G.R. No.

190144 August 1, 2012

BANK OF THE PHILIPPINE ISLANDS, Petitioner,
vs.
CARLITO LEE, Respondent.

DECISION
PERLAS-BERNABE, J.:

In this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, petitioner
Bank of the Philippine Islands (BPI) seeks to reverse and set aside the February 11, 2009
Decision2 and October 29, 2009 Resolution3 of the Court of Appeals (CA) in CA-G.R. No.
87911 which annulled the March 1, 20043 and September 16, 20044 Orders of the
Regional Trial Court (RTC) of Makati City, Branch 61 and instead, entered a new one
directing the RTC to issue a writ of execution and/or enforce garnishment against the
bank deposit of Trendline Resources & Commodities Exponent, Inc. (Trendline) and
Leonarda Buelva (Buelva) with the defunct Citytrust Banking Corporation (Citytrust), now
merged with BPI.

The Facts

On April 26, 1988, respondent Carlito Lee (Lee) filed a complaint for sum of money with
damages and application for the issuance of a writ of attachment against Trendline and
Buelva (collectively called "defendants") before the RTC, docketed as Civil Case No. 88-
702, seeking to recover his total investment in the amount of P5.8 million. Lee alleged
that he was enticed to invest his money with Trendline upon Buelva’s misrepresentation
that she was its duly licensed investment consultant or commodity saleswoman. His
investments, however, were lost without any explanation from the defendants.

On May 4, 1988, the RTC issued a writ of preliminary attachment whereby the Check-O-
Matic Savings Accounts of Trendline with Citytrust Banking Corporation, Ayala Branch,
in the total amount of P700,962.10 were garnished. Subsequently, the RTC rendered a
decision on August 8, 1989 finding defendants jointly and severally liable to Lee for the
full amount of his investment plus legal interest, attorney’s fees and costs of suit. The
defendants appealed the RTC decision to the CA, docketed as CA-G.R. CV No. 23166.

Meanwhile, on April 13, 1994, Citytrust filed before the RTC an Urgent Motion and
Manifestation5 seeking a ruling on defendants' request to release the amount of
P591,748.99 out of the garnished amount for the purpose of paying Trendline’s tax
obligations. Having been denied for lack of jurisdiction, Trendline filed a similar
motion6 with the CA which the latter denied for failure to prove that defendants had no
other assets to answer for its tax obligations.

On October 4, 1996, Citytrust and BPI merged, with the latter as the surviving corporation.
The Articles of Merger provide, among others, that "all liabilities and obligations of
Citytrust shall be transferred to and become the liabilities and obligations of BPI in the
same manner as if the BPI had itself incurred such liabilities or obligations." 7
On December 22, 1998, the CA denied the appeal in CA-G.R. CV No. 23166 and
affirmed in toto the decision of the RTC, which had become final and executory on
January 24, 1999.

Hence, Lee filed a Motion for Execution8 before the RTC on July 29, 1999, which was
granted. Upon issuance of the corresponding writ, he sought the release of the garnished
deposits of Trendline. When the writ was implemented, however, BPI Manager Samuel
Mendoza, Jr. denied having possession, control and custody of any deposits or properties
belonging to defendants, prompting Lee to seek the production of their records of
accounts with BPI. However, on the manifestation of BPI that it cannot locate the
defendants' bank records with Citytrust, the RTC denied the motion on September 6,
2002.

On December 16, 2002, Lee filed a Motion for Execution and/or Enforcement of
Garnishment9 before the RTC seeking to enforce against BPI the garnishment of
Trendline’s deposit in the amount of P700,962.10 and other deposits it may have had with
Citytrust. The RTC denied the motion for dearth of evidence showing that BPI took over
the subject accounts from Citytrust and the fact that BPI was not a party to the case. Lee’s
motion for reconsideration was likewise denied.10

Lee elevated the matter to the CA on a petition for certiorari. In its February 11, 2009
Decision, the CA annulled the questioned orders, finding grave abuse of discretion on the
part of the RTC in denying Lee’s motion to enforce the garnishment against Trendline’s
attached bank deposits with Citytrust, which have been transferred to BPI by virtue of
their merger. It found BPI liable to deliver to the RTC the garnished bank deposit of
Trendline in the amount of P700,962.10, which Citytrust withheld pursuant to the RTC's
previously-issued writ of attachment.

The CA refused to give credence to BPI’s defense that it can no longer locate Trendline’s
bank records with the defunct Citytrust, as its existence was supported by evidence and
by the latter's admission. Neither did it consider BPI a stranger to the case, holding it to
have become a party in-interest upon the approval by the Securities and Exchange
Commission (SEC) of the parties’ Articles of Merger. BPI’s Motion for
Reconsideration11 was denied in the CA's October 29, 2009 Resolution.

The Issues

In this petition, BPI ascribes the following errors to the CA:

A.

THE HONORABLE COURT OF APPEALS ERRED IN NOT

DISMISSING CA-G.R. SP No. 87911, THE PETITION FOR
CERTIORARI UNDER RULE 65 OF THE REVISED RULES OF
COURT, FILED BY RESPONDENT CARLITO LEE BEING AN
IMPROPER REMEDY.
 B.

THE HONORABLE COURT OF APPEALS ERRED IN RULING

THAT PETITIONER BPI BECAME PARTY-IN-INTEREST IN THE
CASE FILED BY RESPONDENT CARLITO LEE UPON THE
APPROVAL BY THE SECURITIES AND EXCHANGE
COMMISSION OF ITS MERGER WITH CITYTRUST BANKING
CORPORATION.

C.

THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING

THAT THE MOTION FOR EXECUTION AND/OR ENFORCEMENT
OF GARNISHMENT IS NOT THE APPROPRIATE REMEDY IN THE
EVENT THERE IS A THIRD PARTY INVOLVED DURING THE
EXECUTION PROCESS OF A FINAL AND EXECUTORY
JUDGMENT.

D.

THE HONORABLE COURT OF APPEALS ERRED IN RULING

THAT PETITIONER BPI SHOULD BE HELD ACCOUNTABLE FOR
THE AMOUNT OF PHP700,962.10.12

The Ruling of the Court

Section 1, Rule 41 of the Revised Rules of Court provides:

SECTION 1. Subject of appeal. - x x x

No appeal may be taken from:

xxx

(b) An interlocutory order;

xxx

In any of the foregoing circumstances, the aggrieved party may file

an appropriate special civil action as provided in Rule 65.13

A punctilious examination of the records will reveal that Lee had previously sought the
execution of the final and executory decision of the RTC dated August 8, 1989 which was
granted and had resulted in the issuance of the corresponding writ of execution. However,
having garnished the deposits of Trendline with Citytrust in the amount of ₱ 700,962.10
by virtue of a writ of preliminary attachment, Lee filed anew a Motion for Execution and/or
Enforcement of Garnishment before the RTC on December 16, 2002. While the RTC
denied the motion in its March 1, 2004 Order, the denial was clearly with respect only to
the enforcement of the garnishment, to wit:

Acting on the Motion for Execution and/or Enforcement of Garnishment filed

by plaintiff Carlito Lee, and there being no evidence shown that the
accounts subject of the motion were taken over by the Bank of the Philippine
Islands from Citytrust Bank and considering further that Bank of Philippine
Islands is not a party to this case, the instant Motion is DENIED for lack of
merit.

SO ORDERED.14

Consequently, the foregoing Order merely involved the implementation of a writ of

execution, hence, interlocutory in nature. An interlocutory order is one that does not finally
dispose of the case, and does not end the court's task of adjudicating the parties’
contentions and determining their rights and liabilities as regards each other, but
obviously indicates that other things remain to be done.15

Conformably with the provisions of Section 1, Rule 41 of the Revised Rules of Court
above-quoted, the remedy from such interlocutory order is certiorari under Rule 65. Thus,
contrary to the contention of BPI, the CA did not err in assuming jurisdiction over the
petition for certiorari.

BPI likewise insists that the CA erred in considering it a party to the case by virtue of its
merger with Citytrust, the garnishee of defendants' deposits.

The Court is not convinced.

Section 5, Rule 65 of the Revised Rules of Court requires that persons interested in
sustaining the proceedings in court must be impleaded as private respondents. Upon the
merger of Citytrust and BPI, with the latter as the surviving corporation, and with all the
liabilities and obligations of Citytrust transferred to BPI as if it had incurred the same, BPI
undoubtedly became a party interested in sustaining the proceedings, as it stands to be
prejudiced by the outcome of the case.

It is a settled rule that upon service of the writ of garnishment, the garnishee becomes a
"virtual party" or "forced intervenor" to the case and the trial court thereby acquires
jurisdiction to bind the garnishee to comply with its orders and processes. In Perla
Compania de Seguros, Inc. v. Ramolete,16 the Court ruled:

In order that the trial court may validly acquire jurisdiction to bind the person
of the garnishee, it is not necessary that summons be served upon him. The
garnishee need not be impleaded as a party to the case. All that is
necessary for the trial court lawfully to bind the person of the garnishee or
 any person who has in his possession credits belonging to the judgment
debtor is service upon him of the writ of garnishment.

The Rules of Court themselves do not require that the garnishee be served
with summons or impleaded in the case in order to make him liable.

xxxx

Through the service of the writ of garnishment, the garnishee becomes a

"virtual party" to, or a "forced intervenor" in, the case and the trial court
thereby acquires jurisdiction to bind him to compliance with all orders and
processes of the trial court with a view to the complete satisfaction of the
judgment of the court.17

Citytrust, therefore, upon service of the notice of garnishment and its acknowledgment
that it was in possession of defendants' deposit accounts in its letter-reply dated June 28,
1988, became a "virtual party" to or a "forced intervenor" in the civil case. As such, it
became bound by the orders and processes issued by the trial court despite not having
been properly impleaded therein. Consequently, by virtue of its merger with BPI on
October 4, 1996, BPI, as the surviving corporation, effectively became the garnishee, thus
the "virtual party" to the civil case.

Corollarily, it should be emphasized that a merger of two corporations produces, among

others, the following effects:

1. The constituent corporations shall become a single corporation which, in

case of merger, shall be the surviving corporation designated in the plan of
merger; and in case of consolidation, shall be the consolidated corporation
designated in the plan of consolidation;

2. The separate existence of the constituent corporation shall cease, except

that of the surviving or the consolidated corporation;

3. The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under this Code;

4. The surviving or the consolidated corporation shall thereupon and

thereafter possess all the rights, privileges, immunities and franchises of
each of the constituent corporations; and all property, real or personal, and
all receivables due on whatever account, including subscriptions to shares
and other choses in action, and all and every other interest of, or belonging
to, or due to each constituent corporation, shall be deemed transferred to
and vested in such surviving or consolidated corporation without further act
or deed; and
 5. The surviving or consolidated corporation shall be responsible and liable
for all the liabilities and obligations of each of the constituent corporations
in the same manner as if such surviving or consolidated corporation had
itself incurred such liabilities or obligations; and any pending claim, action
or proceeding brought by or against any of such constituent corporations
may be prosecuted by or against the surviving or consolidated
corporation. The rights of creditors or liens upon the property of any of such
constituent corporations shall not be impaired by such merger or
consolidation.18(Underscoring supplied)

In sum, although Citytrust was dissolved, no winding up of its affairs or liquidation of its
assets, privileges, powers and liabilities took place. As the surviving corporation, BPI
simply continued the combined businesses of the two banks and absorbed all the rights,
privileges, assets, liabilities and obligations of Citytrust, including the latter’s obligation
over the garnished deposits of the defendants.

Adopting another tack, BPI claims that Lee should have instead availed himself of the
remedy provided under Section 43, Rule 39 of the Revised Rules of Court because he is
a third party to the case who denies possession of the property.

The argument is specious.

Section 43, Rule 39 of the Revised Rules of Court states:

SECTION 43. Proceedings when indebtedness denied or another

person claims the property. – If it appears that a person or
corporation, alleged to have property of the judgment obligor or to be
indebted to him, claims an interest in the property adverse to him or
denies the debt, the court may authorize, by an order made to that
effect, the judgment oblige to institute an action against such person
or corporation for the recovery of such interest or debt, forbid a
transfer or other disposition of such interest or debt within one
hundred twenty (120) days from notice of the order, and may punish
disobedience of such order as for contempt. Such order may be
modified or vacated at any time by the court which issued it, or by
the court in which the action is brought, upon such terms as may be
just. (Underscoring supplied).

The institution of a separate action against a garnishee contemplates a situation where

the garnishee (third person) "claims an interest in the property adverse to him (judgment
debtor) or denies the debt."19 Neither of these situations exists in this case. The garnishee
does not claim any interest in the deposit accounts of the defendants, nor does it deny
the existence of the deposit accounts. In fact, Citytrust admitted in its letter dated June
28, 1988 that it is in possession of the deposit accounts.
Considering the foregoing disquisitions, BPI's liability for the garnished deposits of
defendants has been clearly established.

Garnishment has been defined as a specie of attachment for reaching credits belonging
to the judgment debtor and owing to him from a stranger to the litigation. 20 A writ of
attachment is substantially a writ of execution except that it emanates at the beginning,
instead of at the termination, of a suit. It places the attached properties in custodia legis,
obtaining pendente lite a lien until the judgment of the proper tribunal on the plaintiff’s
claim is established, when the lien becomes effective as of the date of the levy. 21

By virtue of the writ of garnishment, the deposits of the defendants with Citytrust were
placed in custodia legis of the court. From that time onwards, their deposits were under
the sole control of the RTC and Citytrust holds them subject to its orders until such time
that the attachment or garnishment is discharged, or the judgment in favor of Lee is
satisfied or the credit or deposit is delivered to the proper officer of the court. 22 Thus,
Citytrust, and thereafter BPI, which automatically assumed the former’s liabilities and
obligations upon the approval of their Articles of Merger, is obliged to keep the deposit
intact and to deliver the same to the proper officer upon order of the court.

However, the RTC is not permitted to dissolve or discharge a preliminary attachment or

garnishment except on grounds specifically provided23 in the Revised Rules of Court,
namely,24 (a) the debtor has posted a counter-bond or has made the requisite cash
deposit;25 (b) the attachment was improperly or irregularly issued26 as where there is no
ground for attachment, or the affidavit and/or bond filed therefor are defective or
insufficient; (c) the attachment is excessive, but the discharge shall be limited to the
excess;27 (d) the property attachment is exempt from preliminary attachment; 28 or (e) the
judgment is rendered against the attaching creditor.29

Evidently, the loss of bank records of a garnished deposit is not a ground for the
dissolution of garnishment. Consequently, the obligation to satisfy the writ stands.

Moreover, BPI cannot avoid the obligation attached to the writ of garnishment by claiming
that the fund was not transferred to it, in light of the Articles of Merger which provides that
"all liabilities and obligations of Citytrust shall be transferred to and become the liabilities
and obligations of BPI in the same manner as if the BPI had itself incurred such liabilities
or obligations, and in order that the rights and interest of creditors of Citytrust or liens
upon the property of Citytrust shall not be impaired by merger."30

Indubitably, BPI IS liable to deliver the fund subject of the writ of garnishment.

With regard to the amount of the garnished fund, the Court concurs with the finding of the
CA that the total amount of garnished deposit of Trendline as of January 27, 1994 is
P700,962.10,31 extant in its motion for partial lifting of the writ of preliminary
attachment32 and which amount, as correctly observed by the CA, remains
undisputed33throughout the proceedings relative to this case.
WHEREFORE, the instant petition is DENIED and the assailed February 11, 2009
Decision and October 29, 2009 Resolution of the Court of Appeals are AFFIRMED.

SO ORDERED.
 A.C. No. 9390 August 1, 2012
EMILIA O. DHALIWAL, Complainant,
vs.
ATTY. ABELARDO B. DUMAGUING, Respondent.

RESOLUTION

PERLAS-BERNABE, J.:

Emilia O. Dhaliwal filed a complaint for violation of Canon 16 of the Code of Professional
Responsibility against Atty. Abelardo B. Dumaguing.

In her sworn statement, complainant alleged that she engaged the services of respondent
in connection with the purchase of a parcel of land from Fil-Estate Development, Inc. (Fil-
Estate). On June 13, 2000, upon the instruction of respondent, complainant's daughter
and son-in-law withdrew ₱ 342,000.00 from the Philippine National Bank (PNB) and
handed the cash over to respondent. They then proceeded to BPI Family Bank Malcolm
Square Branch where respondent purchased two manager's checks in the amounts of ₱
58,631.94 and ₱ 253,188.00 both payable to the order of Fil-Estate Inc. When asked why
the manager's checks were not purchased at PNB, respondent explained that he has
friends at the BPI Family Bank and that is where he maintains an account. These
manager's checks were subsequently consigned with the Housing and Land Use
Regulatory Board (HLURB) after complainant’s request to suspend payments to Fil-
Estate had been granted. On September 22, 2000, respondent, on behalf of complainant,
filed with the HLURB a complaint for delivery of title and damages against Fil-Estate. A
week after or on September 29, 2000, he withdrew the two manager's checks that were
previously consigned. On March 3, 2003, complainant informed the HLURB through a
letter that respondent was no longer representing her. On March 11, 2003, the HLURB
promulgated its Decision, adverse to complainant, finding the case for delivery of title and
damages premature as there was no evidence of full payment of the purchase price.
Thereafter, complainant made demands upon respondent to return and account to her
the amounts previously consigned with the HLURB. Respondent did not comply. Thus,
complainant prays that respondent be disbarred.

In his answer, respondent admitted substantially all of the allegations in the complaint. In
defense, he claims that the amount of P311,819.94 was consigned to the HLURB to cover
the full payment of the balance of the purchase price of the lot with Fil-Estate. Fil-Estate,
however, did not accept the same as it wanted complainant to also pay interests and
surcharges totalling more than ₱ 800,000.00. Because the amount was formally
consigned with the HLURB, he allegedly filed a motion 1 to verify if the judgment in the
case was already satisfied. He claimed that his motion has not yet been acted upon;
hence, he did not deem it proper as yet to return the consigned amount.

Following the submission by complainant of her verified position paper and the failure of
respondent to submit his, despite having been given ample opportunity to do so, the
Commission on Bar Discipline, through Attorney Gerely C. Rico, submitted its Report and
Recommendation finding complainant to have sufficiently established that respondent
violated Canon 16 of the Code of Professional Responsibility. It also found respondent to
have submitted a false and fabricated piece of documentary evidence, as the January
2004 Motion attached to his answer as Annex A did not bear any proof of service upon
the opposing party and proof of filing with the HLURB. The Commission recommended
that respondent be suspended from the practice of law for a period of one (1) year. On
September 19, 2007, the IBP Board of Governors passed Resolution No. XVIII-2007-93,
adopting with modification the Commission's Report and Recommendation, to wit:

RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and

APPROVED, with modification, the Report and Recommendation of the
Investigating Commissioner of the above-entitled case, herein made part of
this Resolution as Annex "A"; and, finding the recommendation fully
supported by the evidence on record and the applicable laws and rules, and
considering Respondent's violation of Canon 16 of the Code of Professional
Responsibility by his failure to return and account to complainant the
amount previously consigned with the HLURB despite demand, Atty.
Abelardo B. Dumaguing is hereby SUSPENDED from the practice of law
for six (6) months and Orderedto Return the amount of ₱ 311,819.94 to
complainant within thirty (30) days from receipt of notice.

Respondent's motion for reconsideration was denied by the IBP Board of Governors in
Resolution No. XX-2012-42.

The Court adopts the IBP's findings of fact and conclusions of law.

The Code of Professional Responsibility provides:

Canon 16-A lawyer shall hold in trust all moneys and properties of his client
that may come into his possession.

Rule 16.01-A lawyer shall account for all money or property collected or
received for or from the client.

Rule 16.02-A lawyer shall keep the funds of each client separate and apart
from his own and those of others kept by him.

Rule 16.03-A lawyer shall deliver the funds and property of his client when
due or upon demand.

Money entrusted to a lawyer for a specific purpose, such as payment for the balance of
the purchase price of a parcel of land as in the present case, but not used for the purpose,
should be immediately returned.2 "A lawyer's failure to return upon demand the funds held
by him on behalf of his client gives rise to the presumption that he has appropriated the
same for his own use in violation of the trust reposed in him by his client. Such act is a
gross violation of general morality as well as of professional ethics. It impairs public
confidence in the legal profession and deserves punishment." 3

Since respondent withdrew the consignation of the BPI manager’s checks in the total
amount of ₱ 311,891.94 from the HLURB and the same was not used to settle the balance
of the purchase price of the parcel of land purchased by complainant from Fil-Estate, then
reimbursement with legal interest4 was properly ordered by the IBP.

Respondent's proffered excuse of having to await the HLURB action on his alleged
motion-- the filing of which he miserably failed to prove-- as a condition to the return of
the sum of ₱ 311 ,891.94 to complainant compounds his liability and even bolstered his
attitude to use dishonest means if only to evade his obligation. It underlines his failure to
meet the high moral standards required of members of the legal profession.

WHEREFORE, Atty. Abelardo B. Dumaguing is adjudged GUILTY of violating Canon 16

of the Code of Professional Responsibility. He is hereby SUSPENDED from the practice
of law for a period of six (6) months effective upon receipt of this Resolution. He is also
ordered to return to complainant Emilia O. Dhaliwal, the amount of P311,819.94 with legal
interest of six percent (6%) per annum from the time of his receipt of the money on
September 29, 2000 up to the finality of this Resolution and twelve percent (12%) per
annum from finality thereof until paid.

Let copies of this Resolution be furnished the Office of the Bar Confidant to be entered
into respondent’s personal records as attorney. Copies shall likewise be furnished the
IBP and the Office of the Court Administrator for circulation to all courts concerned.

SO ORDERED.
 A.C. No. 6116 August 1, 2012
ENGR. GILBERT TUMBOKON, Complainant,
vs.
ATTY. MARIANO R. PEFIANCO, Respondent.

RESOLUTION

PERLAS-BERNABE, J.:

Before the Court is an administrative complaint for disbarment filed by complainant Engr.
Gilbert Tumbokon against respondent Atty. Mariano R. Pefianco for grave dishonesty,
gross misconduct constituting deceit and grossly immoral conduct.

In his Complaint,1 complainant narrated that respondent undertook to give him 20%
commission, later reduced to 10%, of the attorney's fees the latter would receive in
representing Spouses Amable and Rosalinda Yap (Sps. Yap), whom he referred, in an
action for partition of the estate of the late Benjamin Yap (Civil Case No. 4986 before the
Regional Trial Court of Aklan). Their agreement was reflected in a letter 2 dated August
11, 1995. However, respondent failed to pay him the agreed commission notwithstanding
receipt of attorney's fees amounting to 17% of the total estate or about ₱ 40 million.
Instead, he was informed through a letter3 dated July 16, 1997 that Sps. Yap assumed to
pay the same after respondent had agreed to reduce his attorney's fees from 25% to 17%.
He then demanded the payment of his commission4 which respondent ignored.

Complainant further alleged that respondent has not lived up to the high moral standards
required of his profession for having abandoned his legal wife, Milagros Hilado, with
whom he has two children, and cohabited with Mae FlorGalido, with whom he has four
children. He also accused respondent of engaging in money-lending business5without the
required authorization from the BangkoSentralngPilipinas.

In his defense, respondent explained that he accepted Sps. Yap's case on a 25%
contingent fee basis, and advanced all the expenses. He disputed the August 11, 1995
letter for being a forgery and claimed that Sps. Yap assumed to pay complainant's
commission which he clarified in his July 16, 1997 letter. He, thus, prayed for the dismissal
of the complaint and for the corresponding sanction against complainant's counsel, Atty.
Florencio B. Gonzales, for filing a baseless complaint.6

In the Resolution7 dated February 16, 2004, the Court resolved to refer this administrative
case to the Integrated Bar of the Philippines (IBP) for investigation, report and
recommendation. In his Report and Recommendation8 dated October 10, 2008, the
Investigating IBP Commissioner recommended that respondent be suspended for one (1)
year from the active practice of law, for violation of the Lawyer's Oath, Rule 1.01, Canon
1; Rule 7.03, Canon 7 and Rule 9.02, Canon 9 of the Code of Professional Responsibility
(Code). The IBP Board of Governors adopted and approved the same in its Resolution
No. XIX-2010-4539 dated August
28, 2010. Respondent moved for reconsideration 10 which was denied in Resolution No.
XIX-2011-141 dated October 28, 2011.

After due consideration, We adopt the findings and recommendation of the IBP Board of
Governors.

The practice of law is considered a privilege bestowed by the State on those who show
that they possess and continue to possess the legal qualifications for the profession. As
such, lawyers are expected to maintain at all times a high standard of legal proficiency,
morality, honesty, integrity and fair dealing, and must perform their four-fold duty to
society, the legal profession, the courts and their clients, in accordance with the values
and norms embodied in the Code.11 Lawyers may, thus, be disciplined for any conduct
that is wanting of the above standards whether in their professional or in their private
capacity.

In the present case, respondent's defense that forgery had attended the execution of the
August 11, 1995 letter was belied by his July 16, 1997 letter admitting to have undertaken
the payment of complainant's commission but passing on the responsibility to Sps. Yap.
Clearly, respondent has violated Rule 9.02,12 Canon 9 of the Code which prohibits a
lawyer from dividing or stipulating to divide a fee for legal services with persons not
licensed to practice law, except in certain cases which do not obtain in the case at bar.

Furthermore, respondent did not deny the accusation that he abandoned his legal family
to cohabit with his mistress with whom he begot four children notwithstanding that his
moral character as well as his moral fitness to be retained in the Roll of Attorneys has
been assailed. The settled rule is that betrayal of the marital vow of fidelity or sexual
relations outside marriage is considered disgraceful and immoral as it manifests
deliberate disregard of the sanctity of marriage and the marital vows protected by the
Constitution and affirmed by our laws.13 Consequently, We find no reason to disturb the
IBP's finding that respondent violated the Lawyer's Oath14 and Rule 1.01, Canon 1 of the
Code which proscribes a lawyer from engaging in "unlawful, dishonest, immoral or
deceitful conduct."

However, We find the charge of engaging in illegal money lending not to have been
sufficiently established.1âwphi1 A "business" requires some form of investment and a
sufficient number of customers to whom its output can be sold at profit on a consistent
basis.15 The lending of money to a single person without showing that such service is
made available to other persons on a consistent basis cannot be construed asindicia that
respondent is engaged in the business of lending.

Nonetheless, while We rule that respondent should be sanctioned for his actions, We are
minded that the power to disbar should be exercised with great caution and only in clear
cases of misconduct that seriously affect the standing and character of the lawyer as an
officer of the court and as member of the bar,16 or the misconduct borders on the criminal,
or committed under scandalous circumstance,17 which do not obtain here. Considering
the circumstances of the case, We deem it appropriate that respondent be suspended
from the practice of law for a period of one (1) year as recommended.

WHEREFORE, respondent ATTY. MARIANO R. PEFIANCO is found GUILTY of

violation of the Lawyer’s Oath, Rule 1.01, Canon 1 of the Code of Professional
Responsibility and Rule 9.02, Canon 9 of the same Code and SUSPENDEDfrom the
active practice of law ONE (1) YEAR effective upon notice hereof.

Let copies of this Resolution be entered in the personal record of respondent as a member
of the Philippine Bar and furnished the Office of the Bar Confidant, the Integrated Bar of
the Philippines and the Office of the Court Administrator for circulation to all courts in the
country.

SO ORDERED.
 GR No. 196883, Aug 15, 2012
GLOBAL RESOURCE FOR OUTSOURCED WORKERS
v.
ABRAHAM C. VELASCO

DECISION

PERLAS-BERNABE, J.:

The power to dismiss an employee is a recognized prerogative inherent in the employer's

right to freely manage and regulate his business.[1]However, this power is never unbridled
and the exercise thereof should unfailingly comply with both substantive and procedural
requirements of the law.
This is an appeal under Rule 45 of the Revised Rules of Court which seeks to reverse the
January 31, 2011 Decision[2] and May 13, 2011 Resolution[3] of the Court of Appeals
holding the petitioners liable for overtime pay, nominal damages and attorney's fees.

The Facts
Petitioner Global Resource for Outsourced Workers (GROW), Inc. is a domestic
corporation engaged in the placement of workers for overseas deployment, with petitioner
Eusebio Tanco as its President.[4]
Sometime in January 2008, respondents Abraham Velasco and Nanette Velasco
(collectively respondents) -were hired by petitioners MS Retail KSC/MS Retail Central
Marketing Co. (MS Retail),[5]through GROW, as Circus Performer and Circus Performer-
Assistant, respectively, at MS Retail's Store located in Kuwait.
Based on their employment contracts, respondents Abraham and Nanette were entitled
to monthly salaries of KD 650 or USD 2,303.92 and KD 150 or USD 531.87,
respectively,[6] under the following work schedule:[7]
No. of shows per day: 4 shows/day
No. of work days per week: 6 days/wk.
No. of work hours per month-: 48 hrs/mo.

It was also stipulated that MS Retail may determine the hours of work assigned to
respondents "from time to. time in accordance with the general and particular
requirements of the operation" of MS Retail.[8] Moreover, when respondents are not
actually performing shows, they may be asked to carry out duties as the business may
require.[9]
Respondents arrived in Kuwait on February 22, 2008 and were made to perform shows
after a brief orientation. In a meeting with the store manager of MS Retail, they brought
up their work hours and show schedules as provided for in their employment contract.
They were, however, informed that the work hours of "48 hrs/mo" as appearing in the
contract, was a typographical error as the correct number of their working hours was 48
hours per week, to which they complied.
On August 26, 2008, respondents went to Thailand on approved vacation leave. On
September 2, 2008, respondent Abraham sent an electronic mail (email) to Mr. Joseph
San Juan, the Human Resources Coordinator of MS Retail, advising him of their inability
to return for work on September 3, 2008 because of the political protests in Thailand and
that they had rebooked their return flight to Kuwait on September 10, 2008. [10] However,
contrary to their representation, the respondents proceeded to the Philippines on
September 9, 2008.[11]
On September 17, 2008, Mr. San Juan emailed respondents asking for their definite date
of return to Kuwait and warning them that if they do not immediately return to work before
the end of the month, they will be dismissed from employment for cause. [12]
The respondents ignored the said email. Thus, on September 23, 2008, MS Retail
terminated their employment through email, which reads:[13]
Please be informed that we are terminating your employment contract with MS Retail
effective today, 23rd September 2008. Due to Kuwait Private Labour Law Article 55. "The
employer has the right to terminate the labourer without notice and indemnity in the
following cases:
c) If he has been absent from duty for more that [sic] seven consecutive days without any
legal reason."
Therefore, company decided to terminate your employment contract and blacklist both of
you in entering Kuwait.
Consider this email as your official termination letter.

Unknown to MS Retail, the respondents had already filed a labor case for constructive
dismissal, breach of contract, and payment of the remaining portion of their contracts,
damages and attorney's fees on September 15, 2008.[14] They claimed that, contrary to
the terms of their employment contracts, they were made to work for at least eight (8)
hours a day or 48 hours per week, without overtime pay. Moreover, they were assigned
work not related to their task as circus performers. Hence, they were deemed to have
been constructively dismissed, warranting the payment of the unexpired portion of their
contract, damages and attorney's fees.[15]
Labor Arbiter's Ruling
The Labor Arbiter (LA) granted respondents' claim in her April 8. 2009 Decision, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering GLOBAL
RESOURCES FOR OUTSOURCED WORKERS AND MS RETAIL KSC jointly and
severally liable to pay complainants Abraham C. Velasco and Nannette T. Velasco their
salaries for the unexpired portion of their employment contract for six (6) months:

1.) Abraham Velasco

(US$ 2,303.92 x 6 mos.) = US$ 13,823.52

2.) Nannette Velasco

(US$.531.87 x 6 mos.) = US$43,191.22*
TOTAL US$57,014.74**

3.) Ten (10%) percent Atty.'s fees- US$ 5,701.47***

All other claims are dismissed for want of basis.

SO ORDERED.[16]

The LA found respondents to have been constructively dismissed from service without
just cause, debunking petitioners' defense that respondents abandoned their work as-
shown by the immediate filing of the complaint for illegal dismissal.[17]

Respondents' claim for overtime pay was, however, denied for the reason that indeed a
typographical error was committed in providing the number of working hours as 48
hours per month instead of 48 hours per week. The LA made the observation that "it is a
known practice that employees work for a regular eight (8) hours a day and 48 hours for
6 days work."[18]

Only petitioners filed an appeal before the National Labor Relations Commission
(NLRC). The respondents did not appeal the denial of their claim for overtime pay.

Ruling of NLRC

On October 30, 2009, the NLRC Second Division rendered its Decision[19] dismissing the
complaint for constructive/illegal dismissal on the ground of abandonment. [20]

The NLRC found no basis to sustain, the charge of constructive dismissal premised on
petitioners' act of imposing a greater number of working hours different from that
stipulated in the employment contract. It affirmed the standard practice of other
employees working as party entertainers in the store of MS Retail of rendering an average
of eight (8) hours a day or forty-eight (48) hours work for one (1) week, as well as the LA's
finding of typographical error in the working hours provided for under respondents'
contract.[21]

In contrast to the findings of the LA, the NLRC gave credence to petitioners' claim of
abandonment, holding that the respondents' "continuing absence from work without any
justifiable reason, notwithstanding notice with warning for them to return to work, coupled
with their actual flight back to Philippines, indicated an animusto no longer go back to
their work in Kuwait."[22] Respondents' Motion for Reconsideration[23] was denied in the
NLRC Resolution dated January 25, 2010, prompting the filing of a petition for certiorari
before the Court of Appeals.

Ruling of the Court of Appeals

On January 31, 2011, the CA rendered the assailed Decision[24]holding that while
respondents were validly terminated, the petitioners failed to comply with the twin-notice
rule, to wit: first informing the respondents of the charge and affording them an opportunity
to be heard, then subsequently advising them of their.termination. Petitioners were then
held liable for nominal damages and attorney's fees. Finally, the CA found respondents
entitled to overtime pay for work rendered in excess of 48 hours per month.

The dispositive portion of the assailed Decision reads:

WHEREFORE, premises considered, the Petition for Certiorari is hereby PARTLY
GRANTED. Accordingly, the assailed Decision dated October 30, 2009 and Resolution
January 25, 2010 of the NLRC are AFFIRMED with MODIFICATION. MS Retail is hereby
ordered to pay petitioners the following:
1. PhP 30,000.00 each for non-compliance with statutory due process; and
2. Overtime pay for work rendered in excess of the forty eight (48) hours work per month.

The case is hereby REMANDED to the Labor Arbiter for proper computation of the money
claims.

SO ORDERED.

Issues Presented Before the Court

In the present petition for review, the validity of the dismissal of the respondents was not
assailed. The only issues raised are:
(1) Whether or not the CA erred in granting the respondents overtime pay considering
that its denial by the LA was not appealed by the respondents.

(2) Whether or not the CA erred in awarding nominal damages and attorney's fees to the
respondents.
The Court's Ruling
The petition is partly meritorious

The petitioners contend that the failure of the respondents to appeal the ruling of the LA
denying the latter's claim for overtime pay rendered the same final and binding upon them.
The contention lacks merit.
In the case of Bahia Shipping Services, Inc. v. Chua,[25] the Court cited an exception to
the rule that a party who has not appealed cannot obtain any affirmative relief other than
the one granted in the appealed decision. It stated:
Indeed, a party who has failed to appeal from a judgment is deemed to have acquiesced
to it and can no longer obtain from the appellate court any affirmative relief other than
what was already granted under said judgment. However, when strict adherence to such
technical rule will impair a substantive right, such as that of an illegally dismissed
employee to monetary compensation as provided by law, then equity dictates that the
Court set aside the rule to pave the way for a full and just adjudication of the case.

In the present case, although respondents were found to have been dismissed for cause,
depriving them of overtime pay, if rightly due to them, would still amount to an impairment
of substantive rights. Thus, following the dictates of equity and as an exception to the
general rule, the Court finds it proper for the CA to have passed upon the matter of
overtime pay, despite the fact that respondents did not appeal from the LA Decision
denying the same claim.
Be that as it may, a perusal of the records disclosed a dearth of evidence to support an
award of overtime pay.
As a general rule, the factual findings of the CA when supported by substantial evidence
on record are final and conclusive and may not be reviewed on appeal.[26] This is,
however, subject to several exceptions, one of which is when there is a conflict between
the factual findings of the CA and the NLRC, as in this case, warranting review by the
Court.[27]

Petitioners argue that the "48 hours per month" work schedule stipulated in the
employment contract is a mere typographical error, the true intention of the parties being
for the respondents to render work of at least 48 hours per week.
The Court agrees with the petitioners.
Obligations arising from contracts, like an employment contract, have the force of law
between the contracting parties and should be complied with in good faith. [28]When the
terms of a contract are clear and leave no doubt as to the intention of the contracting
parties, the literal meaning of its stipulations governs.[29] However, when the contract is
vague and ambiguous, as in the case at bar, it is the Court's duty to determine the real
intention of the contracting parties considering the contemporaneous and subsequent
acts of the latter.[30]
The employment contracts of the respondents provide that their work schedule shall be
as follows:[31]
No. of shows per day: 4 shows/day
No. of work days per week: 6 days/wk.
No. of work hours per month: 48 hrs/mo.

The respondents agreed to render four (4) showfs per day with an estimated performance
time of thirty (30) minutes. However, it should also be noted that respondents were given
time to prepare before each show and time to rest after every performance; thus,
respondents would normally consume two (2) hours for each show. [32] If respondents
were required to render at least four (4) shows a day, they necessarily had to work for at
least eight (8) hours a day. Since the petitioners employed a six-day workweek, it is an
inevitable conclusion that respondents were required to work for at least 48 hours per
week.

The Court also notes that the respondents were properly apprised of the error in their
employment contracts. Despite ample opportunity -- more than half a year -- to air out
their misgivings on the matter and ask their employer for overtime pay, if they really
believed that the 48 hours work per month was not erroneous, respondents did nothing.
Respondents did not complain or assail the implementation of their true number of work
hours. Instead, they proceeded to carry out their work under the correct 48-hour week
schedule for more than half of the entire duration of their employment contract, without
any protest. It was only before the LA that respondents raised their complaint on the
matter for the first time. These circumstances indicate that respondents' protest was a
mere afterthought. As such, it cannot sway the Court to accept that work for 48 hours per
month was the true intention of the parties.
An evaluation of the terms of the employment contracts and the acts of the parties indeed
reveal that their true intention was for the respondents to perform work of at least forty
eight (48) hours per week, and not 48 hours per month.
It should be emphasized that in case of conflict between the text of a contract and the
intent of the parties, it is the latter that prevails, [33] for intention is the soul of a contract,
not its wording which is prone to mistakes, inadequacies or ambiguities.[34] To hold
otherwise would give life, validity, and precedence to mere typographical errors and
defeat the very purpose of agreements.[35]
Accordingly, the CA's award for overtime pay must necessarily be recalled.

On the second issue, it is unassailed that the respondents abandoned their work when
they failed without valid reason to resume their duties after their leave of absence expired
on September 3, 2008. Thus, the CA correctly ruled that the termination of the
respondents' employment on September 23, 2008 was with just cause. Nonetheless, the
Court cannot absolve petitioners from liability.
Book V, Rule XIV, of the Omnibus Rules Implementing the Labor Code outlines the
procedure for termination of employment, to wit:
Section 1. Security of tenure and due process. No worker shall be dismissed except for
a just or authorized cause provided by law and after due process.
Section 2. Notice of Dismissal. Any employer who seeks to dismiss a worker shall furnish
him a written notice stating the particular acts or omissions constituting the grounds for
his dismissal. In cases of abandonment of work, the notice shall be served at the worker's
last known address.
xxx

Section 5. Answer and hearing. The worker may answer the allegations stated against
him in the notice of dismissal within a reasonable period from receipt of such notice. The
employer shall afford the worker ample opportunity to be heard and to defend himself with
the assistance of his representatives, if he so desires.
Section 6. Decision to dismiss. The employer shall immediately notify a worker in writing
of a decision to dismiss him stating clearly the reasons therefor.

To be totally free from liability, the employer must not only show sufficient ground for the
termination of employment but it must also comply with procedural due process by giving
the employees sought to be dismissed two notices: 1) notice of the intention to dismiss,
indicating therein the acts or omissions complained of, coupled with an opportunity for the
employees to answer and rebut the charges against them; and 2) notice of the decision
to dismiss.[36] MS Retail failed in this respect. While it notified respondents of their
dismissal in its letter dated September 23, 2008, it failed to furnish them with a written
notice of the charges thus, denying them a reasonable opportunity to explain their side.

The petitioners' failure to observe due process when it terminated respondents'

employment for just cause did not invalidate the dismissal but rendered petitioners liable
for nominal damages.[37]Under the Civil Code, nominal damages is adjudicated 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.[38] The amount thereof is addressed to the sound discretion of the court.
Considering the prevailing circumstances in the case at bar, the Court deems it proper to
award to each of the respondents PhP30,000.00 as nominal damages.[39]

With respect to the attorney's fees, while the CA, in the body of its Decision found
respondents entitled to such award, it omitted to include the same in the dispositive
portion of its Decision. Such award must, however, be upheld, not only because labor
cases take much time to litigate, but also because these require special dedication and
expertise on the part of the pro-worker's counsel.[40] Therefore, it is just to award
attorney's fees of PhP30,000.00 to each of the respondents.

Finally, a more complete and just resolution of the present case calls for the determination
of the nature of the liability of all the petitioners. The Court notes that the CA ordered only
MS Retail to pay respondents. However, Section 10 of Republic Act 8042,[41] as amended
by Republic Act 10022,[42] provides for the solidary liability of the principal and the
recruitment agency, to wit:
SEC. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar, days after the filing
of the complaint, the claims arising out of an employer-employee relationship or by virtue
of any law or contract involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damage. Consistent with this mandate,
the NLRC shall endeavor to update and keep abreast with the developments in the global
services industry.
The liability of the principal/employer and the recruitment/placement agency for any and
all claims under this section shall be joint and several. This provision shall be incorporated
in the contract for overseas employment and shall be a condition precedent for its
approval. The performance bond to be filed by the recruitment/placement agency, as
provided by law, shall be answerable for all money claims or damages that may be
awarded to the workers. If the recruitment/placement agency is a juridical being, the
corporate officers and directors and partners as the case may be, shall themselves be
jointly and solidarity liable with the corporation or partnership for the aforesaid claims and
damages. (Emphasis supplied)

In view of the foregoing, the liability for the monetary awards granted to respondents shall
be jointly and severally borne by all the petitioners.

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed Decision and

Resolution of the Court of Appeals are hereby MODIFIED by DELETING the award for
overtime pay and ORDERING petitioners to jointly and severally pay each of the
respondents PhP30,000.00 as nominal damages and PhP30,000.00 as attorney's fees.

SO ORDERED.
 G.R. No. 191792, August 22, 2012

ANGELITO CASTRO, RAYMUNDO SAURA AND RAMONITO FANUNCION,

PETITIONERS,
VS.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND MANUEL V.
PANGILINAN, RESPONDENTS.

RESOLUTION
PERLAS-BERNABE, J.:
This Petition for Review on Certiorari[1] assails the November 24, 2009 Decision[2] and
March 25, 2010 Resolution[3] of the Court of Appeals (CA) in CA-GR. SP No. 72889,
which set aside the June 21, 2002[4]and September 11, 2002 Resolutions of the National
Labor Relations Commission (NLRC) and directed petitioners, among others, to return
the amount of P133,000.00 which they received from respondents by virtue of the
Order[5] of the Labor Arbiter dated April 18, 2002.
The Factual Antecedents

Respondent Philippine Long Distance Telephone Company (PLDT) is a domestic

corporation engaged in telecommunications business. On the other hand, petitioners
were among the ninety-four (94) union officers and members who were dismissed by
respondent PLDT due to their participation in the strike staged from December 22, 1992
to January 21, 1993 by the Manggagawa ng Komunikasyon sa Pilipinas (MKP), the
collective bargaining agent of all rank and file employees of PLDT. The strike was,
thereafter, declared illegal and the employees' dismissals were adjudged valid in the
Resolution dated February 27, 1998 rendered by the NLRC to which the case was
certified for compulsory arbitration.
Meanwhile, during the pendency of the case before the NLRC, the striking employees
were admitted back to work in April 1993 subject to the outcome of the pending case. The
NLRC Resolution was subsequently upheld by the Court in the Resolution dated August
3, 1998, which eventually attained finality and accordingly entered in the Book of Entries
of Judgments.
In separate letters dated January 12, 1999, the concerned employees including
petitioners were notified of their termination for cause citing the above Resolutions of the
NLRC and the Court. Aggrieved, they filed separate complaints (which were thereafter
consolidated) for illegal dismissal, money claims and damages against PLDT, averring
that in the intervening time between their return to work in April 1993 and their dismissal
on January 12, 1999, PLDT voluntarily extended to a number of the 94 employees the
benefit of redundancy/early retirement program, and even promotions to high-ranking
positions notwithstanding that the continuance of their employment was subject to the
outcome of the pending case. They claimed that the foregoing acts constituted
supervening events or voluntary acts amounting to a waiver/ condonation of the effects
of the illegality of strike which rendered the NLRC and Supreme Court Resolutions moot
and academic.
For its part, PLDT denied any condonation/waiver and interposed the defense of res
judicata claiming that the issue of the validity of the employees' dismissals had already
been resolved with finality by the Court.
In the Decision[6] dated March 15, 2000, Labor Arbiter Vicente R. Layawen rejected the
claim of res judicata and declared the dismissal of the concerned employees illegal He
found PLDT's acts of granting benefits of early retirement/redundancy program, extending
promotions, and re-assigning the employees without any reservation or condition and
without reference to the pending cases as tantamount to its condonation of their unlawful
acts. He thereby ordered PLDT to reinstate them, to pay their backwages with 12%
interest per annum from their termination on January 12, 1999 and to pay attorney's fees.

Pending appeal with the NLRC, the concerned employees were reinstated in the payroll
and received their salaries from April to December 2000 as well as other benefits. [7]

In the Decision[8] dated December 28, 2000, the NLRC vacated the above decision
holding that the intent to waive/condone the effects of the illegal strike was not sufficiently
established by the cited circumstances. However, considering that 29 of the employees
involved were allowed to avail of early retirement and redundancy benefits, it awarded to
the other employees a similar benefit of one-half month pay per year of service as
financial assistance on the basis of equitable and humanitarian considerations.

The parties filed their respective petitions for certiorari before the CA, docketed as CA-
G.R. SP Nos. 68415 and 68770.[9] However, both petitions were dismissed in the Decision
dated March 18, 2005[10]which was affirmed in the Resolution of the Court dated January
16, 2006 in G.R. Nos. 170607-08 that became final and executory and entered in the
Book of Entries of Judgments on April 5, 2006.
Meanwhile on March 14, 2001, MKP and PLDT signed a new Collective Bargaining
Agreement (CBA), among others, granting all PLDT employees the amount of
P133,000.00 each in lieu of wage increases during the first year of the CBA. The CBA
was made effective November 9, 2000, the day immediately following the expiration of
the old CBA. The concerned employees filed motions for execution before the Labor
Arbiter seeking payment of salaries and other benefits granted under the new CBA.

The Ruling of the Labor Arbiter

In the Order[11] dated April 18, 2002, Labor Arbiter Jaime M. Reyno adjudged the
entitlement of the employees to the payment of the amount of P133,000.00 each granted
under the CBA, explaining that the said benefit accrued on November 9, 2000 prior to the
reversal by the NLRC on December 28, 2000 of the March 15, 2000 Decision of Labor
Arbiter Layawen, and thus, included in the reinstatement aspect of the latter decision
pending appeal. He thereby directed respondents to pay the concerned employees the
said amount or a total of P6,517,000.00 (later reduced to P6,384,000.00). [12]

The Ruling of the NLRC

On appeal, the NLRC sustained the above order in the Resolution1 dated June 21, 2002,
holding that the said grant is no different from the other benefits that were received by
petitioners as a consequence of their reinstatement pending appeal.
Upon the employees' motions, Labor Arbiter Reyno ordered PLDT's bank, Equitable PCI
Bank, Ayala Locsin Branch, to release the garnished amount of P6,384,000.00 to the
Sheriff for deposit with the NLRC cashier,[14] which was subsequently released to the
employees.[15]

The Ruling of the CA

In the assailed November 24, 2009 Resolution, the CA vacated the NLRC Decision and
ordered each petitioner to return the amount of P133,000.00 they received by virtue of
the April 18, 2002 Order of Labor Arbiter Reyno. It found that the concerned employees
were no longer employees at the time of the signing of the CBA on March 14, 2001
notwithstanding that its effectivity was made retroactive to November 9, 2000. Thus, not
being members of the bargaining unit, they cannot claim benefits under the CBA.

Issue before the Court

In the instant case, petitioners insist that they are entitled to the payment of the CBA-
imposed P133,000.00 because the CBA became effective on November 9, 2000 prior to
the December 28, 2000 NLRC Decision that declared their dismissal as valid.
On the other hand, respondents contend that the parties to the CBA came to an
agreement on the terms and conditions thereof only on March 14, 2001. Hence, since the
petitioners were no longer part of the bargaining unit represented by MKP at that time,
they can no longer avail of the benefits under the new CBA. Accordingly, the grant to
them of the CBA-imposed P133,000.00 per employee is a form of unjust enrichment.
The Court's Ruling

The petition is bereft of merit.

Settled is the rule that the benefits of a CBA extend only to laborers and employees who
are members of the collective bargaining unit.[16]
In the present case, the Court's August 3, 1998 Resolution sustaining petitioners'
dismissal as a consequence of their participation in the illegal strike became final on
January 18, 1999. Accordingly, PLDT informed them of their termination for cause on the
basis of the said Resolution. While they challenged their dismissals upon a claim that
supervening events evincing an intent on the part of PLDT to waive/condone the effects
of the illegal strike had set in which rendered the final Resolution of the Court moot and
academic, the Court, in the Resolution dated January 16, 2006 in G.R. Nos. 170607-08,
ruled out the presence of supervening events. As such, it is only proper to reckon the
termination of petitioners' employment with PLDT to January 18, 1999.
Consequently, petitioners were no longer employees of PLDT nor members of the
collective bargaining unit represented by MKP when the CBA was signed on March 14,
2001 or when it became effective on November 9, 2000 and are, thus, not entitled to avail
of the benefits under the new CBA. Accordingly, the Court finds no reversible error on the
part of the CA in directing each of the petitioners to return the amount of P133,000.00
which they respectively received from respondents.
WHEREFORE, the assailed November 24, 2009 Decision and March 25, 2010 Resolution
of the Court of Appeals in CA-GR. SP No. 72889 are hereby AFFIRMED.
SO ORDERED.
 GR No. 196231, Sep 04, 2012
EMILIO A. GONZALES III
v.
OFFICE OF PRESIDENT OF PHILIPPINES

DECISION

PERLAS-BERNABE, J.:

The Cases
These two petitions have been consolidated not because they stem from the same factual
milieu but because they raise a common thread of issues relating to the President's
exercise of the power to remove from office herein petitioners who claim the protective
cloak of independence of the constitutionally-created office to which they belong the
Office of the Ombudsman.
The first case, docketed as G.R. No. 196231, is a Petition for Certiorari (with application
for issuance of temporary restraining order or status quo order) which assails on
jurisdictional grounds the Decision[1] dated March 31, 2011 rendered by the Office of the
President in OP Case No. 10-J-460 dismissing petitioner Emilio A. Gonzales III, Deputy
Ombudsman for the Military and Other Law Enforcement Offices (MOLEO), upon a
finding of guilt on the administrative charges of Gross Neglect of Duty and Grave
Misconduct constituting a Betrayal of Public Trust. The petition primarily seeks to declare
as unconstitutional Section 8(2) of Republic Act (R.A.) No. 6770, otherwise known as the
Ombudsman Act of 1989, which gives the President the power to dismiss a Deputy
Ombudsman of the Office of the Ombudsman.
The second case, docketed as G.R. No. 196232, is a Petition for Certiorari and Prohibition
(with application for issuance of a temporary restraining order or status quo order) seeking
to annul, reverse and set aside (1) the undated Order[2] requiring petitioner Wendell
Barreras-Sulit to submit a written explanation with respect to alleged acts or omissions
constituting serious/grave offenses in relation to the Plea Bargaining Agreement
(PLEBARA) entered into with Major General Carlos F. Garcia; and (2) the April 7, 2011
Notice of Preliminary Investigation,[3] both issued by the Office of the President in OP-DC-
Case No. 11-B-003, the administrative case initiated against petitioner as a Special
Prosecutor of the Office of the Ombudsman. The petition likewise seeks to declare as
unconstitutional Section 8(2) of R.A. No. 6770 giving the President the power to dismiss
a Special Prosecutor of the Office of the Ombudsman.
The facts from which these two cases separately took root are neither complicated nor
unfamiliar.

In the morning of August 23, 2010, news media scampered for a minute-by-minute
coverage of a hostage drama that had slowly unfolded right at the very heart of the City
of Manila. While initial news accounts were fragmented it was not difficult to piece together
the story on the hostage-taker, Police Senior Inspector Rolando Mendoza. He was a
disgruntled former police officer attempting to secure his reinstatement in the police force
and to restore the benefits of a life-long, and erstwhile bemedaled, service. The following
day, broadsheets and tabloids were replete with stories not just of the deceased hostage-
taker but also of the hostage victims, eight of whom died during the bungled police
operation to rescue the hapless innocents. Their tragic deaths triggered word wars of
foreign relation proportions. One newspaper headline ran the story in detail, as follows:

MANILA, Philippines - A dismissed policeman armed with an assault rifle hijacked a bus
packed with tourists, and killed most of its passengers in a 10 hour-hostage drama shown
live on national television until last night.
Former police senior inspector Rolando Mendoza was shot dead by a sniper at past 9
p.m.

Mendoza hijacked the bus and took 21 Chinese tourists hostage, demanding his
reinstatement to the police force.
The hostage drama dragged on even after the driver of the bus managed to escape and
told police that all the remaining passengers had been killed.
Late into the night assault forces surrounded the bus and tried to gain entry, but a pair of
dead hostages handcuffed to the door made it difficult for them. Police said they fired at
the wheels of the bus to immobilize it.
Police used hammers to smash windows, door and windshield but were met with
intermittent fire from the hostage taker.
Police also used tear gas in an effort to confirm if the remaining hostages were all dead
or alive. When the standoff ended at nearly 9 p.m., some four hostages were rescued
alive while Mendoza was killed by a sniper.
Initial reports said some 30 policemen stormed the bus. Shots also rang out, sending
bystanders scampering for safety.
It took the policemen almost two hours to assault the bus because gunfire reportedly rang
out from inside the bus

Mendoza hijacked the tourist bus in the morning and took the tourists hostage.

Mendoza, who claimed he was illegally dismissed from the police service, initially
released nine of the hostages during the drama that began at 10 a.m. and played out live
on national television.
Live television footage showed Mendoza asking for food for those remaining in the bus,
which was delivered, and fuel to keep the air-conditioning going.
The disgruntled former police officer was reportedly armed with an M-16 rifle, a 9 mm
pistol and two hand grenades.
Mendoza posted a handwritten note on the windows of the bus, saying "big deal will start
after 3 p.m. today." Another sign stuck to another window said "3 p.m. today deadlock."

Stressing his demand, Mendoza stuck a piece of paper with a handwritten message: "Big
mistake to correct a big wrong decision." A larger piece of paper on the front windshield
was headed, "Release final decision," apparently referring to the case that led to his
dismissal from the police force.
Negotiations dragged on even after Mendoza's self- imposed deadline.

Senior Police Officer 2 Gregorio Mendoza said his brother was upset over his dismissal
from the police force. "His problem was he was unjustly removed from service. There was
no due process, no hearing, no complaint," Gregorio said.
Last night, Gregorio was arrested by his colleagues on suspicions of being an accessory
to his brother's action. Tensions rose as relatives tried to prevent lawmen from arresting
Gregorio in front of national television. This triggered the crisis that eventually forced
Mendoza to carry out his threat and kill the remaining hostages.
Negotiators led by Superintendent Orlando Yebra and Chief Inspector Romeo Salvador
tried to talk Mendoza into surrendering and releasing the 21 hostages, mostly children
and three Filipinos, including the driver, the tourist guide and a photographer. Yebra
reportedly lent a cellphone to allow communications with Mendoza inside the bus, which
was parked in front of the Quirino Grandstand.
Children could be seen peeking from the drawn curtains of the bus while police
negotiators hovered near the scene.
Manila Police District (MPD) director Chief Superintendent Rodolfo Magtibay ordered the
deployment of crack police teams and snipers near the scene. A crisis management
committee had been activated with Manila Vice Mayor Isko Moreno coordinating the
actions with the MPD.
Earlier last night, Ombudsman Merceditas Gutierrez had a meeting with Moreno to
discuss Mendoza's case that led to his dismissal from the service. Ombudsman
spokesman Jose de Jesus said Gutierrez gave a "sealed letter" to Moreno to be delivered
to Mendoza. De Jesus did not elaborate on the contents of the letter but said Moreno was
tasked to personally deliver the letter to Mendoza.
MPD spokesman Chief Inspector Edwin Margarejo said Mendoza was apparently
distraught by the slow process of the Ombudsman in deciding his motion for
reconsideration. He said the PNP-Internal Affairs Service and the Manila Regional Trial
Court had already dismissed criminal cases against him.
The hostage drama began when Mendoza flagged down the Hong Thai Travel Tourist
bus (TVU-799), pretending to hitch a ride. Margarejo said the bus had just left Fort
Santiago in Intramuros when Mendoza asked the driver to let him get on and ride to
Quirino Grandstand. Upon reaching the Quirino Grandstand, Mendoza announced to the
passengers that they would be taken hostage. "Having worn his (police) uniform, of
course there is no doubt that he already planned the hostage taking," Margarejo said.
Sandy Araneta, Nestor Etolle, Delon Porcalla, Amanda Fisher, Cecille Suerte Felipe,
Christina Mendez, AP [Grandstand Carnage, The Philippine Star, Updated August 24,
2010 12:00 AM, Val Rodriguez]. [4]

In a completely separate incident much earlier in time, more particularly in December of

2003, 28-year-old Juan Paolo Garcia and 23 year-old Ian Carl Garcia were caught in the
United States smuggling $100,000 from Manila by concealing the cash in their luggage
and making false statements to US Customs Officers. The Garcia brothers pleaded guilty
to bulk cash smuggling and agreed to forfeit the amount in favor of the US Government
in exchange for the dismissal of the rest of the charges against them and for being
sentenced to time served. Inevitably, however, an investigation into the source of the
smuggled currency conducted by US Federal Agents and the Philippine Government
unraveled a scandal of military corruption and amassed wealth -- the boys' father, Retired
Major General Carlos F. Garcia, former Chief Procurement Officer of the Armed Forces,
had accumulated more than P300 Million during his active military service. Plunder and
Anti-Money Laundering cases were eventually filed against Major General Garcia, his
wife and their two sons before the Sandiganbayan.
G.R. No. 196231
Sometime in 2008, a formal charge[5] for Grave Misconduct(robbery, grave threats,
robbery extortion and physical injuries) was filed before the Philippine National Police-
National Capital Region (PNP-NCR) against Manila Police District Senior Inspector (P/S
Insp.) Rolando Mendoza, and four others, namely, Police Inspector Nelson Lagasca,
Senior Police Inspector I Nestor David, Police Officer III Wilson Gavino, and Police Officer
II Roderick Lopena. A similar charge was filed by the private complainant, Christian M.
Kalaw, before the Office of the City Prosecutor, Manila, docketed as I.S. No. 08E-09512.

On July 24, 2008, while said cases were still pending, the Office of the Regional Director
of the National Police Commission (NPC) turned over, upon the request of petitioner
Emilio A. Gonzales III, all relevant documents and evidence in relation to said case to the
Office of the Deputy Ombudsman for appropriate administrative
adjudication.[6]Subsequently, Case No. OMBP- A-08-0670-H for Grave Misconduct was
lodged against P/S Insp. Rolando Mendoza and his fellow police officers, who filed their
respective verified position papers as directed.
Meanwhile, on August 26, 2008, I.S. No. 08E-09512 was dismissed[7]upon a finding that
the material allegations made by the complainant had not been substantiated "by any
evidence at all to warrant the indictment of respondents of the offenses charged."
Similarly, the Internal Affairs Service of the PNP issued a Resolution [8] dated October 17,
2008 recommending the dismissal without prejudice of the administrative case against
the same police officers, for failure of the complainant to appear in three (3) consecutive
hearings despite due notice.
However, on February 16, 2009, upon the recommendation of petitioner
Emilio Gonzales III, a Decision[9] in Case No. OMB-P-A-080670- H finding P/S Insp.
Rolando Mendoza and his fellow police officers guilty of Grave Misconductwas approved
by the Ombudsman. The dispositive portion of said Decision reads:
WHEREFORE, it is respectfully recommended that respondents P/S Insp. ROLANDO
DEL ROSARIO MENDOZA and PO3 WILSON MATIC GAVINO of PRO-ARMM, Camp
Brig. Gen. Salipada K. Pendatun, Parang, Shariff Kabunsuan; P/INSP. NELSON
URBANO LAGASCA, SPO1 NESTOR REYES DAVID and PO2RODERICK SALVA
LOPEÑA of Manila Police District, Headquarters, United Nations Avenue, Manila, be
meted the penalty of DISMISSAL from the Service, pursuant to Section 52 (A), Rule IV,
Uniform Rules on Administrative Cases in the Civil Service, with the accessory penalties
of forfeiture of retirement benefits and perpetual disqualification from reemployment in the
government service pursuant to Section 58, Rule IV of the same Uniform Rules of
Administrative Cases in the Civil Service, for having committed GRAVE MISCONDUCT.
On November 5, 2009, they filed a Motion for Reconsideration[10] of the foregoing
Decision, followed by a Supplement to the Motion for Reconsideration [11] on November
19, 2009. On December 14, 2009, the pleadings mentioned and the records of the case
were assigned for review and recommendation to Graft Investigation and Prosecutor
Officer Dennis L. Garcia, who released a draft Order[12] on April 5, 2010 for appropriate
action by his immediate superior, Director Eulogio S. Cecilio, who, in turn, signed and
forwarded said Order to petitioner Gonzalez's office on April 27, 2010. Not more than ten
(10) days after, more particularly on May 6, 2010, petitioner endorsed the Order, together
with the case records, for final approval by Ombudsman Merceditas N. Gutierrez, in
whose office it remained pending for final review and action when P/S Insp. Mendoza
hijacked a bus-load of foreign tourists on that fateful day of August 23, 2010 in a desperate
attempt to have himself reinstated in the police service.
In the aftermath of the hostage-taking incident, which ended in the tragic murder of eight
HongKong Chinese nationals, the injury of seven others and the death of P/S Insp.
Rolando Mendoza, a public outcry against the blundering of government officials
prompted the creation of the Incident Investigation and Review Committee
(IIRC),[13]chaired by Justice Secretary Leila de Lima and vice-chaired by Interior and Local
Government Secretary Jesus Robredo. It was tasked to determine accountability for the
incident through the conduct of public hearings and executive sessions. However,
petitioner, as well as the Ombudsman herself, refused to participate in the IIRC
proceedings on the assertion that the Office of the Ombudsman is an independent
constitutional body.
Sifting through testimonial and documentary evidence, the IIRC eventually identified
petitioner Gonzales to be among those in whom culpability must lie. In its Report, [14] the
IIRC made the following findings:
Deputy Ombudsman Gonzales committed serious and inexcusable negligence and gross
violation of their own rules of procedure by allowing Mendoza's motion for reconsideration
to languish for more than nine (9) months without any justification, in violation of the
Ombudsman prescribed rules to resolve motions for reconsideration in administrative
disciplinary cases within five (5) days from submission. The inaction is gross, considering
there is no opposition [t]hereto. The prolonged inaction precipitated the desperate resort
to hostage-taking.
More so, Mendoza's demand for immediate resolution of his motion for reconsideration is
not without legal and compelling bases considering the following:
(a) PSI Mendoza and four policemen were investigated by the Ombudsman involving a
case for alleged robbery (extortion), grave threats and physical injuries amounting to
grave misconduct allegedly committed against a certain Christian Kalaw. The same case,
however, was previously dismissed by the Manila City Prosecutors Office for lack of
probable cause and by the PNP-NCR Internal Affairs Service for failure of the complainant
(Christian Kalaw) to submit evidence and prosecute the case. On the other hand, the
case which was filed much ahead by Mendoza et al. against Christian Kalaw involving
the same incident, was given due course by the City Prosecutors Office.
(b) The Ombudsman exercised jurisdiction over the case based on a letter issued motu
propriofor Deputy Ombudsman Emilio A. Gonzalez III, directing the PNP-NCR - without
citing any reason - to endorse the case against Mendoza and the arresting policemen to
his office for administrative adjudication, thereby showing undue interest on the case. He
also caused the docketing of the case and named Atty. Clarence V. Guinto of the PNP-
CIDG-NCR, who indorsed the case records, as the nominal complainant, in lieu of
Christian Kalaw. During the proceedings, Christian Kalaw did not also affirm his
complaint-affidavit with the Ombudsman or submit any position paper as required.

(c) Subsequently, Mendoza, after serving preventive suspension, was adjudged liable for
grave misconduct by Deputy Ombudsman Gonzales (duly approved on May 21, 2009)
based on the sole and uncorroborated complaint- affidavit of Christian Kalaw, which was
not previously sustained by the City Prosecutor's Office and the PNP Internal Affairs
Service. From the said Resolution, Mendoza interposed a timely motion for
reconsideration (dated and filed November 5, 2009) as well as a supplement thereto. No
opposition or comment was filed thereto.
(d) Despite the pending and unresolved motion for reconsideration, the judgment of
dismissal was enforced, thereby abruptly ending Mendoza's 30 years of service in the
PNP with forfeiture of all his benefits. As a result, Mendoza sought urgent relief by sending
several hand-written letter- requests to the Ombudsman for immediate resolution of his
motion for reconsideration. But his requests fell on deaf ears.

xxxx
By allowing Mendoza's motion for reconsideration to languish for nine long (9) months
without any justification, Ombudsman Gutierrez and Deputy Ombudsman Gonzales
committed complete and wanton violation of the Ombudsman prescribed rule to resolve
motions for reconsideration in administrative disciplinary cases within five (5) days from
submission (Sec. 8, Ombudsman Rules of Procedure). The inaction is gross, there being
no opposition to the motion for reconsideration. Besides, the Ombudsman, without first
resolving the motion for reconsideration, arbitrarily enforced the judgment of dismissal
and ignored the intervening requests for immediate resolution, thereby rendering the
inaction even more inexcusable and unjust as to amount to gross negligence and grave
misconduct.

SECOND, Ombudsman Gutierrez and Deputy Ombudsman Gonzales committed serious

disregard of due process, manifest injustice and oppression in failing to provisionally
suspend the further implementation of the judgment of dismissal against Mendoza
pending disposition of his unresolved motion for reconsideration.
By enforcing the judgment of dismissal without resolving the motion for reconsideration
for over nine months, the two Ombudsman officials acted with arbitrariness and without
regard to due process and the constitutional right of an accused to the speedy disposition
of his case. As long as his motion for reconsideration remained pending and unresolved,
Mendoza was also effectively deprived of the right to avail of the ordinary course of appeal
or review to challenge the judgment of dismissal before the higher courts and seek a
temporary restraining order to prevent the further execution thereof.
As such, if the Ombudsman cannot resolve with dispatch the motion for reconsideration,
it should have provisionally suspended the further enforcement of the judgment of
dismissal without prejudice to its re- implementation if the reconsideration is eventually
denied. Otherwise, the Ombudsman will benefit from its own inaction. Besides, the litigant
is entitled to a stay of the execution pending resolution of his motion for reconsideration.
Until the motion for reconsideration is denied, the adjudication process before the
Ombudsman cannot be considered as completely finished and, hence, the judgment is
not yet ripe for execution.
xxxx
When the two Ombudsman officials received Mendoza's demand for the release of the
final order resolving his motion for reconsideration, they should have performed their duty
by resolving the reconsideration that same day since it was already pending for nine
months and the prescribed period for its resolution is only five days. Or if they cannot
resolve it that same day, then they should have acted decisively by issuing an order
provisionally suspending the further enforcement of the judgment of dismissal subject to
revocation once the reconsideration is denied and without prejudice to the arrest and
prosecution of Mendoza for the hostage-taking. Had they done so, the crisis may have
ended peacefully, without necessarily compromising the integrity of the institution. After
all, as relayed to the negotiators, Mendoza did express willingness to take full
responsibility for the hostage-taking if his demand for release of the final decision or
reinstatement was met.
But instead of acting decisively, the two Ombudsman officials merely offered to review a
pending motion for review of the case, thereby prolonging their inaction and aggravating
the situation. As expected, Mendoza who previously berated Deputy Gonzales for
allegedly demanding Php150,000 in exchange for favorably resolving the motion for
reconsideration rejected and branded as trash ("basura") the Ombudsman [sic] letter
promising review, triggering the collapse of the negotiations. To prevent the situation from
getting out of hand, the negotiators sought the alternative option of securing before the
PNP-NCRPO an order for Mendoza's provisional reinstatement pending resolution of the
motion for reconsideration. Unfortunately, it was already too late. But had the
Ombudsman officials performed their duty under the law and acted decisively, the entire
crisis may have ended differently.

The IIRC recommended that its findings with respect to petitioner Gonzales be referred
to the Office of the President (OP) for further determination of possible administrative
offenses and for the initiation of the proper administrative proceedings.

On October 15, 2010, the OP instituted a Formal Charge15 against petitioner Gonzales
for Gross Neglect of Duty and/or Inefficiency in the Performance of Official Duty under
Rule XIV, Section 22 of the Omnibus Rules Implementing Book V of E.O. No. 292 and
other pertinent Civil Service Laws, rules and regulations, and for Misconduct in
Office under Section 3 of the Anti-Graft and Corrupt Practices Act.[16] Petitioner filed his
Answer[17] thereto in due time.
Shortly after the filing by the OP of the administrative case against petitioner, a complaint
dated October 29, 2010 was filed by Acting Assistant Ombudsman Joselito P. Fangon
before the Internal Affairs Board of the Office of the Ombudsman charging petitioner with
"directly or indirectly requesting or receiving any gift, present, share, percentage, or
benefit, for himself or for any other person, in connection with any contract or transaction
between the Government and any other party, wherein the public officer in his official
capacity has to intervene under the law" under Section 3(b) of the Anti-Graft and Corrupt
Practices Act, and also, with solicitation or acceptance of gifts under Section 7(d) of the
Code of Conduct and Ethical Standards.[18]In a Joint Resolution[19] dated February 17,
2011, which was approved by Ombudsman Ma. Merceditas N. Gutierrez, the complaint
was dismissed, as follows:
WHEREFORE, premises considered, finding no probable cause to indict respondent
Emilio A. Gonzales III for violations of Section 3(b) of R.A. No. 3019 and Section 7(d) of
R.A. No. 6713, the complaint is hereby be [sic] DISMISSED.
Further, finding no sufficient evidence to hold respondent administratively liable for
Misconduct, the same is likewise DISMISSED.
Meanwhile, the OP notified[20]petitioner that a Preliminary Clarificatory Conference
relative to the administrative charge against him was to be conducted at the Office of the
Deputy Executive Secretary for Legal Affairs (ODESLA) on February 8, 2011. Petitioner
Gonzales alleged,[21] however, that on February 4, 2011, he heard the news that the OP
had announced his suspension for one year due to his delay in the disposition of P/S
Insp. Mendoza's motion for reconsideration. Hence, believing that the OP had already
prejudged his case and that any proceeding before it would simply be a charade,
petitioner no longer attended the scheduled clarificatory conference. Instead, he filed an
Objection to Proceedings[22] on February 7, 2011. Despite petitioner's absence, however,
the OP pushed through with the proceedings and, on March 31, 2011, rendered the
assailed Decision,[23] the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, this Office finds Deputy Ombudsman Emilio A.
Gonzales III guilty of Gross Neglect of Duty and Grave Misconduct constituting betrayal
of public trust, and hereby meted out the penalty of DISMISSAL from service.

SO ORDERED.

Hence, the petition.

G.R. No. 196232
In April of 2005, the Acting Deputy Special Prosecutor of the Office of the Ombudsman
charged Major General Carlos F. Garcia, his wife Clarita D. Garcia, their sons Ian Carl
Garcia, Juan Paulo Garcia and Timothy Mark Garcia and several unknown persons
with Plunder(Criminal Case No. 28107) and Money Laundering (Criminal Case No.
SB09CRM0194) before the Sandiganbayan.
On January 7, 2010, the Sandiganbayan denied Major General Garcia's urgent petition
for bail holding that strong prosecution evidence militated against the grant of bail. On
March 16, 2010, however, the government, represented by petitioner, Special Prosecutor
Wendell Barreras- Sulit ("Barreras-Sulit") and her prosecutorial staff sought the
Sandiganbayan's approval of a Plea Bargaining Agreement (hereinafter referred to as
"PLEBARA") entered into with the accused. On May 4, 2010, the Sandiganbayan issued
a Resolution finding the change of plea warranted and the PLEBARA compliant with
jurisprudential guidelines.
Outraged by the backroom deal that could allow Major General Garcia to get off the hook
with nothing but a slap on the hand notwithstanding the prosecution's apparently strong
evidence of his culpability for serious public offenses, the House of Representatives'
Committee on Justice conducted public hearings on the PLEBARA. At the conclusion of
these public hearings, the Committee on Justice passed and adopted Committee
Resolution No. 3,24 recommending to the President the dismissal of petitioner Barreras-
Sulit from the service and the filing of appropriate charges against her Deputies and
Assistants before the appropriate government office for having committed acts and/or
omissions tantamount to culpable violations of the Constitution and betrayal of public
trust, which are violations under the Anti-Graft and Corrupt Practices Act and grounds for
removal from office under the Ombudsman Act.
The Office of the President initiated OP-DC-Case No. 11-B-003 against petitioner
Barreras-Sulit. In her written explanation, petitioner raised the defenses of prematurity
and the lack of jurisdiction of the OP with respect to the administrative disciplinary
proceeding against her. The OP, however, still proceeded with the case, setting it for
preliminary investigation on April 15, 2011.
Hence, the petition.
The Issues
In G.R. No. 196231, petitioner Gonzales raises the following grounds, to wit:

(A)

RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE OTHER

INDIVIDUAL RESPONDENTS, HAS NO CONSTITUTIONAL OR VALID STATUTORY
AUTHORITY TO SUBJECT PETITIONER TO AN ADMINISTRATIVE INVESTIGATION
AND TO THEREAFTER ORDER HIS REMOVAL AS DEPUTY OMBUDSMAN.

(B)

RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE OTHER

INDIVIDUAL RESPONDENTS, GRAVELY ABUSED ITS DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION WHEN IT CONDUCTED ITS
INVESTIGATION AND RENDERED ITS DECISION IN VIOLATION OF PETITIONER'S
RIGHT TO DUE PROCESS.
 (C)

RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE INDIVIDUAL

RESPONDENTS, GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN FINDING THAT PETITIONER COMMITTED DELAY IN
THE DISPOSITION OF MENDOZA'S MOTION FOR RECONSIDERATION.

(D)

RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE INDIVIDUAL

RESPONDENTS, GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN FINDING THAT PETITIONER TOOK UNDUE
INTEREST IN MENDOZA'S CASE.

(E)

RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE INDIVIDUAL

RESPONDENTS, GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN FAULTING PETITIONER FOR NOT RELEASING THE
RESOLUTION ON MENDOZA'S MOTION FOR RECONSIDERATION OR FOR NOT
SUSPENDING MENDOZA'S DISMISSAL FROM SERVICE DURING THE HOSTAGE
CRISIS.

(F)

RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE INDIVIDUAL

RESPONDENTS, GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN FINDING THAT THERE WAS SUBSTANTIAL
EVIDENCE TO SHOW THAT PETITIONER DEMANDED A BRIBE FROM MENDOZA.[25]

On the other hand, in G.R. No. 196232, petitioner Barreras-Sulit poses for the Court the
question
AS OF THIS POINT IN TIME, WOULD TAKING AND CONTINUING TO TAKE
ADMINISTRATIVE DISCIPLINARY PROCEEDING AGAINST PETITIONER BE
LAWFUL AND JUSTIFIABLE?[26]

Re-stated, the primordial question in these two petitions is whether the Office of the
President has jurisdiction to exercise administrative disciplinary power over a Deputy
Ombudsman and a Special Prosecutor who belong to the constitutionally-created Office
of the Ombudsman.
The Court's Ruling
Short of claiming themselves immune from the ordinary means of removal, petitioners
asseverate that the President has no disciplinary jurisdiction over them considering that
the Office of the Ombudsman to which they belong is clothed with constitutional
independence and that they, as Deputy Ombudsman and Special Prosecutor therein,
necessarily bear the constitutional attributes of said office.
The Court is not convinced.
The Ombudsman's administrative disciplinary
power over a Deputy Ombudsman and Special
Prosecutor is not exclusive.
It is true that the authority of the Office of the Ombudsman to conduct administrative
investigations proceeds from its constitutional mandate to be an effective protector of the
people against inept and corrupt government officers and employees,[27] and is subsumed
under the broad powers "explicitly conferred" upon it by the 1987 Constitution and R.A.
No. 6770.[28]
The ombudsman traces its origins to the primitive legal order of Germanic tribes. The
Swedish term, which literally means "agent" or "representative," communicates the
concept that has been carried on into the creation of the modern-day ombudsman, that
is, someone who acts as a neutral representative of ordinary citizens against government
abuses.29 This idea of a people's protector was first institutionalized in the Philippines
under the 1973 Constitution with the creation of the Tanodbayan, which wielded the twin
powers of investigation and prosecution. Section 6, Article XIII of the 1973 Constitution
provided thus:
Sec. 6. The Batasang Pambansa shall create an office of the Ombudsman, to be known
as Tanodbayan, which shall receive and investigate complaints relative to public office,
including those in government-owned or controlled corporations, make appropriate
recommendations, and in case of failure of justice as defined by law, file and prosecute
the corresponding criminal, civil, or administrative case before the proper court or body.
The framers of the 1987 Constitution later envisioned a more effective ombudsman
vested with authority to "act in a quick, inexpensive and effective manner on complaints
against administrative officials", and to function purely with the "prestige and persuasive
powers of his office" in correcting improprieties, inefficiencies and corruption in
government freed from the hampering effects of prosecutorial duties.30 Accordingly,
Section 13, Article XI of the 1987 Constitution enumerates the following powers,
functions, and duties of the Office of the Ombudsman, viz:
(1) Investigate on its own, or on complaint by any person, any act or omission of any
public official, employee, office or agency, when such act or omission appears to be
illegal, unjust, improper, or inefficient.
(2) Direct, upon complaint or at its own instance, any public official or employee of the
Government, or any subdivision, agency or instrumentality thereof, as well as of any
government- owned or controlled corporation with original charter, to perform and
expedite any act or duty required by law, or to stop, prevent, and correct any abuse or
impropriety in the performance of duties.
(3) Direct the officer concerned to take appropriate action against a public official or
employee at fault, and recommend his removal, suspension, demotion, fine, censure, or
prosecution, and ensure compliance therewith.
(4) Direct the officer concerned, in any appropriate case, and subject to such limitations
as may be provided by law, to furnish it with copies of documents relating to contracts or
transactions entered into by his office involving the disbursement or use of public funds
or properties, and report any irregularity to the Commission on Audit for appropriate
action.

(5) Request any government agency for assistance and information necessary in the
discharge of its responsibilities, and to examine, if necessary, pertinent records and
documents.

(6) Publicize matters covered by its investigation when circumstances so warrant and with
due prudence.
(7) Determine the causes of inefficiency, red tape, mismanagement, fraud, and corruption
in the Government and make recommendations for their elimination and the observance
of high standards of ethics and efficiency. (8) Promulgate its rules of procedure and
exercise such other powers or perform such functions or duties as may be provided by
law.[31]
Congress thereafter passed, on November 17, 1989, Republic Act No. 6770,
the Ombudsman Act of 1989, to shore up the Ombudsman's institutional strength by
granting it "full administrative disciplinary power over public officials and
employees,"[32] as follows:
Sec. 21. Officials 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 supplied)

In the exercise of such full administrative disciplinary authority, the Office of the
Ombudsman was explicitly conferred the statutory power to conduct administrative
investigations under Section 19 of the same law, thus:
Sec. 19. Administrative complaints. -The Ombudsman shall act on all complaints relating,
but not limited, to acts or omissions which
1. Are contrary to law or regulation;
2. Are unreasonable, unfair, oppressive or discriminatory;
3. Are inconsistent with the general course of an agency's functions, though in
accordance with law;
4. Proceed from a mistake of law or an arbitrary ascertainment of facts;
5. Are in the exercise of discretionary powers but for an improper purpose; or
6. Are otherwise irregular, immoral or devoid of justification.
While the Ombudsman's authority to discipline administratively is extensive and covers
all government officials, whether appointive or elective, with the exception only of those
officials removable by impeachment, the members of congress and the judiciary, such
authority is by no means exclusive. Petitioners cannot insist that they should be solely
and directly subject to the disciplinary authority of the Ombudsman. For, while Section 21
declares the Ombudsman's disciplinary authority over all government officials, Section
8(2), on the other hand, grants the President express power of removal over a Deputy
Ombudsman and a Special Prosecutor. Thus:
Section 8. Removal; Filling of Vacancy.
xxxx
(2) A Deputy or the Special Prosecutor, may be removed from office by the President for
any of the grounds provided for the removal of the Ombudsman, and after due process.

It is a basic canon of statutory construction that in interpreting a statute, care should be

taken that every part thereof be given effect, on the theory that it was enacted as an
integrated measure and not as a hodge-podge of conflicting provisions. A construction
that would render a provision inoperative should be avoided; instead, apparently
inconsistent provisions should be reconciled whenever possible as parts of a coordinated
and harmonious whole.[33] Otherwise stated, the law must not be read in truncated parts.
Every part thereof must be considered together with the other parts, and kept subservient
to the general intent of the whole enactment.[34]
A harmonious construction of these two apparently conflicting provisions in R.A. No. 6770
leads to the inevitable conclusion that Congress had intended the Ombudsman and the
President to exercise concurrent disciplinary jurisdiction over petitioners as Deputy
Ombudsman and Special Prosecutor, respectively. This sharing of authority goes into the
wisdom of the legislature, which prerogative falls beyond the pale of judicial inquiry. The
Congressional deliberations on this matter are quite insightful, viz:
xxx
Senator Angara explained that the phrase was added to highlight the fact that the Deputy
Tanodbayan may only be removed for cause and after due process. He added that the
President alone has the power to remove the Deputy Tanodbayan.
Reacting thereto, Senator Guingona observed that this might impair the independence of
the Tanodbayan and suggested that the procedural removal of the Deputy Tanodbayan...;
and that he can be removed not by the President but by the Ombudsman.
However, the Chair expressed apprehension that the Ombudsman and the Deputy
Ombudsman may try to protect one another. The Chair suggested the substitution of the
phrase "after due process" with the words after due notice and hearing with the President
as the ultimate authority.
Senator Guingona contended, however, that the Constitution provides for an independent
Office of the [T]anodbayan[,] and to allow the Executive to have disciplinary powers over
the Tanodbayan Deputies would be an encroachment on the independence of the
Tanodbayan.

Replying thereto, Senator Angara stated that originally, he was not averse to the proposal,
however, considering the Chair's observation that vesting such authority upon the
Tanodbayan itself could result in mutual protection, it is necessary that an outside official
should be vested with such authority to effect a check and balance.[35]

Indubitably, the manifest intent of Congress in enacting both provisions - Section 8(2) and
Section 21 - in the same Organic Act was to provide for an external authority, through the
person of the President, that would exercise the power of administrative discipline over
the Deputy Ombudsman and Special Prosecutor without in the least diminishing the
constitutional and plenary authority of the Ombudsman over all government officials and
employees. Such legislative design is simply a measure of "check and balance" intended
to address the lawmakers' real and valid concern that the Ombudsman and his Deputy
may try to protect one another from administrative liabilities.
This would not be the first instance that the Office of the President has locked horns with
the Ombudsman on the matter of disciplinary jurisdiction. An earlier conflict had been
settled in favor of shared authority in Hagad v. Gozo Dadole.[36] In said case, the Mayor
and Vice-Mayor of Mandaue City, and a member of the Sangguniang Panlungsod, were
charged before the Office of the Deputy Ombudsman for the Visayas with violations of
R.A. No. 3019, R.A. No. 6713, and the Revised Penal Code. The pivotal issue raised
therein was whether the Ombudsman had been divested of his authority to conduct
administrative investigations over said local elective officials by virtue of the subsequent
enactment of the Local Government Code of 1991 (R.A. No. 7160), the pertinent provision
of which states:
Sec. 61. Form and Filing of Administrative Complaints. A verified complaint against any
erring local elective official shall be prepared as follows:
(a) A complaint against any elective official of a province, a highly urbanized city, an
independent component city or component city shall be filed before the Office of
the President.
(b) The Court resolved said issue in the negative, upholding the ratiocination of the
Solicitor General that R.A. No. 7160 should be viewed as having conferred on the
Office of the President, but not on an exclusive basis, disciplinary authority over
local elective officials. Despite the fact that R.A. No. 7160 was the more recent
expression of legislative will, no repeal of pertinent provisions in the Ombudsman
Act was inferred therefrom. Thus said the Court:
Indeed, there is nothing in the Local Government Code to indicate that it has repealed,
whether expressly or impliedly, the pertinent provisions of the Ombudsman Act. The two
statutes on the specific matter in question are not so inconsistent, let alone irreconcilable,
as to compel us to only uphold one and strike down the other. Well settled is the rule that
repeals of laws by implication are not favored, and that courts must generally assume
their congruent application. The two laws must be absolutely incompatible, and a clear
finding thereof must surface, before the inference of implied repeal may be drawn. The
rule is expressed in the maxim, interpretare et concordare legibus est optimus
interpretendi, i.e., every statute must be so interpreted and brought into accord with other
laws as to form a uniform system of jurisprudence. The fundament is that the legislature
should be presumed to have known the existing laws on the subject and not to have
enacted conflicting statutes. Hence, all doubts must be resolved against any implied
repeal, and all efforts should be exerted in order to harmonize and give effect to all laws
on the subject.[37]
While Hagad v. Gozo Dadole[38]upheld the plenary power of the Office of the Ombudsman
to discipline elective officials over the same disciplinary authority of the President under
R.A. No. 7160, the more recent case of the Office of the Ombudsman v.
Delijero[39] tempered the exercise by the Ombudsman of such plenary power invoking
Section 23(2)[40] of R.A. No. 6770, which gives the Ombudsman the option to "refer certain
complaints to the proper disciplinary authority for the institution of appropriate
administrative proceedings against erring public officers or employees." The Court
underscored therein the clear legislative intent of imposing "a standard and a separate
set of procedural requirements in connection with administrative proceedings involving
public school teachers"[41] with the enactment of R.A. No. 4670, otherwise known as "The
Magna Carta for Public School Teachers." It thus declared that, while the Ombudsman's
administrative disciplinary authority over a public school teacher is concurrent with the
proper investigating committee of the Department of Education, it would have been more
prudent under the circumstances for the Ombudsman to have referred to the DECS the
complaint against the public school teacher.
Unquestionably, the Ombudsman is possessed of jurisdiction to discipline his own people
and mete out administrative sanctions upon them, including the extreme penalty of
dismissal from the service. However, it is equally without question that the President has
concurrent authority with respect to removal from office of the Deputy Ombudsman and
Special Prosecutor, albeit under specified conditions. Considering the principles
attending concurrence of jurisdiction where the Office of the President was the first to
initiate a case against petitioner Gonzales, prudence should have prompted the
Ombudsman to desist from proceeding separately against petitioner through its Internal
Affairs Board, and to defer instead to the President's assumption of authority, especially
when the administrative charge involved "demanding and soliciting a sum of money"
which constitutes either graft and corruption or bribery, both of which are grounds
reserved for the President's exercise of his authority to remove a Deputy Ombudsman.

In any case, assuming that the Ombudsman's Internal Affairs Board properly conducted
a subsequent and parallel administrative action against petitioner, its earlier dismissal of
the charge of graft and corruption against petitioner could not have the effect of preventing
the Office of the President from proceeding against petitioner upon the same ground of
graft and corruption. After all, the doctrine of res judicata applies only to judicial or quasi-
judicial proceedings, not to the exercise of administrative powers.[42] In Montemayor v.
Bundalian,[43] the Court sustained the President's dismissal from service of a Regional
Director of the Department of Public Works and Highways (DPWH) who was found liable
for unexplained wealth upon investigation by the now defunct Philippine Commission
Against Graft and Corruption (PCAGC). The Court categorically ruled therein that the prior
dismissal by the Ombudsman of similar charges against said official did not operate
as res judicata in the PCAGC case.
By granting express statutory power to the President to remove a Deputy Ombudsman
and a Special Prosecutor, Congress merely filled an obvious gap in the law.
Section 9, Article XI of the 1987 Constitution confers upon the President the power to
appoint the Ombudsman and his Deputies, viz:
Section 9. The Ombudsman and his Deputies shall be appointed by the President from a
list of at least six nominees prepared by the Judicial and Bar Council, and from a list of
three nominees for every vacancy thereafter. Such appointments shall require no
confirmation. All vacancies shall be filled within three months after they occur.
While the removal of the Ombudsman himself is also expressly provided for in the
Constitution, which is by impeachment under Section 244 of the same Article, there is,
however, no constitutional provision similarly dealing with the removal from office of a
Deputy Ombudsman, or a Special Prosecutor, for that matter. By enacting Section 8(2)
of R.A. 6770, Congress simply filled a gap in the law without running afoul of any provision
in the Constitution or existing statutes. In fact, the Constitution itself, under Section 2,
authorizes Congress to provide for the removal of all other public officers, including the
Deputy Ombudsman and Special Prosecutor, who are not subject to impeachment.

That the Deputies of the Ombudsman were intentionally excluded from the enumeration
of impeachable officials is clear from the following deliberations[45] of the Constitutional
Commission, thus:
MR. REGALADO. Yes, thank you. On Section 10, regarding the Ombudsman, there has
been concern aired by Commissioner Rodrigo about who will see to it that the
Ombudsman will perform his duties because he is something like a guardian of the
government. This recalls the statement of Juvenal that while the Ombudsman is the
guardian of the people, "Quis custodiet ipsos custodies", who will guard the guardians? I
understand here that the Ombudsman who has the rank of a chairman of a constitutional
commission is also removable only by impeachment.
MR. ROMULO. That is the intention, Madam President.
MR. REGALADO. Only the Ombudsman?
MR. MONSOD. Only the Ombudsman
MR. REGALADO. So not his deputies, because I am concerned with the phrase "have
the rank of". We know, for instance, that the City Fiscal of Manila has the rank of a justice
of the Intermediate Appellate Court, and yet he is not a part of the judiciary. So I think we
should clarify that also and read our discussions into the Record for purposes of the
Commission and the Committee.[46]
xxx
THE PRESIDENT. The purpose of the amendment of Commissioner Davide is not just to
include the Ombudsman among those officials who have to be removed from office only
on impeachment. Is that right?
MR. DAVIDE. Yes, Madam President.
MR. RODRIGO. Before we vote on the amendment, may I ask a question?
THE PRESIDENT. Commissioner Rodrigo is recognized.
MR. RODRIGO. The Ombudsman, is this only one man?
MR. DAVIDE. Only one man.
MR. RODRIGO. Not including his deputies.
MR. MONSOD. No.[47](Emphasis supplied)
The Power of the President to Remove a Deputy
Ombudsman and a Special Prosecutor is Implied
from his Power to Appoint.
Under the doctrine of implication, the power to appoint carries with it the power to
remove.[48] As a general rule, therefore, all officers appointed by the President are also
removable by him.[49] The exception to this is when the law expressly provides otherwise
that is, when the power to remove is expressly vested in an office or authority other than
the appointing power. In some cases, the Constitution expressly separates the power to
remove from the President's power to appoint. Under Section 9, Article VIII of the 1987
Constitution, the Members of the Supreme Court and judges of lower courts shall be
appointed by the President. However, Members of the Supreme Court may be removed
after impeachment proceedings initiated by Congress (Section 2, Article XI), while judges
of lower courts may be removed only by the Supreme Court by virtue of its administrative
supervision over all its personnel (Sections 6 and 11, Article VIII). The Chairpersons and
Commissioners of the Civil Service Commission [Section 1(2), Article IX(B)], the
Commission on Elections [Section 1(2), Article IX(C)], and the Commission on Audit
[Section 1(2), Article IX(D)] shall likewise be appointed by the President, but they may be
removed only by impeachment (Section 2, Article XI). As priorly stated, the Ombudsman
himself shall be appointed by the President (Section 9, Article XI) but may also be
removed only by impeachment (Section 2, Article XI).
In giving the President the power to remove a Deputy Ombudsman and Special
Prosecutor, Congress simply laid down in express terms an authority that is already
implied from the President's constitutional authority to appoint the aforesaid officials in
the Office of the Ombudsman.
The Office of the Ombudsman is charged with monumental tasks that have been
generally categorized into investigatory power, prosecutorial power, public assistance,
authority to inquire and obtain information and the function to adopt, institute and
implement preventive measures.50 In order to ensure the effectiveness of his
constitutional role, the Ombudsman was provided with an over-all deputy as well as a
deputy each for Luzon, Visayas and Mindanao. However, well into the deliberations of
the Constitutional Commission, a provision for the appointment of a separate deputy for
the military establishment was necessitated by Commissioner Ople's lament against the
rise within the armed forces of "fraternal associations outside the chain of command"
which have become the common soldiers' "informal grievance machinery" against
injustice, corruption and neglect in the uniformed service,[51] thus:
In our own Philippine Armed Forces, there has arisen in recent years a type of fraternal
association outside the chain of command proposing reformist objectives. They
constitute, in fact, an informal grievance machinery against injustices to the rank and file
soldiery and perceive graft in higher rank and neglect of the needs of troops in combat
zones. The Reform the Armed Forces Movement of RAM has kept precincts for pushing
logistics to the field, the implied accusation being that most of the resources are used up
in Manila instead of sent to soldiers in the field. The Guardians, the El Diablo and other
organizations dominated by enlisted men function, more or less, as grievance collectors
and as mutual aid societies.
This proposed amendment merely seeks to extend the office of the Ombudsman to the
military establishment, just as it champions the common people against bureaucratic
indifference. The Ombudsman can designate a deputy to help the ordinary foot soldier
get through with his grievance to higher authorities. This deputy will, of course work in
close cooperation with the Minister of National Defense because of the necessity to
maintain the integrity of the chain of command. Ordinary soldiers, when they know they
can turn to a military Ombudsman for their complaints, may not have to fall back on their
own informal devices to obtain redress for their grievances. The Ombudsman will help
raise troop morale in accordance with a major professed goal of the President and the
military authorities themselves. x x x

The add-on now forms part of Section 5, Article XI which reads as follows:

Section 5. There is hereby created the independent Office of the Ombudsman, composed
of the Ombudsman to be known as Tanodbayan, one over-all Deputy and at least one
Deputy each for Luzon, Visayas and Mindanao. A separate deputy for the military
establishment shall likewise be appointed. (Emphasis supplied)

The integrity and effectiveness of the Deputy Ombudsman for the MOLEO as a military
watchdog looking into abuses and irregularities that affect the general morale and
professionalism in the military is certainly of primordial importance in relation to the
President's own role as Commander-in-Chief of the Armed Forces. It would not be
incongruous for Congress, therefore, to grant the President concurrent disciplinary
authority over the Deputy Ombudsman for the military and other law enforcement offices.
Granting the President the Power to Remove a Deputy Ombudsman does not Diminish
the Independence of the Office of the Ombudsman.
The claim that Section 8(2) of R.A. No. 6770 granting the President the power to remove
a Deputy Ombudsman from office totally frustrates, if not resultantly negates the
independence of the Office of the Ombudsman is tenuous. The independence which the
Office of the Ombudsman is vested with was intended to free it from political
considerations in pursuing its constitutional mandate to be a protector of the people. What
the Constitution secures for the Office of the Ombudsman is, essentially, political
independence. This means nothing more than that "the terms of office, the salary, the
appointments and discipline of all persons under the office" are "reasonably insulated
from the whims of politicians."[52]And so it was that Section 5, Article XI of the 1987
Constitution had declared the creation of the independent Office of the Ombudsman,
composed of the Ombudsman and his Deputies, who are described as "protectors of the
people" and constitutionally mandated to act promptly on complaints filed in any form or
manner against public officials or employees of the Government [Section 12, Article XI].
Pertinent provisions under Article XI prescribes a term of office of seven years without
reappointment [Section 11], prohibits a decrease in salaries during the term of office
[Section 10], provides strict qualifications for the office [Section 8], grants fiscal autonomy
[Section 14] and ensures the exercise of constitutional functions [Section 12 and 13]. The
cloak of independence is meant to build up the Office of the Ombudsman's institutional
strength to effectively function as official critic, mobilizer of government, constitutional
watchdog[53] and protector of the people. It certainly cannot be made to extend to
wrongdoings and permit the unbridled acts of its officials to escape administrative
discipline.

Being aware of the constitutional imperative of shielding the Office of the Ombudsman
from political influences and the discretionary acts of the executive, Congress laid down
two restrictions on the President's exercise of such power of removal over a Deputy
Ombudsman, namely: (1) that the removal of the Deputy Ombudsman must be for any of
the grounds provided for the removal of the Ombudsman and (2) that there must be
observance of due process. Reiterating the grounds for impeachment laid down in
Section 2, Article XI of the 1987 Constitution, paragraph 1 of Section 8 of R.A. No. 6770
states that the Deputy Ombudsman may be removed from office for the same grounds
that the Ombudsman may be removed through impeachment, namely, "culpable violation
of the Constitution, treason, bribery, graft and corruption, other high crimes, or betrayal
of public trust." Thus, it cannot be rightly said that giving the President the power to
remove a Deputy Ombudsman, or a Special Prosecutor for that matter, would diminish or
compromise the constitutional independence of the Office of the Ombudsman. It is,
precisely, a measure of protection of the independence of the Ombudsman's Deputies
and Special Prosecutor in the discharge of their duties that their removal can only be had
on grounds provided by law.
In Espinosa v. Office of the Ombudsman,[54] the Court elucidated on the nature of the
Ombudsman's independence in this wise
The prosecution of offenses committed by public officers is vested in the Office of the
Ombudsman. To insulate the Office from outside pressure and improper influence, the
Constitution as well as RA 6770 has endowed it with a wide latitude of investigatory and
prosecutory powers virtually free from legislative, executive or judicial intervention. This
Court consistently refrains from interfering with the exercise of its powers, and respects
the initiative and independence inherent in the Ombudsman who, 'beholden to no one,
acts as the champion of the people and the preserver of the integrity of public service.
Petitioner Gonzales may not be removed from office where the questioned acts, falling
short of constitutional standards, do not constitute betrayal of public trust.
Having now settled the question concerning the validity of the President's power to
remove the Deputy Ombudsman and Special Prosecutor, we now go to the substance of
the administrative findings in OP Case No. 10-J-460 which led to the dismissal of herein
petitioner, Deputy Ombudsman Emilio A. Gonzales, III.
At the outset, the Court finds no cause for petitioner Gonzales to complain simply because
the OP proceeded with the administrative case against him despite his non-attendance
thereat. Petitioner was admittedly able to file an Answer in which he had interposed his
defenses to the formal charge against him. Due process is satisfied when a person is
notified of the charge against him and given an opportunity to explain or defend himself.
In administrative proceedings, the filing of charges and giving reasonable opportunity for
the person so charged to answer the accusations against him constitute the minimum
requirements of due process.[55]Due process is simply having the opportunity to explain
one's side, or an opportunity to seek a reconsideration of the action or ruling complained
of.[56]

The essence of due process is that a party is afforded reasonable opportunity to be heard
and to submit any evidence he may have in support of his defense.[57] Mere opportunity
to be heard is sufficient. As long as petitioner was given the opportunity to explain his
side and present evidence, the requirements of due process are satisfactorily complied
with because what the law abhors is an absolute lack of opportunity to be
heard.[58] Besides, petitioner only has himself to blame for limiting his defense through the
filing of an Answer. He had squandered a subsequent opportunity to elucidate upon his
pleaded defenses by adamantly refusing to attend the scheduled Clarificatory Conference
despite notice. The OP recounted as follows
It bears noting that respondent Deputy Ombudsman Gonzalez was given two separate
opportunities to explain his side and answer the Formal Charge against him.

In the first instance, respondent was given the opportunity to submit his answer together
with his documentary evidence, which opportunity respondent actually availed of. In the
second instance, this Office called a Clarificatory Conference on 8 February 2011
pursuant to respondent's express election of a formal investigation. Despite due notice,
however, respondent Deputy Ombudsman refused to appear for said conference,
interposing an objection based on the unfounded notion that this Office has prejudged the
instant case. Respondent having been given actual and reasonable opportunity to explain
or defend himself in due course, the requirement of due process has been satisfied. [59]

In administrative proceedings, the quantum of proof necessary for a finding of guilt is

substantial evidence,[60] which is more than a mere scintilla and means such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion.[61] The
fact, therefore, that petitioner later refused to participate in the hearings before the OP is
not a hindrance to a finding of his culpability based on substantial evidence, which only
requires that a decision must "have something upon which it is based." [62]

Factual findings of administrative bodies are controlling when supported by substantial

evidence.[63] The OP's pronouncement of administrative accountability against petitioner
and the imposition upon him of the corresponding penalty of removal from office was
based on the finding of gross neglect of duty and grave misconduct in office amounting
to a betrayal of public trust, which is a constitutional ground for the removal by
impeachment of the Ombudsman (Section 2, Article XI, 1987 Constitution), and a
statutory ground for the President to remove from office a Deputy Ombudsman and a
Special Prosecutor [Section 8(2) of the Ombudsman Act].
The OP held that petitioner's want of care and wrongful conduct consisted of his
unexplained action in directing the PNP-NCR to elevate P/S Insp. Mendoza's case
records to his office; his failure to verify the basis for requesting the Ombudsman to take
over the case; his pronouncement of administrative liability and imposition of the extreme
penalty of dismissal on P/S Insp. Mendoza based upon an unverified complaint-affidavit;
his inordinate haste in implementing P/S Insp. Mendoza's dismissal notwithstanding the
latter's non-receipt of his copy of the Decision and the subsequent filing of a motion for
reconsideration; and his apparent unconcern that the pendency of the motion for
reconsideration for more than five months had deprived P/S Insp. Mendoza of available
remedies against the immediate implementation of the Decision dismissing him from the
service.

Thus, taking into consideration the factual determinations of the IIRC, the allegations and
evidence of petitioner in his Answer as well as other documentary evidence, the OP
concluded that: (1) petitioner failed to supervise his subordinates to act with dispatch on
the draft resolution of P/S Insp. Mendoza's motion for reconsideration and thereby caused
undue prejudice to P/S Insp. Mendoza by effectively depriving the latter of the right to
challenge the dismissal before the courts and prevent its immediate execution, and (2)
petitioner showed undue interest by having P/S Insp. Mendoza's case endorsed to the
Office of the Ombudsman and resolving the same against P/S Insp. Mendoza on the basis
of the unverified complaint- affidavit of the alleged victim Christian Kalaw.
The invariable rule is that administrative decisions in matters within the executive
jurisdiction can only be set aside on proof of gross abuse of discretion, fraud, or error of
law.[64] In the instant case, while the evidence may show some amount of wrongdoing on
the part of petitioner, the Court seriously doubts the correctness of the OP's conclusion
that the imputed acts amount to gross neglect of duty and grave misconduct constitutive
of betrayal of public trust. To say that petitioner's offenses, as they factually appear, weigh
heavily enough to constitute betrayal of public trust would be to ignore the significance of
the legislature's intent in prescribing the removal of the Deputy Ombudsman or the
Special Prosecutor for causes that, theretofore, had been reserved only for the most
serious violations that justify the removal by impeachment of the highest officials of the
land.

Would every negligent act or misconduct in the performance of a Deputy Ombudsman's

duties constitute betrayal of public trustwarranting immediate removal from office? The
question calls for a deeper, circumspective look at the nature of the grounds for the
removal of a Deputy Ombudsman and a Special Prosecutor vis-a-viscommon
administrative offenses.
Betrayal of public trust is a new ground for impeachment under the 1987 Constitution
added to the existing grounds of culpable violation of the Constitution, treason, bribery,
graft and corruption and other high crimes. While it was deemed broad enough to cover
any violation of the oath of office,[65] the impreciseness of its definition also created
apprehension that "such an overarching standard may be too broad and may be subject
to abuse and arbitrary exercise by the legislature." [66] Indeed, the catch-all
phrase betrayal of public trust that referred to "all acts not punishable by statutes as penal
offenses but, nonetheless, render the officer unfit to continue in office" [67] could be easily
utilized for every conceivable misconduct or negligence in office. However, deliberating
on some workable standard by which the ground could be reasonably interpreted, the
Constitutional Commission recognized that human error and good faith precluded an
adverse conclusion.
MR. VILLACORTA: x x x One last matter with respect to the use of the words "betrayal of
public trust" as embodying a ground for impeachment that has been raised by the
Honorable Regalado. I am not a lawyer so I can anticipate the difficulties that a layman
may encounter in understanding this provision and also the possible abuses that the
legislature can commit in interpreting this phrase. It is to be noted that this ground was
also suggested in the 1971 Constitutional Convention. A review of the Journals of that
Convention will show that it was not included; it was construed as encompassing acts
which are just short of being criminal but constitute gross faithlessness against public
trust, tyrannical abuse of power, inexcusable negligence of duty, favoritism, and gross
exercise of discretionary powers. I understand from the earlier discussions that these
constitute violations of the oath of office, and also I heard the Honorable Davide say that
even the criminal acts that were enumerated in the earlier 1973 provision on this matter
constitute betrayal of public trust as well. In order to avoid confusion, would it not be
clearer to stick to the wording of Section 2 which reads: "may be removed from office on
impeachment for and conviction of, culpable violation of the Constitution, treason, bribery,
and other high crimes, graft and corruption or VIOLATION OF HIS OATH OF OFFICE",
because if betrayal of public trust encompasses the earlier acts that were enumerated,
then it would behoove us to be equally clear about this last provision or phrase.

MR. NOLLEDO: x x x I think we will miss a golden opportunity if we fail to adopt the words
"betrayal of public trust" in the 1986 Constitution. But I would like him to know that we are
amenable to any possible amendment. Besides, I think plain error of judgment, where
circumstances may indicate that there is good faith, to my mind, will not constitute betrayal
of public trust if that statement will allay the fears of difficulty in interpreting the
term."[68](Emphasis supplied)
The Constitutional Commission eventually found it reasonably acceptable for the
phrase betrayal of public trust to refer to "[a]cts which are just short of being criminal but
constitute gross faithlessness against public trust, tyrannical abuse of power, inexcusable
negligence of duty, favoritism, and gross exercise of discretionary powers." [69] In other
words, acts that should constitute betrayal of public trust as to warrant removal from office
may be less than criminal but must be attended by bad faith and of such gravity and
seriousness as the other grounds for impeachment.
A Deputy Ombudsman and a Special Prosecutor are not impeachable officers. However,
by providing for their removal from office on the same grounds as removal by
impeachment, the legislature could not have intended to redefine constitutional standards
of culpable violation of the Constitution, treason, bribery, graft and corruption, other high
crimes, as well as betrayal of public trust, and apply them less stringently. Hence,
where betrayal of public trust, for purposes of impeachment, was not intended to cover
all kinds of official wrongdoing and plain errors of judgment, this should remain true even
for purposes of removing a Deputy Ombudsman and Special Prosecutor from office.
Hence, the fact that the grounds for impeachment have been made statutory grounds for
the removal by the President of a Deputy Ombudsman and Special Prosecutor cannot
diminish the seriousness of their nature nor the acuity of their scope. Betrayal of public
trust could not suddenly "overreach" to cover acts that are not vicious or malevolent on
the same level as the other grounds for impeachment.
The tragic hostage-taking incident was the result of a confluence of several unfortunate
events including system failure of government response. It cannot be solely attributed
then to what petitioner Gonzales may have negligently failed to do for the quick, fair and
complete resolution of the case, or to his error of judgment in the disposition thereof.
Neither should petitioner's official acts in the resolution of P/S Insp. Mendoza's case be
judged based upon the resulting deaths at the Quirino Grandstand. The failure to
immediately act upon a party's requests for an early resolution of his case is not, by itself,
gross neglect of duty amounting to betrayal of public trust. Records show that petitioner
took considerably less time to act upon the draft resolution after the same was submitted
for his appropriate action compared to the length of time that said draft remained pending
and unacted upon in the Office of Ombudsman Merceditas N. Gutierrez. He reviewed and
denied P/S Insp. Mendoza's motion for reconsideration within nine (9) calendar days
reckoned from the time the draft resolution was submitted to him on April 27, 2010 until
he forwarded his recommendation to the Office of Ombudsman Gutierrez on May 6, 2010
for the latter's final action. Clearly, the release of any final order on the case was no longer
in his hands.
Even if there was inordinate delay in the resolution of P/S Insp. Mendoza's motion and
an unexplained failure on petitioner's part to supervise his subordinates in its prompt
disposition, the same cannot be considered a vicious and malevolent act warranting his
removal forbetrayal of public trust. More so because the neglect imputed upon petitioner
appears to be an isolated case.
Similarly, petitioner's act of directing the PNP-IAS to endorse P/S Insp. Mendoza's case
to the Ombudsman without citing any reason therefor cannot, by itself, be considered a
manifestation of his undue interest in the case that would amount to wrongful or unlawful
conduct. After all, taking cognizance of cases upon the request of concerned agencies or
private parties is part and parcel of the constitutional mandate of the Office of the
Ombudsman to be the "champion of the people." The factual circumstances that the case
was turned over to the Office of the Ombudsman upon petitioner's request; that
administrative liability was pronounced against P/S Insp. Mendoza even without the
private complainant verifying the truth of his statements; that the decision was
immediately implemented; or that the motion for reconsideration thereof remained
pending for more than nine months cannot be simply taken as evidence of petitioner's
undue interest in the case considering the lack of evidence of any personal grudge, social
ties or business affiliation with any of the parties to the case that could have impelled him
to act as he did. There was likewise no evidence at all of any bribery that took place, or
of any corrupt intention or questionable motivation.
Accordingly, the OP's pronouncement of administrative accountability against petitioner
and the imposition upon him of the corresponding penalty of dismissal must be reversed
and set aside, as the findings of neglect of duty or misconduct in office do not amount to
a betrayal of public trust. Hence, the President, while he may be vested with authority,
cannot order the removal of petitioner as Deputy Ombudsman, there being no intentional
wrongdoing of the grave and serious kind amounting to a betrayal of public trust.
This is not to say, however, that petitioner is relieved of all liability for his acts showing
less than diligent performance of official duties. Although the administrative acts imputed
to petitioner fall short of the constitutional standard of betrayal of public trust, considering
the OP's factual findings of negligence and misconduct against petitioner, the Court
deems it appropriate to refer the case to the Office of the Ombudsman for further
investigation of the charges in OP Case No. 10-J-460 and the imposition of the
corresponding administrative sanctions, if any.
Inasmuch as there is as yet no existing ground justifying his removal from office, petitioner
is entitled to reinstatement to his former position as Deputy Ombudsman and to the
payment of backwages and benefits corresponding to the period of his suspension.

The Office of the President is vested with statutory authority to proceed administratively
against petitioner Barreras-Sulit to determine the existence of any of the grounds for
her removal from office as provided for under the Constitution and the Ombudsman
Act.
Petitioner Barreras-Sulit, on the other hand, has been resisting the President's authority
to remove her from office upon the averment that without the Sandiganbayan's final
approval and judgment on the basis of the PLEBARA, it would be premature to charge
her with acts and/or omissions "tantamount to culpable violations of the Constitution and
betrayal of public trust," which are grounds for removal from office under Section 8,
paragraph (2) of the Ombudsman Act of 1989; and which also constitute a violation of
Section 3, paragraph (e) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act)
causing undue injury to the Government or giving any private party any unwarranted
benefits, advantage or preference through manifest partiality, evident bad faith or gross
inexcusable negligence. With reference to the doctrine of prejudicial procedural
antecedent, petitioner Barreras-Sulit asserts that the propriety of taking and continuing to
take administrative disciplinary proceeding against her must depend on the final
disposition by the Sandiganbayan of the PLEBARA, explaining that if the Sandiganbayan
would uphold the PLEBARA, there would no longer be any cause of complaint against
her; if not, then the situation becomes ripe for the determination of her failings.

The argument will not hold water. The incidents that have taken place subsequent to the
submission in court of the PLEBARA shows that the PLEBARA has been practically
approved, and that the only thing which remains to be done by the Sandiganbayan is to
promulgate a judgment imposing the proper sentence on the accused Major General
Garcia based on his new pleas to lesser offenses. On May 4, 2010, the Sandiganbayan
issued a resolution declaring that the change of plea under the PLEBARA was warranted
and that it complied with jurisprudential guidelines. The Sandiganbayan, thereafter,
directed the accused Major General Garcia to immediately convey in favor of the State
all the properties, both real and personal, enumerated therein. On August 11, 2010, the
Sandiganbayan issued a resolution, which, in order to put into effect the reversion of Major
General Garcia's ill-gotten properties, ordered the corresponding government agencies
to cause the transfer of ownership of said properties to the Republic of the Philippines. In
the meantime, the Office of the Special Prosecutor (OSP) informed the Sandiganbayan
that an Order[70] had been issued by the Regional Trial Court of Manila, Branch 21 on
November 5, 2010 allowing the transfer of the accused's frozen accounts to the Republic
of the Philippines pursuant to the terms of the PLEBARA as approved by the
Sandiganbayan. Immediately after the OSP informed the Sandiganbayan that its May 4,
2010 Resolution had been substantially complied with, Major General Garcia
manifested[71] to the Sandiganbayan on November 19, 2010 his readiness for sentencing
and for the withdrawal of the criminal information against his wife and two sons. Major
General Garcia's Motion to Dismiss,[72] dated December 16, 2010 and filed with the
Sandiganbayan, reads:
1.0 The Co-Accused were impleaded under the theory of conspiracy with the Principal
Accused MGen. Carlos F. Garcia (AFP Ret.), (Principal Accused) with the allegation that
the act of one is the act of the others. Therefore, with the approval by the Honorable Court
of the Plea Bargaining Agreement executed by the Principal Accused, the charges
against the Co-Accused should likewise be dismissed since the charges against them are
anchored on the same charges against the Principal Accused.

On December 16, 2010, the Sandiganbayan allowed accused Major General Garcia to
plead guilty to the lesser offenses of direct bribery and violation of Section 4(b), R.A. No.
9160, as amended. Upon Major General Garcia's motion, and with the express conformity
of the OSP, the Sandiganbayan allowed him to post bail in both cases, each at a measly
amount of P30,000.00.
The approval or disapproval of the PLEBARA by the Sandiganbayan is of no
consequence to an administrative finding of liability against petitioner Barreras-Sulit.
While the court's determination of the propriety of a plea bargain is on the basis of the
existing prosecution evidence on record, the disciplinary authority's determination of the
prosecutor's administrative liability is based on whether the plea bargain is consistent with
the conscientious consideration of the government's best interest and the diligent and
efficient performance by the prosecution of its public duty to prosecute crimes against the
State. Consequently, the disciplining authority's finding of ineptitude, neglect or willfulness
on the part of the prosecution, more particularly petitioner Special Prosecutor Barreras-
Sulit, in failing to pursue or build a strong case for the government or, in this case, entering
into an agreement which the government finds "grossly disadvantageous," could result in
administrative liability, notwithstanding court approval of the plea bargaining agreement
entered into.
Plea bargaining is a process in criminal cases whereby the accused and the prosecution
work out a mutually satisfactory disposition of the case subject to court approval. [73] The
essence of a plea bargaining agreement is the allowance of an accused to plead guilty to
a lesser offense than that charged against him. Section 2, Rule 116 of the Revised Rules
of Criminal Procedure provides the procedure therefor, to wit:
SEC. 2. Plea of guilty to a lesser offense. -- At arraignment, the accused, with the consent
of the offended party and the prosecutor, may be allowed by the trial court to plead guilty
to a lesser offense which is necessarily included in the offense charged. After arraignment
but before trial, the accused may still be allowed to plead guilty to said lesser offense after
withdrawing his plea of not guilty. No amendment of the complaint or information is
necessary. (Sec. 4, Cir. 38-98)

Plea bargaining is allowable when the prosecution does not have sufficient evidence to
establish the guilt of the accused of the crime charged. [74] However, if the basis for the
allowance of a plea bargain in this case is the evidence on record, then it is significant to
state that in its earlier Resolution[75]promulgated on January 7, 2010, the Sandiganbayan
had evaluated the testimonies of twenty (20) prosecution witnesses and declared that
"the conglomeration of evidence presented by the prosecution is viewed by the Court to
be of strong character that militates against the grant of bail."
Notwithstanding this earlier ruling by the Sandiganbayan, the OSP, unexplainably, chose
to plea bargain with the accused Major General Garcia as if its evidence were suddenly
insufficient to secure a conviction. At this juncture, it is not amiss to emphasize that the
"standard of strong evidence of guilt which is sufficient to deny bail to an accused is
markedly higher than the standard of judicial probable cause which is sufficient to initiate
a criminal case."[76] Hence, in light of the apparently strong case against accused Major
General Garcia, the disciplining authority would be hard- pressed not to look into the whys
and wherefores of the prosecution's turnabout in the case.
The Court need not touch further upon the substantial matters that are the subject of the
pending administrative proceeding against petitioner Barreras-Sulit and are, thus, better
left to the complete and effective resolution of the administrative case before the Office
of the President.
The challenge to the constitutionality of Section 8(2) of the Ombudsman Act has,
nonetheless, failed to obtain the necessary votes to invalidate the law, thus, keeping said
provision part of the law of the land. To recall, these cases involve two distinct issues: (a)
the constitutionality of Section 8(2) of the Ombudsman Act; and (b) the validity of the
administrative action of removal taken against petitioner Gonzales. While the Court voted
unanimously to reverse the decision of the OP removing petitioner Gonzales from office,
it was equally divided in its opinion on the constitutionality of the assailed statutory
provision in its two deliberations held on April 17, 2012 and September 4, 2012. There
being no majority vote to invalidate the law, the Court, therefore, dismisses the challenge
to the constitutionality of Section 8(2) of the Ombudsman Act in accordance with Section
2(d), Rule 12 of the Internal Rules of the Court.
Indeed, Section 4(2), Article VIII of the 1987 Constitution requires the vote of the majofity
of the Members of the Court actually taking part in the deliberation to sustain any
challenge to the constitutionality or validity of a statute or any of its provisions.

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.

The challenge to the constitutionality of Section 8(2) of the Ombudsman Act is

hereby DENIED.

SO ORDERED.
 G.R. No. 192945, September 05, 2012
CITY OF IRIGA, PETITIONER,
VS.
CAMARINES SUR III ELECTRIC COOPERATIVE, INC. (CASURECO III),
RESPONDENT.

DECISION
PERLAS-BERNABE, J.:
The Court reiterates that a franchise tax is a tax levied on the exercise by an entity of the
rights or privileges granted to it by the government.[1]In the absence of a clear and
subsisting legal provision granting it tax exemption, a franchise holder, though non-profit
in nature, may validly be assessed franchise tax by a local government unit.

Before the Court is a petition filed under Rule 45 of the Revised Rules of Court seeking
to set aside the February 11, 2010 Decision[2] and July 12, 2010 Resolution[3] of the Court
of Appeals (CA), which reversed the February 7, 2005 Decision of the Regional Trial
Court (RTC) of Iriga City, Branch 36 and ruled that respondent Camarines Sur III Electric
Cooperative, Inc. (CASURECO III) is exempt from payment of local franchise tax.

The Facts
CASURECO III is an electric cooperative duly organized and existing by virtue of
Presidential Decree (PD) 269,[4] as amended, and registered with the National
Electrification Administration (NEA). It is engaged in the business of electric power
distribution to various end-users and consumers within the City of Iriga and the
municipalities of Nabua, Bato, Baao, Buhi, Bula and Balatan of the Province of Camarines
Sur, otherwise known as the "Rinconada area."[5]
Sometime in 2003, petitioner City of Iriga required CASURECO III to submit a report of
its gross receipts for the period 1997-2002 to serve as the basis for the computation of
franchise taxes, fees and other charges.[6] The latter complied[7]and was subsequently
assessed taxes.
On January 7, 2004, petitioner made a final demand on CASURECO III to pay the
franchise taxes due for the period 1998-2003 and real property taxes due for the period
1995-2003.[8] CASURECO III, however, refused to pay said taxes on the ground that it is
an electric cooperative provisionally registered with the Cooperative Development
Authority (CDA),9 and therefore exempt from the payment of local taxes. [10]
On March 15, 2004, petitioner filed a complaint for collection of local taxes against
CASURECO III before the RTC, citing its power to tax under the Local Government Code
(LGC) and the Revenue Code of Iriga City.[11]
It alleged that as of December 31, 2003, CASURECO III.s franchise and real property
taxes liability, inclusive of penalties, surcharges and interest, amounted to Seventeen
Million Thirty-Seven Thousand Nine Hundred Thirty-Six Pesos and Eighty-Nine Centavos
(P17,037,936.89) and Nine Hundred Sixteen Thousand Five Hundred Thirty-Six Pesos
and Fifty Centavos (P916,536.50), respectively.[12]
In its Answer, CASURECO III denied liability for the assessed taxes, asserting that the
computation of the petitioner was erroneous because it included 1) gross receipts from
service areas beyond the latter.s territorial jurisdiction; 2) taxes that had already
prescribed; and 3) taxes during the period when it was still exempt from local government
tax by virtue of its then subsisting registration with the CDA.[13]
Ruling of the Trial Court
In its Decision dated February 7, 2005, the RTC ruled that the real property taxes due for
the years 1995-1999 had already prescribed in accordance with Section 194 [14] of the
LGC. However, it found CASURECO III liable for franchise taxes for the years 2000-2003
based on its gross receipts from Iriga City and the Rinconada area on the ground that the
"situs of taxation is the place where the privilege is exercised."[15] The dispositive portion
of the RTC Decision reads:
WHEREFORE, in view of the foregoing, defendant is hereby made liable to pay plaintiff
real property taxes and franchise taxes on its receipts, including those from service area
covering Nabua, Bato, Baao and Buhi for the years 2000 up to the present. The realty
taxes for the years 1995 and 1999 is hereby declared prescribed. The City Assessor is
hereby directed to make the proper classification of defendant.s real property in
accordance with Ordinance issued by the City Council.
SO ORDERED.[16]
Only CASURECO III appealed from the RTC Decision, questioning its liability for
franchise taxes.
Ruling of the Court of Appeals
In its assailed Decision, the CA found CASURECO III to be a nonprofit entity, not falling
within the purview of "businesses enjoying a franchise" pursuant to Section 137 of the
LGC. It explained that CASURECO III.s non-profit nature is diametrically opposed to the
concept of a "business," which, as defined under Section 131 of the LGC, is a "trade or
commercial activity regularly engaged in as a means of livelihood or with a view to profit."
Consequently, it relieved CASURECO III from liability to pay franchise taxes.

Petitioner moved for reconsideration, which the CA denied in its July 12, 2010 Resolution
for being filed a day late, hence, the instant petition.
Issues Before the Court
Petitioner raises two issues for resolution, which the Court restates as follows: (1) whether
or not an electric cooperative registered under PD 269 but not under RA 6938[17] is liable
for the payment of local franchise taxes; and (2) whether or not the situs of taxation is the
place where the franchise holder exercises its franchise regardless of the place where its
services or products are delivered.
CASURECO III, on the other hand, raises the procedural issue that since the motion for
reconsideration of the CA Decision was filed out of time, the same had attained finality.
The Court's Ruling
The petition is meritorious.
Before delving into the substantive issues, the Court notes the procedural lapses extant
in the present case.
Proper Mode of Appeal from the Decision of the
Regional Trial Court involving local taxes
RA 9282,[18] which took effect on April 23, 2004, expanded the jurisdiction of the Court of
Tax Appeals (CTA) to include, among others, the power to review by appeal decisions,
orders or resolutions of the Regional Trial Courts in local tax cases originally decided or
resolved by them in the exercise of their original or appellate jurisdiction. [19]

Considering that RA 9282 was already in effect when the RTC rendered its decision on
February 7, 2005, CASURECO III should have filed its appeal, not with the CA, but with
the CTA Division in accordance with the applicable law and the rules of the CTA. Resort
to the CA was, therefore, improper, rendering its decision null and void for want of
jurisdiction over the subject matter. A void judgment has no legal or binding force or
efficacy for any purpose or at any place.[20] Hence, the fact that petitioner's motion for
reconsideration from the CA Decision was belatedly filed is inconsequential, because a
void and non-existent decision would never have acquired finality. [21]

The foregoing procedural lapses would have been sufficient to dismiss the instant petition
outright and declare the decision of the RTC final. However, the substantial merits of the
case compel us to dispense with these lapses and instead, exercise the Court.s power of
judicial review.
CASURECO III is not exempt from
payment of franchise tax
PD 269, which took effect on August 6, 1973, granted electric cooperatives registered
with the NEA, like CASURECO III, several tax privileges, one of which is exemption from
the payment of "all national government, local government and municipal taxes and fees,
including franchise, filing, recordation, license or permit fees or taxes." [22]

On March 10, 1990, Congress enacted into law RA 6938,[23] otherwise known as the
"Cooperative Code of the Philippines," and RA 6939[24]creating the CDA. The latter law
vested the power to register cooperatives solely on the CDA, while the former provides
that electric cooperatives registered with the NEA under PD 269 which opt not to
register with the CDA shall not be entitled to the benefits and privileges under the said
law.

On January 1, 1992, the LGC took effect, and Section 193 thereof withdrew tax
exemptions or incentives previously enjoyed by "all persons, whether natural or juridical,
including government-owned or controlled corporations, except local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit
hospitals and educational institutions."[25]
In Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA) v. The Secretary,
Department of Interior and Local Government,[26] the Court held that the tax privileges
granted to electric cooperatives registered with NEA under PD 269 were validly withdrawn
and only those registered with the CDA under RA 6938 may continue to enjoy the tax
privileges under the Cooperative Code.
Therefore, CASURECO III can no longer invoke PD 269 to evade payment of local taxes.
Moreover, its provisional registration with the CDA which granted it exemption for the
payment of local taxes was extended only until May 4, 1992. Thereafter, it can no longer
claim any exemption from the payment of local taxes, including the subject franchise tax.

Indisputably, petitioner has the power to impose local taxes. The power of the local
government units to impose and collect taxes is derived from the Constitution itself which
grants them "the power to create its own sources of revenues and to levy taxes, fees and
charges subject to such guidelines and limitation as the Congress may provide." [27] This
explicit constitutional grant of power to tax is consistent with the basic policy of local
autonomy and decentralization of governance. With this power, local government units
have the fiscal mechanisms to raise the funds needed to deliver basic services to their
constituents and break the culture of dependence on the national government. Thus,
consistent with these objectives, the LGC was enacted granting the local government
units, like petitioner, the power to impose and collect franchise tax, to wit:

SEC. 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other
special law, the province may impose a tax on businesses enjoying a franchise, at a rate
not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the
preceding calendar year based on the incoming receipt, or realized, within its territorial
jurisdiction. xxx

SEC. 151. Scope of Taxing Powers. - Except as otherwise provided in this Code, the city,
may levy the taxes, fees, and charges which the province or municipality may impose:
Provided, however, That the taxes, fees and charges levied and collected by highly
urbanized and independent component cities shall accrue to them and distributed in
accordance with the provisions of this Code. The rates of taxes that the city may levy may
exceed the maximum rates allowed for the province or municipality by not more than fifty
percent (50%) except the rates of professional and amusement taxes.

Taking a different tack, CASURECO III maintains that it is exempt from payment of
franchise tax because of its nature as a non-profit cooperative,as contemplated in PD
269,[28] and insists that only entities engaged in business, and not non-profit entities like
itself, are subject to the said franchise tax.
The Court is not persuaded.
In National Power Corporation v. City of Cabanatuan,[29] the Court declared that "a
franchise tax is 'a tax on the privilege of transacting business in the state and exercising
corporate franchises granted by the state.'"[30] It is not levied on the corporation simply for
existing as a corporation, upon its property or its income, but on its exercise of the rights
or privileges granted to it by the government.[31] "It is within this context that the phrase
„tax on businesses enjoying a franchise. in Section 137 of the LGC should be interpreted
and understood."[32]
Thus, to be liable for local franchise tax, the following requisites should concur: (1) that
one has a "franchise" in the sense of a secondary or special franchise; and (2) that it is
exercising its rights or privileges under this franchise within the territory of the pertinent
local government unit.[33]
There is a confluence of these requirements in the case at bar. By virtue of PD 269, NEA
granted CASURECO III a franchise to operate an electric light and power service for a
period of fifty (50) years from June 6, 1979,[34] and it is undisputed that CASURECO III
operates within Iriga City and the Rinconada area. It is, therefore, liable to pay franchise
tax notwithstanding its non-profit nature.
CASURECO III is liable for franchise tax on gross receipts within Iriga City
and Rinconada area
CASURECO III further argued that its liability to pay franchise tax, if any, should be limited
to gross receipts received from the supply of the electricity within the City of Iriga and not
those from the Rinconada area.
Again, the Court is not convinced.
It should be stressed that what the petitioner seeks to collect from CASURECO III is a
franchise tax, which as defined, is a tax on the exercise of a privilege. As Section 137[35] of
the LGC provides, franchise tax shall be based on gross receipts precisely because it is
a tax on business, rather than on persons or property.[36] Since it partakes of the nature
of an excise tax[37] the situs of taxation is the place where the privilege is exercised, in
this case in the City of Iriga, where CASURECO III has its principal office and from where
it operates, regardless of the place where its services or products are delivered. Hence,
franchise tax covers all gross receipts from Iriga City and the Rinconada area.

WHEREFORE, the petition is GRANTED. The assailed Decision dated February 11, 2010
and Resolution dated July 12, 2010 of the Court of Appeals are hereby SET ASIDE and
the Decision of the Regional Trial Court of Iriga City, Branch 36, is REINSTATED.

SO ORDERED.
 GR No. 174982, Sep 10, 2012
JOSE VICENTE ATILANO II
v.
JUDGE TIBING A. ASAALI

DECISION
PERLAS-BERNABE, J.:

This Petition for Review on Certiorari assails the May 27, 2005 Resolution [1] and
September 6, 2006 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 00231
which dismissed the petition for certiorari filed by petitioners Jose Vicente Atilano II, Heirs
of Carlos V. Tan represented by Conrad K. Tan, Carlos K. Tan, Camilo Karl K. Tan, Carisa
Rosenda T. Go, Nelida F. Atilano and Isidra K. Tan for failure to comply with the rules of
procedure.

The Factual Antecedents

Sometime in January 1990, private respondent Atlantic Merchandising, Inc. filed an action
for revival of judgment against Zamboanga Alta Consolidated, Inc. (ZACI) before the
Regional Trial Court (RTC) of Zamboanga City, Branch 17, docketed as Civil Case No.
3776. In its January 31, 1991 Decision, the RTC revived the judgment in Civil Case No.
3049 and ordered ZACI to pay private respondent the amount of P673,536.54
representing its principal obligation, interest, attorney's fees and costs, plus 12% legal
interest per annum computed from the time of the filing of the complaint until the same is
fully paid. ZACI was likewise directed to pay private respondent attorney's fees equivalent
to 15% of the unpaid amount as well as expenses of litigation and costs.

A writ of execution was issued to enforce the RTC's January 31, 1991 Decision but
because it was returned unsatisfied, private respondent sought the examination of ZACI's
debtors, which included petitioners as its stockholders. In the course of the proceedings,
petitioners denied liability for any unpaid subscriptions with ZACI and offered various
documentary evidence to support their claim.
The RTC Ruling
In the proceedings before the RTC, petitioners offered official records from the Securities
and Exchange Commission (SEC) which revealed the following information [3] as
of February 20, 1988 with respect to ZACI's incorporators, their respective subscriptions:
 Name Amount Subscribed Amount Paid-in
Jose Vicente F. Atilano II P300,000.00 P75,000.00
Carlos F. Tan 150,000.00 37,500.00
Arthur M. Lopez 150,000.00 37,500.00
Nelida F. Atilano 150,000.00 37,500.00
Isidra K. Tan 150,000.00 37,500.00
Mauro Tan 100,000.00 25,000.00

However, the RTC noted[4] that ZACI had folded up and ceased business operations as
early as 1983, and when inquiries regarding its paidin capital were made in 1992, or
almost ten (10) years later, no changes were reflected in the company books.

Finding petitioners to be indebted to ZACI as its incorporators in the aggregate amount

of P750,000.00 by way of unpaid stock subscriptions on the basis of the records of the
SEC, the RTC, in its September 29, 2004 Decision,[5] ordered petitioners to settle their
obligations to the capital stock of ZACI.
Petitioners' motion for reconsideration was denied in the RTC's December 9, 2004
Order.[6]

The CA Ruling

Aggrieved, petitioners filed a petition for certiorari before the appellate court, imputing
grave abuse of discretion upon the RTC for failing to consider Section 43, Rule 39 of the
Revised Rules of Court which substantially provides for the proceedings that should be
conducted when a third person allegedly indebted to a judgment debtor denies the debt.
However, the CA dismissed[7] their petition outright on the following grounds: (1) failure to
attach certified true copies of the assailed RTC Decision and Order; (2) only three out of
four petitioners signed the verification and certification of non-forum shopping; (3) the IBP
Official Receipt Number of the counsel for petitioners was outdated, violating Bar Matter
No. 287; and (4) deficiency in the docket and other fees in the sum of P1,530.00.

Petitioners sought reconsideration of the dismissal of their petition and substantially

complied with the procedural defects enumerated. However, in its September 6, 2006
Resolution,[8] the CA, while acknowledging petitioners' compliance with the technical
defects of their petition, nonetheless, denied petitioners' motion for reconsideration,
finding that the payment of the deficiency in the docket fee was made beyond the
reglementary period.
Issues Before The Court

In this petition for review, petitioners maintain that the CA's outright dismissal of their
petition on procedural grounds, despite substantial compliance, and the RTC Decision
directing them to pay private respondent the amount of their alleged unpaid stock
subscriptions to ZACI, are tantamount to a denial of due process of law.

The Court's Ruling

The petition has merit.

Payment of the full amount of docket fees is an indispensable step to the perfection of an
appeal, and the Court acquires jurisdiction over any case only upon such
payment.[9]Corollary to this, the Court has consistently held that procedural rules are not
to be disregarded simply because their non-observance may result in prejudice to a
party's substantive rights.[10]
However, these same rules may be relaxed, for persuasive and weighty reasons, to
relieve a litigant of an injustice commensurate with his failure to comply with
procedure.[11] Thus, in La Salette College v. Pilotin,[12] the Court explained:
Notwithstanding the mandatory nature of the requirement of payment of appellate docket
fees, we also recognize that its strict application is qualified by the following: first, failure
to pay those fees within the reglementary period allows only discretionary, not automatic,
dismissal; second,such power should be used by the court in conjunction with its exercise
of sound discretion in accordance with the tenets of justice and fair play, as well as with
a great deal of circumspection in consideration of all attendant circumstances.

After a judicious perusal of the records, the Court finds that compelling and substantial
reasons exist in this case as to justify the relaxation of procedural rules.

Records show that petitioners merely became involved in this case when, upon failure to
execute the revived final judgment in its favor in Civil Case No. 3776, respondent sought
to examine the debtors of ZACI, the judgment obligor, which included petitioners on the
allegation that they had unpaid stock subscriptions to ZACI, as its incorporators and
stockholders. During the proceedings, petitioners vehemently denied any such liability or
indebtedness.

Under the circumstances, therefore, the RTC should have directed respondent to institute
a separate action against petitioners for the purpose of recovering their alleged
indebtedness to ZACI, in accordance with Section 43, Rule 39 of the Rules of Court,
which provides:
Section 43. Proceedings when indebtedness denied or another person claims the
property. If it appears that a person or corporation, alleged to have property of the
judgment obligor or to be indebted to him, claims an interest in the property adverse to
him or denies the debt, the court may authorize, by an order made to that effect, the
judgment obligee to institute an action against such person or corporation for the recovery
of such interest or debt, forbid a transfer or other disposition of such interest or debt within
one hundred twenty (120) days from notice of the order, and may punish disobedience of
such order as for contempt. Such order may be modified or vacated at any time by the
court which issued it, or the court in which the action is brought, upon such terms as may
be just. (Emphasis supplied)

It is well-settled that no man shall be affected by any proceeding to which he is a stranger,

and strangers to a case are not bound by a judgment rendered by the court.[13] Execution
of a judgment can only be issued against one who is a party to the action, and not against
one who, not being a party thereto, did not have his day in court.[14] Due process dictates
that a court decision can only bind a party to the litigation and not against innocent third
parties.[15]
In National Power Corporation v. Gonong,[16] the Court explained:
[E]xecution may issue against such person or entity only upon an incontrovertible
showingthat the person or entity in fact holds property belonging to the judgment debtor
or is indeed a debtor of said judgment debtor, i.e., that such holding of property, or the
indebtedness, is not denied. In the event of such a denial, it is not, to repeat, within the
judge's power to order delivery of property allegedly belonging to the judgment debtor or
the payment of the alleged debt. A contrary rule would allow a court to adjudge
substantive liability in a summary proceeding, incidental merely to the process of
executing a judgment, rather than in a trial on the merits, to be held only after the party
sought to be made liable has been properly summoned and accorded full opportunity to
file the pleadings permitted by the Rules in ventilation of his side. This would amount to
a denial of due process of law. [Emphasis and underscoring supplied]

Petitioners were total strangers to the civil case between ZACI and respondent, and to
order them to settle an obligation which they persistently denied would be tantamount to
deprivation of their property without due process of law. The only power of the RTC, in
this case, is to make an order authorizing respondent to sue in the proper court to recover
an indebtedness in favor of ZACI. It has no jurisdiction to summarily try the question of
whether petitioners were truly indebted to ZACI when such indebtedness is denied.[17] On
this note, it bears stressing that stock subscriptions are considered a debt of the
stockholder to the corporation.[18]
Under this factual backdrop, the CA, therefore, should have exercised its sound judicial
discretion when it dismissed petitioners' certiorariaction.
It should have carefully weighed, with circumspection and prudence, the issues and
grievances that petitioners have raised vis-a-vis the procedural defect of their petition.
Records show that petitioners had fully paid the deficiency in the docket fee in the sum of
P1,530.00[19] notwithstanding the fact that it was made beyond the reglementary period
under the rules. What is significant, however, is that petitioners have fully complied with
all the deficiencies enumerated by the CA in its assailed May 27, 2005 Resolution.

Considered in this light, the Court, therefore, deems it in the interest of substantial justice
and petitioners' constitutionally-guaranteed right to due process to relax the rules of
procedure in order to prevent an apparent travesty of justice in this case.
WHEREFORE, the instant petition is GRANTED and the assailed May 27, 2005 and
September 6, 2006 Resolutions of the Court of Appeals are SET ASIDE. The September
29, 2004 Decision and December 9, 2004 Order of the RTC are likewise NULLIFIED,
without prejudice to the institution of a separate action against petitioners in accordance
with Section 43, Rule 39 of the Rules of Court.
SO ORDERED.
 GR No. 189774, Sep 18, 2012
DR. EMMANUEL T. VELASCO
v.
COA

DECISION
PERLAS-BERNABE, J.:

Directives and orders issued by the President in the valid exercise of his power of control
over the executive department must be obeyed and implemented in good faith by all
executive officials. Acts performed in contravention of such directives merit invalidation.

Challenged via petition for certiorari under Rule 64 vis-à-vis Rule 65 of the Rules of Court
is the Decision[1]dated September 15, 2009 of respondent Commission on Audit (COA)
disallowing the Merit Incentive Award and Birthday Cash Gift granted to petitioners.
The Facts
Sometime after the effectivity of the Administrative Code of 1987 (E.O. 292) and in
accordance with Section 35,[2] Chapter 5, Subtitle A, Title I, Book V thereof and its
implementing rules, the Tariff Commission established its own Employee Suggestions
and Incentives Awards System (ESIAS),[3] which was approved by the Civil Service
Commission (CSC) on December 2, 1993. Subsequently, however, the CSC ordered the
Tariff Commission to revise the ESIAS to comply with certain requirements. [4] On January
24, 1994, the revised ESIAS was submitted to the CSC for approval. [5]
Without the revised ESIAS having been acted upon by the CSC, the Tariff Commission,
through its then Chairman Emmanuel T. Velasco, issued Special Order No. 95-02[6] on
December 12, 1995, granting the subject Merit Incentive Award to its officials and
employees in amounts ranging from P1,000.00 to P7,000.00, depending on the date of
employment, for a total disbursement of P929,000.00. Subsequently, on December 16,
1996, the Tariff Commission also issued Resolution No. 96-01, as amended by
Resolution No. 96-01A,[7] granting the subject Birthday Cash Gift of P2,000.00 to eligible
officials and employees for calendar years 1994, 1995 and 1996, for which it disbursed
P794,000.00.[8]

Upon post-audit conducted by the COA, the grant of the Merit Incentive Award was
suspended for "lack of approval of the Office of the President." [9] The Birthday Cash Gift
was likewise suspended for "lack of legal basis."[10] There being no settlement or
submission by the Tariff Commission of the requirements for the lifting of both
suspensions, the same eventually matured into disallowances. [11]Thus, Chairman
Velasco, in a letter[12] to the COA, sought reconsideration with a request that if the
disallowances are not reconsidered, the Merit Incentive Award be converted instead into
"Hazard Pay," similar to that granted by the National Economic Development Authority
(NEDA) to its employees, to dispense with the requirement of a separate approval from
the Office of the President considering that the Tariff Commission is an attached agency
of the NEDA.[13] He also informed the COA that the Tariff Commission adopted Resolution
No. 96-01A which converted the Birthday Cash Gift into "Amelioration Assistance" to
match the same benefit granted to NEDA officials and staff.
In a letter[14] dated March 17, 1999, State Auditor Malaya R. Ochosa denied Chairman
Velasco's request for reconsideration, stating that the grant of the subject incentives was
contrary to Presidential Administrative Order No. 161 [15](AO 161) dated December 6,
1994 and Department of Budget and Management (DBM) National Compensation
Circular No. 73[16](NCC 73) dated December 27, 1994, which prohibited heads of
departments and agencies from establishing and authorizing a separate productivity and
performance incentive award. She also found no legal basis for the conversion of the
disallowed payments into other forms of allowances.[17]
The matter was elevated to COA Director IV Juanito Espino, Jr. who affirmed the
pronouncements of State Auditor Ochosa, holding that since the revised ESIAS was
never approved by the CSC, then the same could not be a valid basis for the grant of the
subject incentives.[18]
Hence, the filing of a petition for review with the COA En Bancassailing the disallowance
of the subject incentives.[19]
Ruling of the COA
On September 15, 2009, the COA En Banc rendered the assailed Decision[20] upholding
the disallowances. It ruled that Section 7 of AO 161 revoked Section 35, Chapter 5,
Subtitle A, Title I, Book V of EO 292 and therefore, presidential approval was required for
the grant of the Merit Incentive Award. It found that the conversion of the subject
incentives did not remove the grant from the coverage of the proscription under AO 161
and NCC 73. Finally, the COA held that the Tariff Commission officers did not act in good
faith since they authorized the subject incentives even after AO 161 had already been in
effect for more than a year. Thus, they must be held personally liable therefor. The
dispositive portion of the Decision reads:
WHEREFORE, premises considered, this Commission finds the instant petition
undeserving of merit. Accordingly, the subject disallowances and credit notice are hereby
AFFIRMED, and the approving officers and recipients of the subject Merit Incentive Award
and Birthday Cash Gift are held liable therefor.[21]
Hence, the present petition.[22]
Issues Before The Court
Petitioners fault the COA and raise issues which may be summarized as follows:
(1) Whether or not the grant to petitioners of the Merit Incentive Award and Birthday Cash
Gift has legal basis.
(2) Whether or not petitioners should refund the subject benefits which they received.
Ruling of the Court
The petition is partly meritorious.
AO 161 was issued to rationalize the grant of productivity incentive benefits under
a uniform set of rules. It sought to address the dissension and dissatisfaction which came
about when some department heads granted incentive benefits of varying amounts to
their officials and employees based on the provisions of Sections 31, 35 and 36 (2),
Chapter 5, Subtitle I, Book V of the Administrative Code of 1987 among those government
employees who received less or no benefits due to lack of funds. It recognized the need
to have a "standard system of incentive pay based on productivity and performance
among officials and employees of the Government."[23]
In accordance with its stated purposes, AO 161 prohibited the establishment of separate
productivity and performance incentive awards. It also expressly revoked all
administrative authorization/decrees relative to the grant of incentive award or bonus
pursuant to Sections 31,[24] 35 and 36 (2),[25] Chapter 5, Subtitle A, Title I, Book V of EO
262. The pertinent provisions of AO 161 read:
Sec. 7. Prohibition from Establishing/Authorizing a Separate Productivity and
Performance Incentive Award. Heads of departments, agencies, governing boards,
commissions, offices including government-owned and/or controlled corporations and
government financial institutions, and local government units, are hereby prohibited from
establishing and authorizing a separate productivity and performance incentive award or
any form of the same or similar nature;
Accordingly, all administrative authorization/decrees issued to select government
offices/agencies, government-owned and/or controlled corporations and government
financial institutions, and local government units, relative to grant of any Incentive Award
or Bonus; administrative, memorandum and/or any order issued authorizing the grant of
Incentive Award or Bonus or any form of similar nature pursuant to the provisions of
Sections 31, 35 and 36(2), Chapter 5, Subtitle A, Title I, Book V of Executive Order No.
292, otherwise known as the Administrative Code of 1987; and executive orders providing
for the grant of said Incentive Award or Bonus that are not consistent with this Order are
hereby revoked.

Subsequently, or on December 27, 1994, and conformably with the provisions of AO 161,
the DBM issued NCC 73[26] which, echoing the presidential issuance, prohibited the
different government agencies from establishing separate productivity and performance
incentive awards.
On this score, it bears pointing out that while the Tariff Commission's ESIAS, which the
CSC approved on December 2, 1993, established the general basis for allowing the Merit
Incentive Award and Birthday Cash Gift, the specific grant and release of these cash
benefits, however, were authorized only through Special Order 95-02 and Resolution No.
96-01 (as amended by Resolution No. 96-01A) dated December 12, 1995 and December
16 (17), 1996, respectively. Notably, when these authorizations were issued, AO 161 and
NCC 73 were already in effect.[27]
Considering these antecedents, the Court cannot therefore give credence to petitioners'
argument that the Tariff Commission's ESIAS provides the legal basis for the grant of the
subject benefits,[28] and that AO 161 finds no application to their existing ESIAS as the
said presidential issuance prohibits only the future establishment of separate incentive
awards.[29]

The Tariff Commission's ESIAS cannot be implemented independently and without

regard to subsequent presidential administrative orders such as AO 161. In Blaquera v.
Alcala,[30] the Court comprehensively discussed the effects of an administrative order
similar to AO 161 on the implementation of the ESIAS. It ruled that in issuing an
administrative order to regulate the grant of productivity incentive benefits, the President
was only exercising his power of control, thus:
Specifically, implementation of the Employee Suggestions and Incentive Award System
has been decentralized to the President or to the head of each department or agency

Section 35. Employee Suggestions and Incentive Award System. - There shall be
established a government-wide employee suggestions and incentive awards system
which shall be administered under such rules, regulations, and standards as may be
promulgated by the Commission.
In accordance with rules, regulations, and standards promulgated by the Commission,
the President or the head of each department or agency is authorized to incur whatever
necessary expenses involved in the honorary recognition of subordinate officers and
employees of the government who by their suggestions, inventions, superior
accomplishment, and other personal efforts contribute to the efficiency, economy, or other
improvement of government operations, or who perform such other extraordinary acts or
services in the public interest in connection with, or in relation to, their official employment.
The President is the head of the government. Governmental power and authority are
exercised and implemented through him. His power includes the control over executive
departments-
"The president shall have control over all the executive departments, bureaus, and
offices. He shall ensure that the laws be faithfully executed."(Section 17, Article VII, 1987
Constitution)

Control means "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 that of the latter." It has been held that "[t]he President can, by virtue of his
power of control, review, modify, alter or nullify any action, or decision of his subordinate
in the executive departments, bureaus, or offices under him. He can exercise this power
motu proprio without need of any appeal from any party."

xxx xxx xxx

The President issued subject Administrative Orders to regulate the grant of productivity
incentive benefits and to prevent discontentment, dissatisfaction and demoralization
among government personnel by committing limited resources of government for the
equal payment of incentives and awards. The President was only exercising his power
of control by modifying the acts of the respondents who granted incentive benefits to their
employees without appropriate clearance from the Office of the President, thereby
resulting in the uneven distribution of government resources. In the view of the
President, respondents [made] a mistake which had to be corrected. In so acting, the
President exercised a constitutionally-protected prerogative-

xxx xxx xxx

Neither can it be said that the President encroached upon the authority of the Commission
of Civil Service to grant benefits to government personnel. [The subject AOs] did not
revoke the privilege of employees to receive incentive benefits. The same merely
regulated the grant and amount thereof.
Sound management and effective utilization of financial resources of government are
basically executive functions, not the Commission's. Implicit is this recognition in EC 292,
which states:
xxx xxx xxx

Conformably, it is the President or the head of each department or agency who is

authorized to incur the necessary expenses involved in the honorary recognition of
subordinate officers and employees of the government." It is not the duty of the
Commission to fix the amount of the incentives. Such function belongs to the President
or his duly empowered alter ego. (underscoring supplied)

In the present case, and in line with the pronouncements in Casal v. Commission on
Audit[31] and Blaquera v. Alcala,[32] the Court finds that AO 161 was issued in the valid
exercise of presidential control over the executive departments, which Chairman Velasco
was duty bound to observe. "Executive officials who are subordinate to the President
should not trifle with the President's constitutional power of control over the executive
branch. There is only one Chief Executive who directs and controls the entire executive
branch, and all other executive officials must implement in good faith his directives and
orders. This is necessary to provide order, efficiency and coherence in carrying out the
plans, policies and programs of the executive branch."[33]
Considering, therefore, that Special Order 95-02 and Resolution No. 96-01 as amended
by Resolution No. 96-01A, were issued in direct contravention of the prohibition in AO
161, it follows that the grant of the incentive awards therein were invalid and lacked legal
basis.
Even prior to the issuance of AO 161, the subject incentive awards could not have been
validly granted in the absence of prior approval from the Office of the President, pursuant
to Section 2 of Administrative Order No. 103 (AO 103),[34] which states:
Sec. 2. All heads of government offices/agencies, including government-owned and/or
controlled corporations, as well as their respective governing boards are hereby enjoined
and prohibited from authorizing/granting Productivity Incentive Benefits or any and all
similar forms of allowances/benefits without prior approval and authorization via
Administrative order by the Office of the President. Henceforth, anyone found violating
any of the mandates in this Order, including all officials/agency found to have taken part
thereof, shall be accordingly and severely dealt with in accordance with the applicable
provisions of existing administrative and penal laws.
Consequently, all administrative authorizations to grant any form of allowance/benefits
and all forms of additional compensation usually paid outside of the prescribed basic
salary under R.A. No. 6758, the Salary Standardization Law, that are inconsistent with
the legislated policy on the matter or are not covered by any legislative action are hereby
revoked. (Underscoring supplied)

AO 103, which took effect on January 14, 1994, enjoins heads of government agencies
from granting incentive benefits without prior approval of the President and, like AO 161,
is also a valid exercise of the President's constitutional[35] power of control and authority
over executive departments. Thus, without the imprimatur of the Office of the President
as required by AO 103, the grant of the subject incentives is null and void.
On the other hand, petitioners contend that even if the grant of the subject incentives
were invalidated, they should not be made to refund the same because the benefits were
given to, and received by, them in good faith.
Indeed, a public officer is presumed to have acted in good faith in the performance of his
duties.[36]However, public officials can be held personally accountable for acts claimed to
have been performed in connection with official duties where they have acted beyond
their scope of authority or where there is a showing of bad faith. [37] Thus, in the case
of Casal v. Commission on Audit,[38] the Court held liable the approving officers who
authorized the grant of productivity award in complete disregard of the prohibition
declared by a presidential issuance, ratiocinating that:
The failure of petitioners-approving officers to observe all these issuances cannot be
deemed a mere lapse consistent with the presumption of good faith. Rather, even if the
grant of the incentive award were not for a dishonest purpose as they claimed, the patent
disregard of the issuances of the President and the directives of the COA amounts
to gross negligence, making them liable for the refund thereof.
Similarly in the present case, the blatant failure of the petitioners-approving officers to
abide with the provisions of AO 103 and AO 161 overcame the presumption of good faith.
The deliberate disregard of these issuances is equivalent to gross negligence amounting
to bad faith. Therefore, the petitioners-approving officers are accountable for the refund
of the subject incentives which they received.
However, with regard to the employees who had no participation in the approval of the
subject incentives, they were neither in bad faith nor were they grossly negligent for
having received the benefits under the circumstances. The approving officers' allowance
of the said awards[39] certainly tended to give it a color of legality from the perspective of
these employees. Being in good faith, they are therefore under no obligation to refund the
subject benefits which they received.[40]
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated September
15, 2009 of respondent COA is AFFIRMEDwith MODIFICATION. Only the approving
officers are directed to return the amounts which they received as Merit Incentive Award
under Special Order No. 95-02 and Birthday Cash Gift under Resolution No. 96-01 as
amended by Resolution No. 96-01A.
SO ORDERED.
 GR No. 199547, Sep 24, 2012
NEW PHILIPPINE SKYLANDERS
v.
FRANCISCO N. DAKILA

RESOLUTION
PERLAS-BERNABE, J.:

The Petition for Review on Certiorari[1] assails the August 31, 2011[2] and November 23,
2011[3]Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 113015 which
affirmed the September 10, 2009 Decision[4] and December 15, 2009 Resolution[5] of the
National Labor Relations Commission (NLRC) finding respondent Francisco N.Dakila
(respondent Dakila) to have been illegally dismissed.
The Factual Antecedents
Respondent Dakila was employed by petitioner corporation as early as 1987 and
terminated for cause in April 1997 when the corporation was sold. In May 1997, he was
rehired as consultant by the petitioners under a Contract for Consultancy Services [6]dated
April 30, 1997.
Thereafter, in a letter[7] dated April 19, 2007, respondent Dakila informed petitioners of
his compulsory retirement effective May 2, 2007 and sought for the payment of his
retirement benefits pursuant to the Collective Bargaining Agreement. His request,
however, was not acted upon. Instead, he was terminated from service effective May 1,
2007.

Consequently, respondent Dakila filed a complaint for constructive illegal dismissal, non-
payment of retirement benefits, under/non-payment of wages and other benefits of a
regular employee, and damages against petitioners, The New Philippine Skylanders, Inc.
and its President and General Manager, Jennifer M. Eñano-Bote, before the NLRC. He
averred, among others, that the consultancy contract was a scheme to deprive him of the
benefits of regularization, claiming to have assumed tasks necessary and desirable in the
trade or business of petitioners and under their direct control and supervision. In support
of his claim, he submitted, among others, copies of his time cards, Official Business
Itinerary Slips, Daily Attendance Sheets and other documents prescribing the manner in
which his tasks were to be accomplished under the control of the petitioners and
acknowledging his status as a regular employee of the corporation.
On the other hand, petitioners, in their position paper,[8] asserted that respondent
Dakilawas a consultant and not their regular employee. The latter was not included in
petitioners' payroll and paid a fixed amount under the consultancy contract. He was not
required to observe regular working hours and was free to adopt means and methods to
accomplish his task except as to the results of the work required of him. Hence, no
employer-employee relationship existed between them. Moreover, respondentDakila
terminated his contract in a letter dated April 19, 2007, thus, negating his dismissal.
Ruling of the Labor Arbiter
On May 28, 2008, Labor Arbiter Thomas T. Que, Jr. rendered a decision [9] finding
respondent Dakila to have been illegally dismissed and ordered his reinstatement with
full backwages computed from the time of his dismissal on May 1, 2007 until his actual
reinstatement as well as the payment of his unpaid benefits under the Collective
Bargaining Agreement (CBA). He declared respondent Dakila to be a regular employee
on the basis of the unrebutted documentary evidence showing that he was under the
petitioners' direct control and supervision and performed tasks that were either incidental
or usually desirable and necessary in the trade or business of petitioner corporation for a
period of ten years. Having been dismissed without cause and notice, respondent Dakila
was awarded moral and exemplary damages in the amount of P50,000.00 each. He is
also entitled to avail of the corporation's retirement benefits upon his reinstatement.
Ruling of the NLRC
On appeal, the NLRC sustained the Labor Arbiter's (LA) finding that respondent Dakila
was a regular employee and that his dismissal was illegal. However, it noted that since
he was already beyond the retirement age, his reinstatement was no longer feasible. As
such, it ordered the payment of his retirement pay to be computed from 1997 until the
date of the decision. Moreover, it found respondent Dakila entitled to reinstatement
wages from the time petitioners received a copy of the LA's Decision on July 7, 2008 up
to the date of the NLRC's decision. Thus, it ordered the petitioners to pay respondent
Dakila the additional amount of P278,508.33representing reinstatement wages and
retirement pay.[10]
The petitioners' motion for reconsideration having been denied in the Resolution[11] dated
December 15, 2009, they filed a petition for certiorari[12] before the CA raising the
following errors:
(1) the complaint should have been dismissed against petitioner Jennifer M. Eñano-Bote
absent any showing of bad faith;
(2) respondent Dakila is not a regular employee;
(3) respondent was not illegally dismissed as it was the respondent who resigned; and

(4) the LA's monetary award has no basis.

Ruling of the CA
In the Resolution[13] dated August 31, 2011, the CA dismissed the petition for failure to
show that the NLRC committed grave abuse of discretion in affirming the LA's Decision. It
found the factual findings of the LA and the NLRC to be supported by substantial evidence
and thus, should be accorded respect and finality. Petitioners' motion for reconsideration
therefrom was likewise denied in the Resolution[14]dated November 23, 2011.
Hence, the instant petition reiterating the arguments raised before the CA.
Ruling of the Court
The issue of illegal dismissal is premised on the existence of an employer-employee
relationship between the parties herein. It is essentially a question of fact, beyond the
ambit of a petition for review on certiorari under Rule 45 of the Rules of Court unless there
is a clear showing of palpable error or arbitrary disregard of evidence which does not
obtain in this case. Records reveal that both the LA and the NLRC, as affirmed by the
CA, have found substantial evidence to show that respondent Dakila was a regular
employee who was dismissed without cause.
Following Article 279 of the Labor Code, an employee who is unjustly dismissed from
work is entitled to reinstatement without loss of seniority rights and other privileges and
to his full backwages computed from the time he was illegally dismissed. However,
considering that respondent Dakila was terminated on May 1, 2007, or one (1) day prior
to his compulsory retirement on May 2, 2007, his reinstatement is no longer
feasible. Accordingly, the NLRC correctly held him entitled to the payment of his
retirement benefits pursuant to the CBA. On the other hand, his backwages should be
computed only for days prior to his compulsory retirement which in this case is only a
day. Consequently, the award of reinstatement wages pending appeal must be deleted
for lack of basis.
Similarly, the Court finds no basis to hold petitioner Jennifer M. Eñano-Bote, President
and General Manager of The New Philippine Skylanders, Inc., jointly and severally liable
with the corporation for the payment of the monetary awards. The mere lack of authorized
or just cause to terminate one's employment and the failure to observe due process do
not ipso facto mean that the corporate officer acted with malice or bad faith.[15]There must
be independent proof of malice or bad faith which was not established in this case.
Perforce, petitioner Jennifer M. Eñano-Bote cannot be made personally liable for the
liabilities of the corporation which, by legal fiction, has a personality separate and distinct
from its officers, stockholders and members. Moreover, for lack of factual and legal
bases, the awards of moral and exemplary damages cannot also be sustained. [16]
WHEREFORE, premises considered, the petition is PARTLY GRANTED.The assailed
August 31, 2011 and November 23, 2011 Resolutions of the Court of Appeals in CA-G.R.
SP No. 113015 are MODIFIED as follows:
petitioner Jennifer M. Eñano-Bote is ABSOLVED from liability for payment of
(1)
respondent Francisco N. Dakila's monetary awards;
the awards of reinstatement wages pending appeal as well as the moral and
(2)
exemplary damages are ordered DELETED; and
 the computation of backwages should be limited only for a day prior to his
(3)
compulsory retirement.

The rest of the decision stands.

SO ORDERED.
 .AM No. P-12-3087, Sep 24, 2012
DIONISIO P. PILOT
v.
RENATO B. BARON

RESOLUTION
PERLAS-BERNABE, J.:

On October 8, 2007, complainant filed a letter-complaint[1] before the Office of the Court
Administrator (OCA) of the Supreme Court charging respondent sheriff of grave
misconduct[2] for his failure/refusal to conduct the auction sale of the levied property
pursuant to the Order of Execution issued by the Regional Trial Court (RTC) of Pasig
City, Branch 264 in Civil Case No. 66262.[3]
Complainant is the judgment obligee in the Decision[4] dated February 25, 2006 rendered
in the aforementioned case, in the amount of P516,297.50 with legal interest from
December 1993, moral and exemplary damages and attorney's fees, each in the amount
of P50,000.00, as well as the costs of the suit.
To implement the writ of execution (writ) issued therein and for the payment of publication
expenses, respondent sheriff asked and received from complainant the amount of
P15,000.00 and thereafter, levied the house and lot of the judgment obligors, Spouses
Noel and Gregoria Bambalan (Sps. Bambalan), located in Bo. Rosario, Pasig City and
covered by Transfer Certificate of Title No. PT-78872. While the auction sale was
scheduled on September 3, 2007, the same did not push through purportedly for lack of
publication. Instead, it was reset to September 19, 2007, then to September 25, 2007
and later to October 5, 2007, which were all canceled on account of complainant's failure
to heed respondent sheriff's additional demand of the amount of P18,000.00 for
publication expenses.
On September 25, 2007, respondent sheriff instructed complainant to proceed to his
office to receive the amount of P500,000.00 paid by the daughter of Sps.
Bambalan. When the latter ignored the instruction, he offered to deliver the said amount
for a sheriff's fee of 2.5% of the amount indicated in the notice of auction
sale.[5] Moreover, on several occasions, he solicited money from complainant for his
cellphone load and transportation expenses in the service of the notice of sale.
Despite directives[6] from the Court, respondent sheriff failed to submit his comment to
the letter-complaint. A fine of P1,000.00,[7] later increased to P2,000.00,[8] was imposed
upon him which he likewise failed to pay, prompting the Court to declare the case
submitted for decision on the basis of the pleadings filed.[9]
The complaint has merit.
Sheriffs play an important role in the administration of justice since they are tasked to
execute final judgments of the courts that would otherwise become empty victories for the
prevailing party if not enforced.[10] The 2002 Revised Manual for Clerks of Court
characterizes sheriffs' functions as purely ministerial, to wit:
Sheriffs are ministerial officers. They are agents of the law and not agents of the parties,
neither of the creditor nor of the purchaser at a sale conducted by him. It follows,
therefore, that the sheriff can make no compromise in an execution sale.
As a ministerial officer, a sheriff is expected to faithfully perform what is incumbent upon
him, even in the absence of instruction.[11] Thus, he must discharge his duties with due
care and utmost diligence. In serving court writs and processes and in implementing
court orders, he cannot afford to err without affecting the integrity of his office and the
efficient administration of justice.[12]
Respondent sheriff, by his omission to file the required comment and to pay the fine
imposed by the Court, disregarded the duty of every employee in the judiciary to obey the
orders and processes of the Court without delay. The same evinces lack of interest in
clearing his name in the face of grave imputations, constituting an implied admission of
the charges.[13] Nonetheless, the Court evaluated and examined the records of the case
and found sufficient basis in complainant's charges.
Records disclose that after levying on the property of the judgment obligors, respondent
sheriff issued a notice of auction sale (notice) and accordingly scheduled the sale on
September 3, 2007. It was, thus, incumbent upon him to comply with the requirements of
Section 15, Rule 39 of the Rules of Court (Rules) prior to the sale, namely, (a) to cause
the posting of the notice for 20 days in 3 public places in Pasig City where the sale was
to take place; (b) to cause the publication of the notice once a week for two consecutive
weeks in a newspaper of general circulation, selected by raffle; (c) to serve a written
notice of the sale to the judgment obligors at least three days before the sale. However,
notwithstanding receipt from the complainant of the amount of P15,000.00 under an
assurance that he would take care of everything, no auction sale was conducted on the
scheduled date for lack of the required publication. Worse, he asked anew for publication
expenses in a higher amount, and solicited money for his cellphone load, transportation
expenses in the service of the notice, as well as sheriff's fee of 2.5% of the minimum bid
amount indicated in the notice. Moreover, instead of conducting the auction sale as re-
scheduled, he unjustifiably insisted that complainant accept the P500,000.00 paid by the
daughter of Sps. Bambalan which is below the amount sought to be recovered under the
subject decision. He likewise failed to observe the proper procedural steps laid down in
Section 10,[14] Rule 141 of the Rules in collecting sums of money from a party-litigant. He
should have (a) prepared an estimate of expenses to be incurred; (b)
obtained court approval for such estimated expenses; (c) caused the interested party
to deposit with the Clerk of Court and Ex Officio Sheriff the corresponding amount; (d)
secured from the Clerk of Court the said amount; (e) disbursed/liquidated his expenses
within the same period for rendering a return on the writ; and (f) refunded any unspent
amount[15] to the complainant.
Consequently, the Court finds respondent sheriff guilty of dishonesty and grave
misconduct when he unlawfully collected[16]and pocketed the amount of P15,000.00
intended to defray the expenses for the publication of the notice and enforcement of the
writ of execution but which was not accordingly spent. He is likewise guilty of dereliction
of duty in failing to observe the proper procedure in collecting execution expenses and
conducting an execution sale.[17] Moreover, he violated Canon III, Section 2(b) of A.M.
No. 03-06-13-SC,[18] which prohibits court employees from receiving tips or any
remuneration from parties to the actions or proceedings with the courts.[19]
Under Section 52[20] of the Uniform Rules on Administrative Cases in the Civil Service,
dishonesty and grave misconduct are classified as grave offenses meriting the supreme
penalty of dismissal from service[21]even for the first offense. On the other hand,
dereliction of duty for failure to comply with Section 10, Rule 141 of the Rules of Court is
punishable with a fine of P5,000.00.[22]
Considering, however, the Resolution of the Court dated April 19, 2010 in A.M. No. 10-3-
76-RTC which declared respondent sheriff dropped from the rolls effective May 4, 2009
for having been on absence without official leave (AWOL), the only appropriate imposable
penalty is fine. Under the premises, the Court imposes upon him a fine in the reasonable
amount of P40,000.00, which may be deducted from his accrued leave credits, if
sufficient.
WHEREFORE, the Court finds respondent RENATO B. BARON GUILTY of dishonesty
and grave misconduct, violation of Canon III, Section 2(b) of A.M. No. 03-06-13-SC and
dereliction of duty, and is FINED in the amount of FORTY THOUSAND PESOS
(P40,000.00) to be deducted from his accrued leave credits, if sufficient.
Let copies of this Resolution be filed in the personal record of respondent and furnished
him at his address of record.
SO ORDERED.
 GR No. 179115, Sep 26, 2012
ASIA INTERNATIONAL AUCTIONEERS
v.
CIR

RESOLUTION
PERLAS-BERNABE, J.:

Before the Court is a Petition for Review seeking to reverse and set aside the Decision
dated August 3, 2007 of the Court of Tax Appeals (CTA) En Banc, [1] and the Resolutions
dated November 20, 2006[2] and February 22, 2007[3] of the CTA First Division dismissing
Asia International Auctioneers, Inc.'s (AIA) appeal due to its alleged failure to timely
protest the Commissioner of Internal Revenue's (CIR) tax assessment.

The Factual Antecedents

AIA is a duly organized corporation operating within the Subic Special Economic Zone. It
is engaged in the importation of used motor vehicles and heavy equipment which it sells
to the public through auction.[4]
On August 25, 2004, AIA received from the CIR a Formal Letter of Demand, dated July
9, 2004, containing an assessment for deficiency value added tax (VAT) and excise tax
in the amounts of P102,535,520.00 and P4,334,715.00, respectively, or a total amount of
P106,870,235.00, inclusive of penalties and interest, for auction sales conducted on
February 5, 6, 7, and 8, 2004.[5]
AIA claimed that it filed a protest letter dated August 29, 2004 through registered mail on
August 30, 2004.[6] It also submitted additional supporting documents on September 24,
2004 and November 22, 2004.[7]
The CIR failed to act on the protest, prompting AIA to file a petition for review before the
CTA on June 20, 2005,[8] to which the CIR filed its Answer on July 26, 2005.[9]
On March 8, 2006, the CIR filed a motion to dismiss[10] on the ground of lack of jurisdiction
citing the alleged failure of AIA to timely file its protest which thereby rendered the
assessment final and executory. The CIR denied receipt of the protest letter dated August
29, 2004 claiming that it only received the protest letter dated September 24, 2004 on
September 27, 2004, three days after the lapse of the 30-day period prescribed in Section
228[11] of the Tax Code.[12]
In opposition to the CIR's motion to dismiss, AIA submitted the following evidence to prove
the filing and the receipt of the protest letter dated August 29, 2004: (1) the protest letter
dated August 29, 2004 with attached Registry Receipt No. 3824;[13] (2) a Certification
dated November 15, 2005 issued by Wilfredo R. De Guzman, Postman III, of the
Philippine Postal Corporation of Olongapo City, stating that Registered Letter No. 3824
dated August 30, 2004 , addressed to the CIR, was dispatched under Bill No. 45 Page 1
Line 11 on September 1, 2004 from Olongapo City to Quezon City; [14] (3) a Certification
dated July 5, 2006 issued by Acting Postmaster, Josefina M. Hora, of the Philippine Postal
Corporation-NCR, stating that Registered Letter No. 3824 was delivered to the BIR
Records Section and was duly received by the authorized personnel on September 8,
2004;[15] and (4) a certified photocopy of the Receipt of Important Communication
Delivered issued by the BIR Chief of Records Division, Felisa U. Arrojado, showing that
Registered Letter No. 3824 was received by the BIR. [16]AIA also presented Josefina M.
Hora and Felisa U. Arrojado as witnesses to testify on the due execution and the contents
of the foregoing documents.
Ruling of the Court of Tax Appeals
After hearing both parties, the CTA First Division rendered the first assailed Resolution
dated November 20, 2006 granting the CIR's motion to dismiss. Citing Republic v. Court
of Appeals,[17] it ruled that "while a mailed letter is deemed received by the addressee in
the course of the mail, still, this is merely a disputable presumption, subject to
controversion, and a direct denial of the receipt thereof shifts the burden upon the party
favored by the presumption to prove that the mailed letter indeed was received by the
addressee."[18]

The CTA First Division faulted AIA for failing to present the registry return card of the
subject protest letter. Moreover, it noted that the text of the protest letter refers to a Formal
Demand Letter dated June 9, 2004 and not the subject Formal Demand Letter dated July
9, 2004. Furthermore, it rejected AIA's argument that the September 24, 2004 letter
merely served as a cover letter to the submission of its supporting documents pointing
out that there was no mention therein of a prior separate protest letter. [19]

AIA's motion for reconsideration was subsequently denied by the CTA First Division in its
second assailed Resolution dated February 22, 2007. On appeal, the CTA En Banc in its
Decision dated August 3, 2007 affirmed the ruling of the CTA First Division holding that
AIA's evidence was not sufficient to prove receipt by the CIR of the protest letter dated
August 24, 2004.
Hence, the instant petition.
Issue Before the Court

Both parties discussed the legal bases for AIA's tax liability, unmindful of the fact that this
case stemmed from the CTA's dismissal of AIA's petition for review for failure to file a
timely protest, without passing upon the substantive merits of the case.
Relevantly, on January 30, 2008, AIA filed a Manifestation and Motion with Leave of the
Honorable Court to Defer or Suspend Further Proceedings[20] on the ground that it availed
of the Tax Amnesty Program under Republic Act 9480[21] (RA 9480), otherwise known as
the Tax Amnesty Act of 2007. On February 13, 2008, it submitted to the Court a
Certification of Qualification[22] issued by the BIR on February 5, 2008 stating that AIA
"has availed and is qualified for Tax Amnesty for the Taxable Year 2005 and Prior Years"
pursuant to RA 9480.
With AIA's availment of the Tax Amnesty Program under RA 9480, the Court is tasked to
first determine its effects on the instant petition.
Ruling of the Court

A tax amnesty is a general pardon or the intentional overlooking by the State of its
authority to impose penalties on persons otherwise guilty of violating a tax law. It partakes
of an absolute waiver by the government of its right to collect what is due it and to give
tax evaders who wish to relent a chance to start with a clean slate.[23]
A tax amnesty, much like a tax exemption, is never favored or presumed in law. The grant
of a tax amnesty, similar to a tax exemption, must be construed strictly against the
taxpayer and liberally in favor of the taxing authority.[24]
In 2007, RA 9480 took effect granting a tax amnesty to qualified taxpayers for all national
internal revenue taxes for the taxable year 2005 and prior years, with or without
assessments duly issued therefor, that have remained unpaid as of December 31,
2005.[25]
The Tax Amnesty Program under RA 9480 may be availed of by any person except those
who are disqualified under Section 8 thereof, to wit:
Section 8. Exceptions. The tax amnesty provided in Section 5 hereof shall not extend to
the following persons or cases existing as of the effectivity of this Act:
(a) Withholding agents with respect to their withholding tax liabilities;
(b) Those with pending cases falling under the jurisdiction of the Presidential Commission
on Good Government;
(c) Those with pending cases involving unexplained or unlawfully acquired wealth or
under the Anti-Graft and Corrupt Practices Act;
(d) Those with pending cases filed in court involving violation of the Anti-Money
Laundering Law;
(e) Those with pending criminal cases for tax evasion and other criminal offenses under
Chapter II of Title X of the National Internal Revenue Code of 1997, as amended, and the
felonies of frauds, illegal exactions and transactions, and malversation of public funds
and property under Chapters III and IV of Title VII of the Revised Penal Code; and

(f) Tax cases subject of final and executory judgment by the courts.(Emphasis supplied)
The CIR contends that AIA is disqualified under Section 8(a) of RA 9480 from availing
itself of the Tax Amnesty Program because it is "deemed" a withholding agent for the
deficiency taxes. This argument is untenable.
The CIR did not assess AIA as a withholding agent that failed to withhold or remit the
deficiency VAT and excise tax to the BIR under relevant provisions of the Tax Code.
Hence, the argument that AIA is "deemed" a withholding agent for these deficiency taxes
is fallacious.
Indirect taxes, like VAT and excise tax, are different from withholding taxes. To
distinguish, in indirect taxes, the incidence of taxation falls on one person but the burden
thereof can be shifted or passed on to another person, such as when the tax is imposed
upon goods before reaching the consumer who ultimately pays for it. [26] On the other
hand, in case of withholding taxes, the incidence and burden of taxation fall on the same
entity, the statutory taxpayer. The burden of taxation is not shifted to the withholding
agent who merely collects, by withholding, the tax due from income payments to entities
arising from certain transactions[27]and remits the same to the government. Due to this
difference, the deficiency VAT and excise tax cannot be "deemed" as withholding taxes
merely because they constitute indirect taxes. Moreover, records support the conclusion
that AIA was assessed not as a withholding agent but, as the one directly liable for the
said deficiency taxes.[28]
The CIR also argues that AIA, being an accredited investor/taxpayer situated at the Subic
Special Economic Zone, should have availed of the tax amnesty granted under RA
9399[29] and not under RA 9480. This is also untenable.
RA 9399 was passed prior to the passage of RA 9480. RA 9399 does not preclude
taxpayers within its coverage from availing of other tax amnesty programs available or
enacted in futuro like RA 9480. Moreso, RA 9480 does not exclude from its coverage
taxpayers operating within special economic zones. As long as it is within the bounds of
the law, a taxpayer has the liberty to choose which tax amnesty program it wants to avail.

Lastly, the Court takes judicial notice of the "Certification of Qualification"[30] issued by the
Eduardo A. Baluyut, BIR Revenue District Officer, stating that AIA "has availed and is
qualified for Tax Amnesty for the Taxable Year 2005 and Prior Years" pursuant to RA
9480. In the absence of sufficient evidence proving that the certification was issued in
excess of authority, the presumption that it was issued in the regular performance of the
revenue district officer's official duty stands.[31]
WHEREFORE, the petition is DENIED for being MOOT and ACADEMIC in view of Asia
International Auctioneers, Inc.'s (AIA) availment of the Tax Amnesty Program under RA
9480. Accordingly, the outstanding deficiency taxes of AIA are deemed fully settled.

SO ORDERED.
 GR No. 193753, Sep 26, 2012
LIVING
v.
MALAYAN INSURANCE COMPANY

RESOLUTION
PERLAS-BERNABE, J.:
This Petition for Review on Certiorari assails, on pure question of law, the Orders dated
April 8, 2010[1] and August 25, 2010[2] of the Regional Trial Court (RTC) of Parañaque
City, Branch 257 dismissing, without prejudice, the complaint for specific performance
and breach of contract filed by petitioner Living @ Sense, Inc. (petitioner) for failure to
implead Dou Mac, Inc. (DMI) as an indispensable party.
The Factual Antecedents

Records show that petitioner was the main contractor of the FOC Network Project of
Globe Telecom in Mindanao. In connection with the project, petitioner entered into a Sub-
Contract Agreement[3](Agreement) with DMI, under which the latter was tasked to
undertake an underground open-trench work. Petitioner required DMI to give a bond, in
the event that DMI fails to perform its obligations under the Agreement. Thus, DMI
secured surety[4] and performance[5] bonds, both in the amount of P5,171,488.00, from
respondent Malayan Insurance Company, Inc. (respondent) to answer: (1) for the
unliquidated portion of the downpayment, and (2) for the loss and damage that petitioner
may suffer, respectively, should DMI fail to perform its obligations under the Agreement.
Under the bonds, respondent bound itself jointly and severally liable with DMI. [6]

During the course of excavation and restoration works, the Department of Public Works
and Highways (DPWH) issued a work-stoppage order against DMI after finding the latter's
work unsatisfactory. Notwithstanding the said order, however, DMI still failed to adopt
corrective measures, prompting petitioner to terminate[7] the Agreement and
seek[8]indemnification from respondent in the total amount of P1,040,895.34. However,
respondent effectively denied[9] petitioner's claim on the ground that the liability of its
principal, DMI, should first be ascertained before its own liability as a surety attaches.
Hence, the instant complaint, premised on respondent's liability under the surety and
performance bonds secured by DMI.
Seeking the dismissal[10] of the complaint, respondent claimed that DMI is an
indispensable party that should be impleaded and whose liability should first be
determined before respondent can be held liable.
On the other hand, petitioner asserted[11] that respondent is a surety who is directly and
primarily liable to indemnify petitioner, and that the bond is "callable on demand" [12] in the
event DMI fails to perform its obligations under the Agreement.

The RTC's Ruling

In its April 8, 2010 Order,[13] the RTC dismissed the complaint without prejudice, for failure
to implead DMI as a party defendant. It ruled that before respondent could be held liable
on the surety and performance bonds, it must first be established that DMI, with whom
petitioner had originally contracted, had indeed violated the Agreement. DMI, therefore,
is an indispensable party that must be impleaded in the instant suit.
On August 25, 2010, the RTC denied[14] petitioner's motion for reconsideration for failure
to set the same for hearing as required under the rules.
The Issue Before The Court
The sole issue to be resolved by the Court is whether DMI is an indispensable party in
this case.
The Court's Ruling

Petitioner maintains that the rule on solidary obligations permits it, as creditor, to proceed
against any of the solidary debtors, citing Article 1216 of the Civil Code which provides:

Article 1216. The creditor may proceed against any one of the solidary debtors or some
or all of them simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the others, so long as the
debt has not been fully collected.
The petition is meritorious.
Records show that when DMI secured the surety and performance bonds from
respondent in compliance with petitioner's requirement, respondent bound itself "jointly
and severally" with DMI for the damages and actual loss that petitioner may suffer should
DMI fail to perform its obligations under the Agreement, as follows:
That we, DOU MAC INC. as Principal, and MALAYAN INSURANCE CO., INC., x xx are
held firmly bound unto LIVING @ SENSE INC. in the sum of FIVE MILLION ONE
HUNDRED SEVENTY ONE THOUSAND FOUR HUNDRED EIGHTY EIGHT AND
00/100 PESOS ONLY (PHP ***5,171,488.00), PHILIPPINE Currency, for the payment of
which sum, well and truly to be made, we bind ourselves, our heirs, executors,
administrators, successors and assigns, jointly and severally, firmly by these presents
xxx[15] (Emphasis Supplied)
The term "jointly and severally" expresses a solidary obligation [16]granting petitioner, as
creditor, the right to proceed against its debtors, i.e., respondent or DMI.
The nature of the solidary obligation under the surety does not make one an indispensable
party.[17] An indispensable party is a party-in-interest without whom no final determination
can be had of an action, and who shall be joined mandatorily either as plaintiffs or
defendants. The presence of indispensable parties is necessary to vest the court with
jurisdiction, thus, without their presence to a suit or proceeding, the judgment of a court
cannot attain real finality. 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 as to those present.[18]
In this case, DMI is not an indispensable party because petitioner can claim indemnity
directly from respondent, having made itself jointly and severally liable with DMI for the
obligation under the bonds. Therefore, the failure to implead DMI is not a ground to
dismiss the case, even if the same was without prejudice.
Moreover, even on the assumption that DMI was, indeed, an indispensable party, the
RTC committed reversible error in dismissing the complaint. Failure to implead an
indispensable party is not a ground for the dismissal of an action, as the remedy in such
case is to implead the party claimed to be indispensable, considering that parties may be
added by order of the court, on motion of the party or on its own initiative at any stage of
the action.[19]
Accordingly, the Court finds that the RTC erred in holding that DMI is an indispensable
party and, consequently, in dismissing the complaint filed by petitioner without prejudice.

WHEREFORE, the assailed April 8, 2010 and August 25, 2010 Orders of the Regional
Trial Court (RTC) of Parañaque City, Branch 257 are hereby SET ASIDE. Petitioner's
complaint is ordered REINSTATEDand the caseremanded to the RTC for further
proceedings.

SO ORDERED.
 GR No. 178584, Oct 08, 2012
ASSOCIATED MARINE OFFICERS
v.
NORIEL DECENA

DECISION
PERLAS-BERNABE, J.:
This Petition for Review on Certiorari seeks the reversal of the Decision [1] of the Court of
Appeals (CA) dated July 31, 2006, as well as the Resolution[2] dated June 20, 2007, which
dismissed the complaint for unlawful detainer filed by petitioner against respondent on
the ground of prematurity, as petitioner has not shown that it complied with the mandatory
requirements for a valid and effective cancellation of the contract to sell a house and lot.

The Factual Antecedents

Associated Marine Officers and Seamen's Union of the Philippines PTGWO-ITF
(petitioner) is a duly registered labor organization engaged in an on-going Shelter
Program, which offers residential lots and fully-furnished houses to its members-seafarers
under a reimbursement scheme requiring no down payment and no interest on the
principal sum advanced for the acquisition and development of the land and the
construction of the house.
On April 27, 1995, petitioner entered into a contract[3] under the Shelter Program with one
of its members, Noriel Decena (respondent), allowing the latter to take possession of a
house and lot described as 7 STOLT MODEL, Lot 16, Block 7, in the Seamen's Village,
Sitio Piela, Barangay Paliparan, Dasmariñas, Cavite, with the obligation to reimburse
petitioner the cost (US$28,563)[4] thereof in 180 equal monthly payments. It was
stipulated in said contract that, in case respondent fails to remit three (3) monthly
reimbursement payments, he shall be given a 3-month grace period within which to remit
his arrears, otherwise, the contract shall be automatically revoked or cancelled and
respondent shall voluntarily vacate the premises without need of demand or judicial
action.[5]

Subsequently, respondent failed to pay twenty-five (25) monthly reimbursement

payments covering the period August 1999 to August 2001, despite demands. Hence,
petitioner cancelled the contract and treated all his reimbursement payments as rental
payments for his occupancy of the house and lot.
On August 21, 2001, petitioner sent respondent a notice of final demand [6] requiring him
to fulfill his obligation within a 30-day grace period. Thereafter, on October 18, 2001, his
wife received a notice to vacate[7] the premises. For failure of respondent to heed said
notices, petitioner filed a complaint before the barangay lupon and, eventually, a case for
unlawful detainer, docketed as Civil Case No. 1210 [8]before the Municipal Trial Court
(MTC) of Dasmariñas, Cavite.
The Ruling of the MTC
On December 4, 2002, the MTC found petitioner's case meritorious and, thus, rendered
judgment[9] ordering respondent to (1) vacate the premises; (2) pay monthly rental in the
amount of P8,109.00 from August 1999 with legal interests thereon until he has actually
and fully paid the same; and (3) pay attorney's fees in the amount of P30,000.00, as well
as the costs of suit.
The Ruling of the RTC
On appeal (App. Civil Case No. 312-03), the Regional Trial Court (RTC) of Imus, Cavite,
affirmed[10] in toto the decision of the MTC after finding that the cancellation and
revocation of the contract for failure of respondent to remit 25 monthly reimbursement
payments converted the latter's stay on the premises to one of "mere permission" [11] by
petitioner, and that respondent's refusal to heed the notice to vacate the premises
rendered his continued possession thereof unlawful.[12]
With respect to the issue raised by respondent that the instant case is covered by
Republic Act No. 6552 (R.A. No. 6552),[13] the Maceda Law, the RTC ruled in the
negative, ratiocinating that the Shelter Contract Award is neither a contract of sale nor a
contract to sell. Rather, it is "more akin to a contract of lease with the monthly
reimbursements as rentals."[14]
The Ruling of the Court of Appeals
On petition for review (CA-G.R. SP No. 81954) before the CA, the appellate court set
aside the decision of the RTC and entered a new judgment [15] dismissing the complaint
for unlawful detainer and restoring respondent to the peaceful possession of the subject
house and lot. The CA held that the contract between the parties is not a contract of
lease, but a contract to sell, which stipulates that upon full payment of the value of the
house and lot, respondent shall become the owner thereof.[16] The issues, which involve
"the propriety of terminating the relationship contracted by the parties, as well as the
demand upon [respondent] to deliver the premises and to pay unpaid
reimbursements,"[17] extend beyond those commonly involved in unlawful detainer suits,
thus, converting the instant case into one incapable of pecuniary estimation exclusively
cognizable by the RTC.[18]
Moreover, the appellate court faulted petitioner for failing to comply with the mandatory
twin requirements for a valid and effective cancellation of a contract to sell under Section
3 (b) of R.A. No. 6552: (1) to send a notarized notice of cancellation, and (2) to refund the
cash surrender value of the payments on the property. Consequently, it held that the
contract to sell still subsists, at least until properly rescinded, and the action for ejectment
filed by petitioner is premature.[19]
Aggrieved, petitioner filed a motion for reconsideration, which was denied by the CA in its
Resolution[20] dated June 20, 2007. Hence, petitioner is now before this Court alleging
that
The Issues

1. The Honorable Court of Appeals erred in changing the main issue to be resolved
in the instant unlawful detainer case from who has the better right of possession
to whether or not the agreement between the parties is a contract of lease or a
contract to sell, especially when the nature of the agreement between the parties
was never questioned nor raised as an issue in the court a quo.
2. Even assuming that the Honorable Court of Appeals was correct in changing the
main issue to be resolved, it nevertheless erred in determining that:

a. The agreement between the parties is allegedly one of contract to sell when
the Housing and Land Use Regulatory Board itself already made a
pronouncement that the Shelter Program and its contract award is not a
sale of real estate.
b. The action for unlawful detainer filed by petitioner AMOSUP is allegedly
premature especially considering that Republic Act No. 6552, which
requires notarial notice of rescission, is not applicable to the case at bar
and, thus, the written notice of termination previously served on the
respondent is already sufficient.[21]

The Ruling of the Court

It is basic that a contract is what the law defines it to be, and not what it is called by the
contracting parties. A contract to sell is defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the subject property despite
delivery thereof to the prospective buyer, binds itself to sell the said property exclusively
to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment
of the purchase price.[22]
The Shelter Contract Award granted to respondent expressly stipulates that "(u)pon
completion of payment of the amount of US$28,563 representing the full value of the
House and Lot subject of (the) Contract Award, the UNION shall execute a Deed of
Transfer and shall cause the issuance of the corresponding Transfer Certificate of Title in
favor of and in the name of the AWARDEE."[23] It cannot be denied, therefore, that the
parties herein entered into a contract to sell in the guise of a reimbursement scheme
requiring respondent to make monthly reimbursement payments which are, in actuality,
installment payments for the value of the subject house and lot.
While respondent occupied the subject premises, title nonetheless remained with
petitioner. Considering, therefore, that the basis for such occupation is a contract to sell
the premises on installment, the contractual relations between the parties are more than
that of a lessor-lessee.[24] The appellate court thus correctly ruled that the Shelter
Contract Award has not been converted into one of lease.
Petitioner tried, albeit in vain, to mislead the Court that the nature of the agreement
between the parties, and even the validity of the termination thereof, were never raised in
the trial courts. In the pre-trial brief filed by respondent before the MTC, the first issue he
presented is "whether or not the present action is a simple case of or an action for unlawful
detainer or an action for rescission of the Contract of Shelter Award which is outside of
the jurisdiction of [the] Honorable Court."[25]
In the parallel case of Pagtalunan v. Dela Cruz Vda. De Manzano,[26]which likewise
originated as an action for unlawful detainer, we affirmed the finding of the appellate court
that, since the contract to sell was not validly cancelled or rescinded under Section 3(b)
of R.A. No. 6552, the respondent therein had the right to continue occupying unmolested
the property subject thereof. Section 3(b) reads:
SEC. 3. In all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act Numbered
Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three
hundred eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:

xxx
(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value
of the payments on the property equivalent to fifty per cent of the total payments made,
and, after five years of installments, an additional five per cent every year but not to
exceed ninety per cent of the total payments made: Provided, That the actual cancellation
of the contract shall take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act and upon full
payment of the cash surrender value to the buyer. (Emphasis supplied)

As we emphasized in Pagtalunan, "R.A. No. 6552, otherwise known as the Realty

Installment Buyer Protection Act, recognizes in conditional sales of all kinds of real estate
(industrial, commercial, residential) the right of the seller to cancel the contract upon non-
payment of an installment by the buyer, which is simply an event that prevents the
obligation of the vendor to convey title from acquiring binding force." While we agreed
that the cancellation of a contract to sell may be done outside of court, however, "the
cancellation by the seller must be in accordance with Sec. 3(b) of R.A. No. 6552, which
requires a notarial act of rescission and the refund to the buyer of the full payment of the
cash surrender value of the payments on the property."[27] In the present case, as aptly
pointed out by the appellate court, petitioner failed to prove that the Shelter Contract
Award had been cancelled in accordance with R.A. No. 6552, which would have been the
basis for the illegality of respondent's possession of the subject premises. Hence, the
action for ejectment must necessarily fail.
Petitioner nonetheless insists on the inapplicability of R.A. No. 6552 in this case,
capitalizing on the Decision[28] of the Housing and Land Use Regulatory Board in HLURB
CASE No. IV6-090902-1842 entitled "Seamen's Village Brotherhood Homeowners
Association, Inc. v. Associated Marine Officers And Seamen's Union of the Philippines
(AMOSUP)" which held that the transaction between petitioner and the residents of
Seamen's Village cannot be considered a sale within the purview of Presidential Decree
(P.D.) No. 957.[29] It should be pointed out that the only issue resolved in that case is
"whether or not the respondent (petitioner herein) is engaged in the business of selling
real estate subdivisions, so as to fall under the ambit of P.D. 957, the resolution of which
would determine whether or not respondent is required under the law to register with (the)
Office and procure a license to sell."[30]
Section 2(b) of P.D. 957 defines a sale as follows:
b.) Sale or Sell "sale" or "sell" shall include every disposition, or attempt to dispose, for a
valuable consideration, of a subdivision lot, including the building and other improvements
thereon, if any, in a subdivision project or a condominium unit in a condominium
project. "Sale" or "sell" shall include a contract to sell, a contract of purchase and sale,
an exchange, an attempt to sell, an option of sale or purchase, a solicitation of a sale, or
an offer to sell, directly or by an agent, or by a circular letter, advertisement or otherwise.

A privilege given to a member of a cooperative, corporation, partnership, or any

association and/or the issuance of a certificate or receipt evidencing or giving the right of
participation in, or right to any land in consideration of payment of the membership fee or
dues, shall be deemed a sale within the meaning of this definition.

A reading of the Decision in its entirety reveals a vacillation on the part of the HLURB in
classifying the transaction between petitioner and its members. While the HLURB held
that there is no sale as contemplated under the first paragraph of the aforequoted
provision "for the reason that there is no valuable consideration involved in the
transaction,"[31] yet it went on to opine that the second paragraph of the same provision
"appears to have an apparent application in the instant case although the same is not
clear."[32] Then, in its final disposition,[33] the HLURB required petitioner to secure a
Certificate of Registration and License to Sell for its subdivision project thereby effectively
bringing it under the jurisdiction of said office. Clearly, the argument of petitioner that
respondent is not a realty installment buyer that needs to be protected by the law has no
leg to stand on.
In the interest, however, of putting an end to the controversy between the parties herein
that had lasted for more than ten (10) years, as in the cited case of Pagtalunan, the Court
orders respondent to pay his arrears and settle the balance of the full value of the subject
premises. He had enjoyed the use thereof since 1995. After defaulting in August 1999,
respondent had not made any subsequent reimbursement payments. Thus, for the delay
in his reimbursement payments, we award interest at the rate of 6% per annum on the
unpaid balance applying Article 2209[34] of the Civil Code, there being no stipulation in the
Shelter Contract Award for such interest.[35] For purposes of computing the legal interest,
the reckoning period should be the notice of final demand, conformably with Articles
1169[36] and 1589[37]of the same Code, which, as found by the MTC, was sent by petitioner
to respondent on August 21, 2001.[38]
In his Comment to the instant Petition, respondent claimed that he had made payments
in the amount of P318,167.70.[39] The total amount for reimbursement for the subject
house and lot is US$28,563, which the Shelter Contract Award requires to be paid in "180
equal monthly periodic reimbursements of US$159 or in equivalent Philippine Currency
at the time the same falls due."[40] For lack of pertinent data with which to determine how
many months respondent's alleged total payment of P318,167.70 is equivalent to, we
direct petitioner to submit to the trial court an accounting of the payments made by
respondent particularly showing the number of months he was able to make the required
payments of US$159 or its peso equivalent. The balance of the full value of the subject
premises shall then be computed on the basis of the following formula: [(180 months
minus the number of months that respondent had already paid) multiplied by US$159 or
its peso equivalent at the time of payment].
WHEREFORE, the Decision of the Court of Appeals dated July 31, 2006 and the
Resolution dated June 20, 2007 are hereby AFFIRMED with the
following MODIFICATIONS:
1. The Municipal Trial Court of Dasmariñas, Cavite is directed to conduct a hearing, within
a maximum period of thirty (30) days from receipt of this Decision, to determine: (a) the
unpaid balance of the full value of the subject house and lot; and (b) the reasonable
amount of rental for the subject property at present times.
2. Within sixty (60) days from the determination of the trial court of said balance,
respondent shall pay the amount thereof to petitioner, with interest at six percent (6%)
per annum from August 1, 2001 up to the date of actual payment;
3. Upon payment, petitioner shall execute a Deed of Absolute Sale of the subject property
and deliver the transfer certificate of title in favor of respondent;
4. In case of failure to pay within the mandated 60-day period, respondent shall
immediately vacate the premises without need of further demand. Petitioner, on the other
hand, shall pay respondent the cash surrender value equivalent to 50% of the total
reimbursement payments made. The Shelter Contract Award shall then be deemed
cancelled thirty (30) days after receipt by respondent of the full payment of the cash
surrender value. If respondent fails to vacate the premises, he shall be charged
reasonable rental in the amount determined by the trial court.

SO ORDERED.
 GR No. 194366, Oct 10, 2012
NAPOLEON D. NERI
v.
HEIRS OF HADJI YUSOP UY

DECISION
PERLAS-BERNABE, J.:
In this Petition for Review on Certiorari[1]under Rule 45 of the Rules of Court, petitioners
Napoleon D. Neri (Napoleon), Alicia D. Neri-Mondejar (Alicia), Visminda D. Neri-
Chambers (Visminda), Rosa D. Neri-Millan (Rosa), Douglas D. Neri (Douglas), Eutropia
D. Illut-Cockinos (Eutropia), and Victoria D. Illut-Piala (Victoria) seek to reverse and set
aside the April 27, 2010 Decision[2]and October 18, 2010 Resolution[3]of the Court of
Appeals (CA) in CA-G.R. CV No. 01031-MIN which annulled the October 25, 2004
Decision[4] of the Regional Trial Court (RTC) of Panabo City, Davao del Norte and instead,
entered a new one dismissing petitioners' complaint for annulment of sale, damages and
attorney's feesagainst herein respondents heirs of spouses Hadji Yusop Uy and Julpha
Ibrahim Uy (heirs of Uy).
The Facts
During her lifetime, Anunciacion Neri (Anunciacion) had seven children, two (2) from her
first marriage with Gonzalo Illut (Gonzalo), namely: Eutropia and Victoria, and five (5)
from her second marriage with Enrique Neri (Enrique), namely: Napoleon, Alicia,
Visminda, Douglas and Rosa. Throughout the marriage of spouses Enrique and
Anunciacion, they acquired several homestead properties with a total area of 296,555
square meters located in Samal, Davao del Norte, embraced by Original Certificate of
Title (OCT) Nos. (P-7998) P-2128[5], (P-14608) P-5153[6] and P-20551 (P-8348)[7]issued
on February 15, 1957, August 27, 1962 and July 7, 1967, respectively.
On September 21, 1977, Anunciacion died intestate. Her husband, Enrique, in his
personal capacity and as natural guardian of his minor children Rosa and Douglas,
together with Napoleon, Alicia, and Visminda executed an Extra-Judicial Settlement of
the Estate with Absolute Deed of Sale[8] on July 7, 1979, adjudicating among themselves
the said homestead properties, and thereafter, conveying them to the late spouses Hadji
Yusop Uy and Julpha Ibrahim Uy (spouses Uy) for a consideration of P80,000.00.

On June 11, 1996, the children of Enrique filed a complaint for annulment of sale of the
said homestead properties against spouses Uy (later substituted by their heirs)before the
RTC, docketed as Civil Case No.96-28, assailing the validity of the sale for having been
sold within the prohibited period. The complaint was later amended to include Eutropia
and Victoria as additional plaintiffs for having been excluded and deprived of their
legitimes as children of Anunciacion from her first marriage.
In their amended answer with counterclaim, the heirs of Uy countered that the sale took
place beyond the 5-year prohibitory period from the issuance of the homestead patents.
They also denied knowledge of Eutropia and Victoria's exclusion from the extrajudicial
settlement and sale of the subject properties, and interposed further the defenses of
prescription and laches.
The RTC Ruling
On October 25, 2004, the RTC rendered a decision ordering, among others,the
annulment of the Extra-Judicial Settlement of the Estate with Absolute Deed of Sale. It
ruled that while the sale occurred beyond the 5-year prohibitory period, the sale is still
void because Eutropia and Victoria were deprived of their hereditary rights and that
Enrique had no judicial authority to sell the shares of his minor children, Rosa and
Douglas.

Consequently, it rejected the defenses of laches and prescription raised by spouses Uy,
who claimed possession of the subject properties for 17 years, holding that co-ownership
rights are imprescriptible.
The CA Ruling
On appeal, the CA reversed and set aside the ruling of the RTC in its April 27, 2010
Decision and dismissed the complaint of the petitioners. It held that, while Eutropia and
Victoria had no knowledge of the extrajudicial settlement and sale of the subject
properties and as such, were not bound by it, the CA found it unconscionable to permit
the annulment of the sale considering spouses Uy's possession thereof for 17 years, and
that Eutropia and Victoria belatedly filed their action in 1997, or more than two years from
knowledge of their exclusion as heirs in 1994 when their stepfather died. It, however, did
not preclude the excluded heirs from recovering their legitimes from their co-heirs.

Similarly, the CA declared the extrajudicial settlement and the subsequent sale as valid
and binding with respect to Enrique and his children, holding that as co-owners, they have
the right to dispose of their respective shares as they consider necessary or fit.While
recognizing Rosa and Douglas to be minors at that time, they were deemed to have
ratified the sale when they failed to question it upon reaching the age of majority.It also
found laches to have set in because of their inaction for a long period of time.

The Issues
In this petition, petitioners impute to the CA the following errors:
I. WHEN IT UPHELD THE VALIDITY OF THE "EXTRA JUDICIAL SETTLEMENT
OF THE ESTATE WITH ABSOLUTE DEED OF SALE" AS FAR AS THE
SHARES OF EUTROPIA AND VICTORIA WERE CONCERNED, THEREBY
DEPRIVING THEM OF THEIR INHERITANCE;
 II. II. WHEN IT DID NOT NULLIFY OR ANNUL THE "EXTRA JUDICIAL
SETTLEMENT OF THE ESTATE WITH ABSOLUTE DEED OF SALE" WITH
RESPECT TO THE SHARES OF ROSA AND DOUGLAS, THEREBY
DEPRIVING THEM OF THEIR INHERITANCE; and

III. WHEN IT FOUND THAT LACHES OR PRESCRIPTION HAS SET IN.

The Ruling of the Court

The petition is meritorious.
It bears to stress that all the petitioners herein are indisputably legitimate children of
Anunciacion from her first and second marriages with Gonzalo and Enrique, respectively,
and consequently, are entitled to inherit from her in equal shares, pursuant to Articles 979
and 980 of the Civil Code which read:
ART. 979. Legitimate children and their descendants succeed the parents and other
ascendants, without distinction as to sex or age, and even if they should come from
different marriages.
xxx

ART. 980. The children of the deceased shall always inherit from him in their own right,
dividing the inheritance in equal shares.
As such, upon the death of Anunciacion on September 21, 1977, her children and Enrique
acquired their respective inheritances,[9]entitling them to their pro indivisoshares in her
whole estate, as follows:
Enrique 9/16 (1/2 of the conjugal assets + 1/16)
Eutropia 1/16
Victoria 1/16
Napoleon 1/16
Alicia 1/16
Visminda 1/16
Rosa 1/16
Douglas 1/16

Hence, in the execution of the Extra-Judicial Settlement of the Estate with Absolute Deed
of Sale in favor of spouses Uy, all the heirs of Anunciacion should have participated.
Considering that Eutropia and Victoria were admittedly excluded and that then minors
Rosa and Douglas were not properly represented therein, the settlement was not valid
and binding upon them and consequently, a total nullity.
Section 1, Rule 74 of the Rules of Court provides:
SECTION 1. Extrajudicial settlement by agreement between heirs. x x x

The fact of the extrajudicial settlement or administration shall be published in a newspaper

of general circulation in the manner provided in the next succeeding section; but no
extrajudicial settlement shall be binding upon any person who has not participated therein
or had no notice thereof. (Underscoring added)

The effect of excluding the heirs in the settlement of estate was further elucidated
in Segura v. Segura,[10]thus:
It is clear that Section 1 of Rule 74 does not apply to the partition in question which was
null and void as far as the plaintiffs were concerned. The rule covers only valid partitions.
The partition in the present case was invalid because it excluded six of the nine heirs who
were entitled to equal shares in the partitioned property. Under the rule "no extrajudicial
settlement shall be binding upon any person who has not participated therein or had no
notice thereof." As the partition was a total nullity and did not affect the excluded heirs, it
was not correct for the trial court to hold that their right to challenge the partition had
prescribed after two years from its execution…

However, while the settlement of the estate is null and void, the subsequent sale of the
subject properties made by Enrique and his children, Napoleon, Alicia and Visminda, in
favor of the respondents is valid but only with respect to their proportionate shares
therein.It cannot be denied that these heirs have acquired their respective shares in the
properties of Anunciacion from the moment of her death [11] and that, as owners thereof,
they can very well sell their undivided share in the estate.[12]
With respect to Rosa and Douglas who were minors at the time of the execution of the
settlement and sale, their natural guardian and father, Enrique, represented them in the
transaction. However, on the basis of the laws prevailing at that time, Enrique was merely
clothed with powers of administration and bereft of any authority to dispose of their 2/16
shares in the estate of their mother, Anunciacion.
Articles 320 and 326 of the Civil Code, the laws in force at the time of the execution of
the settlement and sale, provide:
ART. 320. The father, or in his absence the mother, is the legal administrator of the
property pertaining to the child under parental authority. If the property is worth more than
two thousand pesos, the father or mother shall give a bond subject to the approval of the
Court of First Instance.
ART. 326. When the property of the child is worth more than two thousand pesos, the
father or mother shall be considered a guardian of the child's property, subject to the
duties and obligations of guardians under the Rules of Court.
Corollarily, Section 7, Rule 93 of the Rules of Court also provides:

SEC. 7. Parents as Guardians. When the property of the child under parental authority is
worth two thousand pesos or less, the father or the mother, without the necessity of court
appointment, shall be his legal guardian. When the property of the child is worth more
than two thousand pesos, the father or the mother shall be considered guardian of the
child's property, with the duties and obligations of guardians under these Rules, and shall
file the petition required by Section 2 hereof. For good reasons, the court may, however,
appoint another suitable persons.
Administration includes all acts for the preservation of the property and the receipt of fruits
according to the natural purpose of the thing. Any act of disposition or alienation, or any
reduction in the substance of the patrimony of child, exceeds the limits of
administration.[13] Thus, a father or mother, as the natural guardian of the minor under
parental authority, does not have the power to dispose or encumber the property of the
latter. Such power is granted by law only to a judicial guardian of the ward's property and
even then only with courts' prior approval secured in accordance with the proceedings set
forth by the Rules of Court.[14]
Consequently, the disputed sale entered into by Enrique in behalf of his minor children
without the proper judicial authority, unless ratified by them upon reaching the age of
majority,[15] is unenforceable in accordance with Articles 1317 and 1403(1) of the Civil
Code which provide:
ART. 1317. No one may contract in the name of another without being authorized by the
latter or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party.
ART. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers;

xxx
Ratification means that one under no disability voluntarily adopts and gives sanction to
some unauthorized act or defective proceeding, which without his sanction would not be
binding on him. It is this voluntary choice, knowingly made, which amounts to a ratification
of what was theretofore unauthorized, and becomes the authorized act of the party so
making the ratification.[16]Once ratified, expressly or impliedly such as when the person
knowingly received benefits from it, the contract is cleansed from all its defects from the
moment it was constituted,[17] as it has a retroactive effect.
Records, however, show that Rosa had ratified the extrajudicial settlement of the estate
with absolute deed of sale. In Napoleon and Rosa's Manifestation [18] before the RTC
dated July 11, 1997,they stated:
"Concerning the sale of our parcel of land executed by our father, Enrique Neri concurred
in and conformed to by us and our other two sisters and brother (the other plaintiffs), in
favor of Hadji Yusop Uy and his spouse Hadja Julpa Uy on July 7, 1979, we both
confirmed that the same was voluntary and freely made by all of us and therefore the sale
was absolutely valid and enforceable as far as we all plaintiffs in this case are concerned;"
(Underscoring supplied)
In their June 30, 1997 Joint-Affidavit,[19] Napoleon and Rosa also alleged:

"That we are surprised that our names are included in this case since we do not have any
intention to file a case against Hadji Yusop Uy and Julpha Ibrahim Uy and their family
and we respect and acknowledge the validity of the Extra-Judicial Settlement of the
Estate with Absolute Deed of Sale dated July 7, 1979;" (Underscoring supplied)

Clearly, the foregoing statements constituted ratification of the settlement of the estate
and the subsequent sale, thus, purging all the defects existing at the time of its execution
and legitimizing the conveyance of Rosa's 1/16 share in the estate of Anunciacion to
spouses Uy. The same, however, is not true with respect to Douglas for lack of evidence
showing ratification.
Considering, thus, that the extrajudicial settlement with sale is invalid and therefore, not
binding on Eutropia, Victoria and Douglas, only the shares of Enrique, Napoleon, Alicia,
Visminda and Rosa in the homestead properties have effectively been disposed in favor
of spouses Uy. "A person can only sell what he owns, or is authorized to sell and the
buyer can as a consequence acquire no more than what the seller can legally
transfer."[20] On this score, Article 493 of the Civil Code is relevant, which provides:

Each co-owner shall have the full ownership of his part and of the fruits and benefits
pertaining thereto, and he may therefore alienate, assign or mortgage it, and even
substitute another person in its enjoyment, except when personal rights are involved. But
the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited
to the portion which may be allotted to him in the division upon the termination of the co-
ownership.
Consequently, spouses Uy or their substituted heirs became pro indiviso co-owners of
the homestead properties with Eutropia, Victoria and Douglas, who retained title to their
respective 1/16 shares. They were deemed to be holding the 3/16 shares of Eutropia,
Victoria and Douglas under an implied constructive trust for the latter's benefit,
conformably with Article 1456 of the Civil Code which states:"if property is acquired
through mistake or fraud, the person obtaining it is, by force of law, considered a trustee
of an implied trust for the benefit of the person from whom the property comes." As such,
it is only fair, just and equitable that the amount paid for their shares equivalent to
P5,000.00[21] each or a total of ?15,000.00 be returned to spouses Uy with legal interest.

On the issue of prescription, the Court agrees with petitioners that the present action has
not prescribed in so far as it seeks to annul the extrajudicial settlement of the estate.
Contrary to the ruling of the CA, the prescriptive period of 2 years provided in Section 1
Rule 74 of the Rules of Court reckoned from the execution of the extrajudicial settlement
finds no application to petitioners Eutropia, Victoria and Douglas, who were deprived of
their lawful participation in the subject estate. Besides, an "action or defense for the
declaration of the inexistence of a contract does not prescribe" in accordance with Article
1410 of the Civil Code.
However, the action to recover property held in trust prescribes after 10 years from the
time the cause of action accrues,[22] which is from the time of actual notice in case of
unregistered deed.[23] In this case, Eutropia, Victoria and Douglas claimed to have
knowledge of the extrajudicial settlement with sale after the death of their father, Enrique,
in 1994 which spouses Uy failed to refute. Hence, the complaint filed in 1997 was well
within the prescriptive period of 10 years.
WHEREFORE, the instant petition is GRANTED. The April 27, 2010 Decision and
October 18, 2010 Resolution of the Court of Appeals are REVERSED and SET
ASIDE and a new judgment is entered:
1. Declaring the Extra-Judicial Settlement of the Estate of Anunciacion
Neri NULL and VOID;

2. Declaring the Absolute Deed of Sale in favor of the late spouses Hadji Yusop Uy and
Julpha Ibrahim Uy as regards the 13/16 total shares of the late Enrique Neri, Napoleon
Neri, Alicia D. Neri-Mondejar, Visminda D. Neri-Chambers and Rosa D. Neri-
Millan VALID;

3. Declaring Eutropia D. Illut-Cockinos, Victoria D. Illut-Piala and Douglas D. Neri as

the LAWFUL OWNERS of the 3/16 portions of the subject homestead properties, covered
by Original Certificate of Title Nos. (P-7998) P-2128, (P-14608) P-5153 and P-20551 (P-
8348); and
4. Ordering the estate of the late Enrique Neri, as well as Napoleon Neri, Alicia D. Neri-
Mondejar, Visminda D. Neri-Chambers and Rosa D. Neri-Millan to return to the
respondents jointly and solidarily the amount paid corresponding to the 3/16 shares of
Eutropia, Victoria and Douglas in the total amount of P15,000.00, with legal interest at
6% per annum computed from the time of payment until finality of this decision and 12%
per annum thereafter until fully paid.
No pronouncement as to costs.
SO ORDERED.
 GR Nos. 130714 & 139634, Oct 16, 2012
PEOPLE
v.
VAL DE LOS REYES

RESOLUTION
PERLAS-BERNABE, J.:
This refers to the June 25, 1997 Decision[1] of the Regional Trial Court (RTC) of Tabaco,
Albay, Branch 16, convicting appellant Donel Go (appellant) of two (2) counts of rape
and sentencing him to suffer the death penalty for each count and to pay moral damages
and attorney's fees. By reason of the penalty imposed, these cases were elevated to the
Court for automatic review.
The Factual Antecedents

On December 22, 1994, at around 4:00 o'clock in the afternoon, complainant Imelda B.
Brutas (Imelda), upon the request of her sister Clara, went to the house of appellant at
San Roque, Tabaco, Albay to bring some pictures. Upon arrival thereat, Imelda saw
appellant by the road outside his house talking to another man, whom appellant
introduced to her as Val De Los Reyes (Val). However, because it suddenly rained, the
three of them took shelter inside appellant's house, where appellant and Val forced Imelda
to drink two bottles of beer, causing her to feel dizzy. It was under this condition that Val
succeeded in having sexual intercourse with her against her will. Thereafter, appellant
took his turn with Imelda, aided by Val who covered her mouth and held her hands.
Apparently not satisfied, Val once again ravished Imelda, with the assistance of appellant
who likewise covered her mouth and held her hands.
Thus, Imelda filed criminal complaints for rape against appellant and Val, who were jointly
charged in two (2) Informations, as follows:
Criminal Case No. T-2640[2]

That on or about the 22nd day of December, 1994 at more or less between the hours of
4:00 o'clock in the afternoon and 10:00 o'clock in the evening at Barangay San Roque,
Tabaco, Albay, [Philippines, and within the jurisdiction of this Honorable Court,] DONEL
GO, with the indispensable cooperation and help of VAL DE LOS REYES, by means of
force and intimidation and rendering IMELDA B. BRUTAS almost unconscious by forcing
private complainant to drink two bottles of beer, DONEL GO, wilfully, unlawfully and
feloniously did lie and succeeded in having carnal knowledge of IMELDA B. BRUTAS,
against her will, to her damage and prejudice.
Criminal Case No. T-2641[3]

That on or about the 22nd day of December, 1994 at more or less between the hours of
4:00 o'clock in the afternoon and 10:00 o'clock in the evening at Barangay San Roque,
Tabaco, Albay, Philippines, and within the jurisdiction of this Honorable Court, VAL DE
LOS REYES, with the indispensable cooperation and help of DONEL GO, by means of
force and intimidation and rendering IMELDA B. BRUTAS almost unconscious by forcing
private complainant to drink two bottles of beer, VAL DE LOS REYES, wilfully, unlawfully
and feloniously did lie and succeeded in having carnal knowledge of IMELDA B.
BRUTAS, against her will, to her damage and prejudice.

Unfortunately, the authorities were able to arrest only appellant while Val remained at
large. Thus, appellant was arraigned and pleaded not guilty to the crime charged, but
before the prosecution could conclude the presentation of its evidence, he jumped bail.
Consequently, he was tried in absentia.
On June 25, 1997, the RTC convicted[4]appellant of two (2) counts of rape and sentenced
him to suffer the death penalty for each count and to pay moral damages and attorney's
fees. In view of the penalty of death imposed upon him, the case was elevated to the
Court on automatic review, herein docketed as G.R. Nos. 130714 and 139634.
Meanwhile, the cases against Val were sent to the archives pending his arrest.

On August 19, 1997, the RTC revived[5] the criminal cases against Val,who, after trial,
was likewise found guilty beyond reasonable doubt of the three (3) charges of rape filed
against him.[6] Through counsel, Val appealed his conviction before the Court, docketed
as G.R. Nos. 139331 and 140845-46.
On August 14, 2000, the Court ordered[7] the consolidation of the five (5) cases.

On December 27, 2002, the Court En Banc rendered a Decision[8]vacating the judgment
of conviction against Val, upon a finding that the RTC violated Sections 1 and 2, Rule 132
and Section 1, Rule 133 of the then Revised Rules of Court which required that the
testimonies of the witnesses be given orally. It would appear from the records that during
Val's trial, the prosecution merely adopted the transcript of the stenographic notes during
the trial against appellant and asked the prosecution witnesses to affirm their previous
testimonies. Thus, finding that the proceedings against Val were abbreviated and
irregular, the Court remanded G.R. Nos. 139331 and 140845-46 to the RTC for
rehearing. Meanwhile, the automatic review of the cases against appellant in G.R. Nos.
130714 and 139634 was held in abeyance.
Val was tried anew before the RTC, which, in its Joint Decision[9] dated June 28, 2005,
eventually convicted him for three (3) counts of rape and sentenced him to suffer the
death penalty as well as to pay private complainant P50,000.00 as damages for each
count. He appealed his conviction to the Court of Appeals (CA), docketed as CA-G.R.
CR-H.C. No. 01642 which in its December 19, 2006 Decision,[10] affirmed his conviction,
with the modification reducing the penalty of death to reclusion perpetua for each count,
and ordering the payment of the amount of P50,000.00 by way of moral damages to the
victim. Val's motion for reconsideration was likewise denied,[11] hence, hisseparate appeal
before the Court, docketed as G.R. No. 177357, pending before the Court's Third
Division. With the foregoing factual backdrop, only appellant's appeal is left before the
Court En Banc for resolution.
The Court's Ruling

At the outset, the Court notes that these cases were elevated to Us on automatic review
in view of the RTC's imposition of the death penalty upon appellant in its June 25, 1997
Decision. However, with the Court's pronouncement in the 2004 case of People v.
Mateo[12]providing for and making mandatory the intermediate review by the CA of cases
involving the death penalty, reclusion perpetuaor life imprisonment, the proper course of
action would be to remand these cases to the appellate court for the conduct of an
intermediate review.
After a judicious review of the records, however, the Court no longer sees the necessity
of transferring these cases to the CA for intermediate review and instead, deems it more
appropriate to dismiss the instant appeal.
Records reveal that the appellant jumped bail during the proceedings before the RTC and
was, in fact, tried and convicted in absentia. There is dearth of evidence showing that he
has since surrendered to the court's jurisdiction. Thus, he has no right to pray for
affirmative relief before the courts. Once an accused escapes from prison or confinement,
jumps bail as in appellant's case, or flees to a foreign country, he loses his standing in
court, and unless he surrenders or submits to the jurisdiction of the court, he is deemed
to have waived any right to seek relief therefrom.[13]
Thus, even if the Court were to remand these cases to the CA for intermediate review,
the CA would only be constrained to dismiss appellant's appeal, as he is considered a
fugitive from justice. On this score, Section 8, Rule 124 of the Rules of Court is relevant,
which provides:
SEC. 8. Dismissal of appeal for abandonment or failure to prosecute. The Court of
Appeals may, upon motion of the appellee or motu proprio and with notice to the appellant
in either case, dismiss the appeal if the appellant fails to file his brief within the time
prescribed by this Rule, except where the appellant is represented by a counsel de officio.

The Court of Appeals may also, upon motion of the appellee or motu proprio, dismiss the
appeal if the appellant escapes from prison or confinement, jumps bail or flees to a foreign
country during the pendency of the appeal.[14](Emphasis supplied)
It bears to stress that the right to appeal is merely a statutory privilege, and, as such, may
be exercised only in the manner and in accordance with the provisions of the law. The
party who seeks to avail of the same must comply with the requirements of the Rules,
failing which, the right to appeal is lost.[15]
WHEREFORE, the appeal is DISMISSED.
SO ORDERED.
1. BPI vs. Lee; G.R.No.190144; 08-01-12
2. Dhaliwal vs. Dumaguing; A.C. No. 9390; 08-01-12
3. Tumbakan vs. Pefianco; A.C.No. 6116; 08-01-12
4. Global Resource vs. Velasco; G.R.No. 196883; 08-22-12
5. Castro vs. Philippine Long Distance; G.R.No. 191792; 08-22-12
6. Gonzales vs. Office of the President; G.R. No. 196231; 09-04-12
7. City of Iriga vs. Camarines Sur III Elctric Coop.; G.R. No. 192945; 09-05-12
8. Atilano Vs. Asaali; G.R.No. 174982; 09-10-12
9. Velasco vs. COA; G.R. No. 189774; 09-18-12
10. New Philippine Sky landers vs. Dakila; G.R. No. 199547; 09-24-12
11. Pilot v. Baron; AM No. P-12-3087; 09-24-12
12. Asia International Auctioneers vs. CIR; G.R. No. 179115; 09-26-12
13. Living vs. Malayan Insurance; G.R.No. 193753; 09-26-12
14. Associated marine Officers vs. Decena; G.R. No. 198584; 10-08-12
15. Neri vs Heirs of Spouses Yusop; G.R.No. 194366; 10-10-12
16. People vs. De Los Reyes; G.r. no. 130714; 10-16-12