same ineffective Office of the
Ombudsman that the framers had foreseen and

C. The Deputy Ombudsman: The Dismissal Issue

a. The Office of the Presidents
finding of gross negligence has
no legal and factual leg to
stand on

The OPs decision found Gonzales guilty of Gross

Neglect of Duty and of Grave Misconduct. The
assailed Decision of the OP reads:
Upon consideration of the First Report, the evidence
and allegations of respondent Deputy Ombudsman
himself, and other documentary evidence gathered,
this Office finds that the inordinate and unjustified
delay in the resolution of Captain Mendozas Motion
for Reconsideration timely filed on 5 November 2009
xxx amounted to gross neglect of duty and/or
inefficiency in the performance of official duty.64

b. No gross neglect of duty or inefficiency

Let us again briefly recall the facts.

1. November 5, 2009 - Mendoza filed a Motion for
Reconsideration of the decision of the

Ombudsman,65 which was followed by a Supplement

to the Motion for Reconsideration;66
2. December 14, 200967 - GIPO Garcia, who was
assigned to review these motions and make his
recommendation for the appropriate action, received
the records of the case;

Section 8. Motion for reconsideration or

reinvestigation: Grounds Whenever allowable, a
motion for reconsideration or reinvestigation may only
be entertained if filed within ten (10) days from receipt
of the decision or order by the party on the basis of
any of the following grounds:

3. April 5, 2010 GIPO Garcia released a draft

order to be reviewed by his immediate superior, Dir.
Cecilio;68

a) New evidence had been discovered which

materially affects the order, directive or decision;

4. April 27, 2010 Dir. Cecilio signed and forwarded

to Gonzales this draft order;69

b) Grave errors of facts or laws or serious

irregularities have been committed prejudicial to the
interest of the movant.

5. May 6, 2010 (or nine days after the records were

forwarded to Gonzales) Gonzales endorsed the
draft order for the final approval of the
Ombudsman.70

Clearly, when Mendoza hijacked the tourist bus on

August 23, 2010, the records of the case were
already pending before Ombudsman Gutierrez.

Gross negligence refers to negligence characterized

by the want of even the slightest care, acting or
omitting to act in a situation where there is a duty to
act, not inadvertently but wilfully and intentionally, with
a conscious indifference to consequences insofar as
other persons may be affected. In the case of public
officials, there is gross negligence when a breach of
duty is flagrant and palpable.71

Gonzales cannot be guilty of gross neglect of duty

and/or inefficiency since he acted on the case
forwarded to him within nine days. In finding
Gonzales guilty, the OP72 relied on Section 8, Rule III
of Administrative Order No. 7 (or the Rules of
Procedure of the Office of the Ombudsman, series of
1990, as amended) in ruling that Gonzales should
have acted on Mendozas Motion for Reconsideration
within five days:

the respondent is an official or employee for his

information and compliance with the appropriate
directive contained therein. [italics and emphases
supplied]

Thus, the OPs ruling that Gonzales had been grossly

negligent for taking nine days, instead of five days, to
review a case was totally baseless.

c. No actionable failure to supervise subordinates

Only one motion for reconsideration or reinvestigation

shall be allowed, and the Hearing Officer shall resolve
the same within five (5) days from the date of
submission for resolution. [emphasis and underscore
ours]

Even if we consider this provision to be mandatory,

the period it requires cannot apply to Gonzales since
he is a Deputy Ombudsman whose obligation is to
review the case; he is not simply a Hearing Officer
tasked with the initial resolution of the motion. In
Section 6 of Administrative Order No. 7 on the
resolution of the case and submission of the proposed
decision, the period for resolving the case does not
cover the period within which it should be reviewed:
Section 6. Rendition of decision. Not later than thirty
(30) days after the case is declared submitted for
resolution, the Hearing Officer shall submit a
proposed decision containing his findings and
recommendation for the approval of the
Ombudsman. Said proposed decision shall be
reviewed by the Directors, Assistant Ombudsmen and
Deputy Ombudsmen concerned. With respect to low
ranking public officials, the Deputy Ombudsman
concerned shall be the approving authority. Upon
approval, copies thereof shall be served upon the
parties and the head of the office or agency of which

The OPs claims that Gonzales could have supervised

his subordinates to promptly act on Mendozas motion
and apprised the Tanodbayan of the urgency of
resolving the same are similarly groundless.

The Office of the Ombudsman is not a corner office in

our bureaucracy. It handles numerous cases that
involve the potential loss of employment of many
other public employees. We cannot conclusively
state, as the OP appears to suggest, that Mendozas
case should have been prioritized over other similar
cases. The Court has already taken judicial notice of
the steady stream of cases reaching the Office of the
Ombudsman.73 This consideration certainly militates
against the OSGs observation that there was a
grossly inordinate and inexcusable delay74 on the
part of Gonzales.

Equally important, the constitutional guarantee of

speedy disposition of cases before, among others,
quasi-judicial bodies,75 like the Office of the
Ombudsman, is itself a relative concept.76 Thus, the
delay, if any, must be measured in this objective
constitutional sense. Unfortunately, because of the
very statutory grounds relied upon by the OP in
dismissing Gonzales, the political and, perhaps,
practical considerations got the better of what is
legal and constitutional.

The facts do not show that Gonzales subordinates

had in any way been grossly negligent in their work.
While GIPO Garcia reviewed the case and drafted the
order for more than three months, it is noteworthy that
he had not drafted the initial decision and, therefore,
had to review the case for the first time.77 Even the
Ombudsman herself could not be faulted for acting on
a case within four months, given the amount of cases
that her office handles.

The point is that these are not inordinately long

periods for the work involved: examination of the
records, research on the pertinent laws and
jurisprudence, and exercise of legal judgment and
discretion. If this Court rules that these periods per se
constitute gross neglect of duty, the Ombudsmans
constitutional mandate to prosecute all the erring
officials of this country would be subjected to an
unreasonable and overwhelming constraint. Similarly,
if the Court rules that these periods per se constitute
gross neglect of duty, then we must be prepared to
reconcile this with the established concept of the right
of speedy disposition of cases something the Court
may be hard put to justify.

d. No undue interest

The OP also found Gonzales guilty of showing undue

interest in Mendozas case by having the case
endorsed to the Office of the Ombudsman and by
resolving it against Mendoza on the basis of the
unverified complaint-affidavit of the alleged victim,
Kalaw.

The fact that Gonzales had Mendozas case endorsed

to his office lies within his mandate, even if it were
based merely on the request of the alleged victims
father. The Constitution empowers the Ombudsman
and her Deputies to act promptly on complaints filed
in any form or manner against any public official or
employee of the government.78 This provision is
echoed by Section 13 of RA No. 6770,79 and by

Section 3, Rule III of Administrative Order No. 7,

series of 1990, as amended.80

Moreover, Gonzales and his subordinates did not

resolve the complaint only on the basis of the
unverified affidavit of Kalaw. Based on the
prosecution officers recommendations, the finding of
guilt on the part of Mendoza, et al. was based on their
admissions as well. Mendoza, et al. admitted that
they had arrested Kalaw based on two traffic
violations and allowed him to stay the whole night
until the following morning in the police precinct. The
next morning, Kalaw was allowed to leave the
precinct despite his failure to show a valid license and
based merely on his promise to return with the proper
documents.81] These admissions led Gonzales and
his staff to conclude that Mendoza, et al. irregularly
acted in apprehending Kalaw, since the proper
procedure for the apprehension of traffic violators
would be to give them a ticket and to file a case, when
appropriate.82

Lastly, we cannot deduce undue interest simply

because Gonzales decision differs from the decision
of the PNP-IAS (which dismissed the complaint
against Mendoza). To be sure, we cannot tie the
hands of any judicial or quasi-judicial body by ruling
that it should always concur with the decisions of
other judicial or quasi-judicial bodies which may have
also taken cognizance of the case. To do so in the
case of a Deputy Ombudsman would be repugnant to
the independence that our Constitution has
specifically granted to this office and would nullify the
very purpose for which it was created.

e. Penalty of dismissal totally

incommensurate with established
facts

Given the lack of factual basis for the charges against

Gonzales, the penalty of removal imposed by the OP
necessarily suffers grave infirmity. Basic strictures of
fair play dictate that we can only be held liable for our

own misdeeds; we can be made to account only for

lapses in our responsibilities. It is notable that of all
the officers, it was Gonzales who took the least
time nine days followed by Cecilio, who took 21
days; Garcia the writer of the draft took less
than four months, and the Ombudsman, less than four
months until the kidnapping incident rendered
Mendozas motion moot.

In these lights, the decision of the OP is clearly and

patently wrong. This conclusion, however, does not
preclude the Ombudsman from looking into any other
possible administrative liability of Gonzales under
existing Civil Service laws, rules and regulations.

D. The Special Prosecutor: The Constitutional Issue

The 1987 Constitution created a new, independent

Office of the Ombudsman. The existing Tanodbayan
at the time83 became the Office of the Special
Prosecutor under the 1987 Constitution. While the
composition of the independent Office of the
Ombudsman under the 1987 Constitution does not
textually include the Special Prosecutor, the weight of
the foregoing discussions on the unconstitutionality of
Section 8(2) of RA No. 6770 should equally apply to
the Special Prosecutor on the basis of the legislative
history of the Office of the Ombudsman as expounded
in jurisprudence.

Under the 1973 Constitution,84 the legislature was

mandated to create the Office of the Ombudsman,
known as the Tanodbayan, with investigative and
prosecutorial powers. Accordingly, on June 11, 1978,
President Ferdinand Marcos enacted PD No. 1487.85

Under PD No. 1486,86 however, the Chief Special

Prosecutor (CSP) was given the exclusive authority
to conduct preliminary investigation and to prosecute
cases that are within the jurisdiction of the
Sandiganbayan.87 PD No. 1486 expressly gave the
Secretary of Justice the power of control and

supervision over the Special Prosecutor.88 Consistent

with this grant of power, the law also authorized the
Secretary of Justice to appoint or detail to the Office
of the CSP any officer or employee of Department of
Justice or any Bureau or Office under the executive
supervision thereof to assist the Office of the CSP.

In December 1978, PD No. 160789 practically gave

back to the Tanodbayan the powers taken away from
it by the Office of the CSP. The law created in the
Office of the Tanodbayan an Office of the Chief
Special Prosecutor under the Tanodbayans
control,90 with the exclusive authority to conduct
preliminary investigation and prosecute all cases
cognizable by the Sandiganbayan. Unlike the earlier
decree, the law also empowered the Tanodbayan to
appoint Special Investigators and subordinate
personnel and/or to detail to the Office of the CSP any
public officer or employees who shall be under the
supervision and control of the Chief Special
Prosecutor.91 In 1979, PD No. 1630 further
amended the earlier decrees by transferring the
powers previously vested in the Special Prosecutor
directly to the Tanodbayan himself.92

This was the state of the law at the time the 1987
Constitution was ratified. Under the 1987 Constitution,
an independent Office of the Ombudsman is
created.93 The existing Tanodbayan is made the
Office of the Special Prosecutor, who shall continue
to function and exercise its powers as now94 or
hereafter may be provided by law.95

Other than the Ombudsmans Deputies, the

Ombudsman shall appoint all other officials and
employees of the Office of the
Ombudsman.96 Section 13(8), Article XI of the 1987
Constitution provides that the Ombudsman may
exercise such other powers or perform such
functions or duties as may be provided by law.
Pursuant to this constitutional command, Congress
enacted RA No. 6770 to provide for the functional and
structural organization of the Office of the
Ombudsman and the extent of its disciplinary
authority.

In terms of composition, Section 3 of RA No. 6770

defines the composition of the Office of the
Ombudsman, including in this Office not only the
offices of the several Deputy Ombudsmen but the
Office of the Special Prosecutor as well. In terms of
appointment, the law gave the President the authority
to appoint the Ombudsman, his Deputies and the
Special Prosecutor, from a list of nominees prepared
by the Judicial and Bar Council. In case of vacancy in
these positions, the law requires that the vacancy be
filled within three (3) months from occurrence.97

The law also imposes on the Special Prosecutor the

same qualifications it imposes on the Ombudsman
himself/herself and his/her deputies.98 Their terms of
office,99 prohibitions and qualifications,100 rank and
salary are likewise the same.101 The requirement on
disclosure102 is imposed on the Ombudsman, the
Deputies and the Special Prosecutor as well. In case
of vacancy in the Office of the Ombudsman, the
Overall Deputy cannot assume the role of Acting
Ombudsman; the President may designate any of the
Deputies or the Special Prosecutor as Acting
Ombudsman.103 The power of the Ombudsman and
his or her deputies to require other government
agencies to render assistance to the Office of the
Ombudsman is likewise enjoyed by the Special
Prosecutor.104

Given this legislative history, the present overall legal

structure of the Office of the Ombudsman, both under
the 1987 Constitution and RA No. 6770, militates
against an interpretation that would insulate the
Deputy Ombudsman from the disciplinary authority of
the OP and yet expose the Special Prosecutor to the
same ills that a grant of independence to the Office of
the Ombudsman was designed for.

Congress recognized the importance of the Special

Prosecutor as a necessary adjunct of the
Ombudsman, aside from his or her deputies, by
making the Office of the Special Prosecutor an
organic component of the Office of the Ombudsman

and by granting the Ombudsman control and

supervision over that office.105 This power of control
and supervision includes vesting the Office of the
Ombudsman with the power to assign duties to the
Special Prosecutor as he/she may deem fit. Thus, by
constitutional design, the Special Prosecutor is by no
means an ordinary subordinate but one who
effectively and directly aids the Ombudsman in the
exercise of his/her duties, which include investigation
and prosecution of officials in the Executive
Department.

Under Section 11(4) of RA No. 6770, the Special

Prosecutor handles the prosecution of criminal cases
within the jurisdiction of the Sandiganbayan and this
prosecutorial authority includes high-ranking
executive officials. For emphasis, subjecting the
Special Prosecutor to disciplinary and removal
powers of the President, whose own alter egos and
officials in the Executive Department are subject to
the prosecutorial authority of the Special Prosecutor,
would seriously place the independence of the Office
of the Ombudsman itself at risk.

Thus, even if the Office of the Special Prosecutor is

not expressly made part of the composition of the
Office of the Ombudsman, the role it performs as an
organic component of that Office militates against a
differential treatment between the Ombudsmans
Deputies, on one hand, and the Special Prosecutor
himself, on the other. What is true for the
Ombudsman must be equally true, not only for her
Deputies but, also for other lesser officials of that
Office who act directly as agents of the
Ombudsman herself in the performance of her duties.

In Acop v. Office of the Ombudsman,106 the Court

was confronted with an argument that, at bottom, the
Office of the Special Prosecutor is not a subordinate
agency of the Office of the Ombudsman and is, in
fact, separate and distinct from the latter. In
debunking that argument, the Court said:

Firstly, the petitioners misconstrue Commissioner

Romulo's statement as authority to advocate that the
intent of the framers of the 1987 Constitution was to
place the Office of the Special Prosecutor under the
Office of the President. xxx

In the second place, Section 7 of Article XI expressly

provides that the then existing Tanodbayan, to be
henceforth known as the Office of the Special
Prosecutor, "shall continue to function and exercise its
powers as now or hereafter may be provided by law,
except those conferred on the Office of the
Ombudsman created under this Constitution." The
underscored phrase evidently refers to the
Tanodbayan's powers under P.D. No. 1630 or
subsequent amendatory legislation. It follows then
that Congress may remove any of the
Tanodbayan's/Special Prosecutor's powers under P.D.
N0. 1630 or grant it other powers, except those
powers conferred by the Constitution on the Office of
the Ombudsman.

Pursuing the present line of reasoning, when one

considers that by express mandate of paragraph 8,
Section 13, Article XI of the Constitution, the
Ombudsman may "exercise such other powers or
perform functions or duties as may be provided by
law," it is indubitable then that Congress has the
power to place the Office of the Special Prosecutor
under the Office of the Ombudsman.107

Thus, under the present Constitution, there is every

reason to treat the Special Prosecutor to be at par
with the Ombudsmans deputies, at least insofar as
an extraneous disciplinary authority is concerned, and
must also enjoy the same grant of independence
under the Constitution.
III. SUMMARY OF VOTING

In the voting held on January 28, 2014, by a vote of 87,108 the Court resolved to reverse its September 4,

2012 Decision insofar as petitioner Gonzales is

concerned (G.R. No. 196231). We declared Section
8(2) of RA No. 6770 unconstitutional by granting
disciplinary jurisdiction to the President over a Deputy
Ombudsman, in violation of the independence of the
Office of the Ombudsman.

However, by another vote of 8-7,109 the Court

resolved to maintain the validity of Section 8(2) of RA
No. 6770 insofar as Sulit is concerned. The Court did
not consider the Office of the Special Prosecutor to be
constitutionally within the Office of the Ombudsman
and is, hence, not entitled to the independence the
latter enjoys under the Constitution.

WHEREFORE, premises considered, the Court

resolves to declare Section
8(2) UNCONSTITUTIONAL. This ruling renders any
further ruling on the dismissal of Deputy Ombudsman
Emilio Gonzales III unnecessary, but is without
prejudice to the power of the Ombudsman to conduct
an administrative investigation, if warranted, into the
possible administrative liability of Deputy Ombudsman
Emilio Gonzales III under pertinent Civil Service laws,
rules and regulations.
HACIENDA LUISITA, INCORPORATED versus
PRESIDENTIAL AGRARIAN REFORM COUNCIL
VELASCO, JR., J.:

Land for the landless, a shibboleth the landed

gentry doubtless has received with much misgiving, if
not resistance, even if only the number of agrarian
suits filed serves to be the norm. Through the years,
this battle cry and root of discord continues to reflect
the seemingly ceaseless discourse on, and great
disparity in, the distribution of land among the people,
dramatizing the increasingly urgent demand of the
dispossessed x x x for a plot of earth as their place in
the sun.[2] As administrations and political
alignments change, policies advanced, and agrarian
reform laws enacted, the latest being what is
considered a comprehensive piece, the face of land
reform varies and is masked in myriads of ways. The

stated goal, however, remains the same: clear the

way for the true freedom of the farmer.[3]

Land reform, or the broader term agrarian reform,

has been a government policy even before the
Commonwealth era. In fact, at the onset of the
American regime, initial steps toward land reform
were already taken to address social unrest.[4] Then,
under the 1935 Constitution, specific provisions on
social justice and expropriation of landed estates for
distribution to tenants as a solution to land ownership
and tenancy issues were incorporated.

In 1955, the Land Reform Act (Republic Act No. [RA]

1400) was passed, setting in motion the expropriation
of all tenanted estates.[5]

On August 8, 1963, the Agricultural Land Reform

Code (RA 3844) was enacted,[6] abolishing share
tenancy and converting all instances of share tenancy
into leasehold tenancy.[7] RA 3844 created the Land
Bank of the Philippines (LBP) to provide support in all
phases of agrarian reform.

As its major thrust, RA 3844 aimed to create a system

of owner-cultivatorship in rice and corn, supposedly to
be accomplished by expropriating lands in excess of
75 hectares for their eventual resale to tenants. The
law, however, had this restricting feature: its
operations were confined mainly to areas in Central
Luzon, and its implementation at any level of intensity
limited to the pilot project in Nueva Ecija.[8]

Subsequently, Congress passed the Code of Agrarian

Reform (RA 6389) declaring the entire country a land
reform area, and providing for the automatic
conversion of tenancy to leasehold tenancy in all
areas. From 75 hectares, the retention limit was cut
down to seven hectares.[9]

Barely a month after declaring martial law in

September 1972, then President Ferdinand Marcos
issued Presidential Decree No. 27 (PD 27) for the
emancipation of the tiller from the bondage of the
soil.[10] Based on this issuance, tenant-farmers,
depending on the size of the landholding worked on,
can either purchase the land they tilled or shift from
share to fixed-rent leasehold tenancy.[11] While
touted as revolutionary, the scope of the agrarian
reform program PD 27 enunciated covered only
tenanted, privately-owned rice and corn lands.[12]

Then came the revolutionary government of then

President Corazon C. Aquino and the drafting and
eventual ratification of the 1987 Constitution. Its
provisions foreshadowed the establishment of a legal
framework for the formulation of an expansive
approach to land reform, affecting all agricultural
lands and covering both tenant-farmers and regular
farmworkers.[13]

Agrarian Reform [15] stated the observation that the

assault was inevitable, the CARP being an untried
and untested project, an experiment [even], as all life
is an experiment, the Court said, borrowing from
Justice Holmes.

loan in favor of Tadeco to pay the peso price

component of the sale. One of the conditions
contained in the approving GSIS Resolution No.
3203, as later amended by Resolution No. 356,
Series of 1958, reads as follows:

The Case

That the lots comprising the Hacienda Luisita shall be

subdivided by the applicant-corporation and sold at
cost to the tenants, should there be any, and
whenever conditions should exist warranting such
action under the provisions of the Land Tenure Act;
[21]

In this Petition for Certiorari and Prohibition under

Rule 65 with prayer for preliminary injunctive relief,
petitioner Hacienda Luisita, Inc. (HLI) assails and
seeks to set aside PARC Resolution No. 2005-3201[16] and Resolution No. 2006-34-01[17] issued on
December 22, 2005 and May 3, 2006, respectively, as
well as the implementing Notice of Coverage dated
January 2, 2006 (Notice of Coverage).[18]

The Facts
So it was that Proclamation No. 131, Series of 1987,
was issued instituting a comprehensive agrarian
reform program (CARP) to cover all agricultural lands,
regardless of tenurial arrangement and commodity
produced, as provided in the Constitution.

On July 22, 1987, Executive Order No. 229 (EO 229)

was issued providing, as its title[14] indicates, the
mechanisms for CARP implementation. It created the
Presidential Agrarian Reform Council (PARC) as the
highest policy-making body that formulates all
policies, rules, and regulations necessary for the
implementation of CARP.

On June 15, 1988, RA 6657 or the Comprehensive

Agrarian Reform Law of 1988, also known as CARL
or the CARP Law, took effect, ushering in a new
process of land classification, acquisition, and
distribution. As to be expected, RA 6657 met stiff
opposition, its validity or some of its provisions
challenged at every possible turn.Association of Small
Landowners in the Philippines, Inc. v. Secretary of

At the core of the case is Hacienda Luisita de Tarlac

(Hacienda Luisita), once a 6,443-hectare mixed
agricultural-industrial-residential expanse straddling
several municipalities of Tarlac and owned by
Compaia General de Tabacos de Filipinas
(Tabacalera). In 1957, the Spanish owners of
Tabacalera offered to sell Hacienda Luisita as well as
their controlling interest in the sugar mill within the
hacienda, the Central Azucarera de Tarlac (CAT), as
an indivisible transaction. The Tarlac Development
Corporation (Tadeco), then owned and/or controlled
by the Jose Cojuangco, Sr. Group, was willing to buy.
As agreed upon, Tadeco undertook to pay the
purchase price for Hacienda Luisita in pesos, while
that for the controlling interest in CAT, in US dollars.
[19]

To facilitate the adverted sale-and-purchase package,

the Philippine government, through the then Central
Bank of the Philippines, assisted the buyer to obtain a
dollar loan from a US bank.[20] Also, the Government
Service Insurance System (GSIS) Board of Trustees
extended on November 27, 1957 a PhP 5.911 million

As of March 31, 1958, Tadeco had fully paid the

purchase price for the acquisition of Hacienda Luisita
and Tabacaleras interest in CAT.[22]

The details of the events that happened next involving

the hacienda and the political color some of the
parties embossed are of minimal significance to this
narration and need no belaboring. Suffice it to state
that on May 7, 1980, the martial law administration
filed a suit before the Manila Regional Trial Court
(RTC) against Tadeco, et al., for them to surrender
Hacienda Luisita to the then Ministry of Agrarian
Reform (MAR, now the Department of Agrarian
Reform [DAR]) so that the land can be distributed to
farmers at cost. Responding, Tadeco or its owners
alleged that Hacienda Luisita does not have tenants,
besides which sugar landsof which the hacienda
consistedare not covered by existing agrarian
reform legislations. As perceived then, the
government commenced the case against Tadeco as
a political message to the family of the late Benigno
Aquino, Jr.[23]

Eventually, the Manila RTC rendered judgment

ordering Tadeco to surrender Hacienda Luisita to the
MAR. Therefrom, Tadeco appealed to the Court of
Appeals (CA).

On March 17, 1988, the Office of the Solicitor General

(OSG) moved to withdraw the governments case
against Tadeco, et al. By Resolution of May 18, 1988,
the CA dismissed the case the Marcos government
initially instituted and won against Tadeco, et al. The
dismissal action was, however, made subject to the
obtention by Tadeco of the PARCs approval of a
stock distribution plan (SDP) that must initially be
implemented after such approval shall have been
secured.[24] The appellate court wrote:

The defendants-appellants x x x filed a motion on

April 13, 1988 joining the x x x governmental agencies
concerned in moving for the dismissal of the case
subject, however, to the following conditions
embodied in the letter dated April 8, 1988 (Annex 2) of
the Secretary of the [DAR] quoted, as follows:

1. Should TADECO fail to obtain approval of the stock

distribution plan for failure to comply with all the
requirements for corporate landowners set forth in the
guidelines issued by the [PARC]: or
2. If such stock distribution plan is approved by PARC,
but TADECO fails to initially implement it.

xxxx

WHEREFORE, the present case on appeal is hereby

dismissed without prejudice, and should be revived if
any of the conditions as above set forth is not duly
complied with by the TADECO.[25]

Markedly, Section 10 of EO 229[26] allows corporate

landowners, as an alternative to the actual land
transfer scheme of CARP, to give qualified
beneficiaries the right to purchase shares of stocks of
the corporation under a stock ownership arrangement
and/or land-to-share ratio.

Like EO 229, RA 6657, under the latters Sec. 31, also

provides two (2) alternative modalities, i.e., land or
stock transfer, pursuant to either of which the
corporate landowner can comply with CARP, but
subject to well-defined conditions and timeline
requirements. Sec. 31 of RA 6657 provides:

SEC. 31. Corporate Landowners. - Corporate

landowners may voluntarily transfer ownership over
their agricultural landholdings to the Republic of the
Philippines pursuant to Section 20 hereof or to
qualified beneficiaries x x x.

Upon certification by the DAR, corporations owning

agricultural lands may give their qualified beneficiaries
the right to purchase such proportion of the capital
stock of the corporation that the agricultural land,
actually devoted to agricultural activities, bears in
relation to the companys total assets, under such
terms and conditions as may be agreed upon by
them. In no case shall the compensation received by
the workers at the time the shares of stocks are
distributed be reduced. x x x

Corporations or associations which voluntarily divest

a proportion of their capital stock, equity or
participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to
have complied with the provisions of this Act:
Provided, That the following conditions are complied
with:

(a) In order to safeguard the right of beneficiaries who

own shares of stocks to dividends and other financial
benefits, the books of the corporation or association
shall be subject to periodic audit by certified public
accountants chosen by the beneficiaries;

(b) Irrespective of the value of their equity in the

corporation or association, the beneficiaries shall be
assured of at least one (1) representative in the board
of directors, or in a management or executive

committee, if one exists, of the corporation or

association;

(c) Any shares acquired by such workers and

beneficiaries shall have the same rights and features
as all other shares; and

(d) Any transfer of shares of stocks by the original

beneficiaries shall be void ab initio unless said
transaction is in favor of a qualified and registered
beneficiary within the same corporation.

If within two (2) years from the approval of this Act,

the [voluntary] land or stock transfer envisioned above
is not made or realized or the plan for such stock
distribution approved by the PARC within the same
period, the agricultural land of the corporate owners
or corporation shall be subject to the compulsory
coverage of this Act. (Emphasis added.)

Vis-a-vis the stock distribution aspect of the

aforequoted Sec. 31, DAR issued Administrative
Order No. 10, Series of 1988 (DAO 10),[27]
entitled Guidelines and Procedures for Corporate
Landowners Desiring to Avail Themselves of the
Stock Distribution Plan under Section 31 of RA 6657.

From the start, the stock distribution scheme

appeared to be Tadecos preferred option, for, on
August 23, 1988,[28] it organized a spin-off
corporation, HLI, as vehicle to facilitate stock
acquisition by the farmworkers. For this purpose,
Tadeco assigned and conveyed to HLI the agricultural
land portion (4,915.75 hectares) and other farmrelated properties of Hacienda Luisita in exchange for
HLI shares of stock.[29]

Pedro Cojuangco, Josephine C. Reyes, Teresita C.

Lopa, Jose Cojuangco, Jr., and Paz C. Teopaco were
the incorporators of HLI.[30]

To accommodate the assets transfer from Tadeco to

HLI, the latter, with the Securities and Exchange
Commissions (SECs) approval, increased its capital
stock on May 10, 1989 from PhP 1,500,000 divided
into 1,500,000 shares with a par value of PhP 1/share
to PhP 400,000,000 divided into 400,000,000 shares
also with par value of PhP 1/share, 150,000,000 of
which were to be issued only to qualified and
registered beneficiaries of the CARP, and the
remaining 250,000,000 to any stockholder of the
corporation.[31]

As appearing in its proposed SDP, the properties and

assets of Tadeco contributed to the capital stock of
HLI, as appraised and approved by the SEC, have an
aggregate value of PhP 590,554,220, or after
deducting the total liabilities of the farm amounting to
PhP 235,422,758, a net value of PhP 355,531,462.
This translated to 355,531,462 shares with a par
value of PhP 1/share.[32]

On May 9, 1989, some 93% of the then farmworkerbeneficiaries (FWBs) complement of Hacienda Luisita
signified in a referendum their acceptance of the
proposed HLIs Stock Distribution Option Plan. On
May 11, 1989, the Stock Distribution Option
Agreement (SDOA), styled as a Memorandum of
Agreement (MOA),[33] was entered into by Tadeco,
HLI, and the 5,848 qualified FWBs[34] and attested to
by then DAR Secretary Philip Juico. The SDOA
embodied the basis and mechanics of the SDP, which
would eventually be submitted to the PARC for
approval. In the SDOA, the parties agreed to the
following:

1. The percentage of the value of the agricultural land

of Hacienda Luisita (P196,630,000.00) in relation to
the total assets (P590,554,220.00) transferred and
conveyed to the SECOND PARTY [HLI] is 33.296%
that, under the law, is the proportion of the
outstanding capital stock of the SECOND PARTY,
which is P355,531,462.00 or 355,531,462 shares with
a par value of P1.00 per share, that has to be

distributed to the THIRD PARTY [FWBs] under the

stock distribution plan, the said 33.296% thereof
being P118,391,976.85 or 118,391,976.85 shares.

gain such number of seats in the board of directors of

the SECOND PARTY that the whole 33.296% of the
shares subject to distribution will be entitled to.

2. The qualified beneficiaries of the stock distribution

plan shall be the farmworkers who appear in the
annual payroll, inclusive of the permanent and
seasonal employees, who are regularly or periodically
employed by the SECOND PARTY.

6. In addition, the SECOND PARTY shall within a

reasonable time subdivide and allocate for free and
without charge among the qualified familybeneficiaries residing in the place where the
agricultural land is situated, residential or homelots of
not more than 240 sq.m. each, with each familybeneficiary being assured of receiving and owning a
homelot in the barangay where it actually resides on
the date of the execution of this Agreement.

3. At the end of each fiscal year, for a period of 30

years, the SECOND PARTY shall arrange with the
FIRST PARTY [Tadeco] the acquisition and
distribution to the THIRD PARTY on the basis of
number of days worked and at no cost to them of onethirtieth (1/30) of 118,391,976.85 shares of the capital
stock of the SECOND PARTY that are presently
owned and held by the FIRST PARTY, until such time
as the entire block of 118,391,976.85 shares shall
have been completely acquired and distributed to the
THIRD PARTY.

4.The SECOND PARTY shall guarantee to the

qualified beneficiaries of the [SDP] that every year
they will receive on top of their regular compensation,
an amount that approximates the equivalent of three
(3%) of the total gross sales from the production of
the agricultural land, whether it be in the form of cash
dividends or incentive bonuses or both.

5. Even if only a part or fraction of the shares

earmarked for distribution will have been acquired
from the FIRST PARTY and distributed to the THIRD
PARTY, FIRST PARTY shall execute at the beginning
of each fiscal year an irrevocable proxy, valid and
effective for one (1) year, in favor of the farmworkers
appearing as shareholders of the SECOND PARTY at
the start of said year which will empower the THIRD
PARTY or their representative to vote in stockholders
and board of directors meetings of the SECOND
PARTY convened during the year the entire 33.296%
of the outstanding capital stock of the SECOND
PARTY earmarked for distribution and thus be able to

7. This Agreement is entered into by the parties in the

spirit of the (C.A.R.P.) of the government and with the
supervision of the [DAR], with the end in view of
improving the lot of the qualified beneficiaries of the
[SDP] and obtaining for them greater benefits.
(Emphasis added.)

As may be gleaned from the SDOA, included as part

of the distribution plan are: (a) production-sharing
equivalent to three percent (3%) of gross sales from
the production of the agricultural land payable to the
FWBs in cash dividends or incentive bonus; and (b)
distribution of free homelots of not more than 240
square meters each to family-beneficiaries. The
production-sharing, as the SDP indicated, is payable
irrespective of whether [HLI] makes money or not,
implying that the benefits do not partake the nature of
dividends, as the term is ordinarily understood under
corporation law.

While a little bit hard to follow, given that, during the

period material, the assigned value of the agricultural
land in the hacienda was PhP 196.63 million, while
the total assets of HLI was PhP 590.55 million with
net assets of PhP 355.53 million, Tadeco/HLI would
admit that the ratio of the land-to-shares of stock
corresponds to 33.3% of the outstanding capital stock
of the HLI equivalent to 118,391,976.85 shares of
stock with a par value of PhP 1/share.

Subsequently, HLI submitted to DAR its SDP,

designated as Proposal for Stock Distribution under
C.A.R.P.,[35] which was substantially based on the
SDOA.

Notably, in a follow-up referendum the DAR

conducted on October 14, 1989, 5,117 FWBs, out of
5,315 who participated, opted to receive shares in
HLI.[36] One hundred thirty-two (132) chose actual
land distribution.[37]

After a review of the SDP, then DAR Secretary Miriam

Defensor-Santiago (Sec. Defensor-Santiago)
addressed a letter dated November 6, 1989[38] to
Pedro S. Cojuangco (Cojuangco), then Tadeco
president, proposing that the SDP be revised, along
the following lines:

1.
That over the implementation period of the
[SDP], [Tadeco]/HLI shall ensure that there will be no
dilution in the shares of stocks of individual [FWBs];

5.
That HLI provide guidelines and a timetable for
the distribution of homelots to qualified [FWBs]; and

(e)
free;

6.
That the 3% cash dividends mentioned in the
[SDP] be expressly provided for [in] the MOA.

(f)
2.4 million pesos (P2,400,000) representing
3% from the sale of 80 hectares at 80 million pesos
(P80,000,000) for the SCTEX;

In a letter-reply of November 14, 1989 to Sec.

Defensor-Santiago, Tadeco/HLI explained that the
proposed revisions of the SDP are already embodied
in both the SDP and MOA.[39] Following that
exchange, the PARC, under then Sec. DefensorSantiago, by Resolution No. 89-12-2[40] dated
November 21, 1989, approved the SDP of
Tadeco/HLI.[41]

240-square meter homelots distributed for

(g)
Social service benefits, such as but not
limited to free hospitalization/medical/maternity
services, old age/death benefits and no interest
bearing salary/educational loans and rice sugar
accounts. [42]

Two separate groups subsequently contested this

claim of HLI.
At the time of the SDP approval, HLI had a pool of
farmworkers, numbering 6,296, more or less,
composed of permanent, seasonal and casual master
list/payroll and non-master list members.

On August 15, 1995, HLI applied for the conversion of

500 hectares of land of the hacienda from agricultural
to industrial use,[43] pursuant to Sec. 65 of RA 6657,
providing:

From 1989 to 2005, HLI claimed to have extended the

following benefits to the FWBs:
2.
That a safeguard shall be provided by
[Tadeco]/HLI against the dilution of the percentage
shareholdings of the [FWBs], i.e., that the 33%
shareholdings of the [FWBs] will be maintained at any
given time;

3.
That the mechanics for distributing the stocks be
explicitly stated in the [MOA] signed between the
[Tadeco], HLI and its [FWBs] prior to the
implementation of the stock plan;

(a)
3 billion pesos (P3,000,000,000) worth of
salaries, wages and fringe benefits

(b)
59 million shares of stock distributed for free
to the FWBs;

(c)
150 million pesos (P150,000,000)
representing 3% of the gross produce;
4.
That the stock distribution plan provide for clear
and definite terms for determining the actual number
of seats to be allocated for the [FWBs] in the HLI
Board;

(d)
37.5 million pesos (P37,500,000)
representing 3% from the sale of 500 hectares of
converted agricultural land of Hacienda Luisita;

SEC. 65. Conversion of Lands. - After the lapse of five

(5) years from its award, when the land ceases to be
economically feasible and sound for agricultural
purposes, or the locality has become urbanized and
the land will have a greater economic value for
residential, commercial or industrial purposes, the
DAR, upon application of the beneficiary or the
landowner, with due notice to the affected parties, and
subject to existing laws, may authorize the
reclassification, or conversion of the land and its
disposition: Provided, That the beneficiary shall have
fully paid its obligation.

The application, according to HLI, had the backing of

5,000 or so FWBs, including respondent Rene
Galang, and Jose Julio Suniga, as evidenced by the
Manifesto of Support they signed and which was

submitted to the DAR.[44] After the usual processing,

the DAR, thru then Sec. Ernesto Garilao, approved
the application on August 14, 1996, per DAR
Conversion Order No. 030601074-764-(95), Series of
1996,[45] subject to payment of three percent (3%) of
the gross selling price to the FWBs and to HLIs
continued compliance with its undertakings under the
SDP, among other conditions.

On December 13, 1996, HLI, in exchange for

subscription of 12,000,000 shares of stocks of
Centennary Holdings, Inc. (Centennary), ceded 300
hectares of the converted area to the latter.[46]
Consequently, HLIs Transfer Certificate of Title (TCT)
No. 287910[47] was canceled and TCT No.
292091[48] was issued in the name of Centennary.
HLI transferred the remaining 200 hectares covered
by TCT No. 287909 to Luisita Realty Corporation
(LRC)[49] in two separate transactions in 1997 and
1998, both uniformly involving 100 hectares for PhP
250 million each.[50]

Centennary, a corporation with an authorized capital

stock of PhP 12,100,000 divided into 12,100,000
shares and wholly-owned by HLI, had the following
incorporators: Pedro Cojuangco, Josephine C. Reyes,
Teresita C. Lopa, Ernesto G. Teopaco, and Bernardo
R. Lahoz.

Subsequently, Centennary sold[51] the entire 300

hectares to Luisita Industrial Park Corporation
(LIPCO) for PhP 750 million. The latter acquired it for
the purpose of developing an industrial complex.[52]
As a result, Centennarys TCT No. 292091 was
canceled to be replaced by TCT No. 310986[53] in the
name of LIPCO.

From the area covered by TCT No. 310986 was

carved out two (2) parcels, for which two (2) separate
titles were issued in the name of LIPCO, specifically:
(a) TCT No. 365800[54] and (b) TCT No. 365801,[55]
covering 180 and four hectares, respectively. TCT No.
310986 was, accordingly, partially canceled.

Later on, in a Deed of Absolute Assignment dated

November 25, 2004, LIPCO transferred the parcels
covered by its TCT Nos. 365800 and 365801 to the
Rizal Commercial Banking Corporation (RCBC) by
way of dacion en pago in payment of LIPCOs PhP
431,695,732.10 loan obligations. LIPCOs titles were
canceled and new ones, TCT Nos. 391051 and
391052, were issued to RCBC.

Apart from the 500 hectares alluded to, another 80.51

hectares were later detached from the area coverage
of Hacienda Luisita which had been acquired by the
government as part of the Subic-Clark-Tarlac
Expressway (SCTEX) complex. In absolute terms,
4,335.75 hectares remained of the original 4,915
hectares Tadeco ceded to HLI.[56]

Such, in short, was the state of things when two

separate petitions, both undated, reached the DAR in
the latter part of 2003. In the first, denominated as
Petition/Protest,[57] respondents Jose Julio Suniga
and Windsor Andaya, identifying themselves as head
of the Supervisory Group of HLI (Supervisory Group),
and 60 other supervisors sought to revoke the SDOA,
alleging that HLI had failed to give them their
dividends and the one percent (1%) share in gross
sales, as well as the thirty-three percent (33%) share
in the proceeds of the sale of the converted 500
hectares of land. They further claimed that their lives
have not improved contrary to the promise and
rationale for the adoption of the SDOA. They also
cited violations by HLI of the SDOAs terms.[58] They
prayed for a renegotiation of the SDOA, or, in the
alternative, its revocation.

Revocation and nullification of the SDOA and the

distribution of the lands in the hacienda were the call
in the second petition, styled as Petisyon (Petition).
[59] The Petisyon was ostensibly filed on December
4, 2003 by Alyansa ng mga Manggagawang Bukid ng
Hacienda Luisita (AMBALA), where the handwritten
name of respondents Rene Galang as Pangulo
AMBALA and Noel Mallari as Sec-Gen.

AMBALA[60] appeared. As alleged, the petition was

filed on behalf of AMBALAs members purportedly
composing about 80% of the 5,339 FWBs of
Hacienda Luisita.

HLI would eventually answer[61] the petition/protest

of the Supervisory Group. On the other hand, HLIs
answer[62] to the AMBALA petition was contained in
its letter dated January 21, 2005 also filed with DAR.

Meanwhile, the DAR constituted a Special Task Force

to attend to issues relating to the SDP of HLI. Among
other duties, the Special Task Force was mandated to
review the terms and conditions of the SDOA and
PARC Resolution No. 89-12-2 relative to HLIs SDP;
evaluate HLIs compliance reports; evaluate the
merits of the petitions for the revocation of the SDP;
conduct ocular inspections or field investigations; and
recommend appropriate remedial measures for
approval of the Secretary.[63]

After investigation and evaluation, the Special Task

Force submitted its Terminal Report: Hacienda
Luisita, Incorporated (HLI) Stock Distribution Plan
(SDP) Conflict[64] dated September 22, 2005
(Terminal Report), finding that HLI has not complied
with its obligations under RA 6657 despite the
implementation of the SDP.[65] The Terminal Report
and the Special Task Forces recommendations were
adopted by then DAR Sec. Nasser Pangandaman
(Sec. Pangandaman).[66]

Subsequently, Sec. Pangandaman recommended to

the PARC Executive Committee (Excom) (a) the
recall/revocation of PARC Resolution No. 89-12-2
dated November 21, 1989 approving HLIs SDP; and
(b) the acquisition of Hacienda Luisita through the
compulsory acquisition scheme. Following review, the
PARC Validation Committee favorably endorsed the
DAR Secretarys recommendation afore-stated.[67]

On December 22, 2005, the PARC issued the

assailed Resolution No. 2005-32-01, disposing as
follows:

NOW, THEREFORE, on motion duly seconded,

RESOLVED, as it is HEREBY RESOLVED, to
approve and confirm the recommendation of the
PARC Executive Committee adopting in toto the
report of the PARC ExCom Validation Committee
affirming the recommendation of the DAR to
recall/revoke the SDO plan of Tarlac Development
Corporation/Hacienda Luisita Incorporated.

RESOLVED, further, that the lands subject of the

recalled/revoked TDC/HLI SDO plan be forthwith
placed under the compulsory coverage or mandated
land acquisition scheme of the [CARP].

APPROVED.[68]

A copy of Resolution No. 2005-32-01 was served on

HLI the following day, December 23, without any copy
of the documents adverted to in the resolution
attached. A letter-request dated December 28,
2005[69] for certified copies of said documents was
sent to, but was not acted upon by, the PARC
secretariat.

know from the above-quoted resolution the facts and

the law upon which it is based.[73]

PARC would eventually deny HLIs motion for

reconsideration via Resolution No. 2006-34-01 dated
May 3, 2006.

By Resolution of June 14, 2006,[74] the Court, acting

on HLIs motion, issued a temporary restraining order,
[75] enjoining the implementation of Resolution No.
2005-32-01 and the notice of coverage.

On July 13, 2006, the OSG, for public respondents

PARC and the DAR, filed its Comment[76] on the
petition.

On December 2, 2006, Noel Mallari, impleaded by

HLI as respondent in his capacity as Sec-Gen.
AMBALA, filed his Manifestation and Motion with
Comment Attached dated December 4, 2006
(Manifestation and Motion).[77] In it, Mallari stated
that he has broken away from AMBALA with other
AMBALA ex-members and formed Farmworkers
Agrarian Reform Movement, Inc. (FARM).[78] Should
this shift in alliance deny him standing, Mallari also
prayed that FARM be allowed to intervene.

Therefrom, HLI, on January 2, 2006, sought

reconsideration.[70] On the same day, the DAR
Tarlac provincial office issued the Notice of
Coverage[71] which HLI received on January 4,
2006.

As events would later develop, Mallari had a parting

of ways with other FARM members, particularly
would-be intervenors Renato Lalic, et al. As things
stand, Mallari returned to the AMBALA fold, creating
the AMBALA-Noel Mallari faction and leaving Renato
Lalic, et al. as the remaining members of FARM who
sought to intervene.

Its motion notwithstanding, HLI has filed the instant

recourse in light of what it considers as the DARs
hasty placing of Hacienda Luisita under CARP even
before PARC could rule or even read the motion for
reconsideration.[72] As HLI later rued, it can not

On January 10, 2007, the Supervisory Group[79] and

the AMBALA-Rene Galang faction submitted their
Comment/Opposition dated December 17, 2006.[80]

On October 30, 2007, RCBC filed a Motion for Leave

to Intervene and to File and Admit Attached PetitionIn-Intervention dated October 18, 2007.[81] LIPCO
later followed with a similar motion.[82] In both
motions, RCBC and LIPCO contended that the
assailed resolution effectively nullified the TCTs under
their respective names as the properties covered in
the TCTs were veritably included in the January 2,
2006 notice of coverage. In the main, they claimed
that the revocation of the SDP cannot legally affect
their rights as innocent purchasers for value. Both
motions for leave to intervene were granted and the
corresponding petitions-in-intervention admitted.

On August 18, 2010, the Court heard the main and

intervening petitioners on oral arguments. On the
other hand, the Court, on August 24, 2010, heard
public respondents as well as the respective counsels
of the AMBALA-Mallari-Supervisory Group, the
AMBALA-Galang faction, and the FARM and its 27
members[83] argue their case.

Prior to the oral arguments, however, HLI; AMBALA,

represented by Mallari; the Supervisory Group,
represented by Suniga and Andaya; and the United
Luisita Workers Union, represented by Eldifonso
Pingol, filed with the Court a joint submission and
motion for approval of a Compromise Agreement
(English and Tagalog versions) dated August 6, 2010.

On August 31, 2010, the Court, in a bid to resolve the

dispute through an amicable settlement, issued a
Resolution[84] creating a Mediation Panel composed
of then Associate Justice Ma. Alicia Austria-Martinez,
as chairperson, and former CA Justices Hector
Hofilea and Teresita Dy-Liacco Flores, as members.
Meetings on five (5) separate dates, i.e., September
8, 9, 14, 20, and 27, 2010, were conducted. Despite
persevering and painstaking efforts on the part of the
panel, mediation had to be discontinued when no
acceptable agreement could be reached.

The Issues

IV.
HLI raises the following issues for our consideration:

I.

WHETHER OR NOT PUBLIC RESPONDENTS PARC

AND SECRETARY PANGANDAMAN HAVE
JURISDICTION, POWER AND/OR AUTHORITY TO
NULLIFY, RECALL, REVOKE OR RESCIND THE
SDOA.

II.

[IF SO], x x x CAN THEY STILL EXERCISE SUCH

JURISDICTION, POWER AND/OR AUTHORITY AT
THIS TIME, I.E., AFTER SIXTEEN (16) YEARS
FROM THE EXECUTION OF THE SDOA AND ITS
IMPLEMENTATION WITHOUT VIOLATING
SECTIONS 1 AND 10 OF ARTICLE III (BILL OF
RIGHTS) OF THE CONSTITUTION AGAINST
DEPRIVATION OF PROPERTY WITHOUT DUE
PROCESS OF LAW AND THE IMPAIRMENT OF
CONTRACTUAL RIGHTS AND OBLIGATIONS?
MOREOVER, ARE THERE LEGAL GROUNDS
UNDER THE CIVIL CODE, viz, ARTICLE 1191 x x x,
ARTICLES 1380, 1381 AND 1382 x x x ARTICLE
1390 x x x AND ARTICLE 1409 x x x THAT CAN BE
INVOKED TO NULLIFY, RECALL, REVOKE, OR
RESCIND THE SDOA?

WHETHER THE RIGHTS, OBLIGATIONS AND

REMEDIES OF THE PARTIES TO THE SDOA ARE
NOW GOVERNED BY THE CORPORATION CODE
(BATAS PAMBANSA BLG. 68) AND NOT BY THE x x
x [CARL] x x x.

On the other hand, RCBC submits the following

issues:

I.

RESPONDENT PARC COMMITTED GRAVE ABUSE

OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN IT DID NOT
EXCLUDE THE SUBJECT PROPERTY FROM THE
COVERAGE OF THE CARP DESPITE THE FACT
THAT PETITIONER-INTERVENOR RCBC HAS
ACQUIRED VESTED RIGHTS AND INDEFEASIBLE
TITLE OVER THE SUBJECT PROPERTY AS AN
INNOCENT PURCHASER FOR VALUE.

A. THE ASSAILED RESOLUTION NO. 2005-32-01

AND THE NOTICE OF COVERAGE DATED 02
JANUARY 2006 HAVE THE EFFECT OF
NULLIFYING TCT NOS. 391051 AND 391052 IN THE
NAME OF PETITIONER-INTERVENOR RCBC.

THE ASSAILED RESOLUTION NO. 2005-32-01 AND

THE NOTICE OF COVERAGE DATED 02 JANUARY
2006 WERE ISSUED WITHOUT AFFORDING
PETITIONER-INTERVENOR RCBC ITS RIGHT TO
DUE PROCESS AS AN INNOCENT PURCHASER
FOR VALUE.

LIPCO, like RCBC, asserts having acquired vested

and indefeasible rights over certain portions of the
converted property, and, hence, would ascribe on
PARC the commission of grave abuse of discretion
when it included those portions in the notice of
coverage. And apart from raising issues identical with
those of HLI, such as but not limited to the absence of
valid grounds to warrant the rescission and/or
revocation of the SDP, LIPCO would allege that the
assailed resolution and the notice of coverage were
issued without affording it the right to due process as
an innocent purchaser for value. The government,
LIPCO also argues, is estopped from recovering
properties which have since passed to innocent
parties.

Simply formulated, the principal determinative issues

tendered in the main petition and to which all other
related questions must yield boil down to the
following: (1) matters of standing; (2) the
constitutionality of Sec. 31 of RA 6657; (3) the
jurisdiction of PARC to recall or revoke HLIs SDP; (4)
the validity or propriety of such recall or revocatory
action; and (5) corollary to (4), the validity of the terms
and conditions of the SDP, as embodied in the SDOA.

Our Ruling
III.

WHETHER THE PETITIONS TO NULLIFY, RECALL,

REVOKE OR RESCIND THE SDOA HAVE ANY
LEGAL BASIS OR GROUNDS AND WHETHER THE
PETITIONERS THEREIN ARE THE REAL PARTIESIN-INTEREST TO FILE SAID PETITIONS.

B. AS AN INNOCENT PURCHASER FOR VALUE,

PETITIONER-INTERVENOR RCBC CANNOT BE
PREJUDICED BY A SUBSEQUENT REVOCATION
OR RESCISSION OF THE SDOA.

II.

I.

We first proceed to the examination of the preliminary

issues before delving on the more serious challenges
bearing on the validity of PARCs assailed issuance
and the grounds for it.

Supervisory Group, AMBALA and their

replacing it with some other modality to comply with

RA 6657.

respective leaders are real parties-in-interest

HLI would deny real party-in-interest status to the

purported leaders of the Supervisory Group and
AMBALA, i.e., Julio Suniga, Windsor Andaya, and
Rene Galang, who filed the revocatory petitions
before the DAR. As HLI would have it, Galang, the
self-styled head of AMBALA, gained HLI employment
in June 1990 and, thus, could not have been a party
to the SDOA executed a year earlier.[85] As regards
the Supervisory Group, HLI alleges that supervisors
are not regular farmworkers, but the company
nonetheless considered them FWBs under the SDOA
as a mere concession to enable them to enjoy the
same benefits given qualified regular farmworkers.
However, if the SDOA would be canceled and land
distribution effected, so HLI claims, citing Fortich v.
Corona,[86] the supervisors would be excluded from
receiving lands as farmworkers other than the regular
farmworkers who are merely entitled to the fruits of
the land.[87]

The SDOA no less identifies the SDP qualified

beneficiaries as the farmworkers who appear in the
annual payroll, inclusive of the permanent and
seasonal employees, who are regularly or periodically
employed by [HLI].[88] Galang, per HLIs own
admission, is employed by HLI, and is, thus, a
qualified beneficiary of the SDP; he comes within the
definition of a real party-in-interest under Sec. 2, Rule
3 of the Rules of Court, meaning, one who stands to
be benefited or injured by the judgment in the suit or
is the party entitled to the avails of the suit.

Even assuming that members of the Supervisory

Group are not regular farmworkers, but are in the
category of other farmworkers mentioned in Sec. 4,
Article XIII of the Constitution,[89] thus only entitled
to a share of the fruits of the land, as
indeed Fortich teaches, this does not detract from the
fact that they are still identified as being among the
SDP qualified beneficiaries. As such, they are, thus,
entitled to bring an action upon the SDP.[90] At any
rate, the following admission made by Atty. Gener
Asuncion, counsel of HLI, during the oral arguments
should put to rest any lingering doubt as to the status
of protesters Galang, Suniga, and Andaya:

Justice Bersamin: x x x I heard you a while ago that

you were conceding the qualified farmer beneficiaries
of Hacienda Luisita were real parties in interest?

Atty. Asuncion: Yes, Your Honor please, real party in

interest which that question refers to the complaints of
protest initiated before the DAR and the real party in
interest there be considered as possessed by the
farmer beneficiaries who initiated the protest.[91]

Further, under Sec. 50, paragraph 4 of RA 6657,

farmer-leaders are expressly allowed to represent
themselves, their fellow farmers or their organizations
in any proceedings before the DAR. Specifically:

SEC. 50. Quasi-Judicial Powers of the DAR. - x x x

The same holds true with respect to the Supervisory
Group whose members were admittedly employed by
HLI and whose names and signatures even appeared
in the annex of the SDOA. Being qualified
beneficiaries of the SDP, Suniga and the other 61
supervisors are certainly parties who would benefit or
be prejudiced by the judgment recalling the SDP or

organizations in any proceedings before the DAR:

Provided, however, that when there are two or more
representatives for any individual or group, the
representatives should choose only one among
themselves to represent such party or group before
any DAR proceedings. (Emphasis supplied.)

Clearly, the respective leaders of the Supervisory

Group and AMBALA are contextually real parties-ininterest allowed by law to file a petition before the
DAR or PARC.

This is not necessarily to say, however, that Galang

represents AMBALA, for as records show and as HLI
aptly noted,[92] his petisyon filed with DAR did not
carry the usual authorization of the individuals in
whose behalf it was supposed to have been instituted.
To date, such authorization document, which would
logically include a list of the names of the authorizing
FWBs, has yet to be submitted to be part of the
records.

PARCs Authority to Revoke a Stock Distribution Plan

On the postulate that the subject jurisdiction is

conferred by law, HLI maintains that PARC is without
authority to revoke an SDP, for neither RA 6657 nor
EO 229 expressly vests PARC with such authority.
While, as HLI argued, EO 229 empowers PARC to
approve the plan for stock distribution in appropriate
cases, the empowerment only includes the power to
disapprove, but not to recall its previous approval of
the SDP after it has been implemented by the parties.
[93] To HLI, it is the court which has jurisdiction and
authority to order the revocation or rescission of the
PARC-approved SDP.

xxxx
We disagree.
Responsible farmer leaders shall be allowed to
represent themselves, their fellow farmers or their

Under Sec. 31 of RA 6657, as implemented by DAO

10, the authority to approve the plan for stock
distribution of the corporate landowner belongs to
PARC. However, contrary to petitioner HLIs posture,
PARC also has the power to revoke the SDP which it
previously approved. It may be, as urged, that RA
6657 or other executive issuances on agrarian reform
do not explicitly vest the PARC with the power to
revoke/recall an approved SDP. Such power or
authority, however, is deemed possessed by PARC
under the principle of necessary implication, a basic
postulate that what is implied in a statute is as much a
part of it as that which is expressed.[94]

We have explained that every statute is understood,

by implication, to contain all such provisions as may
be necessary to effectuate its object and purpose, or
to make effective rights, powers, privileges or
jurisdiction which it grants, including all such collateral
and subsidiary consequences as may be fairly and
logically inferred from its terms.[95] Further, every
statutory grant of power, right or privilege is deemed
to include all incidental power, right or privilege.[96]

Gordon v. Veridiano II is instructive:

The power to approve a license includes by

implication, even if not expressly granted, the power
to revoke it. By extension, the power to revoke is
limited by the authority to grant the license, from
which it is derived in the first place. Thus, if the FDA
grants a license upon its finding that the applicant
drug store has complied with the requirements of the
general laws and the implementing administrative
rules and regulations, it is only for their violation that
the FDA may revoke the said license. By the same
token, having granted the permit upon his
ascertainment that the conditions thereof as applied x
x x have been complied with, it is only for the violation
of such conditions that the mayor may revoke the said
permit.[97] (Emphasis supplied.)

Following the doctrine of necessary implication, it may

be stated that the conferment of express power to
approve a plan for stock distribution of the agricultural
land of corporate owners necessarily includes the
power to revoke or recall the approval of the plan.

As public respondents aptly observe, to deny PARC

such revocatory power would reduce it into a
toothless agency of CARP, because the very same
agency tasked to ensure compliance by the corporate
landowner with the approved SDP would be without
authority to impose sanctions for non-compliance with
it.[98] With the view We take of the case, only PARC
can effect such revocation. The DAR Secretary, by his
own authority as such, cannot plausibly do so, as the
acceptance and/or approval of the SDP sought to be
taken back or undone is the act of PARC whose
official composition includes, no less, the President as
chair, the DAR Secretary as vice-chair, and at least
eleven (11) other department heads.[99]

On another but related issue, the HLI foists on the

Court the argument that subjecting its landholdings to
compulsory distribution after its approved SDP has
been implemented would impair the contractual
obligations created under the SDOA.

The broad sweep of HLIs argument ignores certain

established legal precepts and must, therefore, be
rejected.

A law authorizing interference, when appropriate, in

the contractual relations between or among parties is
deemed read into the contract and its implementation
cannot successfully be resisted by force of the nonimpairment guarantee. There is, in that instance, no
impingement of the impairment clause, the nonimpairment protection being applicable only to laws
that derogate prior acts or contracts by enlarging,
abridging or in any manner changing the intention of
the parties. Impairment, in fine, obtains if
a subsequent law changes the terms of a contract
between the parties, imposes new conditions,

dispenses with those agreed upon or withdraws

existing remedies for the enforcement of the rights of
the parties.[100] Necessarily, the constitutional
proscription would not apply to laws already in effect
at the time of contract execution, as in the case of RA
6657, in relation to DAO 10, vis-a-vis HLIs SDOA. As
held in Serrano v. Gallant Maritime Services, Inc.:

The prohibition [against impairment of the obligation

of contracts] is aligned with the general principle that
laws newly enacted have only a prospective
operation, and cannot affect acts or contracts already
perfected; however, as to laws already in existence,
their provisions are read into contracts and deemed a
part thereof.Thus, the non-impairment clause under
Section 10, Article II [of the Constitution] is limited in
application to laws about to be enacted that would in
any way derogate from existing acts or contracts by
enlarging, abridging or in any manner changing the
intention of the parties thereto.[101] (Emphasis
supplied.)

Needless to stress, the assailed Resolution No. 200532-01 is not the kind of issuance within the ambit of
Sec. 10, Art. III of the Constitution providing that [n]o
law impairing the obligation of contracts shall be
passed.

Parenthetically, HLI tags the SDOA as an ordinary

civil law contract and, as such, a breach of its terms
and conditions is not a PARC administrative matter,
but one that gives rise to a cause of action cognizable
by regular courts.[102] This contention has little to
commend itself. The SDOA is a special contract
imbued with public interest, entered into and crafted
pursuant to the provisions of RA 6657. It embodies
the SDP, which requires for its validity, or at least its
enforceability, PARCs approval. And the fact that the
certificate of compliance[103]to be issued by
agrarian authorities upon completion of the
distribution of stocksis revocable by the same
issuing authority supports the idea that everything
about the implementation of the SDP is, at the first
instance, subject to administrative adjudication.

HLI also parlays the notion that the parties to the

SDOA should now look to the Corporation Code,
instead of to RA 6657, in determining their rights,
obligations and remedies. The Code, it adds, should
be the applicable law on the disposition of the
agricultural land of HLI.

Contrary to the view of HLI, the rights, obligations and

remedies of the parties to the SDOA embodying the
SDP are primarily governed by RA 6657. It should
abundantly be made clear that HLI was precisely
created in order to comply with RA 6657, which the
OSG aptly described as the mother law of the SDOA
and the SDP.[104] It is, thus, paradoxical for HLI to
shield itself from the coverage of CARP by invoking
exclusive applicability of the Corporation Code under
the guise of being a corporate entity.

Without in any way minimizing the relevance of the

Corporation Code since the FWBs of HLI are also
stockholders, its applicability is limited as the rights of
the parties arising from the SDP should not be made
to supplant or circumvent the agrarian reform
program.

Without doubt, the Corporation Code is the general

law providing for the formation, organization and
regulation of private corporations. On the other hand,
RA 6657 is the special law on agrarian reform. As
between a general and special law, the latter shall
prevailgeneralia specialibus non derogant.[105]
Besides, the present impasse between HLI and the
private respondents is not an intra-corporate dispute
which necessitates the application of the Corporation
Code. What private respondents questioned before
the DAR is the proper implementation of the SDP and
HLIs compliance with RA 6657. Evidently, RA 6657
should be the applicable law to the instant case.

HLI further contends that the inclusion of the

agricultural land of Hacienda Luisita under the
coverage of CARP and the eventual distribution of the

land to the FWBs would amount to a disposition of all

or practically all of the corporate assets of HLI. HLI
would add that this contingency, if ever it comes to
pass, requires the applicability of the Corporation
Code provisions on corporate dissolution.

We are not persuaded.

Indeed, the provisions of the Corporation Code on

corporate dissolution would apply insofar as the
winding up of HLIs affairs or liquidation of the assets
is concerned. However, the mere inclusion of the
agricultural land of Hacienda Luisita under the
coverage of CARP and the lands eventual distribution
to the FWBs will not, without more, automatically
trigger the dissolution of HLI. As stated in the SDOA
itself, the percentage of the value of the agricultural
land of Hacienda Luisita in relation to the total assets
transferred and conveyed by Tadeco to HLI comprises
only 33.296%, following this equation: value of the
agricultural lands divided by total corporate assets. By
no stretch of imagination would said percentage
amount to a disposition of all or practically all of HLIs
corporate assets should compulsory land acquisition
and distribution ensue.

This brings us to the validity of the revocation of the

approval of the SDP sixteen (16) years after its
execution pursuant to Sec. 31 of RA 6657 for the
reasons set forth in the Terminal Report of the Special
Task Force, as endorsed by PARC Excom. But first,
the matter of the constitutionality of said section.

To a more specific, but direct point, FARM argues that

Sec. 31 of RA 6657 permits stock transfer in lieu of
outright agricultural land transfer; in fine, there is
stock certificate ownership of the farmers or
farmworkers instead of them owning the land, as
envisaged in the Constitution. For FARM, this
modality of distribution is an anomaly to be annulled
for being inconsistent with the basic concept of
agrarian reform ingrained in Sec. 4, Art. XIII of the
Constitution.[107]

Reacting, HLI insists that agrarian reform is not only

about transfer of land ownership to farmers and other
qualified beneficiaries. It draws attention in this regard
to Sec. 3(a) of RA 6657 on the concept and scope of
the term agrarian reform. The constitutionality of a
law, HLI added, cannot, as here, be attacked
collaterally.

The instant challenge on the constitutionality of Sec.

31 of RA 6657 and necessarily its counterpart
provision in EO 229 must fail as explained below.

When the Court is called upon to exercise its power of

judicial review over, and pass upon the
constitutionality of, acts of the executive or legislative
departments, it does so only when the following
essential requirements are first met, to wit:

(1) there is an actual case or controversy;

Constitutional Issue

FARM asks for the invalidation of Sec. 31 of RA 6657,

insofar as it affords the corporation, as a mode of
CARP compliance, to resort to stock distribution, an
arrangement which, to FARM, impairs the
fundamental right of farmers and farmworkers under
Sec. 4, Art. XIII of the Constitution.[106]

(2) that the constitutional question is raised at the

earliest possible opportunity by a proper party or one
with locus standi; and

(3) the issue of constitutionality must be the very lis

mota of the case.[108]

Not all the foregoing requirements are satisfied in the

case at bar.

While there is indeed an actual case or controversy,

intervenor FARM, composed of a small minority of 27
farmers, has yet to explain its failure to challenge the
constitutionality of Sec. 3l of RA 6657, since as early
as November 21, l989 when PARC approved the SDP
of Hacienda Luisita or at least within a reasonable
time thereafter and why its members received
benefits from the SDP without so much of a protest. It
was only on December 4, 2003 or 14 years after
approval of the SDP via PARC Resolution No. 89-122 dated November 21, 1989 that said plan and
approving resolution were sought to be revoked, but
not, to stress, by FARM or any of its members, but by
petitioner AMBALA. Furthermore, the AMBALA
petition did NOT question the constitutionality of Sec.
31 of RA 6657, but concentrated on the purported
flaws and gaps in the subsequent implementation of
the SDP. Even the public respondents, as
represented by the Solicitor General, did not question
the constitutionality of the provision. On the other
hand, FARM, whose 27 members formerly belonged
to AMBALA, raised the constitutionality of Sec. 31
only on May 3, 2007 when it filed its Supplemental
Comment with the Court. Thus, it took FARM some
eighteen (18) years from November 21, 1989 before it
challenged the constitutionality of Sec. 31 of RA 6657
which is quite too late in the day. The FARM
members slept on their rights and even accepted
benefits from the SDP with nary a complaint on the
alleged unconstitutionality of Sec. 31 upon which the
benefits were derived. The Court cannot now be
goaded into resolving a constitutional issue that
FARM failed to assail after the lapse of a long period
of time and the occurrence of numerous events and
activities which resulted from the application of an
alleged unconstitutional legal provision.

It has been emphasized in a number of cases that the

question of constitutionality will not be passed upon
by the Court unless it is properly raised and presented
in an appropriate case at the first opportunity.[109]
FARM is, therefore, remiss in belatedly questioning

the constitutionality of Sec. 31 of RA 6657. The

second requirement that the constitutional question
should be raised at the earliest possible opportunity is
clearly wanting.

The last but the most important requisite that the

constitutional issue must be the very lis mota of the
case does not likewise obtain. The lis mota aspect is
not present, the constitutional issue tendered not
being critical to the resolution of the case. The
unyielding rule has been to avoid, whenever
plausible, an issue assailing the constitutionality of a
statute or governmental act.[110] If some other
grounds exist by which judgment can be made
without touching the constitutionality of a law, such
recourse is favored.[111] Garcia v.
Executive Secretary explains why:

Lis Mota the fourth requirement to satisfy before

this Court will undertake judicial review means that
the Court will not pass upon a question of
unconstitutionality, although properly presented, if the
case can be disposed of on some other ground, such
as the application of the statute or the general law.
The petitioner must be able to show that the case
cannot be legally resolved unless the constitutional
question raised is determined. This requirement is
based on the rule that every law has in its favor the
presumption of constitutionality; to justify its
nullification, there must be a clear and unequivocal
breach of the Constitution, and not one that is
doubtful, speculative, or argumentative.[112] (Italics in
the original.)

The lis mota in this case, proceeding from the basic

positions originally taken by AMBALA (to which the
FARM members previously belonged) and the
Supervisory Group, is the alleged non-compliance by
HLI with the conditions of the SDP to support a plea
for its revocation. And before the Court, the lis mota is
whether or not PARC acted in grave abuse of
discretion when it ordered the recall of the SDP for
such non-compliance and the fact that the SDP, as
couched and implemented, offends certain
constitutional and statutory provisions. To be sure,

any of these key issues may be resolved without

plunging into the constitutionality of Sec. 31 of RA
6657. Moreover, looking deeply into the underlying
petitions of AMBALA, et al., it is not the said section
per se that is invalid, but rather it is the alleged
application of the said provision in the SDP that is
flawed.

It may be well to note at this juncture that Sec. 5 of

RA 9700,[113] amending Sec. 7 of RA 6657, has all
but superseded Sec. 31 of RA 6657 vis-a-vis the
stock distribution component of said Sec. 31. In its
pertinent part, Sec. 5 of RA 9700 provides: [T]hat
after June 30, 2009, the modes of acquisition shall be
limited to voluntary offer to sell and compulsory
acquisition. Thus, for all intents and purposes, the
stock distribution scheme under Sec. 31 of RA 6657 is
no longer an available option under existing law. The
question of whether or not it is unconstitutional should
be a moot issue.

It is true that the Court, in some cases, has

proceeded to resolve constitutional issues otherwise
already moot and academic[114] provided the
following requisites are present:

x x x first, there is a grave violation of the

Constitution; second, the exceptional character of the
situation and the paramount public interest is
involved; third, when the constitutional issue raised
requires formulation of controlling principles to guide
the bench, the bar, and the public; fourth, the case is
capable of repetition yet evading review.

These requisites do not obtain in the case at bar.

For one, there appears to be no breach of the

fundamental law. Sec. 4, Article XIII of the
Constitution reads:

The State shall, by law, undertake an agrarian reform

program founded on the right of the farmers and
regular farmworkers, who are landless, to OWN
directly or COLLECTIVELY THE LANDS THEY TILL
or, in the case of other farmworkers, to receive a just
share of the fruits thereof. To this end, the State shall
encourage and undertake the just distribution of all
agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may
prescribe, taking into account ecological,
developmental, or equity considerations, and subject
to the payment of just compensation. In determining
retention limits, the State shall respect the right of
small landowners. The State shall further provide
incentives for voluntary land-sharing. (Emphasis
supplied.)

The wording of the provision is unequivocalthe

farmers and regular farmworkers have a right TO
OWN DIRECTLY OR COLLECTIVELY THE LANDS
THEY TILL. The basic law allows two (2) modes of
land distributiondirect and indirect ownership.
Direct transfer to individual farmers is the most
commonly used method by DAR and widely accepted.
Indirect transfer through collective ownership of the
agricultural land is the alternative to direct ownership
of agricultural land by individual farmers. The
aforequoted Sec. 4 EXPRESSLY authorizes collective
ownership by farmers. No language can be found in
the 1987 Constitution that disqualifies or prohibits
corporations or cooperatives of farmers from being
the legal entity through which collective ownership
can be exercised. The word collective is defined as
indicating a number of persons or things considered
as constituting one group or aggregate,[115] while
collectively is defined as in a collective sense or
manner; in a mass or body.[116] By using the word
collectively, the Constitution allows for indirect
ownership of land and not just outright agricultural
land transfer. This is in recognition of the fact that
land reform may become successful even if it is done
through the medium of juridical entities composed of
farmers.

Collective ownership is permitted in two (2) provisions

of RA 6657. Its Sec. 29 allows workers cooperatives
or associations to collectively own the land, while the

second paragraph of Sec. 31 allows corporations or

associations to own agricultural land with the farmers
becoming stockholders or members. Said provisions
read:

SEC. 29. Farms owned or operated by corporations

or other business associations.In the case of farms
owned or operated by corporations or other business
associations, the following rules shall be observed by
the PARC.

In general, lands shall be distributed directly to the

individual worker-beneficiaries.

In case it is not economically feasible and sound to

divide the land, then it shall be owned collectively by
the worker beneficiaries who shall form a workers
cooperative or association which will deal with the
corporation or business association. x x x (Emphasis
supplied.)

SEC. 31. Corporate Landowners. x x x

Clearly, workers cooperatives or associations under

Sec. 29 of RA 6657 and corporations or associations
under the succeeding Sec. 31, as differentiated from
individual farmers, are authorized vehicles for the
collective ownership of agricultural land.
Cooperatives can be registered with the Cooperative
Development Authority and acquire legal personality
of their own, while corporations are juridical persons
under the Corporation Code. Thus, Sec. 31 is
constitutional as it simply implements Sec. 4 of Art.
XIII of the Constitution that land can be owned
COLLECTIVELY by farmers. Even the framers of the
l987 Constitution are in unison with respect to the two
(2) modes of ownership of agricultural lands tilled by
farmersDIRECT and COLLECTIVE, thus:

MR. NOLLEDO. And when we talk of the phrase to

own directly, we mean the principle of direct
ownership by the tiller?

MR. MONSOD. Yes.

MR. NOLLEDO. And when we talk of collectively,

we mean communal ownership, stewardship or State
ownership?

xxxx

Upon certification by the

DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such
proportion of the capital stock of the corporation that
the agricultural land, actually devoted to agricultural
activities, bears in relation to the companys total
assets, under such terms and conditions as may be
agreed upon by them. In no case shall the
compensation received by the workers at the time the
shares of stocks are distributed be reduced. The
same principle shall be applied to associations, with
respect to their equity or participation. x x x
(Emphasis supplied.)

MS. NIEVA. In this section, we conceive of

cooperatives; that is farmers cooperatives owning the
land, not the State.

MR. NOLLEDO. And when we talk of collectively,

referring to farmers cooperatives, do the farmers own
specific areas of land where they only unite in their
efforts?

MS. NIEVA. That is one way.

MR. NOLLEDO. Because I understand that there are

two basic systems involved: the moshave type of
agriculture and the kibbutz. So are both
contemplated in the report?

MR. TADEO. Ang dalawa kasing pamamaraan ng

pagpapatupad ng tunay na reporma sa lupa ay ang
pagmamay-ari ng lupa na hahatiin sa individual na
pagmamay-ari directly at ang tinatawag na samasamang gagawin ng mga magbubukid. Tulad sa
Negros, ang gusto ng mga magbubukid ay gawin nila
itong cooperative or collective farm. Ang ibig
sabihin ay sama-sama nilang sasakahin.

xxxx

MR. TINGSON. x x x When we speak here of to own

directly or collectively the lands they till, is this land
for the tillers rather than land for the landless?
Before, we used to hear land for the landless, but
now the slogan is land for the tillers. Is that right?

MR. TADEO. Ang prinsipyong umiiral dito ay iyong

land for the tillers. Ang ibig sabihin ng directly ay
tulad sa implementasyon sa rice and corn lands kung
saan inaari na ng mga magsasaka ang lupang
binubungkal nila. Ang ibig sabihin naman ng
collectively ay sama-samang paggawa sa isang
lupain o isang bukid, katulad ng sitwasyon sa Negros.
[117] (Emphasis supplied.)

As Commissioner Tadeo explained, the farmers will

work on the agricultural land sama-sama or
collectively. Thus, the main requisite for collective
ownership of land is collective or group work by
farmers of the agricultural land. Irrespective of
whether the landowner is a cooperative, association
or corporation composed of farmers, as long as
concerted group work by the farmers on the land is
present, then it falls within the ambit of collective
ownership scheme.

Likewise, Sec. 4, Art. XIII of the Constitution makes

mention of a commitment on the part of the State to
pursue, by law, an agrarian reform program founded
on the policy of land for the landless, but subject to
such priorities as Congress may prescribe, taking into
account such abstract variable as equity
considerations. The textual reference to a law and
Congress necessarily implies that the above
constitutional provision is not self-executory and that
legislation is needed to implement the urgently
needed program of agrarian reform. And RA 6657
has been enacted precisely pursuant to and as a
mechanism to carry out the constitutional directives.
This piece of legislation, in fact, restates[118] the
agrarian reform policy established in the
aforementioned provision of the Constitution of
promoting the welfare of landless farmers and
farmworkers. RA 6657 thus defines agrarian reform
as the redistribution of lands to farmers and
regular farmworkers who are landless to lift the
economic status of the beneficiaries and all other
arrangements alternative to the physical redistribution
of lands, such as production or profit sharing, labor
administration and the distribution of shares of
stock which will allow beneficiaries to receive a just
share of the fruits of the lands they work.

With the view We take of this case, the stock

distribution option devised under Sec. 31 of RA 6657
hews with the agrarian reform policy, as instrument of
social justice under Sec. 4 of Article XIII of the
Constitution. Albeit land ownership for the landless
appears to be the dominant theme of that policy, We
emphasize that Sec. 4, Article XIII of the Constitution,
as couched, does not constrict Congress to passing
an agrarian reform law planted on direct land transfer
to and ownership by farmers and no other, or else the
enactment suffers from the vice of unconstitutionality.
If the intention were otherwise, the framers of the
Constitution would have worded said section in a
manner mandatory in character.

For this Court, Sec. 31 of RA 6657, with its direct and

indirect transfer features, is not inconsistent with the
States commitment to farmers and farmworkers to

advance their interests under the policy of social

justice. The legislature, thru Sec. 31 of RA 6657, has
chosen a modality for collective ownership by which
the imperatives of social justice may, in its estimation,
be approximated, if not achieved. The Court should
be bound by such policy choice.

FARM contends that the farmers in the stock

distribution scheme under Sec. 31 do not own the
agricultural land but are merely given stock
certificates. Thus, the farmers lose control over the
land to the board of directors and executive officials of
the corporation who actually manage the land. They
conclude that such arrangement runs counter to the
mandate of the Constitution that any agrarian reform
must preserve the control over the land in the hands
of the tiller.

This contention has no merit.

While it is true that the farmer is issued stock

certificates and does not directly own the land, still,
the Corporation Code is clear that the FWB becomes
a stockholder who acquires an equitable interest in
the assets of the corporation, which include the
agricultural lands. It was explained that the equitable
interest of the shareholder in the property of the
corporation is represented by the term stock, and the
extent of his interest is described by the term shares.
The expression shares of stock when qualified by
words indicating number and ownership expresses
the extent of the owners interest in the corporate
property.[119] A share of stock typifies an aliquot
part of the corporations property, or the right to share
in its proceeds to that extent when distributed
according to law and equity and that its holder is not
the owner of any part of the capital of the corporation.
[120] However, the FWBs will ultimately own the
agricultural lands owned by the corporation when the
corporation is eventually dissolved and liquidated.

Anent the alleged loss of control of the farmers over

the agricultural land operated and managed by the

corporation, a reading of the second paragraph of

Sec. 31 shows otherwise. Said provision provides that
qualified beneficiaries have the right to purchase
such proportion of the capital stock of the corporation
that the agricultural land, actually devoted to
agricultural activities, bears in relation to the
companys total assets. The wording of the formula
in the computation of the number of shares that can
be bought by the farmers does not mean loss of
control on the part of the farmers. It must be
remembered that the determination of the percentage
of the capital stock that can be bought by the farmers
depends on the value of the agricultural land and the
value of the total assets of the corporation.

There is, thus, nothing unconstitutional in the formula

prescribed by RA 6657. The policy on agrarian
reform is that control over the agricultural land must
always be in the hands of the farmers. Then it falls on
the shoulders of DAR and PARC to see to it the
farmers should always own majority of the common
shares entitled to elect the members of the board of
directors to ensure that the farmers will have a clear
majority in the board. Before the SDP is approved,
strict scrutiny of the proposed SDP must always be
undertaken by the DAR and PARC, such that the
value of the agricultural land contributed to the
corporation must always be more than 50% of the
total assets of the corporation to ensure that the
majority of the members of the board of directors are
composed of the farmers. The PARC composed of
the President of the Philippines and cabinet
secretaries must see to it that control over the board
of directors rests with the farmers by rejecting the
inclusion of non-agricultural assets which will yield the
majority in the board of directors to non-farmers. Any
deviation, however, by PARC or DAR from the correct
application of the formula prescribed by the second
paragraph of Sec. 31 of RA 6675 does not make said
provision constitutionally infirm. Rather, it is the
application of said provision that can be challenged.
Ergo, Sec. 31 of RA 6657 does not trench on the
constitutional policy of ensuring control by the
farmers.

A view has been advanced that there can be no

agrarian reform unless there is land distribution and

that actual land distribution is the essential

characteristic of a constitutional agrarian reform
program. On the contrary, there have been so many
instances where, despite actual land distribution, the
implementation of agrarian reform was still
unsuccessful. As a matter of fact, this Court may take
judicial notice of cases where FWBs sold the awarded
land even to non-qualified persons and in violation of
the prohibition period provided under the law. This
only proves to show that the mere fact that there is
land distribution does not guarantee a successful
implementation of agrarian reform.

As it were, the principle of land to the tiller and the

old pastoral model of land ownership where nonhuman juridical persons, such as corporations, were
prohibited from owning agricultural lands are no
longer realistic under existing conditions. Practically,
an individual farmer will often face greater
disadvantages and difficulties than those who
exercise ownership in a collective manner through a
cooperative or corporation. The former is too often left
to his own devices when faced with failing crops and
bad weather, or compelled to obtain usurious loans in
order to purchase costly fertilizers or farming
equipment. The experiences learned from failed land
reform activities in various parts of the country are
lack of financing, lack of farm equipment, lack of
fertilizers, lack of guaranteed buyers of produce, lack
of farm-to-market roads, among others. Thus, at the
end of the day, there is still no successful
implementation of agrarian reform to speak of in such
a case.

Although success is not guaranteed, a cooperative or

a corporation stands in a better position to secure
funding and competently maintain the agri-business
than the individual farmer. While direct singular
ownership over farmland does offer advantages, such
as the ability to make quick decisions unhampered by
interference from others, yet at best, these
advantages only but offset the disadvantages that are
often associated with such ownership arrangement.
Thus, government must be flexible and creative in its
mode of implementation to better its chances of
success. One such option is collective ownership
through juridical persons composed of farmers.

Aside from the fact that there appears to be no

violation of the Constitution, the requirement that the
instant case be capable of repetition yet evading
review is also wanting. It would be speculative for this
Court to assume that the legislature will enact another
law providing for a similar stock option.

As a matter of sound practice, the Court will not

interfere inordinately with the exercise by Congress of
its official functions, the heavy presumption being that
a law is the product of earnest studies by Congress to
ensure that no constitutional prescription or concept is
infringed.[121] Corollarily, courts will not pass upon
questions of wisdom, expediency and justice of
legislation or its provisions. Towards this end, all
reasonable doubts should be resolved in favor of the
constitutionality of a law and the validity of the acts
and processes taken pursuant thereof.[122]

Consequently, before a statute or its provisions duly

challenged are voided, an unequivocal breach of, or a
clear conflict with the Constitution, not merely a
doubtful or argumentative one, must be demonstrated
in such a manner as to leave no doubt in the mind of
the Court. In other words, the grounds for nullity must
be beyond reasonable doubt.[123] FARM has not
presented compelling arguments to overcome the
presumption of constitutionality of Sec. 31 of RA
6657.

The wisdom of Congress in allowing an SDP through

a corporation as an alternative mode of implementing
agrarian reform is not for judicial determination.
Established jurisprudence tells us that it is not within
the province of the Court to inquire into the wisdom of
the law, for, indeed, We are bound by words of the
statute.[124]

II.

The stage is now set for the determination of the

propriety under the premises of the revocation or
recall of HLIs SDP. Or to be more precise, the inquiry
should be: whether or not PARC gravely abused its
discretion in revoking or recalling the subject SDP and
placing the hacienda under CARPs compulsory
acquisition and distribution scheme.

The findings, analysis and recommendation of the

DARs Special Task Force contained and summarized
in its Terminal Report provided the bases for the
assailed PARC revocatory/recalling Resolution. The
findings may be grouped into two: (1) the SDP is
contrary to either the policy on agrarian reform, Sec.
31 of RA 6657, or DAO 10; and (2) the alleged
violation by HLI of the conditions/terms of the SDP. In
more particular terms, the following are essentially the
reasons underpinning PARCs revocatory or recall
action:

(1) Despite the lapse of 16 years from the approval of

HLIs SDP, the lives of the FWBs have hardly
improved and the promised increased income has not
materialized;

(2) HLI has failed to keep Hacienda Luisita intact and

unfragmented;

(3) The issuance of HLI shares of stock on the basis

of number of hours workedor the so-called man
daysis grossly onerous to the FWBs, as HLI, in the
guise of rotation, can unilaterally deny work to
anyone. In elaboration of this ground, PARCs
Resolution No. 2006-34-01, denying HLIs motion for
reconsideration of Resolution No. 2005-32-01, stated
that the man days criterion worked to dilute the
entitlement of the original share beneficiaries;[125]

(5) HLI has failed to comply with its obligations to

grant 3% of the gross sales every year as productionsharing benefit on top of the workers salary; and

(6) Several homelot awardees have yet to receive

their individual titles.

Petitioner HLI claims having complied with, at least

substantially, all its obligations under the SDP, as
approved by PARC itself, and tags the reasons given
for the revocation of the SDP as unfounded.

Public respondents, on the other hand, aver that the

assailed resolution rests on solid grounds set forth in
the Terminal Report, a position shared by AMBALA,
which, in some pleadings, is represented by the same
counsel as that appearing for the Supervisory Group.

FARM, for its part, posits the view that legal bases
obtain for the revocation of the SDP, because it does
not conform to Sec. 31 of RA 6657 and DAO 10. And
training its sight on the resulting dilution of the equity
of the FWBs appearing in HLIs masterlist, FARM
would state that the SDP, as couched and
implemented, spawned disparity when there should
be none; parity when there should have been
differentiation.[126]

The petition is not impressed with merit.

In the Terminal Report adopted by PARC, it is stated

that the SDP violates the agrarian reform policy under
Sec. 2 of RA 6657, as the said plan failed to enhance
the dignity and improve the quality of lives of the
FWBs through greater productivity of agricultural
lands. We disagree.

(4) The distribution/transfer of shares was not in

accordance with the timelines fixed by law;
Sec. 2 of RA 6657 states:

SECTION 2. Declaration of Principles and Policies.

- It is the policy of the State to pursue a
Comprehensive Agrarian Reform Program (CARP).
The welfare of the landless farmers and farm workers
will receive the highest consideration to promote
social justice and to move the nation towards sound
rural development and industrialization, and the
establishment of owner cultivatorship of economicsized farms as the basis of Philippine agriculture.

To this end, a more equitable distribution and

ownership of land, with due regard to the rights of
landowners to just compensation and to the
ecological needs of the nation, shall be undertaken to
provide farmers and farm workers with the opportunity
to enhance their dignity and improve the quality of
their lives through greater productivity of agricultural
lands.

The agrarian reform program is founded on the right

of farmers and regular farm workers, who are
landless, to own directly or collectively the lands they
till or, in the case of other farm workers, to receive a
share of the fruits thereof. To this end, the State shall
encourage the just distribution of all agricultural lands,
subject to the priorities and retention limits set forth in
this Act, having taken into account ecological,
developmental, and equity considerations, and
subject to the payment of just compensation. The
State shall respect the right of small landowners and
shall provide incentives for voluntary land-sharing.
(Emphasis supplied.)

Paragraph 2 of the above-quoted provision

specifically mentions that a more equitable
distribution and ownership of land x x x shall be
undertaken to provide farmers and farm workers with
the opportunity to enhance their dignity and improve
the quality of their lives through greater productivity of
agricultural lands. Of note is the term opportunity
which is defined as a favorable chance or opening
offered by circumstances.[127] Considering this, by
no stretch of imagination can said provision be

construed as a guarantee in improving the lives of the

FWBs. At best, it merely provides for a possibility or
favorable chance of uplifting the economic status of
the FWBs, which may or may not be attained.

Pertinently, improving the economic status of the

FWBs is neither among the legal obligations of HLI
under the SDP nor an imperative imposition by RA
6657 and DAO 10, a violation of which would justify
discarding the stock distribution option. Nothing in
that option agreement, law or department order
indicates otherwise.

Significantly, HLI draws particular attention to its

having paid its FWBs, during the regime of the SDP
(1989-2005), some PhP 3 billion by way of
salaries/wages and higher benefits exclusive of free
hospital and medical benefits to their immediate
family. And attached as Annex G to HLIs
Memorandum is the certified true report of the finance
manager of Jose Cojuangco & Sons OrganizationsTarlac Operations, captioned as HACIENDA
LUISITA, INC. Salaries, Benefits and Credit Privileges
(in Thousand Pesos) Since the Stock Option was
Approved by PARC/CARP, detailing what HLI gave
their workers from 1989 to 2005. The sum total, as
added up by the Court, yields the following numbers:
Total Direct Cash Out (Salaries/Wages & Cash
Benefits) = PhP 2,927,848; Total Non-Direct Cash Out
(Hospital/Medical Benefits) = PhP 303,040. The cash
out figures, as stated in the report, include the cost of
homelots; the PhP 150 million or so representing 3%
of the gross produce of the hacienda; and the PhP
37.5 million representing 3% from the proceeds of the
sale of the 500-hectare converted lands. While not
included in the report, HLI manifests having given the
FWBs 3% of the PhP 80 million paid for the 80
hectares of land traversed by the SCTEX.[128] On
top of these, it is worth remembering that the shares
of stocks were given by HLI to the FWBs for free.
Verily, the FWBs have benefited from the SDP.

To address urgings that the FWBs be allowed to

disengage from the SDP as HLI has not anyway
earned profits through the years, it cannot be over-

emphasized that, as a matter of common business

sense, no corporation could guarantee a profitable
run all the time. As has been suggested, one of the
key features of an SDP of a corporate landowner is
the likelihood of the corporate vehicle not earning, or,
worse still, losing money.[129]

The Court is fully aware that one of the criteria under

DAO 10 for the PARC to consider the advisability of
approving a stock distribution plan is the likelihood
that the plan would result in increased income and
greater benefits to [qualified beneficiaries] than if the
lands were divided and distributed to them
individually.[130] But as aptly noted during the oral
arguments, DAO 10 ought to have not, as it cannot,
actually exact assurance of success on something
that is subject to the will of man, the forces of nature
or the inherent risky nature of business.[131] Just like
in actual land distribution, an SDP cannot guarantee,
as indeed the SDOA does not guarantee, a
comfortable life for the FWBs. The Court can take
judicial notice of the fact that there were many
instances wherein after a farmworker beneficiary has
been awarded with an agricultural land, he just
subsequently sells it and is eventually left with nothing
in the end.

In all then, the onerous condition of the FWBs

economic status, their life of hardship, if that really be
the case, can hardly be attributed to HLI and its SDP
and provide a valid ground for the plans revocation.

Neither does HLIs SDP, whence the DAR-attested

SDOA/MOA is based, infringe Sec. 31 of RA 6657,
albeit public respondents erroneously submit
otherwise.

The provisions of the first paragraph of the adverted

Sec. 31 are without relevance to the issue on the
propriety of the assailed order revoking HLIs SDP, for
the paragraph deals with the transfer of agricultural
lands to the government, as a mode of CARP
compliance, thus:

SEC. 31. Corporate Landowners. - Corporate

landowners may voluntarily transfer ownership over
their agricultural landholdings to the Republic of the
Philippines pursuant to Section 20 hereof or to
qualified beneficiaries under such terms and
conditions, consistent with this Act, as they may
agree, subject to confirmation by the DAR.

The second and third paragraphs, with their subparagraphs, of Sec. 31 provide as follows:

Upon certification by the DAR, corporations owning

agricultural lands may give their qualified beneficiaries
the right to purchase such proportion of the capital
stock of the corporation that the agricultural land,
actually devoted to agricultural activities, bears in
relation to the companys total assets, under such
terms and conditions as may be agreed upon by
them. In no case shall the compensation received by
the workers at the time the shares of stocks are
distributed be reduced. x x x

Corporations or associations which voluntarily divest

a proportion of their capital stock, equity or
participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to
have complied with the provisions of this Act:
Provided, That the following conditions are complied
with:

(a) In order to safeguard the right of beneficiaries who

own shares of stocks to dividends and other financial
benefits, the books of the corporation or association
shall be subject to periodic audit by certified public
accountants chosen by the beneficiaries;

(b) Irrespective of the value of their equity in the

corporation or association, the beneficiaries shall be
assured of at least one (1) representative in the board
of directors, or in a management or executive

committee, if one exists, of the corporation or

association;

(c) Any shares acquired by such workers and

beneficiaries shall have the same rights and features
as all other shares; and

(d) Any transfer of shares of stocks by the original

beneficiaries shall be void ab initio unless said
transaction is in favor of a qualified and registered
beneficiary within the same corporation.

The mandatory minimum ratio of land-to-shares of

stock supposed to be distributed or allocated to
qualified beneficiaries, adverting to what Sec. 31 of
RA 6657 refers to as that proportion of the capital
stock of the corporation that the agricultural land,
actually devoted to agricultural activities, bears in
relation to the companys total assets had been
observed.

Paragraph one (1) of the SDOA, which was based on

the SDP, conforms to Sec. 31 of RA 6657. The
stipulation reads:

1. The percentage of the value of the agricultural land

of Hacienda Luisita (P196,630,000.00) in relation to
the total assets (P590,554,220.00) transferred and
conveyed to the SECOND PARTY is 33.296% that,
under the law, is the proportion of the outstanding
capital stock of the SECOND PARTY, which is
P355,531,462.00 or 355,531,462 shares with a par
value of P1.00 per share, that has to be distributed to
the THIRD PARTY under the stock distribution
plan, the said 33.296% thereof
being P118,391,976.85 or 118,391,976.85 shares.

The appraised value of the agricultural land is PhP

196,630,000 and of HLIs other assets is PhP
393,924,220. The total value of HLIs assets is,

therefore, PhP 590,554,220.[132] The percentage of

the value of the agricultural lands (PhP 196,630,000)
in relation to the total assets (PhP 590,554,220) is
33.296%, which represents the stockholdings of the
6,296 original qualified farmworker-beneficiaries
(FWBs) in HLI. The total number of shares to be
distributed to said qualified FWBs is 118,391,976.85
HLI shares. This was arrived at by getting 33.296% of
the 355,531,462 shares which is the outstanding
capital stock of HLI with a value of PhP 355,531,462.
Thus, if we divide the 118,391,976.85 HLI shares by
6,296 FWBs, then each FWB is entitled to 18,804.32
HLI shares. These shares under the SDP are to be
given to FWBs for free.

The Court finds that the determination of the shares to

be distributed to the 6,296 FWBs strictly adheres to
the formula prescribed by Sec. 31(b) of RA 6657.

Anent the requirement under Sec. 31(b) of the third

paragraph, that the FWBs shall be assured of at least
one (1) representative in the board of directors or in a
management or executive committee irrespective of
the value of the equity of the FWBs in HLI, the Court
finds that the SDOA contained provisions making
certain the FWBs representation in HLIs governing
board, thus:

5. Even if only a part or fraction of the shares

earmarked for distribution will have been acquired
from the FIRST PARTY and distributed to the THIRD
PARTY, FIRST PARTY shall execute at the beginning
of each fiscal year an irrevocable proxy, valid and
effective for one (1) year, in favor of the farmworkers
appearing as shareholders of the SECOND PARTY at
the start of said year which will empower the THIRD
PARTY or their representative to vote in stockholders
and board of directors meetings of the SECOND
PARTY convened during the year the entire 33.296%
of the outstanding capital stock of the SECOND
PARTY earmarked for distribution and thus be able to
gain such number of seats in the board of directors of
the SECOND PARTY that the whole 33.296% of the
shares subject to distribution will be entitled to.

Also, no allegations have been made against HLI

restricting the inspection of its books by accountants
chosen by the FWBs; hence, the assumption may be
made that there has been no violation of the statutory
prescription under sub-paragraph (a) on the auditing
of HLIs accounts.

Public respondents, however, submit that the

distribution of the mandatory minimum ratio of land-toshares of stock, referring to the 118,391,976.85
shares with par value of PhP 1 each, should have
been made in full within two (2) years from the
approval of RA 6657, in line with the last paragraph of
Sec. 31 of said law.[133]

Public respondents submission is palpably

erroneous. We have closely examined the last
paragraph alluded to, with particular focus on the twoyear period mentioned, and nothing in it remotely
supports the public respondents posture. In its
pertinent part, said Sec. 31 provides:

SEC. 31. Corporate Landowners x x x

If within two (2) years from the approval of this Act,

the [voluntary] land or stock transfer envisioned above
is not made or realized or the plan for such stock
distribution approved by the PARC within the same
period, the agricultural land of the corporate owners
or corporation shall be subject to the compulsory
coverage of this Act. (Word in bracket and emphasis
added.)

Properly viewed, the words two (2) years clearly

refer to the period within which the corporate
landowner, to avoid land transfer as a mode of CARP
coverage under RA 6657, is to avail of the stock
distribution option or to have the SDP approved. The
HLI secured approval of its SDP in November 1989,

well within the two-year period reckoned from June

1988 when RA 6657 took effect.

Having hurdled the alleged breach of the agrarian

reform policy under Sec. 2 of RA 6657 as well as the
statutory issues, We shall now delve into what PARC
and respondents deem to be other instances of
violation of DAO 10 and the SDP.

On the Conversion of Lands

Contrary to the almost parallel stance of the

respondents, keeping Hacienda Luisita unfragmented
is also not among the imperative impositions by the
SDP, RA 6657, and DAO 10.

The Terminal Report states that the proposed

distribution plan submitted in 1989 to the PARC
effectively assured the intended stock beneficiaries
that the physical integrity of the farm shall remain
inviolate. Accordingly, the Terminal Report and the
PARC-assailed resolution would take HLI to task for
securing approval of the conversion to nonagricultural uses of 500 hectares of the hacienda. In
not too many words, the Report and the resolution
view the conversion as an infringement of Sec. 5(a) of
DAO 10 which reads: a. that the continued operation
of the corporation with its agricultural land intact and
unfragmented is viable with potential for growth and
increased profitability.

The PARC is wrong.

In the first place, Sec. 5(a)just like the succeeding

Sec. 5(b) of DAO 10 on increased income and greater
benefits to qualified beneficiariesis but one of the
stated criteria to guide PARC in deciding on whether
or not to accept an SDP. Said Sec. 5(a) does not
exact from the corporate landowner-applicant the
undertaking to keep the farm intact and

unfragmented ad infinitum. And there is logic to HLIs

stated observation that the key phrase in the provision
of Sec. 5(a) is viability of corporate operations:
[w]hat is thus required is not the agricultural land
remaining intact x x x but the viability of the corporate
operations with its agricultural land being intact and
unfragmented. Corporate operation may be viable
even if the corporate agricultural land does not remain
intact or [un]fragmented.[134]

It is, of course, anti-climactic to mention that DAR

viewed the conversion as not violative of any
issuance, let alone undermining the viability of
Hacienda Luisitas operation, as the DAR Secretary
approved the land conversion applied for and its
disposition via his Conversion Order dated August 14,
1996 pursuant to Sec. 65 of RA 6657 which reads:

Sec. 65. Conversion of Lands. - After the lapse of five

years from its award when the land ceases to be
economically feasible and sound for agricultural
purposes, or the locality has become urbanized and
the land will have a greater economic value for
residential, commercial or industrial purposes, the
DAR upon application of the beneficiary or landowner
with due notice to the affected parties, and subject to
existing laws, may authorize the x x x conversion of
the land and its dispositions. x x x

On the 3% Production Share

On the matter of the alleged failure of HLI to comply

with sharing the 3% of the gross production sales of
the hacienda and pay dividends from profit, the
entries in its financial books tend to indicate
compliance by HLI of the profit-sharing equivalent to
3% of the gross sales from the production of the
agricultural land on top of (a) the salaries and wages
due FWBs as employees of the company and (b) the
3% of the gross selling price of the converted land
and that portion used for the SCTEX. A plausible
evidence of compliance or non-compliance, as the
case may be, could be the books of account of HLI.

Evidently, the cry of some groups of not having

received their share from the gross production sales
has not adequately been validated on the ground by
the Special Task Force.

Indeed, factual findings of administrative agencies are

conclusive when supported by substantial evidence
and are accorded due respect and weight, especially
when they are affirmed by the CA.[135] However,
such rule is not absolute. One such exception is when
the findings of an administrative agency are
conclusions without citation of specific evidence on
which they are based,[136] such as in this particular
instance. As culled from its Terminal Report, it would
appear that the Special Task Force rejected HLIs
claim of compliance on the basis of this ratiocination:

The Task Force position: Though, allegedly, the

Supervisory Group receives the 3% gross production
share and that others alleged that they received 30
million pesos still others maintain that they have not
received anything yet. Item No. 4 of the MOA is clear
and must be followed. There is a distinction between
the total gross sales from the production of the
land and the proceeds from the sale of the land. The
former refers to the fruits/yield of the agricultural land
while the latter is the land itself. The phrase the
beneficiaries are entitled every year to an amount
approximately equivalent to 3% would only be
feasible if the subject is the produce since there is at
least one harvest per year, while such is not the case
in the sale of the agricultural land. This negates then
the claim of HLI that, all that the FWBs can be entitled
to, if any, is only 3% of the purchase price of the
converted land.

Besides, the Conversion Order dated 14 August 1996

provides that the benefits, wages and the like,
presently received by the FWBs shall not in any way
be reduced or adversely affected. Three percent of
the gross selling price of the sale of the converted
land shall be awarded to the beneficiaries of the
SDO. The 3% gross production share then is
different from the 3% proceeds of the sale of the
converted land and, with more reason, the 33% share

being claimed by the FWBs as part owners of the

Hacienda, should have been given the FWBs, as
stockholders, and to which they could have been
entitled if only the land were acquired and
redistributed to them under the CARP.
xxxx

The FWBs do not receive any other benefits under

the MOA except the aforementioned [(viz: shares of
stocks (partial), 3% gross production sale (not all) and
homelots (not all)].

Judging from the above statements, the Special Task

Force is at best silent on whether HLI has failed to
comply with the 3% production-sharing obligation or
the 3% of the gross selling price of the converted land
and the SCTEX lot. In fact, it admits that the FWBs,
though not all, have received their share of the gross
production sales and in the sale of the lot to SCTEX.
At most, then, HLI had complied substantially with this
SDP undertaking and the conversion order. To be
sure, this slight breach would not justify the setting to
naught by PARC of the approval action of the earlier
PARC. Even in contract law, rescission, predicated on
violation of reciprocity, will not be permitted for a slight
or casual breach of contract; rescission may be had
only for such breaches that are substantial and
fundamental as to defeat the object of the parties in
making the agreement.[137]

Despite the foregoing findings, the revocation of the

approval of the SDP is not without basis as shown
below.

SEC. 30. Homelots and Farmlots for Members of

Cooperatives. - The individual members of the
cooperatives or corporations mentioned in the
preceding section shall be provided with homelots
and small farmlots for their family use, to be taken
from the land owned by the cooperative or
corporation.

The preceding section referred to in the abovequoted provision is as follows:

SEC. 29. Farms Owned or Operated by Corporations

or Other Business Associations. - In the case of farms
owned or operated by corporations or other business
associations, the following rules shall be observed by
the PARC.

In general, lands shall be distributed directly to the

individual worker-beneficiaries.

In case it is not economically feasible and sound to

divide the land, then it shall be owned collectively by
the worker-beneficiaries who shall form a workers
cooperative or association which will deal with the
corporation or business association. Until a new
agreement is entered into by and between the
workers cooperative or association and the
corporation or business association, any agreement
existing at the time this Act takes effect between the
former and the previous landowner shall be respected
by both the workers cooperative or association and
the corporation or business association.

On Titles to Homelots

Under RA 6657, the distribution of homelots is

required only for corporations or business
associations owning or operating farms which opted
for land distribution. Sec. 30 of RA 6657 states:

Noticeably, the foregoing provisions do not make

reference to corporations which opted for stock
distribution under Sec. 31 of RA 6657. Concomitantly,
said corporations are not obliged to provide for it
except by stipulation, as in this case.

Under the SDP, HLI undertook to subdivide and

allocate for free and without charge among the
qualified family-beneficiaries x x x residential or
homelots of not more than 240 sq. m. each, with each
family beneficiary being assured of receiving and
owning a homelot in the barrio or barangay where it
actually resides, within a reasonable time.

More than sixteen (16) years have elapsed from the

time the SDP was approved by PARC, and yet, it is
still the contention of the FWBs that not all was given
the 240-square meter homelots and, of those who
were already given, some still do not have the
corresponding titles.

During the oral arguments, HLI was afforded the

chance to refute the foregoing allegation by
submitting proof that the FWBs were already given
the said homelots:

Justice Velasco: x x x There is also an allegation that

the farmer beneficiaries, the qualified family
beneficiaries were not given the 240 square meters
each. So, can you also [prove] that the qualified family
beneficiaries were already provided the 240 square
meter homelots.

Atty. Asuncion: We will, your Honor please.[138]

Other than the financial report, however, no other

substantial proof showing that all the qualified
beneficiaries have received homelots was submitted
by HLI. Hence, this Court is constrained to rule that
HLI has not yet fully complied with its undertaking to
distribute homelots to the FWBs under the SDP.

On Man Days and the Mechanics of Stock

Distribution

In our review and analysis of par. 3 of the SDOA on

the mechanics and timelines of stock distribution, We
find that it violates two (2) provisions of DAO 10. Par.
3 of the SDOA states:

3. At the end of each fiscal year, for a period of 30

years, the SECOND PARTY [HLI] shall arrange with
the FIRST PARTY [TDC] the acquisition and
distribution to the THIRD PARTY [FWBs] on the basis
of number of days worked and at no cost to them of
one-thirtieth (1/30) of 118,391,976.85 shares of the
capital stock of the SECOND PARTY that are
presently owned and held by the FIRST PARTY, until
such time as the entire block of 118,391,976.85
shares shall have been completely acquired and
distributed to the THIRD PARTY.

Based on the above-quoted provision, the distribution

of the shares of stock to the FWBs, albeit not entailing
a cash out from them, is contingent on the number of
man days, that is, the number of days that the FWBs
have worked during the year. This formula deviates
from Sec. 1 of DAO 10, which decrees the distribution
of equal number of shares to the FWBs as the
minimum ratio of shares of stock for purposes of
compliance with Sec. 31 of RA 6657. As stated in
Sec. 4 of DAO 10:

Section 4. Stock Distribution Plan. - The [SDP]

submitted by the corporate landowner-applicant shall
provide for the distribution of an equal number of
shares of the same class and value, with the same
rights and features as all other shares, to each of the
qualified beneficiaries. This distribution plan in all
cases, shall be at least the minimum ratio for
purposes of compliance with Section 31 of R.A. No.
6657.

On top of the minimum ratio provided under Section 3

of this Implementing Guideline, the corporate
landowner-applicant may adopt additional stock
distribution schemes taking into account factors such
as rank, seniority, salary, position and other

circumstances which may be deemed desirable as a

matter of sound company policy. (Emphasis supplied.)

The above proviso gives two (2) sets or categories of

shares of stock which a qualified beneficiary can
acquire from the corporation under the SDP. The first
pertains, as earlier explained, to the mandatory
minimum ratio of shares of stock to be distributed to
the FWBs in compliance with Sec. 31 of RA 6657.
This minimum ratio contemplates of that proportion of
the capital stock of the corporation that the
agricultural land, actually devoted to agricultural
activities, bears in relation to the companys total
assets.[139] It is this set of shares of stock which, in
line with Sec. 4 of DAO 10, is supposed to be
allocated for the distribution of an equal number of
shares of stock of the same class and value, with the
same rights and features as all other shares, to each
of the qualified beneficiaries.

On the other hand, the second set or category of

shares partakes of a gratuitous extra grant, meaning
that this set or category constitutes an augmentation
share/s that the corporate landowner may give under
an additional stock distribution scheme, taking into
account such variables as rank, seniority, salary,
position and like factors which the management, in
the exercise of its sound discretion, may deem
desirable.[140]

Before anything else, it should be stressed that, at the

time PARC approved HLIs SDP, HLI
recognized 6,296 individuals as qualified FWBs. And
under the 30-year stock distribution program
envisaged under the plan, FWBs who came in after
1989, new FWBs in fine, may be accommodated, as
they appear to have in fact been accommodated as
evidenced by their receipt of HLI shares.

Now then, by providing that the number of shares of

the original 1989 FWBs shall depend on the number
of man days, HLI violated the afore-quoted rule on
stock distribution and effectively deprived the FWBs of

equal shares of stock in the corporation, for, in net

effect, these 6,296 qualified FWBs, who theoretically
had given up their rights to the land that could have
been distributed to them, suffered a dilution of their
due share entitlement. As has been observed during
the oral arguments, HLI has chosen to use the shares
earmarked for farmworkers as reward system chips to
water down the shares of the original 6,296 FWBs.
[141] Particularly:

Justice Abad: If the SDOA did not take place, the

other thing that would have happened is that there
would be CARP?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: Thats the only point I want to know x x

x. Now, but they chose to enter SDOA instead of
placing the land under CARP. And for that reason
those who would have gotten their shares of the land
actually gave up their rights to this land in place of the
shares of the stock, is that correct?

Atty. Dela Merced: It would be that way, Your Honor.

Justice Abad: Right now, also the government, in a

way, gave up its right to own the land because that
way the government takes own [sic] the land and
distribute it to the farmers and pay for the land, is that
correct?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: And then you gave thirty-three percent

(33%) of the shares of HLI to the farmers at that time
that numbered x x x those who signed five thousand
four hundred ninety eight (5,498) beneficiaries, is that
correct?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: But later on, after assigning them their

shares, some workers came in from 1989, 1990,
1991, 1992 and the rest of the years that you gave
additional shares who were not in the original list of
owners?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: Did those new workers give up any right

that would have belong to them in 1989 when the land
was supposed to have been placed under CARP?

Atty. Dela Merced: If you are talking or referring

(interrupted)

Justice Abad: None! You tell me. None. They gave up

no rights to land?

Atty. Dela Merced: They did not do the same thing as

we did in 1989, Your Honor.

Justice Abad: No, if they were not workers in 1989

what land did they give up? None, if they become
workers later on.

Atty. Dela Merced: None, Your Honor, I was referring,

Your Honor, to the original (interrupted)

Justice Abad: So why is it that the rights of those who

gave up their lands would be diluted, because the
company has chosen to use the shares as reward

system for new workers who come in? It is not that

the new workers, in effect, become just workers of the
corporation whose stockholders were already fixed.
The TADECO who has shares there about sixty six
percent (66%) and the five thousand four hundred
ninety eight (5,498) farmers at the time of the SDOA?
Explain to me. Why, why will you x x x what right or
where did you get that right to use this shares, to
water down the shares of those who should have
been benefited, and to use it as a reward system
decided by the company?[142]

From the above discourse, it is clear as day that the

original 6,296 FWBs, who were qualified beneficiaries
at the time of the approval of the SDP, suffered from
watering down of shares. As determined earlier, each
original FWB is entitled to 18,804.32 HLI shares. The
original FWBs got less than the guaranteed 18,804.32
HLI shares per beneficiary, because the acquisition
and distribution of the HLI shares were based on
man days or number of days worked by the FWB
in a years time. As explained by HLI, a beneficiary
needs to work for at least 37 days in a fiscal year
before he or she becomes entitled to HLI shares. If it
falls below 37 days, the FWB, unfortunately, does not
get any share at year end. The number of HLI shares
distributed varies depending on the number of days
the FWBs were allowed to work in one year. Worse,
HLI hired farmworkers in addition to the original 6,296
FWBs, such that, as indicated in the Compliance
dated August 2, 2010 submitted by HLI to the Court,
the total number of farmworkers of HLI as of said date
stood at 10,502. All these farmworkers, which include
the original 6,296 FWBs, were given shares out of the
118,931,976.85 HLI shares representing the 33.296%
of the total outstanding capital stock of HLI. Clearly,
the minimum individual allocation of each original
FWB of 18,804.32 shares was diluted as a result of
the use of man days and the hiring of additional
farmworkers.

Going into another but related matter, par. 3 of the

SDOA expressly providing for a 30-year timeframe for
HLI-to-FWBs stock transfer is an arrangement
contrary to what Sec. 11 of DAO 10 prescribes. Said
Sec. 11 provides for the implementation of the
approved stock distribution plan within three (3)

months from receipt by the corporate landowner of

the approval of the plan by PARC. In fact, based on
the said provision, the transfer of the shares of stock
in the names of the qualified FWBs should be
recorded in the stock and transfer books and must be
submitted to the SEC within sixty (60) days from
implementation. As stated:

Section 11. Implementation/Monitoring of Plan. - The

approved stock distribution plan shall be implemented
within three (3) months from receipt by the corporate
landowner-applicant of the approval thereof by the
PARC, and the transfer of the shares of stocks in the
names of the qualified beneficiaries shall be recorded
in stock and transfer books and submitted to the
Securities and Exchange Commission (SEC) within
sixty (60) days from the said implementation of the
stock distribution plan. (Emphasis supplied.)

It is evident from the foregoing provision that the

implementation, that is, the distribution of the shares
of stock to the FWBs, must be made within three (3)
months from receipt by HLI of the approval of the
stock distribution plan by PARC. While neither of the
clashing parties has made a compelling case of the
thrust of this provision, the Court is of the view and so
holds that the intent is to compel the corporate
landowner to complete, not merely initiate, the
transfer process of shares within that three-month
timeframe. Reinforcing this conclusion is the 60-day
stock transfer recording (with the SEC) requirement
reckoned from the implementation of the SDP.

To the Court, there is a purpose, which is at once

discernible as it is practical, for the three-month
threshold. Remove this timeline and the corporate
landowner can veritably evade compliance with
agrarian reform by simply deferring to absurd limits
the implementation of the stock distribution scheme.

The argument is urged that the thirty (30)-year

distribution program is justified by the fact that,
under Sec. 26 of RA 6657, payment by beneficiaries

of land distribution under CARP shall be made in thirty

(30) annual amortizations. To HLI, said section
provides a justifying dimension to its 30-year stock
distribution program.

21, l989 approving the HLIs SDP is nullified and

voided.

III.
HLIs reliance on Sec. 26 of RA 6657, quoted in part
below, is obviously misplaced as the said provision
clearly deals with land distribution.

SEC. 26. Payment by Beneficiaries. - Lands awarded

pursuant to this Act shall be paid for by the
beneficiaries to the LBP in thirty (30) annual
amortizations x x x.

Then, too, the ones obliged to pay the LBP under the
said provision are the beneficiaries. On the other
hand, in the instant case, aside from the fact that what
is involved is stock distribution, it is the corporate
landowner who has the obligation to distribute the
shares of stock among the FWBs.

Evidently, the land transfer beneficiaries are given

thirty (30) years within which to pay the cost of the
land thus awarded them to make it less cumbersome
for them to pay the government. To be sure, the
reason underpinning the 30-year accommodation
does not apply to corporate landowners in distributing
shares of stock to the qualified beneficiaries, as the
shares may be issued in a much shorter period of
time.

Taking into account the above discussion, the

revocation of the SDP by PARC should be upheld for
violating DAO 10. It bears stressing that under Sec.
49 of RA 6657, the PARC and the DAR have the
power to issue rules and regulations, substantive or
procedural. Being a product of such rule-making
power, DAO 10 has the force and effect of law and
must be duly complied with.[143] The PARC is,
therefore, correct in revoking the SDP. Consequently,
the PARC Resolution No. 89-12-2 dated November

We now resolve the petitions-in-intervention which, at

bottom, uniformly pray for the exclusion from the
coverage of the assailed PARC resolution those
portions of the converted land within Hacienda Luisita
which RCBC and LIPCO acquired by purchase.

Both contend that they are innocent purchasers for

value of portions of the converted farm land. Thus,
their plea for the exclusion of that portion from PARC
Resolution 2005-32-01, as implemented by a DARissued Notice of Coverage dated January 2, 2006,
which called for mandatory CARP acquisition
coverage of lands subject of the SDP.

To restate the antecedents, after the conversion of the

500 hectares of land in Hacienda Luisita, HLI
transferred the 300 hectares to Centennary, while
ceding the remaining 200-hectare portion to LRC.
Subsequently, LIPCO purchased the entire three
hundred (300) hectares of land from Centennary for
the purpose of developing the land into an industrial
complex.[144] Accordingly, the TCT in Centennarys
name was canceled and a new one issued in LIPCOs
name. Thereafter, said land was subdivided into two
(2) more parcels of land. Later on, LIPCO transferred
about 184 hectares to RCBC by way of dacion en
pago, by virtue of which TCTs in the name of RCBC
were subsequently issued.

Under Sec. 44 of PD 1529 or the Property

Registration Decree, every registered owner
receiving a certificate of title in pursuance of a decree
of registration and every subsequent purchaser of
registered land taking a certificate of title for value and
in good faith shall hold the same free from all
encumbrances except those noted on the certificate
and enumerated therein.[145]

It is settled doctrine that one who deals with property

registered under the Torrens system need not go
beyond the four corners of, but can rely on what
appears on, the title. He is charged with notice only of
such burdens and claims as are annotated on the
title. This principle admits of certain exceptions, such
as when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious
man to make such inquiry, or when the purchaser has
knowledge of a defect or the lack of title in his vendor
or of sufficient facts to induce a reasonably prudent
man to inquire into the status of the title of the
property in litigation.[146] A higher level of care and
diligence is of course expected from banks, their
business being impressed with public interest.[147]

Millena v. Court of Appeals describes a purchaser in

good faith in this wise:

x x x A purchaser in good faith is one who buys

property of another, without notice that some other
person has a right to, or interest in, such property at
the time of such purchase, or before he has notice of
the claim or interest of some other persons in the
property. Good faith, or the lack of it, is in the final
analysis a question of intention; but in ascertaining
the intention by which one is actuated on a given
occasion, we are necessarily controlled by the
evidence as to the conduct and outward acts by which
alone the inward motive may, with safety, be
determined. Truly, good faith is not a visible, tangible
fact that can be seen or touched, but rather a state or
condition of mind which can only be judged by actual
or fancied tokens or signs. Otherwise stated, good
faith x x x refers to the state of mind which is
manifested by the acts of the individual concerned.
[148] (Emphasis supplied.)

In fine, there are two (2) requirements before one may

be considered a purchaser in good faith, namely: (1)
that the purchaser buys the property of another
without notice that some other person has a right to or
interest in such property; and (2) that the purchaser

pays a full and fair price for the property at the time of
such purchase or before he or she has notice of the
claim of another.

It can rightfully be said that both LIPCO and RCBC

arebased on the above requirements and with
respect to the adverted transactions of the converted
land in questionpurchasers in good faith for value
entitled to the benefits arising from such status.

First, at the time LIPCO purchased the entire three

hundred (300) hectares of industrial land, there was
no notice of any supposed defect in the title of its
transferor, Centennary, or that any other person has a
right to or interest in such property. In fact, at the time
LIPCO acquired said parcels of land, only the
following annotations appeared on the TCT in the
name of Centennary: the Secretarys Certificate in
favor of Teresita Lopa, the Secretarys Certificate in
favor of Shintaro Murai, and the conversion of the
property from agricultural to industrial and residential
use.[149]

The same is true with respect to RCBC. At the time it

acquired portions of Hacienda Luisita, only the
following general annotations appeared on the TCTs
of LIPCO: the Deed of Restrictions, limiting its use
solely as an industrial estate; the Secretarys
Certificate in favor of Koji Komai and Kyosuke Hori;
and the Real Estate Mortgage in favor of RCBC to
guarantee the payment of PhP 300 million.

It cannot be claimed that RCBC and LIPCO acted in

bad faith in acquiring the lots that were previously
covered by the SDP. Good faith consists in the
possessors belief that the person from whom he
received it was the owner of the same and could
convey his title. Good faith requires a well-founded
belief that the person from whom title was received
was himself the owner of the land, with the right to
convey it. There is good faith where there is an
honest intention to abstain from taking any

unconscientious advantage from another.[150] It is

the opposite of fraud.

To be sure, intervenor RCBC and LIPCO knew that

the lots they bought were subjected to CARP
coverage by means of a stock distribution plan, as the
DAR conversion order was annotated at the back of
the titles of the lots they acquired. However, they are
of the honest belief that the subject lots were validly
converted to commercial or industrial purposes and
for which said lots were taken out of the CARP
coverage subject of PARC Resolution No. 89-12-2
and, hence, can be legally and validly acquired by
them. After all, Sec. 65 of RA 6657 explicitly allows
conversion and disposition of agricultural lands
previously covered by CARP land acquisition after
the lapse of five (5) years from its award when the
land ceases to be economically feasible and sound
for agricultural purposes or the locality has become
urbanized and the land will have a greater economic
value for residential, commercial or industrial
purposes. Moreover, DAR notified all the affected
parties, more particularly the FWBs, and gave them
the opportunity to comment or oppose the proposed
conversion. DAR, after going through the necessary
processes, granted the conversion of 500 hectares of
Hacienda Luisita pursuant to its primary jurisdiction
under Sec. 50 of RA 6657 to determine and
adjudicate agrarian reform matters and its original
exclusive jurisdiction over all matters involving the
implementation of agrarian reform. The DAR
conversion order became final and executory after
none of the FWBs interposed an appeal to the CA. In
this factual setting, RCBC and LIPCO purchased the
lots in question on their honest and well-founded
belief that the previous registered owners could
legally sell and convey the lots though these were
previously subject of CARP coverage. Ergo, RCBC
and LIPCO acted in good faith in acquiring the subject
lots.

And second, both LIPCO and RCBC purchased

portions of Hacienda Luisita for value. Undeniably,
LIPCO acquired 300 hectares of land from
Centennary for the amount of PhP 750 million
pursuant to a Deed of Sale dated July 30, 1998.[151]
On the other hand, in a Deed of Absolute Assignment

dated November 25, 2004, LIPCO conveyed portions

of Hacienda Luisita in favor of RCBC by way of
dacion en pago to pay for a loan of PhP
431,695,732.10.

As bona fide purchasers for value, both LIPCO and

RCBC have acquired rights which cannot just be
disregarded by DAR, PARC or even by this Court. As
held in Spouses Chua v. Soriano:

With the property in question having already passed

to the hands of purchasers in good faith, it is now of
no moment that some irregularity attended the
issuance of the SPA, consistent with our
pronouncement in Heirs of Spouses Benito Gavino
and Juana Euste v. Court of Appeals, to wit:

x x x the general rule that the direct result of a

previous void contract cannot be valid, is inapplicable
in this case as it will directly contravene the Torrens
system of registration. Where innocent third persons,
relying on the correctness of the certificate of title thus
issued, acquire rights over the property, the court
cannot disregard such rights and order the
cancellation of the certificate. The effect of such
outright cancellation will be to impair public
confidence in the certificate of title. The sanctity of the
Torrens system must be preserved; otherwise,
everyone dealing with the property registered under
the system will have to inquire in every instance as to
whether the title had been regularly or irregularly
issued, contrary to the evident purpose of the law.

Being purchasers in good faith, the Chuas already

acquired valid title to the property. A purchaser in
good faith holds an indefeasible title to the property
and he is entitled to the protection of the law.[152] x x
x (Emphasis supplied.)

To be sure, the practicalities of the situation have to a

point influenced Our disposition on the fate of RCBC
and LIPCO. After all, the Court, to borrow

from Association of Small Landowners in the

Philippines, Inc.,[153] is not a cloistered institution
removed from the realities on the ground. To note,
the approval and issuances of both the national and
local governments showing that certain portions of
Hacienda Luisita have effectively ceased, legally and
physically, to be agricultural and, therefore, no longer
CARPable are a matter of fact which cannot just be
ignored by the Court and the DAR. Among the
approving/endorsing issuances:[154]

(a) Resolution No. 392 dated 11 December 1996 of

the Sangguniang Bayan of Tarlac favorably endorsing
the 300-hectare industrial estate project of LIPCO;

(b) BOI Certificate of Registration No. 96-020 dated

20 December 1996 issued in accordance with the
Omnibus Investments Code of 1987;

(c) PEZA Certificate of Board Resolution No. 97-202

dated 27 June 1997, approving LIPCOs application
for a mixed ecozone and proclaiming the three
hundred (300) hectares of the industrial land as a
Special Economic Zone;

(d) Resolution No. 234 dated 08 August 1997 of the

Sangguniang Bayan of Tarlac, approving the Final
Development Permit for the Luisita Industrial Park II
Project;

(e) Development Permit dated 13 August 1997 for the

proposed Luisita Industrial Park II Project issued by
the Office of the Sangguniang Bayan of Tarlac;[155]

(f) DENR Environmental Compliance Certificate

dated 01 October 1997 issued for the proposed
project of building an industrial complex on three
hundred (300) hectares of industrial land;[156]

(g) Certificate of Registration No. 00794 dated 26

December 1997 issued by the HLURB on the project
of Luisita Industrial Park II with an area of three
million (3,000,000) square meters;[157]

(h) License to Sell No. 0076 dated 26 December 1997

issued by the HLURB authorizing the sale of lots in
the Luisita Industrial Park II;

(i) Proclamation No. 1207 dated 22 April 1998

entitled Declaring Certain Parcels of Private Land in
Barangay San Miguel, Municipality of Tarlac, Province
of Tarlac, as a Special Economic Zone pursuant to
Republic Act No. 7916, designating the Luisita
Industrial Park II consisting of three hundred hectares
(300 has.) of industrial land as a Special Economic
Zone; and

(j) Certificate of Registration No. EZ-98-05 dated 07

May 1998 issued by the PEZA, stating that pursuant
to Presidential Proclamation No. 1207 dated 22 April
1998 and Republic Act No. 7916, LIPCO has been
registered as an Ecozone Developer/Operator of
Luisita Industrial Park II located in San Miguel, Tarlac,
Tarlac.

While a mere reclassification of a covered agricultural

land or its inclusion in an economic zone does not
automatically allow the corporate or individual
landowner to change its use,[158] the reclassification
process is a prima facie indicium that the land has
ceased to be economically feasible and sound for
agricultural uses. And if only to stress, DAR
Conversion Order No. 030601074-764-(95) issued in
1996 by then DAR Secretary Garilao had effectively
converted 500 hectares of hacienda land from
agricultural to industrial/commercial use and
authorized their disposition.

In relying upon the above-mentioned approvals,

proclamation and conversion order, both RCBC and
LIPCO cannot be considered at fault for believing that

certain portions of Hacienda Luisita are

industrial/commercial lands and are, thus, outside the
ambit of CARP. The PARC, and consequently DAR,
gravely abused its discretion when it placed LIPCOs
and RCBCs property which once formed part of
Hacienda Luisita under the CARP compulsory
acquisition scheme via the assailed Notice of
Coverage.

As regards the 80.51-hectare land transferred to the

government for use as part of the SCTEX, this should
also be excluded from the compulsory agrarian reform
coverage considering that the transfer was consistent
with the governments exercise of the power of
eminent domain[159] and none of the parties actually
questioned the transfer.

While We affirm the revocation of the SDP on

Hacienda Luisita subject of PARC Resolution Nos.
2005-32-01 and 2006-34-01, the Court cannot close
its eyes to certain operative facts that had occurred
in the interim. Pertinently, the operative fact doctrine
realizes that, in declaring a law or executive
action null and void, or, by extension, no longer
without force and effect, undue harshness and
resulting unfairness must be avoided. This is as it
should realistically be, since rights might have
accrued in favor of natural or juridical persons and
obligations justly incurred in the meantime.[160] The
actual existence of a statute or executive act is, prior
to such a determination, an operative fact and may
have consequences which cannot justly be ignored;
the past cannot always be erased by a new judicial
declaration.[161]

The oft-cited De Agbayani v. Philippine National

Bank[162] discussed the effect to be given to a
legislative or executive act subsequently declared
invalid:

x x x It does not admit of doubt that prior to the

declaration of nullity such challenged legislative or
executive act must have been in force and had to be

complied with. This is so as until after the judiciary, in

an appropriate case, declares its invalidity, it is
entitled to obedience and respect. Parties may have
acted under it and may have changed their positions.
What could be more fitting than that in a subsequent
litigation regard be had to what has been done while
such legislative or executive act was in operation and
presumed to be valid in all respects. It is now
accepted as a doctrine that prior to its being nullified,
its existence as a fact must be reckoned with. This is
merely to reflect awareness that precisely because
the judiciary is the government organ which has the
final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed
before it can exercise the power of judicial review that
may lead to a declaration of nullity. It would be to
deprive the law of its quality of fairness and justice
then, if there be no recognition of what had transpired
prior to such adjudication.

In the language of an American Supreme Court

decision: The actual existence of a statute, prior to
such a determination of [unconstitutionality], is an
operative fact and may have consequences which
cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be
considered in various aspects,with respect to
particular relations, individual and corporate, and
particular conduct, private and official. x x x

Given the above perspective and considering that

more than two decades had passed since the PARCs
approval of the HLIs SDP, in conjunction with
numerous activities performed in good faith by HLI,
and the reliance by the FWBs on the legality and
validity of the PARC-approved SDP, perforce, certain
rights of the parties, more particularly the FWBs, have
to be respected pursuant to the application in a
general way of the operative fact doctrine.

A view, however, has been advanced that the

operative fact doctrine is of minimal or altogether
without relevance to the instant case as it applies only
in considering the effects of a declaration of

unconstitutionality of a statute, and not of a

declaration of nullity of a contract. This is incorrect, for
this view failed to consider is that it is NOT the SDOA
dated May 11, 1989 which was revoked in the instant
case. Rather, it is PARCs approval of the HLIs
Proposal for Stock Distribution under CARP which
embodied the SDP that was nullified.

A recall of the antecedent events would show that on

May 11, 1989, Tadeco, HLI, and the qualified FWBs
executed the SDOA. This agreement provided the
basis and mechanics of the SDP that was
subsequently proposed and submitted to DAR for
approval. It was only after its review that the PARC,
through then Sec. Defensor-Santiago, issued the
assailed Resolution No. 89-12-2 approving the SDP.
Considerably, it is not the SDOA which gave legal
force and effect to the stock distribution scheme but
instead, it is the approval of the SDP under the PARC
Resolution No. 89-12-2 that gave it its validity.

The above conclusion is bolstered by the fact that in

Sec. Pangandamans recommendation to the PARC
Excom, what he proposed is the recall/revocation of
PARC Resolution No. 89-12-2 approving HLIs SDP,
and not the revocation of the SDOA. Sec.
Pangandamans recommendation was favorably
endorsed by the PARC Validation Committee to the
PARC Excom, and these recommendations were
referred to in the assailed Resolution No. 2005-32-01.
Clearly, it is not the SDOA which was made the basis
for the implementation of the stock distribution
scheme.

That the operative fact doctrine squarely applies to

executive actsin this case, the approval by PARC of
the HLI proposal for stock distributionis well-settled
in our jurisprudence. In Chavez v. National Housing
Authority,[163] We held:

Petitioner postulates that the operative fact doctrine

is inapplicable to the present case because it is an
equitable doctrine which could not be used to

countenance an inequitable result that is contrary to

its proper office.

On the other hand, the petitioner Solicitor General

argues that the existence of the various agreements
implementing the SMDRP is an operative fact that can
no longer be disturbed or simply ignored, citing Rieta
v. People of the Philippines.

The argument of the Solicitor General is meritorious.

The operative fact doctrine is embodied in De

Agbayani v. Court of Appeals, wherein it is stated that
a legislative or executive act, prior to its being
declared as unconstitutional by the courts, is valid and
must be complied with, thus:

xxx

xxx

xxx

This doctrine was reiterated in the more recent case

of City of Makati v. Civil Service Commission, wherein
we ruled that:

Moreover, we certainly cannot nullify the City

Government's order of suspension, as we have no
reason to do so, much less retroactively apply such
nullification to deprive private respondent of a
compelling and valid reason for not filing the leave
application. For as we have held, a void act though in
law a mere scrap of paper nonetheless confers
legitimacy upon past acts or omissions done in
reliance thereof. Consequently, the existence of a
statute or executive order prior to its being adjudged
void is an operative fact to which legal consequences
are attached. It would indeed be ghastly unfair to
prevent private respondent from relying upon the
order of suspension in lieu of a formal leave
application. (Citations omitted; Emphasis supplied.)

The applicability of the operative fact doctrine to

executive acts was further explicated by this Court
in Rieta v. People,[164] thus:

Petitioner contends that his arrest by virtue of Arrest

Search and Seizure Order (ASSO) No. 4754 was
invalid, as the law upon which it was predicated
General Order No. 60, issued by then President
Ferdinand E. Marcos was subsequently declared
by the Court, in Taada v. Tuvera, 33 to have no force
and effect. Thus, he asserts, any evidence obtained
pursuant thereto is inadmissible in evidence.

We do not agree. In Taada, the Court addressed the

possible effects of its declaration of the invalidity of
various presidential issuances. Discussing therein
how such a declaration might affect acts done on a
presumption of their validity, the Court said:

. . .. In similar situations in the past this Court had

taken the pragmatic and realistic course set forth
in Chicot County Drainage District vs. Baxter Bankto
wit:

The courts below have proceeded on the theory that

the Act of Congress, having been found to be
unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no
duties, and hence affording no basis for the
challenged decree. . . . It is quite clear, however, that
such broad statements as to the effect of a
determination of unconstitutionality must be taken
with qualifications. The actual existence of a statute,
prior to [the determination of its invalidity], is an
operative fact and may have consequences which
cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be
considered in various aspects with respect to
particular conduct, private and official. Questions of
rights claimed to have become vested, of status, of
prior determinations deemed to have finality and
acted upon accordingly, of public policy in the light of

the nature both of the statute and of its previous

application, demand examination. These questions
are among the most difficult of those which have
engaged the attention of courts, state and federal,
and it is manifest from numerous decisions that an allinclusive statement of a principle of absolute
retroactive invalidity cannot be justified.

xxx

xxx

xxx

Similarly, the implementation/enforcement of

presidential decrees prior to their publication in the
Official Gazette is an operative fact which may have
consequences which cannot be justly ignored. The
past cannot always be erased by a new judicial
declaration . . . that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be
justified.

The Chicot doctrine cited in Taada advocates that,

prior to the nullification of a statute, there is an
imperative necessity of taking into account its actual
existence as an operative fact negating the
acceptance of a principle of absolute retroactive
invalidity. Whatever was done while the legislative or
the executive act was in operation should be duly
recognized and presumed to be valid in all
respects. The ASSO that was issued in 1979 under
General Order No. 60 long before our Decision
in Taada and the arrest of petitioner is an
operative fact that can no longer be disturbed or
simply ignored. (Citations omitted; Emphasis
supplied.)

To reiterate, although the assailed Resolution No.

2005-32-01 states that it revokes or recalls the SDP,
what it actually revoked or recalled was the PARCs
approval of the SDP embodied in Resolution No. 8912-2. Consequently, what was actually declared null
and void was an executive act, PARC Resolution No.
89-12-2,[165] and not a contract (SDOA). It is,
therefore, wrong to say that it was the SDOA which

was annulled in the instant case. Evidently, the

operative fact doctrine is applicable.

IV.

While the assailed PARC resolutions effectively

nullifying the Hacienda Luisita SDP are upheld, the
revocation must, by application of the operative fact
principle, give way to the right of the original 6,296
qualified FWBs to choose whether they want to
remain as HLI stockholders or not. The Court cannot
turn a blind eye to the fact that in 1989, 93% of the
FWBs agreed to the SDOA (or the MOA), which
became the basis of the SDP approved by PARC per
its Resolution No. 89-12-2 dated November 21, 1989.
From 1989 to 2005, the FWBs were said to have
received from HLI salaries and cash benefits, hospital
and medical benefits, 240-square meter homelots, 3%
of the gross produce from agricultural lands, and 3%
of the proceeds of the sale of the 500-hectare
converted land and the 80.51-hectare lot sold to
SCTEX. HLI shares totaling 118,391,976.85 were
distributed as of April 22, 2005.[166] On August 6,
20l0, HLI and private respondents submitted a
Compromise Agreement, in which HLI gave the FWBs
the option of acquiring a piece of agricultural land or
remain as HLI stockholders, and as a matter of fact,
most FWBs indicated their choice of remaining as
stockholders. These facts and circumstances tend to
indicate that some, if not all, of the FWBs may
actually desire to continue as HLI shareholders. A
matter best left to their own discretion.

With respect to the other FWBs who were not listed

as qualified beneficiaries as of November 21, 1989
when the SDP was approved, they are not accorded
the right to acquire land but shall, however, continue
as HLI stockholders. All the benefits and
homelots[167] received by the 10,502 FWBs (6,296
original FWBs and 4,206 non-qualified FWBs) listed
as HLI stockholders as of August 2, 2010 shall be
respected with no obligation to refund or return them
since the benefits (except the homelots) were
received by the FWBs as farmhands in the
agricultural enterprise of HLI and other fringe benefits

were granted to them pursuant to the existing

collective bargaining agreement with Tadeco. If the
number of HLI shares in the names of the original
FWBs who opt to remain as HLI stockholders falls
below the guaranteed allocation of 18,804.32 HLI
shares per FWB, the HLI shall assign additional
shares to said FWBs to complete said minimum
number of shares at no cost to said FWBs.

With regard to the homelots already awarded or

earmarked, the FWBs are not obliged to return the
same to HLI or pay for its value since this is a benefit
granted under the SDP. The homelots do not form
part of the 4,915.75 hectares covered by the SDP but
were taken from the 120.9234 hectare residential lot
owned by Tadeco. Those who did not receive the
homelots as of the revocation of the SDP on
December 22, 2005 when PARC Resolution No.
2005-32-01 was issued, will no longer be entitled to
homelots. Thus, in the determination of the ultimate
agricultural land that will be subjected to land
distribution, the aggregate area of the homelots will
no longer be deducted.

There is a claim that, since the sale and transfer of

the 500 hectares of land subject of the August 14,
1996 Conversion Order and the 80.51-hectare
SCTEX lot came after compulsory coverage has
taken place, the FWBs should have their
corresponding share of the lands value. There is
merit in the claim. Since the SDP approved by PARC
Resolution No. 89-12-2 has been nullified, then all the
lands subject of the SDP will automatically be subject
of compulsory coverage under Sec. 31 of RA 6657.
Since the Court excluded the 500-hectare lot subject
of the August 14, 1996 Conversion Order and the
80.51-hectare SCTEX lot acquired by the government
from the area covered by SDP, then HLI and its
subsidiary, Centennary, shall be liable to the FWBs for
the price received for said lots. HLI shall be liable for
the value received for the sale of the 200-hectare land
to LRC in the amount of PhP 500,000,000 and the
equivalent value of the 12,000,000 shares of its
subsidiary, Centennary, for the 300-hectare lot sold to
LIPCO for the consideration of PhP 750,000,000.
Likewise, HLI shall be liable for PhP 80,511,500 as

consideration for the sale of the 80.51-hectare

SCTEX lot.

We, however, note that HLI has allegedly paid 3% of

the proceeds of the sale of the 500-hectare land and
80.51-hectare SCTEX lot to the FWBs. We also take
into account the payment of taxes and expenses
relating to the transfer of the land and HLIs statement
that most, if not all, of the proceeds were used for
legitimate corporate purposes. In order to determine
once and for all whether or not all the proceeds were
properly utilized by HLI and its subsidiary,
Centennary, DAR will engage the services of a
reputable accounting firm to be approved by the
parties to audit the books of HLI to determine if the
proceeds of the sale of the 500-hectare land and the
80.51-hectare SCTEX lot were actually used for
legitimate corporate purposes, titling expenses and in
compliance with the August 14, 1996 Conversion
Order. The cost of the audit will be shouldered by
HLI. If after such audit, it is determined that there
remains a balance from the proceeds of the sale, then
the balance shall be distributed to the qualified FWBs.

A view has been advanced that HLI must pay the

FWBs yearly rent for use of the land from 1989. We
disagree. It should not be forgotten that the FWBs
are also stockholders of HLI, and the benefits
acquired by the corporation from its possession and
use of the land ultimately redounded to the FWBs
benefit based on its business operations in the form of
salaries, and other fringe benefits under the CBA. To
still require HLI to pay rent to the FWBs will result in
double compensation.

For sure, HLI will still exist as a corporation even after

the revocation of the SDP although it will no longer be
operating under the SDP, but pursuant to the
Corporation Code as a private stock corporation. The
non-agricultural assets amounting to PhP
393,924,220 shall remain with HLI, while the
agricultural lands valued at PhP 196,630,000 with an
original area of 4,915.75 hectares shall be turned over
to DAR for distribution to the FWBs. To be deducted
from said area are the 500-hectare lot subject of the

August 14, 1996 Conversion Order, the 80.51-hectare

SCTEX lot, and the total area of 6,886.5 square
meters of individual lots that should have been
distributed to FWBs by DAR had they not opted to
stay in HLI.

HLI shall be paid just compensation for the remaining

agricultural land that will be transferred to DAR for
land distribution to the FWBs. We find that the date of
the taking is November 21, 1989, when PARC
approved HLIs SDP per PARC Resolution No. 89-122. DAR shall coordinate with LBP for the
determination of just compensation. We cannot use
May 11, 1989 when the SDOA was executed, since it
was the SDP, not the SDOA, that was approved by
PARC.

The instant petition is treated pro hac vice in view of

the peculiar facts and circumstances of the case.

WHEREFORE, the instant petition is DENIED. PARC

Resolution No. 2005-32-01 dated December 22, 2005
and Resolution No. 2006-34-01 dated May 3, 2006,
placing the lands subject of HLIs SDP under
compulsory coverage on mandated land acquisition
scheme of the CARP, are hereby AFFIRMED with
the MODIFICATION that the original 6,296 qualified
FWBs shall have the option to remain as stockholders
of HLI. DAR shall immediately schedule meetings
with the said 6,296 FWBs and explain to them the
effects, consequences and legal or practical
implications of their choice, after which the FWBs will
be asked to manifest, in secret voting, their choices in
the ballot, signing their signatures or placing their
thumbmarks, as the case may be, over their printed
names.

Of the 6,296 FWBs, he or she who wishes to continue

as an HLI stockholder is entitled to 18,804.32 HLI
shares, and, in case the HLI shares already given to
him or her is less than 18,804.32 shares, the HLI is
ordered to issue or distribute additional shares to
complete said prescribed number of shares at no cost

to the FWB within thirty (30) days from finality of this

Decision. Other FWBs who do not belong to the
original 6,296 qualified beneficiaries are not entitled to
land distribution and shall remain as HLI
shareholders. All salaries, benefits, 3% production
share and 3% share in the proceeds of the sale of the
500-hectare converted land and the 80.51-hectare
SCTEX lot and homelots already received by the
10,502 FWBs, composed of 6,296 original FWBs and
4,206 non-qualified FWBs, shall be respected with no
obligation to refund or return them.

Within thirty (30) days after determining who from

among the original FWBs will stay as stockholders,
DAR shall segregate from the HLI agricultural land
with an area of 4,915.75 hectares subject of PARCs
SDP-approving Resolution No. 89-12-2 the following:
(a) the 500-hectare lot subject of the August 14, l996
Conversion Order; (b) the 80.51-hectare lot sold to, or
acquired by, the government as part of the SCTEX
complex; and (c) the aggregate area of 6,886.5
square meters of individual lots that each FWB is
entitled to under the CARP had he or she not opted to
stay in HLI as a stockholder. After the segregation
process, as indicated, is done, the remaining area
shall be turned over to DAR for immediate land
distribution to the original qualified FWBs who opted
not to remain as HLI stockholders.

The aforementioned area composed of 6,886.5square meter lots allotted to the FWBs who stayed
with the corporation shall form part of the HLI assets.

construction of the SCTEX road network. From the

total amount of PhP 1,330,511,500 (PhP 500,000,000
+ PhP 750,000,000 + PhP 80,511,500 = PhP
1,330,511,500) shall be deducted the 3% of the total
gross sales from the production of the agricultural
land and the 3% of the proceeds of said transfers that
were paid to the FWBs, the taxes and expenses
relating to the transfer of titles to the transferees, and
the expenditures incurred by HLI and Centennary
Holdings, Inc. for legitimate corporate purposes. For
this purpose, DAR is ordered to engage the services
of a reputable accounting firm approved by the parties
to audit the books of HLI and Centennary Holdings,
Inc. to determine if the PhP 1,330,511,500 proceeds
of the sale of the three (3) aforementioned lots were
used or spent for legitimate corporate purposes. Any
unspent or unused balance as determined by the
audit shall be distributed to the 6,296 original FWBs.

HLI is entitled to just compensation for the agricultural

land that will be transferred to DAR to be reckoned
from November 21, 1989 per PARC Resolution No.
89-12-2. DAR and LBP are ordered to determine the
compensation due to HLI.

DAR shall submit a compliance report after six (6)

months from finality of this judgment. It shall also
submit, after submission of the compliance report,
quarterly reports on the execution of this judgment to
be submitted within the first 15 days at the end of
each quarter, until fully implemented.

The temporary restraining order is lifted.

HLI is directed to pay the 6,296 FWBs the
consideration of PhP 500,000,000 received by it from
Luisita Realty, Inc. for the sale to the latter of 200
hectares out of the 500 hectares covered by the
August 14, 1996 Conversion Order, the consideration
of PhP 750,000,000 received by its owned subsidiary,
Centennary Holdings, Inc. for the sale of the
remaining 300 hectares of the aforementioned 500hectare lot to Luisita Industrial Park Corporation, and
the price of PhP 80,511,500 paid by the government
through the Bases Conversion Development Authority
for the sale of the 80.51-hectare lot used for the

BAYAN vs. EXECUTIVE SECRETARY RONALDO

ZAMORA
BUENA, J.:

Confronting the Court for resolution in the instant

consolidated petitions for certiorari and prohibition are
issues relating to, and borne by, an agreement forged

in the turn of the last century between the Republic of

the Philippines and the United States of America -the
Visiting Forces Agreement.

The antecedents unfold.

On March 14, 1947, the Philippines and the United

States of America forged a Military Bases Agreement
which formalized, among others, the use of
installations in the Philippine territory by United States
military personnel. To further strengthen their defense
and security relationship, the Philippines and the
United States entered into a Mutual Defense Treaty
on August 30, 1951. Under the treaty, the parties
agreed to respond to any external armed attack on
their territory, armed forces, public vessels, and
aircraft.[1]

In view of the impending expiration of the RP-US

Military Bases Agreement in 1991, the Philippines and
the United States negotiated for a possible extension
of the military bases agreement. On September 16,
1991, the Philippine Senate rejected the proposed
RP-US Treaty of Friendship, Cooperation and
Security which, in effect, would have extended the
presence of US military bases in the Philippines.[2]
With the expiration of the RP-US Military Bases
Agreement, the periodic military exercises conducted
between the two countries were held in abeyance.
Notwithstanding, the defense and security relationship
between the Philippines and the United States of
America continued pursuant to the Mutual Defense
Treaty.

On July 18, 1997, the United States panel, headed by

US Defense Deputy Assistant Secretary for Asia
Pacific Kurt Campbell, met with the Philippine panel,
headed by Foreign Affairs Undersecretary Rodolfo
Severino Jr., to exchange notes on "the
complementing strategic interests of the United States
and the Philippines in the Asia-Pacific region." Both
sides discussed, among other things, the possible
elements of the Visiting Forces Agreement (VFA for

brevity). Negotiations by both panels on the VFA led

to a consolidated draft text, which in turn resulted to a
final series of conferences and negotiations[3] that
culminated in Manila on January 12 and 13, 1998.
Thereafter, then President Fidel V. Ramos approved
the VFA, which was respectively signed by public
respondent Secretary Siazon and Unites States
Ambassador Thomas Hubbard on February 10,
1998.

On October 5, 1998, President Joseph E. Estrada,

through respondent Secretary of Foreign Affairs,
ratified the VFA.[4]

Secretary Siazon and United States Ambassador

Hubbard.

The VFA, which consists of a Preamble and nine (9)

Articles, provides for the mechanism for regulating the
circumstances and conditions under which US Armed
Forces and defense personnel may be present in the
Philippines, and is quoted in its full text, hereunder:

Respect for Law

"It is the duty of the United States personnel to

respect the laws of the Republic of the Philippines
and to abstain from any activity inconsistent with the
spirit of this agreement, and, in particular, from any
political activity in the Philippines. The Government of
the United States shall take all measures within its
authority to ensure that this is done.

"Article I
Definitions

"Article III
Entry and Departure

On October 6, 1998, the President, acting through

respondent Executive Secretary Ronaldo Zamora,
officially transmitted to the Senate of the Philippines,
[5] the Instrument of Ratification, the letter of the
President[6] and the VFA, for concurrence pursuant to
Section 21, Article VII of the 1987 Constitution. The
Senate, in turn, referred the VFA to its Committee on
Foreign Relations, chaired by Senator Blas F. Ople,
and its Committee on National Defense and Security,
chaired by Senator Rodolfo G. Biazon, for their joint
consideration and recommendation. Thereafter, joint
public hearings were held by the two Committees.[7]

On May 3, 1999, the Committees submitted Proposed

Senate Resolution No. 443[8] recommending the
concurrence of the Senate to the VFA and the
creation of a Legislative Oversight Committee to
oversee its implementation. Debates then ensued.

On May 27, 1999, Proposed Senate Resolution No.

443 was approved by the Senate, by a two-thirds
(2/3) vote[9] of its members. Senate Resolution No.
443 was then re-numbered as Senate Resolution No.
18.[10]

On June 1, 1999, the VFA officially entered into force

after an Exchange of Notes between respondent

"As used in this Agreement, 'United States personnel'

means United States military and civilian personnel
temporarily in the Philippines in connection with
activities approved by the Philippine Government.

"Within this definition:

"1. The term 'military personnel' refers to military

members of the United States Army, Navy, Marine
Corps, Air Force, and Coast Guard.

"2. The term 'civilian personnel' refers to individuals

who are neither nationals of, nor ordinary residents in
the Philippines and who are employed by the United
States armed forces or who are accompanying the
United States armed forces, such as employees of
the American Red Cross and the United Services
Organization.

"Article II

"1. The Government of the Philippines shall facilitate

the admission of United States personnel and their
departure from the Philippines in connection with
activities covered by this agreement.

"2. United States military personnel shall be exempt

from passport and visa regulations upon entering and
departing the Philippines.

"3. The following documents only, which shall be

presented on demand, shall be required in respect of
United States military personnel who enter the
Philippines:

"(a) personal identity card issued by the appropriate

United States authority showing full name, date of
birth, rank or grade and service number (if any),
branch of service and photograph;

"(b) individual or collective document issued by the

appropriate United States authority, authorizing the
travel or visit and identifying the individual or group as
United States military personnel; and

"Article V
"(c) the commanding officer of a military aircraft or
vessel shall present a declaration of health, and when
required by the cognizant representative of the
Government of the Philippines, shall conduct a
quarantine inspection and will certify that the aircraft
or vessel is free from quarantinable diseases. Any
quarantine inspection of United States aircraft or
United States vessels or cargoes thereon shall be
conducted by the United States commanding officer in
accordance with the international health regulations
as promulgated by the World Health Organization,
and mutually agreed procedures.

"4. United States civilian personnel shall be exempt

from visa requirements but shall present, upon
demand, valid passports upon entry and departure of
the Philippines.

"5. If the Government of the Philippines has requested

the removal of any United States personnel from its
territory, the United States authorities shall be
responsible for receiving the person concerned within
its own territory or otherwise disposing of said person
outside of the Philippines.

"Article IV
Driving and Vehicle Registration

"1. Philippine authorities shall accept as valid, without

test or fee, a driving permit or license issued by the
appropriate United States authority to United States
personnel for the operation of military or official
vehicles.

"2. Vehicles owned by the Government of the United

States need not be registered, but shall have
appropriate markings.

Criminal Jurisdiction

"3. In cases where the right to exercise jurisdiction is

concurrent, the following rules shall apply:

"1. Subject to the provisions of this article:

(a) Philippine authorities shall have jurisdiction over

United States personnel with respect to offenses
committed within the Philippines and punishable
under the law of the Philippines.

(b) United States military authorities shall have the

right to exercise within the Philippines all criminal and
disciplinary jurisdiction conferred on them by the
military law of the United States over United States
personnel in the Philippines.

"2. (a) Philippine authorities exercise exclusive

jurisdiction over United States personnel with respect
to offenses, including offenses relating to the security
of the Philippines, punishable under the laws of the
Philippines, but not under the laws of the United
States.

(b) United States authorities exercise exclusive

jurisdiction over United States personnel with respect
to offenses, including offenses relating to the security
of the United States, punishable under the laws of the
United States, but not under the laws of the
Philippines.

(c) For the purposes of this paragraph and paragraph

3 of this article, an offense relating to security means:

(1) treason;
(2) sabotage, espionage or violation of any law
relating to national defense.

(a) Philippine authorities shall have the primary right

to exercise jurisdiction over all offenses committed by
United States personnel, except in cases provided for
in paragraphs 1(b), 2 (b), and 3 (b) of this Article.

(b) United States military authorities shall have the

primary right to exercise jurisdiction over United
States personnel subject to the military law of the
United States in relation to.

(1) offenses solely against the property or security of

the United States or offenses solely against the
property or person of United States personnel; and

(2) offenses arising out of any act or omission done in

performance of official duty.

(c) The authorities of either government may request

the authorities of the other government to waive their
primary right to exercise jurisdiction in a particular
case.

(d) Recognizing the responsibility of the United States

military authorities to maintain good order and
discipline among their forces, Philippine authorities
will, upon request by the United States, waive their
primary right to exercise jurisdiction except in cases of
particular importance to the Philippines. If the
Government of the Philippines determines that the
case is of particular importance, it shall communicate
such determination to the United States authorities
within twenty (20) days after the Philippine authorities
receive the United States request.

(e) When the United States military commander

determines that an offense charged by authorities of
the Philippines against United states personnel arises
out of an act or omission done in the performance of
official duty, the commander will issue a certificate
setting forth such determination. This certificate will be
transmitted to the appropriate authorities of the
Philippines and will constitute sufficient proof of
performance of official duty for the purposes of
paragraph 3(b)(2) of this Article. In those cases where
the Government of the Philippines believes the
circumstances of the case require a review of the duty
certificate, United States military authorities and
Philippine authorities shall consult immediately.
Philippine authorities at the highest levels may also
present any information bearing on its validity. United
States military authorities shall take full account of the
Philippine position. Where appropriate, United States
military authorities will take disciplinary or other action
against offenders in official duty cases, and notify the
Government of the Philippines of the actions taken.

(f) If the government having the primary right does not

exercise jurisdiction, it shall notify the authorities of
the other government as soon as possible.

(g) The authorities of the Philippines and the United

States shall notify each other of the disposition of all
cases in which both the authorities of the Philippines
and the United States have the right to exercise
jurisdiction.

"4. Within the scope of their legal competence, the

authorities of the Philippines and United States shall
assist each other in the arrest of United States
personnel in the Philippines and in handling them
over to authorities who are to exercise jurisdiction in
accordance with the provisions of this article.

"5. United States military authorities shall promptly

notify Philippine authorities of the arrest or detention
of United States personnel who are subject of
Philippine primary or exclusive jurisdiction. Philippine

authorities shall promptly notify United States military

authorities of the arrest or detention of any United
States personnel.

"6. The custody of any United States personnel over

whom the Philippines is to exercise jurisdiction shall
immediately reside with United States military
authorities, if they so request, from the commission of
the offense until completion of all judicial proceedings.
United States military authorities shall, upon formal
notification by the Philippine authorities and without
delay, make such personnel available to those
authorities in time for any investigative or judicial
proceedings relating to the offense with which the
person has been charged in extraordinary cases, the
Philippine Government shall present its position to the
United States Government regarding custody, which
the United States Government shall take into full
account. In the event Philippine judicial proceedings
are not completed within one year, the United States
shall be relieved of any obligations under this
paragraph. The one-year period will not include the
time necessary to appeal. Also, the one-year period
will not include any time during which scheduled trial
procedures are delayed because United States
authorities, after timely notification by Philippine
authorities to arrange for the presence of the
accused, fail to do so.

"7. Within the scope of their legal authority, United

States and Philippine authorities shall assist each
other in the carrying out of all necessary investigation
into offenses and shall cooperate in providing for the
attendance of witnesses and in the collection and
production of evidence, including seizure and, in
proper cases, the delivery of objects connected with
an offense.

"8. When United States personnel have been tried in

accordance with the provisions of this Article and
have been acquitted or have been convicted and are
serving, or have served their sentence, or have had
their sentence remitted or suspended, or have been
pardoned, they may not be tried again for the same
offense in the Philippines. Nothing in this paragraph,

however, shall prevent United States military

authorities from trying United States personnel for any
violation of rules of discipline arising from the act or
omission which constituted an offense for which they
were tried by Philippine authorities.

"9. When United States personnel are detained, taken

into custody, or prosecuted by Philippine authorities,
they shall be accorded all procedural safeguards
established by the law of the Philippines. At the
minimum, United States personnel shall be entitled:

(a) To a prompt and speedy trial;

(b) To be informed in advance of trial of the specific

charge or charges made against them and to have
reasonable time to prepare a defense;

(c) To be confronted with witnesses against them and

to cross examine such witnesses;

(d) To present evidence in their defense and to have

compulsory process for obtaining witnesses;

(e) To have free and assisted legal representation of

their own choice on the same basis as nationals of
the Philippines;

(f) To have the service of a competent interpreter;

and

(g) To communicate promptly with and to be visited

regularly by United States authorities, and to have
such authorities present at all judicial proceedings.
These proceedings shall be public unless the court, in

accordance with Philippine laws, excludes persons

who have no role in the proceedings.

"10. The confinement or detention by Philippine

authorities of United States personnel shall be carried
out in facilities agreed on by appropriate Philippine
and United States authorities. United States
Personnel serving sentences in the Philippines shall
have the right to visits and material assistance.

"11. United States personnel shall be subject to trial

only in Philippine courts of ordinary jurisdiction, and
shall not be subject to the jurisdiction of Philippine
military or religious courts.

"Article VI
Claims

"1. Except for contractual arrangements, including

United States foreign military sales letters of offer and
acceptance and leases of military equipment, both
governments waive any and all claims against each
other for damage, loss or destruction to property of
each other's armed forces or for death or injury to
their military and civilian personnel arising from
activities to which this agreement applies.

"2. For claims against the United States, other than

contractual claims and those to which paragraph 1
applies, the United States Government, in accordance
with United States law regarding foreign claims, will
pay just and reasonable compensation in settlement
of meritorious claims for damage, loss, personal injury
or death, caused by acts or omissions of United
States personnel, or otherwise incident to the noncombat activities of the United States forces.

Importation and Exportation

"1. United States Government equipment, materials,

supplies, and other property imported into or acquired
in the Philippines by or on behalf of the United States
armed forces in connection with activities to which this
agreement applies, shall be free of all Philippine
duties, taxes and other similar charges. Title to such
property shall remain with the United States, which
may remove such property from the Philippines at any
time, free from export duties, taxes, and other similar
charges. The exemptions provided in this paragraph
shall also extend to any duty, tax, or other similar
charges which would otherwise be assessed upon
such property after importation into, or acquisition
within, the Philippines. Such property may be
removed from the Philippines, or disposed of therein,
provided that disposition of such property in the
Philippines to persons or entities not entitled to
exemption from applicable taxes and duties shall be
subject to payment of such taxes, and duties and prior
approval of the Philippine Government.

"2. Reasonable quantities of personal baggage,

personal effects, and other property for the personal
use of United States personnel may be imported into
and used in the Philippines free of all duties, taxes
and other similar charges during the period of their
temporary stay in the Philippines. Transfers to
persons or entities in the Philippines not entitled to
import privileges may only be made upon prior
approval of the appropriate Philippine authorities
including payment by the recipient of applicable duties
and taxes imposed in accordance with the laws of the
Philippines. The exportation of such property and of
property acquired in the Philippines by United States
personnel shall be free of all Philippine duties, taxes,
and other similar charges.

"2. Vessels operated by or for the United States

armed forces may enter the Philippines upon approval
of the Government of the Philippines. The movement
of vessels shall be in accordance with international
custom and practice governing such vessels, and
such agreed implementing arrangements as
necessary.

"3. Vehicles, vessels, and aircraft operated by or for

the United States armed forces shall not be subject to
the payment of landing or port fees, navigation or over
flight charges, or tolls or other use charges, including
light and harbor dues, while in the Philippines. Aircraft
operated by or for the United States armed forces
shall observe local air traffic control regulations while
in the Philippines. Vessels owned or operated by the
United States solely on United States Government
non-commercial service shall not be subject to
compulsory pilotage at Philippine ports.

"Article IX
Duration and Termination

"This agreement shall enter into force on the date on

which the parties have notified each other in writing
through the diplomatic channel that they have
completed their constitutional requirements for entry
into force. This agreement shall remain in force until
the expiration of 180 days from the date on which
either party gives the other party notice in writing that
it desires to terminate the agreement."

"Article VIII
Movement of Vessels and Aircraft

"Article VII

"1. Aircraft operated by or for the United States armed

forces may enter the Philippines upon approval of the
Government of the Philippines in accordance with
procedures stipulated in implementing arrangements.

Via these consolidated[11] petitions for certiorari and

prohibition, petitioners - as legislators, nongovernmental organizations, citizens and taxpayers assail the constitutionality of the VFA and impute to

herein respondents grave abuse of discretion in

ratifying the agreement.

b. the Prohibition against nuclear weapons under

Article II, Section 8?

We have simplified the issues raised by the

petitioners into the following:
I

c. Section 28 (4), Article VI of the Constitution

granting the exemption from taxes and duties for the
equipment, materials supplies and other properties
imported into or acquired in the Philippines by, or on
behalf, of the US Armed Forces?

Do petitioners have legal standing as concerned

citizens, taxpayers, or legislators to question the
constitutionality of the VFA?

LOCUS STANDI

II
Is the VFA governed by the provisions of Section 21,
Article VII or of Section 25, Article XVIII of the
Constitution?

III

At the outset, respondents challenge petitioner's

standing to sue, on the ground that the latter have not
shown any interest in the case, and that petitioners
failed to substantiate that they have sustained, or will
sustain direct injury as a result of the operation of the
VFA.[12] Petitioners, on the other hand, counter that
the validity or invalidity of the VFA is a matter of
transcendental importance which justifies their
standing.[13]

disbursement of public funds derived from taxation.

[16] Thus, in Bugnay Const. & Development Corp. vs.
Laron[17], we held:

"x x x it is exigent that the taxpayer-plaintiff sufficiently

show that he would be benefited or injured by the
judgment or entitled to the avails of the suit as a real
party in interest. Before he can invoke the power of
judicial review, he must specifically prove that he has
sufficient interest in preventing the illegal expenditure
of money raised by taxation and that he will sustain a
direct injury as a result of the enforcement of the
questioned statute or contract. It is not sufficient that
he has merely a general interest common to all
members of the public."

Clearly, inasmuch as no public funds raised by

taxation are involved in this case, and in the absence
of any allegation by petitioners that public funds are
being misspent or illegally expended, petitioners, as
taxpayers, have no legal standing to assail the legality
of the VFA.

Does the VFA constitute an abdication of Philippine

sovereignty?

a. Are Philippine courts deprived of their jurisdiction to

hear and try offenses committed by US military
personnel?
b. Is the Supreme Court deprived of its jurisdiction
over offenses punishable by reclusion perpetua or
higher

IV
Does the VFA violate:

a. the equal protection clause under Section 1, Article

III of the Constitution?

A party bringing a suit challenging the constitutionality

of a law, act, or statute must show "not only that the
law is invalid, but also that he has sustained or in is in
immediate, or imminent danger of sustaining some
direct injury as a result of its enforcement, and not
merely that he suffers thereby in some indefinite way."
He must show that he has been, or is about to be,
denied some right or privilege to which he is lawfully
entitled, or that he is about to be subjected to some
burdens or penalties by reason of the statute
complained of.[14]

In the case before us, petitioners failed to show, to the

satisfaction of this Court, that they have sustained, or
are in danger of sustaining any direct injury as a result
of the enforcement of the VFA. As taxpayers,
petitioners have not established that the VFA involves
the exercise by Congress of its taxing or spending
powers.[15] On this point, it bears stressing that a
taxpayer's suit refers to a case where the act
complained of directly involves the illegal

Similarly, Representatives Wigberto Taada, Agapito

Aquino and Joker Arroyo, as petitioners-legislators, do
not possess the requisite locus standi to maintain the
present suit. While this Court, in Phil. Constitution
Association vs. Hon. Salvador Enriquez,[18]
sustained the legal standing of a member of the
Senate and the House of Representatives to question
the validity of a presidential veto or a condition
imposed on an item in an appropriation bull, we
cannot, at this instance, similarly uphold petitioners'
standing as members of Congress, in the absence of
a clear showing of any direct injury to their person or
to the institution to which they belong.

Beyond this, the allegations of impairment of

legislative power, such as the delegation of the power
of Congress to grant tax exemptions, are more
apparent than real. While it may be true that
petitioners pointed to provisions of the VFA which
allegedly impair their legislative powers, petitioners

failed however to sufficiently show that they have in

fact suffered direct injury.

In the same vein, petitioner Integrated Bar of the

Philippines (IBP) is stripped of standing in these
cases. As aptly observed by the Solicitor General, the
IBP lacks the legal capacity to bring this suit in the
absence of a board resolution from its Board of
Governors authorizing its National President to
commence the present action.[19]

Notwithstanding, in view of the paramount importance

and the constitutional significance of the issues raised
in the petitions, this Court, in the exercise of its sound
discretion, brushes aside the procedural barrier and
takes cognizance of the petitions, as we have done in
the early Emergency Powers Cases,[20] where we
had occasion to rule:

"x x x ordinary citizens and taxpayers were allowed to

question the constitutionality of several executive
orders issued by President Quirino although they
were involving only an indirect and general interest
shared in common with the public. The Court
dismissed the objection that they were not proper
parties and ruled that 'transcendental importance to
the public of these cases demands that they be
settled promptly and definitely, brushing aside, if we
must, technicalities of procedure.' We have since then
applied the exception in many other cases.
(Association of Small Landowners in the Philippines,
Inc. v. Sec. of Agrarian Reform, 175 SCRA 343)."
(Underscoring Supplied)

This principle was reiterated in the subsequent cases

of Gonzales vs. COMELEC,[21] Daza vs. Singson,
[22] and Basco vs. Phil. Amusement and Gaming
Corporation,[23] where we emphatically held:

"Considering however the importance to the public of

the case at bar, and in keeping with the Court's duty,
under the 1987 Constitution, to determine whether or

not the other branches of the government have kept

themselves within the limits of the Constitution and
the laws and that they have not abused the discretion
given to them, the Court has brushed aside
technicalities of procedure and has taken cognizance
of this petition. x x x"

"No treaty or international agreement shall be valid

and effective unless concurred in by at least twothirds of all the Members of the Senate."

Section 25, Article XVIII, provides:

Again, in the more recent case of Kilosbayan vs.
Guingona, Jr.,[24] this Court ruled that in cases of
transcendental importance, the Court may relax the
standing requirements and allow a suit to prosper
even where there is no direct injury to the party
claiming the right of judicial review.

Although courts generally avoid having to decide a

constitutional question based on the doctrine of
separation of powers, which enjoins upon the
departments of the government a becoming respect
for each others' acts,[25] this Court nevertheless
resolves to take cognizance of the instant petitions.

APPLICABLE CONSTITUTIONAL PROVISION

One focal point of inquiry in this controversy is the

determination of which provision of the Constitution
applies, with regard to the exercise by the senate of
its constitutional power to concur with the VFA.
Petitioners argue that Section 25, Article XVIII is
applicable considering that the VFA has for its subject
the presence of foreign military troops in the
Philippines. Respondents, on the contrary, maintain
that Section 21, Article VII should apply inasmuch as
the VFA is not a basing arrangement but an
agreement which involves merely the temporary visits
of United States personnel engaged in joint military
exercises.

The 1987 Philippine Constitution contains two

provisions requiring the concurrence of the Senate on
treaties or international agreements. Section 21,
Article VII, which herein respondents invoke, reads:

"After the expiration in 1991 of the Agreement

between the Republic of the Philippines and the
United States of America concerning Military Bases,
foreign military bases, troops, or facilities shall not be
allowed in the Philippines except under a treaty duly
concurred in by the senate and, when the Congress
so requires, ratified by a majority of the votes cast by
the people in a national referendum held for that
purpose, and recognized as a treaty by the other
contracting State."

Section 21, Article VII deals with treatise or

international agreements in general, in which case,
the concurrence of at least two-thirds (2/3) of all the
Members of the Senate is required to make the
subject treaty, or international agreement, valid and
binding on the part of the Philippines. This provision
lays down the general rule on treatise or international
agreements and applies to any form of treaty with a
wide variety of subject matter, such as, but not limited
to, extradition or tax treatise or those economic in
nature. All treaties or international agreements
entered into by the Philippines, regardless of subject
matter, coverage, or particular designation or
appellation, requires the concurrence of the Senate to
be valid and effective.

In contrast, Section 25, Article XVIII is a special

provision that applies to treaties which involve the
presence of foreign military bases, troops or facilities
in the Philippines. Under this provision, the
concurrence of the Senate is only one of the
requisites to render compliance with the constitutional
requirements and to consider the agreement binding
on the Philippines. Section 25, Article XVIII further
requires that "foreign military bases, troops, or

facilities" may be allowed in the Philippines only by

virtue of a treaty duly concurred in by the Senate,
ratified by a majority of the votes cast in a national
referendum held for that purpose if so required by
Congress, and recognized as such by the other
contracting state.

It is our considered view that both constitutional

provisions, far from contradicting each other, actually
share some common ground. These constitutional
provisions both embody phrases in the negative and
thus, are deemed prohibitory in mandate and
character. In particular, Section 21 opens with the
clause "No treaty x x x," and Section 25 contains the
phrase "shall not be allowed." Additionally, in both
instances, the concurrence of the Senate is
indispensable to render the treaty or international
agreement valid and effective.

VII will find applicability with regard to the issue and

for the sole purpose of determining the number of
votes required to obtain the valid concurrence of the
Senate, as will be further discussed hereunder.

It is a rudiment in legal hermenuetics that when no

distinction is made by law, the Court should not
distinguish- Ubi lex non distinguit nec nos distinguire
debemos.

It is a finely-imbedded principle in statutory

construction that a special provision or law prevails
over a general one. Lex specialis derogat
generali. Thus, where there is in the same statute a
particular enactment and also a general one which, in
its most comprehensive sense, would include what is
embraced in the former, the particular enactment
must be operative, and the general enactment must
be taken to affect only such cases within its general
language which are not within the provision of the
particular enactment.[26]

In like manner, we do not subscribe to the argument

that Section 25, Article XVIII is not controlling since no
foreign military bases, but merely foreign troops and
facilities, are involved in the VFA. Notably, a perusal
of said constitutional provision reveals that the
proscription covers "foreign military bases, troops, or
facilities." Stated differently, this prohibition is not
limited to the entry of troops and facilities without any
foreign bases being established. The clause does not
refer to "foreign military bases, troops, or facilities"
collectively but treats them as separate and
independent subjects. The use of comma and the
disjunctive word "or" clearly signifies disassociation
and independence of one thing from the others
included in the enumeration,[28] such that, the
provision contemplates three different situations - a
military treaty the subject of which could be either (a)
foreign bases, (b) foreign troops, or (c) foreign
facilities - any of the three standing alone places it
under the coverage of Section 25, Article XVIII.

In Leveriza vs. Intermediate Appellate Court,[27] we

enunciated:
To our mind, the fact that the President referred the
VFA to the Senate under Section 21, Article VII, and
that the Senate extended its concurrence under the
same provision, is immaterial. For in either case,
whether under Section 21, Article VII or Section 25,
Article XVIII, the fundamental law is crystalline that
the concurrence of the Senate is mandatory to comply
with the strict constitutional requirements.

On the whole, the VFA is an agreement which defines

the treatment of United States troops and personnel
visiting the Philippines. It provides for the guidelines
to govern such visits of military personnel, and further
defines the rights of the United States and the
Philippine government in the matter of criminal
jurisdiction, movement of vessel and aircraft,
importation and exportation of equipment, materials
and supplies.

Undoubtedly, Section 25, Article XVIII, which

specifically deals with treaties involving foreign
military bases, troops, or facilities, should apply in the
instant case. To a certain extent and in a limited
sense, however, the provisions of section 21, Article

"x x x that another basic principle of statutory

construction mandates that general legislation must
give way to a special legislation on the same subject,
and generally be so interpreted as to embrace only
cases in which the special provisions are not
applicable (Sto. Domingo vs. de los Angeles, 96
SCRA 139), that a specific statute prevails over a
general statute (De Jesus vs. People, 120 SCRA 760)
and that where two statutes are of equal theoretical
application to a particular case, the one designed
therefor specially should prevail (Wil Wilhensen Inc.
vs. Baluyot, 83 SCRA 38)."

Moreover, it is specious to argue that Section 25,

Article XVIII is inapplicable to mere transient
agreements for the reason that there is no permanent
placing of structure for the establishment of a military
base. On this score, the Constitution makes no
distinction between "transient' and "permanent".
Certainly, we find nothing in Section 25, Article XVIII
that requires foreign troops or facilities to be stationed
or placed permanently in the Philippines.

To this end, the intention of the framers of the Charter,

as manifested during the deliberations of the 1986
Constitutional Commission, is consistent with this
interpretation:

"MR. MAAMBONG. I just want to address a question

or two to Commissioner Bernas.

This formulation speaks of three things: foreign

military bases, troops or facilities. My first question
is: If the country does enter into such kind of a treaty,
must it cover the three-bases, troops or facilities-or
could the treaty entered into cover only one or two?

FR. BERNAS. Definitely, it can cover only one.

Whether it covers only one or it covers three, the

requirement will be the same.

MR. MAAMBONG. In other words, the Philippine
government can enter into a treaty covering not bases
but merely troops?

FR. BERNAS. Yes.

MR. MAAMBONG. I cannot find any reason why the

government can enter into a treaty covering only
troops.

FR. BERNAS. Why not? Probably if we stretch our

imagination a little bit more, we will find some. We just
want to cover everything."[29] (Underscoring
Supplied)

Moreover, military bases established within the

territory of another state is no longer viable because
of the alternatives offered by new means and
weapons of warfare such as nuclear weapons, guided
missiles as well as huge sea vessels that can stay
afloat in the sea even for months and years without
returning to their home country. These military
warships are actually used as substitutes for a landhome base not only of military aircraft but also of
military personnel and facilities. Besides, vessels are
mobile as compared to a land-based military
headquarters.

At this juncture, we shall then resolve the issue of

whether or not the requirements of Section 25 were
complied with when the Senate gave its concurrence
to the VFA.

Section 25, Article XVIII disallows foreign military

bases, troops, or facilities in the country, unless the
following conditions are sufficiently met, viz: (a) it
must be under a treaty; (b) the treaty must be duly
concurred in by the Senate and, when so required by

congress, ratified by a majority of the votes cast by

the people in a national referendum; and
(c) recognized as a treaty by the other contracting
state.

There is no dispute as to the presence of the first two

requisites in the case of the VFA. The concurrence
handed by the Senate through Resolution No. 18 is in
accordance with the provisions of the Constitution,
whether under the general requirement in Section 21,
Article VII, or the specific mandate mentioned in
Section 25, Article XVIII, the provision in the latter
article requiring ratification by a majority of the votes
cast in a national referendum being unnecessary
since Congress has not required it.

As to the matter of voting, Section 21, Article

VII particularly requires that a treaty or international
agreement, to be valid and effective, must
be concurred in by at least two-thirds of all the
members of the Senate. On the other hand, Section
25, Article XVIII simply provides that the treaty
be "duly concurred in by the Senate."

Applying the foregoing constitutional provisions, a

two-thirds vote of all the members of the Senate is
clearly required so that the concurrence contemplated
by law may be validly obtained and deemed present.
While it is true that Section 25, Article XVIII requires,
among other things, that the treaty-the VFA, in the
instant case-be "duly concurred in by the Senate," it is
very true however that said provision must be related
and viewed in light of the clear mandate embodied in
Section 21, Article VII, which in more specific terms,
requires that the concurrence of a treaty, or
international agreement, be made by a two -thirds
vote of all the members of the Senate. Indeed,
Section 25, Article XVIII must not be treated in
isolation to section 21, Article, VII.

As noted, the "concurrence requirement" under

Section 25, Article XVIII must be construed in relation
to the provisions of Section 21, Article VII. In a more

particular language, the concurrence of the Senate

contemplated under Section 25, Article XVIII means
that at least two-thirds of all the members of the
Senate favorably vote to concur with the treaty-the
VFA in the instant case.

Under these circumstances, the charter provides that

the Senate shall be composed of twenty-four (24)
Senators.[30] Without a tinge of doubt, two-thirds
(2/3) of this figure, or not less than sixteen (16)
members, favorably acting on the proposal is an
unquestionable compliance with the requisite number
of votes mentioned in Section 21 of Article VII. The
fact that there were actually twenty-three (23)
incumbent Senators at the time the voting was made,
[31] will not alter in any significant way the
circumstance that more than two-thirds of the
members of the Senate concurred with the proposed
VFA, even if the two-thirds vote requirement is based
on this figure of actual members (23). In this regard,
the fundamental law is clear that two-thirds of the 24
Senators, or at least 16 favorable votes, suffice so as
to render compliance with the strict constitutional
mandate of giving concurrence to the subject treaty.

Having resolved that the first two requisites

prescribed in Section 25, Article XVIII are present, we
shall now pass upon and delve on the requirement
that the VFA should be recognized as a treaty by the
United States of America.

Petitioners contend that the phrase "recognized as a

treaty," embodied in section 25, Article XVIII, means
that the VFA should have the advice and consent of
the United States Senate pursuant to its own
constitutional process, and that it should not be
considered merely an executive agreement by the
United States.

In opposition, respondents argue that the letter of

United States Ambassador Hubbard stating that the
VFA is binding on the United States Government is
conclusive, on the point that the VFA is recognized as

a treaty by the United States of America. According to

respondents, the VFA, to be binding, must only be
accepted as a treaty by the United States.

This Court is of the firm view that the phrase

"recognized as a treaty" means that the other
contracting party accepts or acknowledges the
agreement as a treaty.[32] To require the other
contracting state, the United States of America in this
case, to submit the VFA to the United States Senate
for concurrence pursuant to its Constitution,[33] is to
accord strict meaning to the phrase.

Well-entrenched is the principle that the words used in

the Constitution are to be given their ordinary
meaning except where technical terms are employed,
in which case the significance thus attached to them
prevails. Its language should be understood in the
sense they have in common use.[34]

Moreover, it is inconsequential whether the United

States treats the VFA only as an executive agreement
because, under international law, an executive
agreement is as binding as a treaty.[35] To be sure, as
long as the VFA possesses the elements of an
agreement under international law, the said
agreement is to be taken equally as a treaty.

A treaty, as defined by the Vienna Convention on the

Law of Treaties, is "an international instrument
concluded between States in written form and
governed by international law, whether embodied in a
single instrument or in two or more related
instruments, and whatever its particular
designation."[36] There are many other terms used for
a treaty or international agreement, some of which
are: act, protocol, agreement, compromis d' arbitrage,
concordat, convention, declaration, exchange of
notes, pact, statute, charter and modus vivendi. All
writers, from Hugo Grotius onward, have pointed out
that the names or titles of international agreements
included under the general term treaty have little or no

legal significance. Certain terms are useful, but they

furnish little more than mere description.[37]

Article 2(2) of the Vienna Convention provides that

"the provisions of paragraph 1 regarding the use of
terms in the present Convention are without prejudice
to the use of those terms, or to the meanings which
may be given to them in the internal law of the State."

Thus, in international law, there is no difference

between treaties and executive agreements in their
binding effect upon states concerned, as long as the
negotiating functionaries have remained within their
powers.[38] International law continues to make no
distinction between treaties and executive
agreements: they are equally binding obligations upon
nations.[39]

In our jurisdiction, we have recognized the binding

effect of executive agreements even without the
concurrence of the Senate or Congress.
In Commissioner of Customs vs. Eastern Sea
Trading,[40] we had occasion to pronounce:

"x x x the right of the Executive to enter into binding

agreements without the necessity of subsequent
congressional approval has been confirmed by long
usage. From the earliest days of our history we have
entered into executive agreements covering such
subjects as commercial and consular relations, mostfavored-nation rights, patent rights, trademark and
copyright protection, postal and navigation
arrangements and the settlement of claims. The
validity of these has never been seriously questioned
by our courts.

approval. (39 Columbia Law Review, pp. 753-754)

(See, also, U.S. vs. Curtis Wright Export Corporation,
299 U.S. 304, 81 L. ed. 255; U.S. vs. Belmont, 301
U.S. 324, 81 L. ed. 1134; U.S. vs. Pink, 315 U.S. 203,
86 L. ed. 796; Ozanic vs. U.S. 188 F. 2d. 288; Yale
Law Journal, Vol. 15 pp. 1905-1906; California Law
Review, Vol. 25, pp. 670-675; Hyde on International
Law [revised Edition], Vol. 2, pp. 1405, 1416-1418;
willoughby on the U.S. Constitution Law, Vol. I [2d
ed.], pp. 537-540; Moore, International Law Digest,
Vol. V, pp. 210-218; Hackworth, International Law
Digest, Vol. V, pp. 390-407). (Italics Supplied)"
(Emphasis Ours)

The deliberations of the Constitutional Commission

which drafted the 1987 Constitution is enlightening
and highly-instructive:

"MR. MAAMBONG. Of course it goes without saying

that as far as ratification of the other state is
concerned, that is entirely their concern under their
own laws.

FR. BERNAS. Yes, but we will accept whatever they

say. If they say that we have done everything to make
it a treaty, then as far as we are concerned, we will
accept it as a treaty."[41]

The records reveal that the United States

Government, through Ambassador Thomas C.
Hubbard, has stated that the United States
government has fully committed to living up to the
terms of the VFA.[42] For as long as the United States
of America accepts or acknowledges the VFA as a
treaty, and binds itself further to comply with its
obligations under the treaty, there is indeed marked
compliance with the mandate of the Constitution.

"x x x x x x x x x
"Furthermore, the United States Supreme Court has
expressly recognized the validity and constitutionality
of executive agreements entered into without Senate

Worth stressing too, is that the ratification, by the

President, of the VFA and the concurrence of the
Senate should be taken as a clear an unequivocal
expression of our nation's consent to be bound by

said treaty, with the concomitant duty to uphold the

obligations and responsibilities embodied thereunder.

Ratification is generally held to be an executive act,

undertaken by the head of the state or of the
government, as the case may be, through which the
formal acceptance of the treaty is proclaimed.[43] A
State may provide in its domestic legislation the
process of ratification of a treaty. The consent of the
State to be bound by a treaty is expressed by
ratification when: (a) the treaty provides for such
ratification, (b) it is otherwise established that the
negotiating States agreed that ratification should be
required, (c) the representative of the State has
signed the treaty subject to ratification, or (d) the
intention of the State to sign the treaty subject to
ratification appears from the full powers of its
representative, or was expressed during the
negotiation.[44]

In our jurisdiction, the power to ratify is vested in the

President and not, as commonly believed, in the
legislature. The role of the Senate is limited only to
giving or withholding its consent, or concurrence, to
the ratification.[45]

With the ratification of the VFA, which is equivalent to

final acceptance, and with the exchange of notes
between the Philippines and the United States of
America, it now becomes obligatory and incumbent
on our part, under the principles of international law,
to be bound by the terms of the agreement. Thus, no
less than Section 2, Article II of the Constitution,[46]
declares that the Philippines adopts the generally
accepted principles of international law as part of the
law of the land and adheres to the policy of peace,
equality, justice, freedom, cooperation and amity with
all nations.

As a member of the family of nations, the Philippines

agrees to be bound by generally accepted rules for
the conduct of its international relations. While the
international obligation devolves upon the state and

not upon any particular branch, institution, or

individual member of its government, the Philippines
is nonetheless responsible for violations committed by
any branch or subdivision of its government or any
official thereof. As an integral part of the community of
nations, we are responsible to assure that our
government, Constitution and laws will carry out our
international obligation.[47] Hence, we cannot readily
plead the Constitution as a convenient excuse for
non-compliance with our obligations, duties and
responsibilities under international law.

Beyond this, Article 13 of the Declaration of Rights

and Duties of States adopted by the International Law
Commission in 1949 provides: "Every State has the
duty to carry out in good faith its obligations arising
from treaties and other sources of international law,
and it may not invoke provisions in its constitution or
its laws as an excuse for failure to perform this
duty."[48]

Equally important is Article 26 of the convention which

provides that "Every treaty in force is binding upon the
parties to it and must be performed by them in good
faith." This is known as the principle of pacta sunt
servanda which preserves the sanctity of treaties and
have been one of the most fundamental principles of
positive international law, supported by the
jurisprudence of international tribunals.[49]

NO GRAVE ABUSE OF DISCRETION

In the instant controversy, the President, in effect, is

heavily faulted for exercising a power and performing
a task conferred upon him by the Constitution-the
power to enter into and ratify treaties. Through the
expediency of Rule 65 of the Rules of Court,
petitioners in these consolidated cases impute grave
abuse of discretion on the part of the chief Executive
in ratifying the VFA, and referring the same to the
Senate pursuant to the provisions of Section 21,
Article VII of the Constitution.

On this particular matter, grave abuse of discretion

implies such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction, or,
when the power is exercised in an arbitrary or
despotic manner by reason of passion or personal
hostility, and it must be so patent and gross as to
amount to an evasion of positive duty enjoined or to
act at all in contemplation of law.[50]

By constitutional fiat and by the intrinsic nature of his

office, the President, as head of State, is the sole
organ and authority in the external affairs of the
country. In many ways, the President is the chief
architect of the nation's foreign policy; his "dominance
in the field of foreign relations is (then) conceded."[51]
Wielding vast powers an influence, his conduct in the
external affairs of the nation, as Jefferson describes,
is "executive altogether."[52]

As regards the power to enter into treaties or

international agreements, the Constitution vests the
same in the President, subject only to the
concurrence of at least two-thirds vote of all the
members of the Senate. In this light, the negotiation of
the VFA and the subsequent ratification of the
agreement are exclusive acts which pertain solely to
the President, in the lawful exercise of his vast
executive and diplomatic powers granted him no less
than by the fundamental law itself. Into the field of
negotiation the Senate cannot intrude, and Congress
itself is powerless to invade it.[53] Consequently, the
acts or judgment calls of the President involving the
VFA-specifically the acts of ratification and entering
into a treaty and those necessary or incidental to the
exercise of such principal acts - squarely fall within
the sphere of his constitutional powers and thus, may
not be validly struck down, much less calibrated by
this Court, in the absence of clear showing of grave
abuse of power or discretion.

It is the Court's considered view that the President, in

ratifying the VFA and in submitting the same to the
Senate for concurrence, acted within the confines and
limits of the powers vested in him by the Constitution.
It is of no moment that the President, in the exercise

of his wide latitude of discretion and in the honest

belief that the VFA falls within the ambit of Section 21,
Article VII of the Constitution, referred the VFA to the
Senate for concurrence under the aforementioned
provision. Certainly, no abuse of discretion, much less
a grave, patent and whimsical abuse of judgment,
may be imputed to the President in his act of ratifying
the VFA and referring the same to the Senate for the
purpose of complying with the concurrence
requirement embodied in the fundamental law. In
doing so, the President merely performed a
constitutional task and exercised a prerogative that
chiefly pertains to the functions of his office. Even if
he erred in submitting the VFA to the Senate for
concurrence under the provisions of Section 21 of
Article VII, instead of Section 25 of Article XVIII of the
Constitution, still, the President may not be faulted or
scarred, much less be adjudged guilty of committing
an abuse of discretion in some patent, gross, and
capricious manner.

For while it is conceded that Article VIII, Section 1, of

the Constitution has broadened the scope of judicial
inquiry into areas normally left to the political
departments to decide, such as those relating to
national security, it has not altogether done away with
political questions such as those which arise in the
field of foreign relations.[54] The High Tribunal's
function, as sanctioned by Article VIII, Section 1, "is
merely (to) check whether or not the governmental
branch or agency has gone beyond the constitutional
limits of its jurisdiction, not that it erred or has a
different view. In the absence of a showing... (of)
grave abuse of discretion amounting to lack of
jurisdiction, there is no occasion for the Court to
exercise its corrective power...It has no power to look
into what it thinks is apparent error."[55]

As to the power to concur with treaties, the

constitution lodges the same with the Senate alone.
Thus, once the Senate[56] performs that power, or
exercises its prerogative within the boundaries
prescribed by the Constitution, the concurrence
cannot, in like manner, be viewed to constitute an
abuse of power, much less grave abuse thereof.
Corollarily, the Senate, in the exercise of its discretion
and acting within the limits of such power, may not be

similarly faulted for having simply performed a task

conferred and sanctioned by no less than the
fundamental law.

For the role of the Senate in relation to treaties is

essentially legislative in character;[57] the Senate, as
an independent body possessed of its own erudite
mind, has the prerogative to either accept or reject the
proposed agreement, and whatever action it takes in
the exercise of its wide latitude of discretion, pertains
to the wisdom rather than the legality of the act. In this
sense, the Senate partakes a principal, yet delicate,
role in keeping the principles of separation of powers
and of checks and balances alive and vigilantly
ensures that these cherished rudiments remain true to
their form in a democratic government such as ours.
The Constitution thus animates, through this treatyconcurring power of the Senate, a healthy system of
checks and balances indispensable toward our
nation's pursuit of political maturity and growth. True
enough, rudimentary is the principle that matters
pertaining to the wisdom of a legislative act are
beyond the ambit and province of the courts to
inquire.

In fine, absent any clear showing of grave abuse of

discretion on the part of respondents, this Court- as
the final arbiter of legal controversies and staunch
sentinel of the rights of the people - is then without
power to conduct an incursion and meddle with such
affairs purely executive and legislative in character
and nature. For the Constitution no less, maps out the
distinct boundaries and limits the metes and bounds
within which each of the three political branches of
government may exercise the powers exclusively and
essentially conferred to it by law.

WHEREFORE, in light of the foregoing disquisitions,

the instant petitions are hereby DISMISSED.
PEOPLE OF THE PHILIPPINES, petitioner, vs.
HONORABLE NAZAR U. CHAVES
YNARES-SANTIAGO, J.:

This is a petition for review of the decision dated

November 7, 1997 of the Court of Appeals,[1] which
dismissed the petition for certiorari assailing the
Orders dated June 3, 1993; July 15, 1993; and
September 23, 1993 of the Regional Trial Court of
Cagayan de Oro City, Branch 18 in Criminal Case No.
86-39.
Sometime in October 1986, Informations for Multiple
Murder for the killing of members of the Bucag family
in Gingoog City were filed against Felipe Galarion,
Manuel Sabit, Cesar Sabit, Julito Ampo, Eddie Torion,
John Doe, Peter Doe and Richard Doe, with the
Regional Trial Court of Gingoog City.[2] Venue of the
case was moved to Cagayan de Oro City by virtue of
Administrative Order No. 87-2-244. Thus, Criminal
Case No. 86-39 was transferred to the Regional Trial
Court of Cagayan de Oro City, Branch 18, presided by
respondent Judge Nazar U. Chaves.
Only Felipe Galarion was tried and convicted. All the
other accused were at large.
Two years later, in October 1988, Felizardo Roxas,
also known as "Ely Roxas", "Fely Roxas" and "Lolong
Roxas," was identified as another member of the
group who was responsible for the slaying of the
Bucag family. An amended information was filed on
October 6, 1988 to implead Roxas as a co-accused.
He engaged the services of private respondent Miguel
Paderanga as his counsel. In order to give Roxas the
opportunity to adduce evidence in support of his
defense, a preliminary investigation was conducted.
In his counter-affidavit, Roxas implicated Atty.
Paderanga as the mastermind of the killings.
Consequently, the amended information was again
amended to include private respondent Paderanga as
one of the accused in Criminal Case No. 86-39.
Trial of the case ensued. At the hearing on May 18,
1993, the prosecution called Felizardo Roxas as its
first witness. Private respondent objected to the
presentation of Roxas' testimony. The trial court took
the matter under advisement. The following day, May
19, 1993, it sustained private respondent's objection
on the ground that the presentation of Roxas'
testimony will violate his right against selfincrimination. The trial court ruled further that before
Roxas can be presented as a witness for the
prosecution, he must first be discharged as a state

witness. Otherwise put, the prosecution cannot

present Roxas as a hostile witness.

Order granting private respondent's motion for

reconsideration, thus:

The prosecution filed a motion for reconsideration or,

in the alternative, to discharge Roxas as a state
witness. It also manifested its intention to present
Julito Ampo as another state witness or ordinary
prosecution witness.

xxx xxx xxx, it is the considered view of this Court

that, at this stage and insofar as the proposed state
witness is concerned, only his sworn statement may
be admitted and considered by the Court. The
"evidence" contemplated in the above-quoted last
portion of the first paragraph of Rule 119, Sec. 9, is
any evidence other than his testimony. Precisely, the
rule speaks of "and the sworn statement of such
proposed state witness," thus categorizing and
removing such statement from the other kind or class
of evidence mentioned therein.

On June 3, 1993, the trial court issued an Order

denying the prosecution's motion for reconsideration
but setting the motion for the discharge of Roxas as
state witness for hearing, to wit:
The Court believes that it has amply heard the matter
at bar referring to whether the Order of 19 May 1993
on the contention, perception and interpretation of
what the prosecution refers to as "hostile witness."
After both sides or both panels for that matter
extensively argued their respective sides, it is the
considered view of the Court, considering all points
raised by both sides, that the ruling of the Court
should stand and is in fact reiterated with particular
reference on the matter on hostile witness. However,
with respect to the alternative prayer in the Omnibus
Motion for reconsideration, the Court would like to be
satisfied as to which contending side is correct on the
issue whether the proposed witness-accused
Felizardo "Ely" Roxas would satisfy the requirements
embodied in Section 9, Rule 119, regarding a
proposed state witness.[3]
On June 29, 1993, the trial court issued an Order[4]
allowing the presentation of the testimony of Felizardo
Roxas for purposes of proving the conditions of Rule
119, Section 9 of the Rules of Court on the discharge
of a state witness.[5] Private respondent interposed
an objection, which the trial court overruled. The next
day, June 30, 1993, he filed a motion for
reconsideration, arguing that the presentation of
Roxas' testimony will be tantamount to allowing him to
testify as a state witness even before his discharge as
such; that the qualification of a proposed state
witness must be proved by evidence other than his
own testimony; and that at the hearing for the
discharge of a proposed state witness, only his sworn
statement can be presented and not his oral
testimony.
On July 15, 1993, the trial court issued an Omnibus

xxx xxx xxx.

PREMISES CONSIDERED, this Court is left with no
other legally plausible alternative but to grant the
subject Motion for Reconsideration of accused Miguel
Paderanga filed on 30 June 1993. The questioned
Order issued on 29 June 1993 is hereby reconsidered
and/or set aside, without prejudice to the
prosecution's presenting any other evidence in
support of the discharge.
On the other Motion for Reconsideration
simultaneously filed by the prosecution, it appearing
that the same does not point to or specify any
particular Order on record that has to be
reconsidered, no ruling or action thereon is necessary.
Whatever matters that have been treated therein are
deemed resolved hereinabove.
Considering the manifestation of the prosecution to
the effect that it is adopting the same move and stand
with respect to the proposed discharge of accused
Julito Ampo, the ruling herein made likewise applies
to accused Ampo.[6]
On August 9, 1993, the prosecution filed a motion for
reconsideration. In an Order dated September 23,
1993, the trial court denied the motion for lack of
merit.[7]
On November 17, 1993, the prosecution, through the
Office of the Solicitor General, filed a petition for
certiorari, prohibition and mandamus with the Court of
Appeals, docketed as CA-G.R. SP No. 32616,
assailing the trial court's Orders of June 3, 1993; July

15, 1993; and September 23, 1993.

On November 7, 1997, the Court of Appeals
dismissed the petition for lack of merit.[8] Hence, this
petition for review raising the following issues:
I. WHETHER OR NOT THE COURT OF APPEALS
GRAVELY ERRED IN RULING THAT THE
CHALLENGED ORDER OF THE TRIAL COURT
DATED 3 JUNE 1993 (WHICH DENIED
PROSECUTION'S MOTION FOR FELIZARDO "ELY"
ROXAS TO BE PRESENTED AS AN ORDINARY
WITNESS) HAS ALREADY BECOME FINAL SINCE
NO APPEAL HAS BEEN PERFECTED WITHIN THE
REGLEMENTARY PERIOD, BY LOOSELY CITING
THE CASE OF AMARANTE v. COURT OF APPEALS,
232 SCRA 104.
II. WHETHER OR NOT THE COURT OF APPEALS
GRAVELY ERRED IN LIMITING THE EVIDENCE
THAT NEEDS TO BE PRESENTED BY THE
PROSECUTION IN ITS MOTION TO DISCHARGE
TO THE RESPECTIVE SWORN STATEMENT
EXECUTED BY ITS PROPOSED WITNESSES AND
IN UPHOLDING THE TRIAL COURT'S DENIAL OF
THE PRESENTATION OF OTHER EVIDENCE.[9]
The Court of Appeals, in passing upon the issue of
whether or not the prosecution may present the
testimony of Felizardo Roxas as a hostile witness,
held that the trial court's Order of June 3, 1993
disallowing the said presentation had already become
final due to the prosecution's failure to appeal the
same. This is error. Clearly, the Order dated June 3,
1993 was interlocutory; it did not finally dispose of the
case on its merits. As such, the Order cannot be the
proper subject of appeal. It may, however, be assailed
in a special civil action for certiorari. Under the Rules
of Court then governing, the petition for certiorari may
be filed within a reasonable period.[10]
While there is no showing in the record that the
prosecution moved for a reconsideration of the June
3, 1993 Order, it nevertheless appears that it filed a
Motion for Reconsideration of the Omnibus Order
dated July 15, 1993, wherein it raised the matter of
presenting Roxas as an ordinary witness, as
distinguished from a state witness.[11] This Motion
was denied by the trial court on September 23, 1993.
Thereafter, on November 17, 1993, the prosecution

instituted a petition for certiorari, prohibition and

mandamus before the Court of Appeals. The petition,
clearly, was filed well within the reasonable period
contemplated by the Rules. It was even filed within
sixty days, the reglementary period prescribed in the
present 1997 Rules of Civil Procedure.
The prosecution, petitioner herein, also argues that
Ely Roxas and Julito Ampo have voluntarily
expressed their consent to testify as prosecution
witnesses. Hence, there is no need to first discharge
them as state witnesses before they can be presented
on the stand.
The petition has merit. It is true that an accused
cannot be made a hostile witness for the prosecution,
for to do so would compel him to be a witness against
himself. However, he may testify against a codefendant where he has agreed to do so, with full
knowledge of his right and the consequences of his
acts.[12] It is not necessary that the court discharges
him first as state witness. There is nothing in the rules
that says so. There is a difference between testifying
as state witness and testifying as a co-accused. In the
first, the proposed state witness has to qualify as a
witness for the state, after which he is discharged as
an accused and exempted from prosecution.[13] In
the second, the witness remains an accused and can
be made liable should he be found guilty of the
criminal offense.
However, we cannot simply rely on petitioner's
representation that Roxas and Ampo have
volunteered to testify for the prosecution. This is a
matter that the trial court must determine with
certainty, lest their right against self-incrimination be
violated.
Petitioner also maintains that it can validly present the
testimony of Ely Roxas and Julito Ampo at the hearing
for their discharge as state witnesses. We agree. Rule
119, Section 17 of the Revised Rules of Criminal
Procedure (formerly Rule 119, Section 9), provides
that the trial court may direct one or more of the
accused to be discharged with their consent so that
they may be witnesses for the state "after requiring
the prosecution to present evidence and the sworn
statement of each proposed state witness at a
hearing in support of the discharge". The provision
does not make any distinction as to the kind of

evidence the prosecution may present. What it simply

requires, in addition to the presentation of the sworn
statement of the accused concerned, is the
presentation of such evidence as are necessary to
determine if the conditions exist for the discharge, so
as to meet the object of the law, which is to prevent
unnecessary or arbitrary exclusion from the complaint
of persons guilty of the crime charged.[14] No
exemption from the term evidence is provided by the
law as to exclude the testimony of the accused. When
the law does not distinguish, we should not
distinguish.[15]
There is no other evidence more competent than the
testimony of the proposed witness himself to prove
the conditions that his testimony is absolutely
necessary in the case; that there is no other direct
evidence available for the proper prosecution of the
offense; that his testimony can be corroborated in its
material points; that he does not appear to be the
most guilty; and that he has not been convicted of any
offense involving moral turpitude. Further, the trial
judge will not be able to clarify matters found in the
sworn statements of the proposed witnesses if they
are not allowed to testify.
Private respondent counters Roxas and Ampo cannot
be allowed to testify because their testimony will
effectively constitute an admission by a conspirator
which, under Rule 130, Section 30 of the Rules of
Court,[16] is inadmissible as evidence against a coconspirator until the conspiracy is established by
evidence other than said declaration. In this regard,
suffice it to state that private respondent can
interpose the proper objection during the direct
examination of these witnesses, when the prosecution
propounds questions which may touch on the matter
of conspiracy. Indeed, it is still premature for private
respondent to raise this objection in the instant
petition.
WHEREFORE, in view of the foregoing, the petition is
GRANTED. The assailed decision of the Court of
Appeals dated November 7, 1997 is REVERSED. The
Regional Trial Court of Cagayan de Oro City, in
Criminal Case No. 86-39, is directed to determine the
voluntariness of Felizardo Roxas' and Julito Ampo's
decision to testify as prosecution witnesses and,
thereafter, to allow the prosecution to present said
witnesses. In the alternative, the trial court is directed

to allow Felizardo Roxas and Julito Ampo to testify at

the hearing on the motion for their discharge as state
witnesses.
ARNOLD V. GUERRERO, petitioner, vs. THE
COMMISSION ON ELECTIONS
QUISUMBING, J.:
Before the Court is a petition for certiorari, prohibition,
and mandamus, with prayer for a temporary
restraining order and/or preliminary injunction, under
Rule 65 of the Rules of Court. It assails the Order of
the Commission on Elections, Second Division, dated
May 10, 1998, in COMELEC Case No. SPA 98-227,
which dismissed the petition filed by herein
respondent Guillermo C. Ruiz to disqualify respondent
Rodolfo C. Farias as a candidate for the elective
office of Congressman in the first district of Ilocos
Norte during the May 11, 1998 elections. It also
assails the Resolution dated May 16, 1998, of the
COMELEC En Banc, denying the motion for
reconsideration filed by respondent Ruiz and
dismissing the petition-in-intervention filed by herein
petitioner Arnold V. Guerrero.
In the Second Division of the COMELEC, Ruiz sought
to perpetually disqualify respondent Farias as a
candidate for the position of Congressman.1 [Annex
"C," Rollo, pp. 51-58.] Ruiz alleged that Farias had
been campaigning as a candidate for Congressman in
the May 11, 1998 polls, despite his failure to file a
Certificate of Candidacy for said office. Ruiz averred
that Farias' failure to file said Certificate violated
Section 73 of the Omnibus Election Code2 ['SEC. 73.
Certificate of candidacy. - No person shall be eligible
for any elective public office unless he files a sworn
certificate of candidacy within the period fixed herein.
"A person who has filed a certificate of candidacy
may, prior to the election, withdraw the same by
submitting to the office concerned a written
declaration under oath.
"No person shall be eligible for more than one office
to be filled in the same election, and if he files his
certificate of candidacy for more than one office, he
shall not be eligible for any of them. However, before
the expiration of the period for the filing of certificates
of candidacy, the person who has filed more than one
certificate of candidacy may declare under oath the

office for which he desires to be eligible and cancel

the certificate of candidacy for the other office or
offices.

there is no certificate of candidacy to be cancelled,

consequently, no candidate to be disqualified."5 [Id. at
42-43.]

"The filing or withdrawal of certificate of candidacy

shall not affect whatever civil, criminal or
administrative liabilities which a candidate may have
incurred."] in relation to COMELEC Resolution No.
2577, dated January 15, 1998. Ruiz asked the
COMELEC to declare Farias as a "nuisance
candidate" pursuant to Section 69 of the Omnibus
Election Code3 ["SEC. 69. Nuisance candidates. The Commission may, motu proprio or upon a verified
petition of an interested party, refuse to give due
course to or cancel a certificate of candidacy, if it is
shown that said certificate has been filed to put the
election process in mockery or disrepute or cause
confusion among the voters by the similarity of the
names of the registered candidates or by other
circumstances or acts which clearly demonstrate that
the candidate has no bona fide intention to run for the
office for which the certificate of candidacy has been
filed and thus prevent a faithful determination of the
true will of the electorate."] and to disqualify him from
running in the May 11, 1998 elections, as well as in all
future polls.

On May 11, 1998, the elections pushed through as

scheduled. The post-election tally of votes in Ilocos
Norte showed that Farias got a total of 56,369 votes
representing the highest number of votes received in
the first district. Farias was duly proclaimed winner.

On May 8, 1998, Farias filed his Certificate of

Candidacy with the COMELEC, substituting candidate
Chevylle V. Farias who withdrew on April 3, 1998.
On May 9, 1998, Ruiz filed an "Urgent Ex-Parte
Motion To Resolve Petition" with the COMELEC,
attaching thereto a copy of the Certificate of
Candidacy of Farias.
On May 10, 1998, the Second Division of the
COMELEC decided Case No. SPA 98-227, disposing
as follows:
"WHEREFORE, premises considered, the
Commission (Second Division) RESOLVES to
DISMISS the instant petition for utter lack of merit.
"SO ORDERED."4 [Supra Note 1, at 43.]
In dismissing Ruiz's petition, the Second Division of
the COMELEC stated, "[T]here is none (sic) in the
records to consider respondent an official candidate
to speak of without the filing of said certificate. Hence,

On May 16, 1998, Ruiz filed a motion for

reconsideration, contending that Farias could not
validly substitute for Chevylle V. Farias, since the
latter was not the official candidate of the Lakas ng
Makabayan Masang Pilipino (LAMMP), but was an
independent candidate. Another person cannot
substitute for an independent candidate. Thus,
Farias' certificate of candidacy claiming to be the
official candidate of LAMMP in lieu of Chevylle V.
Farias was fatally defective, according to Ruiz.
On June 3, 1998, Farias took his oath of office as a
member of the House of Representatives.
On June 10, 1998, petitioner herein filed his "PetitionIn-Intervention" in COMELEC Case No. SPA 98-227.
Petitioner averred that he was the official candidate of
the Liberal Party (LP) in said elections for
Congressman, and stood to be adversely affected by
Case No. SPA 98-227. Guerrero contended that
Farias, having failed to file his Certificate of
Candidacy on or before the last day therefor, being
midnight of March 27, 1998, Farias illegally resorted
to the remedy of substitution provided for under
Section 77 of the Omnibus Election Code6 ["SEC. 77.
Candidates in case of death, disqualification or
withdrawal of another. - If after the last day for the
filing of certificates of candidacy, an official candidate
of a registered or accredited political party dies,
withdraws or is disqualified for any cause, only a
person belonging to, and certified by, the same
political party may file a certificate of candidacy to
replace the candidate who died, withdrew or was
disqualified. The substitute candidate nominated by
the political party concerned may file his certificate of
candidacy for the office affected in accordance with
the preceding sections not later than mid-day of the
day of the election. If the death, withdrawal or
disqualification should occur between the day before
the election and mid-day of election day, said

certificate may be filed with any board of election

inspectors in the political subdivision where he is a
candidate, or, in the case of candidates to be voted
for by the entire electorate of the country, with the
Commission."] and thus, Farias' disqualification was
in order. Guerrero then asked that the position of
Representative of the first district of Ilocos Norte be
declared vacant and special elections called for, but
disallowing the candidacy of Farias.
On January 6, 1999, the COMELEC En Banc
dismissed Ruiz's motion for reconsideration and
Guerrero's petition-in-intervention in Case No. SPA
98-227. The decretal portion of its Resolution reads:
"PRESCINDING FROM THE FOREGOING
PREMISES, this Commission (En Banc) RESOLVED,
as it hereby RESOLVES, to AFFIRM the Order of the
Commission (Second Division) and thereafter,
DISMISS this instant motion for reconsideration for
lack of jurisdiction (italics in the original) without
prejudice to the filing of a quo warranto case, if he so
desires.
"SO ORDERED."7 [Rollo, p. 49.]
Hence, the instant petition, anchored on the following
grounds:
A. THE RESPONDENT COMELEC GRAVELY
ABUSED ITS DISCRETION AND ACTED IN EXCESS
AND/OR WITHOUT JURISDICTION IN REFUSING
TO RULE ON THE VALIDITY OR INVALIDITY OF
THE CANDIDACY OR PURPORTED CERTIFICATE
OF CANDIDACY OF PRIVATE RESPONDENT
FARI'AS.
B. THE RESPONDENT COMELEC GRAVELY
ABUSED ITS DISCRETION AND ACTED IN EXCESS
AND/OR WITHOUT JURISDICTION IN TOSSING
THE DUTY TO RULE ON THE VALIDITY OR
INVALIDITY OF THE CANDIDACY OR PURPORTED
CERTIFICATE OF CANDIDACY OF PRIVATE
RESPONDENT FARI'AS TO THE HOUSE OF
REPRESENTATIVES ELECTORAL TRIBUNAL
(HRET) CONSIDERING THAT THE LATTER (HRET)
OBVIOUSLY LACKS JURISDICTION TO RULE ON
THE ISSUE THEREBY UNDULY CREATING A
VACUUM AND RENDERING PETITIONER
WITHOUT A REMEDY.

C. THE RESPONDENT COMELEC GRAVELY

ABUSED ITS DISCRETION AND ACTED IN EXCESS
AND/OR WITHOUT JURISDICTION IN NOT
RENDERING A RULING, BASED ON THE FACTS AS
STATED IN ITS ASSAILED RESOLUTION DATED
JANUARY 6, 1999 (Annex "B" hereof)
DISQUALIFYING PRIVATE RESPONDENT
FARI'AS AS A CANDIDATE FOR CONGRESSMAN
OF THE FIRST LEGISLATIVE DISTRICT OF ILOCOS
NORTE DURING THE MAY 11, 1998 ELECTIONS,
PREMISED ON ITS FINDINGS THAT "THERE IS
NONE IN THE RECORDS TO CONSIDER
RESPONDENT (FARI'AS) AN OFFICIAL
CANDIDATE TO SPEAK OF WITHOUT THE FILING
OF SAID CERTIFICATE, HENCE, THERE IS NO
CERTIFICATE OF CANDIDACY TO BE
CANCELLED, CONSEQUENTLY, NO CANDIDATE
TO BE DISQUALIFIED."
D. THE RESPONDENT COMELEC GRAVELY
ABUSED ITS DISCRETION AND ACTED IN EXCESS
AND/OR WITHOUT JURISDICTION IN NOT
CALLING A SPECIAL ELECTION TO FILL-UP THE
VACANT POSITION OF CONGRESSMAN OF THE
FIRST LEGISLATIVE DISTRICT OF ILOCOS NORTE
DUE TO THE DISQUALIFICATION OF
RESPONDENT FARI'AS AS A CANDIDATE
THERETO AND WHO APPEARS TO HAVE
OBTAINED THE HIGHEST NUMBER OF VOTES
CAST IN THE MAY 11, 1998 ELECTIONS.
We find pertinent for our resolution this issue:
Did the COMELEC commit grave abuse of discretion
in holding that the determination of the validity of the
certificate of candidacy of respondent Farias is
already within the exclusive jurisdiction of the
Electoral Tribunal of the House of Representatives?
In its assailed resolution, the COMELEC had noted
that respondent Farias had taken his oath and
assumed office as a Member of the 11th Congress
and by express mandate of the Constitution,8 [Art. VI,
Sec. 17 provides: "The Senate and the House of
Representatives shall each have an Electoral Tribunal
which shall be the sole judge of all contests relating to
the election, returns and qualifications of their
respective Members. Each Electoral Tribunal shall be
composed of nine Members, three of whom shall be

Justices of the Supreme Court to be designated by

the Chief Justice, and the remaining six shall be
Members of the Senate or the House of
Representatives, as the case may be, who shall be
chosen on the basis of proportional representation
from the political parties and the parties or
organizations registered under the party-list system
represented therein. The senior Justice in the
Electoral Tribunal shall be its Chairman."] it had lost
jurisdiction over the case.
Petitioner Guerrero argues that the refusal of the
COMELEC to rule on the validity or invalidity of the
certificate of candidacy of Farias amounted to grave
abuse of discretion on its part. He claims that
COMELEC failed in its Constitutional duty to uphold
and enforce all laws relative to elections.9 ["Art. IX-C,
Sec. 2. The Commission on Elections shall exercise
the following powers and functions:
(1) Enforce and administer all laws and regulations
relative to the conduct of an election, plebiscite,
initiative, referendum, and recall. x x x"] He relies on
Gallardo v. Judge Tabamo, Jr., 218 SCRA 253 (1993),
which reiterated the doctrine laid down in Zaldivar v.
Estenzo, 23 SCRA 533 (1968), that the COMELEC
has exclusive charge of the enforcement and
administration of all laws relative to the conduct of an
electoral exercise.
A special civil action for certiorari may be availed of
when the tribunal, board, or officer exercising judicial
or quasi-judicial functions has acted without or in
excess of jurisdiction and there is no appeal or any
plain, speedy, and adequate remedy in the ordinary
course of law for the purpose of annulling the
proceeding.10 [Suntay v. Cojuangco-Suntay, 300
SCRA 760, 766 (1998) citing Sempio v. Court of
Appeals, 263 SCRA 617 (1996).] It is the proper
remedy to question any final order, ruling and decision
of the COMELEC rendered in the exercise of its
adjudicatory or quasi-judicial powers.11 [Loong v.
Commission on Elections, 305 SCRA 832, 852 (1999)
citing Filipinas Engineering and Machine Shop v.
Ferrer, 135 SCRA 25 (1985); Reyes v. Regional Trial
Court of Oriental Mindoro, Br. XXXIX, 244 SCRA 41,
45 (1995).] But for an action for certiorari to prosper,
there must be a showing that the COMELEC acted
with grave abuse of discretion. This means such
capricious and whimsical exercise of judgment as is

equivalent to lack of jurisdiction or excess thereof, as

where the power is exercised in an arbitrary and
despotic manner by reason of passion or personal
hostility, and it must be so patent as to amount to an
evasion of positive duty or a virtual refusal to perform
the duty enjoined by law.12 [Cuison v. Court of
Appeals, 289 SCRA 159, 171 (1998) citing Esguerra
v. Court of Appeals, 267 SCRA 380 (1997).]
In the present case, we find no grave abuse of
discretion on the part of the COMELEC when it held
that its jurisdiction over Case No. SPA 98-277 had
ceased with the assumption of office of respondent
Farias as Representative for the first district of Ilocos
Norte. While the COMELEC is vested with the power
to declare valid or invalid a certificate of candidacy, its
refusal to exercise that power following the
proclamation and assumption of the position by
Farias is a recognition of the jurisdictional
boundaries separating the COMELEC and the
Electoral Tribunal of the House of Representatives
(HRET). Under Article VI, Section 17 of the
Constitution, the HRET has sole and exclusive
jurisdiction over all contests relative to the election,
returns, and qualifications of members of the House
of Representatives. Thus, once a winning candidate
has been proclaimed, taken his oath, and assumed
office as a member of the House of Representatives,
COMELEC's jurisdiction over election contests
relating to his election, returns, and qualifications
ends, and the HRET's own jurisdiction begins.13
[Aquino v. Commission on Elections, 248 SCRA 400,
417-418 (1995); Romualdez-Marcos v. Commission
on Elections, 248 SCRA 300, 340-341 (1995).] Thus,
the COMELEC's decision to discontinue exercising
jurisdiction over the case is justifiable, in deference to
the HRET's own jurisdiction and functions.
However, petitioner contends that the jurisdiction of
the HRET as defined under Article VI, Section 17 of
the Constitution is limited only to the qualifications
prescribed under Article VI, Section 6 of the
Constitution.14 [Art. VI, Sec. 6 provides: "No person
shall be a Member of the House of Representatives
unless he is a natural-born citizen of the Philippines
and, on the day of the election, is at least twenty-five
years of age, able to read and write, and, except the
party-list representatives, a registered voter in the
district in which he shall be elected, and a resident
thereof for a period of not less than one year

immediately preceding the day of the election."]

Consequently, he claims that any issue which does
not involve these constitutional qualifications is
beyond the realm of the HRET. The filing of a
certificate of candidacy being a statutory qualification
under the Omnibus Election Code is outside the pale
of the HRET, according to him.
This contention lacks cogency and is far from
persuasive. Article VI, Section 17 of the Constitution
cannot be circumscribed lexically. The word
"qualifications" cannot be read as qualified by the
term "constitutional." Ubi lex non distinguit noc nos
distinguire debemos. Basic is the rule in statutory
construction that where the law does not distinguish,
the courts should not distinguish.15 [Olfato v.
Commission on Elections, 103 SCRA 741, 778
(1981).] There should be no distinction in the
application of a law where none is indicated. For
firstly, the drafters of the fundamental law, in making
no qualification in the use of a general word or
expression, must have intended no distinction at all.
Secondly, the courts could only distinguish where
there are facts or circumstances showing that the
lawgiver intended a distinction or qualification. In such
a case, the courts would merely give effect to the
lawgiver's intent.16 [Social Security System v. City of
Bacolod, 115 SCRA 412, 415 (1982).]
Petitioner further argues that the HRET assumes
jurisdiction only if there is a valid proclamation of the
winning candidate. He contends that if a candidate
fails to satisfy the statutory requirements to qualify
him as a candidate, his subsequent proclamation is
void ab initio. Where the proclamation is null and void,
there is no proclamation at all and the mere
assumption of office by the proclaimed candidate
does not deprive the COMELEC at all of its power to
declare such nullity, according to petitioner. But as we
already held, in an electoral contest where the validity
of the proclamation of a winning candidate who has
taken his oath of office and assumed his post as
Congressman is raised, that issue is best addressed
to the HRET.17 [Lazatin v. Commission on Elections,
157 SCRA 337, 338 (1988).] The reason for this ruling
is self-evident, for it avoids duplicity of proceedings
and a clash of jurisdiction between constitutional
bodies, with due regard to the people's mandate.
Whether respondent Farias validly substituted

Chevylle V. Farias and whether respondent became

a legitimate candidate, in our view, must likewise be
addressed to the sound judgment of the Electoral
Tribunal. Only thus can we demonstrate fealty to the
Constitutional provision that the Electoral Tribunal of
each House of Congress shall be the "sole judge of all
contests relating to the election, returns, and
qualifications of their respective members".18
[CONST., Art. VI, Section 17.]
WHEREFORE, the petition is hereby DISMISSED for
lack of merit. Costs against petitioner.
COCA-COLA BOTTLERS, PHILS., INC. (CCBPI),
Naga Plant, Petitioner, versus QUINTIN J. GOMEZ,
a.k.a. "KIT" GOMEZ and DANILO E. GALICIA, a.k.a.
"DANNY GALICIA," Respondents.
BRION, J.:

Is the hoarding of a competitor's product containers

punishable as unfair competition under the Intellectual
Property Code (IP Code, Republic Act No. 8293) that
would entitle the aggrieved party to a search warrant
against the hoarder? This is the issue we grapple with
in this petition for review on certiorari involving two
rival multinational softdrink giants; petitioner CocaCola Bottlers, Phils., Inc. (Coca-Cola) accuses Pepsi
Cola Products Phils., Inc. (Pepsi), represented by the
respondents, of hoarding empty Coke bottles in bad
faith to discredit its business and to sabotage its
operation in Bicolandia.

sworn statements of three witnesses: Naga plant

representative Arnel John Ponce said he was
informed that one of their plant security guards had
gained access into the Pepsi compound and had
seen empty Coke bottles; acting plant security officer
Ylano A. Regaspi said he investigated reports that
Pepsi was hoarding large quantities of Coke bottles
by requesting their security guard to enter the Pepsi
plant and he was informed by the security guard that
Pepsi hoarded several Coke bottles; security guard
Edwin Lirio stated that he entered Pepsi's yard on
July 2, 2001 at 4 p.m. and saw empty Coke
bottles inside Pepsi shells or cases.[2]

Municipal Trial Court (MTC) Executive Judge Julian

C. Ocampo of Naga City, after taking the joint
deposition of the witnesses, issued Search Warrant
No. 2001-01[3] to seize 2,500 Litro and 3,000 eight
and 12 ounces empty Coke bottles at Pepsi's Naga
yard for violation of Section 168.3 (c) of the IP Code.
[4] The local police seized and brought to the MTC's
custody 2,464 Litro and 4,036 eight and 12 ounces
empty Coke bottles, 205 Pepsi shells for Litro, and
168 Pepsi shells for smaller (eight and 12 ounces)
empty Coke bottles, and later filed with the Office of
the City Prosecutor of Naga a complaint against two
Pepsi officers for violation of Section 168.3 (c) in
relation to Section 170 of the IP Code.[5] The named
respondents, also the respondents in this petition,
were Pepsi regional sales manager Danilo E. Galicia
(Galicia) and its Naga general manager Quintin J.
Gomez, Jr. (Gomez).

BACKGROUND
The facts, as culled from the records, are summarized
below.

On July 2, 2001, Coca-Cola applied for a search

warrant against Pepsi for hoarding Coke empty
bottles in Pepsi's yard in Concepcion Grande, Naga
City, an act allegedly penalized as unfair competition
under the IP Code. Coca-Cola claimed that the bottles
must be confiscated to preclude their illegal use,
destruction or concealment by the respondents.[1] In
support of the application, Coca-Cola submitted the

In their counter-affidavits, Galicia and Gomez claimed

that the bottles came from various Pepsi retailers and
wholesalers who included them in their return to make
up for shortages of empty Pepsi bottles; they had no
way of ascertaining beforehand the return of empty
Coke bottles as they simply received what had been
delivered; the presence of the bottles in their yard was
not intentional nor deliberate; Ponce and Regaspi's
statements are hearsay as they had no personal
knowledge of the alleged crime; there is no mention in
the IP Code of the crime of possession of empty
bottles; and that the ambiguity of the law, which has a

penal nature, must be construed strictly against the

State and liberally in their favor. Pepsi security guards
Eduardo E. Miral and Rene Acebuche executed a
joint affidavit stating that per their logbook, Lirio did
not visit or enter the plant premises in the afternoon of
July 2, 2001.

The respondents also filed motions for the return of

their shells and to quash the search warrant. They
contended that no probable cause existed to justify
the issuance of the search warrant; the facts charged
do not constitute an offense; and their Naga plant was
in urgent need of the shells.

Coca-Cola opposed the motions as the shells were

part of the evidence of the crime, arguing that Pepsi
used the shells in hoarding the bottles. It insisted that
the issuance of warrant was based on probable cause
for unfair competition under the IP Code, and that the
respondents violated R.A. 623, the law regulating the
use of stamped or marked bottles, boxes, and other
similar containers.

THE MTC RULINGS

On September 19, 2001, the MTC issued the first

assailed order[6] denying the twin motions. It
explained there was an exhaustive examination of the
applicant and its witnesses through searching
questions and that the Pepsi shells are prima facie
evidence that the bottles were placed there by the
respondents.

In their motion for reconsideration, the respondents

argued for the quashal of the warrant as the MTC did
not conduct a probing and exhaustive examination;
the applicant and its witnesses had no personal
knowledge of facts surrounding the hoarding; the
court failed to order the return of the "borrowed"
shells; there was no crime involved; the warrant was
issued based on hearsay evidence; and the seizure of

the shells was illegal because they were not included

in the warrant.

On November 14, 2001, the MTC denied the motion

for reconsideration in the second assailed order,[7]
explaining that the issue of whether there was unfair
competition can only be resolved during trial.

The respondents responded by filing a petition for

certiorari under Rule 65 of the Revised Rules of Court
before the Regional Trial Court (RTC) of Naga City on
the ground that the subject search warrant was issued
without probable cause and that the empty shells
were neither mentioned in the warrant nor the objects
of the perceived crime.

In a motion for reconsideration, which the RTC denied

on July 12, 2002, the petitioner stressed that the
decision of the RTC was contradictory because it
absolved Judge Ocampo of grave abuse of discretion
in issuing the search warrant, but at the same time
nullified the issued warrant. The MTC should have
dismissed the petition when it found out that Judge
Ocampo did not commit any grave abuse of
discretion.

Bypassing the Court of Appeals, the petitioner asks us

through this petition for review on certiorari under
Rule 45 of the Rules of Court to reverse the decision
of the RTC. Essentially, the petition raises questions
against the RTC's nullification of the warrant when it
found no grave abuse of discretion committed by the
issuing judge.

THE RTC RULINGS

On May 8, 2002, the RTC voided the warrant for lack

of probable cause and the non-commission of the
crime of unfair competition, even as it implied that
other laws may have been violated by the
respondents. The RTC, though, found no grave abuse
of discretion on the part of the issuing MTC judge.[8]
Thus,

Accordingly, as prayed for, Search Warrant No. 200102 issued by the Honorable Judge Julian C. Ocampo
III on July 2, 2001 is ANNULLED and SET ASIDE.
The Orders issued by the Pairing Judge of Br. 1,
MTCC of Naga City dated September 19, 2001 and
November 14, 2001 are also declared VOID and SET
ASIDE. The City Prosecutor of Naga City and SPO1
Ernesto Paredes are directed to return to the
Petitioner the properties seized by virtue of Search
Warrant No. 2001-02. No costs.

SO ORDERED.[9]

THE PETITION and THE PARTIES' POSITIONS

In its petition, the petitioner insists the RTC should

have dismissed the respondents' petition for certiorari
because it found no grave abuse of discretion by the
MTC in issuing the search warrant. The petitioner
further argues that the IP Code was enacted into law
to remedy various forms of unfair competition
accompanying globalization as well as to replace the
inutile provision of unfair competition under Article 189
of the Revised Penal Code. Section 168.3(c) of the IP
Code does not limit the scope of protection on the
particular acts enumerated as it expands the meaning
of unfair competition to include "other acts contrary to
good faith of a nature calculated to discredit the
goods, business or services of another." The inherent
element of unfair competition is fraud or deceit, and
that hoarding of large quantities of a competitor's
empty bottles is necessarily characterized by bad
faith. It claims that its Bicol bottling operation was
prejudiced by the respondents' hoarding and
destruction of its empty bottles.

The petitioner also argues that the quashal of the

search warrant was improper because it complied
with all the essential requisites of a valid warrant. The
empty bottles were concealed in Pepsi shells to
prevent discovery while they were systematically
being destroyed to hamper the petitioner's bottling
operation and to undermine the capability of its
bottling operations in Bicol.

The respondents counter-argue that although Judge

Ocampo conducted his own examination, he gravely
erred and abused his discretion when he ignored the
rule on the need of sufficient evidence to establish
probable cause; satisfactory and convincing evidence
is essential to hold them guilty of unfair competition;
the hoarding of empty Coke bottles did not cause
actual or probable deception and confusion on the
part of the general public; the alleged criminal acts do
not show conduct aimed at deceiving the public; there
was no attempt to use the empty bottles or pass them
off as the respondents' goods.

The respondents also argue that the IP Code does

not criminalize bottle hoarding, as the acts penalized
must always involve fraud and deceit. The hoarding
does not make them liable for unfair competition as
there was no deception or fraud on the end-users.

THE ISSUE

Based on the parties' positions, the basic issue

submitted to us for resolution is whether the Naga
MTC was correct in issuing Search Warrant No. 200101 for the seizure of the empty Coke bottles from
Pepsi's yard for probable violation of Section 168.3 (c)
of the IP Code. This basic issue involves two subissues, namely, the substantive issue of whether the
application for search warrant effectively charged an
offense, i.e., a violation of Section 168.3 (c) of the IP
Code; and the procedural issue of whether the MTC
observed the procedures required by the Rules of
Court in the issuance of search warrants.

OUR RULING

We resolve to deny the petition for lack of merit.

We clarify at the outset that while we agree with the

RTC decision, our agreement is more in the result
than in the reasons that supported it. The decision is
correct in nullifying the search warrant because it was
issued on an invalid substantive basis - the acts
imputed on the respondents do not violate Section
168.3 (c) of the IP Code. For this reason, we deny the
present petition.

The issuance of a search warrant[10] against a

personal property[11] is governed by Rule 126 of the
Revised Rules of Court whose relevant sections state:

Section 4. Requisites for issuing search warrant. - A

search warrant shall not issue except upon probable
cause in connection with one specific offense to be
determined personally by the judge after examination
under oath or affirmation of the complainant and the
witnesses he may produce, and particularly
describing the place to be searched and the things to
be seized which may be anywhere in the Philippines.

Section 5. Examination of complainant; record. - The

judge must, before issuing the warrant, personally
examine in the form of searching questions and
answers, in writing and under oath, the complainant
and the witnesses he may produce on facts
personally known to them and attach to the record
their sworn statements together with the affidavits
submitted.

Section 6. Issuance and form of search warrant. - If

the judge is satisfied of the existence of facts upon
which the application is based or that there is
probable cause to believe that they exist, he shall
issue the warrant, which must be substantially in the
form prescribed by these Rules. [Emphasis supplied]

To paraphrase this rule, a search warrant may be

issued only if there is probable cause in connection
with a specific offense alleged in an application based
on the personal knowledge of the applicant and his or
her witnesses. This is the substantive requirement in
the issuance of a search warrant. Procedurally, the
determination of probable cause is a personal task of
the judge before whom the application for search
warrant is filed, as he has to examine under oath or
affirmation the applicant and his or her witnesses in
the form of "searching questions and answers" in
writing and under oath. The warrant, if issued, must
particularly describe the place to be searched and the
things to be seized.

We paraphrase these requirements to stress that they

have substantive and procedural aspects. Apparently,
the RTC recognized this dual nature of the
requirements and, hence, treated them separately; it
approved of the way the MTC handled the procedural
aspects of the issuance of the search warrant but
found its action on the substantive aspect wanting. It
therefore resolved to nullify the warrant, without
however expressly declaring that the MTC gravely
abused its discretion when it issued the warrant
applied for. The RTC's error, however, is in the form
rather than the substance of the decision as the
nullification of the issued warrant for the reason the
RTC gave was equivalent to the declaration that
grave abuse of discretion was committed. In fact, we
so rule as the discussions below will show.

Jurisprudence teaches us that probable cause, as a

condition for the issuance of a search warrant, is such
reasons supported by facts and circumstances as will
warrant a cautious man in the belief that his action
and the means taken in prosecuting it are legally just
and proper. Probable cause requires facts and

circumstances that would lead a reasonably prudent

man to believe that an offense has been committed
and the objects sought in connection with that offense
are in the place to be searched.[12] Implicit in this
statement is the recognition that an underlying
offense must, in the first place, exist. In other words,
the acts alleged, taken together, must constitute an
offense and that these acts are imputable to an
offender in relation with whom a search warrant is
applied for.

In the context of the present case, the question is

whether the act charged - alleged to be hoarding of
empty Coke bottles - constitutes an offense under
Section 168.3 (c) of the IP Code. Section 168 in its
entirety states:

SECTION 168. Unfair Competition, Rights, Regulation

and Remedies. -

168.1. A person who has identified in the mind of the

public the goods he manufactures or deals in, his
business or services from those of others, whether or
not a registered mark is employed, has a property
right in the goodwill of the said goods, business or
services so identified, which will be protected in the
same manner as other property rights.

168.2. Any person who shall employ deception or any

other means contrary to good faith by which he shall
pass off the goods manufactured by him or in which
he deals, or his business, or services for those of the
one having established such goodwill, or who shall
commit any acts calculated to produce said result,
shall be guilty of unfair competition, and shall be
subject to an action therefor.

168.3. In particular, and without in any way limiting the

scope of protection against unfair competition, the
following shall be deemed guilty of unfair competition:

(a) Any person, who is selling his goods and gives

them the general appearance of goods of another
manufacturer or dealer, either as to the goods
themselves or in the wrapping of the packages in
which they are contained, or the devices or words
thereon, or in any other feature of their appearance,
which would be likely to influence purchasers to
believe that the goods offered are those of a
manufacturer or dealer, other than the actual
manufacturer or dealer, or who otherwise clothes the
goods with such appearance as shall deceive the
public and defraud another of his legitimate trade, or
any subsequent vendor of such goods or any agent of
any vendor engaged in selling such goods with a like
purpose;

(b) Any person who by any artifice, or device, or who

employs any other means calculated to induce the
false belief that such person is offering the services of
another who has identified such services in the mind
of the public; or

(c) Any person who shall make any false statement in

the course of trade or who shall commit any other act
contrary to good faith of a nature calculated to
discredit the goods, business or services of another.

168.4. The remedies provided by Sections 156, 157

and 161 shall apply mutatis mutandis. (Sec. 29, R.A.
No. 166a)

The petitioner theorizes that the above section does

not limit the scope of protection on the particular acts
enumerated as it expands the meaning of unfair
competition to include "other acts contrary to good
faith of a nature calculated to discredit the goods,
business or services of another." Allegedly, the
respondents' hoarding of Coca Cola empty bottles is
one such act.

We do not agree with the petitioner's expansive

interpretation of Section 168.3 (c).

"Unfair competition," previously defined in Philippine

jurisprudence in relation with R.A. No. 166 and
Articles 188 and 189 of the Revised Penal Code, is
now covered by Section 168 of the IP Code as this
Code has expressly repealed R.A. No. 165 and R.A.
No. 166, and Articles 188 and 189 of the Revised
Penal Code.

Articles 168.1 and 168.2, as quoted above, provide

the concept and general rule on the definition of unfair
competition. The law does not thereby cover every
unfair act committed in the course of business; it
covers only acts characterized by "deception or any
other means contrary to good faith" in the passing off
of goods and services as those of another who has
established goodwill in relation with these goods or
services, or any other act calculated to produce the
same result.

What unfair competition is, is further particularized

under Section 168.3 when it provides specifics of
what unfair competition is "without in any way limiting
the scope of protection against unfair competition."
Part of these particulars is provided under Section
168.3(c) which provides the general "catch-all" phrase
that the petitioner cites. Under this phrase, a person
shall be guilty of unfair competition "who shall commit
any other act contrary to good faith of a nature
calculated to discredit the goods, business or services
of another."

From jurisprudence, unfair competition has been

defined as the passing off (or palming off) or
attempting to pass off upon the public the goods or
business of one person as the goods or business of
another with the end and probable effect of deceiving
the public. It formulated the "true test" of unfair
competition: whether the acts of defendant are such
as are calculated to deceive the ordinary buyer

making his purchases under the ordinary conditions

which prevail in the particular trade to which the
controversy relates.[13] One of the essential
requisites in an action to restrain unfair competition is
proof of fraud; the intent to deceive must be shown
before the right to recover can exist.[14] The advent of
the IP Code has not significantly changed these
rulings as they are fully in accord with what Section
168 of the Code in its entirety provides. Deception,
passing off and fraud upon the public are still the key
elements that must be present for unfair competition
to exist.

The act alleged to violate the petitioner's rights under

Section 168.3 (c) is hoarding which we gather to be
the collection of the petitioner's empty bottles so that
they can be withdrawn from circulation and thus
impede the circulation of the petitioner's bottled
products. This, according to the petitioner, is an act
contrary to good faith - a conclusion that, if true, is
indeed an unfair act on the part of the respondents.
The critical question, however, is not the intrinsic
unfairness of the act of hoarding; what is critical for
purposes of Section 168.3 (c) is to determine if the
hoarding, as charged, "is of a nature calculated to
discredit the goods, business or services" of the
petitioner.

Section 2. Declaration of State Policy. - The State

recognizes that an effective intellectual and industrial
property system is vital to the development of
domestic and creative activity, facilitates transfer of
technology, attracts foreign investments, and ensures
market access for our products. It shall protect and
secure the exclusive rights of scientists, inventors,
artists and other gifted citizens to their intellectual
property and creations, particularly when beneficial to
the people, for such periods as provided in this Act.

The use of intellectual property bears a social

function. To this end, the State shall promote the
diffusion of knowledge and information for the
promotion of national development and progress and
the common good.

It is also the policy of the State to streamline

administrative procedures of registering patents,
trademarks and copyright, to liberalize the registration
on the transfer of technology, and to enhance the
enforcement of intellectual property rights in the
Philippines. (n)

We hold that it is not. Hoarding as defined by the

petitioner is not even an act within the contemplation
of the IP Code.

"Intellectual property rights" have furthermore been

defined under Section 4 of the Code to consist of: a)
Copyright and Related Rights; b) Trademarks and
Service Marks; c) Geographic Indications; d)
IndustrialDesigns; e) Patents; f) Layout-Designs
(Topographies) of Integrated Circuits; and
g)Protection of Undisclosed Information.

The petitioner's cited basis is a provision of the IP

Code, a set of rules that refer to a very specific
subject - intellectual property. Aside from the IP
Code's actual substantive contents (which relate
specifically to patents, licensing, trademarks, trade
names, service marks, copyrights, and the protection
and infringement of the intellectual properties that
these protective measures embody), the coverage
and intent of the Code is expressly reflected in its
"Declaration of State Policy" which states:

Given the IP Code's specific focus, a first test that

should be made when a question arises on whether a
matter is covered by the Code is to ask if it refers to
an intellectual property as defined in the Code. If it
does not, then coverage by the Code may be
negated.

A second test, if a disputed matter does not expressly

refer to an intellectual property right as defined above,
is whether it falls under the general "unfair
competition" concept and definition under Sections
168.1 and 168.2 of the Code. The question then is
whether there is "deception" or any other similar act in
"passing off" of goods or services to be those of
another who enjoys established goodwill.

Separately from these tests is the application of the

principles of statutory construction giving particular
attention, not so much to the focus of the IP Code
generally, but to the terms of Section 168 in particular.
Under the principle of "noscitur a sociis," when a
particular word or phrase is ambiguous in itself or is
equally susceptible of various meanings, its correct
construction may be made clear and specific by
considering the company of words in which it is found
or with which it is associated.[15]

As basis for this interpretative analysis, we note that

Section 168.1 speaks of a person who has earned
goodwill with respect to his goods and services and
who is entitled to protection under the Code, with or
without a registered mark. Section 168.2, as
previously discussed, refers to the general definition
of unfair competition. Section 168.3, on the other
hand, refers to the specific instances of unfair
competition, with Section 168.1 referring to the sale of
goods given the appearance of the goods of another;
Section 168.2, to the inducement of belief that his or
her goods or services are that of another who has
earned goodwill; while the disputed Section 168.3
being a "catch all" clause whose coverage the parties
now dispute.

Under all the above approaches, we conclude that the

"hoarding" - as defined and charged by the petitioner does not fall within the coverage of the IP Code and
of Section 168 in particular. It does not relate to any
patent, trademark, trade name or service mark that
the respondents have invaded, intruded into or used
without proper authority from the petitioner. Nor are
the respondents alleged to be fraudulently "passing
off" their products or services as those of the

petitioner. The respondents are not also alleged to be

undertaking any representation or misrepresentation
that would confuse or tend to confuse the goods of
the petitioner with those of the respondents, or vice
versa. What in fact the petitioner alleges is an act
foreign to the Code, to the concepts it embodies and
to the acts it regulates; as alleged, hoarding inflicts
unfairness by seeking to limit the opposition's sales by
depriving it of the bottles it can use for these sales.

In this light, hoarding for purposes of destruction is

closer to what another law - R.A. No. 623 - covers, to
wit:

SECTION 1. Persons engaged or licensed to engage

in the manufacture, bottling or selling of soda water,
mineral or aerated waters, cider, milk, cream, or other
lawful beverages in bottles, boxes, casks, kegs, or
barrels, and other similar containers, with their names
or the names of their principals or products, or other
marks of ownership stamped or marked thereon, may
register with the Philippine Patent Office a description
of the names or are used by them, under the same
conditions, rules, and regulations, made applicable by
law or regulation to the issuance of trademarks.

SECTION 2. It shall be unlawful for any person,

without the written consent of the manufacturer,
bottler or seller who has successfully registered the
marks of ownership in accordance with the provisions
of the next preceding section, to fill such bottles,
boxes, kegs, barrels, or other similar containers so
marked or stamped, for the purpose of sale, or to sell,
dispose of, buy, or traffic in, or wantonly destroy the
same, whether filled or not, or to use the same for
drinking vessels or glasses or for any other purpose
than that registered by the manufacturer, bottler or
seller. Any violation of this section shall be punished
by a fine or not more than one hundred pesos or
imprisonment of not more than thirty days or both.

As its coverage is defined under Section 1, the Act

appears to be a measure that may overlap or be
affected by the provisions of Part II of the IP Code on
"The Law on Trademarks, Service Marks and Trade
Names." What is certain is that the IP Code has not
expressly repealed this Act. The Act appears, too, to
have specific reference to a special type of registrants
- the manufacturers, bottlers or sellers of soda water,
mineral or aerated waters, cider, milk, cream, or other
lawful beverages in bottles, boxes, casks, kegs, or
barrels, and other similar containers - who are given
special protection with respect to the containers they
use. In this sense, it is in fact a law of specific
coverage and application, compared with the general
terms and application of the IP Code. Thus, under its
Section 2, it speaks specifically of unlawful use of
containers and even of the unlawfulness of their
wanton destruction - a matter that escapes the IP
Code's generalities unless linked with the concepts of
"deception" and "passing off" as discussed above.

Unfortunately, the Act is not the law in issue in the

present case and one that the parties did not consider
at all in the search warrant application. The petitioner
in fact could not have cited it in its search warrant
application since the "one specific offense" that the
law allows and which the petitioner used was Section
168.3 (c). If it serves any purpose at all in our
discussions, it is to show that the underlying factual
situation of the present case is in fact covered by
another law, not by the IP Code that the petitioner
cites. Viewed in this light, the lack of probable cause
to support the disputed search warrant at once
becomes apparent.

Where, as in this case, the imputed acts do not violate

the cited offense, the ruling of this Court penned by
Mr. Justice Bellosillo is particularly instructive:

In the issuance of search warrants, the Rules of Court

requires a finding of probable cause in connection
with one specific offense to be determined personally
by the judge after examination of the complainant and
the witnesses he may produce, and particularly
describing the place to be searched and the things to

be seized. Hence, since there is no crime to speak of,

the search warrant does not even begin to fulfill these
stringent requirements and is therefore defective on
its face. The nullity of the warrant renders moot and
academic the other issues raised in petitioners'
Motion to Quash and Motion for Reconsideration.
Since the assailed search warrant is null and void, all
property seized by virtue thereof should be returned
to petitioners in accordance with established
jurisprudence.[16]

Based on the foregoing, we conclude that the RTC

correctly ruled that the petitioner's search warrant
should properly be quashed for the petitioner's failure
to show that the acts imputed to the respondents do
not violate the cited offense. There could not have
been any probable cause to support the issuance of a
search warrant because no crime in the first place
was effectively charged. This conclusion renders
unnecessary any further discussion on whether the
search warrant application properly alleged that the
imputed act of holding Coke empties was in fact a
"hoarding" in bad faith aimed to prejudice the
petitioner's operations, or whether the MTC duly
complied with the procedural requirements for the
issuance of a search warrant under Rule 126 of the
Rules of Court.

WHEREFORE, we hereby DENY the petition for lack

of merit. Accordingly, we confirm that Search Warrant
No. 2001-01, issued by the Municipal Trial Court,
Branch 1, Naga City, is NULL and VOID. Costs
against the petitioner.
PEOPLE OF THE PHILIPPINES, Petitioner, vs.
MEINRADO ENRIQUE A. BELLO
ABAD, J.:

This case is about the Sandiganbayan's criminal

jurisdiction over graft charges filed against the Legal
Department Head of the Armed Forces of the
Philippines-Retirement and Separation Benefit
System (AFP-RSBS) and his co-accused.

The Facts and the Case

In 1998 the Senate Blue Ribbon Committee (the

Committee) inquired into alleged anomalies at the
AFP-RSBS. After investigation, the Committee found
that when acquiring lands, the AFP-RSBS would
execute two sets of deeds of sale: one, an
unnotarized bilateral deed of sale that showed a
higher price and the other, a unilateral deed of sale
that showed a discounted purchase price. The first
would be kept by the AFP-RSBS Legal Department
while the second would be held by the vendors. The
latter would then use these unilateral deeds of sale in
securing titles in the name of AFP-RSBS. This was
done, according to the Committee, to enable the AFPRSBS to draw more money from its funds and to
enable the vendors to pay lesser taxes.

The Committee recommended to the Ombudsman

(OMB) the prosecution of General Jose Ramiscal, Jr.
(Ret.), former AFP-RSBS president, who signed the
unregistered deeds of sale covering acquisitions of
lands in General Santos, Tanauan, Calamba, and
Iloilo for falsification of public documents or violation
of Article 172, paragraph 1, in relation to Article 171,
paragraphs 4 to 6 of the Revised Penal Code (RPC),
and violation of Republic Act (R.A.) 3019,1 Sections
3(e) and 3(g).

Acting on the Committee's recommendation, the OMB

filed with respect to the acquisition of lands in Iloilo
City informations before the Sandiganbayan in
Criminal Cases 26770-75 and 26826-31 against
respondents Meinrado Enrique A. Bello, Manuel S.
Satuito, Rosario Barbasa-Perlas, Hermie Barbasa,
Minviluz Camina, Joelita Trabuco, Rosalinda Tropel,
Felipe Villarosa, Abelio Juaneza, and Raul Aposaga
for six counts of violation of R.A. 3019, Section 3(e),

and six counts of falsification of public documents

under Article 171, RPC.

and controlled corporation, having been created by

special law to perform a public function.

Satuito and Bello filed a motion to dismiss and a

motion to quash the informations on the ground that
the Sandiganbayan had no jurisdiction over the case.
On February 12, 2004 the Sandiganbayan granted
the motions and ordered the remand of the records to
the proper courts, hence, this petition by the People of
the Philippines, represented by the OMB, which
challenges such order.

Still, the Sandiganbayan held that Section 4(a)(1)(g)

cannot apply to the accused since Bello, who held the
highest rank among those who allegedly conspired to
commit the crime charged, did not hold any of the
government positions enumerated under that section,
the pertinent portion of which reads:

The Issue Presented

Sec. 4. Section 4 of the same decree is hereby further
amended to read as follows:
The only issue presented in this case is whether or
not the Sandiganbayan erred in holding that it has no
jurisdiction over offenses involving the heads of the
legal departments of government-owned and
controlled corporations.

The Ruling of the Court

In its February 12, 2004 decision, the Sandiganbayan

held that, not being a stock or non-stock corporation,
AFP-RSBS cannot be regarded as a governmentowned and controlled corporation. Consequently,
respondent AFP-RSBS legal department officers did
not fall under Section 4(a)(1)(g) of R.A. 8249 that
defines the jurisdiction of the Sandiganbayan.2 On
motion for reconsideration by the prosecution,
however, the Sandiganbayan changed its position and
ruled that AFP-RSBS is after all a government-owned

Sec. 4. Jurisdiction. The Sandiganbayan shall

exercise exclusive original jurisdiction in all cases
involving:

a. Violations of Republic Act No. 3019, as amended,

otherwise known as the Anti-graft and Corrupt
Practices Act, Republic Act No. 1379, and Chapter II,
Section 2, Title VII, Book II of the Revised Penal
Code, where one or more of the accused are officials
occupying the following positions in the government,
whether in a permanent, acting or interim capacity, at
the time of the commission of the offense:

xxxx

(g) Presidents, directors or trustees, or managers of

government-owned or controlled corporations, state

universities or educational institutions or foundations.

(Emphasis ours)

Notably, in its February 2, 2005 Resolution, the

Sandiganbayan defined the word "manager" used
above as one who has charge of a corporation and
control of its businesses or of its branch
establishments, and who is vested with a certain
amount of discretion and independent judgment.

The Sandiganbayan cited Black's Law Dictionary,

Revised 4th Ed., 1968 to support this definition.3

After a quick check of the same dictionary source but

of a later edition, however, the Court finds this
additional definition of "manager:"

A manager is one who has charge of corporation and

control of its businesses, or of its branch
establishments, divisions, or departments, and who is
vested with a certain amount of discretion and
independent judgment.4

The Sandiganbayan apparently overlooked the above

definition that includes "divisions, or departments,"
which are corporate units headed by managers. The
United States case of Braniff v. McPherren5 also
referred to "divisions" and "departments" in relation to
the position of "manager." Under this definition,
respondent Bello would fit into the term "manager," he
having charge of the AFP-RSBS Legal Department
when the questioned transactions took place.

In clarifying the meaning of the term "manager" as

used in Section 4(a)(1)(g), the Sandiganbayan also
invoked the doctrine of noscitur a sociis. Under this
doctrine, a proper construction may be had by
considering the company of words in which the term
or phrase in question is founded or with which it is
associated.6 Given that the word "manager" was in
the company of the words "presidents, directors or
trustees," the clear intent, according to the
Sandiganbayan, is to limit the meaning of the term
"manager" to officers who have overall control and
supervision of government-owned and controlled
corporations.

But as the OMB puts it, the enumeration of the

officials in each of the categories in Section 4(a)(1)
should be understood to refer to a range of positions
within a government corporation. By the variety of the
functions they perform, the "presidents, directors or
trustees, or managers" cannot be taken to refer only
to those who exercise "overall" control and
supervision of such corporations.

The directors or trustees of government-owned and

controlled corporations do not, for example, exercise
overall supervision and control; when they act
collectively as a board, the directors or trustees
merely lay down policies for the operating officers to

implement. Since "managers" definitely do not have

the same responsibilities as directors and trustees or
as presidents, they belong to a distinct class of
corporate officers that, under the definition above, has
charge of a corporation's "divisions or departments."
This brings Bello's position within the definition.

Respondent Bello also argues that the

Sandiganbayan does not exercise jurisdiction over
him because his rank at the time of the acts
complained of was merely that of Police
Superintendent in the Philippine National Police. But
the criminal information does not charge him for
offenses relating to the regular police work of a police
officer of his rank. He is rather charged for offenses
he committed in relation to his office, namely, that of a
"manager" of the Legal Department of AFP-RSBS, a
government-owned and controlled corporation.

What is needed is that the public officials mentioned

by law must commit the offense described in Section
3(e) of R.A. 3019 while in the performance of official
duties or in relation to the office being held.7 Here,
the OMB charged Bello of using his office as Legal
Department Head to manipulate the documentations
of AFP-RSBS land acquisitions to the prejudice of the
government.

WHEREFORE, the Court GRANTS the

petition, REVERSES the Sandiganbayan decision
dated February 12, 2004 and resolution dated
February 2, 2005 in Criminal Cases 26770-75 and
26826-31, and DIRECTS the Sandiganbayan
to REINSTATE these cases,
immediately ARRAIGN all the accused, and resolve
accused Raul Aposaga's motion for reinvestigation.
FRANCISCO I. CHAVEZ, Petitioner,
vs.
JUDICIAL AND BAR COUNCIL

MENDOZA, J.:
The issue at hand has been in hibernation until the
unexpected departure of Chief Justice Renato C.
Corona on May 29, 2012, and the nomination of
former Solicitor General Francisco I. Chavez
(petitioner), as his potential successor, triggered the
filing of this case. The issue has constantly been
nagging legal minds, yet remained dormant for lack of
constitutional challenge.
As the matter is of extreme urgency considering the
constitutional deadline in the process of selecting the
nominees for the vacant seat of the Chief Justice, the
Court cannot delay the resolution of the issue a day
longer. Relegating it in the meantime to the back
burner is not an option.
Does the first paragraph of Section 8, Article VIII of
the 1987 Constitution allow more than one (1)
member of Congress to sit in the JBC? Is the practice
of having two (2) representatives from each house of
Congress with one (1) vote each sanctioned by the
Constitution? These are the pivotal questions to be
resolved in this original action for prohibition and
injunction.
Long before the naissance of the present
Constitution, the annals of history bear witness to the
fact that the exercise of appointing members of the
Judiciary has always been the exclusive prerogative
of the executive and legislative branches of the
government. Like their progenitor of American origins,
both the Malolos Constitution1and the 1935
Constitution2 had vested the power to appoint the
members of the Judiciary in the President, subject to
confirmation by the Commission on Appointments. It
was during these times that the country became
witness to the deplorable practice of aspirants
seeking confirmation of their appointment in the
Judiciary to ingratiate themselves with the members
of the legislative body.3
Then, with the fusion of executive and legislative
power under the 1973 Constitution,4 the appointment
of judges and justices was no longer subject to the
scrutiny of another body. It was absolute, except that
the appointees must have all the qualifications and
none of the disqualifications.

Prompted by the clamor to rid the process of

appointments to the Judiciary from political pressure
and partisan activities,5 the members of the
Constitutional Commission saw the need to create a
separate, competent and independent body to
recommend nominees to the President. Thus, it
conceived of a body representative of all the
stakeholders in the judicial appointment process and
called it the Judicial and Bar Council (JBC). Its
composition, term and functions are provided under
Section 8, Article VIII of the Constitution, viz:
Section 8. (1) A Judicial and Bar Council is hereby
created under the supervision of the Supreme Court
composed of the Chief Justice as ex officio Chairman,
the Secretary of Justice, and a representative of the
Congress as ex officio Members, a representative of
the Integrated Bar, a professor of law, a retired
Member of the Supreme Court, and a representative
of the private sector.
(2) The regular members of the Council shall be
appointed by the President for a term of four years
with the consent of the Commission on Appointments.
Of the Members first appointed, the representative of
the Integrated Bar shall serve for four years, the
professor of law for three years, the retired Justice for
two years, and the representative of the private sector
for one year.
(3) The Clerk of the Supreme Court shall be the
Secretary ex officio of the Council and shall keep a
record of its proceedings.
(4) The regular Members of the Council shall receive
such emoluments as may be determined by the
Supreme Court. The Supreme Court shall provide in
its annual budget the appropriations for the Council.
(5) The Council shall have the principal function of
recommending appointees to the Judiciary. It may
exercise such other functions and duties as the
Supreme Court may assign to it.
In compliance therewith, Congress, from the moment
of the creation of the JBC, designated one
representative to sit in the JBC to act as one of the ex
officio members.6 Perhaps in order to give equal
opportunity to both houses to sit in the exclusive body,
the House of Representatives and the Senate would

send alternate representatives to the JBC. In other

words, Congress had only one (1) representative.
In 1994, the composition of the JBC was substantially
altered. Instead of having only seven (7) members, an
eighth (8th) member was added to the JBC as two (2)
representatives from Congress began sitting in the
JBC - one from the House of Representatives and
one from the Senate, with each having one-half (1/2)
of a vote.7 Then, curiously, the JBC En Banc, in
separate meetings held in 2000 and 2001, decided to
allow the representatives from the Senate and the
House of Representatives one full vote each.8 At
present, Senator Francis Joseph G. Escudero and
Congressman Niel C. Tupas, Jr. (respondents)
simultaneously sit in the JBC as representatives of
the legislature.
It is this practice that petitioner has questioned in this
petition,9 setting forth the following
GROUNDS FOR ALLOWANCE OF THE PETITION
I
Article VIII, Section 8, Paragraph 1 is clear, definite
and needs no interpretation in that the JBC shall have
only one representative from Congress.
II
The framers of the Constitution clearly envisioned,
contemplated and decided on a JBC composed of
only seven (7) members.
III
Had the framers of the Constitution intended that the
JBC composed of the one member from the Senate
and one member from the House of Representatives,
they could have easily said so as they did in the other
provisions of the Constitution.
IV
The composition of the JBC providing for three exofficio members is purposely designed for a balanced
representation of each of the three branches of the
government.
V

One of the two (2) members of the JBC from

Congress has no right (not even right) to sit in the
said constitutional body and perform the duties and
functions of a member thereof.
VI
The JBC cannot conduct valid proceedings as its
composition is illegal and unconstitutional.10
On July 9, 2012, the JBC filed its Comment.11 It,
however, abstained from recommending on how this
constitutional issue should be disposed in gracious
deference to the wisdom of the Court. Nonetheless,
the JBC was more than generous enough to offer the
insights of various personalities previously connected
with it.12
Through the Office of the Solicitor General (OSG),
respondents defended their position as members of
the JBC in their Comment13 filed on July 12, 2012.
According to them, the crux of the controversy is the
phrase "a representative of Congress."14 Reverting to
the basics, they cite Section 1, Article VI of the
Constitution15 to determine the meaning of the
term "Congress." It is their theory that the two houses,
the Senate and the House of Representatives, are
permanent and mandatory components of
"Congress," such that the absence of either divests
the term of its substantive meaning as expressed
under the Constitution. In simplistic terms, the House
of Representatives, without the Senate and viceversa, is not Congress.16 Bicameralism, as the
system of choice by the Framers, requires that both
houses exercise their respective powers in the
performance of its mandated duty which is to
legislate. Thus, when Section 8(1), Article VIII of the
Constitution speaks of "a representative from
Congress," it should mean one representative each
from both Houses which comprise the entire
Congress.17
Tracing the subject provisions history, the
respondents claim that when the JBC was
established, the Framers originally envisioned a
unicameral legislative body, thereby allocating "a
representative of the National Assembly" to the JBC.
The phrase, however, was not modified to aptly jive
with the change to bicameralism, the legislative
system finally adopted by the Constitutional
Commission on July 21, 1986. According to

respondents, if the Commissioners were made aware

of the consequence of having a bicameral legislature
instead of a unicameral one, they would have made
the corresponding adjustment in the representation of
Congress in the JBC.18
The ambiguity having resulted from a plain case of
inadvertence, the respondents urge the Court to look
beyond the letter of the disputed provision because
the literal adherence to its language would produce
absurdity and incongruity to the bicameral nature of
Congress.19 In other words, placing either of the
respondents in the JBC will effectively deprive a
house of Congress of its representation. In the same
vein, the electorate represented by Members of
Congress will lose their only opportunity to participate
in the nomination process for the members of the
Judiciary, effectively diminishing the republican nature
of the government.20
The respondents further argue that the allowance of
two (2) representatives of Congress to be members of
the JBC does not render the latters purpose
nugatory. While they admit that the purpose in
creating the JBC was to insulate appointments to the
Judiciary from political influence, they likewise
cautioned the Court that this constitutional vision did
not intend to entirely preclude political factor in said
appointments. Therefore, no evil should be perceived
in the current set-up of the JBC because two (2)
members coming from Congress, whose membership
to certain political parties is irrelevant, does not
necessarily amplify political partisanship in the JBC.
In fact, the presence of two (2) members from
Congress will most likely provide balance as against
the other six (6) members who are undeniably
presidential appointees.21
The Issues
In resolving the procedural and substantive issues
arising from the petition, as well as the myriad of
counter-arguments proffered by the respondents, the
Court synthesized them into two:
(1) Whether or not the conditions sine qua non for the
exercise of the power of judicial review have been
met in this case; and
(2) Whether or not the current practice of the JBC to
perform its functions with eight (8) members, two (2)

of whom are members of Congress, runs counter to

the letter and spirit of the 1987 Constitution.
The Power of Judicial Review
In its Comment, the JBC submits that petitioner is
clothed with locus standi to file the petition, as a
citizen and taxpayer, who has been nominated to the
position of Chief Justice.22
For the respondents, however, petitioner has no "real
interest" in questioning the constitutionality of the
JBCs current composition.23 As outlined in
jurisprudence, it is well-settled that for locus standi to
lie, petitioner must exhibit that he has been denied, or
is about to be denied, of a personal right or privilege
to which he is entitled. Here, petitioner failed to
manifest his acceptance of his recommendation to the
position of Chief Justice, thereby divesting him of a
substantial interest in the controversy. Without his
name in the official list of applicants for the post, the
respondents claim that there is no personal stake on
the part of petitioner that would justify his outcry of
unconstitutionality. Moreover, the mere allegation that
this case is of transcendental importance does not
excuse the waiver of the rule on locus standi,
because, in the first place, the case lacks the
requisites therefor. The respondents also question
petitioners belated filing of the petition.24 Being
aware that the current composition of the JBC has
been in practice since 1994, petitioners silence for
eighteen (18) years show that the constitutional issue
being raised before the Court does not comply with
the "earliest possible opportunity" requirement.
Before addressing the above issues in seriatim, the
Court deems it proper to first ascertain the nature of
the petition. Pursuant to the rule that the nature of an
action is determined by the allegations therein and the
character of the relief sought, the Court views the
petition as essentially an action for declaratory relief
under Rule 63 of the 1997 Rules of Civil Procedure.25
The Constitution as the subject matter, and the
validity and construction of Section 8 (1), Article VIII
as the issue raised, the petition should properly be
considered as that which would result in the
adjudication of rights sans the execution process
because the only relief to be granted is the very
declaration of the rights under the document sought to
be construed. It being so, the original jurisdiction over

the petition lies with the appropriate Regional Trial

Court (RTC). Notwithstanding the fact that only
questions of law are raised in the petition, an action
for declaratory relief is not among those within the
original jurisdiction of this Court as provided in
Section 5, Article VIII of the Constitution.26
At any rate, due to its serious implications, not only to
government processes involved but also to the
sanctity of the Constitution, the Court deems it more
prudent to take cognizance of it. After all, the petition
is also for prohibition under Rule 65 seeking to enjoin
Congress from sending two (2) representatives with
one (1) full vote each to the JBC.
The Courts power of judicial review, like almost all
other powers conferred by the Constitution, is subject
to several limitations, namely: (1) there must be an
actual case or controversy calling for the exercise of
judicial power; (2) the person challenging the act must
have "standing" to challenge; he must have a
personal and substantial interest in the case, such
that he has sustained or will sustain, direct injury as a
result of its enforcement; (3) the question of
constitutionality must be raised at the earliest possible
opportunity; and (4) the issue of constitutionality must
be the very lis mota of the case.27 Generally, a party
will be allowed to litigate only when these conditions
sine qua non are present, especially when the
constitutionality of an act by a co-equal branch of
government is put in issue.
Anent locus standi, the question to be answered is
this: does the party possess a personal stake in the
outcome of the controversy as to assure that there is
real, concrete and legal conflict of rights and duties
from the issues presented before the Court? In David
v. Macapagal-Arroyo,28 the Court summarized the
rules on locus standi as culled from jurisprudence.
There, it was held that taxpayers, voters, concerned
citizens, and legislators may be accorded standing to
sue, provided that the following requirements are met:
(1) cases involve constitutional issues; (2) for
taxpayers, there must be a claim of illegal
disbursement of public funds or that the tax measure
is unconstitutional; (3) for voters, there must be a
showing of obvious interest in the validity of the
election law in question; (4) for concerned citizens,
there must be a showing that the issues raised are of
transcendental importance which must be settled
early; and (5) for legislators, there must be a claim

that the official action complained of infringes upon

their prerogatives as legislators.
In public suits, the plaintiff, representing the general
public, asserts a "public right" in assailing an allegedly
illegal official action. The plaintiff may be a person
who is affected no differently from any other person,
and can be suing as a "stranger," or as a "citizen" or
"taxpayer." Thus, taxpayers have been allowed to sue
where there is a claim that public funds are illegally
disbursed or that public money is being deflected to
any improper purpose, or that public funds are wasted
through the enforcement of an invalid or
unconstitutional law. Of greater import than the
damage caused by the illegal expenditure of public
funds is the mortal wound inflicted upon the
fundamental law by the enforcement of an invalid
statute.29
In this case, petitioner seeks judicial intervention as a
taxpayer, a concerned citizen and a nominee to the
position of Chief Justice of the Supreme Court. As a
taxpayer, petitioner invokes his right to demand that
the taxes he and the rest of the citizenry have been
paying to the government are spent for lawful
purposes. According to petitioner, "since the JBC
derives financial support for its functions, operation
and proceedings from taxes paid, petitioner
possesses as taxpayer both right and legal standing
to demand that the JBCs proceedings are not tainted
with illegality and that its composition and actions do
not violate the Constitution."30
Notably, petitioner takes pains in enumerating past
actions that he had brought before the Court where
his legal standing was sustained. Although this
inventory is unnecessary to establish locus
standi because obviously, not every case before the
Court exhibits similar issues and facts, the Court
recognizes the petitioners right to sue in this case.
Clearly, petitioner has the legal standing to bring the
present action because he has a personal stake in the
outcome of this controversy.
The Court disagrees with the respondents contention
that petitioner lost his standing to sue because he is
not an official nominee for the post of Chief Justice.
While it is true that a "personal stake" on the case is
imperative to have locus standi, this is not to say that
only official nominees for the post of Chief Justice can
come to the Court and question the JBC composition

for being unconstitutional. The JBC likewise screens

and nominates other members of the Judiciary. Albeit
heavily publicized in this regard, the JBCs duty is not
at all limited to the nominations for the highest
magistrate in the land. A vast number of aspirants to
judicial posts all over the country may be affected by
the Courts ruling. More importantly, the legality of the
very process of nominations to the positions in the
Judiciary is the nucleus of the controversy. The Court
considers this a constitutional issue that must be
passed upon, lest a constitutional process be plagued
by misgivings, doubts and worse, mistrust. Hence, a
citizen has a right to bring this question to the Court,
clothed with legal standing and at the same time,
armed with issues of transcendental importance to
society. The claim that the composition of the JBC is
illegal and unconstitutional is an object of concern, not
just for a nominee to a judicial post, but for all citizens
who have the right to seek judicial intervention for
rectification of legal blunders.
With respect to the question of transcendental
importance, it is not difficult to perceive from the
opposing arguments of the parties that the
determinants established in jurisprudence are
attendant in this case: (1) the character of the funds
or other assets involved in the case; (2) the presence
of a clear case of disregard of a constitutional or
statutory prohibition by the public respondent agency
or instrumentality of the government; and (3) the lack
of any other party with a more direct and specific
interest in the questions being raised.31 The
allegations of constitutional violations in this case are
not empty attacks on the wisdom of the other
branches of the government. The allegations are
substantiated by facts and, therefore, deserve an
evaluation from the Court. The Court need not
elaborate on the legal and societal ramifications of the
issues raised. It cannot be gainsaid that the JBC is a
constitutional innovation crucial in the selection of the
magistrates in our judicial system.
The Composition of the JBC
Central to the resolution of the foregoing petition is an
understanding of the composition of the JBC as
stated in the first paragraph of Section 8, Article VIII of
the Constitution. It reads:
Section 8. (1) A Judicial and Bar Council is hereby
created under the supervision of the Supreme Court

composed of the Chief Justice as ex officio Chairman,

the Secretary of Justice, and a representative of the
Congress as ex officio Members, a representative of
the Integrated Bar, a professor of law, a retired
Member of the Supreme Court, and a representative
of the private sector.
From a simple reading of the above-quoted provision,
it can readily be discerned that the provision is clear
and unambiguous. The first paragraph calls for the
creation of a JBC and places the same under the
supervision of the Court. Then it goes to its
composition where the regular members are
enumerated: a representative of the Integrated Bar, a
professor of law, a retired member of the Court and a
representative from the private sector. On the second
part lies the crux of the present controversy. It
enumerates the ex officio or special members of the
JBC composed of the Chief Justice, who shall be its
Chairman, the Secretary of Justice and "a
representative of Congress."
As petitioner correctly posits, the use of the singular
letter "a" preceding "representative of Congress" is
unequivocal and leaves no room for any other
construction. It is indicative of what the members of
the Constitutional Commission had in mind, that is,
Congress may designate only one (1) representative
to the JBC. Had it been the intention that more than
one (1) representative from the legislature would sit in
the JBC, the Framers could have, in no uncertain
terms, so provided.
One of the primary and basic rules in statutory
construction is that where the words of a statute are
clear, plain, and free from ambiguity, it must be given
its literal meaning and applied without attempted
interpretation.32 It is a well-settled principle of
constitutional construction that the language
employed in the Constitution must be given their
ordinary meaning except where technical terms are
employed. As much as possible, the words of the
Constitution should be understood in the sense they
have in common use. What it says according to the
text of the provision to be construed compels
acceptance and negates the power of the courts to
alter it, based on the postulate that the framers and
the people mean what they say.33 Verba legis non est
recedendum from the words of a statute there
should be no departure.34

The raison d tre for the rule is essentially twofold: First, because it is assumed that the words in
which constitutional provisions are couched express
the objective sought to be attained;35 and second,
because the Constitution is not primarily a lawyers
document but essentially that of the people, in whose
consciousness it should ever be present as an
important condition for the rule of law to prevail. 36
Moreover, under the maxim noscitur a sociis, where a
particular word or phrase is ambiguous in itself or is
equally susceptible of various meanings, its correct
construction may be made clear and specific by
considering the company of words in which it is
founded or with which it is associated.37 This is
because a word or phrase in a statute is always used
in association with other words or phrases, and its
meaning may, thus, be modified or restricted by the
latter.38 The particular words, clauses and phrases
should not be studied as detached and isolated
expressions, but the whole and every part of the
statute must be considered in fixing the meaning of
any of its parts and in order to produce a harmonious
whole. A statute must be so construed as to
harmonize and give effect to all its provisions
whenever possible.39 In short, every meaning to be
given to each word or phrase must be ascertained
from the context of the body of the statute since a
word or phrase in a statute is always used in
association with other words or phrases and its
meaning may be modified or restricted by the latter.
Applying the foregoing principle to this case, it
becomes apparent that the word "Congress" used in
Article VIII, Section 8(1) of the Constitution is used in
its generic sense. No particular allusion whatsoever is
made on whether the Senate or the House of
Representatives is being referred to, but that, in either
case, only a singular representative may be allowed
to sit in the JBC. The foregoing declaration is but
sensible, since, as pointed out by an esteemed former
member of the Court and consultant of the JBC in his
memorandum,40 "from the enumeration of the
membership of the JBC, it is patent that each
category of members pertained to a single individual
only."41
Indeed, the spirit and reason of the statute may be
passed upon where a literal meaning would lead to
absurdity, contradiction, injustice, or defeat the clear
purpose of the lawmakers.42 Not any of these

instances, however, is present in the case at

bench. Considering that the language of the subject
constitutional provision is plain and unambiguous,
there is no need to resort extrinsic aids such as
records of the Constitutional Commission.
Nevertheless, even if the Court should proceed to
look into the minds of the members of the
Constitutional Commission, it is undeniable from the
records thereof that it was intended that the JBC be
composed of seven (7) members only. Thus:
MR. RODRIGO: Let me go to another point then.
On page 2, Section 5, there is a novel provision about
the appointments of members of the Supreme Court
and judges of the lower courts. At present it is the
President who appoints them. If there is a
Commission on Appointments, then it is the President
with the confirmation of the Commission on
Appointment. In this proposal, we would like to
establish a new office, a sort of a board composed of
seven members called the Judicial and Bar Council.
And while the President will still appoint the member
of the judiciary, he will be limited to the
recommendees of this Council.
xxx

xxx

xxx

MR. RODRIGO. Of the seven members of the Judicial

and Bar Council, the President appoints four of them
who are regular members.
xxx

xxx

xxx

MR. CONCEPCION. The only purpose of the

Committee is to eliminate partisan politics.43
xxx

xxx

xxx

MR. RODRIGO. If my amendment is approved, then

the provision will be exactly the same as the provision
in the 1935 Constitution, Article VIII, Section 5.
xxx

xxx

xxx

If we do not remove the proposed amendment on the

creation of the Judicial and Bar Council, this will be a
diminution of the appointing power of the highest
magistrate of the land, of the

President of the Philippines elected by all the Filipino

people. The appointing power will be limited by a
group of seven people who are not elected by the
people but only appointed.
Mr. Presiding Officer, if this Council is created, there
will be no uniformity in our constitutional provisions on
appointments. The members of the Judiciary will be
segregated from the rest of the government. Even a
municipal judge cannot be appointed by the President
except upon recommendation or nomination of the
three names by this Committee of seven people,
commissioners of the Commission on Elections, the
COA and the Commission on Civil Serviceeven
ambassadors, generals of the Army will not come
under this restriction. Why are we going to segregate
the Judiciary from the rest of our government in the
appointment of high-ranking officials?
Another reason is that this Council will be ineffective.
It will just besmirch the honor of our President without
being effective at all because this Council will be
under the influence of the President. Four out of
seven are appointees of the President and they can
be reappointed when their term ends. Therefore, they
would be kowtow the President. A fifth member is the
Minister of Justice, an alter ego of the President.
Another member represents the Legislature. In all
probability, the controlling part in the legislature
belongs to the President and, therefore, this
representative form the National Assembly is also
under the influence of the President. And may I say,
Mr. Presiding Officer, that event the Chief Justice of
the Supreme Court is an appointee of the President.
So it is futile he will be influence anyway by the
President.44 [Emphases supplied]
At this juncture, it is worthy to note that the sevenmember composition of the JBC serves a practical
purpose, that is, to provide a solution should there be
a stalemate in voting. This underlying reason leads
the Court to conclude that a single vote may not be
divided into half (1/2), between two representatives of
Congress, or among any of the sitting members of the
JBC for that matter. This unsanctioned practice can
possibly cause disorder and eventually muddle the
JBCs voting process, especially in the event a tie is
reached. The aforesaid purpose would then be
rendered illusory, defeating the precise mechanism
which the Constitution itself created. While it would be
unreasonable to expect that the Framers provide for

every possible scenario, it is sensible to presume that

they knew that an odd composition is the best means
to break a voting deadlock.
The respondents insist that owing to the bicameral
nature of Congress, the word "Congress" in Section
8(1), Article VIII of the Constitution should be read as
including both the Senate and the House of
Representatives. They theorize that it was so worded
because at the time the said provision was being
drafted, the Framers initially intended a unicameral
form of Congress.
Then, when the Constitutional Commission eventually
adopted a bicameral form of Congress, the Framers,
through oversight, failed to amend Article VIII, Section
8 of the Constitution.45 On this score, the Court cites
the insightful analysis of another member of the Court
and JBC consultant, retired Justice Consuelo YnaresSantiago.46 Thus:
A perusal of the records of the Constitutional
Commission reveals that the composition of the JBC
reflects the Commissions desire "to have in the
Council a representation for the major elements of the
community." xxx Theex-officio members of the
Council consist of representatives from the three main
branches of government while the regular members
are composed of various stakeholders in the
judiciary. The unmistakeable tenor of Article VIII,
Section 8(1) was to treat each ex-officio member
as representing one co-equal branch of
government. xxx Thus, the JBC was designed to
have seven voting members with the three exofficio members having equal say in the choice of
judicial nominees.
xxx

xxx

xxx

No parallelism can be drawn between the

representative of Congress in the JBC and the
exercise by Congress of its legislative powers under
Article VI and constituent powers under Article XVII of
the Constitution. Congress, in relation to the executive
and judicial branches of government, is
constitutionally treated as another co-equal branch of
in the matter of its representative in the JBC. On the
other hand, the exercise of legislative and constituent
powers requires the Senate and House of
Representatives to coordinate and act as distinct
bodies in furtherance of Congress role under our

constitutional scheme. While the latter justifies and, in

fact, necessitates the separateness of the two houses
of Congress as they relate inter se, no such
dichotomy need be made when Congress interacts
with the other two co-equal branches of government.
It is more in keeping with the co-equal nature of the
three governmental branches to assign the same
weight to considerations that any of its
representatives may have regarding aspiring
nominees to the judiciary. The representatives of the
Senate and the House of Representatives act as such
for one branch and should not have any more
quantitative influence as the other branches in the
exercise of prerogatives evenly bestowed upon the
three. Sound reason and principle of equality among
the three branches support this conclusion.
[Emphases and underscoring supplied]
More than the reasoning provided in the above
discussed rules of constitutional construction, the
Court finds the above thesis as the paramount
justification of the Courts conclusion that "Congress,"
in the context of JBC representation, should be
considered as one body. It is evident that the
definition of "Congress" as a bicameral body refers to
its primary function in government - to legislate.47 In
the passage of laws, the Constitution is explicit in the
distinction of the role of each house in the process.
The same holds true in Congress non-legislative
powers such as, inter alia, the power of
appropriation,48 the declaration of an existence of a
state of war,49canvassing of electoral returns for the
President and Vice-President,50 and
impeachment.51 In the exercise of these powers, the
Constitution employs precise language in laying down
the roles which a particular house plays, regardless of
whether the two houses consummate an official act
by voting jointly or separately. An inter-play between
the two houses is necessary in the realization of these
powers causing a vivid dichotomy that the Court
cannot simply discount. Verily, each house is
constitutionally granted with powers and functions
peculiar to its nature and with keen consideration to 1)
its relationship with the other chamber; and 2) in
consonance with the principle of checks and
balances, to the other branches of government.
This, however, cannot be said in the case of JBC
representation because no liaison between the two
houses exists in the workings of the JBC. No

mechanism is required between the Senate and the

House of Representatives in the screening and
nomination of judicial officers. Hence, the term
"Congress" must be taken to mean
the entirelegislative department. A fortiori, a pretext of
oversight cannot prevail over the more pragmatic
scheme which the Constitution laid with firmness, that
is, that the JBC has a seat for a single representative
of Congress, as one of the co-equal branches of
government.
Doubtless, the Framers of our Constitution intended
to create a JBC as an innovative solution in response
to the public clamor in favor of eliminating politics in
the appointment of members of the Judiciary.52 To
ensure judicial independence, they adopted a holistic
approach and hoped that, in creating a JBC, the
private sector and the three branches of government
would have an active role and equal voice in the
selection of the members of the Judiciary.
Therefore, to allow the Legislature to have more
quantitative influence in the JBC by having more than
one voice speak, whether with one full vote or onehalf (1/2) a vote each, would, as one former
congressman and member of the JBC put it, "negate
the principle of equality among the three branches of
government which is enshrined in the Constitution."53
To quote one former Secretary of Justice:
The present imbalance in voting power between the
Legislative and the other sectors represented in the
JBC must be corrected especially when considered
vis--vis the avowed purpose for its creation, i.e., to
insulate the appointments in the Judiciary against
political influence. By allowing both houses of
Congress to have a representative in the JBC and by
giving each representative one (1) vote in the Council,
Congress, as compared to the other members of the
JBC, is accorded greater and unwarranted influence
in the appointment of judges.54[Emphasis supplied]
It is clear, therefore, that the Constitution mandates
that the JBC be composed of seven (7) members
only. Thus, any inclusion of another member, whether
with one whole vote or half (1/2) of it, goes against
that mandate. Section 8(1), Article VIII of the
Constitution, providing Congress with an equal voice
with other members of the JBC in recommending
appointees to the Judiciary is explicit. Any

circumvention of the constitutional mandate should

not be countenanced for the Constitution is the
supreme law of the land. The Constitution is the basic
and paramount law to which all other laws must
conform and to which all persons, including the
highest officials of the land, must defer. Constitutional
doctrines must remain steadfast no matter what may
be the tides of time. It cannot be simply made to sway
and accommodate the call of situations and much
more tailor itself to the whims and caprices of the
government and the people who run it.55 Hence, any
act of the government or of a public official or
employee which is contrary to the Constitution is
illegal, null and void.
As to the effect of the Courts finding that the current
composition of the JBC is unconstitutional, it bears
mentioning that as a general rule, an unconstitutional
act is not a law; it confers no rights; it imposes no
duties; it affords no protection; it creates no office; it is
inoperative as if it has not been passed at all.56 This
rule, however, is not absolute. In the interest of fair
play under the doctrine of operative facts, actions
previous to the declaration of unconstitutionality are
legally recognized. They are not nullified. In Planters
Products, Inc. v. Fertiphil Corporation,57 the Court
explained:
The doctrine of operative fact, as an exception to the
general rule, only applies as a matter of equity and
fair play. It nullifies the effects of an unconstitutional
law by recognizing that the existence of a statute prior
to a determination of unconstitutionality is an
operative fact and may have consequences which
cannot always be ignored. The past cannot always be
erased by a new judicial declaration.
The doctrine is applicable when a declaration of
unconstitutionality will impose an undue burden on
those who have relied on the invalid law. Thus, it was
applied to a criminal case when a declaration of
unconstitutionality would put the accused in double
jeopardy or would put in limbo the acts done by a
municipality in reliance upon a law creating it.
Considering the circumstances, the Court finds the
exception applicable in this case and holds that
notwithstanding its finding of unconstitutionality in the
current composition of the JBC, all its prior official
actions are nonetheless valid.

At this point, the Court takes the initiative to clarify

that it is not in a position to determine as to who
should remain as the sole representative of Congress
in the JBC. This is a matter beyond the province of
the Court and is best left to the determination of
Congress.
Finally, while the Court finds wisdom in respondents'
contention that both the Senate and the House of
Representatives should be equally represented in the
JBC, the Court is not in a position to stamp its
imprimatur on such a construction at the risk of
expanding the meaning of the Constitution as
currently worded. Needless to state, the remedy lies
in the amendment of this constitutional provision. The
courts merely give effect to the lawgiver's intent. The
solemn power and duty of the Court to interpret and
apply the law does not include the power to correct,
by reading into the law what is not written therein.
WHEREFORE, the petition is GRANTED. The current
numerical composition of the Judicial and Bar Council
IS declared UNCONSTITUTIONAL. The Judicial and
Bar Council is hereby enjoined to reconstitute itself so
that only one ( 1) member of Congress will sit as a
representative in its proceedings, in accordance with
Section 8( 1 ), Article
PHILIPPINE BASKETBALL ASSOCIATION,
petitioner, vs. COURT OF APPEALS, COURT OF
TAX APPEALS, AND COMMISSIONER OF
INTERNAL REVENUE, respondents.
PURISIMA, J.:
At bar is a petition for review on certiorari under Rule
45 of the Rules of Court seeking a review of the
decision1 [Penned by Associate Justice Pedro A.
Ramirez and concurred by Associate Justices Quirino
D. Abad Santos, Jr. and Eugenio S. Labitoria.] of the
Court of Appeals in CA-G.R. SP No. 34095 which
affirmed the decision of the Court of Tax Appeals in
C.T.A. Case No. 4419.
The facts that matter are as follows:
On June 21, 1989, the petitioner received an
assessment letter from the Commissioner of Internal
Revenue (respondent Commissioner) for the payment
of deficiency amusement tax computed thus:

Deficiency Amusement Tax

Total gross receipts 1987
P19,970,928.00
15% tax due thereon
2,995,639.20
Less: Tax paid
602,063.35

assessment) until fully paid pursuant to the provisions

of Sections 248 and 249 (c) (3) of the Tax Code, as
amended."3 [CTA Decision penned by Associate
Judge Ramon O. de Veyra and concurred by
Presiding Judge Ernesto D. Acosta and Associate
Judge Manuel K. Gruba; Rollo, pp. 70-78.]
Petitioner presented a motion for reconsideration4
[Rollo, pp. 79-89.] of the said decision but the same
was denied by respondent CTA in a resolution5 [Ibid.,
p. 90.] dated April 8, 1994. Thereafter and within the
reglementary period for interposing appeals, petitioner
appealed the CTA decision to the Court of Appeals.

amusement tax on admission receipts of Petitioner is

5%.
"6. Respondent Court of Appeals erred in holding that
the cession of advertising and streamer spaces in the
venue to a third person is subject to amusement
taxes.
"7. Respondent Court of Appeals erred in holding that
the cession of advertising and streamer spaces inside
the venue is embraced within the term 'gross receipts'
as defined in Section 123 (6) of the Tax Code.
"8. Respondent Court of Appeals erred in holding that
the amusement tax liability of Petitioner is subject to a
75% surcharge."

20% interest (2 years)

__1,675,503.10

On November 21, 1994, the Court of Appeals

rendered its questioned Decision,6 [Ibid., pp. 33-40.]
affirming the decision of the CTA and dismissing
petitioner's appeal. Petitioner filed a Motion for
Reconsideration of said decision but to no avail. The
same was denied by the Court of Appeals in a
Resolution7 [Ibid., p. 43.] dated January 31, 1995.
Hence, this petition.

Total Amount Due & Collectible

P 5,864,260.84

Undaunted, petitioner found its way to this Court via

the present petition, contending that:

1. Is the amusement tax on admission tickets to PBA

games a national or local tax? Otherwise put, who
between the national government and local
government should petitioner pay amusement taxes?

"1. Respondent Court of Appeals erred in holding that

the jurisdiction to collect amusement taxes of PBA
games is vested in the national government to the
exclusion of the local governments.

2. Is the cession of advertising and streamer spaces

to Vintage Enterprises, Inc. (VEI) subject to the
payment of amusement tax?

Deficiency amusement tax

P 2,393,575.85
Add:....75% surcharge
1,795,181.89

On July 18, 1989, petitioner contested the

assessment by filing a protest with respondent
Commissioner who denied the same on November 6,
1989.
On January 8, 1990, petitioner filed a petition for
review2 [Rollo, pp. 44-62.] with the Court of Tax
Appeals (respondent CTA) questioning the denial by
respondent Commissioner of its tax protest.
On December 24, 1993, respondent CTA dismissed
petitioner's petition, holding:

"2. Respondent Court of Appeals erred in holding that

Section 13 of the Local Tax Code of 1973 limits local
government units to theaters, cinematographs,
concert halls, circuses and other places of
amusement in the collection of the amusement tax.
"3. Respondent Court of Appeals erred in holding that
Revenue Regulations No. 8-88 dated February 19,
1988 is an erroneous interpretation of law.

"WHEREFORE, in all the foregoing, herein petition for

review is hereby DISMISSED for lack of merit and the
Petitioner is hereby ORDERED to PAY to the
Respondent the amount of P5,864,260.84 as
deficiency amusement tax for the year 1987 plus 20%
annual delinquency interest from July 22, 1989 which
is the due date appearing on the notice and demand
of the Commissioner (i.e. 30 days from receipt of the

"4. Respondent Court of Appeals erred in giving

retroactive effect to the revocation of Revenue
Regulations 8-88.
"5. Respondent Court of Appeals erred when it failed
to consider the provisions of P.D. 851 the franchise of
Petitioner, Section 8 of which provides that

The issues for resolution in this case may be

simplified as follows:

3. If ever petitioner is liable for the payment of

deficiency amusement tax, is it liable to pay a
seventy-five percent (75%) surcharge on the
deficiency amount due?
Petitioner contends that PD 231, otherwise known as
the Local Tax Code of 1973, transferred the power
and authority to levy and collect amusement taxes
from the sale of admission tickets to places of
amusement from the national government to the local
governments. Petitioner cited BIR Memorandum
Circular No. 49-73 providing that the power to levy
and collect amusement tax on admission tickets was
transferred to the local governments by virtue of the
Local Tax Code; and BIR Ruling No. 231-86 which
held that "the jurisdiction to levy amusement tax on
gross receipts from admission tickets to places of

amusement was transferred to local governments

under P.D. No. 231, as amended."8 [See also BIR
Revenue Memorandum Circular No. 8-88.] Further,
petitioner opined that even assuming arguendo that
respondent Commissioner revoked BIR Ruling No.
231-86, the reversal, modification or revocation
cannot be given retroactive effect since even as late
as 1988 (BIR Memorandum Circular No. 8-88),
respondent Commissioner still recognized the
jurisdiction of local governments to collect amusement
taxes.

'3. Fifteen per centum in the case of boxing

exhibitions;

The Court is not persuaded by petitioner's

asseverations.

'6. Fifteen per centum in the case of bowling alleys of

their gross receipts, irrespective of whether or not any
amount is charged or paid for admission. For the
purpose of the amusement tax, the term gross
receipts' embraces all the receipts of the proprietor,
lessee or operator of the amusement place. Said
gross receipts also include income from television,
radio and motion picture rights, if any. (A person or
entity or association conducting any activity subject to
the tax herein imposed shall be similarly liable for said
tax with respect to such portion of the receipts derived
by him or it.)

The laws on the matter are succinct and clear and

need no elaborate disquisition. Section 13 of the
Local Tax Code provides:

"Sec. 13. Amusement tax on admission. -The

province shall impose a tax on admission to be
collected from the proprietors, lessees, or operators of
theaters, cinematographs, concert halls, circuses and
other places of amusement ."
The foregoing provision of law in point indicates that
the province can only impose a tax on admission from
the proprietors, lessees, or operators of theaters,
cinematographs, concert halls, circuses and other
places of amusement. The authority to tax
professional basketball games is not therein included,
as the same is expressly embraced in PD 1959,
which amended PD 1456 thus:
"SEC. 44. Section 268 of this Code, as amended, is
hereby further amended to read as follows:
'Sec. 268. Amusement taxes. -- There shall be
collected from the proprietor, lessee or operator of
cockpits, cabarets, night or day clubs, boxing
exhibitions, professional basketball games, Jai-Alai,
race tracks and bowling alleys, a tax equivalent to:
'1. Eighteen per centum in the case of cockpits;
'2. Eighteen per centum in the case of cabarets, night
or day clubs;

'4. Fifteen per centum in the case of professional

basketball games as envisioned in Presidential
Decree No. 871. Provided, however, That the tax
herein shall be in lieu of all other percentage taxes of
whatever nature and description;
'5. Thirty per centum in the case of Jai-Alai and race
tracks; and

'The taxes imposed herein shall be payable at the end

of each quarter and it shall be the duty of the
proprietor, lessee, or operator concerned, as well as
any party liable, within twenty days after the end of
each quarter, to make a true and complete return of
the amount of the gross receipts derived during the
preceding quarter and pay the tax due thereon. If the
tax is not paid within the time prescribed above, the
amount of the tax shall be increased by twenty-five
per centum, the increment to be part of the tax.
'In case of willful neglect to file the return within the
period prescribed herein, or in case a false or
fraudulent return is willfully made, there shall be
added to the tax or to the deficiency tax, in case any
payment has been made on the basis of the return
before the discovery of the falsity or fraud, a
surcharge of fifty per centum of its amount. The
amount so added to any tax shall be collected at the
same time and in the same manner and as part of the
tax unless the tax has been paid before the discovery
of the falsity or fraud, in which case, the amount so
assessed shall be collected in the same manner as
the tax." (underscoring ours)

From the foregoing it is clear that the "proprietor,

lessee or operator of professional basketball games"
is required to pay an amusement tax equivalent to
fifteen per centum (15%) of their gross receipts to the
Bureau of Internal Revenue, which payment is a
national tax. The said payment of amusement tax is in
lieu of all other percentage taxes of whatever nature
and description.
While Section 13 of the Local Tax Code mentions
"other places of amusement", professional basketball
games are definitely not within its scope. Under the
principle of ejusdem generis, where general words
follow an enumeration of persons or things, by words
of a particular and specific meaning, such general
words are not to be construed in their widest extent,
but are to be held as applying only to persons or
things of the same kind or class as those specifically
mentioned.9 [PNOC Shipping and Transport
Corporation vs. Court of Appeals, 297 SCRA 402, 422
citing: Republic vs. Migrio, 189 SCRA 289, 296-297.]
Thus, in determining the meaning of the phrase "other
places of amusement", one must refer to the prior
enumeration of theaters, cinematographs, concert
halls and circuses with artistic expression as their
common characteristic. Professional basketball
games do not fall under the same category as
theaters, cinematographs, concert halls and circuses
as the latter basically belong to artistic forms of
entertainment while the former caters to sports and
gaming.
A historical analysis of pertinent laws does reveal the
legislative intent to place professional basketball
games within the ambit of a national tax. The Local
Tax Code, which became effective on June 28, 1973,
allowed the province to collect a tax on admission
from the proprietors, lessees, or operators of theaters,
cinematographs, concert halls, circuses and other
places of amusement. On January 6, 1976, the
operation of petitioner was placed under the
supervision and regulation of the Games and
Amusement Board by virtue of PD 871, with the
proviso (Section 8) that " all professional basketball
games conducted by the Philippine Basketball
Association shall only be subject to amusement tax of
five per cent of the gross receipts from the sale of
admission tickets." Then, on June 11, 1978, PD 1456
came into effect, increasing the amusement tax to ten
per cent, with a categorical referral to PD 871, to wit,

"[t]en per centum in the case of professional

basketball games as envisioned in Presidential
Decree No. 871 ." Later in 1984, PD 1959 increased
the rate of amusement tax to fifteen percent by
making reference also to PD 871. With the reference
to PD 871 by PD 1456 and PD 1959, there is a
recognition under the laws of this country that the
amusement tax on professional basketball games is a
national, and not a local, tax. Even up to the present,
the category of amusement taxes on professional
basketball games as a national tax remains the same.
This is so provided under Section 12510 [SEC. 125.
Amusement taxes. - There shall be collected from the
proprietor, lessee or operator of cockpits, cabarets,
night or day clubs, boxing exhibitions, professional
basketball games, Jai-Alai and race tracks, a tax
equivalent to:

a) Eighteen percent (18%) in the case of cockpits;

b) Eighteen percent (18%) in the case of cabarets,
night or day clubs;
c) Ten percent (10%) in the case of boxing exhibitions,
provided, however, that boxing exhibitions wherein
World or Oriental Championships in any division is at
stake shall be exempt from amusement tax; provided,
further, that at least one of the contenders for World
or Oriental Championship is a citizen of the
Philippines and said exhibitions are promoted by a
citizen/s of the Philippines or by a corporation or
association at least sixty percent (60%) of the capital
of which is owned by such citizens;
d) Fifteen percent (15%) in the case of professional
basketball games as envisioned in Presidential
Decree No. 871; provided, however, that the tax
herein shall be in lieu of all other percentage taxes of
whatever nature and description; and
e) Thirty percent (30%) in the case of Jai-Alai and
race tracks of their gross receipts, irrespective of
whether or not any amount is charged for admission.
For the purpose of the amusement tax, the term
"gross receipts" embraces all the receipts of the
proprietor, lessee or operator of the amusement
place. Said gross receipts also include income from

television, radio and motion picture rights, if any. A

person or entity or association conducting any activity
subject to the tax herein imposed shall be similarly
liable for said tax with respect to such portion of the
receipts derived by him or it.

cinematographs, concert halls, circuses and other

places of amusement) where the province may levy
an amusement tax without including therein
professional basketball games.

The taxes imposed herein shall be payable at the end

of each quarter or month and it shall be the duty of
the proprietor, lessee or operator concerned, as well
as any party liable, within twenty (20) days after the
end of each quarter, to make a true and complete
return of the amount of the gross receipts derived
during the preceding quarter and pay the tax due
thereon. (Effective January 1, 1998)] of the 1997
National Internal Revenue Code.

Likewise erroneous is the stance of petitioner that

respondent Commissioner's issuance of BIR Ruling
No. 231-8612 ["this Office is of the opinion and hereby
holds that the jurisdiction to levy amusement tax on
gross receipts from admission tickets to places of
amusement was indeed transferred to local
government under P.D. No. 231, as amended. "] and
BIR Revenue Memorandum Circular No. 8-8813 [" the
sole jurisdiction for collection of amusement tax on
admission receipts in places of admission rests
exclusively on the local government to the exclusion
of the national government."] -- both upholding the
authority of the local government to collect
amusement taxes -- should bind the government or
that, if there is any revocation or modification of said
rule, the same should operate prospectively.

Section 14011 [SEC. 140. Amusement Tax. - (a) The

province may levy an amusement tax to be collected
from the proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, boxing stadia, and
other places of amusement at a rate of not more than
thirty percent (30%) of the gross receipts from
admission fees.
(b) In the case of theaters or cinemas, the tax shall
first be deducted and withheld by their proprietors,
lessees, or operators and the distributors of the
cinematographic films.
(c) The holding of operas, concerts, dramas, recitals,
painting and art exhibitions, flower shows, musical
programs, literary and oratorical presentations, except
pop, rock, or similar concerts shall be exempt from
the payment of the tax herein imposed.
(d) The sangguniang panlalawigan may prescribe the
time, manner, terms and conditions for the payment of
tax. In case of fraud or failure to pay the tax, the
sangguniang panlalawigan may impose such
surcharges, interests and penalties as it may deem
appropriate.
(e) The proceeds from the amusement tax shall be
shared equally by the province and the municipality
where such amusement places are located.] of the
Local Government Code of 1992 (Republic Act 7160),
meanwhile, retained the areas (theaters,

It bears stressing that the government can never be in

estoppel, particularly in matters involving taxes. It is a
well-known rule that erroneous application and
enforcement of the law by public officers do not
preclude subsequent correct application of the
statute, and that the Government is never estopped
by mistake or error on the part of its agents.14 [E.
Rodriguez, Inc. vs. Collector of Internal Revenue, 28
SCRA 1119; United Christian Missionary Society vs.
Social Security Commission, 30 SCRA 982.]
Untenable is the contention that income from the
cession of streamer and advertising spaces to VEI is
not subject to amusement tax. The questioned
proviso may be found in Section 1 of PD 1456 which
states:
"SECTION 1. Section 268 of the National Internal
Revenue Code of 1977, as amended, is hereby
further amended to read as follows:

'Sec. 268. Amusement taxes. -- There shall be

collected from the proprietor, lessee or operator of
cockpits, cabarets, night or day clubs, boxing
exhibitions, professional basketball games, Jai-Alai,

race tracks and bowling alleys, a tax equivalent to:

of their gross receipts, irrespective of whether or not
any amount is charged or paid for admission. For the
purpose of the amusement tax, the term gross
receipts' embraces all the receipts of the proprietor,
lessee or operator of the amusement place. Said
gross receipts also include income from television,
radio and motion picture rights, if any. (A person, or
entity or association conducting any activity subject to
the tax herein imposed shall be similarly liable for said
tax with respect to such portion of the receipts derived
by him or it.)" (underscoring ours)
The foregoing definition of gross receipts is broad
enough to embrace the cession of advertising and
streamer spaces as the same embraces all the
receipts of the proprietor, lessee or operator of the
amusement place. The law being clear, there is no
need for an extended interpretation.15 [Domingo vs.
Commission on Audit, 297 SCRA 163; Republic vs.
Court of Appeals, 299 SCRA 199.]
The last issue for resolution concerns the liability of
petitioner for the payment of surcharge and interest
on the deficiency amount due. Petitioner contends
that it is not liable, as it acted in good faith, having
relied upon the issuances of the respondent
Commissioner. This issue must necessarily fail as the
same has never been posed as an issue before the
respondent court. Issues not raised in the court a quo
cannot be raised for the first time on appeal.16 [Ruby
Industrial Corporation vs. Court of Appeals, 284
SCRA 445; Salao vs. Court of Appeals, 284 SCRA
493; Heirs of Pascasio Uriarte vs. Court of Appeals,
284 SCRA 511.]
All things studiedly considered, the Court rules that
the petitioner is liable to pay amusement tax to the
national government, and not to the local government,
in accordance with the rates prescribed by PD 1959.
WHEREFORE, the Petition is DENIED, and the
Decisions of the Court of Appeals and Court of Tax
Appeals dated November 21, 1994 and December 24,
1993, respectively AFFIRMED. No pronouncement as
to costs.
JAIME GUINHAWA, Petitioner, versus PEOPLE OF
THE PHILIPPINES, Respondent.

CALLEJO, SR., J.:

Jaime Guinhawa was engaged in the business of

selling brand new motor vehicles, including Mitsubishi
vans, under the business name of Guinrox Motor
Sales. His office and display room for cars were
located along Panganiban Avenue, Naga City. He
employed Gil Azotea as his sales manager.

On March 17, 1995, Guinhawa purchased a brand

new Mitsubishi L-300 Versa Van with Motor No.
4D56A-C8929 and Serial No. L069WQZJL-07970
from the Union Motors Corporation (UMC) in Paco,
Manila. The van bore Plate No. DLK 406. Guinhawa's
driver, Leopoldo Olayan, drove the van from Manila to
Naga City. However, while the van was traveling along
the highway in Labo, Daet, Camarines Norte, Olayan
suffered a heart attack. The van went out of control,
traversed the highway onto the opposite lane, and
was ditched into the canal parallel to the highway.[1]
The van was damaged, and the left front tire had to
be replaced.

The incident was reported to the local police

authorities and was recorded in the police blotter.[2]
The van was repaired and later offered for sale in
Guinhawa's showroom.[3]

Sometime in October 1995, the spouses Ralph and

Josephine Silo wanted to buy a new van for their
garment business; they purchased items in Manila
and sold them in Naga City.[4] They went to
Guinhawa's office, and were shown the L-300 Versa
Van which was on display. The couple inspected its
interior portion and found it beautiful. They no longer
inspected the under chassis since they presumed that
the vehicle was brand new.[5] Unaware that the van
had been damaged and repaired on account of the
accident in Daet, the couple decided to purchase the
van for P591,000.00. Azotea suggested that the
couple make a downpayment of P118,200.00, and
pay the balance of the purchase price by
installments via a loan from the United Coconut

Planters Bank (UCPB), Naga Branch, with the L-300

Versa Van as collateral. Azotea offered to make the
necessary arrangements with the UCPB for the
consummation of the loan transaction. The couple
agreed. On November 10, 1995, the spouses
executed a Promissory Note[6] for the amount of
P692,676.00 as payment of the balance on the
purchase price, and as evidence of the chattel
mortgage over the van in favor of UCPB.

On October 11, 1995, the couple arrived in

Guinhawa's office to take delivery of the van.
Guinhawa executed the deed of sale, and the couple
paid the P161,470.00 downpayment, for which they
were issued Receipt No. 0309.[7] They were
furnished a Service Manual[8] which contained the
warranty terms and conditions. Azotea instructed the
couple on how to start the van and to operate its
radio. Ralph Silo no longer conducted a test drive; he
and his wife assumed that there were no defects in
the van as it was brand new.[9]

On October 12, 1995, Josephine Silo, accompanied

by Glenda Pingol, went to Manila on board the L-300
Versa Van, with Glenda's husband, Bayani Pingol III,
as the driver. Their trip to Manila was uneventful.
However, on the return trip to Naga from Manila on
October 15 or 16, 1995, Bayani Pingol heard a
squeaking sound which seemed to be coming from
underneath the van. They were in Calauag, Quezon,
where there were no humps along the road.[10]
Pingol stopped the van in Daet, Camarines Norte, and
examined the van underneath, but found no
abnormalities or defects.[11] But as he drove the van
to Naga City, the squeaking sound persisted.

Believing that the van merely needed grease, Pingol

stopped at a Shell gasoline station where it was
examined. The mechanic discovered that some parts
underneath the van had been welded. When Pingol
complained to Guinhawa, the latter told him that the
defects were mere factory defects. As the defects
persisted, the spouses Silo requested that Guinhawa
change the van with two Charade-Daihatsu vehicles
within a week or two, with the additional costs to be

taken from their downpayment. Meanwhile, the couple

stopped paying the monthly amortization on their
loan, pending the replacement of the van. Guinhawa
initially agreed to the couple's proposal, but later
changed his mind and told them that he had to sell
the van first. The spouses then brought the vehicle to
the Rx Auto Clinic in Naga City for examination. Jesus
Rex Raquitico, Jr., the mechanic, examined the van
and discovered that it was the left front stabilizer that
was producing the annoying sound, and that it had
been repaired.[12] Raquitico prepared a Job Order
containing the following notations and
recommendations:

1. CHECK UP SUSPENSION (FRONT)

2. REPLACE THE ROD END
3. REPLACE BUSHING

NOTE: FRONT STEP BOARD HAS BEEN ALREADY

DAMAGED AND REPAIRED.

NOTE: FRONT LEFT SUSPENSION MOUNTING IS

NOT ON SPECIFIED
ALIGNMENT/MEASUREMENT[13]

Josephine Silo filed a complaint for the rescission of

the sale and the refund of their money before the
Department of Trade and Industry (DTI). During the
confrontation between her and Guinhawa, Josephine
learned that Guinhawa had bought the van from UMC
before it was sold to them, and after it was damaged
in Daet. Subsequently, the spouses Silo withdrew
their complaint from the DTI.

On February 14, 1996, Josephine Silo filed a criminal

complaint for violation of paragraph 1, Article 318 of
the Revised Penal Code against Guinhawa in the
Office of the City Prosecutor of Naga City. After the
requisite investigation, an Information was filed

against Guinhawa in the Municipal Trial Court (MTC)

of Naga City. The inculpatory portion reads:

The undersigned Assistant Prosecutor of Naga City

accuses Jaime Guinhawa of the crime of OTHER
DECEITS defined and penalized under Art. 318, par.
1 of the Revised Penal Code, committed as follows:

"That on or about October 11, 1995, in the City of

Naga, Philippines, and within the jurisdiction of this
Honorable Court, the said accused, being a motor
vehicle dealer using the trade name of Guinhawa
Motor Sales at Panganiban Avenue, Naga City, and a
dealer of brand new cars, by means of false
pretenses and fraudulent acts, did then and there
willfully, unlawfully and feloniously defraud private
complainant, JOSEPHINE P. SILO, as follows: said
accused by means of false manifestations and
fraudulent representations, sold to said private
complainant, as brand new, an automobile with trade
name L-300 Versa Van colored beige and the latter
paid for the same in the amount of P591,000.00,
when, in truth and in fact, the same was not brand
new because it was discovered less than a month
after it was sold to said Josephine P. Silo that said L300 Versa Van had defects in the underchassis and
stepboard and repairs had already been done thereat
even before said sale, as was found upon check-up
by an auto mechanic; that private complainant
returned said L-300 Versa Van to the accused and
demanded its replacement with a new one or the
return of its purchase price from said accused but
despite follow-up demands no replacement was made
nor was the purchase price returned to private
complainant up to the present to her damage and
prejudice in the amount of P591,000.00, Philippine
Currency, plus other damages that may be proven in
court."[14]

Guinhawa testified that he was a dealer of brand new

Toyota, Mazda, Honda and Mitsubishi cars, under the
business name Guinrox Motor Sales. He purchased
Toyota cars from Toyota Philippines, and Mitsubishi
cars from UMC in Paco, Manila.[15] He bought the
van from the UMC in March 1995, but did not use it;

he merely had it displayed in his showroom in Naga

City.[16] He insisted that the van was a brand new
unit when he sold it to the couple.[17] The spouses
Silo bought the van and took delivery only after
inspecting and taking it for a road tests.[18] His sales
manager, Azotea, informed him sometime in
November 1995 that the spouses Silo had
complained about the defects under the left front
portion of the van. By then, the van had a kilometer
reading of 4,000 kilometers.[19] He insisted that he
did not make any false statement or fraudulent
misrepresentation to the couple about the van, either
before or simultaneous with its purchase. He posited
that the defects noticed by the couple were not major
ones, and could be repaired. However, the couple
refused to have the van repaired and insisted on a
refund of their payment for the van which he could not
allow. He then had the defects repaired by the UMC.
[20] He claimed that the van was never involved in
any accident, and denied that his driver, Olayan, met
an accident and sustained physical injuries when he
drove the van from Manila to Naga City.[21] He even
denied meeting Bayani Pingol.

The accused claimed that the couple filed a

Complaint[22] against him with the DTI on January
25, 1996, only to withdraw it later.[23] The couple then
failed to pay the amortizations for the van, which
caused the UCPB to file a petition for the foreclosure
of the chattel mortgage and the sale of the van at
public auction.[24]

Azotea testified that he had been a car salesman for

16 years and that he sold brand new vans.[25] Before
the couple took delivery of the vehicle, Pingol
inspected its exterior, interior, and underside, and
even drove it for the couple.[26] He was present when
the van was brought to the Rx Auto Clinic, where he
noticed the dent on its front side.[27] He claimed that
the van never figured in any vehicular accident in
Labo, Daet, Camarines Norte on March 17, 1995.[28]
In fact, he declared, he found no police record of a
vehicular accident involving the van on the said date.
[29] He admitted that Olayan was their driver, and
was in charge of taking delivery of cars purchased
from the manufacturer in Manila.[30]

On November 6, 2001, the trial court rendered

judgment convicting Guinhawa. The fallo of the
decision reads:

WHEREFORE, premises considered, judgment is

hereby rendered declaring the accused, JAIME
GUINHAWA, guilty of the crime of Other Deceits
defined and penalized under Art. 318(1) of the
Revised Penal Code, the prosecution having proven
the guilt of the accused beyond reasonable doubt and
hereby imposes upon him the penalty of
imprisonment from 2 months and 1 day to 4 months
of Arresto Mayor and a fine of One Hundred Eighty
Thousand Seven Hundred and Eleven Pesos
(P180,711.00) the total amount of the actual damages
caused to private complainant.

As to the civil aspect of this case which have been

deemed instituted with this criminal case, Articles
2201 and 2202 of the Civil Code provides:

"Art. 2201. In contracts and quasi-contracts, the

damages for which the obligor who acted in good faith
is liable shall be those that are the natural and
probable consequences of the breach of the
obligation, and which the parties have foreseen or
could have reasonably foreseen at the time the
obligation was constituted.

"In case of fraud, malice or wanton attitude, the

obligor shall be responsible for all damages which
may be reasonably attributed to the non-performance
of the obligation."

"Art. 2202. In crimes and quasi-delicts, the defendant

shall be liable for all damages which are the natural
and probable consequences of the act or omission
complained of. It is not necessary that such damages
have been foreseen or could have reasonably been
foreseen by the defendant."

Thus, accused is condemned to pay actual damages

in the amount of One Hundred Eighty Thousand
Seven Hundred and Eleven Pesos (Php180,711.00),
which represents the 20% downpayment and other
miscellaneous expenses paid by the complainant plus
the amount of Nineteen Thousand Two Hundred
Forty-One (Php19,241.00) Pesos, representing the
1st installment payment made by the private
complainant to the bank. Accused is, likewise,
ordered to pay moral damages in the amount of One
Hundred Thousand Pesos (Php100,000.00) in view of
the moral pain suffered by the complainant; for
exemplary damages in the amount of Two Hundred
Thousand Pesos (Php200,000.00) to serve as
deterrent for those businessmen similarly inclined to
take undue advantage over the public's innocence. As
for attorney's fees, the reasonable amount of One
Hundred Thousand Pesos (Php100,000.00) is hereby
awarded.

2. The lower court erred in its four (4) findings of fact

that accused-appellant made misrepresentation or
false pretenses "that the van was a brand new car,"
which constituted deceit as defined in Article 318,
paragraph 1 of the Revised Penal Code.

3. The lower court erred in finding accused-appellant

civilly liable to complainant Josephine Silo. But, even
if there be such liability, the action therefor has
already prescribed and the amount awarded was
exhorbitant, excessive and unconscionable.[32]

Guinhawa insisted that he never talked to the couple

about the sale of the van; hence, could not have
made any false pretense or misrepresentation.

On August 1, 2002, the RTC affirmed the appealed

judgment.[33]
SO ORDERED.[31]

The trial court declared that the accused made false

pretenses or misrepresentations that the van was a
brand new one when, in fact, it had figured in an
accident in Labo, Daet, Camarines Norte, and
sustained serious damages before it was sold to the
private complainant.

Guinhawa appealed the decision to the Regional Trial

Court (RTC) of Naga City, Branch 19, in which he
alleged that:

1. The lower court erred in its finding that the repair

works on the left front portion and underchassis of the
van was the result of the accident in Labo, Camarines
Norte, where its driver suffered an attack of
hypertension.

Guinhawa filed a petition for review with the Court of

Appeals (CA), where he averred that:

THE COURT A QUO ERRED IN CONVICTING

PETITIONER OF THE CRIME OF OTHER DECEITS
AND SENTENCING HIM TO SUFFER
IMPRISONMENT OF TWO MONTHS AND ONE DAY
TO FOUR MONTHS OF ARRESTO MAYOR AND TO
PAY FINE IN THE AMOUNT OF P180,711.00.

II

THE COURT A QUO ERRED IN ORDERING

PETITIONER TO PAY PRIVATE COMPLAINANT
P180,711.00 AS DOWNPAYMENT, P19,241.00 AS

FIRST INSTALLMENT WITH UCPB NAGA,

P100,000.00 AS MORAL DAMAGES, P200,000.00
AS EXEMPLARY DAMAGES AND P100,000.00 AS
ATTORNEY'S FEES.[34]

THE COURT A QUO ERRED IN NOT HOLDING

THAT THE INFORMATION CHARGED AGAINST
PETITIONER DID NOT INFORM HIM OF A CHARGE
OF OTHER DECEITS.

On January 5, 2004, the CA rendered judgment

affirming with modification the decision of the RTC.
The fallo of the decision reads:

II

WHEREFORE, premises considered, the instant

petition is hereby partially granted insofar as the
following are concerned: a) the award of moral
damages is herebyREDUCED to P10,000.00 and b)
the award of attorney's fees and exemplary damages
are hereby DELETED for lack of factual basis. In all
other respects, We affirm the decision under review.

Costs against petitioner.

SO ORDERED.[35]

The CA ruled that the private complainant had the

right to assume that the van was brand new because
Guinhawa held himself out as a dealer of brand new
vans. According to the appellate court, the act of
displaying the van in the showroom without notice to
any would-be buyer that it was not a brand new unit
was tantamount to deceit. Thus, in concealing the
van's true condition from the buyer, Guinhawa
committed deceit.

The appellate court denied Guinhawa's motion for

reconsideration, prompting him to file the present
petition for review on certiorari, where he contends:

THE COURT A QUO ERRED IN HOLDING THAT

PETITIONER EMPLOYED FRAUD OR DECEIT AS
DEFINED UNDER ARTICLE 318, REVISED PENAL
CODE.

his constitutional right to be informed of the nature of

the charge against him. And in any case, even if he
had been charged of other deceits under paragraph 1
of Article 318, the CA erred in finding him guilty. He
insists that the private complainant merely assumed
that the van was brand new, and that he did not make
any misrepresentation to that effect. He avers that
deceit cannot be committed by concealment, the
absence of any notice to the public that the van was
not brand new does not amount to deceit. He posits
that based on the principle of caveat emptor, if the
private complainant purchased the van without first
inspecting it, she must suffer the consequences.
Moreover, he did not attend to the private complainant
when they examined the van; thus, he could not have
deceived them.

III

THE COURT A QUO ERRED IN NOT

CONSIDERING THE CIRCUMSTANCES POINTING
TO THE INNOCENCE OF THE PETITIONER.[36]

The issues for resolution are (1) whether, under the

Information, the petitioner was charged of other
deceits under paragraph 1, Article 318 of the Revised
Penal Code; and (2) whether the respondent adduced
proof beyond reasonable doubt of the petitioner's guilt
for the crime charged.

The petitioner asserts that based on the allegations in

the Information, he was charged with estafa through
false pretenses under paragraph 2, Article 315 of the
Revised Penal Code. Considering the allegation that
the private complainant was defrauded of
P591,000.00, it is the RTC, not the MTC, which has
exclusive jurisdiction over the case. The petitioner
maintains that he is not estopped from assailing this
matter because the trial court's lack of jurisdiction can
be assailed at any time, even on appeal, which defect
cannot even be cured by the evidence adduced
during the trial. The petitioner further avers that he
was convicted of other deceits under paragraph 1,
Article 318 of the Revised Penal Code, a crime for
which he was not charged; hence, he was deprived of

The petitioner maintains that, absent evidence of

conspiracy, he is not criminally liable for any
representation Azotea may have made to the private
complainant, that the van was brand new. He insists
that the respondent was estopped from adducing
evidence that the vehicle was involved in an accident
in Daet, Camarines Norte on March 17, 1995,
because such fact was not alleged in the Information.

In its comment on the petition, the Office of the

Solicitor General avers that, as gleaned from the
material averments of the Information, the petitioner
was charged with other deceits under paragraph 1,
Article 318 of the Revised Penal Code, a felony within
the exclusive jurisdiction of the MTC. The petitioner
was correctly charged and convicted, since he falsely
claimed that the vehicle was brand new when he sold
the same to the private complainant. The petitioner's
concealment of the fact that the van sustained serious
damages as an aftermath of the accident in Daet,
Camarines Norte constituted deceit within the
meaning of paragraph 1 of Article 318.

The Information filed against the petitioner reads:

That on or about October 11, 1995, in the City of

Naga, Philippines, and within the jurisdiction of this
Honorable Court, the said accused, being a motor
vehicle dealer using the trade name of Guinhawa
Motor Sales at Panganiban Avenue, Naga City, and
dealer of brand new cars, by means of false
pretenses and fraudulent acts, did then and there,
willfully, unlawfully and feloniously defraud private
complainant, JOSEPHINE P. SILO, as follows: said
accused by means of false manifestations and
fraudulent representations, sold to said private
complainant, as brand new, an automobile with trade
name L-300 Versa Van colored beige and the latter
paid for the same in the amount of P591,000.00,
when, in truth and in fact, the same was not brand
new because it was discovered less than a month
after it was sold to said Josephine P. Silo that said L300 Versa Van had defects in the underchassis and
stepboard and repairs have already been done
thereat even before said sale, as was found upon
check-up by an auto mechanic; that private
complainant returned said L-300 Versa Van to the
accused and demanded its replacement with a new
one or the return of its purchase price from said
accused but despite follow-up demands no
replacement was made nor was the purchase price
returned to private complainant up to the present to
her damage and prejudice in the amount of
P591,000.00, Philippine Currency, plus other
damages that may be proven in court.

commission of the offense; and the place where the

offense was committed.

When an offense is committed by more than one

person, all of them shall be included in the complaint
or information.

The real nature of the offense charged is to be

ascertained by the facts alleged in the body of the
Information and the punishment provided by law, not
by the designation or title or caption given by the
Prosecutor in the Information.[38] The Information
must allege clearly and accurately the elements of the
crime charged.[39]

As can be gleaned from its averments, the

Information alleged the essential elements of the
crime under paragraph 1, Article 318 of the Revised
Penal Code.

The false or fraudulent representation by a seller that

what he offers for sale is brand new (when, in fact, it
is not) is one of those deceitful acts envisaged in
paragraph 1, Article 318 of the Revised Penal Code.
The provision reads:

artculos anteriores de esta seccion, sera castigado

con una multa del tanto al duplo del perjuicio que
irrogare; y en caso de reincidencia, con la del duplo y
arresto mayor en su grado medio al maximo.

For one to be liable for "other deceits" under the law,

it is required that the prosecution must prove the
following essential elements: (a) false pretense,
fraudulent act or pretense other than those in the
preceding articles; (b) such false pretense, fraudulent
act or pretense must be made or executed prior to or
simultaneously with the commission of the fraud; and
(c) as a result, the offended party suffered damage or
prejudice.[40] It is essential that such false statement
or fraudulent representation constitutes the very
cause or the only motive for the private complainant
to part with her property.

The provision includes any kind of conceivable deceit

other than those enumerated in Articles 315 to 317 of
the Revised Penal Code.[41] It is intended as the
catchall provision for that purpose with its broad
scope and intendment.[42]

Thus, the petitioner's reliance on paragraph 2(a),

Article 315 of the Revised Penal Code is misplaced.
The said provision reads:

CONTRARY TO LAW.[37]

Section 6, Rule 110 of the Rules of Criminal

Procedure requires that the Information must allege
the acts or omissions complained of as constituting
the offense:

SEC. 6. Sufficiency of complaint or information. - A

complaint or information is sufficient if it states the
name of the accused; the designation of the offense
given by the statute; the acts or omissions
complained of as constituting the offense; the name of
the offended party; the approximate date of the

Art. 318. Other deceits. - The penalty of arresto

mayor and a fine of not less than the amount of the
damage caused and not more than twice such
amount shall be imposed upon any person who shall
defraud or damage another by any other deceit not
mentioned in the preceding articles of this chapter.

This provision was taken from Article 554 of the

Spanish Penal Code which provides:

El que defraudare o perjudicare a otro, usando de

cualquier engao que no se halle expresado en los

2. By means of any of the following false pretenses or

fraudulent acts executed prior to or simultaneously
with the commission of the fraud:

(a) By using fictitious name, or falsely pretending to

possess power, influence, qualifications, property,
credit, agency, business or imaginary transactions; or
by means of other similar deceits.

The fraudulent representation of the seller, in this

case, that the van to be sold is brand new, is not the
deceit contemplated in the law. Under the principle

of ejusdem generis, where a statement ascribes

things of a particular class or kind accompanied by
words of a generic character, the generic words will
usually be limited to things of a similar nature with
those particularly enumerated unless there be
something in the context to the contrary.[43]

Jurisdiction is conferred by the Constitution or by law.

It cannot be conferred by the will of the parties, nor
diminished or waived by them. The jurisdiction of the
court is determined by the averments of the complaint
or Information, in relation to the law prevailing at the
time of the filing of the criminal complaint or
Information, and the penalty provided by law for the
crime charged at the time of its commission.

Section 32 of Batas Pambansa Blg. 129, as amended

by Republic Act No. 7691, provides that the MTC has
exclusive jurisdiction over offenses punishable with
imprisonment not exceeding six years, irrespective of
the amount of the fine:

Sec. 32. Jurisdiction of Metropolitan Trial Courts,

Municipal Trial Courts and Municipal Circuit Trial
Courts in Criminal Cases. - Except in cases falling
within the exclusive original jurisdiction of Regional
Trial Courts and of the Sandiganbayan, the
Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts shall exercise:

(1) Exclusive original jurisdiction over all violations of

city or municipal ordinances committed within their
respective territorial jurisdiction; and

(2) Exclusive original jurisdiction over all offenses

punishable with imprisonment not exceeding six (6)
years irrespective of the amount of fine, and
regardless of other imposable accessory or other
penalties, including the civil liability arising from such
offenses or predicated thereon, irrespective of kind,
nature, value or amount thereof: Provided, however,
That in offenses involving damage to property through

criminal negligence, they shall have exclusive original

jurisdiction thereof.

Since the felony of other deceits is punishable

by arresto mayor, the MTC had exclusive jurisdiction
over the offense lodged against the petitioner.

On the merits of the petition, the Court agrees with

the petitioner's contention that there is no evidence on
record that he made direct and positive
representations or assertions to the private
complainant that the van was brand new. The record
shows that the private complainant and her husband
Ralph Silo were, in fact, attended to by Azotea.
However, it bears stressing that the representation
may be in the form of words, or conduct resorted to by
an individual to serve as an advantage over another.
Indeed, as declared by the CA based on the evidence
on record:

Petitioner cannot barefacedly claim that he made no

personal representation that the herein subject van
was brand new for the simple reason that nowhere in
the records did he ever refute the allegation in the
complaint, which held him out as a dealer of brand
new cars. It has thus become admitted that the
petitioner was dealing with brand new vehicles - a fact
which, up to now, petitioner has not categorically
denied. Therefore, when private complainant went to
petitioner's showroom, the former had every right to
assume that she was being sold brand new vehicles
there being nothing to indicate otherwise. But as it
turned out, not only did private complainant get a
defective and used van, the vehicle had also earlier
figured in a road accident when driven by no less than
petitioner's own driver.[44]

Indeed, the petitioner and Azotea obdurately insisted

in the trial court that the van was brand new, and that
it had never figured in vehicular accident. This
representation was accentuated by the fact that the
petitioner gave the Service Manual to the private
complainant, which manual contained the warranty

terms and conditions, signifying that the van was

"brand new." Believing this good faith, the private
complainant decided to purchase the van for her buyand-sell and garment business, and even made a
downpayment of the purchase price.

As supported by the evidence on record, the van was

defective when the petitioner sold it to the private
complainant. It had ditched onto the shoulder of the
highway in Daet, Camarines Norte on its way from
Manila to Naga City. The van was damaged and had
to be repaired; the rod end and bushing had to be
replaced, while the left front stabilizer which gave out
a persistent annoying sound was repaired. Some
parts underneath the van were even welded together.
Azotea and the petitioner deliberately concealed
these facts from the private complainant when she
bought the van, obviously so as not to derail the sale
and the profit from the transaction.

The CA is correct in ruling that fraud or deceit may be

committed by omission. As the Court held in People v.
Balasa:[45]

Fraud, in its general sense, is deemed to comprise

anything calculated to deceive, including all acts,
omissions, and concealment involving a breach of
legal or equitable duty, trust, or confidence justly
reposed, resulting in damage to another, or by which
an undue and unconscientious advantage is taken of
another. It is a generic term embracing all multifarious
means which human ingenuity can device, and which
are resorted to by one individual to secure an
advantage over another by false suggestions or by
suppression of truth and includes all surprise, trick,
cunning, dissembling and any unfair way by which
another is cheated. On the other hand, deceit is the
false representation of a matter of fact whether by
words or conduct, by false or misleading allegations,
or by concealment of that which should have been
disclosed which deceives or is intended to deceive
another so that he shall act upon it to his legal injury.
[46]

It is true that mere silence is not in itself concealment.

Concealment which the law denounces as fraudulent
implies a purpose or design to hide facts which the
other party sought to know.[47] Failure to reveal a fact
which the seller is, in good faith, bound to disclose
may generally be classified as a deceptive act due to
its inherent capacity to deceive.[48] Suppression of a
material fact which a party is bound in good faith to
disclose is equivalent to a false representation.[49]
Moreover, a representation is not confined to words or
positive assertions; it may consist as well of deeds,
acts or artifacts of a nature calculated to mislead
another and thus allow the fraud-feasor to obtain an
undue advantage.[50]

Fraudulent nondisclosure and fraudulent concealment

are of the same genre. Fraudulent concealment
presupposes a duty to disclose the truth and that
disclosure was not made when opportunity to speak
and inform was presented, and that the party to whom
the duty of disclosure, as to a material fact was due,
was induced thereby to act to his injury.[51]

Article 1389 of the New Civil Code provides that

failure to disclose facts when there is a duty to reveal
them constitutes fraud. In a contract of sale, a buyer
and seller do not deal from equal bargaining positions
when the latter has knowledge, a material fact which,
if communicated to the buyer, would render the
grounds unacceptable or, at least, substantially less
desirable.[52] If, in a contract of sale, the vendor
knowingly allowed the vendee to be deceived as to
the thing sold in a material matter by failing to
disclose an intrinsic circumstance that is vital to the
contract, knowing that the vendee is acting upon the
presumption that no such fact exists, deceit is
accomplished by the suppression of the truth.[53]

In the present case, the petitioner and Azotea knew

that the van had figured in an accident, was damaged
and had to be repaired. Nevertheless, the van was
placed in the showroom, thus making it appear to the
public that it was a brand new unit. The petitioner was
mandated to reveal the foregoing facts to the private
complainant. But the petitioner and Azotea even

obdurately declared when they testified in the court a

quo that the vehicle did not figure in an accident, nor
had it been repaired; they maintained that the van
was brand new, knowing that the private complainant
was going to use it for her garment business. Thus,
the private complainant bought the van, believing it
was brand new.

Significantly, even when the petitioner was apprised

that the private complainant had discovered the van's
defects, the petitioner agreed to replace the van, but
changed his mind and insisted that it must be first
sold.

The petitioner is not relieved of his criminal liability for

deceitful concealment of material facts, even if the
private complainant made a visual inspection of the
van's interior and exterior before she agreed to buy it
and failed to inspect its under chassis. Case law has it
that where the vendee made only a partial
investigation and relies, in part, upon the
representation of the vendee, and is deceived by such
representation to his injury, he may maintain an action
for such deceit.[54] The seller cannot be heard to say
that the vendee should not have relied upon the
fraudulent concealment; that negligence, on the part
of the vendee, should not be a defense in order to
prevent the vendor from unjustifiably escaping with
the fruits of the fraud.

In one case,[55] the defendant who repainted an

automobile, worked it over to resemble a new one
and delivered it to the plaintiff was found to have
warranted and represented that the automobile being
sold was new. This was found to be "a false
representation of an existing fact; and, if it was
material and induced the plaintiff to accept something
entirely different from that which he had contracted
for, it clearly was a fraud which, upon its discovery
and a tender of the property back to the seller, [it]
entitled the plaintiff to rescind the trade and recover
the purchase money."[56]

On the petitioner's insistence that the private

complainant was proscribed from charging him
with estafa based on the principle of caveat emptor,
case law has it that this rule only requires the
purchaser to exercise such care and attention as is
usually exercised by ordinarily prudent men in like
business affairs, and only applies to defects which are
open and patent to the service of one exercising such
care.[57] In an avuncular case, it was held that:

... The rule of caveat emptor, like the rule of sweet

charity, has often been invoked to cover a multitude of
sins; but we think its protecting mantle has never
been stretched to this extent. It can only be applied
where it is shown or conceded that the parties to the
contract stand on equal footing and have equal
knowledge or equal means of knowledge and there is
no relation of trust or confidence between them. But,
where one party undertakes to sell to another
property situated at a distance and of which he has or
claims to have personal knowledge and of which the
buyer knows nothing except as he is informed by the
seller, the buyer may rightfully rely on the truth of the
seller's representations as to its kind, quality, and
value made in the course of negotiation for the
purpose of inducing the purchase. If, in such case, the
representations prove to be false, neither law nor
equity will permit the seller to escape responsibility by
the plea that the buyer ought not to have believed him
or ought to have applied to other sources to ascertain
the facts. ...[58]

It bears stressing that Azotea and the petitioner had

every opportunity to reveal to the private complainant
that the van was defective. They resolved to maintain
their silence, to the prejudice of the private
complainant, who was a garment merchant and who
had no special knowledge of parts of motor vehicles.
Based on the surrounding circumstances, she relied
on her belief that the van was brand new. In fine, she
was the innocent victim of the petitioner's fraudulent
nondisclosure or concealment.

The petitioner cannot pin criminal liability for his

fraudulent omission on his general manager, Azotea.

The two are equally liable for their collective

fraudulent silence. Case law has it that wherever the
doing of a certain act or the transaction of a given
affair, or the performance of certain business is
confided to an agent, the authority to so act will, in
accordance with a general rule often referred to, carry
with it by implication the authority to do all of the
collateral acts which are the natural and ordinary
incidents of the main act or business authorized.[59]

The MTC sentenced the petitioner to suffer

imprisonment of from two months and one day, as
minimum, to four months of arresto mayor, as
maximum. The CA affirmed the penalty imposed by
the trial court. This is erroneous. Section 2 of Act
4103, as amended, otherwise known as the
Indeterminate Sentence Law, provides that the law
will not apply if the maximum term of imprisonment
does not exceed one year:

SEC. 2. This Act shall not apply to persons convicted

of offenses punished with death penalty or lifeimprisonment; to those convicted of treason,
conspiracy or proposal to commit treason; to those
convicted of misprision of treason, rebellion, sedition
or espionage; to those convicted of piracy; to those
who are habitual delinquents; to those who shall have
escaped from confinement or evaded sentence; to
those who having been granted conditional pardon by
the Chief Executive shall have violated the terms
thereof; to those whose maximum term of
imprisonment does not exceed one year, not to those
already sentenced by final judgment at the time of
approval of this Act, except as provided in Section 5
hereof. (As amended by Act No. 4225.)

In this case, the maximum term of imprisonment

imposed on the petitioner was four months and one
day of arresto mayor. Hence, the MTC was proscribed
from imposing an indeterminate penalty on the
petitioner. An indeterminate penalty may be imposed
if the minimum of the penalty is one year or less, and
the maximum exceeds one year. For example, the
trial court may impose an indeterminate penalty of six
months of arresto mayor, as minimum, to two years

and four months of prision correccional, as maximum,

since the maximum term of imprisonment it imposed
exceeds one year. If the trial court opts to impose a
penalty of imprisonment of one year or less, it should
not impose an indeterminate penalty, but a straight
penalty of one year or less instead. Thus, the
petitioner may be sentenced to a straight penalty of
one year, or a straight penalty of less than one
year, i.e., ten months or eleven months. We believe
that considering the attendant circumstances, a
straight penalty of imprisonment of six months is
reasonable.

Conformably with Article 39 in relation to paragraph 3,

Article 38 of the Revised Penal Code, the petitioner
shall suffer subsidiary imprisonment if he has no
property with which to pay the penalty of fine.

IN LIGHT OF ALL THE FOREGOING, the petition

is DENIED. The assailed Decision and Resolution
are AFFIRMED WITH MODIFICATION. Considering
the surrounding circumstances of the case, the
petitioner is hereby sentenced to suffer a straight
penalty of six (6) months imprisonment. The petitioner
shall suffer subsidiary imprisonment in case of
insolvency.
FRANCIS G. ONG, Petitioner, vs. JOSEPH STANLEY
ALEGRE and COMMISSION ON ELECTIONS,
Respondents.
GARCIA, J.:

Before the Court are these two separate petitions

under Rule 65 of the Rules of Court to nullify and set
aside certain issuances of the Commission on
Elections (COMELEC)en banc.

The first, docketed as G.R. No. 163295, is a petition

for certiorari with petitioner Francis G. Ong impugning
the COMELEC en banc resolution[1] dated May 7,
2004 in SPA Case No. 04-048, granting private
respondent Joseph Stanley Alegre's motion for

reconsideration of the resolution dated March 31,

2004[2] of the COMELEC's First Division.

The second, G.R. No. 163354, is for certiorari,

prohibition and mandamus, with application for
injunctive relief, filed by petitioner Rommel Ong,
brother of Francis, seeking, among other things, to
stop the COMELEC from enforcing and implementing
its aforesaid May 7, 2004 en banc resolution in SPA
Case No. 04-048 pending the outcome of the petition
in G.R. No. 163295.

Per its en banc Resolution of June 1, 2004, the Court

ordered the consolidation of these petitions.

The recourse stemmed from the following essential

and undisputed factual backdrop:

Private respondent Joseph Stanley Alegre (Alegre)

and petitioner Francis Ong (Francis) were candidates
who filed certificates of candidacy for mayor of San
Vicente, Camarines Norte in the May 10, 2004
elections. Francis was then the incumbent mayor.

On January 9, 2004, Alegre filed with the COMELEC

Provincial Office a Petition to Disqualify, Deny Due
Course and Cancel Certificate of Candidacy[3] of
Francis. Docketed as SPA Case No. 04-048, the
petition to disqualify was predicated on the threeconsecutive term rule, Francis having, according to
Alegre, ran in the May 1995, May 1998, and May
2001 mayoralty elections and have assumed office as
mayor and discharged the duties thereof for three (3)
consecutive full terms corresponding to those
elections.

To digress a bit, the May 1998 elections saw both

Alegre and Francis opposing each other for the office
of mayor of San Vicente, Camarines Norte, with the
latter being subsequently proclaimed by COMELEC

winner in that contest. Alegre subsequently filed an

election protest, docketed as Election Case No. 6850
before the Regional Trial Court (RTC) at Daet,
Camarines Norte. In it, the RTC declared Alegre as
the duly elected mayor in that 1998 mayoralty contest,
[4] albeit the decision came out only on July 4, 2001,
when Francis had fully served the 1998-2001
mayoralty term and was in fact already starting to
serve the 2001-2004 term as mayor-elect of the
municipality of San Vicente.

Acting on Alegre's petition to disqualify and to cancel

Francis' certificate of candidacy for the May 10, 2004
elections, the First Division of the COMELEC
rendered on March 31, 2004 a resolution[5]
dismissing the said petition of Alegre, rationalizing as
follows:

We see the circumstances in the case now before us

analogous to those obtaining in the sample situations
addressed by the Highest Court in the Borja case.
Herein, one of the requisites for the application of the
three term rule is not present. Francis Ong might have
indeed fully served the mayoral terms of 1995 to
1998; 1998 to 2001 and 2001 to 2004. The mayoral
term however, from 1998 to 2001 cannot be
considered his because he was not duly elected
thereto. The [RTC] of Daet, Camarines Norte, Branch
41 has voided his election for the 1998 term when it
held, in its decision that Stanley Alegre was the
"legally elected mayor in the 1998 mayoralty election
in San Vicente, Camarines Norte." This disposition
had become final after the [COMELEC] dismissed the
appeal filed by Ong, the case having become moot
and academic.

xxx xxx xxx

On the basis of the words of the Highest Court

pronounced in the Lonzanida case and applicable in
the case at bench, Ong could not be considered as
having served as mayor from 1998 to 2001 because
"he was not duly elected to the post; he merely

assumed office as a presumptive winner; which

presumption was later overturned ... when [the RTC]
decided with finality that [he] lost in the May 1998
elections." (Words in bracket and emphasis in the
original).

Undaunted, Alegre filed a timely motion for

reconsideration, contending, in the main, that there
was a misapplication of the three-term rule, as applied
in the cited cases of Borja vs. Comelec and
Lonzanida vs. Comelec, infra.

On May 7, 2004, the COMELEC en banc issued, in

SPA No. 04-048, a resolution[6] reversing the March
31, 2004 resolution of the COMELEC's First Division
and thereby (a) declaring Francis "as disqualified to
run for mayor of San Vicente, Camarines Norte in
the ...May 10, 2004"; (b) ordering the deletion of
Francis' name from the official list of candidates; and
(c) directing the concerned board of election
inspectors not to count the votes cast in his favor.

The following day, May 8, Francis received a fax

machine copy of the aforecited May 7, 2004
resolution, sending him posthaste to seek the
assistance of his political party, the Nationalist
People's Coalition, which immediately nominated his
older brother, Rommel Ong (Rommel), as substitute
candidate. At about 5:05 p.m. of the very same day which is past the deadline for filing a certificate of
candidacy, Rommel filed his own certificate of
candidacy for the position of mayor, as substitute
candidate for his brother Francis.

2. Atty. Evillo C. Pormento, counsel for the Ong

brothers, addressed a letter[7] to Provincial Election
Supervisor (PES) of Camarines Norte Liza Z. Cario
and Acting Election Officer Emily G. Basilonia in which
he appealed that, owing to the COMELEC's inaction
on Alegre's petition to cancel Rommel's certificate of
candidacy, the name "Rommel Ong" be included in
the official certified list of candidates for mayor of San
Vicente, Camarines Norte. The desired listing was
granted by the PES Carino.

3. On May 10, 2004, Alegre wrote[8] to then

COMELEC Commissioner Virgilio Garcillano,
Commissioner-in-Charge for Regions IV and V,
seeking clarification on the legality of the action thus
taken by the PES Cario. Responding, Commissioner
Garcillano issued a Memorandum under date May 10,
2004[9] addressed to PES Liza D. Zabala-Cario,
ordering her to implement the resolution of the
COMELEC en banc in SPA No. 04-048 promulgated
on May 7, 2004.[10] Said Memorandum partly stated:

The undersigned ADOPTS the recommendation of

Atty. Alioden D. Dalaig [Director IV, Law Department],
which he quote your stand, "that substitution is not
proper if the certificate of the substituted candidacy is
denied due course. In the Resolution of the
Commission En banc, the Certificate of candidacy of
Francis Ong was denied due course," and elaborated
further that:

"x x x there is an existing policy of the Commission

not to include the name of a substitute candidate in
the certified list of candidates unless the substitution
is approved by the Commission.

The following undisputed events then transpired:

1. On May 9, 2004, or a day before the May 10

elections, Alegre filed a Petition to Deny Due Course
to or Cancel Certificate of Rommel Ong.

In view, thereof, it is recommended that 1) the

substitute certificate of candidacy of Rommel Ong
Gan Ong, should be denied due course; and 2) the
election officer be directed to delete his name from
the list of candidates."

The above position of the Commission was in line

with the pronouncement of Supreme Court in Miranda
vs. Abaya (311 SCRA 617) which states:

Alegre's Petition to Deny Due Course to or Cancel

Certificate of Candidacy of Rommel Ong, for being
moot and academic.[14]

"There can no valid substitution where a candidate is

excluded not only by disqualification but also by
denial and cancellation of his certificate of
candidacy."

The issues for resolution of the Court are:

In view thereof, you are hereby directed to faithfully

implement the said Resolution of the Commission En
Banc in SPA No. 04-048 promulgated on May 7,
2004. (Emphasis in the original; words in bracket
added].

4. Owing to the aforementioned Garcillano

Memorandum, it would seem that the Chairman of the
Municipal Board of Canvasser of San Vicente issued
an order enjoining all concerned not to canvass the
votes cast for Rommel, prompting the latter to file a
protest with that Board.[11]

5. On May 11, 2004, the Municipal Board of

Canvassers proclaimed Alegre as the winning
candidate for the mayoralty post in San Vicente,
Camarines Norte.[12]

On May 12, 2004, Francis filed before the Court a

petition for certiorari, presently docketed as G.R. No.
163295. His brother Rommel's petition in G.R. No.
163354followed barely a week after.

In our en banc resolution dated June 1, 2004, G.R.

No. 163295 and G.R. No. 163354 were consolidated.
[13]

Meanwhile, on June 4, 2004, the COMELEC issued

an order dismissing private respondent

In G.R. No. 163295, whether the COMELEC acted

with grave abuse of discretion amounting to lack or
excess of jurisdiction in issuing its en banc resolution
dated May 7, 2004 declaring petitioner Francis as
disqualified to run for Mayor of San Vicente,
Camarines Norte in the May 10, 2004 elections and
consequently ordering the deletion of his name from
the official list of candidates so that any vote cast in
his favor shall be considered stray.

In G.R. No. 163354, whether the COMELEC

committed grave abuse of discretion when it denied
due course to Rommel's certificate of candidacy in the
same mayoralty election as substitute for his brother
Francis.

A resolution of the issues thus formulated hinges on

the question of whether or not petitioner Francis's
assumption of office as Mayor of San Vicente,
Camarines Norte for the mayoralty term 1998 to 2001
should be considered as full service for the purpose of
the three-term limit rule.

Respondent COMELEC resolved the question in the

affirmative. Petitioner Francis, on the other hand,
disagrees. He argues that, while he indeed assumed
office and discharged the duties as Mayor of San
Vicente for three consecutive terms, his proclamation
as mayor-elect in the May 1998 election was
contested and eventually nullified per the decision of
the RTC of Daet, Camarines Norte dated July 4,
2001. Pressing the point, petitioner argues,
citing Lonzanida vs. Comelec[15], that a proclamation
subsequently declared void is no proclamation at all
and one assuming office on the strength of a
protested proclamation does so as a presumptive

winner and subject to the final outcome of the election

protest.

The three-term limit rule for elective local officials is

found in Section 8, Article X of the 1987 Constitution,
which provides:

Sec. 8. The term of office of elective local officials,

except barangay officials, which shall be determined
by law, shall be three years and no such official shall
serve for more than three consecutive terms.
Voluntary renunciation of the office for any length of
time shall not be considered as an interruption in the
continuity of his service for the full term for which he
was elected.

Section 43 (b) of the Local Government Code restates

the same rule as follows:

Sec. 43. Term of Office.

xxx xxx xxx

(b) No local elective official shall serve for more than

three consecutive years in the same position.
Voluntary renunciation of the office for any length of
time shall not be considered an interruption in the
continuity of service for the full term for which the
elective official concerned was elected.

For the three-term limit for elective local government

officials to apply, two conditions or requisites must
concur, to wit: (1) that the official concerned has been
elected for three (3) consecutive terms in the same
local government post, and (2) that he has fully
served three (3) consecutive terms.[16]

With the view we take of the case, the disqualifying

requisites are present herein, thus effectively barring
petitioner Francis from running for mayor of San
Vicente, Camarines Norte in the May 10, 2004
elections. There can be no dispute about petitioner
Francis Ong having been duly elected mayor of that
municipality in the May 1995 and again in the May
2001 elections and serving the July 1, 1995- June 30,
1998 and the July 1, 2001-June 30, 2004 terms in full.
The herein controversy revolves around the 19982001 mayoral term, albeit there can also be no
quibbling that Francis ran for mayor of the same
municipality in the May 1998 elections and actually
served the 1998-2001 mayoral term by virtue of a
proclamation initially declaring him mayor-elect of the
municipality of San Vicente. The question that begs to
be addressed, therefore, is whether or not Francis's
assumption of office as Mayor of San Vicente,
Camarines Norte from July 1, 1998 to June 30, 2001,
may be considered as one full term service in the
context of the consecutive three-term limit rule.

We hold that such assumption of office constitutes, for

Francis, "service for the full term", and should be
counted as a full term served in contemplation of the
three-term limit prescribed by the constitutional and
statutory provisions, supra, barring local elective
officials from being elected and serving for more than
three consecutive term for the same position.

It is true that the RTC-Daet, Camarines Norte ruled in

Election Protest Case No. 6850,[17] that it was
Francis' opponent (Alegre) who "won" in the 1998
mayoralty race and, therefore, was the legally elected
mayor of San Vicente. However, that disposition, it
must be stressed, was without practical and legal use
and value, having been promulgated after the term of
the contested office has expired. Petitioner Francis'
contention that he was only a presumptive winner in
the 1998 mayoralty derby as his proclamation was
under protest did not make him less than a duly
elected mayor. His proclamation by the Municipal
Board of Canvassers of San Vicente as the duly
elected mayor in the 1998 mayoralty election coupled
by his assumption of office and his continuous
exercise of the functions thereof from start to finish of

the term, should legally be taken as service for a full

term in contemplation of the three-term rule.

The absurdity and the deleterious effect of a contrary

view is not hard to discern. Such contrary view would
mean that Alegre would - under the three-term rule be considered as having served a term by virtue of a
veritably meaningless electoral protest ruling, when
another actually served such term pursuant to a
proclamation made in due course after an election.

Petitioner cites, but, to our mind, cannot seek refuge

from the Court's ruling in, Lonzanida vs. Comelec,[18]
citing Borja vs. Comelec[19]. In Lonzanida, petitioner
Lonzanida was elected and served for two
consecutive terms as mayor of San Antonio,
Zambales prior to the May 8, 1995 elections. He then
ran again for the same position in the May 1995
elections, won and discharged his duties as Mayor.
However, his opponent contested his proclamation
and filed an election protest before the RTC of
Zambales, which, in a decision dated January 9,
1997, ruled that there was a failure of elections and
declared the position vacant. The COMELEC affirmed
this ruling and petitioner Lonzanida acceded to the
order to vacate the post. Lonzanida assumed the
office and performed his duties up to March 1998
only. Now, during the May 1998 elections, Lonzanida
again ran for mayor of the same town. A petition to
disqualify, under the three-term rule, was filed and
was eventually granted. There, the Court held that
Lonzanida cannot be considered as having been duly
elected to the post in the May 1995 election, and that
he did not fully serve the 1995-1998 mayoralty term
by reason of involuntary relinquishment of office. As
the Court pointedly observed, Lonzanida "cannot be
deemed to have served the May 1995 to 1998 term
because he was ordered to vacate [and in fact
vacated] his post before the expiration of the term."

The difference between the case at bench

and Lonzanida is at once apparent. For one,
in Lonzanida, the result of the mayoralty election was
declared a nullity for the stated reason of "failure of
election", and, as a consequence thereof, the

proclamation of Lonzanida as mayor-elect was

nullified, followed by an order for him to vacate the
office of mayor. For another, Lonzanida did not fully
serve the 1995-1998 mayoral term, there being an
involuntary severance from office as a result of legal
processes. In fine, there was an effective interruption
of the continuity of service.

On the other hand, the failure-of-election factor does

not obtain in the present case. But more importantly,
here, there was actually no interruption or break in the
continuity of Francis' service respecting the 19982001 term. Unlike Lonzanida, Francis was never
unseated during the term in question; he never
ceased discharging his duties and responsibilities as
mayor of San Vicente, Camarines Norte for the entire
period covering the 1998-2001 term.

The ascription, therefore, of grave abuse of discretion

on the part of the COMELEC en banc when it
disqualified Francis from running in the May 10, 2004
elections for the mayoralty post of San Vicente and
denying due course to his certificate of candidacy by
force of the constitutional and statutory provisions
regarding the three-term limit rule for any local
elective official cannot be sustained. What the
COMELEC en banc said in its May 7, 2004 assailed
Resolution commends itself for concurrence:

As correctly pointed out by Petitioner-Movant

[Alegre]in applying the ruling in
the Borja and Lonzanida cases in the instant petition
will be erroneous because the factual milieu in those
cases is different from the one obtaining here.
Explicitly, the three-term limit was not made applicable
in the cases of Borja and Lonzanidabecause there
was an interruption in the continuity of service of the
three consecutive terms. Here, Respondent Ong
would have served continuously for three consecutive
terms, from 1995 to 2004. His full term from 1998 to
2001 could not be simply discounted on the basis that
he was not duly elected thereto on account of void
proclamation because it would have iniquitous effects
producing outright injustice and inequality as it
rewards a legally disqualified and repudiated loser

with a crown of victory. (Word in bracket added;

emphasis in the original)

Given the foregoing consideration, the question of

whether or not then Commissioner Virgilio Garcillano
overstepped his discretion when he issued the May
10, 2004 Memorandum, ordering the implementation
of aforesaid May 7, 2004 COMELEC en banc
resolution even before its finality[20] is now of little
moment and need not detain us any longer.

much in the same way that a nuisance candidate

whose certificate of candidacy is denied due course
and/or cancelled may not be substituted. If the intent
of the lawmakers were otherwise, they could have so
easily and conveniently included those persons
whose certificates of candidacy have been denied
due course and/or cancelled under the provisions of
Section 78 of the Code.

xxx xxx xxx

Just as unmeritorious as Francis' petition in G.R. No.

163295 is Rommel's petition in G.R. No. 163354 in
which he (Rommel) challenges the COMELEC's act of
not including his name as a substitute candidate in
the official list of candidates for the May 10, 2004
elections. As it were, existing COMELEC policy[21]
provides for the non-inclusion of the name of
substitute candidates in the certified list of candidates
pending approval of the substitution.

A person without a valid certificate of candidacy

cannot be considered a candidate in much the same
way as any person who has not filed any certificate of
candidacy at all can not, by any stretch of the
imagination, be a candidate at all.

Not to be overlooked is the Court's holding in Miranda

vs. Abaya,[22] that a candidate whose certificate of
candidacy has been cancelled or not given due
course cannot be substituted by another belonging to
the same political party as that of the former, thus:

After having considered the importance of a certificate

of candidacy, it can be readily understood why in
Bautista [Bautista vs. Comelec, G.R. No. 133840,
November 13, 1998] we ruled that a person with a
cancelled certificate is no candidate at all. Applying
this principle to the case at bar and considering that
Section 77 of the Code is clear and unequivocal that
only an official candidate of a registered or accredited
party may be substituted, there demonstrably cannot
be any possible substitution of a person whose
certificate of candidacy has been cancelled and
denied due course.

While there is no dispute as to whether or not a

nominee of a registered or accredited political party
may substitute for a candidate of the same party who
had been disqualified for any cause, this does not
include those cases where the certificate of candidacy
of the person to be substituted had been denied due
course and cancelled under Section 78 of the Code.

Expressio unius est exclusio alterius. While the law

enumerated the occasions where a candidate may be
validly substituted, there is no mention of the case
where a candidate is excluded not only by
disqualification but also by denial and cancellation of
his certificate of candidacy. Under the foregoing rule,
there can be no valid substitution for the latter case,

xxx xxx xxx

In any event, with the hard reality that the May 10,
2004 elections were already passe, Rommel Ong's
petition in G.R. No. 163354 is already moot and
academic.

WHEREFORE, the instant petitions

are DISMISSED and the assailed en banc Resolution

dated May 7, 2004 of the COMELEC, in SPA No. 04048 AFFIRMED.

COMMISSIONER OF INTERNAL REVENUE,
petitioner, vs. MICHEL J. LHUILLIER PAWNSHOP,
INC., respondent.
DAVIDE, JR., C.J.:
Are pawnshops included in the term lending investors
for the purpose of imposing the 5% percentage tax
under then Section 116 of the National Internal
Revenue Code (NIRC) of 1977, as amended by
Executive Order No. 273?
Petitioner Commissioner of Internal Revenue (CIR)
filed the instant petition for review to set aside the
decision[1] of 20 November 2001 of the Court of
Appeals in CA G.R. SP No. 62463, which affirmed the
decision of 13 December 2000 of the Court of Tax
Appeals (CTA) in CTA Case No. 5690 cancelling the
assessment issued against respondent Michel J.
Lhuillier Pawnshop, Inc. (hereafter Lhuillier) in the
amount of P3,360,335.11 as deficiency percentage
tax for 1994, inclusive of interest and surcharges.
The facts are as follows:
On 11 March 1991, CIR Jose U. Ong issued Revenue
Memorandum Order (RMO) No. 15-91 imposing a 5%
lending investor's tax on pawnshops; thus:
A restudy of P.D. [No.] 114 shows that the principal
activity of pawnshops is lending money at interest and
incidentally accepting a "pawn" of personal property
delivered by the pawner to the pawnee as security for
the loan.(Sec. 3, Ibid). Clearly, this makes pawnshop
business akin to lending investor's business activity
which is broad enough to encompass the business of
lending money at interest by any person whether
natural or juridical. Such being the case, pawnshops
shall be subject to the 5% lending investor's tax based
on their gross income pursuant to Section 116 of the
Tax Code, as amended.
This RMO was clarified by Revenue Memorandum
Circular (RMC) No. 43-91 on 27 May 1991, which
reads:
1. RM[O] 15-91 dated March 11, 1991.

This Circular subjects to the 5% lending investor's tax

the gross income of pawnshops pursuant to Section
116 of the Tax Code, and it thus revokes BIR Ruling
No[]. 6-90, and VAT Ruling Nos. 22-90 and 67-90. In
order to have a uniform cut-off date, avoid unfairness
on the part of tax- payers if they are required to pay
the tax on past transactions, and so as to give
meaning to the express provisions of Section 246 of
the Tax Code, pawnshop owners or operators shall
become liable to the lending investor's tax on their
gross income beginning January 1, 1991. Since the
deadline for the filing of percentage tax return (BIR
Form No. 2529A-0) and the payment of the tax on
lending investors covering the first calendar quarter of
1991 has already lapsed, taxpayers are given up to
June 30, 1991 within which to pay the said tax without
penalty. If the tax is paid after June 30, 1991, the
corresponding penalties shall be assessed and
computed from April 21, 1991.
Since pawnshops are considered as lending investors
effective January 1, 1991, they also become subject
to documentary stamp taxes prescribed in Title VII of
the Tax Code. BIR Ruling No. 325-88 dated July 13,
1988 is hereby revoked.
On 11 September 1997, pursuant to these issuances,
the Bureau of Internal Revenue (BIR) issued
Assessment Notice No. 81-PT-13-94-97-9-118 against
Lhuillier demanding payment of deficiency percentage
tax in the sum of P3,360,335.11 for 1994 inclusive of
interest and surcharges.
On 3 October 1997, Lhuillier filed an administrative
protest with the Office of the Revenue Regional
Director contending that (1) neither the Tax Code nor
the VAT Law expressly imposes 5% percentage tax
on the gross income of pawnshops; (2) pawnshops
are different from lending investors, which are subject
to the 5% percentage tax under the specific provision
of the Tax Code; (3) RMO No. 15-91 is not
implementing any provision of the Internal Revenue
laws but is a new and additional tax measure on
pawnshops, which only Congress could enact; (4)
RMO No. 15-91 impliedly amends the Tax Code and
is therefore taxation by implication, which is
proscribed by law; and (5) RMO No. 15-91 is a "class
legislation" because it singles out pawnshops among
other lending and financial operations.

On 12 October 1998, Deputy BIR Commissioner

Romeo S. Panganiban issued Warrant of Distraint
and/or Levy No. 81-043-98 against Lhuillier's property
for the enforcement and payment of the assessed
percentage tax.
Its protest having been unacted upon, Lhuillier, in a
letter dated 3 March 1998, elevated the matter to the
CIR. Still, the protest was not acted upon by the CIR.
Thus, on 11 November 1998, Lhuillier filed a "Notice
and Memorandum on Appeal" with the Court of Tax
Appeals invoking Section 228 of Republic Act No.
8424, otherwise known as the Tax Reform Act of
1997, which provides:
Section 228. Protesting of Assessment.
If the protest is denied in whole or in part, or is not
acted upon within one hundred eighty (180) days from
submission of documents, the taxpayer adversely
affected by the decision or inaction may appeal to the
Court of Tax Appeals within thirty (30) days from
receipt of the said decision, or from the lapse of the
one hundred eighty (180)-day period; otherwise, the
decision shall become final, executory and
demandable.
The case was docketed as CTA Case No. 5690.
On 19 November 1998, the CIR filed with the CTA a
motion to dismiss Lhuillier's petition on the ground
that it did not state a cause of action, as there was no
action yet on the protest.
Lhuillier opposed the motion to dismiss and moved for
the issuance of a writ of preliminary injunction praying
that the BIR be enjoined from enforcing the warrant of
distraint and levy.
For Lhuillier's failure to appear on the scheduled date
of hearing, the CTA denied the motion for the
issuance of a writ of preliminary injunction. However,
on Lhuillier's motion for reconsideration, said denial
was set aside and a hearing on the motion for the
issuance of a writ of preliminary injunction was set.
On 30 June 1999, after due hearing, the CTA denied
the CIR's motion to dismiss and granted Lhuillier's
motion for the issuance of a writ of preliminary
injunction.

On 13 December 2000, the CTA rendered a decision

declaring (1) RMO No. 15-91 and RMC No. 43-91 null
and void insofar as they classify pawnshops as
lending investors subject to 5% percentage tax; and
(2) Assessment Notice No. 81-PT-13-94-97-9-118 as
cancelled, withdrawn, and with no force and effect.[2]
Dissatisfied, the CIR filed a petition for review with the
Court of Appeals praying that the aforesaid decision
be reversed and set aside and another one be
rendered ordering Lhuillier to pay the 5% lending
investor's tax for 1994 with interests and surcharges.
Upon due consideration of the issues presented by
the parties in their respective memoranda, the Court
of Appeals affirmed the CTA decision on 20 November
2001.
The CIR is now before this Court via this petition for
review on certiorari, alleging that the Court of Appeals
erred in holding that pawnshops are not subject to the
5% lending investor's tax. He invokes then Section
116 of the Tax Code, which imposed a 5% percentage
tax on lending investors. He argues that the legal
definition of lending investors provided in Section 157
(u) of the Tax Code is broad enough to include
pawnshop operators. Section 3 of Presidential Decree
No. 114 states that the principal business activity of a
pawnshop is lending money; thus, a pawnshop easily
falls under the legal definition of lending investors.
RMO No. 15-91 and RMC No. 43-91, which subject
pawnshops to the 5% lending investor's tax based on
their gross income, are valid. Being mere
interpretations of the NIRC, they need not be
published. Lastly, the CIR invokes the case of
Commissioner of Internal Revenue vs. Agencia
Exquisite of Bohol, Inc.,[3] where the Court of
Appeals' Special Fourteenth Division ruled that a
pawnshop is subject to the 5% lending investor's tax.
[4]
Lhuillier, on the other hand, maintains that before and
after the amendment of the Tax Code by E.O. No.
273, which took effect on 1 January 1988, pawnshops
and lending investors were subjected to different tax
treatments. Pawnshops were required to pay an
annual fixed tax of only P1,000, while lending
investors were subject to a 5% percentage tax on
their gross income in addition to their fixed annual

taxes. Accordingly, during the period from April 1982

up to December 1990, the CIR consistently ruled that
a pawnshop is not a lending investor and should not
therefore be required to pay percentage tax on its
gross income.
Lhuillier likewise asserts that RMO No. 15-91 and
RMC No. 43-91 are not implementing rules but are
new and additional tax measures, which only
Congress is empowered to enact. Besides, they are
invalid because they have never been published in
the Official Gazette or any newspaper of general
circulation.
Lhuillier further points out that pawnshops are strictly
regulated by the Central Bank pursuant to P.D. No.
114, otherwise known as The Pawnshop Regulation
Act. On the other hand, there is no special law
governing lending investors. Due to the wide
differences between the two, pawnshops had never
been considered as lending investors for tax
purposes. In fact, in 1994, Congress passed House
Bill No. 11197,[5] which attempted to amend Section
116 of the NIRC, as amended, to include owners of
pawnshops as among those subject to percentage
tax. However, the Senate Bill and the subsequent
Bicameral Committee version, which eventually
became the E-VAT Law, did not incorporate such
proposed amendment.
Lastly, Lhuillier argues that following the maxim in
statutory construction "expressio unius est exclusio
alterius," it was not the intention of the Legislature to
impose percentage taxes on pawnshops because if it
were so, pawnshops would have been included as
among the businesses subject to the said tax.
Inasmuch as revenue laws impose special burdens
upon taxpayers, the enforcement of such laws should
not be extended by implication beyond the clear
import of the language used.
We are therefore called upon to resolve the issue of
whether pawnshops are subject to the 5% lending
investor's tax. Corollary to this issue are the following
questions: (1) Are RMO No. 15-91 and RMC No. 4391 valid? (2) Were they issued to implement Section
116 of the NIRC of 1977, as amended? (3) Are
pawnshops considered "lending investors" for the
purpose of the imposition of the lending investor's
tax? (4) Is publication necessary for the validity of

RMO No. 15-91 and RMC No. 43-91.

RMO No. 15-91 and RMC No. 43-91 were issued in
accordance with the power of the CIR to make rulings
and opinions in connection with the implementation of
internal revenue laws, which was bestowed by then
Section 245 of the NIRC of 1977, as amended by
E.O. No. 273.[6] Such power of the CIR cannot be
controverted. However, the CIR cannot, in the
exercise of such power, issue administrative rulings or
circulars not consistent with the law sought to be
applied. Indeed, administrative issuances must not
override, supplant or modify the law, but must remain
consistent with the law they intend to carry out. Only
Congress can repeal or amend the law.[7]
The CIR argues that both issuances are mere rules
and regulations implementing then Section 116 of the
NIRC, as amended, which provided:
SEC. 116. Percentage tax on dealers in securities;
lending investors. - Dealers in securities and lending
investors shall pay a tax equivalent to six (6) per
centum of their gross income. Lending investors shall
pay a tax equivalent to five (5%) percent of their gross
income.
It is clear from the aforequoted provision that
pawnshops are not specifically included. Thus, the
question is whether pawnshops are considered
lending investors for the purpose of imposing
percentage tax.
We rule in the negative.
Incidentally, we observe that both parties, as well as
the Court of Tax Appeals and the Court of Appeals,
refer to the National Internal Revenue Code as the
Tax Code. They did not specify whether the provisions
they cited were taken from the NIRC of 1977, as
amended, or the NIRC of 1986, as amended. For
clarity, it must be pointed out that the NIRC of 1977 as
renumbered and rearranged by E.O. No. 273 is a later
law than the NIRC of 1986, as amended by P.D. Nos.
1991, 1994, 2006 and 2031. The citation of the
specific Code is important for us to determine the
intent of the law.
Under Section 157(u) of the NIRC of 1986, as
amended, the term lending investor includes "all

persons who make a practice of lending money for

themselves or others at interest." A pawnshop, on the
other hand, is defined under Section 3 of P.D. No. 114
as "a person or entity engaged in the business of
lending money on personal property delivered as
security for loans and shall be synonymous, and may
be used interchangeably, with pawnbroker or pawn
brokerage."
While it is true that pawnshops are engaged in the
business of lending money, they are not considered
"lending investors" for the purpose of imposing the
5% percentage taxes for the following reasons:
First. Under Section 192, paragraph 3, subparagraphs (dd) and (ff), of the NIRC of 1977, prior to
its amendment by E.O. No. 273, as well as Section
161, paragraph 2, sub-paragraphs (dd) and (ff), of the
NIRC of 1986, pawnshops and lending investors were
subjected to different tax treatments; thus:
(3) Other Fixed Taxes. - The following fixed taxes
shall be collected as follows, the amount stated being
for the whole year, when not otherwise specified:
.
(dd) Lending investors
1. In chartered cities and first class municipalities, one
thousand pesos;
2. In second and third class municipalities, five
hundred pesos;
3. In fourth and fifth class municipalities and municipal
districts, two hundred fifty pesos: Provided, That
lending investors who do business as such in more
than one province shall pay a tax of one thousand
pesos.
.
(ff) Pawnshops, one thousand pesos (underscoring
ours)
Second. Congress never intended pawnshops to be
treated in the same way as lending investors. Section
116 of the NIRC of 1977, as renumbered and
rearranged by E.O. No. 273, was basically lifted from

Section 175[8] of the NIRC of 1986, which treated

both tax subjects differently. Section 175 of the latter
Code read as follows:

included as among those subject to 5% percentage

tax by House Bill No. 11197 in 1994. Section 13
thereof reads:

Sec. 175. Percentage tax on dealers in securities,

lending investors. -- Dealers in securities shall pay a
tax equivalent to six (6%) percent of their gross
income. Lending investors shall pay a tax equivalent
to five (5%) percent of their gross income. (As
amended by P.D. No. 1739, P.D. No. 1959 and P.D.
No. 1994).

Section 13. Section 116 of the National Internal

Revenue Code, as amended, is hereby further
amended to read as follows:

We note that the definition of lending investors found

in Section 157 (u) of the NIRC of 1986 is not found in
the NIRC of 1977, as amended by E.O. No. 273,
where Section 116 invoked by the CIR is found.
However, as emphasized earlier, both the NIRC of
1986 and the NIRC of 1977 dealt with pawnshops and
lending investors differently. Verily then, it was the
intent of Congress to deal with both subjects
differently. Hence, we must likewise interpret the
statute to conform with such legislative intent.
Third. Section 116 of the NIRC of 1977, as amended
by E.O. No. 273, subjects to percentage tax dealers in
securities and lending investors only. There is no
mention of pawnshops. Under the maxim expressio
unius est exclusio alterius, the mention of one thing
implies the exclusion of another thing not mentioned.
Thus, if a statute enumerates the things upon which it
is to operate, everything else must necessarily and by
implication be excluded from its operation and effect.
[9] This rule, as a guide to probable legislative intent,
is based upon the rules of logic and natural workings
of the human mind.[10]
Fourth. The BIR had ruled several times prior to the
issuance of RMO No. 15-91 and RMC 43-91 that
pawnshops were not subject to the 5% percentage
tax imposed by Section 116 of the NIRC of 1977, as
amended by E.O. No. 273. This was even admitted by
the CIR in RMO No. 15-91 itself. Considering that
Section 116 of the NIRC of 1977, as amended, was
practically lifted from Section 175 of the NIRC of
1986, as amended, and there being no change in the
law, the interpretation thereof should not have been
altered.
It may not be amiss to state that, as pointed out by
the respondent, pawnshops was sought to be

"SEC. 116. Percentage tax on dealers in securities;

lending investors; OWNERS OF PAWNSHOPS;
FOREIGN CURRENCY DEALERS AND/OR MONEY
CHANGERS. - Dealers in securities shall pay a tax
equivalent to Six (6%) per centum of their gross
income. Lending investors, OWNERS OF
PAWNSHOPS AND FOREIGN CURRENCY
DEALERS AND/OR MONEY CHANGERS shall pay a
tax equivalent to Five (5%) percent of their gross
income."
If pawnshops were covered within the term lending
investor, there would have been no need to introduce
such amendment to include owners of pawnshops. At
any rate, such proposed amendment was not
adopted. Instead, the approved bill which became
R.A. No. 7716[11] repealed Section 116 of NIRC of
1977, as amended, which was the basis of RMO No.
15-91 and RMC No. 43-91; thus:
SEC. 20. Repealing Clauses. -- The provisions of any
special law relative to the rate of franchise taxes are
hereby expressly repealed. Sections 113, 114 and 116
of the National Internal Revenue Code are hereby
repealed.
Section 21 of the same law provides that the law shall
take effect fifteen (15) days after its complete
publication in the Official Gazette or in at least two (2)
national newspapers of general circulation whichever
comes earlier. R.A. No. 7716 was published in the
Official Gazette on 1 August 1994[12]; in the Journal
and Malaya newspapers, on 12 May 1994; and in the
Manila Bulletin, on 5 June 1994. Thus, R.A. No. 7716
is deemed effective on 27 May 1994.

investors, the assessment from 27 May 1994 onward

would have no leg to stand on.
Adding to the invalidity of the RMC No. 43-91 and
RMO No. 15-91 is the absence of publication. While
the rule-making authority of the CIR is not doubted,
like any other government agency, the CIR may not
disregard legal requirements or applicable principles
in the exercise of quasi-legislative powers.
Let us first distinguish between two kinds of
administrative issuances: the legislative rule and the
interpretative rule. A legislative rule is in the nature of
subordinate legislation, designed to implement a
primary legislation by providing the details thereof. An
interpretative rule, on the other hand, is designed to
provide guidelines to the law which the administrative
agency is in charge of enforcing.[13]
In Misamis Oriental Association of Coco Traders, Inc.
vs. Department of Finance Secretary,[14] this Tribunal
ruled:
In the same way that laws must have the benefit of
public hearing, it is generally required that before a
legislative rule is adopted there must be hearing. In
this connection, the Administrative Code of 1987
provides:
Public Participation. - If not otherwise required by law,
an agency shall, as far as practicable, publish or
circulate notices of proposed rules and afford
interested parties the opportunity to submit their views
prior to the adoption of any rule.
(2) In the fixing of rates, no rule or final order shall be
valid unless the proposed rates shall have been
published in a newspaper of general circulation at
least two weeks before the first hearing thereon.
(3) In case of opposition, the rules on contested cases
shall be observed.
In addition, such rule must be published.

Since Section 116 of the NIRC of 1977, which

breathed life on the questioned administrative
issuances, had already been repealed, RMO 15-91
and RMC 43-91, which depended upon it, are
deemed automatically repealed. Hence, even granting
that pawnshops are included within the term lending

When an administrative rule is merely interpretative in

nature, its applicability needs nothing further than its
bare issuance, for it gives no real consequence more
than what the law itself has already prescribed. When,
on the other hand, the administrative rule goes

beyond merely providing for the means that can

facilitate or render least cumbersome the
implementation of the law but substantially increases
the burden of those governed, it behooves the agency
to accord at least to those directly affected a chance
to be heard, and thereafter to be duly informed,
before that new issuance is given the force and effect
of law.[15]
RMO No. 15-91 and RMC No. 43-91 cannot be
viewed simply as implementing rules or corrective
measures revoking in the process the previous rulings
of past Commissioners. Specifically, they would have
been amendatory provisions applicable to
pawnshops. Without these disputed CIR issuances,
pawnshops would not be liable to pay the 5%
percentage tax, considering that they were not
specifically included in Section 116 of the NIRC of
1977, as amended. In so doing, the CIR did not
simply interpret the law. The due observance of the
requirements of notice, hearing, and publication
should not have been ignored.
There is no need for us to discuss the ruling in CAG.R. SP No. 59282 entitled Commissioner of Internal
Revenue v. Agencia Exquisite of Bohol Inc., which
upheld the validity of RMO No. 15-91 and RMC No.
43-91. Suffice it to say that the judgment in that case
cannot be binding upon the Supreme Court because it
is only a decision of the Court of Appeals. The
Supreme Court, by tradition and in our system of
judicial administration, has the last word on what the
law is; it is the final arbiter of any justifiable
controversy. There is only one Supreme Court from
whose decisions all other courts should take their
bearings.[16]
In view of the foregoing, RMO No. 15-91 and RMC
No. 43-91 are hereby declared null and void.
Consequently, Lhuillier is not liable to pay the 5%
lending investor's tax.
WHEREFORE, the petition is hereby DISMISSED for
lack of merit. The decision of the Court of Appeals of
20 November 2001 in CA-G.R. SP No. 62463 is
AFFIRMED.
Sterling Selections Corporation vs. Laguna Lake
Development Authority (LLDA) and Joaquin Mendoza,
in his capacity as General Manager of LLDA

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari

under Rule 45 of the Rules of Court. Petitioner
Sterling Selections Corporation (petitioner) is
assailing the Decision1 dated May 30, 2005 and the
Resolution2 dated January 31, 2006 of the Court of
Appeals (CA) in CA-G.R. SP No. 79889.

Petitioner is a company engaged in the fabrication of

sterling silver jewelry. Its products are manufactured
in the home of its principal stockholders, Asuncion
Maria and Juan Luis Faustmann (Faustmanns),
located in Barangay (Brgy.) Mariana, New Manila,
Quezon City.3

Sometime in 1992, one of petitioner's neighbors in

Brgy. Mariana filed a complaint with the Office of the
Chairman of Brgy. Mariana against petitioner for
"creating loud unceasing noise and emitting toxic
fumes," coming from the manufacturing plant of the
latter's predecessor, Unson, Faustmann and
Company, Inc.4 During conciliation proceedings,
petitioner's management undertook to relocate its
operations within a month. The parties signed an
Agreement to that effect.5 However, petitioner failed
to abide by the undertaking and continued to
manufacture its products in its Brgy. Mariana
workshop.

On January 16, 1998, Alicia P. Maceda (Maceda),

another neighbor of petitioner, wrote a letter to the
Brgy. Chairman to complain about the loud noise and
offensive toxic fumes coming from petitioner's
manufacturing plant.6 She also filed a formal
complaint with the Department of Environment and
Natural Resources (DENR)-National Capital Region
office. The complaint was endorsed by the DENR to

one of the agencies under it, respondent Laguna Lake

Development Authority (LLDA), which had territorial
and functional jurisdiction over the matter.7

Subsequently, the Monitoring and Enforcement

Section-Pollution Control Division of LLDA conducted
an inspection of petitioner's premises. According to
the LLDA, it was observed that the wastewater
generated by petitioner's operations was drained
directly to the sewer canal. However, since the
wastewater was not yet for disposal, no sample could
be collected during the inspection.

On November 19, 1998, a Notice of Violation and a

Cease and Desist Order (CDO) were served on
petitioner after it was found that it was operating
without an LLDA Clearance and Permit, as required
by Republic Act (R.A.) No. 4850.8

Meanwhile, Maceda's complaint was endorsed by the

LLDA to the Office of the Mayor of Quezon City. After
hearing and investigation, the Office of the Mayor
issued a Closure Order against petitioner after finding
that it was operating without the requisite business
permit, since it was running a jewelry manufacturing
plant with an "Office Only" permit, and for violation of
Zoning and Environmental Laws.9

Petitioner then filed a petition for mandamus before

the Regional Trial Court (RTC), Branch 167, Pasig
City. Contending that, as a cottage industry, its jewelry
business is exempt from the requirement to secure a
permit from the LLDA, petitioner asked the court to
order the latter to issue a certificate of exemption in its
favor. The RTC denied the petition, ruling that
mandamus does not lie to compel the performance of
a discretionary duty. Nonetheless, the RTC allowed
petitioner to file an amended petition for certiorari and
mandamus.10

In its amended petition, petitioner averred that its

business was classified as a cottage industry. It
argued that under R.A. No. 6977, the law prevailing at
the time of its registration with the Securities and
Exchange Commission (SEC) in December 1996,
cottage industry was defined as one with assets
worth P50,001.00 to P500,000.00.11 Since, based on
its Articles of Incorporation and Certified Public
Accountant (CPA)'s Balance Sheet, its total assets
when it was incorporated amounted only
to P312,500.00, it qualified as a cottage industry.

Intervenors Maceda, Ma. Corazon G. Logarta

(Logarta), and Rosario "Charito" Planas (Planas) filed
a motion for intervention. Their Answer-in-Intervention
was subsequently admitted by the RTC.

On April 1, 2002, the RTC promulgated a

decision12 denying the petition. In rejecting
petitioner's claim that it was a cottage industry, the
RTC said:

While it is true that plaintiff [petitioner]'s economic

activity is carried on in a home, which incidentally
gained the ire of the neighbors that culminated in a
complaint against the plaintiff, it was manned not with

the members of the family but by at least two hundred

employees who were strangers and not known to the
community. Moreso, being an accredited exporter
recognized by the Bureau of Export Trade Promotion,
Department of Trade and Industry, seemed a
deviation from the connotation of "small scale."

Worthy to note is the observation of respondentintervenors that to be considered a cottage industry,

plaintiff should have been registered under the
[National Cottage Industries Development Authority
(NACIDA)], Section 12 of R.A. [No.] 3470
substantially provides; (sic) that the plaintiff
corporation who desires to avail of the benefits and
assistance of the law should have registered with the
board. In the absence of any indication that affirm the
status of the plaintiff corporation as a cottage industry,
proof to the contrary may be reasonably accepted, for
he who alleged the affirmative of the issue has the
burden of proof and in this aspect plaintiff miserably
failed.

Petitioner filed a motion for reconsideration of the

RTC decision. The same was denied in an Order
dated May 17, 2002. Hence, it filed a Notice of
Appeal. Subsequently, it filed its appeal with the CA.

In a Decision15 dated May 30, 2005, the CA

dismissed the appeal. The CA brushed aside the
issue of whether petitioner qualified as a cottage
industry. It said that even if petitioner belonged to that
category, it still needed to prove that its business was
exempted by law from the coverage of LLDA
Resolution No. 41, Series of 1997.

Specifically, the CA cited Section 2(30) of said

resolution, to wit:

On the contention that LLDA Resolution No. 41,

series of 1997, exempt the plaintiff corporation from
the requirements imposed by the LLDA, the
interpretation given by [the] government agency itself
should be given greater probative value. As a
regulatory and quasi-judicial body, the LLDA is
mandated to pass upon, approve or disapprove all
plans, programs and project[s] proposed by local
government offices/agencies, public corporations and
private [corporations]. It is in the position to construe
its own rules and regulation. By implication, plaintiff
corporation arrogates unto itself the privilege
bestowed upon a cottage industry. However, there is
nothing in the Resolution that includes jewelry making
as included in the term cottage industry.13

Section 2. Exemptions. The following activities,

projects, and installations are exempt from the above
subject requirements:

Thus, the RTC held that petitioner must subscribe to

the rules and regulations of the LLDA governing
clearance.14

- stuffed toys manufacturing

xxxx

30. Cottage Industries, including

- handicrafts, and

1. The appellate court erred when it failed or refused

to make a definitive pronouncement as to whether
petitioner qualifies as a cottage industry. This, even
after the appellate court (on page 7 of the assailed
Decision) scored the trial court for having "failed to
consider the fact that the predicament of Sterling rests
primarily on the determination of its status," i.e.,
whether petitioner is a cottage industry or not.

- rattan/furniture manufacturing.16

The CA held that, following the principle of ejusdem

generis, the enumeration in the foregoing provision
must be taken to include businesses of the same
kind, which were, as averred by the LLDA, not as
environmentally critical as those enumerated.17 Thus,
the CA declared that the LLDA did not contemplate
the inclusion of the manufacture of jewelry in the
exemptions.18 Additionally, the CA held that the
opinions and rulings of officials of the government
called upon to execute or implement administrative
laws command respect and weight.19 The CA further
held that since petitioner was claiming to be within the
exemption, it had the duty to prove that the law
intended to include it, or that it is within the
contemplation of the law, to be exempted.20

Petitioner moved for the reconsideration of the

Decision, but the CA denied the same in a Resolution
dated January 31, 2006. Hence, petitioner filed this
petition for review.

Petitioner argues that the CA committed the following

errors:

2. The appellate court erred when it deliberately

ignored the provisions of various statutes and
regulations pertaining to cottage industries, which if
the same had been taken into account and accorded
due consideration, would have led the appellate court
to correctly conclude that petitioner is indeed a
cottage industry.

3. The appellate court erred when it declared, after

misapplying the rules of statutory construction, that
No. 30 of Sec. 2 of LLDA Resolution No. 41, Series of
1997, does not serve to exempt petitioner from the
clearance requirement.21

Petitioner also argues that Section 2(30) of LLDA

Resolution No. 41, Series of 1997, contains no
restriction limiting the exemptions to only certain kinds
of cottage industries.22 It contends that the word
"including" connotes a sense of "containing" or
"comprising," and not a sense of exclusivity or
exclusion. The provision, petitioner points out, is
devoid of any restrictive or limiting words; thus, the
LLDA should avoid limiting the kinds or classes of
cottage industries exempted from the clearance
requirement.23

Next, petitioner avers that the CA erred when it

refused to rule on whether it qualified as a cottage

industry. It claims that the CA deliberately ignored the

provisions in various statutes and regulations
pertaining to cottage industries, which would have led
to the conclusion that petitioner was such, and thus
would fall within the exemption.24 Petitioner argues
that its total assets were worth only P312,500.00
during its incorporation, which, under R.A. No. 6977,
would qualify it as a cottage industry. Further,
petitioner argues that, even with the enactment of
R.A. No. 8502, the Jewelry Industry Development Act
of 1998, jewelry-making remains a cottage industry.25

Finally, petitioner puts in question the factual basis for

the issuance of the CDO by the LLDA.

By way of comment, intervenors Maceda, Logarta,

and Planas allege that petitioner has been operating
illegally, violating ordinances and laws, operating
without the required permits and clearances, and
continuing its operations despite LLDA's issuance of a
CDO.26 They further allege that petitioner's business
is located in an area classified as "R-1" or low density
residential zone under Quezon City Ordinance SP918, Series of 2000, and preceding zoning
ordinances. Despite having only an "Office Only"
permit, petitioner deliberately uses the premises to
manufacture jewelry.27

Intervenors also refute petitioner's claim that it is

exempted from obtaining the required LLDA clearance
because it is a cottage industry. First, intervenors
allege that petitioner is not registered with the
National Cottage Industries Development Authority
(NACIDA). Next, intervenors point out that, as
admitted by petitioner itself, it employs at least 229
employees who are strangers to the family, and its
operations yield annual sales of at least P25
million.28

Intervenors also aver that, in R.A. No. 8502, there is

no provision categorizing jewelry-making as a cottage
industry. Going by the classification of jewelry-making
companies in the Implementing Rules and
Regulations of R.A. No. 850229 and petitioner's
financial statements filed with the SEC, which state
that petitioner had assets amounting
to P2,454,459.01 in 1999 and P4,628,900.80 in
1998,30 it cannot be characterized as a micro jewelry
enterprise.

Next, intervenors insist that the LLDA has jurisdiction

over petitioner. They argue that LLDA Resolution No.
41, Series of 1997, does not in any manner waive the
LLDA jurisdiction even over those exempted in the list
of activities, projects, and installations. Jurisdiction is
provided for by law and cannot be diminished by an
act of the agency concerned. In fact, there is no
provision of waiver of jurisdiction contained in the said
regulation. Exemption from securing prior clearance
before implementing an activity does not carry with it
a waiver of jurisdiction.31

Intevernors also point out that cottage industry, as

contemplated under LLDA Resolution No. 41, Series
of 1997, includes only the activities enumerated
therein, namely, stuffed toys manufacturing,
handicrafts, and rattan/furniture manufacturing.
Further, intervenors aver that, under existing laws, the
term cottage industry no longer exists and has been
deleted. Jewelry-making is now classified as an
independent and separate industry under R.A. No.
8502, apart from the general term cottage industry.
Therefore, petitioner's activity cannot be included as
among those exempted from obtaining a clearance
from the LLDA because jewelry-making is not at all
mentioned as an exception to the general rule,
intervenors claim.32

On the other hand, the LLDA and its former General

Manager Joaquin G. Mendoza (respondents) also

filed their Comment. Respondents narrated that in

1998, petitioner was found to be operating its
business without clearance and permit from the
LLDA. Accordingly, a Notice of Violation was issued
against petitioner. Subsequently, the LLDA conducted
a public hearing, which was attended by petitioner, its
company physician, and legal counsels. During the
hearing, petitioner committed to relocate its facilities.
Meanwhile, the same would remain padlocked to
erase all doubts of its continued operation despite the
Closure Order from the Quezon City Mayor's
Office.33 After the public hearing, the LLDA issued
the assailed CDO against petitioner. Thereafter,
proceedings before the RTC, then the CA, ensued,
resulting in the now-assailed decision and resolution.

In their Comment, respondents posit that petitioner is

not a cottage industry within the contemplation of the
law. They argue that to qualify as such, the conditions
in the laws must be complied with. Thus, while
metalcraft activities are considered as cottage
industry, asset requirements and NACIDA registration
requirements must also be complied with.34

Respondents contend that petitioner cannot be

considered a cottage industry considering that it has
assets way above the threshold fixed in the law.
Respondents aver that what petitioner claims as its
assets amounting to P312,500.00 refer only to the
minimum paid-up capital stock required by law for
purposes of incorporation and registration with the
SEC. Respondents argue that petitioner would have
other properties contributed and owned for purposes
of starting the enterprise, such as furniture, fixtures,
machinery, and equipment. Likewise, respondents
point out that petitioner actually has a capitalization
of P5 million, of which P1.25 million had been
subscribed. The amount subscribed minus the paidup capital is a subscription receivable from the
incorporators and is an asset.35

Next, respondents argue that the CA did not err in

ruling that petitioner is not exempted from securing a
clearance from the LLDA. The respondents posit that,
under LLDA Resolution No. 41, Series of 1997, the
cottage industries exempted are those of the same
nature and category as those enumerated therein,
following the principle of ejusdem generis.36 The
activities enumerated, respondents claim, are those
whose operations are basically dry and whose
environmental impact is not so
significant.37 Likewise, respondents argue that,
following the principle expressio unius est exclusio
alterius, the express mention of the three activities
excluded all other cottage industries. If the LLDA had
intended to exempt all types of cottage industries, it
would not have made an enumeration of those
exempt activities, respondents posit.38

In its Reply, petitioner claims that intervenors are

illegally suppressing petitioner's legitimate business
because it is competing with the jewelry business of
intervenor Logarta's cousin.39 Petitioner claims that
Logarta's cousin also operates his business within the
same area as its facilities. It further claims that there
is a total of 34 other businesses, including a
manufacturer of garments, a wholesaler of cement,
and a manufacturer of leather bags, operating in the
same supposedly-residential zone where its office is
located.40 Petitioner also accuses intervenors
Maceda and Planas of going to court with "unclean
hands," considering that they also run businesses in
the same area.41

Petitioner also denies that Mrs. Faustmann, then

operating Unson, Faustmann and Company, Inc.,
reneged on a promise, made in 1992, to relocate the
company's operations. Petitioner claims that Mrs.
Faustmann was pressured into signing the Agreement
before the Lupon, through threats and intimidation. As
to the later complaint, petitioner claims that
intervenors succeeded in pressing residents to sign
the complaint, but those who signed were in fact from
other streets, further away from its office.42

Petitioner also claims that there was no public hearing

conducted before the Quezon City Mayor's Office
issued and enforced the CDO.

Petitioner likewise insists that its business qualifies as

a cottage industry.43 It maintains that pertinent laws
have identified jewelry-making as a cottage industry.
The Cottage Industry Technology Center (CITC)
designates jewelry-making as one of the industries it
actively assists. Petitioner also maintains that its paidup capital qualifies its business as a cottage
industry.44

The petition is unmeritorious; hence, the same is

denied.

The main issue to be resolved is whether petitioner is

exempted from complying with the requirement to
obtain a clearance from the LLDA to operate its
business.

Petitioner insists that it is exempted from complying

with the clearance requirements because it is a
cottage industry. In order to resolve this issue, a
review of the laws pertinent to cottage industries is in
order.

Section 11 of R.A. No. 3470, approved on June 16,

1962, defined cottage industry as an "economic
activity in a small scale which is carried on mainly in
the homes or in other places for profit and which is

mainly done with the help of the members of the

family." Among the activities considered as a cottage
industry is "metalcraft such as making of jewelries,
knives, boloes (sic), scissors, razors, silverwares and
brassworks (sic)."45

The word capitalization as used in this section shall

mean the total current assets and fixed assets,
excluding the value of the land and building leased,
rented and/or used at least six months of each year.
For purpose of this Act, any and all branches,
agencies, outlets or divisions of a licensed cottage
industry shall be collated to determine the
capitalization thereof.

The same law required persons, corporations,

partnerships, or associations that wished to avail of
the benefits of the law to register with the NACIDA.46
R.A. No. 3470 was further amended on October 22,
1975, by Presidential Decree (P.D.) No. 817. The first
sentence of Section 11 was amended, to read:
In 1968, R.A. No. 5326 amended certain sections of
R.A. No. 3470. In particular, Section 11 was amended
to read:
The term "cottage industry" as used in this Act shall
mean an economic activity carried on in the homes or
in other places for profit, with a capitalization of not
exceeding P100,000 at the time of registration.
SEC. 11. Definition. - The term 'cottage industry' as
used in this Act shall mean an economic activity in a
small scale carried on mainly in the homes or in other
places for profit and mainly done with the help of the
members of the family with capitalization not
exceeding fifteen thousand pesos. The term shall also
include economic activities carried on by students of
public and private schools, within school premises, as
a cooperative effort, under supervision of a teacher or
other person approved by and acting under the
supervision and control of school authorities, either as
part of or in addition to ordinary vocational training,
provided all profits shall accrue to the students
working therein. it shall include the following: x x x (5)
metal craft such as making of jewelries, knives,
boloes (sic), scissors, razors, silverwares and
brassworks (sic); x x x All cottage industries shall be
owned and operated by Filipino citizens, or by a
corporation, partnership or cooperative, at least
seventy-five per cent of the capital or investment of
which is owned by Filipino citizens. All members of its
Board of Directors shall be Filipino citizens.

In 1981, then President Ferdinand Marcos issued P.D.

No. 1788, the Cottage Industries Development
Decree of 1981, amending and consolidating R.A.
Nos. 3470 and 5326, P.D. No. 817, and other related
Laws, Decrees, Executive Orders, Letters of
Instructions, and Acts concerning the NACIDA.
Section 10 of P.D. No. 1788 states:

Section 10. Cottage Industry - The term "cottage

industry" shall mean a modest economic activity for
profit using primarily indigenous raw materials in the
production of various articles of the country. Provided,
however, that all cottage industries shall be owned
and operated by Filipino citizens, or by corporations,
partnerships, or cooperatives at least seventy-five
percent (75%) of the capital investment of which shall
be owned by Filipino citizens. Provided, further, that
the total assets of which shall not exceed one
hundred thousand pesos (P100,000.00) at the time of
registration with the NACIDA. Provided, finally that the

maximum total assets allowable for cottage industries

for purposes of registration may be modified and/or
increased accordingly by the NACIDA Board subject
to the approval of the President of the Republic of the
Philippines.

For facility of implementation, coordination and

statistical gathering, cottage industries shall be
classified as follows:

xxxx

a) Metalcraft Industry - That sector using metals or its

alloys as principal raw material component in
producing articles such as brasswares, cutlery items,
fabricated tools, implements and equipment and other
items requiring a certain degree of craftsmanship in
the making thereof including the making of jewelry
items involving the use metals and/or its alloys in
combination with semiprecious or artificial stones.

Executive Order (E.O.) No. 917, issued on October

15, 1983, amended the definition of cottage industry
by increasing the capitalization requirement to a
maximum of P250,000.00, which amount may be
modified or increased accordingly, subject to the
approval of the President.47

When Corazon Aquino became President, she issued

E.O. No. 133, reorganizing the Department of Trade
and Industry (DTI). Section 18 thereof provided that
the NACIDA was reorganized into the CITC, and its
functions, other than technology development and
training, were transferred to the Bureau of Small and
Medium Business Development and relevant line
operating units of the DTI.

In 1990, Congress enacted R.A. No. 6977, the Magna

Carta for Small Enterprises. The capitalization for a
cottage enterprise was changed, viz.:

SEC. 3. Small and Medium Enterprises as

Beneficiaries. - "Small and medium enterprise" shall
be defined as any business activity or enterprise
engaged in industry, agribusiness and/or services,
whether single proprietorship, cooperative,
partnership or corporation whose total assets,
inclusive of those arising from loans but exclusive of
the land on which the particular business entity's
office, plant, and equipment are situated, must have
value falling under the following categories:

medium: P5,000,001 - P20,000,000

In a generic sense, all enterprises with total assets of

Five million pesos (P5,000,000) and below shall be
called small enterprises.

R.A. No. 6977 was amended by R.A. No. 8289 in

1998. Amending Section 1 of R.A. No. 6977, the term
cottage industry or cottage enterprise was completely
eliminated:

SEC. 3. Small and Medium Enterprise as

Beneficiaries. - "Small and Medium Enterprise" shall
be defined as any business activity or enterprise
engaged in industry, agribusiness and/or services,
whether single proprietorship, cooperative,
partnership or corporation whose total assets,
inclusive of those arising from loans but exclusive of
the land on which the particular business entity's
office, plant, and equipment are situated, must have
value falling under the following categories:

micro : less than P50,000

micro : less than P1,500,001

In 1986, the National Economic Development

Authority (NEDA) redefined cottage, small and
medium scale industries. Considered as cottage
industries were enterprises, excluding agriculture,
with total assets after financing of over P500,000.00
but less than P5 million.48

cottage : P50,001 - P500,000

small : P1,500,001 - P15,000,000
small : P500,001 - P5,000,000

medium: P15,000,001 - P60,000,00

The above definitions shall be subject to review and

adjustment by the said Council motu proprio or upon
recommendation of sectoral organization(s) taking
into account inflation and other economic indicators.
The Council may use as variables the number of
employees, equity capital and asset size.

On the other hand, the LLDA was created by R.A. No.

4850 to carry out the development of the Laguna
Lake region with due regard and adequate provisions
for environmental management and control,
preservation of the quality of human life and
ecological systems, and prevention of undue
ecological disturbances, deterioration, and
pollution.50

xxxx

30. Cottage industries including

- stuffed toys manufacturing

Finally, in 1998, Congress enacted R.A. No. 8502, the
Jewelry Industry Development Act of 1998, a law to
support, promote, and encourage the growth and
development of the predominantly small and medium
scale jewelry industries. R.A. No. 8502 did not use the
term cottage industry; instead, it characterized
businesses engaged in jewelry-making as:

The LLDA was granted the power to pass upon and

approve or disapprove all plans, programs, and
projects proposed by the local government
offices/agencies within their regions, by public
corporations, and by private persons or enterprises,
where such plans, programs and/or projects are
related to those of the Authority for the development
of the region, as well as to issue the necessary
clearance for the approved plans, programs and/or
projects.51

- handicrafts and

- rattan/furniture manufacturing.

a) micro jewelry enterprise less than P1,500,001

b) small scale jewelry enterprise P1,500,001

- P15,000,000

c) medium jewelry enterprise P15,000,001

- P60,000,000

d) large scale jewelry enterprise more

than P60,000,000.49

Thus, in LLDA Resolution No. 41, Series of 1997, the

LLDA specified the development activities, projects,
and installations required to secure a clearance from
the LLDA before these can be constructed, operated,
maintained, expanded, modified, or implemented by
any government office/agency or government
corporation or private person or enterprise.52 Section
2 of the LLDA Resolution then set out the activities
exempted from complying with the clearance
requirement, to wit:

Section 2. Exemptions. The following activities,

projects, [or] installations are exempted from the
above subject requirements:

Contrary to the CA's pronouncement and to

respondents' claim, the provision did not restrict the
exemption to the three activities therein mentioned.

The word include means "to take in or comprise as

a part of a whole."53

Thus, this Court has previously held that it necessarily

conveys the very idea of non-exclusivity of the
enumeration.54 The principle of expressio unius est
exclusio alterius does not apply where other
circumstances indicate that the enumeration was not
intended to be exclusive, or where the enumeration is

by way of example only.55 The maxim expressio

unius est exclusio alterius does not apply when words
are mentioned by way of example.56 Said legal
maxim should be applied only as a means of
discovering legislative intent which is not otherwise
manifest.57

medium: P5,000,001 - P20,000,000

In view of the emphasis in law after law on the

capitalization or asset requirements, it is crystal clear
that the same is a defining element in determining if
an enterprise is a cottage industry.

In a generic sense, all enterprises with total assets of

Five million pesos (P5,000,000) and below shall be
called small enterprises.

In another case, the Court said:

[T]he word "involving," when understood in the sense

of "including," as in including technical or financial
assistance, necessarily implies that there are
activities other than those that are being included. In
other words, if an agreement includes technical or
financial assistance, there is [-] apart from such
assistance - something else already in[,] and covered
or may be covered by, the said agreement.58

As the regulation stands, therefore, all cottage

industries including, but not limited to, those
enumerated therein are exempted from securing prior
clearance from the LLDA. Hence, the CA erred in
ruling that only the three activities enumerated therein
are exempted.

Petitioner argues that its assets amount to

only P312,500.00, representing its paid-up capital at
the time of its SEC registration. The law then in force
was R.A. No. 6977, which, to recapitulate, states:

SEC. 3. Small and Medium Enterprises as

Beneficiaries. - "Small and medium enterprise" shall
be defined as any business activity or enterprise
engaged in industry, agribusiness and/or services,
whether single proprietorship, cooperative,
partnership or corporation whose total assets,
inclusive of those arising from loans but exclusive of
the land on which the particular business entity's
office, plant, and equipment are situated, must have
value falling under the following categories:

micro : less than P50,000

Next, the Court must determine if petitioner is in fact a
cottage industry entitled to claim the exemption under
LLDA Resolution No. 41, Series of 1997.

That jewelry-making is one of the activities considered

as a cottage industry is undeniable. The laws bear
this out. However, based on these same laws, the
nature of the activity is only one of several factors to
be considered in determining whether the same is a
cottage industry.

cottage: P50,001 - P500,000

small : P500,001 - P5,000,000

Accordingly, it should be considered as a cottage

industry, petitioner insists.

However, petitioner's contention that its total assets

amounts only to P312,500.00 is misleading.

The P312,500.00 represents the total amount of the

capital stock already subscribed and paid up by the
company's stockholders. It does not, however,
represent the totality of its assets, even at the time of
its registration. By the expert opinion of petitioner's
own consultant, independent CPA Maximiano P.
Sorongon, Jr., it does not mean that the paid-up
capital is the only source of funds of the corporation
for it to support its recurring operational requirements,
as well as its increased financial requirements later
on, as and when the business grows and expands.59

In other words, its paid-up capital is not the only asset

of the company. Under R.A. No. 6977, the term total
assets was understood to mean "inclusive of those
arising from loans but exclusive of the land on which
the particular business entity's office, plant, and
equipment are situated."

Assets consist of property of all kinds, real and

personal, tangible and intangible, including, inter alia,
for certain purposes, patents and causes of action
which belong to any person, including a corporation
and the estate of a decedent. It is the entire property
of a person, association, corporation, or estate that is
applicable or subject to the payment of his, her, or its
debts.60

Thus, the conclusion is that petitioner is not a cottage

industry and, hence, is not exempted from the
requirement to secure an LLDA clearance.
BETP Accreditation : 98-0010 dated July 17, 1998
under R.A. 7844

No. of Employees : 189 (Direct Labor; Salaries &

Allowances Consider these details as found by the Board of
Investments and set forth in a Memorandum dated
June 8, 1999 addressed to the undersecretary of the
DENR, listing the basic information of petitioner as
follows:

P16,064,000)

Value of Export Sales : P19,732,692.00

Name : Sterling Selections Corporation

Total Sales : P37,160,340.00 (based on 1998 ITR)61

Further militating against petitioner's claim is the

RTC's astute observation that being an accredited
exporter recognized by the Bureau of Export Trade
Promotion (BETP) of the DTI seemed like a deviation
from the connotation of "small scale."64

The Court notes that, to be accredited by the BETP

as an exporter, there are strict standards that the
enterprise must meet. Under R.A. No. 7844, the
Export Development Act of 1994, an exporter is any
person, natural or juridical, licensed to do business in
the Philippines, engaged directly or indirectly in the
production, manufacture or trade of products or
services, which earns at least fifty percent (50%) of its
normal operating revenues from the sale of its
products or services abroad for foreign currency.65

Address : 55-A, 11th St., New Manila, Quezon City

Business Activity : Producer of gift items made of

silver
Chairman & Managing Director: Asuncion Maria S. de
Faustmann

SEC Registration : A 1996-10845 dated December 2,

1996

BOI Accreditation : 98-003 dated August 13, 1998

under R.A. 8502

The same figures are reflected in petitioner's own

income statement.62 Petitioner cannot insist on using
merely its paid-up capital as basis to determine its
assets. The law speaks of total assets. Petitioner's
own evidence, i.e., balance sheets prepared by CPAs
it commissioned itself, shows that it has assets other
than its paid-up capital. According to the Consolidated
Balance Sheet presented by petitioner, it had assets
amounting to P4,628,900.80 by the end of 1998,
and P1,746,328.17 by the end of 1997.63 Obviously,
these amounts are over the maximum prescribed by
law for cottage industries.

The same law provides for tax incentives to exporters,

with the qualification that the incentives shall be
granted only upon presentation of their BETP
certification of the exporter's eligibility.66 Qualified
exporters applying for BETP certification must present
a report of their export revenue/sales for the
immediately preceding year.67

DTI Administrative Order No. 3, Series of 1995,

provides for the mechanisms of accreditation for
exporters vis--vis the tax incentives granted under
R.A. No. 7844. Under Procedure for Accreditation of
Exporters, the following schedule of application fees
was set forth:

Export Value Per Year

Application Fee

$1M - 5M Max.

P1,000.00

Above $1M - 5M Max.

2,000.00

Above $5M - 10M Max.

3,000.00

Above $10M - 15M Max.

4,000.00

Above $15M

5,000.00

68

Consequently, an exporter must be able to generate

and export enough products, with an export value of
$1 million per year, in order to be accredited by the
BETP for tax incentives. Petitioner's accreditation
shows that it complied with this requirement.

Based on the foregoing, it is clear that petitioner

cannot be considered a cottage industry. Therefore, it
is not exempted from complying with the clearance
requirement of the LLDA.

which are addressed to the sound discretion of the

government agency entrusted with regulation of
activities coming under the special and technical
training and knowledge of such agency. The exercise
of administrative discretion is a policy decision and a
matter that is best discharged by the government
agency concerned and not by the courts.70

September 28, 2007 of the Court of Appeals (CA) in

CA-G.R. SP No. 98054, which reversed and set aside
the Resolutions dated October 9, 20062 and
December 14, 20063 of the Secretary of Justice, and
reinstated the November 7, 2005 Joint Resolution4 of
the Office of the Chief State Prosecutor. Petitioners
assail also the CA Resolution5 dated March 14, 2008,
denying their motion for reconsideration.

The motives of the intervenors for filing the complaint

are no longer relevant. Regardless of what these
motives may have been, the fact remains that the
LLDA found petitioner to have violated the pertinent
environmental and regulatory laws.1ihpvva1

The Facts

The Court recognizes the right of petitioner to engage

in business and to profit from its industry. However,
the exercise of the right must conform to the laws and
regulations laid down by the competent authorities.

WHEREFORE, the foregoing premises considered,

the Petition is DENIED. The Decision dated May 30,
2005 and the Resolution dated January 31, 2006 of
the Court of Appeals in CA-G.R. SP No. 79889 are
AFFIRMED.

ARNEL U. TY, MARIE ANTONETTE TY, JASON

ONG, WILLY DY, and ALVIN TY, Petitioners,
vs.
NBI
VELASCO, JR., J.:

It is a doctrine of long-standing that factual findings of

administrative bodies on technical matters within their
area of expertise should be accorded not only respect
but even finality if they are supported by substantial
evidence even if they are not overwhelming or
preponderant.69 Courts will not interfere in matters

The Case

In this Petition for Review on Certiorari under Rule 45,

petitioners seek the reversal of the Decision1 dated

Petitioners are stockholders of Omni Gas Corporation

(Omni) as per Omni's General Information
Sheet6 (GIS) dated March 6, 2004 submitted to the
Securities and Exchange Commission (SEC). Omni is
in the business of trading and refilling of Liquefied
Petroleum Gas (LPG) cylinders and holds Pasig City
Mayor's Permit No. RET-04-001256 dated February 3,
2004.

The case all started when Joaquin Guevara Adarlo &

Caoile Law Offices (JGAC Law Offices) sent a letter
dated March 22, 20047 to the NBI requesting, on
behalf of their clients Shellane Dealers Association,
Inc., Petron Gasul Dealers Association, Inc., and
Totalgaz Dealers Association, Inc., for the
surveillance, investigation, and apprehension of
persons or establishments in Pasig City that are
engaged in alleged illegal trading of petroleum
products and underfilling of branded LPG cylinders in
violation of Batas Pambansa Blg. (BP) 33,8 as
amended by Presidential Decree No. (PD) 1865.9

Earlier, the JGAC Law Offices was furnished by

several petroleum producers/brand owners their
respective certifications on the dealers/plants
authorized to refill their respective branded LPG
cylinders, to wit: (1) On October 3, 2003, Pilipinas
Shell Petroleum Corporation (Pilipinas Shell) issued a
certification10 of the list of entities duly authorized to
refill Shellane LPG cylinders; (2) on December 4,
2003, Petron Corporation (Petron) issued a
certification11 of their dealers in Luzon, Visayas, and

Mindanao authorized to refill Petron Gasul LPG

cylinders; and (3) on January 5, 2004, Total
(Philippines) Corporation (Total) issued two
certifications12of the refilling stations and plants
authorized to refill their Totalgaz and Superkalan
Gaz LPG cylinders.

Agents De Jemil and Kawada attested to conducting

surveillance of Omni in the months of March and April
2004 and doing a test-buy on April 15, 2004. They
brought eight branded LPG cylinders
of Shellane, Petron Gasul, Totalgaz, and Superkalan
Gaz to Omni for refilling. The branded LPG cylinders
were refilled, for which the National Bureau of
Investigation (NBI) agents paid PhP 1,582 as
evidenced by Sales Invoice No. 9004013 issued by
Omni on April 15, 2004. The refilled LPG cylinders
were without LPG valve seals and one of the
cylinders was actually underfilled, as found by LPG
Inspector Noel N. Navio of the Liquefied Petroleum
Gas Industry Association (LPGIA) who inspected the
eight branded LPG cylinders on April 23, 2004 which
were properly marked by the NBI after the test-buy.

The NBI's test-buy yielded positive results for

violations of BP 33, Section 2(a) in relation to Secs.
3(c) and 4, i.e., refilling branded LPG cylinders
without authority; and Sec. 2(c) in relation to Sec. 4,
i.e., underdelivery or underfilling of LPG cylinders.
Thus, on April 28, 2004, Agent De Jemil filed an
Application for Search Warrant (With Request for
Temporary Custody of the Seized Items)14 before the
Regional Trial Court (RTC) in Pasig City, attaching,
among others, his affidavit15and the affidavit of
Edgardo C. Kawada,16 an NBI confidential agent.

On the same day of the filing of the application for

search warrants on April 28, 2004, the RTC, Branch
167 in Pasig City issued Search Warrants No.
262417 and 2625.18 The NBI served the warrants the
next day or on April 29, 2004 resulting in the seizure
of several items from Omni's premises duly itemized
in the NBI's Receipt/Inventory of Property/Item
Seized.19 On May 25, 2004, Agent De Jemil filed his
Consolidated Return of Search Warrants with Ex-

Parte Motion to Retain Custody of the Seized

Items20 before the RTC Pasig City.

Subsequently, Agent De Jemil filed before the

Department of Justice (DOJ) his Complaint-Affidavits
against petitioners for: (1) Violation of Section 2(a), in
relation to Sections 3(c) and 4, of B.P. Blg. 33, as
amended by P.D. 1865;21 and (2) Violation of Section
2(c), in relation to Section 4, of B.P. Blg. 33, as
amended by P.D. 1865,22 docketed as I.S. Nos.
2004-616 and 2004-618, respectively.

During the preliminary investigation, petitioners

submitted their Joint Counter-Affidavit,23 which was
replied24 to by Agent De Jemil with a corresponding
rejoinder25 from petitioners.

The Ruling of the Office of the Chief State Prosecutor

in I.S. No. 2004-616 and I.S. No. 2004-618

On November 7, 2005, the 3rd Assistant City

Prosecutor Leandro C. Catalo of Manila issued a Joint
Resolution,26 later approved by the Chief State
Prosecutor Jovencito R. Zuo upon the
recommendation of the Head of the Task Force on
Anti-Intellectual Property Piracy (TFAIPP), Assistant
Chief State Prosecutor Leah C. Tanodra-Armamento,
finding probable cause to charge petitioners with
violations of pertinent sections of BP 33, as amended,
resolving as follows:

WHEREFORE, premises considered, it is hereby

recommended that two (2) Informations for violations
of Section 2 [a] (illegal trading in petroleum and/or
petroleum products) and Section 2 [c] (underfilling of
LPG cylinders), both of Batas Pambansa Bilang 33,
as amended, be filed against respondents [herein
petitioners] ARNEL TY, MARIE ANTONETTE TY,
JASON ONG, WILLY DY and ALVIN TY.27

Assistant City Prosecutor Catalo found the existence

of probable cause based on the evidence submitted
by Agent De Jemil establishing the fact that Omni is
not an authorized refiller of Shellane, Petron
Gasul, Totalgaz and Superkalan Gaz LPG cylinders.
Debunking petitioners' contention that the branded
LPG cylinders are already owned by consumers who
are free to do with them as they please, the law is
clear that the stamped markings on the LPG cylinders
show who are the real owners thereof and they
cannot be refilled sans authority from Pilipinas Shell,
Petron or Total, as the case may be. On the
underfilling of one LPG cylinder, the findings of LPG
Inspector Navio of the LPGIA were uncontroverted by
petitioners.

Petitioners' motion for reconsideration,28 was denied

through a Resolution29 by the Office of the Chief
State Prosecutor issued on May 3, 2006.

In time, petitioners appealed to the Office of the

Secretary of Justice.30

The Ruling of the DOJ Secretary

in I.S. No. 2004-616 and I.S. No. 2004-618

On October 9, 2006, the Office of the Secretary of

Justice issued a Resolution31 reversing and setting
aside the November 7, 2005 Joint Resolution of the
Office of the Chief State Prosecutor, the dispositive
portion of which reads:

WHEREFORE, the assailed resolution is hereby

REVERSED and SET ASIDE. The Chief State
Prosecutor is directed to cause the withdrawal of the
informations for violations of Sections 2(a) and 2(c) of
B.P. Blg. 33, as amended by P.D. 1865, against
respondents Arnel Ty, Mari Antonette Ty, Jason Ong,
Willy Dy and Alvin Ty and report the action taken
within ten (10) days from receipt hereof.

SO ORDERED.32

The Office of the Secretary of Justice viewed, first,

that the underfilling of one of the eight LPG cylinders
was an isolated incident and cannot give rise to a
conclusion of underfilling, as the phenomenon may
have been caused by human error, oversight or
technical error. Being an isolated case, it ruled that
there was no showing of a clear pattern of deliberate
underfilling. Second, on the alleged violation of
refilling branded LPG cylinders sans written authority,
it found no sufficient basis to hold petitioners
responsible for violation of Sec. 2 (c) of BP 33, as
amended, since there was no proof that the branded
LPG cylinders seized from Omni belong to another
company or firm, holding that the simple fact that the
LPG cylinders with markings or stamps of other
petroleum producers cannot by itself prove ownership
by said firms or companies as the consumers who
take them to Omni fully owned them having
purchased or acquired them beforehand.

the Nationwide Association of Consumers, Inc. (NACI)

also filed a similar motion.

stamps or markings by the manufacturers of LPG

cylinders.

On September 28, 2007, the appellate court rendered

the assailed Decision39 revoking the resolutions of
the Office of the Secretary of Justice and reinstated
the November 7, 2005 Joint Resolution of the Office
of the Chief State Prosecutor. The fallo reads:

After granting the appeal of Agent De Jemil, however,

the motions to intervene filed by Petron and NACI
were simply noted by the appellate court.

WHEREFORE, the instant petition is GRANTED. The

assailed resolutions dated October 9, 2006 and
December 14, 2006 are hereby REVERSED and SET
ASIDE. The Joint Resolution dated November 7, 2005
of the Office of the Chief State Prosecutor finding
probable cause against private respondents Arnel Ty,
Marie Antonette Ty, Jason Ong, Willy Dy, and Alvin Ty
is hereby REINSTATED.

SO ORDERED.40
Agent De Jemil moved but was denied
reconsideration33 through another
Resolution34 dated December 14, 2006 prompting
him to repair to the CA via a petition for
certiorari35 under Rule 65 of the Rules of Court,
docketed as CA-G.R. SP No. 98054.

Citing Sec. 1 (1) and (3) of BP 33, as amended, which

provide for the presumption of underfilling, the CA
held that the actual underfilling of an LPG cylinder
falls under the prohibition of the law which does not
require for the underfilling to be substantial and
deliberate.

The Ruling of the CA

The Office of the Solicitor General (OSG), in its

Comment36 on Agent De Jemil's appeal, sought the
dismissal of the latter's petition viewing that the
determination by the Office of the Secretary of Justice
of probable cause is entitled to respect owing to the
exercise of his prerogative to prosecute or not.

On August 31, 2007, Petron filed a Motion to

Intervene and to Admit Attached Petition-inIntervention37 and Petition-in-Intervention38 before
the CA in CA-G.R. SP No. 98054. And much earlier,

Moreover, the CA found strong probable violation of

"refilling of another company's or firm's cylinders
without such company's or firm's written authorization"
under Sec. 3 (c) of BP 33, as amended. The CA relied
on the affidavits of Agents De Jemil and Kawada, the
certifications from various LPG producers that Omni is
not authorized to refill their branded LPG cylinders,
the results of the test-buy operation as attested to by
the NBI agents and confirmed by the examination of
LPG Inspector Navio of the LPGIA, the letteropinion41 of the Department of Energy (DOE) to
Pilipinas Shell confirming that branded LPG cylinders
are properties of the companies whose stamp
markings appear thereon, and Department Circular
No. 2000-05-00742 of the DOE on the required

Petitioners' motion for reconsideration was rebuffed

by the CA through the equally assailed March 14,
2008 Resolution.43

Thus, the instant petition.

The Issues

I. WHETHER OR NOT RESPONDENTS WERE

ENTITLED TO THE SPECIAL CIVIL ACTION OF
CERTIORARI IN THE COURT OF APPEALS.

II. WHETHER OR NOT UNDER THE

CIRCUMSTANCES THERE WAS PROBABLE
CAUSE TO BELIEVE THAT PETITIONERS
VIOLATED SECTION 2(A) OF BATAS PAMBANSA
BLG. 33, AS AMENDED.

III. WHETHER OR NOT UNDER THE

CIRCUMSTANCES THERE WAS PROBABLE
CAUSE TO BELIEVE THAT PETITIONERS
VIOLATED SECTION 2(C) OF BATAS PAMBANSA
BLG. 33, AS AMENDED.

IV. WHETHER OR NOT PETITIONERS CAN BE

HELD LIABLE UNDER BATAS PAMBANSA BLG. 33,
AS AMENDED, FOR BEING MERE DIRECTORS,
NOT ACTUALLY IN CHARGE OF THE

MANAGEMENT OF THE BUSINESS AFFAIRS OF

THE CORPORATION.44

The foregoing issues can be summarized into two

core issues: first, whether probable cause exists
against petitioners for violations of Sec. 2 (a) and (c)
of BP 33, as amended; and second, whether
petitioners can be held liable therefor. We, however,
will tackle at the outset the sole procedural issue
raised: the propriety of the petition for certiorari under
Rule 65 availed of by public respondent Agent De
Jemil to assail the resolutions of the Office of the
Secretary of Justice.

Petitioners raise the sole procedural issue of the

propriety of the legal remedy availed of by public
respondent Agent De Jemil. They strongly maintain
that the Office of the Secretary of Justice properly
assumed jurisdiction and did not gravely abuse its
discretion in its determination of lack of probable
cause-the exercise thereof being its sole prerogativewhich, they lament, the appellate court did not accord
proper latitude. Besides, they assail the nonexhaustion of administrative remedies when Agent De
Jemil immediately resorted to court action through a
special civil action for certiorari under Rule 65 before
the CA without first appealing the resolutions of the
Office of the Secretary of Justice to the Office of the
President (OP).

arbitrariness on the part of the public prosecutor and

the Secretary of Justice, however, concluded,
citing Alcaraz v. Gonzalez51 and Preferred Home
Specialties, Inc. v. Court of Appeals,52 that an
aggrieved party from the resolution of the Secretary of
Justice may directly resort to judicial review on the
ground of grave abuse of discretion, thus:

Petron's Comment-in-Intervention

We cannot agree with petitioners.

On April 14, 2009, Petron entered its appearance by

filing a Motion for Leave to Intervene and to Admit
Comment-in-Intervention45 and its Comment-inIntervention [To petition for Review on Certiorari dated
13 May 2008].46 It asserted vested interest in the
seizure of several Gasul LPG cylinders and the right
to prosecute petitioners for unauthorized refilling of its
branded LPG cylinders by Omni. Petitioners duly filed
their Comment/Opposition47 to Petron's motion to
intervene. It is clear, however, that Petron has
substantial interest to protect in so far as its business
relative to the sale and refilling of Petron Gasul LPG
cylinders is concerned, and therefore its intervention
in the instant case is proper.

For one, while it is the consistent principle in this

jurisdiction that the determination of probable cause is
a function that belongs to the public
prosecutor48 and, ultimately, to the Secretary of
Justice, who may direct the filing of the corresponding
information or move for the dismissal of the
case;49 such determination is subject to judicial
review where it is established that grave abuse of
discretion tainted the determination.

It is thus clear that Agent De Jemil, the aggrieved

party in the assailed resolutions of the Office of the
Secretary of Justice, availed of and pursued the
proper legal remedy of a judicial review through a
petition for certiorari under Rule 65 in assailing the
latter's finding of lack of probable cause on the ground
of grave abuse of discretion.

The Court's Ruling

We partially grant the petition.

Procedural Issue: Petition for Certiorari under Rule 65

Proper

For another, there is no question that the Secretary of

Justice is an alter ego of the President who may opt
to exercise or not to exercise his or her power of
review over the former's determination in criminal
investigation cases. As aptly noted by Agent De Jemil,
the determination of probable cause by the Secretary
of Justice is, under the doctrine of qualified political
agency, presumably that of the Chief Executive unless
disapproved or reprobated by the latter.

Chan v. Secretary of Justice50 delineated the proper

remedy from the determination of the Secretary of
Justice. Therein, the Court, after expounding on the
policy of non-interference in the determination of the
existence of probable cause absent any showing of

x x x [T]he findings of the Justice Secretary may be

reviewed through a petition for certiorari under Rule
65 based on the allegation that he acted with grave
abuse of discretion. This remedy is available to the
aggrieved party.53 (Emphasis supplied.)

First Core Issue: Existence of Probable Cause

Petitioners contend that there is no probable cause

that Omni violated Sec. 2 (a), in relation to Secs. 3 (c)
and 4 of BP 33, as amended, prohibiting the refilling
of another company's or firm's LPG cylinders without
its written authorization. First, the branded LPG
cylinders seized were not traded by Omni as its
representative annotated in the NBI receipt of seized
items that the filled LPG cylinders came from
customers' trucks and the empty ones were taken
from the warehouse or swapping section of the
refilling plant and not from the refilling section.
Second, the branded LPG cylinders are owned by
end-user customers and not by the major petroleum
companies, i.e., Petron, Pilipinas Shell and Total. And
even granting arguendo that Omni is selling these
LPG cylinders, still there cannot be a prima facie case
of violation since there is no proof that the refilled
branded LPG cylinders are owned by another
company or firm.

Third, granting that Petron, Total and Pilipinas Shell

still own their respective branded LPG cylinders
already sold to consumers, still such fact will not bind
third persons, like Omni, who is not privy to the
agreement between the buying consumers and said
major petroleum companies. Thus, a subsequent
transfer by the customers of Petron, Total and
Pilipinas Shell of the duly marked or stamped LPG
cylinders through swapping, for example, will
effectively transfer ownership of the LPG cylinders to
the transferee, like Omni.

Fourth, LPG cylinder exchange or swapping is a

common industry practice that the DOE recognizes.
They point to a series of meetings conducted by the
DOE for institutionalizing the validity of swapping of all
and any kind of LPG cylinders among the industry
players. The meetings resulted in a draft
Memorandum of Agreement (MOA) which
unfortunately was not signed due to the withdrawal of
petroleum major players Petron, Total and Pilipinas
Shell. Nonetheless, the non-signing of the MOA does
not diminish the fact of the recognized industry
practice of cylinder exchange or swapping. Relying on
Republic Act No. (RA) 8479,54petitioners maintain
that said law promotes and encourages the entry of
new participants in the petroleum industry such as
Omni. And in furtherance of this mandate is the valid
practice of cylinder exchange or swapping in the LPG
industry.

We are not persuaded by petitioners' strained

rationalizations.

the criminal complaints, as clearly shown in the

complaint-affidavits of Agent De Jemil, are not based
solely on the seized items pursuant to the search
warrants but also on the test-buy earlier conducted by
the NBI agents.

Second. The written certifications from Pilipinas Shell,

Petron and Total show that Omni has no written
authority to refill LPG cylinders, embossed, marked or
stamped Shellane, Petron
Gasul, Totalgaz and Superkalan Gaz. In fact,
petitioners neither dispute this nor claim that Omni
has authority to refill these branded LPG cylinders.

Third. Belying petitioners' contention, the seized items

during the service of the search warrants tend to
show that Omni illegally refilled branded LPG
cylinders without authority.

On April 29, 2004, the NBI agents who served the

search warrants on Omni seized the following:

Quantity/Uni
t

Description

LPG cylinders Totalgaz, 11.0 kg

[filled]

LPG cylinder Petron Gasul, 11.0 kg

[filled]

Probable violation of Sec. 2 (a) of BP 33, amended

LPG cylinder Shellane, 11.0 kg

[filled]

First. The test-buy conducted on April 15, 2004 by the

NBI agents, as attested to by their respective
affidavits, tends to show that Omni illegally refilled the
eight branded LPG cylinders for PhP 1,582. This is a
clear violation of Sec. 2 (a), in relation to Secs. 3 (c)
and 4 of BP 33, as amended. It must be noted that

29

LPG cylinders Superkalan Gaz, 2.7

kg [empty]

17

LPG cylinders Petron Gasul, 11.0 kg

[emptly]

LPG cylinders Marked

as Omnigas with Shell emboss, 11.0
kg [empty]

LPG cylinders Marked

as Omnigas with Totalgaz emboss,
11.0 kg [empty]

23

LPG cylinders Shellane, 11.0 kg

[empty]

LPG cylinders Marked

as Omnigas with Gasul emboss,
11.0 kg [empty]

21

LPG cylindersTotalgaz, 11.0 kg

[empty]

The foregoing list is embodied in the NBI's

Receipt/Inventory of Property/Item Seized55 signed
by NBI Agent Edwin J. Roble who served and
implemented the search warrants. And a copy thereof
was duly received by Atty. Allan U. Ty, representative
of Omni, who signed the same "under protest" and
made the annotation at the bottom part thereon: "The
above items/cylinders were taken at customers' trucks
and the empty cylinders taken at the warehouse
(swapping section) of the company."56

Even considering that the filled LPG cylinders were

indeed already loaded on customers' trucks when
confiscated, yet the fact that these refilled LPG
cylinders consisting of nine branded LPG cylinders,
specifically Totalgaz, Petron Gasul and Shellane,
tends to show that Omni indeed refilled these branded
LPG cylinders without authorization from Total, Petron
and Pilipinas Shell. Such a fact is bolstered by the
test-buy conducted by Agent De Jemil and NBI
confidential agent Kawada: Omni's unauthorized
refilling of branded LPG cylinders, contrary to Sec. 2

(a) in relation to Sec. 3 (c) of BP 33, as amended.

Said provisos provide:

Sec. 2. Prohibited Acts.-The following acts are

prohibited and penalized:

(a) Illegal trading in petroleum and/or petroleum

products;

xxxx

Sec. 3. Definition of terms.-For the purpose of this

Act, the following terms shall be construed to mean:

Illegal trading in petroleum and/or petroleum

products-

bearing a registered trademark in connection with the

sale, distribution or advertising of goods or services
which is likely to cause confusion, mistake or
deception among the buyers/consumers can be
considered as trademark infringement."60 The Court
affirmed the presence of infringement involving the
unauthorized sale of Gasul and Shellane LPG
cylinders and the unauthorized refilling of the same by
Masagana Gas Corporation as duly attested to and
witnessed by NBI agents who conducted the
surveillance and test-buys.

Similarly, in the instant case, the fact that Omni refilled

various branded LPG cylinders even if owned by its
customers but without authority from brand owners
Petron, Pilipinas Shell and Total shows palpable
violation of BP 33, as amended. As aptly noted by the
Court in Yao, Sr. v. People, only the duly authorized
dealers and refillers of Shellane, Petron Gasul and, by
extension, Total may refill these branded LPG
cylinders. Our laws sought to deter the pernicious
practices of unscrupulous businessmen.

(c) Refilling of liquefied petroleum gas

cylinders without authority from said Bureau, or
refilling of another company's or firm's cylinders
without such company's or firm's written authorization;
(Emphasis supplied.)

Fourth. The issue of ownership of the seized branded

LPG cylinders is irrelevant and hence need no
belaboring. BP 33, as amended, does not require
ownership of the branded LPG cylinders as a
condition sine qua non for the commission of offenses
involving petroleum and petroleum products. Verily,
the offense of refilling a branded LPG cylinder without
the written consent of the brand owner constitutes the
offense regardless of the buyer or possessor of the
branded LPG cylinder.

As petitioners strongly argue, even if the branded

LPG cylinders were indeed owned by customers,
such fact does not authorize Omni to refill these
branded LPG cylinders without written authorization
from the brand owners Pilipinas Shell, Petron and
Total. In Yao, Sr. v. People,57 a case involving
criminal infringement of property rights under Sec.
155 of RA 8293,58 in affirming the courts a quo's
determination of the presence of probable cause, this
Court held that from Sec. 155.159 of RA 8293 can be
gleaned that "mere unauthorized use of a container

After all, once a consumer buys a branded LPG

cylinder from the brand owner or its authorized dealer,
said consumer is practically free to do what he
pleases with the branded LPG cylinder. He can simply
store the cylinder once it is empty or he can even
destroy it since he has paid a deposit for it which
answers for the loss or cost of the empty branded
LPG cylinder. Given such fact, what the law
manifestly prohibits is the refilling of a branded LPG
cylinder by a refiller who has no written authority from
the brand owner. Apropos, a refiller cannot and ought

xxxx

not to refill branded LPG cylinders if it has no written

authority from the brand owner.

Besides, persuasive are the opinions and

pronouncements by the DOE: brand owners are
deemed owners of their duly embossed, stamped and
marked LPG cylinders even if these are possessed by
customers or consumers. The Court recognizes this
right pursuant to our laws, i.e., Intellectual Property
Code of the Philippines. Thus the issuance by the
DOE Circular No. 2000-05-007,61 the letteropinion62 dated December 9, 2004 of then DOE
Secretary Vincent S. Perez addressed to Pilipinas
Shell, the June 6, 2007 letter63 of then DOE
Secretary Raphael P.M. Lotilla to the LPGIA, and
DOE Department Circular No. 2007-10-000764on
LPG Cylinder Ownership and Obligations Related
Thereto issued on October 13, 2007 by DOE
Secretary Angelo T. Reyes.

Fifth. The ownership of the seized branded LPG

cylinders, allegedly owned by Omni customers as
petitioners adamantly profess, is of no consequence.

The law does not require that the property to be

seized should be owned by the person against whom
the search warrants is directed. Ownership, therefore,
is of no consequence, and it is sufficient that the
person against whom the warrant is directed has
control or possession of the property sought to be
seized.65 Petitioners cannot deny that the seized
LPG cylinders were in the possession of Omni, found
as they were inside the Omni compound.

In fine, we also note that among those seized by the

NBI are 16 LPG cylinders bearing the embossed
brand names of Shellane, Gasul and Totalgaz but
were marked as Omnigas. Evidently, this pernicious
practice of tampering or changing the appearance of
a branded LPG cylinder to look like another brand
violates the brand owners' property rights
as infringement under Sec. 155.1 of RA 8293.
Moreover, tampering of LPG cylinders is a mode of

perpetrating the criminal offenses under BP 33, as

amended, and clearly enunciated under DOE Circular
No. 2000-06-010 which provided penalties on a per
cylinder basis for each violation.

Foregoing considered, in the backdrop of the

quantum of evidence required to support a finding of
probable cause, we agree with the appellate court
and the Office of the Chief State Prosecutor, which
conducted the preliminary investigation, that there
exists probable cause for the violation of Sec. 2 (a) in
relation to Sec. 3 (c) of BP 33, as amended. Probable
cause has been defined as the existence of such
facts and circumstances as would excite belief in a
reasonable mind, acting on the facts within the
knowledge of the prosecutor, that the person charged
was guilty of the crime for which he was
prosecuted.66 After all, probable cause need not be
based on clear and convincing evidence of guilt, as
the investigating officer acts upon reasonable beliefprobable cause implies probability of guilt and
requires more than bare suspicion but less than
evidence which would justify a conviction.67

Probable violation of Sec. 2 (c) of BP 33, as amended

Anent the alleged violation of Sec. 2 (c) in relation to

Sec. 4 of BP 33, as amended, petitioners strongly
argue that there is no probable cause for said
violation based upon an underfilling of a lone cylinder
of the eight branded LPG cylinders refilled during the
test-buy. Besides, they point out that there was no
finding of underfilling in any of the filled LPG cylinders
seized during the service of the search warrants.
Citing DOE's Bureau of Energy Utilization Circular No.
85-3-348, they maintain that some deviation is
allowed from the exact filled weight. Considering the
fact that an isolated underfilling happened in so many
LPG cylinders filled, petitioners are of the view that
such is due to human or equipment error and does
not in any way constitute deliberate underfilling within
the contemplation of the law.

Moreover, petitioners cast aspersion on the report and

findings of LPG Inspector Navio of the LPGIA by
assailing his independence for being a representative
of the major petroleum companies and that the
inspection he conducted was made without the
presence of any DOE representative or any
independent body having technical expertise in
determining LPG cylinder underfilling beyond the
authorized quantity.

Again, we are not persuaded.

Contrary to petitioners' arguments, a single

underfilling constitutes an offense under BP 33, as
amended by PD 1865, which clearly criminalizes
these offenses. InPerez v. LPG Refillers Association
of the Philippines, Inc.,68 the Court affirmed the
validity of DOE Circular No. 2000-06-010 which
provided penalties on a per cylinder basis for each
violation, thus:

B.P. Blg. 33, as amended, criminalizes illegal trading,

adulteration, underfilling, hoarding, and overpricing of
petroleum products. Under this general description of
what constitutes criminal acts involving petroleum
products, the Circular merely lists the various modes
by which the said criminal acts may be perpetrated,
namely: no price display board, no weighing scale, no
tare weight or incorrect tare weight markings, no
authorized LPG seal, no trade name, unbranded LPG
cylinders, no serial number, no distinguishing color, no
embossed identifying markings on
cylinder, underfilling LPG cylinders, tampering LPG
cylinders, and unauthorized decanting of LPG
cylinders. These specific acts and omissions are
obviously within the contemplation of the law, which
seeks to curb the pernicious practices of some
petroleum merchants.69 (Emphasis supplied.)

Moreover, in denying the motion for reconsideration of

the LPG Refillers Association of the Philippines, Inc.,
the Court upheld the basis of said DOE Circular No.
2000-06-010 on the imposition of penalties on a per
cylinder basis, thus:

Respondent's position is untenable. The Circular is

not confiscatory in providing penalties on a per
cylinder basis. Those penalties do not exceed the
ceiling prescribed in Section 4 of B.P. Blg. 33, as
amended, which penalizes "any person who
commits any act [t]herein prohibited." Thus, violation
on a per cylinder basis falls within the phrase "any
act" as mandated in Section 4. To provide the same
penalty for one who violates a prohibited act in B.P.
Blg. 33, as amended, regardless of the number of
cylinders involved would result in an indiscriminate,
oppressive and impractical operation of B.P. Blg. 33,
as amended. The equal protection clause demands
that "all persons subject to such legislation shall be
treated alike, under like circumstances and
conditions, both in the privileges conferred and in the
liabilities imposed."70

The Court made it clear that a violation, like

underfilling, on a per cylinder basis falls within the
phrase of any act as mandated under Sec. 4 of BP
33, as amended. Ineluctably, the underfilling of one
LPG cylinder constitutes a clear violation of BP 33, as
amended. The finding of underfilling by LPG Inspector
Navio of the LPGIA, as aptly noted by Manila
Assistant City Prosecutor Catalo who conducted the
preliminary investigation, was indeed not controverted
by petitioners.

On the issue of manifest bias and partiality, suffice it

to say that aside from the allegation by petitioners,
they have not shown that LPG Inspector Navio is
neither an expert nor qualified to determine
underfilling. Besides, it must be noted that the
inspection by LPG Inspector Navio was conducted in
the presence of NBI agents on April 23, 2004 who
attested to that fact through their affidavits. Moreover,
no rules require and petitioners have not cited any

that the inspection be conducted in the presence of

DOE representatives.

Second Core Issue: Petitioners' Liability for Violations

When the offender is a corporation, partnership, or

other juridical person, the president, the general
manager, managing partner, or such other officer
charged with the management of the business affairs
thereof, or employee responsible for the violation shall
be criminally liable; in case the offender is an alien, he
shall be subject to deportation after serving the
sentence.

Sec. 4 of BP 33, as amended, provides for the

penalties and persons who are criminally liable, thus:

Sec. 4. Penalties. - Any person who commits any act

herein prohibited shall, upon conviction, be punished
with a fine of not less than twenty thousand pesos
(P20,000) but not more than fifty thousand pesos
(P50,000), or imprisonment of at least two (2) years
but not more than five (5) years, or both, in the
discretion of the court. In cases of second and
subsequent conviction under this Act, the penalty
shall be both fine and imprisonment as provided
herein. Furthermore, the petroleum and/or petroleum
products, subject matter of the illegal trading,
adulteration, shortselling, hoarding, overpricing or
misuse, shall be forfeited in favor of the Government:
Provided, That if the petroleum and/or petroleum
products have already been delivered and paid for,
the offended party shall be indemnified twice the
amount paid, and if the seller who has not yet
delivered has been fully paid, the price received shall
be returned to the buyer with an additional amount
equivalent to such price; and in addition, if the
offender is an oil company, marketer, distributor,
refiller, dealer, sub-dealer and other retail outlets, or
hauler, the cancellation of his license.

Trials of cases arising from this Act shall be

terminated within thirty (30) days after arraignment.

If the offender is a government official or employee,

he shall be perpetually disqualified from office.
(Emphasis supplied.)

Relying on the third paragraph of the above statutory

proviso, petitioners argue that they cannot be held
liable for any perceived violations of BP 33, as
amended, since they are mere directors of Omni who
are not in charge of the management of its business
affairs. Reasoning that criminal liability is personal,
liability attaches to a person from his personal act or
omission but not from the criminal act or negligence of
another. Since Sec. 4 of BP 33, as amended, clearly
provides and enumerates who are criminally liable,
which do not include members of the board of
directors of a corporation, petitioners, as mere
members of the board of directors who are not in
charge of Omni's business affairs, maintain that they
cannot be held liable for any perceived violations of
BP 33, as amended. To bolster their position, they
attest to being full-time employees of various firms as
shown by the Certificates of Employment71 they
submitted tending to show that they are neither
involved in the day-to-day business of Omni nor
managing it. Consequently, they posit that even if BP
33, as amended, had been violated by Omni they
cannot be held criminally liable thereof not being in
any way connected with the commission of the
alleged violations, and, consequently, the criminal
complaints filed against them based solely on their
being members of the board of directors as per the
GIS submitted by Omni to SEC are grossly
discriminatory.

On this point, we agree with petitioners except as to

petitioner Arnel U. Ty who is indisputably the
President of Omni.

It may be noted that Sec. 4 above enumerates the

persons who may be held liable for violations of the
law, viz: (1) the president, (2) general manager, (3)
managing partner, (4) such other officer charged with
the management of the business affairs of the
corporation or juridical entity, or (5) the employee
responsible for such violation. A common thread of
the first four enumerated officers is the fact that they
manage the business affairs of the corporation or
juridical entity. In short, they are operating officers of a
business concern, while the last in the list is selfexplanatory.

It is undisputed that petitioners are members of the

board of directors of Omni at the time pertinent. There
can be no quibble that the enumeration of persons
who may be held liable for corporate violators of BP
33, as amended, excludes the members of the board
of directors. This stands to reason for the board of
directors of a corporation is generally a policy making
body. Even if the corporate powers of a corporation
are reposed in the board of directors under the first
paragraph of Sec. 2372 of the Corporation Code, it is
of common knowledge and practice that the board of
directors is not directly engaged or charged with the
running of the recurring business affairs of the
corporation. Depending on the powers granted to
them by the Articles of Incorporation, the members of
the board generally do not concern themselves with
the day-to-day affairs of the corporation, except those
corporate officers who are charged with running the
business of the corporation and are concomitantly
members of the board, like the President. Section
2573 of the Corporation Code requires the president
of a corporation to be also a member of the board of
directors.

Thus, the application of the legal maxim expressio

unius est exclusio alterius, which means the mention
of one thing implies the exclusion of another thing not
mentioned. If a statute enumerates the thing upon

which it is to operate, everything else must

necessarily and by implication be excluded from its
operation and effect.74 The fourth officer in the
enumerated list is the catch-all "such other officer
charged with the management of the business affairs"
of the corporation or juridical entity which is a factual
issue which must be alleged and supported by
evidence.

A scrutiny of the GIS reveals that among the

petitioners who are members of the board of directors
are the following who are likewise elected as
corporate officers of Omni: (1) Petitioner Arnel U. Ty
(Arnel) as President; (2) petitioner Mari Antonette Ty
as Treasurer; and (3) petitioner Jason Ong as
Corporate Secretary. Sec. 4 of BP 33, as amended,
clearly indicated firstly the president of a corporation
or juridical entity to be criminally liable for violations of
BP 33, as amended.

Evidently, petitioner Arnel, as President, who

manages the business affairs of Omni, can be held
liable for probable violations by Omni of BP 33, as
amended. The fact that petitioner Arnel is ostensibly
the operations manager of Multi-Gas Corporation, a
family owned business, does not deter him from
managing Omni as well. It is well-settled that where
the language of the law is clear and unequivocal, it
must be taken to mean exactly what it says.75 As to
the other petitioners, unless otherwise shown that
they are situated under the catch-all "such other
officer charged with the management of the business
affairs," they may not be held liable under BP 33, as
amended, for probable violations. Consequently, with
the exception of petitioner Arnel, the charges against
other petitioners must perforce be dismissed or
dropped.

WHEREFORE, premises considered,

we PARTIALLY GRANT the instant petition.
Accordingly, the assailed September 28, 2007
Decision and March 14, 2008 Resolution of the Court
of Appeals in CA-G.R. SP No. 98054
are AFFIRMED with MODIFICATION that petitioners
Mari Antonette Ty, Jason Ong, Willy Dy and Alvin Ty

are excluded from the two Informations charging

probable violations of Batas Pambansa Bilang 33, as
amended. The Joint Resolution dated November 7,
2005 of the Office of the Chief State Prosecutor is
modified accordingly.

No pronouncement as to costs.
SARIO MALINIAS, petitioner, vs. THE COMMISSION
ON ELECTIONS, TEOFILO CORPUZ, ANACLETO
TANGILAG and VICTOR DOMINGUEZ, respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review on certiorari[1] of the
Resolutions of the Commission on Elections
("COMELEC" for brevity) en banc[2] dated June 10,
1999 and October 26, 2000. The assailed Resolutions
dismissed the complaint[3] filed by petitioner Sario
Malinias ("Malinias" for brevity) and Roy S. Pilando
("Pilando" for brevity) for insufficiency of evidence to
establish probable cause for violation of Section 25 of
Republic Act No. 6646[4] and Sections 232 and 261
(i) of Batas Pambansa Blg. 881.[5]
The Facts
Petitioner Malinias was a candidate for governor
whereas Pilando was a candidate for congressional
representative of Mountain Province in the May 11,
1998 elections.[6]
The Provincial Board of Canvassers held the
canvassing of election returns at the second floor of
the Provincial Capitol Building in Bontoc, Mountain
Province from May 11, 1998 to May 15, 1998.[7]
On July 31, 1998, Malinias and Pilando filed a
complaint with the COMELEC's Law Department for
violation of Section 25 of R.A. No. 6646, and Sections
232 and 261 (i) of B.P. Blg. 881, against Victor
Dominguez, Teofilo Corpuz, Anacleto Tangilag,
Thomas Bayugan, Jose Bagwan who was then
Provincial Election Supervisor, and the members of
the Provincial Board of Canvassers. Victor

Dominguez ("Dominguez" for brevity) was then the

incumbent Congressman of Poblacion, Sabangan,
Mountain Province. Teofilo Corpuz ("Corpuz" for
brevity) was then the Provincial Director of the
Philippine National Police in Mountain Province while
Anacleto Tangilag ("Tangilag" for brevity) was then the
Chief of Police of the Municipality of Bontoc, Mountain
Province.
Malinias and Pilando alleged that on May 15, 1998 a
police checkpoint at Nacagang, Sabangan, Mountain
Province blocked their supporters who were on their
way to Bontoc, and prevented them from proceeding
to the Provincial Capitol Building. Malinias and
Pilando further alleged that policemen, upon orders of
private respondents, prevented their supporters, who
nevertheless eventually reached the Provincial
Capitol Building, from entering the capitol grounds.
In their complaint, Malinias and Pilando requested the
COMELEC and its Law Department to investigate and
prosecute private respondents for the following
alleged unlawful acts.
3. That on May 15, 1998 at the site of the canvassing
of election returns for congressional and provincial
returns located at the second floor of the Provincial
Capitol Building the public and particularly the
designated representatives/watchers of both affiants
were prevented from attending the canvassing.
xxx
4. That the aforementioned "Mass-affidavits" support
our allegations in this affidavit-complaint that we and
our supporters were prevented from attending the
provincial canvassing because of the illegal
checkpoint/blockade set-up by policemen in
Nakagang, Tambingan, Sabangan, Mt. Province and
as an evidence to these allegations, Certification of
the Police Station is hereto attached as Annex "D"
and affidavits of supporters hereto attached as Annex
"E", both made an integral part of this affidavitcomplaint; and that said "mass-affidavits" show that
the Provincial canvassing were not made public or
(sic) candidates and their representatives/watchers
prevented because of barricade, closure of
canvassing rooms, blockade by armed policemen that
coerce or threaten the people, the candidates or their
representatives from attending the canvassing;[8]

existing.
In support of the complaint, several supporters of
Malinias and Pilando executed so-called "mass
affidavits" uniformly asserting that private
respondents, among others, (1) prevented them from
attending the provincial canvassing, (2) padlocked the
canvassing area, and (3) threatened the people who
wanted to enter the canvassing room. They likewise
alleged that the Provincial Board of Canvassers never
allowed the canvassing to be made public and
consented to the exclusion of the public or
representatives of other candidates except those of
Dominguez.[9]

After the investigation, in a study dated May 26, 1999,

the COMELEC's Law Department recommended to
the COMELEC en banc the dismissal of the complaint
for lack of probable cause.[11]
In a Resolution dated June 10, 1999, the COMELEC
en banc dismissed the complaint of Malinias and
Pilando for insufficiency of evidence to establish
probable cause against private respondents. On
October 26, 2000, the COMELEC dismissed Malinias'
Motion for Reconsideration.

Furthermore, an alleged text of a radio message

requesting advice from the PNP Provincial Director at
Bontoc, Mt. Province was attached to complainants'
affidavit-complaint. However, said person by the name
of Mr. Palicos was never presented to affirm the truth
of the contents and the signature appearing therein."
[12]
Finding that Malinias failed to adduce new evidence,
the COMELEC dismissed Malinias' Motion for
Reconsideration.[13]

Hence, Malinias filed the instant petition.

Consequently, the COMELEC's Law Department
conducted a preliminary investigation during which
only Corpuz and Tangilag submitted their joint
Counter-Affidavit.
In their Counter-Affidavit, Corpuz and Tangilag
admitted ordering the setting up of a checkpoint at
Nacagang, Sabangan, Mountain Province and
securing the vicinity of the Provincial Capitol Building,
to wit:
"3. We admit having ordered the setting up of check
points in Nakagang, Tambingan, Sabangan, Mountain
Province; as in fact, this is not the only checkpoint set
up in the province. There are other checkpoints
established in other parts of the province, to enforce
the COMELEC gun ban and other pertinent rules
issued by the Commission on Election during the
election period.
4. Policemen were posted within the vicinity of the
capitol grounds in response to earlier information that
some groups were out to disrupt the canvass
proceedings which were being conducted in the
second floor of the Provincial Capitol Building. This is
not remote considering that this had happened in the
past elections. In fact, during the canvass proceeding
on May 15, 1998 a large group of individuals identified
with no less than affiants-complainants Roy S.
Pilando and Sario Malinias was conducting a rally just
in front of the capitol, shouting invectives at certain
candidates and their leaders. This group likewise
were holding placards and posted some in front of the
capitol building.
x x x" [10]

The Court's Ruling

The Comelec's Ruling
In dismissing the complaint against private
respondents, the COMELEC ruled as follows:
"As appearing in the Minutes of Provincial Canvass,
complainant Roy Pilando was present during the May
15, 1998 Provincial Canvass. He even participated
actively in a discussion with the members of the
Board and the counsel of Congressman Dominguez.
The minutes also disclosed that the lawyers of
LAMMP, the watchers, supporters of other candidates
and representatives of the Integrated Bar of the
Philippines were present at one time or another
during the canvass proceedings. The minutes does
not indicate any charges of irregularities inside and
within the vicinity of the canvassing room.
Pursuant to Comelec Res. No. 2968 promulgated on
January 7, 1998, checkpoints were established in the
entire country to effectively implement the firearms
ban during the election period from January 11, 1998
to June 10, 1998. In Mountain Province, there were
fourteen (14) checkpoints established by the
Philippine National Police way before the start of the
campaign period for the May 11, 1998 elections
including the subject checkpoint at Nacagang,
Tambingan, Sabangan, Mountain Province. Thus, the
checkpoint at Sabangan, Mountain Province was not
established as alleged only upon request of
Congressman Dominguez on May 15, 1998 but way
before the commencement of the campaign period.
Granting arguendo that the Congressman did make a
request for a checkpoint at Sitio Nacagang, it would
be a mere surplusage as the same was already

The sole issue for resolution is whether the

COMELEC gravely abused its discretion in dismissing
Malinias and Pilando's complaint for insufficiency of
evidence to establish probable cause for alleged
violation of Section 25 of R.A. No. 6646 and Sections
232 and 261 (i) of B.P. 881.
We rule that the COMELEC did not commit grave
abuse of discretion.
For this Court to issue the extraordinary writ of
certiorari, the tribunal or administrative body must
have issued the assailed decision, order or resolution
in a capricious and despotic manner.
"There is grave abuse of discretion justifying the
issuance of the writ of certiorari when there is a
capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction; where the power is
exercised in an arbitrary or despotic manner by
reason of passion, prejudice, or personal hostility,
amounting to an evasion of positive duty or to a virtual
refusal to perform the duty enjoined, or to act at all in
contemplation of law." [14]
Such is not the situation in the instant case. The
COMELEC dismissed properly the complaint of
Malinias and Pilando for insufficient evidence, and
committed no grave abuse of discretion amounting to
lack or excess of jurisdiction.
First, Malinias charged private respondents with
alleged violation of Section 25 of Republic Act No.
6646, quoted, as follows:

would have been the same?"

"Sec. 25. Right to be Present and to Counsel During
the Canvass. - Any registered political party, coalition
of parties, through their representatives, and any
candidate has the right to be present and to counsel
during the canvass of the election returns; Provided,
That only one counsel may argue for each political
party or candidate. They shall have the right to
examine the returns being canvassed without
touching them, make their observations thereon, and
file their challenge in accordance with the rules and
regulations of the Commission. No dilatory action
shall be allowed by the board of canvassers."
In the present case, Malinias miserably failed to
substantiate his claim that private respondents denied
him his right to be present during the canvassing.
There was even no showing that Malinias was within
the vicinity of the Provincial Capitol Building or that
private respondents prevented him from entering the
canvassing room.
As found by the COMELEC and admitted by Malinias,
Pilando was present and even participated actively in
the canvassing.[15] Malinias failed to show that his
rights as a gubernatorial candidate were prejudiced
by the alleged failure of his supporters to attend the
canvassing. Malinias claimed that even though
Pilando was present during the canvassing, the latter
was only able to enter the room after eluding the
policemen and passing through the rear entrance of
the Provincial Capitol Building.[16] This allegation,
however, is not supported by any clear and
convincing evidence. Pilando himself, who was
purportedly prevented by policemen from entering the
canvassing room, failed to attest to the veracity of this
statement rendering the same self-serving and
baseless.
In an analogous case where a political candidate's
watcher failed to attend the canvass proceedings, this
Court held:
"Another matter which militates against the cause of
petitioner is that he has not shown that he suffered
prejudice because of the failure of his watcher to
attend the canvassing. Had the watcher been present,
what substantive issues would he have raised?
Petitioner does not disclose. Could it be that even if
the watcher was present, the result of the canvassing

There is therefore no merit in petitioner's claim that

respondent Commission on Elections gravely abused
its discretion in issuing its questioned decision. And,
as emphatically stated in Sidro v. Comelec, 102
SCRA 853, this Court has invariably followed the
principle that "in the absence of any jurisdictional
infirmity or an error of law of the utmost gravity, the
conclusion reached by the respondent Commission
on a matter that falls within its competence is entitled
to the utmost respect, xxx. There is justification in this
case to reiterate this principle."[17]
Assuming that Pilando in fact entered the canvassing
room only after successfully evading the policemen
surrounding the Provincial Capitol grounds, Pilando
could have easily complained of this alleged unlawful
act during the canvass proceedings. He could have
immediately reported the matter to the Provincial
Board of Canvassers as a violation of Section 25 of
R.A. No. 6646. However, Pilando opted simply to
raise questions on alleged irregularities in the
municipal canvassing.[18] While he had the
opportunity to protest the alleged intimidation
committed by policemen against his person, it is quite
surprising that he never mentioned anything about it
to the Provincial Board of Canvassers.
Surprisingly, the COMELEC and private respondents
apparently overlooked that R.A. No. 6646 does not
punish a violation of Section 25 of the law as a
criminal election offense. Section 25 merely highlights
one of the recognized rights of a political party or
candidate during elections, aimed at providing an
effective safeguard against fraud or irregularities in
the canvassing of election returns. Section 27[19] of
R.A. No. 6646, which specifies the election offenses
punishable under this law, does not include Section
25.
Malinias further claims that, in violation of this right,
his supporters were blocked by a checkpoint set-up at
Nacagang, Sabangan, Mountain Province. This
allegation is devoid of any basis to merit a reversal of
the COMELEC's ruling. Malinias' supporters who
were purportedly blocked by the checkpoint did not
confirm or corroborate this allegation of Malinias.
Moreover, the police established checkpoints in the

entire country to implement the firearms ban during

the election period. Clearly, this is in consonance with
the constitutionally ordained power of the COMELEC
to deputize government agencies and
instrumentalities of the Government for the exclusive
purpose of ensuring free, orderly, honest, peaceful
and credible elections.[20]
Second, Malinias maintains that Corpuz and Tangilag
entered the canvassing room in blatant violation of
Section 232 of B.P. Blg. 881. His sole basis for this
allegation is the affidavit of his supporters who
expressly stated that they saw Dominguez and
Corpuz (only) enter the canvassing room.[21] Malinias
likewise contends that "Corpuz and Tangilag impliedly
admitted that they were inside or at least within the
fifty (50) meter radius of the canvassing room as they
were able to mention the names of the persons who
were inside the canvassing room in their CounterAffidavit." [22]
The provision of law which Corpuz and Tangilag
allegedly violated is quoted as follows:
"Sec. 232. Persons not allowed inside the canvassing
room. It shall be unlawful for any officer or member of
the Armed Forces of the Philippines, including the
Philippine Constabulary, or the Integrated National
Police or any peace officer or any armed or unarmed
persons belonging to an extra-legal police agency,
special forces, reaction forces, strike forces, home
defense forces, barangay self-defense units,
barangay tanod, or of any member of the security or
police organizations or government ministries,
commissions, councils, bureaus, offices,
instrumentalities, or government-owned or controlled
corporation or their subsidiaries or of any member of
a privately owned or operated security, investigative,
protective or intelligence agency performing identical
or similar functions to enter the room where the
canvassing of the election returns are held by the
board of canvassers and within a radius of fifty meters
from such room: Provided, however, That the board of
canvassers by a majority vote, if it deems necessary,
may make a call in writing for the detail of policemen
or any peace officers for their protection or for the
protection of the election documents and
paraphernalia in the possession of the board, or for
the maintenance of peace and order, in which case
said policemen or peace officers, who shall be in

proper uniform, shall stay outside the room within a

radius of thirty meters near enough to be easily called
by the board of canvassers at any time."
Again, the COMELEC and private respondents
overlooked that Section 232 of B.P. Blg. 881 is not
one of the election offenses explicitly enumerated in
Sections 261 and 262 of B.P. Blg. 881. While Section
232 categorically states that it is unlawful for the
persons referred therein to enter the canvassing
room, this act is not one of the election offenses
criminally punishable under Sections 261 and 262 of
B.P. Blg. 881. Thus, the act involved in Section 232 of
B.P. Blg. 881 is not punishable as a criminal election
offense. Section 264 of B.P. Blg. 881 provides that the
penalty for an election offense under Sections 261
and 262 is imprisonment of not less than one year but
not more than six years.
Under the rule of statutory construction of expressio
unius est exclusio alterius, there is no ground to order
the COMELEC to prosecute private respondents for
alleged violation of Section 232 of B.P. Blg. 881
precisely because this is a non-criminal act.
"It is a settled rule of statutory construction that the
express mention of one person, thing, or
consequence implies the exclusion of all others. The
rule is expressed in the familiar maxim, expressio
unius est exclusio alterius.

restrict its meaning and confine its terms to those

expressly mentioned." [23]

deserves scant consideration as the same is not

supported by any evidence.

Also, since private respondents are being charged

with a criminal offense, a strict interpretation in favor
of private respondents is required in determining
whether the acts mentioned in Section 232 are
criminally punishable under Sections 261[24] and
262[25] of B.P. Blg. 881. Since Sections 261 and 262,
which lists the election offenses punishable as crimes,
do not include Section 232, a strict interpretation
means that private respondents cannot be held
criminally liable for violation of Section 232.

Finally, Malinias asserts that private respondents

should be held liable for allegedly violating Section
261 (i) of B. P. Blg. 881 because the latter engaged in
partisan political activity. This provision states:

This is not to say that a violation of Section 232 of

B.P. Blg. 881 is without any sanction. Though not a
criminal election offense, a violation of Section 232
certainly warrants, after proper hearing, the imposition
of administrative penalties. Under Section 2, Article
IX-C of the Constitution, the COMELEC may
recommend to the President the imposition of
disciplinary action on any officer or employee the
COMELEC has deputized for violation of its directive,
order or decision.[26] Also, under the Revised
Administrative Code,[27] the COMELEC may
recommend to the proper authority the suspension or
removal of any government official or employee found
guilty of violation of election laws or failure to comply
with COMELEC orders or rulings.

xxx

In addition, a careful examination of the evidence

presented by Malinias shows that the same are
insufficient to justify a finding of grave abuse of
discretion on the part of the COMELEC. Obviously,
the evidence relied upon by Malinias to support his
charges consisted mainly of affidavits prepared by his
own supporters. The affidavits of Malinias' own
supporters, being self-serving, cannot be accepted at
face value under the circumstances. As this Court has
often stated, "reliance should not be placed on mere
affidavits." [28]

The rule of expressio unius est exclusio alterius and

its variations are canons of restrictive interpretation.
They are based on the rules of logic and the natural
workings of the human mind. They are predicated
upon one's own voluntary act and not upon that of
others. They proceed from the premise that the
legislature would not have made specified
enumeration in a statute had the intention been not to

Besides, if Corpuz really entered the canvassing

room, then why did Pilando and the representatives of
other candidates, who were inside the room, fail to
question this alleged wrongful act during the
canvassing? Malinias' contention that Corpuz and
Tangilag impliedly admitted they were inside the
canvassing room because they mentioned the names
of the persons present during the canvassing

The rule of expressio unius est exclusio alterius is

formulated in a number of ways. One variation of the
rule is the principle that what is expressed puts an
end to that which is implied. Expressium facit cessare
tacitum. Thus, where a statute, by its terms, is
expressly limited to certain matters, it may not, by
interpretation or construction, be extended to other
matters.

"Sec. 261 (i) Intervention of public officers and

employees. - Any officer or employee in the civil
service, except those holding political offices; any
officer, employee, or member of the Armed Forces of
the Philippines, or any police force, special forces,
home defense forces, barangay self-defense units
and all other para-military units that now exist or
which may hereafter be organized who, directly or
indirectly, intervenes in any election campaign or
engages in any partisan political activity, except to
vote or to preserve public order, if he is a peace
officer."
Section 79, Article X of B.P. Blg. 881 defines the term
"partisan political activity" as an act designed to
promote the election or defeat of a particular
candidate or candidates to a public office.[29]
Malinias asserts that, in setting up a checkpoint at
Nacagang, Tambingan, Sabangan, Mountain Province
and in closing the canvassing room, Corpuz and
Tangilag unduly interfered with his right to be present
and to counsel during the canvassing. This
interference allegedly favored the other candidate.
While Corpuz and Tangilag admitted ordering the
setting up of the checkpoint, they did so to enforce the
COMELEC's firearms ban, pursuant to COMELEC
Resolution No. 2968, among others.[30] There was
no clear indication that these police officers, in
ordering the setting up of checkpoint, intended to
favor the other candidates. Neither was there proof to
show that Corpuz and Tangilag unreasonably
exceeded their authority in implementing the
COMELEC rules. Further, there is no basis to rule that
private respondents arbitrarily deprived Malinias of his
right to be present and to counsel during the
canvassing.
The act of Corpuz and Tangilag in setting up the
checkpoint was plainly in accordance with their
avowed duty to maintain effectively peace and order
within the vicinity of the canvassing site. Thus, the act

is untainted with any color of political activity. There

was also no showing that the alleged closure of the
provincial capitol grounds favored the election of the
other candidates.
In summary, we find that there is no proof that the
COMELEC issued the assailed resolutions with grave
abuse of discretion. We add that this Court has limited
power to review findings of fact made by the
COMELEC pursuant to its constitutional authority to
investigate and prosecute actions for election
offenses.[31] Thus, where there is no proof of grave
abuse of discretion, arbitrariness, fraud or error of law,
this Court may not review the factual findings of the
COMELEC, nor substitute its own findings on the
sufficiency of evidence.[32]
WHEREFORE, the instant Petition is DISMISSED.
The assailed Resolutions of public respondent
COMELEC are AFFIRMED. Costs against petitioner.
THE COMMISSION ON AUDIT OF THE PROVINCE
OF CEBU, Represented by Provincial Auditor ROY L.
URSAL, petitioner, vs. PROVINCE OF CEBU,
Represented by Governor PABLO P. GARCIA,
respondent.
YNARES-SANTIAGO, J.:
May the salaries and personnel-related benefits of
public school teachers appointed by local chief
executives in connection with the establishment and
maintenance of extension classes; as well as the
expenses for college scholarship grants, be charged
to the Special Education Fund (SEF) of the local
government unit concerned?
The instant petition for review, which raises a pure
question of law, seeks to annul and set aside the
decision[1] of the Regional Trial Court of Cebu,
Branch 20, in a petition for declaratory relief, docketed
as Civil Case No. CEB-24422.
The provincial governor of the province of Cebu, as
chairman of the local school board, under Section 98
of the Local Government Code, appointed classroom
teachers who have no items in the DECS plantilla to
handle extension classes that would accommodate
students in the public schools.
In the audit of accounts conducted by the

Commission on Audit (COA) of the Province of Cebu,

for the period January to June 1998, it appeared that
the salaries and personnel-related benefits of the
teachers appointed by the province for the extension
classes were charged against the provincial SEF.
Likewise charged to the SEF were the college
scholarship grants of the province. Consequently, the
COA issued Notices of Suspension to the province of
Cebu,[2] saying that disbursements for the salaries of
teachers and scholarship grants are not chargeable to
the provincial SEF.
Faced with the Notices of Suspension issued by the
COA, the province of Cebu, represented by its
governor, filed a petition for declaratory relief with the
trial court.
On December 13, 1999, the court a quo rendered a
decision declaring the questioned expenses as
authorized expenditures of the SEF. The dispositive
portion thereof reads:
WHEREFORE, in view of all the foregoing premises
considered, judgment is hereby rendered giving due
course to this instant petition for declaratory relief
declaring and confirming that petitioner is vested with
the authority to disburse the proceeds from the
Special Educational Fund [SEF] for the payment of
salaries, allowances or honoraria for teachers and
non-teaching personnel in the public schools in the
Province of Cebu and its component cities, and,
municipalities, as well as the expenses for scholarship
grants of petitioners specially to poor but deserving
students therein.
Declaring, further, respondent's audit findings on
pages 36 and 37 in the Annual Audit Report on the
Province of Cebu for the year ending December 31,
1999 as null and void.[3]
Hence, the instant petition by the Commission on
Audit.
The Special Education Fund was created by virtue of
R. A. No. 5447, which is An act creating a special
education fund to be constituted from the proceeds of
an additional real property tax and a certain portion of
the taxes on Virginia-type cigarettes and duties on
imported leaf tobacco, defining the activities to be
financed, creating school boards for the purpose, and

appropriating funds therefrom, which took effect on

January 1, 1969. Pursuant thereto, P.D. No. 464, also
known as the Real Property Tax Code of the
Philippines, imposed an annual tax of 1% on real
property which shall accrue to the SEF.[4]
Under R. A. No. 5447, the SEF may be expended
exclusively for the following activities of the DECS (a) the organization and operation of such number of
extension classes as may be needed to
accommodate all children of school age desiring to
enter Grade I, including the creation of positions of
classroom teachers, head teachers and principals for
such extension classes x x x;
(b) the programming of the construction and repair of
elementary school buildings, acquisition of sites, and
the construction and repair of workshops and similar
buildings and accessories thereof to house laboratory,
technical and similar equipment and apparatus
needed by public schools offering practical arts, home
economics and vocational courses, giving priority to
elementary schools on the basis of the actual needs
and total requirements of the country x x x;
(c) the payment and adjustment of salaries of public
school teachers under and by virtue of Republic Act
Numbered Five Thousand One Hundred Sixty-Eight
and all the benefits in favor of public school teachers
provided under Republic Act Numbered Four
Thousand Six Hundred Seventy;
(d) preparation, printing and/or purchase of textbooks,
teacher's guides, forms and pamphlets x x x;
(e) the purchase and/or improvement, repair and
refurbishing of machinery, laboratory, technical and
similar equipment and apparatus, including spare
parts needed by the Bureau of Vocational Education
and secondary schools offering vocational courses;
(f) the establishment of printing plant to be used
exclusively for the printing needs of the Department of
Education and the improvement of regional printing
plants in the vocational schools;
(g) the purchase of teaching materials such as work
books, atlases, flip charts, science and mathematics
teaching aids, and simple laboratory devices for

elementary and secondary classes;

to the following:

(h) the implementation of the existing program for

citizenship development in barrio high schools, folk
schools and adult education classes;

(1) Construction, repair, and maintenance of school

buildings and other facilities of public elementary and
secondary schools;

(i) the undertaking of education research, including

that of the Board of National Education;

(2) Establishment and maintenance of extension

classes where necessary; and

(j) the granting of government scholarships to poor

but deserving students under Republic Act Numbered
Four Thousand Ninety; and

(3) Sports activities at the division, district, municipal,

and barangay levels. (Emphasis supplied)

(k) the promotion of physical education, such as

athletic meets. (Emphasis supplied)
With the effectivity of the Local Government Code of
1991, petitioner contends that R.A. No. 5447 was
repealed, leaving Sections 235, 272 and 100 (c) of
the Code to govern the disposition of the SEF, to wit:
SEC. 235. Additional Levy on Real Property for the
Special Education Fund (SEF). - A province or city or
a municipality within the Metropolitan Manila Area,
may levy and collect an annual tax of one percent
(1%) on the assessed value of real property which
shall be in addition to the basic real property tax. The
proceeds thereof shall exclusively accrue to the
Special Education Fund (SEF).
SEC. 272. Application of Proceeds of the Additional
One Percent SEF Tax. - The proceeds from the
additional one percent (1%) tax on real property
accruing to the SEF shall be automatically released to
the local school boards: Provided, That, in case of
provinces, the proceeds shall be divided equally
between the provincial and municipal school boards:
Provided, however, That the proceeds shall be
allocated for the operation and maintenance of public
schools, construction and repair of school buildings,
facilities and equipment, educational research,
purchase of books and periodicals, and sports
development as determined and approved by the
local school board. (Emphasis supplied)

Invoking the legal maxim "expressio unius es exclusio

alterius," petitioner alleges that since salaries,
personnel-related benefits and scholarship grants are
not among those authorized as lawful expenditures of
the SEF under the Local Government Code, they
should be deemed excluded therefrom.
Moreover, petitioner claims that since what is allowed
for local school boards to determine under Section
99[5] of the Local Government Code is only the
"annual supplementary budgetary needs for the
operation and maintenance of public schools," as well
as the "supplementary local cost to meet such
needs," the budget of the local school boards for the
establishment and maintenance of extension classes
should be construed to refer only to the upkeep and
maintenance of public school buildings, facilities and
similar expenses other than personnel-related
benefits. This is because, petitioner argued, the
maintenance and operation of public schools pertain
principally to the DECS.
The contentions are without merit. It is a basic precept
in statutory construction that the intent of the
legislature is the controlling factor in the interpretation
of a statute.[6] In this connection, the following
portions of the deliberations of the Senate on the
second reading of the Local Government Code on
July 30, 1990 are significant:
Senator Guingona. Mr. President.
The President. Senator Guingona is recognized.

SEC. 100. Meeting and Quorum; Budget

xxxxxxxxx
(c) The annual school board budget shall give priority

Senator Guingona. Just for clarification, Mr. President.

In this transfer, will it include everything eventually -lock, stock and barrel, including curriculum?

Senator Pimentel. Mr. President, our stand in the

Committee is to respect the decision of the National
Government in terms of curriculum.
Senator Guingona. But, supposing the Local
Education Board wishes to adopt a certain curriculum
for that particular region?
Senator Pimentel. Mr. President, pursuant to the
wording of the proposed transfer of this elementary
school system to local government units, what are
specifically covered here are merely the construction,
repair, and maintenance of elementary school
buildings and other structures connected with public
elementary school education, payment of salaries,
emoluments, allowances et cetera, procurement of
books, other teaching materials and equipment
needed for the proper implementation of the program.
There is nothing here that will indicate that the local
government will have any right to alter the curriculum.
(Emphasis supplied)
Senator Guingona. Thank you, Mr. President.
Similarly instructive are the foregoing deliberations in
the House of Representatives on August 16, 1990:
INTERPELLATION OF MS. RAYMUNDO
(Continuation)
Continuing her interpellation, Ms. Raymundo then
adverted to subsection 4 of Section 101 [now Section
100, paragraph (c)] and asked if the budget is limited
only to the three priority areas mentioned. She also
asked what is meant by the phrase "maintenance of
extension classes."
In response, Mr. De Pedro clarified that the provision
is not limited to the three activities, to which may be
added other sets of priorities at the proper time. As to
extension classes, he pointed out that the school
boards may provide out of its own funds, for additional
teachers or other requirements if the national
government cannot provide funding therefor. Upon
Ms. Raymundo's query, Mr. de Pedro further
explained that support for teacher tools could fall
under the priorities cited and is covered by certain
circulars.

Undoubtedly, the aforecited exchange of views clearly

demonstrates that the legislature intended the SEF to
answer for the compensation of teachers handling
extension classes.
Furthermore, the pertinent portion of the repealing
clause of the Local Government Code, provides:
SEC. 534. Repealing Clause. - x x x
(c) The provisions of . . . Sections 3, a (3) and b (2) of
Republic Act No. 5447, regarding the Special
Education Fund ... are hereby repealed and rendered
of no force and effect.
Evidently, what was expressly repealed by the Local
Government Code was only Section 3, of R.A. No.
5447, which deals with the "Allocation of taxes on
Virginia type cigarettes and duties on imported leaf
tobacco." The legislature is presumed to know the
existing laws, such that whenever it intends to repeal
a particular or specific provision of law, it does so
expressly. The failure to add a specific repealing
clause particularly mentioning the statute to be
repealed indicates that the intent was not to repeal
any existing law on the matter, unless an
irreconcilable inconsistency and repugnancy exists in
the terms of the new and the old laws.[7] Hence, the
provisions allocating funds for the salaries of teachers
under Section 1, of R.A. No. 5447, which are not
inconsistent with Sections 272 and 100 (c) of the
Local Government Code, remain in force and effect.
Even under the doctrine of necessary implication, the
allocation of the SEF for the establishment and
maintenance of extension classes logically implies the
hiring of teachers who should, as a matter of course
be compensated for their services. Every statute is
understood, by implication, to contain all such
provisions as may be necessary to effectuate its
object and purpose, or to make effective rights,
powers, privileges or jurisdiction which it grants,
including all such collateral and subsidiary
consequences as may be fairly and logically inferred
from its terms. Ex necessitate legis.[8] Verily, the
services and the corresponding compensation of
these teachers are necessary and indispensable to
the establishment and maintenance of extension
classes.

Indeed, the operation and maintenance of public

schools is lodged principally with the DECS. This is
the reason why only salaries of public school teachers
appointed in connection with the establishment and
maintenance of extension classes, inter alia, pertain
to the supplementary budget of the local school
boards. Thus, it should be made clear that not every
kind of personnel-related benefits of public school
teachers may be charged to the SEF. The SEF may
be expended only for the salaries and personnelrelated benefits of teachers appointed by the local
school boards in connection with the establishment
and maintenance of extension classes. Extension
classes as referred to mean additional classes
needed to accommodate all children of school age
desiring to enter in public schools to acquire basic
education.[9]

Solicitor General claims that the Notices of

Suspension issued by the COA to the respondent
province amounted to a breach or violation, and
therefore, the petition for declaratory relief should
have been denied by the trial court.

With respect, however, to college scholarship grants,

a reading of the pertinent laws of the Local
Government Code reveals that said grants are not
among the projects for which the proceeds of the SEF
may be appropriated. It should be noted that Sections
100 (c) and 272 of the Local Government Code
substantially reproduced Section 1, of R.A. No. 5447.
But, unlike payment of salaries of teachers which falls
within the ambit of "establishment and maintenance of
extension classes" and "operation and maintenance
of public schools," the "granting of government
scholarship to poor but deserving students" was
omitted in Sections 100 (c) and 272 of the Local
Government Code. Casus omissus pro omisso
habendus est. A person, object, or thing omitted from
an enumeration in a statute must be held to have
been omitted intentionally. It is not for this Court to
supply such grant of scholarship where the legislature
has omitted it.[10]

WHEREFORE, in view of all the foregoing, the

Decision of the Regional Trial Court of Cebu City,
Branch 20, in Civil Case No. CEB-24422, is
AFFIRMED with MODIFICATION. The salaries and
personnel-related benefits of the teachers appointed
by the provincial school board of Cebu in connection
with the establishment and maintenance of extension
classes, are declared chargeable against the Special
Education Fund of the province. However, the
expenses incurred by the provincial government for
the college scholarship grants should not be charged
against the Special Education Fund, but against the
General Funds of the province of Cebu.

In the same vein, however noble the intention of the

province in extending said scholarship to deserving
students, we cannot apply the doctrine of necessary
implication inasmuch as the grant of scholarship is
neither necessary nor indispensable to the operation
and maintenance of public schools. Instead, such
scholarship grants may be charged to the General
Funds of the province.
Pursuant to Section 1, Rule 63[11] of the 1997 Rules
of Civil Procedure, a petition for declaratory relief may
be filed before there is a breach or violation. The

We are not convinced. As held in Shell Company of

the Philippines, Ltd. v. Municipality of Sipocot,[12] any
breach of the statute subject of the controversy will
not affect the case; the action for declaratory relief will
prosper because the applicability of the statute in
question to future transactions still remains to be
resolved. Absent a definite ruling in the instant case
for declaratory relief, doubts as to the disposition of
the SEF will persist. Hence, the trial court did not err
in giving due course to the petition for declaratory
relief filed by the province of Cebu.

SAN MIGUEL CORPORATION EMPLOYEES

UNION-PHILIPPINE TRANSPORT AND GENERAL
WORKERS ORGANIZATION (SMCEU-PTGWO),
Petitioner, versus SAN MIGUEL PACKAGING
PRODUCTS EMPLOYEES UNION-PAMBANSANG
DIWA NG MANGGAGAWANG PILIPINO
(SMPEOPLEEU-PDMP), Respondent.[1]
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari under Rule 45
of the Revised Rules of Court, petitioner SAN
MIGUEL CORPORATION EMPLOYEES UNIONPHILIPPINE TRANSPORT AND GENERAL
WORKERS ORGANIZATION (SMCEU-PTGWO)
prays that this Court reverse and set aside the (a)
Decision[2] dated 9 March 2005 of the Court of
Appeals in CA-G.R. SP No. 66200, affirming the
Decision[3] dated 19 February 2001 of the Bureau of

Labor Relations (BLR) of the Department of Labor

and Employment (DOLE) which upheld the Certificate
of Registration of respondent SAN MIGUEL
PACKAGING PRODUCTS EMPLOYEES UNIONPAMBANSANG DIWA NG MANGGAGAWANG
PILIPINO (SMPPEU-PDMP); and (b) the
Resolution[4] dated 16 January 2006 of the Court of
Appeals in the same case, denying petitioner's Motion
for Reconsideration of the aforementioned Decision.
The following are the antecedent facts:
Petitioner is the incumbent bargaining agent for the
bargaining unit comprised of the regular monthly-paid
rank and file employees of the three divisions of San
Miguel Corporation (SMC), namely, the San Miguel
Corporate Staff Unit (SMCSU), San Miguel Brewing
Philippines (SMBP), and the San Miguel Packaging
Products (SMPP), in all offices and plants of SMC,
including the Metal Closure and Lithography Plant in
Laguna. It had been the certified bargaining agent for
20 years - from 1987 to 1997.
Respondent is registered as a chapter of
Pambansang Diwa ng Manggagawang Pilipino
(PDMP). PDMP issued Charter Certificate No. 112 to
respondent on 15 June 1999.[5] In compliance with
registration requirements, respondent submitted the
requisite documents to the BLR for the purpose of
acquiring legal personality.[6] Upon submission of its
charter certificate and other documents, respondent
was issued Certificate of Creation of Local or Chapter
PDMP-01 by the BLR on 6 July 1999.[7] Thereafter,
respondent filed with the Med-Arbiter of the DOLE
Regional Officer in the National Capital Region
(DOLE-NCR), three separate petitions for certification
election to represent SMPP, SMCSU, and SMBP.[8]
All three petitions were dismissed, on the ground that
the separate petitions fragmented a single bargaining
unit.[9]
On 17 August 1999, petitioner filed with the DOLENCR a petition seeking the cancellation of
respondent's registration and its dropping from the
rolls of legitimate labor organizations. In its petition,
petitioner accused respondent of committing fraud
and falsification, and non-compliance with registration
requirements in obtaining its certificate of registration.
It raised allegations that respondent violated Articles
239(a), (b) and (c)[10] and 234(c)[11] of the Labor

Code. Moreover, petitioner claimed that PDMP is not

a legitimate labor organization, but a trade union
center, hence, it cannot directly create a local or
chapter. The petition was docketed as Case No. NCROD-9908-007-IRD.[12]
On 14 July 2000, DOLE-NCR Regional Director
Maximo B. Lim issued an Order dismissing the
allegations of fraud and misrepresentation, and
irregularity in the submission of documents by
respondent. Regional Director Lim further ruled that
respondent is allowed to directly create a local or
chapter. However, he found that respondent did not
comply with the 20% membership requirement and,
thus, ordered the cancellation of its certificate of
registration and removal from the rolls of legitimate
labor organizations.[13] Respondent appealed to the
BLR. In a Decision dated 19 February 2001, it
declared:
As a chartered local union, appellant is not required to
submit the number of employees and names of all its
members comprising at least 20% of the employees
in the bargaining unit where it seeks to operate. Thus,
the revocation of its registration based on noncompliance with the 20% membership requirement
does not have any basis in the rules.
Further, although PDMP is considered as a trade
union center, it is a holder of Registration Certificate
No. FED-11558-LC issued by the BLR on 14 February
1991, which bestowed upon it the status of a
legitimate labor organization with all the rights and
privileges to act as representative of its members for
purposes of collective bargaining agreement. On this
basis, PDMP can charter or create a local, in
accordance with the provisions of Department Order
No. 9.
WHEREFORE, the appeal is hereby GRANTED.
Accordingly, the decision of the Regional Director
dated July 14, 2000, canceling the registration of
appellant San Miguel Packaging Products Employees
Union-Pambansang Diwa ng Manggagawang Pilipino
(SMPPEU-PDMP) is REVERSED and SET ASIDE.
Appellant shall hereby remain in the roster of
legitimate labor organizations.[14]

Regional Director dismissing the allegations of fraud

and misrepresentation, and in upholding that PDMP
can directly create a local or a chapter, it reversed the
Regional Director's ruling that the 20% membership is
a requirement for respondent to attain legal
personality as a labor organization. Petitioner
thereafter filed a Motion for Reconsideration with the
BLR. In a Resolution rendered on 19 June 2001 in
BLR-A-C-64-05-9-00 (NCR-OD-9908-007-IRD), the
BLR denied the Motion for Reconsideration and
affirmed its Decision dated 19 February 2001.[15]
Invoking the power of the appellate court to review
decisions of quasi-judicial agencies, petitioner filed
with the Court of Appeals a Petition
for Certiorari under Rule 65 of the 1997 Rules of Civil
Procedure docketed as CA-G.R. SP No. 66200. The
Court of Appeals, in a Decision dated 9 March 2005,
dismissed the petition and affirmed the Decision of
the BLR, ruling as follows:
In Department Order No. 9, a registered federation or
national union may directly create a local by
submitting to the BLR copies of the charter certificate,
the local's constitution and by-laws, the principal office
address of the local, and the names of its officers and
their addresses. Upon complying with the
documentary requirements, the local shall be issued a
certificate and included in the roster of legitimate labor
organizations. The [herein respondent] is an affiliate
of a registered federation PDMP, having been issued
a charter certificate. Under the rules we have
reviewed, there is no need for SMPPEU to show a
membership of 20% of the employees of the
bargaining unit in order to be recognized as a
legitimate labor union.
xxxx
In view of the foregoing, the assailed decision and
resolution of the BLR are AFFIRMED, and the petition
is DISMISSED.[16]
Subsequently, in a Resolution dated 16 January 2006,
the Court of Appeals denied petitioner's Motion for
Reconsideration of the aforementioned Decision.
Hence, this Petition for Certiorari under Rule 45 of the

While the BLR agreed with the findings of the DOLE

Revised Rules of Court where petitioner raises the

sole issue of:
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED REVERSIBLE ERROR IN
RULING THAT PRIVATE RESPONDENT IS NOT
REQUIRED TO SUBMIT THE NUMBER OF
EMPLOYEES AND NAMES OF ALL ITS MEMBERS
COMPRISING AT LEAST 20% OF THE EMPLOYEES
IN THE BARGAINING UNIT WHERE IT SEEKS TO
OPERATE.
The present petition questions the legal personality of
respondent as a legitimate labor organization.
Petitioner posits that respondent is required to submit
a list of members comprising at least 20% of the
employees in the bargaining unit before it may
acquire legitimacy, citing Article 234(c) of the Labor
Code which stipulates that any applicant labor
organization, association or group of unions or
workers shall acquire legal personality and shall be
entitled to the rights and privileges granted by law to
legitimate labor organizations upon issuance of the
certificate of registration based on the following
requirements:
a. Fifty pesos (P50.00) registration fee;
b. The names of its officers, their addresses, the
principal address of the labor organization, the
minutes of the organizational meetings and the list of
the workers who participated in such meetings;
c. The names of all its members comprising at least
twenty percent (20%) of all the employees in the
bargaining unit where it seeks to operate;
d. If the applicant union has been in existence for one
or more years, copies of its annual financial reports;
and
e. Four (4) copies of the constitution and by-laws of
the applicant union, minutes of its adoption or
ratification and the list of the members who
participated in it.[17]

Petitioner also insists that the 20% requirement for

registration of respondent must be based not on the
number of employees of a single division, but in all
three divisions of the company in all the offices and
plants of SMC since they are all part of one
bargaining unit. Petitioner refers to Section 1, Article 1
of the Collective Bargaining Agreement (CBA),[18]
quoted hereunder:
ARTICLE 1
SCOPE
Section 1. Appropriate Bargaining Unit.
The appropriate bargaining unit covered by this
Agreement consists of all regular rank and file
employees paid on the basis of fixed salary per month
and employed by the COMPANY in its Corporate Staff
Units (CSU), San Miguel Brewing Products (SMBP)
and San Miguel Packaging Products (SMPP) and in
different operations existing in the City of Manila and
suburbs, including Metal Closure and Lithography
Plant located at Canlubang, Laguna subject to the
provisions of Article XV of this Agreement provided
however, that if during the term of this Agreement, a
plant within the territory covered by this Agreement is
transferred outside but within a radius of fifty (50)
kilometers from the Rizal Monument, Rizal Park,
Metro Manila, the employees in the transferred plant
shall remain in the bargaining unit covered by this
Agreement. (Emphasis supplied.)
Petitioner thus maintains that respondent, in any
case, failed to meet this 20% membership
requirement since it based its membership on the
number of employees of a single division only,
namely, the SMPP.
There is merit in petitioner's contentions.
A legitimate labor organization[19] is defined as "any
labor organization duly registered with the
Department of Labor and Employment, and
includes any branch or local thereof."[20] The
mandate of the Labor Code is to ensure strict
compliance with the requirements on registration
because a legitimate labor organization is entitled to
specific rights under the Labor Code,[21] and are

involved in activities directly affecting matters of public

interest. Registration requirements are intended to
afford a measure of protection to unsuspecting
employees who may be lured into joining
unscrupulous or fly-by-night unions whose sole
purpose is to control union funds or use the labor
organization for illegitimate ends.[22] Legitimate labor
organizations have exclusive rights under the law
which cannot be exercised by non-legitimate unions,
one of which is the right to be certified as the
exclusive representative[23] of all the employees in
an appropriate collective bargaining unit for purposes
of collective bargaining.[24] The acquisition of rights
by any union or labor organization, particularly the
right to file a petition for certification election, first and
foremost, depends on whether or not the labor
organization has attained the status of a legitimate
labor organization.[25]
A perusal of the records reveals that respondent is
registered with the BLR as a "local" or "chapter" of
PDMP and was issued Charter Certificate No. 112 on
15 June 1999. Hence, respondent was directly
chartered by PDMP.
The procedure for registration of a local or chapter of
a labor organization is provided in Book V of the
Implementing Rules of the Labor Code, as amended
by Department Order No. 9 which took effect on 21
June 1997, and again by Department Order No. 40
dated 17 February 2003. The Implementing Rules as
amended by D.O. No. 9 should govern the resolution
of the petition at bar since respondent's petition for
certification election was filed with the BLR in 1999;
and that of petitioner on 17 August 1999.[26]
The applicable Implementing Rules enunciates a twofold procedure for the creation of a chapter or a local.
The first involves the affiliation of an independent
union with a federation or national union or industry
union. The second, finding application in the instant
petition, involves the direct creation of a local or a
chapter through the process of chartering.[27]
A duly registered federation or national union may
directly create a local or chapter by submitting to the
DOLE Regional Office or to the BLR two copies of the
following:
(a) A charter certificate issued by the federation or

national union indicating the creation or establishment

of the local/chapter;
(b) The names of the local/chapter's officers, their
addresses, and the principal office of the
local/chapter; and
(c) The local/chapter's constitution and by-laws;
Provided, That where the local/chapter's constitution
and by-laws is the same as that of the federation or
national union, this fact shall be indicated accordingly.
All the foregoing supporting requirements shall be
certified under oath by the Secretary or the Treasurer
of the local/chapter and attested to by its President.
[28]
The Implementing Rules stipulate that a local or
chapter may be directly created by
a federation or national union. A duly constituted local
or chapter created in accordance with the foregoing
shall acquire legal personality from the date of filing of
the complete documents with the BLR.[29] The
issuance of the certificate of registration by the BLR
or the DOLE Regional Office is not the operative act
that vests legal personality upon a local or a chapter
under Department Order No. 9. Such legal personality
is acquired from the filing of the complete
documentary requirements enumerated in Section 1,
Rule VI.[30]
Petitioner insists that Section 3 of the Implementing
Rules, as amended by Department Order No. 9,
violated Article 234 of the Labor Code when it
provided for less stringent requirements for the
creation of a chapter or local. This Court disagrees.
Article 234 of the Labor Code provides that
an independent labor organization acquires legitimacy
only upon its registration with the BLR:
Any applicant labor organization, association or group
of unions or workers shall acquire legal personality
and shall be entitled to the rights and privileges
granted by law to legitimate labor organizations upon
issuance of the certificate of registration based on the
following requirements:

(a) Fifty pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the
principal address of the labor organization, the
minutes of the organizational meetings and the list of
the workers who participated in such meetings;
(c) The names of all its members comprising at least
twenty percent (20%) of all the employees in the
bargaining unit where it seeks to operate;
(d) If the applicant union has been in existence for
one or more years, copies of its annual financial
reports; and
(e) Four (4) copies of the constitution and by-laws of
the applicant union, minutes of its adoption or
ratification, and the list of the members who
participated in it. (Italics supplied.)
It is emphasized that the foregoing pertains to the
registration of an independent labor organization,
association or group of unions or workers.
However, the creation of a branch, local or chapter is
treated differently. This Court, in the landmark case
of Progressive Development Corporation v. Secretary,
Department of Labor and Employment,[31] declared
that when an unregistered union becomes a branch,
local or chapter, some of the aforementioned
requirements for registration are no longer necessary
or compulsory. Whereas an applicant for registration
of an independent union is mandated to submit,
among other things, the number of employees and
names of all its members comprising at least 20% of
the employees in the bargaining unit where it seeks to
operate, as provided under Article 234 of the Labor
Code and Section 2 of Rule III, Book V of the
Implementing Rules, the same is no longer required
of a branch, local or chapter.[32] The intent of the law
in imposing less requirements in the case of a branch
or local of a registered federation or national union is
to encourage the affiliation of a local union with a
federation or national union in order to increase the
local union's bargaining powers respecting terms and
conditions of labor.[33]
Subsequently, in Pagpalain Haulers, Inc. v.
Trajano[34] where the validity of Department Order

No. 9 was directly put in issue, this Court was

unequivocal in finding that there is no inconsistency
between the Labor Code and Department Order No.
9.
As to petitioner's claims that respondent obtained its
Certificate of Registration through fraud and
misrepresentation, this Court finds that the
imputations are not impressed with merit. In the
instant case, proof to declare that respondent
committed fraud and misrepresentation remains
wanting. This Court had, indeed, on several
occasions, pronounced that registration based on
false and fraudulent statements and documents
confer no legitimacy upon a labor organization
irregularly recognized, which, at best, holds on to a
mere scrap of paper. Under such circumstances, the
labor organization, not being a legitimate labor
organization, acquires no rights.[35]
This Court emphasizes, however, that a direct
challenge to the legitimacy of a labor organization
based on fraud and misrepresentation in securing its
certificate of registration is a serious allegation which
deserves careful scrutiny. Allegations thereof should
be compounded with supporting circumstances and
evidence. The records of the case are devoid of such
evidence. Furthermore, this Court is not a trier of
facts, and this doctrine applies with greater force in
labor cases. Findings of fact of administrative
agencies and quasi-judicial bodies, such as the BLR,
which have acquired expertise because their
jurisdiction is confined to specific matters, are
generally accorded not only great respect but even
finality.[36]
Still, petitioner postulates that respondent was not
validly and legitimately created, for PDMP cannot
create a local or chapter as it is not a legitimate labor
organization, it being a trade union center.
Petitioner's argument creates a predicament as it
hinges on the legitimacy of PDMP as a labor
organization. Firstly, this line of reasoning attempts to
predicate that a trade union center is not a legitimate
labor organization. In the process, the legitimacy of
PDMP is being impugned, albeit indirectly. Secondly,
the same contention premises that a trade union
center cannot directly create a local or chapter
through the process of chartering.

Anent the foregoing, as has been held in a long line of

cases, the legal personality of a legitimate labor
organization, such as PDMP, cannot be subject to a
collateral attack. The law is very clear on this matter.
Article 212 (h) of the Labor Code, as amended,
defines a legitimate labor organization[37] as "any
labor organization duly registered with the DOLE, and
includes any branch or local thereof."[38] On the other
hand, a trade union center is any group of registered
national unions or federations organized for the
mutual aid and protection of its members; for assisting
such members in collective bargaining; or for
participating in the formulation of social and
employment policies, standards, and programs, and is
duly registered with the DOLE in accordance with
Rule III, Section 2 of the Implementing Rules.[39]
The Implementing Rules stipulate that a labor
organization shall be deemed registered and vested
with legal personality on the date of issuance of its
certificate of registration. Once a certificate of
registration is issued to a union, its legal personality
cannot be subject to collateral attack.[40] It may be
questioned only in an independent petition for
cancellation in accordance with Section 5 of Rule V,
Book V of the Implementing Rules. The
aforementioned provision is enunciated in the
following:
Sec. 5. Effect of registration. The labor organization or
workers' association shall be deemed registered and
vested with legal personality on the date of issuance
of its certificate of registration. Such legal personality
cannot thereafter be subject to collateral attack, but
may be questioned only in an independent petition for
cancellation in accordance with these Rules.
PDMP was registered as a trade union center and
issued Registration Certificate No. FED-11558-LC by
the BLR on 14 February 1991. Until the certificate of
registration of PDMP is cancelled, its legal personality
as a legitimate labor organization subsists. Once a
union acquires legitimate status as a labor
organization, it continues to be recognized as such
until its certificate of registration is cancelled or
revoked in an independent action for cancellation.[41]
It bears to emphasize that what is being directly
challenged is the personality of respondent as a

legitimate labor organization and not that of PDMP.

This being a collateral attack, this Court is without
jurisdiction to entertain questions indirectly impugning
the legitimacy of PDMP.
Corollarily, PDMP is granted all the rights and
privileges appurtenant to a legitimate labor
organization,[42] and continues to be recognized as
such until its certificate of registration is successfully
impugned and thereafter cancelled or revoked in an
independent action for cancellation.
We now proceed to the contention that PDMP cannot
directly create a local or a chapter, it being a trade
union center.
This Court reverses the finding of the appellate court
and BLR on this ground, and rules that PDMP cannot
directly create a local or chapter.
After an exhaustive study of the governing labor law
provisions, both statutory and regulatory,[43] we find
no legal justification to support the conclusion that a
trade union center is allowed to directly create a local
or chapter through chartering. Apropos, we take this
occasion to reiterate the first and fundamental duty of
this Court, which is to apply the law. The solemn
power and duty of the Court to interpret and apply the
law does not include the power to correct by reading
into the law what is not written therein.[44]
Presidential Decree No. 442, better known as the
Labor Code, was enacted in 1972. Being a legislation
on social justice,[45] the provisions of the Labor Code
and the Implementing Rules have been subject to
several amendments, and they continue to evolve,
considering that labor plays a major role as a socioeconomic force. The Labor Code was first amended
by Republic Act No. 6715, and recently, by Republic
Act No. 9481. Incidentally, the term trade union
center was never mentioned under Presidential
Decree No. 442, even as it was amended by Republic
Act No. 6715. The term trade union center was first
adopted in the Implementing Rules, under
Department Order No. 9.
Culling from its definition as provided by Department
Order No. 9, a trade union center is any group of
registered national unions or federations organized for
the mutual aid and protection of its members; for

assisting such members in collective bargaining; or

for participating in the formulation of social and
employment policies, standards, and programs, and is
duly registered with the DOLE in accordance with
Rule III, Section 2 of the Implementing Rules.[46] The
same rule provides that the application for registration
of an industry or trade union center shall be supported
by the following:
(a) The list of its member organizations and their
respective presidents and, in the case of an industry
union, the industry where the union seeks to operate;
(b) The resolution of membership of each member
organization, approved by the Board of Directors of
such union;
(c) The name and principal address of the applicant,
the names of its officers and their addresses, the
minutes of its organizational meeting/s, and the list of
member organizations and their representatives who
attended such meeting/s; and
(d) A copy of its constitution and by-laws and minutes
of its ratification by a majority of the presidents of the
member organizations, provided that where the
ratification was done simultaneously with the
organizational meeting, it shall be sufficient that the
fact of ratification be included in the minutes of the
organizational meeting.[47]
Evidently, while a "national union" or "federation" is a
labor organization with at least ten locals or chapters
or affiliates, each of which must be a duly certified or
recognized collective bargaining agent;[48] a trade
union center, on the other hand, is composed of a
group of registered national unions or federations.[49]
The Implementing Rules, as amended by Department
Order No. 9, provide that "a duly registered federation
or national union" may directly create a local or
chapter. The provision reads:
Section 1. Chartering and creation of a local/chapter. A duly registered federation or national union may
directly create a local/chapter by submitting to the
Regional Office or to the Bureau two (2) copies of the
following:

(a) A charter certificate issued by the federation or

national union indicating the creation or establishment
of the local/chapter;
(b) The names of the local/chapter's officers, their
addresses, and the principal office of the
local/chapter; and

federation, national union or industry or trade union

center or an independent union shall acquire legal
personality and shall be entitled to the rights and
privileges granted by law to legitimate labor
organizations upon issuance of the certificate of
registration based on the following requirements:

(b) The names of its officers, their addresses, the

principal address of the labor organization, the
minutes of the organizational meetings and the list of
the workers who participated in such meetings;

All the foregoing supporting requirements shall be

certified under oath by the Secretary or the Treasurer
of the local/chapter and attested to by its President.
[50]

(c) In case the applicant is an independent union, the

names of all itsmembers comprising at least twenty
percent (20%) of all the employees in the bargaining
unit where it seeks to operate;
(d) If the applicant union has been in existence for
one or more years, copies of its annual financial
reports; and
(e) Four copies of the constitution and by-laws of the
applicant union, minutes of its adoption or ratification,
and the list of the members who participated in it.
SECTION 2. A new provision is hereby inserted into
the Labor Code as Article 234-A to read as follows:

Republic Act No. 9481 or "An Act Strengthening the

Workers' Constitutional Right to Self-Organization,
Amending for the Purpose Presidential Decree No.
442, As Amended, Otherwise Known as the Labor
Code of the Philippines" lapsed[52] into law on 25
May 2007 and became effective on 14 June 2007.[53]
This law further amends the Labor Code provisions
on Labor Relations.

ART. 234-A. Chartering and Creation of a Local

Chapter. - A duly registered federation or national
union may directly create a local chapter by issuing a
charter certificate indicating the establishment of the
local chapter. The chapter shall acquire legal
personality only for purposes of filing a petition for
certification election from the date it was issued a
charter certificate.

Pertinent amendments read as follows:

The chapter shall be entitled to all other rights and

privileges of a legitimate labor organization only upon
the submission of the following documents in addition
to its charter certificate:

SECTION 1. Article 234 of Presidential Decree No.

442, as amended, otherwise known as the Labor
Code of the Philippines, is hereby further amended to
read as follows:
ART. 234. Requirements of Registration. - A

The additional supporting requirements shall be

certified under oath by the secretary or treasurer of
the chapter and attested by its president. (Emphasis
ours.)

(a) Fifty pesos (P50.00) registration fee;

(c) The local/chapter's constitution and by-laws;

provided that where the local/chapter's constitution
and by-laws is the same as that of the federation or
national union, this fact shall be indicated accordingly.

Department Order No. 9 mentions two labor

organizations either of which is allowed to directly
create a local or chapter through chartering - a duly
registeredfederation or a national union. Department
Order No. 9 defines a "chartered local" as a labor
organization in the private sector operating at the
enterprise level that acquired legal personality
through a charter certificate, issued by a duly
registered federation or national union and reported to
the Regional Office in accordance with Rule III,
Section 2-E of these Rules.[51]

the same as that of the federation or the national

union, this fact shall be indicated accordingly.

(a) The names of the chapter's officers, their

addresses, and the principal office of the chapter; and
(b) The chapter's constitution and by-laws: Provided,
That where the chapter's constitution and by-laws are

Article 234 now includes the term trade union

center, but interestingly, the provision indicating the
procedure for chartering or creating a local or chapter,
namely Article 234-A, still makes no mention of a
"trade union center."
Also worth emphasizing is that even in the most
recent amendment of the implementing rules,[54]
there was no mention of a trade union center as being
among the labor organizations allowed to charter.
This Court deems it proper to apply the Latin
maxim expressio unius est exclusio alterius. Under
this maxim of statutory interpretation, the expression
of one thing is the exclusion of another. When certain
persons or things are specified in a law, contract, or
will, an intention to exclude all others from its
operation may be inferred. If a statute specifies one
exception to a general rule or assumes to specify the
effects of a certain provision, other exceptions or
effects are excluded.[55] Where the terms are
expressly limited to certain matters, it may not, by
interpretation or construction, be extended to other
matters.[56] Such is the case here. If its intent were
otherwise, the law could have so easily and
conveniently included "trade union centers" in
identifying the labor organizations allowed to charter a
chapter or local. Anything that is not included in the
enumeration is excluded therefrom, and a meaning
that does not appear nor is intended or reflected in
the very language of the statute cannot be placed
therein.[57] The rule is restrictive in the sense that it
proceeds from the premise that the legislating body
would not have made specific enumerations in a
statute if it had the intention not to restrict its meaning
and confine its terms to those expressly mentioned.
[58] Expressium facit cessare tacitum.[59] What is
expressed puts an end to what is implied. Casus
omissus pro omisso habendus est. A person, object or
thing omitted must have been omitted intentionally.
Therefore, since under the pertinent status and

applicable implementing rules, the power granted to

labor organizations to directly create a chapter or
local through chartering is given to a federation or
national union, then a trade union center is without
authority to charter directly.
The ruling of this Court in the instant case is not a
departure from the policy of the law to foster the free
and voluntary organization of a strong and united
labor movement,[60] and thus assure the rights of
workers to self-organization.[61] The mandate of the
Labor Code in ensuring strict compliance with the
procedural requirements for registration is not without
reason. It has been observed that the formation of a
local or chapter becomes a handy tool for the
circumvention of union registration requirements.
Absent the institution of safeguards, it becomes a
convenient device for a small group of employees to
foist a not-so-desirable federation or union on
unsuspecting co-workers and pare the need for
wholehearted voluntariness, which is basic to free
unionism.[62] As a legitimate labor organization is
entitled to specific rights under the Labor Code and
involved in activities directly affecting public interest, it
is necessary that the law afford utmost protection to
the parties affected.[63] However, as this Court has
enunciated in Progressive Development Corporation
v. Secretary of Department of Labor and Employment,
it is not this Court's function to augment the
requirements prescribed by law. Our only recourse, as
previously discussed, is to exact strict compliance
with what the law provides as requisites for local or
chapter formation.[64]
In sum, although PDMP as a trade union center is a
legitimate labor organization, it has no power to
directly create a local or chapter. Thus, SMPPEUPDMP cannot be created under the more lenient
requirements for chartering, but must have complied
with the more stringent rules for creation and
registration of an independent union, including the
20% membership requirement.
WHEREFORE, the instant Petition is GRANTED. The
Decision dated 09 March 2005 of the Court of
Appeals in CA-GR SP No. 66200
is REVERSED and SET ASIDE. The Certificate of
Registration of San Miguel Packaging Products
Employees Union-Pambansang Diwa ng
Manggagawang Pilipino is ORDERED

CANCELLED, and SMPPEU-PDMP DROPPED from

the rolls of legitimate labor organizations.
RICARDO C. CADAYONA, petitioner, vs. COURT OF
APPEALS and THE PROVINCIAL GOVERNOR OF
LEYTE, respondents.
GONZAGA_REYES, J.:
On January 13, 1997, petitioner Ricardo C. Cadayona
filed a Petition for Review with the Court of Appeals to
annul Resolution Nos. 96-7418 and 96-2569 of the
Civil Service Commission, which affirmed his
preventive suspension. The Petition was docketed as
CA-G.R. SP. No.43104 entitled "Ricardo C. Cadayona
vs. Provincial Governor of Leyte". In a Resolution1
[Special Eighth Division composed of the ponente, J.
Salvador J. Valdez, Jr.; and the members J. Corona
Ibay Somera (Acting Chairman) and J. Romeo J.
Callejo concurring.] dated February 19, 1997, the
Court of Appeals dismissed the petition outright on the
following grounds:
a. the certificate of non-forum shopping attached
thereto was not executed by the petitioner himself but
by his counsel;
b. three annexes attached to it (Annexes D, E and F)
were mere xerox or plain copies and not certified true
copies.
On March 31, 1997, the Court of Appeals denied
petitioner's motion for reconsideration of the dismissal
stating that although there was substantial
compliance with the Circular on forum shopping, the
failure to submit certified true copies of Annexes D, E
and F of the petition is a fatal flaw justifying dismissal
of the petition:
xxx
"The petitioner posits that under the Circular, 'What is
required to be certified are the award, judgment, final
order or resolution appealed from and material
portions of, the record referred to in the petition. The
other supporting papers do not have to be certified
true copies.' He backs up his theory with the so-called
doctrine of last antecedent supposedly enunciated in
Felipe vs. De la Cruz, 99 Phil. 940, under which the
qualifier succeeding phase "such material portions of
the record as are referred to therein," and does not

include the remote phrase "other supporting papers."

Petitioner's legal hermeneutics is faulty and his
reliance on the Felipe case is misplaced. The term
"certified true copies," being the only qualifier in the
phrase 'such material portions of the record as are
referred to therein and other supporting papers,' must
refer to both 'material portions of the record' and
'other supporting papers'. In the Felipe case , there
were two qualifiers; hence, it was held that each must
refer to the object nearest to it.
But even granting that petitioner's interpretation is
correct, Annexes "D" (order of suspension), "E"
(petitioner's letter refusing to sit and serve as a
member of the special committee tasked to
inspect/re-inspect the heavy equipment imported from
Japan) and "F" (administrative charge against the
petitioner) are portions of the record referred to in the
petition. They were all mentioned in the Resolution of
Civil Service Commission (CSC) Regional Director
Vicente-Escarian as well as in the appealed
Resolutions of the CSC. The purpose of the
requirement that they should have been certified as
true copies is to expedite the determination by this
Court of whether or not the petition is prima facie
meritorious on the basis of authentic documents so as
to warrant further action or proceedings.
Petitioner's proffered excuse that it was totally
impossible to obtain certified true copies of these
annexes because the originals are with the
respondent deserves no consideration. He could have
secured certified true copies from the CSC. What is
more, a copy, if not the original, of Annexes "D" and
"F" were presumably served on him while Annex "E"
is his own le,tter. He can not successfully plead time
constraint for his counsel's office and the CSC's are
both in Quezon City. The alleged political undertones
of the case 'could not have prevented him or his
counsel from going to the CSC to obtain the
necessary certified true copies.
Accordingly, for being fatally flawed under Revised
Administrative circular No.1-95, the dismissal of the
petition is justified."2 Decision, pp. 2-5; Rollo, pp. 2225.]
Hence this petition where the petitioner assigns the
following errors:

"I. THE HONORABLE COURT OF APPEALS

COMMITTED AN ERROR OF LAW WHEN IT
IMPOSED THE REQUIREMENT THAT ALL
ANNEXES TO THE PETITION FOR REVIEW BE
CERTIFIED.

phrase "certified true copies" qualifies the words

nearest to it i.e. "such material portion of the record as
are referred to therein and other supporting papers"
We find merit in the petition. The outright dismissal of
the petition for review is a reversible error.

II. THE HONORABLE COURT OF APPEALS

COMMITTED AN ERROR OF LAW WHEN IT
DISMISSED THE PETITION FOR REVIEW."3
[Petition for Review, p. 4; Rollo. p. 10.]

A decision of the Civil Service Commission may be

appealed to t e Court of Appeals under Section 6 of
Rule 43,5 [Previously Administrative Circular 1-95.]
which provides:

Petitioner maintains that Administrative Circular 1-95

requires that only copies of the award, judgment, final
order or resolution appealed from and material points
of record referred in the petition shall be certified; said
circular does not require that the annexes be certified
true copies. Under the so-called doctrine of last
antecedent, the phrase "certified true copies" does
not qualify the remote phrase "other supporting
papers"; the qualifier phrase "certified true copies"
only refers to the immediately succeeding phrase
"such material portions of the record as referred to
therein". Petitioner further argues that even assuming
that some of the annexes he submitted were not
certified, the Court of Appeals could still have made a
prima facie determination of the case based on the
authentic or certified documents. Moreover, the Court
of Appeals could have ordered the transmitta1 of
certified true copies of the entire record of the
proceeding under review. Petitioner also alleges that
his failure to attach certified true copies of the
questioned annexes was excusable. He claims that
he only had a limited period of time within which to
obtain certified documents after he received the
resolution of the Civil Service Commission. This was
impossible to do since he had to file his petition with
the Court of Appeals on January 13, 1997 but he was
only able to engage the services of counsel on
January 5, 1997. Finally, petitioner begs that this court
liberally construe the rules in his favor given that his
appeal was dismissed on a technicality.4 [Petition for
Review, pp. 4-9; Rollo, pp. 10-15.]

"Sec. 6. Contents of the Petition. -The petition or

review shall (a) state the full names of the parties to
the case, without impleading the court or agencies
either as petitioners or respondents; (b ) contain a
concise statement of the facts and issues involved
and the grounds relied upon for the review;

On the other hand, respondents contend that the right

to appeal is merely a statutory right and one must
comply with the requirements of the law in order to
properly exercise said right. Respondent's application
of the doctrine of last antecedent is misleading for the
proper application of the doctrine shows that the

(c) be accompanied by a clearly legible duplicate

original or a certified true copy of the award,
judgment, final order or resolution appealed from,
together with certified true copies of such material
portions of the record referred to therein and other
supporting papers; and (d) contain a sworn
certification against forum shopping as provided in the
last paragraph of section 2, Rule 42. The petition shall
state the specific material dates showing that it was
filed within the period fixed herein."
The failure of the petitioner to comply with any of the
requirements under Rule 43 including the contents of
the petition and the documents which should
accompany the petition, is a sufficient ground for the
dismissal thereof.6 [ 7, Rule 43.]
Section 6 of Rule 1 states that the Rules "shall be
liberally construed in order to promote their objective
of securing a just, speedy and inexpensive disposition
of every action and proceeding." In line with this
guideline, we do not construe the above-quoted
section as imposing the requirement that all
supporting papers accompanying the petition should
be certified true copies. A comparison of this provision
with the counterpart provision in Rule 42 (governing
petitions for review from the RTC to the CA) would
show that under the latter, only the judgments or final
orders of the lower courts need be certified true
copies or duplicate originals.7 [Sec. 2.] Also under
Rule 45 of the Rules of Court (governing Appeals by

Certiorari to the Supreme Court), only the judgment or

final order or resolution accompanying the petition
must be a clearly legible duplicate original or a
certified true copy thereof certified by the clerk of
court of the court a quo.8 [ 4.] Even under Rule 65
governing certiorari and prohibition, petitions need be
accompanied by certified true copies of the
questioned judgment,9 [ 1 and 2.] it being sufficient
that copies of all other relevant documents should
accompany the petition. Numerous resolutions issued
by this Court emphasize that in appeals by certiorari
under Rules 45 and original civil actions for certiorari
under Rule 65 in relation to Rules 46 and 56, what is
required to be a certified true copy is the copy of the
questioned judgment, final order or resolution.10
[Martinez vs. Magallanes, G.R. No.133766, January
13, 1999; Borja vs. Judge Hontanosas, Jr., G.R.
No.134748, January 13, 1999; Regalado, et al vs.
NLRC, et al., G.R. No.134671, January 13, 1999; G
and M (Phils.), Inc. vs. NLRC, et al., G.R. No.133836,
January 13, 1999; Dimalanta vs. People, G.R.
No.134798, November 9, 1988.] No plausible reason
suggests itself why a different treatment, i.e. a stricter
requirement, should be given to petitions under Rule
43, which governs appeals from the Court of Tax
Appeals and quasi-judicial agencies to the Court of
Appeals. None could have been intended by the
framers of the Rules. A contrary ruling would be too
harsh and would not promote the underlying objective
of securing a just, speedy and inexpensive disposition
of every action and proceeding. It must be conceded
that obtaining certified true copies necessary entails
additional expenses that will make litigation more
onerous to the litigants. Moreover, certified true
copies are not easily procurable and party litigants
must wait for a period of time before the certified true
copies are released. At any rate, the entire records of
the case will eventually be elevated to the appellate
court.
In giving due course to the petition, we note that the
petitioner substantially complied with the requirement
of Section 6 since only three (Annexes D,11 [Annex D
- Letter of the Provincial Governor informing the
petitioner of his preventive suspension.] E12 [Annex E
- Letter from the petitioner refusing his appointment in
the commission tasked to appraise ,the condition of
the machinery ordered from Japan.] and F13 [Annex
F - Letter of the Provincial Governor informing the
petitioner of the charge of Insubordination against

him.]) out of seven annexes were not certified true

copies. The allegation of petitioner that the annexes
which were certified are the most important to the
resolution of the case and a prima facie determination
of the merits of the case could have been made on
the basis thereof has not been disputed in the
comment filed by respondent Provincial Governor.
Neither is there any controversion of petitioner's
allegation that the original of Annexes "D", "E" and "F"
are in the possession of respondent rendering his
failure to secure certificates thereof excusable.
The rules of procedure are not to be applied in a very
rigid or technical sense, which would frustrate and not
promote substantial justice. If a technical and rigid
enforcement of the rules were made, their aim would
be defeated.14 [Director of Lands vs. Court of
Appeals, G.R. No. L-47380, February 23, 1999 at p.
11.] Under the circumstances of this case, the Court
of Appeals should have directed the petitioner to
comply with the rule if it doubted the authenticity of
some of the supporting documents instead of
dismissing the case outright
WHEREFORE, the instant petition is hereby
GRANTED. The order of the Court of Appeals
dismissing the petition of herein petitioner is
REVERSED and SET ASIDE and the case is
REMANDED to the Court of Appeals for further
proceedings.
DIGITAL TELECOMMUNICATIONS PHILIPPINES,
INC., Petitioner,versus CITY GOVERNMENT OF
BATANGAS
CARPIO, J.:
The Case
This is a petition for review on certiorari[1] assailing
the Regional Trial Court's Order[2] dated 2 May 2002
in Civil Case No. 5343 as well as the 19 November
2002 Order denying the Motion for Reconsideration.
In the assailed orders, Branch 8 of the Regional Trial
Court (RTC) of Batangas City (RTC-Branch 8)
reversed the 28 March 2001 Order[3] issued by
Branch 3 of RTC-Batangas City (RTC-Branch 3).
RTC-Branch 8 declared that under its legislative
franchise, Digital Telecommunications Philippines, Inc.
(petitioner) is not exempt from paying real property

tax assessed by the Batangas City Government

(respondent).
The Facts

the payment of realty tax, citing the first sentence of

Section 5 of RA 7678, the Letter-Opinion of the
Bureau of Local Government Finance (BLGF) dated 8
April 1997,[5] and the letter of the Office of the
President dated 12 March 1996.[6]

On 17 February 1994, Republic Act No. 7678 (RA

7678)[4] granted petitioner a 25-year franchise to
install, operate and maintain telecommunications
systems throughout the Philippines. Section 5 of RA
7678 reads:

In 1999, respondent refused to issue a Mayor's Permit

to petitioner without payment of its realty taxes.

Sec. 5. Tax Provisions. - The grantee shall be liable to

pay the same taxes on its real estate, buildings, and
personal property exclusive of this franchise as other
persons or corporations are now or hereafter may be
required by law to pay. In addition thereto, the grantee
shall pay to the Bureau of Internal Revenue each
year, within thirty (30) days after the audit and
approval of the accounts, a franchise tax as may be
prescribed by law of all gross receipts of the
telephone or other telecommunications businesses
transacted under this franchise by the grantee;
Provided, That the grantee shall continue to be liable
for income taxes payable under Title II of the National
Internal Revenue Code pursuant to Section 2 of
Executive Order No. 72 unless the latter enactment is
amended or repealed, in which case the amendment
or repeal shall be applicable thereto.

On 2 July 1999, respondent threatened to close down

petitioner's operations. Hence, on 3 July 1999,
petitioner instituted a complaint for prohibition and
mandamus with prayer for a temporary restraining
order or writ of preliminary injunction. This case was
raffled to RTC-Branch 3. On the same date,
respondent served a Cease and Desist Order on
petitioner.[8]

The grantee shall file the return with and pay the tax
due thereon to the Commissioner of Internal Revenue
or his duly authorized representative in accordance
with the National Internal Revenue Code and the
return shall be subject to audit by the Bureau of
Internal Revenue. (Boldfacing and underscoring
supplied)
Sometime in 1997, respondent issued a building
permit for the installation of petitioner's
telecommunications facilities in Batangas City. After
the installation of the facilities, petitioner applied with
the Mayor's office of Batangas City for a permit to
operate. Because of a discrepancy in the actual
investment costs used in computing the prescribed
fees for the clearances and permits, petitioner was
not able to secure a Mayor's Permit for the year 1998.
Petitioner was also advised to settle its unpaid realty
taxes. However, petitioner claimed exemption from

On 22 June 1999, petitioner paid P68,890.39 under

protest as fees for the permit to operate, but
respondent refused to accept the payment unless
petitioner also paid the realty taxes.[7]

On 20 January 2000, during the pendency of the

complaint, petitioner paid its realty taxes of
P2,043,265 under protest.[9] Petitioner resumed its
business, rendering the other issues raised in
petitioner's complaint moot. Consequently, the only
issue left for resolution is whether petitioner is exempt
from the realty tax under Section 5 of RA 7678.
The Ruling of RTC-Branch 3
On 28 March 2001, RTC-Branch 3 issued the
following Order:

WHEREFORE, premises considered, the Court

hereby declares that the real estate, buildings and
personal property of plaintiff Digital
Telecommunications Philippines, Inc. which are used
in the operation of its franchise are exempt from
payment of real property taxes, but those not so used
should be held liable thereto.[10]
RTC-Branch 3 reasoned that the phrase "exclusive of
this franchise" in the first sentence of Section 5 of RA
7678 limits the real properties that are subject to
realty tax only to those which are not used in

petitioner's telecommunications business. In short,

petitioner's real properties used in its
telecommunications business are not subject to realty
tax.[11]

properties used in its telecommunications business

are exempt from the realty tax.

On 1 May 2001, respondent moved for

reconsideration. Before acting on the motion, the
Presiding Judge of RTC-Branch 3 voluntarily inhibited
himself because the newly-elected mayor of Batangas
City was his kumpadre.[12] The case was re-raffled to
RTC-Branch 8.

Petitioner contends that its exemption from realty tax

is based on the first sentence of Section 5 of RA
7678. Petitioner claims that the evident purpose of the
phrase "exclusive of this franchise" is to limit the real
properties that are subject to realty tax only to
properties that are not used in petitioner's
telecommunications business.[14] Petitioner asserts
that the phrase "exclusive of this franchise" must not
be construed as a useless surplusage. Petitioner
points out that its exemption from realty tax was
affirmed in two separate opinions, one rendered by
the Office of the President on 12 March 1996 and the
other by the BLGF on 8 April 1997 and reaffirmed on
4 January 1999.[15] The BLGF declared that "the real
properties of Digitel, which are used in the operation
of its franchise are x x x found to be exempt from the
payment of real property taxes beginning 1 January
1993. However, all other properties of that company
not used in connection with the operation of its
franchise shallremain taxable."[16]

The Ruling of RTC-Branch 8

On 2 May 2002, RTC-Branch 8 issued an Order which
reads:

WHEREFORE, the defendants' Motion for

Reconsideration is hereby granted. The Order of this
Court dated March 21, 2001 is hereby set aside and,
in lieu thereof, judgment is hereby rendered in favor of
the defendants and against the plaintiff:
- DISMISSING the Amended Complaint;
- DECLARING that the plaintiff Digital
Telecommunications Philippines, Inc., under its
legislative franchise RA No. 7678, is not exempted
from the payment of real property tax being collected
by the defendant City of Batangas and, accordingly,
- ORDERING said plaintiff to pay the City of Batangas
real estate taxes in the amount of Ph4,620,683.33
which was due as of January, 2000, as well as those
due thereafter, plus corresponding interest and
penalties.[13]
On 29 May 2002, petitioner moved for
reconsideration. On 19 November 2002, RTC-Branch
8 denied petitioner's motion for reconsideration.
Hence, this petition.

Petitioner's Contentions

Petitioner further argues that under the Local

Government Code, the realty tax is imposed on all
lands, buildings, machineries and other improvements
attached to real property. A franchise is an incorporeal
being, a special privilege granted by the legislature.
Hence, to read the first sentence of Section 5 of RA
7678 to mean that the franchisee shall pay taxes on
its real properties used in its telecommunications
business would render the phrase "exclusive of this
franchise" meaningless.
Petitioner admits that the franchise granted under RA
7678 is a personal property, but the franchise is not
the "personal property" referred to in the first
sentence of Section 5. Petitioner asserts that the
phrase "real estate, buildings, and personal property"
in the first sentence of Section 5 refers solely to real
properties and does not include personal properties.
Petitioner explains thus:

The Issue
The sole issue for resolution is whether, under the first
sentence of Section 5 of RA 7678, petitioner's real

For PTEs (public telecommunication entities), these

personal properties include the switches which were

installed in the exchange buildings as well as the

outside and inside plant equipment. Initially, these
telecommunications materials and equipment were
personal property in character. But, having been
installed and made operational by being attached to
the exchange building, they are now converted into
immovables or real property. That being the case, the
phrase "real estate, buildings and personal property"
actually refer[s] to properties that are liable for real
estate tax. And, Congress having made the
qualification with the phrase "exclusive of this
franchise," only such real properties that are not used
in furtherance of the franchise are subject to real
property tax.[17] (Emphasis supplied)
Respondent's Contentions
Respondent contends that the phrase "exclusive of
this franchise" does not mean that petitioner is
exempt from the realty tax on its real properties used
in its telecommunications business. The first sentence
of Section 5 of RA 7678 makes petitioner "liable to
pay the same taxes for its real estate, buildings, and
personal property exclusive of this franchise as other
persons or corporations are or hereafter may be
required by law to pay." This shows the clear intent of
Congress to tax petitioner's real and personal
properties.[18] Respondent asserts that the phrase
"exclusive of this franchise" is a qualification of the
broad declaration on the franchisee's liability for taxes
which is the main thrust of the first sentence of
Section 5. Respondent points out that petitioner is
paying taxes and fees on all its motor vehicles, which
are personal properties, without distinction.[19]
Respondent also points out that petitioner admits that
the first sentence of Section 5 of RA 7678 is
ambiguous with respect to the phrase "exclusive of
this franchise,"[20] thus petitioner resorted to the rules
on statutory construction.[21]
Respondent adds that the legislative franchises
granted to other telecommunications companies
contain the same phrase "exclusive of this franchise."
This shows the intent of Congress to make
franchisees liable for the realty tax rather than exempt
them even if the real properties are used in their
telecommunications business.[22]
The Office of the Solicitor General (OSG), appearing
for respondent, contends that the first sentence of
Section 5 provides for petitioner's general liability to

pay taxes and does not provide for petitioner's

exemption from realty tax. The OSG invokes the
doctrine of last antecedent which is an aid in statutory
construction. The OSG argues that under this
doctrine, the qualifying word or phrase only restricts
the word or phrase to which the qualifying word or
phrase is immediately associated and not the word or
phrase which is distantly or remotely located. In the
first sentence of Section 5, the phrase "exclusive of
this franchise" restricts only the words "personal
property" which immediately precede the phrase
"exclusive of this franchise." This means that the
franchise, an intangible personal property, should be
excluded from the personal properties that are subject
to taxes under the first sentence of Section 5. The
OSG adds that the use of the comma to separate
"real estate, buildings" from "personal property" exerts
a dominant influence in the application of the doctrine
of last antecedent. Further, the OSG reiterates that
laws granting exemption from tax are to be construed
strictissimi juris against the taxpayer and liberally in
favor of the taxing power.
The Ruling of the Court
The petition has no merit.
Section 5 of RA 7678 imposes taxes and does not
exempt from realty tax
The issue in this case involves the interpretation of
the phrase "exclusive of this franchise" in the first
sentence of Section 5 of RA 7678.
Section 5 of RA 7678 states:

Sec. 5. Tax Provisions. - The grantee shall be liable to

pay the same taxes on its real estate, buildings, and
personal property exclusive of this franchise as other
persons or corporations are now or hereafter may be
required by law to pay. In addition thereto, the grantee
shall pay to the Bureau of Internal Revenue each
year, within thirty (30) days after the audit and
approval of the accounts, a franchise tax as may be
prescribed by law of all gross receipts of the
telephone or other telecommunications businesses
transacted under this franchise by the grantee;

Provided, That the grantee shall continue to be liable

for income taxes payable under Title II of the National
Internal Revenue Code pursuant to Section 2 of
Executive Order No. 72 unless the latter enactment is
amended or repealed, in which case the amendment
or repeal shall be applicable thereto.
The grantee shall file the return with and pay the tax
due thereon to the Commissioner of Internal Revenue
or his duly authorized representative in accordance
with the National Internal Revenue Code and the
return shall be subject to audit by the Bureau of
Internal Revenue. (Boldfacing and underscoring
supplied)
The first sentence of Section 5 of RA 7678 is the
same provision found in almost all legislative
franchises in the telecommunications industry dating
back to 1905.[23] It is also the same provision that
appears in the legislative franchises of other
telecommunications companies like Philippine Long
Distance Telephone Company,[24] Smart Information
Technologies, Inc.,[25] and Globe Telecom.[26] Since
1905, no telecommunications company has claimed
exemption from realty tax based on the phrase
"exclusive of this franchise," until petitioner filed the
present case on 3 July 1999.[27]
The first sentence of Section 5 clearly states that the
legislative franchisee shall be liable to pay the
following taxes: (1) "the same taxes on its real estate,
buildings, and personal property exclusive of this
franchise as other persons or corporations are now or
hereafter may be required by law to pay"; (2)
"franchise tax as may be prescribed by law of all
gross receipts of the telephone or other
telecommunications businesses transacted under this
franchise";[28] and (3) "income taxes payable under
Title II of the National Internal Revenue Code."
The crux of the controversy lies in the interpretation of
the phrase "exclusive of this franchise" in the first
sentence of Section 5. Petitioner interprets the phrase
to mean that its real properties that are used in its
telecommunications business shall not be subject to
realty tax. Respondent interprets the same phrase to
mean that the term "personal property" shall not
include petitioner's franchise, which is an intangible
personal property.
We rule that the phrase "exclusive of this franchise"

simply means that petitioner's franchise shall not be

subject to the taxes imposed in the first sentence of
Section 5. The first sentence lists the properties that
are subject to taxes, and the list excludes the
franchise. Thus, the first sentence provides:
The grantee shall be liable to pay the same taxes on
its real estate, buildings, and personal property
exclusive of this franchise as other persons or
corporations are now or hereafter may be required by
law to pay. (Emphasis supplied)
A plain reading shows that the phrase "exclusive of
this franchise" is meant to exclude the legislative
franchise from the properties subject to taxes under
the first sentence. In effect, petitioner's franchise,
which is a personal property, is not subject to the
taxes imposed on properties under the first sentence
of Section 5.
However, petitioner's gross receipts from its franchise
are subject to the "franchise tax" under the second
sentence of Section 5. Thus, the second sentence
provides:
In addition thereto, the grantee shall pay to the
Bureau of Internal Revenue each year, within thirty
(30) days after the audit and approval of the accounts,
a franchise tax as may be prescribed by law of all
gross receipts of the telephone or other
telecommunications businesses transacted under this
franchise by the grantee; x x x (Emphasis supplied)
In short, petitioner's franchise is excluded from the
properties taxable under the first sentence of Section
5 but the gross receipts from its franchise are
expressly taxable under the second sentence of the
same Section.
The first sentence of Section 5 imposes on the
franchisee the "same taxes" that non-franchisees are
subject to with respect to real and personal
properties. The clear intent is to put the franchisees
and non-franchisees in parity in the taxation of their
real and personal properties. Since non-franchisees
have obviously no franchises, the franchise must be
excluded from the list of properties subject to tax to
maintain the parity between the franchisees and nonfranchisees. However, the franchisee is taxable
separately from its franchise. Thus, the second

sentence of Section 5 imposes the "franchise tax" on

gross receipts, which under Republic Act No. 7716
has been replaced by the 10% Valued Added Tax
effective 1 January 1996.[29]
Section 5 can be divided into three parts. First is the
first sentence which imposes taxes on real and
personal properties, excluding one property, that is,
the franchise. This puts in parity the franchisees and
non-franchisees in the taxation of real and personal
properties. Second is the second sentence which
imposes the franchise tax, which is applicable solely
to the franchisee. And third is the proviso in the
second sentence that imposes the income tax on the
franchisee, the same income tax payable by nonfranchisees.
Petitioner claims that the first sentence refers only to
real properties, and that the phrase "exclusive of this
franchise" exempts petitioner from realty tax on its
real properties used in its telecommunications
business. This claim has no basis in the language of
the law as written in the first sentence of Section 5.
First, the first sentence expressly refers to taxes on
"real estate" and on "personal property." Clearly, the
first sentence does not refer only to taxes on real
properties, but also to taxes on personal properties.
The trial court correctly observed that petitioner pays
taxes on its motor vehicles,[30] which are personal
properties, that are used in its telecommunications
business.[31] There is also the documentary stamp
tax on transactions involving real and personal
properties, which petitioner and other taxpayers are
liable for.[32]
A franchise granted by Congress to operate a private
radio station for the franchisee's communications in
deep-sea fishing shows that the first sentence of
Section 5 of RA 7678 does not refer to real properties
alone. Section 6 of Republic Act No. 3218 (RA 3218),
entitled An Act Granting Batas Riego De Dios A
Franchise To Construct, Maintain And Operate Private
Radio Stations For Radio Communications In Its
Deep-Sea Fishing Industry, provides:

SECTION 6. The grantee shall be liable (1) to pay the

same taxes on its real estate, building, fishing boats
and personal property, exclusive of this franchise as

other persons or corporations are now, or hereafter

may be required by law to pay, and shall further be
liable (2) to pay all other taxes that may be imposed
by the National Internal Revenue Code by reason of
this franchise. (Emphasis supplied)
The inclusion of "fishing boats," personal properties
that can never be attached to a land or building so as
to make them real properties, demonstrates that
Section 6 of RA 3218, like the first sentence of
Section 5 of RA 7678, not only applies to real
properties but also to personal properties.
Second, there is no language in the first sentence of
Section 5 expressly or even impliedly exempting
petitioner from the realty tax. The phrases "exemption
from real estate tax," "free from real estate tax" or "not
subject to real estate tax" do not appear in the first
sentence. No matter how one reads the first
sentence, there is no grant of exemption, express or
implied, from realty tax. In fact, the first sentence
expressly imposes taxes on both real and personal
properties, excluding only the intangible personal
property that is the franchise.
A tax exemption cannot arise from vague inference.
The first sentence of Section 5 does not grant any
express or even implied exemption from realty tax. On
the contrary, the first sentence categorically states
that the franchisee is subject to the "same taxes
currently imposed, and those taxes that may be
subsequently imposed, on other persons or
corporations," taxpayers that admittedly are all subject
to realty tax. The first sentence does not limit the
imposition of the "same taxes" to realty tax only but
even to "those taxes" that may in the future be
imposed on other taxpayers, which future taxes shall
also be imposed on petitioner. Thus, the first sentence
of Section 5 imposes on petitioner not only realty tax
but also other taxes.
The phrase "personal property exclusive of this
franchise" merely means that "personal property"
does not include the franchise even if the franchise is
an intangible personal property. Stated differently, the
first sentence of Section 5 provides that petitioner
shall pay tax on its real properties as well as on its
personal properties but the franchise, which is an
intangible personal property, shall not be deemed
personal property.

The historical usage of the phrase "exclusive of this

franchise" in franchise laws enacted by Congress
indubitably shows that the phrase is not a grant of tax
exemption, but an exclusion of one type of personal
property subject to taxes, and the excluded personal
property is the franchise. Thus, the franchises of
telecommunications companies in Republic Act Nos.
4137,[33] 5692,[34] 5739,[35] 5785,[36] 5790,[37]
5791,[38] 5795,[39] 5810,[40] 5847,[41] 5848,[42]
5856,[43] 5857,[44] 5913,[45] 5914,[46] 5929,[47]
5937,[48] 5958,[49] 5959,[50] 5974,[51] 5993,[52]
5994,[53] 6002,[54] 6006,[55] 6007,[56] 6013,[57]
6024,[58] 6097,[59] 6510,[60] 6536,[61] and 6530[62]
contain the following common tax provision:
The grantee shall be liable to pay the same taxes,
unless exempted therefrom, on its business, real
estate, buildings, and personal property, exclusive of
this franchise, as other persons or corporations are
now or hereafter may be required by law to pay.
(Emphasis supplied)
The phrase "unless exempted therefrom" in the
common provision clearly clarifies that the phrase
"exclusive of this franchise" does not grant any tax
exemption. To claim tax exemption, there must be an
express exemption from tax in another provision of
law. On the other hand, the deletion of the phrase
"unless exempted therefrom" from the common
provision does not give rise to any tax exemption.
Bayantel and Digitel Cases
In City Government of Quezon City v. Bayan
Telecommunications, Inc.,[63] this Court's Second
Division held that "all realties which are actually,
directly and exclusively used in the operation of its
franchise are 'exempted' from any property tax." The
Second Division added that Bayantel's franchise
being national in character, the "exemption" granted
applies to all its real and personal properties found
anywhere within the Philippines. The Second Division
reasoned in this wise:
The legislative intent expressed in the phrase
'exclusive of this franchise' cannot be construed other
than distinguishing between two (2) sets of properties,
be they real or personal, owned by the franchisee,
namely, (a) those actually, directly and exclusively
used in its radio or telecommunications business, and

(b) those properties which are not so used. It is

worthy to note that the properties subject of the
present controversy are only those which are
admittedly falling under the first category.
To the mind of the Court, Section 14 of Rep. Act No.
3259 effectively works to grant or delegate to local
governments of Congress' inherent power to tax the
franchisee's properties belonging to the second group
of properties indicated above, that is, all properties
which, "exclusive of this franchise," are not actually
and directly used in the pursuit of its franchise. As
may be recalled, the taxing power of local
governments under both the 1935 and the 1973
Constitutions solely depended upon an enabling law.
Absent such enabling law, local government units
were without authority to impose and collect taxes on
real properties within their respective territorial
jurisdictions. While Section 14 of Rep. Act No. 3259
may be validly viewed as an implied delegation of
power to tax, the delegation under that provision, as
couched, is limited to impositions over properties of
the franchisee which are not actually, directly and
exclusively used in the pursuit of its franchise.
Necessarily, other properties of Bayantel directly used
in the pursuit of its business are beyond the pale of
the delegated taxing power of local governments. In a
very real sense, therefore, real properties of Bayantel,
save those exclusive of its franchise, are subject to
realty taxes. Ultimately, therefore, the inevitable result
was that all realties which are actually, directly and
exclusively used in the operation of its franchise are
"exempted" from any property tax. (Emphasis
supplied)
In Digital Telecommunications Philippines, Inc.
(Digitel) v. Province of Pangasinan,[64] this Court's
Third Division ruled that Digitel's real properties
located within the territorial jurisdiction of Pangasinan
that are actually, directly and exclusively used in its
franchise are exempt from realty tax under the first
sentence of Section 5 of RA 7678. The Third Division
explained thus:
The more pertinent issue to consider is whether or
not, by passing Republic Act No. 7678, Congress
intended to exempt petitioner DIGITEL's real
properties actually, directly and exclusively used by
the grantee in its franchise.

The fact that Republic Act No. 7678 was a later piece
of legislation can be taken to mean that Congress,
knowing fully well that the Local Government Code
had already withdrawn exemptions from real property
taxes, chose to restore such immunity even to a
limited degree. Accordingly:
The Court views this subsequent piece of legislation
as an express and real intention on the part of
Congress to once again remove from the LGC's
delegated taxing power, all of the franchisee's x x x
properties that are actually, directly and exclusively
used in the pursuit of its franchise.
In view of the unequivocal intent of Congress to
exempt from real property tax those real properties
actually, directly and exclusively used by petitioner
DIGITEL in the pursuit of its franchise, respondent
Province of Pangasinan can only levy real property
tax on the remaining real properties of the grantee
located within its territorial jurisdiction not part of the
above-stated classification. Said exemption, however,
merely applies from the time of the effectivity of
petitioner DIGITEL's legislative franchise and not a
moment sooner.
Nowhere in the language of the first sentence of
Section 5 of RA 7678 does it expressly or even
impliedly provide that petitioner's real properties that
are actually, directly and exclusively used in its
telecommunications business are exempt from
payment of realty tax. On the contrary, the first
sentence of Section 5 specifically states that the
petitioner, as the franchisee, shall pay the "same
taxes on its real estate, buildings, and personal
property exclusive of this franchise as other persons
or corporations are now or hereafter may be required
by law to pay."
The heading of Section 5 is "Tax Provisions," not Tax
Exemptions. To reiterate, the phrase "exemption from
real estate tax" or other words conveying exemption
from realty tax do not appear in the first sentence of
Section 5. The phrase "exclusive of this franchise" in
the first sentence of Section 5 merely qualifies the
phrase "personal property" to exclude petitioner's
legislative franchise, which is an intangible personal
property. Petitioner's franchise is subject to tax in the
second sentence of Section 5 which imposes the
"franchise tax." Thus, there is no grant of tax

exemption in the first sentence of Section 5.

The interpretation of the phrase "exclusive of this
franchise" in the Bayantel and Digitel cases goes
against the basic principle in construing tax
exemptions. In PLDT v. City of Davao,[65] the Court
held that "tax exemptions should be granted only by
clear and unequivocal provision of law on the basis of
language too plain to be mistaken. They cannot be
extended by mere implication or inference."
Tax exemptions must be clear and unequivocal. A
taxpayer claiming a tax exemption must point to a
specific provision of law conferring on the taxpayer, in
clear and plain terms, exemption from a common
burden. Any doubt whether a tax exemption exists is
resolved against the taxpayer.[66]
RCPI case
In Radio Communications of the Philippines, Inc.
(RCPI) v. Provincial Assessor of South Cotabato,[67]
the Court's First Division held that RCPI's radio relay
station tower, radio station building, and machinery
shed are real properties and are subject to real
property tax. The Court added that:
RCPI cannot also invoke the equality of treatment
clause under Section 23 of Republic Act No. 7925.
The franchises of Smart, Islacom, TeleTech, Bell,
Major Telecoms, Island Country, and IslaTel,[68] all
expressly declare that the franchisee shall pay the
real estate tax, using words similar to Section 14 of
RA 2036, as amended. The provisions of these
subsequent telecommunication franchises imposing
the real estate tax on franchisees only confirm that
RCPI is subject to the real estate tax. Otherwise,
RCPI will stick out like a sore thumb, being the only
telecommunications company exempt from the real
estate tax, in mockery of the spirit of equality of
treatment that RCPI is invoking, not to mention the
violation of the constitutional rule on uniformity of
taxation.
It is an elementary rule in taxation that exemptions
are strictly construed against the taxpayer and
liberally in favor of the taxing authority. It is the
taxpayer's duty to justify the exemption by words too
plain to be mistaken and too categorical to be
misinterpreted. (Emphasis supplied)

be extended to the grantee.

In RCPI, the Court emphasized that
telecommunications companies which were granted
legislative franchise are liable to realty tax. The intent
to grant realty tax exemption cannot be discerned
from Republic Act No. 4054[69] and neither from the
legislative franchises of other telecommunications
companies. Tax exemptions granted to one or more,
but not to all, telecommunications companies similarly
situated will violate the constitutional rule on
uniformity of taxation.[70]
The intent of Congress is to make legislative
franchisees liable to tax
In PLDT v. City of Davao,[71] it was observed that
after the imposition of VAT on telecommunications
companies, Congress refused to grant any tax
exemption to telecommunications companies that
sought new franchises from Congress, except the
exemption from specific tax.[72] More importantly, the
uniform tax provision in these new franchises
expressly states that the franchisee shall pay not only
all taxes, except specific tax, under the National
Internal Revenue Code, but also all taxes under
"other applicable laws,"[73] one of which is the Local
Government Code which imposes the realty tax.[74]
In fact, Section 12 of Republic Act No. 9180 (RA
9180),[75] the legislative franchise of Digitel Mobile, a
100%-owned subsidiary of petitioner, states that the
franchisee, its successors or assigns shall be subject
to the payment of "all taxes, duties, fees or charges
and other impositions under the National Internal
Revenue Code of 1997, as amended, and other
applicable laws."[76] Section 12 of RA 9180 provides:

SECTION 12. Tax Provisions. - The grantee, its

successors or assigns, shall be subject to the
payment of all taxes, duties, fees or charges and
other impositions under the National Internal Revenue
Code of 1997, as amended, and other applicable
laws: Provided, That nothing herein shall be
construed as repealing any specific tax exemptions,
incentives, or privileges granted under any relevant
law: Provided, further, That all rights, privileges,
benefits and exemptions accorded to existing and
future telecommunications franchises shall likewise

SO ORDERED.
The grantee shall file the return with the city or
province where its facility is located and pay the
income tax due thereon to the Commissioner of
Internal Revenue or his duly authorized
representatives in accordance with the National
Internal Revenue Code and the return shall be subject
to audit by the Bureau of Internal Revenue.
(Emphasis supplied)

CITY OF MANILA versus

HON. PERFECTO A.S. LAGUIO

Thus, Digitel Mobile is subject to tax on its real estate

and personal properties, whether or not used in its
telecommunications business.

I know only that what is moral is what you feel good

after and what is immoral is what you feel bad after.

In Compagnie Financiere Sucres et Denrees v.

Commissioner of Internal Revenue,[77] the Court
ruled that "the governing principle is that tax
exemptions are to be construed in strictissimi juris
against the taxpayer and liberally in favor of the taxing
authority - he who claims an exemption must be able
to justify his claim by the clearest grant of statute." A
person claiming an exemption has the burden of
justifying the exemption by words too plain to be
mistaken and too categorical to be misinterpreted. Tax
exemptions are never presumed and the burden lies
with the taxpayer to clearly establish his right to
exemption.[78]

Tinga, J.:

Ernest Hermingway
Death in the Afternoon, Ch. 1

It is a moral and political axiom that any dishonorable

act, if performed by oneself, is less immoral than if
performed by someone else, who would be wellintentioned in his dishonesty.
J. Christopher Gerald
Bonaparte in Egypt, Ch. I

BLGF Opinions
On 25 October 2004, the BLGF issued Memorandum
Circular No. 15-2004.[79] This circular reversed the
BLGF's Letter-Opinion dated 8 April 1997 recognizing
realty tax exemption under the phrase "exclusive of
this franchise." This later circular states that the real
properties owned by Globe and Smart
Telecommunications and all other telecommunications
companies similarly situated are subject to the realty
tax. The BLGF has reversed its opinion on the realty
tax exemption of telecommunications companies.
Hence, petitioner's claim of tax exemption based on
BLGF's opinion does not hold water. Besides, the
BLGF has no authority to rule on claims for exemption
from the realty tax.[80]
Wherefore, we DENY the petition. We AFFIRM the 2
May 2002 and 19 November 2002 Orders of the
Regional Trial Court, Branch 8, Batangas City, in Civil
Case No. 5343.

The Court's commitment to the protection of morals is

secondary to its fealty to the fundamental law of the
land. It is foremost a guardian of the Constitution but
not the conscience of individuals. And if it need be,
the Court will not hesitate to "make the hammer fall,
and heavily" in the words of Justice Laurel, and
uphold the constitutional guarantees when faced with
laws that, though not lacking in zeal to promote
morality, nevertheless fail to pass the test of
constitutionality.

The pivotal issue in this Petition[1] under Rule 45

(then Rule 42) of the Revised Rules on Civil
Procedure seeking the reversal of the Decision[2] in
Civil Case No. 93-66511 of the Regional Trial Court
(RTC) of Manila, Branch 18 (lower court),[3] is the
validity of Ordinance No. 7783 (the Ordinance) of the
City of Manila.[4]

The antecedents are as follows:

Private respondent Malate Tourist Development

Corporation (MTDC) is a corporation engaged in the
business of operating hotels, motels, hostels and
lodging houses.[5] It built and opened Victoria Court
in Malate which was licensed as a motel although
duly accredited with the Department of Tourism as a
hotel.[6] On 28 June 1993, MTDC filed a Petition for
Declaratory Relief with Prayer for a Writ of Preliminary
Injunction and/or Temporary Restraining Order[7]
(RTC Petition) with the lower court impleading as
defendants, herein petitioners City of Manila, Hon.
Alfredo S. Lim (Lim), Hon. Joselito L. Atienza, and the
members of the City Council of Manila (City Council).
MTDC prayed that the Ordinance, insofar as it
includes motels and inns as among its prohibited
establishments, be declared invalid and
unconstitutional.[8]

Street in the South and Roxas Boulevard in the West,

pursuant to P.D. 499 be allowed or authorized to
contract and engage in, any business providing
certain forms of amusement, entertainment, services
and facilities where women are used as tools in
entertainment and which tend to disturb the
community, annoy the inhabitants, and adversely
affect the social and moral welfare of the community,
such as but not limited to:

The Ordinance is reproduced in full, hereunder:

SECTION 1. Any provision of existing laws and

ordinances to the contrary notwithstanding, no
person, partnership, corporation or entity shall, in the
Ermita-Malate area bounded by Teodoro M. Kalaw Sr.
Street in the North, Taft Avenue in the East, Vito Cruz

2. Souvenir Shops

1. Sauna Parlors

4. Art galleries

2. Massage Parlors

5. Records and music shops

3. Karaoke Bars

6. Restaurants

4. Beerhouses

7. Coffee shops

5. Night Clubs

8. Flower shops

6. Day Clubs

9. Music lounge and sing-along restaurants, with welldefined activities for wholesome family entertainment
that cater to both local and foreign clientele.

8. Discotheques
9. Cabarets
10. Dance Halls

AN ORDINANCE PROHIBITING THE

ESTABLISHMENT OR OPERATION OF
BUSINESSES PROVIDING CERTAIN FORMS OF
AMUSEMENT, ENTERTAINMENT, SERVICES AND
FACILITIES IN THE ERMITA-MALATE AREA,
PRESCRIBING PENALTIES FOR VIOLATION
THEREOF, AND FOR OTHER PURPOSES.[10]

1. Curio or antique shop

3. Handicrafts display centers

7. Super Clubs
Enacted by the City Council[9] on 9 March 1993 and
approved by petitioner City Mayor on 30 March 1993,
the said Ordinance is entitled-

Ermita-Malate area or convert said businesses to

other kinds of business allowable within the area,
such as but not limited to:

11. Motels
12. Inns

SEC. 2 The City Mayor, the City Treasurer or any

person acting in behalf of the said officials are
prohibited from issuing permits, temporary or
otherwise, or from granting licenses and accepting
payments for the operation of business enumerated in
the preceding section.

SEC. 3. Owners and/or operator of establishments

engaged in, or devoted to, the businesses
enumerated in Section 1 hereof are hereby given
three (3) months from the date of approval of this
ordinance within which to wind up business
operations or to transfer to any place outside of the

10. Theaters engaged in the exhibition, not only of

motion pictures but also of cultural shows, stage and
theatrical plays, art exhibitions, concerts and the like.
11. Businesses allowable within the law and medium
intensity districts as provided for in the zoning
ordinances for Metropolitan Manila, except new
warehouse or open-storage depot, dock or yard,
motor repair shop, gasoline service station, light
industry with any machinery, or funeral
establishments.

SEC. 4. Any person violating any provisions of this

ordinance, shall upon conviction, be punished by
imprisonment of one (1) year or fine of FIVE
THOUSAND (P5,000.00) PESOS, or both, at the
discretion of the Court, PROVIDED, that in case of
juridical person, the President, the General Manager,
or person-in-charge of operation shall be liable
thereof; PROVIDED FURTHER, that in case of
subsequent violation and conviction, the premises of
the erring establishment shall be closed and
padlocked permanently.

SEC. 5. This ordinance shall take effect upon

approval.

Enacted by the City Council of Manila at its regular

session today, March 9, 1993.

constitutes an invasion of plaintiff's property rights; (b)

the City Council has no power to find as a fact that a
particular thing is a nuisance per se nor does it have
the power to extrajudicially destroy it; and (6) The
Ordinance constitutes a denial of equal protection
under the law as no reasonable basis exists for
prohibiting the operation of motels and inns, but not
pension houses, hotels, lodging houses or other
similar establishments, and for prohibiting said
business in the Ermita-Malate area but not outside of
this area.[14]

suppression of the same; or, prohibit certain forms of

amusement or entertainment in order to protect the
social and moral welfare of the community.

In their Answer[15] dated 23 July 1993, petitioners

City of Manila and Lim maintained that the City
Council had the power to "prohibit certain forms of
entertainment in order to protect the social and moral
welfare of the community" as provided for in Section
458 (a) 4 (vii) of the Local Government Code,[16]
which reads, thus:

Petitioners likewise asserted that the Ordinance was

enacted by the City Council of Manila to protect the
social and moral welfare of the community in
conjunction with its police power as found in Article III,
Section 18(kk) of Republic Act No. 409,[19] otherwise
known as the Revised Charter of the City of Manila
(Revised Charter of Manila)[20] which reads, thus:

Section 458. Powers, Duties, Functions and

Compensation. (a) The sangguniang panlungsod, as
the legislative body of the city, shall enact ordinances,
approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant
to Section 16 of this Code and in the proper exercise
of the corporate powers of the city as provided for
under Section 22 of this Code, and shall:

ARTICLE III

Citing Kwong Sing v. City of Manila,[17] petitioners

insisted that the power of regulation spoken of in the
above-quoted provision included the power to control,
to govern and to restrain places of exhibition and
amusement.[18]

Approved by His Honor, the Mayor on March 30,

1993. (Emphasis supplied)

In the RTC Petition, MTDC argued that the Ordinance

erroneously and improperly included in its
enumeration of prohibited establishments, motels and
inns such as MTDC's Victoria Court considering that
these were not establishments for "amusement" or
"entertainment" and they were not "services or
facilities for entertainment," nor did they use women
as "tools for entertainment," and neither did they
"disturb the community," "annoy the inhabitants" or
"adversely affect the social and moral welfare of the
community."[11]

MTDC further advanced that the Ordinance was

invalid and unconstitutional for the following reasons:
(1) The City Council has no power to prohibit the
operation of motels as Section 458 (a) 4 (iv)[12] of the
Local Government Code of 1991 (the Code) grants to
the City Council only the power to regulate the
establishment, operation and maintenance of hotels,
motels, inns, pension houses, lodging houses and
other similar establishments; (2) The Ordinance is
void as it is violative of Presidential Decree (P.D.) No.
499[13] which specifically declared portions of the
Ermita-Malate area as a commercial zone with certain
restrictions; (3) The Ordinance does not constitute a
proper exercise of police power as the compulsory
closure of the motel business has no reasonable
relation to the legitimate municipal interests sought to
be protected; (4) The Ordinance constitutes an ex
post facto law by punishing the operation of Victoria
Court which was a legitimate business prior to its
enactment; (5) The Ordinance violates MTDC's
constitutional rights in that: (a) it is confiscatory and

....
(4) Regulate activities relative to the use of land,
buildings and structures within the city in order to
promote the general welfare and for said purpose
shall:
....
(vii) Regulate the establishment, operation, and
maintenance of any entertainment or amusement
facilities, including theatrical performances, circuses,
billiard pools, public dancing schools, public dance
halls, sauna baths, massage parlors, and other places
for entertainment or amusement; regulate such other
events or activities for amusement or entertainment,
particularly those which tend to disturb the community
or annoy the inhabitants, or require the suspension or

THE MUNICIPAL BOARD

...
Section 18. Legislative powers. - The Municipal Board
shall have the following legislative powers:
...
(kk) To enact all ordinances it may deem necessary
and proper for the sanitation and safety, the
furtherance of the prosperity, and the promotion of the
morality, peace, good order, comfort, convenience,
and general welfare of the city and its inhabitants, and
such others as may be necessary to carry into effect
and discharge the powers and duties conferred by
this chapter; and to fix penalties for the violation of
ordinances which shall not exceed two hundred pesos
fine or six months' imprisonment, or both such fine
and imprisonment, for a single offense.

Further, the petitioners noted, the Ordinance had the

presumption of validity; hence, private respondent

had the burden to prove its illegality or

unconstitutionality.[21]

Petitioners also maintained that there was no

inconsistency between P.D. 499 and the Ordinance as
the latter simply disauthorized certain forms of
businesses and allowed the Ermita-Malate area to
remain a commercial zone.[22] The Ordinance, the
petitioners likewise claimed, cannot be assailed as ex
post facto as it was prospective in operation.[23] The
Ordinance also did not infringe the equal protection
clause and cannot be denounced as class legislation
as there existed substantial and real differences
between the Ermita-Malate area and other places in
the City of Manila.[24]

On 28 June 1993, respondent Judge Perfecto A.S.

Laguio, Jr. (Judge Laguio) issued an ex-parte
temporary restraining order against the enforcement
of the Ordinance.[25] And on 16 July 1993, again in
an intrepid gesture, he granted the writ of preliminary
injunction prayed for by MTDC.[26]

After trial, on 25 November 1994, Judge Laguio

rendered the assailed Decision, enjoining the
petitioners from implementing the Ordinance. The
dispositive portion of said Decision reads:[27]

WHEREFORE, judgment is hereby rendered

declaring Ordinance No. 778[3], Series of 1993, of the
City of Manila null and void, and making permanent
the writ of preliminary injunction that had been issued
by this Court against the defendant. No costs.

On 11 January 1995, petitioners filed the present

Petition, alleging that the following errors were
committed by the lower court in its ruling: (1) It erred
in concluding that the subject ordinance is ultra vires,
or otherwise, unfair, unreasonable and oppressive
exercise of police power; (2) It erred in holding that
the questioned Ordinance contravenes P.D. 499[31]
which allows operators of all kinds of commercial
establishments, except those specified therein; and
(3) It erred in declaring the Ordinance void and
unconstitutional.[32]

In the Petition and in its Memorandum,[33] petitioners

in essence repeat the assertions they made before
the lower court. They contend that the assailed
Ordinance was enacted in the exercise of the inherent
and plenary power of the State and the general
welfare clause exercised by local government units
provided for in Art. 3, Sec. 18 (kk) of the Revised
Charter of Manila and conjunctively, Section 458 (a) 4
(vii) of the Code.[34] They allege that the Ordinance is
a valid exercise of police power; it does not
contravene P.D. 499; and that it enjoys the
presumption of validity.[35]

In its Memorandum[36] dated 27 May 1996, private

respondent maintains that the Ordinance is ultra vires
and that it is void for being repugnant to the general
law. It reiterates that the questioned Ordinance is not
a valid exercise of police power; that it is violative of
due process, confiscatory and amounts to an arbitrary
interference with its lawful business; that it is violative
of the equal protection clause; and that it confers on
petitioner City Mayor or any officer unregulated
discretion in the execution of the Ordinance absent
rules to guide and control his actions.

SO ORDERED.[28]

Petitioners filed with the lower court a Notice of

Appeal[29] on 12 December 1994, manifesting that
they are elevating the case to this Court under then
Rule 42 on pure questions of law.[30]

This is an opportune time to express the Court's deep

sentiment and tenderness for the Ermita-Malate area
being its home for several decades. A long-time
resident, the Court witnessed the area's many turn of
events. It relished its glory days and endured its days
of infamy. Much as the Court harks back to the

resplendent era of the Old Manila and yearns to

restore its lost grandeur, it believes that the Ordinance
is not the fitting means to that end. The Court is of the
opinion, and so holds, that the lower court did not err
in declaring the Ordinance, as it did, ultra vires and
therefore null and void.

The Ordinance is so replete with constitutional

infirmities that almost every sentence thereof violates
a constitutional provision. The prohibitions and
sanctions therein transgress the cardinal rights of
persons enshrined by the Constitution. The Court is
called upon to shelter these rights from attempts at
rendering them worthless.

The tests of a valid ordinance are well established. A

long line of decisions has held that for an ordinance to
be valid, it must not only be within the corporate
powers of the local government unit to enact and
must be passed according to the procedure
prescribed by law, it must also conform to the
following substantive requirements: (1) must not
contravene the Constitution or any statute; (2) must
not be unfair or oppressive; (3) must not be partial or
discriminatory; (4) must not prohibit but may regulate
trade; (5) must be general and consistent with public
policy; and (6) must not be unreasonable.[37]

Anent the first criterion, ordinances shall only be valid

when they are not contrary to the Constitution and to
the laws.[38] The Ordinance must satisfy two
requirements: it must pass muster under the test of
constitutionality and the test of consistency with the
prevailing laws. That ordinances should be
constitutional uphold the principle of the supremacy of
the Constitution. The requirement that the enactment
must not violate existing law gives stress to the
precept that local government units are able to
legislate only by virtue of their derivative legislative
power, a delegation of legislative power from the
national legislature. The delegate cannot be superior
to the principal or exercise powers higher than those
of the latter.[39]

This relationship between the national legislature and

the local government units has not been enfeebled by
the new provisions in the Constitution strengthening
the policy of local autonomy. The national legislature
is still the principal of the local government units,
which cannot defy its will or modify or violate it.[40]

The Ordinance was passed by the City Council in the

exercise of its police power, an enactment of the City
Council acting as agent of Congress. Local
government units, as agencies of the State, are
endowed with police power in order to effectively
accomplish and carry out the declared objects of their
creation.[41] This delegated police power is found in
Section 16 of the Code, known as the general welfare
clause, viz:

SECTION 16. General Welfare.-- Every local

government unit shall exercise the powers expressly
granted, those necessarily implied therefrom, as well
as powers necessary, appropriate, or incidental for its
efficient and effective governance, and those which
are essential to the promotion of the general welfare.
Within their respective territorial jurisdictions, local
government units shall ensure and support, among
other things, the preservation and enrichment of
culture, promote health and safety, enhance the right
of the people to a balanced ecology, encourage and
support the development of appropriate and selfreliant scientific and technological capabilities,
improve public morals, enhance economic prosperity
and social justice, promote full employment among
their residents, maintain peace and order, and
preserve the comfort and convenience of their
inhabitants.

Local government units exercise police power through

their respective legislative bodies; in this case, the
sangguniang panlungsod or the city council. The
Code empowers the legislative bodies to "enact
ordinances, approve resolutions and appropriate
funds for the general welfare of the
province/city/municipality and its inhabitants pursuant
to Section 16 of the Code and in the proper exercise
of the corporate powers of the province/city/

municipality provided under the Code.[42] The inquiry

in this Petition is concerned with the validity of the
exercise of such delegated power.

The constitutional safeguard of due process is

embodied in the fiat "(N)o person shall be deprived of
life, liberty or property without due process of
law. . . ."[48]

The Ordinance contravenes the Constitution

The police power of the City Council, however broad

and far-reaching, is subordinate to the constitutional
limitations thereon; and is subject to the limitation that
its exercise must be reasonable and for the public
good.[43] In the case at bar, the enactment of the
Ordinance was an invalid exercise of delegated power
as it is unconstitutional and repugnant to general
laws.
The relevant constitutional provisions are the
following:

SEC. 5. The maintenance of peace and order, the

protection of life, liberty, and property, and the
promotion of the general welfare are essential for the
enjoyment by all the people of the blessings of
democracy.[44]

SEC. 14. The State recognizes the role of women in

nation-building, and shall ensure the fundamental
equality before the law of women and men.[45]

SEC. 1. No person shall be deprived of life, liberty or

property without due process of law, nor shall any
person be denied the equal protection of laws.[46]

SEC. 9. Private property shall not be taken for public

use without just compensation.[47]
A. The Ordinance infringes the Due Process Clause

There is no controlling and precise definition of due

process. It furnishes though a standard to which
governmental action should conform in order that
deprivation of life, liberty or property, in each
appropriate case, be valid. This standard is aptly
described as a responsiveness to the supremacy of
reason, obedience to the dictates of justice,[49] and
as such it is a limitation upon the exercise of the
police power.[50]

The purpose of the guaranty is to prevent

governmental encroachment against the life, liberty
and property of individuals; to secure the individual
from the arbitrary exercise of the powers of the
government, unrestrained by the established
principles of private rights and distributive justice; to
protect property from confiscation by legislative
enactments, from seizure, forfeiture, and destruction
without a trial and conviction by the ordinary mode of
judicial procedure; and to secure to all persons equal
and impartial justice and the benefit of the general
law.[51]

The guaranty serves as a protection against arbitrary

regulation, and private corporations and partnerships
are "persons" within the scope of the guaranty insofar
as their property is concerned.[52]

This clause has been interpreted as imposing two

separate limits on government, usually called
"procedural due process" and "substantive due
process."

Procedural due process, as the phrase implies, refers

to the procedures that the government must follow
before it deprives a person of life, liberty, or property.
Classic procedural due process issues are concerned

with what kind of notice and what form of hearing the

government must provide when it takes a particular
action.[53]

Substantive due process, as that phrase connotes,

asks whether the government has an adequate
reason for taking away a person's life, liberty, or
property. In other words, substantive due process
looks to whether there is a sufficient justification for
the government's action.[54] Case law in the United
States (U.S.) tells us that whether there is such a
justification depends very much on the level of
scrutiny used.[55] For example, if a law is in an area
where only rational basis review is applied,
substantive due process is met so long as the law is
rationally related to a legitimate government purpose.
But if it is an area where strict scrutiny is used, such
as for protecting fundamental rights, then the
government will meet substantive due process only if
it can prove that the law is necessary to achieve a
compelling government purpose.[56]

The police power granted to local government units

must always be exercised with utmost observance of
the rights of the people to due process and equal
protection of the law. Such power cannot be exercised
whimsically, arbitrarily or despotically[57] as its
exercise is subject to a qualification, limitation or
restriction demanded by the respect and regard due
to the prescription of the fundamental law, particularly
those forming part of the Bill of Rights. Individual
rights, it bears emphasis, may be adversely affected
only to the extent that may fairly be required by the
legitimate demands of public interest or public
welfare.[58] Due process requires the intrinsic validity
of the law in interfering with the rights of the person to
his life, liberty and property.[59]

Requisites for the valid exercise of Police Power are

not met

To successfully invoke the exercise of police power as

the rationale for the enactment of the Ordinance, and

to free it from the imputation of constitutional infirmity,

not only must it appear that the interests of the public
generally, as distinguished from those of a particular
class, require an interference with private rights, but
the means adopted must be reasonably necessary for
the accomplishment of the purpose and not unduly
oppressive upon individuals.[60] It must be evident
that no other alternative for the accomplishment of the
purpose less intrusive of private rights can work. A
reasonable relation must exist between the purposes
of the police measure and the means employed for its
accomplishment, for even under the guise of
protecting the public interest, personal rights and
those pertaining to private property will not be
permitted to be arbitrarily invaded.[61]

Lacking a concurrence of these two requisites, the

police measure shall be struck down as an arbitrary
intrusion into private rights[62] a violation of the due
process clause.

The Ordinance was enacted to address and arrest the

social ills purportedly spawned by the establishments
in the Ermita-Malate area which are allegedly
operated under the deceptive veneer of legitimate,
licensed and tax-paying nightclubs, bars, karaoke
bars, girlie houses, cocktail lounges, hotels and
motels. Petitioners insist that even the Court in the
case of Ermita-Malate Hotel and Motel Operators
Association, Inc. v. City Mayor of Manila[63] had
already taken judicial notice of the "alarming increase
in the rate of prostitution, adultery and fornication in
Manila traceable in great part to existence of motels,
which provide a necessary atmosphere for
clandestine entry, presence and exit and thus become
the ideal haven for prostitutes and thrill-seekers."[64]

The object of the Ordinance was, accordingly, the

promotion and protection of the social and moral
values of the community. Granting for the sake of
argument that the objectives of the Ordinance are
within the scope of the City Council's police powers,
the means employed for the accomplishment thereof
were unreasonable and unduly oppressive.

It is undoubtedly one of the fundamental duties of the

City of Manila to make all reasonable regulations
looking to the promotion of the moral and social
values of the community. However, the worthy aim of
fostering public morals and the eradication of the
community's social ills can be achieved through
means less restrictive of private rights; it can be
attained by reasonable restrictions rather than by an
absolute prohibition. The closing down and transfer of
businesses or their conversion into businesses
"allowed" under the Ordinance have no reasonable
relation to the accomplishment of its purposes.
Otherwise stated, the prohibition of the enumerated
establishments will not per se protect and promote the
social and moral welfare of the community; it will not
in itself eradicate the alluded social ills of prostitution,
adultery, fornication nor will it arrest the spread of
sexual disease in Manila.

Conceding for the nonce that the Ermita-Malate area

teems with houses of ill-repute and establishments of
the like which the City Council may lawfully prohibit,
[65] it is baseless and insupportable to bring within
that classification sauna parlors, massage parlors,
karaoke bars, night clubs, day clubs, super clubs,
discotheques, cabarets, dance halls, motels and inns.
This is not warranted under the accepted definitions
of these terms. The enumerated establishments are
lawful pursuits which are not per se offensive to the
moral welfare of the community.

That these are used as arenas to consummate illicit

sexual affairs and as venues to further the illegal
prostitution is of no moment. We lay stress on the
acrid truth that sexual immorality, being a human
frailty, may take place in the most innocent of places
that it may even take place in the substitute
establishments enumerated under Section 3 of the
Ordinance. If the flawed logic of the Ordinance were
to be followed, in the remote instance that an immoral
sexual act transpires in a church cloister or a court
chamber, we would behold the spectacle of the City of
Manila ordering the closure of the church or court
concerned. Every house, building, park, curb, street
or even vehicles for that matter will not be exempt

from the prohibition. Simply because there are no

"pure" places where there are impure men. Indeed,
even the Scripture and the Tradition of Christians
churches continually recall the presence and
universality of sin in man's history.(Catechism of the
Catholic Church, Definitive Edition, p. 101; ECCE and
Word & Life Publications, Don Bosco Compound,
Makati)

The problem, it needs to be pointed out, is not the

establishment, which by its nature cannot be said to
be injurious to the health or comfort of the community
and which in itself is amoral, but the deplorable
human activity that may occur within its premises.
While a motel may be used as a venue for immoral
sexual activity, it cannot for that reason alone be
punished. It cannot be classified as a house of illrepute or as a nuisance per se on a mere likelihood or
a naked assumption. If that were so and if that were
allowed, then the Ermita-Malate area would not only
be purged of its supposed social ills, it would be
extinguished of its soul as well as every human
activity, reprehensible or not, in its every nook and
cranny would be laid bare to the estimation of the
authorities.

The Ordinance seeks to legislate morality but fails to

address the core issues of morality. Try as the
Ordinance may to shape morality, it should not foster
the illusion that it can make a moral man out of it
because immorality is not a thing, a building or
establishment; it is in the hearts of men. The City
Council instead should regulate human conduct that
occurs inside the establishments, but not to the
detriment of liberty and privacy which are covenants,
premiums and blessings of democracy.

While petitioners' earnestness at curbing clearly

objectionable social ills is commendable, they
unwittingly punish even the proprietors and operators
of "wholesome," "innocent" establishments. In the
instant case, there is a clear invasion of personal or
property rights, personal in the case of those
individuals desirous of owning, operating and
patronizing those motels and property in terms of the

investments made and the salaries to be paid to those

therein employed. If the City of Manila so desires to
put an end to prostitution, fornication and other social
ills, it can instead impose reasonable regulations such
as daily inspections of the establishments for any
violation of the conditions of their licenses or permits;
it may exercise its authority to suspend or revoke their
licenses for these violations;[66] and it may even
impose increased license fees. In other words, there
are other means to reasonably accomplish the
desired end.

necessary for the common welfare."[67] In

accordance with this case, the rights of the citizen to
be free to use his faculties in all lawful ways; to live
and work where he will; to earn his livelihood by any
lawful calling; and to pursue any avocation are all
deemed embraced in the concept of liberty.[68]

The U.S. Supreme Court in the case of Roth v. Board

of Regents,[69] sought to clarify the meaning of
"liberty." It said:

Means employed are constitutionally infirm

The Ordinance disallows the operation of sauna

parlors, massage parlors, karaoke bars, beerhouses,
night clubs, day clubs, super clubs, discotheques,
cabarets, dance halls, motels and inns in the ErmitaMalate area. In Section 3 thereof, owners and/or
operators of the enumerated establishments are given
three (3) months from the date of approval of the
Ordinance within which "to wind up business
operations or to transfer to any place outside the
Ermita-Malate area or convert said businesses to
other kinds of business allowable within the area."
Further, it states in Section 4 that in cases of
subsequent violations of the provisions of the
Ordinance, the "premises of the erring establishment
shall be closed and padlocked permanently."

It is readily apparent that the means employed by the

Ordinance for the achievement of its purposes, the
governmental interference itself, infringes on the
constitutional guarantees of a person's fundamental
right to liberty and property.

Liberty as guaranteed by the Constitution was defined

by Justice Malcolm to include "the right to exist and
the right to be free from arbitrary restraint or
servitude. The term cannot be dwarfed into mere
freedom from physical restraint of the person of the
citizen, but is deemed to embrace the right of man to
enjoy the facilities with which he has been endowed
by his Creator, subject only to such restraint as are

While the Court has not attempted to define with

exactness the liberty. . . guaranteed [by the Fifth and
Fourteenth Amendments], the term denotes not
merely freedom from bodily restraint but also the right
of the individual to contract, to engage in any of the
common occupations of life, to acquire useful
knowledge, to marry, establish a home and bring up
children, to worship God according to the dictates of
his own conscience, and generally to enjoy those
privileges long recognized...as essential to the orderly
pursuit of happiness by free men. In a Constitution for
a free people, there can be no doubt that the meaning
of "liberty" must be broad indeed.

In another case, it also confirmed that liberty

protected by the due process clause includes
personal decisions relating to marriage, procreation,
contraception, family relationships, child rearing, and
education. In explaining the respect the Constitution
demands for the autonomy of the person in making
these choices, the U.S. Supreme Court explained:

These matters, involving the most intimate and

personal choices a person may make in a lifetime,
choices central to personal dignity and autonomy, are
central to the liberty protected by the Fourteenth
Amendment. At the heart of liberty is the right to
define one's own concept of existence, of meaning, of
universe, and of the mystery of human life. Beliefs
about these matters could not define the attributes of
personhood where they formed under compulsion of
the State.[70]

Persons desirous to own, operate and patronize the

enumerated establishments under Section 1 of the
Ordinance may seek autonomy for these purposes.

Motel patrons who are single and unmarried may

invoke this right to autonomy to consummate their
bonds in intimate sexual conduct within the motel's
premises-- be it stressed that their consensual sexual
behavior does not contravene any fundamental state
policy as contained in the Constitution.[71] Adults
have a right to choose to forge such relationships with
others in the confines of their own private lives and
still retain their dignity as free persons. The liberty
protected by the Constitution allows persons the right
to make this choice.[72] Their right to liberty under the
due process clause gives them the full right to engage
in their conduct without intervention of the
government, as long as they do not run afoul of the
law. Liberty should be the rule and restraint the
exception.

Liberty in the constitutional sense not only means

freedom from unlawful government restraint; it must
include privacy as well, if it is to be a repository of
freedom. The right to be let alone is the beginning of
all freedomit is the most comprehensive of rights
and the right most valued by civilized men.[73]

The concept of liberty compels respect for the

individual whose claim to privacy and interference
demands respect. As the case of Morfe v. Mutuc,[74]
borrowing the words of Laski, so very aptly stated:

Man is one among many, obstinately refusing

reduction to unity. His separateness, his isolation, are
indefeasible; indeed, they are so fundamental that
they are the basis on which his civic obligations are
built. He cannot abandon the consequences of his
isolation, which are, broadly speaking, that his
experience is private, and the will built out of that

experience personal to himself. If he surrenders his

will to others, he surrenders himself. If his will is set
by the will of others, he ceases to be a master of
himself. I cannot believe that a man no longer a
master of himself is in any real sense free.

Indeed, the right to privacy as a constitutional right

was recognized in Morfe, the invasion of which should
be justified by a compelling state interest. Morfe
accorded recognition to the right to privacy
independently of its identification with liberty; in itself it
is fully deserving of constitutional protection.
Governmental powers should stop short of certain
intrusions into the personal life of the citizen.[75]

There is a great temptation to have an extended

discussion on these civil liberties but the Court
chooses to exercise restraint and restrict itself to the
issues presented when it should. The previous
pronouncements of the Court are not to be interpreted
as a license for adults to engage in criminal conduct.
The reprehensibility of such conduct is not
diminished. The Court only reaffirms and guarantees
their right to make this choice. Should they be
prosecuted for their illegal conduct, they should suffer
the consequences of the choice they have made.
That, ultimately, is their choice.
Modality employed is unlawful taking

In addition, the Ordinance is unreasonable and

oppressive as it substantially divests the respondent
of the beneficial use of its property.[76] The Ordinance
in Section 1 thereof forbids the running of the
enumerated businesses in the Ermita-Malate area
and in Section 3 instructs its owners/operators to wind
up business operations or to transfer outside the area
or convert said businesses into allowed businesses.
An ordinance which permanently restricts the use of
property that it can not be used for any reasonable
purpose goes beyond regulation and must be
recognized as a taking of the property without just
compensation.[77] It is intrusive and violative of the
private property rights of individuals.

The Constitution expressly provides in Article III,

Section 9, that "private property shall not be taken for
public use without just compensation." The provision
is the most important protection of property rights in
the Constitution. This is a restriction on the general
power of the government to take property. The
constitutional provision is about ensuring that the
government does not confiscate the property of some
to give it to others. In part too, it is about loss
spreading. If the government takes away a person's
property to benefit society, then society should pay.
The principal purpose of the guarantee is "to bar the
Government from forcing some people alone to bear
public burdens which, in all fairness and justice,
should be borne by the public as a whole.[78]

There are two different types of taking that can be

identified. A "possessory" taking occurs when the
government confiscates or physically occupies
property. A "regulatory" taking occurs when the
government's regulation leaves no reasonable
economically viable use of the property.[79]

In the landmark case of Pennsylvania Coal v. Mahon,

[80] it was held that a taking also could be found if
government regulation of the use of property went
"too far." When regulation reaches a certain
magnitude, in most if not in all cases there must be an
exercise of eminent domain and compensation to
support the act. While property may be regulated to a
certain extent, if regulation goes too far it will be
recognized as a taking.[81]

No formula or rule can be devised to answer the

questions of what is too far and when regulation
becomes a taking. In Mahon, Justice Holmes
recognized that it was "a question of degree and
therefore cannot be disposed of by general
propositions." On many other occasions as well, the
U.S. Supreme Court has said that the issue of when
regulation constitutes a taking is a matter of
considering the facts in each case. The Court asks
whether justice and fairness require that the economic

loss caused by public action must be compensated by

the government and thus borne by the public as a
whole, or whether the loss should remain
concentrated on those few persons subject to the
public action.[82]

What is crucial in judicial consideration of regulatory

takings is that government regulation is a taking if it
leaves no reasonable economically viable use of
property in a manner that interferes with reasonable
expectations for use.[83] A regulation that
permanently denies all economically beneficial or
productive use of land is, from the owner's point of
view, equivalent to a "taking" unless principles
of nuisance or property law that existed when the
owner acquired the land make the use prohibitable.
[84] When the owner of real property has been called
upon to sacrifice all economically beneficial uses in
the name of the common good, that is, to leave his
property economically idle, he has suffered a taking.
[85]

A regulation which denies all economically beneficial

or productive use of land will require compensation
under the takings clause. Where a regulation places
limitations on land that fall short of eliminating all
economically beneficial use, a taking nonetheless
may have occurred, depending on a complex of
factors including the regulation's economic effect on
the landowner, the extent to which the regulation
interferes with reasonable investment-backed
expectations and the character of government action.
These inquiries are informed by the purpose of the
takings clause which is to prevent the government
from forcing some people alone to bear public
burdens which, in all fairness and justice, should be
borne by the public as a whole.[86]

A restriction on use of property may also constitute a

"taking" if not reasonably necessary to the
effectuation of a substantial public purpose or if it has
an unduly harsh impact on the distinct investmentbacked expectations of the owner.[87]

The Ordinance gives the owners and operators of the

"prohibited" establishments three (3) months from its
approval within which to "wind up business operations
or to transfer to any place outside of the ErmitaMalate area or convert said businesses to other kinds
of business allowable within the area." The directive
to "wind up business operations" amounts to a
closure of the establishment, a permanent deprivation
of property, and is practically confiscatory. Unless the
owner converts his establishment to accommodate an
"allowed" business, the structure which housed the
previous business will be left empty and gathering
dust. Suppose he transfers it to another area, he will
likewise leave the entire establishment idle.
Consideration must be given to the substantial
amount of money invested to build the edifices which
the owner reasonably expects to be returned within a
period of time. It is apparent that the Ordinance
leaves no reasonable economically viable use of
property in a manner that interferes with reasonable
expectations for use.

The second and third options-- to transfer to any

place outside of the Ermita-Malate area or to convert
into allowed businesses-- are confiscatory as well.
The penalty of permanent closure in cases of
subsequent violations found in Section 4 of the
Ordinance is also equivalent to a "taking" of private
property.

The second option instructs the owners to abandon

their property and build another one outside the
Ermita-Malate area. In every sense, it qualifies as a
taking without just compensation with an additional
burden imposed on the owner to build another
establishment solely from his coffers. The proffered
solution does not put an end to the "problem," it
merely relocates it. Not only is this impractical, it is
unreasonable, onerous and oppressive. The
conversion into allowed enterprises is just as
ridiculous. How may the respondent convert a motel
into a restaurant or a coffee shop, art gallery or music
lounge without essentially destroying its property?
This is a taking of private property without due
process of law, nay, even without compensation.

The penalty of closure likewise constitutes unlawful

taking that should be compensated by the
government. The burden on the owner to convert or
transfer his business, otherwise it will be closed
permanently after a subsequent violation should be
borne by the public as this end benefits them as a
whole.

Petitioners cannot take refuge in classifying the

measure as a zoning ordinance. A zoning ordinance,
although a valid exercise of police power, which limits
a "wholesome" property to a use which can not
reasonably be made of it constitutes the taking of
such property without just compensation. Private
property which is not noxious nor intended for noxious
purposes may not, by zoning, be destroyed without
compensation. Such principle finds no support in the
principles of justice as we know them. The police
powers of local government units which have always
received broad and liberal interpretation cannot be
stretched to cover this particular taking.

Distinction should be made between destruction from

necessity and eminent domain. It needs restating that
the property taken in the exercise of police power is
destroyed because it is noxious or intended for a
noxious purpose while the property taken under the
power of eminent domain is intended for a public use
or purpose and is therefore "wholesome."[88] If it be
of public benefit that a "wholesome" property remain
unused or relegated to a particular purpose, then
certainly the public should bear the cost of reasonable
compensation for the condemnation of private
property for public use.[89]

Further, the Ordinance fails to set up any standard to

guide or limit the petitioners' actions. It in no way
controls or guides the discretion vested in them. It
provides no definition of the establishments covered
by it and it fails to set forth the conditions when the
establishments come within its ambit of prohibition.
The Ordinance confers upon the mayor arbitrary and
unrestricted power to close down establishments.
Ordinances such as this, which make possible abuses
in its execution, depending upon no conditions or

qualifications whatsoever other than the unregulated

arbitrary will of the city authorities as the touchstone
by which its validity is to be tested, are unreasonable
and invalid. The Ordinance should have established a
rule by which its impartial enforcement could be
secured.[90]

Ordinances placing restrictions upon the lawful use of

property must, in order to be valid and constitutional,
specify the rules and conditions to be observed and
conduct to avoid; and must not admit of the exercise,
or of an opportunity for the exercise, of unbridled
discretion by the law enforcers in carrying out its
provisions.[91]

Thus, in Coates v. City of Cincinnati,[92] as cited in

People v. Nazario,[93] the U.S. Supreme Court struck
down an ordinance that had made it illegal for "three
or more persons to assemble on any sidewalk and
there conduct themselves in a manner annoying to
persons passing by." The ordinance was nullified as it
imposed no standard at all "because one may never
know in advance what 'annoys some people but does
not annoy others.' "

Similarly, the Ordinance does not specify the

standards to ascertain which establishments "tend to
disturb the community," "annoy the inhabitants," and
"adversely affect the social and moral welfare of the
community." The cited case supports the nullification
of the Ordinance for lack of comprehensible
standards to guide the law enforcers in carrying out its
provisions.

Petitioners cannot therefore order the closure of the

enumerated establishments without infringing the due
process clause. These lawful establishments may be
regulated, but not prevented from carrying on their
business. This is a sweeping exercise of police power
that is a result of a lack of imagination on the part of
the City Council and which amounts to an interference
into personal and private rights which the Court will
not countenance. In this regard, we take a resolute

stand to uphold the constitutional guarantee of the

right to liberty and property.

Worthy of note is an example derived from the U.S. of

a reasonable regulation which is a far cry from the illconsidered Ordinance enacted by the City Council.

In FW/PBS, INC. v. Dallas,[94] the city of Dallas

adopted a comprehensive ordinance regulating
"sexually oriented businesses," which are defined to
include adult arcades, bookstores, video stores,
cabarets, motels, and theaters as well as escort
agencies, nude model studio and sexual encounter
centers. Among other things, the ordinance required
that such businesses be licensed. A group of motel
owners were among the three groups of businesses
that filed separate suits challenging the ordinance.
The motel owners asserted that the city violated the
due process clause by failing to produce adequate
support for its supposition that renting room for fewer
than ten (10) hours resulted in increased crime and
other secondary effects. They likewise argued than
the ten (10)-hour limitation on the rental of motel
rooms placed an unconstitutional burden on the right
to freedom of association. Anent the first contention,
the U.S. Supreme Court held that the reasonableness
of the legislative judgment combined with a study
which the city considered, was adequate to support
the city's determination that motels permitting room
rentals for fewer than ten (10 ) hours should be
included within the licensing scheme. As regards the
second point, the Court held that limiting motel room
rentals to ten (10) hours will have no discernible effect
on personal bonds as those bonds that are formed
from the use of a motel room for fewer than ten (10)
hours are not those that have played a critical role in
the culture and traditions of the nation by cultivating
and transmitting shared ideals and beliefs.

The ordinance challenged in the above-cited case

merely regulated the targeted businesses. It imposed
reasonable restrictions; hence, its validity was upheld.

The case of Ermita Malate Hotel and Motel Operators

Association, Inc. v. City Mayor of Manila,[95] it needs
pointing out, is also different from this case in that
what was involved therein was a measure which
regulated the mode in which motels may conduct
business in order to put an end to practices which
could encourage vice and immorality. Necessarily,
there was no valid objection on due process or equal
protection grounds as the ordinance did not prohibit
motels. The Ordinance in this case however is not a
regulatory measure but is an exercise of an assumed
power to prohibit.[96]

The foregoing premises show that the Ordinance is

an unwarranted and unlawful curtailment of property
and personal rights of citizens. For being
unreasonable and an undue restraint of trade, it
cannot, even under the guise of exercising police
power, be upheld as valid.

B. The Ordinance violates Equal Protection Clause

Equal protection requires that all persons or things

similarly situated should be treated alike, both as to
rights conferred and responsibilities imposed. Similar
subjects, in other words, should not be treated
differently, so as to give undue favor to some and
unjustly discriminate against others.[97] The
guarantee means that no person or class of persons
shall be denied the same protection of laws which is
enjoyed by other persons or other classes in like
circumstances.[98] The "equal protection of the laws
is a pledge of the protection of equal laws."[99] It
limits governmental discrimination. The equal
protection clause extends to artificial persons but only
insofar as their property is concerned.[100]

The Court has explained the scope of the equal

protection clause in this wise:

... What does it signify? To quote from J.M. Tuason &

Co. v. Land Tenure Administration: "The ideal situation

is for the law's benefits to be available to all, that none

be placed outside the sphere of its coverage. Only
thus could chance and favor be excluded and the
affairs of men governed by that serene and impartial
uniformity, which is of the very essence of the idea of
law." There is recognition, however, in the opinion that
what in fact exists "cannot approximate the ideal. Nor
is the law susceptible to the reproach that it does not
take into account the realities of the situation. The
constitutional guarantee then is not to be given a
meaning that disregards what is, what does in fact
exist. To assure that the general welfare be promoted,
which is the end of law, a regulatory measure may cut
into the rights to liberty and property. Those adversely
affected may under such circumstances invoke the
equal protection clause only if they can show that the
governmental act assailed, far from being inspired by
the attainment of the common weal was prompted by
the spirit of hostility, or at the very least, discrimination
that finds no support in reason." Classification is thus
not ruled out, it being sufficient to quote from the
Tuason decision anew "that the laws operate equally
and uniformly on all persons under similar
circumstances or that all persons must be treated in
the same manner, the conditions not being different,
both in the privileges conferred and the liabilities
imposed. Favoritism and undue preference cannot be
allowed. For the principle is that equal protection and
security shall be given to every person under
circumstances which, if not identical, are analogous. If
law be looked upon in terms of burden or charges,
those that fall within a class should be treated in the
same fashion, whatever restrictions cast on some in
the group equally binding on the rest.[101]

2) It must be germane to the purposes of the law.

Legislative bodies are allowed to classify the subjects

of legislation. If the classification is reasonable, the
law may operate only on some and not all of the
people without violating the equal protection clause.
[102] The classification must, as an indispensable
requisite, not be arbitrary. To be valid, it must conform
to the following requirements:

The standard "where women are used as tools for

entertainment" is also discriminatory as prostitution,
one of the hinted ills the Ordinance aims to banish, is
not a profession exclusive to women. Both men and
women have an equal propensity to engage in
prostitution. It is not any less grave a sin when men
engage in it. And why would the assumption that there
is an ongoing immoral activity apply only when
women are employed and be inapposite when men
are in harness? This discrimination based on gender
violates equal protection as it is not substantially
related to important government objectives.[104]
Thus, the discrimination is invalid.

3) It must not be limited to existing conditions only.

Failing the test of constitutionality, the Ordinance

likewise failed to pass the test of consistency with
prevailing laws.

4) It must apply equally to all members of the class.

[103]

C. The Ordinance is repugnant to general laws; it is

ultra vires

In the Court's view, there are no substantial

distinctions between motels, inns, pension houses,
hotels, lodging houses or other similar
establishments. By definition, all are commercial
establishments providing lodging and usually meals
and other services for the public. No reason exists for
prohibiting motels and inns but not pension houses,
hotels, lodging houses or other similar
establishments. The classification in the instant case
is invalid as similar subjects are not similarly treated,
both as to rights conferred and obligations imposed. It
is arbitrary as it does not rest on substantial
distinctions bearing a just and fair relation to the
purpose of the Ordinance.

The Ordinance is in contravention of the Code as the

latter merely empowers local government units to
regulate, and not prohibit, the establishments
enumerated in Section 1 thereof.

The Court likewise cannot see the logic for prohibiting

the business and operation of motels in the ErmitaMalate area but not outside of this area. A noxious
establishment does not become any less noxious if
located outside the area.

The power of the City Council to regulate by

ordinances the establishment, operation, and
maintenance of motels, hotels and other similar
establishments is found in Section 458 (a) 4 (iv),
which provides that:

Section 458. Powers, Duties, Functions and

Compensation. (a) The sangguniang panlungsod, as
the legislative body of the city, shall enact ordinances,
approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant
to Section 16 of this Code and in the proper exercise
of the corporate powers of the city as provided for
under Section 22 of this Code, and shall:
...

1) It must be based on substantial distinctions.

(4) Regulate activities relative to the use of land,

buildings and structures within the city in order to
promote the general welfare and for said purpose
shall:
...
(iv) Regulate the establishment, operation and
maintenance of cafes, restaurants, beerhouses,
hotels, motels, inns, pension houses, lodging houses,
and other similar establishments, including tourist
guides and transports . .

..

While its power to regulate the establishment,

operation and maintenance of any entertainment or
amusement facilities, and to prohibit certain forms of
amusement or entertainment is provided under
Section 458 (a) 4 (vii) of the Code, which reads as
follows:

Section 458. Powers, Duties, Functions and

Compensation. (a) The sangguniang panlungsod, as
the legislative body of the city, shall enact ordinances,
approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant
to Section 16 of this Code and in the proper exercise
of the corporate powers of the city as provided for
under Section 22 of this Code, and shall:
...
(4) Regulate activities relative to the use of land,
buildings and structures within the city in order to
promote the general welfare and for said purpose
shall:
...
(vii) Regulate the establishment, operation, and
maintenance of any entertainment or amusement
facilities, including theatrical performances, circuses,
billiard pools, public dancing schools, public dance
halls, sauna baths, massage parlors, and other places
for entertainment or amusement; regulate such other
events or activities for amusement or entertainment,
particularly those which tend to disturb the community
or annoy the inhabitants, or require the suspension or
suppression of the same; or, prohibit certain forms of
amusement or entertainment in order to protect the
social and moral welfare of the community.

Clearly, with respect to cafes, restaurants,

beerhouses, hotels, motels, inns, pension houses,
lodging houses, and other similar establishments, the
only power of the City Council to legislate relative
thereto is to regulate them to promote the general
welfare. The Code still withholds from cities the power

to suppress and prohibit altogether the establishment,

operation and maintenance of such establishments. It
is well to recall the rulings of the Court in Kwong Sing
v. City of Manila[105] that:

The word "regulate," as used in subsection (l), section

2444 of the Administrative Code, means and includes
the power to control, to govern, and to restrain; but
"regulate" should not be construed as synonymous
with "suppress" or "prohibit." Consequently, under the
power to regulate laundries, the municipal authorities
could make proper police regulations as to the mode
in which the employment or business shall be
exercised.[106]

And in People v. Esguerra,[107] wherein the Court

nullified an ordinance of the Municipality of Tacloban
which prohibited the selling, giving and dispensing of
liquor ratiocinating that the municipality is empowered
only to regulate the same and not prohibit. The Court
therein declared that:

(A)s a general rule when a municipal corporation is

specifically given authority or power to regulate or to
license and regulate the liquor traffic, power to
prohibit is impliedly withheld.[108]

These doctrines still hold contrary to petitioners'

assertion[109] that they were modified by the Code
vesting upon City Councils prohibitory powers

Similarly, the City Council exercises regulatory powers

over public dancing schools, public dance halls,
sauna baths, massage parlors, and other places for
entertainment or amusement as found in the first
clause of Section 458 (a) 4 (vii). Its powers to
regulate, suppress and suspend "such other events or
activities for amusement or entertainment, particularly
those which tend to disturb the community or annoy
the inhabitants" and to "prohibit certain forms of
amusement or entertainment in order to protect the
social and moral welfare of the community" are stated

in the second and third clauses, respectively of the

same Section. The several powers of the City Council
as provided in Section 458 (a) 4 (vii) of the Code, it is
pertinent to emphasize, are separated by semi-colons
(;), the use of which indicates that the clauses in
which these powers are set forth are independent of
each other albeit closely related to justify being put
together in a single enumeration or paragraph.[110]
These powers, therefore, should not be confused,
commingled or consolidated as to create a
conglomerated and unified power of regulation,
suppression and prohibition.[111]

The Congress unequivocably specified the

establishments and forms of amusement or
entertainment subject to regulation among which are
beerhouses, hotels, motels, inns, pension houses,
lodging houses, and other similar establishments
(Section 458 (a) 4 (iv)), public dancing schools, public
dance halls, sauna baths, massage parlors, and other
places for entertainment or amusement (Section 458
(a) 4 (vii)). This enumeration therefore cannot be
included as among "other events or activities for
amusement or entertainment, particularly those which
tend to disturb the community or annoy the
inhabitants" or "certain forms of amusement or
entertainment" which the City Council may suspend,
suppress or prohibit.

The rule is that the City Council has only such powers
as are expressly granted to it and those which are
necessarily implied or incidental to the exercise
thereof. By reason of its limited powers and the nature
thereof, said powers are to be construed strictissimi
juris and any doubt or ambiguity arising out of the
terms used in granting said powers must be
construed against the City Council.[112] Moreover, it
is a general rule in statutory construction that the
express mention of one person, thing, or
consequence is tantamount to an express exclusion
of all others. Expressio unius est exclusio alterium.
This maxim is based upon the rules of logic and the
natural workings of human mind. It is particularly
applicable in the construction of such statutes as
create new rights or remedies, impose penalties or
punishments, or otherwise come under the rule of
strict construction.[113]

The argument that the City Council is empowered to

enact the Ordinance by virtue of the general welfare
clause of the Code and of Art. 3, Sec. 18 (kk) of the
Revised Charter of Manila is likewise without merit.
On the first point, the ruling of the Court in People v.
Esguerra,[114] is instructive. It held that:

divided into two general classes: those which occur

where an act is so inconsistent or irreconcilable with
an existing prior act that only one of the two can
remain in force and those which occur when an act
covers the whole subject of an earlier act and is
intended to be a substitute therefor. The validity of
such a repeal is sustained on the ground that the
latest expression of the legislative will should prevail.
[117]

The powers conferred upon a municipal council in the

general welfare clause, or section 2238 of the
Revised Administrative Code, refers to matters not
covered by the other provisions of the same Code,
and therefore it can not be applied to intoxicating
liquors, for the power to regulate the selling, giving
away and dispensing thereof is granted specifically by
section 2242 (g) to municipal councils. To hold that,
under the general power granted by section 2238, a
municipal council may enact the ordinance in
question, notwithstanding the provision of section
2242 (g), would be to make the latter superfluous and
nugatory, because the power to prohibit, includes the
power to regulate, the selling, giving away and
dispensing of intoxicating liquors.

In addition, Section 534(f) of the Code 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." Thus,
submitting to petitioners' interpretation that the
Revised Charter of Manila empowers the City Council
to prohibit motels, that portion of the Charter stating
such must be considered repealed by the Code as it
is at variance with the latter's provisions granting the
City Council mere regulatory powers.

On the second point, it suffices to say that the Code

being a later expression of the legislative will must
necessarily prevail and override the earlier law, the
Revised Charter of Manila. Legis posteriores priores
contrarias abrogant, or later statute repeals prior ones
which are repugnant thereto. As between two laws on
the same subject matter, which are irreconcilably
inconsistent, that which is passed later prevails, since
it is the latest expression of legislative will.[115] If
there is an inconsistency or repugnance between two
statutes, both relating to the same subject matter,
which cannot be removed by any fair and reasonable
method of interpretation, it is the latest expression of
the legislative will which must prevail and override the
earlier.[116]

Implied repeals are those which take place when a

subsequently enacted law contains provisions
contrary to those of an existing law but no provisions
expressly repealing them. Such repeals have been

It is well to point out that petitioners also cannot seek

cover under the general welfare clause authorizing
the abatement of nuisances without judicial
proceedings. That tenet applies to a nuisance per se,
or one which affects the immediate safety of persons
and property and may be summarily abated under the
undefined law of necessity. It can not be said that
motels are injurious to the rights of property, health or
comfort of the community. It is a legitimate business.
If it be a nuisance per accidens it may be so proven in
a hearing conducted for that purpose. A motel is not
per se a nuisance warranting its summary abatement
without judicial intervention.[118]

Notably, the City Council was conferred powers to

prevent and prohibit certain activities and
establishments in another section of the Code which
is reproduced as follows:

Section 458. Powers, Duties, Functions and

Compensation. (a) The sangguniang panlungsod, as
the legislative body of the city, shall enact ordinances,
approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant
to Section 16 of this Code and in the proper exercise
of the corporate powers of the city as provided for
under Section 22 of this Code, and shall:

(1) Approve ordinances and pass resolutions

necessary for an efficient and effective city
government, and in this connection, shall:
...
(v) Enact ordinances intended to prevent, suppress
and impose appropriate penalties for habitual
drunkenness in public places, vagrancy, mendicancy,
prostitution, establishment and maintenance of
houses of ill repute, gambling and other prohibited
games of chance, fraudulent devices and ways to
obtain money or property, drug addiction,
maintenance of drug dens, drug pushing, juvenile
delinquency, the printing, distribution or exhibition of
obscene or pornographic materials or publications,
and such other activities inimical to the welfare and
morals of the inhabitants of the city;
...

If it were the intention of Congress to confer upon the

City Council the power to prohibit the establishments
enumerated in Section 1 of the Ordinance, it would
have so declared in uncertain terms by adding them
to the list of the matters it may prohibit under the
above-quoted Section. The Ordinance now vainly
attempts to lump these establishments with houses of
ill-repute and expand the City Council's powers in the
second and third clauses of Section 458 (a) 4 (vii) of
the Code in an effort to overreach its prohibitory
powers. It is evident that these establishments may
only be regulated in their establishment, operation
and maintenance.

It is important to distinguish the punishable activities

from the establishments themselves. That these

establishments are recognized legitimate enterprises

can be gleaned from another Section of the Code.
Section 131 under the Title on Local Government
Taxation expressly mentioned proprietors or operators
of massage clinics, sauna, Turkish and Swedish
baths, hotels, motels and lodging houses as among
the "contractors" defined in paragraph (h) thereof. The
same Section also defined "amusement" as a
"pleasurable diversion and entertainment,"
"synonymous to relaxation, avocation, pastime or
fun;" and "amusement places" to include "theaters,
cinemas, concert halls, circuses and other places of
amusement where one seeks admission to entertain
oneself by seeing or viewing the show or
performances." Thus, it can be inferred that the Code
considers these establishments as legitimate
enterprises and activities. It is well to recall the
maximreddendo singula singulis which means that
words in different parts of a statute must be referred
to their appropriate connection, giving to each in its
place, its proper force and effect, and, if possible,
rendering none of them useless or superfluous, even
if strict grammatical construction demands otherwise.
Likewise, where words under consideration appear in
different sections or are widely dispersed throughout
an act the same principle applies.[119]

Not only does the Ordinance contravene the Code, it

likewise runs counter to the provisions of P.D. 499. As
correctly argued by MTDC, the statute had already
converted the residential Ermita-Malate area into a
commercial area. The decree allowed the
establishment and operation of all kinds of
commercial establishments except warehouse or
open storage depot, dump or yard, motor repair shop,
gasoline service station, light industry with any
machinery or funeral establishment. The rule is that
for an ordinance to be valid and to have force and
effect, it must not only be within the powers of the
council to enact but the same must not be in conflict
with or repugnant to the general law.[120] As
succinctly illustrated in Solicitor General v.
Metropolitan Manila Authority:[121]

The requirement that the enactment must not violate

existing law explains itself. Local political subdivisions
are able to legislate only by virtue of a valid

delegation of legislative power from the national

legislature (except only that the power to create their
own sources of revenue and to levy taxes is conferred
by the Constitution itself). They are mere agents
vested with what is called the power of subordinate
legislation. As delegates of the Congress, the local
government units cannot contravene but must obey at
all times the will of their principal. In the case before
us, the enactment in question, which are merely local
in origin cannot prevail against the decree, which has
the force and effect of a statute.[122]

Petitioners contend that the Ordinance enjoys the

presumption of validity. While this may be the rule, it
has already been held that although the presumption
is always in favor of the validity or reasonableness of
the ordinance, such presumption must nevertheless
be set aside when the invalidity or unreasonableness
appears on the face of the ordinance itself or is
established by proper evidence. The exercise of
police power by the local government is valid unless it
contravenes the fundamental law of the land, or an
act of the legislature, or unless it is against public
policy or is unreasonable, oppressive, partial,
discriminating or in derogation of a common right.
[123]

Conclusion

All considered, the Ordinance invades fundamental

personal and property rights and impairs personal
privileges. It is constitutionally infirm. The Ordinance
contravenes statutes; it is discriminatory and
unreasonable in its operation; it is not sufficiently
detailed and explicit

that abuses may attend the enforcement of its

sanctions. And not to be forgotten, the City Council
under the Code had no power to enact the Ordinance
and is therefore ultra vires, null and void.

Concededly, the challenged Ordinance was enacted

with the best of motives and shares the concern of the
public for the cleansing of the Ermita-Malate area of
its social sins. Police power legislation of such
character deserves the full endorsement of the
judiciary- we reiterate our support for it. But inspite of
its virtuous aims, the enactment of the Ordinance has
no statutory or constitutional authority to stand on.
Local legislative bodies, in this case, the City Council,
cannot prohibit the operation of the enumerated
establishments under Section 1 thereof or order their
transfer or conversion without infringing the
constitutional guarantees of due process and equal
protection of laws - not even under the guise of police
power.
WHEREFORE, the Petition is hereby DENIED and
the decision of the Regional Trial Court declaring the
Ordinance void is AFFIRMED. Costs against
petitioners.

MA. MERCEDITAS N. GUTIERREZ Petitioner, vs.

THE HOUSE OF REPRESENTATIVES
CARPIO MORALES, J.:

The Ombudsman, Ma. Merceditas Gutierrez

(petitioner), challenges via petition for certiorari and
prohibition the Resolutions of September 1 and 7,
2010 of the House of Representatives Committee on
Justice (public respondent).

Before the 15th Congress opened its first session on

July 26, 2010 (the fourth Monday of July, in
accordance with Section 15, Article VI of the
Constitution) or on July 22, 2010, private respondents
Risa Hontiveros-Baraquel, Danilo Lim, and spouses
Felipe and Evelyn Pestao (Baraquel group) filed an
impeachment complaint1 against petitioner, upon the
endorsement of Party-List Representatives Arlene
Bag-ao and Walden Bello.2

A day after the opening of the 15th Congress or on

July 27, 2010, Atty. Marilyn Barua-Yap, Secretary
General of the House of Representatives, transmitted
the impeachment complaint to House Speaker
Feliciano Belmonte, Jr.3 who, by Memorandum of
August 2, 2010, directed the Committee on Rules to
include it in the Order of Business.4

On August 3, 2010, private respondents Renato

Reyes, Jr., Mother Mary John Mananzan, Danilo
Ramos, Edre Olalia, Ferdinand Gaite and James
Terry Ridon (Reyes group) filed another impeachment
complaint5 against petitioner with a resolution of
endorsement by Party-List Representatives Neri
Javier Colmenares, Teodoro Casio, Rafael Mariano,
Luzviminda Ilagan, Antonio Tinio and Emerenciana de
Jesus.6 On even date, the House of Representatives
provisionally adopted the Rules of Procedure in
Impeachment Proceedings of the 14th Congress. By
letter still of even date,7 the Secretary General
transmitted the Reyes groups complaint to Speaker
Belmonte who, by Memorandum of August 9,
2010,8 also directed the Committee on Rules to
include it in the Order of Business.

On August 10, 2010, House Majority Leader Neptali

Gonzales II, as chairperson of the Committee on
Rules,9 instructed Atty. Artemio Adasa, Jr., Deputy
Secretary General for Operations, through Atty. Cesar
Pareja, Executive Director of the Plenary Affairs
Department, to include the two complaints in the
Order of Business,10which was complied with by their
inclusion in the Order of Business for the following
day, August 11, 2010.

On August 11, 2010 at 4:47 p.m., during its plenary

session, the House of Representatives
simultaneously referred both complaints to public
respondent.11

After hearing, public respondent, by Resolution of

September 1, 2010, found both complaints sufficient

in form, which complaints it considered to have been

referred to it at exactly the same time.

counsel) filed their respective Comments on

September 27, 29 and 30, 2010.

Meanwhile, the Rules of Procedure in Impeachment

Proceedings of the 15th Congress was published on
September 2, 2010.

Speaker Belmonte filed a Motion for Leave to

Intervene dated October 4, 2010 which the Court
granted by Resolution of October 5, 2010.

On September 6, 2010, petitioner tried to file a motion

to reconsider the September 1, 2010 Resolution of
public respondent. Public respondent refused to
accept the motion, however, for prematurity; instead,
it advised petitioner to await the notice for her to file
an answer to the complaints, drawing petitioner to
furnish copies of her motion to each of the 55
members of public respondent.

Under an Advisory15 issued by the Court, oral

arguments were conducted on October 5 and 12,
2010, followed by petitioners filing of a Consolidated
Reply of October 15, 2010 and the filing by the parties
of Memoranda within the given 15-day period.

After hearing, public respondent, by Resolution of

September 7, 2010, found the two complaints, which
both allege culpable violation of the Constitution and
betrayal of public trust,12 sufficient in substance. The
determination of the sufficiency of substance of the
complaints by public respondent, which assumed
hypothetically the truth of their allegations, hinged on
the issue of whether valid judgment to impeach could
be rendered thereon. Petitioner was served also on
September 7, 2010 a notice directing her to file an
answer to the complaints within 10 days.13

Six days following her receipt of the notice to file

answer or on September 13, 2010, petitioner filed with
this Court the present petition with application for
injunctive reliefs. The following day or on September
14, 2010, the Court En Banc RESOLVED to direct the
issuance of a status quo ante order14 and to require
respondents to comment on the petition in 10 days.
The Court subsequently, by Resolution of September
21, 2010, directed the Office of the Solicitor General
(OSG) to file in 10 days its Comment on the petition

The Baraquel group which filed the first complaint, the

Reyes group which filed the second complaint, and
public respondent (through the OSG and private

The petition is harangued by procedural objections

which the Court shall first resolve.

Respondents raise the impropriety of the remedies of

certiorari and prohibition. They argue that public
respondent was not exercising any judicial, quasijudicial or ministerial function in taking cognizance of
the two impeachment complaints as it was exercising
a political act that is discretionary in nature,16 and
that its function is inquisitorial that is akin to a
preliminary investigation.17

These same arguments were raised in Francisco, Jr.

v. House of Representatives.18 The argument that
impeachment proceedings are beyond the reach of
judicial review was debunked in this wise:

The major difference between the judicial power of

the Philippine Supreme Court and that of the U.S.
Supreme Court is that while the power of judicial
review is only impliedly granted to the U.S. Supreme
Court and is discretionary in nature, that granted to
the Philippine Supreme Court and lower courts, as
expressly provided for in the Constitution, is not just a
power but also a duty, and it was given an expanded
definition to include the power to correct any grave

abuse of discretion on the part of any government

branch or instrumentality.

There are also glaring distinctions between the U.S.

Constitution and the Philippine Constitution with
respect to the power of the House of Representatives
over impeachment proceedings. While the U.S.
Constitution bestows sole power of impeachment to
the House of Representatives without limitation, our
Constitution, though vesting in the House of
Representatives the exclusive power to initiate
impeachment cases, provides for several limitations
to the exercise of such power as embodied in Section
3(2), (3), (4) and (5), Article XI thereof. These
limitations include the manner of filing, required vote
to impeach, and the one year bar on the
impeachment of one and the same official.

Respondents are also of the view that judicial review

of impeachments undermines their finality and may
also lead to conflicts between Congress and the
judiciary. Thus, they call upon this Court to exercise
judicial statesmanship on the principle that "whenever
possible, the Court should defer to the judgment of
the people expressed legislatively, recognizing full
well the perils of judicial willfulness and pride."

But did not the people also express their will when
they instituted the above-mentioned safeguards in the
Constitution? This shows that the Constitution did not
intend to leave the matter of impeachment to the sole
discretion of Congress. Instead, it provided for certain
well-defined limits, or in the language ofBaker v.
Carr,"judicially discoverable standards" for
determining the validity of the exercise of such
discretion, through the power of judicial review.

xxxx

There is indeed a plethora of cases in which this

Court exercised the power of judicial review over
congressional action. Thus, in Santiago v. Guingona,

Jr., this Court ruled that it is well within the power and
jurisdiction of the Court to inquire whether the Senate
or its officials committed a violation of the Constitution
or grave abuse of discretion in the exercise of their
functions and prerogatives. In Taada v. Angara, in
seeking to nullify an act of the Philippine Senate on
the ground that it contravened the Constitution, it held
that the petition raises a justiciable controversy and
that when an action of the legislative branch is
seriously alleged to have infringed the Constitution, it
becomes not only the right but in fact the duty of the
judiciary to settle the dispute. In Bondoc v. Pineda,
this Court declared null and void a resolution of the
House of Representatives withdrawing the
nomination, and rescinding the election, of a
congressman as a member of the House Electoral
Tribunal for being violative of Section 17, Article VI of
the Constitution. In Coseteng v. Mitra, it held that the
resolution of whether the House representation in the
Commission on Appointments was based on
proportional representation of the political parties as
provided in Section 18, Article VI of the Constitution is
subject to judicial review. In Daza v. Singson, it held
that the act of the House of Representatives in
removing the petitioner from the Commission on
Appointments is subject to judicial review. In Taada
v. Cuenco, it held that although under the
Constitution, the legislative power is vested
exclusively in Congress, this does not detract from the
power of the courts to pass upon the constitutionality
of acts of Congress. In Angara v. Electoral
Commission, it ruled that confirmation by the National
Assembly of the election of any member, irrespective
of whether his election is contested, is not essential
before such member-elect may discharge the duties
and enjoy the privileges of a member of the National
Assembly.

Finally, there exists no constitutional basis for the

contention that the exercise of judicial review over
impeachment proceedings would upset the system of
checks and balances. Verily, the Constitution is to be
interpreted as a whole and "one section is not to be
allowed to defeat another." Both are integral
components of the calibrated system of independence
and interdependence that insures that no branch of
government act beyond the powers assigned to it by
the Constitution.19 (citations omitted; italics in the
original; underscoring supplied)

Francisco characterizes the power of judicial review

as a duty which, as the expanded certiorari
jurisdiction20 of this Court reflects, includes the power
to "determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or
instrumentality of the Government."21

In the present case, petitioner invokes the Courts

expanded certiorari jurisdiction, using the special civil
actions of certiorari and prohibition as procedural
vehicles. The Court finds it well-within its power to
determine whether public respondent committed a
violation of the Constitution or gravely abused its
discretion in the exercise of its functions and
prerogatives that could translate as lack or excess of
jurisdiction, which would require corrective measures
from the Court.

Indubitably, the Court is not asserting its ascendancy

over the Legislature in this instance, but simply
upholding the supremacy of the Constitution as the
repository of the sovereign will.22

Respondents do not seriously contest all the essential

requisites for the exercise of judicial review, as they
only assert that the petition is premature and not yet
ripe for adjudication since petitioner has at her
disposal a plain, speedy and adequate remedy in the
course of the proceedings before public respondent.
Public respondent argues that when petitioner filed
the present petition23 on September 13, 2010, it had
not gone beyond the determination of the sufficiency
of form and substance of the two complaints.

An aspect of the "case-or-controversy" requirement is

the requisite of ripeness.24 The question of ripeness
is especially relevant in light of the direct, adverse
effect on an individual by the challenged conduct.25
In the present petition, there is no doubt that
questions on, inter alia, the validity of the
simultaneous referral of the two complaints and on

the need to publish as a mode of promulgating the

Rules of Procedure in Impeachment Proceedings of
the House (Impeachment Rules) present
constitutional vagaries which call for immediate
interpretation.

The unusual act of simultaneously referring to public

respondent two impeachment complaints presents a
novel situation to invoke judicial power. Petitioner
cannot thus be considered to have acted prematurely
when she took the cue from the constitutional
limitation that only one impeachment proceeding
should be initiated against an impeachable officer
within a period of one year.

And so the Court proceeds to resolve the substantive

issue? whether public respondent committed grave
abuse of discretion amounting to lack or excess of
jurisdiction in issuing its two assailed Resolutions.
Petitioner basically anchors her claim on alleged
violation of the due process clause (Art. III, Sec. 1)
and of the one-year bar provision (Art. XI, Sec 3, par.
5) of the Constitution.

Due process of law

Petitioner alleges that public respondents

chairperson, Representative Niel Tupas, Jr. (Rep.
Tupas), is the subject of an investigation she is
conducting, while his father, former Iloilo Governor
Niel Tupas, Sr., had been charged by her with
violation of the Anti-Graft and Corrupt Practices Act
before the Sandiganbayan. To petitioner, the actions
taken by her office against Rep. Tupas and his father
influenced the proceedings taken by public
respondent in such a way that bias and vindictiveness
played a big part in arriving at the finding of
sufficiency of form and substance of the complaints
against her.

The Court finds petitioners allegations of bias and

vindictiveness bereft of merit, there being hardly any

indication thereof. Mere suspicion of partiality does

not suffice.26

The act of the head of a collegial body cannot be

considered as that of the entire body itself. So GMCR,
Inc. v. Bell Telecommunications Phils.27 teaches:

First. We hereby declare that the NTC is a collegial

body requiring a majority vote out of the three
members of the commission in order to validly decide
a case or any incident therein. Corollarily, the vote
alone of the chairman of the commission, as in this
case, the vote of Commissioner Kintanar, absent the
required concurring vote coming from the rest of the
membership of the commission to at least arrive at a
majority decision, is not sufficient to legally render an
NTC order, resolution or decision.

Simply put, Commissioner Kintanar is not the National

Telecommunications Commission. He alone does not
speak and in behalf of the NTC. The NTC acts
through a three-man body x x x. 28

In the present case, Rep. Tupas, public respondent

informs, did not, in fact, vote and merely presided
over the proceedings when it decided on the
sufficiency of form and substance of the
complaints.29

likewise a respondent in another case. How can he be

expected to act with impartiality, in fairness and in
accordance with law under that matter, he is only
human we grant him that benefit.

JUSTICE MORALES:

Is he a one-man committee?

JUSTICE CUEVAS:

He is not a one-man committee, Your Honor, but he

decides.

JUSTICE MORALES:

Do we presume good faith or we presume bad faith?

JUSTICE CUEVAS:

We presume that he is acting in good faith, Your

Honor, but then (interrupted)

Even petitioners counsel conceded during the oral

arguments that there are no grounds to compel the
inhibition of Rep. Tupas.

JUSTICE MORALES:

JUSTICE CUEVAS:

So, that he was found liable for violation of the Anti

Graft and Corrupt Practices Act, does that mean that
your client will be deprived of due process of law?

Well, the Committee is headed by a gentleman who

happened to be a respondent in the charges that the
Ombudsman filed. In addition to that[,] his father was

JUSTICE CUEVAS:

No, what we are stating, Your Honor, is that

expectation of a client goes with the Ombudsman,
which goes with the element of due process is the
lack of impartiality that may be expected of him.

That called for a voluntary inhibition. Is there any law

or rule you can cite which makes it mandatory for the
chair of the committee to inhibit given that he had
previously been found liable for violation of a law[?]

swift completion of the Investigating Panels initial task

cannot be relegated as shoddy or shady without
discounting the presumably regular performance of
not just one but five state prosecutors.32 (italics in the
original; emphasis and underscoring supplied)

JUSTICE CUEVAS:
JUSTICE MORALES:

But as you admitted the Committee is not a one-man

committee?

JUSTICE CUEVAS:

That is correct, Your Honor.

JUSTICE MORALES:

There is nothing, Your Honor. In our jurisprudence

which deals with the situation whereby with that
background as the material or pertinent antecedent
that there could be no violation of the right of the
petitioner to due process. What is the effect of notice,
hearing if the judgment cannot come from an impartial
adjudicator.30 (emphasis and underscoring supplied)

Petitioner contends that the "indecent and precipitate

haste" of public respondent in finding the two
complaints sufficient in form and substance is a clear
indication of bias, she pointing out that it only took
public respondent five minutes to arrive thereat.

Petitioner goes on to contend that her participation in

the determination of sufficiency of form and substance
was indispensable. As mandated by the Impeachment
Rules, however, and as, in fact, conceded by
petitioners counsel, the participation of the
impeachable officer starts with the filing of an answer.

JUSTICE MORALES:

Is it not that the Committee should first determine that

there is sufficiency in form and substance before she
is asked to file her answer (interrupted)

JUSTICE CUEVAS:
So, why do you say then that there is a lack of
impartiality?

JUSTICE CUEVAS:

Because if anything before anything goes (sic) he is

the presiding officer of the committee as in this case
there were objections relative to the existence of the
implementing rules not heard, there was objection
made by Congressman Golez to the effect that this
may give rise to a constitutional crisis.

An abbreviated pace in the conduct of proceedings is

not per se an indication of bias, however. So SantosConcio v. Department of Justice31 holds:

Speed in the conduct of proceedings by a judicial or

quasi-judicial officer cannot per se be instantly
attributed to an injudicious performance of functions.
For ones prompt dispatch may be anothers undue
haste. The orderly administration of justice remains as
the paramount and constant consideration, with
particular regard of the circumstances peculiar to
each case.

That is correct, Your Honor.

JUSTICE MORALES:

During which she can raise any defenses she can

assail the regularity of the proceedings and related
irregularities?

JUSTICE CUEVAS:
JUSTICE MORALES:

The presumption of regularity includes the public

officers official actuations in all phases of work.
Consistent with such presumption, it was incumbent
upon petitioners to present contradictory evidence
other than a mere tallying of days or numerical
calculation. This, petitioners failed to discharge. The

Yes. We are in total conformity and in full accord with

that statement, Your Honor, because it is only after a
determination that the complaint is sufficient in form
and substance that a complaint may be filed, Your

Honor, without that but it may be asked, how is not

your action premature, Your Honor, our answer is- no,
because of the other violations involved and that is
(interrupted).33 (emphasis and underscoring
supplied)

Rule III(A) of the Impeachment Rules of the 15th

Congress reflects the impeachment procedure at the
Committee-level, particularly Section 534 which
denotes that petitioners initial participation in the
impeachment proceedings the opportunity to file an
Answer starts after the Committee on Justice finds
the complaint sufficient in form and substance. That
the Committee refused to accept petitioners motion
for reconsideration from its finding of sufficiency of
form of the impeachment complaints is apposite,
conformably with the Impeachment Rules.

Petitioner further claims that public respondent failed

to ascertain the sufficiency of form and substance of
the complaints on the basis of the standards set by
the Constitution and its own Impeachment Rules.35

The claim fails.

The determination of sufficiency of form and

substance of an impeachment complaint is an
exponent of the express constitutional grant of rulemaking powers of the House of Representatives
which committed such determinative function to public
respondent. In the discharge of that power and in the
exercise of its discretion, the House has formulated
determinable standards as to the form and substance
of an impeachment complaint. Prudential
considerations behoove the Court to respect the
compliance by the House of its duty to effectively
carry out the constitutional purpose, absent any
contravention of the minimum constitutional
guidelines.

Contrary to petitioners position that the Impeachment

Rules do not provide for comprehensible standards in

determining the sufficiency of form and substance, the

Impeachment Rules are clear in echoing the
constitutional requirements and providing that there
must be a "verified complaint or resolution,"36 and
that the substance requirement is met if there is "a
recital of facts constituting the offense charged and
determinative of the jurisdiction of the committee."37

Notatu dignum is the fact that it is only in the

Impeachment Rules where a determination of
sufficiency of form and substance of an impeachment
complaint is made necessary. This requirement is not
explicitly found in the organic law, as Section 3(2),
Article XI of the Constitution basically merely requires
a "hearing."38In the discharge of its constitutional
duty, the House deemed that a finding of sufficiency of
form and substance in an impeachment complaint is
vital "to effectively carry out" the impeachment
process, hence, such additional requirement in the
Impeachment Rules.

Petitioner urges the Court to look into the narration of

facts constitutive of the offenses vis--vis her
submissions disclaiming the allegations in the
complaints.

This the Court cannot do.

Francisco instructs that this issue would "require the

Court to make a determination of what constitutes an
impeachable offense. Such a determination is a
purely political question which the Constitution has left
to the sound discretion of the legislature. Such an
intent is clear from the deliberations of the
Constitutional Commission. x x x x Clearly, the issue
calls upon this court to decide a non-justiciable
political question which is beyond the scope of its
judicial power[.]"39 Worse, petitioner urges the Court
to make a preliminary assessment of certain grounds
raised, upon a hypothetical admission of the facts
alleged in the complaints, which involve matters of
defense.

In another vein, petitioner, pursuing her claim of

denial of due process, questions the lack of or, more
accurately, delay in the publication of the
Impeachment Rules.

To recall, days after the 15th Congress opened on

July 26, 2010 or on August 3, 2010, public respondent
provisionally adopted the Impeachment Rules of the
14th Congress and thereafter published on
September 2, 2010 its Impeachment Rules,
admittedly substantially identical with that of the 14th
Congress, in two newspapers of general
circulation.40

Citing Taada v. Tuvera,41 petitioner contends that

she was deprived of due process since the
Impeachment Rules was published only on
September 2, 2010 a day after public respondent
ruled on the sufficiency of form of the complaints. She
likewise tacks her contention on Section 3(8), Article
XI of the Constitution which directs that "Congress
shall promulgate its rules on impeachment to
effectively carry out the purpose of this section."

Public respondent counters that "promulgation" in this

case refers to "the publication of rules in any medium
of information, not necessarily in the Official Gazette
or newspaper of general circulation."42

Differentiating Neri v. Senate Committee on

Accountability of Public Officers and
Investigations43 which held that the Constitution
categorically requires publication of the rules of
procedure in legislative inquiries, public respondent
explains that the Impeachment Rules is intended to
merely enable Congress to effectively carry out the
purpose of Section 3(8), Art. XI of Constitution.

Blacks Law Dictionary broadly defines promulgate as

To publish; to announce officially; to make public as

important or obligatory. The formal act of announcing
a statute or rule of court. An administrative order that
is given to cause an agency law or regulation to
become known or obligatory.44 (emphasis supplied)

While "promulgation" would seem synonymous to

"publication," there is a statutory difference in their
usage.

The Constitution notably uses the word "promulgate"

12 times.45 A number of those instances involves the
promulgation of various rules, reports and issuances
emanating from Congress, this Court, the Office of the
Ombudsman as well as other constitutional offices.

To appreciate the statutory difference in the usage of

the terms "promulgate" and "publish," the case of the
Judiciary is in point. In promulgating rules concerning
the protection and enforcement of constitutional
rights, pleading, practice and procedure in all courts,
the Court has invariably required the publication of
these rules for their effectivity. As far as promulgation
of judgments is concerned, however, promulgation
means "the delivery of the decision to the clerk of
court for filing and publication."46

Section 4, Article VII of the Constitution contains a

similar provision directing Congress to "promulgate its
rules for the canvassing of the certificates" in the
presidential and vice presidential elections. Notably,
when Congress approved its canvassing rules for the
May 14, 2010 national elections on May 25, 2010,47 it
did not require the publication thereof for its effectivity.
Rather, Congress made the canvassing rules effective
upon its adoption.

In the case of administrative agencies, "promulgation"

and "publication" likewise take on different meanings
as they are part of a multi-stage procedure in quasilegislation. As detailed in one case,48 the publication

of implementing rules occurs after their promulgation

or adoption.

Promulgation must thus be used in the context in

which it is generally understoodthat is, to make
known. Generalia verba sunt generaliter inteligencia.
What is generally spoken shall be generally
understood. Between the restricted sense and the
general meaning of a word, the general must prevail
unless it was clearly intended that the restricted sense
was to be used.49

Since the Constitutional Commission did not restrict

"promulgation" to "publication," the former should be
understood to have been used in its general sense. It
is within the discretion of Congress to determine on
how to promulgate its Impeachment Rules, in much
the same way that the Judiciary is permitted to
determine that to promulgate a decision means to
deliver the decision to the clerk of court for filing and
publication.

It is not for this Court to tell a co-equal branch of

government how to promulgate when the Constitution
itself has not prescribed a specific method of
promulgation. The Court is in no position to dictate a
mode of promulgation beyond the dictates of the
Constitution.

Publication in the Official Gazette or a newspaper of

general circulation is but one avenue for Congress to
make known its rules. Jurisprudence emphatically
teaches that

x x x in the absence of constitutional or statutory

guidelines or specific rules, this Court is devoid of any
basis upon which to determine the legality of the acts
of the Senate relative thereto. On grounds of respect
for the basic concept of separation of powers, courts
may not intervene in the internal affairs of the
legislature; it is not within the province of courts to
direct Congress how to do its work. In the words of

Justice Florentino P. Feliciano, this Court is of the

opinion that where no specific, operable norms and
standards are shown to exist, then the legislature
must be given a real and effective opportunity to
fashion and promulgate as well as to implement them,
before the courts may intervene.50 (italics in the
original; emphasis and underscoring supplied;
citations omitted)

Had the Constitution intended to have the

Impeachment Rules published, it could have stated so
as categorically as it did in the case of the rules of
procedure in legislative inquiries, per Neri. Other than
"promulgate," there is no other single formal term in
the English language to appropriately refer to an
issuance without need of it being published.

IN FINE, petitioner cannot take refuge in Neri since

inquiries in aid of legislation under Section 21, Article
VI of the Constitution is the sole instance in the
Constitution where there is a categorical directive to
duly publish a set of rules of procedure. Significantly
notable in Neri is that with respect to the issue of
publication, the Court anchored its ruling on the 1987
Constitutions directive, without any reliance on or
reference to the 1986 case of Taada v.
Tuvera.51 Taada naturally could neither have
interpreted a forthcoming 1987 Constitution nor had
kept a tight rein on the Constitutions intentions as
expressed through the allowance of either a
categorical term or a general sense of making known
the issuances.

From the deliberations of the Constitutional

Commission, then Commissioner, now retired
Associate Justice Florenz Regalado intended Section
3(8), Article XI to be the vehicle for the House to fill
the gaps in the impeachment process.

MR. REGALADO. Mr. Presiding Officer, I have

decided to put in an additional section because, for
instance, under Section 3 (2), there is mention of
indorsing a verified complaint for impeachment by any

citizen alleging ultimate facts constituting a ground or

grounds for impeachment. In other words, it is just like
a provision in the rules of court. Instead, I propose
that this procedural requirement, like indorsement of a
complaint by a citizen to avoid harassment or crank
complaints, could very well be taken up in a new
section 4 which shall read as follows: THE
CONGRESS SHALL PROMULGATE ITS RULES ON
IMPEACHMENT TO EFFECTIVELY CARRY OUT
THE PURPOSES THEREOF. I think all these other
procedural requirements could be taken care of by the
Rules of Congress.52(emphasis and underscoring
supplied)

The discussion clearly rejects the notion that the

impeachment provisions are not self-executing.
Section 3(8) does not, in any circumstance, operate to
suspend the entire impeachment mechanism which
the Constitutional Commission took pains in designing
even its details.

As against constitutions of the past, modern

constitutions have been generally drafted upon a
different principle and have often become in effect
extensive codes of laws intended to operate directly
upon the people in a manner similar to that of
statutory enactments, and the function of
constitutional conventions has evolved into one more
like that of a legislative body. Hence, unless it is
expressly provided that a legislative act is necessary
to enforce a constitutional mandate, the presumption
now is that all provisions of the constitution are selfexecuting. If the constitutional provisions are treated
as requiring legislation instead of self-executing, the
legislature would have the power to ignore and
practically nullify the mandate of the fundamental law.
This can be cataclysmic. That is why the prevailing
view is, as it has always been, that

. . . in case of doubt, the Constitution should be

considered self-executing rather than non-selfexecuting . . . . Unless the contrary is clearly intended,
the provisions of the Constitution should be
considered self-executing, as a contrary rule would
give the legislature discretion to determine when, or

whether, they shall be effective. These provisions

would be subordinated to the will of the lawmaking
body, which could make them entirely meaningless by
simply refusing to pass the needed implementing
statute.53 (emphasis and underscoring supplied)

Even assuming arguendo that publication is required,

lack of it does not nullify the proceedings taken prior
to the effectivity of the Impeachment Rules which
faithfully comply with the relevant self-executing
provisions of the Constitution. Otherwise, in cases
where impeachment complaints are filed at the start
of each Congress, the mandated periods under
Section 3, Article XI of the Constitution would already
run or even lapse while awaiting the expiration of the
15-day period of publication prior to the effectivity of
the Impeachment Rules. In effect, the House would
already violate the Constitution for its inaction on the
impeachment complaints pending the completion of
the publication requirement.

Given that the Constitution itself states that any

promulgation of the rules on impeachment is aimed at
"effectively carry[ing] out the purpose" of
impeachment proceedings, the Court finds no grave
abuse of discretion when the House deemed it proper
to provisionally adopt the Rules on Impeachment of
the 14th Congress, to meet the exigency in such
situation of early filing and in keeping with the
"effective" implementation of the "purpose" of the
impeachment provisions. In other words, the
provisional adoption of the previous Congress
Impeachment Rules is within the power of the House
to promulgate its rules on impeachment to effectively
carry out the avowed purpose.

Moreover, the rules on impeachment, as

contemplated by the framers of the Constitution,
merely aid or supplement the procedural aspects of
impeachment. Being procedural in nature, they may
be given retroactive application to pending actions. "It
is axiomatic that the retroactive application of
procedural laws does not violate any right of a person
who may feel that he is adversely affected, nor is it
constitutionally objectionable. The reason for this is

that, as a general rule, no vested right may attach to,

nor arise from, procedural laws."54 In the present
case, petitioner fails to allege any impairment of
vested rights.

It bears stressing that, unlike the process of inquiry in

aid of legislation where the rights of witnesses are
involved, impeachment is primarily for the protection
of the people as a body politic, and not for the
punishment of the offender.55

Even Neri concedes that the unpublished rules of

legislative inquiries were not considered null and void
in its entirety. Rather,

x x x [o]nly those that result in violation of the rights of

witnesses should be considered null and void,
considering that the rationale for the publication is to
protect the rights of witnesses as expressed in
Section 21, Article VI of the Constitution. Sans such
violation, orders and proceedings are considered valid
and effective.56 (emphasis and underscoring
supplied)

Petitioner in fact does not deny that she was fully

apprised of the proper procedure. She even availed of
and invoked certain provisions57 of the Impeachment
Rules when she, on September 7, 2010, filed the
motion for reconsideration and later filed the present
petition. The Court thus finds no violation of the due
process clause.

The one-year bar rule

Article XI, Section 3, paragraph (5) of the Constitution

reads: "No impeachment proceedings shall be
initiated against the same official more than once
within a period of one year."

Petitioner reckons the start of the one-year bar from

the filing of the first impeachment complaint against
her on July 22, 2010 or four days before the opening
on July 26, 2010 of the 15th Congress. She posits
that within one year from July 22, 2010, no second
impeachment complaint may be accepted and
referred to public respondent.

On the other hand, public respondent, respondent

Reyes group and respondent-intervenor submit that
the initiation starts with the filing of the impeachment
complaint and ends with the referral to the
Committee, following Francisco, but venture to
alternatively proffer that the initiation ends somewhere
between the conclusion of the Committee Report and
the transmittal of the Articles of Impeachment to the
Senate. Respondent Baraquel group, meanwhile,
essentially maintains that under either the prevailing
doctrine or the parties interpretation, its impeachment
complaint could withstand constitutional scrutiny.

Contrary to petitioners
asseveration, Francisco58 states that the term
"initiate" means to file the complaint and take initial
action on it.59 The initiation starts with the filing of the
complaint which must be accompanied with an action
to set the complaint moving. It refers to the filing of
the impeachment complaint coupled with Congress
taking initial action of said complaint. The initial action
taken by the House on the complaint is the referral of
the complaint to the Committee on Justice.

Petitioner misreads the remark of Commissioner

Joaquin Bernas, S.J. that "no second verified
impeachment may be accepted and referred to the
Committee on Justice for action"60 which
contemplates a situation where a first impeachment
complaint had already been referred. Bernas and
Regalado, who both acted as amici curiae in
Francisco, affirmed that the act of initiating includes
the act of taking initial action on the complaint.

From the records of the Constitutional Commission, to

the amicus curiae briefs of two former Constitutional
Commissioners, it is without a doubt that the term "to
initiate" refers to the filing of the impeachment
complaint coupled with Congress' taking initial action
of said complaint.

Having concluded that the initiation takes place by the

act of filing and referral or endorsement of the
impeachment complaint to the House Committee on
Justice or, by the filing by at least one-third61 of the
members of the House of Representatives with the
Secretary General of the House, the meaning of
Section 3 (5) of Article XI becomes clear. Once an
impeachment complaint has been initiated, another
impeachment complaint may not be filed against the
same official within a one year period.62 (emphasis
and underscoring supplied)

The Court, in Francisco, thus found that the assailed

provisions of the 12th Congress Rules of Procedure
in Impeachment Proceedings ? Sections 1663 and
1764 of Rule V thereof ? "clearly contravene Section
3(5) of Article XI since they g[a]ve the term initiate a
meaning different from filing and referral."65

Petitioner highlights certain portions of Francisco

which delve on the relevant records of the
Constitutional Commission, particularly Commissioner
Maambongs statements66 that the initiation starts
with the filing of the complaint.

Petitioner fails to consider the verb "starts" as the

operative word. Commissioner Maambong was all too
keen to stress that the filing of the complaint indeed
starts the initiation and that the Houses action on the
committee report/resolution is not part of that initiation
phase.

Commissioner Maambong saw the need "to be very

technical about this,"67 for certain exchanges in the
Constitutional Commission deliberations loosely used
the term, as shown in the following exchanges.

MR. DAVIDE. That is for conviction, but not for

initiation. Initiation of impeachment proceedings still
requires a vote of one-fifth of the membership of the
House under the 1935 Constitution.

MR. MONSOD. A two-thirds vote of the membership

of the House is required to initiate proceedings.

MR. DAVIDE. No. for initiation of impeachment

proceedings, only one-fifth vote of the membership of
the House is required; for conviction, a two-thirds vote
of the membership is required.

xxxx

MR. DAVIDE. However, if we allow one-fifth of the

membership of the legislature to overturn a report of
the committee, we have here Section 3 (4) which
reads:

No impeachment proceedings shall be initiated

against the same official more than once within a
period of one year.

So, necessarily, under this particular subsection, we

will, in effect, disallow one-fifth of the members of the
National Assembly to revive an impeachment move
by an individual or an ordinary Member.

MR. ROMULO. Yes. May I say that Section 3 (4) is

there to look towards the possibility of a very liberal

impeachment proceeding. Second, we were

ourselves struggling with that problem where we are
faced with just a verified complaint rather than the
signatures of one-fifth, or whatever it is we decide, of
the Members of the House. So whether to put a
period for the Committee to report, whether we should
not allow the Committee to overrule a mere verified
complaint, are some of the questions we would like to
be discussed.

MR. DAVIDE. We can probably overrule a rejection by

the Committee by providing that it can be overturned
by, say, one-half or a majority, or one-fifth of the
members of the legislature, and that such overturning
will not amount to a refiling which is prohibited under
Section 3 (4).

Another point, Madam President. x x x68 (emphasis

and underscoring supplied)

An apparent effort to clarify the term "initiate" was

made by Commissioner Teodulo Natividad:

MR. NATIVIDAD. How many votes are needed to

initiate?

MR. BENGZON. One-third.

MR. NATIVIDAD. To initiate is different from to

impeach; to impeach is different from to convict. To
impeach means to file the case before the Senate.

MR. REGALADO. When we speak of "initiative," we

refer here to the Articles of Impeachment.

MR. NATIVIDAD. So, that is the impeachment itself,

because when we impeach, we are charging him with
the Articles of Impeachment. That is my
understanding.69 (emphasis and underscoring
supplied)

Thank you, Mr. Presiding Officer.70 (italics in the

original; emphasis and underscoring supplied)

[II]
Capping these above-quoted discussions was the
explanation of Commissioner Maambong delivered on
at least two occasions:

[I]

MR. MAAMBONG. Mr. Presiding Officer, I am not

moving for a reconsideration of the approval of the
amendment submitted by Commissioner Regalado,
but I will just make of record my thinking that we do
not really initiate the filing of the Articles of
Impeachment on the floor. The procedure, as I have
pointed out earlier, was that the initiation starts with
the filing of the complaint. And what is actually done
on the floor is that the committee resolution containing
the Articles of Impeachment is the one approved by
the body.

As the phraseology now runs, which may be

corrected by the Committee on Style, it appears that
the initiation starts on the floor. If we only have time, I
could cite examples in the case of the impeachment
proceedings of President Richard Nixon wherein the
Committee on the Judiciary submitted the
recommendation, the resolution, and the Articles of
Impeachment to the body, and it was the body who
approved the resolution. It is not the body which
initiates it. It only approves or disapproves the
resolution. So, on that score, probably the Committee
on Style could help in rearranging the words because
we have to be very technical about this. I have been
bringing with me The Rules of the House of
Representatives of the U.S. Congress. The Senate
Rules are with me. The proceedings on the case of
Richard Nixon are with me. I have submitted my
proposal, but the Committee has already decided.
Nevertheless, I just want to indicate this on record.

MR. MAAMBONG. I would just like to move for a

reconsideration of the approval of Section 3 (3). My
reconsideration will not at all affect the substance, but
it is only with keeping with the exact formulation of the
Rules of the House of Representatives of the United
States regarding impeachment.

I am proposing, Madam President, without doing

damage to any of its provision, that on page 2,
Section 3 (3), from lines 17 to 18, we delete the words
which read: "to initiate impeachment proceedings"
and the comma (,) and insert on line 19 after the word
"resolution" the phrase WITH THE ARTICLES, and
then capitalize the letter "i" in "impeachment" and
replace the word "by" with OF, so that the whole
section will now read: "A vote of at least one-third of
all the Members of the House shall be necessary
either to affirm a resolution WITH THE ARTICLES of
impeachment OF the committee or to override its
contrary resolution. The vote of each Member shall be
recorded."

I already mentioned earlier yesterday that the

initiation, as far as the House of Representatives of
the United States is concerned, really starts from the
filing of the verified complaint and every resolution to
impeach always carries with it the Articles of
Impeachment. As a matter of fact, the words "Articles
of Impeachment" are mentioned on line 25 in the case
of the direct filing of a verified complaint of one-third
of all the Members of the House. I will mention again,
Madam President, that my amendment will not vary
the substance in any way. It is only in keeping with the
uniform procedure of the House of Representatives of
the United States Congress.

Thank you, Madam President.71 (emphasis and

underscoring supplied)

The Court cannot countenance any attempt at

obscurantism.

To the next logical question of what ends or

completes the initiation, Commissioners Bernas and
Regalado lucidly explained that the filing of the
complaint must be accompanied by the referral to the
Committee on Justice, which is the action that sets
the complaint moving. Francisco cannot be any
clearer in pointing out the material dates.

What the cited discussion was rejecting was the view

that the Houses action on the committee report
initiates the impeachment proceedings. It did not state
that to determine the initiating step, absolutely nothing
prior to it must be done. Following petitioners line of
reasoning, the verification of the complaint or the
endorsement by a member of the House steps done
prior to the filing would already initiate the
impeachment proceedings.

Having concluded that the initiation takes place by the

act of filing of the impeachment complaint and referral
to the House Committee on Justice, the initial action
taken thereon, the meaning of Section 3 (5) of Article
XI becomes clear. Once an impeachment complaint
has been initiated in the foregoing manner, another
may not be filed against the same official within a one
year period following Article XI, Section 3(5) of the
Constitution.

In fine, considering that the first impeachment

complaint was filed by former President Estrada
against Chief Justice Hilario G. Davide, Jr., along with
seven associate justices of this Court, on June 2,
2003 and referred to the House Committee on Justice
on August 5, 2003, the second impeachment
complaint filed by Representatives Gilberto C.
Teodoro, Jr. and Felix William Fuentebella against the
Chief Justice on October 23, 2003 violates the
constitutional prohibition against the initiation of
impeachment proceedings against the same
impeachable officer within a one-year
period.72 (emphasis, italics and underscoring
supplied)

These clear pronouncements notwithstanding,

petitioner posits that the date of referral was
considered irrelevant in Francisco. She submits that
referral could not be the reckoning point of initiation
because "something prior to that had already been
done,"73 apparently citing Bernas discussion.

Contrary to petitioners emphasis on impeachment

complaint, what the Constitution mentions is
impeachment "proceedings." Her reliance on the
singular tense of the word "complaint"74 to denote the
limit prescribed by the Constitution goes against the
basic rule of statutory construction that a word covers
its enlarged and plural sense.75

The Court, of course, does not downplay the

importance of an impeachment complaint, for it is the
matchstick that kindles the candle of impeachment
proceedings. The filing of an impeachment complaint
is like the lighting of a matchstick. Lighting the
matchstick alone, however, cannot light up the candle,
unless the lighted matchstick reaches or torches the
candle wick. Referring the complaint to the proper
committee ignites the impeachment proceeding. With
a simultaneous referral of multiple complaints filed,
more than one lighted matchsticks light the candle at
the same time. What is important is that there should
only be ONE CANDLE that is kindled in a year, such
that once the candle starts burning, subsequent
matchsticks can no longer rekindle the candle.

A restrictive interpretation renders the impeachment

mechanism both illusive and illusory.

For one, it puts premium on senseless haste.

Petitioners stance suggests that whoever files the

first impeachment complaint exclusively gets the

attention of Congress which sets in motion an
exceptional once-a-year mechanism wherein
government resources are devoted. A prospective
complainant, regardless of ill motives or best
intentions, can wittingly or unwittingly desecrate the
entire process by the expediency of submitting a
haphazard complaint out of sheer hope to be the first
in line. It also puts to naught the effort of other
prospective complainants who, after diligently
gathering evidence first to buttress the case, would be
barred days or even hours later from filing an
impeachment complaint.

Placing an exceedingly narrow gateway to the avenue

of impeachment proceedings turns its laudable
purpose into a laughable matter. One needs only to
be an early bird even without seriously intending to
catch the worm, when the process is precisely
intended to effectively weed out "worms" in high
offices which could otherwise be ably caught by other
prompt birds within the ultra-limited season.

Moreover, the first-to-file scheme places undue strain

on the part of the actual complainants, injured party or
principal witnesses who, by mere happenstance of an
almost always unforeseeable filing of a first
impeachment complaint, would be brushed aside and
restricted from directly participating in the
impeachment process.

Further, prospective complainants, along with their

counsel and members of the House of
Representatives who sign, endorse and file
subsequent impeachment complaints against the
same impeachable officer run the risk of violating the
Constitution since they would have already initiated a
second impeachment proceeding within the same
year. Virtually anybody can initiate a second or third
impeachment proceeding by the mere filing of
endorsed impeachment complaints. Without any
public notice that could charge them with knowledge,
even members of the House of Representatives could
not readily ascertain whether no other impeachment

complaint has been filed at the time of committing

their endorsement.

The question as to who should administer or

pronounce that an impeachment proceeding has been
initiated rests also on the body that administers the
proceedings prior to the impeachment trial. As
gathered from Commissioner Bernas disquisition76 in
Francisco, a proceeding which "takes place not in the
Senate but in the House"77 precedes the bringing of
an impeachment case to the Senate. In fact, petitioner
concedes that the initiation of impeachment
proceedings is within the sole and absolute control of
the House of Representatives.78 Conscious of the
legal import of each step, the House, in taking charge
of its own proceedings, must deliberately decide to
initiate an impeachment proceeding, subject to the
time frame and other limitations imposed by the
Constitution. This chamber of Congress alone, not its
officers or members or any private individual, should
own up to its processes.

The Constitution did not place the power of the "final

say" on the lips of the House Secretary General who
would otherwise be calling the shots in forwarding or
freezing any impeachment complaint. Referral of the
complaint to the proper committee is not done by the
House Speaker alone either, which explains why
there is a need to include it in the Order of Business
of the House. It is the House of Representatives, in
public plenary session, which has the power to set its
own chamber into special operation by referring the
complaint or to otherwise guard against the initiation
of a second impeachment proceeding by rejecting a
patently unconstitutional complaint.

Under the Rules of the House, a motion to refer is not

among those motions that shall be decided without
debate, but any debate thereon is only made subject
to the five-minute rule.79 Moreover, it is common
parliamentary practice that a motion to refer a matter
or question to a committee may be debated upon, not
as to the merits thereof, but only as to the propriety of
the referral.80 With respect to complaints for
impeachment, the House has the discretion not to

refer a subsequent impeachment complaint to the

Committee on Justice where official records and
further debate show that an impeachment complaint
filed against the same impeachable officer has
already been referred to the said committee and the
one year period has not yet expired, lest it becomes
instrumental in perpetrating a constitutionally
prohibited second impeachment proceeding. Far from
being mechanical, before the referral stage, a period
of deliberation is afforded the House, as the
Constitution, in fact, grants a maximum of three
session days within which to make the proper referral.

As mentioned, one limitation imposed on the House in

initiating an impeachment proceeding deals with
deadlines. The Constitution states that "[a] verified
complaint for impeachment may be filed by any
Member of the House of Representatives or by any
citizen upon a resolution or endorsement by any
Member thereof, which shall be included in the Order
of Business within ten session days, and referred to
the proper Committee within three session days
thereafter."

In the present case, petitioner failed to establish grave

abuse of discretion on the allegedly "belated" referral
of the first impeachment complaint filed by the
Baraquel group. For while the said complaint was filed
on July 22, 2010, there was yet then no session in
Congress. It was only four days later or on July 26,
2010 that the 15th Congress opened from which date
the 10-day session period started to run. When, by
Memorandum of August 2, 2010, Speaker Belmonte
directed the Committee on Rules to include the
complaint in its Order of Business, it was well within
the said 10-day session period.81

There is no evident point in rushing at closing the

door the moment an impeachment complaint is filed.
Depriving the people (recall that impeachment is
primarily for the protection of the people as a body
politic) of reasonable access to the limited political
vent simply prolongs the agony and frustrates the
collective rage of an entire citizenry whose trust has
been betrayed by an impeachable officer. It

shortchanges the promise of reasonable opportunity

to remove an impeachable officer through the
mechanism enshrined in the Constitution.

But neither does the Court find merit in respondents

alternative contention that the initiation of the
impeachment proceedings, which sets into motion the
one-year bar, should include or await, at the earliest,
the Committee on Justice report. To public
respondent, the reckoning point of initiation should
refer to the disposition of the complaint by the vote of
at least one-third (1/3) of all the members of the
House.82 To the Reyes group, initiation means the
act of transmitting the Articles of Impeachment to the
Senate.83 To respondent-intervenor, it should last
until the Committee on Justices recommendation to
the House plenary.84

The Court, in Francisco, rejected a parallel thesis in

which a related proposition was inputed in the therein
assailed provisions of the Impeachment Rules of the
12th Congress. The present case involving an
impeachment proceeding against the Ombudsman
offers no cogent reason for the Court to deviate from
what was settled in Francisco that dealt with the
impeachment proceeding against the then Chief
Justice. To change the reckoning point of initiation on
no other basis but to accommodate the socio-political
considerations of respondents does not sit well in a
court of law.

x x x We ought to be guided by the doctrine of stare

decisis et non quieta movere. This doctrine, which is
really "adherence to precedents," mandates that once
a case has been decided one way, then another case
involving exactly the same point at issue should be
decided in the same manner. This doctrine is one of
policy grounded on the necessity for securing
certainty and stability of judicial decisions. As the
renowned jurist Benjamin Cardozo stated in his
treatise The Nature of the Judicial Process:

It will not do to decide the same question one way

between one set of litigants and the opposite way
between another. "If a group of cases involves the
same point, the parties expect the same decision. It
would be a gross injustice to decide alternate cases
on opposite principles. If a case was decided against
me yesterday when I was a defendant, I shall look for
the same judgment today if I am plaintiff. To decide
differently would raise a feeling of resentment and
wrong in my breast; it would be an infringement,
material and moral, of my rights." Adherence to
precedent must then be the rule rather than the
exception if litigants are to have faith in the evenhanded administration of justice in the courts.85

As pointed out in Francisco, the impeachment

proceeding is not initiated "when the House
deliberates on the resolution passed on to it by the
Committee, because something prior to that has
already been done. The action of the House is
already a further step in the proceeding, not its
initiation or beginning. Rather, the proceeding is
initiated or begins, when a verified complaint is filed
and referred to the Committee on Justice for action.
This is the initiating step which triggers the series of
steps that follow."86

Allowing an expansive construction of the term

"initiate" beyond the act of referral allows the
unmitigated influx of successive complaints, each
having their own respective 60-session-day period of
disposition from referral. Worse, the Committee shall
conduct overlapping hearings until and unless the
disposition of one of the complaints ends with the
affirmance of a resolution for impeachment or the
overriding87 of a contrary resolution (as espoused by
public respondent), or the House transmits the
Articles of Impeachment (as advocated by the Reyes
group),88 or the Committee on Justice concludes its
first report to the House plenary regardless of the
recommendation (as posited by respondentintervenor). Each of these scenarios runs roughshod
the very purpose behind the constitutionally imposed
one-year bar. Opening the floodgates too loosely
would disrupt the series of steps operating in unison
under one proceeding.

The Court does not lose sight of the salutary reason

of confining only one impeachment proceeding in a
year. Petitioner concededly cites Justice Adolfo
Azcunas separate opinion that concurred with the
Francisco ruling.89 Justice Azcuna stated that the
purpose of the one-year bar is two-fold: "to prevent
undue or too frequent harassment; and 2) to allow the
legislature to do its principal task [of] legislation," with
main reference to the records of the Constitutional
Commission, that reads:

MR. ROMULO. Yes, the intention here really is to

limit. This is not only to protect public officials who, in
this case, are of the highest category from
harassment but also to allow the legislative body to do
its work which is lawmaking. Impeachment
proceedings take a lot of time. And if we allow multiple
impeachment charges on the same individual to take
place, the legislature will do nothing else but
that.90 (underscoring supplied)

It becomes clear that the consideration behind the

intended limitation refers to the element of time, and
not the number of complaints. The impeachable
officer should defend himself in only one
impeachment proceeding, so that he will not be
precluded from performing his official functions and
duties. Similarly, Congress should run only one
impeachment proceeding so as not to leave it with
little time to attend to its main work of law-making.
The doctrine laid down in Francisco that initiation
means filing and referral remains congruent to the
rationale of the constitutional provision.

Petitioner complains that an impeachable officer may

be subjected to harassment by the filing of multiple
impeachment complaints during the intervening
period of a maximum of 13 session days between the
date of the filing of the first impeachment complaint to
the date of referral.

As pointed out during the oral arguments91 by the

counsel for respondent-intervenor, the framework of
privilege and layers of protection for an impeachable
officer abound. The requirements or restrictions of a
one-year bar, a single proceeding, verification of
complaint, endorsement by a House member, and a
finding of sufficiency of form and substance all
these must be met before bothering a respondent to
answer already weigh heavily in favor of an
impeachable officer.

Aside from the probability of an early referral and the

improbability of inclusion in the agenda of a complaint
filed on the 11th hour (owing to pre-agenda standard
operating procedure), the number of complaints may
still be filtered or reduced to nil after the Committee
decides once and for all on the sufficiency of form and
substance. Besides, if only to douse petitioners fear,
a complaint will not last the primary stage if it does not
have the stated preliminary requisites.

To petitioner, disturbance of her performance of

official duties and the deleterious effects of bad
publicity are enough oppression.

Petitioners claim is based on the premise that the

exertion of time, energy and other resources runs
directly proportional to the number of complaints filed.
This is non sequitur. What the Constitution assures an
impeachable officer is not freedom from arduous effort
to defend oneself, which depends on the qualitative
assessment of the charges and evidence and not on
the quantitative aspect of complaints or offenses. In
considering the side of the impeachable officers, the
Constitution does not promise an absolutely smooth
ride for them, especially if the charges entail genuine
and grave issues. The framers of the Constitution did
not concern themselves with the media tolerance
level or internal disposition of an impeachable officer
when they deliberated on the impairment of
performance of official functions. The measure of
protection afforded by the Constitution is that if the
impeachable officer is made to undergo such ride, he
or she should be made to traverse it just once.
Similarly, if Congress is called upon to operate itself

as a vehicle, it should do so just once. There is no

repeat ride for one full year. This is the whole import
of the constitutional safeguard of one-year bar rule.

Applicability of the Rules on Criminal Procedure

On another plane, petitioner posits that public

respondent gravely abused its discretion when it
disregarded its own Impeachment Rules, the same
rules she earlier chastised.

In the exercise of the power to promulgate rules "to

effectively carry out" the provisions of Section 3,
Article XI of the Constitution, the House promulgated
the Impeachment Rules, Section 16 of which provides
that "the Rules of Criminal Procedure under the Rules
of Court shall, as far as practicable, apply to
impeachment proceedings before the House."

Finding that the Constitution, by express grant,

permits the application of additional adjective rules
that Congress may consider in effectively carrying out
its mandate, petitioner either asserts or rejects two
procedural devices.

First is on the "one offense, one complaint" rule. By

way of reference to Section 16 of the Impeachment
Rules, petitioner invokes the application of Section
13, Rule 110 of the Rules on Criminal Procedure
which states that "[a] complaint or information must
charge only one offense, except when the law
prescribes a single punishment for various offenses."
To petitioner, the two impeachment complaints are
insufficient in form and substance since each charges
her with both culpable violation of the Constitution and
betrayal of public trust. She concludes that public
respondent gravely abused its discretion when it
disregarded its own rules.

Petitioner adds that heaping two or more charges in

one complaint will confuse her in preparing her
defense; expose her to the grave dangers of the
highly political nature of the impeachment process;
constitute a whimsical disregard of certain rules;
impair her performance of official functions as well as
that of the House; and prevent public respondent from
completing its report within the deadline.

Public respondent counters that there is no

requirement in the Constitution that an impeachment
complaint must charge only one offense, and the
nature of impeachable offenses precludes the
application of the above-said Rule on Criminal
Procedure since the broad terms cannot be defined
with the same precision required in defining crimes. It
adds that the determination of the grounds for
impeachment is an exercise of political judgment,
which issue respondent-intervenor also considers as
non-justiciable, and to which the Baraquel group adds
that impeachment is a political process and not a
criminal prosecution, during which criminal
prosecution stage the complaint or information
referred thereto and cited by petitioner, unlike an
impeachment complaint, must already be in the name
of the People of the Philippines.

The Baraquel group deems that there are

provisions92 outside the Rules on Criminal Procedure
that are more relevant to the issue. Both the Baraquel
and Reyes groups point out that even if Sec. 13 of
Rule 110 is made to apply, petitioners case falls
under the exception since impeachment prescribes a
single punishment removal from office and
disqualification to hold any public office even for
various offenses. Both groups also observe that
petitioner concededly and admittedly was not keen on
pursuing this issue during the oral arguments.

carrying out the relevant constitutional provisions,

which prerogative the Constitution vests on Congress,
and without delving into the practicability of the
application of the one offense per complaint rule, the
initial determination of which must be made by the
House93 which has yet to pass upon the question,
the Court finds that petitioners invocation of that
particular rule of Criminal Procedure does not lie.
Suffice it to state that the Constitution allows the
indictment for multiple impeachment offenses, with
each charge representing an article of impeachment,
assembled in one set known as the "Articles of
Impeachment."94 It, therefore, follows that an
impeachment complaint need not allege only one
impeachable offense.

The second procedural matter deals with the rule on

consolidation. In rejecting a consolidation, petitioner
maintains that the Constitution allows only one
impeachment complaint against her within one year.

Records show that public respondent disavowed any

immediate need to consolidate. Its chairperson Rep.
Tupas stated that "[c]onsolidation depends on the
Committee whether to consolidate[; c]onsolidation
may come today or may come later on after
determination of the sufficiency in form and
substance," and that "for purposes of consolidation,
the Committee will decide when is the time to
consolidate[, a]nd if, indeed, we need to
consolidate."95 Petitioners petition, in fact, initially
describes the consolidation as merely
"contemplated."96

Since public respondent, whether motu proprio or

upon motion, did not yet order a consolidation, the
Court will not venture to make a determination on this
matter, as it would be premature, conjectural or
anticipatory.97

Petitioners claim deserves scant consideration.

Without going into the effectiveness of the suppletory

application of the Rules on Criminal Procedure in

Even if the Court assumes petitioners change of

stance that the two impeachment complaints were
deemed consolidated,98 her claim that consolidation

is a legal anomaly fails. Petitioners theory obviously

springs from her "proceeding = complaint" equation
which the Court already brushed aside.

WHEREFORE, the petition is DISMISSED. The

assailed Resolutions of September 1, 2010 and
September 7, 2010 of public respondent, the House
of Representatives Committee on Justice,
are NOT UNCONSTITUTIONAL. The Status Quo
Ante Order issued by the Court on September 14,
2010 is LIFTED.

SO ORDERED.

CALTEX (PHILIPPINES) INC., petitioner-appellee, vs.

ENRICO PALOMAR, in his capacity as THE
POSTMASTER GENERAL, respondent-appellant.
CASTRO, J.:

In the year 1960 the Caltex (Philippines) Inc.

(hereinafter referred to as Caltex) conceived and laid
the groundwork for a promotional scheme calculated
to drum up patronage for its oil products.
Denominated "Caltex Hooded Pump Contest", it calls
for participants therein to estimate the actual number
of liters a hooded gas pump at each Caltex station will
dispense during a specified period. Employees of the
Caltex (Philippines) Inc., its dealers and its advertising
agency, and their immediate families excepted,
participation is to be open indiscriminately to all
"motor vehicle owners and/or licensed drivers". For
the privilege to participate, no fee or consideration is
required to be paid, no purchase of Caltex products
required to be made. Entry forms are to be made
available upon request at each Caltex station where a
sealed can will be provided for the deposit of
accomplished entry stubs.

A three-staged winner selection system is envisioned.

At the station level, called "Dealer Contest", the
contestant whose estimate is closest to the actual

number of liters dispensed by the hooded pump

thereat is to be awarded the first prize; the next
closest, the second; and the next, the third. Prizes at
this level consist of a 3- burner kerosene stove for
first; a thermos bottle and a Ray-O-Vac hunter lantern
for second; and an Eveready Magnet-lite flashlight
with batteries and a screwdriver set for third. The first
prize winner in each station will then be qualified to
join in the "Regional Contest" in seven different
regions. The winning stubs of the qualified
contestants in each region will be deposited in a
sealed can from which the first-prize, second prize
and third prize winners of that region will be drawn.
The regional first-prize winners will be entitled to
make a three-day all-expenses-paid round trip to
Manila, accompanied by their respective Caltex
dealers in order to take part in the "National Contest".
The regional second-prize and third-prize winners will
receive cash prizes of P500 and P300, respectively.
At the national level, the stubs of the seven regional
first-prize winners will be placed inside a sealed can
from which the drawing for the final first-prize,
second-prize and third prize winners will be made.
Cash prizes in store for winners at this final stage are:
P3,000 for first; P2,000 for second; P1,500 for third;
and P650 as consolation prize for each of the
remaining four participants.

Foreseeing the extensive use of the mails not only as

amongst the media for publicizing the contest but also
for the transmission of communications relative
thereto, representations were made by Caltex with the
postal authorities for the contest to be cleared in
advance for mailing, having in view sections 1954 (a),
1982 and 1983 of the Revised Administrative Code,
the pertinent provisions of which read as follows:

"SECTION 1954. Absolutely non-mailable matter. - No

matter belonging to any of the following classes,
whether sealed as first- class matter or not, shall be
imported into the Philippines through the mails, or be
deposited in or carried by the mails of the Philippines,
or be delivered to its addressee by any officer or
employee of the Bureau of Posts:

(a) Written or printed matter in any form advertising,

describing, or in any manner pertaining to, or
conveying or purporting to convey any information
concerning any lottery, gift enterprise, or similar
scheme depending in whole or in part upon lot or
chance, or any scheme, device, or enterprise for
obtaining any money or property of any kind by
means of false or fraudulent pretenses,
representations, or promises."

"SECTION 1982. Fraud orders. - Upon satisfactory

evidence that any person or company is engaged in
conducting any lottery, gift enterprise, or scheme for
the distribution of money, or of any real or personal
property by lot, chance, or drawing of any kind, or that
any person or company is conducting any scheme,
device, or enterprise for obtaining money or property
of any kind through the mails by means of false or
fraudulent pretenses, representations, or promises,
the Director of Posts may instruct any postmaster or
other officer or employee of the Bureau to return to
the person, depositing same in the mails, with the
word 'fraudulent' plainly written or stamped upon the
outside cover thereof, any mail matter of whatever
class mailed by or addressed to such person or
company or the representative or agent of such
person or company."

"SECTION 1983. Deprivation, of use of money order

system and telegraphic transfer service. - The
Director of Posts may, upon evidence satisfactory to
him that any person or company is engaged in
conducting any lottery, gift enterprise, or scheme for
the distribution of money, or of any reel or personal
property by lot, chance, or drawing of any kind, or that
any person or company is conducting any scheme,
device, or enterprise for obtaining money or property
of any kind through the mails by means of false or
fraudulent pretenses, representations, or promise,
forbid the issue or payment by any postmaster of any
postal money order or telegraphic transfer to said
person or company or to the agent of any such
person or company, whether such agent is acting as
an individual or as a firm, bank, corporation, or
association of any kind, and may provide by
regulation for the return to the remitters of the sums
named in money orders or telegraphic transfers

drawn in favor of such person or company or its

agent."

has no right to bar the public distribution of said rules

by the mails."

The overtures were later formalized in a letter to the

Postmaster General, dated October 31, 1960, in
which the Caltex, thru counsel, enclosed a copy of the
contest rules and endeavored to justify its position
that the contest does not violate the anti-lottery
provisions of the Postal Law. Unimpressed, the then
Acting Postmaster General opined that the scheme
falls within the purview of the provisions aforesaid and
declined to grant the requested clearance. In its
counsels letter of December 7, 1960, Caltex sought a
reconsideration of the foregoing stand, stressing that
there being involved no consideration on the part of
any contestant, the contest was not, under controlling
authorities, condemnable as a lottery. Relying,
however, on an opinion rendered by the Secretary of
Justice on an unrelated case seven years before
(Opinion 217, Series of l953), the Postmaster General
maintained his view that the contest involves
consideration, or that, if it does not, it is nevertheless
a "gift enterprise" which is equally banned by the
Postal Law, and in his letter of December 10, 1960
not only denied the use of the mails for purposes of
the proposed contest but as well threatened that if the
contest was conducted, "a fraud order will have to be
issued against it (Caltex) and all its representatives."

The respondent appealed.

Caltex thereupon invoked judicial intervention by filing

the present petition for declaratory relief against
Postmaster General Enrico Palomar, praying "that
judgment be rendered declaring its 'Caltex Hooded
Pump Contest not to be violative of the Postal Law,
and ordering respondent to allow petitioner the use of
the mails to bring the contest to the attention of the
public". After issues were joined upon the respective
memoranda of the parties, the trial court rendered
judgment as follows:

"In view of the foregoing considerations, the Court

holds that the proposed 'Caltex Hooded Pump
Contest' announced to be conducted by the petitioner
under the rules marked as Annex B of the petition do
(sic) not violate the Postal Law and the respondent

The parties are now before us, arrayed against each

other upon two basic issues: first, whether the petition
states a sufficient cause of action for declaratory
relief; and, second, whether the proposed "Caltex
Hooded Pump Contest" violates the Postal Law. We
shall take these up in seriatim.

1. By express mandate of section 1 of Rule 66 of the

old Rules of Court, which was the applicable legal
basis for the remedy at the time it was invoked,
declaratory relief is available to any person "whose
rights are affected by a statute

. . . to determine any question of construction or

validity arising under the . . . statute and for a
declaration of his rights or duties thereunder" (now
section 1, Rule 64, Revised Rules of Court). In
amplification, this Court, conformably to established
jurisprudence on the matter, laid down certain
conditions sine qua non therefor to wit: (1) there must
be a justiciable controversy; (2) the controversy must
be between persons whose interests are adverse; (3)
the party seeking declaratory relief must have a legal
interest in the controversy; and (4) the issue involved
must be ripe for judicial determination (Tolentino vs.
The Board of Accountancy, et al. 90 Phil., 83;
Delumen, et al. vs. Republic of the Philippines, 94
Phil., 287; 50 Off. Gaz., No. 2, pp. 578, 578-579;
Edades vs. Edades, et al., 99 Phil., 675). The
gravamen of the appellant's stand being that the
petition herein states no sufficient cause of action for
declaratory relief, our duty is to assay the factual
bases thereof upon the foregoing crucible.

As we look in retrospect at the incidents that

generated the present controversy, a number of
significant points stand out in bold relief. The appellee

(Caltex), as a business enterprise of some

consequence, concededly has the unquestioned light
to exploit every legitimate means, and to avail of all
appropriate media to advertise and stimulate
increased patronage for its products. In contrast, the
appellant, as the authority charged with the
enforcement of the Postal Law, admittedly has the
power and the duty to suppress transgressions
thereof - particularly thru the issuance of fraud orders,
under sections 1982 and 1983 of the Revised
Administrative Code, against legally non-mailable
schemes. Obviously pursuing its right aforesaid, the
appellee laid out plans for the sales promotion
scheme hereinbefore detailed. To forestall possible
difficulties in the dissemination of information thereon
thru the mails, amongst other media, it was found
expedient to request the appellant for an advance
clearance therefor. However, likewise by virtue of his
jurisdiction in the premises and construing the
pertinent provisions of the Postal Law, the appellant
saw a violation thereof in the proposed scheme and
accordingly declined the request. A point of difference
as to the correct construction to be given to the
applicable statute was thus reached. Communications
in which the parties expounded on their respective
theories were exchanged. The confidence with which
the appellee insisted upon its position was matched
only by the obstinacy with which the appellant stood
his ground. And this impasse was climaxed by the
appellant's open warning to the appellee that if the
proposed contest was "conducted, a fraud order will
have to be issued against it and all its
representatives."

Against this backdrop, the stage was indeed set for

the remedy prayed for. The appellee's insistent
assertion of its claim to the use of the mails for its
proposed contest, and the challenge thereto and
consequent denial by the appellant of the privilege
demanded, undoubtedly spawned a live controversy.
The justiciability of the dispute cannot be gainsaid.
There is an active antagonistic assertion of a legal
right on one side and a denial thereof on the other,
concerning a real - not a mere theoretical - question
or issue. The contenders are as real as their interest
are substantial. To the appellee, the uncertainty
occasioned by the divergence of views on the issue of
construction hampers or disturbs its freedom to
enhance its business. To the appellant, the

suppression of the appellee's proposed contest

believed to transgress a law he has sworn to uphold
and enforce is an unavoidable duty. With the
appellee's bent to hold the contest and the appellant's
threat to issue a fraud order therefor if carried out, the
contenders are confronted by the ominous shadow of
an imminent and inevitable litigation unless their
differences are settled and stabilized by a tranquilizing
declaration (Pablo y Sen, et al. vs. Republic of the
Philippines, G. R. No. L-6868, April 30, 1955). And,
contrary to the insinuation of the appellant, the time is
long past when it can rightly be said that merely the
appellee's "desires are thwarted by its own doubts, or
by the fears of others" - which admittedly does not
confer a cause of action. Doubt, if any there was, has
ripened into a justiciable controversy when, as in the
case at bar, it was translated into a positive claim of
right which is actually contested (III Moran,
Comments on the Rules of Court, 1963 ed., pp. 132133, citing: Woodward vs. Fox West Coast Theaters,
36 Ariz., 251, 284 Pac. 350).

We cannot hospitably entertain the appellant's

pretense that there is here no question of construction
because the said appellant "simply applied the clear
provisions of the law to a given set of facts as
embodied in the rules of the contest", hence, there is
no room for declaratory relief. The infirmity of this
pose lies in the fact that it proceeds from the
assumption that, in the circumstances here
presented, the construction of the legal provisions can
be divorced from the matter of their application to the
appellee's contest. This is not feasible. Construction,
verily, is the art or process of discovering and
expounding the meaning and intention of the authors
of the law with respect to its application to a given
case, where that intention is rendered doubtful,
amongst others, by reason of the fact that the given
case is not explicitly provided for in the law (Black,
Interpretation of Laws, p. 1). This is precisely the case
here. Whether or not the scheme proposed by the
appellee is within the coverage of the prohibitive
provisions of the Postal Law inescapably requires an
inquiry into the intended meaning of the words used
therein. To our mind, this is as much a question of
construction or interpretation as any other.

Nor it is accurate to say, as the appellant intimates,

that a pronouncement on the matter at hand can
amount to nothing more than an advisory opinion the
handing down of which is anathema to a declaratory
relief action. Of course, no breach of the Postal Law
has as yet been committed. Yet, the disagreement
over the construction thereof is no longer nebulous or
contingent. It has taken a fixed and final shape,
presenting clearly defined legal issues susceptible of
immediate resolution. With the battle lines drawn, in a
manner of speaking, the propriety - nay, the necessity
- of setting the dispute at rest before it accumulates
the asperity, distemper, animosity, passion and
violence of a full-blown battle which looms ahead (III
Moran, Comments on the Rules of Court, 1963 ed., p.
132 and cases cited), cannot but be conceded.
Paraphrasing the language in Zeitlin vs. Arnebergh,
59 Cal., 2d., 901, 31 Cal. Rptr., 800, 383 P. 2d., 152,
cited in 22 Am. Jur., 2d., p. 869, to deny declaratory
relief to the appellee in the situation into which it has
been cast, would be to force it to choose between
undesirable alternatives. If it cannot obtain a final and
definitive pronouncement as to whether the antilottery provisions of the Postal Law apply to its
proposed contest, it would be faced with these
choices: If it launches the contest and uses the mails
for purposes thereof, it not only incurs the risk, but is
also actually threatened with the certain imposition, of
a fraud order with its concomitant stigma which may
attach even if the appellee will eventually be
vindicated; if it abandons the contest, it becomes a
self-appointed censor, or permits the appellant to put
into effect a virtual fiat of previous censorship which is
constitutionally unwarranted. As we weigh these
considerations in one equation and in the spirit of
liberality with which the Rules of Court are to be
interpreted in order to promote their object (Section 1,
Rule 1, Revised Rules of Court) - which, in the instant
case, is to settle, and afford relief from uncertainty
and insecurity with respect to, rights and duties under
a law - we cannot see in the present case any
imposition upon our jurisdiction or any futility or
prematurity in our intervention.

The appellant, we apprehend, underrates the force

and binding effect of the ruling we hand down in this
case if he believes that it will not have the final and
pacifying function that a declaratory judgment is
calculated to subserve. At the very least, the appellant

will be bound. But more than this, he obviously

overlooks that in this jurisdiction, "Judicial decisions
applying or interpreting the law shall form a part of the
legal system" (article 8, Civil Code of the Philippines).
In effect, judicial decision assume the same authority
as the statute itself and, until authoritatively
abandoned, necessarily become, to the extent that
they are applicable, the criteria which must control the
actuations not only of those called upon to abide
thereby but also of those in duty bound to enforce
obedience thereto. Accordingly, we entertain no
misgivings that our resolution of this case will
terminate the controversy at hand.

It is not amiss to point out at this juncture that the

conclusion we have herein just reached is not without
precedent. In Liberty Calendar Co. vs. Cohen, 19 N.
J., 399, 117 A. 2d., 487, where a corporation engaged
in promotional advertising was advised by the county
prosecutor that its proposed sales promotion plan had
the characteristics of a lottery, and that if such sales
promotion were conducted, the corporation would be
subject to criminal prosecution, it was held that the
corporation was entitled to maintain a declaratory
relief action against the county prosecutor to
determine the legality of its sales promotion plan. In
pari materia, see also: Bunis vs. Conway, 17 App. Div.
2d., 207, 234 N.Y.S. 2d., 435; Zeitlin vs. Arnebergh,
supra.; Thrillo, Inc. vs. Scott, 15 N.J. Super. 124, 82 A.
2d., 903.

In fine, we hold that the appellee has made out a case

for declaratory relief.

2. The Postal Law, chapter 52 of the Revised

Administrative Code, using almost identical
terminology in sections 1954(a), 1982 and 1983
thereof, supra, condemns as absolutely non-mailable,
and empowers the Postmaster General to issue fraud
orders against, or otherwise deny the use of the
facilities of the postal service to, any information
concerning "any lottery, gift enterprise, or scheme for
the distribution of money, or of any real or personal
property by lot, chance, or drawing of any kind". Upon

these words hinges the resolution of the second issue

posed in this appeal.

which a valuable consideration of some kind is paid

directly or indirectly for the chance to draw a prize"

Happily, this is not an altogether untrodden judicial

path. As early as in 1922, in "El Debate", Inc. vs.
Topacio, 44 Phil., 278, 283-284, which significantly
dwelt on the power of the postal authorities under the
above-mentioned provisions of the Postal Law, this
Court declared that -

Reverting to the rules of the proposed contest, we are

struck by the clarity of the language in which the
invitation to participate therein is couched. Thus -

"While countless definitions of lottery have been

attempted, the authoritative one for this jurisdiction is
that of the United States Supreme Court, in
analogous cases having, to do with the power of the
United States Postmaster General, viz: The term
'lottery' extends to all schemes for the distribution of
prizes by chance, such as policy playing, gift
exhibitions, prize concerts, raffles at fairs,-etc., and
various forms of gambling. The three essential
elements of a lottery are: First, consideration; second,
prize; and third, chance. (Horner vs. United States
[1892], 147 U.S. 449; Public Clearing House vs.
Coyne [1903], 194 U.S., 497; U.S. vs. Filart and
Singson [1915], 30 Phil., 80; U.S. vs. Olsen and
Marker [1917], 36 Phil., 395; U.S. vs. Baguio [1919],
39 Phil, 962; Valhalla Hotel Construction Company vs.
Carmona, p. 233, ante."

Unanimity there is in all quarters, and we agree, that

the elements of prize and chance are too obvious in
the disputed scheme to be the subject of contention.
Consequently, as the appellant himself concedes, the
field of inquiry is narrowed down to the existence of
the element of consideration therein. Respecting this
matter, our tasks is considerably lightened inasmuch
as in the same case just cited, this Court has laid
down a definitive yardstick in the following terms -

"In respect to the last element of consideration, the

law does not condemn the gratuitous distribution of
property by chance, if no consideration is derived
directly or indirectly from the party receiving the
chance, but does condemn as criminal schemes in

"No puzzles. no rhymes? You don't need wrappers,

labels or boxtops? You don't have to buy anything?
Simply estimate the actual number of liters the Caltex
gas pump with the hood at your favorite Caltex dealer
will dispense from . . . to . . ., and win valuable prizes .
. ."

Nowhere in the said rules is any requirement that any

fee be paid, any merchandise be bought, any service
be rendered, or any value whatsoever be given for the
privilege to participate. A prospective contestant has
but to go to a Caltex station, request for the entry form
which is available on demand, and accomplish and
submit the same for the drawing of the winner.
Viewed from all angles or turned inside out, the
contest fails to exhibit any discernible consideration
which would brand it as a lottery. Indeed, even as we
heed the stern injunction, "look beyond the fair
exterior, to the substance, in order to unmask the real
element and pernicious tendencies which the law is
seeking to prevent" ("El Debate", Inc. vs. Topacio,
supra, p. 291), we find none. In our appraisal, the
scheme does not only appear to be, but actually is, a
gratuitous distribution of property by chance.

There is no point to the appellant's insistence that

non-Caltex customers who may buy Caltex products
simply to win a prize would actually be indirectly
paying a consideration for the privilege to join the
contest. Perhaps this would be tenable if the
purchase of any Caltex product or the use of any
Caltex service were a pre-requisite to participation.
But it is not. A contestant, it hardly needs reiterating,
does not have to buy anything or to give anything of
value.

Off-tangent, too, is the suggestion that the scheme,

being admittedly for sales promotion, would naturally
benefit the sponsor in the way of increased patronage
by those who will be encouraged to prefer Caltex
products "if only to get the chance to draw a prize by
securing entry blanks". The required element of
consideration does not consist of the benefit derived
by the proponent of the contest. The true test, as laid
down in People vs. Cardas, 28 P. 2d. 99, 137 Cal.
App. (Supp). 788, is whether the participant pays a
valuable consideration for the chance, and not
whether those conducting the enterprise receive
something of value in return for the distribution of the
prize. Perspective properly oriented, the standpoint of
the contestant is all that matters, not that of the
sponsor. The following, culled from Corpus Juris
Secundum, should set the matter at rest:

"The fact that the holder of the drawing expects

thereby to receive, or in fact does receive, some
benefit in the way of patronage or otherwise, as a
result of the drawing, does not supply the element of
consideration. Griffith Amusement Co. vs. Morgan,
Tex. Civ. App., 98 S.W. 2d., 844." (54 C.J.S., p. 849).

Thus enlightened, we join the trial court in declaring

that the "Caltex Hooded Pump Contest" proposed by
the appellee is not a lottery that may be
administratively and adversely dealt with under the
Postal Law.

Put it may be asked: Is it not at least a "gift enterprise,

or scheme for the distribution of money, or of any real
or personal property by lot, chance, or drawing of any
kind", which is equally proscribed? Incidentally, while
the appellant's brief appears to have concentrated on
the issue of consideration, this aspect of the case
cannot be avoided if the remedy here invoked is to
achieve its tranquilizing effect as an instrument of
both curative and preventive justice. Recalling that the
appellant's action was predicted, amongst other
bases, upon Opinion 217, Series 1953, of the
Secretary of Justice, which opined in effect that a
scheme, though not a lottery for want of
consideration, may nevertheless be a gift enterprise in

which that element is not essential, the determination

of whether or not the proposed contest - wanting in
consideration as we have found it to be - is a
prohibited gift enterprise, cannot be passed over sub
silencio.

While an all-embracing concept of the term "gift

enterprise" is yet to be spelled out in explicit words,
there appears to be a consensus among
lexicographers and standard authorities that the term
is commonly applied to a sporting artifice under which
goods are sold for their market value but by way of
inducement each purchaser is given a chance to win
a prize (54 C.J.S., 850; 34 Am. Jur., 654; Black, Law
Dictionary, 4th ed., p. 817; Ballantine, Law Dictionary
with Pronunciations, 2nd ed., p. 55; Retail Section of
Chamber of Commerce of Plattsmouth vs. Kieck, 257
N.W., 493, 128 Neb. 13; Barker vs. State, 193 S.E.,
605, 56 Ga. App., 705; Bell vs. State, 37 Tenn. 507,
509, 5 Sneed, 507, 509). As thus conceived, the term
clearly cannot embrace the scheme at bar. As already
noted, there is no sale of anything to which the
chance offered is attached as an inducement to the
purchaser. The contest is open to all qualified
contestants irrespective of whether or not they buy
the appellee's products.

Going a step farther, however, and assuming that the

appellee's contest can be encompassed within the
broadest sweep that the term "gift enterprise" is
capable of being extended, we think that the
appellant's pose will gain no added comfort. As stated
in the opinion relied upon, rulings there are indeed
holding that a gift enterprise involving an award by
chance, even in default of the element of
consideration necessary to constitute a lottery, is
prohibited (E.g.: Crimes vs. State, 235 Ala. 192, 178
So. 73; Russell vs. Equitable Loan & Sec. Co., 129
Ga., 154, 58 S.E, 88; State ex. rel. Stafford vs. FoxGreat Falls Theater Corporation, 132 P. 2d., 689, 694,
698, 114 Mont. 52). But this is only one side of the
coin. Equally impressive authorities declare that, like
a lottery, a gift enterprise comes within the prohibitive
statutes only if it exhibits the tripartite elements of
prize, chance and consideration (E.g.: Bills vs.
People, 157 P. 2d., 139, 142, 113 Colo., 326; D'Orio
vs. Jacobs, 275 P. 563, 565, 151 Wash., 297; People

vs. Psallis, 12 N.Y.S., 2d., 796; City and County of

Denver vs. Frueauff, 88 P., 389, 394, 39 Colo. 20, 7
L.R.A., N. S. 1131, 12 Ann. Cas., 521; 54 C.J.S., 851,
citing: Barker vs. State, 193 S.E., 605, 607, 56 Ga.
App., 705; 18 Words and Phrases, perm. ed., pp.
590-594). The apparent conflict of opinions is
explained by the fact that the specific statutory
provisions relied upon are not identical. In some
cases, as pointed out in 54 C.J.S., 851, the terms
"lottery" and "gift enterprise" are used interchangeably
(Bills vs. People, supra,); in others, the necessity for
the element of consideration or chance has been
specifically eliminated by statute (54 C.J.S., 351-352,
citing Barker vs. State, supra; State ex rel. Stafford vs.
Fox-Great Falls Theater Corporation, supra). The
lesson that we derive from this state of the pertinent
jurisprudence is, therefore, that every case must be
resolved upon the particular phraseology of the
applicable statutory provision.

gambling spirit and to corrupt public morals (Com. vs.

Lund, 15 A. 2d., 839, 143 Pa. Super. 208). Since in
gambling it is inherent that something of value be
hazarded for a chance to gain a larger amount, it
follows ineluctably that where no consideration is paid
by the contestant to participate, the reason behind the
law can hardly be said to obtain. If, as it has been
held -

Taking this cue, we note that in the Postal Law, the

term in question is used in association with the word
"lottery". With the meaning of lottery settled, and
consonant to the well-known principle of legal
hermeneutics noscitur a sociis - which Opinion 217
aforesaid also relied upon although only in so far as
the element of chance is concerned - it is only logical
that the term under construction should be accorded
no other meaning than that which is consistent with
the nature of the word associated therewith. Hence, if
lottery is prohibited only if it involves a consideration,
so also must the term "gift enterprise" be so
construed. Significantly, there is not in the law the
slightest indicium of any intent to eliminate that
element of consideration from the "gift enterprise"
therein included.

We find no obstacle in saying the same respecting a

gift enterprise. In the end, we are persuaded to hold
that, under the prohibitive provisions of the Postal
Law which we have heretofore examined, gift
enterprises and similar schemes therein contemplated
are condemnable only if, like lotteries, they involve the
element of consideration. Finding none in the contest
here in question, we rule that the appellee may not be
denied the use of the mails for purposes thereof.

This conclusion firms up in the light of the mischief

sought to be remedied by the law, resort to the
determination thereof being an accepted extrinsic aid
in statutory construction. Mail fraud orders, it is
axiomatic, are designed to prevent the use of the
mails as a medium for disseminating printed matters
which on grounds of public policy are declared nonmailable. As applied to lotteries, gift enterprises and
similar schemes, justification lies in the recognized
necessity to suppress their tendency to inflame the

"Gratuitous distribution of property by lot or chance

does not constitute 'lottery', if it is not resorted to as a
device to evade the law and no consideration is
derived, directly or indirectly, from the party receiving
the chance, gambling spirit not being cultivated or
stimulated thereby. City of Roswell vs. Jones, 67 P.
2d., 286, 41 N.M., 258." (25 Words and Phrases,
perm. ed., p. 695, Emphasis supplied).

Recapitulating, we hold that the petition herein states

a sufficient cause of action for declaratory relief, and
that the "Caltex Hooded Pump Contest" as described
in the rules submitted by the appellee does not
transgress the provisions of the Postal Law.

MILAGROS E. AMORES, Petitioner, versus HOUSE

OF REPRESENTATIVES ELECTORAL TRIBUNAL
and EMMANUEL JOEL J. VILLANUEVA,
Respondents.
CARPIO MORALES, J.:
Via this petition for certiorari, Milagros E. Amores
(petitioner) challenges the Decision of May 14, 2009
and Resolution No. 09-130 of August 6, 2009 of the

House of Representatives Electoral Tribunal (public

respondent), which respectively dismissed petitioner's
Petition for Quo Warranto questioning the legality of
the assumption of office of Emmanuel Joel J.
Villanueva (private respondent) as representative of
the party-list organization Citizens' Battle Against
Corruption (CIBAC) in the House of Representatives,
and denied petitioner's Motion for Reconsideration.
In her Petition for Quo Warranto[1] seeking the ouster
of private respondent, petitioner alleged that, among
other things, private respondent assumed office
without a formal proclamation issued by the
Commission on Elections (COMELEC); he was
disqualified to be a nominee of the youth sector of
CIBAC since, at the time of the filing of his certificates
of nomination and acceptance, he was already 31
years old or beyond the age limit of 30 pursuant to
Section 9 of Republic Act (RA) No. 7941, otherwise
known as the Party-List System Act; and his change
of affiliation from CIBAC's youth sector to its overseas
Filipino workers and their families sector was not
effected at least six months prior to the May 14, 2007
elections so as to be qualified to represent the new
sector under Section 15 of RA No. 7941.
Not having filed his Answer despite due notice, private
respondent was deemed to have entered a general
denial pursuant to public respondent's Rules.[2]
As earlier reflected, public respondent, by Decision of
May 14, 2009,[3] dismissed petitioner's Petition for
Quo Warranto, finding that CIBAC was among the
party-list organizations which the COMELEC had
partially proclaimed as entitled to at least one seat in
the House of Representatives through National Board
of Canvassers (NBC) Resolution No. 07-60 dated July
9, 2007. It also found the petition which was filed on
October 17, 2007 to be out of time, the reglementary
period being 10 days from private respondent's
proclamation.
Respecting the age qualification for youth sectoral
nominees under Section 9 of RA No. 7941, public
respondent held that it applied only to those
nominated as such during the first three
congressional terms after the ratification of the
Constitution or until 1998, unless a sectoral party is
thereafter registered exclusively as representing the
youth sector, which CIBAC, a multi-sectoral

organization, is not.
In the matter of private respondent's shift of affiliation
from CIBAC's youth sector to its overseas Filipino
workers and their families sector, public respondent
held that Section 15 of RA No. 7941 did not apply as
there was no resultant change in party-list affiliation.
Her Motion for Reconsideration having been denied
by Resolution No. 09-130 dated August 6, 2009,[4]
petitioner filed the present Petition for Certiorari.[5]
Petitioner contends that, among other things, public
respondent created distinctions in the application of
Sections 9 and 15 of RA No. 7941 that are not found
in the subject provisions, fostering interpretations at
war with equal protection of the laws; and NBC
Resolution No. 07-60, which was a partial
proclamation of winning party-list organizations, was
not enough basis for private respondent to assume
office on July 10, 2007, especially considering that he
admitted receiving his own Certificate of Proclamation
only on December 13, 2007.
In his Comment,[6] private respondent avers in the
main that petitioner has not substantiated her claims
of grave abuse of discretion against public
respondent; and that he became a member of the
overseas Filipinos and their families sector years
before the 2007 elections.
It bears noting that the term of office of party-list
representatives elected in the May, 2007 elections will
expire on June 30, 2010. While the petition has, thus,
become moot and academic, rendering of a decision
on the merits in this case would still be of practical
value.[7]
The Court adopts the issues framed by public
respondent, to wit: (1) whether petitioner's Petition for
Quo Warranto was dismissible for having been filed
unseasonably; and (2) whether Sections 9 and 15 of
RA No. 7941 apply to private respondent.
On the first issue, the Court finds that public
respondent committed grave abuse of discretion in
considering petitioner's Petition for Quo Warranto filed
out of time. Its counting of the 10-day reglementary

period provided in its Rules[8] from the issuance of

NBC Resolution No. 07-60 on July 9, 2007 is
erroneous.
To be sure, while NBC Resolution No. 07-60 partially
proclaimed CIBAC as a winner in the May, 2007
elections, along with other party-list organizations,[9]
it was by no measure a proclamation of private
respondent himself as required by Section 13 of RA
No. 7941.
Section 13. How Party-List Representatives are
Chosen. Party-list representatives shall be proclaimed
by the COMELEC based on the list of names
submitted by the respective parties, organizations, or
coalitions to the COMELEC according to their ranking
in said list.
AT ALL EVENTS, this Court set aside NBC Resolution
No. 07-60 in Barangay Association for National
Advancement and Transparency v. COMELEC[10]
after revisiting the formula for allocation of additional
seats to party-list organizations.
Considering, however, that the records do not
disclose the exact date of private respondent's
proclamation, the Court overlooks the technicality of
timeliness and rules on the merits. Alternatively, since
petitioner's challenge goes into private respondent's
qualifications, it may be filed at anytime during his
term.
Qualifications for public office are continuing
requirements and must be possessed not only at the
time of appointment or election or assumption of
office but during the officer's entire tenure. Once any
of the required qualifications is lost, his title may be
seasonably challenged.[11]
On the second and more substantial issue, the Court
shall first discuss the age requirement for youth sector
nominees under Section 9 of RA No. 7941 reading:
Section 9. Qualifications of Party-List Nominees. No
person shall be nominated as party-list representative
unless he is a natural-born citizen of the Philippines, a
registered voter, a resident of the Philippines for a
period of not less than one (1)year immediately
preceding the day of the election, able to read and
write, a bona fide member of the party or organization

which he seeks to represent for at least ninety (90)

days preceding the day of the election, and is at least
twenty-five (25) years of age on the day of the
election.
In case of a nominee of the youth sector, he must at
least be twenty-five (25) but not more than thirty (30)
years of age on the day of the election. Any youth
sectoral representative who attains the age of thirty
(30) during his term shall be allowed to continue in
office until the expiration of his term. (Emphasis and
underscoring supplied.)
The Court finds no textual support for public
respondent's interpretation that Section 9 applied only
to those nominated during the first three
congressional terms after the ratification of the
Constitution or until 1998, unless a sectoral party is
thereafter registered exclusively as representing the
youth sector.
A cardinal rule in statutory construction is that when
the law is clear and free from any doubt or ambiguity,
there is no room for construction or interpretation.
There is only room for application.[12]
As the law states in unequivocal terms that a nominee
of the youth sector must at least be twenty-five (25)
but not more than thirty (30) years of age on the day
of the election, so it must be that a candidate who is
more than 30 on election day is not qualified to be a
youth sector nominee. Since this mandate is
contained in RA No. 7941, the Party-List System Act,
it covers ALL youth sector nominees vying for partylist representative seats.
As petitioner points out, RA No. 7941 was enacted
only in March, 1995. There is thus no reason to apply
Section 9 thereof only to youth sector nominees
nominated during the first three congressional terms
after the ratification of the Constitution in 1987. Under
this interpretation, the last elections where Section 9
applied were held in May, 1995 or two months after
the law was enacted. This is certainly not sound
legislative intent, and could not have been the
objective of RA No. 7941.
There is likewise no rhyme or reason in public
respondent's ratiocination that after the third
congressional term from the ratification of the

Constitution, which expired in 1998, Section 9 of RA

No. 7941 would apply only to sectoral parties
registered exclusively as representing the youth
sector. This distinction is nowhere found in the law.
Ubi lex non distinguit nec nos distinguire debemus.
When the law does not distinguish, we must not
distinguish.[13]
Respecting Section 15 of RA No. 7941, the Court fails
to find even an iota of textual support for public
respondent's ratiocination that the provision did not
apply to private respondent's shift of affiliation from
CIBAC's youth sector to its overseas Filipino workers
and their families sector as there was no resultant
change in party-list affiliation. Section 15 reads:
Section 15. Change of Affiliation; Effect. Any elected
party-list representative who changes his political
party or sectoral affiliation during his term of office
shall forfeit his seat: Provided, That if he changes his
political party or sectoral affiliation within six (6)
months before an election, he shall not be eligible for
nomination as party-list representative under his new
party or organization. (emphasis and underscoring
supplied.)
What is clear is that the wording of Section 15 covers
changes in both political party and sectoral affiliation.
And the latter may occur within the same party since
multi-sectoral party-list organizations are qualified to
participate in the Philippine party-list system. Hence,
a nominee who changes his sectoral affiliation within
the same party will only be eligible for nomination
under the new sectoral affiliation if the change has
been effected at least six months before the elections.
Again, since the statute is clear and free from
ambiguity, it must be given its literal meaning and
applied without attempted interpretation. This is the
plain meaning rule or verba legis, as expressed in the
maxim index animi sermo or speech is the index of
intention.[14]
It is, therefore, beyond cavil that Sections 9 and 15 of
RA No. 7941 apply to private respondent.
The Court finds that private respondent was not
qualified to be a nominee of either the youth sector or
the overseas Filipino workers and their families sector
in the May, 2007 elections.

The records disclose that private respondent was

already more than 30 years of age in May, 2007, it
being stipulated that he was born in August, 1975.[15]
Moreover, he did not change his sectoral affiliation at
least six months before May, 2007, public respondent
itself having found that he shifted to CIBAC's
overseas Filipino workers and their families sector
only on March 17, 2007.[16]
That private respondent is the first nominee of CIBAC,
whose victory was later upheld, is of no moment. A
party-list organization's ranking of its nominees is a
mere indication of preference, their qualifications
according to law are a different matter.
It not being contested, however, that private
respondent was eventually proclaimed as a party-list
representative of CIBAC and rendered services as
such, he is entitled to keep the compensation and
emoluments provided by law for the position until he
is properly declared ineligible to hold the same.[17]
WHEREFORE, the petition is GRANTED. The
Decision dated May 14, 2009 and Resolution No. 09130 dated August 6, 2009 of the House of
Representatives Electoral Tribunal are SET ASIDE.
Emmanuel Joel J. Villanueva is declared ineligible to
hold office as a member of the House of
Representatives representing the party-list
organization CIBAC.
THE PEOPLE OF THE PHILIPPINES, plaintiffappellees, vs. JOSE JABINAL Y CARMEN,
defendant-appellant.
ANTONIO, J:

Appeal from the judgment of the Municipal Court of

Batangas (provincial capital), Batangas, in Criminal
Case No. 889, finding the accused guilty of the crime
of Illegal Possession of Firearm and Ammunition and
sentencing him to suffer an indeterminate penalty
ranging from one (1) year and one (1) day to two (2)
years imprisonment, with the accessories provided by
law, which raises in issue the validity of his conviction
based on a retroactive application of Our ruling in
People v. Mapa. 1

The complaint filed against the accused reads:

"That on or about 9:00 o'clock, p.m., the 5th day of
September, 1964, in the poblacion, Municipality of
Batangas, Province of Batangas, Philippines, and
within the jurisdiction of this Honorable Court, the
above-named accused, a person not authorized by
law, did then and there wilfully, unlawfully and
feloniously keep in his possession, custody and direct
control a revolver Cal. .22, RG-8 German made with
one (1) live ammunition and four (4) empty shells
without first securing the necessary permit or license
to possess the same."
At the arraignment on September 11, 1964, the
accused entered a plea of not guilty, after which trial
was accordingly held.
The accused admitted that on September 5, 1964, he
was in possession of the revolver and the ammunition
described in the complaint, without the requisite
license or permit. He, however, claimed to be entitled
to exoneration because, although he had no license
or permit, he had an appointment as Secret Agent
from the Provincial Governor of Batangas and an
appointment as Confidential Agent from the PC
Provincial Commander, and the said appointments
expressly carried with them the authority to possess
and carry the firearm in question.
Indeed, the accused had appointments from the
above-mentioned officials as claimed by him. His
appointment from Governor Feliciano Leviste, dated
December 10, 1962, reads:
"Reposing special trust and confidence in your civic
spirit, and trusting that you will be an effective agent in
the detection of crimes and in the preservation of
peace and order in the province of Batangas,
especially with respect to the suppression of
trafficking in explosives, jueteng, illegal cockfighting,
cattle rustling, robbery and the detection of unlicensed
firearms, you are hereby appointed a SECRET
AGENT of the undersigned, the appointment to take
effect immediately, or as soon as you have qualified
for the position. As such Secret Agent, your duties
shall be those generally of a peace officer and

particularly to help in the preservation of peace and

order in this province and to make reports thereon to
me once or twice a month. It should be clearly
understood that any abuse of authority on your part
shall be considered sufficient ground for the automatic
cancellation of your appointment and immediate
separation from the service. In accordance with the
decision of the Supreme Court in G.R. No. L-12088
dated December 23, 1969, you will have the right to
bear a firearm, particularly described below, for use in
connection with the performance of your duties.
"By virtue hereof, you may qualify and enter upon the
performance of your duties by taking your oath of
office and filing the original thereof with us.
Very truly yours,
(Sgd.) FELICIANO LEVISTE
Provincial Governor
FIREARM AUTHORIZED TO CARRY:
Kind: - ROHM-Revolver
Make: - German
SN: - 64
Cal: - .22"

On March 15, 1964, the accused was also appointed

by the PC Provincial Commander of Batangas as
Confidential Agent with duties to furnish information
regarding smuggling activities wanted persons, loose
firearms, subversives and other similar subjects that
night affect the peace and order condition in Batangas
province, and in connection with these duties he was
temporarily authorized to possess an ROHM revolver,
Cal. .22 RG-8 SN-64, for his personal protection while
in the performance of official duties.
The accused contended before the court a quo that in
view of his above-mentioned appointments as Secret
Agent and Confidential Agent, with authority to
possess the firearm subject matter of the prosecution,
he was entitled to acquittal on the basis of the
Supreme Court's decisions in People v. Macarandang

2 and People v. Lucero. 3 The trial court, while

conceding that on the basis of the evidence of record
the accused had really been appointed Secret Agent
and Confidential Agent by the Provincial Governor
and the PC Provincial Commander of Batangas,
respectively, with authority to possess and carry the
firearm described in the complaint, nevertheless held
the accused in its decision dated December 27, 1968,
criminally liable for illegal possession of a firearm and
ammunition on the ground that the rulings of the
Supreme Court in the cases of Macarandang and
Lucero were reversed and abandoned in People v.
Mapa, supra. The court considered as mitigating
circumstances the appointments of the accused as
Secret Agent and Confidential Agent.
Let us advert to Our decisions in People v.
Macarandang, supra, People v. Lucero, supra, and
People v. Mapa, supra. In Macarandang, We reversed
the trial court's judgment of conviction against the
accused because it was shown that at the time he
was found to possess a certain firearm and
ammunition without license or permit, he had an
appointment from the Provincial Governor as Secret
Agent to assist in the maintenance of peace and order
and in the detection of crimes, with authority to hold
and carry the said firearm and ammunition. We there
held that while it is true that the Governor has no
authority to issue any firearm license or permit,
nevertheless, section 879 of the Revised
Administrative Code provides that "peace officers" are
exempted from the requirements relating to the
issuance of license to possess firearms; and
Macarandang's appointment as Secret Agent to assist
in the maintenance of peace and order and detection
of crimes, sufficiently placed him in the category of a
"peace officer" equivalent even to a member of the
municipal police who under section 879 of the
Revised Administrative Code are exempted from the
requirements relating to the issuance of license to
possess firearms. In Lucero, We held that under the
circumstances of the case, the granting of the
temporary use of the firearm to the accused was a
necessary means to carry out the lawful purpose of
the battalion commander and must be deemed
incident to or necessarily included in the duty and
power of said military commander to effect the
capture of a Huk leader. In Mapa, expressly
abandoning the doctrine in Macarandang, and by

implication, that in Lucero, We sustained the

judgment of conviction on the following ground:
"The law is explicit that except as thereafter
specifically allowed, 'it shall be unlawful for any
person to . . . possess any firearm, detached parts of
firearms or ammunition therefor, or any instrument or
implement used or intended to be used in the
manufacture of firearms, parts of firearms, or
ammunition. (Sec. 878, as amended by Republic Act
No. 4, Revised Administrative Code.) The next section
provides that 'firearms and ammunition regularly and
lawfully issued to officers, soldiers, sailors, or marines
[of the Armed Forces of the Philippines], the
Philippine Constabulary, guards in the employment of
the Bureau of Prisons, municipal police, provincial
governors, lieutenant governors, provincial treasurers,
municipal treasurers, municipal mayors, and guards
of provincial prisoners and jails,' are not covered
'when such firearms are in possession of such
officials and public servants for use in the
performance of their official duties.' (Sec. 879,
Revised Administrative Code.)
'The law cannot be any clearer. No provision is made
for a secret agent. As such he is not exempt. . . ."
It will be noted that when appellant was appointed
Secret Agent by the Provincial Government in 1962,
and Confidential Agent by the Provincial Commander
in 1964, the prevailing doctrine on the matter was that
laid down by Us in People v. Macarandang (1959) and
People v. Lucero (1958). Our decision in People v.
Mapa reversing the aforesaid doctrine came only in
1967. The sole question in this appeal is: Should
appellant be acquitted on the basis of Our rulings in
Macarandang and Lucero, or should his conviction
stand in view of the complete reversal of the
Macarandang and Lucero doctrine in Mapa? The
Solicitor General is of the first view, and he
accordingly recommends reversal of the appealed
judgment.
Decisions of this Court, although in themselves not
laws, are nevertheless evidence of what the laws
mean, and this is the reason why under Article 8 of
the New Civil Code, "Judicial decisions applying or

interpreting the laws or the Constitution shall form a

part of the legal system . .

." The interpretation upon a law by this Court

constitutes, in a way, a part of the law as of the date
that law was originally passed, since this Court's
construction merely establishes the contemporaneous
legislative intent that the law thus construed intends to
effectuate. The settled rule supported by numerous
authorities is a restatement of the legal maxim "legis
interpretatio legis vim obtinet" - the interpretation
placed upon the written law by a competent court has
the force of law. The doctrine laid down in Lucero and
Macarandang was part of the jurisprudence, hence, of
the law, of the land, at the time appellant was found
by possession of the firearm in question and when he
was arraigned by the trial court. It is true that the
doctrine was overruled in the Mapa case in 1967, but
when a doctrine of this Court is overruled and a
different view is adopted, the new doctrine should be
applied prospectively, and should not apply to parties
who had relied on the old doctrine and acted on the
faith thereof. This is especially true in the construction
and application of criminal laws, where it is necessary
that the punishability of an act be reasonably foreseen
for the guidance of society.
It follows, therefore, that considering that appellant
was conferred his appointments as Secret Agent and
Confidential Agent and authorized to possess a
firearm pursuant to the prevailing doctrine enunciated
in Macarandang and Lucero, under which no criminal
liability would attach to his possession of said firearm
in spite of the absence of a license and permit
therefor, appellant must he absolved. Certainly,
appellant may not be punished for an act which at the
time it was done was held not to be punishable.
WHEREFORE, the judgment appealed from is hereby
reversed, and appellant is acquitted, with costs de
oficio.

BERNADETTE L. ADASA, PETITIONER, VERSUS

CECILLE S. ABALOS, RESPONDENT.

CHICO-NAZARIO, J.:
This Petition for Review under Rule 45 of the Rules of
Court, filed by petitioner Bernadette L. Adasa, seeks
to nullify and set aside the 21 July 2004 Decision[1]
and 10 June 2005 Resolution[2] of the Court of
Appeals in CA-G.R. SP No. 76396 which nullified the
Resolutions of the Department of Justice (DOJ). The
Resolutions of the DOJ reversed and set aside the
Resolution of the Office of the City Prosecutor of
Iligan City, which found on reinvestigation probable
cause against petitioner, and directed the Office of the
City Prosecutor of Iligan City to withdraw the
information for Estafa against petitioner.
The instant case emanated from the two complaintsaffidavits filed by respondent Cecille S. Abalos on 18
January 2001 before the Office of the City Prosecutor
of Iligan City, against petitioner for Estafa.
Respondent alleged in the complaints-affidavits that
petitioner, through deceit, received and encashed two
checks issued in the name of respondent without
respondent's knowledge and consent and that despite
repeated demands by the latter, petitioner failed and
refused to pay the proceeds of the checks.
On 23 March 2001, petitioner filed a counter-affidavit
admitting that she received and encashed the two
checks issued in favor of respondent.
In her Supplemental Affidavit filed on 29 March 2001,
petitioner, however, recanted and alleged instead that
it was a certain Bebie Correa who received the two
checks which are the subject matter of the complaints
and encashed the same; and that said Bebie Correa
left the country after misappropriating the proceeds of
the checks.
On 25 April 2001, a resolution was issued by the
Office of the City Prosecutor of Iligan City finding
probable cause against petitioner and ordering the
filing of two separate Informations for Estafa Thru
Falsification of Commercial Document by a Private
Individual, under Article 315 in relation to Articles 171
and 172 of the Revised Penal Code, as amended.
Consequently, two separate criminal cases were filed
against petitioner docketed as Criminal Cases No.

8781 and No. 8782, raffled to Branches 4 and 5,

Regional Trial Court of Iligan City, respectively.
This instant petition pertains only to Criminal Case
No. 8782.
On 8 June 2001, upon motion of the petitioner, the
trial court in Criminal Case No. 8782 issued an order
directing the Office of the City Prosecutor of Iligan City
to conduct a reinvestigation.
After conducting the reinvestigation, the Office of the
City Prosecutor of Iligan City issued a resolution
dated 30 August 2001, affirming the finding of
probable cause against petitioner.
Meanwhile, during her arraignment on 1 October
2001 in Criminal Case No. 8782, petitioner entered an
unconditional plea of not guilty.[3]
Dissatisfied with the finding of the Office of the City
Prosecutor of Iligan City, petitioner filed a Petition for
Review before the DOJ on 15 October 2001.
In a Resolution dated 11 July 2002, the DOJ reversed
and set aside the 30 August 2001 resolution of the
Office of the City Prosecutor of Iligan City and
directed the said office to withdraw the Information for
Estafa against petitioner.
The said DOJ resolution prompted the Office of the
City Prosecutor of Iligan City to file a "Motion to
Withdraw Information" on 25 July 2002.
On 26 July 2002, respondent filed a motion for
reconsideration of said resolution of the DOJ arguing
that the DOJ should have dismissed outright the
petition for review since Section 7 of DOJ Circular No.
70 mandates that when an accused has already been
arraigned and the aggrieved party files a petition for
review before the DOJ, the Secretary of Justice
cannot, and should not take cognizance of the
petition, or even give due course thereto, but instead
deny it outright. Respondent claimed Section 12
thereof mentions arraignment as one of the grounds
for the dismissal of the petition for review before the
DOJ.
In a resolution dated 30 January 2003, the DOJ
denied the Motion for Reconsideration opining that

under Section 12, in relation to Section 7, of DOJ

Circular No. 70, the Secretary of Justice is not
precluded from entertaining any appeal taken to him
even where the accused has already been arraigned
in court. This is due to the permissive language "may"
utilized in Section 12 whereby the Secretary has the
discretion to entertain an appealed resolution
notwithstanding the fact that the accused has been
arraigned.

the charge, she was deemed to have waived her right

to reinvestigation and right to question any irregularity
that surrounds it.

Meanwhile, on 27 February 2003, the trial court

issued an order granting petitioner's "Motion to
Withdraw Information" and dismissing Criminal Case
No. 8782. No action was taken by respondent or any
party of the case from the said order of dismissal.

In disposing of the last issue, the Court of Appeals

held that the order of the trial court dismissing the
subject criminal case pursuant to the assailed
resolutions of the DOJ did not render the petition
moot and academic. It said that since the trial court's
order relied solely on the resolutions of the DOJ, said
order is void as it violated the rule which enjoins the
trial court to assess the evidence presented before it
in a motion to dismiss and not to rely solely on the
prosecutor's averment that the Secretary of Justice
had recommended the dismissal of the case.

Aggrieved by the resolution of the DOJ, respondent

filed a Petition for Certiorari before the Court of
Appeals. Respondent raised the following issues
before the appellate court:

Anent the second issue, the Court of Appeals

declared that the existence of probable cause or the
lack of it, cannot be dealt with by it since factual
issues are not proper subjects of a Petition
for Certiorari.

1. Whether or not the Department of Justice gravely

abused its discretion in giving due course to
petitioner's petition for review despite its having been
filed after the latter had already been arraigned;

Dissatisfied by the Court of Appeals' ruling, petitioner

filed a Motion for Reconsideration setting forth the
following grounds:

2. Whether or not there is probable cause that the

crime of estafa has been committed and that
petitioner is probably guilty thereof;

1. that the over-all language of Sections 7 and 12 of

Department Circular No. 70 is permissive and
directory such that the Secretary of Justice may
entertain an appeal despite the fact that the accused
had been arraigned;

3. Whether or not the petition before the Court of

Appeals has been rendered moot and academic by
the order of the Regional Trial Court dismissing
Criminal Case No. 8782.
The Court of Appeals in a Decision dated 21 July
2004 granted respondent's petition and reversed the
Resolutions of the DOJ dated 11 July 2002 and 30
January 2003.
In resolving the first issue, the Court of Appeals,
relying heavily on Section 7 of DOJ Circular No. 70
which states "[i]f an information has been filed in court
pursuant to the appealed resolution, the petition shall
not be given due course if the accused had already
been arraigned," ruled that since petitioner was
arraigned before she filed the petition for review with
the DOJ, it was imperative for the DOJ to dismiss
such petition. It added that when petitioner pleaded to

2. that the contemporaneous construction by the

Secretary of Justice should be given great weight and
respect;
3. that Section 7 of the Circular applies only to
resolutions rendered pursuant to a preliminary
investigation, not on a reinvestigation;
4. that the trial court's order of dismissal of the
criminal case has rendered the instant petition moot
and academic;
5. that her arraignment was null and void it being
conducted despite her protestations; and
6. that despite her being arraigned, the supposed
waiver of her right to preliminary investigation has

been nullified or recalled by virtue of the trial court's

order of reinvestigation.[4]
The Court of Appeals stood firm by its decision. This
time, however, it tried to construe Section 7 side by
side with Section 12 of DOJ Circular No. 70 and
attempted to reconcile these two provisions.
According to the appellate court, the phrase "shall
not" in paragraph two, first sentence of Section 7 of
subject circular, to wit:
If an information has been filed in court pursuant to
the appealed resolution, the petition shall not be given
due course if the accused had already been
arraigned. x x x. (Emphasis supplied.)
employed in the circular denotes a positive
prohibition. Applying the principle in statutory
construction - that when a statute or provision
contains words of positive prohibition, such as "shall
not," "cannot," or "ought not" or which is couched in
negative terms importing that the act shall not be
done otherwise than designated, that statute or
provision is mandatory, thus rendering the provision
mandatory - it opined that the subject provision simply
means that the Secretary of Justice has no other
course of action but to deny or dismiss a petition
before him when arraignment of an accused had
already taken place prior to the filing of the petition for
review.
On the other hand, reading Section 12 of the same
circular which reads:
The Secretary may reverse, affirm or modify the
appealed resolution. He may, motu proprio or upon
motion, dismiss the petition for review on any of the
following grounds:
xxxx

"may" in Section 12 would seem to imply that the

Secretary of Justice has discretion to entertain an
appeal notwithstanding the fact that the accused has
been arraigned. This provision should not be treated
separately, but should be read in relation to Section 7.
The two provisions, taken together, simply meant that
when an accused was already arraigned when the
aggrieved party files a petition for review, the
Secretary of Justice cannot, and should not take
cognizance of the petition, or even give due course
thereto, but instead dismiss or deny it outright. The
appellate court added that the word "may" in Section
12 should be read as "shall" or "must" since such
construction is absolutely necessary to give effect to
the apparent intention of the rule as gathered from the
context.
As to the contemporaneous construction of the
Secretary of Justice, the Court of Appeals stated that
the same should not be given weight since it was
erroneous.
Anent petitioner's argument that Section 7 of the
questioned circular applies only to original resolutions
that brought about the filing of the corresponding
informations in court, but not to resolutions rendered
pursuant to a motion for reinvestigation, the appellate
court simply brushed aside such contention as having
no basis in the circular questioned.

having been filed after the accused had already been

arraigned. It asserts that the fact of arraignment of an
accused before the filing of an appeal or petition for
review before the DOJ "is not at all relevant" as the
DOJ can still take cognizance of the appeal or Petition
for Review before it. In support of this contention,
petitioner set her sights on the ruling of this Court
in Crespo v. Mogul,[5] to wit:
The rule therefore in this jurisdiction is that once a
complaint or information is filed in Court any
disposition of the case as to its dismissal or the
conviction or acquittal of the accused rests in the
sound discretion of the Court. Although the fiscal
retains the direction and control of the prosecution of
criminal cases even while the case is already in Court
he cannot impose his opinion on the trial court. The
Court is the best and sole judge on what to do with
the case before it. The determination of the case is
within its exclusive jurisdiction and competence. A
motion to dismiss the case filed by the fiscal should
be addressed to the Court who has the option to grant
or deny the same. It does not matter if this is done
before or after the arraignment of the accused or that
the motion was filed after a reinvestigation or upon
instructions of the Secretary of Justice who reviewed
the records of the investigation. (Emphasis supplied.)

It also rejected petitioner's protestation that her

arraignment was forced upon her since she failed to
present any evidence to substantiate the same.

To bolster her position, petitioner cites Roberts v.

Court of Appeals,[6] which stated:

It is petitioner's contention that despite her being

arraigned, the supposed waiver of her right to
preliminary investigation has been nullified by virtue of
the trial court's order or reinvestigation. On this score,
the Court of Appeals rebuffed such argument stating
that there was no "supposed waiver of preliminary
investigation" to speak of for the reason that petitioner
had actually undergone preliminary investigation.

There is nothing in Crespo vs. Mogul which bars the

DOJ from taking cognizance of an appeal, by way of a
petition for review, by an accused in a criminal case
from an unfavorable ruling of the investigating
prosecutor. It merely advised the DOJ to, "as far as
practicable, refrain from entertaining a petition for
review or appeal from the action of the fiscal, when
the complaint or information has already been filed in
Court. x x x. (Emphasis supplied.)

Petitioner remained unconvinced with the

explanations of the Court of Appeals.

(e) That the accused had already been arraigned

when the appeal was taken; x x x.

Hence, the instant petition.

the Court of Appeals opined that the permissive word

Again, petitioner contends that the DOJ can give due

course to an appeal or petition for review despite its

Petitioner likewise invokes Marcelo v. Court of

Appeals[7] where this Court declared:
Nothing in the said ruling forecloses the power or
authority of the Secretary of Justice to review

resolutions of his subordinates in criminal cases. The

Secretary of Justice is only enjoined to refrain as far
as practicable from entertaining a petition for review
or appeal from the action of the prosecutor once a
complaint or information is filed in court. In any case,
the grant of a motion to dismiss, which the
prosecution may file after the Secretary of Justice
reverses an appealed resolution, is subject to the
discretion of the court.
The Court is unconvinced.
A cursory reading of Crespo v. Mogul reveals that the
ruling therein does not concern the issue of an appeal
or petition for review before the DOJ after
arraignment. Verily, the pronouncement therein has to
do with the filing of a motion to dismiss and the court's
discretion to deny or grant the same. As correctly
pointed out by respondent, the emphasized portion in
the Crespo ruling is a parcel of the entire paragraph
which relates to the duty and jurisdiction of the trial
court to determine for itself whether or not to dismiss
a case before it, and which states that such duty
comes into play regardless of whether such motion is
filed before or after arraignment and upon whose
instructions. The allusion to the Secretary of Justice
as reviewing the records of investigation and giving
instructions for the filing of a motion to dismiss in the
cited ruling does not take into consideration of
whether the appeal or petition before the Secretary of
Justice was filed after arraignment. Significantly, in
the Crespo case, the accused had not yet been
arraigned when the appeal or petition for review was
filed before the DOJ. Undoubtedly, petitioner's
reliance on the said case is misplaced.
Also unavailing is petitioner's invocation of the cases
of Roberts v. Court of Appeals and Marcelo v. Court of
Appeals. As in Crespo v. Mogul, neither Roberts v.
Court of Appeals nor Marcelo v. Court of Appeals took
into account of whether the appeal or petition before
the Secretary of Justice was filed after arraignment.
Just like in the Crespo case, the accused in
both Roberts v. Court of Appeals and Marcelo v. Court
of Appeals had not yet been arraigned when the
appeal or petition for review was filed before the DOJ.
Moreover, petitioner asserts that the Court of Appeals'
interpretation of the provisions of DOJ Circular No. 70
violated three basic rules in statutory construction.

First, the rule that the provision that appears last in

the order of position in the rule or regulation must
prevail. Second, the rule that the contemporaneous
construction of a statute or regulation by the officers
who enforce it should be given weight. Third,
petitioner lifted a portion from Agpalo's Statutory
Construction[8] where the word "shall" had been
construed as a permissive, and not a mandatory
language.

following grounds:

The all too-familiar rule in statutory construction, in

this case, an administrative rule[9] of procedure, is
that when a statute or rule is clear and unambiguous,
interpretation need not be resorted to.[10] Since
Section 7 of the subject circular clearly and
categorically directs the DOJ to dismiss outright an
appeal or a petition for review filed after arraignment,
no resort to interpretation is necessary.

(d) That the appealed resolution is interlocutory in

nature, except when it suspends the proceedings
based on the alleged existence of a prejudicial
question;

(a) That the petition was filed beyond the period

prescribed in Section 3 hereof;
(b) That the procedure or any of the requirements
herein provided has not been complied with;
(c) That there is no showing of any reversible error;

(e) That the accused had already been arraigned

when the appeal was taken;
(f) That the offense has already prescribed; and

Petitioner's reliance to the statutory principle that "the

last in order of position in the rule or regulation must
prevail" is not applicable. In addition to the fact that
Section 7 of DOJ Circular No. 70 needs no
construction, the cited principle cannot apply
because, as correctly observed by the Court of
Appeals, there is no irreconcilable conflict between
Section 7 and Section 12 of DOJ Circular No. 70.
Section 7 of the circular provides:
SECTION 7. Action on the petition. - The Secretary of
Justice may dismiss the petition outright if he finds the
same to be patently without merit or manifestly
intended for delay, or when the issues raised therein
are too unsubstantial to require consideration. If an
information has been filed in court pursuant to the
appealed resolution, the petition shall not be given
due course if the accused had already been
arraigned. Any arraignment made after the filing of the
petition shall not bar the Secretary of Justice from
exercising his power of review. (Italics supplied.)
On the other hand, Section 12 of the same circular
states:
SECTION 12. Disposition of the Appeal. - The
Secretary may reverse, affirm or modify the appealed
resolution. He may, motu proprio or upon
motion, dismiss the petition for review on any of the

(g) That other legal or factual grounds exist to warrant

a dismissal. (Emphases supplied.)
It is noteworthy that the principle cited by petitioner
reveals that, to find application, the same
presupposes that "one part of the statute cannot be
reconciled or harmonized with another part without
nullifying one in favor of the other." In the instant case,
however, Section 7 is neither contradictory nor
irreconcilable with Section 12. As can be seen above,
Section 7 pertains to the action on the petition that the
DOJ must take, while Section 12 enumerates the
options the DOJ has with regard to the disposition of
a petition for review or of an appeal.
As aptly observed by respondent, Section 7
specifically applies to a situation on what the DOJ
must do when confronted with an appeal or a petition
for review that is either clearly without merit,
manifestly intended to delay, or filed after an accused
has already been arraigned, i.e., he may dismiss it
outright if it is patently without merit or manifestly
intended to delay, or, if it was filed after the acccused
has already been arraigned, the Secretary shall not
give it due course.
Section 12 applies generally to the disposition of an
appeal. Under said section, the DOJ may take any of
four actions when disposing an appeal, namely:

1. reverse the appealed resolution;

2. modify the appealed resolution;
3. affirm the appealed resolution;
4. dismiss the appeal altogether, depending on the
circumstances and incidents attendant thereto.
As to the dismissal of a petition for review or an
appeal, the grounds are provided for in Section 12
and, consequently, the DOJ must evaluate the
pertinent circumstances and the facts of the case in
order to determine which ground or grounds shall
apply.
Thus, when an accused has already been arraigned,
the DOJ must not give the appeal or petition for
review due course and must dismiss the same. This is
bolstered by the fact that arraignment of the accused
prior to the filing of the appeal or petition for review is
set forth as one of the grounds for its dismissal.
Therefore, in such instance, the DOJ, noting that the
arraignment of an accused prior to the filing of an
appeal or petition for review is a ground for dismissal
under Section 12, must go back to Section 7 and act
upon as mandated therein. In other words, the DOJ
must not give due course to, and must necessarily
dismiss, the appeal.
Likewise, petitioner's reliance on the principle of
contemporary construction, i.e., the DOJ is not
precluded from entertaining appeals where the
accused had already been arraigned, because it
exercises discretionary power, and because it
promulgated itself the circular in question, is
unpersuasive. As aptly ratiocinated by the Court of
Appeals:
True indeed is the principle that a contemporaneous
interpretation or construction by the officers charged
with the enforcement of the rules and regulations it
promulgated is entitled to great weight by the court in
the latter's construction of such rules and regulations.
That does not, however, make such a construction
necessarily controlling or binding. For equally settled
is the rule that courts may disregard
contemporaneous construction in instances where the

law or rule construed possesses no ambiguity, where

the construction is clearly erroneous, where strong
reason to the contrary exists, and where the court has
previously given the statute a different interpretation.
If through misapprehension of law or a rule an
executive or administrative officer called upon to
implement it has erroneously applied or executed it,
the error may be corrected when the true construction
is ascertained. If a contemporaneous construction is
found to be erroneous, the same must be declared
null and void. Such principle should be as it is applied
in the case at bar.[11]
Petitioner's posture on a supposed exception to the
mandatory import of the word "shall" is misplaced. It is
petitioner's view that the language of Section 12 is
permissive and therefore the mandate in Section 7
has been transformed into a matter within the
discretion of the DOJ. To support this stance,
petitioner cites a portion of Agpalo's Statutory
Construction which reads:
For instance, the word "shall" in Section 2 of Republic
Act 304 which states that "banks or other financial
institutions owned or controlled by the Government
shall, subject to availability of funds xxx, accept at a
discount at not more than two per centum for ten
years such (backpay) certificate" implies not a
mandatory, but a discretionary, meaning because of
the phrase "subject to availability of funds." Similarly,
the word "shall" in the provision to the effect that a
corporation violating the corporation law "shall, upon
such violation being proved, be dissolved by quo
warranto proceedings" has been construed as
"may."[12]
After a judicious scrutiny of the cited passage, it
becomes apparent that the same is not applicable to
the provision in question. In the cited passage, the
word "shall" departed from its mandatory import
connotation because it was connected to certain
provisos/conditions: "subject to the availability of
funds" and "upon such violation being proved." No
such proviso/condition, however, can be found in
Section 7 of the subject circular. Hence, the word
"shall" retains its mandatory import.

At this juncture, the Court of Appeals' disquisition in

this matter is enlightening:
Indeed, if the intent of Department Circular No. 70
were to give the Secretary of Justice a discretionary
power to dismiss or to entertain a petition for review
despite its being outrightly dismissible, such as when
the accused has already been arraigned, or where the
crime the accused is being charged with has already
prescribed, or there is no reversible error that has
been committed, or that there are legal or factual
grounds warranting dismissal, the result would not
only be incongruous but also irrational and even
unjust. For then, the action of the Secretary of Justice
of giving due course to the petition would serve no
purpose and would only allow a great waste of time.
Moreover, to give the second sentence of Section 12
in relation to its paragraph (e) a directory application
would not only subvert the avowed objectives of the
Circular, that is, for the expeditious and efficient
administration of justice, but would also render its
other mandatory provisions - Sections 3, 5, 6 and 7,
nugatory.[13]
In her steadfast effort to champion her case, petitioner
contends that the issue as to whether the DOJ
rightfully entertained the instant case, despite the
arraignment of the accused prior to its filing, has been
rendered moot and academic with the order of
dismissal by the trial court dated 27 February 2003.
Such contention deserves scant consideration.
It must be stressed that the trial court dismissed the
case precisely because of the Resolutions of the DOJ
after it had, in grave abuse of its discretion, took
cognizance of the petition for review filed by
petitioner. Having been rendered in grave abuse of its
discretion, the Resolutions of the DOJ are void. As the
order of dismissal of the trial court was made
pursuant to the void Resolutions of the DOJ, said
order was likewise void. The rule in this jurisdiction is
that a void judgment is a complete nullity and without
legal effect, and that all proceedings or actions
founded thereon are themselves regarded as invalid
and ineffective for any purpose.[14] That respondent
did not file a motion for reconsideration or appeal from
the dismissal order of the trial court is of no moment.
Since the dismissal was void, there was nothing for
respondent to oppose.

Petitioner further asserts that Section 7 of DOJ

Circular No. 70 applies only to appeals from original
resolution of the City Prosecutor and does not apply
in the instant case where an appeal is interposed by
petitioner from the Resolution of the City Prosecutor
denying her motion for reinvestigation. This claim is
baseless.
A reading of Section 7 discloses that there is no
qualification given by the same provision to limit its
application to appeals from original resolutions and
not to resolutions on reinvestigation. Hence, the rule
stating that "when the law does not distinguish, we
must not distinguish"[15] finds application in this
regard.
Petitioner asserts that her arraignment was null and
void as the same was improvidently conducted.
Again, this contention is without merit. Records reveal
that petitioner's arraignment was without any
restriction, condition or reservation.[16] In fact she
was assisted by her counsels Atty. Arthur Abudiente
and Atty. Maglinao when she pleaded to the charge.
[17]
Moreover, the settled rule is that when an accused
pleads to the charge, he is deemed to have waived
the right to preliminary investigation and the right to
question any irregularity that surrounds it.[18] This
precept is also applicable in cases of reinvestigation
as well as in cases of review of such reinvestigation.
In this case, when petitioner unconditionally pleaded
to the charge, she effectively waived the
reinvestigation of the case by the prosecutor as well
as the right to appeal the result thereof to the DOJ
Secretary. Thus, with the arraignment of the petitioner,
the DOJ Secretary can no longer entertain the appeal
or petition for review because petitioner had already
waived or abandoned the same.
Lastly, while there is authority[19] permitting the Court
to make its own determination of probable cause,
such, however, cannot be made applicable in the
instant case. As earlier stated, the arraignment of
petitioner constitutes a waiver of her right to
preliminary investigation or reinvestigation. Such
waiver is tantamount to a finding of probable cause.
For this reason, there is no need for the Court to
determine the existence or non-existence of probable
cause.

Besides, under Rule 45 of the Rules of Court, only

questions of law may be raised in, and be subject of,
a petition for review on certiorari since this Court is
not a trier of facts. This being the case, this Court
cannot review the evidence adduced by the parties
before the prosecutor on the issue of the absence or
presence of probable cause.[20]

request of both parties, the case was certified for

arbitration on July 7, 1975 (p. 18, NLRC rec.).
On August 25, 1975, Labor Arbiter Ricarte T. Soriano
rendered a decision in the above-entitled case,
granting petitioner's complaint for payment of holiday
pay. Pertinent portions of the decision read:

WHEREFORE, the petition is DENIED. The Decision

of the Court of Appeals dated 21 July 2004 and its
Resolution dated 10 June 2005 in CA-G.R. SP No.
76396 are AFFIRMED. Costs against petitioner.

xxx xxx xxx

NSULAR BANK OF ASIA AND AMERICA

EMPLOYEES' UNION (IBAAEU), petitioner, vs. HON.
AMADO G. INCIONG,

'Art. 208. Right to holiday pay. -

MAKASIAR, J.:
This is a petition for certiorari to set aside the order
dated November 10, 1979, of respondent Deputy
Minister of Labor, Amado G. Inciong, in NLRC case
No. RB-IV-1561-76 entitled "Insular Bank of Asia and
America Employees' Union (complainant-appellee),
vs. Insular Bank of Asia and America" (respondentappellant), the dispositive portion of which reads as
follows:

"The records disclosed that employees of respondent

bank were not paid their wages on unworked regular
holidays as mandated by the Code, particularly Article
208, to wit:

'(a) Every worker shall be paid his regular daily wage

during regular holidays, except in retail and service
establishments regularly employing less than 10
workers.
'(b) The term "holiday" as used in this chapter, shall
include: New Year's Day, Maundy Thursday, Good
Friday, the ninth of April, the first of May, the twelfth of
June, the fourth of July, the thirtieth of November, the
twenty-fifth and thirtieth of December and the day
designated by law for holding a general election.
'xxx xxx xxx'

"xxx xxx xxx

"ALL THE FOREGOING CONSIDERED, let the
appealed Resolution en banc of the National Labor
Relations Commission dated 20 June 1978 be, as it is
hereby, set aside and a new judgment promulgated
dismissing the instant case for lack of merit" (p. 109,
rec.).

The antecedent facts culled from the records are as

follows:
On June 20, 1975, petitioner filed a complaint against
the respondent bank for the payment of holiday pay
before the then Department of Labor, National Labor
Relations Commission, Regional Office No. IV in
Manila. Conciliation having failed, and upon the

"This conclusion is deduced from the fact that the

daily rate of pay of the bank employees was
computed in the past with the unworked regular
holidays as excluded for purposes of determining the
deductible amount for absences incurred 4 Thus, if
the employer uses the factor 303 days as a divisor in
determining the daily rate of monthly paid employee,
this gives rise to a presumption that the monthly rate
does not include payments for unworked regular
holidays. The use of the factor 303 indicates the
number of ordinary working days in a year (which
normally has 365 calendar days), excluding the 52
Sundays and the 10 regular holidays. The use of 251
as a factor (365 calendar days less 52 Saturdays, 52
Sundays, and 10 regular holidays) gives rise likewise
to the same presumption that the unworked
Saturdays, Sundays and regular holidays are unpaid.
This being the case, it is not amiss to state with
certainty that the instant claim for wages on regular

unworked holidays is found to be tenable and

meritorious.
"WHEREFORE, judgment is hereby rendered:
"(a) . . .
"(b) Ordering respondent to pay wages to all its
employees fro all regular holidays since November 1,
1974" (pp. 97-99, rec.).
Respondent bank did not appeal from the said
decision. Instead, it complied with the order of Arbiter
Ricarte T. Soriano by paying their holiday pay up to
and including January, 1976.
On December 16, 1975, Presidential Decree No. 850
was promulgated amending, among others, the
provisions of the Labor Code on the right to holiday
pay to read as follows:
"Art. 94. Right to holiday pay. - (a) Every worker shall
be paid his regular daily wages during regular
holidays, except in retail and service establishments
regularly employing less than ten (10) workers;
"(b) The employer may require an employee to work
on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate; and
"(c) As used in this Article, 'holiday' includes: New
Year's Day, Maundy Thursday, Good Friday, the ninth
of April, the first of May, the twelfth of June, the fourth
of July, the thirtieth of November, the twenty-fifth and
the thirtieth of December, and the day designated by
law for holding a general election."
Accordingly, on February 16, 1976, by authority of
Article 5 of the same Code, the Department of Labor
(now Ministry of Labor) promulgated the rules and
regulations for the implementation of holidays with
pay. The controversial section thereof reads:
"Sec. 2. Status of employees paid by the month. Employees who are uniformly paid by the month,
irrespective of the number of working days therein,
with e salary of not less than the statutory or
established minimum wage shall be presumed to be

paid for all days in the month whether worked or not.

"For this purpose, the monthly minimum wage shall
not be less than the statutory minimum wage
multiplied by 365 days divided by twelve".
On April 23, 1976, Policy Instruction No. 9 was issued
by the then Secretary of Labor (now Minister)
interpreting the above-quoted rule, pertinent portions
of which read:
"xxx xxx xxx
"The ten (10) paid legal holidays law, to start with, is
intended to benefit principally daily employees. In the
case of monthly, only those whose monthly salary did
not yet include payment for the ten (10) paid legal
holidays are entitled to the benefit.
"Under the rules implementing P.D. 850, this policy
has been fully clarified to eliminate controversies on
the entitlement of monthly paid employees. The new
determining rule is this: If the monthly paid employee
is receiving not less than P240, the maximum monthly
minimum wage, and his monthly pay is uniform from
January to December, he is presumed to be already
paid the ten (10) paid legal holidays. However, if
deductions are made from his monthly salary on
account of holidays in months where they occur, then
he is still entitled to the ten (10) paid legal holidays. . .
. ".
Respondent bank, by reason of the ruling laid down
by the aforecited rule implementing Article 94 of the
Labor Code and by Policy Instruction No. 9, stopped
the payment of holiday pay to all its employees.
On August 30, 1976, petitioner filed a motion for a writ
of execution to enforce the arbiter's decision of August
25, 1975, whereby the respondent bank was ordered
to pay its employees their daily wage for the
unworked regular holidays.
On September 10, 1975, respondent bank filed an
opposition to the motion for a writ of execution
alleging, among others, that: (a) its refusal to pay the
corresponding unworked holiday pay in accordance
with the award of Labor Arbiter Ricarte T. Soriano

dated August 25, 1975, is based on and justified by

Policy Instruction No. 9 which interpreted the rules
implementing P.D. 850; and (b) that the said award is
already repealed by P.D. 850 which took effect on
December 16, 1975, and by said Policy Instruction
No. 9 of the Department of Labor, considering that its
monthly paid employees are not receiving less than
P240.00 and their monthly pay is uniform from
January to December, and that no deductions are
made from the monthly salaries of its employees on
account of holidays in months where they occur (pp.
64-65, NLRC rec.).
On October 18, 1976, Labor Arbiter Ricarte T.
Soriano, instead of issuing a writ of execution, issued
an order enjoining the respondent bank to continue
paying its employees their regular holiday pay on the
following grounds: (a) that the judgment is already
final and the findings which is found in the body of the
decision as well as the dispositive portion thereof is
res judicata or is the law of the case between the
parties; and (b) that since the decision had been
partially implemented by the respondent bank, appeal
from the said decision is no longer available (pp. 100103, rec.).
On November 17, 1976, respondent bank appealed
from the above-cited order of Labor Arbiter Soriano to
the National Labor Relations Commission, reiterating
therein its contentions averred in its opposition to the
motion for writ of execution. Respondent bank further
alleged for the first time that the questioned order is
not supported by evidence insofar as it finds that
respondent bank discontinued payment of holiday pay
beginning January, 1976 (p. 84, NLRC rec.).
On June 20, 1978, the National Labor Relations
Commission promulgated its resolution en banc
dismissing respondent bank's appeal, the dispositive
portion of which reads as follows:
"In view of the foregoing, we hereby resolve to
dismiss, as we hereby dismiss, respondent's appeal;
to set aside Labor Arbiter Ricarte T. Soriano's order of
18 October 1976 and, as prayed for by complainant,
to order the issuance of the proper writ of execution"
(p. 244, NLRC rec.).
Copies of the above resolution were served on the

petitioner only on February 9, 1979 or almost eight (8)

months after it was promulgated, while copies were
served on the respondent bank on February 13, 1979.
On February 21, 1979, respondent bank filed with the
Office of the Minister of Labor a motion for
reconsideration/appeal with urgent prayer to stay
execution, alleging therein the following: (a) that there
is prima facie evidence of grave abuse of discretion,
amounting to lack of jurisdiction on the part of the
National Labor Relations Commission, in dismissing
the respondent's appeal on pure technicalities without
passing upon the merits of the appeal; and (b) that
the resolution appealed from is contrary to the law
and jurisprudence (pp. 260-274, NLRC rec.).
On March 19, 1979, petitioner filed its opposition to
the respondent bank's appeal and alleged the
following grounds: (a) that the office of the Minister of
Labor has no jurisdiction to entertain the instant
appeal pursuant to the provisions of P. D. 1391; (b)
that the labor arbiter's decision being final, executory
and unappealable, execution is a matter of right for
the petitioner; and (c) that the decision of the labor
arbiter dated August 25, 1975 is supported by the law
and the evidence in the case (p. 364, NLRC rec.).
On July 30, 1979, petitioner filed a second motion for
execution pending appeal, praying that a writ of
execution be issued by the National Labor Relations
Commission pending appeal of the case with the
Office of the Minister of Labor. Respondent bank filed
its opposition thereto on August 8, 1979.
On August 13, 1979, the National Labor Relations
Commission issued an order which states:
"The Chief, Research and Information Division of this
Commission is hereby directed to designate a SocioEconomic Analyst to compute the holiday pay of the
employees of the Insular Bank of Asia and America
from April 1976 to the present, in accordance with the
Decision of the Labor Arbiter dated August 25, 1975"
(p. 80, rec.).
On November 10, 1979, the Office of the Minister of
Labor, through Deputy Minister Amado G. Inciong,
issued an order, the dispositive portion of which
states:

"ALL THE FOREGOING CONSIDERED, let the

appealed Resolution en banc of the National Labor
Relations Commission dated 20 June 1978 be, as it is
hereby, set aside and a new judgment promulgated
dismissing the instant case for lack of merit" (p. 436,
NLRC rec.).
Hence, this petition for certiorari charging public
respondent Amado G. Inciong with abuse of discretion
amounting to lack or excess of jurisdiction.
The issue in this case is: whether or not the decision
of a Labor Arbiter awarding payment of regular
holiday pay can still be set aside on appeal by the
Deputy Minister of Labor even though it has already
become final and had been partially executed, the
finality of which was affirmed by the National Labor
Relations Commission sitting en banc, on the basis of
an Implementing Rule and Policy Instruction
promulgated by the Ministry of Labor long after the
said decision had become final and executory.
WE find for the petitioner.
I
WE agree with the petitioner's contention that Section
2, Rule IV, Book III of the implementing rules and
Policy Instruction No. 9 issued by the then Secretary
of Labor are null and void since in the guise of
clarifying the Labor Code's provisions on holiday pay,
they in effect amended them by enlarging the scope
of their exclusion (p. 11, rec.).
Article 94 of the Labor Code, as amended by P.D.
850, provides:
"Art. 94. Right to holiday pay. - (a) Every worker shall
be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly
employing less than ten (10) workers. . . . . "

The coverage and scope of exclusion of the Labor

Code's holiday pay provisions is spelled out under
Article 82 thereof which reads:
"Art. 82. Coverage. - The provision of this Title shall
apply to employees in all establishments and
undertakings, whether for profit or not, but not to
government employees, managerial employees, field
personnel, members of the family of the employer
who are dependent on him for support, domestic
helpers, persons in the personal service of another,
and workers who are paid by results as determined by
the Secretary of Labor in appropriate regulations.
"xxx xxx xxx".
From the above-cited provisions, it is clear that
monthly paid employees are not excluded from the
benefits of holiday pay. However, the implementing
rules on holiday pay promulgated by the then
Secretary of Labor excludes monthly paid employees
from the said benefits by inserting, under Rule IV,
Book III of the implementing rules, Section 2, which
provides that: "employees who are uniformly paid by
the month, irrespective of the number of working days
therein, with a salary of not less than the statutory or
established minimum wage shall be presumed to be
paid for all days in the month whether worked or not."
Public respondent maintains that " (T)he rules
implementing P. D. 850 and Policy Instruction No. 9
were issued to clarify the policy in the implementation
of the ten (10) paid legal holidays. As interpreted,
'unworked' legal holidays are deemed paid insofar as
monthly paid employees are concerned if (a) they are
receiving not less than the statutory minimum wage,
(b) their monthly pay is uniform from January to
December, and (c) no deduction is made from their
monthly salary on account of holidays in months
where they occur. As explained in Policy Instruction
No. 9, 'The ten (10) paid legal holidays law, to start
with, is intended to benefit principally daily paid
employees. In case of monthly, only those whose
monthly salary did not yet include payment for the ten
(10) paid legal holidays are entitled to the benefit'"
(pp. 340-341, rec.). This contention is untenable.
It is elementary in the rules of statutory construction

that when the language of the law is clear and

unequivocal the law must be taken to mean exactly
what it says. In the case at bar, the provisions of the
Labor Code on the entitlement to the benefits of
holiday pay are clear and explicit - it provides for both
the coverage of and exclusion from the benefits. In
Policy Instruction No. 9, the then Secretary of Labor
went as far as to categorically state that the benefit is
principally intended for daily paid employees, when
the law clearly states that every worker shall be paid
their regular holiday pay. This is a flagrant violation of
the mandatory directive of Article 4 of the Labor Code,
which states that "All doubts in the implementation
and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall
be resolved in favor of labor." Moreover, it shall
always be presumed that the legislature intended to
enact a valid and permanent statute which would
have the most beneficial effect that its language
permits (Orlosky vs. Haskell, 155, A. 112.).

when necessary, correct constitutional (and/or

statutory) interpretation, in the context of the
interactions of the three branches of the government,
almost always in situations where some agency of the
State has engaged in action that stems ultimately
from some legitimate area of governmental power
(The Supreme Court in Modern Role, C. B. Swisher,
1958, p. 36).

Obviously, the Secretary (Minister) of Labor had

exceeded his statutory authority granted by Article 5
of the Labor Code authorizing him to promulgate the
necessary implementing rules and regulations.

Xxx xxx xxx

Public respondent vehemently argues that the intent

and spirit of the holiday pay law, as expressed by the
Secretary of Labor in the case of Chartered Bank
Employees Association v. The Chartered Bank (NLRC
Case No. RB-1789-75, March 24, 1976), is to correct
the disadvantages inherent in the daily compensation
system of employment - holiday pay is primarily
intended to benefit the daily paid workers whose
employment and income are circumscribed by the
principle of "no work, no pay." This argument may
sound meritorious; but, until the provisions of the
Labor Code on holiday pay is amended by another
law, monthly paid employees are definitely included in
the benefits of regular holiday pay. As earlier stated,
the presumption is always in favor of law, negatively
put, the Labor Code is always strictly construed
against management.
While it is true that the contemporaneous construction
placed upon a statute by executive officers whose
duty is to enforce it should be given great weight by
the courts, still if such construction is so erroneous, as
in the instant case, the same must be declared as null
and void. It is the role of the Judiciary to refine and,

Thus, in the case of Philippine Apparel Workers Union

vs. National Labor Relations Commission (106 SCRA
444, July 31, 1981) where the Secretary of Labor
enlarged the scope of exemption from the coverage of
a Presidential Decree granting increase in emergency
allowance, this Court ruled that:
". . . the Secretary of Labor has-exceeded his
authority when he included paragraph (k) in Section 1
of the Rules implementing P.D. 1123.

"Clearly, the inclusion of paragraph k contravenes the

statutory authority granted to the Secretary of Labor,
and the same is therefore void, as ruled by this Court
in a long line of cases. . . . .
"'The recognition of the power of administrative
officials to promulgate rules in the administration of
the statute, necessarily limited to what is provided for
in the legislative enactment, may be found in the early
case of United States vs. Barrios decided in 1908.
Then came in a 1914 decision, United States vs.
Tupasi Molina (29 Phil. 119) delineation of the scope
of such competence. Thus: 'Of course the regulations
adopted under legislative authority by a particular
department must be in harmony with the provisions of
the law, and for the sole purpose of carrying into
effect its general provisions. By such regulations, of
course, the law itself cannot be extended. So long,
however, as the regulations relate solely to carrying
into effect the provisions of the law, they are valid.' In
1936, in People vs. Santos, this Court expressed its
disapproval of an administrative order that would
amount to an excess of the regulatory power vested
in an administrative official. We reaffirmed such a
doctrine in a 1951 decision, where we again made
clear that where an administrative order betrays
inconsistency or repugnancy to the provisions of the
Act, 'the mandate of the Act must prevail and must be

followed.' Justice Barrera, speaking for the Court in

Victorias Milling Inc. vs. Social Security Commission,
citing Parker as well as Davis did tersely sum up the
matter thus: 'A rule is binding on the Courts so long as
the procedure fixed for its promulgation is followed
and its scope is within the statutory authority granted
by the legislature, even if the courts are not in
agreement with the policy stated therein or its innate
wisdom . . . . On the other hand, administrative
interpretation of the law is at best merely advisory, for
it is the courts that finally determine what the law
means.'
"'It cannot be otherwise as the Constitution limits the
authority of the President, in whom all executive
power resides, to take care that the laws be faithfully
executed. No lesser administrative executive office or
agency then can, contrary to the express language of
the Constitution, assert for itself a more extensive
prerogative.
Necessarily, it is bound to observe the constitutional
mandate. There must be strict compliance with the
legislative enactment. Its terms must be followed. The
statute requires adherence to, not departure from its
provisions. No deviation is allowable. In the terse
language of the present Chief Justice, an
administrative agency 'cannot amend an act of
Congress.' Respondents can be sustained, therefore,
only if it could be shown that the rules and regulations
promulgated by them were in accordance with what
the Veterans Bill of Rights provides'" (Phil. Apparel
Workers Union vs. National Labor Relations
Commission, supra, 463, 464, citing Teozon vs.
Members of the Board of Administrators, PVA, 33
SCRA 585; see also Santos vs. Hon. Estenzo, et al.,
109 Phil. 419; Hilado vs. Collector of Internal
Revenue, 100 Phil. 295; Sy Man vs. Jacinto & Fabros,
93 Phil. 1093; Olsen & Co., Inc. vs. Aldanese and
Trinidad, 43 Phil. 259).
This ruling of the Court was recently reiterated in the
case of American Wire & Cable Workers Union
(TUPAS) vs. The National Labor Relations
Commission and American Wire & Cable Co., Inc.,
G.R. No. 53337, promulgated on June 29, 1984.
In view of the foregoing, Section 2, Rule IV, Book III of
the Rules to implement the Labor Code and Policy
Instruction No. 9 issued by the then Secretary of

Labor must be declared null and void. Accordingly,

public respondent Deputy Minister of Labor Amado G.
Inciong had no basis at all to deny the members of
petitioner union their regular holiday pay as directed
by the Labor Code.

On the question of whether or not a law or statute can

annul or modify a judicial order issued prior to its
promulgation, this Court, through Associate Justice
Claro M. Recto, said:
"xxx xxx xxx

II
It is not disputed that the decision of Labor Arbiter
Ricarte T. Soriano dated August 25, 1975, had
already become final, and was, in fact, partially
executed by the respondent bank.
However, public respondent maintains that on the
authority of De Luna vs. Kayanan, 61 SCRA 49,
November 13, 1974, he can annul the final decision of
Labor Arbiter Soriano since the ensuing promulgation
of the integrated implementing rules of the Labor
Code pursuant to P.D. 850 on February 16, 1976, and
the issuance of Policy Instruction No. 9 on April 23,
1976 by the then Secretary of Labor are facts and
circumstances that transpired subsequent to the
promulgation of the decision of the labor arbiter, which
renders the execution of the said decision impossible
and unjust on the part of herein respondent bank (pp.
342-343, rec.).
This contention is untenable.
To start with, unlike the instant case, the case of De
Luna relied upon by the public respondent is not a
labor case wherein the express mandate of the
Constitution on the protection to labor is applied. Thus
Article 4 of the Labor Code provides that, "All doubts
in the implementation and interpretation of the
provisions of this Code, including its implementing
rules and regulations, shall be resolved in favor of
labor"; and Article 1702 of the Civil Code provides
that, "In case of doubt, all labor legislation and all
labor contracts shall be construed in favor of the
safety and decent living for the laborer."
Consequently, contrary to public respondent's
allegations, it is patently unjust to deprive the
members of petitioner union of their vested right
acquired by virtue of a final judgment on the basis of a
labor statute promulgated following the acquisition of
the "right".

"We are decidedly of the opinion that they did not.

Said order, being unappealable, became final on the
date of its issuance and the parties who acquired
rights thereunder cannot be deprived thereof by a
constitutional provision enacted or promulgated
subsequent thereto. Neither the Constitution nor the
statutes, except penal laws favorable to the accused
have retroactive effect in the sense of annulling or
modifying vested rights, or altering contractual
obligation. (China Ins. & Surety Co. vs. Judge of First
Instance of Manila, 63 Phil 324).
In the case of In re: Cunanan, et al., 19 Phil. 585,
March 18, 1954, this Court said: ". . . when a court
renders a decision or promulgates a resolution or
order on the basis of and in accordance with a certain
law or rule then in force, the subsequent amendment
or even repeal of said law or rule may not affect the
final decision, order, or resolution already
promulgated, in the sense of revoking or rendering it
void and of no effect." Thus, the amendatory rule
(Rule IV, Book III of the Rules to Implement the Labor
Code) cannot be given retroactive effect as to modify
final judgments. Not even a law can validly annul final
decisions (In re: Cunanan, et al., Ibid.).
Furthermore, the facts of the case relied upon by the
public respondent are not analogous to that of the
case at bar. The case of De Luna speaks of final and
executory judgment, while in the instant case, the final
judgment is partially executed. Just as the court is
ousted of its jurisdiction to annul or modify a judgment
the moment it becomes final, the court also loses its
jurisdiction to annul or modify a writ of execution upon
its service or execution; for, otherwise, we will have a
situation wherein a final and executed judgment can
still be annulled or modified by the court upon mere
motion of a party. This would certainly result in
endless litigations thereby rendering inutile the rule of
law.
Respondent bank counters with the argument that its

partial compliance was involuntary because it did so

under pain of levy and execution of its assets (p. 138,
rec.). WE find no merit in this argument. Respondent
bank clearly manifested its voluntariness in complying
with the decision of the labor arbiter by not appealing
to the National Labor Relations Commission as
provided for under the Labor Code under Article 223.
A party who waives his right to appeal is deemed to
have accepted the judgment, adverse or not, as
correct, especially if such party readily acquiesced in
the judgment by starting to execute said judgment
even before a writ of execution was issued, as in this
case. Under these circumstances, to permit a party to
appeal from the said partially executed final judgment
would make a mockery of the doctrine of finality of
judgments long enshrined in this jurisdiction.
Section 1 of Rule 39 of the Revised Rules of Court
provides that ". . . execution shall issue as a matter of
right upon the expiration of the period to appeal . . . or
if no appeal has been duly perfected." This rule
applies to decisions or orders of labor arbiters who
are exercising quasi-judicial functions since; ". . . the
rule of execution of judgments under the rules should
govern all kinds of execution of judgment, unless it is
otherwise provided in other laws" (Sagucio vs. Bulos,
5 SCRA 803) and Article 223 of the Labor Code
provides that ". . . decisions, awards, or orders of the
Labor Arbiter or compulsory arbitrators are final and
executory unless appealed to the Commission by any
or both of the parties within ten (10) days from receipt
of such awards, orders, or decisions. . . . . "
Thus, under the aforecited rule, the lapse of the
appeal period deprives the courts of jurisdiction to
alter the final judgment and the judgment becomes
final ipso jure (Vega vs. WCC, 89 SCRA 143, citing
Cruz vs. WCC, 2 PHILAJUR 436, 440, January 31,
1978; see also Soliven vs. WCC, 77 SCRA 621;
Carrero vs. WCC and Regala vs. WCC, decided
jointly, 77 SCRA 297; Vitug vs. Republic, 75 SCRA
436; Ramos vs. Republic, 69 SCRA 576).
In Galvez vs. Philippine Long Distance Telephone
Co., 3 SCRA 422, 423, October 31, 1961, where the
lower court modified a final order, this Court ruled
thus:
"xxx xxx xxx

"The lower court was thus aware of the fact that it was
thereby altering or modifying its order of January
8,1959. Regardless of the excellence of the motive for
acting as it did, we are constrained to hold, however,
that the lower court had no authority to make said
alteration or modification. . . . .
"xxx xxx xxx
"The equitable considerations that led the lower court
to take the action complained of cannot offset the
demands of public policy and public interest - which
are also responsive to the tenets of equity - requiring
that all issues passed upon in decisions or final orders
that have become executory, be deemed conclusively
disposed of and definitely closed, for, otherwise, there
would be no end to litigations, thus setting at naught
the main role of courts of justice, which is to assist in
the enforcement of the rule of law and the
maintenance of peace and order, by settling
justiciable controversies with finality.
"xxx xxx xxx
In the recent case of Gabaya vs. Mendoza, 113 SCRA
405, 406, March 30, 1982, this Court said:
"xxx xxx xxx
"In Marasigan vs. Ronquillo (94 Phil. 237), it was
categorically stated that the rule is absolute that after
a judgment becomes final, by the expiration of the
period provided by the rules within which it so
becomes, no further amendment or correction can be
made by the court except for clerical errors or
mistakes. And such final judgment is conclusive not
only as to every matter which was offered and
received to sustain or defeat the claim or demand but
as to any other admissible matter which must have
been offered for that purpose (L-7044, 96 Phil. 526).
In the earlier case of Contreras and Ginco vs. Felix
and China Banking Corp., Inc. (44 O.G. 4306), it was
stated that the rule must be adhered to regardless of
any possible injustice in a particular case for '(W)e
have to subordinate the equity of a particular situation
to the overmastering need of certainty and
immutability of judicial pronouncements.'.
"xxx xxx xxx"

III
The despotic manner by which public respondent
Amado G. Inciong divested the members of the
petitioner union of their rights acquired by virtue of a
final judgment is tantamount to a deprivation of
property without due process of law. Public
respondent completely ignored the rights of the
petitioner union's members in dismissing their
complaint since he knew for a fact that the judgment
of the labor arbiter had long become final and was
even partially executed by the respondent bank.
A final judgment vests in the prevailing party a right
recognized and protected by law under the due
process clause of the Constitution (China Ins. &
Surety Co. vs. Judge of First Instance of Manila, 63
Phil. 324). A final judgment is "a vested interest which
it is right and equitable that the government should
recognize and protect, and of which the individual
could not be deprived arbitrarily without injustice"
(Rookledge v. Gariwood, 65 N.W. 2d 785, 791).
It is by this guiding principle that the due process
clause is interpreted. Thus, in the pithy language of
then Justice, later Chief Justice, Concepcion: ". . .
acts of Congress, as well as those of the Executive,
can deny due process only under pain of nullity, and
judicial proceedings suffering from the same flaw are
subject to the same sanction, any statutory provision
to the contrary notwithstanding" (Vda. de Cuaycong
vs. Vda. de Sengbengco, 110 Phil. 118, italics
supplied). And "(I)t has been likewise established that
a violation of a constitutional right divests the court of
jurisdiction; and as a consequence its judgment is null
and void and confers no rights" (Phil. Blooming Mills
Employees Organization vs. Phil. Blooming Mills Co.,
Inc., 51 SCRA 211, June 5, 1973).
Tested by and pitted against this broad concept of the
constitutional guarantee of due process, the action of
public respondent Amado G. Inciong is a clear
example of deprivation of property without due
process of law and constituted grave abuse of
discretion, amounting to lack or excess of jurisdiction
in issuing the order dated November 10, 1979.
WHEREFORE, THE PETITION IS HEREBY
GRANTED, THE ORDER OF PUBLIC

RESPONDENT IS SET ASIDE, AND THE DECISION

OF LABOR ARBITER RICARTE T. SORIANO DATED
AUGUST 25, 1975, IS HEREBY REINSTATED.
COSTS AGAINST PRIVATE RESPONDENT
INSULAR BANK OF ASIA AND AMERICA.

MANILA PRINCE HOTEL, petitioner, vs.

GOVERNMENT SERVICE INSURANCE SYSTEM,
MANILA HOTEL CORPORATION, COMMITTEE ON
PRIVATIZATION and OFFICE OF THE
GOVERNMENT CORPORATE COUNSEL,
respondents.

BELLOSILLO, J:

The Filipino First Policy enshrined in the 1987

Constitution, i.e., in the grant of rights, privileges, and
concessions covering the national economy and
patrimony, the State shall give preference to qualified
Filipinos, 1 is invoked by petitioner in its bid to acquire
51% of the shares of the Manila Hotel Corporation
(MHC) which owns the historic Manila Hotel.
Opposing, respondents maintain that the provision is
not self-executing but requires an implementing
legislation for its enforcement. Corollarily, they ask
whether the 51% shares form part of the national
economy and patrimony covered by the protective
mantle of the Constitution.

The controversy arose when respondent Government

Service Insurance System (GSIS), pursuant to the
privatization program of the Philippine Government
under Proclamation No. 50 dated 8 December 1986,
decided to sell through public bidding 30% to 51% of
the issued and outstanding shares of respondent
MHC. The winning bidder, or the eventual "strategic
partner," is to provide management expertise and/or
an international marketing/ reservation system, and
financial support to strengthen the profitability and
performance of the Manila Hotel. 2 In a close bidding
held on 18 September 1995 only two (2) bidders
participated: petitioner Manila Prince Hotel

Corporation, a Filipino corporation, which offered to

buy 51% of the MHC or 15,300,000 shares at P41.58
per share, and Renong Berhad, a Malaysian firm, with
ITT-Sheraton as its hotel operator, which bid for the
same number of shares at P44.00 per share, or P2.42
more than the bid of petitioner.

a. Execution of the necessary contracts with

GSIS/MHC not later than October 23, 1995 (reset to
November 3, 1995); and

b. Requisite approvals from the GSIS/MHC and COP

(Committee on Privatization)/ OGCC (Office of the
Government Corporate Counsel) are obtained." 3

Pertinent provisions of the bidding rules prepared by

respondent GSIS state -

I. EXECUTION OF THE NECESSARY CONTRACTS

WITH GSIS/MHC -

1. The Highest Bidder must comply with the

conditions set forth below by October 23, 1995 (reset
to November 3, 1995) or the Highest Bidder will lose
the right to purchase the Block of Shares and GSIS
will instead offer the Block of Shares to the other
Qualified Bidders:

a. The Highest Bidder must negotiate and execute

with the GSIS/MHC the Management Contract,
International Marketing/Reservation System Contract
or other type of contract specified by the Highest
Bidder in its strategic plan for the Manila Hotel . . . .

b. The Highest Bidder must execute the Stock

Purchase and Sale Agreement with GSIS . . . .

K. DECLARATION OF THE WINNING

BIDDER/STRATEGIC PARTNER -

The Highest Bidder will be declared the Winning

Bidder/Strategic Partner after the following conditions
are met

Pending the declaration of Renong Berhard as the

winning bidder/strategic partner and the execution of
the necessary contracts, petitioner in a letter to
respondent GSIS dated 28 September 1995 matched
the bid price of P44.00 per share tendered by Renong
Berhad. 4 In a subsequent letter dated 10 October
1995 petitioner sent a manager's check issued by
Philtrust Bank for Thirty-three Million Pesos
(P33,000,000.00) as Bid Security to match the bid of
the Malaysian Group, Messrs. Renong Berhad . . . . 5
which respondent GSIS refused to accept.

On 17 October 1995, perhaps apprehensive that

respondent GSIS has disregarded the tender of the
matching bid and that the sale of 51% of the MHC
may be hastened by respondent GSIS and
consummated with Renong Berhad, petitioner came
to this Court on prohibition and mandamus. On 18
October 1995 the Court issued a temporary
restraining order enjoining respondents from
perfecting and consummating the sale to the
Malaysian firm.

On 10 September 1996 the instant case was

accepted by the Court En Banc after it was referred to
it by the First Division. The case was then set for oral
arguments with former Chief Justice Enrique M.
Fernando and Fr. Joaquin G. Bernas, S.J., as amici
curiae.

In the main, petitioner invokes Sec. 10, second par.,

Art. XII, of the 1987 Constitution and submits that the
Manila Hotel has been identified with the Filipino
nation and has practically become a historical

monument which reflects the vibrancy of Philippine

heritage and culture. It is a proud legacy of an earlier
generation of Filipinos who believed in the nobility and
sacredness of independence and its power and
capacity to release the full potential of the Filipino
people. To all intents and purposes, it has become a
part of the national patrimony. 6 Petitioner also argues
that since 51% of the shares of the MHC carries with
it the ownership of the business of the hotel which is
owned by respondent GSIS, a government-owned
and controlled corporation, the hotel business of
respondent GSIS being a part of the tourism industry
is unquestionably a part of the national economy.
Thus, any transaction involving 51% of the shares of
stock of the MHC is clearly covered by the term
national economy, to which Sec. 10, second par., Art.
XII, 1987 Constitution, applies. 7

It is also the thesis of petitioner that since Manila

Hotel is part of the national patrimony and its
business also unquestionably part of the national
economy petitioner should be preferred after it has
matched the bid offer of the Malaysian firm. For the
bidding rules mandate that if for any reason, the
Highest Bidder cannot be awarded the Block of
Shares, GSIS may offer this to the other Qualified
Bidders that have validly submitted bids provided that
these Qualified Bidders are willing to match the
highest bid in terms of price per share. 8

Respondents except. They maintain that: First, Sec.

10, second par., Art. XII, of the 1987 Constitution is
merely a statement of principle and policy since it is
not a self-executing provision and requires
implementing legislation(s). . . . Thus, for the said
provision to operate, there must be existing laws "to
lay down conditions under which business may be
done." 9

Second, granting that this provision is self-executing,

Manila Hotel does not fall under the term national
patrimony which only refers to lands of the public
domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries,
forests or timber, wildlife, flora and fauna and all

marine wealth in its territorial sea, and exclusive

marine zone as cited in the first and second
paragraphs of Sec. 2, Art. XII, 1987 Constitution.
According to respondents, while petitioner speaks of
the guests who have slept in the hotel and the events
that have transpired therein which make the hotel
historic, these alone do not make the hotel fall under
the patrimony of the nation. What is more, the
mandate of the Constitution is addressed to the State,
not to respondent GSIS which possesses a
personality of its own separate and distinct from the
Philippines as a State.

Third, granting that the Manila Hotel forms part of the

national patrimony, the constitutional provision
invoked is still inapplicable since what is being sold is
only 51% of the outstanding shares of the corporation,
not the hotel building nor the land upon which the
building stands. Certainly, 51% of the equity of the
MHC cannot be considered part of the national
patrimony. Moreover, if the disposition of the shares of
the MHC is really contrary to the Constitution,
petitioner should have questioned it right from the
beginning and not after it had lost in the bidding.

Fourth, the reliance by petitioner on par. V., subpar. J.

1, of the bidding rules which provides that if for any
reason, the Highest Bidder cannot be awarded the
Block of Shares, GSIS may offer this to the other
Qualified Bidders that have validly submitted bids
provided that these Qualified Bidders are willing to
match the highest bid in terms of price per share, is
misplaced. Respondents postulate that the privilege
of submitting a matching bid has not yet arisen since
it only takes place if for any reason, the Highest
Bidder cannot be awarded the Block of Shares. Thus
the submission by petitioner of a matching bid is
premature since Renong Berhad could still very well
be awarded the block of shares and the condition
giving rise to the exercise of the privilege to submit a
matching bid had not yet taken place.

Finally, the prayer for prohibition grounded on grave

abuse of discretion should fail since respondent GSIS
did not exercise its discretion in a capricious,

whimsical manner, and if ever it did abuse its

discretion it was not so patent and gross as to amount
to an evasion of a positive duty or a virtual refusal to
perform a duty enjoined by law. Similarly, the petition
for mandamus should fail as petitioner has no clear
legal right to what it demands and respondents do not
have an imperative duty to perform the act required of
them by petitioner.

enjoyed or protected, is self-executing. Thus a

constitutional provision is self-executing if the nature
and extent of the right conferred and the liability
imposed are fixed by the constitution itself, so that
they can be determined by an examination and
construction of its terms, and there is no language
indicating that the subject is referred to the legislature
for action. 13

We now resolve. A constitution is a system of

fundamental laws for the governance and
administration of a nation. It is supreme, imperious,
absolute and unalterable except by the authority from
which it emanates. It has been defined as the
fundamental and paramount law of the nation. 10 It
prescribes the permanent framework of a system of
government, assigns to the different departments their
respective powers and duties, and establishes certain
fixed principles on which government is founded. The
fundamental conception in other words is that it is a
supreme law to which all other laws must conform
and in accordance with which all private rights must
be determined and all public authority administered.
11 Under the doctrine of constitutional supremacy, if a
law or contract violates any norm of the constitution
that law or contract whether promulgated by the
legislative or by the executive branch or entered into
by private persons for private purposes is null and
void and without any force and effect. Thus, since the
Constitution is the fundamental paramount and
supreme law of the nation, it is deemed written in
every statute and contract.

As against constitutions of the past, modern

constitutions have been generally drafted upon a
different principle and have often become in effect
extensive codes of laws intended to operate directly
upon the people in a manner similar to that of
statutory enactments, and the function of
constitutional conventions has evolved into one more
like that of a legislative body. Hence, unless it is
expressly provided that a legislative act is necessary
to enforce a constitutional mandate, the presumption
now is that all provisions of the constitution are selfexecuting. If the constitutional provisions are treated
as requiring legislation instead of self-executing, the
legislature would have the power to ignore and
practically nullify the mandate of the fundamental law.
14 This can be cataclysmic. That is why the prevailing
view is, as it has always been, that -

Admittedly, some constitutions are merely

declarations of policies and principles. Their
provisions command the legislature to enact laws and
carry out the purposes of the framers who merely
establish an outline of government providing for the
different departments of the governmental machinery
and securing certain fundamental and inalienable
rights of citizens. 12 A provision which lays down a
general principle, such as those found in Art. II of the
1987 Constitution, is usually not self-executing. But a
provision which is complete in itself and becomes
operative without the aid of supplementary or
enabling legislation, or that which supplies sufficient
rule by means of which the right it grants may be

. . . in case of doubt, the Constitution should be

considered self-executing rather than non-selfexecuting. . . . Unless the contrary is clearly intended,
the provisions of the Constitution should be
considered self-executing, as a contrary rule would
give the legislature discretion to determine when, or
whether, they shall be effective. These provisions
would be subordinated to the will of the lawmaking
body, which could make them entirely meaningless by
simply refusing to pass the needed implementing
statute. 15

Respondents argue that Sec. 10, second par., Art. XII,

of the 1987 Constitution is clearly not self-executing,
as they quote from discussions on the floor of the
1986 Constitutional Commission -

MR. RODRIGO. Madam President, I am asking this

question as the Chairman of the Committee on Style.
If the wording of "PREFERENCE" is given to
"QUALIFIED FILIPINOS," can it be understood as a
preference to qualified Filipinos vis-a-vis Filipinos who
are not qualified. So, why do we not make it clear? To
qualified Filipinos as against aliens?

THE PRESIDENT. What is the question of

Commissioner Rodrigo? Is it to remove the word
"QUALIFIED?"

MR. RODRIGO. No, no, but say definitely "TO

QUALIFIED FILIPINOS" as against whom? As against
aliens or over aliens?

MR. NOLLEDO. Madam President, I think that is

understood. We use the word "QUALIFIED" because
the existing laws or prospective laws will always lay
down conditions under which business may be done.
For example, qualifications on capital, qualifications
on the setting up of other financial structures, et
cetera (emphasis supplied by respondents).

MR RODRIGO. It is just a matter of style.

MR. NOLLEDO. Yes. 16

Quite apparently, Sec. 10, second par., of Art. XII is

couched in such a way as not to make it appear that it
is non-self-executing but simply for purposes of style.
But, certainly, the legislature is not precluded from
enacting further laws to enforce the constitutional
provision so long as the contemplated statute squares
with the Constitution. Minor details may be left to the
legislature without the self-executing nature of
constitutional provisions.

In self-executing constitutional provisions, the

legislature may still enact legislation to facilitate the
exercise of powers directly granted by the
constitution, further the operation of such a provision,
prescribe a practice to be used for its enforcement,
provide a convenient remedy for the protection of the
rights secured or the determination thereof, or place
reasonable safeguards around the exercise of the
right. The mere fact that legislation may supplement
and add to or prescribe a penalty for the violation of a
self-executing constitutional provision does not render
such a provision ineffective in the absence of such
legislation. The omission from a constitution of any
express provision for a remedy for enforcing a right or
liability is not necessarily an indication that it was not
intended to be self-executing. The rule is that a selfexecuting provision of the constitution does not
necessarily exhaust legislative power on the subject,
but any legislation must be in harmony with the
constitution, further the exercise of constitutional right
and make it more available. 17 Subsequent legislation
however does not necessarily mean that the subject
constitutional provision is not, by itself, fully
enforceable.

Even the cases cited by respondents holding that

certain constitutional provisions are merely
statements of principles and policies, which are
basically not self-executing and only placed in the
Constitution as moral incentives to legislation, not as
judicially enforceable rights - are simply not in point.
Basco v. Philippine Amusements and Gaming
Corporation 20 speaks of constitutional provisions on
personal dignity, 21 the sanctity of family life, 22 the
vital role of the youth in nation-building, 23 the
promotion of social justice, 24 and the values of
education. 25 Tolentino v. Secretary of Finance 26
refers to constitutional provisions on social justice and
human rights 27 and on education. 28 Lastly,
Kilosbayan, Inc. v. Morato 29 cites provisions on the
promotion of general welfare, 30 the sanctity of family
life, 31 the vital role of the youth in nation-building 32
and the promotion of total human liberation and
development. 33 A reading of these provisions indeed
clearly shows that they are not judicially enforceable
constitutional rights but merely guidelines for
legislation. The very terms of the provisions manifest
that they are only principles upon which legislations
must be based. Res ipsa loquitur.

Respondents also argue that the non-self-executing

nature of Sec. 10, second par., of Art. XII is implied
from the tenor of the first and third paragraphs of the
same section which undoubtedly are not selfexecuting. 18 The argument is flawed. If the first and
third paragraphs are not self-executing because
Congress is still to enact measures to encourage the
formation and operation of enterprises fully owned by
Filipinos, as in the first paragraph, and the State still
needs legislation to regulate and exercise authority
over foreign investments within its national
jurisdiction, as in the third paragraph, then a fortiori,
by the same logic, the second paragraph can only be
self-executing as it does not by its language require
any legislation in order to give preference to qualified
Filipinos in the grant of rights, privileges and
concessions covering the national economy and
patrimony. A constitutional provision may be selfexecuting in one part and non-self-executing in
another. 19

On the other hand, Sec. 10, second par., Art. XII of

the 1987 Constitution is a mandatory, positive
command which is complete in itself and which needs
no further guidelines or implementing laws or rules for
its enforcement. From its very words the provision
does not require any legislation to put it in operation.
It is per se judicially enforceable. When our
Constitution mandates that [i]n the grant of rights,
privileges, and concessions covering national
economy and patrimony, the State shall give
preference to qualified Filipinos, it means just that qualified Filipinos shall be preferred. And when our
Constitution declares that a right exists in certain
specified circumstances an action may be maintained
to enforce such right notwithstanding the absence of
any legislation on the subject; consequently, if there is
no statute especially enacted to enforce such
constitutional right, such right enforces itself by its
own inherent potency and puissance, and from which
all legislations must take their bearings. Where there
is a right there is a remedy. Ubi jus ibi remedium.

As regards our national patrimony, a member of the

1986 Constitutional Commission 34 explains -

The patrimony of the Nation that should be conserved

and developed refers not only to our rich natural
resources but also to the cultural heritage of our race.
It also refers to our intelligence in arts, sciences and
letters. Therefore, we should develop not only our
lands, forests, mines and other natural resources but
also the mental ability or faculty of our people.

We agree. In its plain and ordinary meaning, the term

patrimony pertains to heritage. 35 When the
Constitution speaks of national patrimony, it refers not
only to the natural resources of the Philippines, as the
Constitution could have very well used the term
natural resources, but also to the cultural heritage of
the Filipinos.

Manila Hotel has become a landmark - a living

testimonial of Philippine heritage. While it was
restrictively an American hotel when it first opened in
1912, it immediately evolved to be truly Filipino.
Formerly a concourse for the elite, it has since then
become the venue of various significant events which
have shaped Philippine history. It was called the
Cultural Center of the 1930's. It was the site of the
festivities during the inauguration of the Philippine
Commonwealth. Dubbed as the Official Guest House
of the Philippine Government it plays host to
dignitaries and official visitors who are accorded the
traditional Philippine hospitality. 36

The history of the hotel has been chronicled in the

book The Manila Hotel: The Heart and Memory of a
City. 37 During World War II the hotel was converted
by the Japanese Military Administration into a military
headquarters. When the American forces returned to
recapture Manila the hotel was selected by the
Japanese together with Intramuros as the two (2)
places for their final stand. Thereafter, in the 1950's
and 1960's, the hotel became the center of political
activities, playing host to almost every political

convention. In 1970 the hotel reopened after a

renovation and reaped numerous international
recognitions, an acknowledgment of the Filipino talent
and ingenuity. In 1986 the hotel was the site of a
failed coup d'etat where an aspirant for vice-president
was "proclaimed" President of the Philippine
Republic.

ASSOCIATIONS WHOSE CAPITAL OR

CONTROLLING STOCK IS WHOLLY OWNED BY
SUCH CITIZENS."

For more than eight (8) decades Manila Hotel has

bore mute witness to the triumphs and failures, loves
and frustrations of the Filipinos; its existence is
impressed with public interest; its own historicity
associated with our struggle for sovereignty,
independence and nationhood. Verily, Manila Hotel
has become part of our national economy and
patrimony. For sure, 51% of the equity of the MHC
comes within the purview of the constitutional shelter
for it comprises the majority and controlling stock, so
that anyone who acquires or owns the 51% will have
actual control and management of the hotel. In this
instance, 51% of the MHC cannot be disassociated
from the hotel and the land on which the hotel edifice
stands. Consequently, we cannot sustain
respondents' claim that the Filipino First Policy
provision is not applicable since what is being sold is
only 51% of the outstanding shares of the corporation,
not the Hotel building nor the land upon which the
building stands. 38

MR. MONSOD. Madam President, apparently the

proponent is agreeable, but we have to raise a
question. Suppose it is a corporation that is 80percent Filipino, do we not give it preference?

The argument is pure sophistry. The term qualified

Filipinos as used in our Constitution also includes
corporations at least 60% of which is owned by
Filipinos. This is very clear from the proceedings of
the 1986 Constitutional Commission -

xxx xxx xxx

MR. DAVIDE. The Nolledo amendment would refer to

an individual Filipino. What about a corporation wholly
owned by Filipino citizens?

MR. MONSOD. At least 60 percent, Madam

President.

MR. DAVIDE. Is that the intention?

MR MONSOD. Yes, because, in fact, we would be

limiting it if we say that the preference should only be
100-percent Filipino.

MR. DAVIDE. I want to get that meaning clear

because "QUALIFIED FILIPINOS" may refer only to
individuals and not to juridical personalities or
entities.

THE PRESIDENT. Commissioner Davide is

recognized.
MR. MONSOD. We agree, Madam President. 39
MR. DAVIDE. I would like to introduce an amendment
to the Nolledo amendment. And the amendment
would consist in substituting the words "QUALIFIED
FILIPINOS" with the following: "CITIZENS OF THE
PHILIPPINES OR CORPORATIONS OR

xxx xxx xxx

MR. RODRIGO. Before we vote, may I request that

the amendment be read again.

MR. NOLLEDO. The answer is "yes."

a "qualified foreigner" and a "qualified Filipino," the

latter shall be chosen over the former."

MR. FOZ. Thank you. 41

MR. NOLLEDO. The amendment will read: "IN THE
GRANT OF RIGHTS, PRIVILEGES AND
CONCESSIONS COVERING THE NATIONAL
ECONOMY AND PATRIMONY, THE STATE SHALL
GIVE PREFERENCE TO QUALIFIED FILIPINOS."
And the word "Filipinos" here, as intended by the
proponents, will include not only individual Filipinos
but also Filipino-controlled entities or entities fullycontrolled by Filipinos. 40

The phrase preference to qualified Filipinos was

explained thus -

MR. FOZ. Madam President, I would like to request

Commissioner Nolledo to please restate his
amendment so that I can ask a question.

MR. NOLLEDO. "IN THE GRANT OF RIGHTS,

PRIVILEGES AND CONCESSIONS COVERING THE
NATIONAL ECONOMY AND PATRIMONY, THE
STATE SHALL GIVE PREFERENCE TO QUALIFIED
FILIPINOS."

MR. FOZ. In connection with that amendment, if a

foreign enterprise is qualified and a Filipino enterprise
is also qualified, will the Filipino enterprise still be
given a preference?

MR. NOLLEDO. Obviously.

MR. FOZ. If the foreigner is more qualified in some

aspects than the Filipino enterprise, will the Filipino
still be preferred?

Expounding further on the Filipino First Policy

provision Commissioner Nolledo continues -

MR NOLLEDO. Yes, Madam President. Instead of

"MUST," it will be "SHALL - THE STATE SHALL GIVE
PREFERENCE TO QUALIFIED FILIPINOS." This
embodies the so-called "Filipino First" policy. That
means that Filipinos should be given preference in the
grant of concessions, privileges and rights covering
the national patrimony. 42

The exchange of views in the sessions of the

Constitutional Commission regarding the subject
provision was still further clarified by Commissioner
Nolledo 43 -

"Paragraph 2 of Section 10 explicitly mandates the

"Pro-Filipino" bias in all economic concerns. It is
better known as the FILIPINO FIRST Policy. . . . This
provision was never found in previous
Constitutions. . . .

The term "qualified Filipinos" simply means that

preference shall be given to those citizens who can
make a viable contribution to the common good,
because of credible competence and efficiency. It
certainly does NOT mandate the pampering and
preferential treatment to Filipino citizens or
organizations that are incompetent or inefficient, since
such an indiscriminate preference would be
counterproductive and inimical to the common good.

In the granting of economic rights, privileges, and

concessions, when a choice has to be made between

Lastly, the word qualified is also determinable.

Petitioner was so considered by respondent GSIS
and selected as one of the qualified bidders. It was
pre-qualified by respondent GSIS in accordance with
its own guidelines so that the sole inference here is
that petitioner has been found to be possessed of
proven management expertise in the hotel industry, or
it has significant equity ownership in another hotel
company, or it has an overall management and
marketing proficiency to successfully operate the
Manila Hotel. 44

The penchant to try to whittle away the mandate of

the Constitution by arguing that the subject provision
is not self-executory and requires implementing
legislation is quite disturbing. The attempt to violate a
clear constitutional provision - by the government
itself - is only too distressing. To adopt such a line of
reasoning is to renounce the duty to ensure
faithfulness to the Constitution. For, even some of the
provisions of the Constitution which evidently need
implementing legislation have juridical life of their own
and can be the source of a judicial remedy. We
cannot simply afford the government a defense that
arises out of the failure to enact further enabling,
implementing or guiding legislation. In fine, the
discourse of Fr. Joaquin G. Bernas, S.J., on
constitutional government is apt -

The executive department has a constitutional duty to

implement laws, including the Constitution, even
before Congress acts - provided that there are
discoverable legal standards for executive action.
When the executive acts, it must be guided by its own
understanding of the constitutional command and of
applicable laws. The responsibility for reading and
understanding the Constitution and the laws is not the
sole prerogative of Congress. If it were, the executive
would have to ask Congress, or perhaps the Court,
for an interpretation every time the executive is
confronted by a constitutional command. That is not
how constitutional government operates. 45

Respondents further argue that the constitutional

provision is addressed to the State, not to respondent
GSIS which by itself possesses a separate and
distinct personality. This argument again is at best
specious. It is undisputed that the sale of 51% of the
MHC could only be carried out with the prior approval
of the State acting through respondent Committee on
Privatization. As correctly pointed out by Fr. Joaquin
G. Bernas, S.J., this fact alone makes the sale of the
assets of respondents GSIS and MHC a "state
action." In constitutional jurisprudence, the acts of
persons distinct from the government are considered
"state action" covered by the Constitution (1) when
the activity it engages in is a "public function;" (2)
when the government is so-significantly involved with
the private actor as to make the government
responsible for his action; and, (3) when the
government has approved or authorized the action. It
is evident that the act of respondent GSIS in selling
51% of its share in respondent MHC comes under the
second and third categories of "state action." Without
doubt therefore the transaction, although entered into
by respondent GSIS, is in fact a transaction of the
State and therefore subject to the constitutional
command. 46

When the Constitution addresses the State it refers

not only to the people but also to the government as
elements of the State. After all, government is
composed of three (3) divisions of power - legislative,
executive and judicial. Accordingly, a constitutional
mandate directed to the State is correspondingly
directed to the three (3) branches of government. It is
undeniable that in this case the subject constitutional
injunction is addressed among others to the Executive
Department and respondent GSIS, a government
instrumentality deriving its authority from the State.

It should be stressed that while the Malaysian firm

offered the higher bid it is not yet the winning bidder.
The bidding rules expressly provide that the highest
bidder shall only be declared the winning bidder after
it has negotiated and executed the necessary
contracts, and secured the requisite approvals. Since
the Filipino First Policy provision of the Constitution

bestows preference on qualified Filipinos the mere

tending of the highest bid is not an assurance that the
highest bidder will be declared the winning bidder.
Resultantly, respondents are not bound to make the
award yet, nor are they under obligation to enter into
one with the highest bidder. For in choosing the
awardee respondents are mandated to abide by the
dictates of the 1987 Constitution the provisions of
which are presumed to be known to all the bidders
and other interested parties.

Adhering to the doctrine of constitutional supremacy,

the subject constitutional provision is, as it should be,
impliedly written in the bidding rules issued by
respondent GSIS, lest the bidding rules be nullified for
being violative of the Constitution. It is a basic
principle in constitutional law that all laws and
contracts must conform with the fundamental law of
the land. Those which violate the Constitution lose
their reason for being.

Paragraph V. J. 1 of the bidding rules provides that [i]f

for any reason the Highest Bidder cannot be awarded
the Block of Shares, GSIS may offer this to other
Qualified Bidders that have validly submitted bids
provided that these Qualified Bidders are willing to
match the highest bid in terms of price per share. 47
Certainly, the constitutional mandate itself is reason
enough not to award the block of shares immediately
to the foreign bidder notwithstanding its submission of
a higher, or even the highest, bid. In fact, we cannot
conceive of a stronger reason than the constitutional
injunction itself.

In the instant case, where a foreign firm submits the

highest bid in a public bidding concerning the grant of
rights, privileges and concessions covering the
national economy and patrimony, thereby exceeding
the bid of a Filipino, there is no question that the
Filipino will have to be allowed to match the bid of the
foreign entity. And if the Filipino matches the bid of a
foreign firm the award should go to the Filipino. It
must be so if we are to give life and meaning to the
Filipino First Policy provision of the 1987 Constitution.
For, while this may neither be expressly stated nor

contemplated in the bidding rules, the constitutional

fiat is omnipresent to be simply disregarded. To ignore
it would be to sanction a perilous skirting of the basic
law.

This Court does not discount the apprehension that

this policy may discourage foreign investors. But the
Constitution and laws of the Philippines are
understood to be always open to public scrutiny.
These are given factors which investors must
consider when venturing into business in a foreign
jurisdiction. Any person therefore desiring to do
business in the Philippines or with any of its agencies
or instrumentalities is presumed to know his rights
and obligations under the Constitution and the laws of
the forum

The argument of respondents that petitioner is now

estopped from questioning the sale to Renong Berhad
since petitioner was well aware from the beginning
that a foreigner could participate in the bidding is
meritless. Undoubtedly, Filipinos and foreigners alike
were invited to the bidding. But foreigners may be
awarded the sale only if no Filipino qualifies, or if the
qualified Filipino fails to match the highest bid
tendered by the foreign entity. In the case before us,
while petitioner was already preferred at the inception
of the bidding because of the constitutional mandate,
petitioner had not yet matched the bid offered by
Renong Berhad. Thus it did not have the right or
personality then to compel respondent GSIS to accept
its earlier bid. Rightly, only after it had matched the bid
of the foreign firm and the apparent disregard by
respondent GSIS of petitioner's matching bid did the
latter have a cause of action.

Besides, there is no time frame for invoking the

constitutional safeguard unless perhaps the award
has been finally made. To insist on selling the Manila
Hotel to foreigners when there is a Filipino group
willing to match the bid of the foreign group is to insist
that government be treated as any other ordinary
market player, and bound by its mistakes or gross
errors of judgment, regardless of the consequences to
the Filipino people. The miscomprehension of the

Constitution is regrettable. Thus we would rather

remedy the indiscretion while there is still an
opportunity to do so than let the government develop
the habit of forgetting that the Constitution lays down
the basic conditions and parameters for its actions.

Since petitioner has already matched the bid price

tendered by Renong Berhad pursuant to the bidding
rules, respondent GSIS is left with no alternative but
to award to petitioner the block of shares of MHC and
to execute the necessary agreements and documents
to effect the sale in accordance not only with the
bidding guidelines and procedures but with the
Constitution as well. The refusal of respondent GSIS
to execute the corresponding documents with
petitioner as provided in the bidding rules after the
latter has matched the bid of the Malaysian firm
clearly constitutes grave abuse of discretion.

The Filipino First Policy is a product of Philippine

nationalism. It is embodied in the 1987 Constitution
not merely to be used as a guideline for future
legislation but primarily to be enforced; so must it be
enforced. This Court as the ultimate guardian of the
Constitution will never shun, under any reasonable
circumstance, the duty of upholding the majesty of the
Constitution which it is tasked to defend. It is worth
emphasizing that it is not the intention of this Court to
impede and diminish, much less undermine, the influx
of foreign investments. Far from it, the Court
encourages and welcomes more business
opportunities but avowedly sanctions the preference
for Filipinos whenever such preference is ordained by
the Constitution. The position of the Court on this
matter could have not been more appropriately
articulated by Chief Justice Narvasa -

As scrupulously as it has tried to observe that it is not

its function to substitute its judgment for that of the
legislature or the executive about the wisdom and
feasibility of legislation economic in nature, the
Supreme Court has not been spared criticism for
decisions perceived as obstacles to economic
progress and development . . . in connection with a
temporary injunction issued by the Court's First

Division against the sale of the Manila Hotel to a

Malaysian Firm and its partner, certain statements
were published in a major daily to the effect that that
injunction "again demonstrates that the Philippine
legal system can be a major obstacle to doing
business here."

Let it be stated for the record once again that while it

is no business of the Court to intervene in contracts of
the kind referred to or set itself up as the judge of
whether they are viable or attainable, it is its bounden
duty to make sure that they do not violate the
Constitution or the laws, or are not adopted or
implemented with grave abuse of discretion
amounting to lack or excess of jurisdiction. It will
never shirk that duty, no matter how buffeted by winds
of unfair and ill-informed criticism. 48

Privatization of a business asset for purposes of

enhancing its business viability and preventing further
losses, regardless of the character of the asset,
should not take precedence over non-material values.
A commercial, nay even a budgetary, objective should
not be pursued at the expense of national pride and
dignity. For the Constitution enshrines higher and
nobler non-material values. Indeed, the Court will
always defer to the Constitution in the proper
governance of a free society; after all, there is nothing
so sacrosanct in any economic policy as to draw itself
beyond judicial review when the Constitution is
involved. 49

Nationalism is inherent in the very concept of the

Philippines being a democratic and republican state,
with sovereignty residing in the Filipino people and
from whom all government authority emanates. In
nationalism, the happiness and welfare of the people
must be the goal. The nation-state can have no higher
purpose. Any interpretation of any constitutional
provision must adhere to such basic concept.
Protection of foreign investments, while laudable, is
merely a policy. It cannot override the demands of
nationalism. 50

The Manila Hotel or, for that matter, 51% of the MHC,
is not just any commodity to be sold to the highest
bidder solely for the sake of privatization. We are not
talking about an ordinary piece of property in a
commercial district. We are talking about a historic
relic that has hosted many of the most important
events in the short history of the Philippines as a
nation. We are talking about a hotel where heads of
states would prefer to be housed as a strong
manifestation of their desire to cloak the dignity of the
highest state function to their official visits to the
Philippines. Thus the Manila Hotel has played and
continues to play a significant role as an authentic
repository of twentieth century Philippine history and
culture. In this sense, it has become truly a reflection
of the Filipino soul - a place with a history of grandeur;
a most historical setting that has played a part in the
shaping of a country. 51

This Court cannot extract rhyme nor reason from the

determined efforts of respondents to sell the historical
landmark - this Grand Old Dame of hotels in Asia - to
a total stranger. For, indeed, the conveyance of this
epic exponent of the Filipino psyche to alien hands
cannot be less than mephistophelian for it is, in
whatever manner viewed, a veritable alienation of a
nation's soul for some pieces of foreign silver. And so
we ask: What advantage, which cannot be equally
drawn from a qualified Filipino, can be gained by the
Filipinos if Manila Hotel - and all that it stands for - is
sold to a non-Filipino? How much of national pride will
vanish if the nation's cultural heritage is entrusted to a
foreign entity? On the other hand, how much dignity
will be preserved and realized if the national
patrimony is safekept in the hands of a qualified,
zealous and well-meaning Filipino? This is the plain
and simple meaning of the Filipino First Policy
provision of the Philippine Constitution. And this
Court, heeding the clarion call of the Constitution and
accepting the duty of being the elderly watchman of
the nation, will continue to respect and protect the
sanctity of the Constitution.

WHEREFORE, respondents GOVERNMENT

SERVICE INSURANCE SYSTEM, MANILA HOTEL
CORPORATION, COMMITTEE ON
PRIVATIZATION and OFFICE OF THE

GOVERNMENT CORPORATE COUNSEL are

directed to CEASE and DESIST from selling 51% of
the shares of the Manila Hotel Corporation
to RENONG BERHAD, and to ACCEPT the matching
bid of petitioner MANILA PRINCE HOTEL
CORPORATION to purchase the subject 51% of the
shares of the Manila Hotel Corporation at P44.00 per
share and thereafter to execute the necessary
agreements and documents to effect the sale, to
issue the necessary clearances and to do such other
acts and deeds as may be necessary for the
purpose.

JUAN D. VICTORIA, petitioner, vs. THE

COMMISSION ON ELECTIONS and JESUS JAMES
CALISIN, respondents.
QUIASON, J.:
This is a petition for certiorari, under Rule 65 of the
Revised Rules of Court in relation to Section 2, Article
IX of the Constitution, to set aside (a) the Resolution
of the Commission on Elections (COMELEC) dated
January 22, 1993, which certified respondent James
Calisin as the highest ranking member of the
Sangguniang Panlalawigan of the Province of Albay
and (b) its Resolution dated February 22, 1993, which
denied the motion for reconsideration of petitioner.
The issue in the case at bench is the ranking of the
members of the Sangguniang Panlalawigan of the
Province of Albay for purposes of succession.
In the May 11, 1992 Elections, the following
candidates from the first, second and third districts of
the Province of Albay were elected and proclaimed as
members of the Sangguniang Panlalawigan, to wit:
FIRST DISTRICT
Name No. of Votes Garnered
1. Jesus James Calisin 28,335 votes
2. Vicente Go, Sr. 17,937 votes
3. Clenio Cabredo 16,705 votes
SECOND DISTRICT

1. Juan D. Victoria 32,918 votes

2. Jesus Marcellana 26,030 votes
3. Lorenzo Reyeg 23,887 votes
THIRD DISTRICT
1. Ramon Fernandez, Jr. 19,315 votes
2. Masikap Fontanilla 19,241 votes
3. Arturo Osia 17,778 votes
4. Nemesio Baclao 17,545 votes
(Rollo, pp. 27-28)
Due to the suspension of Governor Romeo Salalima
of the Province of Albay, Vice-Governor Danilo Azana
automatically assumed the powers and functions of
the governor, leaving vacant his post as vicegovernor. Under the law, Azana's position as vicegovernor should be occupied by the highest ranking
Sanggunian member, a post being contested by
petitioner and private respondent.
In answer to private respondent's petition for his
declaration as senior Sanggunian member for the
Province of Albay, the COMELEC issued a resolution
dated January 22, 1993, certifying him as first in the
order of ranking with petitioner herein as second
ranking member. The COMELEC based its
certification on the member of votes obtained by the
Sanggunian members in relation to the number of
registered voters in the district.
Thus, on February 15, 1993, Secretary Rafael M.
Alunan III of the Department of Interior and Local
Government designated private respondent as acting
Vice-Governor of the province.
Petitioner filed a motion for reconsideration of the
COMELEC resolution which was denied on February
22, 1993.
Hence, this petition.
Petitioner claims that the ranking of the Sanggunian
members should not only be based on the number of
votes obtained in relation to the total number of
registered voters, but also on the number of voters in
the district who actually voted therein. He further
argues that a district may have a large number of
registered voters but only a few actually voted, in

which case the winning candidate would register a

low percentage of the number of votes obtained.
Conversely, a district may have a smaller number of
registered voters but may have a big voters\\\' turnout, in which case the winning candidate would get a
higher percentage of the votes. Applying his formula,
petitioner would come out to be the highest ranking
Sanggunian member.
Petitioner gives the following illustration:
1. for private respondent.

107,216 (actually voted) x 28,335 (votes obtained) =

23.40%
129,793 (registered voters)
(Rollo, pp. 24, 25 and 30)
2. for petitioner
121,423 (actually voted) x 32,918 (votes obtained) =
25.84%
154,665 (registered voters)
(Rollo, p. 9).
We are not persuaded.
The Local Government provides:

"SEC. 44 Permanent Vacancies in the Office of the

Governor, Vice-Governor, Mayor, and Vice-Mayor. ---(a) If a permanent vacancy occurs in the office of the
governor or mayor, the vice-governor or vice-mayor
concerned shall become governor or mayor. If a
permanent vacancy occurs in the offices of the
governor, vice-governor, mayor, or vice-mayor, the
highest ranking sanggunian member or, in case of his
permanent inability, the second highest ranking
sanggunian member, shall become the governor,
vice-governor, mayor or vice-mayor, as the case may

be. Subsequent vacancies in the said office shall be

filled automatically by the other sanggunian members
according to their ranking as defined herein.

CARPIO MORALES, J.:

In the case of Globe-Mackay Cable and Radio
Corporation v. National Labor Relations Commission,
206 SCRA 710 (1992), we held that:

xxx xxx xxx

"For purposes of succession as provided in this
Chapter, ranking in the sanggunian shall be
determined on the basis of the proportion of votes
obtained by each winning candidate to the total
number of registered voters in each district in the
immediately preceding local election" (Underlining
ours).
The COMELEC came up with the following ranking of
the top three Sanggunian members:
NAME : District : Registered : Votes : Percent : Rank
of Elected : : Voters : Obtained : Dist'n :
Candidates : : : : :
-----------------------------ALBAY : : : : :
CALISIN, : : : : :
JESUS JAMES : : : : :
B. : 1st : 130,085 : 28,335 : 21.78 : 1st
: : : : : VICTORIA, : : : : :
JUAN D. : 2nd : 155.318 : 32,918 : 21.19 : 2nd
: : : : : MARCELLA : : : : :
NA : : : : :
JESUS, M. : 2nd : 155.318 : 26,030 : 16.76 : 3rd
-----------------------------(Rollo, p. 14)

The law is clear that the ranking in the Sanggunian

shall be determined on the basis of the proportion of
the votes obtained by each winning candidate to the
total number of registered voters of each district. It
does not mention anything about factoring the
numbers of voters who actually voted. In such a case,
the Court has no recourse but to merely apply the law.
The courts may not speculate as to the probable
intent of the legislature apart from the words (Pascual
v. Pascual-Bautista, 207 SCRA 561 [1992]).

". . . Under the principles of statutory construction, if a

statute is clear, plain and free from ambiguity, it must
be given its literal meaning and applied without
attempted interpretation. This plain-meaning rule or
verba legis derived from the maxim, index animi
sermo est (speech is the index of intention) rests on
the valid presumption that the words employed by the
legislature in a statute correctly express its intent or
will and preclude the court from construing it
differently. The legislature is presumed to know the
meaning of the words, to have used words advisedly,
and to have expressed its intent by the use of such
words as are found in the statute. Verba legis non est
recedendum, or from the words of a statute there
should be no departure. . . ."

Before the Court is a petition for Prohibition.

Republic Act No. 7903 (R.A. No. 7903), which was
enacted into law on February 23, 1995, created the
Zamboanga City Special Economic Zone
(ZAMBOECOZONE) and the ZAMBOECOZONE
Authority. Among other things, the law gives the
ZAMBOECOZONE Authority the following power
under Sec. 7 (f), viz:

Section 7.
xxxx
(f) To operate on its own, either directly or through a
subsidiary entity, or license to others, tourism-related
activities, including games, amusements and
recreational and sports facilities;
xxxx

Petitioner's contention is therefore untenable

considering the clear mandate of the law, which
leaves no room for other interpretation. We are not
unmindful of the practicality of petitioner's
interpretation but it must very well be addressed to
the legislative branch and not to this Court which has
no power to change the law.
Considering the foregoing, we find no grave abuse of
discretion on the part of the COMELEC in issuing the
Resolution dated January 22, 1993.
WHEREFORE, the petition is DISMISSED.

PHILIPPINE AMUSEMENT AND GAMING

CORPORATION (PAGCOR) represented by ATTY.
CARLOS R. BAUTISTA, JR.,Petitioner, versus
PHILIPPINE GAMING JURISDICTION
INCORPORATED (PEJI), ZAMBOANGA CITY
SPECIAL ECONOMIC ZONE AUTHORITY, et
al.,Respondent.

Apparently in the exercise of its power granted under

the above provision, public respondent
ZAMBOECOZONE Authority passed Resolution No.
2006-08-03 dated August 19, 2006 approving the
application of private respondent Philippine E-Gaming
Jurisdiction, Inc. (PEJI) to be a Master
Licensor/Regulator of on-line/internet/electronic
gaming/games of chance.
PEJI forthwith undertook extensive advertising
campaigns representing itself as such
licensor/regulator to the international business and
gaming community, drawing the Philippine
Amusement and Gaming Corporation (PAGCOR) to
file the present petition for Prohibition which assails
the authority of the ZAMBOECOZONE Authority to
operate, license, or regulate the operation of games
of chance in the ZAMBOECOZONE.
PAGCOR contends that R.A. No. 7903, specifically
Section 7(f) thereof, does not give power or authority
to the ZAMBOECOZONE Authority to operate,
license, or regulate the operation of games of chance
in the ZAMBOECOZONE. Citing three (3) statutes,
which it claims are in pari materia with R.A. No. 7903

as it likewise created economic zones and provided

for the powers and functions of their respective
governing and administrative authorities, PAGCOR
posits that the grant therein of authority to operate
games of chance is clearly expressed, but it is not
similarly so in Section 7(f) of R.A. No. 7903.

(f) To operate on its own, either directly or through a

subsidiary entity, or license to others, tourism-related
activities, including games, amusements, recreational
and sports facilities such as horse-racing, dog-racing
gambling, casinos, golf courses, and others, under
priorities and standards set by the CEZA;

Thus PAGCOR cites these three statutes and their

respective pertinent provisions:

xxxx

Republic Act No. 7227, or the "Bases Conversion and

Development Authority Act" enacted on March 13,
1992:

And Republic Act No. 7916 or the "Special Economic

Zone Act of 1995," enacted on February 24, 1995
authorizing other economic zones established under
the defunct Export Processing Zone Authority (EPZA)
and its successor Philippine Economic Zone Authority
(PEZA) to establish casinos and other games of
chance under the license of PAGCOR by way of the
ipso facto clause, viz:

Section 13. The Subic Bay Metropolitan Authority. xxxx

(b) Powers and functions of the Subic Bay
Metropolitan Authority. - The Subic Bay Metropolitan
Authority, otherwise known as the Subic Authority,
shall have the following powers and functions:
xxxx
(7) To operate directly or indirectly or license tourismrelated activities subject to priorities and standards
set by the Subic Authority including games and
amusements, except horse-racing, dog-racing and
casino gambling which shall continue to be licensed
by the Philippine Amusement and Gaming
Corporation (PAGCOR) upon recommendation of the
Conversion Authority; to maintain and preserve the
forested areas as a national park;
xxxx
Republic Act No. 7922 or the "Cagayan Economic
Zone Act of 1995" enacted on February 24, 1995:
Section 6. Powers and Functions of the Cagayan
Economic Zone Authority - The Cagayan Economic
Zone Authority shall have the following powers and
functions:
xxxx

SECTION 51. Ipso Facto Clause. - All privileges,

benefits, advantages or exemptions granted to special
economic zones under Republic Act No. 7227 shall
ipso facto be accorded to special economic zones
already created or to be created under this Act. The
free port status shall not be vested upon the new
special economic zones.
PAGCOR maintains that, compared with the abovequoted provisions of the ecozone-related statutes,
Section 7(f) of R.A. No. 7903 does not categorically
empower the ZAMBOECOZONE Authority to operate,
license, or authorize entities to operate games of
chance in the area, as the words "games" and
"amusement" employed therein do not include
"games of chance." Hence, PAGCOR concludes,
ZAMBOECOZONE Authority's grant of license to
private respondent PEJI encroached on its
(PAGCOR's) authority under Presidential Decree No.
1869 vis-a-vis the above-stated special laws to
centralize and regulate all games of chance.
ZAMBOECOZONE Authority, in its Comment,[1]
contends that PAGCOR has no personality to file the
present petition as it failed to cite a superior law which
proves its claim of having been granted exclusive
right and authority to license and regulate all games
of chance within the Philippines; and that, contrary to
PAGCOR's assertion, the words "games" and

"amusements" in Section 7(f) of R.A. No. 7903

include "games of chance" as was the intention of the
lawmakers when they enacted the law.
In its Reply Ex Abundante Ad Cautelam,[2] PAGCOR
cites the November 27, 2006 Opinion[3] rendered by
the Office of the President through Deputy Executive
Secretary for Legal Affairs Manuel B. Gaite, the
pertinent portions of which read:
Coming to the issue at hand, the ZAMBOECOZONE
Charter simply allows the operation of tourism-related
activities including games and amusements without
stating any form of gambling activity in its grant of
authority to ZAMBOECOZONE.
xxxx
In view of the foregoing, we are of the opinion that
under its legislative franchise (RA 7903), the
ZAMBOECOZONE is not authorized to enter into any
gaming activity by itself unless expressly authorized
by law or other laws specifically allowing the same.
(Emphasis and underscoring supplied)
The Court finds that, indeed, R.A. No. 7903 does not
authorize the ZAMBOECOZONE Authority to operate
and/or license games of chance/gambling.
Section 7(f) of R.A. No. 7903 authorizes the
ZAMBOECOZONE Authority "[t]o operate on its own,
either directly or through a subsidiary entity, or license
to others, tourism-related activities, including games,
amusements and recreational and sports facilities."
It is a well-settled rule in statutory construction that
where the words of a statute are clear, plain, and free
from ambiguity, it must be given its literal meaning
and applied without attempted interpretation.[4]
The plain meaning rule or verba legis, derived from
the maxim index animi sermo est (speech is the index
of intention), rests on the valid presumption that the
words employed by the legislature in a statute
correctly express its intention or will, and preclude the
court from construing it differently. For the legislature
is presumed to know the meaning of the words, to
have used them advisedly, and to have expressed the

intent by use of such words as are found in the

statute. Verba legis non est recedendum. From the
words of a statute there should be no departure.[5]

enter into licensing agreements, the latter is not. The

relevant portions of said Opinion read:

The words "game" and "amusement" have definite

and unambiguous meanings in law which are clearly
different from "game of chance" or "gambling." In its
ordinary sense, a "game" is a sport, pastime, or
contest; while an "amusement" is a pleasurable
occupation of the senses, diversion, or enjoyment.[6]
On the other hand, a "game of chance" is "a game in
which chance rather than skill determines the
outcome," while "gambling" is defined as "making a
bet" or "a play for value against an uncertain event in
hope of gaining something of value." [7]

The difference in the language and grant of powers to

CEZA and ZAMBOECOZONE is telling. To the former,
the grant of powers is not only explicit, but amplified,
while to the latter the grant of power is merely what
the law (RA 7903) states. Not only are the differences
in language telling, it will be noted that both charters
of CEZA and ZAMBOECOZONE were signed into law
only one (1) day apart from each other, i.e., February
23, 1995 in the case of ZAMBOECOZONE and
February 24, 1995 in the case of CEZA. x x x
Accordingly, both laws have to be taken in the light of
what Congress intended them to be, and the
distinction that the lawmakers made when they
enacted the two laws.

A comparison of the phraseology of Section 7(f) of

R.A. No. 7903 with similar provisions in the three cited
statutes creating ECOZONES shows that while the
three statutes, particularly R.A. No. 7922 which
authorized the Cagayan Economic Zone Authority to
directly or indirectly operate gambling and casinos
within its jurisdiction, categorically stated that such
power was being vested in their respective
administrative bodies, R.A. No. 7903 did not.
The spirit and reason of the statute may be passed
upon where a literal meaning would lead to absurdity,
contradiction, injustice, or defeat the clear purpose of
the lawmakers.28 Not any of these instances is
present in the case at bar, however. Using the literal
meanings of "games" and "amusement" to exclude
"games of chance" and "gambling" does not lead to
absurdity, contradiction, or injustice. Neither does it
defeat the intent of the legislators. The lawmakers
could have easily employed the words "games of
chance" and "gambling" or even "casinos" if they had
intended to grant the power to operate the same to
the ZAMBOECOZONE Authority, as what was done in
R.A. No. 7922 enacted a day after R.A. No. 7903. But
they did not.
The Court takes note of the above-mentioned Opinion
of the Office of the President which, after
differentiating the grant of powers between the
Cagayan Special Economic Zone and the
ZAMBOECOZONE Authority, states that while the
former is authorized to, among other things, operate
gambling casinos and internet gaming, as well as

Coming to the issue at hand, the ZAMBOECOZONE

Charter simply allows the operation of tourism-related
activities including games and amusements without
stating any form of gambling activity in its grant of
authority to ZAMBOECOZONE. On the other hand,
the grant to CEZA included such activities as horseracing, dog-racing and gambling casinos.
xxxx
In view of the foregoing, we are of the opinion that
under its legislative franchise (RA 7903), the
ZAMBOECOZONE is not authorized to enter into any
gaming activity by itself unless expressly authorized
by law or other laws specifically allowing the same.
(Emphasis supplied)
Both PAGCOR and the Ecozones being under the
supervision of the Office of the President, the latter's
interpretation of R.A. No. 7903 is persuasive and
deserves respect under the doctrine of respect for
administrative or practical construction. In applying
said doctrine, courts often refer to several factors
which may be regarded as bases thereof - factors
leading the courts to give the principle controlling
weight in particular instances, or as independent rules
in themselves. These factors include the respect due
the governmental agencies charged with
administration, their competence, expertness,
experience, and informed judgment and the fact that
they frequently are the drafters of the law they

interpret; that the agency is the one on which the

legislature must rely to advise it as to the practical
working out of the statute, and practical application of
the statute presents the agency with unique
opportunity and experiences for discovering
deficiencies, inaccuracies, or improvements in the
statute.[8]
In fine, Section 7(f) did not grant to the
ZAMBOECOZONE Authority the power to operate
and/or license games of chance/gambling.
WHEREFORE, the petition is GRANTED. Public
respondent Zamboanga Economic Zone Authority
is DIRECTED to CEASE and DESIST from exercising
jurisdiction to operate, license, or otherwise authorize
and regulate the operation of any games of chance.
And private respondent Philippine Gaming
Jurisdiction, Incorporated is DIRECTED to CEASE
and DESIST from operating any games of chance
pursuant to the license granted to it by public
respondent.

REPUBLIC OF THE PHILIPPINES, Petitioner, versus

CIPRIANO ORBECIDO III, Respondent.
QUISUMBING, J.:

Given a valid marriage between two Filipino citizens,

where one party is later naturalized as a foreign
citizen and obtains a valid divorce decree capacitating
him or her to remarry, can the Filipino spouse likewise
remarry under Philippine law?
Before us is a case of first impression that behooves
the Court to make a definite ruling on this apparently
novel question, presented as a pure question of law.
In this petition for review, the Solicitor General assails
the Decision[1] dated May 15, 2002, of the Regional
Trial Court of Molave, Zamboanga del Sur, Branch 23
and its Resolution[2] dated July 4, 2002 denying the
motion for reconsideration. The court a quo had
declared that herein respondent Cipriano Orbecido III
is capacitated to remarry. The fallo of the impugned
Decision reads:

WHEREFORE, by virtue of the provision of the

second paragraph of Art. 26 of the Family Code and
by reason of the divorce decree obtained against him
by his American wife, the petitioner is given the
capacity to remarry under the Philippine Law.
IT IS SO ORDERED.[3]

The factual antecedents, as narrated by the trial court,

are as follows.
On May 24, 1981, Cipriano Orbecido III married Lady
Myros M. Villanueva at the United Church of Christ in
the Philippines in Lam-an, Ozamis City. Their
marriage was blessed with a son and a daughter,
Kristoffer Simbortriz V. Orbecido and Lady Kimberly V.
Orbecido.
In 1986, Cipriano's wife left for the United States
bringing along their son Kristoffer. A few years later,
Cipriano discovered that his wife had been
naturalized as an American citizen.

The OSG contends that Paragraph 2 of Article 26 of

the Family Code is not applicable to the instant case
because it only applies to a valid mixed marriage; that
is, a marriage celebrated between a Filipino citizen
and an alien. The proper remedy, according to the
OSG, is to file a petition for annulment or for legal
separation.[5] Furthermore, the OSG argues there is
no law that governs respondent's situation. The OSG
posits that this is a matter of legislation and not of
judicial determination.[6]
For his part, respondent admits that Article 26 is not
directly applicable to his case but insists that when his
naturalized alien wife obtained a divorce decree which
capacitated her to remarry, he is likewise capacitated
by operation of law pursuant to Section 12, Article II of
the Constitution.[7]
At the outset, we note that the petition for authority to
remarry filed before the trial court actually constituted
a petition for declaratory relief. In this connection,
Section 1, Rule 63 of the Rules of Court provides:

relief has a legal interest in the controversy; and (4)

that the issue is ripe for judicial determination.[8]

This case concerns the applicability of Paragraph 2 of

Article 26 to a marriage between two Filipino citizens
where one later acquired alien citizenship, obtained a
divorce decree, and remarried while in the U.S.A. The
interests of the parties are also adverse, as petitioner
representing the State asserts its duty to protect the
institution of marriage while respondent, a private
citizen, insists on a declaration of his capacity to
remarry. Respondent, praying for relief, has legal
interest in the controversy. The issue raised is also
ripe for judicial determination inasmuch as when
respondent remarries, litigation ensues and puts into
question the validity of his second marriage.

Coming now to the substantive issue, does Paragraph

2 of Article 26 of the Family Code apply to the case of
respondent? Necessarily, we must dwell on how this
provision had come about in the first place, and what
was the intent of the legislators in its enactment?

Sometime in 2000, Cipriano learned from his son that

his wife had obtained a divorce decree and then
married a certain Innocent Stanley. She, Stanley and
her child by him currently live at 5566 A. Walnut
Grove Avenue, San Gabriel, California.

RULE 63

Cipriano thereafter filed with the trial court a petition

for authority to remarry invoking Paragraph 2 of Article
26 of the Family Code. No opposition was filed.
Finding merit in the petition, the court granted the
same. The Republic, herein petitioner, through the
Office of the Solicitor General (OSG), sought
reconsideration but it was denied.

Section 1. Who may file petition-Any person

interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute,
executive order or regulation, ordinance, or other
governmental regulation may, before breach or
violation thereof, bring an action in the appropriate
Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of
his rights or duties, thereunder.

In this petition, the OSG raises a pure question of

law:

...

All marriages solemnized outside the Philippines in

accordance with the laws in force in the country
where they were solemnized, and valid there as such,
shall also be valid in this country, except those
prohibited under Articles 35, 37, and 38.

The requisites of a petition for declaratory relief are:

(1) there must be a justiciable controversy; (2) the
controversy must be between persons whose
interests are adverse; (3) that the party seeking the

On July 17, 1987, shortly after the signing of the

original Family Code, Executive Order No. 227 was
likewise signed into law, amending Articles 26, 36,
and 39 of the Family Code. A second paragraph was
added to Article 26. As so amended, it now provides:

WHETHER OR NOT RESPONDENT CAN

REMARRY UNDER ARTICLE 26 OF THE FAMILY
CODE[4]

DECLARATORY RELIEF AND SIMILAR REMEDIES

Brief Historical Background

On July 6, 1987, then President Corazon Aquino
signed into law Executive Order No. 209, otherwise
known as the "Family Code," which took effect on
August 3, 1988. Article 26 thereof states:

ART. 26. All marriages solemnized outside the

Philippines in accordance with the laws in force in the
country where they were solemnized, and valid there
as such, shall also be valid in this country, except
those prohibited under Articles 35(1), (4), (5) and (6),
36, 37 and 38.
Where a marriage between a Filipino citizen and a
foreigner is validly celebrated and a divorce is
thereafter validly obtained abroad by the alien spouse
capacitating him or her to remarry, the Filipino spouse
shall have capacity to remarry under Philippine
law. (Emphasis supplied)

On its face, the foregoing provision does not appear

to govern the situation presented by the case at hand.
It seems to apply only to cases where at the time of
the celebration of the marriage, the parties are a
Filipino citizen and a foreigner. The instant case is
one where at the time the marriage was solemnized,
the parties were two Filipino citizens, but later on, the
wife was naturalized as an American citizen and
subsequently obtained a divorce granting her capacity
to remarry, and indeed she remarried an American
citizen while residing in the U.S.A.
Noteworthy, in the Report of the Public Hearings[9] on
the Family Code, the Catholic Bishops' Conference of
the Philippines (CBCP) registered the following
objections to Paragraph 2 of Article 26:

1. The rule is discriminatory. It discriminates against

those whose spouses are Filipinos who divorce them
abroad. These spouses who are divorced will not be
able to re-marry, while the spouses of foreigners who
validly divorce them abroad can.
2. This is the beginning of the recognition of the
validity of divorce even for Filipino citizens. For those
whose foreign spouses validly divorce them abroad
will also be considered to be validly divorced here and
can re-marry. We propose that this be deleted and
made into law only after more widespread
consultation. (Emphasis supplied.)

Legislative Intent

Records of the proceedings of the Family Code

deliberations showed that the intent of Paragraph 2 of
Article 26, according to Judge Alicia Sempio-Diy, a
member of the Civil Code Revision Committee, is to
avoid the absurd situation where the Filipino spouse
remains married to the alien spouse who, after
obtaining a divorce, is no longer married to the
Filipino spouse.
Interestingly, Paragraph 2 of Article 26 traces its origin
to the 1985 case of Van Dorn v. Romillo, Jr.[10]
The Van Dorn case involved a marriage between a
Filipino citizen and a foreigner. The Court held therein
that a divorce decree validly obtained by the alien
spouse is valid in the Philippines, and consequently,
the Filipino spouse is capacitated to remarry under
Philippine law.
Does the same principle apply to a case where at the
time of the celebration of the marriage, the parties
were Filipino citizens, but later on, one of them
obtains a foreign citizenship by naturalization?
The jurisprudential answer lies latent in the 1998 case
of Quita v. Court of Appeals.[11] In Quita, the parties
were, as in this case, Filipino citizens when they got
married. The wife became a naturalized American
citizen in 1954 and obtained a divorce in the same
year. The Court therein hinted, by way of obiter
dictum, that a Filipino divorced by his naturalized
foreign spouse is no longer married under Philippine
law and can thus remarry.
Thus, taking into consideration the legislative intent
and applying the rule of reason, we hold that
Paragraph 2 of Article 26 should be interpreted to
include cases involving parties who, at the time of the
celebration of the marriage were Filipino citizens, but
later on, one of them becomes naturalized as a
foreign citizen and obtains a divorce decree. The
Filipino spouse should likewise be allowed to remarry
as if the other party were a foreigner at the time of the
solemnization of the marriage. To rule otherwise
would be to sanction absurdity and injustice. Where

the interpretation of a statute according to its exact

and literal import would lead to mischievous results or
contravene the clear purpose of the legislature, it
should be construed according to its spirit and reason,
disregarding as far as necessary the letter of the law.
A statute may therefore be extended to cases not
within the literal meaning of its terms, so long as they
come within its spirit or intent.[12]
If we are to give meaning to the legislative intent to
avoid the absurd situation where the Filipino spouse
remains married to the alien spouse who, after
obtaining a divorce is no longer married to the Filipino
spouse, then the instant case must be deemed as
coming within the contemplation of Paragraph 2 of
Article 26.

In view of the foregoing, we state the twin elements

for the application of Paragraph 2 of Article 26 as
follows:

1. There is a valid marriage that has been celebrated

between a Filipino citizen and a foreigner; and

2. A valid divorce is obtained abroad by the alien

spouse capacitating him or her to remarry.

The reckoning point is not the citizenship of the

parties at the time of the celebration of the marriage,
but their citizenship at the time a valid divorce is
obtained abroad by the alien spouse capacitating the
latter to remarry.

In this case, when Cipriano's wife was naturalized as

an American citizen, there was still a valid marriage
that has been celebrated between her and Cipriano.
As fate would have it, the naturalized alien wife
subsequently obtained a valid divorce capacitating
her to remarry. Clearly, the twin requisites for the
application of Paragraph 2 of Article 26 are both
present in this case. Thus Cipriano, the "divorced"

Filipino spouse, should be allowed to remarry.

We are also unable to sustain the OSG's theory that
the proper remedy of the Filipino spouse is to file
either a petition for annulment or a petition for legal
separation. Annulment would be a long and tedious
process, and in this particular case, not even feasible,
considering that the marriage of the parties appears
to have all the badges of validity. On the other hand,
legal separation would not be a sufficient remedy for it
would not sever the marriage tie; hence, the legally
separated Filipino spouse would still remain married
to the naturalized alien spouse.
However, we note that the records are bereft of
competent evidence duly submitted by respondent
concerning the divorce decree and the naturalization
of respondent's wife. It is settled rule that one who
alleges a fact has the burden of proving it and mere
allegation is not evidence.[13]
Accordingly, for his plea to prosper, respondent herein
must prove his allegation that his wife was naturalized
as an American citizen. Likewise, before a foreign
divorce decree can be recognized by our own courts,
the party pleading it must prove the divorce as a fact
and demonstrate its conformity to the foreign law
allowing it.[14] Such foreign law must also be proved
as our courts cannot take judicial notice of foreign
laws. Like any other fact, such laws must be alleged
and proved.[15] Furthermore, respondent must also
show that the divorce decree allows his former wife to
remarry as specifically required in Article 26.
Otherwise, there would be no evidence sufficient to
declare that he is capacitated to enter into another
marriage.

Nevertheless, we are unanimous in our holding that

Paragraph 2 of Article 26 of the Family Code (E.O.
No. 209, as amended by E.O. No. 227), should be
interpreted to allow a Filipino citizen, who has been
divorced by a spouse who had acquired foreign
citizenship and remarried, also to remarry. However,
considering that in the present petition there is no
sufficient evidence submitted and on record, we are
unable to declare, based on respondent's bare
allegations that his wife, who was naturalized as an
American citizen, had obtained a divorce decree and
had remarried an American, that respondent is now

capacitated to remarry. Such declaration could only

be made properly upon respondent's submission of
the aforecited evidence in his favor.
ACCORDINGLY, the petition by the Republic of the
Philippines is GRANTED. The assailed Decision
dated May 15, 2002, and Resolution dated July 4,
2002, of the Regional Trial Court of Molave,
Zamboanga del Sur, Branch 23, are hereby SET
ASIDE.

ARNOLD JAMES M. YSIDORO, Petitioner, versus

PEOPLE OF THE PHILIPINES, Respondent.
ABAD, J.:

This case is about a municipal mayor charged with

illegal diversion of food intended for those suffering
from malnutrition to the beneficiaries of reconstruction
projects affecting the homes of victims of calamities.

The Facts and Case

The Office of the Ombudsman for the Visayas

accused Arnold James M. Ysidoro before the
Sandiganbayan in Criminal Case 28228 of violation of
illegal use of public property (technical malversation)
Under Article 220 of the Revised Penal Code.1

The facts show that the Municipal Social Welfare and

Development Office (MSWDO) of Leyte, Leyte,
operated a Core Shelter Assistance Program (CSAP)
that provided construction materials to indigent
calamity victims with which to rebuild their homes.
The beneficiaries provided the labor needed for
construction.

On June 15, 2001 when construction for calamity

victims in Sitio Luy-a, Barangay Tinugtogan, was
70% done, the beneficiaries stopped reporting for

work for the reason that they had to find food for their
families. This worried Lolita Garcia (Garcia), the
CSAP Officer-in-Charge, for such construction
stoppage could result in the loss of construction
materials particularly the cement. Thus, she sought
the help of Cristina Polinio (Polinio), an officer of the
MSWDO in charge of the municipality's Supplemental
Feeding Program (SFP) that rationed food to
malnourished children. Polinio told Garcia that the
SFP still had sacks of rice and boxes of sardines in its
storeroom. And since she had already distributed
food to the mother volunteers, what remained could
be given to the CSAP beneficiaries.

Garcia and Polinio went to petitioner Arnold James M.

Ysidoro, the Leyte Municipal Mayor, to seek his
approval. After explaining the situation to him, Ysidoro
approved the release and signed the withdrawal slip
for four sacks of rice and two boxes of sardines worth
P3,396.00 to CSAP.2 Mayor Ysidoro instructed
Garcia and Polinio, however, to consult the
accounting department regarding the matter. On
being consulted, Eldelissa Elises, the supervising
clerk of the Municipal Accountant's Office, signed
the withdrawal slip based on her view that it was an
emergency situation justifying the release of the
goods. Subsequently, CSAP delivered those goods to
its beneficiaries. Afterwards, Garcia reported the
matter to the MSWDO and to the municipal auditor as
per auditing rules.

On August 27, 2001 Alfredo Doller, former member of

the Sangguniang Bayan of Leyte, filed the present
complaint against Ysidoro. Nierna Doller, Alfredo's
wife and former MSWDO head, testified that
the subject SFP goods were intended for its target
beneficiaries, Leyte's malnourished children. She also
pointed out that the Supplemental
Feeding Implementation Guidelines for Local
Government Units governed the distribution of SFP
goods.3 Thus, Ysidoro committed technical
malversation when he approved the distribution of
SFP goods to the CSAP beneficiaries.

In his defense, Ysidoro claims that the diversion of the

subject goods to a project also meant for the poor of
the municipality was valid since they came from the
savings of the SFP and the Calamity Fund. Ysidoro
also claims good faith, believing that the municipality's
poor CSAP beneficiaries were also in urgent need of
food. Furthermore, Ysidoro pointed out that the COA
Municipal Auditor conducted a comprehensive audit of
their municipality in 2001 and found nothing irregular
in its transactions.

On February 8, 2010 the Sandiganbayan found

Ysidoro guilty beyond reasonable doubt of technical
malversation. But, since his action caused no damage
or embarrassment to public service, it only fined him
P1,698.00 or 50% of the sum misapplied. The
Sandiganbayan held that Ysidoro applied public
property to a pubic purpose other than that for which it
has been appropriated by law or ordinance. On May
12, 2010 the Sandiganbayan denied Ysidoro's motion
for reconsideration. On June 8, 2010
Ysidoro appealed the Sandiganbayan Decision to this
Court.

3. Whether or not his failure to present the municipal

auditor can be taken against him; and

4. Whether or not good faith is a valid defense for

technical malversation.

The Court's Rulings

One. The crime of technical malversation as

penalized under Article 220 of the Revised Penal
Code4 has three elements: a) that the offender is
an accountable public officer; b) that he applies public
funds or property under his administration to some
public use; and c) that the public use for which such
funds or property were applied is different from the
purpose for which they were originally appropriated by
law or ordinance.5 Ysidoro claims that he could not
be held liable for the offense under its third element
because the four sacks of rice and two boxes of
sardines he gave the CSAP beneficiaries were not
appropriated by law or ordinance for a specific
purpose.

72 months; and 2) the families of six members whose

total monthly income is P3,675.00 and below.11 This
rule provides assurance that the SFP would cater only
to the malnourished among its people who are in
urgent need of the government's limited resources.

Ysidoro disregarded the guidelines when he approved

the distribution of the goods to those providing free
labor for the rebuilding of their own homes. This is
technical malversation. If Ysidoro could not legally
distribute the construction materials appropriated for
the CSAP housing beneficiaries to the SFP
malnourished clients neither could he distribute the
food intended for the latter to CSAP beneficiaries.

Two. Ysidoro claims that the subject goods already

constituted savings of the SFP and that, therefore, the
same could already be diverted to the CSAP
beneficiaries. He relies on Abdulla v. People12 which
states that funds classified as savings are not
considered appropriated by law or ordinance and can
be used for other public purposes. The Court
cannot accept Ysidoro's argument.

The Questions Presented

In essence, Ysidoro questions the Sandiganbayan's

finding that he committed technical malversation. He
particularly raises the following questions:

1. Whether or not he approved the diversion of the

subject goods to a public purpose different from their
originally intended purpose;

2. Whether or not the goods he approved for diversion

were in the nature of savings that could be used to
augment the other authorized expenditures of the
municipality;

But the evidence shows that on November 8, 2000

the Sangguniang Bayan of Leyte enacted Resolution
00-133 appropriating the annual general fund for
2001.6 This appropriation was based on the
executive budget 7 which allocated P100,000.00 for
the SFP and P113,957.64 for the Comprehensive and
Integrated Delivery of Social Services8 which covers
the CSAP housing projects.9 The creation of the two
items shows the Sanggunian's intention to appropriate
separate funds for SFP and the CSAP in the annual
budget.

Since the municipality bought the subject goods using

SFP funds, then those goods should be used for
SFP's needs, observing the rules prescribed for
identifying the qualified beneficiaries of its feeding
programs. The target clientele of the SFP according
to its manual10 are: 1) the moderately and severely
underweight pre-school children aged 36 months to

The subject goods could not be regarded as savings.

The SFP is a continuing program that ran throughout
the year. Consequently, no one could say in mid-June
2001 that SFP had already finished its project,
leaving funds or goods that it no longer needed. The
fact that Polinio had already distributed the food items
needed by the SFP beneficiaries for the
second quarter of 2001 does not mean that the
remaining food items in its storeroom constituted
unneeded savings. Since the requirements of hungry
mouths are hard to predict to the last sack of rice or
can of sardines, the view that the subject goods were
no longer needed for the remainder of the year was
quite premature.

In any case, the Local Government Code provides

that an ordinance has to be enacted to validly apply
funds, already appropriated for a determined public
purpose, to some other purpose. Thus:

SEC. 336. Use of Appropriated Funds and Savings. Funds shall be available exclusively for the specific
purpose for which they have been appropriated. No
ordinance shall be passed authorizing any transfer
of appropriations from one item to another. However,
the local chief executive or the presiding officer of the
sanggunian concerned may, by ordinance, be
authorized to augment any item in the approved
annual budget for their respective offices from savings
in other items within the same expense class of their
respective appropriations.

The power of the purse is vested in the local

legislative body. By requiring an ordinance, the law
gives the Sanggunian the power to determine whether
savings have accrued and to authorize the
augmentation of other items on the budget with those
savings.

Three. Ysidoro claims that, since the municipal

auditor found nothing irregular in the diversion of the
subject goods, such finding should be respected. The
SB ruled, however, that since Ysidoro failed to present
the municipal auditor at the trial, the presumption is
that his testimony would have been adverse if
produced. Ysidoro argues that this goes against the
rule on the presumption of innocence and the
presumption of regularity in the performance of official
functions.

Ysidoro may be right in that there is no basis for

assuming that had the municipal auditor testified, his
testimony would have been adverse to the mayor.
The municipal auditor's view regarding the transaction
is not conclusive to the case and will not necessarily
negate the mayor's liability if it happened to be
favorable to him. The Court will not, therefore, be
drawn into speculations regarding what the municipal
auditor would have said had he appeared and
testified.

Four. Ysidoro insists that he acted in good faith since,

first, the idea of using the SFP goods for the CSAP
beneficiaries came, not from him, but from Garcia and
Polinio; and, second, he consulted the
accounting department if the goods could be
distributed to those beneficiaries. Having no criminal
intent, he argues that he cannot be convicted of the
crime.

But criminal intent is not an element of technical

malversation. The law punishes the act of diverting
public property earmarked by law or ordinance for a
particular public purpose to another public purpose.
The offense is mala prohibita, meaning that the
prohibited act is not inherently immoral but becomes a
criminal offense because positive law forbids
its commission based on considerations of public
policy, order, and convenience.13 It is the commission
of an act as defined by the law, and not the character
or effect thereof, that determines whether or not the
provision has been violated. Hence, malice or
criminal intent is completely irrelevant.14

Dura lex sed lex. Ysidoro's act, no matter how noble

or miniscule the amount diverted, constitutes the
crime of technical malversation. The law and this
Court, however, recognize that his offense is not
grave, warranting a mere fine.

Lerum and G. Viola Fernando as private prosecutors

in behalf of the People of the Philippines for the
purpose of testing the sufficiency and probative value
of the testimony of former Judge Roman A. Cruz to
prove a decree of divorce issued by him while a
Judge of First Instance of Manila sometime in 1944.
It appears that a case for bigamy was filed against
Nello Y. Roa in the Court of First Instance of Rizal
(Case No. 962). In the course of the trial held in June
13 and 30, 1948, former Judge Roman A. Cruz was
placed on the witness stand by the defendant to prove
that his wife Elena Muoz has already secured a
decree of divorce against him in July 1944. The
prosecution objected to this move of the defendant,
but the objection was overruled, and so the
prosecution filed a petition for a writ of prohibition with
this court praying that the respondent judge be
enjoined from allowing the defendant to prove the
alleged decree of divorce by oral evidence (G. R. No.
L-2340). The petition was dismissed for lack of merit.
Judge Roman Cruz then was allowed to testify, and
his testimony reads as follows:

"Sr. Guanlao:
"P. Conoce Ud. personalmente a Elena Muoz?
"R. Si, seor.
"P. Conoce Ud. personalmente a Nello Roa?
xxx xxx xxx

WHEREFORE, this Court AFFIRMS in its entirety the

assailed Decision of the Sandiganbayan in Criminal
Case 28228 dated February 8, 2010.

EULOGIO R. LERUM and G. VIOLA FERNANDO,

petitioners-appellants; THE PEOPLE OF THE
PHILIPPINES, necessary party, vs. ROMAN A.
CRUZ, ELENA MU?OZ and NELLO Y. ROA,
respondents-appellees.
BAUTISTA ANGELO, J.:
This is an appeal from an order of the Court of First
Instance of Rizal (Quezon City) dismissing the petition
for declaratory relief filed by Attorneys Eulogio R.

"P. Porque dice Ud. que conoce a Elena Muoz?

"R. La conozco porque fue demandante en una causa
de divorcio que se habia ventilado en una de las
salas que yo presidia entonces en el Juzgado de
Primera Instancia de Manila durante mi incumbencia
en 1944.

"Sr. Viola Fernando:

"Pido Su Seoria el descarte de esta parte del
testimonio del testigo por ser incompetente y,
ademas, es una conclusion.
"Juzgado:

"El testigo esta declarando sobre hechos de su

conocimiento propio.
"Sr. Viola Fernando:
"Es una conclusion.
"Juzgado:
"El testimonio del Juez Cruz no puede considerarse
como una prueba secundaria, sino mas bien que
vendria a ser como una prueba primaria o principal,
cuyo expediente surgio a rais de sus actuaciones
oficiales como Juez. (Steno. Notes, Transcript, pp. 47.).
xxx xxx xxx
"Sr. Guanlao:
"P. De su propio conocimiento y segun su mejor
recuerdo, se tramito ante Ud. la causa de referencia?.
xxx xxx xxx
"Juzgado:
"Se le pregunta si recuerda. . . .
"Juzgado:
"Eso incumbe al Juzgado. Puede contestar.
"R. Si, seor. (Steno. Transcript Notes, p. 6.).
xxx xxx xxx
"Juzgado:
"Puede contestar.
"Testigo:
"Si, seor se ha tramitado ese asunto de divorcio
durante mi incumbencia en 1944, cuando presidia
entonces una de las salas de Juzgado de primera
Instancia de Manila.
"P. Y cual fue el resultado de ese asunto de divorcio si
Ud. recuerda?
"R. Se concedio el divorcio solicitado por la entonces
demandante.
"P. Sabe Ud. si el demandado apelo de esa decision
"R. No podia haber apelado porque era un divorcio
concedido mediante rebeldia.

"P. Pero Ud. no esta seguro si el demandado apelo o

no?
"R. Que yo sepa, ni siquiera peticion de
reconsideracion se presento, ni que se hay dado
curso a alguna apelacion. (Steno. Notes, Transcript,
pp. 13-14, hereto attached as Exhibit A.)" (Copied
from G. R No. L-2783, pp. 23-25, record on appeal.).
The prosecution moved for the striking out of the
above testimony of Judge Cruz, and when the motion
was denied, the prosecution again brought the case
to this Court through certiorari (G. R. No. L-2483), and
again the petition was denied on the ground that the
respondent judge had power and authority to rule on
the question raised therein. After the steps taken by
the prosecution to foil the attempt to prove the alleged
decree of divorce by oral evidence proved futile, the
private prosecution filed the present petition for
declaratory relief.
It also appears that the petition was at first filed by
City Attorney Jose F. Fernandez, and by Attorneys
Eulogio R. Lerum and G. Viola Fernando as private
prosecutors in the bigamy case No. 962, but later,
upon motion filed by City Attorney Fernandez, his
name was stricken out from the pleadings, and so an
amended petition was filed wherein Attorneys Lerum
and Viola Fernando appeared as the only petitioners
representing the People of the Philippines. It finally
appears that Attorneys Lerum and Viola Fernando
made an attempt to have the Solicitor General appear
as counsel, but this attempt was again ruled out on
the ground that under the law the Solicitor General
can only be required to intervene when the validity of
a statute is involved.
While the petitioners have assigned in their brief
seven errors which are alleged to have been
committed by the lower court, we believe that the
issues raised can be boiled down into two, to wit: (1)
whether petitioners have the necessary personality
and interest to file the petition under consideration;
and (2) whether the subject matter of the petition is
among those that can be determined by way of
declaratory relief under Rule 66 of the Rules of Court.
1. The incident giving rise to the petition for
declaratory relief arose in a criminal case for bigamy
instituted against one Nello Y. Roa. The information

was filed by City Attorney Jose F. Fernandez as

required by the Rules of Court, and Attorneys Eulogio
R. Lerum and G. Viola Fernando appeared as private
prosecutors in behalf of the offended party. The
incident concerns the presentation of the oral
testimony of former Judge Roman A. Cruz to prove a
decree of divorce issued by him as judge of First
Instance of Manila in an effort to bring about the
acquittal of the defendant. The interested party,
therefore, in testing the sufficiency or probative value
of the aforesaid testimony is the People of the
Philippines. In fact it is the City Attorney who filed the
two certiorari cases with this court in a vain attempt to
get a ruling on the matter. This being the case, the
city attorney should be the one to ask for the
declaratory relief if it is desired to have said matter
tested in court and if and when this step is feasible
under the law. It appears, however, that City Attorney
Jose F. Fernandez has refused to join the petitioners
in filing the herein petition for declaratory relief as
shown by his attitude in asking that his name be
stricken out from the pleadings. This attitude is
indicative that the government has no interest in
prosecuting the petition, and inasmuch as all criminal
actions can only be prosecuted under the direction
and control of the fiscal and for that matter he is the
only official who can represent the People of the
Philippines (sec. 4, Rule 106, of the Rules of Court;
Herrero vs. Diaz, 42 Off. Gaz., 1166; 75 Phil., 489), it
is evident that the petitioners herein, who as private
prosecutors can only intervene subject to the control
of the City Attorney (Herrero vs. Diaz, id.), are not the
proper parties to file the petition under consideration.
2. Granting for the sake of argument that the
petitioners herein can be considered as parties in
interest within the meaning of the statute, the next
question to determine is whether the subject matter
which they want to be tested is among those
mentioned in section 1, rule 66, of the Rules of Court.
Under this rule, only a person who is interested
"under a deed, will, contract or other written
instrument, and whose rights are affected by a statute
or ordinance, may bring an action to determine any
question of construction or validity arising under the
instrument or statute and for a declaration of his rights
or duties thereunder." This means that the subject
matter must refer to a deed, will, contract or other
written instrument, or to a statute or ordinance, to

warrant declaratory relief. Any other matter not

mentioned therein is deemed excluded. This is under
the principle of expressio unius est exclussio alterius.
Now, does the subject matter under consideration
come within the import of the rule? The answer
cannot but be in the negative, for it does not refer to
any written instrument, statute or ordinance. It merely
refers to the sufficiency or probative value of an oral
evidence concerning a decree of divorce issued by a
former judge, which the court trying the bigamy case
has ample power and authority to pass upon. This is
not the opportune moment to look into the correctness
of the ruling of the court in said bigamy case allowing
the presentation of oral evidence to prove a decree of
divorce under the circumstances at present obtaining,
for the bigamy case is still pending determination.
This will be determined in due time when properly
presented before this Court. For the purposes of this
appeal, it suffices for this Court to declare that the
subject matter of the petition does not warrant the
granting of declaratory relief within the meaning of
said Rule 66.

MARTIN CENTENO, petitioner, vs. HON. VICTORIA

VILLALON-PORNILLOS, Presiding Judge of the
Regional Trial Court of Malolos, Bulacan, Branch 10,
and THE PEOPLE OF THE PHILIPPINES,
respondents.
REGALADO, J.:
It is indeed unfortunate that a group of elderly men,
who were moved by their desire to devote their
remaining years to the service of their Creator by
forming their own civic organization for that purpose,
should find themselves enmeshed in a criminal case
for making a solicitation from a community member
allegedly without the required permit from the
Department of Social Welfare and Development.
The records of this case reveal that sometime in the
last quarter of 1985, the officers of a civic organization
known as the Samahang Katandaan ng Nayon ng
Tikay launched a fund drive for the purpose of
renovating the chapel of Barrio Tikay, Malolos,
Bulacan. Petitioner Martin Centeno, the chairman of
the group, together with Vicente Yco, approached
Judge Adoracion G. Angeles, a resident of Tikay, and

solicited from her a contribution of P1,500.00. It is

admitted that the solicitation was made without a
permit from the Department of Social Welfare and
Development.
As a consequence, based on the complaint of Judge
Angeles, an information 1 was filed against petitioner
Martin Centeno, together with Religio Evaristo and
Vicente Yco, for violation of Presidential Decree No.
1564, or the Solicitation Permit Law, before the
Municipal Trial Court of Malolos, Bulacan, Branch 2,
and docketed as Criminal Case No. 2602. Petitioner
filed a motion to quash the information 2 on the
ground that the facts alleged therein do not constitute
an offense, claiming that Presidential Decree No.
1564 only covers solicitations made for charitable or
public welfare purposes, but not those made for a
religious purpose such as the construction of a
chapel. This was denied 3 by the trial court, and
petitioner\'s motion for reconsideration having met the
same fate, trial on the merits ensued.
On December 29, 1992, the said trial court rendered
judgment 4 finding accused Vicente Yco and
petitioner Centeno guilty beyond reasonable doubt
and sentencing them to each pay a fine of P200.00.
Nevertheless, the trial court recommended that the
accused be pardoned on the basis of its finding that
they acted in good faith, plus the fact that it believed
that the latter should not have been criminally liable
were it not for the existence of Presidential Decree
No. 1564 which the court opined it had the duty to
apply in the instant case.
Both accused Centeno and Yco appealed to the
Regional Trial Court of Malolos, Bulacan, Branch 10.
However, accused Yco subsequently withdrew his
appeal, hence the case proceeded only with respect
to petitioner Centeno. On May 21, 1993, respondent
Judge Villalon-Pornillos affirmed the decision of the
lower court but modified the penalty, allegedly
because of the perversity of the act committed which
caused damage and prejudice to the complainant, by
sentencing petitioner Centeno to suffer an increased
penalty of imprisonment of 6 months and a fine of
P1,000.00, without subsidiary imprisonment in case of
insolvency. 5 The motion for reconsideration of the
decision was denied by the court. 6
Thus it is that a fine of P200.00 imposed as a penalty

by the lowest court in the judicial heirarchy eventually

reached this highest tribunal, challenged on the sole
issue of whether solicitations for religious purposes
are within the ambit of Presidential Decree No. 1564.
Quantitatively, the financial sanction is a nominal
imposition but, on a question of principle, it is not a
trifling matter. This Court is gratified that it can now
grant this case the benefit of a final adjudication.
Petitioner questions the applicability of Presidential
Decree No. 1564 to solicitations for contributions
intended for religious purposes with the submissions
that (1) the term "religious purpose" is not expressly
included in the provisions of the statute, hence what
the law does not include, it excludes; (2) penal laws
are to be construed strictly against the State and
liberally in favor of the accused; and (3) to subject to
State regulation solicitations made for a religious
purpose would constitute an abridgment of the right to
freedom of religion guaranteed under the Constitution.
Presidential Decree No. 1564 (which amended Act
No. 4075, otherwise known as the Solicitation Permit
Law), provides as follows:
"Sec. 2. Any person, corporation, organization, or
association desiring to solicit or receive contributions
for charitable or public welfare purposes shall first
secure a permit from the Regional Offices of the
Department of Social Services and Development as
provided in the Integrated Reorganization Plan. Upon
the filing of a written application for a permit in the
form prescribed by the Regional Offices of the
Department of Social Services and Development, the
Regional Director or his duly authorized
representative may, in his discretion, issue a
permanent or temporary permit or disapprove the
application. In the interest of the public, he may in his
discretion renew or revoke any permit issued under
Act 4075."
The main issue to be resolved here is whether the
phrase "charitable purposes" should be construed in
its broadest sense so as to include a religious
purpose. We hold in the negative.
I. Indeed, it is an elementary rule of statutory
construction that the express mention of one person,
thing, act, or consequence excludes all others. This

rule is expressed in the familiar maxim "expressio

unius est exclusio alterius." Where a statute, by its
terms, is expressly limited to certain matters, it may
not, by interpretation or construction, be extended to
others. The rule proceeds from the premise that the
legislature would not have made specified
enumerations in a statute had the intention been not
to restrict its meaning and to confine its terms to those
expressly mentioned. 7
It will be observed that the 1987 Constitution, as well
as several other statutes, treat the words "charitable"
and "religious" separately and independently of each
other. Thus, the word "charitable" is only one of three
descriptive words used in Section 28 (3), Article VI of
the Constitution which provides that "charitable
institutions, churches and parsonages . . ., and all
lands, buildings, and improvements, actually, directly,
and exclusively used for religious, charitable, or
educational purposes shall be exempt from taxation."
There are certain provisions in statutes wherein these
two terms are likewise dissociated and individually
mentioned, as for instance, Sections 26 (e)
(corporations exempt from income tax) and 28 (8) (E)
(exclusions from gross income) of the National
Internal Revenue Code; Section 88 (purposes for the
organization of non-stock corporations) of the
Corporation Code; and Section 234 (b) (exemptions
from real property tax) of the Local Government
Code.
That these legislative enactments specifically spelled
out "charitable" and "religious" in an enumeration,
whereas Presidential Decree No. 1564 merely stated
"charitable or public welfare purposes," only goes to
show that the framers of the law in question never
intended to include solicitations for religious purposes
within its coverage. Otherwise, there is no reason why
it would not have so stated expressly.
All contributions designed to promote the work of the
church are "charitable" in nature, since religious
activities depend for their support on voluntary
contributions. 8 However, "religious purpose" is not
interchangeable with the expression "charitable
purpose." While it is true that there is no religious
purpose which is not also a charitable purpose, yet
the converse is not equally true, for there may be a
"charitable" purpose which is not "religious" in the
legal sense of the term. 9 Although the term

"charitable" may include matters which are "religious,"

it is a broader term and includes matters which are
not "religious," and, accordingly, there is a distinction
between "charitable purpose" and "religious purpose,"
except where the two terms are obviously used
synonymously, or where the distinction has been
done away with by statute. 10 The word "charitable,"
therefore, like most other words, is capable of
different significations. For example, in the law,
exempting charitable uses from taxation, it has a very
wide meaning, but under Presidential Decree No.
1564 which is a penal law, it cannot be given such a
broad application since it would be prejudicial to
petitioners.
To illustrate, the rule is that tax exemptions are
generally construed strictly against the taxpayer.
However, there are cases wherein claims for
exemption from tax for "religious purposes" have
been liberally construed as covered in the law
granting tax exemptions for "charitable purposes."
Thus, the term "charitable purposes," within the
meaning of a statute providing that the succession of
any property passing to or for the use of any
institution for purposes only of public charity shall not
be subject to succession tax, is deemed to include
religious purposes. 11 A gift for "religious purposes"
was considered as a bequest for "charitable use" as
regards exemption from inheritance tax. 12
On the other hand, to subsume the "religious"
purpose of the solicitation within the concept of
"charitable" purpose which under Presidential Decree
No. 1564 requires a prior permit from the Department
of Social Services and Development, under pain of
penal liability in the absence thereof, would be
prejudicial to petitioner. Accordingly, the term
"charitable" should be strictly construed so as to
exclude solicitations for "religious" purposes. Thereby,
we adhere to the fundamental doctrine underlying
virtually all penal legislations that such interpretation
should be adopted as would favor the accused.
For, it is a well-entrenched rule that penal laws are to
be construed strictly against the State and liberally in
favor of the accused. They are not to be extended or
enlarged by implications, intendments, analogies or
equitable considerations. They are not to be strained
by construction to spell out a new offense, enlarge the
field of crime or multiply felonies. Hence, in the

interpretation of a penal statute, the tendency is to

subject it to careful scrutiny and to construe it with
such strictness as to safeguard the rights of the
accused. If the statute is ambiguous and admits of
two reasonable but contradictory constructions, that
which operates in favor of a party accused under its
provisions is to be preferred. The principle is that acts
in and of themselves innocent and lawful cannot be
held to be criminal unless there is a clear and
unequivocal expression of the legislative intent to
make them such. Whatever is not plainly within the
provisions of a penal statute should be regarded as
without its intendment. 13
The purpose of strict construction is not to enable a
guilty person to escape punishment through a
technicality but to provide a precise definition of
forbidden acts. 14 The word "charitable" is a matter of
description rather than of precise definition, and each
case involving a determination of that which is
charitable must be decided on its own particular facts
and circumstances. 15 The law does not operate in
vacuo nor should its applicability be determined by
circumstances in the abstract.
Furthermore, in the provisions of the Constitution and
the statutes mentioned above, the enumerations
therein given which include the words "charitable" and
"religious" make use of the disjunctive "or." In its
elementary sense, "or" as used in a statute is a
disjunctive article in indicating an alternative. It often
connects a series of words or propositions indicating
a choice of either. When "or" is used, the various
members of the enumeration are to be taken
separately. 16 Accordingly, "charitable" and
"religious," which are integral parts of an enumeration
using the disjunctive "or" should be given different,
distinct, and disparate meanings. There is no
compelling consideration why the same treatment or
usage of these words cannot be made applicable to
the questioned provisions of Presidential Decree No.
1564.
II. Petitioner next avers that solicitations for religious
purposes cannot be penalized under the law for,
otherwise, it will constitute an abridgment or
restriction on the free exercise clause guaranteed
under the Constitution.
It may be conceded that the construction of a church

is a social concern of the people and, consequently,

solicitations appurtenant thereto would necessarily
involve public welfare. Prefatorily, it is not implausible
that the regulatory powers of the State may, to a
certain degree, extend to solicitations of this nature.
Considering, however, that such an activity is within
the cloak of the free exercise clause under the right to
freedom of religion guaranteed by the Constitution, it
becomes imperative to delve into the efficaciousness
of a statutory grant of the power to regulate the
exercise of this constitutional right and the allowable
restrictions which may possibly be imposed thereon.
The constitutional inhibition of legislation on the
subject of religion has a double aspect. On the one
hand, it forestalls compulsion by law of the
acceptance of any creed or the practice of any form of
worship. Freedom of conscience and freedom to
adhere to such religious organization or form of
worship as the individual may choose cannot be
restricted by law. On the other hand, it safeguards the
free exercise of the chosen form of religion. Thus, the
constitution embraces two concepts, that is, freedom
to believe and freedom to act. The first is absolute
but, in the nature of things, the second cannot be.
Conduct remains subject to regulation for the
protection of society. The freedom to act must have
appropriate definitions to preserve the enforcement of
that protection. In every case, the power to regulate
must be so exercised, in attaining a permissible end,
as not to unduly infringe on the protected freedom. 17
Whence, even the exercise of religion may be
regulated, at some slight inconvenience, in order that
the State may protect its citizens from injury. Without
doubt, a State may protect its citizens from fraudulent
solicitation by requiring a stranger in the community,
before permitting him publicly to solicit funds for any
purpose, to establish his identity and his authority to
act for the cause which he purports to represent. The
State is likewise free to regulate the time and manner
of solicitation generally, in the interest of public safety,
peace, comfort, or convenience. 18
It does not follow, therefore, from the constitutional
guaranties of the free exercise of religion that
everything which may be so called can be tolerated.
19 It has been said that a law advancing a legitimate
governmental interest is not necessarily invalid as one
interfering with the "free exercise" of religion merely

because it also incidentally has a detrimental effect on

the adherents of one or more religion. 20 Thus, the
general regulation, in the public interest, of
solicitation, which does not involve any religious test
and does not unreasonably obstruct or delay the
collection of funds, is not open to any constitutional
objection, even though the collection be for a religious
purpose. Such regulation would not constitute a
prohibited previous restraint on the free exercise of
religion or interpose an inadmissible obstacle to its
exercise. 21
Even with numerous regulative laws in existence, it is
surprising how many operations are carried on by
persons and associations who, secreting their
activities under the guise of benevolent purposes,
succeed in cheating and defrauding a generous
public. It is in fact amazing how profitable the
fraudulent schemes and practices are to people who
manipulate them. The State has authority under the
exercise of its police power to determine whether or
not there shall be restrictions on soliciting by
unscrupulous persons or for unworthy causes or for
fraudulent purposes. That solicitation of contributions
under the guise of charitable and benevolent
purposes is grossly abused is a matter of common
knowledge. Certainly the solicitation of contributions
in good faith for worthy purposes should not be
denied, but somewhere should be lodged the power
to determine within reasonable limits the worthy from
the unworthy. 22 The objectionable practices of
unscrupulous persons are prejudicial to worthy and
proper charities which naturally suffer when the
confidence of the public in campaigns for the raising
of money for charity is lessened or destroyed. 23
Some regulation of public solicitation is, therefore, in
the public interest. 24
To conclude, solicitation for religious purposes may be
subject to proper regulation by the State in the
exercise of police power. However, in the case at bar,
considering that solicitations intended for a religious
purpose are not within the coverage of Presidential
Decree no. 1564, as earlier demonstrated, petitioner
cannot be held criminally liable therefor.
As a final note, we reject the reason advanced by
respondent judge for increasing the penalty imposed
by the trial court, premised on the supposed
perversity of petitioner's act which thereby caused

damage to the complainant. it must be here

emphasized that the trial court, in the dispositive
portion of its decision, even recommended executive
clemency in favor of petitioner and the other accused
after finding that the latter acted in good faith in
making the solicitation from the complainant, an
observation with which we fully agree. After all,
mistake upon a doubtful and difficult question of law
can be the basis of good faith, especially for a
layman.
There is likewise nothing in the findings of respondent
judge which would indicate, impliedly or otherwise,
that petitioner and his co-accused acted abusively or
malevolently. this could be reflective upon her
objectivity, considering that the complainant in this
case is herself a judge of the Regional Trial Court at
Kalookan City. It bears stressing at this point that a
judge is required to so behave at all times as to
promote public confidence in the integrity and
impartiality of the judiciary, 25 should be vigilant
against any attempt to subvert its independence, and
must resist any pressure from whatever source. 26

LYDIA O. CHUA, petitioner, vs. THE CIVIL SERVICE

COMMISSION, THE NATIONAL IRRIGATION
ADMINISTRATION, THE DEPARTMENT OF
BUDGET AND MANAGEMENT, respondent.
PADILLA, J.:

Pursuant to the policy of streamlining and trimming

the bureaucracy, Republic Act No. 6683 was
approved on 2 December 1988 providing for benefits
for early retirement and voluntary separation from the
government service as well as for involuntary
separation due to reorganization. Deemed qualified to
avail of its benefits are those enumerated in Sec. 2 of
the Act, as follows:

"Sec. 2. Coverage. This Act shall cover all appointive

officials and employees of the National Government,
including government-owned or controlled
corporations with original charters, as well as the
personnel of all local government units. The benefits

authorized under this Act shall apply to all regular,

temporary, casual and emergency employees,
regardless of age, who have rendered at least a total
of two (2) consecutive years of government service as
of the date of separation. Uniformed personnel of the
Armed Forces of the Philippines including those of the
PC-INP are excluded from the coverage of this Act."

Petitioner Lydia Chua believing that she is qualified to

avail of the benefits of the program, filed an
application on 30 January 1989 with respondent
National Irrigation Administration (NIA) which,
however, denied the same; instead, she was offered
separation benefits equivalent to one half (1/2) month
basic pay for every years of service commencing from
1980. A recourse by petitioner to the Civil Service
Commission yielded negative results. 1 Her letter
for reconsideration dated 25 April 1989 pleaded thus:

xxx xxx xxx

"With due respect, I think the interpretation of the

Honorable Commissioner of RA 6683 does not
conform with the beneficent purpose of the law. The
law merely requires that a government employee
whether regular, temporary, emergency, or casual,
should have two consecutive years of government
service in order to be entitled to its benefits. I more
than meet the requirement. Persons who are not
entitled are consultants, experts and contractual(s).
As to the budget needed, the law provides that the
Department of Budget and Management will shoulder
a certain portion of the benefits to be alloted to
government corporations. Moreover, personnel of
these NIA special projects are entitled to the regular
benefits, such (sic) leaves, compulsory retirement and
the like. There is no reason why we should not be
entitled to RA 6683.

xxx xxx xxx" 2

Denying the plea for reconsideration, the Civil Service

Commission (CSC) emphasized:

'2.3 Excluded form the benefits under R.A. No. 6683

are the following:

"xxx xxx xxx

a) Experts and Consultants hired by agencies for a

limited period to perform specific activities or services
with a definite expected output: i.e. membership in
Task Force, Part-Time, Consultant/Employees.

We regret to inform you that your request cannot be

granted. The provision of Section 3.1 of Joint DBMCSC Circular Letter No. 89-1 does not only require an
application to have two years of satisfactory service
on the date of separation/retirement but further
requires said applicant to be on a casual, emergency,
temporary or regular employment status as of
December 2, 1988, the date of enactment of R.A.
6683. The law does not contemplate contractual
employees in the coverage.

Inasmuch as your employment as of December 31,

1988, the date of your separation from the service, is
co-terminus with the NIA project which is contractual
in nature, this Commission shall sustain its original
decision.

xxx xxx xxx" 3

In view of such denial, petitioner is before this Court

by way of a special civil action for certiorari, insisting
that she is entitled to the benefits granted under
Republic Act No. 6683. Her arguments:

"It is submitted that R.A. 6683, as well as Section 3.1

of the Joint DMB-CSC Circular Letter No. 89-1
requires an applicant to be on a casual, emergency,
temporary or regular employment status. Likewise,
the provisions of Section 23 (sic) of the Joint DBMCSC Circular Letter No. 88-1, implementing
guidelines of R.A. No. 6683, provides that:

b) Uniformed personnel of the Armed Forces of the

Philippines including those of the Philippine
Constabulary and Integrated National Police (PCINP).

c) Appointive officials and employees who retire or

elect to be separated from the service for optional
retirement with gratuity under R.A. No. 1616, 4968 or
with pension under R.A. No. 186, as amended by
R.A. No. 6680 or P.D. No. 1146, as amended, or viceversa.

d) Officials and employees who retired voluntarily

prior to the enactment of this law and have received
the corresponding benefits of that
retirement/separation.

e) Officials and employees with pending cases

punishable by mandatory separation from the service
under existing civil service laws, rules and
regulations; provided that if such officials and
employees apply in writing within the prescriptive
period for the availment of the benefits herein
authorized, shall be allowed only if acquitted or
cleared of all charges and their application accepted
and approved by the head of office concerned.'

Based on the above exclusions, herein petitioner

does not belong to any one of them. Ms. Chua is a full
time employee of NIA entitled to all the regular
benefits provided for by the Civil Service Commission.
She had a permanent status as Personnel Assistant

A, a position which belongs to the Administrative

Service. . . . If casals and emergency employees were
given the benefit of R.A. 6683 with more reason that
this petitioner who was holding a permanent status as
Personnel Assistant A and has rendered almost 15
years of faithful, continuous service in the government
should be similarly rewarded by the beneficient (sic)
purpose of the law." 4

The NIA and the Civil Service Commission reiterate in

its comment petitioner's exclusion from the benefits of
Republic Act No. 6683, because:

1. Petitioner's employment is co-terminus with the

project per appointment papers kept by the
Administrative Service in the head office of NIA (the
service record was issued by the Watershed
Management and Erosion Control Project (WMECP),
Pantabangan, Nueva Ecija). The project, funded by
the World Bank, was completed as of 31 December
1988, after which petitioner's position became functus
officio.

2. Petition is not a regular and career employee of

NIA - her position is not included in its regular
plantilla. She belongs to the non-career service (Sec.
6, P.D. No. 807) which is inherently short-lived,
temporary and transient; on the other hand,
retirement presupposes employment for a long
period. The most that a non-career personnel can
expect upon the expiration of his employment is
financial assistance. Petitioner is not even qualified to
retire under the GSIS law.

3. Assuming arguendo that petitioner's appointment is

permanent, security of tenure is available only for the
term of office (i.e. duration of project).

4. The objective of Republic Act No. 6683 is not really

to grant separation or retirement benefits but
reorganization 5 to streamline government functions.

The application of the law must be made consistent

with the purpose for which it was enacted. Thus, as
the expressed purpose of the law is to reorganize the
government, it will not have any application to special
projects such as the WMECP which exists only for a
short and definite period. This being the nature of
special projects, there is no necessity for offering its
personnel early retirement benefits just to induce
voluntary separation as a step to reorganization. In
fact, there is even no need for reorganizing the
WMECP considering its short and limited life-span. 6

5. The law applies only to employees of the national

government, government-owned or controlled
corporations with original charters and local
government units.

Due to the impossibility of reconciling the conflicting

interpretations of the parties, the Court is called upon
to define the different classes of employees in the
public sector (i.e. government civil servants).

Who are regular employees? The Labor Code in Art.

280 (P.D. No. 492, as amended) deems an
employment regular where the employee has been
engaged to perform activities which are usually
necessary or desirable in the usual business or trade
of the employer. No equivalent definition can be found
in P.D. No. 807 (promulgated on 6 October 1975,
which superseded the Civil Service Act of 1965 R.A.
No. 2260) or in the Administrative Code of 1987
(Executive Order No. 292 promulgated on 25 July
1987). The Early Retirement Law itself (Rep. Act No.
6683) merely includes such class of employees
(regular employees) in its coverage, unmindful that no
such specie is employed in the public sector.

1. permanent one issued to a person who has met the

requirements of the position to which appointment is
made, in accordance with the provisions of the Civil
Service Act and the Rules and Standards
promulgated in pursuance thereof; 7

2. temporary In the absence of appropriate eligibles

and it becomes necessary in the public interest to fill a
vacancy, a temporary appointment shall be issued to
a person who meets all the requirements for the
position to which he is being appointed except the
appropriate civil service eligibility: Provided, That such
temporary appointment shall not exceed twelve
months, but the appointee may be replaced sooner if
a qualified civil service eligible becomes available. 8

The Administrative Code of 1987 characterizes the

Career Service as:

"(1) Open Career positions for appointment to which

prior qualification in an appropriate examination is
required;

(2) Closed Career positions which are scientific, or

highly technical in nature; these include the faculty
and academic staff of state colleges and universities,
and scientific and technical positions in scientific or
research institutions which shall establish and
maintain their own merit systems;

(3) Positions in the Career Executive Service; namely,

Undersecretary, Assistant Secretary, Bureau Director,
Assistant Bureau Director, Regional Director,
Assistant Regional Director, Chief of Department
Service and other officers of equivalent rank as may
be identified by the Career Executive Service Board,
all of whom are appointed by the President.

The appointment status of government employees in

the career service is classified as follows:
(4) Career officers, other than those in the Career
Executive Service, who are appointed by the

President, such as the Foreign Service Officers in the

Department of Foreign Affairs;

(5) Commission officers and enlisted men of the

Armed Forces which shall maintain a separate merit
system;

(6) Personnel of government-owned or controlled

corporations, whether performing governmental or
proprietary functions, who do not fall under the noncareer service; and

3. Chairman and Members of Commissions and

boards with fixed terms of office and their personal or
confidential staff;

4. contractual personnel or those whose employment

in the government is in accordance with a special
contract to undertake a specific work or job requiring
special or technical skills not available in the
employing agency, to be accomplished within a
specific period, which in no case shall exceed one
year and performs or accomplishes the specific work
or job, under his own responsibility with a minimum of
direction and supervision from the hiring agency.

(7) Permanent laborers, whether skilled, semi-skilled,

or unskilled." 9
5. emergency and seasonal personnel." 10
The Non-Career Service, on the other hand, is
characterized by:

". . . (1) entrace on bases other than those of the

usual tests of merit and fitness utilized for the career
service; and (2) tenure which is limited to a period
specified by law, or which is coterminous with that of
the appointing authority or subject to his pleasure, or
which is limited to the duration of a particular project
for which purpose employment was made."

Included in the non-career service are:

1. elective officials and their personal or confidential

staff;

2. secretaries and other officials of Cabinet rank who

hold their positions at the pleasure of the President
and their personal confidential staff(s);

employee. While with this project, her designation

was changed to personnel assistant on 5 November
1981, starting 9 July 1982, the status became
permanent until the completion of the project on 31
December 1988. The appointment paper 12 attached
to the OSG's comment lists her status as co-terminus
with the Project."

The employment status of personnel hired under

foreign - assisted projects is considered co-terminous,
that is, they are considered employees for the
duration of the project or until the completion or
cessation of said project (CSC Memorandum Circular
No. 39, S. 1990, 27 June 1990).

Republic Act No. 6683 seeks to cover and benefits

regular, temporary, casual and emergency employees
who have rendered at least a total of two (2)
consecutive years of government service.

There is another type of non-career employee:

"Casual where and when employment is not

permanent but occasional, unpredictable, sporadic
and brief in nature (Caro v. Rilloroza, 102 Phil. 70;
Manuel v. P.P. Gocheco Lumber Co., 96 Phil. 945)".

Consider petitioner's record of service:

"Service with the government commenced on 2

December 1974 designated as a laborer holding
emergency status with the NIA Upper Pampanga
River Project, R & R Division. 11 From 24 March 1975
to 31 August 1975, she was a research aide with
temporary status on the same project. On 1
September 1975 to 31 December 1976, she was with
the NIA-FES III, R & R Division, then on 1 January
1977 to 31 May 1980, she was with NIA - UPR IIS
(Upper Pampanga River Integrated Irrigation
Systems) DRD. On 1 June 1980, she went to NIAW.M.E.C.P. (Watershed Management & Erosion
Control Project) retaining the status of temporary

Resolution No. 87-104 of the CSC, 21 April 1987,

provides:

"WHEREAS, pursuant to Executive Order No. 966

dated June 22, 1984, the Civil Service Commission is
charged with the function of determining creditable
services for retiring officers and employees of the
national government;

WHEREAS, Section 4 (b) of the same Executive

Order No. 966 provides that all previous services by
an officer/employee pursuant to a duly approved
appointment to a position in the Civil Service are
considered creditable services, while Section 6 (a)
thereof states that services rendered on contractual,
emergency or casual status are non-creditable
services;

WHEREAS, there is a need to clarify the aforesaid

provisions inasmuch as some contractual, emergency

or casual employment are covered by contracts or

appointments duly approved by the Commission.

NOW, therefore, the Commission resolved that

services rendered on contractual, emergency or
casual status, irrespective of the mode or manner of
payment therefor shall be considered as creditable for
retirement purposes subject to the following
conditions: (emphasis provided).

'1. These services are supported by approved

appointments, official records and/or other competent
evidence. Parties/agencies concerned shall submit
the necessary proof of said services;

2. Said services are on full time basis and rendered

prior to June 22, 1984, the effectivity date of
Executive Order No. 966; and

3. The services for the three (3) years period prior to

retirement are continuous and fulfill the service
requirement for retirement."

What substantial differences exist, if any, between

casual, emergency, seasonal, project, co-terminous or
contractual personnel? All are tenurial employees with
no fixed term, non-career, and temporary. The 12 May
1989 CSC letter of denial 13 characterized herein
petitioner's employment as co-terminous with the NIA
project which in turn was contractual in nature. The
OSG says petitioner's status is co-terminous with the
Project. CSC Memorandum Circular No. 11, series of
1991 (5 April 1991) characterizes the status of a coterminous employee

"(3) Co-terminous status shall be issued to a person

whose entrance in the service is characterized by
confidentiality by the appointing authority or that
which is subject to his pleasure or co-existent with his
tenure.

The foregoing status (co-terminous) may be further

classified into the following:

'a) co-terminous with the project - when the

appointment is co-existent with the duration of a
particular project for which purpose employment was
made or subject to the availability of funds for the
same;

b) co-terminous with the appointing authority when

appointment is co-existent with the tenure of the
appointing authority.

c) co-terminous with the incumbent when appointment

is co-existent with the appointee, in that after the
resignation, separation or termination of the services
of the incumbent the position shall be deemed
automatically abolished; and d) co-terminous with a
specific period, e.g. 'co-terminous for a period of 3
years' the appointment is for a specific period and
upon expiration thereof, the position is deemed
abolished.'

It is stressed, however, that in the last two

classification (c) and (d), what is termed co-terminous
is the position, and not the appointee-employee.
Further, in (c) the security of tenure of the appointee
is guaranteed during his incumbency; in (d) the
security of tenure is limited to a specific period."

A co-terminous employee is a non-career civil

servant, like casual and emergency employees. We
see no solid reason why the latter are extended
benefits under the Early Retirement Law but the
former are not. It will be noted that Rep. Act No. 6683
expressly extends its benefits for early retirement to
regular, temporary, casual and emergency
employees. But specifically excluded from the
benefits are uniformed personnel of the AFP including
those of the PC-INP. It can be argued that, expressio

unius est exclusio alterius. The legislature would not

have made a specific enumeration in a statute had
not the intention been to restrict its meaning and
confine its terms and benefits to those expressly
mentioned 14 or casus omissus pro omisso habendus
est. A person, object or thing omitted from an
enumeration must be held to have been omitted
intentionally. 15 Yet adherence to these legal maxims
can result in incongruities and in a violation of the
equal protection clause of the Constitution.

The case of Fegurin, et al. v. NLRC, et al., 16 comes

to mind where, workers belonging to a work pool,
hired and re-hired continuously from one project to
another were considered non-project-regular and
permanent employees.

Petitioner Lydia Chua was hired and re-hired in four

(4) successive projects during a span of fifteen (15)
years. Although no proof of the existence of a work
pool can be assumed, her service record cannot be
disregarded.

Art. III, Sec. 1 of the 1987 Constitution guarantees:

"No person shall be deprived of life, liberty, or
property without due process of law, nor shall any
person be denied the equal protection of the laws."

". . . In Felwa vs. Salas, L-26511, Oct. 29, 1966, We

ruled that the equal protection clause applies only to
persons or things identically situated and does not bar
a reasonable classification of the subject of
legislation, and a classification is reasonable where
(1) it is based on substantial distinctions which make
real differences; (2) these are germane to the purpose
of the law; (3) the classification applies not only to
present conditions but also to future conditions which
are substantially identical to those of the present; (4)
the classification applies only to those who belong to
the same class." 17

Applying the criteria set forth above, the Early

Retirement Law would violate the equal protection
clause were we to sustain respondents' submission
that the benefits of said law are to be denied a class
of government employees who are similarly situated
as those covered by said law. The maxim
of Expressio unius est exclusio alterius should not be
the applicable maxim in this case but the doctrine of
necessary implication which holds that:

"No statute can be enacted that can provide all the

details involved in its application. There is always an
omission that may not meet a particular situation.
What is thought, at the time of enactment, to be an
all-embracing legislation may be inadequate to
provide for the unfolding events of the future.

So-called gaps in the law develop as the law is

enforced. One of the rules of statutory construction
used to fill in the gap is the doctrine of necessary
implication. The doctrine states that what is implied in
a statute is as much a part thereof as that which is
expressed. Every statute is understood, by
implication, to contain all such provisions as may be
necessary to effectuate its object and purpose, or to
make effective rights, powers, privileges or jurisdiction
which it grants, including all such collateral and
subsidiary consequences as may be fairly and
logically inferred from its terms. Ex necessitate legis.
And every statutory grant of power, right or privilege is
deemed to include all incidental power, right or
privilege. This is so because the greater includes the
lesser, expressed in the maxim, in eo plus sit, simper
inest et minus." 18

During the sponsorship speech of Congressman

Dragon (re: Early Retirement Law), in response to
Congressman Dimaporo's interpellation on coverage
of state university employees who are extended
appointments for one (1) year, renewable for two (2)
or three (3) years, 19 he explained:

"This Bill covers only those who would like to go on

early retirement and voluntary separation. It is
irrespective of the actual status or nature of the
appointment one received, but if he opts to retire
under this, then he is covered."

It will be noted that, presently pending in Congress, is

House Bill No. 33399 (a proposal to extend the scope
of the Early Retirement Law). Its wording supports the
submission that Rep. Act No. 6683 indeed overlooked
a qualified group of civil servants, Sec. 3 of said
House bill, on coverage of early retirement, would
provide:

"Sec. 3. Coverage. It will cover all employees of the

national government, including government-owned or
controlled corporations, as well as the personnel of all
local government units. The benefits authorized under
this Act shall apply to all regular, temporary, casual,
emergency and contractual employees, regardless of
age, who have rendered at least a total of two (2)
consecutive years government service as of the date
of separation. The term 'contractual employees' as
used in this Act does not include experts and
consultants hired by agencies for a limited period to
perform specific activities or services with definite
expected output.

"Uniformed personnel of the Armed Forces of the

Philippines, including those of the PC-INP are
excluded from the coverage of this Act." (emphasis
supplied).

The objective of the Early Retirement or Voluntary

Separation Law is to trim the bureaucracy, hence,
vacated positions are deemed abolished upon
early/voluntary retirement of their occupants. Will the
inclusion of co-terminous personnel (like the
petitioner) defeat such objective? In their case, upon
termination of the project and separation of the project
personnel from the service, the term of employment is
considered expired, the office functus officio. Casual,
temporary and contractual personnel serve for shorter

periods, and yet, they only have to establish two (2)

years of continuous service to qualify. This,
incidentally, negates the OSG's argument that coterminous or project employment is inherently shortlived, temporary and transient, whereas, retirement
presupposes employment for a long period. Here,
violation of the equal protection claus of the
Constitution becomes glaring because casuals are
not even in the plantilla, and yet, they are entitled to
the benefits of early retirement. How can the objective
of the Early Retirement Law of trimming the
bureaucracy be achieved by granting early retirement
benefits to a group of employees (casuals) without
plantilla positions? There would, in such a case, be no
abolition of permanent positions or streamlining of
functions; it would merely be a removal of excess
personnel; but the positions remain, and future
appointments can be made thereto.

Co-terminous or project personnel, on the other hand,

who have rendered years of continuous service
should be included in the coverage of the Early
Retirement Law, as long as they file their application
prior to the expiration of their term, and as long as
they comply with CSC regulations promulgated for
such purpose. In this connection, Memorandum
Circular No. 14, Series of 1990 (5 March 1990)
implementing Rep. Act No. 6850, 20 requires, as a
condition to qualify for the grant of eligibility, an
aggregate or total of seven (7) years of government
service which need not be continuous, in the career or
non-career service, whether appointive, elective,
casual, emergency, seasonal, contractual or coterminous, including military and police service, as
evaluated and confirmed by the Civil Service
Commission. 21 A similar regulation should be
promulgated for the inclusion in Rep. Act No. 6683 of
co-terminous personnel who survive the test of time.
This would be in keeping with the coverage of "all
social legislations enacted to promote the physical
and mental well-being of public servants." 22 After all,
co-terminous personnel are also obligated to the
government for GSIS contributions, medicare and
income tax payments, with the general disadvantage
of transience.

In fine, the Court believes, and so holds, that the

denial by the respondents NIA and CSC of petitioner's
application for early retirement benefits under Rep.
Act No. 6683 is unreasonable, unjustified, and
oppressive, as petitioner had filed an application for
voluntary retirement within a reasonable period and
she is entitled to the benefits of said law. While the
application was filed after expiration of her term, we
can give allowance for the fact that she originally filed
the application on her own without the assistance of
counsel. In the interest of substantial justice, her
application must be granted; after all she served the
government not only for two (2) years the minimum
requirement under the law but for almost fifteen (15)
years in four (4) successive governmental projects.

JOSE ESCRIBANO, petitioner, vs. HON. DAVID P.

AVILA, as Presiding Judge of the Court of First
Instance of Cotabato (First Branch) and SALIPADA K.
PENDATUN, respondents.
AQUINO, J:
This case is about the jurisdiction of the Court of First
Instance to conduct the preliminary investigation of a
complaint for written defamation.
On September 25, 1968 Congressman Salipada K.
Pendatun, the governor-elect of Cotabato, filed
directly with the Court of First Instance of that
province (now North Cotabato) a complaint for libel
against Mayor Jose Escribano of Tacurong, Cotabato
(now the province of Sultan Kudarat). The complaint
was subscribed and sworn to before respondent
Judge David P. Avila. It was supported by the affidavit
of Acting Governor Simeon Datumanong.
In that complaint Escribano was charged with having
said in a speech, which was broadcasted on August
26, 1968 by a radio station at Cotabato City, that "Mr.
Pendatun is the worst animal that ever live (lived) in
this province" (Criminal Case No. 5283).
Escribano questioned Judge Avila's authority to
conduct the preliminary investigation of the offense.
Judge Avila in his orders of March 5, 20 and 27, 1969
ruled that he had the power to conduct the preliminary
investigation. He received complainant's evidence.

On April 1, 1969 Escribano filed in this Court against

Judge Avila and Pendatun the instant special civil
actions of certiorari and prohibition, praying that the
said orders of Judge Avila be set aside. The
respondents were required to answer the petition. No
restraining order was issued.
On April 18 Escribano filed a supplemental petition to
annul Judge Avila's order of March 29, 1969. In that
order he found that Pendatun's evidence had
"established a probable cause to believe that" libel by
radio had been committed and that Escribano
"probably committed the same". Judge Avila ordered
the arrest of Escribano, fixed the bail at three
thousand pesos, and referred the case to the city
fiscal of Cotabato for the filing of the corresponding
information. A warrant of arrest was issued on March
31. Sometime before April 16 the city fiscal filed an
information for libel against Escribano.
On August 10, 1970 this Court issued a resolution
restraining Judge Avila from proceeding with the
arraignment of Escribano.
The issue is whether the Court of First Instance of
Cotabato is invested with authority to conduct the
preliminary investigation of the crime of libel
committed by means of radio at Cotabato City or
whether that power is lodged exclusively in the city
attorney of that city.
Petitioner Escribano, in support of his contention that
city fiscal of Cotabato is the only functionary
empowered conduct the preliminary investigation of
the libel charge, invokes the following provisions of
the charter of Cotabato Republic Act No. 2364, as
amended by Republic Act No. 3332:
"SEC. 23. The city attorney His compensation,
powers and duties. - The provisions of
Commonwealth Act Numbered hundred nine to the
contrary notwithstanding, the city shall have an
attorney who shall be the chief legal adviser of the city
. . . The city attorney shall have the following powers
and duties:
xxx xxx xxx
"(f) He shall investigate all charges of crimes,

misdemeanors and violations of laws and city

ordinances and prepare the informations or make the
necessary complaints against the persons
accused. . . .
"(g) He shall have charge of the prosecution of all
crimes, misdemeanors and violations of laws and city
ordinances triable in the Court of First Instance of
Cotabato, and the municipal court of the city, and
shall discharge all the duties in respect to criminal
prosecutions enjoined by law upon provincial fiscals."
He cites the ruling in Sayo vs. Chief of Police, 80 Phil.
859; Montelibano vs. Ferrer and Benares, 97 Phil.
228, and Guerrero vs. Ferrer, 106 Phil. 1163, that in
chartered cities the city fiscal has the exclusive
authority to conduct preliminary investigations.
He also invokes the following provisions of article 360
of the Revised Penal Code, which were inserted by
Republic Act No. 4363, approved on June 19, 1965,
and which do not empower the Court of First Instance
to conduct's preliminary investigation of written
defamations:
"Preliminary investigation of criminal actions for
written defamations as provided for in the chapter
shall be conducted by the provincial or city fiscal of
the province or city, or by the municipal court of the
city or capital of the province where such actions may
be instituted in accordance with the provisions of this
article."
On the other hand, complainant Pendatun and
respondent Judge rely on section 13, Rule 112 of the
Rules of Court to support their view that the Court of
First Instance of Cotabato could conduct the
preliminary investigation:

"SEC. 13. Preliminary examination and investigation

by the judge of the Court of First Instance. - Upon
complaint filed directly with the Court of First Instance,
without previous preliminary examination and
investigation conducted by the fiscal, the judge
thereof shall either refer the complaint to the
municipal judge referred to in the second paragraph

of section 2 hereof for preliminary examination and

investigation, or himself conduct both preliminary
examination and investigation simultaneously in the
manner provided in the preceding sections, and
should be find reasonable ground to believe that the
defendant has committed the offense charged. shall
issue a warrant for his arrest, and thereafter refer the
case the fiscal for the filing of the corresponding
information."

Was it intended by Republic Act No. 4363, in

specifying that the preliminary investigation of criminal
actions for written defamations may be conducted by
the provincial or city fiscal of the province or city, or
the municipal court of the city or capital of the
province, where the criminal action may befiled, to
exclude the Court of First Instance from conducting
such preliminary investigation and to entrust that
power exclusively to those fiscals and courts? (Libel
by means of radio is a written defamation under
article 355 of the Revised Penal Code).
As admitted by the petitioner, the purpose of the
amendment is to prevent the complainants in written
defamation cases from harassing the accused by
means of out-of-town libel suits, meaning complaints
filed in remote municipal courts (Time, Inc. vs. Reyes,
L-28882, May 31, 1971, 39 SCRA 303, 311; p. 11,
Memorandum, p. 113, Rollo).
The rule is that in construing a statute the mischief
intended to be removed or suppressed and the
causes which induced the enactment of a law are
important factors to be considered in its construction
(2 Sutherland on Statutory Construction, 885-886,
cited in Philippine Sugar Centrals Agency vs.
Collector of Customs, 51 Phil. 131, 145).
Therefore, it is safe to conclude that the enumeration
in the amendatory law of the public of officers and the
courts that may conduct the preliminary investigation
of complaints for written defamation was designed to
divest the ordinary municipal court of that power but
not to deprive the proper Court of First Instance of
that same power.
Article 360 in its original form provided that the venue
of the criminal and civil actions for written defamations

is the province wherein the libel was published,

displayed or exhibited, regardless of the place where
the same was written, printed or composed. Article
360 originally did not specify public officers and the
courts that may conduct preliminary investigation of
complaints for libel.
Before article 360 was amended, the rule was that a
criminal action for libel may be instituted in any
jurisdiction where libelous article was published or
circulated, irrespective of where it was written or
printed (People vs. Borja, 43 Phil. 618). Under that
rule, the criminal action is transitory and the injured
party has a choice of venue.
Experience had shown that under that old rule the
offended party could harass the accused in a libel
case by laying the venue of the criminal action in a
remote or distant place.
Thus, in connection with an article published in the
Daily Mirror and the Philippines Free Press, Pio
Pedrosa, Manuel V. Villareal and Joaquin Roces were
charged with libel in the justice of the peace court of
San Fabian, Pangasinan (Amansec vs. De Guzman,
93 Phil. 933). To forestall such harassment, Republic
Act No. 4363 laid down the following rules on the
venue of the criminal and civil actions in written
defamations: *
1. General rule: The action may be filed in the Court
of First Instance of the province or city where the
libelous article is printed and first published or where
any of the offended parties actually resides at the time
of the commission of the offense.
2. If the offended party is a public officer with office in
Manila at the time the offense was committed, the
venue is Manila or the city or province where the
libelous article is printed and first published.
3. Where an offended party is a public official with
office outside of Manila, the venue is the province or
the city where he held office at the time of the
commission of the offense or where the libelous
article is printed and first published.
4. If an offended party is a private person, the venue
is his place of residence at the time of the commission

of the offense or where the libelous article is printed

and first published.
The common feature of the foregoing rules is that
whether the offended party is a public officer or a
private person, he has always the option to file the
action in the Court of First Instance of the province or
city where the libelous article is printed or first
published.
Congress did not confine the amendatory law to
laying down the guidelines for the venue of criminal
and civil actions. Since, as already noted, its purpose
is to minimize the filing in municipal courts of out-oftown libel suits, the lawmaking body, in order to attain
that objective, deprived the ordinary municipal courts
of the power to conduct the preliminary investigation
of a criminal action for written defamation.
In other words, the amendment contains not only the
rules limiting the venue of the criminal and civil
actions to the Court of First Instance of the province
or city where the libelous matter is printed and first
published, or where the offended party held office or
resided at the time the libel was committed, but it also
specifies that the preliminary investigation should be
conducted by the provincial or city fiscal of the
province or city or by the municipal court of the city or
capital of the province where the action may be
instituted, (See People and Navarro vs. Hechanova,
L-26459, November 29, 1973, 54 SCRA 101).
It should be repeated that the amendment, in
specifying those who may conduct the preliminary
investigation, deprived the ordinary municipal court of
that power in cases written defamations. And it should
be recalled that the power of the ordinary municipal
court to conduct such preliminary investigations under
the old law facilitated the filing of libel cases in remote
municipal courts and the consequent harassment of
the accused.
That purpose of the amendment has nothing to do
with power of the Court of First Instance to conduct
preliminary investigations in criminal cases cognizable
by it. To retain power of the Court of First Instance
would in a way be an implementation of the purpose
of the amendment, which is to prevent complainants,
from harassing and embarrassing the accused with

libel suits in distant municipalities.

Therefore, it can be stated without fear of successful
contradiction that the lawmaking body, by means of
that amendment, never intended to take away the
jurisdiction of the proper Court of First Instance to
conduct a preliminary investigation in libel cases. The
amendment merely sought to strip ordinary municipal
court (not the municipal court of the provincial capital
or the city court) of its power to hold a preliminary
investigation of written defamations.
The fact that the Court of First Instance is not
mentioned in Article 360 as a tribunal that may
conduct the preliminary investigation of libel cases
would seem to suggest that it cannot conduct such
preliminary investigation, following the maxim inclusio
unius est exclusio alterius (the inclusion of one thing
is the exclusion of another or the enumeration of
particular things excludes the idea of something else
not mentioned, applied in Acosta vs. Flor, 5 Phil. 18;
De la Rosa vs. Revita Santos, 10 Phil. 148, 149;
Conde vs. Abaya, 13 Phil. 249; Tavora vs. Gavina, 79
Phil. 421, 435; In re Guzman, 73 Phil. 51; In re Estate
of Enriquez and Reyes, 29 Phil. 167; Weigall vs.
Shuster, 11 Phil. 340, 357; Vega vs. Municipal Board
of Iloilo, 94 Phil. 949, 953; Gomez vs. Ventura, 54
Phil. 726; Mendenilla vs. Onandia, 115 Phil. 534, 539;
Canlas and Manila Pencil Co. vs. Republic, 103 Phil.
712, 716; Lao Oh Kim vs. Reyes, 103 Phil. 1139).
Under that canon of legal hermeneutics, where a
statute directs the performance of certain acts by a
particular person or class of persons, it implies that it
shall not be done otherwise or by a different person or
class of persons (82 C.J.S. 667-668).
That maxim is not a rule of law. It is just a tool of
statutory construction or a means of ascertaining the
legislative intent. It is not of universal application and
is not conclusive. It cannot be used to defeat the
plainly indicated purpose of the lawmaking body (82
C.J.S. 668). The maxim is inapplicable if there is
some special reason for mentioning one thing and
none for mentioning another which is otherwise within
the statute, so that the absence of any mention of
such other will not exclude it (82 C.J.S. 670).
The maxim does not apply in case a statute appears
upon its face to limit the operation of its provisions to

particular persons or things by enumerating them, but

no reason exists why other persons or things not so
enumerated should not have been included, and
manifest injustice will follow by not so including them
(Springer vs. Philippine Islands, 72 Law. ed. 845, 227
U.S. 189; People vs. Manantan, 115 Phil. 657, 668).
"The maxim is no more than an auxiliary rule of
interpretation to be ignored where other
circumstances indicate the enumeration was not
intended to be exclusive" (Manabat vs. De Aquino, 92
Phil. 1024, 1027).
The maxim cannot be applied in this case because,
as shown above, the fact that the Court of First
Instance is not mention in the amendment, as being
empowered to conduct a preliminary investigation in
cases of written defamation, has nothing to do with
the purpose of the amendment. It should be stressed
that in construing a law, the court must look to the
object to be accomplished, the evils and mischief
sought to be remedied, or the purpose to be
subserved, and it should give the law a reasonable or
liberal construction which will best effect its purpose
rather than one which will defeat it (82 C.J.S. 593)
It is reasonable to surmise that the Court of First
Instance was not mentioned due to inadvertence.
That oversight is not unusual since preliminary
investigations are usually conducted by municipal
courts and fiscals. In practice, a preliminary
investigation by the Court of First Instance is the
exception, not the general rule.
In this connection, it is pertinent to cite the recent
ruling that the power of the Court of First Instance to
conduct preliminary investigation is derived from the
constitutional provision that "no warrants shall issue
but upon probable cause, to be determined by the
judge after examination under oath or affirmation of
the complainant and the witnesses he may produce"
(Sec. 1[3], Art. III, now Sec. 3, Art. IV, 1973
Constitution; Collector of Customs vs. Villaluz, L34038, June 18, 1976 and five other cases, 71 SCRA
356).
Implicit in that provision is the constitutional grant of
power to the judge to hold a preliminary examination
and to issue warrants of arrest and search warrants.
That which is plainly implied in the language of a law

is as much a part as that which is expressed (In re

McCulloch Dick, 38 Phil. 41, 45, 90). The term "judge"
embraces a judge of the Court of First Instance. Its
coverage is not restricted to judges of inferior courts.
The silence of Article 360 on the power of a judge of
the Court of First Instance to conduct a preliminary
investigation of criminal actions for written
defamations does not preclude a judge of that court
from holding such investigation.
However, the exercise of that power is tied up with the
rules on the venue of a criminal action for written
defamation. That power is lodged in the Court of First
Instance of the city or province where the libelous
article was printed or first published or where the
offended party actually resided, or where the offended
public official held office, at the time of the
commission of the offense.
Escribano's contention that in chartered cities the city
fiscal has the exclusive authority to conduct
preliminary investigations is not correct. While section
23(f) of the Charter of Cotabato City (Republic Act No,
2364) empowers its city attorney to "investigate all
charges of crimes, misdemeanors and violations of
laws and city ordinances and prepare the necessary
informations or make the necessary complaints
against the persons accused", that power is not
exclusive.
Section 78 of the same charter provides that the
municipal or city court of Cotabato City "may also
conduct preliminary investigations for any offense,
without regard to the limits of punishments", a
provision which is found in section 87 of the Judiciary
Law and in section 2, Rule 112 of the Rules of Court.
That same power is found in the last sentence of
section 41 of Republic Act No. 409, the Revised
Charter of Manila, which took effect on June 18, 1949
or after Sayo vs. Chief of Police of Manila, 80 Phil.
859 was decided.
But that provision is not found in Commonwealth Act
No. 326, the charter of Bacolod City, under which
Montelibano vs. Ferrer, 97 Phil. 228 and Guerrero vs.
Ferrer, 106 Phil. 1163 were decided, nor is it found in
the old Manila Charter contained in the Revised
Administrative Code.

Hence, in the Sayo, Montelibano and Guerrero cases,

it was held that the city court could not conduct
preliminary investigations. (See Callanta vs.
Villanueva, L-24646 and L-24674, June 20, 1977, 77
SCRA 377).

ORLANDO PRIMERO, petitioner, vs. HON. COURT

OF APPEALS and HON. SOLICITOR GENERAL,
respondents.

and there willfully, unlawfully and feloniously carry

outside of his residence a deadly weapon, to wit: a
bayonet, 19-1/2" long, which was not then being used
as a necessary tool or implement to earn a living or
being used in connection therewith, but was used in
the commission of the crime of Acts of Lasciviousness
for which he was charged in Crim. Case No. 1184 of
this Honorable Court.

August 5, 1976). Not long after, the father of Angelita

Maycong, who was then tending his farm from where
he heard the shouts for help, arrived (Ibid). Having
learned of the attempt made on the honor of her
daughter, father and daughter reported the matter to
the Barrio Captain (Ibid). The bayonet was
surrendered to the police force of Camiling, Tarlac."
(pp. 3-5, Solicitor's Brief) (Decision, p. 10, Rollo).

"Contrary to Law.

The defendant, in turn, claims that the filing of these

two (2) criminal accusations was motivated by
revenge. He testified that he and the complainant
were sweethearts who were engaged to get married.
He lived in the house of the complainant for three (3)
months where he was practically treated by the father
of the complainant, Florentino Maycong, as a son-inlaw helping in the farm work and in the daily chores in
the house. However, the planned marriage did not
take place because the complainant's family wanted
an ostentations ceremony which he (defendant) could
not afford. As an alternative, defendant suggested to
complainant that they elope but the latter refused.
Subsequently, the defendant left the complainant and.
married another woman, a decision which was
allegedly resented by the complainant.

"Tarlac, Tarlac, February 19, 1976." (p. 29, Rollo).

PARAS, J.:
Before the then Court of First Instance of Tarlac,
Orlando Primero was charged with the crimes of Acts
of Lasciviousness and Illegal Possession of Deadly
Weapon.
The complaint for Acts of Lasciviousness reads:
"That on or about 5:30 P.M., November 12, 1975 in
the municipality of Camiling, Province of Tarlac, the
abovenamed accused, did then and there willfully,
unlawfully and feloniously, while armed with a deadly
weapon (bayonet) and by means of force and
intimidation and with lewd designs committed
lascivious acts upon the person of the undersigned
complainant at Brgy. Pindangan 2nd, Camiling Tarlac
by then and there embracing, touching and fondling
the breast and private parts of the undersigned
against the complainants' will.
"CONTRARY TO LAW."

"Camiling Tarlac." (Decision, pp. 28-29, Rollo).

While the Provincial Fiscal. filed an Information for
Illegal Possession of Deadly Weapon, to wit:
"That on or about November 12, 1975, at about 5:30
in the afternoon, at Barangay Pindangan 2nd, in the
Municipality of Camiling, Province of Tarlac,
Philippines, and within the jurisdiction of this
Honorable Court, the said Orlando Primero did then

The aforementioned offenses were jointly tried for

having been committed on the same occasion.
The evidence for the prosecution, as found by the
respondent appellate Court is as follows:
"During the time material to this case Angelita
Maycong was about 24 years old, single and a
resident of Pindangan II, Camiling, Tarlac (p. 16, tsn.,
August 5, 1976).
"On or about November 12, 1975, on their way home
from Tarlac where they joined a parade (p. 30, tsn.,
August 30, 1976), Angelita Maycong and one Elena
Garcia saw Orlando Primero emerge suddenly from
the talahib along their path, brandishing a bayonet at
them (p. 17, tsn., August 5, 1976). Elena, Garcia ran
away (p. 6, tsn., August 30, 1976). Angelita Maycong
descended on the 'pilapil' to her left side and also
tried to run away (p. 18, tsn, August 5, 1976).
Unfortunately, Angelita stumbled, as a result of which,
Orlando grabbed her and pinned her down on the
ground (Ibid), He held her neck with his right hand
and held her breasts with the left hand and kissed her
right cheek (pp. 19, 20, tsn., August 5, 1976). Fighting
back, she kicked Orlando near his organ and struck
him with left hand (p. 20, Ibid.; p. 27, tsn., August 5,
1976). In the struggle, Angelita was able to get the
bayonet (p. 2, Ibid).
"In the meantime, Elena Garcia shouted for help (p.
20, tsn., August 5, 1976). Angelita also shouted for
help (p. 20, Ibid).
"Upon seeing the bayonet in the possession of
Angelita, Orlando Primero ran away (p. 23, tsn.,

Furthermore, defendant raises the defense of alibi. It

is argued that at the time the incident was allegedly
committed, he was in Paniqui, Tarlac harvesting palay
with some other farm laborers. He maintained that he
worked there from 6 o\'clock in the morning to past 6
o'clock in the evening of November 12, 1975. The
foregoing testimony of the defendant was
corroborated by Cipriano Sudaria and Teodoro
Cayabyab.
After trial, the lower court convicted the defendant of
the two (2) offenses charged in the two (2) separate
informations and sentenced him as follows:
"WHEREFORE, finding the accused Orlando Primero
guilty beyond reasonable doubt in Crim. Case No.
1184 of the offense of Acts of Lasciviousness
punishable under Article 336 of the Revised Penal
Code, he is hereby sentenced to a term of TWO (2)
YEARS, FOUR (4) MONTHS, and ONE (1) DAY to
FOUR (4) YEARS and TWO (2) MONTHS of prision
correccional, medium period, and in Crim. Case No.
1195 on the charge of Illegal Possession of a Deadly
Weapon, punishable under PD 9, he is further

sentenced to a prison term of TEN (10) YEARS which

is the maximum term imposed by the law, with costs.

The respondent Court erred in its non-consideration

of the defense of alibi interposed by the defendant.

"The bayonet, Exh. A, is ordered confiscated and

once this decision becomes final, the same shall be
forwarded to the 184th PC Company, Paniqui, Tarlac
for disposition according to law." (p. 12, Rollo).

After a careful perusal of the entire record of this

case, We find no cogent reason to disturb the findings
of the respondent Court.

On appeal, the respondent Court rendered a decision,

* the dispositive portion of which reads:
"WHEREFORE, affirming the judgment of conviction
in both offenses but modifying the penalty imposed by
the lower court, We hereby sentence the defendant to
the following:
"1. As regards to the accusation of acts of
lasciviousness the defendant is hereby sentenced to
a penalty of Six (6) Months of Arresto Mayor to Four
(4) Years of Prision Correccional; and
"2. As regards the violation of Presidential Decree No.
9 the defendant is hereby sentenced to an
indeterminate penalty of Five (5) Years as minimum to
Ten (10) Years as maximum. The bayonet, Exhibit is
ordered confiscated in favor of the government." (pp.
15-16, Rollo).
Hence, this petition raising the following issues:

I
The respondent Court erred in giving credence to the
testimonies of the prosecution witnesses.
II
The respondent Court failed to pass upon the
contention that bayonet ii not one of the weapons the
carrying of which outside one's residence is punished
under Section 3 of Presidential Decree No. 9.
III

With regard to the issue of credibility, We cannot

acquiesce with the argument raised by the petitioner
that the testimonies of the prosecution witnesses,
being close relatives, (father and niece) of the
complainant, should not be given weight and should
be considered biased and self-serving. Be it
remembered that mere relations cannot militate
against the credibility of a witness. Neither could it
distort the testimony due from such witnesses. In
point is the ruling in the case of People v. Libed
reported in 14 SCRA 410:
"The fact alone of relationship to the victim does not
destroy a witness' credibility. It is not to be lightly
supposed that the relatives of the deceased would
callously violate their conscience . . . by blaming it on
persons whom they know to be innocent thereof."
In this regard, it is relevant to restate herein that the
trial court, which had the opportunity of observing the
demeanor and deportment of the witnesses, found the
testimonies of the prosecution witnesses to have the
hallmarks of truth and credibility. Thus, the trial court
pertinently observed:
"The Court is inclined to believe the claim of the
complainant. Angelita Maycong, her father Florentino
Maycong, and her companion Elena Garcia, appear
to be credible witnesses. They impressed the Court
as being innocent farm folks, and while appearance
may be deceiving, their story is not incredible and was
entirely believable. Being an unmarried woman and in
the prime of her maidenhood (she was 25 years of
age when she testified on August 5, 1976), what
reason would Angelita have for unnecessarily
exposing herself if indeed the story of the accused
violating her honor was not true. Her story was
corroborated in material aspects by the two other
witnesses, her companion Elena Garcia and her
father Florentino Maycong." (Decision, p. 12 Rollo)

Accordingly, it need not be emphasized that the trial

court's finding that the testimonies of the witnesses
were reliable, being supported by evidence of record,
should be given credence. Thus, on matters of
credibility the findings of the trial court are accorded
the highest respect (People v. Cabanit, 139 SCRA 94;
People v. Jones, 137 SCRA 166; People v. Canamo,
138 SCRA 141; People v. Pasco, Jr., 137 SCRA 137;
Guita v. CA, 139 SCRA 576).
Anent the second issue, We regret to say that the
same is bereft of merit. It is worth noting that the
dispositive portion of the respondent Court's decision
makes mention of violation by the petitioner of P.D.
No. 9 for which he was sentenced to an indeterminate
penalty of five (5) years as minimum to ten (10) years
as maximum, and wherein the bayonet was ordered
confiscated in favor of the government. It goes without
saying that the Court of Appeals would not have
sustained the trial court's finding of petitioner's guilt as
to the charge of illegal possession of deadly weapon
were it not convinced that a bayonet is a "bladed"
pointed or blunt weapon" decreed unlawful under P.D.
No. 9.
It can not be disputed that, ordinarily, the enumeration
of specified matters in a statute is construed as an
exclusion of matters not enumerated unless a
different intention appears. However, the maxim
expressio unius est exclusio alterius is only an
auxiliary rule of statutory construction. It is not of
universal application-neither is it conclusive. It should
be applied only as a means of discovering legislative
intent which is not otherwise manifest and should not
be permitted to defeat the plainly indicated purpose of
the legislature (Statutory Construction, Martin, sixth
edition, 1984, pp. 71-72). Where a statute appears on
its face to limit the operation of its provisions to
particular persons or things by enumerating them, but
no reason exists why other . . . things not so
enumerated should not have been included, and
manifest injustice will follow by not so including them,
the maxim expressio unius est exclusio alterius
should not be invoked (Ibid, p. 79). Applying the same
in the instant case, it cannot be convincingly argued
that a bayonet is not a bladed, pointed or blunt
weapon, possession of which outside of one's
residence is decreed by P.D. No. 9 to be illegal. True
enough, if the carrying outside one\'s residence of

such weapons as fan knife, "balisong" or club, which

are less deadly than the bayonet, are prohibited under
the law, there is no logical reason why the bayonet
should be exempted from the prohibition.
Finally, as regards the defense of alibi, not only is it a
weak defense but also it cannot prevail over the
positive identification of the accused and by credible
prosecution witnesses (People v. Obenque, 147
SCRA 448; People v. Pacada, Jr., 142 SCRA 427;
People v. Canturia, 139 SCRA 280). Moreover,
defendant failed to prove that it was physically
impossible for him to be at the scene of the incident.

EMETERIA LIWAG, Petitioner, vs. HAPPY GLEN

LOOP HOMEOWNERS ASSOCIATION, INC.,
Respondent.
SERENO, J.:

This Rule 45 Petition assails the Decision[1] and

Resolution[2] of the Court of Appeals (CA) in CA-GR
SP No. 100454. The CA affirmed with modification the
Decision[3]and Order[4] of the Office of the President
(O.P.) in OP Case No. 05-G-224, which had set aside
the Decision[5] of the Board of Commissioners of the
Housing and Land Use Regulatory Board (HLURB) in
HLURB Case No. REM-A-041210-0261 and affirmed
the Decision[6] of the Housing and Land Use Arbiter
in HLURB Case No. REM-030904-12609.

The controversy stems from a water facility in Happy

Glen Loop Subdivision (the Subdivision), which is
situated in Deparo, Caloocan City.

Sometime in 1978, F.G.R. Sales, the original

developer of Happy Glen Loop, obtained a loan from
Ernesto Marcelo (Marcelo), the owner of T.P. Marcelo
Realty Corporation. To settle its debt after failing to
pay its obligation, F.G.R. Sales assigned to Marcelo
all its rights over several parcels of land in the
Subdivision, as well as receivables from the lots
already sold.[7]

As the successor-in-interest of the original

developer, Marcelo represented to subdivision lot
buyers, the National Housing Authority (NHA) and the
Human Settlement Regulatory Commission (HSRC)
that a water facility was available in the Subdivision.
[8]

For almost 30 years, the residents of the Subdivision

relied on this facility as their only source of water.
[9] This fact was acknowledged by Marcelo and
Hermogenes Liwag (Hermogenes), petitioners late
husband who was then the president of respondent
Happy Glen Loop Homeowners Association
(Association).[10]

Sometime in September 1995, Marcelo sold Lot 11,

Block No. 5 to Hermogenes. As a result, Transfer
Certificate of Title (TCT) No. C-350099 was issued to
him. When Hermogenes died in 2003, petitioner
Emeteria P. Liwag subsequently wrote a letter to
respondent Association, demanding the removal of
the overhead water tank from the subject parcel of
land.[11]

Refusing to comply with petitioners demand,

respondent Association filed before the HLURB an
action for specific performance; confirmation,
maintenance and donation of water facilities;
annulment of sale; and cancellation of TCT No.
350099 against T.P. Marcelo Realty Corporation (the
owner and developer of the Subdivision), petitioner
Emeteria, and the other surviving heirs of
Hermogenes.

After the parties submitted their respective position

papers, Housing and Land Use Arbiter Joselito
Melchor (Arbiter Melchor) ruled in favor of the
Association. He invalidated the transfer of the parcel
of land in favor of Hermogenes in a Decision dated 5
October 2004, the dispositive portion of which reads:
[12]

WHEREFORE, premises considered, judgment is

hereby rendered as follows:

1.
Confirming the existence of an easement for
water system/facility or open space on Lot 11, Block 5
of TCT No. C-350099 wherein the deep well and
overhead tank are situated,

2.
Making the Temporary Restraining Order dated
01 April 2004 permanent so as to allow the
continuous use and maintenance of the said water
facility, i.e., deep well and over head water tank, on
the subject lot, by the complainants members and
residents of the subject project, and restraining all the
respondents from committing the acts complained of
and as described in the complaint,

3.
Declaring as void ab initio the deed of sale
dated 26 February 2001, involving Lot 11, Block 5 in
favor of spouses Liwag, and TCT No. C-350099 in the
name of same respondents without prejudice to
complainants right to institute a criminal action in
coordination with the prosecuting arms of the
government against respondents Marcelo and Liwag,
and furthermore, with recourse by Liwag against T.P.
and/or Marcelo to ask for replacement for
controverted lot with a new one within the subject
project; and

4.
Ordering respondents, jointly and severally, to
pay complainant the amount of P10,000.00 as
attorneys fees and the amount of P20,000.00 as
damages in favor of the complainants members.

SO ORDERED.

On appeal before the HLURB Board of

Commissioners, the Board found that Lot 11, Block 5

was not an open space. Moreover, it ruled that

Marcelo had complied with the requirements of
Presidential Decree No. (P.D.) 1216 with the donation
of 9,047 square meters of open space and road lots.
It further stated that there was no proof that Marcelo
or the original subdivision owner or developer had at
any time represented that Lot 11, Block 5 was an
open space. It therefore concluded that the use of the
lot as site of the water tank was merely tolerated.[13]

development of the Subdivision or the sale of its lots

to buyers.[20] The CA likewise deleted the award of
attorneys fees and damages in favor of respondent.
[21]

Respondent Association interposed an appeal to the

OP, which set aside the Decision of the HLURB Board
of Commissioners and affirmed that of the Housing
and Land Use Arbiter.[14]

The Courts Ruling

The OP ruled that Lot 11, Block 5 was an open space,

because it was the site of the water installation of the
Subdivision, per Marcelos official representation on
file with the HLURB National Capital Region Field
Office. The OP further ruled that the open space
required under P.D. 957 excluded road lots; and, thus,
the Subdivisions open space was still short of that
required by law. Finally, it ruled that petitioner Liwag
was aware of the representations made by Marcelo
and his predecessors-in-interest, because he had
acknowledged the existence of a water installation
system as per his Affidavit of 10 August 1982.[15]

Petitioner Liwag unsuccessfully moved for

reconsideration,[16] then filed a Rule 43 Petition for
Review before the CA.[17]

The CA affirmed that the HLURB possessed

jurisdiction to invalidate the sale of the subject parcel
of land to Hermogenes and to invalidate the issuance
of TCT No. C-350099 pursuant thereto.[18] The
appellate court agreed with the OP that an easement
for water facility existed on the subject parcel of land
and formed part of the open space required to be
reserved by the subdivision developer under P.D. 957.
[19] However, it ruled that Arbiter Melchor should not
have recommended the filing of a criminal action
against petitioner, as she was not involved in the

Aggrieved, petitioner filed the instant Petition before

this Court.

We affirm the ruling of the appellate court.

I
The HLURB has exclusive jurisdiction
over the case at bar

The jurisdiction of the HLURB is outlined in P.D. 1344,

Empowering the National Housing Authority to Issue
Writ of Execution in the Enforcement of its Decision
under Presidential Decree No. 957, viz:

Sec. 1. In the exercise of its functions to regulate real

estate trade and business and in addition to its
powers provided for in Presidential Decree No. 957,
the National Housing Authority shall have the
exclusive jurisdiction to hear and decide cases of the
following nature.

A. Unsound real estate business practices;

B. Claims involving refund and any other claims filed

by subdivision lot or condominium unit buyer against
the project owner, developer, dealer, broker or
salesman; and

C. Cases involving specific performance of

contractual and statutory obligations filed by buyers of
subdivision lots or condominium units against the
owner, developer, broker or salesman.

When respondent Association filed its Complaint

before the HLURB, it alleged that Marcelos sale of
Lot 11, Block 5 to Hermogenes was done in violation
of P.D. 957 in the following manner:

12. Through fraudulent acts and connivance of [T.P.

and Ernesto Marcelo] and the late Liwag and without
the knowledge and consent of the complainants all in
violation of P.D. 957 and its implementing regulations,
respondents T.P. and Ernesto Marcelo transferred the
same lot where the deep well is located which is
covered by TCT No. C-41785 in favor of
spouses Hermogenes Liwag and Emeteria Liwag to
the great damage and prejudice of complainants x x
x.[22] (Empasis in the original)

We find that this statement sufficiently alleges that the

subdivision owner and developer fraudulently sold to
Hermogenes the lot where the water facility was
located. Subdivisions are mandated to maintain and
provide adequate water facilities for their
communities.[23] Without a provision for an
alternative water source, the subdivision developers
alleged sale of the lot where the communitys sole
water source was located constituted a violation of
this obligation. Thus, this allegation makes out a case
for an unsound real estate business practice of the
subdivision owner and developer. Clearly, the case at
bar falls within the exclusive jurisdiction of the
HLURB.

It is worthy to note that the HLURB has exclusive

jurisdiction over complaints arising from contracts
between the subdivision developer and the lot buyer,
or those aimed at compelling the subdivision
developer to comply with its contractual and statutory
obligations to make the Subdivision a better place to

live in.[24] This interpretation is in line with one of P.D.

957s Whereas clauses, which provides:

Discontinuous easements are those which are used

at intervals and depend upon the acts of man.

hospitals, health centers, barangay centers and other

similar facilities and amenities.[33]

P.D. 957 was promulgated to closely regulate real

estate subdivision and condominium businesses.
[25] Its provisions were intended to encompass all
questions regarding subdivisions and condominiums.
[26] The decree aimed to provide for an appropriate
government agency, the HLURB, to which aggrieved
parties in transactions involving subdivisions and
condominiums may take recourse.[27]

Apparent easements are those which are made

known and are continually kept in view by external
signs that reveal the use and enjoyment of the same.

The decree makes no specific mention of areas

reserved for water facilities. Therefore, we resort to
statutory construction to determine whether these
areas fall under other similar facilities and amenities.

II
An easement for water facility exists on Lot 11, Block
5 of Happy Glen Loop Subdivision

Easements or servitudes are encumbrances imposed

upon an immovable for the benefit of another
immovable belonging to a different owner,[28] for the
benefit of a community, [29] or for the benefit of one
or more persons to whom the encumbered estate
does not belong.[30]

The law provides that easements may be continuous

or discontinuous and apparent or non-apparent. The
pertinent provisions of the Civil Code are quoted
below:

Art. 615. Easements may be continuous or

discontinuous, apparent or non-apparent.

Continuous easements are those the use of which is

or may be incessant, without the intervention of any
act of man.

Non-apparent easements are those which show no

external indication of their existence.

In this case, the water facility is an encumbrance on

Lot 11, Block 5 of the Subdivision for the benefit of the
community. It is continuous and apparent, because it
is used incessantly without human intervention, and
because it is continually kept in view by the overhead
water tank, which reveals its use to the public.

Contrary to petitioners contention that the existence

of the water tank on Lot 11, Block 5 is merely
tolerated, we find that the easement of water facility
has been voluntarily established either by Marcelo,
the Subdivision owner and developer; or by F.G.R.
Sales, his predecessor-in-interest and the original
developer of the Subdivision. For more than 30 years,
the facility was continuously used as the residents
sole source of water.[31] The Civil Code provides that
continuous and apparent easements are acquired
either by virtue of a title or by prescription of 10 years.
[32] It is therefore clear that an easement of water
facility has already been acquired through
prescription.

The basic statutory construction principle of ejusdem

generis states that where a general word or phrase
follows an enumeration of particular and specific
words of the same class, the general word or phrase
is to be construed to include or to be restricted to
things akin to or resembling, or of the same kind or
class as, those specifically mentioned.[34]

Applying this principle to the afore-quoted Section 1 of

P.D. 1216, we find that the enumeration refers to
areas reserved for the common welfare of the
community. Thus, the phrase other similar facilities
and amenities should be interpreted in like manner.

Here, the water facility was undoubtedly established

for the benefit of the community. Water is a basic
need in human settlements,[35] without which the
community would not survive. We therefore rule that,
based on the principle of ejusdem generis and taking
into consideration the intention of the law to create
and maintain a healthy environment in human
settlements,[36] the location of the water facility in the
Subdivision must form part of the area reserved for
open space.

III
Lot 11, Block 5 of Happy Glen Loop Subdivision forms
part of its open space

The term open space is defined in P.D. 1216 as an

area reserved exclusively for parks, playgrounds,
recreational uses, schools, roads, places of worship,

IV
The subject parcel of land is beyond the commerce of
man and its sale is prohibited under the law

The law expressly provides that open spaces in

subdivisions are reserved for public use and are

beyond the commerce of man.[37] As such, these

open spaces are not susceptible of private ownership
and appropriation. We therefore rule that the sale of
the subject parcel of land by the subdivision owner or
developer to petitioners late husband was contrary to
law. Hence, we find no reversible error in the
appellate courts Decision upholding the HLURB
Arbiters annulment of the Deed of Sale.

Petitioner attempts to argue in favor of the validity of

the sale of the subject parcel of land by invoking the
principle of indefeasibility of title and by arguing that
this action constitutes a collateral attack against her
title, an act proscribed by the Property Registration
Decree.

Petitioner is mistaken on both counts.

First, the rule that a collateral attack against a Torrens

title is prohibited by law[38] finds no application to this
case.

There is an attack on the title when the object of an

action is to nullify a Torrens title, thus challenging the
judgment or proceeding pursuant to which the title
was decreed.[39] In the present case, this action is
not an attack against the validity of the Torrens title,
because it does not question the judgment or
proceeding that led to the issuance of the title. Rather,
this action questions the validity of the transfer of land
from Marcelo to petitioners husband. As there is no
attack direct or collateral against the title,
petitioners argument holds no water.

Second, the principle of indefeasibility of title is not

absolute, and there are well-defined exceptions to this
rule.[40] In Aqualab Philippines, Inc. v. Heirs of
Pagobo,[41] we ruled that this defense does not
extend to a transferee who takes the title with
knowledge of a defect in that of the transferees
predecessor-in-interest.

In this case, Spouses Liwag were aware of the

existence of the easement of water facility when
Marcelo sold Lot 11, Block 5 to them. Hermogenes
even executed an Affidavit dated 10 August 1982
attesting to the sufficiency of the water supply coming
from an electrically operated water pump in the
Subdivision.[42] It is undisputed that the water facility
in question was their only water source during that
time. As residents of the Subdivision, they had even
benefited for almost 30 years from its existence.
Therefore, petitioner cannot be shielded by the
principle of indefeasibility and conclusiveness of title,
as she was not an innocent purchaser in good faith
and for value.

From the discussion above, we therefore conclude

that the appellate court committed no reversible error
in the assailed Decision and accordingly affirm it in
toto.

WHEREFORE, premises considered, the instant

Petition for Review is DENIED, and the assailed
Decision and Resolution of the Court of Appeals
in CA-GR SP No. 100454 are hereby AFFIRMED.

AMELITO R. MUTUC, petitioner, vs. COMMISSION

ON ELECTIONS, respondent.
FERNANDO, J:

The invocation of his right to free speech by petitioner

Amelito Mutuc, then a candidate for delegate to the
Constitutional Convention, in this special civil action
for prohibition to assail the validity of a ruling of
respondent Commission on Elections enjoining the
use of a taped jingle for campaign purposes, was not
in vain. Nor could it be considering the conceded
absence of any express power granted to respondent
by the Constitutional Convention Act to so require and
the bar to any such implication arising from any
provision found therein, if deference be paid to the
principle that a statute is to be construed consistently

with the fundamental laws which accords the utmost

priority to freedom of expression, much more so when
utilized for electoral purposes. On November 3, 1970,
the very same day the case was orally argued, five
days after its filing, with the election barely a week
away, we issued a minute resolution granting the writ
of prohibition prayed for. This opinion is intended to
explain more fully our decision.

In this special civil action for prohibition filed on

October 29, 1970, petitioner, after setting forth his
being a resident of Arayat, Pampanga, and his
candidacy for the position of delegate to the
Constitutional Convention, alleged that respondent
Commission on Elections, by a telegram sent to him
five days previously, informed him that his certificate
of candidacy was given due course but prohibited him
from using jingles in his mobile units equipped with
sound systems and loud speakers, an order which,
according to him, is "violative of [his] constitutional
right . . . to freedom of speech." 1 There being no
plain, speedy and adequate remedy, according to
petitioner, he would seek a writ of prohibition, at the
same time praying for a preliminary injunction. On the
very next day, this Court adopted a resolution
requiring respondent Commission on Elections to file
an answer not later than November 2, 1970, at the
same time setting the case for hearing for Tuesday
November 3, 1970. No preliminary injunction was
issued. There was no denial in the answer filed by
respondent on November 2, 1970, of the factual
allegations set forth in the petition, but the justification
for the prohibition was premised on a provision of the
Constitutional Convention Act, 2 which made it
unlawful for candidates "to purchase, produce,
request or distribute sample ballots, or electoral
propaganda gadgets such as pens, lighters, fans (of
whatever nature), flashlights, athletic goods or
materials, wallets, bandanas, shirts, hats, matches,
cigarettes, and the like, whether of domestic or
foreign origin." 3 It was its contention that the jingle
proposed to be used by petitioner is the recorded or
taped voice of a singer and therefore a tangible
propaganda material, under the above statute subject
to confiscation. It prayed that the petition be denied
for lack of merit. The case was argued, on November
3, 1970, with petitioner appearing in his behalf and
Attorney Romulo C. Felizmea arguing in behalf of
respondent.

This Court, after deliberation and taking into account

the need for urgency, the election being barely a week
away, issued on the afternoon of the same day, a
minute resolution granting the writ of prohibition,
setting forth the absence of statutory authority on the
part of respondent to impose such a ban in the light of
the doctrine of ejusdem generis as well as the
principle that the construction placed on the statute by
respondent Commission on Elections would raise
serious doubts about its validity, considering the
infringement of the right of free speech of petitioner.
Its concluding portion was worded thus: "Accordingly,
as prayed for, respondent Commission on Elections is
permanently restrained and prohibited from enforcing
or implementing or demanding compliance with its
aforesaid order banning the use ,of political jingles by
candidates. This resolution is immediately executory."
4

1. As made clear in our resolution of November 3,

1970, the question before us was one of power.
Respondent Commission on Elections was called
upon to justify such a prohibition imposed on
petitioner. To repeat, no such authority was granted
by the Constitutional Convention Act. It did contend,
however, that one of its provisions referred to above
makes unlawful the distribution of electoral
propaganda gadgets, mention being made of pens,
lighters, fans, flashlights, athletic goods or materials,
wallets, bandanas, shirts, hats, matches, and
cigarettes, and concluding with the words "and the
like." 5 For respondent Commission, the last three
words sufficed to justify such an order. We view the
matter differently. What was done cannot merit our
approval under the well-known principle of ejusdem
generis, the general words following any enumeration
being applicable only to things of the same kind or
class as those specifically referred to. 6 It is quite
apparent that what was contemplated in the Act was
the distribution of gadgets of the kind referred to as a
means of inducement to obtain a favorable vote for
the candidate responsible for its distribution.

The more serious objection, however, to the ruling of

respondent Commission was its failure to manifest

fealty to a cardinal principle of construction that a

statute should be interpreted to assure its being in
consonance with, rather than repugnant to, any
constitutional command or prescription. 7 Thus,
certain Administrative Code provisions were given a
"construction which should be more in harmony with
the tenets of the fundamental law." 8 The desirability
of removing in that fashion the taint of constitutional
infirmity from legislative enactments has always
commended itself. The judiciary may even strain the
ordinary meaning of words to avert any collision
between what a statute provides and what the
Constitution requires. The objective is to reach an
interpretation rendering it free from constitutional
defects. To paraphrase Justice Cardozo, if at all
possible, the conclusion reached must avoid not only
that it is unconstitutional, but also grave doubts upon
that score. 9

2. Petitioner's submission of his side of the

controversy, then, has on its favor obeisance to such
a cardinal precept. The view advanced by him that if
the above provision of the Constitutional Convention
Act were to lend itself to the view that the use of the
taped jingle could be prohibited, then the challenge of
unconstitutionality would be difficult to meet. For, in
unequivocal language, the Constitution prohibits an
abridgment of free speech or a free press. It has been
our constant holding that this preferred freedom calls
all the more for the utmost respect when what may be
curtailed is the dissemination of information to make
more meaningful the equally vital right of suffrage.
What respondent Commission did, in effect, was to
impose censorship on petitioner, an evil against which
this constitutional right is directed. Nor could
respondent Commission justify its action by the
assertion that petitioner, if he would not resort to
taped jingle, would be free, either by himself or
through others, to use his mobile loudspeakers.
Precisely, the constitutional guarantee is not to be
emasculated by confining it to a speaker having his
say, but not perpetuating what is uttered by him
through tape or other mechanical contrivances. If this
Court were to sustain respondent Commission, then
the effect would hardly be distinguishable from a
previous restraint. That cannot be validly done.

It would negate indirectly what the Constitution in

express terms assures. 10

3. Nor is this all. The concept of the Constitution as

the fundamental law, setting forth the criterion for the
validity of any public act whether proceeding from the
highest official or the lowest functionary, is a postulate
of our system of government. That is to manifest
fealty to the rule of law, with priority accorded to that
which occupies the topmost rung in the legal
hierarchy. The three departments of government in
the discharge of the functions with which it is
entrusted have no choice but to yield obedience to its
commands. Whatever limits it imposes must be
observed. Congress in the enactment of statutes must
ever be on guard lest the restrictions on its authority,
whether substantive or formal, be transcended. The
Presidency in the execution of the laws cannot ignore
or disregard what it ordains. In its task of applying the
law to the facts as found in deciding cases, the
judiciary is called upon to maintain inviolate what is
decreed by the fundamental law. Even its power of
judicial review to pass upon the validity of the acts of
the coordinate branches in the course of adjudication
is a logical corollary of this basic principle that the
Constitution is paramount. It overrides any
governmental measure that fails to live up to its
mandates. Thereby there is a recognition of its being
the supreme law.

To be more specific, the competence entrusted to

respondent Commission was aptly summed up by the
present Chief Justice thus: "Lastly, as the branch of
the executive department - although independent of
the President - to which the Constitution has given the
'exclusive charge' of the 'enforcement and
administration of all laws relative to the conduct of
elections,' the power of decision of the Commission is
limited to purely 'administrative questions.' " 11 It has
been the constant holding of this Court, as it could not
have been otherwise, that respondent Commission
cannot exercise any authority in conflict With or
outside of the law, and there is no higher law than the
Constitution. 12 Our decisions which liberally construe
its powers are precisely inspired by the thought that
only thus may its responsibility under the Constitution
to insure free, orderly and honest elections be

adequately fulfilled. 13 There could be no justification

then for lending approval to any ruling or order issuing
from respondent Commission, the effect of which
would be to nullify so vital a constitutional right as free
speech. Petitioner's case, as was obvious from the
time of its filing, stood on solid footing.

WHEREFORE, as set forth in our resolution of

November 3, 1970, respondent Commission is
permanently restrained and prohibited from enforcing
or implementing or demanding compliance with its
aforesaid order banning the use of political taped
jingles. Without pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar,

Castro, Barredo and Villamor, JJ., concur.

Dizon and Makasiar, JJ., are on official leave.

Teehankee, J., concurs in a separate opinion.

TEEHANKEE, J., concurring:

In line with my separate opinion in Badoy vs. Ferrer 1

on the unconstitutionality of the challenged provisions
of the 1971 Constitutional Convention Act, I concur
with the views of Mr. Justice Fernando in the main
opinion that "there could be no justification . . . for
lending approval to any ruling or order issuing from
respondent Commission, the effect of which would be
to nullify so vital a constitutional right as free speech."
I would only add the following observations:

This case once again calls for application of the

constitutional test of reasonableness required by the
due process clause of our Constitution. Originally,
respondent Commission in its guidelines prescribed
summarily that the use by a candidate of a "mobile

unit roaming around and announcing a meeting and

the name of the candidate . . . is prohibited. If it is
used only for a certain place for a meeting and he
uses his sound system at the meeting itself, there is
no violation." 2 Acting upon petitioner's application,
however, respondent Commission ruled that "the use
of a sound system by anyone be he a candidate or
not whether stationary or part of a mobile unit is not
prohibited by the 1971 Constitutional Convention Act"
but imposed the condition "provided that there are no
jingles and no streamers or posters placed in
carriers."

Respondent Commission's narrow view is that "the

use of a 'jingle,' a verbally recorded form of election
propaganda, is no different from the use of a
'streamer' or 'poster,' a printed-form of election
propaganda, and both forms of election advertisement
fall under the prohibition contained in sec. 12 of R.A.
6132," and "the record disc or tape where said 'jingle'
has been recorded can be subject of confiscation by
the respondent Commission under par. (E) of sec. 12
of R.A. 6132." In this modern day and age of the
electronically recorded or taped voice which may be
easily and inexpensively disseminated through a
mobile sound system throughout the candidate's
district, respondent Commission would outlaw
"recorded or taped voices" and would exact of the
candidate that he make use of the mobile sound
system only by personal transmission and repeatedly
personally sing his "jingle" or deliver his spoken
message to the voters even if he loses his voice in the
process or employ another person to do so personally
even if this should prove more expensive and less
effective than using a recorded or taped voice.

Respondent Commission's strictures clearly violate,

therefore, petitioner's basic freedom of speech and
expression. They cannot pass the constitutional test
of reasonableness in that they go far beyond a
reasonable relation to the proper governmental object
and are manifestly unreasonable, oppressive and
arbitrary.

Insofar as the placing of the candidate's "streamers"

or posters on the mobile unit or carrier is concerned,
respondent Commission's adverse ruling that the
same falls within the prohibition of section 12,
paragraphs (C) and (E) has not been appealed by
petitioner. I would note that respondent Commission's
premise that "the use of a 'jingle' . . . is no different
from the use of a 'streamer' or 'poster' "in that these
both represent forms of election advertisements - to
make the candidate and the fact of his candidacy
known to the voters is correct, but its conclusion is
not. The campaign appeal of the "jingle" is through the
voters' ears while that of the "streamers" is through
the voters' eyes. But if it be held that the
Commission's ban on "jingles" abridges unreasonably,
oppressively and arbitrarily the candidate's right of
free expression, even though such "jingles" may
occasionally offend some sensitive ears, the
Commission's ban on "streamers" being placed on the
candidate's mobile unit or carrier, which "streamers"
are less likely to offend the voters' sense of sight
should likewise be held to be an unreasonable,
oppressive and arbitrary curtailment of the candidate's
same constitutional right.

The intent of the law to minimize election expenses as

invoked by respondent Commission, laudable as it
may be, should not be sought at the cost of the
candidate's constitutional rights in the earnest pursuit
of his candidacy, but is to be fulfilled in the strict and
effective implementation of the Act's limitation in
section 12(G) on the total expenditures that may be
made by a candidate or by another person with his
knowledge and consent.

COLGATE-PALMOLIVE PHILIPPINES, INC.,

petitioner, vs. HON. PEDRO M. GIMENEZ as
AUDITOR GENERAL and ISMAEL MATHAY as
AUDITOR OF THE CENTRAL BANK OF THE
PHILIPPINES, respondents.
GUTIERREZ DAVID, J.:

The petitioner Colgate-Palmolive Philippines, Inc., is a

corporation duly organized and existing under

Philippine laws engaged in the manufacture of toilet

preparations and household remedies. On several
occasions, it imported from abroad various materials
such as irish moss extract, sodium benzoate, sodium
saccharinate, precipitated calcium carbonate and
dicalcium phosphate, for use as stabilizers and
flavoring of the dental cream it manufactures. For
every importation made of these materials, the
petitioner paid to the Central Bank of the Philippines
the 17% special excise tax on the foreign exchange
used for the payment of the cost, transportation and
other charges incident thereto, pursuant to Republic
Act No. 601, as amended, commonly known as the
Exchange Tax Law.

On March 14, 1956, the petitioner filed with the

Central Bank three applications for refund of the 17%
special excise tax it had paid in the aggregate sum of
P113,343.99. The claim for refund was based on
section 2 of Republic Act 601, which provides that
"foreign exchange used for the payment of the cost,
transportation and/or other charges incident to the
importation into the Philippines of . . . stabilizer and
flavors . . . shall be refunded to any importer making
application therefor, upon satisfactory proof of actual
importation under the rules and regulations to be
promulgated pursuant to section seven thereof." After
the applications were processed by the Officer inCharge of the Exchange Tax Administration of the
Central Bank, that official advised the petitioner that of
the total sum of P113,343.99 claimed by it for refund,
the amount of P23,958.13 representing the 17%
special excise tax on the foreign exchange used to
import irish moss extract, sodium benzoate and
precipitated calcium carbonate had been approved.
The auditor of the Central Bank, however, refused to
pass in audit its claims for refund even for the
reduced amount fixed by the Officer-in-Charge of the
Exchange Tax Administration, on the theory that
toothpaste stabilizers and flavors are not exempt
under section 2 of the Exchange Tax Law.

Petitioner appealed to the Auditor General, but the

latter on December 4, 1958 affirmed the ruling of the
auditor of the Central Bank, maintaining that the term
"stabilizer and flavors" mentioned in section 2 of the
Exchange Tax Law refers only to those used in the

preparation or manufacture of food or food products.

Not satisfied, the petitioner brought the case to this
Court thru the present petition for review.

The decisive issue to be resolved is whether or not

the foreign exchange used by petitioner for the
importation of dental cream stabilizers and flavors is
exempt from the 17% special excise tax imposed by
the Exchange Tax Law (Republic Act No. 601) so as
to entitle it to refund under section 2 thereof, which
reads as follows:

"SEC. 2. The tax collected under the preceding

section on foreign exchange used for the payment of
the cost, transportation and/or other charges incident
to importation into the Philippines of rice, flour,
canned milk, cattle and beef, canned fish, soya
beans, butter, fat, chocolate, malt syrup, tapioca,
stabilizer and flavors, vitamin concentrate, fertilizer
poultry feed; textbooks, reference books, and
supplementary readers approved by the Board on
Textbooks and/or established public or private
educational institutions; newsprint imported by or for
publishers for use in the publication of books,
pamphlets, magazines and newspapers; book paper,
book cloth, chip board imported for the printing of
supplementary readers (approved by the Board of
Textbooks) to be supplied to the Government under
contracts perfected before the approval of this Act, the
quantity thereof to be certified by the Director of
Printing; anesthetics, antibiotics, vitamins, hormones,
X-Ray films, Laboratory reagents, biologicals, dental
supplies, and pharmaceutical drugs necessary for
compounding medicines; medical and hospital
supplies listed in the appendix to this Act, in quantities
to be certified by the Director of Hospitals as actually
needed by the hospitals applying therefor; drugs and
medicines listed in the said appendix; and such other
drugs and medicine as may be certified by the
Secretary of Health from time to time to promote and
protect the health of the people of the Philippines
shall be refunded to any importer making application
therefor, upon satisfactory proof of actual importation
under the rules and regulations to be promulgated
pursuant to section seven thereof." (Emphasis
supplied.)

The ruling of the Auditor General that the term

"stabilizer and flavors" as used in the law refers only
to those materials actually used in the preparation or
manufacture of food and food products is based,
apparently, on the principle of statutory construction
that "general terms may be restricted by specific
words, with the result that the general language will
be limited by the specific language which indicates
the statute's object and purpose." (Statutory
Construction by Crawford, 1940 ed. p. 324-325.) The
rule, however, is, in our opinion, applicable only to
cases where, except for one general term, all the
items in an enumeration belong to or fall under one
specific class. In the case at bar, it is true that the
term "stabilizer and flavors" is preceded by a number
of articles that may be classified as food or food
products, but it is likewise true that the other items
immediately following it do not belong to the same
classification. Thus "fertilizer" and "poultry feed" do
not fall under the category of food or food products
because they are used in the farming and poultry
industries, respectively. "Vitamin concentrate"
appears to be more of a medicine than food or food
product, for, as a matter of fact, vitamins are among
those enumerated in the list of medicines and drugs
appearing in the appendix to the law. It should also
here be stated that "cattle", which is among those
listed preceding the term in question, includes not
only those intended for slaughter but also those for
breeding purposes. Again, it is noteworthy that under
Republic Act 814 amending the above-quoted section
of Republic Act No. 601, "industrial starch", which
does not always refer to food for human consumption,
was added among the items grouped with stabilizer
and flavors". Thus, on the basis of the grouping of the
articles alone, it cannot validly be maintained that the
term "stabilizer and flavors" as used in the abovequoted provision of the Exchange Tax Law refers only
to those used in the manufacture of food and food
products. This view is supported by the principle "Ubi
lex non distinguit nec nos distinguire debemos", or
"where the law does not distinguish, neither do we
distinguish". (Ligget & Myers Tobacco Company vs.
Collector of Internal Revenue, 53 Off. Gaz. [15], page
4831). Since the law does not distinguish between
"stabilizer and flavors" used in the preparation of food
and those used in the manufacture of toothpaste or
dental cream, we are not authorized to make any
distinction and must construe the words in their

general sense. The rule of construction that general

and unlimited terms are restrained and limited by
particular recitals when used in connection with them,
does not require the rejection of general terms
entirely. It is intended merely as an aid in ascertaining
the intention of the legislature and is to be taken in
connection with other rules of construction. (See
Handbook of the Construction and Interpretation of
Laws by Black, p. 215-216, 2nd ed.)

Having arrived at the above conclusion, we deem it

now idle to pass upon the other questions raised by
the parties.

WHEREFORE, the decision under review is reversed

and the respondents are hereby ordered to audit
petitioner's applications for refund which were
approved by the Officer-In-Charge of the Exchange
Tax Administration in the total amount of P23,958.13.

CATHOLIC ARCHBISCHOP OF MANILA, petitionerappellant, vs. SOCIAL SECURITY COMMISSION,

respondent-appellee.
GUTIERREZ DAVID, J.:

On September 1, 1958, the Roman Catholic

Archbishop of Manila, thru counsel, filed with the
Social Security Commission a request that "Catholic
Charities, and all religious and charitable institutions
and/or organizations, which are directly or indirectly,
wholly or partially, operated by the Roman Catholic
Archbishop of Manila," be exempted from compulsory
coverage of Republic Act No. 1161, as amended,
otherwise known as the Social Security Law of 1954.
The request was based on the claim that the said Act
is a labor law and does not cover religious and
charitable institutions but is limited to businesses and
activities organized for profit. Acting upon the
recommendation of its Legal Staff, the Social Security
Commission in its Resolution No. 572, series of 1958,
denied the request. The Roman Catholic Archbishop
of Manila, reiterating its arguments and raising
constitutional objections, requested for

reconsideration of the resolution. The request,

however, was denied by the Commission in its
Resolution No. 767, series of 1958; hence, this
appeal taken in pursuance of section 5 (c) of Republic
Act No. 1161, as amended.

Section 9 of the Social Security Law, as amended,

provides that coverage "in the System shall be
compulsory upon all employees between the age of
sixteen and sixty years inclusive, if they have been for
at least six months in the service of an employer who
is a member of the System, Provided, that the
Commission may not compel any employer to
become a member of the System unless he shall
have been in operation for at least two years and has
at the time of admission, if admitted for membership
during the first year of the System's operation at least
fifty employees, and if admitted for membership the
following year of operation and thereafter, at least six
employees . . .." The term "employer" as used in the
law is defined as "any person, natural or juridical,
domestic or foreign, who carries in the Philippines any
trade, business, industry, undertaking, or activity of
any kind and uses the services of another person who
is under his orders as regards the employment,
except the Government and any of its political
subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government"
(par. [c], sec. 8), while an "employee" refers to "any
person who performs services for an `employer' in
which either or both mental and physical efforts are
used and who receives compensation for such
services" (par. [d] sec. 8). "Employment", according to
paragraph [j] of said section 8, covers any service
performed by an employer except those expressly
enumerated thereunder, like employment under the
Government, or any of its political subdivisions,
branches or instrumentalities including corporations
owned and controlled by the Government, domestic
service in a private home, employment purely casual,
etc.

From the above legal provisions, it is apparent that

the coverage of the Social Security Law is predicated
on the existence of an employer-employee
relationship of more or less permanent nature and
extends to employment of all kinds except those
expressly excluded.

Appellant contends that the term "employer" as

defined in the law should - following the principle of
ejusdem generis - be limited to those who carry on
"undertakings or activities which have the element of
profit or gain, or which are pursued for profit or gain,"
because the phrase "activity of any kind" in the
definition is preceded by the words "any trade,
business, industry, undertaking." The contention
cannot be sustained. The rule ejusdem generis
applies only where there is uncertainty. It is not
controlling where the plain purpose and intent of the
Legislature would thereby be hindered and defeated.
Grosjean vs. American Paints Works [La], 160 So.
449). In the case at bar, the definition of the term
"employer" is, we think, sufficiently comprehensive as
to include religious and charitable institutions or
entities not organized for profit, like herein appellant,
within its meaning. This is made more evident by the
fact that it contains an exception in which said
institutions or entities are not included. And, certainly,
had the Legislature really intended to limit the
operation of the law to entities organized for profit or
gain, it would not have defined an "employer" in such
a way as to include the Government and yet make an
express exception of it.

It is significant to note that when Republic Act No.

1161 was enacted, services performed in the employ
of institutions organized for religious or charitable
purposes were by express provisions of said Act
excluded from coverage thereof (sec. 8, par. [j],
subpars. 7 and 8). That portion of the law, however,
has been deleted by express provision of Republic
Act No. 1792, which took effect in 1957. This is clear
indication that the Legislature intended to include
charitable and religious institutions within the scope of
the law.

In support of its contention that the Social Security

Law was intended to cover only employment for profit
or gain, appellant also cites the discussions of the
Senate, portions of which were quoted in its brief.
There is, however, nothing whatsoever in those
discussions touching upon the question of whether
the law should be limited to organizations for profit or
gain. Of course, the said discussions dwelt at length
upon the need of a law to meet the problems of
industrializing society and upon the plight of an
employer who fails to make a profit. But this is readily
explained by the fact that the majority of those to be
affected by the operation of the law are corporations
and industries which are established primarily for
profit or gain.

Appellant further argues that the Social Security Law

is a labor law and, consequently, following the rule
laid down in the case of Boy Scouts of the Philippines
vs. Araos (G.R. No. L-10091, January 29, 1958) and
other cases 1 , applies only to industry and
occupation for purposes of profit and gain. The cases
cited, however, are not in point, for the reason that the
law therein involved expressly limits its application
either to commercial, industrial or agricultural
establishments or enterprises.

Upon the other hand, the Social Security Law was

enacted pursuant to the "policy of the Republic of the
Philippines to develop, establish gradually and perfect
a social security system which shall be suitable to the
needs of the people throughout the Philippines and
shall provide protection to employees against the
hazards of disability, sickness, old age and death."
(Sec. 2, Republic Act No. 1161, as amended.) Such
enactment is a legitimate exercise of the police power.
It affords protection to labor, especially to working
women and minors, and is in full accord with the
constitutional provisions on the "promotion of social
justice to insure the well being and economic security
of all the people." Being in fact a social legislation,
compatible with the policy of the Church to ameliorate
living conditions of the working class, appellant
cannot arbitrarily delimit the extent of its provisions to
relations between capital and labor in industry and
agriculture.

CHICO-NAZARIO, J.:
There is no merit in the claim that the inclusion of
religious organizations under the coverage of the
Social Security Law violates the constitutional
prohibition against the application of public funds for
the use, benefit or support of any priest who might be
employed by appellant. The funds contributed to the
System created by the law are not public funds, but
funds belonging to the members which are merely
held in trust by the Government. At any rate,
assuming that said funds are impressed with the
character of public funds, their payment as retirement,
death or disability benefits would not constitute a
violation of the cited provision of the Constitution,
since such payment shall be made to the priest not
because he is a priest but because he is an
employee.

Neither may it be validly argued that the enforcement

of the Social Security Law impairs appellant's right to
disseminate religious information. All that is required
of appellant is to make monthly contributions to the
System for covered employees in its employ. These
contributions, contrary to appellant's contention, are
not "in the nature of taxes on employment." Together
with the contributions imposed upon the employees
and the Government, they are intended for the
protection of said employees against the hazards of
disability, sickness, old age and death in line with the
constitutional mandate to promote social justice to
insure the well-being and economic security of all the
people.

IN VIEW OF THE FOREGOING, Resolutions Nos.

572 and 767, series of 1958, of the Social Security
Commission are hereby affirmed. So ordered with
costs against appellant.

SPOUSES NEREO and NIEVA DELFINO, Petitioners,

versus ST. JAMES HOSPITAL, INC. and HON.
RONALDO B. ZAMORA, EXECUTIVE SECRETARY,
OFFICE OF THE PRESIDENT, Respondents.

Before Us is a Petition for Review on Certiorari under

Rule 45 of the Rules of Civil Procedure, assailing the
Decision[1] of the Court of Appeals in CA-G.R. SP No.
60495, dated 20 January 2003, which affirmed the
Decision[2] of the Office of the President, dated 26
March 1999, and the Resolution[3] dated 11 August
2000, reinstating the grant to respondent St. James
Hospital, Inc. of a Locational Clearance and a
Certificate of Locational Viability (CLV) for its
expansion as a four-storey, forty-bed capacity
hospital.

St. James Hospital was established in 1990 as a twostorey, ten-bed capacity hospital in Mariquita Pueblo
Subdivision in Santa Rosa, Laguna. In 1994, it
applied for a permit with the Housing and Land Use
Regulatory Board (HLURB) to expand its hospital into
a four-storey, forty-bed capacity medical institution.
Thus, on 23 November 1994, Reynaldo Pambid,
HLURB Deputized Zoning Administrator for Santa
Rosa, Laguna, issued a "temporary" clearance for the
expansion of said hospital. Said issuance was
challenged by herein petitioners spouses Nereo and
Nieva Delfino, residents of Mariquita Pueblo
Subdivision, on the ground that the proposed
expansion is in violation of the provisions of the 1981
Santa Rosa Municipal Zoning Ordinance. Thereafter,
Mr. Pambid referred the matter for evaluation by his
superiors.

On 19 April 1995, HLURB Regional Office No. IV

Director Alfredo M. Tan II issued a letter explaining
that the issuance of a "temporary" clearance is not
allowed under existing laws for it may be erroneously
construed as a permit to start construction. Director
Tan, however, opined that under existing HLURB
guidelines, CLVs may be issued to certain projects for
purposes of securing an Environment Compliance
Certification (ECC) from the Department of
Environment and Natural Resources (DENR).

On the strength of said opinion, Mr. Pambid revoked

the temporary clearance issued to St. James Hospital
and declared the expansion as not viable. The
municipal engineer of Santa Rosa, Laguna, also
suspended the hospital's building permit, while DENR
Regional Executive Director Antonio Principe issued a
cease and desist order on 16 August 1995.
Nevertheless, upon written representation of the
hospital's operator, Dr. Jose P. Santiago, that the St.
James Hospital will retain the same number of beds
maintained in the hospital, Mr. Pambid issued a CLV
dated 29 October 1995 for the hospital's expansion
project. Upon protest from the petitioners, Mr. Pambid
thereafter suspended the issued CLV.

In the interim, the Sangguniang Panlalawigan of

Laguna passed on 11 December 1995 Resolution No.
811, approving the 1991 Comprehensive Land Use
Plan (CLUP) or the Comprehensive Zoning Ordinance
of the Municipality of Santa Rosa, Laguna. Under the
new Zoning Ordinance, hospitals are now excluded
from the list of viable institutions within the residential
zone of Santa Rosa, Laguna.

Oblivious of the approval of the 1991 Zoning

Ordinance, Mr. Pambid issued on 1 February 1996 a
Certificate of Zoning Compliance or Locational
Clearance for the two-storey, ten-bed St. James
Hospital citing as basis the provisions of the 1981
Santa Rosa Municipal Zoning Ordinance. On 14
March 1996, Mr. Pambid likewise issued a CLV for a
four-storey, forty-bed hospital expansion project in
favor of St. James Hospital.

These issuances of Mr. Pambid were, however,

invalidated by HLURB Director Tan on 25 April 1996,
as it violated, according to Director Tan, the provisions
of the 1991 Zoning Ordinance. As a result thereof, Mr.
Pambid suspended the locational clearance issued to
St. James Hospital and elevated the matter to the
HLURB for disposition. According to Mr. Pambid, he
received a copy of the new Zoning Ordinance only on
14 February 1996, two weeks after issuing the
locational clearance.

On 16 May 1996, petitioners filed before the HLURB

Regional Office No. IV a letter-complaint against Mr.
Pambid for issuing the CLV in violation of both the
1981 and 1991 Zoning Ordinances, and against Dr.
Santiago for continuing with the expansion project
despite the invalidation of the CLV issued by Mr.
Pambid.

In reply to petitioners' complaint, St. James Hospital

maintained that there is a need to expand the existing
hospital to address the acute deficiency of medical
facilities in the municipality, and that the project is
permissible under the new Zoning Ordinance.
Furthermore, it pointed out that the project has been
favorably endorsed not only by the residents of
Mariquita Pueblo Subdivision, but also by the
residents of other neighboring communities. St.
James Hospital also argued that it has already
incurred millions of pesos in losses for every day of
delay in the construction.

Pursuant to HLURB Rules, the case was elevated to

the HLURB Legal Services Group (LSG), and was
assigned to Arbiter Erwin T. Daga. During the course
of the proceedings, Arbiter Daga issued the following
Orders:

1. Order dated December 6, 1996 (temporary

restraining order) enjoining St. James [Hospital] from
continuing with its expansion project;

2. Order dated December 11, 1996 ordering St.

James [Hospital] to cease and desist from proceeding
with its expansion project;

3. Order dated December 12, 1996 denying St.

James [Hospital's] motion to lift the temporary
restraining order; and

4. Order dated December 14, 1996 ordering St.

James [Hospital] to again cease and desist from
further work and construction of the hospital's
expansion building pending the resolution of the case.
[4]

On 4 March 1997, Dr. Santiago filed before the

HLURB Board of Commissioners a Motion seeking
the inhibition of Arbiter Daga for partiality, which was
subsequently denied.

On 16 July 1997, after the parties have submitted

their respective position papers and draft decisions,
Arbiter Daga rendered a Decision in favor of
petitioners, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is

hereby rendered, to wit:

1. The Locational Clearance dated February 1, 1996

issued by public respondent Reynaldo Pambid to the
expansion hospital building of private respondent St.
James Hospital, Inc. is hereby revoked and set aside;

2. Ordering private respondent to demolish its twostorey hospital expansion building within ONE
MONTH at its cost and upon failure to comply within
the period given, pay complainants P10,000.00 per
day of delay;

3. Ordering private respondent to relocate its existing

ten-bed capacity hospital within ONE YEAR and
thereafter to permanently cease and desist from
operating a hospital/clinic within a residential zone,
particularly in Mariquita Pueblo Subdivision, Dita, Sta.
Rosa, Laguna and failure to comply within the
reglementary period given, pay complainants the
amount of P10,000.00 per day of delay;

4. Ordering private respondent to pay this Board

administrative fine of P20,000.00, aside from the
other fines previously imposed;

5. Ordering private respondent to pay this Board

P5,000.00 per day beginning February 4, 1997 until
the day that it ceased or finished the construction of
its expansion building as determined by the Board's
Regional Office No. IV;

6. Ordering private respondent to pay complainants

FIVE HUNDRED THOUSAND PESOS as moral
damages, TWO MILLION PESOS exemplary
damages, TWO HUNDRED THOUSAND PESOS as
attorney's fees, and FIFTY THOUSAND PESOS cost
of litigation;

The motion of private respondent dated 24 June 1997

is hereby DENIED and its Counterclaim is hereby
dismissed for lack of merit.

Without prejudice to the filing of criminal action that

may be filed with the proper court.[5]

Aggrieved by the aforecited Decision, St. James

Hospital appealed to the HLURB Board of
Commissioners asserting that the proposed
expansion of the hospital conforms to the 1991
Zoning Ordinance. Resolving said appeal, the HLURB
effectively modified Arbiter Daga's Decision, ruling
that the existing hospital, with its original two-storey,
ten-bed capacity, is allowable under the old 1981
Zoning Ordinance and may be allowed to continue as
a medical institution within the Mariquita Pueblo
Subdivision even after the effectivity of the 1991
Zoning Ordinance. However, the HLURB opined that
the new construction of commercial buildings within
the said residential zone, such as the forty-bed
capacity expansion building of St. James Hospital, is
repugnant to Section 2, Article VI of the 1991 Santa
Rosa Municipal Zoning Ordinance and, hence, should

be disallowed. Thus, on 13 January 1998, the HLURB

Special Division rendered a Decision, to wit:

WHEREFORE, the decision of the LSG dated July 16,

1997, is hereby SET ASIDE and a new decision
entered:

1. Declaring the original two-storey, ten-bed capacity

St. James Hospital, as allowable in the Mariquita
Pueblo Subdivision, Sta. Rosa, Laguna;

2. Ordering respondent St. James to set-up an

efficient hospital waste disposal system in conformity
with the rules and regulations and standards of the
Department of Health, the Department of Environment
and Natural Resources and all other concerned
government agencies; and present a certification of
compliance to the Board from said agencies within
ninety (90) days from finality hereof; and

3. Revoking the Locational Clerance dated February

01, 1996 issued by respondent Pambid for the
expansion Hospital building of respondent St. James.
[6]

The separate Motions for Reconsideration of both

parties having been denied by the HLURB, the parties
elevated the case to the Office of the President, which
rendered a decision on 26 March 1999 in favor of St.
James Hospital. According to the Office of the
President:

Without doubt, the establishment of a ten-bed

capacity hospital, like the existing St. James Hospital,
is allowed within a residential zone. This is expressly
provided under Section 2, paragraph 1(d), Article VI of
the 1981 Sta. Rosa Municipal Zoning Ordinance, the
law existing at the time of the founding of the said
hospital. The term "hospital" was, however, deleted
from the list of conforming establishments within a

residential zone in the recently approved 1991 CLUP

or the Comprehensive Zoning Ordinance of the
Municipality of Sta. Rosa, Laguna. The question now
is whether or not the proposed expansion of St.
James Hospital, which will transform it into a fourstorey, 40-bed capacity hospital, is allowable under
the 1991 zoning ordinance. Stated differently, does
the term "institutional", as used in the said ordinance,
include hospitals and other medical establishments.

In construing words or phrases used in a law, the

general rule is that, in the absence of legislative intent
to the contrary, they should be given their plain,
ordinary, and common usage meaning (Amadora vs.
Court of Appeals, 160 SCRA 315). For, words are
presumed to have been employed by the lawmaker in
their ordinary and common use and acceptation
(People vs. Kottinger, 45 Phil. 352).

Under Section 2, Article VI of the 1991 Zoning

Ordinance, certain activities that are commercial
and institutional in character are allowed within the
residential zone. St. James maintained the term
"institutional" includes hospitals and other medical
establishments.

We agree. The word "institutional" used as it is in said

ordinance without qualification should be understood
in its plain and ordinary meaning. In law, the word
"institution" is understood to mean an establishment
or place, especially one of public character or one
affecting a community (Black's Law Dictionary,
Revised 4th edition, 1968, p. 940). It may be private in
character, designed for profit to those composing the
organization, or public and charitable in its purposes.

From the above definition, it is clear that hospitals fall

within the pale of the term "institution", a hospital
being a public establishment and that the nature of its
business is for profit. The fact that hospitals are not
categorized as dwelling unit does not inevitably mean
that it is already a non-conforming establishment
within a residential zone. As provided under aforecited

provision of the 1991 Zoning Ordinance, settlement

activities that are "institutional in character" are
allowed within the residential zone. Even the HLURB
recognized St. James as a medical institution within
the residential zone of the Municipality of Sta. Rosa,
Laguna. Be that as it may, St. James Hospital may be
allowed to continue its business within the Mariquita
Pueblo Subdivision. To limit the term "institutional" to
activities conducted within the dwelling units of the
residents would be unrealistic and would contemplate
undue restrictions to existing and lawful
establishments, like the St. James Hospital.

As a conforming establishment within the residential

zone, St. James Hospital may also be allowed to
expand its present structure. It is not disputed that the
new zoning ordinance does not expressly prohibit
expansion of existing buildings within the residential
zone. As correctly observed by St. James, it would be
an absurd requirement if such establishment, like
hospitals, would have the appearance of residential
units or that its use be incidental and subordinate to
its residential purposes. The parameters mentioned in
the said ordinance should only be applied to
residential units.

Foregoing considered, the locational clearance and

the complementary certificate of locational viability
may now be issued in favor of St. James Hospital.

WHEREFORE, the grant to St. James Hospital, Inc.,

of a Locational Clearance and a Certificate of
Locational Viability (CLV) relative to its expansion as a
4-storey, 40-bed capacity hospital dated February 1,
1996, is hereby REINSTATED. In all other respects,
the Decision of the Housing and Land Use Regulatory
Board dated January 13, 1998 is AFFIRMED in toto.
[7]

The Motion for Reconsideration of herein petitioners

having been denied in a Resolution dated 11 August
2000, petitioners appealed to the Court of Appeals. In
the assailed Decision dated 20 January 2003, the

appellate court affirmed the Decision of the Office of

the President, adopting the latter's conclusion that the
establishment/expansion of the St. James Hospital is
not a proscribed land use in the designated residential
zone known as Mariquita Pueblo Subdivision.

Section 2, Article VI of the 1981 Zoning Ordinance

states:

Petitioners' Motion for Reconsideration was

subsequently denied in a Resolution dated 14
January 2005. Hence, the instant Petition.

SECTION 2. REGULATIONS FOR URBAN CORE

ZONE. - This zone shall be devoted to various
settlement activities that are residential and
commercial, or institutional in character, subject to the
following terms and conditions:

From the facts of the case, it is undisputed that the

Mariquita Pueblo Subdivision located at Barangay
Dita, Santa Rosa, Laguna, is located within an area
classified as a residential zone under both the 1981
and 1991 Zoning Ordinances. There is also no
question that a two-storey, ten-bed capacity hospital,
such as St. James Hospital, was allowed to be
constructed within a residential zone under the 1981
Zoning Ordinance. Likewise, it is apparent that under
the 1981 Zoning Ordinance, the proposed expansion
of the St. James Hospital into a four-storey, forty-bed
capacity hospital would be disallowed as it violates
the restriction set by said Zoning Ordinance regarding
permissible activities within a residential zone, which
specifically limits any medical institution built within a
residential zone to a two-storey, ten-bed capacity
structure.

Nonetheless, with the passage of the 1991 Zoning

Ordinance, the proposed expansion of the St. James
Hospital must now be decided in light of the
provisions of the new Zoning Ordinance. Hence, the
pivotal issue now to be resolved in this Petition is
whether or not the proposed expansion of St. James
Hospital into a four-storey, forty-bed capacity medical
institution may be permitted under the 1991 Zoning
Ordinance. However, in order to settle the present
controversy, it is essential that we determine the effect
of the enactment of the 1991 Zoning Ordinance with
respect to the proposed expansion of the St. James
Hospital in view of the deletion therein of the phrase
"hospitals with not more than ten capacity" from those
enumerated as allowable uses in a residential zone
as contained in Section 2, Article VI of the 1981
Zoning Ordinance.

1. In the Residential Sector, only the following uses

shall be allowed:

a) All types of dwelling units (one-family detached,

two-family detached, one-family semi-detached, twofamily semi-detached and multi-family of not more
than 5 doors)

b) Home occupation, or the practice of one's

profession or occupation, such as tailoring,
dressmaking, banking, and like provided that:

b.1. Not more than five (5) outside assistants or

helpers shall be employed;

b.2. The use of the dwelling unit for the home

occupation shall be clearly incidental and subordinate
to its use for residential purpose by its occupants;

b.3. As much as possible there shall be no change in

the outside appearance of the building or premises;

b.4. No equipment or process shall be used in such

home occupation which creates noise, vibration,
glare, fumes, odors, or electrical interference or
outside the dwelling unit if conducted in a place other

than a single-family residence. In the case of

electrical interference, no equipment or process shall
be used which creates visual or audible interference
in any radio or television receiver or causes
fluctuation in line voltage off the premises.

h) Parks and playground

i) Barangay tanod stations

a) Elementary schools
j) Neighborhood assembly hall
b) High Schools and vocational schools

5. Multi-family dwelling with not more than five (5)

families residing

6. Residential Subdivision Projects

7. Home occupation for the practice of one's

profession or for engaging an in-house business such
as dressmaking, tailoring, baking, running a sari-sari
store and the like, provided that:

k) Recreation centers[8]
c) Chapels, churches, and other place of worship
On the other hand, Section 2, Article VI of the 1991
Zoning Ordinance reads:
d) Clinics, hospitals with not more than ten (10)
capacity

e) Drugstores

f) Backyard gardens and raising of pigs, poultry and

other animals and fowls provided:

1. That they are only for family consumption

2. No undue noise shall be created

3. No foul smell shall be emitted

4. Other sanitary requirements enforced in the

municipality

SECTION 2. REGULATIONS FOR RESIDENTIAL

ZONE. - This zone shall be devoted to various
settlements, activities that are residential, commercial,
and institutional in character and other spaces
designed for recreational pursuit and maintenance of
ecological balance of the municipality, subject to the
following terms and conditions:

7.2. Maximum of five (5) outside helpers or assistants

shall be employed;

7.3. The use of the dwelling unit for home occupation

shall be clearly incidental and subordinate to its use
for residential purpose by its occupants and for the
conduct of the home occupation, not more than
twenty-five (25%) percent of the floor area of the
dwelling unit shall be used;

The following uses shall be allowed:

1. Single detached family dwellings

2. Semi-detached family dwelling

3. Two detached family dwelling

4. Two semi-detached family dwelling

g) Boarding House

7.1. Only members of the family residing within the

premises shall be engaged in such home occupation;

7.4. As much as possible there shall be no change in

the outside appearance of the building premises;

7.5. No home occupation shall be conducted in any

accessory building;

7.6. No traffic shall be generated by such home

occupation in greater volume than would normally be
expected in a residential neighborhood and any need
for parking generated by the conduct of such home
occupation shall be met off the street and in a place
other than in a required front yard;

7.7. No equipment or process shall be used in such

home occupation which created noise, vibration,
glare, fumes, odors, or electrical interference
detectable to the normal sense off the lot, if the
occupation is conducted in a single family residence
or outside the dwelling unit if conducted in a place
other than a single-family-residence. In the case of
electrical interference, no equipment or process shall
be used which created visual or audible interference
in any radio or television receiver or causes
fluctuation in line voltage off the premises.

8. Backyard gardens and raising of pigs, poultry and

other animals and fowls provided:

8.1. That they are only for family consumption;

8.2. No undue noise shall be created;

8.3. No foul smell shall be emitted; and

8.4. Other sanitary requirements enforced in the

municipality are complied with.

Repeal of all Ordinances in Conflict Therewith," as

well as the Repealing Clause[10] of the same
Ordinance which states that "all other ordinances,
rules or regulations that are in conflict with the
provisions of this ordinance are hereby repealed,"[11]
clearly express the intent of the Sangguniang Bayan
of Santa Rosa, Laguna, to repeal any enactment that
is inconsistent with the new Ordinance. The inclusion
of this general repealing provision in the Ordinance
predicated the intended repeal under the condition
that a substantial conflict must be found in existing
and prior acts.

This is what is known as an implied repeal. Repeal by

implication proceeds on the premise that where a
statute of later date clearly reveals an intention on the
part of the legislature to abrogate a prior act on the
subject, that intention must be given effect.[12] There
are two categories of implied repeal. The first is where
the provisions in the two acts on the same subject
matter are in an irreconcilable conflict, the latter act to
the extent of the conflict constitutes an implied repeal
of the earlier one.[13] The second is if the later act
covers the whole subject of the earlier one and is
clearly intended as a substitute, it will operate to
repeal the earlier law.[14] The second category of
repeal is only possible if the revised statute was
intended to cover the whole subject matter and as a
complete and perfect system in itself. It is the rule that
a subsequent statute is deemed to repeal a prior law
if the former revises the whole subject matter of the
former statute.[15]

9. Barangay Tanod Stations.

10. Police outposts.[9]

The enactment of the 1991 Zoning Ordinance

effectively repealed the 1981 Zoning Ordinance. This
intent to repeal is manifested in the very wordings of
the 1991 Zoning Ordinance. The complete title of said
Ordinance, "An Ordinance Adopting a Comprehensive
Zoning Regulation for the Municipality of Santa Rosa,
Laguna and Providing for the Administration,
Enforcement and Amendment Thereof. And for the

In the case at bar, there is no doubt that the 1991

Zoning Ordinance not only covers the same, but
embraces the whole subject matter contained in the
1981 Zoning Ordinance, and was enacted to
substitute the latter. A perusal of the two pieces of
legislation will reveal that both Ordinances were
enacted to guide, control, and regulate the future
growth and development of the Municipality of Santa
Rosa, Laguna, in accordance with the municipality's
development plan, as well as to promote the general
welfare of the residents of the community by
regulating the location and use of all buildings and
land within the municipality. However, unlike the 1981
Zoning Ordinance, the 1991 Zoning Ordinance clearly

identifies the development plan to which it is

patterned after, specifically the development plan
adopted by the Sangguniang Bayan through
Kapasiyahan Blg. 20-91, dated 20 February 1991.
Considering that the 1981 Zoning Ordinance was not
in furtherance of the later development plan,
consequently, there was the necessity to adopt a new
statute to effect the changes contained therein,
hence, the adoption of the 1991 Zoning Ordinance.

Since it is presumed that the Sangguniang Bayan

knew of the existence of the older Ordinance, by
enacting the later law embracing the complete subject
matter of the 1981 Zoning Ordinance, it must be
concluded that the legislative body had intended to
repeal the former Ordinance. With respect to the
omission of the phrase "hospitals with not more than
ten capacity" from the 1991 Zoning Ordinance, we
conclude that the Sangguniang Bayan did intend to
remove such building use from those allowed within a
residential zone. As ruled by this Court, when both
intent and scope clearly evince the idea of a repeal,
then all parts and provisions of the prior act that are
omitted from the revised act are deemed repealed.
[16]

Likewise, it must be stressed at this juncture that a

comprehensive scrutiny of both Ordinances will
disclose that the uses formerly allowed within a
residential zone under the 1981 Zoning Ordinance
such as schools, religious facilities and places of
worship, and clinics and hospitals have now been
transferred to the institutional zone under the 1991
Zoning Ordinance.[17] This clearly demonstrates the
intention of the Sangguniang Bayan to delimit the
allowable uses in the residential zone only to those
expressly enumerated under Section 2, Article VI of
the 1991 Zoning Ordinance, which no longer includes
hospitals.

It is lamentable that both the Office of the President

and the Court of Appeals gave undue emphasis to the
word "institutional" as mentioned in Section 2, Article
VI of the 1991 Zoning Ordinance and even went
through great lengths to define said term in order to

include hospitals under the ambit of said provision.

However, they neglected the fact that under Section
4, Article VI of said Ordinance[18], there is now
another zone, separate and distinct from a residential
zone, which is classified as "institutional", wherein
health facilities, such as hospitals, are expressly
enumerated among those structures allowed within
said zone.

Moreover, both the Office of the President and the

appellate court failed to consider that any meaning or
interpretation to be given to the term "institutional" as
used in Section 2, Article VI must be correspondingly
limited by the explicit enumeration of allowable uses
contained in the same section. Whatever meaning the
legislative body had intended in employing the word
"institutional" must be discerned in light of the
restrictive enumeration in the said article. Under the
legal maxim expressio unius est exclusio alterius, the
express mention of one thing in a law, means the
exclusion of others not expressly mentioned.[19]
Thus, in interpreting the whole of Section 2, Article VI,
it must be understood that in expressly enumerating
the allowable uses within a residential zone, those not
included in the enumeration are deemed excluded.
Hence, since hospitals, among other things, are not
among those enumerated as allowable uses within
the residential zone, the only inference to be deduced
from said exclusion is that said hospitals have been
deliberately eliminated from those structures
permitted to be constructed within a residential area in
Santa Rosa, Laguna.

Furthermore, according to the rule of casus

omissus in statutory construction, a thing omitted
must be considered to have been omitted
intentionally. Therefore, with the omission of the
phrase "hospital with not more than ten capacity" in
the new Zoning Ordinance, and the corresponding
transfer of said allowable usage to another zone
classification, the only logical conclusion is that the
legislative body had intended that said use be
removed from those allowed within a residential zone.
Thus, the construction of medical institutions, such as
St. James Hospital, within a residential zone is now
prohibited under the 1991 Zoning Ordinance.

Be that as it may, even if the St. James Hospital is

now considered a non-conforming structure under the
1991 Zoning Ordinance as it is located in a residential
zone where such use is no longer allowed, said
structure cannot now be considered illegal. This is
because the St. James Hospital was constructed
during the effectivity of the 1981 Zoning Ordinance,
and, as earlier stated, under the said Ordinance, the
construction of a two-storey, ten-bed capacity hospital
within a residential zone is explicitly allowed.

Having concluded that the St. James Hospital is now

considered a non-conforming structure under the
1991 Zoning Ordinance, we now come to the issue of
the legality of the proposed expansion of said hospital
into a four-storey, forty-bed medical institution. We
shall decide this said issue in accordance with the
provisions of the 1991 Zoning Ordinance relating to
non-conforming buildings, the applicable law at the
time of the proposal. As stated in Section 1 of Article
X of the 1991 Zoning Ordinance:

Section 1. EXISTING NON-CONFORMING USES

AND BUILDINGS. The lawful uses of any building,
structure or land at the point of adoption or
amendment of this Ordinance may be continued,
although such does not conform with the provisions of
this Ordinance.

1. That no non-conforming use shall [be] enlarge[d] or

increased or exten[ded] to occupy a greater area or
land that has already been occupied by such use at
the time of the adoption of this Ordinance, or moved
in whole or in part to any other portion of the lot parcel
of land where such [non]-conforming use exist at the
time of the adoption of this Ordinance.[20] (Emphasis
ours.)

It is clear from the abovequoted provision of the 1991

Zoning Ordinance that the expansion of a nonconforming building is prohibited. Hence, we
accordingly resolve that the expansion of the St.

James Hospital into a four-storey, forty-bed capacity

medical institution within the Mariquita Pueblo
Subdivision is prohibited under the provisions of the
1991 Zoning Ordinance.

WHEREFORE, premises considered, the instant

Petition is hereby GRANTED. The Decision of the
Court of Appeals in CA-G.R. SP No. 60495, dated 20
January 2003, is hereby REVERSED and SET
ASIDE and a new Decision entered:

1. Sustaining that the original two-storey, ten-bed

capacity St. James Hospital is allowable within the
Mariquita Pueblo Subdivision, Sta. Rosa, Laguna as
long as it shall comply with the provisions on existing
non-conforming buildings under the 1991 Zoning
Ordinance, as well as the rules and regulations and
standards of the Department of Health, Department of
Environment and Natural Resources and all other
concerned government agencies; and

2. Prohibiting the proposed expansion of the St.

James Hospital into a four-storey, forty-bed capacity
hospital, the proposed expansion being illegal under
the 1991 Zoning Ordinance.

MAPALAD AISPORNA, petitioner, vs. THE COURT

OF APPEALS and THE PEOPLE OF THE
PHILIPPINES, respondents.
DE CASTRO, J.:
In this petition for certiorari, petitioner-accused
Aisporna seeks the reversal of the decision dated
August 14, 1974 [1] in CA-G.R. No. 13243-CR entitled
"People of the Philippines, plaintiff-appellee, vs.
Mapalad Aisporna, defendant-appellant" of
respondent Court of Appeals affirming the judgment of
the City Court of Cabanatuan [2] rendered on August
2, 1971 which found the petitioner guilty for having
violated Section 189 of the Insurance Act (Act No.
2427, as amended) and sentenced her to pay a fine
of P500.00 with subsidiary imprisonment in case of

insolvency, and to pay the costs.

Petitioner Aisporna was charged in the City Court of
Cabanatuan for violation of Section 189 of the
Insurance Act on November 21, 1970 in an
information [3] which reads as follows:

"That on or before the 21st day of June, 1969, in the

City of Cabanatuan, Republic of the Philippines, and
within the jurisdiction of this Honorable Court, the
above-named accused, did then and there, willfully,
unlawfully and feloniously act as agent in the
solicitation or procurement of an application for
insurance by soliciting therefor the application of one
Eugenio S. Isidro, for and in behalf of Perla Compania
de Seguros, Inc., a duly organized insurance
company, registered under the laws of the Republic of
the Philippines, resulting in the issuance of a Broad
Personal Accident Policy No. 28PI-RSA 0001 in the
amount not exceeding FIVE THOUSAND PESOS
(P5,000.00) dated June 21, 1969, without said
accused having first secured a certificate of authority
to act as such agent from the office of the Insurance
Commissioner, Republic of the Philippines.

"CONTRARY TO LAW."
The facts, [4] as found by the respondent Court of
Appeals are quoted hereunder:

"IT RESULTING: That there is no debate that since 7

March, 1969 and as of 21 June, 1969, appellant\'s
husband, Rodolfo S. Aisporna was duly licensed by
Insurance Commission as agent to Perla Compania
de Seguros, with license to expire on 30 June, 1970,
Exh. C; on that date, at Cabanatuan City, Personal
Accident Policy, Exh. D was issued by Perla thru its
authorized representative, Rodolfo S. Aisporna, for a
period of twelve (12) months with beneficiary as Ana
M. Isidro, and for P5,000.00; apparently, insured died
by violence during lifetime of policy, and for reasons
not explained in record, present information was filed
by Fiscal, with assistance of private prosecutor,
charging wife of Rodolfo with violation of Sec. 189 of

Insurance Law for having, wilfully, unlawfully, and

feloniously acted, 'as agent in the solicitation for
insurance by soliciting therefore the application of one
Eugenio S. Isidro for and in behalf of Perla Compaa
de Seguros, . . . without said accused having first
secured a certificate of authority to act as such agent
from the office of the Insurance Commission,
Republic of the Philippines.' and in the trial, People
presented evidence that was hardly disputed, that
aforementioned policy was issued with active
participation of appellant wife of Rodolfo, against
which appellant in her defense sought to show that
being the wife of true agent, Rodolfo, she naturally
helped him in his work, as clerk, and that policy was
merely a renewal and was issued because Isidro had
called by telephone to renew, and at that time, her
husband, Rodolfo, was absent and so she left a note
on top of her husband's desk to renew . . ."

Consequently, the trial court found herein petitioner

guilty as charged. On appeal, the trial court\'s decision
was affirmed by the respondent appellate court
finding the petitioner guilty of a violation of the first
paragraph of Section 189 of the Insurance Act.
Hence, this present recourse was filed on October 22,
1974. [5]
In its resolution of October 28, 1974, [6] this Court
resolved, without giving due course to this instant
petition, to require the respondent to comment on the
aforesaid petition. In the comment [7] filed on
December 20, 1974, the respondent, represented by
the Office of the Solicitor General, submitted that
petitioner may not be considered as having violated
Section 189 of the Insurance Act. [8] On April 3, 1975,
petitioner submitted his Brief [9] while the Solicitor
General, on behalf of the respondent, filed a
manifestation [10] in lieu of a Brief on May 3, 1975
reiterating his stand that the petitioner has not
violated Section 189 of the Insurance Act.
In seeking reversal of the judgment of conviction,
petitioner assigns the following errors [11] allegedly
committed by the appellate court:

"1. THE RESPONDENT COURT OF APPEALS

ERRED IN FINDING THAT RECEIPT OF

COMPENSATION IS NOT AN ESSENTIAL ELEMENT

OF THE CRIME DEFINED BY THE FIRST
PARAGRAPH OF SECTION 189 OF THE
INSURANCE ACT.
"2. THE RESPONDENT COURT OF APPEALS
ERRED IN GIVING DUE WEIGHT TO EXHIBITS F, F1, TO F-17, INCLUSIVE SUFFICIENT TO
ESTABLISH PETITIONER'S GUILT BEYOND
REASONABLE DOUBT.
"3. THE RESPONDENT COURT OF APPEALS
ERRED IN NOT ACQUITTING HEREIN
PETITIONER"

We find the petition meritorious.

The main issue raised is whether or not a person can
be convicted of having violated the first paragraph of
Section 189 of the Insurance Act without reference to
the second paragraph of the same section. In other
words, it is necessary to determine whether or not the
agent mentioned in the first paragraph of the
aforesaid section is governed by the definition of an
insurance agent found on its second paragraph.
The pertinent provision of Section 189 of the
Insurance Act reads as follows:

"No insurance company doing business within the

Philippine Islands, nor any agent thereof, shall pay
any commission or other compensation to any person
for services in obtaining new insurance, unless such
person shall have first procured from the Insurance
Commissioner a certificate of authority to act as an
agent of such company as hereinafter provided. No
person shall act as agent, subagent, or broker in the
solicitation of procurement of applications for
insurance, or receive for services in obtaining new
insurance, any commission or other compensation
from any insurance company doing business in the
Philippine Islands, or agent thereof, without first
procuring a certificate of authority so to act from the
Insurance Commissioner, which must be renewed
annually on the first day of January, or within six
months thereafter. Such certificate shall be issued by
the Insurance Commissioner only upon the written

application of persons desiring such authority, such

application being approved and countersigned by the
company such person desires to represent, and shall
be upon a form approved by the Insurance
Commissioner, giving such information as he may
require. The Insurance Commissioner shall have the
right to refuse to issue or renew and to revoke any
such certificate in his discretion. No such certificate
shall be valid, however, in any event after the first day
of July of the year following the issuing of such
certificate. Renewal certificates may be issued upon
the application of the company.
"Any person who for compensation solicits or obtains
insurance on behalf of any insurance company, or
transmits for a person other than himself an
application for a policy of insurance to or from such
company or offers or assumes to act in the
negotiating of such insurance, shall be an insurance
agent within the intent of this section, and shall
thereby become liable to all the duties, requirements,
liabilities, and penalties to which an agent of such
company is subject.
"Any person or company violating the provisions of
this section shall be fined in the sum of five hundred
pesos. On the conviction of any person acting as
agent, subagent, or broker, of the commission of any
offense connected with the business of insurance, the
Insurance Commissioner shall immediately revoke the
certificate of authority issued to him and no such
certificate shall thereafter be issued to such convicted
person."

A careful perusal of the above-quoted provision

shows that the first paragraph thereof prohibits a
person from acting as agent, subagent or broker in
the solicitation or procurement of applications for
insurance without first procuring a certificate of
authority so to act from the Insurance Commissioner,
while its second paragraph defines who is an
insurance agent within the intent of this section and,
finally, the third paragraph thereof prescribes the
penalty to be imposed for its violation.
The respondent appellate court ruled that the
petitioner is prosecuted not under the second

paragraph of Section 189 of the aforesaid Act but

under its first paragraph. Thus -

". . . it can no longer be denied that it was appellant's

most active endeavors that resulted in issuance of
policy to Isidro, she was there and then acting as
agent, and received the pay therefor - her defense
that she was only acting as helper of her husband can
no longer be sustained, neither her point that she
received no compensation for issuance of the policy
because 'any person who for compensation solicits or
obtains insurance on behalf of any insurance
company or transmits for a person other than himself
an application for a policy of insurance to or from such
company or offers or assumes to act in the
negotiating of such insurance, shall be an insurance
agent within the intent of this section, and shall
thereby become liable to all the duties, requirements,
liabilities, and penalties, to which an agent of such
company is subject.' paragraph 2, Sec. 189,
Insurance Law, now it is true that information does not
even allege that she had obtained the insurance, 'for
compensation' which is the gist of the offense in
Section 189 of the Insurance Law in its 2nd
paragraph, but what appellant apparently overlooks is
that she is prosecuted not under the 2nd but under
the 1st paragraph of Sec. 189 wherein it is provided
that,
'No person shall act as agent, subagent, or broker, in
the solicitation or procurement of applications for
insurance, or receive for services in obtaining new
insurance any commission or other compensation
from any insurance company doing business in the
Philippine Island, or agent thereof, without first
procuring a certificate of authority to act from the
insurance commissioner, which must be renewed
annually on the first day of January, or within six
months thereafter.' therefore, there was no technical
defect in the wording of the charge, so that Errors 2
and 4 must be overruled." [12]
From the above-mentioned ruling, the respondent
appellate court seems to imply that the definition of an
insurance agent under the second paragraph of
Section 189 is not applicable to the insurance agent
mentioned in the first paragraph. Parenthetically, the

respondent court concludes that under the second

paragraph of Section 189, a person is an insurance
agent if he solicits and obtains an insurance for
compensation, but, in its first paragraph, there is no
necessity that a person solicits an insurance for
compensation in order to be called an insurance
agent.
We find this to be a reversible error. As correctly
pointed out by the Solicitor General, the definition of
an insurance agent as found in the second paragraph
of Section 189 is intended to define the word "agent"
mentioned in the first and second paragraphs of the
aforesaid section. More significantly, in its second
paragraph, it is explicitly provided that the definition of
an insurance agent is within the intent of Section 189.
Hence -

"Any person who for compensation . . . shall be an

insurance agent within the intent of this section, . . ."

Patently, the definition of an insurance agent under

the second paragraph holds true with respect to the
agent mentioned in the other two paragraphs of the
said section. The second paragraph of Section 189 is
a definition and interpretative clause intended to
qualify the term "agent" mentioned in both the first
and third paragraphs of the aforesaid section.
Applying the definition of an insurance agent in the
second paragraph to the agent mentioned in the first
and second paragraphs would give harmony to the
aforesaid three paragraphs of Section 189. Legislative
intent must be ascertained from a consideration of the
statute as a whole. The particular words, clauses and
phrases should not be studied as detached and
isolated expressions, but the whole and every part of
the statute must be considered in fixing the meaning
of any of its parts and in order to produce harmonious
whole. [13] A statute must be so construed as to
harmonize and give effect to all its provisions
whenever possible. [14] The meaning of the law, it
must be borne in mind, is not to be extracted from any
single part, portion or section or from isolated words
and phrases, clauses or sentences but from a general
consideration or view of the act as a whole. [15] Every
part of the statute must be interpreted with reference

to the context. This means that every part of the

statute must be considered together with the other
parts, and kept subservient to the general intent of the
whole enactment, not separately and independently.
[16] More importantly, the doctrine of associated
words (Noscitur a Sociis) provides that where a
particular word or phrase in a statement is ambiguous
in itself or is equally susceptible of various meanings,
its true meaning may be made clear and specific by
considering the company in which it is found or with
which it is associated. [17]
Considering that the definition of an insurance agent
as found in the second paragraph is also applicable to
the agent mentioned in the first paragraph, to receive
a compensation by the agent is an essential element
for a violation of the first paragraph of the aforesaid
section. The appellate court has established
ultimately that the petitioner-accused did not receive
any compensation for the issuance of the insurance
policy of Eugenio Isidro. Nevertheless, the accused
was convicted by the appellate court for, according to
the latter, the receipt of compensation for issuing an
insurance policy is not an essential element for a
violation of the first paragraph of Section 189 of the
Insurance Act.
We rule otherwise. Under the Texas Penal Code
1911, Article 689, making it a misdemeanor for any
person for direct or indirect compensation to solicit
insurance without a certificate of authority to act as an
insurance agent, an information, failing to allege that
the solicitor was to receive compensation either
directly or indirectly, charges no offense. [18] In the
case of Bolen vs. Stake, [19] the provision of Section
3750, Snyder's Compiled Laws of Oklahoma 1909 is
intended to penalize persons only who acted as
insurance solicitors without license, and while acting
in such capacity negotiated and concluded insurance
contracts for compensation. It must be noted that the
information, in the case at bar, does not allege that
the negotiation of an insurance contract by the
accused with Eugenio Isidro was one for
compensation. This allegation is essential, and having
been omitted, a conviction of the accused could not
be sustained. It is well-settled in our jurisprudence
that to warrant conviction, every element of the crime
must be alleged and proved. [20]
After going over the records of this case, We are fully

convinced, as the Solicitor General maintains, that

accused did not violate Section 189 of the Insurance
Act.
WHEREFORE, the judgment appealed from is
reversed and the accused is acquitted of the crime
charged, with costs de oficio.

TWIN ACE HOLDINGS CORPORATION, Petitioner,

versus RUFINA AND COMPANY, Respondent.
CHICO-NAZARIO, J.:

From the records, it appears that on 3 December

1991, Twin Ace Holdings Corporation (Twin Ace) filed
a Complaint [1] for recovery of possession of personal
property, permanent injunction and damages with
prayer for the issuance of a writ of replevin, temporary
restraining order and a writ of preliminary injunction
against Rufina and Company (Rufina).

As alleged in the complaint, Twin Ace is a private

domestic corporation engaged in the manufacture of
rhum, wines and liquor under the name and style
"Tanduay Distillers." It has registered its mark of
ownership of its bottles with the Bureau of Patent,
Trademarks and Technology Transfer under Republic
Act No. 623. In the conduct of its business, it sells its
products to the public excluding the bottles. It makes
substantial investments in brand new bottles which it
buys from glass factories and which they use for
about five times in order to recover the cost of
acquisition. Twin Ace thus retrieves its used empty
bottles, washes and uses them over and over again
as containers for its products.

On the other hand, Rufina is engaged in the

production, extraction, fermentation and manufacture
of patis and other food seasonings and is engaged in
the buying and selling of all kinds of foods,
merchandise and products for domestic use or for
export to other countries. In producing patis and other
food seasonings, Rufina uses as containers bottles
owned by Twin Ace without any authority or

permission from the latter. In the process, Rufina is

unduly benefited from the use of the bottles.

Upon the posting of Twin Ace of the required bond,

the Regional Trial Court (RTC) of Manila, Branch 26,
issued an Order dated 5 February 1992 granting the
application for the issuance of a writ of replevin. [2]
Upon the implementation of the said writ, Deputy
Sheriff Amado P. Sevilla was able to seize a total of
26,241 empty bottles marked "TANDUAY
DISTILLERY, INC.," [3] at the address of Rufina.

In its Answer with counter-application for a Writ of

Preliminary Injunction, Rufina claimed that the marked
bottles it used as containers for its products were
purchased from junk dealers; hence, it became the
owner thereof.

After hearing, the trial court rendered its decision

dated 20 May 1995 the dispositive portion of which
states:

WHEREFORE, PREMISES CONSIDERED, judgment

is hereby rendered in favor of the defendant as
follows:

a) dismissing the complaint for lack of merit;

b) dissolving the order of replevin;

c) ordering the plaintiff to return 26,241 bottles to the

defendant in the place where the bottles were seized
at the expense of the plaintiff within 48 hours from
receipt hereof;

d) ordering the plaintiff to pay the defendant the sum

of P100,000.00 as actual damages sustained by the
latter to be taken from the replevin bond;

Court of Appeals dated 29 September 2003. [8]

Hence, this Petition for Review.

For resolution are the following issues:

e) ordering the plaintiff to pay the defendant the sum
of P1,000,000.00 as damages for besmirched
reputation;

f) ordering the plaintiff to pay the sum of P100,00.00

as nominal damages;

g) ordering the plaintiff to pay the defendant the sum

of P50,000.00 as attorney's fee; and

I.

THE HONORABLE COURT OF APPEALS ERRED IN

HOLDING THAT RESPONDENT RUFINA IS NOT
COVERED WITHIN THE EXEMPTION PROVIDED
BY SECTION 6 OF R.A. 623, AS AMENDED BY R.A.
5700.

II.
h) ordering the plaintiff to pay the cost of the suit. [4]

Twin Ace appealed to the Court of Appeals. On 27

September 2002, the appellate court rendered its
decision[5] modifying the decision of the trial court as
follows:

WHEREFORE, in view of all the foregoing, the

appealed decision dated May 20, 1995 of Branch 26,
Regional Trial Court, Manila, in Civil Case No. 9259862 is MODIFIED, in that the award of damages,
except nominal damages, and attorney's fees is
DELETED for lack of legal and factual basis. The
award of nominal damages is reduced to P50,000.00.
In all other respects, the assailed decision is
AFFIRMED.

Costs against plaintiff-appellant. [6]

A motion for reconsideration dated 19 October 2002

[7] filed by Twin Ace was denied in a resolution of the

THE HONORABLE COURT OF APPEALS ERRED IN

AWARDING NOMINAL DAMAGES AGAINST
PETITIONER TWIN ACE CONSIDERING THAT IT
WAS THE ONE WHOSE RIGHTS HAVE BEEN
VIOLATED OR INVADED BY RESPONDENT
RUFINA.

Sec. 2. It shall be unlawful for any person, without the

written consent of the manufacturer, bottler, or seller,
who has successfully registered the marks of
ownership in accordance with the provisions of the
next preceding section, to fill such bottles, boxes,
kegs, barrels, steel cylinders, tanks, flasks,
accumulators, or other similar containers so marked
or stamped, for the purpose of sale, or to sell, dispose
of, buy or traffic in, or wantonly destroy the same,
whether filled or not to use the same for drinking
vessels or glasses or drain pipes, foundation pipes,
for any other purpose than that registered by the
manufacturer, bottler or seller. Any violation of this
section shall be punished by a fine of not more than
one thousand pesos or imprisonment of not more
than one year or both.

Sec. 3. The use by any person other than the

registered manufacturer, bottler or seller, without
written permission of the latter of any such bottle,
cask, barrel, keg, box, steel cylinders, tanks, flasks,
accumulators, or other similar containers, or the
possession thereof without written permission of the
manufacturer, by any junk dealer or dealer in casks,
barrels, kegs, boxes, steel cylinders, tanks, flasks,
accumulators, or other similar containers, the same
being duly marked or stamped and registered as
herein provided, shall give rise to a prima
facie presumption that such use or possession is
unlawful. [12]

III.

THE HONORABLE COURT OF APPEALS ERRED IN

NOT FINDING THAT PETITIONER AS OWNER OF
THE SUBJECT BOTTLES IS ENTITLED TO
COMPENSATION FOR ITS UNAUTHORIZED USE
BY RESPONDENT RUFINA. [9]

Pertinent provision of Republic Act No. 623, [10] as

amended by Republic Act No. 5700, [11] is quoted
hereunder for clarity:

Sec. 4. The criminal action provided in this Act shall in

no way affect any civil action to which the registered
manufacturer, bottler, or seller, may be entitled by law
or contract.

Sec. 5. No action shall be brought under this Act

against any person to whom the registered
manufacturer, bottler, or seller, has transferred by way
of sale, any of the containers herein referred to, but
the sale of the beverage contained in the said
containers shall not include the sale of the containers
unless specifically so provided.

Sec. 6. The provisions of this Act shall not be

interpreted as prohibiting the use of bottles as
containers for "sisi," "bagoong," "patis," and similar
native products. [13]

In sum, Twin Ace asserts that the provision under the

law affords protection only to small scale
producers/manufacturers who do not have the
capacity to buy new bottles for use in their products
and cannot extend to Rufina which had unequivocably
admitted in its Answer [14] and affirmed in the
decision of the trial court that it is engaged, on a large
scale basis, in the production and manufacture of
food seasonings.

For its part, Rufina counters that the law did not really
distinguish between large scale manufacturers and
small time producers.

The petition is not meritorious.

The earlier case of Twin Ace Holdings Corporation v.

Court of Appeals, [15] applies to the present petition.
In said case, Twin Ace filed a Complaint for Replevin
against Lorenzana Food Corporation to recover three
hundred eighty thousand bottles allegedly owned by
Twin Ace but detained and used by Lorenzana Food
Corporation as containers for its native products
without its express permission, in violation of the law.
In that case, this Court acknowledged that the
exemption under the law is unqualified as the law did
not make a distinction that it only applies to small
scale industries but not to large scale manufacturers.
Thus, even if the court in said case held that the
exemption is primarily meant to give protection to
small scale industries, it did not qualify that the
protection therein was intended and limited only to
such. The Court held:

Petitioner itself alleges that respondent LORENZANA

uses the subject 350 ml., 375 ml. and 750 ml. bottles
as containers for processed foods and other related

products such as patis, toyo, bagoong, vinegar and

other food seasonings. Hence, Sec. 6 squarely
applies in private respondent's favor. Obviously, the
contention of TWIN ACE that the exemption refers
only to criminal liability but not to civil liability is
without merit. It is inconceivable that an act
specifically allowed by law, in other words legal, can
be the subject of injunctive relief and damages.
Besides, the interpretation offered by petitioner
defeats the very purpose for which the exemption was
provided.

Republic Act No. 623, "An Act to Regulate the Use of

Duly Stamped or Marked Bottles, Boxes, Casks,
Kegs, Barrels and Other Similar Containers," as
amended by RA No. 5700, was meant to protect the
intellectual property rights of the registrants of the
containers and prevent unfair trade practices and
fraud on the public. However, the exemption granted
in Sec. 6 thereof was deemed extremely necessary to
provide assistance and incentive to the backyard,
cottage and small-scale manufacturers of indigenous
native products such as patis, sisi and toyo who do
not have the capital to buy brand new bottles as
containers nor afford to pass the added cost to the
majority of poor Filipinos who use the products as
their daily condiments or viands. If the contention of
petitioner is accepted, i.e., to construe the exemption
as to apply to criminal liability only but not to civil
liability, the very purpose for which the exemption was
granted will be defeated. None of the small-scale
manufacturers of the indigenous native products
protected would possibly wish to use the registered
bottles if they are vulnerable to civil suits. The effect is
a virtual elimination of the clear and unqualified
exemption embodied in Sec. 6. It is worthy to note
that House Bill No. 20585 was completely rejected
because it sought to expressly and directly eliminate
that which petitioner indirectly proposes to do with this
petition. [16] (Emphasis supplied.)

It is worth noting that Lorenzana Food Corporation

which prevailed in the case filed by Twin Ace against it
is certainly not a small scale industry. Just like Rufina,
Lorenzana Food Corporation also manufactures and
exports processed foods and other related
products, e.g., patis, toyo, bagoong, vinegar and other
food seasonings.

It is a basic rule in statutory construction that when

the law is clear and free from any doubt or ambiguity,
there is no room for construction or interpretation. As
has been our consistent ruling, where the law speaks
in clear and categorical language, there is no
occasion for interpretation; there is only room for
application. [17]

Notably, attempts to amend the protection afforded by

Section 6 of Republic Act No. 623, by giving
protection only to small scale manufacturers or those
with a capitalization of five hundred thousand pesos
or less (P500,000.00), through then House Bill No.
20585, [18] and subsequently through House Bill No.
30400, [19] proved unsuccessful as the amendment
proposed in both Bills was never passed.

In view of these considerations, we find and so hold

that the exemption contained in Section 6 of Rep. Act
No. 623 applies to all manufacturers of sisi, bagoong,
patis and similar native products without distinction or
qualification as to whether they are small, medium or
large scale.

On the issue of nominal damages, Article 2222 of the

Civil Code [20] states that the court may award
nominal damages in every obligation arising from any
source enumerated in Article 1157, [21] or in every
other case where any property right has been
invaded. [22] Nominal damages are given in order
that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying
the plaintiff for any loss suffered by him. [23] In
another case, [24] this Court held that when plaintiff

suffers some species of injury not enough to warrant

an award of actual damages, the court may award
nominal damages. Considering the foregoing, we find
that the award of nominal damages to Rufina in the
amount of fifty thousand pesos (P50,000.00) is
reasonable, warranted and justified.

As to the third issue, Rule 60, Section 2(a), of the

Revised Rules of Court mandates that a party praying
for the recovery of possession of personal property
must show by his own affidavit or that of some other
person who personally knows the facts that he is the
owner of the property claimed, particularly describing
it, or is entitled to the possession thereof. [25] It must
be borne in mind that replevin is a possessory action
the gist of which focuses on the right of possession
that, in turn, is dependent on a legal basis that, not
infrequently, looks to the ownership of the object
sought to be replevied. [26] Wrongful detention by the
defendant of the properties sought in an action for
replevin must be satisfactorily established. If only a
mechanistic averment thereof is offered, the writ
should not be issued. [27] In this case, Twin Ace has
not shown that it is entitled to the possession of the
bottles in question and consequently there is thus no
basis for the demand by it of due compensation. As
stated by the court in the earlier case of Twin Ace
Holdings Corporation v. Court of Appeals [28]:

Petitioner cannot seek refuge in Sec. 5 of RA No. 623

to support its claim of continuing ownership over the
subject bottles. In United States v. Manuel [7 Phil. 221
(1906)] we held that since the purchaser at his
discretion could either retain or return the bottles, the
transaction must be regarded as a sale of the bottles
when the purchaser actually exercised that discretion
and decided not to return them to the vendor. We also
take judicial notice of the standard practice today that
the cost of the container is included in the selling price
of the product such that the buyer of liquor or any
such product from any store is not required to return
the bottle nor is the liquor placed in a plastic container
that possession of the bottle is retained by the store.

WHEREFORE, premises considered, the instant

petition is DENIED for lack of merit and the decision
dated 27 September 2002 and resolution dated 29
September 2003, in CA-G.R. CV No. 52852, both of
the Court of Appeals are Affirmed.

MARCELA LLENARES, plaintiff-appellant, vs. FELISA

VALDEAVELLA and ALFONSO ZORETA, defendantsappellees.
OSTRAND, J .:
This is an action in ejectment, the plaintiff alleging that
she is the owner of two parcels of land in the barrio of
Wacas, municipality of Tayabas, having acquired said
parcels by purchase at a sheriff's sale under writ of
execution issued by the justice of the peace of the
municipality of Tayabas in a case in which she was
the plaintiff and the defendant Felisa Valdeavella and
her now deceased husband Zacarias Zabella were
the defendants.
The defendants Felisa Valdeavella and Alfonso Zoreta
in their answer allege that Felisa Valdeavella never
has been in possession of the parcels as owner: that
she and her husband some four years prior to the
filing of the answer (October 22, 1918) were in
possession of the land as tenants of Irineo
Valdeavella, the true owner of the land; and that the
defendant Alfonso Zoreta has been in possession
under an agreement made with Zacarias Zabella
whereby Zoreta was to have the use and benefit of
the land as security for a debt of P100. Subsequent to
the filing of this answer Irineo Valdeavella was
impleaded. In his answer he alleges that he is the
owner of the land and has been in possession thereof
for over fifteen years.
The court below rendered judgment in favor of the
defendants holding that Irineo Valdeavella was the
owner of the parcels of land in question and that,
moreover, the sheriff's sale under which the plaintiff
claims title to the land was irregular and void
inasmuch as there had not been a sufficient levy on
the lands, nor a sufficient notice of the sale. From this
judgment the plaintiff appeals to this court.
In her first assignment of error the appellant maintains

that the court erred in holding that Irineo Valdeavella

was the owner of the land at the time of the attempted
levy of the execution. In our opinion, this assignment
of error is well taken. The testimony in support of the
claim of Irineo Valdeavella is so contradictory and
inconsistent that no reliance whatever can be thereon.
Under the second assignment of error the appellant
argues that the sale, under execution by virtue of
which she claims ownership of the land, was valid.
This assignment cannot be sustained.
The levy of an execution is defined as the acts by
which an officer sets apart r appropriates for the
purpose of satisfying the command of the writ, a part
or the whole of a judgment debtor's property. In the
absence of statutory provisions no special formalities
are required for a valid levy, and in regard to real
property it has usually been held sufficient if the
seizure of the property is made known to the
occupants thereof and endorsed on the writ. But it is
otherwise where, as in this jurisdiction, the matter is
regulated by statute; there a substantial compliance
with the statute is indispensable.
The statutory provisions to this case are found in
section 450 and 429 of the Code of Civil Procedure.
Section 450 states that property "may be attached on
execution in like manner as upon writs of attachment."
This provision while permissive in form must,
nevertheless, be regarded as mandatory. No other
method of effecting the levy is prescribed and it is an
old rule that powers through the exercise of which a
person may be divested of his property are always
strictly construed and that the provisions regulating
the procedure in their exercise are mandatory as to
the essence of the thing to be done. (Lewis'
Sutherland on Statutory Construction, 2d., ed., 627.)
Section 429 of the Code reads as follows:

"Real property, standing upon the records in the name

of the defendant or not appearing at all upon the
record, shall be attached by filing with the registrar of
the titles of the land for the province in which the land
is situated, a copy of the order of attachment, together
with a description of the property attached, and a
notice that it is attached, and by leaving a similar copy
of the order, description and notice with an occupant
of the property, if there is one.
"Real property or an interest therein, belonging to the
defendant and held by any other person, or standing
on the records in the name of any other person, shall
be attached by filing with the registrar of the land titles
in the province in which the land is situated, a copy of
the order of attachment, together with a description of
the property, and a notice that such real property and
any interest of the defendant therein, held by or
standing in the name of such person (naming him) are
attached; and by leaving with the occupant, if any,
and with such other person, or his agent, if known and
within the province, a copy of the order, description
and notice. The registrar must index attachments filed
under the first paragraph of this section, in the names,
both of the plaintiff and of the defendant, and must
index attachments filed under the second paragraph
of this section, in the names of the plaintiff and of the
defendant and of the person by whom the property is
held or in whose name it stands on the records."
In the present case it is admitted by the plaintiff that
notice of attachment for the execution was not filed
with the registrar of deeds and that there was no copy
thereof served on the defendants. It is therefore clear
that the attempted levy was not made in accordance
with the provisions of the statute, and, according to
the great weight of authority, a proper levy is
indispensable to a valid sale on execution. A sale
unless preceded by a valid levy, is void, and the
purchaser acquires no title. (Leath vs. Deweese, 162
Ky., 227; Jarboe vs. Hall, 37 Md., 345.)
There having been no sufficient levy of the execution
in question, the plaintiff took no title to the property
sold thereunder and the present action can therefore
not be maintained.

The judgment appealed from is affirmed, without

costs. So ordered.

JOSE ANTONIO MAPA, petitioner, vs. HON. JOKER

ARROYO, in his Capacity as Executive Secretary,
and LABRADOR DEVELOPMENT CORPORATION,
respondents.
REGALADO, J.:
We are called upon once again, in this special civil
action for certiorari, for a pronouncement as to
whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction
on the part of the executive branch of Government,
particularly in the adjudication of a controversy
originally commenced in one of its regulatory
agencies.
Petitioner herein seeks the reversal of the decision of
the Office of the President, rendered by the Deputy
Executive Secretary on April 24, 1987, 1 which
dismissed his appeal from the resolution of the
Commission Proper, Human Settlements Regulatory
Commission (HSRC, for short), promulgated on
January 10, 1986 and affirming the decision of July 3,
1985 of the Office of Adjudication and Legal Affairs
(OAALA, for brevity) of HSRC. Petitioner avers that
public respondent "gravely transcended the sphere of
his discretion" in finding that Presidential Decree No.
957 is inapplicable to the contracts to sell involved in
this case and in consequently dismissing the same. 2
The established facts on which the assailed decision
is based are set out therein as follows:
"Records disclose that, on September 18, 1975,
appellant Jose Antonio Mapa and appellee Labrador
Development Corporation (Labrador, for short),
owner/developer of the Barangay Hills Subdivision in
Antipolo, Rizal, entered into two contracts to sell over
lots 12 and 13 of said subdivision. On different
months in 1976, they again entered into two similar
contracts involving lots 15 and 16 in the same
subdivision. Under said contracts, Mapa undertook to
make a total monthly installment of P2,137.54 over a
period of ten (10) years. Mapa, however, defaulted in
the payment thereof starting December 1976,

prompting Labrador to send to the former a demand

letter, dated May 5, 1977, giving him until May 18,
1977, within which to settle his unpaid installments for
the 4 lots amounting to P15,411.66, with a warning
that non-payment thereof will result in the cancellation
of the four (4) contracts. Despite receipt of said letter
on May 6, 1977, Mapa failed to take any action
thereon. Labrador subsequently wrote Mapa another
letter, dated June 15, 1982, which the latter received
on June 21, 1982, reminding him of his total arrears
amounting to P180,065.27 and demanding payment
within 5 days from receipt thereof, but which letter
Mapa likewise ignored. Thus, on August 16, 1982,
Labrador sent Mapa a notarial cancellation of the four
(4) contracts to sell, which Mapa received on August
20, 1982. On September 10, 1982, however, Mapa's
counsel sent Labrador a letter calling Labrador's
attention to, and demanding its compliance with,
Clause 20 of the four (4) contracts to sell which
relates to Labrador's obligation to provide, among
others, lighting/water facilities to subdivision lot
buyers.
"On September 10, 1982, Labrador issued a
certification 'holding the implementation of the letter
dated August 16, 1982 (re notarial cancellation)
pending the complete development of road lot cul de
sac within the properties of Mapa at Barangay Hills
Subdivision.' Thereafter, on October 25, 1982,
Labrador sent Mapa a letter informing him 'that the
construction of road, sidewalk, curbs and gutters
adjacent to Block 11 Barangay Hills Subdivision are
already completed' and further requesting Mapa to
'come to our office within five (5) days upon receipt of
this letter to settle your account.'
"On December 10, 1982, Mapa tendered payment by
means of a check in the amount of P2,187.54, but
Labrador refused to accept payment for the reason
that it was agreed 'that after the development of the
cul de sac, he (complainant) will pay in full the total
amount due,' which Labrador computed at
P260,138.61. On December 14, 1982, Mapa wrote
Labrador claiming that 'you have not complied with
the requirements for water and light facilities in lots
12, 13, 15 & 16 Block 2 of Barangay Hills
Subdivision.' The following day, Mapa filed a
complaint against Labrador for the latter's neglect to
put 1) a water system that meets the minimum
standard as specified by HSRC, and 2) electrical

power supply. By way of relief, Mapa requested the

HSRC to direct Labrador to provide the facilities
aforementioned, and to issue a cease and desist
order enjoining Labrador from cancelling the contracts
to sell.
"After due hearing/investigation, which included an
on-site inspection of the subdivision, OAALA issued
its decision of July 3, 1985, dismissing the complaint
and declaring that 'after the lapse of 5 years from
complainant's default respondent had every right to
rescind the contract pursuant to Clause 7 thereof . . .''
"Per its resolution of January 10, 1986, the
Commission Proper, HSRC, affirmed the aforesaid
OAALA decision." 3
It was petitioner's adamant submission in the
administrative proceedings that the provisions of
Presidential Decree No. 957 4 and implementing rules
form part of the contracts to sell executed by him and
respondent corporation, hence the obligations
imposed therein had to be complied with by Labrador
within the period provided. Since, according to
petitioner, Labrador failed to perform the
aforementioned obligations, it is precluded from
rescinding the subject contracts to sell since petitioner
consequently did not incur in delay on his part.
Such intransigent position of petitioner has not
changed in the petition at bar and unyielding reliance
is placed on the provisions of Presidential Decree No.
957 and its implementing rules. The specific
provisions of the Decree which are persistently relied
upon read:

"SEC. 21. Sales Prior to Decree. In cases of

subdivision lots or condominium units sold or
disposed of prior to the effectivity of this Decree, it
shall be incumbent upon the owner or developer of
the subdivision or condominium project to complete
compliance with his or its obligations as provided in
the preceding section within two years from the date
of this Decree unless otherwise extended by the
Authority or unless an adequate performance bond is
filed in accordance with Section 6 hereof.

"All improvements except those requiring the services

of a public utility company or the government shall be
completed within a period of three (3) years from date
of this contract. Failure by the SELLER to reasonably
comply with the above schedule shall permit the
BUYER/S to suspend his monthly installments without
any penalties or interest charges until such time that
these improvements shall have been made as
scheduled. 6

"Failure of the owner or developer to comply with the

obligations under this and the preceding provisions
shall constitute a violation punishable under Sections
38 and 39 of this Decree."

As recently reiterated, it is jurisprudentially settled that

absent a clear, manifest and grave abuse of discretion
amounting to want of jurisdiction, the findings of the
administrative agency on matters falling within its
competence will not be disturbed by the courts. 7
Specifically with respect to factual findings, they are
accorded respect, if not finality, because of the special
knowledge and expertise gained by these tribunals
from handling the specific matters falling under their
jurisdiction. Such factual findings may be disregarded
only if they "are not supported by evidence; where the
findings are vitiated by fraud, imposition or collusion;
where the procedure which led to the factual findings
is irregular; when palpable errors are committed; or
when grave abuse of discretion, arbitrariness or
capriciousness is manifest." 8

Rule V of the implementing rules, on the other hand,

requires two (2) sources of electric power, two (2)
deepwell and pump sets with a specified capacity and
two standard fire hose flows with a capacity of 175
gallons per minute. 5
The provision, in said contracts to sell which,
according to petitioner, includes and incorporates the
aforequoted statutory provisions, is Clause 20 of said
contracts which provides:

"Clause 20 ---- SUBDIVISION DEVELOPMENT ---- To

insure the physical development of the subdivision,
the SELLER hereby obliges itself to provide the
individual lot buyer with the following:
a) PAVED ROADS

"SEC. 20. Time of Completion. Every owner or

developer shall construct and provide the facilities,
improvements, infrastructures and other forms of
development, including water supply and lighting
facilities, which are offered and indicated in the
approved subdivision or condominium plans,
brochures, prospectus, printed matters, letters or in
any form of advertisements, within one year from the
date of the issuance of the license for the subdivision
or condominium project or such other period of time
as may be fixed by the Authority.

b) UNDERGROUND DRAINAGE
c) CONCRETE CURBS AND GUTTERS
d) WATER SYSTEM
e) PARK AND OPEN SPACE.
"These improvements shall apply only to the portions
of the subdivision which are for sale or have been
sold.

A careful scrutiny of the records of the instant case

reveals that the circumstances thereof do not fall
under the aforesaid excepted cases, with the findings
duly supported by the evidence.
Petitioner's insistence on the applicability of
Presidential Decree No. 957 must be rejected. Said
decree was issued on July 12, 1976 long after the
execution of the contracts involved. Obviously and
necessarily, what subsequently were statutorily
provided therein as obligations of the owner or
developer could not have been intended by the
parties to be a part of their contracts. No intention to
give restrospective application to the provisions of
said decree can be gathered from the language
thereof. Section 20, in relation to Section 21, of the
decree merely requires the owner or developer to
construct the facilities, improvements, infrastructures
and other forms of development but only such as are
offered and indicated in the approved subdivision or
condominium plans, brochures, prospectus, printed
matters, letters or in any form of advertisements.

Other than what are provided in Clause 20 of the

contract, no further written commitment was made by
the developer in this respect. To read into the contract
the matters desired by petitioner would have the law
impose additional obligations on the parties to a
contract executed before that very law existed or was
contemplated.
We further reject petitioner's strained and tenuous
application of the so-called doctrine of last antecedent
in the interpretation of Section 20 and, correlatively, of
Section 21. He would thereby have the enumeration
of "facilities, improvements, infrastructures and other
forms of development" interpreted to mean that the
demonstrative phrase "which are offered and
indicated in the approved subdivision plans, etc." refer
only to "other forms of development" and not to
"facilities, improvements and infrastructures." While
this subserves his purpose, such bifurcation, whereby
the supposed adjectival phrase is set apart from the
antecedent words, is illogical and erroneous. The
complete and applicable rule is ad proximum
antecedens fiat relatio nisi impediatur sentencia. 9
Relative words refer to the nearest antecedent, unless
it be prevented by the context. In the present case,
the employment of the word "and" between "facilities,
improvements, infrastructures" and "other forms of
development," far from supporting petitioner's theory,
enervates it instead since it is basic in legal
hermeneutics that "and" is not meant to separate
words but is a conjunction used to denote a joinder or
union.
Thus, if ever there is any valid ground to suspend the
monthly installments due from petitioner, it would only
be based on non-performance of the obligations
provided in Clause 20 of the contract, particularly the
alleged non-construction of the cul-de-sac. But, even
this is unavailing and is obviously being used only to
justify petitioner's default. The on-site inspection of
the subdivision conducted by the OAALA and its
subsequent report reveal that Labrador substantially
complied with its obligation. 10
Furthermore, the initial non-construction of the cul-desac, as private respondent Labrador explained, was
because petitioner Mapa requested the suspension of
its construction since his intention was to purchase
the adjoining lots and thereafter enclose the same. 11
If these were not true, petitioner would have invoked

that supposed default in the first instance. As the

OAALA noted, petitioner "stopped payments of his
monthly obligations as early as December, 1976,
which is a mere five months after the effectivity of P.D.
No. 957 or about a year after the execution of the
contracts. This means that respondent still has 1 and
1/2 years to comply with its legal obligation to develop
the subdivision under said P.D. and two years to do so
under the agreement, hence, it was improper for
complainant to have suspended payments in
December, 1976 on the ground of non-development
since the period allowed for respondent's obligation to
undertake such development has not yet expired." 12
ON THE FOREGOING CONSIDERATIONS, the
petition should be, as it is hereby DISMISSED.

THE PEOPLE OF THE PHILIPPINES, plaintiffappellant, vs. MAXIMO MARTIN, CANDIDO MARTIN
and RODOLFO HIGASHI, defendants-appellees.
CASTRO, J:

This appeal by the People of the Philippines from the

order dated August 2, 1968 of the Court of First
Instance of La Union dismissing criminal case A-392
on the ground of lack of jurisdiction, was certified by
the Court of Appeals to this Court, the issues raised
being purely of law.

The central issue is the proper interpretation of the

provisions of section 46 of Commonwealth Act 613,
as amended by Rep. Act 144 and Rep. Act 827,
otherwise known as the Philippine Immigration Act.

The defendants Maximo Martin, Candido Martin and

Rodolfo Higashi were charged in criminal case A-392
of the CFI of La Union with a violation of section 46 of
Com. Act 613, as amended. The information dated
January 12, 1968 recites as follows:

"The undersigned Acting-State Prosecutor, and Asst.

Provincial Fiscal accuse MAXIMO MARTIN,
CANDIDO MARTIN and RODOLFO HIGASHI of
violation of Sec. 46 of Commonwealth Act No. 613
otherwise known as Philippine Immigration Act of
1940, as amended by Republic Act No. 827,
committed as follows:

"That on or about the 22nd day of September, 1966,

in the Municipality of Sto. Tomas, Province of La
Union, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused,
conspiring and confederating together and mutually
helping one another and in active aid with Filipino
nationals who are presently charged before the Court
of First Instance of Bulacan in Crim. Case No. 6258M, did then and there wilfully, unlawfully and
feloniously bring in and carry into the Philippines thirty
nine (39) Chinese aliens who traveled by the Chinese
vessel 'Chungking' from the port of Hongkong and
who are not duly admitted by any immigration officer
or not lawfully entitled to enter the Philippines, and
from the Chinese vessel 'Chungking,' accused took
delivery, loaded, and ferried the Chinese aliens in the
vessel 'MARU XI' owned, operated, under the charge
and piloted by all the herein accused from outside into
the Philippines, surreptitiously landing the said aliens
at Barrio Damortis, Sto. Tomas, La Union, Philippines,
which place of landing is not a duly authorized port of
entry in the Philippines."

After the thirty-nine (39) illegal entrants were landed

in barrio Damortis, as charged in the indictment, they
were loaded in a car and two jeepneys for transport to
Manila. They did not however reach their destination
because they were intercepted by Philippine
Constabulary agents in Malolos, Bulacan.

For concealing and harboring these thirty-nine aliens,

Jose Pascual, Filipinas Domingo, Jose Regino,
Alberto Bunyi, Emerdoro Santiago and Ibarra
Domingo were charged before the Court of First
Instance of Bulacan in criminal case 6258-M. The
amended information in the said criminal case reads

as follows:

"The undersigned Provincial Fiscal accuses Jose

Pascual, Filipinas Domingo, Jose Regino, Alberto
Bunyi, Emerdoro Santiago and Ibarra Domingo of the
violation of Section 46 of Commonwealth Act No. 613,
otherwise known as the Philippine Immigration Act of
1940, as amended by Republic Act No. 827,
committed as follows:

"That on or about the 22nd day of September, 1966,

in the municipality of Malolos, Province of Bulacan,
Philippines, and within the jurisdiction of this
Honorable Court, the above named accused and
several others whose identities are still unknown,
conspiring and confederating and aiding one another,
did then and there wilfully, unlawfully and feloniously,
bring, conceal and harbor 39 Chinese aliens not duly
admitted by any immigration officer or not lawfully
entitled to enter or reside within the Philippines under
the terms of the Immigration Laws, whose names are
as follows: Hung Chang Cheong, Hung Ling Choo,
Sze Lin Chuk, Chian Giok Eng, Mung Bun Bung, Lee
Chin Kuo, Gan Kee Chiong, See Sei, Hong Chun, Go
Kian Sim, Kho Ming Jiat, See Lee Giok, Uy Chin Chu,
Go Su Kim, Go Chu, Chiang Tian, Chua Tuy Tee, Sy
Jee Chi, Sy Sick Bian, Sy Kang Liu, Ang Chi Hun,
Kho Chu, Chua Hong, Lim Chin Chin, Ang Lu Him,
William Ang, Sy Siu Cho, Ang Puy Hua, Sy Chi Tek,
Lao Sing Tee, Cua Tiong Bio, Kho Lee Fun, Kho Lee
Fong, Ang Giok, Sy Si Him, Sy Lin Su, Lee Hun, Sy
Siong Go and Sy Cho Lung, who previously earlier on
the same day, thru the aid, help and manipulation of
the abovenamed accused, were loaded and ferried to
the shore from the Chinese vessel 'CHIUNG HING' in
a fishing vessel known as the 'MARU XI' and landed
at barrio Damortis, Sto. Tomas, La Union, and
immediately upon landing were loaded in 3 vehicles
an automobile bearing plate No. H-3812-Manila
driven and operated by Emerdoro Santiago and 2
jeepneys with plates Nos. S-27151-Philippines, 1966
and S-26327-Philippines, 1966 driven and operated
by Jose Regino and Alberto Bunyi, respectively, and
brought southwards along the MacArthur highway and
upon reaching Malolos, Bulacan, were apprehended
by the agents of the Philippine Constabulary, the latter

confiscating and impounding the vehicles used in

carrying and transporting the said aliens and including
the sum of P15,750.00 found in the possession of the
accused Jose Pascual which was used and/or to be
used in connection with the commission of the crime
charged."

On July 1, 1968 the three accused in criminal case A392 filed a "motion to dismiss" [quash] on the ground
that the CFI of La Union has no jurisdiction over the
offense charged in the said indictment as the court
had been pre-empted from taking cognizance of the
case by the pendency in the CFI of Bulacan of
criminal case 6258-M. This motion was opposed by
the prosecution.

On August 2, 1968 the Court of First Instance of La

Union dismissed the case, with costs de oficio. The
Government's motion for reconsideration was denied;
hence the present recourse.

In this appeal the Government contends that the

lower court erred (1) "in declaring that the information
in the instant case [A-392] alleges conspiracy
between the accused herein and the persons accused
in criminal case 6258-M of the Court of First Instance
of Bulacan;" (2) "in holding that by reason of said
allegation of conspiracy in the information in this case
[A-392], the act of one of the accused in both criminal
cases is deemed the act of all the accused and that
as a consequence all those accused in the two cases
are liable and punishable for one offense or violation
of section 46 of Commonwealth Act 613, as amended,
although committed by and through the different
means specified in said section;" (3) "in holding that
the violation of section 46 of Commonwealth Act 613,
as amended, committed by the accused in both
criminal cases partakes of the nature of a transitory or
continuing offense;" and (4) "in declaring that it lacks
jurisdiction and is now excluded from taking
cognizance of this case [A-392] and in dismissing it."
Section 46 of Commonwealth Act 613, as amended,
reads as follows:

"Any individual who shall bring into or land in the

Philippines or conceal or harbor any alien not duly
admitted by any immigration officer or not lawfully
entitled to enter or reside within the Philippines under
the terms of the immigration laws, or attempts,
conspires with, or aids another to commit any such
act, and any alien who enters the Philippines without
inspection and admission by the immigration officials,
or obtains entry into the Philippines by wilful, false, or
misleading representation or wilful concealment of a
material fact, shall be guilty of an offense and upon
conviction thereof, shall be fined not more than ten
thousand pesos, imprisoned for not more than ten
years, and deported if he is an alien.
"If the individual who brings into or lands in the
Philippines or conceals or harbors any alien not duly
admitted by any immigration officer or not lawfully
entitled to enter or reside herein, or who attempts,
conspires with or aids another to commit any such
act, is the pilot, master, agent, owner, consignee, or
any person in charge of the vessel or aircraft which
brought the alien into the Philippines from any place
outside thereof, the fine imposed under the first
paragraph hereof shall constitute a lien against the
vessel or aircraft and may be enforced in the same
manner as fines are collected and enforced against
vessels under the customs laws: Provided, however,
That if the court shall in its discretion consider
forfeiture to be justified by the circumstances of the
case, it shall order, in lieu of the fine imposed, the
forfeiture of the vessel or aircraft in favor of the
Government, without prejudice to the imposition of the
penalty of imprisonment provided in the preceding
paragraph."

To be stressed at the outset is the significant

repetition, in the second paragraph above-quoted, of
basic words and concepts set forth in the first
paragraph. Thus, the first paragraph begins with: "Any
individual who shall bring into or land, in the
Philippines or conceal or harbor any alien . . . ;" the
second paragraph starts with: "If the individual who
brings into or lands in the Philippines or conceals or
harbors any alien . . . " (emphasis ours) Scanning

section 46 in its entire context, it is at once apparent,

there being no indication to the contrary, that the act
of bringing into, the act of landing, the act of
concealing, the act of harboring, are four separate
acts, each act possessing its own distinctive, different
and disparate meaning. "Bring into" has reference to
the act of placing an alien within the territorial waters
of the Philippines. "Land" refers to the act of putting
ashore an alien. "Conceal" refers to the act of hiding
an alien. "Harbor" refers to the act of giving shelter
and aid to an alien. It is of course understood that the
alien brought into or landed in the Philippines, or
concealed or harbored, is an "alien not duly admitted
by any immigration officer or not lawfully entitled to
enter or reside within the Philippines under the, terms
of the immigration laws." 1

The rule is too well-settled to require any citation of

authorities that the word "or" is a disjunctive term
signifying dissociation and independence of one thing
from each of the other things enumerated unless the
context requires a different interpretation. While in, the
interpretation of statutes, 'or' may read 'and' and vice
versa, it is so only when the context so requires. 2

A reading of section 46 above-quoted does not justify

giving the word "or" a non-disjunctive meaning.

Bringing into and landing in the Philippines of the 39

aliens were completed when they were placed ashore
in the barrio of Damortis on September 22, 1966. The
act of the six accused in criminal case 6258-M before
the CFI of Bulacan of transporting the aliens
constitutes the offenses of "concealing" and
"harboring," as the terms are used in section 46 of our
Immigration Laws. The court a quo in point of fact
accepted this interpretation when it observed that "it
could happen that different individuals, acting
separately from, and independently of each other
could violate and be criminally liable for violation of
the Immigration Act, if each individual independently
commits any of the means specified under said
section 46 of Commonwealth Act 613, as amended by
Republic Act 827. For example, an individual acting

independently, with the use of a motor boat, brings

into the country and lands several Chinese aliens and
after doing so he goes away. There is no question that
said individual violated said section 46 of the
Immigration Act, for bringing into and landing in the
Philippines some aliens. Now, after the said landing of
the said aliens another individual also acting
independently, without connection whatsoever with
the one who brought and landed the said aliens, and
knowing that the Chinese aliens have no right to enter
the country or unlawfully conceals or harbors the said
aliens. There is no doubt that this person is also liable
and punishable for another separate violation of said
section 46 of Commonwealth Act 613."

This notwithstanding, the court dismissed this case on

the ground that there is an express allegation in the
information of connivance between the three
defendants-appellees herein and the six accused in
criminal case 6258-M of the CFI of Bulacan. In our
view the court a quo incurred in error in reaching this
conclusion. This error, which is one of
misinterpretation of the phraseology of the
information, was induced by a mis-reading of the first
portion of the said information which states as follows:

"That on or about the 22nd day of September, 1966,

in the Municipality of Sto. Tomas, Province of La
Union, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused,
conspiring and confederating together and mutually
helping one another and in active aid with Filipino
nationals who are presently charged before the CFI of
Bulacan in Crim. Case No. 6258-M, did then and
there wilfully, unlawfully and feloniously bring in and
ferry into the Philippines thirty-nine (39) Chinese
aliens who traveled by the Chinese vessel
'Chungking' from the port of Hongkong . . ."

It is crystal-clear that the words, "the above-named

accused, conspiring and confederating together and
mutually helping one another," can refer only and
exclusively to the three persons accused in this case,
namely Maximo Martin, Candido Martin and Rodolfo

Higashi. While the unfortunate insertion in the

information of the clause reading, "and in active aid
with Filipino nationals who are presently charged
before the CFI of Bulacan in Criminal Case No. 6258M," may yield the implication that the three
defendants-appellees and the six accused in criminal
case 6258-M before the CFI of Bulacan, may have
agreed on the sequence of the precise steps to be
taken in the smuggling of the Chinese aliens and on
the identities of the persons charged with
consummating each step, still there seems to be no
question that the three defendants-appellees are
charged only with bringing in and landing on
Philippine soil the thirty-nine aliens, whereas the six
accused in criminal case 6258-M are charged only
with concealing and harboring the said aliens. It is
technically absurd to draw a conclusion of conspiracy
among the three defendants-appellees and the six
accused in the criminal case 6258-M before the CFI
of Bulacan who are not named defendants in this
case.

At all events, the words, "and in active aid with Filipino

nationals who are presently charged before the CFI of
Bulacan in Crim. Case No. 6258-M," can and should
be considered as a surplusage, and may be omitted
from the information without doing violence to or
detracting from the intendment of the said indictment.
These words should therefore be disregarded.

Finally, the court a quo erred in maintaining the view

that the acts of bringing into and landing aliens in the
Philippines illegally and the acts of concealing and
harboring them constitute one "transitory and
continuing violation". We here repeat and emphasize
that the acts of bringing into and landing an alien in
the Philippines are completed once the alien is
brought ashore on Philippine territory, and are
separate and distinct from the acts of concealing and
harboring such alien. If the aliens in this case were
apprehended immediately after landing, there would
be no occasion for concealing and harboring them.
Upon the other hand, one set of persons may actually
accomplish the act of bringing in and/or landing aliens
in the Philippines, and another completely different
set of persons may conceal and/or harbor them. The

general concept of a continuing offense is that the

essential ingredients of the crime are committed in
different provinces. An example is the complex
offense of kidnapping with murder if the victim is
transported through different provinces before he is
actually killed. In such case, the CFI of any province
in which any one of the essential elements of said
complex offense has been committed, has jurisdiction
to take cognizance of the offense. 3

The conclusion thus become ineluctable that the court

a quo erred in refusing to take cognizance of the case
at bar.

Petition for writ of certiorari to review the judgment of

the Court of First Instance of Cebu, in Civil Case No.
R-10631, upholding the validity of Ordinance No. 23,
series of 1966, as amended by Ordinance No. 25,
series of 1967, of the Municipality of Mandaue, Cebu,
imposing "a graduated quarterly fixed tax based on
the gross value of money or actual market value at
the time of removal of the manufactured articles from
their factories or other manufacturing or processing
establishments."
In enacting the said ordinances, the municipal council
of Mandaue invoked as basis of its authority Republic
Act No. 2264 (Local Autonomy Act).
The relevant portion of Section 1, Ordinance No. 23
(1966), as amended by Ordinance No. 25 (1967),
provides as follows:

ACCORDINGLY, the order of the Court of First

Instance of La Union of August 2, 1968, dismissing
this case and cancelling the bail bond posted by the
three defendants-appellees, is set aside, and this
case is remanded for further proceedings in
accordance with law.
THE SAN MIGUEL CORPORATION, petitioner, vs.
THE MUNICIPAL COUNCIL, THE MAYOR, and THE
MUNICIPAL TREASURER OF THE MUNICIPALITY
OF MANDAUE, PROVINCE OF CEBU, respondents.

"SECTION 1. Municipal License Tax On Proprietors

Or Operators Of . . . Breweries, . . . Proprietors or
operators of . . . breweries, . . . within the territorial
limits of this municipality shall pay a graduated
quarterly fixed tax based on the gross value in money
or actual market value at the time of removal, of the
manufactured articles from their factories . . . during
the preceding quarter in accordance with the following
schedules: . . . :

ANTONIO, J:
CLASS QUARTERLY LICENSE TAX
P160.00 and P0.30 for
QUARTERLY GROSS VALUE each P1,000 or fraction
thereof in excess
1 P37,500.00 or over of P37,500.00 gross value.
2 P31,250.00 to P37,499.99 P158.00 per quarter
3 25,000.00 to 31,249.99 132.00 " "
4 20,000.00 to 24,999.99 105.00 " "
5 15,000.00 to 19,999.99 83.00 " "
6 12,500.00 to 14,999.99 63.00 " "
7 10,000.00 to 12,499.99 50.00 " "
8 8,750.00 to 9,999.99 42.00 " "
9 7,500.00 to 8,749.99 37.00 " "

10 6,500.00 to 7,499.99 31.00 " "

11 5,500.00 to 6,499.99 27.00 " "
12 4,500.00 to 5,499.99 23.00 " "
13 3,750.00 to 4,499.99 19.00 " "
14 3,000.00 to 3,799.99 16.00 " "
15 2,500.00 to 2,999.99 13.00 " "
16 2,000.00 to 2,499.99 11.00 " "
17 1,750.00 to 1,999.99 9.00 " "
18 1,500.00 to 1,749.99 8.00 " "
19 1,250.00 to 1,499.99 7.00 " "
20 Less than P1,250.00 5.00 " "
The pertinent portion of Section 2 of Ordinance No.
23 which was not amended by Ordinance No. 25
states:

"Payment of Municipal License Tax. A fixed tax

imposed in this ordinance must first be paid before
any person can engage in business and is payable for
each taxable business; . . .
"The graduated fixed tax provided in this ordinance
shall be paid at the Office of the Municipal Treasurer
quarterly, on or before the twentieth of January, April,
July and October; . . . Provided further, That as
regards businesses already operating at the time this
ordinance takes effect, the tax for the initial quarter
shall he paid pursuant to the provisions of this
ordinance and shall be based on the gross value in
money during the quarter immediately preceding,. . . .
"Within the time fixed for the payment of the license
taxes herein imposed, the taxpayers shall prepare
and file with the Municipal Treasurer, a sworn
statement of the gross value in money during the
preceding quarter on the basis of which the tax shall
be assessed and collected . . .
The basic Ordinance was No. 88, 1 which took effect
on September 25, 1962, but this was amended by
Ordinance No. 23 (January 1, 1967), and by
Ordinance No. 25 (January 1, 1968).
Petitioner, a domestic corporation engaged in the
business of manufacturing beer and other products
with a subsidiary manufacturing plant in Mandaue,

Cebu, since December, 1967, paid the taxes

prescribed in the aforesaid ordinance, under protest
thus: P309.40 on January 22, 1968 and P5,171.80 as
of July 18, 1968, computed respectively "on the basis
of 70,412 and 2,203.070 cases of beer manufactured
and removed from said Mandaue plant, multiplied by
P7.60 which is the prevailing market price
(wholesaler's price) per case of beer at the time of the
removal".
Claiming that it is adversely affected by the ordinance,
which in its view was beyond the power and authority
of the municipality to enact, petitioner brought and
action in the Court of First Instance of Cebu, Branch
VI, for the annulment of said ordinance.
Petitioner contends that (1) the phrase "gross value in
money or actual market value" employed in the
questioned ordinance clearly referred to "sales or
market price" of the articles or commodities
manufactured thereby indicating a manifest intent to
impose a tax based on sales, and (2) that to impose a
tax upon the privilege of manufacturing beer, when
the amount of the tax is measured by the gross
receipts from its sales of beer, is the same as
imposing a tax upon the product itself.
Respondents upon the other hand insist that the tax
imposed in the questioned ordinance (1) is not a
percentage tax or a tax on the sales of beer but is a
tax on the privilege to engage in the business of
manufacturing beer, and the phrase "actual market
value" was merely employed as a basis for the
classification and graduation of the tax sought to be
imposed; (2) that it is not a specific tax because it is
not a tax on the beer itself, but on the privilege of
manufacturing beer; and (3) that with the conversion
of Mandaue into a city on June 21, 1969, the appeal
has become moot, because the prohibition against
the imposition of any privilege tax on sales or other
taxes in any form based thereon, is applicable only to
municipalities.
While We have heretofore announced the doctrine
that the grant of power to tax to charterred cities and
municipalities under Section 2 of the Local Autonomy
Act is sufficiently plenary, 2 it is, however, subject to
the exceptions and limitations contained in the two (2)
provisos of the same statute. In other words, the
municipal corporation should not transcend the

limitations imposed by the statute on the basis of

which the power to tax is sought to be exercised.
Thus, We held in the Marinduque case, 3 that an
ordinance providing for a graduated tax based on
either "gross output or sales" violates the prohibition
on municipalities against imposing any percentage tax
on sales, or other taxes in any form based thereon, as
the only standard provided for measuring the gross
output is its peso value, as determined from true
copies of receipts and/or invoices that the taxpayer is
required to submit to the municipal treasurer.
We are thus confined to the narrow issue of whether
or not the challenged ordinance has transcended the
exceptions and limitations imposed by section 2 of
Republic Act 2264.
Section 2 of the aforecited statute provides:

"Provided, That municipalities and municipal districts

shall, in no case, impose any percentage tax on sales
or other taxes in any form based thereon nor impose
taxes on articles subject to specific tax. . . . "
Section 1 of Ordinance No. 88 of the Municipality of
Mandaue, as amended by Ordinances Nos. 23 (1967)
and 25 (1968), specifically provides that the
graduated quarterly fixed tax shall be "based on the
gross value in money or actual market value at the
time of removal, of the manufactured products . . .
from their factories . . . during the preceding calendar
year . . . "
Well settled is the rule that in the absence of
legistative intent to the contrary, technical or
commercial terms and phrases, when used in tax
statutes, are presumed to have been used in their
technical sense or in their trade or commercial
meaning. Thus, the phrase "gross value in money"
has a well-defined meaning in our tax statutes. For
instance, the term gross value in money" of articles
sold, bartered, exchanged or transferred, as used in
Sections 184, 185 and 186 of the National Internal
Revenue Code, has been invariably used as
equivalent to "gross selling price" and has been
construed as the total mount of money or its
equivalent which the purchaser pays to the vendor to
receive or get the goods. 4 It must be noted that the

ordinance specifically provides that the basis of the

tax is the "gross value in money or actual market
value" of the manufactured article.
The phrase "actual market value" has been construed
as the price which an article "would command in the
ordinary course of business, that is to say, when
offered for sale by one willing to sell, but not under
compulsion to sell, and purchased by another who is
willing to buy, but under no obligation to purchase it, 5
or the price which the property will bring in a fair
market after fair and reasonable efforts have been
made to find a purchaser who will give the highest
price for it. 6 The "actual market value" of property, for
purposes of taxation, therefore means the selling
price of the article in the course of ordinary business.
Considering that the phrase "gross value in money" is
followed by the words "or actual market value", it is
evident that the latter was intended to explain and
clarify the preceding phrase. For the word "or" may be
used as the equivalent of "that is to say" and gives
that which precedes it the same significance as that
which follows it. It is not always disjunctive and is
sometimes interpretative or expository of the
preceding word. 7 Certainly We cannot assume that
the phrase "or actual market value" was a mere
surplusage, for it serves to clarify and explain the
meaning and import of the preceding phrase. In any
event, it is the duty of the courts, so far as reasonably
practicable, to read and interpret a statute as to give
life and effect to all its provisions, so as to render it a
harmonious whole.
It is also significant to note, that there is a set ratio
between the amount of the tax and the volume of
sales. Thus if the "gross value in money or actual
market value" of the been removed from the factory
exceeds P37,500.00 per quarter, the taxpayer is
required to pay a quarterly license tax of P160.00 plus
P0.30 for every P1,000.00 or fraction of the excess. In
other words in excess of P37,500.00, the taxpayer will
pay to the municipality a certain amount of tax
measured by a percentage of the sales. It is therefore
evident that the challenged ordinance was a
transparent attempt on the part of the municipality to
impose a tax based on sales.
Although section 2 of the ordinance in question
provides in a vague manner that the tax shall be

assessed and collected on the basis of the sworn

statement of the manager of a firm or corporation "of
the gross value in money during the preceding
quarter," in actual practice the quarterly tax levied
upon petitioner, was computed on the basis of the
total market value of the beer, per quarter, as shown
by the shipping memorandum certified to by the
storekeeper of the Bureau of Internal Revenue
assigned to the brewery. Thus the taxes amounting to
P309.40 and P5,171.80, paid by petitioner on January
22, 1968 and July 18, 1968, were actually determined
respectively on the basis of 70,412 and 2,203.070
cases of beer manufactured and removed from the
Mandaue plant, multiplied by P7.60 which is the
prevailing market price (wholesaler's price) per case
of beer.
In Laoag Producers' Cooperative Marketing
Association, Inc. vs. Municipality of Laoag, 8 We held
that the challenged ordinance imposed a tax based
on sales, although the ordinance merely imposed a
"municipal tax or inspection fee of one-half (1/2)
centavo on every kilo of Virginia leaf tobacco, garlic
and onion on all wholesale dealers and vendors"
because, in its application, it does impose a tax based
on sales, as it is based on the number of kilos sold
and purchased by him and when the wholesaler or
vendor accumulates his stock, he does so for only
one purpose, to sell the same at the appropriate time,
and "he cannot by its very nature, carry on his
business unless he sells what he has bought."
Similarly, in the case at bar, the circumstance that the
tax is imposed upon petitioner at the time of removal
from the factory of the manufactured beer, and not on
the date of actual sale, is not of important
consequence since petitioner will, in the end, sell the
been removed from the factory, because by the
nature of its business, it has no alternative but to sell
what it has manufactured.
We therefore hold that the questioned ordinance
imposed a tax based on sales and therefore beyond
the authority of the municipality to enact.
Having reached this conclusion, it becomes
unnecessary to pass upon the additional question
posed, i.e., whether or not the challenged ordinance
imposes a tax on a product subject to specific tax.
Respondents however claim that with the conversion

of Mandaue into a city pursuant to Republic Act No.

5519, which was approved on June 21, 1969, the
issue has already become moot, since the prohibition
contained in section 2 of Republic Act 2264 applies
only to municipalities and not to chartered cities. The
same contention has been rejected in City of Naga v.
Court of Appeals, 9 and Laoag Producers'
Cooperative Marketing Association, Inc. v.
Municipality of Laoag, supra, where We ruled that the
legality of an ordinance depends upon the power of
the municipality at the time of the enactment of the
challenged ordinance. Since the municipality of
Mandaue had no authority to enact the said
ordinance, the subsequent approval of Republic Act
No. 5519 which became effective on June 21, 1969,
did not remove the original infirmity of the ordinance.
Indeed there is no provision in the aforecited statute
which invests a curative effect upon the ordinances of
the municipality which when enacted were beyond its
statutory authority.
IN VIEW WHEREOF, the appealed judgment is
hereby reversed and Ordinance No. 23, series of
1966, as amended by Ordinance No. 25, series of
1967, which became effective on January 1, 1968, of
the Municipality of Mandaue, Cebu, is hereby
declared null and void. Respondents are also ordered
to refund the taxes paid by Petitioners under the said
ordinance, with legal interest thereon. No costs.

The facts of the case are as follows:

On January 15, 1960, private respondents (as
members of the Board of Directors of the defunct
National Resettlement and Rehabilitation
Administration created under Republic Act No. 1160,
approved June 18, 1954 - NARRA) approved the
following resolution:
"RESOLUTION NO. 13 (Series of 1960)
"RESOLVED, as it is hereby resolved, to appoint Mr.
Bruno O. Aparri as General Manager of the National
Resettlement and Rehabilitation Administration
(NARRA) with all the rights, prerogatives and
compensation appurtenant thereto to take effect on
January 16, 1960);
"RESOLVED FURTHER, as it is hereby resolved, to
inform the President of the Philippines of the above
appointment of Mr. Aparri" (p. 2, rec.)
Pursuant thereto, private respondent Remedios O.
Fortich, in her capacity as Chairman of the NARRA
Board, appointed petitioner Bruno O. Aparri as
reflected in the following letter:

BRUNO O. APARRI, petitioner, vs. THE COURT OF

APPEALS

"Manila, January 22, 1960

MAKASIAR, J.:

"Mr. Bruno O. Aparri

c/o NARRA, Manila

This petition for certiorari seeks to review the decision

of the then Court of Appeals (now Intermediate
Appellate Court under BP 129) dated September 24,
1968, affirming the decision of the then Court of First
Instance (now Regional Trial Court), the dispositive
portion of which is as follows:
WHEREFORE, the judgment of the lower court
insofar as it decrees the dismissal of the present
petition for mandamus is hereby affirmed, without
pronouncement as to costs" (p. 50, rec.)

"SIR:
"You are hereby appointed as GENERAL MANAGER
in the National Resettlement and Rehabilitation
Administration (NARRA) with compensation at the
rate of TWELVE THOUSAND (P12,000.00) PESOS
per annum, the appointment to take effect January
16, 1960 . . . REINSTATEMENT . . ." (p. 2, rec.)
The power of the Board of Directors of the NARRA to
appoint the general manager is provided for in

paragraph (2), Section 8, Republic Act No. 1160

(approved June 18, 1954), to wit:
"Sec. 8. Powers and Duties of the Board of Directors.
- The Board of Directors shall have the following
powers and duties: . . ..
"2) To appoint and fix the term of office of General
Manager . . ., subject to the recommendation of the
Office of Economic Coordination and the approval of
the President of the Philippines, . . .. The Board, by a
majority vote of all members, may, for cause, upon
recommendation of the Office of Economic
Coordination and with the approval of the President of
the Philippines, suspend and/or remove the General
Manager and/or the Assistant General Manager" (p.
46, rec., emphasis supplied)
On March 15, 1962, the same Board of Directors
approved the following resolution:
"RESOLUTION NO. 24 (Series of 1962)
"WHEREAS, the Chairman of the Board has
transmitted to the Board of Directors the desire of the
Office of the President, Malacaang, Manila, to fix the
term of office of the incumbent General Manager up
to the close of office hours on March 31, 1962, in
accordance with the provision of Section 8, subsection 2 of R.A. No. 1160;
"NOW, THEREFORE, BE IT RESOLVED, as it is
hereby resolved, that the Board of Directors hereby
fix, as it is hereby fixed, the term of office of the
incumbent General Manager of the National
Resettlement and Rehabilitation Administration
(NARRA) to March 31, 1962" (pp. 6-7, rec., emphasis
supplied)
Petitioner filed a petition for mandamus with
preliminary injunction with the then Court of First
Instance of Manila on March 29, 1962. The petition
prayed to annul the resolution of the NARRA Board
dated March 15, 1962, to command the Board to
allow petitioner to continue in office as General
Manager until he vacates said office in accordance
with law and to sentence the private respondents

jointly and severally to pay the petitioner actual

damages in the sum of P95,000.00, plus costs.
On August 8, 1963, when the case was still pending
decision in the lower court, Republic Act No. 3844,
otherwise known as the Agricultural Land Reform
Code, took effect. The said law abolished the NARRA
(Sec. 73, R.A. 3844) and transferred its functions and
powers to the Land Authority. On October 21, 1963,
the then Court of First Instance of Manila rendered
judgment, finding "that this case has become
academic by reason of the approval of the Agricultural
Land Reform Code (Republic Act No. 3844) and
thereby dismissing the instant petition without
pronouncement as to costs" (p. 5, rec.)
On appeal to the then Court of Appeals, the appellate
tribunal, speaking through then Mr. Justice Antonio C.
Lucero, affirmed the decision of the lower court in
dismissing the petition for mandamus. Pertinent
provisions of the decision are as follows:
xxx xxx xxx
"In the light of the foregoing facts, it is evident that
Bruno O. Aparri accepted the position of General
Manager without fixed term and his appointment is, in
essence, terminable at the pleasure of the appointing
power which, in this case, is the Board of Directors.
Where, as in the case at bar, the appointing officer,
that is, the Board of Directors, had fixed the term of
office of the incumbent Manager to end on March 31,
1962, the replacement of Bruno O. Aparri is not
removal but by reason of the term of his office which
is one of the recognized modes of terminating official
relations. Considering that the term of office of the
General Manager of the NARRA is not fixed by law
nor has it been fixed by the Board of Directors at the
time of his appointment although it had the power to
do so, it is obvious that the term of office of herein
petitioner Bruno O. Aparri expired on March 31, 1962
and his right to hold the said office was thereby
extinguished. In other words, Bruno O. Aparri's
cessation from office invokes no removal but merely
the expiration of the term of office which was within
the power of the Board of Directors to fix. Hence,
Bruno O. Aparri continues only for so long as the term
of his office has not ended (Alba vs. Hon. Jose N.
Evangelista, 100 Phil. 683) [Decision of the Court of
Appeals, pp. 48-39, rec., emphasis supplied].

The motion for reconsideration by petitioner in the

then Court of Appeals was denied on January 10,
1969.
On January 20, 1969, the petitioner filed a petition for
certiorari to review the decision of the then Court of
Appeals dated September 24, 1968 (pp. 1-41, rec.).
The same was initially denied for lack of merit in a
resolution dated January 27, 1969 (p. 55, rec.); but on
motion for reconsideration filed on February 11, 1969,
the petition was given due course (p. 66, rec.).
The only legal issue sought to be reviewed is whether
or not Board Resolution No. 24 (series of 1962) was a
removal or dismissal of petitioner without cause.
WE affirm. WE hold that the term of office of the
petitioner expired on March 31, 1962.
A public office is the right, authority, and duty created
and conferred by law, by which for a given period,
either fixed by law or enduring at the pleasure of the
creating power, an individual is invested with some
portion of the sovereign functions of the government,
to be exercised by him for the benefit of the public
(Mechem, Public Offices and Officers, Sec. 1). The
right to hold a public office under our political system
is therefore not a natural right. It exists, when it exists
at all, only because and by virtue of some law
expressly or impliedly creating and conferring it
(Mechem, Ibid., Sec. 64). There is no such thing as a
vested interest or an estate in an office, or even an
absolute right to hold office. Excepting constitutional
offices which provide for special immunity as regards
salary and tenure, no one can be said to have any
vested right in an office or its salary (42 Am. Jur. 881).
The National Resettlement and Rehabilitation
Administration (NARRA) was created under Republic
Act No. 1160 (approved June 18, 1954), which
provides that:
"Sec. 2. NATIONAL RESETTLEMENT AND
REHABILITATION ADMINISTRATION - . . . there is
hereby created a corporation to be known as National
Resettlement and Rehabilitation Administration
hereafter referred to as 'NARRA' to perform under the
supervision and control of the President of the
Philippines, through the Office of Economic

Coordinator all the duties and functions of the Bureau

of Lands as provided for in Commonwealth Act
numbered Six Hundred and Ninety-One, as amended,
and such other duties as are hereinafter specified in
this Act. It shall be headed by a General Manager and
an Assistant Manager who shall be appointed as
hereinafter provided" (emphasis supplied).
Paragraph 2, Section 8 of Republic Act 1160
expressly gives to the Board of Directors of the
NARRA the power "to appoint and fix the term of
office of the general manager . . . subject to the
recommendation of Economic Coordination and the
approval of the President of the Philippines"
(emphasis supplied).
By "appointment" is meant the act of designation by
the executive officer, board or body, to whom that
power has been delegated, of the individual who is to
exercise the functions of a given office (Mechem, op.
cit., Sec. 102). When the power of appointment is
absolute, and the appointee has been determined
upon, no further consent or approval is necessary,
and the formal evidence of the appointment, the
commission, may issue at once. Where, however, the
assent or confirmation of some other officer or body is
required, the commission can issue or the
appointment is complete only when such assent or
confirmation is obtained (People vs. Bissell, 49 Cal.
407). To constitute an "appointment" to office, there
must be some open, unequivocal act of appointment
on the part of the appointing authority empowered to
make it, and it may be said that an appointment to
office is made and is complete when the last act
required of the appointing authority has been
performed (Molnar vs. City of Aurora, 348 N.E. 2d
262, 38 Ill. App. 3d 580). In either case, the
appointment becomes complete when the last act
required of the appointing power is performed (State
vs. Barbour, 53 Conn. 76, 55 Am. Rep. 65).
The petitioner was appointed as general manager
pursuant to Resolution No. 13 (series of 1960 approved on January 15, 1960) of the Board of
Directors. A careful perusal of the resolution points out
the fact that the appointment is by itself incomplete
because of the lack of approval of the President of the
Philippines to such appointment. Thus, We note that
Resolution No. 13 states:

xxx xxx xxx

". . . RESOLVED FURTHER, as it is hereby resolved,
to inform the President of the Philippines of the above
appointment of Mr. Aparri" (p. 2, rec.)
Presumably, the Board of Directors of the NARRA
expected that such appointment be given approval by
the then President. Lacking such approval by the
President as required by the law (par. 2, Sec. 8 of
R.A. 1160), the appointment of petitioner was not
complete. The petitioner can, at best, be classified as
a de facto officer because he assumed office "under
color of a known appointment or election, void
because the officer was not eligible or because there
was a want of power in the electing body, or by
reasons of some defect or irregularity in its exercise,
such ineligibility, want of power, or defect being
unknown to the public" (State vs. Carroll, 38 Conn.
449, 9 Am. Rep. 409).
However, such appointment was made complete
upon approval of Resolution No. 24 (series of 1962 approved March 15, 1962) wherein the President
submitted to the Board his "desire" to fix the term of
office of the petitioner up to the close of office hours
on March 31, 1962. The questioned resolution
corrected whatever requisite lacking in the earlier
Resolution No. 13 of the respondent Board.
Resolution No. 24, approved by the respondent Board
and pursuant to "the desire of the President" legally
fixed the term of office of petitioner as mandated by
paragraph 2, Section 8 of Republic Act 1160.
The word "term" in a legal sense means a fixed and
definite period of time which the law describes that an
officer may hold an office (Sueppel vs. City Council of
Iowa City, 136 N.W. 2D 523, quoting 67 CJS
OFFICERS, secs. 42, 54[1l). According to Mechem,
the term of office is the period during which an office
may be held. Upon the expiration of the officer's term,
unless he is authorized by law to hold over, his rights,
duties and authority as a public officer must ipso facto
cease (Mechem, op. cit., Secs. 396-397). In the law
on Public Officers, the most natural and frequent
method by which a public officer ceases to be such is
by the expiration of the term for which he was elected
or appointed. The question of when this event has
occurred depends upon a number of considerations,

the most prominent of which, perhaps, are whether he

was originally elected or appointed for a definite term
or for a term dependent upon some act or event . . .
(Mechem, op. cit., Sec. 384).
It is necessary in each case to interpret the word
"term" with the purview of statutes so as to effectuate
the statutory scheme pertaining to the office under
examination (Barber vs. Blue, 417 P. 2D 401, 51 Cal.
Rptr. 865, 65 C.2d N5). In the case at bar, the term of
office is not filed by law. However, the power to fix the
term is vested in the Board of Directors subject to the
recommendation of the Office of Economic
Coordination and the approval of the President of the
Philippines. Resolution No. 24 (series of 1962)
speaks of no removal but an expiration of the term of
office of the petitioner.
The statute is undeniably clear. It is the rule in
statutory construction that if the words and phrases of
a statute are not obscure or ambiguous, its meaning
and the intention of the legislature must be
determined from the language employed, and, where
there is no ambiguity in the words, there is no room
for construction (Black on Interpretation of Laws, Sec.
51). The courts may not speculate as to the probable
intent of the legislature apart from the words
(Hondoras vs. Soto, 8 Am. St., Rep. 744). The reason
for the rule is that the legislature must be presumed to
know the meaning of words, to have used words
advisedly and to have expressed its intent by the use
of such words as are found in the statute (50 Am. Jur.
p. 212).
Removal entails the ouster of an incumbent before
the expiration of his term (Manalang vs. Quitoriano,
50 O.G. 2515). The petitioner in this case was not
removed before the expiration of his term. Rather, his
right to hold the office ceased by the expiration on
March 31, 1962 of his term to hold such office.
WHEREFORE, THE DECISION APPEALED FROM
IS HEREBY AFFIRMED. WITHOUT COSTS.

TEODULO RURA, petitioner, vs. THE HON.

GERVACIO A. LOPENA
ABAD SANTOS, J.:

This case involves the application of the Probation

Law (P.D. No. 968, as amended), more specifically
Section 9 thereof which disqualifies from probation
those persons:
"(c) who have previously been convicted by final
judgment of an offense punished by imprisonment of
not less than one month and one day and/or a fine of
not less than Two Hundred Pesos."
Petitioner Teodulo Rura was accused, tried and
convicted of five (5) counts of estafa committed on
different dates in the Municipal Circuit Trial Court of
Tubigon-Clarin, Tubigon, Bohol, denominated as
Criminal Case Nos. 523, 524, 525, 526 and 527.
The five cases were jointly tried and a single decision
was rendered on August 18, 1983. Rura was
sentenced to a total prison term of seventeen (17)
months and twenty-five (25) days. In each criminal
case the sentence was three (3) months and fifteen
(15) days.
Rura appealed to the Regional Trial Court of Bohol
but said court affirmed the decision of the lower court.
When the case was remanded to the court of origin
for execution of judgment, Rura applied for probation.
The application was opposed by a probation officer of
Bohol on the ground that Rura is disqualified for
probation under Sec. 9 (c) of the Probation Law

quoted above. The court denied the application for

probation. A motion for reconsideration was likewise
denied. Hence the instant petition.
The question which is raised is whether or not the
petitioner is disqualified for probation.
In denying the application for probation, the
respondent judge said:

"Previous conviction, we submit, presupposes that

there is a prior sentence or that there was already a
decision rendered which convicted the accused. In
this instant cases, however, there is only one decision
rendered on the five (5) counts of Estafa which was
promulgated on the same date. In other words the
effects of conviction does not retract to the date of the
commission of the offense as the trial court held." (Id.,
pp. 8-9.)

"Though the five estafa cases were jointly tried and

decided by the Court convicting the accused thereof,
yet the dates of commission are different. Upon
conviction, he was guilty of said offenses as of the
dates of commission of the acts complained of."
(Rollo, p. 58.)

We hold for the petitioner. When he applied for

probation he had no previous conviction by final
judgment. When he applied for probation the only
conviction against him was the judgment which was
the subject of his application. The statute relates
"previous" to the date of conviction, not to the date of
the commission of the crime.

Upon the other hand, the petitioner argues:

WHEREFORE, the petition is granted and the

respondent judge is directed to give due course to the
petitioner's application for probation. No costs.

"We beg to disagree. There is no previous conviction

by final judgment to speak of. The five (5) cases of
Estafa were tried jointly and there is only one decision
rendered on the same date - August 18, 1983. It could
not be presumed that accused-petitioner had been
convicted one after the other for the five cases of
Estafa because the conviction in these cases took
place within the same day, August 18, 1983 by means
of a Joint Decision, and not in a separate decision.